CQ Transcriptwire

[*] KING: I’m John King. This is our “State of the Union,” for this Sunday, February 8.

As the jobless rate soars, President Obama pressures Congress to pass his economic recovery plan, but will it really put people back to work? We’ll have the first Sunday interview with a member of the Obama Cabinet, Transportation Secretary Ray LaHood .

The Senate is poised to act on its version of a stimulus bill, but the vote is a nail biter. Many House Democrats say it’s a sellout, not a compromise. We’ll discuss whether this dial will hold with Democratic Senator Charles Schumer and Republican Senator Richard Shelby.

And can we spend our way out of the recession? One governor emphatically says no. That important voice in the economy debate from South Carolina Governor Mark Sanford . That is all ahead in this hour of “State of the Union.”

Before we get to our guests this morning, a quick rundown of what we will do this Sunday and every Sunday morning on this program. Here in our 9:00 a.m. Eastern hour, straight to the day’s top stories, interviews with the top newsmakers in the United States and around the world. At 10:00 a.m., Howie Kurtz and his “Reliable Sources” take a critical look at the media. At 11:00 a.m. Eastern, members of the best political team on television, CNN’s reporters and analysts, will go behind the headlines, also discuss and debate all the Sunday morning talk shows.

And at noon eastern, the last live interview program in the United States, someone will get “The Last Word.” And through at all, we keep our promise to add your voices to our Sunday conversation.

So let’s get started.

The numbers are bad. The picture isn’t pretty. 589,000 workers lost their jobs in January alone. That pushed the country’s unemployment rate to 7.6 percent, its highest level since 1992. President Obama used the bad news to pressure Congress to quickly approve nearly $1 trillion in new spending and tax cuts. But even if the president gets his way, will the plan work? And how fast?

Joining us now on “State of the Union” for the first Sunday interview by a member of the Obama Cabinet is the transportation secretary, Ray LaHood . He is in his hometown of Peoria, Illinois. Mr. Secretary, thank you for joining us on “State of the Union.” I want to get straight to... LAHOOD: Good morning.

KING: ... the kitchen table. Good morning to you, sir.

I want to get straight to the kitchen table accountability test. The American people are under a lot of pressure right now economically. They hear all these numbers being thrown around in Washington. If you get this money, set the standard for us, the accountability threshold right now. How many jobs and how fast?

LAHOOD: A lot of jobs, John. And I’ve invited every secretary of transportation to Washington this Wednesday, that we’re going to have a meeting at the Old EOB across from the White House. We’re going to lay out for them what we believe are the opportunities for every state in the country to put people back to work on projects that are ready to go, by the book, no shortcuts. These projects really are projects that have been sitting on shelves all over the country, where states are waiting for the money. And this is an opportunity for every state in the country to bring to Washington a couple of examples of projects that they will be able to implement quickly, within the timeframes that are in the legislation, so that people will be building roads and bridges and other infrastructure projects this spring, summer and fall. And I believe an enormous number of people, thousands of people, will be going to work in good paying jobs.

KING: Well, Mr. Secretary, where do you draw the line in terms of what is stimulus spending and what is wasteful spending, maybe even a boondoggle? And I ask the question because the debate in Washington, you know, has been veered off track a little bit by legitimate concerns, many would say, about spending money on anti- smoking programs in this bill. Maybe a worthy goal, but why is it in this emergency recovery bill?

How do you draw the line between stimulus and maybe boondoggle? One mayor I talked to this past week, for example, says he wants to use some of this money to build a new wave pool in his community, with a water slide. He says it creates job. Is that the kind of project that passes your sniff test?

LAHOOD: Well, look, our criteria is going to be the criteria that we’ve used at the department for a long time, John. And, also, the money will be going to the governors and their state secretaries of transportation and highway administrators. And the one thing that the president has said all through this and set a very high bar -- no earmarks. The money has to go to projects that are ready to go in the states, and I just know that there are lots of these projects around, and we’re going to learn a lot more about it next Wednesday.

And the point is, there aren’t going to be any earmarks and there aren’t going to be any boondoggles. This money will be spent correctly, by the book, with no shortcuts.

KING: Mayors think they should spend the money, not governors. We have turf battles in Washington between Democrats and Republicans. When you get out to the states, you know this well, it’s the mayors and the governors sometimes at odds. Why do the governors have a better plan than the mayors? The mayors would tell you that they can get the shovels in the ground faster.

LAHOOD: Well, look, the bureaucracy is in place at the state level, John. The states have these departments of transportation, and they know how to meet the criteria that we have to set at the department so that the money is spent correctly, that people are put to work, that the projects are done according to the way that they are supposed to be done.

Lots of cities -- some of the big cities, perhaps like Chicago or Boston or otherwise, you know, may have these kind of staff people in place. But for the most part, every state, all 50 states do have the mechanism and the bureaucracy to make sure that this is done by the book. And that is going to be something that -- go ahead.

KING: The word bureaucracy scares me a little bit, but we hope it works out and it’s a good bureaucracy.

I want to get to a point -- I was in Carmel, Indiana this past week, talking to the mayor, and he says one of the ways to get the shovels in the ground faster is for you to use your executive authority here in Washington to change the rules, at least temporarily. As you know, there are environmental impact studies. There can be, you know, public comment and review periods at times. Listen to the mayor of Carmel, Indiana, Jim Brainard.

(BEGIN VIDEO CLIP)

MAYOR JIM BRAINARD (R), CARMEL, IN: Waive the rules. The rules for transportation projects that we normally have to deal with on the highway. Environmental impact statements, public comment periods, they slow it down. The absolute key is to get shovels in the ground as quickly as possible.

(END VIDEO CLIP)

KING: Mr. Secretary, will you and the president use your executive authority? As you know, that might anger environmental groups, that might anger labor unions, but is waiver to get these projects moving faster, is that the way to do this?

LAHOOD: Not at all. It really isn’t. And it would be different if every one of these states didn’t have projects.

You all know -- and I think that the viewers know -- that these states have had a pent-up demand for these projects to get funded and haven’t had the local match to fund them, haven’t had the ability to do it, because they haven’t had the money to do it.

It’s not as if we’re going to be lacking for projects, John. There are lots of road, bridges, infrastructure that can be implemented immediately, within the timeframes that -- in the legislation, and put a lot of people to work in good paying jobs.

We don’t need to waive anything. This is going to be done by the book, according to the rules, no shortcuts, no earmarks. KING: Mr. Secretary, I’m going to stand up here in Washington and walk over to my magic wall. Because I was in your community last week. You’re speaking to us from Peoria, an area you represented in the Congress for some time. When I was in your city right here in middle America, right along the river -- it is a beautiful city -- but it is struggling at the moment, like many factory towns. This is the floor of Caterpillar. You see these amazing tractors and earth-movers being made. Many of these workers, union workers, see the buy American provisions in the House version and the Senate version of this legislation, they think it sounds good, it sounds patriotic, but it might actually cost more of them their jobs. More than 20,000 have already been let go. Will your president fight to get that out of there? They say the buy American provision will cause a trade war, and they won’t be able to export these tractors overseas.

LAHOOD: I think there is going to be a lot of discussion about the buy American provision in the conference. And I think you’re going to see the president weigh in on this. And I haven’t talked to the president directly about it, but...

KING: Is that an in or an out?

LAHOOD: ... his chief of staff -- I think there is going to be a lot of discussion about it, John.

KING: OK. Well, at least -- we’ll leave that to that (ph).

I want to talk about your unique role in the administration. Just a few months ago, you were a Republican in the United States Congress. You were questioning many of the priorities of the Democrats who ran the United States Congress. You’re now serving in the Democratic president’s Cabinet. Every one of your former colleagues in the House, Republican House members, voted no. If Ray LaHood was still a Republican member of Congress from Peoria, Illinois, would you have joined them, sir, in voting no on the first stimulus package?

LAHOOD: Well, look, I didn’t get elected to anything last November, John. I’m a part of the Obama team. I’m proud to be a part of President Obama’s team. I consider it a great privilege that the president asked me to join his team. I’m going to do everything I can to help the president find the votes for the conference report once the Senate passes this. I’m going to work very hard next week. I’m going to work the phones. I am going to talk to my former colleagues, and do all that I can to persuade them that this bill really will put people to work.

KING: What about...

LAHOOD: America is hurting...

KING: What about in the first round, sir? Excuse for interrupting. Did the president call you and say, hey, Ray, we got a problem in the House? All your friends in the Republican conference are saying no? Can you pick up the phone? Can you work these guys? Or did you go to him and say, Mr. President, you’ve got a problem here?

LAHOOD: Well, it was a combination of both. The president asked me to go up with him to the Republican conference, and I was privileged to be able to do that. And I did make some phone calls. I talked to some people.

Obviously, I wasn’t very persuasive, since I wasn’t able to persuade anybody to vote for it. But, look, I’ve been talking to some senators when I’ve had the opportunity and I’m going to continue to do that for the next 10 days until this bill is passed.

And I think the conference report that will come out of the conference report that will be considered will be something that Republicans, some Republicans will look very carefully at.

KING: When you were in the House, again as a Republican, you were not always a fan of the speaker, Nancy Pelosi . You have joined this administration in part because the new president -- because he wants to have true bipartisanship in Washington, after eight years of Bill Clinton and eight years of George W. Bush , where there wasn’t much bipartisanship in Washington.

KING: And yet, after the compromise came out of the Senate, the other day, the House speaker, Democrat Nancy Pelosi , said this.

“Washington seems consumed in the process argument of bipartisanship when the rest of the country says they need this bill.”

You didn’t always get along with the speaker when you were in the Congress. Does your president, a Democrat, now have a problem with the House speaker, who doesn’t think bipartisanship should rule Washington?

LAHOOD: Look, the president ran on this notion that people have to work together. This is what people in the country want, and...

KING: So is Nancy Pelosi wrong?

(CROSSTALK)

KING: Is Nancy Pelosi wrong, and does the president need to call her on this?

LAHOOD: The people in America want us to work in a bipartisan way. People want to go back to work. The only way we’re going to solve the problems of unemployment and a bad economy is in a bipartisan way. The president has carried that message all the way through here, and I think he’ll carry it all the way to the signing of this bill.

KING: I want to close, sir, with what is a remarkable moment. Back when I was covering the White House and you were a House Republican, you were the gentleman who presided over most of the impeachment trial of a Democratic president in the House of Representatives.

And I want to make clear to our viewers, you received high marks from Democrats and Republicans alike for the manner in which you conducted these proceedings. But there is Ray LaHood , we’re showing our viewers, in the chair in the House of Representatives, presiding over the impeachment of a Democratic president. You’re now in the Cabinet of the next Democratic president. Reflect on that.

LAHOOD: I consider it a privilege. When President Obama was a senator from Illinois, he and I worked very well together. I have a wonderful relationship with the president and his chief of staff, and I consider it a great privilege to be a part of their administration, and help push through an opportunity to put America back to work. This is an extraordinary opportunity for me, to be a part of a team that wants to get America working again, and I consider it a privilege to be able to do that.

KING: Mr. Secretary, we thank you for joining us on “State of the Union.” We will keep in touch in the weeks and months ahead, and we will keep you accountable, make sure that money gets to the projects that create jobs in the short term. Thank you very much, sir.

LAHOOD: Appreciate it, John.

KING: Thank you, sir.

LAHOOD: Thank you.

KING: And up next, we turn to the action on Capitol Hill, where there’s still much work to be done. Senators Chuck Schumer and Richard Shelby break down the Senate stimulus bill and its impact on you.

In the 10 o’clock hour, Howard Kurtz goes one-on-one with the anchor of the CBS Evening News, Katie Couric. At 11 a.m., our diner visit and our Sunday conversation with the best political team on television. And at 12 p.m., the former CEO of General Electric, Jack Welch, gives his job review to a very important chief executive, the president.

Our “State of the Union” report is just getting started.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, R-ARIZ.: There are 40 Republican senators here. We now have two -- count them, two -- who have decided, behind closed doors. And I’ve been involved in a lot of bipartisan legislation around here, Mr. President, but I guarantee you, this is not bipartisan.

(END VIDEO CLIP)

KING: Senator John McCain with some tough words, after a deal on the economic rescue bill were cut Friday night. Key votes on the measure are set for Monday and Tuesday.

Joining us now to talk about it, Democratic Senator Charles Schumer of New York and Republican Senator Richard Shelby of Alabama.

Senator Schumer, let me start with you. The Democratic bill -- in your view, is it better than the House bill on the key test, creating jobs as soon as possible?

Or is it a lesser bill but one you had to agree to, simply to get the votes in the Senate? SCHUMER: It’s very close to the House bill. Overall, they overlap 90 percent. The overall number, $819 billion in the House; about $820 billion in the Senate, so that’s a good mark. I believe that’s where we’re going to end up, at about $820 billion.

And there are some differences. The House bill has a little more on education, a little less on tax cuts. I personally would favor the House bill.

But the most important thing is that we are not going to let small differences stand in the way of passing this very strong bill, which the American economy desperately needs. To quibble over small, little things and let the bill go down would be a huge mistake for the American people, given the state of our economy and the need for a real shot in the arm.

KING: Well, Senator Shelby, I know you quibble with big things in this bill.

And I want to show you, just so that we get to you in Alabama. This is the Tuscaloosa News: “Stimulus Bill Debated in Rare Session.”

This is, of course, front page news, not only in your state, Senator Shelby, but around the country.

Is the compromise brokered in the Senate -- I know you don’t like big things about this bill -- but is it better or did the input of those few Republicans who changed this bill make it worse?

SHELBY: Oh, I think it’s -- it’s similar to what Chuck Schumer said. It’s close to the House bill. They tweaked it a little bit, but the substance is the same. It hadn’t been changed much. It’s not anything I could support.

And I would hope -- and I’m afraid we won’t -- if the Republicans would stay together, we could shelf this bill and start again. That’s what we really need to do.

KING: That’s what we really need to do?

Now, we talk a lot, and we’re going to talk about a cloture vote here in Washington. It’s a word many Americans don’t understand. It’s a process in the Senate. We talk about billions and billions of dollars.

I want you both to listen. I was in Indiana, this week, talking to workers about this. I want you to listen, here, to the voice of a union auto worker who worries this bill may not help him out. Let’s listen.

(BEGIN VIDEO CLIP)

KING (voice over): A General Motors plant in Indianapolis.

JAMES KENDALL, FORMER GENERAL MOTORS EMPLOYEE: I was tickled to death when I hired in here. I mean, I was working for the largest corporation in America. I mean, I was just on cloud nine.

KING: Thirty-four hundred workers when James Kendall arrived 18 years ago.

(on camera): And how many now?

KENDALL: Well, after a layoff they’re fixing to have, there will be roughly 630 folks working. It’s just snowballing into a massive, massive unemployment. And I don’t think we’ve seen the end of it. I mean, all you’ve got to do is watch the news, and it’s depressing.

(END VIDEO CLIP)

KING: Senator Schumer, how does this legislation deal with that gentleman’s concerns, 600,000 jobs lost in the economy last month; a million manufacturing jobs lost in the economy in the last year?

Mr. Kendall, there, thinks he could be next. In the next month or two, GM might say, you’re out of work, after 18 years.

Is this bill short-term stimulus spending or does it do anything for the fundamental structural problems in the U.S. economy?

SCHUMER: Well, it does really help in this situation. We have the same situation in Buffalo and Syracuse auto plants, really hurting. People have worked hard their whole lives, worried about being laid off.

But in this bill, for instance, is a tax incentive to encourage people to buy cars. Just like you get the interest off when you have a mortgage for your home, off on your taxes, and it’s an incentive to home ownership that’s worked, we’re trying the same thing. Barbara Mikulski spearheaded it, to do that for automobiles.

So there are things here that would help.

SCHUMER: In addition, if we pump money into the economy, if we employ people in construction jobs, if we make sure that teachers, for instance, are not laid off, then there will be more money in the economy, more people will buy cars, and the chances of this fine gentleman being laid off would decrease.

I’ll tell you one thing for sure. To do nothing, to do nothing would certainly seal his fate. And that’s why the American people, 65 to 70 percent of them, support President Obama’s plan.

KING: So Senator Shelby, I want to talk a little bit more about the specifics, because I want you to be as specific as you can in telling us what you think is wrong with this plan. In the Senate bill, here are some of the provisions. $47 billion to provide extended unemployment benefits. $16.5 billion to increase food stamp benefits. $3 billion in temporary welfare payments. $17 billion so there can be a one-time $300 payment to people receiving Social Security or supplemental Social Security income and veterans on disability pensions. And $4.7 billion for homeland security programs.

Are those specifics OK with you, Senator Shelby, or are those among the provisions you think are unnecessary or unwarranted in this kind of bill?

SHELBY: Well, they’ve got merit to them, but I don’t believe in this bill.

John, the bottom line is this bill, nearly $1 trillion before it’s over with, is not going to turn around our economy that you mentioned earlier. The gentleman -- the auto worker understands that. He’s got a lot of sense. He knows that stimulus bills generally are not going to save his job.

Are there some merits to some of this? Some of the infrastructure is good. But are they -- is it emergency? Is it going to just flip our economy? No.

What we need to do, John, we’ve got to attack our banking system. We’ve got to bring trust back to our banking system. I hope the administration -- and they are working on this, and Senator Schumer and I will be in the middle of this on the Banking Committee. But until we straighten out our banking system, until there is trust in our banking system, until there’s investment there, this economy is going to continue to tank.

KING: I want to talk about the banking system on the second half of our conversation. But Senator Schumer, in the 20 seconds we have left in this one, if this passes the Senate just barely -- the House has already said they don’t like it, they want to put some of that money back in. Does the president have to go to the House Democrats and say on this one, I’m the leader of this party, you must hold the line and stay right here where this bill is coming out of the Senate?

SCHUMER: I believe House Democrats, Senate Democrats, and the three courageous Republican senators who joined us all realize we have to get this done, and everyone is going to have to give a little. We will have a bill by the end of this week. The two bills are quite close.

KING: Senator Shelby, Senator Schumer, stand by. We will be back with more of our conversation in just a minute.

And then one governor who is not so sure he will even accept the federal money to help his state. South Carolina’s Mark Sanford ahead on “State of the Union.”

(COMMERCIAL BREAK)

KING: I’m John King and this is “State of the Union.”

Here are some stories breaking this Sunday morning. The death toll rises. Officials in Australia say 96 people have now died in dozens of wildfires, raging across much of the country. Many victims burned to death inside their cars as they tried to flee the fast- moving flames. Police suspect some of those fires were deliberately set.

In Afghanistan today, the military says two U.S. soldiers were killed while trying to disarm a roadside bomb. Three Afghans were also killed, including a police chief.

The artist who created the famous poster for Barack Obama is in trouble with the law again. Boston police have arrested Shepard Fairey on two outstanding graffiti warrants. His arraignment is tomorrow. The Associated Press has accused Fairey of copyright infringement, saying the poster is based on an AP photo.

And on a lighter note, President Obama’s dog dilemma. When will he fulfill his pledge to get a puppy for his two daughters? CNN’s Anderson Cooper puts that question to the president himself. That and more ahead, “State of the Union,” at 11:00 Eastern time.

Back now to our important discussion about the economy. A shot of the White House there. Big decisions facing this president. And back with us, Democratic Senator Charles Schumer and Republican Senator Richard Shelby.

Gentlemen, I want to get to the bank bailout, the financial bailout. We’ll have more on that this week. But Senator Schumer, just before the break, you said House Democrats, Senate Democrats and those few Republicans are going to have to make some tough decisions to get this done fast. By that, do you mean Speaker Pelosi, Chairman Obey, the Democrats who are saying we want to put that money back in, what you did in the Senate was wrong -- by that do you mean simply, sorry, can’t do it? We need to keep the bottom line where it is?

SCHUMER: No, I think there is going to be some give and take. And as I said, all three parties to this -- House Democrats, led ably by the speaker; Senate Democrats, led by Reid; and the three courageous Republicans -- all realize there has to be some give and take.

And you know, I appreciate the frustration in the House. There are 240 Democratic House members, and they say how could three Republicans in the Senate, whose votes are needed so, you know, move the bill over in their direction some? The answer is go ask James Madison or Benjamin Franklin. They put a lot of checks and balances in this system. So you need -- it’s tough to act.

KING: Senator Shelby, you noted before the break that both of you -- Senator Schumer represents Wall Street and the state of New York; you’re down in Alabama with a key role in the Banking Committee, in the banking debate. Secretary Geithner and the administration are going to come forward with their plan to spend the second half of the $700 billion in financial institution bailout money, and they are going to come forward with that plan, and also make clear, without giving you a specific number, that they need more money.

You are a fierce skeptic of this plan. Is there anything the administration can do in the next few days that convinces Dick Shelby to say, all right, I’ll support you and give you a chance here?

SHELBY: Not with -- not the road they’re going down.

What I fear, John, is this is more of the same. No accountability, no transparency, a lot of secrets, a lot of deals made. The American people want integrity and trust in the banking system. This is not the way to go if it’s going -- if Geithner’s plan is similar to what he and Paulson had before, it’s going to be a disaster and it’s not going to help anybody.

