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State of the Union

New Report Warns of Home-Grown Terror Danger; Interview With House Majority Leader Steny Hoyer

Aired September 12, 2010 - 09:00   ET


CANDY CROWLEY, HOST: A new report says the U.S. is now particularly vulnerable to home-grown terrorism. The report's conclusions: "The threat is more complex and more diverse than at any time over the past nine years. Terrorists groups see operational value in conducting more frequent and less sophisticated attacks. By the law of averages, Al Qaida or an affiliate will succeed in getting some kind of attack through in the next years."


PRESIDENT BARACK OBAMA: There is always going to be the potential for an individual or a small group of individuals, if they are willing to die, to kill other people.


CROWLEY: Nine years after 9/11, the threat has changed, but it remains.


CROWLEY (voice-over): Today, an anxious anniversary, with Homeland Security Secretary Janet Napolitano, former Homeland Security Secretary Michael Chertoff, and former White House counter-terrorism adviser Fran Townsend.

Then, 51 days out from the mid-term elections, politics, with House Democratic leader Steny Hoyer. And the battle for the soul of the GOP with former House Republican leader Dick Armey, and former Senate Republican leader Trent Lott.

I am Candy Crowley, and this is STATE OF THE UNION.


CROWLEY: This 9/11 was remarkable for its divisiveness. Protests over a planned Islamic Cultural Center blocks from Ground Zero. Protests from a pastor in Florida. Protests in Afghanistan and Pakistan.


OBAMA: We are seeing today riots in Kabul, riots in Afghanistan, that threaten our young men and women in uniform. And although this may be one individual in Florida, part of my concern is to make sure that we don't start having a whole bunch of folks all across the country think this is the way to get attention.

(END VIDEO CLIP) CROWLEY: Joining me now here in Washington, Homeland Security Secretary Janet Napolitano, former Homeland Security Secretary Michael Chertoff, and former Assistant to the President for Homeland Security and current CNN national security contributor Fran Townsend. Mouthful all.

Let's talk about this preacher in Florida, because I think what amazes me is we all sit back and go, this is like (INAUDIBLE) in the middle of Florida, and the next thing we know, there are protests and approaching riots in Pakistan and in Afghanistan, a bit in Indonesia. I don't get that.

NAPOLITANO: Well, I think what we have to understand is that we all recognize that this minister is a little small church, in part it's a creation of the media, but it goes across the Internet and across the globe as an accelerant, and they don't appreciate that we are a country with freedom of speech, freedom of expression, freedom of religion, this is just one small minister who we all disagree with on a values basis. But it, boy, gets interpreted aboard very differently.

CROWLEY: But then wouldn't the president and the secretary of defense, and the secretary of state, and former Secretary of State Colin Powell, had been better off to try to contextualize this for people?

CHERTOFF: Well, I think it's difficult, because part of the problem is the media jumps on top of the story, it does get on the Internet, and, of course, that is very hard to calibrate the context on the Internet.

And I think the political leaders have to make a judgment about whether they can continue to ignore it in the hopes it goes away or whether they have to address it.

TOWNSEND: You know, and, Candy, I was in Afghanistan when this story began to break. I was in Kabul with General Petraeus, General Jim Stavridis, the supreme allied commander of NATO, and I will tell you, it doesn't -- they don't understand, the way this story is reported, that this is just representative of 50 people in Gainesville, Florida.

I mean, General Petraeus and I lived through Abu Ghraib, right? It's a criminal act -- an isolated criminal act, horrific, but the pictures went around the Internet and inspired protests. And not only are our soldiers at danger when that happens, but also our diplomats.

And so you understand our leaders feel an obligation to try and do whatever they can to protect our people who are serving this nation overseas.

CROWLEY: So what is the answer? Because there is freedom of speech running up against what the administration felt was making a very real threat, not to just to U.SD. service-people, which is bad enough, but to Americans in general. Because, I mean, there are countries have laws against what they term hate speech. Do we then -- do we begin to curb freedom of speech?


CHERTOFF: Yes, I don't think we can do that. I don't think we can do that. I think what you have to do is you have to fight bad speech with good speech. And that means people who have contrary points of view, and more tolerant points of view have to get out there and talk about it.

Part of the responsibility of the media is to cover that, again, in context, and not to give a disproportionate amount of time to people who say extreme things and ignore the people who say more balanced things.

CROWLEY: And can you give us some sense, Madam Secretary, of the activity -- I don't even know the real word for it, that did you see an uptick in worrisome incoming intelligence as a result of this single person in Florida and the media coverage of it?

