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President Obama Speaks at House GOP Retreat in Baltimore

Aired January 30, 2010 - 18:00   ET



We hear it all the time, voters want politicians here in Washington to stop fighting and start working together. We saw a very unusual attempt Friday to change the slash and burn tone. The president agreed to answer questions from GOP lawmakers on their turf, a House Republican retreat in Baltimore. It was even more remarkable because television cameras were allowed inside to record every tough exchange. And there were plenty. This hour, we want you to hear it all for yourself.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I very much am appreciative of not only the tone of your introduction, John, but also the invitation that you extended to me. You know what they say, keep your friends close, but visit the Republican caucus every few months.


Part of the reason I accepted your invitation to come here was because I wanted to speak with all of you, and not just to all of you. So I'm looking forward to taking your questions and having a real conversation in a few moments. And I hope that the conversation we begin here doesn't end here. That we can continue our dialogue in the days ahead. It is important to me that we do so. It is important to you, I think, that we do so. But most importantly it is important to the American people that we do so.

I've said this before, but I'm a big believer not just in the value of a loyal opposition, but in its necessity. Having differences of opinion, having a real debate about matters of domestic policy and national security, that's not something that is only good for our country, it is absolutely essential. It is only through the process of disagreement and debate that bad ideas get tossed out, and good ideas good refined and made better. That kind of vigorous back and forth that imperfect, but well founded process, messy as it often is, at the heart of our democracy. That's what makes us the greatest nation in the world.

So, yes, I want you to challenge my ideas and I guarantee you that after reading this I may challenge a few of yours. I want you to stand up for your beliefs and knowing this caucus I have no doubt you will. I want us to have a constructive debate. The only thing I don't want, and here I am listening to the American people, and I think they don't want it either is for Washington to continue being so Washington-like.

I know folks, when we're in town there, spend a lot of time reading the polls and looking at focus groups, and interpreting which party has the upper hand in November and in 2012, and so on and so on and so on. That's their obsession. And I'm not a pundit. I'm just a president. So take it for what it's worth. But I don't believe that the American people want us to focus on our job security. They want us to focus on their job security.


I don't think they want more gridlock. I don't think they want more partisanship. I don't think they want more obstruction. They didn't send us to Washington to fight each other in some sort of political steel cage match, to see who comes out alive. It's not what they want. They sent us to Washington to work together, to get things done, and to solve the problems they're grappling with every single day. I think your constituents would want to know that despite the fact it doesn't get a lot of attention, you and I have actually worked together on a number of occasions. There have been times where we have acted in a bipartisan fashion. And I want to thank you and your Democratic colleagues for reaching across the aisle.

There has been, for example, broad support for putting in the troops necessary in Afghanistan to deny Al Qaeda safe haven, to break the Taliban's momentum and to train Afghan security forces. There has been broad support for disrupting, dismantling and defeating Al Qaeda. And I know we're all united in our admiration of our troops.


So, today, in line with what I stated at the State of the Union, I have proposed a new jobs tax credit for small business. And here's how it would work. Employers would get a tax credit of up to $5,000 for every employee they add in 2010. They would get a tax break for increases in wages as well. So if you raise wages for employees making under $100,000, we would refund part of your payroll tax, for every dollar you increase those wages faster than inflation.

It is a simple concept. It is easy to understand. It would cut taxes for more than 1 million small businesses. So I hope you join me. Let's get this done. I want to eliminate the capital gains tax for small business investment and take some of the bailout money the Wall Street banks have returned and use it to help community banks start lending to small businesses again.

So join me. I am confident that we can do this together for the American people and there's nothing in that proposal that runs contrary to the ideological predispositions of this caucus. The question is what is going to keep us from getting this done? I have proposed a modest fee on the nation's largest banks and financial institutions to fully recover for taxpayers money -- that they provided -- to the financial sector when it was teetering on the brink of collapse. And it is designed to discourage them from taking reckless risks in the future. If you listen to the American people, John, they'll tell you they want their money back. Let's do this together, Republicans and Democrats.

