'This Week' Transcript: Defense Secretary Leon Panetta

WASHINGTON, DC, May 27, 2012— -- TAPPER: Good morning. Welcome to THIS WEEK.

(BEGIN VIDEOTAPE)

TAPPER (voice-over): On this Memorial Day weekend, our exclusive headliner, the secretary of defense, Leon Panetta. He's charged with winding down the war in Afghanistan, preventing Iran from going nuclear, and defending the nation against a resurgent Al Qaida. Can he do it? What keeps him up at night?

Then --

PRESIDENT BARACK OBAMA: If your main argument on how to grow the economy is "I knew how to make a lot of money for investors," then you're missing what this job is about."

FORMER GOV. MITT ROMNEY, R-MASS., PRESIDENTIAL CANDIDATE: Someone who's never spent a day in the private sector, like President Obama, simply doesn't understand."

TAPPER (voice-over): Obama and Romney spar over job creation.

While the Facebook IPO turns from frenzy to fiasco. Those stories and the rest of the week's politics with our "Powerhouse Roundtable," George Will, Jennifer Granholm, Liz Claman, Nia-Malika Henderson and Ron Brownstein.

ANNOUNCER: From ABC News, THIS WEEK WITH GEORGE STEPHANOPOULOS. It's your voice, your vote, reporting from the Newseum in Washington, Jake Tapper.

(END VIDEOTAPE)

TAPPER: Good morning, everyone. George Stephanopoulos has a well-deserved morning off. This Memorial Day weekend as the country pays tribute to its fallen heroes, we also remember that for the eleventh consecutive Memorial Day, we are a nation at war with 88,000 soldiers, sailors, airmen and Marines fighting in Afghanistan. And countless others monitoring hot spots around the globe. On war ships in the Persian Gulf amidst the nuclear standoff with Iran. Down the Arabian peninsula in Yemen as al Qaeda continues to threaten to attack the U.S. homeland. In Pakistan, where tensions with our supposed ally continue to mount. And from the South China Sea and the world's largest nation, China, seeks to build its military might.

And to talk about all of this, let's bring in our exclusive headliner, the Secretary of Defense, Leon Panetta. Secretary Panetta, welcome back to "This Week."

LEON PANETTA, U.S. SECRETARY OF DEFENSE: Nice to be with you, Jake.

TAPPER: So, I want to get to some specifics in a moment. But before I do, just broadly speaking, in this era of terrorist threats, nonstop terrorist threats, as a former director of the CIA and the current secretary of defense, what is it like having this responsibility? How often does a terrifying message come on your desk about some threat, and you just think, oh my God?

PANETTA: Well, you don't get a hell of a lot of sleep, let's put it that way. There are a lot of challenges. You know, as director of the CIA, got an awful lot of intelligence about all the horrible things that could go on across the world. In this job, I get the same intelligence but I'm responsible for a lot of the operations dealing with those threats.

But I have probably the greatest strength of our country is the men and women in uniform that serve this country, put their lives on the line. And that's something that I get to see up close and I'm very proud of them and proud of what they do.

TAPPER: So, turning to Afghanistan, which might be one of the biggest challenges – definitely one of the biggest challenges that the nation faces right now and you face. At the NATO summit, President Obama and the administration made it clear that the combat mission ends come midnight December 31, 2014. But the chairs of the Senate and House Intelligence Committees just returned from Afghanistan and they say that from their briefings there, they believe that the Taliban is actually stronger now than since the surge began.

Do we have a plan in place in case after the U.S. combat mission ends, Afghanistan or parts of it start falling to the Taliban?

PANETTA: Well the most important point is that we're not going anyplace. We're gonna, we have an enduring presence that will be in Afghanistan. We'll continue to work with them on counterterrorism. We'll continue to provide training, assistance, guidance. We'll continue to provide support.

We are making good progress. I mean, the Taliban, my view is that they have been weakened. We have not seen them able to conduct any kind of organized attack to regain any territory that they've lost. We've seen levels of violence going down. We've seen an Afghan army that is much more capable at providing security. We've seen transitions take place where we're beginning to transition. Now we're at about 50 percent of their population that's been transitioned to their control. We're going to be at 75 percent --

TAPPER: Right, but Secretary-

PANETTA: So, we're on the right track.

TAPPER: But you're not naive. I mean, there are problems with the Afghan forces, and you – (crosstalk) the military is always planning for a worst-case scenario. I'm assuming there is some sort of plan just in case the residual forces left there are not enough.

PANETTA: Listen, we still have a fight on our hands. The American people need to know that. The world needs to know that we still have a fight on our hands. We're still dealing with the Taliban. Although they've been weakened, they are resilient. We have the concern about the safe haven in Pakistan, the fact that they can seek refuge in that safe haven, that's a concern.But we're on the right track. General Allen has laid out a plan that moves us in the direction of an Afghanistan that can truly govern and secure itself. And that is going to be our greatest safeguard to the potential of the Taliban ever coming back.

TAPPER: At the NATO summit in Chicago, General Allen who is the commander of the NATO alliance troops there, ISAF troops, provided a briefing. And he was asked about the so-called green on blue attacks--Afghan army, Afghan police forces attacking U.S. forces. And this was his response. I want to get your reaction.

