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State of the Union

Interview With Ray LaHood; Interview With Senators Schumer, Shelby

Aired February 08, 2009 - 20:00   ET


JOHN KING, HOST: I'm John King. And this is our STATE OF THE UNION, for this Sunday, February 8th.

Unemployment is soaring. budgets are being slashed across the country. Will the president's rescue plan end the pain? We'll get the latest from Transportation Secretary Ray LaHood in a first Sunday interview for a member of President Obama's Cabinet.

On Capitol Hill emotions run high as the battle over the stimulus bill drags on. Has the national interest been forgotten within partisan bickering? Straight talk with Democratic Senator Chuck Schumer and Republican Senator Richard Shelby.

The legendary CEO, Jack Welch, grades the performance of the new chief executive.

That's all ahead in this hour of STATE OF THE UNION.

The numbers are bad. The picture isn't pretty. 589,000 workers lost their jobs in January alone. That pushed the country's unemployment rate to 7.6 percent, its highest level since 1992. President Obama used the bad news to pressure Congress to quickly approve nearly $1 trillion in new spending and tax cuts. But even if the president gets his way, will the plan work? And how fast?

Joining us now on STATE OF THE UNION for the first Sunday interview by a member of the Obama Cabinet is the transportation secretary, Ray LaHood. He is in his hometown of Peoria, Illinois.

Mr. Secretary, thank you for joining us on STATE OF THE UNION. I want to get straight to the...


KING: ... the kitchen table. Good morning to you, sir.

I want to get straight to the kitchen table accountability test. The American people are in a lot of pressure right now economically. They hear all these numbers being thrown around in Washington. If you get this money, set the standard for us, the accountability threshold right now. How many jobs and how fast?

LAHOOD: A lot of jobs, John. And I've invited every secretary of transportation to Washington this Wednesday that we're going to have a meeting at the old EOB across from the White House. We're going to lay out for them what we believe are the opportunities for every state in the country to put people back to work on projects that are ready to go, by the book, no shortcuts.

These projects really are projects that have been sitting on shelves all over the country, where states are waiting for the money. And this is an opportunity for every state in the country to bring to Washington a couple of examples of projects that they will be able to implement quickly, within the timeframes that are in the legislation, so that people will be building roads and bridges and other infrastructure projects this spring, summer and fall.

And I believe an enormous number of people, thousands of people, will be going to work in good paying jobs.

KING: Well, Mr. Secretary, where do you draw the line in terms of what is stimulus spending and what is wasteful spending, maybe even a boondoggle? And I ask the question because the debate in Washington, you know, has been veered off track a little bit by legitimate concerns, many would say, about spending money on anti- smoking programs in this bill. Maybe a worthy goal, but why is it in this emergency recovery bill?

How do you draw the line between stimulus and maybe boondoggle? One mayor I talked to this past week, for example, says he wants to use some of this money to build a new wave pool in his community, with a water slide. He says it creates job. Is that the kind of project that passes your sniff test?

LAHOOD: Well, look, our criteria is going to be the criteria that we've used at the department for a long time, John. And, also, the money will be going to the governors and their state secretaries of transportation and highway administrators. And the one thing that the president has said all through this and set a very high bar -- no earmarks.

The money has to go to projects that are ready to go in the states, and I just know that there are lots of these projects around, and we're going to learn a lot more about it next Wednesday.

And the point is, there aren't going to be any earmarks and there aren't going to be any boondoggles. This money will be spent correctly, by the book, with no shortcuts.

KING: Mayors think they should spend the money, not governors. We have turf battles in Washington between Democrats and Republicans. When you get out to the states, you know this well, it's the mayors and the governors sometimes at odds. Why do the governors have a better plan than the mayors who -- the mayors would tell you that they can get the shovels in the ground faster.

LAHOOD: Well, look, the bureaucracy is in place at the state level, John. The states have these departments of transportation, and they know how to meet the criteria that we have to set at the department so that the money is spent correctly, that people are put to work, that the projects are done according to the way that they are supposed to be done.

Lots of cities -- some of the big cities, perhaps like Chicago or Boston or otherwise, you know, may have these kind of staff people in place. But for the most part, every state, all 50 states do have the mechanism and the bureaucracy to make sure that this is done by the book.

KING: The word ...

LAHOOD: And that is going to be something that -- go ahead.

KING: he word bureaucracy scares me a little bit, but we'll hope that works out and it's a good bureaucracy.

I want to get to a point -- I was in Carmel, Indiana this past week, talking to the mayor, and he says one of the ways to get the shovels in the ground faster is for you to use your executive authority here in Washington to change the rules, at least temporarily. As you know, there are environmental impact studies. There can be, you know, public comment and review periods at times.

Listen to the mayor of Carmel, Indiana, Jim Brainard.


MAYOR JIM BRAINARD (R), CARMEL, INDIANA: Waive the rules. The rules for transportation projects that we normally have to deal with on the highway. Environmental impact statements, public comment periods, they slow it down. The absolute key is to get shovels in the ground as quickly as possible.


