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Location: Washington, DC

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REP. ERIC CANTOR (R-VA): Good morning, David.

MR. GREGORY: Everybody's talking about the State of the Union address, and the president is already previewing it. This is a portion of the message that he will deliver on Tuesday. Watch.

(Videotape, yesterday)

PRES. BARACK OBAMA: And so my principle focus, my number one focus, is going to be making sure that we are competitive, that we are growing, and that we are creating jobs not just now, but well into the future. And that's what is going to be the main topic of the State of the Union.

(End videotape)

MR. GREGORY: Being competitive, in his mind, also means some additional targeted spending in some areas to make America competitive, as well as cuts, as well as dealing with the deficit. Here is the headline in The New York Times this morning, the way they describe it: "Obama to Press Centrist Agenda in His Address. A Retooled Presidency. Balancing Deficit Cuts with New Spending to Create Jobs."

Is that a vision you can support?

REP. CANTOR: David, you know, I'm, I'm really interested to see and hear what the president has to say. I, I, I think he's got a real chance to lead here. But the question is, did he listen and has he learned from the last election? I think that the vision the president laid out over the last two years is one very much focused on increasing government spending and trying to spawn action from a Washington-based perspective. And, and what the people have said is, "Enough. We've got to shrink government, we've got to cut spending, and we need to really look to the private sector to grow jobs."

MR. GREGORY: But he's saying, he's saying now there's got to be a combination of some spending to keep America competitive, and also cuts dealing with the deficit. Is that a vision you can support?

REP. CANTOR: What we've said is our Congress is going to be a cut and grow Congress; that we believe we've got to cut spending, we've got to cut the regulations that have stopped job growth.

MR. GREGORY: Right.

REP. CANTOR: When the president talks about competitiveness, sure, we want America to be competitive. But then when he talks about investing, I think even someone from the White House this week had said that this is going to be a cut and invest White House. We want to cut and grow. Because when we, we hear invest, when--from anyone in Washington, to me that means more spending. And any...

MR. GREGORY: Right. Well, well, let's just be clear. You don't believe that there's a balance that you have to get right in terms of investing in the economy to help it innovate, to become more competitive. That's not a vision you agree with.

REP. CANTOR: David, where--what I would say is the investment needs to occur in the private sector.

MR. GREGORY: Not by government.

REP. CANTOR: And, and for too long, and for too long now there's been uncertainty on the part of investors.

MR. GREGORY: Right. OK, well, let's, let's pick up where Republicans have left off. Cut and grow, that's the mantra. You campaigned on a pledge to America last September, and this is a part of what you said, it was very clear: "We will roll back government spending to pre-stimulus, pre-bailout levels, saving us at least $100 billion in the first year alone and putting us on a path to balance the budget and pay down the debt." And then you came into office and you said, "Well, we're not going to hit that $100 billion figure." And here was the headline on Friday in The Washington Post: "GOP bloc in the House calls for deeper cuts," and the sub-headline: "Campaign pledge divides the party." You're arguing about just how much to spend. I thought this was already worked out.

REP. CANTOR: David, let, let's step back a minute and look at sort of the whole sort of continuum of the spending challenges. We're, we're going to really have three bites at the apple here as far as approaching reducing spending and the size of Washington. As far as the mess in the past, we're going to have this debt limit increase vote that will come, and that is dealing with the rampant spending that's been in place in this town for some time that's gone on overdrive in, in the last couple years.

MR. GREGORY: And I'll get to the debt limit, but this is a targeted question.

REP. CANTOR: But as far as the decisions that we make now, it is about the continuing resolution vote that will come up in the next month or so, al right?

MR. GREGORY: Right. But $100 billion, or not $100 billion?

REP. CANTOR: And, and we've committed to say $100 billion in reductions, which brings spending down to '08 levels.

Now, we also are in the position where we are starting to even deliberate on that five months into the fiscal year. We are intent on making sure, on an annualized basis, that we are hitting the '08 levels or below. And so every member will have the chance to come to the floor, to talk about whether they believe that '08 levels are enough to cut, because some members actually want to see us do more. And I agree, we ought to look in every way possible to reduce spending as much as possible.

