JOHN KING, CNN HOST: I'm John King, and this is STATE OF THE UNION.
KING (voice-over): One on one with President Obama.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I don't think that illegal immigrants should be covered under this health care plan.
KING: Our sit-down interview, the president discusses the signature issues facing the nation, from health care to the economy and the U.S. mission in Afghanistan. And we put your questions to the president.
Then, reaction from the top Republican in Congress, Senate Minority Leader Mitchell McConnell of Kentucky.
And analysis from STATE OF THE UNION's exclusive duo, James Carville and Mary Matalin.
And our "American Dispatch" from Connecticut, where fears of a possible H1N1 flu pandemic have campuses on high alert and vaccine- makers in a rush.
This is the STATE OF THE UNION report for Sunday, September 20th.
KING: It is eight months to the day since Barack Obama made history. He took office as the 44th president of the United States. From day one, enormous challenges. An economy in collapse. Two difficult wars overseas. The daunting math of matching health care reform and other ambitious campaign promises up against the rising red ink of deficit spending.
On this, day 244 of the Obama presidency, the challenges are just as many and dealing with them complicated by a political climate here in Washington and across the country that has turned raw and contentious. In part, some believe because the president is African- American.
A lot to talk about as I sat down with the president in the Roosevelt Room at the White House.
(BEGIN VIDEOTAPE) KING: Mr. President, thank you for joining us.
OBAMA: Great to see you.
KING: I want to begin with the economy.
KING: I get out of Washington every week for the show.
KING: We're in Connecticut and Rhode Island this week.
KING: And I knew I was going to be seeing you, so I asked 20 people, "What would you ask if you had the privilege that I have at this moment?" Eighteen of the twenty, eighteen, asked a variation of...
KING: ... where are the jobs? When are they coming back?
OBAMA: Yes. Well, look, the -- this is something that I ask every single one of my economic advisers every single day, because I know that ultimately the measure of an economy is, is it producing jobs that help people support families, send their kids to college? That's the single most important thing we can do.
What we've done, I think, in the first eight months is to stop the bleeding. We've...
KING: Is the recession over?
OBAMA: Well, you know, I'll leave that up to the Fed chairman to pronounce whether it's officially over or not. I think what's absolutely clear is that -- that the financial markets are working again, that we even saw manufacturing tick up, in terms of production, last month. So all of the signs are that the economy is going to start growing again.
But here's -- here's the challenge, that not only are usually jobs figures the last to catch up, they're the lagging indicator, but the other problem is, we lost so many jobs that making up for those that have already been lost is going to require really high growth rates.
And so what we're focused right now on is, how can we make sure that businesses are investing again? How can we make sure that certain industries that were really important, like housing, are stabilized? How can we expand our export markets? And that's part of what the G-20 meeting in Pittsburgh is going to be about, making sure that there's a more balanced economy. We can't go back to the era where the Chinese or the Germans or other countries just are selling everything to us, we're taking out a bunch of credit card debt or home equity loans, but we're not selling anything to them.
So that's how all this is going to fit together. But I want to be clear that probably the jobs picture is not going to improve considerably -- and it could even get a little bit worse -- over the next couple of months. And we're probably not going to start seeing enough job creation to deal with the -- a rising population until some time next year.
KING: Do you think jobs will not grow -- you'll not be adding jobs until some time next year, or maybe...
OBAMA: Well, I think -- I think we'll be adding jobs, but you need 150,000 additional jobs each month just to keep pace with a growing population. So if we're only adding 50,000 jobs, that's a great reversal from losing 700,000 jobs early this year, but, you know, it means that we've still got a ways to go.
KING: Let's talk health care. The Senate Finance Committee finally has a proposal before it by the chairman, Max Baucus. It's getting some criticism from the left, some criticism from the right. I want to get to the details of it in a minute. It's also getting some important praise from the middle.
KING: I want to break down some of the details in a minute. But if the Baucus bill made it to your desk, as is, would you sign it? Does it meet your goals?
OBAMA: Well, that's such a hypothetical since it won't get there as is, that I'm not going to answer that question. But can I say that it does meet some broad goals that all the bills that have been introduced meet?
KING: Is it better than the others?
OBAMA: It provides health insurance to people who don't have it at affordable prices. I'd like to make sure that we've got that affordability really buttoned down, because I think that's one of the most important things, is that if we're offering people health insurance and we're saying that people have to get health insurance if it's affordable, we've got to make sure it's affordable.
