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President Obama's Budget Blueprint; First-Time Jobless Claims Surge; GM Loses $9.6 Billion in Fourth Quarter; GM European Turmoil; Your Health Care Under the New Budget; Tiger Woods, On Course

Aired February 26, 2009 - 10:59   ET


TONY HARRIS, CNN ANCHOR: It is Thursday, February 26th. And here are the top stories this hour in the CNN NEWSROOM.

It is a tax raiser. For Republicans, probably a hell raiser. The new president sends his first budget blueprint to Congress.

Crash at General Motors. The company reports staggering losses for 2008. Can GM survive?

Tiger Woods back on the PGA Tour with his golf groove in check. He returns just as he left -- simply the best.

Good morning, everyone. I'm Tony Harris, and you are in the CNN NEWSROOM.

President Obama's budget blueprint -- what's in it? More importantly, what's in it for you?

We are waiting to hear from the White House budget director, live this hour, as we break down the numbers. Here are some highlights.

Tax increases on the wealthy: if you are making $250,000 a year or more, the plan curbs deductions, effectively raising your taxes.

Health care: money from higher taxes would go towards a health care reserve fund. It will be used to reform the system and expand coverage for uninsured Americans.

Military spending: the plan would cut some Pentagon weapons programs, but it includes more than $200 billion for U.S. war efforts over the next year and a half.

Our correspondents are digging into the details of the president's blueprint. Ed Henry crunching the numbers on the budget and the bailout, and looking at military spending. Chris Lawrence has Pentagon reaction. Dana Bash is on Capitol Hill, where Republicans are taking aim at the tax hikes.

Let's start with you, Ed, in Washington.

And Ed, a combination of spending and cuts for the Pentagon.

ED HENRY, CNN SR. WHITE HOUSE CORRESPONDENT: That's right, Tony. We looked in the hard copy of the budget here, but we've got the CNN budget team going through it line by line. And what's fascinating is, when you walk over to the magic wall, and you look at some of the departments, let's start at Treasury, before we get to Defense, because that's another big-ticket item when you talk about the so- called TARP bailout fund.


HENRY: And what's interesting is, President Obama, if you look at this one graph, lays out that he has now a $250 billion contingent reserve for further efforts to stabilize the financial system. The reserve, which reflects a net cost to the government, would support $750 billion in asset purchases.

What does that mean? It means that it could potentially a budget hit of $250 billion in order to buy up another $750 billion in troubled assets, the toxic assets you've heard so much.


HENRY: It gives you an idea. He's not asking for the money yet, but he is saying, by the end of 2009, I may need to actually do some more bailing out, whether it's auto bailouts, bank bailouts, et cetera. That is a number that we have to keep a close eye on, because it could explode down the road.

Here's the Department of Defense you asked about. What's fascinating about that is you see $533.7 billion in spending right here for the Department of Defense.


HENRY: That's in 2010, a four percent increase over 2009. Some people thought maybe there would be a cut in the Pentagon early on. But no, there is going to be a small increase in the base budget.

What does that mean? Base budget means when you don't include the wars in Iraq and Afghanistan. Of course, you're going to need to include that. So the president is now asking for $75.5 billion for 2009 for those two wars, $130 billion for 2010.

Let's look at one last figure, which is -- I've got to lose that.


HENRY: And we could then go to this big chart here, which is important to look at the trajectory on defense spending, such a big- ticket item. And we see here where President Bush had it in 2006, $534 billion. Then it went up to $600 billion. 2008, in the presidential election year, $666 billion.

Now, right now, it's -- there's been a small cut. We're down to $654 billion. But in 2010, interestingly, it's going to start going back up to $663 billion.

Why is that? Well, the president is starting to send more troops to Afghanistan, some 17,000 more. He's trying to wind down the war in Iraq, but there's still costs there on the ground. So what's fascinating is, when you look at the tough choices ahead for Defense Secretary Robert Gates, if he starts cutting weapons systems and other things, it looks like it will be down the road beyond 2010. In the short term, Pentagon spending is not going down, actually -- Tony.

HARRIS: Boy, I'm glad you're doing this and explaining this with charts, because otherwise these numbers can just be overwhelming.

Good stuff, Ed. Appreciate it. Thank you.

