Return to Transcripts main page


State of the Union: Best Political Team on Television

Aired March 8, 2009 - 11:00   ET


JOHN KING, HOST: I'm John King. And this is our STATE OF THE UNION report for this Sunday, March 8th.

He was elected on a promise to fix the struggling economy, but the numbers keep getting worse. Is President Obama taking the right steps to put America back to work?

We'll debate that question and much more with Donna Brazile and Mary Matalin.

The recession has millions of families facing home foreclosures and shrinking budgets. How can you avoid financial disaster?

Financial advisers Jennifer Openshaw and David Bach are here to help.

President Obama promises to reform health care and get the job done this year. We'll head down to North Carolina and talk to residents who wish him well but wonder if the government has all the health care solutions.

That's all ahead in this hour of STATE OF THE UNION.

KING: A picture of the United States Capitol building there. It is a beautiful Sunday morning in Washington, D.C. The debate of course over the bad economy, the prospect of more bailouts dominated the Sunday conversations. A key White House official acknowledges the economy has slipped even more since putting together the president's budget plan just a few weeks ago. But Peter Orszag, the budget director, says it's too soon to say whether the president will have to raise more taxes or delay top priorities like health care reform.


ORSZAG: It's not constructive to constantly be chasing your tail every time new data comes in and revising all the numbers. There's a process here. When the mid session review comes out, we will have an opportunity to revise.


KING: One of the president's fellow Democrats says the administration and Congress risk looking out of touch if the president goes ahead with plans to sign a massive spending bill loaded with pork barrel projects.


SEN. EVAN BAYH, D-IND.: The perceptual problem, which I think is just as great, is that at a time when many Americans are having to tighten their belts, many businesses are having to make tough decisions, it looks as if Congress is just on auto pilot, immune from the problems that most people face.


KING: And Republicans not only don't like the president's budget, many now argue it's time for the federal government to get out of the bailout business. They say let struggling banks and auto makers fail, let the markets run its course.


SEN. JOHN MCCAIN, R-ARIZ.: I don't think they made the hard decisions and that is to let these banks fail, to let General Motors go under bankruptcy and re-emerge, and reorganize with new contracts with labor and others. I don't think they've made the tough decisions. Some of these banks have to fail.


KING: As you can see, we've been watching all the Sunday shows so you don't have to. Joining me now are two veteran political strategists, in New Orleans Mary Matalin and with me here in Washington, Democrat Donna Brazile. Mary and Donna, let's get first to this economy and the spending bill coming President Obama's way. I want to start with you first, Donna, on the idea that Barack Obama said, elect me, I'm unique among the candidates for president, Democrat and Republican, that's I'm new to Washington, I will change the way it works on day one. And yet they say they're going to sign this big earmark loaded spending bill. Why not take a stand?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: Well first of all John, this bill has been going through the process now for several months, as you well know. It's an omnibus bill.

KING: That's one of those great Washington words, omnibus bill.

BRAZILE: Well, because they didn't finish up their work at the end of the fiscal year and so this is a catch all bill. But look, the fact is that this $410 million bill represent what many Democrats and Republicans believe to be the right programs to lead us forward. Yes, there's earmarks in the bill, less than 1 percent of the bill, but overall it's a good bill. It has money for education, infrastructure, and at a time when we're shedding 650,000, 100,000 jobs, we need to put forward a bill that will get the American people back to work.

KING: Mary, I want to bring you in, but first I want you to listen to both sides of the debate. Peter Orszag, the budget director was here earlier this morning as was the number two House Republican Eric Cantor. As you might imagine, very different views. Let's listen.


ORSZAG: This is like your relief pitcher come into the ninth inning and wanting to redo the whole game. Next year, we will be the starting pitcher and the game will be completely different. If you look at what we have done, for example on the recovery act, no earmarks.

CANTOR: There is no way anyone can take what Mr. Orszag has said and with any credibility. Of course they're negotiating on this bill in the Senate right now. To say that we would have drawn it differently but leave $430 billion on the table like this? No way. People are expecting this administration to live up to the promises made.


KING: So Mary, I know he's not your president in terms of your political support for him, but should Barack Obama go to the Rose Garden and say no, or should he just let this one go, last year's business?

MARY MATALIN, REPUBLICAN STRATEGIST: Yes, that was a real missed opportunity, politically and substantively. They keep saying it was last year's business, but so was Iraq and Afghanistan and so was stem cell. I mean, he's the president today. They keep also saying it's 1 percent of the GDP. But in combination with the stimulus and the housing and the banking and all the bailouts, we're getting close to 40 percent of our GDP.

If he would have said no to this, just said no, it would have sent a powerful signal to the markets who every time he talks, they take. They don't have confidence in the plan. They don't have confidence in Geithner or in the staff or his lack thereof. And this would have been the powerful symbol that he needed to do to give the markets the confidence they need to help kick start this economy.

KING: As we rough up the administration a little bit, I want to make clear that 40 percent of the earmarks in this bill are from Republicans. One of the Republicans, one of the leading Republicans Dick Shelby. He is the ranking Republican on the Senate Banking Committee. And he was on another program this morning and his point is, let's -- you might not love this bill, but let's move on. Let's listen to Richard Shelby.


