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STATE OF THE UNION WITH CANDY CROWLEY

Interview With Secretary Geithner; Interview With Tom Price; Interview With Dianne Feinstein; Interview With Tim Pawlenty

Aired July 24, 2011 - 09:00   ET

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


CANDY CROWLEY, HOST: It's hard to find common ground when nobody budges.

Today meetings without movement. The administration's take from Treasury Secretary Tim Geithner.

(BEGIN VIDEO CLIP)

GEITHNER: It's unthinking the country will not meet its obligation on time. It's just unthinkable we'd ever do that.

(END VIDEO CLIP)

CROWLEY: The leadership view from House Republican Tom Price. Then, senior Democratic Senator Diane Feinstein.

And presidential politics with Governor Tim Pawlenty in Iowa doing what it takes.

(BEGIN VIDEO CLIP)

PAWLENTY: He's the president. Come on out to the lawn of the White House or the microphone and tell us your plan on entitlement reform. And he won't do it because he doesn't have the courage to do it.

(END VIDEO CLIP)

CROWLEY: I am Candy Crowley, and this is State of the Union.

Late into the night, leaders on Capitol Hill scrambled to put together a last-minute debt deal, now being considered a two-step plan that would raise the debt ceiling through 2011 in exchange for a trillion dollars in spending cuts.

Both sides are onboard. But the hang-up is the second increase that will be needed in 2012. Before that happens, Republicans want a special commission to outline future reductions a no-go at the White House.

I spoke with Treasury Secretary Tim Geithner earlier.

(BEGIN VIDEOTAPE)

CROWLEY: Mr. Treasury Secretary thank you so much for joining us.

GEITHNER: Nice to see you.

CROWLEY: You heard the two-tier plan coming from the Republicans. Let me have the White House take on it.

GEITHNER: Well, let me tell you what we're trying to do, okay? The most important thing is that we remove this threat of default from the country for the next 18 months. Very important we do that. Can't leave the American economy with...

CROWLEY: Through the election.

GEITHNER: Yeah, I would say through the election. This is a hard thing to do, and you want take this out of politics. You don't want politics messing around with America's credit.

CROWLEY: Might be too late on that. It already is messing around with...

GEITHNER: They have taken it too far, frankly. But the other thing we want to do is to put in place a framework that locks in real reforms, real savings, so we can return to living within our means as a country. That's very important to do. We have to do it in a way that is fair and balanced. And we have to force congress, frankly, to make some tough decisions over the next several months, 18 months. And we're trying to do both of those things.

And those are important to do, because we have to get back to the business, get congress back to the business of trying to do things to make this economy stronger, get more Americans to work.

CROWLEY: So does the speaker's plan get you there?

GEITHNER: Well I think there's -- as the president said when he brought them to the White House yesterday, we sort of have two paths ahead of us now we can choose. One is the framework that the president and the Speaker have been talking about now for several weeks.

CROWLEY: Right, which is so far a no go.

GEITHNER: Well, again, I think that's the president's preference, still. And the value of that approach is that we are identifying, and really putting in place, real savings, commitment to tax reform, balanced framework.

Now, the other approach...

CROWLEY: Let me just, on that point, are you saying that there's still -- I mean the Speaker and the president as far as I know are no longer negotiating. Is that true?

GEITHNER: No, that is not true. In fact, over the course of yesterday, the president was in touch with all the leaders. They met together over the course of today. And they were talking, you know... CROWLEY: Beyond that early-morning meeting.

GEITHNER: Yeah, they were talking.

CROWLEY: So the president is still actively involved...

GEITHNER: Oh, absolutely.

CROWLEY: In these negotiations?

GEITHNER: Absolutely, you know what the leaders know...

CROWLEY: With the speaker?

GEITHNER: Yes.

What the leaders know is that they need to agree on something together that will pass the House, pass the Senate that the president can accept. That's what we're working towards.

So there are two paths here. One is that framework comprehensive balance of reforms, and the other thing is a process like what Senator McConnell introduced and Senator Reid have been talking about which would take default off the table and set up a special committee, very powerful committee, exceptional powers, with a clear deadline to try and enact reforms to achieve the same objectives within a specified period of time.

CROWLEY: My question is that none of those appear to be on the able publicly at this point. And I -- obviously you should know that the president is still negotiating with the speaker and others, but right now what we know publicly is that Speaker Boehner has a plan on the table that would take you through 2011, and give you -- lift the deficit by about $1 trillion. And then you have another go around and lift it through 2012. Is that acceptable to the White House?

GEITHNER: Well, I think inevitably we are going do this in two stages. You know, we'll lock in the savings we agree to, and then there will be a second stage where congress is forced to identify and agree on a set of other reforms -- tax reform that raises revenue, and entitlement reform to make sure we put that on a sustainable footing.