And let's quickly now get to -- and let's keep moving here. Let's get to the Pentagon and our Chris Lawrence.

And Chris, I'm wondering, given the numbers that Ed just sort of detailed here, I'm wondering if you're hearing any initial reaction.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Tony, I'm going to try to keep it simple.


LAWRENCE: First of all, OK, when you think about this budget, you know, think about it like chapter one of a book. It's laying out the characters, the plot is still to come. This is the top line.

HARRIS: Yes. Yes.

LAWRENCE: It's giving you the big number...

HARRIS: Great point.

LAWRENCE: ... not exactly how things are going to be spent here. And the thing about trying to get information right now is, Secretary Gates has sworn everyone to secrecy. Everyone involved, these top military and civilian officials, had to sign this nondisclosure agreement, which is kind of unprecedented, swearing that they weren't going to talk about any of the details until the Pentagon actually gets in there and starts making its cuts.

That said, we can look at some of the things that he said in the past and start to follow the -- connect the dots, so to speak. Some of these big Cold War weapon systems, you know, the -- some of the Navy destroyers, the computer link vehicles, the Army's future combat systems, the F-22 fighter jet, those are things that could see reductions. But basically, what you're seeing now, what's going on behind the scenes, is sort of a battle.

You know, you've got Secretary Gates, who wants to cut. You've got defense contractors all over the country who want to keep what they've got.


LAWRENCE: And you've got Congress, who sometimes straddles the line between wanting to keep projects that could help them, or that they believe in, and wanting to make cuts to make room for other things.

HARRIS: Boy, fights to come all over Washington.

Chris Lawrence at the Pentagon for us.

Chris, good to see you. Thank you.


HARRIS: And just another note here. We are going to replay most of the president's comments for you in our next half-hour so you can hear for yourself how he plans to use the budget to boost the American economy.

OK. The president's budget sets the stage for a tax fight with Republicans, to be sure.

Senior Congressional Correspondent Dana Bash live now from Capitol Hill with that part of the story.

And Dana, if you would, take a moment and walk us through what is probably going to be a pretty stiff fight to come down the road.

DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: Right. And that fight is going to be, just as you said, over the tax portion of the president's budget. What he wants to do is essentially to raise taxes.

He's going to roll back the taxes for the wealthiest Americans that President Bush had in place. And not just that. According to this plan, he also wants to not allow those wealthy Americans to deduct as much when they make charitable contributions, and possibly even when they -- when they buy a house for their mortgages.

And this is something, as you can imagine, that Republicans are screaming from the rooftops about, because philosophically, most Republicans and even some Democrats believe that that is the wrong thing to do in a recession. They believe that it is not right to, in effect, raise taxes, because they say it will hurt small businesses.

In addition, they also are talking about the health care portion of the president's plan. They say, look, it's fine, well and good to be -- want to give everybody health care. It is a critical problem in this country. But they say not the way President Obama wants to do it.

I'll read you one quote from John Boehner, the House Republican leader. We're actually going to hear from him in a little while. But in the meantime, we have a quote from him, and I'll read it to you.

"Everyone agrees that all Americans deserve access to affordable health care, but is increasing taxes during an economic recession, especially on small businesses, the right way to accomplish that goal? Given the size of our $1.2 trillion deficit, a proposal costing up to $1 trillion must raise troubling questions."


BASH: So that gives you a little bit of a taste of the kind of thing we're going to continue to hear from Republicans.

HARRIS: And Dana, the White House budget director, Peter Orszag, is at the microphone now to begin his comments. Let's take you there now.


PETER ORSZAG, WHITE HOUSE BUDGET DIRECTOR: The first trillion- dollar deficit, which is shown on the first chart, is the gap between how much the economy could produce each year and how much it is producing each year. As you see in these estimates, both this year and next year, there is a GDP gap of roughly $1 trillion. The purpose of the Recovery Act was to start to jump-start the economy and reduce that gap and output.

Christina Romer will be talking at more length about the economic assumptions and how we see the economy evolving over time at the end of my remarks.

The second deficit that we are inheriting is a very significant budget deficit. Under current policies, and without any policy intervention, our estimates suggest that we would face $9 trillion in budget deficits over the next decade.

