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STATE OF THE UNION WITH JOHN KING

Sound of Sunday

Aired August 9, 2009 - 11:00   ET

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


JOHN KING, HOST: I'm John King, and this is STATE OF THE UNION.

(BEGIN VIDEOTAPE)

KING (voice-over): It's 11:00 a.m. Eastern. Time for STATE OF THE UNION'S "Sound of Sunday."

Twenty-seven government officials, politicians and analysts have had their say -- the U.S. ambassador to the United Nations and the president's national security adviser, the Senate's top Republican, former chairman of the Democratic Party. We've watched the Sunday shows so you don't have to. We'll break it down with Donna Brazile and Ed Gillespie, the best political team on television.

STATE OF THE UNION "Sound of Sunday" for August 9th.

(END VIDEOTAPE)

KING: And a dramatic statement this Sunday from the Senate's number two Democrat. President Obama says the so-called public insurance option is essential to health care reform. But Senator Dick Durbin tells us here on STATE OF THE UNION that if the votes aren't there, Democrats might have to at least temporarily scale back their goals.

(BEGIN VIDEO CLIP)

DURBIN: I support a public option, but, yes, I am open. Just understand that after we pass this bill -- and I hope we do in the Senate -- it will go to conference committee and we'll have a chance to work out all of our differences.

DURBIN: So we'll see how this ends, but I don't want the process to be filibustered to failure.

(END VIDEO CLIP)

KING: Now some Democrats complain the health care town halls back home are being disrupted in protests carefully orchestrated by critics of the president's health care ideas. But the Senate's top Republican says those complaints are proof to him that Democrats are nervous.

(BEGIN VIDEO CLIP)

MCCONNELL: To demonize citizens who are -- you know, who are energetic about this strikes me as demonstrating a kind of weakness in your position. In other words, you want to change the subject and rather than talk about the half trillion dollars in Medicare cuts, let's talk about somebody at some town meeting who misbehaved.

(END VIDEO CLIP)

KING: And on the world stage, the president's ambassador to the United Nations says former President Clinton's trip to North Korea was a huge success, rejecting the suggestion it amounted to negotiating with terrorists.

(BEGIN VIDEO CLIP)

RICE: Absolutely not. That is, in fact, a ridiculous statement. We don't negotiate with terrorists, that's the policy of the United States. But this was a unique opportunity for the former president, on a private humanitarian mission, to obtain the release of two American women who had been held for many months.

(END VIDEO CLIP)

KING: As you can see, as always, we've been watching all of the other Sunday shows so maybe you don't have. Let's bring in the best political team on television, as we do every Sunday at this hour, and break down the issues. Joining me, former Republican National Committee Chairman Ed Gillespie, and CNN contributor and Democratic strategist Donna Brazile.

Donna, let's start with that statement from Dick Durbin, which was in part startling, in part maybe a reflection of reality though. He says he doesn't like it, that he wants a strong public option in the bill, but if the Democrats don't have the votes, that he thinks maybe pass a bill that doesn't have a public option, get to Conference Committee with the House and then maybe try to restore it there.

That's a concession of a bit of a problem, isn't it.

BRAZILE: John, first of all, four out of five committees have passed real strong health reform. We know that at some point the Democrats will have to get together and try to figure out how to make sure that these bills are consistent.

The public would like to see some option in the reform package that will lower costs, and to ensure that they don't get dropped from their current system.

I believe a public option is necessary, not only to lower costs, but to ensure that most Americans with pre-existing conditions can go about their way and get the best possible insurance.

There's a lot of debate going on right now within the Democratic caucus over the best way to proceed in September. I think right now the president would like to see the four guiding principles he put on the table remain intact.

But I also believe that the democrats -- majority of Democrats would like to see that public option stay in there.

KING: But what does it tell you -- and again, I want to be clear and fair to Senator Durbin, he wants it, and he hopes it's there in the end, but he essentially says, look, if we can't get it in the first sweep in the Senate, let's do something, lay down a marker, and then try to get it later. That is not what the president hoped we would be talking about.

GILLESPIE: It's not what the president hoped we would be talking about. And the fact is this reflects the drop in support and understandable skepticism about a public option that voters are bringing to bear right now on their elected officials, and particularly senators while they're home for these town hall meetings and House members as well.

John, I think where this is heading is to have a bill that is scaled back, focused on those who are involuntarily uninsured, where you can get some bipartisan consensus, drops the public option, drops these tax increases, drops the slashing of the Medicare system.

I suspect at the end of the day, you get a health care bill that gets some Republican votes, and doesn't have all that the president wanted in it, but he signs it and tries to claim victory.

But I think it will actually be a victory for those who are opposed to these massive government interventions.

KING: Hang on one second, let's stay on health care, but I want to bring some more sound into the conversation. First on this issue of the public option, you heard Senator Durbin open the door a little bit. Governor Dean -- Governor Howard Dean, the former chair of the Democratic National Committee, who happens to also be a long-time practicing doctor in the state of Vermont, he says you need to keep the public option.

Let's listen.

(BEGIN VIDEO CLIP)

HOWARD DEAN, FORMER DNC CHAIRMAN: If you're voting against having a public option, what you are voting against is something that 72 percent of Americans in two polls want, which is the choice. Most of them aren't going to sign up for the public option, but they think they have the choice.

(END VIDEO CLIP)

KING: They think they should have the choice. Donna, what's interesting right now is that this is largely a debate among Democrats over what the next step is, is it not?

