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STATE OF THE UNION WITH JOHN KING

State of the Union: Best Political Team on Television

Aired June 7, 2009 - 11:00   ET

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


KING: Much to talk about today. Our next hour of STATE OF THE UNION starts right now.

President Obama is sending a special envoy to the Middle East this week, hoping to get the Israelis and the Palestinians back to the bargaining table. There hasn't been a real peace process in years, but a top White House adviser tells us he hopes the president's big speech to the Muslim world will help change that.

(BEGIN VIDEO CLIP)

AXELROD: And he was very clear to the Palestinians, clear to the Israelis. He was very clear to the Arab world, and he is very clear about what our responsibilities are and have been.

AXELROD: And I think that kind of candor clears away some of the debris that has stood in -- in the way of progress. And our hope is that now we can take advantage of that.

(END VIDEO CLIP)

KING: North Korea is another big global challenge facing the administration. And Secretary of State Hillary Clinton raises the possibility that its recent missile and nuclear test could land Pyongyang back on the U.S. list of states that sponsor terrorism.

(BEGIN VIDEO CLIP)

CLINTON: We take it very seriously. I mean, obviously, they were taken off of the list for a purpose, and that purpose is being thwarted by their actions.

(END VIDEO CLIP)

KING: And remember her question back in last year's Democratic primaries? Would you trust the inexperienced Barack Obama to answer that 3 a.m. crisis call at the White House? Well, she's changed her answer.

(BEGIN VIDEO CLIP)

CLINTON: The president, in his public actions and demeanor, and certainly in private with me and with the national security team, has been strong, thoughtful, decisive. I think he's doing a terrific job, and it's an honor to serve with him.

(END VIDEO CLIP)

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

Let's bring in the best political team on television, as we do every Sunday at this hour, and break down the issues. Joining me both here in Washington, Democratic strategist and CNN political contributor Donna Brazile and Republican strategist and CNN political contributor Alex Castellanos.

Welcome to you both. Let's start with Secretary Clinton. She's on the payroll now, so I guess she has to change her answer about, do you trust Barack Obama to answer that 3 a.m. call? It's good theater; it's good politics. But it also has been a big question, could these two get along? Would she function well at the State Department? Would she try to have her own turf, if you will, in Washington? What do you think so far?

BRAZILE: I think Secretary Clinton has done a remarkable job in the few months that she's been in the office. She's not only traveled abroad, represented the country at important conferences, but I think she's helping the president reset his foreign policy in many critical areas around the globe, including the Middle East.

She was just recently down in Latin America for the inauguration of the president of Honduras. And once again, she's dealing with our relations with that critical part of the world and also putting together a strategy for how we deal with Cuba.

KING: Are you surprised how smooth things seem?

CASTELLANOS: You know, I think Hillary Clinton would be -- could tell you if anyone could that 3 a.m. is a lot less volatile in the Obama administration than the Clinton administration, I guess.

But she has to be one of the stars of the Obama administration. Clearly, for years, she sublimated her own interest to help Bill Clinton achieve political success. She's doing the same thing now for President Obama.

And I think, on both sides of the aisle, you'll find that -- that she is respected for her efforts, not always agreed with, but she's certainly performing.

KING: Here is proof that time flies and you can sometimes lose perspective when you're having so much fun, like we do every Sunday. It was exactly one year ago today...

(BEGIN VIDEO CLIP)

CLINTON: Well, this isn't exactly the party I'd planned, but I sure like the company.

(END VIDEO CLIP)

KING: That is then-Senator Hillary Clinton bowing out of the Democratic race for the president one year ago today. She was interviewed this morning, as you saw a bit earlier, you saw her talking about North Korea, talking about the 3 a.m. call. She said, when she did that, when she said goodbye, yes, she thought Obama would win the White House, but she thought that she would just go back to the Senate.

(BEGIN VIDEO CLIP)

CLINTON: I was looking forward to going back to the Senate and, frankly, going back to my life and representing New York, which I love. And I had no idea that he had a different plan in mind.

(END VIDEO CLIP)

KING: No idea, Donna Brazile?

BRAZILE: I'm sure at the time then-Senator Clinton thought she would go back to the Senate. I mean, her seniority would have risen. But President Obama wanted to have not just the best and the brightest, but someone with her experience, her background to help him confront some of the most important challenges of this administration. So he made a wise choice in putting her around that table, and, again, I think she's off to a great start.

CASTELLANOS: You know, Senator Clinton and now Secretary of State Clinton is known for her toughness. And one of the things that's questioned about the Obama administration there is their diplomacy, their idea that reasonable people can agree on anything. As this administration exhausts some of its diplomatic options, I think you're going to see Hillary Clinton's toughness become a more important asset to this administration.

KING: And, Donna, you know her and the people around her very well. Is there any resentment, tension, frustration -- I'm not sure what the right word is -- for the fact that, you know, they have a special envoy, Richard Holbrooke, who goes to Afghanistan and Pakistan, former Senator George Mitchell is off to the Middle East this week to try to get the Israelis and the Palestinians back at the table? Does that bother her? Does she think that should be her job? Or does she understand there's so much going on she'll coordinate and have all these special envoys?

