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Interview With Benjamin Netanyahu; Interview With Saeb Erakat; Interview With Queen Noor of Jordan

Aired January 4, 2009 - 11:00   ET


WOLF BLITZER, HOST: This is LATE EDITION, the last word in Sunday talk.

BLITZER (voice-over): Showdown in Gaza.

SECRETARY OF STATE CONDOLEEZZA RICE: It is obvious that cease- fire should take place as soon as possible, but we need a cease-fire that is durable and sustainable.

BLITZER: What will it take to end the fighting between Israel and Hamas? We'll get four perspectives on the conflict from former Israeli Prime Minister Benjamin Netanyahu, chief Palestinian negotiator Saeb Erakat, Israeli government minister Isaac Herzog and Jordan's Queen Noor.

BARACK OBAMA, PRESIDENT-ELECT: We must make strategic investments that will serve as a down payment on our long-term economic future.

BLITZER: President-elect Barack Obama lays out his proposal to rescue the U.S. economy. Is he offering the right plan? Former Republican presidential candidate Mitt Romney, New Jersey Democratic Governor Jon Corzine and South Carolina Republican Governor Mark Sanford weigh in.

GOV. ROD R. BLAGOJEVICH, D-ILL.: Please, don't allow the allegations against me to taint this good and honest man.

BLITZER: A defiant Illinois governor picks his successor for Barack Obama's old Senate seat. Insight and analysis from James Carville, Ed Rollins and three of the best political team. The first hour of LATE EDITION begins right now.


BLITZER: It's 11:00 a.m. here in Washington, 6:00 p.m. in Gaza and 7:00 p.m. in Baghdad. Wherever you're watching from around the world, thanks very much for joining us for LATE EDITION.

It's day nine of a military conflict between Israel and the Palestinian group Hamas with no end in sight. Hamas continues to launch rockets and missiles into Israel and Israel is now in the first full day of a major ground offensive into Gaza. CNN's chief international correspondent Christiane Amanpour is standing by live. She's in Jerusalem with the latest. Christiane, what do we know today? I know you had an exclusive interview with the Israeli foreign minister, Tzipi Livni.

AMANPOUR: Indeed and she said that they believe that they are affecting the Hamas rock capability, which is their aim. They know they can't get it down to zero, but what they want to do quote is to "cripple the capability and more importantly the motivation." Otherwise, the will to actually use those rockets, to make the pain so hard and so high that Hamas will think many times before doing it again.

On the other hand, we also spoke to her about the loss cost of life on the Palestinian side. She admits there have been civilian casualties although insists that the Israelis are doing their best to avoid that. But the fact of the matter is there are 400-plus, perhaps 480 Palestinians that have been killed in the last eight days compared to four Israelis. And this is really becoming a player on the street. We talked to Tzipi Livni, I did, a short while ago, about the notion of proportionality of response and what the Palestinian leadership has been bitterly complaining about.


TZIPI LIVNI, ISRAELI FOREIGN MINISTER: I can't understand what is the nature of proportionality which is needed. I mean, they targeted last week a school in Israel. Do you think that the proportionate action is to target a school? We are not going to do this. They are targeting civilians. We are not going to do this.

So the only measure that we are taking is to have them understand this needs to be stopped. This is the expression of self-defense, the right of self-defense of a state.

And we tried a truce. We decided not to target at all. We decided not to retaliate at all. It didn't help. So this time, we needed to say that, yes, maybe it is not according to -- we are not answering one to one, one more to one missile to come from Israel. These need to be stopped. So the question of proportionality I think has been misused against Israel.


AMANPOUR: And yet she admits because I pressed her on this, the notion of those civilian casualties, the images and the deep distress from inside Gaza is a player in this military drama and she admits that in the next several days, she expects public reaction particularly in the Arab and Islamic world is going to cause a lot of pressure on Israel.

However, still saying that they don't expect and will not agree to any kind of cease-fire right now, despite the flurry of diplomatic activity with world leaders, diplomatic leaders from Britain, Russia, the E.U. and elsewhere here in the region trying to sort something out. Wolf?

BLITZER: Did she spell out, Christiane, the bottom line conditions for the Israeli government in accepting a cease-fire?

AMANPOUR: Well, here's the thing. She won't even mention the word cease-fire, she told me, with Hamas. She said we're a religious government, they're a terrorist organization. We don't even talk about a cease-fire. What we want is for them to stop the rocket attack. To understand they must stop the rocket attacks in the future, otherwise we're simply going to go on. Even if we bring this matter to an end, at some point, we're going to bring it up again if they continue.

So what they want is to cripple the rocket capability, to ensure that there is no smuggling ability by Hamas to get weapons in, to have some kind of monitoring ability to make sure that that doesn't happen again. They know they're going to get this result down to zero. They are just trying to really hammer home a point. And right now, according to a senior military official who gave a briefing today, they are in control he says of the northeast parts of Gaza.

They are also encircling Gaza City and they are meeting some resistance from Hamas, mostly mortars, IEDs, booby traps, very little hand to hand combat so far. But she said, Tzipi Livni, that Hamas had tried to kidnap some Israeli soldiers but, in fact, they did not get away with that. Wolf?

BLITZER: All right, Christiane. Christiane is watching the situation in Israel. Let's go to the West Bank right now, the city of Ramallah to get Palestinian reaction from the chief Palestinian negotiator, Saeb Erakat. Thanks very much, Saeb Erakat, for coming in. First of all, give us your reaction to what Tzipi Livni, the foreign minister of Israel, is now telling CNN.

ERAKAT: Well, Wolf, before I respond to anything, all I just want to see is we need an immediate cessation of attacks on Gaza. That's the most important thing. People should know that we have 1.5 million people in Gaza, six persons per square meter there. We have a human catastrophe there. People are without running water, without medical supplies, without food supplies.

There's an enormous disproportionate use of force. And imagine, 3,000 people out of the 1.5 million have been killed or wounded in the last nine days. If the nation is 300 million people, that would mean 600,000 people have been killed and wounded.

So what we need to do now is stay the course in having the Israelis stop their attacks. I'm not undermining that we need to re- establish the cease-fire, the mutual cessation of hostilities in Gaza, brokered by Egypt between June and December.

I don't undermine the fact that there are requirements, but the most important thing now is to move in the direction of stopping the Israeli attacks and secondly deal with the human catastrophe that's facing us in Gaza. BLITZER: What about getting a commitment from Hamas that it will cease any mortar or rocket or missile attacks in southern Israel. Isn't that a bottom line requirement for any Israeli government? ERAKAT: Well, that's the point. The point is here, Wolf, is to stop the attacks immediately and then, you know, I'm not undermining. I said the Egyptians have brokered between June 2008 and sustained until December actually a mutual cease-fire. And it worked.

And if we stop the attacks immediately, then we can get through the Egyptian officers, re-establish the cease-fire and then we can find the formula in accordance with the agreement of 2005 and we can have some sort of international presence. It will work, but the most important thing at this stage is to stop immediately all forms of attack against Gaza. We have a human catastrophe in Gaza. And that's what the international community needs to focus on.

Now as far as Ms. Livni is saying, many things, I just want to say one thing. We're a people with no army, no navy, no air force. And Israel has now entered Gaza and they are in Gaza. They are in many parts of Gaza and as far as the -- they are the occupying power. They're responsible in accordance with international law on Gaza and the West Bank. So what we need to begin, Wolf, is a process of de- escalation and a process of de-confliction. At the end of the day, you don't need more military solutions. It does not work in south Lebanon. It does not work in Iraq. It does not work in Afghanistan. It will not work in Gaza. This will add to the complexities. The only thing that will be the result of this attack and campaign, military campaign is enlarging the cycle of violence on counter violence, weakening moderates and strengthening extremists in the region.

BLITZER: President Bush says Hamas is to blame for the collapse of the cease-fire. I want to play for you what he said on his radio address yesterday.


PRESIDENT GEORGE W. BUSH: This recent outburst of escalation was instigated by Hamas, a Palestinian terrorist group supported by Iran and Syria that calls for Israel's destruction. Egypt brokered a cease fire between Hamas and Israel. But Hamas routinely violated that cease-fire by launching rockets into Israel.


BLITZER: Is Hamas to blame for the current crisis?

ERAKAT: In accordance with President Bush, that's his logic. And there are others recalling what the Israelis are carrying out in Gaza with this disproportionate use of force. They're calling it defense. I don't know what defense, I don't know how people will do this, but my main point here is not to score points, not to fingerpoint. I think the main job is to view the consequences of this military campaign and military attack against the people of the Gaza. This is undermining the peace process. This is burying the peace process. This is undermining moderates. This is strengthening extremists, not here but also throughout the region.

We don't need more military solutions. It had proven wrong. And what you need to do now is to begin a process of deconfliction, de- escalation. This begins by, number one, stopping the attacks immediately. Number two, reinstating the cease-fire brokered by Egypt in June. Number three, to deal with the humanitarian catastrophe engulfing 1.5 million people in Gaza, and then we can move.

You know, in a Security Council resolution to take care of the passages, the agreement, smuggling and all these issues that are required in the Security Council resolution. We're not undermining any of these things.

