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State of the Union

Interview with Senators McCain, Lieberman; Interview with Christina Romer

Aired January 10, 2010 - 09:00   ET


JOHN KING, HOST: I am John King, and this is "State of the Union."


KING (voice-over): President Obama takes responsibility for a national security breakdown.

OBAMA: Ultimately, the buck stops with me.

KING: Is the administration taking the right steps to fix things, to keep Americans safe? In exclusive interviews, we will get a first-hand assessment from two senators who are visiting key fronts in the war against Al Qaida -- top Republican on the Armed Services Committee, John McCain, and the chairman of the Homeland Security Committee, independent Joe Lieberman.

The year brings fresh pain to Americans seeking work. When will the jobs come back? I will ask one of the president's top economic advisers, Christina Romer.

And we complete our 50-state tour with this week's "American Dispatch." Grand Teton mountains of Wyoming, beautiful views, and hopes this new year means more visitors and an economic rebound.

This is the "State of the Union" report for Sunday, January 10th.


KING: We begin this Sunday with two key senators and two paramount questions. Is Al Qaida stronger and smarter than we have been led to believe? And are recent intelligence failures and security lapses isolated incidents or proof of serious shortcomings that leave us vulnerable to terrorists attacks?

Two chilling incidents brought these questions to the fore -- the Christmas day attempt to blow up a Northwest Airlines flight and a suicide bombing just days later that killed seven CIA operatives in Afghanistan. As the president promises to improve airport security and information sharing among intelligence agencies, let's get an assessment now of the threat and the administration's response from two senators who are spending this congressional recess traveling to the frontlines in the fight against Al Qaida and Islamic extremism. After stops in Iraq, Kuwait, Afghanistan, Pakistan and Lebanon, Senators John McCain of Arizona and Joseph Lieberman of Connecticut join us exclusively this Sunday from their latest stop in Israel. Gentlemen, thank you for joining us this morning.

It's a perfect time, based on your trip, to have this conversation. I want to go through your many stops, important stops on this trip, but I want to start first with the biggest question the American people are asking about -- asking themselves after these recent attacks. Have we underestimated Al Qaida's threat? To you first, Senator McCain. We were told dating back to the final years of the Bush administration, they were scattered, their leadership was on the run, they were not capable of mounting a big sustained attack? Did we misunderestimate, to use (ph) the term, Al Qaida, and have they regrouped, have they learned from what we are doing to find new ways to attack us?

MCCAIN: Well, John, that requires probably a long answer and I will try to make it short.

I think America is safer since 9/11, but we are not -- certainly not safe. We have a long way to go, but I think we have made significant progress. I think we've shown that Al Qaida can land almost anywhere. Where there is fertile ground, they are going to breed. Now, the latest, of course, is Yemen, where there certainly is a significant challenge.

Al Qaida continues to inhabit areas along the Afghan-Pakistan border, which, again, argues for success in Afghanistan. But I think that we have to continue our emphasis and our focus on the fact that this challenge is not going away anytime soon.

KING: Senator Lieberman, to that point, you are the chairman of the Homeland Security Committee. As Al Qaida adapts its tactics -- and we have seen it in recent weeks, the new things they are trying to do -- have the United Sates kept up? Are we ahead of them, if you will, not only in improving airport security, but in looking overseas, in our intelligence gathering, are we still ahead of the game?

LIEBERMAN: We are ahead of the game, but this is a war. And there are times when I think because it's such an unconventional war, that people in our country may forget it. It's a war with many battlefields. We are on the verge of really an extraordinary turnaround and success in Iraq. President Obama is committed to win the war in Afghanistan, and I think we have got an extraordinary team there that John and I visited a few days ago. And we will succeed in Afghanistan.

We have chased some of the Al Qaida enemy to Yemen, but the fact is that in the last year, there have been more than a dozen known attempted terrorists attacks on the homeland of the United States. Three of them broke through our defenses. Two of them successfully killing people. One in Arkansas earlier this year, where a U.S. Army recruiter was killed at his recruiting station simply because he was wearing the uniform of the U.S. Army, and second, of course, Nidal Hasan, the murderer at Ft. Hood. The third breakthrough was only by act of God not a disaster, and that's Abdulmutallab, the Detroit bomber. So, as in any war, when the enemy breaks through your lines, you have got to regroup, you've got to strengthen your defenses. Because the truth is, in this war, we cannot set any goal less than 100 percent success. And that means we have got to close the gaps.

I think some people have to be held accountable for the mistakes, the human errors that the president acknowledged that were made, that enabled that Nigerian terrorist to get on that plane to Detroit, and we've got to change some things in the system.

