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STATE OF THE UNION WITH JOHN KING

Interview With David Axelrod; Interview With Nancy Pelosi; Interview With Mitch McConnell

Aired July 26, 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 STATE OF THE UNION.

(BEGIN VIDEOTAPE)

KING (voice-over): A key deadline on health care reform melts away because of Democratic Party infighting. But the president insists he will win in the end.

OBAMA: Let me tell you something, I'm from Chicago, I don't break.

KING: Health care isn't his only headache, the president steps into an emotional racial debate and tries to step back.

OBAMA: In my choice of words I think I unfortunately gave an impression that I was maligning the Cambridge Police Department or Sergeant Crowley specifically.

KING: Top adviser David Axelrod takes us inside the White House strategy on both issues.

Plus, two STATE OF THE UNION exclusives, House Speaker Nancy Pelosi, and Senate Republican leader Mitch McConnell.

And we travel to Texas for our "American Dispatch," the health care debate through the eyes of a 23-year-old facing a life and death challenge.

This is our STATE OF THE UNION report for Sunday, July 26th.

(END VIDEOTAPE)

KING: Virginia and North Carolina on President Obama's schedule in the coming week. Health care reform again, his focus. Both states have a conservative history when it comes to presidential politics. Yet both backed Mr. Obama in last year's historical election. And now it is in places like North Carolina and Virginia Mr. Obama faces his toughest sell in the health care debate.

Concerns over the price tag and the role of government already mean the Senate won't meet the president's initial August deadline. And some say those worries could undermine the entire efforts and the president's top domestic priority, more than enough to worry about.

But the president also set up a firestorm this past week in saying he didn't know all of the facts but that police acted stupidly in arresting a leading African-American scholar, Harvard Professor Henry Louis Gates. Big challenges for the president and for his closest adviser David Axelrod. David Axelrod joins us now from Chicago.

David, I want to get to those issues, especially health care in just a moment. But I want to start with something that had us scratching our heads a bit when we read the newspapers this morning and that already have some of your Republican critics doing handstands.

The vice president writing an op-ed piece in The New York Times about the economy says this about the stimulus a program. He says, quote: "The Recovery Act has led some people to ask whether we are moving too slowly, but the act was intended to provide steady support for our economy over an extended period, not a jolt that would last only a few months."

I want you to listen now to something that President-elect Obama said back in November using the word "jolt" and he has used it many times as president.

(BEGIN VIDEO CLIP)

OBAMA: We have a consensus, which is pretty rare, between conservative economists and liberal economists that we need a big stimulus package that will jolt the economy back into shape.

(END VIDEO CLIP)

KING: Again, the president, as you said, termed several times, and even the vice president has used it certain several times. Just last month he said the stimulus act was designed to, quote, "give an initial big jolt to give the economy a head start." Is the vice president this morning trying to rewrite history?

AXELROD: Not at all. And I think if you're just listening to the words, John, I would point out that he says not just to provide a jolt in the short run, but to give us a long-term recovery or lay the foundation for a long-term recovery.

And, in fact, I think that the Recovery Act has done that. The -- if you look at what the economists are projecting now and we're about to hear what the growth numbers were for the second quarter, many outside experts are now saying they expect that the Recovery Act added 2 to 3 points of growth in the second quarter and helped slow the rate of this recession.

Money -- when 95 percent of Americans got tax cuts, money went to the states to offset the disaster they have, and to keep police and teachers and firefighters from being laid off. Money went to the people who are unemployed in this recession, extended unemployment benefits, health benefits, so they can get through the storm here.

And all of that has helped contribute to a reduction in the impact of this recession. We have lots of work to do, but we've made progress and we're going to continue to make progress over the next couple of years.

KING: Let's move on to health care, one deadline has already fallen, your hope to get the Senate to vote by the August recess. House negotiators are working throughout the weekend because of disagreements among Democrats trying to bring their bill up next week before they go out on recess.

Has the White House been assured by the speaker and her office that they will have that vote, that another deadline will not fall?

AXELROD: John, let me be clear. We're less interested in hard deadlines than in moving the process forward. The deadlines have had a disciplining effect. Three of the five committees of jurisdiction in the Congress have passed bills, the other two are working hard on it.

We want to move the process forward, even if both the House and the Senate had voted on these bills before the break, this would still go, as you know, well into the fall because then you'd have to reconcile those two bills and there'd be continued debate.

What we don't want is for the process to bog down here. We want to keep moving forward, and I believe we will.

KING: Well, let's try to move it forward. In the House, they would pay for the new revenues they need through a surtax on wealthy Americans. In the Senate, a proposal gaining steam in the negotiations in the Finance Committee is to tax so-called "Cadillac insurance plans," high-end insurance plans that give very generous benefits.