We're helping people who have health insurance with the -- with knowing that, if they're paying their premiums, they're actually getting what they pay for, and that has been a huge problem -- people not able to get insurance because of pre-existing conditions, being surprised because some fine print says that they've got to pay huge out-of-pocket expenses or they hit a lifetime cap. All those reforms are in there, and that's really important. Deficit neutrality, very important. Bending the cost curve or reducing health care inflation over time. Part of the reason that's so important, there's just a report that came out last week. Kaiser Family Foundation said, if you've got health insurance, last year, your premiums went up 5.5 percent, 5.5 percent. This is despite the fact that inflation was negative on everything else.
And that's been true almost every year. Premiums have doubled, gone up over 130 percent over the last 10 years. That's the direction we're heading. More and more people are finding that their employers are dropping their coverage, because it's getting too expensive, so making sure that we're controlling the long-term costs by improving the delivery systems, all that's in the bill.
Now, there are a whole bunch of details that still have to get worked out. I suspect you'll have one or two questions about them. But what I'll say is, is that right now I'm pleased that, basically, we've got 80 percent agreement. We've got to really work on that next 20 percent over the last few weeks.
KING: One of the issues is how to pay for it. And one of the things Chairman Baucus does -- and you have endorsed, at least in concept -- is putting a fee, slapping a fee on these so-called "Cadillac" insurance plans.
KING: And the fee would go on the insurance company, not on the individual.
KING: But as you know, many of your allies, Senator Rockefeller, other Democrats, and many union presidents who have helped you in this fight, say you know what? That insurance company will pass that on to the consumer, and they think it's a backdoor way potentially of violating your promise during the campaign to not raise taxes, not hurt middle-class Americans, because that will be passed back on through the back door.
OBAMA: Keep in mind that the average insurance plan, I think, is about $13,000, a little -- maybe a little more than that, because of health care inflation. Even the health care plan that members of Congress get is, you know, in that range of the teens. And so people would be, for the most part, completely unaffected by this.
You do have some Cadillac plans -- I mean, you know, the CEOs of Goldman, I think, published what their plans were worth. They were worth $40,000 or something like that. That's probably leading to...
KING: Would you make sure...
OBAMA: ... some waste...
KING: I hate to interrupt, but would you make sure that these unions have negotiated pretty good plans, too.
OBAMA: Oh, absolutely.
KING: Would you make sure theirs are carved out, or should some of them be subject to that?
OBAMA: This is a very important issue. I've been talking to the unions about it. I've been honest with them about it. What I've said is, is that the -- we want to make sure that guys are protected, guys and gals who have got a good benefit, that they are protected, but we also want to make sure that we're using our health dollars wisely.
And I -- I do think that giving a disincentive to insurance companies to offer Cadillac plans that don't make people healthier is part of the way that we're going to bring down health care costs for everybody over the long term.
KING: It is not one of the central issues, but it has become one of the emotional flashpoints, and that is coverage of illegal immigrants. The Finance Committee plan is the only one in Congress right now that has specific language that says an illegal immigrant cannot go to one of these new health insurance exchanges. It requires documentation.
Would you sign a bill without that documentation? Or is that an adamant red line for you?
OBAMA: Let me be clear. I think that, if I'm not mistaken, almost all the plans had specific language saying that illegal immigrants would not be covered. The question really was, was the enforcement mechanism strong enough?
Here's what I've said, and I will repeat. I don't think that illegal immigrants should be covered under this health care plan. There should be a verification mechanism in place. We do that for a whole range of existing social programs. And I think that's a pretty straightforward principle that will be met.
KING: Mitch McConnell told a conservative group, "We're winning the health care debate." What do you think of that?
OBAMA: Well, you know, they -- they were saying they were winning during the election, too.
KING: Up next, we turn to global challenges, wrestling with sending more U.S. troops to Afghanistan and a headline from former President Bill Clinton's trip to North Korea. Much more with President Obama, next.
KING: Afghanistan is now often referred to as Obama's war and the strategy and decisions he faces in the coming weeks could well define his presidency. The American people have deep doubts about the mission and some of the president's fellow Democrats see eerie parallels to Iraq in Afghanistan's failure to build a more capable army and its government corruption and dysfunction.
Defining the mission is perhaps the president's biggest challenge.
KING: Let me move on to the world stage.
KING: You face a very tough decision in the weeks ahead about Afghanistan. Our Pentagon correspondent, Barbara Starr, says she has been told that General McChrystal has finished his report and his recommendation to you, but he has been told, "Don't call us; we'll call you. Hold it."
Are you or someone working for you asking him to sit on that at the moment because of the dicey politics of this?
OBAMA: No, no, no, no. Let -- let me describe the process from start to where we are now.
When we came in I think everybody understood that our Afghanistan strategy was somewhat adrift, despite the extraordinary valor of the young -- men and women who are -- who are fighting there.
