CHUCK TODD: Secretary Panetta, welcome back to MEET THE PRESS. General Dempsey, welcome. Thanks for being here. Let me start with the man that is poised to take your place. He underwent on Thursday a pretty tough round of questioning. He seemed to struggle with a lot of the answers. This of course Chuck Hagel, the former Republican Senator from Nebraska. I want you guys to take a look at some of his answers.

(BEGIN VIDEO CLIP)

CHUCK HAGEL (R), FORMER SENATOR FROM NEBRASKA: I should have used another term and I'm sorry. I would -- I would like to go back and change the words and the meaning. The bigger point is, what I was saying, I think -- what I meant to say, should have said, is recognizable. It's been recognized, is recognized. Well, I said it. And I don't remember the context or when I said it. Well, I said what I said. I said many, many things over many years. That's what I should have said. And thank you.

(END VIDEO CLIP)

TODD: Secretary Panetta, many of those answers did not satisfy a lot of Republicans. Senator Roy Blunt a Republican from Missouri is going to vote no. He said "His answers were simply too inconsistent particularly as it related to Iran and Israel". Marco Rubio said "I've been deeply concerned about his previous comments." John McCain: "The fact that he wouldn't answer a straightforward question was disappointing." John Barrasso: "He appeared weak and wobbly." Are you concerned?

DEFENSE SECRETARY LEON PANETTA: Well, everyone you quoted from is a Republican and it's pretty obvious that the political knives were out for Chuck Hagel.

TODD: (inaudible) what, you think this was totally personal, totally partisan?

PANETTA: Well -- well look, what disappointed me is that they talked a lot about past quotes. But what about what a Secretary of Defense is confronting today. What about the war in Afghanistan? What about the war on terrorism? What about the budget sequester and what impact it's going to have on readiness? What about Middle East turmoil? What about cyber attacks? All of the issues that confront a Secretary of Defense, frankly, those were -- we just did not see enough time spent on discussing those issues. And in the end, that's what counts.

TODD: And you're fully confident Chuck Hagel is prepared to take your place?

PANETTA: Absolutely.

TODD: General Dempsey, he brought up the issue on Afghanistan we did a word count. Something like 37 mentions of Afghanistan in an eight-hour hearing. Nearly 130 more than 130 mentions of Israel. Do you think -- do you agree with the Secretary that the questioning was not directed in the right place?

DEMPSEY: Well, I mean, I was -- I was somewhat surprised at the things that weren't discussed in depth. But I'm always concerned when Afghanistan isn't prominent in any conversation we're having as Americans because we have 68,000 young men and women serving there.

TODD: Are you confident of Chuck Hagel? Have you spent a little bit time with him? Are you confident you can be -- you guys have to have this partnership. A Secretary of Defense, Chairman of the Joint Chiefs this is -- whether you like each other or are not, are you confident you can have a good partnership with him as you have with Secretary Panetta?

DEMPSEY: I've spent some time with Senator Hagel, well I have spent with Senator Hagel including when he was teaching over at Georgetown, on strategic issues. And then in helping prepare him for these confirmation hearings we had several opportunities to talk about strategy. And I found him well prepared and very thoughtful about it.

TODD: Was his answers to you better than the answers you saw there?

DEMPSEY: Well I'm not going to grade his homework. But I will say that in my conversations with him, he was well-prepared, articulate, concise.

TODD: And you're confident that he can do the job?

DEMPSEY: I'm not going to speak about confidence. He could be my boss. And when is the last time you saw a subordinate discuss their confidence in their potential boss? But I think he's got great credentials, my personal contacts with him have been very positive. And if he's confirmed, I look forward to working with him.

TODD: Secretary Panetta, Senator Lindsey Graham said he is going to hold up Chuck Hagel's nomination until you go on Capitol Hill and testify in a Benghazi hearing. I know that Senator Carl Levin, the Chairman of the Armed Services, announced that there is going to be a Benghazi hearing. I assume you're going to be at that hearing.

PANETTA: I suspected you know --

TODD: If invited, you will testify?

PANETTA: We will -- if we're invited, that we'll have the opportunity to testify. And we look forward to it. We've -- you know, the Defense Department has been up there participating in most of the hearings. And so we look forward to presenting what -- what we know about what took place.