Is the White House ready to say that is our preferable approach, let's tax the Cadillac plans?

AXELROD: Well, what the president has said is that this is a new proposal that surfaced, to put an excise tax on insurance companies on high-end policies such as the $40,000 policies that the head of Goldman Sachs has that will not impact on the middle class.

And that was our big concern is that we not impose vast new burdens on the middle class. So he said that it's an intriguing proposal, we're looking at that. But we're waiting for the committees to finish their work.

KING: Preferable to a surtax?

AXELROD: Well, you know, I'm not going to make a choice between them. I think that those things have to be worked out in between the two chambers eventually. The president has also said that, you know, a millionaire's tax puts a burden on folks who can afford to pay a little more. He has often said people like him can afford to pay a little bit more.

But the biggest point to make is that two-thirds of the cost of this whole reform will be borne by reallocating money within the health care system, by doing away with wasteful practices that don't add to patient care.

And so we're talking about that other third. And, you know, there are a number of proposals we're willing to consider.

KING: I want you to listen to the president's word from his prime time news conference this past week. He was asked the question if he gets his way and we adopt comprehensive health care reform, that even if it does the country about lot of good, will Americans have to sacrifice something? Here's what the president said.

(BEGIN VIDEO CLIP) OBAMA: They're going to have to give up paying for things that don't make them healthier. And I -- speaking as an American, I think that's the kind of change you want.

(END VIDEO CLIP)

KING: Is that it, David? As I travel and visit hospitals and doctors and people who know the system well, they -- even people who support you completely say, if you get it exactly right, it's going to be a bit of a shock to the system.

And initially, Americans -- at least initially, Americans will face some changes. And they might have to give up something they had in exchange for something better. Is the president underestimating the amount of sacrifice?

AXELROD: Well, look, first of all, I think it's important to stress what you say, initially they will face sacrifice. Initially what they'll get is some stability, some security, the knowledge that if they lose their insurance, if they lose their job or change their job, move, or if they're sick, if they have a pre-existing condition, they can get insurance.

There will be a cap on out-of-pocket expenses. There will be -- they will remove the insurance cap on yearly expenses. So if you have a catastrophic illness, your insurance company can't run away from it.

And there are a series of things. And it will make preventive and wellness care, check-ups, mammograms, and things like that required in every insurance policy without co-pays which will both save money and improve patient care.

Those are enormous positives for the American people because right now we have a system that works well for the insurance companies, but not particularly well for patients. So that's what they're -- that's what they can look forward to.

Now, look, there's no doubt that there are inefficiencies in our health care system, you know, multiple tests when one will do because people repeat them because they can't access their records, expensive treatments that don't do as well as less expensive treatments because the health care insurance company or provider can make more money off of the more expensive treatment.

Those are things that we have to look at in order to move this health care system forward. KING: David, I want to walk you through a time line of what the president said about the arrest of his friend, Professor Skip Gates. He came in to the -- at his White House press conference, he was asked about this on Wednesday, and he said in one breath he didn't know all of the facts and then he said this.

(BEGIN VIDEO CLIP)

OBAMA: The Cambridge Police acted stupidly in arresting somebody when there was already proof that they were in their own home.

(END VIDEO CLIP)

KING: The very next day he was asked by ABC News about this and he didn't seem to understand why there was such a firestorm across the country.

(BEGIN VIDEO CLIP)

OBAMA: I have to say I am surprised by the controversy surrounding my statement, because I think it was pretty straightforward commentary that you probably don't need to handcuff a guy, a middle-aged man who uses a cane, who is in his own home.

(END VIDEO CLIP)

KING: And yet the very next day he came -- a surprise appearance in the White House Briefing Room, and you'd have to call this damage control.

(BEGIN VIDEO CLIP)

OBAMA: I want to make clear that in my choice of words I think I unfortunately gave an impression that I was maligning the Cambridge Police Department or Sergeant Crowley specifically. And I could have calibrated those words differently.

(END VIDEO CLIP)

KING: I guess a simple question, David. He's the first African- American president, he knows anything he says about race is going to be magnified in such a huge way. What was he thinking?

AXELROD: Well, I think that he -- I think I'd let his words speak for himself. I think he recognized in reading the commentary and watching the commentary over the -- in the hours and the day after he made the...

KING: But it's -- I want to jump in and interrupt you. I'm sorry. But it's not just the commentary. This is the president of the United States who said, I don't know all of the facts, and then went on within two or three sentences to say, they acted stupidly.

