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What to Expect from State of the Union?; Watchdog Keeps Eye on Stimulus Funds; Congressional Hearing Examines Bank Bailout; Small Island Suffers Secondary Effects of Quake

Aired January 27, 2010 - 13:00   ET

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

ALI VELSHI, CNN ANCHOR: I'm Ali Velshi. I'm going to be with you for the next two hours today and every weekday here on CNN, breaking it down for you and letting you understand, with some greater depth, some of the important issues. Every important topic we cover, I'm going to try and break it down for you. I'm going to try and give you a level of detail that is going to help you make certain decisions about your spending, about your safety and security, and maybe over the next two hours, I'll help you understand the world around you a little better.

Now, listen, that's my Twitter page, you can go to it: @AliVelshi. And every day I'm going to give you highlights of who's on. We've got former labor secretary, Robert Reich. We've got Reverend Jesse Jackson talking about how to get money to Haiti more effectively. We've got Christine Romans coming on to talk about the testimony that is underway right now with -- with former treasury secretary, Hank Paulson, and the treasury secretary, Timothy Geithner. We've got Josh Levs on the stimulus project we've been following all week. We've got Ed Henry and Gloria Borger on the State of the Union.

Our coverage starts in seven hours; the president speaks in eight hours.

We'll have Ron Paul on to tell you about stimulus and why we shouldn't have even done what we've done and how to address it now. We've got the White House economic adviser, Valerie Jarrett. So it is a packed show.

But first thing I want to tell you about is some brand-new polls. All this week we've been bringing you new polls about the economy. One of them is where we have asked people what it is extremely important for the president and the Congress to deal with.

Take a look at the No. 1 spot here. The economy is the most important thing for Americans. It's been that way for well over a year. Within that, unemployment, No. 2. So economy 61 percent. Fifty-eight percent say unemployment. Fifty-five percent say terrorism. Forty-three percent say health care.

The wars are up there, as well. The war in Afghanistan, 39 percent say it's extremely important for the president and Congress to deal with the war in Afghanistan. Thirty-eight percent say the war in Iraq. All of this is important for the president as he gets ready for his first State of the Union address, taking place tonight, live in Washington, at Congress. Our coverage of that will be full, and it's already on.

Let's bring in our senior political analyst, Gloria Borger. She's joining me. She's ready. She's in New York.

Gloria, I guess -- I guess there are a lot of questions here, but we hear from the president and we hear from his advisors every single day. Why is tonight different?

GLORIA BORGER, CNN POLITICAL ANALYST: Tonight -- tonight's a really big night for them, because don't forget, it was just a week ago they had that huge loss of a Senate seat in Massachusetts.

And they've been sitting in the White House, I can tell you, doing an awful lot of soul searching, doing an awful lot of what they call prioritizing in Washington, trying to figure out whether they can salvage this health-care bill, and how they would salvage it. And also how to take a turn and let the American public know that they are focusing on those issues that you just had up there on the screen.

VELSHI: Yes.

BORGER: Ali, because it's very clear the American public is saying, "Wait a minute. You spent so much time on health care, but I don't have a job. And I'm worried about my future and my kids' future, so you'd better get cooking on that."

VELSHI: Let's take a look at a couple more of these -- these poll results. We asked how things are going in the country today. Thirty-two percent said they're going well. Sixty-seven percent, two- thirds, say it's going badly.

And then we asked how things are going for you personally. Seventy-six percent -- this is interesting -- said well, and 23 percent said badly. So in other words, even if things are going OK, you think the country is going to hell in a hand basket.

So you just said something about this is an opportunity for the president to take a turn. How does he do that?

BORGER: Well, it's interesting, because one thing the public is also concerned about is the deficit, the fact that he seems to be spending too much.

So, what he's got to do is he's -- he's got to be confident, but he can't be arrogant. People like a confident president. So, he wants to say to them, "I'm starting to get this under control. We are in a better place today than we were a year ago." So, he's got to show them some progress.

But he also has to show where he's going to take them. And that he's not going to break the bank in doing it. So, he's going to talk about how he wants to get the deficit under control, how he's going to have this spending freeze, how he's going to have this deficit commission.

But, at the same time, he's going to say, "I'm also going to try to do things to stimulate jobs, to make sure the unemployment rate starts going down."

So, it's -- it's a very tricky thing, Ali, because it's a little bit of a mixed message: "I'm going to try and save money, but I also have to spend money..."

VELSHI: Yes.

BORGER: "... and also to save money in the long term." It's not easy.

VELSHI: You're going to be listening to this. We're all going to be listening in tonight in our coverage of it. Is this a messaging issue, or has the president actually got to lay out a change in direction?

BORGER: You know, when you talk to people in the White House, they will admit freely and say this has been a communications problem for them. They didn't communicate the health-care bill, for example, very well, because when you poll people about the things, what's in the health-care bill, they like it. But then when you ask them, do you like this health-care reform plan, they say absolutely not.

