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State of the Union

Interview With John Boehner; Interview With Peter Orszag

Aired May 17, 2009 - 09:00   ET


JOHN KING, HOST: I'm John King. This is our STATE OF THE UNION report for this Sunday, May 17th.

President Obama says America's health care system is broken and reform has to happen this year. But can the country afford his ambitious plan? We'll break down the numbers with the White House budget director Peter Orszag.

House Speaker Nancy Pelosi tries to set the record straight on what she knew what and when about waterboarding during the Bush administration. But Republicans say she isn't coming clean and is wrong to lash out at the CIA.

House GOP leader John Boehner right here to discuss that and more.

And we'll go to Selma, Alabama, a city with a big place in the struggle for civil rights that at the moment is struggling to deal with the pain of nearly 20 percent unemployment. That's all ahead in this hour of STATE OF THE UNION.

President Obama's push to reform the nation's health care system this year faces some key tests in the Congress the coming weeks. Majority Democrats share the president's urgency but paying the bill is a huge challenge. Even more so now because of new indications the economy isn't rebounding as fast as the administration had hoped.

Joining us to discuss the numbers and the path ahead is the White House budget director Peter Orszag.

Peter, welcome to STATE OF THE UNION.

And if you could join me over here what we lovingly call the magic wall, I want to start over here. Because I want to talk as Americans wake up this Sunday morning with this economic snapshot. You had hoped the economy would start to rebound especially with the stimulus program. The Dow this past week down 306 points, initial jobless claims, 637,000 of them this past week, quite a high number, and consumer spending, the engine of the American economy down 0.4 percent in the latest government data.

Before we get into the numbers crunching on health care, just as Americans look at these numbers I assume the impression we have not hit bottom yet?

ORSZAG: Well, I think what happened is the free-fall in the economy seems to have stopped and we're, I guess the analogy there are some glimmers of sun shining through the trees, but we're not out of the woods yet. We do have more work ahead.

KING: More work ahead. I want to shrink this one and pull it over here for a second. Because of the more work ahead, those numbers are not rebounding as fast as you had hoped just a little bit of time ago. You had hoped in your budget projection, you were here two months ago to discuss the budget. The administration's budget is based on unemployment averaging 8.1 percent this year. In May the rate went up to 8.9 percent. For the year it's averaging 8.3. percent which is above your average and most economists say it's going to go up before it comes down.

If it stays up here, something has to give in your budget, right? Because you're not taking in as much revenue and you're spending more in terms of unemployment benefits and the like?

ORSZAG: We are going to update all of these assumptions in the mid-session review in a few months so we'll have more to say with an updated set of numbers in just a couple months.

KING: Just a couple of months. You say just a couple of months.

I want to again bring in one more number here. This is your deficit. Move this down so people can see this. You had projected a smaller deficit. Your deficit numbers have gone up $89 billion for the current fiscal year just from February. That's just a few months ago, 87 billion. More than 175 billion dollars there just in two months. In two months a higher deficit number. If the deficit is going up at this rate, you say you'll update this in the future but I assume now the big question for the budget director what has to give? Higher deficit or scale back the agenda.

ORSZAG: Well, this is coming from some technical changes. You have to remember the deficit is very sensitive to the state of the economy. As the economy starts to recover the deficit comes down quickly. The economy remains weak we will continue to have these elevated deficits so, again, we're going to have more to say about this in a couple of months.

KING: You say more in a couple of months. I want to remind you something you said here in a couple of months ago. Because I asked you these questions. If the unemployment rate doesn't follow your budget, and it hasn't if the deficit numbers don't follow your budget and they haven't and if the growth rate doesn't follow your budget and so far it hasn't, what will change? Here was your answer two months ago.


ORSZAG: We need to give this recovery act some time to work. I don't think we should be chasing our tail constantly revising assumptions. Let's see what happens. Let it work. (END VIDEO CLIP)

KING: Now you say we have to wait a couple of more months. ORSZAG: Well, hold on. At that time I also said we would be revising our economic assumptions for the mid session review and so that is exactly what we're still saying. Look. The Recovery Act passed three months ago, $100 billion has been obligated, it always was designed to kind of ramp up and you're going to get more momentum from the Recovery Act over time. That's what should be expected.

KING: Let's sit and continue the conversation. But as we do so, let me ask you this question here. Which is you say the Recovery Act kick in. There are some who thought the Recovery Act would kick in a little sooner in terms of maybe the unemployment number. Maybe people would be just the psychology of it would help with consumer spending. Why not?

ORSZAG: Well, again, it takes time to get money out the door wisely. We are trying to do it quickly and wisely. Our goal is 70 percent of the money out the door before the end of fiscal year 2010. We're on target for that. This is exactly how -- we're on target with our initial projections for the Recovery Act ...

KING: As you know ...

ORSZAG: And I would note also the sense of free-fall has attenuated. So while we're not out of the woods yet the sense was the case two, three months ago that the economy was in free-fall I think has attenuated a bit.

