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STATE OF THE UNION WITH JOHN KING

Interview With John Boehner

Aired November 1, 2009 - 09:00   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."

After one of the deepest recessions in U.S. history, this bold claim from the White House.

(BEGIN VIDEO CLIP)

BIDEN: We've hit bottom.

(END VIDEO CLIP)

KING: In an interview you'll see only on CNN, the vice president says the Obama stimulus is helping power the recovery. And the Republicans ask a powerful question -- where are the jobs? We'll talk exclusively with the House GOP leader John Boehner about the economy and his new health care outline.

Plus, Virginia and New Jersey pick new governors, but are voters also sending a national message?

And "State of the Union's" exclusive duo, James Carville and Mary Matalin.

And our "American Dispatch" from New Jersey, where an underdog candidate for governor tests whether voter frustration with both parties can add up to an independent surprise.

This is the "State of Union" report from Sunday, November 1st.

We begin this Sunday with a question asked every day, not only here in Washington, but at kitchen tables across the America. Is the economy out of its rut, and will it soon start creating jobs again?

The official statistics can be pretty confusing. The government, for example, told us this past week gross domestic product -- that is the most comprehensive look at the overall economy -- grew in the third quarter of the year, and grew at a fairly robust pace. But consumer spending is still shaky, meaning many of you aren't confident you can afford to spend more. And the president's economic team believes the unemployment rate will continue to grow for a while, likely past 10 percent soon.

The Republican view in a moment from the man who hopes to be the next speaker of the House. But first, a telling glimpse at the delicate balance the administration is trying to strike. Our senior White House correspondent Ed Henry sat down for an exclusive conversation with Vice President Joe Biden. His bottom line on the economy is quite upbeat, but the vice president is also well aware millions of unemployed Americans see it differently.

(BEGIN VIDEOTAPE)

BIDEN: Well, look, there's a necessary disconnect when people are out of a job -- and a lot of people are -- that no matter what you say -- for example, the GDP grew 3.5 percent. Every expert out there has said, Ed, and you know this, is that it in large part is attributable to the stimulus package. Put another way, without the stimulus package, the economy wouldn't have grown this past quarter, number one.

Number two, this is the most transparent undertaking the government has ever engaged in. You can go on recovery.gov, pick a zip code you live in, go down to the corner of the street that you want to find out about that crosswalk being built with federal money, be able to spend -- how much was spent, who spent it, who the contractor was, how many jobs. We're going to be able today to announce that just from the one portion of the plan, 650,000 jobs were created. That is direct contracts given to -- federal money sent to the states, sent into a community.

There's another close to a million job independent verifiers have acknowledged that are a consequence of the money put in for recovery for everything from extended unemployment benefits to make sure that states are able to keep teachers hired, to policemen hired, being able to make sure that they have what they called F-MAT, fancy federal phrase for saying Medicaid in the states. So it is working.

ED HENRY, CNN CORRESPONDENT: So do you think we've hit bottom?

BIDEN: Oh, I'm confident we've hit bottom. The question -- look, we're not going to be satisfied, Ed, until we -- I'm able to sit in front of you and say, look, this month we grew jobs. The net effect is growing jobs.

It doesn't say a lot to people to say, you know, there would have been a million more, or a 1.6 million more jobs lost, but for this. My grandpop used to have an expression, Ed. We lived in Scranton, Pennsylvania. He said, when a guy in Dixon City, a suburb, is out of work, it's an economic slowdown; when your brother-in-law is out of work, it's a recession; when you're out of work, it's a depression. It's a depression for millions of people.

(END VIDEOTAPE)

KING: So has the economy hit bottom? Did the Obama stimulus plan really make the difference, and does the Republican Party really have a new comprehensive health care alternative? All questions for the House Republican leader, John Boehner, who's with us exclusively this Sunday.

Do you share the vice president's assessment? Have we hit bottom? BOEHNER: I don't think anybody knows whether we've hit bottom. The one thing I do know is that there's no model for estimating how many jobs could have been saved or created as a result of the stimulus package. All I know are the facts. The president said that when he signed the bill that unemployment would not exceed 8 percent. Now we have unemployment nearly 10 percent. He also said that jobs would be created immediately, and the fact is, they haven't. Most of the so- called jobs that have been saved or created are government jobs, even though the president promised that 90 percent of these jobs would be private-sector jobs. Three million Americans have lost their jobs since the stimulus was signed into law. And yes, the economy grew last month. But after $1 trillion of an economic stimulus plan was spent, probably another $7 trillion or $8 trillion that the Fed has pumped into the economy, I would hope that we've seen some economic growth. But Americans all around the country continue to ask the question, where are the jobs?

KING: And so the vice president says it grew because of the stimulus. You opposed the stimulus. Your party opposed the stimulus. Stand by that vote or was it a mistake? Was that spending necessary, to do something?