But he also has a programmatic problem here. And that's people don't want too much government. Because trust in government is at the lowest it's been since Watergate, Ali. So, he's got to say to them, "I can help you, but I'm not going to give you huge, fat, government programs that are going to make things better for you." So, he's got to kind of narrow his focus to a certain degree.

VELSHI: All right. So, it's going to be very interesting for all of us. Gloria, you'll be there. We'll be there together.

BORGER: We will.

VELSHI: Gloria is one of our best, but our full team, our political and economic team, will be tuning in.

BORGER: Our big team.

VELSHI: A big team, a big effective team. We'll all be there, watching tonight for the State of the Union. Our coverage begins at 8 p.m., although we will be covering the lead-up to it all afternoon. Our special coverage, as I said, does kick off at 8 p.m.

What we do have to talk about and what we've been focusing on this week at CNN is the stimulus project. How much of it is actually been spent and whether or not you're actually getting your value for it.

Now, we're going to talk to a man with a very big job. It's his job to keep tabs on billions of your tax dollars. You may not know who he is, but you should. (COMMERCIAL BREAK)

VELSHI: All this week we're looking at CNN stimulus project. We are reviewing some of the 57,000 projects that have been funded by the government. As of now, $3.5 billion worth of projects are under review by our stimulus desk. This is the stimulus desk right here. Robert's going to show them to you. They are calling individual projects recipients to find out where the jobs are, who's actually created jobs as a result.

Now, we're doing this, but all across the network, we're covering the stimulus project. Kate Bolduan went out and spoke to the guy who's actually in charge of administering this program.

Kate, tell us a bit about this.

KATE BOLDUAN, CNN CORRESPONDENT: Hey, there.

Well, he does have quite a big job. And one of the biggest parts of this jobs, Ali, is running the administration's stimulus Web site, Recovery.gov. And what we're all talking about and have been is $862 billion, a very big number. And we have exclusive access to the man and the office of the stimulus watchdog.

(BEGIN VIDEOTAPE)

BOLDUAN (voice-over): An early-morning carpool with his wife, arriving at a nondescript building just steps from the White House, probably not what you'd expect from the man tasked with overseeing hundreds of billions of taxpayer dollars.

EARL DEVANEY, CHAIRMAN, RECOVERY, ACCOUNTABILITY AND TRANSPARENCY BOARD: Tom, what's your start today?

BOLDUAN: His name, Earl Devaney. Official title: chairman of the Recovery, Accountability and Transparency Board, affectionately known as the RAT Board.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: With the appointment of Earl Devaney.

BOLDUAN: Sixty-two years old and ready to retire, Devaney was appointed by President Obama just days after the stimulus bill was passed.

OBAMA: I pointed out just when I saw him, he looks like an expectant dad. He's tough. You know, he barely cracks a smile.

BOLDUAN: He found out the president was planning to make that announcement just ten minutes beforehand. His wife got the news from a co-worker who saw it on TV.

DEVANEY: So, I had a hard time coming up with the right birthday present this year, the right Mother's Day present, the right Christmas present.

BOLDUAN: We spent a day with Earl Devaney to find out how he does his job, watching out for your money.

(on camera) Anyone coming up, saying, "Where are my tax dollars today?"

DEVANEY: No, nobody today. But I wouldn't be surprised. I think -- I really do think that if you're going to steal money, this is not the money to steal. There's too many eyeballs on it.

BOLDUAN (voice-over): His staffers call him the big guy. He's a former college football lineman, later a Secret Service agent turned inspector general. He's best known for helping uncover the Jack Abramoff lobbying scandal at the Interior Department.

(on camera) You are the watchdog of the stimulus. How big is this job?

DEVANEY: It's a momentous figure of $887 billion, which is very hard to get your head around. The job is what I.G.'s do. Every day we look for proactive ways to prevent fraud, waste, and abuse.

BOLDUAN (voice-over): And we now know the stimulus total is up to $862 billion.

DEVANEY: What about the states? Are they coming in?

BOLDUAN: Devaney is considered a straight shooter and no nonsense, but did come under fire when bad information surfaced on the recovery Web site, including reports of stimulus jobs in ZIP codes that don't exist.

So far, though, he maintains a rare reputation in Washington: well respected on both sides of the aisle.

UNIDENTIFIED MALE: I encourage you to continue doing the great work that you're doing.

UNIDENTIFIED MALE: I'm very appreciative of your work.

BOLDUAN: Republican Darrell Issa calls Devaney the most honest man he knows.

REP. DARRELL ISSA (R), CALIFORNIA: I think there's going to be one silver lining to the stimulus, and that's going to be the work that Earl Devaney and the whole Recovery.gov is doing.

BOLDUAN: He answers directly to Vice President Biden.

(on camera) And there were two things that you made very clear to tell the vice president.

DEVANEY: I would tell him what he needed to hear, not what he wanted to hear, and then I would probably make him mad, in the first six months.

