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STATE OF THE UNION WITH JOHN KING

John King Interviews Barack Obama

Aired January 18, 2009 - 20:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


JOHN KING, CNN ANCHOR: I'm John King and we're here live on the roof of the Newseum, overlooking the majestic United States Capitol in Washington, D.C., where in just about 40 hours, Barack Obama will be sworn in as the 44th president of the United States.
Today, we're launching a new kind of Sunday program. We'll be on the air every Sunday morning for four hours and back for another hour every Sunday evening, bringing you the top newsmakers from Washington and other capitals around the world and always taking time to head out on the road to hear from everyday Americans from every state in the union. Our goal, to make you more interested and more involved in our Sunday conversations.

Tonight is a special event as we continue CNN's coverage of the inauguration of the first African-American president. On Friday, I sat down for an exclusive interview with the president-elect and I asked him what this historic event will mean on the most personal level.

(BEGIN VIDEOTAPE)

KING: Mr. President-elect, thanks so much for joining us.

BARACK OBAMA, PRESIDENT-ELECT OF THE UNITED STATES: Thanks for having me.

KING: A lot of policy ground I want to cover, but I want to start with the moment. You are on the verge of putting your hand on the Lincoln Bible and taking the oath of office on the steps of the United States Capitol, built on the back of slaves. And you will walk down Pennsylvania Avenue and you will move into a historic house, built on the backs of slaves.

OBAMA: Yes.

KING: You're known as no-drama Obama. Some people say, well, he's too detached and he's so cool, you never see his emotions. This has to be incredibly overwhelming.

OBAMA: Well, look, if you think about the journey that this country has made, then it can't help but stir your heart. Obviously, it's an extraordinary personal moment, but you know, you don't have to go back to slavery. You can think about what Washington, D.C. was like 50 years ago or 60 years ago, and the notion that I now will be standing there and sworn in as the 44th president I think is something that hopefully our children take for granted, but our grandparents I think are still stunned by, and it's a remarkable moment. KING: A remarkable moment, but you're still pretty cool in describing it. In private, do you get more emotional? John Lewis, for example. He was beaten. He was jailed. He walked the walk of the journey he thinks you're helping almost complete. There's more to be done, and he says he might not be able to keep it together at the inauguration.

OBAMA: Well, I'm going to try to keep it together. But I will tell you that during the convention, there was a moment at the end of my convention speech, where I talk about Dr. King and what he accomplished. And the first time we practiced it, I had to stop. I started choking up, because, you know, what you start thinking about is not just your own personal journey, but you think about all the women who walked instead of riding the bus, about Montgomery and Birmingham, and what a moment like this would mean to them.

And what's remarkable is, some of them are still alive. They're still there, and some of them are going to be standing there at the inauguration.

KING: We'll get back to the moment, but I want to go through some policy ground. Let's start with where we are. We're in Ohio.

OBAMA: Right.

KING: This state is struggling. The country is struggling. This factory we're in today is a success story, and it's one of the reasons you're here. But if you go around this neighborhood, many of the factories are bleeding jobs and they're losing, a lot of them are in the auto industry.

We had breakfast this morning with some local people, and if I could boil their economic concerns into one question, it would be, to their new president, they want to know when will the bleeding stop?

OBAMA: Well, we're going to have a tough year, 2009. I don't think that any economist disputes that we're in the worst economic crisis since the Great Depression. The good news is that we're getting a consensus around what needs to be done. We've got to have a bold, aggressive reinvestment and recovery package. It's working its way through Congress. That's going to help create or save 3 to 4 million new jobs.

What we also need is to make sure that those jobs are in industries that can lay the foundation for long-term economic growth. And that's why this factory's so special, because what you're seeing here are traditional manufacturing converted to focus on the wind turbines and wind power of the future. And so, what we want to do is to try to duplicate the success here.

These folks use American steel. They've got American workers, and their goods are being imported to create American energy. And what we want to see if what we can do is to duplicate this, train workers. We're still going to have to focus on stabilizing our financial system, and so I was glad that Congress gave us the authority to use much more wisely the money that's been allocated to stabilize the financial system, deal with home foreclosures in a serious way. And we've got to have tough financial regulations, so that we don't have Wall Street getting the country into the kind of crisis that we're in right now anymore.

KING: You mentioned the solutions -- the stimulus plan, the recovery plan as you call it, the bailout plan, the TARP program as they call it in Washington. You'll get that money. It's hard to find anybody who disputes the urgency, but you find a lot of people worried about the price tag.

OBAMA: And they should be.

KING: One of your key allies in Congress said just yesterday, $850 billion in stimulus may be a first step. They might need more. You know what the bankers are saying on Wall Street, that the financial institutions are still losing money. Many of them holding on to that federal money even, and they say it might not be enough. $700 billion might not be enough. Are you going to have to in your early days draw a line, say we can't keep printing money? This is it.

OBAMA: Here's what we're going to have to do. We've got to distinguish between short term and long term. Short term, the most important thing is to put people back to work. All those folks that you had breakfast with. If they're working, that means they're paying taxes, that means that they're buying goods and services, and the economy, instead of being on a downward spiral, starts back up on an upward spiral.

