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STATE OF THE UNION WITH JOHN KING

Interview With David Petraeus, Richard Holbrooke; Interview With Kent Conrad, John Spratt

Aired March 29, 2009 - 09:00   ET

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


JOHN KING, HOST: I'm John King, and this is our State of the Union report for this Sunday, March 29.

President Obama unveils his new plan to disrupt, dismantle and defeat Al Qaida and the Taliban terrorists in Afghanistan and Pakistan and Afghanistan. We'll go through the details of the new strategy in an exclusive interview with the region's top military commander and top diplomat, General David Petraeus and Ambassador Richard Holbrooke.

North Dakota still on guard this morning. But there's hope residents will avoid a flooding disaster. Cold weather may have helped the Red River level off. We'll talk with the state's senior senator Kent Conrad. And we'll take you to St. Louis, Missouri, where mass transit cuts are leaving many of the area's residents stranded. That's all ahead in this hour of State of the Union.

Scenes of the flooding here in North Dakota. Terrible scenes, but it could have been worse. We'll talk to General Petraeus and Ambassador Holbrooke in just a moment.

First, residents in Fargo, North Dakota are no doubt breathing a bit easier this morning. The fear was that the Red River would crest at or above the city's dikes and levies at 43 feet. But the river is leveling off, after rising to a record 40.82 feet early Saturday. So far two deaths and 50 injuries are being blamed on the flooding. And the danger isn't over for Fargo or its neighboring city, Moorhead, Minnesota. Although Red River levels are expected to drop over the next several days, forecasters are warning of relative uncertainty about the prediction, saying, quote, "The river will continue to behave in ways never before seen."

Later this hour we'll go to North Dakota and talk to Senator Kent Conrad. He'll join us live from Fargo.

But now to President Obama's new Afghan war strategy. He's sending an additional 4,000 troops to Afghanistan to train the country's army and police force and hundreds of civilians to advise Afghanistan's government on agriculture, education and other issues. But the president's plan also includes a new emphasis on Pakistan. Let's talk about it with the two men who will be in charge of this effort, the top U.S. military commander in the region, General David Petraeus, and the diplomat appointed by the president, Ambassador Richard Holbrooke.

Gentlemen, welcome both of you to State of the Union. And General Petraeus, let me start with the threshold question for you, how many troops will it take? How long will it be.

PETRAEUS: Well, as you know, John, the president and President Bush before him have set in motion orders for troops that will more than double the number that were on the ground at the beginning of the year. We'll get those on the ground. We'll take a lot of effort with infrastructure, logistics and so forth, start employing those in the months that lie ahead. They'll all be on the ground by the end of the summer and the early fall.

And along the way we'll be doing the assessments. And among those assessments, of course, will be the kinds of questions about force levels, about additional civilians and other resources as well.

KING: General McKiernan, your commander on the ground, had been up-front that he needed even more troops. Why did the president say no?

PETRAEUS: Well, he certainly hasn't said no. What everyone has said is let's get these forces on the ground. Every request for forces and every recommendation that General McKiernan and I made through this year, this entire year, has been approved. And, as I said, we'll take that forward, do the assessments. And I think it'd be premature to get beyond that right now.

KING: Ambassador Holbrooke, before we get to your challenges in the diplomacy, I want you to take us inside the deliberations about this strategy, because as you know, many Democrats have warned this could be President Obama's Vietnam, that you're sending more troops into an area where you still have huge problems on the Pakistani side of the border -- and we'll talk about that -- with corruption and other issues on the Afghan side of the border. And we'll talk in more detail about that. But take us inside the room when it comes to the risk assessment for this president at this moment.

HOLBROOKE: First of all, John, I served in Vietnam for three and half years, and I'm aware of certain structural similarities. But there's a fundamental difference. The Viet Cong and the North Vietnamese never posed any direct threat to the United States and its homeland. The people we are fighting in Afghanistan, and the people they are sheltering in Western Pakistan pose a direct threat. Those are the men of 9/11, the people who killed Benazir Bhutto. And you can be sure that, as we sit here today, they are planning further attacks on the United States and our allies.

In terms of the deliberation itself, the president shared at least four meetings, by my count, of the full National Security Council -- very unusual, very impressive. He ran the meetings himself. I've been in meetings with presidents since Lyndon Johnson in whose White House I served. And I have never seen a president take charge of a meeting the way President Obama did continually.

In other meetings without the president present, General Jones, his national security adviser, his deputy Tom Donilon, and the senior members of the administration, including Hillary Clinton, Bob Gates and the military command, including my colleague and friend David Petraeus, all had a vigorous debate. The vice president participated heavily. And in these discussions, John, I can assure you, and through you everyone who's watching, that every single option was considered, its pros and cons. A convergence and a consensus was immediate, that we couldn't walk away from the situation, no matter how bad it was and how bad the situation we had inherited was.

