Return to Transcripts main page


Transition to Power

Aired November 9, 2008 - 20:00   ET


JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Welcome to a CNN special report, "Transition to Power." I'm John King. There are 72 days to go until Barack Obama is sworn in as the 44th president of the United States. And when you think of what needs to be done, that's not a lot of time. Tonight, we're going to look at the Obama presidency from four very different viewpoints. Will Barack Obama's aggressive plans make it through the meat grinder up on Capitol Hill? That could be up to the Senate Majority Leader Harry Reid. Yes, he's a Democrat, but as he warns, we in the legislative branch are equal to the president.
What are the issues that Barack Obama will tackle and who will be there to help him? That story from the transition co-chair John Podesta. Congratulations have been pouring in from world leaders. But how will they really treat this young American president? I'll discuss that with the former British prime minister, Tony Blair.

And finally, it's fine to talk about being post-partisan, but is it really possible in today's poisonous political environment? Well, if there's one man who knows what it's like to reach across the aisle, it's the governor of California, Arnold Schwarzenegger, who's married to Maria Shriver, a life-long Democrat and member of the Kennedy clan.

As he told me in this exclusive interview, this election was a family affair.


KING: Thank you for your time, to begin with.


KING: Maria has bragging rights in the house right now? Is that a fair statement?

SCHWARZENEGGER: Oh, I would say so. I think that Maria is gloating now for these last few days, and it's been very tough for me, because she's running around the house with a cutout, a life-size cutout of Obama, you know? We won, we won, Obama won. Obama -- all of those kind of things.

So -- but luckily, I can get back into the bedroom, so there's the big advantage.

KING: On a more serious note -- although I might want to continue that one -- on a more serious note, give me your assessment of what happened, in the sense that was this a rejection of the Republicans or an embrace of the Democrats, a little bit of both? What happened?

SCHWARZENEGGER: I think that you will see that when there's an economic downturn of what we have experienced these last few months, especially -- started this last year -- but these last few months I think we have experienced a huge crash, especially on the stock market, that had a tremendous effect. And combined with the housing crisis and the mortgage crisis, I think that no matter what party would have been in control, would have probably lost.

And we've seen it over and over again. We've seen it when Jimmy Carter lost. There, the advantage went to the Republicans. Then we saw what happened in 1992, you know, when Bush lost, and the advantage went to the Democrats at this point. Then again eight years later, the economy went down again, and we've seen how that helped Bush to get elected in 2000. So I think we have seen it over and over, these kind of trends.

So, I think no one knew that it's going to be that bad. I think the Republicans were trying to hold on to, you know, if it would have been just the housing crisis or the mortgage crisis. But then when the stock market crash came, I think it was just too much.

So, that's my take. And you will see people guessing and having all kinds of other theories and ideas about that. I'm not one of the pundits and experts that is analyzing all this stuff or overanalyzing it. I just think what I said is what I believe.

KING: Well, I want to talk more about that, about the Republican Party picking up the pieces in a minute. But let me start with where we are. When you were out campaigning with Senator McCain, you were funny but also very critical of Barack Obama, talking about his scrawny arms and skinny legs, saying you needed to give him an exercise routine. But you also said he had Soviet-style, "spread the wealth" policies. Given the state of the economy right now, are you worried that a Democratic administration with policies as you see them, Soviet-style, "spread the wealth," will that make it worse?

SCHWARZENEGGER: Well, first of all, let me just say that ever since I've come to the United States, I have sworn to myself that I would do everything that I can in order for us in America never to adopt a system that they had in Europe in general, not just the Soviet Union -- because I didn't compare it with the Soviet Union, I compared it with Europe. And I think that Europe when I left, four decades ago, was mostly socialistic. And I've seen what effect it has on people and businesses and on new opportunities. And America was always known as the land of opportunity. And I've seen it first hand, what tremendous impact it had on me, to be able to have a successful body-building career, to have a successful acting career, to have a successful political career, to have a successful -- and a great family, and all of those things, making millions of dollars and all this.

So, I don't want to go and have America go in the direction of Europe, the way they were four decades ago.

