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THE SITUATION ROOM

Interview With Senator Judd Gregg

Aired February 25, 2009 - 16:00   ET

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


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And here's why, when the Federal Reserve steps in as a lender of last resort, which it's had to do repeatedly since this financial crisis began, it's providing an insurance policy underwritten by the American taxpayer. And taxpayers should be assured that the Fed understands the institutions that it is effectively insuring and actively monitoring this to make sure they're not taking risks that will cost taxpayers in the long-term.

Second, our regulatory system and each of our major markets must be strong enough to withstand system both system-wide stress and the failure of one or more large institutions. And that means modernizing and streamlining the regulatory structure and monitoring the scale and scope of risks that institutions can take.

Third, to rebuild trust in our markets. We must redouble our efforts to promote openness, transparency and plain language throughout our financial system.

Fourth, we need strong supervision and uniformed supervision of financial products marketed to investors and consumers. We should base this oversight not on abstract models created by the institutions themselves, but on actual data on how actual people make financial decisions.

Fifth, we must demand strict accountability, starting at the top. Executives who violate the public trust must be held reasonable.

Sixth, we must make sure our system of regulations covers appropriate institutions and markets, and is comprehensive and free of gaps and prevents those being regulated from cherry picking among competing regulators.

Finally, we must recognize that the challenges we face are not just American challenges, they are global challenges. So as we work to set high regulatory standards here in the United States, we have to challenge other countries around the world to do the same. That's how we will stop financial crisis from spilling across borders and prevent global crisis of this sort that we now face.

In the end of, the work of constructing a new regulatory framework will not be easy and reform will not happen overnight. But we must never forget that our market has always been the engine of American success. Rewarding innovators and risk takers, creating opportunities for generations of Americans and prosperity that is the envy of the world. And I have the utmost confident that if these outstanding public servants standing beside me are working in concert, if we all do our jobs, if we once again guide the markets' invisible hand with a higher principle, our markets will recover. Our economy will once again thrive and America will once again lead the world in this new century as it did in the last.

So thank you very much, everybody.

WOLF BLITZER, CNN HOST: So there he is, the president. He's been meeting with top democrats and republicans involved in the financial sector - the chairman and the ranking member of the banking committees - outlining some steps, rules that he says need to be followed if the U.S. credit system is going to get in place.

Let's go to our White House correspondent, Dan Lothian. He's been monitoring what the president is saying. And this is a day after his address before a joint session of Congress, lots going on. He's not backing away from that very ambitious agenda that he outlined last night.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right. Now focusing on the banking industry. Talking about, as you pointed out, rules of the road to make sure that this banking crisis does not happen again, and to hold executives and Wall Street accountable. But as you mentioned, the president, last night, had an ambitious agenda. Today, the White House was trying to move beyond the speech.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): It was an economic sales pitch to Congress and the country. Identify the problem, paint it in very real terms, then offer solutions.

OBAMA: The answers to our problems don't lie beyond our reach. They exist in our laboratories and our universities, in our fields, in our factories.

LOTHIAN: The day after the president's address to a joint session of Congress, the Obama administration is now moving to step two: get the stimulus money out the door as quickly as possible.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The tax cuts will soon move out in people's paychecks. The president announced just a few days ago with the governors in town, a big chunk of money relating to Medicaid and health care to insure that they're not having making drastic cuts.

LOTHIAN: The Department of Housing and Urban Development is now taking the first step in awarding $10 billion to states and local governments. Money to create jobs by improving public housing and making units more energy efficient.

Watching over how all this money is spent is a team headed by Vice President Biden. Meeting at the White House for the first time in what will be a weekly gathering, Mr. Biden says he's willing to publically embarrass governors and mayors who are inefficient.

JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: I'm going to go on television and say, you know, we gave so-and-so x-amount of dollars and nothing's happening. Why hasn't it happened?

LOTHIAN: The early stages of cracking open the piggy bank. Over the next few weeks, the administration says money will be freed up for food stamps, unemployment insurance, low-income housing tax credits, and law enforcement grants. The White House says taxpayers will be able to watch the process closely, like accountants at recovery.gov.

EARL DEVANEY, ACCOUNTABILITY BOARD CHAIR: If they see things that they don't like, and hopefully, we'll get some attention to misuse of any of this money.

(END VIDEOTAPE)

LOTHIAN: Last night, when talking about the budget and also the deficit, the president pointed that out his administration had found some $2 trillion in savings. Well, tomorrow, the president will be unveiling the budget and we should get a better idea of what stays in the budget and what gets cut - Wolf.

BLITZER: Dan Lothian, thanks very much.

I want to go from the White House up to Capitol Hill. Right now our senior congressional correspondent, Dana Bash, is standing by.

