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STATE OF THE UNION WITH JOHN KING

Interview With Senators Lugar, Reed; Interview With Tony Blair

Aired November 29, 2009 - 09:00   ET

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


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

(BEGIN VIDEOTAPE)

KING (voice-over): President Obama prepares to announce his new strategy for Afghanistan.

PRESIDENT BARACK OBAMA: It is my intention to finish the job.

KING: Two influential senators weigh in on troop levels, the timetable, and the cost of war: Democrat Jack Reed of Rhode Island and Republican Richard Lugar of Indiana.

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: Now is the time to move forward towards peace.

KING: A rare hint of movement in the search for Middle East peace. We'll check in with special envoy Tony Blair live from the region.

And in our "American Dispatch," we travel to Seattle to see how, despite scarce resources, one program tries to get homeless teens off the streets and on to a better path.

This is the STATE OF THE UNION report for Sunday, November 29th.

(END VIDEOTAPE)

KING: Good morning. Hope you all had a great Thanksgiving.

President Obama this week will unveil his long-awaited new strategy for Afghanistan. Administration sources suggest it includes a significant boost in U.S. troop levels. The official announcement is planned in prime-time Tuesday night at the West Point Military Academy before an audience of Army cadets and military officials.

The bigger audience, of course, is a skeptical American public, which is divided on the question of whether sending more troops is a good idea. And the toughest sell for the president is within his own Democratic Party. Here to discuss the president's Afghanistan dilemma are two leading voices on foreign and military affairs. Senator Richard Lugar of Indiana is the top Republican on the Senate Foreign Relations Committee. And in Wilmington, Delaware, Democratic Senator Jack Reed, a member of the Senate Armed Services Committee and himself a West Point graduate. Senators, thanks for being with us. Let me start just with the basics. And "The Washington Post" lays out some of it today in this story: "Newly Deployed Marines to Target Taliban Bastion," 30,000 to 35,000 new troops is what we expect, about 9,000 Marines will go first into the Helmand province, where -- has had the heaviest fighting right there.

Senator Lugar, let me start with you, does the president have it right here, 30,000 to 35,000 troops over the next year to 18 months?

LUGAR: Well, the president needs to start by outlining the war we are in. Now by that, I mean, the war not against the Taliban, Al Qaida, but what is, at least, the objective of continuing in Afghanistan or in any place?

That is basic because this has to be a confident speech in which the president recognizes we're at war. the American public recognizes that. Our friends and foes around the world see the resolution. Having said that, then the president has to outline why Afghanistan is important. Why -- now, many Americans say, well, of course it's important, this is where the Al Qaida did their encampment, protected by the Taliban, can't go through that again.

But next door in Pakistan there are also Taliban battle going on there. The president has to mention Pakistan. What is the implication of that war there, and Pakistan itself? Or General Petraeus's survey of the 20 parts of the Central Command, the 20 nations in which there may be other people from Al Qaida, how do we deal with all of that?

In other words, Afghanistan is crucial and we've been concentrating on the number of troops and so forth. Now the president will need to outline that and he's wanting to do so with confidence that this is not a few troops here, a few troops there, a reevaluation each time through. Likewise, he'll have to talk about, can the Afghans to 134,000 people on their own to protect what they are doing? Will the allies from NATO come in? How confident we are of that, all of that in a comprehensive speech has to be a part of this picture.

KING: Well, Senator Reed, I want to get to some of the specifics. Senator Lugar teed some of them up right there. But on the basics, are you ready to support 30,000 to 35,000 more troops over the next 12 to 18 months and maybe even more a year from now if General McChrystal comes back and says, Mr. President, things are going well, but I need a little more?

REED: Well, as Senator Lugar said, the president has to speak to the American people, remind them why we're there, and also lay out a strategy, not just the reflexive response to a recommendation, but a strategy that involves protecting the homeland from Al Qaida.

And that involves a presence in Afghanistan. It involves being influential in Pakistan. It involves having a combination of intelligence, counterterrorism, and counterinsurgency operations, all of these things. I think the president has taken appropriately the time to study this carefully. I think his recommendation will be sound. But I think, more importantly, the president will say, not only there's an increase in troops, but lay it out in the context of how this will allow us to shift the burden to the Afghani forces, to build them up as we go forward.

And the key element here is not just more troops, the key element is shifting the operations to the Afghanis. And if that can be done, then I would support the president.