AXELROD: And, John, that's why he said that on Friday that he calibrated his words poorly, that he regretted the formulation that he used. As you know, he spoke with Sergeant Crowley, who has an exemplary record on these issues.

He spoke with Professor Gates, and he said, look, pretty clearly the situation got out of hand. But his comments didn't push the debate in the right direction. There's a real debate -- or not debate, but a discussion to be had about how we improve police- community relations and what he was concerned about was that his poor choice of words helped pushed the debate in the wrong direction and he wanted to get it back on track. And I think he did do that, and there's -- you know, I admire -- part of being a leader is saying, you know what, my words had an effect that I didn't calibrate, and I'm -- and I want to acknowledge that and move us forward.

KING: It seems like he almost wanted to say, I'm sorry.

AXELROD: Well, I mean, I think that he obviously regretted that formulation. I think that was very clear from his remarks. The important thing now is, I think his statement had a very positive effect. And if you hear the dialogue since, it has been very constructive and we've sort of relieved some of the heat and now we're seeing more light in this discussion. And that's a positive thing.

KING: So I want David Axelrod to put aside his White House senior adviser hat for this last question and be David Axelrod the campaign strategist. This is Sarah Palin's last day as Alaska governor. She is stepping down, and as you know, there is a huge debate. Is she done? Will we see her again on the national stage?

When you're sitting around in your weekly meetings with all of your political friends, not worrying about health care reform, when you take that little break you get every week, is Sarah Palin somebody that David Axelrod, the man who engineered the Obama campaign, says, we are going to hear from her again, keep an eye on her? Or is she done?

AXELROD: John, I can tell you with absolute honesty that when I sit around with my political friends, particularly friends who are involved with me in my current pursuits, there's very little or no discussion of Sarah Palin. We're talking about the problems we're dealing with right now facing the country and so on.

And I really have no idea what Governor Palin is going to do. She's entering private life now. We wish her well and it's up to her to decide what role she's going to play in the future. She has got plenty of advice, I'm sure, she doesn't need mine.

KING: A diplomatic answer from the president's right-hand man, David Axelrod, in Chicago this morning. David, thank you very much.

AXELROD: Good to be with you, John.

KING: And when we come, we'll turn to the fight in Congress, with Democrats splintering over health care reform. How does the House speaker plan to get her own party back in line? Our exclusive interview with Speaker Nancy Pelosi is next.

(COMMERCIAL BREAK) KING: Setback is a word heard frequently in conversations about health care reform here in Washington in recent days. Senators are finding it difficult to reach consensus on a plan. And the House this past week was marked by escalating tensions in the Democratic ranks.

Yet Democratic leaders say they're confident major reform legislation will pass and pass this year. One reason, as we zoom in on the Capitol, for that Democratic optimism is the map.

You see the United States Capitol there, well over here on the Senate side, 58 Democrats plus two independents who vote with them most of the time, so 60 here and 40 here, that's one reason for optimism.

Here's even more, over on the House side, 256 Democrats to 178 Republicans, just shy of an 80-seat majority there. But despite those big majorities, there are worries within the Democratic ranks, many in the House, for example, are worried they'll take risky votes only to see the Senate stall.

But the House speaker, Nancy Pelosi, says she won't wait for the Senate, health care dominated our conversation at the Capitol late Friday as the speaker shuttled between meetings with key players in the effort.

(BEGIN VIDEOTAPE)

KING: Madam Speaker, thank you for spending some time with us.

PELOSI: My pleasure.

KING: I want to begin with the big issue of the day, which is, of course, health care. The Senate says now it will wait until the fall. The president says that's not what I would like, but I'm OK with that. But you want to press forward, why? What's the rush in the House?

PELOSI: It's not a question of rush, it's a question of the American people who have been waiting a very long time for health insurance that gives them confidence that if they have a preexisting condition or if they lose their job or change their job or start a business that they will have health insurance.

KING: But if you had more time, perhaps you could better settle some of the disputes within your own party.

PELOSI: We believe that we have a good bill, this isn't about rushing, we've been talking about this for a very long time and the American people have been waiting a long time. And we have -- we have three committees, two of them have reported out a bill, the Energy and Commerce Committee is the last one to report out a bill.

And they have some differences of opinion, differences of opinion about the public option, which has the overwhelming support of the House Democratic Caucus. A robust, level playing field, public option, and that's one of the sticking points. KING: But it is the speaker's job sometimes, and you're doing a lot better than I, to referee disputes within the family. Are you worried your family is coming apart on this? And that you might not...

PELOSI: Absolutely not.

KING: ... have the votes on the floor?

PELOSI: Absolutely, positively not. When I...

KING: You have the votes.

