>> schieffer: today on "face the nation," egypt in crisis. we'll have reports from our correspondents on the scene. we'll get the latest from secretary of state clinton. we'll hear from white house chief of staff bill daley, and have analysis from david sanger of "the new york times". it's all ahead on "face the nation." captioning sponsored by cbs "face the nation" with cbs news chief washington correspondent bob schieffer. and now from cbs news in washington, bob schieffer. >> schieffer: good morning. egypt is in chaos. thousands of prisoners have now broken out of cairo prisons, and looters and thieves have joined protestors on the streets. president mubarak still barely clings to power.

and in a new show of force, sent egyptian warplanes flying low over the demonstrators. we'll start this morning by going first to elizabeth palmer, who is on the scene. elizabeth, you've been there from the beginning of all this. what is the absolute latest right now? >> well, bob, just in the last couple of minutes, we've seen an extraordinary show of (inaudible) (plane flying overhead) i don't know if you can hear me. the aircraft are (inaudible) flying over the crowd. >> schieffer: what is the meaning of that? are they trying to frighten people off the streets? what... it sounds like a fly- over at a football game or something. >> well, the army is deployed widely all over the city in a very unthreatening way.

but a way that shows muscle. the context is that, overnight, the city... parts of the city were sacked. the police were nowhere to be seen. people were taking to their own neighborhoods in militias to protect their houses. so there's a total breakdown of order that is only being held together by what the citizens can do, and also by this show of muscle by the army, who in fact has been attacking looters and so on, arresting and in some cases killing them. this is a whole new escalation. perhaps to make the crowd understand that, if push comes to shove, they will use force. very intimidating, as you can appreciate. >> schieffer: what exactly... are people still... is there still looting going on down there? has it quieted down by now? where is it right now? >> it has quieted down right now, because the sun is up. the minute it gets dark, it will all kick off again.

a lot of the people believe-- and there's reason to believe-- that the looters are un-uniformed police who kept their weapons and turned into thugs. (aircraft flying overhead) >> schieffer: elizabeth, how long has that been going on, elizabeth? these planes? >> about ten minutes. you mean, the fighter aircraft? >> schieffer: yes. >> ten minutes. >> schieffer: do you sense what the government has said, what mr. mubarak has said, the appointing of a new vice president, all of that-- has that had any impact on what's happening out in the streets now, or are people demanding the very same thing. >> they are demanding the very same thing. it's not clear whether the wind went out of their sails a little bit after the appointment of the vice president, because he is

quite widely respected. but now, it appears that the rage is gathering again. i can tell you that when those planes flew over the square, it just inflamed the crowd. >> schieffer: secretary of state hillary clinton is monitoring all of this from the state department. we spoke to her about it just a while ago. we're just off the line with liz palmer, our person in cairo. during her report, f-16s, egyptian air force warplanes apparently were flying low over the demonstrators in the main part of cairo. do you know what this is about? >> bob, i don't. let me repeat again what president obama and i have been saying. that is, to urge the egyptian security forces to show restraint, to not respond in any way through violence or intimidation that falls upon the peaceful protestors who are demanding that their grievances

be heard. and obviously, our reports up until now have been that the egyptian army had taken up positions, that they were showing such restraint. and we strongly urge that that continue. what the people who are in the square and elsewhere in egypt are protesting for is the right to participate in their government, to have economic opportunities, for their human rights to be respected. we are very clearly asking both in public and private that the egyptian authorities respond to that, that they start a process of national dialogue that will lead to a transition to such democracy. and what president mubarak himself said the other day-- that they would begin to take concrete steps for democratic and economic reform. we expect to see happen. >> schieffer: madam secretary, do you think those things are possible if president mubarak stays in office, or is he eventually going to have to

leave? >> i'm not going to speculate, bob. what we are focused on now is a transition that will meet the needs of the egyptian people and that will truly establish democracy, not just for one election and then no more elections after that, or not for radicals, extremists, violent elements to take over. we want to see the... what really was at the core of the protests, which were people saying, "hey, we deserve a better life. we deserve more opportunity to be respected and responded to." that is what we've been conveying. that's what we will continue to make very clear. and we stand ready to assist. >> schieffer: do you... are you concerned that if president mubarak does go, it may give an opportunity for the muslim brotherhood, which has been the opposition to his government for so many years, could somehow come to power? i think most people agree they were not the start of this or the cause of these

demonstrations. but where do you see... what role do you see them playing, if president mubarak should go? >> well, first, i'm not speculating about, you know, who goes or who stays. i'm not, you know, prepared to comment on what kind of democratic process the egyptian people can construct for themselves. but we obviously want to see people who are truly committed to democracy, not to imposing any ideology on egyptians, and therefore we would like to encourage that people who have been the voice of protests and been the voice of civil society be the ones at the table trying to design what would be an orderly transition to meet the democratic and economic needs of the people. you know, bob, we're all very conscious of the fact that egypt is an incredibly important country, a large country with,

you know, great influence in the region and meaning for the arab world. and we want to see the outcome of what started as peaceful protests, legitimately demanding redress for grievances, to result in a true democracy-- not a phony one like we saw with iranian elections, not to see a small group that doesn't represent the full diversity of egyptian society take over and try to impose their own religious or ideological beliefs. we want to see the full diversity and dynamism of egyptian society represented. >> schieffer: do you believe his appointment of a new vice president, is that helpful? >> well, it's something that american government representatives have been urging and requesting for 30 years. i talk... i've talked with former ambassadors over the last weeks who have said, "boy, i remember when i went in 1980-this or 1990-that.

