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STATE OF THE UNION WITH JOHN KING

State of the Union: Insight & Analysis

Aired March 22, 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 ahead in our STATE OF THE UNION report for this Sunday, March 22, 2009.

Three more banks and two major credit unions were closed on Friday. Are Americans losing faith in the administration's ability to stop this fiscal meltdown?

We'll ask two of the best political team on television, James Carville and Bill Bennett.

One senator says that Americans are crazy angry over the AIG bonus payouts. Will this derail Treasury Secretary Tim Geithner's rescue plans? We'll get the latest from the CNN reporters who have been breaking this story.

And unemployment isn't getting any worse in Louisiana, but that's because, over three years later, they're still rebuilding and getting money because of Hurricane Katrina. Our weekly conversation over coffee, really good coffee, from the French Quarter in New Orleans. That's all ahead in this hour of "State of the Union."

Live picture of the White House there. It is a beautiful Sunday here in the Washington. And amid all the outrage over the AIG bonuses and questions about the administration's new plan to get banks back in the lending business, the president's top economist voices confidence on the biggest question: When will the recession end?

(BEGIN VIDEO CLIP)

ROMER: I have every expectation, as do private forecasters, that we will bottom out this year and actually be growing again by the end of the year.

(END VIDEO CLIP)

KING: But Republicans, including one who almost joined the Obama cabinet, see things very, very differently and say the president's agenda will drown the country in deficit spending.

(BEGIN VIDEO CLIP)

GREGG: The practical implications of this is bankruptcy for the United States. There's no other way around it. If we -- if we maintain the proposals which are in this budget over the 10-year period that our -- that this budget covers, this country will go bankrupt. (END VIDEO CLIP) KING: Also this morning, more outrage over those big AIG bonuses and more debate about what Washington should do about it.

(BEGIN VIDEO CLIP)

PENCE: What we ought to say is to AIG, we ought to say, "No more bailout money until AIG recovers all of the more than $200 million that's been distributed in executive bonuses."

(END VIDEO CLIP)

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

Let's bring in two of our CNN contributors as we do every Sunday morning at this hour. Let's break down the policy and the politics.

Down in New Orleans for us, Democratic strategist James Carville, and with me here in Washington, radio talk show host and Washington fellow at the Claremont Institute, Bill Bennett.

Gentlemen, thank you.

Let's deal first with the big picture here. The president of the United States trying to pass his budget, which includes health care spending, education spending, a big, ambitious agenda, whether you are for it or against it, at a time when the country is anxious about all these bailouts, now mad about these AIG bailouts. And I want you to listen to something that the New York mayor, Mike Bloomberg, said on "Meet the Press" this weekend, because I think he captures the political challenge for the president quite well. Let's listen to Mayor Bloomberg.

(BEGIN VIDEO CLIP)

BLOOMBERG: The political will issue is the president's greatest single challenge. There is a crisis of confidence in this country. He's got to now explain exactly that to the public: why it is so important to make the investment and to commit ourselves down the road and our kids down the road to pay back all of the money they're spending today.

(END VIDEO CLIP)

KING: So, James Carville, a day before they announce a new plan on these toxic assets, which essentially is billions more in taxpayer guarantees, is the president doing a job dealing with that crisis of confidence the mayor speaks of?

CARVILLE: Well, I mean, I think the mayor is exactly right. And I think that the president this week started out trying to, and I think that -- I think Ms. Romer did a great job on the show this morning. There's no doubt that they can -- they can do better, and I think that they realize that. But basically, the public is not going to understand the details of the new toxic assets relief plan, but they can explain that they're doing and what they're trying to do to keep these banks afloat.

I mean, they're having some pretty serious problems here, and I think the public is willing to give them a lot of leeway in trying to deal with them. And -- and I think the mayor's right. They need to double up and push in that sort of explanation of what they're trying to do.

KING: Are they explaining it right, Bill? And I just want to show a front page as we do so. We have all these papers. We look at them every Sunday. This is what's dominating in the discussion. This is a president who has very ambitious plans -- you disagree with some of them -- but very ambitious agenda, and this is what the country is talking about right now.

BENNETT: Well, they're not handling it right when he says we'll use every legal means possible to stop these bonuses when it's his administration that authorized it, when he says, "Where did this come from? This is an outrage." His team did it. Tim Geithner did it. Chris Dodd, obviously, did it -- did it, as well.

So what's going on there, either he didn't know this was happening, which suggests a degree of incompetence in the White House that shouldn't be, or he did know and he's not leveling with us completely.

By the way, the Geithner thing, which James mentioned, remains a problem. You had Christina Romer. Hate to say you didn't have an exclusive. She was everywhere, John, because Tim Geithner is not to be found. The president has total confidence in Geithner, but he cannot get on these news shows and defend himself. So the president is going to have to change the tune here.

Also, as Judd Gregg pointed out, you can keep raising the temperature on all the big banks and organizations, but to get this economy moving, if you need these big banks and organizations, who's going to make a deal with the government, which decides to start taxing retroactively at 91 percent?

KING: James, come in on the Geithner debate here in Washington, because the president, again, on "60 Minutes" tonight will say full confidence, saying he's even he's been joking with Tim Geithner, sorry, buddy, you've got all these problems. You have to say.

You know, you were instrumental in the election of Bill Clinton, who had guys like Lloyd Bentsen and Bob Rubin, and Larry Summers after that, but Lloyd Bentsen, Bob Rubin, guys with credibility, guys who the markets stopped and listened to, and Rubin especially was seen as a very reassuring figure, people talking about his post-Clinton legacy.

