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STATE OF THE UNION WITH JOHN KING

'The Last Word': Senator Judd Gregg

Aired October 18, 2009 - 12:00   ET

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


KING: We'd like to welcome back our international viewers. I'm John King, this is STATE OF THE UNION.

(BEGIN VIDEO CLIP)

OBAMA: I'm just getting started! I don't quit. I'm not tired. I'm just getting started!

(END VIDEO CLIP)

KING: Testing time for President Obama. Nearing a critical decision about troop levels in Afghanistan and deep into tough negotiations on health care. We go inside the deliberations with the president's point man, White House chief of staff, Rahm Emanuel.

(BEGIN VIDEO CLIP)

KERRY: It would be entirely irresponsible for the president of the United States to commit more troops to this country when we don't even have an election finished.

(END VIDEO CLIP)

KING: The Afghan political crisis and the fight against Al Qaida from a pivotal voice in Congress. Foreign Relations Committee Chairman John Kerry is visiting Afghanistan and Pakistan and shares his firsthand assessment.

Then, our "American Dispatch" from Alaska. It is breathtaking and struggling. The recession arrived here late, but it is now making a painful mark.

And he says the president's spending will crush our economy. The top Republican on the Budget Committee, New Hampshire Senator Judd Gregg gets "The Last Word."

This is the "State of the Union" report for Sunday, October 18th.

We begin this Sunday with one of the most powerful men in Washington. He's President Obama's gatekeeper, determining who gets access to the Oval Office, and he also plays a key role in virtually every decision the president makes. The White House chief of staff, Rahm Emanuel, welcome to "State of the Union."

EMANUEL: Thanks, John. KING: I want to begin overseas. There are reports that we are getting, hearing from U.S. officials, Western officials who have met with him and also on the ground, that President Karzai is resisting the findings that the fraud in the election was significant enough that there should be a runoff. In the view of the president of the United States, does President Karzai have a choice? Must there be a runoff?

EMANUEL: Well, first of all, what President Karzai must do and the process there is a credible and legitimate election or result, more importantly, for the Afghan people and for that government going forward, whether that's through a runoff, whether that's through negotiations. The process will be determined by the Afghan people. The result, for us and for the president, is whether, in fact, there's a credible government and a legitimate process. KING: At this point, since we do not view the prior election and the U.N. does not view the prior election as legitimate, is that then -- is the choice then a runoff election or a negotiated power sharing agreement with Mr. Abdullah?

EMANUEL: John, you've seen in the papers, you see the reports that are coming from Kabul. There is basically two roads there, or two basically processes. One is another runoff election between the two top candidates, or a negotiation between those candidates. But the end result must be a legitimate and credible government to the Afghan people. That's what's important. It's the Afghans making a decision about what type of government they're going to have and what road they're going to take to that point.

KING: And this plays out as the president faces a decision of enormous gravity, whether to send thousands, tens of thousands of more U.S. troops. Will the president wait and delay that decision until after you have a clear picture of the political situation?

EMANUEL: The review's going to continue to go on. That's not in question. The question, and one of the central questions of that review -- so we will continue. We've had five meetings. There's another set of meetings this week and the following week.

The question, though, and one of the questions is at the heart is -- and even General McChrystal's own report says -- the question does not come how many troops you send, but do you have a credible Afghan partner for this process that can provide the security and the type of services that the Afghan people need?

And you know, here in Washington, we want to have a debate, and you can't -- we would love the luxury of this debate to be reduced down to just one question, additional troops, 40,000. This is a much more complex decision. Even the general's own report and General Petraeus' own analysis says the question, the real partner here is not how much troops you have, but whether in fact there's an Afghan partner.

And when you go through all the analysis, it's clear that basically we had a war for eight years that was going on, that's adrift. That we're beginning at scratch, and just from the starting point, after eight years. And there's not a security force, an army, the type of services that are important for the Afghans to become a true partner.

So that is the question. And what I think it would be irresponsible -- and it's clear that as I saw the clip earlier, Senator Kerry said -- Senator Kerry, who's now in Kabul in Afghanistan noted, that it would be reckless to make a decision on U.S. troop level if, in fact, you haven't done a thorough analysis of whether, in fact, there's an Afghan partner ready to fill that space that the U.S. troops would create and become a true partner in governing the Afghan country.

KING: Whether the president sends more troops or not, how are we going to pay for this? Even if he does nothing more, there will be 68,000 U.S. troops on the ground in Afghanistan at the end of the year, maybe a little more than that, without a decision to increase them. Will the president have to request emergency funding to pay for that, or is that (inaudible)?

EMANUEL: It will be part -- I mean, if we did this, it would be part of what we have to do as we've done both for our Iraq and Afghanistan wars in the past. It would be part of that process.

KING: But the president said in April, he had hoped not to do that anymore. The president sent a letter to the House speaker, and he said, "this is the last planned war supplemental." And he said, you know, in the past, after seven years of war, the American people deserve an honest accounting of the cost of our involvement in ongoing military operations. Is this something that candidates can say one thing or a young president can say another thing that you learn that sometimes you can't ...

