Video and Transcript: President Obama on Pakistan-Afghanistan (29 March 2009)

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HOST BOB SCHIEFFER: Today on “Face the Nation” from the White House, it’s Obama’s war now, and he talks about that in our exclusive interview.

Mr. President, thank you for joining us. This economic crisis has been so severe that it has literally pushed all the other issues off the television, out of the newspapers. But as -- when you outlined your program for Afghanistan and the new strategy, it really underlined in the starkest terms that we may not be talking about these serious issues, but there’s some very serious things going on out there. So I’d like to start there.

OBAMA: Please.

SCHIEFFER: If I could. This is a hugely ambitious plan -- 22,000 more troops. You’re going to increase spending by 60 percent. You said in your announcement, we must defeat Al Qaida.

OBAMA: Right.

SCHIEFFER: This has really now become your war, hasn’t it?

OBAMA: I think it’s America’s war. And it’s the same war that we initiated after 9/11 as a consequence of those attacks on 3,000 Americans, who were just going about their daily round, and the focus over the last seven years I think has been lost.

What we want to do is to refocus attention on Al Qaida. We are going to root out their networks, their bases. We are going to make sure that they cannot attack U.S. citizens, U.S. soil, U.S. interests and our allies’ interests around the world.

In order for us to do that, we have to ensure that neither Afghanistan nor Pakistan can serve as a safe haven for Al Qaida. And unfortunately, over the last several years, what we’ve seen is essentially Al Qaida moving several miles from Afghanistan to Pakistan, but effectively still able to project their violence and hateful ideologies out into the world.

SCHIEFFER: You talked many times during your -- as you outlined this strategy about Al Qaida in Pakistan. You talk about safe havens in Pakistan.

OBAMA: Right.

SCHIEFFER: Are you giving our commanders now in Afghanistan the green light to go after these people even if they’re in what used to be safe havens in Pakistan?

OBAMA: Well, I haven’t changed my approach. If we have a high- value target within our sights -- after consulting with Pakistan, we’re going after them. But our main thrust has to be to help Pakistan defeat these extremists.

Now, one of the concerns that we’ve had building up over the last several years is a notion, I think, among the average Pakistani that this is somehow America’s war and that they are not invested. And that attitude, I think, has led to a steady creep of extremism in Pakistan that is the greatest threat to the stability of the Pakistan government, and ultimately the greatest threat to the Pakistani people. What we want to do is say to the Pakistani people, you are our friends, you are our allies. We are going to give you the tools to defeat al Qaeda and to root out these safe havens, but we also expect some accountability, and we expect that you understand the severity and the nature of the threat.

In addition, what we want to do is to help Pakistan grow its economy, to be able to provide basic services to its people, and that I think will help strengthen those efforts.

If the Pakistan government doesn’t have credibility, if they are weakened, then it’s going to be much more difficult for them to deal with the extremism within their borders.

SCHIEFFER: But you’re talking about going after them. Are you talking about with American boots on the ground, pursuing these people into these so-called safe havens?

OBAMA: No. Our plan does not change the recognition of Pakistan as a sovereign government. We need to work with them and through them to deal with Al Qaida, but we have to hold them much more accountable and we have to recognize that part of our task in working with Pakistan is not just military. It’s also our capacity to build their capacity through civilian interventions, through development, through aid assistance.

OBAMA: And that’s part of what you’re seeing both in Afghanistan and Pakistan, I think, is fully resourcing a comprehensive strategy that doesn’t just rely on bullets or bombs, but also relies on agricultural specialists, on doctors, on engineers, to help create an environment in which people recognize that they have much more at stake, in partnering with us and the international community, than giving in to some of these extremist ideologies.

SCHIEFFER: Help me out here. How do you -- what if they can’t do it? What if they won’t do it?
I mean, we have reports now about members of Pakistan’s intelligence service actually actively helping the Taliban and Al Qaida.

OBAMA: Well, some of those...

SCHIEFFER: What if they don’t do it?

OBAMA: Some of those reports aren’t new. There are a whole host of contingencies that we’ve got to deal with. I mean, this is going to be hard, Bob. I’m under no illusions. If it was easy, it would have already been completed.

So we’re going to have to go with a strategy that is focused, that is narrowly targeted on defeating Al Qaida. We think that, if you combine military, civilian, diplomatic, development approaches; if we are doing a much better job of coordinating with our allies, we can be successful.