KING: Well, we'll talk about in a second. First, I want you to both assess the difficult politics for the president. I want to show some polling numbers. If you ask the American people, what should the president do? They're pretty divided. Begin to withdraw, 39 percent. Increase by about 40,000 troops, 37 percent. Increase by less than 40,000 troops, 10 percent. Keep it the same, 9 percent.

But here's the most telling poll numbers. If you look at the recent "USA Today"/Gallup poll, how is the president handling Afghanistan? A 20-point drop in his approval rating between July and now, and a 20 percent increase in the disapproval rate.

So, Senator Lugar, to you first, he took a little more than three months from General McChrystal's recommendation to the speech he will give Tuesday night. Some have said that's deliberative, thoughtful process. Others, some of your conservative friends, have said it is dithering.

Has the president paid a price, a political price, for waiting?

LUGAR: Perhaps. but at this point, that's beside the point. The president is in a moment in which he really has to regain the approval of the American people, as well as people around the world, that we are on the right course. This is why this speech and the plan is so important.

So I'll give the president credit for taking time. I think the dilemma for the president, beyond those we've already talked about, is that the war is costly. Additional troops will cost a great deal more, by all estimates. We have a...

KING: Some say $1 million per troop per year.

LUGAR: Precisely. And we've really not heard good calculations of how much cost the Afghan troops will be for us. In other words, are we as American taxpayers going to pay for this increase to 134,000, even if the Afghans were able to do that in one year, as opposed to four, which used to be the old plan? We're going to have to have a serious talk about budget and about the $1 trillion deficit we are in now and will continue to be in. And if we were talking about several years of time, how many more years beyond that? What is the capacity of our country to finance this particular type of situation as opposed to other ways of fighting Al Qaida and the war against terror? KING: Senator Reed, does the president have to say, I need your trust, citizens, I need your support financially, and here's the end game? Does he need to draw a date on a calendar out there and say, this is when we get out of Afghanistan? And can he do that right now?

REED: I think he has to make a speech that shows that all of our efforts are pointed to our reduced presence in Afghanistan. But I think he has to also indicate again and again how critical this is to our national security.

The elements, the Al Qaida elements that attacked us on 9/11 are still on the Afghan/Pakistan border. We still have to keep up the pressure. But I think he has to make it very clear that this is not an unending responsibility of the United States without limit.

Senator Lugar pointed out the issue of cost. You know, we have over eight years in Iraq and Afghanistan under the Bush administration not paid for any of those military operations. Now that is coming home to reckon in terms of a huge deficit. We have to move forward and support this operation responsibly.

But the president -- I think the key to the president's response is laying down a strategy, informing the American public of what's at stake, and I think that when they listen and when they hear, they will be supportive, but it will be a support that has to be continually developed and strengthened going forward.

KING: You've both mentioned the cost. Let me ask you, we're going to talk to Chairman David Obey of the House Appropriations Committee later in the program. He wants a special war surtax, He wants it laid out transparently so the American people know every time they get their tax bill, here's what goes to the government normally, and here's the part that's going to pay for Iraq and Afghanistan. Senator Levin in the Senate has talked about something similar.

Senator Reed, to you first, do you support that? Do you think it should be broken out separately so the American people get a separate bill for the wars in Iraq and Afghanistan, so they fully understand the price tag?

REED: We have to begin to pay for everything we do. We're engaged in a huge debate on health care and central to that debate is paying for it. And if we're paying for the health and welfare of the American people, we certainly have to pay for our operations overseas. Whether it's broken out specifically or not, that is a detail.

I think the important point is that we have to commit not to indefinitely, through deficits, fund these operations, but do it in a reasonable, pragmatic way. KING: Do you support a separate accounting, a separate war surtax?

LUGAR: I believe there will be a separate accounting, but in any event, I think we will have to pay for it. I would just make this suggestion, that in the three weeks of debate we still have ahead of us, we really ought to concentrate in the Congress on the war, on the overall strategy of our country and the cost of it. And we ought to be on the budget. Passing appropriations bills in a proper way.

LUGAR: Now in the course of that, we may wish to break out that. We may wish to discuss higher taxes to pay for it. But we're not going to do that debating health care and the Senate for three weeks through all sorts of strategies and so forth.

The war is terribly important. Jobs and our economy are terribly important. So this may be an audacious suggestion, but I would suggest we put aside the health care debate until next year, the same way we put cap and trade and climate change and talk now about the essentials, the war and money.

KING: Is your Republican friend making sense, Senator Reed? Should health care be set off to next year?

