This is a rush transcript from "Your World With Neil Cavuto," January 5, 2010. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: K.T. McFarland joins me right now. She's a former assistant secretary of defense, all of this on the same day the president is coming up with a plan to deal with this sort of stuff.

KATHLEEN TROIA MCFARLAND, FORMER DEPUTY ASSISTANT SECRETARY OF DEFENSE: Yes.

And I think that's why his address is late. He's probably waiting...

(CROSSTALK)

CAVUTO: Probably waiting. Very good point.

MCFARLAND: He does not want to make a speech and then, two minutes later, have it be overtaken very events.

CAVUTO: What does he have to say?

MCFARLAND: Look, the biggest problem that the president has, it's not — don't just fire one or two people and think that solves it. That doesn't solve it.

We have — we have looked the wrong way on this whole terrorist issue from the very beginning. And both Presidents Bush and Obama have done it. They have been looking for the weapons terrorists might use. Now, that's useful, but we are still taking off our shoes, long after that shoe bomber has gone off doing something else. We need to start looking for terrorists.

CAVUTO: It was because of that guy that we had to take off our shoes.

MCFARLAND: Yes. Well, we need to look at terrorists.

We need to not racial-profile, but we need to terrorist-profile. We need to, because, if we look just at the weapons that they might use, take off your shoes, don't use that bottle of water, don't take that toothpaste tube on the plane, we are always going to be a step behind.

These guys are clever. They're adaptive. They have now moved on. For example, they're not in Afghanistan. They're in Yemen. But they're not even in Yemen. They're in cyberspace. If this announcement that Catherine Herridge was talking about, it appeared on a blog, that means Al Qaeda has moved on to cyberspace.

We don't — we're always looking for them where they used to be. We are always looking for the weapon they used before. We have got to look ahead of this.

CAVUTO: And you pointed out be careful what you think you see...

MCFARLAND: Right.

CAVUTO: ... that this could all be an elaborate head-fake, this entire incident. What do you mean by that?

MCFARLAND: Well, it might be a head-fake, but you have to make sure that it's not.

But, on the other hand, what are we looking for? We're still looking at airplanes. We're still looking at shoe bombers. We're still looking in suitcases. Where else should we be looking? We should be looking at ports. One of the things that is a very vulnerable part of the United States infrastructure is ports.

What if a ship comes in, a pleasure craft comes in to Manhattan, and it has got an explosive device on it and it parks underneath the 59th Street Bridge, it blows it up? Then what happens? Well, Manhattan shuts down. But every other city in the United States, every mayor says, gee, I might be next. We shut those down.

We're looking at this in a very after-the-fact catchup ball kind of way. And we need to look proactively, what is our port security?

CAVUTO: You might be right.

(CROSSTALK)

CAVUTO: A statement out one of the Al Qaeda operatives who was saying, we're going to hit you by water next and all that.

MCFARLAND: Right.

CAVUTO: Nevertheless, as we look at this scene in Minneapolis/Saint Paul, where they have a partial shutdown because bomb sniffers are looking for a bomb that might have come in and luggage from abroad, but, nevertheless, everything always goes back to the airports. Everything always goes back to the planes. Why is that?

MCFARLAND: Yes. Well, I think they have found that the majority of the American economy flies, one way or another.

And American — that's where we are the most vulnerable psychologically.

(CROSSTALK)

CAVUTO: So, they know this could have an economic effect?

MCFARLAND: You know it could have an economic effect and you know it could has a psychological effect.

The other thing I think that is very important in this whole debate is, why are we treating these guys like citizens? Why are we giving potential terrorists or suspected terrorists the rights of citizens and putting them in our civilian courts?

CAVUTO: Well, now, on this news, we have talk that these Yemenis who were going to back home from Gitmo might be resent to Illinois.

MCFARLAND: They're heading back.

CAVUTO: What do you make of that?

MCFARLAND: Yes, right.

Well, why are we endangering Illinois? Why are we endangering New York City? They have a trial of the sheik in New York City. When we take — for example, when the Nigerian, when the Christmas Day bomber got off that plane, he started talking right away to the FBI.

But — and what he said was, they're more like me. There are more coming.

But then what happened? He got his Miranda rights read to him. He's not a citizen. He doesn't have Miranda rights. He then got lawyered up, and then he clammed up.

(CROSSTALK)

CAVUTO: Is that so? Really, is that what happened?

MCFARLAND: He did not start — he stopped talking.

