Transcript: David Petraeus and Richard Holbrooke on CNN (29 March)

HOST JOHN KING: General Petraeus, let me start with the threshold question for you, how many troops will it take? How long will it be.

PETRAEUS: Well, as you know, John, the president and President Bush before him have set in motion orders for troops that will more than double the number that were on the ground at the beginning of the year. We'll get those on the ground. We'll take a lot of effort with infrastructure, logistics and so forth, start employing those in the months that lie ahead. They'll all be on the ground by the end of the summer and the early fall.

And along the way we'll be doing the assessments. And among those assessments, of course, will be the kinds of questions about force levels, about additional civilians and other resources as well.

KING: General McKiernan, your commander on the ground, had been up-front that he needed even more troops. Why did the president say no?

PETRAEUS: Well, he certainly hasn't said no.

What everyone has said is let's get these forces on the ground. Every request for forces and every recommendation that General McKiernan and I made through this year, this entire year, has been approved. And, as I said, we'll take that forward, do the assessments. And I think it'd be premature to get beyond that right now.

KING: Ambassador Holbrooke, before we get to your challenges in the diplomacy, I want you to take us inside the deliberations about this strategy, because as you know, many Democrats have warned this could be President Obama's Vietnam, that you're sending more troops into an area where you still have huge problems on the Pakistani side of the border -- and we'll talk about that -- with corruption and other issues on the Afghan side of the border. And we'll talk in more detail about that. But take us inside the room when it comes to the risk assessment for this president at this moment.

HOLBROOKE: First of all, John, I served in Vietnam for three and half years, and I'm aware of certain structural similarities. But there's a fundamental difference. The Viet Cong and the North Vietnamese never posed any direct threat to the United States and its homeland. The people we are fighting in Afghanistan, and the people they are sheltering in Western Pakistan pose a direct threat. Those are the men of 9/11, the people who killed Benazir Bhutto. And you can be sure that, as we sit here today, they are planning further attacks on the United States and our allies.

In terms of the deliberation itself, the president shared at least four meetings, by my count, of the full National Security Council -- very unusual, very impressive. He ran the meetings himself. I've been in meetings with presidents since Lyndon Johnson in whose White House I served. And I have never seen a president take charge of a meeting the way President Obama did continually.

In other meetings without the president present, General Jones, his national security adviser, his deputy Tom Donilon, and the senior members of the administration, including Hillary Clinton, Bob Gates and the military command, including my colleague and friend David Petraeus, all had a vigorous debate. The vice president participated heavily. And in these discussions, John, I can assure you, and through you everyone who's watching, that every single option was considered, its pros and cons. A convergence and a consensus was immediate, that we couldn't walk away from the situation, no matter how bad it was and how bad the situation we had inherited was.

Then the issue became what do we do about it? All the options were considered. On the civilian side, we focused on the agricultural sector, which has been neglected. And yet it's an agricultural sector -- country. We focused on creating jobs. On the informational side, Dave Petraeus and I agree that we don't have a strong enough counter- informational program to combat the Taliban and Al Qaida, and so on and so forth down a wide range of issues.

From this review, Dave Petraeus and I are now going to sit down and plot the most serious integration of civilian and military activities that we can -- we have had in our time. We're going to integrate the policy like it's never been done before. And, in fact, Dave and I are now planning a retreat to do just that.

KING: Well, let me -- let me talk about the challenge ahead, because no matter how right or how smart the United States is this time -- and you, obviously, in saying what you just said, Mr. Ambassador, you're criticizing what happened in the previous administration. But I don't to look backwards. For you to succeed, you need partners. And I want to play something that then-Candidate Obama told our Fareed Zakaria back in 2008 about the president of Afghanistan, Hamid Karzai -- the president of the United States, now, saying, back then, he didn't have much trust. Let's listen

I'm sorry, we don't have that sound for you. But here is what he said back in 2008. He said: I think the Karzai government has not gotten out of the bunker and helped to organize Afghanistan and government, the judiciary, police forces, in ways that would give people confidence. So there are a lot of problems there.

General, if there are a lot of problems there, have those problems been fixed? Or are you sending more U.S. troops into a country that can't organize and run itself?

PETRAEUS: Well, first of all, it's a comprehensive effort. And among the various lines of operation, if you will, are diplomatic lines that will be spearheaded by the ambassadors in both countries and with Ambassador Holbrooke, of course overseeing that. Among that effort has to be, without question, the strengthening -- the building in some cases -- of the kind of trust, cooperation, coordination that is necessary to deal with the problems that have emerged over the years.

It is no secret that the legitimacy of the Afghan government has been challenged by the corruption and some of the other issues there. President Karzai has appointed corruption committees, has made important starts, appointed some good officials, among them Minister of Interior Atmar. That now needs to be moved forward, as we run up to the elections. And then beyond, of course, it would be very important that we all work together to combat the kinds of issues that we discussed.

KING: You say it needs to be more forward. But Ambassador, I want you in on this point, because you have called corruption a cancer in Afghanistan. President Karzai's been in charge of seven years, first of an interim government, a transitional government. He's been president for four and a half years. If there is a cancer of corruption in Afghanistan, and he has been in charge for seven years, is he not part of the problem?

HOLBROOKE: There isn't any question that the government has corruption at high levels. I've said it as a private citizen, and I'm not going to repudiate anything I said as a private citizen. President Karzai called me right after the president's speech, which he which he watched live on CNN. He said it was a great speech, and he agreed with every word of it. And you will note that the president, for the first time at the presidential level, addressed corruption directly and frontally.

I will be meeting with President Karzai tomorrow in the Hague, in advance of the secretary of state's arrival there for this big international conference. Hillary Clinton will meet with Karzai the following day, the day after tomorrow. We will talk about corruption to him as we have before.

We do think it's a cancer. President Karzai says publicly that he agrees with that. And now it's up to his government to take action. But I would stress to you, John, that there is an election coming up on August 20th, the second election in Afghanistan's history. It's a hugely important election. President -- Secretary Clinton will address that in her remarks on Tuesday. And that election will be a chance for the people to vote on these issues.

KING: General Petraeus, I want you to come with me so we can take a closer look at the source of the issue here. And Ambassador Holbrooke, I believe you can see this on a monitor you have up in New York. This is your range of territory, General. You cover all this. But the problem at the moment is right here. And I want to pull out this border region just a little bit more and bring it over to the center, and pull this out a bit, so people can see what we're looking at.

Now, you believe the problem is as much on this side as on this side. So the U.S. troops are going here into Afghanistan. But many would say you're sending the fire department here, when the fire is here, that Al Qaida and the Taliban are on this side of the border. How confident are you that sending troops here will deal with the problem here in the context of trust? We just talked about trust with President Karzai. Do you trust -- let me ask you a simple question first. Do you tell the Pakistani military the most sensitive U.S. secrets? Or can you not trust that that information will be passed on to their security services and them onto the terrorists?

PETRAEUS: Well, first, let me just say that it's very important that the fire department address the fires that have sprung up in the eastern and southern parts of Afghanistan without question.

PETRAEUS: And then it's critically important that the fire department, if you will, in Pakistan, do the same thing in the Federally Administered Tribal Areas.

And if you move this down here, in fact, I just talked to General Kayani and had an update from him on operations that are ongoing in Bajaur and Mohmand, which are part of the Federally Administered Tribal agencies, some of which you have here.

And also in Khyber. They have just launched another operation in Mohmand. Clearly there has to be the establishment of true trust there as well. We discussed that actually this morning.