Since then, Europe has learned. Since then, Europe has rolled back and has adopted a lot of the American ideas. So that's the right way to go, and so I want America to keep it this way. Having said that, the rhetoric is over. I have made it very clear that now, since the election is over and the people have chosen Obama, that I will be 100 percent behind this man. Anything that he needs, we as a state will work with him. We want to make sure that he is successful, because then the country is successful. It has absolutely nothing to do with politics. I'm all about getting the job done, whatever party it is. Let's work together, Democrats and Republicans, and I think a lot of things can be accomplished.

KING: Any communication with you? Your name gets kicked around in Washington every now and then, say, for a cabinet job. Any interest? Any communication?

SCHWARZENEGGER: No. I also made it clear that I wanted to stay here until I'm finished with my term. There are so many different challenges that California has. It's the greatest state in the greatest country in the world, but we also have challenges like the rest of the country, with unemployment, with the housing crisis, the mortgage crisis. So, there's a lot of work ahead, and I want to make sure that we can put people back to work and to keep people in their homes and to stimulate the economy again. But we have to do that together with the federal government.

KING: You are facing many of the challenges he will face. You're chief executive of the world's seventh largest economy here in the state of California, and President Obama in just a few short weeks will be facing many of the choices you have to make. And at the moment, you have talked about the pain of the economic slowdown, to the point where you're proposing to raise the sales taxes, cut some services, because you need to balance the books.

When you look at the Obama agenda from the campaign, is there anything that he proposed to do that would make it worse for you?

SCHWARZENEGGER: I think it is important thing now not to analyze of what was said in the past, but what will be done in the future. Because we only can work off what is done in the future.

I think the most important thing for, you know, President-elect Obama is to go and, as he has said in his last press conference, to bring the economy back as quickly as possible, to stimulate the economy, and to get people back to work, and also to work on the housing crisis and to modify some of the loans so that we can keep people in their homes. It's very important, the loan modification, so we can reduce the payments, the monthly payments for people so they can stay there.

I think all of this is so important. And then to go and create health care reform, as he has talked about. It's very important also to go and to rebuild America, because America has fallen behind, way behind when it comes to infrastructure.

This is now the most perfect time to do that, to lay out a plan to rebuild America, just like Roosevelt has done, because it will stimulate the economy and it will create a tremendous amount of jobs. And I think this is one of the most important things to do.

KING: Can the country afford that right now?

SCHWARZENEGGER: Absolutely the country can afford it.

Look, I have heard that same dialogue a half a year ago when people talked about can the country afford infrastructure, and look how much money we have lost since then. So, the country can afford, because what it will do is it's an investment. It's not spending. It's an investment where you get twice the amount of money back, because it will bring people to work. You don't have to pay for unemployment insurance and benefits and all of these things. And it is what the American dream is all about, that you have home ownership, that you have a great job, and that you can make money and raise a family. These are the most basic things, and to have great health care. These are the most basic things, and I think these are the things that the new administration should shoot after.

KING: You just mentioned the American dream there. You mentioned your story. You are a compelling American dream story, your life is. As an American now and a governor now, a Republican, sure, but as a political leader, what was it like to watch -- he wasn't your candidate, but to watch an African-American get elected president?

SCHWARZENEGGER: I was touched by it. I thought it was so historic. And I maybe look at it a little bit from the outside, more so than Americans that were born here. As much as I watch this great nation in general, as an outsider, as an European, with a European mentality, and also with an American mentality. So to me it was a huge breakthrough, because it will have an effect worldwide on how much the African-American, you know, people have moved up and got the bump that I think they needed so badly, because they've been held down and held down for so long.

And I think this is a refreshing new thing. It gives them certain pride. And I think that's terrific. So, I mean, I was proud of it, of the American people went in that direction and that we didn't see the prejudice -- maybe a certain percentage, but not what people expected.

And so, I think it's great. It makes me, again, proud to be an American.


KING: Just ahead, Governor Arnold Schwarzenegger on how the Republican Party rebuilds after a resounding defeat.

And later, Senator Harry Reid breaks down the new Democratic agenda. "Transition to Power" will continue in just a moment.


KING: Welcome back to a CNN special report, "Transition to Power." I'm John King and during this hour, we're bringing you four very different views on the future of American politics, after the historic election of Barack Obama.

In part two of my exclusive interview with California Governor Arnold Schwarzenegger, we discussed how the Republican Party recovers.


