CROWLEY: The crisis in Egypt has left the Obama administration in a delicate position. Joining me from the State Department, Secretary of State Hillary Clinton.

Madam Secretary, thank you for being here.

CLINTON: Thank you, Candy.

CROWLEY: It seems to me that when this started out and we saw the signs and the protesters in the street, they were anti-Mubarak. Now, if you are watching, we are seeing signs that say "U.S., stop backing Mubarak." What side is the U.S. on, Mubarak or the people in the streets?

CLINTON: Well, there's another choice. It's the Egyptian people. We are on the side -- as we have been for more than 30 years -- of a democratic Egypt that provides both political and economic rights to its people, that respects the universal human rights of all Egyptians. And that is the message that every ambassador, whether Republican or Democratic president, everyone has conveyed for over 30 years.

What happens is truly up to the Egyptian people. And what the United States is doing is sending a very clear message: We wish to see everyone refrain from violence. The army is now fulfilling security responsibilities. They're a respected institution in Egyptian society. And we know they have a delicate line to walk, because they want to protect peaceful protests, but they also don't want to see any city descend into chaos with looting and criminal activity. And we are encouraging a very -- a very careful approach that respects the rights of people.

We are also very much behind the kind of concrete steps that need to be taken for economic and political reform. We have, over the past 30 years, supported civil society groups. We have supported women's groups. We have tried to help build up a lot of the elements within Egyptian society that are going to be necessary when there is a national dialogue as we are urging to determine the path forward.

And clearly, Candy, this is a complex, very difficult situation. Egypt has been a partner of the United States over the last 30 years, has been instrumental in keeping the peace in the Middle East between Egypt and Israel, which is a critical accomplishment that has meant so much to so many people.

So I think we have to keep on the message we've been on, convey that publicly and privately as we are doing, and stand ready to help with the kind of transition that will lead to greater political and economic freedom.

CROWLEY: The president's remarks, in which he said much of what you just said, warning against huge crackdowns against peaceful protesters, saying we've got to see some concrete steps towards opening up political reform and advancing it, it's been interpreted here by many and some overseas as a beginning to back away from President Mubarak. Do you argue with that translation?

CLINTON: We -- we do not want to send any message about backing forward or backing back. What we're trying to do is to help clear the air so that those who remain in power, starting with President Mubarak, with his new vice president, with the new prime minister, will begin a process of reaching out, of creating a dialogue that will bring in peaceful activists and representatives of civil society to, you know, plan a way forward that will meet the legitimate grievances of the Egyptian people.

There is a -- there's no easy answer. And, clearly, increasing chaos or even violence in the streets, prison breaks, which we've had reports about, that is not the way to go. We want to see this peaceful uprising on the part of the Egyptian people to demand their rights, to be responded to in a very clear, unambiguous way by the government and then a process of national dialogue that will lead to the changes that the Egyptian people seek and that they deserve. Now, that will take time. It is unlikely to be done overnight without very grave consequences for everyone involved. So what we want to see is, as we've said over and over again, the concrete steps taken. You know, it took 30 years to have a vice president appointed. We want to see both the existing and any new members of any government continue to put real life into what President Mubarak himself said, which were concrete steps toward democratic and economic reform.

CROWLEY: If I could, the people that we're seeing and certainly that you're seeing don't seem like the type that want to wait another 30 years for full democracy.

CLINTON: Oh, of course not.

CROWLEY: So when -- when we look at these demonstrations, when we talk to some of the people involved in it, it does not seem that even if President Mubarak were to do everything you have now laid out that he is at all acceptable. Do you think that President Mubarak can survive this?

CLINTON: You know, again, Candy, this is going to be up to the Egyptian people. But let's look at what we have. We have a calendar that already has elections for the next president scheduled, so there is an action-enforcing event that is already on the calendar. Can there be efforts made to really respond to the political desires of the people so that such an election is free and fair and credible?

There are many steps that can be taken by reaching out to those who have advocated a peaceful, orderly transition to greater democracy where the Egyptian people themselves get to express their views. That's what we wish to see.

CROWLEY: But from what you've seen -- from what you've seen, will that be enough? If he takes those steps and says, "Hey, we've already got prescheduled elections coming up," is that enough to keep him in power?

CLINTON: Well, no. Much has to be done. And we're not advocating -- we're not advocating any specific outcome. We are advocating that the government, the representatives of the civil society, the political opposition and activists begin a dialogue to chart a course.