The first step in addressing this very deep fiscal hole is honesty. This budget will not play the games that are typically played in which you assume that there will never again be a hurricane or disaster; that the alternative minimum tax, which is a second tax system resting alongside the regular income tax, would be allowed to gradually take over the tax code; that the costs of the war in Iraq and Afghanistan will magically disappear overnight. All told, we are showing $2.7 trillion in costs in this budget that were excluded from previous budgets, and I think that's a mark of the honesty and responsibility contained in this document.

The next step after you have an honest assessment of where you stand is to start to reorient the federal budget. And let me be very clear -- as is natural during a transition, we have had six weeks to do what normally takes six months.

This document is an overview. There will be more details available in April. We will then, throughout the year, continue the process of examining what works and what doesn't in the federal budget. And next year, we will have that full six-to-eight-month timeline to put together our full budget in addition.

So this is an overview. There is more to come over time, as we continue to examine what works and what doesn't.

We, in this budget, have already, though, identified specific policy interventions that will help to cut the deficit in half over the next four years. So by the end of the president's first term, the deficit will be reduced in half.

I should say, in response to some media reports that were out this morning, we're being very clear, we're not raising the price before a sale. This is a deficit reduction relative to the deficit that we inherited before the Recovery Act and before any of our policy interventions. That deficit will be reduced in half by the end of the president's first term, so I want to be very clear about that.

How does that happen and how do we get that deficit reduction? There are four main categories of deficit reduction mechanisms.

The first is that we do expect, in large part because of the Recovery Act, and also because of the normal business cycle that occurs, that eventually the economy will recover. And you'll hear again more about that from Christina Romer. That does help to reduce the budget deficit.

In addition, as the president campaigned on, we are allowing the high income tax provisions to expire when they are scheduled to expire at the end of 2010. And in particular, what that means is that, although we are cutting taxes for 95 percent of working families, families making more than $250,000 a year will be asked to pay more in revenue, in taxes, in 2011, and thereafter. In addition, we are closing down a variety of corporate tax loopholes, including involving international transactions, that help to reduce the deficit.

Third, we are winding down the war, and that will reduce costs over time.

Fourth, we are making government more efficient. And let me be a little bit more specific in that category as we begin this process of examine what works and what doesn't.

There is solid evidence suggesting that each dollar spent on program integrity -- that is making sure that, for example, under the Medicare program, providers are paid only when they are supposed to be paid, and not improperly paid -- that a dollar in additional program integrity funding yields $1.60 in savings in reduced -- basically erroneous payments. There are similar solid evidence with regard to the tax gap, with regard to the Social Security Administration. All told, the budget contains almost $50 billion in reduced errors and improper payments, both on the benefit side and in -- on the revenue side over 10 years.

We are also looking at some things that we strongly support but that simply don't work. This administration strongly supports encouraging work among low-and-middle-income families. A big part of that involves the earned income tax credit, which has been a very successful intervention to encourage work among those families.

There is, however, an advanced earned income tax credit, which under one percent of those who claim their earned income tax credit utilize and which is subject to very high error rates. This budget proposes eliminating it, not because we don't support work incentives for low-and-moderate-income workers, but rather because that program simply does not work well. I can go on. For example, in the agricultural side of the budget, we are proposing, as the president suggested during the campaign, a variety of changes that will reduce payments for large farms while protecting family farmers. I'll give you one example.

There is a set of direct payments that are made to farmers that are based just on the amount of land they own, rather than the farming they undertake. Thirty-six percent of farmers receive these payments. The president is proposing to phase out those payments over time for farms with revenue of more than $500,000 a year. That would save $10 billion over 10 years.

Another example involves inefficient subsidies through private lenders that support higher education loans. The evidence suggests very strongly that the government has a more effective way of providing those types of financial assistance to students, and we are proposing $50 billion -- actually, technically, $48 billion in savings in that area. I can go on in more length, but that's the final category of deficit reduction.

All told, there is $2 trillion in deficit reduction contained in this budget, roughly a trillion dollars in reduced spending, compared to the current policy path that we are on, and roughly $1 trillion in additional revenue compared to the current path that we are on.

Finally, while doing that deficit reduction, the budget is focused on three key areas to promote long-term economic performance: education, energy and health.