(BEGIN VIDEO CLIP)

GENERAL ALLEN: There's a good news story here, and that is that the Afghans have arrested more than 160 individuals in the last several months that they believe could have been in the throes of planning for an attack on ISAF forces. So, the process is working.

(END VIDEO CLIP)

TAPPER: That does not seem like a good news story to me, that there are 160 Afghan security forces that were considered to be threats. That seems like a lot.

PANETTA: Well, as General Allen pointed out, we are making progress on that front. It is a concern. Of course it's a concern. It's the kind of thing that the Taliban would use to come at our forces. And it's an indication again that because they can't organize efforts to come at us, they're going to use this kind of tactic to try to frighten us.

And it's not going to work for several reasons. Number one, the Afghan army has put into place a very thorough effort to review those that are serving.

Secondly, our forces are going to be very vigilant as well in terms of how they operate to make sure that they watch their backs as we go through this process.

And, thirdly, I think overall, what we're seeing is the basic training that's going into the Afghan army is one that truly is testing the qualifications and quality of individuals that are going to be fighting on behalf of Afghanistan.

JAKE TAPPER: Mitt Romney's had this to say about the president's Afghan strategy and the date certain.

(BEGIN VIDEO CLIP)

FORMER GOV. MITT ROMNEY, R-MASS., PRESIDENTIAL CANDIDATE: You just scratch your head and say how can you be so misguided? And so naïve? His secretary of defense said that on a date certain, the middle of 2013, we're going to pull out our combat troops from Afghanistan. Why in the world do you go to the people that you're fighting with and tell them the day you're pulling out your troops?

(END VIDEO CLIP)

TAPPER: Now, first of all, there's a factual error that Mr. Romney made that I'm sure you want to correct, but the larger point about giving a date certain for the withdrawal or the end of the combat mission, could you address that as well after you correct him?

(LAUGHTER)

PANETTA: Well, Okay. You know, I think without getting into the campaign rhetoric of what he's asserting, I think you've got 50 nations in NATO that agree to a plan in Afghanistan. It's the Lisbon agreement, an agreement that, you know, others, President Bush, President Obama, everyone has agreed is the direction that we go in in Afghanistan.

What is that direction? It's to take us to a point where we draw down by the end of 2014. That is the plan that has been agreed to. And it's a plan that is working.

And very frankly, the only way to get this accomplished in terms of the transition that we have to go through is to be able to set the kind of timelines that have been set here in order to ensure that we fulfill the mission of an Afghanistan that governs and secures itself. That's what this is about.

TAPPER: You mentioned Pakistan just a minute ago. This week, the Pakistani doctor who helped the U.S. find bin Laden was sentenced to 33 years in prison by the Pakistan government.

Secretary of State Hillary Clinton says the arrest was unwarranted. Congress has proposed cutting aid to Pakistan by $33 million, $1 million for each year of his sentence. Realistically, is there anything that the U.S. can do to help this doctor?

It certainly seems like this is a shot across the bow, saying anyone who ever helps the United States, you know, the U.S. is not going to be there, and you're going to be held accountable by your own government.

PANETTA: It's - it is so difficult to understand and it's so disturbing that they would sentence this doctor to 33 years for helping in the search for the most notorious terrorist in our times. This doctor was not working against Pakistan.

He was working against Al Qaeda. And I hope that ultimately Pakistan understands that, because what they have done here, I think, you know, does not help in the effort to try to reestablish a relationship between the United States and Pakistan.

TAPPER: Secretary Panetta, can we call Pakistan an ally when they do something like this, when they sentence a doctor who helps the United States find bin Laden, who has killed more Muslims than I can count? How can we call them an ally when they sentence this guy to prison?

PANETTA: Well, Jake, this has been one of the most complicated relationships that we've had, working with Pakistan. You know, we have to continue to work at it. It is important. This is a country that has - that has nuclear weapons.

This is a country that still is critical in that region of the world. It's an up-and-down relationship. There have been periods where we've had good cooperation and they have worked with us.

And there have been periods where we've had conflict. But they're dealing with the terrorist threat just like we are.

So our responsibility here is to keep pushing them to understand how important it is for them to work with us to try to deal with the common threats we both face. And what they did with this doctor doesn't help in the effort to try to do that.

TAPPER: And you've been in the middle of a very difficult negotiation with the Pakistanis about the lines of transit through which we supply U.S. troops in Afghanistan by using Pakistan and they shut them down after that incident at the border in November. They initially charged about $250 per truck.

They are now trying to charge $5,000 per truck. We already give them – the U.S. taxpayer already gives the Pakistanis billions of dollars a year. And now they're trying to charge $5,000 per truck. How high are you willing to go in this negotiation? Are you willing to pay more than $1,000 a truck?

PANETTA: We're going to pay a fair price. We're not going to -

TAPPER: What's that, a few hundred dollars per truck?

PANETTA: We're going to pay a fair price. They're negotiating what that price ought to be. You know, clearly we don't (inaudible) we're not about to get gouged in the price. We want a fair price.

TAPPER: Let's move to Yemen right now. We saw this past week a suicide bombing that killed 100 soldiers. The Al Qaeda affiliate in Yemen has attempted at least twice to bring down a U.S. plane. You've said Al Qaeda in Yemen poses the greatest threat to the United States. But you've also said you will not send American troops into the country.

