Graham did not call for military action but said "all options" should be considered. He said assistance to Pakistan should be reconfigured and that the U.S. should no longer designate an amount of aid for Pakistan but have a more "transactional relationship" with the country.
"They're killing American soldiers," he said. "If they continue to embrace terrorism as a part of their national strategy, we're going to have to put all options on the table, including defending our troops."
In testimony last week to Graham's committee, the chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, said Pakistan's powerful intelligence agency had backed extremists in planning and executing the assault on the U.S. Embassy in Afghanistan and a truck bomb attack that wounded 77 American soldiers. Both occurred this month.
Mullen contended that the Haqqani insurgent network "acts as a veritable arm" of Pakistan's Inter-Services Intelligence agency as it undermined U.S.-Pakistan relations, already tenuous because of the war in Afghanistan. Pakistan exports violence, Mullen said, and threatens any success in the 10-year-old war.
Graham said Pakistan does cooperate with the U.S. in actions against al-Qaida. But he said the Pakistani military feels threatened by a democracy in Afghanistan and is betting that the Taliban will come back there.
"The best solution is for Pakistan to fight all forms of terrorism, embrace working with us so that we can deal with terrorism along their border, because it is the biggest threat to stability," he said. "But Pakistan is terrorism itself. They have made a tremendous miscalculation."