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STATE OF THE UNION WITH JOHN KING

President Obama Urges Peace Between Israel and Pakistan; Unemployment Rates Hit All Time High; A Look at Tiananmen Square, 20 Years Ago

Aired June 7, 2009 - 20:00   ET

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


JOHN KING, HOST: I'm John King. And this is our STATE OF THE UNION report for this Sunday, June 7th.

President Obama is putting his promise of a new beginning with the Islamic world to a quick test, dispatching a special envoy to try to get Israeli and the Palestinians to revive peace talks.

Arabs praise Mr. Obama's tough criticism of Israeli settlements. But will it strain ties with a critical U.S. ally? We'll hear from the president's senior adviser, David Axelrod.

America's unemployment rate hit a 26-year high in May. But the numbers include some potentially positive signs as job losses appear to be slowing. Three mayors in towns where major General Motors plants are about to close are here talk about the recession's toll on the America's cities.

And 20 years ago when China's government ordered this network to stop broadcasting the massive pro-democracy demonstrations in Tiananmen Square, he was reporting from the front lines in Beijing. CNN legend Bernard Shaw gets "The Last Word."

That's all ahead on this Sunday's STATE OF THE UNION.

We begin with the president's overseas trip and the ambitious domestic agenda awaiting the president as he returns today from overseas. The trip was five days in all, the president traveling from the United States, first, to Riyadh, Saudi Arabia. Then it was on to Cairo, Egypt, where he delivered his major speech to the Muslim world.

The president then moved on to Europe, Dresden, Germany. He visited a Nazi concentration camp. Final stop of the trip was here in France. The president visiting Paris, also up to Normandy for the 65th anniversary of the D-Day landing.

The troop ended in Paris which is where this morning we find the president's senior adviser, David Axelrod.

David, I want to begin first with the moment. With a new president, we are still seeing many things for the first time. He walked the hallowed grounds of the American Cemetery near Normandy. It is a remarkable place, it is a sobering place.

I'm wondering if he shared his reflections with you on being the commander-in-chief walking that ground? DAVID AXELROD, WHITE HOUSE SENIOR ADVISER: Well, look, I think there's an enormous sense of pride that he felt representing the United States of America. It's such an extraordinary, inspiring story of what happened on those cliffs off the beaches of Normandy.

And when you stand there and contemplate it, look at those at that cemetery, consider the valor of kids who were barely shaving and, yet, they saved -- they saved the world from the scourge of Nazism and fascism.

And so I think he felt all of that and he felt very, very proud to stand there as the president of the United States. It was particularly emotional for him because his uncle Charlie was there who helped liberate the Buchenwald concentration camp.

And Charlie, I think, reminded him about his grandfather who served and came across those beaches in Normandy, and an uncle -- another great uncle. So, you know, it was -- it was an extraordinary day for him and one I know he'll never forget.

KING: While there in Paris he announced that Senator George Mitchell, his special envoy to the Middle East, will be going back to the region this week to talk to the Israelis, to talk to the Palestinians.

What is the goal of this trip? Because many speak of the peace process but there really is no process. The Israelis and the Palestinians have not been at the table negotiating in earnest for some time. Is that the goal, to get them back to the table in the near future?

AXELROD: Well, certainly we want to get them back talking to each other. And I think there is a recognition -- a broad recognition in the region that there needs to be progress. One of the great heartening things about the president's speech in Cairo is the enormously positive reaction it generated across the region and around the world.

And from both Israel and the Arab world, we saw positive responses. And when the president talked to leaders in the region and here in Europe, I mean, there's just such a hunger for this process to move forward.

So the hope is that Senator Mitchell can get that -- can get -- can make some progress next week on his visit.

KING: Let's focus on the president's speech in Cairo. Public reactions were overwhelmingly positive, but there was a bit of grumbling from Israelis privately and from some in the American Jewish community back here. Not so much at what the president said, but that where he said it.

I want you to listen to one line from the president's speech that raised some eyebrows, and it concerns his calling on Israel to stop building settlements. Let's listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Israelis must acknowledge that just as Israeli'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: The interesting thing to some, David Axelrod, is that the president said that in Cairo, Egypt, to a major Arab capital, and the speech was, of course, covered around the Arab and Muslim world. He said a similar thing in the Oval Office last week with President Mahmoud Abbas of the Palestinian Authority.

And many Israelis are asking that you know, you should know that Netanyahu's government in Israel is so fragile that if he did that now, if he stopped the settlements now, his government might collapse.

And so they ask the question, why do you keep pushing?