Now, what does he know? We don't know. But wouldn't it be nice if we knew who, when, where, why, what might the next terrorist attack be?

CAVUTO: All right. This is a photo we're getting from the meeting a few minutes ago that the president had with all his top security folks and top Cabinet agencies.

MCFARLAND: That is the White House Situation Room.

CAVUTO: OK. Thank you for telling me that.

MCFARLAND: I worked there for seven years.

CAVUTO: Really?

MCFARLAND: Yes.

CAVUTO: All right.

So, he's going to glean thoughts and recommendations from everyone on this team. What do they generally tell a president?

MCFARLAND: Well, first of all, they're all going to be protecting their turf and saying, it wasn't my fault. All right? You have got everybody around that table...

CAVUTO: Really?

MCFARLAND: ... who has a piece of that action. And they're all going to be saying, well, it was somebody else. I couldn't have been expected...

(CROSSTALK)

CAVUTO: Well, who gets served up? Is Janet Napolitano there? Yes, I think I see her.

MCFARLAND: I think that's her on the right.

CAVUTO: So, is she — what is going to happen to her? Yes, she is on the right there. OK.

MCFARLAND: Well, I think that she probably will not have that job a year from now.

CAVUTO: Really?

MCFARLAND: But I don't think that solves the problem.

If you just fire somebody, that's window dressing. You have got to address the root of the problem, which is, we're treating citizens like terrorists and terrorists like citizens, that we're giving civilian rights to people who don't deserve them, and that we're always looking at the last attack, like a general always fights the last war, and we're not looking ahead to what the next attack might be.

CAVUTO: Well, how quickly can the president turn around a meeting like that and, in a few minutes, go before the American people with a list of recommendations?

(CROSSTALK)

MCFARLAND: Oh, I think pretty quickly.

CAVUTO: Really?

MCFARLAND: I think — yes. I think that what he has got to do is, he's got to reassure the American people one way or another that he has got this under control.

I mean, the problem that President Obama has had in this whole issue, as in others, is, he says everything is just fine, and then the average guy on the street says, huh? This doesn't make any sense. I have been taking my shoes off for eight years. I have been checking my hand luggage and standing in those long lines for eight years. But I know I'm not any more secure...

(CROSSTALK)

CAVUTO: Do you think Americans are more open to the possibility, though, now, that, look, we're going to be taking images of you in your birthday suit, and you just deal with it?

MCFARLAND: Sure. I think Americans want to be safe, and they want to be reassured by the government that they're being kept safe, and that all the extra efforts that they're making are worth something, instead of the notion that some guy is getting on a plane carrying what he was carrying, no return ticket, no luggage, paid cash, and dad had turned him in, you know, three months ago.

I mean, that's just...

(CROSSTALK)

CAVUTO: How does that happen, by the way? I don't want to push the time here, but such a sequential breakdown in communication, that's pretty explosive stuff.

MCFARLAND: Yes. Every — every step of the way. Whatever — the one thing that really should have set off bells was in Nigeria when here's one of the most respected members of that community went in and met with officials in the American Embassy and in effect turned in his son.

I mean, can you imagine as — what that would have taken to say, I'm worried about my son; I think he's been radicalized?

CAVUTO: What, did they just drop the ball on it and just...

MCFARLAND: You don't know. And I bet you everybody sitting around that room is trying to pretend it wasn't them who dropped the ball.

CAVUTO: But you have been with presidents when they do this sort of thing.

MCFARLAND: Yes.

CAVUTO: Do they get really ballistic and just say, what the hell happened here? Or do they...

(CROSSTALK)

MCFARLAND: Some do, and some don't. This president, I don't think, gets terribly ballistic.

(CROSSTALK)

CAVUTO: Who was the most ballistic president who you worked...

(CROSSTALK)

MCFARLAND: Reagan when he felt that something was very wrong, Nixon occasionally.

But, yes, I would say Reagan when he thought that the American people were being snookered or something bad had been done to them, because then he — he didn't get mad often, but, when he got mad, he was very firm, and he followed through with what he said.

CAVUTO: As do you, young lady.

MCFARLAND: Thank you.

CAVUTO: K.T. McFarland, thank you very, very much, my friend. I appreciate it. Happy new year to you. All right.

Content and Programming Copyright 2010 Fox News Network, LLC. ALL RIGHTS RESERVED. Transcription Copyright 2010 CQ Transcriptions, LLC, which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, LLC'S and CQ Transcriptions, LLC's copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.