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Sarah Palin Versus David Letterman; Obama's New Push for Health Care Reform Sparks New Battles; Middle East Experts Warning U.S. They May Collide With Israel

Aired June 13, 2009 - 18:00   ET


WOLF BLITZER, HOST: Sarah Palin versus David Letterman. The Alaska Governor outraged over what she calls Letterman's crude, perverted joke about her daughter. We talk about that and much more. Sarah Palin, here in the SITUATION ROOM.

Also, President Obama's new push for health care reform sparks new battles. We get all sides with White House budget director Peter Orszag, Republican Senator Judd Gregg and Independent Senator Bernie Sanders.

And veteran Middle East experts are warning that the U.S. may be on a collision with one of its closest allies, Israel. We talked to the author of a new book "Myths, Illusions and Peace."

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Polls show a majority of Americans think the Republican Party doesn't have a clear leader. That could create an opportunity for Sarah Palin. The Alaska governor's keeping a high profile and a busy media schedule. She's covering all the issues a national leader would, economic and national security under President Obama, the Middle East peace process, even her own political future. She's especially vocal about a deal toward more energy independence that some are already criticizing.


WOLF BLITZER, CNN ANCHOR: And joining us now, the governor of Alaska, Sarah Palin. Governor, thanks very much for coming in.

GOV. SARAH PALIN (R), ALASKA: Thank you so much, Wolf.

BLITZER: You have a big energy deal that's in the works right now, and you announced it with a lot of fanfare. A $26 billion natural gas pipeline which would bring natural gas from Alaska through Canada down to the Lower 48. Not everyone is enthused, including "The Wall Street Journal." They say this: "Among the most serious questions it faces is whether the Alaskan gas is even needed. North America is in the midst of a natural gas glut, driving down prices, and observers believe liquefied natural gas imports are set to grow as overseas producers seek to unload their gas in the United States."

Why do you disagree with "The Wall Street Journal"? PALIN: Well, I think very short-sighted, whomever wrote that for "The Wall Street Journal," assuming that market conditions are going to stay as they are today. Demand for natural gas is increasing. In fact, by probably 2030, we'll see about a 40 percent increase in demand for natural gas. Domestically, we have the supply. The resources are up there in Alaska, and it's time that we build this infrastructure and flow that very valuable resource into hungry markets throughout the U.S.

This is going to be the largest energy project in the world by the private sector. It's a great venue that we have, a vehicle called AGIA, the Alaska Gas Line Inducement Act, and believe me, Exxon, the largest company in the world, and TransCanada, the best pipeline building company in the world, I'm sure they would not have aligned and committed to building this project had they not crunched the numbers and figured out that for their bottom line. And for our nation's security and for our environment, for our economy, this project is right. It is time. Short-sighted to assume that there won't be growing demand for energy sources.

BLITZER: It's more energy independence as well. Instead of importing this kind of energy, it's here. It's homegrown in the United States. That's a significant development potentially. But it's not cheap. Who's going to pay for all of this?

PALIN: The private sector, thank goodness. I mean, this isn't a government program. It's not a government service. And heaven forbid anybody think that this infrastructure project needs to be nationalized. We have to keep our eyes and ears open to make sure that nobody thinks that the federal government should ever come in and take control over an energy project like this.

There is a need for it. The economy is asking for such a stimulus package as this to create the jobs. Thousands and thousands of jobs will be created with the construction and the operation, then, of this pipeline. It's time. It's ready to do it, and it's a private-sector project, as well it should be.

BLITZER: How long is it going to take to build it?

PALIN: It should be about a decade before that energy flows. These are long lead time-type projects. I mean, we've been talking about it and planning for it in Alaska for decades. But it took this alignment that was announced yesterday to really see the path forward made much clearer. The project will come to fruition.

BLITZER: And the grumbling you're hearing from some politicians in Alaska in your home state, how do you react to those complaints that they're saying, you know what, this is not necessarily such a great idea?

PALIN: Well, a couple of the politicians who are up for re- election and they're trying to position themselves, you know, they have to kind of distance themselves from some of the positions that the administration has taken, for political reasons, I believe. But the numbers speak for themselves. Largest companies in the world aligning to get the project built for national security reasons and for our environment and for our economy. Even those politicians up in Alaska. And really, Wolf, I think they do support it. They voted for it. I think there's just some political wrangling going on right now to position themselves.

BLITZER: On the economic stimulus package, and I want to just clarify this, originally, you were supposed to get Alaska $288 million in stimulus money that you didn't want. You said the state didn't need it, didn't want it, didn't like the strings that were attached to it. In the end, you're going to get everything but about $28 million and maybe even that you'll have to take as well. What happened here? The original reluctance on your part to accept the money from the federal government, but now you're going to accept it.