BOLDUAN: How did that work out? DEVANEY: I think -- I don't know if "mad's" the right word, but I've -- the vice president and I have had some interesting discussions.

BOLDUAN (voice-over): Those interesting discussions have likely included Devaney's take on counting stimulus jobs. Last November when critics raised questions about White House claims of how many jobs the stimulus had created or saved, Devaney suggested the numbers aren't so clear.

DEVANEY: I believe that the principle downside of transparency is embarrassment, and there is enough of that here to go all around.

BOLDUAN (on camera): Why should the American public trust you, trust Earl Devaney, with their tax dollars?

DEVANEY: All I've ever done is tried to ensure that the American people don't get ripped off or don't have their money wasted.

BOLDUAN: One year ago I would have to believe so many people would say they had no idea who Earl Devaney was. Would you have preferred to keep it that way?

DEVANEY: Yes.

(END VIDEOTAPE)

BOLDUAN: So, while the chairman was not releasing information on ongoing investigations, Ali, the board has received more than 1,000 complaints of wrongdoing. They've opened 106 investigations and have 25 criminal cases in the works. You can only imagine that job and that number could possibly climb as more money heads out the door.

VELSHI: Of course, as he said, there's a lot of eyeballs on this, too many eyeballs on this money. That's what we're doing this week.

We've got phone calls going into a lot of these projects and we're in touch with the vice president's office. And when we find something that does seems unusual, as you know, Kate, they've actually told us, they agree with some of our findings on this.

BOLDUAN: Right. Good work, Ali.

VELSHI: Kate, good to see you. Thanks very much.

BOLDUAN: Thank you.

VELSHI: Great interview. Kate Bolduan.

Listen, let's take a quick look at what's going on in Washington right now. There's a hearing under way. Henry Paulson is testifying, and Tim Geithner was testifying right before him. So, the previous treasury secretary and the current treasury secretary. We're going to go find out what they're talking about -- it's getting pretty heated in there -- when we come back. (COMMERCIAL BREAK)

VELSHI: All right. Want to get right to this. There's a hearing going on, on Capitol Hill. Christine Romans is here to make sense of it. It got very hot this morning when Treasury Secretary Timothy Geithner was on the stand, and now Henry Paulson, the former treasury secretary.

Christine, just -- I want to -- take us back for a second, to September 15, 2008. It was a late Sunday night, and we were all surprised to learn -- we knew that the government was meeting with some big bankers, and they were trying to save Lehman Brothers. And it failed on a Sunday night.

And the next day, on Monday, they announced a massive bailout of AIG for its problems: $85 billion at the time. It soon became much higher. And that was really the front end of the depths of this crisis for so many people. And that's what's going on today. The discussion going on today was who knew what, when, and what were they doing on those -- those days.

CHRISTINE ROMANS, CNN ANCHOR: And who were they paying? Were there back-door bailouts of some other big banks? And were there cover-ups about what the public should know about that big bailout of AIG?

Look, this was pretty much a circus. You're seeing Henry Paulson right now, by the way, the former treasury secretary, who's answering questions. But earlier, it got very hot for Timothy Geithner, some Democrats, some Republicans challenging him on what he remembers about -- about the bailout.

He says he did not have a role, Ali, in deciding that some big banks were going to be paid 100 cents on the dollar by -- by taxpayers for their exposure to AIG. But listen to this exchange.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It makes me doubt, it makes me doubt, your commitment to the American people. It makes me doubt Mr. Paulson's -- Mr. Paulson's commitment to the American people, and I think the commitment to Goldman Sachs trumped the responsibility that -- that our officials had to the American people.

TIMOTHY GEITHNER, TREASURY SECRETARY: Congressman, I respect your opinion. I know you hold those opinions strongly, but I completely disagree. The American taxpayer would not have been better off if the government had made it possible for equity holders in Bear Stearns to get more money. The American taxpayer would not have been better off if we had let AIG default.

(END VIDEO CLIP)

ROMANS: At issue here, Ali, as you know, we can put up the numbers of some $62 billion of payments of AIG money and taxpayer money to some big banks, some big foreign banks, to Merrill Lynch, to Goldman Sachs, Societe Generale, the biggest beneficiary there.

And what these congressmen and women are charging, they're charging that the New York Fed, under the direction of Timothy Geithner, and the Federal Reserve and the United States Treasury did not negotiate well enough on behalf of taxpayers and that, in a sense, the taxpayers got ripped off twice.

VELSHI: So -- let's push -- Robert, push back into that graphic for a second. I want to just talk about this for a second with Christine.

So AIG got our money, $85 billion, to bail them out. And what happened in turn was, they -- part of the reason they needed the money is to pay off these other banks that had a financial relationship with them.

And I guess the allegation is that, should Henry Paulson and Tim Geithner, who was then the head of the New York Federal Reserve, which oversees financial institutions, should they have cut a better deal? How come those banks on the screen didn't have to take a haircut, when ultimately everybody else in America had to take a haircut, had to suffer somehow because of this crisis?