But does the administration have a problem when the treasury secretary does not at least yet appear as a reassuring figure? CARVILLE: Well, as long as his -- his ideas are right and -- and -- and Ms. Romer's right, and people in the administration are right, and some of these private forecasters are right, and we come out of this thing toward the end of this year, they're all going to look pretty good.

And if they're right that these bank assets are a lot stronger than anybody thinks -- and I think that's what their plan is -- they're going to look pretty good. If they're wrong and the economy stays and doesn't grow, then it's going to -- we're going to have a really tough go at it here.

But, you know, what's really surprising -- that people talking about populists with pitchforks, if you look at what's happened to productivity since 2001, if you look at what happened to income, if you look at what happened to household wealth, the staggering thing to me is that people are not even madder, that they're literally not in the middle of the street.

And -- and there's legitimate, legitimate reasons for public anger out there and the administration, I think, is starting to -- to understand this, very deeply and very profoundly, and it's something that they have to deal with. These are not -- when people are -- are mad about this, they have good reason to be mad.

BENNETT: This would be a mistake to send it back to Bush, though. It's -- they're running out of that one. You know, we inherited this and that. Yes, there were serious problems, but he's the president now, and he's got to deal with it. And this week, he did not deal with it honestly or competently, one -- one or the other.

By the way, in terms of these projections, this is not just Republicans who are criticizing. The Congressional Budget Office, CBO, says that, if President Obama does what he wants to do, it will threaten the nation's stability. You heard what Judd Gregg said; the CBO says the same thing. And every day, more and more people in the center, not on the right, are saying this guy does not know what he's doing.

KING: All right. So, James, what do you do if you're the president of the United States and you know -- Bill's right, to the point that many centrist Democrats in Congress are saying, look, the economy is not going to do as well as you think and we're going to have to pare your budget back some.

Do you do that now, in the context of President Obama as a candidate said he was going to change the way Washington works, he was not going to play the old Washington games, he was going to be open and transparent? Do you say now that, "If the economy is slower than I thought, this is what I'm going to pare back. We won't do health care this year. We'll wait until next year"? Or do you wait?

CARVILLE: Right, let's don't blame Bush. Let's just go to January the 20th, OK? And when President Obama takes office, interest rates are at 1 percent. There's no -- there's no monetary stimulus left. I'm glad to see that Senator Gregg is now so concerned about the deficit and all of these Republicans are. The truth of the matter is, they never were concerned for eight years about it.

But, however, looking forward, this is -- in order to create some demand out there, they have the stimulus package going. They believe, as do a lot of people believe, that this is going to cause the economy to turn around and get better here toward the end of the year.

And I keep coming -- and that's the same thing, it appears to me, that they're doing with the -- with the bank program, that these banks' assets, once the economy starts to lift, the value of these things are going to lift.

And there's an element of a gamble here; of course there is. But, you know, let's consider the fact that they just might be right.

KING: Let me bring in before -- I know Bill has a point he wants to make. Let me bring in...

BENNETT: No, no, you can't -- you can't make a bet that way. You can't say, "The administration might be right," because if they are wrong, if they are wrong, and the CBO thinks they're wrong, and a lot of independent economists think they're wrong, you're talking not about a bad situation or deflation. You're talking about wrecking the nation's economy and the stability of the whole economy. Those are -- those are the terms.

CARVILLE: Right, it's wrecked right now, sir.

BENNETT: No, it isn't wrecked. No, it isn't wrecked.

CARVILLE: It's wrecked right now.

KING: Let me -- let me ask -- let me...

BENNETT: Well, you said a minute ago things -- things are starting -- Christina Romer said things are starting to show some life signs. And I think they are, because this is a very resilient beast, the American economy. But you can kill it. You can choke it. You can overburden it, which I think is what -- what you're going to get with this program.

KING: James -- James, you mentioned pitchforks earlier. I want to play a little sound from Senator Gregg in that interview. This was in the context of should Congress be taking punitive action against those who get these big bonuses at AIG and perhaps other entities getting government taxpayer bailout money. Let's listen to Senator Gregg.

(BEGIN VIDEO CLIP)

GREGG: People are disgusted and outraged, as they should be. But let's not overreact in a way that basically has the Congress grabbing its pitchforks, and charging up the hill, and abusing what is a core authority of a government, which is the authority to tax its people.

(END VIDEO CLIP)

KING: With so many big problems -- first to James and then to Bill -- should the Congress be going after it the way they are, punitive taxes on those who took bonuses?

CARVILLE: Well... KING: Go ahead, James.

CARVILLE: Well, I mean, look...

BENNETT: No.

CARVILLE: ... it's going to be in the Senate, and it's a more deliberative body. But there has to be something -- and it's outrageous that a -- that a company -- and some of these people that have caused this much grief in this economy -- I can completely understand where people are coming from. I can completely understand like -- you know, and a lot of these Republicans voted for this.

But it's now in the Senate. There might be a better way to do this. But these -- the bankers have to understand and the people on Wall Street that people's anger -- these are not a bunch of -- these are people who have worked harder, produced more, have seen their incomes go down, and seen their household net worth go down. And -- and a lot of it, Wall Street is to blame for a lot of it, quite frankly. And so some of this is appropriate.

BENNETT: James said there may be a better way to do it. He knows there's a better way to do it. This is not a good way to do it.

You've got an administration that put these bonuses in place by legislation. Now you -- and Democrats in the Congress. Now you've got them legislating 91 percent taxes. This is ridiculous. This was the rule of law.

Again, in the future, these companies that you're going to need to get this economy going are going to say, how can we deal with a government that plays like this? It also shows what happens when the government takes over.

I've got to get one word on deficits, because the deficits that George Bush left us -- and you're right, they're there -- are nothing, nothing, James, compared to what Barack Obama will leave us, all the projections.