I proposed that we close tax loopholes that reward companies for shipping American jobs overseas and instead give companies greater incentive to create jobs right here at home -- right here at home. Surely that's something that we can do together, Republicans and Democrats. We know that we have got a major fiscal challenge, in reining in deficits that have been growing for a decade, and threaten our future. That's why I've proposed a three-year freeze in discretionary spending other than what we need for national security. That's something we should do together. That's consistent with a lot of the talk, both in Democratic caucuses and Republican caucuses. We can't blink when it is time to actually do the job.

I know how bitter and contentious the issue of health insurance reform has become. And I will eagerly look at the ideas and better solutions on the health care front. If anyone here truly believes our health insurance system is working well for people, I respect your right to say so, but I just don't agree. And neither would millions of Americans with pre-existing conditions, who can't get coverage today, or find out that they lose their insurance just as they're getting seriously ill. That's exactly when you need insurance. And for too many people they're not getting it.

I don't think a system's working when small businesses are gouged, and 15,000 Americans are losing coverage every single day. When premiums have doubled, and out of pocket costs have exploded, and they're poised to do so again. I mean, to be fair, the status quo is working for the insurance industry, but it is not working for the American people. It is not working for our federal budget. It needs to change. This is a big problem. And all of us are called on to solve it.

Let me close by saying this. I was not elected by Democrats or Republicans, but by the American people. That's especially true because the fastest growing group of Americans are independents. That should tell us both something. So I am optimistic. I know many of you individually. And the irony, I think, of our political climate right now is that compared to other countries, the differences between the two major party on most issues is not as big as it is represented. But we have gotten caught up in the political game in a way that is just not helping. It is dividing our country in ways that are preventing us from meeting the challenges of the 21st century. I'm hopeful that the conversation we have today can help reverse that. So thank you very much. Thank you, John.




REP. MIKE PENCE (R), INDIANA: Now last year, about the time you met with us, unemployment was 7.5 percent in, this country. Your administration and your party in Congress told us that we would have to borrow more than $700 billion to pay for a so-called stimulus bill that was a piecemeal list of projects and boutique tax cuts, all of which was -- we were told had to be passed, or unemployment would go to 8 percent, as your administration said.

Well, unemployment is 10 percent now as you well know, Mr. President. Here in Baltimore it is considerably higher. Now Republicans offered a stimulus bill at the same time, cost half as much as the Democrat proposal in Congress and using your economic analyst models it would have created twice the jobs, at half the cost. It essentially was across the board tax relief, Mr. President. We know you've come to Baltimore today, and you've raised this tax credit, which was last promoted by President Jimmy Carter.

But the first question I would pose to you very respectfully, Mr. President, is would you be willing to consider embracing in the name of little David Carter, Jr., and his dad, in the name of every struggling family in this country, the kind of across the board tax relief that Republicans have advocated, that President Kennedy advocated, that President Reagan advocated, and that has always been the means of stimulating broad-based economic growth?

OBAMA: Well, the -- there was a lot packed into that question there.


Let's talk about just the jobs environment generally. You're absolutely right that when I was sworn in the hope was that unemployment would remain around 8 percent, or in the 8 percent range. That was just based on the estimates made by both conservative and liberal economists because at that point not all the data had trickled in. We have lost 650,000 jobs in December. I'm assuming you're not faulting my policies for that. We had lost, it turns out, 700,000 jobs in January, the month I was sworn in. I'm assuming it wasn't my administration policies that accounted for that. We lost another 650,000 jobs the subsequent month, before any of my policies had gone into effect. So I'm assuming that wasn't as a consequence of our policies. That doesn't reflect the failure of the Recovery Act.

The point being that what ended up happening was that the job losses from this recession proved to be much more severe in the first quarter of last year, going into the second quarter of last year, than anybody anticipated. So, I mean, I think we -- we can score political points on the basis of the fact that we underestimated how severe the job losses were going to be. But those job losses took place before any stimulus, whether it was the ones that you guys proposed or the ones that we proposed, could have ever taken effect. The package we put together at the beginning of the year, the truth is should have reflected, and I believe reflected what most of you would say are common sense things.

