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"Face the Nation" transcript: January 8, 2012

Below is a rush transcript of "Face the Nation" on January 8, 2012, hosted by CBS News chief Washington correspondent and "Face the Nation" anchor Bob Schieffer. The guests are: Defense Secretary Leon Panetta; General Martin Dempsey, chairman of the Joint Chiefs of Staff; and Sen. John McCain, R-Ariz.

Click here for links to transcripts from earlier broadcasts.

**RUSH TRANSCRIPT**

SCHIEFFER: And good morning again. Joining us for their first Sunday morning interviews in the jobs they now hold, General Martin Dempsey, the Chairman of the Joint Chiefs of Staff, been on the job now about four months, and the Secretary of Defense, Leon Panetta. Gentlemen, thank you both for coming. Yesterday, you outlined not only a reduction in the size of our military forces, but really a whole new strategic idea of what we want our military to do. This is obviously going to be one of the major issues of the campaign, and it should be. But look at what Mitt Romney said just Friday morning about it.

VIDEO CLIP

MITT ROMNEY: Yesterday he announced a major program to reduce the capacity of our military. Inexcusable and unthinkable and it must be reversed. We have to protect our military. (APPLAUSE)

END CLIP

BOB SCHIEFFER: So that's just the first in a series of statements that have been coming from the Republican side. So what about that, Mr. Secretary?

SECRETARY LEON PANETTA: Well, I-- you know, I think this country has to deal with the reality of the situation that we're confronting. We're coming out of a decade of war. We're facing a huge budget crisis in this country. The Congress said to us that we have to reduce the defense budget by $487 billion. And I think the question isn't whether we're going to do this, the question is how. And that's something that frankly everyone is going to have to face.

BOB SCHIEFFER: One of the critics said this is not a strategy with a budget, it's a budget looking for a strategy. Is that overstating it?

SECRETARY LEON PANETTA: Well, clearly, we face the constriction of having to reduce the budget by almost a half a trillion dollars. The issue we had to face is-- do we do this by simply cutting across the board as we've done in the past in this country and created a hollow force, or do we develop a strategy as to exactly the kind of force we need for the future? And we decided we have to develop a strategy. I work with the service chiefs, with General Dempsey. And we developed a strategy that said it is going to be leaner, it is going to be smaller, but it has to be agile, it has to be adaptable, it has to be flexible, quickly deployable, and it has to be technologically advanced. That's the kind of force we need for the future.

BOB SCHIEFFER: General, let me ask you this as a military man. You know, we have always said in the past we had to be ready to fight two ground wars at once. Basically, the strategy you outlined and that the Secretary has outlined in this new policy envisions that not happening again. Are you concerned that if, I mean and we all hope it doesn't happen again, but there are no guarantees in this world. If it should happen again-- what do we do?

GENERAL MARTIN DEMPSEY: Well actually, I think it will happen again. And I didn't-- we didn't rule out a strategy that suggested that we wouldn't be able to more than one thing at a time. In fact, we were pretty adamant that we must be able to do more than one thing at a time. And by the way, not limit ourselves to two. I mean, the threat and the environment in which we find ourselves in this decade of the 21st century suggest to us that it's likely to be more than two. That-- so back to Secretary Panetta's point. This isn't about sizing ourselves against two particular scenarios. This is about building a force that is capable of doing more than one thing at a time, that has the leadership, the manning, the equipping, the personnel, the readiness to be able to provide options to the National Command Authority. And one other point, it's-- I think it may not have gotten the emphasis that it needed to yesterday, but we've learned an enormous amount over the last ten years about how to wage war. And it's not just in the traditional way, it's other capabilities that have, that have come into the force. It's capabilities of special operating forces. It's I.S.R. in a way that was unimaginable ten years ago. It's cyber. And so what we're looking to do here is not constrain ourselves to a two-war construct, but rather build a force that has the kind of agility the Secretary mentioned, that is a learning organization that will adapt itself to what it confronts it for the nation.

BOB SCHIEFFER: Are you worried, Mr. Secretary, that our adversaries might misread this? Because basically what it is talking about is increasing our presence in the Pacific. Are we going to just lead the Middle East to run itself? What will people in the Middle East think when they-- when they see our new strategy?

SECRETARY LEON PANETTA: I think the primary message to the world is that the United States is going to remain the strongest military power in the world. This strategy is going to give us the flexibility to continue to remain the strongest military power in the world. Yes, we have to prioritize in terms of the Pacific and the Middle East. Yes, we have to have a presence elsewhere in the world. Yes, we have to develop and invest in new technologies and new capabilities. But the bottom line is, when we face an aggressor, any place in this world, we're going to be able to respond and defeat them. And that's the lesson everybody ought to take home with them.