PALIN: You know, legislators across the country, including in Alaska, many resolved to take the money anyway, to go around governors and via resolution said, well, we're going to apply for the money anyway. Look at what happened in South Carolina, where the governor said, no, I'm not going to take the money. And they ended up in court. And the judiciary told the administrative branch, which is an odd mingling there of branches of government, the judiciary told that governor, you're going to take the money anyway.

There are fat strings attached to these federal dollars, not the least of which is an attachment to contributing to the dizzying debt of our nation and borrowed money to supply the funds to grow this government that the stimulus package is all about. I've had great hesitancy in embracing such a thing, and I did veto some of the money. Our lawmakers are discussing now whether they'll override that veto. More power to them in that debate whether they should override or not. That's the beauty of our democracy, the checks and balances that are in place. That protects the people whom we're serving.

So, discussion on whether they'll override my action against hesitance to accept some of these energy funds because they're tied to energy building codes, universal building codes that for the most part, communities in Alaska have opted out of. We don't want the federal government mandating to a local community or a business or a family how they can build and develop opportunities for more progress in an individual's life. We don't necessarily think that it's the right way to go is to allow the federal government to mandate more universal codes on how we'll develop.

BLITZER: How do you think President Obama's doing now in these early months as president?

PALIN: I think he's growing government way too quickly, and he's digging that hole of debt for our country that we're going to pass on to our children and our grandchildren, expecting them to pay off debt for us. It's a selfish thing that we're doing right now if we think that is OK. So, I do like some of the talk that he's giving Americans right now, though, about eventually here getting to the point of reining in spending and finding efficiencies within government. I encourage him to follow through on that. We have to follow through on that, because it is unfair to our kids and grandkids that we expect that we grow government... BLITZER: You think they'll be able to do it?

PALIN: Yes. He's got to be able to do it. He's promised that he would do it, that he would consider some of these actions and take action to slow down the growth of government. Now, having said that, we have to recognize what's already happened. Trillions of dollars more in spending.

Trillion dollars stimulus package - we don't have that money. We're borrowing it from China, so, you know, we become indebted to another country that can essentially control some of the things that go in our country, because of that debt. That's a very scary place for America to be, for our economy and for our national security.

BLITZER: You recently said that - I want you to clarify what you meant - you said that the Obama administration is trying to bail out some of the debt-ridden states so they can, quote, "control the people." Explain what you meant by that.

PALIN: Here's - here's - sure. Here's what I said. These stimulus package dollars, they're very enticing, and some states were made to look unethical or incompetent for not accepting all this debt- ridden, largesse packages, federal funds. And, my belief has been, look what's happened in the private sector with these bailout funds. Government was able to get in there and control some of those businesses then that had accepted those stimulus bailout dollars. What's to say same thing won't happen with the state?

This state has not made wise decisions, gotten itself in a heck of a lot of debt, and then they be enticed by federal dollars to come in and bail them out. Who's to say that the same principle wouldn't apply to there, then? That government would be able to get in there and control some of the decisions that a state government is making? That - that's not a safe place to be.

Local control is the best form of government. The most responsive, responsible level of government is local government, not big, centralized federal government.


BLITZER: Governor Palin is now in a very public battle with the a late night TV star.


PALIN: It goes beyond, though, David Letterman's crude, sexist, perverted joke about a 14-year-old girl being, quote-unquote, "knocked up by Alex Rodriguez." I think he's like 30-some years old. I think that that's, you know, pretty perverted. (END VIDEOTAPE)

BLITZER: Letterman now admits a mistake. Will Sarah Palin forgive him? I'll ask her, part 2 of the interview coming up.

Also, the battle over health care reform, can we afford it in the face of a record deficit? We talked to the man crunching the numbers of President Obama, the White House budget director Peter Orszag.

And are the U.S. and Israel on a collision course? I'll ask a Middle East expert what he thinks. Stick around. You're in THE SITUATION ROOM.


BLITZER: You just heard Alaska Governor Sarah Palin blast President Obama for government spending. In part 2 of our interview, she criticizes his foreign policy and national security agendas, then turns her fire to a light night comedian.


BLITZER: Let's move on to some other issues that are out there, including the president's speech in Cairo to the Muslim world. What do you think of it?

PALIN: Well, I would certainly like our president to stand very, very strong and bold in his statements about our protection of Israel that so many of us believe in, and our strongest ally in the Middle East being Israel, deserve our protections. I would have liked to see a little bit more passion in that arena.

BLITZER: Are you suggesting he's not pro-Israel enough? Is that what I'm hearing?

PALIN: I'm sure he is pro-Israel. I would have liked to see more passion in the talk he gave regarding our friends in Israel, our strongest ally, making sure they know that we are here for them. We're going to stand by their side; we're going to help them.

BLITZER: You recently criticized him for showing weakness by having some Pentagon cuts in terms of missile defense that clearly affects Alaska. Is the country safer now that Barack Obama is president of the United States?