KING: A quick timeout, quick timeout.

CARVILLE: The logic...

KING: Referee King is calling a quick timeout here, quick timeout.

CARVILLE: All right.

KING: James and Bill will be right back. As you can see, they're in a feisty mood this morning, a lot more to talk about.

Let's also take a look, though, at what's still coming up in our "State of the Union" report. We'll take you to Tulane University in New Orleans for a master class in politics with Professor James Carville -- Carville special -- Republican Speaker Newt Gingrich. You've never seen a class like this. And at the top of the hour, the latest on the banking crisis with Christina Romer, the chair of the White House Council on Economic Advisers, and a frank critique of the administration's budget from Judd Gregg. He's the senior Republican on the Budget Committee.

And finally, after all the others have spoken, Democratic Governor Jennifer Granholm of Michigan is here with a last word.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GINGRICH: An event we haven't seen in 80 years is big. And the numbers are -- the first thing you know about an event you haven't seen in 80 years is nobody has a clue. So when you tune in on Sunday morning and listen to all these really smart people explain to you whatever they believe, remember, the reason they're doing that is they can't be on TV unless they know something.

And so even if they don't know something, they have to pretend to know something. And if you actually track them week by week, you'll begin to figure out they were all wrong.

(END VIDEO CLIP)

KING: That's the former speaker of the House, Newt Gingrich, in Professor James Carville's class, saying that all those guys you see on Sunday morning television are wrong.

You guys are never wrong, are you?

BENNETT: Hey, listen, I have a PhD. I want to be in that classroom. I've got a bona fide PhD, James.

KING: We're going to...

CARVILLE: And we're going -- we're definitely going to have you in there, Mr. Secretary, because (inaudible) do in the fall and see if -- if I can do it. But let me say this. Academic freedom rules at Tulane.

BENNETT: Good.

CARVILLE: My own speaker was attacking me. We like having that.

KING: We're going to have more of the classroom, a fascinating look inside this class. I was lucky to attend it this past week. And Carville is a pretty good professor. He's tough on the students.

BENNETT: I'll bet. I'll bet you.

KING: We're going to have more on this -- more on the class at the end of the hour.

Let's get back to the dual challenges, the many challenges facing the president. But Ed Rendell, the governor of Pennsylvania, was on "Meet the Press" this weekend, and I think he's -- again, Mayor Bloomberg summed up the big challenge. Governor Rendell says, there's two issues when it comes to the spending in Washington, some people like and some they don't like at all. Let's listen to Governor Rendell.

(BEGIN VIDEO CLIP)

RENDELL: ... American people don't -- aren't against spending. They're against spending they can't see, the bailouts. They can't get their arms around it. They can't touch it. They can't say, "Well, that's what happened for our money in the bailout." But for infrastructure, if we do it right and we're committed to seeing that it's done right, if we do it right, the American people will not only be able to see it, they'll be able to touch it.

(END VIDEO CLIP)

KING: Bill, they can't see the bailout money. I think Governor Rendell put it pretty well there. And -- and what is the impact there of, you know, this president? I know you don't agree with some of his policy proposals. But the coin he has right now is trust and credibility. Does the -- does the frustration and anger at the bailout money eventually start to erode at that a little bit because he's in charge?

BENNETT: Well, he has to take responsibilities for where the buck stops. He said, "I will take responsibility," but it was kind of a hollow acceptance, because he then didn't make clear that he and his administration were responsible for awarding in legislation these bonus bailouts.

But, yes, these concrete things, some of them made of concrete that Ed Rendell was talking about, some of them are worthy projects. But I predict, as Senator Conrad, Democrat pointed out, that this budget is going to go down. It's going to down by hundreds of billions of dollars, as Conrad said, because it just won't stand, given the kind of deficits that you will run on it.

And, by the way, I took one area of this budget, the proposals, education. It's an area I know pretty well. Let me tell you: There's a ton of waste in there that I could identify and that people can see and get their arms around. And that stuff better go before they try to sell this to the American people.

KING: In terms of crisis leadership, though, James, people are mad about the bailouts. At what point, even if he's doing everything perfectly, at what point does he become -- he's another politician caught up in this bailout mess? CARVILLE: Well, look, it's easy to explain a bridge. It's easy to explain a high-speed rail line. It's easy to explain unemployment compensation.

How do you explain to somebody what a -- what a derivative is? How do you explain to somebody what a tranche is? Or how do you explain to somebody who quants are, all of these -- all of these things that these people made up that it turned, as Warren Buffett so correctly said, weapons of financial mass destruction? What he's having to do is deal with a -- with a financial aftermath of some kind of nuclear war here. And you're right: People don't see where the money is going. But if the -- if -- if you didn't have that, any confidence that we're going to do something about the banking system, as President Bush said, the whole sucker could go down...

KING: I want to...

CARVILLE: ... which I thought was one of the really brilliant things he said.

KING: I want to -- I want to...

BENNETT: But he -- his credibility is critical, I mean, and his belief. And people do believe in him. And this week, there was some erosion of that because of this fast and loose on the bonus legislation.

KING: I want to ask another -- another policy. I want to move on. I actually want to end this segment on sports, gentlemen. I want to end this segment on sports.

But before I do, very quickly, I want each of you to talk about another politician in the spotlight, Senator Chris Dodd of Connecticut. This is the New Haven Register this Sunday, "Dodd's Street Credibility Slipping."

He, of course, is the chairman of the Senate Banking Committee. He was the person who told CNN on one day he had nothing to do with that language protecting the AIG bonuses, then on the next day said, actually, I did have a lot to do with it at the insistence of the Treasury Department.