But what I'm saying now, there are three points that are -- that need to be taken care of immediately. Stopping the attacks, the humanitarian suffering in Gaza, and a process of supplying Gaza with the needs of 1.5 million people.

BLITZER: Saeb Erakat is the chief Palestinian negotiator, watching this closely from Ramallah on the West Bank. Thanks very much for joining us.

BLITZER: Coming up, we'll get a very different perspective, the view from Israel. The former Israeli Prime Minister Benjamin Netanyahu, he's standing by live to respond to what we just heard.

And later, two top U.S. governors. They will debate the possibility of sending as much -- spending as much as $1 trillion to stimulate the U.S. economy. A lot more happening here on "Late Edition" right after the break.


BLITZER: Welcome back to "Late Edition." I'm Wolf Blitzer in Washington.

Joining us now from Tel Aviv is the former Israeli prime minister, the current chairman of the opposition Likud Party, Benjamin Netanyahu. Mr. Prime Minister, thanks very much for coming in.

Why not immediately cease the operation, given the humanitarian crisis that has developed inside Gaza?

NETANYAHU: This humanitarian crisis is the direct result of the Hamas tactic of firing at our civilians and hiding behind their civilians, and it's something that we cannot tolerate. No nation would tolerate 6,000 rockets fired on its cities, and Israel finally decided to take action.

We have to make sure that we don't just have a cease-fire, but that this criminal rocketing of our cities is not resumed a few months from now. Because that's exactly what happened a few months ago. They were firing rockets at us, the Hamas. We had a cease-fire. They used the cease-fire to get further range -- longer-range rockets, which they have now fired at Beersheba and Ashdod and into the southern suburbs of Tel Aviv. So obviously, we have to remove the threat, not just stop the firing. And that's what Israel is engaged in right now.

BLITZER: You're a former Israeli ambassador to the United Nations. I want you to listen to what the secretary-general to the U.N., Ban Ki-Moon, said on Wednesday. This is several days ago. Listen to this.


BAN KI-MOON, U.N. SECRETARY-GENERAL: I wish to underline in the strongest possible terms the world's call for an immediate cease-fire that is fully respected by all parties. This must be achieved now. The parties must step back from the brink. All this violence must end.


BLITZER: Certainly seems to be a lot of international pressure emerging on the government of Israel to accept a cease-fire. How does the Israeli government deal with this? And I know you speak as the opposition leader.

NETANYAHU: Well, there is no opposition in coalition. There is no politics right now. We're united as a people to roll back this enormous terror threat to our people.

Remember that a million people -- that's roughly equivalent to 45 million Americans -- are under rocket fire in our major cities. So that's something we can't tolerate. No nation would tolerate it. You imagine that you're -- you now would hear an air raid siren from where you are. I think you're in Washington, is that right, Wolf?


NETANYAHU: Are you in Washington right now?


NETANYAHU: All right, now imagine that you hear an air -- a siren, or a missile, a warning siren. You have 30 seconds to get into an air raid shelter. And that happens hourly, day after day, month after month, year after year.

Obviously, that has to be stopped. And what we want to make sure is that it's not resumed again. So Israel is using the means available to -- not the means, a fraction of the means available to it.

If we just wanted to hit civilians, we would carpet-bomb Gaza. This is not something that we would even imagine doing.

We sent in our soldiers today and risked their lives -- in fact, lost Israeli lives today, the lives of our boys, because we're trying to ferret out the terrorists. If we just wanted to act from the air, we could have done what Britain did in World War II when thousands of rockets were fired on its cities, and you know, it leveled Dresden and a few other places in Germany.

I'm not criticizing Britain for that. The circumstances were such that it probably had to act in that fashion, but we are not acting in that fashion. We are doing what we can to pinpoint, surgically strike the terrorists. And sometimes, there are incidental civilian casualties.

But the burden of responsibility is on Hamas, and the way to stop this is to ensure that Hamas doesn't have the capability to resume fire within a very short time. BLITZER: There have been some who have suggested, Mr. Prime Minister, that Israel's goal right now is to destroy Hamas, to remove Hamas from its control of Gaza and allow the Palestinian Authority of the President Mahmoud Abbas to re- emerge as the authority in Gaza. Is that your understanding?

NETANYAHU: Well, my understanding is that the desire is to stop the firing and remove the threat. Does removing the threat require removing the Hamas regime? Ultimately, probably the answer is yes, for the simple reason that you have to ask, why is Hamas firing these rockets in the first place? After all, we left every square inch of Gaza. And they're quite explicit and may I say, quite honest about it, quite direct. They say, look, we're firing these rockets to liberate occupied Palestine, occupied Ashkelon, occupied Ashdod, occupied Tel Aviv. To them, any place that Israel sits on, any square inch of Israel is occupied territory, and Israel has to be destroyed.

So obviously, if you have such a militant Islamic base under the control and inspiration of Iran, a few minutes from Tel Aviv, obviously ultimately I think we'll have to remove that base. Whether or not that is the goal of that current operation, well, you would have to ask the government that.

BLITZER: Some have suggested, Mr. Prime Minister, that what's happening in Gaza right now, similar to what Israel did in Lebanon in 2006 when it went after Hezbollah, which was launching rockets and mortars into northern Israel. But Hezbollah emerged from that conflict 30 days or so in what arguably is even a stronger political situation than it was before. It's now part of the Lebanese government.

How worried are you that Hamas might emerge politically stronger as a result of what's going on right now in Gaza?

NETANYAHU: Well, I think that's a real concern that we want to make sure that there's no question as to the defeat of Hamas that such tactics of firing on civilians and hiding behind civilians, that Hamas is employing, which is by the way, a double war crime according to the international law. We have to ensure that they are not rewarded for this, that they're severely punished for this. And I think that is Israel's concern right now. Otherwise, they would gain politically. But remember that Gaza is different.

BLITZER: Looks like, unfortunately, we just lost our satellite with Tel Aviv. We'll try to get that up and continue this conversation. Actually, I think we're back. Mr. Prime minister, are you there?


BLITZER: Go ahead, finish your thought on how you're hoping that this operation in Gaza vis-a-vis Hamas will end differently than what Israel tried to do in 2006 against Hezbollah in Lebanon.

NETANYAHU: I think we have to be more decisive and to learn the lessons of not being decisive in Lebanon. Second, unlike Lebanon, Gaza is an isolated arena. There is no supply line from which Iran and Syria can continually supply Hamas. They've supplied them up to this current crisis, but the supply routes are blocked off.

So I think that it's possible to give you a decisive blow to Hamas and I want to emphasize that one is talking about -- I'm talking, the government is talking about Hamas. Its fighters, its command hierarchy, but not the civilians. Regrettably, Hamas doesn't care about Palestinian civilians. It doesn't really care for them any more than it cares for Israeli civilians.

So they hide inside the populated areas, seeking immunity. A responsible government doesn't let terrorists get away with it. They ferret out the terrorists that are embedded in the civilian population. They seek to minimize civilian casualties, sometimes at the expense of our own casualties, of our own troops. But under no circumstances do we give the terrorists immunity. That would be an enormous victory for terrorism, and they would just repeat this tactic again and again, and not only against us.

BLITZER: Benjamin Netanyahu is the former prime minister of Israel, the current leader of Likud. Thanks very much, Mr. Prime Minister, for joining us. We'll continue this conversation down the road.

BLITZER: And by the way, coming up in our next hour, we'll get more perspective on this conflict in Gaza. A top Israeli cabinet minister and Queen Noor of Jordan -- they're both standing by, live.

We're also watching the economic crisis here in the United States; two leading U.S. governors about to weigh in on what President-elect Barack Obama has to do to try to turn things around. "Late Edition" continues, right after this.


BLITZER: Welcome back to "Late Edition." I'm Wolf Blitzer in Washington.

A new year and a new push to try to rescue the U.S. economy. President President-elect Barack Obama is proposing a very ambitious economic stimulus plan, at a cost of more than $700 billion. Others are suggesting a plan as large as $1 trillion.

Here with their fix on what to do about the economy, two leading U.S. governors: in South Carolina, the state's Republican governor, Mark Sanford, and in our New York studio, the New Jersey Democratic governor, Jon Corzine.

Governors, happy new year to both of you. Thanks very much for joining us.

I want to get to the economy in a moment, but your quick reaction to what's happening, right now, in Israel and Gaza. Governor Corzine, first to you. Do you believe the Israelis are overreacting?

CORZINE: I think every government has a responsibility to protect its people. And the terrorist attacks that are reflected in the missile firings into Israel, I think, brought a proper response from the Israelis.

We certainly hope that we can get to a real cease-fire, but no one in responsibility, in any country, any place in the world, can leave their people exposed to the kind of threats that was consistently brought forth.

BLITZER: And, Governor Sanford, what do you think?

SANFORD: Jon and I may see the prescription a bit differently with regard to the economy, but I very much agree with what he just said. I mean, it's inconceivable to me that, if missiles were coming out of Cuba into South Florida, that we wouldn't respond. It's inconceivable to me that, if missiles were coming out of Mexico, that we wouldn't respond.

I think that any sovereign state has that prerogative and needs to, at times, to take that prerogative.

BLITZER: All right. Let's move on to the economy, right now.

And, Governor Sanford, I'm going to play a clip of what the president-elect, Barack Obama, said yesterday in his radio address, on one principle that he has in dealing with this economic crisis. Listen to this.


