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Anderson Cooper 360 Degrees

Special Report: Extreme Challenges; Breaking News on North Korean Missile Tests

Aired May 25, 2009 - 22:00   ET

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

ANNOUNCER: This is CNN Breaking News.

RANDI KAYE, CNN ANCHOR: I'm Randi Kaye at CNN Center in New York.

We will go to our A.C. 360 special, "Extreme Challenges," in a few minutes, but, first, we want to bring you breaking news.

We're hearing reports that North Korea is preparing to fire more short-range missiles. Reports are that this next round of missile tests will be fired from its West Coast.

The North Korean government has issued a ban for ships in the sea off its south Pyongyang Province. This word of more missile tests comes right on the heels of that country's second underground test of a nuclear device, an act the United Nations Security Council quickly and unanimously condemned today in an emergency session.

Let's get more now from CNN correspondent Sohn Jie-Ae. She's live in Seoul, South Korea.

Jie-Ae, what can you tell me about these short-range missiles that North Korea is now threatening to launch?

SOHN JIE-AE, CNN CORRESPONDENT: Well, as of yet, Randi, we're not getting any confirmation from South Korea's defense ministry.

But the South Korean Yonhap News Agency, a semi-government news agency, is reporting that there are signs that North Korea is getting ready to fire some short-range missiles off the west coast of the Korean Peninsula. Now, this is a different coast from the east coast firings that they did yesterday on the same day that it also test -- tested a nuclear device.

Now, they are saying that this -- they're not actually being clear about what the signs are, but there are signs, of course, that they have -- they have told ships to stay clear of the water. And if we take the last missile, the long-range missile firing that North Korea did in April, the signs then were that there was satellite imagery that told people outside North Korea that there was a missile loaded onto a launch pad.

So, there may be signs along those lines that are also coming from North Korea -- Randi.

KAYE: And this would not be an underground test, like we saw yesterday. These would be surface-to-air missiles.

Why do you think North Korea is doing this?

SOHN: It is difficult to say exactly why North Korea does a lot of these things.

But we have talked to some analysts, and they say it is almost a natural course for North Korea. North Korea wants to keep the spotlight on itself. North Korea, as -- as yesterday, tested a nuclear device, showing the world that it has the nuclear capabilities.

It also is now testing missiles. It is showing the world that not only is it a nuclear power, but it also has delivery capabilities. And, so it wants the -- the world to know that North Korea is a power to be dealt with, and it has to be dealt with now -- Randi.

KAYE: All right, Sohn Jie-Ae, thank you for your insight, live for us from South Korea.

Let's take a step back now for a moment and give you the short version of how we got here. It was back in April of 2003 that North Korea declared it had nuclear weapons. Then, in October 2006, North Korea successfully tested a nuclear weapon underground. A year later, February 2007, North Korea agreed to close its main nuclear reactor in an exchange for an aid package worth $400 million.

Later that year, in September, at the six-party talks, it signed an agreement to start disabling its nuclear facilities, but, just two months later, talks broke down after North Korea refused to give inspectors access to suspected nuclear sites.

Then, just last month, it launched a nuclear missile, which it said was a peaceful launch of a satellite, and, just yesterday, as you know, the underground test blast there, and now this warning that it is preparing to launch short-range missiles.

So, the question becomes, why? What is North Korea's motivation here?

Joining me now on the phone, Mike Chinoy from the Pacific Council on International Policy. He's a former CNN correspondent and author of "Meltdown: The Inside Story of the North Korean Nuclear Crisis."

Mike, good to have you with us.

First, North Korea conducts an underground nuclear test. Now comes word that it's -- it's going to test fire short-range missiles. What exactly is going on here?

MIKE CHINOY, PACIFIC COUNCIL ON INTERNATIONAL POLICY: I think there are a couple of important factors at work.

The North Koreans were very frustrated last year at what they saw as the United States reneging on a deal that was reached at the time. The reason was the Bush administration's demand that the North agree to accept to put into intrusive measures to verify the status of their nuclear program, without what the North Koreans felt were corresponding concessions from Washington.

So, that left the diplomatic process -- process deadlocked. And into this deadlock, we had the -- Kim Jong Il, the North Korean leader, suffering a stroke. And that appears to have set in motion a very complicated succession process in North Korea.

And, so, part of this is the North Koreans kind of circling the wagons while they sort out the transition to Kim Jong Il's son. And, in this transition, the North Korean military is playing a key role. And it's always been much more hard-line than the diplomats. And, so, part of this is bolstering the standing in the regime, and part of it is projecting strength to the rest of the world, so that the people, the North Koreans, feel other countries won't press them.

And, also, if diplomacy ever get started again, the North will be operating from a position of strength.

KAYE: So, you think North Korea is just saber-rattling here?

CHINOY: Well, I think this is -- I think this is for real, but I think the -- I -- I -- the North Koreans always have used these very dramatic gestures for political effect, as well as for -- for military effect here.

And I think it's designed to bolster the North Korean regime and leadership, at a time of transition and domestic uncertainty. It's designed to tell the rest of the world: Don't think that, because we're undergoing this transition, you can mess with us.

And it's designed, so that, if and when you get dialogue going again -- and I still think the North Koreans are ultimately interested in some kind of diplomatic accommodation with the United States...