Then the issue became what do we do about it? All the options were considered. On the civilian side, we focused on the agricultural sector, which has been neglected. And yet it's an agricultural sector -- country. We focused on creating jobs. On the informational side, Dave Petraeus and I agree that we don't have a strong enough counter- informational program to combat the Taliban and Al Qaida, and so on and so forth down a wide range of issues.

From this review, Dave Petraeus and I are now going to sit down and plot the most serious integration of civilian and military activities that we can -- we have had in our time. We're going to integrate the policy like it's never been done before. And, in fact, Dave and I are now planning a retreat to do just that.

KING: Well, let me -- let me talk about the challenge ahead, because no matter how right or how smart the United States is this time -- and you, obviously, in saying what you just said, Mr. Ambassador, you're criticizing what happened in the previous administration. But I don't to look backwards. For you to succeed, you need partners. And I want to play something that then-Candidate Obama told our Fareed Zakaria back in 2008 about the president of Afghanistan, Hamid Karzai -- the president of the United States, now, saying, back then, he didn't have much trust. Let's listen

I'm sorry, we don't have that sound for you. But here is what he said back in 2008. He said: I think the Karzai government has not gotten out of the bunker and helped to organize Afghanistan and government, the judiciary, police forces, in ways that would give people confidence. So there are a lot of problems there.

General, if there are a lot of problems there, have those problems been fixed? Or are you sending more U.S. troops into a country that can't organize and run itself?

PETRAEUS: Well, first of all, it's a comprehensive effort. And among the various lines of operation, if you will, are diplomatic lines that will be spearheaded by the ambassadors in both countries and with Ambassador Holbrooke, of course overseeing that. Among that effort has to be, without question, the strengthening -- the building in some cases -- of the kind of trust, cooperation, coordination that is necessary to deal with the problems that have emerged over the years.

It is no secret that the legitimacy of the Afghan government has been challenged by the corruption and some of the other issues there. President Karzai has appointed corruption committees, has made important starts, appointed some good officials, among them Minister of Interior Atmar. That now needs to be moved forward, as we run up to the elections. And then beyond, of course, it would be very important that we all work together to combat the kinds of issues that we discussed.

KING: You say it needs to be more forward. But Ambassador, I want you in on this point, because you have called corruption a cancer in Afghanistan. President Karzai's been in charge of seven years, first of an interim government, a transitional government. He's been president for four and a half years. If there is a cancer of corruption in Afghanistan, and he has been in charge for seven years, is he not part of the problem? HOLBROOKE: There isn't any question that the government has corruption at high levels. I've said it as a private citizen, and I'm not going to repudiate anything I said as a private citizen. President Karzai called me right after the president's speech, which he which he watched live on CNN. He said it was a great speech, and he agreed with every word of it. And you will note that the president, for the first time at the presidential level, addressed corruption directly and frontally.

I will be meeting with President Karzai tomorrow in the Hague, in advance of the secretary of state's arrival there for this big international conference. Hillary Clinton will meet with Karzai the following day, the day after tomorrow. We will talk about corruption to him as we have before.

We do think it's a cancer. President Karzai says publicly that he agrees with that. And now it's up to his government to take action. But I would stress to you, John, that there is an election coming up on August 20th, the second election in Afghanistan's history. It's a hugely important election. President -- Secretary Clinton will address that in her remarks on Tuesday. And that election will be a chance for the people to vote on these issues.

KING: General Petraeus, I want you to come with me so we can take a closer look at the source of the issue here. And Ambassador Holbrooke, I believe you can see this on a monitor you have up in New York. This is your range of territory, General. You cover all this. But the problem at the moment is right here. And I want to pull out this border region just a little bit more and bring it over to the center, and pull this out a bit, so people can see what we're looking at.

Now, you believe the problem is as much on this side as on this side. So the U.S. troops are going here into Afghanistan. But many would say you're sending the fire department here, when the fire is here, that Al Qaida and the Taliban are on this side of the border. How confident are you that sending troops here will deal with the problem here in the context of trust? We just talked about trust with President Karzai. Do you trust -- let me ask you a simple question first. Do you tell the Pakistani military the most sensitive U.S. secrets? Or can you not trust that that information will be passed on to their security services and them onto the terrorists?

PETRAEUS: Well, first, let me just say that it's very important that the fire department address the fires that have sprung up in the eastern and southern parts of Afghanistan without question.

PETRAEUS: And then it's critically important that the fire department, if you will, in Pakistan, do the same thing in the Federally Administered Tribal Areas.

And if you move this down here, in fact, I just talked to General Kayani and had an update from him on operations that are ongoing in Bajaur and Mohmand, which are part of the Federally Administered Tribal agencies, some of which you have here.

And also in Khyber. They have just launched another operation in Mohmand. Clearly there has to be the establishment of true trust there as well. We discussed that actually this morning.