ROMANS: Right. The American -- that's absolutely right. And that -- there's no real headway on that in this hearing. You'll notice on that screen, all of those different banks, only two of those were American banks. You look at the next -- I mean, there's this idea of American taxpayer dollars going right into AIG and then right out the door again. And that's something that has really unnerved a lot of these folks.

There's also this -- this allegation, this appearance, really, that there was some sort of a cover-up, of keeping some of these details away from the public in the fog of war, because they were worried about some kind of run on AIG or a run on some of these -- on some of these banks.

And that's the bottom line, Ali: were these just frenetic decisions made by various staffs of regulatory agencies in the chaos of that moment? Were these fatal mistakes, or were these all decisions that were made, really, for the best interests of the American people? And we really just don't know that right now.

I will say that Henry Paulson, in the only light moment of the past 2 1/2 hours, the only light moment was someone said to Henry Paulson, "You must be happy to be back in Washington."

He said, "You can't guess how much." And I can -- I can bet 100 cents on the dollar that he's joking.

VELSHI: Yes. No kidding. Christine, thanks for this.

ROMANS: Sure.

VELSHI: You can watch Christine and me both, Saturday at 1 p.m. Eastern and Sunday at 3 p.m. Eastern, where we co-host "YOUR $$$$$" on CNN.

We're going to go back to Haiti after the break. Ivan Watson is there. He's taken a trip to an island that wasn't hit by the quake but is suffering, almost as if it was. Stay with us.

(COMMERCIAL BREAK)

VELSHI: OK. Week three of the rescue and recovery is under way in Haiti. Ivan Watson's been in Port-au-Prince since the beginning. Now he has taken a trip. He's back in Port-au-Prince, but he's taken a trip out of there to take a look at areas that weren't hit by the quake, but really, really have felt some devastating effects -- Ivan.

IVAN WATSON, CNN CORRESPONDENT: Absolutely, Ali. It's week three. You've still got hundreds of thousands of people homeless, like in the park behind me, sleeping in makeshift tents.

Harder to gauge is the secondary impact of this earthquake on places that weren't physically hit, but are now seeing medical care disappearing, the price of food skyrocketing, fuel -- difficult to get fuel, and we took a look at one of these places.

Let's watch this report.

(BEGIN VIDEOTAPE)

WATSON (voice-over): It looks like paradise. Dolphins darting through the water during the ride to Isle de la Gonave, an island off the coast of Haiti.

A bit closer, and it starts to feel like you're going back in time. This wooden sailboat normally ships vital food from Port-au- Prince to the island, but the capital is shattered now, and the captain warns food on the island is running out.

Locals call Isle de la Gonave the forgotten island. It's crushingly poor, and the earthquake on the mainland is only making things worse.

UNIDENTIFIED MALE: This isn't hit by it, but we still feel it.

WATSON (on camera): How?

UNIDENTIFIED MALE: Hunger.

WATSON (voice-over): With food prices skyrocketing, a missionary group is trying to help, bringing in 500 pounds of rice and baby formula aboard this small plane.

UNIDENTIFIED MALE: It's completely cut off, and that's why we started coming here.

WATSON: The U.S. military is pitching in, too, with Navy doctors working at this small clinic.

UNIDENTIFIED MALE: It hurts, where? UNIDENTIFIED MALE: Hey, get L.T.

WATSON: Some of their patients suffer from new injuries. Others have been cut off from advanced medical treatments on the mainland.

UNIDENTIFIED FEMALE: Can he move his feet? Can he move his...

WATSON: Nine-year-old Jean Donaldson (ph) was supposed to have the pins removed from his leg at a hospital in Port-au-Prince last week.

UNIDENTIFIED FEMALE: OK. So, he can't go back to Port-au- Prince?

UNIDENTIFIED MALE: No.

WATSON: After several hours, the doctors leave, leaving behind medical supplies for the clinic. Kids chase them as they head back to the beach. Their hovercraft waits like some giant spaceship from another planet.

The doctors are going back with some new passengers: 9-year-old Jean Donaldson (ph) will finally get the pins out of his legs.

LT. KISHLA ASKINS, U.S. NAVY DOCTOR: He has an external fixator. He has two of them on that he's unable to have taken out, and he's well overdue. It's something that we can do on the USS Nassau to help him.

WATSON: For a few hours, residents of Isle de la Gonave don't feel quite so forgotten.

UNIDENTIFIED MALE: That's the reason why we feel very proud the Americans is coming. This thing you see here is the first time the Haitians see that thing.

WATSON: But then the hovercraft blasts off. Until the next visit, these poor people will have to fend for themselves.

(END VIDEOTAPE)

WATSON: Now, Ali, amid all this misery, perhaps the best hope for this country are the Haitians themselves and their own resilience.