KAYE: Yes, that's what I was going to ask you, because...

(CROSSTALK)

CHINOY: ... be dealing from strength, because it has nukes.

KAYE: ... we see -- we see the reports on these launches and these tests, and -- and, you know, it leaves a lot of folks wondering, does North Korea want to start a war, or is it looking to have any type of relationship with the United States?

CHINOY: I don't think the North Koreans want to start a war.

I think the intention here is -- is to use these for essentially diplomatic effect, the old saying about war is politics by other means. I think the -- the North is interested in flexing its muscles, in strengthening its own position, especially vis-a-vis the United States.

And their playbook has traditionally been brinksmanship, ratchet up the tension, and use that as a prelude for some kind of diplomatic engagement.

The problem now is that this has been one series of provocations after another. The response is likely to be moves towards sanctions. That's what the U.S. is talking about. But, unfortunately, the track record shows that, when you try and pressure North Korean and impose sanctions, more often than not, it has the opposite of the intended effect.

KAYE: Absolutely.

CHINOY: They just dig in their heels and get tougher.

KAYE: And we -- we are seeing the effects of that right now.

Mike Chinoy, the author of "Meltdown: The Inside Story of the North Korean Nuclear Crisis" -- Mike, thanks so much for your time tonight.

Earlier today, right after learning North Korea tested a nuclear bomb underground, its second such test of a nuclear device, President Barack Obama promised a strong response from the United States.

Now, with word that North Korea also plans to launch more short- range missiles, the world awaits that response.

More now from foreign affairs correspondent Jill Dougherty.

(BEGIN VIDEOTAPE)

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT (voice-over): North Korean TV trumpets what it calls its most powerful nuclear test so far. The political shock waves reverberating at the White House.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: North Korea's nuclear and ballistic missile programs pose a great threat to the peace and security of the world, and I strongly condemn their reckless action.

DOUGHERTY: As candidate, Barack Obama charged President Bush made things worse by refusing to talk with North Korea.

(BEGIN VIDEO CLIP, OCTOBER 7, 2008)

OBAMA: North Korea quadrupled its nuclear capability.

We've got to try to have talks, understanding that we're not taking military options off the table.

(END VIDEO CLIP)

DOUGHERTY: , But on Mr. Obama's watch, North Korea has launched a long-range ballistic missile, angrily pulled out of talks, kicked out international inspectors, and restarted plutonium enrichment. Secretary of State Hillary Clinton talks tough.

HILLARY CLINTON, U.S. SECRETARY OF STATE: There will be consequences.

DOUGHERTY: But not only did the administration fail to get the U.N. to condemn North Korea, experts on North Korea warned this test pushes the North closer to having a nuclear weapon that could be launched on a ballistic missile. The president's top adviser on weapons of mass destruction thinks that North Korea is rejecting talks because it now sees itself as part of the so-called nuclear club.

GARY SAMORE, PRESIDENTIAL ADVISER ON ARMS CONTROL: I think the North Koreans would like to be recognized or accepted as a nuclear weapons state, and we're not going to do that. We've made that very clear.

(END VIDEOTAPE)

KAYE: Once again, that was CNN's Jill Dougherty with that report.

She joins me now on the phone, live from Washington.

Jill, what North Korea is doing here is highly provocative. So, what can the U.S. do about this threat at this time?

DOUGHERTY: Well, what it's doing right now, Randi -- in fact, we just got a -- a briefing from the White House, some background on exactly what the president has been up to in the last few hours.

But they're -- it's a full-court diplomatic press. They said that -- that President Obama has been on the phone. He was talking both with the South Korean president, Lee Myung-Bak, and the Japanese prime minister, Taro Aso.

With both of them, the message, essentially, was they agreed that it's, as they called it, a reckless violation of international law and that it compels action in response.

So, what are they going to do? Well, they're going to work on what they call a strong U.N. Security Council resolution with concrete measures -- they're not saying exactly which -- but concrete measures to curtail North Korea's nuclear and missile activities.

And, significantly, President Obama assured both leaders, South Korea and the Japanese prime minister, of the unequivocal commitment of the United States to the defense of both countries. And they -- finally, Randi, they mentioned that they will be intensifying cooperation with China and Russia.

So, you do have all of the parties involved in those six-party talks getting together with what they hope will be a coordinated and very strong action in the United Nations.

KAYE: Certainly needed at this time.

Jill Dougherty, thank you.

Once again, breaking news: reports that North Korea is preparing to fire more short-range missiles, this time from its west coast. Could happen today or tomorrow, according to reports -- this on the same day we learned of that country's second underground test explosion of a nuclear device.

Be sure to stay with CNN for the very latest.

A.C. 360's "Extreme Challenges" continues right after this break.

(COMMERCIAL BREAK)

ANDERSON COOPER, HOST, "ANDERSON COOPER 360": We're back, talking about the extreme challenges facing President Obama in his next 100 days, some of them unique to his administration.

Others have troubled American presidents as far back as Harry Truman -- Israel, for one. President Obama entered office firmly committed to his two-state solution, Israel and Palestine side by side.

His Israeli counterpart, on the other hand, does not share that commitment, nor does Hamas, which controls Gaza.