This notion that this was a radical package is just not true. A third of them were tax cuts and they weren't -- when you say were boutique tax cuts, Mike, 95 percent of working Americans got tax cuts. Small businesses got tax cuts. Large businesses got help in terms of their depreciation schedules. It was a pretty conventional list of tax cuts. A third of it was stabilizing state budgets. There is not a single person in here who had it not been for what was in the stimulus package wouldn't be going home to more teachers laid off, more firefighters laid off, more cops laid off. And the notion that I would somehow resist doing something that cost half as much but would produce twice as many jobs, why would I resist that? I wouldn't. That's my point is that -- I am not an ideologue. I'm not. It doesn't make sense, if somebody could tell me you could do this cheaper, and get increased results, that I wouldn't say great. The problem is I couldn't find credible economists that would back up the claims that you just made.

Now, we can -- here's what I know going forward, though. We're talking -- we were talking about the past. We can talk about this going forward. I have looked at every idea out there in terms of accelerating job growth to match the economic growth that has already taken place. The jobs credit that I'm discussing right now is one that a lot of people think would be the most cost effective way for encouraging people to pick up their hiring. There may be other ideas that you guys have. I am happy to look at them. And I'm happy to embrace them. I suspect I will -- I will embrace some of them, some of them I already embraced.

But the question I think we're going to have to ask ourselves is, as we move forward, are we going to be examining each of these issues based on what's good for the country, what the evidence tells us? Or are we going to be trying to position ourselves so that come November we're able to say, the other party, it is their fault. If we take the latter approach, then we're probably not going to get much agreement. If we take the former, I suspect there will be a lot of overlap, all right?




UNIDENTIFIED MALE: Maria Blackburn, Tennessee.

UNIDENTIFIED FEMALE: Thank you, Mr. President. And thank you for acknowledging that we have ideas on health care because, indeed, we do have ideas. We have plans, we have over 50 bills, we have lots of amendments that would bring health care ideas to the forefront. And if those good ideas aren't making it to you, maybe it is the House Democrat leadership that is an impediment instead of a conduit. When will we look forward to starting anew? And sitting down with you to put all of these ideas on the table, to look at these lessons learned, to benefit from that experience, and to produce a product that is going to reduce government interference, reduce costs, and be fair to the American taxpayer?


OBAMA: Actually, I've gotten many of your ideas. I've taken a look at them, even before I was handed this. Some of the ideas we have embraced in our package. Some of them are embraced with caveats.

So, let me give you an example. I think one of the proposals that has been focused on by the Republicans, as a way to reduce costs, is allowing insurance companies to sell across state lines. We actually include that as part of our approach. But the caveat is we have got to do so with some minimum standards because otherwise what happens is that you could have insurance companies circumvent a whole bunch of state regulations about, you know, basic benefits, or what have you, making sure that a woman is able to get mammograms as part of preventive care, for example.

Part of what could happen is insurance companies could go into states and cherry pick and just get those who are healthiest, and leave behind those who are least healthy, which would raise everybody's premiums who weren't healthy, right? So it is not that many of these ideas aren't workable, but we have to refine them to make sure that they don't just end up worsening the situation for folks rather than making it better.

Now, what I said at the State of the Union is what I still believe. If you can show me, and if I get confirmation from health care experts -- people who know the system and how it works, including doctors and nurses -- ways of reducing people's premiums, covering those who do not have insurance, making it more affordable for small businesses, having insurance reforms that insure people have insurance even when they have got pre-existing conditions that they're coverage has not dropped them just because they're sick, that young people right out of college or as they're entering the workforce can still get health insurance. If those component parts are things that you care about, and want to do, I'm game.

At its core if you look at the basic proposal that we put forward, that has an exchange so that businesses and the self-employed can buy into a pool and can get bargaining power the same way big companies do, the insurance reforms that I've already discussed, making sure that there is choice and competition for those who don't have health insurance, the component parts of this thing are pretty similar to what Howard Baker, Bob Dole, and Tom Daschle proposed at the beginning of this debate last year.

Now, you may not agree with Bob Dole and Howard Baker and, certainly you don't agree with Tom Daschle on much, but that's not a radical bunch. But if you were to listen to the debate, and frankly how some of you went after this bill, you'd think that this thing was some Bolshevik plot. I mean, that's how you guys -- that's how you guys presented it. And so I'm thinking to myself, well, how is it that a plan that is pretty centrist -- no, look, I mean I'm just saying, I know you guys disagree, but if you look at the facts of this bill, most independent observers would say this is actually what many Republicans -- is similar to what many Republicans proposed to Bill Clinton when he was doing his debate on health care.