But the key question is what happens at the end of that first stage? And what we cannot do, and this is very important, what we cannot do because it would be irresponsible is to leave the threat of default hanging over the economy for a longer period of time.

Look, you know, back in January more than seven months ago we started this process of working with the Congress to get them to raise the debt ceiling so we can avoid a crisis. It has taken us seven months to get to the place we are now. We're almost out of runway. We're not nowhere, but we're almost out of runway and we cannot put the American economy through this periodic...

CROWLEY: Is that a no? I'm just...

GEITHNER: It's a no.

CROWLEY: That's what I needed to know.

If Speaker Boehner comes back to you, I think we can all agree that the House is the most difficult place to get something through at this point. If the speaker comes back to you and says this deal that I'm talking about, 2011 we'll raise it. We'll revisit again in 2012 is the best I can get, will you believe him?

GEITHNER: You know, Candy, it's been clear for some time that to get legislation passed to avert a default crisis and to resolve our fiscal problems is going to require Democrats as well as Republicans -- I'll tell you a conversation I had with Republican leadership right after the mid-term elections. They said to me, then, and they (inaudible) up with me -- they said you know we're going to need Democrats on this debt limit thing because it's going to be very hard for us.

They have known from the beginning they're going to need Democrats to pass the House, not just to pass the Senate. The...

CROWLEY: Right, because they're going to lose some -- probably some conservative Republicans.

GEITHNER: So what they are all doing now is to try and figure out what is going to get votes to pass both houses, because they don't have time left, on terms of the president can accept. That's what they're working towards.

And you know, let me give you the optimistic view. I'm very confident ins this country. We're a AAA country. Congress is just going to prove that they have the ability now to get this done in the short time frame remaining. And I think that forces of reason are getting stronger now. If you listen carefully now -- I mean, there's a lot of political rhetoric, there's a lot of gnashing of teeth, but if you listen carefully now both sides are getting a lot closer. You see the leadership of the Republicans saying, we are not going to default. This country will not default. We're a country that meets its obligations.

And if you listen carefully, you see people coming closing together on the kind of tough choices the country is going to need.

Now we have an agreement -- we have very different visions for the country, we're still a very divided country in many ways, but we all agree now we have to find a way to go back to living within our means so we can turn our attention to try and get this economy back to work.

CROWLEY: And that's -- I mean, agreed upon means sort of -- not the means, but the agreed upon goal has been there for a while. Let me try and button up where we are on the current Boehner proposal, the two-tier proposal...

GEITHNER: Two stage. CROWLEY: Two stage proposal. It's not acceptable in its current form to the White House. So if that comes to you, if a short-term deal which is defined as not taking you through the election, is sent to the president, are you telling me despite all these dire warnings he would veto that bill?

GEITHNER: It's not going to make it that far, Candy, because...

CROWLEY: So he won't have to veto it.

GEITHNER: He needs Democrats for that to work, and Nancy Pelosi said that she will not vote for that approach. And it will not make its way through the Senate. So that's not a viable option. Now there's nothing wrong with doing this in stages, but what we can't do is leave the threat of default hanging over the American economy. That's like a tax on all Americans. It's deeply irresponsible. And you can't put that additional burden of uncertainty and fear on average working Americans, and on American businesses going forward.

CROWLEY: Timing seems to be of great moment at this point. The speaker has said that he wants a deal before the Asian markets open, which is 9:00, 10:00, eastern time today. What will happen -- and I am told that you warned congressional leaders yesterday morning of what might happen in the Asian markets if no deal is struck by then. What would happen?

GEITHNER: Well, you know Candy, look at markets around the world over the last few weeks or so. They still show really a remarkable degree of confidence that America is going to meet its obligations, as we always have, and that we're going to find a way to being to make progress on our long-term fiscal challenges.

But that will start to erode the longer we wait.

CROWLEY: Today?

GEITHNER: We can't tell.

CROWLEY: You come here very confidently today saying we're going to get a deal as opposed to some of the more dire warnings we have had if we don't get a deal. I guess what I would like to know sort of in our remaining couple of minutes is are you basing this on something in the process that you think we're near, we're near, we're near? Or are you basing this on trying to calm the markets?

GEITHNER: It's unthinkable that this country will not meet its obligations on time. It's just unthinkable we'd ever do that.

CROWLEY: It's not going to happen?

GEITHNER: It's not going to happen. And you've the Republican leadership say that, not just the president and Democratic leadership. They all recognize it's very important to do. So that's why I am confident.

But also again, if you sit in the room with them as we have done, and you listened to them talk about how to solve this, you hear people starting to come together. They are much more realistic about what is possible. They recognize we have to get this done.

CROWLEY: And that's based on more than hope that you are going to get it done?

GEITHNER: Oh, absolutely. Yes.