BRAZILE: First of all, she has a very special relationship with the president. They gather often to have lunch and to, of course, coordinate their strategy.

But, more importantly, she is the kind of person that I think welcomes the kind of experience that George Mitchell brings in the Middle East, Richard Holbrooke in the Far East. So this is a -- this is -- I'm calling her the former first lady -- this is a secretary who clearly understands the role that she has in the Obama administration, and she's working with all of these strong individuals to make sure that we have the very best foreign policy.

CASTELLANOS: She is the only one on the foreign policy team that has political potential down the road. I mean, four years from now, perhaps eight, there's going to be another Democratic candidate. Clearly, one of those front-runners will be Hillary Clinton. Will those two agendas ever diverge?

But one thing we do know is, Barack Obama is not a man of small things. He is trying to -- big, transformational change in foreign policy, as well as domestic policy. That leaves plenty of room for, I think, different interest in the administration.

KING: You said four years down the road. I'm willing to bet everything I got that Barack Obama will be the Democratic presidential nominee in four years. But you're suggesting maybe he'll be looking for somebody else on the ticket?

CASTELLANOS: You never know how things are going to go four years from now. What I -- I think is clear is that Senator Clinton, now Secretary of State Clinton has not abandoned her -- any political ambitions.

KING: Do you think there's any chance -- any chance that President Obama going into his re-election campaign would say, "I'm not going to do what George W. Bush and Dick Cheney did. I'm not going to have a vice president who maybe is going to be too old or not going to be able to run for president down the road"? Would he switch?

BRAZILE: I'm sure we'll start seeing Web sites now tomorrow on Obama-Clinton. No, I think that this president is very satisfied with the team. He's satisfied with the vice president and the role that Joe Biden is playing in the American recovery act. So this president will continue to lead in a way that the American people expects him to.

KING: That was a non-answer, I think, is the technical definition of that. In the new book by Richard Wolffe, "Renegade," he talks about how, when they were considering making this offer to Senator Clinton, that some of the advisers around then-Senator Obama -- wait a minute, wait a minute, wait a minute. Bill Clinton might be -- and that the now-president himself was a little concerned that you might have a loose cannon in Bill Clinton when you brought him back into the administration. Those concerns founded?

BRAZILE: I don't think so. Look, President Clinton has been embarking on his continued campaign to make the world a safer and better place, a healthier place. He's -- he's helping now the administration in Haiti. He has an important global initiative conference coming up this fall. He's been a valuable asset to this administration, and I'm sure he's an asset to the secretary of state, as well.

CASTELLANOS: What Joe Biden is to Barack Obama Bill Clinton is to Hillary Clinton, you know, a loose cannon on the deck, but so far he's been fairly well behaved. There was an interesting New York Times piece about how he has learned to live outside the limelight, and it was, of course, in the limelight. So, no, I think -- I think we still have the Clintons to fill our political day. KING: Let me get a bit more serious here, and an issue that President Clinton spent a great deal of time on, the Middle East. He got close to the finish line but couldn't get there.

After the president's big speech in Cairo this week, the public statements were all praise, but there were some grumbling privately by pretty senior officials in the Israeli government that he -- that they took part of his speech as a moral equivalency between the Holocaust and the plight of the Palestinians.

But even -- even more importantly, it wasn't so much what he was saying, but where he was saying it and how he was saying it, with President Abbas in the Oval Office, then standing in an Arab capital, criticizing Israeli settlement, saying Israel must stop. Never would have seen that in the eight years of George W. Bush, and they sense a total change. Are they right to sense that?

CASTELLANOS: I think, clearly, this is an administration that has distanced the United States from Israel, and not only from Israel, but from American exceptionalism...

(CROSSTALK)

KING: ... from this administration in Israel, the Netanyahu government.

CASTELLANOS: From the Netanyahu government, from Israel, and from something even more important, from American exceptionalism, from democratic exceptionalism, from the idea that liberty-loving countries, democratic countries like Israel and like the United States, are different and better than -- than other countries who don't tolerate liberty, as well.

And that is the moral equivalence argument. And that is a frightening thing to a lot of people in this country and, of course, in Israel itself, because it means that -- that we're not going to deal with our friends any differently than perhaps we deal with our adversaries.

The argument, for example, with women that somehow, "Oh, gosh, you know, America has its own problem with women's rights, as well," well, we don't stone anyone -- women in the public square in America. You know, we may have a few problems with college sports and women's rights, but this idea that somehow a democratic -- a democratic ally in the Middle East, Israel, is morally equivalent to -- to countries that don't value that is -- has got some of our allies, I think, concerned.

BRAZILE: I reject that -- that line of thinking that somehow or another the president tried to put these two different issues on the same level. In fact, what he was trying to do -- and I think he did very well -- was to say that Israel has responsibilities in helping to come up with the right ingredients to become -- to get back on a road to peace.

BRAZILE: But he also equally challenged the Palestinians not only to renounce violence, to recognize Israel, but to also do right by their own people.