BOEHNER: That spending, in the stimulus bill, did nothing more than grow government. Republicans had a better solution that would have cost half as much and created twice as many jobs, according to a model created by the president's own chairwoman of the Council of Economic Advisers. And this was about allowing the American people, families and small businesses, to keep more of what they earned. We really would have gotten the economy going.

And the problem we're having is that small businesses and large businesses are sitting on their hands. Why? They're seeing a government here in Washington with spending that's out of control, a national energy tax, a nationalization of our health care delivery system, and higher taxes on the horizon. And so business people are afraid to invest in their business, afraid to grow their business, because they don't know what's going to happen next.

KING: Let me ask you -- I want to move on to health care, but let me ask you one question about that. One of the things that has people nervous out there is increasing federal deficits. And there's a story in the New York Times today that the administration might be warming to an idea that for 10 months, it has flatly resisted, and that is some sort of a bipartisan commission, get together, look at how to reduce the deficit. You would have to deal with entitlement reforms there. And one proposal on the table from Senator Kent Conrad, a Democrat, and Republican Senator Judd Gregg, is have one of these commissions, they come up with recommendations. Congress would have to vote up or down, no amendments. Would you sign on to something like that, knowing that one recommendation would likely be some higher taxes?

BOEHNER: I've co-sponsored a bill by Representative Frank Wolf from Northern Virginia that would create such a commission. I am concerned that the answer is going to be we're going to raise taxes. But I do agree that we have to get our arms around this deficit. We've got to get our arms around growing entitlement programs.

But before we get to creating this commission, why don't we do something about the spending that's going on right now? It's out of control. You can have $1 trillion deficits for as far as the eye can see, and that's what the budget is that's been passed by the liberals here in Washington.

KING: You would accept that commission, if it was structured in a way you were comfortable with, to try to take the politics out of that debate going forward? I (inaudible)... BOEHNER: Absolutely. Because these entitlement programs are not sustainable. The American people know they're not sustainable. Baby boomers have made promises to each other that our kids and grandkids can't afford. And it's time to do something about it.

KING: Let's move on to health care. I know you brought something with you, and it's more than 1,900 pages, and that is the House Democratic health care bill. Before we get to that, I want to hold up something else. This is the text of your radio address. It's two pages. Now, this was an effort by the Republican Party to say we have alternatives. It's not a bill, I want to be fair to you, but it lays out a number of things you would like to do in the Republican Party.

What it does not do, and what that does, even though you don't like it, in 1,900 pages, it lays out what they would do. It says how much it would cost. The Congressional Budget Office has said in the end what percentage of people would be covered.

Where is the Republican proposal where you can say to the American people, we'll spend this much over 10 years, it will do this to the deficit, and when we're done, X percent of the American people will have health insurance?

BOEHNER: You can go to healthcare.gop.gov and see our eight or nine ideas about how to make our current health care system work better.

KING: But they're separate pieces of legislation right now...

BOEHNER: There are separate pieces...

KING: But will you have something to stack next to that?

BOEHNER: What I'm hopeful for is to take these eight or nine ideas and put them together in a bill that's being scored right now by the Congressional Budget Office and present it on the House floor during this debate. And I'm hopeful that Speaker Pelosi will allow us to offer an alternative.

But what we do is we try to make the current system work better. We take a step-by-step approach, by allowing people to buy insurance across state lines, allowing small businesses and other groups of individuals to group together for the purpose of buying health insurance at lower costs, like big businesses and unions can. We need to do something about junk lawsuits. I think that one of our proposals is to give grants to states who have innovative programs to help bring down the cost of health insurance. And 34 states today have high-risk pools for those with pre-existing conditions. We want to encourage all states to have these. And we put more money into these high-risk pools so that we can bring down the cost of health insurance. And at the end of the day, what we're doing with our proposal is lowering health care insurance premiums, lowering cost and expanding access.

KING: But the perception out there is, and the Democrats have fed this -- and I understand that, and I have read some of the separate proposals Republicans have, that you don't have a comprehensive plan.

KING: Here's a question we had on Twitter. "Where's the magical Republican plan?" Mario asked. "Where is the magical Republican health care bill? I've looked on Google and nothing."

How do you deal with the perception out there fed by the Democrats that do not have -- you have several proposals, but you don't have one where you can say, let's go through all of the issues right here.

BOEHNER: Well, the Democrats don't have one either. I mean, we just saw this first bill, this is the first real bill, one bill, that we've seen from the Democrats in the House, 1,990 pages. That ought to tell you all that we need to know, that we're going to have 1,990 pages of legislation. The word "shall" exists in this bill 3,345 times. Shall, that means, you must do. The Republican proposals have been on healthcare.gop.gov since June. We've talked about them and we talked about them and we're going to continue to talk about them. But it's a common sense approach to make the current system work better. We do not attempt to cover 46 million more Americans.

KING: How many?

