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THE SITUATION ROOM

Investigating the Bush Administration; Obama Stimulus Plan; Senator Leahy Interview

Aired February 14, 2009 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


WOLF BLITZER, CNN HOST: A high-ranking senator calls for an investigation of possible wrongdoing by the Bush administration. He calls it a truth and reconciliation commission, but could it lead to prison for former administration officials? Senate Judiciary Committee Chairman Patrick Leahy joins us this hour.

Also, President Obama's economic recovery plan, is it the right medicine for an ailing nation? I'll ask Republican Senator Lindsey Graham, who finds it a tough pill to swallow, and the president's top economic adviser Larry Summers, who says it's the prescription the country needs.

Plus, a reality check from a top economic expert. And the commander of cool, and the first lady of vogue, the Obama style is getting noticed. We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Nobody's above the law. And if there are clear instances of wrongdoing, that people should be prosecuted, just like any ordinary citizen. But that generally speaking, I'm more interested in looking forward than I am in looking backwards.

(END VIDEO CLIP)

BLITZER: President Obama may have his sights set on the future, but some say there are dark secrets in the not-so-distant past that must be exposed to the light of day. Did the Bush administration go too far with some of its most controversial policies? A leading lawmaker wants to appoint a unique commission to find out.

(BEGIN VIDEOTAPE)

And joining us now, the chairman of the Senate Judiciary Committee, Senator Patrick Leahy of Vermont.

Senator, thanks very much for coming in.

SEN. PATRICK LEAHY (D), VERMONT: Good to be with you, Wolf.

BLITZER: You caused some ripples this week. You recommended that there be a so-called Truth Commission to look back on some of the more controversial policies of the Bush administration over eight years, including the firing of those U.S. Attorneys, allegations of torture, rendition, the warrantless wiretaps. Do a little historical review. And President Obama was asked about your proposal at his news conference earlier in the week and he said this. Listen to this.

OBAMA: So, I will take a look at Senator Leahy's proposal, but my general orientation is to say, let's get it right moving forward.

BLITZER: All right. What did you think when you heard him say that?

LEAHY: Well, I wasn't surprised by the answer. The president was speaking, as he should be speaking, about the stimulus package, and how he wanted to get that through, put people back to work. That was what he was concentrating on. We are all concentrating on it.

But I want to raise this point. I will sit down with the president, I will talk to him about it. Some people want to just go back and prosecute, try to find as many people as you can prosecute for the illegal activities of the last administration. We can take 15 years before we'd ever get to the bottom of things doing that.

Others say, just forget it, which I think would be a mistake. Mine is sort of a middle ground. I'm saying, let's have this truth commission. People could come forward, speak freely. They won't be prosecuted unless they commit perjury and lie. But find out why orders were given for illegal wiretapping, why orders were given for the prosecutions that violated Justice Department policy and on and on, the whole litany that you went through earlier.

We've done some of this at the committee level. As a result, a former attorney general was forced out of office. Half a dozen of his people were forced out of office, but let's get the answer. Everything is done. And then look for it.

BLITZER: Your ranking member, Senator Arlen Specter, your friend, the ranking Republican of the Judiciary Committee, he was asked about your proposal. And he said, "If every administration started to re-examine what every prior administration did, there would be no end to it. This is not Latin America." That's a pretty strong statement for him.

LEAHY: Well, you know, I like Arlen Specter, but of course, even during the Eric Holder hearings, he talked about all the investigations that he conducted of the Clinton administration after the Clinton administration left office. So he's certainly been involved in those. I'm not doing this to humiliate or hurt somebody. I just want -- we all know the number of illegal things were done. Let's do like Frank Church did years ago, when the FBI was spying on war protesters. Let's find out the illegal things that were done, put in checks and balances so they won't be done again, either by the Obama administration or the next administration.

But if you do find there was criminal wrongdoing underway, why not do what John Conyers, the Chairman of the House Judiciary Committee, or Nancy Pelosi, for that matter, the Speaker says - the Speaker of the House, go ahead and file criminal charges if someone violated the law. No one should be above the law. LEAHY: Well, some criminal charges have been filed in the past. And we know Scooter Libby. Of course, President Bush then commuted his sentence. But we -- one worry I have, that may end up the way we go. But one worry I have is that when criminal prosecution has been brought, for example, to the tortured Abu Ghraib, it's always the least powerful people way down the chain of command, the least powerful people who get nailed. Those who are actually making the orders, they tend to get off scot-free.

I want to find out how high a level this went. And I think this is probably the only way you're going to find out, and then put in steps so that it doesn't happen again. I'm not on this as any kind of vendetta. I just want to make sure that the United States never makes these mistakes again.

BLITZER: What about if those White House officials who would be called to testify before this Truth Commission refuse to testify and said, you know what, I'm not coming. We've already had Karl Rove not willing to testify because the White House consul under President Bush said that would be confidential conversations between you and the president.