SEN. RICHARD C. SHELBY, R-ALA.: I think we ought to fund the government and move on. Are there some things in this bill that I don't like, I wouldn't vote for if I could? I voted for amendments, you know, knocked things out of it? Sure. But overall, I think it's -- we need to get it behind us and I think we will.


KING: Overall, we need to get it behind us. Mary and Donna, let's look at this graphic up on the screen right now. Of Republican senators with earmarks in this bill, that senator right there who says yes, I guess I can take this, Richard Shelby, has $114 million in earmarks.

Every member of the Republican leadership in the Senate has earmarks in this bill. Mary, does it undermine the moral authority or the credibility of your party's message when they say President Obama, take a stand when Republicans are loading this up, too.

MATALIN: Yes, John, it does undermine the credibility of the Republican or the new Republican ascendancy. It's a very key critical inspiring moment was when that was when the House Republicans united to defeat earlier pork spending.

And if the Republicans want to recover and offend again, that's what they're going to have to do, go back to first principles. Our defeat was not a result of being too conservative, it was a result of not being conservative enough. And when we are saying on the one hand, stop the madness and we're spending as madly on the other hand, it's more of the same. It's not what people want. It very much undermines our credibility to not be part of the solution.

KING: And yet Donna Brazile, Speaker Pelosi and Leader Reid in the Senate have made clear to President Obama, earmarks aren't going away. We like them and we think there are prerogatives, that members of Congress should be able to put in spending proposals targeted to their districts because their argument is, we know our home base best. Did President Obama make a mistake? He didn't say he would eliminate them. Some people think he said that in the campaign. He did not say that. He said he would reform the process and make it more transparent. How do we get out of this back and forth mess now? What should the president do to say here's where we're going from here?

BRAZILE: Well first of all, earmarks quadruple under the Republican leadership. And one of the things that Speaker Pelosi and Majority Leader Reid are trying to do is to try to reduce the number of earmarks. That's why they've gone down over 43 percent. On the other hand, the president has to start reforming the budgetary process. I agree with his budget director that you can't reform it overnight, especially when these bad habits have been in place hundreds of years.

But I think going forward, this week he announced that he will eliminate soul-source contracting in the federal budget process. I think every week the president needs to announce some mechanism to again to reform the budgetary process. Congress may not get the news right away, John, but at least they know there's a new sheriff in town.

KING: This guy, he's like a news sheriff. This guy's been in the news quite a bit in the last week or two. This is Rush Limbaugh, now on the cover of "Newsweek's" magazine. You see it there on your screen. There's been a big debate. He's been in a back and forth with the new chairman of the Republican National Committee, Michael Steele.

Mary Matalin, you worked at the Republican National Committee for some time, at a time when it was helping the Republican Party get back on its feet. What do you make of this back and forth and the "Newsweek" cover is enough, a conservative's case against Limbaugh?

MATALIN: You know, if Rush were the head of the party, we wouldn't be where we are today. Rush has been on the air and has expanded his audience for some 20 years now. That's the equivalent of were he in Congress, of 10 terms. He has been the most intellectually honest and consistent conservative and an inspiration for millions of people. He was a big part of why we ascended to the majority in 1994. But enough is enough.

We did, Republicans did play right into the crafty distortionists from the White House on this, and we need to focus on going back to what we did right and how we did achieve the economic success that we did, working with President Clinton in the '90s and through the 2000s.

You know, George Bush inherited a recession as well, but he acted swiftly and it was shallow and it was short. Barack Obama is acting and he is exacerbating the problems that we're in. We need to go back to where we were and go back to what we know works which is incentivizing work through tax cuts and investment tax cuts. BRAZILE: It's easy when you inherit a recession and you have a budget surplus as in the case of George Bush in 2001. And then, of course, I think what President Obama is trying to do is act responsible.

But going back to Rush Limbaugh, I think Mr. Limbaugh is basically filling a leadership vacuum right now. The Republicans are unable to speak with one voice. The Senate Republicans and the House Republicans are often at odds. So what he's doing is he's filling the vacuum. Of course, Democrats are having a field day watching Rush Limbaugh try to lift the Republican Party out of the wilderness. Meanwhile, the Republicans, I think, are still rudderless.

KING: You say Democrats are having a party watching all this. But Mary calls it crafty distortionist. Newt Gingrich, who was the speaker of the House for the Republicans in the mid 1990s in that period when Mary was talking about, working with President Clinton. He thinks -- I think he would probably agree with Mary's characterization. Let's listen to the former speaker.


NEWT GINGRICH, FORMER SPEAKER OF THE HOUSE: I think what they did with the Rush Limbaugh thing. They can't defend signing the 9,000 earmarks, they can't defend an energy tax increase. They can't defend Geithner's failure to pay his taxes. So they decide, let's have a fight over Rush Limbaugh. It is the exact opposite of what the president promised.


KING: Does he have a point, Donna?

BRAZILE: Oh, absolutely not, because I haven't heard an intellectually honest conversation from conservatives about the huge budget deficits, and of course, all of the problems that President Obama inherited.

