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STATE OF THE UNION WITH JOHN KING

State of the Union: Interview With Suze Orman

Aired March 1, 2009 - 11:00   ET

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


JOHN KING, HOST: And here's what's still coming up on our STATE OF THE UNION report for this Sunday, March 1st.

President Obama made it plain. By August 31 of next year, the combat mission in Iraq will end. But is Iraq strong enough to stand alone? And what will happen to the tens of thousands of U.S. troops left behind? We'll ask Admiral Mike Mullen, the chairman of the joint chiefs about that and much more.

Like a lot of big cities, Philadelphia is in trouble, slashing jobs and public services and still facing a billion dollar deficit. Green jobs could be an answer but the stimulus money to pay for them won't arrive for months. We'll talk to the man responsible for make it all work, the Philadelphia mayor, Michael Nutter.

And the latest government reports prove what you probably already know, the economy is heading downhill and sadly gathering speed. The layoffs, foreclosures and rising expenses more and more families are living on the edge of financial disaster. Suze Orman will be here in just a moment for her plan to survive what's going to be a rough 2009. That's all ahead on STATE OF THE UNION.

Members of the president's national security team, you look there a picture of the Statue of Liberty, members of the president's national security team are out today explaining President Obama's new plan for the drawdown in Iraq. During the campaign, candidate Obama promised to get out within 16 months. Now President Obama is saying most combat troops will be home within 19 months, a compromise military leaders who once objected to any timeline, say they're willing to accept.

(BEGIN VIDEO CLIP)

MULLEN: In that listing, we had a very thorough review, discussion, debate, and it was their cumulative discussion that got us to the point where we made a recommendation for the 19-month withdrawal plan, and the president accepted that and has made that decision.

(END VIDEO CLIP)

KING: And during that review, the defense secretary who carried over from the Bush days to the Obama administration, says he got a glimpse of a new commander in chief with a very different style.

(BEGIN VIDEO CLIP) DEFENSE SECRETARY ROBERT M. GATES: I think that probably President Obama is somewhat more analytical and he, he makes sure he hears from everybody in the room on an issue. And if they don't speak up, he calls on them. President Bush was interested in hearing different points of view but didn't go out of his way to make sure everybody spoke, if he they hadn't spoken up.

(END VIDEO CLIP)

KING: President's budget plan also a big debating point this Sunday. The White House and its supporters say it will dramatically redirect Washington's priorities to health care and the needs of middle class families. But Republicans warn it won't create jobs, and isn't what the American people thought they were voting for.

(BEGIN VIDEO CLIP)

PRICE: The era of big government clearly is back, John, and deficits are, I believe, deficits are not acceptable in the level to which this president has put them on the table. The budget that he put out there is going to have the largest debt in the history of the nation over the 10-year period of time.

(END VIDEO CLIP)

KING: As you can see, we've been watching all of the other Sunday shows, so you don't have to.

OK, President Obama has signed into law the $800 billion in stimulus money and he has proposed $3.5 trillion budget. But let's put it bluntly, what's in it for you? Will any of this protect you and your family? For that, let's turn to a master of blunt answers, personal finance expert, Suze Orman.

Suze, I have right here, your 2009 action plan, not $3.6 trillion in here I don't think. I want to get your sense as we start. People see the president's budget out there. They also see another rocky week on Wall Street. I'm going to start by showing you the front page of the "Omaha World Herald" this Sunday. Warren Buffett -- people listen to Suze Orman, they also listen to Warren Buffett -- sees no quick rebound. Ben Bernanke, the chairman of the Fed, as you know, was out this week. He says the recession will be over in 2009. 2010 will be a year of rebound. You buy that?

ORMAN: I think that we don't know actually. I think a lot of times people are saying things now, John, in the hopes that it's going to work out because god forbid we should portray that we feel hopeless or we feel confused or we don't know what to do.

I think the truth of the matter is, is that America, every single person, needs to have their own personal financial stimulus program. They can't wait to see, is this going to work, is it not going work? They have to cut back and do the hard things that they have to do in their own personal family as President Obama's doing right now in America today. And so, will it work, will it not? Who knows? I have to tell you, I personally don't think they have a clue really how deep this is, the problems that are out there, every time we, you know, solve one thing, another thing falls. I think it is a very, very serious situation.

KING: Not a very optimistic take there. As you know, Suze, part of the economic problem is structural. Part of it is some people believe a crisis of confidence. I want you to listen to what the president said to the American people in his big speech Tuesday night. Yes, he says the stimulus program will help. Yes, he says his budget will redirect the economy. But he also seems to be determined after a lot of criticism, he was talking down the economy to make people a bit more optimistic. Let's listen.

(BEGIN VIDEO CLIP)

OBAMA: We will rebuild. We will recover. And the United States of America will emerge stronger than before.

(END VIDEO CLIP)

KING: So a tad more optimistic from the president there. Will that help? Is there psychology a long part of the battle?

ORMAN: I think psychology is a little bit part of the battle, but you know, the thing is, I think my driver John here in New York City kind of exemplifies it the best. I got into the car, right after the president gave his speech, and I said, John, how did you feel about the president's speech? And he said, hopeful. I said, that's good, John. But he said, Suze, I don't want hope, I want relief. I want to know, on March 4th, when the new housing, when they come out with the new housing rules, and I'm going to know, can I keep my house or not on March 4th. I want relief. I don't want hope.