MR. GREGORY: It seems like it's a straightforward question, though. Are you going to live up to the $100 billion pledge? I assume you've put a lot of thought into that...

REP. CANTOR: David...

MR. GREGORY: ...$100 billion figure. Can you make it or not?

REP. CANTOR: Absolutely. On an annualized basis, we will cut spending $100 billion.

MR. GREGORY: You do it this year as you pledged?

REP. CANTOR: On an annualized basis...

MR. GREGORY: Which means what exactly?

REP. CANTOR: Well, again, David, look where we are. We are where we are because the Democratic majority, last Congress, didn't pass a budget, right? They didn't do it. So we're in a continuing resolution environment. So now we've got an interim step to take to make sure that we reset the dial and bring spending back down to '08 levels. We will do that.

MR. GREGORY: You talk about the debt, it's passing $14 trillion. And last week you gave an interview to The Washington Post about this important vote that'll come up in the spring about raising the debt ceiling, which has been done for a long time in the past. And this is what you said in The Washington Post: "`It's a leverage moment for Republicans,' Cantor said in an interview... `The president needs us. There are things we were elected to do. Let's accomplish those if that the president needs us to clean up the old mess.'"

I want you to be specific here. What's the leverage moment? What will you exact as a promise in order for your members to vote to increase the debt ceiling?

REP. CANTOR: Well, let, let me be clear, David. Republicans are not going to vote for this increase in the debt limit unless there are serious spending cuts and reforms.

MR. GREGORY: Like what?

REP. CANTOR: I mean--and, and that is just the way it is, OK?

MR. GREGORY: Right.

REP. CANTOR: So, so we have talked a lot about bringing spending levels down to '08 levels. We've talked about things that we can do to make sure that off into the future this does--this kind of spending doesn't continue. And when I went back and told you there's three bites at the apple, the other piece is our budget. We're going to work on our budget and say, "Look, we're going to have to institute some reforms to make sure these spending patterns don't recur."

MR. GREGORY: But you don't have--if you say serious spending cuts, you clearly have--don't have something specific in mind, right? You--in other words, you'll, you'll know it when you see it, is that the approach?

REP. CANTOR: No, no, that's not true. First of all, David, we're going to have a vote on the floor on Tuesday of this week directing our appropriations committees to go about deliberating on where those cuts are. Now, we know that there are hundreds of programs that are going to need to be cut. When you're talking about cutting $100 billion, you're going to have hundreds of programs in the thousands pages of spending plan that the federal government has. This week we will vote on an issue having to do with the Presidential Election Fund. We're going, we're going to vote to cut that. That's a $500 and some million expenditure. We're going to see hundreds of programs experience analysis and cuts just like that.

MR. GREGORY: But let's deal with the--you know, $500 million is really a drop in the bucket in the federal--I, I realize it's real money, but in terms of the federal--the, the budget, that's nothing. You're not really tackling the big three. You're not tackling entitlements. What about defense? Is defense on the table, defense cuts on the table? Do they have to be?

REP. CANTOR: I'll get to entitlements in a second if you want.

MR. GREGORY: OK.

REP. CANTOR: But I can tell you, we've always said this, too: Every dollar should be on the table. And I've said before...

MR. GREGORY: Including defense cuts.

REP. CANTOR: I've--absolutely.

MR. GREGORY: OK.

REP. CANTOR: I've said before, no one can defend the expenditure of every dollar and cent over at the Pentagon. And we've got to be very serious to make sure that they're doing more with less as well.

MR. GREGORY: But look at The Wall Street Journal, the piece by Dick Armey of Freedom Works, the tea party group. He said, "What Congress Should Cut," and the sub-headline says this: "Let's scrap the Departments of Commerce and Housing and Urban Development, end farm subsidies, and end urban mass transit grants, just for starters." Would those be on the table?

REP. CANTOR: Everything, David, is on the table. I mean, we've got to do with...

MR. GREGORY: Cancer research is on the table.