If this is the biggest threat to the U.S., why would we not try to play a bigger role?

PANETTA: Well, our whole effort there is aimed at going after those terrorists who threaten to attack our country.

We've been successful. We've gone after a number of key targets there. We'll continue to do that.

TAPPER: But I think, I think the question is whether or not the smaller counterterrorism is - approach to this is enough. What we're seeing in Yemen seems to be a possible nightmare scenario of a terrorist state. Let me just show you a map.

PANETTA: Yeah.

TAPPER: Our Martha Raddatz was there earlier this week, helped us put together this map. The portion shaded in red are territory in which Al Qaeda has a strong and significant presence. As you can see, that's most of the country, and they're starting to hold those territories. I know I'm not telling you anything you don't know, but can we really fight them without boots on the ground there?

PANETTA: The answer is yes, because very frankly, what we're targeting, the operations we're conducting, require the kind of capabilities that don't necessarily involve boots on the ground, but require the kind of capabilities that target those that we're after who are threats to the United States.

That's what this mission is about.

TAPPER: President Obama recently said that -- recently told John Brennan, his counterterrorism adviser at the White House that he wanted a little bit more transparency when it comes to drones, which are the - is one of the approaches that you're alluding to in Yemen.

And "The Times of London" reported last week that the civilian casualties in Yemen as a result of drone strikes have, quote, "emboldened Al Qaeda."

Is there not a serious risk that this approach to counterterrorism, because of its imprecision, because of its civilian casualties, is creating more enemy than it is killing?

PANETTA: First and foremost, I think this is one of the most precise weapons that we have in our arsenal. Number two, what is our responsibility here? Our responsibility is to defend and protect the United States of America.

And using the operations that we have, using the systems that we have, using the weapons that we have, is absolutely essential to our ability to defend Americans. That's what counts, and that's what we're doing.

TAPPER: Let's turn now to Iran. Our diplomats were in Baghdad this week negotiating as part of the international coalition, trying to convince Iran to stop its suspected nuclear weapons program. But we recently saw an Iranian diplomat seemingly bragging to "The New York Times" about out-negotiating us.

Are they not just running out the clock? And are these negotiations once a month enough?

PANETTA: We begin with the fundamental premise here. The fundamental premise is that neither the United States or the international community is going to allow Iran to develop a nuclear weapon. We will do everything we can to prevent them from developing a weapon.

International community's been unified. We've put very tough sanctions on them as a result of that, and we are – you know, we are prepared for any contingency in that part of the world. But our hope is that these matters can be resolved diplomatically.

TAPPER: The American Ambassador to Israel said a few days ago that the U.S. is quote "ready from a military perspective to carry out a strike on Iran." That's true?

PANETTA: One of the things that we do at the Defense Department, Jake, is plan. And we have – we have plans to be able to implement any contingency we have to in order to defend ourselves.

TAPPER: There's been a lot in the press in the last few days about the fact that the Obama administration cooperated with the filmmakers Kathryn Bigelow and Michael Boal, who are making this Bin Laden film. Can you assert that nothing inappropriate was shared with these filmmakers?

PANETTA: Yeah – nothing inappropriate was shared with them, Jake. You know, we get inquires everyday from the entertainment industry. We get inquiries from people writing articles, from people writing books, people doing television shows. And the process that we've established is that you know, we will work with those individuals. We'll try to make sure that we give them accurate information so that the historic record is protected. But you know, we do not share anything that is inappropriate with anybody.

TAPPER: You were head of the CIA when bin Laden was captured. Now you're head of the Pentagon. There was an effort by the Obama campaign to talk more about the capture and killing of bin Laden. What is your take on this? Are you uncomfortable at all with what some have described as chest-thumping?

PANETTA: You know, I guess my view, having participated in that operation, is that it was something very special in terms of both the intelligence and military communities working together to go after bin Laden and doing it successfully. And whether you're Republicans, whether you're Democrats, whether you're Independents, I think this country ought to be proud of what our intelligence and military community did. And you know what, I'll let history be the judge as to whether or not that was a successful mission.

TAPPER: Well, obviously it was a successful mission but the politicization of it, that doesn't make you uncomfortable at all?

PANETTA: I would hope that both Republicans and Democrats would be justly proud of what was accomplished.

TAPPER: There are massive mandatory budget cuts heading your way -- I know you're more than aware of this -- if Congress doesn't come to an agreement on deficit reduction. You've said that defense cuts would lead to a hollow military but in a recent interview, Senate Majority Leader Harry Reid said this: "So now see the Republicans scrambling to do away with the cuts to defense that would be required by this agreement. I will not accept that. My people in the state of Nevada, and I think the country, have had enough of whacking all the programs. We've cut them to a bare bone and defense is going to have to bear their share of the burden." Is that language okay with you, that language from the Democratic leader of the Senate?

PANETTA: Well-- my view is that when you're facing the size deficits and debt that we're facing, that obviously defense has to play a role in trying to be able to achieve fiscal responsibility. We provided a budget that, we think, meets not only the goal of savings but also, more importantly, protects a strong national defense for this country. The thing that does concern me is the sequester which involves another $500 billion in defense cuts.

TAPPER: That's these automatic cuts I'm talking about.

PANETTA: These automatic cuts that would take place that I think would be disastrous in terms of our national defense. And I would say this.

