Leon Panetta: I've never seen Washington so dysfunctional

This is a rush transcript from "Your World," October 25, 2017. This copy may not be in its final form and may be updated.

NEIL CAVUTO, "YOUR WORLD" HOST: Not surprisingly, this has broken down along party lines, with Republicans saying it's something significant, Democrats saying it's much ado about nothing, that opposition research happens all the time, an argument, Republicans point out, that the administration had been using when explaining Trump Jr.'s meeting with those Russians.

Anyway, it's confusing, some people say a little bit too political.

Regardless, Leon Panetta, the former CIA director, defense secretary under President Obama, former chief of staff for President Clinton.

Director, very good to have you. Thank you for taking the time.


CAVUTO: What do you think of this? Is it a big deal? A lot of Republicans have been claiming what is good for the goose, you know the drill, good for the gander. What do you think?

PANETTA: Well, you know, I think the best thing here is to let the committees that are going to be investigating this issue proceed, investigate it, and report exactly what is involved here.

I suspect that Bob Mueller, as special counsel, is also looking at the dossier and the facts associated with that. So, it's obviously a very confusing issue.

I think the best thing is to let the committees do their work and let's find out what the facts are.

CAVUTO: Did you or were you familiar with any of this in your day with the administration, that this was going on or that the Russians were trying to exert some influence here for a uranium deal that would extract some concessions?

PANETTA: No, I wasn't. I wasn't aware of any of that.


So when it comes to the possibility or the charges, as you know, sir, that there were bribes and influence maybe through the Clinton Initiative or to at least make payments, it's way too early for you to know whether that was going on or not?

PANETTA: Yes, I think it is important for the American people to allow Congress, as I said, and Bob Mueller both to really be able to look at these issues and determine exactly what is involved.

Everybody these days -- as the president himself said, politics is a pretty ugly business. And there's a lot of negative research that goes on, a lot of attacks that go back and forth. I wish politics were better. I wish they would focus instead of -- on cutting each other up, focus on the issues that are important to the American people.

CAVUTO: Former -- and I don't want to belabor this, sir, so I do want to go on to something -- but former Clinton spokesperson Brian Fallon had said that there is nothing unusual or untoward going on here.

In an interview with CNN, he had said opposition research goes on all the time. Wasn't that the argument that Donald Trump Jr. made and the Trump campaign later made for his meeting with some of these Russians?

PANETTA: Yes, you know, look, it's hard to be shocked about the fact that campaigns engage in negative research on their opponents. That's a reality.

This reminds me a little bit of the Claude Rains quote from "Casablanca," when he was police chief and gambling all day, and then suddenly says he is shocked to know that there's gambling going on in the back room.

Well, in politics, the fact is, both sides do negative research on their opponents, and that's a reality.

CAVUTO: It's interesting, the timing of all of this, as you know, because Senators Corker and Flake, who have been frequent critics of the president, and it really sort of metastasized yesterday, saying that he is scaring other foreign leaders with his demeanor and his behavior.

Yet, if a lot of this was going on in the prior administration, they should have been plenty scared about that, right?

PANETTA: Well, you know, the fact is, Neil, that I have never seen a Washington as dysfunctional as it is.

I have seen Washington at its best and Washington at its worst. I have been involved in public life for 50 years. The good news is, I saw Washington work, where Republicans and Democrats were willing to work together to be able to deal with the issues facing this country.

Today, it's awfully partisan. Both sides attack each other. It's difficult to get people to sit down and really try to resolve issues and find consensus. And that just means that Washington is failing to deal with a lot of the issues facing the American people.

And that's what we ought to be concerned about. And, by the way, it didn't just happen in this administration. I think for the last more than 10 years, we have had a dysfunctional Washington. It's time for Washington, frankly, to get their act together and to govern the country.

CAVUTO: You have seen it from so many sides, as a congressman, a director, even a chief of staff for Bill Clinton.

But this issue of intraparty squabbling, and you have two prominent Republican senators. Maybe I could add a third if you add John McCain's rocky relationship with the president. Rarely do I see it so in the open.

And I'm wondering what that tells you about the environment and even the likely passage or lack of likelihood for passing tax cuts?

PANETTA: Well, that's -- I worry about the depth of divisiveness that is going on, not only within the Republican parties, and just generally with regards to the partisanship that we see in Washington.

