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STATE OF THE UNION WITH JOHN KING

More of the Obama Interview; David Axelrod Interivew Replay; Ed Gillespie Interview

Aired January 18, 2009 - 12:00   ET

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


JOHN KING, CNN HOST: This is STATE OF THE UNION, live from the roof of the Newseum with a breathtaking view of the Capitol on the National Mall here in Washington, D.C. I'm John King. At the top of Barack Obama's agenda is an economic stimulus package that could cost taxpayers hundreds of millions of dollars. Some say could reach a trillion dollars. But with the economy in free fall, President Obama will face some very, very tough choices. When I sat down with the president- elect in Ohio for his last scheduled interview before being inaugurated, I asked him which campaign promises might simply have to wait.
(BEGIN VIDEOTAPE)

KING: Every new president learns that governing math is sometimes a little more difficult than campaign math and you talked about this. There will be trade-offs, that some people are going to have to wait. I want to talk about a couple of them. You made a big priority during the campaign. You said $50 to $65 billion, you would spend, on health care reform and you could get that money from rolling back the Bush tax cuts for people who make over $250,000 a year.

Even many who know want to roll those tax cuts back say not now, would hurt the economy at a precious time. Does that mean you will let those tax cuts stay in place for a while and say to people who are urgently waiting, health care reform is going to have a little bit.

OBAMA: We have not made a final decision on this. We'll be unveiling our budget in February. The important principle is that folks making more than $250,000 a year can afford to give up those Bush tax cuts so we can give those tax breaks to 95 percent of working families who desperately need some relief.

We are going to make sure that that's part of our package.

KING: But it might take a little long...

(CROSSTALK)

OBAMA: It might take a little bit longer. Keep in mind, though, that the legislation to get our health care plan in place is going to take a significant amount of time during the course of this year. That is a huge process.

We've got to get all of the stakeholders together, the providers, the nurses, the doctors, the hospitals, everybody is going to have to sit around the table and then we've got to move it through Congress. So what I -- but here's the good news, that in the economic recovery package that we put together, we have a lot of investment in making the health care system more efficient. Those are things that had to be paid for anyway.

Just a simple thing like converting from a paper system to electronic medical records for every single person can drastically reduce costs, drastically reduce medical error, make not only health care more affordable, but also improve its quality.

KING: If you're not busy enough, you now say early on you will have an entitlement summit.

OBAMA: Yes.

KING: President Clinton tried some of this.

OBAMA: Yes.

KING: I know you disagreed with his proposals, but President Bush put a lot of capital into this. It's a frustrating challenge that presidents in the past have faced. You'll have this summit, but what is your timetable for action in Congress?

OBAMA: Well, you know, I think here's the difference. There is something about a trillion dollars that gets people's attention. And...

KING: One would hope.

OBAMA: I hope.

(LAUGHTER)

OBAMA: And I think that across the political spectrum people are looking at what we have to do now to get this economy back on track. And they're saying to themselves, we know we can't sustain this, and that means we've got to make some tough decisions. And I'm going to be using a significant amount of political capital.

What I want to do is lay out the situation for the American people. And this is going to be a general principle of governing. No spin, play it straight, describe to the American people the state that we're in. And then provide them and Congress a sense of direction.

Here's how I think we can solve this problem. Now I'm not going to get my way 100 percent of the time. I expect that people will have good ideas. And if they've got better ideas in terms of how to deal with Medicare or Social Security than I do, I will gladly accept them. I just want things to work.

But what I know will not work is us seeing our debt levels double again like they did under George W. Bush. We can't do it and it's a burden on future generations that I'm not willing to accept. KING: You went to every corner of this country promising to restore trust and confidence in government and particularly and especially in Washington.

OBAMA: Yes.

KING: Do you think that promise is in any way at risk because of the controversy over your pick to be treasury secretary who failed to pay more than $30,000 in taxes? You have said it's an honest mistake, people make them.

"The New York Times," for example, has an editorial today saying, not the right guy for the job at this time of economic peril. They say this controversy has tainted his ability to command respect and instill confidence.

OBAMA: Well, you know, "The New York Times" editorial page has a lot of opinions, as does "The Wall Street Journal" editorial page, and some of them are better than others. This wasn't a good one.

Tim Geithner...

KING: He's going to be the head of the IRS, the man who...

OBAMA: I understand.

(CROSSTALK)

KING: ... and administers the tax code.

OBAMA: But keep in mind, nobody disputes that this guy is the best equipped guy for the job. That he has got the best qualifications imaginable. That he has dealt with financial crises consistently and steadily.