James Carville, as a Democrat, is this Democratic senator in trouble?

CARVILLE: Well, look, there's no doubt that this was an embarrassing thing. And I know that -- that Secretary Bennett remembers that President Reagan said something about Iran-Contra and then had to come back and say, "Well, I -- I really was wrong about that." And I think people can be forgiven if you step forward pretty -- pretty soon after you say something like that.

CARVILLE: But, you know, and he's -- people in Connecticut know Senator Dodd well. But this is -- there's no doubt that this has -- could hurt him and it's something that he's going to have to deal with. And I suspect he's going to be spending a lot of time in the state trying to deal with it.

BENNETT: Ronald Reagan was never yelling for Ollie North's head, however. And Dodd was yelling for the head of these bonus receivers when in fact he was involved in the authorization of it.

I've got to credit CNN for the get. It was terrific and it was unbelievable to me. I just have to say this, I watched FOX about an hour later and FOX would not report on your story, your get, Dana Bash's get, Wolf's get, I guess because it would have meant credit for CNN.

So the public doesn't get that information in order that a network rivalry may be preserved. That's not good. That's not -- I know that's for Howie Kurtz, but it's relevant.

(CROSSTALK)

KING: Well, let's move on -- let's move on to another competition -- let's...

(CROSSTALK)

KING: Go ahead, James, quickly.

CARVILLE: This I can report, but the night that you were at my class, you were working all night on your doohickey, your BlackBerry or whatever they are called, but working on this story.

(LAUGHTER)

BENNETT: Doohickey.

CARVILLE: But I can report that...

BENNETT: Doohickey.

KING: Call it what you will. I'm going standing up...

(CROSSTALK)

BENNETT: High-tech Democrat, doohickey. KING: I'm standing up here. He is a high-tech guy. I'm standing up here. This -- we're going to end this on a lighter note. There's a competition going on around the country that many of us, you know, have, I would say a wager.

This is my bracket. I have Louisville winning in the end right here. This is my bracket right here. I'm going to walk over here. This one here is the president of the United States. You see these hand scribbles? This is President Barack Obama.

Now, James, he has got some question marks. You can't see them so well up here -- well, there is a question mark right here. He scratches out a couple of things. You can see it maybe on this one a little bit better. He has got a scratch here, the question mark here.

Is the president of the United States focus grouping his brackets here? What's going on? He picked UNC. UNC beat your team yesterday, didn't they?

CARVILLE: Yes. We had a great 32 minutes, unfortunately we will say the game lasts 40 minutes. But, you know, I had President Clinton on my radio show and he has Louisville as you do. So, you know, we'll see. It's going to -- it could be kind of interesting, all right. President Bush 41, he has got North Carolina, so if you're a Clinton guy, you're kind of pulling for Louisville here.

KING: Did you have LSU?

CARVILLE: No, I hate to say it, I'm kind of embarrassed, but I thought that Hansbrough was a little too strong inside for us. And then when they had the guard Ty -- name escapes me right -- Lawson...

BENNETT: Ty Lawson.

CARVILLE: You know, Coach Williams -- they were just a better team than we were over 40 minutes. But let me tell you, if that game was 32 minutes, we were looking pretty good.

KING: Thirty-two minutes doesn't count. That's kind of like three years of a four-year term. Who's going to win, Bill Bennett?

BENNETT: Well, I -- despite that I'm married to a Chapel Hill graduate, I picked Duke. So I don't know if I can go home. But watch Cleveland State. They are going. They are something. And they are going to go further than a lot of people think. That's what I believe.

KING: So who's going to end in the end, Carville?

CARVILLE: I've got Duke going pretty deep too, yes.

KING: Who is going to win? Never mind who is going pretty deep, who is going to win?

CARVILLE: Louisville, Louisville, Louisville, Louisville, Louisville. KING: OK. You say Louisville, I say Louisville, the president of the United States says North Carolina.

BENNETT: Duke.

KING: Bill Bennett says Duke. It's March. It's madness. We'll keep track if it right here on STATE OF THE UNION and we'll get it to the end. Bill Bennett, James Carville, thanks very much, gentlemen.

BENNETT: Thank you.

CARVILLE: Thank you.

KING: Newt Gingrich says the real challenge for every president is the failure to perform. More on his appearance at James Carville's political science classroom coming up.

But next, coffee, beignets, and criticism, our conversation over breakfast this week at New Orleans' favorite, Cafe du Monde.

(COMMERCIAL BREAK)

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

A deadly encounter between a gunman and police in Oakland, California. Authorities say and parolee wanted by police opened fire during a traffic stop, killing one officer and critically injuring another. Hours later, police say, the gunmen killed two more officers and wounded a third during a shootout with the SWAT team. The suspect was also killed.

People in North Dakota are preparing for what could be record flooding. The Red River is expected to crest at 22 feet above flood stage over the next several days. Officials have called in the National Guard and volunteers, as you might expect, are scrambling to fill sandbags.

After a private funeral service, actress Natasha Richardson will be buried today near her home in the Upstate New York town of Millbrook. It's the same town where Richardson married actor Liam Neeson and raised their two sons. The Tony Award-winning actress died this week from a head injury suffered while skiing in Canada.

That and more ahead on STATE OF THE UNION.

Our travels this week took us down to New Orleans. And as you know, we have a morning diner segment. We decided to have it in New Orleans because we wanted to look at this contrast, the national unemployment rate 8.1 nationally, 5.1 in Louisiana.