LEAHY: I think if somebody's been involved in illegal activity, they'd be wise to come before a commission like this, because enough people will come forward and testify. And if there are people at a higher level did something illegal, refused to testify, they don't get immunity, but the testimony of the other people can then be used against them in a prosecution.

I think the reason these things have worked, for example, in some of the civil rights matters in this country is because people know that if they do come forward, they clean the slate. They don't come forward, they face potential prosecution.

BLITZER: Because that was the history in South Africa. And I take it, you've modeled your proposal on the post Apartheid Truth and Reconciliation Commission down there? Is that right?

LEAHY: Well, that's one I've looked at. But I've also looked at - we've done it in the South in this country in areas of civil rights abuses that took place during the '60s and cleared the air that way.

I just want to make sure no administration, whether this administration or the next administration does the same kind of illegal things. You know, I'm a former prosecutor. My usual instinct is to go let's just go arrest somebody, prosecute them, and clear it up that way. But we could be 15 or 20 years down that road. And we'd probably end up with all the small fries. I want to make sure that nobody in a position of authority makes these kind of decisions in the future, no matter whether we have a Republican or a Democratic president.

BLITZER: Senator Leahy, thanks very much for joining us.

LEAHY: Good to be with you, Wolf.

(END VIDEOTAPE)

BLITZER: President Obama's economic recovery plan, it's massive and ambitious, but will it do the trick?

(BEGIN VIDEO CLIP)

SEN. RICHARD GRAHAM (R): We've lost the focus. We're throwing everything but the kitchen sink in this bill and not focusing on creating jobs.

(END VIDEO CLIP)

BLITZER: Republican Senator Lindsey Graham is here to explain why he thinks it's the wrong prescription. Team Obama insists it will create jobs and turn the economy around, but when? I'll ask the president's top economic adviser, Lawrence Summers.

Plus, going green while the economy drowns in red ink. Can it be done? The White House Energy and Climate Director is here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: What I've been concerned about is some of the language that's been used, suggesting that this is full of pork, and this is wasteful government spending, so on and so forth. First of all, when I hear that from folks who presided over a doubling of the national debt, then you know, I just want them to not engage in some revisionist history. I inherited the deficit that we have right now and the economic crisis that we have right now.

(END VIDEO CLIP)

BLITZER: President Obama tells Republicans and others, their economic theories got the United States into this financial mess, so it's time for change. So what is the Republican Senator Lindsey Graham of South Carolina think of the plan to fix the economy in its current form?

Senator Graham is joining us now from Capitol Hill.

Senator, thanks very much for coming in.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Thank you.

BLITZER: If someone said to me over the past few weeks, you know what, the president is going to reach out to moderate Republicans, mavericks, I always assumed the two senators from Maine, Olympia Snowe and Susan Collins, would be onboard. Arlen Specter, he often goes with the Democrats on sensitive issues.

But I always assumed that John McCain, a maverick, and Lindsey Graham, probably, would be there as well. But the two of you came out swinging. You hate this deal. Why? GRAHAM: Well, number one, it started in the House very poorly. This bill was not written by a bunch of economists focused for creating jobs written by House appropriators with the attitude we won, we write the bill. You couldn't pick up one Republican in the House and you lost 11 Democrats. You lost more Democrats than you picked up Republicans. That's not bipartisanship.

John and I had an alternative that was $415 billion that had tax cuts for business, and tax cuts for individuals. It had spending on food stamps and unemployment insurance benefits and infrastructure projects. The compromise between $415 billion that every Republican voted for in the Senate, in 790, whatever the number is, is not a bipartisan compromise.

So we're disappointed in the process and the substance.

BLITZER: What...

GRAHAM: This bill creates more new government than it does new jobs.

BLITZER: What does it say to you about the new president of the United States?

GRAHAM: I think what happened in the House kind of threw -- I think he should have probably written the bill but the House started with a spending bill that was unfocused on creating jobs. Twenty percent of this bill hits the economy in the first year. If it can't come out within a year, or 18 months, it shouldn't be in this bill.

There are a lot of programs in this bill that are policy changes, they're unrelated in creating a job, and I think we've lost the focus. We throw in everything but the kitchen sink in this bill and not focus on creating jobs.

BLITZER: He says, he says, the president, don't let the perfect be the enemy of the good.

GRAHAM: Right.

BLITZER: Isn't this better than nothing?

GRAHAM: No. This was worse than nothing. This is a trillion dollars over the next 10 years. And when the economy gets better, the interest on this bill is about $400 billion. I think it would have been better to start with housing. It would have been better to start with banking. We've taken about $800 billion in the name of stimulus to grow the government, not create jobs, and we've done nothing about the underlying problems with housing and banking.