In education, it builds upon the Recovery Act's investment in early education, because the evidence strongly suggests that high- quality, early education programs pay off over time. It supports higher education through an expansion of the Pell Grant system, and a more reliable funding source for it, along with a dramatic simplification of the application process for those grants. Currently, the application process for Pell Grants is more complicated than the tax code, and that complexity seems to discourage many students from even applying in the first place.

In energy, we are committed to reducing our dependence on foreign oil, improving the energy efficiency of the government's own operations by 25 percent by the end of -- by 2013. Part of that will involve $15 billion a year in energy efficiency investments. So, for example, creating an electricity superhighway that would allow transportation of wind energy from the Dakotas to the population centers where that electricity is needed.

Currently, there's not a connection that let's the available wind energy in the Dakotas get to the population centers that need the electricity. We would invest in things like that. That $15 billion a year would be financed in a fiscally responsible way, along with tax relief for working families, through a cap in trade program that would be a market-friendly approach to reducing greenhouse gas emissions over time, and thereby addressing global climate change.

And finally, let me turn to health care. Health care is perhaps the most important driving force in our long-term fiscal gap. It is already reducing workers' take-home pay to a degree that I think is underappreciated and unnecessarily large. At the state government level, it is crowding out a variety of other priorities, including higher education.

The single-most important thing we could do, and the reason that I am committed to getting this budget done this year, is reform the health system so that we bend the curve on health care costs, and thereby put the nation on a sounder, long-term fiscal trajectory, and also help working families enjoy higher take-home pay, because their employers would not face as large health care insurance costs. How do we do that? There is very significant evidence that there are substantial opportunities to improve the efficiency of health care system.

Just yesterday, a new set of research was released from Dartmouth College showing the very substantial variation across parts of the United States in health care costs, without any corresponding improvements in quality or outcomes in the higher spending, more interventionist kinds of approaches. We seem to have as much as $700 billion a year in health care tests and services that are unnecessary, that don't improve health outcomes, and that just add to costs, both for the federal government and for workers, without making anyone healthier.

The way to get at that has been started in the Recovery Act, in which we invest in health information technology, we start to better measure what works and what doesn't, and we start to pay for better care rather than more care. This budget builds upon that by setting up a process in which we want to get health care reform done this year.

We are putting on the table a significant down payment towards a more efficient health care system. It includes $634 billion towards health care efficiency, including reducing the overpayments that go to private insurance firms that cover beneficiaries under the Medicare program.

We will introduce a competitive bidding process under which those firms would bid for the business of covering Medicare beneficiaries, and would be paid the average of their bids. That is estimated to save more than $170 billion over 10 years.

So I just want to emphasize again, while we're reducing the deficit, while we're being honest and responsible in the numbers, we are also investing in these three key areas of education, energy and health care. And in terms of our long-term fiscal future, the single- most important thing we could do is bend the curve on health care costs.

I'm going to turn it over to Christina Romer, the chair of the Council of Economic Advisers, to talk about...

HARRIS: And at this time, we're going to bail a bit. Peter Orszag, the White House budget director, talking through the budget outline submitted to Congress this morning.

The tax cuts that were to expire in 2010 will be allowed to expire, effectively meaning a tax increase. The White House is counting on savings from the winding down of the war in Iraq. But as Ed Henry mentioned just moments ago, Pentagon costs will increase as the effort in Afghanistan intensifies.

We will continue to drill down on the budget proposals and the savings the president and Peter Orszag believe will be realized by running departments more efficiently and eliminating programs that they have determined aren't working or are wasteful. And, of course, we will drill down on the proposals for health care, coming up in just moments in the NEWSROOM.

You know, on the same day the president announces a $3 trillion budget, we get new disturbing jobless numbers. Live to New York City, and that's next.


HARRIS: You know, the president has promised all kinds of transparency, and if you would like to see the 140-page budget outline for yourself, here's the page: Just go to right now if you would like to read through the 140- page budget outline submitted to Congress this morning by the president.

You know, it has been the pattern all year, the economy losing jobs at an alarming rate, and so it was last week.

CNN's Stephanie Elam is at the business desk in New York with first-time jobless claims.