KING: And as we sit here today, the Republican candidate for president lost in the suburbs by double digits -- 12, 15, 18 points -- about 40 percent or more of the American people live in the suburbs. Overwhelmingly lost among the new, younger voters, who are energized in this election to come out and vote. And lost more than two out of every three Latino votes across the country. Is that a viable national party?

SCHWARZENEGGER: I think that, first of all, let me just say I think the Republican Party is a very good party, and I'm very proud of the party because of its principles, if it is, you know, getting government off your back, reducing the restrictions on businesses, you know, trading with the world, being strong on military, strong on law enforcement, keeping the criminals locked up, all of this, being fiscally responsible. All of those Republican principles are good principles. So we should never, you know, discredit that. But I think the important thing for the Republican Party is now to also look at other issues that are very important for this country and not to get stuck in ideology, in the ideological corners. Let's go and talk about health care reform. Let's go and strive towards having everyone have insurance and be insured so that they're covered. Let's make sure to go and to open up and to go and fund programs if they're necessary programs, and not get stuck on just the fiscal responsibility, but look at the reality of what needs to be done. And so I think the party has to open up and do more of the things that the American people right now need. Then, they can be again the party that they once were.

KING: So, then, what do you say to some conservatives, who after this election have come together and say, "our problem is that we lost our way and we need to go back to the basics," which is fiscal conservatism, but also social conservatism. And whether that's opposition to abortion or opposition to same-sex marriage, what do you say to those people?

SCHWARZENEGGER: Well, remember one thing that Eisenhower said, that politics is like the road to center, you can drive, and the left and the right is the gutter. And I think that's exactly what is true. Where the action is, is in the middle. And this is what I'm trying to do, and this is why we have been successful trying to bring Democrats and Republicans together in the center. And the times when we were not successful, it is because of the system, the way it's set up. So that, in order to win here in a Democratic district, you have to be way to the left. And in order to win in the Republican district, you have to be way to the right. And then they're so far apart, they can't get together in the middle. And that's why we are doing the redistricting and that's why Proposition 11 won.

KING: What is your role? How do you see your role in the reshaping, the rebuilding of the Republican Party? You have a loud, strong voice. You are known as someone who if necessary, can bang heads. I mean that as a compliment, to get things done. Do you want a role in that? Because as you know, there are many who disagree with you, especially when it comes to a more moderate approach and an open approach to the social issues. How do you want to be involved?

SCHWARZENEGGER: You know, I never saw myself getting involved in rebuilding the Republican Party or anything like that. My dream always was to, when the recall came about in California, that I'm going to run, that I can do a great job, that I have a very clear vision of what needs to be done in California.

I have -- you know, I wanted to embrace both parties, bring them both together and do a great job for the people. That's it. I want to do the best job possible, so when people look back, they say, that guy got things done and he reformed the system and he, under the most difficult circumstances, pulled California back out again. Not to reform the Republican Party or to do anything nationally. Those were not my ambitions.

KING: But do you think people should look at you and say, this guy is a success? Of course people don't like everything. But he's been re-elected. He's relatively popular. Maybe we ought to -- he's in the most populous state, a huge economy, maybe we should copy him?

SCHWARZENEGGER: I think always when you see someone being successful in something, you should copy it, you should learn from that. That's what I've done my whole life. I've always had idols. I've always had people that I admired. And then I tried to do the similar things.

If it was in training, if it is in lifting, if it is in making money, in business, in show business. I always had idols that I looked up to and said he has done a great movie. He's done a great job in directing. I want to copy that. And I think that's what they should do.

But I'm not going to force my way, my style on anyone. That's my style. If they think they can learn from that, like we've had many governors, Republican governors that have come and learned about the environment and about protecting the environment and fighting global warming and all those things, great. I copy some of their things. I talked to Huntsman all the time. I talk to Charlie Crist all the time. And they get -- what did they do that I admire? I want to grab that and take that and do that here in California. So I think that we all can learn from one another.

KING: As someone who has come to power after a dramatic election, with great expectations, but still difficult choices to make, any advice for a President Obama?

SCHWARZENEGGER: I think that if he does the things that he has promised and does the health care reform and be very strong on an energy policy, and to fight global warming and to do the kind of policy that we have done in California -- that's why I said we have to work together, because we want to share this knowledge that we have gained with our negotiations and research that we've done. Also to go and do the loan modifications, to get people back to work as quickly as possible, and also to deal with the world and with the problems that are facing him. Because there are some really very critical problems and big problems, if it is Iraq or if it is Afghanistan, if it is Russia or if it is China, if it is Africa, the Europeans, they are our allies, you know, how to deal with them. How to deal with, you know, South America and Central America, with those issues. How to deal with terrorism and protecting the borders.