REED: Absolutely not. I think we're in the midst of probably the most significant debate and conclusion with legislation that we've ever had. And the health care debate is essential to our economic future. There are businesses and individuals each year pay more and more for health care. It has become unaffordable. We have to go ahead and conclude this debate.

To stop now would be stopping on the edge of, I think, significant reform, which is so important for the country. And frankly, it's ironic, there has -- now under the Bush administration, there was no serious debate about Afghanistan. that was relegated to the sidelines. There was no attempt to pay for it. And suddenly, now, that becomes a critical need that we put aside health care. I don't think so.

I think we have to push forward. I think the president's speech will be appropriate. I think the strategy we'll analyze in the committees and I think we can go forward on both fronts and we have to.

KING: A quick break. The two senators will be back in just a moment. We'll put to them the question, as the president prepares to send thousands of more U.S. troops to Afghanistan, can his partner in Afghanistan, President Karzai, be trusted? And a reminder that CNN's coverage of the president's speech begins Tuesday at 7:00 p.m. Eastern. Please stay with us.

(COMMERCIAL BREAK)

KING: Back with two top senators. Republican Richard Lugar and Democrat Jack Reed. Let's stay on Afghanistan. You mentioned before the break, Senator Lugar, the goal is to train 134,000 Afghan security forces by next October. That would require 5,000 a month. And yet, just this past month, the Afghani government failed its target by more than 2,000.

Some would say that this is Iraq deja vu. That the United States government keeps saying, we're going to train them, we're going to train them, we're going to train them, and because of problems with the Afghan government, in this case, corruption, people leaving once they get the training, it won't get done. Do you trust the other side of the equation? Do we have a reliable partner in the Afghan government?

LUGAR: For the moment, we don't have a reliable partner. And that is a question, clearly, of the building process. If the training occurs, will the government really take hold? We don't know, frankly. And we know right now, as you say, that the attrition of the forces that are trained as such and the number of people we have to send over to do the training is limited. So that's a phased-in process, while this acceleration is predicted.

KING: So explain, Senator Reed, to a skeptical American out there who says, if we don't think we can trust the government, and we need to see, time will tell, to use the cliche, why would you send 30,000 more troops into Afghanistan unless and until you know that President Karzai has his act together this time?

REED: Well, we have to, I believe, increase our forces, first, our trainers, which is consensus to do that. But also some of our brigade combat teams to give us the time and also to seize the initiative from the Taliban so that the Karzai administration can begin to carry through some of its commitments. They made commitments left and right. Now they have to carry those commitments through.

The military forces there, according to our troops, are actually very good fighters. But we need more of those units, more of those small unites. It will take some time. But the effort here really is to stabilize the situation and insist that the government of Afghanistan begin to perform. And I think the other effort is begin to, at the local level, have effective governance.

And that means good governors. That means governors that won't be interfered with and disrupted from the center. That is something we're going to have to insist upon. And part of our commitment and part of the president's speech will be to communicate the fact that we have these understandings and that they're enforceable.

KING: The enforceable part is what I want to follow up on. Will the Congress insist -- as a senator, Barack Obama was for benchmarks in Iraq. As president, executives often think a little differently. Will the Congress want enforceable benchmarks that the Afghan government must meet or else? Will there be an "or else" in terms of cutting off the funding and bring home the troops?

To you, Senator Lugar, first. LUGAR: Well, if we have that kind of a speech, then we have a lack of confidence to begin with. Because there is not a great deal of confidence in the ability of the Afghan government to perform. Now we're going to have to get this straight. We are in Afghanistan and President Karzai said this again this week, for our own interests.

Now we said, listen, Mr. Karzai, you know, for yours too. not necessarily. Karzai and others may think Afghanistan has done very well without foreigners for a long while. If we have contingency plans, all sorts of benchmarks, at which point the president says, all right, it's all over because they didn't perform and so forth, we're off to a very jagged situation. KING: Well, I want you to actually listen, Senator, before you jump in. I want you to listen, President Karzai did an interview with Margaret Warner of "The Newshour" a couple weeks ago. And I want you to listen Senator Lugar's point about why is the United States there and does he trust the United States?

(BEGIN VIDEO CLIP FROM "THE NEWSHOUR")

MARGARET WARNER, PBS ANCHOR: Do you have any doubts about the U.S. commitment to Afghanistan?

HAMID KARZAI, AFGHANI PRESIDENT: Well, Afghanistan was abandoned after the war with the Soviet Union. Not only abandoned, but left to the mercy of the neighbors in a very cruel way. We keep hearing assurances from the United States, but we are like, once bitten, twice shy. We have to watch and be careful while we trust.