But what we also have to recognize is that the deficit levels that I'm inheriting -- over $1 trillion coming out of last year -- that that is unsustainable. At a certain point, other countries stop buying our debt. At a certain point, we'd end up having to raise interest rates, and it would end up creating more economic chaos, and potentially inflation.

So what we want to do is to say that instead of just printing more money, let's look at medium term and long term. Let's get a handle on Social Security. Let's get a handle on Medicare. Let's eliminate waste in government where it exists. Let's reform our Pentagon procurement practices. All those things are going to have to be done in concert, and that's going to be tough. It's going to be tough, because the only way to do it is if Democrats and Republicans both are willing to give up a little bit of what they consider to be their favorite programs. And we're going to have to look at all this stuff in a fairly short period of time, because we're not going to have five or 10 or 15 years to kick the can down the road. We've got to get started right now.

KING: Back a few years ago, Ross Perot used to get attention for saying there's this giant sucking sound of U.S. jobs going overseas. Many people now say they hear this constant flushing sound, $700 billion. They don't know where it's going, and they think it's going literally down the toilet.

I want to read you a question. We asked some of our viewers what would they like to ask the president-elect, and John Stevens (ph) of Torriton (ph), Connecticut, to the point you were just making about mortgages and foreclosures. He says.

(BEGIN VIDEO CLIP)

UNKNOWN: I'm unemployed, going through a foreclosure. The bank doesn't want to work with me. They've actually told me on the phone that it's easier for them and more cost-effective for them to take my home than to work out a payment plan with me.

(END VIDEO CLIP)

KING: Are there not specific things, requirements for these banks? If you're going to get billions of dollars in taxpayer money, you have to help these people.

OBAMA: That's my attitude, and that's what we're going to have in our plan.

Look, there's no doubt that we needed to stabilize the banking system. It could have been even more catastrophic. When we saw the stock market start collapsing in September, we could have seen a serious downward spiral.

But there's nothing wrong with us placing some conditions, making sure the money's not going to executive compensation, making sure that you're not seeing big dividend payouts to shareholders, and making sure that money is being lent so that we can get credit flowing again, not just to individual homeowners who are losing their homes, but also small businesses, who are the lifeblood of this economy. If they can't get credit, then they end up having to shutter their doors. And when they shutter their doors, people lose jobs. They then can't pay their mortgage, and you start down the road that we're on.

We want to reverse that path, and that means that the way we use the next $350 billion that Congress voted on -- and that was a very tough vote for a lot of people, so -- and it was tough for me to have to request it. We've got to make sure that it's transparent, that there's oversight, that the American people know exactly how the money's being used, and that dealing with home foreclosure is a central policy in that program.

(END VIDEOTAPE)

KING: Up next, we'll ask Barack Obama what might be on his desk on day one. And the question on everyone's mind, has the Obama family decided on a first puppy? Stay with STATE OF THE UNION. We're live from the Newseum in Washington, D.C.

President-elect Barack Obama on what he plans to do when he gets to the Oval Office. When we come back, I'll ask the president-elect which campaign promises he may simply not be able to keep. Much more of "State of the Union" just ahead.

(COMMERCIAL BREAK)

KING: This is STATE OF THE UNION, live from the roof of the Newseum, with a breathtaking view of the Capitol and the National Mall. I'm John King. The economy in free fall. President Obama will face some incredibly tough choices. In my exclusive interview, I asked him if any of his campaign promises may simply have to wait.

(BEGIN VIDEOTAPE)

KING: Every new president learns that government -- governing math is sometimes a little more difficult than campaign math, and you've talked about this, that there will be trade-offs and some people are going to have to wait.

I want to talk about a couple of them. You made a big priority during the campaign, you said $50 to $65 billion you would spend on health care reform, and you would get that money from rolling back the Bush tax cuts for people who make over $250,000 a year. Even many who want to roll those tax cuts back say not now, would hurt the economy at a precious time. Does that mean you will let those tax cuts stay in place for a while and say to people who are urgently waiting, health care reform is going to have to wait a little bit?

OBAMA: We have not made a final decision on this. We'll be unveiling our budget in February. The important principle is that folks making more than $250,000 a year can afford to give up those Bush tax cuts so we can give those tax breaks to 95 percent of working families, who desperately need some relief.

We are going to make sure that that's part of our package.

KING: But it might take a little longer.

OBAMA: It might take a little bit longer. Keep in mind, though, that the legislation to get our health care plan in place is going to take a significant amount of time during the course of this year. That is a huge process.

We've got to get all the stakeholders together, the providers, the nurses, the doctors, the hospitals, everybody is going to have to sit around the table, and then we've got to move it through Congress.

So what I -- but here's the good news, that in the economic recovery package that we put together, we have a lot of investment in making the health care system more efficient. Those are things that had to be paid for anyway.

Just a simple thing like converting from a paper system to electronic medical records for every single person can drastically reduce costs, drastically reduce medical error, make not only health care more affordable, but also improve its quality.

