AC: "This is one more step that is being played out behind the scenes."

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Length: 6:14

ANDERSON COOPER: But we begin tonight in Washington and the power of the president's pen.

President Bush made good on his promise today, vetoing a $124 billion war spending bill. It is only the second time he's exercised his veto power. The House and the Senate passed the bill last week, but without enough support to override a veto. The legislation set a March 2008 goal for withdrawing U.S. combat troops from Iraq.

Here's what Mr. Bush said about it today.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Setting a deadline for withdrawal is setting a date for failure. And that would be irresponsible.


COOPER: Well, that's what he said today. Here's what he said four years ago today.


BUSH: Major combat operations in Iraq have ended. In the battle of Iraq, the United States and our allies have prevailed. (CHEERING AND APPLAUSE)


COOPER: Well, that, of course, sadly, turned out not to be the case.

Few know that better than CNN's Baghdad correspondent Michael Ware. He joins me now, along with former presidential adviser David Gergen.

David, both sides say don't play politics with this. Both sides are playing politics with this. It's unfortunate. It is cynical, but it's true. So, politically, did either side emerge stronger after all this today?


And -- but I do think, Anderson, finally, finally, we see some signs now that a compromise can be reached which sounds very reasonable there. Very importantly, Anderson, there are Republicans who have been signaling that they are -- the president may be willing to go off a cliff, but they're not going to go with him. And they are willing to work with Democrats, potentially, on a new bill that would not set a date for withdrawal of troops, but would set what -- so-called benchmarks for the Maliki government in Iraq.

They would say, you must do the following things. And, if he doesn't meet the benchmarks, then we might begin reducing U.S. aid. It would be the beginning of the end of U.S. engagement.

So, that would be a very important compromise. It may be, Anderson, that Democrats will find it easier to negotiate with Republicans on Capitol Hill than they will with the White House.

COOPER: Well, Michael Ware, let's talk about those benchmarks. Both sides in this debate seem to agree on one thing, that there's no military solution to Iraq. They all say it requires a political solution.

The benchmarks, I guess, are to pressure Maliki. Has pressure worked on him in the past?


i mean, this is such an old scenario, Anderson. I mean, this word benchmark has been used over and over and over. And no matter what conditions have been set for Maliki to meet, he's never once lived up to them. So now Washington is trying to up the ante, increase the pressure upon him in what most likely will be the vain hope that he will deliver.

But, to be honest, it's not entirely in his interest to deliver. And, at the end of the day, he simply doesn't have the power. And the political solution in Iraq will not be brokered between Washington and Maliki. You must deal with the real power in Iraq. Essentially, America's going to have to start looking at cutting deals or find some accommodation -- and I hate to say it -- with Iran.

And we're already seeing them come to accommodations with the Baathists, with the Sunni insurgents. The political answer is going to come from how much America is prepared to give on those two fronts.

COOPER: David, what about that? Politically, does this administration have too many eggs in the Maliki basket? Are there other options out there?

GERGEN: Well, they have a lot in the Maliki basket.

But I think the point is well taken that there may well have to be some private, secret negotiations, conversations with Iran and with others to arrange anything. And it's important, of course, that Condoleezza Rice may indeed be talking to the Iranians here in the next few days, when there's a conference on Iraq.

But I think the larger point is this. You know, we have been -- from an American point of view -- it may well be that a lot of things have to be worked out on the ground in Baghdad, but, from an American point of view, we have been stuck.

You know, we couldn't leave, but we couldn't stay. And the benchmarks begin to point to a path towards saying, OK, if the Maliki government is not going to do these things, if they decide -- if they don't follow through, and if they're -- you can't get the kind of arrangements, America then has more -- let's put it, rationale.

And Republicans will find it easier to say, if this isn't going to work, we really should begin disengaging. So, I don't -- while the benchmarks may seem like a -- sort of a Washington game, in some ways, they're a very important prelude to the United States beginning to look for a way to disengage.

COOPER: Michael, CNN is reporting that al-Maliki is running an office within his government which is pushing a Shia agenda, carrying out the Baghdad security plan really along sectarian lines.

Is this notion of a unified democracy of Sunni and Shia, is there any real support for it within the Iraqi government?

WARE: No, no, none that I have seen, Anderson. And I have dealt a lot with all of the important factions within the Iraqi government.

It's simply in no one's interest whatsoever to pursue a true reconciliation. And what we're seeing with the creation of this office of the commander in chief, this is one more step in the great game that is being played out behind the scenes.

What's at stake is the intelligence community landscape in Iraq. And that will be the -- you know, the steering wheel of true power in that country. We know that the Iraqi version of the CIA was set up by the Americans. Yet it does not answer to the Iraqi government.

So, in the meantime, the Shia factions sponsored by Iran have set up their own parallel agencies. And they're attempting to bring it all under their umbrella, all under their power. The Americans there on the ground are trying to prevent that. The creation of this office is one more step in the Iranian-backed factions trying to consolidate their power.

COOPER: It's a complicated situation. I appreciate you trying to sort it out for us.

Michael Ware, David Gergen, guys, thanks very much.