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STATE OF THE UNION WITH JOHN KING

Both Republican, Democratic Senators Critique Obama Stimulus Plan; One Says To Cut Spending, The Other Warns That Much More Will Be Needed Before The Economy Is Back On Track

Aired January 25, 2009 - 20:00   ET

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


JOHN KING, CNN ANCHOR, STATE OF THE UNION: I'm John King. This is STATE OF THE UNION.

President Barack Obama takes office on a wave of goodwill but how will he keep the political map on his side? We'll hear from his presidential campaign manager, David Plouffe.

From the economy to the war on terror, the new president wants Congress to back his plan, but will lawmakers buy in? We ask two key Senators, Republican Lindsey Graham and Democrat Kent Conrad.

And in an exclusive interview, New York City Mayor Michael Bloomberg has some advice for President Obama about fixing the economy.

That's all ahead on STATE OF THE UNION.

President Obama is trying to get lawmakers from both side of the aisle behind his economic stimulus package, but so far most Republicans aren't backing the plan. A bit earlier I spoke with Republican Senator Lindsey Graham about that and working with the new president.

(BEGIN VIDEOTAPE)

KING (On camera): I want to talk to you now about the big debate here in Washington and in your home state. I want to show you some newspapers from your state, as I do so. This is the "Sun News" this morning. Talks about the stimulus plan and the economic debate. In "The State" newspaper, there are conversations as well about some economic projects.

I want to start with the $700-billion bailout bill for the financial sector. You voted for it when George W. Bush was president and said it was critical to stabilizing the economy. Then when the vote comes up for the second installment of the money with a Democrat in the White House, Barack Obama, you vote no. Why, sir?

SEN. LINDSEY GRAHAM, (R-SC) ARMED SERVICES CMTE.: Yeah. It had nothing to do with Barack Obama. The money was used to be lent to automobile companies. I can promise you this, John, that if we had known on the first vote, for the first $350 billion, money would have not gone to banks but would have gone to the Big Three automobile companies you wouldn't have passed. I thought it was a breach of trust as to how the money was used. I want the assurances that it will go to deal with the underlying problem, the mortgage problem, the home failures, not car failures.

KING: You are a fiscal conservative, from a fiscal conservative state, yet, I want to show you the "Sun News" again, "Revised Stimulus Shines On I-73". So there are, in every state, there are people saying, great, we want some of that money. $825 billion or more for stimulus, on top of the $700 billion for the financial bailout. Where is the limit here or can you support a government that keeps printing money?

GRAHAM: If you keep printing money you'll create inflation. I can support a stimulus package that has robust tax cuts, that will help people create jobs in the near term and long term. I can support government spending if it will create a job in the near term. I-73 is probably not going to get included in the package because it would be an earmark.

But there are projects in South Carolina, throughout the nation, when it comes to bridges, roads, water, sewer projects, that would help our economy and improve the quality of life in the short term. So stimulating the economy to create a job in the first 18 months, on the spending side, I would support, if it's a merit-based project. Cutting taxes to create jobs now that will sustain themselves, over time I will support. The private sector can't do this by itself, that's why the government has a role here.

KING: Is the president's plan, as it now stands, acceptable to you? Or do you see things in there that either won't stimulate the economy, or many say, delay the spending two, three, years down the road, won't create jobs in the short term?

GRAHAM: Well, the House plan is a nonstarter for me, because only about 13 percent of the money is spent in the first year. The president said he wants 75 percent of the spending to hit the economy during the first 18 months. I think it would be good to have a summit of Republicans and Democrats, with the administration, looking at how do you cut taxes in a way to create jobs now and sustain job creation.

And it you're going to spend all this money, make sure you get the biggest bang for your buck, and it stimulates the economy in the near term, because every dollar, John, is borrowed. The people spending the money will are not going to be the ones paying it back. It will be your kids and your grandkids. I'd like to get together in a room, Republicans and Democrats, and figure this out.

KING: I want to turn to a national security issue. During the campaign, both now President Obama and your friend Republican nominee John McCain supported closing the detainee facility at Guantanamo Bay. President Obama has said he will do that within a year. Many believe that could make the United States less safe.

I want to read you something from one of your colleagues on the House side, Representative Eric Cantor, of Virginia, who is in the House leadership, says this: "Actively moving terrorists inside our borders weakens our security, raises far more questions than it answers, and is the wrong track for our nation. Are you convinced the new president has a plan to deal with where those detainees go? How they are put to trial, in a way that will keep America safe? Or are you worried we could be more at risk, Sir.

GRAHAM: Well, I hope he will choose a safer path. Why would you close Guantanamo Bay? It is a well-run jail now. But it does represent image problems for this country. The battleground in the war on terror is not a location. It's not a capital or a particular country. Part of it is the moral high ground. By closing Guantanamo Bay and relocating these prisoners, we get a chance to start over and prove to the world they will be housed under the rule of law, which I think is the law of armed conflict, detained in a humane way, and they will go to trial in a transparent way. No one will be held in jail unless there's competent evidence, with a check and balance system, where you have an independent judiciary agreeing with the military. Yes, these people are in fact enemy combatants.