PALIN: I think it's a sign of weakness to cut defense spending right now, especially when particular projects and services like missile defense systems. There in Alaska, we're strategically located where we could intercept a missile coming from North Korea.

You see what Kim Jong-Il is up to right now, having watched the six - small missiles, and now deciding that by June 16, he saying, to launch a large missile. Alaska has the position and the equipment, it it's funded correctly, to intercept a missile. And to see then, that there is talk of cutting that system - I think it's nonsense. I think it's a sign of weakness.

We need to be showing signs of strength with our national defense. Especially when you consider, Wolf, our young men and women abroad fight for us and our safety, our security. We need to do all that we can with our military to show that we are strong on offense, not just defense. BLITZER: In recent days, there's been a huge brouhaha over David Letterman's jokes involving your family and your daughter. He said he made a mistake. He says, yeah, it was probably in bad taste. He - he shouldn't have done it. Are you willing to forgive and forget?

PALIN: I will always forgive whomever is asking for forgiveness. It goes beyond, though, David Letterman's crude, sexist, perverted joke about a 14-year-old girl being, quote-unquote, "knocked up by Alex Rodriguez." I think he's like 30-some years old. I think that that's, you know, pretty perverted.

But it goes beyond that. Not just that joke, but this insinuation that it's OK, it's acceptable to talk like that, and then that it's acceptable for the media to not provide the American public, the listeners, the readers, the full context of that joke. Letterman says, now, hey, I wasn't talking about her 14-year old. David, my 14- year-old was there with me at the game. She was the only one there with me. It wasn't my older daughter, who's in college and taking care of her young family. It was my 14-year-old.

So, for the American public to not be given the full context of what that joke was all about, I think that's quite unfortunate. And also, it is that sad commentary on what Americans are fed in terms of full news.

BLITZER: Because he says - now says he was talking about your 18-year-old daughter, not the 14-year old daughter.

PALIN: Yes, it is a weak, convenient excuse, now. And you know what? Regardless of which daughter, it was inappropriate. I think it contributes to some low-self esteem of many of the young girls in the country. Very unfortunate. I'm so glad to see women standing up and saying, enough is enough. Talk about a 14-year-old being -- statutory rape is what this is. Because a 14-year-old would not consent to be "knocked up," quote-unquote. By (AUDIO GAP) gentleman, in this (AUDIO GAP) A-Rod.

I think it's degrading. I think it contributes to so many problems. It's not acceptable. And I'm very, very glad to hear you say that even David Letterman has recognized that it was inappropriate.

BLITZER: All right. Let's move on, talk a little bit about politics, a subject close to your heart. 2012. Before there's 2012 there 2010. Are you definitely going to seek re-election?

PALIN: I'm not definitely going to do anything yet. What I'm trying to get done for Alaska right now is to get that Alaska gas line built. We need those energy sources flowing through North America. That's what my focus is. That and raising my family, doing those good things that we need done up there in Alaska. That's my focus.

BLITZER: So, no decision yet on either 2010 or let alone 2012, is that right?

PALIN: No decision that I'd want to announce today. BLITZER: All right. Well, you'll let us know when you're ready to make that announcement, is that right?

PALIN: I'll let you know, Wolf.

BLITZER: Hey, Governor, thanks very much for joining us. Good luck out there.

PALIN: Thank you so much. I appreciate you.


BLITZER: President Obama wants the Israeli Prime Minister Benjamin Netanyahu to stop building Jewish settlements in the Palestinian territories. But is that demanding too much from Israel? I'll talk about that and more with the author of a brand new book who says the U.S. needs a reality check on the Middle East.

And is government spending affecting the rising price of oil? You're going to hear what the White House budget director Peter Orszag has to say about that. He's coming up, right here in THE SITUATION ROOM.



BARACK OBAMA, PRESIDENT OF THE UNITED STATES: America will align our policies with those who pursue peace. And we will say in public what we say in private to Israelis and Palestinians and Arabs. We cannot impose peace. But privately, many Muslims recognize that Israel will not go away. Likewise many Israelis recognize the need for a Palestinian state. It is time for us to act on what everyone knows to be true.


BLITZER: Is the United States heading for a collision course with one of its closest allies? President Obama has made it very clear what he expects from Israel in order to get peace efforts up and running.

Joining us now, a veteran Middle East analyst David Makovfsky. He's the co-author of a brand new book entitled "Myths, Illusions and Peace." It's written with Dennis Ross, an architect of past U.S. peace efforts. He's back in the Obama administration right now serving as a special envoy on Iran and other issues. That's why, David, you're out promoting the book by yourself. He's not doing it.

DAVID MAKOVSKY, WASHINGTON INST. FOR NEAR EAST POLICY: That's right. He's Caspar the friendly ghost. He's invisible.