I think what both Republicans and Democrats need to do and the leaders on both sides is to recognize that if sequester takes place, it would be disastrous for our national defense and very frankly for a lot of very important domestic programs. They have a responsibility to come together, find the money necessary to de-trigger sequester. That's what they ought to be working on now.

TAPPER: Lastly, several key members of the president's cabinet, Secretaries Clinton and Geithner most prominently, have said if there is a second Obama term, they will not be in it. Will you?

(LAUGHTER)

PANETTA: You know, one thing I've learned over 40 years is that when you have jobs in Washington, you do it day by day and that's what I'm doing as secretary of defense. And, I serve at the will of the president and that's what I intend to continue to do.

TAPPER: If there is a President Mitt Romney and he asks you to stay on as President Obama did with Secretary Gates, would you consider it?

PANETTA: I don't engage in hypotheticals.

(LAUGHTER)

TAPPER: Alright. Secretary Panetta, thank you so much for joining us. We really appreciate your time.

PANETTA: Thank you.

TAPPER: And a little later on the program, come along as the secretary and I pay a visit to the Vietnam Veterans Memorial.

But up next, our powerhouse roundtable weighs in on all the week's politics.

(BEGIN VIDEO CLIP)

OBAMA: This is not a distraction. This is what this campaign is going to be about.

(END VIDEO CLIP)

TAPPER: The Obama campaign doubles down on its Bain Capital attack, but is it resonating? Polls show the race tightening.

(BEGIN VIDEO CLIP)

JIMMY FALLON, TALK SHOW HOST: While attending meetings in Chicago this week, President Obama stayed in a hotel instead of his own house. True. It was annoying, though, when he asked for a wake-up call, they just showed him his latest poll numbers.

(END VIDEO CLIP)

TAPPER: And Facebook fallout. The most hyped IPO in a generation now dogged by lawsuits and investigations. What went wrong? And what can be done now?

(BEGIN VIDEO CLIP)

JAY LENO, TALK SHOW HOST: Facebook has lost so much money, Mark Zuckerberg has been named an honorary board member of JPMorgan. So that's really good.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ROMNEY: There's no question that he's attacking capitalism, in part I think because he doesn't understand how the free economy works.

OBAMA: I don't know how they've been bamboozling folks into thinking that they are the responsible, fiscally disciplined party. They run up these wild debts, and then when we take over, we've got to clean it up.

ROMNEY: Someone who spent their career in the economy is more suited to help fix the economy than someone who spent his life in politics and as a community organizer.

OBAMA: Well, if that's true, why is he peddling the same bad ideas that brought our economy to the brink of collapse? Most good business people I know, if something doesn't work, they do something different.

(END VIDEO CLIP)

TAPPER: A little Bob Dylan there. No editorial comment intended. He'll be at the White House on Tuesday to receive the Presidential Medal of Freedom. But we're joined now by our powerhouse roundtable. As always, George Will. Liz Claman, anchor at Fox Business Network. Ron Brownstein, editorial director for National Journal. Nia-Malika Henderson, national political reporter for the Washington Post. And former Michigan Governor Jennifer Granholm, host of "The War Room" on Current TV. Welcome one and all.

George, these attacks on Bain Capital, could they work?

GEORGE WILL, ABC NEWS: It depends on how mature the American public is. The president is quite right. He's made clear what the choice is this fall, and it really became clear I think this week. The president wants capitalism without casualties. He wants dynamism but no dislocations. Now, remember, this is the president who says that ATMs and airport ticket kiosks cause unemployment. That gives you his grasp of the economy. And the question is, what's his alternative to the market allocating wealth and opportunity? The answer is it's the government to do it. It's Solyndra, it is the energy programs, investment in Energy Department's operation as a venture capital firm, investing in companies. 71 percent of its money went to Obama bundlers and contributors.

TAPPER: Liz, Bain Capital, do you think that that at the end of the day is going to make the difference in this election that is hinging so much on the economy?

LIZ CLAMAN, FOX BUSINESS NETWORK: Private equity has never been the best calling card for calling yourself pro-jobs, OK? But that said, it's disingenuous to say that all private equity does is roll up debt and then drive the company into the ground. If Mitt Romney is smart, the governor will turn around and say, here are four examples of when I saved a company and it's still alive and viable today.

But the president, if he's smart, will go after it and simply use the other examples.

The fact is that you have to be real about private equity and say that it's in part about creating profits; it is not necessarily about creating jobs. And if either side can take that part of the message and make it work for them better than the other guy, then there you'll have who wins.

TAPPER: Ron, you had an interesting column this week about the Obama economic message. Do you think that there's something that he has yet to say that he needs to say for this to work?

RON BROWNSTEIN, NATIONAL JOURNAL: Well, look, I think, look, I covered the 1994 Senate race with Ted Kennedy and Mitt Romney. And in that race, Bain was a knockout punch. It will not be a knockout punch this time, because the ground is just more contested. When people are dissatisfied with the status quo, their tolerance for imperfection in the challenger, I think, is higher.

So what Obama has done so far, I think, is engage Romney on the grounds of philosophy, along the lines of what George is talking about. He would build a different frame around it. And biography, arguing that the Bain experience shows that Romney is not going to produce an economy that's going to generate positive results for everybody, that his focus is on enriching the few at the expense of the money. That's his agenda, that's background.