There is a substantial and significant and sustained commitment that is part of this Af-Pak strategy that was announced on Friday. We've had ups and downs between our countries over the years. We've now got to get on an up and stay on an up with them. And again, working our way forward in that regard has to be critical.

KING: And when you say we need to establish true trust, again, at a time of economic recession at home, when American families are struggling, we have given Pakistan more than $12 billion in recent years in aid and we don't have true trust?

PETRAEUS: Well, we have had ups and downs. Now, it is important to point out that there has been progress in these areas. It's significant to note that for a variety -- through a variety of ways, nine of the top 20 extremist leaders in this area -- let's remember, this is where the al Qaeda and transnational extremists are that have -- that were the ones that launched the 9/11 attacks, of course, and have launched attacks more recently in the U.K., Afghanistan, Pakistan, India, and other areas.

So very important to get into this. We have established, as an example, a joint coordination center just here just across the Khyber Pass. That is the kind of building trust that is very important where we're providing the products of intelligence activities and so forth and we see the building with the frontier core, with the other elements of the Pakistani military that are active there, the kind of cooperation and coordination necessary.

I should add that it's also important that this be trilateral. And in fact, as Richard explains frequently, the intelligence services of these two countries, which have had quite a bit enmity between them, they also have to cooperate and we're going to work together, all of us, to try to foster that cooperation as well. KING: And, Ambassador, to that point, how difficult is -- already difficult and incredibly complicated and sensitive diplomacy, how much more difficult is it if you can't be sure that you share a secret, you share some sensitive information with somebody in Pakistan and there is a history of this information being passed on to the security services and then in some cases passed on to the al Qaeda and Taliban?

HOLBROOKE: Well, of course, you're absolutely right, John. It's a huge concern for General Petraeus and me. Leon Panetta made his first trip as director of central intelligence to this region. This is going to be his focus.

We have started a new trilateral process of the leaders of the two countries, Afghanistan and Pakistan, coming to the United States. They came in late February to advise us on the strategic review. Both -- Karzai also praised the president's speech, by the way.

And now we are planning a new session for early May which Leon Panetta, Secretary of Agriculture Tom Vilsack, Vice President Biden, and others will join Secretary Clinton, General Petraeus, and me, and Bob Gates to participate in.

In all of these issues, we have to break down what you just referred to and what the Pakistani foreign minister himself called the trust deficit. You're absolutely right. There is a -- the relationship between Pakistan and the United States is immensely complicated and it isn't quite where it should be.

And the new focus on Pakistan and what General Petraeus just referred to as Af-Pak, Afghanistan-Pakistan, is designed to emphasize the fact that as we move forward, we need to focus as much on Pakistan, but with one key caveat, John. As the foreign minister of Pakistan has said publicly and repeatedly, there cannot be American combat boots, combat troops on the ground in western Pakistan.

So when you talk about fighting the fire on the other side of the border, we are constrained in going after people on that side of the border, even though they are the ones, to a large extent, planning further attacks.

This is the challenge of a uniquely difficult problem. Now we're recommitted to it and General Petraeus and I are shoulder-to-shoulder in this effort.

KING: I want to go to a quick break, but before I do, on this point -- and we'll have much more discussion, but on that key point that you're not allowed -- the Pakistani government says you're not allowed to put people in here.

From time to time we know there have been Special Forces operations in this area. How much of that is for public consumption? And how much of -- do you have the freedom, if you see something right here and you can get to it before the Pakistanis can, would you do it?

PETRAEUS: Well, I think the president made that clear the other day where he talked about consulting with the Pakistanis. But if it ultimately comes to it that we will, if necessary, take action.

Let me caveat that very, very carefully though. And that is that there is no intention for us to be conducting operations in there certainly on the ground, and there is every intention by the Pakistani military and their other forces to conduct those operations.

This is a very proud country. It has existing institutions. Our job is to enable those institutions, to help them develop the kinds of counterinsurgency capabilities that are needed and to help their entire government at large to conduct the kind of comprehensive effort that is necessary well beyond just the military effort, but one that then looks after displaced citizens, that tries to foster local economic development, and there was some of that in the president's speech as well.

KING: Much more to discuss with our two distinguished guests, General Petraeus and Ambassador Holbrooke. We'll be back in a minute. Among the topics, U.S. tensions with Iran. How close is that country to a nuclear weapon?

And of course, we're keeping our eye on the North Dakota where the Red River remains a flooding threat. We'll talk to Senator Kent Conrad, who is assessing the situation in his home state. STATE OF THE UNION will be right back.

(COMMERCIAL BREAK)

KING: We're discussing the many challenges here with General David Petraeus and Ambassador Richard Holbrooke discussing the many challenges here.

We were just talking, gentlemen, about the problems, the many issues you have to deal with, the tough jobs you have with the Afghanistan-Pakistan border. I want to move, a little bit this way in the neighborhood is Iran.

Admiral Mullen, the chairman of the joint chiefs, was on this program a couple of weeks ago. And I put to him the question, does he agree with international assessments that Iran now has enough fissile material to build a nuclear weapon?

Let's listen to Admiral Mullen.

(BEGIN VIDEO CLIP)

KING: Does Iran have enough to make a bomb?

ADMIRAL MIKE MULLEN (USN), CHAIRMAN, JOINT CHIEFS OF STAFF: We think they do, quite frankly. And Iran having a nuclear weapon, I've believed, for a long time, is a very, very bad outcome to for the region and the world.

(END VIDEO CLIP)

KING: Now, General, Secretary Gates, the same weekend, said, yes, they may have enough material but he doesn't think they're close to a weapon yet.

What is your assessment of the -- where they are in development of the weapon and what kind of a threat and a complication that makes your efforts in the rest of the very troubled neighborhood?

PETRAEUS: Well, Admiral Mullen clarified what it was that he was saying and he pointed out that there are additional steps required between having enough low-enriched uranium and actually having something that can be weaponized.

You have to highly enrich it. You have to actually do the physical package. You have to have delivery and so forth. The bottom line is that we think it's at least a couple of years away in that regard. It could be more. It could be a little bit less. There are certainly a lot of facts that we don't know about what goes on inside Iran.

KING: And is this -- is this regime being helpful when you deal with Afghanistan and Pakistan or are they trying to undermine what you doing over here, just as the administration -- the previous administration said repeatedly they tried to do what you were trying to solve in Iraq?

PETRAEUS: I think it's probably a mix. We have common objectives with Iran with respect to Afghanistan. They don't want to see the Taliban and the extremists elements that sought sanctuary there before return to running that country, certainly, a Sunni extremist organization, they, of course, being a Shia country.

They want to see a reduction in the flow of the illegal narcotics that has trapped many of their own citizens in addiction and so forth.

So there are common interests here, but there's also a sense, at times, we think, where they would certainly like us to bleed a bit more perhaps. They don't want to make it too easy for us. And certainly, they want to have a degree of influence, some of that legitimate, some perhaps a little less legitimate.

KING: Well, Ambassador Holbrooke, you will be in a meeting in the week ahead, I believe. I know Secretary Clinton will be there, in which Iranian diplomats will be in the room.

It is the highest-level contact in quite some time. What are your guidelines?

Where has the president said, Richard, if this comes up, you're allowed to talk about this. Let's say the Iranians come in and they're in a talkative mood and they want to talk about a lot of things. Where's your red line?

HOLBROOKE: Well, let's just see what happens in the Hague, John. I don't want to -- I don't want to forecast what's going to happen. Red lines? Well, we're not going to eradicate 30 years of bitter disagreements in one meeting.

But I want to be clear here that the United States has been asked repeatedly since January 20th how we feel about Iran participating in meetings on Afghanistan and Pakistan.