KING: Mr. Secretary, will you and the president use your executive authority? As you know, that might anger environmental groups, it might anger labor unions, but is waiver to get these projects moving faster, is that the way to do this?

LAHOOD: Not at all. It really isn't. And it would be different if every one of these states didn't have projects.

You all know -- and I think that the viewers know -- that these states have had a pent-up demand for these projects to get funded and haven't had the local match to fund them, haven't had the ability to do it, because they haven't had the money to do it.

It's not as if we're going to be lacking for projects, John. There are lots of road, bridges, infrastructure that can be implemented immediately, within the timeframes that -- in the legislation, and put a lot of people to work in good paying jobs.

We don't need to waive anything. This is going to be done by the book, according to the rules, no shortcuts, no earmarks.

KING: Mr. Secretary, I'm going to stand up here in Washington and walk over to my magic wall, because I was in your community just last week. You're speaking to us from Peoria, an area you represented in the Congress for some time. When I was in your city right here in middle America, right along the river. It's a beautiful city, but it is struggling at the moment, like many factory towns. This is the floor of Caterpillar. You see these amazing tractors and earth-movers being made. Many of these workers, union workers, see the "Buy American" provisions in the House version and the Senate version of this legislation, they think it sounds good, it sounds patriotic, but it might actually cost more of them their jobs.

More than 20,000 have already been let go. Will your president fight to get that out of there? They say the "Buy American" provision will cause a trade war, and they won't be able to export these tractors overseas.

LAHOOD: I think there's going to be a lot of discussion about the "Buy American" provision in the conference. And I think you're going to see the president weigh in on this. And I haven't talked to the president directly about it, but...

KING: Is that an in or an out?

LAHOOD: ... his chief of staff -- I think there's going to be a lot of discussion about it, John.

KING: OK. Well, at least -- we'll leave that debate.

I want to talk about your unique role in the administration. Just a few months ago, you were a Republican in the United States Congress. You were questioning many of the priorities of the Democrats who ran the United States Congress. You're now serving in the Democratic president's Cabinet. Every one of your former colleagues in the House, Republican House members, voted no.

If Ray LaHood was still a Republican member of Congress from Peoria, Illinois, would you have joined them, sir, in voting no on the first stimulus package?

LAHOOD: Well, look, I didn't get elected to anything last November, John. I'm a part of the Obama team. I'm proud to be a part of President Obama's team. I consider it a great privilege that the president asked me to join his team.

I'm going to do everything I can to help the president find the votes for the conference report once the Senate passes this. I'm going to work very hard next week. I'm going to work the phones. I'm going to talk to my former colleagues, and do all that I can to persuade them that this bill really will put people to work.

KING: What about...

LAHOOD: America is hurting...

KING: What about in the first round, sir? Excuse for interrupting. Did the president call you and say, hey, Ray, we got a problem in the House? All your friends in the Republican conference are saying no? Can you pick up the phone? Can you work these guys? Or did you go to him and say, Mr. President, you've got a problem here?

LAHOOD: Well, it was a combination of both. The president asked me to go up with him to the Republican conference, and I was privileged to be able to do that. And I did make some phone calls. I talked to some people.

Obviously, I wasn't very persuasive, since I wasn't able to persuade anybody to vote for it. But, look, I've been talking to some senators when I've had the opportunity and I'm going to continue to do that for the next 10 days until this bill is passed.

KING: I want to close, sir, with what is a remarkable moment. Back when I was covering the White House and you were a House Republican, you were the gentleman who presided over most of the impeachment trial of a Democratic president in the House of Representatives.

And I want to make clear to our viewers, you received high marks from Democrats and Republicans alike for the manner in which you conducted these proceedings. But there is Ray LaHood, we're showing our viewers, in the chair in the House of Representatives, providing -- presiding over the impeachment of a Democratic president. You're now in the Cabinet of the next Democratic president. Reflect on that.

LAHOOD: I consider it a privilege. When President Obama was a senator from Illinois, he and I worked very well together. I have a wonderful relationship with the president and his chief of staff, and I consider it a great privilege to be a part of their administration, and help push through an opportunity to put America back to work.

This is an extraordinary opportunity for me, to be a part of a team that wants to get America working again, and I consider it a privilege to be able to do that.

KING: Mr. Secretary, we thank you for joining us on state of the union. We will keep in touch in the weeks and months ahead, and we will keep you accountable, make sure that money gets to the projects that create jobs in the short term. Thank you very much, sir.

LAHOOD: Appreciate it, John.

KING: Up next, we turn to the action on Capitol Hill, where there's still a lot of work to be done. Senators Chuck Schumer and Richard Shelby break down the stimulus bill and its impact on you.



SEN. JOHN MCCAIN (R), ARIZONA: This agreement is not bipartisan. I've been in bipartisan being too many. This is three Republican senators. Every Republican congressman voted against it in the House, plus 11 Democrats and all but three Republicans stayed together. And that's not bipartisanship. That's just picking off a couple of senators.