You're throwing good money after bad until you fix the banking problem and the housing problem. So I think it had been better to do nothing on stimulus, start with banking and housing where you have a real chance to jump start the economy, then do stimulus.

BLITZER: Listen to what the president said about what this will do. Listen to this. GRAHAM: OK.

(BEGIN VIDEO CLIP)

OBAMA: Governments are sealing -- seeing more people filing unemployment claims, signing up for Medicaid, requesting government services. And all the while, people are spending less, earning less, and paying less in taxes. So across the country, states need help. And with my plan, help is what they will get.

(END VIDEO CLIP)

BLITZER: Doesn't South Carolina need some help?

GRAHAM: Yes. But there's only one taxpayer. This is not money we found under a tree in Washington. The money we're sending back to the states came out of the same wallet that the money going to the states came from. So, yes, South Carolina needs help. I'm all for infrastructure spending. But it's got to be shovel ready.

I'm for helping people sign up for Medicaid. There's $90 billion in the bail. All you need to do is get people eligible for Medicaid in terms of new enrollees is $11 billion. I'm not for $75 billion slush fund for states that can be spent on anything they want to spend it on including budget problems because we've got our own budget problems and you're rewarding states who have done very little to trim up their own budget...

BLITZER: South -- yes.

GRAHAM: ... and punish states that have done things at home.

BLITZER: South Carolina will get money out of this bill.

GRAHAM: Yes.

BLITZER: Should South Carolina take the money?

GRAHAM: I think that, yes, from my point of view, I -- you don't want to be crazy here. I mean, if there's going to be money on the table that will help my state, but I've got a job to do up here, and that is to try to help people and not damn the next generation. We had a $415 billion package to help people who have lost their jobs, that cut taxes, that create new jobs. We've got a spending bill, not a job creation bill. And we're being all things to all people.

We've dug a hole for the next generation of young Americans they can't get out of. Total cost of this bill is over $1 trillion and it's not going to create jobs as much as it does throw government and when you send the money to South Carolina, that's not going to create a job for the national economy. It's going to help a bunch of politicians balance their books and not create jobs in South Carolina.

BLITZER: One final question. We're almost out of time, Senator.

GRAHAM: Yes. BLITZER: Where do you see yourself cooperating with President Obama down the road? On which issues -- because in the past you've worked with Democrats on comprehensive immigration reform.

GRAHAM: Yes.

BLITZER: On CAFE and finance reform. Where do you see...

GRAHAM: I -- I can give you...

BLITZER: What issues will you be his partner?

GRAHAM: Social Security. We can't do it without bipartisanship. And this bill is not bipartisanship. If this becomes the new definition of bipartisanship, we've lost our way. But he's going to need help from Republicans on Social Security and closing Guantanamo Bay, what to do with the detainees.

I think we can move them back into the United States as long as we're smart about it. He's going to need help on earmark reform, budget reform. He's going to need help on banking and housing. And I want to help him. I want him to succeed but this bill started in the House, it became a monstrosity of a spending bill. It has lost its focus in terms of creating jobs and I can't help him here and I'm sorry. But this is a bad deal to the American taxpayer.

BLITZER: Lindsey Graham is a Republican senator from South Carolina.

Senator, thanks for coming in.

GRAHAM: Thank you.

(END VIDEOTAPE)

BLITZER: Americans have started going green.

(BEGIN VIDEO CLIP)

OBAMA: I don't care whether you're driving a hybrid or an SUV, if you're headed for a cliff, you've got to change direction.

(END VIDEO CLIP)

BLITZER: But will worries about a red ink economy overshadowing concerns about the environment? I'll ask Carol Browner of the White House Energy and Climate Director.

Plus, the government is pouring money into the economy. How long will it take to turn things around? I'll ask Lawrence Summers, director of the White House Economic Council.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BLITZER: More than 90% of the jobs created by this plan will be in the private sector. 90%. And they won't be make-work jobs. They'll be jobs that lay the groundwork for a lasting economic movement. Jobs that put people to work today, preparing America for tomorrow. Jobs building wind turbines and solar panels and fuel-efficient cars, doubling our investment in clean energy, helping end our dependence on foreign oil.

(END VIDEO CLIP)

BLITZER: Our economic concerns are right now overshadowing concerns about the environment. Worried about red ink, will Americans stop going green?

(BEGIN VIDEOTAPE)

BLITZER: And joining us now from the north lawn of the White House, the assistant to the president for Energy and Climate Change, Carol Browner.

Carol, thanks very much for coming in.

CAROL BROWNER, WHITE HOUSE ENERGY & CLIMATE DIRECTOR: Thanks for having me.

BLITZER: Given the enormity of the economic crisis that the country is facing right now, millions of Americans are either losing their jobs or their homes or their life savings, how worried are you that this whole issue of energy and climate change is going to be pushed aside right now, given the other priorities?