KING: Let's apply that now, the economic prescription, to where we go especially in the health care debate. Usually (ph) expensive. The president overrode objections of some very serious people on his team who said let's not try to do this in the first year. Too much to do. The president says, no, let's go forward. Now Congress is trying to figure out how to pay for it. Doesn't agree with everything the administration says which is to be expected. The Congress is doing it. But if you face -- if those numbers stay where they are and you face a decision later this year in paying for health care, either higher deficit numbers to pay for it, or wait a while for the economy to come back and help you on that front, what will the decision be?

ORSZAG: Let's be very clear. We've always said health care reform has to be deficit neutral over a five or 10-year window and much better than that over the long term. So we are committed to making sure health care reform is self-financing and also brings down costs over time, both for families and for the federal government. So you are not going to see a deficit increasing health care reform.

KING: You mentioned bring down health care costs over time. The president had a pretty big photo-op at the White House this week and brought in some people who were standing in with him in a Democratic White House, the health care industry, the doctors, the insurance, the providers, the people who raised political opposition to the last Democratic president who tried to sign health care legislation and torpedoed it with a lot of spending. And we have a picture of them up on the wall with them arrayed behind the president.

The president said they had agreed to these huge savings in the system. Within a few days they said, no, we said we would try but we did not agree to that specific number.

ORSZAG: Not quite. And if you look at their letter, they specifically say 1.5 percentage points per year lower growth rate, $2 trillion in savings. The controversy or the thing that came out later in the week is they want a couple of years to ramp up to the 1.5 percentage points reduction in the growth rate. That's understandable. It doesn't change either the political significance of the statement that they made, which is they believe they can get efficiencies out of the health care system or the long-term impact. If we achieve that 1.5 percentage point reduction and that would help sustain lower growth rates in Medicare, eliminate two thirds of the Medicare deficit over the next 75 years. It is a huge thing to do and we should get on doing it.

KING: I want to talk about Medicare in a second but let's talk about paying for health care reform this year. On the table in Congress taxing the health insurance benefits that workers get. I get from my company and many people get from their companies saying if you're at a certain income level we're going to tax those benefits. The administration has said not our idea but you haven't said no way.

ORSZAG: Yes. It was not in the president's campaign plan, it wasn't in our budget. Clearly, some members of Congress who are putting it on the table and we are going to have to let this play out.

KING: Let this play out. But would the president sign a bill that includes a pretty significant tax increase? That would be a tax increase.

ORSZAG: We're not going to be -- I think it's premature to be commenting on individual items. We're looking for a comprehensive plan that brings down costs and expands coverage and there are lots of ideas that are being put on the table and that is exactly how it should be.

KING: What other items? How else could you do it? If the Congress won't accept your plans the tax changes you want and you ...

ORSZAG: By way the way, I don't know if that is the case either. We went through a policy process that come to our proposals. I think you're seeing the Congress go through that same process. Let's see where they wind up.

KING: We also learned this past week in the trustees' report on Medicare and Social Security, this year, this year, as we sit here Medicare will pay out more than it takes in. That also happened last year and Medicare fund will be depleted in 2017. Social Security will pay out more than it takes in in 2016. If this president is reelected that would be in his second term.

There are those who say we understand you want to do climate change, you want to do health care reform and you want to do all of these other things but why not, why not put together a group, Senator Kent Conrad, a man I know you are a fan of, he issued this statement this week. He says he knows you are trying to do health care reform and he knows it will help when it comes to Medicare but he also says a solution to the long-term fiscal imbalance has to involve all aspects including Social Security, Medicare, underlying costs, rising costs of health care and fixing our outdated and inefficient revenue system.

Why not do, what is the harm in doing what Senator Conrad wants? A bipartisan panel to study Medicare and Social Security and then Congress would have to vote up or down. Why not put that together, tell them give us a report one year from today so you can do everything you are trying to do this year and then next year be ready to move immediately on Social Security and the bigger Medicare question. What is the harm?

ORSZAG: Well, I think what we're trying to do is get health care reform done this year because that is, by far, a more important force on our long-term fiscal imbalance than other factors. Social Security matters but if you look at the deficit in Social Security it's a fraction of the deficit in Medicare. We are trying to deal with the big problem first and bring down costs and address the long term imbalance in Medicare and then it will be time then to turn to Social Security. The president has been clear while we want to get health care reform done this year we also do need to address other aspects of our long-term fiscal imbalance.

KING: But you have a first things first answer to that approach and yet the administration is doing so many things this year and has decided we're going to try to do all of these things at once. Is he just opposed to the commission idea, does he want to do it a different way? Is that why you won't do that now and just again say we don't want to hear from you guys again for a year. So don't clutter this year debate but get ready?

ORSZAG: I think we will be able to turn to different processes on Social Security and other aspects of our fiscal imbalance after we get health care reform done but it would be unusual to say to a commission, here, go off and study our long term fiscal imbalance and in the meanwhile we are going to be making these significant changes to health care and Medicare while you're doing your work. I think that is one of the key problems.