So I thought it was harsh medicine for the Palestinians and also equally harsh medicine for the Israelis, in terms of the -- the settlement issue. But this is an issue that the Israelis have agreed to in the past in the -- in many agreements that they have come up with, not to stop the settlements tomorrow.

But in order to get back on the road to peace, this is a sticking point. And I think that's the point the president was trying to make. And he also made this point here in America when he met with the prime minister, Netanyahu, at the White House.

So this is -- Israel is our friend. Israel is our ally. And -- and the president said that we're not going to abandon Israel.

CASTELLANOS: But, John, in return, Israel has agreed to some of these limitations before, and what they've gotten in return is shelling, bombing, and missiles in their homes. You know, the president seems to think...

BRAZILE: And the president addressed that. He addressed that.

CASTELLANOS: The president seems to think that reasonable people can somehow obliterate all differences. Well, this is like the NFL. You know, football teams may have a lot in common, but at the end of the day it's also about power and only one team wins.

This is not a debate just about ideas, as Barack Obama seems to think. This is also a competition for power. And right now, I think the burden is on those who have been America's adversaries and who don't support democratic principles to concede, as Donna said, Israel should have a right to exist, Iran should be starved economically, should be starved of nuclear weapons, and terrorism should be renounced.

The ball is in their court. The president has -- has not said they need to go first. The president really has more effect, I think, on Israel.

BRAZILE: Well, you may have missed that line, because I think he addressed Hamas very clearly on that.

KING: We'll agree to disagree on this point for now. We're going to move to a quick break. When we come back, much more of our conversation with Alex and Donna. We'll move on to some domestic issues, including health care. Interesting shifts in that debate in the week just past and then the week to come.

And don't forget to tell us the headlines in your local Sunday paper. Be a part of the conversation. Go to our Facebook page. Let us know the big story in your hometown. "State of the Union" will be right back.

(COMMERCIAL BREAK)

KING: We're back with CNN political contributors Donna Brazile and Alex Castellanos. A shot of the Superdome there, New Orleans, Louisiana. Donna Brazile likes that town.

Let's move on to health care, the domestic agenda facing the president. He's on his way home from this overseas trip. He sent a letter up to senators, to key senators on Capitol Hill last week saying, Here's what he need to do. We need to do this year; we need to lower costs; we need to get everybody covered.

And one -- the leading plan, Senator Kennedy's plan, making its way around the Senate includes a mandate, essentially that if you are an American, you have to buy health insurance or you have to have health insurance. This is something the Obama campaign distributed back in the Iowa primaries in early 2008, criticizing Senator Hillary Clinton because her health care plan had a mandate in it.

And it asks, "Is that the best we can do for families struggling with high health care costs?" And it went on to say -- excuse me for turning the page -- that the Clinton plan would punish families who can't afford health care.

That just doesn't make sense, just doesn't make sense, it says here. Now they say they're open, Donna, to this mandate, not the first president to do things different in governing than he said in campaigning, but how did -- did they open themselves up to -- is hypocrisy the word or what's the word?

BRAZILE: John, this is going to be a long, hot summer when it comes to the debate on health care, because, as you know, there are so many proposals floating on Capitol Hill, some that include the mandate, some that has a public option, of course, and many Democrats would like to have the single-payer option.

The big challenge is, how do we pay for it, given the fact that the president has also said that this should be deficit neutral over the next 10 years?

So I think all of these proposals are ripe for discussion at this point. It's been 15 years since the last time we've had a serious discussion on health care. And during the 15 years, the health insurance companies have not come up with their own options. So this president said, Let's put it all on the table and then let us have a serious debate. KING: And as he puts it all on the table, I want to let you in, but I want to play one more thing first. As he says, Put it all on the table, again, the White House says this is not their first option, but they say they're willing to listen to the Senate if the Senate decides the way to pay for it is to tax the health insurance benefits that many Americans receive from their employers, open to it now. Here's what they said during the campaign when John McCain proposed the very same thing.

We don't have that ad ready. I'm sorry. What he said was -- he said, "John McCain taxing health benefits, cutting Medicare. We can't afford John McCain."

CASTELLANOS: Well, I remember that ad. Please don't play any more ads from the last campaign.

BRAZILE: Is that one of your ads?

CASTELLANOS: No, no, no. He's going to get surprisingly little criticism on both those issues from Republicans, frankly, because Republicans themselves are split on it. Republicans are debating whether it's better to have -- to tax those benefits and level the playing field.

Why should -- shouldn't individuals who aren't getting health care through their employers, why should they suffer while people who get their health care through an employer, frankly, get a benefit? So Republicans are -- he's going to get very little criticism.

What is going to get criticism is that this -- the Obama plan to reduce health care costs seems to cost $1.5 trillion more. Now, saving money shouldn't be that expensive. And that's where I think we're having a real problem with -- with the initial thing we're looking at in the Obama health care reform.

BRAZILE: And that's going to be a key issue for the administration and Congress, because, again, the president said he wants this to be deficit neutral. How do you pay for it, especially the upfront cost?