EMANUEL: No, I mean, one of the points is, is, what is the cost if we took this approach? And that's been part of the discussion. The first part of this discussion, John, has been about the fact that, where are we, what is the context, what is the assumptions built into this? One of the things that has been analyzed in all this is that, you know, and people would like to reduce this down and would like the luxury that, you know, send more troops, as if that's all that it takes.

You have to have a policy. It's important -- the policy is as important to protecting the troops as the equipment they have. And an analysis of where we are, what happened.

And what I find interesting and just intriguing from this debate in Washington, is that a lot of people who all of a sudden say, this is now the epicenter of the war on terror, you must do this now, immediately approve what the general said -- where, before, it never even got on the radar screen for them. That -- everything was always about Iraq.

This is where Al Qaida is based. Not just in Afghanistan, it's clear that they're based in Pakistan.

KING: A quick break with the White House chief of staff, Rahm Emanuel. When we come back, we'll bring the debate home, domestic issue. Will health care reform pass this year, and what about the record federal budget deficit? Stay with us.

(COMMERCIAL BREAK)

KING: We're back with the White House chief of staff, Rahm Emanuel.

You are deeply involved in this health care negotiations on Capitol Hill.

Right now, behind closed doors in the Senate -- this is a story from the Washington Post today. "Small group now leads closed-door negotiations." And it quotes the president, from candidate Obama, saying, we will have these discussions televised on C-SPAN, everybody will be at the table, we'll do this in an open and transparent way.

Why does it have to be done behind closed doors?

EMANUEL: Well, John, first of all, I mean, you know very well that this has been -- the entire health care process has been fully public and...

KING: This is the most important part.

EMANUEL: And everybody is going to continue to be involved. We went up to have the first set of a series of discussions. You saw all the hearings. Many people said, you know, cover the hearings in five separate committees that had those discussions or discussions happening then, both at the hearing level, and also...

KING: So as you negotiate now...

EMANUEL: ... as you negotiate in private. But that doesn't mean that you can't have what's going on.

The key point in this debate about health care, John, isn't what's going on in a sense of just these negotiations -- those are key -- is what, at the end of the day, will the result achieve what I call the four C's. That is, are we going to control cost, expand coverage, give people choice, and competition in the system. And that's the goal the president set out. We went up there. You had two committee chairmen, as well as the Senate majority leader there. Everybody knows these issues that we're discussing.

KING: You have another stop, so I'm going to interrupt you, because you have another stop to make and my time is limited. In the C's, controlling costs...

(CROSSTALK)

EMANUEL: I was actually getting close to be (ph) a senator (inaudible) filibustering for a second.

KING: You were filibustering quite well. You're very good. One of the controlling cost elements here is competition -- excuse me, here -- is would you have the public option. And on the Senate side, you know, it's harder to sell in the Senate, because you have more centrists involved. Is this an acceptable public option to Rahm Emanuel, the Olympia Snowe trigger plan, maybe with a combination of Tom Carper's proposal to let the states do it?

EMANUEL: Breaking news, John. Doesn't matter whether it's acceptable.

(CROSSTALK)

KING: It does matter whether it's acceptable, because you'll have to sell it on the House side.

EMANUEL: No, here's the deal. As you saw the president say in the joint session to Congress, he believes a public plan, a public option is important to competition. Because in many parts of the country, a single health insurance industry has 80 percent, 70 percent of the market. Let me go -- finish. It is also parts of -- that parts of the country where premiums are the highest. So if you don't have competition, an insurance company has the run of not only premiums, but what kind of health care you have.

And so the president believes in it as a source of competition. He also believes that it's not the defining piece of health care. It's whether we achieve both cost control, coverage, as well as the choice that...

(CROSSTALK)

KING: Is a trigger good enough for the president?

EMANUEL: The president of the United States will obviously weigh in when it's important to weigh in on that. There are key members of the Senate that want a public option. The Senator Snowe, who's also important, would like to see a trigger. But what's implicit in the notion of a trigger is that you should always have available that option of having a public plan to bring the type of competition that brings downward pressure on prices and price-effective health care costs.

KING: The way the Senate Finance Committee bill is paid for is a fee on these Cadillac insurance plans. And your friends in the labor movement say, no way. That what happens is you'll put a fee on the insurance companies, and they will backdoor that by passing the costs onto the consumers. Gerry McEntee, the president of the American Federation of State, County and Municipal Employees, says we "all worked for these people. We worked for Obama. What do we get for it? We not only don't get anything for it, we get a slap in the face." They say that it's a backdoor way of violating the president's promise not to raise taxes on the middle class. Will that be in the final bill?

EMANUEL: First -- one of the first things the president did when he got into office, was ensure the largest middle class tax cut in history. Because middle class had basically saw their incomes...

(CROSSTALK)

KING: But why does a labor leader call it a slap in the face?

