Transcript: Senior WH Adviser Valerie Jarrett

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ABC NEWS, THIS WEEK WITH GEORGE STEPHANOPOULOS INTERVIEW WITH SENIOR WHITE HOUSE ADVISER VALERIE JARRETT

GEORGE STEPHANOPOULOS, HOST: It was one year ago this week that Barack Obama made history with his sweeping win over John McCain. How much has he changed the country? How much has the office changed him? We have the "Roundtable" standing by to debate those questions and all of the week's politics, including Harry Reid's role in the public option, and the GOP civil war that has forced their nominee out of Tuesday's congressional race in Upstate New York.

But first, let's check in with one of the president's closest friends and advisers, White House counselor Valerie Jarrett.

Welcome to the THIS WEEK.

VALERIE JARRETT, ASSISTANT TO THE PRESIDENT FOR INTERGOVERNMENTAL RELATIONS & PUBLIC LIAISON: Thank you, George. It's a pleasure to be here.

STEPHANOPOULOS: Let me bring you back to one of -- probably one of the best moments of your life, one year ago this week, when President Obama accepted the verdict of the country's voters. Here is what he said that night.

(BEGIN VIDEO CLIP)

BARACK OBAMA, THEN-PRESIDENT-ELECT: Let's resist the temptation to fall back on the same partisanship and pettiness and immaturity that has poisoned our politics for so long. And while the Democratic Party has won a great victory tonight, we do so with a measure of humility and determination to heal the divide that have held back our progress.

(END VIDEO CLIP)

STEPHANOPOULOS: One year later, the president's economic plan has passed, but with no Republican votes in the House, only three in the Senate. It sure looks like right now no Republican support, the health care bills, as they are going forward in the Congress.

And our polling shows that this partisan divide persists on issue after issue after issue. Why has that core promise of the president's campaign, healing the divide, gone unfulfilled?

JARRETT: Well, you should ask that question to the Republican Party. I mean, frankly, just listening to the president's words again, it brought back terrific memories, and I think his message was a profound one. And he has stayed true to that message. He has reached out. He has listened. He has reached across the aisle.

Just recently meeting with both the Democrats -- the Republicans and the Democrats in both the House and in the Senate. His effort has been sustained throughout the year. And the fact...

STEPHANOPOULOS: So the president bears no responsibility for the failure to get Republican votes?

JARRETT: Well, I think -- I think what we look to the president to do is to lead by example. He has reached out. He has listened. He has included very helpful advice from the Republicans when it has been forthcoming. But the fact...

STEPHANOPOULOS: But not their ideas in the legislation..

JARRETT: Well, actually, that's not true. There have been examples of where he has included their ideas. And ultimately whether they vote for a piece of legislation or not, doesn't mean that it hasn't been an open and fruitful process.

STEPHANOPOULOS: So the president doesn't feel he needs to change the way he does business at all, to reach out more to Republicans, to get more Republicans buy-in?

JARRETT: Oh, George, listen. He is constantly reaching out to Republicans. Both he and his team. And he will continue to do that. But ultimately it's up to the Republicans to decide if they want to be a constructive force and come to the table and work with us in a positive way.

We want to hear good ideas. The president is known for listening most closely to those with whom he disagrees. So the door is always open.

STEPHANOPOULOS: Does that mean, for example, that Speaker Pelosi should give the Republicans a vote on an alternative in health care?

JARRETT: I'm not going to in any way comment on what the speaker should do. She is an extraordinary leader and she is going to continue to do that. And she is going to reach out in a way that she deems appropriate.

But your question is what is the president's leadership about it, and hearkening back to the message from last year, and I think he has been consistent not just here, domestically, but also around the world in the way he has reached out.

STEPHANOPOULOS: Well, to follow through, shouldn't he ask the speaker then to give Republicans a vote?

JARRETT: To give them a vote and give them a voice. It gives them an opportunity to contribute constructively. That doesn't mean that you actually have to change what you think is in the best interests of the American people simply to get a Republican vote.

What you do is you reach out, you listen, you collaborate, but ultimately, the president is accountable to the Republican people -- to the American people, sorry.

STEPHANOPOULOS: Let's talk about this election coming up Tuesday in Upstate New York. The president created a vacancy by making John McHugh -- Congressman John McHugh, the secretary of the army. And now there appears to be a bit of a Republican civil war going on there. The Republican nominee, Dede Scozzafava, was forced out of the race by a conservative challenger.