BRAZILE: Well, John, the Democrats have offered plans. The Republicans, while there are some plans on the table, the leadership clearly have not embraced it and they have made it clear to Congressman Ryan, don't put forward your plans, because let's debate with the Democrats. What we do know, John, is that if we do nothing, insurance premiums will continue to go up.

KING: Hold it up. Hold it up, if you want to hold it up.

BRAZILE: We have the most expensive health care system in the world, ranked 24th, and yet we get less bang for our buck. The other problem, John, is that for the uninsured, they have the best insurance program in the world and that is they can go to the emergency room, and Ed and all of us have to pay for it.

So I think what Governor Dean is saying, if we really want to lower costs, we want to, you know, ensure choice and make sure that patients run their health care system, we need to keep that public option in the debate.

GILLESPIE: John, let me -- Donna is right about the cost. And that is the central focus of most voters. That is where the concern is. And I think that's where this White House got off on the wrong foot, because it made people realize that they are going to raise my cost, if I have insurance, my cost is going to go up in order to pay for those who have no insurance right now.

There are other ways to do this, to make sure that we can help get those who are involuntarily uninsured covered in the system. But raising the cost of those who have insurance now, private sector insurance or even Medicare insurance, is the wrong way to do it.

And look, the public option is not just a choice. It is going to end up siphoning folks out of the private insurance system into the government-run system. It's as simple as that. A friend of mine -- best friend, runs a couple of car dealerships up in Harrisburg, Pennsylvania. He did the math. Paying the 8 percent surtax on his employees would be cheaper for him than providing the insurance he currently provides for 74 employees. He'll shift them into the public option if that's where things end up. And people know that. They're starting to figure it out.

BRAZILE: Well, the costs will continue to go up $1,800 a year, and because in fact we have more Americans retired, and the government program, the Medicaid, Medicare program will continue to rise over the next 10, 50 years because more and more Americans will start to retire.

So we have to do something to control costs and continue to provide choice.

KING: This is a legitimate and a very interesting policy divide. What are your choices, what should they cost, where would the money come from? There is also a political calculation that the White House and the Democrats are going to have to go through as we move through August as the lawmakers prepare to come back.

And that is the president has been adamant that this must happen this year. And for him not to get a health care bill would be viewed as a huge failure. So one of the options on the table is let's try to have bipartisan negotiations. They're working on that in the Senate.

But if you come back, about a month from now, and you don't have Republicans on board, the Democrats try to muscle this through. They have got a nearly 80-seat majority in the House, 60 votes in the Senate if you get the two independents.

So Dick Durbin, also earlier this morning, says if necessary, do you it the Democrats' way.

(BEGIN VIDEO CLIP)

DURBIN: If it reaches a point where we cannot reach a bipartisan agreement, I don't want to see health care reform fail. We only get a chance once in a political lifetime to do something.

(END VIDEO CLIP)

KING: It would be a major challenge. You would have the Democratic president, the Democratic majorities muscling through on the Republicans. Could they do it?

GILLESPIE: I don't think they can, John. The American people don't want to see something of this significance to be done with only one party only support. They want to see something that reflects bipartisan consensus because they understand that that probably protects their interests.

Trying to muscle this through using reconciliation or some of these protected procedures in the Senate I think would result in a huge backlash for Democrats. And I don't think they would get it done.

BRAZILE: Well, we have had 16 years to do something, and nothing happened even when the Republicans controlled both the Congress and the White House. What the Democrats want to do is to lower the costs and provide choice for all Americans and to keep their existing insurance that they have.

We have the votes -- everyone knows that. And we are moving it through the committees, everybody sees that. But the White House must revamp their message this coming fall to ensure that the American people are brought along so they understand what is in it for them, how they will benefit from it, John.

KING: Well, let's talk a bit about that. You say revamp the message. I want to move on to a different issue but it's a very -- it's a connected issue, and that is the broader economy.

Donna Brazile did not only just bring her charts today, Ed, she's in The Washington Post this morning writing her views on what the president needs to do to restore the American people's confidence in the economy and in his handling of the economy.

And Donna Brazile writes this: "The economy is getting better, but main street isn't feeling any relief. And since most Americans aren't likely to for quite some time, it would be a mistake for the White House to start shouting the economy is working too loudly and too soon."

So, Donna, you're telling the president be cautious.

BRAZILE: Absolutely, John, because we all know, history tells us, that getting the jobs back, job growth will take time after the recession. And so I'm urging my colleagues not to go out there and start popping the champagne because main street, they're still hurting.

The banks are finally starting to lend. Economic activity is starting to turn around, but it will take time for us to get out of this deep recession.

KING: Ed, you've been there in the Oval Office with the president. And you know, presidents want to seize on any good economic news because they know they are defined -- their political standing is defined by how the people feel about the economy.

GILLESPIE: And it is a -- you've got to get the right balance of trying to foster people to understand that things may be turning around, at the same time not looking out of step with people's concerns.

And we have to be careful here. Look, the payroll loss was less than was expected, but we lost 270,000 jobs. That is not gaining jobs. And we didn't we haven't gotten the sign right yet. We're not in the plus column. And we need to get in the plus column.

I thought it was a dissonant note when Rahm Emanuel said, you know, we fixed the economy. We haven't fixed the economy. And the fact is people are rooting for this president. I've seen some focus groups, it's clear. People want to see President Obama succeed.