KING: The stimulus plan or the recovery act, as you call it, was passed with great urgency at the beginning of the administration. I have traveled to 21 states, I believe, around now since the beginning of the administration, and mayor after mayor have said, I want that money, where is that money? Some of them have started to receive it, or others have at least said you will get this money soon, so they can make the plans and get going.

But I was this week in Selma, Alabama. It's in Dallas County. The unemployment rate there is 18.1 percent. And I saw the mayor, George Evans, and I said to him afterwards as we walked through downtown and all the shops were closed -- it's a depressing place at the moment, even though the citizens are inspiring -- I said, isn't this a perfect test case for stimulus money? He said, yes, and we want the money, but not yet. Listen to the mayor.

(BEGIN VIDEO CLIP) MAYOR GEORGE EVANS, SELMA, ALABAMA: We have not gotten any yet. We submitted over $40,000 -- $40 million of stimulus projects for our city. You know, street maintenance, curbs, gutters, interpretive (ph) center, our riverfront project, but we have not yet gotten any response on it at this point, so we are still hoping.


KING: Why is it a place with enormously high unemployment -- I assume that would be the poster city for stimulus money -- why not a dime yet?

ORSZAG: Well, I'll have to look into the specifics there, but again, we've obligated $100 billion. We're running at about $1 billion a day now, so there is a significant impulse coming. At the same time, we want to make sure that the money goes out for real projects that will help boost the economy and not for swimming pools and things that will -- you know, that are not for intended purposes. So quickly and wisely is the balance.

KING: But is the system maybe backwards in that they have to apply for the money and it goes through the bureaucracy, as opposed to somebody in Washington saying, where's the need greatest, let's take it to them?

ORSZAG: Well, there is some of that. So the Army Corps of Engineers, for example, ranks projects and then gets money out the door based on that ranking. So it's a mixture. KING: I want to ask you, finally, our next guest is the House Republican leader, John Boehner. He, as you know, has been critical of the administration's stimulus plan. All the Republicans in the House voted against the president's budget. All the Republicans in the Senate, for that matter.

There are stress tests of the banking industry have been in the news, and he sort of turned that moment into saying, let's take a stress test of your fiscal policies. Let's listen to Leader Boehner.


BOEHNER: What would it look like if we gave the federal government a stress test? Taking into account some of the leading economic indicators, frankly, I think Washington fails and fails miserably.


KING: Fails and fails miserably?

ORSZAG: No. I mean, again -- look. The key thing is the economy recovers, we have to reduce the growth rate of health care costs. That will dramatically improve our long-term fiscal imbalance. I'm really encouraged, from what I hear, that Republicans will be stepping forward this week with their own health care reform plans. I think that's terrific, and that's the kind of engagement and constructive debate that I think should occur. KING: And is there any possibility that if the economy does not come back as you think -- I know you have your review coming, I don't want you to go into the numbers -- any possibility that three months from now, if the numbers are as bad as they still are, that you will say time-out on health care, we have to save it until next year when the economy comes back, or will you do it this year, regardless?

ORSZAG: Well, again, health care reform is going to be deficit- neutral, and then actually over the medium and long-term, deficit reducing. So I don't think there is a conflict between concerns about the deficit and getting health care reform. In fact, if anything, the opposite.

KING: I want to close with something from the thesis of a guy named Peter Orszag at Princeton. It was mentioned in a "New Yorker" article this week. And you -- one of your conclusions you wrote, was quote, "It is clear that Congress suffers from a lack of understanding of even the most rudimentary economics." Do you still stand by that? Leader Boehner is right over there.

ORSZAG: I think I was 19 or 20. I think one of my other recommendations was that the Congressional Budget Office could regularly brief members of Congress. So there was obviously a bit of naivete with a Princeton senior. But...


KING: Peter Orszag, welcome back to the "State of the Union." We'll keep reading that thesis.

Next, the GOP view on health care reform and on House Speaker Nancy Pelosi's claim that the CIA misled Congress about its terror interrogations. The House Republican Leader John Boehner when "State of the Union" returns.


KING: Welcome back to "State of the Union." Happy Sunday to you. We're joined now by the House Republican Leader, John Boehner. Mr. Leader, welcome to "State of the Union."

BOEHNER: John, nice to be with you.

KING: Let's start where we left off with Peter Orszag. He says health care reform will be deficit-neutral so they can do it this year even if the economy continues to perform worse than they had anticipated.

BOEHNER: Well, let's underline what he said. Deficit neutral. In order to put their government-run health care plan together, they have got to raise taxes in their budget. Already $634 billion over the next 10 years, and that's only about half of what it is expected to cost.

Listen, the American people want affordable access to high quality health insurance, and there is no disagreement between Republicans and Democrats on trying to achieve that goal. That's why this week, Republican leaders sent to the president a letter outlining our goals to fix the health care system, and reaching out to him to try to find some bipartisan way to achieve this.