And so the notion that somebody who has made what is a common mistake because they worked for an international organization, they paid this money back, paid penalties, and the notion that somehow that is disqualifying makes absolutely no sense.

And, you know, the -- I think that one of the things that we need to change about Washington is this notion that if you can play gotcha and you find, over the course of an exemplary record, one mistake that somebody makes that somehow that's disqualifying.

If that were true, then I couldn't be president, and you probably couldn't be a correspondent. So what I want is somebody who has terrific qualifications for the job, who has core integrity. I'm not looking for somebody who has never made a mistake in their life. And I don't think the American people are either.

KING: You will have the power at the end of that parade to, at the stroke of a pen, lift the federal ban on embryonic stem cell research. There may be the votes to do it in Congress now, but you don't have to wait, you could do it in your first few minutes in office, will you? OBAMA: Well, if we can do something legislative then I usually prefer a legislative process because those are the people's representatives. And I think that on embryonic stem cell research, the fact that you have a bipartisan support around that issue, the fact that you have Republicans like Orrin Hatch who are fierce opponents of abortion and yet recognize that there is a moral and ethical mechanism to insure that people with Parkinson's disease and Alzheimer's can actually find potentially some hope out there, you know, I think that sends a powerful message.

So we're still examining what things we'll do through executive order. But I like the idea of the American people's representatives expressing their views on an issue like this.

KING: You spent two years traveling the country saying President Bush was incompetent when it came to domestic leadership, had a debacle of a war in Iraq, and had hurt our image around the world.

KING: You've gotten to know him a little bit better during what by all accounts is an incredibly smooth and professional transition. Anything about him you want to take back or any new judgments about him?

OBAMA: You know, I think if you would look at my -- if you look at my statements throughout the campaign, I always thought he was a good guy. I mean, I think personally he is a good man who loves his family and loves his country.

And I think he made the best decisions that he could at times under some very difficult circumstances. That does not detract from my assessment that over the last several years we have made a series of bad choices and we are now going to be inheriting the consequences of a lot of those bad choices.

That does not mean that I think he's not a good person. And his White House staff has done an extraordinary job in working with us for a smooth transition. And that's part of what, I think, America is about. That we can have disagreements politically but still treat each other civilly, and I think he has embodied that during this process.

(END VIDEOTAPE)

KING: When we come back, Barack Obama opens up about his family and takes us inside an emotional trip with his wife and daughters to the Lincoln Memorial.

And there is much more to come. Top Obama aide David Axelrod gives us a look at what's ahead in the first hundred days of the new administration. CNN senior political analyst Gloria Borger joins us to wrap up the emotions and the politics of a very important Sunday.

And finally, White House Counselor Ed Gillespie will have the last word. It will be a signature segment here on STATE OF THE UNION. Stay with us.

(COMMERCIAL BREAK)

KING: You're watching this special Inaugural edition of STATE OF THE UNION, live from the rooftop of the Newseum, right in the middle of it all here in Washington, D.C. Over the next few days Barack Obama not only a new president, also a father, dealing with the many problems of moving his young family into a new house and a new city.

When I sat down with him in Bedford Heights, Ohio, we talked about how he and his wife Michelle and their two daughters are handling the personal transition.

(BEGIN VIDEOTAPE)

KING: Let's spend a few minutes, as we close, on your personal transition.

OBAMA: Yes.

KING: Another one of our questions from viewers was about the big choice you have to make for the family. This is Jill Pearson (ph) from Marietta, Georgia.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Have you decided on your first puppy?

(END VIDEO CLIP)

OBAMA: Well, yes, we have narrowed it down. I made the statement that says we're thinking about either a Labradoodle or a Portuguese Water Dog. Malia is allergic, so we have to have a hypoallergenic dog.

We'd also like a shelter dog, though. So, you know, how we're going to manage all of this will be closely watched, I know, in the weeks and months to come.

KING: I have spent some time since the election with a young boy named Melvin Thomas. He's 14 years old, lives just outside of Baltimore, African-American. If I was visiting with him a year and a half ago and said, who's your hero? He would have said without blinking, Michael Jordan. If I asked him today, he says, Barack Obama.

OBAMA: Well...

KING: And he says, Barack Obama is going to change the country. He thinks you're going to create more jobs. And he thinks you're going to help stop people from hating black people. What's the burden you feel there and the responsibility to kids like Melvin Thomas?

OBAMA: Well, first of all, I hope that -- part of what my election communicates to Melvin is he can shoot for the stars. He can go as far as his worth ethic and his -- his imagination takes him.