And we've given the same answer to everyone. We have no objections. Iran is a neighbor. And as David Petraeus has just said, they have -- we and they have common concerns.

In 2002 they helped stand up the Karzai government. They hate the Taliban and they need stability on their eastern frontier.

On the other hand, we have enormous differences with them on their nuclear program, on Hezbollah, Hamas and many other issues. So this is a work in progress. We also have to be mindful of the interests of our very important friends and allies in the rest of the region.

And so it's a very complicated issue. But the door is open for Iran to participate in international efforts to stabilize Afghanistan. Those must involve all the neighbors, including India, China, Russia, Turkey, Saudi Arabia, United Arab Emirates, plus our NATO allies.

So this -- we'll see how it goes.

KING: The vice president (sic) of the United States was a guest on this program two weeks ago. And he said something that caused a bit of a stir over at the White House and around town. I want you to listen.

(BEGIN VIDEO CLIP)

KING: Do you believe the president of the United States has made Americans less safe?

FORMER VICE PRESIDENT DICK CHENEY: I do. He is making some choices that, in my mind, will, in fact, raise the risk to the American people of another attack.

(END VIDEO CLIP)

KING: General Petraeus, you served in the Bush administration under Vice President Cheney and President Bush. You're now serving in the Obama administration.

Are the American people less safe because of this new president, as Vice President Cheney says?

PETRAEUS: Well, I wouldn't necessarily agree with that, John. I think that, in fact, there is a good debate going on about the importance of values in all that we do. I think that, if one violates the values that we hold so dear, that we...

KING: You mean torture?

PETRAEUS: ... we jeopardize -- well, in fact, I put out a memorandum to the soldiers in the Multinational Force-Iraq, when I was the commander, because of concern that we may not be taking some of these seriously enough.

As you know, the field manual came out, from the Army, that is used by all of the different services that completely, clearly outlaws torture. So we think for the military, in particular, that can't -- that's a line that can't be crossed.

(CROSSTALK)

KING: So was the line crossed in the Bush administration?

Was the line crossed? Did you do things which you fundamentally thought were wrong and immoral?

PETRAEUS: We certainly did not. Now, there were some incidents that did, and we learned some very hard lessons from Abu Ghraib and other cases. And we believe that we took corrective measures in the wake of that. And that is very, very important.

But it is hugely significant to us to live the values that we hold so dear and that we have fought so hard to protect over the years.

KING: I want to talk through a timeline of Iraq. The American people came to know General David Petraeus as the general who turned around -- and many would accept that statement -- a flawed strategy in Iraq.

I want to go through a timeline. Then-state senator Barack Obama, way back in 2002, said he thought the Iraq war was a fundamental mistake and he opposed it.

And then, as a senator of the United States and a candidate for president, he spoke out quite passionately against the surge strategy. Let's listen.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: The responsible course of action for the United States, for Iraq and for our troops is to oppose this reckless escalation and to pursue a new policy.

(END VIDEO CLIP)

KING: As president of the United States, shortly after taking office, he was unveiling new Iraq strategy. He called you "brilliant," General Petraeus, and he said this. It sounds a little different.

(BEGIN VIDEO CLIP)

OBAMA: Under tough circumstances, the men and women of the United States military had served with honor and succeeded beyond any expectation.

(END VIDEO CLIP)

KING: And then recently, in a 60 minutes interview, he, almost under his breath, said something to the effect of who knew Iraq would be the least of his problems as president of the United States.

He has never publicly -- President Obama has never publicly said, you know what, I was wrong; the surge was the right strategy. Has he told you that?

PETRAEUS: Well, we haven't actually talked about the surge. What we talked about is looking forward. And I think it's very important, actually, at points like this, to take the rearview mirrors off the bus, as we say, and look -- look ahead. That has been the focus.

I think you know that, on the day after the inauguration, the first full day in office, the president sat down with the commander from Iraq by video teleconference, myself in the situation room, the chairman, the secretary of defense, the other members of the national security team and discussed Iraq.

And that's what launched the review of the Iraq policy that eventually culminated in the address at Camp Lejeune, something that General Odierno, Ambassador Crocker and I support, something to which we had substantial input, and we think quite a pragmatic and proper, prudent way forward.

KING: Ambassador Holbrooke, you were a fierce critic of the Bush approach in Iraq. In the political debate about it here in Washington, though, many Democrats will tell you privately, you know what, I was wrong; the surge worked because of David Petraeus and that, you know, President Bush, in the end, and John McCain and Joe Lieberman were right.

Why is that such a hard thing for Democrats to say?

HOLBROOKE: I -- I'm not going to partisanize the discussion here. But I do want to say something about Dave Petraeus, whom I did not know until about three months ago and then fate and destiny put us together as counterparts.

I think the nation owes General Petraeus a debt of gratitude for what he's achieved in Iraq. And I am confident, absolutely confident, having known the entire United States military chain of command from General Westmoreland in Vietnam on, that we now have the best team we possibly could have on the ground, from Admiral Mullen to General Petraeus to the command in Afghanistan.

And I'm proud to work with them. And we all ought to acknowledge what has been achieved.

Now, in regard to the previous comment that you played, by the former vice president of the United States, I need to say -- and I hope I can do this in a spirit of bipartisanship and nonbipartisanship, that I don't have a clue what he's talking about.

We are treating Afghanistan and Pakistan as a single theater. We are going to address it in an integrated way. We are going to give it more resources. And that is where the people planning the next attack on the United States or on our European allies are certainly doing it. So I just do not understand what his comments were referenced to.

KING: All right. We will leave it there. Ambassador Holbrooke being very diplomatic. We'll catch you next campaign season. We'll see if that stays the same.

(LAUGHTER) Ambassador Holbrooke, General Petraeus, on a serious note, you both have very difficult work in the days and weeks ahead and we certainly, as Americans, we wish you very well in that work.

Good luck to both of you. And thanks for coming in this morning.

Video and Text: Obama News Conference (24 March)

See Also: John Matlin on "Obama and the US Economy"

"If the Washington press corps successfully links Obama with the privileged in American society and nails him as unable to curb the worst excesses of Wall Street, his Presidency may descend into the disaster that few predicted and fewer, except died-in-the-wool Republicans, wanted."

CNN Summary: "Obama defends his budget as essential to recovery"



PRESIDENT OBAMA: Hello, everybody. Please have a seat.

Good evening. Now, before I take questions from the correspondents, I want to give everyone who’s watching tonight an update on the steps we’re taking to move this economy from recession to recovery, and ultimately to prosperity.

Now, it’s important to remember that this crisis didn’t happen overnight and it didn’t result from any one action or decision. It took many years and many failures to lead us here. And it will take many months and many different solutions to lead us out. There are no quick fixes, and there are no silver bullets.

That’s why we’ve put in place a comprehensive strategy designed to attack this crisis on all fronts. It’s a strategy to create jobs, to help responsible homeowners, to restart lending, and to grow our economy over the long term. And we’re beginning to see signs of progress.

The first step we took was to pass a recovery plan to jump-start job creation and put money in people’s pockets. And this plan’s already saved the jobs of teachers and police officers. It’s creating construction jobs to rebuild roads and bridges. And yesterday I met with a man whose company is reopening a factory outside of Pittsburgh that’s rehiring workers to build some of the most energy-efficient windows in the world.

And this plan will provide a tax cut to 95 percent of all working families that will appear in people’s paychecks by April 1st.

The second step we took was to launch a plan to stabilize the housing market and help responsible homeowners stay in their homes. This plan’s one reason that mortgage interest rates are now at near- historic lows.