There is $635 billion in savings from some existing cuts that will happen this year with Medicare and Medicaid, but do you cut more there? Do you, what I call, enact -- enact a sin tax that will impact many Americans?

CASTELLANOS: Raise taxes?

BRAZILE: Raise -- look, tobacco, sugary products. You know, I had to write them down, alcohol and other products. I mean, so there will be many debates on not just the quality, the affordability, but also how do you pay for this important initiative?

CASTELLANOS: Here's one thing to watch for. Everybody agrees something has to be done to reduce health care costs: Republicans, Democrats, even health insurance industry, pharmaceutical industry. The question is, who's going to do the saving? Is it Washington that's going to decide how much health care you get and how much it's going to cost, or is it going to be doctors and patients? Republicans are talking about bottom-up savings; Democrats are talking about top- down savings, a closed system where they decide what you get.

They're already limiting MRIs in the Kennedy proposal. They're limiting home health care. That's a closed system. The open health care movement that says, no, let doctors and patients do that, I think that's going to be the debate.

KING: And is there a broader debate -- I'm going to test my luck here and try to see if we can get to something Senator Richard Shelby said earlier this morning on television.

Is there a broader challenge for your party, Donna? As you do this, there will be a government option in health care? The government is spending billions of dollars on the stimulus plan, billions of dollars on the financial bailout, billions more now to help the auto company bailout.

You can already see the line emerging from Republicans articulated earlier today by Senator Richard Shelby of Alabama.

(BEGIN VIDEO CLIP)

SEN. RICHARD SHELBY (R), ALABAMA: I believe that there's no doubt that we're going down to government intervention everywhere, government ownership, unprecedented in this country, and it's a long road and it's a slippery slope.

(END VIDEO CLIP)

BRAZILE: Well, first of all, and with all due respect to Senator Shelby, who has been very consistent on the role the government has played in bailing out the financial industry and of course bailing out the auto industry, is that we're in this position because we're in a deep recession and the financial markets collapse and the credit dried up and the government has intervened.

I don't think this is a long-term solution, but I think we're taking the necessary steps as a country to insure that we rebuild the private sector so that every American can enjoy the benefits of living in this wonderful and prosperous country.

KING: If General Motors comes out of bankruptcy, if they pass health care reform, and at least in the early months the American people seem to like what they get at the end of this year, can Republicans run on that in 2010 or will that not work?

CASTELLANOS: I think Republicans are going to run on that in 2010. They want to see a brake pedal on this car. Right now we're driving near the edge of the cliff at a fast pace, and there's no restraint. The Barack Obama experiment is beginning to scare people. You know, GM went bankrupt anyway. Well, that only cost us $30 billion. The stimulus, well, $700 billion, $800 billion, hasn't really stimulated anything yet. But we're talking about 17 percent of our gross national product on health care. That's what we spent, but if that Barack Obama experiment with our health care, that doesn't work, we're also talking about human lives, we're also talking about the quality of our health care.

Rushing this through like I think the Obama administration intends to do -- they want to do this quick so people don't look at the details, I don't think that's going to work. We're going to have to slow down and take a real good look at this one.

KING: We won't let them rush it through fast enough that we can't spend more time on other Sundays looking at all of the details, I promise you that. We're out of time at the moment. Donna is surrendering, that is good. I appreciate it.

BRAZILE: I surrender now.

KING: For today. For today. She'll be back to fight another day. You can bet on it at home. Donna Brazile, Alex Castellanos, thank you very much. We'll have much more from our CNN team in just a bit. Our reporters join us.

But when we come back, my favorite part of the program, a chance to get out of Washington and ask regular folks like you what you think about the decisions being made here in Washington that affect your lives. Among our stops this week, took the bus to the 2400 Diner in Fredericksburg, Virginia, a town struggling now to deal with the shutdown of a General Motors plant. We'll be right back.

(COMMERCIAL BREAK)

KING: In our time outside of Washington over the past four months, we have spent a lot of time dealing with the struggles of the U.S. auto industry. We did so this again this week because of the GM bankruptcy filing.

A quick look here. These are the GM plans that are in the United States of America, the blue dots, places where GM has factories. Now watch the red dots come up here. This is the announcement. GM, who filed for bankruptcy this past week, announced it would close these factories right here.

There's more at risk here, too, because GM has already announced it would close this many. We know of this many of the dealerships it would close, the red dots being that, and there are more dealers at risk. Look at that. Look at the scope of this across the country, the impact of all of these changes as we go.

We wanted to take an up-close look. So we took one place to pick out, it's not all that far from Washington, D.C. You see Fredericksburg right here. It's a community that has had manufacturing for years, as one plant has closed, another has reopened. In fact, workers say it was the GM plant and the jobs there -- the good jobs there with health care benefits, retiree benefits that helped protect them after other manufacturing jobs had left town. So in a fabulous place, the 2400 Diner, we sat down.

Our group included one GM worker, two other members of the community, to ask them, is the economy at bottom or is there more pain still to come?