KING: Well, Senator Schumer, address that. You said during Mr. Geithner’s confirmation hearing that you made calls around Wall Street and they think it could take $3 trillion or $4 trillion to stabilize the financial industry. Are the American taxpayers going to be in for that?

SCHUMER: No, it would be $3 or $4 trillion if you did a bad bank, if the government bought every one of the bad assets all the banks have. And I said it was too expensive then, I believe it now.

But I think Secretary Geithner’s plan is going to be very smart. It’s going to be very different than the plan that Hank Paulson and George Bush put together.

SCHUMER: And as Senator Shelby correctly asks for, there is going to be much more accountability, there is going to be much more transparency, there’s going to be tougher limits on executive compensation. The American people are just fed up with very high salaries for people who messed up. And even most importantly, there’s going to be some conditions so that there is actual effect here, so that when the banks get some money, we will see it in lending to Main Street, small businesses...

KING: Well, you say -- let me interrupt...

SCHUMER: ... home owners, automobiles and things like that.

KING: I’m sorry to interrupt, Senator, but you say we’ll see it in lending to Main Street. There is not apparently a requirement in this new plan that the banks lend the money. In my travels around the country, I can tell you, every time you meet somebody, whether they are in a conservative community or a blue-collar community, they say when is this money coming to us? Why do the banks not have to lend to us?

Senator Shelby, should there be a requirement that the banks have to lend this money?

SHELBY: I think it should be, and I’ll tell you why. Without lending to small, medium-sized businesses all over the country, this economy is going to continue to tank.

SCHUMER: OK. Let me say, there are two things going to be in this bill that are going to make lending much better. First, there is going to be much more pressure on the banks to lend if they’re going to get this money, and because they are not doing a big broad thing, one-size-fits-all, they are going to call in the individual bank in trouble and say, all right, if we give you this, how much lending will you do?

But secondly, and this is even more important, a good part of this plan is going to just skip the banks and go right to Main Street. Not only in terms of housing, $50 to a $100 billion of this 350 will go to housing, but there’s also going to be a real effort to loosen up the markets in auto buying, home buying, small business lending, by going directly to those people, by loosening up the overall credit market, not doing it through the banks.

KING: Gentlemen, I want to close by asking you both to assess the moment, where we are as a country. A trillion dollars nearly in stimulus spending appears likely to pass, even though Republicans like Senator Shelby object. $700 billion for this financial institution bailout. More money likely to come, because everyone thinks the administration will ask for billions and billions more down the road.

Want to show you the cover of Newsweek this week. “We are all socialists now.” Newsweek is saying that we are back in this era of big government, where the government is not only spending and spending and spending, but controlling and controlling and controlling what used to be a free-market economy.

Senator Shelby, to you first, sir. Assess the moment. And is there a limit on how much money we can print and deficit-spent?

SHELBY: Well, I can tell you, we’re going down a road where it’s uncharted. We’re going down a road to disaster. We’ve never seen this kind of spending, ever, and there is a lot more to come.

There has got to be some other way better than what we’re doing. Not the socialist way, but to try to get our free markets working again.

KING: Senator Schumer, is there a limit? And it’s your party that is now in charge of every branch of the government here in Washington, spending all this money that we don’t have.

SCHUMER: First, there will be a limit. There is no question, you can’t keep printing money. Second, there is going to be far more accountability.

Third, the alternative that so many of my Republican colleagues have -- do nothing or just tax cuts for the wealthy -- that failed under George Bush. And let’s not forget, George Bush, the most conservative president in a long time, did all this government intervention.

We are in a very bad situation. We’re only a few steps away from spiraling down to a depression. And I think what the Obama administration is strong, it’s powerful, it’s thoughtful, it’s far more conditioned than what the Bush administration did.

And I’ll tell you this. The risk of doing nothing could lead to a Great Depression. So we have to do something, do something smart. But just to say no, no, no, and not have any real solution, that will lead to huge -- even worse unemployment and a much worse economy.

KING: We’re out of time, Senator Shelby, but go ahead. I see you agitating. Take a few seconds, quickly.

SHELBY: One last thing. We are going down a road to financial disaster. Everybody on the street in America understands that. This is not the right road to go. We’ll pay dearly.

KING: Thank you both, gentlemen. Republican Richard Shelby of Alabama, Democrat Chuck Schumer of New York. Thank you both, gentlemen. We’ll have you back as all this plays out in the weeks ahead. His state’s unemployment rate is high, but he is giving the economic rescue plan a big thumbs down. We will hear from Republican Governor Mark Sanford of South Carolina when “State of the Union” returns.

(COMMERCIAL BREAK)

KING: To hear the president, massive stimulus spending is critical to jump-starting the anemic economy. Most mayors and most governors agree, but not all, not our next guest, who sees more and more debt as a recipe for disaster.

Republican Governor Mark Sanford of South Carolina joins us from Columbia. And Governor, as I introduce you, I want to pop up your state on our magic wall here, because you wrote a provocative essay in the Wall Street Journal. This one -- you’ve written a more recent one, but this one is back a little bit. “Don’t bail out my state. South Carolina governor says more debt isn’t the answer.”

So let me ask you, as this debate goes forward, right now about $4 billion would come your way in South Carolina -- $2 billion in tax cuts to your people, $2 billion in stimulus spending. Some of that money you would have control over. Would you say on this morning, keep it, Mr. President, I won’t take your money? Because you think this is so flawed?

SANFORD: I think that ultimately, we’ll decide that question when we get to it. But the bigger point right now is trying to wake up the American public, as Senator Shelby was doing just a few moments ago, to the fact that if we go down this road, I believe it has disastrous consequences not just for the economy of South Carolina, but frankly, the economy of the nation.

KING: So what should be done, Governor? And I said that I want to bring up, your state unemployment rate is 9.5 percent. Here are three counties in your state, Allendale, Marion and Chester, where the rate is 19.7, 19, 17.3. What, if you don’t want the federal government to spend all this money, what about these people out of work? What should be done for them?

SANFORD: Well, I would say what was interesting is the Congressional Budget Office report itself that said in the long run, we’ll have a slower rate of economic growth if this stimulus bill goes through than if we didn’t. So I would say you got to focus on the things that have long-lasting impact in those three counties, or frankly across our state, or, for that matter, across our country.

A problem that was created by building up of too much debt will not be solved with yet more debt. And so, I think you have got to look at the notion of economic development or economic activity much more broadly than borrowing money to print checks and send those checks out of Washington, D.C.

You’ve got to look at something like card check, you’ve got to look at trade policy, you’ve got to look at tax policy. You’ve got to look much more broadly on the foundational setting to economic development.

KING: Most mayors and most governors, even Republican governors -- they might quibble with this provision or that provision -- but most mayors and most governors want this money and they say it’s urgent to pass a big stimulus bill. You have said no.

KING: Governor Rick Perry of Texas has said no. What makes you right and just about everybody else wrong?

SANFORD: I would say a couple of different things. One, we’re moving precipitously close to what I would call a savior-based economy. And a savior-based economy sort of is definitional of what you see in Russia or Venezuela or Zimbabwe or places like that, where it matters not how good your product is to the consumer, but what your political connection is to those in power.

And if you think about the power that’s been granted to the Fed or to the Treasury, it has savior-like qualities. Everybody knows that we’re an economic slowdown, but -- but the consideration now is, if I can just get my word, if I can be a plaintiff to the right person in Washington, D.C., I can get this thing fixed.

That is quite different than a market-based economy, where some rise and some fall, but there’s a consequence to making a stupid decision. And a lot of people who’ve made very stupid decisions are being bailed out by the population at large and, one, from an equity standpoint, it really grates them -- on them, and, two, what they know from the annals of history is that these kinds of things don’t work.

And we can look at other places around the globe, or we can look at examples even in our own country. If you look in the late 1920s and the early 1930s, we tried this same approach, the stimulus. What’s not remembered is that the Hoover-era projects of the Golden Gate Bridge or the L.A. aqueduct system or the Hoover dam were stimulus projects designed to get the economy going, and they didn’t.

If you look in the 1990s at Japan, same kind of stimulus approach tried, but it was a lost decade in Japan. You can look at both history and the examples of other countries to say that this particular track that we’re taking, again, as Senator Shelby just mentioned a moment ago, is an example that has not worked well based on history.

And so I’d say history is with us, as well as a lot of economic data that says, wait a minute, if you’re at a trip -- at a tipping point with regard to debt versus GDP, you could quickly go over the edge wherein folks decide not to buy Treasuries and we look at a run on the dollar that would undermine every bit of stimulus that’s been taken to date.

KING: Let me ask you, lastly, then, Governor, before we let you go. You talked about those Hoover-era examples; let’s talk about current-day examples.

I’ve been down to see you many times in your state, as you know, and you had once a thriving textile industry that was the envy of the world and the envy of the country. Most of it’s now gone because of changes in the economy.

Are you saying that, like the textile industry of South Carolina, the shrimping industry maybe down in the Gulf Coast, and the auto industry that is now feeling the pain in Middle America, and some of banking industry on Wall Street, that they have to go? If they have not made the right decisions, then let them fail, even if -- even if tens of thousands of people will suffer the consequences by being thrown from work?

SANFORD: Yes. What I’m saying is, Adam Smith ’s so-called process of -- of creative destruction is a painful one. But the -- the choice is a much more painful one, wherein we have a politically driven economy.

And people are talking of the word “nationalization” these days when they talk about a number of banks, wherein the same entity that ran operations with Hurricane Katrina down in the gulf would be the same entity -- the federal government -- that would be running banking operations across this country or a whole host of other businesses.

Given the example that we’ve seen in Katrina and given the example we’ve seen in a lot of government programs that haven’t worked so well, we believe -- or I certainly believe, with a lot of other taxpayers across my state and across the country -- that that is not the best approach.

Is there pain? Yes. And the real truth that needs to be conveyed to the American public is that debt grew at three times GDP or three times the economy over the last 15 years, and we’re going to go through a process of deleveraging, and it will be painful.

The question is, do we apply a bunch of different Band-Aids that lengthen and prolong this pain, or do we take the Band-Aid off? I believe very strongly, let’s get this thing over with. Let’s not drag it on, as Japan did for 10 years and as we saw in the Great Depression, as things got drug on, in many cases because of well intended and well meaning, but ultimately disastrous government programs.

KING: Governor Mark Sanford of South Carolina, a conservative, a somewhat lonely but an important voice at the moment in this debate, we’ll keep in touch in the weeks and months ahead, Governor. Thanks so much for your time.

SANFORD: Thanks, John.

KING: A rollercoaster week for President Obama. Whatever happened to bipartisanship? Democratic strategist James Carville and Republican veteran Ed Rollins talk about the state of the Obama presidency. “State of the Union,” the first and last word in Sunday talk. (COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Then you get the argument, “Well, this is not a stimulus bill. This is a spending bill.” What do you think a stimulus is?

(LAUGHTER)

That’s the whole point.

(END VIDEO CLIP)

KING: President Obama punching back there at Republican critics of his economic recovery plan. Is the honeymoon over?

Joining me now, two men with firsthand knowledge about how tough it gets in the Oval Office. Democratic strategist James Carville with us this morning from New Orleans. Veteran Republican strategist and old Reagan hand Ed Rollins with us from New York this morning.

Gentlemen, I want to start with this. You know, at the end of the week, the president seemed to get his compromise, but at the beginning of the week, he was still dealing with the fallout over the nomination, now withdrawn, of Tom Daschle to be his health and human services secretary.

And listen to what he had to tell CNN’s Anderson Cooper. This is a president who had to spend a lot of capital on a personnel issue.

(BEGIN VIDEO CLIP)

OBAMA: I think this was a mistake. I think I screwed up. And, you know, I take responsibility for it, and we’re going to make sure we fix it so it doesn’t happen again.

(END VIDEO CLIP)

KING: James, you remember the rocky early days of the Clinton presidency.

JAMES CARVILLE, CNN CONTRIBUTOR: Oh, yes.

KING: That’s a pretty big deal, isn’t it, a president having to call in the five big TV anchors and spend capital on a personnel choice when he’s got so many big policy fights?

CARVILLE: Well, I think he did it pretty good. I think -- I think this week, for him was a little opposite of March. I think he came in, you know -- on Monday, he was a lamb, and by Friday he was -- he was like a lion. He’s gotten his feet back.

But you’re right. It did cause him some problems. You know, the way Washington works is that he got wrapped up in this, but I think that Senator Daschle made the right decision by taking his name out.

And, you know, he did something that very few presidents do. He got out in front of this thing and said he messed up.

But, you know, one of the things we’ve got to realize, he’s not been in office for three weeks. They’re going to announce a complete revampment of the way we’re doing banking here on Monday. Their stimulus package is all but done. They got the SCHIP thing done. They got all of the stuff on Gitmo done. They’ve dispatched envoys to the Middle East, to Pakistan.

I mean, we’re not three weeks away. And if you look back, there’s actually a lot of stuff that this administration has gotten done in a very short period of time. And I think he ended the week on a pretty good note here.

KING: Well, Ed, jump in on that point.

KING: You know, we learn a lot from new presidents in their early days, and we still don’t know a lot about this president, especially when it comes to executive leadership style, because he came out of the United States Senate. What have we learned?

ED ROLLINS, CNN CONTRIBUTOR: Well, what we’ve learned is -- what he’s learned is you get a big house when you get the job, a big office, a big plane, get to go up to Camp David this weekend, and you get to sit in the presidential box. With those perks comes the toughest job in history. He’s there at the toughest time probably than any modern president has had.

And I think, to a certain extent, you know, he’s got to fight with his own party. He’s got to fight with Republicans.

The era of bipartisanship has been over for about 30 years at least. And what he’s going to find is there’s different viewpoints. Republicans believe in doing something one way, Democrats believe another way.

And he may get a couple of Republicans in the Senate once in a great while. Maybe those three will be the ones that will go with him the whole way. But at the end of the day, he’s got -- he’s repeated several times this week, “I won. We get to do what we want.” He gets to do what he wants.

KING: Well, let’s listen -- let’s listen -- and I want to follow up on this point. Has -- has he changed or can he change the tone in Washington? Let’s listen to the number-two Republican in the Senator, Jon Kyl of Arizona, on the floor not too happy with the president’s rebuke of Republicans. Let’s listen.

(BEGIN VIDEO CLIP)

SEN. JON KYL, R-ARIZ., SENATE MINORITY WHIP: ... discussing with the American people his approach to the stimulus of our economy, he’s first really used some dangerous words, I would say. So it seems to me that the president is -- is rather casually throwing out some -- some careless language.

(END VIDEO CLIP)

KING: “Rather casually throwing out some careless language,” in the view that leading Republican, James Carville, essentially saying, you know, we tried your way. It doesn’t work. We’re not going back to those policies. I understand the president’s position -- he did win the election -- but that was not a bipartisan speech he gave to House Democrats earlier this week.

CARVILLE: Well, I don’t know -- I don’t know what problem with it that Senator Kyl has. I was in Arizona this week. And, Senator, things are pretty bad in your state.

And -- but the truth of the matter is, he’s done more to reach out to these Republicans, and it was very interesting watching Senator Shelby just a little bit earlier on your show, John. He was -- he’s against this banking thing, and he ain’t even seen it.

I mean, at some point, usually they would give you the courtesy of at least looking at it and then being against it. These guys are just against it before they see it.

But I think that really the president has gone a long way to invite Republicans, gone over to see them, to do things like that. I don’t think -- I don’t know what the president said that Senator Kyl would find offensive at all. What he said was just absolute truth.

KING: Well, Ed, I want you in on this point, but I want to add a Democratic vote to this debate about bipartisanship. The Senate comes to this compromise. They have to water the bill down a little bit, take some spending out to get a few Republican votes, and the House speaker, Nancy Pelosi , doesn’t like it, and she says this: “Washington seems consumed in the process argument of bipartisanship when the rest of the country says they need this bill.”

The president of the United States, Ed, who is a member of Speaker Pelosi’s own party, says this is critical, having true bipartisanship. She says it’s a process argument. Does the Democratic president have a problem with the Democratic speaker?

ROLLINS: Well, I think he does. And I think, to a certain extent, Democrats have waited a long time to have a president who would basically carry their agenda, but even more important they’re ready to move their own agenda forward.

And this is -- Chairman Obey, Nancy Pelosi , a lot of these people have wanted some of these types of programs. They can call it stimulus whatever at this point in time, but it’s a lot of programs that they’ve tried to put in, in the past and haven’t been able to.

Bipartisanship is a nice term, but the bottom line is there’s very different viewpoints between these two parties. And Republicans feel that they weren’t as responsible as they might have been on the fiscal issues during the Bush era, and now they’re going to basically sit and be the watchdog and make sure that the public’s money is spent well.

KING: The first primetime news conference of the new president’s administration will come Monday night. Here’s the Washington Post front page, “Planning a One-Two Punch.” It talks about the stimulus plan, billions and billions of dollars, the financial industry bailout plan, billions and billions of dollars, also a bit on the National Security Council. There’s a story on the Iraq war down here.

Just a reminder, one quick look at the front page of just one newspaper in the country, this president has a very deep and complicated inbox.

James Carville, you’ve been there. What is the biggest challenge for the president of the United States when he has his first primetime news conference?

CARVILLE: Well, I think his biggest challenge is, is that the country is very, very apprehensive right now, and with great justification. This is a terrible economic situation. And -- and -- and I think that he’s got to assure the country that there is a direction there.

He’s got to -- and I think they understand that the thing is not going to be done overnight and that the stimulus is one part of trying to get this back together. What they do with the banking thing tomorrow is going to be enormously important.

They have no room on interest rates. When he took office, interest rates were near zero. They’ve destroyed the fiscal nature of the United States. We didn’t -- you know, we had these huge deficits that were accumulated, and they’re trying to deal with a very difficult thing.

And I think people understand that. And they understand that he’s trying to reach out, and he’s got to take them into his confidence, and he’s going to have to keep them there over a long period of time. And if anybody can do it, I think -- I think this president is capable of doing it. I really do.

KING: We’re out of time, unfortunately. Ed, I’ll have to save your view of what -- “What would Ronald Reagan do?” was going to be my question. I’ll save that for another day, because we’re out of time.

Ed Rollins in New York, James Carville in New Orleans, thank you both, gentlemen.

And we’d like now to say goodbye to our international viewers for now.

But up next, the latest Sunday headlines and “Reliable Sources” host Howard Kurtz. “State of the Union” will be right back.

(COMMERCIAL BREAK)

KING: I’m John King, and this is “State of the Union” for this Sunday, February 8th.

In this hour, our weekly critical look at the media. You’ve all seen it, that photo of Olympic gold medalist Michael Phelps holding a bong. Howard Kurtz will ask veteran sportswriters Will Leitch and Christine Brennan if this means top athletes are now under 24-hour media scrutiny. President Obama’s top economic adviser Larry Summers one of those speaking out on the morning shows this Sunday in support of the economic stimulus bill. In our next hour, the best political team on television will give us the real stories behind today’s Sunday talk.

And as we always do, we’ll go outside the beltway and find out how Americans are being affected by the big economic decisions being made here in Washington. Today we head to Carmel, Indiana, and talk to Jim Brainard, a Republican fighting on the frontlines of our national economic meltdown.

That’s all ahead on “State of the Union.”

As we do every Sunday, we turn this hour over to Howard Kurtz. He’s the host, of course, of “Reliable Sources.”

And, Howie, as you take a critical look at the media today, let’s take a critical look at some headlines. And for full disclosure -- we do that in the news media -- this is a Red Sox fan talking to you, as it shows you this headline in the Daily News, A-Rod, shocking stain on baseball’s biggest star as slugger tests positive, sources says -- tests positive -- you see the syringe up here -- for steroids.

And let’s go over right here, the Trentonian across in New Jersey, Rodriguez, report Yankee slugger tested positive for steroids during his MVP season.

I know you’re already exploring the Michael Phelps story today, something like this not what you expect to see in the Sunday paper, and I’ll keep my partisanship -- my partisanship in baseball to myself, I guess, Howie.

KURTZ: All right. Then I’ll put aside my rooting for the Yankees. Look, the media issue here is that these were anonymous sources telling Sports Illustrated about these confidential tests conducted by the union in 2003 at a time when baseball wasn’t even imposing penalties for steroid use, but nobody will care about that.

Why? Because A-Rod is not just a big baseball superstar. He’s a huge celebrity who hangs out with the likes of Madonna.

KURTZ: And I think there’s a lot of resentment towards him, certainly in the press, maybe in the public, for that $275 million contract. He, when asked by “Sports Illustrated” reporters, said that, well, you’ll have to talk about the union about that.

In the past, with an interview with Katie Couric, he has denied using steroids. So he has now become, I think, will become, the face of baseball’s steroids problem.

KING: And you make a great point. It’s not just the questions about baseball and whether it’s dealt with the steroids problem, it does raise interesting questions about our business and when and how we should use these anonymous sources. They’re big here in Washington, but now, of course, we can see again they are big all over the place.

So with that note, take it away, Howie.

KURTZ: All right. Thanks very much, John.