BLITZER: He's got to do what he's doing in the government. Here's the key question a lot of people are asking right now. Is President Obama on a collision course with the Israeli Prime Minister Benjamin Netanyahu? MAKOVSKY: I don't think it's inevitable. We'll hear with Mr. Netanyahu's speech this weekend. I think we all understand that the effort should be to try to find what is doable in terms of a solution. We can't solve all the problems, but this is a football game. We can't throw a Hail Mary and just believe we can solve everything. We should try to throw a screen pass and bring the ball down the field as much as we can. And I think of the big issues, Jerusalem, refugees, security, and land. I think actually on territory, the sides are not that far apart.

BLITZER: Will we hear the prime minister of Israel do what the president of the United States is appealing for him to do, freeze all settlement activity on the West Bank?

MAKOVSKY: I think what we'll hear from him I hope is two things. One that the end is a two state solution, a demilitarized Palestinian state.

BLITZER: So far, he's refused to say he supports an independent Palestinian state.

MAKOVSKY: That is correct.

BLITZER: But you think he'll support that?

MAKOVSKY: I do think so because he says that Israel supports the roadmap, which a U.S. diplomatic plan, which has as its goal a Palestinian state.

BLITZER: So you think he will say that?

MAKOVSKY: I think he'll say the goal is a demilitarized Palestinian state, which is the American position as well.

And the second issue on settlements, without splitting hairs, I think he could say what is Israel's position? That it will not expand settlements in a way that would prejudge those territory negotiations or take more land from the Palestinians. The word freeze brings up all sorts of ideas. Can someone add a balcony to their house?

BLITZER: Secretary of State Hillary Clinton says no, they're can't be any of that, no natural growth as it's called.

MAKOVSKY: The term natural growth is also something I expect Prime Minister Netanyahu will try to explain. But I think the goal is to articulate if Israel's position is no geographic expansion that he needs to say that. And I hope that we'll hear that on Sunday.

BLITZER: Well, we'll soon find out. The whole notion of Israel's concern, as far as Iran is concerned, the nuclear program in Iran, how much time is there for Israel to make up its mind whether it's going to try to destroy those Iranian nuclear facilities?

MAKOVSKY: I think by the end of the year, Israel will certainly have a better sense of how is the U.S. engagement with Iran going? This is what Israel is waiting for. It's as - great, you find a diplomatic solution out. Israel's the first one to endorse it.

The skepticism, though, is can a diplomatic solution be found? Dennis Ross, who was the negotiator, is trying to bring that solution about. But we'll have to see if he's successful. I do not see Israel preempting American negotiations with Iran. What Israel wants to know if it fails, what is America going to do? And if America does not have a credible program to stop the Iranian nuclear program, then I think your question is accurate. But I think the likelihood...

BLITZER: Do you think the Israelis have a plan that's in the works right now, contingency plan...


BLITZER: ...that they would go ahead and could they do it? Do they have the ability to destroy those facilities?

MAKOVSKY: Well, there have been a lot of questions about that. They have published it. They have done a lot of contingency plans. We've seen Israeli air force exercises off the coast of Greece, I think about the same distance to Iran. There are questions, can they hit the whole facility or will it hit part of the facility to set the program back for years?

Let's be clear, military solution is not the preferable approach. The preferable approach is if you can have a political solution. The question though is, is a political solution possible? And if it isn't possible, what are the alternatives? And then I think Israel will end up -- will do this if there are no other alternatives. But I think this has got to be a last resort, not a first resort.

BLITZER: The book is entitled "Myths, Illusions, and Peace: Finding a New Direction for American in the Middle East." Dennis Ross and David Makovsky are the authors. David, thanks for coming in.

MAKOVSKY: Thank you, Wolf, for having me.

BLITZER: Is President Obama open to increasing taxes to help pay for its health insurance plan?


UNIDENTIFIED MALE: Ideas like that are floating around on Capitol Hill. We're going to have to wait and see how the whole legislative process plays out.


BLITZER: As the president starts a new push for health care reform, I'll speak with the White House budget director Peter Orszag.

And a key Republican says the president's plan would put the U.S. on a slippery slope toward a European style health care system. We'll speak about that and more with Republican Senator Judd Gregg of New Hampshire.



OBAMA: Health care reform is not something I just cooked up when I took office. Sometimes I hear people saying he's taking on too much. Why is he -- I'm not doing this because I don't have enough to do. We need health care reform because it's central to our economic future. It's central to our long-term prosperity as a nation.


BLITZER: And joining us now from the North Lawn of the White House, Peter Orszag, he is the White House budget director.

Peter, thanks very much for coming in.


BLITZER: Last year, 2008, the budget -- the annual budget deficit was about $459 billion. And now the Congressional Budget Office, an office you used to head, is projecting for this year 1.8 -- nearly $1.8 trillion.

Now this is getting out of control, isn't it?

ORSZAG: Well, look, that is reflecting the severity of the economic downturn that has occurred and also the steps that have been necessary, including the Recovery Act, to try to get us back on the path to economic recovery.