But scrapping our current system and putting together this big government option I don't think is the answer. I think that what we can do is go in and look at those who don't have access to high- quality affordable health insurance, find ways of getting them insurance in the private sector, and I think that we can improve the system for all Americans.

KING: While we went through this debate early in the Clinton years, you had some help on the outside, Republicans did, when they opposed the Clinton plan. You had help from the insurers, from the hospitals. Many of those same organizations that spent the money and ran the Harry and Louise ads were standing behind President Obama in the White House this week. You don't have them and the money to help you. You have fewer votes in the House because of the election last November. Do you feel like you're going into this health care battle with fewer weapons than you had in the last health care battle?

BOEHNER: Well, some in the health industry have adopted the "hang me last" strategy. And I think as the details become more apparent...

KING: Hang me last.

BOEHNER: ... about this plan, they are going to be going, whoa, whoa, whoa, I really didn't want to be standing there.

The American people don't want their care rationed. They don't want the government deciding what are the appropriate procedures. Frankly, we think doctors and patients can make these decisions on their own. Let's go in and tinker with the current system and make sure it works better. We have got the greatest health care delivery system in the world. Why do we want to jeopardize that with some big government-run health care option?

KING: But do you have any reason to believe your views will be taken into account by this president, or by the House leadership -- let's just stay on your side of the capital right now -- based on what you have seen so far in the other debates and in the early days of the health care debate?

BOEHNER: Well, so far, there has been absolutely no reaching out. The president asked for our ideas on the stimulus. We gave them to him. They were promptly ignored.

But as I'm fond of telling my colleagues, never, ever give up. I'm never going to give up on trying to find common ground with the president.

We found common ground on his Iraq strategy, on his Afghanistan strategy and, frankly, his decision this week to make sure that those detainee photos were not released. There are places where we have common ground and there could be more. KING: Well, let -- let's talk about that, a little bit. The supplemental, the emergency spending bill, essentially, to fund Iraq and Afghanistan was on the floor and 51 Democrats voted against it. They have a pretty big majority, right now, so they can afford that.

But Republicans were pretty much in sync for this. Fifty-one Democrats voted against the president's money.

You mentioned the photo release. The left is mad at him about Iraq, about Afghanistan, about, now, keeping the military commissions.

What do you -- what's your sense of -- on the foreign policy issues of what's happening in the party?

BOEHNER: Well, I think, on foreign policy, with regard to our soldiers and our effort to defeat the terrorists, there is a lost common ground.

I've got concerns about the idea of sitting down and negotiating, or having a conversation with the Iranians, who have all but vowed to wipe Israel off the face of the earth, have said the most anti- American things in the world.

Sitting down and talking to them, frankly, I think, is a sign of weakness. But -- but the president has a tough job to do. And I think he is beginning to learn how difficult it is to govern. You know, it's one thing to campaign and to make statements. But when it comes to governing, there have got to be much more pragmatic decisions.

We've seen the president make several of those lately. And I hope that he continues to listen to members from both parties and our diplomats and commanders around the world to make the important decisions that really are going to affect our future as a country.

KING: I want to turn your attention to the big controversy in town, especially in the capital building this week. And that is what did Speaker Pelosi know and when did she know it, about the enhanced interrogation tactics, water-boarding, slamming people against walls and things like that in the days after 9/11.

And if you turn over your right shoulder, we have a timeline I want to show you here. We now know that, in 2002 in September, Speaker Pelosi, not the speaker at the time -- she was briefed by the CIA. There was a dispute. She says she was not told there was water- boarding going on. The CIA says she was.

Last month, in April, at a news conference, she insisted she had not been told. Let's listen.


REP. NANCY PELOSI, D-CALIF., SPEAKER OF THE HOUSE: We were not -- I repeat -- not told that water-boarding or any of these other enhanced interrogation methods were used.


KING: But then, last week, she did concede on Thursday that one of her aides was briefed a few months after that September 2002 briefing and that the aide was told and it was relayed to her these tactics were being used. But, at that same event, she lashed out at the CIA, accusing them, accusing them of misleading the Congress.


PELOSI: Those briefing me in September 2002 gave me inaccurate and incomplete information.


KING: Where's this going? There are some who say the speaker has been dishonest. The speaker is accusing the CIA, now, of lying to the Congress. It's interesting theater here in Washington, but does it serve any policy purpose? And what's next?

BOEHNER: Lying to the Congress of the United States is a crime. And if the speaker is accusing the CIA and other intelligence officials of lying or misleading the Congress, then she should come forward with evidence and turn that over to the Justice Department so they can be prosecuted.

And if that's not the case, I think she ought to apologize to our intelligence professionals around the world.

You have to understand, John, we treat prisoners, detainees, prisoners of war better than any country in the world. And our intelligence professionals have done a marvelous job in doing their job, keeping Americans safe.