So there's a lot of issues like that, that come together. So it's overwhelming in a way, especially when you have been in the Senate, where you don't really -- where you don't really run something.

So, but I think that he has good people on the campaign, and I think that he has good people around him now, and I think they're going to accomplish a lot.

And like I said, the important thing is that no one should look at this from now political. Even though that's what happens anyway, but it's just that the attempt should be not to look at it in that way.

Democrats and Republicans should do everything they can to help this man and his administration to be successful, because when he is successful -- because the people have already spoken that he's the president. So, when he is successful, then the nation is successful. And then the world is successful. So, we've all got to work together on this.


KING: Just ahead, my exclusive interview with Senate Majority Leader Harry Reid. Yes, he's a fellow Democrat but as you'll see, he's not about to salute and follow orders from the White House. "Transition to Power" will be right back.


DON LEMON, CNN ANCHOR: Hello, everyone, I'm Don Lemon live at the CNN World Headquarters. Back to "Transition to Power" in just moments.

But here's what we're working on for you. President-elect Barack Obama and his wife Michelle will soon get a tour of their future home. They're visiting the White House. They're going to do it tomorrow. They're visiting with President Bush and First Lady Laura Bush and touring the private residence.

Issue number one for the Obama administration of course will be the economy. Now top Congressional Democrats suggest expanding the $700 billion bailout plan to help out a major U.S. automaker which they had been bleeding jobs and also cash as well.

President-elect Obama says his transition team is looking at ways to help. And tonight at 11 p.m. Eastern here on CNN, we're taking you inside the circle. You'll hear from those closest to President-elect Obama. People like Valerie Jarrett, who is a friend and a confidante and co-chair of the Obama transition team. I spoke to her while I was in Chicago. Here is some of that conversation you'll see later.


LEMON: I have to ask you, the first thing once it was announced, what did he say to you?

VALERIE JARRETT, CO-CHAIR, OBAMA TRANSITION TEAM: He just looked at me and I looked back at him and you couldn't possibly put in words how we were feeling. But the expression said it all. It was really like, job well done, job well done. Change the world.

LEMON: You did.

JARRETT: He did.

LEMON: You helped, though.

JARRETT: It couldn't happen without him. Leadership and tone, vision, judgment, that all starts at the top.


LEMON: More from Valerie Jarrett a little bit later on tonight, 11 p.m. Eastern.

After election night, I visited Urban Prep Academy, an all boys public charter school in Chicago. They have been called little Obamas. I have to tell you, I was very impressed and inspired by these young men.


LEMON: They're calling you little Obamas. What do you think of that? Little Obama? Are you a little Obama?

UNIDENTIFIED MALE: Me personally, I think we are little Obamas because just like he made change, we are making change. We are going to an all boys school and we are trying to get to the places where he's been. And that's to college.


LEMON: Future leaders, no doubt about it. More on their story tonight at 11 p.m. Eastern. I'm Don Lemon. Back to "Transition to Power" after the break.


KING: Welcome back to "Transition to Power." I'm John King.

They raise them tough in Searchlight, Nevada and few tougher than Senate Majority Leader Harry Reid. He led the Democrats through some of the hard years when the Republicans ruled Capitol Hill. And now, he's realistic about what can be done and perhaps more importantly, what can't. We talked about all that in my exclusive interview, but first, his personal reaction to the election of this country's first black president.


KING: Let me ask you before we get to the specifics of the responsibilities on the Democrats and the new president. Just your reflections on the moment. If I were here a year ago or 18 months ago and said to you, Senator Reid do you think there will be an African American president in your lifetime, what would your answer have been?

SEN. HARRY REID (D-NV), MAJORITY LEADER: I probably would have said, well, it could be, but as the campaign went on, I thought, well, that's the way it's going to be.

KING: What do you think the moment means for the country, the first African-American president?

REID: When I was a very young lieutenant governor in Nevada, I was 30-years-old, we had all kinds of lawsuits because the Nevada gaming industry was not integrated. You would walk into one of those big casinos and you couldn't see a black face.