In the city of New Orleans, before Katrina, almost 500,000 people, 330,000 people now. One reason the economy is doing OK, more than $126 billion in federal aid to the city and the state since Katrina hit. So the economy and the recovery the big topics of discussion at Cafe du Monde. (BEGIN VIDEOTAPE)

KING: Let me start by -- this is a unique state. It's the only state in the country that last month had a decrease in its unemployment rate. Every other state either was flat or up. Louisiana went down a little bit. Why is that? Did you deal with your pain already when it comes to the economy?

JOE MESA, CO-OWNER, CAFE DU MONDE: Yes, I think we did. Katrina took care of that for us. Not that we're not going to have a recession, but so far, you know, we're doing pretty well. Where most of the, you know, country has -- was a slow, gradual of losing jobs and housing, we did it all in one day from Sunday to Monday.

KING: You're back here, you were gone?

TIFFANY FLOYD, WAITRESS, CAFE DU MONDE: Yes, I traveled a lot. Katrina took me to Mississippi, Atlanta, North Carolina, and then to Houston, and back home.

KING: And why are you back home?

FLOYD: Because this is home. My family is here. We wanted to rebuild. You know, I'm from the Lower Ninth Ward, the hardest hit area.

KING: There are a lot of people who say it's in the lowest ground, it's the most at risk, please live somewhere else, come back to New Orleans but live somewhere else. What do you think?

FLOYD: That's hard. That's hard when that's all you know. That's hard. I mean, that's like saying, you can't ever come back home. I can't go back and say, this is my grandmother's house. This is the school that I went to, I don't have anymore. But we're working hard to bring that back.

KING: This state relied a lot on help, federal government help, compassionate people from around the country and even around the world came in to help this state. What is the government's role now when you have these big banks, AIG, insurance companies, they are struggling, General Motors is struggling, Chrysler is struggling, is that the government's job or should they have the tough love, if you will, and have to deal with bankruptcy and failing?

JONES: I think they do have to deal with it, with the bankruptcy, because -- or at least volunteer and give their bonuses up or something. Because it's just -- it's not right for the rest of us.

(CROSSTALK)

KING: Have you seen the headlines in recent days?

They're getting your money, taxpayer money, and they're paying off these big bonuses.

JONES: Right. And even though they're saying that it's owed to them, they should just do the right thing and give -- give it back.

KING: When he talks about "too big to fail," and there are a great number of employees at these big companies that -- do you think that's why the government is bailing them out or do you think they just have political power because they're big and they're rich and they have good lobbyists and they give campaign money to all of the politicians?

JONES: I think so. I do. I think that it's just a big game to them. I think they're not really thinking about the people and their everyday needs.

KING: Does having been through what you've been through -- does that make you more of an optimist?

(UNKNOWN): It makes me stronger. It makes me look at things a whole lot differently, the government, the state -- you know, just everything in general. It makes me look at life a whole lot differently.

JONES: I get angry, and the reason why I'm angry is because, you know, we have people that are trying to turn things around. Then you have opposing people who are just critical of everything, you know, and that -- that makes me upset.

(UNKNOWN): I think, after Katrina there was -- I, kind of, agree with him. After Katrina, there was a slight distrust of politicians. And I still have that, a little bit, and I'm not sure... KING: All of them?

(UNKNOWN): Yes, pretty much all of them.

(END VIDEOTAPE)

KING: More on our trip to New Orleans and a closer look at the lower ninth ward in our next hour of "State of the Union."

If you want to learn more about our travels down there, go to CNNPolitics.com. My column is there, as well as some fascinating pictures from across the city of New Orleans.

And when we come back, we break down the day's headlines and take a look at the tough week ahead for the administration with the best political team on television. "State of the Union" will be right back.

(COMMERCIAL BREAK)

KING: Let's break down the day headlines and look ahead to a big week ahead for the Obama administration and the Congress. Joining us, CNN's senior White House correspondent, Ed Henry; our national political correspondent Jessica Yellin, and our senior congressional correspondent Dana Bash.

Welcome, on a Sunday, to "State of the Union."

Here's where I want to begin, the front page of The Washington Post, Ed Henry, "Treasury Presses Ahead With Plan For Toxic Assets."

This is the next installment of trying to get all the bad loans, essentially, off the books, so that the banks -- it looks like it will happen. Even some Republicans are saying we have to do it even if we don't like it.

But among the people saying "I don't like it" is Charlie Rangel. He's an influential Democrat, the chairman of the House Ways and Means Committee. Listen to Charlie Rangel this morning.

(BEGIN VIDEO CLIP)

REP. CHARLES B. RANGEL, D-N.Y.: No, I don't approve, but I don't think we have a lot of choices. This is a very complex financials crisis that we find ourselves in. And I'm really surprised that we have to go to people that come from the fiscal families that caused this problem to try to help us to get out of it.

(END VIDEO CLIP)

KING: What he means, there in the end, the "fiscal families," meaning hedge funds and other private investors will be helping out, but it's the taxpayers who will be picking up the biggest risk.

Ed Henry, if even Democrats and a chairman, a Democratic chairman, already are, sort of, holding their nose at this plan, "I don't like it, but I'll go along with the president," what does that say?

HENRY: It tells you they're in deep political trouble. Because the other option, of course, would be to go up to Capitol Hill and try to get taxpayer money up front, instead of leaving risk down the road.

But this White House has already, in just a few weeks, been burned so much by the fact that the past bailout, the TARP situation -- there's no -- seems very little accountability and oversight, that there is no appetite for more taxpayer money up front, so they've got to try to come up and use FDIC money, use the Federal Reserve, and try to get some of these hedge funds involved so that there's this private investment, although it's still unclear whether the private investment will materialize.

So a lot of Democrats on the Hill are skeptical. The White House is telling them, in private, what else are we going to do at this point; we can't get more taxpayer money; people are frustrated.