(END VIDEO CLIP) KING: That was Senator John McCain blasting the president's stimulus plan speaking on CBS this morning.

In reality, there are not two economic rescue packages under consideration, the House plan includes more government spending to stimulate the economy. The Senate compromise stripped out tens of billions of dollars of that spending but has a bit more tax cuts.

The Senate bill looks likely to pass this week -- barely. I spoke about that and where the debate goes from here with Democratic Senator Charles Schumer York and Republican Senator Richard Shelby.

Senator Schumer, let me start with you. The Democratic bill -- in your view, is it better than the House bill on the key test, creating jobs as soon as possible? Or is it a lesser bill but one you had to agree to, simply to get the votes in the Senate?

SEN. CHARLES SCHUMER (D), FINANCE COMMITTEE: Well, John, it's very close to the House bill. Overall, they about overlap 90 percent. The overall number, $819 billion in the House; about $820 billion in the Senate, so that's a good mark. IS believe that's where we're going to end up, at about $820 billion.

And there are some differences. The House bill has a little more on education, a little less on tax cuts. I personally would favor the House bill. But the most important thing is that we are not going to let small differences stand in the way of passing this very strong bill, which the American economy desperately needs.

To quibble over small, little things and let the bill go down would be a huge mistake for the American people, given the state of our economy and the need for a real shot in the arm.

KING: Well, Senator Shelby, I know you quibble with big things in this bill. And I want to show you this, just so that we get to you in Alabama. This is the Tuscaloosa News: "Stimulus Bill Debated in Rare Session."

This is, of course, front page news, not only in your state, Senator Shelby, but around the country. Is the compromise brokered in the Senate? I know you don't like big things about this bill -- but is it better or did the input of those few Republicans who changed this bill make it worse?

SEN. RICHARD SHELBY (R), RANKING MEMBER, BANKING COMTE.: Oh, I think it's -- it's similar to what Chuck Schumer said. It's close to the House bill. They tweaked it a little bit, but the substance is the same. It hadn't been changed much. It's not anything I could support.

And I would hope -- and I'm afraid we won't -- if the Republicans would stay together, we could shelf this bill and start again. That's what we really need to do.

KING: That's what we really need to do? Now, we talk a lot, we're going to talk about a cloture vote here in Washington. It's a word many Americans don't understand. It's a process in the Senate. We talk about billions and billions of dollars.

I want you both to listen. I was in Indiana, this week, talking to workers about this. And I want you to listen here to the voice of a union auto worker who worries this bill may not help him out. Let's listen.


KING (voice over): A General Motors plant in Indianapolis.

JAMES KENDALL, FORMER GENERAL MOTORS EMPLOYEE: I was tickled to death when I hired in here. I mean, I was working for the largest corporation in America. I mean, I was just on cloud nine.

KING: Thirty-four hundred workers when James Kendall arrived 18 years ago.

(On camera): And how many now?

KENDALL: Well, after a layoff they're fixing to have, there will be roughly 630 folks working. It's just snowballing into a massive, massive unemployment. And I don't think we've seen the end of it. I mean, all you've got to do is watch the news, and it's depressing.


KING: Senator Schumer, how does this legislation deal with that gentleman's concerns, 600,000 jobs lost in the economy last month; a million manufacturing jobs lost in the economy in the last year?

Mr. Kendall there thinks he could be next. In the next month or two, GM might say, you're out of work, after 18 years.

Is this bill short-term stimulus spending or does it do anything for the fundamental structural problems in the U.S. economy?

SCHUMER: Well, it does really help in this situation. We have the same situation in Buffalo and Syracuse auto plants, really hurting. People have worked hard their whole lives, worried about being laid off.

But in this bill, for instance, is a tax incentive to encourage people to buy cars. Just like you get the interest off when you have a mortgage for your home, off on your taxes, and it's an incentive to home ownership that's worked, we're trying the same thing. Barbara Mikulski spearheaded it, to do that for automobiles.

So there are things here that would help. In addition, if we pump money into the economy, if we employ people in construction jobs, if we make sure that teachers, for instance, are not laid off, then there'll be more money in the economy, more people will buy cars, and the chances of this fine gentleman being laid off would decrease.

I'll tell you one thing for sure. To do nothing, to do nothing would certainly seal his fate. And that's why the American people, 65 to 70 percent of them, support President Obama's plan. KING: I want to talk a little bit more about the specifics, because I want you to be as specific as you can in telling us what you think is wrong with this plan. In the Senate bill, here are some of the provisions. $47 billion to provide extended unemployment benefits. $16.5 billion to increase food stamp benefits. $3 billion in temporary welfare payments. $17 billion so there can be a one-time $300 payment to people receiving Social Security or supplemental Social Security income and veterans on disability pensions. And $4.7 billion for homeland security programs.

Are those specifics OK with you, Senator Shelby, or are those among the provisions you think are unnecessary or unwarranted in this kind of bill?

SHELBY: Well, they've got merit to them, but I don't believe in this bill.