AXELROD: Well, because these are agreements that the Israelis have made in the past. Palestinians have made agreements in the past that they have not observed. And the president's point in that speech is that everybody has to step up now and meet their responsibilities, because the prospect of generations more bloodshed, of generations, more suffering is something no one -- no one should accept.

And I must say that the reason the speech was well-received is because it was very candid and it was very clear, and he was very clear to the Palestinians, clear to the Israelis. He was very clear to the Arab world and he was very clear about what our responsibilities are and have been.

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

One thing I would say, John, is one of the most heartening statements came from Shimon Peres, the president of Israel, who called the speech "brave and courageous" and praised the president for his leadership. I think that was an encouraging statement.

KING: But are you asking then to continue the candor? If Mr. Netanyahu's coalition would not allow him to stop settlements, would not allow him to sit down with the Palestinians and start talking about the difficult choices, land for peace, should Mr. Netanyahu then either challenge his own ministers or should he try to form a new government?

AXELROD: John, look, the president is very -- has been very clear that he understands that there are enormous difficulties, enormous difficulties for Prime Minister Netanyahu, enormous difficulties for President Abbas in this process. It's laden with difficulties and he understands the politics of it. But the stakes are so enormous, enormous for Israel, for the region.

You know, Israel is our greatest ally in the region. We have bonds that are not just strategic, but bonds of the heart with Israel, and we care deeply about its security and we want peace to come so Israel can live in peace, in secure borders and -- but that's not going to come without people stepping up and -- and challenging the prevailing politics on both sides, and the president is urging them to do that.

KING: And how does he respond to those who say he has been on an apology tour, going around the world apologizing for the United States' actions in the past?

AXELROD: I think that they didn't pay attention to this speech or any of the speeches that he's making, because embedded in this speech was a very strong -- a strong explanation -- explication of who we are and what we're all about, about our values as a country and our history as a country.

John, the whole point that he made was there are stereotypes of the Muslim world that have been -- that have grown up because of a small group of extremists who have been -- who have been used to define the entire Muslim world. And he said by the same token, America has been stereotyped in a way that bears no resemblance to who we are. So I think he made a strong statement for our country there.

KING: David Axelrod, we're going to ask you to stand by. We need to sneak in a quick break here, but when we return, we'll talk to David about the president's crowded domestic agenda, rising unemployment, a complicated and expensive health care debate, and a confirmation of a Supreme Court justice.

Stay with us.

(COMMERCIAL BREAK)

KING: Let's continue our conversation with the president's senior adviser, David Axelrod. He is in Paris at the end of the president's overseas trip.

David, I want to focus on the nomination fight to confirm Judge Sonia Sotomayor. A week ago on this program, the debate had been defined early by her statement -- you know it well -- where she said, "I would hope that a wise Latina woman, with the richness of her experiences, would more often than not reach a better conclusion than a white male who hasn't lived that life."

Now the president of the United States said last week that she was sure she would like to restate that. You used the words and Robert Gibbs, the press secretary, used it, said that she had made a poor choice of words, and that if she could rewrite that speech, she would do it differently.

But in the materials you submitted, the White House submitted to the Senate, if you go back through prior speeches, prior comments, we have found at least a half dozen times where she has used that language.

So a poor choice of words, many are saying, has happened repeatedly, and critics are saying this shows poor judgment, not a poor choice of words.

AXELROD: Well, first of all, John, I don't think that the words in those speeches were all precisely that language that the president was referring to. But the point she was making and the point the president made about the point she was making is that we're all the sum total of our experiences and you bring those experiences with you to the bench. It's the same point that Justice Ginsburg and Justice Alito have made.

And I think that the debate is kind of a diversion from her 17- year record as a judge. As you and I have talked about before, no one has come to this point, being appointed to the Supreme Court, with more experience on the bench than Judge Sotomayor does now, in 100 years.

No one has had the combination of being a big city prosecutor, an international commercial litigator, a trial court judge and an appeals court judge. Her opinions are widely quoted. She is widely respected as a judge. So I think those who oppose her nomination would like to create a side debate by taking her words out of context.

I think the American people, however, are going to look at the -- at her life, at her record, and I think the Senate will as well when the time comes to vote.

KING: Was the president aware of the time she used similar language, though, when he said it was a poor choice of words?

AXELROD: I don't know whether the president was aware or not, but he certainly is now. I don't think it's changed -- changed his view on that.

But the interesting thing is I think that the Senate was aware of it when they confirmed her for the U.S. court of appeals, because some of those speeches occurred before her confirmation in 1998.