CROWLEY: Let me ask you a couple questions on the economy. The first is that there have been a number of private forecasters who have lowered their growth rate estimates for the second quarter.

CROWLEY: Will the second quarter be lower than the first?

GEITHNER: It's possible. You know, it gets hard to tell. And the second quarter is behind us. What really matters now is what happens the rest of the year and next year.

CROWLEY: But the second quarter, you think, will -- might be lower than 1.9 percent growth?

GEITHNER: Yes, the growth slowed a lot in the first half of the year. It's probably for the first half going to be at 2 percent or slightly maybe even slightly lower.

CROWLEY: And you think with that the second -- the third or fourth quarters will be better?

GEITHNER: They should be better. And there is no reason why they shouldn't be better, but...

CROWLEY: How much better?

GEITHNER: They should be better. I think, again, if you look at the average of forecasters -- private forecasters, not my forecast, private forecasters now, the best forecasters in the country, they think the second half should be around 3 percent, stronger than the first half.

CROWLEY: And finally, 9.2 percent unemployment, at what point do you think we will begin to see a fairly good downward trajectory on unemployment? By November of next year, which, as we all know, is an election date, do you see unemployment below 9 percent? How much below?

GEITHNER: Well, you need growth for more Americans to get back to work. That's the most important thing. We need faster growth than we've had in the first half of this year. There's no reason why that should not the happen as long as Congress lifts this fear as a default crisis. And that requires...

CROWLEY: So will we see unemployment with an 8 percent in front -- with an 8 in front of it rather than a 9?

GEITHNER: Depends how fast we grows. Again, unemployment is unacceptably high, terribly high. It's still a very tough economy for millions of Americans because of the trauma of the crisis. And it's going to take time for us to get the unemployment rate down. But with stronger growth, the unemployment rate will start to come down again.

CROWLEY: Eight percent -- somewhere in the 8 percent range by election time?

GEITHNER: You know, you just can't know. It depends on the choices Congress makes.

CROWLEY: All right. Thanks so much, Treasury Secretary Tim Geithner, I really appreciate your being here.

GEITHNER: Thank you. Sure.

CROWLEY: What will it take for Republicans to back a debt deal? We will ask a member of the House leadership team, Congressman Tom Price is next.

(COMMERCIAL BREAK)

CROWLEY: Joining me now, Congressman Tom Price of Georgia, a member of the Republican House leadership team, heading up the Republican Study Group which formulates policy for Republicans on the House side.

You heard, Congressmen, from the treasury secretary who says the plan now on the table that Speaker Boehner is talking about is unacceptable to the White House. Your reaction?

REP. TOM PRICE (R), GEORGIA: Well, I think at 9:15 on Sunday morning that may be the case. Let me, if I may, Candy, stipulate three facts. The first fact is that this debt crisis is not being driven by politics, it's being driven by math. The demographics of our society and the aging of our population dictate that we need to live up to the debts that we made. But need to structurally change and fundamentally change the way Washington spends money.

Secondly, it's House Republicans -- in a bipartisan activity last week, the House Republicans, who, on two occasions this year, once in the spring with our budget that would have put on a path to a balanced budget and paying off our debt, and then last week with our "cut, cap, and balance," the short-term decrease in spending right now, mid term putting a limit on spending in Washington, and then long term putting in place the structure for a balanced budget amendment that even your network says that 66 percent of the American people want.

And that third, sadly, the Senate Democrats and the president, even though they continue to complain, have yet to live up to their responsibility and put a specific proposal on the table.

In fact, when the president put his budget on the table last February, the Senate Democrats voted and the Senate voted it down 97- 0. So you have to wonder...

CROWLEY: Congressman... PRICE: You have to wonder, who is not willing to compromise? CROWLEY: And, again, we kind of are where we are in this process, regardless of who left what on the table at what particular point, so what is the next move for the speaker and for Republicans on Capitol Hill with the White House saying they don't -- what they object to, as you know, is they want this issue settled at least through 2012, because next year is election year, and if we think it's about politics now, next year it's even worse.

So will you -- as a general principle, are you opposed to taking this thing through 2012 so it's not dealt with again until 2013?

PRICE: Not at all. In fact, that's why we passed our budget earlier this year because we wanted to begin this discussion at a time when cooler heads might prevail. Now we're up against a remarkable deadline. And so what we are trying to do is to make certain that we can get through this deadline in a way that brings about the structural reforms, not just the spending reductions, but the structural reforms that absolutely have to be put in place so we don't find ourselves in this remarkable crisis again.

And that's -- if we...

CROWLEY: So 2012...

PRICE: If we can reach that goal, we're there.

CROWLEY: So you're OK with, yes, let's get a deal that will take us through 2012, that in particular is not objectionable to you?