(BEGIN VIDEOTAPE)

KING: The GM plant in this town is one of those GM will shut down. What's your sense first of just the state of the economy? Is it bouncing back or is it, as we saw this week, maybe getting worse before it gets better?

MARY STRAM, FREDERICKSBURG, VIRGINIA: Things are still pretty unstable. There are a lot of store fronts closed downtown in Fredericksburg. Times are tough.

KING: Times are tough. And the top priority of the new administration is to try to help with the stimulus spending. But do you see any impact of that yet or...

MELVIN CARTER, FREDERICKSBURG, VIRGINIA: No. I worked at the GM plant in Fredericksburg, so quite naturally we're impacted by it. And it may be turnaround, but we know it's going to take a long time to come.

TIM BARBROW, FREDERICKSBURG, VIRGINIA: I have a friend who owns a small restaurant and, you know, it's sort of a barometer of the economy because when things are well, they were packed, it's like a little pizza joint and tips were good and things were well for them. And now their business has really declined.

KING: Two other big things on the president's plate this week, one is a big overseas speech where he tries to reach out to the Arab and Muslim world. And in doing so, he says the United States sort of broke its own rules in the Bush days by the president's account, Guantanamo Bay, the use of the enhanced interrogation techniques, what some people call torture.

Is that the right thing to do in terms of -- does any president need to reach out to the Muslim world and was his tone right?

BARBROW: Yes, I think so. I think he absolutely needs to reach out to the Muslim world. I think the last eight years did a lot of damage to our relationship with the Muslim world. I think it's in our national security to reach out to the Muslim world and try to lessen some of the hatred towards America.

KING: Do you agree with that?

CARTER: Yes, I do. I feel same way. Like we already had two wars going on now, and like I say, we've got to keep peace with someone. And I'm fine with that. KING: The other big thing this week is his Supreme Court nominee making the rounds on Capitol Hill. And there were some very harsh conservative criticisms out of the box. Now that seems to have dialed back a little bit. What are your first impression of her?

STRAM: I'm happy to see another woman on the court, and I'm a little concerned that she's being held accountable for decisions that were made 20 and 30 years ago. Let's make a decision based on the person she is now.

CARTER: I think it's a good choice. And I think it's promoting diversity and that's a good thing. I agree with that.

BARBROW: I'm also a criminal defense attorney, and I've also heard that, you know, she is sort of conservative on those issues, which actually causes me little concern.

KING: If you had a chance to get five minutes -- if he popped in here, sat down for breakfast or lunch, and you could say, Mr. President, here's what I would like you to do a little bit differently, what would it be?

STRAM: For personal reasons, I would like for him to move forward with health care reform. I'm an insulin-dependent diabetic. I'm retired. It'll be three years before I qualify for Medicare. And my health insurance is costing me about $1,500 a month now. KING: That's a lot of money.

STRAM: That only covers prescriptions after I meet the deductible.

CARTER: You mentioned the G.M. plant. And it's really devastating to work all these years for a company and you think you're going to have your retirement set in your 401(k) and everything's bashed and you're not able to make it anymore.

BARBROW: I'm worried that we're spending ourselves into potential bankruptcy. I mean, as the father of two small daughters, I mean, that concerns me a great deal of the debt we're passing on to them. But that's concerned me a great deal for 25 or 30 years now.

(END VIDEO CLIP)

KING: A great visit there to the 2400 Diner, and a fantastic meal.

Straight ahead, more from the best political team on television, a look back at a big week overseas for President Obama and a look forward to some of the many tough problems waiting for him right here at home. We'll be right back.

(COMMERCIAL BREAK)

KING: I'm John King, and this is "State of the Union." Here are our stories breaking this Sunday morning.

Brazilian officials say they've recovered three more bodies today in the search for Air France Flight 447. That brings the total number recovered to five. Authorities also say pilots have spotted several more bodies floating in the Atlantic. The doomed jetliner was heading from Rio de Janeiro to Paris when it vanished last Monday with 228 people on board.

Five American security contractors are being detained in Iraq's Baghdad Green Zone. They're being held in connection with the killing of another American contractor. James Kitterman was found bound, blindfolded, and stabbed to death inside the heavily protected zone last month. The five detained contractors have not yet been charged in the case.

President Obama is on his way home after wrapping up a nearly weeklong trip to the Middle East and Europe. Before leaving Paris today, the president did some sightseeing with his wife and daughters. Among the stops, the Pompidou Centre, a modern art museum.

That and much more ahead on "State of the Union."

Downtown Chicago right there, a live picture, the president's hometown, Chicago, Illinois. Looks like a beautiful Sunday morning there, as well.

Here we are in Washington. And joining us now to discuss the president's overseas trip and the agenda when he comes back home, in Boston, CNN senior political analyst, former presidential adviser David Gergen. With me here in Washington, our foreign affairs correspondent Jill Dougherty and our senior political analyst, Gloria Borger.

Thanks for being with us. Let's get right to the president's speech and the criticism of it. In public, governments around the world praised his speech. Privately, there was some grumbling from the Israeli government and from some in the American Jewish community saying that he didn't seem to treat the Israelis the way they're accustomed to being treated by an American president.