They've been trying to figure out, Dana, all sorts of ways to deal - to deal with this new budget and some of the so-called pork barrel spending. You've been looking into this, tell us what's going on.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Wolf, the House just passed that spending bill. And in fact, the Senate majority leader, where this is going to end up now, told us earlier today that he understands that President Obama wants to quote, save money, but he also believes that Congress has to spend money to get out of the hole.

(BEGIN VIDEOTAPE)

BASH (voice-over): Less than 24 hours after President Obama urged Congress to make tough choices to lower the deficit, his fellow democrats in Congress moved to increase government spending.

UNIDENTIFIED MALE: For health care projects, for education projects, all very important to get our economy moving again.

BASH: The $410 million spending bill funds the government for the rest of this year with $31 billion more than last year. Republicans accuse democrats of living in a parallel universe.

UNIDENTIFIED MALE: American families and small businesses are making sacrifices across this country and cutting expenses due to tough economic times. Yet, this democratic majority continues to spend like there's no problem at all.

BASH: Democrats insist they're mostly trying to make up for cuts under President Bush that hurt the needy. For example, a program that feeds poor women and infants would get $6.9 billion, a 21 percent increase.

But democrats are also giving generous increases for everything from the Agriculture Department to Amtrack. And Congress is giving its own budget a 10 percent increase to $4.4 billion, well above inflation. That includes $40 million more to finish the Capitol Visitors Center. And even though republicans are blasting the bill, they're getting $8 million more taxpayer dollars to keep GOP aides from being fired, even though they lost Senate seats.

And then, $7.7 billion in earmarks. The House in charge is bringing tens of millions back to his Wisconsin district, including $1.9 million for a new building. He defended the earmarks.

without the earmark process, the White House would make every single spending decision in government.

Now, republicans may not be openly defending the earmark process like that, but nearly half of the earmarks in this bill are from republicans. As for President Obama, the White House still hasn't taken a public position on the fact that he has going to get this bill and what he will do about it considering it will have nearly 9,000 so- called pet projects. He'll have to decide whether or not he's going to sign this bill.

BLITZER: Tough edition.

Meanwhile, President Obama announced his third choice for commerce secretary - Gary Locke. Mr. Obama acknowledged his previous picks dropped out, but expressed hopes that Locke would make it all the way to confirmation and the place in the Capitol.

(BEGIN VIDEO CLIP)

OBAMA: I'm sure it's not lost on anyone that we've tried this a couple of times, but I'm a big believer in keeping at something until you get it right and Gary is the right man for this job.

LOCKE: Working with the professionals at the Department of Commerce, I'm committed to advancing policies and restoring the American Dream.

(END VIDEO CLIP)

BLITZER: I'll speak with one of the president's previous choices, Judd Gregg.

A lot of attention, meanwhile, has been given to the president's problems filling the commerce and health secretaries posts. But some other influential yet lower level slots still are open, including the head of the Federal Aviation Administration, overseeing airline safety, and the slot of surgeon general, the leading voice of U.S. public health policy, as well as the director of the Federal Emergency Management Agency, FEMA, a key figure for disaster relief.

Let's go to Jack Cafferty today, right now, for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: In the Republican response to President Obama's speech last night, Louisiana Governor Bobby Jindal called the stimulus package irresponsible, saying that it will grow government, increase taxes in the future, and saddle future generations with debt. "Who among us would ask our children for a loan so we can spend money we don't have on things we don't need? That is precisely what the Democrats in Congress just did."

It's interesting; isn't it? After the last eight years, it would seem that Republicans are hardly in a position to lecture anybody about fiscal responsibility.

When President Bush took office in 2000, our national debt was $5.7 trillion. After two wars and a lot of other spending under a Republican president, the national debt is now approaching $11 trillion. President Bush, a Republican, ran up more debt for this country than all previous presidents combined.

Bobby Jindal acknowledged last night that in recent years, "... our party got away from its principles." No kidding.

Keep in mind, Jindal, who some see as a possible contender for the Republican nomination for president in 2012, is one of the Republican governors who's talking about rejecting stimulus funding for his state. Jindal says he plans to turn down $100 million because it would require his state to change its unemployment laws.

I guess when you're a wealthy state like Louisiana, you don't need no stinking stimulus money.

Here's the question. Are the Republicans in any position to lecture President Obama, or anybody else, for that matter, on fiscal responsibility?

Go to CNN.com/caffertyfile. You can post a comment on my blog.

BLITZER: Jack Cafferty, thank you.

Members of Congress were all atwitter during the president's speech last night, and their running commentary ranged from glowing to snarky to downright embarrassing. We've got the best and the worst online.

Also ahead, a new report on human rights is not getting Secretary of State Hillary Clinton off the hook with her critics of her dealings with China.