PRICE: Well, we're OK with an agreement, a solution. We're not interested in a deal, we're interested in a solution, and a solution that changes the way that Washington does business so that we correct the challenges that we have right now and get ourselves on a path to pay off our debt and to balance our budget. It's what the American people demanded, it's what they demanded in the elections last November.

CROWLEY: And, you know, you Republicans do make a lot of what the voters said in the last election, saying, we want Washington to spend within its means, et cetera, et cetera, but we're also seeing poll after poll after poll that shows that Americans want compromise, that they do believe there ought to be something on the revenue side. But you all keep saying no, so why are you ignoring those polls but saying, this is what the elections said?

PRICE: Well, in fact, that's not true, Candy. As you know, our budget that we passed in the spring dealt with all of the corporate loopholes that the president now champions to want to do away with it.

Our budget did away with those but we did away with them in a manner that allows for fundamental tax reform so that you get the whole situation fixed and solved. We're not interested in just doing little bites at the apple, little nips at the side, because that is not what is going to get this crisis solved. So, yes, our budget actually took away those corporate loopholes and all of that and broadened the base for tax reform, lowered the rates for individuals so that we can get this economy growing and creating jobs, because that's really the key, we have got to grow our way out of this challenge.

CROWLEY: Speaking for yourself, or for the leadership if you care to, if you cannot get these things that you have outlined, major structural changes somehow within the next eight days, I realize it has been going on for seven months, but the reality is you have got eight days, if you can't get that, will you allow the U.S. to default, you personally or the leadership?

PRICE: Well, the U.S. won't default, because default means that you don't pay your creditors. And it takes about 10 percent of the money that's coming in right now...

CROWLEY: Without raising the debt ceiling, then, let me change the question. Would you allow August 2nd to pass without a vote to raise the debt ceiling?

PRICE: Well, that's not what we desire at all and that's why we passed the two pieces of legislation that we've passed and seen no action on the part of the Senate.

But to your question of default, default means that you don't pay your creditors, and that will not happen. It cannot happen. It must not happen.

PRICE: But we have got more than enough money coming to be able to pay those individuals.

The question is what doesn't get paid? And that's where the president has, I think, sadly put fear into this equation and saying that seniors won't get their Social Security checks or that active duty military personnel won't be paid. There's no reason for that kind of discussion because there's enough resources to be able to get us through a short-term.

Now at some point as I said, this is all about math. It's all about arithmetic. And so you have to solve the challenge, you have to solve the crisis. And that's what we're ready to do. We have been ready since we took the majority in January of this year. And we just hope that we have a willing partner on the other side to solve these challenges.

CROWLEY: If your speaker comes to you and says here is the best deal I can get, it does not include some of these things you are talking about, major structural changes et cetera. And he says, as he said publicly a lot of times, we cannot allow that August 2nd deadline to pass, will you vote with your speaker? Or are you prepared to vote against raising the debt ceiling if you don't get what you want?

PRICE: Again, the House Republicans in a bipartisan fashion last week already voted to raise the debt ceiling.

CROWLEY: But that's not acceptable. The Senate voted to table it. So we're not dealing with that. That's not reality.

PRICE: The reality is the Senate hasn't lived up to their responsibility. And that's where the onus ought to be. Why not have the discussion, which is where it ought to be, among -- if you don't like the reductions in spending we put on the table, what do you like? If you don't like the limitations on government spending that we put on the table, what do you like? If you don't like our form of a balanced budget amendment, what kind of balanced budget amendment do you want? Or what kind of controls do you want in Washington spending? That's where we need to be.

It's not an ideal versus what we have passed. It's what we have passed versus what the Senate is able to do. And they haven't even put a plan or a proposal on the table.

CROWLEY: Congressman Tom Price, thank you so much for joining us today. We appreciate it. Up next, a check of the day's top stories. And then Senator Dianne Feinstein on her mission to repeal the Defense of Marriage Act.

(COMMERCIAL BREAK)

CROWLEY: Time for a check of today's top stories. Norwegians gather this morning at a church in Oslo the mourn the victims of the bombing and mass shooting that killed at least 93 people. Local TV and newspaper reports identified the accused assailant as 32 year old Anders Behring Breivik who has not entered a plea of guilty but has confessed to twin terror attacks.

Breivik's attorney says the suspect believes the attacks were horrible but necessary.

Six people are dead and four others injured after a birthday party shooting at a Texas roller skating rink. Police in the town of Grand Prairie say the suspected gunman is among the dead. A witness told police that the alleged shooter was the guest of honor celebrating his birthday.

Congressman David Wu is facing calls for his resignation. A young woman alleges she had an unwanted sexual encounter with the Oregon Democrat. The alleged incident occurred three weeks after Wu's reelection last November. The congressman had a telephone conversation with House Democratic Leader Nancy Pelosi about the allegations, but would not comment on that talk.