So what the governor and I did is we entered into a consent decree. We said, OK, we lost, let's integrate, and we got the casinos with a little pressure for us to agree.

That was not that long ago. That wasn't that long ago. And now we have an African American as president of the United States. That's what it means to me.

KING: Well then let's fast forward to January. Barack Obama is president of the United States at that point. And you do have a bigger majority. What's first? George W. Bush came out of the gates with the tax cuts. Will the Democrats come out of the gates with the Obama tax plan?

REID: First of all, we're going to wait and see what Senator Obama, President-elect Obama, President Obama, wants to do first. John, I am -- I've been here quite a while. And I understand the Senate. I hope I understand our country. I really try to.

And no matter how you cut it, we, the legislative branch of government are equal to the president. I want to work with the president as much as I can, but I also realize that we're an independent branch of government constitutionally.

And I'm going to cooperate as much as I can, but my goal is to recognize that we have to work with the Republicans. And so I'm not going to be taking votes here just to be taking votes. I'm going to be taking votes here to get things done. That's what the American people want. I'm going to work with the president, work with the House and I'm certainly going to work with my Republican counterparts here to try to actually get some things done. You see, people have forgotten around here that if you accomplish things, there's credit for everybody. But if we continue to stalemate as we have the last couple years, there's blame to go around to everybody, as it has.

KING: Let's look around the world for a minute. You were quite frustrated over the last two years saying I want to bring the troops home from Iraq and I want to end this war because you think it's a mistake. And you said you couldn't do it because there was a Republican down Pennsylvania Avenue who wouldn't let you. You will have a Democrat down the street in a few weeks. When will you keep your promise, it's your promise, too, to end the war and bring the troops home ...

REID: I think we've all had enough of the war in Iraq. As we speak, this little short interview, the American people are paying $5,000 a second every hour of the day, every week of the month, every month of the year. $5,000 a second. $10 or $12 billion a month.

So we're going to bring our troops home.

KING: And if a President Obama ...

REID: They're not all going to come home tomorrow as he said numerous times and we agree, that's what our resolutions that have been defeated on the floor have said. Set a timeline. The Iraqi government wants a timeline.

Set a timeline, leave people there to take care of our assets, to make sure that the Iraqis are trained properly and that we have rapid deployment forces in the vicinity that can move in a matter of an hour or two to take care of some problems.

KING: And if a President Obama tells you, Leader Reid, Harry, the generals have convinced me, they do need a little more time. Would you trust that in a way you did not trust that from President Bush and could you sell that to a caucus in a way you could not sell to them with a Republican in the White House?

REID: Senator Obama said the troops are coming home and they are coming home. It's just a question of how fast they come home. Everybody -- there will be a timeline, the Iraqis have a budget surplus, we don't, we can't spend $5,000 a second on that war. We've got to focus on what the real problems are and that's in Afghanistan today.

KING: What is the greatest lesson of 1993 that you do not want to repeat next year when you have a new Democratic president and a Democratic majority so that two years from now when a guy named Harry Reid's name is on the ballot, the Democrats are not punished for going beyond their mandate.

REID: Listen, we have to understand the power we have and the power we don't have. You know, those interesting men who wrote this Constitution kept in mind situations just like we're in today that we can only do so much and the more that we're able to accomplish is our ability to reach across the aisle and work with the Republicans. So I think the key is understand this was an election, it's not forever, two more years there's going to be another election and we have to during that period of time convince the American people, these people really tried. These people worked very, very hard and I admire what they tried to do, I admire what they accomplished.

KING: Mr. Leader, thank you for your time.

(END VIDEOTAPE) KING: Up next, the co-chair of Barack Obama's transition team, John Podesta, lays out the priorities as the Obama campaign makes the difficult transition into a new administration.

And later, former British Prime Minister Tony Blair discusses the global reaction to Barack Obama's victory.


KING: I'm John King and this is a CNN special report, "Transition to Power." So far, we have gotten outside views of President-elect Barack Obama's transition. No one is more of an insider than John Podesta, a chief of staff for President Bill Clinton and now a leader of the Obama transition team, working to find the right people and more importantly, pinpoint the vital issues for the upcoming Obama administration. We spoke this morning, first about how campaign promises might have to change in the face of harsh reality.


