NJ: What was your reaction to Obama's decision to add 17,000 more troops to the U.S. bases in Afghanistan and Defense Secretary Robert Gates' plea to NATO for more allied support?

Hagel: I don't think anyone was surprised by the decision of the president to send in additional American troops. Afghanistan is a huge problem. I think we are seeing a very dangerous unwinding in Afghanistan. By every measurement used, I think we are losing ground in Afghanistan. But at the same time, as the president said when he announced that he was sending 17,000 more troops, this is not the only way, policy or approach to find a solution to that complicated problem. We need a strong military force structure there, yes, mainly -- if for no other reason -- to help in every way we can the Afghan government to build its own force structure and police structure through training and enhancement and all the things we can do to help them, because in the long term, that will be the answer. It cannot be, it will not be more American troops -- the president said that. We are going to have to find more creative, strategic approaches on a regional basis that would include wiser and smarter diplomacy, economic development, working with the people as well as a strong military presence.

I think the president felt, and I agree -- and certainly he was also responding to his field commanders -- that we needed to bulk up our force structure there. The NATO allies need to do more.... I don't think anyone was particularly surprised by the president's decision, except maybe some thought he would announce a larger troop commitment. But I think he did the right thing; I think he put about the right number in there.

NJ: Do you foresee Afghanistan becoming "Obama's war"?

Hagel: I don't see how it could be "Obama's war" since we're now in our eighth year in Afghanistan, and he was not the one who initiated either the Iraq war or the Afghanistan war. We're now in our eighth year in Afghanistan, and next month we will be in our seventh year in Iraq. I find it a bit of a stretch for anyone to claim or name the wars in Afghanistan or Iraq Obama's wars.

NJ: You have often said you don't consider the war in Afghanistan a win-lose proposition. And yet Obama has called the Afghanistan conflict "winnable." Is there a chance for victory there?

Hagel: In both Afghanistan and Iraq, the outcome will be decided by the people. The outcome will not be decided by so-called military victory. I'm not sure what the definition of a "military victory" is. Does that mean we have a surrender? By who? Will there be a peace document surrender? Surrender an army? No, this is not a conventional "win or lose" kind of a situation. This is a whole different dynamic and different kind of a war than we've ever seen. What I have always believed, that because -- like in Vietnam or like in any kind of struggle like this based on history, based on culture and religion and ethnicity, it is an accommodation of how the people themselves will eventually govern themselves....

The Afghanis drove the Soviets out.... They drove the British out. They drove out many great leaders, Alexander the Great. No one could ever conquer those areas. There never was a victory or a loss. It can't be judged that way. It's not ours to win or lose. It's the people of each of those areas that will decide what kind of government they want, what kind of future. Now, we can help.... We are deep into the bog, and we have some responsibilities there to the people because we started those wars.

NJ: Do you think similar reasoning was behind Obama's decision to announce an end to the "combat mission" in Iraq rather than a final end of U.S. involvement?

Hagel: We, the United States, have to honor an agreement that we reached and signed with the Iraqi government in the Status of Forces Agreement. If you recall, that was an agreement that said all of our troops will be out of there by 2011 and our combat troops will be out by the summer of 2010. That was an agreement reached during the Bush administration, not the Obama administration....

I am one who believes that Iraq right now is a very delicate veneer of stability. The Iraqi population, Iraqi politicians have not come to any accommodation on one of the biggest problems they have over there that they're going to have to deal with. That's the Kurdish issue.... What about an oil law? Who's going to share in the oil wealth in Iraq?.... Those are two very, very difficult issues that have not been resolved. I think that we have a very thin veneer of stability there. Now, is the violence down? Yes. Is there progress being made? Yes. But a great deal of that, too, has been based on America putting $10-12 billion a month in Iraq, and that's going to stop. It should stop.... In the end, it will be the Iraqi people -- the Sunnis, the Shias, the Kurds -- finding some accommodation to get along, to govern themselves, to deal with their own interest. And if they can't do that, they will never get to a resolution; and if they can't get to a resolution, there will continue to be war.

NJ: The much-debated "Buy American" clause in the recent stimulus package made some American trade partners apprehensive. Will the Atlantic Council be involved in smoothing out the consequences of this provision, and what are those going to be?

Hagel: The Atlantic Council has been and is an institution that is focused primarily on relations on both sides of the Atlantic and those certainly include trade, commerce, national security and all aspects of a geopolitical relationship.... I think most people realize that we all now are a part of a global economy, and we are not going to unwind that. And we need to all be mindful of very dangerous protectionist streaks that can seep into policies and to thinking of all countries..... All systems are imperfect, but we have to accommodate each other's interests for the good of all of us. And I have confidence that our country and our allies, especially those who are a part of the Atlantic alliance, will not only realize -- and have realized that -- but in fact also put that into practice.... So, the Atlantic Council, I believe, will continue to be a steadying voice and a voice of common sense and stability to enhance our relationships around the world rather than divide it.

NJ: You have often said that successfully governing this country requires a consensus of common interest. How far do you think Obama is from being able to forge such a consensus?

Hagel: Democracies work because of compromise, because of a consensus, finding a way forward. Our government has failed our people the last few years because we have allowed the government to grind down as a result of rank, raw, political partisan paralysis....

What President Obama must do -- and he knows this and he's attempting to do that -- is find that consensus out there to govern this country.... This is a joint responsibility of the governing party, the majority party, and the opposition party, the minority party. Always a president tries to strive for that balance, always a president strives to find that working consensus. And it is difficult. But I don't think President Obama will give up on this -- he can't. He's going to have to continue to reach out and do what he can to bring enough of the other party on board, giving where he needs to give, having compromise where he needs to have compromise. But at some point, the tension must be broken in a system, and the system must be allowed to accomplish an objective of the people.

NJ: With so few centrists left in Congress, who will help break that tension?

Hagel: I think the center of gravity there, the centrifugal force that you're talking about, is and always will be -- and always has been in a democracy -- the people.... If you as a congressman or senator or any elected official are seen in the eyes of a majority of your constituents as not adding to finding solutions and working toward an objective to fix the problems, they'll vote you out and bring someone else in who they feel will strive to try to find some accommodation and some consensus to governance rather than being captive to political ideology, partisan ideology, talking-points-type ideology....

This economic crisis is resonating in ways that no one could have understood.... It's very dangerous when that happens, because these countries that are striving to become democracies, nations of law, nations of order, there's a breakdown in that law, breakdown in that order, breakdown in civilization when people don't have jobs, when they don't have a future.... That's what's at stake here in the world. I think we have the capacity to lead the world out of it. I think we have the resources to do that. It's going to take some time. It's going to be painful. It's going to be unfair. But these times in history come every now and then, and we have got to be wise enough to get above it and help lead the world out of it. And that's what the president is facing, the Congress is facing and the American people and the world face right now.