What I'm hearing is that under President Obama the stock market is going down. Well, the stock market is now down 50 percent since its peak in 2007, and that's because companies are imploding and look what's going on with consumer confidence. People don't feel like they should spend.

So the Republicans are making excuses. At least you can give Rush Limbaugh credit that he's entertaining the country while President Obama is trying to lead us out of this mess.

KING: Come in, Mary, I see the head shaking.

MATALIN: John, can I go back to Rush for just a minute. This was such a silly strategy and it was so -- to watch the press secretary stand on the podium and giggle about Rush Limbaugh, but this is -- is so counterproductive for the Democrats in this way.

What it did was drive people to Rush's show where they saw or heard two things, they realized two things, one, that he's not the demon that they -- these distortionists made him out to be. That he is a fuzzy little softball. And that he's -- more importantly, he is an intellectual giant.

The only way they can demonize him is by distorting what it is that he says. So when people go and listen to his program, he is nothing like what they portrayed him to be. And indeed, the message that he is able to convey, the clarity with which he espouses conservatism is, in the absence of -- and Donna is exactly right, in the absence of this leadership vacuum, for the ideas to be given with such clarity that only Rush Limbaugh can do, I want to thank the Democrats for their sending all of those new...


BRAZILE: And I want to thank Rush Limbaugh for...


KING: Hang on, we're almost out of time. You each get 10 seconds on the other side of this one. One of the guys who has been in this spat with Rush Limbaugh is Michael Steele, the new chairman of the Republican National Committee, and a gentleman who is familiar to both of you, more familiar to one of you than the other one, says Michael Steele will soon be out of work.

Let's listen to a guy named James Carville.


JAMES CARVILLE, DEMOCRATIC STRATEGIST: I think that Michael Steele is done. He's over.


KING: Is he done and over, Mary Matalin? You know that guy pretty well.

MATALIN: Oh, I think you said one of us is more familiar with James' Democratic tricks. I think that would be Donna, not me.


BRAZILE: I think Michael is off to a rocky start, but, you know, knowing the Republican Party, they will rally behind him and he'll get himself back together.

KING: Mary Matalin and Donna Brazile, who, apparently, is more familiar with her husband's Democratic tricks, as she calls them. I'll leave it there on this day. Mary and Donna, thanks to both for joining us.

BRAZILE: Thank you.

KING: Here's a look at what's ahead on STATE OF THE UNION, two leading financial experts break down Washington's economic rescue plan and explain what it means for your wallet. We'll go to Cagney's Restaurant (ph) in Winston-Salem, North Carolina, where some residents pinpointed the one issue they say the president needs to face head on.

I'll ask the president's budget director why he thinks health care reform is the key to financial stability.

And the newly reelected mayor of Los Angeles weighs in on the staggering unemployment numbers in our "Last Word" segment. Please stay with us.



WILL FORTE, "TIMOTHY GEITHNER": Earlier today I proposed that the federal Treasury set aside $420 billion. This $420 billion will be placed in a special fund and will go to the first individual who comes up with a workable plan to solve the banking crisis.

If you have such a plan or know of someone who does, you can call the number on the screen below...



KING: That's Will Forte on "Saturday Night Live" last night spoofing the treasury secretary, Tim Geithner, laughing there. But if you take a look at your 401(k) lately, you're not laughing. You've seen staggering losses in your savings. Investors are rattled as the stock market sinks to new lows.

President Obama even offered some investment advice this past week. So how can you keep your money safe during the economic crisis? Our next guests offer their financial expertise. Joining me now from New York is David Bach, he is the author of the new book "Fight for Your Money." And Jennifer Openshaw is the author of "The Millionaire Zone."

Thank you, both, for joining us this morning.


KING: As Americans at home listen to the budget director and listen to the politicians debate taxes and spending and budgets, let's start with the threshold question of where are we going? I asked Peter Orszag earlier in the show, where's the bottom? Where's the bottom of this economy?

They project, in their budget next year, that the economy will grow at a rate of 3.2 percent. Jennifer, to you first, is that at all reasonable?

JENNIFER OPENSHAW, AUTHOR, "THE MILLIONAIRE ZONE": Well, most people are predicting the bottom to come a little bit later in the year, second or third quarter, and the real issue is, John, that nobody is going to know when the bottom comes, because we're not going to know until we look back and we say, hey, it was in the second quarter of 2009.

And I think, you know, if you took all of the newspapers away, and all of the drumbeat of bad news, the economy would instantly improve. And what people are looking for is certainty and some good numbers.

And I think it's going to be a little bit coming until we pass it. What people are looking for is certainty and some good numbers. And I think it's going to be a little bit until we see those.

A little bit, David, can you define a little bit or is that the big guess?

BACH: A little bit, it's a long bit. Look, here is the reality. We spent for 10 years money we didn't have. The average American used credits and home equity to buy everything that is in their house right now. They've got five iPods. They've got two plasma screen TVs. They have two cars in their driveway. They've got stuff in storage.

And now we're having to cut back on our spending to finally build some savings and pay down that debt. Well, if it took you five to 10 years to get in credit card debt, you can't get out of credit card debt in a year.

And so the conversation that's happening across America at the dinner table is, we have to cut back our spending. Well, that makes the recession longer. But the -- you know, you look at what is happening in this country, what's the good news? We are spending less and we are saving more.