Republicans need to be careful that we don't look like we are trying to hope for him to fail, because we're all in this together, we want to make sure that we can turn the economy around. We've got concerns about his policies. But I think they are a little too forward-leaning right now in terms of the nature of the good news. It's not all that great.

BRAZILE: Well, I think what Rahm -- and I definitely won't speak for Rahm, because we know that he will call me up later and tell me that's (INAUDIBLE)...

(LAUGHTER)

KING: He can come on in if he wants.

BRAZILE: But what he was saying, and I think what most economists and others are saying is that the stimulus helped to rescue the economy from the brink that it was going under.

BRAZILE: Now we have some stabilization in various markets and various sectors of the economy, but we haven't turned the corner. And there will be a twists and many, many more turns in the future. Five hundred thousand jobs already saved as a result of the stimulus -- that's something we should celebrate. We shouldn't be despondent just because...

GILLESPIE: First of all, obviously...

BRAZILE: ... just because the numbers are going down. Let's...

GILLESPIE: Not surprising, I'm skeptical of the 500,000 jobs figure, but more importantly, the American people are. People don't believe that the stimulus package is turning the economy around.

And let's be honest. Only 6 percent of it has gone out the door. It can't have had that great an effect on the economy at this point.

BRAZILE: The money going to...

(CROSSTALK)

BRAZILE: ... your home town, is helping to save firefighters. The money that is going to New York City is helping to save teachers' jobs. We know that is helping the economy.

KING: Quick time-out -- a quick time-out. We'll come back with much more to discuss, as you can see. Ed and Donna both came feisty today. We'll be right back.

(COMMERCIAL BREAK)

KING: We're back with Ed Gillespie and Donna Brazile, and let's move to the international stage.

If you pick up today's Washington Post, there's a story by the veteran journalist, Walter Pincus, and this is the lead. "As the Obama administration expands U.S. involvement in Afghanistan, military experts are warning that the United States is taking on security and political commitments that will last at least a decade and a cost that will probably eclipse that of the Iraq war."

A pretty stunning lead of that piece in The Washington Post. And the president's national security adviser, Jim Jones, was asked about this earlier today on another program. And he said, not quite. (BEGIN VIDEO CLIP)

GENERAL JIM JONES (USMC, RET.), NATIONAL SECURITY ADVISER: ... predict, here, where the tipping point is, just like we couldn't really predict it in Iraq. But if it's done right and it's done cohesively, the tipping point will be much, much quicker, much sooner than that. We will know whether this strategy is working within -- by the end of the next year, and we'll be able to make some predictions -- maybe some predictions, at that time, but not before.

(END VIDEO CLIP)

KING: Donna, he said that, know whether the strategy is working sometime in the coming months, but he didn't say how long U.S. troops would be there. And some U.S. troops would be there, most people believed, the decade.

And the idea that this could cost as much as the Iraq war -- in a Democratic party that picked Barack Obama as its nominee in part because he was the most credible anti-war candidate when it came to Iraq -- if he is asking for 10 years in Afghanistan and hundreds of billions of dollars, what will the reaction be?

BRAZILE: Well, first of all, I think they will question what is our commitment, how much it will cost.

And there's a larger issue here, John, and that is the capabilities of the Afghan government. You know, there's an election coming up soon. If that government can be seen as stable, providing for its people; if they can update their security apparatus, perhaps we will not be there very long.

But General McChrystal, at the request of Secretary Gates, is doing an assessment right now. And some time within the next week or two, we will hear from Secretary Gates, maybe the president, and hopefully they will explain to us how long and how much.

KING: You came in, Ed, after -- to the Bush administration -- after the beginning of the Iraq war. But, you know, one of the big criticisms was that the president underestimated how long it would take, underestimated the cost in money, underestimated the cost in blood, and essentially didn't tell the American people up front, "You're buying a pretty long war, here, that's going to cost a lot of money."

Has President Obama explained to the American people what the stakes are and the exit strategy in Afghanistan?

GILLESPIE: I don't think he has yet. I want to be clear that I think President Obama has acted very responsibly relative to Afghanistan. I think that he has properly identified it as a threat to our national security. If Afghanistan's government fails there, that is a very dangerous region of the world to the United States. And he has committed to being willing to provide more troops.

I was disconcerted by a report that I saw over the weekend that General Jones had told the generals on the ground in Afghanistan, "Don't come asking for more troops because the president will have an adverse reaction to that."

I didn't see that addressed this morning, but I hope that's not the case.

KING: He said he did say this morning it's the table, still. Additional troops are possibly on the table.

GILLESPIE: Right, but I didn't see it addressed whether or not he had signaled to the generals, "Don't ask for them," and I think that would be a mistake.

And I do think the president, who is a very effective communicator, does need to do more on this front and does need to explain to the American people what are the stakes in Afghanistan; why does it matter to our national security, and why may we need to put more troops into Afghanistan, and why might we need to be there longer?

KING: Well, what does it tell us, that you have Republicans, conservative voices, saying he's doing the right thing; he's identified the problem, but he could explain the situation better.

And, as you know, the questions, and in some cases, criticisms, have come from the left -- and, to be fair to them, from people who are committed anti-war liberals who oppose all U.S. military involvement overseas, or most U.S. military involvement overseas.

BRAZILE: There was a resurgence of the Taliban when we took our eyes off of Afghanistan. We all know the price that we paid on September 11. No one would like to see the United States or any of our allies, anyone, to pay that kind of price.

And so I recognize the sentiment on the left or the right or anybody else. But the truth is that this is a very important strategic moment for us in Afghanistan.