PRESIDENT-ELECT BARACK OBAMA: We must restore fiscal responsibility and make the tough choices so that, as the economy recovers, the deficit starts to come down. That is how we will achieve the number one goal of my plan, which is to create 3 million new jobs, more than 80 percent of them in the private sector.


BLITZER: As far as the deficit is concerned, if he's going to spend $700 billion or $800 billion, in the short term, over the next year or two, it doesn't look like that deficit is going to go down; it's going to go up, and the national debt will increase.

But what do you think about his general approach to try to stimulate the economy right now?

SANFORD: I think it's a horrible mistake. I think the Bush administration has been making a horrible mistake with bailout after bailout after bailout. And it sounds like he's going to repeat that process.

And I think it has absolutely dire consequences for the value of the dollar. I think it has absolutely dire consequences with regard to inflation, that the middle class and all Americans will one day face.

And I think it has absolutely dire consequences with the regard to the purchasing power of the dollars we hold globally.

So I think -- and most of all, it has dire consequences for the next generation, in paying for all this debt that's been stacked one dollar bill upon the other.

BLITZER: You believe, Governor Corzine, that he's being too modest in the sum that he wants to use to stimulate the economy, the president-elect. You want -- you want him to throw $1 trillion at this problem, don't you?

CORZINE: Well, I think we need a bold step to restart the economy. I think the dire consequences for people who are losing their homes, losing their jobs, losing their health care, seeing the quality of their education undermined for their children is an unacceptable price to pay, in the current circumstances.

And I think President-elect Obama is exactly right that we need a strategic short-term program that restarts the economy.

We see GDP declining 3 percent or 4 percent. That's $400 billion to $500 billion decline in the absolute production of our -- of our economy. And that needs to be replaced.

CORZINE: And so the $1 trillion, by the way, Wolf, is over two years. It matches the kind of short fall we see, or decline in our gross national product. And we will have incredibly dire consequences on human beings if we don't take investments that create jobs in infrastructure, if we don't take countercyclical measures to make sure people have health care, unemployment benefits, if we don't educate our children so they have the tools to have a productive economy as we go forward into the future.

BLITZER: Your state, Governor Sanford, has the third highest unemployment rate in the United States right now, according to the U.S. Department of Labor, 8.4 percent. Michigan and Rhode island, the only states ahead of you. Wouldn't you welcome the federal government pumping in a lot of money into South Carolina right now to try to deal with this crisis?

SANFORD: Absolutely not. Because again, the presumption is the federal government is going to solve this problem. The federal government had a lot to do with the problem that we're in. If you look at Freddie, you look at Fannie, you look at the proliferation of debt across households in America, in large part because of these quasi-governmental entity, in fact, government was the root of the problem.

So the idea that the government now is going to go out and throw more debt on top of more debt to debt to solve the problem is a little bit strange. But I will say this, our unemployment numbers are a little bit misleading in that unemployment is in part driven by labor force growth. And so we actually have many more people, new people working in South Carolina than they were five or six years ago, unlike states up in the northeast that actually have far fewer folks working but they have a lower unemployment rate.

So I would simply say a lot of people have left the upper northwest or the Upper Midwest to come to a state like South Carolina or Georgia and other states in the sunbelt because they think there's more opportunity and it at times skews our numbers.

Now is there more that can be done? Yes. But the idea of another round of bailouts with not a lot in the way of transparency and a whole lot of uncertainty fused in the marketplace coming with them as a way of solving this problem I don't think so.

BLITZER: All right, I want you to respond, Governor Corzine. And put your hat on as the former chairman of Lehman Brothers.

CORZINE: Goldman Sachs, please.

BLITZER: You know a lot about all of these bailouts, but go ahead. Goldman Sachs, you're right, I'm sorry, Goldman Sachs as opposed to Lehman Brothers, you're right.

CORZINE: First of all, I want to frame this as not a bailout, because it is not a bailout. It's a partnership with the federal government. The fact is the states are being forced, because we have balanced budget requirements in 49 out of the 50 states to make cuts.

New Jersey has cut its budget 8 percent, almost $2.7 billion in the current fiscal years and we're going to have another $2 to $3 billion worth of cuts in the upcoming year. We are making the tough choices.

But the fact is if we do that and 50 states across the country, we will end up offsetting anything that the federal government does, and we need to be in partnership. The states have the mechanism to put money to work in a transparent accountable fashion with regard to highways and schools and alternative energies and energy efficiency elements.

We have the mechanism to provide the counter cyclical aid in unemployment insurance programs and other aspects of Medicaid distribution for people who are thrown out of work and don't have health insurance.

We have the ability to make sure that our kids get a quality education from preschool right through college. Those places for investment are in place in our states and that's why it should come through the states in my view. It should be strong so that we offset that big hole that is developing with regard to our economic gross national product.

BLITZER: But everybody is worried about the huge sums of money being talked about and the potential for pork barrel spending, the so- called earmarks, the U.S. conference of mayors, Governor Corzine, for example, they listed a bunch of projects that they say are ready to go. Many of them are very good, infrastructure, roads, construction.

But look at this. In your state of New Jersey, two projects. In Edison, New Jersey, $10 million proposed for the Thomas A. Edison Museum and Tower improvements. In Trenton, New jersey, $30 million for a new museum of contemporary science. These are the kinds of sums that raise questions among the American public at large what's being used -- how this money is being used?

CORZINE: First of all, that is a problem that can easily be addressed by giving the president, with respect to the infrastructure investment program that both President-elect Obama is proposing and most governors and mayors are responsibly proposing is -- by giving the president and the Office of Management and Budget a line item veto so they can review according to the standards of return on the investment, they can give that kind of oversight, give that kind of oversight to the executive to make sure that it isn't loaded down with pork. Each one of those projects needs to be examined on its own merits. I'm not aware of these two that you just proposed. I can tell you that I think we have in the state of New Jersey a very serious review program. As a matter of fact, we're putting forthright now a $4 billion transportation program and a $5 billion school project program that we have done just exactly what I think needs to be done at the federal level. Review it, look at returns on the investment to make sure that they're appropriate investments.

BLITZER: In that same report, Governor Sanford, ready to go jobs and infrastructure projects that the U.S. conference of mayors put out. For your state, Charleston in South Carolina, $6.5 million proposed for the Concord Park, $3 million in Charleston for the Johns Island Airport Apron expansion. As I say, a lot of Americans look at this and they become cynical.

SANFORD: And rightly so because the bottom line, I mean, we're -- this is Washington double-speak. The idea that Washington can ever efficiently go through the appropriations process and not end up with pork is against 200 years of history in our republic.

It's just not the way the system works. And anybody who has been a real observer of our system knows that. So the question is, you can't have your cake and eat it, too. People say we've got to do something, we've got to do something. And so let's put something into education, let's put something into infrastructure, let's put something into health care.

Who could be against any of those things? But the question is, if this problem is as big as people say, why don't you just cut people a check? If you really want to stimulate the economy, just cut them a check so they can immediately spend that money.

And so we end up with this sort of -- it's a big problem, we've got to do something, but let's put into it some stuff that may in fact get very inefficiently be spent, and may not be spent for months if not years.

I don't think that's the way to stimulate the economy. And I think that the problem it leaves us with is really substantial. We have a $52 trillion unfunded liability in Washington, D.C. So we're not topping about tapping a giant piggy bank in Washington. What we're talking about going and borrowing more money from the Chinese, from other folks around the world, from our kids, from our grand kids, from Social Security, to pay for these different projects. And I think again, the idea of stacking more debt on top of more debt is only going to lead to real problems.

And the first problem we're going to see coming down the line will be its deterioration in the value of the dollar that will hurt every American and have the unintended consequence of undermining the very stimulus that's proposed out of Washington.

BLITZER: Governor Sanford and Governor Corzine, to both of you, thank you so much for joining us, a good discussion. Up next, should President-elect Barack Obama be more aggressive in his response to the conflict in Gaza? James Carville and Ed Rollins are standing by to talk about that and a lot more. Stay with LATE EDITION, we'll be right back.


BLITZER: And welcome back to "Late Edition." President-elect Barack Obama heads to Washington, later today, to prepare for life in the White House. But even though he's not yet in office, the president-elect is certainly already getting some serious criticism from Hamas about his response to the conflict in Gaza.

Let's get some insight on what's going on, on that front, as well as everything else happening in the transition to power, from two members of the best political team on television, in New Orleans, the Democratic strategist James Carville, and in New York, the Republican strategist Ed Rollins.

This is a mess, what's going on in the Middle East, James, right now. But I guess, if there's any silver lining for Barack Obama, right now, it's that he's not yet president of the United States, that the Israelis have launched this operation into Gaza on George Bush's watch, not on his.

CARVILLE: Well, I think, unfortunately, if things continue to go like they have for the last 5,000 years, he'll have plenty of messes to deal with over there.

I don't think Hamas really understands our system. I mean, particularly in an area like this, in foreign policy, we can't have but one president. And we have the one we have now.

And come January 20th we'll have a different one. And it will -- you know, it's an ongoing problem. It's terrible situation they have. And, you know, until Hamas and -- accepts a two-party-state solution, this thing is going to go on and on and on.