But that leads to a longer recession. I think this recession goes on for at least a year or two, year-and-a-half. I don't think we're even halfway through the job cuts that we're starting to see right now. And the truth is the politicians don't know what to tell you right now. KING: That's a sober assessment, Jennifer, before you come back -- before you come back in, the president is not only trying to manage all of the crises, he's trying to play financial adviser. I want you to listen to President Obama earlier this week telling Americans, you know, it may look bad on Wall Street, but maybe this is a time to buy.

Let's listen to the president.


OBAMA: What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal, if you've got a long-term perspective on it.


KING: Are you accepting the president's advice, Jennifer?

OPENSHAW: Well, I think he may well be right. Let me tell you, David Letterman over this last week said, hey, instead of buying a latte, you could by 1,000 shares of GM. Well, instead of buying 10 lattes, you could buy a share of Wal-Mart.

We are probably going to look back and this will be a low time. Stock prices are as low as 1997. But I think we're still in for some ups and downs as we go through this whole recession.

But what we are seeing, John, is people are saying, hey, we've seen millions -- so many people lose millions of dollars, whether it's smart people like Steven Spielberg and John Malkovich and whether they trusted experts like Bernie Madoff, and people are finally saying, you know what, where was I when there was a Dow Jones 101 class? It's time for me to learn.

OPENSHAW: And that's why at WeSeed, we're saying, hey, let's teach people in a safe virtual place so that you are ready when the market rebounds and you're in a position to ask smarter questions even if you are working with an expert.

KING: And so -- so, David, the president's psychological boost to the economy -- is that the goal of that statement?

BACH: Well, I think, you know, that's probably his chief job right now, actually, is to get the psychology of all of us up. It's to have a positive voice in a very negative time.

But I agree with Jennifer. And I think, you know, what we need to hear the president say is that we need to go back to personal economic responsibility.

Everybody's focused on the stimulus plan that President Obama is trying to put forward.

Folks, you have to fight for your money. You have to have your own family, personal economic stimulus plan.

Now, what are people doing in this recession?

They're looking for better deals. One of the things I talk about in "Fight for Your Money" right now is that the average American can save $5,000 this year on their expenses.

That's everything. That's insurance at home. That's your cell phone. That's your cable. That's your car bill. Everything, right now, is renegotiable.

Somebody read the book yesterday and sends an e-mail and said, "I saved $1,320 with three phone calls from just a couple ideas."

The great chance right now with people is, look -- I say, you don't have to go to book stores and buy books. If you want, go into libraries, right now, and read, right now, books on personal finance. Fix your own finances. Because, if you're going to wait for the government to start sending you checks to change your life, you'll be waiting for a long time.

KING: That's a big statement, there, an author of a new book telling people to go to the library and not buy the book.

(LAUGHTER) KING: As we continue the conversation, I'm going to get up for a minute, because I want to walk over here to our wall and show something.

Because, as we talk about, is this a good time to come in, I want to pull this out.

This is the Dow. And this is where we were in 1997, at 6,900. And this is where we are now, closing, Friday, at 6,600. And you see, of course, in October, 2007, we hit the all-time high of 14,000.

So for somebody at home who has watched their 401(k) -- and I think we can show on our screen -- the average 401(k) was about $69,200, last year. It is now $50,200; 27.5 percent is the average loss, Jennifer and David.

Help that person sitting there watching this right now, again, who sometimes gets confused when all the politicians start talking about taxes and spending and the economy. What should they be doing, on this Sunday morning, if they're looking at their paperwork?

OPENSHAW: First of all, you need to know this. Studies over 60 years show that the S&P gains back 46 percent in the first year following its bottom, OK?

We may not be at the bottom, but the point is, prices are very low.

Secondly, don't stop contributing to your 401(k), especially if you've got a long-term horizon.

Thirdly, do take a look at what you have. In fact, I just did this with my husband. Pull out all your investment accounts. Take a look at what you have and re-evaluate. Because some studies are showing that people who are heading into retirement have too much study in stocks. And so it might be a good time for you to pull back.

And it doesn't mean, necessarily, that you're going to sell what you have, but with the additional new money that you're starting to put into savings, you might put that into a bond fund.

KING: So a lesson from the pain, David?

BACH: I think the lesson from the pain is we always go back to time horizon. If you're in your 60s, right now, and you're a year or two away from retirement and you've lost 50 percent in your 401(k) plan, you had too much money in stocks.

I've always been an advocate that you have a third in real estate, a third in guaranteed investments and a third in the stock market. Because then you've always got yourself a hedge.

For those people who are younger, right now, as Jennifer said, I wouldn't worry about this market, right now. You're buying it at a 50 percent discount to where it was two years ago.

If we see this market stay at these levels for another 10 years, you're buying the market cheap. The market will come back up again. Long term, America always wins. So I think if you bet on America long-term, you're betting in the right place.

KING: And let me ask you, in closing -- we just have a few seconds left -- does it help or hurt -- I don't mean the political risk here in Washington; I mean the psychology of what you two do for a living, each of you -- and I'm sorry; we only have about 10, 15 seconds each -- when the president of the United States is cheerleading the economy to the point of saying, buy stocks?