TODD: What more can be done from your perspective, from the Pentagon's role, in securing our embassies? We just had a near suicide attack, if you will, a suicide bomber at an embassy in Ankara, Turkey just last week. What can be done more that isn't being done now?

PANETTA: Well, the important things to do are, first of all you've got to build up the host country capacity. In the end, these embassies do depend on host country details that provide security. So you've got to have -- you've got try to develop that.

TODD: This shouldn't be more Marines? This shouldn't be more --

PANETTA: No, no. Let me get the rest of it.

TODD: OK, all right, all right.

PANETTA: Second issue is you've to harden these embassies as much as possible. And the third is that we've been working with the State Department to -- to determine whether additional Marines ought to be assigned to that area. And in the end, then you know the final alternative is our ability to respond in having our troops in a position where they can respond quickly. But I have to tell you, a lot of that still is dependent on whether intelligence tells us that we've got a big problem and gives us enough warning so that we can get to the place so we can respond.

TODD: Did you have enough time to get there in time? You didn't have enough warning, General...

DEMPSEY: No we did not.

TODD: And is there anything that could have been done better on the intelligence front do you think that could have given you more time to do something or is this something that you know this is – this is what happens in a place like Libya that right now is an unstable state?

DEMPSEY: Well, we've learned a lot from the Benghazi incident. And we as the Secretary said, we work with the State Department kind of surveying those parts of the world where -- where there's a new norm, if you will, of -- of instability. In terms of, you know, discussing the intelligence apparatus. It's pretty easy to talk about the intelligence failures. We don't talk much about them many times when we have intelligence and we're able to stop or prevent, disrupt an attack. So of course we should continue to learn from these events.

TODD: Is Turkey a success? What -- the stopping of, you know, he was stopped at the perimeter. Should we see that as a success?

PANETTA: Well I think -- I think the fact that that was at the perimeter, the fact that he got -- he got nowhere close to where the embassy was, I think that was a good security in terms of preventing it. The fact that we, you know, we were able to locate that down that had man pants on it and be able to respond to that is an example of good intelligence being able to guide us so that we could prevent something more serious from happening.

TODD: So when we invited you, we knew you guys were in charge of military, in charge of the Defense Department. We also didn't realize you were in charge of our economy. Just this week, the new gross domestic product number came out and it turned out here is the AP headline of all places the Norfolk Virginia Pilot that said, "Defense cuts cause economy to shrink. A plunge in defense spending helped pushed the economy into negative territory for the first time since mid-2009. Defense spending plummeted more than 22 percent, the steepest drop in more than 40 years. Nearly all those cuts were in services, such as weapons, maintenance and personnel support." Secretary Panetta, this is even before those automatic sequester spending cuts kick in, in March. These are the cuts that you guys agreed to back in 2011 that finally kicked in. What -- what is going -- first of all, is sequester going to happen?

PANETTA: I certainly hope not. If -- if Congress stands back and allows sequester to take place, I think it would really be a shameful and irresponsible act.

TODD: But are you preparing for it?

PANETTA: We have to prepare for it because, you know, there are members up on the Capitol Hill that are saying, "Oh, no, we're going to stand back and let sequester happen." Let me tell you, if sequester happens, it is going to badly damage the readiness of the United States of America. We have the most powerful military force on the face of the earth right now. It is important in terms of providing stability and peace in the world. If sequester goes into effect, and we have to do the kind of cuts that will go right at readiness, right at maintenance, right at training, we are going to weaken the United States. And make it much more difficult for us to respond to the crises in the world.

TODD: I want to show you this is what President Obama, his last campaign promise to the American people, the final debate, this is what he had said about sequester.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: First of all, sequester is not something that I proposed. It's something that Congress has proposed. It will not happen.

(END VIDEO CLIP)

TODD: He said it will not happen. You're preparing for it to happen. It seems Paul Ryan was just on MEET THE PRESS last week and he said it's more likely to happen than not. In your -- in your view, is this going to happen?

PANETTA: In a world of responsible politics, it should not happen.

TODD: And OK. We don't live in that world right now.

PANETTA: I know unfortunately that's right.

TODD: Are you assuming it's going to happen?