PELOSI: ... take this bill to the floor, it will win. But we will move forward. This will happen. Americans, again, with preexisting medical conditions or concern about losing their jobs or changing their jobs or the health care that is available for their children and their families with a big dose of prevention and the rest can take heart and comfort in knowing that this bill will pass.

KING: Do you worry at all when you have these conservative Democrats saying this bill doesn't control costs, I can't support it, I won't vote for it, that this is bad for our party, it's not fiscally responsible? Do you worry that that gives pretty fertile ammunition to your Republican critics?

PELOSI: No. I -- we are all attempting to squeeze as much as possible out of the cost of this legislation. Some of us in the House do not support agreements made with the Senate to, say, limit the cost-savings from the pharmaceutical industry, from the hospital industry, and the rest.

So we think there are more savings that can be gained. But in doing so, we will have a bill that is over 50 percent savings and only half -- less than half will need a revenue source. Maybe not.

As I said, squeeze it all out, keep squeezing until we can't find another drop of savings in the bill. That's something that we are all doing.

KING: You want more money from the pharmaceutical industry, the insurance industry, but do you trust them? They're cutting these deals with the Senate and with the White House. Do you trust them to keep their word and to come up with those savings?

PELOSI: Oh, I think they will come up with those savings because there's much more savings they can come up -- much more savings I think...

(CROSSTALK)

KING: So the White House and the Senate is not getting enough?

PELOSI: I don't think so, but let's see how we go forward. But what is important about all of this is that as we have reforms in the bill for the delivery of service and reforms in the bill for health insurance that the costs come down, as well.

This is very important as how we go forward as we make the systemic change. You mentioned the CBO, the Congressional Budget Office here, in their accounting, they don't give any credit for prevention. We know and the president knows that prevention saves hundreds of billions of dollars. And it can be documented, except they don't count it. So we know that as we go forward, the cost of health care will come down, the quality will go up, the choices will expand, and the peace of mind will be established for the American people.

KING: One of the other questions that comes up a lot in my travels, and I've been to high-end facilities like the Cleveland Clinic, I was this week at a public hospital in the Dallas-Fort Worth area that is doing the lord's work, letting people without insurance or very limited coverage come in and get everything from emergency room to cancer treatment.

And those doctors say they share your goals but they're a little worried that in the short-term, the day after you throw this switch, if the bill passes that when you squeeze Medicare and squeeze Medicaid, that you will drive more providers to say, forget about it, the reimbursements are too low, I'm not participating.

PELOSI: Well, in the legislation and in our broader agenda here, we have initiatives to promote more doctors, especially in primary care, but perhaps if they're more familiar with what the bill actually does. And that's why we want to finish this third piece so that we can have a document that people can make judgments about.

But you have to be careful when you're squeezing it down that you're not scraping seniors or affecting care.

KING: But when we spoke a few weeks back, you were adamant that the final bill would include a public option.

PELOSI: Definitely.

KING: You gave an interview this week where you were asked if you could support a bill that didn't have one in the end, and you said, I don't think so. Is that some softening?

PELOSI: No, no, no, no, the president has said he believes the public option is a way to keep the private insurance companies honest. But he said, if you can find another way to do this, show it to me.

KING: So is that non-negotiable? If the Senate passed a bill that did not have a public option or that had a public option that, say, had a three- or five-year trigger, let's see what happens, see if we can make reforms, and if we don't, then a public option would kick in, is that non-negotiable with the speaker?

PELOSI: I think the private insurance industry has had a long enough time to have a trigger. We know what happens left to their own devices. This is about having an alternative, to give much more leverage to the individual. And the president has said, if you like the insurance that you have, you like your doctor, you can keep them. Well, most people, many people feel good about all of that, but they don't know what's going to happen to the cost.

And the cost, that's an accessibility issue. And we know that a family of four -- average family of four, their health insurance costs will increase by $1,800 a year, that would be $18,000 by 2020. It's just not affordable. And therefore not accessible.

KING: If this bill passes and there's a public option, should that public option cover abortions?

PELOSI: That's not -- that's not the issue. The issue is people go out there to -- we'll be working on that issue. But that's not the issue. The public option doesn't cover -- insurance programs...

KING: But the public option would have a lot of -- the public option would have say on the marketplace about what is covered in certain plans. If...

PELOSI: No, but the insurance companies, as with private, would be treated just the way private insurance is treated now.

KING: So when you have somebody like Bart Stupak who says he wants language like the Hyde Amendment put into any health care reform bill?

