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Again, we very much appreciate the fact that you were the first U.S. President to call for the creation of an independent Palestinian state. But in all the recent proposals that are being circulated, including the latest disengagement plan, we did not see any specific timetable. What happened to your pledge to create a Palestinian state by 2005? Well, 2005 may be hard, since 2005 is right around the corner. When I laid out the date of 2005, I believe it was around the time I went to Aqaba, Jordan. It was a very meaningful moment, where former Prime Minister Abu Mazen, myself, Prime Minister Sharon, and His Majesty, the King of Jordan, stood up and pledged to work together. But we hit a bump in the road-violence, as well as Abu Mazen was replaced, which changed the dynamic. I do not want to make any excuses, but nevertheless I think the timetable of 2005 is not as realistic as it was 2 years ago. Nevertheless, I do think we ought to push hard as fast as possible to get a state in place. And I repeat to you, sir, that part of my frustrations were alleviated with the Quartet making the statement it made the other day-the Quartet being the EU, Russia, United Nations, and the United States, working together. But there is a certain sense of responsibility that falls upon the Palestinians, reform-minded Palestinians to step up and say, Yes, we accept these institutions necessary for a peaceful state to emerge. Egypt has got, in my judgment, an important role to play to help make sure there is security in Gaza as the civil structure is put in place and as the Government structure is put in place. And President Mubarak, I think, is willing to assume that responsibility over time. I do not want to put him on a timetable, but I do believe he is committed to helping bring security to that part of the world. It is in Egypt's interest that there be security. You know, ENTITY, we did our best, I mean, getting all the factions together in Cairo, Egypt, to try to convince them to have one single opinion and that we are ready for training the police and security guards. President Mubarak has been a leader on the issue of security.

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As you say, he is convened a very important meeting to make it clear that in order for there to be a peaceful evolution of a state, there has to be security, and that he is willing to train police. Egypt plays a mighty important role. And it is a great country, and it should play an important role. You have said, ENTITY, in recent statements that the assurances you gave to Sharon did not differ from what was being discussed and what we mentioned now and previous final status talks. Why were these proposals absent from your recent letters? Look, I want to assure you once again that I understand the sensitivity of these final status issues. But they will be negotiated, not between the United States and the parties; they are negotiated between Israel and the Palestinian Government of a new state. It is what I told my friend President Mubarak. I just told that to His Majesty, the King of Jordan. And I will explain that consistent position of mine. People-I think some people are trying to read something into what I said or did not say. This is an opportunity that we cannot let go by. There is a lot of argument about final status issues, and they are very important issues, do not get me wrong. You have praised Sharon's proposal to withdraw from Gaza, which is an idea that does not represent more than one percent of--Palestine. Would you accept guarantee for granting Palestinians similar letter of assurances stating that any annexation of West Bank territory has to be minimal and that Israel has to pull out from nearly the entire West Bank, according to Security Resolution 242 and 338? No, I will write-I will say the exact same thing in a letter to the Palestinians that I have said publicly today, that I believe an opportunity exists, and it is essential that the Palestinian Authority find reform-minded leaders who are willing to step up and lead. You have repeatedly-repeatedly stated that Israel had the right to defend itself. But do you believe that by building walls and settlements and by assassinating Palestinian leaders, Israel is enhancing security and helping and reassuring peace talks? I think that any country has a right to defend herself. And you are looking at a President who is now in the process of defending my country against terrorist attacks. It is very difficult for the President of the United States to condemn anybody for defending themselves. My problem with the wall was not the security aspect of the wall.

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My problem with the wall was that at one point in time, it looked like it was trying to prejudge any final status, and that I hope-my hope is, at one point in time, the wall is unnecessary. The hope is, is that a peaceful Palestinian state, that-I keep saying that, but I think it is possible-but a peaceful Palestinian state must be a state in which youngsters are well educated and have a chance to make a living and have a chance to- parents have a chance to realize-raise their children in a peaceful setting. And I think that a peaceful Palestinian state will eventually change the dynamics on that which exists on the ground today. I thank you very much for your patience. I will move to the other topic, Iraq. You said yesterday that you first learned of the abuses of Abu Ghraib and other prison-and other prisons in Iraq generally. Why has it taken so long to adopt serious measures against those directly responsible and their commanders? First of all, I learned about the fact that there was an investigation going on. I did not know the extent of the abuse. And there was a report done as a result of those investigations, and what you are hearing here in America is, why did not I see the report? That is one of the questions I am asking, because I first saw about the pictures on television screens. But one of the things you have got to understand about our country is that, one, we reject this kind of treatment of people. We will investigate, and there is a procedure in the military that is necessary to make sure that the guilty are truly guilty. It is very important for the Commander in Chief not to prejudge. Your viewers have got to know that here in America, in our system, the judicial process will be fully transparent, and you are beginning to see the transparency. The press corps wants to know different questions, and those questions need to be answered. Tomorrow our Secretary of Defense, in whom I have got confidence and believe in, will go up and testify at the United States Senate. So you will see the process evolve as to-and the truth come out as to why the military needed to take the time necessary to fully investigate these horrible, horrible acts. And I repeat to you, sir, I am sorry for the humiliation suffered by those individuals. It makes me sick to my stomach to see that happen. I will tell you what else I am sorry about.

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I am sorry that the truth about our soldiers in Iraq becomes obscured. In other words, we have got fantastic citizens in Iraq, good kids, good soldiers, men and women who are working every day to make Iraqi citizens' lives better. And there are a thousand acts of kindness that take place every day of these great Americans who really do care about the citizens in Iraq. It is an awful, awful period for the American people, just like it is awful for the Iraqi citizens to see that on their TV screens. Again, sir, do you feel like you need to apologize to the Iraqis and the Arab world after you said that, I am sorry ? Well, I am sorry for the prisoners. I think it is humiliating, and it is, again-what the Arab world must understand is a couple of things. One, under a dictatorship, these- this would not be transparent. In other words, if there was torture under a dictator, we would never know the truth. In a democracy, you will know the truth, and justice will be done. And that is what people need to know. How much control are you ready to cede to the United Nations and the future Iraqi Government? Well, I think the Iraqi Government wants the sovereignty. And I think that is the proper-the proper relationship is for the Iraqi-the sovereignty to be passed to the Iraqi Government with help from coalition as well as the United Nations. I will tell you, a very good role for the United Nations is to help set up the elections that will take place in January of 2005. And the United Nations Security Council resolution is important, because it says to members of the world, please participate in helping this Government grow. But the sovereignty-Iraqi people want to run the Government themselves. That is not to say they do not want help. Of course they want help. But they want to run their Government. Frankly, you hear frustrations about America there in Iraq. And I can understand that, because the Iraq-nobody wants their Government run for them. The people of Iraq want to run their own Government, and that is what will happen. How long do you think the United States will stay in Iraq? A recent Gallup Poll showed that 71 percent of Iraqis considered the United States an occupying power. Does this disappoint you?

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I mean, if I were an Iraqi and I saw people-was asked, am I happy that somebody is running my Government for me, which basically is what the question implies, the answer would be, No, we want to run our Government ourselves. And that is why we are transferring sovereignty. I will tell you, however, the Iraqi people understand that America needs to be around for a while to help make sure that the killers-the foreign fighters who are there, disgruntled former Saddamists- do not wreak havoc. And they are-and they need help right now, until security-Iraqi security forces are efficient, are formed in a way that will be able to be responsive to the dangers of these few people. It is essential that there be a secure environment as Iraq emerges from this period of tyranny, and they want our help there. They also want the reconstruction aid. I mean, there is some wonderful things that have happened in Iraq, which of course do not get mentioned very often. For example, I will tell you an interesting thing that is happened, is that the currency, the old currency was replaced by a new currency in about a 6- or 7-month period of time. And yet, it was done without a lot of arbitrage, a lot of counterfeiting, theft. There was no theft, and the currency is stable, which is a remarkable feat, when you think about it. The oil production, which is Iraqi oil production, it is not American, it is -Iraq owns the oil-it is up to about 2 1/2 million barrels a day. And then we had this period of fighting, where elements in society decided to fight because they saw freedom coming and they wanted to try and stop it, is what they are trying to do. And we took them on and are defeating them. What is happening now is that big projects are starting back up again because the security situation is a little better, and big companies are moving in with these reconstruction projects. It will start back up, and Iraq will be better for it. Yes. Do you care to share the details of that meeting with us? I did have the honor of welcoming a group of women to the Oval Office. I was told ahead of time that some members of the delegation did not want to come in the Oval Office because they did not want to get their picture taken, because they were afraid, not of American reaction but of reaction back home.

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I met with those ladies later. The door opened to the Oval Office, and the first woman that walked in looked at me, and she burst out in tears and said, You are my liberator. It touched my heart. And I, of course-I held her in my arms and tears came to my eyes as she cried out of joy. She said, Thank you, ENTITY. You liberated us. I said, No, the American people helped liberate you. We had about six of us in our office. These were people that were obviously somewhat taken aback that they were in with the President of the United States. And yet, when they were with me, it was deeply emotional. It touched my heart. I still remember it clearly today. It made me very joyous inside to think that people who had been enslaved to tyranny, fearful of torture, probably had friends in mass graves, would be so thankful for the chance to live in peace. And I will tell you what is really important for the people-those people, those women, and I think about them all the time, is for me to never show any weakness in the face of the dangers in Iraq. In other words, those killers want us to leave. But my attitude is, having met with these women, if we leave, they will be in jeopardy. And I have an obligation, no matter how difficult it gets, to stay strong on behalf of those women and their chance to raise their children in freedom. The other day I had the Olympic Committee from Iraq come, two members of the Olympic Committee. I love sports, for starters, and the head of the women's Olympic committee came. And she told me about her 2-year-old son and 1-year-old son. She had quit the Olympic team because she did not want to run for one of Saddam's sons, for fear of her life, and yet she was so grateful for the freedom she has. I met with Fulbright Scholars, young Iraqis that are here studying in the United States. I met with doctors from Iraq who are getting new training, all of whom are desperate for there to be a free society so they can live in peace, and that is why we share the same goal. On greater Middle East, ENTITY, has your vision on the greater Middle East initiative changed at all in light of recent reactions from Arab and European countries? What will be presented to the G-8 leaders in their meeting next month?

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My vision for the greater Middle East reforms were strengthened by the Alexandria Library Conference. You might have heard of that. I saw the spirit of that conference. There are people in the Middle East who understand the need for reforms. Now, when I talk about reforms, I fully understand the pace of reform will be different from country to country. I am as strong today on reforms in the greater Middle East as I have ever been. I fully understand criticism. I mean, I get criticized all the time in my job. I think the job of a leader is to have a vision, a vision that is hopeful and optimistic and one based upon certain principles, a principle like rule of law, a principle like human dignity by empowering individuals to make decisions in the political process, a principle that every person deserves respect, a principle that says that a peaceful society is more likely to be one that is a free society. And therefore, I will not abandon those principles, no matter how significant the pressure. Why does your administration insist on imposing sanctions against Syria? Because they will not fight terror, and they will not join us in fighting terror. We have asked them to do some things, and they have not responded. And Congress passed a law saying that if Syria will not join-for example, booting out a Hezbollah office out of Damascus-that the President has the right to put sanctions on. I have yet to impose a sanction yet, but the bill enables me to do so. And we have talked to the Syrian leader very clearly, and these are not -these are reasonable requests, and thus far, he has not heeded them. And that is why, if I make the decision to put on sanctions, it will be because he has not been a full partner in the war against terror. That would create another-more problems in the area. I mean, there is no need to harbor people who are expressing hatred. And if the world would join together to rout out terrorist organizations who want to kill innocent people, it would be a heck of a lot better off. We have got Muslims killing Muslims in Iraq. There are Muslims who will kill an innocent Muslim for the sake of trying to create fear. What they are trying to do is they are trying to shake our will, our collective will. For those of us who love freedom, they were trying to say, Well, do not work for freedom. Leave us alone so we can kill other people.

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ENTITY, Senator Paul Laxalt, your old friend, said that early on in your administration, not long after the assassination attempt, that he told you he thought that the Lord saved you out there on the sidewalk, not so much to save the economy but to save the world, and that what he meant by that-to reach some sort of an arms control agreement with the Soviets. And he said you did not disagree with that. Now, you have recently in the speech at Glassboro said that you are firmly committed to an arms reduction. I was just wondering, the Soviets have made a proposal now for deep reduction in offensive weapons in return for some restraint on deployment of the space-based defense. Can you accept that in principle? Well, almost all of them in principle-there have been, you know, like the figures and so forth, talking of the weapons. I think because of the mix that each of us sees, we have chosen a different way to go-with what we call the triad-than they have. They have placed more reliance on the intercontinental. Now, we are still in the process of studying their latest proposal. But I am encouraged because-not only this one but the first proposals that they began making-it is , to my knowledge, the first time that the Soviets have ever proposed actually reducing the number of weapons. Well, you may be able to accept that in principle, then-that proposal? Yes, but do not pin me down on this, because, as I say, we are still studying this and- The other thing is just what kind of priority do you give-I mean, how high a priority do you give on arms control or arms reduction? Would it be possible, for example, to raise the level of the Geneva talks from ambassadorial level to the level of foreign minister to accelerate the progress there? But whatever way is necessary to get an agreement, we will do. Eventually, of course, it has to come back to the top. And, therefore, if the General Secretary and I could in a forthcoming summit arrive at some agreements there, and then hand it over to our negotiators to put it down on paper and work out the details-but we agreed, as you say, in principle, then, on all the major elements-that would probably help shortcut it, instead of waiting for something to come back to us and then having to go through it, dotting every i and so forth.

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The previous efforts at arms-which have literally only been a kind of legitimizing of a continued arms increase-I have been critical of those. That was why I spoke as harshly as I did about a couple of those stories. Is it your highest priority for a second term? I think that this could be as important a thing for the world at large. If anything is to remove this menace-for the world to sit here with the MAD policy, as it is called-and it is mad, even though it means mutual assured destruction. The idea that we are going to base our hopes for peace on each being able to destroy the other and, therefore, hoping that no one will suddenly go mad and push the button. ENTITY, I would like to see if I cannot get you to be a little more specific on what it is you do not like about the latest Soviet offer. Is it the level of reductions? Is it the link to the ABM treaty? Can you tell us what is- It is things of that kind that have to be ironed out, that are not specific, and that we might, in some instance, find ourselves in disagreement. We have announced our willingness several times of changed figures to approximate theirs in which we are willing to buy any substantial reduction as long as we both are aiming eventually at the total elimination. So, you do have problems in all of those three areas-with the link to the ABM treaty? I mean, that is a crucial part of their latest offer. As I say, we are still studying those things. And I am waiting for some of the people who are dealing with the exact terms-for us to get together and sit down and see what our positions really are. As a matter of principle, is some sort of hold-down on SDI, some sort of delay in the deployment of the SDI-is that acceptable as part of the package? We know that this has been of great concern to them-the SDI. with the idea of making it possible for us mutually to depend more on defensive systems than on just the threat of overpowering offensive systems. And we have some ideas about that, too, which we think will be forthcoming when we start responding to their latest proposal. I just want to ask you, on a sort of a lighter

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You have been mostly silent on the subject of the Middle East peace process for months if not more. You are not interested, you are pessimistic, you felt burnt the last time around. What accounts for the silence, and where do you think this is headed? The silence on my part is a direct result of my secretary of state, John Kerry, engaging in some of the most vigorous, active diplomacy that we have seen on this issue in many years. And John is not doing that by accident. He is doing it because as an administration we think that it is in the interest of the Israelis and the Palestinians, but also in the interest of the United States and the world to arrive at a framework for negotiations that can actually bring about a two-state solution that provides Israel the security it needs peace with its neighbors at a time when the neighborhood has gotten more volatile, and gives Palestinians the dignity of a state. I think John has done an extraordinary job, but these are really difficult negotiations. I am very appreciative that Prime Minister Netanyahu and President Abbas have taken them very seriously. And you are keeping up to date on all of this? John reports to me almost weekly about progress and occasionally asks for direction. It does not serve anybody's purposes for me to be popping off in the press about it. In fact, part of what both the Israelis and the Palestinians and us agreed to at the beginning of these negotiations was that we would not be characterizing them publicly until we were able to report on success or until the negotiations actually broke down. We are coming to a point, though, over the next couple of months where the parties are going to have to make some decisions about how they move forward. And my hope and expectation is, despite the incredible political challenges, that both Prime Minister Netanyahu and Abbas are able to reach past their differences and arrive at a framework that can move us to peace. We are running out of time. We are running out of possibilities. If we do not succeed now and I know I am raising those stakes but if we do not succeed now, we may not get another chance. He has also suggested strongly that there might be a third intifada down the road and that if this peace process does not work, Israel itself could be facing international isolation and boycott. Do you agree with this assessment? And, obviously, this is a conflict that has gone on for decades. And humanity has a way of muddling through, even in difficult circumstances.

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So you never know how things play themselves out. But John Kerry, somebody who has been a fierce advocate and defender on behalf of Israel for decades now, I think he has been simply stating what observers inside of Israel and outside of Israel recognize, which is that with each successive year, the window is closing for a peace deal that both the Israelis can accept and the Palestinians can accept in part because of changes in demographics; in part because of what is been happening with settlements; in part because Abbas is getting older, and I think nobody would dispute that whatever disagreements you may have with him, he has proven himself to be somebody who has been committed to nonviolence and diplomatic efforts to resolve this issue. We do not know what a successor to Abbas will look like. I believe that President Abbas is sincere about his willingness to recognize Israel and its right to exist, to recognize Israel's legitimate security needs, to shun violence, to resolve these issues in a diplomatic fashion that meets the concerns of the people of Israel. And I think that this is a rare quality not just within the Palestinian territories, but in the Middle East generally. For us not to seize that opportunity would be a mistake. And I think John is referring to that fact. What we know is that it gets harder by the day. What we also know is that Israel has become more isolated internationally. We had to stand up in the Security Council in ways that 20 years ago would have involved far more European support, far more support from other parts of the world when it comes to Israel's position. And that is a reflection of a genuine sense on the part of a lot of countries out there that this issue continues to fester, is not getting resolved, and that nobody is willing to take the leap to bring it to closure. In that kind of environment, where you have got a partner on the other side who is prepared to negotiate seriously, who does not engage in some of the wild rhetoric that so often you see in the Arab world when it comes to Israel, who has shown himself committed to maintaining order within the West Bank and the Palestinian Authority and to cooperate with Israelis around their security concerns for us to not seize this moment I think would be a great mistake. With permanent borders? And has an opportunity also to take advantage of a potential realignment of interests in the region, as many of the Arab countries see a common threat in Iran.

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The only reason that that potential realignment is not, and potential cooperation is not, more explicit is because of the Palestinian issue. I want to come to Iran in a moment, but two questions about two leaders you are going to be dealing with pretty intensively. Abu Mazen all these things you say are true, but he is also the leader of a weak, corrupt and divided Palestinian entity that is already structurally semi-powerless. Do you think he could deliver anything more than a framework agreement? Is this the guy who can lead the Palestinian people to say, OK, no more claims against Israel, permanent peace, permanent recognition? What is lost by testing it? If in fact a framework for negotiations is arrived at, the core principles around which the negotiations are going to proceed is arrived at I have no doubt that there are going to be factions within the Palestinian community that will vigorously object in the same way that there are going to be those within Israel who are going to vigorously object. That for all that we have seen over the last several decades, all the mistrust that is been built up, the Palestinians would still prefer peace. They would still prefer a country of their own that allows them to find a job, send their kids to school, travel overseas, go back and forth to work without feeling as if they are restricted or constrained as a people. So I actually think that the voices for peace within the Palestinian community will be stronger with a framework agreement and that Abu Mazen's position will be strengthened with a framework for negotiations. There would still be huge questions about what happens in Gaza, but I actually think Hamas would be greatly damaged by the prospect of real peace. And the key question, the legitimate question for Israel, would be making sure that their core security needs are still met as a framework for negotiations led to an actual peace deal. And part of what John Kerry has done has been to dig into Israel's security needs with the help of General John Allen, the former commander in Afghanistan. And they have developed, based on conversations with the Israeli Defense Forces about their defense needs, they have come up with a plan for how you would deal with the Jordan Valley, how you would deal with potential threats to Israel that are unprecedented in detail, unprecedented in scope. And as long as those security needs were met, then testing Abbas ends up being the right thing to do.