Ahead, we’ll check in with Katie Couric on her exclusive interview with the US Airways pilot who made that miracle landing in the Hudson River and her tenure as the CBS anchor.

But first, President Obama wanted the biggest megaphone he could fine, and that meant calling in the network anchors. He would deliver his economic message to Charlie Gibson, to Katie Couric, to Brian Williams, to Anderson Cooper, to Chris Wallace. But then the Tom Daschle nomination, which the press had assured us was a virtual certainty, blew up, and the storyline changed. The anchors confronted the new president about how he could name as his health secretary a guy who had to repay $140,000 in back taxes for use of a chauffeured limo, no less.

(BEGIN VIDEO CLIP)

CHARLES GIBSON, ABC NEWS: There’s more of a problem than just Daschle, and you’re the one in your inaugural speech who talked about an era of responsibility.

BRIAN WILLIAMS, NBC NEWS: “The Philadelphia Inquirer” today, “Surely President Obama can find qualified people to serve in his cabinet who aren’t hustling to write overdue checks to the IRS.”

You lost two nominees, two appointments today. Did that make you angry, I imagine? COURIC: So, what happens, it gives people the impression that you talked the talk during the campaign, but now you’re in office and you’re not walking the walk.

CHRIS WALLACE, FOX NEWS: In less than two weeks, you have signed waivers to allow the hiring of lobbyists to be deputy secretary at the Pentagon, deputy secretary at HHS, and chief of staff at the Treasury. Is that a clean break?

ANDERSON COOPER, CNN: Do you feel you’ve lost some of that moral high ground which you set for yourself on day one?

(END VIDEO CLIP)

KURTZ: Obama had an answer to those questions, and it’s not one we usually hear from presidents.

(BEGIN VIDEO CLIP)

OBAMA: I think I made a mistake.

I screwed up.

I take responsibility for this mistake.

I think I’ve messed up.

GIBSON: Mr. President, has this been an embarrassing day for the administration?

OBAMA: Oh, I think it has.

(END VIDEO CLIP)

KURTZ: So how has the president handled the media during this difficult week, and what does the Daschle debacle tell us about Washington journalism?

Joining us now, Amy Holmes, a CNN political contributor, and Ceci Connolly, national correspondent for “The Washington Post.”

Ceci, were the anchors, as we just saw there, pretty aggressive toward Obama on this fiasco, or did they kind of let him skate?

CECI CONNOLLY, “WASHINGTON POST”: Well, I think that they were aggressive, and certainly had several questions on it. But to give them credit, the full interviews then turned to the economic stimulus package, which is what the president wanted to talk about. I think there was the appropriate level of questioning given that not only did you have Tom Daschle pulling out, but that you also had Tim Geithner having to repay back taxes, you had Nancy Killefer withdrawing her nomination. So it was not just one, but several.

KURTZ: Absolutely.

Amy Holmes, Brian Williams asked if the president was angry. I thought that was an odd choice of words. Didn’t Obama appoint Obama and these other people with tax problems?

AMY HOLMES, CNN CONTRIBUTOR: Well, exactly. And that this was Obama’s responsibility, not that he was an outside observer having some emotional reaction to this. And I think it’s important to note that this tough questioning, it came after Daschle withdrew his nomination.

The night -- that Friday night that it was breaking, the journalists were saying, oh, Daschle, he’ll skate right on by, he’ll skate through this, it’s not a big deal. I was even on a show where a journalist was defending the person who gave Daschle the car as being someone he knew and a really good guy. If anything, I think that we saw a lot of conventional wisdom mongering among the press. They have a long relationship with Daschle, so it was that inside the beltway sort of clubbishness, I think, where the press didn’t really blow this issue up.

KURTZ: I want to come back to that question, but first I want to bring in Clarence Page. He, of course, a columnist for “The Chicago Tribune,” joining our panel as well.

And Clarence, did Obama -- we played some tape there of Obama saying, “I messed up,” “I screwed up,” “It was my fault.” Did he preempt an escalating series of stories about what a mess this was by saying right at the outset, “I screwed up”?

CLARENCE PAGE, COLUMNIST, “THE CHICAGO TRIBUNE”: Well, the stories are still going on and we’re still talking about it on Sunday morning, but at least Obama did not run and hide. He took responsibility for it.

This is the first time he’s made such a bold statement like that since he referred to his own relationship with Tony Rezko back in Chicago as a “bonehead move.” That didn’t preempt all talk about his association with Rezko. There was nothing illegal in it, but nevertheless, you know, people still talked about it.

KURTZ: Right.

I want to come back to your point, Amy, about the way in which the press portrayed this nomination right up until the point when the plug was pulled. “The Washington Post” said it almost certainly confirmed Tom Daschle. “The Chicago Tribune” “The nomination seems to be in little jeopardy of losing.” And on the airwaves, well, we just happen to have some videotape about what people were saying during the time when Tom Daschle was still the HHS nominee.

(BEGIN VIDEO CLIP)

BRETT BAIER, FOX NEWS: Is this a major problem for Tom Daschle?

MORT KONDRACKE, FOX NEWS CONTRIBUTOR: I don’t think so in the end.

NINA EASTON, FOX NEWS CONTRIBUTOR: The Senate club is going to take -- as Mort indicated, is going to take care of its own. CHARLES KRAUTHAMMER, FOX NEWS CONTRIBUTOR: Daschle will be confirmed.

CHRIS MATTHEWS, MSNBC: Will he get through?

UNIDENTIFIED FEMALE: You know, I think he’s likely to get confirmed.

DAVID GERGEN, CNN CONTRIBUTOR: I do think he’s going to be confirmed. The general view in Washington has always been extremely positive toward Tom Daschle.

GIBSON: Any thought that he might take himself out of the running?

GEORGE STEPHANOPOULOS, ABC NEWS: Not on today’s facts, Charlie. I don’t think so.

(END VIDEO CLIP)

KURTZ: Ceci, didn’t most journalists blow it, pure and simple?

CONNOLLY: Well, I’m sure you didn’t have a sound bite of me predicting that he was going to skate through. I certainly don’t think we did. I think our coverage was pretty aggressive.

Many of us were asking questions even before this story broke. We had requested his tax returns, we had requested the questionnaire that he filled out for the Senate Finance Committee. Sometimes you can’t always get the answers as quickly as you like.

KURTZ: How much pushback did you get from administration officials when you were on the phone asking these questions about, how long did Daschle know about this, and why didn’t he come clean sooner, and so forth?

CONNOLLY: Quite a bit. One of the most difficult things in reporting of that story -- and I pressed hard from the minute we got the first inklings -- was a timeline, and it was like pulling teeth trying to get them to acknowledge that in June 2008, Tom Daschle first discussed this with his accountant, and it was not until January 2nd that he paid most of the back taxes and January 4th that he told the White House. That timeline they did not want to give up because it was so damning.

KURTZ: So they were less than fully cooperative.

Clarence Page, did journalists simply pay too much attention to the inside-the-beltway game, what Democratic Senate leaders were saying, and not to how this was playing in the country?

PAGE: To say journalists pay attention to the inside-the-beltway game is like saying fish paid attention to water. I mean, it’s a culture. It’s more than a game.

Everybody just presumed Daschle was going to slide on through. So what if he’s got this -- so what if he’s a lobbyist?

We cannot forget that President Obama campaigned against lobbyists, as if being a lobbyist itself is a sin. It is not, but what you reap you must sow, and now he -- part of this whole new wave now that people expect is that he will go after people like Tom Daschle, who have been very useful to the way Washington works. I think this is a lesson for everybody in some ways about how you educate the public in the culture of Washington versus the way the culture in Washington to live day by day.

KURTZ: But you know, the so-called liberal press did not exactly go easy on Daschle. I mean, these stories about his tax problems were on page one of “The New York Times” “The Washington Post” right away. Katrina vanden Heuvel, the editor of “The Nation,” called on Daschle to withdraw. “The New York Times” editorial page called on Daschle to withdraw. And he withdrew that very day, telling Andrea Mitchell that he had seen that Times editorial.

So the idea that those of us in the business would become Obama cheerleaders seems to me to be wrong.

HOLMES: Well, I wouldn’t say that it was pure Obama cheerleading -- you know, you make a good point -- but that it would take the editorial page. I mean, we’re talking about the news pages in terms of investigating and giving this information, and I don’t think that they were fresh eyes.

These eyes have been on Daschle for a very long time. Most American voters -- most Americans vote watching the news don’t have this familiar acquaintanceship with the former senator. And I would make another point in terms of Obama’s reaction to all of this on that string of evening anchor shows that you showed. That, yes, he handled the press well by saying, you know, “I messed up,” I bungled this, but where was the follow-up question, what did you bungle, nominating Daschle, not asking for Daschle to withdraw his name sooner? What part of this are you actually taking part of this for?

And you know what? It seems that the press has already moved on.

KURTZ: Ceci Connolly, what about Daschle cashing in after being the Senate Democratic leader? This is a guy who made $5 million in two years from corporations and a law firm, which was basically influence peddling without technically being registered as a lobbyist.

Was that part of the media narrative that helped sink him, in addition to the specific back-tax problem?

CONNOLLY: Oh, absolutely. I mean, I even spoke to friends and supporters of his who said that they were flabbergasted when they saw that he had earned $5 million in just the last two years. But again, you know, I have to defend the press here a little bit.

He did not file his ethics form with the Office of Government Ethics until January 21st. And to get those documents, we have to file a written request and send someone to go in person when that document is ready, so it’s not easy. One other point, Daschle was already acting as if he was HHS secretary.

KURTZ: Right.

CONNOLLY: Back on Christmas week, I went to Indiana with him, where he held a town hall style meeting in a fire station. He was already moving forward.

KURTZ: Right. It was almost like he was in the job.

CONNOLLY: And it’s the Senate’s job to confirm these guys.

KURTZ: That is true, as we’ve been reminded.

Let me give you my two cents on this. I think the press, while aggressive toward Daschle on the facts, just botched the story because, first of all, too many journalists all but predicted that he would be confirmed, just like we predicted that Hillary Clinton would lose the New Hampshire primary. Too many journalists were numb to how outrageous this all seemed, a nominee not paying back taxes, and blind, I think, to the cashing in culture of Washington, that we’ve all perhaps become to inured to if you live here long enough, that everyone does it.

This was the culture that Obama promised to change. And so it seems to me that the press was a little bit out of touch on this story.

Now, the stimulus package, you could say similar things, Amy Holmes, because the press was basically saying this was going to pass easily, that no Republicans voted for it in the House. I think journalists were slow to see how unpopular at least parts of this bill were.

Would you agree with that?

HOLMES: I would agree with that. I would also say that the stimulus package was over 700 pages, so journalists had to, you know, run pretty quick to be able to read all of the fine print that was in there.

But something -- even just last night, watching the media discussion about this, that, oh, this is politics as usual in Washington. Again, that predictive kind of smarty pants sort of attitude oftentimes that journalists bring to it. This is not usual to pass a $1 trillion bill in a week.

KURTZ: Clarence, the pork and other special interest stuff that is in that legislation may be a small fraction of the overall spending, but that is what’s been getting the media attention and maybe, therefore, was a mistake.

PAGE: Well, that was part of the Republican strategy, to put the focus on the so-called pork. And by the way, what is pork? It is money that goes to somebody else’s district. Everybody knows that.

I mean, as Obama finally said when he was accused of having a spending bill and not a jobs bill, he said of course it’s a spending bill, spending is stimulus. And yes, that’s the narrative that the Democrats should have said up in the beginning, but the Republicans kept hammering away, with the help of conservative talk radio, I might add, at the idea that this is a pork bill. Pork, pork, pork.

And that became this central debating point rather than Keynesianism, which is putting money into the economy the way Franklin Roosevelt did and getting the economy moving. They should have called it a jobs bill, they should have called it a put America to work bill, something like that.

KURTZ: Right. Well, it does show you how important framing the debate is.

The Republicans control nothing in Washington, but they did manage to take control of the debate. And the media, I think, belatedly woke up to the fact that the terms of this debate had changed.

Amy Holmes, Ceci Connolly, Clarence Page, thanks for stopping by this morning.

When we come back, move over daytime soaps. The real afternoon drama is Robert Gibbs versus the White House press corps, carried live on cable. Who’s got the upper hand? We’ll ask former Clinton press secretary Dee Dee Myers.

And later, Katie Couric, the “CBS Evening News” anchor, joins us to talk about tonight’s exclusive interview with America’s newest hero, the pilot Chesley Sullenberger.

(COMMERCIAL BREAK)

KURTZ: It’s become the latest drama on afternoon cable, Robert Gibbs sparring with the press. As White House press secretary, his job is to doggedly defend the president, right up to the point where the president changes his approach and the old talking points have to be thrown out.

For a look at how he’s doing, I spoke earlier with someone who stood at that podium on Bill Clinton’s behalf, Dee Dee Myers.

(BEGIN VIDEOTAPE)

KURTZ: Dee Dee Myers, welcome.

MYERS: Thank you, Howie. It’s good to be here. KURTZ: Robert Gibbs spent days defending the Tom Daschle nomination until, suddenly, the former senator pulls out.

Let’s take a look at what Gibbs said the day before and the day of the withdrawal.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think the Senate will lay a serious but corrected mistake against that three-decade career in public service.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Why the about-face from here on Tom Daschle?

GIBBS: I think they both recognize that you can’t set an example of responsibility but accept a different standard on who serves.

(END VIDEO CLIP)

KURTZ: Isn’t it embarrassing to have to do a 180 like that?

MYERS: Yes. You know, it’s a little bit awkward, but it comes with the territory.

You’re 100 percent behind a nominee until you’re not, and that’s always a delicate game. I don’t think on -- you know, on the first clip we saw, that Robert Gibbs or anyone else really thought that Daschle would go down in this process.

KURTZ: Clearly.

MYERS: They were still fighting for him. Sometimes you see it coming and you still have to go out there and give 100 percent support, even though you know this thing is in deeper trouble and may not make it, because the minute you hedge, it’s over

KURTZ: But then he doesn’t come out and say, OK, I was wrong yesterday when I said this tax issue was a minor mistake, he just recites the new marching orders.

MYERS: Yes. You know, I mean...

KURTZ: I Mean, did you ever -- in that position -- were you ever in that position?

MYERS: Yes. There were definitely times where things changed so quickly, and rather than making the entire day about how you had to go back and apologize and, you know, eat your words, you just move forward, and sometimes that’s a better strategy. I mean, I think, you know, he’s only been in this job for two weeks, and I think he’s done a terrific job. He has not once become the story by making a mistake, and I think...

KURTZ: But as you say, it’s early.

MYERS: Yes, it’s early, but, you know, you usually you make those mistakes in the very, very beginning.

KURTZ: But as someone who took the slings and arrows from reporters for two years under Bill Clinton, does a spokesman’s credibility suffer when you keep minimizing something that everybody knows is a big political problem?

MYERS: Right. You know, you can and you have to be careful. I think you get one or two of those over the course of a few months, or even a few years, because everyone understands how the process work.

This is one where they fought for the guy and it didn’t work out. And he went down and he went down fast.

I think the thing that protects Robert Gibbs in particular is everybody in that room and everybody watching from around this town knows that he has direct access to President Obama. He is in the inner, inner circle. He has his e-mail address, he has walk-in access to the Oval Office. Knowing that, reporters are going to treat him differently, particularly about issues like this, than they would if they thought -- if they were not sure whether he was in the inner circle, where they weren’t sure if he had the access that he needs.

KURTZ: He’s not just a talking head, he is, in fact, a close adviser.

MYERS: He’s not a talking head.

KURTZ: But I have watched him bob and weave in these opening weeks.

MYERS: Right.

KURTZ: And he is pretty adept at this.

MYERS: Right.

KURTZ: And he’s also very adept at not answering questions he doesn’t want to answer.

Let’s take a look at some historical research provided courtesy of “The Daily Show.”

(BEGIN VIDEO CLIP)

GIBBS: Senator Daschle decided to remove his name from consideration and remove his nomination. He did not want to be a distraction.

SCOTT MCCLELLAN, FMR. WHITE HOUSE PRESS SECRETARY: Well, Commissioner Kerik is the one who made the decision to withdraw his name. And he indicated that he did not want to be a distraction. GIBBS: I don’t want to go into hypotheticals about what may or may not happen.

DANA PERINO, FMR. WHITE HOUSE PRESS SECRETARY: It’s a hypothetical question that I would be able to answer here.

MCCLELLAN: We’re not going to play into some hypothetical situation.

GIBBS: I’m not going to spend a lot of time up here today looking through the rearview mirror...

ARI FLEISCHER, FMR. WHITE HOUSE PRESS SECRETARY: The president is looking forward, not backward.

GIBBS: ... or playing Monday morning quarterback on all this.

MCCLELLAN: I’m not going to try to play too much Monday morning quarterback.

(END VIDEO CLIP)

KURTZ: This is not a hypothetical question.

(LAUGHTER)

KURTZ: Is there a playbook that you hand down from one press secretary to the next with all these ways of dodging a question?

MYERS: Sure. Sure. I mean, I think, you know, anybody who comes into the job talks to and looks at the performance of previous press secretaries. You would be foolish not to do that and to try to learn.

One of the things you learn before -- by the way, you don’t start your first press secretary job on the podium at the White House. You’ve been through a number of campaigns and probably government jobs before you get there. And one of the things you learn is you never answer a hypothetical question. There’s nothing the press would love you to do more than to answer a hypothetical question, and when it turns out to be completely specious from the beginning, they come back and beat the heck out of you for having said whatever it was you were going to say.

So you learn those kinds of things.

KURTZ: Is the job often to avoid making news? I mean, you’re standing up there for 30 or 40 minutes, reporters are trying all kinds of tricks and techniques to try to get to you commit to something, to set a goal, to set a number, and often press secretaries don’t want to do that.

MYERS: I would say if the briefing has a goal, it’s to provide information without making news. You want to -- you know, you saw Robert Gibbs. This week he’ll talk about the president’s schedule. He’ll talk about -- you know, sort of give some background on how decisions were made.

But he never tries to move the ball forward. And one of the things he does, and I think quite effectively, is he slows the game down. You know, he’s a southerner. He talks slowly. He puts in a lot of parenthetical phrases. He slows things down in an effort not to get caught in the rat-a-tat-tat that can take over a briefing.

KURTZ: On Monday night, President Obama will hold his first news conference, a primetime news conference. MYERS: Right.

KURTZ: That was a big fixture under Ronald Reagan. George Bush, George W. Bush and Bill Clinton had trouble getting the networks to carry primetime news conferences.

MYERS: Right.

KURTZ: Smart move by a new president who’s fighting for an economic package?

MYERS: I think it is, yes. And we’ll see what happens with the stimulus by Monday night. Who knows where it will be, but...

KURTZ: But won’t the reporters want to show up for that primetime audience and pin the president down and be aggressive?

MYERS: Yes, they will. And it will be an opportunity for President Obama live, in front of the entire nation, or whatever portion is watching, to show that he can parry. They will thrust and he’ll parry.

And he’s been pretty good at that. He hasn’t done a lot of this at this level, at the White House, with the whole world watching. And so we’ll see how that goes. But it’s an opportunity for the president to go out there, show he’s not afraid, and to make his points about why his economic package needs to move forward.

KURTZ: A lot of people will be watching because...

MYERS: Yes, they will.

KURTZ: ... their favorite shows...

MYERS: And you and I will be among them, right.

KURTZ: ... will be delayed.

MYERS: Right.

KURTZ: Dee Dee Myers, thanks for joining us.

MYERS: Yes. You bet.

(END VIDEOTAPE)

KURTZ: And coming up in the second half of RELIABLE SOURCES, landing the pilot. We’ll check in with Katie Couric about getting the first sit-down with Captain Sully and whether she’s finally being accepted as an evening news anchor.

Plus, candid camera. A cell phone snapshot lands Olympian Michael Phelps in hot water. Was publishing that picture fair game or really foul play?

(COMMERCIAL BREAK) KING: I’m John King and this is STATE OF THE UNION. Here are some stories breaking this Sunday morning.

Vice President Joe Biden is wrapping up his first overseas trip at this hour. He laid out the Obama administration’s new foreign policy vision at a security conference in Germany this weekend. A top Russian official calls the vice president’s stance on major nuclear issues and relations with Russia “very positive.”

Supporters of the president’s economic stimulus bill will start airing radio ads as early as today. The spots made by a liberal interest group will thank key Republican senators who are backing the plan. A Senate vote expected Tuesday.

And a Republican mayor from a conservative town throwing his support behind President Obama and the stimulus bill. Find out why he thinks this plan is so critical for the country.

That and much, much more ahead on “State of the Union.”

But first we go back to our friend Howie Kurtz and “Reliable Sources.”

Howie, let’s show a few headlines here as you discuss how we’re doing, how the media is doing in this stimulus debate.

This is a big paper, the “Sunday Los Angeles Times.” “Now the only option for states is pain,” talking about all the state budget cuts in the tough economy and how many governors are hoping for some help from Washington.

