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THE SITUATION ROOM

Obama Administration Does Self-Grading; Lawmakers Leave, Health Reform Waits; Economy Inches Away From 'The Edge'

Aired July 31, 2009 - 15:59   ET

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


JOHN KING, CNN ANCHOR: And happening now, progress report. Six months in, the Obama administration does some self-grading. Amid a new sign the economy's approving, what high and low marks might the administration give itself during a weekend retreat?

Exodus. The nation's lawmakers head for the exits for a summer recess. But with no firm health care reform plan, will lawmakers face backlash from their constituents?

And running on empty. The Cash for Clunkers program is low on cash, but lawmakers act. A little bit more in the tank.

Wolf Blitzer is off today. I'm John King in CNN's command center for breaking news, politics, and extraordinary reports from around the world.

You're in THE SITUATION ROOM.

President Obama says when he took office the nation's economy was close to the edge. Six months later, the president says there's new reason to be optimistic. He's reacting to a report on the nation's Gross Domestic Product. That's the broadest range of measuring the economy. And while the economy did shrink slightly in the second quarter, it shrank far less than in the first quarter.

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: Today's GDP is an important sign that the economy is headed in the right direction and that business investment, which had been plummeting in the last several months, is showing signs of stabilizing.

(END VIDEO CLIP)

KING: The president says his administration's efforts deserve at least partial credit, and today and this weekend, top officials are huddling to assess what the administration has done well and what it might do better.

Let's bring in CNN White House Correspondent Dan Lothian for more on the weekend retreat.

Hi, Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: (AUDIO GAP) and top-level staffers are meeting today and tomorrow at the Blair House. The White House saying that this is not a chance to come up with some kind of report card and give grades to everyone, but really a chance to sit down, assess the past, and look ahead to the next six months.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): With the economy on life support when Mr. Obama came into office six months ago, the administration is taking credit for bringing it back from the brink of disaster.

OBAMA: We were in a position where we could have gone into a great depression. I think those fears have abated.

LOTHIAN: One reason, they say, a $787 billion stimulus plan.

OBAMA: This and other difficult but important steps that we've taken over the last six months have helped us put the brakes on the recession.

LOTHIAN: But that stimulus plans which Republicans thought was wasting taxpayer dollars is perhaps the biggest example of what hasn't happened so far -- wide-scale bipartisanship. Mr. Obama vowed to change the way Washington works...

OBAMA: Surely there's got to be some capacity for us to work together.

LOTHIAN: ... but has had to fall back on his own party to get things done.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: He was not under the illusion that change was going to come to this town easily.

LOTHIAN: The president has pulled back in Iraq, fulfilling a campaign promise. Troops are now fighting extremists in Afghanistan.

He's announced the closing of the Guantanamo Bay detention facility, but making that happen has been sticky, as is Mr. Obama's push for health care reform, which some say if he fails could undermine his presidency. Politico's Mike Allen says that's way overstated.

MIKE ALLEN, "POLITICO": The chance that some health care bill is going to define his presidency is zero, but at the moment he's way out on that limb and he needs a win.

LOTHIAN: If the White House is keeping track of wins and losses, some say image would be in the "W" column.

ALLEN: He's made Americans feel better about themselves, and he delivered on his campaign promise of giving America a different face overseas.

(END VIDEOTAPE)

LOTHIAN: Now John, this administration doesn't like to talk about polls, unless, of course, they're positive polls. But no doubt they're paying attention to what has happened over the past six months. The president's approval rating has gone from the mid-60s to our latest Poll of Polls, now in the mid-50s -- John.

KING: And Dan, even in the point Mike Allen was making there in the close of your piece, America's image abroad is better. The Cairo speech by the president was the big event in terms of trying to change that image. But is the president satisfied that he's had substantive progress, whether it's trying to get Israel and Palestine back to the bargaining table, or other issues around the world?

LOTHIAN: Well, they do believe that they are making progress, but the one thing the White House likes to point out on all of these measures is everything takes time. And a lot of times they'll point the finger at us and say the media is always saying, well, why isn't this being done, why isn't it being done fast enough? And they point out everything, including change and bipartisanship here in Washington, takes time.

KING: Dan Lothian at the White House for us.

Dan, thanks so much.

And while the administration grades itself, many of you are grading the administration. Next week, right here, we take note of 200 days in office for the Obama White House. CNN anchors, analysts, and many of you will grade the president on the economy, health care reform, foreign policy, and other issues you care about. Special coverage of this "National Report Card" starts right here, next week on CNN.

Another issue you care about, how much work the nation's lawmakers have done or failed to do. Right now, House members are heading for the exits for the congressional summer recess. But still unfinished, work on major health care changes. How might the time off affect that debate?

Let's bring in CNN Senior Congressional Correspondent as the House leaves, Dana Bash -- Dana.

DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: Well, John, look, you know that leaving for Congress, it is sort of standard operating procedure for leaders to give their members talking points. But this time, getting this card from the speaker's office for Democrats is critically important because -- and I think we have it to show you on the wall -- also, it gives them very important message points about what they can do for their health care plan, what it does for people, and also some defense about what it does not do for people. And this is something that they think is critically important for rank-and-file Democrats to use because they know the onslaught of Republican ads and ads from outside groups are coming.