Then there's Iran's nuclear program, which poses a dire threat to Israel. Listen.

(BEGIN VIDEO CLIP)

OBAMA: I have said from the outset that when it comes to my policies towards Israel and the Middle East, that Israel's security is paramount. And I repeated that to Prime Minister Netanyahu.

It is in U.S. national security interests to assure that Israel's security as an independent Jewish state is maintained.

(END VIDEO CLIP)

COOPER: President Obama with the new Israeli Prime Minister Benjamin Netanyahu at the White House. Back with our panel, David Gergen, Fareed Zakaria, Christiane Amanpour, and Michael Ware.

Fareed, what is U.S. policy -- how much difference is there between President Obama's policy and where Israel is right now?

FAREED ZAKARIA, CNN WORLD AFFAIRS ANALYST: There's a big difference in the sense that, first of all, I don't think President Obama wants the agenda to be entirely about Iran. I think he wants to approach the Israeli/Palestinian issue centrally. He's appointed a very high-level negotiator.

Clearly he hopes to get some movement there, because, clearly, he believes that that could be a kind of key that unlocks U.S. relations with the Islamic world, the Arab world more broadly.

Prime Minister Netanyahu, on the other hand, wants to speak with about Iran, Iran, Iran, and the threat from Iran. So they see things differently. I also think there is a broader structural difference. I think, as you put it, Iran does pose a security threat to Israel. We can debate how extreme it is.

Iran does not pose an immediate security threat to American security. It poses a threat to American interests in the region. Maybe it's making a play for dominance, which would displace the United States. But it's a second-order problem.

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: It seemed that Prime Minister Netanyahu got his agenda to be successful at least in the public iterations of the two leaders, because what President Obama didn't get him to say is the two-state solution or to stop the settlements.

He, in fact, did say is what we're going to give a limit to our diplomacy on Iran. That's the first time we've heard President Obama say that.

COOPER: Israel is concerned that too long of a negotiation with Iran would just allow Iran essentially to stall while they build up a nuclear program.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Exactly. Well, Israel feels that they have to base their security on the worst-case scenario. In other words, how soon could Iran possibly get nuclear capability? And they think that's sometime next year.

So for them, this is the looming deadline, and it puts a lot of pressure on President Obama in terms of timeframe, because he does not want Israel to act on its own against Iran.

AMANPOUR: You see this map? Iran. Every major issue that the United States has right now involves Iran. There's Afghanistan, Pakistan, Iraq. There's the Persian Gulf. There's the Arab Sunni neighbors.

And it was many, many analysts that said -- and President Obama essentially had a referendum on this in his election -- "I am going to reach out and try diplomacy to engage adversaries." The American people didn't oppose that. They voted him into office.

And many, many people say that unless you really do engage with Iran, not just on one issue -- a very important issue -- but on a whole new set of strategic relationships and objectives, it's going to be very difficult to either secure Israel or Afghanistan, Pakistan, Iraq.

COOPER: What about Iraq? Is the United States going to be able to withdraw on the timetable that they have now put forward?

MICHAEL WARE, CNN CORRESPONDENT: In many ways, they have little choice. I mean, the deal is signed and sealed.

COOPER: But you already hear from some commanders on the ground talking about extending it in some cities. WARE: Yes. Mosul is something that they're looking at there. But even there, you're seeing this ever-increasingly concentrated Iraqi government, which is evolving around the orbit of the prime minister, Nouri al-Maliki, who day by day is consolidating further and further power.

He is not budging. Even in Mosul, which is the last holdout, urban holdout of Al Qaeda, despite of at least two major offenses to wipe them out from that city, he's saying no. June 30 is the day. There's no room for negotiation on this.

COOPER: Can they provide for the security themselves?

WARE: No.

COOPER: The Iraqi forces?

WARE: No. But there's so many interests afoot here that there's certain things that the Iraqi factions are prepared to tolerate on the security front to make gains in other areas, principally politically and elsewhere.

COOPER: So a certain number of deaths, a certain number of suicide bombings?

WARE: It's a gamble. But, don't forget, not only are there common enemies like, say, Al Qaeda, but there's enemies within the government. Don't forget, this is a deeply factionalized government.

And we're not just talking about political factions that you'll see warring in Congress or on the Hill. We're talking about people with militias. We're talking about armed forces...

COOPER: So what happens when U.S. troops...

ZAKARIA: I think the likely scenario -- first of all, Michael is exactly right. We have to be out. There's an agreement with the government of Iraq, you know. We have to be down to zero by June. So it's going to happen, with maybe a few exceptions, Mosul being perhaps the principal one.

I think what's going to happen is there will be a resumption of some violence. There will be flare-ups, but you will not have the resumption of the civil war between the Sunnis and the Shia.

That is the bet that the U.S. government is making. That is the bet that Prime Minister Maliki is making, that the Sunnis, while disgruntled, feel disempowered, will not return to a full-scale civil war, and thus you will be able to get by with some substantial withdrawal.

AMANPOUR: Yes there's been the highest number of Iraqis killed, you know, in many, many years just this year alone.

WARE: There was a spike. However, I think Fareed is right. There is a delicate scenario in place that bodes some hope for the future.