(END VIDEO CLIP)

KING: Senator Reed, you listen to that, and how -- we'll watch and see whether or not we trust the United States. If you pick up "The Washington Post" tomorrow, there are Marine officers quoted on the record saying they're not sure President Karzai will crack down on the opium trade because they believe some of his buddies are involved in it.

Again, to a skeptical American out there, if President Karzai is saying things like that about once bitten, twice -- don't trust the United States, should we send more troops?

REED: Well, John, first of all, it's in his self-interest and his interests of survival that there be a coherent effort, not just by the United States, and NATO.

REED: Again, we sometimes forget this is not just an American operation. General McChrystal is a NATO commander also.

But it's in his self-interest and the interests of his country that there be collaboration. One of the things I heard -- and I was in Afghanistan on the ground in September -- is that the people of Afghanistan are offended about the corruption; they're offended about the drug trade. It's his people, not just the people in the United States.

He has to begin to understand that; then, in his own self- interest, not doing us a favor, has to operate for an effective government.

I think that point should be made time and time again with President Karzai and I hope he recognizes that. It's not just in our interest. In fact, fundamentally, it's in his interest. If we cannot maintain a suitable presence in Afghanistan, then the prospect for successful government by the Afghani people will be diminished substantially.

KING: We talked about the benchmarks for the Afghan government. They must end corruption. They must do more about the drug trade. They must improve their own security forces.

Senator Lugar, what is your benchmark for the counterinsurgency strategy?

How will you know this is succeeding or failing? What's the test?

LUGAR: Well, many press accounts have said, in Helmand province, the first attempt will be made by several thousand additional troops coming in there -- and the capital, we've not been able to have success. So there would be at least some initial idea whether Helmand itself works out better, and furthermore, whether, after we chase the Taliban out of there, whether people are willing to take hold or whether they're, over their shoulder, saying, you know, "You Americans will be gone and they'll be back, and therefore, we're going to be very tentative about this."

KING: All right. Senator Reed, your test for General McChrystal's strategy, not the Afghan government?

REED: Well, a test for the McChrystal strategy is if they can essentially stabilize, particularly the capitals in Helmand province and in Kandahar, and also if they can begin to see a defection from the Taliban ranks of those nonideological fighters.

And the ultimate test is that there are villages able to protect themselves, with the help of the Afghani national army and, to a degree, the United States and NATO forces, and that you're beginning to see a revival of civic activity, economic activity.

That's the final test, a return to what would be, sort of, normalcy. And that -- that will take a while, but it will be at the local village level.

KING: There's a new report from Democrats on the committee on which you are the ranking Republican member, the Foreign Relations Committee, and it looks back at time at Tora Bora and the early days of the war in Afghanistan under the Bush administration.

There have been long rumors that Osama bin Laden was allowed to escape or that he was there and he was not grasped. Here's what the Democratic report from the Foreign Relations Committee staff says. "The decisions that opened the door for his escape to Pakistan allowed bin Laden to emerge as a potent symbolic figure who continues to attract a steady flow of money and inspire fanatics worldwide. The failure to finish the job represents a lost opportunity that forever altered the course of the conflict in Afghanistan and the future of international terrorism."

This report, Senator Lugar, prepared by the Democratic staff for the Democratic chairman of your committee -- is it just looking back to learn a history lesson, or is it relevant at the moment?

LUGAR: Well, perhaps both. But at the same time, it does serve as a convenient way for, perhaps, Democrats to say once again, there's another failing of the past administration; all the problems have accumulated.

I think we have to accept that there were many failings. But the problem right now is, what do we do presently? What will the president's plan be? How much confidence do we have in this president and this plan?

KING: Is that the way to look at it, Senator Reed, that, yes, there were many mistakes under the Bush administration, but at the moment, now and certainly after the speech Tuesday night, this is President Obama's war?

REED: Well, the president is confronting the culmination of decisions that were made eight years and -- or more before. That's made the situation much more difficult for him.

The escape of bin Laden is -- is an interesting comment, but the real strategic misjudgment, I think, was shifting our focus away from Afghanistan and Pakistan and underresourcing it for seven years while the Bush administration pursued a policy in Iraq.

Now we're living with the consequences of that, in terms of the population of Afghanistan that is much more wary of us because we didn't deliver the promises they thought were forthcoming in 2002 and 2003. You've got a renewed Taliban. You have a situation where Al Qaida has reconstituted itself. You have Pakistan, which is even more unstable today than it was in the past.