John, the bottom line is this bill, nearly $1 trillion before it's over with, is not going to turn around our economy that you mentioned earlier. The gentleman -- the auto worker understands that. He's got a lot of sense. He knows that stimulus bills generally are not going to save his job.

Are there some merits to some of this? Some of the infrastructure is good. But are they -- is it emergency? Is it going to just flip our economy? No. What we need to do, John, we've got to attack our banking system. We've got to bring trust back to our banking system. I hope the administration -- and they are working on this, and Senator Schumer and I will be in the middle of this on the Banking Committee.

But until we'd straighten out our banking system, until there's trust in our banking system, until there's investment there, this economy is going to continue to tank.

KING: Gentlemen, I want to close by asking you both to assess the moment, where we are as a country. A trillion dollars nearly in stimulus spending appears likely to pass, even though Republicans like Senator Shelby object. $700 billion for this financial institution bailout. More money likely to come, because everyone thinks the administration will ask for billions and billions more down the road.

Want to show you the cover of "Newsweek" this week. "We Are All Socialists Now." "Newsweek" is saying that we are back in this era of big government, where the government is not only spending and spending and spending, but controlling and controlling and controlling what used to be a free-market economy.

Senator Shelby, to you first, sir. Assess the moment. And is there a limit on how much money we can print and deficit-spent?

SHELBY: Well, I can tell you, we're going down a road where it's uncharted. We're going down a road to disaster. We've never seen this kind of spending, ever, and there is a lot more to come.

There has got to be some other way better than what we're doing. Not the socialist way, but to try to get our free markets working again. KING: Senator Schumer, is there a limit? And it's your party that is now in charge of every branch of the government here in Washington, spending all this money that we don't have.

SCHUMER: First, there will be a limit. There is no question, you can't keep printing money. Second, there is going to be far more accountability. Third, the alternative that so many of my Republican colleagues have -- do nothing or just tax cuts for the wealthy -- that failed under George Bush. And let's not forget, George Bush, the most conservative president in a long time, did all this government intervention.

We are in a very bad situation. We're only a few steps away from spiraling down to a depression. And I think what the Obama administration is strong, it's powerful, it's thoughtful, it's far more conditioned than what the Bush administration did.

And I'll tell you this. The risk of doing nothing could lead to a Great Depression. So we have to do something, do something smart. But just to say no, no, no, and not have any real solution, that will lead to huge -- even worse unemployment and a much worse economy.

KING: We're out of time, Senator Shelby, but go ahead. I see you agitating. Take a few seconds, but quickly.

SHELBY: One last thing. We are going down a road to financial disaster. Everybody on the street in America understands that. This is not the right road to go. We'll pay dearly.

KING: Thank you both, gentlemen. Republican Richard Shelby of Alabama, Democratic Chuck Schumer of New York.

SHELBY: Thanks, John.

KING: Is the president getting off to a rocky start as the country's top executive. We'll get an early job interview from one of the best known CEOs in the country. Former GE chairman Jack Welch when STATE OF THE UNION returns.


KING: If running a country is like being CEO of a large company, then how's the president doing running the business of America? And what's the right prescription for America's ailing economy?

For answers to that, and a lot more, we turn to former chairman and CEO of General Electric Jack Welch.

I want to begin with a simple question. You're a CEO, widely respected in the business and corporate world. We're watching our new CEO, President Obama, of the United States. And earlier this week, he had to go to the Oval Office, give five network television interviews to say, "I screwed up."

I want your early assessment. But first, let's listen to the president. (BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think this was a mistake. I think I screwed up. And, you know, I take responsibility for it. And we're going to make sure we fix it so it doesn't happen again.


KING: Jack Welch, big personnel choices are some of big challenges every CEO faced.

A, why the mistake? What are we learning about him as a chief executive? And, you know, it's tough when you have to go in and say, "I screwed up." How is he doing?

JACK WELCH, FMR. CHAIRMAN & CEO, GENERAL ELECTRIC: Well, I think going and admitting that he had some problems -- candor always wins, John. And him coming out is very gratifying to a lot of us that get a lot of air from Washington. So I think it was a hell of a good move.

KING: And when you watch him make decisions and then communicate them with the American people, as someone who has had to make the tough choices. Sometimes it's hiring new workers, sometimes it's laying off workers. When you watch this president communicate as a leader, give us an early assessment.

WELCH: Well, it's a little too early. I can judge him from the campaign, where he was fantastic.

Monday night's a very big deal, John. He's got to go in there -- he's been using fear for the last few days. The country doesn't need fear. But he needed fear to rally the Congress behind this stimulus bill.

He's got to go in and balance confidence with fear. There's no question about that. He's got to give people a feeling that, I've got this thing under control; I know where it's going; it's going to be difficult, but I've got a great team here, and we can pull it off.

KING: One of the issues he has talked quite emphatically about is that any financial institution that takes taxpayer money as part of the bailout should cap the pay to its CEO at $500,000, the administration says. You can take some stock, maybe, down the road, but the president making the case that this is taxpayer money; there should be restrictions.