We’ve already seen a jump in refinancings of mortgages as homeowners take advantage of lower rates. And every American should know that up to 40 percent of all mortgages are now eligible for refinancing. This is the equivalent of another tax cut, and we’re also beginning to see signs of increased sales and stabilizing home prices for the first time in a very long time.

The third part of our strategy is to restart the flow of credit to families and businesses. To that end, we’ve launched a program designed to support the markets for more affordable auto loans, student loans and small-business loans -- a program that’s already securitized more of this lending in the last week than in the last four months combined.

Yesterday, Secretary Geithner announced a new plan that will partner government resources with private investment to buy up the assets that are preventing our banks from lending money. And we will continue to do whatever is necessary in the weeks ahead to ensure the banks Americans depend on have the money they need to lend, even if the economy gets worse.

Finally, the most critical part of our strategy is to ensure that we do not return to an economic cycle of bubble and bust in this country. We know that an economy built on reckless speculation, inflated home prices and maxed-out credit cards does not create lasting wealth. It creates the illusion of prosperity, and it’s endangered us all.

The budget I submitted to Congress will build our economic recovery on a stronger foundation so that we don’t face another crisis like this 10 or 20 years from now. We invest in the renewable sources of energy that will lead to new jobs, new businesses and less dependence on foreign oil. We invest in our schools and our teachers, so that our children have the skills they need to compete with any workers in the world.

We invest in reform that will bring down the cost of health care for families, businesses and our government.

And in this budget, we have -- we have to make the tough choices necessary to cut our deficit in half by the end of my first term, even under the most pessimistic estimates.

At the end of the day, the best way to bring our deficit down in the long run is not with a budget that continues the very same policies that have led us to a narrow prosperity and massive debt. It’s with a budget that leads to broad economic growth by moving from an era of borrow-and-spend to one where we save and invest.

And that’s why clean-energy jobs and businesses will do -- all across America. That’s what a highly skilled workforce can do all across America. That’s what an efficient health-care system that controls costs and entitlements like Medicare and Medicaid will do.

That’s why this budget is inseparable from this recovery, because it is what lays the foundation for a secure and lasting prosperity.

The road to that prosperity is still long, and we will hit our share of bumps and setbacks before it ends. But we must remember that we can get there if we travel that road as one nation, as one people.

You know, there was a lot of outrage and finger-pointing last week, and much of it is is understandable. I’m as angry as anybody about those bonuses that went to some of the very same individuals who brought our financial system to its knees, partly because it’s yet another symptom of the culture that led us to this point.

But one of the most important lessons to learn from this crisis is that our economy only works if we recognize that we’re all in this together, that we all have responsibilities to each other and to our country.

Bankers and executives on Wall Street need to realize that enriching themselves on the taxpayer’s dime is inexcusable, that the days of outsize rewards and reckless speculation that puts us all at risk have to be over. At the same time, the rest of us can’t afford to demonize every investor or entrepreneur who seeks to make a profit. That drive is what has always fueled our prosperity, and it is what will ultimately get these banks lending and our economy moving once more.

We’ll recover from this recession, but it will take time; it will take patience; and it will take an understanding that when we all work together, when each of us looks beyond our own short-term interest to the wider set of obligations we have towards each other, that’s when we succeed. That’s when we prosper. And that’s what is needed right now.

So let’s look towards the future with a renewed sense of common purpose, a renewed determination, and, most importantly, renewed confidence that a better day will come.

All right. With that, let me take some questions. And I’ve got a list here; let’s start off with Jennifer Loven, AP.

QUESTION: Thank you, Mr. President.

Your Treasury secretary and the Fed chair have been -- were on Capitol Hill today, asking for this new authority that you want to regulate big, complex financial institutions. But given the problems that the financial bailout program has had so far -- banks not wanting to talk about how they’re spending the money, the AIG bonuses that you mentioned -- why do you think the public should sign on for another new, sweeping authority for the government to take over companies, essentially?

PRESIDENT OBAMA: Well, keep in mind that it is precisely because of the lack of this authority that the AIG situation has gotten worse. Now, understand that AIG’s not a bank, it’s an insurance company. If it were a bank and it had effectively collapsed, then the FDIC could step in, as it does with a whole host of banks -- as it did with IndyMac -- and in a structured way renegotiate contracts, get rid of bad assets, strengthen capital requirements, resell it on the private marketplace.

So we’ve got a regular mechanism whereby we deal with FDIC-insured banks. We don’t have that same capacity with an institution like AIG, and that’s part of the reason why it has proved so problematic. I think a lot of people understandably say: Well, if we’re putting all this money in there, and if it’s such a big systemic risk to allow AIG to liquidate, why is it that we can’t restructure some of these contracts? Why can’t we do some of the things that need to be done in a more orderly way? And the reason is -- is because we have not obtained this authority.

We should have obtained it much earlier, so that any institution that poses a systemic risk that could bring down the financial system we can handle, and we can do it in an orderly fashion that quarantines it from other institutions. We don’t have that power right now. That’s what Secretary Geithner was talking about.

And I think that there’s going to be strong support from the American people and from Congress to provide that authority so that we don’t find ourselves in a situation where we’ve got to choose between either allowing an enormous institution like AIG, which is not just insuring other banks but is also insuring pension funds and potentially putting people’s 401(k)s at risk if it goes under -- that’s one choice -- and then the other choice is just to allow them to take taxpayer money without the kind of conditions that we’d like to see on it. So that’s why I think the authority’s so important.

QUESTION: But why should the public trust the government to handle that authority well?

PRESIDENT OBAMA: Well, as I said before, if you look at how the FDIC has handled a situation like IndyBank, for example, it actually does these kinds of resolutions effectively when it’s got the tools to do it.

We don’t have the tools right now.

Okay. Chuck Todd.

QUESTION: Thank you, Mr. President. Some have compared this financial crisis to a war, and in times of war, past presidents have called for some form of sacrifice. Some of your programs, whether for Main Street or Wall Street, have actually cushioned the blow for those that were irresponsible during this -- during this economic period of prosperity or supposed prosperity that you were talking about.

Why, given this new era of responsibility that you’re asking for, why haven’t you asked for something specific that the public should be sacrificing to participate in this economic recovery?

PRESIDENT OBAMA: Well, let me -- let me take that question in a couple -- couple of phases. First of all, it’s not true that we have not asked sacrifice from people who are getting taxpayer money. We have imposed some very stiff conditions. The only problem that we’ve had so far are contracts that were put in place before we took over.

But moving forward, anybody -- any bank, for example, that is receiving capital from the taxpayers is going to have to have some very strict conditions in terms of how it pays out its executives, how it pays out dividends, how it’s reporting its lending practices. So we want to make sure that there’s some stiff conditions in place.

With respect to the American people, I think folks are sacrificing left and right. They -- you’ve got a lot of parents who are cutting back on everything to make sure that their kids can still go to college. You’ve got workers who are deciding to cut an entire day and entire day’s worth of pay so that their fellow co-workers aren’t laid off. I think that across the board people are making adjustments, large and small, to accommodate the fact that we’re in very difficult times right now.

What I’ve said here in Washington is that we’ve got to make some tough choices. We got to make some tough budgetary choices. What we can’t do, though, is sacrifice long-term growth investments that are critical to the future. And that’s why my budget focuses on health care, energy, education -- the kinds of things that can build a foundation for long-term economic growth as opposed to the fleeting prosperity that we’ve seen over the last several years. I mean, when you have an economy in which the majority of growth is coming from the financial sector -- when AIG selling a derivative is counted as an increase in the gross domedic -- domestic product, then that’s not a model for sustainable economic growth.