Egypt is a large, complex, very important country. I don't think the Egyptian people want to see what is a very clear effort to obtain political and economic rights turn into any kind of new form of oppression or suppression or violence or letting loose criminal elements. That's not what they're in the streets protesting for.

So how do we get from where they are today to where they would like to be? It needs to be done immediately with a process that brings people to the table and that the Egyptian people can see, "Oh, I know so-and-so. He represents a group that has been advocating for democracy for many years."

This is going to be a legitimate effort that is going to result in changes that will have responded to the needs and the voices of the people who have been protesting.

CROWLEY: Secretary of State Hillary Clinton, a busy woman these days. We thank you for your time.

CLINTON: Thank you, Candy.

(COMMERCIAL BREAK)

CROWLEY: Joining me now in Washington, Republican Senator John McCain of Arizona. We are at the point in foreign policy where our values are just running headlong into our strategic interests. I asked Secretary of State Hillary Clinton, who do we back? Do we back Mubarak or do we back the people on the street. She said, well, we back the Egyptian people which was a little different to her from the people on the street.

Is it time to cut him loose?

MCCAIN: Not cut him loose, but also I think one of the lessons here is that we need to be on the right side of history in these countries and we need to do a better job of emphasizing and arguing strenuously for human rights. I understand how important -- and I hope we all understand how important Egypt is as an ally, as a center of culture. And one out of every four Arabs in the Middle East live in Egypt and how important they are. But it was clear for a long time that the kind of repressive regime sooner or -- that Mubarak controls, sooner or later there is going to be great difficulties. Good news I think is that the army is playing a very constructive role. So I think what we need to do now is to lay out a plan for Mubarak to lift the state of emergency, announce that elections -- free and fair -- will be held in September, which were already planned, allow an open and free democratic process, which I think we could have some confidence if it was an open process that you would see a free and fair election and that we make sure that the aspirations of the Egyptian people are realized finally.

And it's fraught with danger, as you earlier guessed: the Muslim Brotherhood, the Iranian example and others, but there is also a good chance for a real functioning democracy and arguably the most important nation in the middle east.

CROWLEY: But, you know, for 30 years Republican and Democratic presidents have publicly at times, most privately as we saw in some of those leaked WikiLeak cables from the diplomatic cables, they said, you have to do something here, you can't be an authoritarian. It didn't work. It was 30 years of -- I mean, he'd do something and we'd say, okay, thanks and then we'd sort of retreat.

So what else could have been done? Isn't he too important to us?

MCCAIN: Madeleine Albright and I sent a letter before the last election saying allow observers in. Russ Feingold and I sponsored a resolution calling for more respected human rights. You can't -- you cannot over -- isn't it a lesson of history you cannot have autocratic, regimes last forever. And the longer they last, the more explosive the results. And that's a lesson we have to learn that all of these rights that individuals have is not confined to the United States of America and our allies.

And so I still think we have a real opportunity to see a democratic transition. And by the way, could I also mention, Jordan is a very serious situation. Yemen is a country that's fraught with more problems than we can take the time to describe on this program. Even as far away as Libya.

So this is a very critical time.

MCCAIN: What happens in Egypt will directly and dramatically effect what happens in these other countries. There is a real awakening going on.

CROWLEY: And -- but we are talking about other U.S. allies in the area who we have joined forces with and they are not exactly democracies -- Jordan, Saudi Arabia, places like that. Now what?

I mean, on Capitol Hill you all have the ability to cut aid to these countries, but Egypt is number two in foreign aid after Israel.

MCCAIN: Yes. And I think that we have to say that everything is on the table and encourage and help and assist, you know, a process that leads to a free and fair election.

I have confidence in the Egyptian people that they are not going to elect an extremist. They are not going to allow an extremist group to hijack their country and that can be prevented if we have a fair, open process beginning now between now and September, you could have the rise of political parties. You could have a real democratic process that could be celebrated throughout the region and a model for the rest of the region.

The other is, of course is hang on, more demonstrations. The army turns one way -- there is all kinds of bad scenarios here and really only one good one. But I would say I think the president's statement was correct. Now we need to take it a step further and we've got to be on the right side of history here.

CROWLEY: I guess the problem is that if we have been at them for 30 years to change, I wonder why they would listen to us now -- why Mubarak would listen to us now?