And the fact is, I think the last election is the story of a lot of angry and frustrated people who felt that Washington wasn't working to deal with their concerns. Well, we now have a situation where Congress has done very little, other than approving a Supreme Court justice. They have not dealt with health care. They have not dealt with immigration reform. They have not dealt with tax reform.

They have not dealt with the budget. And unless they begin to roll up their sleeves and start to deliver on these issues, you're going to have a very angry and frustrated constituency in the next election.

CAVUTO: I'm wondering, when it comes to this tax cut thing and whether it ever materializes, it looks like it will almost entirely depend on Republicans voting for it, much as it looked like on the health care front it was only Democrats voting for it.

Is that just the way it is now?

PANETTA: Well, it shouldn't be that way. I think that's a lousy way to govern, is to simply try to get your own party to jam something through the Congress. That's a lousy way to legislate.

What you need to do, frankly, is to sit down in a room and be able to find consensus, because we do need tax reform in this country. We do need our health care system improved. We do need, frankly, comprehensive immigration reform. We need funding for infrastructure in this country.

All of those should be bipartisan issues. And, frankly, both sides ought to be willing to sit down, to negotiate, and to come up with an approach that can pass the House and the Senate and be signed into law. That's what governing is all about. That's what our democracy is supposed to be all about.

It's not supposed to be about one party just pounding their shoe on the table or the other party pounding their shoe on the table. They need -- they're elected to go back to Washington to govern. And that's what they should do.

CAVUTO: As a former chief of staff, you have probably heard and read about the dust-up that John Kelly, the four-star general, is getting over his recollection of a congresswoman's statement and whether he should apologize to this congresswoman for maybe misrepresenting that.

But it gets back to how a president conveys sympathies to a spouse who lost a loved one in battle. The president said he said nothing disrespectful or wrong to this woman.

What do you think?

PANETTA: Well, I have been very disappointed with the back and forth on this issue.

And I will tell you why, because the main focus ought to be on our very brave and courageous young men and women in uniform that are willing to put their lives on the line.

And when they lose their lives, it ought to be on those families who basically suffer probably the most terrible sacrifice that any family can suffer. And that's what we ought to be focusing on.

And as to how condolences are delivered or who said what, I frankly think that both sides ought to put this issue aside and focus on the important thing, which is, how do we prevent the kind of wars that are going to take the lives of more Americans in the future?

CAVUTO: North Korea, many critics, including Republican Senators Flake and Corker, have faulted the president for heightening the tensions and maybe making matters worse.

Now, of course, his response has always been, well, they're pretty bad as it is, and that's the result of sort of the normal way we go about negotiating under Republican and Democratic administrations, and he's going to change that.

What do you think of that?

PANETTA: Well, this has been a very difficult issue that this country has struggled with going back to the end of the Korean War.

And the fact is there's a lot of responsibility and blame to go around for all sides in the failure to confront this issue. But the fact right now is that we're dealing with a North Korea that is very close to developing an ICBM. And if they can develop a miniaturized nuclear weapon, they are a direct threat to our national security.

That's the important issue. And so I think it's important for, frankly, the president and his national security team -- it's a national security team that I have a lot of admiration for. They're a good team. But there's no easy military solution here.

Any military solution involves a serious risk that hundreds of thousands of lives would be lost in Seoul in South Korea, and perhaps a nuclear war would break out on the peninsula and in the world.

So I think the key right now is to lower the volume of rhetoric going back and forth and focus on tightening the noose around North Korea, building up our military presence, building up the security of South Korea and Japan and others, developing a strong missile shield that can protect us from any use of missiles, and also tightening these sanctions.

I think if China...

CAVUTO: But isn't the president doing most, if not all of that, sir?

PANETTA: Yes. No, I think he is. And that's what he ought to continue to do, because, frankly, the key right now is to squeeze North Korea, so that they understand that the only option for them is to be willing to sit down and try to negotiate a resolution.

CAVUTO: But we have been working on squeezing them for decades, right, under Republican and Democratic administrations, right?

PANETTA: But it isn't going to happen -- it isn't going to happen -- well, look, Neil, it's not going to happen just with talk.

CAVUTO: Right.


And words. That's not going to make it happen. The North Korean leader is not going to be moved by the president's words. And the president isn't going to be moved by the North Koreans' words. They can say whatever the hell they want.

But the reality is, can the United States build up our defenses, build up our protection, build up our covert and overt capabilities there, and squeeze on these sanctions to impact the North Korean economy, so that they really are forced to ultimately sit down and negotiate?