And I know that the president's political team is hoping to convince her to throw her support to the Democrat, Bill Owens. Any luck on that?

JARRETT: Well, we'll see. We would love to have -- of course, have her support. And it's rather telling when the Republican Party forces out a moderate Republican and it says I think a great deal about where the Republican Party leadership is right now.

So of course we would love to have her support, and those are the people who are going to vote for her.

STEPHANOPOULOS: What does it say about where the Republican Party leadership is?

JARRETT: Well, I think it's becoming more and more extreme and more and more marginalized. Look at the number of people who actually say that they are registered, consider themselves a Republican. And if that's the direction they want to go find, what we're going to do is what we've always done, and that is, we're going reach out, we're going to try to include as many people to be a part of our governing process, being open, being transparent, and we're going to let the American people decide.

And right now what you see is a great deal of momentum moving forward, for example, on health care. The American people want change. They don't want the same old health care system that is not affordable, that doesn't offer coverage to everybody, that keeps escalating in costs.

And what we've seen from the Republicans is really a desire to have the status quote. And, George, that's not acceptable anymore.

STEPHANOPOULOS: Our latest polling shows that there is not majority support for the president's health care plans.

JARRETT: Well, we actually think that there is. And I suppose it depends upon what poll you're looking at. But as more and more word has gotten out about what health care reform is all about, whether it's our desire to make it affordable, whether it's to cover all people, whether it's to make sure that people who have pre-existing conditions don't lose their coverage, whether if somebody changes a job, they don't lose their coverage, if somebody is unemployed they don't lose their coverage.

All of these are extraordinarily important to the American people. This has been an unusual process. It has been open, it has been transparent. Oftentimes the sausage-making in Washington is a little bit off-putting.

But look how far we've come. George, five different committees have approved health care. It's now being debated. And all of those five committees have -- the content of those bills is consistent with what the president put forward.

STEPHANOPOULOS: You know, you say that all five bills are consistent with what the president has put forward, but the bill coming out of the Senate Finance Committee includes a tax on these high-priced insurance plans.

Senator Charles Grassley, the Republican ranking member of that committee has looked at Joint Tax Committee figures, and according to those figures, it shows that 46 million families making less than $200,000 will eventually see their taxes go up under this plan. That would break the president's promise not to raise any taxes on people earning under $250,000 a year.

So how can you say that's consistent with his plan?

JARRETT: Yes, well, first of all, there are lots of different analyses of the plans, and until we have a final bill, let's hold off prejudging what it's going to do. But the president has been clear, he does not want to impose a tax on the middle class. That's why immediately upon taking office, when the Recovery Act was passed, it provided a tax relief to the middle class, something -- a very big point he made in the course of the campaign.

STEPHANOPOULOS: Well, then let me press this point, because it's not just Republicans who say this. You've got union leaders like Gerry McEntee and several others have said this is also a tax increase on the middle class. You've got 180 House Democrats who are saying the same thing, saying that that's why they're opposed to it.

So are you saying that the president will not sign this proposal if it does indeed raise taxes on the middle class?

JARRETT: What I'm saying to you, George, is, let's let the process go forward. Let's not pre-judge to the end. There have been so many constructive conversations going on as recently as Friday with the various leadership in both the House and the Senate.

And I think what the president has said is, look, we do not want to have any additional tax burden on the middle class. We want to have affordable health care. We want to make sure that people who have not had insurance before have it. We need to bring down the costs, because that's going to help our federal deficit...

STEPHANOPOULOS: So if...

JARRETT: All of those parameters -- and no, what I'm saying is that I'm not going to leap forward to the end. What we're going to do...

STEPHANOPOULOS: But don't you have to set the bottom line for the...

(CROSSTALK)

JARRETT: No, no. What you do and what he has done, and what has brought us to the point where we are right now where we have five bills for the first time in history, after decades of effort, what he is doing is working. And what he is doing is talking constructively.

His team is up on the Hill every single day, meeting with the leadership, meeting with all of the different members. And we're going to see where we go. And he has made it clear, as I said from the outset, what his parameters are. And he's constantly...

STEPHANOPOULOS: So he will not -- bottom line, he will not violate that commitment, is what you're saying?

JARRETT: What I'm saying is that he is confident that a bill that's going to be passed is going to be consistent with his parameters, yes.