So, again, I think this is a kind of a side show. The fact is that there is nothing in her record that reflects anything but fairness and fidelity to the law, and I think that's what we want in a U.S. Supreme Court justice.

KING: Just at its beginning is the health care reform debate, a top priority of the president. He says it must be done this year. Senator Kennedy has distributed a draft of his bill. There are other proposals in the Congress that include a mandate, essentially a requirement that Americans get health insurance.

During the campaign, the campaign you helped run, then-Senator Obama distributed this brochure against Hillary Clinton. I'm holding it up for our viewers. I know you can't see it. But he criticized the mandate going on in this brochure to say that the mandate would punish families who can't afford health insurance. But the White House now says it is open to that. Is that true? Something the president thought was bad in the campaign is possible now?

AXELROD: Well, I think if you look at the president's comments during the campaign, what he said was that he felt that a mandate, without making health care affordable, was something that he did not want to do.

Any health reform has to be geared toward reducing the cost of health care for people and making health care affordable. And certainly if there were such a mandate, it would have to have provisions to help those who can't afford it get health care.

But the real thrust of health reform has to be to reduce costs. The cost is crushing families, businesses, and the federal government and state governments as well, state and local governments. We have to bring down the cost of health care.

If we do that, and make it affordable, people are going to buy it, mandate or no mandate. People want health care.

KING: And one more question on how we pay for this. During the campaign, Senator McCain proposed taxing the health insurance benefit that most Americans receive from their employers and the Obama campaign, again, a campaign you ran, launched this ad criticizing that proposal.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: John McCain, taxing health benefits, cutting Medicare. We can't afford John McCain.

OBAMA: I'm Barack Obama and I approve this message.

(END VIDEO CLIP)

KING: But if you listen now, David, to the chief Democrats in the Senate writing this legislation, they say they have been told by the White House that you don't like doing it that way but that you're open to it. Is that fair?

AXELROD: Well, I was in the meeting when the president met with the Senate Democrats and what he -- and he made a very strong case for the proposal that he put on the table, which is to cap deductions for high income Americans.

And he urged them to go back and look at that. He said, I'm not -- you know, everybody ought to put their ideas on the table. I'm not foreclosing anything, but I really think my idea is the best.

Now people may have drawn -- they can draw whatever conclusions they want from this, but the president believes that is the best approach. He was critical of the other approach. He has concerns about it. And that's a discussion we're going to have to have moving forward. KING: I want to close our conversation by asking you to take us inside the Great Pyramids of Egypt. The president is on a tour of the Great Pyramids. He's dressed casually and something on the wall catches his attention. He is shown it by the guide and he is noting the big ears and he calls over David Axelrod and Rahm Emanuel and says, look at this.

What was the president telling you?

AXELROD: Right. He said, who does that look like? He said, it's me. And I have to confess that the ears were a giveaway, it really did look like him. I was wondering whether someone chiseled that in there in honor of our visit, but apparently this was done some thousands of years ago.

So kind of interesting. We didn't know what to make of it. But our guide said that he thinks the president might be descendant from King Tut. So we'll see. We have no proof of that. We're not claiming that. But -- and I think perhaps he says that to all the visiting dignitaries. But the ears were unmistakable, I must say.

KING: We will go back and retrace the family tree. David Axelrod, thanks so much for joining us on STATE OF THE UNION from Paris today. Have a safe trip home.

AXELROD: OK.

KING: We just heard from the president's right-hand man. Next, we'll go into America and talk with three mayors whose communities are being hard-hit by this punishing recession. Stay with us.

(COMMERCIAL BREAK)

DON LEMON, CNN ANCHOR: Hello, everyone. I'm Don Lemon. More "STATE OF THE UNION" with John King in just a moment. But first, a look at your headlines.

You know, we're getting a first and exclusive look at the five Americans detained in the murder of an American contractor in Iraq's green zone. Sources tell CNN they work for a security firm based in North Carolina and the five have not been charged yet.

James (INAUDIBLE) was found tied up, blindfolded and stabbed in his car last month. We have more exclusive details. We're working on more exclusive details for you tonight 10:00 p.m. Eastern. Make sure you tune in.

Seventeen bodies have been found from the crash of an Air France plane in the Atlantic Ocean. Flight 447 disappeared over the Atlantic a week ago with 228 people on board. It was heading to Paris from Brazil. Much, much more again, 10:00 p.m. Eastern. They're continuing to find bodies there.

The polls are closed in Lebanon after a crucial vote. Today's election could unseat Lebanon's pro-western coalition replacing it with one dominated by the militant group Hezbollah. Early results are expected to trickle in tonight.