KING: And this is about as complicated as it gets. But to the taxpayer out there, Jessica, this is, "So they're putting more of my money at risk after they just used some of my money to give bonuses to guys at AIG."

YELLIN: It looks awful. It looks awful, but it -- you know, you talk to the people -- and I've tried to get educated on all of these business -- big, funny terms like "collateralized debt."

KING: How's that going?

(LAUGHTER)

YELLIN: I'm working on it, OK.

(LAUGHTER)

They say, look, it has to be done because essentially Wall Street is holding the rest of the economy hostage. Until this problem of these bad toxic assets is fixed, none of the rest of us can get home mortgages, et cetera, the way we need to get it.

The problem, I think, is that the Obama administration has failed to do what they used to do so beautifully during the campaign, which is communicate clearly; help Americans -- almost do Ross Perot-style, show charts, say, "This is what is going on and help everybody feel like they are part of the solution."

It's not happening now.

BASH: Jessica's exactly right. Not only have they not been communicating clearly; what has happened, even in the past week, with those bonuses, that is it is hard to overstate how much that has hurt the cause of the administration, doing what Ed was talking about, getting Congress on board to help them. Because they do need help.

And if the administration went up to Congress, right now, and said, look, we just need some more money up front, they would just be laughed out the door, because there's no way, given the uproar going on out there, that that would be impossible.

KING: Well, another factor in the uproar -- and it is limited. It is limited, but there are some Republican calls for the Treasury secretary to step aside.

Now, Ed, you know this well. Everybody knows, at the table, the president will be on "60 Minutes" tonight. He gave an interview that was taped over the weekend, where he says, "He's my man." He said he even jokes with him, "Sorry, buddy, you've got to stay and deal with all these problems."

But I want you to listen to Richard Shelby, ranking Republican on the Senate Banking Committee. He says he has questions about Tim Geithner.

(BEGIN VIDEO CLIP)

SEN. RICHARD C. SHELBY, R-ALA.: My confidence is waning every day. I said confidence brings confidence to everything. I don't see a lot of things positively, thus far, that Timothy Geithner has been involved in.

(END VIDEO CLIP)

KING: A tough one for him, Ed, because he doesn't have much of a staff at the Treasury Department.

HENRY: Right.

KING: But what does it say, again, in political Washington, where you haven't seen Tim Geithner on a show like this or any other of the Sunday shows, in part because he's busy. But some say the administration is not putting him out until they think he...

(CROSSTALK)

HENRY: Part of the problem, as you know, is expectations were set so high by this president.

HENRY: I mean, we were introduced to Tim Geithner as the whiz kid, the guy, same age as the president...

BASH: Uniquely qualified.

HENRY: Uniquely qualified, over and over again. And some of the lines I remember in The New York Times, they wrote a few weeks ago, if you were a bank, Tim Geithner would be "too big to fail."

(LAUGHTER)

HENRY: It's sort of the same line, that he was the only guy who could get us out of this. Now it looks like the problem is getting deeper. And so if the president were to throw Tim Geithner under the bus, it would be acknowledging he picked the wrong guy, and then there would be even less confidence on Wall Street and Main Street. YELLIN: Although, you know, there's the other argument to be made. Obviously that's what the White House is concluding. The other argument is cut your losses, and once Wall Street starts -- Washington starts calling for someone's head, things are not going to look rosier from there.

If Geithner is not going to build confidence, it might be time to start thinking differently.

KING: And what is the impact on the bigger agenda, Dana? You're on Capitol Hill where the Democrats have a bigger majority in both the House and the Senate. A little shy of what they would like to have in the Senate.

But when there are headlines around the country when the lawmakers go home for the weekend, "bailouts stop here," and, you know, "more toxic assets." What has it done to the mood of the country that -- about the big stuff, health care, the spending plan, education reform, when all we're talking about is, you know, bonuses for guys at AIG?

BASH: Well, obviously that's a big issue, is the whole question of bailouts. But the other, I think, even bigger issue is what we saw on Friday, is the fact that we now have new numbers that show that the deficits are absolutely enormous.

I think it's, you know, $9.3 trillion over the next 10 years. That's four times as high as under George W. Bush. And that is, I think, in some ways, oddly, I know we've been talking a lot about bailouts, that is something that I think could hurt President Obama's agenda much more than these bailouts.

Because you have senior Democrats on Capitol Hill saying President Obama, given these deficits, he's going to have to trim back his sails on what he wants to do.

HENRY: Think about Christina Romer, what she was telling you earlier in the show about -- when she was candid about saying, well, you know, if we can't deal with health care right now, we'll have to find other sources of revenue to make sure we can deal with it.

What's the source of revenue? Democrats on the Hill are already shooting down this idea of changing tax deductions for rich people. They don't like that, with charitable deduction changing that. Where are you going to find the money?

The president wants to set aside $634 billion as a down payment, they acknowledge up front, that's not going to pay for the whole health plan. So if you don't have that pot of money, where is the money?

BASH: Which is why Democrats are saying, reel (ph) back, sir.

KING: And more money talk, much more money talk and more politics when we come back in just a moment.

But first, here's a preview of what Campbell Brown will be covering next week.

(BEGIN VIDEOTAPE)

CAMPBELL BROWN, HOST, "CAMPBELL BROWN: NO BIAS, NO BULL": John, this woman's home is in foreclosure and she's looking for answers. But when Megan Cavaleri (ph) calls her bank...

UNIDENTIFIED MALE: For operator assistance, press zero...

UNIDENTIFIED FEMALE: Please remain on the line...

UNIDENTIFIED FEMALE: ... Espanol...