We've got to get it right. We need a definite strategy for ensuring that the Afghan government can provide for their people; we stop the Taliban, Al Qaida, and we help Afghanistan, with NATO and others, to retrain -- to train their troops, recruit and train their troops so the Taliban is not the only game in town with their poppy money.

KING: We watched Bill Clinton return to the world stage this past week. He took a secret mission to North Korea. He helped win the release of two journalists who were being held in a North Korean prison camp. He returned home with them to Los Angeles.

The White House and former President Clinton have been very hush- hush as to any specifics in his conversations with the South -- the North Korean leader, Kim Jong-Il.

But some conservatives have criticized this, a man you worked with in the Bush administration, John Bolton, the former U.N. ambassador, saying it came pretty close to negotiating with terrorists.

I've put that question to the woman now in that job at the United Nations, Susan Rice, this morning. Was Bill Clinton negotiating with terrorists?

(BEGIN VIDEO CLIP)

RICE: Well, obviously, this was not a negotiation. I want to be clear about this. This was a humanitarian mission. But Bill Clinton has enormous skills, experience and talent. We're very grateful for his willingness to take this private mission, and we're pleased with the results.

And I can't predict what might transpire down the road, but we obviously value what he can contribute.

(END VIDEO CLIP)

KING: So, two questions. Take them in each order you -- you wish. Propaganda victory for the North Koreans or the right thing to do to secure the release?

And what will we see next from Bill Clinton?

BRAZILE: Well, first of all, this was a very unique mission to free these two American journalists.

BRAZILE: Former Vice President Al Gore worked tirelessly behind the scenes, working with allies, the Swedes and others, the State Department, the White House, to get their release. And clearly Bill Clinton went on a private, humanitarian mission. And I know it's not seen as private because his wife is the secretary of state. But I want to applaud the president for undertaking the challenge of going and bringing home these two Americans to reunite with their families.

Clearly we need to know now where do we go from here? Will we get the North Koreans back to the table for the six-party talks? Will we figure out any more about Kim Jong-il's status, his health, the succession plan. But there's a lot more on the table. But nothing really has changed in my judgment.

GILLESPIE: Well, two things, John. First of all, obviously happy for the two journalists being reunited with their families. But in terms of it being a private mission, not only is he married to the secretary of state, former president, but this was negotiated apparently between the two governments that if he were to go, he would get the journalists back. That is a negotiation.

So I thought that that was a little bit of an uncredible statement that was made in characterizing the nature of the discussion. Secondly, I thought that Henry Kissinger's op/ed today in the "Washington Post," highlighting the fact that this raises real concerns. While we are all happy for these journalists to be reunited to their families, what kind of a signal to we send? We have now got three hikers apparently in Iran who are being held by the Iranian government. Are we going to send Bill Clinton to Tehran to get those three out? And what is the outcome of that? And let's not kid ourselves. This was a definite benefit to Kim Jong-il and the North Korean government, this photo-op with former President Clinton.

KING: And we'll see if better diplomacy come of it, better relations come with it. But for this segment, we'll call it quits for today. Ed Gillespie, Donna Brazile, thanks for coming in.

And we'll have more analysis in the "Sound of Sunday" in just a moment. But straight ahead, how the folks feel at Brail's Restaurant in Eugene, Oregon, , where the unemployment rate has doubled, doubled, in the past year? "State of the Union" will be right back.

(COMMERCIAL BREAK) KING: Our travels this week took us out to the Pacific Northwest to a state that back a quarter century ago was a swing state in presidential politics. Let's look right here. This is Oregon, back in 1984, when Ronald Reagan won. Let's go through time. Blue, blue, blue, blue, blue and blue. Oregon now reliably Democratic. Now why is that? Here we're out in Eugene. There are 894,000 registered Democrats, 677,000 registered Republicans. The state has been hard hit by the recession, 12.2 percent unemployment is doubled the rate one year ago.

And more than 17 percent of the residents of Oregon do not have health insurance. So for our breakfast conversation, we chose Brail's Restaurant in Eugene. It's a college town, so being voted Eugene's best hangover breakfast three years running is a source of major pride. In a community that went big for candidate Obama last November, the concerns about President Obama's focus though, were quite telling.

(BEGIN VIDEOTAPE)

KING: Are we on the right track or is the country still on the wrong track?

MATTHEW JORDAN, EUGENE: I see more people being more -- or ingenious with how they go through and the whole recession. My mom is a great example. She is being self-sustaining. She actually bought a dairy goat. And she is making feta cheese on her own. We are saving money any way we can and it's working.

KING: Joy, you depend on people coming in and being able to spend money. In this economy, is your business down?

SANG JOO "JOY" KNUDTSON, OWNER, BRAIL'S: For now, I'm OK. I don't know how it's going to be later.

KING: So is it -- is it getting better though or is it getting worse?

MICHAEL MOFFITT, EUGENE: I think it's getting better.

KING: Why?

MOFFITT: I think it's at least poised to get better. It's not getting worse. We are not seeing new news that is bad. And I see people this year taking steps that are the kinds of things you wouldn't do if you thought it was really getting a lot worse.

KNUDTSON: I have a bit of issue with medical issue. I'm looking at it right now. You know, I've been looking at it. I want everybody in my -- you know, full-time workers want to have medical insurance. But medical insurance is way high.

KING: So do you trust the government to make it more affordable, or when the government gets involved do things get worse?