There is a substantial and significant and sustained commitment that is part of this Af-Pak strategy that was announced on Friday. We've had ups and downs between our countries over the years. We've now got to get on an up and stay on an up with them. And again, working our way forward in that regard has to be critical.

KING: And when you say we need to establish true trust, again, at a time of economic recession at home, when American families are struggling, we have given Pakistan more than $12 billion in recent years in aid and we don't have true trust?

PETRAEUS: Well, we have had ups and downs. Now, it is important to point out that there has been progress in these areas. It's significant to note that for a variety -- through a variety of ways, nine of the top 20 extremist leaders in this area -- let's remember, this is where the al Qaeda and transnational extremists are that have -- that were the ones that launched the 9/11 attacks, of course, and have launched attacks more recently in the U.K., Afghanistan, Pakistan, India, and other areas.

So very important to get into this. We have established, as an example, a joint coordination center just here just across the Khyber Pass. That is the kind of building trust that is very important where we're providing the products of intelligence activities and so forth and we see the building with the frontier core, with the other elements of the Pakistani military that are active there, the kind of cooperation and coordination necessary.

I should add that it's also important that this be trilateral. And in fact, as Richard explains frequently, the intelligence services of these two countries, which have had quite a bit enmity between them, they also have to cooperate and we're going to work together, all of us, to try to foster that cooperation as well. KING: And, Ambassador, to that point, how difficult is -- already difficult and incredibly complicated and sensitive diplomacy, how much more difficult is it if you can't be sure that you share a secret, you share some sensitive information with somebody in Pakistan and there is a history of this information being passed on to the security services and then in some cases passed on to the al Qaeda and Taliban?

HOLBROOKE: Well, of course, you're absolutely right, John. It's a huge concern for General Petraeus and me. Leon Panetta made his first trip as director of central intelligence to this region. This is going to be his focus.

We have started a new trilateral process of the leaders of the two countries, Afghanistan and Pakistan, coming to the United States. They came in late February to advise us on the strategic review. Both -- Karzai also praised the president's speech, by the way.

And now we are planning a new session for early May which Leon Panetta, Secretary of Agriculture Tom Vilsack, Vice President Biden, and others will join Secretary Clinton, General Petraeus, and me, and Bob Gates to participate in.

In all of these issues, we have to break down what you just referred to and what the Pakistani foreign minister himself called the trust deficit. You're absolutely right. There is a -- the relationship between Pakistan and the United States is immensely complicated and it isn't quite where it should be.

And the new focus on Pakistan and what General Petraeus just referred to as Af-Pak, Afghanistan-Pakistan, is designed to emphasize the fact that as we move forward, we need to focus as much on Pakistan, but with one key caveat, John. As the foreign minister of Pakistan has said publicly and repeatedly, there cannot be American combat boots, combat troops on the ground in western Pakistan.

So when you talk about fighting the fire on the other side of the border, we are constrained in going after people on that side of the border, even though they are the ones, to a large extent, planning further attacks.

This is the challenge of a uniquely difficult problem. Now we're recommitted to it and General Petraeus and I are shoulder-to-shoulder in this effort.

KING: I want to go to a quick break, but before I do, on this point -- and we'll have much more discussion, but on that key point that you're not allowed -- the Pakistani government says you're not allowed to put people in here.

From time to time we know there have been Special Forces operations in this area. How much of that is for public consumption? And how much of -- do you have the freedom, if you see something right here and you can get to it before the Pakistanis can, would you do it?

PETRAEUS: Well, I think the president made that clear the other day where he talked about consulting with the Pakistanis. But if it ultimately comes to it that we will, if necessary, take action.

Let me caveat that very, very carefully though. And that is that there is no intention for us to be conducting operations in there certainly on the ground, and there is every intention by the Pakistani military and their other forces to conduct those operations.

This is a very proud country. It has existing institutions. Our job is to enable those institutions, to help them develop the kinds of counterinsurgency capabilities that are needed and to help their entire government at large to conduct the kind of comprehensive effort that is necessary well beyond just the military effort, but one that then looks after displaced citizens, that tries to foster local economic development, and there was some of that in the president's speech as well.

KING: Much more to discuss with our two distinguished guests, General Petraeus and Ambassador Holbrooke. We'll be back in a minute. Among the topics, U.S. tensions with Iran. How close is that country to a nuclear weapon?

And of course, we're keeping our eye on the North Dakota where the Red River remains a flooding threat. We'll talk to Senator Kent Conrad, who is assessing the situation in his home state. STATE OF THE UNION will be right back.

(COMMERCIAL BREAK)

KING: We're discussing the many challenges here with General David Petraeus and Ambassador Richard Holbrooke discussing the many challenges here.