BROWNER: Well, first of all, when we think about energy, we can think about doing things that will save people money, save the government money, save businesses money. And you know, obviously, everybody's looking right now for what are the efficiencies, what are the changes, what are the renewables that can be a part of our energy future going forward?

I mean, we don't have to, I think, stop thinking about changing our energy future, about energy independence, about energy security in these times. In fact, we need to think even more about those issues.

BLITZER: But people have -- their priorities right now are putting food on the table if you will, not necessarily buying a hybrid, or thinking green, as you say.

BROWNER: Well, that's right. People are very worried about their jobs, they're worried about putting food on their table, but they're also worried about how much they're spending on energy. And if we can get cleaner forms of energy, if we can get efficiencies, if we can, you know, use less energy to heat our homes, to heat and cool our office buildings, that's good for America.

BLITZER: There were accusations, as you know, during the eight years of the Bush administration that from the top down, they were suppressing some of the science as far as climate change is concerned. Since President Obama took office, have you reversed any of those decisions that were in place during the eight years of the Bush administration?

BROWNER: Well, virtually every decision that can be reviewed is under review right now. Some of them we've already indicated that we're going to take a second look. For example, California asked permission of the EPA to sell cleaner calls, to require the sale of cleaner cars. The Bush administration said no. The president has already asked the EPA administrator to review that and to make a decision based on the science and the law. BLITZER: With the price of a gallon of gas going down dramatically over the past year, how worried are you that people are going to go back to the old ways and just buy bigger cars and trucks and not worry so much about driving a more fuel-efficient vehicle?

BROWNER: Well, the good news is I just went to the auto show here in Washington, D.C. And more and more of the manufacturers are giving consumers real choices. They're giving them the size cars they want, they're giving them the family sedans they want, but they're giving them with greater and greater fuel efficiency.

One of the first things the president did was direct the Department of Transportation to adopt new car fuel efficiency standards, which will be good for the environment and good for energy independence.

BLITZER: But in the short-term, people are -- it looks like people are going back to their old ways. Is that a fair assessment?

BROWNER: Well, I think cars are an important part of how many Americans manage their daily lives. We have to take our kids to school, we have to drive to work, we have to get to the grocery store.

What we can do is to help make sure that the cars of the future are cleaner, that they're more efficient, and that it's all part of our plan to really secure our energy future, our energy independence and energy security.

BLITZER: Do you agree with Tom Friedman, "The New York Times" columnist and author, that at a time when the price of a gallon of gas is relatively low, the government should slap a huge tax on it so as to suppress the desire, the demand out there and make for a cleaner environment?

BROWNER: I don't think that's something that we're going to see in Washington, which is some big tax on gasoline. I think what we are going to see is a commitment to better technologies, to making sure that we're working in partnership with industry to find those new technologies, investments in research and development, so that we can get more out of an ounce of gasoline.

BLITZER: Carol Browner, thanks very much for coming in. Good luck.

BROWNER: Thank you.

(END VIDEOTAPE)

BLITZER: The president and Congress are racing to find a cure for the economy. And experts warn, there's no time to spare. (BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I fear that the economy is slipping away. We need to act aggressively and quickly.

(END VIDEO CLIP)

BLITZER: An economist weighs in on the stimulus package and the best way to create jobs and ease America's pain.

And Michelle Obama as a role model and trendsetter. A "Vogue" magazine editor takes us insid the First Lady's cover shoot. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: You didn't send us to Washington because you were hoping for more of the same. You sent us there to change things. The expectation that we would act quickly and boldly to carry out change. And that's exactly what I intend to do as president of United States of America.

(END VIDEO CLIP)

BLITZER: The president in Indiana, echoing his theme of change, especially an urgent need for an economic plan. But how soon might you benefit from it? I posed that question to Lawrence Summers, director of the White House National Economic Council.

LAWRENCE SUMMERS, WHITE HOUSE ECONOMIC ADVISER: You'll see the effects begin almost immediately. Layoffs that otherwise would have happened in cities in towns to cops and teachers won't happen. You'll see withholding schedules adjusted so that people have more money in their paychecks. You'll see orders go out for new roads, new bridges, new computers for hospitals. You'll start to see better maintenance of schools.

So things will happen very, very quickly.

BLITZER: So, so but...

SUMMERS: The effect will build, the effect will build over time. And Wolf, this is one thing people do have to recognize -- the president inherited a very, very difficult situation, a $1 trillion deficit, an economy that, frankly, was in freefall. And so while there will be clear impacts of this package that one will see almost immediately, we've inherited an economy that was programmed for substantial decline before the president got here.

BLITZER: In other words, when -- what month of this year would you tell us things are going to start to turn around?

SUMMERS: There's one thing I'm certain of -- that day will come much sooner with the president's program than it will come without the president's program. But I'm not going to hold out for you the prospect that it is imminent. Perhaps it will be towards the end of the year. Perhaps it will be early next year. Perhaps, if confidence takes hold quickly, it will be somewhat sooner.