NAPOLITANO: Look, we are always dealing with ever-evolving types of threats. And some of them are international in derivation; some of them result from U.S. persons. It is a very dynamic threat environment. One of the things we have been focused on is really getting preparation for and the ability to respond to threats of any kind outside of Washington, D.C., spread across the homeland, into state and local hands, empowering them; more information-sharing, more resources to them.

Because we are never going to be totally immune from threats. And as the president indicated on the clip that you just showed, look, at some point somebody may get through even all of the protective layers that we have created.

CROWLEY: Let me move to sort of a more general look at national security at this point, and in homeland security in particular. We had a new CNN/Opinion Research Corporation Poll asking people, are we safer from terrorism now than we were before 9/11? Interesting to me that about 36 percent said, OK, we're safer, about 37 percent, we're about as safe, and 27 percent, less safe. So pretty even, less safe, more safe.

Is this a sign of the times, really? Is this just accepting what you all see as reality? That there is a danger there, period, and we need to live with it?

NAPOLITANO: Look, there are threats now, and as I said before, we live in a global ever-changing threat environment. The key thing is to do everything we can to minimize those threats, to be able to anticipate and intervene early, but also to empower communities and individuals on how to respond if something were to happen.

CHERTOFF: Candy, and I think part of the problem is the threat is changing. The enemy adapts as we adapt, and that's an ongoing process. So what people are seeing now is it's no longer just South Asia, where we were focused on over the last several years. It's Yemen. It's Somalia. It's now North Africa.

And that's alarming to people, because what they see is it's becoming more diffuse. And that's, I think, an issue we are going to have to deal with over the next few years.

TOWNSEND: See, Candy, I think some of what you are seeing in the poll data is, while I think there is no question over the last nine years the American government has made the American people safer, and we have not been attacked, the answer is I've also seen in the last year, the Christmas Day attempt, the Times Square attempt, Zazi Najibullah in New York on the subways.

And so I think people have a sense this may actually happen, despite all of the efforts and all of the money we've spent, this is a very determined enemy. And I think that's part of what is reflected in the polls.

CROWLEY: Well, and exactly. Isn't it just that? That we are talking about home-grown. So I think there was this sense, at least before the attacks in Britain, from British nationals, that, well, this is where the land of the free, people love being here, our citizens wouldn't turn on us, and guess what, some of the scariest attempts have been the enemy within.

CHERTOFF: But we have to put it in perspective, though, because although there has been an uptick in the number of what we would call home-grown cases, as an absolute percentage of the population here, and even of the Muslim population, it's very, very small.

But we are a large country. And even a very small number of people, a small percentage can be a significant number of people. And so some of the sense we had perhaps that this was a European problem, home-grown terrorism, I think we're now realizing we have got to deal with that issue in our own communities.

NAPOLITANO: Yes, that's right. The United States, we are not immune, and we do see U.S. persons who, for whatever reason, have been radicalized to the point of violence, maybe violence in the name of Islam. And, you know, they travel to the FATA, they train, they learn the tradecraft, they come back.

And that is something that is relatively new in kind of the known threat stream that we have been dealing with. But it's not unique, nor was it unanticipated, really, that that could occur.

TOWNSEND: And I think we ought to -- again, putting this in context, let me claim some success for the secretary and the former secretary. The answer is, if we have reduced al Qaeda from a 9/11- type massive spectacular attack, to the idiot with the bomb in his underwear or the guy that screws up the bomb in Times Square, you've been pretty successful over the course of your administrations at reducing their operational capability.

CROWLEY: We are going to take a quick break, but we will be right back, and a little on the search for bin Laden. Stick with us.


CROWLEY: We are back with Homeland Security Secretary Janet Napolitano, former Homeland Security Secretary Michael Chertoff and CNN national security contributor Fran Townsend.

I want to go back to the homegrown terrorism fight. And you have warned us it's not quite as -- you know, it's not someone in every corner plotting against their country, but nonetheless this seems to be the shifting of what we thought was, OK, over some place in some foreign land, people are plotting against us. Now it could be this individual who feels some sort of affiliation with Al Qaida or who has a personal gripe.

So how is that fight different than the fight against an organization like Al Qaida, and what has the U.S. government done to shift that arena?

NAPOLITANO: Well, it means that, first of all, it's more dispersed. Secondly, you know, a big conspiracy, you have opportunities to intercept, to hear about, to learn about ahead of time. When you have individuals or small groups, that's much more difficult.

And thirdly, our ability to collect intelligence is much more limited when U.S. persons are involved than, say, internationally.