All of that has been pretty effective. The big hole in this, though, is ultimately a race with an incumbent is a referendum more than anything else on that incumbent. And where Obama has been the lightest in his explaining what he would do in a second term to get the economy moving faster than it is today. And that piece of it is still, I think, a big blank spot in the center of his reelection campaign.

TAPPER: Nia, you covered Romney on the road, on the ground, you're going to go with him this week in Las Vegas and other places. Do they think these attacks are just not even worth responding to?

NIA-MALIKA HENDERSON, WASHINGTON POST: In some ways, yes. I mean, they feel like that they can essentially throw back the anti-capitalist argument back at Obama. And that's essentially what they're doing.

They also feel like they're in very beginning stages of really painting a picture Romney on this canvas to explain his record, to explain what he did at Bain and so that's what you see him doing. A couple of weeks ago, he was talking about spending, the week before he was talking about education. This week he'll talk about energy. So they very much feel like they're in this transitional phase.

In terms of talking to Republicans privately, they say they do feel like Romney hasn't quite made the transition from coming across as a very wealthy, successful businessman to being an actual job creator. So that's I think one of the transitions that he still needs to make, really telling his narrative in story form. He doesn't quite do that, doesn't quite talk about his Bain -- you know, what you are saying, these are the four companies that I helped succeed, invested in. So I think that's what we're going to see in these coming weeks.

TAPPER: We have someone at our table who has been an incumbent during a rough economic time who then faced a successful businessman in a difficult re-election and that is you, Governor Granholm. You faced...

JENNIFER GRANHOLM, FRM. GOVERNOR OF MICHIGAN: I've been in this movie.

TAPPER: You admitted -- here's a little ad from your 2006 race against businessman Dick DeVos.

(BEGIN VIDEO CLIP)

ANNOUNCER: What do we really know about Dick DeVos? We know as head of Amway, Dick DeVos eliminated nearly 1,400 Michigan workers. We know Dick DeVos built a factory in China and created thousands of jobs there. And now we know Dick DeVos incorporated his business in Bermuda avoiding paying their fair share of U.S. taxes.

(END VIDEO CLIP)

TAPPER: OK first of all, I'm terrified. I'm so scared. I'm going to hide under my desk.

So, obviously, it worked. Why did it work?

GRANHOLM: First of all, it was very similar circumstances, Michigan had the highest unemployment rate in the country. I was an incumbent. The question was is this a referendum or is this a choice? This is a choice. This is choice.

And so the choice in Michigan was do you want to pick a businessman who got rid of jobs in Michigan and invested overseas? He's a billionaire, very wealthy man. Spent way more money on this election than I did. I was under water in my favorability. But I won by the largest number of votes that were cast for Michigan, 56-42.

Why? Because it was a question of he is not the solution, he is part of the problem. He is not going to fix this. He exacerbated what we're going through. And by the way he supports all those Bush policies which got us into this mess.

TAPPER: And Ron, this touches on something you and I were talking about?

BROWNSTEIN: I think we are at a point in this election where we're right now standing with a double negative. We don't have a majority that is convinced they want to re-elect President Obama for a second term and we do not have a majority that is convinced that they want to turn power in Washington to Republicans.

And the core argument I think that this Bain attack is designed is to effect is to basically link Romney's private experience with his public agenda and to argue that in both cases essentially he's trying to enrich the few at the expense of the many. And as governor said, one of the big vulnerabilities that Romney has, is that in many ways his agenda looking forward is -- faces significant doubt -- the idea of converting Medicare into a premium support program, another 20 percent marginal tax cut.

Obama wants this to be a choice as much as possible. But the referendum inexorably is a big of it with an incumbent and on that front he is not looking at a majority today.

TAPPER: George.

WILL: I just don't understand the dichotomy between the choice and the referendum. It seems to me that it's the same thing looked at from different sides.

Surely it seems to me that the Romney campaign boils down to eight-word sentence, is this really the best we can do? Ask that to the American people, and they'll say no, because next Sunday, when this movable feast of a television show regathers, we'll be in June. June is the third anniversary of this recovery, and it does not feel like a recovery to most Americans.

CLAMAN: Although there's a brand new piece of data that came out this week, Jake, and that is the consumer sentiment hit the highest level that it's seen since October of 2007. Now it's one piece of data, you can argue it all over the place, because other pieces don't look so good -- durable goods orders went down. But when you look at that, that translates directly to how the consumer is feeling, whether they will buy more, whether they will be spending, whether they will feel psychologically better about their chances of getting a job.

And if the president capitalizes on that and says we're now at least back on that part of it, to where we were when this disaster began, then it becomes...

(CROSSTALK)

BROWNSTEIN: I'm sorry. That is why Obama is back in the game, because those numbers are better than they were a year ago.

I mean, the risk to him is whether the slowdown and the job growth ultimately kind of breaks that chain. Because what he wants to argue is we're not where we want to be, but we're better than we were. And we're moving in the right direction. Do you want to go back?

The key -- the most vulnerable link in that chain is we are moving in the right direction. And that has what's been called into question by the slow economic growth.