But we recognize there are going to be a lot of hurdles between now and us finally having weakened Al Qaida or destroyed Al Qaida to the point it cannot -- it doesn’t pose a danger to us.

And we will continue to monitor and adjust our strategies to make sure that we’re not just going down blind alleys.

SCHIEFFER: Are you concerned at all -- because some people say the more troops you put in, it’s just going to inflame the situation; it’s going to make it worse. What do you say to them?

OBAMA: I’m very mindful of that. Look, I -- I’m enough of a student of history to know that the United States, in Vietnam and other countries, other epochs of history have overextended to the point where they were severely weakened. And the history in Afghanistan obviously shows that that country has not been very favorably disposed towards foreign intervention. And that’s why a central part of our strategy is to train the Afghan National Army so that they are taking the lead, increasingly, to deal with extremists in their area.

That’s been one of the few success stories we’ve seen over the last several years, is the Afghan National Army actually has great credibility. They’re effective fighters. We need to grow that. And that’s part of the reason why we want to make sure that there are trainers there.

But the last point I would make, you know, a request was made for increased troop levels in Afghanistan. I have already authorized 17,000. We’re now adding 4,000 trainers, specifically designed to train Afghan security forces.

But what I’ve also said to the Department of Defense and what I will say to the American public is that, you know, we now have resourced properly this strategy. It’s not going to be an open-ended commitment of infinite resources. We’ve just got to make sure that we are focused on achieving what we need to achieve with the resources we have.

SCHIEFFER: What you seem to be saying is we have to win; there’s no choice here. So does that mean, if more is needed; if the commanders come back to you and say, we may need more troops, Mr. President, to do this, you’re going to be ready to do that?

OBAMA: What I will not do is to simply assume that more troops always results in an improved situation.
I think there was a good argument, after us scrubbing this very hard and talking to a lot of our allies in the region, including the Pakistan and Afghanistan governments, the Europeans and our other NATO allies, that this was the best strategy.

But just because we needed to ramp up from the greatly underresourced levels that we had doesn’t automatically mean that, if this strategy doesn’t work, that what’s needed is even more troops.
There may be a point of diminishing returns in terms of troop levels. We’ve got to also make sure that our civilian efforts, our diplomatic efforts and our development efforts are just as robustly encouraged.
And, so for example, in the budget that I’ve presented to Congress, I’ve said we’ve got to increase foreign aid in Afghanistan and we’ve got to increase foreign aid in Pakistan. And I’m going to be really pushing Congress, because sometimes foreign aid is a, you know, juicy target, particularly during tough times.
I’m going to tell them, this is central to our strategy. And it can save lives and troops if we properly execute it.

SCHIEFFER: But you described this in very dark terms. I mean, and there’s no question that things are worse than ever in Afghanistan. You would agree with that?

OBAMA: I do.

SCHIEFFER: But you’re saying...

OBAMA: Let me make sure I’m clear. They’re not worse than they were when the Taliban was in charge...

SCHIEFFER: Yes.

OBAMA: ... and Al Qaida was operating with impunity. We have seen a deterioration over the last several years. And unless we get a handle on it now, we’re going to be in trouble.

SCHIEFFER: You said the other day in the “60 Minutes” interview that you would not have thought at this point in your presidency that Iraq would be the least of your worries, something to that effect.

OBAMA: Right.

SCHIEFFER: Are things going well enough there now that you may consider speeding up the withdrawal of troops from Iraq?

OBAMA: No, I think the plan that we put forward in Iraq is the right one, which is let’s have a very gradual withdrawal schedule through the national elections in Iraq. There’s still work to be done on the political side to resolve differences between the various sectarian groups around issues like oil, around issues like provincial elections. And so we’re going to continue to make progress on that front.

I’m confident that we’re moving in the right direction, but Iraq is not yet completed. We still have a lot of work to do. We still have a lot of training of Iraqi forces to improve their capacity. I’m confident, though, that we’re moving in the right direction.

SCHIEFFER: Let me ask you about something closer to home, and that is Mexico. You talked about sending more aid to the Mexican government, but things down there are really serious, as you well know. It’s my understanding that 90 percent of the guns that they’re getting down in Mexico are coming from the United States. We don’t seem to be doing a very good job of cutting off the gun flow. Do you need any kind of legislative help on that front? Have you, for example, thought about asking Congress to reinstate the ban on assault weapons?