Again, let's listen to President Obama.


OBAMA: This is America. We don't disparage wealth. We don't begrudge anybody for achieving success. And we certainly believe that success should be rewarded. But what gets people upset, and rightfully so, are executives being rewarded for failure.

(END VIDEO CLIP) KING: Jack Welch, I think you got a few bonuses when you were a CEO. Obviously, you weren't taking taxpayer money at the time; your company was not.

Is this a good idea? It's obviously populist. It's easy politics. But is this a good idea for the government to be setting pay limits on CEOS, even when there's taxpayer money involved?

WELCH: Look, obviously, you'd like it not to be this way, John. But I think the president showed a lot of restraint, a lot of balance. He could have -- the country's mad. People are angry. And he made this thing perspective. He allowed them to put incentives in that they can't cash out until they pass us all back, as taxpayers.

I think, on balance, with the heat around the country, the anger everywhere -- you meet a cab driver; you meet somebody in a restaurant -- people are angry. They've all lost money, real money. And I think he walked the fine line. He threaded the needle, I'd say, in a very reasonable way.

KING: A lot of anxious workers might be out there watching this today. Maybe last week they were laid off. Maybe next month they think they'll be laid off, and they want your perspective.

The unemployment rate -- I'm going to get up and walk over to the wall, as we talk. The national unemployment rate is 7.6 percent; $598,000, Jack, flushed out of the economy just last month. 207,000 manufacturing jobs lost in December, a million manufacturing jobs lost in the last year.

On our map, here, the hot states, the yellow states are the 10 states with the highest unemployment rate. They are going to have a revised TARP. That's the bailout plan for anybody outside of Washington or New York who doesn't get the language. They have $350 billion more to spend. And they've made clear they're going to have to come back for billions and billion more down the road.

What can they do? Because when you go to those small towns, people think that money is not coming my way. And we are told that in this new plan, they say more transparency. They say more of a focus on housing to help the financial institutions. But they also say no requirements that banks lend the money. Be treasury secretary for a minute. What would Jack Welch do?

WELCH: Jack Welch is not good enough and we have Geithner and we have Summers there to give us the perfect answer. I think that we've got to take these toxic assets and foreclosures and deal with both of them.

In foreclosures, there are five suggestions out there. And I'm not sure which one is best. But we have to take action on that. We've got to stop the house price slide.

On the question of the toxic assets, I favor a guarantee or insurance plan keeping the assets on the banks' books so the banks work them out. And I don't agree with forcing lending. We've done that before. And we end up with some of the mess we have.

I think you can't give people money and then say make a bad loan. But on the other hand, if we take these bad assets and put a backstop, we don't put cash in, we put a government guarantee behind it, we don't spend zillions of dollars until they go bad and we give incentives to the bankers to work it out, to get -- so they don't take those loans from us, those guarantees.

So, I -- you know, I'm not the expert. We have -- the nice thing is we have two very good people here. And I think the president Monday night can talk about these two very good people who both will put their best brains together and come up with a plan. But that plan, John, is 1,000 times more important than all this stimulus discussion whether it's 819, 820, 821. That's all politics. That's not jobs. But that's where I come out.

KING: I think the president would like to think it's not all politics, there are some jobs in there. But Jack Welch, what do you say to Republicans who say, you know, we can't afford all this deficit spending. If a bank is in a bad strait, let it fail?

WELCH: I think get the most pragmatic deal we can get. The president won the election. His party won the election. Hopefully he will play a centrist role in bringing all of us together to solve this incredible problem that in my 48 years in business I've never seen one as big. But he's got the tools and the support of the country. Grab it and fix this thing.

KING: Jack Welch, we thank you for joining us on STATE OF THE UNION today as we try to hold them accountable and track all this money in the weeks and months ahead. We hope you'll come back quite frequently and give us a hand.

WELCH: Thanks, John.

KING: Thank you, Jack.

Straight ahead, he backed John McCain in the presidential election, but now the Republicans mayor of a conservative town is supporting President Obama's stimulus plan. Find out why when STATE OF THE UNION returns.


DON LEMON, CNN ANCHOR: I'm Don Lemon live from Washington. Back to "STATE OF THE UNION" with John King in just a moment. But first a look at what's happening right now.

A critical week for President Barack Obama who's back at White House after his family's first trip to Camp David. As the Senate gets ready to vote on his massive stimulus bill, some Republicans warn the plan could lead to -- this is a quote -- "financial disaster."

Plus, new polls show public support seems to be slipping. The president holds his first primetime news conference tomorrow night and, of course, we'll carry that for you live right here on CNN. Tonight, though, we are going to break all of this down for you. We'll tell you what the stimulus really means to you and when you'll start to see some results from it.

Plus, we'll show you the personal side of this recession and tell you where the jobs are.

And as always you can be part of our newscast, it's tonight at 10:00 p.m. Eastern.

Now we want to take you to Australia where at least 108 people dead and hundreds of thousands of acres are burned. The country's facing the worst wildfires in history tonight. The deadliest fires are in the southeast part of the country. And some victims, burned to death in their cars, trying to flee those flames.