STEPHANOPOULOS: OK. Let's talk about Afghanistan for a second. We see today the opposition candidate to President Karzai, Abdullah Abdullah, has said he's not going to run in the run-off. Is this a welcome development or is the White House worried the questions about this election will cast a cloud over President Karzai and make it more difficult for the president to implement his strategy?

JARRETT: We don't think that it's going to add a complication to the strategy. It's up to the Afghan people and their authorities to decide how to proceed going forward. We watched the election very carefully. And we're going to work with the leader of the Afghan government and hopefully that's going to improve the state of conditions for the people in Afghanistan, and also help us as we try to bring this war to a close.

STEPHANOPOULOS: So this is not a complication as far as you see it?

JARRETT: No. We don't see it as a complication.

STEPHANOPOULOS: And we also -- we're getting some word following the president's meeting with the joint chiefs on Friday that the target date for announcing this decision may be slipping a bit. The president wants some more information from the Joint Chiefs.

Is it now possible that it's going to come after the president returns from Asia, more like the end of November than the middle?

JARRETT: What the president has said consistently is he is going through a very rigorous process. George, before he puts our men and women in harm's way, he wants to make absolutely sure that he has a strategy. This isn't just a matter of how many troops are sent over. Although that is a very important component.

We have to look at what's going on on the ground. We have to look at what our allies are doing. We have to look at the state of the government in Afghanistan. And he's looking for a strategy that leads to keeping our nation safe. And so the timing for that is completely up to the president, who makes the decision when he is confident that he has all of the facts that he needs to make the right decision for our country.

STEPHANOPOULOS: So it could be later in the month.

Let me just -- also this week the president went to Dover. And we want to show our audience some of the pictures from that. The president seemed -- did seem quite moved, almost stricken at times during that visit. It had quite an impact on the president, didn't it?

JARRETT: How could it not? I mean, my goodness, to meet the families of people who have given their lives, the maximum sacrifice to our country? Of course he was deeply moved by the experience. Anyone who was there would have to be.

STEPHANOPOULOS: Did you have a chance to talk to him about it and how do you think it will affect his decision-making?

JARRETT: I think that he is going to make the decision that he -- that he thinks is right for the American people. It certainly is a reminder of what is at stake. And you talk about 40,000 troops, behind every troop is a family. And it's a huge sacrifice that we're asking our men and women to make.

And I think going to Dover and showing respect on behalf of our country for that sacrifice was something that was very important to the president. But ultimately he is going to make the decision that he thinks is going to keep our country safe.

STEPHANOPOULOS: One final question, the president received both praise and criticism for doing that visit with television cameras there. Why was it important for the president to do that somewhat in public?

JARRETT: Well, he wouldn't have done it in public if the families had objected. So the first and foremost thing is what is important to the families. And I think that it's important for us all to recognize what is at stake. And so when you talk about numbers, like 40,000 troops, as I said a minute ago, I think it's a reminder about how deep the sacrifice is.

And it's something that's open and transparent, and it was a way for him as the president to convey to those families on behalf of the American people how much we appreciate that enormous sacrifice they've made.

STEPHANOPOULOS: Valerie Jarrett, thanks very much.

JARRETT: You're welcome. Good to see you.

STEPHANOPOULOS: We're going to go straight to the roundtable, so as our panelists take their seats, we have a little bookend to that election night excerpt we showed from President Obama. Gracious words from Senator McCain.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), THEN-REPUBLICAN PRESIDENTIAL NOMINEE: Senator Obama and I have and argued our differences, and he has prevailed. No doubt many of those differences remain. These are difficult times for our country. And I pledge to him tonight to do all in my power to help and lead us through the many challenges we face.

(APPLAUSE)

(END VIDEO CLIP)

STEPHANOPOULOS: We're going to go straight to the roundtable, so as our panelists take their seats, we have a little bookend to that election night excerpt we showed from President Obama. Gracious words from Senator McCain.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama and I have and argued our differences, and he has prevailed. No doubt many of those differences remain. These are difficult times for our country. And I pledge to him tonight to do all in my power to help and lead us through the many challenges we face.

(END VIDEO CLIP)

STEPHANOPOULOS: One year ago this week. With that, let me bring in our roundtable. I am joined as always by George Will; Ed Gillespie, counselor to President George W. Bush; Ron Brownstein of the National Journal; Dee Dee Myers, press secretary to Bill Clinton; and the Reverend Al Sharpton. Welcome to all of you.