And Stephanie, this number was surprising.

STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: Yes, it definitely was a surprising number, Tony -- 666,000 people filed initial claims for unemployment benefits last week. That's up 36,000 from the prior week, and the highest level since October of 1982.

Now, the biggest increases in claims, they came in New Jersey. Also, Virginia and Rhode Island.

The number was a bit of a surprise, since many economists actually expected the tally would droop for the week. And you can really see how things deteriorated over the last couple of years. While the claims held fairly steady for February of 2007 to February of 2008, this month's number of jobless claims have doubled from those levels, as you can see there.

Now, the one thing that we really want to take a look at here, and what may be more telling about this government report, is the number of Americans who continue to live on unemployment benefits. These are people who are getting benefits for more than one week.

That figure is at an all-time high of more than 5.1 million, since the Labor Department began keeping records in 1967. So this shows us that people are really, really, really having a tough time getting a new job after they have been laid off, after they have lost their job, whatever the situation may be -- Tony.

HARRIS: Yes. Hey, Stephanie, anything to suggest that things are going to get better soon, any time soon?

ELAM: Not right now. There is really not.

You know, a lot of companies are looking at the economic environment right now, and they're fearful about what this means for their future.

HARRIS: Right.

ELAM: So that means they're working to streamline their operations, so they're not hiring and, in some cases, they are letting people go. So economists predict first-time claims will keep on rising, maybe even reaching 750,000 a week in coming months. But...


ELAM: I know, it's a huge number, and they're saying hopefully that won't happen. But obviously one thing that will help out some people is that Congress has extended the length of unemployment benefits. They did that last year, so hopefully that will help some people stay on their feet and get back and going once the economy turns around here.

HARRIS: Yes. And the Dow in positive territory. Who can figure the Dow? You get a jobless report like this, and the Dow -- who can figure it? Who can figure it?

ELAM: I know. Well, I think a lot of it has to do with the fact that there is some money being set aside by the Obama administration to help out those banks. Seeing that there is more support there, I think that's what's giving the Dow a lift. Financial stocks are up right now.

HARRIS: Stephanie, appreciate it. Thank you.

ELAM: Sure.

HARRIS: More than $9 billion, folks, that's how much General Motors says it lost in the last three months of 2008.


HARRIS: Want to take you back to Capitol Hill quickly, before we get to business news. There you see House Minority Leader John Boehner. He is reacting to the president's budget outline delivered to Congress this morning by Peter Orszag, the director of the Office of Management and Budget. You heard from him just a couple of moments ago.

Again, Peter Orszag, stressing that this is an outline. The full proposal is due in April, but John Boehner is reacting to it right now.

Our senior congressional correspondent, Dana Bash is following this, and we will talk to her again at the top of the hour.

General Motors appears to be running on empty. The troubled automaker is reporting it lost $9.6 billion in the last three months of 2008. GM ended the fourth quarter with $14 billion in cash. And you'll recall, GM got a $4 billion federal loan late last year. If not for that, GM's cash level would have fallen below the 11 to 14 billion it needs to continue operating.

So, how is Wall Street reacting to that huge loss? Susan Lisovicz is at the New York Stock Exchange with a look at GM's stock price.

Good to see you. Good morning, Susan.


In the land of big numbers, this one really still is a shocker. GM losing more than $100 million a day. So there was a reaction at the open. GM shares dropped six percent. Right now, down three cents, but because the stock price is so low, that's a move of more than one percent. GM's shares are, you know, trading at $2.50.

HARRIS: $2.50!

LISOVICZ: For America's biggest automaker. And last week, we told you that GM's shares closed below $2.00, at a 70-year low. So, basically, where it was at in the 1930s.

The big question for investors is whether or not GM is going to make it through. Its CEO, the company's CEO, says the company isn't forecasting any heroic recovery in industry conditions this year. So, it's going to be tough sledding for a while.

In its earnings, GM said it's close to the minimum amount of cash that it needs to fund its operations. Its auditors are keeping a close eye on the company. GM hoping to get another $16 billion from the government, and company executives are in the nation's capital today to ask for those funds.

As for the overall numbers, well, doing better. The Blue Chips up 69 points. Of course, GM is one of the Dow 30 stocks. The NASDAQ is up six points or about half a percent, Tony.