And so, you know, there are all kinds of different things that go into play. And I think what Michael said is right. We're not talking about huge numbers all across the country, but what we are talking about is an ever-evolving threat that has not kept the United States immune. There are U.S. persons now involved. And that means the Department of Homeland Security itself has had to evolve.

CROWLEY: Let me ask you, because there's been this talk. We heard the president asked about Osama bin Laden, and of course he would still like to find him.

But when you look at this new homegrown threat and you look at someone like Anwar al-Awlaki, who's more dangerous?

Who do we really actually need to go and find?

Is it Awlaki, who has ties to the Fort Hood shooter, who has ties to the -- at least was inspiring to the Christmas Day bomber -- sorry, to the Times Square bomber -- and had also had ties with the Christmas Day plane hijacker.

CHERTOFF: There's no -- there's no doubt about the fact that, symbolically, bin Laden is still in a class by himself. But I do think you make an important point. Over the years we have eliminated or incapacitated the operational leaders. And now of course we see replacement leaders come up.

And taking out that level of leadership is a critical part of the strategy. Because they are the most experienced planners. They are the people who have the ability to put together the schemes and train and launch the attacks. And so while we'd all like to get bin Laden, the fact is getting these operational leaders is a critical part of success.

CROWLEY: And Awlaki is on the Internet. I mean, he's...


... you know, e-mailing people back and forth. I mean, why is this so difficult? I mean, he's on a list, apparently, that we want to go get him and yet he's, kind of, it seems to me, hiding in plain sight in some ways.

TOWNSEND: That's right. And that's been true for years. I mean, Awlaki has been a target of the U.S. government over the last nine years. But he's smart. Remember, when we have been able to take effective operational action at a tactical level, mostly these people have been in unsettled areas, in rural areas.

We understand now from reports -- when you say he's hiding in plain sight in the middle of the city, it makes it operationally more difficult.

And when you talk about bin Laden, I'd only add, it's more than symbolic to me. He is used for recruitment, training, fund-raising. And quite frankly, the American people have a right to retribution. I mean, let's remember, there were 3,000 Americans killed. And there is a really important, sort of, moral calculus here. I think both will remain at the top of the target list.

CROWLEY: Awlaki, would you concede, is more dangerous, at this point -- if you take away the symbolism -- seems more dangerous, a more immediate threat than bin Laden seems to be?

NAPOLITANO: Well, he's certainly a active recruiter, and particularly his use of the Internet, his use of language, his ability to reach out to Westerners, including Americans, and attract them into -- into the movement -- yes, he's very dangerous.

CROWLEY: Let me -- in our closing moments, I want to talk about Fran's and my favorite discussion we had once. And that's about this advisory system and the orange levels and the yellow levels and -- which, as far as I can tell, have remained the same for years.

Have they not lost their effectiveness?

You called for a study to look into this. You've had that study. Is anything going to change?

NAPOLITANO: Well, it might, in the sense that -- and Fran was actually on the study committee, so thank you for that, Fran. Because what we realize is that the colors themselves weren't exchanging or giving people information.

And as I said earlier, one of our chief goals is to make sure that the citizenry of the United States and communities know what's going on and know what to do if something were to change.

CROWLEY: Might you get rid of that?

Because, to me, it's, sort of, like a sign that says "Flood Area," right, because it's just there all the time.?

NAPOLITANO: Well, don't -- don't drive through that.


I mean, that's the point. So, yes, we have forwarded some recommendations based on what the subcommittee came to us for into what's called the interagency process. Michael knows what that means. And...


CROWLEY: ... it takes a long time?

NAPOLITANO: It means it's being considered because it's important and it's going to affect a lot of different things.

CROWLEY: So you can see it changing?


TOWNSEND: And, Candy, you know, to your point, you know, walk through the airport. We've been at orange. This has been, as Michael will remember, a pet peeve of mine. You shouldn't put this system up a level to something like orange if you're not prepared to say what it's going to take to bring it back down, because, to your point, Candy, the system then loses credibility.

And that was why I was glad to help co-chair that study.

CROWLEY: What do you think?

Has the system, as it's now set up, lost its usefulness?

CHERTOFF: Well, let me go back to how it got started. The genesis of this system was that, operationally, sometimes you need to do different things depending on the threat level.

So, for example, when you go to orange at the airport, you do different things in the back part of the airport.

That -- it's important to preserve that, because that has a real operational impact. Then, of course, when it was first initiated, it wasn't made public. I remember someone ran out immediately and announced that people complained that the government was keeping it secret. And so, in the interest of transparency, it became public.