KING: If you're not busy enough, you now say early on you will have an entitlement summit.

OBAMA: Yes.

KING: President Clinton tried some of this.

OBAMA: Yes. KING: I know you disagreed with his proposals, but President Bush put a lot of capital into this. It's a frustrating challenge that presidents in the past have faced. You'll have this summit, but what is your timetable for action in Congress?

OBAMA: Well, you know, I think here's the difference. There is something about $1 trillion that gets people's attention. And...

KING: One would hope.

OBAMA: I hope. And I think that across the political spectrum, people are looking at what we have to do now to get this economy back on track, and they're saying to themselves, we know we can't sustain this, and that means we've got to make some tough decisions. And I'm going to be using a significant amount of political capital.

What I want to do is lay out the situation for the American people. And this is going to be a general principle of governing. No spin, play it straight, describe to the American people the state that we're in. And then provide them and Congress a sense of direction. Here's how I think we can solve this problem. Now I'm not going to get my way 100 percent of the time. I expect that people will have good ideas. And if they've got better ideas in terms of how to deal with Medicare or Social Security than I do, I will gladly accept them. I just want things to work. But what I know will not work is us seeing our debt levels double again like they did under George W. Bush. We can't do it and it's a burden on future generations that I'm not willing to accept.

KING: You went to every corner of this country promising to restore trust and confidence in government and particularly and especially in Washington.

OBAMA: Yes.

KING: Do you think that promise is in any way at risk because of the controversy over your pick to be treasury secretary, who failed to pay more than $30,000 in taxes? You have said it's an honest mistake, people make them. "The New York Times," for example, has an editorial today saying, not the right guy for the job at this time of economic peril. They say this controversy has tainted his ability to command respect and instill confidence.

OBAMA: Well, you know, "The New York Times" editorial page has a lot of opinions, as does "The Wall Street Journal" editorial page, and some of them are better than others. This wasn't a good one. Tim Geithner...

KING: He's going to be the head of the IRS, the man who...

OBAMA: I understand.

KING: ... implements and administers the tax code.

OBAMA: But keep in mind, nobody disputes that this guy is the best-equipped guy for the job. That he has got the best qualifications imaginable. That he has dealt with financial crises consistently and steadily. And so the notion that somebody who has made what is a common mistake because they worked for an international organization, they paid this money back, paid penalties, and the notion that somehow that is disqualifying makes absolutely no sense.

And, you know, the -- I think that one of the things that we need to change about Washington is this notion that if you can play gotcha and you find, over the course of an exemplary record, one mistake that somebody makes that somehow that's disqualifying. If that were true, then I could be president, and you probably couldn't be a correspondent. So what I want is somebody who has terrific qualifications for the job, who has core integrity. I'm not looking for somebody who has never made a mistake in their life. And I don't think the American people are either.

KING: You will have the power at the end of that parade to, at the stroke of a pen, lift the federal ban on embryonic stem cell research. There may be the votes to do it in Congress now, but you don't have to wait. You could do it in your first few minutes in office. Will you?

OBAMA: Well, you know, if we can do something legislative, then I usually prefer a legislative process because those are the people's representatives.

And I think that on embryonic stem cell research, the fact that you have a bipartisan support around that issue, the fact that you have Republicans like Orrin Hatch who are fierce opponents of abortion and yet recognize that there is a moral and ethical mechanism to insure that people with Parkinson's disease and Alzheimer's can actually find potentially some hope out there, you know, I think that sends a powerful message. So we're still examining what things we'll do through executive order. But I like the idea of the American people's representatives expressing their views on an issue like this.

KING: You spent two years traveling the country saying President Bush was incompetent when it came to domestic leadership, had a debacle of a war in Iraq, and had hurt our image around the world. You've gotten to know him a little bit better during what by all accounts is an incredibly smooth and professional transition. Anything about him you want to take back or any new judgments about him?

OBAMA: You know, I think if you would look at my -- if you look at my statements throughout the campaign, I always thought he was a good guy. I mean, I think personally he is a good man who loves his family and loves his country. And I think he made the best decisions that he could at times under some very difficult circumstances.

That does not detract from my assessment that over the last several years we have made a series of bad choices and we are now going to be inheriting the consequences of a lot of those bad choices. That does not mean that I think he's not a good person. And his White House staff has done an extraordinary job in working with us for a smooth transition. And that's part of what, I think, America is about. That we can have disagreements politically but still treat each other civilly, and I think he has embodied that during this process.

(END VIDEOTAPE)

KING: When we come back, some personal reflections. Barack Obama opens up about his family. He also tells us whether he gets to keep his beloved BlackBerry after Tuesday. Then we'll hear from two top White House advisers, David Axelrod, who's on the way in, and Ed Gillespie, who's on the way out. Stick around, STATE OF THE UNION will be right back.

(COMMERCIAL BREAK)

KING: You're watching the special inaugural edition of STATE OF THE UNION, live from the top of the Newseum right smack in the middle of Washington, D.C. Today has been a very public celebration, only the beginning of days full of pageant and ceremony. But away from the public eye, the new first family will face some wrenching changes personally in the next weeks and months. I asked the president-elect about that when we sat down in Ohio.