REP. CANTOR: We've got to--listen, we've got to do what families in this country are doing, what businesses are doing. You've got to learn to do more with less. You can't afford to sustain this level of borrowing and spending. Everyone knows that. So we've got to be very, very good and disciplined to make sure that we are cutting what needs to be cut and focused on growing this economy so America can maintain its competitiveness and we can see jobs grow in the private sector.

MR. GREGORY: Let's talk about Social Security. A couple weeks ago Majority Leader Reid in the Senate was on the program, and I asked him about whether Social Security is in crisis. This is what he said.

(Videotape, January 9, 2011)

SEN. HARRY REID (D-NV): When we start talking about the debt, the first thing people do is run to Social Security. Social Security is a program that works, and it's going to be--it's fully funded for the next 40 years. Stop picking on Social Security. There are a lot of places that we can go to...

MR. GREGORY: Senator, are you really saying the arithmetic on Social Security works?

SEN. REID: I'm saying the arithmetic in Social Security works. I have no doubt it does. For the next...

MR. GREGORY: It's not in crisis.

SEN. REID: No, it's not in crisis. This is, this is, this is something that's perpetuated by people who don't like government. Social Security is fine.

(End videotape)

MR. GREGORY: If you disagree with Leader Reid, are you prepared to raise the retirement age, means test benefits or, in another way, seriously tackle the entitlement of Social Security?

REP. CANTOR: David, what we have said is we've got a serious fiscal train wreck coming for this country if we don't deal with these entitlements. And so entitlements are something that we need to begin to work on. Now, for me, the first entitlement we need to deal with is the healthcare bill, is the Obamacare bill, you know.

MR. GREGORY: All right, we'll get to health care. I asked you about Social Security, though.

REP. CANTOR: Absolutely. And, and so we have got to focus on what we can do together. Now, as you--as, as that just indicated, the Senate is not willing to do anything under Harry Reid.

MR. GREGORY: Well, what are you willing to do? Means test benefits, raise the retirement age?

REP. CANTOR: David, we've--we have a program that we have seen one of our members, Paul Ryan, the chairman of the Budget Committee, put together called the "Roadmap."

MR. GREGORY: Mm-hmm.

REP. CANTOR: And he and Kevin McCarthy and I wrote a book together, and in that book we reserved a chapter for a discussion about Social Security, about Medicare, and how we can begin to at least discuss to do that.

MR. GREGORY: But what are you for? Leader, I'm asking you what you what you're for.

REP. CANTOR: Well, what, what I'm telling you we're for, is we're for an active discussion to see what we can come together and do.

MR. GREGORY: How long do we need to discuss Social Security and what is happening? It's been discussed for years.

REP. CANTOR: Well...

MR. GREGORY: How about--and the irony of Paul Ryan being introduced, the budget chairman, and he's doing the response to the State of the Union, he is the one who's proposed draconian cuts to Social Security and to Medicare...

REP. CANTOR: Well, David...

MR. GREGORY: ...and Republicans don't stand behind him.

REP. CANTOR: David, that's not true. I just told you that we put a chapter in our book about it because the direction in which the Roadmap goes is something we need, we need to embrace. Now, let me tell you this.

MR. GREGORY: Raising the retirement age, means testing benefits, those are specifics. That...

REP. CANTOR: The fundamental--the starting point in any plan has got to be we need to distinguish between those at or nearing retirement. Anyone 55 and older in this country has got to know that their Social Security benefits will not be, will not be changed. It is for all the younger people, those 54 and younger, we're going to have to have a serious discussion. Now, with Harry Reid talking about the fact that he doesn't want to even discuss it...

MR. GREGORY: Mm-hmm.

REP. CANTOR: ...that's not leadership.

MR. GREGORY: All right, let, let's, let's move on to health care because House Republicans did repeal the president's healthcare reform plan, but the real question is what Republicans are prepared to replace it with and whether you have a serious plan. Major Garrett in the National Journal reports this week the following about the speaker's plan, Speaker Boehner: "The Boehner plan, according to the Congressional Budget Office, would add just three million Americans to the insurance rolls, leaving about 50 million still without coverage through 2019. CBO said that the proposal would reduce costs in the group-insurance market, which constitutes nearly 80 percent of private-sector premiums, by less than 3 percent. `If it's all they do, it is not a serious effort,' Douglas Holtz-Eakin, a former CBO director and chief policy adviser for John McCain's 2008 presidential campaign, said of the Boehner alternative. `You can't just do that.'"