So all I'm saying is we have got to close the gap a little bit between the rhetoric and the reality. I'm not suggesting that we're going to agree on everything whether it is on health care, or energy, or what have you. But if the way these issues are being presented by the Republicans is that this is some wild-eyed plot to impose huge government in every aspect of our lives, what happens is you guys then don't have a lot of room to negotiate with me. I mean the fact of the matter is that many of you, if you voted with the administration on something, are politically vulnerable in your own base, in your own party. You've given yourselves very little room to work in a bipartisan fashion, because what you've been telling your constituents is this guy's doing all kinds of crazy stuff that's going to destroy America.

And I would just say that we have to think about tone. It is not just on your side, by the way. It is on our side as well. This is part of what's happened in our politics, where we demonize the other side so much that when it comes to actually getting things done, it becomes tough to do.



PENCE: Dr. Tom Price from Georgia? And then we'll have one more after that, if your time permits, Mr. President.

OBAMA: You know, I'm having fun.


This is great.


PENCE: So are we.

Tom Price, Georgia?


I want to stick on -- on the general topic of health care, but ask a very specific question. You have repeatedly said, most recently at -- at the State of the Union, that Republicans have offered no ideas and no solutions, in spite of the fact...

OBAMA: I don't think I said that.

What I said was within the context of health care -- I remember that speech pretty well. It was only two days ago.


I said I'd welcome ideas that you might provide.

I didn't say that you haven't provided ideas. I said I'd welcome those ideas that you'll provide.

PRICE: Mr. President, multiple times from your administration there have come statements that Republicans have no ideas and no solutions, in spite of that fact that we've offered, as demonstrated today, positive solutions to all of the challenges we face, including energy and the economy and health care.

Specifically, in the area of health care, this bill, H.R. 3400, that has more cosponsors than any health care bill in the House. It is a bill that would provide health coverage for all Americans, would correct the significant insurance challenges of portability and preexisting, would solve the lawsuit abuse issue, which isn't addressed significantly in the other proposals that went through the House and the Senate, would write into law that medical decisions are made between patients and families and doctors, and does all of that without raising taxes by a penny.

But my specific question is, what should we tell our constituents who know that Republicans have offered positive solutions to the challenges that Americans face and yet continue to hear out of the administration that we've offered nothing?

OBAMA: Tell them I -- look, I have to say, that on the -- let's just take the health care debate. And it's probably not constructive for us to try to debate a particular bill. This isn't the venue to do it. But if you say that we can offer coverage for all Americans and it won't cost a penny, that's just not true. You can't structure a bill where suddenly 30 million people have coverage and it costs nothing.



PRICE: ... and I understand that we're not interested in debating this bill.

OBAMA: Sir...

PRICE: But what should we tell our constituents, who know that we've offered these solutions, and yet hear from the administration that -- that we have offered nothing?

OBAMA: Let me -- I'm using this as a specific example, so let me answer your question. You asked a question, I want to answer it.

OBAMA: It's not enough, if you say, for example, that we've offered a health care plan and I look up -- this is just under the section that you've just provided me -- or the book that you've just provided me, "Summary of GOP Health Care Reform Bill."

"The GOP plan will lower health care premiums for American families and small businesses, addressing America's number one priority for health reform."

I mean, that's an idea that we all embrace. But specifically it's got to work. I mean, there's got to be a mechanism in these plans that I can go to an independent health care expert and say, "Is this something that will actually work, or, is it boilerplate?"

REP. SHELLEY MOORE CAPITO (R), WEST VIRGINIA: Thank you, Mr. President, for joining us here today.

OBAMA: Thank you.

CAPITO: As you said on your -- in the State of the Union address on Wednesday, jobs and the economy are number one. And I think everyone in this room, certainly I, agree with you on that. I represent the state of West Virginia. We're resource rich. We have a lot of coal and a lot of natural gas. But our -- my miners and the folks who are working and those who are unemployed are very concerned about some of your policies in these areas: cap-and-trade, an aggressive EPA and the looming prospect of higher taxes. In our minds, these are job-killing policies.