But the situation that we've inherited is a very, very difficult one. And so the first step for policy has to be containing the damage, limiting the downturn, laying a foundation from which growth can resume. That's why the economic recovery program is so important.

That's why it has to be complemented with a financial recovery program as well. Because, you know, a weak economy hurts the financial system. A weak financial system hurts the economy. And so you've got to intervene in both ways. And that's what the president is going to do.

BLITZER: The housing market, clearly, one of the major causes of this economic downturn. There are some calling, as you know, for government-backed 4 percent, mortgage rates for homeowners out there. Are you onboard?

SUMMERS: Well, the president's going to be proposing a very comprehensive housing strategy that's going to have as its focus preventing foreclosures. It's going to have at its focus easing refinancings, promoting affordability of housing. And then I think it's frankly long overdue and offer some real prospects of containing the damage in the housing sector.

BLITZER: When does he do that? When does he going to do that?

SUMMERS: I think we've got to be very skeptical of any government- administered price. Some of the suggestions that have been made would involve literally the issue of some trillions of dollars of new federal debt. And that's probably a step further than is responsible for us to go to. But no question, within the next two weeks the president will be laying out his approach to housing.

(END VIDEOTAPE)

BLITZER: Meanwhile, what are outside economic experts saying about the plan to fix the economy?

(BEGIN VIDEOTAPE)

BLITZER: Joining us is Mark Zandi. He's the chief economist at Moodyseconomy.com.

Mark, thanks very for coming in. What's a better way to deal with this economic crisis. Cut people's taxes? Or spend government money given to the states to build infrastructure, roads, bridges?

MARK ZANDI, ECONOMIST: Well, I think you need both. The infrastructure spending has a bigger economic bang for the buck. It creates more jobs. But the problem is, you can't get it into the economy quickly. So I think you do need tax cuts. That doesn't have the same bang for the buck. It's not as efficacious, but you can get that into the economy quickly. So a plan like the current plan that has both tax cuts and spen spending increases, I think, is the best plan.

BLITZER: The Republicans say they want more tax cuts for the middle class, but only tax cuts for those individuals and families who actually pay federal income tax, but none for those that don't pay any federal income tax. Are the Republicans right?

ZANDI: Well, I think that would reduce the effectiveness of a tax cut, because people who are in lower income groups that, in fact, probably don't pay income tax, if they got the tax break, would spend it and would spend it very quickly. And that would raise the stimulus. So to make it more effective, I think it should go to lower income households who in fact don't pay income tax.

BLITZER: And they would presumably spend it very quickly. And that would help to stimulate the economy. That's the theory, right?

ZANDI: That's the idea. And I think it works. I mean, people who are in lower income groups, they're under more financial stress. If they get a dollar, they're going to spend that dollar and they're going to spend it very quickly. And that's exactly what we want to see right now.

BLITZER: What's wrong with just pumping money in that's going to create jobs right away? Why do you need to put into this legislation money that's going to create jobs two, three, four years down the road?

ZANDI: Well, a fair amount of the money is for jobs now, helping people who lose their jobs.

BLITZER: But a big chunk is only for two or three years down the road?

ZANDI: Yeah, that's right. But I think everyone does realize that this economy, it's not coming back quickly. So if it gets help in '09, that would be wonderful and great. But if it gets help in 2010 and 2011, it's going to need it then as well.

BLITZER: Some economists say this is a waste of money, a waste of time, and could be a disaster. They point to the Japan model in the '90s, when the Japanese government did a stimulus plan, and they pumped tons of money into their economy. And they say it was a lost decade for Japan, because it really didn't turn their economy around. Is there a parallel between what Japan went through in the '90s and what the U.S. is going through now?

ZANDI: Well, there's good lessons from the Japanese experience. What the Japanese did is they did their stimulus over a period of a decade. They took their time about doing it. They didn't try to stem the downturn right up-front with a lot of spending.

Moreover, they spent only on bridges and roads. And ultimately, they built so many roads and bridges that they literally were building bridges to nowhere. And that wasn't very effective.

So I think the lesson is, we need to have a plan that includes spending, tax cuts, help for people who are losing their jobs, aid to state and local governments, a diversified set of stimulus, and also do it up front and in a big way.

BLITZER: Bottom line, even though you were an adviser to John McCain during the campaign, you say support what president Obama is doing right now. You say that to members of the House and Senate.

ZANDI: I absolutely do. You know, I fear that the economy is slipping away. We need to act aggressively and quickly. This isn't a perfect plan by any stretch, but it is a good plan, a good enough plan. It will create jobs. And it will make a difference and we need to pass it quickly.

BLITZER: Mark Zandi, thanks very much for coming in.

ZANDI: Thank you.