The president is talking about closing Guantanamo Bay but has not come up with a disposition plan. I believe that plan should include trials for war criminals and military commissions. We can reform the commissions, but I think the military should try these people. And those not subject to going to trial, but we know are enemy combatants, where you have an independent judiciary agreeing they are in fact enemy combatants, need to be held off the battlefield as long as they're a threat.

The worst thing we could do is criminalize this war. We're not fighting a bunch of criminals. We're fighting warriors committed to our destruction and we need to get this right.

KING: We're short on time, sir. But I want to ask you, the Pentagon this past week says it believes as many as 61 detainees who have been released from Guantanamo Bay are back in the terrorism business. They couldn't quite explain how they came to that number saying it's classified, sensitive information.

GRAHAM: Right.

KING: Do you believe that number, and if that number is anywhere close to true, aren't you concerned in some cases -and you're a JAG lawyer, you're in the Active Reserves in the United States military - that in some of these cases, the CIA doesn't want to bring this evidence into court, and those people could be set free?

GRAHAM: That's my biggest concern. You could have reliable evidence that the person is an enemy combatant, but it could not be subject to criminal prosecution. I want a judge, an independent judge, to look at all of these cases to make sure the military is making correct decisions.

But at the end of the day, some people are going to be let go, that go back to the fight. Some people have been caught in a net that was too large. I want a process that would tell the world no one's being let go, or kept, without a system that has checks and balances based on the rule of law, calling the law of armed conflict. And share the risk, President Obama, allow the Congress to help you write this new system. Create a role for the federal judges, so it's just not on your watch. Make sure all three branches of the government have a say about how to go forward so the nation can share the risk of letting people go, and keeping them in jail.

The Bush administration pushed away too much. I stand ready as a Republican member of the Senate to help create a system, where we all share the risk in making these very difficult decisions, adhering to our values and keeping us safe.

KING: Senator Lindsey Graham, we're out of time.

But one quick question, before I let you go. You spent two years on the road with John McCain. After the election you went around the world to Iraq, Afghanistan, Pakistan with our new Vice President Joe Biden. Who's the better travel buddy?

GRAHAM: I learned to listen very well with the vice president. Both of them have their unique way of keeping you entertained. I enjoyed both trips. I wish the vice president well and I'll be traveling with my buddy John McCain in a couple of weeks. I've had fun and learned a lot.

KING: Senator Lindsey Graham, thanks for joining us on STATE OF THE UNION.

GRAHAM: OK.

KING: We'll touch base with you in the weeks ahead. Thank you very much, sir.

(END VIDEOTAPE)

KING: Coming up, not all Democrats agree with President Obama's plan for the economy. Up next, advice from the powerful Senate Budget Committee chairman. And later, my exclusive interview with New York Mayor Michael Bloomberg . You'll want to hear what he thinks about the new president's lack of executive experience. STATE OF THE UNION will be right back.

(COMMERCIAL BREAK)

KING: Senator Kent Conrad is chairman of the Budget Committee and for years has warned against the dangers of big deficit. When we spoke earlier, he expressed worry that the federal government might not be doing enough, spending enough, to revive the economy.

(BEGIN VIDEOTAPE)

KING (On camera): I want to talk to you, especially, because you're a Democrat. You have a new Democratic president, and yet you're not happy, exactly, with the details of this stimulus plan. You've had exchange of letters back and forth. When it comes to reviving the economy, creating, Obama says his plan will create 3 million to 4 million new jobs. A, do you buy that number?

SEN. KENT CONRAD, (D-ND) CHRM. SENATE BUDGET CMTE.: I think we have to have some question about the number. Simply because most of the models that determine you can create that number of jobs are based on the financial system working normally. And of course what we know, John, the financial system is not working normally. So, I think it's critically important that we focus on the overall package, that means the TARP funds, as well as the economic recovery funds. How they function together. Because I think the basic underlying package the president is supporting is wise, it's required.

The question is, are we doing enough to help the financial sector? And are we doing enough about housing? Because if we don't get those two right, we're not going it see the kind of lift out of this downturn that we need.

KING: I want to come back to the TARP issue in a minute, but I want to stay on this stimulus plan. The bill as it now stands has $50 million for the NEA, the National Endowment for the Arts, $600 million for the government to buy a fleet of new cars, $650 million to help the transition to digital television, in an economic stimulus bill? Those proposals create jobs?

CONRAD: Yeah, they probably do create some jobs. Certainly buying cars that are going to have to be replaced, to get more fuel efficient cars in the federal fleet, that makes sense on two grounds. Number one, it creates some jobs, but in addition to that, it makes our government work more effectively. We get a better use of taxpayer funds.