BLITZER: You know, you think about all the crises, Ed, that the president-elect is about to inherit, not only two wars in Iraq and Afghanistan, but what we know is going on in Pakistan and India, the war on terror and now this crisis in Gaza, these are just foreign policy crises. Forget about the domestic economic crisis, which is huge, as well. What a -- what an agenda he has before him. ROLLINS: No president has ever been challenged the way this president will be challenged. And I think the reality is, in 16 days, when he takes the Oval Office, and takes over these problems, I think what the -- what Hamas will discover, very quickly, is that American foreign policy toward Israel has been very consistent, whether it's a Democrat or Republican administration. If you attack a neighbor, as Hamas has allowed to happen, that neighbor is going to have the opportunity to go back and protect itself. Israel is our friend and our ally, long-term. And America will, no matter who's in the Oval Office, will stand by those commitments we've made to Israel through the years.

BLITZER: Let's talk, a little bit, about some of the big political stories of the week, James, including, in Illinois, the governor, Rod Blagojevich, announcing he's got a new senator, a junior senator from the state of Illinois, Roland Burris, the former Illinois attorney general.

And Burris said this. I'll play this little clip of what he told CNN on Wednesday.


FORMER ILL. ATTORNEY GENERAL ROLAND BURRIS: He is probably going to make contacts with the leadership of the Senate, to let them know that the governor of Illinois has made a legal appointment and that I am currently the junior senator from the state of Illinois.


BLITZER: All right. What do you think about what's happening in Illinois, as far as the seat that has been held by Barack Obama?

CARVILLE: Well, I've got to tell you, as a Democrat, I don't like this. This looks ridiculous. This governor is under serious investigation. There's a lot of questions being raised. It looks like they're playing, sort of, politics with this thing.

Now we have a constitutional question as to whether or not the Senate has the power not to seat the designee, I guess you'd call Burris, and this all at a time of, as we pointed out, and Ed just pointed out, and you did, unbelievable international crises and unbelievable economic crises. Listening to Governor Corzine, you see that.

And I've got to tell you, as a Democrat, none of this has a very good odor to it. I think there's got to be a more reasonable way to do this. I think the governor is playing politics, trying to focus -- force people's hands here, when that's not the appropriate mechanism to do this.

BLITZER: He's still the governor, Ed, of Illinois, hasn't been convicted of anything yet. He does have that authority. He's named Roland Burris to be the next senator from the state of Illinois.

Here's the question to you. Does the Senate have the authority to block Burris from being sworn in?

ROLLINS: Well, they certainly can attempt, procedurally, to do it. I think it's idiotic to try and do this. I think Burris will be a good Democrat senator. He's been elected, statewide, four times, including the job of attorney general. The governor does have the power, whether we like it or not. He's not been impeached. He's not been indicted yet. And he's not been convicted. We do believe in due process.

So, for Harry Reid to make phone calls and recommend that African-American congressmen don't be appointed, and that someone else should, I think, is very foolish on his part, and to draw this thing out when they have all these other problems.

And it will go to the Supreme Court regardless if they try and block him. I think it's a big distraction. And they don't need any distractions. They need to get to work.


BLITZER: James, go ahead.

CARVILLE: I wasn't aware Senator Reid's made phone calls urging him not to appoint an African-American.


CARVILLE: But maybe -- I wasn't aware of that. What he said was, was they were not going to seat, and 50 other Democrats said it also, that they were not going to seat anybody that Governor Blagojevich appointed because there are very, very serious allegations that he had said that he wanted something in return for the seat.

ROLLINS: But as you know, having lived through the Clinton administration, James, and having been a great defender, allegations don't necessarily -- can be proven out.

CARVILLE: I understand...

ROLLINS: And I think, to a certain extent, at this point in time, we have to believe in due process.

CARVILLE: Again, I'm not aware that Senator Reid ever called and urged -- and said, don't appoint an African-American senator. I'd be stunned if he made any such phone call. But what he said was, given the seriousness of these allegations, and I am aware of that, that it would be better to put this off.

And I think the Senate Democrats (inaudible) that there's a constitutional question. There seems to be some conflict in our Constitution. But, basically, the Senate is allowed to determine the qualifications of its own members.

BLITZER: I don't think there's any doubt, guys, that the Democratic majority, and Republicans for that matter, would oppose an African-American. But the racial issue has certainly been brought in by the fact that Barack Obama was the only African-American in the U.S. Senate. And now this nominee, or designee -- whatever we want to call Roland Burris -- is himself an African-American.

Listen to what Congressman Bobby Rush of Illinois said about all of this, just the other day.


REP. BOBBY L. RUSH, D-ILL.: We need to have not just one African-American in the U.S. Senate. We need to have many African- Americans in the U.S. Senate. So I applaud the governor for his decision.


BLITZER: Where does the racial element, James, play in all of this?

CARVILLE: Well, look, this is Illinois politics. And in American politics, a racial element is everywhere. But what's happened here -- this is not -- this is about the Senate Democrats saying that we don't want to seat someone, an appointment made by this governor, given the current legal and political environment in Illinois.

This is a governor trying to make this -- trying to make this play, here. Maybe he can do it. And I don't blame Ed. Look, I'm saying, this is not a politically very good situation for Democrats. I wish there was a way that Blagojevich could reconcile this issue, by resigning and fighting the allegations.

I mean, that's an option that's available to him. It certainly would be in the best interests of the Democratic Party. I don't know how anybody can govern under these kind -- under these kinds of allegations.

There's nothing prohibiting this governor from resigning and fighting. And who knows? If he's innocent, then more power to him. He'll be a hero, get elected, and anything he wants.

BLITZER: All right. Ed, hold on for a second, because I want to take a quick break, but continue this conversation. We're also going to talk about Caroline Kennedy. Is it a done deal? Will she be replacing Hillary Clinton in the U.S. Senate? Much more "Late Edition," right after this.


BLITZER: Welcome back. We're talking to Democratic strategist James Carville and Republican strategist Ed Rollins.

Ed, you're in New York. Is it a done deal that the governor there, David Paterson, is going to announce that Caroline Kennedy is his choice to replace Hillary Clinton in the U.S. Senate?

(LAUGHTER) ROLLINS: Being one of the few Republicans in New York, I have no way of knowing. I'm not, obviously, an intimate of the governor.

I think the governor has a tough choice to make. I think Caroline Kennedy has put herself, certainly, near the top of the list by her lobbying campaign.

But the other side is she's not made as favorable an impression as a lot of people might have thought she would, as she's gone out and met with the press and met with some political leaders.

There are an awful lot of political leaders in New York who think there are other people that are more deserving, who have paid the price. And regardless, whoever gets elected has to run again in two years. The governor has a tough choice, and he has to run again with whoever it is.

So I would not say she's not a shoo-in, at this point in time.

BLITZER: The Associated Press, James, reported on Friday, this. It said "Two people close to Governor David Paterson tell the Associated Press they believe Caroline Kennedy will be his choice, but the governor cautions he's still looking."


She has to be confirmed by the Senate as the secretary of state, Hillary Clinton, and then all of this will become realistic. What's your understanding?

CARVILLE: Well, look, first of all, let's take them in order, here. The thing in Illinois is an absolute fiasco. This is -- the Kennedy people and Mayor Bloomberg people are trying to put pressure on the government, and I don't think their campaign has been all that impressive. She may very well get appointed, but I wouldn't give her campaign, thus far, tremendously high marks.

Let's move to a place where somebody did something right, in Colorado, where the governor there appointed the head of the Denver school system, who, from everybody's account is a, sort of, first- class guy; moved in decisively and did that.

I mean, I would think Governor Paterson has got a lot of options, and I hope that he makes a decision pretty quickly, here. If he appoints Mrs. Kennedy, that would be fine. She's a good Democrat. She's very bright and a good name. But her campaign has not helped her any. I don't think the execution of that thing has done anything to impress anybody.

BLITZER: In Minnesota, Norm Coleman seems to be slightly behind Al Franken, and Al Franken looks like he's heading toward Washington, although Republicans are resisting. What do you think, Ed?

ROLLINS: If Al Franken has the votes, he deserves to be seated. And I think that, you know, if you want to make a challenge post, that's one thing, but I think that certification will come this week. If he's ahead, he deserves to be seated with his class.

My sense is, this is different than the Senate basically saying Burris is not qualified, and Burris, obviously, can argue he is qualified, to the Supreme Court.


BLITZER: Ed Rollins and James Carville. Guys, thanks. We've got to leave it, unfortunately, right there, because we're out of time. We'll continue next week, though.

Coming up, the latest on the fighting in Gaza. A top Israeli cabinet minister and Queen Noor of Jordan -- they give is their take. They're standing by, live. "Late Edition" continues right after this.


BLITZER: This is "Late Edition," the last word in Sunday talk.

BLITZER: Crisis in the Middle East. The war between Israel and Hamas intensifies. What will it take for the two sides to agree to a truce? Israeli cabinet minister Isaac Herzog and Jordan's Queen Noor weigh in.


OBAMA: We need an American recovery and reinvestment plan that not only creates jobs in the short term, but spurs economic growth and competitiveness in the long term.