BOEHNER: We will cover millions more Americans, but we don't attempt to do this.

KING: But how many more? The American people want to know how many more.

BOEHNER: This is not -- what this is going to do is bankrupt America. It's going to cost millions of Americans their jobs and cut benefits for seniors. This is not what the American people want.

KING: Where do you --

BOEHNER: They want a more gradual approach to fixing our current system.

KING: Where do you draw the line? You are a key player negotiating with the late Senator Edward Kennedy on No Child Left Behind when you had the Education Committee in the House. And that bill has some shalls in it too. It has some federal mandates. So the government does have a role. You've acknowledged that in past legislation. Where is your line in health care in the sense that the Republican Party is the party of states' rights. You believe Washington is too strong, let the states make the decisions. If you could get an opt-in public option, it's a little confusing, I want to explain it to our viewers. But not a public option where states have to make a decision to get out, but a national health care bill that says if states wanted to create a public option, they could do so on their own. Would you vote for that?

BOEHNER: They already can. You know many states, Massachusetts has a plan that they've enacted. Tennessee has enacted their own plan.

KING: There's no public plan in Massachusetts.

BOEHNER: There are a lot of innovative programs out there in the states. And I, frankly, think that we could help those programs work better.

KING: So you will have a proposal? I just want to clear this --

BOEHNER: We are going to have a proposal.

KING: You will have a proposal --

BOEHNER: And I would hope that the speaker would allow us to have a debate and a vote on our proposal.

KING: And it will be a bill? I'll be able to stack the two up side by side?

BOEHNER: Go to healthcare.gop.gov and look at the eight or nine proposals that we have that we expect to make part of -- as a part, together, our substitute.

KING: And so by the end of this week, will people be able to look at one proposal that says, we'll spend this much over 10 years, this is what the CBO says it will cost and this is what the CBO says will end up the percent of Americans who will have health insurance.

BOEHNER: We do not increase taxes, we do not cut Medicaid or Medicare, and do not have mandates on individuals or businesses.

KING: Republican Leader John Boehner. We're going to take a quick break. When we come back, we'll ask him about Afghanistan and the evolving political situation there. We'll also ask him about Tuesday's big elections here in the United States. Stay with us. (COMMERCIAL BREAK)

KING: We're back with the House Republican leader, John Boehner. I want to spend some time on politics, but a couple quick questions first. The administration announced Friday night that it is going to make the H1N1 vaccine available to detainees at the Guantanamo Bay terror detention facility. There are shortages here in the United States for families who are trying to get them. I wonder if you think that's a good idea.

BOEHNER: I don't think it's a good idea. The administration probably didn't think it would be very popular either, that's why they announced it on Friday night. We have prisoners in my own home county who are going to get H1N1 shots while there are vulnerable populations who want the shots who can't get them. I just think that's wrong.

KING: Let me ask you about the Afghan elections. The challenger, Abdullah Abdullah, has said he will not participate now because he doesn't trust the election process. As you know, the administration has said we want to see who we have and what kind of partner we have in Afghanistan before the president makes this momentous decision about troop levels. What does this political uncertainty in your mind do to the situation there and the president's decision?

BOEHNER: Well I think President Karzai did the right thing by agreeing to the runoff and accepting the decision of the commission. But I think everyone expected that President Karzai was going to be re-elected. So Dr. Abdullah's exit from this race, I think, really says more about the fact that he knew he wasn't going to win.

But that should not hamper our decision with regard to Afghanistan. The president made clear that we are not going to withdraw from Afghanistan. But I have looked for every reason in the world to put off a decision, and the longer this decision hangs, the more jeopardy and the more danger our troops on the ground there are in the middle of. We've had the highest casualty totals in years over the last month or two. Why? Because all of the uncertainty around what the president's going to decide. I'm concerned about this delay. I would hope that the president would make a decision and make it soon.

KING: I want to talk to you about politics. You would like to be the next speaker of the House of Representatives. And while much of the attention on this year's elections are on the governor's races in New Jersey and Virginia, there's a special election in New York state. I'm going to hold up the newspaper. This is the Syracuse newspaper. You see "One out, two left in battle for 23rd."

It's the 23rd district and the Republican Party's endorsed candidate, Dede Scozzafava yesterday withdrew from the race. You endorsed her. She was the party's nominee. But she withdrew from the race after Sarah Palin, Tim Pawlenty, the former governor of Alaska, the current governor of Minnesota, two people who might want to run for president some day, and other conservatives jumped in and said she's not good enough, she's not pure enough to be a Republican.

Can you be the speaker of the House, can your party survive in this part of the country if things like this happen?

BOEHNER: Well this is a pretty unusual situation. You had seven county chairmen who chose Dede to be our nominee. And clearly, she would be on the left side of our party, a conservative decided to leave the Republican Party and sign up on the conservative party ticket, which is allowed in New York.