Former House speaker Newt Gingrich says he has reframed, reframed, something he said online. He recently called Supreme Court nominee Sonia Sotomayor a racist on Twitter. He cited her 2001 comments when she said, "A wide Latina woman would more often than not reach a better conclusion than a while male." Newt Gingrich's new view today.

(BEGIN VIDEO CLIP)

HARRY SMITH, HOST: Let's talk about Sonia Sotomayor and what you've said about her. You rescinded.

NEWT GINGRICH (R), FORMER HOUSE SPEAKER: Well, I reframed it. One I did a Twitter about her having read what she said, I said that was racist. But I applied it to her as a person. Truth is, I don't know her as a person.

It's clear that what she said was racist, and it's clear -- or as somebody wrote recently -- racialist, if you prefer. And it's clear that she didn't just say it once.

And I think one of the challenges for the administration is having first chided me for language, then having said she didn't mean it, then having said she ought to restate. Now they face the fact that she has said this, written about it four or five times.

(END VIDEO CLIP)

LEMON: The former House speaker was on "Face the Nation" on CBS this morning. Gingrich is a potential candidate we hear for president in 2012.

President Barack Obama is back home after a four-nation overseas trip. It included an appeal to the Muslim world and a speech marking the 65th anniversary of D-Day. His focus now shifts to domestic matters. He meets with Vice President Biden tomorrow to talk about the $787 billion stimulus.

I'm Don Lemon. I'll see you right back here at 10:00 p.m. Eastern. "STATE OF THE UNION" with John King continues.

KING: We want to give you a snapshot of the big economic news this week to help put that conversation into context. This is a graph here showing job losses. If you go back nine months ago to last September, 321,000 jobs lost in the economy back then.

Look at the steady increase to the peak, 742,000 jobs lost in January of this year. And then slight decreases every month since, 345,000 jobs lost in May, the government reported on Friday.

Some see that as encouraging news because it is a lower number than the months previously. But the jobs may be falling at a slower -- being lost at a slower pace. This is the unemployment snapshot, September of last year, follow it over nine months from 6.2 percent up on a steady climb, 9.4 percent now the unemployment rate in the United States.

We're going to get next to three mayors on the front line of this, but we want to first do this to help put this into context. Here is a map of the country. This is where General Motors has plants in the United States. And you see one down here just south of the border in Mexico.

But this is what General Motors announced as it filed for bankruptcy. The red dots are the 14 plants that will be closed or idled as GM goes through a painful bankruptcy restructuring plan.

One other point we want to get to. It also has announced it is closing -- these are 300 dealerships we know will be closed by General Motors as part of the restructuring. And there are hundreds more at risk across the country.

The gold dots. Other dealers that potentially will be closed as we await the final details of this plan., which brings us to the conversation we want to have now with three mayors on the front lines, Mayors Michael Dinwiddie of Spring Hill, Tennessee, Michael Brown of Flint, Michigan, and James Baker of Wilmington, Delaware.

Gentlemen, thank you for joining us. This thing you share in common is the painful news this past week that General Motors will close or idle a plant in your community.

I want to start with you, Mayor Brown. In Flint, Michigan, a town that has already suffered through the recession -- Michigan has the highest unemployment rate -- a simple question to you first and then to your colleagues. Bad news for your town this week, but are you convinced, as some in Washington are, that we've hit bottom and that things are about to get better or do you see more pain coming?

MAYOR MICHAEL BROWN, FLINT, MICHIGAN: Well, certainly, as we make budget decisions, it feels like we're in quicksand at times. But even the news this week was good for us, in a way, because we had two plants identified that were globally competitive -- our truck plant and our Flint Engine South plant -- and they have survived and become part of the new GM. So that's good news for Flint.

The Flint North site we expected would close, but, as you say, we've been experiencing this recession for 25 years in Flint, so we're really the epicenter of this crisis.

KING: And, Mayor Baker in Wilmington, Delaware, do you see any irony -- the vice president is from your state, and your plant gets closed, while there's a GM plant, say, in Kentucky -- the Senate Republican leader, Mitch McConnell, lives there. He opposes any money going to GM for a bailout, but he gets to keep his plant. Any irony in that?

MAYOR JAMES BAKER, WILMINGTON, DELAWARE: Well, I don't know about the irony. We've known for some time that there has been talk about closing the plant. We also have the Chrysler.

Actually, the plant is in Newark. It's not in Wilmington, Delaware, precisely, but it affects our whole area.

So I don't -- I just think the restructuring was coming and it was necessary. It hurts us because, obviously, we have a lot of people who work at GM and -- and Chrysler, and it affects us very much.