BLITZER: An economy in crisis is issue No. 1 for the next U.S. president. We'll assess Barack Obama's economic recovery plan with former Republican presidential candidate Mitt Romney.

Inauguration countdown. As President-elect Obama and his family head to Washington, insight and analysis on his transition to power from three of the best political team on television. "Late Edition's" second hour begins right now.

And welcome back to "Late Edition." We'll get to the Israeli security cabinet member Isaac Herzog in just a moment, but first let's go straight to CNN's Paula Hancocks. She's got the latest on the fighting in Gaza. Paula is right on the border between Israel and Gaza. What's going on, Paula, right now?

PAULA HANCOCKS, CNN CORRESPONDENT: Well, Wolf, we're still hearing intermittent explosions, and the horizon behind me over Gaza is being lit up. So certainly, the onslaught from the sea, from the ground, and from the air is continuing.

Now, according to our sources in Gaza, Israeli troops are actually cutting parts of the Gaza strip in two, trying to -- we assume trying to keep the militants away from each other so they can't get reinforcements to each other. But of course, that means you can't get humanitarian aid around Gaza either.

And certainly, our sources on the ground have been speaking to people today who are absolutely terrified, saying one of the main things that they're worried about at this point is they don't have water. Now, there's not enough food, water, or medical supplies getting into Gaza. Here we are on day nine, and certainly, the people in Gaza, 1.5 million residents still suffering horribly. The hospitals are close to collapse. They're understaffed. They don't have enough qualified doctors. They don't have enough medical supplies. And the Gazan hospitals at best are very, very badly equipped -- Wolf.

BLITZER: Paula, is Hamas still launching mortars or missiles, rockets into southern Israel?

HANCOCKS: They certainly are, yes. They've been launching a few mortars in this area throughout the day. And according to the Israeli military, at least 30 rockets have been hitting different towns along the border.

So, even though this is day nine, even though the ground troops are in Gaza, the Israeli military has still not managed to dent the capability of these militants to get these rockets into Israel -- Wolf.

BLITZER: All right, Paula, stand by, be careful over there.

The Israeli government says the ground assault in Gaza could last for days, maybe even weeks. Is there any chance, though, for a cease- fire? Is the United States doing enough to forge a truce? Let's get the analysis from the Israeli government. Joining us is the Israeli cabinet minister, Isaac Herzog, in Jerusalem. Thanks, Minister, very much for joining us.

Let's talk about the humanitarian crisis in Gaza. You just heard Paula report that it's bad and getting so much worse. What, if anything, can be done to alleviate the plight of 1.5 million Palestinians who are stuck there?

HERZOG: It's a major issue that we are very much aware of. We are dealing with it from day one. In fact, we have increased dramatically the amount of supplies and trucks going into Gaza. We have -- this is a major topic that's been discussed in the Israeli government. We're scrutinizing and reviewing this constantly. So far, the situation is stable, despite the pressure, despite the pains of many Gazans.

We are aware of it, but one needs to understand that the circumstances are such that the terrorists, the Hamas fighters, are fighting from within civilian terrain, from apartments, from houses, from schools, from shops, and, therefore, part of the circumstances are that in certain neighborhoods, when we are trying to find out where the launchers are, the missiles are, there are pains and there are difficult moments.

BLITZER: What would it take, Minister, for the Israeli government to order an immediate cessation to the military operations on the ground, in the air and from the sea?

HERZOG: A very clear understanding that a dramatic change has been introduced into the Israel/Gaza border, whereby one side just doesn't have the capability or is not allowed or cannot just simply press a button in the morning and launch a missile into Israeli homes. This is impossible for the last years, but clearly, in the last few months, in the last six weeks, we have suffered very heavy attacks, attacks on Israeli citizens going on with their daily life, with no real reason, just because the Hamas decided to break the cease-fire and decided it wants to now gain new gains on -- I would say on the expense of Israeli citizens.

This is unacceptable. We are determined, absolutely determined, to go as far as possible, and it takes -- whatever it takes to change the situation. We are not aiming at eradicating Hamas, changing its regime. We want to protect our citizens. This is our aim.

BLITZER: Do you see any indication that Hamas may be easing its stance and may be ready to say, you know what, there's not going to be any more missiles or rockets or mortars launched from Gaza into Israel?

HERZOG: The intelligence reports that we've received today in the Israeli cabinet are that the Hamas is looking for a respectable way of finding a way to get out of this situation. Namely, they are, indeed, under huge pressure. It is clear they are, indeed, under huge pressure. And part of the problem is, of course -- and that's very important for your viewers and listeners to understand -- that the Middle East is now divided between two coalitions. There's the moderate coalitions of Arab nations, which, together with Israel and Turkey and the Palestinian Authority headed by President Abbas, which understands the need to move to peace, to a two-state solution, peace between Israel and Palestine, and, of course, the containment of the Iranian influence in the region.

The other coalition, the coalition of hatred, is a coalition headed by Tehran with two agents, Hezbollah and Hamas. And Hamas is getting orders from Tehran, and this is part of the problem, of course.

BLITZER: How concerned are you, Minister, that Hamas may emerge, along the lines of Hezbollah in Lebanon, which emerged politically even stronger after the Israeli invasion of Lebanon back in 2006?

HERZOG: The situation is quite different. We need to understand it in the following manner. If you look at what is the alternative, where is the horizon, you can look at the West Bank, where we've been negotiating a very painful political peace process with the Palestinians, painful in the sense that we are willing to go very far in a peace agreement with the Palestinians. And this is a horizon whereby you see improvement in the West Bank, improvement in the functioning of the Palestinian Authority, better economic life, and so forth and so on.

You look at Gaza. Gaza was taken over by a brutal coup by the Hamas in 2006, by firing and killing their own brothers and sisters who were in the Fatah Party. And ever since, it's became a terrorist base. And we are offering the Gazan people a different venue. We are saying let's get back to quiet and tranquility. Let's improve the situation. Let's help you guys get out of this situation and let's move towards peace.

Now, for this, both the Egyptians are our partners, the Jordanians and others, because we really, really, sincerely would like to move towards peace.

BLITZER: Isaac Herzog is a member of the Israeli security cabinet. Minister Herzog, thanks very much for coming in.

HERZOG: Thanks, Wolf.

BLITZER: And just ahead, are Arab nations stepping up to the plate to help end this conflict in Gaza? We'll get the view from Jordan's Queen Noor. She's standing by live. "Late Edition" continues right after this.


BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. We're covering the crisis in the Middle East right now. And joining here us in our Washington studios is her majesty, Queen Noor of Jordan. I know, your majesty, you've been deeply concerned about this humanitarian crisis in Gaza. What are you hearing from people that have been directly involved in trying to get supplies to the Palestinians?

QUEEN NOOR: Enormous frustration. There are estimates that between 100 and 400 trucks are needed to get into Gaza on a daily basis in order just to provide minimal supplies to people who are 80 percent living on food subsistence and half were unemployed before this operation began.

We've heard from ICRC that they have not been able to get supplies in for three days now. That makes so many of us worry about what is happening to the men, women and children who did not have adequate medical supplies, did not have adequate food, did not have adequate living conditions living amongst raw sewage, et cetera, for the past 18 months of this blockade, let alone now.

BLITZER: We just heard from the Israeli cabinet minister, Isaac Herzog, that he said even as this military operation continues, supplies are going in, trucks are going in. I'm trying to get some independent confirmation.

QUEEN NOOR: I hope that it is true that there are supplies going in because it's absolutely critical, of course. These people have been living for now several years under the poverty line, 80 percent of them, and living without hope in complete despair, and now today the conditions can only be worse. I do hope there are supplies getting in.

BLITZER: Those trucks have been going in, generally, correct me if I'm wrong, from Israel into Gaza. QUEEN NOOR: With international supplies.

BLITZER: Right, international. But what about from Egypt? Because there is a border between Gaza and Egypt. Are any supplies coming in from the Egyptian side?

QUEEN NOOR: I have been trying to get an understanding of that assessment today. My understanding is that the border is closed, they are not allowing supplies in. A few, a very small number of critical cases did manage to get out in the last day or so. But other than that, my understanding is that it's closed.

BLITZER: The Egyptians basically took in a handful of very severely injured Palestinian children or women or others who needed immediate critical care. But not very many.

QUEEN NOOR: That's what I've seen, as well.

BLITZER: So, what should the international community be doing right now? They're trying to get some sort of cease-fire, but it doesn't seem to be developing.

QUEEN NOOR: Well, obviously, I think that has to be the first priority, is the cease-fire, an end to the violence on both sides. And that has to be something that is pursued in the context of a renewed commitment to a larger peace process where the political will is there to implement what already is accepted as a framework for peace by Israelis and Palestinians and others. The framework exists. It's existed since the last days of the Clinton administration. The Arab peace initiative of 2002, which was reaffirmed in 2007 by all Arab states, and various other initiatives, as well.

That larger context, the conditions of people in the West Bank, almost 50 percent are unemployed. And they're also living under the poverty line. The seizures, the settlement expansions, the roadblocks, all this is destroying economic lives in the West Bank and has been doing that in Gaza, as well.