And one of the things that has happened is the sense of freefall in the economy seems to be attenuating. So many of the measures seem to be working, at least to some degree.

BLITZER: You're hoping that that budget deficit stays at around 3 percent of GDP, gross domestic product. But this week in The New York Times, David Leonhardt, one of their economic writers, said this: "Mr. Orszag says the president is committed to a deficit equal to no more than 3 percent of gross domestic product within five to 10 years.

"The Congressional Budget Office projects a deficit of at least 4 percent for most of the next decade, even that may turn out to be optimistic since the government usually ends up spending more than it says it will. So Mr. Obama isn't on course to meet his target."

Is David Leonhardt right?

ORSZAG: Well, under our projections, we do hit our target. Deficits are very sensitive to how the economy turns out, especially five years out, those are numbers you're quoting for 2014. Even by the CBO's own projections, their confidence interval is plus or minus several hundred billion dollars.

There is a huge amount of uncertainty, and under our projections we do hit our target.

BLITZER: Because you remember back in January when you came out with your budget, there were many economists who said your assumptions were overly optimistic. And on some areas they turned out to be overly optimistic.

For example, unemployment, you didn't think it would go above 8 percent. It's already 9.4 percent and going up higher. Have you had a chance to revisit all of those economic assumptions?

ORSZAG: We are in the midst of doing that. And we will also, especially as we go into next year's budget, have an opportunity to be revisiting all of the policies that we have put together for the medium term.

But we need to remember in addition, the key driver of our long-term deficits is something we are trying to tackle right now, and that is health care.

BLITZER: I want to get to health care in a moment, but before we do, I want to talk about the dollar right now, which seems to be going down almost on a daily basis versus the euro, for example. And that's having an immediate effect on the price per barrel for oil.

It's now over $70, almost twice as much as it was only a few months ago and it seems to be going higher. This is clearly a hidden tax on a lot of Americans who want to fill up their cars because it's costing them more and more each time.

The value of the dollar seems to be going down because of all of this spending, is that right?

ORSZAG: Oh, no, I don't think that's the cause. And I'm -- I don't want to get into day-to-day movements or even week-to-week movements in exchange rates. But one of the things that you need to remember is as the economy starts to get at least stabilized, maybe not growing, but at least the sense of freefall attenuated.

Lots of things that occurred during the severity of the downturn, in particular, the flight to safety of U.S. Treasury securities, that will start to get unwound, and you will see some upward pressure on interest rates and their other effects on other financial markets.

BLITZER: Let's get to health care right now, which is a huge issue. The American Medical Association issued a statement this week reacting to some of your proposals to create a public insurance fund, if you will, to compete with some of the private companies like Blue Cross and Blue Shield, or United Healthcare, whatever.

"The introduction of a new public plan," the AMA says, "threatens to restrict patient choice by driving up private insurers which currently provide coverage for nearly 70 percent of Americans."

Do you accept that argument against your plan? That you're going to -- it's going to be an unfair competition between the public insurance companies that you want, and the private ones that are in business right now?

ORSZAG: Well, no, I don't. But first, let me say I think the AMA has been playing a very constructive role in the reform debate. They were part of the group that came in and met with the president and agreed that we can wring more cost out of the system and improve quality.

The reason we favor a public plan is that in many insurance markets there is not enough competition. And that public plan can introduce additional competition and thereby help consumers and help to lead to lower cost and better -- better quality.

Sorry, I just -- I'm having trouble hearing. But the argument that we know exactly how this public plan is going to be designed is premature. There are lots of different versions of a public plan.

Senator Conrad, for example this week, put forward a version that involved non-profits operating the public plan.

BLITZER: Co-ops, he calls it.

ORSZAG: Yes, exactly.

BLITZER: Would you support that?

ORSZAG: Well, there are different versions. I think -- again, I don't want to be commenting on the legislative process as it's evolving. But the point there is, there are lots of different ways of doing this. Premature to be making grand generalizations about what the impact will be before the details are finalized.

BLITZER: We invited our viewers to ask you a question.


BLITZER: We got this comment from Bruce (ph) via our CNN I- Report, from Tucson, Arizona, listen to this.


UNIDENTIFIED MALE: Well, let me tell you something, Obama's campaign promise was he wasn't going to raise our taxes. If he puts a tax on a benefit, he has just done that. He will be done at the end of one term.


BLITZER: Are you open to taxing health insurance benefits that employers provide their workers, something the president adamantly opposed when he was running for office, but now seems to be open to?

ORSZAG: Well, look, that has not been part of our plans to date. It wasn't in the budget, it wasn't in the things that we have put forward. Ideas like that are floating around on Capitol Hill. We're going to have to wait and see how the whole legislative process plays out. But I'd note, even the proposals that are being put forward by folks like Senator Baucus on Capitol Hill, are much different than what Senator McCain had talked about last year.