The question now is whether we want to calibrate so we don't have quite so many levels. One of the things I think both Secretary Napolitano has done it and I did was we tried to explain, when we did make a move, here's why we've made it, rather than just move it up or down without -- you know, a very opaque set of explanations.

CROWLEY: Because now it pretty much just sits there.


CROWLEY: I mean, hasn't it been orange for years?


NAPOLITANO: Well, but let's recognize, and as Michael said, look, at airports, it means something very different than, say, at shopping malls or in homes.

And so there are different levels, in a way, or different things that are happening based on the actual threat. And so it is complicated, but the basic point is to get information to people so that it's operational so they know what to do. And whether it's colors, whether it's colors associated with other things, whether you tweak the system or totally amend the system, that is all -- that is what is under consideration.

CROWLEY: And I literally have about 30 seconds left with you all, so I just want a quick answer to what I think everybody asked on 9/11. Are we safer?

CROWLEY: And do you expect that, at some point, we're going to get unlucky?

NAPOLITANO: I believe we are safer. I believe, however, that there is no 100 percent guarantee.

CHERTOFF: We have reduced the risk. We have not eliminated the risk.

TOWNSEND: Safer, but I think, in all likelihood, we will get attacked. Despite best efforts, they will -- they are determined to get through.

CROWLEY: Fran Townsend, Michael Chertoff, Janet Napolitano, thank you all so much for joining us.

Up next, we're going to turn to politics. Have the Democrats done enough to maintain control of the Congress?


CROWLEY: The economy is struggling. Many voters are skeptical of health care reform and worried about federal responding. It's a recipe for Democratic disaster in the midterms. What's a president to do?


OBAMA: Between now and November, what I'm going to remind the American people of is that the policies that we have put in place have moved us in the right direction, and the policies that the Republicans are offering right now are the exact policies that got us into this mess.


CROWLEY: But a new Quinnipiac poll finds 60 percent of registered voters disapprove of the way congressional Democrats are handling their jobs. Still, House Majority Leader Steny Hoyer has his game face on: "Our candidates are energized and not hanging their tails between their legs. They are confident" -- perhaps in some part because the same polling shows 59 percent of Americans also disapprove of the way congressional Republicans are doing their jobs. A pox on both their houses.

A conversation with Congressman Hoyer when we come back. (COMMERCIAL BREAK)

CROWLEY: Joining me now is the Democratic majority leader in the House of Representatives, Steny Hoyer.

Congressman, thanks so much for being here.

HOYER: Candy, always good to be with you. Thank you.

CROWLEY: I want to start off with what I think is going to occupy your fall, and that is these Bush tax cuts, which are set to expire in January.

The Democratic position and the administration's position has been we want to keep them for the middle class, and any household making $250,000 or above, we're going to repeal them.

So what you have here now is the argument, no, bad time; there's not enough jobs out there; you can't create jobs by essentially raising taxes, even if you want to call these rich people.

I want to introduce into this argument something that Peter Orszag wrote. Now, he, of course, is the former director of the Office of Management and Budget for the president. And he's talking about the idea of this huge deficit versus the huge jobs deficit.

"In the face of the duelling deficits, the best approach is a compromise, extend the tax cuts for two years and then end them altogether."

And by extending the tax cuts, he means for the rich; permanent ones for the middle class. How about that?

HOYER: Well, Candy, first of all, we need to realize what is going to happen was put in place by the Republicans in '01 and '03, to meet their budget numbers. They had these taxes go up for all Americans. The president has said; we have said we absolutely, in this troubled economic time, are not going to allow families to have a tax increase, period.

Now, families, as you say, we referred to as the $250,000 and under people, which is 98 percent of America. And we don't believe that their taxes ought to go up. CROWLEY: But what about a compromise here?

HOYER: Well, compromise has been very tough to get, as you know, Candy.

CROWLEY: But are you open to it?

HOYER: Sure, we'll...

CROWLEY: Do you think the Democratic...

HOYER: We'll talk about compromise, but we don't believe -- I don't agree with Mr. Orszag or others who believe that a tax cut on the richest Americans are going to have any affect on the economy.

CROWLEY: OK, then what about...


HOYER: ... we gave 98 percent of America, as you know, tax cuts in the Recovery Act.

CROWLEY: So a lot of people make the argument, look, this isn't going to create jobs if we allow these tax cuts to expire for the rich. Then why not get behind a payroll holiday?

HOYER: Well, of course we did on the FICA tax, as you know, passed legislation that it's in place that gave small businesses, if they hire people who are unemployed, a tax holiday, as you point out.

And not only did we give that, but we gave $1,000 bonus if those people are on the payroll a year from now.