EMANUEL: Well, that's his position. In fact, he spoke -- the president spoke to this in the joint session.

But I want to go back. Remember this -- the middle class received the largest -- one of the largest tax cuts in one of the first things he's done in the 45 -- in the first 45 days of his office.

Second, this is basically one of the ways in which you basically put downward pressure on health care costs. The president believes, as he said in the joint session, that while he opposed this originally, thinks that -- and based on the analysis -- it is helpful in getting costs under control. And it hits the insurance companies and the high expansive and expensive plans.

KING: We have a $1.4 trillion deficit this year. I know the president has said he will cut it in half in his first term. Health care reform will be deficit-neutral is the president's position, and yet...

EMANUEL: More than deficit-neutral, John.

KING: And yet...

EMANUEL: John, wait a second. Wait a second. More than deficit-neutral.

KING: You say it will help bring the deficit down.

(CROSSTALK)

EMANUEL: Also, let me make a point up here, which I think -- I really want to make this point. When the prescription drug bill was passed, in the '80s -- I mean, rather, in 2005.

KING: In the Bush administration.

EMANUEL: Yes, in the Bush administration, there was no pay-for. It was charged on the credit card. And it run up costs as far as the eye can see, basically for about $850 billion. This bill, somewhere will be about $850 billion, $900 billion, fully paid for, done within the health care system, and it brings down the deficit. And it's the first step, if you want to control...

KING: Except... EMANUEL: As you know, John...

KING: The administration has asked the Senate to do this...

EMANUEL: ... if you want to control health care costs...

KING: ... $250 billion Medicare fix to doctors. The administration has asked the Senate to do that outside of health care reform. And right now, there is no way to pay for it.

EMANUEL: Yes, but, John, in fact is -- the president -- this is one of the gimmicks that was done year after year in Washington...

KING: So why do it now? If it's been done year after year, why not end it?

EMANUEL: And the president's budget, in fact, he included it in his budget when we negotiated that and we passed the budget. The first year, it's paid for.

What happens is, everybody says, you know, don't worry about it, and then they just pass it on. We've made a difference.

But the first piece of controlling the deficit is health care. I will also say the next step, is also important, is paying pay as you go. In the 2000 era, starting in 2001, the discipline of the '90s that led to a surplus was pay as you go. That was eliminated, basically allowed to lapse. And we passed three tax cuts, a prescription drug bill that led to $5 trillion of red ink run up -- the biggest red ink run-up in the shortest period of time in American history. Literally over half the nation's debt is accumulated in the last eight years.

KING: I traveled 40 states in the last 40 weeks, and people often use language for which you and I are known for using, mostly in private, not often in public, when they come to the issue...

EMANUEL: I didn't know you were a fellow traveler, John.

KING: They're watching Wall Street and they see the stock market going up, and many of them think that's a good thing, but they also see 9, 10 percent, if you go to Michigan, 15 percent unemployment. And they see this past week Citigroup gets $45 million in government bailout money, pays $5.3 billion in bonuses. Bank of America gets $45 billion in their taxpayer money, pays out $3.3 billion in bonuses. Is there anything the president can do about this?

EMANUEL: Well, one -- yes. And the level is -- and one of the issues is -- I mean, I think the American people have a right to be frustrated and angry.

And I -- and the president understands, and it's why he's spoken to this, why the American people are frustrated.

Not only do they come for a bailout, but in this short period of time where they have a level of normalcy because of what the government did to help them, they're now back trying to fight consumer offices and the type of protections that will prevent another type of situation where the economy is taken over the cliff by the actions taken on Wall Street and the financial market. And that -- and that is what's frustrating people.

What's also frustrating to the American people, and the part on the bonuses, and I understand, as a former member of Congress representing people, is that while they see these bonuses going back and three see that as part of what the banks pay, is in fact -- there was an article the other day in the USA Today, incomes are at their 18-year low.

So while they're struggling to try to make ends meet, save for their retirement, pay for health care costs that are going up 10 percent next year, according to the Hewitt Associates, provide for their children an education -- while they're struggling to make ends meet, Wall Street is back doing what Wall Street did.

They have a responsibility to the whole system. And it starts with not fighting the financial regulatory system and the reforms that are necessary to protect consumers, homeowners, and others. They have a responsibility to come to the table and understand that taking -- that the risks that they took, took the economy to a place, it was near a depression, which we hadn't seen since literally the '30s.

They have a responsibility to be part of the solution, not part of being the obstacle and the forces, which is what the president is facing both on health care and the financial system, is fighting the very special interests that have vested interests in keeping the status quo and their friends up on Capitol Hill, who have actually been their advocates in keeping the status quo.

KING: You need to go, and so I'm going to ask you one more quick question. I let you answer that because I could see how important it was to you and I didn't interrupt you. I've known you for...

EMANUEL: That's so much like a family discussion.