So I think people can be hopeful for very short periods of time but unless they actually get financial relief and they see something going down to their bottom line sooner than later, hope turns to despair, and then there goes the hope, it's gone.

KING: When you talk about people's bottom lines, last year you said if you hadn't already gotten out of the stock market, you might as well stay in and try to catch it when it comes back up. I want to know if you believe that advice still holds after watching yet another volatile and down week on Wall Street? Stay in if you're?

ORMAN: I think at this point you have to stay in. Look how low we are, but you're only staying if you have time on your side. I have said it forever, 9 will always say it forever, that you need at least 10 years or longer, preferably longer, that you don't need this money. Then you can dollar cost average into these markets as long as you are at least getting a dividend, some type of payment, to stay in.

Otherwise, we are in serious trouble. Do I still think that over this year we could see the Dow go down more? Really the S&P, I'm not sure the Dow Jones Industrial average is even an indicator, if you look at so many of the stocks are under $10 a share and they're not even supposed to be on the Dow Jones Industrial average if they're under $10. They're supposed to be off that index. So if you look at the Standard & Poor's, I would not be surprised to see it at 660 sometime this year. KING: And help Americans who are sitting around the kitchen table as we speak this morning, maybe looking at their personal budget and having a very hard time and then maybe looking over at their credit cards thinking, well here, here's how I'll get by for a few months. Should Americans be running up credit cards to be buy time through this tough period?

ORMAN: Here's what's again so sad. At a time when the credit card companies really could be helping everybody by lowering interest rates, by making it so that people could just get by. If they stay current on their payments and just get by, it would be OK. That's not what we're doing. They are literally rescinding your credit limit, revoking your credit cards, increasing your interest rates to 32 percent.

They're making it, John, so that credit cards are no longer a viable option to just get by and, therefore, you have to be very careful, everybody. The key to the future is going to be that you have a stash of cash. If you have a choice between paying down your credit card bills and you may lose your job and you don't have any emergency fund, you need to just be paying the minimum on your credit cards. Stop charging on them and build up whatever you can because in case you lose a job, how are you going to get by? Be very careful.

Also, everybody, when you pay off your credit cards in full, do you know many of the companies are literally closing down your credit cards? They don't want you to have credit cards anymore. So you have to find another way to make it because the credit card companies, they're not going to be there for you.

KING: As you know the debate in Washington is over the stimulus plan. Will stimulus spending designed to prime the economy, I want you to listen to the advice Robert Gibbs, the White House press secretary trying to play Suze Orman. Let's listen.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The point of an economic stimulus plan is to get money into people's hands and into people's pockets so that they use their hand to reach in their pocket and spend that money.

(END VIDEO CLIP)

KING: Spend that money. If I look here on page 208, I believe it is, you say, become a better saver, be more careful with your budget, don't spend your money. You take issue with Mr. Gibbs?

ORMAN: Oh, are you kidding? I'd take issue with him with a few things especially bringing up Rick Santelli's name during one of his press conferences. What is he thinking, sir, but that is not what we're talking about here right now. The truth of the matter is the key is to stimulate the economy so people can offer jobs to people so people can keep their jobs so they have money so that they can spend their money on, what? On their mortgage, on their car payment, so they in can save money, so that in case something goes wrong and they happen to lose a job, they don't have to all the sudden claim bankruptcy or be a dependent on somebody else.

Stimulate the economy, sir, so that jobs are created for people who don't have jobs. People, if you don't have money, you have credit card debt. You're behind on your car payment, you're under water in your home, you don't have money to spend. It is your job to save money so that in case you get laid off, in case you don't have a job, you now have some money to save yourself. Don't take this money and spend it, if you don't have any money.

ORMAN: Is he out of his mind?

KING: All right-y, on that point we'll call a quick time-out. Suze is going to stay with us. At home, time for a cup of coffee, maybe. But don't go anywhere, just pour another cup because in just a moment we'll continue to discuss your family's financial future.

On the other Sunday talk shows, the conversation was about the national financial future. We'll analyze it with four of CNN's best analysts and correspondents.

And later, we'll add a little reality into the mix with our weekly diner drop-by, this time in Center City, Philadelphia.

And at the top of the hour, Admiral Mike Mullen, chairman of the joint chiefs will tell us how President Obama's decision to withdraw troops from Iraq will affect this unstable region of the world.

And will green jobs really be the answer to low wages and unemployment? We'll talk to people who already making wind turbines in a factory where a previous generation made steel. Stay with us.

(COMMERCIAL BREAK)

KING: We're back now with personal finance expert Suze Orman.

And, Suze, I travel a lot for the show, and I think the TIME magazine cover this week sums up what you hear and feel when you talk to average Americans, "holding on for Dear Life," questions about the economy, questions about the foreclosure plan, questions about whether there will be jobs in their community. It is a tough time out there.

I want you to listen and react, we sat down last week in the Fremont Diner in Lansing, Michigan, with two voters, Ralph Harmon and Maureen Hilliard, who they look at the president's mortgage plan and whether it's true or not, they think this plan is going to bail out somebody up the street who is living in a house they probably shouldn't have bought in the first place. Let's listen.