And let me just begin with the threshold question. We're about a year out from the election. Has the president delivered on that promise of change?

WILL: I think domestically and in foreign policy, he has. His one great achievement is to enhance the status of the United States. Now, that happens to have zero cash value, it turns out. The Iranians, the North Koreans, the Afghan government, China and India regarding carbon limitations -- he's made no progress on any of these fronts, but people like us better. So I suppose that's an achievement.

SHARPTON: I think he absolutely has changed -- I agree with George. He's changed the perception of America. I think that he's also changed some things here, the economy. When you look at the GDP, up 3.5. When you look at 30-year mortgages at a lower rate than it's ever been...

STEPHANOPOULOS: Be careful there. Unemployment almost 10 percent.

SHARPTON: Unemployment -- again, the hardest thing once you bring an economy back, is the jobs. I think he has to finish the task.

Let's remember, George, he's only been there 10 months as president. In nine months, he's helped restore America's image, he's helped to stop the hemorrhaging of jobs, and bring the economy back. So in nine months, what it usually takes to make a baby, he's starting the rebirth of America.

STEPHANOPOULOS: And Ed Gillespie, I was thinking of you as Valerie Jarrett was here talking. Basically, her answer on why this partisan divide hasn't healed at all is it was the Republicans' fault.

GILLESPIE: Right. Well, it's always the Republicans' fault if you listen to this White House, and I think that's one of the disappointments, I think, frankly, for a lot of us Republicans, independents, is that this has not been a post-partisan presidency, as we were led to believe. In fact, it's been a very partisan White House, very political in its nature.

And just, for example, I've heard Valerie Jarrett say, well, in terms of health care reform, you know, no Republican support. Well, look at what's happened in that debate. The things that got Olympia Snowe's vote in the United States Senate, they dropped and so yet they contend they're looking for Republican support. They eliminated the one Republican they had a shot of getting so far. The president in his Joint Session speech talked about medical liability reform. The Pelosi bill punishes states that put a limit on attorney's fees or put a cap on damages. So when you look at their actions relative to the rhetoric, I think that accounts for the bipartisanship.

STEPHANOPOULOS: I want to get more to health care later. But first, Dee Dee, on this broader question, the president obviously came in with more popular support than Bill Clinton had in 1993 but similar numbers in both the House and the Senate. And they did seem to make the choice, not unlike the choice in 1993/'94 to secure the Democratic base first on their big pieces of legislation.

MYERS: Well, I think after some consultation in the early weeks and months, they ran up against the reality. It's true the president has in some ways changed the tone, but he's also in these nine short months, 10 short months shown the limitations of bipartisanship. You can talk a good game, you can go meet with people and you realize they're just not going to be for you and so that leaves you no alternative than to secure your base. You have to get the votes out of your base. And if you can pick off one or two people in the middle like Olympia Snowe, moderate Republican, to call the bill bipartisan, great. But if not, then you have to be able to pass legislation with Democrats.

BROWNSTEIN: These are much more structural problems than really dealing with one president in their control. We are moving much closer to something like a parliamentary system in this country where each party is now much more the base, the coalition is much more ideologically homogeneous than it was a generation ago and that exerts tremendous and typical pressure for legislators on one side to stand with their side against the other on almost every major issue.

I think Obama wants to bring in Republicans but he wants to do so by addition. He's willing to add Republican ideas, I think, to his package. Republicans need -- really need subtraction.

I mean that even if, for example, you have medical malpractice reform in the health care bill, there are very few Republicans today who could vote for an individual mandate, which is the cornerstone of the bill, even though that was the Republican alternative to Hillary Clinton's plan in 1993.

I think the parties are structurally moving apart, and it is very difficult for either side to win substantial support on their legislative priorities from the other. That is just a reality of our politics today.

MYERS: But it's worth noting that twice as many people, American people, think Obama and the Democrats have tried harder to reach across the aisle than Republicans.

WILL: But the reality is the Democrats have a very clear agenda, unified theory of this administration and it is equality, understood as equality of outcome. And, therefore, every proposal the president has from dealing with General Motors to the United Autoworkers to health care is to increase the number of Americans equally dependent on the federal government for more and more things. And I don't think the American people at the end of the day want that.

SHARPTON: Well, I think that you cannot get by Dee Dee's point. I think that the American people have said very, very clearly that they think that this administration and the Democrats have been the ones to reach out. We're waiting to see the Republican that emerges that reaches back. Even on education reform, the president has Newt Gingrich and I touring together. I mean, you can't reach out more than to try to get Newt Gingrich and I to go on tour together.