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My impression watching your relationship with Netanyahu over the years is that you admire his intelligence and you admire his political skill, but you also get frustrated by an inability or unwillingness on his part to spend political capital in terms of risking coalition partnerships in order to embrace what he says he accepts, a two-state solution. When he comes to Washington, how hard are you going to push him out of his comfort zone? And I take him at his word when he says that he sees the necessity of resolving the Israeli-Palestinian conflict. I think he genuinely believes that. I also think that politics in Israel around this issue are very difficult. You have the chaos that is been swirling around the Middle East. People look at what is happening in Syria. They look at what is happening in Lebanon. Obviously, they look at what is happening in Gaza. And understandably a lot of people ask themselves, Can we afford to have potential chaos at our borders, so close to our cities? So he is dealing with all of that, and I get that. What I have said to him privately is the same thing that I say publicly, which is the situation will not improve or resolve itself. And for Bibi to seize the moment in a way that perhaps only he can, precisely because of the political tradition that he comes out of and the credibility he has with the right inside of Israel, for him to seize this moment is perhaps the greatest gift he could give to future generations of Israelis. And as somebody who occupies a fairly tough job himself, I am always sympathetic to somebody else's politics. I have not yet heard, however, a persuasive vision of how Israel survives as a democracy and a Jewish state at peace with its neighbors in the absence of a peace deal with the Palestinians and a two-state solution. Nobody has presented me a credible scenario. The only thing that I have heard is, We will just keep on doing what we are doing, and deal with problems as they arise. And we will build settlements where we can. And where there are problems in the West Bank, we will deal with them forcefully. We will cooperate or co-opt the Palestinian Authority. And yet, at no point do you ever see an actual resolution to the problem. It is maintenance of a chronic situation. And my assessment, which is shared by a number of Israeli observers, I think, is there comes a point where you cannot manage this anymore, and then you start having to make very difficult choices.

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Do you resign yourself to what amounts to a permanent occupation of the West Bank? Is that the character of Israel as a state for a long period of time? Do you perpetuate, over the course of a decade or two decades, more and more restrictive policies in terms of Palestinian movement? Do you place restrictions on Arab-Israelis in ways that run counter to Israel's traditions? Well, I am being honest that nobody has provided me with a clear picture of how this works in the absence of a peace deal. If that is the case one of the things my mom always used to tell me and I did not always observe, but as I get older I agree with is if there is something you know you have to do, even if it is difficult or unpleasant, you might as well just go ahead and do it, because waiting is not going to help. If not now, when? This is not an issue in which we are naive about the challenges. I deal every day with very difficult choices about U.S. security. As restrained, and I think thoughtful, as our foreign policy has been, I am still subject to constant criticism about our counterterrorism policies, and our actions in Libya, and our lack of military action in Syria. And so if I am thinking about the prime minister of Israel, I am not somebody who believes that it is just a matter of changing your mind and suddenly everything goes smoothly. But I believe that Bibi is strong enough that if he decided this was the right thing to do for Israel, that he could do it. If he does not believe that a peace deal with the Palestinians is the right thing to do for Israel, then he needs to articulate an alternative approach. And as I said before, it is hard to come up with one that is plausible. You told me in an interview six years ago, when you were running for president, you said, My job in being a friend to Israel is partly to hold up a mirror and tell the truth and say if Israel is building settlements without any regard to the effects that this has on the peace process, then we are going to be stuck in the same status quo that we have been stuck in for decades now. It is been the official position of the United States for decades that settlements are illegitimate. If this process fails, do you see this becoming more than the rhetorical position of the United States?

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Whether that has impact on the way you deal with the United Nations questions, an impact on the aid that the U.S. provides Israel? The U.S. commitment to Israel's security is not subject to periodic policy differences. That is a rock-solid commitment, and it is one that I have upheld proudly throughout my tenure. I think the affection that Americans feel for Israel, the bond that our people feel and the bipartisan support that people have for Israel is not going to be affected. So it is not realistic nor is it my desire or expectation that the core commitments we have with Israel change during the remainder of my administration or the next administration. But what I do believe is that if you see no peace deal and continued aggressive settlement construction and we have seen more aggressive settlement construction over the last couple years than we have seen in a very long time if Palestinians come to believe that the possibility of a contiguous sovereign Palestinian state is no longer within reach, then our ability to manage the international fallout is going to be limited. And that has consequences. Look, sometimes people are dismissive of multilateral institutions and the United Nations and the EU and the high commissioner of such and such. There is a lot of hot air and rhetoric and posturing that may not always mean much. But in today's world, where power is much more diffuse, where the threats that any state or peoples face can come from non-state actors and asymmetrical threats, and where international cooperation is needed in order to deal with those threats, the absence of international goodwill makes you less safe. The condemnation of the international community can translate into a lack of cooperation when it comes to key security interests. It means reduced influence for us, the United States, in issues that are of interest to Israel. Let us go to Iran. Two years ago, you told me in an interview that, I think both the Iranian and the Israeli governments recognize that when the United States says it is unacceptable for Iran to have a nuclear weapon, we mean what we say. You know, I do not have to tell you, that many of your Arab and Israeli friends are worried, post-Syria the incident in which you drew a red line and there was no military enforcement of it they are worried about your willingness to use force under any circumstance. How do you think the Iranian regime saw your reluctance to use force against Assad? And does this have any impact on the way they are dealing with the current nuclear negotiations?

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I threatened kinetic strikes on Syria unless they got rid of their chemical weapons. When I made that threat, Syria denied even having chemical weapons. In the span of 10 days to two weeks, you had their patrons, the Iranians and the Russians, force or persuade Assad to come clean on his chemical weapons, inventory them for the international community, and commit to a timeline to get rid of them. And the process has moved more slowly than we would like, but it has actually moved, and we have now seen 15 to 20 percent of those chemical weapons on their way out of Syria with a very concrete schedule to get rid of the rest. That would not have happened had the Iranians said, Obama's bluffing, he is not actually really willing to take a strike. If the Russians had said, Ehh, do not worry about it, all those submarines that are floating around your coastline, that is all just for show. Of course they took it seriously! That is why they engaged in the policy they did. Now, the truth is, some of our commentators or friends in the region, their complaint is not that somehow we indicated an unwillingness to use military force in the region their complaint is that I did not choose to go ahead, even if we could get a deal on chemical weapons, to hit them anyway as a means of getting rid of Assad, in what has increasingly become a proxy war inside of Syria. You do not believe the Iranian leadership now thinks that your all options are on the table threat as it relates to their nuclear program you do not think that they have stopped taking that seriously? I know they take it seriously. How do you know they take it seriously? We have a high degree of confidence that when they look at 35,000 U.S. military personnel in the region that are engaged in constant training exercises under the direction of a president who already has shown himself willing to take military action in the past, that they should take my statements seriously. Now, that does not mean that that is my preferred course of action. There are always consequences to military action that are unpredictable and can spin out of control, and even if perfectly executed carry great costs. So if we can resolve this issue diplomatically, we absolutely should.

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And the fact that in painstaking fashion, over the course of several years, we were able to enforce an unprecedented sanctions regime that so crippled the Iranian economy that they were willing to come to the table and, in fact, helped to shape the Iranian election, and that they are now in a joint plan of action that for the first time in a decade halts their nuclear program no centrifuges being installed; the 20 percent enriched uranium being drawn down to zero; Arak on hold; international inspectors buzzing around in ways that are unimaginable even a year ago what that all indicates is that there is the opportunity, there is the chance for us to resolve this without resorting to military force. And if we have any chance to make sure that Iran does not have nuclear weapons, if we have any chance to render their breakout capacity nonexistent, or so minimal that we can handle it, then we have got to pursue that path. And that has been my argument with Prime Minister Netanyahu; that has been my argument with members of Congress who have been interested in imposing new sanctions. My simple point has been, we lose nothing by testing this out. If we were able to get Iran to operate in a responsible fashion not funding terrorist organizations, not trying to stir up sectarian discontent in other countries, and not developing a nuclear weapon you could see an equilibrium developing between Sunni, or predominantly Sunni, Gulf states and Iran in which there is competition, perhaps suspicion, but not an active or proxy warfare. I think I understand what you mean, but in the Gulf and this goes to the question of why our allies are uneasy in the Gulf you have a king of Saudi Arabia who has been asking for years for you to cut the head off the snake, referring to Iran. They are hearing this they are reading this and hearing you say, live with the snake. Do you understand why they are uneasy about your approach, or your broader philosophical approach, or are they overinterpreting this opening to Iran? Here is what I understand. For years now, Iran has been an irresponsible international actor. They have sponsored terrorism. They have threatened their neighbors. They have financed actions that have killed people in neighboring states. And Iran has also exploited or fanned sectarian divisions in other countries. In light of that record, it is completely understandable for other countries to be not only hostile towards Iran but also doubtful about the possibilities of Iran changing. I get that.

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But societies do change I think there is a difference between an active hostility and sponsoring of terrorism and mischief, and a country that you are in competition with and you do not like but it is not blowing up homes in your country or trying to overthrow your government. And you feel there is a real opportunity to achieve a genuine breakthrough? And the new leaders are just for show. Let us assume all that. If we can ensure that they do not have nuclear weapons, then we have at least prevented them from bullying their neighbors, or heaven forbid, using those weapons, and the other misbehavior they are engaging in is manageable. If, on the other hand, they are capable of changing; if, in fact, as a consequence of a deal on their nuclear program those voices and trends inside of Iran are strengthened, and their economy becomes more integrated into the international community, and there is more travel and greater openness, even if that takes a decade or 15 years or 20 years, then that is very much an outcome we should desire. So again, there is a parallel to the Middle East discussion we were having earlier. The only reason you would not want us to test whether or not we can resolve this nuclear program issue diplomatically would be if you thought that by a quick military exercise you could remove the threat entirely. And since I am the commander in chief of the most powerful military on earth, I think I have pretty good judgment as to whether or not this problem can be best solved militarily. And what I am saying is it is a lot better if we solve it diplomatically. So why are the Sunnis so nervous about you? I think that there are shifts that are taking place in the region that have caught a lot of them off guard. I think there was a comfort with a United States that was comfortable with an existing order and the existing alignments, and was an implacable foe of Iran, even if most of that was rhetorical and did not actually translate into stopping the nuclear program. What I have been saying to our partners in the region is, We have got to respond and adapt to change. What is the best way for us actually to make sure Iran does not have a nuclear weapon? I am not big on extremism generally. I do not think you will get me to choose on those two issues. What I will say is that if you look at Iranian behavior, they are strategic, and they are not impulsive.

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They have a worldview, and they see their interests, and they respond to costs and benefits. And that is not to say that they are not a theocracy that embraces all kinds of ideas that I find abhorrent, but they are not North Korea. They are a large, powerful country that sees itself as an important player on the world stage, and I do not think has a suicide wish, and can respond to incentives. And that is the reason why they came to the table on sanctions. So just to finish up, the most important thing that I have said to Bibi and members of Congress on this whole issue is that it is profoundly in all of our interests to let this process play itself out. Let us test whether or not Iran can move far enough to give us assurances that their program is peaceful and that they do not have breakout capacity. If, in fact, they cannot get there, the worst that will have happened is that we will have frozen their program for a six-month period. We will have much greater insight into their program. All the architecture of our sanctions will have still been enforced, in place. Their economy might have modestly improved during this six-month to one-year period. But I promise you that all we have to do is turn the dial back on and suddenly Well, partly because 95 percent of it never got turned off. And we will be in a stronger position to say to our partners, including the Russians, the Chinese and others, who have thus far stuck with us on sanctions, that it is Iran that walked away; it was not the U.S., it was not Congress, it was not our new sanctions that jettisoned the deal. And we will then have the diplomatic high ground to tighten the screws even further. If, on the other hand, it is perceived that we were not serious about negotiations, then that ironically is the quickest path to sanctions unraveling, if in fact Iran is insincere. If sanctions got them to the table, why would not more sanctions keep them at the table? The logic of sanctions was to get them to negotiate. The logic of the joint action plan is to freeze the situation for a certain period of time to allow the negotiators to work.

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The notion that in the midst of negotiations we would then improve our position by saying, We are going to squeeze you even harder, ignores the fact that Rouhani and the negotiators in Iran have their own politics. They have got to respond to their own hardliners. And there are a whole bunch of folks inside of Iran who are just as suspicious of our motives and willingness to ultimately lift sanctions as we are suspicious of their unwillingness to get rid of their nuclear program. Even in the old Westerns or gangster movies, right, everyone puts their gun down just for a second. You sit down, you have a conversation; if the conversation does not go well, you leave the room and everybody knows what is going to happen and everybody gets ready. But you do not start shooting in the middle of the room during the course of negotiations. So the logic of new sanctions right now would only make sense if, in fact, we had a schedule of dismantling the existing sanctions. And we have kept 95 percent of them in place. Iran is going to be, net, losing more money with the continuing enforcement of oil sanctions during the course of this joint plan of action than they are getting from the modest amount of money we gave them access to. And, by the way, even though they are talking to European businesses, oil companies have been contacting Iran and going into Iran, nobody has been making any deals because they know that our sanctions are still in place. They may want to reserve their first place in line if, in fact, a deal is struck and sanctions are removed. But we have sent a very clear message to them and, by the way, to all of our partners and the P5 + 1, that they better tell their companies that their sanctions are still in force, including U.S. unilateral sanctions. And we are going to enforce them, and we have been enforcing them during the course of these discussions so far. I believe that force can be justified on humanitarian grounds, as it was in the Balkans, or in other places that have been scarred by war. Inaction tears at our conscience and can lead to more costly intervention later. I was really struck by that last sentence. I am wondering at what point in Syria does it become too much to bear? I am not talking about the bifurcated argument, boots on the ground or nothing, but what does Assad have to do to provoke an American-led military response?

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If you could roll back the clock three years, could you have done more to build up the more-moderate opposition groups? I think those who believe that two years ago, or three years ago, there was some swift resolution to this thing had we acted more forcefully, fundamentally misunderstand the nature of the conflict in Syria and the conditions on the ground there. When you have a professional army that is well-armed and sponsored by two large states who have huge stakes in this, and they are fighting against a farmer, a carpenter, an engineer who started out as protesters and suddenly now see themselves in the midst of a civil conflict the notion that we could have, in a clean way that did not commit U.S. military forces, changed the equation on the ground there was never true. We have supported military assistance to a moderate opposition in Syria, and we have done so at a pace that stretches the limits of what they can absorb. But the fact of the matter is if you are looking at changing the military facts on the ground, the kind of involvement, the kind of involvement on the part of U.S. military forces that would have been required would have been significant enough that there would have been severe questions about our international authority to do so. You do not have a UN mandate; congressional authority we saw how that played out even on the narrow issue of chemical weapons. And there was the possibility that we would have made the situation worse rather than better on the ground, precisely because of U.S. involvement, which would have meant that we would have had the third, or, if you count Libya, the fourth war in a Muslim country in the span of a decade. Having said all that the situation in Syria is not just heartbreaking, but dangerous. Over the last two years I have pushed our teams to find out what are the best options in a bad situation. And we will continue to do everything we can to bring about a political resolution, to pressure the Russians and the Iranians, indicating to them that it is not in their interests to be involved in a perpetual war. I am always darkly amused by this notion that somehow Iran has won in Syria. I mean, you hear sometimes people saying, They are winning in Syria. And you say, This was their one friend in the Arab world, a member of the Arab League, and it is now in rubble. It is bleeding them because they are having to send in billions of dollars.

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Were you surprised by the intensity of the reaction, and the hostility from the AIG bonus debacle? I was not surprised by it. Our team was not surprised by it. The one thing that I have tried to emphasize, though, throughout this week, and will continue to try to emphasize during the course of the next several months as we dig ourselves out of the economic hole that we are in, is we cannot govern out of anger. We have got to try to make good decisions based on the facts, in order to put people back to work, to get credit flowing again. And I am not going to be distracted by what is happening day to day. Well, I think that as a general proposition, you do not want to be passing laws that are just targeting a handful of individuals. You want to pass laws that have some broad applicability. And as a general proposition, I think you certainly do not want to use the tax code to punish people. I think that you have got a pretty egregious situation here that people are understandably upset about. And so let us see if there are ways of doing this that are both legal, that are constitutional that uphold our basic principles of fairness, but do not hamper us from getting the banking system back on track. You have got a piece of legislation that could affect tens of thousands of people. Some of these people probably had nothing to do with the financial crisis. And some of them probably deserve the bonuses that they got. Well, that is why we are going to have to take a look at this legislation carefully. Clearly the AIG folks getting those bonuses did not make sense. And one of the things that I have to do is to communicate to Wall Street that, given the current crisis that we are in, they cannot expect help from taxpayers but they enjoy all the benefits that they enjoyed before the crisis happened. You get a sense that, in some institutions that has not sunk in. That you cannot go back to the old way of doing business, certainly not on the taxpayers' dime. And we do not want to cut off our nose to spite our face. Your Treasury Secretary Tim Geithner has been under a lot of pressure this week. Has he volunteered to, or come to you and said, Do you think I should step down? And if he were to come to me, I'd say, Sorry, Buddy. You you have still got the job. He is got a lot of stuff on his plate.

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And he is doing a terrific job. And I take responsibility for not, I think, having given him as much help as he needs. It is gotten tougher in the age of 24-7 news cycles. And a lot of people who we think are about to serve in the administration and Treasury suddenly say, Well, you know what? I do not want to go through some of the scrutiny, embarrassment, in addition to taking huge cuts in pay. Have you offered some of these high level positions the Treasury to people who would have turned them down? Your Treasury Secretary's plan... Geithner's plan, and -- your plan really -- for solving the banking crisis -- was met with very, very, very tepid response. And you had a lot of people criticize... a lot of people said they did not understand it. A lot of people said it did not have any -- enough details to solve the problem. I know you are coming out with something next week on this. But these criticisms were coming from people like Warren Buffett, people who had supported you, and you had counted as being your... And nd Warren still does support me. But I think that understand Warren's also a big player in the financial markets who is a major owner of Wells Fargo. And so he is got a perspective from the perspective of somebody who is part owner of a bank. You have got members of Congress who've got a different perspective. Which is, We do not want to spend any more taxpayer money. You have got a whole host of players, all of whom may have a completely different solution. And you know, one of the challenges that Tim Geithner has had is the same challenge that anybody would have in this situation. People want a lot of contradictory things. You know, the banks would love a lot of taxpayer money with no strings attached. Folks in Congress, as well as the American people, would love to fix the banks without spending any money. And so at a certain point, you know, you have got just a very difficult line to walk. You need the financial community... Do you think that the people on Wall Street and the people in the financial community that you need trust you, believe in you? Part of my job is to communicate to them, Look, I believe in the market. I believe in financial innovation. And I believe in success.

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But what I also know is that the financial sector was out of balance. People, if you went into investment banking, you were making 20 times what a teacher made. You were not making 200 times what a teacher made. There is a perception right now, at least in New York, which is where I live and work. And now I think there are a lot of people say, Look, we are not going to be able to keep our best people. They are not going to stay and work here for $250,000 a year when they can go work for a hedge fund, if they can find one that is still working-- I have told them directly. Cause I have heard some of this. they need to spend a little time outside of New York. Because you know, if you go to North Dakota, or you go to Iowa, or you go to Arkansas, where folks would be thrilled to be making $75,000 a year -- without a bonus -- then I think they'd get a sense of why people are frustrated. I think we have to understand the severity of the crisis that we are in right now. The fact is that, because of bad bets made on Wall Street, there have been enormous losses. I mean there were a whole bunch of folks who, on paper, if you looked at quarterly reports, were wildly successful, selling derivatives that turned out to be... Now you know, gosh, I do not think it is me being anti-Wall Street just to point out that the best and the brightest did not do too well on that front, and that you know, maybe the incentive structures that have been set up have not produced the kinds of long term growth that I think everybody's looking for. Were you surprised at the depth of this recession when you got here? I do not think that we anticipated how steep the decline would be, particularly in employment. I mean if you look at just, you know, hundreds of thousands, now millions of jobs being shed over the course of two months -- or three months, that slope is a lot steeper than anything that we have said -- we have seen before. Now, there is a potential silver lining, which may be that things are so accelerated now, the modern economy is so intertwined and wired, that things happen really fast for ill, but things may recover faster than they have in the past.