PELOSI: Well, I don't know that that -- that Bart's language is exactly that. But those -- we have people who are working together to help promote health insurance for all Americans, that people will be treated the same in a public option as they are in a private option and that this issue should not be an issue, being respectful of Bart Stupak's concerns and respectful of full reproductive health care for America's women.

KING: What about illegal immigrants, what should happen to them if we have national health care reform? Should they be able...

PELOSI: I'm sorry?

KING: Illegal immigrants.

PELOSI: Illegal immigrants?

KING: If you're in this country illegally, should you be able to get health care?

PELOSI: No, illegal immigrants are not covered by this plan.

KING: And so what happens to a public hospital then if they walk into the emergency room? Again, the hospital I was at this week, they said, you know, they do 6,000 births a year there and 70 percent of them are for undocumented.

PELOSI: I don't know about that. But I do know that the law requires that if somebody comes in off the street and needs care, that it is extended. What we see in this legislation is that people will have access to affordable health care, and it will diminish the number of people going into those private -- public hospitals in the manner in which you described.

(END VIDEOTAPE) KING: Ahead, more with the House speaker, Nancy Pelosi, including her take on whether it might take -- might be time for yet another stimulus plan to help with the country's punishing recession.

(COMMERCIAL BREAK)

KING: More now of our conversation with the Speaker of the House, Nancy Pelosi.

(BEGIN VIDEOTAPE)

KING: Let me ask you about the politics of this for you. You were here, not in this role, but you were here the last time we had a Democratic president...

PELOSI: Right.

KING: ... and the Democrats in charge of both chambers of Congress, and the president wanted health care reform. It didn't pass, and his party was hammered in the mid-term elections -- not the president, he came out of it just fine, but you lost 52 seats. Do you have any worry that we're heading into a similar situation?

PELOSI: Absolutely not. I remind you, but I don't need to remind you, that the health care bill did not pass at that time. I think the American people want us to perform. They need this. This is urgent. It's urgent in terms of their health, their economic stability -- the economic stability of their families. And they want to see Democratic majorities in the House and Senate and the Democratic president in the White House to show that we can work together to have a positive impact on their lives by removing the instability that the uncertainty of access to health care causes for America's (INAUDIBLE)

KING: When you passed the stimulus bill back earlier this year, the administration said it thought the unemployment rate would average about 8.1 percent. It obviously hasn't turned out that way. It's approaching 10 percent now, 9.5. Most believe it will crack 10 percent in the months ahead. Did you underestimate the depths of the recession at the time? And is it maybe time now to go back and do more?

PELOSI: Well, one thing is for sure, if we hadn't done that stimulus package, the unemployment rate would be even higher. And I believe that as the -- it's like a time release capsule. As the initiatives are put forth in the timely fashion they were planned to, that more jobs will be created.

As you know, the job rate is -- joblessness -- there's a lag of turn in the economy and the lowering of the unemployment rate. So I believe that good times are ahead. I would rather just stick with the initiative that we have, get it out there faster, if we can, but not worry about doing another stimulus package.

I do think the health care bill is a stimulus package. I do believe that our energy bill was, for the creation of new green jobs, a jump start. I just remind you of this. When we passed our budget 100 days after the president became president, House and Senate both passed the budget that day, same day. And at that time, we passed a budget that had three pillars to turn the economy around, to create jobs and to lower the deficit -- energy, education, and health care.

These three bills are now out of committee -- in one case, energy, off the floor, in the House as we go forward. These are stimulants to the economy, as well. A new creation of jobs whether it's in the health care field, whether the energy field, and of course, energy and job creation begins in the classroom. So our education bill is part of that, as well.

KING: Madam Speaker, thank you.

PELOSI: Thank you.

(END VIDEOTAPE)

KING: Up next, another STATE OF THE UNION exclusive. The Senate's top Republican, Mitch McConnell, tells us how his party would reform health care and revive the economy.

(COMMERCIAL BREAK)

KING: Six months into the Obama presidency, Republicans are intensifying their criticism of his domestic agenda. They say the president's proposal for overhauling health care is too expensive for a country still deep in recession and gives the government too much power. They also call the $787 billion stimulus plan that Mr. Obama said would create new jobs a dismal failure.

With us now is the number one Republican in the Senate, Mitch McConnell of Kentucky. Mr. Leader, thanks for joining us.

MCCONNELL: Glad to be with you.

KING: I just heard -- you just heard the Speaker. I want to pick up with what she said. She says a public option in health care reform is, in her view, non-negotiable. Can Senate Republicans sign onto a plan that includes a public option?

MCCONNELL: I think I can pretty safely say there aren't any Senate Republicans who think a government plan is a good idea. We have 1,300 health insurance companies now, robust competition among them. We know that if we create a government plan, there won't be any more private health insurance companies and there won't be any competition.