And when you think about the fact that we lost 3,000 of our citizens on September 11; we've lost nearly 5,000 of our soldiers in Iraq and Afghanistan fighting for our safety and security here in America, all of -- all of this information that helps our soldiers, that helps our border security people, all comes from our intelligence professionals around the world.

And instead of criticizing them; instead of accusing them of lying, we ought to be patting them on the back and telling them, "Job well done."

KING: Well, you have, in the past, questioned some information you have received from the CIA, including on this network, in the past. I want you to listen.


WOLF BLITZER, CNN ANCHOR: Are you suggesting, as I think you are, that you don't necessarily have confidence in this new NIE?


BOEHNER: Well, either I don't have confidence in what they told me several months ago or I don't have confidence in what they're telling me today.


BOEHNER: John, we're comparing apples and oranges here. What was referred to as a national intelligence estimate with regard to Iran, which was very contradictory from a lot of other information I was presented with -- and, frankly, raising questions about that was the right thing to do.

But we're talking about the speaker of the House accusing our intelligence professionals of lying and misleading Congress. I've dealt with these people for 3 1/2 years, on almost a daily basis, and I can tell you that I have never felt that I was misled. I've never felt that I've been lied to.

Frankly, when they come in and present their information, it's thorough; it's complete. They want to answer questions. And there's always, always an opportunity to -- to object.

And if there was something that was happening, called for by the president, that I objected to, the opportunity is there to do so. And Speaker Pelosi has, at times, objected to activities that were approved by the president. Those activities were changed, as a result of her objection.

KING: In the intelligence environment?

BOEHNER: In the intelligence environment.

KING: I want you to listen to something your friend and the former House speaker, Newt Gingrich, said about this controversy and what he thinks should happen.


NEWT GINGRICH, FMR. SPEAKER OF THE HOUSE, R-GA.: I think she has lied to the House. And I think that the House has an absolute obligation to open an -- an inquiry. And I hope there will be a resolution to investigate her. And I think this is a big deal. I don't think the speaker of the House can lie to the country on national security matters.


KING: Has he lied to the House? Has she lied to the country? And should there be an inquiry?

BOEHNER: I think I've outlined what I would describe as a different approach, that if, in fact, she believes she was lied to, that is against the law. She ought to make that information public and turn it over to the Justice Department so they can prosecute these people.

KING: But do you think she...

(CROSSTALK) BOEHNER: But if she did -- but if she does not produce this and she changes her mind, well, then she ought to apologize. That would be the appropriate course of action.

KING: Just apologize? You don't see an inquiry happening? You don't have the votes, but you wouldn't push for one?

BOEHNER: I -- I think that she ought to either present the evidence or apologize, one or the other.

KING: Much more to discuss with the House Republican leader, John Boehner, when we come back: Dick Cheney's role in the GOP's future and the president's bonding moment with our guest. More with the House Republican leader, John Boehner, in just a moment.


KING: We're back with the minority leader in the House, Republican Congressman John Boehner.

I want to move on to a political discussion, where the Republican Party goes from here. But first, I just want to -- we were just talking about this controversy over Speaker Pelosi, what she knew, when she knew it.

She says in part that you guys keep raising this to distract, to distract from the Bush interrogation tactics, which some say could have been unlawful, and to just distract from the broader Obama agenda.

BOEHNER: Well, we're not bringing this issue up. She's the one that continues to bring the controversy to new levels by talking about it and in ways that raise more questions than answers.

You know, I've had concerns about the release of these interrogation memos, the fact that they've closed Gitmo without having a plan, with what to do with these terrorists.

The bigger question is, what is the administration's overarching strategy to confront the terrorist threat that we have and to keep Americans safe? And some of these decisions that the president has -- have been made early on were rather contradictory to what I believe was needed to keep America safe. Over the last couple of weeks, he has been more pragmatic about some of these decisions.

But this controversy over the speaker was caused by her and continues to be escalated by none other than Speaker Pelosi.

KING: All right. Let's move on to the Republican Party. In 1995, there were 230 Republicans in the House from 44 states. There are now 178 Republicans from 40 states. And as the debate over where the party goes forward plays out, your colleague, your deputy in the House leadership, Eric Cantor, took the lead in forming this new group, the National Council for a New America.

They want to have town hall meetings around the country. You signed on to the letter creating that. A number of prominent Republican governors have signed on. Rush Limbaugh doesn't like it. Let's listen.

(BEGIN AUDIO CLIP) REP. ERIC CANTOR (R-VA), WHIP: What we're trying to do here today is kick off a series of town hall forums so that we can get back to listening to the people.

RUSH LIMBAUGH, HOST, "THE RUSH LIMBAUGH SHOW": We do not need a listening tour. We need a teaching tour. That is what the Republican Party or slash, the conservative movement needs to focus on. Listening tour ain't it.


KING: Who is right, Rush or Eric Cantor?

BOEHNER: Listen, all of the wisdom in America isn't found here in Washington, D.C. And I think they're...

KING: That's not -- you're not picking there.