BOB SCHIEFFER: General, you know, some people would argue that we already have an army that's too small to do the missions that we've assigned to it. And, you know, when we were in Iraq and in Afghanistan at the same time, people talked about we were just wearing the army out, that we were having to send people into battle without the proper amounts of rest and all that sort of thing. Now it is getting even smaller. Are you concerned about that?

GENERAL MARTIN DEMPSEY: Well, you do know I was the Army Chief for a period of time...

BOB SCHIEFFER: I do know that.

GENERAL MARTIN DEMPSEY: ...and of course, we're always concerned about the pace at which we utilize the force. On the other hand, the demand is going down for a long-protracted stability operation in Iraq and Afghanistan. And I know that both while I was the chief and I know that what General Ray Odierno is doing now is taking a look at how to adapt the force. This-- this is the point. We're at a strategic inflection point, where we find a different geopolitical challenge, different economic challenges, shifting of economic and military power. And what we're trying to do is to challenge ourselves to respond to that shift and to react to that strategic inflection point and adapt ourselves. And so I suppose I would say of course I'm worried. But we do have a rather significant, capable guard and reserve component. And we do have an active component that has learned a lot over the last ten years. So if I take the template of 2001 and apply it now, I might have to come to that conclusion. What we're trying to do is break that template and think about different ways of accomplishing the task to give more options to our nation's leaders.

BOB SCHIEFFER: Mr. Secretary, let's talk a little bit about Iran. That is getting a lot of attention out on the campaign trail. Mitt Romney says we cannot tolerate a nuclear Iran. Ron Paul, at the other end says we just need to be nicer to them. We have put these big sanctions into place. And now the price of oil has shot up to over $100 a barrel again. It's pretty clear that we in the West are going to pay a price ourselves for having to impose these sanctions. Do you have any indication that that's beginning to work, that that's causing the Iranians to back off this idea of producing a nuclear weapon, if in fact, do you think that's what they're trying to do?

SECRETARY LEON PANETTA: I think the international strategy here, and this really has been an international strategy to apply sanctions, to apply diplomatic pressure on them, to try to convince Iran that if, you know, they want to do what's right, they need to join the international family of nations and act in a responsible way. I think the pressure of the sanctions, I think the pressure of diplomatic pressures from everywhere -- Europe, United States, elsewhere-- is working to put pressure on them, to make them understand that they cannot continue to do what they're doing. Are they trying to develop a nuclear weapon? No. But we know that they're trying to develop a nuclear capability. And that's what concerns us. And our red line to Iran is do not develop a nuclear weapon. That's a red line for us.

BOB SCHIEFFER: Rick Santorum says we should already be making it known to them and the rest of the world that we're planning an attack to take out their nuclear facilities. And that we should let them know about that right now. What about a military reaction right now?

SECRETARY LEON PANETTA: Well, you don't take any option off the table. I think that's extremely important. Don't take any option off the table. But the responsible thing to do right now is to keep putting diplomatic and economic pressure on them to force them to do the right thing. And to make sure that they do not make the decision to proceed with the development of a nuclear weapon.

BOB SCHIEFFER: General, how hard would it be to take out their nuclear capability, if in fact we decided to do that -- this is not just going in there and dropping one bomb on one building.

GENERAL MARTIN DEMPSEY: Well, I'd rather not discuss the degree of difficulty and in any way encourage them to read anything into that. But I will say that-- our-- my responsibility is to encourage the right degree of planning, to understand the risks associated with any kind of military option-- in some cases to position assets, to provide those options on-- in a timely fashion. And all those activities are going on.

BOB SCHIEFFER: Could we, if we had to, without using nuclear weapons ourselves, take out their nuclear capability?

GENERAL MARTIN DEMPSEY: Well, I certainly want them to believe that that's the case.

BOB SCHIEFFER: Well, is it?

GENERAL MARTIN DEMPSEY: I absolutely want them to believe that that's the case.

BOB SCHIEFFER: Mr. Secretary, would you like to add anything to that?

SECRETARY LEON PANETTA: I think they need to know that-- that if they take that step -- that they're going to get stopped.

BOB SCHIEFFER: What about if they decide to block us off at the Straits of Hormuz?

SECRETARY LEON PANETTA: We made very clear that the United States will not tolerate the blocking of the Straits of Hormuz. That's another red line for us and that we will respond to them.

BOB SCHIEFFER: And we would be able to-- could they actually, General, do they have the capability to actually block off that waterway, which is, of course, where all the oil to get it out of that part of the world comes through?

GENERAL MARTIN DEMPSEY: They've invested in capabilities that could, in fact, for a period of time block the Straits of Hormuz. We've invested in capabilities to ensure that if that happens, we can defeat that. And so the simple answer is yes, they can block it. Of course, that is as well a-- we've described that as an intolerable act. And it's not just intolerable for us, it's intolerable to the world. But we would take action and reopen the Straits.