KNUDTSON: I think small business will be hurt. If we have to pay those kinds of amount of fees, you know, it's going to hurt.

MOFFITT: I have employees, and the crazy thing is, if I want to do the right thing and give them health care --

KNUDTSON: I do, too.

MOFFITT: I get basically -- basically all the tax incentives are against me doing that. That's crazy. And so if the alternative is mandating me to do it, that has got a bunch of problems, too. But whether it's private or public, I don't know what the right answer is, but for goodness, you should make it easy for Joy and me to give our employees health care.

KNUDTSON: Oregon, minimum wage is $8.40. I think minimum wage is really high here.

KING: So the state is squeezing you?

KNUDTSON: I think so.

KING: Watching the new president for little more than six months, is there a big surprise for you? The biggest atta-boy or biggest disappointment?

JORDAN: I love how he went after lobbyists. Lobbyists and big corporations, the golden parachute, problems, CEOs. At the same time we're giving them a lot of money. I think it was Bill Maher made a reference that Obama needs a little bit more Bush in him. He needs to be a little bit more like Bush. He has got to say things, do things and not really care what people think.

And I've noticed lately -- I've noticed lately a lot of people, well, a lot of things are -- I don't know, kind of getting to him. He's slipping a bit more. The Gates controversy, really not a huge deal, he's a very prominent man, but he slipped. Obama slipped. And that's -- he kept so cool through the elections. And that's what people liked about him. And it's getting to him. It's the hardest job in the country, but we liked him because he kept his cool.

MOFFITT: I actually quite like the deliberativeness. I think wholly aside from what the decisions wind up being, the fact that there is evident thinking about it that we're really going to take time and think about it. That's a welcomed change. If there's a disappointment, I can't tell what his small number of real priorities is. I fear that he's so smart that he may be getting into every issue that comes along.

(END VIDEO CLIP)

KING: Great conversation, and trust me a great breakfast at Brail's Restaurant in Eugene, Oregon.

We're going to take a quick break. When we come back, more "Sound of Sunday." Our reporter panel just ahead.

(COMMERCIAL BREAK) KING: I'm John King and this is "State of the Union." Here are stories breaking this Sunday morning.

Divers have recovered a fourth victim of a deadly air collision in New York. A total of nine people are presumed dead after a small plane and tourist helicopter collided yesterday over the Hudson River. Among the victims, at least one child and several Italian tourists.

President Obama's national security adviser says North Korean leader Kim Jong-il appears to be "in full control of his government" despite reports of declining health. That assessment coming from White House adviser Jim Jones on the Sunday morning talk circuit. Jones says former President Clinton passed no official messages to North Korea during his mission last week to bring home two U.S. journalists.

President Obama leaves for Mexico this afternoon for a summit of North Korean leaders. He will meet with the leaders of Mexico and Canada in Guadalajara. High on the agenda, the global economic crisis and strategies to contain the H1N1 flu virus. That and more ahead on "State of the Union."

Joining me now, CNN senior White House correspondent Ed Henry, "Washington Post" reporter and author Dan Balz, he is co-author of "The Battle for America 2008: The Story of an Extraordinary Election." And CNN national political correspondent Jessica Yellin.

Got the book right here. It's a good beach read, took it on vacation last week, excellent. Excellent. All right, let's start. I found pretty dramatic statements from the number two Democrat in the Senate this morning, Dick Durbin. As we all know, the House and Senate both missed the president's deadline to pass health care bills before going on this congressional recess. And Dick Durbin, I want to be fair to him, he said he wants that government option that the president says is so critical. He says he wants it, he hopes it is there in the end, but Dick Durbin opening the door to supporting a Senate bill that does not have the public option.

(BEGIN VIDEO CLIP)

DURBIN: I support a public option, but, yes, I am open. Just understand that after we pass this bill and I hope we do in the Senate, it will go to conference committee, we'll have a chance to work out all of our differences, so we'll see how this ends. But I don't want the process to be filibustered to failure, which, unfortunately, many senators are trying to do. I want to make sure that we do something positive for the American people.

(END VIDEO CLIP)

KING: Ed, he is not only the number two Democrat in the Senate, he's a close friend of the president of the United States, and he is essentially saying we may have to at least initially compromise a lot in the Senate.

ED HENRY, CNN SR. WHITE HOUSE CORRESPONDENT: I think it's another signal that that is exactly where the debate is heading, that the president's only hope of really getting some sort of a comprehensive reform bill is to not have a public option. And we said this a couple of weeks ago when we were talking about how there might be some difficult conversations at the end of this whole debate between the president and Speaker Pelosi, some in the left and the House.

But the fact of the matter is the only way the president is really going to get something that he can call bipartisan is if it goes through the Senate Finance Committee and the Republicans on the committee, as you were pointing out earlier and some of the Democrats like Max Baucus and Kent Conrad, have signaled at least that a public option is very unlikely.

So now to have a leader like Dick Durbin to also signal that. Again, as you point out, he still wants a public option but he is signaling it is going to be difficult. I think the writing is on the wall. It's very unlikely a public option will be there.

KING: But is it an incremental concession and you try to get it back in conference committee, Dan Balz, and then you explain to the American people who are saying, huh, what are those guys in Washington talking about?

The House passes something, the Senate passes something. We know the House will pass something that has a public option. At least they have the host to do that. Is the goal of Dick Durbin's goal, look, let's just get this through the Senate, then we negotiate a compromise and we will come back with a public option in the end? Of if it's not in the initial Senate version, is it gone?