KING: Well, who -- should someone be held accountable...

LIEBERMAN: There should be better screening and a proper watch list.

KING: Forgive me for interrupting, Senator, if somebody should be held accountable, who?

LIEBERMAN: No, no -- well, I think the investigation will show that. But the point is that it seems to me clear that, beginning with the Department of State when the father came into our embassy in Nigeria, not only should that name have been sent to the National Counterterrorism Center, but somebody should have checked the visa list and immediately pulled that terrorist's visa, so he never got on that plane. Secondly, at the National Counterterrorism Center, something went wrong. That's the place we created after 9/11. It served us very well, but it did not in this case. So if human errors were made, I think some of the humans who made those errors have to be disciplined so that they never happen again.

KING: And you both -- I know you have been traveling, but I am sure you are familiar, the president stepped forward this week and said the buck stops with me, I'm responsible. So if you are mad, I am the president of the United States. The ultimate responsibility lies with me. He also said something else, that some would say was a shift in tone. Let's listen briefly to the president.


OBAMA: We are at war. We are at war against Al Qaida, a far- reaching network of violence and hatred that attacked us on 9/11, that killed nearly 3,000 innocent people, and that is plotting to strike us again. And we will do whatever it takes to defeat them.


KING: At times, both of you senators have been critical of the administration's approach, saying -- this is my word, not yours, it's a bit too soft. It relies on the federal court system as opposed to military justice systems. He has changed some things from the Bush administration, some of which you support, some of which you don't support.

Senator McCain, when you hear the president say that, you know many conservative critics of the president said he doesn't view this as a war. When you hear him say that, do you see just a new tone or are you seeing new substantive policy shifts that make you feel better?

MCCAIN: Well, I appreciate the president's comments and I think they are important. They are a departure from his language before. Second of all, people should be held responsible for what happened. And we can't go back to the old Washington kind of routine, we are all responsible so therefore nobody is responsible. Somebody has got to be held responsible.

Second of all, I don't think the president's action matched his rhetoric when we send this individual to a civilian court. That person should be tried as an enemy combatant, he's a terrorist. And if we are at war, then we certainly should not be trying that individual in a court other than a military trial. To have a person be able to get lawyered up when we need that information very badly, I think betrays or contradicts the president's view that we are at war.

KING: Give us an assessment of your travels, and let's start in Pakistan, gentlemen. There were some tensions, obviously. You promised close relations between the United States and Pakistan, but there are some tensions. They think there are too many strings attached to U.S. aid money, and they are also upset with the escalating number of drone attacks going after Al Qaida and Taliban. Is your sense, Senator Lieberman, to you first, is Pakistan a full partner now or are they still, as many have said they have done in the past, picking and choosing when to fight, which targets to hit?

LIEBERMAN: Pakistan is a full partner in the war on terrorism. And I think John and I both felt that we have seen a really significant change in Pakistan on this visit. I think they clearly understood that they, the Pakistani people, are the targets of terrorism. They have suffered terribly, including, for instance, attacks at mosques, terrorist attacks at mosques. I think they are also beginning to understand that there is not a clear separation between the Taliban that's fighting in Afghanistan and the Taliban fighting in Pakistan. There is an overlap.

And they are good partners. And I would say particularly, we met with General Kayani, the chief of the army. The Pakistani army is on the move. It pushed the Taliban out of the Swat province, the Swat area. It pretty much cleared South Waziristan. I think there is a possibility that we'll see some movement in the North Waziristan.

There are issues that we disagree on. It's a complicated relationship. But I think fundamentally, Pakistan is our ally today in the war on terrorism, and a very critical ally.

LIEBERMAN: And it's based on the understanding that we have a common enemy. We also have common values -- democracy -- but we have a common enemy, and together we're going to beat it.

KING: And, Senator McCain, let me get your assessment of the stop in Afghanistan, a very difficult challenge ahead for the United States. And I want it in the context of something you said when you were with us about three months ago. Listen to this.

(BEGIN VIDEO CLIP) MCCAIN: Corruption in the government is a huge problem, and we have -- have to have -- that's part of this equation. And we have to have the Karzai government show us that we -- it is going to truly reform.


KING: But let's start with the Karzai government, Senator McCain. While you're there, President Karzai is trying another time to get his cabinet approved. If he cannot even get a cabinet approved, he does not have the faith of other people in his government that these people aren't corrupt, that they know how to do the basics of good governance, if we can't get to that simple first step, how can we build institutions, how can we repair roads, how can we put people to work and educate them in Afghanistan, and build the confidence of the Afghan people that trust your central government, not the Taliban?