And what I also hope is that not only me, but all of us take responsibility for the millions of Melvins out there. There are so many young people with so much talent.

KING: What, specifically, do you need to do?

OBAMA: Well, I think that part of what we have to do is make sure that our school system works. Part of it is all of us as parents taking responsibility, because government can't do it all.

And what Melvin is going to benefit from, hopefully, is some good policies from my White House, but I also hope he's going to benefit from parents who instill in him a thirst for learning, that he has a community that is supportive of the idea that there's nothing wrong with black boys, or any American child, hitting the books before they worry about whether they're popular or whether they're worrying about their sports.

You know, I think that the idea that each and every one of us has responsibilities to the next generation is one of the things that I want to communicate, both on Inauguration Day and throughout my presidency.

KING: We're short on time, so a couple of more quick ones. You took your family to the Lincoln Memorial.

OBAMA: Yes.

KING: What did you talk about, walking around and looking at the president and reading those walls?

OBAMA: Now this is a good story. I love the Lincoln Memorial at night. It always inspires me. So I took Michelle and the girls. We're looking at the Gettysburg Address. And Michelle's describing what Lincoln's words mean.

The fact that these soldiers died on this battlefield means that any words that Lincoln could have said or any of us could have said would ring hollow. They've already consecrated this ground, and what we have to do is to honor them by working for -- for a more just -- more justice, more equality here in America.

At which point, Malia turns to me, and she says, yes, how are we doing on that, Mr. President-elect?

(LAUGHTER)

KING: Accountability in the house, that's a good thing.

OBAMA: Absolutely. And then we go and look at the -- Lincoln's second Inaugural, which is on the other wall. And Sasha looks up, and she says, boy, that's a long speech, do you have to give one of those?

I said, actually, that one is pretty short. Mine may even be a little longer. At which point, then Malia turns to me and says, first African-American president, better be good.

(LAUGHTER)

KING: You were tired during the campaign, and it's a pretty exhausting process. At one point you got a little confused about how many years you've been married. I know you're busy right now, so I just wanted to help you out. You know what this weekend is, right?

OBAMA: This is her birthday, Michelle's birthday. And we are going to make sure that we -- we actually had a little birthday party last night. And...

KING: Ahead of the curve this time. That's a smart man.

OBAMA: You know, listen, if you're going to miss it, better miss it earlier than miss it late.

KING: I'll ask you one last question. And it's, in part, silly. But it's not always silly. You like these. I was just with you before this, and you have a couple of them. And there are a lot of people who say, because this will end up in the presidential library, because you don't have privacy any more, your life is about to change Tuesday noon, you have to give this up.

OBAMA: Yes.

KING: You going to do it?

OBAMA: I think we're going to be able to beat this back. I think...

KING: Beat this back?

OBAMA: I think we're going to be able to hang onto one of these.

Now...

KING: You want mine?

(LAUGHTER)

OBAMA: My working assumption, and this is not new, is that everything I write on an e-mail could end up being on CNN.

OBAMA: So I make sure that -- to think before I press "send."

But what this has been -- what this does is -- and it's just one tool among a number of tools that I'm trying to use, to break out of the bubble. To make sure that people can still reach me. But if I'm doing something stupid, somebody in Chicago can send me an e-mail and say, "What are you doing?" You know? Or "you're too detached" or "you're not listening to what is going on here in the neighborhood."

I want to be able to have voices, other than the people who are immediately working for me, be able to reach out and -- and send me a message about what's happening in America.

KING: Do you think you fully comprehend how much your life's about to change?

OBAMA: Hey, I've gotten a pretty good sense over the last few -- last few days. And truthfully, over the last two years. It's -- it's a process that is consistently ratcheting up. And you've got to pick up your game correspondingly. And so far, so good.

KING: Mr. President-elect, we thank you for your time.

OBAMA: Sure.

KING: I wish you the best.

OBAMA: Thank you so much.

KING: I'll see you again when we drop the "elect" part.

OBAMA: There you go. Appreciate it.

KING: Thank you very much, sir.

(END VIDEOTAPE)

KING: Up next, two very different views from two men who work as closely as can you get with the incoming and the out going president. All looks friendly on the surface of this transition, we'll peel back the curtain to see what is really going on behind the scenes.

And don't forget, a lot more live coverage of this historic inauguration all throughout the day starting at 2:00 p.m. Eastern. I'll be back with Wolf Blitzer and the rest of the best political team on television. Stay right here. (COMMERCIAL BREAK)

KING: I'm John King. Welcome back to STATE OF THE UNION. We're coming to you live from the roof of the Newseum here in Washington, D.C. But I think we can show you across town, the South Lawn of the White House. It is still George W. Bush's house for just about 48 more hours. I don't know it we still have that picture, maybe not.