DAN BALZ, WASHINGTON POST: Well, I think if it's not in the Senate version, it is almost certainly not going to make it into the final bill. I think everybody knows that and I think that the administration has been quietly pointing in that direction. One of the problems that the president has had over the last month is that Democrats have been fighting Democrats on health care. You have got a disunited party at a moment when he needs unity. And I think that one of the things we're beginning to see is a little bit tougher lines coming from administration allies. And Senator Durbin is certainly one saying we've got to be on the same page and this was a signal this morning of that.

KING: And this plays out at a time when these guys are all home and some people have questioned who is sending all these loud people to our town halls. Some say that's democracy, welcome to it. And as you know, Jessica, and you've been out at some of these rallies, some people say, no, no this is the insurance industry. This is Republican critics trying to essentially steal the debate and get some flashy clips on cable television or on YouTube.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Some of these people I've talked to who are voicing this opposition to the president's plan, who are using the words this is socialism who are outraged, insist that they are just Americans who are upset about what they see the government doing. But the problem is that this is giving voice to people who have already been dissatisfied with President Obama, maybe didn't like him from the beginning and think his entire agenda smacks of what they're calling socialism from the stimulus to climate change legislation to this.

And the storyline is building that this government option that they are talking about in Washington is part of the broad socialist message that they think is coming from this Obama White House. And the only Obama administration has lost the upper ground in message control. And that's part of the reason they've lost the ability to control this public option debate and could lose it in the end.

KING: Well one of the questions they will face when they come back from recess is whether to try to muscle through something more to their liking. They have a 78 vote majority in the House. They have 60 votes, if they can keep people, in the Senate. That's the big "if" at the moment. But one of the things Democrats have talked about is if we can't get a bipartisan deal, we will try to do it just on a party line vote. The former House speaker Newt Gingrich was out this morning and he said if Democrats do that, they will be asking for trouble.

(BEGIN VIDEO CLIP)

NEWT GINGRICH, FORMER HOUSE SPEAKER: The Senate rules on passing reconciliation were clearly designed for budget items. If we are now going to try to rewrite 17 percent of the economy, life and death for every American, by pretending that massive health reform is a reconciliation item and ramming it through 51 votes, first of all, I don't think -- I think a lot of Democrats will rebel.

(END VIDEO CLIP)

KING: Dan Balz, you understand the party system as well as anybody in town. Can they do that? Is it that important to the president that if he doesn't have any Republicans, just to try to ram it through?

BALZ: Well, I think that that's the big choice that he is going to face in September or October as this comes to a conclusion. First of all, for the Democrats, failure is not an option. They remember what happened in 1993 and '94 when they couldn't even get a bill to the floor to have a vote on it. They do not want that to happen. They desperately want to show that they can get results and get things done to prove to the American people that they've changed the way Washington works.

But the danger of doing that with only Democratic votes is, as Speaker Gingrich says, when are dealing with something as large as the health care system, not to have broader support risks real problems down the road if the implementation isn't smooth, which it rarely is.

YELLIN: This sounds like gobbley gook to some out there when you talk about reconciliation and conference committee. What happened to the discussion about denied claims, preexisting conditions, overpriced insurance? Where has that discussion gone? And until they get that discussion back, you are bound to have a party line vote.

HENRY: And you're pointing towards the fact that the passion right now is on the right at these town hall meetings. So where are the people on the left?

HENRY: I mean, the unions are saying they're going to get -- start getting people out there. But when John was talking about democracy in action, the people on the left don't seem to be standing up, saying, "Look, people are being denied claims, right now, in the current system. You keep saying that a government takeover is going to, you know, result in people not getting the tests they need and they're going to die. Well, people are facing that with insurance campaigns right now."

So no matter where you are in this debate, the current system is not perfect, but we are seeing the passion on the right, not on the left.

And I will tell you that I've done some reporting on this in the last couple of days, and there is more -- there are more and more Democrats in private, very senior ones ones close to the White House, saying that this reconciliation option is more and more likely, that -- originally, when they looked at process of just 51 votes, it was set up, they believed, so that you could only do a portion of this, and then you'd have to come back and do other bills later to fix the system.

They're now looking at it and they're saying in private that they think they can do more and more of this reform through reconciliation, and they may be heading down that road.

KING: Let me ask -- let me ask you, Dan, something that you write about in the book. It's looking back in time in the book, but I want you to then bring it to the moment.

This talks about when Barack Obama, the candidate, got Ted Kennedy's endorsement. It was a big deal in the Democratic primaries.

And you write -- you and Haynes Johnson write in your book, "His endorsement came with conditions. Kennedy wanted a commitment from Obama that, as president, he would push for universal health care. He wanted it to be the first priority of an Obama administration. Obama agreed."

I assume the president doesn't regret that commitment. But I bet, as we have this crumbling on Capitol Hill, he misses Senator Kennedy.

BALZ: Well, I think that's the more important point. I think the absence of Ted Kennedy in this is -- is very crucial for the administration. Ted Kennedy, known as, you know, one of the strongest liberals is also one of the most savvy legislators in the Senate. And not having him in the middle of this is a problem.

For Obama to have made that promise was easy. I mean, he certainly wanted the endorsement of Ted Kennedy. It's very easy to say to somebody when they're about to endorse you, "Yes." We all remember John Edwards asked for support on poverty when he got out of the race, and both Hillary Clinton and Barack Obama said, sure, "We'll make poverty a big issue."