There are some other things that I think we should be concerned about. And that is those parts of the package that spend out beyond two years, because you know, we need to be temporary, we need it to be timely, we need to be targeted. We have to be concerned about things that add to the deficit and the debt, beyond the two years of what we anticipate to be this downturn.

KING: Let me follow-up on that point. Because this is something you said to "The Washington Post" back in September 2006, when we had a Republican president in the White House, speaking of his budget.

"It's utterly reckless. The debt load and our growing obligations to foreign creditors are weakening us. We're running risks we shouldn't run."

So, if we have an $825 billion of stimulus plan, $750 billion in a financial industry bailout plan, on Wall Street they say that won't be enough. They'll be back for more money. On Capitol Hill, some of your colleagues, in the Democratic Party say it won't be enough. We'll be back for more money. At what point do, even these well-intentioned programs to try and salvage the financial institutions, revive the economy, at what point do they take us off a cliff?

CONRAD: We have to be very concerned about our long-term fiscal condition. That's why I'm delighted President Obama's called for a fiscal responsibility summit in February. Has called on a number of us to help in designing how that will be run. And that we focus on pivoting, once we get through this downturn, and get back to fiscal responsibility, because as you know, the previous administration doubled the debt of this country. We're on track to double it again, if we don't get our long-term circumstances under control.

KING: And what would you do? You've seen the House proposal. When it comes across to the Senate, where are you going to say, I'm sorry, Mr. President, not this one, and not this one. Here's a better way.

CONRAD: What I think we have to focus on, number one, how does the economic recovery package work in conjunction with the TARP funds, which as you know are designed to deal with the downturn in the financial situation, the financial markets. I think that's where we've got to focus. Do these work in combination effectively? Is there enough money in a financial rescue package to prevent a further decline, and credit availability, which would prevent the economic recovery package from working effectively?

So what does that mean? That means in the economic recovery package, we've got to make certain that we are targeted, that we're timely, those moneys are going out in a way that will give short-term lift to the economy, but also that there are enough resources to deal with housing, and to deal with the financial sector.

KING: Let's talk about the financial sector. You sent a letter to the Treasury Department, this Friday, just two days ago, in which you were complaining about how this TARP, this bailout money, $700 billion, the first $350 billion has been spent. And you are quite mad about how some of it has been spent.

In your letter you say this, "It's utterly reckless." Huh, that's the --let me move around there. Here we go.

"TARP was intended to restore liquidity to the credit markets so that Main Street businesses could get the funds they need to meet payroll, purchase materials and finance sales. It was never intended to fund lavish bonuses for the people who got us into this mess." Now that was spent when George W. Bush was president of the United States, a Republican, but the Democrats controlled the Congress, was this approved, by your party, as well as the president, without proper strings and controls?

CONRAD: We thought we had strings and controls. For example, we had an oversight board. Only the outgoing administration never called it to meet. So I'm not sure what you can do about that if you aren't part of the administration.

Look, very serious mistakes were made. On the other hand, I think we have to recognize without that first package we might well have had a financial collapse in this country. In fact, I believe the Dow Jones today would be at 4,000 without that package in place. However, it wasn't used as well as it might have been. For example, money was given to some of the major banks in this country, some $250 billion, with no strings attached. They weren't required to expand the credit pool. They weren't restricted on bonuses, although the legislation clearly called for such restrictions.

One way they got around it in the case of Merrill Lynch is they put the bonuses out before they got the federal money. In other words, they almost created a circumstance in which they would have to get federal money because they put out $4 billion in bonuses in December of last year, then were sold, bailed out basically, by Bank of America. And then Bank of America gets $20 billion in taxpayer money. That is an outrage.

And for the man who ran Merrill Lynch, to then go to Bank of America and spend over $1 million redoing his office at Bank of America, when he knew there were massive losses and that the federal government, the taxpayers of the country, were going to be asked to make up this money. That really is outrageous.

KING: How do you feel as a Democrat? Outrageous the way the money's being spent? It's $700 billion in that, probably more as we go forward. And $825 billion in a stimulus plan, perhaps more as we go forward. How concerned are you that these problems are pretty profound and these things will take time to turnaround, that in the midterm elections of the Obama presidency, Republicans will say Democrats spent $700 billion here, more than $800 billion there, the economy is still in the tank, the unemployment rate is 8 or 9 percent, hold the Democrats accountable. That's message.

CONRAD: Yes, look, but let's remember the history. The $700 billion was approved under the previous president. The $800 billion of economic recovery fund, I think economists have almost every stripe, I've many of them before the Budget Committee, Republicans, Democrats, conservatives, progressives, they have all delivered the same message. In fact, we just had Martin Feldstein, who was Ronald Reagan's chief economic advisor, come before the Budget Committee this week, and say this package is not enough. Conservative, Republican, chief economic adviser to Ronald Reagan, saying this package is not big enough.

KING: How big?