And what's happened over the last several weeks is her numbers have continued to slide. Hoffman, Doug Hoffman, the conservative party candidate, his numbers continue to grow. And so Dede yesterday decided to withdraw from the race.

BOEHNER: This is a pretty unusual circumstance, that we see in New York.

KING: But does it not send a signal? Your friend and former House speaker Republican Newt Gingrich said, if this happened, it would be a purge of the Republican Party.

This is what Chris Van Hollen -- obviously, he's a Democrat and your colleague in the House. He's chairman of the Democratic Congressional Campaign Committee. He says, "The far-right tea-bag party is leading the Republican Party around by the nose."

BOEHNER: Now, listen, we accept moderates in our party and we want moderates in our party. We cover a wide range of Americans. I've -- I was at the tea party in Bakersfield, California on April 15th.

I answered questions in front of 18,000 tea-party people Labor Day weekend in West Chester, Ohio. I've worked with these people. And what they're concerned about is the growing size of government. They want someone who's really going to actively reduce spending and reduce control here in Washington. They're scared to death.

And in this particular case, they think that Mr. Hoffman was a better candidate than the Republican.

KING: If you were a pro-choice Republican, say in the Northeast part of the country -- maybe you support same-sex marriage as well, but you're a fiscal conservative and you think you're a New England moderate Republican, Northeast moderate Republican -- would you enter a race, now, for Congress next year, seek the Republican nomination, knowing that something like this might happen?

BOEHNER: I -- I would hope so. I would hope so. Because what we need is we need a broad group of people in our party.

KING: Doesn't this send a pretty stern signal to those people...

BOEHNER: No, this is a very unusual circumstance.

KING: You don't think the people who went after Dede are going to think, "We can go after other Republicans now," now that they've succeed here?

BOEHNER: Well, I think that going after Republicans is one thing. Having a party standing on fiscal responsibility, like we have all year; standing on principle against the crazy policies that we see out of Speaker Pelosi and Majority Leader Reid -- the American people want to see us take these principled stands. And they want to see us continue to offer what we think are better solutions. If we can continue to do that, we'll have a broad cross-section of people in our party.

KING: As the House Republican leader and the man who would like to be speaker, how do you -- looking at what happened here, you think it's isolated; you hope it's isolated. What do you do when you're in a room with a Sarah Palin, a Governor Pawlenty, the Club for Growth, the people who attacked your party's nominee there?

What message do you send to them about -- I assume you'd want them to pick and choose future battles pretty carefully. You don't have much room for error in next year's elections if you want to get your ultimate goal.

BOEHNER: Well, we're in the middle of, I think, of a political rebellion going on in America. And this rebellion are by people who really have not been actively involved in the political process. And they don't really care whether you're a Democrat or a Republican. They want to see people who are going to stand up and protect the future for our kids and grandkids.

And so it's going to be a difficult road to walk, to work with relatively new entrants into the political system and to work with them to show them that, by and large, we are the party who represents their interests.

KING: Let me ask you, lastly, thought, but sometimes does the party need to draw a line?

What's the point of having a party if people in your party will attack your own nominees? I mean, where do you draw that line?

BOEHNER: Listen, I'm a big believer in Ronald Reagan's 11 commandment -- 11th commandment. Never talk ill about another Republican.

KING: That was not followed in this race.

BOEHNER: I know.

KING: John Boehner, the House Republican leader, the man who hopes to be speaker, we appreciate your coming in here today.

The H1N1 virus is spreading fast and the government is behind its goals of producing vaccines. Up next, we put your questions to our CNN chief medical correspondent, Dr. Sanjay Gupta.

(COMMERCIAL BREAK)

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

Election turmoil in Afghanistan. This morning, presidential challenger Dr. Abdullah Abdullah announced he's dropping out of the November 7th runoff election. Dr. Abdullah says he believes the second round will be as fraudulent as the first. A spokesman for Afghan president Hamid Karzai calls the decision very unfortunate but says the vote should continue.

Secretary of State Hillary Clinton is in Morocco in an effort to restart stalled Mideast peace negotiations. Last night she wrapped up talks with the Israeli prime minister Benjamin Netanyahu (inaudible) praised Israel for making what she calls an unprecedented offer on curbing settlement construction in the West Bank. But Palestinian leaders are insisting Israel stop all settlements before restarting any peace talks.

The Centers for Disease Control says the H1N1 virus is spreading, but more vaccine is becoming available to fight it. The CDC says the swine flu is now widespread in all but two states. Health officials say nearly 27 million doses of vaccine are now available in the United States. That's up more than 10 million doses from just a week ago.

Those are your top stories, here on "State of the Union."

Let's get some insight now on the challenges of fighting the H1N1 flu virus and what you can do to protect your family. Let's bring in our chief medical correspondent, Dr. Sanjay Gupta. You see him there at Boston Children's Hospital.

Welcome.

GUPTA: Thanks. Thanks for having me.