BROWN: All she gets is a recording and she is hardly alone. We are taking a "NO BIAS, NO BULL" look at help line black holes and answering your tough financial questions with the help of our CNNMoney team. We've got all of that along with the latest in news and politics tomorrow at 8:00 p.m. Eastern, "NO BIAS, NO BULL" -- John.

(END VIDEOTAPE)

KING: Thanks, Campbell. And at the top of the hour here, we'll get both sides on the administration's plan for the economy. Christina Romer, the chair of the White House Council of Economic Advisers, and the senator who almost became President Obama's commerce secretary, Republican Judd Gregg.

Stay with us. We'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: For everybody in Washington that is busy scrambling, trying to figure out how to blame somebody else, just go ahead and talk to me, because it's my job to make sure that we fix these messes even if I don't make them.

(END VIDEO CLIP)

KING: That was the president of the United States in California last week, talking about the controversy, the outrage over those big bonuses to AIG executives. Of course, that's your taxpayer dollars helping pay those bonuses. We'll get to the substance of that debates and the politics of that debate in a minute.

But, Ed Henry, the president, two town halls in California last week, he went on "The Tonight Show" with Jay Leno, he'll be on "60 Minutes" tonight, and he has his second primetime news conference in 60 days coming up on Tuesday night. Do they have any concerns at all at the White House that they are overexposing this guy?

HENRY: They insist that they don't, even though a lot of -- even Democrats are telling him privately, go careful here. But they think he is the best asset they have right now. And as we've been talking, who else are you going to put out there , Tim Geithner? They don't have anyone else right now with the gravitas or obviously the stature that the president has. And they also feel, candidly, in private, they will say that they believe that the Bush administration really dropped the ball on not using the president more, speaking candidly about both the war in Iraq and the economy, and he lost the people's confidence. They want the president to get out there and speak directly about this financial crisis.

The problem is, that the morn the American people hear about the financial crisis, they're still not seeing where we're going to turn the corner. And each day that passes that we get away from the Bush administration, the whole inheritance argument becomes less and less powerful because he own it now.

YELLIN: And part of the problem is, though, when the president takes responsibility, each time he says it, it's followed by but. Even there he says, you can blame me, well, you're the president, but, we didn't create this mess.

Well, you did treat this as if it were business as usual. You did honor these contracts when top lawyers in the field say that's not done when companies are insolvent. They have to actually take more responsibility, not just give the appearance of taking responsibility and changing the way they are dealing with these companies.

And they need, bottom line, more transparency in the bailout system.

KING: And when the president speaks, I sound like an old Wall Street ad, does Congress listen? Or are they at the point where, you know, he is out there all of the time?

BASH: No. I mean, I think that they listen, but I think that, to be honest with you, they are listening a lot more to their constituents and that is overwhelming everything that is happening in Washington right now because the outrage that is coming from their constituents -- you talk to lawmaker after lawmaker, no matter what their party is on Capitol Hill, they will tell you, you know, they haven't seen or heard of anything like this in a very long time and that's what they are forced to respond to.

KING: You talk about their constituents, I want to show you the front page of The New Haven Register. I used this a bit earlier with James and Bill. "Dodd's street credibility slipping." Dodd is Senator Christopher Dodd of Connecticut. He's the chairman of the Senate Banking Committee.

And, Dana, you had a couple of fascinating exchanges with him this past week. But he had gone on CNN's air and said he had absolutely nothing to do with the language in the stimulus bill that protected the AIG bonus money, and then your reporting proved that to be not so true and Senator Dodd came back on our air. Let's listen.

(BEGIN VIDEO CLIP)

SEN. CHRISTOPHER DODD (D-CT), CHAIRMAN, BANKING COMMITTEE: I agreed to a modification in the legislation reluctantly. I wasn't negotiating with myself here. I wasn't changing my own amendment. I was changing the amendment because others were insisting upon it.

BASH: You were very adamant yesterday, very adamant that you didn't know how this change got in there. And now you're saying that your staff did work with the administration...

DODD: Well, going back and looking, and obviously I apologize...

(END VIDEO CLIP)

KING: "I apologize." But he continued to also say that Treasury made him do it, that the Obama administration, the Treasury Department that works for the president who was out voicing outrage over these bonuses told him to put in the language protecting those bonuses.

BASH: Exactly. And the Treasury Department -- in fact, the Treasury secretary said on CNN, the next day, that that's accurate, that it was the administration.

So this goes back to what Jessica and Ed were talking about, is that, you know, Senator Dodd got himself twisted up into a pretzel like we have not seen in a very long time...

(LAUGHTER)

... but -- and maybe that, kind of, you know, overshadowed, maybe, the bigger picture here, which is that it was the administration, the Obama administration, just like the Bush administration, that had, when they came in, said, hold on a second; we don't want to do a lot to change the bonus structure, for lots of reasons.

They have given lots of reasons to Democrats on Capitol Hill. And now that seems to be coming back to haunt them.

KING: Ed, I had a -- a former senior official in the Clinton White House call me up and say these guys are giving "Clintonian" a bad name.

(LAUGHTER)

Because, you know, did the president know this? Did the president know that his Treasury Department had put that language in there, when he was out saying, this is an outrage; we're going to try to stop it?

HENRY: It doesn't seem like he knew the full extent of what Dana was reporting, clearly. And they were frustrated by all -- how it played out, in part because they keep saying, again and again, that even if the president had known sooner, they insist they couldn't have ripped up the contract, even though a lot of people say they could have.

And one top White House aide put it this way. He said, basically, the hurricane was coming. Whether we found out Tuesday or Thursday, it still was going to blow the windows out.