But the governor and others are not giving up totally. They will begin immediately to work on maybe solutions as to alternatives. So it's not a total loss yet. We're -- we're still fighting.

KING: And Mayor Dinwiddie, yours is the smallest of these communities I'm mentioning, and the Spring Hill plant was the Saturn plant. It was supposed to be the new GM back in the day. Then it was building Chevy Traverses. Now it is idle.

There's a possibility GM will keep that plant open. It may choose your community for the new small car manufacturing plant.

What is that competition like? How do you convince GM build those new cars in your community, not somewhere else?

MAYOR MICHAEL DINWIDDIE, SPRING HILL, TENNESSEE: Well, I think if you look at the Spring Hill plant and you look at what it can do, and the fact that they just put a billion dollars' worth of improvements into that plant roughly a year-and-a-half ago, it is the most technologically advanced plant in the country, in all of North America, in fact.

So I think if -- if GM looks at this strictly from a business standpoint, they're going to -- they're going to have to realize that that plant is a very valuable asset to them.

KING: And, gentlemen, again, let's stay in the same order. We'll go to Flint first. Do you think -- does the government belong in the car business, the government making these decisions, and talking about people involved from the White House and the Treasury Department about which plant should be closed, which dealership should be closed? Is that the right role for the federal government?

BROWN: Well, certainly, somebody had to do something. I mean, you know, this is kind of a -- this isn't just about the auto industry, you know? The credit markets dried up. We've got a housing industry in crisis. And, certainly, the federal government had to do something here.

I think, from our point of view, we're just glad somebody is listening. And we had Dr. Ed Montgomery in town. We put together a plan for Flint, calling together stakeholders. We submitted that plan, and we believe they're listening. So that's positive.

Now, obviously, we want GM to be running their own business as we go forward, but I think there was no alternative at this point in time, as far as I'm concerned.

KING: There's been a bit of a dustup, Mayor Baker, here in Washington. A lot of the car dealers who are being told they're being shut down, whether they're from GM or Chrysler, are complaining that this is not being handled right and that many of them say, "Hey, I'm profitable. I could be helping GM or helping Chrysler."

Is the government handling that part of the equation right?

BAKER: Well, I don't know if it's just the government themselves. I think we're talking about just looking at the whole industry and -- and this company and what must be done.

I agree with the mayor from Flint that thank God the government got involved, because what we're seeing is just a stack of cards or a domino effect where things have just gone awry. And we're all suffering; we're all trying to deal with loss of revenues. I mean, it was just like our revenues went off the cliff.

Well, if we don't do something, it's only going to get worse. And I know there's people that don't want to see the government involved, and you get that dumb argument down there in Washington about the conservatives and the liberals and all that. Who needs it? We need the country working together on our problems.

So, you know, I'm not condemning the government. They didn't create the problem. So we've got to get this thing straightened out.

KING: And Mayor -- Mayor Dinwiddie, follow up on that point, because we have a lot of arguments here in Washington that apparently look pretty dumb to the mayors out there in America.

But in terms of the auto industry, is what's happening in Washington, does it make sense? Does it work in the real world?

DINWIDDIE: Well, I've got to agree with both my colleagues here. And I don't think this is a Republican issue or a Democrat issue. I think the worse thing that we could possibly do is turn this into a political battle.

This is an American issue. We have thousands, hundreds of thousands of American lives at stake. American families are going to be suffering. And we have got to -- we have all got to come together. This is not just a city-by-city issue. This is a nationwide issue.

And if we continue to see an exodus of our jobs market going to other countries that -- that have different forms of government than we have that that we can't, quite frankly, compete with, because it's not on a level playing field, we are going to see -- I think the state of our nation is going to decline as we move forward.

So I think that we need to do everything possible to come together and solve these issues now.

KING: Up next a look back at the 20th anniversary of Tiananmen Square with a CNN legend. Former anchor Bernard Shaw gets "The Last Word."

(COMMERCIAL BREAK) KING: Twenty-three newsmakers, analysts and reporters were out on the Sunday morning talk shows, but only one gets "The Last Word." That honor today goes to a legend in our business, the former CNN anchor Bernard Shaw.

Twenty years ago, 20 years ago, Bernie got another last word as Chinese authorities demanded that CNN stop our satellite transmission from Tiananmen Square and the live coverage of the massive pro- democracy demonstrations.

(BEGIN VIDEO CLIP)

BERNARD SHAW, FORMER CNN ANCHOR: OK. We've heard the orders. We have our instructions from headquarters in Atlanta. For Steve Hurst...