Smaller newspapers, too. This, “the Decatur Daily,” down in the state of Alabama. “Dueling Stimulus Plan.” It talks about the debate here in Washington.

And Howie, one more thing. I know you have a special guest. You’re about to talk to a good friend of mine, Katie Couric.

Look at this. That is a young Katie Couric many, many years ago in Dharan, Saudi Arabia, feeding grapes to a former press Associated Press correspondent named John King.

Now, we were just having fun. No scandals for you out there in blog land. Just having a little fun. Katie saying thank you to me before she headed back to the states doing her duty and my duty covering the first Persian Gulf War, when we both were, shall we say, Howie, a little bit younger.

KURTZ: Now, are you putting that picture out there, John, because you didn’t want anybody to blackmail you and put it on a blog and have some nefarious interpretation of just what was going on there?

KING: I have had this picture in my office forever, because Katie was quite fun to help cover that first Gulf War with, not a fun story with. But she came by to say thank you and she was heading home.

But I’ve had this picture for a very, very long time. I need to get her a copy. No blackmail. Just two hardworking reporters having our -- those were days when you slept about two minutes a night, and that was -- we were taken away, maybe, from our two minutes of sleep to have a laugh.

It was just a funny moment, and I thought I’d share it before you have a conversation with Katie.

KURTZ: I can tell from that shot how hard you both are working.

(LAUGHTER)

KURTZ: Well, just for the record, Katie Couric has never fed me grapes, but she has talked to me over the years, and she’s going to talk to us in just a second.

Thanks, John.

When a US Airways pilot made that miraculous safe landing in the Hudson River, you might have expected that he’d hold a news conference or negotiate a book deal or make the rounds of the TV talk circuit. But Chesley Sullenberger didn’t do any of that, didn’t attempt to capitalize on the amazing feat that saved 155 lives.

Journalists, of course, have been in hot pursuit, and now the pilot finally breaking his silence with Katie Couric. The CBS anchor sat down with him for a 60-minute interview that airs at 7:00 Eastern tonight.

(BEGIN VIDEO CLIP)

CAPT. CHESLEY SULLENBERGER, US AIRWAYS PILOT: It was the worst, sickening, pit of your stomach, falling through the floor feeling I’ve ever felt in my life. I knew immediately it was very bad.

COURIC: Did you think, how are we going to get ourselves out of this?

SULLENBERGER: No. My initial reaction was one of disbelief.

(END VIDEO CLIP)

KURTZ: And Katie Couric joins me now by phone from New York.

And Katie, we appreciate you calling in. You were so anxious to be on the program that you called in early. We had to call you back.

COURIC: Well, I didn’t want to be late, Howie. I got nervous, because I’ve been on the receiving end of late calls, so I didn’t want to do that to you.

KURTZ: Yes.

COURIC: But it’s nice to talk to you. KURTZ: Same here.

When you sat down with Sully, he seems like such a self-effacing guy. Was he reluctant to take a lot of credit for what he had done?

COURIC: Yes, very much so. You know, he is -- I mean, I think you look up “self-effacing” in the dictionary, and it has a picture of Sully Sullenberger. He is extremely humble, extraordinarily modest, and he is very quick to point out that there were five crew members on that plane that day.

COURIC: And in fact, when I asked him about the label of “hero,” he said he thought the first responders were the heroes because they were at the ready in about four minutes, all surrounding that plane as it floated in a very surreal fashion on the Hudson River. And he said if they hadn’t been there as quickly as they were, it would have been complete disaster. I said, “Yes, but you’re the one that landed the plane, and the plane was intact.” And, of course, that was an extremely part of the story. But he is extremely understated and humble about the whole thing.

KURTZ: And you were careful to include the entire crew, so the program is not just about Sullenberger.

COURIC: No. Well, you know, his co-pilot played an important role as well, Jeff Skiles. He had just trained, by the way, Howie, to fly the Airbus 320. And I think that was actually fortuitous, because he was very familiar with sort of the procedures, so as Sully Sullenberger took over the controls -- because it was Jeff’s turn. They alternate who flies the plane at any given time when they are on a four-day trip like this. And when he said, “My aircraft,” Jeff Skiles said, “Your aircraft,” and then proceeded to help kind of go down the checklist for an emergency landing of this kind.

And by the way, the flight attendants are fascinating, too, because it’s almost as if there were two situations or two separate accidents on that plane. In the back of the plane, it was a much more violent landing. The water was coming through and into the plane.

KURTZ: Right.

COURIC: And at one point, the flight attendant in the back thought it was over for her. So I think you’ll really be interested in the sort of dual accounts inside that cabin.

KURTZ: Right, everybody having a different perspective on those horrendous moments.

COURIC: Right.

KURTZ: Was it difficult to get Sully to talk about the emotions he felt during those pressure-packed moments?

COURIC: Yes. You know, I mean, I think he is the consummate professional.

He’s been an Air Force fighter pilot, he’s been flying commercially for 30 years. And I think, you know, he didn’t allow himself -- quite frankly, he didn’t have the time to indulge himself into any feelings of panic.

I think what he said in that clip you ran, and the fact that it was first a feeling of feeling incredulous that this was happening. After that he realized, you know, he had a lot to do.

He had to figure out where they were going to land, you know, knowing that LaGuardia and Teterboro eventually would not be possibilities, and then prepare for a landing, a water landing, which is extremely difficult to do. So, you know, he did -- I think he wasn’t all that emotional during the process.

In fact, at one point I said, “Did you pray at any moment?” And he said, “There were a lot of people in the cabin doing that for me. I had to fly the airplane.”

KURTZ: Right. You know, even in normal circumstances, I guess, to be a successful pilot, you have to be able to tune out just about every distraction and focus on the job at hand.

COURIC: Yes. He said it took enormous concentration and focus to kind of remove those feelings of fear, and obviously he did what he needed to do to get the job done.

KURTZ: Right. Right.

Now your former partner, Matt Lauer, had announced that “The Today Show” was going to do the first interview with Sully. I don’t want to use the word “steal,” but how did you lure Sully over to do the interview with you in “60 Minutes?”

COURIC: Well, you know, in fairness, I think they might have jumped the gun a bit, because this whole interview -- really, I think maybe Matt was told by one person, but it was really a lot of people involved in the decision-making process, including the entire crew, Sully and his family, the Airline Pilots Association, the flight attendants. There were a couple of people helping them out from a PR perspective.

And so we did it like anybody else does these things. We talked to them, we told them we thought that “60 Minutes” was a good venue for them, it was more controlled. And we thought we could craft and produce a really excellent piece. And, you know, I think ultimately they all got together and they made that decision, and that’s what happened.

KURTZ: Earlier in the show, Katie, we played clips of interviews with the network anchors that President Obama did. You were at the White House this week, talked to the president.

Did he seem ready to just admit that he had screwed up on the Daschle nomination? In other words, that it didn’t take much prodding on your part?

COURIC: Oh, yes. I mean, I think that the administration definitely decided before we even, you know, arrived in Washington that this was going to be a mea culpa moment.

I don’t think -- when they arranged for these interviews to take place, I think it was designed to really focus on the stimulus package. But then Tom Daschle withdrew at about noon, I believe.

KURTZ: Right.

COURIC: And the woman from OMB, the deputy director who is going to be head of performance review, she pulled out because of tax issues. And so I think they realized that the focal point of the interviews had changed pretty radically from when they had invited us down to the Oval Office. So, yes, he was very, very quick to say that.

The one question I wish I had followed up with -- you know, sometimes you think about these a half an hour later...

KURTZ: Of course.

COURIC: ... is, when you say, “I’m sorry, I screwed up, I made a mistake,” was it a mistake that you actually chose Tom Daschle knowing he had tax issues and you underestimated the impact it would have, or was it a mistake that he hadn’t about as thoroughly vetted as he might have been?

KURTZ: Right. What is the nature of the mistake.

COURIC: So I still think that’s a bit of a question mark.

KURTZ: I think that’s something we need to explore further.

You’ve been getting some pretty good press lately for your work on the “CBS Evening News.” You’re still in third place, but the ratings have ticked up a little bit.

After two and a half years in the anchor chair, why do you think it’s taken so long?

COURIC: Well, I think by many people’s standards, that wouldn’t be taking so long at all. I think these things move glacially, actually, and viewer habits are pretty firmly entrenched.

KURTZ: Right.

COURIC: You know, I know it’s been taking you a while for you to get a big audience on CNN.

KURTZ: It’s taken a little while.

(LAUGHTER)

COURIC: So I just think it’s one of those things that I think, first of all, people had to get used to me in the job. You know, a face that had not been familiar to CBS viewers. And then I also think that, you know, I had to get used to the job, and we had to sort of find the right balance of me getting out in the field and doing interviews, which is what I really enjoy doing, and reporting. And I just think it took a while to sort of be operating on all four cylinders.

But Rick Kaplan is doing a fantastic job. I think the show has been really high quality. I was really proud of the show from the get-go...

KURTZ: Right.

COURIC: ... but I think these things just take time. And that’s OK. And, you know, I don’t really look at the ratings. I look at the quality of the work. And I really think our newscast is as good or better than any of our competitors, and I’m really proud of the work that all of the correspondents and producers do on a nightly basis.

KURTZ: Right.

Some of the early criticism, you know, turned kind of personal, and is a woman really right for evening news anchor? And I just wonder whether that was a painful period for you at all?

COURIC: I mean, you know, listen, it’s not a lot of fun being pummeled in the press. But on the other hand, I’ve always had enough confidence in my abilities and my work to know that sometimes there are larger issues at work here about the role of women in society and, you know, sort of -- I didn’t really take it that personally. I think that there are a lot of unhappy, sort of insecure, vitriolic people out there, and I always sort of feel bad for them, that this is how they spend their time.

KURTZ: Right.

We’re going to put up some pictures of you over the years, and I’m going to ask you whether the you think at all a factor in your recent success could be this new hairstyle.

COURIC: I don’t know. You know, you should ask Charlie Gibson about how he’s changed his part a little bit, or how Brian looks more tan on the air. I really don’t know, Howie.

KURTZ: While we have you, we’re seeing you on “The Today Show.” Oh, that’s an interesting one. You’ll have to see a tape of this.

COURIC: I was pregnant. I actually am watching these.

KURTZ: OK. You’ve got the TV on.

COURIC: Yes. I kind of like the John King shot of me feeding him grapes the best.

KURTZ: Yes. Do you have an explanation for that before we go?

COURIC: I don’t really remember, but I do remember being over there with John. And he’s a great reporter, and I’m so happy for his success.

KURTZ: Well, it was so nice of you to treat him royally the way you did.

Katie Couric, thanks so much for calling in.

COURIC: OK, Howie. Good to talk to you. Bye.

KURTZ: Nice to talk to you this morning.

And up next, taking a hit. A British tabloid runs an embarrassing photo of Michael Phelps and a bong, and now swimming officials have suspended him. Is it fair to sink an Olympic hero based on a cell phone snapshot?

(COMMERCIAL BREAK)

KURTZ: The headline more or less writes itself. Was Michael Phelps just smoking dope, or is he a dope, or both? The British tabloid “News of the World” created a worldwide buzz by obtaining a photo of the Olympic medal winner taking a hit on a bong, a photo that was then sold to “Star” magazine.

(BEGIN VIDEO CLIP)

MATT LAUER, NBC: Let’s start though with the fallout from that photo of Michael Phelps.

JOHN ROBERTS, CNN: Michael Phelps has taken a big PR hit for his now-infamous bong photo. But who says the super swimmer’s reputation is going to pot?

A.J. HAMMER, CNN HEADLINE NEWS: Michael’s marijuana mess. Michael Phelps has literally gone to pot. And the big question tonight is, will he literally pay for it, big time?

MAGGIE RODRIGUEZ, CBS NEWS: Olympic swimmer Michael Phelps is now paying a hefty price for that photo of him smoking a marijuana pipe.

(END VIDEO CLIP)

KURTZ: This was no one-day story, and Phelps apologized.

(BEGIN VIDEO CLIP)

KATE AMARA, WBAL-TV: What do you want to say today to your supporters, to your detractors, and to all the kids who jumped in the pool here today and around the world because they want to be like you?

MICHAEL PHELPS, OLYMPIC GOLD MEDALIST: You know, the biggest thing is, you know, I clearly made some bad judgments and mistakes in my life. And, you know, I can -- I think the best thing is, you know, learn from your mistakes.

(END VIDEO CLIP)

KURTZ: U.S. swimming officials have now suspended Phelps for three months, but we’re going to dive into this question: Is it unsporting for newspapers and tabloids to be publishing this kind of picture, undoubtedly taken with someone’s cell phone? I spoke earlier with Christine Brennan, sports correspondent for “USA Today,” and Will Leitch, contributing editor at “New York Magazine” and author of “God Save the Fan,” now out in paperback.

(BEGIN VIDEOTAPE)

KURTZ: Christine Brennan, should we feel slightly sorry for Michael Phelps, or should he have expected that people are always going to be snapping pictures no matter what he’s doing?

CHRISTINE BRENNAN, “USA TODAY”: I think slightly sorry, sure. He’s a human being, he’s 23 years old. He was America’s hero just a few months ago.

KURTZ: Was? You used the past tense.

BRENNAN: Yes, I did, because the reality is, of course, he made the choice. He and his management group, Howie, made the choice to go for the money and to basically, you know, make himself, put himself on a pedestal as America’s pitchman to kids, whether it’s the box of Rice Krispies Treats or Corn Flakes, or whatever it may be.

KURTZ: And once do you that you’ve got a media image to uphold.

BRENNAN: Exactly.

KURTZ: But let’s look at how this story developed.

Will Leitch, “News of the World” quotes an unnamed source at this party back in November as saying, “He looked just as natural with a bong in his hands as he does swimming in the pool. He was the gold medal winner of bong hits.”

Now, isn’t that funny that quote is so perfect? Was this a sleazy thing for a British tabloid to do?

WILL LEITCH, FOUNDER, DEADSPIN.COM: Well, I mean, certainly it’s out of character for a British tabloid. But, you know, it’s funny. It is -- you know, when you have something like that, when he first kind of came on the scene and became kind of this mix between, like, the handsome vampire from “Twilight” and like G.I. Joe, like, during the Olympics, I think it was kind of destined that something like this was going to happen.

I think Ms. Brennan’s right. Like, once they kind of made the decision to make him all things for all people, inevitably he was going to have to be knocked back down to a human being. And it’s a shame, because when you think about Mark Spitz, Mark Spitz has had all kinds of issues going on in his life, too, but he’s from a different time. And that never -- and this comes on the heels so quickly of that, that I think this is probably going to end up being on Phelps’ almost personal record, if you will, and I think that’s kind of a shame.

KURTZ: Yes. Well, it’s easier to be a bad boy in the era before cell phone cameras. Would you have published this? If this didn’t exist and somebody brought you this picture, and you were convinced the picture was authentic, would you have put it in “USA Today?”

BRENNAN: That’s a good question. I think because he’s a public figure and because, Howie, he has set himself up as the nation’s role model, I think it becomes news, yes.

KURTZ: Have we in the news business played along with him being the nation’s role model? In other words, do we merchandise the Phelps’ image? Do we use him as much as any of these corporate sponsors?

BRENNAN: I would like to think that those of us on the print side especially did not. You know, we’re covering the story.

KURTZ: What about “Sports Illustrated?” They put him on the cover with those eight gold medals against his naked torso?

BRENNAN: OK. Maybe I need to make my universe smaller to the side that’s not involved in business with the International...

KURTZ: With TV.

BRENNAN: I think -- well, NBC wanted to make it. You’re watching in August. I of course was over there, I didn’t see it, but it must have been like a movie, right? Day after day and Michael and his mom and his sisters.

And by the way, I like the Phelps family very, very much. They are good people. And I’ve known them for years.

But the reality is, I think those of us who are not in business dealings with the International Olympic Committee, and we were not banking on Phelps, and we were not using Phelps -- I feel good about writing, for example, Howie, that he’s not a complex man, that he was just taking a few classes at Michigan. He’s not a Michigan graduate, he’s a high school graduate, which is fine. But I think he was built up to be a bit larger than life by those who also had a stake in his success because it was also going to be their economic success

KURTZ: Well, I think I would include all of the media in that building up, because that’s what we do. And he was a feel-good story, an American who’s winning all these medals.

Well, the guy got high at a party. Yes, I know it’s against the law, but so in the past have the current president of the United States, George Bush, Bill Clinton, Al Gore. They all admitted trying pot.

Is the press holding Phelps here to a ridiculous standard?

LEITCH: I think what they are doing is they are holding the image of Phelps up to that standard. I think if Phelps would have actually have said even before -- it was almost an image management thing. If he had just said before the Olympics, OK, in the past, I smoked a little bit of pot, it would have been this thing that kind of went away.

But the fact that it was built up so much, I think that it was -- as I said, it was kind of inevitable that it would come to this point. And it’s a shame, too, because, you know, I mean, the notion that -- like, if he wasn’t -- if you didn’t see him, like, drinking a bottle of whisky while getting in a car. I mean, this was something that happens in so many different circumstances, in so many different ways. I think it kind of speaks to our kind of notions of substances and their abuses and our perceptions of them, than necessarily thinks (ph) about Phelps.

BRENNAN: But Howie, of course, there was the DUI back in 2004, as you know as well. So there has been an offense before, and as you said, probably worse than smoking pot in a college party.

KURTZ: Right. But he wasn’t using steroids and he wasn’t using something that would help him win his swimming matches. If anything, pot probably didn’t help.

In the old days, it seems to me, Christine Brennan, that professional photographers would cut athletes some slack. You wouldn’t necessarily see pictures like this published. But nowadays, anybody can take a picture, and maybe somebody at that party didn’t like him. Maybe it was his ex-girlfriend, and somebody can post it online.

BRENNAN: But Michael needs to be smarter than that though. He is, of course, from that generation. He’s 23, so he is text savvy. And he knows he probably has a cell phone or two or three that have cameras as well. So I think that’s part of it.

And one point I think, historically, since we were talking about the past, there was an athlete who once was as big or almost as big as Phelps, who did walk away from endorsements, who said he wanted his life back. Of course that was Eric Heiden, who won five gold medals in speed skating at the 1980 Lake Placid winter Olympic games. He disappeared. He said no to endorsements.

Michael Phelps -- I know it sounds strange in our world today, but Michael Phelps could have done that. He could have said, I don’t want to do any of this, I want my life back, I want to go to parties. And he already had, because of deals before the Beijing games, Howie, he already had enough money to probably live on for the rest of his life.

KURTZ: Once you get on that media pedestal, you’re obviously fair game to be knocked off.

Now, Will Leitch, your former blog, sports blog called “Deadspin,” has had 174,000 page views for a picture of a backup quarterback for the Arizona Cardinals holding a funnel for a young woman who is chugging beer. So is there just a whole insatiable market for these kinds of embarrassing images?

LEITCH: Well, you know, realize that, you know, I think it was five, six years ago, like, “Newsday” ran a big picture of a Mets reliever, a relatively non-well known reliever, with a bong. And in the newspaper.

So I think that like -- I think it’s not just a matter of -- I’ve talked in the past, and almost a little bit tongue in cheek, about the idea that there’s a humanization idea. But yes, speaking of the idea to Ms. Brennan’s point, like, you know, when you have -- when you have that kind of idea of he -- not only -- I think he was almost a void in a lot of ways. I think because he didn’t have a strong personality like an Eric Heiden, and he was willing to just kind of say, OK, I am whatever you want me to be, I think that’s kind of what the major problem here was, is that he didn’t have that strong personality, so he was kind of just led around a little bit.

KURTZ: He was.

LEITCH: And I think this is the type of thing that’s going to happen.

KURTZ: He was apparently especially vulnerable to this. And, of course, it will be always be part of the image we now associate with Michael Phelps.

Will Leitch, Christine Brennan, thanks very much for joining us.

BRENNAN: Thank you.

LEITCH: Thank you.

KURTZ: And a programming note. We’ve been getting e-mails on this. If you want to record RELIABLE SOURCES on a TiVo or DVR, in most cable systems you can now set it to “STATE OF THE UNION,” 10:00 a.m. Eastern now, or “State of the Union-Reliable.” And that way you can watch us any time.

After the break, blast from the past. A YouTube clip reminds us how strange and surreal the idea of online news once seemed. This is really priceless. Stick around.

(COMMERCIAL BREAK)

KURTZ: Back in the early days of computers, I used to go on the road with a clunky Radio Shack laptop. And to file a story, you had to put the phone into these rubber couplets and twist them tight, dial a number, and basically pray. The Internet was a far-off fantasy.

I thought of this the other day after seeing a YouTube clip, a 1981 report on San Francisco station KRON, that was about the future.

(BEGIN VIDEOTAPE)

(UNKNOWN): Imagine, if you will, sitting down to your morning coffee, turning on your home computer to read the day’s newspaper. Well, it’s not as farfetched as it may seem.

(UNKNOWN): When the telephone connection between these two terminals is made, the newest form of electronic journalists light up Mr. Halloran’s (ph) television with just about everything “The Examiner” prints in its regular edition. That is, with the exception of pictures, ads and comics.