And those are your headlines this hour. More "STATE OF THE UNION" with John King after a short break. See you at 10:00 p.m. Eastern.

KING: The president turns into a traveling salesman on Monday, well, sort of. He's hitting the road to push his economic stimulus plan. Let's use the magic map to give you a peek. Where he's heading is right out here to Indiana. The state of Indiana, Barack Obama narrowly carried it. But where the president will be tomorrow is up here, Elkhart County. It is a conservative county, red because it supported John McCain. Double-digit unemployment here where the president will be tomorrow.

And if you come down south from Elkhart County, you find Hamilton County. That is where we have the small city of Carmel. We were out there just this past week for the same reason the president is going to Indiana to get a firsthand look at the economic stresses.

While were there at Carmel, we met a mayor, who, every day, sees how families are hurting. Now he's a Republican. He says what his town needs right now, though, is help, not partisanship.


KING (voice-over): Carmel, Indiana is comfortable and conservative. A small upscale city that backed John McCain last November but whose Republican mayor is, at the moment rooting, for Barack Obama.

BRAINARD: Government should be investing in infrastructure. That's what government is meant to do. It creates long term value. And I think the stimulus plan is a good one.

KING: Sixty years ago, this was a farm community of 1,500. Now it is 80,000, affluent, but not immune to the credit crunch and housing crisis.

BRAINARD: We had over building but not nearly the extent that I've seen in other places. We've had roughly an 8 percent drop in our housing value. Again, that's not good. But it's not nearly as bad as other places in the country.

KING: Work on an ambitious new city center is under way. There is not enough of this work in Carmel and across America. Indiana's unemployment rate is more than 8 percent. Construction among the industries hurting most.

DAVE RICHTER, PRES., UNITED CONSULTING: It's basically fear, it's caution.

KING: Dave Richter's design firm has plans for dozens of new transportation projects. But most are on hold.

RICHTER: The economy is bad. And so many thousands and tens of thousands of people are getting laid off. Everybody gets scared. Nobody is very comfortable with spending a lot of money and putting new things on the books.

KING: Amanda Newman knows the economy is bad because her business, three consignment shop, is booming.

AMANDA NEWMAN, OWNER, CARMEL CONSIGNMENT: Just a lot of new people. A lot of new people that have never even considered shopping second hand. It may be a wealthy community. But, you know, we're just regular people and a lot of people have been hit pretty hard. So it is a little scary.

KING: Jim Brainard sees stimulus money as the road back and like every mayor, has a wish list. $428 million worth of projects, new roads, a parking garage, fire trucks and more.

(On camera): Central park aquatic center, construction of additional water slide and wave pool. There are people out there who would say come on, Mr. Mayor, how does that create jobs?

BRAINARD: Well, someone who has to construct that amenity.

KING (voice over): A Republican mayor with a budge squeeze sees things very differently from most Republicans in Congress. And also differently from governors who say they should control most of the money.

BRAINARD: Mayors know how to get things done. They have to deal with constituents every day of the year. And if the money were to come directly to the cities, we'll have shovels in the ground within weeks.

KING: He knows many in his conservative community are skeptical of Mr. Obama and of big spending. But this Republican mayor is, at the moment, an enthusiastic pitch man for the new Democratic president.

BRAINARD: This isn't a bill that's going to put doctors and lawyers and Wall Street brokers to work. But rather a bill that's going to put people who are hurting the most to work. We just have to get some money out in the economy. We've got to get people working. And we need that confidence and spirit as much as anything.


KING: In a moment, political strategist James Carville and Ed Rollins join us talk stimulus and President Obama's big week. But first, let's stay outside the beltway and listen to some union workers in Indiana who are afraid that either way they choose, they lose.


KING (voice over): A General Motors plant in Indianapolis.

KENDALL: I was tickled to death when I hired in here. I mean, I was working for the largest corporation in America. I mean, I was just on cloud nine.

KING: Thirty-four hundred workers when James Kendall arrived 18 years ago.

(On camera): And how many now?

KENDALL: Well, after a layoff they're fixing to have, there will be roughly 630 folks working.

KING (voice over): Inside on Friday, GM officials tried to sell those union workers on a buyout plan. The company says shrinking its workforce is critical to becoming more competitive.

Kendall will say no, as will Scott McMillin. Indianapolis is his third GM plant in the past 15 years. He has a daughter in college.

SCOTT MCMILLIN, INDIANAPOLIS AUTO WORKER: If I did retire now from General Motors, I would be looking for another job, and they're just not out there.

KING: But saying no is a gamble. GM has talked of closing this plant altogether.

MCMILLIN: You just don't know. It's -- it's all a crap shoot. My dad worked for 27 years and retired from the foundry that I started in. His job was secure from day one. Nowadays, an auto worker is pretty much a modern day gypsy moving from plant to plant.

KING: Workers who say the buyout isn't enough, no layoffs later, could mean nothing.