And hundreds of same-sex couples are getting married today in New York. This is the first day that same-sex marriages are legal in the state. The weddings began at midnight. New York is the sixth and largest state to legalize same-sex marriage.

And those are today's top stories.

Coming up, two opposing views on the future of gay marriage. First, Senator Dianne Feinstein on her fight to repeal the Defense of the Marriage Act. And later, a defender of traditional marriage, Republican presidential candidate Tim Pawlenty. (BEGIN VIDEO CLIP)

PAWLENTY: Every time this issue has been put to the people, even in California, the people have supported traditional marriage.

(COMMERCIAL BREAK)

CROWLEY: Joining me now, Democratic Senator Dianne Feinstein of California.

If I can, kind of, recap for you this morning on the debt crisis, the Treasury secretary has told us that the current plan that the speaker has been working on, which is, sort of, a two-phased plan for raising the debt ceiling, tied to spending cuts, is unacceptable at the White House because it does not bring the debt crisis past the next election.

And we have heard the speaker say, you know, we're perfectly willing to go ahead on that plan without the help of Democrats on the House side. That then puts it back in the Senate.

FEINSTEIN: Right.

CROWLEY: So just -- I want to gauge your optimism here. You have been around Washington -- you and I have both been around Washington for a while. Are you more or less optimistic that we're going to come up against August 2nd and have a deal?

FEINSTEIN: Well, what I'm surprised at is the recalcitrance, is the real refusal to understand the position of the United States Senate.

Let me give you -- I represent 37 million people. California's bigger than 21 states and the District of Columbia put together. Fifteen to twenty million people in my state depend on programs that the Republicans want to take a meat axe -- not a scalpel but a meat axe to, SSI, Social Security, Medicaid, Medicare.

We need to know how it's done because it is possible to cut back these programs, but it's going to take some real care and concern to see that it's done so that it hurts people the very least.

Now, Republicans...

CROWLEY: So you can see...

(CROSSTALK)

CROWLEY: ... entitlements cuts; it's just the nature of the cuts you're talking about?

FEINSTEIN: It's the nature of the cuts; it's when and how they come. It's also, I think, how you fund them.

We would probably take three parts cuts to one parts revenues. What we won't do is take $4 trillion in cuts with no additional revenues. We strongly believe that the wealthiest in our society should help with this crisis, that it should be a fair-share plan, not just the people who are poor and dependent on these programs. That's not unreasonable.

CROWLEY: But it's also -- like, for seven months we've been having this argument.

FEINSTEIN: That's right.

CROWLEY: As you know...

(LAUGHTER)

... it's been going on for seven months. Everyone could argue about who's to blame and all of that, but the reality is we're really up against a deadline here, and the Republicans are determined to go ahead. Where do you see this coming out?

FEINSTEIN: Well, I could tell you in the Senate. The House I can't quite figure out. But the Senate...

CROWLEY: That's OK; they can't figure it out, either.

(CROSSTALK)

FEINSTEIN: There are now 39 members, bipartisan, that support the gang of six proposal.

CROWLEY: Six -- three Republicans, three senators that have come up with a collection of cuts and revenue...

FEINSTEIN: That's correct. And the revenue enhancements make sense. They would also take the Simpson-Bowles tax -- the Simpson- Bowles commission's tax reform in it.

So it's a big, big step forward for the Senate. If that could be wrapped into a proposal that would provide the length of time to do it and do it carefully, I think you have an arrangement.

But I think this business of -- you know, here you had two months of negotiation with the vice president, and the Republican walked out. You had hours of negotiations with the president, and the Republican walked out. They said no to Simpson-Bowles. They said no to the gang of six.

CROWLEY: In fairness, there were parts of Simpson-Bowles that Democrats also said no to. I mean, we, sort of, get down to that.

But let me -- because our time with you is short, I want to -- I want to move on a little. Let's say you're more or less optimistic you're going to get this debt ceiling thing done?

We're going to move on to a different subject.

FEINSTEIN: I am neither. This is the first time in 19 years that I feel something that can be done very simply is being held hostage for a very high stakes game.

CROWLEY: Let me move you on because you have a new bill that you proposed called the Respect for Marriage Act, which would undo the Defense of Marriage Act, which defines marriage as between a man and a woman and disallows same-sex couples from having any federal benefits.

FEINSTEIN: That's right.

CROWLEY: And why is now the time -- because a lot of people will point out to you that 39 states have banned same-sex marriage. Why is this the time to do this?

FEINSTEIN: Well, I -- I'd point out to you that six states plus the District of Columbia now support same-sex marriage.

Marriage is always a creature of the state for legal reasons. Divorce is. Inheritance is. Adoption -- all family matters are done by state law.

What DOMA did, the Defense of Marriage Act did was, in 1993 or 1994, it was passed and it said you can have none of the federal rights or benefits that come with a state same-sex marriage.