So, this is the largest context in which this conflict and what many term this radical resistance to occupation by Hamas, this is the context in which you have to look at this problem. I'm not condoning Hamas. I won't condone the killing of innocent civilians on any side of any conflict. But you have to look at the larger context to see the desperate need for a political solution and one that this new administration has an opportunity to engage in actively and will have to from the onset.

BLITZER: Because many in the Arab world, in the more moderate Arab world, see this as part of a much bigger struggle between the more moderates and the Islamic fundamentalists and the militants who are out there, including Hamas.

And I noticed this paragraph in today's "Washington Post," David Ignatius, the columnist, wrote this, and refers to Jordan. I'm going to read this to you because I want your reaction. "In a classic sign of uneasiness in the Hashemite Kingdom, King Abdullah II is said to have replaced his intelligence chief. Out is Muhammad Dahabi, a respected former chief of staff of the service; in is Muhammad Ratha'n Raqqad, an experienced case officer from a powerful Jordanian family, who made his name targeting radical Islamic groups."

How concerned are folks in Jordan or Egypt or elsewhere, Saudi Arabia, for that matter, about this rise of the fundamentalist, this militant movement? QUEEN NOOR: I would say that people throughout the region are desperately concerned and fearful about the rise of extremes on both sides, or on all sides, and that the more military force is employed by whomever is employing it, the more you drive people to those radical extremes.

And we've seen this time and time again. We saw it in 2006 with the Israeli assault on Lebanon and the Hezbollah attacks on Israel. We see time and time again that when military force is used, it erodes prospects for peace, it diminishes the strengths of the moderates and their position, it weakens these peace process initiatives that I mentioned earlier that are absolutely the building blocks of peace.

BLITZER: There are some are pointing to these regimes, these governments are going to determine they have to use extensive military force. I remember your late husband, King Hussein, who was beloved and who was a hero in so much of the world because of his leadership on the peace process, when he felt that his regime was endangered by Palestinian militants during Black September in the '70s, he cracked down with a brutal vengeance and kicked them out. You remember those days.

QUEEN NOOR: Well, actually, I wasn't living there in those days.

BLITZER: I know, but you remember.

QUEEN NOOR: They tried to set up an alternative government in Jordan. And the Jordanians had to respond forcefully. It's true. It was not the brutal crackdown that's been -- that's been pictured, but it was a very strong and emphatic, you know, reaction if you will. The problem is --

BLITZER: Sometimes these regimes, they think they have no choice.

QUEEN NOOR: No. That's absolutely correct. But the reason is, in the absence of a sense of security and peace -- and I know the Israelis have been talking about how they're trying to guarantee that for their population in Israel -- in the absence of a sense of security and peace and freedom for the Palestinians, you are only going to have increasingly radical resistance.

When there is no economic activity, when there is no political horizon for anyone in the Palestinian community, then you are going to have reactions. And those are going to spill over in the larger Arab and Muslim worlds. Military action like this that is taking such heavy, heavy civilian tolls among the people of Gaza is only exacerbating and empowering those radicals who might seek to recruit among people who would otherwise choose very constructive and peaceful ways of life. They have no hope. So, they are more easily drawn to the radicals. The radicals would have no support, political or otherwise. And Hamas was losing that support before this military action. They were losing support among their own people and the Palestinian community because they had not been able to provide a better life for their people. BLITZER: We've just been told, by the way, from the United Nations, three trucks with humanitarian supplies were allowed to cross into Gaza today from Rafah.

QUEEN NOOR: Thank god. Thank god. Thank god.

BLITZER: So at least a little bit.

QUEEN NOOR: But they need 100 to 400.

BLITZER: Three trucks probably.

QUEEN NOOR: But it's better than nothing.

BLITZER: Let's hope that more will be on the way.

QUEEN NOOR: God willing.

BLITZER: Queen Noor, thanks very much for coming in.

QUEEN NOOR: Thank you, Wolf.

BLITZER: Straight ahead on LATE EDITION, we'll talk more about the bailout of the U.S. automobile industry, the man for whom it is a family affair, the former Massachusetts governor, Mitt Romney.

And then, with Barack Obama arriving in Washington later today and Congress about to return to Capitol Hill, what's next? It promises to be a big week in politics. We'll get a preview from three of the best political team on television. LATE EDITION continues right after this.


BLITZER: We'll get a preview from three of the best political team on television. LATE EDITION continues right after this.


BLITZER: And welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. For my next guest, a precarious situation in the U.S. automobile industry is certainly a family affair. The former Massachusetts Governor Mitt Romney's father led American Motors back in the 1950s. Some have suggested that Governor Romney would be a good choice, by the way, to spearhead the industry's recovery, to in effect become the car czar. We're going to talk about that, the economy, and a lot more. The governor is joining us from Salt Lake City.

But first, I want to get your reaction, Governor Romney, to what's happening in the Middle East right now. Are you with the Israelis? Are you with the Palestinians right now? Where do you see this situation unfolding?

ROMNEY: Well, you look at the -- their current circumstances in Gaza, and you say to yourself, why in the world did Israel allow the rockets to be blasted into Israel year after year, 6,400 rockets shot into Israel without real military response?

From the very beginning, there should have been response to say this is unacceptable. Hamas was very clearly not a government intent on helping their people. When sovereignty was give on the Palestinians in the Gaza Strip, they didn't build roads, they didn't build hospitals, they didn't build schools or businesses. Instead, they bought rockets, millions and millions of dollars worth of rockets. They were intent on destroying Israel. And in a circumstance like that, Israel has no choice but to take military action. They're taking it now. It's terribly unfortunate. But the cause of this is the constant attack over the last several years by Hamas.

BLITZER: The Hamas leader Khaled Meshaal in Damascus on Friday railed against Barack Obama, and he said this. I'm going to play the little clip and translation.


KHALED MESHAAL, HAMAS LEADER (through translator): Mr. Obama, your beginning is not good. You got involved and you had a statement regarding the issue of Mumbai, but you would not get involved and say anything about the enemy's crime against Gaza. Enough of your double standards, oh, western nations.


BLITZER: Do you have confidence that the incoming president is, from your perspective, going to do the right thing as far as the Middle East is concerned?

ROMNEY: I believe that Barack Obama is firmly behind Israel's right to protect itself. He said so time and time again in debates as well as in statements since his election. The United States is committed to doing what's right here. This is obviously a big question for a lot of countries because they look at the opportunity to trade with over a billion Muslims, many of them angry with regards to the Palestinian effort. But, in fact, Israel is in the right in this circumstance. They are an independent nation. They've been attacked time and time again by Hamas. And an independent nation has a right to protect itself against this kind of attack.

BLITZER: What do you think of this national security team that he's putting together, the president-elect, with Hillary Clinton becoming secretary of state, Jim Jones, the retired U.S. marine corps commandant, the national security adviser, and holding onto Robert Gates as defense secretary?

ROMNEY: I think you have to be pretty encouraged. If you're a conservative, obviously conservatives have had some difficulty with Hillary Clinton over the years, but she does have experience and she has some perspective with regards to foreign policy that I think will be useful. And General Jones and of course continuing with Secretary Gates is very, very encouraging. These are people who have been tested time and time again. I don't think you're going to see a dramatic departure from the historic commitment that we have to peace and prosperity in the world and the cause of democracy.

BLITZER: He's talking about a $750 billion economic stimulus package. He wants it to be passed as soon as possible. It's unclear if whether it can be passed before he's inaugurated on January 20th. What do you think about this proposal?

ROMNEY: Well, I frankly wish that the last Congress would have dealt with the stimulus issue and that the president could assign that before leaving office. I think there is need for economic stimulus. Americans have lost about $11 trillion in net worth. That translates into about $400 billion a year less spending that they'll be doing, and that's net of additional government programs like Medicaid and unemployment insurance. And government can help make that up in a very difficult time. And that's one of the reasons why I think a stimulus program is needed.

I'd move quickly. These are unusual times. But it has to be something which relieves pressure on middle-income families. I think a tax cut is necessary for them as well as for businesses that are growing. We'll be investing in infrastructure and in energy technologies. But let's not make this a Christmas tree of all of the favors for various politicians who have helped out the Obama campaign, giving them special projects.

That would be wrong. You'll see Republicans fight that tooth and nail if that happens. Let's do what's right for the economy, and let's not do what's a political expedient move.

BLITZER: The economic bailout that the president approved for Chrysler and for General Motors just a couple of weeks or so ago, you're not thrilled by that, are you?

ROMNEY: No. I think we lost an opportunity there, and maybe we can get the opportunity again in the next several months. But frankly, the U.S. auto industry, the domestic manufacturers, have every reason to thrive and to succeed in this country. There's no reason for them to continue to lose share as they have over the past 20 years, if they are restructured. And if the excessive costs which they have in health care, in retiree benefits, in work rules, and in labor rates, if those things are brought in line with the foreign manufacturers who make cars here in the U.S., if they're brought in line, the domestic manufacturers can succeed.

But we had the opportunity to do that, to bring the costs in line, the UAW balked, the industry balked, managers balked in the various company, and the job didn't get done. And just bailing them out and funding a continuation of the historic loss of market share is not good for the industry long term. I want this industry to thrive and grow, and it can.

BLITZER: Do you think that they can come up with a plan, the auto industry, by the end of March, which they're supposed to do, now that they've been given this lifeline?