And he was so at odds with the president on spending, that he said no to the commerce secretary's job when all the dust settled. Is Judd Gregg having any second thoughts after listening to the president's address to Congress last night?

He's standing by live. You see him on Capitol Hill. I'll speak with him when we come back.

(COMMERCIAL BREAK)

BLITZER: My next guest is keenly interested in the Obama administration's economic plans. He was actually very close to working for the president, but decided in the end, he did not want to be President Obama's commerce secretary, citing what he called irresolvable conflicts.

Republican Senator Judd Gregg of New Hampshire is joining us now from Capitol Hill. He's the ranking member of the Budget Committee.

Senator, thanks very much for coming in.

SEN. JUDD GREGG (R), NEW HAMPSHIRE: Wolf, thank you for having me on.

BLITZER: When you heard the president's address before a joint session of Congress, did anything in your mind say, you know, maybe I made a mistake, I should have gone on to become a member of his cabinet?

GREGG: I thought he gave an excellent address. And I thought he -- I liked his positive approach and his upbeat approach towards the country. And thought he raised some of the key issues we have to address.

But I have to tell you, I've been my own person for 30 years. It would have been very difficult for me to be in the cabinet and be 100 percent with the president, 100 percent of the time, which a cabinet member needs to be.

I guess I feel badly about anything. It wasn't that I didn't -- I did not focus on that soon enough, and I created what was a very unfortunate situation for the president, for myself, but it was really my fault, and I take reasonability.

BLITZER: Do you believe he's on the right track right now?

GREGG: On a lot of issues, I think he's been extraordinarily constructive, because -- and positive, and is on the right track. He has set out the fact which has to be said over and over again, in my opinion, which is that we can't kick the can down the road anymore. We've got to address these really big fiscal problems that are coming at us, primarily -- after the immediate problem of the recession, obviously -- but primarily the retirement of the baby boom generation and the fact that we're going to have this fiscal tsunami that's going to bankrupt the country and make our -- and pass on to our children a country that's less than we were given by our parents.

BLITZER: Are you...

GREGG: So I like the fact he's taken an aggressive -- making aggressive statements in those areas. Now we need -- the proof's in the pudding, of course, but at least he's talking about it. And that's a big first step. BLITZER: Are you with David Obey, the chairman of the Appropriations Committee -- and you're on the Appropriations Committee -- when it comes to earmarks or pork barrel spending -- he defends the thousands of earmarks in the current spending bill -- or are you with the president when he says he'd like to eliminate all that pork barrel spending?

GREGG: Well, I believe the omnibus that's working its way through here is too high. I don't think we need to increase spending. I think it should be frozen. I think once you set a very stringent upper limit on an appropriating bill, you should allow -- the Congress should have the right to allocate funds under that limit in a reasonable way, as long as there's still transparency...

(CROSSTALK)

BLITZER: So you support the earmarks?

GREGG: I don't support this bill.

BLITZER: But the principle of earmarks...

GREGG: Yes, I support it.

BLITZER: ... in the congressional spending legislation, you think that members of Congress should be able to determine where that money goes?

GREGG: Absolutely. Under the Constitution, we control the purse strings, as long as there's total transparency and as long as it's done within a very tight budget, and as long as people have the ability to knock it out, you know, so you have to defend it on the floor.

BLITZER: Listen to what the president said in his address before Congress. I want to go through some points. Listen to this.

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: I want to pass a budget next year that ensures that each dollar we spend reflects only our most important national priorities.

(END VIDEO CLIP)

BLITZER: All right. Do you believe that's possible?

GREGG: Yes, of course it's possible. And it's exactly what we should do.

BLITZER: Given the politics of Washington?

GREGG: Well, you know, the politics of Washington is defining the national priorities. I mean, he's got his priorities, Republicans have our priorities, Democratic council members have their priorities. And the politics is to get together and figure out which are the most important, and then do them.

The number one priority right now is to get this economy going. The number two priority is to face up to the fact that we've got a huge fiscal problem in the out years, and take on the issues of entitlement spending and how we make these programs affordable to our children, that are basically going to support the baby boom when it retires.

BLITZER: Listen to this other excerpt from the president's address. Listen to this on health care.

(BEGIN VIDEO CLIP)

OBAMA: Already, we've done more to advance the cause of health care reform in the last 30 days than we've done in the last decade.

(END VIDEO CLIP)

BLITZER: He was referring to the passage of the Children's Health Insurance Program, an expansion of several million kids who didn't have insurance before. Is he right?

GREGG: Well, the program is flawed as it was passed, because it basically took millions of kids who were already covered under the private sector, moved them over to the public sector, so the taxpayers ended up picking up the costs of those children. And that program should have been adjusted, yes, but it should have been adjusted to make sure that low-income kids were covered, not middle-income kids who already had insurance. So I think it was a not very good policy, in my opinion.