They feel like this whole bonus thing was a political hurricane that they couldn't stop. Critics of the White House are saying, you could have stopped it; why didn't you do it sooner? KING: And, Jessica, you spent a lot of time with the Obama -- with then-candidate Obama during the campaign. And the thing they were good at is, when they had problems, when they had made mistakes, they were very good at resetting.

YELLIN: Resetting, getting out in front of them. They made a mistake, in terms of pure P.R. strategy, on this one, by sending Larry Summers out, a week ago, to say, oh, these were contracts we couldn't do anything about, and saying, you know, we are, sort of, powerless in the face of this.

And I think, personally, more than anything else, that's what helped trigger this outrage. Because you felt like, gosh, the watchdogs, the people who are supposed to be protecting us say they can't do anything to stop Wall Street. Why are we giving them the money? It really eroded faith in the administration's ability to control Wall Street through these bailouts.

BASH: And the other thing that was very interesting, that we found out this week, through the course of the week, is that it went beyond P.R..

If you talk to Democrats on Capitol Hill, they will tell you that it is philosophy, that the philosophy of the Obama administration is that -- at least was; clearly, it seems to be changing now -- but was that, if you get rid of these bonuses, it will drive talent away from Wall Street; if you get rid of these bonuses, it will hurt us in the end because it will make it so that these companies that are taking federal money in order to get themselves back on track, that they won't take the federal money anymore.

So they really were arguing against it from a philosophical point of view. And that's why they seem to be doing a 180, right now, saying, OK, we're going to change that.

(CROSSTALK)

KING: We need to call a time-out here. I wish we could put a camera on when these guys walk off...

(CROSSTALK)

... conversation...

(UNKNOWN): Oh, you don't want to hear.

(LAUGHTER)

KING: Some day we'll try that.

(LAUGHTER)

Ed, Jessica, Dana, thank you very much.

Now, if you played the cello, you'd want a lesson from Yo-Yo Ma, wouldn't you; or if you wanted the guitar, tips, maybe, from Bruce Springsteen?

How about these Tulane University students? They get to learn politics from the former House speaker Newt Gingrich and their professor, who happens to be our own James Carville. And in just a moment, you can audit the class.

(COMMERCIAL BREAK)

KING: On the syllabus, it's listed as Political Science 401, Analyzing the Election of 2008.

On the day we visited, Professor James Carville -- that's right, James Carville -- turned the class over to a political rival who is also a personal friend, Newt Gingrich, the former speaker of the House. Let's listen.

(BEGIN VIDEO CLIP)

JAMES CARVILLE, DEMOCRATIC POLITICAL STRATEGIST: You have an open floor, and talk about whatever you want, and the Republican Party and the future of it. And I know that our students have some good questions. They better because I will choke them to death if they don't.

(LAUGHTER)

I'll, like, hurdle over things, and go get 'em.

Thank you, sir. We appreciate it. Thank you very much.

(APPLAUSE)

NEWT GINGRICH, FMR. SPEAKER OF THE HOUSE: Well, I partially had to come down here just to see what kind of people would sign up for a class with James Carville.

(LAUGHTER)

What are you guys willing to talk about?

(UNKNOWN): The direction of the Republican Party.

GINGRICH: The direction of the Republican Party, OK. That's the key theme?

Beats me.

We are now in the mid-game of the Bush-Obama strategy. And it's very important to understand that. On domestic -- this is not true in social policy. It's probably not true in most foreign policy. But on economic strategy, as relates to finance, there's a Bush-Obama strategy. And this is part of why both parties are going to be so messed up in another six months. You can't have capitalism on the way up and socialism on the way down. And that's what all these rich guys wanted. All these rich guys were terrific as long as they were winning. You know, they loved the big airplane, loved the big yacht, loved all the extra money.

Then they started losing and they said, oh, please, take care of me.

The correct answer that morning was "Get a lawyer and go to the bankruptcy court."

I think the challenge for Obama is actually the challenge that George W. Bush faced. George W. Bush failed to perform. Failure to perform is the greatest problem an American president can have. Because we are a ruthlessly consumer-centric country. And when something doesn't work, we change.

When Bush came down here and said, "Brownie, you're doing a heck of a job," I think the whole country just looked and thought, this guy is out of touch with reality, which is the Jimmy Carter problem.

And the country, as a general rule, does not like presidents who are out of touch with reality. Because they think it's very dangerous.

And they also said, if you can't figure out what's going on in New Orleans, why do I believe you about Iraq?

And from that point on -- if you look at the polling data, he never recovers after coming down there.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

CARVILLE: In our lifetime, in the Republican stump speech, the villains have included Hollywood, the media, elites in general. But it's never been -- the basic Republican stump speech has generally not incorporated Wall Street or corporate America.

My question is, as we go forward, do you see that Wall Street becomes one of the villains, with -- with Hollywood or with the media or other people that gang up on people?

Do you see -- do you see this, sort of, emerging in the future of the party?

GINGRICH: Well, I think -- I mean, what my advice to the party is going to be, that if -- that a party which is actually willing to be for free markets and is willing to explain that there are winners and losers in free markets, and that rich guys who lose shouldn't be made winners by the government, is -- I don't know whether you want to call making -- it's not making Wall Street the bad guy. I'm a Theodore Roosevelt Republican in the sense that one of my conclusions over the last 10 years is, if you're too big to fail, you're too big to manage.

CARVILLE: OK.

GINGRICH: And I would break up Fannie Mae. I would break up Freddie Mac. I would break up AIG. I frankly wouldn't defend any of the biggest banks. And I'd say, if you're too big to be managed, you need to become smaller.

(END VIDEOTAPE)

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