One of the reasons they didn't like it was that, after doing it in the Oval Office with the Palestinian president, then standing on a giant stage in the Arab world in Cairo, Egypt, the president lectured Israel about settlements.

(BEGIN VIDEO CLIP)

OBAMA: Israelis must acknowledge that, just as Israel's right to exist cannot be denied, neither can Palestine's. The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop.

(END VIDEO CLIP)

KING: And as we begin our discussion, here's today's Jerusalem Post: "Israel Rejects Clinton Claim of No Settlement Agreement." The Israeli government saying they had an agreement with the Bush administration that there could be what they call "natural growth" of the settlements. And Secretary Clinton saying that's not in writing; we don't believe it is a binding deal.

David Gergen, what is going on here, in the sense that Israel is the rock-solid U.S. ally in the Middle East and there is a tone change, there is a tone change certainly between Obama and George W. Bush? Do they have the right to complain?

GERGEN: I think they've got the right to be very wary; I'm not sure they have the right to be -- to complain yet. Certainly, the Obama administration came in with a view, John, of course, that -- that negotiations had reached an impasse in the Middle East, that things were continuing to deteriorate, and that we face greater threats of terrorism and unrest across the board in that region.

And they have tried to recast the conversation away from what they see as the politics of fear represented by Dick Cheney, perhaps, to a politics of hope and trying to change the underlying conversation.

The only way they could do that was to show an open sympathy for the aspirations of Muslims as well as the continued emphasis upon friendship with Israel. But the United States in truth has differences with both sides, the Palestinians and the Israelis, and the president aired those differences. In the Bush administration, there was an attempt not to air differences with Israel. And what the Israelis are reading into that -- and some American Jews are reading into that -- is, I wonder how far he's going to go with this?

Most American Jews agree the settlements should not be continued, but they're worried, is there -- is this going to lead to some sort of break? And that's -- so they have a right to be wary, but I think he's basically fundamentally on the right track.

KING: And, Jill, to that point, some of the Israelis I talked to said, "Why? Why is he pushing so hard? Why is he pushing so publicly?" He understands that Netanyahu came to power with an incredibly fragile government. Essentially if one of you left the table, the government collapses, and that many of the conservatives in that government would not support an immediate end to settlements, would not even support him sitting down with the Palestinians and starting to negotiate land for peace. So they ask, "Why is he pushing us so hard?"

DOUGHERTY: Yes, in fact, some people are saying, "Maybe he wants the government to collapse." Now, what he appears to be doing is -- and in that speech you heard that phrase -- we're going to talk about things openly that we talk about behind closed doors.

So he's putting it all out there. This is a very sensitive time, but he also realizes -- for the Israeli government, but it's also a sensitive time in the Muslim world and this -- and the Palestinian issue -- note the word "Palestine," actually it was quite interesting.

KING: Right.

DOUGHERTY: But I -- I think he -- that he is putting it out there that we have to shake this up, that it's not going to be the same. And I think you're seeing that in a lot of different areas with Obama. Shake it up; start over.

And this is not the end. He has indicated before that we don't know where this is all headed. This may not be the last sentence coming out of Netanyahu's mouth. So I think this is, you know, going to go on. KING: And a big speech for Netanyahu in the coming week. And, Gloria, help me here. Sometimes, you know, international politics can be like our domestic politics, that you look at something, your first impression is, "Abbas and the Palestinians, they're weak at the moment; they can't do this. Netanyahu's government is fragile; they can't do this."

But then you say, "Well, wait a minute. Sometimes out of two weak leaders comes an opportunity."

BORGER: And I think that's exactly what the administration is thinking.

BORGER: And I think, you know, you'll notice that after the Cairo speech where the president was accused by some of kind of a moral equivalency between the two states, he also went out of his way the next day to criticize the Palestinian Authority and to say -- talk about the corruption within the Palestinian Authority that needs to be addressed.

And so, I think what the president is doing is sort of trying to position himself between these two weak governments and say, I can help you folks find a political way out of your own domestic political problem.

KING: And the administration says there was no such moral equivalency drawn. Those who saw it listened to the president give a very powerful portion of the speech about the horrors of the Holocaust and how those horrors shape and define the modern state of Israel.

And then in the next paragraph of the speech, he said this.

(BEGIN VIDEO CLIP)

OBAMA: The Palestinian people, Muslims and Christians, have suffered in pursuit of a homeland. Let there be no doubt the situation for the Palestinian people is intolerable. And America will not turn our backs on the legitimate Palestinian aspiration for dignity, opportunity, and a state of their own.

(APPLAUSE)

(END VIDEO CLIP)

KING: Another headline as we go back to David Gergen. This is the Arab News, and it says: "Among other things, a shift in U.S. attitudes seen." So certainly in the Arab world, David, they do see a shift, they sense a shift, not just on the question of Israel and Palestine, but on the broader U.S. role in the world. Those saying there was a moral equivalency...