HARRIS: Susan, help me here. GM has been closing plants, cutting thousands of jobs, we're reporting it seemingly all of time here. Isn't that helping?

LISOVICZ: You know, it's helping. But, you know, these are extraordinary times. And when you see the Japanese automakers, which have been leaving GM in the dust, and they're not selling their cars, you get an understanding that it's more than simply its bloated cost structure. But that is a huge problem for GM. It burned through $6 billion in just three months. These problems aren't just GM's. Employers everywhere are cutting jobs, pushing first-time unemployment claims up to 667,000 last week. That's double what we saw the same time last year. One analyst says, first-time claims may reach 750,000 per week in the coming months. And the number of people who continue to get benefits, that's for more than one week, topped five million, the highest on record.

We're in the trenches right now, Tony. I mean, the first six months of the year, pretty much projected by all economists to be the worst part of it. At least that's what we're hoping. So...

HARRIS: What does that number...

LISOVICZ: ... you have to keep that in mind.

HARRIS: What does that number look like if you factor in the people who have run out of unemployment benefits? I don't know where that number is.

LISOVICZ: They've been extended. So that's the good thing.

HARRIS: That's the good news.

All right, Susan, appreciate it. See you next hour. Thank you.

LISOVICZ: You're welcome.

HARRIS: General Motors' problems are certainly not limited to the United States. Check out this protest in Europe. We will tell you what it is all about.


HARRIS: Well, thousands of GM workers in Europe are demonstrating today. They fear losing their jobs, as GM tries to stop bleeding money.

Our Frederik Pleitgen is in Berlin.

And, Frederik, good to see you. What are you hearing from some of those GM workers?

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Well, there's a lot of fear among the GM workers here in Europe, but also a lot of them say they want to fight for their jobs.

Just a little background. GM employs about 55,000 people here in Europe, and the company, the European wing of General Motors, is set to come up with a restructuring plan tomorrow. And, of course, a lot of people, a lot of GM workers here in Europe, fear, Tony, that that could mean job losses and also closing plants here across the European continent. GM has plants in six countries here in Europe.

And, you know, the interesting thing about General Motors here on the continent is that a lot of the GM brands here in Europe are really very traditional European brands. You have Opal (ph) here in Germany and you have Saab in Sweden. So a lot of European governments are now saying they want to try and perhaps get in with those traditional European companies and sever ties to General Motors to try and save those companies on a European level.

But, of course, Tony, there are a lot of problems with that. A lot of research and development for GM is global, really. So a lot of the American cars that are produced, the research and development for those, was done in Europe and the other way around. So, it's difficult to sever those ties, but that is certainly one of the things that is an option here in Europe that's being discussed. But a lot of fear among the workers here looking up to tomorrow to that restructuring plan, Tony.

HARRIS: You hear about job losses all around the world. Frederik Pleitgen for us in Berlin. Frederik, appreciate it, thank you.

Jobs, jobs, jobs. You want to see a sign of the times? Take a look at this. Where is this picture? This is from Davy, Florida. This is a job fair.

Do we have the video? Awesome.

OK. This is the South Florida Diversity Job Fair taking place today at the Signature Grand. This, again, is in Davy. Look at the line. Around the building, around the block. Thanks to our affiliate there in Miami, WSVN.

Let me see here. We've got employers on hand from the U.S Army, Carnival Cruise Lines, Bed Bath & Beyond, Allstate Insurance Company. And this is a fair where they're hiring for positions in Fort Lauderdale, Miami and West Palm Beach. Sign of the times. What a line, as people attend this job fair in Davy, Florida.

President Obama says his budget will help change America's health care system for the better.


OBAMA: We must make it a priority to give every single American quality, affordable health care.


HARRIS: So how is he going to pay for it?


HARRIS: On a very busy Thursday, let's get a check of weather now. Rob Marciano is in the Severe Weather Center.

Good to see you. What are you following today, Rob?

ROB MARCIANO, AMS METEROLOGIST: I want to show you pictures of this volcano we have been watching. Yes, it's cool stuff. Of course, if you live near is, not so cool. Kind of time-lapsed images of this latest eruption. As you know, in May, it peeked its little head out of hibernation after 9,000 years. Kind of buried a town close by.