All these things have developed over the last several years. But Senator Lugar is right. The question now is what to do about it. Be informed by the past, make judgments based upon the experience of the past, but we have to look forward and we have to -- and the president has to propose a strategy that will carry us forward and that will ensure the security and safety of the United States.

KING: Well, Senator Lugar, then look forward. In a best-case scenario, what should the American people be prepared for? How long -- five more years, 10 more years, 20 years more in Afghanistan?

LUGAR: The American people will not sustain a war in Afghanistan for five years or 10 years, in my judgment. Below that, we do have troops in many countries still sustaining efforts, so we're not in a full-scale war, but I -- this is why I get back to the budget.

We're going to have to take a look at what our own resources are, what our own troop levels are, whether we can continue to recruit enough people and what other things are occurring in the world at the same time. These may not be the only wars America has to face. And that's an important factor, to have at least some reserve situation.

KING: So Senator Reed, five years, 10 years? Do you have a sense?

Will, 10 years down the road, there be 30,000 U.S. troops still in Iraq and 25,000 or 30,000 still in Afghanistan?

REED: What we have to have is a continually decreasing military presence in Afghanistan. I don't think there's going to be an overnight withdrawal of American forces, but unless we're on a trajectory in which our troop levels come down, the ability of the American public to support it and financially to support it is questionable.

But I think that has to be and will be inherent in the president's speech on Tuesday evening at West Point.

KING: Senator Jack Reed, Democrat of Rhode Island, Senator Richard Lugar, Republican of Indiana, gentlemen, thank you both for your time today, very thoughtful discussion.

Up next, we'll turn to the Middle East, where some see a possible -- possible sign of movement in the effort to revive the Israeli- Palestinian peace talks. The former British prime minister Tony Blair, now a special envoy to the region, takes us inside this delicate diplomacy. Please stay with us.

(COMMERCIAL BREAK)

KING: I'm John King and this is STATE OF THE UNION. Here are stories breaking this Sunday morning. President Obama is preparing to unveil a new strategy for Afghanistan that's expected to include a substantial boost in troop levels. The president will announce the plan during his speech Tuesday night at the West Point Military Academy. A defense official tells CNN the Pentagon is preparing for an increase of 34,000 troops. CNN, of course, will carry that speech live.

Investigators in Russia are calling a deadly train derailment an act of terror. At least 26 people were killed and another 100 injured when an explosion caused several cars to jump the tracks Friday night. Several passengers are still unaccounted for. Investigators say they found elements of an explosive device, including a crater under the tracks where the train derailed.

Investigators in Florida are hoping to interview Tiger Woods and his wife today about the golfing great's mysterious car accident. Two previous attempts to meet with them have failed. Woods was treated for minor injuries when he crashed his SUV into a fire hydrant and then a tree outside his Orlando area home early Friday morning.

Those are your top stories here on STATE OF THE UNION. Up next, we'll go live to Jerusalem where special Mideast envoy Tony Blair is standing by.

(COMMERCIAL BREAK)

KING: After months of stalemate, perhaps a bit of movement in the Israeli/Palestinian dispute. Israeli Prime Minister Benjamin Netanyahu has announced a 10-month freeze of Jewish settlements in the West Bank. But Palestinian officials say the moratorium doesn't go far enough, because it doesn't include a halt in construction in East Jerusalem.

So is there an opening for progress or just more finger-pointing and frustration? Our next guest has unique insight. Tony Blair is the former British prime minister and now special envoy to the Middle East for the United States, Russia, the European Union, and the United Nations.

Mr. Prime Minister, thank you for joining us. Let's start with the basic question, will the Israelis and the Palestinians sit down or will they continue just to talk about sitting down? BLAIR: Well, I hope they sit down because it's absolutely essential that we get a political negotiation under way and get it under way as quickly as possible. Because there are things, positive things happening on the ground right at the moment on the West Bank.

The Palestinian economy is growing. There are check points being opened or removed. There's a lot of bustle and activity on the West Bank. In Gaza, let us hope we get the release of the kidnapped Israeli soldier and then start to get some opening up of Gaza to the outside world.

So there are positive things that are happening, but it needs an overarching political negotiation in order to succeed.