In the case of health care, though, this was something that Senator Obama -- now President -- wanted to do as much as Ted Kennedy.

KING: Got to take a quick break. We'll be right back with more from Ed Henry, Dan Balz and Jessica Yellin. Don't go anywhere.

(COMMERCIAL BREAK)

KING: We're back with Ed Henry, Dan Balz and Jessica Yellin. Let's stay on health care for a moment, but let's elevate it to the bigger debate and what we're learning about our president, a little more than six months into office.

Again, Dan is with us. His book has just been published, and it is a great book and you should read it -- a book along with Haynes Johnson.

You talk about getting into the race and the memo David Axelrod wrote to then-Senator Obama about whether he should run for president.

And David Axelrod wrote this. "You care far too much what is written and said about you. You don't relish combat when it becomes personal and nasty."

Let's fast-forward to where we are right now. A lot of not-nice things are being written about the president and his health care bill. And this combat is personal and it is nasty. What are we learning about our president?

BALZ: Well, I mean, I think David Axelrod was right, at the time, about Barack Obama. He was not somebody who took criticism well, whether it was external or even from some of his advisers.

Axelrod's memo also goes on to say the campaign can be a proving ground. And in many ways, I think it was. It was a learning experience for Barack Obama and a proving ground.

Fast-forward to to where we are today, I think, having been through the campaign, he is more used to that kind of criticism. He doesn't particularly like it, but I think he knows better how to deal with it.

But there's no question that he's had a very tough July. And I think August is a point where he's got to, sort of, rebalance the presidency and get himself back to where he really needs to be. KING: How do they see the moment, Ed? You hear the president sometimes saying, oh, this is all cable chatter; things will be fine. But they have to understand, if they just do the simple math among their own members on Capitol Hill, they've got a problem.

HENRY: They do. And you notice it in the president's demeanor, I think, in recent weeks. He's been getting much sharper in, sort of, how things are getting under his skin.

Just a couple nights ago, when he was in Virginia for Creigh Deeds, who's running for governor, he gave a pretty fiery speech. It almost hearkened back to the campaign. But was talking a lot about "what the critics are saying about me" and trying to push back hard.

The president needs to use the bully pulpit to do that, but you can see the, sort of, calm, cool Obama that we know so well from the campaign -- he's starting to fray just ever so slightly, because he's getting tired of the "he wants to take over your health care" and "he's a socialist" and, you know, other issues that are out there.

YELLIN: And it seems like he's lost his greatest skill here, which is his jujitsu ability to see what the critics are saying and turn that on them to make his case, to -- and his greatest ability is to use language to persuade people, and he just has not found the way, in this instance, to win the debate. He's really at a loss in this case.

BALZ: And I think one of the things, one of the president's advisers recently told me, that, I think, has been difficult for them is to try to do what the president is good at doing, which is communicating in the middle of a legislative battle.

I think that caused them some difficulty. They've tried to work through it. And I think they actually look forward to Congress being away for a few weeks so he can have the stage for himself.

(LAUGHTER)

YELLIN: Go at it?

(LAUGHTER)

HENRY: Well, he can't focus 100 percent, either, just on health care, because it's such a big battle. We've talked about the economy, big job numbers this week. We've been talking about Afghanistan this morning.

I mean, that war -- it, in some ways, looks like it's spinning, a little bit, out of control, and they may have to send more troops. His mind is being occupied by so many things beyond just health care. Even though that's getting all the attention, there's a lot else going on.

KING: Well, let's talk about that. The Afghan elections are 11 days away. It is presumed President Karzai will win re-election. But there's a lot of doubts about his competence and corruption in the Karzai government.

More U.S. troops are on their way now, and it is very possible the commanders will say they need still more. Lindsay Graham, Republican of South Carolina, John McCain's best friend in the United States Senate, out this morning saying that, if the commanders want more troops, he would agree to send them, but he doesn't know if the Democrats would.

(BEGIN VIDEO CLIP)

SEN. LINDSEY GRAHAM, R-S.C.: I'm one Republican that would support more troops in Afghanistan. I do believe -- quite frankly, I'll be shocked if more troops are not requested by our commanders.

Afghanistan has deteriorated. In July of last year, the president said, when he was a candidate for office, that Afghanistan, not Iraq, was the central battle in the war on terror. I disagreed then because Iraq hung in the balance. Iraq is more stable. The president is right. Afghanistan is now the central battle front on the war on terror.

That means more of everything: more troops, more political engagement, more economic engagement.

(END VIDEO CLIP)

KING; And, Jessica, more questions from the left in the Democratic Party, saying, why more troops and what's the exit strategy?

YELLIN: They're not going to -- this is not the man they voted for. The left in this party did not elect Barack Obama to send more troops to Afghanistan.

YELLIN: But they're going to have to accept it. He is going to take a lot of heat from his left flank if he does that, especially because of those numbers you showed this morning when you were interviewing Susan Rice. The U.S. has such a greater commitment than the rest of the world, why can't we bring the rest of the world along?

KING: And, Dan, what did you learn in studying how he campaigned that carries over now as he faces these difficult challenges, questions as president? One of the gifts he had as a candidate was when he did make mistakes and missteps, he recovered so quickly.

BALZ: Yes. That's exactly right. I mean, we now forget how difficult the early months of the campaign were for Barack Obama. He was not a particularly good candidate. He was not a happy candidate, as we have learned. He went through a process of learning how to become a candidate.