OPENSHAW: Well, it is all about confidence, John, and I think that was part of his point. And it's really saying, hey, you know, we're in control. We've got a plan. It is going to take some time. But he wants people to be buying companies because that obviously is going to prop up the market.

BACH: The reality is we need longer conversations about this topic and we need to hear more from the president. It's not that the president is Warren Buffett; it's just that this country, right now, is down in the jumps.

There was, like, a 48-hour period where, after President Obama was elected, everybody felt euphoric. Well, we need to hear from him more often, quite frankly, because America needs that motivational pump right now.

And, honestly, they're not getting it from the media and they're not getting it from listening to Democrats or Republicans go back to fighting like they were fighting right before he was elected.

KING: Well, we'll try to keep the conversation going, here on Sunday morning, and we'll have both of you back.

Jennifer, David, thank you very much for joining us this morning.

BACH: Thank you.

KING: Thank you, and take care.

At the top of the hour, I'll ask the president's numbers- crunchers how his budget proposal will affect your taxes.

And straight ahead, we get out of Washington to hear what's on your mind, this week at Cagney's (ph) Restaurant in Winston-Salem, North Carolina.


KING: I'm John King and this is "State of the Union." Here are some stories breaking this Sunday morning.

The U.S. military says 12,000 troops will be pulled from Iraq over the next six months; 4,000 British troops are also being withdrawn, as security improves there.

President Obama announced last month that he'll withdraw most American troops from Iraq by August 2010.

In Baghdad, a man wearing a vest packed with explosives drove a motorcycle rigged with bombs into a crowd of police recruits. Officials say 30 people were killed, more than 60 injured.

Joint Chiefs chairman Admiral Mike Mullen briefed President Obama on Mexico's crackdown on cartels along the U.S.-Mexican border. One key issue discussed: how the U.S. military might be able to help. The U.S. military official says the Pentagon is already sharing intelligence with the Mexican military.

Your "State of the Union" report continues right now.

Part of our commitment to you is to listen and shape our conversations with newsmakers and our reporters and analysts around the things you talk about and worry about in your kitchens and communities.

It's the part of the job I love the most. And this week, we stopped in Winston-Salem, North Carolina. As we were down in North Carolina, let's remind you of the tough economic times there. Unemployment in the state is 8.1 percent. A year ago, it was just 5 percent; 92,000 jobs lost in just the past year, almost 40,000 of those jobs manufacturing jobs.

And this is a state -- 45 million nationally without health insurance; about 2.5 million of them live in North Carolina. So the economy, health care, and President Obama's early weeks in office dominated our breakfast discussion at Cagney's.

(BEGIN VIDEOTAPE) KING: I just want to start with the big headline, which is the economy lost 650,000 jobs last month.

KING: The unemployment rate is now 8.1 percent. It's the highest since 1983. Let me just start to my left. How has the bad economy impacted your life?

NANCY RIVERS, ELLERBE: I don't think it's really impacted mine. I know that it's impacted a lot of people around me. I still have a job, even though my job is not secure.

ALAN BENTLEY, WINSTON-SALEM: People are very fearful and they are worried about the future of this country, not only for the economy but where we stand in the world and where we can maintain our preeminence as far as economic and political force in this world.

KING: When you look at Washington from your perspective here in North Carolina, does it make sense what's happening or does it worry you?

JENNIFER KLINE, KERNERSVILLE: I think that the agree of their involvement concerns me.

KING: Too much government in your view?

KLINE: Yeah.

KING: Let me say the politics of this table. If you supported Obama in the election, raise your hand. So two out of three. So one of the challenges of the new president now is he ran in this campaign saying he was going to change Washington, change the way they did things, make things more open, more hones, more transparent. And yet he says now he will sign this massive spending bill left over from last year. But it's loaded, 8,000 or 9,000 of these earmarks that some people say is wasteful park barrel spending.

Some members of Congress say no, that's a courthouse or a bridge in my district. There's a big debate about it. But to President Obama's promise of making things different, when he says well, this is last year's, we'll fix this later, I'm going to sign this one, can you agree with that? Or do you agree with the Republicans who that's a copout? You said you were going to say things, draw a line.

RIVERS: I think that personally for me, I have a lot of trust in Obama. He seems to be a very moral person. I think that's what our country needs to get back to its morals.

BENTLEY: He's the president and he has inherited this problem, he needs to own it and he needs to work to make sure that we get the results that we need to in the country.

KING: So own it by standing up to his party and saying I'm sorry?

BENTLEY: If that's necessary, we need to put partisan politics aside for the benefit of the country. KING: When you look at health care reform now, A, do you believe they'll actually do it and B, what's the single most important thing from your perspective as someone who worked in the industry?

RIVERS: Well, I think it's for all people to be able to afford health care.

KING: You mean something like universal coverage paid for by the government?

RIVERS: Well, I don't know if paid for by the government, but I think that, you know, absolutely needs to be where people can afford a premium or something and be able to get something that's affordable.

KLINE: I'd be very concerned when we talk about what I would think of as more of a socialized medicine approach in that again, it goes back to the free market system and the ability of our industry to assist us to solve this problem.