PANETTA: No I -- look, we've got to plan for that possibility because there are so many members that are saying you know we're going to let it take place. But I have to tell you, it is irresponsible for it to happen. I mean, why -- why in God's name would members of Congress elected by the American people take a step that would badly damage our national defense? But more importantly, undermine the support for our men and women in uniform. Why would you do that?

TODD: General Dempsey explain -- you have said this would be catastrophic.

DEMPSEY: Right.

TODD: You have talked about this idea of a hollow force. But explain specifically. Sequestered, are we less safe?

DEMPSEY: We will become less safe.

TODD: How?

DEMPSEY: I'll tell you how. We -- first of all, it's not just sequester. That's the piece of this that's been missing in the discussion. We're also operating under a continuing resolution. The accumulative -- the combined effects of sequester and the continuing resolution creates a magnitude of cut in the last half of the year. We have to absorb $52 billion when you count the effects of both sequestration and the continuing resolution in the last half of the year. When some of that money is already committed and the only place you can go and get it under that circumstance is readiness. It's operations. It's maintenance. And it's training. And by the way, the civilians that you hear talked about as potentially being furloughed --

TODD: We're talking 800,000, I believe, 800,000.

DEMPSEY: That's correct.

TODD: You guys are already preparing the Defense Department.

DEMPSEY: We are. And they will lose two days per pay period, 20 percent less pay for the rest of the year. And these are not people living in Washington, D.C. There's this notion that that's probably OK because they are just a bunch of white-collar bureaucrats. These -- the 86 percent that will be affected that live outside of Washington, D.C., are in our schools, in our clinics, in our motor pools, in our depots, in our factories. This will affect the entire country. And it will undermine our readiness for the next several years.

TODD: The two of you are very passionate this. Secretary Panetta you've -- Secretary I know you're making phone calls on Capitol Hill. The President did a public stop in Las Vegas, he talked about immigration, he's going to talk about guns next week. Has he been out there enough on this publicly trying to build support to get Congress to do something?

PANETTA: Well you know the President is very concerned about this. He's proposed that we do a budget deal involving $4 trillion. He's put specific proposals on the table. You know, as somebody who has worked with budgets throughout my life, in order to deal with the deficit problem, you've got to deal with entitlements. You have to deal with revenues. And you have to deal with discretionary. All of that has to be part of a package.

TODD: Yes but is he doing enough?

PANETTA: Well I think he's pushing as hard as he can.

TODD: Should he be more public?

PANETTA: Well you know look, the President of the United States has indicated the concern about sequester. He's indicated his concern about maintaining a strong national defense. And he's proposed a solution to this. The ball is in Congress's court. They have got to take action to delay sequester.

TODD: All right, I want to move on to some of the hot spots. We're going to start in North Africa. A lot of news this week that's been going on there here is the AP headline. "U.S. Limited in Fight Against North African militants. The United States is struggling to confront an uptick in threats from the world's newest jihadist hot spot with limited intelligence and few partners to help as the Obama Administration weighs how to keep Islamic extremists in North Africa from jeopardizing national security without launching war."

We want to put up a map here. And explain to people where this is -- Egypt, Libya, Algeria, Mali, Niger. Secretary Panetta when I read about the idea that we're -- we don't have enough intelligence, we've known about al Qaeda in North Africa since before 9/11. This is the original safe haven of Osama bin Laden, was in North Africa. Did we drop the ball?

PANETTA: You know, when al Qaeda attacked the United States on 9/11 and it became clear that we had to go to war on terrorism against al Qaeda, we focused on al Qaeda's core leadership and where they were at. And we've done that. We've gone after them in the FATA, in Pakistan, we've gone after them in Afghanistan, we're going after them in Yemen, we're going after them in Somalia. Yes AQIM is out there.

TODD: And it's been out there a long time, right? This is not new.

PANETTA: It has been out there. But in terms of the threat we were facing, clearly the threat was coming from core al Qaeda leadership, which was planning attacks, continuing to plan attacks, in the United States of America. And that's where we focused our main effort. Obviously, there are other elements of al Qaeda that are out there.

We -- you know, we knew that AQIM was out there. But we also were focusing on where the main threats were coming from. In -- in Yemen, for example, they were actually putting bombs on planes to come to the United States. So we focused on Yemen. Same thing is true for Somalia.