(BEGIN VIDEO CLIP) RALPH HARMON, LANSING MICHIGAN: I'm concerned about that, that they're paying rent or mortgages for people that are not going to pay them themselves. I mean, I'm really concerned about that.

(UNKNOWN): I agree. I think... HARMON: That's a good point.

MAUREEN HILLIARD, LANSING MICHIGAN: ... the personal responsibility has been lacking in a lot of people and I don't appreciate having to pay for someone else living above their means.

(END VIDEO CLIP)

KING: And as that message takes hold, I want to show our viewers a bumper sticker that is getting more and more popular, Republicans spreading this quickly, "honk if you're paying my mortgage," the O, of course, there, the Obama campaign logo in the middle of it.

Perception or reality, Suze, that the government is bailing out people who bought way too big of a house to begin with?

ORMAN: I don't think people bought way too big of a house to begin with. I think, again, it's very easy to say, oh, let them go, let it crash, it doesn't matter. The truth of the matter is, in my opinion, there are many people who purchased homes, and I'm going to go back again to my driver Jean (ph), because Jean is the man on the street.

Two years ago he bought a home. He bought a home that he could afford. He put money down, he could afford the payment. Now here we are two years later, and driving in New York City, he drives for a company, is down 50 percent. His income has decreased by 50 percent.

Now he can no longer afford the home that he purchased two years ago when he could afford the home. And now the Obama plan is absolutely going to save him, it's absolutely going to allow him to stay in the house, but he wasn't irresponsible.

I refuse to believe that the majority of the people in the United States purchased homes that were irresponsible. Many of them did, not the majority, many of them lied, not the majority.

So I really wish people would just stop it already and understand we have to do whatever we can do to save the people that want to be saved, to stay in their homes because if you let those houses go down and foreclosures continue, it's going to affect everybody one way or the other.

So just get off it, people. I really think we have to start saving those that want to save themselves and that's a good place to start. And I'm absolutely behind the plan that we see in place right here and right now.

KING: Suze Orman, emphatic on that point. Let me ask you another question. We encountered some autoworkers who work at General Motors on in Indianapolis, and they have on the table a buyout plan from General Motors. It will give them about $20,000 plus a voucher for a car up to $25,000. Might seem like a lot but it's not if you can't then find a job down the road.

I want you to listen to Scott McMillin debating his big choice. (BEGIN VIDEO CLIP)

SCOTT MCMILLIN, GENERAL MOTORS EMPLOYEE: If I did retire now from General Motors, I would be looking for another job and they're just not out there. And so, you know, I think I would -- the best move for me would be to stay with GM at this point in time.

(END VIDEO CLIP)

KING: But he says it's a crapshoot to stay, Suze, because he could lose his job in six months and then get nothing, get no buyout. Should Scott McMillin ride that risk or should he take the buyout?

ORMAN: I would probably -- I'm so sorry to say, I would take the buyout. And only because I don't think the problems for General Motors are going to be fixed very shortly here. So I think there's probably a greater possibility that the job may go away than it's going to be fixed and he's going to keep his job.

So while he may not be able to find a job where he's currently living, $20,000 will allow him to get by for a while, maybe move to a place that he can do something else, but if he lives and does it responsibly, I think 100 percent is something, you know, is a lot better now than maybe 50 percent of nothing, which it may be if he keeps his job.

KING: We have about a minute left. So I want your final thought, and I'm holding up your book here, your action plan, because in this book, your list, you tell people to separate their wants from their needs, get over their guilt that they aren't providing for their kids, strike the word "deserve" from the conversation.

What you deserve is irrelevant, what you can afford is all that counts, you say. And also, try to negotiate better terms. In the minute we have left, give people your last, best piece of advice on this Sunday morning.

ORMAN: I want you all to save yourself. I want you all to really get tough with yourself. While the administration has its hands full, you have your hands full, in my opinion, you have got to have a plan. You have got to have an emergency plan in place to get yourself by from now until whenever this is over, and in my opinion it could be a few years.

Again, start putting money away, check out saveyourself.com, a place that you can put $100 month away and you'll be paid $100 after 12 months of doing so. Do whatever you can, people. But it's going to be rough and if you don't get tough with yourself, it's going to get even rougher.

KING: As always, blunt and candid advice from Suze Orman. Suze, take care, thanks for coming in. We'll see you again. In front of a live audience of Marines at Camp Lejeune in North Carolina, President Obama announced on Friday that most U.S. troops will be out of Iraq in 19 months. Is this pace too fast for an Iraq still struggling to provide its own security, or is it too slow for a war weary United States?

At the top of the hour, we'll and ask Admiral Mike Mullen to answer from a military point of view. But straight ahead, we got to two of CNN's best political contributors to see how it's playing with the voters who put Barack Obama in office.

Stay with us, we'll be right back.

(COMMERCIAL BREAK)

KING: Joining me in Washington, two veteran political strategists, Democrat Donna Brazile and Republican Ed Gillespie.

A lot of ground to cover -- I want to start with Iraq, and, Ed, I want to start with you.