That is an option that we have to continue to try to press on, because, frankly, it's the one way ultimately to deal with this, short of war.

CAVUTO: If you don't mind my going back to party politics, what's going on, sir, there's been a lot of back and forth about Republicans and their inability to shoot straight when it comes to coming up with a health care replacement. They haven't. A great division over tax cuts. They might materialize. So far, they haven't.

But yet it's Democrats who appear to have having the fund-raising difficulties. They're raising but a fraction of what Republicans are. There could be anywhere from, I don't know, 25 to 125 going for the next Democratic presidential nomination.

What is going on with your party?


PANETTA: Well, I think we can ask that question about both parties.

CAVUTO: You're right.

PANETTA: I think there's a lot of concern in this country about whether or not the Republicans and the Democrats are really going to be able to govern our country.

As I said, that hasn't happened for a long time. And so there's a lot of disappointment, a lot of disappointment with the Republicans, who are very divided, a lot of disappointment with the Democrats, who sometimes don't come up with alternatives to the very issues we talked about.

But most important, there's an unwillingness to be able to sit down and work together.

Look, I commend Lamar Alexander and Patty Murray for trying to sit down and trying to do something on health care. And the president initially supported that and then backed away from it.

Well, you know, very frankly, both sides need to work together on these issues.


PANETTA: Tax reform ought to be something supported by both Republicans and Democrats. The time has come for both of them to work out that kind of approach.

CAVUTO: Leon, I would be remiss if I didn't ping-pong -- again, you have been very patient -- but back to North Korea.

And I was reminded of the fact the president today did sort of tease about whether or he's going to visit the demilitarized zone. Officially, it's not on his schedule when he goes to Asia.

I want you to react to the president discussing this with reporters earlier today.


QUESTION: The DMZ, yes or no, are you going? Yes or no?

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Well, I would rather not say, but you will be surprised. You will be surprised.


CAVUTO: Do you think he should go?

PANETTA: Well, you know, I mean, this is one of those things where I think he ought to ask his key military types, his intelligence types as to what kind of signal would that send to North Korea and could it be incendiary in any way?

This situation is tense enough. And that tension, does it need to be heightened? So, I just think he ought to take the time to carefully talk with people.

CAVUTO: But every president -- I guess every president, Leon, save Ronald Reagan, has, right? So what would be the big deal if he did?

PANETTA: Well, past presidents have done this, but you will admit that most of them have done it when the tensions have not been as high as they are today.

So, I'm just asking the president, take your time, talk to the key people, get their advice before you decide to do it.

CAVUTO: Do you, when you see Washington today and the environment today, is this just the way it's always going to be, and that whoever is best in working that system will work that system, and maybe it is Donald Trump's approach to just fight fire with fire?

PANETTA: Well, I think that's a lousy way to govern. And I don't think it has to be that way.

I think the reality is that the president can exercise the leadership necessary to try to get both sides to the table and try to resolve these issues. They have got to restore and element of trust.

And, you know, throughout my time in the Congress, as a Democrat, I worked with Republicans. Tip O'Neill worked with Bob Michel. Bob Dole worked with George Mitchell.

That is the tradition of how you govern, through consensus, through compromise. And, ultimately, we have got to get back to that, because that is how our democracy works. That's what our forefathers designed, and that's what we need to do if we're going to be able to resolve the issues facing this country.

CAVUTO: You had expressed some empathy, maybe some sympathy for Chief of Staff John Kelly, even recommending, I think, a bottle of scotch to help him out with that job.


CAVUTO: Did he ever say that he would take you up on that offer?


PANETTA: If I know John -- he was my military aide.

CAVUTO: Indeed.

PANETTA: And we went on a lot of -- we went on a lot of trips abroad.

And I have to tell you that both of us shared -- shared a glass of something.


PANETTA: You know, he said he likes whiskey more than Scotch.

CAVUTO: All right. All right.

PANETTA: I will let him decide what he wants to drink. But he needs a good stiff drink at the end of the day.

CAVUTO: Yes, no matter who he is serving. That's a very, very tough job.


CAVUTO: Leon Panetta, very good seeing you again. Thank you so much.

PANETTA: Nice to talk with you, Neil.

CAVUTO: All right, former defense secretary, CIA director, OMB director, Bill Clinton chief of staff -- what a resume -- Leon Panetta.


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