So what we said was, let's do a soup-to-nuts re-evaluation, focusing on what our original goal was, which was to get al Qaeda, the people who killed 3,000 Americans. To the extent that our strategy in Afghanistan is serving that goal, then we're on the right track. If it starts drifting away from that goal, then we may have a problem.
What I also said was we've got an election coming up. I ordered 21,000 troops in to secure that election. But I said, after the elections are over, we've got to review it because we've got to figure out what kind of partner do we have in Afghanistan? Are they willing to make the commitment to build their capacity to secure their own country?
We are in the process of working through that strategy. The only thing I've said to my folks is, A, I want an unvarnished assessment, but, B, I don't want to put the resource question before the strategy question.
You know, the -- because there is a natural inclination to say, if I get more, then I can do more. But right now, the question is -- the first question is, are we doing the right thing? Are we pursuing the right strategy?
And -- and once I have that clarity from the commanders on the ground, Secretary Gates, my national security adviser, Jim Jones, and others -- when we have clarity on that, then the question is, OK, how do we resource it? And that's -- what I will say to the American public is not going to be driven by the politics of the moment. It's going to be driven by the fact that, A, my most important job is to keep us safe -- and al Qaeda is still trying to do us harm, but, B, every time I sign an order, you know, I'm answerable to the parents of those young men and women who I'm sending over there, and I want to make sure that it's for the right reason.
KING: On that point, about a month before the election, you promised a re-focused national security strategy. And you said, quote, "We will kill bin Laden. We will crush al Qaeda."
KING: As president, commander-in-chief, are you finding it's harder to find him than you thought it might have been as a candidate?
OBAMA: Oh, I think as a candidate I knew I was -- it was going to be hard. I don't doubt the interest and the desire of the previous administration to find him and kill him. But I do think that, if we have a overarching strategy that reminds us every day that that's our focus, that we have a better chance of capturing and killing him and certainly keeping al Qaeda on the run than if we start drifting into a whole bunch of other missions that really aren't related to what is our essential strategic problem and rationale for being there.
KING: It is a small number, but a growing number of Democrats in the Congress who say they want a timeline. They want a time limit on U.S. troop commitments in Afghanistan.
KING: You thought that was a good idea when it came to Iraq.
KING: Is it a good idea for Afghanistan?
OBAMA: You know, I think that what we have to do is get the right strategy, and then I think we've got to have some clear benchmarks, matrix of progress. That's part of the reason why I said, even after six months, I wanted us to re-evaluate. You know...
KING: What would you say to the American who says you've been president for eight months, why are you still looking for a strategy?
OBAMA: Well, no, no, no. Keep in mind that we have a -- we put a strategy in place, clarified our goals, but what the election has shown, as well as changing circumstances in Pakistan, is that, you know, this is going to be a very difficult operation, and we've got to make sure that we're constantly refining it to keep our focus on what our primary goals are.
KING: Do you think President Karzai stole the election?
OBAMA: You know, I don't think that, you know, I'm going to make comments on the election until after everything has been certified. I think there is no doubt that there were reports of fraud out there that at first glance look pretty serious. They're being investigated. They're going through the -- the normal processes.
How much fraud took place and whether that had a substantial effect on the results of the election, I think that is something that we're going to have to wait and see in the next few weeks.
KING: A couple other quick security questions, then I want to bring it back home. You recently had lunch with President Clinton. He went to North Korea to help facilitate the release of those American journalists. What is the most interesting thing he told you about Kim Jong-il?
OBAMA: You know, I think President Clinton's assessment was that he's -- he's pretty healthy and in control. And that's important to know, because we don't have a lot of interaction with the North Koreans. And, you know, President Clinton had a chance to see him close up and have conversations with him.
I won't go into any more details than that. But there's no doubt that this is somebody who, you know, I think for a while people thought was slipping away. He's reasserted himself. It does appear that he's concerned about -- he was more concerned about succession when he was -- succession when he was sick, maybe less so now that he's well.
But our -- but our main focus on North Korea -- and I'm very -- actually, this is a success story so far, and that is that we have been able to hold together a coalition that includes the Chinese and the Russians to really apply some of the toughest sanctions we've seen, and it's having an impact.
And I think that North Korea is saying to itself, you know, we can't just bang our spoon on the table and somehow think that the world is going to react positively. We've got to start behaving responsibly. So hopefully, we'll start seeing some progress on that front.
KING: Seven former directors of Central Intelligence have sent you a letter saying, please, invoke your authority to stop the attorney general's investigation of the Bush era interrogation tactics.