BLITZER: Senator McCain was really attacked by the Obama campaign for even raising this notion of taxing as regular income the health benefits that employers provide their workers. But now I hear you saying that the president is going to review it. He is open to it, potentially.

ORSZAG: Well, I didn't quite say that. What I am saying is, it wasn't in our proposals. There are lots of things floating around on Capitol Hill that we have to just let play out and see what a final package looks like.

But it is worth noting, Senator McCain had proposed eliminating the tax exclusion for health benefits, Senator Baucus and others are putting forward a much different thing which the tax exclusion would be scaled back somewhat, especially for high-income beneficiaries. That's a much different set of proposals.

BLITZER: All right. We'll leave it there, but continue the conversation down the road. Peter Orszag, thanks for coming in.

ORSZAG: Thanks, Wolf. Thank you.


BLITZER: It's one of the top issues facing Americans.


UNIDENTIFIED FEMALE: I had a serious health problem when I was unemployed. I was able to choose all of my doctors, all of my treatments, and my health care was covered at nearly 100%.


BLITZER: Republican Senator Judd Gregg is here to respond to President Obama's health care proposals and your I-reports.

And we'll get a very, very different view from independent Senator Bernie Sanders of Vermont. He wants to scrap the entire health care system as it exists in the United States right now and get a single payer government system in place.



OBAMA: As Congress moves forward on health care legislation in the coming weeks, there's going to be different ideas and disagreements about how to achieve this goal. And I welcome all ideas. We've got to have a good debate. What I will not welcome, I will accept is endless delay, or denial that reform needs to happen.


BLITZER: President Obama says he welcomes debate on health care reform from all sides. We just heard from the White House budget director Peter Orszag. Let's get a very different perspective right now.


WOLF BLITZER, HOST: And joining us now, Republican Senator Judd Gregg of New Hampshire.

Senator, thanks very much for coming in.

SEN. JUDD GREGG (R), NEW HAMPSHIRE: Wolf, thank you for having me on.

BLITZER: I want you to listen to what the president on Thursday about his proposal to try to reform health care.

Let me read to you what he said. He said, "No matter how we reform health care, I intend to keep this promise -- if you like your doctor, you'll be able to keep your doctor. If you like your health care plan, you'll be able to keep your health care plan."

Are you on board with the president when it comes to that?

GREGG: Oh, absolutely. I think that's critical. There's a very large segment -- in fact, the vast majority of Americans have health care which they're reasonably happy with through their employer, usually. And they have health care deliverers, paid doctors and doctor groups and hospitals which they're comfortable going to and there's no reason to upset that situation. And in fact, it would be counterproductive to do that.

So, I hope any plan that's put forward would accomplish that goal as sort of a preliminary step.

BLITZER: And then he goes further and he says he would like to see a new form of health insurance out there that the government would provide. If you like United Healthcare, if you like Blue Cross and Blue Shield, if you like Kaiser Permanente, keep all of those. But he wants a new plan that he says would make the entire system more productive.

Listen to what he says. He says this, "If the private insurance companies have to compete with a public option, it'll keep them honest and it'll keep their prices down."

Do you agree with the president on that?

GREGG: Well, absolutely not, unfortunately.

The fact is that private system and a public system basically play on different ball fields. And you're -- essentially if you create a public system, a government-run health care system you're basically on a slippery slope to a single payer, total government system and nationalization of the system. That's not healthy because it ends up putting Washington bureaucrats between you and your doctor. It ends up leading to delays and rationing as you see in countries like Canada and England. So, that is not a good way to approach the resolution of this issue. And in fact, it stands -- it's probably contradictory to the first position which is you get to keep your health care plan because once you put a public government plan into the playing field or into the mix that you're inevitably going to have that taking over everything.

BLITZER: But, in fact, what he's suggesting is -- take Medicare for example. A lot of folks love Medicare. That's a government-run insurance program for people that were over 65 years old.

GREGG: Well, Medicare has some warts. And one of the problems Medicare has is its reimbursement system. So you've got a lot of doctors who don't participate in it. And you've got it reimbursing a lot of hospitals at a discounted rate, which means the private sector is actually picking up the full cost of that hospital stay. So, Medicare isn't probably a good example to point to because it's really not a system that is based on the cost of services provided as a system which is arbitrarily price enforced where you have price controls.

If you were to nationalize the whole system, in other words, make everything a Medicare system, then you would basically have to reduce the quality of health care across the board because you couldn't pay for it. You wouldn't be able to reimburse the hospital at adequate rates.

BLITZER: Right now there are, what? 40 or 50 million Americans who have no health insurance. And a lot more who have health insurance but aren't very satisfied with the health insurance and they're deeply worried that if they really get sick, they could go broke. We got this I-Report from a viewer who's living -- an American living in France, Sally Sharpien(ph), who said this -- and I want to play it for you.

Listen to this.



