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Bill Kristol:So we have Lindsey Graham here. (Audience laughs). Now, Im just kidding. Lindsey is of course you all know and has been a leader of some of the issues but particularly thoughtful I think and very courageous on defense and national security issues. He will also have a distinction, I think he will be the only US senator after December 31st. When his colleague Jim DeMint steps down, hell be the only person representing the State of South Carolina. Hell be able to cast two votes on the floor of the Senate through January and February until he has a colleague who joins himno just kidding, I know thats not the rules. And (audience laughs) anyway, Lindsey took time from a very its actually a very busy time in the Senate as you know and hes got a very busy schedule and we really appreciate him joining us here for a few minutes today, Lindsey. (Audience claps). Lindsey Graham:Well thank you Bill. About the Senate being busy, if were doing anything, I dont know it. (Laughs). So, glad to be with you (laughs), or at least talking about doing something. Thanks, Id like two paychecks too by the way. Im going to miss Jim. Hes been a strong voice for conservatism at the time when we needed a strong voice but Michael has always you you really challenge me and others to think. About budgets and defense, I think the way I look at things is the first question Id like to build upon and Michael brought it up: what is our role in the world? If were going to be Switzerland, we can do without a lot we have today. But I dont think the world wants us to be Switzerland and I like Switzerland. Theyre great people. Theyre always helping find ways to solve problems. But if you believe that were an exceptional nation and theres no substitute for American leadership when it comes to foreign policy, then one of the tools that every president needs at their disposal is to enact foreign policy that makes the world a better place. And sometimes that requires force, a lot of times it requires the threat of force and at all the times, it requires your enemies who are irrational to believe they will lose. So I would like to start the discussion with a concept that were at war. How many people believe were at war? Okay, then when you look at historical spending at the time of war in terms of GDP, are we on the upper end or the lower end? Were on the lower end. So, if you buy Michael that the nation is at war, then we would need to look at our defense spending I think in terms of GDP as a consistent measurement. And what could make the argument (clears throat), were on dramatically the low-end compared to other conflicts. But I will buy this, you could also make the argument were going to be Greece as a nation if we dont get our fiscal house in order. So, you have two things going on at the same time. Were about to reach a point where our economy is going to stall and fail and China will pass us if we dont get our fiscal house in order. And were one political compromise away from dominating the 21st century. Dont worry about people buying our bonds or our treasury notes, where else are you going to go? But we should worry about making promises that we cant afford to keep in the future. And that our economy cannot bear the weight of unreformed entitlement spending and the current discretionary numbers we have. So Michael, if we could come up with an entitlement reform bill that saves us security and medicare and deals with medicaid and sets some spending limits that are more sustainable, I would entertain going past $487 billion. But the one concept I will not entertain is having a military that doesnt make us an exceptional nation. We cannot afford that. The world cannot afford it. And I can tell you from travelling the world, people miss America being an exceptional nation because were not right now when it comes to foreign policy. So as we debate the budget, I think we need to establish that were at war but were also in economic crisis that has to be dealt with. Secondly, we need to establish the concept, at least from my point of view, that every budget we pass on the defense side will allow us to continue to be an exceptional nation, the strongest voice for democracy on the planet. And that our capabilities are such that no rational foe would want to engage in war with the United States because you will lose. So, what number should we pick? Is it 5% of GDP? Is that a fair number? Well, that would put us on the historical low-end of a nation at conflict in terms of spending but I think it would probably give us enough to do what we are challenged to do in the times on which we live. But before I make any decisions about going beyond $489, I want to know how this movie ends in the mid-east. You talk about were on in passing. I want the Iranian nuclear theat to be resolve before I go to a $100 and a $150 billion beyond the $489. I want to make sure that Syria ends in a way that doesnt blow up the entire region. The Arab Spring is a work in progess. I would like to know with some general idea how this movie ends. If we dont know how these things unfold, then I think were making a very poor national security decision driven by budgets. So now is not the time, in my view, to go much beyond $487 billion. But when you talk about how to reduce spending, sign me up for Michaels analysis of trying to do more with less. Numbers matter but capabilities matter more. So you could have a smaller landforce if they have more capability, you all agree with that? Okay, so the idea about having one fighter versus five because the F-35 can probably do things that the F-18 and the F-16 cant do by a factor of five. But you got a coverage problem too. Does it matter that you have nine carrier battle groups versus eleven? I think it does because the conflicts that were facing in the 21st centurey require coverage. So what Im going to do is say no to sequestration with all the force in my being because it is a dumb way to reduce defense spending. And I just want to say Bill that I appreciate you and others from the conservative world who still believe that foreign policy matters. And Im disappointed in the Republican party for signing up for the sequestration deal. The party of Ronald Reagan would never have done the following, if a bunch of politicians fail to reach an agreement over a $1.2 trillion spending package, lets punish the military beyond recognition. It means as a party, we have slipped from what the role of the federal government should be. So my time, whatever is left in the Senate is going to try to re-establish my party in terms of priority. When we do a federal budget knowing that everything is on the table, the first question a Republican should ask and I think any American should ask, how did the defense department fare? Because without national security social securtiy is an illusion. So lets get back to the idea of having a budget built around core principles of whats important at this critical time in the world and what is the proper role of the federal government. If