Pete's going to swivel over here, behind me, what we just noticed. There used to be a first aid clinic where we saw people literally dying on the sidewalk getting treated for serious injuries. And now we just noticed in the past 24 hours, locals have started setting up stalls, selling trinkets, selling jewelry, three weeks after this devastating crisis.

This is a way that people are going to try to survive and try to get by. It's really amazing, Ali.

VELSHI: All right. Well, there's obviously no infrastructure to accept tourism, so they can't be selling that to tourists. I guess it must be some attempt to return to some normalcy in an environment which is just so shattered.

WATSON: Absolutely. Trade, try to -- any way to try to make a dollar or the Haitian currency, try to feed your family. And that's what we're seeing right behind us right now.

VELSHI: All right, Ivan Watson, thanks again for the great continued work on the ground in Haiti, along with all of our CNN team.

When we come back, we'll go live to chilly, Davos, Switzerland, where the French president got a little bit heated in his opening speech at the World Economic Forum. Richard Quest is there, and he's going to make sense of it all for us.

(COMMERCIAL BREAK)

VELSHI: I don't know whether we got a cheap flight for Richard Quest, which is why he's been in Davos long before the World Economic Forum started, but he has been there, and finally, the thing is under way. So he's actually got some news to report for us.

Richard, now that they've got you working, what can you tell us?

RICHARD QUEST, CNN CORRESPONDENT: You can be so cruel, Mr. Velshi, or perhaps it's just jealousy.

Listen Ali, President Sarkozy has opened formally the world economic forum. Now, remember, the agenda item is really about how to restructure the global economy, essentially especially the banks. Sarkozy left no one in any doubt. It was a brutal, frank, honest speech.

He talked about needing deep, profound change. He talked about what role for capitalism in the future. He asked, what do we want to do with capitalism? The change of regulation, the change of accounting rules. Frankly, he came right into the heart of capitalism and then attacked it!

(BEGIN VIDEO CLIP)

NICOLAS SARKOZY, PRESIDENT OF FRANCE (through translator): Without state intervention, everything would have imploded -- total collapse. This is not a matter of liberalism or state intervention or socialism or being from the left or from the right. It is a fact. And not to draw the lesson from what we experienced a year ago, namely, that we need deep, profound change, means that were we not to change, we would quite simply be showing tremendous irresponsibility.

(END VIDEO CLIP)

QUEST: And he attacked the banks and policymakers for too much leverage and leverage. He even used the phrase, which, of course, I can't quite say in French, that it was a theory and a philosophy of the fast buck. Now, why is this important, Ali...

VELSHI: Yes. QUEST: ... because this is all setting the agenda. This is all the groundwork for the discussions, not just here, but in the G-20 as to what governments will find acceptable as they move forward.

VELSHI: And it's sort of a sense that everybody there is looking for permission to speak their mind and if we kick it off with somebody in a position of such authority, a government leader, saying, let's admit that the system that got us into this may be partially or more than partially broken. It probably sets the table for discussion about that, that is, possibly substantive.

QUEST: Yes. Yes, because you -- let's take Bob Dimon who is the head, the CEO of Barclays Capital, Bob Dimon here at Davos has already come straight out and said, President Obama's plans will not work. They don't make sense and he doesn't think they're the right way forward. That's my paraphrasing.

Stephen King of HSBC, believes the same thing, that they're not the right way. So, what you're starting to see -- and we're at the embryonic stage of the battle -- is this discussion, maybe more than embryonic, perhaps, but people setting out their stalls, the lobbying taking place. And into this inferno, Nicolas Sarkozy has just thrown a dollop of gasoline that, frankly, will determine the direction, certainly here in Davos.

VELSHI: And what you're missing here, of course, in the United States is that in DC, Treasury Secretary Geithner and former Treasury Secretary, Paulson, there's a little bit of gas on the conversation with them about their role in the banking sector. I'll keep you posted on that. Richard, have a good time. You promised us video of you skiing. I didn't see it on TV today. So maybe you can just e- mail that to me or something, Richard Quest.

QUEST: Tomorrow, tomorrow, tomorrow.

VELSHI: That's what he always says. Richard Quest in Davos, Switzerland.

We've got breaking news here, Apple finally peeling back the curtain on its long-awaited tablet. It's called the iPad. Apple CEO Steve Jobs introduced the gadget today. The screen is about 10 inches. You can use to it watch videos. You can surf the web, play games and, of course, read electronic books. No price tag and information on it yet, however, we are going to get a report on this very shortly from -- from our people at CNN who are studying what's going on, what this means, how much it's going to cost and the impact that it's going to have. A pretty exciting day for those of you who are early adopters of technology. This may be something -- or this type of thing might be something that we use very -- very frequently in months and years to come.

All right. Other news that is important to you. Toyota. We've told you about this Toyota recall and the freeze of sales on eight Toyota models. For those of you who know people who drive Toyotas or you drive one yourself, when we come back, come back with a pen and paper. We've got the number to call and the types of cars that are affected by this. Stay with us.