KING: As you know from your own experience in the past, sometimes the promises of campaigning crash into the realities of governing. Since the election, with what you've learned, whether it's something around the world or the depth of the economic crisis and government resources, what will a President-elect Obama have to tell the American people, I promised you this, but you have to wait.

JOHN PODESTA, OBAMA TRANSITION TEAM: Well, first of all, just this last week we learned that last month we've shed 240,000 more jobs. We've lost more than a million jobs this year. I think his first priority, as he said in his press conference on Friday was to get the economy moving again, to get an economic recovery package in place to begin to deal with the fact that people are losing their jobs and their wages are down and they're paying more for the goods that they have to pay for. So that's job number one. I think he talked about that during the campaign.

But I think he's also been very clear that a link to the economic problems that the country faces are the fact that we're dependent on foreign oil. We need an energy transformation strategy. We've got a health care system that's not working for people. Health care costs are spiraling out of control and people are losing their health insurance.

And we've got a public education system that is going to produce the workers of tomorrow. So these are all core, if you will, economic questions and they need to be tackled together and I think he'll have a program and a strategy to move aggressively across all those fronts.

KING: Laying out all those programs you just did, you're talking about billions and billions in new government spending at a time when the government is already running pretty big deficits and does not have as much money coming in because the economy is so slow. A price you have to pay, but you believe, but as part of that, George W. Bush led with tax cuts, even though he just barely won in the contested election eight years ago. Will Barack Obama's tax plan be in those early days or does that have to wait?

PODESTA: Yes, no, absolutely. I think you have to think about this in the short term and the long term. It's clear that we need to get, to stabilize the economy, to deal with the financial meltdown that's now spreading across the rest of the economy. The auto industry is really, really back on its heels.

So, we're going to need to deal with this -- with, again, maybe to think about this in a short-term context with a recovery program in which we will have to inject a good deal of money into the economy to stabilize it and to get jobs growing again, to get the economy growing again and to get job growth back in the economy.

Over the long term, I think Senator Obama's been quite clear, President-elect Obama has been quite clear that when it comes to things like health care, et cetera, we ought to do it in a way that's fiscally disciplined and we pay for the investments that we need but there's no question for the long-term success of this country and for the long-term success of the middle class, that those are investments that the country needs to make.

KING: Senator Obama's signature campaign initiative on foreign policy was to bring the troops home from Iraq. Many of the generals are saying, we want to bring them home, too. And we are starting to bring them home in significant numbers but it will take a little bit longer than the 16 months that Senator Obama, candidate Obama laid out. Will a President Obama, is he prepared to go to the Congress too, to the Democrats who also want to bring the troops home and say, it is going to take a little longer?

KING: Or, if faced with a choice between listening to the generals or keeping a political promise, will he choose the political promise?

PODESTA: Well, of course, he was advised by former military leaders, including a number that served in Iraq and served during the course of the Bush administration, in making that pledge.

I think that he fundamentally is convinced that we can draw down one or two brigades a month, that we can -- that we can get on the path of eliminating our combat force from Iraq.

We need to pay attention to what's going on in Afghanistan and Pakistan, where the military has also called for the increase of troops in Afghanistan to stabilize the circumstance there.

So I think he'll meet with -- with the Joint Chiefs. He'll listen to military commanders on the ground in -- in Iraq.

But I think that we want to withdraw. I think he's clear that he wants to withdraw the combat force from Iraq in a responsible way, and that the time frame that he put out is, again, is consistent with where the Iraqi government is today.

They want to take over management of their own affairs. We need to stop spending $10 billion a month in Iraq. And we can do that and ensure that there is stability there and that the Iraqis are defending their own country.

That doesn't mean all troops will be eliminated from Iraq. It will still be necessary for force protection and our counterterrorism mission and to -- and to do -- continue training of Iraqi forces.

But we can get our combat force out of Iraq, pay attention to Afghanistan, and do that on -- I believe, on the time frame that President-elect Obama has suggested.

KING: May I ask you, lastly, you are working very closely now with an administration, the Bush administration, that, for eight years, you frankly called incompetent, over and over again, from the outside.

Are they cooperating now, in a competent way?

PODESTA: Yes. I think that we've had very good conversations with the administration before the election. I met with Josh Bolten, the president's chief of staff. His deputy, Blake Gottesman, is really heading up the transition effort inside the White House. We've had several meetings before and subsequent to the election.