(BEGIN VIDEOTAPE)

BASH (voice-over): After the last vote, the exodus. House members rushing home for the entire month of August. And if you're a vulnerable Democrat, prepare for the political tsunami on health care.

REP. TOM PERRIELLO (D), VIRGINIA: They're going to get the first shot in, the 30-second attack. But the more people know, the more they like what we're doing. And that's going to be good for us over the long term.

BASH: Tom Perriello is a freshman Democrat who only won his conservative Virginia district by .2 of one percentage point. He's undecided about his party's health care plan and will use August with his constituents to decide.

PERRIELLO: Eighteen counties, 18 "Tom in your Towns" and meetings with elected officials and doctors and others, road-testing this. I haven't committed on the bill.

BASH: Democratic leaders are hoping to defend Democrats like Perriello from withering Republican attacks by arming them with a media strategy from power points to simple message ideas -- hold insurance companies accountable, remove them from between you and your doctor. To get their message out, Democratic leaders suggest using town halls, Twitter, Facebook.

Pennsylvania Democrat Jason Altmire rolls his eyes at those instructions.

REP. JASON ALTMIRE (D), PENNSYLVANIA: The House bill is, in my opinion, flawed.

BASH: He's a vulnerable Democrat who voted against his party's health care plan in committee and says Democratic leaders have put Democrats like him from conservative districts in a tough spot by including controversial proposals in their health care plan like a tax increase.

ALTMIRE: ... go back to their district and explain to their constituents why they took a politically unpopular vote. It just was tone deaf to me.

BASH: He insists he's not worried about the onslaught of ads, calls and protests that await him at home.

ALTMIRE: At least it's encouraging debate. We didn't ram this through. We took the August recess to allow the country's voice to be heard.

(END VIDEOTAPE)

BASH: Now, every Democratic lawmaker I spoke with today said that they were elected on a promise to reform the health care system, and they believe at the end of the day, that will get done. But the key, they said, is to regain the message from Republicans to explain what they're going to do for you, not to you, as Republicans are saying.

And they're very much treating this, John, like a political campaign. In fact, one of the Democratic leaders insisted today they are not going to get swift-boated during the month of August.

KING: Interesting use of words.

Dana Bash on Capitol Hill.

It will be quite interesting to match up what they say now with what they say when they come back.

Dana, thanks very much.

We have some unfortunate news regarding Connecticut Senator Christopher Dodd. A short while ago, he announced he has early stage prostate cancer. But the senator is optimistic about his treatment.

(BEGIN VIDEO CLIP)

SEN. CHRISTOPHER DODD (D), CONNECTICUT: We caught this early. The great thing about the annual physical is if you get an early detection of prostate cancer, it's very, very manageable. And so, the good news is I'm going to be back out and doing all the things you have to do in order to represent my state.

(END VIDEO CLIP)

KING: Senator Dodd says he'll undergo that surgery quite soon. You may remember, he was one of many Democrat who sought the presidency in 2008. He's a five-term senator who says he'll continue in what's expected to be a tough bid for re-election next year.

We certainly wish him the best as he deals with his cancer.

And Jack Cafferty is with us now in New York with "The Cafferty File."

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: John, nice to see you.

After beers at the White House, Sergeant James Crowley and Professor Henry Gates say their talks were productive and they plan to meet again. The two men at the center of what grew into a national conversation on race met with President Obama and Vice President Biden at a patio table outside the White House.

What was Biden doing there?

Crowley says it was a frank discussion, that they agreed to move forward rather than dwell on the past. He didn't give more specifics except to say that no one apologized. Gates says he hopes the experience will prove an occasion for education, not recrimination. President Obama said he was thankful to both men for joining him for a friendly, thoughtful conversation.

The White House is probably very happy that this is over. They hope it's over. Hoping now the president can get the nation to focus on his priority of health care.

It probably was not the president's finest moment. A new Pew poll shows 41 percent of those surveyed disapproved of President Obama's handling of the Gates' arrest. Only 29 percent approved.

Gates was arrested for disorderly conduct after making charges of racism against Crowley. President Obama jumped into the debate by saying the Cambridge police acted stupidly while admitting he didn't know all of the facts. Later, the president walked back his comments a bit, but he stopped short of apologizing.

So, here's the question: Sergeant Crowley says nobody apologized at White House beer summit. Were apologies in order?

Go to CNN.com/caffertyfile and post a comment on my blog.

Why was Biden there?

KING: Maybe because he likes beer.

CAFFERTY: There's a good possibility.

KING: You're going to have a lot to read through I suspect on this Friday. This was quite controversial. I was on the road this week and it came up at every stop along the way.

CAFFERTY: And a huge distraction for the White House. I mean, talk about getting your eye taken off the ball. If he'd have stopped that news conference right before the last question, all our lives might be a lot different right now.

KING: You wouldn't be asking this question.

CAFFERTY: That's true.

KING: Jack, we'll check in with you in just a bit. Good to see you.

CAFFERTY: All right.

KING: Does President Obama's former rival think the president has brought political rivals together? I asked Senator John McCain if he thinks the president is bipartisan enough. Wait until you hear Senator McCain's answer.

Amid a new encouraging economic sign, when might the nation see more people getting hired than getting laid off? CNN Chief Business Correspondent Ali Velshi dissects today's GDP report.