CONRAD: I don't think anybody knows. I mean if we are just honest with people, we are in uncharted territory. We've never been in a circumstance quite like this one before, where you have not only an economic slowdown but the financial sector locking up. That's the point I don't think can be lost here.

We've got to make certain, that yes, there's a robust economic recovery package. I think the president is going in precisely the right direction there. But that also we have enough resources to give lift to the financial sector, and that we deal with housing foreclosures. We have a circumstance now where one in 10 houses in America are behind in their payments, or under foreclosure. One in five are upside down. That is they owe more than their house is worth.

I mean, that is a continuing crisis that has never been dealt with adequately. We've got to make certain in these two packages, second half of TARP and the economic recovery plan that there are sufficient resources to deal effectively with the housing crisis and with our financial institutions.

KING: A lot of money. We'll keep our eye on it as these debates go forward. The Budge Committee Chairman Kent Conrad, thanks so much for your time today on STATE OF THE UNION.

CONRAD: You bet.

KING: Up next, the man Barack Obama calls the unsung hero of his presidential campaign. A rare interview with his Obama's campaign manager, David Plouffe.

And then my exclusive interview with New York Mayor Michael Bloomberg. A man with a close up view of the Wall Street meltdown. That's next on STATE OF THE UNION.

(COMMERCIAL BREAK)

KING: He's the man Barack Obama selected out for high praise on election night.

(BEGIN VIDEO CLIP)

BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: To my campaign manager, David Plouffe, the unsung hero of this campaign, who built the best political campaign I think in the history of the United States of America.

(END VIDEO CLIP)

KING: Now as President Obama gets to work here in Washington, David Plouffe, not on the White House staff, but still a key player in selling the president's agenda, trying to turn the grassroots movement that won the election into a powerful governing tool. I spoke with him earlier.

(BEGIN VIDEOTAPE)

KING: For two plus years, you're in the war room, throughout the campaign, in all the big meetings. I want to get your perspective now from the outside looking in, your impressions of the first week and the changes between a candidate and a president.

DAVID PLOUFFE, OBAMA PRESIDENTIAL CAMPAIGN MANAGER: I think it's been an outstanding week for the president and the country. I think many of the things he talked about in the campaign we are being to see manifested itself here.

The recovery plan that's really focused on the middle class and small businesses, but doesn't put aside the hard choices in energy and health care that will help us create jobs today, but are going to be the engines of growth tomorrow. Making govern more open and accessible, rebuilding that trust with the American people. So, I think it's been a terrific week.

KING: Look at our latest poll, 78 percent of the American people have a favorable opinion of their new president. That's a great blessing. But does it put you on a perch of such high expectations that you think how can we meet these?

PLOUFFE: Well, I don't think you'll see the administration paying too much attention to polls day-to-day, at all. I think the American people are very realistic about the challenges we face. They're sober about them. They realize it's going to take a long time to dig us out of this economic hole. In many respects they don't want it to go too fast. They want a slow, steady recovery. I think they'll give the president time.

KING: One of his central promises was to change the way this town does business. And with great fan fair on his first full day in office, the President Obama pulled the senior White House staff together, announced their pay would be frozen. He also signed some orders imposing what he said were the strictest rules in history to limit the revolving door, lobbyists coming in and out of government. Let's listen to the president.

(BEGIN VIDEO CLIP)

OBAMA: These steps are aimed at establishing firm rules of the road for my administration and all who serve in it. And to help restore that faith in government without which we cannot deliver the changes we were sent here to make.

(END VIDEO CLIP)

KING: Yet within 48 hours we learn that his choice to be the number two at the Pentagon, William Lynn, a former lobbyist for Raytheon, gets a waiver. How can you say all who serve in my administration will have to abide by these rules, and then in your first week in office say, except this guy?

PLOUFFE: As we said during the campaign, and with this standard, no standard is perfect. And you retain the right to make exceptions. He is uniquely qualified in a critical position in government. I'd like to focus on not that one exception but the general rule. These are the most far-reaching ethical reforms we've seen in Washington. No one who works in that administration, including Mr. Lynn, can then leave and lobby the administration. It was, I think, a remarkably far-reaching set of proposals and I think it will rebuild trust.

KING: But an example like that can help undermine it. Gives your opponents, critics to say, look, he didn't really mean it. That is the same old Washington that he promised to change. When you say that one exemption, is that it, or will there be more exemptions as we go forward?

PLOUFFE: I'm not in the government, as you know. I think what the American people will focus on is the large standard. I think they realize there can be an exception from time to time. That has never happened before. The president has never said that no one who works in his administration can then go out and lobby it. That's a fundamental change in the way this town works and it's desperately needed.

KING: I want to take you over, as we continue the questioning, I want to walk you over to the map here, and bring it up. Because your new job outside of government is to use the grassroots network you have at your disposal; 13 million e-mail addresses, 4 million cell phones that you can text message, 2 million active volunteers. You had them to do this, which was quite extraordinary, 53 percent of the vote, turning. I just want to show our viewers quickly, if they don't remember this from the campaign, look at these blue states out here in the West. You go back in time, that was how - those were Bush states before. They are Obama states now.