so, yes, it's something we have said that is absolutely imperative. it finally has happened. there are some new people taking responsibility in government. we hope that they can contribute to the kind of democratic and economic reforms that the people of egypt deserve. >> schieffer: so far though, it does not seem that anything that mr. mubarak has said or done up until this point has in any way tempered these demonstrations. i mean. things seem to be getting worse rather than better. >> well, i think there are several things going on. but first and foremost, words alone are not enough. there have to be actions. there has to be a demonstrable commitment to the kind of reforms that we all know are needed and desired. but also, there is now unfortunately, in addition to the legitimate peaceful protests that are going on, lots of reports of looting, prison breaks and the like. so it makes the situation much more complicated than it was even before.

because everyone wants to ensure that the right of assembly, the right of association, the right of free expression, be protected, that there be no violence against the protests. at the same time, people in the streets have to refrain from violence themselves. i've heard many stories of egyptians, you know, protecting their national museum, protecting their homes. they're protecting them, you know, from looters and from criminals. so, this is an incredibly complex set of circumstances. we are hoping and praying that the authorities will be able to respond to the legitimate requests for participation by the peaceful protestors. let's begin to see some meetings with representatives of the government and representatives of civil society. let's begin to see some steps taken that will lead toward free, fair and credible elections in the future. those will begin to put some

substance behind the words and give the protesters who are trying to see a future for egypt that is responsive to their needs a reality that they can hang on to. >> schieffer: madam secretary, thank you so much. >> thank you. >> schieffer: a little while ago, i talked to dr. mohammed el baradai, an opposition leader in egypt. we reached him just when those planes were flying over cairo. i asked him what triggered all of this. >> i think this was many, many years in the making, bob. i mean, you can't run a country on repression, detention, torture, lack of economic opportunity for 30 years. i have been warning of that for many years. many others have been seeing the painting on the wall. it's simply... there was a tipping point when things exploded. it is not a surprise.

if washington didn't see that coming, then there was something wrong with their perception of what was going on in egypt. >> schieffer: what has to happen now? the administration is urging mr. mubarak to make all these reforms and to open up his government. is that possible. or does he have to leave? >> he absolutely has to leave, bob. this is not me; this is 85 million egyptians. yesterday, it was the call for him to leave. today, it's a call for him to put to trial. the american government cannot ask the egyptian people to believe that a dictator who has been in power for 30 years will be the one to implement democracy. i mean, this is really a farce. i mean, people here could be poor but they're intelligent. and the first thing which will calm the situation is for mubarak to leave. and leave with some dignity.

otherwise, i fear that things will get bloody. you have to stop the life support to the dictator. you have to root for the people. you are losing credibility by the day. on the one hand, you are talking about democracy, rule of law, you know, human rights. on the other hand, you are lending support to a dictator who has continued to repress his people. today as i am sitting here in cairo, jets are flying over cairo. we are completely, you know, the internet... the entire internet is shut. the satellite television station is shut. stuff is being looted. buildings are ablaze. it is a lawless country. i don't see how could you wait, you know, for mr. mubarak to leave? >> schieffer: what do you think will happen if he leaves? >> i think what, you know, what

everybody is clear on right now, bob, is that, you know, the first steps that need to be taken and taken urgently. first one, that he should leave today. the second step that we will have a national unity government or a national salvation government, a coalition government. i think once mubarak is out, you will see that a lot of these demonstrators will go home. i can bet you that once he decides or announces or is forced to leave, all the demonstrations will go home. and then we are capable here, bob, of then running a transitional... smooth transitional peace. >> schieffer: dr. mohammed el baradai. i'm joined here in the studio by the chief washington correspondent for "the new york times," david sanger. first, david, tell me who el baradai is. is he a credible voice here and will the people of egypt listen to him? >> he was the director general of the international atomic

energy agency and a long-time diplomat, but he hasn't really lived in egypt for some time. his connections with these young people to streets who are fomenting the demonstrations is pretty remote. most egyptians don't know him. to the americans, he may well be a very good transitional figure, if they could get that far. because, while he is certainly not pro american-- and you heard him criticizing the administration in that interview-- i think he is somebody who could put a government together. >> schieffer: let's talk about what he said. he's talking about mubarak has to go. that's the only way. he thinks there can be a transition. clearly, the secretary of state is walking a very fine line here. clearly, the administration fears some sort of void developing if, if mubarak does go. >> that's right, bob. i think the administration has two fears. it explains why they have not urged president mubarak to leave. they've walked right up to the edge, but not quite said it. the first fear is the power