I think that he has reached out. I think at some point, there will be a tremendous backlash on the Republicans when they don't reach back. And I think that that is the problem that they're having in a lot of these pollings that we're seeing.

BROWNSTEIN: I was going to say, look, the president has had some success and broadening his coalition outside of Congress. He has had more success than Clinton did at bringing in business interests on really all of the major initiatives whether it's on cap and trade with some of the major utilities...

STEPHANOPOULOS: Or health care policy.

BROWNSTEIN: But the underlying fact I think is George is correct whether you characterize it the way he did or not, what Obama and the Democrats want to do and what the Republicans fundamentally want to do at this point, the gulf is so large, it is very difficult to see them coming together in meaningful numbers.

And if you say what Obama has done in nine months, he really has changed the frame of debate. The stimulus plan included more net new public investment and the things that Democrats prize, like education, alternative energy than Clinton was able to achieve in his eight years.

And let's not forget that he is within sight now of a health care bill that has defeated every president who has tried it since Franklin Roosevelt. So he is changing the terms of the debate. There are political costs, we'll talk about those later, but he is shifting what we're discussing and what the solutions we're discussing are.

STEPHANOPOULOS: One area where we've seen less change than actually I would have expected is on the issue of race relations in the United States. Remarkable poll from the Gallup organization this week. They asked, "Do you think that relations between blacks and whites will always be a problem for the United States, or that a solution will eventually be worked out?" You go back to December 1963, 42 percent thought it would be a problem, 55 percent thought it would eventually be worked out. By November 2008, the number thought a year ago on Election Day, it would be a problem, had gone down quite a bit.

STEPHANOPOULOS: And the number who thought it would be worked out had gone up.

But look at October 2009, right back to where we were, basically, in November 1963, despite all the changes we've had in those times, Reverend Sharpton.

SHARPTON: Because I think the structural inequality is still there. The reality is that you still see the race gap in education, in employment, in health care. And I think the reality has sobered a lot of people up.

I think what the president has done is tried to reach out and bring people together, and I think everyone appreciates that. But I think people are looking at the reality.

So a year after his election, with all the hope of Americans coming together and the great symbolism of having an African-American president, I don't think we've lost that; I think we just sobered up to the reality. We've learned that he can't walk on water, but he's still the best swimmer in national politics.

(LAUGHTER)

STEPHANOPOULOS: Best swimmer, George?

WILL: When a poll shows something that is so obviously preposterous, they ought to go back and look at the poll. The Voting Rights Act, public accommodations act, enormous changes in education in the United States, access to college -- we've made enormous strides. And for them to say essentially nothing has changed is just nonsense.

Watch the election in Atlanta this week.

(CROSSTALK)

WILL: ... mayor. A black city may be about to elect, for the first time in, what, two generations, a white mayor. Now, that indicates a, kind of, coming of the real color-blind nature of our politics.

(CROSSTALK)

MYERS: The same thing may (ph) happen in Atlanta. GILLESPIE: No, I think -- the (inaudible), George, is that it's -- we're moving the goal posts in a good way. You know, we've always got to do better, but the fact is, I can tell you, my children have grown up in a more color-blind society than I grew up in, and I grew up in a more color-blind society than my parents grew up in. And we have made great progress.

The election of President Obama was a proud moment for the United States of America in that regard.

But, that said, I think what you see is an American public that says, you know what, we've got to keep striving. And I think that's a positive thing.

BROWNSTEIN: Each cohort -- each younger cohort in American life is more diverse than the one older. We are becoming inexorably a more diverse society. This was the first election in American history more than a quarter of the voters were nonwhite. That number isn't going down. It's only going up.

Now, having said that, there is a red flag out there that goes back to what George was saying before, I think. There are very -- there are divergent views between white and nonwhite America over the role of government, and that is widening at a really -- almost at an ominous rate.

I mean, white America is moving, I think, by and large, in a very, kind of, Perot-esque direction. There is, kind of, a backlash against some of the ambition of what Obama is pursuing and the Democrats pursuing across the board, whereas there is much more tolerance in nonwhite America for a larger, more expansive federal role.

And that skepticism about institutions that you see in big chunks of the white electorate, contrasted with the support in the nonwhite electorate, is, kind of, an unstable phenomenon.