BOEHNER: The fact is, is that, there's nothing wrong with going out and listening to the American people, sharing our principles, trying to find ways to address the concerns of the American people, but address those concerns with solutions, solutions that are built on Republican principles.

And so I think this dialogue is important. We've got a long way to come back. We've been through two disastrous election cycles. And so the idea of working on new solutions -- and I made it clear on the opening day, when I gave Speaker Pelosi the gavel, that we wouldn't just be the party of no.

That if we found ourselves in a position where we had to disagree with our new president or we had to disagree with our Democrat colleagues in the House, that it was our obligation to come forward with what we thought was a better solution.

KING: And so...

BOEHNER: We had a better solution on the stimulus, we've had a better solution on the budget, we're going to have a better solution this week on health care.

KING: But the American people, increasingly here -- from Rush Limbaugh, Newt Gingrich, you heard him a bit earlier in the show, he is very active in the current debate, and Dick Cheney. Is that helpful or hurtful to you as you try to help the Republican Party come back?

BOEHNER: Listen, I've got my job to do. Dick Cheney is a private citizen entitled to his opinion.

(CROSSTALK) KING: Would you rather...


KING: ... publicly?

BOEHNER: Big member in our party, and frankly having these voices out there, it doesn't hurt us, it helps us. If we're going to show the American people that we've got a better way forward, having a chorus of voices out there, I think, it's helpful to our effort.

KING: Let me give you a flashback to 1994. A class photo on the steps of the Congress. The "Contract with America" was what Republicans decided at that standpoint. All of your candidates -- most of them came to Washington. Big contract here, if you elect us, this is what we will do. Do you need to do this again this time or do you want a different approach?

BOEHNER: I think over the next 18 months the American people will see what our better solutions are. They will know what we have stood and fought against. How we present that agenda is still up for debate.

But there are a lot of people around America who think something like the contract would be an appropriate way of marketing that.

KING: Are you one of them?

BOEHNER: As the leader, I'm listening to all of these voices. We'll make that decision, you know, a year from now.

KING: Make that decision a year from now.

Last weekend here in Washington was the annual White House Correspondents' Dinner. It was the president's debut as a comedian as well as a president here in town. He gave a speech in which he mostly poked fun at his own administration but here you had the nation's first African-American standing up at the dais.

You were a guy who, even in the winter, seems to find a way to somehow keep his tan, and as you know, it has been a joke from your friends and colleagues as well, and the president decided to make it one. Let's listen.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In the next 100 days, our -- my partisan outreach will be so successful that even John Boehner will consider becoming a Democrat. After all, we have a lot in common. He is a person of color.


OBAMA: Although not a color that appears in the natural world.

(LAUGHTER) OBAMA: What's up, John?


BOEHNER: You know, as I tell my friends, you only tease the ones you love. And, you know, if the president wants to go out and take a walk with me, as I do every day, or I walked 18 holes yesterday. Last weekend it was in Ohio cutting my grass, trimming my beds, I enjoy being outside. But I'd rather be heckled than ignored.

KING: All right. The House Republican leader, John Boehner, thanks for coming in this morning.

As we just heard, Republicans who oppose most of the president's domestic initiatives do back some his efforts in Iraq and Afghanistan. His fellow Democrats, who, on those fronts, are getting angry. We'll get inside on that and more from CNN contributors Hilary Rosen and Alex Castellanos next. Stay with us.


KING: Let's digest another busy Washington week and take a peek at what is ahead with two of our favorite CNN contributors, Democrat Hilary Rosen and Republican Alex Castellanos.

Welcome. Let's start in the debate about Speaker Pelosi, what she knew, when she knew it, whether this is a significant policy avenue that needs to continue to be explored or political theater.

And as I do so, I want you to listen to the former House speaker, Newt Gingrich. CNN caught up with him yesterday and he says this.


NEWT GINGRICH (R), FORMER HOUSE SPEAKER: I don't see how she can serve as speaker if it turns out that she has lied about national security both to the House and to the country. I mean, I would expect at that point a motion of censure and I think -- and under the rules of the House, you can't serve to for the rest of that term if you've been censured.


KING: Hilary Rosen, Leader Boehner was just here. And he says, no. He says, this will go on but not a motion of censure, not a House inquiry. Where are we going here?

HILARY ROSEN, CNN CONTRIBUTOR: Well, I was impressed that at least he didn't fly off on the Gingrich rhetoric. But, you know, that he was being demur when he was suggesting that this is not the key Republican talking point for the last four days, which is to push back on Nancy Pelosi.

Nothing she said has actually been contradicted. She said, when I was originally briefed on interrogation techniques, we weren't told that they were actually being used. Later on, they were told they were actually being used. The Democrats on the Intelligence Committee registered their objection to the CIA and to the White House.