MCCAIN: Well, obviously he's in an extremist position. The army is now the critical institution. The police, as we all know, have disappeared. It's the only real stabilizing force in the country right now. Fortunately, we have had close relations with the Egyptian military. There are a lot of very good, strong people there.

So -- and also I think that President Mubarak, he knows what's going on in his own country. It's up to the United States to be a helpful, assisting but insisting partner. And by the way, we cannot afford a Tiananmen Square in Cairo.

CROWLEY: And that's the question, I guess. When you look at these streets throughout Egypt, not just in Cairo, do you see a group willing to wait until September to get rid of Hosni Mubarak?

MCCAIN: I think that the group -- and I don't know the sentiment on the street, but it seems to me logic if Mubarak said, I'm not going to run again. I am turning over this government to a caretaker that you can trust probably with the army involved, they are not going to have any further political aspirations and we'll set up a process for a free, open, transparent election in September. I think you could do that.

But this is a narrow window of opportunity. The longer the unrest exists, the more likely it is to become extreme.

CROWLEY: Tell me how you think the president has done so far. Sounds like you think he's done pretty well. And what do you want him to do next?

MCCAIN: I think the president should get a little bit more out ahead. I think his statement that he made day before yesterday was good.

CROWLEY: How? Ahead of...

MCCAIN: Well, I think in other words lay out a scenario of what we think the Egyptian people should have every right to expect, the kind that I just described. The past performance of this administration hasn't been great. They cut off some of the money for democratization, et cetera. But we can review that at a later time. The important thing is I think the president made the right statement. I think that the secretary of state made a good presentation to you. I just want to see her go a little bit further. And let's get out in front on this issue on behalf of the things we have always stood for and believed in.

And every time we have been on the right side of history it's usually turned out okay.

CROWLEY: What is your -- I asked Negroponte and Walker before you, what do you fear the most watching this? Because there is so much uncertainty right now that we really don't know which way it's going to go.

MCCAIN: My great fear is, obviously, a radical Islamic extremist -- the Iran scenario versus the Philippines or other scenario. That's all of our greatest fear, but the longer this unrest, the more likely the radicals see openings to take power -- the Lenin scenario.

So that's my greatest fear. My second greatest fear, of course, started in Tunisia. Egypt, we see problems in Yemen; Jordan, our dearest, most important -- very important ally. This could be a really seminal moment in history of the Middle East.

And the question is, is does that turn out good or does it turn out to the advantage of radical Islamic extremism? And I don't know the answer yet.

CROWLEY: I don't know either... MCCAIN: Egypt will be key though.

CROWLEY: We will have you back when the answers become clearer. Thank you very much. Appreciate it.

Up next, we want to speak to Senator McCain's Democratic colleague, Senator Chuck Schumer of New York.

(COMMERCIAL BREAK)

CROWLEY: Joining me now from our New York bureau, Democratic Senator Chuck Schumer. Thank you for being here.

Obviously the story of the day and what's going on in Egypt. Let me get your take now on really what now seems to be the key question: can President Mubarak survive this long enough for there to be some sort of transition to something else?

SCHUMER: Well, that is -- the hope is that there will be a transition to something else. I agree with the thrust of Senator McCain which is quite the same as the thrust of the president.

The bottom line is this, there are some good signs here. It's not all terrible. The fact that the army is in control, the army is a respected institution in Egypt. The people like it. You can see even in the pictures the army and the protesters joining together to protect neighborhoods.

And thus far most, not all, but most of the protesters have been focused on economic and political freedoms. It is not an anti-U.S. message primarily nor is it a fundamentalist, radical Islamist message but a secular message. We want freedom. We want economic and political freedom. If the energy can be channeled constructively into free and open elections in September where there is some time for some secular opposition parties to germinate, that's probably the ideal outcome. It's hardly a certainty, but it's certainly a real possibility.

CROWLEY: Well, Senator, I -- I agree with you that, when we first started this earlier this week, it was very definitely an anti- Mubarak protest across the country. But we've been noticing in the past couple of days that we are seeing more signs directed at the U.S.

One of those, just recently, in the past hour or so, caught our attention and I wanted to show it to you, a young man holding up the sign that says, "USA, we hate your hypocrisy."