However, it is so precarious. The Mahdi army is still in place. The commanders are in sanctuary in Iran and in Syria. The foot soldiers are still there. The weapons are at home. They're not on the streets.

The same with the Sunnis -- they have not been integrated into the Iraqi government as promised. And in some areas, they're not being paid by the Iraqi government.

GERGEN: Yes, but to look at it from the president's point of view and what he faces -- his ultimate challenge is going to be can he pull out and not have Iraq fall apart in some fashion, because if that happens, he's going to be the president who lost Iraq? And that would be devastating for him politically.

COOPER: Has America's role -- image in the world changed already?

AMANPOUR: Yes. The page has been changed. The first 100 days, especially the first trip overseas, did that.

And now the second 100 days, in fact, the rest of the administration will be determined by the policies. And President Obama was elected with a huge mandate to take on some very bold new initiatives.

ZAKARIA: What we've been talking about have been the crises, the failures, the hot spots, the places you've got to send troops. But there's actually a much broader agenda in foreign policy.

At the end of the day, some of these areas are peripheral parts of the world -- a strategic relationship with China. We need China to continue to buy U.S. debt every day. The strategic relationship with Russia. How do you integrate India into this new international order?

Those are issues that are going to require presidential attention. If the president isn't personally engaged with China, you are not going to have any breakthroughs on energy, on environment.

COOPER: You're totally stressing me out.

(LAUGHTER)

It gets worse and worse. The more we talk.

GERGEN: This is tough.

COOPER: The number of things on his plate is truly extraordinary.

ZAKARIA: And in addition to all the domestic problems.

COOPER: We're going to have more on that up next.

Two simple words that dwarf all other extreme challenges facing president Obama, two words that will almost certainly define his presidency: "the economy."

We will be right back.

(COMMERCIAL BREAK)

COOPER: By now, you have heard all the catchphrases: "green shoots," "glimmers of hope," "signs of improvement." Yet, you probably also know someone out of work or worried about losing a job.

It is a mixed picture out there, to be sure, and the Obama administration seems to be taking care not to seem too high on the economy or too down. Listen.

(BEGIN VIDEO CLIP)

OBAMA: Now is not a time for small planners. It's not a time to pause or to be passive or to wait around for our problems to somehow fix themselves.

Now's the time to put a new foundation for growth in place to rebuild our economy, to retrain our work force, and reequip the American people.

(END VIDEO CLIP)

Well, his challenge, maintaining the sense that the worst is over while dealing with the fact of high unemployment, possibly for years.

For more joining me is Fareed Zakaria and David Gergen, CNN's Candy Crowley and Ali Velshi.

Ali, have we reached bottom? Have we seen the bottom?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Well, it depends how you want to look at a bottom. We may have reached a bottom when it comes to markets. We've seen a real upswing since about the beginning of March.

But in terms of housing prices, no. There's nobody who doesn't expect housing prices to go lower. In terms of jobs, we expect the unemployment rate to go higher, and we expect to lose more jobs.

But in terms of the actual recession, the aggregate slowing of growth and negative growth, we probably are very close to a bottom and that, probably sometime this summer, late summer, perhaps, at the latest, some are saying by the end of 2009. It's just not like a light switch that turns on and all of a sudden things are good.

COOPER: In terms of the economy, what is the biggest struggle, the biggest challenge for the president?

CANDY CROWLEY, CNN SENIOR POLITICAL ANALYST: Holding on to his popularity. Really, I mean, what is...

COOPER: Politically. CROWLEY: ... what is fueling this guy at the moment is the fact that people have taken a leap of faith. And with that leap of faith that he's going to fix things has come some fairly good consumer buying, which, as we all know, fuels the economy.

So as long as people continue to have confidence that this president is beginning to move things around, then I think he is -- everybody -- you know, he's on board and he's headed in the right direction.

ZAKARIA: I think that the president gets fairly substantially good grades for the crisis management of the economy. The credit has unfrozen. The financial system is in much better shape. He didn't under-react, but he also didn't overreact.

Remember, there were a lot of calls for nationalization, wholesale takeover of the banks. He steered a middle course, which has proved, at least so far, to be quite effective.

The great challenge, I think, outside of the political one economically is what will this recovery look like? We're in new terrain here. It is quite conceivable that we have a recovery, that Ali will be completely right, but that we won't go back to 3 percent, 3. 5 percent growth, which the United States has been used to for the last 20 years, but more like 1 percent, 1.5 percent growth.

Why? Because we're laden with debt as a country. The consumer is maxed out. States, local governments are maxed out. The federal government is maxed out. It's going to be running budget deficits in the 10 percent to 15 percent of GDP range, highest since World War II.

So that's not an environment of strong growth.

GERGEN: I agree with that. I think Fareed's captured it exactly.

And for the president, it's both a political and an economic challenge, because in past recessions, there's usually been a driver to get the economy moving again, a driving force. It's usually been consumers.

And consumers come back into the market, they start buying again. The wheels start turning. Jobs start appearing again. Houses and prices go up. Everything else starts to work out.

Here we've got consumers who are in retreat. You know, their housing values have gone way down. they have lost their 401(k).

So what are they doing? They're saving as much money as they can to rebuild. I think most Americans had assumed we would get back to normal.