(CROSSTALK)

GERGEN: Well, I think if you're looking for ways to criticize the Obama speech, then you point out, yes, there's a moral equivalency. I don't think that's what was intended. And the fact that he went the next day -- President Obama went to Buchenwald, the former -- the concentration camp near Weimar, I think underscored just how seriously he takes the Holocaust. He did go after the Holocaust deniers like Ahmadinejad in Iran. I don't think that's the heart of what this is all about. At the heart of what this is about is an attempt to shake up the Middle East with the Palestinians and the Israelis, as Jill just said, but it's also to create a new landscape in which we can begin to rebuild a moderate middle with the Muslim world.

To try to change a whole series of issues, whether it be our U.S. relations with Iran and trying to defuse that or whether it be, you know, Iraq, Pakistan, a whole series of things that we're dealing with.

One of the things this president has done, of course, is to raise the bar for his own presidency. It's astonishing how much he is now taking on himself, how much pressure he's putting on himself to deliver within just a few months, maybe by the end of the year, in all sorts of ways. We've never seen this before, John.

BORGER: I think this is really risky, to follow on what David said. I mean, five months into this administration, he has taken on everything from peace in the Middle East to reforming health care to reforming energy to now he has got a Supreme Court justice he has got to go through, and the list grows.

This is a risk for him because none of these problems is easy. Presidents before have tried to solve these issues and have had no success. I mean, if you'll recall, the Bush administration decided not to wade into the Mideast process until what...

KING: Until very late.

BORGER: ... two years, yes? Two or three years, yes?

(CROSSTALK)

KING: Oh -- please.

DOUGHERTY: Oh, sorry, John. I was just going to say that, you know, this is a unique president who can actually even attempt to do this, because let's face it, here is an African-American, has Muslim ancestry, also has, you know, his great-uncle who was at Normandy. I mean, he can reach out to different constituencies.

And I think if there is any moment that you can kind of, again, have the great -- the big-bang theory, you know, let's just go for it. And this may be what they're doing, they're just going for it.

KING: Well, we will spend our summer watching. He has reached into every box. We'll see how he does. All of you stay right there. Much more of our conversation with Jill and Gloria and David to come. And we want to talk to you especially about some intriguing comments Secretary of State Hillary Clinton said today about her former rival. Remember him? He is now the president. Stay with us, STATE OF THE UNION will be right back.

(COMMERCIAL BREAK) KING: And we're back now with CNN's David Gergen, Jill Dougherty, and Gloria Borger. This one is apropos of nothing, but we like the newspapers, we like funny headlines on this show. Here's one from The New York Daily News: "Talk like an Egyptian," after the president's speech in Egypt. Nice shot of the president sightseeing at the pyramids there and a very colorful camel behind him. Just because we can. That's why we do that.

Let's stay on foreign policy for a minute. This is a question Amanda put up on our Facebook site. She said she's reading The Washington Post and there's a Reuters account in The Washington Post of what Secretary Clinton said in an interview this morning about the possibility of putting North Korea back on the terrorism list because of their missile tests and the nuclear tests.

And Amanda comments: "Our attention span on this issue seems to be that of a parent with a whining child. Once we placate the child to stop screaming, we stop caring what they are doing."

Jill Dougherty, a serious possibility now and what would the ramifications be if they put North Korea back on the state sponsors of terror?

DOUGHERTY: Well, it is serious, I mean, if they actually did that, we'd be back to the future again with relations. And also, you know, there's this part of interdiction of any type of weapons of mass destruction coming from North Korea.

Several countries now, including South Korea, have signed on to this security agreement that allows them to board ships. We're verging on, you know, some pretty dangerous territory. But I think there's an enormous frustration about where you -- how you stop what has been going on.

You know, nuclear explosions, missiles being fired, and Amanda kind of sounds like some officials that I have heard who are talking about this as if North Korea is an errant child and unstable and we just have to, you know, bring them back to reality.

BORGER: Well, I don't think we're quite back to the axis of evil point, but, on the other hand, the administration has put out the carrot, has talked about negotiations without preconditions with Iran, and -- and North Korea, and I think that, you know, this is a sense that the administration has that we've given about as much as we can give and maybe we'll just put them back on the list.

KING: No good options here, David.

GERGEN: No, John, and it -- we should understand that North Korea is not our most dangerous problem. Pakistan is by far and away when it comes to nuclear weapons, but North Korea is rising again on the -- on the radar screen. I've been in and around these efforts to restrain the North Koreans now stretching all the way back to the Clinton administration, and you -- every administration, they try all of the options, and nothing seems to work very well.

This is just a very recalcitrant, as we all know, very withdrawn almost, you know, medieval type of regime, and the best thing we can do probably is contain it.

(CROSSTALK)

DOUGHERTY: Now we're sending Al Gore over there, correct?

BORGER: Well, if...

DOUGHERTY: If all of this goes according to plan, but we do have two journalists being held who are going through trial. In fact, we thought it would be over by the end of the week. So that's another thing. If they were convicted, he could go over to take them out perhaps on a humanitarian basis.