Look, this came a week after Vice President Cheney actually acknowledged that both he and the president authorized torture illegally, and so the idea that somehow -- I think that actually that torture happened takes precedence over which month Speaker Pelosi actually heard the briefing. And, in fact, what we've seen is that the change in Congress and the change in control, I think, that the speaker has been quite patriotic in saying, let's move forward, let's not prosecute these guys, to the -- you know, she has gotten a lot of heat from our party on this to try to say, let's move on and now the Republicans are taking on her on in this ridiculous matter.

KING: On that point, there is an important policy debate about the tactics and whether the president obviously has said he is not going to have them, but some want to go back and look at them and how this came about.

The speaker says in that first meeting they weren't told. Senator Bob Graham, the other Democrat in that first meeting says, we weren't told. The Republicans say they were told. So you have a he said-she said, 2-2. Does it matter to sort this out or should we just move on?

ALEX CASTELLANOS, CNN CONTRIBUTOR: Of course, it matters. Speaker Pelosi said she was misled by the CIA. The CIA, Leon Panetta says, no, she wasn't. So there is a conflict here.


CASTELLANOS: And I think if Speaker Pelosi were still capable of human facial expression, we would see she would be embarrassed because right now she is in a very Nixon-like position. She is trying -- she got kind of caught off-base here on this, protecting her own political interests making the left happy. And it's a real problem for her.

When the speaker of the house loses credibility, when it says everybody in the government is wrong but me, it's a real issue for her. And she is the one extending this by not coming forward with the facts and saying, look, here is what really happened and either apologizing or just presenting the real rhetoric.

ROSEN: Well, first of all, Leon Panetta, the director of the CIA, did not say that she was not misled. He said it's not the practice of the CIA to want to mislead members of Congress. And when they looked at the notes...


ROSEN: ... it was quite clear that there was ambiguity in what was actually discussed in the briefing. So you know, this is the same...

KING: He says the note suggests she was told.

CASTELLANOS: And why was she briefed on something that the CIA was not going to use? ROSEN: This is the same CIA who in those two or three years came up with the weapons of mass destruction existing in Iraq, came up with the faulty intelligence reports to the Congress and to the president, like come on. CASTELLANOS: So your position is the CIA did mislead Nancy Pelosi?

ROSEN: No, my position is...

CASTELLANOS: Well, let's litigate (ph) that. Let's find out.

ROSEN: ... why are we doing this -- if we're going to hold people responsible, let's hold people responsible that actually used that intelligence falsely...

KING: Let's move on before we -- we're going to run out of time. We're going to run out of time, quickly, let's move on to one other issue.

The president of the United States has changed his position on a few issues in the national security front. He has decided not to release the photos and he has decided they will keep the military tribunals in a new form -- military commissions in a new form. He says he'll give more rights for detainees.

I want you to listen to something the president said before he was president.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES, THEN CANDIDATE: I'll also reject a legal framework that does not work. I have faith in America's courts and I have faith in our Jags. As president, I will close Guantanamo, reject the Military Commissions Act, and adhere to the Geneva Conventions.


KING: Now they will have some form of these military trials that he said he didn't want to have. And 51 House Democrats voted against his money for Iraq and Afghanistan. How much anger, frustration is there on the left?

ROSEN: Well, there is some frustration I think that trying to be balanced about this ends up in a, you know, political maelstrom. I think the photos is a tough issue. The president obviously doesn't want to be responsible for inflaming anti-American sentiment.

On the other hand, these photos are probably going to get leaked at some point anyway. With the tribunals, what they have said is, we can't just let the detainees go there is such sketchy evidence we don't know what is true and what is not true and we need a process.

The American courts can't handle this capacity and what they have said is they are going to revise the tribunals. They are not going with the same Bush tribunals with the lack of due process. They are going to revise the tribunals. CASTELLANOS: But there is a lot of politics involved here too. Why is he doing what he is doing? Obama got elected from the center. He was "no drama Obama." He didn't scare people. He has gone so far left on economic matters, frightening them out of spending, that frankly it's very useful for him to have the left in the Democratic Party attack him a little bit for going to the center too much on some of his policy.

He is trying to -- it's the Democrats that are trying to moderate right now and need to, not the Republicans. That is what Obama is doing.

KING: I need to call a truce here. We are out of time, unfortunately. I've run a little long. I need to enforce the schedule. Alex and Hilary, thanks so much for coming in.

Coming up, a city that was on the front lines of the civil rights movement is now feeling the pain of economic recession. We'll take you to Selma, Alabama, when STATE OF THE UNION returns.


KING: As you know, we get outside of Washington and travel every week. This week, as we have many weeks, we want to take a look at the economy. The brighter the state, the higher the unemployment rate.

I want to focus in here, look at Alabama. We wanted to go down here because look at these counties right here as I pull out the state of Alabama. This is the "Black Belt," predominantly African-American communities, the highest unemployment in the state. One of the wonders of traveling, though, is the surprises.

You go in with a set of interviews planned, sometimes you meet remarkable people.

KING: In Selma, Alabama, we met Frederick Douglass Reese. Who was he? He was one of the courageous eight, the civil rights activist in Selma who convinced Dr. Martin Luther King and others to come and march.