Now AQIM is out there. They try to establish a base of operations, that's serious. I'm glad that France took the steps they did. We are now working with France to make sure that al Qaeda has no place to hide even in North Africa.

TODD: General Dempsey -- is AQIM here -- al Qaeda in North Africa the number one national security threat to the United States?

DEMPSEY: No, I wouldn't describe them as the number one national security threat but they are a threat that is localized, becoming regionalized and left unaddressed will become a global threat.

By the way, to the Secretary's point and yours about did we miss something here, let's think about what's changed over the last three or four years in that region. The regimes that used to maintain control over that space, that would in fact be part of the solution of keeping al Qaeda and its affiliates at bay, are no longer there. The Arab Spring has stripped that away. And what we have got is a period of ungoverned space, or we have a period of which -- at which geography is less governed than it used to be. That's why this has become a near-term problem.

TODD: You know, he brings up the Arab Spring, Secretary Panetta. This is the issue here, what is our policy? North Africa and the Middle East. Is it stability or is it democracy?

We've been on the side of these democratic movements in Libya, in Egypt, but it's brought instability and it's brought more danger.

PANETTA: Well, that's what change is all about. And that's what we're seeing in that part of the world, is a tremendous amount of change. I mean our hope is that change can move in the direction of providing greater democracy and greater stability. That's what you hope for these countries. That's what you hope for --

TODD: It's less stable now though...

PANETTA: Well, there is instability associated with change, and that's what we're seeing in these key countries and that's what's creating some of the opening that General Dempsey talked about.

TODD: All right. I want to move east here to Iran. You have said a couple of times that you did not believe the Iranians were pursuing a nuclear weapon, that they have been pursuing the capabilities of nuclear energy or whatever these nuclear -- but not pursuing nuclear weapons. Are they pursuing nuclear weapons? Are you confident they are -- are you still confident they are not pursuing a nuclear weapon?

PANETTA: What I've said, and I will say today, is that the intelligence we have is they have not made the decision to proceed with the development of a nuclear weapon. They are developing and enriching uranium. They continue to do that. They continue to work at developing their capability.

TODD: Why do you believe they are doing that? Why do you believe they're doing that?

PANETTA: I think the -- it's a clear indication -- they say they're doing it in order to develop their own energy source. I think it is suspect that they continue to enrich uranium because that is dangerous, and that violates international rules.

TODD: You do believe they are probably pursuing a weapon but the intelligence isn't there?

PANETTA: I can't tell you they are in fact pursuing a weapon because that's not what intelligence says they are doing right now. But every indication is they want to continue to increase their nuclear capability. And that's a concern, and that's what we're asking them to stop doing.

TODD: General Dempsey, Senator Hagel said he was -- he was briefed, his first trip to the Pentagon, he was briefed on the potential plans, military plans, to deal with Iran should they cross this red line and be seen as pursuing a nuclear weapon. You have been very careful. Do we have the capability of stop this militarily?

DEMPSEY: We have the capability to -- by the way, Iran is not just threatening the region through its acquisition of nuclear weapons. They are very disruptive and a malicious influence in Syria. They smuggle weapons. They are active in any number of ways.

We have the capability to -- I have, we have the capability to provide options to the President in any number of scenarios to include their acquisition of nuclear weapons.

TODD: So because you were careful before never to say you wanted -- you wanted them to think that we did, but you were careful never to say, you were -- so we have the capability to stop them?

DEMPSEY: Well, stopping is a decision they would make in a political sense, the same way that other nations make decisions. We could --

TODD: You have the military plan?

DEMPSEY: To destroy their capability but intentions have to be influenced through other means.

TODD: Secretary Panetta, Afghanistan and the withdrawal. You know, we heard the White House say there was a zero option on the table. Is that a serious option? No troops in Afghanistan after 2014.

PANETTA: You know, the President has made clear in Chicago that we are committed to General Allen's plan in Afghanistan. And it's a plan that's working.

TODD: He's calling for more, quite a few troops --

PANETTA: But in Chicago, we also said that we are committed to an enduring presence. And I believe that the President of the United States is going to do everything possible to implement the Chicago agreements.

TODD: So we should expect to see thousands of troops, maybe not 10,000, but thousands of troops in Afghanistan, General Dempsey, after 2014?