COOPER: Right.

GERGEN: We would get back to where we were within a couple of years. And what we're talking about, what Fareed is talking about... COOPER: The game has changed.

GERGEN: ... is that we're -- there's no normal. There's no -- there's nothing...

(CROSSTALK)

CROWLEY: I think they still assume that.

GERGEN: Yes. You still think there's a -- yes, go ahead.

CROWLEY: There is still that assumption that we're going to get back to, you know, the normal lifestyle. And when people look and say, OK, we've spent how many trillions of dollars, and now we've got this? Somebody's going to have to pay for it.

VELSHI: And our lifestyle is going to be different.

COOPER: What about that fear, that we have just spent ourselves into a hole? I mean, we have this huge deficits.

VELSHI: I think that it's only a good thing that everybody's finally fearful about this, because the reality of being in too much debt has been with us for some time. We're just now in a lot too much debt.

And the good news is now Americans have heard that enough and they're getting annoyed about it. Maybe not in the right ways in certain places, but the reality is it's a political thing that has to be dealt with now.

Sometime during this administration, they are going to aggressively have to deal with Social Security and Medicare and our growing deficits ahead.

COOPER: It's an interesting thought, though, that you raise that we're not going to go back to what we consider normal. So what does the new normal look like?

VELSHI: I often say that instead of buying the TV and paying for it over two years, our new economy may be about saving for two years and buying the TV.

Ultimately you'll get the TV but you'll have to work for it and save for it and make a decision that it's the right thing to do.

If you extend that to everything you buy, including cars and refrigerators and travel and houses, it just means a slower rate of growth that Fareed is talking about.

We will still ultimately get what we need. We just may have shaved some excess out of the system.

ZAKARIA: Americans are used to growth. I mean, we pride ourselves on the idea that, you know, the Europeans believe in this kind of slower, stable growth. We believe in turbocharged convertibles.

VELSHI: You don't think that's actually going to happen?

GERGEN: I -- I worry a lot that we're going to have shrunken dreams coming out of this, and that we're going to find America -- I agree with Fareed. I think the president deserves a lot of credit for helping to lift the sense of crisis within the country. We clearly are not in a crisis mode anymore.

But people do have a belief that they're going to be able to rebuild their economic situation. They're going to be able to find a good job. And if it's a long slow, painful recover -- a joyless recovery, in effect -- in which jobs are not coming.

I think that's going to -- I think, psychologically, that's going to be a real blow.

(CROSSTALK)

VELSHI: Well, and, Anderson...

(CROSSTALK)

CROWLEY: Because -- and the fact is, you can't...

GERGEN: Yes.

CROWLEY: ... shrink dreams.

GERGEN: Yes.

(CROSSTALK)

CROWLEY: That's not what this country is built on.

GERGEN: Right.

(CROSSTALK)

CROWLEY: You breed resentment, though.

VELSHI: Rather than a shrunken dream, what if it is the new realization that we don't need everything we thought we needed to -- to move on? Maybe we can be a bit of a post-consumer society.

You started by saying, when does the recession end? I think what David is saying is, it's not going to feel like it ends for most people.

COOPER: Well, we will end it on that.

Up next: a self-imposed challenge for President Obama, fixing health care. Can this president succeed where so many others have not?

(COMMERCIAL BREAK) ANNOUNCER: This is CNN, breaking news.

KAYE: I'm Randi Kaye at CNN center in New York. AC 360's "Extreme Challenges" continues in a moment. Updating you now on some breaking news.

North Korea reportedly plans to test fire more short-range missiles. This right after setting off a nuclear device in a test explosion underground yesterday.

A 13-year-old cancer patient and his mother on the run for a week are now back in Minnesota. Daniel and Colleen Hauser returned voluntarily from California overnight. The pair fled to avoid the boy's court-ordered chemotherapy, citing religious beliefs.

Former boxing champ Mike Tyson's 4-year-old daughter said to be on life support in a Phoenix, Arizona, hospital. Tyson was seen entering that hospital earlier today. Police say the girl was hurt in an accident involving a treadmill at her mother's home.

On President Obama's first Memorial Day in office, a compromise. He sent wreaths to both the Confederate Soldiers Memorial and, for the first time, the African-American Civil War Memorial.

That's what's happening right now. "Extreme Challenges" continues right after this.

(COMMERCIAL BREAK)

COOPER: Well, say what you will about Sisyphus, the ancient Greek condemned to forever push a boulder up a hill, he had it easy: it wasn't health care reform. That boulder crushed Bill Clinton and has stymied every president for the last 60 years.

Now President Obama says he wants to deal with it and deal with it by the end of this summer. Joining our panel now is CNN's Dr. Sanjay Gupta.

Sanjay, you discussed this with the president. What are his main goals in terms of health care? What is absolutely nonnegotiable for him?

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: I think he wants to build on the existing system. I think he doesn't want to completely toss away the system that exists now and create something brand new. I think there's lots of things about the system that he wants to maintain in some way, but he also recognizes that access is sort of going to be very important.

What I think is interesting, Anderson, is that if you sort of divide the issues into costs and access, I think that he believes lowering costs, ultimately through a bunch of different strategies, will ultimately improve access. So it's costs first and then access.