BENTLEY: We've got to face this problem head on and it's one of these things like a lot of the things that we're dealing with in the country because times were good, we buried our heads in the sand and hoping that the problem would go away, it never does, it always gets worse. And so when you do actually confront it, it becomes much more painful than it would have been if we had taken the steps 10 or 15 years ago.


KING: Our thanks to our guests and the great people in Winston- Salem, North Carolina. For more of my reporting from North Carolina, check out

Well President Obama spent the week pushing his ambitious domestic plans here at home. His Secretary of State and former political rival was busy overseas outlining the administration's foreign policy objectives. The best political team on television talks about that and a whole lot more just ahead.


KING: Joining me now to continue our Sunday conversation in Boston, CNN senior political analyst David Gergen and here with me in Washington, CNN's foreign affairs correspondent Jill Dougherty, just returned from covering Secretary of State Clinton's trip to Europe in the Middle East. No jet lag there. And senior political correspondent Candy Crowley.

Let's start with the big budget battle, spending battle here in the United States. I want to play something that Peter Orszag, the president's budget director was in this morning. And there are thousands of earmarks, billions of dollars, some call it wasteful pork barrel spending. And Barack Obama said during the campaign he would clean up Washington, change the rules and reform the way this was done. But Peter Orszag makes the case, not yet, let's listen.


ORSZAG: It's like we're stepping in in the ninth inning. You can't just redo the whole game.

KING: Sometimes the pitcher comes in in the ninth inning and changes the game, changes the game.

ORSZAG: But you can't change the rules of the game and go back to the --

KING: You can change the dynamics of the game, though, Peter, you can.


KING: Candy, what's the translation here? They've decided to let this one go, to save their powder for bigger fights down the road?

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Right and they've got a lot on their plate. This is an easy one frankly. Well, no, that was the last Congress, we have nothing to do with it, let's just sign this and get off and you know, their political calculation is nobody cares.

KING: Does anybody care, David? Or should the president have taken a stand here?

DAVID GERGEN, CNN SR. POLITICAL ANALYST: I think the president would have been far wiser to take a stand here. He has to send a signal after having a fiscal responsibility summit after all that he's serious about it, that he will say no and stand up to the barons on Capitol Hill when they come up with these earmarks, 8,500 of them. I think that's important to send that political signal.

It's also important to show a political signal that he's going to be prudent about spending. These earmarks are not stimulative. They do not create jobs. Some of them are valuable and worthwhile. But I think the president would have been wiser here to have said no. Let's rework this.

KING: Jill, your observation, we'll talk about the specifics of Secretary Clinton's in a minute, but as you traveled the world with her early in the administration, I assume when you run into diplomats overseas or pick up the newspaper overseas, they're not focused on this spending battle. But as the fight starts here in Washington, you've twice been overseas with the secretary of state. Perception of the United States?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, let me just tell you, they are worried about the economic situation. And that is -- no matter what she's talking about, that's a lot of the subtext that's hanging over everything. With that said, the impression seems to be they are glad to see the United States is back, it's involved. Secretary Clinton seems to be going over well. People seem to like her. I think that she's studied hard, she knows the subjects and she wants to be active. KING: Wants to be active. She will be active and we'll get to a lot of that in just a second. But let's continue on this spending battle for just a second.

KING: The House Republican leader, John Boehner, was on CBS this morning, and he says, echoing essentially the point you just said, David, that the president of the United States, especially given the tough decisions being made around kitchen tables all across America, should have jumped into this fight.

Let's listen to John Boehner.


REP. JOHN A. BOEHNER, R-OHIO, HOUSE MINORITY LEADER: American families are tightening their belt, but they don't see government tightening its belt. And I think that we can get through this year and lead by example and show the American people that the government can go on a diet as well.


KING: Interesting philosophical moment, Candy. The Republicans are saying, free spending. The administration says, you might need another stimulus plan, more spending.

CROWLEY: Absolutely. And I don't know if, in this particular instance, he was talking about the spending bill they're about to pass, but there were an awful lot of Republican earmarks in that.

But that has been -- I mean, that's the territory they have staked out, stop the spending. They -- as you know, philosophically, this is the Republican position. We've got to first cut the budget before we start raising taxes, and that's -- that's the political territory they have staked out and that's why the House, as you know, Boehner brought them all together to vote against the last money package.

So, you know, they're with it. I mean, they're either going to look great next year or they're going to lose big, one of the two.

KING: And it's that political calculation, David, as we wait to find out whether they're right or wrong in the political calculation, that the big theme of the campaign was Barack Obama was going to change Washington, was going to work differently, sound differently, look differently.

Is it working, looking, or sounding any different?

GERGEN: Well, I think on some -- on policy matters, yes, it's sounding enormously different. And I think one of the reasons Barack Obama enjoys such high political support is that he has changed direction on a number of things as he promised during the campaign.

This spending bill is a smaller item to be sure. But it's symbolically very, very important. It's not that he wants or should stop spending all together or free spending, rather, he should cut out wasteful spending, and you know, the imprudent spending, spending we just don't need.