So I'm asking in -- in to -- if you would be willing to re-look at some of these policies, with the high unemployment and unsure economy that we have now, to assure West Virginians that you're listening.

OBAMA: Well, I -- look, I listen all the time, including to your governor, who's somebody who I enjoyed working with a lot before the campaign and now that I'm president.

And I know that West Virginia struggles with unemployment. And I know how important coal is to West Virginia and a lot of the natural resources there. That's part of the reason why I've said that we need a comprehensive energy policy that sets us up for a long-term future.

For example, nobody's been a bigger promoter of clean coal technology than I am. In testament to that, I ended up being in a whole bunch of advertisements that you guys saw all the time about investing in ways for us to burn coal more cleanly.

I've said that I'm a promoter of nuclear energy, something that, you know, I think over the last three decades has been subject to a lot of partisan wrangling and ideological wrangling. I don't think it makes sense. I think that that has to be part of our energy mix.

I've said that I am supportive -- and I said this two nights ago at the State of the Union -- that I'm in favor of increased production.

So if you look at the ideas that this caucus has, again, with respect to energy, I'm for a lot of what you said you are for.

The one thing that I've also said, though -- and here we have a serious disagreement and my hope is we can work through this agreement -- these disagreements; there's be effort on the Senate side to do so on a bipartisan basis -- is that we have to plan for the future.

And the future is that clean energy -- cleaner forms of energy are going to be increasingly important. Because even if folks are still skeptical in some cases about climate change in our politics and in Congress, the world's not skeptical about it.

If we're going to be going after some of these big markets, they're going to be looking to see is the United States the one that's developing clean coal technology? Is the United States developing our natural gas resources in the most effective way? Is the United States the one that is going to lead in electric cars?

Because if we're not leading, those other countries are going to be leading.

OBAMA: So what I want to do with West Virginia to figure out how we can seize that future. But to do that, that means there's going to have to be some transition. We can't operate the coal industry in the United States as if we're still in the 1920s or the 1930s or the 1950s. We've got to be thinking, what does that industry look like in the next hundred years?

And it's going to be different. And that means there's going to be some transition, and that's where I think a well-thought-through policy of incentivizing the new while, you know, recognizing that there's going to be a transition process and we're not just suddenly putting the old out of business right away. That has to be something that both Republicans and Democrats should be able to embrace.


PENCE: Mr. President, a point of clarification.

What's in the "Better Solutions" book are all the legislative proposals that were offered...

OBAMA: Oh, I understand. I've actually read your bills.

PENCE: ... throughout 2009.

OBAMA: I understand.

PENCE: And so rest assured the summary document that you received is backed up by precisely the kind of detailed legislation that Speaker Pelosi and your administration have been busy ignoring for 12 months.

OBAMA: Well, Mike, hold on, hold on a second.


No, no, no, no, no. Hold on a second guys.


You know, Mike, I've read your legislation. I mean, I take a look at this stuff. And the good ideas we take.

But here -- here's the thing, here's the thing, I guess, that all of us have to be mindful of. It can't be all-or-nothing one way or the other, all right?

You -- you -- and what I mean by that is this. If we put together a stimulus package in which a third of it are tax cuts that normally you guys would support, and support for states and the unemployed and helping people stay on COBRA that your governors certainly would support, Democrat or Republican. And then you've got some infrastructure, and maybe there's some things in there that you don't like in terms of infrastructure, or you think the bill should have been $500 billion instead of $700 billion, or there's this provision or that provision that you don't like. If there's uniform opposition because the Republican caucus doesn't get 100 percent or 80 percent of what you want, then it's going to be hard to get a deal done. That's because that's not how democracy works. So my hope would be that we can look at some of these components parts of what we're doing, and maybe we break some of them up on different policy issues. So if the good congressman from Utah has a particular issue on lobbying reform that he wants to work with us on, we may not be able to agree on a comprehensive package on everything, but there may be some component parts that we can work on.

OBAMA: You may not support our overall jobs package, but if you look at the tax credit that we're proposing for small businesses right now, it is consistent with a lot of what you guys have said in the past. And just the fact that it's my administration that's proposing it shouldn't prevent you from supporting it.

That's my point.

PENCE: Thank you, Mr. President.

Peter Roskam from the great state of Illinois?