UNIDENTIFIED FEMALE: I had a serious health problem when I was unemployed in France. I was able to choose all of my doctors, all of my treatments and my health care was covered at nearly 100 percent. If this had happened to me in the United States, I would have had to declare bankruptcy.


BLITZER: All right, Senator. What do you say to Sally?

GREGG: Well, first off, I have no interest in turning the United States into France. We're not going to Europeanize this country, even though I regret to say that the policies that this government right now appear to be moving us down that road, toward the nationalization of an awful lot of stuff.

I believe that we produce the best health care system -- delivery system in the world. We're on the cutting edge of technologies, we're on the cutting edge of procedures. And the reason we're able to do that is because we have a private health care system in this country.

I also believe everybody in the nation should be insured, should have the opportunity to get insurance and if they can't afford it, should have the assistance of the government in subsidizing their insurance. And so I put forward a plan which would have taken care of Sally's problem. She would not have to declare bankruptcy under my plan. In fact, my plan is specifically directed at those people who get very seriously ill or have a serious accident in their family and run up large health care costs. My plan would make sure that they have insurance to cover those costs. In addition, my plan would significantly expand our efforts in the area of preventive care and healthy lifestyle so that we could incentivize people to go out and live a healthier lifestyle, thus reducing costs. It would also change the reimbursement system so that we would allow the reimbursement system to reimburse quality and efficiency, not simply reimburse procedures. And further we'd look at diseases that we think are driving the process, driving the costs and try to address those diseases like Alzheimer's and obesity.

BLITZER: Well, good luck with your plan. Good luck with all the plans up there. We'll see what emerges in the coming weeks and months. Senator Gregg, thanks for joining us.

GREGG: Well, thank you. And I hope that we can get something that's bipartisan. That would be very helpful for the country.

BLITZER: A lot of people would love that.


BLITZER: Ratcheting up the health care debate.


UNIDENTIFIED FEMALE: If you have cancer in the U.K. today, you're going to die quicker than any other country in Europe.


BLITZER: Just one example of conservative groups pushing back against the effort for government funded health insurance. We're going to talk to a senator who says it's time for the nation to have a publicly funded health care program.

Plus, a new era for Somalia's navy. Just one of our hot shots, pictures worth 1,000 words. (COMMERCIAL BREAK)


KEIVN BRACY KNIGHT, CNN I-REPORTER: If anyone wants to have private health care, fine. You go right ahead. And I think that the duty of the country is to make sure that everyone else, everyone who can't afford it or can't prioritize it because they're trying to take care of their children or their children to - obviously can't prioritize it, we find a way to insure them for free through our system.


BLITZER: It's one of our I-reporters with his own view on how to reform America's ailing health care system. Can the system be fixed? Should it be scrapped entirely?


WOLF BLITZER, HOST: And joining us now, the Independent senator from the state of Vermont, Senator Bernie Sanders.

Senator, thanks very much for coming in.

SEN. BERNIE SANDERS (I), VERMONT: It's good to be with you.

BLITZER: You just wrote this -- and I'll read it and put I up on the screen:

"I think the evidence is overwhelming that we must end the private insurance company domination of health care in our country and move toward a publicly funded, single payer, Medicare-for-all approach."

You want a nationalized health care system in this country.

SANDERS: No, not a nationalized. I want a national health insurance program which will continue to have privately funded doctors and non-profit hospitals.

The fact of the matter is, our current system is disintegrating. You've got 46 million without any health insurance. More are underinsured. We have 60 million Americans who do not have access to a doctor on a regular basis. 20,000 Americans die every single year because they don't get the medical care they should be getting, and you know what, Wolf? At the end of the day we spend almost twice as much per person on health care as any other major countries, all of which have national health insurance programs.

Does that make a lot of sense to you?

BLITZER: So you want to get rid of all of the insurance companies that deal with private health care insurance whether United Healthcare, or Kaiser Permanente --

SANDERS: Oh, United.

BLITZER: You want the government to take over the health insurance business?

SANDERS: Exactly.

And that's different that socialized medicine. That's a public health insurance program not dissimilar from what Canada has.

United Health Insurance. A couple of years ago the head of that company was a guy named William McGuire. He received $1.6 billion in stock options. Now, do you think that's a cost effective way of putting money into health care? We don't have enough primary health care doctors -- one guy has $1.6 billion.

BLITZER: President Obama, as you know, he makes the point repeatedly that under any health care reform that he wants -- if you like -- millions of people have health insurance and they like their insurance policies, they like their doctors. He says, if you like what you have right now you can keep on doing exactly that. Why is he wrong?

SANDERS: He's not wrong. He's exactly right.

All that we're changing -- we're not telling people they should go to a different doctor. We're not telling people they don't have a free choice --

BLITZER: But you're telling them they should go to a different health insurance company.