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That the financial system could still implode if you had a big failure at AIG or at Citicorp? And if we did nothing you could still have some big problems. There are certain institutions that are so big that if they fail, they bring a lot of other financial institutions down with them. And if all those financial institutions fail all at the same time, then you could see an even more destructive recession and potentially depression. Because I think we did learn lessons from the Great Depression. Is there some limit to the amount of money we can spend? And are we getting close to it? The limit is our ability to finance these expenditures through borrowing. And, you know, the United States is fortunate that it has the largest, most stable economic and political system around. And so the dollar is still strong because people are still buying Treasury Bills. If we do not get a handle on this, and also start looking at our long-term deficit projections, at a certain point people will stop buying those Treasury Bills. Do you have any idea when this might end? Well, we are already starting to see flickers of hope out there. That promises the possibility at least of the housing market bottoming out and stabilizing. It is not going to happen equally in every part of the country. I just want to say that the only thing less popular than putting money into banks is putting money into the auto industry. 18 percent are in favor. You are laughing about some of these problems. Are people going to look at this and say, I mean, he is sitting there just making jokes about money-- How do you deal with -- I mean, wh -- explain - You know, sometimes my team talks about the fact that if you had said to us a year ago that the least of my problems would be Iraq, which is still a pretty serious problem, I do not think anybody would have believed it. But we have got a lot on our plate. And a lot of difficult decisions that we are going to have to make. Making sure that al Qaeda cannot attack the U.S. homeland and U.S. interests and our allies. And in service of that priority there may be a whole host of things that we need to do. We may need to build up economic capacity in Afghanistan. We may need to improve our diplomatic efforts in Pakistan. We may need to bring a more regional, diplomatic approach to bear. We may need to coordinate more effectively with our allies.

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But we cannot lose sight of what our central mission is. The same mission that we had when we went in after 9-11. And that is these folks can project violence against the United States' citizens. And that is something that we cannot tolerate. But what we cannot do is think that just a military approach in Afghanistan is going to be able to solve our problems. So what we are looking for is a comprehensive strategy. This should not come as news to anybody given its history. We need to be careful what we are getting ourselves into in Afghanistan. Because we have come to be looked upon there by people in Afghanistan, and even people now in Pakistan. As another foreign power coming in, trying to take over the region. I am very mindful of that. Afghanistan is not going to be easy in many ways. This is the assessment of commanders on the ground. Is Iraq was actually easier than Afghanistan. You have got a much better educated population, infrastructure to build off of. You do not have some of the same destabilizing border issues that you have between Afghanistan and Pakistan. But it is not acceptable for us to simply sit back and let safe havens of terrorists plan and plot I am sure you want to answer this. A week ago Vice President Cheney-- said essentially that your willingness to shut down Guantanamo and to change the way prisoners are treated and interrogator -- interrogated -- was making America weaker and more vulnerable to another attack. And that the interrogation techniques that were used at Guantanamo were essential in preventing another attack against the United States. I fundamentally disagree with Dick Cheney. You know, I think that Vice President Cheney has been at the head of a movement whose notion is somehow that we cannot reconcile our core values, our Constitution, our belief that we do not torture, with our national security interests. I think he is drawing the wrong lesson from history. The facts do not bear him out. I think he is -- that attitude, that philosophy has done incredible damage to our image and position in the world. I mean, the fact of the matter is after all these years how many convictions actually came out of Guantanamo? How many terrorists have actually been brought to justice under the philosophy that is being promoted by Vice President Cheney? What it has been is a great advertisement for anti-American sentiment. Which means that there is constant effective recruitment of Arab fighters and Muslim fighters against U.S. interests all around the world.

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Some of it being organized by a few people who were released from Guantanamo. Well there is no doubt that we have not done a particularly effective job in sorting through who are truly dangerous individuals that we have got to make sure are not a threat to us, who are folks that we just swept up. The whole premise of Guantanamo promoted by Vice President Cheney was that somehow the American system of justice was not up to the task of dealing with these terrorists. I fundamentally disagree with that. Now do these folks deserve Miranda rights? Do they deserve to be treated like a shoplifter down the block? What do you do with those people? Well, I think we are going to have to figure out a mechanism to make sure that they not released and do us harm. But do so in a way that is consistent with both our traditions, sense of due process, international law. And, you know, I am surprised that the Vice President is eager to defend a legacy that was unsustainable. Let us assume that we did not change these practices. Are we going to just keep on going until -- you know, the entire Muslim world and Arab world despises us? I do not know a lot of thoughtful thinkers, liberal or conservative, who think that that was the right approach. So have you gotten into a routine? You know, I typically work out in the morning. Michelle's often there with me. And then I come down here and talk to our National Security team. Then we talk to the economic team. After that, who knows? 00 I sort of know what I am doing. This is the living quarters, up on the second floor. We got a gym right over there up on the third floor. And the second floor is our bedroom's on this side, and we got a dining room on that side. How are you finding the job? It is challenging you know, I find that the governance part of it, the decision making part of it actually comes -- comes pretty naturally. I think I have got a great team. I think we are making good decisions. The hardest thing about the job is staying focused. Because there is so many demands and decisions that are pressed upon you. What is the hardest decision you have had to make in the last 60 days? Well, I would say that the decision to send more troops-- into Afghanistan. But it is a weighty decision because we actually had to make the decision prior to the completion of strategic review that we were conducting.

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When I make a decision to send 17 thousand young Americans to Afghanistan, you can understand that intellectually - but understanding what that means for those families, for those young people when you end up sitting at your desk, signing a condolence letter to one of the family members of a fallen hero, you are reminded each and every day at every moment that the decisions you make count. What is the most frustrating part of the job? The fact that you are often confronted with bad choices that flow from less than optimal decisions made a year ago, two years ago, five years ago, when you were not here. A lot of times, when things land at my desk, it is a choice between bad and worse. And as somebody pointed out to me the only things that land on my desk are tough decisions. Because, if they were easy decisions, somebody down the food chain's already made them. How many decisions do you have to make a day? Every time somebody walks in your office. Otherwise, they do not get a meeting. And you are briefed for all that before it happens. I spend a lot of time reading. People keep on asking me, Well, what are you reading these days? You know, you get a little time to read history or you know, policy books that are of interest. But there is a huge amount of information that has to be digested, especially right now. Because the complexities of Afghanistan are matched, maybe even dwarfed, by the complexities of the economic situation. Do you take a day off? I will wander down to the oval office I will do some work, but I will still have time for the kids. I have to say that I was not the purchaser of this. The admiral, our chief usher, Admiral Steve Rochon, took great interest when we said that we should get a swing set, and found what I assume must be the -- Rolls Royce of swing sets. You did not have one of these when you were a kid? I thought we were going to get like two swings. Have the girls had kids over after school? And they have tested this out. And it got a thumbs up. Are they liking it here? You know, they are adapting remarkably-- in ways-- that I just would not have expected. Well it is cool, but what is interesting is actually how unimpressed they are with it. I mean they -- they are going to school. And they are having fun.

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ENTITY, the major focus of your Presidency has been the reactivation of the economy, and many would, of course, arguably say that you have been very successful at that. Why now with the project of tax reform? Well, what we have started with the economy and the growth that we have had-the increase in prosperity here-I think is only a beginning. I think there is further to go, and so the tax reform, I think, could contribute to economic growth. But the main thing is, even without that, our present tax system is unfair. It is so complicated that a great many people cannot determine how much they owe the Government without getting expensive legal help. And we believe it is long overdue that we have a tax system that is more fair; that is simpler, more easily understood by the people; and that, at the same time, can lower the tax rates in the simplification, removing some of the loopholes that have led to unfair deductions by some, the use of tax shelters to avoid, legally, a fair share of tax. If through simplification and through the new tax system the average amount of money that the individual is going to contribute to the IRS is going to diminish, how, then, is the Government going to compensate for the diminishing tax returns that it will take? Well, we are not going to diminish the total tax revenues the Government gets. It is true we will lower the rates; it is true that individuals will pay less tax than they are presently paying. The difference will be made up in part by what we think will be more growth in the economy, and the more the economy grows, the more tax revenues there'll be. But mainly it is because right now there are a great many people who have taken advantage of some well-intentioned tax loopholes, as we call them, to reduce their personal tax burden, and this has resulted in a great unfairness. For example, we have people today who are paying a higher income tax as individuals than the great corporations they work for are paying as their total tax. So, once we change that, the difference will mainly be made up by those tax revenues that are being avoided by some, and that is where the fairness comes in. Everybody will be paying their fair share. And we are also banking on the growth of the economy.

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Talking about the primary focus of this reform, many see the family as the main concern of yours, and I would like to ask you about which is the main focus of this project of yours. Well, we think it is aimed at the family, and we think that the family is the most important unit in our whole social structure. But what we are going to do in addition to lowering the rates, we are going to make the personal deduction for a wage earner $4,000. We are going to almost double the increase exemption-or deduction for dependents to $2,000 because it has not nearly kept up with inflation over the years-that deduction that used to be $600 and then came to $1,040. Well, now it is going to be $2,000 under our plan, and thus we feel particularly the families at the lower end of the earning scale-we could see an average family of four that would not have to pay a penny on the first $12,000 of earnings. Also we are going to see people that are near the poverty line that are going to be dropped from the tax rolls entirely. Now, ENTITY, tax reform is a very serious and complex issue, and there have been many attempts in the past. There is opposition in Congress, and I would like to ask you, in here, which are the political angles of tax reform, or are there any political angles to it? I think the main political angles have to do with specific changes we want to make-some of those deductions I am talking about removing-that there are special interest groups that will try to preserve those, and they will get here and there some congressional support in behalf of one or the others of those features. But I believe that overall this may be one of those times when we see there are no Democrats or Republicans, just Americans, because overall there is a bipartisan feeling that tax reform is necessary. Well, among the Americans, we have Hispanic Americans, and, of course, as you know, most of Hispanic America-not most, a large proportion of Hispanic America is in the modest-income category. You already talked a little bit about how people with a modest income would benefit, but talking specifically about Hispanic Americans, most of them in a modest-income category, how would modest-income and middle-income Americans benefit from this proposal? They would benefit most of all, particularly at the lower end of the earnings.

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Right now, you know, there are 14 tax brackets that people, based on their earnings, fall into. We are reducing that to 3-a 15-percent bracket, a 25-percent bracket, and a 35-percent bracket. The people at the very lowest end and there around the poverty line will find they no longer have any taxes at all to pay. And elderly people that are in that particular bracket, some of the handicapped people, and then those that are just earning but around that location-they will not have any tax to pay at all. ENTITY, let me go to another major concern of your Presidency. I remember interviewing you in Los Angeles in 1980, and you mentioned as one of your big concerns the spread of communism in this hemisphere, in the Caribbean and Central America. Well, one of your most notable successes in foreign policy has been Grenada; however, we still have Nicaragua, and it continues unabated. What can you tell us that will give us confidence that the problems presented now by the Sandinista regime in Nicaragua will be solved in the future? Right now we have a totalitarian government-the Sandinista government-in Nicaragua. This came out of the revolution to overthrow the dictator, Somoza. But the people who are fighting as the contras against the Sandinista government now are mainly the people who were part of the revolution also against Somoza. They came together to overthrow that particular regime. In 1979 those revolutionaries, including the Sandinistas, went to the Organization of American States and asked that organization to appeal to Somoza to step down so the killing could stop. Well, what were the goals of their revolution? The promise was given that it was to have democracy, to have free labor unions, a free press, free speech-all the things that we associate with democracy and government by and of and for the people. They had been a pro-Communist organization for years back. They ousted from the revolution those who had fought with them. Some of the leaders had to flee into exile; some of them were imprisoned; some of them, I am afraid, were executed. And we have this totalitarian government. It is literally a satellite of Cuba, the Communist regime in Cuba, and that means it is indirectly a satellite of the Soviet Union. It has made it plain that its revolution knows no borders, that it is going to be the centerpiece here in the Western Hemisphere for spreading that kind of Communist regime throughout the hemisphere.

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Their military has been furnished, and their weapons-well, they are furnishing weapons to the guerrillas in their neighboring country, El Salvador, where there is a democratic government. So, we think that in helping, as we have been trying to help, the contras-and we have seen them grow as the dissatisfaction in Nicaragua with the Sandinistas spread among the people; the forces of the contras have grown to around 20,000 in number. Deserters from the Nicaraguan ENTITY, the Sandinista army, are turning up and volunteering as contras. So, we think that those people who were simply striving for the original promises of the revolution to be kept should have our help. That does not mean, however, military forces from the United States. All of our friends in Latin America have made it plain to us-maybe with some memories of a far distant past-that, no, they have the manpower; they do not need American manpower. They do need our help in supplies and weapons and training and so forth, and that we are giving them. And, so, I know that the contras have progressed to the point that they have several times offered to lay down their arms and negotiate a settlement with the Sandinistas, their former allies in the revolution, and the Sandinistas have repeatedly refused. But we think they deserve our help. Well, you say that we are giving them help, and, yes, we are; however, Congress has wavered constantly on this issue. It is teeter-tottered between the Boland amendment and no aid to the contra& Has Congress been playing politics with the security of this hemisphere? Well, I hesitate to say that. I think maybe the rest were well intentioned, and they are suffering from something I call the Vietnam syndrome. I think too many of them, still remembering our entanglement there 10,000 miles away from our own land, in that that this might lead to our military involvement. And, so, they have been cautious about what we can do. As I have already explained, we have no intention of military involvement nor do I think it is needed. And I think as more of them come to see that, and also as more of them have come to realize the real nature of the Sandinista government-that it is a totalitarian, Communist government-that that opposition is lessening. ENTITY, another very important issue for Hispanic Americans is that of immigration.

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As you know, there have been attempts in the past at immigration reform. This is the third time that Senator Simpson is pushing his own version of immigration reform through Congress-and Congressmen Rodino and Mazzoli in the House-do you support this? Are you behind this attempt? Would you sign into law a Simpson-Rodino-Mazzoli bill if it comes to be? I have to say that, beginning back in 1981, I supported the principle of reform in our immigration laws because we, in a way, have lost control of our borders. Right now, I have to say with regard to the Simpson bill that-and we have informed of this-that we support generally his bill, but there are some amendments that we think are necessary. For one, we very much need in any immigration bill-we need protection for people who are in this country and who have not become citizens, for example, that they are protected and legitimized and given permanent residency here. And we want to see some things of that kind added to the immigration bill. ENTITY, this is my last question, really, and I want to ask you simply if you have any messages for the Hispanic community in America that is listening to you. Our whole country is made up of people who came here from someplace else, either the individuals themselves or, like myself-in my case it was grandparents, others it is their parents-but we represent the cultures and the diversity of the whole world. And we have come together in what some people called a melting pot and created a whole new breed of human being called an American. And I have to say, I think America's great success in the world has been the result of this diversity and this understanding and coming together of such diverse peoples. And I just have to say that our Hispanic Americans-their contribution to America is not surpassed by that of any other people. They have brought a great warmth, and they have brought great traditions of family. In our wars, they have brought great service and great heroism and loyalty to this country. And all I would like to say to them is, God bless them all, and vaya con Dios.

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When it comes to pacific trade this seems like this is fourth quarter, full court press, from you and your administration. It is the right thing to do for the American economy and the American people, and certainly the right thing to do for Seattle and the state of Washington. You know, since I have came into office, we have had very significant recovery and about a third of that has been driven by exports. We know that not only does it create billions of dollars in business and you know, millions of jobs depend on it, but what also is true is that typically wages for folks who work for exporting companies are about 18 percent higher than companies just focusing on the domestic market. So what we are arguing here is that globalization is here to stay, we have got to do everything we can to make sure that we are accessing other markets the same way that they are accessing ours, and that there is a level playing field on issues like labor standards and environmental standards. And that is what is reflected in this trade deal. Let me address that last issue. When Secretary Kerry was in Seattle area a couple weeks ago, some of the Boeing workers protested and some said they are worried about a trade deal that would adversely affect them, fearing that Boeing would build more plane parts outside of the United States, thus costing American jobs. What assurances can you give that worker from Boeing and any other big manufacturing plant that their job will be assured and stay put? Well let me just say this, other than maybe the CEO of Boeing, I do not know anyone who is done more to sell Boeing planes around the world than me and this administration. We have been very active in promoting some of our outstanding manufacturers and Boeing obviously is an iconic company. And what we know is is that when we have access to these markets then we are going to be able to compete and we also know that the U.S. has the best workers in the world, the best innovation in the world. And if Boeing was looking to relocate facilities than they would have already done so because under existing rules there is not much preventing them from doing so. Nothing in this agreement is going to induce other companies to move jobs, in fact it what it may do is bring some jobs back. I was at Nike, which like a lot of footwear companies, manufactures overseas.

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And what they said is look if this passes, we may bring ten thousand jobs back here to the United States because a lot of the production's moving into the high end production as opposed to low end, and we have more skilled workers here in the United States than we do in some of these other places. So you see no dislocation other than that would benefit the United States and American workers? You know, in an economy of this size, there is always going to be some dislocations. Companies that are reliant on a model of just low wage workers, they have already left. And what we are seeing, cause manufacturing has actually grown faster under my administration than any time since the 1990s. And it is grown faster than any other sector of the economy. What we are finding is is that companies want to move here because of low energy cost, high worker skills, access to the biggest market in the world. What they worry about is are they also going to be able to sell from the United States to other countries and if we can pry those markets open, we are going to be that much better off. Well it is not NAFTA partly because we have-one of the big problems with NAFTA is we did not have strong labor and environmental standards that were enforceable in the agreement. And we have corrected that. And in fact, the two countries that were involved in NAFTA, Canada and Mexico, has signatories that if they end up agreeing to this Trans-pacific Partnership, they'd actually now be subject to higher labor and environmental standards than they currently are. So it is more likely that a U.S. worker is going to be competing on a level playing field with a worker in Mexico than he is under current law. If the voting Congress in the House, which is the one we are anticipating perhaps as early as next week, does not go your way, is that a disavowal of the Pacific trade treaty? Well first of all I-I never hypothesize that we are not going to get this done because it is the right thing for the American people and- You must think about it though. I think it will-but understand, all this does is give me the authority to negotiate the deal. And once we complete the deal, before I sign the deal, I have got to give Congress and the American people and the press 60 days in which this every provision every page is posted on a website.

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Let us bring in the Speaker of the House, ENTITY. I know there is still a lot of votes to be counted and, anyway, we have a lot of news to get to. But before we get to that, I just wanted to ask, how is your husband, Paul, doing? He is one good day after another, he is improving. It will take a little while. But we have been so comforted by the outpouring of so many prayers and good wishes and even people saying, 'I was not going to vote, but now I am going to vote because this has gone too far.' I will convey that to him. You know, we last spoke in September. You were confident then that the Democrats would do well, kind of a lonely voice at that time, given high inflation and President Biden's low approval ratings. How did Democrats do it? Well, first of all, thank you for acknowledging that we had a different approach. It was not anything that we ever accepted when the pundits in Washington said we could not win because history, history, history. Elections are about the future. I am very proud of our candidates, both our incumbents as well as our Red to Blue candidates. They never accepted the punditry that they could not win, they had courage, they had purpose, and they understood their district. They also rejected calls from Washington about, 'Oh, your message should change.' No, our message was clear - People Over Politics, lower costs, bigger paychecks, safer communities. And they knew the value of a woman's right to choose, they knew how important it was to protect our democracy, they knew the contrast between themselves and their opponents, and that is what made them win. It was not about Washington said 'you should change your message,' Washington says 'you cannot win.' I hope that is a lesson, because really it depresses the vote sometimes when people say 'it is all over' eighteen months before the election. We never accepted that. Now the road to keeping the Democratic Majority is still quite narrow. Democrats have to run the table on the toss-up races still out there to keep control of the House. Do you see a realistic path to victory? And I give tribute, of course, to our candidates, I also give credit to our grassroots. This - they are our VIPs, our volunteers in politics, millions of doors knocked, millions of doors knocked.

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So they crossed a threshold. They leapfrogged over all the projections - the predictions and the rest. Whatever the outcome, we are on the path to taking our country to a better place than with being dragged down by the other side. I am disappointed with what happened in New York, that four votes could make the difference at the end of the day. But we have not - we have not given up, and we have not given up because the quality of our candidates, the purpose of our why, why this is important, and President Biden did a great job presenting about our democracy being on the ballot. So it took a great deal to get to where we are, and we will just see. I said before, and you have heard me say on our walk in the park, it is like the Olympics. In a half a second, you can be a gold, silver, bronze or honored to be an Olympian. But, again, we are very proud of the outcome, and we are very proud because it was a victory For The People, not the punditry, but For The People, as well as the success in Nevada is a personal joy for some of us because of Harry Reid. The President, we have the White House, we have the Senate, and we are going to have a big strong vote in the House, a very different outcome than some would have predicted. And if Democrats keep the Majority, will you run again for Speaker? I am not - right now, I have said I am not making any comments until this election is finished, and we have a little more time to go. I wish it - It is going to take some time to count those votes in California, I know. Your Republican counterpart, Kevin McCarthy, it looks like even if Republicans do prevail, we are going to be talking about 219, 220, maybe 221 votes in the House. Can he govern with that kind of a Majority? Well, it depends on their purpose. In our House, we had that kind of - those kinds of numbers. But we were united - we were very united in terms of being there for the - America's working families, that dominated our discussion - although we have our differences of opinion on certain issues, when it came down to the main purpose of the Democrats, America's working families, there was no question that we would win every vote that we would - took to the Floor.

