WEEKLY: You recently became a member the Iraq Study Group, formed by Congress and headed by James Baker. Do you believe it is possible to find a strategy other than “stay-the-course” or “cut-and-run”? How do you see this work proceeding?

LEON PANETTA: Well you know, it’s an interesting commentary on the politics of our time that Congress has to reach out to a bipartisan group outside of the political institutions of the administration and Congress to look for answers. That is as much of a crisis as Iraq is. In part I think it’s a commentary of dysfunctionality of the government in Washington. And in part it’s probably a kind of cry for help, that you need to go outside of government, to a group of people who’ve been involved in some capacity, to be able to see if there’s a bipartisan approach that can help resolve the issue. I don’t know that there is.

I do know that I entered into this to get an opportunity to find out a lot more about the issues involved in Iraq, find out what our intelligence is showing, what’s happening on the ground there, what the government of Iraq is all about. And then out of all of that, ultimately to see if there’s a better way to deal with this.

I approach it with an open mind, I approach it with the basis that the people I’m dealing with don’t bring a political agenda to the table, but really are trying to see if there is a legitimate approach here that can benefit the nation in that terrible situation. Everything that I’ve seen indicates that it is as bad a mess as everybody perceives right now. A mess in terms of the situation there, and frankly a mess in terms of present policy.

We’re borrowing to provide tax cuts, borrowing for the war in Iraq, borrowing for prescription drug benefits—and all that debt is being passed on to our children.

WEEKLY: I wanted to talk today about money and the state of the federal budget a little bit, and that’s obviously one of the impacts of Iraq. You were known throughout your career in Congress as a budget hawk. Even before you became head of the House Budget Committee and then head of the Office of Management and Budget, you led your party to accept the idea that a balanced budget was a good thing—that was considered radical for a Democrat. And then, with President Bill Clinton, you were instrumental in balancing the federal budget for the first time in…I don’t know how long. Now we are looking at a historic budget deficit. What will that mean for the future?

PANETTA: I think it’s another one of these crises that leadership is not confronting in Washington. I’ve never, in the over 30 years that I’ve been in politics, ever seen a situation where there are as many large crises that are not being dealt with by the people we elect to deal with these problems. It’s the war in Iraq, it’s the war on terror, the record deficits, it’s global warming, it’s healthcare, Social Security, it’s Medicare, immigration. The major issues that confront this country simply are not being dealt with.

Clearly the deficit is one of those issues. It has a huge impact.

One of the reasons I always got involved with budget issues is because it’s not about numbers, it’s about priorities for the country. And it’s also about the future. It’s like any business, or family for that matter—if you run huge debts and bankrupt the business or family, clearly your children are going to bear the burden of that irresponsibility. And that’s what’s happening now. It’s a fiscal situation that’s totally irresponsible.

There’s no discipline there; they didn’t even pass a budget in the Congress this year or provide any kind of guidelines. We’re running these record deficits—which means we’re borrowing to provide tax cuts, borrowing for the war in Iraq, borrowing for prescription drug benefits—and all that debt is being passed on to our children.

What it’s gonna do, what it’s doing right now, is it undermines any ability of our economy to recover. You can’t borrow that kind of money, at the federal level, and not have an impact on the strength of our economy. It’s raising interest rates because we have to obviously borrow that money from abroad and make it attractive to lend money to us. It’s making us indebted to those countries that are buying our debt, from China to Korea to Japan to Great Britain—we owe them well over 50 percent of our debt—and that makes us vulnerable in terms of our ability to exercise independent judgment.

But most importantly it’s robbing us of resources. We have to confront issues in this country. Whether it’s education, whether it’s infrastructure, whether it’s healthcare, whether it’s Social Security and Medicare, we’ve got to be able to confront those issues. We are robbing ourselves of the resources we are going to need in order to deal with those issues. I think it’s putting us on a terrible track.

Unless it’s changed I think it’s going to make us a second-rate power. You cannot operate this way fiscally and expect that you’re going to be a major power in today’s world.

WEEKLY: If the election on Nov. 7 is a turnaround that returns control of Congress to the Democrats, how will the country change?

PANETTA: That’s probably one of the most important questions that will confront the Democrats should they take control of the House or the Senate or both bodies. What’s going to change?

If they do have that responsibility, I think it’s extremely important that they show the country that they can govern.

What’s happened in Washington over the last 12, 15 years is that winning has become much more important than governing. And operating on the basis of what you can get today has become more important than focusing on tomorrow.

We’re paying a huge price for that. The consequence of that has been this kind of hardened trench warfare in which both parties have been locked into trenches throwing grenades at one another. It’s created an inability in either party to be able to come out and to find a kind of consensus and compromise that’s important to solving problems. The war has become much more important than trying to find peace.