We have a good example of that, John, already, in the automobile industry. The government is now running GM and Chrysler, and you know, in Louisville, they're making Fords, Ford vehicles. And the CEO of Ford called me up recently and said, The good news is people seem to like the fact that we haven't taken any government money and we're doing reasonably well, given the slowdown, the recession that we're in, but our problem is financing our cars because the government is backing up GMAC and Ford's financing arm.

So that's exactly what would happen in the health care system, and I think people on my side don't like it. And you know, it's interesting, the Democrats are having a hard time selling it to their own members, as well.

KING: Let's talk about another issue on the table. You say public option a non-starter with Senate Republicans. How to pay for this is another big thing. As you know, the House bill has a surtax on wealthy Americans. I know you don't like that. One of the things they're talking about in the Finance Committee, where a few of your members involved in the negotiations, trying to find bipartisan ground, is this so-called Cadillac insurance plan tax, that you would tax the most lucrative insurance policies that give way above average benefits. You OK with that?

MCCONNELL: Well, some of our members think that that's a reasonable way to go. But if you're talking about paying for it, let's look at the plans that are actually out there, John, the House bill and the Senate health committee bill. They pay for it by cutting doctors, cutting hospitals, and raising taxes on small business. Those are very difficult pay-fors (ph), and they're having a hard time selling it to their own members. The only thing bipartisan about the measures so far is the opposition to them.

(LAUGHTER)

KING: That's an interesting way to put it. Help me understand Senator Grassley's role, Chuck Grassley, Republican of Iowa, senior Republican on the Finance Committee. He and a few other Republicans are in the negotiations. What has he promised you? Is a bipartisan bill three or four or five Republicans? Or has Senator Grassley expressly promised you that he would not sign onto anything in committee that can't get a good chunk of the Republican caucus?

MCCONNELL: Well, what Senator Grassley is doing, along with Senator Enzi, our top Republican on the health committee, are negotiating with the Democrats, Senator Baucus and some others, in that effort to come up with a truly bipartisan bill. What he does is report those discussions back to us. All of our membership is in a meeting every Wednesday afternoon in which Senator Grassley and Senator Enzi give them a rundown. They -- Senator Grassley and Senator Enzi give me a report on a daily basis, so they...

KING: And what is the extent of their promise to you?

MCCONNELL: Well, we have to see what they come up with. I mean, I think they -- I don't believe either one of them are going to sign onto a package that the vast majority of our members think is a bad idea. Our idea of bipartisanship, in the end, is not just talking, it's what do you do? And what kind of proposal is it? What is the policy?

KING: Well, on that point, I want to step back in time. After the election, as President-elect Obama was preparing to come to Washington, you gave a big speech at the National Press Club, where you laid out your views on what was likely to happen. And among the things you said was this.

(BEGIN VIDEO CLIP)

MCCONNELL: We fully expect to be a full partner in developing major health care reform.

(END VIDEO CLIP)

KING: Might sound a little cynical, but how's that going?

MCCONNELL: Well, I think we will be, at a certain point.

KING: You will be. You're not now.

MCCONNELL: Look, John, what's happened now is they can't sell it to their own members. As I said a minute ago, the only thing bipartisan so far is the opposition to it. At some point, they understand that in order to comfort their own members and to have broad support among the American people, it will need to be bipartisan. So far, they have produced a measure that they cannot sell even to their own members.

KING: So how do we do that? How do we change the process? In the past, if we go back to George H.W. Bush, when you had the budget crisis, he had the big summit at Camp David. Some say it cost him the presidency because he agreed to raise taxes. What's the circuit breaker? Can you offer one to the president, say, Mr. President, here's my hand as the leader of Senate Republicans, let's start over or start somewhere and let's do something different? What would it be?

MCCONNELL: Well, I think starting over would be a good idea. I mean, we've basically been negotiating off a set of Democrat-preferred options, shall I say. Now, we'd like to start over with a genuine bipartisan approach. And let me give you the kinds of things we ought to be able to do.

We know that we're losing billions of dollars every year in junk lawsuits against doctors and hospitals. We don't see any kind of legal abuse reform in any of these proposals. Everybody's excited about prevention. We've seen the example of the Safeway company, where the CEO there has incentivized his employees to target their own decisions -- quit smoking, fight obesity, check your cholesterol, your high blood pressure, exercise. They've actually incentivized their employees to engage in that kind of behavior and brought down the cost of their health insurance.

In addition to that, we know we have an access problem because of the rise in cost. Cost and access are the two big problems. Equalize the tax code. Make it possible for an individual who purchased insurance to deduct that cost, just like a corporation can in providing health insurance.