KURTZ (voice-over): Yes, small problem. It was just text on a flickering screen. No wonder it didn’t catch on right away. But the San Francisco papers knew they were on to something.

DAVID COLE, “SAN FRANCISCO EXAMINER”: This is an experiment. We’re trying to figure out what it’s going to mean to us as editors and reporters, and what it means to the home user. And we’re not in it to make money.

KURTZ: Almost three decades later, even with lots of pictures and video, newspapers are still having trouble making money online.

(UNKNOWN): This is only the first step in newspapers by computer. Engineers now predict the day will come when we get all our newspapers and magazines by home computer.

(UNKNOWN): Well, it takes over two hours to receive the entire text of the newspaper over the phone. And with an hourly use charge of $5, the new telepaper won’t be much competition for the 20-cent street edition.

(END VIDEOTAPE)

KURTZ: Two hours? Now when it takes five seconds for a page to load, we all get impatient and start clicking the mouse.

You know, TV stories about the shimmering world of the future are notoriously unreliable, but that one really nailed it. If only I had caught on and bought stock in Microsoft.

We’ll be right back.

(COMMERCIAL BREAK)

KURTZ: Rod Blagojevich on the air this week, even after he’s been kicked out of office.

But we are short on time. I want to bring my partner John King back in.

And John, as we both have noted, President Obama doing the primetime news conference tomorrow night. There’s starting to be some chatter about whether this guy, three weeks in office, is on TV so much that maybe he’s risking overexposure.

KING: It’s an interesting question and it’s a debate every new administration faces. How often do you use your best weapon, your best communicator, the president of the United States? But clearly, Howie, they think they need to put him out there to get things back on track in the economic debate, and many Democrats privately have been begging the White House, get him out of Washington.

He’ll do that on Monday. This is the Elkhart newspaper, the Sunday newspaper. “We’re ready for our close-up, Mr. President.” Even before that primetime news conference, he’s going to go to a county in northern Indiana where the unemployment rate, Howie, is at 15 percent.

So it is a debate we’ll keep watching on RELIABLE SOURCES and throughout STATE OF THE UNION, but this president is going to be very busy and very visible this week.

KURTZ: It certainly makes sense to get the president out of Washington and show him interacting with real people who would be helped, presumably, by the legislation he’s pushing.

Thanks, John.

KING: Thank you, Howie. We’ll see you next Sunday. Have a great day ahead.

And a busy two hours ahead here as we track new developments in the debate over how to fix the economy and other big stories around the nation and around the world on our STATE OF THE UNION report this Sunday, the 8th of February.

It’s been a tough week for President Barack Obama . What happened to all the Kumbaya moments we saw just days ago?

KING: We’ll ask three of the best political analysts in the business if it’s bye-bye bipartisanship or maybe a return to business as usual in Washington.

Tomorrow, the president will kick it up a gear, the battle for his stimulus plan heading to Indiana for a town hall, holding his first primetime White House news conference.

Are we seeing a return to campaign mode? We’ll get a preview from three of the best political team on television. And we’ll hit the highway to Indiana ourselves to see how a Republican mayor is fighting to keep his town alive feels about the new Democratic president. That’s all ahead in STATE OF THE UNION.

A lot of news made this Sunday morning and it’s hardly a surprise that the primary subject, almost the only subject, was the economic debate going on in the U.S. Capitol. You just saw it there and the debate about how to get the economy kick started. Ray LaHood is the new secretary of transportation. He just told us right here that a stimulus bill could mean real jobs real soon.

(BEGIN VIDEO CLIP)

LAHOOD: People will be building roads and bridges and other infrastructure projects this spring, summer and fall, and I believe an enormous number of people, thousands of people, will be going to work in good-paying jobs.

(END VIDEO CLIP)

KING: But on NBC, one of Ray LaHood ’s former House comrades, Republican Mike Pence of Indiana indicated that in his view, this stimulus bill is way off the mark.

(BEGIN VIDEO CLIP)

REP. MIKE PENCE, R-IND., CHAIR, HOUSE REPUBLICAN CONFERENCE: The centerpiece of any effective stimulus bill that’s ever been passed by Congress in the recent past has been tax relief. The center of this stimulus bill is massive unaccountable government spending and the American people are tired of it.

(END VIDEO CLIP)

KING: At least one member of the House Democratic leadership, Chris Van Hollen of Maryland told FOX they weren’t happy about what was taken out in the Senate, not happy about it, but not about to go to war over it.

(BEGIN VIDEO CLIP)

REP. CHRIS VAN HOLLEN, D-MD.: There’s a lot that that we think in the House bill we should have in the final package. Having said that, we are not in the business of drawing lines in the sand because we believe the overriding priority right now is to get something done.

(END VIDEO CLIP)

KING: Get something done. Chris Van Hollen says we’re watching the other Sunday morning shows, as we like to put it, so you don’t have to and we’ll do that every week.

Let’s get beyond the sound bites, behind the headlines and look at what’s really going on. Joining me right here in Washington, Republican strategist, Alex Castellanos, Democratic strategist, CNN political contributor, Donna Brazile and CNN senior political analyst Gloria Borger. A lot of titles in that, welcome and good morning.

Let’s start with the sound we just heard. The interesting player in the Obama cabinet, the Republicans saying give me the money, give it to me now, I’ll get jobs created. But Alex Castellanos, he is the Republican in the Democratic cabinet and the Republicans on Capitol Hill are saying this bill on is not going to do what you say it will.

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: No, I think the Republicans -- Barack Obama has reminded Republicans that they are Republicans. He did something frankly that George Bush didn’t do. George Bush spent like a Democrat and we lost our brand. Barack Obama made Republicans, Republicans again on spending and Republicans on the Hill are looking at this thing and going wait a minute, John King, you’ve just lost your job and I’m a politician.

Here, can you loan me $20? And then you come back and say, by the way, John King, I’m sorry you lost your job, but don’t worry, I’ve got $20 for you. That’s what Republicans are seeing in the stimulus plan. They just don’t see that it’s going to do what we need to get done here.

KING: Is that the coffee kicking in Donna or are you a little unhappy with Alex?

DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Oh, I’m not unhappy with Alex but I think bipartisanship is not giving the opposition both the opportunity to veto as well as pass on providing real ideas to the stimulus package.

The president has invited the Republicans to help him govern, to help him improve the bill and what the Republicans, at least the majority of them so far has done, is to reject the president’s overtures.

I think the president might continue to reach out, but at the same time, the Democrats who control the Congress must improve this bill and let the American people feel the relief. GLORIA BORGER, CNN SR. POLITICAL ANALYST: You know, this is just a philosophical war we’re seeing. In a way, it’s a test of ideas, that we’re seeing play out in the Congress. It’s about whether tax cuts would be more stimulative or spending is going to be more stimulative. In the end, you’re going to get what President Obama wants and it’s going to be the test of what works, and if Republicans all vote against it, they are going to be on the wrong side of history.

KING: It’s also a test of how this new administration in its early days define something that is very important, what is bipartisanship, true bipartisanship to Barack Obama ? Let’s listen. John Cornyn is a Republican senator from the state of Texas. He was on FOX earlier today and he says this compromise in the Senate, Democrats, the White House are calling it bipartisan, John Cornyn says no.

(BEGIN VIDEO CLIP)

SEN. JOHN CORNYN, R-TEXAS: I think having three Republicans potentially supported in the Senate out of 535 members of Congress is hardly a bipartisan effort. I think it’s a disappointment, surely must be for President Obama.

(END VIDEO CLIP)

KING: A disappointment, Gloria, for President Obama? He’s going to get the bill he wants. I guess the question is at what price going down the road if he’s going to have to do business with two or three Republicans.

BORGER: It is a disappointment, they will say no, but it is a disappointment. Their line out of the White House is we’re playing this for the long haul. We may only get three Republicans this time, but we’re going to keep talking to Republicans because we know that we’re going to have to work with them and we want bipartisanship.

As far as the public is concerned, recent polls show that 80 percent of the American public wants a bipartisan stimulus package. A majority of the public believes that President Obama is being more bipartisan than the Republicans, so it’s a long-term strategy here. But, yes, they are disappointed, no mistake about it.

KING: So Donna, how do you get more Republicans on board? You have to give some, don’t you?

BRAZILE: Well, he has been willing to give, but we can’t water the bill down so much that it looks like the bills of the past that got us in the mess in the first place. I think the president is being very strategic in reaching out. At the same time, he understands that he must keep Democrats on board because without the support of Democrats he won’t have the votes necessary to get this bill through the Congress.

CASTELLANOS: Something I think about this bipartisanship is rubbing some people, Democrats and Republicans wrong, and that is, you know, bipartisanship is just a great idea and there’s something wonderful about Obama getting elected president.

We all sense that and feel that in terms of race for this country, people who are now part of the country who didn’t feel they were before, in terms of what it says about us internationally and about the limitless possibilities in the country, all those are wonderful things that Barack Obama was coming.

BORGER: I sense a “but” coming.

CASTELLANOS: But that doesn’t mean that everything Obama does is wonderful. That doesn’t mean there shouldn’t be any debate about the biggest expansion of government in American history. Republicans have remembered again who they are and that is, it’s not about tax cuts. It’s about what do you think is the engine of growth in this country, is it people or is it Washington? Nobody thinks Washington is working.

(CROSSTALK)

KING: I was going to say this -- let me jump in one second, Donna. Let me jump in for one second, because I want to frame the debate.

I was going to save this for later, but Alex makes the point that Republicans are finding their voice. This is the cover of “Newsweek” this week. “We’re all socialists now.” You’re going to disagree with that, I think, Donna, but it is a lot of money. You have the government spending nearly $1 trillion on stimulus, $700 billion with more billions to come on the financial bailout.

We don’t have this money. It’s all deficit spending. Now the administration says necessary deficit spending and that’s the debate we’re having in the town but do you worry as a leading Democrat, your party once had a horrible time in national elections because it was the party of tax and spend, of fiscal irresponsibility. Are you worried that this big -- more big government could hurt in the long run?

BRAZILE: You know, John, when our party left the White House in 2001, we handed President Bush and Mr. Cheney $280 billion surplus in 2001, over a $5 trillion surplus through this fiscal year so we’re not worried that we’re going to be tagged with the big spender label.

I hope the Democrats at the end of the day is tagged with helping to take this economy off the brink of collapse and to revive the American economy so that ordinary people can pay their bills, stay in their homes and their neighborhoods. That is at the end of the day what the Democrats will be measured against is did we help the American people, did we help American taxpayers and I think we will be proud of that.

KING: Alex, you’re shaking your head but to Donna’s point, Democrats say look, we won and you had your chance. Let’s listen to Larry Summers, he’s on ABC this morning. He’s a top economic adviser in the White House. His point to Republicans is we’ve heard this song before. (BEGIN VIDEO CLIP)

LAWRENCE H. SUMMERS, DIRECTOR, NATIONAL ECONOMIC COUNCIL: Those who presided over the last eight years, the eight years that brought us to the point where we inherit trillions of dollars of deficit, an economy that’s collapsing more rapidly than at any time in the last 50 years, don’t seem to be in a strong position to lecture about the lessons of history.

(END VIDEO CLIP)

KING: A lecture about lecturing there from Larry Summers, but does he have a point?

CASTELLANOS: Sure, he’s absolutely right. Republicans spent like drunks. It was terrible and the American people kicked us out of office in large part because of it. Therefore, what, what have we learned, we should do even more? I mean, this really is like being drunk and saying, no, if you stop drinking you’ll have a hangover, drink even more. This is crazy.

No one thinks Washington is working well. The biggest crisis in American financial history and what are we thinking? Well, those people in Washington, they will do better this time. Why don’t we give them more money, this is kerosene on a fire.

BORGER: I guess the question really is, didn’t George W. Bush , President Bush, get Republicans in this situation in the first place?

CASTELLANOS: Yes.

BORGER: Because the first bank bailout came under -- came under President Bush. And so sort of one of the ironies of history that a president who branded himself as one of the most conservative presidents.

CASTELLANOS: Well, he was, I think that’s the key, Gloria.

BORGER: He wasn’t.

KING: Is what you’re hearing new? Are you hearing something new from Republicans? Larry Summers says it’s the same old song. Are they saying something new?

CASTELLANOS: Yes. I think Republicans are remembering who they are. We’re going back. Let’s spend less, let’s take money not to Washington, let’s put it in the hands of people with tax cuts.

BORGER: Where’s the plan?

CASTELLANOS: Look, when you corrode the economy...

BRAZILE: This is a myth, John. This has been created in the Republican psyche for over 40 years that somehow or another they are the disciples of fiscal discipline.

BRAZILE: This is a moment, that President Obama stated in his inaugural address, for us to change the political climate and to do what’s right for the American people.

The Republicans can either join the Democrats and make this right, get it right for the American people, or they can continue with the retro policies of the past that will only give more of them a...

(CROSSTALK)

KING: OK. Quick time-out. Quick time-out.

That’s a nice purple tie. That’s not retro.

(LAUGHTER)

We’re going to continue our discussion, when we come back. And we’re not the only ones watching the debate. The cast, the writers of “Saturday Night Live,” paying attention to the new administration and having fun with it. That’s ahead. We’ll have a laugh.

Also, when we come back, we’ll take a look at something else. The president is going to go out on the road this week, and so I’m going to head this way.

He’ll have a news conference. He’ll go out to Indiana and to Florida. He’s trying to sell the new stimulus plan, and he’s getting some help from the people at the grassroots level who helped get him get elected president. They have tried to stay organized.

So we took a trip all over the country, this week, coffee meetings, house meetings, rallies by Obama supporters to get together and decide, how can we help sell the stimulus plan?

We went about an hour outside of Washington, out here to Fauquier County, Virginia. John McCain carried this county, out here, where a bunch of people sitting around deciding how they could help their president -- “Chili for Change,” they called it.

(BEGIN VIDEOTAPE)

(UNKNOWN): Hi, Bob.

(UNKNOWN): This must be the place.

(UNKNOWN): The process is debating the issues and compromising on a position that’s going to be great for the whole.

(UNKNOWN): There’s no reason for cutting education. There’s none -- no good reason.

(UNKNOWN): Spending a stimulus, whether you’re spending it on crack cocaine, prostitutes or good works like fixing the mall -- so it’s all stimulative. So spending is spending.

(UNKNOWN): Almost $1 trillion. Do we need to spend that much money to stimulate the economy?

You need to put a price on everything and say that’s where we’re going to be.

(UNKNOWN): This is part of the process of our democracy, when you have people that can debate that, where it doesn’t have to be, “I’m right; you’re wrong.”

(CROSSTALK)

(UNKNOWN): No, we’re not. I’m talking about what’s happening, right now, down in Washington.

(CROSSTALK)

(UNKNOWN): I got some postcards from the post office, and I have enough for everybody to have one for each of their senators and one for their congressman. They ought to be hearing from us, via this, often.

(UNKNOWN): We voted in November for change, and that’s what we’re trying to do right now, and we don’t want to just do things the way we’ve been doing it.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SETH MYERS, SATURDAY NIGHT LIVE CAST MEMBER: After two of his top Cabinet nominees withdrew their bids, on Tuesday, because of their failure to pay back taxes, President Obama said, “This was a mistake. I screwed up.”

That’s your mistake? I don’t know if you remember, but the last guy broke the world.

(LAUGHTER)

(APPLAUSE)

(END VIDEO CLIP)

KING: Welcome back here. One of the lighter moments of the week, Seth Myers from “Saturday Night Live,” “Weekend Update,” last night.

Once again, with me here, Alex Castellanos, Donna Brazile, and Gloria Borger.

You know, we’re laughing about that, but, Gloria, how much extra leeway, extra patience does President Obama get because the last president, George W. Bush , left on such a sour note with such low approval ratings?

BORGER: Well, you see, and that’s it. He gets -- he gets a little bit of extra patience. His popularity is still quite high, although it’s come down a touch.

No new president -- no president ever gets a free ride, and that’s the way it should be. And I think President Obama is going to be judged by the results.

And if he gets a stimulus package through and it works, people will applaud. Because I think one thing everyone in this country agrees on, now, is they want this president to succeed, because we’re in such a crisis.

KING: All right. Let’s listen -- let’s turn this a little more serious, before we continue. And I want your voice, Donna and Alex.

Let’s actually listen. Seth Myers is making fun of the president saying, “I screwed up.”

He said that to our Anderson Cooper and some other television anchors, in an interview. It was, of course, about losing the nomination of Tom Daschle, who had a tax problem. Let’s listen to the president in the Oval Office.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: I think this was a mistake. I think I screwed up. And, you know, I take responsibility for it, and we’re going to make sure we fix it so it doesn’t happen again.

(END VIDEO CLIP)

KING: Now, Donna, he wanted those interviews to be about the economy and the stimulus package. They were dominated by the Tom Daschle screw-up. I think it’s a fair word. He used it himself.

How hurtful is it -- he has enormous popularity; he has enormous good will, but that is spending political capital, opening the Oval Office up for TV interviews?

How much did he have to spend?

BRAZILE: Well, John, I think what the president was trying to do was to get back on his message about the economy. The Daschle episode, however distressing, was a distraction, and the president clearly wanted to get back to talking about the economy. Look, he’s set the bar pretty high, in this city, right now, for changing the tone and trying to usher in a new era with abandoning lobbyists, and so forth. So any time we practice the politics of the past or the politics as usual, the status quo, the president will have to use a little bit of his political capital to get back on course.

KING: You remember, George W. Bush , many times, was asked, “What mistakes have you made,” and he couldn’t give a very good answer until late in his presidency.

So does he get points for that? You’re paying a price; you are spending some political capital, there, but...

CASTELLANOS: George Bush’s biggest mistake was not being able to remember one.

And it’s very human to be able to admit your mistakes. You know, our old heroes in our culture were John Wayne, 10 feet tall, pardner, and, you know, perfect, but that’s hard to identify with. Perfection is false.

That’s very human. That’s very accessible, and it’s much more heroic, in a way, when regular people stumble, fall, pick yourselves up and try again. Brilliant political communications, very effective.

BORGER: But what was the mistake?

Was the mistake nominating Tom Daschle, or was the mistake not vetting Tom Daschle? I don’t...

KING: That is -- I hope that’s a question asked at the first prime time news conference. Because that was my question: What is the mistake?

Is the mistake saying, I shouldn’t have said we’ll be the most honest and ethical administration ever, so that you could have that nomination?

Or was the mistake the nomination?

Was the mistake the lawyers...

(CROSSTALK)

CASTELLANOS: ... era of responsibility.

KING: Yes, we -- we don’t know. I would love the answer to that question.

Let’s talk about that. Because the president is trying to turn a corner there, move on past Daschle. He gets this compromise at end of the week, tenuous, but it looks like he has the votes.

And now many Democrats, Donna -- and you know this better than any of us at the table -- were saying, get him outside of the White House; don’t become trapped in that White House; he’s a great communicator; he’s in touch with the American people; go, get out.

So he’s going to have a prime time news conference at the White House. But first he’s going to go to Indiana. This is the Elkhart Truth: “We’re ready for our close-up, Mr. President.”

Unemployment in this county, last time I checked, was at 15.1 percent. The value, Donna Brazile, of getting the president out of the bubble and with the people is?

BRAZILE: Well, first of all, this bill, now, in the Senate, is over 770 pages, and I don’t know about you, but I need some more Xerox paper, because...

(LAUGHTER)

... that’s a lot of information.

KING: Yes, Al Gore is not happy.

BRAZILE: Absolutely not.

(LAUGHTER)

But, look, what the president will be able to do on Monday is to explain, in real people terms, not this Washington speak, but how this plan will help ordinary Americans who are losing their jobs, who are worried about paying their mortgages.

BRAZILE: And so I think this gets them out of this Washington bubble where they are talking about programs and how much and rather he’ll talk about how this will help ordinary citizens.

CASTELLANOS: But what we’ve seen so far is just the opposite, is that the more we look at this plan, Barack Obama ’s numbers go up. He’s doing great, but the plan seems to be sinking, because it’s not very American.

I mean, this thing is just a huge expansion of government and more spending and it just doesn’t seem to be -- I mean, this is the Democratic party that elected Richard Nixon, Ronald Reagan, you know, two Bushes. This is the Democratic Party of big spending and fiscal irresponsibility.

BORGER: He’s got to go out on the campaign trail, and that’s what he’s going to do. He’s going to go to Indiana. He’s going to go to Florida. He’s got to sell this plan to the American people, honestly, he knows he’s probably going to get the votes for it in the Congress. This isn’t about the Congress anymore. This is about bringing the American public on board because the stimulus package, as you said, Alex, is going down and public opinion.

KING: How does he keep the trust? You see these two courses. How does he keep the trust of the American people at a time when they want help?

If you travel the country, most people desperately want help and they want to think their new administration and their new administration in Washington, Congress included is doing things to help them.

But they’re sitting around the table and they’re saying, we can’t go to Disneyland this year because we don’t have the money. We might not even be able to go to McDonald’s this month because we don’t have the money. And in Washington, in the name of helping them, in the name of helping them, $1 trillion in stimulus spending, $700 billion with more to come from financial institutions. How does the president of the United States keep the trust of the American people that deficit spending, money we do not have, is critical at a time when they are having trouble paying their own bills?