BLITZER: Looking ahead, are you upbeat or pessimistic when it comes to working with this president -- you're a Republican -- working with this president on some of these key issues like education, energy, health care reform, appropriations, or is it going to be strictly partisan once again?

GREGG: Hey, you know, we're out of time here. You know, we've got to get going.

The country's in a serious way. We have to have an effort to try to resolve these problems. And most of these problems are so big and so pervasive, that they have to be addressed in a bipartisan way.

And here in the Senate, at least, there is fertile ground for moving forward in a bipartisan way on issues like Social Security reform, like health care reform. I'm already working in two or three, four major working groups that are 20, 30 members of the Senate, equally divided between Republicans and Democrats on those types of issues.

So I think the opportunity is there. What we need is a little leadership. The president says he's going to give it to us. He's given us the statements that he's committed to this. Now we need the template, the procedures, for getting to these issues and making progress on them. But we've got to work together here on some of these big issues or we're simply going to pass on to our kids a country that's in really serious shape. .

BLITZER: Senator Gregg, thanks very much for coming in.

GREGG: Thank you.

BLITZER: John McCain offers advice to President Obama on how to win a war. It involves Afghanistan, and Senator McCain even offers rare praise for something President Obama will do there.

And we've talked a lot about the president's plans, but do you know who will actually help him execute that plan? We're starting a new series here in THE SITUATION ROOM that profiles some of the new power players in the Obama administration. Today, you'll meet the youngest member of the president's cabinet. What he does could affect us all.

Stay with us. You're in THE SITUATION ROOM.

(NEWSBREAK)

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, a nightmare strikes again. A plane falls from the sky, killing some of the people on board. After other recent high- profile plane crashes, what might have caused this latest horror?

It's a volcanic issue, a debate erupting over the use of government money from the economic stimulus plan to monitor volcanoes. Louisiana's governor, Bobby Jindal, slams Democrats, but what's the truth behind all of this?

And the recession certainly is stressful, but can the nation's biggest banks handle the pressure? Nineteen are being put to the test. Can they survive in this harsh environment, or might they snap under the strain?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The State Department is putting out its annual report on human rights around the world, and it scolds a nation that the U.S. wants to improve relations with right now.

Let's go to our foreign affairs correspondent, Jill Dougherty. She's gone through the report.

What's the latest, Jill?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, Wolf, Secretary of State Hillary Clinton says she wants a new, results- oriented approach to human rights, but she's running into a lot of criticism.

(BEGIN VIDEOTAPE) DOUGHERTY (voice-over): She rolled out the State Department's human rights report, but Hillary Clinton ducked questions about whether she had sent the wrong signal to China, a government the U.S. considers one of the worst offenders.

HILLARY RODHAM CLINTON, U.S. SECRETARY OF STATE: Thank you.

DOUGHERTY: In Asia last week, Clinton infuriated human rights supporters, who accused her of downplaying human rights because the U.S. needs China's continuing financial investments, telling reporters, "Our pressing on those issues can't interfere with the global economic crisis, the global climate change crisis, and the security crisis."

REP. FRANK WOLF (R), VIRGINIA: I rise today to add my voice to the chorus of human rights organizations who have expressed shock and disappointment at Secretary Clinton's comments during a recent Asia indicating that human rights will not be a priority in her engagement with China.

DOUGHERTY: The annual State Department report says, last year, the Chinese government's record remained poor and worsened in some areas, citing extrajudicial killings and torture, coerced confession, and forced labor.

Secretary Clinton insists she will pursue human rights.

CLINTON: I am looking for results.

DOUGHERTY: She says she wants a new approach, not just scolding governments, but working with citizen groups and non-governmental organizations, to bring about change. Human rights charge, that's the wrong message.

LARRY COX, AMNESTY INTERNATIONAL: The fear is, if you make a statement like that, that it disheartens people who are risking everything to try to promote democracy, try to promote freedom.

(END VIDEOTAPE)

DOUGHERTY: Now, the State Department acknowledges there's plenty of criticism about the United States's own record on human rights. And it says the United States is doing something about it, citing President Obama's decision to close Guantanamo and to have reviews on the policies of detention and interrogation -- Wolf.

BLITZER: All right, Jill, thank you.

Jill is over at the State Department. Regarding the U.S. detention center at Guantanamo Bay in Cuba, President Obama's plans to shut it down continue to meet some resistance.

Let's go to our homeland security correspondent, Jeanne Meserve. She's looking at this part of the story -- Jeanne.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Hey, Wolf. Though the president underlined last night his intention to close the prison at Guantanamo, the controversy hasn't subsided, even in his own party.

(BEGIN VIDEOTAPE)

MESERVE (voice-over): It was one of the applause lines in President Obama's speech last night.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: That is why I have ordered the closing of the detention center at Guantanamo Bay and will seek swift and certain justice for captured terrorists.