But he will be coming back from Camp David, his last time. We've lost that picture temporarily. President Bush will go returning to the White House for the last time from Camp David, the presidential retreat he loves so much. And we will be bringing you there live as it happens.

After Tuesday when the parade is over, of course, and the enormous crowds of Americans go home, Barack Obama and the new administration will turn to the long list of serious problems confronting this country.

Earlier this morning, I spoke about the president-elect's upcoming agenda with David Axelrod, the incoming senior White House adviser.

(BEGIN VIDEOTAPE)

KING: I want to get to the big decisions that the new president will have to make. But first, you're a friend. You're not just a senior adviser. You're a friend to Barack Obama. You were a key architect of the campaign that brought this moment to bow and you spent a lot of time with him as he goes over the speech and considers what he wants his first words to be to the American people as president. What does this moment mean to you?

AXELROD: Oh, it's hard to put in words, John. It's been such an extraordinary journey. I mean we started off together trying to persuade people that he could get elected the senator from Illinois. But it's been a magical journey ever since. And really, I applaud your notion about getting out to talk to the American people because we drew our strength and inspiration from them.

But you can't help but be here this weekend and not be moved by the magnitude of this and mostly I'm thrilled because I really believe in him. I think this country needs an extraordinary president right now. And I think he'll be one.

KING: First actions matter. They set the tone of a new administration. They signal to the country and world what will come. Israel yesterday said it would implement a cease-fire in Gaza. Hamas this morning, CNN has now confirmed, said it will abide by a cease- fire as well.

As you know, from watching from the outside, these things often are very tentative and very fragile. Will the Obama administration have an envoy on the ground in the Middle East on Tuesday, on day one?

AXELROD: Well first of all, let me say that all of us are hopeful that a cessation of violence will hold. But the president- elect has said repeatedly that he intends to engage early and aggressively with diplomacy all over the world. And using the men and women, the professionals who are in place who are great and wear appropriate special envoys.

KING: That fast though?

AXELROD: Well, I think the events around the world demand that he act quickly. And I think you'll see him act quickly.

KING: The big priority at home obviously is the economy. And the stimulus package is making its way through Congress. $850 billion, roughly is the House version. It still of course has to go over to the Senate.

There are some in the House who say this is a starting point, a down payment. The economy is in such dire straits, we're going need even more money. There are Republicans who say we would like to work with the new president but we look at this bill and we see a whole bunch of old Democratic pork barrel spending, a lot of which they don't believe will actually create jobs in America, but will instead go to schools or go to places that might be worthy spending but not something that will create jobs immediately.

Will President Obama say this is all we can afford, $825, $850 billion or will we be printing money throughout this administration?

AXELROD: Well, we -- we have been involved in discussions with Congress for the last few weeks. We started with a figure that was somewhat lower than that. Obviously, there are limits to what we can do. But we do have to think boldly right now that the scope of the emergency we face is so large that economists from the right to the left agree we have to do something big.

But let me just say this on the question of how the money is spent. We were determined and we are determined not to simply spend money to create jobs in the short term. And we do believe it will create 3.5 to 4 million jobs. But we're determined to make investments that will strengthen the economy in the long run.

KING: In the campaign, candidate Barack Obama promised the most open and transparent administration in American history. Your treasury secretary nominee has hit a speed bump over the disclosure he failed to pay some $30,000 in taxes. He has paid the taxes, he has paid the interest.

But the transition disclosed that to the Senate Finance Committee on December 5th. The American people were not told about this publicly until January 13th. Is that -- could you call that truly open and transparent when the American people were not told something for more than a month that is pretty critical?

AXELROD: John, it is absolutely appropriate for us to first take this matter to the Finance Committee. It was very clear that that was going to be discussed in open hearings for American people to watch and formulate their own judgments. So I wouldn't say this is a transparency issue.

And as to Tim Geithner, yes, he made a mistake on his taxes. It was related to his service overseas and how certain withholding was treated. Most accountants say this is a fairly common mistake. When it was discovered, he redressed it.

AXELROD: The bigger point is, here's a guy who has been involved in public service all of his life who was a major architect of the last international financial rescue in the '90s, who has vast experience and great values and a great insight into this process.

(END VIDEOTAPE)

KING: Up next, we'll give the last word this Sunday to Bush White House counselor Ed Gillespie, his take on what faces Barack Obama and on the legacy of the man he has served, President George W. Bush.