We were just talking, gentlemen, about the problems, the many issues you have to deal with, the tough jobs you have with the Afghanistan-Pakistan border. I want to move, a little bit this way in the neighborhood is Iran.

Admiral Mullen, the chairman of the joint chiefs, was on this program a couple of weeks ago. And I put to him the question, does he agree with international assessments that Iran now has enough fissile material to build a nuclear weapon?

Let's listen to Admiral Mullen.

(BEGIN VIDEO CLIP)

KING: Does Iran have enough to make a bomb?

ADMIRAL MIKE MULLEN (USN), CHAIRMAN, JOINT CHIEFS OF STAFF: We think they do, quite frankly. And Iran having a nuclear weapon, I've believed, for a long time, is a very, very bad outcome to for the region and the world.

(END VIDEO CLIP)

KING: Now, General, Secretary Gates, the same weekend, said, yes, they may have enough material but he doesn't think they're close to a weapon yet.

What is your assessment of the -- where they are in development of the weapon and what kind of a threat and a complication that makes your efforts in the rest of the very troubled neighborhood?

PETRAEUS: Well, Admiral Mullen clarified what it was that he was saying and he pointed out that there are additional steps required between having enough low-enriched uranium and actually having something that can be weaponized.

You have to highly enrich it. You have to actually do the physical package. You have to have delivery and so forth. The bottom line is that we think it's at least a couple of years away in that regard. It could be more. It could be a little bit less. There are certainly a lot of facts that we don't know about what goes on inside Iran.

KING: And is this -- is this regime being helpful when you deal with Afghanistan and Pakistan or are they trying to undermine what you doing over here, just as the administration -- the previous administration said repeatedly they tried to do what you were trying to solve in Iraq?

PETRAEUS: I think it's probably a mix. We have common objectives with Iran with respect to Afghanistan. They don't want to see the Taliban and the extremists elements that sought sanctuary there before return to running that country, certainly, a Sunni extremist organization, they, of course, being a Shia country.

They want to see a reduction in the flow of the illegal narcotics that has trapped many of their own citizens in addiction and so forth.

So there are common interests here, but there's also a sense, at times, we think, where they would certainly like us to bleed a bit more perhaps. They don't want to make it too easy for us. And certainly, they want to have a degree of influence, some of that legitimate, some perhaps a little less legitimate.

KING: Well, Ambassador Holbrooke, you will be in a meeting in the week ahead, I believe. I know Secretary Clinton will be there, in which Iranian diplomats will be in the room.

It is the highest-level contact in quite some time. What are your guidelines?

Where has the president said, Richard, if this comes up, you're allowed to talk about this. Let's say the Iranians come in and they're in a talkative mood and they want to talk about a lot of things. Where's your red line?

HOLBROOKE: Well, let's just see what happens in the Hague, John. I don't want to -- I don't want to forecast what's going to happen. Red lines? Well, we're not going to eradicate 30 years of bitter disagreements in one meeting.

But I want to be clear here that the United States has been asked repeatedly since January 20th how we feel about Iran participating in meetings on Afghanistan and Pakistan.

And we've given the same answer to everyone. We have no objections. Iran is a neighbor. And as David Petraeus has just said, they have -- we and they have common concerns.

In 2002 they helped stand up the Karzai government. They hate the Taliban and they need stability on their eastern frontier.

On the other hand, we have enormous differences with them on their nuclear program, on Hezbollah, Hamas and many other issues. So this is a work in progress. We also have to be mindful of the interests of our very important friends and allies in the rest of the region.

And so it's a very complicated issue. But the door is open for Iran to participate in international efforts to stabilize Afghanistan. Those must involve all the neighbors, including India, China, Russia, Turkey, Saudi Arabia, United Arab Emirates, plus our NATO allies.

So this -- we'll see how it goes.

KING: The vice president (sic) of the United States was a guest on this program two weeks ago. And he said something that caused a bit of a stir over at the White House and around town. I want you to listen.

(BEGIN VIDEO CLIP)

KING: Do you believe the president of the United States has made Americans less safe?

FORMER VICE PRESIDENT DICK CHENEY: I do. He is making some choices that, in my mind, will, in fact, raise the risk to the American people of another attack.

(END VIDEO CLIP)

KING: General Petraeus, you served in the Bush administration under Vice President Cheney and President Bush. You're now serving in the Obama administration.

Are the American people less safe because of this new president, as Vice President Cheney says?

PETRAEUS: Well, I wouldn't necessarily agree with that, John. I think that, in fact, there is a good debate going on about the importance of values in all that we do. I think that, if one violates the values that we hold so dear, that we...

KING: You mean torture?

PETRAEUS: ... we jeopardize -- well, in fact, I put out a memorandum to the soldiers in the Multinational Force-Iraq, when I was the commander, because of concern that we may not be taking some of these seriously enough.