(BEGIN VIDEOTAPE)

KING: Let's spend a few minutes, as we close, on your personal transition.

OBAMA: Yes.

KING: Your family has come to Washington, your two beautiful daughters have left some friends behind and they're making new friends in a new school. I have a 12-year-old daughter. She sees their pictures in those magazines that we should probably both keep away from our daughters on occasion. And she says, Daddy, do they have new friends? And what sports do they like? Where do you draw the line? There are pictures of them even around this plant. People have pictures of your family on their machine stations. Where do you draw the line when it comes to my business and your daughters and your family?

OBAMA: Well, my hope is that the press is going to be respectful of the fact that growing up is hard enough without doing it in a fishbowl. It would be naive of me or Michelle to expect that people take no interest in the girls. But I think the press has a lot of control over this.

We've asked them not to follow them around, not to take pictures of them when they're not with their parents doing something that is a public event, and I hope that folks are respectful of that precisely because, you know, folks in the press are parents as well and they know the struggles and even if you're not a parent, you remember what it was like being a teenager, and that can be a painful process as well.

KING: Another one of our questions from viewers is about the big choice you have to make for the family. This is Jill Pearson (ph) from Marietta, Georgia.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Have you decided on your first puppy yet?

(END VIDEO CLIP)

OBAMA: Well, yes, we have narrowed it down. I made the statement that says we're thinking about either a Labradoodle or a Portuguese water dog. Malia is allergic, so we have to have a hypoallergenic dog.

We'd also like a shelter dog, though. So, you know, how we're going to manage all of this will be closely watched, I know, in the weeks and months to come.

KING: I have spent some time since the election with a young boy named Melvin Thomas. He's 14 years old, lives just outside of Baltimore, African-American. If I was visiting with him a year and a half ago and said, who's your hero? He would have said without blinking, Michael Jordan. If I asked him today, he says, Barack Obama.

OBAMA: Well...

KING: And he says, Barack Obama is going to change the country. He thinks you're going to create more jobs. And he thinks you're going to help stop people from hating black people. What's the burden you feel there and the responsibility to kids like Melvin Thomas?

OBAMA: Well, first of all, I hope that -- part of what my election communicates to Melvin is he can shoot for the stars. He can go as far as his worth ethic and his -- his imagination takes him. And what I also hope is that not only me, but all of us take responsibility for the millions of Melvins out there. There are so many young people with so much talent.

KING: What, specifically, do you need to do?

OBAMA: Well, I think that part of what we have to do is make sure that our school system works. Part of it is all of us as parents taking responsibility, because government can't do it all. And what Melvin is going to benefit from, hopefully, is some good policies from my White House, but I also hope he's going to benefit from parents who instill in him a thirst for learning, that he has a community that is supportive of the idea that there's nothing wrong with black boys, or any American child, hitting the books before they worry about whether they're popular or whether they're worrying about their sports. You know, I think that the idea that each and every one of us has responsibilities to the next generation is one of the things that I want to communicate, both on Inauguration Day and throughout my presidency.

KING: We're short on time, so a couple of more quick ones. You took your family to the Lincoln Memorial.

OBAMA: Yes.

KING: What did you talk about, walking around and looking at the president and reading those walls?

OBAMA: Now this is a good story. I love the Lincoln Memorial at night. It always inspires me. So I took Michelle and the girls. We're looking at the Gettysburg Address. And Michelle's describing what Lincoln's words mean.

The fact that these soldiers died on this battlefield means that any words that Lincoln could have said or any of us could have said would ring hollow. They've already consecrated this ground, and what we have to do is to honor them by working for a more just -- more justice, more equality here in America. At which point, Malia turns to me, and she says, yes, how are we doing on that, Mr. President- elect? (LAUGHTER)

KING: Accountability in the house, that's a good thing.

OBAMA: Absolutely. And then we go and look at the -- Lincoln's second Inaugural, which is on the other wall. And Sasha looks up, and she says, boy, that's a long speech, do you have to give one of those? I said, actually, that one is pretty short. Mine may even be a little longer. At which point, then Malia turns to me and says, first African-American president, better be good. (LAUGHTER)

KING: You were tired during the campaign, and it's a pretty exhausting process. At one point you got a little confused about how many years you've been married. I know you're busy right now, so I just wanted to help you out. You know what this weekend is, right?

OBAMA: This is her birthday, Michelle's birthday. And we are going to make sure that we actually had a little birthday party last night. And...

KING: Ahead of the curve this time. That's a smart move.

OBAMA: You know, listen, if you're going to miss it, better miss it earlier than miss it late.

KING: I'll ask you one last question. And it's, in part, silly. But it's not always silly. You like these. I was just with you before this, and you have a couple of them. And there are a lot of people who say, because this will end up in the presidential library, because you don't have privacy any more, your life is about to change Tuesday noon, you have to give this up.

OBAMA: Yes.