CROWLEY: Social Security...

FEINSTEIN: In my view, that's both wrong and unconstitutional.

That's right, spousal benefits, certain inheritance rights, all of those things. It's just plain wrong to do it. If a state enacts same-sex marriage, that state is entitled to be able to be treated like any other marriage state.

So we have produced this bill. We have 27 co-sponsors. We had the first hearing this past week. I believe it may be a long march, but I believe it's going to happen.

CROWLEY: And when you look at this, and you look at what's happening in New York today, do you think that, over time, this will just be a generally accepted practice?

Is that where you're, sort of, headed, despite what have been some, most recently in -- certainly in state votes, people turning down the idea of same-sex marriage?

FEINSTEIN: Yes, I think so. As time goes on, what I find is more and more people have gay friends; they have gay relatives. People are much more forward with their thinking about this now. I think they're much more open to it. The polls are showing a change in attitude.

And the problem here is that, if a state says, yes, we're going to countenance same-sex marriage, then all the rights and benefits thereof ought to be due to that relationship.

CROWLEY: Federal benefits?

FEINSTEIN: Exactly.

CROWLEY: Let me just turn you quickly to Libya. Because France seems to -- has said, listen, if Gadhafi steps down, he can stay in the country. The U.S. also seems to be softening its position. Do you think that's a good idea?

FEINSTEIN: Well, if you're not going to -- let me be candid. If you're not going to kill him, take him out, what you want...

(CROSSTALK)

FEINSTEIN: What you want is him out of office. What I want is him out of office and nowhere near the governance of Libya.

If he lives in a house and behaves himself, that's not a problem for me. If he leaves the country, that's not a problem for me. But to continue to run this country in the way in which he has, with the favoritism, with the (inaudible), the corruption, practicing acts of terror from time to time is a big problem.

CROWLEY: But we won't really know that, will we, until he's out of office and sitting there, if he's going to cause any trouble?

FEINSTEIN: That's right. That's right.

CROWLEY: Senator Dianne Feinstein, it's always great to have you here.

FEINSTEIN: Thank you.

CROWLEY: I hope you'll come back.

FEINSTEIN: Thank you, Candy. I look forward to it.

CROWLEY: Up next, catching up with Republican candidate Tim Pawlenty, who grew up playing hockey and is doing whatever it takes to get the votes.

(COMMERCIAL BREAK)

CROWLEY: Iowa, the first contest of the primary season and site of the Ames Straw Poll next month is a land of opportunity for campaigns looking for traction, which brings us to Tim Pawlenty. The former Minnesota governor is a serious, charming, well-credentialed candidate who has not moved the meter.

Polling in the low single digits nationally, he runs a distant third in Iowa polls behind Romney and fellow Minnesotan Michele Bachmann. For Pawlenty, the man once seen as the strongest contender to fill the not-Romney slot, pretty much everything now rides on Iowa.

He is all over its political terrain, on the ground and in the air with a classic underdog strategy.

(BEGIN VIDEO CLIP)

TIM PAWLENTY (R), PRESIDENTIAL CANDIDATE: I face an opponent experts say can't be beat. You fight. You bleed. You prevail.

AL MICHAELS, SPORTSCASTER: Do you believe in miracles?

PAWLENTY: Join me and prove the experts wrong.

(END VIDEO CLIP)

CROWLEY: Friday, an encouraging word from Ohio Republican activists, Pawlenty placed in a straw poll there behind Romney but ahead of Bachmann. Still, the August straw poll in Iowa is a far bigger headline moment. Pawlenty is reportedly spending about $1 million and definitely spending a whole lot of time revving up support.

If not a make-or-break time, it is a rare chance to spark a campaign in need of fire. Tim Pawlenty in the Hawkeye State, next.

(COMMERCIAL BREAK)

CROWLEY: Governor, thank you for joining us. The debt ceiling. I think we are on plan C, D, or E at this point. If you are president, you are on the hot seat, it seems to me. President Obama has got to come up with a deal or he gets blamed for what could be default. So if you're...

PAWLENTY: Well, he should get blamed. He should get blamed. CROWLEY: Sure. And if -- but you're in his position, but you're a Republican, OK, with your stated values, how would you get a deal at this moment?

PAWLENTY: Well, I have been a supporter -- and if I was president, getting structural reforms, "cut, cap, and balance" approach, long-term constitutional amendment to balance the budget, peg spending to a percent of GDP so they can't just raise taxes, and then...

(CROSSTALK)

CROWLEY: But that's not going to happen between now and August.

PAWLENTY: Yes, but you're saying if I was president, what would I push for? That's what I would push for.

CROWLEY: Sure, but where would you -- what I'm asking is where we -- I think we know what you would push for, where would you compromise? Because "cut, cap, and balance" is not passing the Senate. You have to come up with something. And so I guess my question is, where do you -- where's the give here, if there is? Because you have to get it passed the Senate and the Senate is controlled by Democrats?