(COMMERCIAL BREAK)

VELSHI: OK. Some of you may already know this. If you own a Toyota, you've probably heard about it. If you went to buy a Toyota, you may have heard about it. Toyota is suspending sales and temporarily shutting down production of eight models because of faulty gas pedals that could get stuck.

Let's go through what they are. There are certain Camry, one of the best-selling cars in history, certain of the 2007 to 2010 Camrys, not all of them, but you should call and find out whether yours is affected. The 2010 Highlander, the 2007 to 2010 Toyota Tundra trucks and the 2008-2010 Sequoias. These ones are four of the ones that are being -- suspended for sales. Also the 2009-2010 modes of the Rav-4, the 2009-2010 models of the Corolla, same years for the Matrix and 2005-2010 models of the Toyota Avalons.

If you have any of these cars, call up the dealer, to find out what you have to do about it. If you planning on buying any of those, you're going to have to wait. They will be available in time. The idea is that they can fix them better at the factory than they can if they ship them to the dealers and have them retrofit what is necessary.

There are by the way a number of brands associated with Toyota that are not involved in the recall, not all Toyota cars, the Toyota Scion and Lexus brands are not involved. However -- however -- Lexus is part of an ongoing recall because of a gas pedal that could get stuck under a loose floor mat. So, again, if you've got a Lexus, just call the dealer. It doesn't cost you much. Just call up the dealer. The number's on the screen, 800-331-4331. That's on the bottom of your screen. Six North American plants are being -- are being shut down until they figure this out. Factories in Indiana, Kentucky, Texas and in Canada.

All right in Peru, heavy rains are unleashing mud slides near the famous Incan ruins in Machu Picchu, reportedly killing at least seven people. Roads are closed. A bridge has collapsed. The only train that you can get to and from there on is blocked. The railway is blocked. Emergency crews are working to evacuate hundreds of stranded tourists.

In Washington, Federal Reserve Chairman Ben Bernanke is looking for a second term. The Senate has set a vote tomorrow that would pave his way. There's been some talk that some Democrats want to block his confirmation. But the Senate leadership believes cautiously it has the votes to keep Bernanke on the job. We're going to be hearing by the way from the Fed in less than an hour about interest rates.

And she has the president's ear and in a minute we're going to have hers. Senior presidential advisor Valerie Jarrett joins me live from the White House on the state of the union and the state of the president's agenda.

Stay with us. (COMMERCIAL BREAK)

VELSHI: Watch for our state of the union coverage all afternoon, starting at 8:00 with our whole team. Right now the whole team is on the stimulus desk, the stimulus project with CNN. These are the 57,000 projects, details on them. We're making calls, what are you finding, Josh?

JOSH LEVS, CNN CORRESPONDENT: It's interesting. The more we see, the more we realize it starts to feel so random in some cases with which projects out there got funding and which ones didn't. I've a really good example for you now. It's something that we touched on earlier this week. It turns out they got about 10 times more money than we knew about.

Let's show you this graphic first of all. This is for primate research. It's based at Tulane University and we're talking about more than $3 million, $3.2, a little more than that, -- for primate research, a center at Tulane. They say jobs created, 21 so far. They say there will be a total of 40. What I always want to know is that last thing and you and I have talked about this, not just how many jobs, because job is such a buzz word right now, how long do they last? These are pretty lasting jobs as these things go. We're not talking two weeks on a construction site, two years for a lot of these jobs.

VELSHI: In case people wonder, the primate research is to bring in colonies of primates to study diseases like AIDS, like (INAUDIBLE)

LEVS: Let's zoom in here for a second actually. You guys can take this. I'm going to show you some images of this on this computer here. And what we have is the official website for Tulane national primate research center. They do a lot of research as Ali was saying. They look at AIDS. They look at malaria and how it spreads. They are talking, a really interesting website, too. They talk about whether it's humane and what steps they take to make sure their research is humane.

And they also have told us that this specific research would have been told off, they don't know how long, were it not for this specific research would have been put off, they don't know how long, were it not for this amount of money. It's just a good example to stop and take a look at this because what we're saying is, sure, it is a great project but there are other great projects too that didn't get funding. How does that get decided? Ultimately, that's the big question surrounding the stimulus.

VELSHI: We're going to keep working through it and hopefully some trends will emerge. Josh, thanks very much and the great work that you're doing on the stimulus desk.

Let's go to the White House right now, Valerie Jarrett joins us. She's a senior presidential adviser. Valerie, thanks for being with us. Good to have you on the show.

VALERIE JARRETT, SENIOR ADVISER TO THE PRESIDENT: It's my pleasure. Good afternoon Ali.

VELSHI: Valerie, we were watching the Sunday shows and you had the most conservative estimate coming out of the White House of the number of jobs created by the stimulus bill, something Josh and I were just talking about. You said thousands and thousands of jobs. We're trying to get our head around it. What's your best guess as to how effective the stimulus bill, the recovery and reinvestment act has been in terms of creating jobs for Americans.