OBAMA: Oh, Peter's an old friend of mine.

ROSKAM: Hey, Mr. President.

OBAMA: Peter and I have had many debates.


REP. PETER ROSKAM, (R), ILLINOIS: Well, this won't be one. Mr. President, I heard echoes today of the state senator that I served with in Springfield, and there was an attribute and a characteristic that you had that I think served you well there. You took on some very controversial subjects: death penalty reform. I -- you and I...

OBAMA: We worked on it together.

ROSKAM: ... negotiated on.


ROSKAM: You took on ethics reform. You took on some big things. One of the keys was you rolled your sleeves up, you worked with the other party, and ultimately you were able to make the deal.

Now, here's an observation.

Over the past year, in my view, that attribute hasn't been in full bloom. And by that I mean, you've gotten the subtext of House Republicans that sincerely want to come and be a part of this national conversation toward solutions, but they've really been stiff-armed by Speaker Pelosi. Now, I know you're not in charge of that chamber, but there really is this dynamic of, frankly, being shut out. When John Boehner and Eric Cantor presented last February to you some substantive job creation, our stimulus alternative, the attack machine began to marginalize Eric -- and we can all look at the articles -- as Mr. No. And there was this pretty dark story, ultimately, that wasn't productive and wasn't within this sort of framework that you're articulating today.

So here's the question: Moving forward -- I think all of us want to hit the reset button on 2009, how do we move forward?

And on the job creation piece in particular, you mentioned Colombia, you mentioned Panama, you mentioned South Korea. Are you willing to work with us, for example, to make sure those FTAs get called? That's no-cost job creation. And ultimately, as you're interacting with world leaders, that's got to put more arrows in your quiver, and that's a very, very powerful tool for us.

But the obstacle is, frankly, the politics within the Democratic Caucus.

OBAMA: Well, the -- first of all, Peter and I did work together effectively on a whole host of issues. One of our former colleagues is right now running for governor on the Republican side in Illinois.

OBAMA: In the Republican primary, of course, they're running ads of him saying nice things about me.


Poor guy.


Although, that's the -- that's one of the points that I made earlier. I mean, we've got to be careful about what we say about each other sometimes because it boxes us in in ways that makes it difficult for us to work together because our constituents start believing us. They don't know sometimes this is just politics, what you guys, you know, or folks on my side do sometimes. So just a tone of civility instead of slash-and-burn would be helpful.

The problem we have sometimes is a media that responds only to slash- and-burn-style politics. You don't get a lot of credit if I say, "You know, I think Paul Ryan's a pretty sincere guy and has a beautiful family." Nobody's going to run that in the newspapers, right?


And by the way, in case he's going to get a Republican challenge, I didn't mean it.


I don't want to -- don't want to hurt you, man.

(LAUGHTER) But, the -- on the specifics, I think both sides can take some blame for a sour climate on Capitol Hill. What I can do maybe to help is to try to bring Republican and Democratic leadership together on a more regular basis with me. That's, I think, a failure on my part is to try to foster better communications, even if there's disagreement. And -- and I will try to see if we can do more of that this year.


OBAMA: You know, if I'm told, for example, that the solution to dealing with health care costs is tort reform, something that I've said I am willing to work with you on, but the CBO or other experts say to me, you know, "At best, this could reduce health care costs relative to where they're growing by a couple of percentage points or save $5 billion a year, that's what we can score it at, and it will not bend the cost curve long term or reduce premiums significantly," then you can't make the claim that that's the only thing that we have to do.

If we're going to do multi-state insurance so that people can go across state lines, I've got to be able to go to an independent health care expert, Republican or Democrat, who can tell me that this won't result in cherry-picking of the healthiest going to some and the least healthy being worse off.

So I am absolutely committed to working with you on these issues. But it can't just be political assertions that aren't substantiated when it comes to the actual details of policy, because otherwise we're going to be selling the American people a bill of goods.

I mean, the easiest thing for me to do on the health care debate would have been to tell people that, "What you're going to get is guaranteed health insurance, lower your costs, all the insurance reforms, we're going to lower the cost of Medicare and Medicaid, and it won't cost anybody anything." That's great politics. It's just not true.