The truth is, Republicans do not have a serious alternative to covering more Americans, do they?

REP. CANTOR: I disagree with that, obviously, David. First of all, you know, we believe you can do better in health care. I mean, we want to try and address the situation so more folks can have coverage, can, can have the kind of care that they want.

MR. GREGORY: But that's not what the Boehner plan does.

REP. CANTOR: Well, the...

MR. GREGORY: It's not more folks being covered.

REP. CANTOR: Well, the--if you recall last session, we Republicans were given one shot; we didn't have any open debate for both sides at all on the healthcare bill the way it was jammed through. The Boehner plan is just a starting point. You know, what we said when we went and voted to repeal Obamacare last week in Congress, what we said is we want our committees to begin a process of deliberations from both sides, open, honest debates, so the people can understand everything that's being discussed. And we're going to focus on patient-controlled health care. We're going to focus on, first and foremost, bringing down costs and adding to people's choices and flexibility.

MR. GREGORY: But, Leader, you're talking about bringing down costs. If you were serious about this, why not negotiate with Democrats in areas where you could deliver Republican votes? There are currently efficiencies in the Obama healthcare bill that deal with penalties for hospitals if there are recurrent infections. There are efficiencies that do address cost, and they certainly address getting more people covered than any Republican plan you're suggesting.

REP. CANTOR: David, the problem is if we're all really desirous of trying to deal with people who are in need and want to improve the healthcare future for this country, you, you can't start with a Washington-controlled system. That's the structure of Obamacare. It's broad, sweeping federal mandates imposing the kind of health care that people should have instead of allowing people to choose for themselves and allow for the flexibility and choice. That's why we're going to have an open process, invite the other side in to have debates. We have committed, in the Pledge to America, that we are going to finally see the institution work. Speaker Boehner's always said that, that we're going to actually have committees do their work, we're going to have work on the floor. We're not going to see an instance where you're going to jam through a healthcare bill the way that Speaker Pelosi did.

MR. GREGORY: Right. Although isn't that what you just did on the repeal?

REP. CANTOR: We, we--no. We pledged...

MR. GREGORY: How is that different than what you say the Democrats did?

REP. CANTOR: Because it was, it was a page and a half bill, David. It was a page...

MR. GREGORY: Yeah. Seven hours of debates. So there wasn't, wasn't a lot of room for a lot of negotiation.

REP. CANTOR: Yeah. Really...

MR. GREGORY: Wasn't it symbolic, simply to make this a marker for the 2012 campaign?

REP. CANTOR: No, it was something that was very much a policy-based vote. You know, we disagree as far as the prescription on how we better health care in this country.

MR. GREGORY: Mm-hmm.

REP. CANTOR: And really, if you look at '012, if, if you want to put it in that context, it comes back to the State of the Union. You know, Obamacare really represents what I believe this president sees as policy focus in this town. And that is start with Washington, allow Washington to set the parameters, and then try and impose that as a prescription to do things better. We don't believe that. And that's really, in the State of the Union, I think, the president's task. Is he going to be able to step up and prove that he's listened and learned to the electorate, and that he's actually going to change going into this next two years?

MR. GREGORY: Let me ask you a little about politics. Do you think, as 40 percent in our recent poll thought, the president's become a moderate. Do you agree with that?

REP. CANTOR: Well, I think actions speak louder than words. And that'll be the real question here, is whether he decouples himself from the last two years, a very active federal government-centric attitudes, towards looking to the American people and say, "You know, we're going to trust in, in individuals, and we're going to allow for the government to step back, stop these very aggressive regulatory postures, and allow the private sector to grow and individuals to engage in making more decisions themselves."

MR. GREGORY: There's been a lot of talk about discourse, about how you all can get along a little bit better and do it a little bit more civilly. And I wonder, this is the leadership moment here, OK? There are elements of this country who question the president's citizenship, who think that it--his birth certificate is inauthentic. Will you call that what it is, which is crazy talk?