And we're standing by for the arrival of President Bush to the White House aboard Marine One. This will be the final trip home to the White House as president. Next time, he'll be a guest.

Stay with us. Much more STATE OF THE UNION just ahead.

(COMMERCIAL BREAK)

KING: Welcome back to STATE OF THE UNION. I'm John King in Washington. Look at that. That's the National Mall in Washington, D.C. Jumbotrons you see on the edge of the Mall. They're those little black dots. Those are giant televisions.

There is the Washington Monument. A crowd gathering. People coming to this city by the tens of thousands for the Inauguration of Barack Obama, going down to check out the real estate. Still a lot of space. A lot of grass there at the moment. Watch as we go from Monday into Tuesday, it will be hard to find any grass in the camera view there.

You know, this morning -- oh, we also want to take a look, that's the South Lawn of the White House. I've been out there many, many times watching presidents come and go. Family members, staff members of the White House there for good reason. George W. Bush will soon come back from Camp David.

He loves the presidential retreat in the mountains of Maryland. He will return to the White House for the last time. Two more nights in the White House for George W. Bush. We'll take that live as the president comes back in just a short time.

You know, this morning, 37 news makers, analysts and reporters hit the Sunday morning talk show circuit, but only one man gets the last word. That man is with us now. He's Ed Gillespie who for two more days will serve as the White House counselor to President George W. Bush.

Ed, thanks for joining me.

ED GILLESPIE, WHITE HOUSE COUNSELOR: Thank you, John, for letting me be on.

KING: You're more than welcome. And we hope to have you many times back as you now go back to the private sector. But that picture we just saw, presidents come and go. It's almost like the bus stop.

The president gets on Marine One and he goes off. I want you to describe the moment as you spent time in private with George W. Bush over the past few days, most Americans probably forget he has been in that house so often, when his dad was vice president and during his dad's presidency and now eight years as president, where is he right now in terms of his mindset at the moment?

GILLESPIE: He is as ready to go home to Texas and to spend time with his family and to work on his library. He feels that we have accomplished, I think, what he tests the staff with, which was a smooth transition to make sure that his successor, regardless of party, would be able to take the reins of the executive branch without any kind of problems.

And I think we've done a good job in that regard. A smooth handoff. And so I think he feels ready to get home and feels like it has been a good run. And time for it to end and turn it over to the next person and recede from the spotlight.

KING: You say turn it over. He is president -- my math is not always so good, but about 47 more hours if I have the math about right. One of the questions many people ask around town, I remember in the last minutes, not the last hours of the Clinton administration, a very controversial pardon of a financier named Marc Rich. Many in this town have said will this president issue a big pardon? One of the questions is Scooter Libby, the vice president's former chief of staff. Any paperwork sitting on the president's desk for big ticket item like that, a pardon -- a potentially controversial pardon or are we past that?

GILLESPIE: As you know, John, the president has the authority to issue a pardon up until 11:59 on Tuesday. I'm not going to preclude that option for him. So I think at this point we wait and make any announcement on that probably tomorrow or Tuesday.

KING: All right. We will wait and see on that.

Discuss the moment. The president is leaving office at a time -- you know the political talk in Washington, just look at the approval numbers. And maybe (INAUDIBLE) polls, our polling, 31 percent of an approval rating for George W. Bush. The New York Times poll has him at 22 percent.

I guess CNN polls are in favor at the White House at the moment. I don't mean to joke about it. Though it's tough for a guy who has given so much to politics, when he looks at that number, does it make him mad, make him defiant?

GILLESPIE: He doesn't much look at that number. I, obviously am someone who looks at those numbers, and I'd rather see them higher than lower. It's my nature.

But I also feel, as the president does, that as the -- you know, the bitterness that surrounded unfortunately for whatever reason so much of the vitriol directed at the president, as that dissipates over time, as the facts bear out and as people see the true record, obviously we lived in a time of tough economic situation.

The president has moved boldly to help address that for -- help make it a little easier for a successor who will have a challenge on that front. But, you know, after the attacks of September 11th and through this one, we had 52 months of uninterrupted job creation. That is the longest in the history of the United States.

The fact is we're -- Iraq is on its way to being a stable democracy in the heart of the Middle East. Very important, I think, in the long term. And a lot of other statistics that we've got out there that I think as people look at the data over time, I think he'll get a fair shake.

KING: You mentioned the economy. One of the last acts was this bailout. And $350 billion of it has been spent on George W. Bush's watch. The second installment will come on Barack Obama's. But many Americans, when you travel, they think, where did this money go? Did big banks get it on Wall Street? It is being flushed literally down the toilet? They don't see the impact on Main Street.