And what we have to do is invest in those things that will allow the American people’s capacity for ingenuity and innovation, their ability to take risks but make sure that those risks are grounded in good products and good services that they believe they can market to the rest of the country, that those models of economic growth are what we’re promoting, and that’s what I think our budget does.

QUESTION: But you don’t think there should be a specific call to action that you want the American -- I mean, this is -- you’ve described this as an economic crisis like nothing we have seen since the Great Depression.

PRESIDENT OBAMA: Well, as I said, the American people are making a host of sacrifices in their individual lives. We are going through an extraordinary crisis, but we believe that taken -- if you take the steps that we’ve already taken with respect to housing, with respect to small businesses, if you look at what we’re doing in terms of increasing liquidity in the financial system, that the steps that we’re taking can actually stabilize the economy and get it moving again.

What I’m looking from the American people to do is that they are going to be doing what they’ve always done, which is working hard, looking after their families, making sure that despite the economic hard times that they’re still contributing to their community, that they’re still participating in volunteer activities, that they are paying attention to the debates that are going on in Washington.

And the budgets that we’re putting forward and some of the decisions that we’re having to make are going to be tough decisions, and we’re going to need the support of the American people, and that’s part of why what I’ve tried to do is to be out front as much as possible, explaining in very clear terms exactly what we’re doing.

Jake?

QUESTION: Thank you, Mr. President. Right now on Capitol Hill, Senate Democrats are writing a budget, and according to press accounts and their own statements, they’re not including the middle-class tax cut that you include in the stimulus. They’re talking about phasing that out. They’re not including the cap-and-trade that you have in your budget, and they’re not including other measures.

I know when you outlined your four priorities over the weekend, a number of these things were not in there. Will you sign a budget if it does not contain a middle-class tax cut, does not contain cap-and- trade?

PRESIDENT OBAMA: Well, I’ve emphasized repeatedly what I expect out of this budget. I expect that there’s serious efforts at health care reform, and that we are driving down costs for families and businesses, and ultimately for the federal and state governments that are going to be broke if we continue on the current path.

I’ve said that we’ve got to have a serious energy policy that frees ourselves from dependence on foreign oil and makes clean energy the profitable kind of energy. We’ve got to invest in education, K through 12 and beyond, to upgrade the skills of the American worker so we can compete in -- in the international economy. And I’ve said that we’ve got to start driving our deficit numbers down.

Now, we never expected, when we printed out our budget, that they would simply Xerox it and vote on it. We assume that it has to go through the legislative process. I have not yet seen the final product coming out of the Senate or the House, and we’re in constant conversations with them. I am confident that the budget we put forward will have those principles in place.

When it comes to the middle-class tax cut, we already had that in the recovery. We know that that’s going to be in place for at least the next two years. We had identified a specific way to pay for it. If Congress has better ideas in terms of how to pay for it, then we’re happy to listen.

When it comes to cap-and-trade, the broader principle is that we’ve got to move to a new energy era. And that means moving away from polluting energy sources towards cleaner energy sources.

That is a potential engine for economic growth.

I think cap-and-trade is the best way, from my perspective, to achieve some of those gains, because what it does is it starts pricing the pollution that’s being sent into the atmosphere.

The way it’s structured, it has to take into account regional differences. It has to protect consumers from huge spikes in electricity prices. So there are a -- a lot of technical issues that are going to have to be sorted through.

Our point in the budget is, let’s get started now. We can’t wait. And my expectation is that the energy committees, or other relevant committees in both the House and the Senate, are going to be moving forward a strong energy package. It’ll be authorized. We’ll get it done. And I will sign it. Okay?

QUESTION: So is that a yes, sir? You’re willing to sign a budget that doesn’t have those two provisions?

PRESIDENT OBAMA: No; I -- what I said was -- is I haven’t seen yet what provisions are in there. The bottom line is -- is that I want to see health care, energy, education and serious efforts to reduce our budget deficit.

And there are going to be a lot of details that are still being worked out. But I have confidence that we’re going to be able to get a budget done that’s reflective of what needs to happen in order to make sure that America grows. Okay?

Chip Reid.

QUESTION: Thank you, Mr. President.

At both of your town hall meetings in California last week, you said, quote, ”I didn’t run for president to pass on our problems to the next generation.”

But under your budget, the debt will increase $7 trillion over the next 10 years. The Congressional Budget Office says $9.3 trillion. And today on Capitol Hill, some Republicans called your budget, with all the spending on health care, education and environment, the most irresponsible budget in American history.

Isn’t that kind of debt exactly what you were talking about when you said passing on our problems to the next generation?

PRESIDENT OBAMA: First of all, I suspect that some of those Republican critics have a short memory, because as I recall, I’m inheriting a $1.3 trillion deficit, annual deficit, from them. That would be point number one.

Point number two. Both under our estimates and under the CBO estimates, both -- the most conservative estimates out there, we drive down the deficit over the first five years of our budget. The deficit is cut in half. And folks aren’t disputing that.

Where the dispute comes in is what happens in a whole bunch of out years. And the main difference between the budget that we presented and the budget that came out of Congressional Budget Office is assumptions about growth.

They’re assuming a growth rate of 2.2. We’re assuming a growth rate of 2.6. Those small differences end up adding up to a lot of money. Our assumptions are perfectly consistent with what blue chip forecasters out there are saying.

Now, none of us know exactly what’s going to happen six or eight or 10 years from now. Here’s what I do know: If we don’t tackle energy, if we don’t improve our education system, if we don’t drive down the costs of health care, if we’re not making serious investments in science and technology and our infrastructure, then we won’t grow 2.6 percent; we won’t grow 2.2 percent. We won’t grow.

And so what we’ve said is let’s make the investments that ensure that we meet our growth targets, that put us on a pathway to growth, as opposed to a situation in which we’re not making those investments and we still have trillion-dollar deficits.

And there’s a interesting reason why some of these critics haven’t put out their own budget. I mean, we haven’t seen an alternative budget out of them. And the reason is because they know that, in fact, the biggest driver of long-term deficits are the huge health care costs that we’ve got out here that we’re going to have to tackle.

And we -- that if we don’t deal with some of the structural problems in our deficit, ones that were here long before I got here, then we’re going to continue to see some of the problems in those out years.

And so what we’re trying to emphasize is let’s make sure that we’re making the investments that we need to grow, to meet those growth targets. At the same time, we’re still reducing the deficit by a couple of trillion dollars. We are cutting out wasteful spending in areas like Medicare. We’re -- we’re changing procurement practices when it comes to the Pentagon budget. We are looking at social- service programs and education programs that don’t work and eliminate them. And we will continue to go line-by-line through this budget, and where we find programs that don’t work we will eliminate them.

But it is -- it is going to be a(n) impossible task for us to balance our budget if we’re not taking on rising health care costs. And it’s going to be an impossible task to balance our budget or even approximate it if we are not boosting our growth rates. And -- and that’s why our budget focuses on the investments we need to make that happen.

QUESTION: But even under your budget -- as you said, over the next four or five years, you’re going to cut the deficit in half. Then, after that, six years in a row it goes up, up, up.

If you’re making all these long-term structural cuts --

PRESIDENT OBAMA: Right.

QUESTION: -- why does it continue to go up in the out years?

PRESIDENT OBAMA: Well, look. It is going to take a whole host of adjustments, and we couldn’t reflect all of those adjustments in this budget. Let me give you an example. There’s been a lot of talk about entitlements and Medicare and Medicaid. The biggest problem we have long term is Medicare and Medicaid, but whatever reforms we initiate on that front -- and we’re very serious about working on a bipartisan basis to reduce those deficits -- or reduce those costs -- you’re not going to see those savings reflected until much later.