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And this new - the new Members coming in, again, a constant reinvigoration of the Congress that our founders intended. They will be speaking so clearly to it. We have one of the youngest Members, Congressman-to-be Frost, coming in, and it is - it is pretty exciting for us. It is about what the message and purpose will be demonstrated to the American people. And, again, it is about our democracy. Our democracy was on the ballot. Our planet was on the ballot. Personal freedom was on the ballot. These three issues very important to young voters, and they were very important in our success in this election. Whatever the outcome, you said this week, quote, 'We need to unify, I think it is really important to restore unity to Congress.' What steps do Democrats need to take to bring the country together? Well, we have always been taking that step because we honor our oath to protect and defend the Constitution of the United States, and that should be a unifying principle for us. The - when, many of our bills, we worked very hard to make it bipartisan, bipartisan, bipartisan. With it, you can accomplish almost anything. And the point I want to make is, when the public knows what is at stake and what is happening there, I think we will see more cooperation, again, working together to produce a bill, but not having people vote no, take the dough, and make it look like we do not have bipartisanship, when, in fact, in the bills we do, but in the votes, not necessarily. Before the new Congress is sworn in in January, you have a lot of work in what would be a lame duck session in December. Probably at the top of that list, extending the debt limit because Republicans have said, if they get the Majority, they are going to try to force concessions from Democrats in order to extend the debt limit. Do you believe you can get a permanent or a very large extension of the debt limit during the lame duck session? I think it is important to note that what the Republicans have said is they are going to use the vote on the debt limit as leverage to cut Medicare and Social Security. I think the public should know that. It is a difference of opinion, and I think the public should know who is on their side on all of this. We cannot allow them to cut Social Security.

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People paid into it, and the Republicans cannot use it as leverage to say, 'We will only lift the debt ceiling if you will reduce the benefits for our seniors and others on Medicare and Social Security.' But our best shot I think is to do it - to do it now. But again, winning the Senate gave us a lot of leverage for how we go forward if we do not do it in the lame duck. But my hope would be that we could get it done in the lame duck. The Constitution removes all doubt. The full faith and credit of the United States of America should not - is not in doubt. But this is a practice that we have engaged in. And so, we will have to, again, lift the debt ceiling so the full faith and credit of the United States is respected. When the Republicans did this before, it lowered our credit rating. It lowered our credit rating - even though it did not eventually happen, but just the discussion of it. So this is - this is dealing with fire when we are talking about the stability of our credit rating. In the face of all this news, we see that Donald Trump is planning to announce for President again on Tuesday. Is that good news for Democrats? I do not go into any discussion of his plans. I mean, I think it is bad news for the country, let us put it that way, because this is a person who has undermined the integrity of our elections, has not honored his oath of office, who has encouraged people, strange kind of people to run for office, who do not share the values of our democracy. They have said it very clearly in their statements. So he is not been a force for good. So, I do not think his candidacy is a force for good for our country. But that is up to the Republicans to decide - to decide who they will choose. Understand this, we have very vast differences. Republicans do not support science, so they disregard what we are saying about climate. They do not support governance, so they do not want to honor what science tells us in terms of the planet, in terms of health care and the rest. So, we have some very big differences. There is - the main event of it all is the Presidential.

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As important as our races are, if we were in Las Vegas, we are the lounge act, they are - the Presidential is the main event, and this will be a very important election, very dispositive of the direction our country will go in. I mean President Biden has been a great President for our country. He has accomplished so much. He has just done so many things that are so great. We need a lot more show to tell it. But he is put money in people's pockets, vaccines in their arms, children back to school, people back to work, for starters, creating 10 million jobs. He has made America independent by passing the CHIPS bill that says we are no longer reliant on those who would withhold products that enable us to manufacture in our country. The IRA - I just saw him make the speech in Egypt where he spoke about America's commitment to preserving the planet with the legislation, the IRA, $368 billion in good-paying green jobs, clean air, clean water for our children, national security issue to stop migrations and competition for habitat and food, as well as honoring our responsibility to future generations. The PACT Act, honoring our veterans, the Bipartisan Infrastructure Bill, all of it with justice, with equity, with inclusiveness, with diversity, taking us to a new place. He has been a great President, and he has a great record to run on. Finally, ENTITY, if you do decide to step away from Congress, how do you want your Speakerships to be remembered? Well, I do not have any plans to step away from Congress. I do not - you asked me about running for Leadership. The - well, my flagship issue has - from the start of my being in Congress has been the climate issue. But in the course of things we - when we had the opportunity to expand health care for all Americans, that has to be my major accomplishment. I take great pride in that. I take great pride in saving it from those who wanted to repeal it. You'd have to ask them. That - Martin Luther King said, 'Of all the inequalities, the inequity in access to health care is the most inhuman,' he said, 'because people can die.' So I thank God for giving me the opportunity to play a role in that. And it is an ongoing role to pass it, to protect it, to expand it.

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You said that the war was ended in Iraq. And what we have is a situation in which, in part because of growing mistrust between Sunni and Shia, some of the forces that have always possibly pulled Iraq apart are stronger now. Those forces that could keep the country united are weaker. It is ultimately going to be up to the Iraqi leadership to try to pull the politics of the country back together again. Would you have moved differently in Syria, given this eruption in Iraq and given that the chaos has spilled over now? You know, if what you are suggesting is that there was a simple solution in Syria that would have avoided the civil war and chaos there, that is just not true. You know, you had a ruthless dictator that started killing his own people, and you had the makings of a moderate opposition that still exists and that we still work with, but not an opposition that was going to be in a position anytime soon to be able to compete with an army, Hezbollah, Iran and Russia supporting the regime. They just were not going to be able to do that. And they certainly were not going to be able to immediately compete with a bunch of hardened jihadists who had moved into the vacuum in some of these areas. So, you know, I think that one of the things that the American people, at least, understand is that these societies are going through these enormous transformations. There was a long period after World War II in which authoritarian regimes were able to maintain national boundaries, despite the fact that internally there were all kinds of sectarian divisions. As those regimes have begun to collapse or break apart, in part because of corruption, in part because of, you know, changes in society generally and economic pressures, you know, there is going to be this long, difficult transition moving to a different kind of society in the Middle East. And what we can do is work with the best impulses there. Folks who understand moderation, tolerance, are trying to deliver for their people. We are going to have to deal with some of the worst impulses there, the extremism that ISIS represents. What we are not going to be able to do is to play Whac-A-Mole and chase wherever extremists appear, occupy those countries for long periods of time, and think somehow that we are going to solve those problems. That is something that, even as the world's lone superpower, exceeds our capabilities.

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Does the situation in Iraq at all make you consider Afghanistan differently, especially as it pertains to taking the troops out by 2016? I think that what we have done, assuming that the Afghans sign a security agreement that gives our troops immunity, which the Iraqis declined to do, we are prepared to have a residual force that helps to continue to train their forces, to continue to help stabilize the situation as you have a new government coming in. But keep in mind that our goal in Afghanistan was to decapitate al-Qaida, which had carried out 9/11. Now Afghanistan is, you know, a sovereign country that is going to have to deal with its own security. That does not mean that there could not potentially be problems there, just as there are in Iraq. Unless we are prepared to stay indefinitely in all these various countries, something that we cannot afford and would involve, over time, accusations that we were occupying these countries, you know, at some stage they are going to have to take responsibility for working together. Is this part of reality, going back into Iraq? Because you said that the war was ended in Iraq. It is ultimately going to be up to the Iraqi leadership to try to pull the politics of the country back together again. In the meantime, we have got an organization, ISIS, that has the ability to, you know, at least right now in western Iraq, cause a lot of havoc and violence, and over time could pose a serious threat to the United States. That does not mean that we reoccupy Iraq. It does mean that we are going to have to do our best to work with partners in the region, including hopefully a coherent Iraqi government, to slowly chip away at some of the advances that they have made. Would you have moved differently in Syria, given this eruption in Iraq and given that the chaos has spilled over now? You know, if what you are suggesting is that there was a simple solution in Syria that would have avoided the civil war and chaos there, that is just not true. You know, you had a ruthless dictator that started killing his own people, and you had the makings of a moderate opposition that still exists and that we still work with. I think that one of the things that the American people, at least, understand is that these societies are going through these enormous transformations.

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And what we can do is work with the best impulses there, folks who understand moderation, tolerance, are trying to deliver for their people. We are going to have to deal with some of the worst impulses there, the extremism that ISIS represents. What we are not going to be able to do is play Whac-A-Mole and chase wherever extremists appear, occupy those countries for long periods of time, and think somehow that we are going to solve those problems. That is something that, even as the world's lone superpower, exceeds our capabilities. Do you think Prime Minister Maliki has demonstrated the ability to bring Iraq together, given what we have seen him do since 2006? And what I said yesterday still holds, which is an election has just taken place. And the test now, not just for Mr. Maliki but for all the leadership in Iraq, is are they able to set aside their suspicions, their sectarian preferences, for the good of the whole? The one thing I do know is that if they fail to do that, then no amount of military action by the United States can hold that country together. Equal pay kicked off your presidency; two of the champions here in the room with us. It is become really a theme, one of the themes of your time here. Do you think there will be a day in our lifetime where women are paid equally across the board? I think there is a whole series of actions that we can take that empower people to make sure they are being treated fairly, but also to give information to employers about what is good for their business. Keep in mind that issues like equal pay for equal work, issues like child care, issues like workplace flexibility and paid family leave, those are not just women's issues. Women now account for 40 percent of the primary breadwinners among American families. You have got men who recognize that they'd like to spend time with their kids too. There are very few families who have not gone through this. And when I think back to when Malia and Sasha were young, the biggest source of stress for us and we were a lot luckier than most was these issues surrounding work and family. You know, I am away down at the state capitol. She is got her own job. Then how do you deal with that? And that is the kind of thing that everybody, I think, can relate to.

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Many Americans woke up to the news today that the Whitewater independent counsel is investigating an allegation that you, or you and Vernon Jordan, encouraged a young woman to lie to lawyers in the Paula Jones civil suit. And I have told people that I would cooperate in the investigation, and I expect to cooperate with it. I do not know any more about it than I have told you and any more about it really than you do, but I will cooperate. The charges are not true, and I have not asked anybody to lie. ENTITY, where do you think this comes from? Did you have any kind of relationship with her that could have been misconstrued? ENTITY, I am going to do my best to cooperate with the investigation. I want to know what they want to know from me. I think it is more important for me to tell the American people that there was not improper relations; I did not ask anybody to lie; and I intend to cooperate. And I think that is all I should say right now, so I can get back to the work of the country. But you are not able to say whether you had any conversations with her about her testimony, any conversations at all? I think, given the state of this investigation, it would be inappropriate for me to say more. I have said everything I think that I need to say now. I am going to be cooperative, and we will work through it. But is the fact that in this case, as we understand it, a close friend of this young woman was outfitted with a wire, with a microphone to record conversations with her at the instruction of the Whitewater counsel, does that disturb you? Do you regard that Mr. Starr is playing the inquisitor here in this case? But it is inappropriate for me to comment on it at this time. I just have to cooperate, and I will do that. I understand that you do not want to comment on this. There are some commentators on our network, it would be Kevin Phillips, who said that the moral leadership of the Presidency justifies the kind of scrutiny that you are receiving. Do you agree with that? Well, I think there is a lot of scrutiny, and there should be, and I think that is important. I will leave it to others to define whether the kind we have received in volume, nature, and accuracy, and sometimes downright honesty, is appropriate. I just have a certain number of days here. I came here as not a Washington person.

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I came here to try to change the country and to work to build the future of America in a new century. And I just have to try to put this in a little box like I have every other thing that has been said and done, and go on and do my job. That is what I am going to work at. , earlier today you said you tried your best to contain your natural impulses and get back to work. Is that what you were referring to? And what were you furious about? 30 last night; I am getting ready for Mr. Arafat; I am working on the State of the Union; and we have got a lot of big issues out there within and beyond our borders. And I do not think any American questions the fact that I have worked very hard at this job. And anything that is a distraction I dislike. Do you see this as a partisan attack? I did not say that. I do not know enough to say any more about this. I do not want to get into that. You know at least as much about it as I do. 30 last night on something else. That is why I have given the answer that I have given to your questions today. Moving on to the matter you were working on late at night last night. First, it seems the message to Mr. Netanyahu from the U.S. was, we want to see you withdraw from some part of the West Bank. First, what is the message to Yasser Arafat, if you could sum it up? Well, first of all, let us talk about what they want. I think what Israel wants is a peace process that moves immediately to final status negotiations and gives them a stronger sense of security. I think what the Palestinians want is a peace process that gives them a stronger sense of self-determination and possibility and dignity. So what we have tried to do for 12 months now, ever since the Hebron redeployment, we have been out involved in the region, talking to all the players that is not the royal we, I mean me, the Secretary of State, Mr. Ross, Mr. Berger, others involved trying to analyze what it would take to get the peace process back on track. And we have formulated some ideas and we talked to the Israeli Prime Minister about them yesterday; we are going to talk to Mr. Arafat about them tomorrow.

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We hope that by the time we finish the talk that both sides will be closer together than they were before we started. But I think there may be circumstances under which we could take a real leap forward in the Middle East peace process if we get a break or two. It is going to take a while. We have to work with the Palestinians tomorrow, then we have to analyze where we are with both and whether we can go forward. And we may not make any progress at all. And if we do not , I will tell you that. I'd like to ask you, though, after spending so much time with Mr. Netanyahu on this visit and on other visits, some people regard him as a man who always opposed a land for peace settlement to the conflict with the Palestinians, certainly would not have negotiated the Oslo accords had he been in office then, has never liked them particularly. Some would say he is really trying to thwart that process and contain the damage from his standpoint. No, I cannot say that based on what I have seen. I do believe he is made no secret of the fact that he has principle differences with the Oslo process, which he has pledged to support. And we all know he has a different political coalition, and that indeed, the political forces in Israel itself are different than they were even a few years ago in terms of the composition of the population, the rise of these small parties and immigrant-related intense groups and all that. I think that, historically, there is been a little bit of difference in the kind of the texture of the relationship between the Likud Party and the Palestinians and the Labor Party and the Palestinians. But the bottom line is, I think, Mr. Netanyahu is an intelligent man who wants to make peace and understands that there has to be some formula where some marginal increase in territorial insecurity by giving up land is more than offset by a dramatic increase in security by changing the feelings of the people, the climate, the capacity for growth and opportunity. So we are just trying to hammer out what each side will have to do to take another step. ENTITY, in Iraq, diplomacy has not worked yet. UNSCOM is still barred from doing its job the way it sees fit, getting into the sites that it wants to inspect. Yet on the other hand, military action also has downsides. It might upset any progress you are making with allies on other issues.

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Do you think the U.S. has any good choices on Iraq? If we define good as easy, the answer is no. The problem is the weapons of mass destruction program, chemical and biological weapons, primarily. And that means that Saddam Hussein cannot determine when, where, and who, when it comes to the UNSCOM teams. So now he says that he is going to determine that, and there is not going to be any when for a couple of months, during which time he will be free to move whatever he wants wherever he wants. I think that this is a big mistake, and I believe that the United Nations will see it as such, and a real thwarting of its position. Do you feel that to even wield the threat of military action, possible military action, that you have to be able to point to some progress in the Arab-Israeli negotiations in order to maintain the support of U.S. friends in the region? It may affect the atmospherics, just, you know, the attitude about America. The main thing is every country in the region and throughout the world has a vested interest in seeing that no one who would either use or sell weapons of mass destruction especially chemical and biological weapons which could be carried around in small amounts, in little valises that no one who would use or sell them has a big program of them, which is why the whole United Nations is against the Iraqi program. They need to think long and hard, these countries that have been a little squeamish about being firm, whether or not it is possible that they could be the victims of this, if not directly from Iraq, from some group or another that Iraq sells to in the future. So I think we need to be firm, and I am going to do my best to keep rallying support and keep working ahead. I prefer the inspections. I prefer the diplomatic pressure. I have not been triggerhappy on this; some here in our country think that we should have acted before. But I do not think we can rule out any option. ENTITY, moving to domestic policy and the budget surplus, Republicans and Democrats on the Hill have already said what they want to do with it, either cut taxes or pay down the debt or spend more money on social problems. But so far, you have been silent on this.

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And I am wondering if you are ready to make a commitment to using whatever surplus there might be to shoring up the Social Security Trust Funds, making sure that safety net is there for the baby boom generation when it retires. Well, I will make a commitment that in my State of the Union Address, I will announce what I think should be done. I need to have something to say in the State of the Union that is new. But let me say before I say that, I would like to just caution we have had 5 great years, and we have always done better than we were predicted to do on the deficit. But I think I would still caution the Democratic and Republican leaders of Congress from passing some big 5year program to spend money through spending programs or tax cuts that has not yet materialized. We do not yet have a balanced budget. We have worked so hard for so long to get this done; I sure hate to start counting our chickens before they hatch. So I would like to start with that. And then when I speak at the State of the Union, I will say what I think ought to be done. Would you like to caution equally against shoring up the Social Security fund in that case? Well, in general, I believe my position on Social Security is that we need a bipartisan and fairly rapid process to work through the options and prepare for the long term health and viability of the Social Security system, along with the efforts that are going to be made by the Medicare commission, which I am very hopeful about. One of the big things I hope to achieve before I leave office is entitlement reform in both major systems. So I tell you, I think that that needs to be done, and we are exploring how best to do that. Well, we do not want to let you off the hook too easily. You are not saying you are against using the surplus to shore up the Social Security Trust Funds? I am not saying one way or the other. I am saying I'd like to have something to announce on State of the Union night. That would achieve the aims in theory of raising the cost of a pack of cigarettes by so much that it would be beyond the reach of teenagers, achieve your major aim, and not take companies off the hook for future liability. Are you in favor of such a bill? You'd have a children's only bill that did what? I am sorry, you had a lot of points there.

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Yes, well, first, it would raise the price of a pack of cigarettes simply to deter teenage purchasers of cigarettes. Well, I would favor doing something like that without committing to the specifics if we fail to get a global settlement. But I think we owe it to the attorneys general and the others who worked with us on this in good faith to try to achieve one, because I think, long term, we need to deter teen smoking with more than just a higher price tag for cigarettes. I think there are lots of other things that can be done. And I think that we ought to have certain benchmarks of performance for the tobacco companies, too, which in my view will help because then they will be free to do more that they even have to spend a little more money than they are obligated to under the agreement if they are not meeting the targets, they may decide they ought to do that to save even more money down the road. So I am going to look for a global settlement in the tobacco case for the benefit of our children. If we fail, then I will look at something else. ENTITY, following up on that, you have cautioned Congress not to spend the surplus until they have it. Yet you have committed $60 billion of some projected tobacco settlement bill before it is even passed to new spending. And if you do not get a tobacco settlement, are you committed to those programs? Will you cut elsewhere in order to keep that new spending? I will not, under any circumstances, favor funding anything I have recommended with the surplus with the projected surplus. So, if you do not get the tobacco settlement, you will cut elsewhere? If I do not get in other words, if we do not get the tobacco settlement, we will either have to cut the size of the child care initiative or cut elsewhere, or do something else, because I will not just, on my own, get up and propose that we spend the proposed settlement, or part of it, on these programs. I think they are terribly important, but right now we have got other fish to fry. And we have got to make sure the most important thing is to keep this economy growing, to keep disciplined, to keep strong, to do what makes sense. And that is what has gotten us here, 5 hard years of that, and we do not want to forget that. So we do have new spending in our programs, but it is new spending within a context of fiscal discipline.

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It is new discipline with the smallest Federal Government since Kennedy was President and the size of it continuing to go down. Federal prosecutors reportedly rejected a plea bargain agreement not long ago with Theodore Kaczynski, with his lawyers at least, that might have guaranteed his imprisonment for life. Evidently they want the death penalty. Is it important to you, say, if he is convicted, that there be an exercise of the Federal death penalty? If he is guilty, he killed a lot of people deliberately, and, therefore, I think it is something that the jury should be able to consider. From my point of view, I approve of the laws that we have in America now, the sort of two-tiered trial where you determine guilt and then you determine penalty, and I would want to hear all the testimony before I decided how I'd vote in that case. But I do think it should be presented to the penalty phase. Even if you had a guilty plea that as there is no parole in the Federal system guaranteed none and spared any possibility of an acquittal, you would still prefer to reject that plea, to offer the jury the option of the death penalty? I think the jury should have the option. Now, also, as a practical matter, there are not many inmates perhaps he would be one that actually do get life without parole. That is, in a prison system, where you do not want prison riots, you have to reward people who do an extraordinarily good job of being good inmates within the prison system, perhaps the practice of allowing people who have life sentences to be paroled after quite a long period of time is a good one, or, at least, defensible. But juries know that, too. But this was a case where, based on what I know, I would consider it appropriate to present that to the jury. ENTITY, on the Asian financial crisis, a lot of Americans do not understand why taxpayers should help bail out banks and investors in the U.S. or Japan or in Europe who took a risk and made some mistakes. Do not they bear some responsibility? Do not they have to take some of the hit? They do bear some of the responsibility, and they should not all be bailed out. And that is one of the most frustrating things about this. On the other hand, what this is about is about rebuilding confidence in the investment climate of these countries.