COOPER: It's interesting, David, though, in terms of getting this done, the president's kind of leaving the details up to Congress. Is that -- he's done that in the past in the last 100 days or so. Is that a smart way to go about this?

GERGEN: So far it's been very smart. When Bill Clinton proposed his own form of health care working with Hillary Clinton and putting it up to Congress, the Congress basically after a big, big debate, he couldn't get it out of committee. He couldn't get it out of either the Senate or the House committee, which were controlled by Democrats.

So, in that sense, he's going to get this bill out of committee this summer, out of both the Senate and the House, because he's worked it this way. So he's got the best chance, in my judgment, of any president in 60 years to get that rock up the Hill.

COOPER: He is framing it as part of the economic recovery, that health care has to be changed, reformed, in order to help our economy. But there's a lot of costs. I mean, he's proposing huge spending on health care.

GERGEN: It's -- I don't know. Sanjay may have a better number, but people generally say it's about $1.2 trillion over ten years, maybe higher. And he -- there's no plan right now on the table to definitely get us from here to paying for it. And if it adds significantly to the deficits, that is actually going to wash back into the economy and eventually cause problems with interest rates and inflation. So he's got to get this paid for.

And he's got some very tough challenges doing that. He's got a very tough challenge figuring out whether he wants to shove something through with just Democratic votes or whether he's going to go for something more bipartisan, which would also probably be watered down from what the Democrats really want.

VELSHI: There are issues with how you pay for it because, as David said, this is going to include higher premiums or higher tax rates for folks.

But the issue here, and maybe Sanjay can speak to this better than I can, is there are many different ways that you can pay for health care. We don't need new science on that. We don't need new studies on that. This is becoming a political issue.

GERGEN: We need more political will.

VELSHI: The issue is political will.

COOPER: Sanjay.

GUPTA: One thing that's worth pointing out, there are all sorts of different proposals on the table already starting to be put out there, including taxing employer-based health care, which is going to be a looming battle, because if you start taxing employer-based health care, it changes the dynamics of the system.

What is interesting as well, Anderson, if you listen to what the president is saying very closely with regards to prevention, with regards to health I.T., with regards to this idea of creating more of a Medicare system for those who can't afford it, all those things are going to cost money, certainly in the short run. But his argument is that, eventually, they're going to start paying for themselves.

COOPER: Sanjay, we keep hearing a lot about the public option. And some Republicans are saying, "Look, socialized medicine." What is the public option, and where does it stand?

GUPTA: Well, people define the public option in different ways, but this idea of subsidizing health care for those who can't afford it. Again, you know, President Obama's been very clear in that people who have health-care insurance, whether it's employer-based or some other form of health-care insurance, if you want to keep it, you keep it. For people who can't afford it, though, there would be this Medicare-type option for it.

Now, here's the controversy. Here's the problem. On appearances, it makes a lot of sense. People who can't afford it, you get the subsidies. What critics will charge is that, look, this starts to give an unfavorable advantage to government-run health-care systems to the point where private health cares or private insurance, I should say, might start to be unfairly sort of unable to compete. And as a result, you sort of get in this backdoor towards a completely publicly-financed health-care system. Again, that's what the critics charge and that's a big battle.

COOPER: So, is there more -- I mean is Congress different this time? Is there more political will in Congress to do it themselves?

GERGEN: There's more political will in American industry, which is an important factor here. And that is because the health-care costs have been so high for corporations. They're looking for a way to get out from under. And there's a significant coalition of private companies now that are supporting health-care reform along with the providers. I think...

COOPER: We've just saw recently health-care industry leaders at the White House promising to reduce costs significantly. I suppose they're doing that because they're afraid Congress is going to mandate some sort of costs.

GERGEN: That's exactly right, they're afraid of the mandate, and they also feel if they're -- if they're constructive up front, they can avoid some of the worst aspects of things they really disagree with.

COOPER: So, you think they can get it done?

GERGEN: I think they've got the best chance of getting it done of any president -- every Democrat since Harry Truman has tried this. Every single one has failed. I think that Barack Obama has the best chance of anyone.

COOPER: We're going to have more coming up.

Back next with a challenge many presidents look forward to, even though it often ends up hurting or embarrassing them: picking a Supreme Court Justice. That and all the hot-button issues before the court ahead on EXTREME CHALLENGES: THE NEXT 100 DAYS. (COMMERCIAL BREAK)

COOPER: Justice David Souter's departure from the Supreme Court is both a challenge and an opportunity for President Obama, as it would be for any president. Adding interest, though, is the fact that this president is both a student and a one-time teacher of constitutional law. Listen.

(BEGIN VIDEO CLIP)

OBAMA: We'll seek somebody who is dedicated to the rule of law, who honors our constitutional traditions, who respects the integrity of the judicial process, and the appropriate limits of the judicial role. I will seek somebody who shares my respect for constitutional values on which this nation was founded and who brings a thoughtful understanding of how to apply them in our time.

(END VIDEO CLIP)

COOPER: Well, as for who he'll pick and what issues the Supreme Court will deal with, we bring in senior legal analyst, Jeffrey Toobin, who's written a great book on the Supreme Court, called "The Nine," along with David Gergen and Joe Johns.