BRAZILE: Well, the good news is that President Obama is a great communicator and I think he will be able to talk about all the misleading lies and information that has been cherry picked apart. The American people need to know exactly what’s in the bill. John, it’s painstaking to go through a bill this long and this difficult, but this bill wasn’t just about giving, you know, birth control. And by the way, I said oh, maybe there’s some Viagra in it and they need birth control.

But it’s beyond just talking about what’s bad. But what’s good for the American people, 95 percent of the American people will get a tax cut. Businesses, 75 percent of this money will be spent in the next 18 months.

We’ve had 13 months of job losses. This bill will help create millions of new jobs for the American people and I think what they want to hear is that the president is on their side and that he’s going to lead in helping them.

KING: Is part of his challenge, Alex, when he talks to the American people to make sure that they help him in pressuring House Democrats to accept something very close to the Senate deal so we can get this done soon? Because as you know, House Democrats, not your crowd I know, but they want to put more of this money back in. They are mad at the Senate. They say no, it was too small to begin with. We want to spend more. Will the president arm twist his own party?

CASTELLANOS: He’s got the resources to do it. He’s got the e- mail list, he’s got about 20,000, 25,000 supporters on an e-mail list in every congressional district in America.

He can turn up the heat if he wants, you know, but, again, this is just such an unprecedented effort. FDR did something like this, but he didn’t do it in the age of the 24/7 communication cycle. You know, he had -- if his program failed, we might find out a couple years later that the farmer didn’t get the money somewhere in Arkansas. We’re going to know now in 20 seconds.

KING: Is he willing to be tough with his party?

BORGER: I think time will tell, but I believe, and Donna would know better than I would, but I believe in talking with some Democrats in the House, they believe they are in this with him, and so in the end, they are not going to like everything, but they are going to hold their noses and vote for it.

CASTELLANOS: If he was going to be tough, he’d cut some pork and he didn’t.

BRAZILE: We have a process.

KING: Time out for now, but we’ll continue this conversation in the green room and over coffee as we go. I’ve got to stay here for a while. You guys can keep it going. Alex Castellanos, Donna Brazile, Gloria Borger, thank you. We’ll go back to newsmakers in the next hour of STATE OF THE UNION, including the first Sunday interview with a member of the new cabinet and a performance review of President Obama from former top CEO Jack Welch. And straight ahead, our weekly conversation over coffee. They are not happy with President Obama in Carmel, Indiana.

(COMMERCIAL BREAK)

KING: I’m John King and this is STATE OF THE UNION. Here are some stories breaking this Sunday morning. Wildfires in Australia claiming more lives. Officials say 96 people have now died. Many of the victims burned to death inside their cars as they tried to flee the fast-moving flames. Police suspect some of those fires were deliberately set.

Vice President Joe Biden heading back to Washington after his first overseas trip. He laid out the Obama administration’s vision of a new foreign policy at a big security conference this weekend in Germany. A top Russian official calls the vice president’s stance on major nuclear issues and relations with Moscow very positive.

And what’s up with President Obama, a long-time smoker who pledged to quit? Has he had a cigarette since he arrived at the White House? Our Anderson Cooper asks him that and much more ahead on STATE OF THE UNION.

Three of the best political team on television standing by to help us analyze the very busy week in the nation’s capital and a very busy week ahead, but remember our promise. Every week we say we will get out of Washington and talk to you about the issues and concerns in your lives. People like we met over coffee this week in Carmel, Indiana. It is out here in Middle America. You see the state of Indiana. Barack Obama surprised many people by narrowly carrying the state 50 percent to 49 percent. We visited first with some blue collar workers here in Indianapolis, that’s blue. Obama carried the urban area. But then we went up here to Hamilton County, 3 percent of the state’s population, a red county, McCain county. We wanted to get out there to talk to people and we were there having breakfast with them on the morning that the government said the unemployment rate was going back up. More than 600,000 jobs, just shy of 600,000 jobs lost last month. So with all the talk of spending more money in Washington, we sat down here at Mike’s to ask people do they trust the new president and all that government spending?

(BEGIN VIDEOTAPE)

ROBIN LUEHRMANN, CARMEL, INDIANA: I’m a realtor, and I see it a lot with trying to resell homes and stuff like that, and people who are needing to get out of their homes because they have lost their jobs, but they are waiting for somebody to buy it, but the person who is buying it probably has to sell their home first, you know, like a mouse in one of those wheel things just going round and round.

(UNKNOWN): I’m at that point where I have another 15 to 20 years to work and I don’t know if I’ll be able to retire when I planned on it. The economy has eroded. Our savings and our 401(k) and I’ve got one kid going off to college next year, and I worry about just how we’re going to -- we used to have a strong household and now it’s been weakened somewhat.

SCOTT DUNWOOD, CARMEL, INDIANA: This is going to turn around. History repeats itself, you know. It’s not the greatest time, but as Americans, we’ve always been resilient type to actually, you know, pick up the pieces after everything has collapsed.

KING: Nobody here voted for Barack Obama ? All voted for McCain, and so what do you see now when you watch this debate in Washington where the president says we have to act now and act fast and spend somewhere in the ballpark of $800 billion to $900 billion to stimulate the economy. When you watch the debate, do you think it will help you?

LUEHRMANN: No. It won’t help me at all.

KING: It won’t create jobs in this community that might get people buying and selling houses again, you don’t think so?

LUEHRMANN: No, I really don’t think so. I think a lot of it -- especially where he’s willing to send a lot of this money to, it’s a lot of crazy things he wants to send money to. He approved to have funding sent overseas for abortions.

DUNWOOD: Instead of spending money to patch up issues with the automobile companies and everyone else, let’s spend the money wisely and not spend as much but funnel it to smaller businesses to start up. That will stimulate the economy.

KING: You disagreed but he said one of the reasons to vote for him was he was going to change Washington. It’s only three weeks, but is he doing that? Does Washington look different from you as you look at it?

LUEHRMANN: No, you hear that every campaign. I see where Barack is jumping in with both feet, most definitely. But I also don’t think he’s thinking very wisely before he does it. He’s hiring on people who can’t even pay their own taxes.

KING: Is that a major flaw, or is that a rookie mistake? All presidents make a few mistakes early out of box?

(UNKNOWN): I’d say rookie mistake. I wanted McCain who has the experience to -- has been in the system.

KING: Has he made the case that $700 billion was not enough and to prop up the financial institutions will in the long run help you, and he needs billions of dollars more? KIM RAMIREZ, CARMEL, INDIANA: I don’t know how that money is really going to trickle down to us. I don’t think people have been responsible with how they have spent the money that has been pumped in.

DUNWOOD: You know, you can’t just keep asking someone else for help. You have to do your own issues. You’ve got to deal with everything that’s going on yourself. You can’t go downtown and ask for, you know, I lost my job, I need money. Well, go get a job, do something.

(END VIDEOTAPE)

KING: You may agree, may disagree with what you heard from those people at Mike’s Diner but remember those voices. Those conservative viewpoints are one of the reasons congressional Republicans feel so free to say no to the Obama stimulus plan and other big issues because when they go home, that’s what they hear.

Town halls in Florida and Indiana, his first full-blown primetime press conference this week, President Obama going out in the country and maybe on the attack. Straight ahead a preview of all that and more. And just so we’re not all dead serious, another look at the political process from last night’s “Saturday Night Live.”

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

KING: For auto worker Scott McMillin, the issue is survival.

SCOTT MCMILLIN, INDIANAPOLIS AUTO WORKER: My dad worked for 27 years and retired from the foundry I started in. He never had to worry about any of this. His job was secure from day one. I’ve been to three different plants now. And nowadays an auto worker is pretty much a modern day gypsy.

KING: He can’t afford to take a GM buyout on the table. He may end up with nothing if the company closes this plant.

MCMILLIN: If I did retire now from General Motors, I’d be looking for another job and they are just not out there. So I think it would -- the best move for me would be to stay with GM at this point in time. It’s all a crap shoot.

(END VIDEO CLIP)

KING: A crap shoot, Scott McMillin calls it a reminder that the economic debate here in Washington has huge consequences for anxious workers out here in the country.

Joining me now to talk about this discussion, this debate and the big issue, three of CNN’s top reporters, senior political correspondent Candy Crowley, senior congressional correspondent Dana Bash and White House correspondent Suzanne Malveaux. Suzanne, let me start with you. This is the president’s number one issue. He gets a compromise in the Senate on Friday. Just this morning, you see liberals in the House saying, no, we don’t like what the Senate did. We want to put more of this money back in. Will President Obama twist arms in his own party and say it’s not the perfect deal, but this is the best we can get?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well sure John, we’re going to see an active president, a lot more active than actually in the last couple of weeks. There’s some lessons that he learned. Obviously the first go-round with the House Democrats, not very much involved in the legislation itself. He let them pretty much outline the legislation. He had some broad outlines and he said OK, this is what I want you to do, but very different than President Bush who would essentially go on the Hill and say very specifically, this is what I want. This is what you’re going to vote for.

He got a little bit more involved when it came to the Senate side but obviously what you’re going to see is chief of staff Rahm Emanuel taking a much more aggressive approach here, a hands-on approach. You saw President Obama pick up the phone. He also talked to some of those key Republicans, Senator Olympia Snowe at the White House. Got a chance to talk to her this week and she seemed quite optimistic that this was going to go through. But it just is not enough and the administration realizes that. So we’re going to see him directly involved in the next couple of days.

KING: Directly involved. Candy, you’ve known the speaker of the House for quite a long time, Nancy Pelosi . She’s empowered right now. She’s got a bigger majority after the election so she’s as happy and as powerful, she might think, as President Obama. And she sees this bill in the Senate, she doesn’t like it, she thinks there should be billions more in spending and she sees people in this town, including the Democratic president who says bipartisanship, bipartisanship. She says this, “Washington seems consumed in the process argument of bipartisanship when the rest of the country says they need this bill.” She’s defying her own president.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, absolutely, but, look, in the end, these Democrats need this president to succeed so they will find something. And by the way, conference bills have a way of coming out more expansive than either one of the bills that go in there, so I would -- I would submit that probably the House will be happy, but you’re right.

I mean, this is -- from the very beginning, this has been about the balance of power, and Nancy Pelosi has a little more power. Senator Reid has a little more power, Barack Obama obviously has a lot of people behind him. He has the power, so they are -- you know, they are still sort of marking their territories here and I suspect she will get more money in this bill.

KING: And so I guess the question is where do we go? Will there be more money? You broke word Friday that we had this compromise deal in the Senate. It’s enough to get through the Senate unless there’s a big change before the votes Monday and Tuesday, but then what? DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: Well then, this is going to be a real negotiation between the House and the Senate. And when you look at the numbers, really what they are going to be fighting over, the overall number is pretty much the same, about $820 billion.

But in the Senate, it took about $40 billion out of spending for the states, much of that was intended for education, and they ended tax cuts.

In the House, they say, House speaker was quoted this morning saying wait a minute, that is the wrong approach. So you’re going to have Democrat v. Democrat in terms of trying to figure out the right balance of philosophy, what their philosophy is, what the right approach is in stimulus and let’s get real.

BASH: How they do this and keep those Republican votes in -- in the Senate? You know, we heard -- there was a lot of talk, this week, about Barack Obama speaking to House Democrats. And it was portrayed, a lot, as a rallying cry.

But you also heard him say, “Don’t let the perfect be the enemy of the good.”

There is no question that that was a message to his Democrats: this is going to be tough when we have to negotiate; you might have to pull back a little bit.

KING: So let’s listen -- as this goes forward, the stimulus bill goes forward, it appears he’ll go forward with a few Republicans, two or three in the Senate.

And a lot of Republicans aren’t happy about, including the man he just ran against, John McCain , who, after the election, said, “I want to work with you, Mr. President.”

Listen to Senator McCain this morning.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, R-ARIZ.: This agreement is not bipartisan. I’ve been in bipartisan agreements, many. This is three Republican senators. Every Republican congressman voted against it in the House, plus 11 Democrats. And all but three Republicans stayed together on this. That’s not bipartisanship. That’s just picking off a couple of senators.

(END VIDEO CLIP)

KING: Candy, here in Washington, that’s the processed answer; it’s not bipartisanship; two or three votes.

But as we go forward, in this economic debate, but then to things like climate change, things -- to health care, things that matter to the auto worker out there who might get laid off in the next few weeks, in the substance of what Barack Obama wants to do, what price will he pay if he starts off with most Republicans -- all in the House, on this bills, most in the Senate, on this bill, saying, you know what, no?

CROWLEY: Well, I think he’s come to, sort of, see the handwriting on the wall here, and he’s not going to get that many Republicans.

But they do believe, at the White House that they’ve kind of gathered some chips here, that he went up there, he said I’m interested in your ideas.

Really, the Republicans in the Senate and the House blame their House and Senate leaders more than they blame President Obama.

So there’s still some good will here. And when -- you know, climate change -- that’s something John McCain is interested in. He will pick up John McCain , most likely, during that.

So it’s -- these are chips that he’s gathered, knowing full well that this is a basic Republican premise, here, and that is too much government spending. And he knows he’s not going to move them off of that.

KING: And one of the Republicans in the Senate, as we track the policies of all of this, Arlen Specter is one of the quote/unquote “good guys,” from the White House perspective. He’s on the ballot. He’s running in a tough race. What his political calculation, looking forward?

BASH: Well, that’s the -- you know, that’s one of the main reasons why he is one of the three Republicans who is on this, because he is from a purple-leaning blue state of Pennsylvania, and he knows that it has been going Democrat for the past, you know, several election cycles.

But he admitted to us that he’s going to have a problem, because he’s going to get challenged from the right, for the reason that Candy was just explaining, because it is not Republican credo to spend this much money, this much government money. It just isn’t.

So he -- he’s said, so many times to us, in the hallway, this is so incredibly tough for us.

But just to give you a little sense of the horse trading here, the number two Democrat admitted to us that part of the reason why they got him is because they agreed to spend money on NIH, spend money on health care, and this is a man who was suffering from cancer. And because of that, and for other reasons, he has been a big champion of research for health care. That helped pull him along. It gives you a sense of how these things are done.

KING: OK, we’ve got to sneak in a quick break, here. Everybody stand by. Suzanne, Dana and Candy, stand by. A lot more talk coming up. We’ll talk about the administration’s plan to end our economic pain with the new secretary of transportation, Ray LaHood . And Democratic Representative Debbie Wasserman Schultz gets the last word in Sunday talk.

“State of the Union,” back in a moment.

(COMMERCIAL BREAK)

(MUSIC)

KING: You’re listening, there, to Michael Adams, “I Want My Bailout Money,” maybe this generation’s “Hey Buddy, Can You Spare a Dime?”

Once again, I’m joined by Candy Crowley, Dana Bash and Suzanne Malveaux. Serious subjects, the debate of the economy; some people are trying to carve a little niche by making some music about it.

Let’s stop one second and have a laugh.

(BEGIN VIDEO CLIP)

(UNKNOWN): And in the House, we made no concessions, because, thanks to our majority, we don’t have to. For eight years, they didn’t seem to care much about reaching across the aisle, but now it’s boo hoo; what about us? Give me a break.

(LAUGHTER)

(UNKNOWN): Maybe if you didn’t put in over $200 million for condoms, you wouldn’t have been in such a tough position.

(LAUGHTER)

(UNKNOWN): Now, I know it’s a blast to poke fun at San Fran Nancy for her ideas about sex ed, but maybe if we spent money on condoms and education, the next generation won’t have so many stupid people running around ruining our economy.

(LAUGHTER)

(END VIDEO CLIP)

KING: Agree or disagree, no matter your position on the stimulus debate here in Washington, a little light moment on “Saturday Night Live” last night.

Back with our panel. Suzanne, the president, as you know, is going to try to learn from his mistakes and ratchet it up this week.

And we’ve shown this once before. I want to show it again, the Elkhart Truth. He’s going out to Indiana. “We’re ready for our close-up, Mr. President.”

Unemployment in this county is 15 percent. They make RVs. It’s big business, but it’s hurting at the moment.

You say he’s learned from his mistakes. Prime time news conference, Monday night, what is the number one priority?

MALVEAUX: You know, obviously, he’s trying to get back control of the bully pulpit, here and get back on message.

I think one thing that he really needs to do that he has not done is he needs to tell the American people, what do we do next? You’ve been out to Indiana and other places. Obviously, when you talk to ordinary folks and they ,say I’m going to do my part when it comes to the economy, they talk about, oh, I’m not going to get my hair done; I’ll do it myself; I’m not going to get my nails done; we’re not going to go out to dinner.

Everybody is hunkering down. That is not what the Obama administration wants.

President Obama has teased Bush about it, saying, look, after 9/11, he asked for everybody to go shopping. I think what the Obama administration needs to do is give some guidance to the American people. That’s what they’re looking for.

And if you’re looking for a change if behavior, to actually have some sort of faith in the system, in investments, then that’s the kind of message that he needs to convey, tell the American people what should we do.

KING: But to that point, Candy, tell the American people, but, Suzanne, they did mock President Bush. That’s not all he said after 9/11, but it was easy for the Democrats to latch on to that.

A lot of Republicans are saying, where’s the sacrifice from this president? Families are making those decisions, every day, about spending in their budget. Where’s the sacrifice, here, from this president?

CROWLEY: Well, absolutely. And they’re saying, look how much he’s spending. So, far, it’s been give, give, give, and there’s, like, where’s the sacrifice?

I mean, but the fact of the matter is he’s a little stuck, here, because so much of what’s wrong with the economy is also about confidence.

So every day he’s out there going, it is going to be Armageddon; it’s going to be terrible; we need to have this -- because he needs to get this out of Congress.

CROWLEY: On the other hand, you’re trying to get people settled down. And I think Suzanne is exactly right. At some point, you have to find that balance in there. And you have to find some way to say it’s going to be okay. Which he was much more about during the campaign than he has been, you know, after he was elected when we heard just ratcheting up and ratcheting up.

I think they now know that at some level, you have to say to people we’re in control. It’s not enough to do symbols. Here is my big guy on the Treasury and here’s my big guy at the Commerce Department, whatever it is. He doesn’t have a big guy at the Commerce Department.

KING: We’ll get there, eventually.

CROWLEY: But you know what I mean. It’s not enough to give the symbols. You have to say, listen, we’re going to get this under control. So, you know, getting people who actually have money to maybe spend a little of it, frankly.

KING: And Dana, on the Hill, what do they make? We’re in this feeling out process not only just internally in the Democratic Party, but everybody. The country is -- what do they make of this president? A few scrapes, the Daschle nomination and a few others, pretty partisan moments at the House Democrats. As they size him up on Capitol Hill, where are we three weeks in?

BASH: I think you know, the point that you made that you got from the people that you were talking to in Indiana is a very astute one in that, you know, you have these particularly in the House, these Republicans who understand that President Obama is incredibly popular, understand that the country wants everybody to succeed and they want people to work across the aisle, big picture.

But the fact of the matter is we are in a very divided country still, and a divided congressional district. So that these Republicans, for the most part, they’re hearing from their constituents. Stop him, don’t let him spend this money because you people in Washington, you don’t know what you’re doing.

So I think it’s going to be -- and we definitely have seen evidence of this, but so hard for the president to overcome -- I mean democracy at work, basically. And these Republicans, hearing from their constituents, don’t do it, don’t spend this kind of money.

KING: And we spent a lot of time on the process because it’s important. You can’t get that bill to the president’s desk without the votes in the Senate and all the like.

But let’s take a look at what he promised in the campaign and where we are now, again, three weeks in. But he has signed the health insurance program for children. That is something he promised to do. He has done that. He has signed the Lilly Ledbetter equal pay act, something he promised during the campaign he would support. He has done that.

So he has some victories that he can go to the American people and say, promise made, promise kept. But, Candy, the fundamental promise is jobs. The economy, the anxiety, how does he address those people out there that it is coming?

CROWLEY: Well you know, absolutely. First of all, this is all low hanging fruit. Those bills were ready for him. They just needed the right president, the Democrats to get him to sign it. The executive orders, that’s all the easy stuff. And you’re right.

The tough part is reaching out. But let me tell you something, as you know full well. I still get David Plough e-mails every day. Have a party. Let’s talk about the stimulus. I mean it’s -- literally they have got this subterranean ability to reach out to people and gather what really is the source of the president’s strength. And that’s the people that you’re out there talking to. It’s not, you know, what the Democrats on the Hill owe him. It’s what the people out there believe he will do. So he needs to play off that.

BASH: And the other side of that, you also have John McCain and Sarah Palin doing the exact same thing. I mean, he had a petition that he had 200,000 people sign in a day, John McCain , saying stop Barack Obama . So we have the same campaign tactics going on on both sides.

MALVEAUX: I get those e-mails as well, Candy, and one thing that I guess is a little bit challenging for the president is he can’t use this language that’s so dire and that’s, you know, the consequence is catastrophic in a way that it starts to sound like it’s chicken little and, you know, the house is on fire, the sky is falling.