So we have done things of that nature. We've done a number of things in the House of Representatives to spur job creation, job growth. Unfortunately, we've had trouble getting them through the Senate.

One of the bills that we absolutely want to get done this coming four weeks is to provide for dollars for small business to get loans to expand their businesses.

CROWLEY: To ease the credit?

HOYER: We've passed that twice, and it's still sitting in the Senate. We hope that they'll pass it.

CROWLEY: When it comes to this -- these tax cuts for the wealthy, do -- you're a smart guy. It seems to me one of two things is going to happen here. Either you take this off the table, because your own Democrats are out there going, oh, no, don't want to do this. You've got more than a handful of Democrats in the House saying this is not a good idea.

So you either need to take it off the table and deal with it after the election or come to a compromise. What's going to happen? HOYER: Candy, one -- well, what's going to happen is, A, we're going to see what the Senate can do. As you know, the House is -- we've got over 400 bills pending in the Senate that have passed, 70 percent of them with 50 Republicans, so non-controversial; they're just sitting in the Senate.

So one of the things we're going to do -- and I've talked to Senator Reid about this -- we're going to see what the Senate is going to do. Then the House will make its determination...


CROWLEY: Because the art of the doable, and you might go along. HOYER: Sure.

CROWLEY: And you know the Senate's going to come up with a compromise because that's the only way...


CROWLEY: ... they get anything done.

HOYER: But, again, our policy is, we are not going to allow the Republican policy of increasing taxes by having these taxes expire.

HOYER: Which was Republican policy, we are not going to allow that to happen for the middle income Americans, working Americans.

CROWLEY: You have spent your break in 11 states, 20 candidates. We are now looking at some fairly well-respected political pundits saying Democrats might lose as many as 60 seats. What's the problem out there?

HOYER: Well, I think those pundits are wrong. Number one, we are going to hold the House. We're going to win...

CROWLEY: But you are going to lose seats?

HOYER: We are going to lose seats, probably. I think that's undoubtedly, historically...

CROWLEY: Twenty-four, 34?

HOYER: I am not going to speculate on a number, Candy. But we are going to hold the House. As I say, I have been to -- as you said, I have been with 20 candidates, 11 states over the last two-and-half weeks. Our candidates are feeling good.

And what is going to happen is, people are going to compare not the perfect, but the alternatives. As Joe Biden likes to say, they are not going to compare us with the almighty, they're going to compare us with the alternative, an alternative that wants to go back to the exact same Bush policies, according to Mr. Sessions, their campaign chairman, which led to high deficits, the worst job performance of any administration since Herbert Hoover, and extraordinary reduction in wealth of our country, and the stock market tanked.

CROWLEY: But can you stave off disaster for Democrats...

HOYER: Absolutely.

CROWLEY: ... when you have Democrats who don't particularly want to talk about health care reform, and those who voted against it are -- actually have ads out there for it, who don't much want to talk about the stimulus program and how much it costs?

Is it enough to say, yes, but the Republicans got us into this mess? I mean, that's not much of a bumper sticker.

HOYER: Well, you have -- the American public is smart, and they pursued a vote in 1992 that elected a president. He put in place a program, they were somewhat skeptical, as you recall. But they became very enthusiastic when they saw how well that economic program worked, opposed by every Republican.

Then the -- in 2000, a new administration came in, said their policies were going to work. In fact, they failed and gave the worst economy in 75 years. So people are going to compare the failed Bush policies, which the Republicans say they want to return to. That's a quote, not a supposition.

CROWLEY: But you agree it's a bit -- right now you could say we are on a path, we're moving forward, it's going to get better, but it's kind of a weak hand to go into November with?

HOYER: Well, I think in fact that things have gotten better. We have had four quarters of economic growth. The stock market, Dow, S&P, Nasdaq, up now over 60 percent. Things are getting better, 2 million, 3 million, 4 million jobs have been created under the Recovery Act.

So, yes, we are not where we want to be. We want to get those 8 million jobs back that were lost under the Bush administration, so we can get people back to work. And we are going to continue to focus on policies, which is what the president said in Cleveland when he gave his speech about investing in infrastructure and creating jobs.

The other thing, Candy, I want to mention, is we have an agenda, not just for the balance of this year, but an agenda for the coming years, and that's the "Make It in America" agenda.

People are concerned and fearful they're not going to be able to make it in America. And one of the things they believe is we need to make things in America. We need to manufacture things in America so people have the availability of good-paying jobs with good benefits.

