SUSIE GHARIB (PBS): Umm, why the hesitation about the "R" word? Isn't it time to call it what it is?
DUYBA: Well, because, uhh, you know, there's a, there's a definition for the "R" word, and we hadn't reached the definition, and secondly, uhh, I am confident in the long-term growth of the country. Uhh, umm, I — if, if you want me to say we're in a tough patch, having a tough time, it's — bad, eh, you know, it's a, ta — times are rough — I'll say all those three, because that's the truth. And the key the American people have got to know is, raather than, you know, fretting, we moved, and we moved a very robust, pro-growth pa, ahh, package, uhh, that, uhh, will — you know, will start movin' money into the economy quickly. Uhh, by the second week of May, people start getting their rebate checks, plus we sent a signal to businesses large and small that there'll be additional incentives this year for you to invest, which — uhh, I think will lead to jobs.

Secondly, we're strengthening the defenses at our most important and vulnerable locations. In other words, part of a strategy is ta — to try to figure out where the enemy may attack. You assess your weaknesses, and you build on those — and you, and you, strengthen your weaknesses. That's the — remember, we're, this is a war. This isn't a — you know, maybe a, you know, a ketta, a law enforcement adventure. We're at war with these people, and therefore, during a time of war, you've got to do everything you can to strengthen your defenses. And so we'll continue to enhance protection at our borders and coastlines and airports and bridges and nukyular power pants.

And so the first question that anybody running for President gets: Is this a war? Or is this like law enforcement? Is it a — does this require full use of U.S. assets in order to protect the American people? As you know, I made the decision that it does require those assets. Secondly, that these are two very important fronts, both of which are important to the future of the country. And therefore, we got to succeed in both. Thirdly, one front right now is going better than the other, and that's Iraq, where we're succeeding, and our troops are coming home based upon success. And Afghanistan is a tough fight. It's a tough fight because, one, this is a state that had been just ravaged by previous wars, and there wasn't a lot of central government outreach to the people. Secondly, there is a tough enemy, and they're brutal, and they kill at the drop of a hat in order to affect behavior.

My only point to you is, is that we're in constant contact with people on the ground to help make sure that we save lives. Now that the water is beginning to recede, the question is, how do we help with the recovery? ...Secondly, what's going to happen in the long term to the homes? And so Michael is going to set up a housing task force similar to the kind we set up in California for the wildfires, to work with state and local authorities to have an orderly strategy to help people get back in their homes. ...Secondly, we're worried about farmers and ranchers. The country that's being affected by these floods has got a lot of farm country, a lot of people raising livestock. And the Secretary of Agriculture has briefed me on the conditions — and we're still assessing how widespread the damage is on the farmlands — and assures me that his team is in place to help farmers and ranchers with the federal aid available. And finally, Director Nussle is here from the Budget Office. We've got what we called a Disaster Relief Fund.

We've had seven years working together, a chance to have some pretty candid exchanges. And secondly — and this is his [Russian President Putin's] last — this will be our last face-to-face meeting as a presidency, and I'll thank him.

REPORTER: Beyond your concern that you stated here, and your expectations for these stimulus checks, what kind of hope can you offer to people who are in dire straits?
DUBYA: Permanent tax — keep the tax cuts permanent, for starters. There's a lot of economic uncertainty. You just said that. You just said the price of gasoline may be up to 4-dollars-a-gallon — or some expert told you that — and that creates a lot of uncertainty if you're out there wondering whether or not — you know, what your life is going to be like and you're looking at 4-dollars-a-gallon, that's uncertain. And when you couple with the idea that taxes may be going up in a couple of years, that's double uncertainty. And therefore one way to deal with uncertainty is for Congress to make the tax cuts permanent. Secondly, it's — people got to understand that our energy policy needs to be focused on a lot of things — one, renewables, which is fine, which I strongly support, as you know. Two, conservation. But we need to be finding more oil and gas at home if we're worried about becoming dependent on oil overseas. And this — I view it as a transitory period to new technologies that will change the way we live, but we haven't built a refinery in a long time. We're expanding refineries, but we haven't built a refinery in a long time. I strongly suggested to the Congress that we build refineries on old military bases, but, no, it didn't pass. But if you've got less supply of something, as demand continues to stay steady or grow, your price is going to go up. Secondly, on oil, we — the more oil we find at home, the better off we're going to be in terms of the short-run.