(END VIDEOTAPE)

BLITZER: An election in Israel, an uncertainty for the Obama administration.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: President Obama looks forward to working with whoever makes up that next Israeli government in a search for lasting and durable peace in the region.

(END VIDEO CLIP)

BLITZER: Ahead, the president inherits a world of trouble in the Middle East and beyond.

Plus, from the White House to the cover of "Vogue." both president and Mrs. Obama are showing a lot of style.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: One of the great advantages of Michelle is she embraces being a mother, a wife. And she's got a lot of things to juggle. And she can sit down and shop and get a whole outfit online for $400.

(COMMERCIAL BREAK)

BLITZER: We've got the inside story on the new "Vogue" magazine, cover of Michelle Obama. That's coming up shortly.

But right now, let's take a look at the always dangerous situation in the Middle East. For the United States, the stakes are enormous. President Obama took office right after the latest round of fighting in Gaza. He's put the region very high on his agenda, but he faces some huge problems.

(BEGIN VIDEOTAPE) BLITZER: And joining us now is Patrick Tyler. He's the author of a new book entitled "A World of Trouble: The White House and the Middle East from the Cold War to the War on Terror".

Pat used to work for "The New York Times" and "The Washington Post." Thanks very much for coming in.

PAT TYLER, AUTHOR, "A WORLD OF TROUBLE": Delighted to be here. Thanks.

BLITZER: Your book looks like it's on President Obama's book shelf. We saw it behind him on that January 10th weekly radio address. Here's the question, what is the one thing, the most important thing you'd like him to take away if he were in fact to read your book?

TYLER: That any president who seriously wants to engage the parties and make progress on peace has to prepare the ground in a way that the constituencies in both countries, in all of the countries involved, in the Arab world, in Israel, and in the United States are engaged and part of the process, because they all have stakes in it. They all have potential conflicts with it. And their support is critical when the going gets tough, when terrorism breaks out, when those who want to oppose the peace process dig the claws in. So it's very difficult, it's very important for a president to pay attention to the politics in the full context.

BLITZER: You write that he inherits, President Obama, a major problem throughout the region. Let me read from the book. "Most distressing for America today and for a new American president is the task of untangling the policies of the past, of addressing the acute hostility that has developed toward a country once trusted as an honest broker." Do you believe, Pat, that President Obama can emerge as the so-called honest broker in trying to bring the Israelis and the Palestinians together?

TYLER: I think, yes. The simple answer is yes and for this reason. I think the Middle East is still a region where peoples, as a general rule, project their hopes on the United States. We are still the indispensable power. And so, any American president who comes in, and as President Obama has done right from the get-go, with his interview, with al Arabiya, attempting to change the tone, to talk about mutual respect. Now this is what the region is looking for. A way to engage with an American leader who they sense wants that role back, wants the mantle back.

BLITZER: Is he going to engage in what some are calling the kind of tough love that so many experts believe will be necessary to convince the Israelis, for example, to make the kind of difficult concessions they might have to make in order to achieve this so-called two-state solution?

TYLER: That's the $64,000 question. I believe that if you look at Obama's history as a candidate, as a thinker, as a person, where he's come from in his life and his appointment of George Mitchell, all the signs are is that they're going to lay a careful predicate on what they have to do, and then decide about the tough choices, who their partners are going to be. And that will determine a lot about how they proceed.

But yeah, that's an indispensable element is that notion of being willing to use pressure when pressure is required. And the parties want that from America. They just want it fairly.

BLITZER: Here's what you write about Bill Clinton. "He got close near the end of his term, but not close enough. Clinton exuded remarkable characteristics of empathy and understanding, but his approach was missing the most essential ingredients, trust that he would do what was necessary, unwavering principle, and political discipline." All right, explain what you meant.

TYLER: Well, I think that Bill Clinton may have been the smartest president we've had in the White House in a generation. But his great capacity for empathy put him in a position that he was absorbed and obsessed with the last person he talked to and their narrative.

He understood the Palestinian narrative. He understood the Zionist narrative in the last century. He didn't want to be the heavy in the negotiations, the one who, you know, put the pedal to the metal and the real pressure of forcing concessions from people. He wanted other people to do it, but he didn't know how to orchestrate it. And so there was a chaotic quality to it. An indiscipline to the way he proceeded and his negotiating style.

And then, as we know at the end, Wolf, instead of focusing on business, he got involved in that last week of his administration with a very ill-considered set of pardons, including for Mark Rich, which again debilitated his credibility in the region.

BLITZER: He blamed Yasser Arafat for missing an opportunity at success. Is that blame fair?

TYLER: I think history will apportion some of the blame on Arafat. It has to. It simply has to. But at the same time, I've often questioned why President Clinton decided to poison the well about his feelings about Yasser Arafat by calling Colin Powell, as he did on the eve of President George W. Bush's inauguration and saying he's a liar, he ruined my life, etcetera, etcetera. Why would a president who's that interested in peace poison the well with his successor? I think it's a puzzle about Bill Clinton's character.