MCCAIN: Well, they have a long way to go in the area of corruption. But the fact that the parliament rejected his nominees, I think you could look at a democratic process moving forward.

I believe that President Karzai recognizes that what he's just been through was an important lesson to him. We have to keep pressing on the corruption issue.

But let me tell you two other things that concern me. First of all, I think we have the right strategy and the right resources and the right leadership. We went outside Kandahar to an operating base where Americans and Afghan soldiers are operating together.

Two things concern me. One is the -- the -- the statement the president made about leaving by mid-2011 has reverberated throughout the region and bred uncertainty. I wish that he would reassure our allies and friends, we are there to win. The second, of course, is that I don't think there are plans to build the Afghan army to the size that's necessary to take over the responsibilities that we will have to hand over to them.

Is the Karzai government effective yet? I think that they've got a long way to go, but I know the Afghan people do not want the Taliban back, and he has that advantage. But this is going to be tough, long slog, but I am confident now we have the recipe for success.

KING: And while you gentlemen have been traveling, there have been some reports of tension back here, some political aides at the White House thinking the Pentagon is not getting those troops in process, getting them deployed to Afghanistan as fast as they would like to implement what the president hoped would be an accelerated surge. Senator Lieberman, did the commanders on the ground give you any sense of that? Are they behind schedule in the Afghan surge?

LIEBERMAN: I was extremely impressed with not only our leadership, military leadership, General McChrystal, Rodriguez, Caldwell, but with the men who are -- men and women who are out there on the lines. This is a -- a gifted, talented, resourceful, brave group of Americans, very idealistic, partnering with a -- with a tough group of Afghan soldiers. And they're doing everything they can as quick as they can.

You know, I saw that article in the New York Times today. And I've got to tell you, John, it made me furious. It made me furious because an article like that does not serve the national security interest. It -- it reveals a -- a disagreement on our side to our enemies. It can only weaken us. And it unfairly disparages the U.S. military, who I know are doing everything they can as quickly as they can to get reinforcements the new surge that the president wisely and courageously ordered into Afghanistan.

So I would say this. If the story is wrong, the president should come right out and make that clear. If there are people, on the other hand, in the White House or the administration who are leaking stories of that kind, they ought to be disciplined, because they have undermined our war effort and, in that sense, our national security and our homeland security. It's just an unacceptable form of behavior.

If you've got an argument with the military, argue it during a war in house, quietly, privately. Don't spill it out in the media of our country. That's just un-American; it's bad for our country.

KING: John McCain, you want in on that one before we take a quick break?

MCCAIN: No, I -- I -- I agree with Joe. General McChrystal has got a huge challenge. He doesn't need this kind of back-and-forth. But he is confident of victory. I'm confident that if we stay the course that we will maintain the support of the American people and we can succeed, mainly because the quality of men and women who are doing the job. KING: Senator McCain and Lieberman will stand by with us. When we come back, we will ask them, just fresh from Iraq, is the United States on track to get combat troops out by the August deadline? We'll also bring them home for a couple quick questions on politics here on the homefront. Stay with us.


KING: We're back with Senators John McCain and Joe Lieberman, both joining us exclusively from Jerusalem.

You were both recently in Iraq as part of this trip. You know the timetable to get the combat troops out by August 2010. Senator McCain, are we on track to meet that timeline? And do you have any concerns that it has become a political push? And is it in sync with conditions on the ground, I guess, is the better way to put it?

MCCAIN: No, I'm very satisfied. I wish every American knew that the month of December was the first month without a single American killed, which is the best indicator of success that we could ever have. And our troops are still working hard, but the environment has dramatically changed, and -- and we have won there.

Now, the Iraqi government will take two steps forward and one step back. It's a messy business, democracy, and we will see problems and challenges and continued attacks. But the ability of Al Qaida or the extremists to -- to have a sustained campaign of attacks in Iraq is not there anymore. General Odierno is confident that, after the elections, which will now -- hopefully will be in March, that we will be able to draw down rapidly.

I'm very pleased with the success there. And it's still tough, but they -- they have succeeded.

KING: Interesting to hear from each of you, as you have these conversations with U.S. military officials, with our intelligence, our diplomatic people overseas, and with these other government leaders as you travel, what is their assessment of the strength of the regime in Iran? You see the protests. There are some who think there are signs of cracking, maybe even some signs of dissent within the elite Revolution Guard.

Senator Lieberman, to you first, do you have any sense that the Iranian regime, from your conversations, is in trouble?

LIEBERMAN: Yes, I think that everybody we spoke to thought that the green movement, the protests of the people of Iran, are very significant, and that, in some sense, a real sense, it is the beginning of the end of the repressive extremist regime in Tehran. The question is, when does it end?