I would say it's like — as I explained to this fellow here — that one of the lessons of the genocide in Rwanda was to take some of the early warnings signs seriously. Secondly, a clear lesson I learned in the museum was that outside forces that tend to divide people up inside their country are unbelievably counterproductive. In other words, people came from other countries — I guess you'd call them colonialists — and they pitted one group of people against another. And an early warning sign was — and it's hard to have seen it, I readily admit, but I'm talking earlier than 1994, and earlier than the '90s — was the fact that it become a habit to divide people based upon — you know, in this case, whether they were Tutsi or Hutu, which eventually led to exploitation. Secondly, I would tell my successor that the United States can play a very constructive role.

One of the interesting tactical decisions that Russia has made that the United States supports is the notion that Iran has a sovereign right to have a civilian nukyular power program. What they don't have is our confidence that they should be able to enrich uranium so that those plants would work. Why? Because they had a covert weapons program that they did not declare and have yet to declare. Secondly, we understand that if they were to develop that weapons program it would be a real danger. And so the Russians said, well, would you support us on this notion — that because they're untrustworthy when it comes to the fuel cycle, we will provide the fuel and we will collect the spent fuel? And I have, publicly. I'll say it again — and we discussed this part of our strategy. Secondly, I explained to him the content of the NIE, what it meant and how our working together has been effective. And thirdly, we talked about ongoing efforts to come up with another U.N. Security Council resolution if the Iranian regime doesn't suspend.

REPORTER: Mr. President, tomorrow, August 31st, Malaysia celebrates its 50th —
DUBYA: Fiftieth. Make sure my congratulatory remarks get in your article. Headline, Bush congratulates Malaysia. Do you think that's what it will say?
REPORTER: Something like that.
DUBYA: Upbeat, optimistic George Bush —
REPORTER: War on terrorism.
DUBYA: Yes, sure.
REPORTER: It also marks the 50th [year of] relations between the U.S. and Malaysia —
DUBYA: Yes.
REPORTER: So what are your outlook and hopes for U.S.-Malaysia relations, and especially with Malaysia being the 10th largest trading partner?
DUBYA: First of all, I do believe we ought to have — take this notion of trade and have meaningful discussions with a potential free trade agreement with Malaysia. Secondly, I respect Prime Minister Badawi, admire his leadership. When his wife died I tried to call him early just to let him know I cared about him.
REPORTER: He has remarried.
DUBYA: Has he? Good. I'll congratulate him. Thanks for giving me that heads-up. Don't put that in the article that you had to tell me that. You can put it in there if you want. I'll be glad to — I'm going to congratulate him. That's neat.
[NATIONAL SECURITY COUNCIL AIDE] DENNIS WILDER: You did, sir.
DUBYA: What?
WILDER: You did congratulate him.
DUBYA: Exactly. I'm going to congratulate him again. I'll double the congratulations. That's right, I did write him a note. I forgot. Did I call him or write him a note?
WILDER: You wrote him a note.
DUBYA: That's right, yes. Sent him a couple flowers. Anyway, Malaysia is an interesting example of how a free society can deal with movements that could conceivably change and alter the nature of the free society.

Let me comment on the civilian casualties, if I might. First, I fully understand the angst, the agony and the sorrow that Afghan citizens feel when an innocent life is lost. I know that must cause grief in villages and heartbreak in homes. Secondly, I can assure the Afghan people, like I assured the President, that we do everything we can to protect the innocent; that our military operations are mindful that innocent life might be exposed to danger, and we adjust accordingly. Thirdly, it is the Taliban who surround themselves with innocent life as human shields. The Taliban are the cold-blooded killers. The Taliban are the murderers. The Taliban have no regard for human life. And therefore, we've spent some time talking about — as the President rightly expressed his concerns about civilian casualty. And I assured him that we share those concerns. Secondly, it's up to Iran to prove to the world that they're a stabilizing force as opposed to a destabilizing force. After all, this is a government that has proclaimed its desire to build a nuclear weapon. This is a government that is in defiance of international accord, a government that seems to be willing to thumb its nose at the international community and, at the same time, a government that denies its people a rightful place in the world and denies its people the ability to realize their full potential.