It’s something that President Bush did when it came to national security threats. You don’t want to desensitize the American people. You want to give him a sense that there is going to be some confidence. There is going to be kind of success at the end of the plan.

KING: Suzanne Malveaux, Dana Bash, Candy Crowley. The president called this cable chatter when he was down speaking to House Democrats. We like a little cable chatter every now and then. It helps move the process along. Thank you for joining us.

And coming up on STATE OF THE UNION, one of America’s best known CEOs, Jack Welch joins us to give President Obama an early performance review. And right after the break, Anderson Cooper sat down with the president for a wide-ranging interview, including some lighter moments. Among Anderson’s questions, when will the puppies arrive? Have you smoked in the White House? What do you like about your new car? The president’s answers, next on STATE OF THE UNION.

(COMMERCIAL BREAK)

KING: If you are trying to quit smoking, like President Obama is, this was the kind of week that would have you back to a pack a day in no time. So he is lighting up on the South Lawn? Smoking only one of the very personal subjects raised by my colleague Anderson Cooper.

(BEGIN VIDEOTAPE)

ANDERSON COOPER, CNN ANCHOR: What’s the latest on the dog search?

OBAMA: We are going to get it in the spring. I think the theory was that the girls might be less inclined to do the walking when it was cold outside.

COOPER: Portuguese Water Dog, or you don’t know yet?

OBAMA: You know, we’re still experimenting.

COOPER: Coolest thing about your new car?

OBAMA: You know, I thought it was the phones until I realized I didn’t know which button to press. That was a little embarrassing.

COOPER: Have you had a cigarette since you’ve been to the White House?

OBAMA: No, I haven’t had one on these grounds and, I -- you know, I -- sometimes it’s hard, but, you know, I’m sticking to it.

COOPER: You said on these grounds. I’ll let you pass on that. And final question, you read a lot about Abraham Lincoln. What is the greatest thing you learned from your studies of Lincoln that you’re bringing to the office right now?

OBAMA: You know when I think about Abraham Lincoln, what I’m struck by is the fact that he constantly learned on the job. He got better. You know, wasn’t defensive. He wasn’t arrogant about his tasks. He was very systematic in saying I’m going to master the job and I understand it’s going to take some time.

But in his case, obviously, the Civil War was the central issue. And he spent a lot of time learning about military matters even though that wasn’t his area of experience. Right now I’m learning an awful lot about the economy. I’m not a trained economist. But I’m spending a lot of time thinking about that so that I can make the very best decisions possible for the American people.

COOPER: Mr. President, thank you very much.

OBAMA: Thank you.

(END VIDEOTAPE)

KING: I’m John King and this is our STATE OF THE UNION report for Sunday, February 8th.

Nearly 600,000 people lost jobs in January. Is President Obama’s plan enough to turn things around?

KING: In the first Sunday interview with a member of the president’s Cabinet, we’ll hear from the transportation secretary, Ray LaHood .

After a week of partisan fighting, the Senate prepares to vote on an economic stimulus bill. We’ll discuss its chances of passage with Democratic Senator Charles Schumer and Republican Senator Richard Shelby.

And is the nation’s chief executive off to a good start? We’ll get perspective on that and the economic mess from a mover and shaker in the corporate world, former General Electric CEO Jack Welch. All this and much, much more ahead on “State of the Union.”

Striking a deal, late nights, and a rare Saturday session put the Senate on track to vote tomorrow and Tuesday on what supporters call a lifeline for America’s ailing economy. The Senate stimulus package carries an $827 billion pricetag, and the compromise follows Friday’s news that the nation experienced its worst job losses in 34 years. So will this plan pass and will it work?

Joining us in the first Sunday interview for any of the president’s Cabinet secretaries is Transportation Secretary Ray LaHood .

(BEGIN VIDEOTAPE)

KING: Mr. Secretary, thank you for joining us on “State of the Union.” I want to get straight to...

LAHOOD: Good morning.

KING: ... the kitchen table. Good morning to you, sir.

I want to get straight to the kitchen table accountability test. The American people are under a lot of pressure right now economically. They hear all these numbers being thrown around in Washington. If you get this money, set the standard for us, the accountability threshold right now. How many jobs and how fast?

LAHOOD: A lot of jobs, John. And I’ve invited every secretary of transportation to Washington this Wednesday, that we’re going to have a meeting at the Old EOB across from the White House. We’re going to lay out for them what we believe are the opportunities for every state in the country to put people back to work on projects that are ready to go, by the book, no shortcuts. These projects really are projects that have been sitting on shelves all over the country, where states are waiting for the money. And this is an opportunity for every state in the country to bring to Washington a couple of examples of projects that they will be able to implement quickly, within the timeframes that are in the legislation, so that people will be building roads and bridges and other infrastructure projects this spring, summer and fall. And I believe an enormous number of people, thousands of people, will be going to work in good paying jobs.

KING: Well, Mr. Secretary, where do you draw the line in terms of what is stimulus spending and what is wasteful spending, maybe even a boondoggle? And I ask the question because the debate in Washington, you know, has been veered off track a little bit by legitimate concerns, many would say, about spending money on anti- smoking programs in this bill. Maybe a worthy goal, but why is it in this emergency recovery bill?

How do you draw the line between stimulus and maybe boondoggle? One mayor I talked to this past week, for example, says he wants to use some of this money to build a new wave pool in his community, with a water slide. He says it creates job. Is that the kind of project that passes your sniff test?

LAHOOD: Well, look, our criteria is going to be the criteria that we’ve used at the department for a long time, John. And, also, the money will be going to the governors and their state secretaries of transportation and highway administrators. And the one thing that the president has said all through this and set a very high bar -- no earmarks. The money has to go to projects that are ready to go in the states, and I just know that there are lots of these projects around, and we’re going to learn a lot more about it next Wednesday.

And the point is, there aren’t going to be any earmarks and there aren’t going to be any boondoggles. This money will be spent correctly, by the book, with no shortcuts.

KING: Mayors think they should spend the money, not governors. We have turf battles in Washington between Democrats and Republicans. When you get out to the states, you know this well, it’s the mayors and the governors sometimes at odds. Why do the governors have a better plan than the mayors? The mayors would tell you that they can get the shovels in the ground faster.

LAHOOD: Well, look, the bureaucracy is in place at the state level, John. The states have these departments of transportation, and they know how to meet the criteria that we have to set at the department so that the money is spent correctly, that people are put to work, that the projects are done according to the way that they are supposed to be done.

Lots of cities -- some of the big cities, perhaps like Chicago or Boston or otherwise, you know, may have these kind of staff people in place. But for the most part, every state, all 50 states do have the mechanism and the bureaucracy to make sure that this is done by the book. And that is going to be something that -- go ahead.

KING: The word bureaucracy scares me a little bit, but we hope it works out and it’s a good bureaucracy.

I want to get to a point -- I was in Carmel, Indiana this past week, talking to the mayor, and he says one of the ways to get the shovels in the ground faster is for you to use your executive authority here in Washington to change the rules, at least temporarily. As you know, there are environmental impact studies. There can be, you know, public comment and review periods at times. Listen to the mayor of Carmel, Indiana, Jim Brainard.

(BEGIN VIDEO CLIP)

MAYOR JIM BRAINARD (R), CARMEL, IN: Waive the rules. The rules for transportation projects that we normally have to deal with on the highway. Environmental impact statements, public comment periods, they slow it down. The absolute key is to get shovels in the ground as quickly as possible.

(END VIDEO CLIP)

KING: Mr. Secretary, will you and the president use your executive authority? As you know, that might anger environmental groups, that might anger labor unions, but is waiver to get these projects moving faster, is that the way to do this?

LAHOOD: Not at all. It really isn’t. And it would be different if every one of these states didn’t have projects.

You all know -- and I think that the viewers know -- that these states have had a pent-up demand for these projects to get funded and haven’t had the local match to fund them, haven’t had the ability to do it, because they haven’t had the money to do it.

It’s not as if we’re going to be lacking for projects, John. There are lots of road, bridges, infrastructure that can be implemented immediately, within the timeframes that -- in the legislation, and put a lot of people to work in good paying jobs.

We don’t need to waive anything. This is going to be done by the book, according to the rules, no shortcuts, no earmarks.

KING: Mr. Secretary, I’m going to stand up here in Washington and walk over to my magic wall. Because I was in your community last week. You’re speaking to us from Peoria, an area you represented in the Congress for some time. When I was in your city right here in middle America, right along the river -- it is a beautiful city -- but it is struggling at the moment, like many factory towns. This is the floor of Caterpillar. You see these amazing tractors and earth-movers being made. Many of these workers, union workers, see the buy American provisions in the House version and the Senate version of this legislation, they think it sounds good, it sounds patriotic, but it might actually cost more of them their jobs. More than 20,000 have already been let go. Will your president fight to get that out of there? They say the buy American provision will cause a trade war, and they won’t be able to export these tractors overseas.

LAHOOD: I think there is going to be a lot of discussion about the buy American provision in the conference. And I think you’re going to see the president weigh in on this. And I haven’t talked to the president directly about it, but...

KING: Is that an in or an out?

LAHOOD: ... his chief of staff -- I think there is going to be a lot of discussion about it, John.

KING: OK. Well, at least -- we’ll leave that to that (ph).

I want to talk about your unique role in the administration. Just a few months ago, you were a Republican in the United States Congress. You were questioning many of the priorities of the Democrats who ran the United States Congress. You’re now serving in the Democratic president’s Cabinet. Every one of your former colleagues in the House, Republican House members, voted no. If Ray LaHood was still a Republican member of Congress from Peoria, Illinois, would you have joined them, sir, in voting no on the first stimulus package?

LAHOOD: Well, look, I didn’t get elected to anything last November, John. I’m a part of the Obama team. I’m proud to be a part of President Obama’s team. I consider it a great privilege that the president asked me to join his team. I’m going to do everything I can to help the president find the votes for the conference report once the Senate passes this. I’m going to work very hard next week. I’m going to work the phones. I am going to talk to my former colleagues, and do all that I can to persuade them that this bill really will put people to work.

KING: What about...

LAHOOD: America is hurting...

KING: What about in the first round, sir? Excuse for interrupting. Did the president call you and say, hey, Ray, we got a problem in the House? All your friends in the Republican conference are saying no? Can you pick up the phone? Can you work these guys? Or did you go to him and say, Mr. President, you’ve got a problem here?

LAHOOD: Well, it was a combination of both. The president asked me to go up with him to the Republican conference, and I was privileged to be able to do that. And I did make some phone calls. I talked to some people.

Obviously, I wasn’t very persuasive, since I wasn’t able to persuade anybody to vote for it. But, look, I’ve been talking to some senators when I’ve had the opportunity and I’m going to continue to do that for the next 10 days until this bill is passed.

And I think the conference report that will come out of the conference report that will be considered will be something that Republicans, some Republicans will look very carefully at.

KING: Mr. Secretary, we thank you for joining us on “State of the Union.” We will keep in touch in the weeks and months ahead, and we will keep you accountable, make sure that money gets to the projects that create jobs in the short term. Thank you very much, sir.

LAHOOD: Appreciate it, John.

(END VIDEOTAPE)

KING: A compromise, of course, doesn’t mean anything if the Senate can’t reach agreement with the House and get a bill to the president’s desk.

From putting Americans back to work to putting more money in your pockets. Does this deal have what it takes? We’ll ask Republican Senator Richard Shelby and Democrat Chuck Schumer, next.

(COMMERCIAL BREAK)

KING: Welcome back to STATE OF THE UNION. A big week ahead for the president because there are two competing economic rescue plans before the Congress here in Washington. And President Obama wants a bill on his desk by the end of the week. First out of the House, $819 billion, an emphasis there more on government spending than on tax cuts.

Then a Senate compromised brokered Friday, $827 billion is the math on that package. A bit more in tax cuts to satisfy the few Republicans that Democrats absolutely need to get the votes in the Senate.

Where do we go from here? When will the president get a bill? Republican Senator Richard Shelby of Alabama and New York Democrat Charles Schumer join us now to discuss that.

(BEGIN VIDEOTAPE)

KING: Senator Schumer, let me start with you. The Democratic bill -- in your view, is it better than the House bill on the key test, creating jobs as soon as possible? or is it a lesser bill but one you had to agree to, simply to get the votes in the Senate?

SCHUMER: Well John, it’s very close to the House bill. Overall, they overlap 90 percent. The overall number, $819 billion in the House; about $820 billion in the Senate, so that’s a good mark. I believe that’s where we’re going to end up, at about $820 billion. And there are some differences. The House bill has a little more on education, a little less on tax cuts. I personally would favor the House bill.

But the most important thing is that we are not going to let small differences stand in the way of passing this very strong bill, which the American economy desperately needs. To quibble over small, little things and let the bill go down would be a huge mistake for the American people, given the state of our economy and the need for a real shot in the arm.

KING: Well, Senator Shelby, I know you quibble with big things in this bill.

And I want to show you, just so that we get to you in Alabama. This is the Tuscaloosa News: “Stimulus Bill Debated in Rare Session.” This is, of course, front page news, not only in your state, Senator Shelby, but around the country.

Is the compromise brokered in the Senate -- I know you don’t like big things about this bill -- but is it better or did the input of those few Republicans who changed this bill make it worse?

SHELBY: Oh, I think it’s -- it’s similar to what Chuck Schumer said. It’s close to the House bill. They tweaked it a little bit, but the substance is the same. It hadn’t been changed much. It’s not anything I could support.

And I would hope -- and I’m afraid we won’t -- if the Republicans would stay together, we could shelf this bill and start again. That’s what we really need to do.

KING: That’s what we really need to do?

Now, we talk a lot, and we’re going to talk about a cloture vote here in Washington. It’s a word many Americans don’t understand. It’s a process in the Senate. We talk about billions and billions of dollars.

I want you both to listen. I was in Indiana, this week, talking to workers about this. I want you to listen, here, to the voice of a union auto worker who worries this bill may not help him out. Let’s listen.

(BEGIN VIDEO CLIP)

KING (voice over): A General Motors plant in Indianapolis.

KENDALL: I was tickled to death when I hired in here. I mean, I was working for the largest corporation in America. I mean, I was just on cloud nine.

KING: Thirty-four hundred workers when James Kendall arrived 18 years ago.

(on camera): And how many now?

KENDALL: Well, after a layoff they’re fixing to have, there will be roughly 630 folks working. It’s just snowballing into a massive, massive unemployment. And I don’t think we’ve seen the end of it. I mean, all you’ve got to do is watch the news, and it’s depressing.

(END VIDEO CLIP)

KING: Senator Schumer, how does this legislation deal with that gentleman’s concerns, 600,000 jobs lost in the economy last month; a million manufacturing jobs lost in the economy in the last year?

Mr. Kendall, there, thinks he could be next. In the next month or two, GM might say, you’re out of work, after 18 years.

Is this bill short-term stimulus spending or does it do anything for the fundamental structural problems in the U.S. economy?

SCHUMER: Well, it does really help in this situation. We have the same situation in Buffalo and Syracuse auto plants, really hurting.

People have worked hard their whole lives, worried about being laid off.

But in this bill, for instance, is a tax incentive to encourage people to buy cars. Just like you get the interest off when you have a mortgage for your home, off on your taxes, and it’s an incentive to home ownership that’s worked, we’re trying the same thing. Barbara Mikulski spearheaded it, to do that for automobiles.

So there are things here that would help. In addition, if we pump money into the economy, if we employ people in construction jobs, if we make sure that teachers, for instance, are not laid off, then there will be more money in the economy, more people will buy cars, and the chances of this fine gentleman being laid off would decrease.

I’ll tell you one thing for sure. To do nothing, to do nothing would certainly seal his fate. And that’s why the American people, 65 to 70 percent of them, support President Obama’s plan.

KING: So Senator Shelby, I want to talk a little bit more about the specifics, because I want you to be as specific as you can in telling us what you think is wrong with this plan. In the Senate bill, here are some of the provisions, $47 billion to provide extended unemployment benefits, $16.5 billion to increase food stamp benefits, $3 billion in temporary welfare payments, $17 billion so there can be a one-time $300 payment to people receiving Social Security or supplemental Social Security income and veterans on disability pensions. And $4.7 billion for homeland security programs.

Are those specifics OK with you, Senator Shelby, or are those among the provisions you think are unnecessary or unwarranted in this kind of bill?

SHELBY: Well, they’ve got merit to them, but I don’t believe in this bill.

John, the bottom line is this bill, nearly $1 trillion before it’s over with, is not going to turn around our economy that you mentioned earlier. The gentleman -- the auto worker understands that. He’s got a lot of sense. He knows that stimulus bills generally are not going to save his job.

Are there some merits to some of this? Some of the infrastructure is good. But are they -- is it emergency? Is it going to just flip our economy? No.

What we need to do, John, we’ve got to attack our banking system. We’ve got to bring trust back to our banking system. I hope the administration -- and they are working on this, and Senator Schumer and I will be in the middle of this on the Banking Committee. But until we straighten out our banking system, until there is trust in our banking system, until there’s investment there, this economy is going to continue to tank.

(END VIDEOTAPE)

KING: Between that partisan brawl over the stimulus plan and tax troubles with his nominees, it’s a fair question to ask, how well is the country’s new chief executive running the business of America? We put that question to someone well respected in the corporate world, former CEO of General Electric, Jack Welch.

Plus, workers facing a frightening choice. Gamble on an uncertain future at their auto plant or take their chances in a very tough job market? Still ahead, stay with us.

(COMMERCIAL BREAK)

KING: I’m John King and this is the “State of the Union.” Here are the top stories breaking this Sunday morning.

Iran’s former reformist president says he’ll challenge hard-liner Mahmoud Ahmadinejad in the June presidential election. Iranian media reported today that Mohammad Khatami has thrown his hat into the ring.

Khatami was Iran’s president from 1997 through 2005. He’s credited with relaxing some of the country’s cultural and social restrictions.

President Obama’s new bank bailout bill will likely be unveiled a day later than planned. That’s the one on how to restructure the second half of the $700 billion in emergency relief to banks.

Today a top White House economic aide suggested the changes in that plan will be released on Tuesday, not Monday, that to allow Treasury officials to focus on the economic stimulus package.

And a Republican mayor from a conservative town, throwing his support behind President Obama and the stimulus bill. Find out why he thinks this plan is so critical for the country.

That and much, much more, ahead on “State of the Union.”

Less than three weeks into office and the president already admits he’s made some mistakes. At the same time, he looks to be headed for a win with the economic recovery plan.

If being president is like being the country’s CEO, then our next guest knows a bit about the challenges Mr. Obama is facing. The former chairman and CEO of General Electric, Jack Welch -- he’s also the author of a new book, and you can see it right there, “Winning.”

Jack Welch joins us from New York.

Jack, thanks for joining us on “State of the Union” this morning.

WELCH: Thank you, John.

KING: I want to begin with a simple question. You’re a CEO, widely respected in the business and corporate world. We’re watching our new CEO, President Obama, of the United States.

And earlier this week, he had to go to the Oval Office, give five network television interviews to say, “I screwed up.”

I want your early assessment. But first, let’s listen to the president.

(BEGIN VIDEO CLIP)

OBAMA: I think this was a mistake. I think I screwed up. And, you know, I take responsibility for it. And we’re going to make sure we fix it so it doesn’t happen again.

(END VIDEO CLIP)

KING: Jack Welch, big personnel choices are some of big challenges every CEO faced.

A, why the mistake? What are we learning about him as a chief executive?

And, you know, it’s tough when you have to go in and say, “I screwed up.” How is he doing?

WELCH: Well, I think going and admitting that he had some problems -- candor always wins, John. And him coming out is very gratifying to a lot of us that get a lot of air from Washington.

So I think it was a hell of a good move.

KING: And when you watch him make decisions and then communicate them with the American people, as someone who has had to make the tough choices. Sometimes it’s hiring new workers; sometimes it’s laying off workers.

When you watch this president communicate as a leader, give us an early assessment.

WELCH: Well, it’s a little too early. I can judge him from the campaign, where he was fantastic.

Monday night’s a very big deal, John. He’s got to go in there -- he’s been using fear for the last few days. The country doesn’t need fear. But he needed fear to rally the Congress behind this stimulus bill.

He’s got to go in and balance confidence with fear. There’s no question about that. He’s got to give people a feeling that, I’ve got this thing under control; I know where it’s going; it’s going to be difficult, but I’ve got a great team here, and we can pull it off.

KING: One of the issues he has talked quite emphatically about is that any financial institution that takes taxpayer money as part of the bailout should cap the pay to its CEO at $500,000, the administration says; you can take some stock, maybe, down the road, but the president making the case that this is taxpayer money; there should be restrictions.

Again, let’s listen to President Obama. (BEGIN VIDEO CLIP)

OBAMA: This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we certainly believe that success should be rewarded. But what gets people upset, and rightfully so, are executives being rewarded for failure.

(END VIDEO CLIP)

KING: Jack Welch, i think you got a few bonuses when you were a CEO. Obviously, you weren’t taking taxpayer money at the time; your company was not.