OBAMA: I think the main thing we need is better enforcement. And so this week, we put forward a comprehensive initiative to assist those border regions that are being threatened by these drug cartels to provide assistance to the Mexican government, to make sure that on our side of the border we’ve got more personnel, more surveillance equipment.

SCHIEFFER: Why are we having so much trouble with that? I mean...

OBAMA: Well, what’s happened is that President Calderon, I think, has been very bold, and rightly has decided that it’s gotten carried away. That the drug cartels have too much power, are undermining and corrupting huge segments of Mexican society, and so he is taking them on, in the same way that when Eliot Ness took on Al Capone back during Prohibition, oftentimes that causes even more violence. And we’re seeing that flare up.

SCHIEFFER: Do you think it’s a threat to the United States security?

OBAMA: I don’t think that it is a -- what would be called an existential threat, but it is a serious threat to those border communities, and it’s gotten out of hand. And so what we have to do is to recognize that, look, this is a two-way street. As Secretary Clinton indicated, we’ve got to reduce demand for drugs. We’ve got to do our part in reducing the flow of cash and guns south.

SCHIEFFER: Are we anywhere close to putting U.S. troops on the border?

OBAMA: You know, obviously, there have been calls to increase National Guard troops on the borders. That’s something that we are considering. But we want to first see whether some of the steps that we’ve taken can help quell some of the violence. And we want to make sure that we are consulting as effectively as we can with the Mexican government in moving this strategy forward.

SCHIEFFER: All right. Let’s take a break here and we’ll come back and talk about some domestic issues.

(COMMERCIAL BREAK)

SCHIEFFER: Mr. President, you’re scheduled to announce on Monday what you plan to do with the auto industry, as they’re asking for more federal money.

OBAMA: Right.

SCHIEFFER: You’ve told them they’re going to have to cut back, present a different business plan. Our sources tell us that, as far as the White House is concerned, they’re not there yet.

Do they have to do more in order to get this money?

OBAMA: Yes. They’re not quite there yet. There’s been some serious efforts to deal with a combination of long-standing problems in the auto industry and the current crisis, which has seen the market for new cars drop from 14 million to 9 million.

Everybody is having problems, even Toyota and other very profitable companies.

And so what we’re trying to let them know is that we want to have a successful auto industry -- U.S. auto industry. We think we can have a successful U.S. auto industry. But it’s got to be one that’s realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is.

And that’s going to mean a set of sacrifices from all parties involved, management, labor, shareholders, creditors, suppliers, dealers. Everybody is going to have to come to the table and say it’s important for us to take serious restructuring steps now in order to preserve a brighter future down the road.

SCHIEFFER: But they’re not there yet?

OBAMA: They’re not there yet.

SCHIEFFER: You campaigned on cutting taxes for the middle class. And yet, lately, I don’t see any middle-class tax cut in the version of the budget that’s going through the Senate right now.

You have suggested that maybe you’d let the tax cuts you put for the middle class in the stimulus bill run out next year.

Can you tell us, are you still pushing a middle-class tax cut? I know you said you want the Congress to follow the principles you set out, your priorities: education...

OBAMA: Health care.

SCHIEFFER: ... reducing the deficit, health care and so on -- and education. But have you abandoned the middle-class tax cut?

OBAMA: Absolutely not. Now, first of all, let’s understand, Bob, I’ve delivered that middle-class tax cut for two years, in the stimulus package. So people will be getting...

SCHIEFFER: This year and next year?

OBAMA: That’s right.

SCHIEFFER: But are you going to let that run out?

OBAMA: Hold on a second. They’ll be seeing their tax cuts in their -- their paychecks starting on April 1, for 95 percent of working families, just as we promised.

I strongly believe that we should continue those tax cuts. We should make them permanent because the average worker out there, the average family, saw their wages and incomes flatlined, even during boom times, over the last decade.

And there’s been a huge growth in income at the very top echelons but not for average American workers. They’ve been losing ground. So I think it’s the right thing to do. What I’ve also said, though, is we’ve got to pay for it.

Now, in my original budget, we had a way of paying for it. And some of the proposals that we have made, members of Congress have said, well, we’re not quite comfortable with that.