BOB SCHIEFFER: A lot of people, Mr. Secretary, say, "We ought to just tell the Israelis quietly, 'Look, if you need to take out that nuclear capability in Iran, go ahead. That'll be fine with us.'" What would happen if Israel does decide to take this matter into its own hands and what would be our reaction and response to that?

SECRETARY LEON PANETTA: I think I-- you know, our preference is that the international community, including Israel, ought to work together on this issue. We face -- we have common cause here. We're not interested in them developing a nuclear weapon. We are not interested in them proliferating violence throughout that region. We are not interested in them trying to assist in terrorism. We are not interested in them trying to destabilize governments in that region or any place else. We have common cause here. And the better approach is for us to work together. And not act--

BOB SCHIEFFER: But what if the Israelis did that?

SECRETARY LEON PANETTA: If the Israelis made that decision, we would have to be prepared to protect our forces in that situation. And that's what we'd be concerned about.

BOB SCHIEFFER: Let me ask you about Iraq. We still have 15,000, 17,000 civilians there, as I understand it. Are you confident that they're safe?

SECRETARY LEON PANETTA: We're confident that we have an Iraqi government and an Iraqi security force that is capable of dealing with the security threats that are there now. The level of violence has been down. It's been down for a long time. And even though we've had these periodic acts of violence, that's something we've experienced there for a long time. But the bottom line is that the Iraqis can provide good security and that our people can be secure in what we they're doing there.

BOB SCHIEFFER: But I mean, the fact of the matter is, we've had over 100 people killed just this week there, have we not? As this-- these various attacks have come about, and...

SECRETARY LEON PANETTA: Bob, you're right. We're going to see those kinds of acts of violence take place. But when you look at the level of violence overall, it is down and it has been down, mainly because the Iraqis have been able, effectively, to develop good security. And that's important.

BOB SCHIEFFER: Let me ask you both this question. And I'll start with you, General. What is it right now in the world -- is it North Korea, is it Iraq, is it Iran -- what is it that worries you the most right now?

GENERAL MARTIN DEMPSEY: I-- you know, I think you've articulated--

SECRETARY LEON PANETTA: All of the above. (LAUGH)

GENERAL MARTIN DEMPSEY: Yeah, that's right, all of the above. (LAUGH) Do I have to pick one of those? No look, I think that's what worries me is that, because the conversation that we're having, this year, about changing strategy and budget problems, that there may be some around the world who see us as a nation in decline, and worse, as a military in decline. And nothing could be further from the truth. And that miscalculation could be troublesome in, particularly in the three areas you describe, but it could be-- it could cause even our close partners to wonder what kind of partner are we? So what I'd like to say right now is we're the same partner we've always been, and intend to remain that way.

BOB SCHIEFFER: Secretary?

SECRETARY LEON PANETTA: I think the main message that the world needs to understand is: America is the strongest military power and we intend to remain the strongest military power and nobody ought to mess with that.

BOB SCHIEFFER: All right, well gentlemen, I want to thank you very much for being with us this morning. And we'll be back in one minute with Republican Senator John McCain.

(COMMERCIAL BREAK)

BOB SCHIEFFER: And back now with Sen. John McCain who today is kind of our one-size-fits-all kind of guest, he has just endorsed Mitt Romney and of course he is the Republican of the most influence on the United States Senate, I would say, on defense policy. I'll just ask you the general question, what's your reaction to what you just heard?

SENATOR JOHN MCCAIN: There's no doubt that savings have to be made in defense, personnel costs, entitlements they're kind of a microcosm of the overall problems we face in these areas. I have obviously been a strong advocate of these, eliminating these terrible cost overruns, it's really a culture of corruption at the Pentagon on cost overruns of these weapons systems but I'm very worried about ignoring the lessons of history. After World War Two there was never going to be another land war. After Vietnam we ended up in a quote hollow army. But I understand these savings have to be made but I am more worried about the perception in the world of what the United States is doing. Secretary of Defense Panetta mentioned Iraq. In all due respect, Iraq is unraveling, it's unraveling because we did not keep residual forces there. Because the President of the United States pledged to get out of Iraq and we could have kept a residual force there and kept some stability. And instead it's unraveling, and Iran's influence is increasing and there's every possibility you could see a very chaotic situation there.

BOB SCHIEFFER: Do you think there's a civil war coming there?