The question is, from outside of government, how do you keep - the stimulus debate as going through Congress? And you have some people saying, no, Mr. President, we don't like that spending. How are you going to use that to move the map, out in the states, as this happens? And will you use that money, Kent Conrad, he is the Budget Committee chairman, he says he wants to help the new president, but he doesn't like some of the things in this bill. John Kerry, a chairman in the Congress from a blue state, Massachusetts, doesn't like some things in the bill. Will you use that network against Democrats during the policy debates?

PLOUFFE: It's a nice-looking map, first of all.

KING: Thanks. You like it?

PLOUFFE: Having looked at it now. The blue.

First of all, I think it's a little bit misunderstood. What we're trying to do is to we have found that millions of Americans were part of the campaign. Our hope is that millions that weren't, who may agree with the president on an issue like energy or health care, want to get involved in building support, educating, and having conversations. It will be great for democracy if these debates aren't Washington centered. If in states and communities all across the country, people are talking to their neighbors and their colleagues and their family members, about energy, health care and the economy.

So we look at this as a way to connect people to their democracy, a way to build public support. But I think that the notion that somehow this is going to be a weapon aimed at individual members of Congress misses the purpose.

You ordered a postmortem on the campaign. And from that comes Organizing for America, this new project of yours; 500 pages, is that about right, on this postmortem?

PLOUFFE: Well, a lot of data to look at.

KING: And so my understanding of it, my copy must have been lost in the mail. I haven't received it yet. But my understanding from talking to people is that you've identified a pretty distinct groups from the election.

And there are Democrats and then there are Obama Democrats, new voters who came to play and participate because of their affinity for Barack Obama, not necessarily the Democratic Party. As you go forward, how do you bring them into the Democratic fold? Or do you leave that to the next guy to worry about and you worry about Barack Obama?

PLOUFFE: Well, it's a good question. If you look at our support, we had a lot of people who hadn't volunteered before. Half of the people who contributed and volunteered to our campaign had never done so before. Remarkable statistic. A lot of independents and Republicans. So organizing for America, the work they're going to be doing does not have an electoral aim in mind. It's to build support out there for these issues and connect America to these debates in Washington. My great hope is someone who didn't even help us in '08 and may not vote for us in 2012 says, you know what, but on energy, I agree with where President Obama is trying to lead the country.

I'm going to pitch in in my community. We do want this to be a very open entity.

KING: He built a $1 billion business and now runs the nation's largest city. Up next, my exclusive interview with New York Mayor Michael Bloomberg.

(COMMERCIAL BREAK)

DON LEMON, CNN ANCHOR: I'm Don Lemon at the CNN world headquarters. We'll get back to STATE OF THE UNION in just a minute but I want to tell you what's happening right now. A Central Florida federal prison is on lockdown right now after a big brawl among inmates in the recreation yard. Eight inmates had to be taken to the emergency room with what's described as knife and gunshot wounds. No reports of injuries to prison staff, though. We will follow up on this story 10:00 p.m. Eastern.

The Philadelphia suburb of Coatesville is a city under fire tonight. A wave of apparent arsons, including one last night, has terrorized Coatesville over the past year. There have been 14 fires this month alone. We'll take you there, 10:00 p.m. Eastern as well.

Fixing the economy, a presidential priority this week. President Obama plans to meet with Republican lawmakers on Tuesday to push his economic stimulus bill. Mr. Obama is hoping to have the bill on his desk by mid February.

And the impeachment trial of Illinois Governor Rod Blagojevich gets under way Monday. But the governor plans to skip out. And instead he is planning a full day of media interviews, including CNN's LARRY KING LIVE. Tonight at 10:00 p.m. Eastern Lynn Sweet of the "Chicago Sun- Times" joins me to preview that impeachment trial. Also we'll preview some of his interviews he's already done.

Some of Hollywood's best and brightest stars are adding another hunk of hardware to their mantles. The 15th annual Screen Actor's Guild awards under way right now at the Shrine Auditorium in Los Angeles. Alec Baldwin, Tina Fey, early winners for their roles in "30 Rock."

I'm Don Lemon here at the CNN world headquarters. I'll see you back, 10:00 p.m. Eastern tonight. Let me get you back to STATE OF THE UNION with John King.

KING: The economy is on everyone's mind. And few politicians have a better handle on it than New York's Mayor Michael Bloomberg. I had a chance to sit down with him in city hall. We talked about the challenges ahead for the economy and for the new president. (BEGIN VIDEOTAPE)

KING: You're the CEO of a large and sometimes difficult to manage city. Before that you were a very successful CEO in the corporate world. Barack Obama has never been the chief executive. Only watching the first week unfold before us, but just what do you make of the man when you watch how he makes decisions and who he has assembled around him?