As you know, the field manual came out, from the Army, that is used by all of the different services that completely, clearly outlaws torture. So we think for the military, in particular, that can't -- that's a line that can't be crossed.

(CROSSTALK)

KING: So was the line crossed in the Bush administration?

Was the line crossed? Did you do things which you fundamentally thought were wrong and immoral?

PETRAEUS: We certainly did not. Now, there were some incidents that did, and we learned some very hard lessons from Abu Ghraib and other cases. And we believe that we took corrective measures in the wake of that. And that is very, very important.

But it is hugely significant to us to live the values that we hold so dear and that we have fought so hard to protect over the years.

KING: I want to talk through a timeline of Iraq. The American people came to know General David Petraeus as the general who turned around -- and many would accept that statement -- a flawed strategy in Iraq.

I want to go through a timeline. Then-state senator Barack Obama, way back in 2002, said he thought the Iraq war was a fundamental mistake and he opposed it.

And then, as a senator of the United States and a candidate for president, he spoke out quite passionately against the surge strategy. Let's listen.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: The responsible course of action for the United States, for Iraq and for our troops is to oppose this reckless escalation and to pursue a new policy.

(END VIDEO CLIP)

KING: As president of the United States, shortly after taking office, he was unveiling new Iraq strategy. He called you "brilliant," General Petraeus, and he said this. It sounds a little different.

(BEGIN VIDEO CLIP)

OBAMA: Under tough circumstances, the men and women of the United States military had served with honor and succeeded beyond any expectation.

(END VIDEO CLIP)

KING: And then recently, in a 60 minutes interview, he, almost under his breath, said something to the effect of who knew Iraq would be the least of his problems as president of the United States.

He has never publicly -- President Obama has never publicly said, you know what, I was wrong; the surge was the right strategy. Has he told you that?

PETRAEUS: Well, we haven't actually talked about the surge. What we talked about is looking forward. And I think it's very important, actually, at points like this, to take the rearview mirrors off the bus, as we say, and look -- look ahead. That has been the focus.

I think you know that, on the day after the inauguration, the first full day in office, the president sat down with the commander from Iraq by video teleconference, myself in the situation room, the chairman, the secretary of defense, the other members of the national security team and discussed Iraq.

And that's what launched the review of the Iraq policy that eventually culminated in the address at Camp Lejeune, something that General Odierno, Ambassador Crocker and I support, something to which we had substantial input, and we think quite a pragmatic and proper, prudent way forward.

KING: Ambassador Holbrooke, you were a fierce critic of the Bush approach in Iraq. In the political debate about it here in Washington, though, many Democrats will tell you privately, you know what, I was wrong; the surge worked because of David Petraeus and that, you know, President Bush, in the end, and John McCain and Joe Lieberman were right.

Why is that such a hard thing for Democrats to say?

HOLBROOKE: I -- I'm not going to partisanize the discussion here. But I do want to say something about Dave Petraeus, whom I did not know until about three months ago and then fate and destiny put us together as counterparts.

I think the nation owes General Petraeus a debt of gratitude for what he's achieved in Iraq. And I am confident, absolutely confident, having known the entire United States military chain of command from General Westmoreland in Vietnam on, that we now have the best team we possibly could have on the ground, from Admiral Mullen to General Petraeus to the command in Afghanistan.

And I'm proud to work with them. And we all ought to acknowledge what has been achieved.

Now, in regard to the previous comment that you played, by the former vice president of the United States, I need to say -- and I hope I can do this in a spirit of bipartisanship and nonbipartisanship, that I don't have a clue what he's talking about.

We are treating Afghanistan and Pakistan as a single theater. We are going to address it in an integrated way. We are going to give it more resources. And that is where the people planning the next attack on the United States or on our European allies are certainly doing it. So I just do not understand what his comments were referenced to.

KING: All right. We will leave it there. Ambassador Holbrooke being very diplomatic. We'll catch you next campaign season. We'll see if that stays the same.

(LAUGHTER) Ambassador Holbrooke, General Petraeus, on a serious note, you both have very difficult work in the days and weeks ahead and we certainly, as Americans, we wish you very well in that work.

Good luck to both of you. And thanks for coming in this morning.

When we come back, the White House is promising all the help Fargo, North Dakota, needs and other areas also threatened by the Red River. We'll go straight to the scene and talk to the state's senior senator, Kent Conrad. Stay with us.

(COMMERCIAL BREAK)

KING: I'm John King, and this is STATE OF THE UNION. Here are some stories breaking this Sunday morning. Kansas is digging out from a major snow storm. More than two feet of snow buried parts of the state this weekend. Tens of thousands of people still without power. Two deaths are being blamed on the storm. And the governor has declared disaster emergencies in dozens of Kansas counties.

Tens of thousands of protesters marching in Berlin and other major cities across Europe, they are demanding more jobs, environmental accountability, and an end to poverty and inequality. These are the first of what is expected to be six days of protests and demonstrations all targeting this week's G-20 summit in London on the global economic crisis.