(On camera): What if it doesn't work out? What happens to you?

KENDALL: Well, we'll just -- I don't know. We'll see. If it don't work out here at this facility and there's nowhere else to go, I'll do what I have to do to get by.

It's just snowballing into a massive, massive unemployment. And I don't think we've seen the end of it. I mean, all you've got to do is watch the news, and it's depressing, really.




OBAMA: Then you get the argument, "Well, this is not a stimulus bill. This is a spending bill." What do you think a stimulus is?


That's the whole point.


KING: President Obama punching back with a fair amount of passion earlier this week at his Republican critics of the economic recovery plan. Has he given up on being Mr. Nice Guy in the face of partisan opposition? I spoke about all this with two men with firsthand knowledge about just how tough it gets from the oval office, Democratic strategist James Carville and Republican strategist, Ed Rollins.

Gentlemen, I want to start with this. You know, at the end of the week, the president seemed to get his compromise, but at the beginning of the week, he was still dealing with the fallout over the nomination, now withdrawn, of Tom Daschle to be his health and human services secretary.

And listen to what he had to tell CNN's Anderson Cooper. This is a president who had to spend a lot of capital on a personnel issue.


OBAMA: I think this was a mistake. I think I screwed up. And, you know, I take responsibility for it, and we're going to make sure we fix it so it doesn't happen again.


KING: James, you remember the rocky early days of the Clinton presidency.


KING: That's a pretty big deal, isn't it, a president having to call in the five big TV anchors and spend capital on a personnel choice when he's got so many big policy fights?

CARVILLE: Well, I think he did it pretty good. I think -- I think this week, we have was a little opposite of March. I think he came in, you know -- on Monday, he was a lamb, and by Friday he was -- he was like a lion. He's gotten his feet back.

But you're right. It did cause him some problems. You know that the way Washington works is that he got wrapped up in this, but I think that Senator Daschle made the right decision by taking his name out.

And, you know, he did something that very few presidents do. He got out in front of this thing and said he messed up.

But, you know, one of the things we've got to realize, he's not been in office for three weeks. They're going to announce a complete revamp of the way we're doing banking here on Monday. Their stimulus package is all but done. They got the SCHIP thing done. They got all those stuff on Gitmo done. They've dispatched envoys to the Middle East, to Pakistan.

I mean, we're not three weeks away. And if you look back, there's actually a -- lot of stuff that this administration has gotten done in a very short period of time. And I think he ended the week on a pretty good note here.

KING: Well, Ed, jump in on that point. You know, we learn a lot from new presidents in their early days, and we still don't know a lot about this president, especially when it comes to executive leadership style, because he came out of the United States Senate. What have we learned?

ED ROLLINS, CNN POLITICAL CONTRIBUTOR: Well, what we've learned is -- what he's learned is you get a big house when you get the job, a big office, a big plane, get to go up to Camp David this weekend, and you get to sit in the presidential box.

With those perks comes the toughest job in history. He's there at the toughest time probably than any modern president has had. And I think, to a certain extent, you know, he's got to fight with his own party. He's got to fight with Republicans.

The era of bipartisanship has been over for about 30 years at least. And what he's going to find is there's different viewpoints. Republicans believe in doing something one way, Democrats believe another way.

And he may get a couple of Republicans in the Senate once in a great while. Maybe those three will be the ones that will go with him the whole way. But at the end of the day, he's got -- he's repeated several times this week, "I won. We get to do what we want." He gets to do what he wants.

KING: Well, let's listen -- let's listen -- and I want to follow up on this point. Has -- has he changed or can he change the tone in Washington? Let's listen to the number-two Republican in the Senator Jon Kyl of Arizona on the floor not too happy with the president's rebuke of Republicans. Let's listen.


SEN. JON KYL (R-AZ), SENATE MINORITY WHIP: Discussing with the American people his approach to the stimulus of our economy, he's first really used some dangerous words, I would say. So it seems to me that the president is -- is rather casually throwing out some -- some careless language.


KING: "Rather casually throwing out some careless language," in the view of that leading Republican, James Carville, essentially saying, you know, we tried your way. It didn't work. We're not going back to those policies. That -- I understand the president's position, he did win the election. But that was not a bipartisan speech he gave to House Democrats earlier this week.

CARVILLE: Well, I don't know -- I don't know what problem with it that Senator Kyl has. I was in Arizona this week. And, Senator, things are pretty bad in your state.

And -- but the truth of the matter is, he's done more to reach out to these Republicans, and it was very interesting watching Senator Shelby just a little bit earlier on your show, John. He was -- he's against this banking thing, and he ain't even seen it.

I mean, at some point, usually they would give you the courtesy of at least looking at it and then being against it. These guys are just against it before they see it.

But I think that really the president has gone a long way in trying to invite Republicans, gone over to see them, to do things like that. I don't think -- and I don't know what the president said that Senator Kyl would find offensive at all. What he said was just absolute truth.