And I think we have to do everything we can not just to put economic sanctions on Iran because of their development of nuclear weapons but to support the people of Iran, to cry out against the human rights abuses, the terrible repression of the demonstrators and just the freedom of average citizens in Iran.

But I think, in -- there's two things going on in this region. One is a fear of the government of Iran, heightened in some sense by the instability of the -- of the people of Iran, and secondly, a feeling that the days of this regime are numbered, and the sooner it ends, the better.

KING: Another big challenge in the region, and you've both touched...


Go ahead, Senator.

MCCAIN: Could I just...

KING: Please.

MCCAIN: I just to want to add that this -- I believe that this regime's days are numbered, but in the meantime, one of the dangerous aspects is that, if the Iranian government chooses to try to divert the attention of the people from their domestic situation to increasing confrontation with Israel is a real threat, and it argues for progress in the Israeli-Palestinian peace talks.

KING: Well, you mentioned that, and you're sitting in Jerusalem for us this morning. As you know, George Mitchell, your former colleague in the Senate, who is the president's envoy to the region now -- he has said that, if he could get the Israelis and the Palestinians back to the bargaining table, which, as we all know, is a pretty big "if" -- but he says, if he can get them there, he thinks you could do this in two years.

Is there any reason -- do either one of you share that optimism?

Do you think they're at a point that, if you can get them in a room, they can get this done in a year or two?

MCCAIN: I do. I do. And I think that there is a heightened understanding that, with other tensions in the region, and I just mentioned Iran; I mentioned other situations such as better -- and when I say better, more effective capability of Hezbollah in southern Lebanon and other threats, that there's a certain urgency to the peace process. And I believe that not only is it possible but I think it's very likely you could see some progress in this area.

KING: You both talked about some progress and some optimism in Afghanistan, at least on the military side, some progress and optimism that Pakistan is being a better partner there.

What about the question of Yemen, in the context of -- I want you to listen to remarks by Yemen's deputy prime minister for security and defense. He said in The Washington Post on Thursday, "If there is direct intervention by the United States, it will strengthen Al Qaida. We cannot accept any foreign troops on Yemeni territory."

What must the president -- what must the United States do when it comes to the Al Qaida and terrorist challenge in Yemen?

LIEBERMAN: Well, of course, This has to be done in coordination with the government and military of Yemen, and we're doing that.

I mean, look, it's important to say that President Obama has authorized a significant increase in American support for the Yemeni military against Al Qaida there.

And you just have got to look at the three cases in which our homeland defenses were broken through this year, Arkansas, Fort Hood and the Detroit bomber. They all three of those have a connection to Al Qaida on the Arabian Peninsula, which is headquartered in Yemen.

So we have a responsibility, which the commander in chief, President Obama, has carried forward, not to let Al Qaida develop a sanctuary, a safe haven, there in Yemen. And I think we're doing that very effectively.

KING: I want to bring you home, gentlemen. It's an election year here in the United States. As I say, happy new year to you as you travel the word. And as you know, Senator Lieberman's colleague in Connecticut, Christopher Dodd, has announced he will not seek re- election. Another Democrat, Byron Dorgan of North Dakota, has decided he doesn't like the way the Senate is; he doesn't think it's a gentlemanly body anymore. He's not going to seek re-election. There's a gentleman on the screen right now, John McCain of Arizona, who is on the ballot this year. And some have questioned whether, after running for president, John McCain might say, you know, no, it's time to pack it in. But this week Senator McCain launched some new ads. I want you to listen to this.


MCCAIN: President Obama is leading an extreme left-wing crusade to bankrupt America. I stand in his way every day.


KING: Senator Lieberman, you two are close friends. You stood by your Republican friend during the 2008 presidential campaign.



KING: Do you agree with that ad? Is President Obama leading an extreme left-wing campaign to bankrupt America?

LIEBERMAN: You know, every now and then, John McCain and I disagree. And that's one of the cases.


So I don't -- I don't agree with that. I think that the president understands the importance of bringing our government back into balance. Look, he came in at a most difficult economic time, inheriting a national debt that had doubled in the preceding eight years.

And I think you're going to hear from the president, in his State of the Union, maybe earlier about some tough medicine for our economy. We need it, and I hope that there will be bipartisan support in Congress for doing that.

Because, as our economy begins to grow again, we're not going to really get out of the -- get to real growth until we can assure the rest of the world that we can pay our bills. And right now, we're just adding to our debt.

KING: Senator McCain, many still consider you the leader of the Republican Party. You were its last presidential nominee. But the man who is chairman of the Republican National Committee has a book out, and he's caused quite a stir this past week.