And there's concern about economic stimulus money helping the homeless find homes so they can find jobs, but one person who's lived on the streets says not to worry.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: And I thank you all. The only thing I can do now is show the end results. And I won't fail.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: According to a new report, the nation's economic pain is starting to ease. More now on our top story regarding a new report on the U.S. Gross Domestic Product, the broadest measure of economic strength. It shows while the economy did shrink slightly in the second quarter, it shrank far less than in the previous three months. Let's bring in our CNN Chief Business Correspondent Ali Velshi.

Many experts, Ali, thought it might get worse still.

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Yes. Well, GDP, John, is the biggest measure of our economy. It's a measure of everything we produce and sell in America.

Experts had expected it to be down in the second quarter -- that's March until the end of June -- by about 1.5 percent. It was only down by one percent. It's almost negligible. We'd like it to be up, but the bottom line is it went down.

Let me show you exactly how it looks over here on the wall.

I've gone back to the second quarter of 2008. A quarter obviously is three months. That was the last time we had positive growth in the economy, 1.5 percent. That means the economy grew 1.5 percent more than it had been the year earlier.

By the third quarter of 2008, the end of 2008, we were already down, minus 2.7 percent. By the fourth quarter of 2008, look at that, the economy had shrunk 5.4 percent. And in the first quarter of this year, the first three months, it was down 6.4 percent.

Now take a look at it, just down one percent. So, if you look at that trend, it got worse, it got worse, it got worse, and then now substantially better.

That is what everybody's a little bit excited about. It's helping these markets out. It's certainly helping the president out right now, John, as he goes out and tells people, see, what we were doing was actually working.

KING: But -- so, Ali, the question many Americans ask, then, does looking better mean out of the woods?

VELSHI: Well, no. There are a lot of things that you have to worry about in this economy.

GDP, first of all, is old. It's a rearview mirror look at what's going on.

This economy is very dynamic. So, let's look at a few of the other things that we know about.

Housing prices, for instance. We have seen an increase for the first time, a little increase in the price of homes, a .5 percent increase. That's not very much, but it's there.

We've seen an increase in the price of existing homes, new homes. We've even seen an increase in the number of people buying homes. Why? Because interest rates are low and people are able to get into some of these great deals that are other people's foreclosures. So, we've seen that happen. But that's part of the picture. We're seeing some improvements there. We're still not out of the woods. And half a percent increase in housing prices doesn't compare to the more than 20 percent that they've dropped since their peak -- John.

KING: Ali Velshi for us today tracking the GDP.

Ali, we'll be back to you as the day goes on. Thanks much.

And President Obama says the $787 billion stimulus program is helping the economy now begin to pull itself out of recession. Some are asking, where did all the money go? Some of the places might surprise you.

CNN's Kate Bolduan has been looking into this.

Hi, Kate.

KATE BOLDUAN, CNN CORRESPONDENT: Hi there, John.

Well, sometimes the connection between stimulus money and jobs is not so clear. And in this case in California, it's based on an idea that helping the homeless can help the economy.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Right over here in the back.

BOLDUAN (voice over): Uhuru Sawaba, who's 70 years old, has lived here in Fresno's tent city for two and a half years.

UHURU SAWABA, FRESNO RESIDENT: And I get tired of sleeping on the ground because they steal my stuff. So that's basically where it's at.

BOLDUAN: Sawaba does odd jobs at a local business, but has battled drug addiction and hasn't been able to get back on his feet.

SAWABA: It's been quite a while.

BOLDUAN: Until now. Sawaba is moving from tent city to temporary housing, courtesy of economic stimulus money from Washington.

The Department of Housing and Urban Development has awarded $1.2 billion to Fresno and about 400 other communities across the country for homeless prevention and rapid re-housing.

GREG BARFIELD, FRESNO HOMELESS PREVENTION MANAGER: My phone rings constantly with individuals asking for assistance.

BOLDUAN: Fresno's homeless prevention manager Greg Barfield says while the stimulus money doesn't arrive until October, with unemployment above 15 percent, they can't wait. Knowing more money is on the way lets them spend more now and get more homeless people off the street. BARFIELD: What we provided is a step up. It's a first step up and from the dirt into a house. And in that, we've wrapped case management and other services around the individual.

BOLDUAN: But is that the point? We took the questions straight to Mercedes Marquez, HUD's assistant secretary for community planning and development.

(on camera): The stimulus is about jobs, jobs, jobs. How does stimulus money going towards homeless prevention create jobs?

MERCEDES MARQUEZ, ASSISTANT SECRETARY, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT: When you stabilize someone and when you create a job, it is that money that they put back into the economy that creates further stimulus and it stops the bleeding from continuing.

BOLDUAN (voice-over): The stimulus money can be used for short- term rental assistance and to help pay security deposits, among other things.

SAWABA: It's been so long since I had one of this.

BOLDUAN: And while his job prospects are uncertain, Uhuru Sawaba sees this as the best chance he's had in years.

SAWABA: I thank you all. The only thing I can do now is show the end results -- and I won't fail.

(END VIDEOTAPE)

BOLDUAN: But is this effective use of stimulus money? The exact cost and payoff of the stimulus money is harder to measure. Fresno city leaders say they're still budgeting, but of the $1 million they have for rapid re-housing, they're targeting 200 additional people to start. So, 200 additional people off the street into houses -- John.

KING: Doing good things, but you mentioned the political debate will continue. Not just health care.

BOLDUAN: Absolutely.