KING: I've known you for 17 years, and we've been through a lot of campaigns together, you practice hardball politics with relish. I'm trying to get behind the curtain and understand why your White House has decided that it is in its interest to have this, boom, with our rival, Fox News, Anita Dunn, one of your staff, calls it the -- the communications director, the wing of the Republican Party. why?

EMANUEL: Well, no, it's not so much a conflict with FOX News. But unlike -- I suppose, the way to look at it, and the way we -- the president looks at it and we look at it, is, it's not a news organization so much as it has a perspective. And that's a different take.

And more importantly, it does not have -- the CNNs and others in the world basically be led and following FOX, as if that -- what they're trying to do is a legitimate news organization, in the sense of both sides and a sense of a value opinion. But let me say this. While it's clear what the White House and what Anita said, I mean, the concentration at the White House isn't about what Fox is doing. Its concentration is about, what does it take to make sure the economy is moving, creating jobs, helping the economy grow, making sure that we responsibly withdraw from Iraq, making sure what -- the decisions we make on Afghanistan, we ask the questions before we go ahead first into putting 40,000 more troops on the line and America's reputation, its most treasured resources, its young men and women, and its resources.

That's what's occupying the decisions and the time in the White House.

KING: I know you'd rather be home with your children. I will let you go.

EMANUEL: Absolutely.

(LAUGHTER)

KING: Rahm Emanuel, the White House chief of staff, thanks for coming in to "State of the Union."

EMANUEL: Thanks, John.

KING: And when we come back, should the president send thousands of more troops to Afghanistan? And should he at least wait? You heard Rahm Emanuel's view. When we come back, one of the most powerful voices in Congress is in Afghanistan. The Senate Foreign Relations Committee's chairman, John Kerry, next.

(COMMERCIAL BREAK)

KING: I'm John King and this is STATE OF THE UNION. Here are stories breaking this Sunday.

Suicide bomber strikes in Iran. At least 29 people are dead, including the deputy commander of the elite Revolutionary Guard, four other top commanders. It happened today in the southeastern city of Sarbaz. The president -- the speaker, excuse me, of Iran's parliament blames the United States for the attack. A State Department spokesman though says that accusation is completely false and the department is condemning the bombing.

Authorities say an Air Force pilot whose F-16 collided with another fighter jet over the Atlantic most likely died instantly. The search for Captain Nicholas Giglio has now shifted to a recovery mission. Investigators believe Giglio's jet was pierced by a second F-16 during a training exercise Thursday night near Myrtle Beach, South Carolina. The other pilot was able to land safely.

The sheriff in Larimer County, Colorado, says he expects criminal charges will be filed in the so-called runaway balloon saga. The sheriff is holding a news conference at 1:00 p.m. Eastern. We'll carry that live for you right here on CNN.

Then "FAREED ZAKARIA: GPS," "AMANPOUR," and "YOUR MONEY" will be seen in their entirety. Those are your top stories here on STATE OF THE UNION.

You just heard the White House perspective on the question of what's next in Afghanistan. Should there be more troops? What happens with the dispute over the contested election? We also have the views this morning for you of a very powerful voice in Congress, who is in the ground -- on the ground in Afghanistan, the Senate Foreign Relations Committee chairman, John Kerry.

(BEGIN VIDEOTAPE) KING: Senator Kerry, thank you for joining us from the ground there. First, I want your assessment of the political situation. How soon do you think they could administer a runoff election in Afghanistan?

KERRY: I'm told by the authorities here that they could do it in two weeks. And I accept that. I think it could be done in two weeks. KING: What do you think the United States, the United Nations, and the international community need to do to make sure that what happened last time doesn't happen again? How do we strengthen the administration and the integrity of that election process?

KERRY: Well, I think it's critical -- obviously, in any emerging democracy, there are going to be a certain number of difficulties. I think they've done a good job, frankly, over the last months and weeks of isolating what those difficulties were, and of throwing out the votes that needed to be thrown out.

But if there is indeed going to be a run-off, then we want to try to do it as effectively as humanly possible. One of the things that was lacking last time, particularly in the south, was adequate security.

KING: Do you believe we should just step back from this, or is the best thing now going forward to try to encourage negotiations? There has been some talk of maybe a power-sharing arrangement. President Karzai would then bring Dr. Abdullah into the government somehow. Is that a good approach?

KERRY: I think it's entirely up to President Karzai to make -- assuming he gets reelected, if he is, then he has got to make decisions about what the make-up of this government is going to be. That doesn't mean we just stand by, no. I don't accept that. We have too much at stake here, our troops are on the line. We have people in harm's way in this country. And they're making great sacrifices.

And we have a responsibility to make certain that the government here is a full partner in our efforts to be able to be as effective as we can be. So before the president makes a decision about the numbers of troops that ought to come here, I believe it is critical for us to be satisfied that the reform efforts that are absolutely mandatory within the government here are in fact going to take place and be fully implemented.

This struggle here in Afghanistan, and the goals of the president that he has defined with respect to al Qaeda and the stability of the region, those goals will not be achieved by just the United States military or the numbers of troops here.