He has been criticizing Republicans, President Bush, your campaign to a degree, says he's not sure if the Republicans can win, take back the House and Senate in the 2010 elections. Do you have confidence in Michael Steele as the party chairman or does he need to go?

MCCAIN: I have confidence in Michael Steele. Could I mention what you just asked Joe to comment?

Look, I've worked with the president in a number of areas, in Afghanistan and others, but the president promised that he would stop the wasteful spending. He has not vetoed these pork-barrel bills. We have increased the debt and deficit dramatically. No one believed that General Motors and Chrysler would be part of the -- would be owned by the federal government. The spending is out of control and it's not been brought under control. And that's what I'm fighting every day. Because we've laid a debt on our children and grandchildren that is unconscionable. And the pork-barrel spending and corruption and behind -- back-room deals, without C-SPAN cameras as he promised, has gone on. And that's what I am fighting, and I will continue to fight it.

KING: Senator Joe Lieberman of Connecticut, Senator John McCain of Arizona, gentlemen, we thank you for taking some time on a very hectic trip to join us this morning, especially for your assessment of what's going on overseas. And we'll see you when you're back here in the States. Thank you both.

The first big economic report of the new year was sobering, to say the least. The national unemployment rate is 10 percent and the economy is still losing jobs. Up next, we'll ask one of the president's top economic advisers when to expect more hiring and just how the White House will keep its promise to tackle the deficit this year.


KING: I am John King and this is STATE OF THE UNION. Here are stories breaking this Sunday morning.

Crews in Northern California are scrambling to restore power to thousands of people who lost electricity after a strong earthquake. A 6.5 magnitude quake struck late yesterday afternoon near Eureka, California. No serious injuries and only minor damage being reported.

President Obama says he accepts Senate Majority Leader Harry Reid's apology for making a racially insensitive comment about him during the presidential campaign. A new book quotes Reid as saying Obama could win the Democratic nomination in part because of his light skin, and because he had, quote, "no Negro dialect."

Those are your top stories here on STATE OF THE UNION. Up next, White House Economic Adviser Christina Romer here to talk about the latest unemployment numbers and when we can expect the jobs to come back.


KING: Joining me now here in Washington to discuss the economy and President Obama's agenda for year two in office is Christina Romer. She's the chair of the White House Council of Economic Advisers.

Welcome back. ROMER: Great to be with you.

KING: We just had the December jobs report which was sobering in some regards. And I want your help to the question, we visited all 50 states, and the question in each one is, when is the economy going to bounce back?

And a little context first. If you go back to the beginning of the recession in December 2007, the unemployment rate was 5 percent, and at that point, there were about 7.7 million Americans who were unemployed. Essentially everything has doubled. Come forward to now, 10 percent unemployment, 15.3 million Americans who are unemployed.

When -- if we start the year at 10 percent unemployment, where will it be when we end this year? ROMER: Well, you know, that's -- we first do have to talk about the December jobs report was a disappointment. We know it was a setback from November, where we now know we actually added 4,000 jobs in that month. So that certainly is, you know, something to keep in mind.

I mean, what you do know, though, is we are continuing the pattern of moderating job loss. And I will just give you one statistic. In the first quarter of 2009, we were losing on average 691,000 jobs a month. Now with these new numbers, we know in the fourth quarter we were losing 69,000. That's still way too many, it's not job gains. But it's about a tenth of when we came into office. The big question is, when does it turn positive?

I think we have been saying by spring. And I think that is a realistic estimate. And I think your point of when does the unemployment rate start coming down? I think that's very much determined by how fast we grow, right? So an important fact is GDP not only needs to grow, it needs to grow at about a normal rate, like at 2.5 percent to actually bring down the unemployment rate. So the thing we're going to be looking for is, do you see that kind of robust GDP growth?

KING: Well, let's get up, if you will, and go over to the wall for a minute, because I want to take a closer look at the numbers you talked about. You did talk about job losses. And so we can take a peek. We'll use the state of Michigan, which has, of course, very high unemployment. Now here is the job losses you talked about.

At the beginning of the year, we were up around 700,000 a month. And so it is right to say this is progress. Still bad news. Americans are losing their jobs, a very slight job gain in November. As you look at more stimulus money being spent in the new year, will that help bring the rate down and bring the job growth numbers up, keep this in the positive?

ROMER: You know exactly what the president has been talking about, say, back in December, when we had the jobs summit, is there are some targeted actions we can take at this point in the recovery that we think can help to jump-start private sector job creation. Things like incentives for small businesses to hire, right? We know -- we see, say, in the temporary jobs -- the temporary help employment numbers, firms are starting to kind of dip their toe into hiring. Something like...