GRANHOLM: He's been very careful about the language that he uses, the president is he cannot claim victory because he knows people aren't feeling it. But with gas prices going down and consumer confidence going up and what is it, you know, 4.2 million private sector jobs that have being created since he took over, he has got at least something to be able to hang his hat on and saying that the other guy would make it worse because he's adopting the policies of the previous administration, which got us here.

HENDERSON: And one of the things you see from the Romney campaign is they are kind of moving the goalpost in terms of what constitutes a bad economy. I think he said that anything over 4 percent is at this point is unacceptable. He would guarantee 6 percent unemployment, they always say. You know the stimulus package that Obama promised that they below 8 percent. It probably will be by election day, possibly. So that will take away that talking point.

One of the things they're also doing is talking about Greece as a worst-case scenario saying that if things continue on this path America could hit a Greece-like wall. And so I think they're trying to reframe it because they're obviously aware that there are some little signs -- you know, green shoots that the economy is...

BROWNSTEIN: Also Nia, to your point, not everyone is responding in the same way, not everyone has the same view of what's happening here. I think we are seeing consistently in polling, including your ABC/Washington Post poll this week, a separation between white-collar American and blue-collar American.

TAPPER: Let's bring up those numbers for one second. First of all just as a general point, trust to handle the economy it was Obama 46 percent, Romney 47 percent. So they're neck and neck.

But with white non-educated -- I'm sorry, white non-college educated voters, Romney, 59 percent, Obama, 35 percent.

BROWNSTEIN; That's right. We have been living through 40 years of what I've called a class inversion. Democrats now do run better consistently with college educated white-collar whites than blue-collar whites partly because of social issues like gay marriage. You saw a very different reaction to Obama's announcement of that.

But in this election, all of that is being reinforced, not only the ideological divide between white-collar America is a little more open to activist government than blue-collar America, but attitudes toward the economy. In your poll, roughly 40 percent of non-college whites said they knew someone who had been laid off in their household. Only about 25 percent among the non-college whites. Half, half of the blue collar -- among the college -- half in your poll, roughly half of working-class whites said they are struggling to remain in the middle class.

So this is a very...

TAPPER; He's going to lose white, non-college educated voters, but it's a question of how much.

BROWNSTEIN: He only won 40 percent of them last time. But now in your poll and others, he's consistently polling at 35 percent or below and that, you know, those are historically low numbers and that makes it a challenge for him to make the rest of that up.

GRANHOLM: And the Millennial generation, we were talking about earlier, the Millennial generation is going to, I think, create the bubble for victory for Obama. There are 4 million Millennials that have aged into the system every single year since 2008. That means 16 million new Millennials are available to vote. They support the Obama administration 2 to 1 over Romney. If only half of them vote that's a significant bubble. Those Millennials, I think, will make a huge difference.

TAPPER: George?

WILL: That's some kind of evidence. But so is this, this week Nancy Pelosi suggested to Boehner that Boehner conduct a vote on the floor by preserving for the Bush tax cuts for people below $1 million.

TAPPER: Which is differing than the president. The president wanted it below $250,000.

WILL: That's a couple trillion dollar difference over a decade.

So, it seems that the Democrats are at this point flinching from their own president's agenda.

TAPPER: I want to turn to the political trail. You're going to be going to Las Vegas. And Mitt Romney is holding an unusual event there with Donald Trump, the billionaire developer and it's an interesting timing because Trump on Friday, doubled down with these birther claims that President Obama was born in Kenya. Obviously, they're false claims, they're nonsense and Trump keeps doing it.

George, Mitt Romney wants us to take him, us as voters and the media, to take him seriously as a serious man, why does he keep doing things with Donald Trump? And do you think it hurts him?

WILL: I do not understand the cost-benefit here. The costs are clear. The benefit, what voter is going to vote for him because he's seen with Donald Trump?

The cost of appearing with this bloviating ignoramus is obvious, it seems to me. Donald Trump is redundant evidence that if your net worth is high enough, your IQ can be very low, and you can still intrude into American politics. But again I don't understand the benefit. What is Romney seeking?

CLAMAN: Well, it's a dangerous game that Mitt Romney is playing here, because Donald Trump doesn't have a lot to lose by keeping this birther conversation alive. But Mitt Romney --

(CROSSTALK)

TAPPER: I've got to believe that if you think Barack Obama was born in Kenya, you're probably not going to vote for him.

UNIDENTIFIED FEMALE: Yes, I would think.

CLAMAN: Mitt Romney and his people have to decide whether standing next to Donald Trump means more votes or fewer votes, and it is a scary prospect for them because, right now, you talk to Americans and here's what they care about: putting food on their families' tables, getting an upwardly mobile job, a career type of job where they can continue to make more money each year of the way, and putting their kids through college.

So if Mitt Romney doglegs off somewhere to the side on this issue, it is an issue that may end up annoying some very serious conservative business people, who are just saying, be friendlier to business. Let's focus on the economy.

BROWNSTEIN: But it's a long pattern. I mean, Mitt Romney throughout the entire primary season has shown very little willingness to confront the right. And there is a big portion of the conservative base of the party that does believe that Barack Obama wasn't born in the U.S. and Romney --

TAPPER: Falsely.

(CROSSTALK)

BROWNSTEIN: -- and Romney has just seemed to be spooked throughout the whole process at the thought that the right will mobilize against him.