(HELICOPTER FLYING OVER)

KING: And we'll tell our viewers we have a helicopter flying overhead here. Not a surprise in Washington on a big security weekend.

(LAUGHTER)

KING: But can you cite specific evidence that the first $350 billion has done anything to begin the turnaround?

GILLESPIE: You can, John. And in fact, if you look at the rates that have narrowed in terms of credit markets, the TED spreads and LIBOR, things, frankly, I didn't know that much about until about six months ago, they were very -- the spreads were high. And that's not good for the credit markets.

The injection that the Treasury has put into the capital markets has helped ease those. Again, this is a difficult time. But the president said the other night, I believe rightly, that had we not acted boldly and had we not put this money into the financial markets, we would have seen a lot worse of a financial strain on the American people today than what we're already witnessing.

KING: Before we go to a quick break, because we want to take the president's arrival back to the White House. And I want your help as that happens, but I'm fascinated during this campaign, you're having covered the president for a while and known him a little bit when he was the governor of Texas and in his dad's days here in Washington, he loves politics and he loves campaigning.

And we know from talking to people that he was not thrilled by how he was treated by his own party. Senator McCain kept him off the road. He didn't campaign much for Republican candidates for the House and the Senate and governor for that matter.

Behind the scenes, that just had to tick him off.

GILLESPIE: Well, you know, he's a -- he was a little bit chomping at the bit, but understood that the nature and the environment and obviously was strongly supportive of Senator McCain, and made clear we would do whatever we could to help him, if that meant laying low, that was fine, too.

GILLESPIE: And so I do think it's important, though, that people do defend the lower taxes, the strong national security and the response to terror that this administration brought about, that has kept us safer.

And I think, over the long term, it's in the party's interest to set the record straight on some of those things. Because, if not, you're just adding weight to your ankle weights as you run up a hill.

KING: We need to sneak in a very quick break. We'll be right back with the White House counselor Ed Gillespie. You're watching "State of the Union."

(COMMERCIAL BREAK)

KING: A live look -- a live look, there, at the south portico of the White House, a majestic building. It has been home to George W. Bush for eight years, that crowd waiting for the president's last return from Camp David.

We are told he has not yet left Camp David. So we likely will not be able to show you his last arrival back on Marine One before the top of the hour. We will keep that tape. It's well worth watching. The president loves the building. He'll live there for two more days.

Our special guest is Ed Gillespie, the White House counsel to George Bush. We're also joined by our senior political analyst Gloria Borger, up here. Luxury box? Nice seats, nice view of the United States Capitol, here.

BORGER: Absolutely.

KING: I asked you, before the break, to peel back the curtain on the campaign. I want to talk a little bit more policy business. But I mentioned the politics of the moment.

We saw both the president of the United States, George W. Bush and his father, the former president of the United States, George H.W. Bush, say they thought that Jeb Bush, his brother, the former governor of Florida, would make a great candidate for an open Senate seat in Florida.

Everyone took that as a cue; boy, Jeb's going to get in. And in the end, he decided not to. Take us behind the curtain.

GILLESPIE: Well, I think, actually, that's one of the ones where there was no curtain.

(LAUGHTER)

I think the president and the former president felt like Jeb would be a great candidate. By the way, as a former RNC chairman, I thought he would have been a great candidate. A lot of people agreed with that.

But, you know, politics is also about people and their families. And people have to make decisions as to where am I and, you know, at a certain point in life. And I don't think it was the right time for Jeb, given what he said, in saying he wasn't going to run.

KING: Come on in.

BORGER: Well, I, sort of, was wondering whether Jeb had actually talked to either his brother or this father before they told -- before they said publicly, oh, he would be a great Senate candidate.

(LAUGHTER)

GILLESPIE: I think he was going through the thought process, and I think they knew that, but that's -- you can agree that he'd be a great candidate but also understand if he chooses not to run.

KING: You mentioned you're a former RNC chairman. Gloria and I have talked about this quite a bit since the election, whither the Republican Party? Obama comes in with a clear majority. He comes in with the good will of American people, even those who didn't vote for him.

And it's a "Who's on first?" moment for the Republican Party. Who is the leader of the Republican Party, former chairman Ed Gillespie?

Who is the leader, right now?

And what is the strategy when it comes to dealing with this new president?

GILLESPIE: Well, I think the foremost leaders will be the leaders in the House and the Senate, Senator Mitch McConnell, the Republican leader there, and John Boehner in the House.