The essential ingredients, frankly, as important as anything, is the ability of the government of Afghanistan to deliver at the top, all the way down to the local level; and secondly, the ability of the international community to bring the civilian sector in underneath the military effort in order to provide an improvement in the quality of life and opportunities for the people of this country. Those are critical components of counterinsurgency strategy. It would be very hard, I think, for the president to make a commitment to X number of troops, whatever it might be, or to the new strategy, without knowing that all of the components of the strategy are indeed capable of being achieved.

KING: Well, let me ask you a little -- more questions about that then. You've had meetings with General McChrystal and his deputies there on the ground. Before you left Washington, you said you were very wary of the prospect of sending maybe 40,000 more troops into the situation in Afghanistan.

After the face-to-face contact with the generals, are you more comfortable with their plan?

KERRY: They answered a lot of questions. And obviously General McChrystal is a very impressive leader. Not all of the questions have been answered. And some of the assumptions that General McChrystal is making, and he acknowledges this himself, are based on the other two things I talked about.

And so this mission is not defined exclusively by its military component. And we've got to make certain that the other pieces, again, I say, are achievable. And I'm not yet convinced that we're there.

KING: Not yet convinced. You have, in the past, many times raised the Vietnam analogy, saying your worry was that then-Defense Secretary McNamara, General Westmoreland, would keep asking for more troops without examining all of the big underlying questions.

Are you convinced that General McChrystal is not General Westmoreland?

KERRY: Absolutely. I think General McChrystal is asking the questions about the underlying assumptions. This is not Vietnam in many respects. We are here in Afghanistan because people attacked us here in the most significant attack against the United States since Pearl Harbor. We are here because there are still people at large who are plotting against the United States of America. And we are here because the stability of this region is of critical strategic interest to the United States.

I think most people agree on that. So the basic assumptions here are very, very different from what we experienced years ago in Vietnam.

KING: We had Senator McCain in here last week. And you know his opinion, but I want to share it with our viewers and get your reaction to it. I asked him the question, what will it take in Afghanistan to succeed? Listen to Senator McCain.

(BEGIN VIDEO CLIP)

KING: Do you think the United States can win in Afghanistan with fewer than 40,000 more troops? SEN. JOHN MCCAIN (R), ARIZONA: I do not. And I think the great danger now is not an American pullout, I think the great danger now is a half measure, sort of a -- you know, try to please all ends of the political spectrum.

(END VIDEO CLIP) KERRY: I don't think the president has any intention of doing that. I think he is going to make his judgment about what kind of mission he is going to set. And then he is going to make, I think, a solid judgment about what it's going to take to accomplish that mission.

You know, I have great respect for John McCain. He and I served in the same war. We both have searing memories about what happened when politics took over the decisions of that. So I respect his caution about it.

But I'm convinced that the review the president is going through is exhaustive, it's thorough, and I'm absolutely confident the president is not going to make a decision remotely connected to politics. He is going to make a decision based on the national security interests of our country and of what he thinks it takes to achieve the mission that he defines to meet those interests.

KING: A quick break. But when we come back, more with John Kerry, the chairman of the Senate Foreign Relations Committee, who was on the ground in Afghanistan. Stay with us.

(COMMERCIAL BREAK)

KING: Let's continue our conversation, now, with Senator John Kerry of Massachusetts, the chairman of the Senate Foreign Relations Committee.

Let's get your assessment of the threat. What is the threat now, in Afghanistan, of Al Qaida and the Taliban to the United States? General Jones was here a few weeks ago, and he said probably fewer than 100 Al Qaida operatives currently in Afghanistan. What is the threat?

KERRY: It's a several-fold threat. It's the threat of the failure of governance, which is empowering Taliban to be able to recruit people because of their dissatisfaction and distrust, not essentially because they agree with the Taliban.

But if the Taliban gain sufficient footholds in parts of the country, most people, I think, make a judgment that that is an opportunity for Al Qaida to take advantage of their alliance and therefore create, conceivably, a sanctuary or training ground for terrorist activities in other parts of the world.

We have seen that. That is their modus operandi. And that's what we have to worry about. That's the threat, insofar as the Taliban might or might not present a challenge to us. I don't think they're about to take over the country. Al Qaida is not essentially here today. It is in northwest Pakistan and in some 58 or 59 other countries in the world. But we need to also guarantee that the Taliban and our own presence don't become a destabilizing factor with respect to Pakistan and their efforts to fight against their own Taliban as well as other extremist groups that threaten their government.

And they are, as we recall, a government with nuclear weapons, a government with a major number of troops lined up on the border with India, and a government that, for a number of other reasons, I think has national security interests for the United States.

KING: Help us, Mr. Chairman, understand that delicate and difficult balance. Do you worry, for example, that, if the United States were to add 30,000, 40,000 more troops into Afghanistan, you would be roughly, then, with U.S. and NATO troops, where the Soviets were back in the old days of their incursion into Afghanistan?