What do we know, Jeff, about the kind of justice the president would like to pick?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: I think there's a big threshold decision that the president has to make. He has spoken often of wanting to get away from the Court of Appeals route to the Supreme Court. This Supreme Court is the first Supreme Court in the history of the country where all nine justices are former federal appeals court judges.

Part of him certainly wants to pick a governor, a senator, a cabinet member, someone who has experience with people's real-life problems.

COOPER: But it's not real-life experiences.

TOOBIN: Exactly, and that's something he's talked about a lot. I did an interview with Greg Craig, the White House counsel, note too long ago, where he said very clearly that he -- that the president does not think you have to be a Court of Appeals judge to be on the Supreme Court.

Now whether that means he'll actually pick a non-judge remains to be seen, but certainly Jennifer Granholm's been to the White House. Jennifer Granholm is the governor of Michigan. Janet Napolitano, the Secretary of Homeland Security. She's obviously under consideration. I think that is a real possibility.

COOPER: And is it a litmus test on -- on abortion?

TOOBIN: Not in so many words, but in reality I think there is. President Obama is not going to pick someone to the Supreme Court who he believes or anyone believes is going to overturn Roe v. Wade. Whether there are other cases that are quite as precise a litmus test, I don't think. But, in fact, if not in name, there is a litmus test.

COOPER: Joe, how tough is this nomination process going to get? I mean, how -- are Republicans going to fight this, no matter who it is?

JOE JOHNS, CNN CORRESPONDENT: That's the whole test. You know, if you just watch what's going on right now, particularly on the Web, there are Web ads you look closely, some from the conservatives, some from the Republicans. Those web ads look just a little bit like "Nightmare on Elm Street."

COOPER: The warning of what's to come.

JOHNS: The Supreme Court looks like the haunted house; there's lightning strikes and so on. So there are people who would really like to see this become a big battle, particularly because, while the Republicans know they can't win on a nomination, they can't get the person they want, they can at least raise some of the key issues. The issues that they think are important to sort of galvanize their support out there.

Things like gay marriage, for example, executive power, some other issues that they really want these Republican senators to focus on. So they're holding their feet to the fire, insisting that they stand up for principles. And the question, of course, is whether those Republican senators are actually going to do it.

COOPER: David, the president is obviously a constitutional scholar in his former life. What lessons do you think he's learned from past choices that presidents have made?

GERGEN: Everything we know about this man is think big. Think audaciously. And, just as he's trying to reshape the landscape here at home and he's trying to transform the world, I think he's going to -- I think he will see this as an opportunity to begin transforming the judicial system in this country.

And for him, unlike all the things we've been talking about today, in this program, this is the real opportunity.

COOPER: So where's the big challenge for him in this selection?

GERGEN: I think the big challenge for him is to come up with a person of true excellence who will withstand these kind of attacks. What you don't want to choose is someone who's got chinks in the armor that the Republicans can actually score some points.

If you come up with a person everybody says, basically, you may not like this person's views, but it's a person of true excellence, I think that person is likely to sail through.

TOOBIN: The one thing that I might disagree with you a little about there is that, if you look at Obama's record on legal issues, he is no big bomb thrower. I mean, he is someone who has been very moderate in his views. He is someone who is not, I think, looking to go back to the big liberals like Thurgood Marshall or William Brown (ph).

GERGEN: I don't think he'll be looking for a Scalia of the left.

TOOBIN: Right.

GERGEN: I agree with that. But what I do think he has the opportunity to do is to recast the court with a new majority that would be firmly on the progressive side. Because this is a man who thinks he's probably going to be in the White House for eight years. And he's going to have a number of selections. And he can move it away.

COOPER: And in the next court, what issues do you see playing out in a big way?

TOOBIN: I think race is going to be a very big issue. This court, the current court, is really looking to get rid of all racial preferences, to say that affirmative action basically is unconstitutional in all circumstances: in school integration, in college admissions, in employment settings.

And Barack Obama is on record saying, "I think there is a place for race consciousness in some places." So Souter has been on that side; so his replacement probably won't mean much.

GERGEN: Do you think over time, given the government's growing intervention in the private markets, we're going to have a renewal of constitutional issues about the proper role of government and commerce and that sort of thing?

TOOBIN: Well, you know, that was the great fight in the court right after the New Deal.

GERGEN: Right.

TOOBIN: That the nine old men struck down a bunch of the New Deal initiatives.

GERGEN: Right.

TOOBIN: You know, I think John Roberts and Samuel Alito are the kind of conservatives where they're not going to get -- pick that fight. They're big government conservatives. They think the government has a lot of power. So I don't think this initiative -- group of initiatives that the president brought are going to bring the big constitutional fights. I think it's going to be more social issues.

COOPER: Coming up next, President Obama's promise to change the way Washington governs as EXTREME CHALLENGES continues.

(COMMERCIAL BREAK)

COOPER: President Obama's final extreme challenge is both ongoing and entirely self imposed. He promised to change Washington: more transparency, more accountability, a new way of doing business. Listen.

(BEGIN VIDEO CLIP)

OBAMA: To my Republican friends, I want them to realize that me reaching out to them has been genuine. I can't sort of define bipartisanship as simply being willing to accept certain theories of theirs that we tried for eight years and didn't work, and the American people voted to change. But there are a whole host of areas where we can work together.