So our "Make It in America" agenda is going to be one of the hallmarks as we move forward. And frankly when you look at the Clinton administration's creation of 21 million new jobs in the private sector as opposed to George Bush's 1 million, you see that there is a real contrast. CROWLEY: And just quickly, on a matter of strategy. We know that there has been much made of the fact that eventually your money does run out and you have got to save who you can and toss some others overboard. When are you going to begin to toss some of your weaker Democratic candidates overboard in terms of money?

HOYER: We don't think we have weak Democratic candidates right now.


HOYER: Candy, I'm not done. You didn't expect an answer to that. Clearly we will look at, and if there are candidates that are very substantially behind, and they can't make it, clearly we will have to make some tough judgments. But with all due respect to my good friend Carl Hulse, who I think is a terrific reporter, that decision has not been made, as Chris Van Hollen made it very clear. And in fact, Betsy Markey, who was one of those, Frank Kratovil, one of those mentioned in Carl's article, are absolutely top priorities for me and for our party. Betsy Markey is tied in the polls. Frank Kratovil is slightly ahead. So these candidates are in very good shape, and they are going to win.

CROWLEY: Thank you so much.

HOYER: Thank you, Candy.

CROWLEY: Democratic leader Steny Hoyer, we appreciate your time.

HOYER: Appreciate it.

CROWLEY: Next, can the tea party and Republicans make for a winning team this November?


CROWLEY: The 9/12 taxpayer march is taking place in Washington today, protesting what demonstrators see as a government that over- regulates, over-spends, and over-taxes. The event is spearheaded by FreedomWorks, an organization founded over 25 years ago to promote conservative causes.

It has most recently provided organization and structure to the tea party movement. FreedomWorks chairman is former House Republican leader Dick Armey, once the voice of the establishment, and now a voice from the outside.


ARMEY: When we help you win back that majority that you love so much, we will be aware of your penchant for drinking backsliders' wine.


CROWLEY: Some of the biggest Republican newcomers in the mid- term elections are running with the tea party's blessing. Senate candidates Rand Paul in Kentucky, Sharron Angle in Nevada, Ken Buck in Colorado, Joe Miller in Alaska, and Florida's Marco Rubio.

Not every Republican is whole-heartedly enthused with the rise or the rhetoric of the tea party. Former Senate Majority Leader Trent Lott doesn't expect the predicted tea party sweep into Congress, but for those who do make it into power, Lott advises his former colleagues, as soon as they get here, we need to co-opt them.

We'll talk to Dick Armey and Trent Lott next.


CROWLEY: Joining me now here in Washington, former Republican congressional leaders Dick Armey and Trent Lott.

Gentlemen, thank you both.

Looking hale and hearty, as formers, I must say.


Thank you all for being here.

I want to get into the "co-opt" line, simply because you have -- you have backed and continue to back a number of Tea Party candidates who have upset what we call establishment Republican candidates, which generally is the people we expect are going to win and then they get tossed out.

And you talked about, fine, if they come to the Senate, we need -- we, meaning the Republicans, need to co-opt them.

Can you define your term for me?

LOTT: Well, when they get here, they want to do something about bad legislation, more regulations, too much spending, too much taxation. They want to get something done. They need to be -- the leaders need to be able to work with the people that come in to the House and the Senate.

It's not a matter of trying to get them to change their positions. They're going to bring enthusiasm and new ideas and pressures in Washington, and I think that's good. But I do think the leadership has got to learn very quickly to work with them and to turn it into positive energy.

And I believe they will. I think that John Boehner, as the next speaker, will do that, and I think Mitch McConnell and Jon Kyl will do it in the Senate.

CROWLEY: Congressman, you know, when you hear the word, OK, we need to co-opt them when they come in, what does that say to you?

And what do you see the role of these so-called Tea Party candidates inside the Republican Party, assuming they're going to caucus with Republicans? ARMEY: My own view is that was a bad choice of words.


Because you were talking about a group of people whose necks will stiffen immediately upon hearing that word.

These are independent-minded people. They really have no particular appreciation for the performance of either party in the past several years. They've -- they want to run for office in order to change that. For the most part, they've understood that our path to a position in Washington is through the Republican Party giving our small-government values, but we're here to reform and restore that party to dedicate a service to that proposition.

I think this class is going to be quite similar to the class of 1992, and the class of 1992, the Republican congressional class of 1992 was the cultural-changing class that resulted in the majority of '94. They're just going to happen to come in and get their majority at the same time they change the culture.

CROWLEY: So the question is who changes who, right?

You're, sort of, saying, look, they come in; you've got to deal with the structure the way it is. I mean, the Senate works the way the Senate works; the House works the way the House works, and...