And some say that that would cause so much instability in Pakistan, the giant U.S. presence, that you would be doing more harm than good.

Do you share that assessment?

KERRY: Well, I don't share the beginning -- the beginning basis of the premise in which you asked the question.

I don't think people here in Afghanistan are viewing the United States now in the same way that they viewed the Soviet Union, not at all.

Yes, there is, however, a legitimate question about whether or not a certain number of troops, depending on their mission, might drive people into Pakistan, and thereby present further difficulties in the western part of that country or even fuel the extremism there.

That is a legitimate question. And it is raised by a number of Pakistanis, and it's one of the reasons why I wanted to come over here to talk to people on both sides of the border about that perception.

KING: Help the American people understand -- best-case scenario, how long will U.S. troops be in Afghanistan, 10 years, 20 years, more?

(LAUGHTER)

KERRY: Well, I hope it won't be that long, obviously. And I have -- you know, I'm trying to think about a mission that doesn't touch those kinds of time frames. My hope is that we can define a mission, here, that will achieve what we need to do to meet our national security interests.

KING: I want to share with you an assessment by the commander of the VFW back here in the United States and get your comments on it. Tom Tradewell, the commander of the Veterans of Foreign Wars said this.

"In battle, weaknesses are exploited and attacked, which proved to be the case during the Vietnam War. North Vietnam correctly perceived that the United States government did not possess the political will to complete the mission. And that perception became reality.

"In Afghanistan, the extremists are sensing weakness and indecision within the United States government, which plays into their hands, as evidenced by the increased attacks in Afghanistan as well as Pakistan. I fear that an emboldened enemy will not intensify their efforts to kill more U.S. soldiers."

Is there weakness and indecision in the United States government? Is the commander of the VFW right?

KERRY: I -- I respectfully disagree with the judgment that he makes about -- at this point in time. Look, obviously, if you exhibit weakness or indecision, or if the United States were to suddenly pull out of here, it would disastrous, in terms of the message that it sends. Nobody is talking about that. That's not what's on the table here.

What we're trying to figure out, so that we don't repeat mistakes of the past, is not just committing people in -- putting them in harm's way and endlessly asking our military to deploy and go out and fight if we aren't certain that we're giving them the mission that, in fact, is achievable and that the American people will in fact stay committed to it.

That's part of what has to be tested here. A lot of us have tough memories of what happens when the country loses that will.

So, you know, I want to understand this as well as I can. I don't think -- I think the president -- and look, it would be entirely irresponsible for the president of the United States to commit more troops to this country, when we don't even have an election finished and know who the president is and what kind of government we're working with.

And when our own, you know, commanding general tells us that a critical component of achieving our -- our mission here is, in fact, good governance, and we're living with a government that we know has to change and provide it, how could the president responsibly say, oh, they asked for it; sure, here they are -- and we know that the two critical schools of counterinsurgency aren't going to stand. That would be irresponsible for a president of the United States.

And no commander-in-chief should be, you know, cornered into making a decision that isn't based on a responsible assessment about what is possible and what the American people are prepared to commit to.

KERRY: I think this is being approached in an entirely responsible way. General McChrystal told me that, even if the commander in chief made the decision tomorrow to put those troops in here, many of them wouldn't even begin to start the flow here until next year, because that's the way it works.

So this is not a situation where someone here is being deprived today or tomorrow or the next day. This is a situation where I think people here are being protected by a smart way of making policy.

KING: Chairman of the Senate Foreign Relations Committee -- Senator John Kerry -- Senator Kerry, be safe in your travels, and we'll catch up with you when we get home.

KERRY: Good enough, thank you John, very much.

(END VIDEOTAPE)

KING: He was nearly a member of President Obama's cabinet. Now he's one of the most vocal critics of the president's spending plan. The Senate Budget Committee's top Republican, Judd Gregg of New Hampshire gets "The Last Word," next.

(COMMERCIAL BREAK)

KING: Fifteen newsmakers, analysts and reporters were out on the Sunday morning talk shows but only one gets "The Last Word." That honor today goes to Republican Senator Judd Gregg who joins us from his home state of New Hampshire. Senator, good to see you again.

GREGG: Thank you, John.

KING: Let me start quickly where we left off with Senator Kerry. He says, and the White House Chief of Staff Rahm Emanuel says until there's a resolution of the political crisis in Afghanistan, either run-off election or an agreement on power sharing, the president should wait and not announce his troop decision.

Others have said if the enemy is al Qaeda and the Taliban, the government of Afghanistan is irrelevant, make that decision. Where do you stand?

GREGG: Well our purpose in being there is to basically eliminate people who are threatening us. That's al Qaeda and the support that the al Qaeda gets from the Taliban. And if the general on the ground says he needs the troops, then if we're going to have troops in that country, we should give the general what he needs.