KING: Some positive things, as you know, but what is missing, and you know this all too well, is trust. Prime Minister Netanyahu is not trusted by the Palestinians, and even after this concession on his part, which caused him a bit of grief in his own political support, but Prime Minister Netanyahu has made this concession, but the Palestinian prime minister, Mr. Fayyad, says it's not enough.

He says, what has changed to make something that was not acceptable a week or 10 days ago acceptable now? The exclusion of Jerusalem is a very serious problem for us.

Should the Palestinians, in your view, sit down, even though it's not perfect? Is it time to sit down and just say, look, you're not going to get everything you want entering negotiations? Just sit down and negotiate?

BLAIR: Well, I've just spent some time with the Israeli prime minister, Mr. Netanyahu, and I think he is genuine and serious in wanting the negotiation to start. I think from the Palestinian point of view, they need to know that this negotiation is going to be credible. In other words, it's not just going to be sitting down and talking, but it is genuinely going to lead us towards the two-state solution that everyone wants to see.

So the debate at the moment is, how do we create the context in which people think this negotiation is serious, that it will lead to a viable Palestinian state, one that is a secure neighbor for Israel, but also a Palestinian state in which the Palestinians have the freedom to run their own territory?

KING: Assess the politics of the moment. Some would look at these two governments and say Prime Minister Netanyahu cannot afford to give up much or he'll lose his coalition. President Abbas has said, enough, I'm frustrated with this, I'm not going to stay in power much longer. So you see two weak governments, some would say, there is no way they could get anything done, and others would say, that's the perfect opportunity. How do you see it?

BLAIR: Because I'm more naturally optimistic, I see it as an opportunity. I also think both of them have got one great source of strength that's not to be underestimated here. I mean, I spend a lot of time in Israel and in the Palestinian territory. There is no doubt in my mind at all that a majority of people, both Israelis and Palestinians, want to see a two-state solution.

Their doubt over the past years has been whether it's possible to have it, but their commitment in principle to getting it has not diminished. So our task, if you like, is to set the context in which they think this can be done. Now I've spent time talking to the leadership of both sides.

Whatever doubts they have about each other's good faith from time to time, I mean, I don't doubt the good faith of either. I think they genuinely want to find a way through, but they come at it from completely opposite sides. Israel wants to know that its security is going to be protected, while on the West Bank the Palestinian Authority have made real strides forward in security.

I mean, I can go to cities on the West Bank now, Jenin and Nablus and Hebron and Qalqilya and Jericho, places that two years ago would have had quite a different security setting, now with security greatly improved. So there are things that the Palestinians are doing, actually, to help meet that Israeli concern.

On the other side, for the Palestinians, what they need to know is that if they sit down and talk so the Israelis, it will lead, genuinely, to an independent Palestinian state. And what is it that they want to know? They want to know that the weight of occupation will be lifted.

But there again, actually, there have been some things that have happened on the West Bank: check points opened, some of the restrictions lifted, Israeli-Arabs coming into the Palestinian territory, an increase in economic growth. As a result, the West Bank economy is probably growing maybe in double digits, actually, at the moment.

BLAIR: So there is real potential and hope, but the next month, I think, will be completely critical, fundamental to this, because if we can't get negotiations going that are credible, then the vacuum that is created will suit no one but the extremists.

KING: Let me follow up on that point. You mentioned the next month is critical. One of the questions being asked back here in the United States is where is the U.S. leadership? I want to read you a bit from a "New York Times" editorial this Saturday. "Nine months later, the president's promising peace initiative has unraveled. The Israelis have refused to stop all. The Palestinians say that they won't talk to the Israelis until they do. President Mahmoud Abbas is so despondent, he has threatened to quit. Arab states are refusing to do anything. Mr. Obama's own credibility is so diminished, his own approval rating in Israel is 4 percent, that serious negotiations may be farther off than ever. Peacemaking takes strategic skill, but we see no sign that President Obama and Mr. Mitchell were thinking more than one move down the board."

That's a pretty sober, pretty negative assessment of the American diplomatic involvement. Do you share it?

BLAIR: I don't, actually. I mean, it won't surprise you to know. I think that, first of all, let me tell you that I worked with Senator George Mitchell of the Northern Ireland peace negotiations. We work together very closely. He is, in my view, one of the most skilled and strategic negotiators I've ever come across.

Secondly, I think President Obama, Secretary Clinton are completely committed to doing this. But third and perhaps most important of all, I went through situations in times in the Northern Ireland process where people were convinced the thing was going to fail. Where even at times, I found it difficult to see a way through. But you know, the thing is, there is a way through here because in fact, both parties want to achieve a two-state solution.