KING: On a temporary basis, so they're not quite confident enough yet to give somebody a full-time job?

ROMER: Exactly. But maybe that may be a situation where a small incentive makes them say, well, I was going to hire permanently next year, maybe with some incentive I will bring it forward a year, which would be great for the American people.

KING: But you sound reluctant to pick a number, say if it will be down to X percent by the end of the year. And I'm wondering if this is one of the factors in that. You have unemployment, which is the orange line, but under-employment, which is the yellow line, people who would love to work full-time but who, because of the hard economy, can only find a part-time job.

When the economy starts to grow back and they come into the workforce, and those who have been discouraged and have just stopped looking come into the workforce, and there are hundreds of thousands of them, is it likely that even if the economy grows at 3 percent, that the rate might actually still go up because people -- more people start looking for jobs?

ROMER: I mean, you're absolutely right that there is a lot of uncertainty about the unemployment numbers, precisely because of things like the labor force, right? If, as I very much expect and hope, we start to grow again robustly, and when we start to add jobs, you're right, one of the first things that can happen is people can have a sense of hope. Some of those discouraged workers could come back in.

That's why what we tend to focus on are things like the employment numbers, and are we seeing the kind of progress -- we will be watching the labor force numbers. People coming back into the labor force is not a bad thing, right? That's good for them. That's good ultimately for the economy. But it's something that can push that unemployment rate up.

KING: And do you have any hesitation -- I understand your caution about picking a number, do you have any hesitation that come November, say, of this year, which happens to be an election year, and the number will matter, that the unemployment rate will be lower then than it is now?

ROMER: Oh, I don't want to make a prediction just because there is so much uncertainty. What I know is that we are seeing steady progress. I would absolutely expect that progress to continue through next year, and I hope accelerate.

KING: But let's have a seat and continue the conversation. I want to bring up another item on which the American people are feeling a bit of a crunch. They are uncertain about the job market. And as we have seen cold these past few weeks all across the country, energy prices also on the rise.

Home heating oil costs up a bit from this time last year. And prices at the pump, when people are driving to work every day or driving to look for a job, up nearly a dollar a gallon from this time a year ago. When you look at that, is that the market as you would expect or are there any shenanigans in energy prices right now?

ROMER: You know, I think it's largely the market that one would expect. I think the main thing that this is getting at, and I think it's good that you bring it up, is there are so many ways that ordinary families are just really suffering through this recession. We tend to focus on the unemployment rates that you've talked about, but, you know, there are just lots of -- you know, they have seen their pensions get -- you know, their pension funds get decimated by the stock market, their housing values.

They have suffered tremendously.

ROMER: And that has always been sort of on the forefront of the president's, you know, mind, as not only do we need to rescue this economy from the immediate crisis, but to say, go back, you know, over the last 10 years, middle-class families have -- have seen their standards of living stagnate. What are the other reforms we need to do to -- to make them grow again?

KING: And those middle-class families who are paying higher energy prices, are uncertain about the job market, not always fair, but in the next week, it's what they call bank bonus season, and the banks will begin giving their bonuses. And -- and president and his team often get blamed, because people want to be mad at somebody, so they blame the political leadership when they see behavior on Wall Street.

We will see in the next week or two five-, six-digit, seven- digit, maybe even, some say, eight-digit bonuses for people in the banking industry. Is there a message from the Obama White House to the banks as they prepare to make these big announcements?

ROMER: For heaven's sakes, people, you know, it does seem really ridiculous. You know, we have had to take extraordinary actions to rescue the financial system. We always did it because that's what had to be done for the American people. No one wanted to bail out the banks just for the bank's sake. It's because we know that credit is the lifeblood of a modern economy and without it families can't get loans to buy cars or send their kids to school and small businesses can't get loans. So we know that the financial sector matters.

But at the same time, right, we have had to take these extraordinary actions. And you would certainly think that the financial institutions that are now doing a little bit better would have some sense. And this big bonus season of course is going to offend the American people. It offends me.

KING: Let's focus a bit on the president's year two agenda. He's a week away from hitting the one-year mark. And one of the things he hopes to get very early on in year two is a health care bill. He's working to negotiate now between the Senate and the House.

The CMS, which is the Medicare actuary, keeps track of spending in the Medicare program, has a new report out looking at the Senate Democratic bill as it now stands, and that report says it would grow national health care expenditures by about $222 billion over the next year, so health care costs nationally would continue to grow. And it says it believes unrealistic, difficult to attain, are the words it used for the proposed Medicare savings, trying to squeeze more than $500 billion out of the program.