And so a -- a budget is a snapshot of what we can get done right now, understanding that eight, 10 years from now we will have had a whole series of new budgets. And we’re going to have to make additional adjustments. And once we get out of this current economic crisis, then it’s going to be absolutely important for us to take another look and say, ”Are we growing as fast as we need to grow? Are there further cuts that we need to make? What other adjustments are -- is it going to take for us to have a sustainable budget level?”

But keep in mind -- just to give one other example, as a percentage of gross domestic product, we are reducing non-Defense discretionary spending to its lowest level since the ’60s -- lower than it was under Reagan, lower than it was under Clinton, lower than it was under Bush or both Bushes.

And so if we’re growing, if we are doing what’s necessary to create new businesses and to expand the economy, and we are making sure that we’re eliminating some of these programs that aren’t working, then over time that gap can close.

But I’m -- look, I’m not going to lie to you. It is tough. As I said, that’s why the critics tend to criticize, but they don’t offer an alternative budget, because even if we were not doing health care, we were not doing energy, we were not doing education, they’d still have a whole bunch of problems in those out years, according to CBO projections. The only difference would -- is that we will not have invested in what’s necessary to make this economy grow.

Is Lourdes here, from Univision? (Let’s see ?).

QUESTION: Thank you, Mr. President. Today your administration presented a plan to help curb the violence in Mexico and also to control any or prevent any spillover of the violence into the United States. Do you consider the situation now a national security threat?

And do you believe that it could require sending national troops to the border? Governor Perry of Texas has said that you still need more troops and more agents. How do you respond to that?

PRESIDENT OBAMA: Well, first of all let’s focus on what we did today. It’s very significant. We are sending millions of dollars in additional equipment to provide more effective surveillance. We are providing hundreds of additional personnel that can help control the border, deal with customs issues. We are coordinating very effectively with the Mexican government and President Calderon, who has taken on a(n) extraordinarily difficult task dealing with these drug cartels that have gotten completely out of hand.

And so the steps that we’ve taken are designed to make sure that the border communities in the United States are protected and you’re not seeing a spillover of violence, and that we are helping the Mexican government deal with a very challenging situation.

Now, we are going to continue to monitor the situation. And if the steps that we’ve taken do not get the job done, then we will do more.

One last point that I want to make about this. As I said, President Calderon has been very courageous in taking on these drug cartels.

We’ve got to also take some steps. Even as he is doing more to deal with the drug cartels sending drugs into the United States, we need to do more to make sure that illegal guns and cash aren’t flowing back to these cartels. That’s part of what’s financing their operations. That’s part of what’s arming them. That’s what makes them so dangerous. And this is something that we take very seriously, and we’re going to continue to work on diligently in the months to come.

Kevin Baron, Stars and Stripes. Is Kevin here? There you go.

QUESTION: Mr. President, where do you plan to find savings in the Defense and Veterans Administration’s budgets when so many items that seem destined for the chopping block are politically untenable, perhaps?

PRESIDENT OBAMA: I’m sorry, so many?

QUESTION: When so many items that may be destined for the chopping block seem politically untenable, from major weapons systems -- as you mentioned, procurement -- to wounded warrior care costs, or increased operations on Afghanistan, or the size of the military itself.

PRESIDENT OBAMA: Well, a couple of -- a couple of points I want to make.

The budget that we’ve put forward reflects the largest increase in veterans funding in 30 years. That’s the right thing to do. Chuck asked earlier about sacrifices. I -- I don’t think anybody doubts the extraordinary sacrifices that men and women in uniform have already made. And when they come home, then they have earned the benefits that they receive.

And unfortunately, over the last several years, all too often the VA has been under-resourced when it comes to dealing with things like post-traumatic stress disorder or traumatic brain injury, dealing with some of the backlogs in admission to VA hospitals.

So there are a whole host of veterans’ issues that I think every American wants to see properly funded, and that’s what’s reflected in our budget. Where the savings should come in -- and I’ve been working with Secretary Gates on this and will be detailing it more in the weeks to come -- is how do we reform our procurement system so that it keeps America safe and we’re not wasting taxpayer dollars? And there is uniform acknowledgment that the procurement system right now doesn’t work. That’s not just my opinion; that’s John McCain’s opinion; that’s Carl Levin’s opinion.

There are a whole host of people who are students of the procurement process that will say if you’ve got a whole range of billion-dollar, multi-billion-dollar systems that are -- where we’re seeing cost overruns of 30 percent or 40 percent or 50 percent, and then still don’t perform the way they’re supposed to or are providing our troops with the kinds of tools that they need to succeed on their missions, then we’ve got a problem.

Now, I think everybody in this town knows that the politics of changing procurement is tough, because, you know, lobbyists are very active in this area. You know, contractors are very good at dispersing the jobs in plants in the Defense Department widely.

And so what we have to do is to go through this process very carefully, be more disciplined than we’ve been in the last several years. As I’ve said, we’ve already identified, potentially, $40 billion in savings, just by some of the procurement reforms that are pretty apparent to a lot of -- a lot of critics out there. And we are going to continue to find savings in a way that allows us to put the resources where they’re needed but to make sure that we’re not simply fattening defense contractors.

One last point. In order for us to get a handle on these costs, it’s also important that we are honest in what these costs are. And that’s why it was so important for us to acknowledge the true costs of the Iraq war and the Afghan war, because if -- if those costs are somehow off the books and we’re not thinking about them, then it’s hard for us to make some of the tough choices that need to be made.

Okay. Ed Henry. Where’s Ed? There he is.

QUESTION: Thank you, Mr. President. You spoke again at the top about your anger about AIG. You’ve been saying that for days now. But why is it that it seems Andrew Cuomo seems to be, in New York, getting more actual action on it? And when you and Secretary Geithner first learned about this, 10 days, two weeks ago, you didn’t go public immediately with that outrage. You waited a few days, and then you went public after you realized Secretary Geithner really had no legal avenue to stop it.

And more broadly -- I just want to follow up on Chip and Jake -- you’ve been very critical of President Bush doubling the national debt. And to be fair, it’s not just Republicans hitting you. Democrat Kent Conrad, as you know, said, quote, ”When I look at this budget, I see the debt doubling again.” You keep saying that you’ve inherited a big fiscal mess. Do you worry, though, that your daughters, not to mention the next president, will be inheriting an even bigger fiscal mess if the spending goes out of control?

PRESIDENT OBAMA: Of course I do, Ed, which is why we’re doing everything we can to reduce that deficit. Look, if this were easy, then we would have already had it done and the budget would have been voted on and everybody could go home. This is hard. And the reason it’s hard is because we’ve accumulated a structural deficit that’s going to take a long time, and we’re not going to be able to do it next year or the year after or three years from now.

What we have to do is bend the curve on these deficit projections, and the best way for us to do that is to reduce health care costs. That’s not just my opinion; that’s the opinion of almost every single person who has looked at our long-term fiscal situation.

Now, how do we -- how are we going to reduce health care costs? Because the problem is not just in government-run programs, the problem is in the private sector as well. It’s experienced by families. It’s experienced by businesses. And so what we’ve said is, look, let’s invest in health information technologies, let’s invest in preventive care, let’s invest in mechanisms that look at who’s doing a better job controlling costs while producing good-quality outcomes in various states, and let’s reimburse on the basis of improved quality as opposed to simply how many procedures you’re doing. Let’s do a whole host of things, some of which cost money on the front end but offer the prospect of reducing costs on the back end.