Bob Gates, who carried over from the Bush administration to this administration, said, this morning, in comparing and contrasting the styles of the two commanders in chief he has served, he said that President Bush went around the room but President Obama, if you haven't spoken up, he reaches out and calls on you -- essentially making the point that, in his view, President Obama is reaching out more.

Did President Bush not want to listen to everybody?

GILLESPIE: Of course he did, and did listen to everyone. I think what Secretary Gates said was that President Bush listened to everyone, but if people didn't offer opinions, he didn't go and call on everyone in the room.

And the fact is, look, there are no shrinking violets in these meetings, John.

(LAUGHTER)

I've been in them. And if someone had a point a make, they would make it, and if they didn't -- you know, everybody has their own style. I'm not sure how much benefit you get from pressing someone who didn't want to volunteer something.

So I -- you know, different styles. But the fact is, clearly, they are both listening to folks with different points of views and coming to their own conclusions.

KING: I want to talk to you, Donna, about what I would consider the dramatic irony of what President Obama said Friday at Camp Lejeune.

Here was the guy who said, during the primaries, he was the most -- the purest anti-war candidate. And he's down there in front of those Marines, essentially saying he can bring the troops home now, on a timeline, a little later than what he said in the campaign, but close -- on a timeline, because of the work they have done and the success they have achieved.

So the candidate who said the surge was a reckless disaster and criticized President Bush and Senator McCain now has a plan that is based essentially on the success of the surge, right?

BRAZILE: Well, absolutely. I think President Obama acknowledged that the troops -- clearly, they've done a tremendous job over there in Iraq and, of course, Afghanistan.

But the president also said that he would order a review, and he has listened to his generals. He has listened to his national security advisers and Secretary Gates. And he's made a decision, based on the SOFA agreement, the status of forces agreement, that he will begin to bring our troops home in a responsible way.

John, the troops who will remain -- they have a single mission, and that is to not just protect the civilians and the military but to train the Iraqis and to have a small counterterrorism force targeted to ensure that the Iraqi government can step up and protect its own people.

KING: Do you think most Democrats who voted for President Obama thought that, in two years, there would still be probably 50,000 troops in Iraq for some time out?

BRAZILE: Of course not. I think most Democrats thought that the troops should come home as soon as possible. But President Obama was also careful, on the campaign trail, to say that the troops will come home in a responsible manner. And I think this is a responsible manner.

It's not as fast as what some Democrats would like, but he's pledged to bring the troops home.

KING: Being president's a little different than running for president.

(LAUGHTER)

GILLESPIE: It is. And this is a time frame that is very consistent with the agreement that former President Bush and Prime Minister of Iraq worked out and agreed to back in December, I think it was, or January of earlier this year.

And the fact is, I think that President Obama sees that it's in the American interest for a stable Iraq to take root. The elections were very positive, and that's a good thing.

KING: Washington does things in ways that governors can't do because state laws don't let them, and most families can't do, I think, maybe, you could say, because common sense gets in the way.

(LAUGHTER) But Washington is debating a bill, this week, essentially to pay the bills for the budget year that's already under way. We're under way and we're going on what's called a continuing resolution.

In this bill are a whole bunch of these 8,000 or so earmarks. Now, some members of Congress say, damn right; that's a project to bring home the district.

President Obama did, though, say, during the campaign, he wanted to do things differently in Washington. And this is one of the things the American people don't like. I want you to listen to his budget director this morning, though, who indicates that, yes, President Obama could veto this, but it seems like he's going to save his energy for another fight.

(BEGIN VIDEO CLIP)

OFFICE OF MANAGEMENT AND BUDGET DIRECTOR PETER ORSZAG: This is last year's business. We want to just move on. Let's get this bill done, get it into law, and move forward.

GEORGE STEPHANOPOULOS, HOST, "THIS WEEK": So he'll sign it?

ORSZAG: Yes.

(END VIDEO CLIP)

KING: So he will sign it, he says. Now, that's not sitting well with the number two Republican in the House, Eric Cantor, who says that, if the president meant what he said in the campaign, he should veto this bill, and to sign it would be hypocrisy. Let's listen.

(BEGIN VIDEO CLIP)

REP. ERIC CANTOR, R-VA., HOUSE MINORITY WHIP: I think that we need to put our money where our mouth is and not just do as I say, not as I do. The fact that there are 9,000 earmarks in this bill and the fact that the vetting process just doesn't take place the way it should -- we ought to stand up and draw the line right now and stop the waste.

(END VIDEO CLIP)

KING: Donna, is that an acceptable position for President Obama to say, yes, I said that during the campaign, but we'll start next week?

BRAZILE: John, as you well know, you can't change Washington overnight. And you clearly are not going change the behavior of Congress more than, you know, one election at a time.

I think this budget that the Democrats and Republicans acted on this week has about 40 percent less earmarks than before. It's not a perfect blueprint, but I think the president should sign it because it once again will signal that the country's serious about taking on the emerging challenges that we face. GILLESPIE: John, the fact is there is about $8 billion in earmark spending in this in omnibus package. KING: From Democrats and Republicans?

GILLESPIE: Not -- Democrats and -- it's 9,000, mostly from Democrats...