My larger question to that is, isn't there a real chance here that the U.S.'s strongest ally, next to Israel, of course, or after Israel, in that region is Egypt, and we may be about to lose that?

SCHUMER: Well, that's a real worry. And there are no really excellent solutions here. The best solution would be channeling legitimate protests and hurts of the people, both economic and democratic, into a democratic election.

And if that can happen, there's a chance, as Senator McCain said, for a decent outcome, maybe even a model for the rest of the Middle East.

There is some anti-Americanism in the protests, but by and large, they still are basically, you know, a college student -- a college graduate who hasn't been able to get a job for five years. That's what the people really want changed.

And we believe, as we always have, that democratic government is the way to go. And hopefully, it can be channeled in that direction with the Army, sort of, as a guiding hand.

CROWLEY: Last question on this, because I do want to turn you to some domestic questions. But this has the potential of rocking the peace process. And I wonder what you think the threat to Israel is now -- not -- I don't mean physical threat, but the threat to peace and stability in the region as a result of what's going on right now.

SCHUMER: Well, Egypt, by and large, has been a stabilizing force, obviously, recognizing Israel's right to exist. Even after the assassination of Sadat, that continued. And so it is a very stabilizing force.

My hope is that Egyptian politics, which has tended to be secular, certainly wanting more rights and deserving more rights, both economic and political, takes root in that country now. And maybe we're at the time where it can. You know, not every country can become a democracy at the snap of a finger, but Egypt might well be ready for it. And that would be the best outcome, as I say, of a lot of bad choices. Mubarak cannot continue in the long term with the oppressive regime he's had now. The demonstrators have shown that.

CROWLEY: Let me turn you to domestic policy because it is budget season. It is time to raise the debt ceiling. Otherwise the U.S. is going to lose its ability to pay its debts.

Where do you see this fight going now?

Because, basically, we have a very determined bunch of Republicans right now, particularly on the House side, saying, no way we're going to raise this debt ceiling until we start doing some cutting.

SCHUMER: Well, there's even a problem before the debt ceiling. On March 4th, the government funding resolution expires. And it seems that a lot of Republicans in the House want to risk a shutdown of the government if they don't absolutely get their way.

That was a mistake when Newt Gingrich tried it in 1995. It will be a bigger mistake now. It's really playing with fire because, if they were to shut down the government, not only would horrible things happen like an inability of people to get Social Security checks, you can't fund the military, but ultimately, it risks the credit markets.

They are getting wary because of the large debt we have, which we have to get down, but if they feel that people are willing to shut down the government, you could risk the credit markets really losing some confidence in the United States Treasury, and that could create a deeper recession than we had over the last several years -- God forbid, even a depression.

So I would urge my Republican colleagues, no matter how strongly they feel -- you know, we have three branches of government. We have a House. We have a Senate. We have a president. And all three of us are going to have to come together and give some, but it is playing with fire to risk the shutting down of the government, just as it is playing with fire to risk not paying the debt ceiling.

CROWLEY: So, Senator, just quickly in the minute we have left, where do you see this going?

Because it is not an unpopular position at this point for a politician to say, we're spending too much, and if you can't come to an agreement with the Democratic Senate or the Democratic White House, why would it be so unpopular to say, fine, you know, if you guys won't agree, let's just stop spending and see what happens?

SCHUMER: Well, let's say two things. First, certainly, we in the Senate and the president believes we have to rein in spending. The president called for a five-year freeze on spending. That's rather significant. It saves $400 billion. But you can't just demand your position, particularly the position has kept getting more and more and more over to the right. Originally, they wanted to go down to the 2008 levels, now down to the 2006 levels.

That would cause huge problems. Just one little example: 3,000 food inspectors would be fired, risking the health of our food; 4,000 FBI agents, risking both safety on the streets and antiterrorism.

So what government is all about is having strongly held views, but when not everyone agrees with you, coming to a reasonable position.

We can come to a reasonable agreement that curbs spending. We Democrats showed that when we supported the bipartisan session, McCaskill's proposal, in the last -- in the last budget.

But to just stay in your corner and say, "It's my way or I'm shutting down the government," that could lead to terrible, terrible problems. And I would plead with my new Republican colleagues in the House who seem to want to do this, that that is playing with fire. Please don't do it.

CROWLEY: Senator Chuck Schumer out of New York, thank you so much for joining us today. We really appreciate it. Next...

SCHUMER: Thank you, Candy.