The transition executive director, Chris Lu, is in daily touch with Blake. And we're moving and proceeding in a very professional way. They've been very forthcoming in trying to help move this situation forward in...


KING: ... integrating you into the most sensitive things?

PODESTA: I think we -- we're just beginning that process. Josh and I signed a memorandum of understanding yesterday, which will permit our people to be in the federal agencies as early as this week coming up.

We've had, already, 100 people pre-cleared. They've gotten security clearances already in place. That was the result of legislation that was passed in 2004.

We took advantage of that by providing the names and the information necessary to clear them for their -- for security. I'm meeting, again, when President-elect Obama is meeting with the president tomorrow, I'm going to have a follow-up meeting with the chief of staff and deputy chief of staff at the White House, and move the process forward.

So far, cooperation has been excellent. We envision having a couple of joint meetings, once our national security team's named, between their national security principals and ours, so that we can have a seamless transition from the, you know, from January 19th to January 20th, when the president takes the oath of office.

We've -- I think we're trying to accelerate the process of identifying, selecting, nominating and hopefully confirming a layer below the cabinet. And we've had good cooperation with the White House in pursuit of that.

So, their personnel office, across the board, I think, in the White House, we've had a very collegial and cooperative arrangement, and I thank them for that.

KING: John Podesta, thanks for your time.

PODESTA: Thank you.


KING: Up next, the Bush administration has tacitly abandoned all hopes of brokering a deal between the Israelis and the Palestinians. But it's certain to be high on the to-do list for President Barack Obama. The man in the center of the peace process, former British Prime Minister Tony Blair, is next.


KING: Welcome back to a CNN special report, "Transition to Power." The situation in Iraq, Iran and the rest of the region is inextricably tied to the conflict between the Israelis and the Palestinians. So how should Barack Obama address this? I talked about that and much more with Tony Blair, the envoy to the Middle East with the Quartet. That's the term for the effort of the United States, the United Nations, Europe and Russia, to create progress for peace in the Middle East. Prime Minister Blair was in Jerusalem for a summit meeting.


KING: Mr. Prime Minister, thank you for your time. I want your assessment of the situation in the Middle East. At the moment, in the context of it was a year ago when the Bush administration recommitted itself to vigorous diplomacy in the Middle East.

Secretary Rice had been to the region a half dozen or so times. But the administration now concedes that there will not be an agreement during this administration. What happens from here on out and are you stuck in a holding pattern?

TONY BLAIR, FORMER U.K. PRIME MINISTER, SPECIAL MIDDLE EAST ENVOY: I think there hasn't been an agreement, and that's partly as a result of all of the turmoil in Israeli politics. But there is a foundation to build on. I mean, there is an agreed way forward with political negotiation. There are measures now in place to build the institutions of Palestinian statehood at the same time as giving security to the Israelis. So I think we've got something to build on, but it will be obviously very important that we build on it, that we -- right from the very outset of the new administration, we treat this issue with the seriousness and the priority it needs and deserves.

KING: Let's talk about some other issues in the neighborhood, if you will, and beginning with Iran. During the campaign, Senator Obama said that he would be more open than the Bush administration to direct dialogue at a higher level, including even the possibility of sitting down with President Ahmadinejad. Is that something you would advise a President Obama to do at this moment? Or do various issues regarding the nuclear program and other security issues need to be resolved first? BLAIR: Well, you know, I wouldn't presume to offer advice, really, on that. But I tell you what I would say. I think the important thing is not whether you sit down and talk or you don't, the important thing is what you say, and whether you mean what you say. And I think that for Iran, they need to get a very clear, specific, precise message which is that if you want to be part of the international community, and part of the solution to the problems of the region, that is fine. But here is the basis of it. The basis is that you do not try and develop nuclear weapons in breach of international obligations. And you do not support terrorism and extremism around the region. Now I think however that message is communicated, that is the important thing that they hear. I would say, however, that if we were able to make progress in the Israeli- Palestinian issue, that would also hugely empower and help the forces of modernization and moderation within the Islamic world who really want to put the dispute behind it and want to co-exist peacefully with the Western world.

KING: You, of course, sir, were closely involved with President Bush in overthrowing Saddam Hussein and the military action within Iraq. Candidate Obama said that he would get all U.S. combat troops out of Iraq within 16 months, by the middle of 2010, essentially. Do you believe he will be able to keep that promise without undermining the security of Iraq and the broader Middle East?