So there's got to be some test of realism in any of these proposals, mine included. I've got to hold myself accountable, and I guarantee the American people will hold themselves -- will hold me accountable if what I'm selling doesn't actually deliver.

That's on the -- sort of, the general issue.

On the specific issue of trade, you're right. There are conflicts within and fissures within the Democratic Party. I suspect there probably are going to be some fissures within the Republican Party as well. I mean, you know, if you went to some of your constituencies, they'd be pretty suspicious about it -- new trade agreements, because the suspicion is somehow they're all one-way.

So part of what we've been trying to do is make sure that we're getting the enforcement side of this tight; make sure that if we've got a trade agreement with China or other countries, that they are abiding with it, they're not stealing our intellectual property, we're making sure that their non-tariff barriers are lowered, even as ours are opened up.

OBAMA: And my hope is is that we can move forward with some of these trade agreements, having built some confidence, not just among particular constituency groups, but among the American people, that trade is going to be reciprocal, that it's not just going to be a one- way street.

You are absolutely right, though, Peter, when you say, for example, South Korea is a great ally of ours. I mean, when I visited there, there's no country that is more committed to friendship on a whole range of fronts than South Korea.

What is also true is that the European Union is about to sign a trade agreement with South Korea, which means right at the moment when they start opening up their markets, the Europeans might get in there before we do.

So we've got to make sure that we seize these opportunities. I will be talking more about trade this year. It's going to have to be trade that combines opening their markets with an enforcement mechanism, as well as just opening up our markets.

I think that's something that all of us would agree on. Let's see if we can execute it over the next several years.

All right? Is that it?

PENCE: Jeb Hensarling of Texas, and that'll be it, Mr. President.

OBAMA: Jim's (sic) going to wrap things up?

PENCE: Yes, sir.

OBAMA: All right.

REP. JEB HENSARLING (R), TEXAS: Jeb, Mr. President.

OBAMA: How are you?

HENSARLING: I'm doing well.

Mr. President, a year ago I had an opportunity to speak to you about the national debt. And something that you and I have in common is we both have small children. And I left that conversation really feeling you're sincere commitment to ensuring that our children, our nation's children do not inherit an unconscionable debt.

We know that under current law that government -- the cost of government is due to grow from 20 percent of our economy to 40 percent of our economy right about the time our children are leaving college and getting that first job.

Mr. President, shortly after that conversation a year ago, the Republicans proposed a budget that ensured that government did not grow beyond the historical standard of 20 percent of GDP. It was a budget that actually froze immediately non-defense discretionary spending. It spent $5 trillion less than ultimately what was enacted into law.

And unfortunately, I believe that budget was ignored.

And since that budget was ignored, what were the old annual deficits under Republicans have now become the monthly deficits under Democrats. The national debt has increased 30 percent.

Now, Mr. President, I know you believe -- and I understand the argument; I respect the view -- that the spending is necessary due to the recession. Many of us believe, frankly, it's part of the problem, not part of the solution, but I understand and I respect your view.

HENSARLING: But this is what I don't understand, Mr. President. After that discussion, your administration proposed a budget that would triple the national debt over the next 10 years. Surely you don't believe 10 years from now we will still be mired in this recession. It proposed new entitlement spending and moved the -- the cost of government to almost 24.5 percent of the economy. Now, very soon, Mr. President, you're due to submit a new budget and my question...

OBAMA: Jim (sic), I know there's a question in there somewhere, because you're making a whole bunch of assertions, half of which I disagree with.


And I'm having to sit here listening to them. At some point, I know you're going to let me answer.


OBAMA: All right.

HENSARLING: That's the question.

You are soon to submit a new budget, Mr. President. Will that new budget, like your old budget, triple the national debt and continue to take us down the path of increasing the cost of government to almost 25 percent of our economy? That's the question, Mr. President.

OBAMA: All right. Jim (sic), with all due respect, I've just got to take this last question as an example of how it's very hard to have the kind of bipartisan work that we're going to do, because the whole question was structured as a talking point for running -- running a campaign.

Now, look, let's talk about the budget, once again, because I'll go through it with you line by line. The fact of the matter is, is that when we came into office, the deficit was $1.3 trillion. $1.3 trillion. So -- so when you say that suddenly I've got a monthly budget that is higher than the annual -- or a monthly deficit that's higher than the annual deficit left by Republicans, that's factually just not true, and you know it's not true. And what is true is that we came in already with a $1.3 trillion deficit before I had passed any law. What is true is, we came in with $8 trillion worth of debt over the next decade.