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I do not think they ought to get one red cent unless the governments commit to do things for the future that will mean these banks will have to take a bigger risk, and get their act cleaned up, unless the International Monetary Fund plan is implemented, and then the U.S. and Japan and these other countries come in as a backup. But if we refuse on the front end to do anything, the problem is it could hurt us a lot worse than it could hurt the odd banker that does not get his money back, because if a lot of people start not getting any of their money back, then other people say, Well, I am going to get my money out, and then others say, Well, I am not going to put my money in ; and then all of a sudden the value of the currency goes way down. They do not have any money to buy American products and all their products are cheaper, competing against ours and other countries. So we have a big economic interest as well as a huge interest in a stable, democratic Asia. And that is why I think we are doing the right thing. I hope in the State of the Union I can persuade the American people that it is the right thing. I want to ask you about Clintonism. We have been hearing a lot about Clintonism lately, a coherent political philosophy that may or may not be identified with you. I think, first of all, it is a very it is a future-oriented political philosophy that attempts to break the logjam between the 1980's and early nineties debate of the Republican position that Government is the enemy and the Democratic position is, sort of, Government is the solution if we do more of the same; we just need to do more. My position is we need a different kind of Government for a different kind of society and a different kind of world. And we need to focus more on giving people the tools they need to make the most of their own lives, more on being a catalyst for good ideas, more on empowering the disadvantaged, and creating opportunity, enforcing responsibility, building community. I think that is what Clintonism is about. And I think it will get us to the 21st century.

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I do not think I am betraying any confidence when I say that I checked with the VH1 people and I said, How did you get ENTITY involved in this campaign? And they threw their arms up and they said, He kind of volunteered I mean, he is called many times and said, 'What can I do? ' Why is this so important to you? Well, Hillary and I both spent a lot of time on this, and it is important for two reasons. One is, I was in music when I was the age of these children, and I know what it can do. And secondly, I have been very disturbed over the years over the last 20 years, more and more, as schools have come under financial pressure, they have tended to drop their music programs. You know, the principals have a lot of problems. They have a lot of challenges they have to meet, and many times the money is not there. And the school districts have cut a lot of these music programs out all over the country. And when I heard what VH1 was doing, I did kind of volunteer to get involved. I wrote John Sykes a letter and said, Look, I am for this, and I think we have got to get music back into these schools. A lot of young children we know that a lot of our young children learn better if they have access to music education. Not everyone learns in the same way. Not everyone's brain is stimulated in the same way. And the schools that have vigorous music programs tend to have higher academic performance. What do you say, though I mean, let us say, devil's-advocate it for a second I am a member of the local school board, and I sit down, and I look at the budget, and it is shrinking. And I say, I have got choices. I have to make cuts. I have got school lunches over here. I have books for the library here. I have music education over here. How do you stop me from cutting music education? And that is what that wonderful movie about music education here in New York City, Music of the Heart, was about. But what this program tries to do is to encourage the schools to put some money into music education by giving them extra help with instruments and sometimes with other support.

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And what we have tried to do at the national level, with the National Endowment for the Arts and the President's Commission on the Arts and Humanities that Hillary's the honorary chair of, is to constantly support music education, to emphasize that the schools that have good music education programs see positive other academic advancements as a result of it, and of course, try to get some more funds for the lower income schools out there. I mean, you had music education as a kid; so did I. We took it for granted. We are now in a time of unprecedented economic prosperity, and still today, only 25 percent of schools across this country offer music education as a basic part of the curriculum. See, what a lot of people do not know is, over the last 20 years and particularly in the last decade or so, while our school populations have been growing again, a smaller percentage of property-tax payers have kids in the schools. And an awful lot of our schools are funded primarily through the property tax. So the schools have had all kinds of financial problems. A lot of them have substandard physical facilities. They have the need to hire more teachers to teach various academic requirements that may have come in. And they do not want to stop any of their competitive athletic proposals. So the two things that have suffered most in the schools are the music programs and the art programs, on the one hand, and the physical education programs for people who are not in competitive team sports. I mean, when people like VH1 come in and they donate money like this, it is great, but it is private and public partnership. Why cannot we find a way, even through the Federal Government's assistance, to make sure that this is a basic part of education? I think we should do that. But the main thing we have to do is to build broader public support for doing it. Let me say, interestingly enough, you asked me the budget question. Well, what would you do if you had all these tough budget decisions? Our research indicates that the number one factor in whether music education programs stay or come back to schools is strong community involvement pushing for it. In other words, where people at the grassroots want it, the people who make the budget decisions tend to find a way to provide it.

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And so, what we can best do, I think, is to point out consistently what the overall educational benefits are, number one, and number two, to try to get more Federal assistance out there to the schools to help deal with their big problems. That is why I am trying to get the Federal Government to help with school construction and school repair, to help the school districts hire teachers to lower class sizes so they do not have to cut out music to hire that extra teacher when the population goes up, and to get the overall aid to low income schools up. So if we do those things and we get the kind of grassroots support we need, then what VH1 will be doing is supplementing a growing trend, instead of trying to fill a huge hole. Is it possible to take it a step further? From what I understand now, the Federal Government supplies about 9 percent of funding for schools; local and States provide the rest. Can you offer States incentives? Can you say to them, Look, we will provide more funding if you take it upon yourselves to make music education part of your basic curriculum? We could do that. I had not thought of that, exactly in that way. What we tried to dolet me just say this. What we have tried to do for the last 7 years, since I have been ENTITY, is to say, Look, here are the Nation's education goals. They include music and the arts. And if you come up with a plan to meet those goals, we will give you some help to implement the plan, which included music and the arts. Basically, the specific targeted dollars we have for schools go to schools that have greater financial need, because they have got a higher percentage of low income kids, or to hire more teachers, generally, because the school population is going up. I think if we will stay with the position that we are going to help all the schools that have these goals, which include music and the arts, and then we come in with the big ticket items, which are personnel and school building and repair, and we can build the kind of grassroots support we need, then these music programs will be able to survive. But one of the things that really happened is a lot of folks just took the music programs for granted. A lot of people who were making tough budget decisions assumed nobody would care if they were eliminated.

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So I think what is going to happen you will see a big infusion of public money going back into these programs because of what VH1 has done and because more and more parents will insist on the music being there. And I will be glad to do whatever I can to help. We are going to take a little break. When we come back, I understand we are joined by another special guest, and we will talk more about music education. And we are back with President Bill Clinton at P.S. 96 in East Harlem. Let me ask for a couple of quick answers to some questions in the news. Congress is holding hearings on security breaches there. Two hard drives containing nuclear secrets disappeared. It is not clear, but I think it is very important to get to the bottom of it. The FBI is investigating it, and we have got Senator Baker and Congressman Hamilton, who have agreed to take an independent look. It is a serious issue, and I think what we ought to do is just see the investigation through and see where the facts lead us. But we need to do what we can to find out what happened, whether there was a security breach, and if so, how we can change it so it will never happen again. You and I were both watching the news earlier about gas prices. People in Chicago, Milwaukee, in particular, paying 40 cents a gallon more than the rest of us. It is been very frustrating to me. I am quite concerned about it. Let me tell you what we know. We know that the prices were affected by the shutdown of a refinery, which is coming back up, a leak in a pipeline, which is the cheapest way to transport gas, and an unusual increase in demand in the Chicago-Milwaukee area. And all that affected it. Also, they used the cleaner gasoline, which is more expensive to produce, but that is only about 5 or 6 cents a gallon. So we know that it would be more expensive for a little while until the transportation and the refinery problems are solved. What we do not know is whether there was any price gouging. So we have got the Federal Trade Commission looking into that, and we have also had the Department of Energy and the Environmental Protection Agency looking into it. I am very worried about it. But I am hoping that we can break the logjam on it soon. If you will stay with it long enough, until you like to hear yourself play, then it will be easier for you to keep practicing.

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But if you play one of these reed instruments, you will squeak a lot. If you play a string instrument, it'll hurt your ears in the beginning. And when you reach the point where you like to hear yourself play, then it is all downhill from there. Maybe it is a good time for you to relate to them also. You had a music teacher in your early life who had a pretty strong impact on your life. I had a well, my high school band director, Virgil Spurlin, is still a friend of mine, still writes me to this day. My grade school band director was a man named George Grey, who had a big impact on me. My vocal my choir teacher when I was in elementary school, I still remember vividly. All the kids I knew had access to choir and could be in the band if they wanted to. And I am so glad that John Sykes and VH1 and all these people are trying to make it possible for you to do this, because it is something you do not have to I was not as good as Billy Joel, see, so I did not get to be a professional musician. But I had a wonderful time. It changed my life for the better. And it still benefits me, and I still play. you have to be thinking a lot about legacy. And you look at young people in the third and fourth grade how do you want them to be a part of your legacy? And I want them to grow up in a country that is a more just and decent country, where there is less discrimination and where people work together more. But it is really important that kids are not deprived of opportunities like music, just because of where they happen to live and whether their parents have money or not. That should not be what determines this. You have got some free time coming up in January, and Billy, you have got a little free time. I am thinking, you go to the garage in Chappaqua; you get a little amplifier like you used to do in high school aggravate the neighbors, and put together a little band here. Billy Joel, it is always good to see you.

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In your speech last night you said that drugs were wrong and deadly. But on MTV a couple of years ago, someone asked you if you could inhale-if you could do it over again, would you inhale, and you said, Yeah, I tried the first time. Because Republicans are planning on using this to attack you. Oh, they are using it, but all I said was-I was just trying to make the point that I had never-when I answered the question I told the truth. I just told the truth about the question. The question was, in context, it was a light-hearted-- It was a light-hearted question, and it was not in the context of some sort of endorsement of drug use, and they know that. If you look at the record I established as Governor, the record I have established as ENTITY, the things I have worked on, and if you look at the terrible price my own family has paid and my brother's problem which literally nearly killed him, I think that my position on this is clear. I am very concerned about it really because every so often, you know, years go by and we see drug use going down. We still see drug use going down among adults; that is the interesting thing. In the last 4 years, drug use among people 18 to 34 has gone down because people have begun to think more about their own lives, their responsibilities then when they have children, and they began to be concerned about the risks. The risks of, let us say, cocaine, heroin, and hallucinogens and marijuana are different kinds of risks, but there are real risks associated with all of them. And I am very hopeful, now that General McCaffrey has come on and agreed to be our drug czar and we are focusing now- I would not say exclusively but clearly primarily on people under 18, that we and people around the country will be able to do something about this. I wanted to ask you another question about the convention. I think a lot of people were confused by what they saw at both conventions; they saw singing Senators and delegates macarena-ing. Obviously it is a party, you know, but many people did not hear the message coming from the conventions. For instance, obviously Christopher Reeve has done a lot of good for people who suffer from his disability, but why is his disability an argument to vote for you? One is, Christopher Reeve made an impassioned plea for research.

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In my budget we have consistently invested more in research, both in health care areas like spinal cord disease, breast cancer, ENTITY, and ENTITY, and also in science and technology. We are now building with IBM a computer, a supercomputer that will do more calculations in a second than a person with a handheld calculator could do in 30,000 years-30,000 years. And I believe that it is very important to vote for ENTITY who believes in the future and who is really committed to science and technology and research. The second reason is, as Christopher Reeve so eloquently told me when we were visiting in the Oval Office, not everyone who gets a serious injury and becomes disabled is wealthy; most people are not , and even wealthy people can quickly be bankrupted by the cost of care. The Medicaid program which the Federal Government has maintained for 30 years contains a guarantee of aid to families with disabilities who are middle class or below, to enable them to maintain a middle class life, to keep their jobs, and still give their disabled family member some help. In the budget-which I vetoed-of the Republican Congress, which Senator Dole and Mr. Gingrich led through Congress, they would have removed that guarantee, just sent some money to the States, put a lid on it, and then let the States decide what to do. And I think it is highly likely that the first people to be sacrificed would have been people with disabilities. So those are the two reasons that his being there embodied the human connection to ENTITY and his actions, the Congress, and what happens to people's lives. And every other person that was there on Monday night, the same thing. The Brady bill, it was obvious because they talked about it. Mike Robbins, the Chicago police officer, was riddled with bullets by an assault weapon. The young AmeriCorps girl was important because the Republicans have tried to abolish AmeriCorps twice. The educator is important because they wanted to cut back on educational aid; I wanted to invest more money in education. So everybody there-the Toledo autoworker was important because we have opened new markets to Japan and other parts in the world and America is number one in auto production again. So we started our convention in a very different way. We had a whole series of citizens speaking to establish the connection between their vote and their lives.

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Speaking of Senator Dole and the Republicans, the Republicans are accusing you of theft of their values agenda, stealing their ideas and making them your own. Well, the Republicans tried for years to convince the American people that only one party had values. And unfortunately-I believe it was unfortunate-they were too often rewarded for that. But I never believed that only Republicans could stand up for the American family. I never believed that only Republicans could be tough on crime. The first bill I signed was the Family and Medical Leave Act. My predecessor, my Republican predecessor, vetoed it twice, and Senator Dole led the fight against it. I fought the crime bill through, which put 100,000 police on the street, banned assault weapons, and had tougher punishment programs and prevention programs for young people. The bitterest, I mean really, literally, bitterest opponent of the crime bill in the entire Congress was Senator Dole. Now, who is strong against crime? We have got 4 years of declining crime. So I did not steal their values. On welfare reform, long before they ever passed a bill, 3 months into my Presidency I granted the first waiver to a State to try a welfare-to-work experiment. We now have 1.8 million fewer people on welfare than we did the day I took office- before this welfare bill takes effect. So I did not steal their values agenda. I believe they are American values, and I did something about it. And I think they are angry because they made so many votes for years just by talking about it and not doing anything about it. So we did something about it, and they are complaining about it. Are you afraid of being seen as sort of-are you afraid of your politics being perceived as sort of Republican-like, a less radical approach to their ideas? Let me just take one other example. The only reason I ask is because people are wondering if you are the same person they elected in '92. If you look at what we talked about at the convention, if you look at what we have done over the last 4 years-including in the last 2 years-the budget that I passed, I put the Democrats on the side of deficit reduction and balancing the budget, because I believe that. That is what I ran on. But all the Republicans voted against our budget because it also made the Tax Code fairer.

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It lowered taxes on 15 million working people, asked those of us in the highest income groups, the top one percent of us, to pay a little more. They opposed me on family and medical leave, most of them did. They opposed my education reforms, all progressive things. They opposed the crime bill. Then when we finally got some action out of this last Congress, there was-the health care reform proposal was a big part of my health care reform bill that I signed. The minimum wage bill, the pension relief for small businesses, was legislation that I always advocated. But what was the biggest thing I did in the last 2 years? I vetoed their budget. I just think that they like saying, We are for a balanced budget; the Democrats are big spenders. We are tough on crime; the Democrats are weak on crime. We are for work instead of welfare; the Democrats are for welfare instead of work. And even some of our own commentators kind of got hung up in that. If we protect children and we give families the right to and the tools they need to make the most of their own lives, we should be for a balanced budget, a growing economy, work instead of welfare, and tough on crime. So I feel very good about it, and I do not think it is inconsistent. Dick Morris helped you make a political comeback over the last 2 years, and he is been running, according to just about everyone, a phenomenal campaign. Will you still be talking to him on the phone about politics? I do not plan to do that, no. But we do have a good team, and we all work together. No, because we have a good team. And everybody had a role to play, and we all agreed early on on a strategy. And then when we-we had a decisionmaking process which I think is very good, which I am just going to keep in place. I am going to keep the team I have got. I am going to keep the decisionmaking process in place. So you will not be communicating with him anymore? I do not have any plans to do that. I do not say I will not communicate with him. My wife and I and the Vice President all called him and just had a purely personal conversation.

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But this campaign is now the product of a record we have made and the proposals we have out there and the fact that we-our administration stood against what Mr. Gingrich and Mr. Dole tried to do in '95 and early '96. And those will be the salient elements that the American people will have to decide on, and we will do the best we can. But I feel good about it. There is talk in Republican circles of renewing character attacks on you because of their opinion that you surround yourself with questionable people. I am going to keep doing my job. I think the reason that talk is there, though, is that way they do not have to talk about over 10 million new jobs; they do not have to talk about the fact that my Democratic administration is the first one to reduce the deficit in all 4 of its years, since before the Civil War; that our budget would be in surplus today if it were not for the interest we pay on the debt run up in the 12 years of the Republican Presidencies before me; that we have made college loans more available and more affordable, and they tried to cut back on it; that the crime rate has come down under our strategy, and they opposed it. They do not have to talk about those things, but I am going to talk about what is right for the American people. The American people will make their judgments about-and probably already have made their judgments about that. And I do not intend to respond in kind. I like Senator Dole. I have had a good relationship with him. I honor the 35 years he gave this country in Congress, and I respect him for the way he fought back from his injury in the war. And I just do not think that it is good for America, and I am going to try to make this election about big things that touch the people we just saw on the side of the road there. Or little things that touch them, too. And the little things that touch them. You captured the imagination of young people in 1992, along with their votes. I saw young people at the MTV Inaugural Ball weeping when you arrived. Maybe their expectations were too high, but even with national service and all your educational programs, a lot of them feel just as disconnected today as they did 4 years ago. Do you feel like you have let people down? Have you not gotten your message out as clearly as you could have?

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But if you look at what happened on this train trip, that was my first real-I do not think polls can tell you these things. I do not think you can poll this. But when we were out there, and on this train trip we stopped-most of our rallies were in very small towns. We only had 2 stops where there were fewer than 10,000 people there. There were more than 150,000 total people who came to our rallies in those 3 days on the train. And then there were hundreds and hundreds of people, place after place after place, just on the side of the road as we were going. We had 30,000 in Cape Girardeau, Missouri, today, our first bus stop. Look, I think they feel like they are part of something bigger than themselves. I do believe in the first 2 years that-one of the things that I have learned over many years is that there is a time lag between when ENTITY or a Governor or a Congress takes an action and when it can be felt in the lives of the American people. So that we saw real economic growth coming from 1993 on, but there was no evidence until really about 8 months ago that the American people were beginning to feel it in their own lives, when paychecks finally started to go up again, when people saw that there were enough new jobs to make a difference in the local economy. It is the same thing with education. Now we are beginning-we have got a critical mass of young people who have been either in national service or even many, many more are getting the new college loans, the direct loans that they can pay back as a percentage of their income. We have reduced the welfare rolls by enough now that people are beginning to perceive it. The crime rate has come down now 4 years in a row so that people are finally beginning to perceive it. Their streets are safer, even though the crime rate in America is far too high still. I think that is a part of it. And so I think that my obligation is to go back to the young people of America and say, here is what I said I'd do 4 years ago; here is what we have done; here is what we are going to do in the next 4 years. And that is a lot of what we tried to do at our convention. Young people are alienated from politics. Young people think politics is rigged by money, and they are right.

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Democrats received tens of millions of dollars in corporate contributions. What are those corporations getting for their money? Well, I think it is fair to say that most of the corporations that contribute to either party agree with their policies. But keep in mind, almost all the wealthy individuals and some of the corporations that contributed to the Democratic Party are doing so even though their tax bills went up, because only the top 1.2 percent of individuals and corporations with incomes over $10 million a year had an income tax increase under our tax bill. And a lot of them supported us anyway, first of all because they knew I was right, that to get the deficit down, get interest rates down-they'd all do better with a healthier economy. I do not believe that any of them have supported me for some sort of bad or unseemly reason. On the other hand, I think it would be better if we had a campaign finance reform system that would enable people in public life to spend less time raising money and to be less dependent on it. But the only way you can do it is to give greater access to the airwaves, to candidates or parties, because it just costs so much to communicate. No, no, I do not mean it that way. Look, here is a country with a $1.5 trillion budget, an annual income of over $6 trillion. So you talk about a party raising and spending $150 million in a year and a half for an election, it sounds like a lot of money. Against that, it does not sound like so much money. It just costs a lot of money to communicate. The communications costs-not just on television-radio, print, mail, travel, it is very high. Do you think-so corporations are not getting access? I read a report that they get to sleep in the Lincoln Bedroom once in a while, CEO's or-- Well, the people who sleep in the Lincoln Bedroom are people I personally invite, who have been my friends, and a lot of them have supported me. But I do not think any President has made a habit of inviting his opponents to sleep in the Lincoln Bedroom. I mean, I think you normally invite your supporters. There is never been any attempt to raise any money with the promise that you can spend the night in the Lincoln Bedroom. I have invited people who have been helpful to me to spend the night in the Lincoln Bedroom, but it was never a quid pro quo there.