ROMNEY: Well, it doesn't take very long to come up with a plan. The answer for what's necessary for the industry is pretty straightforward. The question is whether management and the unions will actually take the necessary action. And the only way that they're going do that is if they realize they don't have any alternative. And when government is willing to write checks and became them out and continue the status quo, they're just funding a continuation of the decline of the industry.

You're going to have to stand up to the UAW and to management and say, these are the changes that have to happen, and if you do these things, we'll give you the financial relief you need, and if you don't, we're not going to help you at all. And that's the only kind of leverage I think that's going to get the UAW and management to take the necessary action.

BLITZER: You said you liked the president-elect's national security team he's putting together. What do you think about his economic team?

ROMNEY: You know, there are some very good people there. I'm very pleased with the person that's going to be running Treasury. He's a capable, experienced individual, having run the Federal Reserve or been chief of the Federal Reserve in New York. I'm very hopeful.

ROMNEY: Look, this is a time when we're all hopeful for the president-elect. He was kind enough to call our home when my wife was ill, and he said that he and Michelle had my wife in their prayers, and I said, Mr. President-elect, Ann and I have you in our prayers. And we do.

All Americans -- Republicans, Democrats, Independents -- want to see this president successful. He's chosen good people. If they do the right thing and put politics to the side and instead focus on what's right for the nation at such a critical time, we're all going to be behind him.

BLITZER: I notice in "The Wall Street Journal" on December 27th they ask you for your 2009 resolutions. Among your professional resolution, you said this, "I want to help restore balance in Washington. Our democracy needs two strong parties if we are to deal effectively with the challenges our nation faces."

On a personal note, you said stop wearing a suit and tie to bed, which was very cute. But let's talk a little bit about the Republican Party right now in opposition. Who is the leader right now of the Republican Party?

ROMNEY: Well, the great thing about our party right now is there's no one leader. We have voices from Washington as well as across the nation. You just heard from Governor Sanford, but there are other great governors across the country that are making a real difference, Haley Barbour, Bobby Jindal. I won't go through the whole list, but you've got quite a group of Republican governors and then of course in the Senate and the House, you've got strong voices. And we'll be listening to those voices. Senator McCain continues to have an influence in the party of significance. And I think you're going to find that we will, as a party, represent a strong and viable pathway for America to strengthen our economy. That's issue number one right now, is to get this economy going again, not with old political favors being paid back and earmarks being applied but, instead, by taking action to reduce taxes on the American people and on American business.

BLITZER: Who's your choice to be the next chairman of the Republican National Committee?

ROMNEY: You know, I haven't weighed in on that, Wolf. There are several good people who are running. In some respects, I'd hope for a very visible and prominent name to step forward. But that hasn't happened to date. I don't think it's likely to at this stage, but there's some folks who have been running the state parties and their respective states and some have also been running the national republican committee already.

So, among them, I think you'll find that the committee chooses someone who can guide our party at a critical time. But really, I think the most powerful voices of the party are going to be elected officials in the Senate, in the House, and in governors' offices.

BLITZER: You'd probably be a pretty good candidate if you wanted to throw your hat in the ring. Is that something you're interested in doing?

ROMNEY: Not interested in that race, thanks. I'm going to continue to fight for electing conservative Republicans across the nation. I'm going to do that by fund raising, by giving speeches, by writing op-eds, doing whatever I can to talk about the need to have a strong second party in this country and balancing the overwhelming lead that the Democrats have in Washington right now.

BLITZER: Governor Romney, happy new year to you and your family. Thanks very much for joining us.

ROMNEY: Thanks, Wolf. Good to be with you.

BLITZER: Thank you. And coming up on LATE EDITION, President- elect Barack Obama's arriving in Washington later today so he can send his two little girls to school starting tomorrow. With the crisis, though, in Gaza and the continuing recession, their father certainly facing some tough tests himself. We'll get more on that from three of the best political team on television. LATE EDITION continues right after this.


BLITZER: Between the conflict in the Middle East and the U.S. economy in crisis, President-elect Barack Obama certainly has a lot of his plate before he even takes office. Let's talk about the transition to power and more with CNN's senior White House correspondent Ed Henry. He's standing by in Chicago and here in Washington, our senior political analyst Gloria Borger. And the editor in chief of "The Hotline," our CNN contributor, Amy Walter. Guys, thanks very much for coming in. Happy new year.

Ed, how does the president-elect deal with this crisis? It's a huge crisis unfolding in the Middle East right now.

ED HENRY, CNN SR. WHITE HOUSE CORRESPONDENT: For now, he does nothing, Wolf, and he's getting some criticism for that, particularly from the Palestinian side, where there are people who feel he should be speaking out a lot more to get Israel to restrain itself.

And they keep pointing back to a remark he made last summer in July, you'll remember, when he visited Israel as a presidential candidate and spoke out in very personal terms, in fact, invoked his own daughters, which is something he usually doesn't do, in saying, Barack Obama did, that if his home with his two daughters sleeping there, was getting hit by rockets, he would understand why Israel would need to defend itself, would need to respond.

Israeli officials are using that to say -- you know, to justify their current actions. And so, what we keep hearing from the transition team is the mantra of there's only one president at a time, and yet Palestinians look and see the fact that on the economy, for example, Barack Obama has been speaking out somewhat. And, in fact, when he gets to Washington late tonight, I'll be on that plane, on Monday, he has meetings with Democrat and Republican leaders to deal with the financial crisis, to talk about the stimulus plan.

And so, there are some people looking for more leadership from him on this issue. What he's trying to do is monitor it and hit the ground running on January 20th. Those are critics who want him to jump in sooner, Wolf.

BLITZER: I'm sure there are some who would suggest, Gloria, that he should be grateful to the Israelis for doing this now rather than waiting until after January 20th.

GLORIA BORGER, CNN SR. POLITICAL ANALYST: You know, how many more things on his plate can he have? He's got the crisis that we saw in Mumbai, he's got the Middle East, he's got an economic crisis here at home. And I think honestly, it's very smart for Barack Obama, particularly when it comes to the Middle East, to say there's only one president at a time, because he cannot intervene at this moment.

And you can be sure that Hillary Clinton and his foreign policy and national security people are in touch with George Bush's security team. And I think that that's the way it has to be until he becomes president of the United States. He can't say anything right now.

BLITZER: It doesn't sound, at least right now, Amy, that there's a huge amount of difference, at least in the rhetoric coming from the Bush administration and the Obama transition.

AMY WALTER, CNN CONTRIBUTOR: Right. And I think -- and I agree with Gloria, too, that in terms of spending political capital, I think it's not just there's one president at a time as much as there's one president who stops at the water's edge at a time. And so, domestically, of course, he can be spending that political capital talking to leaders. We know he's not just sitting down with Democrats, but he's sitting down with Republicans.

WALTER: If the point is to bring people together, there's no reason why right now he should be using that to basically put himself in a no-win situation that could change by the time he takes the oath of office.

BLITZER: Still sixteen days to go and counting.

Roland Burris, let's talk a little bit about that. Ed, you're in Chicago right now. He's been named by the governor of Illinois to be the replacement, the successor to Barack Obama in the U.S. Senate, but there's a lot of opposition, as you well know. First of all, tell us how the Obama team has reacted to this and what they want to see happen.

HENRY: Well, in recent days, what the president-elect has said is reiterate his call for the governor to step down. But he has largely tried to stay out of the back-and-forth. I think it's become more of a political headache, frankly, for Democratic leaders in the Senate, particularly Harry Reid, the majority leader.

The Chicago papers this weekend, particularly the Sun-Times, have been hitting him hard with a story -- suggestion is that it was leaked from the governor's side obviously here in Chicago -- that suggested there was a phone call back in December between Harry Reid and the governor, Rod Blagojevich, in which Harry Reid suggested he didn't want any of three African-American House members here in the Chicago area from getting that Senate seat. And the suggestion from the Blagojevich team is that Harry Reid didn't want an African-American in the Senate, and now is blocking Roland Burris, or at least trying to block him from literally entering the Senate doors.

That's a big political headache. The Reid side is saying, look, this phone conversation is being distorted by the Blagojevich team. What's really fascinating is that Chicago papers this morning suggesting this phone conversation between Harry Reid and Rod Blagojevich could have been on tape. So, in the end, we may end up hearing exactly what was said in that call. Big political headache for Democrats.

BORGER: You have a he said-he said here, and Harry Reid says that Blagojevich is lying about this. And so, if it is on tape, then we'll be able to listen to it.

Look, I think the Senate Democrats are in kind of a pickle here, because constitutionally the governor does have the right to appoint Roland Burris, constitutionally. Now, they're going to keep him out, and Blagojevich did it just to stick his thumb in their eyes. And so, we're going to have a bit of drama when the Senate comes back.

BLITZER: Just to let our viewers who aren't familiar -- a lot of those conversations were taped by the U.S. attorney and the FBI because of the continuing investigation into the sitting governor of Illinois.

WALTER: That's right. And there's nothing wrong with -- you know, and Harry Reid was saying this, there's nothing wrong with calling up a governor and talking about prospective candidates. The question becomes -- and you're right, they box themselves in here by saying we're not going to seat this guy, and they're really taking the issue of precedents maybe to the courts, which is we in the Senate and the House can decide how we seat our own members and whether or not we are going to do it in this case.