BLITZER: Patrick Tyler's book is entitled "A World of Trouble: The White House and the Middle East: From the Cold War to the War on Terror." Pat, thanks for coming in.

TYLER: My pleasure.

(END VIDEOTAPE)

BLITZER: Here's a question, what might you and First Lady Michelle Obama have in common? You might want to compare your clothes to many of hers.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It's all J. Crew, it's all J. Crew, it's all one of her favorite resources is J. Crew.

(END VIDEO CLIP)

BLITZER: The "Vogue" editor at large, Andre Leon Talley reveals one of the first lady's favorite clothing brands and more. And wait until you hear other details of her fashion sense. She's on the cover of "Vogue."

Meanwhile, fashionistas are also inspired by what the president is wearing.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Where's Obama?

MICHELLE OBAMA: He's in Florida.

UNIDENTIFIED MALE: He doesn't live with you?

M. OBAMA: No, he does live with me. He just went there for today.

UNIDENTIFIED MALE: He lives with you?

M. OBAMA: He lives with me, he does. Really.

(END VIDEO CLIP)

BLITZER: The First Lady on a visit this week to a school in Washington, D.C. We've been seeing a lot of Mrs. Obama. Next month, we'll be seeing more of her. She's gracing the cover of "Vogue" magazine.

(BEGIN VIDEOTAPE)

BLITZER: And joining us now, Andre Leon Talley. He's the editor at large at "Vogue" magazine. On the cover, we saw it on the website, Andre, a great picture of Michelle Obama, the First Lady of the United States. I see a broad smile. I read the article you wrote. Tell us about this photograph. Tell us about the First Lady.

ANDRE LEON TALLEY: Great, Wolf. It's great to be on your show. And I'm happy to talk about our First Lady. The cover, Annie Leibovitz wanted to evoke the real Michelle Obama. It's a cover about her warmth, which comes from within. It's not about her being a fashion icon. And we're not trying to put her on a pedestal and make her into a fashionista.

It's just the naturalness and the grace of Michelle Obama. It's who she is. What you see is what you get. And it all comes from her smile, her naturalness. You know, she's beautiful, she can wear anything. But the cover expresses the hope and the optimism that comes with the Obama administration and a new era.

BLITZER: It's -- she looks fabulous, and it's a great dress. Who picked out the dress? Did the First Lady pick it out?

TALLEY: Michelle.

BLITZER: Or did you guys?

TALLEY: The First lady picked out her dress from one of her favorite designers, Jason Wu. And she picked out the clothes inside from J. Crew, one of her favorite resources. I mean, in the days of first ladies like Jackie Kennedy, they couldn't shop online at J. Crew. One of the great advantages of Michelle is, she embraces being a mother, a wife. And she's got a lot of things to juggle. And she can sit down and shop and get a whole outfit online for $400.

Annie Leibovitz, who is the photographer, a fabulous photographer, as we know, she must have taken a lot of pictures, but I have another picture we saw on your website, in which you see the First Lady there, pen in hand...

TALLEY: Yes.

BLITZER: ...taking some notes on a legal pad, it looks like. People tend to forget, she is a trained attorney. She went to Harvard Law School.

TALLEY: Exactly. You have to realize that she has the best education. She grew up in Chicago. That was her home, her roots. And she's a lawyer, a trained lawyer. She's a community activist. And she's a very integrilligent woman.

The thing that impresses you most when you're in the midst of Michelle or with the president and Michelle is her clarity and her focus of her vision, of her goals, of goals for the White House. Her new ideas about entertaining, opening the White House seminars for children. You know, she wants to use the kitchen as the classroom for young, urban kids to come and see how a kitchen works.

BLITZER: What about the outfit she's wearing in that picture on the couch. We see a sweater and her skirt.

TALLEY: It's all J. Crew, it's all J. Crew. It's all her favorite -- one of her favorite resources is J. Crew. She dressed her daughters in J. Crew for the inaugural. Those two girls had on lovely coats and matching accessories. It all came from J. Crew, which is, you know, one of the favorite resources for every American woman. She gets style at a price.

BLITZER: And you got to know her. You've known her for a while, right?

TALLEY: Yes, I've known her ever since I got to meet her at Oprah Winfrey's house in Santa Barbara.

BLITZER: When was that?

TALLEY: Oh, 2005 when she had her big legends ball. And the night before the ball, Oprah had a very impromptu dinner party, very impromptu at her home in the dining room. And she went to set me down. There was no place settings. And she said, here, you're going to sit here.