Is the president comfortable with the cost curve? Is it bent enough as it now stands? Or in negotiating a final compromise, do you need to bend it more?

ROMER: All right, so certainly the Medicare actuary is -- is one person or one group that -- that looks at this. The Congressional Budget Office has also -- a nonpartisan agency -- has been looking at both the Senate bill and the House bill, and the Council of Economic Advisers has actually done a lot of work looking at the -- what the CBO is projecting, and we feel very confident that -- that, based on their numbers, based on the Joint Committee on Taxation's, that the -- the Senate version of the bill would genuinely slow the growth of costs over the long run by about 1 percentage point a year, which may sound small, but it's actually enormous. And in terms of what it adds up to over time, it's huge. I think the important thing is, the president, he has made this a priority.

KING: And the administration is committed. In the president's State of the Union speech, which is coming up in a few weeks, and in his new budget, which is coming up in a few weeks, to try to do more to tackle the deficit problem. You believe spending was necessary last year. We'll leave your critics aside for now, but the administration believed spending was necessary, running up more deficit was necessary to help prime the economy.

Now, as you shift toward trying to control the deficit, as well as to keep the economy going again, some tough choices. You have to decide what to cut, what to squeeze, maybe to find new revenues. In that context, I want to remind you of a promise the president made late in the campaign. This is Barack Obama, September 2008.


OBAMA: I can make a firm pledge: Under my plan, no family making less than $250,000 a year will see any form of tax increase, not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.


KING: Does that stand as we head into year two of the Obama administration and you try to make the difficult choices to start to bring the deficit under control? Does that promise still stand, not any of your taxes if you're under $250,000?

ROMER: I mean, yes. And let me talk, though, about the -- the bigger issue, which is, you know, even -- to the degree that we, of course, care deeply about the deficit, and you're right. In 2010, that is going to be something very much that the president is focusing on and talking about.

It is important to understand we are also talking about actions taken right now, targeted actions to jump-start job creation. And there is no conflict between those, because anybody will tell you that you don't get your budget deficit under control at a 10 percent unemployment rate. So we absolutely have to get people back to work, obviously, for their sake, but also for the budget deficit.

KING: And does the disappointing December jobs report make that more important and deficit reduction in the short term perhaps a little less important than if I had had this conversation with you four or six weeks ago?

ROMER: Yeah, I think it's always been important, right? The unemployment rate was 10 percent in November; it was 10 percent in November. At that kind of a level, we have to do something. We are -- you know, there are more targeted actions that we think absolutely will help.

What the president is going to be talking about is getting, you know, our fiscal house in order over the longer run. We are engaged in the biggest piece of that right now on the floor of the United States Congress, the -- the picture that you have up there, because health care reform is the number-one thing you've got to -- to -- to do to -- to get your long-run budget deficit under control.

KING: Let me ask you in closing about something that I -- I hope is a little fun, but to some people out watching it might have been a bit of a mixed message. You were out about a month ago -- Larry Summers, your colleague, was on this program about a month ago. There are academic definitions for what is the end of a recession that you'll find in an economic textbook, and there are political definitions, which means the pain people are feeling around the kitchen table, as they might be watching this program this morning. When you and Larry Summers were out about a month ago, you seemed to have a bit of a difference of opinion. Let's listen.


SUMMERS: Today, everyone agrees that the recession is over. And the questions are around how fast we'll recover.

ROMER: I mean, the president's always said and what I firmly believe is, you're not recovered until all those people that want to work are back to work.

GREGORY: So, in your mind, this recession is not over?

ROMER: Of course not.


KING: What's a Monday morning meeting like after that one? Who carried the day?

ROMER: I think the important thing, you didn't show the clip of before. I said the academic opinion would be that, you know, economists date a recession as when you turn the corner, and that was exactly what -- what Larry had said. And I did say -- and as you know, right -- for ordinary Americans, with the unemployment rate at 10 percent, with the pain that they're suffering, of course it's not over in a fundamental sense. So I think we actually agreed completely, just different ways of expressing it. KING: Dr. Christina Romer, we thank you for your time today, and we wish you luck in the year ahead.

And up next, we head out to Wyoming, and we keep a promise, our 50th state. And amid all the breathtaking beauty, the recurring question of our coast-to-coast travels this year: Is the economy finally ready to rebound?


KING: This is a very special Sunday here on "State of the Union." We've met our goal of visiting all 50 states in the first year of the Obama presidency, which also happens to be the first year of "State of the Union."

Number 50 for us was beautiful Wyoming, perhaps best known for its national parks, most notably Yellowstone and Grand Teton. It is a state whose beauty is big business. And in tough economic times, the tourism industry is one of the most accurate barometers of consumer spending.