KING: Let's deal with the first question. Even the administration now suggests it overpromised when it came to the number of vaccines available. You've been out there in Boston and other places around the country. Still bad shortages, or starting to get better?

GUPTA: Starting to get better, but still bad. You know, back in the spring, when we first talked about this, they said they would be up to 120 million doses by the fall. That was back in May they were saying that.

They revised those numbers to about 40 million doses available by the end of this -- or end of last month, now, and then 10 million doses a week after that. You just said it, 27 million doses, roughly, so 13 million behind.

The problem is, I think, for people on the front lines, it's, sort of, forced them to act in this ad hoc, sort of, position. They had some really clear guidelines on who would get it. There would be enough for everybody. There's not, so doctors, hospitals, are being forced to make some choices, and there's a lot of frustration going around.

KING: And the number of pediatric deaths is quite alarming. It's now past what we normally have in a full season of regular flu. And that's alarming to parents out there. And I think people are starting to get confused. What are they supposed to do?

GUPTA: Yes, so, you know, normally, in any given flu season, about 80 to 90 deaths in kids in a seasonal flu season. Already 114 deaths, as you mentioned -- it is concerning. About a third, they say, are in healthy children as well. So these were children that didn't have any other underlying illness.

What are they supposed to do? You know, I think -- I think the basic rules still apply. It doesn't change the advice that's being given either by the doctors or the CDC. I think it does make the vaccination issue a larger issue. The vaccine does seems to be pretty effective in these early and short clinical trials, but it really ends up being a very good tactic at, sort of, trying to staving off some of these numbers.

KING: You mentioned "stave off" and "effective." There's a debate about this as well, out there, as you know. There are people out there who say, is it safe; can I trust it; it's new; what are the side effects?

You were in Boston this week interviewing the former Massachusetts governor Mitt Romney, mainly on health care policy, because he was the architect of the Massachusetts plan.

KING: And we're going to spend a lot of time on that in our 11:00 hour today. But I want to deal with the issue of the vaccine because as you know, people out there are criticizing it. Rush Limbaugh, a conservative, says the government tells me to get this vaccine, for that reason alone, I will not get it. You put the question to Governor Romney, do you think it's safe? Let's listen.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), FORMER MASSACHUSETTS GOVERNOR: Everyone is willing to make their own or should make their own decision about their own health care treatment. My wife makes it a practice not to describe her own treatment for her MS, for instance, because she doesn't want people to think that's the approved approach. Everyone has to look at their health care in their own way. But I can tell you when it comes to vaccines, I'm in favor for myself. But other people will have to decide what's right for them. But I've been getting the number of flu shots for a number of years, and fortunately, knock on wood, I haven't been getting the flu.

(END VIDEO CLIP)

KING: If you travel, if you look at our Twitter tweets, and if you look on Facebook, anywhere you go, even down in our unit, we've had several people get the H1N1 and people say, is this safe?

GUPTA: Well you know, it's interesting. What Ii have found so fascinating is that there seems to be two reasons people don't want to get the vaccine. One is that. You know, is it safe? Two is there are a lot of people who don't think it's a big deal, this whole H1N1. I think that may have been what Rush Limbaugh was talking about as well.

I would love to see five years of safety data on everything, especially if I'm giving it to my kids, John, but the reality is, every year the flu vaccine is different, because there's a different strain that becomes a dominant strain and they make a vaccine based on that. I think it's better than 1976, there was a concern about Guillain-Barre, I don't think we're going to have those problems now. There haven't been any side effects in the trial or really so far. So I did give them to my kids. And I say it that way only because I think at the end of the day, that's what people want to know. I looked at a lot of papers, I looked at the studies and that's the decision I made. KING: You communicate about health care all the time and you've been covering this crisis to the point that people have all these questions out there. Is that just the way it is and the way it would be anyway, or has the administration missed a beat or failed in some step in terms of the communication. They, obviously, don't have enough vaccine. They failed that test and they're trying to adapt to it. But in terms of communicating to people, this is safe, trust us, are they doing something wrong?

GUPTA: No, I think they've been out there quite a bit saying that exact message. There have a couple of missteps where people maybe weren't as forceful I think in the initial steps regarding the safety or the efficacy of the vaccine.

But I think, so far, it's been pretty good. There is a deep distrust of government. There's been a sordid history when it comes to vaccines overall, especially dating back to 1976 and there are concerns that linger still about vaccines overall and the links potentially with autism in children.

And so these three things sort of in combination I think have -- it's not surprising, I think in many ways, that we're seeing this. But I also think that there are still more people that want this vaccine than vaccine is available. So the demand is still outstripping the supply.

KING: We appreciate the house call here on STATE OF THE UNION. And viewers, Sanjay will be back in our 11:00 hour. We're going to have a lot of fun talking politics and health care and we're going to put Dr. Gupta in with the best political team on television and have some fun.