Fargo, North Dakota, remains on edge. Overnight the slowly receding Red River briefly breached a dike, sending water into a school campus. It was contained though in an enormous effort to save the city. The city will resume sandbagging today. Two people have died in the flooding.

That and much, much more ahead on STATE OF THE UNION after this quick break.

(COMMERCIAL BREAK)

KING: Welcome back to STATE OF THE UNION. President Obama went to Capitol Hill this past week to hard sell his budget to lawmakers. Most telling about the trip, his meetings were with fellow Democrats. The president insists his proposal to spend on health care and energy reform are vital to the country's economic recovery.

But Republicans say it's a return of tax and spend liberalism. And even some Democrats say the Obama agenda costs more than the country can afford right now. Navigating those tough policy and political choices is the task of two powerful Democrats who lead the budget committees.

And both men are with us this morning. Senator Kent Conrad joins us from his home state of North Dakota. Here in the studio, Democratic Congressman John Spratt of North Carolina (sic).

Gentlemen, I want to get to the economy and the budget in just a minute. But I want to first hold up the Bismarck Tribune right here in the studio: "Hope Rises in Fargo," and I say that and then we'll go back to that live picture right there. This is the Red River you're seeing on your screen from the Minnesota side.

But, Senator Conrad, you are home because of this crisis in your state, there seems to be cautious optimism this morning. Take a minute to give us the latest.

CONRAD: Well, John, this is a heroic effort. Tens of thousands of volunteers, an all-out fight to contain this river that is now at the highest level ever in recorded history, and it went down a little bit overnight but we expect a second crest. And there is a tremendous volume of water out there that still is heading toward the river.

So we're cautiously optimistic, but we also understand this fight is far from over.

KING: All right. Senator, we will keep tracking that throughout the day and keep in touch with you. But I want to move now to the monumental task both of you gentlemen face, and that is getting the budget through the Congress.

I want to have the conversation this morning not as three guys who work in Washington, but as three guys who, like other Americans sitting around their kitchen table maybe watching this morning are having a hard time making the numbers add up.

And families are saying, can we afford that summer vacation? Maybe we need a new car, can we afford it? So when I look at your budget proposals, I want you to help me through this in the context.

So let me start with you, Chairman Spratt, is that many would say, look, we know you and Congress don't like these financial bailouts. Nobody likes spending billions of dollars that go to the big banks. But the president, in his budget, said, I'm probably going to need $250 billion down the road, so I'm going to be honest and I'm going to put it in my budget.

You have decided in your budget to take that out. Now some say that is a gimmick so that you get a lower deficit number than the president, but you know you're going to have to spend that money.

REP. JOHN SPRATT (D-SC), CHAIRMAN, BUDGET COMMITTEE: Well, we don't know it and we're essentially saying, come make your case, the burden of persuasion is upon the president. Nobody likes funding these things. We would like to see more definition than we got in the last packages. So this is our way of exercising a little leverage over it.

If it's needed, we will be there to support it. But let's not create a presumption it is needed and see if we can't make the most of what's in circulation already.

KING: And, Senator, you do the same in your budget.

KING: But there's another thing, especially given where you are today, that has many people rolling their eyes, saying, you know, Kent Conrad is trying to have a lower deficit number but he took out the contingency funding for natural disasters in his Senate budget proposal. And in the House, I believe they cut it in half.

You're sitting here today watching your city, your state at such a risk and there's no money in your budget for a contingency plan that would be used in just these situations.

CONRAD: Yes, that's because we have never funded disasters going forward because nobody knows what the disasters might be. The president, for the first time, put in his budget -- in a 10-year budget, an estimate of what disasters might be, but the Congressional Budget Office would not score it because they said it was too speculative, and so we left it out for that reason.

The Congressional Budget Office simply couldn't determine whether those estimates had any validity or not.

KING: Well, as you know, many would say you -- that helps you get to a lower deficit number.

But let's talk about a bigger challenge. The president says we must reform health care and we must do it this year. He had about $650 billion in a reserve fund in his budget. You have both decided that, yes, you want to deal with health care, both of your budgets say we will deal with health care, but it leaves the decision about financing it down the road.

Your leader, Senator Conrad, Senator Reid said this past week, you know, with the cap and trade and some energy taxes, we will get about $650 billion and that's about what we need as a down payment on health care reform.

Are you willing to pay for health care reform through higher energy taxes?

CONRAD: Well, that's an option. But, look, what we have done is provide for a deficit-neutral reserve fund. The administration has said all along they want to do major health care reform and we agree with them entirely. They are exactly right.

And they have said they would pay for it over a period of time, and that is what we've provided for. We've given maximum opportunity for the committees of jurisdiction, maximum flexibility to write major health care reform and to pay for it.