And I think they pursued an appropriate strategy, which is there are areas where we can agree, we will agree and we'll work with the president-elect, soon to be the president. Where there are areas where there are principle disagreements, we'll disagree.

I do think, and I encourage my fellow Republicans and people who share my more conservative philosophy that we not fall prey to trying to retaliate from the kind of viciousness and the kind of bitter attacks, personal attacks against President Bush that we saw from the left in the past eight years.

We can make a stand on principle. And we can oppose on policy without -- you know, engaging in that kind of harsh, personal, nasty rhetoric. It's not good for the process. It's not good for the country.

And, look, I, obviously, was hoping for a different outcome in the election. I'm excited, as an American, that we're going to make history with the first African-American to be elected president.

And if I'm invited back or in a position to comment, I will be careful to make clear that, you know, I want the president to succeed. He will be my president on Tuesday. I am an American; I may disagree with his policies, and I hope that my friends on the right will adopt that tone.

BORGER: But, you know, the president himself, getting back to John's point about the Republican Party, has warned the Republican Party, don't turn inward.

For example, this is a president who opposed his party on immigration reform. This is a president who wants to open the Republican Party. And you saw, in the presidential vote, it seemed to get a lot smaller, fewer minorities, for example.

So what's the message from George W. Bush to fellow Republicans, as he leaves?

GILLESPIE: Well, he has been pretty explicit about that, which is we do have to be -- reach out to people, bring people into the party, be careful about how we talk about certain issues, and make sure that we connect with people on issues they care about, kitchen table issues, health care, jobs, the economy, and on issues like immigration.

I think our handling of that issue did cost us in the election. And we saw the president got 44 percent of the Hispanic vote in 2004. We got, depending on your estimate, 31 percent to 33 percent. That's a pretty big drop. And in places in Florida, Nevada, New Mexico, Colorado, that's pretty damaging.

KING: We have another helicopter overhead, which challenges us from an audio perspective. We have about 30 seconds left.

I want you to give me the moment for the country, the peaceful transition of power, a very smooth transition. The Obama people tip their caps, every day, to President Bush, yourself, and others on the staff.

Presidents leave a little note behind for the next guy coming in. Give us a snapshot of what George W. Bush will tell Barack Obama at this moment.

GILLESPIE: It is customary, and it will be in the top desk drawer. And I understand President-elect Obama will keep the (inaudible) desk. And I don't know what will be on that note.

I know that the president was going to give some thought to that while he was at Camp David this weekend.

And, look, they are part of a very exclusive fraternity. And he understands the weight of that job. And I'm sure it will be something that will be helpful to the president-elect. He's rooting for the president-elect to be successful, too.

KING: I want to thank you both for being here. I wish we had more time on this inaugural edition of "State of the Union." But we'll have you back.

It is all the time we have today. Be sure to join me again tonight, though, at 8 p.m. Eastern for another one-hour special edition of "State of the Union."

And I'll be back with Wolf Blitzer, Anderson Cooper, and the rest of the award-winning CNN political team in one hour for more live coverage of the inauguration of Barack Obama. Until then, thanks for watching.

END

GILLESPIE: And so I do think it's important, though, that people do defend the lower taxes, the strong national security and the response to terror that this administration brought about, that has kept us safer.

And I think, over the long term, it's in the party's interest to set the record straight on some of those things. Because, if not, you're just adding weight to your ankle weights as you run up a hill.

KING: We need to sneak in a very quick break. We'll be right back with the White House counselor Ed Gillespie. You're watching "State of the Union."

(COMMERCIAL BREAK)

KING: A live look -- a live look, there, at the south portico of the White House, a majestic building. It has been home to George W. Bush for eight years, that crowd waiting for the president's last return from Camp David.

We are told he has not yet left Camp David. So we likely will not be able to show you his last arrival back on Marine One before the top of the hour. We will keep that tape. It's well worth watching. The president loves the building. He'll live there for two more days.

Our special guest is Ed Gillespie, the White House counsel to George Bush. We're also joined by our senior political analyst Gloria Borger, up here. Luxury box? Nice seats, nice view of the United States Capitol, here.

BORGER: Absolutely.

KING: I asked you, before the break, to peel back the curtain on the campaign. I want to talk a little bit more policy business. But I mentioned the politics of the moment.

We saw both the president of the United States, George W. Bush and his father, the former president of the United States, George H.W. Bush, say they thought that Jeb Bush, his brother, the former governor of Florida, would make a great candidate for an open Senate seat in Florida.