MAYOR MICHAEL BLOOMBERG, NEW YORK CITY: Well, the first thing he has to do is put together a great team. And what he has done that impresses me is he has reached out different political persuasions, different ages, different levels of experience. I think the reason that New York City has done well or at least people seem happy with the mayor, is not me, but I picked the best and the brightest.

Would it be better if he had more management experience? Yeah, I suppose so. He's learning on the job. Virtually everybody who comes into being president of the United States learns on the job, there's no other comparable job, only when you're running for re-election can you say to the public I know what it's about, I know I can do it. And I've demonstrated I can do it.

KING: You have spoken passionately and forcefully about what you call the crisis of confidence in the economy. Can just having a new president, his enormous goodwill for him, his approval ratings are off the charts, any politician would love to have him.

BLOOMBERG: Sure. Keep in mind, George W. Bush had a 90 percent approval rating at one point.

KING: At one point. So just having sky high approval ratings and a new boss in Washington, a new president in Washington, is that enough?

BLOOMBERG: No, it's not enough but it helps. I think people are optimistic. They are looking for leadership. Of course now he has to deliver. He ran on the campaign of change. And people say sometimes he wasn't as explicit as to what those changes would be. And I've said look, cut the guy some slack.

The problems that he is going to face once he's president are not the problems the country faced when he was campaigning. You don't know what the next -- when you go around that corner, you don't know what you're going to find.

But I do think it is a crisis of confidence. I do think the public wants to think that somebody's in charge. What's going to get the public to spend again, to invest again, to be expansive and take risks again, it is not sending them a check. I'm not so sure I wouldn't vote to send them a check if I were in Congress, but I'm not so sure that I'd rush to do it, either. What this country needs to see is that we have a government that's addressing the key problems. And even if those problems have little to do with the economy, it sets that tone.

KING: The American people don't like this $700 billion bailout plan. They seem to have the belief it was the first $350 billion, anyways, money that went to the big banks, went to Wall Street and has not flowed back to them as they thought it was supposed to. Barack Obama gets to spend the other $350 billion. If the phone rang and he said Mr. Mayor, Mike, help me out. What would you do differently? What would it be?

BLOOMBERG: Well, number one, I don't think it's fair to criticize. I know the public think, incidentally, the $350 billion just went to a bunch of rich banks. Until you get the banking system stabilized you can't do anything else. So it's unfortunate we're in that situation. I know it doesn't make good theater, it isn't a good populist thing.

But I think Paulson was right and Geithner was a big part of the process and Geithner is secretary of treasury or will be approved, I assume. And he's a very competent guy. I know he and Hank very well. They're New Yorkers. The first 350 was not misspent. I think the government probably could have done a better job of promising. But you remember, the world were coming apart. We were having brokerage firms and banks going belly-up every day. The market was gyrating up and down five percent a day. We didn't have a lot of time to do things.

And everybody is screaming do it now, do it now, do it now. And then afterwards come back and say, you should have taken more time, you should have explained it. Come on, let's be fair.

I think if the president called me and said what should we do I would focus on things that were doable and affordable I think and really would address the problem.

Number one, Mr. President, you've got to be the leader on those issues that I just enumerated, crime, immigration, health, terrorism those kinds of things. Number two, if we're going to make investments, you have to first open up the municipal bond market. The municipal bond market.

Municipalities won't build bridges to nowhere if it's their own money. They know what's needed. Building infrastructure has to get down to the level of where the rubber meets the road. Clearly the case in roads but in everything.

KING: Do you have the confidence spending $825, $850 billion, some say more than that, that the Congress and the new president understand that at the level you're talking about? Or do you think ...

BLOOMBERG: You'll have to ask them. I think the politics are just spend money. That said, I think if you ask Larry Summers and Tim Geithner, there are some very smart people in government. And they will have their views, but you'll certainly get a diverse range of views as to how effective these stimulus packages are.

I am sort of the mind that you don't send checks out to everyone. You have to pick and choose.

KING: It sounds to me like you believe or at least you're deeply worried that they're going to take a grab bag approach to this as opposed to a strategic approach.

BLOOMBERG: I don't think there is any question they're going to do that. When they approved TARP a friend of mine said to me, that was outrageous they added on like $150 billion of member items or earmarks, whatever they call it. Every legislative body as a different term. And I said I was just thrilled that it was that small a percentage. Usually you have to ride them with more.

(END VIDEOTAPE)

KING: Up next, Rush Limbaugh says he wants Barack Obama to fail. How should Republicans react to the influential radio host? We'll ask Bill Bennett and Donna Brazile. STATE OF THE UNION will be right back.

(COMMERCIAL BREAK)

KING: The last picture was Barack Obama being sworn in on Wednesday with considerably less fanfare after Chief Justice Roberts jumbled the wording of the oath of office the first time around. It's actually the first time a president has been sworn in by a Supreme Court justice that he's voted against.

Here with me to talk about this historic week and a lot more, Democratic strategist Donna Brazile, conservative radio talk show host William Bennett. Thanks for joining us this morning. One of the things we're going to do every Sunday is read the Sunday newspapers with people around the country.