So what I’ve said is, if you don’t want to pay for it in those ways, let’s find another way to pay for it. I think it’s still the right thing to do. And I’m going to be pushing as hard as I can to get it done in this budget.

If it’s not done in this budget, then I’m going to keep on pushing for it next year and the year afterwards, so that we don’t see a drop-off after the two-year tax cuts...

(CROSSTALK)

SCHIEFFER: So what you’re saying is that the Congress may want to find a different way to pay for it but you’re going to insist on...

OBAMA: Absolutely. That’s still...

(CROSSTALK)

SCHIEFFER: ... a middle-class tax cut? I want to ask you, also, about these bonuses and all that on Wall Street. Congress expressed outrage. You seemed outraged. And then after the Congress -- the House passed the bill to get that money back with some kind of taxes on those people, you seemed to throw a little cold water on that. You said we shouldn’t legislate out of anger.

Have you now, on reflection, decided that maybe you let that go a little too far?

OBAMA: Oh, no. I think that the anger was justified. And had we not seen some healthy expressions of anger, we wouldn’t have gotten $50 million of those bonuses back that had been sent to AIG.
But what I consistently said -- and I said this even on the first day, when I announced that, in fact, we were going to do everything we could to get some of those bonuses back.

OBAMA: I said at the time that it is important to keep our eye on the ball. My most important job is to get this economy moving again, to get credit flowing again, so that businesses, large and small, can start rehiring, open their doors, and we can start seeing economic growth again. That’s my most important job.
What I don’t want is that larger project to be threatened by short-term gratifications of our legitimate frustrations with some of the behavior that we’ve seen on Wall Street. And I met with bankers, some of the...

SCHIEFFER: Did you talk about that in your big meeting with the bankers at the White House?

OBAMA: I did. I talked to them. And what I said was, look, first of all, there are a lot of bankers that are doing good work in the community, that are acting responsibly, that haven’t taken huge risks. I understand that. But understand that for the average single mom who is just barely struggling to pay her mortgage or medical bills for her kid, who is paying her taxes, who is playing by the rules, and then finds out that a taxpayer-assisted firm is paying out multimillion-dollar bonuses, that’s not just not acceptable.

Show some restraint. Show some -- show that you get that this is a crisis and everybody has to make sacrifices.

SCHIEFFER: So what did they say?

OBAMA: They agreed. And they recognized it.

Now, the proof of the pudding is in the eating, so I expect to see that restraint operate. Another way of putting it is I said to those folks, let me help you -- help me help you. It’s very difficult for me as president to call on the American people to make sacrifices to help shore up the financial system if there’s no sense of mutual obligation and mutual help.

Now, the flip side is I have got to explain to the American people we’re not going to get this recovery if we don’t see a recovery of the financial sector. And there’s no separation between Main Street and Wall Street. We’re all in this together. And it’s my job to help keep that focus as we move forward.

SCHIEFFER: One more question, Mr. President. This week, I went down to Monticello, Thomas Jefferson’s home, where they have this wonderful new visitors’ center. And one of the historians down there reminded me that Thomas Jefferson once said the presidency is a splendid misery. But at the end of his term, he also said, quote, that the presidency had brought him nothing but increasing drudgery and a daily loss of friends.
I just wonder, have you lost any friends yet?

OBAMA: I don’t think I’ve lost any friends. But I’m sure I’ve strained some friendships.

And look, this is an invigorating job. In some ways, I feel incredibly fortunate to be in this job at a time where the presidency really matters. This is not a caretaker presidency right now. Every decision we’re making counts, and my team understands that.

You know, if I had my preferences, would I love to deal with one of these at a time? Deal with Afghanistan now and maybe put off banking until later, or deal with health care three years from now? That would be great.

I don’t have that luxury because the American people don’t have that luxury. They need to be kept safe now. They need health care assistance now. They need this economy back on track now. They need to educate their kids now. And given that they’re having to make a lot of difficult choices, it’s important for us to work as hard as we can to help them live out their American dream.

SCHIEFFER: Thank you, Mr. President.

OBAMA: Great to talk to you, Bob. Thank you.

Transcript: Secretary of Defense Gates on Fox News Sunday (29 March)

HOST CHRIS WALLACE: This week, President Obama took ownership of the war in Afghanistan. Here for an exclusive interview on the new strategy as well as other tough challenges around the world is the Secretary of Defense Robert Gates.