The real question for the Democrats is that, if they have that responsibility, are they going to be able to govern? Are they going to be an effective check and balance in our system?

Winning has become much more important than governing. And what you can get today has become more important than focusing on tomorrow.

One of the things that I’ve been very concerned about is that we have moved away, in many ways, from what our forefathers envisioned our democracy to be all about. They feared a centralization of power—in a king, or a parliament, or in a Star Chamber court. They understood the lessons of history. That’s why they created this system. For over 200 years it’s operated in line with what they envisioned our democracy was going to be all about. Today we’ve moved away in many ways from those basic principles.

There is more centralized power now in the executive branch than I’ve ever seen in my lifetime, with very little checks and balances, in my opinion, in the legislative branch. One of the things that I think Democrats have to do is to obviously exercise that responsibility of effectively providing checks and balances.

Secondly, I think they’ve got to restore the legislative process to what it’s supposed to be. The legislative process is about debate. It’s about amendment. It’s about having committees and subcommittees do their work and mark up the bills and move them through the process. And we’ve moved away from that.

They now operate in kind of a slam-dunk approach to legislation in which the committees sometimes play a very small role. Leadership basically dictates how bills are going to be drafted by the rules committee, there’s no debate on the floor other than these kind of prescribed party sound bytes that both sides provide. Even in the conferences—the Democrats have not even participated in any of the conferences on legislation.

Democrats have to get back to what I call “regular order,” which is the legislative process, and trust in it, and be able to give the minority their opportunities, have some votes where members are required to vote up or down on some of these amendments. Let the process work.

So I think that’s going to be a major responsibility. I think they’ve got to get some things done. I don’t think it can be all about confrontation.

As a matter of fact I think one of the first things ought to be lobbying reform; it ought to be reform of the problems that we see in Washington that the Republicans haven’t been able to deal with. I think that the Democrats could get that through, probably with Republican support.

I think they ought to do an immigration bill. You’ve got the opportunity to do it, a president basically in concurrence with what the Senate is doing. I think that there’s a real opportunity to pass something on immigration reform and get it done.

In a word, Democrats have to govern. If they don’t, if all they do is kind of another version of Tom DeLay in Congress, then I think they’ll pay a price in two years.

WEEKLY: You’ve said the word “bipartisan” several times here already today. You entered politics as a Republican—why did you change parties?

PANETTA: My first job was as a legislative assistant to a guy named Tom Kuchel, the Republican whip in the Senate, but Kuchel came out of the same tradition I did in California, which was a progressive moderate tradition, made up of Republicans, starting with Hiram Johnson, and continuing with Goodwin Knight and Earl Warren. So that’s what I was pretty much raised with.

When I went into the [Nixon] administration and was the director of the Office for Civil Rights, I had a commitment to enforce civil rights legislation, because I thought that clearly the party of Lincoln ought to be responsible for enforcing civil rights. But I found that the party was moving away from that. Richard Nixon cut a deal with the southerners to abort civil rights laws. That, plus the fact that Spiro Agnew when he was vice president started campaigning against moderate Republicans…and I could see that the party was beginning to move to the extreme.

Later, I was working for [New York City Mayor] John Lindsay at the time, who was one of those moderate Republicans, and when he changed parties, I felt that if I was going to stay true to what I believed in, that there was a bigger tent on the Democratic side.

WEEKLY: Next week you’re going to host your annual Jefferson Lincoln Awards dinner in Spanish Bay to honor a couple of public servants, a Democrat and a Republican, who are able to cross party lines and get things done. What is so good about bipartisan cooperation?

In our democracy we govern either through leadership or crisis. Right now we are governing largely through crisis.

PANETTA: I think it again goes to what our forefathers believed was the essence of what would make our democracy work. They created the system of checks and balances—that’s not only a formula for limiting power, it can be a formula for crippling it, as we’ve seen. I think that what they believed in was that a key to breaking that kind of gridlock was that people you elect would debate. Yes, they would have their ideologies, their beliefs, their differences, but then ultimately they would work towards consensus. They very much believed that people of different philosophies ultimately had to work together to find compromise, and in many ways that’s what Philadelphia was all about.

They had very different ideas about what this country ought look like. Some felt we ought to have a king, some felt we should have a congress, some that we should have a supreme court, and yet in their own way they found compromise.

So in many ways the miracle of Philadelphia was what is at the heart and soul of what makes our democracy work—that’s number one. Number two: In my own experience, I have seen that process work to the benefit of this community. When I was in the Senate working as a legislative assistant, there were moderate Republicans; it was not just Kuchel. There was Clifford Case from New Jersey and Hugh Scott from Pennsylvania, George Aiken from Vermont, Jacob Javits from New York. What they did is—sure they had their political differences—but when it came to big issues they worked together to find answers. That’s why we have a Clean Air Act, that’s why we have civil rights laws, that’s why we have education bills and healthcare bills—they were largely bipartisan.