vacuum that will lead to more looting and chaos that you've seen. that could create an opening for the muslim brotherhood or another islamist group to step in in some way. i think their second big fear is that, if the united states appears to be the puppet master here and pushes mubarak out and things go wrong, it will have happened on president obama's watch. if he emerges with a government that, for example, walked away from the peace agreement with israel, i think that would be pretty problematic. >> schieffer: dr. el baradai says this concern about the muslim brotherhood, he doesn't see it as that much of a problem. he's not a part of it, but doesn't see it as that much of a problem. >> that's because the muslim brotherhood also is not an especially popular group there. but you could imagine, in a coalition government, they would have a voice. i think the concern the u.s. has is making sure it isn't the dominant voice. it was interesting that you heard the iranians this week

support these protests, because they think this is the chance to put an islamic government in cairo. i don't think many other think that is likely. >> schieffer: david sanger. thank you so much, david. we'll be back. somewhere in america, there's a doctor who can peer into the future. there's a nurse who can access in an instant every patient's past. and because the whole hospital's working together, there's a family who can breathe easy, right now. somewhere in america, we've already answered some of the nation's toughest healthcare questions. and the over 60,000 people of siemens are ready to do it again. siemens. answers. >> woman: good night, gluttony-- a farewell long awaited. good night, stuffy. >> ( yawning ) >> good night, outdated. >> ( click ) >> good night, old luxury and all of your wares. good night, bygones

everywhere. >> ( engine revs ) >> good morning, illumination. good morning, innovation. good morning, unequaled inspiration. >> ( heartbeats ) >> schieffer: white house chief of staff william daley was supposed to be our exclusive and sole guest this morning, but that was overtaken by events in egypt. we did want you to hear some of what he had to say. mr. daley, when your appointment was announced, big business, the chamber of commerce, and frankly a lot of republicans were delighted. because as far as big business goes, you're part of it. you were a part of business, although you have a long political background. do you think that the administration went too far in demonizing wall street and business, and is your appointment a signal that that is going to change?

>> no, i don't think it's about demonizing wall street or the... listen, there were serious difficulties in the nation. the president was very direct to the business community, to the political system that we have to make changes. we have to do certain things. >> schieffer: it's not hard to figure out that you didn't like the president's health care plan. you said so, when it was passed, when you were in private enterprise. you said it basically went too far. do you think it ought to be changed and where? >> what i was commenting on was the politics, really, of the moment around health care. i thought it was a very difficult climate to try to accomplish what they tried to. and i think the results, because of the misinterpretation of health care by many people, had a negative impact on democrats. but i absolutely believe, having been in business and hearing from business people the importance of a need for the reform of health care-- it was the business community that was really say to go the politicians, "this is costing us too much. it's too much of a wet blanket on the economy."

>> schieffer: do you think that the plan that they passed is just perfect? >> no. >> schieffer: and should be left alone? >> no. the president has said he's open to changes to this. he is not open to refighting the entire fight of health care. people have suggestions on how to make it better. but he's not in favor of refighting this fight. >> schieffer: the president made quite a point in his state of the union message to talk to about the infrastructure and what we need to do to overhaul it and improve it. people on all sides seem to agree that it does need some work. what he didn't talk about is how do you pay for that. how are you going to pay for that? >> i think you'll see in the budget an attempt to pay for an expansion in that. i think there's a lot of interest we've heard from the private sector to come in and finance some of the high speed rail. even foreign governments and foreign companies have talked about coming in to finance some of these projects. if there's a private-public partnership, i think that's a creative way to go forward. >> schieffer: do you think the president would ever entertain

raising the gasoline tax to pay for some of this? >> i don't think raising the taxes on the american people right now is the way to go at this point of our economy. but we want to sit down with the leadership of congress as we work through the deficit, as we work through the other issues and talk about the possibilities. the reality is, as certain people in the republican party have said, there's no way they're going to look for any revenue raising in any way, shape or form. that puts a tremendous constraint on, obviously, the budget and the deficit. >> schieffer: the republicans are also talking about coming in there and whacking $55 billion out of this year's budget, the 2012 budget. do you think figures like that are actually feasible? is that realistic? >> well, you know, it's the old saying "where's the beef?" let's see exactly the cuts they're talking about, and see whether the american people believe that such cuts-- albeit, we all agree there must be cuts to this government, and again,

you're going to see this president lay out a very substantial cut. already that the freeze amounts to $400 billion over ten years. again.... >> schieffer: that's going to take a lot more than that. >> it will take a tremendous amount more than that. we've got to work our way over many years. we got in the hole over many years. you're not going to get out of it... no business, when they get in trouble, just cuts and has much of a business when the cycle comes back. what the president has talked about is investing. and the time to invest, while you're cutting, is to take some of those cuts, invest them in things that will have a return as you come out of this recession. that's what successful companies do. and that's what the government has got to do. >> schieffer: white house chief of staff bill daley, yesterday. you can see the entire interview on cbs news dot-com. we'll be back to cairo in a minute.

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