And, Mr. Secretary, welcome back to “FOX News Sunday.”

GATES: Thank you, Chris.

WALLACE: Let’s start with President Obama’s mission statement Friday on the new strategy in Afghanistan. Here it is.



OBAMA: ... that we have a clear and focused goal to disrupt, dismantle and defeat Al Qaida in Pakistan and Afghanistan.

(END VIDEO CLIP)

WALLACE: President Bush used to talk about building a flourishing democracy. Has President Obama narrowed our mission and, if so, why? GATES: I think the -- the near-term objectives have been narrowed. I think our long-term objective still would be to see a flourishing democracy in Afghanistan.

But I think what we need to focus on and focus our efforts is making headway in reversing the Taliban’s momentum and strengthening the Afghan army and police, and -- and really going after Al Qaida, as the president said.

WALLACE: Yeah, I’m going to pick up on that. The president said that Al Qaida is actively planning attacks against the U.S. homeland. Does Al Qaida still have that kind of operational capability to plan and pull off those kinds of attacks?

GATES: They certainly have the capability to plan, and in many ways they have metastasized, with elements in North Africa, in the Levant, in the Horn of Africa and elsewhere, and they aren’t necessarily directly controlled from Al Qaida in western Pakistan, but they are trained there. They often get guidance from there and inspiration from there.

So I think they do have those capabilities. They clearly have been inhibited by all the things that have been done over the last six or seven years.

WALLACE: When you say they still have those capabilities to pull off an attack on the U.S. homeland, do you still regard them as a very serious threat?

GATES: I still regard them as a very serious threat, yes.

WALLACE: U.S. commanders in the field wanted more combat troops than the 17,000 that President Obama committed.

Why did he decide against committing all of those additional combat troops? And will there be enough for the kind of counterinsurgency, living among the population, protecting the population, that was so key to the success of the surge in Iraq?

GATES: Well, let me be very clear about this. The president has approved every single soldier that I have requested of him. I have not sent any requests for units or troops to the president so far that he has not approved.

Now, the reality is I’ve been at this a long time, and I don’t think I’ve ever in several decades run into a ground commander who thought he had enough troops. That’s probably true in all of history.

But we have fulfilled all of the requirements that General McKiernan has put down for 2009, and my view is there’s no need to ask for more troops, ask the president to approve more troops, until we see how the troops we -- he already has approved are in there, how they are doing, what the Europeans have done. And we will be reviewing that come the end of the year.

WALLACE: And are there enough for the kind of counterinsurgency tactics -- living in the population, protecting the population -- that we saw so successful in Iraq?

GATES: Well, based on the requirements that have been levied by General McKiernan for 2009, that would be his view, I think.

And the reality is there already are a lot of troops there. This will bring us, when all is said and done, to about 68,000 troops, plus another 35,000 or so Europeans and other partners.

WALLACE: What kind of long-term commitment has the president given you? Has he promised you that he will stay in Afghanistan until the Taliban, in fact, are -- and Al Qaida are defeated?

GATES: He has clearly -- he clearly understands that this is a very tough fight and that we’re in it until we’re successful, that Al Qaida is no longer a threat to the United States, and that -- and that we are in no danger of either Afghanistan or the western part of Pakistan being a base for Al Qaida.

By the same token, I think he’s been clear -- and frankly, it was my view in our discussions -- that we don’t want to just pursue -- settle on this strategy and then pursue it blindly and open-endedly.

And that’s why I felt very strongly that toward the end of the year or about a year from now we need to reevaluate this strategy and see if we’re making progress.

WALLACE: But the strategy is subject to review. The commitment to defeat the Taliban and Al Qaida -- is that subject to review?

GATES: I don’t think so.

WALLACE: That is the commitment.

GATES: Certainly, to defeat Al Qaida and -- and make sure that Afghanistan and western Pakistan are not safe havens for them.

WALLACE: There were reports this week that elements of Pakistani intelligence, the ISI, are providing the Taliban and other extremists with money, supplies, even tips on allied missions against them. One, is it true? And two, if so, can we stop it?

GATES: Well, the way I would answer is to say that we certainly have concerns about the contacts of -- between the Pakistani intelligence service and the -- and some of these groups in the past.