REPORTER: You spoke very soberly and seriously in your statement about how you weighed different legal questions in coming to your decision on that commutation. But one issue that you did not address was the issue of the morality of your most senior advisors leaking the name of a confidential intelligence operator. Now that the case is over — it's not something you've ever spoken to — can you say whether you're at all disappointed in the behavior of those senior advisors? And have you communicated that disappointment to them in any way?
DUBYA: Michael, I — first of all, the Scooter Libby decision was, I thought, a fair and balanced decision. Secondly, I haven't spent a lot of time talking about the testimony that people throughout my administration were forced to give as a result of the special prosecutor. I didn't ask them during the time and I haven't asked them since. I'm aware of the fact that perhaps somebody in the administration did disclose the name of that person, and I've often thought about what would have happened had that person come forth and said, I did it. Would we have had this, you know, endless hours of investigation and a lot of money being spent on this matter? But it's been a tough issue for a lot of people in the White House, and it's run its course and now we're going to move on.

A couple of points. One, that I understand the Congress is going to express their opinion, and it's very clear where the Democrats are, and some Republicans; I know that. They didn't like the decision I made. And by the way, that doesn't mean that I think that they're not good, honorable citizens of the country. I just have a different opinion. I considered some of their opinions and felt like it would not lead to a country that could govern itself, sustain itself, and be an ally in the war on terror. One. Secondly, my hope, however, is that this non-binding resolution doesn't try to turn into a binding policy that prevents our troops from doing that which I have asked them to do. That's why I keep reminding people, on the one hand you vote for David Petraeus in a unanimous way, and then the other hand you say that you're not going to fund the strategy that he thought was necessary to do his job, a strategy he testified to in front of the Senate. I'm going to make it very clear to the members of Congress, starting now, that they need to fund our troops and they need to make sure we have the flexibility necessary to get the job done. Secondly, I find it interesting that there is a declaration about a plan that they have not given a chance to work.

Secondly, it's really important, Pete, that people not think government is a loving entity. Government is law and justice. Love comes from the hearts of people that are able to impart love. And therefore, what Craig is doing is — he doesn't realize it — he's a social entrepreneur. He is inspiring others to continue to reach out to say to somebody who is lonely, I love you. And I'm afraid this requires a higher power than the federal government to cause somebody to love somebody.

I based a lot of my foreign policy decisions on some things that I think are true. One, I believe there's an Almighty, and secondly, I believe one of the great gifts of the Almighty is the desire in everybody's soul, regardless of what you look like or where you live, to be free.

REPORTER: Mr. President, what are our plans if civil war breaks out in Iraq?
DUBYA: Yes. Step one is to make sure — do everything we can that there not be one. Secondly, I believe the Iraqi people have made a choice. It wasn't all that long ago that 11 million people went to the polls. It may seem like an eternity, but that was last December that people defied assassins, car bombers, threats and said, we want a democracy. Secondly, the first real test for an interim government occurred when the Shia's shrine was blown up, the holy site. And while there's — as I said earlier, there was — no question there was violence and killing, the society took a step back from the abyss. And people took a sober reflection about what a civil war would mean.

REPORTER: The FISA law was implemented in 1978 in part because of revelations that the National Security Agency was spying domestically. What is wrong with that law if you feel you have to circumvent it and, as you just admitted, expand presidential power?
DUBYA: May I — if I might, you said that I have to circumvent it. There — wait a minute. That's a — there's something — it's like saying, you know, you're breaking the law. I'm not. See, that's what you've got to understand. I am upholding my duty, and at the same time, doing so under the law and with the Constitution behind me. That's just very important for you to understand. Secondly, the FISA law was written in 1978. We're having this discussion in 2006. It's a different world. And FISA is still an important tool. It's an important tool. And we still use that tool. But also — and we — look — I said, look, is it possible to conduct this program under the old law? And people said, it doesn't work in order to be able to do the job we expect us to do.

REPORTER: What is your reaction to the news about the South Koreans on embryonic —
DUBYA: I'm — first, I'm very concerned about cloning. I worry about a world in which cloning becomes acceptable. Secondly, I made my position very clear on embryonic stem cells. I'm a strong supporter of adult stem cell research, of course. But I made it very clear to the Congress that the use of federal money, taxpayers' money to promote science which destroys life in order to save life is — I'm against that.