Everyone took that as a cue; boy, Jeb's going to get in. And in the end, he decided not to. Take us behind the curtain.

GILLESPIE: Well, I think, actually, that's one of the ones where there was no curtain.

(LAUGHTER)

I think the president and the former president felt like Jeb would be a great candidate. By the way, as a former RNC chairman, I thought he would have been a great candidate. A lot of people agreed with that.

But, you know, politics is also about people and their families. And people have to make decisions as to where am I and, you know, at a certain point in life. And I don't think it was the right time for Jeb, given what he said, in saying he wasn't going to run.

KING: Come on in.

BORGER: Well, I, sort of, was wondering whether Jeb had actually talked to either his brother or this father before they told -- before they said publicly, oh, he would be a great Senate candidate.

(LAUGHTER) GILLESPIE: I think he was going through the thought process, and I think they knew that, but that's -- you can agree that he'd be a great candidate but also understand if he chooses not to run.

KING: You mentioned you're a former RNC chairman. Gloria and I have talked about this quite a bit since the election, whither the Republican Party? Obama comes in with a clear majority. He comes in with the good will of American people, even those who didn't vote for him.

And it's a "Who's on first?" moment for the Republican Party. Who is the leader of the Republican Party, former chairman Ed Gillespie?

Who is the leader, right now?

And what is the strategy when it comes to dealing with this new president?

GILLESPIE: Well, I think the foremost leaders will be the leaders in the House and the Senate, Senator Mitch McConnell, the Republican leader there, and John Boehner in the House.

And I think they pursued an appropriate strategy, which is there are areas where we can agree, we will agree and we'll work with the president-elect, soon to be the president. Where there are areas where there are principle disagreements, we'll disagree.

I do think, and I encourage my fellow Republicans and people who share my more conservative philosophy that we not fall prey to trying to retaliate from the kind of viciousness and the kind of bitter attacks, personal attacks against President Bush that we saw from the left in the past eight years.

We can make a stand on principle. And we can oppose on policy without -- you know, engaging in that kind of harsh, personal, nasty rhetoric. It's not good for the process. It's not good for the country.

And, look, I, obviously, was hoping for a different outcome in the election. I'm excited, as an American, that we're going to make history with the first African-American to be elected president.

And if I'm invited back or in a position to comment, I will be careful to make clear that, you know, I want the president to succeed. He will be my president on Tuesday. I am an American; I may disagree with his policies, and I hope that my friends on the right will adopt that tone.

BORGER: But, you know, the president himself, getting back to John's point about the Republican Party, has warned the Republican Party, don't turn inward.

For example, this is a president who opposed his party on immigration reform. This is a president who wants to open the Republican Party. And you saw, in the presidential vote, it seemed to get a lot smaller, fewer minorities, for example. So what's the message from George W. Bush to fellow Republicans, as he leaves?

GILLESPIE: Well, he has been pretty explicit about that, which is we do have to be -- reach out to people, bring people into the party, be careful about how we talk about certain issues, and make sure that we connect with people on issues they care about, kitchen table issues, health care, jobs, the economy, and on issues like immigration.

I think our handling of that issue did cost us in the election. And we saw the president got 44 percent of the Hispanic vote in 2004. We got, depending on your estimate, 31 percent to 33 percent. That's a pretty big drop. And in places in Florida, Nevada, New Mexico, Colorado, that's pretty damaging.

KING: We have another helicopter overhead, which challenges us from an audio perspective. We have about 30 seconds left.

I want you to give me the moment for the country, the peaceful transition of power, a very smooth transition. The Obama people tip their caps, every day, to President Bush, yourself, and others on the staff.

Presidents leave a little note behind for the next guy coming in. Give us a snapshot of what George W. Bush will tell Barack Obama at this moment.

GILLESPIE: It is customary, and it will be in the top desk drawer. And I understand President-elect Obama will keep the (inaudible) desk. And I don't know what will be on that note.

I know that the president was going to give some thought to that while he was at Camp David this weekend.

And, look, they are part of a very exclusive fraternity. And he understands the weight of that job. And I'm sure it will be something that will be helpful to the president-elect. He's rooting for the president-elect to be successful, too.

KING: I want to thank you both for being here. I wish we had more time on this inaugural edition of "State of the Union." But we'll have you back.

It is all the time we have today. Be sure to join me again tonight, though, at 8 p.m. Eastern for another one-hour special edition of "State of the Union."

And I'll be back with Wolf Blitzer, Anderson Cooper, and the rest of the award-winning CNN political team in one hour for more live coverage of the inauguration of Barack Obama. Until then, thanks for watching.

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