This one is from just up the road, the "Baltimore Sun." You see first steps, the headline there. And it has this montage of photographs going through the first five days of office.

Let's begin on that and let me begin with the loyal opposition. First impressions in the first week? Anything you saw that you particularly liked and anything you saw that you say wait a minute.

BILL BENNETT, CNN POLITICAL CONTRIBUTOR: Yeah. Loyal opposition indeed. And I hope to remain so. I liked the fact that allowed that strike in Pakistan, maybe ordered that drone strike in Pakistan, suggesting to some on the left who believe this is a law enforcement issue, not a war on terror, that it is indeed a war on terror and he continues to wage it. So good for him.

A lot of symbolic steps, this week, the announcement of the closing of Guantanamo is an announcement of the closing of Guantanamo. It's not yet the closing of Guantanamo and the resolution of where those prisoners go. So we'll wait and see.

I thought the stands on ethics were good and an exception immediately made. I think they are wrong to confirm Geithner and I think this will be an issue for every taxpayer audited by the IRS, by the way.

But I think more importantly, the setup now for the stimulus debate and the bailout debate. Continuity is actually one of the themes this week. I know Democrats, a lot of Democrats, I shouldn't say that, not all Democrats, love to hate George Bush. But for the most part you're seeing a continuation of most of the major outlines of Bush policy. Some symbolic departures, whether they're real departures remains to be seen.

KING: Well, Donna, Bill mentioned stimulus. I want to bring in another. This is all the way across the country. "The Los Angeles Limes." "Stimulus is looking less bipartisan." This is a president who says he wants to reach out to everybody, he wants to include everybody. But this stimulus bill was written by House Democrats. And the Republicans are saying if you want our ideas, Mr. President, maybe you'll have a meeting with us. Why aren't they in the legislation? Why aren't you listening to us and changing his ideas? Is he off to a bad start in being too close to the Democrats?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: Absolutely he's not. First of all, he's extend an invitation to the Republicans to be a part of this package. He's held two bipartisan bicameral meetings. This week he'll meet with the House Republicans to listen to their concerns.

The Republicans offered amendments in the committees and I believe that the president is making a very important effort to get Republican support for this bill.

At the same time, we know how the legislative process works. Someone has to write the bill, someone must author the bill and someone must introduce the bill. Of course Democrats are in charge. While Democrats have enough votes to pass this legislation, it's the president who is setting the tone and telling the Congress that he would like to have a bipartisan bill.

KING: Let's listen to one problem or issue or confrontation, you pick your word, that he had this week with Rush Limbaugh, the conservative talk radio host. And as you know, Bill, well from your own radio program, conservatives are trying to figure out how to react this. You're being polite and open minded at the moment.

Listen to this one from Rush Limbaugh. It is, shall we say, more provocative.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: I want him to fail. If his agenda is a far left collectivism, some people say socialism. As a conservative heartfelt, why would I want socialism to succeed?

(END VIDEO CLIP)

KING: Rush Limbaugh says he wants him to fail. This is Barack Obama's response, speaking to Republican lawmakers at one of the meetings Donna was just talking about.

The president says this, "You can't just listen to Rush Limbaugh and get things done. There are big things that unify Republicans and Democrats. We shouldn't let partisan politics derail what are very important things that need to get done."

An early showdown with Rush Limbaugh, where does it go from here.

BENNETT: Not a good idea for the president to personalize and talk about Limbaugh. Rush Limbaugh is an entertainer, as he will tell you. Of course, if you're talking about policies with which you disagree you don't want him to succeed.

The locution, "I want him to fail," is not what you say the first week the man's been inaugurated. There is support for the president.

KING: (Inaudible)

BENNETT: Yeah but he did qualify it by saying if he puts in left wing policies. Anyway, the rhetoric could be improved.

But I think the president then pointing to Limbaugh just gins that whole thing up again. If he's looking for bipartisan support - remember, Bill Clinton used to talk about Rush all the time. It never helped Bill Clinton. It certainly helps Rush.

But this is a sidetrack. This is not where we want to go.

BRAZILE: Two point six million Americans lost their jobs last year. Do we want this president to fail in trying to create or save 4 million jobs, do we want this president to fail in trying to prevent more people from losing their homes? No, we don't. We want this president to succeed. We want every president to succeed because we're Americans.

BENNETT: It's rhetorical. If he's doing the wrong thing you don't root for him. If he's doing the right thing, sure. In general you want to give him a lot of room to move and Republicans don't have all the choices they would like to have because of limitations here of power.

But I do think Barack Obama does, by his statements, indicate he would like to have more consensus on this than a lot of us thought going in. And that's a good thing.

KING: You said a lot of these first moves were symbolic. One of the things he did was reverse the Mexico City Policy that allows U.S. taxpayer dollars to go to organizations around the world and here that give abortion counseling. That's not symbolic.