(LAUGHTER)

... but 9,000 earmarks. And because President Obama did not keep his word on this and did not stand firm against those, he's going to be held accountable for every one of the earmarks in this budget. And the fact is that Eric Cantor is right and this is a good bright line for Republicans to draw.

KING: We live in an interesting time in Washington, watching your party, the Republican Party, try to find its place, find its voice, and try to actually see who will be its leader.

Eric Cantor -- we just saw him -- he is one of the leaders of the Republican Party.

A gentleman named Rush Limbaugh spoke yesterday at the Conservative Political Action Conference here. I want to play a snippet first of what Rush Limbaugh had to say. Then we'll get some White House reaction, too. But let's listen to Rush Limbaugh talking about President Obama's spending priorities.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: Do you know that President Obama, in six weeks of his administration, has proposed more spending than from the founding of the country to his inauguration?

(END VIDEO CLIP)

KING: I'm not sure if that math is right, but it's an impassioned address, there, from Rush Limbaugh, making the case against a big spending in the Obama administration.

The White House chief of staff, Rahm Emanuel, out on CBS this morning, had this, firing back.

(BEGIN VIDEO CLIP)

RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: He is the voice and the intellectual force and energy behind the Republican Party. And he has been up front about what he views, and hasn't stepped back from that, which is, he hopes for failure.

(END VIDEO CLIP)

KING: What is Rush Limbaugh's role in the Republican Party right now?

GILLESPIE: Well, Rush Limbaugh gives voice to a lot of people who view the president's agenda as way too much government. And that is a largely Republican audience, a lot of conservative whose may not even -- they may be conservative first, Republicans second.

But the fact is, Rush puts out information that people don't get from other sources. It's a healthy thing in the debate.

GILLESPIE: The fact is, what he was clear that he said yesterday was he wants the country to succeed and, in his view, and I think it's a view shared by a lot of us, the agenda that President Obama's putting forward now, so clearly, $4 trillion in spending, $1.4 trillion in new taxes, $5 trillion in debt, is not going to make us successful and is not going to grow our economy and that's a legitimate concern held by a lot of people.

KING: And Donna, is Rush Limbaugh right, speaking to that audience? I know you don't think Rush Limbaugh's right on the policy, to that audience when he says slow it down if you can. Stop it if you can. I know we don't have the vote but was he framed the debate very much like what we went through back in 1993, when Bill Clinton came into office as to call it higher spending, call it out, call it out, call it out, do not be shy and good will come to you and good came to the Republicans in 1994 with a sweeping midterm election gain because they made the case effectively then that this was big government and not what you voted for.

BRAZILE: President Obama inherited soaring deficits, soaring deficits, huge debt. It was doubled over the last eight years. We all know how we got there. But what Rush Limbaugh disagrees with is how we go forward and I think that's a good debate for both parties to start. And none of us are clean in this process.

The Republicans cannot claim to be holier than thou and the Democrats must understand that we are going to cut places where we don't like to cut but the truth is, is that we're in a fiscal crisis. And Rush may not like the fact that President Obama's budget if you look at discretionary spending is about $90 billion larger than what President Bush submitted last year. That's because he's including the price of the war. He's including the amount of money that we're going to spend for natural disasters. So this is a lot of politicking and a lot of posturing and Rush Limbaugh is quite the entertainer.

KING: Ed Gillespie, Donna Brazile, we need to call it there. I could go on for a little bit here, but we'll do it another time. Thank you both for coming in. And next week, Congress starts picking apart the president's budget. In just a few moments, I'll be joined by two CNN correspondents covering the story.

So straight ahead, one of my favorite parts of the program. We get out of Washington to see and hear first hand what's on your mind this week at the Midtown Diner in Center City, Philadelphia.

(COMMERCIAL BREAK) KING: I'm John King and this is STATE OF THE UNION. Here are stories breaking this Sunday morning. Forecasters calling it a storm to remember, even before it hits. A massive winter storm moving into the eastern states. This is the scene from Memphis this morning. Before it's observe forecasters say every major city in the Northeast could significant amounts of sleet, freezing rain, or snow.

A big announcement expected at the White House tomorrow. Two administration officials telling CNN President Obama has chosen the Kansas Governor Kathleen Sebelius as his nominee for health and human services secretary and she has accepted the post.

Death has silenced one of the most familiar voices in radio. Broadcast pioneer Paul Harvey died at his winter home in Arizona yesterday. He was 90. Former President George W. Bush says Harvey's commentary entertained and enlightened and informed. That and much, much more ahead on STATE OF THE UNION.

A shot of the White House on a wintry morning here in Washington. We already had a bit of sleet and rain here. We'll see what the day brings. In his Saturday online address, President Obama said he was ready to fight special interests and lobbyists to save his $3.5 trillion budget.

But in real life, people talked about the economy in terms of lower tips and higher medical co-pays. At least that's what we're discussing here in Pennsylvania. We went into Philadelphia this week and I want to tell you, as our diner segment went, we first visited -- this is the Gamesa Factory, where they are creating those new green jobs in a state that needs new jobs. These are parts of giant wind turbines that you will see out in wind farms. As you see that going on, you also see inside the city, sad things likes this. This, a soup kitchen, at the Bright Hope Baptist Church. Some 100 to 125 people a day come. That spaghetti dinner in some cases their only meal. Now why? That is a state that has been hard hit.