Actually, the Palestinians have made significant progress on security. In fact, the Israelis are prepared, in my view, to change significantly their posture on the West Bank. And if we can get Corporal Shalit released, then a major change in the way that we view Gaza. It's not without hope.

And here's the thing, John. There is no alternative but to keep trying. The alternative to a two-state solution is a one-state solution and that will be, I assure you, be a hell of a fight. So I think when we look at the various strands of negativity there are around at the moment and there always are in these negotiations, there are, nonetheless, positives.

We've got to seize on them, work on them, and make sure that we bring about a situation in which the central strategic objective of President Obama, which is right at the outset of his administration, to make this process count and work is achieved. And I do emphasize that as well. The president said this at this beginning. This is, to my mind, the big difference of what has come before.

At the very beginning of this administration, he set that as a core strategic objective. I have absolutely no doubt he holds to that and whatever the difficulties and the obstacles, we have to find a way through. And personally, although as I say I am optimist by nature, I believe we will.

KING: Let me shift subjects. I want to get your thoughts about an inquiry back in your home country. There's an inquiry into the run-off, the political decisions, the military decisions in the run-up to the Iraq war. And your name, and your credibility have been called into question, your good name has been called into question in this inquiry.

Lord Goldsmith, who was your attorney general back in those days, says that he warned you that this was a breach of international law, but that he was bullied into being quiet and convinced not to resign from the government. Is that an accurate portrayal?

BLAIR: No, it's not, but I think the best thing with this inquiry is actually to let us all give our evidence to the inquiry. And you know, I've been through these issues many, many times over the past few years and I'm very happy to go through them again. But I think probably the appropriate place to do that is in front of the inquiry.

KING: Well, let me try one more on you. This is your former ambassador to the United States, Christopher Meyer, talking about your meeting with President Bush in Crawford, Texas, a meeting I covered some years ago. He says, "I know what the cabinet office says were the results of the meeting, but to this day, I'm not entirely clear what degree of convergence was if you like signed in blood at the Crawford ranch in Texas."

Your former ambassador saying essentially you came to visit President Bush and you came back and then within days were talking about the need for regime change in Iraq. Again, this is your reputation, your credibility being called into question. Is that an accurate portrayal?

BLAIR: John, it's been called into question many times over these past years about exactly these issues, all of which, as I say, have been gone over many times before.

But I feel, because I'll be giving evidence in the new year in front of the inquiry that it really is best rather that I respond to each and every news report or allegation, the best thing is to go in front of the inquiry, answer their questions, and I'm very, very happy to do so. I've always been happy to do so. You know, this is a situation where over the years, I've answered questions time and time again on it. And I'm happy to do so again. It's an important decision. It was a very momentous decision in terms of your country and in terms of mine. But I think the appropriate place to look at all these issues is the inquiry itself.

KING: Well let me then try and lastly this way. I'll leave the specifics for when you testify to the inquiry, but if you pick up media accounts in your country, friends of yours are saying that you feel betrayed, that you feel your reputation is being damaged by men you bestowed high offices to in the government. Do you feel betrayed? Are you angry at how this is being done?

BLAIR: Absolutely not. One of the things you learn as a leader in a country is you have the responsibility to take decisions. Some of those decisions are difficult decisions and some of them are very controversial. And what happens, your time in leadership goes on, and I spent 10 years as UK prime minister, is that these controversies, sometimes they can be very bitter, very difficult.

That's part of being a leader. And I think it was one of your presidents that once said if you can't stand the heat, don't come into the kitchen. And that's my view of politics. So I take decisions, I stand by them, and as I say, these are all questions I've answered many times before. I'm happy to go through it again.

KING: The former British Prime Minister Tony Blair, now special envoy to the Middle East. Mr. Prime Minister, thanks so much for your time today.

BLAIR: Thanks, John.

KING: And up next, we head west to Seattle, Washington, a painful recession here in the United States is causing a spike in teenage homelessness and testing the resolve of organizations determined to give these struggling youths a hot meal, some shelter, and perhaps some hope.

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KING: We've seen, time and time again, in our travels, the troubled economy is affecting just about everyone. One of the groups hit hardest are the homeless in our cities. And if you take a look, you might be shocked at the young faces scouting in allies and abandoned buildings for shelter.

Let's take a closer look at the problem. Twenty-seven percent- plus unemployment rate for teenagers, 16 to 19 years old. Children make up 27 percent of the homeless population, and they are the fastest-growing segment of that population.