BENNETT: It's not symbolic. It's real. I think it's deeply regrettable. It happens. We've had it before as administrations change. But this is one clear demarcatable difference. And it happened on the anniversary of Roe v. Wade.

BRAZILE: It happened the day after.

But this will save lives. This will allow organizations to give people age-appropriate information about reproductive health services. So this is about saving lives, not about destroying them.

BENNETT: It may save some lives, it will take other lives.

KING: Let's do it this way. Let's rate the first week from the left and the right on a scale of one to 10.

BRAZILE: I give it a 10. Clearly this was an exciting week in American history. President Obama has gotten off to a great start and, of course, there are difficult days ahead. But he is leading by trying to bring people together.

KING: Can lead with a 10.

BENNETT: I'll give it a seven and a half.

KING: Seven and a half?

BENNETT: Yes, I'll give it a seven and a half. Look, it was a great week. We were down on the Mall or close to the Mall. Mrs. Bennett and I at 6th and Pennsylvania. A lot of people asked to have their picture taken with me. With me. I said do you realize who I am? We're for you, we like you, Bill. It's that kind of week.

So the country needs to come together. It really does. We need to state our differences when we have them and, you know, that begins already this week. We have a new president. He's the president of all the people. I liked the inaugural. I liked reaching back, not just to King and Lincoln but all the way back to George Washington. That second half of that speech was the book of virtues. Man, it was a great ending.

BRAZILE: And I would have taken a picture with Bill that day.

KING: On subsequent Sundays we're going to see how long this Kumbaya holds. Donna Brazile, Bill Bennett. Thanks for coming in to join us.

The prices on Wall Street affects everyone, men and women across the country but also those closest to the action. Up next, the roller coaster ride that is the life of a Wall Street trader.

(COMMERCIAL BREAK)

KING: Today's front page of "The New York Times" has this lead story. "Obama plans fast action to tighten financial rules." Will new regulation help rebuild confidence in the financial markets?

Now we go outside of Washington for an up close look, the view from the floor of the New York Stock Exchange.

(BEGIN VIDEOTAPE)

KING (voice-over): It is a breathtaking morning commute. A glimmering sunrise. And the daily glimpse at the majestic symbol of American freedom and optimism.

But then comes the walk up Wall Street. These days David Henderson finds it hard to keep his spirits up and he's looking to the new administration in Washington for help and, yes, hope.

DAVID HENDERSON, TRADER: We definitely want them to rebuild trust and confidence in the system. That the capitalist system does work and it does reward people for, you know, hard work.

KING: A Henderson has been working the floor for nearly 150 years now. On the big highs like when the Dow crashed 14,000, Dave knows his joy is shared by millions.

HENDERSON: It's euphoric. Everyone loves an up market.

KING (on camera): Many of the Americans who loved being part of it have lost 40, 45, some 50 or more percent of what they've had.

HENDERSON: Most definitely. A lot of trust and a lot of confidence in the marketplace itself has gone out the window.

KING (voice-over): It is the morning after the market ended up but early on, signs this will be yet another down day.

HENDERSON: Microsoft came out with earnings this morning. Worse than expected. It put a big damper on things. And it doesn't look good.

KING: And Henderson paces the floor to get his bearing.

HENDERSON: You check out the dollar to see what's going on with the dollar. You check out the oil markets.

KING: Maybe even collect a few tips.

HENDERSON: BRJ (ph) selling, UBS buying.

An instant messaging system keeps him in touch with clients looking to trade. Vital for business but also a sad reminder of how much things have changed.

HENDERSON: I still carry paper around with me, buy and sell pads. When the computers go down which they do occasionally, you have a buy and sell pad. It used to be a lot more exciting, a lot more fun. It was a total daily thing from 9:30 to 4:00. We couldn't stop. We'd be running around, doing things.

KING: Now traders spend much of their day staring at computer screens. The market, Henderson said, has been corrupted by greed and risky new products.

HENDERSON: All these whiz kids, computer whizzes, develop these new products and stuff. And the world seemed to accept it. The credit default swaps and what have you. The government seems to let everything go the way it was going. They've taken the investor out of this equation and it's just, you might as well be in Las Vegas or Atlantic City or whatever, playing the slots.

KING (on camera): The government says it will step in and have a more heavy hand. Do you trust that?

HENDERSON: Not really. Usually when the government gets involved in something, they sort of mess things up even more so.

KING: Does simply the fact of having a new president change anything down here in terms of the mood, the psychology, sometimes the market goes on momentum.

HENDERSON: The changing of the guard doesn't change anything down here. The place is going to operate and keep running. Hopefully Obama can do something. It will probably take time because of the damage that's been done already to all the institutions. It is going to take a while to bounce back from this one.

(END VIDEOTAPE)

KING: We'll be here again next Sunday and every Sunday at 9:00 a.m. Eastern for the first and last word in Sunday talk. Until then I'm John King in Washington. Take care.

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