Pretty soon, we're going to turn New Jersey and upstate New York to Tuesday, as voters fill the governor's race and fill a congressional seats. Will the results of these governor's elections be a message to President Obama? We'll talk it over with STATE OF THE UNION's exclusive duo, James Carville and Mary Matalin, up next.

(COMMERCIAL BREAK)

KING: You can only see them together right here on STATE OF THE UNION, CNN political contributor and Democratic strategist James Carville and CNN political contributor and Republican strategist Mary Matalin who join us this morning from New Orleans. Good morning, guys.

Let me start by asking you about the political fallout or the political risks in the vice president telling our Ed Henry, "I'm confident we've bottomed out."

An economist would tell you, that's probably the case. But can a politician, James, say that just yet, when they also say unemployment's going to probably crack 10 percent?

JAMES CARVILLE, DEMOCRATIC STRATEGIST: Well, I mean, he can say it. And I thought -- I watched the interview. I thought he did pretty good. It's a very difficult thing to say, because people are -- we're still losing jobs, although at a much slower rate than we were when the president took office. It's very difficult to talk about. And if we keep, we're still losing jobs a year from now, we're obviously going to have a pretty ugly 2010 election for the Democrats. I don't think that's going to be the case. I certainly hope not.

But it's always difficult to talk about an economy that has, quote, "bottomed out," but still is not producing jobs at the level that it needs to. So this is -- this is still pretty sticky wicked out there.

KING: And Mary, Leader Boehner stood by, the vice president said and even a lot of economists will say that the economy grew last quarter because of that stimulus spending. But the Republican leader said it's still a mistake to spend that money in the way it was spent.

MARY MATALIN, REPUBLICAN STRATEGIST: Well, not all economists say that, of course. The Clunkers Program, or the first-time home buyers program, which were one-shot deals, do not provide a sustainable recovery.

In fact, many economists believe that this recovery is being slowed by the uncertainty and the uncertainty of what's going to be happening next with the policies or the policies that they profess are going to be happening are expanding the government, which does not create wealth. It extracts from the private sector. It's slowing down private sector recovery.

And Joe Biden particularly -- I don't want to say inarticulate --- but unbelievable advocate for this. First, we're doing too much or we didn't do enough, or we didn't know it was this deep. And every time he comes on, he says something different, and none of it, not a bit of it comports with people's lives.

He's saying we're creating and saving jobs. There's absolutely zero metric to be able to measure that, but people know we've lost 4.5 million jobs. So they should -- maybe they should get somebody else besides Joe Biden to be the advocate here.

KING: Let me ask you Mary first about -- on Mary first, on the stakes, the political stakes for the Republicans in the health care debate. Leader Boehner came in here with the nearly 2,000 page Democratic bill. But if you're an American out there and you say, all right, I want to read that, but I also want to read a Republican alternative, there's not one yet.

There are several pieces of legislation. He says they'll try to pull them all together. But if the Republicans want to have a better political standing in this debate, shouldn't they already have that comprehensive proposal so you can say, they'll spend this much over 10 years, it will do this to the deficit, this percentage of Americans will have health insurance when it's said and done.

MATALIN: Somehow we've all bought into this notion that there has to be some giant comprehensive re-haul and takeover of the health care sector. For years, Republicans have been trying to do some narrow targeted fixes and that's what all the polls seem to suggest people want.

MATALIN: They want their problems fixed. They want the costs reduced.

Huge cost reductions would accrue from just letting cross-state competition occur or letting small businesses pool like big businesses to get that economy of scale or let consumers be directly involved in the selection of the health care that they get through health savings accounts or to stop junk lawsuits, which the president said, would be in one of these many bills.

So I think what the polls are showing and what -- I was going to say, Speaker Boehner, hopefully Speaker Boehner someday was saying, is we're focusing on the problems people are experiencing in their real lives. We're not trying to take over a sixth of the economy. And that's the way people want to get it done. Whatever's going to get done here is not what anybody other than some sliver of the most liberal of the Democratic Party is wanting to have done.

CARVILLE: Well, John, I've got a couple of things, interesting, that bill that he had, those pages actually, according to the CBO, which was the holy grail of the whole conservative movement three months ago, said that that would actually cover more people and save money. This actually reduces the deficit.

And I was also stunned that you asked him if he was going to produce a bill, and he said, well, I hope so. As we say in Washington, sort of aspirational that they'd put any of their ideas on the table. There have been six different bills that have passed, Democratic bills that have passed out of committees, and other than Senator Snowe, with no Republicans.

I mean, this thing -- this train is moving. This is the most progress that's ever been made on health care ever, and it looks like we're going to end up in a process where we're going to cut the deficit and cover more people. I think that that's a joyous occasion and a historic occasion in this debate that's been going on forever in American politics.

MATALIN: John, on this issue of the CBO scoring -- one point on this. The selective reading of the CBO scoring, I don't -- I'm pretty confident nobody we know has read the 1,990 pages, but I know no one has read the CBO scoring.