HARRIS: Is that Chile?

MARCIANO: That's in Chile. Chaiten, I think is the way you pronounce that. About 2,700 feet high, that's with its top. A little less now. And they have pretty much evacuated the entire town and the mayor is saying we've just got to move the town. So they're going to try to do that, and just obviously very active there.


HARRIS: President Obama's budget blueprint. What's in it, and more importantly, what's in it for you? Here are some of the highlights.

Tax increases on the wealthy. If you're making $250,000 or more a year, the plan curbs deductions, effectively raising your taxes.

Health care. We're going to talk about this section of the blueprint with Elizabeth Cohen in just a couple of moments here. Money from higher taxes would go towards a health care reserve fund. It will be used to reform the system and expand coverage for uninsured Americans.

Military spending. The plan will cut some Pentagon weapons programs, but it includes more than $200 billion for U.S. war efforts over the next year and a half.

And here is the president, just last hour.


OBAMA: I worked for the American people. And I'm determined to bring the change that the people voted for last November. And that means cutting what we don't need to pay for what we do.

Now, what I won't do, as I mentioned at the joint session speech a couple of days ago. What I won't do is sacrifice investments that will make America stronger, more competitive and more prosperous in the 21st century. Investments that have been neglected for too long. These investments must be America's priorities, and that's what they will be when I sign this budget into law. Because our future depends on our ability to break free from oil that's controlled by foreign dictators.

We need to make clean, renewable energy, the profitable kind of energy. That's why we'll be working with Congress on legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy. And to support this effort, we'll invest $15 billion a year for ten years to develop technologies like wind power and solar power, and to build more efficient cars and trucks right here in America.

It's an investment that will put people back to work, make our nation more secure, and help us meet our obligation as good stewards of the Earth we all inhabit.

Because of crushing health care costs, and the fact they drag down our economy, bankrupt our families and represent the fastest- growing part of our budget. We must make it a priority to give every single American quality, affordable health care. That's why this budget builds on what we have already done over the last month to expand coverage for millions more children, to computerize health records, to cut waste and reduce medical errors, which save, by the way, not only tax dollars, but lives.

With this budget, we are making a historic commitment to comprehensive health care reform. It's a step that will not only make families healthier and companies more competitive, but over the long- term, it will also help us bring down our deficit.

And because countries that outteach us today will outcompete us tomorrow, we must make excellence the hallmark of an American education. That's why this budget supports the historic investment in education we made as part of the recovery plan by matching new resources with new reform. We want to create incentives for better teacher performance, and pathways for advancement. We want to reward success in the classroom. And we'll invest in innovative initiatives that is will help schools meet high standards and close achievement gaps, preparing students for the high-paying jobs of tomorrow, but also helping them fulfill their god-given potential.

These must be the priorities reflected in our budget. For in the end, a budget is more than simply numbers on a page. It is a measure of how well we are living up to our obligations to ourselves and one another. It is a test for our commitment to making America what it was always meant to be. A place where all things are possible for all people. And that is a commitment we are making in this, my first budget, and it is a commitment I will work every day to uphold in the months and years ahead.


HARRIS: OK. Comments from the president just about an hour ago. If you would like to see the budget outline for yourself and read through it, about 140 pages long, just go to, and we will have a link there that will take you to, where you can read the entire budget proposal.

We want to examine the president's plan for health care. He is vowing to overhaul the system. CNN's senior medical correspondent, Elizabeth Cohen, is here with us to help us do this.

All right. This is a huge - this is a huge issue the president is taking on now. And he talked about it in terms of creating a fund now that is essentially a down payment. But this is some down payment.

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Oh, yes, $634 billion over ten years, that is a lot of money. Because the problem is so huge. I mean, 47 million uninsured Americans. And more every day, because every day people are losing their jobs. HARRIS: So how does the president plan to pay for at least what he is proposing so far, which is this fund?

COHEN: Right. OK. Well, let's talk a little bit about what his goal is.


COHEN: About what he wants to do. So, what I have here, this is his campaign promise. OK, this is what he told us in the campaign. So, let's take a look at a very relevant sentence in this campaign promise, "(Provide) affordable, comprehensive and portable health coverage for every American..."