BORGER: But what are the criteria for that?

WALTER: Well, that's correct, and there's going to be a lot of...


WALTER: This is what's going to happen...


WALTER: ... delay this until they can impeach Blagojevich and hope that Quinn, by early February, will be the governor and can appoint a successor.

BLITZER: But is there a racial problem, though, because of the fact that there are no, right now, African-Americans in the U.S. Senate? Barack Obama was the only one, and he's going to be president of the United States. Where does this play into this whole fight that is about to unfold tomorrow in the U.S. Senate?

HENRY: It's a big part of it. It's a very sensitive issue, obviously, race in general, and there are a lot of Democrats in Washington who believe that the governor knew that he was putting Harry Reid and other Democratic leaders just in that position by picking a very highly respected African-American leader, 71-year-old man in Roland Burris, a former state attorney general, impeccable credentials, someone Barack Obama has spoken warmly of, that it would make it that much harder for Senate leaders to block an African- American from taking Barack Obama's seat, from replacing him in the Senate. And so I think that that is very hard.

And also, there are a lot of Democrats who believe privately that Rod Blagojevich is trying to play to a potential African-American jury pool here in Chicago in that trial by picking an African-American.

So, I don't think clearly it was -- it was not a mistake that Rod Blagojevich picked an African-American leader. He was trying to put Democrats in this very pickle that Gloria and Amy are talking about.

BLITZER: All right, guys. Stand by, because we have a lot more to talk about, including Caroline Kennedy in New York. And the vice president, Dick Cheney, he was a guest on one of the Sunday morning talk shows today. We're going to bring you what he said in our very popular "In Case You Missed It" segment. That's coming up right here on "Late Edition." (COMMERCIAL BREAK)

BLITZER: Welcome back to our political panel. But first, in case you missed it, let's check some of the highlights from the other Sunday morning talk shows here in the United States.

On CBS, the vice president, Dick Cheney, discussed where the United States stands in the conflict in Gaza.


VICE PRESIDENT DICK CHENEY: We've been very concerned, especially about the Palestinian people, that they are victims, in a sense, of Hamas, as well. But we think if there's to be a cease-fire, you can't simply go back to the status quo ante, what it was a few weeks ago, where you had a cease-fire recognized by one side but not adhered to by the other.


BLITZER: On NBC, the Senate majority leader, Harry Reid, explained why he wants to block Roland Burris, the man appointed by the Illinois governor, from serving in President-elect Barack Obama's vacated Senate seat.


SEN. HARRY REID, D-NEV., SENATE MAJORITY LEADER: Blagojevich obviously is a corrupt individual. I think that's pretty clear. And the reason that he's done what he's done is divert attention from the arrest that was just made of him. That's why President-elect Obama agreed with us that Mr. Burris is tainted, not as a result of anything that he's done wrong -- I don't know a thing wrong with Mr. Burris. It's not the person that has been appointed; it's the appointee.


BLITZER: And on Fox, the former president, George Herbert Walker Bush, weighed in on his son, the former Florida Governor Jeb Bush's political future.


FORMER U.S. PRESIDENT GEORGE HERBERT WALKER BUSH: I think if Jeb wants to run for the Senate from Florida, he ought to do it. And he'd be an outstanding senator. I'd like to see him run. I'd like to see him be president someday.


BUSH: Or maybe senator, whatever. Yes, I would. I mean, right now it's probably a bad time. Had enough Bushes in there.


BLITZER: Highlights from some of the other Sunday morning talk shows here on "Late Edition," the last word in Sunday talk.

And don't forget, coming up right at the top of the hour, right after "Late Edition," a special live "Fareed Zakaria: GPS." He'll focus in on the crisis in Gaza and what it means for the region. Right at the top of the hour, "Fareed Zakaria: GPS," only here on CNN.

We'll have much more with our political panel, including Caroline Kennedy and the transition to power. "Late Edition" continues after this.


BLITZER: Welcome back. We're talking politics with CNN's Ed Henry, Gloria Borger, and The Hotline's Amy Walter.

Gloria, Caroline Kennedy -- you know, the AP's suggesting that it's virtually a done deal, that the governor, David Paterson will name her to replace Hillary Clinton in the U.S. Senate.

BORGER: I think, when you look at the choices before him, it probably is pretty much of a done deal. This is all about somebody not only who he can put in that seat now but who can run in two more years and raise the money and help him raise money. So she'll have a different power base than he will. They won't intersect that way. He can raise his money; she can raise her money.

I think, however, her rollout has been so abysmal, Wolf, that a lot of people are, kind of, scratching their heads and saying, was this the right way to introduce Caroline Kennedy to the American public? And most people are saying no.

BLITZER: Yes, a lot of criticism coming in, not just from Republicans but from a lot of Democrats.

WALTER: Right. I mean, the whole question is not whether she has the qualifications for this office but whether she can be a good candidate in this position. So, it's doing the -- first of all, dealing with the New York press, which it seems, every day, there's another story coming out. They want more answers from her; they're not going to get them, and so they're going to press even harder; and going and doing the retail politics, which we haven't seen her do yet.

If she has the ability to go out there, make the case to voters, I that will help her a great deal.

But I think, for Democrats, the concern is, she may be a very good candidate on paper -- and the money, of course, very important; how she translates in 2010; who knows what the political environment's going to look like -- and obviously Paterson is on the ticket, too, so he needs her to help him.

BLITZER: Yes, he's going to be looking out for his own political self-interest, as he should, no doubt about that.

You know, Ed Henry, this has been a difficult issue for the Obama transition to try to deal with. Have they actually said anything publicly about this New York state Senate seat?

HENRY: They've said very little, because you're right; it's a delicate situation. They want to keep to the mantra of one president at a time, both -- not just on policy but politically.

He doesn't want to be using political capital right now, as Gloria was saying before. She's right that Caroline Kennedy's rollout has been abysmal.

I think the good news, though, is, number one, you mentioned Barack Obama. In the days ahead, he could be a very strong advocate for her, especially if she does get this.

And in 2010, let's face it, she went to bat for him, big time, in getting Ted Kennedy's endorsement of Barack Obama at a pivotal time in the Democratic presidential primaries. He could return the favor in 2010. That could be a big plus.

And, number two, there was another woman in New York, very famous, eight years ago. You'll remember her, Hillary Clinton. A lot of people were saying, early on, the rollout is awful; does she have her own political ability; she's never run for anything.

And she went out there and went out in the (inaudible) went into upstate New York, the area you know well, Wolf, Buffalo, Rochester, everywhere else, and really worked hard for it.

Caroline Kennedy has not shown that ability just yet, but she has time, if she follows the Clinton model, to potentially get back on her feet, if you will, and really make a go of this.

BLITZER: And very quickly, Amy, who's going to be the next senator from Minnesota, the incumbent, Norm Coleman, or the challenger, Al Franken?

WALTER: Well, the canvassing board meets Monday, and it looks like they're going to say that Al Franken has won this election, at something like a 225-vote lead; the Coleman campaign saying, we're going to go and take this to court.

But in looking at some of the analysis that folks have done, it's going to be very hard for Norm Coleman to overturn this. And indeed, we may have, now, the 59th Democratic senator, assuming that, in Illinois, there is a Democratic senator.

BLITZER: I want more final thoughts from all of you, but I'll take a quick break. More coming up with our political panel, right after this.


BLITZER: Gloria Borger, what are you looking for to happen this week, here in Washington?

BORGER: Well, of course, we have to see what happens with Roland Burris in the Senate, whether it's "Katy, bar the door." And then I'm looking, Wolf, to see if there's a different tone developing in Washington. Barack Obama is going to meet with Republicans. We'll have to see how that meeting goes and what the stimulus package looks like.

BLITZER: Amy, what are you looking for?

WALTER: Yes, and I'm absolutely looking for that, whether this idea of we're going to all come together; this is a different kinds of politics; change is in the air -- will we see a change in the way that Washington works?

We already know that Barack Obama wants to change the way the White House works.

BLITZER: I know Ed Henry's looking forward to getting back to Washington after two weeks in Hawaii...


... a couple days in Chicago. You're coming home, Ed. How does that feel?


HENRY: It feels wonderful to come home, Wolf. I still miss Hawaii, though, I have to admit. I'm going to be looking closely at the meetings, tomorrow, Barack Obama will have with Democratic and Republican leaders on the Hill.

How quickly can the stimulus bill get done? He may face some hurdles there.

And one last thing, in case you don't have me on next week: We're going to miss you on Sunday mornings. John King is going to knock it out of the park. We wish him well. But you set a very high standard on Sunday mornings, Wolf.

BLITZER: Well, next week, we're going to have the vice president of the United States, Dick Cheney. He'll be among my guests next week, here on "Late Edition."

Ed Henry, thanks very much.

Gloria and Amy, thanks to you guys.

Happy new year to all of you, and to all of our viewers out there in the United States and around the world. And that is your "Late Edition" for this Sunday, January 4th. Please be sure to join me next Sunday, 11:00 a.m. Eastern, for the last word in Sunday talk.

Remember, I'm in "The Situation Room," Monday through Friday from 4:00 p.m. to 7:00 p.m. Eastern. Thanks very much for watching.