(CHEERING AND APPLAUSE)

MESERVE: But a fellow Democrat says, closing Guantanamo Bay may need rethinking.

REP. ALCEE HASTINGS (D), FLORIDA: If Amnesty International and the Red Cross are permitted to see the actual circumstances, then I believe that Guantanamo, different than most, can stay open with a greater understanding in the world as to why the individuals are being held there.

MESERVE: The challenges in closing Guantanamo are complex. Where would dangerous detainees, like accused 9/11 mastermind Khalid Sheikh Mohammed, go? If detainees are held on U.S. soil, would they win the constitutional right to a trial? If they did go to court, could the U.S. present evidence against them without revealing sensitive intelligence sources and methods?

Would some evidence be thrown out because detainees were subjected to harsh interrogation techniques? If there is a risk some detainees would be released into the U.S. or that detainees sent from Guantanamo to other countries would be set free?

Those thorny questions are being thrashed out by a task force led by Attorney General Eric Holder, who made his first visit to Guantanamo Monday. He says the facility, at least at present, is well-run.

ERIC HOLDER, U.S. ATTORNEY GENERAL: I think it does not in any way decrease our determination to close the facility. This will not be an easy process. It's done that we will do in a way that ensures that people are treated fairly and that the American people are kept safe.

(END VIDEOTAPE)

MESERVE: The Holder task force has about a year to determine what to do with each of the 245 Guantanamo detainees. But the debate over whether it is the best course of action is likely to continue even longer than that -- Wolf.

BLITZER: All right, Jeanne, thank you.

The president's former campaign rival, John McCain, is offering some words of advice, as well as some praise, for the new president.

Brian Todd is looking at this story for us.

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, as you know, John McCain was a determined critic last year of Barack Obama's inexperience on national security. So, today, all eyes were on Senator McCain as he addressed what should be done in Afghanistan and Iraq.

(BEGIN VIDEOTAPE)

TODD (voice-over): Finally, the two bitter rivals from campaign 2008 seem to be coalescing. In a major speech, John McCain usually his positions on the troop surge in Iraq to hit home a point about the other crucial battlefront.

SEN. JOHN MCCAIN (R), ARIZONA: The same truth was apparent three years ago in Iraq is apparent today in Afghanistan.

TODD: On the campaign trail, the surge strategy in Iraq was one of their most bitter fights. Then candidate Obama had voted against it, but Senator McCain said it turned out to be the key to turning the war around.

Now, on Afghanistan, McCain won't have to fight to get a troop increase. President Obama ordered more forces to the region just last week.

MCCAIN: I welcome the president's decision last week to deploy some 17,000 additional troops to Afghanistan, given the dire state of affairs there.

TODD: No need for Senator McCain to say, "I told you so."

Throughout the campaign, Senator Obama had supported an increased in troops in Afghanistan. The administration will decide on a broader plan after a 60-day review. McCain also suggests something that worked well in Iraq.

MCCAIN: We should also strengthen local tribes in these areas, who are willing to fight terrorists, the strategy that was, as we all know, used successfully in Anbar and elsewhere in Iraq.

TODD: But the American commander in Afghanistan says the pilot program they're trying is a little different.

GEN. DAVID MCKIERNAN, COMMANDER, U.S. FORCES IN AFGHANISTAN: That is not tribal militias. It's community-based to represent everybody that lives in that geographic area.

TODD: Will a surge in Afghanistan provide a strategy that everyone in Washington can agree on?

MICHAEL O'HANLON, SENIOR FELLOW IN FOREIGN POLICY STUDIES, BROOKINGS INSTITUTION: There's already, of course, an anti-war voice that doesn't like the idea of troop escalation in general. And I'm afraid that, within a year, we may see that voice grow louder, because the Afghan mission will take longer to show progress than the Iraq surge required.

(END VIDEOTAPE)

TODD: Now, on Iraq, John McCain warned throughout the campaign against Barack Obama's call to withdraw within a year-and-a-half, but, today, the Republican said he will leave it to military commanders to give the president good advice on how soon to draw down troops.

Wolf, we're told by military officials that the president could order a withdrawal within 19 months, a little longer than he proposed during the campaign.

BLITZER: Sixteen months, what he proposed.

TODD: Right.

BLITZER: Thanks very much, Brian, for that.

We're going to have more on that part of the story at the top of the hour.

In may sound like a contradiction: a Washington power player who admits he's a nerd.

(BEGIN VIDEO CLIP)

PETER ORSZAG, DIRECTOR OF OFFICE OF MANAGEMENT AND BUDGET: And I said, yes, I'm a super nerd. And the whole room cracked up. But I try to -- I don't think I was self-described.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: As a nerd?