KING: You going to do it?

OBAMA: I think we're going to be able to beat this back. I think...

KING: Beat this back?

OBAMA: I think we're going to be able to hang onto one of these.

Now... KING: You want mine?

(LAUGHTER)

OBAMA: My working assumption, and this is not new, is that anything I write on an e-mail could end up being on CNN.

So I make sure that -- to think before I press "send."

But what this has been -- what this does is -- and it's just one tool among a number of tools that I'm trying to use, to break out of the bubble, to make sure that people can still reach me. That if I'm doing something stupid, somebody in Chicago can send me an e-mail and say, "What are you doing?," you know? Or, "You seem detached." Or, "You're not listening to what is going on here in the neighborhood."

I want to be able to have voices other than the people who are immediately working for me, be able to reach out and send me a message about what's happening in America.

KING: Do you think you fully comprehend how much your life's about to change?

OBAMA: Oh, I've gotten a pretty good sense over the last few days. And, truthfully, over the last two years. It's a process of consistently ratcheting up. And you've got to pick your game correspondingly, and so far, so good.

KING: Mr. President-elect, we thank you for your time.

OBAMA: Thank you. I enjoyed it.

KING: We wish you the best.

OBAMA: Thank you so much.

KING: Hope to see you again when we drop the 'elect' part.

OBAMA: There you go. Appreciate it, John.

KING: Thank you very much.

OBAMA: Thank you.

(END VIDEOTAPE)

KING: President-elect Barack Obama there in his last scheduled interview before taking the oath of office.

I'm joined now to discuss this moment, CNN's senior political analyst David Gergen joins me.

And David, I want your reflections on the challenges. As we do so, let's show our viewers -- 78 percent of the American people have a favorable opinion of their new president -- president-elect at the moment. But 78 percent.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: We have numbers...

KING: I'd say stratosphere.

GERGEN: We haven't seen any new president in this stratosphere in my lifetime. Perhaps Dwight Eisenhower, when he came in as a war hero.

And there's been something about this man that has touched chords with people, that's given them a sense of hope that they have not had before. There's a sense of excitement going into this inaugural that, I think, surpasses what we have normally seen. We're going to have crowds here that are going to be bigger than anything we've ever seen.

But what was nice about that last part of that conversation with him is how human he is. And, you know, the BlackBerry is really sort of a metaphor for the larger question for him. And it is: How do I stay in touch? How do I stay in touch with my friends, with my roots, with my values, with my kids? And that's a very healthy thing to (INAUDIBLE)

KING: He's a guy who seems to thrive on that, like Bill Clinton, when he's out and touching, seeing people. He gets energy from them.

GERGEN: Yes, it is. You know, it's like, John -- it's like if you were back here trying to cover the campaign from Washington by just reading the polls. You would never do that. You want to -- you wanted to go out and talk to people in Ohio. You wanted to talk to people in Florida. Because that way, you could understand it.

And that's what he wants to do. And it's a very healthy thing, because I've seen -- you've seen, for instance -- they get into this cocoon. And it's -- it's very easy to spend your time at the White House all wrapped up in those decision, go up to Camp David, spend your weekend, come back to the White House, and never talk to anybody outside the grounds.

KING: It's a big challenge. David will be with us the rest of the program.

And up next on STATE OF THE UNION, the man who will have the president's ear. Among the closest: incoming senior adviser David Axelrod.

Please stay with us.

(COMMERCIAL BREAK)

KING: Receptions and parties continuing into the night. People still wandering the National Mall. The preparations for the historic inauguration of Barack Obama, who, in fewer than 40 hours, will become the 44th president of the United States.

Earlier today, I spoke about the president-elect's upcoming agenda with a man who will have unfettered access to the Oval Office, the new senior White House adviser, David Axelrod.

(BEGIN VIDEOTAPE)

KING: I want to get to the big decisions that the new president will have to make.

But, first, you're a friend. You are not just a senior adviser; you're a friend to Barack Obama. You were a key architect of the campaign that brought this moment about, and you've spent a lot of time with him, as he goes over the speech and considers what he wants his first words to be to the American people as president.

What does this moment mean to you?

DAVID AXELROD, SENIOR ADVISER TO PRESIDENT-ELECT BARACK OBAMA: Oh, it's hard to put in words, John. It's been such an extraordinary journey.

I mean, we started off together trying to persuade people that he could get elected as senator from Illinois, and it's been a magical journey ever since. And really, (INAUDIBLE) -- I applaud your notion about getting out to talk to the American people, because we drew our strength and inspiration from them.

But you can't help but be here this weekend and not be moved by the magnitude of this. And mostly, I'm thrilled because I really believe in him. I think this country needs an extraordinary president right now, and I think he'll be one.

KING: First actions matter.

Israel yesterday said it would implement a cease-fire in Gaza. Hamas this morning, CNN has now confirmed, has said it will abide by a cease-fire as well.

As you know from watching from the outside, these things often are very tentative and very fragile. Will the Obama administration have an envoy on the ground in the Middle East on Tuesday -- on day one?