Had nothing to do with anything that we had done. It had to do with the fact that in 2000, when there was a budget surplus of $200 billion, you had a Republican administration and a Republican Congress, and we had two tax cuts that weren't paid for, you had a prescription drug plan -- the biggest entitlement plan, by the way, in several decades -- that was passed, without it being paid for, you had two wars that were done through supplementals, and then you had $3 trillion projected because of the lost revenue of this recession.

OBAMA: That's $8 trillion. Now, we increased it by $1 trillion because of the spending that we had to make on the stimulus.

I am happy to have any independent factchecker out there take a look at your presentation versus mine in terms of the accuracy of what I just said.


OBAMA: Now, going forward, here's the deal.

I think Paul, for example, head of the Budget Committee, has looked at the budget and has made a serious proposal. I've read it. I can tell you what's in it. And there are some ideas in there that I would agree with, but there are some ideas that we should have a healthy debate about, because I don't agree with them.

The major driver of our long-term liabilities, everybody here knows, is Medicare and Medicaid and our health care spending. Nothing comes close.

Social Security we could probably fix the same way Tip O'Neill and Ronald Reagan sat down together and they could figure something out. That is manageable. Medicare and Medicaid, massive problem down the road. That's where -- that's -- that's going to be what our children have to worry about.

Now, Paul's approach, and I don't -- I want to be careful not simplifying this, because I know you've got -- you've got a lot of detail in your plan -- but, if I understand it correctly, would say we're going to provide vouchers of some sort for current Medicare recipients at the current level. No?


OBAMA: 55 and -- well, no, I understand. I mean, there's a grandfathering in, but just for future beneficiaries. Right?

That's why I said I didn't want to -- I want to make sure that I'm not being unfair to your proposal, but I just want to point out that I've -- I've read it.

And the basic idea would be that at some point, we hold Medicare costs per recipient constant as a way of making sure that that doesn't go way out of -- way out of whack. And I'm sure there are some details that...

REP. PAUL RYAN (R), WISCONSIN: (INAUDIBLE) a blend of inflation and health inflation. The point of our plan is because Medicare, as you know, is a $38 trillion unfunded liability...

OBAMA: Right.

RYAN: ... it has to be reformed for younger generations, because it won't exist because it's going bankrupt.

And the premise of our idea is, look, why not give people the same kind of health care plan we here have in Congress? That's the kind of reform we're proposing for Medicare.


OBAMA: Well, look, as I've said before, this is an entirely legitimate proposal. The problem is two-fold. One is that, depending on how it's structured, if recipients are suddenly getting a plan that has their reimbursement rates going like this, but health care costs are still going up like that, then over time the way we're saving money is essentially by capping what they are getting relative to their costs.

Now, I just want to point out -- and this brings me to the second problem -- when we made a very modest proposal as part of our package -- our health care reform package to eliminate the subsidies going to insurance companies for Medicare Advantage, we were attacked across the board by many on your aisle for slashing Medicare. You remember? "We're going to start cutting benefits for seniors." That was -- that was the story that was perpetrated out there; scared the dickens out of a lot of seniors.

And so the question is, at what point can we have a serious conversation about Medicare and its long-term liability, or a serious question about -- a serious conversation about Social Security, or a serious conversation about budget and debt in which we're not simply trying to position ourselves politically. That's what I'm committed to doing. We won't agree all the time in getting it done, but I'm committed to doing it.

UNIDENTIFIED MALE: Mr. President, take one more?

OBAMA: I've already gone over time.

PENCE: He's gone way over...


OBAMA: I'll be happy to take your question, Congressman, off- line. You can give me a call, all right?

Thank you, everybody. God bless you. God bless the United States of America. Thank you, everybody. (APPLAUSE)


BLITZER: I'm Wolf Blitzer. Join us weekdays in THE SITUATION ROOM from 5:00 to 8:00 p.m. Eastern, and every Saturday at 6:00 p.m. Eastern, right here on CNN. And at this time every weekend on CNN International.

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