ORSZAG: Yes.

YELLIN: OK.

(END VIDEO CLIP)

BLITZER: All right, you can stand by to learn about the president's budget director, Peter Orszag, something that may surprise you.

And are the thoughts of former President George W. Bush worth $150,000 a pop? That's his going rate on the speaker circuit right now. We will dissect that and more in our "Strategy Session."

And, later, you're going to find out what Michelle Obama has been up to in the White House when her husband's been away. We will show you and you will see it right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: You heard President Obama last night say he's moving forward this year on massive health care reform. There's new information coming in to THE SITUATION ROOM right now.

Our national political correspondent, Jessica Yellin, is getting the information for us.

What is going on?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, we have learned that the president's budget, which will be released tomorrow, will include almost $650 billion that will go to a health care reserve fund.

That fund, they say, will be used to help fund a massive overhaul of the nation's health care system. And the White House is telling us that it will be paid for through some cuts, trims, they say, in tax breaks to the wealthy, and also, Wolf, by tightening the payments that go out to insurers and hospitals. As you say, they are determined to get health care gone. It's going to cost money. And this is their down payment on that effort.

BLITZER: This is a down payment. You said $650 billion or million?

YELLIN: Million.

BLITZER: Million. OK. I just wanted to make sure that it's million.

YELLIN: Did I have that right? Yes.

(CROSSTALK)

BLITZER: I wanted to make sure it's million dollars.

YELLIN: Million.

BLITZER: Now, the guy who's going to be releasing the budget tomorrow is the new budget director. He's relatively young, but he's experienced.

YELLIN: That's right. That man's name is Peter Orszag. And the White House chief of staff, Rahm Emanuel, calls him brilliant. The president likes to tease him. Peter Orszag is fast becoming a power player in this administration.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): He's the youngest member of the president's Cabinet, an increasingly public face of the Obama economic team...

ORSZAG: Barack Obama.

(APPLAUSE)

YELLIN: ... and a cooperative target of White House jokes. In a meeting with congressional leadership, the president teased Peter Orszag for this photo, which ran in "The New York Times."

ORSZAG: And I said, yes, I'm a super nerd. And the whole room cracked up. But I try to -- I don't think I was self-described.

YELLIN (on camera): As a nerd?

ORSZAG: Yes.

YELLIN (voice-over): Neither would "People" magazine. Its Web site called him one of the Obama team's hunks.

Tomorrow, Peter Orszag will present the president's blueprint, which for the first time will account for the cost of the wars in Iraq and Afghanistan.

ORSZAG: We're not going to play the games that have been played in the past.

YELLIN: A marathon runner, he lives off Diet Coke, and he will need it. President Obama has tasked Orszag with cutting the budget deficit in half and helping to get health care done this year.

A professional economist, Orszag has long argued that large-scale health care reform is essential to fixing the deficit.

ORSZAG: And we will have to see where that legislative process goes, but I -- I think the goal should be universal coverage.

YELLIN: He was one of the key negotiators in the final hours for the stimulus bill, which prompted Senator Harry Reid to declare:

SEN. HARRY REID (D-NV), MAJORITY LEADER: He's a natural. He's a brilliant man.

YELLIN: And he won the trust of fiscal conservatives when he ran the Congressional Budget Office.

UNIDENTIFIED MALE: I think Peter's one of the best things that President Obama has going for him when it comes to bipartisanship.

YELLIN: Recently, Orszag got some unexpected attention. He accidentally forced an evacuation of a White House building when he lit some logs that were left by his fireplace. He didn't know the building's chimneys had been covered over.

ORSZAG: And, so, while everything was venting down here, two or three floors up, there was smoke filling a room.

YELLIN: But he quickly came up with a joke to make light of it.

ORSZAG: Rahm wanted me to send some smoke signals to the Hill, or, I'm the budget director. Come on. I was just trying to save a little money on the heating costs.

(END VIDEOTAPE) YELLIN: And to clarify what we said at the top, that health care fund will be $650 almost billion, with a B, Wolf. That would be projected out over multiple budget years, as many as a decade, but the plan is to start with those cuts now to fund health care reform for the future.

BLITZER: And, so, as you say, this is step one in what's going to be a massive overhaul, potentially, of the health care system.

YELLIN: Correct.

BLITZER: Thanks very much, Jessica, for that.

Let's move on.

The White House budget director, by the way, Peter Orszag, will be among my guests tomorrow right here in THE SITUATION ROOM. We will talk to him after he releases the new Obama administration's budget.

President Obama is urging Congress and the American people to work together.

(BEGIN VIDEO CLIP)

OBAMA: Their resolve must be our inspiration. Their concerns must be our cause. And we must show them and all our people that we are equal to the task before us.