SPRATT: Could I add to that?

KING: Please.

SPRATT: With respect to the health care trust fund, the reserve fund, it is paid for by identified items in the president's budget, not necessarily items we accept or (INAUDIBLE). We don't get down to that level of specificity. But he provides $634 billion, half of which are savings in existing Medicare and Medicaid programs, the other half of which comes from limiting the itemization of deductibles... KING: Mortgage deduction and charitable deductions...

SPRATT: That is true.

KING: ... more affluent Americans. Are you prepared to do that?

SPRATT: Well, we didn't put it in our budget resolution, so we think it's an open debate and a lot of people are not prepared to go that far. But...

KING: If you're not prepared to go that far though, and, Senator Conrad, you come in first, where will the money come from? Are you going -- you would have to find revenue elsewhere, which means higher taxes elsewhere.

CONRAD: You know, I think part of this is there is a misunderstanding of what the actual powers of the Budget Committee are. We don't have the power to tell the committees of jurisdiction how to specifically spend the money. We tell them how much money they have to spend.

We don't have the power to tell the Finance and Ways and Means Committee how to raise the money. We have the authority to tell them how much money to raise. So it is not within our power to tell them specifically how to do it. We do have the responsibility to give them a number to hit and that is what we have done.

KING: You're both trying. You're both trying. Both of you made your names in the Congress as deficit hawks, among the Democrats years ago who were willing to stand up to your own party and say, look, we're spending too much money, we have to balance the budget.

I want to get a sense from each of you is how much do you feel you're maybe having to compromise your hard-fought principles to be loyal to this president who has a very, very ambitious agenda.

I know, Mr. -- Chairman Spratt, you have said just last week, we will try to get it all done the first year, but I'm not sure we can.

SPRATT: Well, wait, he has only been in office as president a few months. And for the most part what we're looking at, these horrendous deficits, is something that is carried over from the previous administration. KING: But they get bigger under his. And I want to...

SPRATT: They do, indeed.

KING: ... put a picture up on the screen as we continue the conversation. Senator Judd Gregg, your friend, Senator Conrad, had an event last week in which he noted that the projected deficits under President Obama would be more than the 43 presidents in 232 years before him. Is that a legacy you want the Democratic Party to inherit?

CONRAD: Well, we've already inherited it. Unfortunately, we inherited it from the previous administration, a doubling of the debt, a tripling of foreign holdings of U.S. debt, and an economy in shambles.

And so when that happens, obviously, deficits and debt go up dramatically in the short term. The great challenge here is to put us on a more sustainable path. And, look, in fairness to the Obama administration, they made their estimates of the revenue available to us three months ago.

In the intervening period, those deficits have eroded and, as a result, we have had to make changes in the president's proposal to get the deficit on a track that will reduce it by two-thirds over the next five years.

So you ask initially, have we compromised with the president and have we compromised our principles being concerned about debt? Absolutely not. The president said to us, look, we've got to reduce our dependence on foreign energy, absolutely critical.

We have got to focus on excellence in education. We've got to have major health care reform because that is the 800-pound gorilla. That is the thing that can swamp the boat fiscally for the United States. So those provisions are in this budget as well as reducing the deficit by two-thirds over five years, getting us back on a better course.

KING: Let me ask you both in closing, we're almost out of time, a more political question. You both survived 1994. And you make the case about what you inherited from the Bush administration. But life and politics are often not fair.

You know what is going to happen in two years, President Obama is not on the ballot for almost four years, but the Republicans are already gearing up for the -- this is what happened when you elected Bill Clinton, you got big government, tax and spend liberalism, I know you disagree with the charge, but, sir, are you nervous for your party in the midterm elections going forward? Because the deficit reduction that Senator Conrad talks about that you promise comes down the road, it doesn't come in those first two years.

SPRATT: Well, we have to understand why that is and also acknowledge that both Senator Conrad and I are moving the budget towards balance within a reasonable period of time. From about trillion-8, thereabouts, to mid 500 billion in four to five years' time.

That is not an acceptable number. I want to see the glide path of deficit reduction continue onward for the second five years, but that is a pretty ambitious target and one we think we can hit partly because what is swelling the deficit now are non-recurring items such as the TARP, such as the cost of taking over Fannie Mae and Freddie Mac.

These things, we hope, won't occur -- recur in 2009 and 2010. And that gives us an opportunity to drive this budget down to an acceptable, for the time being, debt level.

KING: Gentlemen, I'm sorry, we're out of time this morning. We'll invite you both back, it's a very important issue but we did want to take some time to deal with the flood as well.

Senator Conrad, good luck to you and the people of North Dakota as you deal with this crisis. We hope everything turns out for the best.

CONRAD: Thank you.

KING: Chairman Spratt, thank you so much for joining us.

SPRATT: Thank you.