BORGER: And that may have something to do with her statement. KING: Let's step back from the substance for a minute and have a little interesting Washington political theater. Secretary Clinton was out this morning, it's the first time she has had a Sunday morning interview.

And she talked about North Korea, she talked about Iran, she talked about the many substantive policy challenges she faces, but she also took a little time to talk about her relationship with her former rival, now her boss, and how she came to be the secretary of state. Let's listen.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE: When he called and asked me to come see him, and we had our first conversation, I said, you know, I really don't think I'm the person to do this, I want to go back to my life. I really feel like I owe it to the people of New York.

And I gave him a bunch of other names of people who I thought would be great secretaries of state, but he was quite persistent and very persuasive.

(END VIDEO CLIP)

KING: Jill, you've traveled the world with her. Is she having fun? Does she feel under the White House thumb?

DOUGHERTY: You know, I don't really feel that that's the case. I mean, I think that this is her thing now. She has got -- she has the State Department. She can be -- actually, if she plays her cards right, she could be an historic secretary of state because of the Obama administration and what it's chewing off.

And if she is successful, if the president is successful, she is successful, she is successful. So I think that there is -- there's this mutual bond that they go down together or they rise together.

KING: And, David, it was exactly one year ago today that she bowed out of the race for president, one year ago today she said, you know, I was in it to win it, and it didn't work out. And she, of course, endorsed Obama at that moment. She's now the secretary of state, it's a big difference exactly one year makes.

GERGEN: It is a big difference. I must say I think she gets high marks for her cooperative, collaborative attitude and the way she has developed personally with the president and the way the National Security Council as a team has operated.

This is not a "team of rivals," but a team of collaborators at this point, and that, you know, we didn't know if that would work just a few months ago. At the same time, I would imagine, John, I think she really enjoys the substance of the work. I hear that from everybody around her.

But there has to be a part of her who watches as Barack Obama goes to the Middle East and makes that speech in Cairo, who realizes that he is turning his personal charisma, his celebrity-hood, if you would like, into the most important weapon -- one of the most important weapons this administration has as it exercises soft power, and she is on the margins of that.

I mean, the fact this was her first Sunday talk show I think suggests how much she has not been at the center of the conversation. I think the administration would be far better off if they unleashed Hillary Clinton, let her have much more of the stage, because she's going to have to do a lot of the hard follow-up work to bring all of these promises to fruition.

BORGER: But it's interesting because that raises the point of what a team player she has been, and I remember when we were talking about whether or not he should ask her to be secretary of state. The big question was, was she going to have her separate little enclave in Foggy Bottom, and would there be infighting?

And in fact there has not been, and she has stepped out. At a certain point Barack Obama may say to her, you know what, Madam Secretary, we need you to get out front now because I've got other things I've got to do.

KING: Need to call a time-out right there for today. Jill Dougherty, Gloria Borger, David Gergen, thanks for coming. We will watch for that Hillary unleashed headline. That will make the New York tabloids when it comes out. Thank you all very much.

(LAUGHTER)

In just a moment, we head out to Las Vegas, one of the worst-hit regions in the housing crisis. We're going to take a ride with people trying to make the best of bad times.

(COMMERCIAL BREAK)

KING: A rising foreclosure rate is one of the prices we're paying in this punishing recession. Look at the map. The brighter the state, the higher the rate of foreclosures. First, let's look at the national number, 0.267 percent.

That means one in every 374 homes in this country are in foreclosure. The brightest state right out here in Nevada. Look at numbers here, nearly five times that rate, one in 68 homes, one in every 68 homes in foreclosure.

In Nevada, Las Vegas, the city, the second-highest rate of foreclosures of any city in the country. One in eight Nevadans are behind on their mortgage. There are more than 17,000 foreclosure homes listed for sale in Las Vegas.

Say you wanted to think about buying one of them. You could look in the real estate section, you could look online, or you could take a foreclosure bus tour.

(BEGIN VIDEOTAPE) NICK NOLF, RE/MAX CENTRAL: Now this property, and if we just rewind time a little bit, was purchased in 2004 at just under $341,000, and now we fast forward to today, and we're looking at just under $220,000.

Again, if you hear the doorbell ring, that means that you just bought the property, and we have left, OK?

(LAUGHTER)

NOLF: All right. Let's go.

There are fewer single stories available because land is so expensive. I want to go over a few things, motivating factors, things that are signs and things you want to look at when buying a property and how to get into the property.

UNIDENTIFIED FEMALE: We're looking for a bargain. We may move from Florida to Las Vegas.

NOLF: We get a lot of people that are in your position in Florida that are coming over to Las Vegas. One thing that's nice about Las Vegas, well, first of all, humidity. Humidity there, especially in the summer, is a tough, tough deal, but the second thing that's also kind of nice about Las Vegas, is that we have no natural disasters.

We're not going to have a tsunami here, hopefully not or else California has a huge issue, right?

(LAUGHTER)

NOLF: So, I mean, that's a big deal.

(END VIDEOTAPE)

KING: A little humor there by the tour guide at a tough time, the foreclosure crisis in Vegas.

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