(END VIDEO CLIP)

BLITZER: Did the president undermine the upbeat tone by working in some digs at the Republicans, the previous administration? Stand by for our "Strategy Session."

And, later, a leading economist's take on the president's ambitious agenda and when the U.S. economy will reach rock-bottom.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: I know that we haven't agreed on every issue thus far.

(LAUGHTER)

OBAMA: There are surely times in the future where we will part ways. But I also know that every American who is sitting here tonight loves this country and wants it to succeed.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

BLITZER: President Obama saying last night both parties need to work together.

But if you listen carefully to his speech, you will notice that he criticized the Bush years at several key points.

Let's discuss what is going in our "Strategy Session."

Joining us now, the Democratic strategist and CNN political contributor Donna Brazile, and Republican strategist John Feehery.

I will play a few more sound bites from what the president said last night. And you will get the point. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future.

(CHEERING AND APPLAUSE)

We'll eliminate the no-bid contracts that have wasted billions in Iraq...

(CHEERING AND APPLAUSE)

For seven years, we've been a nation at war. No longer will we hide its price.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

BLITZER: Referring to the spending for the war in Iraq, not part of the annual budget process, but as part of supplemental budget requests.

So, is that going to help in his effort to try to reach out and get some bipartisanship in Washington, these sort of veiled criticisms of the Republicans?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, Wolf, as you know, because you moderated many of the Republican debates last year, the Republicans criticized the Republicans for their excessive behavior over the past seven years. So, I don't think the president was going in the wrong lane, so to speak, when he started pointed out some of their deficiencies.

BLITZER: And even Bobby Jindal, in the Republican response to the president last night, he lamented the Republicans losing some of their ways over the past several years as well.

JOHN FEEHERY, REPUBLICAN STRATEGIST: And if you look at who the president hugged on the floor, Tom Coburn, who is going to be one of his best friends when it comes to cutting spending...

BLITZER: The Republican senator from Oklahoma.

FEEHERY: Who is a big passionate tax -- spending cutter.

And I will tell you, if the president is true to his word -- I think he will be -- on trying to cut spending, he's going to need Republicans like Tom Coburn and John McCain, because they're the ones who are going to call the budget process for what it is. And it's been a sham for too long. And the president is right on that.

BLITZER: Because we heard even David Obey, the chairman of the Appropriations Committee in the House of Representatives, a Democrat from Wisconsin, he's strongly defending those earmarks, the so-called pork barrel spending, and setting up potentially a collision course between the Democrats in Congress and the Democrats in the White House.

BRAZILE: Well, this is a new era. And the president last night said it once again, that this is a era of responsibility, of shared sacrifice, but also smarter government.

And I think Chairman Obey and many other chairmen on Capitol Hill -- and John and I both know that Hill very well -- they're going to have to live within their means. The American people just don't have the appetite for the kind of pork that we're used to.

BLITZER: But Congressman Obey -- and you worked in the House of Representatives, John, for a long time.

FEEHERY: Sure.

BLITZER: He makes the point -- and Judd Gregg, the Republican senator from New Hampshire, who was just here in THE SITUATION ROOM, makes a similar point -- if you don't have those earmarks, Congress doesn't determine where the money goes. Some anonymous bureaucrats in the executive branch of the government are going to say, well, you can have this, you can have this, and why should Congress, an equal branch of the government, leave it up to anonymous bureaucrats in the executive branch to make those decisions?

FEEHERY: Or Ray LaHood, who is the transportation secretary. You know, it's a good point.

BLITZER: Former Republican congressman from Illinois.

FEEHERY: Exactly.

The fact of the matter is, Robert Byrd just wrote a letter to the president saying of this unprecedented overreach of power because of earmarks -- and earmarks is a thing that -- people want earmarks in Congress, because it exerts their constitutional authority. But presidents always don't like earmarks, because it takes away their authority. So, this is a constitutional clash, not just a spending clash.

BLITZER: Let's talk about the speaking circuit, the lecture circuit, out there right now.

(LAUGHTER) BLITZER: We now know that former President Bush is going to follow in the footsteps of former President Clinton, his father, the first President Bush, Gerald Ford, and whole a bunch of other presidents, going out on the lecture circuit, and the current -- the new former president, President Bush, going to be taking in at least $150,000 a speech.

What do you think about this? Because hear that they're going out on the lecture circuit, whether in the United States or around the world, and they wonder, is this appropriate for a former president?

BRAZILE: First of all, I think so, because if you look at what former Presidents Clinton, Carter and Mr. Bush, they all have foundations. They're helping people. They're also out there with research.

And so I hope that he will use a portion of this money, because he's already a wealthy man, he will use a portion of this money to really go out there and do the lord's work. That's what George W. Bush wants to do. If he makes this money, fine. Use it to go out there and help people in need.