KING: Where's the stimulus money going? As Congress goes home for the recess, a lot of talk.

Kate Bolduan, thanks so much.

Identity theft can happen to just about anyone. Now a U.S. congressman says someone got his Social Security number and tried to use it to get money out of him. The suspect is in jail on another continent.

A no deductible, no co-pay, no out-of-work network restrictions. They're the Cadillac of medical plans, and some people say they should be slapped with a hefty tax.

(COMMERCIAL BREAK) (NEWSBREAK)

KING: John McCain on the U.S. strategy in Afghanistan. I asked the senator if more troops are needed for that war. You'll hear what Senator McCain has to say.

And from Baghdad to Vermont, Iraqi teens mingle with American teens. And they want you to know about the inflict of violent conflict.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: War has definitely changed us. We're not the same persons. I guess...

MARY SNOW, CNN CORRESPONDENT: How are you different?

UNIDENTIFIED MALE: I'm different. I'm more patient. I'm more optimistic.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: You're in THE SITUATION ROOM.

Happening now, it's so popular, it almost ran out of money in a matter of days. We'll bring you up to date on the status of the rebate better known as Cash for Clunkers.

Just seven more flights before the space shuttles are grounded in two years. But should they live on past their expiration date? They might have to, to keep Americans flying in space.

Out of the emergency room and into neighborhood clinics. Is there a problem with the program for low-income patients that Michelle Obama helped create in Chicago? We'll investigate.

Wolf Blitzer is off today.

I'm John King.

You're in THE SITUATION ROOM.

As the United States begins to wind down its commitment in Iraq, some young Americans and Iraqis are learning more about each other far from the war in New England.

CNN's Mary Snow has more now on how bridges are being built between the two cultures.

Hi, Mary.

MARY SNOW, CNN CORRESPONDENT: Hi there, John.

You know, one of the striking things about the Iraqi teenagers you're about to meet is their sense of optimism. Some explain to us when death is a possibility in your daily life, you make the most out of every day.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Five thousand miles from Baghdad, in Vermont's Green Mountains, Iraqi teenagers get their first taste of the United States, from the mundane to the musical. The goal is to break down barriers with their British and American counterparts.

UNIDENTIFIED MALE: And now let's practice in Arabic.

SNOW: But behind the camaraderie, 17-year-old Cortez Alexander of Chicago says he first had to confront his stereotypes of Iraqis.

CORTEZ ALEXANDER, CAMPER: I thought that they were going to be, like, really mean toward me or say, like, racist stuff toward me, and it's not like that. It's like we're all humans and we're working towards the same common goal.

UNIDENTIFIED MALE: They had this awful idea about that Islam is all about killing people.

SNOW: These two Iraqi teenagers who can't be identified for security reasons say dispelling stereotypes is nothing new for them. They are eager to set the record straight not only about Islam, but about Iraq, where they say life is slowly returning to normal. And even though it's not ideal, they say a key lesson is learning to adapt.

UNIDENTIFIED MALE: War has definitely changed us. We're not the same persons. And I guess...

(CROSSTALK)

SNOW (on camera): How are you different?

UNIDENTIFIED MALE: I'm different. I'm more patient. I am more optimistic.

SNOW (voice-over): As Iraqi teens share their experiences on grounds that were once used to train Peace Corps volunteers, Americans like Ariel Goodman of Vermont see a far-lasting impact.

ARIEL GOODMAN, CAMPER: This is like what ends wars is, like, the future coming together, the future of two countries at war coming together, and healing them through the past by talking and having relationships.

SNOW: And it's citizen diplomacy, says one of the camp's leaders, that the program targets.

JOHN UNGERLEIDER, PROFESSOR OF CONFLICT TRANSFORMATION, SIT GRADUATE INSTITUTE: I think the -- that the young people can take a sense of shared leadership. They learned how to communicate. They learned how to problem-solve together, learned how to make decisions.

SNOW: And, as these two boys prepare to enter college, they know they face an uncertain future, but hope to bring home leadership qualities. UNIDENTIFIED MALE: In Iraq, like, being angry, being always crying, being always, like...

(CROSSTALK)

UNIDENTIFIED MALE: It's not an option for us, no.

(END VIDEOTAPE)

SNOW: Now, before heading back to Iraq, these teens will be visiting cities in -- in the United States. That includes Washington, D.C.

It's all part of a program created by the U.S. Embassy in Baghdad. And, John, it's now in its third year.

KING: Interesting take.

Mary Snow, thanks for that very much.

Some people say America just can't afford the sticker price for health care reform. They want to know where Washington will get all the money. Others say it's right under the hood of some top-of-the-line health care plans.

CNN congressional correspondent Brianna Keilar joins us with more on the health care math.

Hi, Brianna.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Hi there, John.

Well, this is an idea that's getting a bipartisan look in the Senate. The idea is taxing these insurance companies that provide some of these plans that some people say are over the top. But wait just a minute, critics say. This tax could also hit the middle class.

(BEGIN VIDEOTAPE)

KEILAR (voice-over): They're the best health insurance plans money can buy. In Washington, they have a name.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Super gold-plated Cadillac plans.

KEILAR: What makes them so great?

PAUL FRONSTIN, SENIOR RESEARCH ASSOCIATE, EMPLOYEE BENEFITS RESEARCH INSTITUTE: No deductible, no co-payments, no co-insurance, unlimited choice of drugs, no restrictions on network.