This spending bill sounds like politics of the old days. And I think it was a moment, an opportunity for him really to say no. But I must say, John, I think one of the concerns the president must have today is that he's enjoying this enormous popularity among the American people, but confidence is eroding within the business community.

And we're seeing that both in the markets and the way business people are reacting. They would like this president to succeed personally, but they're having increasing concerns about the direction of policy.

KING: And, Jill, from the international perspective, a lot of money has been spent by the United States overseas, on the war in Iraq, on the war in Afghanistan, President Obama says he can save money by bringing troops home from Iraq, but Secretary Clinton in her travels is promising to give out some money, aid to the Palestinians, foreign aid a big part of her travels? Or just in the case of the Middle East?

DOUGHERTY: Some of it. Now I wouldn't say it's a huge part of it because they're not that specific. You know, they're still putting together policy, let's get real, on Afghanistan, on Iran, on Russia, everything -- North Korea.

Everything is still being, you know, reviewed. That's the mantra, we're reviewing this. Afghanistan will be completed, we think, by the middle of the month. So maybe they can get more specific. But even that foreign assistance, that's peanuts compared to what we're talking about.

KING: Peanuts, Jill says. We will talk about the substance of that, Iran, the Middle East, Russia, in just a minute.

Coming up, my conversation with the mayor of Winston-Salem, North Carolina. He's feeling pressure from constituents to put the stimulus money to work. The problem is, he doesn't have it yet.

And straight ahead, more from CNN's best political team. Stay with us.


KING: Want to update you on some breaking news just in on CNN. At least five people, including a pastor, have been shot at a church in Maryville, Illinois, that's just outside St. Louis. The suspect was them jumped by members of the church, we are told, and stabbed in the process.

A dispatcher for the Maryville Police Department telling CNN the gunman went to the First Baptist Church, shot the pastor at least three times and wounded the others before the gunman himself was captured. The pastor and several others of those wounded have been taken to local hospitals. No word yet on the motive. We will continue to track this story throughout the day here on CNN.

Let's get back now to our conversation with Candy Crowley, Jill Dougherty, and David Gergen. Let's shift to the foreign affairs priorities of this administration. A big debate over Iran. In an interview with you on this trip, Secretary Clinton talking about her efforts at diplomacy that she hopes will bring about some resolution to a number of problems, including Iran's nuclear program. Let's listen.


SECRETARY OF STATE HILLARY RODHAM CLINTON: Obviously engagement of whatever nature is not being done just for the sake of engaging Iran. What we're looking for is a way to end Iran's nuclear program, end Iran's sponsorship of terrorism.


KING: Secretary Clinton speaking to our Jill Dougherty there. Now let's listen to John McCain, Barack Obama's opponent in the election, was out on the Sunday show this morning. He believes -- maybe diplomacy will give it a chance, but he believes this is heading towards a crisis. Let's listen.


MCCAIN: This is a great threat to Israel, who they threatened to, quote, wipe off the face of the earth. And this is going to be a -- I think, a serious international crisis before it's over.


KING: Would you take us inside the debate in the administration, where this one is going?

DOUGHERTY: Yes, you know, there are two sides to it. And they're really doing both at the same time. One is, Iran is a threat, Iran is a big threat, we've got to do something. You heard the two priorities there. Nuclear program and supporting terrorism.

On the other hand, they're talking about somehow engaging with Iran. And we're going to see the first instance of that, which could be very interesting. March 31st, the secretary has called for a conference on Afghanistan.

And as she put it, Iran is part of the neighborhood of Afghanistan. We want the neighbors to come and be part of this conference. And it looks as if the Iranians will come. So conceivably, you could have Hillary Clinton meeting with an Iranian representative.

So they're doing both things at the same time. Hard line that it's a threat, but the other thing is they do want to talk, if possible.

KING: And from a policy perspective, David, what is the significance and what are the risks?

GERGEN: Well, John, they're enormous consequences here. There are people at the top of the Obama administration who share John McCain's view that this could be heading toward an international crisis. Not immediately. But just over the horizon. And I think what Secretary Clinton and the rest of the foreign policy team, I think they've got off to an excellent start.

They're making important strategic moves. What they're trying to do in effect is present to Iran a choice.

GERGEN: Either you engage with us when we invite you into the 21st century and you have a chance for economic growth, or we're going to increasingly isolate you and make it very difficult and hold in the closet the possibility of a war club.

And the isolation comes through what they're doing now with Syria. Hillary Clinton is sending a couple of envoys to Syria to start opening talks and that could also help with Israel, by the way, but see if you can't break off Syria from Iran. That would be a loss for Iran. If Syria came more over to -- over in effect toward the western side of this. It would be harmful for Iran.

So it seems to me the administration is playing a very smart game. We'll have to see where it goes. And nobody knows -- to go to Jill's point, nobody knows whether engagement will work. That's what the pessimists believe it won't work. Hillary Clinton herself has suggested it may not work. But they're trying hard now. And I think they are making some smart strategic moves.

KING: And Candy, the politics are delicious because as David just noted in the campaign, it was Hillary Clinton who said this guy is naive. He is way too optimistic about what you can get through diplomacy.

