This is a rush transcript from "On the Record," Sept. 8, 2010. This copy may not be in its final form and may be updated.


    GRETA VAN SUSTEREN, FOX NEWS HOST: All right, so what's up? Is Secretary of State Hillary Clinton going a bit rogue? While today the president is in Ohio, pushing for more spending, Secretary of State Clinton has a big warning.


    HILLARY CLINTON, SECRETARY OF STATE: I think that our rising debt levels poses a national security threat. And it poses a national security threat in two ways. It undermines our capacity to act in our own interests and it does constrain us, where constraint may be undesirable. And it also sends a message of weakness internationally.


    VAN SUSTEREN: Joining us live is former secretary of state Henry Kissinger. Good evening, sir. And do you agree with the current secretary of state that our debt is a -- poses a possible national security problem?

    HENRY KISSINGER, FORMER SECRETARY OF STATE: I agree with Secretary Clinton that the deficit constrains our ability to act and probably keeps us from or may keep us from doing things that we would otherwise do and should do.

    VAN SUSTEREN: So how do we reconcile -- and maybe we can't reconcile -- on the one hand, we have the president saying we need to spend more, which creates more debt or more deficit, and we've got the secretary of state on the same day saying that it creates a possibility of a national security threat? How do we reconcile those two very serious problems?

    KISSINGER: Well, in the short term, we -- it will not have an immediate impact. But what will be needed is to review our international commitments and our foreign activities to see in what priority they should be conducted. That will be a major responsibility over the years ahead.

    VAN SUSTEREN: Why do you think the Chinese buy our debt? Is it because they think it is a good financial investment or because they like the idea of us owing them money and it has some sort of element of control?

    KISSINGER: Well, originally, they invested here because it was an element of stability and also because it created some obligations on our part, some appreciation on our part. But the impact of the financial crisis on China has been enormous in the sense that they used to think that we knew how to run the financial system. And now I think they have become much more cautious and probably have cut down their purchase of our debt to a significant degree.

    VAN SUSTEREN: Have we had -- have we lost diplomatic muscle? Because we certainly need China to help us with North Korea, with Iran, with other, you know, hot spots in the world. Have we lost our diplomatic muscle vis- a-vis them because we owe them so much money?

    KISSINGER: In the short term, it may not make too much difference. But over a period of time, when countries are making their assessment of what risks they are going to run together with us and what commitments they will make in relation to us, the indebtedness of the United States will be a big handicap.

    VAN SUSTEREN: How do we get around that? I mean, do you have any sort of thoughts? I realize your history is, you know, in the diplomatic, political world, but I know also you have a strong grip on economic issues. So what do you recommend?

    KISSINGER: We'll have to go through a period of getting our house in order and we'll have to start reducing our debt. And I personally believe we have to reindustrialize our country so that we have more manufacturing capability and don't become more and more a service economy. And I repeat that doesn't make -- it may not have an impact in any six-month-period, but it will have an impact over a five-year period.

    VAN SUSTEREN: What about our deficit? Does the deficit have any bearing on our strength vis-a-vis trying to get countries to help us with Iran? You know, take China out of the equation, but in terms of our international stature?

    KISSINGER: No. No, I don't think the deficit is the primary element in -- on the Iran question. The problem with respect to the Iran question is that a number of countries -- China, Russia -- have been unwilling to make commercial sacrifices. If you're not willing to make a commercial sacrifice, you're not going to be able to have effective sanctions. And a point inevitably will be reached where the Iranian program will be so far down the road that what the international community does is irrelevant, and in a way, counterproductive. That is my big worry. That is not driven primarily by the deficit in the time period in which these sanctions are being discussed.

    VAN SUSTEREN: Is Iran going to get nuclear weapons? Or do you see anything to stop them, at this point?

    KISSINGER: Well, we are on a road where, within a measurable period of time, we have to decide whether to take more decisive measures -- that means sanctions and other pressures that really bite -- or whether we're going to live in a world of proliferated nuclear weapons, which creates an entirely new set of circumstances. We will not get to that point by very gradual sanctions that are defined by the fact that they don't fully bite and that that's the only way we get countries to join them. So we are -- that process is turning on itself (ph), and I would say within some period, 18 months, we will come to that point of decision where we either do more or recognize that Iran is going to become a nuclear weapons state.

    VAN SUSTEREN: Dr. Kissinger, thank you, sir. Always nice to see you. You need come back more often, sir. We haven't seen you in a while.

    KISSINGER: Pleasure to be here.

    VAN SUSTEREN: Thank you, sir.