Is this a good idea? It’s obviously populist. It’s easy politics. But is this a good idea for the government to be setting pay limits on CEOS, even when there’s taxpayer money involved?

WELCH: Look, obviously, you’d like it not to be this way, John. But I think the president showed a lot of restraint, a lot of balance.

He could have -- the country’s mad. People are angry. And he made this thing perspective. He allowed them to put incentives in that they can’t cash out until they pass us all back, as taxpayers.

I think, on balance, with the heat around the country, the anger everywhere -- you meet a cab driver; you meet somebody in a restaurant -- people are angry. They’ve all lost money, real money. And I think he walked the fine line. He threaded the needle, I’d say, in a very reasonable way.

KING: A lot of anxious workers might be out there watching this today. Maybe last week they were laid off; maybe, next month, they think they’ll be laid off, and they want your perspective.

The unemployment rate -- I’m going to get up and walk over to the wall, as we talk. The national unemployment rate is 7.6 percent; $598,000, Jack, flushed out of the economy just last month; 207,000 manufacturing jobs lost in December, a million manufacturing jobs lost in the last year.

On our map, here, the hot states, yellow states are the 10 states with the highest unemployment rate.

Jack Welch, I was out in Indiana this past week, one of those states. The unemployment rate is now in excess of 8 percent. We talked to some blue-collar auto workers in Indianapolis. I want you to hear their anxiety about the economy.

(BEGIN VIDEOTAPE)

KING (voice over): General Motors plant in Indianapolis.

JAMES KENDALL, GENERAL MOTORS EMPLOYEE: I was tickled to death when I hired in here. I mean, I was working for the largest corporation in America. I mean, I was just on cloud nine.

KING: Thirty-four hundred workers when James Kendall arrived 18 years ago.

(on camera): And how many now?

KENDALL: Well, after a layoff they’re fixing to have, there will be roughly 630 folks working.

KING: Inside, on Friday, GM officials tried to sell those union workers on a buyout plan. The company says shrinking its workforce is critical to becoming more competitive.

Kendall will say no, as will Scott McMillin. Indianapolis is his third GM plant in the past 15 years. He has a daughter in college.

SCOTT MCMILLIN, GENERAL MOTORS EMPLOYEE: If I did retire now from General Motors, I would be looking for another job, and they’re just not out there.

KING: But saying no is a gamble. Gm has talked of closing this plant altogether.

MCMILLIN: You just don’t know. It’s -- it’s all a crap shoot. My dad worked for 27 years and retired from the foundry that I started in. His job was secure from day one. Nowadays, an auto worker is pretty much a modern day gypsy moving from plant to plant.

KING: Workers who say the buyout isn’t enough, no layoffs later, could mean nothing.

(on camera): What if it doesn’t work out? What happens to you?

KENDALL: Well, well just -- I don’t know. We’ll see. If it don’t work out here at this facility and there’s nowhere else to go, I’ll do what I have to do to get by.

It’s just snowballing into a massive, massive unemployment. And I don’t think we’ve seen the end of it. I mean, all you’ve got to do is watch the news, and it’s depressing, really.

(END VIDEOTAPE)

KING: It is depressing, Jack Welch, to sit and talk with these workers. They’re hard workers. They’ve been at the companies for years, and in some cases their dad and their grandfather worked there as well.

Help us understand what is happening to our economy and to people like that. It used to be, you got a job at one of those factories, you were good for life.

What is happening?

And in the context of that, nearly $1 trillion in stimulus spending -- the House plan is a little different from the Senate plan. Is that package going to help those auto workers or is it a Band-Aid?

WELCH: John, let me put some perspective, if I may. I managed through three recessions, ‘74, ‘75, ‘81-’83 and ‘90-’92. If you will, we knew in February, this week in February what our sales would be in April plus or minus a couple percent.

This one is different. Orders have crashed. There is no visibility. CEOs are as nervous as that good man in that plant is. They don’t know what they’re doing. So a lot of these actions could be overdone as they have no visibility as to what’s happening and they’re in a preservation mode for their companies.

Certainly a lot of small companies are really in that mode where they’re not getting the credit and they need to take action and get costs down for survival. That’s why I am so frustrated that we’re spending all this time, every talk show today, all about stimulus.

The real issue is going to come when Monday Tim Geithner unveils the banking plan. If an economy doesn’t have credit, we don’t have a game. And we’ve got to get credit flowing. I know people are angry with the top and other things. But we have to get the -- what we’re doing with the stimulus plan is we’re buying a new wardrobe for a patient whose lying in cardiac arrest.

We have to take the operation which is the banks and get the blood flowing and the blood in this case is credit, John. Credit is the most important thing we deal with for that man’s job and for CEOs getting some visibility as to where they’re going.

KING: So let’s talk about that. They’re going to have a revised talk. That is the bailout plan for anybody outside of Washington or New York who doesn’t get the language. They have $350 billion more to spend. And they made clear they have to come back for billions more down the road.

What can they do? Because when you go to those small towns, people think that money is not coming my way. And we’re told that in this new plan, they say more transparency. They say more of a focus on housing to help the financial institutions. They also say no requirements that banks lend the money. Be treasury secretary for a minute. What would Jack Welch do?

WELCH: Jack Welch is not good enough and we have Geithner and we have Summers there to give us the perfect answer. I think that we’ve got to take these toxic assets and foreclosures and deal with both of them. In foreclosures, there are five suggestions out there. And I’m not sure which one is best. But we have to take action on that. We’ve got to stop the house price slide.

On the question of the toxic assets, I favor a guarantee or insurance plan keeping the assets on the banks books so the banks work them out. And I don’t agree with forcing lending. We’ve done that before. And we end up with some of the mess we have.

I think you can’t give people money and then say make a bad loan. But on the other hand, if we take these bad assets and put a backstop, we don’t put cash in, we put a government guarantee behind it, we don’t spend zillions of dollars until they go bad and we give incentives to the bankers to work it out, to get -- so they don’t take those loans from us, those guarantees.

So, you know, I’m not the expert. We have -- the nice thing is we have two very good people here. I think the president Monday night can talk about these two very good people who both will put their best brains together and come up with a plan. But that plan, John, is 1,000 times more important than all this stimulus discussion whether it’s 819, 820, 821. That’s all politics. That’s not jobs. But that’s where I come out.

KING: I think the president would like to think it’s not all politics, there are some jobs in there. But Jack Welch, what do you say -- we have about 20 seconds left -- what do you say to Republicans who say we can’t afford all the deficit spending. If a bank is in a bad strait, let it fail?

WELCH: I think get the most pragmatic deal we can get. The president won the election. His party won the election. Hopefully he will play a centrist role in bringing all of us together to solve this incredible problem that in my 48 years in business I’ve never seen one as big. But he’s got the tools and the support of the country. Grab it and fix this thing.

KING: Jack Welch, we thank you for joining us on STATE OF THE UNION today as we try to hold them accountable and track all of this money in the weeks and months ahead. We hope you’ll come back quite frequently and give us a hand.

WELCH: Thanks, John.

KING: Thank you Jack, take care. We saw the president change his tone this past week. Don was the attempt to court the opposition. Democratic strategist James Carville and Republican political veteran Ed Rollins on the art of negotiations and more, up next.

(COMMERCIAL BREAK)

KING: At first, we saw President Obama reaching out to the Republican opposition. Then this past week, he switched from conciliatory to critic. Our next guests know what it’s like to navigate the tricky waters of the presidency, Democratic strategist James Carville and Republican strategist Ed Rollins. (BEGIN VIDEOTAPE)

KING: Gentlemen, I want to start with this. At the end of the week, the president seemed to get his compromise. But at the beginning of the week, he was still dealing with the fallout over the nomination, now withdrawn of Tom Daschle to be his health and human services secretary. And listen to what he had to tell CNN’s Anderson Cooper. This is a president who had to spend a lot of capital on a personnel issue.

(BEGIN VIDEO CLIP)

OBAMA: I think I screwed up. And, you know, I take responsibility for it. And we’re going to make sure we fix it so it doesn’t happen again.

(END VIDEO CLIP)

KING: James, you remember the rocky early days of the Clinton presidency. That’s a pretty big deal, isn’t it? A president having to call in the five big TV anchors and spend capital on a personnel choice when he’s got so many big policy fights?

CARVILLE: Well, I think he did it pretty good. I think this week he handled himself. I think he came in on Monday, he was a lamb. And by Friday, he was like a lion. He had gotten his feet back. But you’re right, it did cause him some problems. He got wrapped up in this.

But I think that Senator Daschle made the right decision by taking his name out. He did something that very few presidents do. He got out front of this thing and said he messed up. But one of the things we have to realize, he’s not been in office for three weeks. They’re going to announce a complete revampment of the way we’re doing the banking here on Monday. The stimulus package is all but done. They got the SCHIP thing done. They got all that stuff from Gitmo done.

CARVILLE: They have dispatched envoys to the Middle East, to Pakistan. I mean, we’re not three weeks away and if you look back, there is actually a lot of stuff that this administration has gotten done in a very short period of time. And I think he ended the week on a pretty good note here.

KING: Well Ed, jump in on that point. We learn a lot from new presidents in their early days and we still don’t know a lot about this president, especially when it comes to executive leadership style because he came out of the United States Senate. What have we learned?

ROLLINS: Well, what we’ve learned -- what he’s learned is you get a big house when you get the job, a big office, a big plane. You have to go up to Camp David this weekend. And you got to sit in the presidential box. With those perks comes the toughest job of history. He’s there at the toughest time, probably, than any modern president has had.

I think to a certain extent, he’s got to fight with his own party. He’s got to fight with Republicans. The era of bipartisanship has been over for about 30 years at least. And what he’s going to find is there are different viewpoints. Republicans believe in doing something one way. Democrats believe in other ways.

And he may get a couple Republicans in the Senate once in a great while, maybe those three will be the ones that will vote with him the whole way. But at the end of the day, he repeated several times this week, I won, we get to do what we want. He gets to do what he wants.

KING: Well, let’s listen. I want to follow up on this point. Has he changed or can he change the tone in Washington? Let’s listen to the number two Republican in the Senate, Jon Kyl of Arizona, not too happy with the president’s rebuke of Republicans. Let’s listen.

(BEGIN VIDEO CLIP)

SEN. JON KYL, R-ARIZ.: Discussing with the American people his approach to the stimulus of our economy, he first really used some dangerous words, I would say. So it seems to me that president is rather casually throwing out some careless language.

(END VIDEO CLIP)

KING: Rather casually throwing out some careless language in the view of that leading Republican, James Carville, essentially saying, you know, we tried your way. It didn’t work. We’re not going back to those policies. I understand the president’s position. He did win the election. But that was not a bipartisan speech he gave to House Democrats earlier this week.

CARVILLE: I don’t know what problem with it that Senator Kyl had. I was in Arizona this week and things are pretty bad in their state.

But the truth of the matter, he’s done more to reach out to these Republicans and it was very interesting watching Senator Shelby just a little bit earlier on your show, John. He is against this banking thing and he hasn’t even seen it.

At some point, usually they would give you the courtesy of at least looking at it and then being against it. These guys were just against it before they see it. But I think that really the president has gone a long way in trying to invite Republicans, gone over to see them, to do things like that. I don’t think -- and I don’t know what the president said that Senator Kyl would find offensive at all. What he said was absolute truth.

KING: Ed, I want you in on this point. But I want to add a Democratic voice to this debate about bipartisanship. The Senate comes to this compromise. They have to water the bill down a little bit, take some spending out to get a few Republicans votes. And the House Speaker Nancy Pelosi doesn’t like it. She says this. “Washington seems consumed in the process argument of bipartisanship when the rest of the country says we need this bill.”

The president of the United States, Ed, who is a member of Speaker Pelosi’s own party, says this is critical, having true bipartisanship. She says it’s a process argument. Does the Democratic president have a problem with the Democratic speaker?

ROLLINS: Well, I think he does and I think to a certain extent, Democrats have waited a long time to have a president who would basically carry their agenda. But even more important, they’re ready to move their own agenda forward. And this is Chairman, Nancy Pelosi , a lot of these people wanted these types of programs. They can call it stimulus or whatever at this point in time.

But it’s a lot of programs that they’ve tried to put in in the past and they haven’t been able to. Bipartisanship is a nice term. But the bottom line is there are very different viewpoints between these two parties. And Republicans feel that they weren’t as responsible as they might have been on the fiscal issues during the Bush era. And now they’re going to basically sit and be the watchdog and make sure that public’s money is spent well.

KING: From stemming the economy free fall to the president’s performance. Representative Debbie Wasserman Schultz gets “the last word” next.

(COMMERCIAL BREAK)

KING: The United States Capitol there on a beautiful Sunday morning here in Washington -- 37 lawmakers, critics and analysts have made the rounds this morning on the Sunday talk shows. Democratic Congresswoman Debbie Wasserman Schultz of Florida, she gets the last word. Thank you for joining us here.

If you listen to the debate this morning, people look at this compromise the Senate brokered Friday and they say the only way to keep it intact and get a bill to President Obama by the end of this coming week is to keep that number. As you know, your speaker, many other Democrats in the House say, no. No, we don’t like this bill. I think the speaker used the term violent, did violence to what you’re trying to accomplish in the House. So will you come back in the House this week and say we’re putting the money back in?

SCHULTZ: What we’re going to come back in the House this week and do is make sure that we can apply the tourniquet to the gash that has been busted open in the economy after eight years of Republican applied leeches.

At the end of the day, the front page of “The Washington Post” said agree speed matters more than size and shape. And we’re going through the normal legislative process, the give and take, and ensure that we can invest in our nation’s infrastructure.

KING: But if speed matters more than size or shape, to use the headline you just read, why doesn’t the House say you know what, we don’t like this, we thought ours was better, but we will accept it because then we can get a bill to the president on Wednesday or Thursday.

SCHULTZ: Well, we know that we crafted a bill that includes the priorities of the American people to ensure that we can get them working again. Investing in our nation’s infrastructure, roads and bridges, making sure that we can rebuild schools. Establishing a streamline health care system so we can computerize medical records and reduce health care costs. We have to get aid to states to avoid layoffs and teachers and firefighters and police officers.

Those are the kinds of investments that need to be made to ensure that we can get this economy turned around. Now that’s 90 percent of both bills. We’ve got about a 10 percent difference. And we’re going to make sure that we negotiate over that last 10 percent and pass a bill that can get the economy turned around and send it to the president.

KING: So you won’t take the Senate bill. You will insist in the House on putting some of that spending back in.

SCHULTZ: The founding fathers created a legislative process that also created the conference committee and we’re going to go through the conference committee and the appropriations process this week, come out with a good product that will help get the economy turned around.

KING: As you know, the new president came to town promising a new era of bipartisanship. Eight years of George W. Bush , eight years of Bill Clinton, not much true bipartisanship in this town. Your speaker after the Senate compromise was reached on Friday, made clear she doesn’t like it. She said this, “Washington seems consumed in the process argument of the bipartisanship when the rest of the country says they need this bill.”

The process argument of bipartisanship. The president said it is a critical spirit to have in this town. Your boss in the House, the speaker, doesn’t seem to think it’s important.

SCHULTZ: On the contrary, Speaker Pelosi has made bipartisanship and reaching out in the Republicans in the House a priority. We made sure that we had markup after markup in committee this week and in the last few weeks which included Republican amendments that we heard, that some that we accepted.

SCHULTZ: We reached out our hand across the aisle, asked them to help craft this legislation. That was rejected. So we have made an effort at reaching out our hand across the aisle. They really seem to be more interested in making sure that this whole process fails. It’s really baffling to me why they don’t want to pass an economic recovery package. They’ll have to answer the American people as to why that is.

KING: Well, one of your colleagues on the Republican side, the one -- one of the ones who disagrees with you, Mike Pence , was out this morning and he says this plan is horrible. Let’s listen.

(BEGIN VIDEO CLIP)

PENCE: The Senate piece of any effective stimulus bill that’s ever been passed by Congress in the recent past has been tax relief. The center of this stimulus bill is massive, unaccountable government spending. And the American people are tired of it.

(END VIDEO CLIP)

KING: You’re shaking your head. But if you had to add some tax cuts to take up some spending to get it palatable, to get three, just three Republican votes over in the Senate. I’m going to ask you the last question on this one. I know you disagree with Congressman Pence. But will you accept the current mix if that is the only way to get a bill to the president this week?

SCHULTZ: Well, that is predictable criticism from my friend Mike Pence . But the bottom line is that we’ve had eight years as the president said of doing it their way through pure tax cuts.

We have to have the right mix of tax cuts that go targeted to the middle class, like President Obama’s tax cut that would go to 95 percent of Americans that we included in the House bill. We’re going to have a balance, the right balance of tax cuts and spending.

But we’re not going to continue to allow the middle class to twist in the wind and we’re going to focus on investments and this economy that will create jobs -- 598,000 jobs lost in the last month, 2.6 million in the last year of the Bush administration. Job creation at least three to four million, those are priorities, that is the president’s priority, making sure we get tax cuts targeted for the middle class. That’s how we’re going to get the economy turned around. KING: We’ll watch the debate as it leaves the Senate, comes back your way to the House this week. Congresswoman Debbie Wasserman Schultz , thank you for having the last word with us today.

And when it’s your neighbors who are out of work struggling, you see things differently. Next, an unlikely pitchman for the president, the Republican mayor of one Midwestern town who right now is rooting for Democrat Barack Obama .

(COMMERCIAL BREAK)

KING: The president turns into a sort of traveling salesman tomorrow, hitting the road to push the stimulus plan. Let’s map it out on the magic wall. He’ll be going out here to the state of Indiana. Right up here in northern Indiana, Elkhart County, that’s where the president will be, the unemployment rate in double digits there.

If you head south from there, you come down here to Carmel. And as you can see, Hamilton County, where Carmel is, is red. That shows you John McCain carried the county and quite handedly. So as a conservative place, however, we were out there and we met a mayor, a Republican mayor, who says families in Carmel and across the state are hurting. This Republican says what his city needs now is money, help, not partisan gamesmanship.

(BEGIN VIDEOTAPE)

KING (voice-over): Carmel, Indiana, is comfortable and conservative. Small upscale city that backed John McCain last November but whose Republican mayor is at the moment rooting for Barack Obama .

BRAINARD: Government should be investing in infrastructure. That’s what government is meant to do. It creates long term value. I think the stimulus plan is a good one.

KING: Sixty years ago, this was a farm community of 1,500. Now it is 80,000, affluent, but not immune to the credit crunch and housing crisis.

BRAINARD: We had over building but not nearly the extent that I’ve seen in other places. We’ve had roughly an 8 percent drop in our housing value. Again, that’s not good. But it’s not nearly as bad as other places in the country.

KING: Work on an ambitious new city center is under way. There is not enough of this work in Carmel and across America. Indiana’s unemployment rate is more than 8 percent. Construction among the industries hurting most.

DAVE RICHTER, UNITED COUNSELING: It is basically fear, it’s caution.

KING: Dave Richter’s design firm has plans for dozens of new transportation projects. But most are on hold. RICHTER: The economy is bad. And so many thousands and tens of thousands of people are getting laid off. Everybody gets scared. Nobody is very comfortable with spending a lot of money and putting new things on the books.

KING: Amanda Newman knows the economy is bad because her business, consignment shop, is booming.

AMANDA NEWMAN, CARMEL CONSIGNMENT: Just a lot of new people. A lot of new people that have never even considered shopping second hand. It may be a wealthy community. But, you know, we’re just regular people and a lot of people have been hit pretty hard. So it is a little scary.

KING: Jim Brainard sees stimulus money as the road back and like every mayor, has a wish list. $428 million worth of projects, new roads, a parking garage, fire trucks and more.

(on camera): Central park aquatic center. Construction of additional water slide and wave pool. There are people out there who say come on Mr. Mayor, how does that create jobs?

Well, someone who has to construct that amenity.

KING: A Republican mayor with a budge squeeze sees things very differently from most Republicans in Congress. And also differently from governors who say they should control most of the money.

BRAINARD: Mayors know how to get things done. They have to deal with constituents every day of the year. And if the money were to come directly to the cities, we’ll have shovels in the ground within weeks.

KING: He knows many in his conservative community are skeptical of Mr. Obama and of big spending. But this Republican mayor is at the moment, an enthusiastic pitch man for the new Democratic president.

BRAINARD: This isn’t a bill that’s going to put doctors and lawyers and Wall Street brokers to work. But rather a bill that’s going to put people who are hurting the most to work. We just have to get some money out in the economy. We’ve got to get people working. And we need a confident spirit as much as anything.

(END VIDEOTAPE

KING: Our thanks to Mayor Jim Brainard and the people of Carmel, Indiana and also to those autoworkers we met just to the south in Indianapolis, sharing their anxiety with us this past week. We’ll be here again next Sunday and every Sunday 9:00 a.m. Eastern for the first and last word in Sunday talk. If you missed any part of our program, tune in tonight at 8:00 p.m. Eastern. We’ll showcase the best of today’s STATE OF THE UNION. Until then, I’m John King in Washington. Have a great Sunday.