PAWLENTY: Yes. Well, first, let's -- I do want to say, let's remember how we got here. President Obama took office with a $500 billion or so deficit, and he ran it up the deficit to $1.5 trillion -- excuse me, $1.5 trillion. CROWLEY: Can I just interject that he inherited two wars. He inherited an ongoing prescription drug plan that was passed under the Bush administration, and a recession that went deeper and deeper.

PAWLENTY: The two wars were taking place under President Bush at a larger level in Iraq. So, again, when President Bush left office there was a $500 billion deficit. Now it's about $1.5 trillion under President Obama's watch. He tripled the deficit of this country.

He looked the American people in the eye in March of 2009 after he knew full well about the wars, after he knew full well about the economic collapse, after he knew full well about the Medicare Part D prescription drug expansion, and he looked the American people in the eye and said, I will reduce the deficit in half in my first term, and then he looked and he tripled it.

That's one of his many broken promises, one of his many false statements. And he needs to be held accountable for it. Now that being said, we are where we are, but they need to find a solution where they at least get some movement and progress towards real permanent reductions in spending.

And then I believe that, you know, Congressman Boehner and others could find a way to do that. You know, it's gut check time. And, of course, if you say, well, we're really in a tough spot, well, if they are not going to do real spending reform now, when is it going to be? They always say, oh, we're going to do the tough things soon. One day we're going to make tough decisions. Some time we're going to make tough decisions. After the next election, we really might fix that.

Well, the time is now, and as important as the debt ceiling is, the other issues of whether we're going to fix the spending problems of this country also deserve attention, and if not now, when?

So one example would be, what are they going to do to fix Medicaid? It's bankrupting states, it's running the federal government over the cliff financially, where is the president of the United States on the most pressing financial challenges of our country on entitlement reform? Where is his specific Medicaid reform proposal? Where is his specific Medicare reform proposal? Where is his Social Security reform proposal?

The answer is, he does not have one. You can't find him publicly talking about that. He's ducking. He's bobbing. He's weaving. He's not leading. And that's not the kind of president we need. And that's why he needs to be removed from office.

CROWLEY: We should say that with -- apparently with Speaker Boehner he has talked about some of these reforms, block grants, et cetera...

PAWLENTY: Well, if you are the leader of the free world, would you please come to the microphone and quit hiding in the basement about your proposals and come on up and address the American people? Is he chicken?

CROWLEY: Can I see if -- is he?

PAWLENTY: Well, you would think...

CROWLEY: Let me have you answer that question.

PAWLENTY: ... we shouldn't have to have, with all -- I love Paul Ryan, but we shouldn't have to have a congressman from Wisconsin leading the debate on the nation's financial challenge in one of the most historically important moments in the country's history. The president should be standing out courageously and leading on these issues specifically. And you can't find him on it.

CROWLEY: But he has agreed to do that, as we're told, and I...

PAWLENTY: When?

CROWLEY: ... grant you -- and I want to move on from this, but I just wanted to say, he has agreed to do that in private, but they say the problem is that the Republicans won't...

PAWLENTY: If we can do that in private, we can go down to the VFW basement. I can go have a beer with my neighbor over that. He's the president. Come on out of the basement and come on out to the lawn of the White House with a microphone and tell us your plan on entitlement reform. And he won't do it because he doesn't have the courage to do it.

CROWLEY: All of these things that you are talking about now, Medicare, Medicaid, even cuts at the Pentagon, can't get done between now and the time of that debt ceiling. So let me just see it as a wrap-up question, if I understand where you are. You would let that debt ceiling -- you would let that timeframe expire?

PAWLENTY: No, they are going to have to fix it, Candy. They're going to have to fix it. We don't want to default. The United States of America should not default. But they do need -- they meaning the Republicans and the president, need to show the country and the world and the markets, A, that they can fix the problem, but, B, that it's a meaningful structural, permanent fix or at least a step, a piece of real progress in that regard.

And we'll see if they can do it. If they can't -- he was the one when he was a U.S. senator, Barack Obama said it's an example of failed leadership. And now he's the leading champion of raising it. Again, another, you know, sophistry, another piece of fake rhetoric from him. He made all these big promises to the country, all these big speeches, all these big -- you know, things that he said he's going to do, and he hasn't done any of it.

We've had enough of it. We need results. The country is sinking; the country is drowning. We need real leaders. And that's why this emphasis on entertainment and rhetoric is not the right direction for the country.

CROWLEY: When we come back, Governor Pawlenty on his opposition to gay marriage. (COMMERCIAL BREAK)

CROWLEY: Welcome back. We are here with former Minnesota Governor Tim Pawlenty.