LOTT: Well, I don't accept that.

CROWLEY: All right.

LOTT: I don't think you have to accept the culture the way it is. The culture is a problem.

CROWLEY: Well, it's the system the way it is.

LOTT: But here I think you get caught up in personalities when really what you're talking about is issues and policy. When Dick Armey and I were the majority leaders in the House and the Senate respectively, in the late 90s, we had a Democrat president, President Clinton.

And yet during that time -- he takes credit for a lot of it -- but during that time, we had -- we cut spending -- we controlled spending and then we cut it. We cut taxes. We had balanced budgets. We had welfare reform. We passed things like safe drinking water and portability of insurance. We got a lot of things done.

We didn't always do it just by doing it the way it was always done. We broke the mold several times. They led the way in the House, quite frankly.

CROWLEY: And -- but you know how the Senate works and you know how the House works. And in the end, do you think it's possible -- I was trying to game out the possibilities here. Do you think it's possible that Tea Party candidates, or Tea Party-blessed candidates who come into the Republican caucus can move the caucus more toward the middle, because they're going to have to reach out to Democrats to get something done?

So in other words, you've got, you know, the more conservative Tea Party candidates, the more liberal Democratic candidates. Isn't this possibly going to build up the middle?

ARMEY: Well, in fact, these candidates are the middle of American politics. Your own poll earlier revealed the American people are by and large disenchanted with both political parties. They want fiscal responsibility; they want fiscal restraint; they want good governments and creative new ideas.

This is a group of young members of Congress from both sides of the aisle -- I'm sorry -- primarily from the Republican side of the aisle that are going to provide that change.

But I must say, Trent, you recall in your own personal experience the establishment was so lackadaisical and unwilling to move forward and be creative that you left the House for the Senate, and that changed with that class of '92 that came in following you because they got together, before they ever got to Washington, and had a consolidation of who are we and what are our purposes and how are we going to stick together in order to make this establishment once again be disciplined and indeed disciplined in following the procedures -- parliamentary procedures of their own body.

One of the most heartbreaking things about Congress as we know it today is it's wholly undisciplined in its own processes by which you could make good legislation.

CROWLEY: Let me -- I want to move on to just another subject. Because before we -- you all count your chickens before they're hatched, I want to take a look at a couple of races and ask you the overall question, has the Tea Party activism helped or hurt the GOP?

Let me just show you a quick couple of polls.

From Nevada, where the Tea Party candidate overtook the establishment candidate to win the primary, the polls are now showing that Harry Reid, who once looked very vulnerable, is now in a dead heat with Sharron Angle, the Tea Party candidate.

Look at Colorado, where we see Michael Bennet, who looked quite vulnerable, Democrat. He's now leading Ken Buck, a Tea Party candidate, who threw out an established Republican, by three points. The Democrat is up.

And then in Kentucky, very Republican land, as both of you know, Rand Paul, a Tea Party-blessed candidate is now in a dead heat with Jack Conway. A Republican losing Kentucky would be interesting.

Have the Tea Party candidates made some of these states more vulnerable than a more established candidate might have? LOTT: Well, first I want to comment on a good example of the kind of people I think we will have coming into the -- into the Senate. Marco Rubio in Florida -- I was impressed with him from the beginning, and was supportive of his candidacy. This is a guy that was speaker of the Florida state house. He is going to come in and be a factor on the issues, but he also knows how to get things done. That's critical.

In those races you are talking about, I am surprised at that poll you just mentioned in Kentucky, because the numbers I have been seeing are very much in favor of Rand Paul. He -- you know, he came in there. He ran a good campaign. He beat the...

CROWLEY: This is an early September poll, showing him tied.

LOTT: He beat the -- well, I guess the anointed one. And he's still running a very strong campaign. I think he will win.

CROWLEY: Well, but, you know, and he may -- he may win. I'm not saying he won't. I'm just saying that all of these states look -- certainly Nevada looked like Reid was toppable. Certainly Kentucky, you would expect, would definitely go -- you'd expect the polls to be (inaudible). And yet you put people in here, or people have been, you know, nominated in the primary process who look like they've made these seats doable for Democrats.

ARMEY: Well, Harry Reid has spent a ton of money, and we knew he'd do that. I suspect that's been true of the Democrats in the other two races you mentioned as well.

But when it comes down to Election -- Election Day, it's energy and feet on the ground and who's moving people. Right now, the Democrat Party, rank and file across the country, is confused and demoralized. The great source of energy, right now, on the field of politics is the grassroots activists for small government. They're going to turn out the vote for the small-government conservative.