KING: One of the big disputes here in Washington is on the front page of one of your newspapers this morning. Here's the "Sunday News." "Out of work, short on time." It talks about New Hampshire families whose unemployment benefits are about to run out. This has been held up, extending the benefits has been held up because of a disagreement, procedural mostly, between Republicans and Democrats here in Washington. Will that be done soon and resolved?

GREGG: Yes, I think so. There's a legitimate pay for, which is what's critical. First, these type of benefits should be extended but they should be paid for. We shouldn't pass the bill on to our kids.

And there's a legitimate pay for that's been identified so I think we'll clear this up fairly soon and we'll be able to extend benefits. And it should be a two-chair effort. In states which have really severe unemployment, there's going to have to be a further extension. Places like New Hampshire which has unemployment, but not quite as severe, we should have the extension but it shouldn't be at the same level and the same extent of time as places where they're over 8.5, 10 percent unemployment.

KING: Let's talk about pay fors, the term you just used. We learned the other day that the operating deficit of the United States government in the current fiscal year will be $1.42 trillion -- $1.42 trillion with a "T." Now the administration says this, "The FY 2009 deficit was largely the product of the spending and tax policies inherited from the previous administration exacerbated by a severe recession and the financial crisis that were underway as the current administration took office."

Let me start quickly, your perspective on -- you almost joined this administration and you had some disagreements over issues like this. Is that fair, what they say?

GREGG: Well with, if you're going to get political about it, yes. But this deficit is driven by us. I mean, you talk about systemic risk. The systemic risk today is the Congress of the United States.

We're creating these massive debts which we're passing on to our children. We're going to undermine fundamentally the quality of life for our children by doing this. And the projections for the deficit for the next 10 years under the Obama budget are $1 trillion a year. Now you can't blame that on George Bush.

We're taking public debt from 40 percent of GDP, which is tolerable but still too high, up to 80 percent of GDP, which means we're basically on the path of a banana republic type of financial situation in this country.

And you just can't do that. You can't keep running these programs out and not paying for them. And you can't keep throwing debt on top of debt. And it's all really primarily a function in the long run at least of growing the government too much. We're taking the size of the government from 20 percent of gross national product up to about 26 percent. We're not but I mean this administration is proposing that. That's not sustainable for the nation or our children and it means we will devalue their future. It will be hard for our kids to buy a car, buy a house, or send their kids to college. Standard of livings will drop if we keep this up.

KING: Let's go through a couple of the particulars. The administration wants to deal with this Medicare funding formula for doctors, and it asked the Senate to pass a bill. It's about $250 billion, and that bill will not be part of the health care bill because they want to be able to say the health care bill is deficit neutral.

But at least as of the other day, there was not a way to pay for the $250 billion and some conservative Democrats along with Republicans were objecting saying that's a sham. We can't say health care reform is deficit neutral if we don't pay for this.

GREGG: That's absolutely right. That's gamesmanship. The idea that you're going to add $250 billion to the debt over the next 10 years and claim that it's off budget in some ways so you don't have to look at it so you can go forward with a health care plan which is going to spend $1 trillion to $2 trillion over the next 10 years.

It's just a very bad way to manage your household, to say nothing of your government. It shouldn't be done. We should pay for this. Every year -- we've only done yearly fixes in this area, the doctor fix because it's a pretty difficult number to always pay for, but we have always paid for it. Now suddenly, the administration is suggesting we do a 10-year fix and we not pay for any of it. Wrong way to do it. It's going to create serious problems for us as a nation as we add this type of debt to our books.

KING: We're at a very delicate moment in the health care negotiations. The administration is trying to keep one Republican and some centrist Democrats on board in the Senate and trying to keep liberals on board in the House who don't quite understand what's going on across at the Senate.

I want you to listen to the perspective of a friend of yours, Arlen Specter was a Republican for quite some time. He left and he joined the Democratic Party. That was only a few months ago that he left the Republicans. But listen to his scathing take on your party's perspective in the health care debate.

(BEGIN VIDEO CLIP)

SPECTER: On the Republican side, it is no, no, no, a party of obstructionism. This is no longer the party of John Heinz and Mac Mathias and Lowell Weicker. You have responsible Republicans who have been in the Senate like Howard Baker and Bob Dole and Bill Frist who say Republicans ought to cooperate.

SPECTER: Well, they're not cooperating.

(END VIDEO CLIP)

KING: Is Arlen Specter right about this party of no, his former party?

GREGG: Well, I suppose he has to call it something now that he has left the party. But I think that's unfortunate because if you look at the proposals, I have my own personal proposal that I put forward, which is very substantive, very comprehensive, Senator Coburn, Senator Burr have a comprehensive proposal. And then there's a bipartisan proposal that I'm a co-sponsor of with Senator Wyden and Senator Bennett.

All of these are very positive proposals which would accomplish significant health care reform, which would move us down the road in a very positive way towards getting everybody covered, bending the out- year cost curve and making sure people didn't lose insurance.