Let's take a closer look. In 2009, because of the recession, July 4th travel was down 2 percent. Labor Day travel was down 13 percent. National park visits go up a bit, 4 percent nationally, in 2009. Why? They're cheaper, less expensive; families taking advantage of a bargain.

So in our "American Dispatch" this week, we hit the slopes at Jackson Hole. And around a few snowboard runs -- I enjoyed that -- we heard some cautious optimism that this new year will bring bigger crowds, more spending, and perhaps the seeds of recovery.


KING (voice over): The Grand Teton peak reaches nearly 14,000 feet, this above the clouds' view, part of Jackson Hole's wonder and its leading industry.

Beauty is big business here, and Wyoming a case study in how a bad economy impacts travel and tourism. With family budgets tight, 2009 saw record visitations to inexpensive national parks like Grand Teton and Yellowstone and lots of open space on the more expensive slopes at places like the Jackson Hole mountain resort...

NICK MERLUZZI, JACKSON HOLE MOUNTAIN RESORT EMPLOYEE: How are you guys doing today? Conditions are pretty good.

KING: ... where Nick Merluzzi has worked for two winters now.

MERLUZZI: It's snowing and it's -- I love to be outside and have this be my office, with the views I get and the benefits I get. It's great.

All right. Have a good run, sir. KING: An up-close look now at whether 2010 will bring more people and a recovery for a guy who had an all-too-close view of the economy's crash.

MERLUZZI: I used to work in finance in New York City. Unfortunately, I lost that job around February of 2008. I was in global wealth management, in operations, where I was seeing a lot of terminations and liquidations come flowing in. People just did not trust their money in stocks anymore.

KING: This job, a vastly different pay scale, but also a very different perspective.

MERLUZZI: It's pretty fun today, huh?

In this world, I'm not able to save any money. I'm living paycheck by paycheck, compared to when I was working in finance in New York City. It was -- it was much nicer. I was making more money. I was able to put some away. However, my lifestyle over there was a lot more stressful than it is here.

KING: Merluzzi's move from Wall Street to the lift line is in itself a sign of the times.

MERLUZZI: All right. Have a good time.

JERRY BLANN, PRESIDENT, JACKSON HOLE MOUNTAIN RESORT: We didn't really grow as quickly as we'd like.

KING: In years past, Jackson Hole Mountain Resort president Jerry Bland often had to seek temporary visas for foreign workers, but not this year.

BLANN: We're staying domestic, 100 percent domestic. This fall, when we had our job fair, we had 500 people show up for essentially 200 jobs. And the quality and the educational capability of the people who came in the door was extraordinary.

(UNKNOWN): Thank you much.

KING: The recession hit in the middle of a $100 million improvement project, including a new tram to the resort's highest peak, forcing Blann to deal not only with fewer visitors but also with the credit crunch he says continues to hamper businesses.

BLANN: In the midst of all that, we had to do a refinance, and we were able to put it together. It was a tough negotiation, took a long time. It's not back to where it should be, and we've got -- we've got to loosen the reins a lot more.

KING: Still, after a tough 2009, Blann is cautiously optimistic the slopes will be more crowded in the new year, but only if the travel and tourism industry heeds the recession lessons.

BLANN: Everybody's looking for that value proposition, and that's just natural. They're asking for deals and getting them. KING (on camera): If you didn't do that; if you were stubborn and said, no, we're going to -- you know, this is our profit margin; we're going to keep our profit margin, what happens?

BLANN: Well, obviously, you're going to lose some volume. And volume, for us, is key.

KING (voice over): A snowboard run during a recent visit found only modest crowds. But Christmas week business was up from last year and bookings for the rest of January and February have resort officials optimistic.

BLANN: You know, I think people have been conservative, have been holding their pocketbooks pretty close for a while and I think they're ready to -- to jump out.


KING (on camera): Our thanks to everyone at beautiful Jackson Hole and to everyone we have met in the course of our 50-state tour. We'll spend a little more time next Sunday discussing everything we've learned.

But in the meantime, if you're curious, check out, where you can see what we've seen, what we've learned, the people we've met when we traveled to your state.

We want to say goodbye now to our international audience for this hour. But up next, for our viewers in the United States, Howard Kurtz is standing by with his "Reliable Sources."


KING: I'm John King and this is "State of the Union."

(voice over): Brit Hume used the Sunday talk show to offer Tiger Woods some religious advice. Did the Fox News analyst cross the line?

Plus, low ratings killed NBC's big prime time experiment with Jay Leno.

In this hour of "State of the Union," Howard Kurtz, as always, breaks it down with his "Reliable Sources."