AXELROD: Well, first of all, let me say that all of us are hopeful that a cessation of violence will hold.

But the president-elect has said repeatedly that he intends to engage early and aggressively with diplomacy all over the world and using the men and women, the professionals who are in place, who are -- who are great, and, where appropriate, special envoys.

KING: That fast, though?

AXELROD: Well, I think that the events around the world demand that he act quickly, and I think you'll see him act quickly.

KING: The big priority at home, obviously, is the economy. And the stimulus package is making its way through Congress -- $850 billion, roughly, is the House version. It still of course has to go over to the Senate.

There are some in the House who say this is a starting point, a down payment. The economy is in such dire straits, we're going to need even more money. There are Republicans who say we'd like to work with the new president, but we look at this bill and we see a whole bunch of old Democratic pork-barrel spending, a lot of which they don't believe will actually create jobs in America, but will instead go to schools or go to places that might be worthy spending, but not something that will create jobs immediately.

Will President Obama say this is all we can afford, $825, $850 billion? Or will we be printing money throughout this administration?

AXELROD: Well, we have been involved in discussions with Congress for the last few weeks. We started with a figure that was somewhat lower than that.

Obviously, there are limits to what we can do. But we do have to think boldly right now, that the scope of the emergency we face is so large that economists from the right to the left agree we have to do something big.

But let me just say this on the question of how the money is spent. We were determined and we are determined not to simply spend money to create jobs in the short term -- and we do believe it'll create 3.5 to 4 million jobs -- but we're determined to make investments that will strengthen the economy in the long run.

KING: In the campaign, candidate Barack Obama promised the most open and transparent administration in American history.

Your Treasury secretary nominee has hit a speed bump, at a minimum, over the disclosure that he failed to pay some $30,000 in taxes. He has paid those taxes, he has paid the interest. But the transition disclosed that to the Senate Finance Committee on December 5. The American people were not told about this publicly until January 13.

Is that -- can you call that truly open and transparent, when the American people were not told something for more than a month that's pretty critical?

AXELROD: John, it is absolutely appropriate for us to first take this matter to the Finance Committee. It was very clear that that was going to be discussed in open hearings for the American people to watch and form -- formulate their own judgment. So I wouldn't say this is a transparency issue.

And as to Tim Geithner -- yes, he made a mistake on his taxes. It was related to his service overseas and how certain withholding was treated. Most accountants say this is a typical -- a fairly common mistake. When it was discovered, he redressed it.

The bigger point is, here's a guy who'd been involved in public service all his life, who was a major architect of the last international financial rescue in the '90s, who has vast experience and great values and a great insight into this process.

(END VIDEOTAPE)

KING: David Gergen is still with me here. He's a man who's had that title, senior adviser to the president, had that unfettered access to the Oval Office.

When we come back, we'll get David's thoughts on the policy challenges ahead.

And also, we'll here from another man with that title, or a similar title: White House counselor Ed Gillespie. He shares some of his thoughts on the Bush legacy.

Much more on STATE OF THE UNION just ahead.

(COMMERCIAL BREAK)

A bit earlier today, I had the chance to speak with the White House counselor Ed Gillespie. And along with my partner Gloria Borger, we discussed the departure of George W. Bush.

(BEGIN VIDEOTAPE)

KING: All right. We will wait and see on that.

(BEGIN VIDEOTAPE)

KING: Discuss the moment. The president is leaving office at a time -- you know the political talk in Washington, just look at the approval numbers. And maybe (INAUDIBLE) polls, our polling, 31 percent of an approval rating for George W. Bush. "The New York Times" poll has him at 22 percent.

I guess CNN polls are in favor at the White House at the moment.

I don't mean to joke about it, though it's tough for a guy who has given so much to politics -- when he looks at that number, does it make him mad? Make him defiant?

ED GILLESPIE, WHITE HOUSE COUNSELOR: He doesn't much look at that number. I obviously am someone who looks at those numbers, and I'd rather see them higher than lower. It's my nature.

But I also feel, as the president does, that as the -- you know, the bitterness that surrounded, unfortunately, for whatever reason, so much of the vitriol directed at the president -- as that dissipates over time, as the facts bear out and as people see the true record -- obviously, we lived in a time of tough economic situation. The president has moved boldly to help address that for -- help make it a little easier for a successor, who will have a challenge on that front.

But, you know, after the attacks of September 11th and through this one, we had 52 months of uninterrupted job creation. That's the longest in the history of the United States. The fact is we're -- Iraq is on its way to being a stable democracy in the heart of the Middle East. Very important, I think, in the long term.

And a lot of other statistics that we've got out there that I think, as people look at the data over time, I think he'll get a fair shake.

We're also joined by our senior political analyst Gloria Borger, up here. Luxury box? Nice seats, nice view...

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Absolutely.

KING: ... of the United States Capitol here.

Both the president of the United States, George W. Bush, and his father, the former president of the United States, George H.W. Bush, say they thought that Jeb Bush, his brother, the former governor of Florida, would make a great candidate for an open Senate seat in Florida.