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No, I am not trying to imply that. You are doing really well in the polls, but there is a certain percentage of people who not only do not support you but they seem to actively dislike you. Why do some people dislike you so much? Well, I think-there is a sign on the side of your bus; it is a quote of Bill Cosby's that I just love. He says, I do not know the secret of success. But I know the secret of failure is trying to please everybody. And I have always believed that in public life, when you were given an office, you should outline the major challenges and go after them and really try to get something done. And you should enlist the energies of people and try to bring them together and do it. And I have always had a certain core of people who have opposed me. When I was Governor of my State, I got elected five times and would regularly get nearly two-thirds of the vote. There would always be a core of people who were intensely opposed to my policies. But people did not necessarily like Reagan's policies, either, but it did not seem to get as personal. Do you think it has to do with your generation? It may have more to do with the comparative tactics of the two parties. I have no idea. It may have more to do with the way people are talked about now. One of the reasons I have tried so hard- especially since the Oklahoma City bombing, which I say had a profound impact on our country and on me-I have really tried hard to bring a sense of civility and decency back into public discourse. I went back and read some of my own speeches in '92, and while they are not rough at all by the standards of today, I thought, well, I want to elevate what I am saying and how I am saying it a little more now. And if you go back to the early 1800's, for example, it is a period of real tumult in our country, what was said and done and how much people had it pretty rough. I mean, when Thomas Jefferson was elected President, the John Adams party-because Mr. Adams was trying to hold onto the Presidency-said that he would kill religion in America, he would end godliness among the American people. So we have always had some of this, but I think we need to resist it.

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I remember a very proud group of your inner circle of friends at the convention 4 years ago walking around boasting FOB pins. Jim Guy Tucker, Vince Foster, Webb Hubbell, even the First Lady? Well, I feel very badly, obviously, about Vince Foster because he was my longtime friend, and it is always tragic when someone commits suicide. And I do feel that a lot of people were targeted just because they were from Arkansas. Governor Tucker, for example, had-he was my Lieutenant Governor, we had been friends for a long time, but he'd never been part of my political life. But he was targeted, and I feel badly about that. And the country is going to have to evaluate, when this whole thing is over and there will be time for a fair accounting, whether they think it was the right thing to do. And I feel very badly about Hillary and a lot of her staff have been subject to, because it was just pure naked politics from the get-go. But that is what I am talking about. That is sort of the way of the cycle. It is the cost of doing business in Washington. I mean, the people-- Was that a surprise to you, that it was as harsh as it was? It is been deteriorating over time. Yes, it surprised me that you could be exonerated from one thing after another and it would never be noticed and then just another set of charges just to keep these going. That bothered me. But you know, the thing I think is important that I'd ask the American people to look at is that all these folks in our administration sustained all these hits, and we kept producing for the American people. We said, we cannot control this, we cannot do anything about it; all we can do is get up tomorrow and try to do our job. We came here to help move the country forward and bring the country together, and that is what we are going to do. And our convention showed how productive our administration had been and our country had been in the last 4 years. And I think the fact that we could do it while having people like Senator D'Amato on us day-in and day-out I think is a tribute to the character and the public devotion of the people in this administration. I am proud of them. That is what I wanted to ask you.

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If you can just-try to take this in the way that I mean it, but you have suffered incessant character assassination over the past 4 years. You get up, there is another funeral; you have probably only had a couple hours of sleep that night. Between the funeral, a scandal, another country maybe going to war, why do you want 4 more years? I mean, what are you thinking? It is the most rewarding thing in the world for a citizen of our country, who loves our country and believes in the promise of its people, to be ENTITY. To look back on the last 4 years and to go out here as I did on the train ride or on this bus trip, and you look into the eyes of people and you go through these crowds, and somebody will say, I have got a home because of one of your programs ; I have gotten a job since you were here ; I am on one of your college loans ; I am an AmeriCorps student -when you see how the country is changing for the better, it is immensely rewarding. And in this day and time-you know, as I said, we have had periods like this in our politics before. In the early 1800's, Mr. Jefferson faced many of the same things. When you live in a time which is really rough, with no holds barred, and a lot of people seek personal advantage by what I call the politics of destruction, you have to be always, always, always defining yourself and the quality of your life by what is inside. And you cannot confuse who you are and the quality of your own life with whatever is going on in the day-to-day headlines. ENTITY should always be trying to be bigger than he is and lifting the country up. And you just have to keep putting that out of your mind; you just have to let it go. I cannot do anything about anything that happened yesterday or even an hour ago; you just have to let that stuff go and keep trying to lift the country up.

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ENTITY, we are delighted to join you here today in the Solarium on the third floor of the White House, a charming and homey room. As you now round out your first year in the White House, do you feel at home here? Do you find that you enjoy the splendid misery of the Presidency, to use those famous words of Thomas Jefferson? It is a magnificent home, of course. It can get a little lonely at times. It is big, but there are so many wonderful things here that you can enjoy. It also gives you an opportunity to focus in on the problems, and it is the problems that come with the house that make it somewhat difficult at times to really relax and enjoy yourself. Speaking of those problems, ENTITY, I think many people regarded you as something of an interim ENTITY when you first assumed office. Do you feel now that a year later, that you have established a ENTITY Presidency? I think we have gradually put together a domestic program and a foreign policy that can be identified as a ENTITY Administration. As we move in the next 12 to 14 months, I think it will become more and more evident, which, of course, gives us an opportunity in the next election to lay that record out so the public can judge it against any alternative programs submitted by the opposition. I do not think there will be any problem in identifying what we have done, what we have tried to do, and it will be known as a ENTITY policy or a ENTITY program, so to speak. What would you pick out as the things you have done in this first year that make it indeed a ENTITY Presidency, both in domestic and foreign policy? Before getting into foreign and domestic policy, ENTITY, I think it is entirely proper to say that I have tried to restore public confidence in the Government and, particularly, in the Administration, in the executive branch, in the White House. I do not mean to criticize anybody else, but all the polls showed that roughly a year ago there had been a great loss of confidence on the part of the American people in their Government. We, the new Administration, with our appointments, with our openness, with our attempt to be frank and honest with the American people, I think we have turned the corner, and there is a restored confidence on behalf of the American people in their Government. Now, let us turn to the policy areas. We inherited a very difficult economic situation. The rate of inflation was somewhere between 12 and 14 percent, the highest in a good many years.

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That was our immediate economic problem, and we undertook some activities both fiscally and in a monetary sense to correct the situation. I am glad to report that it is now somewhere between 5 and 6 percent per annum. That is too high, and we had a little setback the last announcement on the CPI, the Consumer Price Index. In fact, it indicates it is going to go up 14 percent if it continues at this rate. But if you annualize the last 6 months of the Wholesale Price Index, it shows it is almost zero, because we had 5 months of, as I recall, negative increases in the Wholesale Price Index. So, I think you have to look at it in the broad span. We have made significant progress in the field of inflation, and we are going to continue to do so. Then, of course, we were faced in January with a precipitous drop in employment and a tremendous increase in unemployment. We adjusted our economic policies to meet that problem without sacrificing our effort against inflation. We did have an increase of unemployment up to 9.2 percent much, much too high but the last 2 months the unemployment figure has gone down from 9.2 to 8.4, and the most encouraging part is the fact that we have had an increase in employment of about 600,000, as I recall the figure. We are putting people back to work even though the unemployment figure is still too high. Now, this is a very narrow line to follow of still .trying to control inflation and at the same time reduce unemployment. I can just assure you we are going to follow a steady, firm, I think, correct policy to meet these two challenges. When you referred to a correct policy, ENTITY, I would like to remind you that it seems to us that in the past 2 or 3 weeks we have had an awakening, new concern that inflation may take off again, that unemployment is going to remain quite high through the election year of 1976. So, do you plan any new measures to deal with the economy? If we were to go along with the Congress that wants to spend a great deal more money I drew the line at a deficit of $60 billion the Congressional figures are up to $70 billion or $80 billion deficit for the current fiscal year if we were to go along with that kind of a deficit figure that the Congress proposes, I think we would be in serious trouble on the reigniting of inflation.

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So, we are still going to veto bills that accelerate expenditures in the Federal Government beyond a reasonable figure. On the other hand, with the restoration of public confidence by our, I think, responsible action, I believe that we are going to regenerate industrial activity, which means more jobs. Now, let me take one aspect of the last 6 months. We have had the most rapid inventory sell-off in the history of the United States. The net result is that current inventories in many, many areas of the country, in industries in the country, are down. So, they have to come up with additional production to meet current daily demand. With consumer confidence coming back the way it has and all the pollsters show that I think our steady, firm, responsible course is going to meet the challenge of inflation and unemployment. They will not be as good as we would like I am very honest and very frank about it but we will be moving in the right direction. Let us take the direction in which we are moving, which we are in today, leaving percentages aside. We have got better than 8 million Americans who do not have jobs. We reckon now that there are something like 24 million Americans 12 percent of the population of this country that are at the poverty level or below. And many of your critics make the point that while you are a good man and a decent man, you do not show a sufficient amount of compassion, in their opinion, for the people who are unfortunate in that sense, for the people who are on welfare and people who live on food stamps. A good many Americans think that there are too many abuses both in welfare and food stamps, and I think there are too many abuses. If we could correct the abuses, we could be more compassionate to the people who have a real need for both welfare and/or food stamps or both. Now, you know, inflation,ENTITY, hits the unemployed even more drastically than it hurts the people who are employed, so my compassion is across the spectrum. It is not just aimed at the people who are employed. We want to control inflation to help all Americans, including the unemployed. If we do not control inflation, the ones who are hurt the most are the people who are unemployed and the people on fixed incomes.

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ENTITY, no one would argue that inflation is not a threat, but the concern is that you seem to be more worried, really, constantly and it is a conscious decision on the part of your Administration with inflation than you have been with unemployment. ENTITY, I must respectfully disagree with you. This Administration has extended the unemployment compensation program to, I think, 65 weeks. We have broadened the eligibility of unemployment beyond what it ever was in the United States. We have paid more money out in unemployment benefits than any administration has ever done. So, we have shown in dollars and in programs a deep concern for the unemployed. We have gone along with a public service employment program up to the maximum authorized by the Congress. But yet you have also vetoed an effort for a job bill that was passed by the Congress. Martin, that was, I think, a poor label for a bad piece of legislation. The facts are, I sent up a request for $1,900 million for public service employment or a jobs bill that included $450 million for a summer youth employment program and the remainder for the public service employment. That shows my interest in the youth who wanted employment this summer, and it shows my interest in the people we could hire in the public service area. Now, what the Congress did was to take my recommendation and add $3 billion in pork-barrel programs that would not have solved the problem of the people unemployed today. It was pure Congressional politics of a pork-barrel kind, and that is the reason I vetoed it. After I vetoed it, the Congress recognized they were wrong and they sent back a bill that included my public service employment, my summer youth program, and added a few hundred million dollars just to satisfy their ego. Now, the truth is we got a good program through and we did not get a pork-barrel program shoved down the American people. Let me take this to a somewhat different plane, ENTITY There are critics who suggest that you have not provided the kind of broad roadmap for the country's future which this Nation with its many problems desperately needs today. Does it disturb you that you do not appear to have captured the hearts and minds of a great many Americans? I read both of those articles, and they are very able columnists. I think we will, with the next State of the Union message, have some areas that will point the direction in the long run for our country. I instituted this year what we call a no new program approach.

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Why did we do that? We had to solve our current problems first in order to get our fiscal situation under control. Once we have achieved that result and I think we have made substantial headway then we can take a look at and make recommendations for the long range that will meet some of the problems that are raised by Scotty Reston and Dave Broder, and by others. How do you deal with this perception that people have about the lack of leadership, and not only for you but for the Republican Party? For example, Senator Brock of Tennessee, of your party, said the Republican Party must come to stand for something and until it does that the word Republican will be associated with Watergate and big business, hard times . Well, I, of course, deny that this Administration, the ENTITY Administration, is in any way whatsoever connected with Watergate. The ENTITY Administration is going to be known, in my judgment, for a successful implementation of economic policy that will provide jobs in the private sector in the long run and in foreign policy will expand our efforts for peace throughout the world. That is what this Administration will stand for. I think those are good things for an administration to be remembered over the years. If you achieve them. I think the record is going to be good, and I think right now the public, if you look at the polls, is beginning to perceive that. The polls show that, on a personal basis, I am doing much better. It is not as high as I would like, but not many people in public life are doing very well in the polls. But also, ENTITY, the polls show that only 7 of 100 Americans-by one pollster who happens to be from your home State, Robert Teeter-that only 7 of 100 Americans today regard themselves as strict Republicans. I think this relates additionally to the fact that rightly or wrongly, many Members of Congress and elsewhere, your critics, detect a negative quality about your leadership. And does not that do damage perhaps to your own Presidency and to the Republican Party? Well, let me quote, if I might, some other statistics. Most polls that are taken today indicate that a majority of Americans are in the middle of the road or conservative. Now they do not label themselves as Democrats or Republicans. They are talking about a philosophy. And maybe labels today are not the right way to identify people's views, whether it is Democrat or Republican. I believe the American people want a healthy economy, a firm and successful foreign policy.

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That is what we are going to give them, and that is what we are giving them at the present time. When you talk about a healthy economy, ENTITY, there are other problems as well. What do we do about the rising cost of medical care, what do we do about the 12 percent of the population which ENTITY referred to which is now at the poverty level in this country? What do we do about the enormous problems of the cities which seem to be accelerating? Well, let us take the last one first. I think the cities have to recognize that they have a responsibility in the fiscal area as well. The Federal Government has done a substantial amount for cities through the general revenue sharing program, through a multitude of categorical grant programs. The cities have to realize that they have a fiscal management problem, too, and many of them have. Many of our cities are well managed; a few are not. I think the record speaks for itself. Well, ENTITY, in one area, the welfare area, your outgoing Welfare Secretary Weinberger suggested the other day that we should now be giving thought to some kind of negative income tax, in effect, a guaranteed annual income. Is that in the future as far as your Administration is concerned? Sometime this fall, there will be conducted under our Domestic Council and the Vice ENTITY is acting Chairman, Vice Chairman, but the actual acting Chairman of the Domestic Council and he and his associates are going to conduct some public hearings around the country where a number of areas will be examined by that Council, where people in various communities will have an opportunity to testify, proponents of one approach or another approach . Some people say we should modify the present welfare program. Some say we should junk it and come in with a new one. What we are going to do through the Domestic Council is give people throughout the country, not just the Washington complex, an opportunity to express themselves, to tell us what they think is the answer to the welfare problem. There is an awful lot of wisdom out in the country on what is right and what is wrong about welfare, what we today ought to do about medical care and the costs and the program. And as a result of those hearings on a nationwide basis, we will formulate our recommendations in those areas that need change. The decision has to be made ultimately in the Oval Office.

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Is it your thinking that the welfare system in this country is now in such a chaotic mess that some new system must be devised, and it is likely that some form of guaranteed annual income which was a concept that was put forward by Richard Nixon? There is no doubt that the present welfare program either ought to be junked and a substitute put in its place or the present welfare program has to be tightened up very, very greatly. Now, you can get proponents on either side. When I was in the House of Representatives, I voted twice for the program that was submitted by the previous administration, because I believed then and now that welfare reform was mandatory. Unfortunately, even though the House of Representatives passed that legislation twice, the United States Senate refused or did not act on it. Now, it is my judgment that we will come out of these public hearings, we will come up with either some tightening of the existing welfare program or will offer a substitute, and there are a number of alternatives. I am not going to prejudge what the public is going to tell us. We want the public to be a participant in this process. ENTITY, could we return to the question of confidence, which is a real concern. You have been ENTITY for a year, and looking back, would you agree with the conventional wisdom, as far as Watergate is concerned, that the system worked? I think the system did work, Martin. It went through a very traumatic period, but if you look back through what happened before August 9 and what has happened since, I think you must come to the conclusion that the system did work. And looking ahead beyond that, do you think that in this year that you have been in office that safeguards have been put into effect that would ensure that we would not have another Watergate? Do you feel there is a sense in the country that you have achieved that? Certainly what I have tried to do precludes a Watergate from happening under a ENTITY Administration, and I believe through the press, through the public, through the Congress, there would never be an opportunity for another Watergate to take place. Let me ask you to deal then with a rather remarkable and startling observation that was made to me by the Special Watergate Prosecutor, Leon Jaworski, a few days ago. I asked Mr. Jaworski, if your predecessor had destroyed the Watergate tapes, would he be sitting today in the White House, and he answered Yes.

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I would not undercut any judgment by Leon Jaworski. He knew intimately the content of many of the tapes, and he had a special responsibility. So, if he made that judgment, I am certainly not going to contradict it. Let us carry it, not only the judgment but its implications-and you know the famous observation of Congressman Mann, Next time will there be a watchman in the night? What concerns everyone in the country is that after Watergate, we now have a crisis of confidence, in the CIA, for example, a feeling that it is out of hand, that it is not sufficiently accountable. How do you feel about the revelations of CIA? How do you relate them to the crisis of confidence? As a result of some of the revelations, I appointed the Rockefeller Commission. That Commission conducted a very thorough investigation of the allegations concerning the CIA. That Commission has recommended to me certain administrative actions that I should take and some legislative proposals that I should submit to the Congress. My staff has taken the Rockefeller Commission recommendations and the Murphy Commission recommendations-and that Commission got into the CIA to some extent and I intend to submit to the Congress specific proposals that I think will maintain the CIA and our total intelligence-gathering community so they can do the job which is essential for our national security on the one hand and at the same time preclude our intelligence-gathering agencies from violating our constitutional rights as individuals. That is a point that I would like to raise with you. Now, those fellows in the CIA do not just report on wars and the like. They go out and make their own and there is nobody to keep track of what they are up to. They spend billions of dollars on stirring up trouble so they will have something to report on. They do not have to account to anybody. That is a very dangerous thing in a democratic society. Well, the recommendations that have come from the Rockefeller Commission and from the Murphy Commission and the result of the investigations in the House as well as the Senate, I think, will give to the Congress and to the ENTITY the tools to correct the abuses that Mr. Truman spoke of in his conversations. And that you perceive? And that I think have to be done in the future to eliminate any possibility of abuses such as Mr. Truman mentioned. ENTITY, the feeling is that perhaps you yourself as ENTITY, in terms of the record of the Presidency versus the CIA, may not even be aware of many areas in which the CIA operates.

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I can assure you, Martin, of two things. One, as a Member of the House and a member of a committee that had some jurisdiction over the CIA, but more specifically as ENTITY, I have probably gotten into the operations of the CIA and other related intelligence agencies in greater depth than any other ENTITY. And as a consequence, the proposals that I will submit and the administrative actions that I will take will correct those alleged and actual abuses. I think I know more about the CIA than any other ENTITY, certainly since 1945 or 1946 when it was established, and either in the rules and regulations or the law or the personnel, we are going to make certain that the CIA does its job in the gathering of foreign intelligence and the analyzation of that intelligence for the benefit of the ENTITY, the Department of State, and the Secretary of Defense, and at the same time will not abuse the proper constitutional rights of 214 million Americans. We are going to do that. Well, ENTITY, you served in Congress for a long time and Congress is the people's instrument that was really supposed to be protecting us against the excesses of the CIA. It is obvious now that Congress never did its job adequately. Did you ever have any inkling when you say you have been familiar with the CIA since 1946 did you ever have any inkling that these things were going on? I must admit, ENTITY, that I was not familiar with some of the details that have been brought to light. I was among a very limited number of Members of Congress, House and Senate, Democrats and Republicans, who analyzed the CIA budget and their overall programs. But I must admit that that kind of control by the Congress, in retrospect, was not adequate. Do you feel that members of the CIA lied to you as a Member of Congress? No, I do not think they lied to me. I will not pass judgment on what they said to others. But I do believe that the control of the CIA by the Congress over a period of years was not as sufficient as it should have been. Do you feel this is now essential for the future, that Congress must exercise greater control over the CIA? I think there has to be some improvement in this area, but I am not passing judgment on this program as to the specific recommendations I will make. We are now analyzing various proposals, and what the Congress does, of course, is their decision.