KEILAR: These plans are often marketed to the wealthy. They cost as much as $40,000, far above the national average of $12,000. And critics say they encourage the overuse of doctor visits and procedures.

A Democratic proposal to tax insurance companies that provide these pricey plans is gaining bipartisan support in the Senate as a way to help pay for health care reform and keep costs down.

SEN. RON WYDEN (D), OREGON: You can tax insurance companies, and that will then put pressure on them to try to try to make sure that people look for more cost-effective health care packages.

KEILAR: Some lawmakers say a tax on plans with premiums over $25,000 could raise as much as $90 billion to reform health care. The insurance industry, which opposes the tax, insists it would hit the policies of middle-class Americans, and not just the rich.

Economists and insurance expert Paul Fronstin agrees.

FRONSTIN: But you may also find a plan that costs $25,000 because the average age of the workers is 55. And, because they use a lot of health care, the cost of the plan is very high.

KEILAR: Labor unions, a powerful Democratic ally, also oppose the tax. The nation's largest union for public employees and health care workers says insurance companies will pass the cost on to consumers.

STEVEN KREISBERG, HEALTH CARE POLICY AND COLLECTIVE BARGAINING DIRECTOR, AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES: Well, we think that any plan involving taxation of health care reform should not make health care more expensive. So, alternatively, we think taxing income levels is better way to go. Another way to do this is to tax capital gains.

(END VIDEOTAPE)

KEILAR: That may be so, but this is a tax that's been proposed by Senator John Kerry on the Senate Finance Committee, where talks are going on. And it's getting a serious look from Senator Chuck Grassley, Republican from Iowa, who is a key member of those bipartisan talks, John, so, certainly interest in Democrats and Republicans.

KING: On the Senate side, Brianna, what happens if we talked across the Capitol, where things are often very different on the House side?

(LAUGHTER)

KEILAR: Well, on the House side, what they are planning for a tax, what's come out of three committees there, is this increased income tax on the wealthy.

So, that's in place there. But there are certainly some conservative Democrats who are not in favor of that surtax. And I talked with one aide who said they would not rule out the possibility of the House entertaining this tax, this Cadillac tax, in the future. So, the door hasn't been shut.

KING: That's what we will learn a lot about during this recess.

Brianna Keilar for us on Capitol Hill -- Brianna, thank you very much.

John McCain on President Obama -- does the former presidential rival think the president has brought rival parties together? I put the question to Senator McCain. And what he says might surprise you/

There's no place like him. But, as lawmakers head home for summer recess, might they may face any backlash for not making more progress on health care reform?

And warning: If you drive one particular brand of car, there's a massive new recall expansion you need to know about.

(COMMERCIAL BREAK)

KING: I was up on Capitol Hill a short time ago for a conversation with Senator John McCain. We talked about war and political conflict, the health care debate, and progress, or lack thereof, when it comes to the economy.

One of the issues I brought up, has the president, in his view, kept his post-election process to make Washington (INAUDIBLE) bipartisan?

(BEGIN VIDEO CLIP)

KING: Just before the inauguration, the president had a dinner in your honor. And he said you were an American hero and a guy who reached across the aisle. And that is the tone he wanted to set when he came to Washington.

On this point, has he failed that test he laid out at that dinner to be truly bipartisan?

SEN. JOHN MCCAIN (R), ARIZONA: I'm afraid they have.

And, look, they have got the votes. We understand that. They had the votes in the stimulus package, in the budget, in the omnibus, in the SCHIP, all this legislation. And they have picked off sometimes two or three Republicans. But that's not changing the climate in Washington.

What that is, is exercising a significant majority. And, so, I -- I respect their successes, but please don't call it changing the climate in Washington.

(END VIDEO CLIP)

KING: Let's bring in senior political analyst Gloria Borger.

A bit scornful there in the end. "Please don't call it changing the climate in Washington."

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes.

KING: And he was interesting in the conversation. He said he knows there are three Republicans in the Finance Committee in negotiations on health care. And he said that, if someone would ask him, that he would be willing, John McCain would be willing, to play a bigger role, if he could help with bipartisanship.

But he clearly thinks the White House... BORGER: They're on the phone right now.

KING: I doubt it.

(LAUGHTER)

KING: He -- he clearly thinks the White House doesn't want it that way.

BORGER: Well, you know, he does have a point. I mean, the White House does have the votes. And they are in negotiations on health care with these few moderate Republicans.

But understand that Washington has become so partisan because of the way we elect our officials. And big and complex issues are very, very difficult to solve in the way that Social Security was voted in, in 1935, with bipartisan majorities, because the parties themselves are much more ideological.

So, it is very difficult. And I do think he has a point. He hasn't changed the way Washington works. Maybe no president can do that.

KING: We have spent a lot of time -- and we will spend more -- on health care, the economy, domestic issues. But, in our conversations, we also talked about foreign policy, because Senator McCain, during the upcoming congressional recess, is going overseas.

And among his stops will be in Afghanistan. And the commanding general there believes he might need additional U.S. troops, a question I put to the senator.

(BEGIN VIDEO CLIP)

KING: We see that General McChrystal, the new commanding general in Afghanistan, is a little worried about corruption, about the Taliban, and there are indications that he will ask the president of the United States for more troops.