DEMPSEY: What you should expect to see is that we will live up to our commitment to Afghanistan to maintain a long-term partnership and relationship. Help them continue to develop. The decision on numbers hasn't been made yet. You can also count on us to match the mission to the number of troops and to keep three things in equilibrium as we get there.

One is the mission. Second is retrograde -- we have a significant challenge of retrograding equipment and people out. And the third one is the protection of the force.

TODD: What is the mission?

PANETTA: The mission in Afghanistan is to establish a secure and a capable Afghanistan that can govern itself and ensure that al Qaeda never again establishes a safe haven in that country.

TODD: I want to show you a travel warning that came out this week. The State Department put this travel warning out. And I know that Afghanistan is not a big tourist spot. But this is the travel warning they put out: "Afghan authorities have a limited ability to maintain order and ensure the security of Afghan citizens and foreign visitors." This is right now. If they can't secure their own citizens now, do we think it's going to change in a year and a half?

PANETTA: Chuck, let's face it. There's a war going on in Afghanistan. This is not -- you know, this is not your peaceful little paradise, you know, where tourists can go there to sun bathe. This is a war area. And, you know, the fact is we've made good progress in the war. We've been able to have 75 percent of their population now under Afghan control and security. We've been able to diminish the Taliban's capabilities. Violence has gone down. We're also developing an Afghan army that has increased its operational skill to provide security.

So we're on the right path towards trying to give Afghanistan the opportunity to govern and secure itself.

TODD: General Dempsey, very quickly, women in combat -- implementing that. Is there some movement on Capitol Hill to pass a law to make sure you don't change standards, somehow lower standards. Do you think that's good legislation?

DEMPSEY: They can legislate if they like. They don't have to do that, because --

TODD: You're not going to change your stance?

DEMPSEY: We're going to make sure that we have the right standards for the right job that maintain the readiness of the force. My primary responsibility is the readiness of the force and I would do nothing to allow that to be undermined.

By the way, there's also a requirement, as we open up occupational specialties, to report to Congress, and they would have the opportunity to ask us what we've done to standards. Look, this really is about changing the paradigm from one of exclusiveness to inclusiveness to do the best job, to make the best force, for Joint Force 2020, which is where we're looking. We have to get from here to 2020, and make sure we have the right talent in the force. And this is part of it.

TODD: "Zero Dark Thirty". We'll show a little bit here. We've got James Gandolfini, of course, most people call him Tony Soprano playing you as a CIA director. I won't ask you to comment on the acting, but there's been a serious debate about the movie seems to say -- seems to indicate that enhanced interrogation techniques or torture were used to get information on bin Laden. Is that true?

PANETTA: Well, first of all, it's a movie. Let's remember that. I lived the real story with the --

(CROSSTALK)

PANETTA: -- operation. And the real story is that in order to put the puzzle of intelligence together that led us to bin Laden, there was a lot of intelligence. There were a lot of pieces out there that were part of that puzzle. Yes, some of it came from some of the tactics that were used at that time, interrogation tactics that were used. But the fact is, we put together most of that intelligence without having to resort to that.

TODD: And you think you could have gotten it without any --

PANETTA: I think we could have gotten bin Laden without that.

TODD: All right. It's a big weekend. There's a big contest a lot of people are talking about. PANETTA: Go 49ers.

TODD: It's the contest that has to do with Clinton or Biden -- 2016.

(LAUGHTER)

PANETTA: Oh.

TODD: You've been close to both of them. Secretary Panetta, I've got to ask you, who's ready to be commander in chief tomorrow?

PANETTA: I think both of them -- I have worked with both of them. You know, if they make the decision they want to be commander in chief, I think they are both qualified to do it.

TODD: What's their distinctive strengths?

PANETTA: I think distinctive strength for Joe Biden, is obviously as vice president, knowing the world, knowing the issues involved, knowing what it means to govern from that perspective. And for Hillary Clinton, she knows it from every angle now, having worked in the White House, been a part of that, and now as Secretary of State knowing the world.

TODD: General Dempsey, you want a piece of that -- Biden or Clinton?

DEMPSEY: I'd like to see which of the Harbaugh brothers are going to come out on top.

TODD: Gentlemen, thank you both for being here.

PANETTA: Thank you, Chuck.

DEMPSEY: Nice to be here.