The Orion Center in Seattle has seen a 50 percent increase in demand for services just over the past year. So, in our "American Dispatch" this week, we visited the streets of Seattle, Washington and a remarkable place that many homeless teens seek out first for a hot meal and then for something more.

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KING (voice over): Life on the street has its own rhythm and rules. There is safety in numbers, and a numbing sadness in the search for shelter in Seattle's cold, raw rain. Living here leaves an indelible mark.

(UNKNOWN): I've been cold. I've been hungry. I've been soaked to the skin and tired and sick and injured, and you definitely learn quite a bit about yourself from that.

KING: At Seattle's Orion Center, Michael first found smiles and support, then skills in an eight-week computer diagnostics class.

(UNKNOWN): If I hadn't found this place, I'd probably be squatting either in a park or in an abandoned building.

(UNKNOWN): What you do is you press this, and you start pulling the shot into a shot glass.

KING: Down the hall, Orion's barista training program...

(UNKNOWN): Cash handling; you learn interview kills. KING: ... where Kayla Wyatt developed new skills and the confidence to move back with her mother after two years off and on on the street. (UNKNOWN): You think it's easy at first, and then it gets harder and harder, especially during the winter because it's so cold here.

KING: For just about everyone, the first Orion Center visit is for what the street kids call "the feed," free meals. Some linger longer to enjoy a break from the elements, a hot shower, maybe warmer clothes for the next night.

Twelve thousand meals a year, 10,000 showers, and believe it or not, 10,000 pair of socks to keep young people's feet warm.

Melinda Giovengo is executive director of YouthCare, and Orion Center is its flagship program, needed more than ever in this punishing recession.

MELINDA GIOVENGO, EXECUTIVE DIRECTOR, YOUTHCARE: We're seeing 180 new faces a month. We've had young people come in and say, I'm here; I'm 18 years old; my family can't afford me anymore. It's not just affecting, you know, underprivileged kids. It's affecting the entire strata of America.

KING: A 50 percent spike in demand but fewer resources because a bad economy dries up funding.

GIOVENGO: We've had family foundations who have been supportive of us for 20 years are saying, "We can't this year." All the government fundings have been jeopardized, restricted or reduced over the last few years, so we're just hanging on, trying to do more with less.

KING: The bad economy also takes a toll in other ways. Michael took a position in a bowling alley because technology jobs are so scarce now. Delaun was a classmate in the computer program. He now works as an Orion Center intern because a tough job market is even tougher for someone with no experience and a history on the street.

(UNKNOWN): It's terribly hard, I mean, especially in certain situations, where you've got youth who are being faced with various other challenges that society may bring, as far as trouble with the law and other things that they can get very easily caught up in. I came here, kind of, lost, and I found myself a whole lot more than I intended to here.

KING: They took different paths to the street. Delaun had problems at home he prefers not to discuss. Michael left home in Ohio to join a young Seattle man he met on the Internet.

(UNKNOWN): Partly to get away from my family because I was just, you know, coming out as queer, and I wanted some time on my own to actually get things sorted out for myself and work up the courage to actually tell them.

KING: Some here have or developed drug problems. Others make life-changing choices in the name of survival.

GIOVENGO: Trading sex for places to live and money to get food with and ending up being seduced into a lifestyle of chronic adult or being seduced into the, kind of, sexual exploitation industry that's out there.

So it's more and more dangerous and there's fewer and fewer of us and fewer, fewer resources to go out and capture them early so that they don't get absorbed into that very, very dark world.

KING: Here at Orion, there is an escape, a hot meal and, if nothing else, the company and support of others who understand.

(END VIDEOTAPE)

KING: A remarkable place. We thank everyone at Orion for sharing their time and their stories with us. And as you know, one of our goals is to get out of Washington as often as we can. We've made it our pledge here on "State of the Union" to travel to all 50 states in our first year. So far, 45 and counting, including Montana, Michigan, North Carolina and Washington state. Check out CNN.com/stateoftheunion, where you can see what we've learned when we visited your state.

We want to say goodbye to our international audience for this hour. But up next, for our viewers here in the United States, Howard Kurtz and his "Reliable Sources" look at how media coverage of President Obama has changed dramatically during his first year in office.

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

(voice over): High unemployment, an unpopular war in Afghanistan and slipping job approval numbers. Is a string of bad news turning the media against President Obama?

And with the economy struggling to recover, are journalists partly to blame for the nation's financial meltdown?

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