CROWLEY: I was thinking about that when Jill was talking. This is sort of a mix of both their policies. She's the one going, no, no, no, it's naive, you can't talk to these people. You've got to first deal with -- they've got to stop with what the building of what they believe is a nuclear weapon, or a nuclear capability. And his saying we need to reach out. So they've sort of found some middle ground here that she clearly is comfortable with.

DOUGHERTY: Yes and you see it on a lot of different issues. I mean, you know, talk about talking with the Taliban, you know, presumably the Russians. We don't like what they're doing but we can still talk with them. North Korea, dangerous, dangerous. However, maybe we can talk to them.

KING: Help us on the Russian question as we close this discussion. It's an important policy question that also turned into a bit of a comical moment in diplomacy this week. And we'll have it first on STATE OF THE UNION, one of our correspondents is speaking some Russian. Explain the whole reset button.

DOUGHERTY: Well, it is a really classic. You know, the mantra is we want to reset the reset button with relations with Russia. So when Hillary Clinton met with Sergei Lavrov, you can see it right there. There is a button. She brings out this box. And inside the box is a button. And on the button supposedly is written the word "reset" in Russian. Actually, it wasn't even Russian letters, it was English letters. So Lavrov looks at it and says to Hillary Clinton, "we tried very hard, you know, to make it correct. Is this?" And he says, well actually, it's not. Because they use a word, there is "peregruzka" which means like to overload, when you plug too many things into a socket, OK? And then there is "perezagruzka," which means to restart, reboot a computer. So somebody, I guess, didn't do their home work.

KING: And David Gergen, what are the risks with rebooting with Russia, comedy aside?

GERGEN: Well, you know, there have been many people who do think Putin is a thug and that he wants to bring back a semi Cold War. There are others in the administration who hope that, look if, we can restart this relationship, we've got a lot of mutual interests on energy. We have mutual interests in Afghanistan on Iran. So they're trying, once again, to see if they can't take it in a different direction. It may not work.

KING: It may not work on that, silver note, we need to end on. Unfortunately we're out of time. David Gergen in Boston, Candy Crowley and Jill Dougherty here in Washington, thank you so much.

And trying to keep a city running when the money is running out. One Southern mayor paints an eye opening picture. That's next. (COMMERCIAL BREAK)

KING: Last week, we were in Philadelphia where the mayor told us he needs the stimulus money, doesn't know when he'll get it. This week we went to Winston-Salem, North Carolina, down into this community here. It's in Forsyth County. You'll see, Barack Obama carried the county 55 percent to 44 percent in the election. And it was one of the surprises when North Carolina, traditionally red state, turned blue in this election.

In the community, we wanted to talk about the state of the economy. You see Winston-Salem is a medium-sized city. It is struggling. It does have some health care research facilities that have kept the unemployment rate from going down too low. But you see here part of the economic struggle. Now the mayor, Allen Joines, he says he needs the stimulus money to create jobs in his community. He believes he could create thousands of jobs once he gets it. But he says he keeps asking when it will come and he can't get an answer.


KING: Let me just start with a basic question about the state of the economy here. It's bad to worse everywhere. What are you seeing here?

MAYOR ALLEN JOINES, WINSTON-SALEM: This is a tremendous impact on our budget. It keeps the budget balance. We're seeing probably a 12 percent or more reduction ourselves in our sales tax revenues, which is a huge part of our overall budget.

KING: And now let's talk about the stimulus debate. We're here because one of the things you would like from the federal government in this package, resources to help you expand your fire department. And renovate and modernize your fire department. Tell us why.

JOINES: That's right, John. We're in the immediate to build three new stations here in Winston-Salem, plus renovate a number of the older stations here. So the stimulus moneys would allow us to move forward with some of this work.

KING: What else do you hope for in other areas across the city?

JOINES: Well, certainly we have needs with regards to highways and bridges and sidewalk work within our community. Again, shovel rain products projects we can do. Very interested in some of our environmental issues to help us carry those efforts forward. We have a senior plan to end chronic homelessness. We have a need to create about 300 new housing units for homeless individuals. So this will allow us to get construction going, we believe.

KING: And let's discuss lastly the process. Do you have any idea? I mean the money was passed and it was urgent. The debate in Washington and the White House said we have to do this now, we have to do this now. And now when you go around and talk to mayors, they say well they're still waiting to hear how this one is going to work. And the regulation is being written. And this department has that and this department has that and the mayors say, I don't know. Do you know?

JOINES: I don't know a lot of it, to be honest with you. In terms of the transportation work, we seem to have a little bit better feel coming from the state and also guidelines on that. So we're anxious to get the guidelines and get the dollars available so we can hit those two-year guidelines and get the job done. We'll do it. But we've just go to know how.

KING: Is there a frustration that you don't know? I mean you're the guy. You're the one who is going to be held accountable. And your people are going to hold you accountable regardless because you're the mayor and they think there is all this money out there and it's their money, taxpayer's money.

JOINES: Exactly. And I think every group I speak to today asks me about the stimulus. Mayor, when you are going to get things started here? What are we going to be able to do? So I think there is certainly a level of expectation that has been built up. We put the list of projects on our Web site, for instance. So our citizens are -- know what we're going to try to do. I would like to very soon be able to tell them what we're going to do, when we're going to do it. So the sooner the better, certainly.