JARRETT: I did take some teasing over that. The stimulus bill has been very effective. I was really speaking in terms of firemen and teachers and policemen about jobs that have been saved. As of last month, the estimate was up to 1.6 million jobs have been created. That number's going up, obviously. And so when you look at where our economy was a year ago, when the president was able to get the Congress to adopt the stimulus bill and how it helped bring us back from the brink of disaster, we believe it's been very effective and we still have a long way to go. So, it's been a tremendous program, very successful.

VELSHI: I want to ask you something, brand new polling that we got just at the top of the hour, CNN Opinion Research Corporation. We did ask about where respondents thought the stimulus money mostly went. About 36 percent say it went to benefit the economy. About 63 percent said it went to political projects with no economic impact. What's the response to that? I'm not asking you whether that's right or wrong, obviously we're studying that with the stimulus project, but what's your response? Because clearly people aren't getting the message if those numbers aren't accurate.

JARRETT: If that's the poll, then I think we have to do what we always do and that's work harder to communicate. The stimulus package has been very helpful, as I said earlier, in terms of jobs for local and state government, whether it's firefighters, policemen, all kinds of different state and local jobs as well as extending unemployment for people who lost their jobs. It's getting COBRA benefits for people who lost their jobs, providing a tax break to 95 percent of working families, something that the president committed to do in the course of the campaign and fulfilled immediately. Investing in education, in innovation, in green jobs and energy, and it is -- it is a whole big package. And so getting the message out about each single component is a challenge and we'll work hard every day to get that message out.

VELSHI: What are we going to see? What do you think we're going to see with respect to the president talking about that? One of the issues that has cropped up out of stimulus, out of health care, whether you agree with these programs or not, is a sense of out-of- control government spending and that seems to be reflected in some of our polling and some of the news we've seen. So how does the president convey the good work that you say is being done versus the discipline that seems to be that Americans are craving?

JARRETT: Well, they're craving discipline and they are deserving of that discipline. In this economic climate, every single penny of taxpayer dollars that we spend should be spent efficiently and wisely. One of the reasons why the president asked the vice president to take charge of overseeing the stimulus spending is to make sure that that layer of senior discipline was imposed and we've done a tremendous job. It's been transparent. It's not to say there haven't been bumps along the road. That's the case with any enormous package, but the discipline and attention and focus that has been brought to the funding of those dollars I think is second to none that we've ever seen before in the public sector and many in the private sector. We're taking best practices from wherever we can and imposing that discipline.

Looking forward, a big part of the president's speech tonight will be focusing on jobs. The engine of our -- of jobs, as you well know, are small businesses, so he will be discussing what he can do to incentivize small businesses to invest, to give them the tax breaks that they need to continue to invest and grow and support them. He'll be focusing on infrastructure and how important that is to our economy. The backbone of our country is investing in our infrastructure, as well as jobs of the future, green jobs.

VELSHI: Let me ask you about jobs for a second. One of the reasons that the stimulus went from $787 billion, the Congressional Budget Office increased the estimate of what it's going to cost by $75 billion, is because the estimate that the White House and the administration used for unemployment turned out to be too low. We're at 10 percent. We were estimating 8 percent. What are you estimating going forward? What do we think unemployment's going to look like a year from now, two years, three years?

JARRETT: I'm not the economist. There are plenty of people who can come on the show and predict what the unemployment rate will be in the future. But I can say this to you. Everybody, the economists, everyone did not realize a year ago how absolutely close to the brink of economic disaster we were. We were literally hanging on the precipice. And we knew it was bad, which is why the projection of an 8 percent unemployment rate was crafted. We did not realize it would be as bad as it was.

Just keep in mind, we were losing 700,000 jobs a month, a year ago. We've cut that down to 10 percent. That's still too high. Our unemployment rate of 10 percent is still too high. If there's a single American who wants to work who isn't, the president is still committed, as he has been throughout the year, to challenging his economic team every single day to come up with new measures for jump- starting the economy.

But the other thing we all know is that the public sector can't do this alone. We have to foster the kind of environment here in the United States for companies who want to invest and grow. And we have seen a tremendous amount of that over the last year, but we're still losing more jobs than we're gaining.

VELSHI: Yes.

JARRETT: And we have to turn that around.

VELSHI: Valerie Jarrett, thanks for joining us. Valerie Jarrett is the senior presidential adviser. Good to talk to you and of course, we'll all be tuned in all day waiting for the president's comments which begin at 9:00 Eastern. Our special coverage on CNN begins at 8:00 p.m. Eastern. We'll be covering every aspect of the president's state of the union address, both the political side and the economic side, the impact that it's going to have on you.

In a moment, I'll speak to the former labor secretary of the United States, Robert Reich, to get his take on what's working and what's not. He's standing by for our conversation and pretty soon, I'll speak to Congressman Ron Paul, who has been on Capitol Hill today grilling the Treasury secretary and the former Treasury secretary. We'll get his views on the banking system, the economy and stimulus.