KING: Well, Ed, I want you in on this point, but I want to add a Democratic voice to this debate about bipartisanship. The Senate comes to this compromise. They have to water the bill down a little bit, take some spending out to get a few Republican votes, and the House speaker, Nancy Pelosi, doesn't like it, and she says this: "Washington seems consumed in the process argument of bipartisanship when the rest of the country says they need this bill."

The president of the United States, Ed, who is a member of Speaker Pelosi's own party, says this is critical, having true bipartisanship. She says it's a process argument. Does the Democratic president have a problem with the Democratic speaker?

ROLLINS: Well, I think he does. And I think, to a certain extent, Democrats have waited a long time to have a president who would basically carry their agenda, but even more important they're ready to move their own agenda forward.

And this is -- Chairman Obey, Nancy Pelosi, a lot of these people have wanted some of these types of programs. They can call it stimulus or whatever at this point in time, but it's a lot of programs that they've tried to put in, in the past and haven't been able to.

Bipartisanship is a nice term, but the bottom line is there's very different viewpoints between these two parties. And Republicans feel that they weren't as responsible as they might have been on the fiscal issues during the Bush era, and now they're going to basically sit and be the watchdog and make sure that the public's money is spent well.

KING: The first primetime news conference of the new president's administration will come Monday night. Here's the "Washington Post" front page, "Planning a One-Two Punch." It talks about the stimulus plan, billions and billions of dollars, the financial industry bailout plan, billions and billions of dollars, also a bit on the National Security Council. There's a story on the Iraq war down here.

Just a reminder, one quick look at the front page of just one newspaper in the country, this president has a very deep and complicated inbox.

James Carville, you've been there. What is the biggest challenge for the president of the United States when he has his first primetime news conference?

CARVILLE: Well, I think his biggest challenge is, is that the country is very, very apprehensive right now, and with great justification. This is a terrible economic situation. And -- and -- and I think that he's got to assure the country that there is a direction there.

He's got to -- and I think they understand that the thing is not going to be done overnight and that the stimulus is one part of trying to get this back together. What they do with the banking thing tomorrow is going to be enormously important.

They have no room on interest rates move. When he took office, interest rates were near zero. They've destroyed the fiscal nature of the United States. We didn't -- you know, we had these huge deficits that were accumulated, and they're trying to deal with a very difficult thing.

And I think people understand that. And they understand that he's trying to reach out, and he's got to take them into his confidence, and he's going to have to keep them there over a long period of time. And if anybody can do it, I think -- I think this president is capable of doing it. I really do.

KING: We're out of time, unfortunately. Ed, I'll have to save your view of what -- "What would Ronald Reagan do?" was going to be my question. I'll save that for another day, because we're out of time.

Ed Rollins in New York, James Carville in New Orleans, thank you both, gentlemen.

And right after the break, Anderson Cooper sat down with the president this past week for a wide ranging interview. A lot of substance but also some lighter moments. Among Anderson's questions, when will the puppies arrive? Have you smoked in the White House? And what do you like about your new car?

The president's answers up next on STATE OF THE UNION.


KING: Finally, if you're trying to quit cigarettes, like President Obama is, well, this was the kind of week that might have you back smoking a pack a day or more time. So is he lighting up on the South Lawn? Smoking just one of subjects raised in the oval office by my colleague Anderson Cooper.


ANDERSON COOPER, CNN ANCHOR: What's the latest on the dog search?

OBAMA: We are going to get it in the spring. I think the theory was that the girls might be less inclined to do the walking when it was cold outside.

COOPER: Portuguese Water Dog, or you don't know yet?

OBAMA: You know, we're still experimenting.

COOPER: The coolest thing about your new car?

OBAMA: You know, I thought it was the phones until I realized that I didn't know which button to press. That was a little embarrassing.

COOPER: Have you had a cigarette since you've been to the White House?

OBAMA: You know, no, I haven't had one on these grounds and, I -- you know, I -- sometimes it's hard, but, you know, I'm sticking to -- sticking to it.

COOPER: You said on these grounds, I'll let you pass on that. And final question, you read a lot about Abraham Lincoln. What is the greatest thing that you've learned from your studies of Lincoln that you're bringing to the office right now?

OBAMA: You know when I think about Abraham Lincoln, what I'm struck by is the fact that he constantly learned on the job. He got better. You know, he wasn't defensive. He wasn't arrogant about his tasks. He was very systematic in saying I'm going to master the job and I understand it's going to take some time.

But in his case, obviously, the Civil War was the central issue. And he spent a lot of time learning about military matters even though that wasn't his area of experience. Right now I'm learning an awful lot about the economy. I'm not a trained economist. But I'm spending a lot of time thinking about that so that I can make the very best decisions possible for the American people.

COOPER: Mr. President, thank you very much.

OBAMA: Thank you.


KING: A lot of thinking about the economy. You heard the president there. That will be his focus in the week ahead. And remember, we'll be here again next Sunday and every Sunday at 9:00 a.m. Eastern for the first and last words in Sunday talk. Until then, I'm John King in Washington. Take care.

"LARRY KING WEEKEND" begins right now.