I think he has to go through a similar process, and he's going through it, of how to become the most effective president possible. That takes some time, and we can see some of the frustrations, as Ed was talking about, in his presidency, but you can also know, from having watched Barack Obama on the campaign trail, that this is somebody who is thinking about what am I doing wrong, how do I make this better, how do I make this message more effective? And we're going to see more of that.

HENRY: And while it's easy to sort of paint this picture and you do a good job in your column this morning about how there are all of these problems, it has been a bad summer so far for the president in some ways, on the other hand, as you also point out, in the last week, he has gotten the first Latina Supreme Court justice, history made, in the last couple of days, gotten very little attention.

And those job numbers on Friday, while they're still -- you know, more than a couple hundred thousand people lost their jobs, 400,000 people just gave up look for work, those are bad signs, it's looking perhaps like it's starting to hit bottom.

If that starts turning around, the picture of this president is going to change rapidly in a positive direction.

KING: Everybody stay put. All of you stay right where you are. When we come back, call it a lightning round. The topic today, Howard Dean versus Sarah Palin.

(COMMERCIAL BREAK) KING: Again, I'm joined by Ed Henry, Dan Balz, and Jessica Yellin. We're going to call this the "Lightning Round." This is Sarah Palin on her Facebook page talking about the health care plan.

"The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama's 'death panel' so his bureaucrats can decide, based on a subjective judgment, of their 'level of productivity' in society, whether they are worthy of health care. Such a system is downright evil."

She's not going quietly.

YELLIN: No, and that's a low blow. That's not an accurate assessment of what this panel is, but it definitely will get her attention.

BALZ: Jessica is right, it does get attention. It's not the way to debate this bill, and it's another example of Sarah Palin having difficulty figuring out how to enter into a serious debate about issues.

HENRY: Yes, and people are being whipped up on that issue right now and they think that essentially euthanasia is going to be allowed based on this health bill. Obviously it just doesn't pass the "Joe Six-pack" test, I think even Sarah Palin would acknowledge.

(LAUGHTER)

KING: I don't know that he's ever been called "Joe Six-pack," but Howard Dean, who was a practicing physician in the state of Vermont, the longtime governor of the state of the Vermont, and then the chairman of the Democratic National Committee, was asked about Sarah Palin's Facebook posting a bit earlier this morning.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Let me get your reaction to Governor Palin's comments on her Facebook page?

HOWARD DEAN, FORMER DNC CHAIRMAN: About euthanasia? They're just totally erroneous. She just made that up, you know, just like the "bridge to nowhere" she supposedly didn't support. There's nothing like euthanasia in the bill.

Look, I practiced medicine for a long time, and of course you have to have end-of-life discussions, the patients want that. There is nothing -- euthanasia is not in this bill.

(END VIDEO CLIP)

KING: A silly distraction, a Dean-Palin debate?

HENRY: No, I think it actually is a bigger part of what we were talking about before, which is that that is a serious allegation that has been out there for weeks, and the left has sort of let it build and build on talk radio and other venues, that the president is pushing euthanasia. It's a pretty absurd argument but it hasn't really been countered until now.

BALZ: That's right. I think that's right. I mean, the charge is one that is probably easily refutable, but it is out there now and is more difficult to do that as a result of it having gotten some traction.

YELLIN: And they should probably stop at saying this is not true. To add on, there will be discussions of end-of-life decisions, doesn't help. That sort of muddies the waters. They should just stop with, not true.

KING: And now, temporary question, maybe, because we don't know what she'll do in the long term. But is just having the discussion, you all say Sarah Palin is wrong on the facts here, we're not talking about her resigning, we're not talking about people saying she is a quitter. Is this what she wants to do, interject herself in debates like this?

YELLIN: If she does, she'll be very effective at it, because it really is helping to drive the message.

BALZ: I'm not sure I entirely agree with that. I think that she needs to figure out a way to become a part of a national debate in a more serious and substantive way. I don't think you can do it sort of with Twitter or through Facebook.

I mean, you've got to engage in that debate and stand up to some criticism and back and forth. And she has yet to really do that.

HENRY: It's almost like the ad that the McCain-Palin camp ran against Barack Obama as a candidate. He's the world's biggest celebrity, but what does he want to do? Is he ready?

She's a pretty big celebrity, maybe not the world's biggest one, but she has got to figure out how to go from celebrity to serious policy person, what's her issue, is it the economy, is it health care, and attack it in a serious way, not just sort of on the fringe.

YELLIN: Aren't you waiting for the Palin talk show to be announced, though? I think there will be a platform at some point.

KING: I might be out of work.

(LAUGHTER)

KING: So we've been watching the theater of these town halls. People coming out, some organized by political organizations, others just coming out to vent their positions on health care, whether it's single-payer advocates who say that the Democratic plan doesn't go far enough, or conservatives who say it goes way too far.

Let's talk about substance and what we should be looking for. What is the one thing or the one person you're going to track over the next couple months of this recess to see if this person or this thing happens when they come back that will change the dynamic?

YELLIN: In terms of a politician?

KING: Yes.

YELLIN: I guess it would be Enzi and Snowe and to see where they go in this debate in the Finance Committee.

KING: Two words each.

HENRY: I'm going to Montana later this week because the president will be heading there, I'm going a little early to see what people in Max Baucus's state are saying. He's the key guy.

KING: OK. I'm sorry, I need to cut you both off. Ed Henry, Dan Balz, Jessica Yellin, thank you very much.

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