Stay with us.

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VELSHI: All right. We want to go out to Berkeley, California, where Robert Reich is standing by. He is the former Labor secretary of the United States. He is a professor of public policy at UC Berkeley. He's an author. He's a columnist. He's a blogger. He keeps very up to speed with everything that is going on.

And Robert, I would tell you that if I were the president's staff right now, I would be a little concerned at the direction in which things are going. There seems to have been a real turn of opinion about how this administration is running the political and economic, the political and economic track of this country right now.

ROBERT REICH, FORMER LABOR SECRETARY: Ali, undoubtedly people are worried about their jobs, their incomes, their savings, their homes and as long as this recession continues, that worry is going to affect the president's standing. But Washington is a little bit of an echo chamber. I think Washington, a lot of people in Washington are kind of panicked. They look at the polls and they think things are much worse in terms of politics than they actually are. The president still has a great deal of support out in the hasting (ph).

VELSHI: Let's take a look. You mentioned polls. We've got some polls. One of them that surprised me, we asked are economic conditions the worst in your lifetime, 77 percent of our respondents said yes.

This is another one we are looking at. Just keep that up for a second, all right, let's switch to the other one.

We asked if things are going badly in the country, 67 percent said yes, but that is lower, Robert, than it was a year ago when 79 percent said yes. So the bottom line is this White House does not seem to be capitalizing on what seems to be a slightly improving trend. People still seem to be thinking it is very bad.

REICH: Well, Ali, I think that there are kind of two theories about politics and the economy. One holds that the absolute levels of unemployment and economic slowness or the speed of the economy count a great deal. The other view and I must admit I hold to the second view, is that the direction things are moving in are actually most important.

And what you just showed, those graphs you just showed actually indicate that not only are things getting better, but I think the White House and the Democrats are in better shape than a lot of panicked Washington otherwise thinks. It is the direction that people are going to catch on to. If people feel that things are moving generally in the right direction, then by November, the Democrats should do perfectly fine.

VELSHI: Obviously, things would improve dramatically if the employment situation would improve even less than dramatically. You were the Labor secretary. You understand these things. You're an economist. What exactly can if anything, what can the administration do to turn that around?

REICH: A president is blamed or credited for an economy to a much larger extent than the president actually deserves, whether things are going well or things are going badly, because the Federal Reserve Board has a huge role to play. Ben Bernanke is a key player here. The president does not control the Fed obviously.

Also, Congress is a big player, but most importantly, businesses have got to decide to hire and small businesses are the most important of all, because they are responsible for most jobs. So what the president needs to do tonight and in the future is number one, be very clear with the public that his number one priority is jobs.

Number two, also be clear that he is going to try to create jobs by making it easier for small businesses to get credits, providing perhaps new jobs, tax credits for small businesses.

Number three, changing the focus of his attention from Wall Street to Main Street and be very, very clear that he had -- he is fine -- he's very pleased that Wall Street is back up on its feet, but now it is critically important to make sure that the rest of America is back up on their feet.

VELSHI: In fact I just showed a poll when we were talking to Valerie Jarrett, that 65 percent of our respondents said that the stimulus money went most to political projects as opposed to those that benefit the economy. I want to talk about how we get back to Main Street and get the focus off Wall Street when we come back with Robert Reich.

Stay with us.

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VELSHI: We are back with Robert Reich, a professor of public policy at UC-Berkeley, but for purposes of our conversation he was also former labor secretary. Robert, you were a close adviser to President Clinton. You were cabinet secretary. This is President Obama's first state of the union address tonight and some people -- Gloria Borger, who we spoke to her earlier today and whom you know, Gloria says this is a remarkable opportunity for the president to make a turn, to make a shift toward those things that appear to be more important to Americans who are feeling a little left out of the economic conversation right now.

REICH: I think that is right, Ali. It is also an opportunity for the president to connect the dots, to show people what he has been doing, where he wants to take the nation, why every item that he has been particularly concerned about is related or to the extent it is related to jobs and how he is going to focus in the future.

This is a framing opportunity for him, not an opportunity to make a big list of things. I would advise him, avoid the lists. People's eyes glaze over. They don't want to hear a lot of specific policies. What they want most to hear is what the president overall wants to do, where he's going to lead the nation, how he is going to do it and where the values are.

VELSHI: In the event that the White House is still watching, because Valerie Jarrett was on a few moments ago so they may have the TV on, you know how to connect those dots, so if you were writing something today, how would you connect the dots for the American people on what this administration is trying to do and the economic situation we are in?

REICH: Well, first of all, I would say that health care reform is critically important to middle class, to wages and everything else. It's also say that the job picture can only be cured if we in the short term, the government provides and makes up for the huge hole that the private sector has left because the private sector is not hiring.

VELSHI: Unfortunately, we've lost our connection to Robert Reich.