The risk here is that, as I said, I mean, I think the key swing vote in this election are those upper middle class white voters, many of whom are somewhat disappointed in Obama economically and ideologically, but who are clearly not convinced they're ready to turn the country back to the Republicans.

And to the extent that this kind of associates them with extremism and intolerance is just one more brick in the wall, one more hurdle that Romney has to get over to win those voters who will probably decide this.

TAPPER: And it's not just this event they're appearing at, the Romney campaign to raise money, the Obama campaign is raffling off to donors a dinner with Barack Obama and Bill Clinton.

HENDERSON: That's right, and they --

TAPPER: The Romney campaign is raffling off dinner with Mitt Romney and Donald Trump.

HENDERSON: Exactly. And that's the point. I mean, it's to raise money. I mean, he is, as you said before, and I'm quoting you here, Donald Trump is sort of their version of George Clooney. Not as handsome, but certainly --

TAPPER: I'm going to get a call for that.

(CROSSTALK)

HENDERSON: But I don't think they think that he can be a surrogate to the business community. I don't think they imagine that he's going to be on the Sunday shows talking about the Romney agenda.

(CROSSTALK)

HENDERSON: This might be a two-, three-day news cycle. We'll talk about it today; we'll talk about it on Tuesday. But after that, I think Donald Trump goes away.

GRANHOLM: I think he's -- I have this nefarious belief that actually he's setting this up as an opportunity to say I disagree with this issue, because everybody's complaining that he can't stand up to his base. So this gives him a chance to say I disagree, but in front of Donald Trump, right there.

(CROSSTALK)

BROWNSTEIN: -- broader point, though, when Rush Limbaugh called the Georgetown student a slut, Romney was almost silent. Rick Santorum said Kennedy made him want to throw up. Mitt Romney was silent. These were all opportunities to identify yourself as kind of a more centrist. And he's not taking it. And it is having a cost.

If you look at some of those upper middle class, socially liberal, economically moderate white voters, Obama is holding them -- especially the women -- and that is the thin margin that is keeping him on top, and I think it's a consistent challenge for Romney.

CLAMAN: Both of these people, President Obama and Mitt Romney, better get off the whole birther issue, the cars on dog roofs, the Bain Capital, these are side shows. Americans care about the main act and that is jobs, the economy.

And at this point, we're not seeing enough jobs. The economy incrementally getting better, and where are the ideas? We better start presenting them.

GRANHOLM: I don't think Bain Capital is a side show, as the president says. This is the issue. This is the issue (inaudible) --

(CROSSTALK)

CLAMAN: Then why doesn't he go to businesses that were helped by private equity?

GRANHOLM: That's not -- but that's the whole point, is that he's not going after free enterprise because he's attacking this man for his job experience. That would be like saying, you know, if you did a story I didn't like, free speech, I'm attacking free speech.

That's just not the case. He's attacking him for that experience, claiming that that experience is the experience that we should be looking to, to create jobs in America when it's clearly not.

WILL: So, it would be fair for Romney to say, look at Solyndra, they laid off 1,100 people with no pensions, no severance, nothing else. And that's the result of the president's idea of green energy.

(CROSSTALK)

BROWNSTEIN: And George, to your point, from before. I mean, those are the two competing frames that the candidates are offering for what's happening in America.

As you said, the Romney frame is that government is intruding on the private market and producing weaker results. The Obama frame is that the private market isn't producing an economy that works for everyone.

GRANHOLM: And there is --

BROWNSTEIN: And that ultimately government has to be involved in trying to create more broadly shared opportunity.

GRANHOLM: There is a big difference with Solyndra, though. The president was not personally profiting. It was an effort to try to jump-start an industry and a business. Romney was personally profiting (inaudible).

WILL: There's another difference, that is when Bain invested -- invests money that it gets voluntarily, to be invested. When the president throws a half-billion dollars away on Solyndra, it's money taken away by the police power of the federal government from unwilling taxpayers.

(CROSSTALK)

TAPPER: I just want to (inaudible) - we only have a few minutes left, and I do want to get to one of the biggest financial stories of the last year, which happened in the last week, which was the Facebook IPO.

And Liz, you covered this from your perch. This was a disaster. What happened?

CLAMAN: Well, it is a categorical disaster. And when all is said and done, Facebook will end up being the most aptly named company ever, because when the final chapter on the book is written, there will be egg on a select group of people's faces.

What happened was that nine days before the actual initial public offering of what was supposed to be the most populist of companies -- 900 million members, anybody can join, it's free -- they looked at and they saw their numbers, and they saw that more people are using smartphones to access Facebook. And there are no ads on smartphones for the Facebook app.

So they realized that they wouldn't be able to monetize it, get money from ads at this point. So they downgraded their estimates on how they would make money.

The problem then becomes that they only told a select few people in the beginning, a group of about 20 or so. And while they put it in a prospectus for all to read, the argument now is that the retail investor, the so-called little guy, didn't get enough time to see that.

Look, are we sitting here in the business of making sure that everybody catches up and gets to the finish line at the same time? No. And anybody who invests in this stuff should know that. But now the question becomes, did the big boys on Wall Street, the big analysts, the Morgan Stanleys of the world, get that information early and often?

They were able to realize, "I don't want this stuff," and then on top of it, you had the Nasdaq plumbing get gummed up because of the trades that wouldn't go through. The little guy lost.