If they don't make this fact that the CBO included in there, that this will never -- none of these scoring will be deficit neutral or reduce the cost of health care, if it includes in it policies that cannot been sustained, like cutting Medicare provisions. And you know why they say that? Because politically, every time that comes up, it never happens.

So if you can't have the cost-cutting provisions politically sustainable in the bill, which also include taxing the Cadillac things, then you're not going to reduce the deficit. They have to score what they're given, but they cannot account for future political will. They can only account for past history, which has been nil.

KING: Let's move on.

MATALIN: You can laugh all you want.

CARVILLE: Yeah, let's move on, because --

MATALIN: Because you're wrong, let's move on.

KING: Let's move on to the politics of the moment. I want to focus on this special congressional election up here in upstate New York. It's on the battle. This is the Siena Research Institute Poll and had the Democrat Bill Owens at 36 percent, the conservative candidate Doug Hoffman at 35. Now Dede Scozzafava dropped out of the race yesterday, she was at 20 percent in the polls.

Mary Matalin, you have worked on trying to build the Republican Party. What message does it send to more moderate Republicans like Dede Scozzafava, that if you get in this race, if you get the endorsement of your party, even if you have that stamp of approval, the endorsement of your party, that Governor Palin, Governor Pawlenty, the Club for Growth and conservative groups who don't think you're good enough might come after you.

What message does it send to a moderate Republican out there in the United States thinking about running for an election?

MATALIN: You know, there's some really massive inside-the- Beltway or bubble thinking about what is a moderate Republican. What Doug Hoffman ran on what was bringing Democrats to him and Independents to him and not just conservatives to him and what the 20 percent of the Democrats said Dede had, cared about and they thought she would do a better job than the Democrat was debt.

This is not about abortion, it's not about gay rights, it's not about what the Beltway describes as a conservative. The overlapping issue for all of these various sectors of the electorate, which is expanding, Independents are expanding -- has to do with the debt and expanding government beyond sustainability, which is dashing the dreams of our future.

And it's making -- and people feel it's dangerous in their immediate lives. So if you are a Democrat right now in Watertown, be prepared to have everybody coming and personally asking you for your vote. Those were 20 percent of the Democrats that were for Dede are going to go to Hoffman. And Hoffman is going to win on a message of common sense fiscal conservative limited government. This is not a party issue. This is a common sense issue. People across the country of every party are feeling like we're moving too far, too fast on too many issues and they don't want fundamental transformation of this country.

CARVILLE: Well, John, I have an announcement to make. Ronald Reagan's big tent just collapsed in upstate New York. It no longer exists. And the reality is, a lot of Republicans are delighted at that prospect. I hear people all the time say, you know, I'm not a Republican, I'm a real conservative. And the message in the Republican Party is, if you're not our definition -- if you're not a Rush Limbaugh, a Glenn Beck, a Sarah Palin directive of what constitutes a Republican, if you don't check the necessary boxes, then they're going to primary you.

And to some extent, you've got to say this is something that people who have said this for a long time, this is the kind of party they wanted, they now have it. And so somebody can now go pick the tent up and throw it out into Lake Ontario somewhere, because it doesn't exist anymore.

KING: We need to stop you there for this hour, but James and Mary, we're going to have plenty of James and Mary in our 11:00 hour when we go through the "Sound of Sunday" and all these races in much more detail. James and Mary, thank you, we'll see you in a bit.

And up next, we head to one of the other states we'll be watching closely on Tuesday, New Jersey. The incumbent Democratic governor is wildly unpopular and the Republican challenger is somewhat controversial. But is that enough to bring an Independent revolt?

(COMMERCIAL BREAK)

KING: Two states elect new governors Tuesday, Virginia and New Jersey. And a big question here in Washington is, will voters also be sending some sort of a national message? We'll circle back Tuesday night when we have a better answer. But we do know this, Republicans are confident and Democrats, well, they're a bit nervous that they won't be able to match the remarkable energy of last year's presidential campaign.

KING: Now, the president's not on the ballot, but he is quite invested. He knows more than bragging rights are at stake.

Let's look quickly at Virginia, here. You have here the president's campaigned twice for Creigh Deeds. He's the Democratic candidate here. And yet, if you look at the latest polling, he is down 11 points, the Democrat is down. Republicans are very confident they are going to win here in Virginia, which would put to an end a big Democratic streak there.

Now let's move up to the north and go into the state of New Jersey. Here you have three candidates in the race. And in the latest poll, the independent, Chris Daggett, getting six; a very close race between the incumbent Democrat John Corzine and the Republican Chris Christie.

The president will be there today. It's the third time he will campaign for Jon Corzine. No Democrat has carried every election in this state. No Republican has won statewide since 1997.