Now, the alternative is to stand pat, and to simply say we are just going to not invest in health care; we’re not going to take on energy, we’ll wait until the next time that gas gets to $4 a gallon; we will not improve our schools, and we’ll allow China or India or other countries to lap our young people in terms of their performance; we will settle on lower growth rates, and we will continue to contract both as an economy and our ability to -- to provide a better life for our kids.

That I don’t think is the better option.

Now, have -- am I completely satisfied with all the work that needs to be done on deficits? No. That’s why I convened a fiscal responsibility summit, started in this room, to start looking at entitlements and to start looking at the big drivers of costs over the long term. Not all of those are reflected in our budget, partly because the savings we anticipate would be coming in years outside of the 10-year budget cycle that we’re talking about. Okay?

QUESTION: So on AIG, why did you wait -- why did you wait days to come out and express that outrage?

PRESIDENT OBAMA: I --

QUESTION: It seems like the action is coming out of New York in the attorney general’s office. It took you days to come public with Secretary Geithner and say, look, we’re outraged. Why did it take so long?

PRESIDENT OBAMA: Well, it took us a couple of days because I like to know what I’m talking about before I speak. (Laughter.) All right?

QUESTION: Secretary Geithner alluded --

PRESIDENT OBAMA: Major?

QUESTION: (Off mike.)

PRESIDENT OBAMA: Yeah.

QUESTION: Good evening, Mr. President. Thank you. Taking this economic debate a bit globally, senior Chinese officials have publicly expressed an interest in an international currency. This is described by Chinese specialists as a sign that they are less confident than they used to be in the value and the reliability of the U.S. dollar. European countries have resisted your calls to spend more on economic stimulus.

I wonder, sir, as a candidate who ran concerned about the image of the United States globally, how comfortable you are with the Chinese government, run by communists, less confident than they used to be in the U.S. dollar, and European governments, some of the center-left, some of them socialist, who say you’re asking them to spend too much?

PRESIDENT OBAMA: Well, first of all, I haven’t asked them to do anything. What I’ve suggested is -- is that all of us are going to have to take steps in order to lift the economy. We don’t want a situation in which some countries are making extraordinary efforts and other countries aren’t, with the hope that somehow the countries that are making those important steps lift everybody up.

And so somebody’s got to take leadership. It’s not just me, by the way. I was with Kevin Rudd, prime minister of Australia, today, who was very forceful in suggesting that countries around the world, those with the capacity to do so, take the steps that are needed to fill this enormous hole in global demand. Gordon Brown, when he came to visit me, said the exact same thing.

So the goal at the G-20 summit, I think, is to do a couple of things. Number one, say to all countries: Let’s do what’s necessary in order to create jobs and to get the economy moving again. Let’s avoid steps that could result in protectionism, that would further contract global trade. Let’s focus on how are we going to move our regulatory process forward in order so that we do not see the kinds of systemic breakdowns that we’ve already seen.

And that -- that means not just dealing with banks, but also some of the other financial flows that are out here that are currently unregulated. We’ve got to update regulations that date back to the 1930s, and we’re going to have to do some coordination with other countries in order to accomplish that.

As far as confidence in the U.S. economy or the dollar, I would just point out that the dollar is extraordinarily strong right now. And the reason the dollar is strong right now is because investors consider the United States the strongest economy in the world, with the most stable political system in the world.

So you don’t have to take my word for it. I think that there is a great deal of confidence that ultimately, although we are going through a rough patch, that the prospects for the world economy are very, very strong.

And -- and last point I would make in terms of changing America’s image in the world, Garrett, I -- you know, I haven’t looked at the latest polling around the world, but I think the -- it’s -- I think it’s fair to say that the response that people have had to our administration and the steps we have taken are ones that are restoring a sense of confidence and the ability of the United States to assert global leadership.

QUESTION: Is there a need --

PRESIDENT OBAMA: That will just strengthen -- excuse me?

QUESTION: Is there a need for a global currency?

PRESIDENT OBAMA: I don’t believe that there’s a need for a global currency.

Mike Allen, Politico. Hi, Mike.

QUESTION: Mr. President, are you -- (takes mic) -- thank you. Thank you, Mr. President. Are you reconsidering your plan to cut the interest-rate deduction for mortgages and for charities? And do you regret having proposed that in the first place?

PRESIDENT OBAMA: No, I think it’s -- I think it’s the right thing to do.

Where we’ve got to make some difficult choices -- here’s what we did with respect to tax policy. What we said was that over the last decade, the average worker, the average family have seen their wages and incomes flat. Even at times where supposedly we were in the middle of an economic boom, as a practical matter their incomes didn’t go up. And so (what/well ?) we said -- let’s give them a tax cut. Let’s give them some relief, some help -- 95 percent of American families.

Now, for the top 5 percent, they’re the ones who typically saw huge gains in their income. I -- I fall in that category. And what we’ve said is, for those folks, let’s not renew the Bush tax cuts. So let’s go back to the rates that existed back in -- during the Clinton era, when wealthy people were still wealthy and doing just fine. And let’s look at the level at which people can itemize their deductions.

And what we’ve said is let’s go back to the rate that existed under Ronald Reagan.

People are still going to be able to make charitable contributions. It just means if you give $100 and you’re in this tax bracket, at a certain point, instead of being able to write off 36 (percent) or 39 percent, you’re writing off 28 percent. Now, if it’s really a charitable contribution, I’m assuming that that shouldn’t be the determining factor as to whether you’re giving that hundred dollars to the homeless shelter down the street.

And so this provision would effect about 1 percent of the American people. They would still get deductions. It’s just that they wouldn’t be able to write off 39 percent. In that sense, what it would do is it would equalize. When I give $100, I get the same amount of deduction as when some -- a bus driver who’s making $50,000 a year or $40,000 a year gives that same hundred dollars. Right now, he gets 28 percent -- he gets to write off 28 percent, I get to write off 39 percent. I don’t think that’s fair.

So I think this was a good idea. I think it is a realistic way for us to raise some revenue from people who benefitted enormously over the last several years. It’s not going to cripple them.

They’ll still be well-to-do. And, you know, ultimately if we’re going to tackle the serious problems that we’ve got, then in some cases those who are more fortunate are going to have to pay a little bit more.

QUESTION: It’s not the well-to-do people; it’s the charities. Given what you’ve just said --

PRESIDENT OBAMA: Yeah.

QUESTION: -- are you confident that charities are wrong when they contend that this would discourage giving?

PRESIDENT OBAMA: Yes. I am. I mean, if you look at the evidence -- there’s very little evidence that this has a significant impact on charitable giving. I’ll tell you what has a significant impact on charitable giving is a financial crisis and an economy that’s contracting. And so the most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine.

Kevin Chappell. Hi, Kevin.

QUESTION: Thank you, Mr. President. A recent report found that as a result of the economic downturn, one in 50 children are now homeless in America. With shelters at full capacity, tent cities are sprouting up across the country.

In passing your stimulus package, you said that help was on the way, but what would you say to these families, especially children, who are sleeping under bridges and in tents across the country?

PRESIDENT OBAMA: Well, the first thing I’d say is that I’m heartbroken that any child in America is homeless.

And the most important thing that I can do on their behalf is to make sure their parents have a job. And that’s why the recovery package said, as a first priority, how are we going to save or create 3.5 million jobs? How can we prevent layoffs for teachers and police officers? How can we make sure that we are investing in the infrastructure for the future that can put people back to work right away? How do we make sure that when people do lose their jobs, that their unemployment insurance is extended, that they can keep their health care?

So there are a whole host of steps that we’ve done to provide a cushion for folks who have fallen on very hard times and to try to spur immediate projects that can put people back to work.