REP. CANTOR: David, you know, I mean, a lot of that has been an, an issue sort of generated by not only the media, but others in the country. Most Americans really are beyond that, and they want us to focus...

MR. GREGORY: Right. Is somebody brings that up just engaging in crazy talk?

REP. CANTOR: Well, David, I, I don't think it's, it's nice to call anyone crazy, OK?

MR. GREGORY: All right. Is it a legitimate or an illegitimate issue?

REP. CANTOR: And--so I don't think it's an issue that we need to address at all. I think we need to focus on...

MR. GREGORY: All right. His citizenship should never be questioned, in your judgment. Is that what you're saying?

REP. CANTOR: It is, it is not an issue that even needs to be on the policy-making table right now whatsoever.

MR. GREGORY: Right. Because it's illegitimate? I mean, why won't you just call it what it is?

REP. CANTOR: I--because, again...

MR. GREGORY: I mean, I feel like there's a lot of Republican leaders who don't want to go as far as to criticize those folks.

REP. CANTOR: No. I think the president's a citizen of the United States.

MR. GREGORY: Period.

REP. CANTOR: So what--yes. Why, why is it that you want me to go and engage in name-calling?

MR. GREGORY: No, I'm just...

REP. CANTOR: I think he's a citizen of the United States.

MR. GREGORY: Because, because I think a lot of people, Leader, would say that a leader's job is to shut some of this down. You know as well as I do, there are some elements on the right who believe two things about this president: He actively is trying to undermine the American way and wants to deny individuals their freedom. Do you reject those beliefs?

REP. CANTOR: I...

MR. GREGORY: As a leader in our Congress.

REP. CANTOR: Let me tell you, David, I believe this president wants what's best for this country. It's just how he feels we should get there, that there are honest policy differences.

MR. GREGORY: Fair enough.

REP. CANTOR: That's it. And, and so the question will be, over the next two years, whether he will demonstrate that he no longer wants to adhere to more spending, to more sort of trying to achieve equal outcomes rather than equal opportunity, that he really does believe America was built on those striving to--for opportunity, willing to take their own responsibility to achieve their success, and not rely on Washington to sort of determine winners and losers. Now, that, that to me is what America's about. That's how we get to a better place in this country and continue to lead. And, and the question will be--and I think that most Americans are like that. And so the question is, does the president now embrace what the electorate said, which is, "We reject your agenda, Mr. President. We understand the results have not been there. Let's try it a different way."

MR. GREGORY: Is the tea party a difficult crosscurrent in the Republican Party to manage right now? Michele Bachmann is giving an additional response to the State of the Union. How difficult is that for you as the majority leader to deal with this new caucus? Are they in sync with you?

REP. CANTOR: Yeah. I've always said this. The tea party--first of all, the acronym is "taxed enough already." The tea party's very focused on our making sure we get spending under control. They've been a tremendous force in having us focus on fiscal issues first to get our fiscal house in order. And if you're looking at ways to grow the economy, you know, the Heritage Foundation just came out with their Index of Freedom. One of the reasons they cite as to the United States falling in that index is the rampant government spending, which promises more tax increases in the future. So the tea party has come in and said enough spending already.

MR. GREGORY: Right. If the economy gets better, Harry Reid predicts the tea party goes away.

REP. CANTOR: I, I think that Washington has been about its bigger spending ways for a long time. And that's...

MR. GREGORY: So you think the tea party's here to stay?

REP. CANTOR: Absolutely. And I think that they bring a very fresh, new look to all spending and get us more in sync with the people in this country as far as living within our means.

MR. GREGORY: Leader, more to do but we're out of time.

REP. CANTOR: Thanks, David.

MR. GREGORY: Thank you very much for being here.

And coming up next, the president enjoys a bounce in the polls at his two-year mark, but how will he address the economy in his State of the Union? Joining us on the roundtable: assistant Democratic leader, Representative Jim Clyburn of South Carolina; former adviser to President George W. Bush, Karen Hughes; former White House chief of staff from the Center for American Progress, John Podesta; CNBC's Erin Burnett; and the National Journal's Ron Brownstein. Plus, our MEET THE PRESS minute, remembering Sargent Shriver.

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