BLAIR: Well, I think everybody now wants to see a situation in which Iraq is able to handle its own security. I mean, that's the very purpose of the measures that have been taken in recent months. So I'm hopeful that that can be done. And I think more broadly what is necessary is to make sure that we treat, in a sense, this region, indeed, wider than this region, as one essential problem. And that problem is that everywhere within the region and in neighboring countries, whether it's in Iran or Afghanistan or Pakistan, there is basically a struggle going on between those people who want peacefully to co-exist with the West on the basis of mutual respect and tolerance and those people who want to see the narrative, as it were, as Islam versus the West. Now what we've got to do is stand firm, support and empower the modern and moderate voices, and make sure that we deal effectively with those people who are preaching extremism and hate.

And if you look around this region today, it is basically one struggle with many different components. And that's why as I come back to the thing I'm responsible for. In respect to Israel and Palestine, the solution has got to be one that is completely consistent with Israel's security. But if we can get a solution to it, it would make a huge difference in sending a signal out to this region and to the wider world that actually peaceful coexistence is possible, legitimate, and in-line with the aspirations of the majority of people whether they're Muslim, Jewish, or Christian.

KING: You came to power, sir, in Great Britain, under similar circumstances as Barack Obama will assume the presidency here in the United States. The new Labour Party created a great deal of excitement and enthusiasm after a period of conservative rule, and came to power with that excitement and enthusiasm, but also with a long list of significant policy problems to deal with. Any advice for Senator Obama as he handles this transition?

BLAIR: Well, I wouldn't presume to give advice. But I think it was another Democrat politician, Mario Cuomo, who once said that you've -- you campaign in poetry but you govern in prose. And, I mean, there is this huge weight of expectations. But, you know, he is a man of tremendous ability, and I think it is possible to meet at least the reasonable parts of those expectations. I mean, nothing is ever perfect, nothing is ever without its challenges. But I think there is a sense around the world of a desire to reach out to America, hope that America reaches out to the rest of the world, and that we can find the right agenda that unifies sensible people who are firmly fixed on the future.

If we can find that agenda and unify the world, then I think at least, as I say, the reasonable part of those expectations can be met. And I certainly hope they are.

KING: What do you make of the international reaction? This amazing out-flowing in support of President-elect Obama and in reaction to the U.S. election, how much of that is an embrace of him and how much of that is just people who are frankly happy to turn the page after many did not have as close a relationship with George W. Bush as you did, sir? And can Barack Obama meet those expectations around the world? Is the world asking too much of him?

BLAIR: Well, I think he can to a large degree, insofar as those expectations are reasonable. In other words, what people want is an America that leads with an American that listens. And so I think if when he comes to office, President Obama, is saying, I will treat the Middle East peace process seriously from day one, I am going to lead the way on finding a new climate change, a new environmental agreement, I am going to make sure that we are in a position where we deal responsibly and sensibly and effectively with the financial crisis. But here is what I also need from you, the rest of the world, which is support, for example, in Afghanistan, where we're battling terrorists, people who want to disrupt us, where America also needs help from its allies and partners to meet the challenges of the world.

If he is able, as I think he is, to say, here is an agenda that is capable of unifying people, then, you know, I think that there is a prospect that he can meet those expectations. And I think, you know, one of the things that you should understand, I mean, in many parts of the world, not least here, there were people who said to me, whatever the opinion polls, America simply couldn't elect somebody like Barack Obama.

And I used to say to them, actually, America can do what America wants to do. And it has shown throughout its history that it's prepared to be bold and adventurous when the times require it. And that's what happened.

And I think that has then released a sense around the world that there is this great era of possibility. And, you know, if it's -- things always work out in a more difficult way, and events come and collide and disrupt and so on. But I think there is a chance of getting an agenda in foreign policy today where sensible, serious, modern-minded people around the world can say, OK, we can run for that, some of the things are going to be difficult for us, some of the things are going to be difficult for them, but there is a basis upon which that unity can exist.

KING: Mr. Prime Minister, thank you so much for your time, and we wish you the best of luck under very difficult circumstances in your current job, sir. Thank you.

BLAIR: Thank you.


KING: Thanks for watching this CNN special report, "Transition to Power." I'm John King. "LARRY KING LIVE" is next.