Do you believe we need more troops in Afghanistan?

MCCAIN: I also await General McChrystal's opinion.

Everything -- and our visit. But, from everything I have seen, it looks like the Afghan army has to be increased, and significantly. And that's going to be a huge cost. And I -- I -- it appears as if we need more troops.

But I have continued to be guided by -- to a large degree, by the commanders on the ground and their view, not strictly dictated. But they're the ones that really have the responsibility, to a great extent. And General Petraeus was right on Iraq. And I think General...

(END VIDEO CLIP)

KING: He said at the end he thinks General McChrystal will be right in Afghanistan there.

Twenty-one thousand troops additionally, the president has already sent. Gloria Borger, if the generals want more troops, what kind of a political storm will that cause...

BORGER: Oh.

KING: ... the president among Democrats? Senator McCain said he would support him.

BORGER: Well, first of all, it's going to cause a political storm inside the White House, I think.

You know, there was an internal debate about those 21,000 troops going into Afghanistan. The president came down, said, we're going to send those troops.

Since -- since he's taken office, he's doubled the amount of troops in Afghanistan. He's clearly very skeptical about sending more. What he doesn't want to do, politically -- and I'm not saying he wouldn't do it, but what's difficult for him politically is going to Congress at this particular time, when he's asking them for so much, and suddenly saying, OK, we need Democrats, particularly the liberal Democrats in the House, who may be upset with health care reform in the end, go to them and say, I want more troops in Afghanistan.

Very tough for this president.

KING: Tough for the president, one the few issue where he does have more Republican support.

BORGER: Absolutely. Bipartisanship, maybe.

(LAUGHTER)

KING: Bipartisan -- that's one way to define it.

BORGER: Yes.

KING: Gloria Borger for us here -- Gloria, thank you very much.

New signs of life in the economy -- Wall Street rallies, but Americans are still -- still desperate for work.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: As far as I'm concerned, we won't have a recovery as long as we keep losing jobs, and I will not rest until every American who wants a job can find one.

(END VIDEO CLIP)

KING: And should the space shuttles keep flying after their scheduled to become museum pieces? It could the only way to keep America at the forefront of space exploration.

(COMMERCIAL BREAK)

KING: Politics of health care only heating up as the dog days of summer arrive. What can members of Congress expect when they go home for the August recess? Will being home help or hurt the health care reform debate?

Democratic strategist Jamal Simmons of The Raben Group, and Republican strategist John Feehery are here to talk and discuss that.

Gentlemen, you have both been through this before. An issue is building up steam, or maybe it's caught and confused. People go home. There's genuine grassroots out there, and then there's what we call AstroTurf. Everybody spends money, they come in. So the president's organization will be tested here, Jamal, in places where some Democrats are seeing his poll numbers coming down and getting some jitters.

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: I think that's right.

But what will happen, I think people will hear two things. One, they will hear from all the -- a lot of people who are a little bit more moderate out there: What are you guys doing there? What's going to happen on the tax front? Who's -- how is going to pay the cost for this?

On the other hand, I think they will hear from people: Get it done. We have got real health care problems. Stop messing around between the two parties. We're tired of the politics. Just get it done, and fix this problem for us.

KING: And what's the risk, if you're the Republicans, and, politically, politically, things are going your way, in the sense that the Democrats are fighting amongst themselves, they can't come up with a consensus right now? But if you strip away the specifics of this week's debate or last week's debate and ask the American people, would you like pretty significant health care reform, John, they still say yes.

JOHN FEEHERY, REPUBLICAN STRATEGIST: Yes, they do.

But, right now, I think, when people go home, they are going to hear two things. First, they're going to hear about jobs. I -- I -- where are my jobs? I'm worried about my financial security.

And, then, from the specific groups and grassroots and grasstops, as you say, you will hear specific asks, from the hospitals, from the doctors, from the different organizations that are going to be tremendously affected by this.

And then the president is going to come in with this big ad campaign, which I don't think is going to have much of an impact. Now, people are worried -- do want health care reform, but they don't want to lose their won health care. And since 60 percent to 70 percent of the American people are satisfied with their health care, that's a big leap for the president. KING: And, so, let's look at some of the ad wars that will be under way. As you mentioned, interest groups will get involved. The parties are getting involved. And the Democratic Congressional Campaign Committee is going on the radio.

I want you to listen to a snippet. This one in particular targets California Republican Dan Lungren. But there are many, of course. Let's listen.

(BEGIN AUDIO CLIP, DEMOCRATIC CONGRESSIONAL CAMPAIGN COMMITTEE AD)

NARRATOR: Health care bills, every year the cost goes higher, making it harder to make ends meet. But, year after year, Congressman Dan Lungren opposed reforms to make health care more affordable. Call Congressman Lungren. Tell him not to side with the insurance companies and start supporting real health care reform.

(END AUDIO CLIP)

KING: In that, John Feehery, Democrats -- and you hear it -- they don't call it health care reform anymore, even -- they call it health insurance reform, attacking Congressman Lungren there: Stop siding with the insurance companies.

They have found their target.

FEEHERY: Yes. And I think that any Republican should join them in attacking the insurance companies. I have never been a big fan of the insurance companies myself, when I try to get reimbursed for whatever health care costs I have.