Now, in the meantime, we’ve got to work very closely with the states to monitor and to help people who are still falling through the cracks.

And, you know, the homeless problem was bad even when the economy was good. Part of the change in attitudes that I want to see here in Washington and all across the country is a belief that it is not acceptable for children and families to be without a roof over their heads in a country as wealthy as ours. And so we’re going to be initiating a range of programs as well to deal with homelessness.

One area in particular I want to focus on is the issue of veterans. The rate of homelessness among veterans is much, much higher than for non-veteran populations.

And so we’ve got -- a number of the increases that we’re looking for in our budget on veterans funding directly addresses the issue of homeless veterans. That, I think, can provide some real help.

Ann Compton. Hey, Ann.

QUESTION: Sir. (Soft laughter.)

PRESIDENT OBAMA: You sound surprised. (Laughter.)

QUESTION: I am surprised! (Chuckles.) Could I ask you about race?

PRESIDENT OBAMA: You may.

QUESTION: Yours is a rather historic presidency, and I’m just wondering whether in any of the policy debates that you’ve had within the White House, the issue of race has come up, or whether it has in the way you feel you’ve been perceived by other leaders or by the American people. Or have the last 64 days been a relatively color- blind time?

PRESIDENT OBAMA: I -- I think that the last 64 days has been dominated by me trying to figure out how we’re going to fix the economy, and that’s -- affects black, brown and white. And you know, obviously, at the Inauguration I think that there was justifiable pride on the part of the country that we had taken a step to move us beyond some of the searing legacies of racial discrimination in this country, but that lasted about a day. And you know, right now the American people are judging me exactly the way I should be judged, and that is, are we taking the steps to improve liquidity in the financial markets, create jobs, get businesses to reopen, keep America safe?

And that’s what I’ve been spending my time thinking about.

Okay. Jon Ward, Washington Times. Where’s Jon?

QUESTION: Right here, sir.

PRESIDENT OBAMA: There you go.

QUESTION: Thank you, Mr. President.

In your remarks on stem-cell research earlier this month, you talked about a majority consensus in determining whether or not this is the right thing to do, to federally fund embryonic stem-cell research. I’m just wondering, though, how much you personally wrestled with the morality or ethics of federally funding this kind of research, especially given the fact that science so far has shown a lot of progress with adult stem cells but not a lot with embryonic?

PRESIDENT OBAMA: Okay. No, I -- I think it’s a -- I think it’s a legitimate question.

I -- I wrestle with these issues every day. As I mentioned to -- I think in an interview a couple of days ago, by the time an issue reaches my desk, it’s a hard issue. If it was an easy issue, somebody else would have solved it and it wouldn’t have reached me.

Look, I believe that it is very important for us to have strong moral guidelines, ethical guidelines, when it comes to stem-cell research or anything that touches on, you know, the issues of possible cloning or issues related to, you know, the human life sciences.

I think those issues are all critical, and I’ve said so before. I wrestle with it on stem cell; I wrestle with it on issues like abortion.

I think that the guidelines that we provided meet that ethical test. What we have said is that for embryos that are typically about to be discarded, for us to be able to use those in order to find cures for Parkinson’s or for Alzheimer’s or for, you know, all sorts of other debilitating diseases, juvenile diabetes, that -- that it is the right thing to do. And that’s not just my opinion. That is the opinion of a number of people who are also against abortion.

Now, I am glad to see progress is being made in adult stem cells. And if the science determines that we can completely avoid a set of ethical questions or political disputes, then that’s great. I have -- I have no investment in causing controversy. I’m happy to avoid it if that’s where the science leads us.

But what I don’t want to do is predetermine this based on a very rigid ideological approach. And that’s what I think is reflected in the executive order that I signed.

QUESTION: I meant to ask as a follow-up, though, do you think that scientific consensus is enough to tell us what we can and cannot do?

PRESIDENT OBAMA: No. I think there’s always an ethical and a moral element that has to be -- be a part of this. And so, as I said, I don’t take decisions like this lightly. They’re ones that I take seriously. And -- and I respect people who have different opinions on this issue.

But I think that this was the right thing to do and the ethical thing to do. And as I said before, my hope is, is that we can find a mechanism ultimately to cure these diseases in a way that gains a hundred percent consensus. And we certainty haven’t achieved that yet. But I think on balance this was the right step to take.

STAFF: Last question.

PRESIDENT OBAMA: Okay. Stephen Collinson, AFP.

QUESTION: Mr. President, you came to office pledging to work for peace between Israel and the Palestinians.

PRESIDENT OBAMA: Yeah.

QUESTION: How realistic do you think those are hopes are now, given the likelihood of a prime minister who’s not fully signed up to a two- state solution and a foreign minister who’s been accused of insulting Arabs?

PRESIDENT OBAMA: It’s not easier than it was, but I think it’s just as necessary. We don’t yet know what the Israeli government is going to look like. And we don’t yet know what the future shape of Palestinian leadership is going to be comprised of.

What we do know is this; that the status quo is unsustainable. That it is critical for us to advance a two-state solution where Israelis and Palestinians can live side by side in their own states with peace and security. And by assigning George Mitchell the task of working as special envoy, what we’ve signaled is that we’re going to be serious from day one in trying to move the parties in a direction that acknowledges that reality. How effective these negotiations may be, I think we’re going to have to wait and see.

But, you know, we were here for Saint Patrick’s Day, and you’ll recall that we had what had been previously sworn enemies celebrating here in this very room; you know, leaders from the two sides in Northern Ireland that, you know, a couple of decades ago or even a decade ago people would have said could never achieve peace. And here they were, jointly appearing and talking about their commitment, even in the face of violent provocation.

And what that tells me is that if you stick to it, if you are persistent, then -- then these problems can be dealt with.

That whole philosophy of persistence, by the way, is one that I’m going to be emphasizing again and again in the months and years to come, as long as I am in this office. I’m a big believer in persistence. I think that when it comes to domestic affairs, if we keep on working at it, if we acknowledge that we make mistakes sometimes and that we don’t always have the right answer, and we’re inheriting very knotty problems, that we can pass health care, we can find better solutions to our energy challenges, we can teach our children more effectively, we can deal with a very real budget crisis that is not fully dealt with in my -- in my budget at this point, but makes progress.

I think when it comes to the banking system, you know, it was just a few days ago or weeks ago where people were certain that Secretary Geithner couldn’t deliver a plan. Today, the headlines all look like, well, all right, there’s a plan.

And I’m sure there’ll be more criticism and we’ll have to make more adjustments, but we’re moving in the right direction.

When it comes to Iran, you know, we did a video sending a message to the Iranian people and the leadership of the Islamic Republic of Iran. And some people said, ”Well, they did not immediately say they were eliminating nuclear weapons and stop funding terrorism.” Well, we didn’t expect that. We expect that we’re going to make steady progress on this front.

We haven’t immediately eliminated the influence of lobbyists in Washington. We have not immediately eliminated wasteful pork projects. And we’re not immediately going to get Middle East peace. We’ve been in office now a little over 60 days.

What I am confident about is that we’re moving in the right direction, and that the decisions we’re making are based on, how are we going to get this economy moving? How are we going to put Americans back to work? How are we going to make sure that our people are safe? And how are we going to create not just prosperity here but work with other countries for global peace and prosperity?

And we are going to stay with it as long as I'm in this office, and I think that -- you look back four years from now, I think, hopefully, people will judge that body of work and say, "This is a big ocean liner. It's not a speedboat. It doesn't turn around immediately. But we're in a better -- better place because of the decisions that we made."

All right? Thank you, everybody.