In Philadelphia, in the county aloe, an 8.2 percent unemployment rate. The state projects a deficit this year of $2.3 billion. Let me bring this up here. We'll bring this out. And as you talk about these budget challenges, people hears about $3.6 trillion in Washington. They are waiting for the stimulus money to come.

But as we sat down with a group at the Midtown Diner for an afternoon conversation, they're very skeptical that the government could help them, even those who supported the new president.

(BEGIN VIDEOTAPE)

KING: If you look at the headlines in the newspapers, if you drive around town, you see that the economy is struggling. I'd just like to start, and I'll start to my right, has it affected you in any way in terms of your own employment situation or your own budget situation?

CURTIS KISE, PHILADELPHIA: No, it has not. Not yet, at least. I'm afraid, though it could in the future. I work in retail and if people stop spending money, then it could be affected drastically.

KING: How about your perspective?

HARRY WATKINS, PHILADELPHIA: Well, I was affected by the economy. I was laid off recently. But I'm working again. I was working for a five-star establishment in Philadelphia and so we've been greatly affected by the economy, I think.

KING: You say you're working again.

WATKINS: Yes.

KING: The same wages and benefits or did you have to compromise?

WATKINS: A lot of compromise. Less money, more hours, different type of job.

KING: All right. How about yourself?

KEITHA BRANDON, PHILADELPHIA: Well, it has affected me a bit because being in the restaurant industry, I mean, your tips get lower, you know, and you do have to work longer hours to make ends meet.

KING: The president says they're going to spend almost $800 billion and he says it's going to create or save 3 million or 4 million jobs. But are you confident that it's going to create jobs here in your community?

MARLON BRANDON, PHILADELPHIA: No. I didn't -- I heard a lot of good stuff and I love my man, I really believe him, I'm very proud of him. I didn't think it would happen in my lifetime, but I did not see an ability to stimulate the economy on a mainstream level. And that did concern me.

KING: Let me ask, before I move on, with the show of hands, how many people supported Obama? All Obama supporters.

WATKINS: I did not vote for him. I'm a Republican. But I still see that they could compromise and put out the hand to the other party and we'll work together to get through this tough time, I think, which we really need to do.

KING: A few questions all of them with a show of hands in the sense that do you trust him? OK. Do you trust the Congress? That was resounding.

KING: Should the federal government give more money, meaning more of your tax dollars, to bail out the banks, the financial institutions?

GROUP: No.

KING: No one thinks they deserve it?

GROUP: No.

(CROSSTALK)

(UNKNOWN): Didn't they get us here? Didn't they get us here, their policies?

(CROSSTALK)

K. BRANDON: And they really have...

WATKINS: ... led us to this problem.

KING: How many of you have watched your health care costs go up and up and up in recent years?

(UNKNOWN): Wow.

KING: That everybody?

GROUP: Yes.

KING: That's everybody.

(CROSSTALK)

(UNKNOWN): And quality goes down. I'm concerned about the government controlling health care.

KING: You're a Republican, you said, but you support the president now. Do you trust the president and the Democratic majority in Congress to deal with health care?

BRANDON: I don't think it's going to happen in this administration.

KING: You don't think it's going to happen?

WATKINS: No, I think there's too much to deal with the economy itself, we've got to get back...

(CROSSTALK)

BRANDON: Yes, I think he has a lot of...

(CROSSTALK)

WATKINS: He has got a big job with that.

(UNKNOWN): I agree with that.

KING: Let me end by circling back to where we began, the economy, and again, a show of hands if you think it's going to get worse before it gets better.

(UNKNOWN): Yes.

KING: Everybody?

(UNKNOWN): Yes. That's inevitable. That's inevitable.

KING: That's pretty depressing.

(UNKNOWN): What can you do? Sometimes the sore has to hurt before it heals. BRANDON: Somehow, you know, the little man has been falling through the cracks. The guy who has been working eight and -- not eight, but even 10 and 12 hours a day, he has been falling through the cracks with all that has been going on. And I don't know, someone has to save him.

(END VIDEOTAPE)

KING: Straight ahead, we'll talk to the Philadelphia mayor, Michael Nutter. It's his job to try to find jobs for those people falling through the cracks. I'll also sit down with two of our correspondents who are cover the president's budget battle and his plan to draw down troops in Iraq. Stay with us.

(COMMERCIAL BREAK)

KING: Joining me to continue our Sunday conversation, senior congressional correspondent Dana Bash and White House correspondent Suzanne Malveaux. Let's start with the president's budget proposal, $3.6 trillion. Republicans are out saying too much spending, too much deficits. The number two Republican in the Senate, Jon Kyl, was on "FOX News Sunday," and he says, unlike the stimulus battle, he hopes Republicans can keep enough unity to block this budget.

Let's listen.

(BEGIN VIDEO CLIP FROM "FOX NEWS SUNDAY")

KYL: I hope that we can, but that means that all of us will have to be together on this and there are only 41 of us, so we have to be absolutely united on this and we will be if the American people convey to all of us their desire that we get a handle on this budget.