And on my right was Michelle Obama. On my left was Tina Turner. And I was so impressed with Michelle. It's not what she was wearing. I hadn't know her. I had never heard of Michelle Obama until I sat next to her. Then of course, I found out that she was the wife of Barack Obama. And she was just so incredible to talk to. She could talk about so many things. So when I got up from that table, it wasn't what she was wearing what I remembered. I remembered her as a human being.

BLITZER: Tell us one thing, Andre, about the First Lady that most of our viewers don't know?

TALLEY: One of the things about the First Lady is, when she was on the train coming from Philadelphia to Washington, the way Abraham Lincoln had done, with her family and her husband, her two daughters spent two hours in the children's train, decorating it to give their mother a surprise birthday party, because she was turning 45 that day. And the mother took the party over. And she was surprised. And she led all the kids in a stomp dance, singing acappella.

And to see Michelle dance on that train with her children around her, to see her daughters having so much, just giving in to that moment of fun was so important. And the first thing she said to me after the party was I just said to Barack this is nice. Well, who's going to clean up this mess? We can't leave Amtrak in this mess. So this was really a cue for all of us to get up and volunteer to pitch in, to pick up all the paper cups and all the streamers and all the party things. And we did. I think it's wonderful.

BLITZER: She's only the second First Lady ever to be on the cover of "Vogue" magazine. She's on the new cover. Michelle Obama. The subheadline "The First Lady the world's been waiting for."

TALLEY: Right.

BLITZER: Andre Leon Talley is the editor at large at "Vogue" magazine. Andre, thanks very much for coming in.

TALLEY: Thank you, Wolf, I appreciate it. Thank you very much.

(END VIDEOTAPE)

BLITZER: Hillary Clinton, by the way, is the only other First Lady ever to be on the cover of "Vogue." This First Lady was supposed to be the fashion icon as we all know in the White House, but now the president is catching some notice as well for his sharply tailored, often casual attire. What they're saying on the street. Plus...

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Some of the weekend wear has been a little bit questionable, but you know, I'm going to let the weekends be his.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

BLITZER: The First Lady has been described as a fashion icon, but what about the president? As CNN's Amy Holmes show us, his style may have some influence after all. Amy?

AMY HOLMES, CNN POLITICAL CONTRIBUTOR: Well, Wolf, as you know, it's been a heated week here in Washington, but President Obama is keeping his sartorial cool. From sharply tailored suits, crisp white shirts, and perfectly knotted power ties, President Obama like his wife is setting a new style bar.

(BEGIN VIDEOTAPE)

AMY HOLMES, CNN CONTRIBUTOR: I'm here with my boys, here at Evolve in Washington, D.C.

Jason, what's one word that can describe Obama's fashion?

JASON: Presidential.

HOLMES: Paul?

PAUL: Sartorial splendor.

HOLMES: Michael?

MICHAEL: Smooth.

HOLMES: The president's favorites are the two-button Hark Shafner (ph) Marks, made to order suits that retail at about $1,500.

On his first day in office, Obama made a controversial executive fashion decision.

UNIDENTIFIED MALE: The prestige for the president should wear (INAUDIBLE). It's the power in the wool. It's not the only thing (INAUDIBLE) commander in chief. It's the wool commander in chief.

HOLMES: And the commander in surf holiday pick.

Obama, shirtless, Hawaii, vacation. Should he do that again?

UNIDENTIFIED MALE: Yes, let the man swim. And there's probably a huge constituency in the United States that actually like that. HOLMES: Whatever the case, it couldn't be worse than this.

The question, of course, on everyone's minds, are brothers going to pull their pants up?

UNIDENTIFIED MALE: Well, look at guys like Jayzee and P. Diddy. He went from being a rap star...

HOLMES: And the blinged out... UNIDENTIFIED MALE: Right, totally blinged out to a fashion icon and now a major mogul, both of them. And look at them now that Barack is in the White House.

HOLMES: Is there one bit of advice you would give President Obama in terms of, you know, how to look sharp?

UNIDENTIFIED MALE: In case of our next ice storm, he needs a hat.

UNIDENTIFIED MALE: Check with Michelle first.

UNIDENTIFIED MALE: Some of the weekend wear has been a little bit questionable, but you know, I'm going to let the weekends be his. So if you need any advice, holler at your boy.

(END VIDEOTAPE)

HOLMES: So, Wolf, here's a fun fact I learned. Our very own Ed Henry gets his suits from Georgia Paris, the unofficial tailor to the president. That guy with the white, crazy hair. So between you, Anderson, and Ed, we have some very sharp dressers here at CNN. Oh, and we can't forget Ali Velshi.

BLITZER: Amy, thank you very much. Excellent points.

I'm Wolf Blitzer. Remember, we're in THE SITUATION ROOM weekdays from 4:00 to 7:00 p.m. Eastern, every Saturday at 6:00 p.m. Eastern right here on CNN and also at this time every weekend on CNN International.

The news continues next right here on CNN.