Now, there's some rules, and it's important for you to know the rules. One, you can't take your money that you set aside in the personal account and go to the race track. ...Secondly, you can't pull it all out when it comes time to your — you can't take it all and then go to the track.

First of all, we spend about $80 billion on asbestos litigation, and that could end up being $200 billion over time. Secondly, these asbestos suits have bankrupted a lot of companies, and that affects the workers here in Michigan and around the country. Thirdly, those with no major medal impairment now make up the vast majority of claims, while those who are truly sick are denied their day in court.

And why is it [asbestos lawsuits] a national problem? Well, first of all, we spend about $80 billion on asbestos litigation, and that could end up being $200 billion over time. Secondly, these asbestos suits have bankrupted a lot of companies, and that affects the workers here in Michigan and around the country. Thirdly, those with no major medal impairment now make up the vast majority of claims, while those who are truly sick are denied their day in court.

REPORTER: Mr. President, why are you and the Vice President insisting on appearing together before the 9/11 Commission? And, Mr. President, who will you be handing the Iraqi government over to on June 30th?
DUBYA: We will find that out soon. That's what Mr. Brahimi is doing. He's figuring out the nature of the entity we'll be handing sovereignty over. And, secondly, because the 9/11 Commission wants to ask us questions, that's why we're meeting. And I look forward to meeting with them and answering their questions.
REPORTER: I was asking why you're appearing together, rather than separately, which was their request.
DUBYA: Because it's a good chance for both of us to answer questions that the 9/11 Commission is looking forward to asking us, and I'm looking forward to answering them.

I remember when we had the discussion down in Crawford, one of reporters, fellow reporters, said, I hear you don't pay attention to the press. I said, not really. And he said, why? And I said, well, because sometimes your opinion matters to me and sometimes it doesn't, but I've got a job and I'm willing to lead. And the fellow said, well, how do you know what the people think? And I said, well — I reminded the fellow that people don't make up their mind based upon what they write, and secondly, my job is to lead.

Secondly, the answer to your question about reconstruction efforts, the answer is, who can do the best job for the Iraqi people?

I appreciate the desire for flexibility, I support the governor's desire for flexibility so long as, one, federal monies going to the states are used only for Head Start. In other words, what we really don't want to do is say we're going to focus on Head Start, the Head Start money goes for, you know, the prison complex — I know that won't happen with Governor Ehrlich, but there needs to be a guarantee that the federal money spent on Head Start, only go to Head Start. Secondly, states and local governments must put money into the program, which would lock in the Head Start money for Head Start. So, the flexibility given to the State would not allow the state's budget flexibility. Governors ought to have that flexibility to hope that Congress will provide that flexibility so that when the accountability systems kick in, fully kick in, that a governor can truthfully say, well, I've had the tools necessary to make sure the Head Start program fits into an overall comprehensive plan for literacy and math for every child in the state of Maryland, in Governor Ehrlich's case.

Secondly, I had a chance to speak to the United Nations to talk about another threat face — that we face — that we face, all of us face, in the civilized world — and that is a threat of weapons of mass destructions in the hands of leaders who disregard human liberty, that do not believe in freedom. A leader, in this case, who's poisoned his own people, poisoned his neighbors, attacked in his neighborhood, and refuses — refuses — to comply with United Nations' regulations, as a matter of fact, defies the United Nations.

Secondly, you need to pray for the good Lord to protect America, provide a shield over our country, to prevent us from harm.

Secondly, is to make sure that the good hearts of the American people and the Russian people, and people all over the world, are affected. By that I mean that we get the aid to the starving folks in Afghanistan.

I assured the prime minister, my administration will work hard to lay the foundation of peace in the Middle — to work with our nations in the Middle East, give peace a chance. Secondly, I told him that our nation will not try to force peace, that we'll facilitate peace and that we will work with those responsible for a peace.

I mean, these good folks are revolutionizing how businesses conduct their business. And, like them, I am very optimistic about our position in the world and about its influence on the United States. We're concerned about the short-term economic news, but long-term I'm optimistic. And so, I hope investors, you know — secondly, I hope investors hold investments for periods of time — that I've always found the best investments are those that you salt away based on economics.