SANDERS: Do you think people are saying, Oh, my God. I want a freedom of choice of hundreds of health insurance companies? That's not what they're saying. They're saying, I want to go to the doctor that I want to go to. I want to go to the hospital --

BLITZER: But there are a lot of people that don't trust the federal government to do a good job managing their health insurance.

SANDERS: Well, I would tell you this. That far more people look favorably on the Veteran's Administration, look favorably upon Medicare or on Medicaid than they do on the private health insurance system.

People detest -- you know, one of the reasons in my view that Obama is president -- you remember during his campaign he said in so many words, my mom was struggling with cancer, she eventually died. And she didn't -- she had to use half her energy to deal with getting claims from the private insurance companies. Let's be clear. The function of a private insurance company is not to provide health insurance. It's not to provide health care. Its goal is to make as much money as it can and you do that by denying people health insurance.

BLITZER: Here's what Karl Rove write in the "Wall Street Journal" on Thursday. He says, "If Democrats enact a public option health insurance program, America is on their way to becoming a European-style welfare state."

SANDERS: Oh, my goodness. Well, I mean, the credibility of Karl Rove, who was Bush's guy for eight years leaves something to be desired.

In my humble opinion, George Bush will go in down history as one of the worst presidents we've ever had. And he was advised ably in that regard by Karl Rove. So, what Rove says isn't terribly important to me.

Let's talk about so-called "European-welfare states." Every one of those countries has a national health care program and you know what? Not only is their health system more cost-effective, but what ends up happening, they do a lot better in terms of health care outcomes.

We are 37th in the world, in terms of infant mortality. Do you think that's a good record?

BLITZER: Not if you listen to some of the commercials that are already running. A group called Conservatives for Patients Rights is already airing this commercial. Listen and watch.


UNIDENTIFIED FEMALE: If you have cancer in the U.K. today, you're going to die quicker than any other country in Europe.

UNIDENTIFIED FEMALE: I feel that national health service has let me down because I feel that if I had asked -- if I had had a (INAUDIBLE) when I'd asked one originally, I wouldn't have just gone through everything that I've been through now. And I feel that them raising the age limit has pretty much signed my death warrant.


BLITZER: All right. You hear those horror stories --

SANDERS: Oh! Wait a minute. Are these conservative people representing the insurance companies going to be putting ads on the television?

BLITZER: You know there's going to be a lot of buzz --

SANDERS: Of course they are. That's the reason why we are the only major country without a national health insurance company. An actual health insurance program.

Because the insurance companies are going to spend part of our health care doctors on lobbying and advertising and campaign contributions to the tune over a period of years of hundreds of millions of dollars. I don't see the ad out there, talking about the 20,000 Americans who die every single year because they don't have access to a doctor in a proper way.

Is there a problem with the British system? Of course there is. Do you know what the differential is in spending per person in the United States and Great Britain? It's about three to one. We could do much better than the British do. We can do better than the Canadians do. None of these guys have an answer about why we spend so much on health care and we get so little value in return.

BLITZER: Senator Sanders, I'm sure you'll be at the forefront of this debate that's going to be unfolding over the next several weeks and months.

Thanks for coming in.

SANDERS: My pleasure.


BLITZER: A harp day, yes, harp day in Paraguay. Dozens of harpists give a concert at a government palace. Just one of our hot shots, pictures worth 1,000 words.


BLITZER: Here's a look at some of the hot shots coming in from our friends over at the Associated Press. In Paraguay, more than 50 harp players gathered at a - the government palace to celebrate National Harp Day. Who knew? In England, the LDV van plant was deserted and locked up after the company was placed under bankruptcy. In Somalia, new Navy recruits started training for that country's first naval force in two decades. And in India, take a look at this. A monkey took a swig of water as it traveled with a man on Hindu pilgrimage. Some of this week's hot shots, pictures worth 1,000 words.

And we leave you with a pretty funny moment this week at President Obama's town hall meeting in Green Bay, Wisconsin on health care. Listen to this.


UNIDENTIFIED MALE: I'm fortunate enough to be here with my 10 year old daughter, who is missing her last day of school for this. I hope she doesn't get in trouble.

OBAMA: Oh, no.


OBAMA: Do you need me to write a note?

UNIDENTIFIED MALE: I'll take you up on that actually, Mr. President.

OBAMA: No, no, I'm serious. What's your daughter's name?



UNIDENTIFIED MALE: Her name is Kennedy.

OBAMA: Kennedy, all right, that's a cool name.


BLITZER: And here's Kennedy showing off the note. It says this, "To Kennedy's teacher, please excuse Kennedy's absence. She's with me." And signed Barack Obama. Very cute. She'll have that forever.

I'm Wolf Blitzer in Washington. Join us weekdays right here in THE SITUATION ROOM from 4:00 to 7:00 p.m. Eastern and every Saturday at 6:00 p.m. Eastern on CNN, and at this time every weekend on CNN International. The news continues next right here on CNN.