If you look at the polls or travel a lot as I do, plenty of evidence of voter frustration with both political parties. People often don't see a difference.

In that New Jersey race, there's one candidate trying to tap that frustration and mount an independent surprise.

(BEGIN VIDEOTAPE)

KING (voice over): Rain or shine, the election is Tuesday. In a soggy morning commute from Princeton, Chris Daggett...

CHRIS DAGGETT, NEW JERSEY CANDIDATE FOR GOVERNOR (I): How are you doing? Can I say hello? I'm Chris Daggett. I'm running for governor.

(UNKNOWN): Hi.

(UNKNOWN): Thanks.

DAGGETT: Thank you.

KING: ... finds hope.

DAGGETT: Are you happy with Jon Corzine this year?

(UNKNOWN): I'm not particularly happy with anybody.

KING: Anger at the incumbent Democrat, grumbling about the Republican alternative.

DAGGETT: Did it work?

(UNKNOWN): Yes.

KING: For an independent like Daggett, the perfect storm.

(UNKNOWN): He's an independent in the race.

KING: Well, not quite perfect.

DAGGETT: Actually, the trick is to see where I am on the ballot. If you look on the back, they manage to figure out how to try to bury us on the ballot.

KING: So, with the literature, comes a county by county guide to where you can find Daggett on the ballot.

DAGGETT: And what I said is...

KING: He's also short money. There's no party apparatus to help with turnout, and yet predicts growing national frustration with both parties will bring a miracle in New Jersey.

DAGGETT: But I'm pretty sure that this is the beginning of a wave of independents. It's been growing for quite some time.

I did it, in part, because I sensed things were -- there was a feeling out there that things were going off-track and we needed an alternative. It's far deeper and more widespread than I -- I ever imagined.

KING: Daggett believes his own politics are a good fit for the state and for the times.

DAGGETT: I'm very supportive of a woman's right to choose. So I'm pro-choice. I've said that I support stem-cell research. I support gay marriage. If a bill were to pass, I would sign it in the legislature.

I believe strongly in gun control, but at the same time, I believe in the second amendment right to have a weapon.

Most people are more centrist, I think, than they are on the extremes, but the extremes capture the two parties.

(APPLAUSE)

KING: In campaign stops, like this synagogue, Daggett quickly looks to tap the anger.

DAGGETT: I believe that it doesn't matter who is in Trenton, Republican or Democrat; nothing ever changes. Just listen closely to those health care forums that we've heard. There's a lot more anger being expressed than about health care. It's about the stimulus package that didn't stimulate. It's about full-time jobs to part-time jobs and people out of work and foreclosed homes and about politicians that can't ever seem to solve the problems that face us.

KING: There's no doubt the frustration is real.

(UNKNOWN): I think you're about the only one who's actually addressed the issues and, you know, told us what you will do about it.

KING: The question, in the final days, is, where is this going?

And John Weingart of the Eagleton Institute of Politics at Rutgers University is among those who see Daggett as making an important statement, even having a big impact.

JOHN WEINGART, EAGLETON INSTITUTE OF POLITICS, RUTGERS UNIVERSITY: I don't think he can win. And I think most voters will find, when they go to make the final decision, that, even though they may wish that Daggett would win, they don't want to cast a vote that they think would help the major party candidate they like the least.

KING: Republicans worry they get hurt more; if Daggett draws away moderate GOP voters, it could help the profoundly unpopular Democratic incumbent.

KING: What if you wake up Wednesday morning and it doesn't go the way you want it to go and people are you saying, you know, Daggett, you're the spoiler; you caused -- most people think it would be Corzine to win again, but does it matter to you?

DAGGETT: No, not in the least. Because I never saw in the U.S. Constitution anything that said about it had to be a two-party system or that somebody who tried to challenge the two parties was a spoiler.

Democracy is about the exchange of ideas and figuring out who's got the best ideas and voting for the best person. I keep saying, in the debates, it's never wrong to vote for the right person.

KING: As you know, one of our goals is to get out of Washington as often as we can. We've made it our pledge on "State of the Union" to travel to all 50 states in our first year. So far, 42 weeks, 42 states, including Delaware, New Hampshire and Oregon. Check out CNN.com/stateoftheunion, where you can see what we've learned when we visited your state.

We want to say goodbye, right now, to our international audience for this hour. But up next, for viewers here in the United States, Howard Kurtz and his "Reliable Sources" look at how the media plans to cover the big Tuesday elections.

(COMMERCIAL BREAK)

KING: I'm John King and this is "State of the Union."

The deadliest month ever for U.S. troops put the media's focus squarely back on Afghanistan. Will the renewed attention on the once forgotten war play a role in the president's decision on the road ahead?

Plus, all eyes on New Jersey and Virginia. Will two key governors' races be a sign of things to come or are the pundits just looking for an off-year election storyline?

In this hour of "State of the Union," Howard Kurtz, as always, breaks it down with his reliable sources.