BLITZER: Do you have a problem with this?

FEEHERY: It depends on who he speaks to. Ronald Reagan got in big trouble when he went to Japan in the middle of all the '80s, where we were worried about all of these things, because he took money from the Japanese.

BLITZER: A couple million dollars, in fact.

FEEHERY: Right. It depends on who he speaks to. And I think he's got to be very cognizant of that. And where the money goes to, I think that's -- Donna, you're right.

By the way, my -- my rate's much less than that.

(LAUGHTER)

(CROSSTALK)

BRAZILE: I will take whatever he leaves on the table, you know?

(LAUGHTER)

BLITZER: Thank you, guys.

(LAUGHTER)

BLITZER: Up next: information you want to know if you ever fly -- why some people lived, others died in the latest airline crash. It's terrifying passengers around the globe right now.

And it's the new punching bag for the critics of the stimulus package, thanks to Governor Bobby Jindal. We're looking into a $140 million so-called volcano monitoring project. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: During President Obama's speech last night, members of Congress were busily Twittering from their BlackBerrys, offering a running commentary from inside the House chamber, but, in some cases, their posts were a bit too candid, shall we say.

Let's go to our Internet reporter, Abbi Tatton.

What happened, Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, the messages were coming in thick and fast from the House chamber last night.

Taking a look at some of them.

From Missouri Senator Claire McCaskill, an avid Twitterer, she wrote -- she was very excited at one point. She said, "I did a big woo-hoo for Justice Ginsburg" when she walked in. "She looks good."

Someone who was less excited to see Governor Jindal was Congressman from Oregon Earl Blumenauer, who wrote, "Jindal is weird; I can't believe Jindal" on his Twitter feed.

Some of the posts last night, as you said, a little bit too candid, a little bit too off-the-cuff.

Look at the official stream from Texas Republican Congressman Joe Barton. This said -- this was his Twitter feed right before the speech started: "Aggie basketball game is about to start on ESPN2 for those of you that aren't going to bother watching Pelosi smirk for the next hour."

He's referring to House Speaker Nancy Pelosi, who would be seated behind the president throughout the speech.

Well, a couple of minutes later, the feed was replaced by this one right here: "Disregard that last tweet from a staffer."

Pretty soon, both of those updates disappeared, but nothing really disappears on the Web. It's still archived there. I think the message is, think before you tweet -- Wolf.

BLITZER: Whenever you hit that keyboard, just assume it's going to stay there forever.

TATTON: It's going to be there forever.

BLITZER: OK. Thanks very much, Abbi.

Let's go to Jack Cafferty. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: What -- what is wrong with these people? BLITZER: I know.

CAFFERTY: Huh?

BLITZER: They hit send before they think too much.

CAFFERTY: But, I mean, why would you write that kind of stuff and put it on the -- I mean, these are the people we put in charge of making our laws? It's time for a revolution in this country.

The question this hour, are the Republicans in any position to lecture President Obama on fiscal responsibility?

Janet writes from Yosemite Gateway, California, one of the prettiest places in the world: "Hello, Jack. Eight years of George Bush spending like a drunken sailor, and now the Republicans want oversight and financial responsibility? Shame on them. Any lecturing by the GOP should be done in front of a full-length mirror."

Julius in Canada writes: "The Republicans are the architects of the current crisis. They let the banking and mortgage firms run amok, and now it's up to Obama to try to fix it. Maybe the Republicans ought to go back and look at the last year to see where they failed the American people and go from there. Yes, they need to keep the Democrats in check, but, unless they take responsibility for their mishandling of the economy, nobody will take them seriously."

Ray in Virginia writes: "Someone needs to be fiscally responsible. The Democrats controlled Congress the last two years, and the federal debt has increased $2 trillion. Obama has said that deficits don't matter, so we see where he stands. I only hope the Republicans try to hold spending. If not, we will be in much worse trouble in the near future than we are now."

Tom in Pennsylvania: "Neither party should be throwing stones. However, the Republicans should just bury their heads in the sand for a while and let Obama straighten things out. Republicans equal deregulation. And that's what got us into this mess."

Carole writes: "Governor Jindal said last week he would refuse the stimulus money the government had passed into law, on principle. This is a young man who pundits hailed as one of the saviors of the Republican Party. I listened to his rebuttal last night. My husband and I haven't laughed so hard in a while. He's a joke."

And Michael in Los Angeles writes: "Not hardly. Last night, Governor Jindal was sent on a suicide mission, and he knew it. You could see it in his eyes."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile, and look for yours there, among hundreds of others.

It's a -- it's probably a good thing I don't know how to do that Twittering, because -- because I would get myself in trouble, I would think. BLITZER: You're going to learn pretty soon, Jack. I have no doubt.

(LAUGHTER)

BLITZER: Stand by.

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