STEPHANOPOULOS: It's going to reach such tension next year, as the president goes forward. We're going to take a break in just a minute.

Before we do, there's a new book out by President Obama's campaign manager, David Bluff -- Plouffe -- called "The Audacity to Win."

And, Reverend Sharpton, there's a fascinating little excerpt about you in the book. He describes a moment on Christmas Eve 2007, very close race in Iowa, where President -- then Senator Obama calls Plouffe as Plouffe is in church, because he's worried -- he's gotten word that you might be coming to Iowa, and that is not entirely good news for him.

On the one hand, if you're coming to endorse Hillary Clinton, they're fine with that, but they felt that, if you were coming to endorse him, it might create problems for Obama that they didn't want. The way it ends us, you don't come. They say you played a constructive role the rest of the campaign. What happened?

SHARPTON: There was a group that tried to get me to come in, and I think they were -- this was at the time when they were trying to really go for these race politics and miscast...

STEPHANOPOULOS: Coming for Obama.

SHARPTON: No, they wanted me to come in, period, on a race issue, which, really, you'd have to be hard-pressed to really deal with that in Iowa.

(LAUGHTER)

But we determined it was a distraction (inaudible). And I picked up the phone and called then-Senator Obama and said, I'm not going to be used like that. And I've worked, as they said, constructively throughout the rest of the campaign.

Because, even though he and I may not agree on every strategy, I think that, once you decide you want to work with someone, you do what is best, whether you're out front or behind the scenes.

STEPHANOPOULOS: OK, we're going to take a quick break. We'll be back with more roundtable in just a minute, and later, the Sunday funnies.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, HOST, "THE LATE SHOW": Because of the weather and due to the low ceiling -- listen to this -- earlier this afternoon a Northwest Airline airplane, passenger plane, accidentally landed at the correct airport.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

STEPHEN COLBERT, DAILY SHOW: Staunch conservative George Will has for the last two Sundays on ABC's THIS WEEK wore a long tie. Clearly his bow ties were the only thing tethering George Will to reality.

WILL: Marijuana is getting much better.

COLBERT: Then he tried to eat George Stephanopoulos because he thought he was a teddy graham.

WILL: We legalized prostitution, as anyone who opens a telephone book and looks under escort can tell you.

COLBERT: I don't now which is more disturbing, that George Will goes to prostitutes or that he still uses the phone book.

(END VIDEO CLIP)

STEPHANOPOULOS: George Will's star turn on "Comedy Central," you and Steve Colbert.

I want to bring you back in here along with Ed Gillespie, Ron Brownstein, Dee Dee Myers and the Reverend Al Sharpton. I could ask you to respond but we can go straight to the politics of the week. First time I've ever seen George Will blush.

MYERS: Yeah.

STEPHANOPOULOS: A lot of elections coming up this week. Let's show the latest polling in these gubernatorial races and important congressional race. No. 1, down in Virginia, Creigh Deeds, the Democrat, about 10 points behind in the latest "Washington Post" poll to Bob McDonnell, the Republican.

Up in New Jersey, Jon Corzine, the incumbent, 43 percent, Chris Christie, Republican, 38 percent and Independent Chris Daggett has 13 percent. That race really too close to call according to most of the polling right now.

And then this congressional district up in upstate New York, New York 23. John McHugh left to become secretary of the army. It was a dead heat according to the poll that came out from the Siena Research Institute yesterday between the Democrat Bill Owens, the conservative candidate, Doug Hoffman, the Republican Dede Scozzafava was far behind at 20 percent.

And yesterday, George Will, she dropped out of the race. A lot of big Republican power brokers had come in on either side of this race. Sarah Palin came in for the conservative candidate. So did Tim Pawlenty. Newt Gingrich, the former speaker came in on behalf of Scozzafava and he said something interesting in "The New York Times" this morning. And he said, he warned about an impending civil war in the Republican Party. He said "If we get into a cycle where every time one side loses they run a third-party candidate, we'll make Pelosi speaker for life and guarantee Obama's re-election."

WILL: If they had done what Newt Gingrich urged them to do in that district, the district probably would have gone to a Democrat and would have lost a seat. Newt was just tone deaf as were the people who picked this woman. Who is a candidate of among other things the working families party which is a wholly owned subsidiary of the Public Employees Union. She's for tax increases, same-sex marriage. She's for abolishing the right of secret ballot in union elections. There's already a party for people who think like that. It's called the Democratic Party.