TAPPER: George, quickly. I want to get to everybody on this.

WILL: Well, Facebook, A, has to answer for turning a good serviceable noun friend into a verb, more damage being done.

(LAUGHTER)

WILL: But beyond that, this is all about advertising. At bottom, it is about advertising. There are metrics by which you measure advertising. The metrics for Facebook simply don't add up for their model to monetize the waste of time.

BROWNSTEIN: This is where it links back to what we were talking about before. I think most Americans look at this and say that's the way the economy works every day. Big institutions are profiting at my expense. They don't trust the private sector. They also don't trust government.

That's why we have what I would call a double negative at this point, where neither candidate, really, I think, will be able to pull away, because whichever frame you put on it, more people are kind of distrustful of the institution. And I think Facebook and the kind of story you talked about is exactly why people feel that way.

HENDERSON: That's right. I think people are asking themselves what is the purpose of Facebook at this point? I mean, I get a lot of virtual (inaudible) sent to me on Facebook and people poke me. But beyond that, it seems like, what is this all about? It's obviously a vehicle for advertising. He looks like he's trying to go into making it easier to go on Facebook and be an organ donor.

But it doesn't seem, I mean, it's not like it's Apple, where you wait in line for your shiny new object, or Amazon, that's transformed the way we read. But I think that's the question, I mean, what's next for Facebook?

GRANHOLM: And I do think the market has to figure out how to value this kind of intellectual capital. But -- and I also agree that it's an advertising mecca if they can figure out the way to do it.

But Facebook and social media have given us, for example, elections in Egypt. I mean, they've given us freedom and democracy in other nations, not just Facebook but obviously social media. And I think there's huge value there. The question is, is anybody going to create jobs as a result of it?

TAPPER: All right, we'll have to leave it there. We'll have more in the green room. We'll be back in a moment with the story behind this incredible photograph that resonated with so many of you.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We still have that experience where you can come in, have a coffee with your neighbor, the kids can order ice cream and charge it to their family account.

(COMMERCIAL BREAK)

TAPPER: And now, your voice, your picks. For over a month we have been asking to see what Americana means to you. You sent in over 1,000 incredible snapshots. These two photos were the most popular. This classic scene from the American west by Steve Borko (ph). And this one of a country store with an amazing made in America story.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: My name is Terry Bolin (ph). And I'm calling from Deep Haven, Minnesota.

The cottage and store truly is the heart of our neighborhood. Years ago, a for sale sign went up in the front window of the store, and a group of concerned neighbors decided to purchase the store to save it from potential demolition. The cottage and store is a perfect example of what Americans can do from when they join together for a great cause.

(END VIDEO CLIP)

TAPPER: I also wanted to share my favorite. For two years now, I have been working on a book about the sacrifices made by our soldiers in Afghanistan. And so this image of a sailor in Afghanistan seeing his daughter for the first time over Skype resonated with me.

Thank you for your submissions. And remember you can head over to abcnews.com/thisweek to see all of the photos.

When we come back, a personal look at the Vietnam Veterans Memorial with Secretary Panetta.

(COMMERCIAL BREAK)

TAPPER: This Memorial Day weekend, we mark 50 years since the official start of the Vietnam War. I recently took a walk with Secretary Panetta to that powerful symbol of the fallen heroes, the Vietnam Veterans Memorial, to reflect on the meaning of sacrifice for country.

(BEGIN VIDEOTAPE)

PANETTA: This was a bloody war, a bloody war, 58,000. When you consider Afghanistan and Iraq, I think we have lost now close to about 6,500 which is too many, but to think back to Vietnam and 58,000 lives that were lost.

TAPPER: And you know people on this wall.

PANETTA: Oh, yeah. I had three good friends who I went through ROTC with at Santa Clara. We all got commissioned. I went on to law school before I actually went in the service and they actually went right in. were deployed to Vietnam and lost their lives there.

TAPPER: What have we as a nation learn from that war?

PANETTA: We can never lose sight of men and women in uniform who put their lives on the line, fight and die for America. When the people to agree or disagree with the cause, when there are men and women willing to do that for this country, that is something, that's a strength that I hope we always appreciate and are grateful for in the future.

And there's one thing this wall is all about it's a reminder that we always remember those who served.

(END VIDEOTAPE)

TAPPER: And in that spirit, as we do every week, we pause now to honor our fellow Americans who served and sacrificed.

This week the Pentagon released the names of nine soldiers and marines killed in Afghanistan.

That's all for us today. Tune in to World News David Muir for the latest headlines tonight.

And two special programming notes. Tuesday morning, First Lady Michelle Obama visits GMA to discuss her new book "American Grown." And Tuesday night, Katie Couric anchors an extraordinary two-hour edition of "20/20" in honor of Queen Elizabeth's diamond jubilee. Katie will have interviews with the queen's grandsons Princes William Harry and special access inside Buckingham Palace.

Finally, I hope you have a very meaningful Memorial Day. And a personal note, getting to know troops and their families these past two years while working on a book project, has left an indelible impression of the world of service and sacrifice made by so few on behalf of so many. To those missing someone this Memorial Day weekend thank you, you are in our thoughts and prayers more often than you may know.

George Stephanopoulos will see you back here next week.

END