But the reality is the Pakistanis have had contacts with these groups since they were fighting the Soviets 20 or 25 years ago when I first was dealing with the Pakistanis on this, and I must say also helping make sure that some of those same groups got weapons from our safe haven in Pakistan.

But with people like Gulbuddin Hekmatyar and the Haghani [Haqqani] network, the Pakistanis have had contacts with these people for a long time, I think partly as a hedge against what might happen in Afghanistan if we were to walk away or whatever. What we need to do is try and help the Pakistanis understand these groups are now an existential threat to them and that we will be there as a steadfast ally for Pakistan, that they can count on us and that they don’t need that hedge.

WALLACE: There’s a NATO summit coming up next week in Europe. Have we given up on the idea of getting our allies to send more combat troops to fight alongside the U.S. in Afghanistan?

GATES: No, we haven’t. And in fact, I think some of our allies will send additional forces there to provide security before the August elections in Afghanistan.

But I think what we’re really interested in for the longer term from our partners and the allies is helping us with this civilian surge in terms of experts in agriculture, and finance, and governance and so on, to help us improve the situation inside Afghanistan, give a sense of forward progress on the part of the Afghan people.

Also, police trainers -- you know, the Caribinieri, the Guardia Seville, these various groups in Europe are really very good paramilitary-type police, and I think they could do a good job in the police training, so those will be probably the principal focus of our requests.

WALLACE: New subject. North Korea says that it will launch a communications satellite sometime in the next few days. They have, in fact, even moved a missile out to the launch pad. Several questions. Why are we so troubled by an activity that the North Koreans say is civilian?

GATES: Well, I think that they’re -- I don’t know anyone at a senior level in the American government who does not believe this technology is intended as a mask for the development of an intercontinental ballistic missile.

WALLACE: Do we believe that they now have the ability to put a nuclear warhead on top of a missile, as the head of the Defense Intelligence Agency, General Maples, suggested?

GATES: I think that we believe that that’s their long-term intent. I personally would be skeptical that they have the ability right now to do that.

WALLACE: The commander of U.S. forces in the Pacific, Admiral Keating, says that we are, quote, “fully prepared” to shoot down this missile. Are there any circumstances under which we will do that?

GATES: Well, I think if we had an aberrant missile, one that was headed for Hawaii, that looked like it was headed for Hawaii or something like that, we might consider it. But I don’t think we have any plans to do anything like that at this point.

WALLACE: What if it were headed for the West Coast, for Alaska?

GATES: Well, we -- I don’t think we believe this missile can do that.

WALLACE: And what about the Japanese? Obviously -- would -- they have some of our technology. Do we believe they’re going to -- prepared to shoot this down?

GATES: Well, again, based on what I read in the newspapers, what the Japanese are saying is that the -- if that missile fails, and it looks like it’s going to drop debris on Japan, that they might take some action.

WALLACE: You’re basically discussing this, Mr. Secretary, as if it’s going to happen.

GATES: The launch?

WALLACE: Yeah.

GATES: I think it probably will.

WALLACE: And there’s nothing we can do about it?

GATES: Nope.

WALLACE: And what does that say to you?

GATES: Well, I would say we’re not prepared to do anything about it.

WALLACE: There are reports -- well, let me -- I want to stay with that. What does that say to you about the North Korean regime, that -- that we and the rest of the world can all say that this is -- you know, a provocative act, an unlawful act, and they thumb our noses and we’re not going to do anything about it?

GATES: Well, I think it’s very troubling. The reality is that the six-party talks really have not made any headway any time recently.

There has certainly been no -- if this is Kim Jong-il’s welcoming present to a new president, launching a missile like this and threatening to have a nuclear test, I think it says a lot about the imperviousness of this -- of this regime in North Korea to any kind of diplomatic overtures.

WALLACE: There are reports that the Obama White House has asked you to cut $2 billion from the next budget for missile defense, roughly 20 percent. Is this president less committed? Is he less convinced that this program will work than President Bush was?

GATES: Well, I don’t know about the comparison. I would say -- I would tell you that I have not received any specific requests from the White House in terms of our budget. We’ll be talking about that. We have the top line number.

We receive what we call a pass-back from the Office of Management and Budget, but I considered the suggestions that they made simply those, suggestions. I’ve taken some of them and some of them I haven’t.