(END VIDEO CLIP)

KING: Senators Specter, Collins, and Snowe, the three Republicans who defected on the stimulus, Dana, can the Republican leadership hold them on the budget?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: It's going to be hard. And I think, really, a lot of it depends on what the "it" is. You know, the president put out a blueprint, a rough outline, but is it, obviously, Congress that is going to write the details of the budget.

And there are already things that some Democrats don't like -- many of them don't like, like, for example, getting rid of some of the deductions that people can take for charity, just for one example.

So it just depends on what happens at the end of the day because we are a long way away from actually seeing legislation on this. But those three Republicans are so incredibly powerful and Jon Kyl is going to have a little bit of a hard time keeping them in check.

KING: And as Jon Kyl tries to keep them in check, what are we learning about the new president and his ability to court the other side?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: You know, it's funny, because they're not really concerned about it so much because you look at the polls and despite the fact that Americans say, we don't know if this is going to work, we don't know if we should even believe this, but we're go to trust this guy, anyway. We're going to give him a chance.

And so that's what they're banking on, that's what they're counting on is that he is still very popular, they're going to put him out in front of these audiences, he is going to have this summit on health care this week.

And so they're hoping that people are just going to have a little bit of faith here and that it's the Republicans that essentially are -- that they're going to fail, that he is going to get this budget forward and that people are going to see that as a party of just no solutions.

KING: A big announcement at the White House tomorrow on another big domestic issue, the governor of Kansas, right here on the front page of The Washington Post, Kathleen Sebelius, tapped to be the secretary of health and human services.

This was the job that was supposed to go to the ultimate insider, Tom Daschle, the former senator. He was not only going to be a cabinet secretary, Suzanne, he was going to have an Office of Health Care Reform in the White House, special status, so that he could be the guy with the president's blessing right down the hall to bang the heads and the twist the arms to get the elusive health care deal.

Will Kathleen Sebelius have the power and influence that Tom Daschle would have had?

MALVEAUX: Well, first of all, she's not going to have both positions. A health care czar position, the White House position that Tom Daschle created, essentially, is going to go to somebody else. So she will have a partner essentially to work with. But she's -- you know, she's not a novice.

Obviously she's not a Washington insider, but she comes from a political family. She reaches across the aisle. She was the insurance commissioner. So one of the things, the major battle that the Obama administration is going to have is with the health care insurers, the providers, they've already geared up for this huge fight.

Well, she's taking it on in her own state, so that is her own experience as the insurance commissioner. And you also you have John Podesta, chief of staff to President Clinton, transition guy for Obama, who has already kind of launched this public relations campaign to go up against those insurance companies.

KING: But in the hideaway offices on Capitol Hill, they would say, does she have sway? BASH: Yes -- no. I mean, and I think Suzanne makes a great point in terms of her experience with the health care provides and insurance companies. But, you know, what happens on Capitol Hill and the kind of understanding of Congress and of the way those things work is going to be absolutely crucial which is why very likely she did not get the health care czar role.

But, you know, the reality is we have to remember this, and I see this almost every day because he's on Capitol Hill almost every day, is that Barack Obama, President Obama, has put in place his chief of staff, a former member of Congress, and a lot of people who have a lot of experience, and experience with the health care debacle that they tried in the Clinton administration, and so that is something that they already understand.

KING: Let's shift to Iraq. The president outlined his proposal on Friday, it gets the combat troops out in 19 months, not 16 months, but pretty close to his campaign promise. But he says he will leave 50,000 troops behind. I asked the chairman of the joint chiefs earlier on this program, what happens if we're, say, six months away from that deadline and things aren't going as well as you had hoped, and you go to the president of the United States and say, sir, we need more troops and we need more time, will he listen?

Let's listen to Admiral Mullen.

(BEGIN VIDEO CLIP)

MULLEN: If I were to use the process we just went through with respect to making -- his making this decision in Iraq and his willingness to listen at every level in the chain of command, certainly, my expectations are in the future that he would continue to do that. (END VIDEO CLIP)

KING: Dana Bash, are Democrats in Congress going to like that?

You reported on Friday that it was Harry Reid, the Senate leader, who said Mr. President, try not to say 50,000, use the lower number, 35,000 because there are some antsy moods about this on the left. Hearing the admiral say well if we need more time or more troops, we think we'll get it. How's that going to play?

BASH: Not very well, not very well at all. I mean I've got to tell you that it is --- remember the "Seinfeld" episode, bizarro world where everything is opposite? That's what happened on Friday with this Iraq announcement where you had Democrats saying, this isn't really what we wanted with regard to withdrawing from Iraq, what has been the most partisan issue in Republicans. Even President Obama's rival in the campaign, John McCain, applauding him from the Senate floor.

But on that issue, no, Democrats are not going to be happy to hear that, but they also understand, and this is another thing that I heard that happened inside that White House meeting, that Senate Majority Leader Harry Reid said to President Obama, I understand you are getting certain advice from your commanders and you do have to follow that, but we don't like it very much, politically and otherwise.