And, so, I do think, in general, the problem with this process thus far is, it's not about the Republicans. It's actually about the Democrats. It's about the moderate Democrats and -- and -- in the House, and the Kent Conrads and Max Baucus in the Senate. They are the ones who are making the decisions. Republicans really aren't the big players here.

KING: He has a point, right? In the sense, the ads -- straw man is a term a lot of critics are -- being used, because it is the Democrats in the House, the liberals can't agree with the conservative Blue Dogs. It is in the Senate, where they are trying to have a few Democrat votes, but Democrats there can't agree.

The biggest -- the president's biggest problem right now, it is fair to say, is Democratic infighting.

SIMMONS: Yes, but here's the problem. The problem is, you can't -- it's harder to attack conservative Democrats. And, frankly, without a lot of those Democrats, we wouldn't have a majority.

Just because people chose Democrats in the last couple of elections in those congressional districts mean -- doesn't mean they aren't conservative. So, if you can go after Republicans in some of these places, and make the argument, some Democratic voters are going to hear that, and some of those Blue Dogs and some of those first -- these freshmen who are -- and sophomores who are in the Congress are going to hear that also.

But here's the thing. The Republicans are going to have to come up with a plan. And that's what's missing. They can't just say no. And I think, when the Republicans go home, they may be surprised by hearing from enough people saying, you know what, what's your plan; what are you guys going to do about this?

It is a problem.

KING: An interesting point, because the Republicans are clearly trying to influence the broader political climate, not just in the health care debate.

FEEHERY: Sure.

KING: But they're using the health care debate as a vehicle. Here's a memo from John Boehner, the House Republican leader.

And this is his memo as folks go home for the recess: "The 111th Congress to date has been a textbook illustration of what happens when a powerful majority tries to go it alone and write legislation that benefits its special-interest allies. It's also an example of what happens when Republicans set out to win the issues, stay unified, and offer better solutions every step of the way."

John Feehery, to you point because of your experience working with the Republican leadership on Capitol Hill. The first part there, you know, Republicans feel pretty strong about that, saying the Democrats are going to try to ram things down. They can cite the stimulus bill. They can cite others.

On the second part, do you think the American people believe the Republicans have put forward unified, better solutions every step of the way?

FEEHERY: I don't think they have heard about those solutions, and I think that's part of the problem of being in the minority. If you look at what's going to happen in the House, the Republicans really don't have a chance to offer many alternatives.

In the Senate, you have Chuck Grassley trying to work out a bipartisan deal. And, so, I think -- I do think that it's been hard for the Republicans to get some traction on their -- their better solutions.

But, at the same time, they're actually winning the issue, because people are turning against this big-government plan, as perceived by the American people, and a big-cost plan. So, for -- in this sense, John Boehner is absolutely right. They are winning the issue.

KING: But -- but, if you're a Democrat now, going into this recess period, do you want to be saying the Republicans are the party no, or do you want to be going home and having tough, tough, but important, conversations about, here's what I mean my public option; this is what it would do, this is what it would cover, this is what it would not cover; here are the two or three proposals on the table to pay for it; one is a surtax; one is this Cadillac benefit plan; one is maybe taxing health care benefits?

Do you want to be trying to build support for specific proposals, or just saying it's the Republicans in the way?

SIMMONS: I do think the Democrats have to come up with how do you pay for this? Most Americans look at this and they say, look, we're going to add 47 million people to the insurance pool, and somebody somewhere is going to have to pay for this.

If we're going to bend the cost down, that means somebody is not going to make as much money as they used to. Who is that somebody? Is it me? So, we have got answer that question for them.

At the same time, though, the Republicans are standing in the way. And even though we're talking about the Blue Dogs and the moderates, where are the Republicans in the deal, other than three Republicans in the Senate and I don't know how many people in the House? I don't think any Republicans...

(CROSSTALK)

FEEHERY: Well, they're not -- they're not allowed in the process, and that's the hard part about the House, because, typically, the House majority works its will.

I think for the -- this is sausage making.

KING: But let me interrupt for one second.

FEEHERY: Yes.

KING: I just want you to be candid. Same when you were -- you -- when you guys were in charge?

FEEHERY: Sure.

KING: OK. Keep going.

(LAUGHTER)

FEEHERY: When we were in charge, we tried to get Charlie Rangel and Nancy Pelosi engaged in the prescription drugs, but they didn't want to play.

But we -- I think Republicans do want to play in the House, but they're not allowed to. That being said, this is the sausage-making process. I think, from the Democrat -- given the Democrats some advice, they probably don't need to get in the specifics of the sausage-making process.

They need to make sausage, and they do it -- they need to make it quickly, because they're starting to lose credibility with the American people.

KING: Let's -- let's come up here.

(CROSSTALK)

KING: Go ahead.

SIMMONS: We're talking about 17 percent of the American economy. It would be nice to have Republicans, who represent a big chunk of the American population, at the table and involved...

(CROSSTALK)

FEEHERY: Absolutely. I agree 100 percent.

(CROSSTALK)

KING: What does it say -- what does it say about the president?

(CROSSTALK)

KING: Again, if he gets this at the end of the year, people go back and find this tape and laugh at the three of us.

(LAUGHTER)

KING: But what does it say about the president? This was a big deadline. Six months, I want you -- by the time you go home in August, I want a plan out of the House, a plan out of the Senate voted and passed, so that, then, we can start working on the big compromise.