KING: Will you do that?
OBAMA: You know, first of all, I respect all seven of them. And as importantly or more importantly, I have absolute respect and have reliance upon a robust CIA.
And I've said before, I want to look forward and not backwards on this issue. On the other hand, I've also said nobody is above the law. And I don't want to start getting into the business of squelching, you know, investigations that are being conducted.
Now, it's not a criminal investigation as yet, my understanding. I trust career prosecutors to be judicious. I've made clear both publicly and privately that I have no interest in witch hunts. But, ultimately, the law is the law, and we don't go around sort of picking and choosing how we approach it.
KING: Ahead, angry outbursts and disturbing images in recent weeks have some on the left suggesting racism motivates some Obama critics. Does the president see race as the issue? I'll ask him next.
KING: How much, if at all, does our first African-American president believe race motivates his critics? Back to our conversation in the Roosevelt Room.
KING: It's a tough business, as you know. But in recent weeks, people have raised some pretty serious questions, the big rally in town, signs talking about Afro-socialism, swastikas with your name and your picture on them, "You lie" shouted at you during a nationally televised addressed, and former President Carter says he sees racism in some of this. Do you?
OBAMA: You know, as I've said in the past -- you know, are there people out there who don't like me because of race? I'm sure there are. That's not the overriding issue here. I think there are people who are anti-government.
I think that there are -- there has been a longstanding debate in this country that is usually that much more fierce during times of transition or when presidents are trying to bring about big changes.
I mean, the things that were said about FDR are pretty similar to the things that were said about me, that he was a communist, he was a socialist. Things that were said about Ronald Reagan when he was trying to reverse some of the New Deal programs, you know, were -- were pretty vicious, as well.
The only thing I'd just hope is, is that people -- you know, I think we can have a strong disagreement, passionate disagreements about issues without -- without resorting to name-calling. We can maintain civility. We can give other people the benefit of the doubt that -- that they want what is best for this country.
KING: The speaker says it reminds her of the hateful anti-gay language in San Francisco that led to deadly violence. Jim Clyburn, who's the highest-ranking African-American in Congress, says he thinks people are trying to de-legitimize you.
Did you see it as that worrisome? OBAMA: You know, I've got to tell you that, as I said before, you know, yelling at politicians is as American as apple pie. I mean, that's -- that's in our DNA. We -- I said this in the speech to the joint session, that we have a long tradition of being skeptical of government.
I do think that it's important for us, again, to remind ourselves that all of us are Americans who love this country. I think it's important not to exaggerate or provide just rank misinformation about each other.
You know, I'm amused. I can't tell you how many foreign leaders who are heads of center-right governments say to me, I don't understand why people would call you socialist. In my country, you'd be considered a conservative.
You know -- and the other thing I've got to say is, is that I think it's important for the media -- you know, not to do any media- bashing here -- to recognize that right now, in this 24-hour news cycle, the easiest way to get on CNN or FOX or any of the other stations -- MSNBC -- is to just say something rude and outrageous.
You know, if you're civil, and polite, and you're sensible, and you don't exaggerate the -- the bad things about your opponent, and, you know, you might maybe get on one of the Sunday morning shows, but -- but you're not going to -- you're not going to be on the loop.
And, you know, part of what I'd like to see is -- is all of us reward decency and civility in our political discourse. That doesn't mean you can't be passionate, and that doesn't mean that you can't speak your mind. But I think we can all sort of take a step back here and remind ourselves who we are as a people.
KING: I'm over my time. If I can, I want to ask you one question as a parent, not as a president. I was on a college campus this week and at a lab where they're trying to make an H1N1 vaccine.
KING: As a parent with two daughters in school, how are you dealing with this? And does the Obama family plan include a vaccine for you?
OBAMA: Well, the -- here's the Obama family plan, is to call up my HHS secretary, Kathleen Sebelius, and my CDC director and just ask them, what's your recommendation? And whatever they tell me to do, I will do.
My understanding at this point is that the high-risk populations are going to be first with the vaccine, and that means not only health care workers, but particularly children with underlying neurological vulnerabilities. And so we've got to make sure that those vaccines go to them first.
I'm assuming -- and pregnant women, by the way. After that, I think you're looking at kids, and so Malia and Sasha would fall into that category. I suspect that I may come fairly far down the line, so we're not going to -- here's what I guarantee you. We want to get vaccinated. We think it's the right thing to do. We will stand in line like everybody else. And when folks say it's our turn, that's when we'll get it.
KING: Mr. President, thank you for your time.
OBAMA: All right. Thank you so much.
KING: Thank you.
OBAMA: Appreciated it.
KING: Thank you.
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