QUIJANO: The White House didn't actually -- they didn't mind that it was bizarro world for that day because I was getting e-mails from the White House saying, look at what John McCain is saying. Look at what Boehner is saying. Look, they're supporting the president. So they really didn't mind that they had lost a little bit of support from the Democrats on the left. And it's not totally surprising because there was a moment in the campaign where we saw the candidate Obama go from the far left to the center to the middle. And it was his adviser David Axelrod and we kept asking hey wait a minute, is he was changing his position when it comes to troop levels or the time table because it was a little bit fuzzy at one point. And he said no, no, no, we're being consistent here. But there was a little bit of a hint that he's more pragmatic than he revealed early on.

KING: Some people in politics call that a pivot, others call it a flip. Let's talk, we only have about a minute left so you each get about 20 seconds on this point. This omnibus spending bill, which everybody at home is saying, what is that? The big bill that essentially pays the bills for the year. It's all under way. It's going to come the president's way, Suzanne. He said he doesn't like earmarks. He wants to change the way Washington does business. But his team says we're going to sign this one, even though it has 8,000 or 9,000 of those earmarks because we need to move on and focus on our agenda, not the carryover from the Bush days. Republicans are saying hypocrisy.

QUIJANO: Yes, I mean that's a point that they're making here. The Obama administration, aides say that they believe they can kind of move forward here. You put up the budget, talks about a new era of responsibility, turning a corner. They believe that if you look forward on the stimulus plan and what they put forward in the budget, that they're going to be able to convince the American people to look beyond that.

KING: You get 10 seconds.

BASH: Well on this issue of earmarks, the Obama administration, they have got a big problem on their hands because if the president really thinks he's going to stand up and say no earmarks, the Senate majority leader and other Democrats, say no, that's the way we do business and that's the way it's going to stay.

KING: They like earmarks. Dana Bash, Suzanne Malveaux, thank you very much.

In the next hour of STATE OF THE UNION, we'll give the last word to a congressman who's been very close to the Obama family, but who says the president is heading for a colossal geopolitical blunder in Afghanistan.

We're heading back to Philadelphia next in my conversation with the mayor, a guy who says if he doesn't get the stimulus money he needs, he'll drive to Washington and get it himself.

(COMMERCIAL BREAK) KING: TastyKakes have been around for almost 100 years, and are much a part of Philadelphia as soft pretzels and cheese steaks. They taste pretty good too. So it's fitting that my conversation with Mayor Michael Nutter took place in the new green headquarters and bakery that TastyKakes is building on the grounds of the historic Philadelphia Navy Yard.

(BEGIN VIDEOTAPE)

MICHAEL NUTTER, MAYOR, PHILADELPHIA: What I find very exciting again about the green economy is whether it's on the construction side or on weatherization, people doing -- converting plant roofs in Philadelphia, green roofs, lower temperature in the building. We have training programs for folks that don't take a long period of time.

KING: Where do you get the money for that?

NUTTER: From the economic recovery. Without the economic recovery money, you really can't do a lot of this kind of new job training and really have that kind of focus. You know, the president has emphasized so much and you know fought for that component in the bill.

KING: Are you convinced because the money's not flowing the way mayors would prefer that it will come to you in short order or you are going to get caught up?

NUTTER: If I have to drive my car up to where ever it is and take bags with me, we'll figure it out.

KING: When is your best guess or best hope that you'll actually have dollars in your hand?

NUTTER: The assumption here is that many of the programs, you'll start seeing the applications coming out, may be some time in March. Go through whatever that process is, we're figuring maybe summer into the fall, after the regs get situated, plans or applications get reviewed and somebody checks off all the boxes that need to be checked off. People get trained, people are lined up to start an application process to get involved in these programs. So maybe summer, fall for some of them. It is what it is.

KING: You're having a tough time right now.

NUTTER: Philadelphia's having a tough time. Just about every city in the country is having a tough time. We have proposed cut backs on services at our libraries, our swimming pools, our streets department, did not hire as many police officers as I wanted. Took some fire equipment out of service. I mean, those are very difficult choices. Save money, close that hole, and then another one opened up. All tax revenues down first of the year, every one that we have, all down.

So the economic recovery money is not to fill our budget deficit, so we will still have to make some tough choices, but as the president has also said, help is on the way. KING: Do you worry about the expectations in that the president demanded that Congress act so fast, saying speed was the issue, we need to get this money out now, and you think it would be maybe next fall before you have any that you can actually say, see, there's a job created with this money.

NUTTER: That's only my current estimate, just kind of knowing a little bit about government, but I know that the president has been hammering folks about getting dollars out the door because of the peril, the dire circumstances that we find ourselves in. If it comes earlier, that's great. Whenever it's ready, we'll be ready.

KING: Mayor, thank you.

NUTTER: Thank you.

(END VIDEOTAPE)

KING: I'd like to welcome back our international audience to our STATE OF THE UNION report for this Sunday, March 1st.

President Obama says most troops will exit Iraq by August 31st of next year, but will that heighten the danger for the tens of thousands who will be staying behind? We'll hear from the chairman of the joint chiefs of staff, Admiral Mike Mullen.

KING: Ironically, it is the Democrats most unhappy with the president's troop withdrawal plan. We'll talk about why with Democratic Congressman Neil Abercrombie, he gets "The Last Word."

And the shrinking economy is wiping out jobs, homes, and savings for millions of Americans, Suze Orman offers her plans for surviving these tough financial times.

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

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