(END VIDEO CLIP)

COOPER: Well, so how's he doing? Let's bring back our panel along with Candy Crowley.

Candy, has he really reached out to Republicans?

CROWLEY: Well, depends on who you talk to. Listen, bipartisanship is the most fungible word, I think, in Washington because, in fact, no matter what he says, bipartisanship tends to be "if you agree with me, that makes you bipartisan," on both sides. It is difficult.

I mean, and yes, there are plenty of issues where they will work together, where Republicans will agree with him on immigration, on any number of issues. But the fact of the matter is on the issues that have come so far, there has not been bipartisanship, largely because the Republicans didn't agree with the stimulus bill. They don't agree with the budget. So there has not been that kind of thing.

But there has been, by the way, on foreign policy. You've seen John McCain out there supporting the Afghanistan efforts that the president's made. You see him out there supporting his plan for Iraq. So there has been some. But on key issues, you cannot expect Republicans are going to go, "Yes, I love the stimulus bill."

COOPER: Joe, there was so much talk of change during the election. Has President Obama changed the way Washington does business, or have we seen signs of change?

JOHNS: We've seen signs of attempt to change. That's what we have seen. We've seen an attempt to bring a Republican into a higher ranking position, which blew up. We have seen the governor of Utah being put into the ambassadorship to China. So the president is making the right sounds, is making the right noises, but Washington changes very slowly.

You know, when I was in college in political science classes, we had a whole class called "System Maintenance." And the whole idea was that the American political system is set up not to change, to resist change, so that it's very stable. And that's what's happening here. The president has a long row to hoe if he's going to change the way Washington works fundamentally. GERGEN: I think in terms of the way Washington works, the process, there hasn't been not much change. But in the larger scheme of things, there's been a historic shift of power to Washington; away from Wall Street, away from New York and away from other commercial centers.

This government has more influence and authority over the economy than any government I think we've seen in our lifetimes, and it's going to grow.

COOPER: Which strikes fear in the hearts of many Republicans and many people who are concerned about Washington assuming so much power.

TOOBIN: Imagine a secretary of the treasury who did not work at Goldman Sachs. That's a change -- that's a change right there. There's a whole string of them.

I think there's a tone difference, too. I was so struck by President Obama's speech at Notre Dame, where on abortion, which is this issue that is so polarizing, he really went out of his way to say, "Look, let's listen to each other. Let's try to find common ground on that." He didn't play to his base. He didn't pander to his opponents. He really talked about trying to get people together. Now, whether that will work, I don't know.

COOPER: Well, beyond speeches, in terms of how he actually governs, what have we learned in the first 100 days that we can apply to this next 100 days?

CROWLEY: Well, we've learned, first of all, I think what we knew on the campaign trail, which is that he's very deliberative. He does reach out and say, "Tell me what you think of this" from a number of people. But we also know that he is going to play his political capital and play it very hard.

When he wants it, he goes up there and, whether it's Nancy Pelosi or Mitch McConnell, he'll roll over them to get what he needs, and we saw that on the stimulus bill. He gave up some a little bit, but by and large, he got everything he wanted. And by and large, that's because he has the public...

COOPER: He also sort of leaves to Congress some of the heavy lifting on a lot of these policies.

JOHNS: Exactly. That's what he does. He'll give you a broad outline and throw it to Congress and say, "Go get it. Show me how you want it done. Come to some agreement and we'll go from there." I think that's what he's doing on health care and a variety of other big ticket items. And that's an interesting concept. It's not over management; it's micromanagement.

CROWLEY: I don't believe for a minute that this White House said that. They're telling them what he wants. He might not be doing it.

GERGEN: He's far more strategic than most of the presidents we've had. Most strategic president we've had since Reagan. That is someone who has their eye on the horizon.

COOPER: So in terms of the next 100 days, what -- in terms of governance, what are the big challenges?

JOHNS: Don't get distracted. That's one of the things it looks like this administration is trying to do.

Some people say part of the reason why they really haven't waded into the whole issue of "don't ask don't tell" is because they don't want to launch the country off on a very divisive fight, where Republicans understand they can score some real points.

So the point is to try to stay on the big things, it seems to me, over there and deal with the things not as big some time down the road.

GERGEN: Domestically, get the economy back on track as rapidly as possible, but this summer, have both health care and climate change bills teed up for passage in the fall. Certainly, health care in both chambers and climate change in the House, and get a Supreme Court nominee done. I think that's...

TOOBIN: Also don't point to me. I'm not going to be the nominee. I wish I were.

GERGEN: You said that in the election. You said he wanted someone with real-world experience.

TOOBIN: Outside -- outside the box. I don't have any real-life experience.

(CROSS TALK)

GERGEN: Clearly. That would be...

TOOBIN: I can hope.

GERGEN: He's got -- he's got a very, very full set of challenges for the next 100 days and well beyond.

COOPER: We'll leave it there. That's our report.

Thanks to all our panelists throughout the hour. Thanks to all of you for watching. Be sure to keep watching, because the challenges are not going away, and new ones never stop coming.

We all need to know how well the president's handling them now more than ever. I'll see you next time.