STEVE HURST, CNN CORRESPONDENT: Good-bye, it's been a lot of fun, it's been very interesting. I've never seen anything like this.

SHAW: John Lewis.

JOHN LEWIS, CNN CORRESPONDENT: Interesting hardly describes what we've seen, Bernie.

MIKE CHINOY, CNN CORRESPONDENT: The most...

SHAW: Mike Chinoy?

CHINOY: The most extraordinary event I've ever witnessed in 20 years of following China.

SHAW: In my 26 years in this business, I've never seen anything like this. The situation in Tiananmen Square is that, it is a standoff. For all of the hard-working men and women of CNN, goodbye from Beijing.

(END VIDEO CLIP)

KING: It is a treat, it is a treat and an honor to have you here. Take us back. Hard to believe it's been 20 years. Take us back to that moment.

SHAW: It's an honor to be with you and to be at my favorite network.

I had chills going through my body in that signoff. Prior to that, just minutes before that, two Chinese Foreign Ministry officials had stormed into our CNN control room, and with a document, said, "Your purpose for being here no longer exists, you must shut down."

And I was just shivering. I was enraged, and I was thinking, here I am a child of democracy, and somebody is coming into our control room ordering us off the air.

The official purpose was that CNN was there covering that historic Sino-Soviet summit between Deng Xiaoping and Mikhail Gorbachev, which was summarily overshadowed by this mushrooming demonstration, to the point that they went from 500,000 demonstrators in Tiananmen Square to more than a million each day.

KING: Let's look at some of the pictures. If you look over your right shoulder, this has been the iconic snapshot of what happened that day, the young man standing in front of the line of tanks. Take us back to your memory of the images, especially this powerful image.

SHAW: Well, this picture was taken just off a boulevard going into Tiananmen Square. An AP photographer, Widener, took this picture, and he went up to the eighth floor of a nearby hotel, and he actually got one of the students to take him up so he could get the high shot.

And you can imagine what's going through the tank commander's mind. He knows everyone is watching him. And he goes to the left, he goes to the right. And then when he mounts the tank -- regrettably nobody knows where he is now.

One of the other images that stuck in my mind was when the original order for the army to move in was given. You have these convoys of trucks being confronted by hundreds and hundreds of demonstrators who are saying to them, shouting to them, "We are your brothers, we are your sisters." And you see these soldiers with these confused looks on their face, and -- faces, and they eventually turned around.

This created a major problem for the Chinese leadership. What they did was they had the 4th army, in abeyance, several rings outside the city. The city is divided into rings. They took the commanding general from Beijing garrison, relieved him of command, switched out the soldiers, and brought in 4th army soldiers.

And these were the people who cracked the heads and executed the carnage on that fateful June 4th night. We later found out that one of the demonstrators was the daughter of the original commanding general.

KING: I want to show you another one of these images. I call this Mao looking out at democracy. It looks to many Americans like the Statue of Liberty, this picture in Tiananmen Square. Obviously, I believe Goddess of Democracy was what this figurine was called, the statue in Tiananmen Square. Tell us that story.

SHAW: Well, that was made by some students at an art school there in Beijing, and that took on all the emotionally raw powerful symbolism of our Statue of Liberty. And that was moved around Tiananmen Square from time to time during the day, in the extremely hot temperatures.

At night, this place is so cold. The demonstrators were housing themselves in cardboard shanties, some tents, and some actually were shivering. When we walked among them at night, those who were being treated for illnesses, colds and what have you -- of course, that was mild compared to what happened after the slaughter began. KING: I want to show you something from the present day, because so much has changed in China. The glistening skyscrapers now in Beijing. Beijing has had a huge makeover for the Olympics. Shanghai is a major international city, and yet some things have not changed.

Our John Vause, one of our correspondents, our Beijing bureau chief, went out this week to shoot a story commemorating the 20-year anniversary. And as you know, what many Americans might not know, if you're wandering around the streets of Beijing and you're a correspondent, you are being followed, without a doubt.

And I want to show you John Vause trying to shoot a stand-up in Tiananmen Square, and what happens. And what you are seeing are not innocent bystanders. These are undercover officers following John. Let's watch.

(BEGIN VIDEO CLIP)

JOHN VAUSE, CNN CORRESPONDENT: ... Tiananmen Square. This is about as close as we can get to the square because these plain-clothed officers are using their umbrellas to try and stop our view so that we cannot actually do any videotaping here.

There is an incredible security presence here on the eve of the 20th anniversary. There are so many police and soldiers. These plain-clothed -- are you rolling? These plain-clothed officials are using these umbrellas here to block our view whenever we try and do any videotaping anywhere near the square. They are also carrying these walkie-talkies...