I remember Medicare passing, and it was a huge conflict, but there were Republicans who supported Lyndon Johnson in establishing that. In my own history, when I was in Congress, I worked with my Republican colleagues. The budget summits that were done that established the first deficit reduction plan, whether it was in the Reagan Administration or in the first Bush Administration, those were bipartisan efforts that really required both sides to give a little and to sacrifice a little for the larger good. So I’m a believer in that process.

I think that in our democracy you can’t slam-dunk a damn thing. I think that parties that think they can slam-dunk what they want without reaching out and ensuring that everybody has had a say in the direction of where the country needs to go—I think that they’ve made a huge mistake. In fact you’ve seen that. One of the problems of a president and a Congress of the same party is that it tends to distort where the middle ground is, where the balance is of a democracy, and we begin to move towards the extremes and that’s

dangerous.

WEEKLY: That goes right to my next question. Right now, at a time when bipartisan cooperation seems most necessary, it also seems less possible. We just endorsed Arnold Schwarzenegger in our newspaper—I had a lady call me on the telephone hyperventilating. I think that she would have just come across the line and slapped the hell out of me. She called me a fascist. She was just so upset.

Part of the reason for that, as I understand it, is the perception that the Republican Party has moved way, way, way to the right. So now, reaching out to cooperate, when we really need to do something like that, seems just about impossible.

PANETTA: The problem is that there are a lot of factors that have contributed to that move to the extremes that are going to have to be dealt with, because this isn’t something that can turn around very easily. It’s going to take a lot of leadership and a lot of sacrifice on both sides to kind of reverse what’s happened.

Number one, the fight for limited, narrow power margins here, both in the Congress at times and in the legislature has made the fight for power much more important than the ability to govern. The money that’s involved in campaigns now largely flows from special interests. Thos special interests will basically force you into extremes. If you’re dependent on those interests to get most of your campaign money then you’re going to cater to their will and that has produced a tremendous amount of gridlock and extreme decisions on both sides.

Redistricting has been something that distorted the system to create all of these same districts and you basically block in people who then have to cater more to their extremes. A Republican is concerned more about somebody who is to its right so they’ll be much more extreme. And somebody on the left will be worried about the competition to the left. So it tends to move the parties to the extremes.

If an opportunity came along and something was there that I really felt interested in and was willing to get back into the game, I’d be comfortable doing that.

All of that kind of produces an unwillingness to take risks. If you’re going to lead in this country you’ve got to be willing to take risks. Now risk means that you’re going to be asking people to sacrifice in order to do something. And neither party, frankly, has been very willing to ask people to take those risks and make those sacrifices. So everybody kind of pretends that you can get a lot of things done and do what you’ve got to do for the state and the country and not ask anything of people in return.

You put all of that together and it produces a political situation in which neither party is interested in working together to resolve these issues, but would rather stay in their trenches and basically throw grenades at one another.

Having been in politics, it’s an easy way out, because you don’t have to ask people to do anything. You basically wait for crises to drive policy. That’s why I’ve often said that in our democracy we govern either through leadership or crisis. Right now we are governing largely through crisis. Both parties basically wait for crisis to happen and then try to respond, as a way out. I think we pay a hell of a price for that.

The biggest price we pay is people lose trust in the system and lose trust in the process. You change things either by leadership, if it’s willing to take on those risks, or by crisis.

And there’s a third way, which is that people suddenly realize that they have the power to vote. What we went through with the recall in California was an indication that people got so angry and frustrated at the failure of people leading in Sacramento that they were willing to throw the governor out. And frankly, if the legislature had been on the ballot, they probably would’ve thrown them out as well.

In the end it all comes back to our forefathers. Probably the most important power they created was the power of the people to exercise their right to vote and make changes.

WEEKLY: Ever since you returned from Washington, people have mentioned your name as a possible candidate for governor. I heard plenty of people saying you might have been the one guy who could beat Schwarzenegger. Is this something you’d consider? Why didn’t you run?

PANETTA: My thought was that when you have to raise 20 or 30 million dollars to run in a statewide race, and you’re running against two people who are independently wealthy, it really makes it difficult to be able to go to the people with ideas of what needs to be done. Politics these days, what you’re left with is either people who are independently wealthy or people who want to sell their souls to whatever interests contribute to their campaign. I’m not independently wealthy and I certainly don’t want to sell my soul on issues, so what are you left with?

You’ve got to give some serious consideration to how do you allow people to be able to engage in the process without having to go through a process where they’re having to sell their souls.