And I believe that I can say that, in the final analysis, as we saw in New Jersey, where our current governor was not in fact ever ahead in the polls, on Election Day, when it comes down to who really gets the vote to the polls, the small-government conservatives are going to win that contest.

LOTT: And I do think a story that needs to be emphasized, too, is states like Wisconsin, Washington, California, that people thought, oh, well, the Republicans won't have a chance there, our candidates are running neck and neck in all three races.

CROWLEY: Real quick yes-or-no answer to you all. Can the marriage of establishment Republicans and Tea Party insurgents survive?

ARMEY: Yes, it can. Look what we did in '92, '93, '94, '95. It can survive, and this time, it will survive with a duration that we did not have before. LOTT: Actually, it can, and we know because that's really where we came from. When I was elected in '72 as a Republican from Mississippi, that was unheard of. You know, I was, sort of, a revolutionary; same thing with Dick Armey, when he came to the House from Texas. Nobody thought he had a chance to win. He won and became majority leader. It will work. CROWLEY: You all say revelation -- revolution redux.

ARMEY: Absolutely. I was majority leader and I was never establishment.


CROWLEY: Thank you so much. Former Congressman Dick Armey, former Senator Trent Lott. Thank you so much for being here.


CROWLEY: Up next, a check of the top stories. And then, President Obama's new point man on the economy shares his funny side.


CROWLEY: Time for a check of today's top stories. Afghan and coalition forces killed a Taliban commander overnight. He was among five insurgents targeted in the eastern part of Afghanistan. According to NATO intelligence reports, the Taliban commander was planning to conduct rocket attacks against voting centers during parliamentary elections set for next week.

Sarah Shourd, one of the three American hikers detained in Iran since last July, is scheduled to be released, but the Iranian prosecutors are demanding $500,000 bail. Shourd's lawyer says she could be released as early as today or tomorrow.

A new report finds that the U.S. poverty rate has risen by a record amount under the Obama administration. The recession left 45 million people, about 15 percent of the U.S. population, in poverty last year. The trend is an estimate of 2009's Census data set to be released. All of this according to the Associated Press.

Six people are now reported missing after a massive gas line fire that decimated part of a California neighborhood. Four people were killed in the San Bruno explosion which occurred Thursday. The blast destroyed 37 homes.

And there is more help on the way for the 33 miners trapped in Chile. The men have received a power line that will allow them to install electrical lights in their shelter. And the miners' long- standing request for cigarettes has been granted. They'll be getting two packs a day. Could take until November to free the men.

Those are your top stories here on STATE OF THE UNION. Up next, when is it OK for the top White House economist to invoke the name of Karl Marx?

(COMMERCIAL BREAK) CROWLEY: The president has picked a new chairman for his Council of Economic Advisers, his long-time friend and adviser Austan Goolsbee.


OBAMA: He's one of the finest economists in the country.


CROWLEY: Goolsbee graduated Yale summa cum laude in economics, Ph.D. from MIT, Sloan fellow, Fulbright scholar, blah, blah, blah. Here's the good part.


UNIDENTIFIED MALE: Give it up for Austan Goolsbee, come on down.


CROWLEY: Austan Goolsbee, reigning champion of D.C.'s "Funniest Celebrity Contest." And before we go any further, yes, we use the word "celebrity" loosely here in Washington.


GOOLSBEE: When we came in office, the -- it was not that fun of a time to be here in the economy. But it was OK because as we took office, you know, it was an all-star team of economists, and we basically knew what to do. Panic.


GOOLSBEE: What we were coming in is let's react the right way when things happen, aiiiee!


GOOLSBEE: Let's just sort it out and start from the fundamentals. How do we throw money at this problem? And the thing is, most of the lessons aren't recent. I mean, it has been a long, long time since things were this bad. So we kind of had to go back and look at the old textbooks, Karl Marx, Trotsky.


CROWLEY: He is funny, but dock some points on originality. Check out "Saturday Night Live" alum Kevin Nealon, "Mr. Subliminal."


KEVIN NEALON, COMEDIAN: I don't care what you say about people in Queens, I think they're very sophisticated white trash. I don't know what they do for a living...

(END VIDEO CLIP) CROWLEY: Overall, though, we give our Goolsbee our congratulations on his new gig, the one at the White House, and our undying admiration for being the only chief presidential economic adviser in recent memory to have mentioned Karl Marx and Leon Trotsky in public.

Thanks for watching STATE OF THE UNION, I'm Candy Crowley in Washington. For our international viewers, "WORLD REPORT" is next. For everyone else, "FAREED ZAKARIA: GPS" starts right now.