Ooh, boy, that is a big, big goal. And specifically, let's look at a couple of specifics here. He wants to insure all children. He wants to help small employers afford insurance, because right now small employers often cannot afford to employ their employees. And also people with preexisting conditions buy insurance. Because, I'm sure you've heard of this, if you - if your employer is not giving you insurance and you just want to go out and buy some, but you have some preexisting condition, good luck. It's hard.

HARRIS: We can't do this all by ourselves. Are we talking about a fundamental shift here? We've got this - we've got a public/private system now. Does this become, under this proposal, the tales to come in the budget in April, does this become an even more government-run operation? And then there's the question of, do we really want that? And what's the cost? Because we know that there are taxes that will be raised for folks to come.

COHEN: Right. You are asking the tough questions here. And let me tell you, those are not all answered right now. Because if, in time, Americans start to think what President Obama is proposing is some kind of government-run health system - ala Canada, ala England - he will get resistance in the same way that Hillary Clinton got resistance when she tried to do tried to do this in the '90s.

So that is going to be the big question. Is, will people start to feel like he's pushing too far?

HARRIS: And give me a couple moments here. One point five million seniors making over $170,000 a year will pay higher prescription drug premiums.

COHEN: Right. Because let's think about this for a minute. We're talking $634 billion over ten years, where's that money coming from? We're not picking it up off trees here, right?

HARRIS: Right.

COHEN: OK. So let's talk about some ways that President Obama says he is going to fund that huge amount of money. Here's just three of them.

He says he's going to wake make seniors pay more for their drugs. Because, right now, you can make a bazillion dollars a year and Medicare will help you pay for your drugs. And some people are like, why in the world should the government be helping rich people pay for drugs. So that would save, theoretically, $8.1 billion.

Also, he proposes making wealthy Americans, if you make more than $250,000 a year, you should pay higher taxes. That, he says, will save $318 billion.

Also, he says, right now, Medicare is highly in inefficient. That they over-pay hospitals in some cases, and that that would pay - save $175 billion.

HARRIS: Eddie (ph), I'm sorry, I want to go one more question here.

I know I'm killing my time for Tiger but we need to do this.

One more question. The president and also Peter Orszag, the Budget Office, is saying you have really no idea how much savings is available to us by running the program efficiently and eliminating waste, because that has to be factored into these numbers that we're hearing now. The numbers are shocking. But the White House is pushing back saying, there is a large amount of savings available if we run the program more efficiently.

COHEN: Right. Right. The White House says there's tons of waste and if we only streamline things, we'll save a ton of money. Other folks are saying, you know what, that's not the case. You're not going to save all that much money. We'll see whose right in the future.

HARRIS: I'm getting pounded here. But that was fun. That was fun.

All right, Elizabeth, thank you.

COHEN: Thanks.

HARRIS: All right, TV ratings took a big hit when Tiger Woods' injury took him out of the game. He is back. Live to Arizona where the Tiger is on the prowl again.


HARRIS: Tiger Woods, he is back on the PGA Tour showing why he is the best golfer on the planet. Sports correspondent Patrick Snell is at the Ritz Carlton Golf Club just outside Tucson, Arizona.

Patrick, how'd he look yesterday?


Tiger Woods it looks as though he had never been away from the game. It was vintage Tiger right from the beginning. The so-called bionic left knee, standing up through the scrutiny of the rigors of professional golf.

He opened up against Brendon Jones, the relatively unknown Australian player. And Woods opened up brilliantly. It was a birdie on the first hole. Then just for good measure, he followed that one up with a conceded eagle. So that means he won the first two.

Did Jones have any hope at all? Well, to his credit, he hung on in there. He actually got to within one hole of the game's top player, but he couldn't beat him. Tiger Woods just put his foot down on the gas and accelerated away. He got four holes up, then he just closed it out three and two, Tony. Vintage Tiger Woods.

Next up, Tim Clark, the plucky South African predicted to be a lot harder against him, Tony.

HARRIS: The plucky South African. All right, the fun is back in the game.

Patrick, good to see you. Thank you.

The president's budget blueprint has some republicans seeing red. A close-up look at the $3 trillion plan in the NEWSROOM.