SENATOR JOHN MCCAIN: I think there's clearly an unraveling going on which could eventually lead basically into three different kinds of states in Iraq. We needed to keep residual force there and that was what the Bush Administration envisioned and that is what we should have done and we never gave them a number until, in the words of General Dempsey, the numbers cascaded down to 3,500. The Iraqis were ready to deal on the issue. This administration did not give them a number and so what the perception is now, particularly in that part of the world, is that the United States is weak and that we're withdrawing and that is also having its effect in other places, including emboldening Iran. Leading from behind is not what this world needs and we still do have the best military in the world, we still do have the most efficient and capable ways of defending the nation.

BOB SCHIEFFER: Let me just ask you, you heard Sec. Panetta say he's confident that there's an Iraqi army in place that could protect those 15,000-17,000 Americans who are still there. Are you confident that those people are safe?

SENATOR JOHN MCCAIN: Of course not...

BOB SCHIEFFER: And what would happen? Do we have to go back?

SENATOR JOHN MCCAIN: I think that we would have to withdraw them. Look what Secretary Panetta may not understand, and I have great admiration and respect for him is that the situation is unraveling. The Vice President of Iraq is now hiding out in Erbil. There is militias and death squads operating. There is a breakdown in the Iraqi government and there will be increased tensions on the border between the Kurdish areas and Iraq and all of these could have been avoided if we had led rather than followed. In Libya all we had to do was lead and we would have prevented thousands of casualties of brave young Libyans who gave their lives because we didn't use all of our assets. Syria, we needed to lead, we needed to encourage those people. Finally, the biggest mistake that's been made in recent history was when a million and a half Iranians were demonstrating in the streets of Tehran, chanting, "Obama, Obama are you with us or are you with them?" And his response was" I don't want to jeopardize my chances to negotiate with Iran." We are paying a very heavy price.

BOB SCHIEFFER: Let's talk a little bit about politics out on the trail. Last week, of all things you endorsed Mitt Romney and I have to say I've always known you have a pretty tough hide Senator McCain, but after some of the things you all said in 2008, I mean, look here... (VIDEO CLIP)

BOB SCHIEFFER: Well, who knows, he might ask you to be Vice President?

SENATOR JOHN MCCAIN: Look, you can run clips of Reagan and Bush back in 1980 and get the same thing. These are spirited discussions and debates.

BOB SCHIEFFER: Why did you decide to endorse him? And so early?

SENATOR JOHN MCCAIN: I think that by far he's the best qualified to lead. I admire him, I admire his family, I admire his values. Look, after the 2008 campaign was over, no one worked harder on behalf of my campaign than Mitt Romney did. You put these things aside just like Reagan and Bush did and of course they're spirited and of course they should have sometimes heated discussions, but after it's over we share the same principles, values and view of the future of this country.

BOB SCHIEFFER: Some of the other candidates have said some unkind words about you recently. Rick Santorum said that you didn't understand torture, you who spent a long time in a North Vietnamese prison camp. Could you find yourself endorsing him if he wound up with the nomination?

SENATOR JOHN MCCAIN: I will endorse the nominee of the party but I don't have any response to Mr. Santorum's allegation that I don't understand torture. We do have a difference and I do with Newt as well on this issue of earmarks which exploded during that period of time. In Senator Tom Coburn's words, earmarks are the gateway drug to corruption.

BOB SCHIEFFER: Alright, Senator thank you so much for being with us we really appreciate it.

(ANNOUNCEMENTS)

BOB SCHIEFFER: Finally today, well, what have we learned in this campaign so far? Mainly that money is still the most powerful force in American politics and that the internet has made negative ads more powerful than ever. Take the case of Newt Gingrich. He zoomed to the top of the polls until Mitt Romney and Ron Paul dumped the load of negative ads on him. Down he went. The Romney people were saying Newt's fall wasn't all their doing. The ads ran only in Iowa and Gingrich's popularity also went down in New Hampshire and South Carolina too. Well, that's not quite right. The ads were seen in those states and everywhere else. Not once but over and over on cable shows and websites and then hashed out on blogs and Twitter and Facebook and all the places people get their news today. When the Berlin Wall fell, I remember writing that in the television age, there were no secrets on the other side of the tracks. People in the East could see a better way of life in the West on television and they wanted it and the wall came down.

In the age of the internet, we see not only just beyond the tracks but over the mountains behind the tracks, and behind the house, and under the bed. A television ad runs in Iowa and in seconds it's being seen in Bangor, Maine and Waco, Texas. This is probably better overall but not always. Social media has redefined the idea of privacy. Everything is out there now. And I can't get very excited about extending the reach of negative ads. But as a friend of mine who used to work here once said, "That's the way it is."

That's it for us today. Join us next week when Jodi Kantor, author of the explosive new book, The Obamas, will join us on FACE THE NATION and look for us on the web on Wednesday for our new midweek FACE THE NATION extra, FACE TO FACE at www.cbsnews.com/facethenation.

We'll see you tomorrow morning from New Hampshire on CBS THIS MORNING.

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