Everyone took that as a cue; boy, Jeb's going to get in. And in the end, he decided not to. Take us behind the curtain.

GILLESPIE: Well, I think actually, that's one of the ones where there was no curtain.

(LAUGHTER)

I think the president and the former president felt like Jeb would be a great candidate. By the way, as a former RNC chairman, I thought he would have been a great candidate. A lot of people agreed with that.

But, you know, politics is also about people and their families. And people have to make decisions as to where am I and, you know, in a certain point in life. And I don't think it was the right time for Jeb, given what he said, in saying he wasn't going to run.

KING: Come on in.

BORGER: Well, I sort of was wondering whether Jeb had actually talked to either his brother or this father before they told -- before they said publicly, "Oh, he would be a great Senate candidate."

(LAUGHTER)

GILLESPIE: I think he was going through the thought process, and I think they knew that. But that's -- you can agree that he'd be a great candidate, but also understand if he chooses not to run.

KING: You mentioned you're a former RNC chairman. Gloria and I have talked about this quite a bit since the election, whither the Republican Party?

Obama comes in with a clear majority. He comes in with the good will of American people, even those who didn't vote for him.

And it's a "Who's on first?" moment for the Republican Party. Who is the leader of the Republican Party, former Chairman Ed Gillespie?

Who is the leader, right now?

And what is the strategy when it comes to dealing with this new president?

GILLESPIE: Well, I think the foremost leaders will be the leaders in the House and the Senate, Senator Mitch McConnell, the Republican leader there, and John Boehner in the House.

And I think they've pursued an appropriate strategy, which is where there are areas where we can agree, we will agree and we'll work with the president-elect, soon to be the president. Where there are areas where there are principled disagreements, we'll disagree.

I do think, and I encourage my, you know, fellow Republicans and people who share my more conservative philosophy, that we not fall prey to trying to retaliate from the kind of viciousness and the kind of bitter attacks, personal attacks against President Bush that we saw from the left in the past eight years.

We can make a stand on principle. And we can oppose on policy without being -- you know, engaging in that kind of harsh, personal, nasty rhetoric. It's not good for the process. It's not good for the country.

And -- look, I, obviously, was hoping for a different outcome in the election. I'm excited, as an American, that we're going to make history with the first African-American to be elected president.

And if I'm invited back or in a position to comment, I will be careful to make clear that, you know, I want the president to succeed. He will be my president on Tuesday. I am an American; I may disagree with his policies, and I hope that my friends on the right will adopt that tone.

BORGER: But, you know, the president himself -- getting back to John's point about the Republican Party has warned the Republican Party, 'Don't turn inward.'

For example, this is a president who opposed his party on immigration reform. This is a president who wants to open the Republican Party. And you saw, in the presidential vote, it seemed to get a lot smaller. Fewer minorities, for example.

So what's the message from George W. Bush to fellow Republicans, as -as he leaves?

GILLESPIE: Well, he has been pretty explicit about that, which is we do have to be -- reach out to people, bring people into the party, be careful about how we talk about certain issues, and make sure that we connect with people on issues they care about: kitchen- table issues, health care, jobs, the economy.

(END VIDEOTAPE)

KING: Take a look at this quick snapshot of how President Bush stands in American public opinion as he leaves office. Only 3 percent think he will be remembered as one of the greatest presidents; 17 percent "good"; 35 percent "average"; 46 percent of Americans say George W. Bush will be -- they consider him a "poor" president.

Rejoining our conversation, David Gergen, you watch the outgoing president leave politically weakened. The incoming president-elect quite strong right now.

This might sound some people at home, but does it help or hurt Barack Obama that he comes to power with a disorganized opposition?

GERGEN: It helps enormously.

I mean, we saw this when Jimmy Carter left office and Ronald Reagan came in. There was -- it wasn't -- Reagan had -- didn't have this much of an oomph coming in, but he had a lot. And, you know, it's you always want to follow a weak act when you become president of something. And this will make it a much -- because people are going to just respond in a positive and embrace Obama to an extra degree because they're so pleased and relieved to have a change.

Now, it's (INAUDIBLE), Ed Gillespie is right. Maybe, you know, historians, 35, 50 years from now, will look back and say the Bush presidency was better than people thought. That's not the way Americans feel right now. That's really coming through in these polls.

I mean, we have this juxtaposition of a president going out -- one president going out with the lowest numbers we've ever seen, and another president coming in with the highest numbers we've ever seen. Remarkable.

KING: It is remarkable. And we will watch it as we get closer and closer to the inauguration.

When we come back here, a woman who's been waiting her entire life for what will happen right over there, right there on the Capitol steps in less than two hours -- in less than 40 hours. I'm sorry.

STATE OF THE UNION will be right back.

(COMMERCIAL BREAK)

KING: We will broadcast most Sundays from Washington, D.C. But our passion, the one thing we are determined to do with this new Sunday program, is to get outside of Washington, outside the Beltway, explore the real state of our union.

The way it's seen by people like Edith Childs, a remarkable woman who was walking the walk long before Barack Obama was born.