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But I can make recommendations as to how we can tighten up the control and at the same time give to the ENTITY and other people who have an interest the information on foreign intelligence which is so essential to our national security. You have to balance the two, and that is a very fine line. And I think we can do it. The Attorney General, Mr. Levi, in reading the material which you sent over from the White House which has not been released to the public about CIA activities, said he was appalled by some of the things he read. I think some of the things were improper, but I must say, Paul, people can judge what others have done and unfortunately sometimes do not put themselves in the position of a previous ENTITY or put themselves in the position of a previous Secretary of Defense. I think we can recognize the areas of mistake, but I do not like to be a Monday-morning quarterback. I think we ought to deal with the facts and we ought to deal with what we should do in the future and learn from the past, and I think we can correct these things. What we learned from the past, even despite your dislike of being a Monday-morning quarterback, is that your predecessors accepted proposals which called for the assassination of a foreign chief of state, for one thing, and brought about the overturn of a government in Chile, for another thing. ENTITY, I am not going to pass judgment on whether there was an order or was not an order about assassination. I do not want to point a finger at any other ENTITY or ENTITYs. I have looked at all of the material. We have given the material to the Church committee, and it is their obligation to, I think, analyze it but not do any finger-pointing. Now, the CIA has two kinds of operations one covert and the other overt. Their covert operations, under the procedures we have under this Administration, are carefully monitored carefully monitored, and I can assure you that every one that is done is in the national interest of the United States. But your predecessors might well have thought the same thing. The concern is the use of the CIA covertly, if you like, as an instrument of policy and foreign policy by your predecessors. ENTITY, I think we have to understand we live in a real world. Every nation, either a friend or an adversary, has a comparable intelligence-gathering, intelligence-operating organization in their government. And they do it for their own national security.

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Now, the United States has to compete in this real world. It is a tough world, and our national security on many occasions involves doing things in a covert way. I can only assure you that if and when we undertake them under this Administration, they will be carefully monitored and they will be directly related to the national security of this country. I am not going to pass judgment on what other ENTITYs did. I can only pass judgment on what I want us to do, and those are the guidelines that we will follow. Speaking of national security and foreign policy, ENTITY-and I must say parenthetically that you look very fit and relaxed for a man who just came back from Europe nonetheless, your trip to Helsinki has encountered a substantial degree of hostility in this country, as you perhaps well know, and, rightly or wrongly, some people are suggesting that the Russians were the winners at Helsinki and we were the losers. What is your response to that criticism? I think that is a completely inaccurate interpretation concerning the CSCE Conference in Helsinki. I think it is a judgment some people make, but I thoroughly disagree with it. Let me just put this in perspective, if I might. We predicated many of the decisions involving borders on what? No border was agreed to in Helsinki that was not previously agreed to by previous American ENTITYs or by previous governments in other countries. We provided in that Helsinki agreement for peaceful change of borders. We made it far less likely that there will be military intervention by one country against another. What we have really done is to make it possible for people in the East as well as in the West in Europe to communicate, to reestablish family relationships. I will come to that in a minute, ENTITY. We have made it possible for the news media to have greater freedom in all of the 35 countries. In my speech before the Conference, I said, on paper this is good. We have 2 years between now and the next meeting in 1977, and the test will be, have all 35 countries lived up to the agreement? It offers a hope. The reality will depend upon the execution. I happen to believe that world pressure will force all countries, Communist countries and other countries, to live up to the agreement. But let us just take one example, ENTITY. You talk about a peaceful change in borders being in the agreement. Now realistically speaking, do you think that the Russians would give up the Baltic territory, which they took over at the end of World War II?

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Do you think they would give up the Eastern European countries? Do you think that they would negotiate to give back these countries their independence? Let me put it the other way around. If we had not gone to Helsinki, do you think the Russians would have permitted any of the things you are talking about? In Helsinki, they at least signed an agreement that says you can change borders by peaceful means. But does it mean anything, ENTITY? Well, they have signed something that says you can change borders by peaceful means. ENTITY, you used a very good phrase at Helsinki. You said Peace is not a piece of paper, a very memorable phrase, and it conveys this idea that we are talking about now. Many of your critics and let us take it all of the way from Solzhenitsyn 1 to George Ball, a former Under Secretary of State-have voiced concern about legitimizing what, for example, George Ball calls the Soviet stolen empire, and asks, how do you reconcile that with Western ideals? that it is our obligation to follow policy that is more concerned with morality and principle than the acceptance of these borders would indicate. Well, Martin, I go back to the peace treaties of Yalta and Paris and Potsdam and the agreement by the Germans themselves to establish those borders. Those were peace treaties that established borders for all of Eastern Europe and all of Western Europe. Those are factual things done in the forties, the fifties, et cetera. The Conference on European Security and Cooperation did not change any of those, but it did say and every one of the nations did sign something that is different, that there can be peaceful adjustments of borders. But despite what you are now saying, ENTITY, there is in this country, as you well know, a rising amount of criticism about detente itself, people questioning the value of detente. What is your feeling about this criticism, and do you think this is endangering detente? I hope it is not endangering detente because I think there are many pluses to us and, yes, to the Soviet Union. I believe that SALT I was an outgrowth of detente. Does anybody want to tear up SALT I? Anything that puts a lid or a limitation on the development of nuclear weapons, the expansion of nuclear weapons any agreement that puts a lid or controls, that is good. So, detente helped achieve SALT I.

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Detente may help I hope it will SALT II, where we will put an actual cap on nuclear weapons and other nuclear weapons systems. One of the happiest dividends that detente could possibly produce would be a reduction of forces by the Soviet Union as well as the Western allies in Western Europe. Was that raised at Helsinki? Did you get anywhere at all with that with Brezhnev? As you know, historically, when CSCE was originally agreed to as a program, it was also agreed to that there would be negotiations for mutual and balanced force reductions in Europe MBFR. Those negotiations have been going on now for about 2 years. They are presently stalled, but now that we have the Helsinki agreement, it is my judgment that we have opened up encouraging prospects for additional movement in the MBFR negotiations. I think the Allies and the West are getting together for perhaps a new position. I believe that the Soviet Union and its allies are taking a look at the current stalemated negotiations and may come up with some agreement. The prospects for a mutual and balanced force reduction in Europe have been enhanced by the Helsinki agreement no question about that whatsoever. Well, ENTITY, to go back to SALT I for a moment, you said at a recent news conference that according to your investigation the Russians had not cheated on the agreement limiting the use of certain strategic weapons. Your old friend, Melvin Laird, had written an article suggesting they had cheated. Since then, you have talked to Mr. Laird. Have you changed your mind about what you said earlier? I naturally investigated the allegations that were made by a number of people, including Mel. And after a thorough investigation, I have come to the conclusion that a person might legitimately make the charge there had been violations, but on complete and total investigation I think any person who knew the facts as I know them would agree that there had been no violations of any consequence. There are some ambiguities I want to be frank about it but all of the responsible, knowledgeable people in the Pentagon or in any of the other responsible agencies would agree with me there have been no serious violations, and any that have been called to their attention have been Stopped. Very minor, but we have what we call a consultative group where if we think they are violating something, we make that point. It is investigated, and in the cases where there was any instance that might be an honest charge of a violation, they have been stopped.

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The Soviet Union has raised some questions about certain activities that we have undertaken, and we have investigated them. And I think that arrangement of the consultative group has been very effective in making sure that SALT I was lived up to. Let me turn now to the Middle East, ENTITY. You beat me to it. We have had intensive negotiations going on now for about 2 months to try to get a peace treaty moving in this area. I am optimistic on an increasing basis, but I have learned that until it is signed in black and white that I should not predict that it will be finalized. Let me ask you - I want to just ask you one more question in this area. Do you find the Russians are now less troublesome in the Middle East in the efforts to achieve a peace agreement? They have acted in a very responsible way, during my time, in the Middle East. Let me just turn to the question of these negotiations that are going on between Israel on the one hand and Egypt on the other. Both of those countries have to understand that flexibility at this crucial time is important for the peace of that area of the world and possibly peace in the world. If there is not movement in the Middle East right now, the potential for war is increased significantly. And a war in the Middle East today has broader potential ramification than any time in the past, and we have had four wars in the Middle East since 1946 or 1947. A fifth one not only means that Israel will be fighting the Arabs but the potential of a confrontation between the United States and the Soviet Union is a possibility. You must have raised that with Brezhnev. How did he react to it? We talked about the Middle East. We told them, or I told him, what we were doing. Secretary Kissinger had had a previous meeting with Foreign Minister Gromyko. I repeat what I said a moment ago, ENTITY. The Soviet Union has acted in a very responsible way. I think they understand the potential consequences of no progress for continued peace and understanding in the Middle East. What do you see, sir, as our future policy toward South Vietnam? Do you think that we will recognize that Communist regime in the foreseeable future? Their current actions certainly do not convince me that we should recognize South Vietnam or North Vietnam. We have taken a very strong stand that we would not agree to the admission of South or North Vietnam unless and until South Korea is admitted. We believe in universality across the board.

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We do not believe in kicking nations out kicking Israel out, for example. Did Mr. Brezhnev say he agreed with you on that they were supporting that movement? We let it be known very, very strongly that we believe Israel should be permitted to be a member of the United Nations. But on the other hand, we also believe that if you believe in universality, which includes South and North Vietnam, you have to have South Korea. ENTITY, when you first took office, you obviously relied a great deal upon Secretary of State Henry Kissinger. Do you now make more of the decisions on your own? Do you rely less upon Mr. Kissinger? I am not going to get into that discussion. Henry Kissinger and I have the closest possible rapport, personally and professionally. I see him every day for roughly an hour. We talk about the Middle East. We talk about SALT. We talk about our total foreign policy. It has been from the very first day. It is now, and I expect it to continue in the future. And I do not want to get into whether I do more or do less. We are a good team, and I think we have made some good decisions. Are you aware, ENTITY, of the criticism at the Capitol - ENTITY.from Republicans and not just Democrats, that in the Turkish aid fight, for example, that Mr. Kissinger was responsible for your losing that battle to lift the ban against military aid. I have heard those arguments but I do not think they are valid. I think the Congress, or the House of Representatives in this case, made the most serious wrong decision since I have been in Washington, which is 27 years. The Congress was totally wrong or the House of Representatives. Why do I say that? First, they have not solved the Cyprus problem. Number two, they have weakened NATO. Number three, because of the Turkish aid embargo, they have lessened our own national security capability by preventing us from using intelligence-gathering installations in Turkey. Are you saying Congress is harming our foreign policy? The decision of the House of Representatives to continue the Turkish arms embargo has seriously jeopardized our foreign policy and undercuts in a significant way our own national security, including that of NATO, and it has not solved it has not solved the Cyprus problem. There was a law that said that aid that was given to Turkey could not be used as it was used against Cyprus. We have lived up to the law.

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We have stopped, because Congress told us to, the shipment of military hardware that the Turks bought and paid for. And incidentally, they bought and paid for the hardware, and because of Congressional action, the Turks are now being charged warehouse storage fees for equipment that they own that Congress said they could not get. But anyhow, aside from that, which is, I think, a ridiculous development, we have lived up to the law. We are not sending them any military hardware, and unfortunately, the net result is what I told you. But, Martin, I think you have to recollect a little bit. Who started the problem in Cyprus? It was the Greek Government, it was the previous Greek Government that tried to throw Makarios out and assassinate him, and the previous Greek Government wanted to move in with Greek troops and take over Cyprus. And as a result of Greek violations, the Turks moved in and have, unfortunately, dominated the situation. But the whole program or the whole problem arose by the unwise action of the previous Greek Government. ENTITY, our time is almost out, and I must bring up a subject with which you are obviously quite familiar, namely, the rumors in this town that Nelson Rockefeller may not be your running mate in 1976. Is he going to be back on the ticket? I have read the various reports, and frankly, I think it is a tempest in a teapot. That is what he said. I happen to agree with him. Nelson Rockefeller was selected by me because I think he would make and has made a first-class Vice ENTITY. The realities of the political situation are I am going to go out with my campaign people to get my delegates. He, of course, will seek his delegates in the interim. I think the team of ENTITY and Rockefeller has done a good job, and at this time, I do not see any reason to change it. Is the position you take one that might finesse Mr. Reagan out of the picture, too? I only talk about the affirmative things, Martin. I do not want to get into who did this or who did that or what is going to happen. The realities are Nelson Rockefeller has done an excellent job as Vice ENTITY He works hard. He has taken every job I have given him and done really a great job. When you have somebody that works on a team with you, why do you want to change?

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In front of the Israeli parliament, the Knesset, you said that negotiating with Iran is pointless. Were you referring to Senator Barack Obama? People need to read the speech. What I said was, is that we need to take the words of people seriously. And when, you know, a leader of Iran says that they want to destroy Israel, you got to take those words seriously. And if you do not take them seriously, then it harkens back to a day when we did not take other words seriously. It was fitting that I talked about not taking the words of Adolph Hitler seriously on the floor of the Knesset. But I also talked about the need to defend Israel, the need to not negotiate with the likes of Al Qaida and Hizballah and Hamas, and the need to make sure Iran does not get a nuclear weapon. It was a but I also talked about a vision of what is possible in the Middle East. Repeatedly, you have talked about Iran and that you do not want to see Iran develop a nuclear weapon. How far away do you think Iran is from developing a nuclear capability? You know, ENTITY, I do not want to speculate, and there is a lot of speculation. We need to prevent them from learning how to enrich uranium. And I have made it clear to the Iranians that there is a seat at the table for them if they would verifiably suspend their enrichment. And if not, we will continue to rally the world to isolate them. You have been rallying the world. Have you had some success on this Arab tour to try and and Israeli tour to mobilize this community against Iran? Is that part of your mission? No, it is not so much; actually, the place where I am spending time, in terms of dealing with serious economic isolation, is with our European friends. They are the ones who have had significant trade with the Iranians. We are dealing with it not only in goods and services, trying to convince them to hold back goods and services until there is a verifiable suspension, but also dealing with the Iranian finances. I do not have to spend too much time in the world in this part of the world creating concerns about Iran. There is big concern about Iran, given the fact that Hizballah is destabilizing Lebanon, Hamas is trying to prevent the creation of a Palestinian state, and, of course, Iranian action inside of Iraq.

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A lot of Iran's empowerment is a result of the war in Iraq. that Iran is its position in the world is rising because of your actions in Iraq? See, I am not so sure I agree with that. As a matter of fact, I think Iran is troubled by the fact that a young democracy is growing in Iraq. I you know, this notion about somehow if Saddam Hussein were in power, everything would be fine in the Middle East is a ludicrous notion. Saddam Hussein was a sponsor of terror. And can you imagine what it'd be like to see an arms race between Saddam Hussein and Ahmadi-nejad, in terms of creating instability in the Middle East? As a matter of fact, the way to ultimately defeat those who use terror to destabilize young democracies is to help the young democracies succeed. I have watched Iran's influence grow in Iraq. It is been very steady over the years. Yes. Well, Basra, for example, is we stood by the Prime Minister's decision to move into Basra and to continue to encourage the Prime Minister to go after Shi'a criminals and Shi'a armed militias that are doing harm to the average Iraqi and, at the same time, encourage him to use some of the Iraqi wealth to improve conditions of life. Basra is it is still obviously got work to be done, but it was a successful operation, as you know better than me. He is now heading into Sadr City he, the Iraqi Govern-ment all aiming to protect innocent people from people who are operating outside the law. And to the extent that those are folks who are supported by Iran, it will serve as a defeat to Iran. You know it better than anybody; you have been spending a lot of time there. And it is in the interest of the United States that we help it continue to change to the better. You talked about Iran being a major threat to American policies in the region, with Hamas, Hizballah, militia groups in Iraq. Do you intend to finish your term in office with a military action of some kind against Iran? I have always made it clear that options are on the table. But, you know, the biggest weapon we have against those who cannot stand freedom is the advance of freedom. I am going to give a speech here in a minute that talks about the need to advance the freedom agenda in the Middle East.

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And my you know, Iran is a threat to people who want to live in peace. That is what they have clearly shown. I mean, the interesting thing in Lebanon is that Hizballah, which had sold itself as a protector against Israel, all of a sudden turned its weapons on the people of Lebanon and all the the true colors. And sometimes in life there needs to be clarity in order for people to rally to solve a problem. And so the best way to deal with the Iranians in the Middle East is to help the young democracy of Lebanon survive, is to stand up a Palestinian state obviously, subject to the roadmap which we intend to do before my Presidency, and succeed in Iraq. How are you going to prevent Hizballah from taking over in Lebanon? They had a small coup. The army did not do anything. And they proved that they are clearly in control of the streets when they want to be. And obviously, one thing to do is to help strengthen the Lebanese ENTITY, which I sent General Dempsey to Beirut I do not know if he was there when you were there, but he was there precisely to help inventory the Lebanese ENTITY is to make it clear to Prime Minister Siniora, we stand strongly with you. We will see what happens out of this agreement and how whether it sticks or not. But we strongly support the March 14th Coalition. Perhaps one way to help deal with the situation is to get the U.N. tribunal up and running that is investigating the death of Hariri. I mean, this is and yet the Lebanese people deserve a peaceful democracy, and our aim is to help them. It sounded like, when you were addressing the Israeli Knesset, you gave a green light to Israel to take action against Hizballah and Hamas. I do not ENTITY, you can read into it what you want to read into it. My intention was to say that all of us need to understand that radical groups are the threat to peace, whether it be Al Qaida or Hamas or Hizballah. Negotiations with Iran is that appeasement? My position, ENTITY, all along has been that if the Iranians verifiably suspend their enrichment, which will be a key measure to stop them from gaining the know-how to build a weapon, then we they can come to the table, and the United States will be at the table.

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That is been a position of my administration for, gosh, I cannot remember how many years, but it is a clear position. We have stated it over and over again. But I have also said that if they choose not to do that verifiably suspend we will continue to rally the world to isolate the Iranians. And it is having an effect inside their country. There is a better way forward for the Iranian people than to be isolated, and their leaders just need to make better choices. In Iraq, I recently met a soldier. He was medevaced out on his first tour. He is now back on his second tour was already medevaced to the green zone. How many more tours do these soldiers have to do? Well, first of all, the fact that this person volunteered again speaks to the great bravery of our troops. And we need to honor them and will honor them. in for 12, out for 12. The other thing is to take care of their families, and when they are veterans, take care of the vets. You know, the fact that you told me about a guy who got medevaced twice only says to me that we have got a courageous military. In terms of success, we are returning troops on success. You might remember, I had to make a difficult choice to put more troops in. Those troops are coming home by July. And then, of course, General Petraeus and his successor will assess the situation on the ground, and we will end up having the troops necessary to help the Iraqis succeed. It just sounds like we need to support them as much as we can and keep them there for as long as we can. I think the end, ENTITY, is, I told you, return on success. The more successful Iraq is, the fewer troops we will need. The security situation has changed; the political situation is a lot better; the economic situation unlike other parts of this world are pretty strong. And now the question is, are they going to be able to get the resources in an efficient way to the people, so the people see the benefits of democracy? And they are doing a better job of that. You still view Iraq as a success. Because on the ground, it looks very bleak. People still want to leave the country, and people are Well, that is interesting you said that.

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That is a little different from the surveys I have seen and a little different from the attitude of the actual Iraqis I have talked to, but you are entitled to your opinion. The Iraqi Government, I think, has one position, which is that it is seeing a lot of progress. But Sadr City has been up in revolt. I was just in a major firefight in Sadr City, hit by an EFP. But there is no question that the Iraqi Government are dealing with the violent people. It is like this attitude about Basra. What you are watching is an Iraqi Government take care of extremists in their midst so that a democracy can survive. And it is essential that this democracy survive for our own security as well as the stability of the Middle East. You have talked about having a Israeli-Palestinian peace agreement by the end of this year. What gives you hope that that is not overly ambitious? Because, first of all, people in Israel understand that in order for them to have long-term security, there has to be a democratic state. People in Palestine want a democratic state. Secondly, I know their leaders. I spent a lot of time with Prime Minister Olmert and ENTITY Abbas. They are dedicated to doing the hard work. And yes, Hamas was elected, and they have done a disaster in of running Gaza. And it is that vision, the competing visions that will be put forth to the Palestinian people at some time. And I believe a state will exist, and I know it is necessary for peace in the Middle East. And I think I feel good that we can get it defined during my Presidency and implemented subject to roadmap. Going back to your vision and the message you have been pushing about democracy and supporting moderates across the region, if you look back over the last several years, the Middle East that you will be handing over to the next ENTITY has is deeply problematic. You have Hamas in power, Hizballah empowered, taking to the streets, more stronger than the Government, Iran empowered, Iraq still at war. What we are handing over is a Middle East that, one, recognizes the problems and the world recognizes them. They have been that is why we put them on the terrorist list before my Presidency. And what you are beginning to see is new democracies. You will see a Palestinian state. The freedom movement is a challenge to a system that said, the status quo is acceptable, when underneath was brewing all kinds of resentments.