(END VIDEO CLIP)

KING: So, sometimes, Bernie, sometimes the most simple device, a simple cheap umbrella serves their purpose.

SHAW: Well, what's ironic here is that at the highlight of what was happening in Tiananmen Square, that was one of the eeriest things, being a journalist there, and the rest of my colleagues from CNN -- with more than a million people in the square -- in effect you've got a revolution going on.

You've got the Central Committee deciding what to do. They had not given the order to crack down. And we could not get a peep, no official peep out of the People's Republic of China's government throughout that ordeal, John. Can you imagine covering a story of such magnitude and having no government official to go to for any kind of clarification?

KING: Do you see any lessons learned? Do you see any progress from the government's standpoint in how it treats its people or how it interacts with us?

SHAW: Well, the Chinese government is hoping that its muscle economy, producing more jobs and raising standards of living, will be a kind of opium to sedate the people who are inclined to want freedoms, rights that we take for granted. That's what they are banking on. And there's polling that indicates that young people are more concerned about getting out of college, getting a job, helping their families, than they are about rights that they wished they had like people elsewhere around the world.

KING: It was a moment, historic moment for the world. Also a very telling signature moment in a then still young CNN. Reflect on that.

SHAW: I think we got a Golden Ace for that coverage. Our attitude was to be in Beijing for, as I say, the historic Sino-Soviet summit, and then this just exploded. These demonstrations had gone on for seven weeks. And after a while, you didn't worry about the 18- hour days.

Everybody worked 18, 19 hours at CNN. We knew that this was an utterly important story, and we were determined to cover it. That was the -- the gung-ho spirit at CNN then. It still exists now. But without that spirit, without that sacrifice -- and there were sacrifices, especially personal ones -- CNN would not have made it.

One of the things that underscored the importance of this story was the fact that as it was happening, President George Herbert Walker Bush was at the vacation home at Kennebunkport, Maine. The Secret Service said, sir, we think you ought to come down here, you will want to see this.

The president of the United States was at the command post watching CNN coverage. And based on the pictures and what he heard and what he did not hear, President Bush issued statements on behalf of the American government, urging restraint on these government officials.

So you had the president of the United States reacting in real time to events that were, of course, very real in China. And he, of course, was a former ambassador to China, so he really has a feeling for that part of the world and for that story.

KING: I'm going to ask my friend to stand by. More of our conversation with Bernie Shaw when STATE OF THE UNION returns in just a moment.

(COMMERCIAL BREAK)

KING: Welcome back. Now part two of my interview with former CNN anchor Bernie Shaw.

Our viewers don't know this, but it comes with me every day when I come to work. I made a switch to this network 12 years ago from a great job at a great wire service in this country, because of you, because of the work you did at this network and the promise that I could continue to do what I did then if I came here. It has been nine and a half years, I say this lovingly, since you abandoned me. Are you...

SHAW: Well...

KING: Do you miss it? You are an African-American pioneer in our business. We have the first African-American president. There's a great deal of domestic stories, international stories. Are there days when Bernie Shaw, maybe on the golf course, says, wow, I want to go back?

SHAW: No. I don't miss it. I don't miss it. I don't miss my favorite network. I enjoy coming back such as times like this, but I -- I don't miss it. And besides, nobody at CNN has invited me back.

KING: Well, I'll invite you. You have a standing invitation. You can come here anytime you want.

SHAW: But I sense that CNN's viewers know that you constitute the best political reporter on television.

KING: We're not here to talk about me. I'm going to cut you off, because we're not here...

SHAW: I just wanted to return the compliment...

KING: .. we're not here to talk about me.

SHAW: ... and I say that sincerely.

KING: Let me ask you in closing, as somebody with such a great pedigree in the business, you're a news consumer, how are we doing as a business?

SHAW: As a business? Because of the way the business has changed, the economics have just -- they have caused this business to undergo so many changes with the various platforms for information. I marvel at what you're able to do at CNN because there's so much competition.

It's so hydra-headed. CNN existed at a time when MSNBC and FOX did not exist. That's changed. And with the other platforms, the Internet and all kinds of things, the ways consumers can get news, I admire what you're doing, but the challenge is to do it the way it should be done and to do it better. That's the challenge.

KING: Well, I will close with this that it's a great treat to have a friend in the studio, and you have an invitation to come back whenever you would like.

SHAW: Thank you.

KING: Bernie Shaw, thank you. And when we come back, we're going to head out to Las Vegas, where the nation's housing crisis is magnified by the city's large number of foreclosures and the breakdowns of some neighborhoods.