Those are the kinds of things that would dramatically move us in the right direction. And remember that we have the finest health care in the world now. We don't want to scrap the excellent quality that we have as we move forward.

KING: I want to ask you to watch me as I walk up to the magic wall because I want to talk about the political calculation of this debate as we do this because you mentioned we have the finest health care. If you look at the polls right now, 55 percent of the American people say we need a great deal of reform, 40 percent say we need some reform.

I want to look at this as we go forward. These are the Senate Republican seats up. The red states are the Senate Republicans up in the next election. And I want to circle a few because I just want to say -- when you see these states -- these are where you have members up next year, the states I've circled. And I want to come forward to the presidential election we just had. In those states there, and then add New Hampshire into that, states won by President Obama.

I want to understand whether you think it's helpful, when you look at this map and think about the calculation in the year ahead, to have some of your own members and leading voices in the party, like Senator DeMint in the Senate says, you know, This is Obama's Waterloo. He says, If we're able to stop Obama on this, it will be his Waterloo, it will break him. And then Bill Kristol writing in "The Weekly Standard," a conservative paper, says, "Some Republicans will now be tempted, because Obama's back on his heels a bit, to cut a deal, to try to find a compromise." He says, "My advice, for what it's worth, resist the temptation. This is no time to pull punches. Go for the kill."

As the leader of Senate Republicans, as the highest elected Republican in the country, does Mitch McConnell think that saying, Let's break him and go for the kill, is constructive language?

MCCONNELL: I think what we ought to be doing is trying to fix the problem. The election's 15 months away. It'll take care of itself. What we ought to be doing now is concentrating on the health care issue. I don't know a single member of my conference in the Senate, not one, who doesn't want to pass health care reform. We ought to concentrate on trying to fix this -- fix this, do it right. This is a huge, huge issue that effects 16 percent of our economy. If we get it fixed right, the politics will take care of itself next year in the election.

KING: Can I translate that into saying that that language is not helpful? If you want to create -- if you want the American people to think you're serious and that you would like to do a bipartisan bill, is language like that, Go for the kill, This will break him, counterproductive?

MCCONNELL: Look, I can only speak for myself. What I think is the right for Senate Republicans to be doing is to try to get health care fixed, to do it the right way for the American people, and let the politics take care of itself next year.

KING: You were here at the two-month mark of the Obama administration, and I asked you for a report card. And this is what you said.

(BEGIN VIDEOTAPE)

MCCONNELL: I'm disappointed after two months. The president has not governed in the middle, as I had hoped he would.

(END VIDEOTAPE)

KING: Six months now, any different? Is your phone ringing more often?

MCCONNELL: Well, I would -- I think that was pretty accurate for now, too.

(LAUGHTER)

MCCONNELL: You know, the president's trying to do most of these things on the far left. I think the stimulus was a big mistake. I think we can, you know, fairly safely declare it now a failure. It was sold to us as something that was going to jolt the economy, that was going to hold unemployment to 8 percent. Unemployment's going over 10 percent.

We're spending $100 million a day in interest on the national debt. The deficit this year's going to be $1.8 trillion. To put that in context, we're going to have a bigger deficit this year than the last five years together. The budget that they passed, looking to the future, doubles the national debt in five and triples it in ten.

I think the administration's off on the wrong foot. I'd like to see him come back to the political middle, meet us there, and solve these problems for the American people.

KING: We're out of time, but let me ask you quickly, again, as the nation's highest elected Republican leader -- "Anchorage Daily News" here -- it is Sarah Palin's last day as governor. Does she have a national future in your party?

MCCONNELL: Boy, I don't think we've seen the last of Sarah Palin. She excites an awful lot of members of my party and they're anxious to see what she's going to do next, and so am I.

KING: Senate Republican leader Mitch McConnell, thank you for your time this morning.

MCCONNELL: Thank you.

KING: And up next, a look at the health care debate through the eyes of one young man facing a life-and-death challenge.

(COMMERCIAL BREAK) KING: That might be a hint there. In our travels this week, we again wanted to take an up-close look at the health care debate, part of our constant effort to see if what is being debated here in Washington matches up with the needs and concerns where you live. This week, as you might have figured out from those pictures, we visited Texas.

Now, why did we go Texas? Look at these statistics. They are stunning. Nationally, 15.3 percent of Americans lack health insurance. In Texas, it's nearly 25 percent. Of these, 70 percent of the uninsured nationally are in working families. In Texas, nearly 83 percent. Twelve-and-a-half percent of the country lives below the poverty line. It is above 16 percent in Texas. And so no surprise, the national family median income is nearly $50,000. In Texas, it is $5,000 lower than that. And because of that, you have the challenge, more people uninsured.