(BEGIN VIDEOTAPE)

KING (voice-over): Greenwood, South Carolina, a monument to heroes, but also a reminder of the dark days of hatred and segregation.

(on camera): That's you right there.

(voice-over): Edith Childs has lived here all her 60 years, knows the divide as well as anyone.

OBAMA: I want to know one thing, Edith...

KING: And as much as she celebrates the success of her new friend, knows just as well that making history doesn't erase history.

She was 6 or 7 when a noise in the night stirred her to peek out the window.

EDITH CHILDS, COMMUNITY ACTIVIST: And there was actually people on a horse with white clothes and all.

There was no question who they were, they were the Ku Klux Klan. That was the worst time, because I was so scared.

KING: On walks to school, taunting was common.

CHILDS: You could walk past cars and even children would say, you know, "Mom, those are niggers."

KING: And once in the classroom, more reminders of separate but hardly equal.

CHILDS: We got those things that were left over from the white school. Our books were always secondhand books that came to us. Many times they weren't even worth using, really, but we didn't have a choice.

KING: Edith Childs grew both precocious and defiant. At the five and dime, she waited for when no one was looking.

CHILDS: The white water fountain was nice cold water, and our water was just hot water. I would always get me some cold water. Always.

KING: Always a divide.

(on camera): And if you were black and you wanted to go to this theater, where would you be?

UNIDENTIFIED MALE: You would be up here in the balcony section. There was a separate colored entrance from the front of the building.

KING (voice-over): Matt Edwards (ph) runs the town museum.

Segregation is a threat in the photographs.

This, a late 1950s all-white snapshot outside a local mill.

I haven't seen one yet that has any African-American folks in it. I know these folks worked at the plants and at the mills, but they weren't in the shift photos that came out.

Nursing school was the first time Edith Childs shared a classroom with whites. She's on the county council now and says things are better.

She first met Barack Obama when he visited in 2007. In the back of the room, she began to repeat an old civil-rights chant.

CHILDS: Fired up. Ready to go. Fired up. Ready to go.

OBAMA: Fired up.

KING: Obama adopted the cheer. And even though he lost conservative South Carolina, Childs and Greenwood became part of his improbable journey, and he a part of theirs.

CHILDS: The day after the election, it was so quiet in Greenwood until it was unreal. I just could not believe it was that quiet. I mean, the kind of quiet that you're saying, 'What is going on?,' you know? But you know why the quiet is.

KING: A shocked quiet, Edith says. Because, while things are better in Greenwood, they are far from perfect. The monument to Confederate soldiers still stands. And even today, in 2009, the stars and stripes flies over two American Legion halls in Greenwood.

Locals know this one as the white post. This one for blacks.

CHILDS: There we go again, John. There are still those that are not going to change no matter what.

KING: But Edith Childs is betting more minds and hearts will change now.

She is off to Washington to watch her friend make history, knowing it won't change Greenwood's past, but maybe its future.

CHILDS: I never thought that I would be able to see this day, so I just need to be there. Don't want to be nowhere near the front. I just want to be there.

It means everything to me, because I want to be treated as a person. Not because I'm Edith Childs and black, but because I'm a person.

(END VIDEOTAPE)

KING: Edith Childs, quite remarkable, David.

And it was stunning to be in Greenwood and to hear her story and to see the town. And it begs what I think is a big question, as big as any. We will talk about what happens to taxes, what happens to the economy, how fast will the troops come home from Iraq.

But what happens in America?

GERGEN: That's absolutely right.

When Edith Childs -- you remember Ralph Ellison, the African- American novelist wrote a book called the "Invisible Man." You know, it was about being black. People just -- white people just look right through you.

And what's important about this inauguration is, it's kicking off a time when all these African-Americans are coming to Washington. We're going to have a very different-looking set of faces on the Mall on Tuesday than anything we -- you and I have ever seen.

And I don't -- these people don't feel invisible anymore. They feel like they can stand up and be counted, and America is going to change, you know?

So that's the sense people are coming with.

KING: And the expectations, what about those on Barack Obama? If you're in inner-city Baltimore and the houses are boarded up; if you're in a rural area and you want to play basketball like Barack Obama, but there's no net on the hoops, or there's glass on the court?

GERGEN: Well, I think we're in danger of putting Barack Obama on a pedestal and asking too much of him too quickly.

And the real test is going to be whether, 35 years from now or 50 years from now -- and Edith Childs can -- from Baltimore can come here, and her streets will be paved, there will be good housing. And you can go through there and say, 'I'm proud to be here.'

But I just want to tell you, John, that was a great interview. And it's clear to me, you're fired up and ready to go.

KING: You know, it's good to get out and meet people like her, and we're going to do that. And Edith Childs is here this week, so we're going to keep in touch with her as she's here, and we are going to bring you some of her thoughts next week.

Thanks so much for watching this primetime edition, STATE OF THE UNION. Please join us next Sunday and every Sunday, 9 a.m. Eastern.

I'm John King in Washington. CNN's coverage of this inauguration of Barack Obama continues now with "LARRY KING LIVE."

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