The first legal gay marriages will take place in New York. They have been in place here in Iowa for more than a year. And what has been the harm of that?

PAWLENTY: Well, from my standpoint, I don't think all domestic relationships are the same as traditional marriage, Candy. I think that a marriage between a man and a woman is something that should remain elevated socially, culturally and practically, legally, morally in our society.

CROWLEY: No, but how -- but I understand your position on it, which is -- many people have that position. I'm just wondering if you see that there has been harm to Iowa, to the state of Iowa, or will there be harm to the state of New York because they've legalized gay marriage?

PAWLENTY: Well, I wouldn't phrase it that way, in the sense that -- I think there's just a difference of opinion about whether all domestic relationships are in the eyes of the law and otherwise going to be the same as traditional marriage. I don't think they should be. I know other people...

CROWLEY: Why? I mean, like, in particular, what should gay couples or lesbian couples not have that straight couples do?

PAWLENTY: Well, I think we have a longstanding practice -- it's social; it's legal; it's cultural -- that says a man and a woman are joined together for obvious reasons, in relationship, in marriage, in procreation, in raising children, in their function in society.

And I'm not at the point, nor will I ever be at the point, where I'm going to say, you know what, that really is not special; it's not any different than any other domestic relationships that we can imagine or assemble. I don't buy that at all.

CROWLEY: But there's a difference between your saying, look, I'm just never going to get there and saying there is harm to the state of Iowa or society in general. Do you see...

PAWLENTY: I think, when society devalues traditional marriage by saying all other domestic relationships are the same as traditional marriage, you then dilute and devalue traditional marriage.

CROWLEY: And it's a cultural thing to you, that just culturally, or religiously, you don't -- you don't believe that and won't believe that?

PAWLENTY: Well, it's more -- yeah, I mean, it's certainly a social and cultural and moral issue. But it also has practical effects. I mean, I think, you know, obviously a man and woman together are the traditional family. That's how children are born and raised, traditionally.

CROWLEY: There's plenty of single parents.

PAWLENTY: Of course.

CROWLEY: There are plenty of gay couples with children that have, you know, adopted or otherwise, you know, had surrogates, whatever happens. Are those not families?

PAWLENTY: There are many examples of single parents and others who heroically and lovingly raise children. Obviously, an example would be somebody who lost a spouse and is working two jobs and has children.

And so I'm not saying that there can't be, you know, single parents, and there obviously are single parents who are wonderful parents. I'm just saying we want to maintain traditional marriage, elevate it in the eyes of the law and in our society. It is not the same as other domestic relationships.

CROWLEY: Let me bring your attention to something that Rudy Giuliani told us last week. We were talking about gay marriage. And he's also opposed to marriage. He's pro-civil union.

But he said of the New York move and other states, "I think the Republican Party would be well-advised to get the heck out of people's bedrooms and let these things get decided by states."

Do you think it is time for the Republican Party to say -- or members of the Republican party such as yourself to say, I'm never going to agree with this, but, you know what, we've got a lot of our plate; let this one go, let the states decide and move on?

PAWLENTY: Clearly, the main focus for the country right now is the economy and jobs and our finances, but if you're going to be president of the United States, you've got to be able to walk and chew gum at the same time and address lots of different issues. So these issues of being pro-family or pro-traditional-marriage or being pro- life are important. And they're important to me and I think they're important...

CROWLEY: Do you run the risk of looking intolerant?

Most -- I mean, most of the polls that we now see are that the majority of people favor gay marriage. And so does the Republican Party look like it's behind the curve? Does it risk looking intolerant?

PAWLENTY: Well, every time this issue has been put to the people, even in California, the people have supported traditional marriage. So this notion that the people broadly don't support traditional marriage -- that hasn't been the case when it's been put to a vote.

CROWLEY: Do you care if there are same-sex couples who have gotten married? I mean, does that truly bother you or is it just as a general principle?

PAWLENTY: Look, it's -- to me, it's just the idea that we're going to have traditional marriage be viewed in the eyes of the law and society as no different than other domestic relationships, I think, is a bad idea. We want traditional marriage to be -- remain elevated legally and socially.

CROWLEY: Because?

PAWLENTY: Because it plays an obvious and unique role in our culture and society.

CROWLEY: A man and a woman having a child is what you're talking about?

PAWLENTY: Of course -- I mean, of course, and a man and a woman in relationship. I mean, to say that that is somehow the equal of all other possible domestic relationships defies common sense, Candy.

CROWLEY: Governor Pawlenty, I want to thank you so much for joining us here today. We appreciate your time.

PAWLENTY: You're welcome. Thanks for having me.

CROWLEY: Next week, more with Tim Pawlenty on his chances in Iowa and his feelings about Michele Bachmann. Thanks for watching "State of the Union." I'm Candy Crowley in Washington.