KING: Later in the program we will hear from the Republican leader in the Senate, Mitch McConnell of Kentucky.

Straight ahead, though, we'll take you to St. Louis, Missouri, one of many cities where many transit cuts are leaving residents stranded and angry.

(COMMERCIAL BREAK)

KING: In our travels this week, we wanted to look at a problem that is facing many communities from coast to coast. Look up at the map here. These little dots are communities that are facing cutbacks in mass transit.

If it's a yellow dot, it means service cuts. If it's a purple cut, service cuts and fare increases. You also see in the light blue, that means job losses as well. It is happening from coast to coast. One place we wanted to go take a look this time is out in the city of St. Louis where bus service and rail service are being slashed because of a tough economy and a lack of money.

(BEGIN VIDEOTAPE)

KING (voice-over): Stuart Falk is first up the lift. Wife, Diane (ph), next. Strapped in for a 45-minute, three-day-a-week commute.

UNIDENTIFIED MALE: All right. Eight dollars, thank you.

STUART FALK, SUBURBAN ST. LOUIS RESIDENT: No problem.

KING: That takes them to the gym and the community theater group. It is their lifeline, and it is being eliminated, effective Monday.

S. FALK: To be in prison. That's what it's going to feel like. It's going to feel like being punished for something we didn't do, being held back from the things we love, and at no fault of our own. It's going to be suffocating.

JEAN MCPHERSON, STUDENT: A lot of people are going to be in a bad situation.

KING: For 20-year-old Jean McPherson, Monday morning means horrible choices as she juggles work, an infant, and going back to school to get her high school diploma.

MCPHERSON: I'm not going to be able to get to my destination. So I might have end to up losing my job or not being able to take my daughter to day care.

KING: Money is short, so is her patience. MCPHERSON: So I'm trying to get a car, but a lot of people in St. Louis, you know, they can't afford it, especially with the recession that we're in. You can't afford a car, so that's why you use public transportation.

KING: Metro faces a more than $50 million budget gap, two dozen bus routes are being eliminated, others shortened or put on less frequent schedules. Light rail is also being cut back, leaving riders in the working class community surrounding St. Louis like Darren Berryl, asking, why me?

DARREN BERRYL, COMMUTER: Most definitely the little guy does get screwed in the deal.

KING (on camera): How will you get around losing this bus route, which is the direct route?

BERRYL: I really don't know yet. I mean, I really haven't come up with a plan.

KING (voice-over): The funding gap has local roots. St. Louis County voters rejected a modest tax hike to help the metro system. Local officials like County Executive Charlie Dooley thought it would pass, but say voters suddenly got stingy just before the November election as the stock market tumbled and Washington bailed out big financial firms.

CHARLIE DOOLEY, ST. LOUIS COUNTY EXECUTIVE: This entire community is going to be impacted and I don't think we realized it at the time that we had this vote. It's about jobs. It's always about jobs. And if you don't have public transportation, how do you create jobs, how do you attract businesses to move to St. Louis to improve our workforce?

KING: To Dooley, the metro shortfall is a perfect use of some of the $150 billion in transportation spending called for the in the Obama stimulus plan.

DOOLEY: We asked about it, they told us we can't do it.

KING: Mass transit slice can be used to buy new buses or to build new rail lines, but it cannot be used for operational expenses, like keeping existing routes in service.

DOOLEY: No, I don't think that's right. Of course that's not right. I mean, at the end of the day, it's about creating jobs and opportunity. That's what public transportation is.

UNIDENTIFIED MALE: It comes down to money.

KING: Sixteen years experience protects John Crossland (ph) from the 500 jobs metro is slashing along with its services.

(on camera): That has got to be tough.

UNIDENTIFIED MALE: It is. KING: In a bad economy (INAUDIBLE).

UNIDENTIFIED MALE: Yes, it does (INAUDIBLE).

KING: The Falks, confined to wheelchairs because of multiple sclerosis, say they worry about those jobs.

DIANE FALK, SUBURBAN ST. LOUIS RESIDENT: And that doesn't seem like what Obama wants.

KING: As much as losing their link to the city and the activities that ease their struggles.

S. FALK: It shouldn't be this way. I never realized before how delicate our lives were.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

KING: I'm John King and this is our STATE OF THE UNION report for this Sunday, March 29th, 2009. In Fargo, North Dakota, they're checking for leaks and crossing their fingers, but it appears they're winning their desperate battle against the Red River. We'll bring you the latest, as it happens.

President Obama is sending more troops to Afghanistan and vowing to defeat al Qaeda and the Taliban. The president is out explaining his decision this morning. We'll get analysis from the best political team on television.

Are some reporters taking their assignments from the White House press secretary? One veteran Republican strategist says yes. Howie Kurtz will put the tough questions to top Bush White House adviser, Ed Gillespie. That's all ahead in this hour of STATE OF THE UNION.

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