WEEKLY: And maybe that’s the answer to this next question. Ten years ago you were at the right hand of power, you were one of Bill Clinton’s most trusted advisors. There are people who now think that since that time, you completely disappeared. I don’t know if you ever Google yourself, but I Googled you a couple of days ago. Do you know the game “Dead or Alive?”

PANETTA: No.

WEEKLY: Well it’s a game, it’s like a trivia contest—they name a person who was once famous, like a TV star from the 1980s, and the question is: Is so-and-so dead or alive? And on the first page of your Google search, there’s a link to you on the “Dead or Alive” Web site. (Laughter.) Which means that plenty of people think that you’ve vanished; they don’t even know where you are. Do you feel that you have purposely stepped back from the national political stage, the place where you once wielded an immense amount of power? And if so, why?

PANETTA: Well you know, when I became chief of staff, at the time I told the president I would take him through the election. I really wanted to come back to my home. Because I love this area. I represented it in Congress. I was born and raised here. It really is my home.

And I did that. After I took the president through the re-election, he asked me if I could stay as chief of staff, and I said, “No, I really want to get back to my home in California.” And we did that.

I didn’t want to stay around Washington as a lobbyist. I really thought I could make a greater contribution back home.

I can be blamed for an awful lot of things in politics, but one thing in politics that I cannot be blamed for is having a bad sense of timing of when to get the hell out of Washington. (Laughter.) So in part, I owe that to this area because my home was calling us back. And also I didn’t want to, frankly, stay around Washington as a lobbyist or somebody who’s just hanging around. I really thought that I could make a greater contribution back in my home area.

In fact, I really think that is what we’ve done here in creating this [Leon and Sylvia Panetta for Public Policy] Institute, and trying to be able to inspire young people to be involved. It’s really an important mission.

I think there’s real danger that young people are turned off by politics. And every one of our research efforts nationwide has established that young people—while they are concerned about the country and concerned about their future—73 to 75 percent don’t want to get involved in any kind of a public way. They have those concerns but they don’t really want to engage in the political process. And I sensed that when I came back. My wife and I both sensed that coming out of a generation ourselves, a generation of people that were inspired to get involved in public politics. I think that inspiration is lacking right now.

So what we decided is to begin this institute to try to take our own experiences in public life and try to share those with young people. I think that we’ve affected literally thousands of students in some way. Through our intern program, through our leadership program, a lecture series that we have here, and we’ve got lots of lights to the future, regardless of what anyone says.

And I was chair of the new Oceans Commission, and served on the immigration task force, and the Iraq Study Group…so you make your contributions in that effect. I try to be politically involved in things that I want to work on.

WEEKLY: Yes, it seems like you’ve been all over, just lately. I noticed that [New Yorker editor David] Remnick talked to you for his Clinton profile. I’d bet he was pleased when you gave him that quote about how Clinton should just quit blaming other people for his failures. Have you talked to Clinton since that piece was published?

PANETTA: I told him that a long time ago. (Laughter.)

WEEKLY: Well, because of the fact that I’ve been seeing you all over the newspapers lately, I wonder if you have decided that maybe it’s time to get back into the fight.

PANETTA: When I first went back to Washington, the senator who I worked for brought us into the room to talk to us. There were two legislative assistants back then; now a senator has 30. But in those days there were two of us, one handling foreign affairs and one domestic. And he brought us in and he said, “You’re going to be subjected to a lot of temptation in this job. But the most important thing to remember is that we’re all here to serve the interests of the people of California and the nation. And there’s another thing: When you get up in the morning, you gotta look at yourself in the mirror.” And I’ve never forgotten that, because in the end it’s about integrity. It’s about whether you take your integrity in the process.

And it’s also about doing the right thing. My view of politics is that—rather than focus on “What do I want to run for? What office do I want to hold?”—my approach is just do the best at what you’re doing each day. And if those opportunities come along, fine. Look at them and then decide whether it’s right for you, but don’t let it deter you from doing the things that you feel are right. That’s the way I view politics.

Which is to say, if an opportunity came along and something was there that I really felt interested in and was willing to get back into the game, I’d be comfortable doing that. But if it doesn’t feel right, if it’s something that for whatever reason that I just don’t think I would put my heart and soul in it…you know, anything in politics, you’re silly if you’re pushed into doing something. You’ve got to feel it in your guts. You’ve got to feel that it’s right for you. You’ve got to feel like you can commit yourself a thousand percent to what you want to do.

So if something like that comes along and I really like it, I don’t feel the urge to say, “Oh no, I’d never do that,” because I probably would do it. But all in all, I’ve got to say, it’s a good life. Living in Carmel Valley, enjoying the institute, serving on five corporate boards, being involved in these commissions that I’m involved in—it’s a good life.