FREDERICK DOUGLASS REESE, ORGANIZED SELMA MARCH: Privilege in 1965 to lead the 1965 voting right rights movement. I was successful in inviting Dr. King. We marched together, went to jail together, slept together.


KING: What a treat it was to meet this person with such a role in history, a Selma legend. Like everyone in Selma, F.D. Reese told us the economy is as bad as they have ever seen it, yet it is a remarkably hopeful place.

(BEGIN VIDEOTAPE) KING: To cross the Edmond Pettis Bridge into Selma is to share a stage with history. In the fight for civil rights, this is hallowed ground.

And on the other side, this is today's bleak reality. Abandoned store fronts, a downtown in disrepair. Mayor George Evans says Selma was struggling to begin with and is now being choked by a punishing recession.

GEORGE EVANS, SELMA MAYOR: It's a double whammy. There is no doubt about it. People are not buying. People are not spending. Businesses are going out of business. We've lost a lot of businesses.

KING: The cigar factory is just one of them. More than 200 jobs lost when the plant closed abruptly in November.

BEATRICE JACKSON, UNEMPLOYED SELMA RESIDENT: And it was really shocking to us. It was shocking to everybody because we weren't expecting this. We were expecting to lay off a few and they ended up closing the whole point.

KING: Beatrice Jackson's weekly check was $400 or so. Now, unemployment benefits run about $250. She has been looking for six months now. JACKSON: You have to go and look and you have to go apply for jobs, but ain't nothing really in Selma. You get depressed. You get really depressed.

KING: Jimmie Coleman III sees the domino effect at the Calhoun Food Store he manages in Selma. Sales of paper goods, canned foods and cereals are way down. People strapped for cash go to the Wal-Mart for lower prices. The result -- a meat department geared toward Selma's predominantly African American population is the backbone of the business now.

JIMMIE COLEMAN III, CALHOUN FOODS: A lot of key items that we carry that Wal-Mart don't carry, like the hog maw, jaws, pig stomach, the meat department was doing 35 percent of our business last year. They're actually doing 50 percent of our business. The shopping pattern definitely has changed.

KING: With revenues down, Calhoun Foods considered layoffs. Instead, it cut back to 32-hour workweeks, saving jobs but leading to grumbling for some who had depended on steady overtime.

COLEMAN: Hopefully, this ain't going to last long, but we're now in our third month of this, and it's still continuing.

KING: Continuing because the statistics are staggering. In Dallas County, where Selma sits, unemployment now tops 18 percent. This is Camden in neighboring Wilcox County, where the jobless rate is more than 22 percent. In what locals call Alabama's Black Belt one in every five people is unemployed.

EVANS: It does seem to be those cities which has the larger population of minority that has taken the biggest hit. KING: Selma would appear a perfect target for President Obama's stimulus spending, and Mayor Evans and the City Council have a $40 million wish list. But to date, Selma has not received a dime.

(on camera): Is that frustrating? It was passed with such urgency and obviously there's such a need.

EVANS: It's very frustrating. The (inaudible) cities, the larger cities with greater populations have gotten theirs, but the smaller cities like Selma has not gotten theirs yet.

KING (voice-over): As long as anyone can remember, Selma has had a divide between the haves and the have-nots, a split on race and class lines that Mayor Evans is determined to help bridge.

EVANS: It's not as bad as it has been, but it's not as good as it can be.

KING: Progress is harder when times are so tough. But the mayor is an optimist. Selma's famous bridge, his favorite metaphor.

EVANS: Now we may be divided, but I am looking at that bridge has been the instrument in which we as citizens of Selma will go across it and journey back, saying now we are one, we're united, and we are suffering the most, but I believe that's all going to work out. I just have faith that it will all work out.


KING: We want to thank the mayor and the people of Selma. The mayor joined us at dinner while we were there and brought the entire City Council. We had a great visit to Selma, we thank everybody for that.

We want to say goodbye to our international audience for this hour. Coming up for viewers here in the United States, actress Muriel Hemingway talks to Howie Kurtz about being a star on Twitter.


KING: I'm John King, and this is our STATE OF THE UNION report for Sunday, May 17th. Former Vice President Cheney stepped up his attacks on the Obama administration this week. Is he being treated fairly by the media.

In our RELIABLE SOURCES hour Howie Kurtz will break this down with three veteran media observers.

And as we saw at last week's star-studded Washington press bash, Hollywood is big on the banks of the Potomac. Director Barry Levinson unveils his new movie "Poliwood" about the intersection of stardom and politics.

Later today, President Obama will speak at Nortre Dame amid protests over his views on abortion. It's a controversial speech, and we will discuss it right here with CNN contributors James Carville and Bill Bennett. That's all ahead on STATE OF THE UNION.

Time now, though, as we always do at this point in the morning to turn things over to my colleague, Howie Kurtz, and his RELIABLE SOURCES and Howie is on the Left Coast this morning.