However, the present proposal which is on the table, which came out of the Kennedy-Dodd committee, which is now the Harkin committee, and the Finance Committee, is a huge expansion of the size of government. You're talking about taking the government and increasing it by $1 trillion to $2 trillion over the next 10 years.

And growing government at that rate is going to have a very debilitating effect, I believe, on our economy and specifically on health care that people get in this country because a lot of it -- a lot of people are going to lose, I believe, their present policies and be pushed into this public plan, which will inevitably be part of the final package I suspect in some form.

KING: Senator Judd Gregg of New Hampshire, the ranking Republican on the Budget Committee, Senator, thanks for joining us today.

GREGG: Thank you, John.

KING: Take care, sir.

And up next, we head from New Hampshire to Alaska. It's a beautiful state and its isolation often protects it when with the national economy takes a turn for the worst. But just as winter arrives, the unemployment rate is on the rise.

(COMMERCIAL BREAK)

KING: This is our 40th program on STATE OF THE UNION. And this week we've visited our 40th state, up to the great state of Alaska, look at the economy changing up there. September 2008, 6.7 percent unemployment. It's up to 8.4 percent now and still climbing. Every year, the state gives residents a dividend from the oil and gas revenues it takes in. Last year it was more than $2,000. This year down to $1,300. In our "American Dispatch" this week from Anchorage, a firsthand look at the rugged beauty that makes Alaska so different and yet also at the pain of recession that is all too familiar.

(BEGIN VIDEOTAPE)

KING: Alaska takes pride in its natural beauty, and the geographic isolation that makes it very different from what folks here call the "Lower 48."

NEAL FRIED, ECONOMIST, DEPARTMENT OF LABOR, ALASKA: Our economy really beats to a very different drummer than sort of the average American economy, if there is such a thing.

KING: But state economist Neal Fried says the numbers don't lie. Tourism is down, trade is slumping, unemployment climbing.

FRIED: Now we're part of it like the rest of the country is. We appear to be more attached and we're being more affected by this recession than we've ever been in prior recessions elsewhere in the country.

KING: With jobs so scarce, Brad Gillespie says the state is taking new steps, including an online warning to discourage people who lost jobs elsewhere from migrating to Alaska.

BRAD GILLESPIE, ANCHORAGE AREAS ALASKA JOB CENTER: We have a fair number of people that think Alaska is the promised land. They have maybe misconceptions about what's up here, and they load up their family and head out on the Alaska Highway and we want to encourage them to not do that until they have something lined up before they get up here.

KING: Sharon Phillips is a regular here, out of work for nine months now.

SHARON PHILLIPS, UNEMPLOYED ALASKA RESIDENT: I put in for probably -- oh, probably 10 jobs -- eight or 10 jobs a week. I get interviewed for about four a week and I'm still unemployed. There's usually about 70 or 80 people that apply for most jobs. We've been here 27 years, but this is probably the worst I've ever seen the economy anywhere since I've been alive.

KING: Sharon's unemployment benefits run about $450 a month. She says others have it worse.

PHILLIPS: My husband also works for the state, so we're making it, you know, but it's -- I see so many people -- I see more people out on the streets, I see more people homeless. It's going to get worse with winter.

KING: Demand for shelter is increasing, and at this one in Anchorage, the faces reflect the recession's higher toll on native Alaskans.

So does the activity at the Cook Inlet Tribal Council Job Center. Unemployment among Native Alaskans is around 20 percent, and with winter approaching, Employment and Training Director Carol Wren worries it will go higher.

CAROL WREN, COOK INLET TRIBAL COUNCIL: But they face a lot of other challenges that non-Native individuals may not face. You look at education levels, they're usually lower. Poverty rates, pregnancy rates, some of those things. So I think that it's going to be a little rough for folks here into the future. I think we're just starting to feel it here.

KING: The Tribal Center has benefited from federal stimulus money, so has the state government. But Republican Governor Sean Parnell says he would prefer longer-term help from Washington, like approval of new oil and gas leases.

GOV. SEAN PARNELL (R), ALASKA: Outer Continental Shelf development means 35,000 new jobs. The problem with the stimulus funds is that they're great when they come in, but it's horrible when they're gone. So it's a dependence that gets created that doesn't lead to any more freedom or prosperity in the long run. I'd like to see more policy geared towards investment and job creation rather than, you know, propping up the states along the way.

KING: Looking ahead, the governor worries next summer will be another tough tourism season and that a recession that came late to Alaska will linger too long. PARNELL: Alaska tends to trail the rest of the U.S. when it comes to the economy, so when the rest of the economy is headed up, it takes Alaska some time behind it. When the national economy is heading down, we trail.

(END VIDEOTAPE)

KING: A beautiful place to see a sunset.

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

For our international viewers, "AFRICAN VOICES" is next. For everyone else, we're standing by for a live press conference regarding that runaway balloon scare out of Colorado last week, and for that, we turn things over to Fredricka Whitfield at the CNN Center in Atlanta.

Hey, Fred.

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