well start with that analysis, I think everything falls into place. And whether or not in a 2500 F-35s or half that amount, I think really will be determined by the threats that we face. I dont want to go to war with China and I dont expect we will but its always good to know that you could and win. I hope military force is not necessary to stop the Iranian regime marching toward a nuclear capability. But I do know this, that if force is to be used, our capabilities need to be such that it would be decisive. My biggest fear about an Israeli attack in Iran is that they dont have the capabilities in my view to bring the program to a complete end. I think the biggest airplane they have is the F-15. Their airforce is one of the finest in the world but the Iranian nuclear threat is so dispersed and so redundant. I think it would be very difficult with an F-15, F-16 package to stop those programs. I think it would be very difficult for the United States to stop the nuclear programs by themselves. But with the F-22, a deployable F-35, the stand-out weapons we have today, Id rather bet on us than the Iranians. And what would the world be like if we dont go to the next generation manned aircraft and beef up our drone program? Because the world is not stagnant when it comes to defense capabilities. So I just use Iran as an example, of why it is important to understand the threats we face and get some of the threats resolved (clears throat) before we march down the road of additional defense spending much beyond $489 billion. I think weve reached the point now where if there is a military engagement with Iran, just attacking nuclear sites is not enough. I dont think we could stop the program with confidence. I think were at the point now that if military force has to be used against the Iranian regime, it should be used to shoot down their airforce, sink their navy and punish the revolutionary guard so they have very little offensive punch. We will take a blow. The day that military force is used against Iran, youre opening up Pandoras box. They can unleash suicide bomber units all over the world. They can hit our bases in the Gulf region. They can do damage to us. But I know how this movie ends, they lose we win. And the reason we win is because our capabilities at this moment in time are so much superior than any other capability on the planet. What would the world be like if that gap closed? I think the world would be an exceedingly dangerous place. We do have the ability to go deep in Iran and come back. We do have the ability to hit them from the sea, air and land without putting a boot on the ground. We can destroy their airforce, we can sink their navy, we can punish the revolutionary guard at this moment of time. The question for us in the 21st century, will there be other occasions where we need to do the same? Were worried about going into Syria now because of their air defense capabilities. Theyre different than Libya, that is right. But let me just suggest to you this, if we disarm more than were doing todayif we reduce our capabilities beyond todays level, what would the next Syria be like? So I would suggest to you that Lindsey Graham, one of the strongest defense hawks in the Congress understands were $16 trillion in debt. Now, well embrace what Michael is talking about, going beyond $489. Only once as a nation we decide on who we are and we honestly deal with the threats we face. The budget has to be reflective of the fact that there is no substitute for American military power in the 21st century. That American military power has to be superior to anything on the planet at all times. I am not looking for a fair fight, are you all? Im looking for an overwhelming advantage. Money matters, numbers matter but the more capable the force, the more investment in research and development, the more drones. And as an airforce guy, this is heresy. I see a day where therell be a dramatic less need for manned fighter aircraft because the technology is being developed on the drone side. So as we go into January 2013, the first thing a conservative, and I think any American should want to do, is take off the table sequestration cuts that our military are facing because it is national suicide. Take those cuts off the table, sit down as a group of Republicans and Democrats and say the following, defense spending reductions beyond 489 are on the table, only if we stop this country from becoming Greece. And that would mean meaningful entitlement reform. I am willing to give, yet again, but I have to see how this movie ends on the financial side. If there is an effort by the Congress to address why were becoming Greece in a real way, count me in for more contributions from the Department of Defense. But my bottomline about how much I will give is going to be based on two very simple concepts. Were still at war and we cant afford to lose. And secondly, there is no substitute in the 21st century or any other time that I can envision for a strong America who has the ability through the force of arms to fight and defeat evil. And I would just suggest that were in the 20s and 30s all over again. The reason World War II happened is because people after World War I were so weary and so tired they did not want to embrace the idea there could be a Second World War. And when the radical elements of their day presented themselves, the people of that era rationalized themselves into believing that the threats were not real and genuine. Let us not make that mistake. Let us understand, with a clear purpose and a firm resolve, that radical Islam cannot be accommodated, it must be defeated. And if America is not going to help fight radical Islam, who will? Ronald Reagan said when ask, how does the Cold War end? We win, they lose. And he engaged in a Cold War concept that challenged the Russians and the Soviet Union to the point that they collapsed. I would encourage us to engage in a full-force effort to defeat radical Islam. That does not mean boots on the ground by itself. A clean, drinking-well water source, a one-room school house that you would not send your kids to for 15 minutes can do more in many areas of the world to destroy the radical Islam as to agenda than a brigade of troops. So the one thing we havent talked aboutIll end on this note, when you talk about defense spending, you also need to talk about foreign assistance because that 1% of the budget sometimes is all we have in terms of the presence. So I know were $16 trillion in debt, I know that a guy like me has to give in areas that I find very important in hold near and dear. But we cannot, ladies and gentlemen, afford the luxury of believing that the times in which we live in can be resolved without an exceptional America. So let us come up with a budget that recognizes that concept and also will allow us to end any war we fight with any enemy, wherever they may be in a decisive manner. Let us also realize that the 1% of foreign aid for lack of a better term can do as much to keep us safe as any military hardware. God bless you. (Audience claps).