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We have taken on Al Qaida in the Middle East. It was from here that they recruited people to launch attacks. Do you believe that Iran is now more of a threat in Iraq than Al Qaida? I believe yes, I bet I think they have both been seriously hurt in Iraq. And you know, Al Qaida thought they were going to have a stronghold in Anbar Province. They proudly proclaimed this was going to be their capital from which they were going to launch missions around the world and throughout the region, and they failed. And in Iran , * Shi'a groups funded by Iran have tried to take on the Government. And the Government is succeeding, and it is but it is going to take a while. The war on terrorism has been the centerpiece of your Presidency. Many people say that it has not made the world safer, that it has created more radicals, that there are more people in this part of the world who want to attack the United States. That theory says, by confronting the people that killed us, therefore, there is going to be more; therefore, we should not confront them. Or creating more people who want to kill us, one could also say. Well, you can say that, but the truth of the matter is, there is fewer Al Qaida leaders; the people are on the run; they are having more trouble recruiting in the Middle East. Saudi Arabia, our partner, has gone after Al Qaida. People now see Al Qaida for what it is, which is a group of extremists and radicals who preach nothing but hate. We should have just let the beehive sit there and hope the bees do not come out of the hive. My attitude is, the United States must stay on the offense against Al Qaida two ways. But have not you just smashed the bees two ways in the hive and let them spread? One, find them and bring them to justice what we are doing; and two, offer freedom as an alternative to their vision. And somehow to suggest that bees would stay in the hive is naive. They did not stay in the hive when they came and killed 3,000 of our citizens.

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although it is good evening for Russian audience because of the time change. So how important the D-day is for you, personally, and for your family? He is he was alike many in America and in Russia that were called upon to defend the world against nazism. And today, the celebration in Russia will remind us all about the sacrifices of, in my case, an individual I love, but also a generation, a generation of men and women who made extraordinary efforts, inRussia's case to defend the homeland, in America's case to work with allies to defeat Adolf Hitler as well as the Japanese. And so it is a special day for me, personally, because it reminds me of the willingness of a young kid to go fight. But it also reminds me of the duty of my generation to work together to make the world a better place. The after-war Europe has been reshaped according to the Yalta Conference of 1943, by the decision of three very important personalities of this time, Mr. Roosevelt, Mr. Churchill, and Mr. Stalin. How fair is it to hold only Russia responsible for all the misfortunes of Eastern Europe and Baltic States over the last? Obviously, it was a decision made at the end of the war. I think that the main complaint would be that the form of government that the Baltics had to live under was not of their choosing. But no, there is no question three leaders made the decision. So not only Russia the bad guy of history? Well, I think everybody ought to bear theas historians look back at Yaltagot to recognize that it was you are rightly so in pointing it outit was not only the Russian leader but the British and American leader were at the table and agreed on the agreement. In Russia, we are very concerned on the rise of neo-nazism in Baltic States when Russian war veterans are humiliated publicly, when monuments to Russian soldiers are vandalized, and at the same time, where, on May 8th, there is a plan to open the monument to Nazi Brigade, that is well known only for fightingnot only for fighting against Russians but also for quite ugly things that were common for SS troops. Well, look, there is I have got a message when I go to the Baltics, and that is it is important to respect democracy but, also, the respect of democracy is respect for minority rights.

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In other words, a true democracy is one that says minorities are important and that the will of the majority cannot trample the minority. And as to whether or not nations are honoring nazism, I mean, of course that should be rejected. We are celebrating the defeat of nazism. It is an extremist point of view that believes that you should be able to trample the rights of minorities. It was the Nazis who annihilated millions of Jews, for example, and there is a classic example of the rights of minorities being trampled. And we must never forget the lessons of why we fought together in World War II. And so I am looking forward to delivering that message of tolerance. There is a question that has nothing to do with your visit to Russia but is very important to our country as an oil-producing country. Once you mentioned that you will be happy to find a magic wand and to cut the price on oil. So what oil price will be acceptable for the United States, and what do you think is the chance of finding this magic wand? A soldier asked me, he said, Why do not you lower gasoline prices, as if the government controlled price. And in our country, the Government does not control price. And I told him, I said, If I had a magic wand, I would wave it and lower your price. This is a world based the price based upon supply and demand. And demand has been going up relative to supply, which has been beneficial for oil-producing countries like Russia. Obviously, the lower the better for our economy, because every time the money the dollars go up on the gasoline price, money leaves the pocketbooks of the working people. Hopefully, higher price will stimulate more production. More production will then help the price reach an equilibrium. I would hope that Russia would encourage a lot of investment, to open up the vast reserves she has. We need to do more exploration here. I spoke to the Crown Prince of Saudi Arabia who assured me that he is trying to put moreto find more oil. And that is what high prices do. But people who have got oil have got to understand if the price gets too high, it could wreck economies, which will mean there is less purchasing power for the product.

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What an honor for me to say I am live at the White House, and I am joined by ENTITY of the United States. Michael, it is great to be on the show again. Every time we'v been on, it is been a great time, so I appreciate the opportunity. They are anxious to pose some questions about health care to the President of the United States. More than 5,000 e-mail suggestions have flowed through my web site in just the last 24 hours alone. If it is all right, I will start by posing a couple of questions and some of the things that I continue to hear from folks, and we will welcome phone callers as well. Allow me, sir, to begin with this. You know, a great deal has been made as to what she said pertaining to the so-called public option. The surprising thing is, she'd been saying this all along. She said the same thing a month ago. We have consistently talked about the need for health care reform because family premiums are going up three times faster than inflation and wages. The costs of Medicare and Medicaid will bankrupt this country if we do not reduce the cost inflation of health care. You have got families who cannot get health care because of preexisting conditions, or they bump up against some lifetime cap if a family member gets really ill. So what we have said is, there are a number of components of health care. One is that for people who already have health insurance, they can keep their health insurance, but we are going to have some consumer protections to regulate how insurers operate. For example, they cannot prohibit people from getting it-health insurance-because of a preexisting condition. They cannot have lifetime caps or yearly caps that prevent people from getting the care that they need. We are also going-for people who do not have health insurance-to set up a system similar to what Congress has, where you can buy into a bigger pool, get better rates, have better protections around you. You would be buying that insurance from private insurers. But one of the options we talked about was a public option, where there would not be a profit motive involved; it would be non-for-profit. And that public option would give you affordable health insurance. Now, what we have said is, we think that is a good idea. But we have not said that that is the only aspect of health insurance.

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And what she essentially said was, is that all these other insurance reforms are just as important as the public option. The press got a little excited, and some folks on the left got a little excited about this. We think that the key is cost control, competition, making sure that people have good, quality options. If we are able to achieve that, that is the end that we are seeking. And the means-you know, we can have some good arguments about what the best way to achieve it is, but we have got to change, because the status quo is unsustainable. ENTITY, there is a mindset among many folks in my audience who say that the endgame, it is all about single-payer, that it is a public option or it is a cooperative. And, sir, you know that there is a perception out there that you want it all. You know, you want to be in the banks, you want to be in the automotive industry, and now you want to be in health care. Can you address that mindset? First of all, look, the intervention in the banks was not started by me; it was started by a conservative Republican administration. And rightly so, because our banks were on the verge of meltdown. The only thing that we have done is said let us put in place some financial regulations to make sure that this does not happen again. The auto interventions were not started by me; they were started by a conservative Republican administration. The only thing that we did was rather than just write GM and Chrysler a blank check, we said, you know what, if you are going to get any more taxpayer money, you have got to be accountable. They went through a record bankruptcy, and now GM for the first time is actually hiring folks back. So I know that there is this perception that somehow we have engaged in these extraordinary interventions. Part of it had to do with the worst financial crisis in history. And the fact that both the auto bailout and the bank bailout were started under a previous, conservative Republican administration indicates the fact that this was not ideological; this was a matter of necessity. Now, as far as health care goes, I have consistently said I would love the private marketplace to be handling this without any Government intervention. What we are seeing is about 14,000 folks lose their health insurance every single day. We are seeing health care inflation go up about twice as fast as regular inflation. Businesses are being crippled by it.

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Small businesses especially have almost no access to the marketplace because they have got no leverage with insurance companies. So all we have said is, let us keep the private system intact, but let us make sure that people who right now cannot get health insurance-about 46 million-that they are able to buy into the market. And number two, let us have some consumer protections to make sure that those of us who have health insurance do not end up getting a bad deal because we did not read the fine print and we think that we have coverage; when we finally get sick and we need it, it turns out that we are vulnerable because insurance companies are not operating in the interests of their customers. I like to drive an MDX and an F-150, and I have communicated by e-mail in the last 24 hours with the woman who sold me the MDX and the guy who sold me the F-150, and each of them, ENTITY, are saying that Cash for Clunkers has been a great idea and a wonderful initiative, and they have closed a lot of deals, but the payments are late. And I am hearing from a number of folks who say, Come on, if the Federal Government cannot get it together relative to Cash for Clunkers, I do not want to entrust my health care to the Federal Government. Well, let me first address Cash for Clunkers. It has been successful beyond anybody's imagination. And we are now slightly victims of success, because the thing happened so quick, there was so much more demand than anybody expected that dealers were overwhelmed with applications. Now, this program has only been going on for a few weeks, and we have hired three times as many people to process this stuff as we originally had. I understand dealers want to get their money back as soon as possible, but the fact of the matter is, this is a good-news story; they are seeing sales that they have not seen in years. And they will get their money, but we have got to process it properly, because if we were careless about it, if we were just sending out checks where applications were incomplete and so on, first of all, we'd be breaking the law because there are statutes set up in terms of how this is supposed to go. And secondly, there'd probably be some story-you'd be asking me about scandals, where there were a whole bunch of checks of taxpayer money being wasted, going out to people who had not actually bought cars.

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So I think this is actually a high-class problem to have, that we are selling too many cars too quickly and there is some backlog in the application process. ENTITY, Ernie is a listener of mine on WTKK in Boston and wishes to pose the following question. I understand you have said that the Federal health care plan for Government employees is a pretty good plan. And Congress has voted, to my understanding, not to join the public plan once it passes because they want to keep their good Federal plan. Would you be willing to either urge Congress to have the Federal employees join the public plan, or would you be willing to urge Congress to somehow open up the Federal health plan to all Americans? I hear this all the time, ENTITY. First of all, understand that currently, Federal employees have a very good health care plan because they are able to leverage the insurance companies. There are so many members of their-of the Federal workforce that they can get the best rates possible, for every insurance company wants to do business with the Federal Government. The same concept is what we are trying to do in setting up what is called a health insurance exchange. Essentially, it'd be a marketplace where people who currently do not have health insurance or small businesses could pool their numbers so they have leverage over the insurance companies. And they could go on a web site and look at the various options, the types of various private health insurance plans that are being offered, and choose the one that is best for their families. So we are actually trying to duplicate what exists for Federal employees. We want to make that available to everybody else. Now, what we have said is, let us make a public option one choice of many choices that are available to people who are joining the exchange. And I see nothing wrong with potentially having that public option as one option for Federal employees as well. Nobody would be obligated to choose the public option. If you went on that web site and you said, you know what, Aetna or Blue Cross Blue Shield are offering a good deal, and I would rather choose that plan than the public plan, you'd be perfectly free to do so. Nobody would be saying, you are obligated to go into a public plan.

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I think what folks are saying is that they'd love it if you'd stand up and say, whatever it is that we are creating, be it a co-op, be it a public option, whatever name ultimately might be ascribed to it, we in the executive branch, we in the Congress, we will live with exactly these parameters. I think there would be-I think it would make perfect sense for us to make the public option available to Federal employees as well. But keep in mind, it would just be a choice. Tracy listens on WXNT News Talk 1430 in Indianapolis. Until I heard you say that a private option is just a sliver of your health care proposal recently, I think myself and many Americans thought that pretty much was your proposal. So my question is, could you please quickly list five or six bullet points of what legislation must include for you to be willing to sign it? Must it include a public option? First of all, you mentioned illegal immigrants. This has been an example of just pure misinformation out there. None of the bills that have been voted on in Congress and none of the proposals coming out of the White House propose giving coverage to illegal immigrants-none of them. That has never been on the table; nobody has discussed it. So everybody who is listening out there, when you start hearing that somehow this is all designed to provide health insurance to illegal immigrants, that is simply not true and has never been the case. Because there is a 1986 law on the book that says if you show up at an ER, you have got to be treated. Well, that will continue, because we do not want a situation in which some child, even if they are an illegal immigrant, shows up in an emergency room with tuberculosis and nobody is giving them treatment, and then they are going back to the playground and playing next to our kids. So there-I think there is a basic standard of decency where if somebody is in a death situation or a severe illness, that we are going to provide them emergency care. But nobody has talked about providing health insurance to illegal immigrants. Now, Tracy, you had a good point about what are the bullet points that I want. This has to be paid for, because in the past, some of the health care plans that we have put forward have not been paid for. A good example of this was the prescription drug benefit for seniors.

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That was a important thing to do, but we never actually figured out how to pay for it. That just went directly into the deficit and the national debt. We cannot afford to do that. Point number two, it has to bend the cost curve. What that means is that we have got to create a plan that experts credibly say will reduce health care inflation, because if all we are doing is adding more people, but we are not controlling costs, that will blow up the deficit over the long term, and it will blow up the burdens on individual families and businesses. We have got to get control of our costs. We spend $6,000 more than any other advanced country per person on health care. Number three, we have got to have the insurance reforms I talked about for people who already have health insurance. And that means making sure you can get health insurance even if you have got a preexisting condition, making sure that you are not burdened by lifetime caps, making sure that insurance companies cannot drop you just because you get sick or because you are older or because you are not as healthy; so making sure that there are basic insurance protections, that is very important. Number four is I want to make sure that we have a health exchange, as I just described, that is similar to what Members of Congress have, where you will have a set of options. If you are a small business, if you are an individual, self-employed, you have trouble getting health insurance right now, you can go and look at a bunch of options. And we have got to make it affordable for middle class families, so part of the plan has to be that if you cannot afford a market-based premium, that we are giving you a little bit of help and you are able to get health insurance. Choice, competition, reducing costs-those are the things that I want to see accomplished in this health reform bill. Where, ENTITY, does personal responsibility factor into all this? There was a front-page story in USA Today recently that talked about obesity being the single most significant factor. How about rewarding those who get on a StairMaster every day? Well, the interesting thing is, you are already starting to see this happen among a lot of private companies. Safeway, for example, is a company that has done a great job in helping encourage its employees to get fit, and they actually give them an incentive.

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They say, Look, we are -you are going to save X amount on your insurance premiums; you will see that in your paycheck if you are taking steps to take care of yourself. And I think that creating incentives like that for prevention, for wellness, creating cash incentives for people who-where it shows up they are saving money on their health insurance because of it, I think that is something that should be part of this. listens to me at Home Base, which is the Big Talker 1210 in Philadelphia. Oh, I am scared out of my mind talking to you here. I am a supporter, worked hard for you last year. You have an overwhelming majority in both the House and the Senate, and you own the whole shooting match. And I am just not getting-it is very frustrating to watch you try and compromise with a lot of these people who are not willing to compromise with you. Well, look, I guarantee you, Joe, we are going to get health care reform done. And I know that there are a lot of people out there who have been hand-wringing, and folks in the press are following every little twist and turn of the legislative process. You know, passing a big bill like this is always messy. It is -FDR was called a socialist when he passed Social Security. JFK and Lyndon Johnson, they were both accused of a Government takeover of health care when they passed Medicare. This is the process that we go through, because, understandably, the American people have a long tradition of being suspicious of government until the government actually does something that helps them, and then they do not want anybody messing with whatever gets set up. And I am confident we are going to get it done, and as far as negotiations with Republicans, my attitude has always been, let us see if we can get this done with some consensus. I would love to have more Republicans engaged and involved in this process. I think early on a decision was made by the Republican leadership that said, Look, let us not give them a victory, and maybe we can have a replay of 1993, '94 when Clinton came in. He failed on health care, and then we won in the midterm elections, and we got the majority. And I think there is some folks who are taking a page out of that playbook. This is a issue for the American people. There are a bunch of Republicans out there who have been working very constructively.

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One of them, Olympia Snowe in Maine, she is been dedicated on this. Chuck Grassley, Mike Enzi, others-they have been meeting in the Senate Finance Committee. I want to give them a chance to work through these processes. And we are happy to make sensible compromises. What we are not willing to do is give up on the core principle that Americans who do not have health insurance should get it, that Americans who do have health insurance should get a better deal from insurance companies and have consumer protections. We have got to reduce health care inflation so that everybody can keep the health care that they have. A bit off message, today the Scots released the Lockerbie bomber due to-actually, maybe it is health care-related. He is got terminal cancer. We have been in contact with the Scottish Government indicating that we objected to this, and we thought it was a mistake. We are now in contact with the Libyan Government, and want to make sure that if in fact this transfer has taken place, that he is not welcomed back in some way, but instead should be under house arrest. We have also, obviously, been in contact with the families of the Pan Am victims and indicated to them that we do not think this was appropriate. ENTITY, in each of our prior three conversations, I spoke with you extensively about the need for closure, and we agreed relative to bin Laden and Ayman Al-Zawahiri. And as a matter of fact-and this is well documented; I have written and spoken about it extensively-things that you said during the course of the campaign played a critical role in my personal decisionmaking pertaining to the 2008 election. So I feel I'd be derelict in my duty if I did not come here today and say, where are we? I know we had a major victory recently with the number-one individual for the Taliban in those tribal regions. But pertaining to bin Laden and Ayman Al-Zawahiri, where is it? Well, here is where we are at. We are continuing to ramp up the pressure in Afghanistan. And we had a-what appears to be a successful election in Afghanistan despite the Taliban's effort to disrupt it. You have got General McChrystal now over there and more troops who are putting pressure on the eastern and southern portions of Afghanistan. Right. the top Taliban leader in Pakistan, who was also one of bin Laden's key allies.

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So the goal here is essentially to have a pincer, where we are squeezing them on both sides. We are eliminating their allies. It is making it more difficult for them to communicate, making it more difficult for them to operate safe havens, and over time, what we hope to do is to flush them out. We are going to keep on putting pressure on them, and I know that it is at great cost. I mean, I have to sign letters to family members who have fallen, and a lot more are falling in Afghanistan than in Iraq. And as a consequence, we have got to make sure that we are really focused on finishing the job in Afghanistan, but it is going to take some time. ENTITY, Susan listens to WOR News Radio 710 in New York City. We all want reform. And a lot of us feel that the Federal Government is just not equipped or it is their role to be getting involved in delivering health care services. And we are very concerned that most of the money will actually go-instead of taking care of people, it will go to, you know, the cost of administering a huge Government bureaucracy. Like here in New York, we already have free health care for people who cannot afford it. And you know, it should only be for people who cannot afford it, not for the 20- and 30-somethings that choose to spend their money on SUVs and the latest electronic gadgets. And it is not free, because we all know that we are going to be paying for it, and it should be only for the people who cannot really afford it. And we want to have our own health care decisions locally, and we do not want the Federal Government making those decisions for us. Well, look, first of all, Susan, I think that it is important to understand that part of the health reform proposal that we have put forward would involve the States. The States, in some cases, would be empowered to expand Medicaid to cover more people the same way that they have been able to cover more children under the Children's Health Insurance Program. So a sizable portion of the people who are currently uninsured would in fact be getting their insurance through the States. That is how the current Medicaid program is able to allow States to cover more people. Keep in mind that nobody is talking about the Government administering all of health care.

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What we are talking about here is a public option that people could sign up for, but in that situation, they'd have to operate like any private insurer. They'd have to be collecting premiums and so forth. The track record for Government administering health care actually is surprisingly good. Medicare, for example, a Government program, has much lower administrative costs than private insurers do. Now, part of it is, is because they do not have-either somebody is qualified or they are not, and so signing them up is a lot more automatic. But that points to one of the big problems that we have. In private insurance, huge amounts of insurance companies are spending a lot of money and a lot of effort and a lot of staff just trying to cherry-pick people who are healthy and sign them up and then eliminate people who are sick. And part of what we want to do here is just reform the system so that insurance companies are operating more fairly to all people. If you are young, actually, it is easier to get health insurance these days. The really tough population are folks who are from 50 to 64. They have a whale of a time trying to buy health insurance, and we want to make sure that there is a market for them. Last point that I would make is that, you mention the fact that a lot of young people opt out. One of the things that we would do under reform is to say, if you want, you can stay on your health insurance-or your parents' health insurance up to the age of 26. That would cover a lot of young people who they-fall in that gap. Their first job does not necessarily offer them insurance. It gives them a way of having coverage until they get that job that has a little bit more security. You are needed across town. I appreciate very much the privilege of coming to the White House. And I want to thank all your listeners, terrific questions. There is a great dialogue that takes place on this show, and I just hope that we can continue that dialogue in the same spirit to solve some of America's big problems. I will be back in just a moment from the White House.

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