STATE OF THE UNION will be right back.

(COMMERCIAL BREAK)

KING: In our weekly travels out of Washington, the thing we try to do most in recent months is to understand the toll of this recession on your pocketbook and that's our focus again this week. And let's have some statistics to put things in context.

Every three months 250,000, 250,000 new families enter foreclosure. That is a stunning number. Let's move it over here and we'll continue to move West. And as you prepare for the summer, the average price of gasoline now $2.60 a gallon, not $4, we've been there before, but still up 27 percent just in the past seven-and-a-half weeks.

Another big thing we see happening across the country, if you're not unemployed, you may be working fewer hours. Businesses have cut the hours of their workers by the largest margin since 1975. Many people who were full time are now working 30 hours or so.

And another big number here, the national unemployment rate this last week, we learned, 9.4 percent. Out in Nevada it is 10.6 percent. As more people lose their jobs out there, they can't pay their mortgage. When they can't pay their mortgage, they get foreclosed on. It is one of the highest rates of foreclosure in the country. An opportunity for some, a crisis for others.

(BEGIN VIDEOTAPE)

KING (voice-over): To some this is the sound of recovery. New homes being finished on the outskirts of Las Vegas. A few doors down, Donald Leffert and Robyn Eddy Leffert are moving in, excited to own their first home.

DONALD LEFFERT, FIRST-TIME HOMEOWNER: It was pre-wired for stuff, you know, networking. It was in a location we wanted. There was very little that needs to be done.

KING: And the price was right. Two years ago this house sold for $400,000, but now on the market for $179,000.

D. LEFFERT: Everything else on the paper is the exact same. The only difference is the date and the price.

KING: Las Vegas is ground zero in the nation's housing crisis. More inventory means lower prices.

(On camera): Had the market not gone down significantly here, would you guys be able to afford this?

D. LEFFERT: This particular house? No, no.

ROBYN EDDY LEFFERT, FIRST-TIME HOMEOWNER: No.

D. LEFFERT: We would have been able to afford a house, just not this house.

R. LEFFERT: And not a decent house. D. LEFFERT: And not a decent house.

(LAUGHTER)

D. LEFFERT: And there's another walk-in closet.

R. LEFFERT: Closet over there.

KING (voice-over): Though Donald and Robin are mindful their gain follows someone else's foreclosure.

R. LEFFERT: It is pretty sad when you think about the people who have lost their home. It's -- you can't go into a house thinking of it being someone's house or someone's home. You have to think of it as a new experience.

KING: The "bank-owned" signs are all over town, so many of them that real estate firms offer foreclosure bus tours.

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

KING: Some agents do see some hopeful signs, like more offers of late.

NICK NOLF, RE/MAX CENTRAL: 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.

KING: Neal Williams also sees evidence of profound change for the worse.

NEAL WILLIAMS, LAS VEGAS RESIDENT: I've sat in my upstairs windows and watched kids trying to break into a house next door.

KING: Williams says a wave of foreclosures has dramatically changed the streets he picked 14 years ago with his children in mind.

WILLIAMS: Just a nice neighborhood, a lot of comfortable people to be around, enjoyed the nights like tonight, beautiful night, walk around and walk down the street and say hi and talk to people.

KING: No more. Someone recently threw a rock through one of the windows and Williams plans to add cameras to these security lights, and he doesn't oil the gate on purpose.

WILLIAMS: This is my infamous squeaky gate that is one of my alarms.

KING: Williams says renters have moved into some of the foreclosed homes and the sense of community has collapsed. Yards in disrepair, trash in the streets, graffiti and crime.

WILLIAMS: There was a shooting just recently a couple of doors down. There's -- we've been robbed on several occasions.

I'm impressed, buddy.

I love my son, in one of his classes he has a gang member. I go shooting once in a while and he asked my son Thomas to steal my guns and knives out of my house and give it to him.

KING: Adding to the fear and frustration is the financial price. He keeps current on his mortgage, but his home's value has collapsed.

WILLIAMS: I'm really scared to look. I know it has gone down quite a bit. My wife says more than half. I honestly don't know.

KING: His neighbor of six months is moving at a big loss because of the rising crime, but Williams is, for now, adding security systems but holding firm.

WILLIAMS: Do I want to put up with the embarrassment of people saying you look like you live in a prison? Yes, I'll deal with that embarrassment, but I know that I'm -- I'm safer. I am a stubborn son of a gun. This is my house. This is where I'm staying.

(END VIDEOTAPE)

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

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