To explore the issue up close, we met an extraordinary young man, who at the age of 23 faces a life-and-death struggle.

(BEGIN VIDEOTAPE)

KING (voice-over): Gregory Rose is seven months into his new life. The feeling of invincibility that comes with being 23 shattered when even a few simple steps became unbearable.

GREGORY ROSE, CANCER PATIENT: Each step, from my back to the ball and socket in the hip, was like on fire, grinding. I know that kind of pain I've never felt like that before. They tested my blood and my white blood cell count was over 62,000, which for a normal person is 5,000 to 10,000.

KING: Leukemia, diagnosed finals week, a shock to a young man whose plan was to pay down his student loans, then worry about health care.

ROSE: Being healthy, I figured going a little ways without health insurance should be OK, but I got caught.

KING: The JPS Cancer Center is part of a Ft. Worth-area public hospital network that not only has given Rose care, including five cycles of chemotherapy, but also helped him navigate the dizzying health care bureaucracy.

UNIDENTIFIED FEMALE: Are you able to pay your bills with good checks, for the most part?

ROSE: Just my rent.

UNIDENTIFIED FEMALE: Just your rent. OK.

KING: First Medicaid, then Social Security disability payments. Next, a painful lesson. In Texas, the modest income from Social Security put Gregory over the limit to receive Medicaid. No insurance but a bagful of medications that run more than $5,000 a month.

ROSE: I now have no insurance again.

KING: No insurance, but a bag full of medications that run more than $5,000 a month.

ROSE: Every day. Every day.

KING: And the prospect, if the cancer comes back, of much more daunting expenses.

ROSE: The bone marrow testing alone has cost, like, $300,000. That's just the testing part of it. At least, that's what I was told.

KING: Eight hundred thousand patients pass through JPS every year. Fewer than 7 percent of them have private health insurance. Those here who do have coverage are likely on Medicare or Medicaid, and when JPS CEO Robert Early and chief of medicine Dr. Gary Floyd hear the president promise to squeeze billions in savings from those federal programs, they worry that, among other things, it could exacerbate an already acute doctor shortage in Texas.

DR. GARY FLOYD, JPS HEALTH NETWORK: In Texas, we have a significant problem with Medicaid. Only 38 percent of our physicians participate in Medicaid programs. So if we start squeezing the payment rates down or freezing them, we're going to see fewer and fewer physicians who will want to participate in those programs.

KING: While public hospitals like JPS see the bulk of the uninsured, Dr. Cara East also sees a steady flow when Baylor Medical Center advertises for new clinical research studies.

DR. CARA EAST, BAYLOR UNIVERSITY MEDICAL CENTER: They'll come to us, knowing they have high blood pressure and haven't done medicines for two years, and absolutely, the trial provides those medicines. So that is an option for that person. We even had a gentleman come to us one time who didn't have health insurance. And I always ask them, Well, you know, Charlie, why don't you have that? And he -- I asked him, Well, what do you do? He runs an insurance agency. And I went, What? He said, Well, I can't afford it.

KING: Gregory Rose proudly displays a sign of his political allegiance, but as he watches the debate in Washington, he is more and more frustrated.

ROSE: Typical Washington fight.

KING: His first reflex is to blame Republicans, but Rose knows Democrats not only have the White House but big majorities in the House and Senate. He says Democrats fighting among themselves over how to pay reforms should spend some time in his shoes.

ROSE: They really need to get their heads together and get their act straight. With those majorities in place, things should be happening. If they don't get it done, there's going to be a lot of people that's going to be hurting because of it.

(END VIDEOTAPE) KING: We thank Gregory for sharing his story, and we certainly wish him the very best.

We want to stay good-bye now to our international audience for this hour. But up next, for our viewers here the United States, Howie Kurtz looks at how the media has covered the controversial arrest of Professor Henry Louis Gates.

(COMMERCIAL BREAK)

KING: I'm John King, and this is STATE OF THE UNION. President Obama won't meet a key deadline but isn't giving up.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We will pass reform and we will do it this year.

(END VIDEO CLIP)

KING: Are reporters focusing on what happens to your health care or being sidetracked by political drama?

(BEGIN VIDEO CLIP)

PROF. HENRY LOUIS GATES, HARVARD UNIVERSITY: Are you not responding to me because you're a white police officer and I'm a black man?

(END VIDEO CLIP)

KING: A Harvard professor is arrested on his front porch. Can the media handle a story about race.

In this hour of STATE OF THE UNION, Howard Kurtz, always, breaks it down with "Reliable Sources."

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