Yet, he didn't get that, Jamal. Elected with 53 percent of the vote, nearly an 80-seat majority in the House, 60 votes in the Senate right now. What does it say about the president's leadership abilities, the organization of the Democratic Party, that he didn't get what was a pretty big goal?

SIMMONS: Well, one, I think that we're not at the end of this year yet. So, he's -- you know, what he wants is a bill on his desk this fall. He will probably get that bill on his desk.

Two, yes, he set a deadline. And you know what? Had he not set the deadline for the recess, we probably wouldn't be as far as we are. Three out of five committees in the Congress have already passed a bill.

But, three, he also got a huge stimulus bill. He got a climate change package, which you can argue about whether they should have done that before health care. But he got a stimulus bill, a climate change package. And so things are moving in the House that we have not seen and in the Congress that we have not seen.

FEEHERY: I think that they were overly ambitious and overly aggressive with the cost and the worries that people had about the -- how much this all would cost. I think that they should have gone for a smaller package on health care.

I don't think they learned the lesson from Hillarycare in '93, '94, and I think that that's going to hurt them. At the end of the day, I think they will get a package, but it's going to be much smaller than the Democratic left is going to be happy with. And that's going to hurt them going into the -- into the midterms.

KING: We will save the tape.

(LAUGHTER)

KING: And we will take our own recess here.

Jamal, John Feehery, thank you very much.

SIMMONS: Good to see you, John.

KING: It's one of the top hospitals in the nation, and it is defending a program that critics say targets the uninsured. How does the University of Chicago Medical Center explain itself? It's where first lady Michelle Obama once worked.

And is Iranian President Mahmoud Ahmadinejad at odds with Iran's powerful supreme leader?

Stay with us.

(COMMERCIAL BREAK)

KING: On our "Political Ticker" this Friday: the vice president and the Urban League. Vice President Joe Biden addresses the group's annual conference in Chicago. Vice President Biden says the civil rights group has helped many African-Americans rise to the middle class. That Urban League conference set to end tomorrow.

An update regarding the Supreme Court nomination of Sonia Sotomayor. Floor debate in the Senate is expected Tuesday and a final vote now slated for Thursday. That's according to Senate aides. Democrats and Republicans, though, have not reached a final agreement on just how the debate will play out or what time that final vote might happen.

Former Alaska Governor Sarah Palin won't be visiting the Ronald Reagan Presidential Library in Southern California next week after all. Palin had been invited to an August 8 gala at the Simi Valley library honoring the 50th anniversary of a local Republican women's group. Her attendance could have been seen as an effort to raise her profile, perhaps for another political run.

But a spokesperson for her political action committee said the former Republican vice presidential candidate won't be there.

And, remember, for the latest political news at any time, check out CNNPolitics.com.

And Jack joins us now with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: John, the question this hour: Sergeant Crowley said there was no apologies, not from anybody, at that White House beer summit. Were apologies in order?

Anthony in New York says: "I'm less concerned with apologies than I am with simply talking. As an African-American, I have been discriminated against, as have the majority of minorities in one way or another. Hearing someone out or at least attempting to understand is more of a step in the right direction than simply saying, 'I'm sorry.'"

Linda in Arizona: "God, what a stupid mess. I am so sick of it. Crowley should apologize for lying in his report. Gates should apologize for flying off the handle. Obama should apologize for dragging everyone through this ridiculous exercise and not inviting Lucia Whalen, who was the only person who behaved well in this whole incident. Biden should apologize for a bunch of other things."

(LAUGHTER)

CAFFERTY: "Now can we please just move on?"

Mike in North Carolina: "President Obama owes an apology to those of us who are sweating out the health care reform debate, anxious to rein in the profiteering insurance companies. We really could have done without this distraction."

Jack writes: "Yes, Gates should have apologized on behalf of every member of the self-perceived elite who has opened a conversation with a police officer by saying, 'Don't you know who I am?' Those situations generally end in unnecessary arrests. The officer was doing his job, according to his training."

Stan says in Canada: "I believe a beer summit is the international code for letting bygones be bygones. They had a good discussion about the situation, and they had a beer while doing it. No apologies necessary."

Joseph writes: "You owe us apologies for covering this non-story endlessly. Why can't you just let this go? Let it go, Jack. Just let it go."

And Michael says: "Jack, you and I both know that men do not apologize over one beer. It takes at least a case, which is followed by either a fight or repeated use of the phrase, 'I love you, man.'"

If you didn't see your e-mail here, you can go to my blog, CNN.com/caffertyfile. Look for yours there, among hundreds of others -- John.

KING: I told you that was going to be a bit provocative.

(LAUGHTER)

CAFFERTY: It's great. I love that stuff.

KING: All right. We will see you in a little bit. Thanks, Jack.

(LAUGHTER)

KING: And you're in THE SITUATION ROOM.

Happening now; too many clunkers, not enough cash. The House votes to pump more money into the popular stimulus program aimed at driving up auto sales.

Before she was first lady, Michelle Obama was a top exec at a major medical center. Is a program that she helped to create there helping or hurting care for Chicago's poor?

And the latest shuttle flight ends successfully. Only a handful of missions remain before the fleet is retired. How many years will American have to hitch rides into space with the Russians before the next-generation spacecraft is ready?

Wolf Blitzer is off today. I'm John King. You're in THE SITUATION ROOM.