WALLACE: But do you regard there is a new skepticism in the part of the White House towards missile defense?

GATES: I think that -- I think one of the things that we need to do is sit down and go through the capabilities that we have, the tests that we’ve been through, and -- and focus on where -- where we need to sustain development, where we need to sustain a commitment to have a capability.

WALLACE: So it sounds like that’s under review.

GATES: I think so.

WALLACE: There are so many trouble spots around the world, but I want to do a lightning round tour of the horizon. I know this is not your thing, Mr. Secretary, but let’s try to do quick questions, quick answers.

Iraq -- do you see any developments so far that might cause you to have to slow down President Obama’s time line to pull out of the major cities by this summer and to get our combat troops out by August of 2010?

GATES: I haven’t seen anything at this point that would lead me to think that there will be a need to change the time lines.

WALLACE: Iran -- you said recently -- you said recently that they are not close to a nuclear weapon. Admiral Mullen, Chairman of the Joint Chiefs, says that they have enough material to make a bomb. Is there a contradiction there?

GATES: No. What they have is -- is probably enough low-enriched uranium from their centrifuges at Natanz to give them the capacity should they then enrich it more highly to proceed to make a weapon. They don’t have the capability at this point to enrich. We were suspicious they may be building one clandestinely.

We do not believe they are doing enriching beyond a low level at Natanz, and the IAEA [International Atomic Energy Agency] is in there, so we will know if they tried to do that. So I guess the point -- the bridge between what Admiral Mullen said and what I’ve said is they do have enough low-enriched uranium that if they should then proceed to enrich it more highly, they could build a weapon.

WALLACE: You expressed, I think it would be fair to say, extreme skepticism about the ability of diplomacy to alter the behavior of the North Koreans. Do you feel the same way about the Iranians?

GATES: Well, I think -- I think, frankly, from my perspective the opportunity for success is probably more in economic sanctions in both places than it is in diplomacy.

Diplomacy -- perhaps if there is enough economic pressure placed on Iran, diplomacy can provide them an open door through which they can walk if they choose to change their policies, and so I think the two go hand in hand, but I think what gets them to the table is economic sanctions.

WALLACE: A couple of more questions for the lightning round. Mexico -- the Pentagon issued a report in November on the growing drug violence there that said this, “An unstable Mexico could represent a homeland security problem of immense proportions to the United States.”

Mr. Secretary, how likely is that scenario, that the Mexican government loses control of part of the country?

GATES: I don’t think that’s a likely scenario at this point. I think that a lot of the violence is -- is among or between the cartels as they strive for control of certain areas in Mexico.

I think President Calderon has acted with enormous courage and forcefully in sending troops in to try and get control of that situation.

And I think that -- as I think Admiral Blair testified just in the last couple of days, I think that the chances of the Mexican government losing control of some part of their country or becoming a failed state is -- are very low.

WALLACE: In January, White House Press Secretary Robert Gibbs gave a one-word answer, “yes,” when asked if this president is going to end the policy of “don’t ask, don’t tell” for gays in the military.

Where does that stand? And why is there currently money in the 2010 budget to keep enforcing that policy?

GATES: Well, it continues to be the law. And any change in the policy would require a change in the law. We will follow the law, whatever it is.

That dialogue, though, has really not progressed very far at this point in the administration. I think the president and I feel like we’ve got a lot on our plates right now, and let’s push that one down the road a little bit.

WALLACE: And finally, and we have just a minute left, President Bush used to talk about the global war on terror. This administration, this White House, seems to steer away from that.

In fact, in his speech on Friday, President Obama talked about a campaign against extremism. Beyond the words, is there a strategic difference between the way these two presidents see the fight?

GATES: I think that they -- they both see Al Qaida as a threat to the United States, Al Qaida and its extremist allies. And I think they both have made clear their determination to go after it.

We have the opportunity now that perhaps we did not have before to apply the kind of resources, both military and civilian, against it and a broader kind of strategy that we did not have before.

WALLACE: But a difference between saying war on terror or campaign against extremism...

GATES: I think that’s people looking for differences where there are none.

WALLACE: Mr. Secretary, I want to thank you so much for coming in. We got through everything. Thank you. Please come back, sir.

GATES: My pleasure. Thank you.

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.