MYERS: It was interesting that she was chosen by the county party chairs, 11 people got in a back room and chose her for some reasons that may have to do with state party politics and not to do with winning. But there's no question -- it will be very interesting to see what lessons both Democrats and particularly Republicans take from this. Is this going to be a carte blanche for conservatives to take on more moderate incumbents in primaries?

GILLESPIE: Well, look, Dee Dee's point is a very important one. This nominee, Scozzafava was chosen by 11 people behind closed doors. Disenfranchised Republican primary voters and that led to I think a lot of greater --

STEPHANOPOULOS: It was a caucus process, wasn't it?

GILLESPIE: It's a process but it doesn't make it a good one. The fact is that a lot of Republicans said, wait a second, she wasn't a moderate Republican as George pointed out. She is a liberal Republican. Daily Kos, the left wing Web site endorsed her over the Democrat. The fact is I think Republicans, many of whom support her because she was the Republican Party nominee, and there is an obligation that have you in the party to support the nominee are relieved today at the opportunity to pick up this seat now.

And I think that if you look at the 20 percent that Scozzafava was getting in that poll, I suspect that breaks about 3-1 to Hoffman at the end of the day.

STEPHANOPOULOS: And Ron, the Republicans almost certainly will now win. BROWNSTEIN: It seems the momentum is there. It sends a mixed message for Republicans out of this. On the one hand, I think it's going to be another indication, I think we'll see others on Tuesday, that there is energy in the small government, anti-spending argument at this point.

On the other hand, the fall of the Dede as I think she's known now, I think is a sign that the leash that the base is holding on the party is tightening and that the Palins, the talk radio, the Rush Limbaughs, the FOX, the definition of what is acceptable as a Republican I think is narrowing.

I mean this does come after Arlen Specter essentially was forced to leave the party after voting for the stimulus, after Chuck Grassley faced threats, open threats of a primary challenge if he compromised with Max Baucus.

In the long run -- in the short run, there's clear energy here in the small government, anti-government argument. But in the long run, I do wonder about whether Republicans are going to have the freedom of maneuver they'll need to recover in some of those blue states where they've significantly eroded.

GILLESPIE: I think they will. Let's understand something. This is a conservative district. This is a district where a conservative -- this is not some swing district where having a moderate Republican, not a liberal Republican, but a moderate Republican who may vary with the party on some things has a better change of winning here.

(CROSSTALK)

GILLESPIE: ... conservative Republican.

(CROSSTALK)

GILLESPIE: I agree, but I just -- I don't think it's right to read too much into New York 23, in terms of this civil war that I'm reading about...

SHARPTON: Newt Gingrich was the one that said it. And I think we should read all we could.

(LAUGHTER)

I encourage civil war all over the Republican Party.

(LAUGHTER)

And I'm very encouraged, on a Sunday morning, to hear you, Ed, admit that the Republicans' candidates are chosen by these 11 guys at the top.

GILLESPIE: Not always.

SHARPTON: And I hope the masses of the Republicans rebel and divide all over the country.

GILLESPIE: My point, Reverend, is that was the exception. That's one of the things -- you know, usually, our nominees come through a primary process where the voters have a chance to express themselves.

MYERS: Really important point, which is the Democratic Part was able to take back the House in 2006 with a big-tent strategy, by opening the party to people who didn't agree on every ideological -- you know, the Heath Shulers of the world.

Will the Republicans be able to do that, if they want to win back the House in 2010?

GILLESPIE: One of the points I make, Dee Dee, all the time, is, look, if you look at what the Democrats did, they were very smart about it. They did get districts, one, carried by people in Oklahoma, Texas, other places, predominantly Catholic areas, where they might not agree on abortion as the party platform. But in doing so, in winning the majority in the House, they did not -- their party did not move to the right. The Democratic Party, if anything, moved to the left in that process. So I think there's a lesson we've learned there.

STEPHANOPOULOS: You're now going to see this play out in other races. We've Marco Rubio challenging Governor Crist for the Senate.

WILL: And primary...

(CROSSTALK)

WILL: He will win.

STEPHANOPOULOS: He will win?

WILL: Absolutely. Absolutely, he'll win.

STEPHANOPOULOS: Against the popular governor of Florida, the state of Florida?

WILL: Look -- look what the local caucuses are saying in their straw polls. Look at who votes in an off-year, closed primary. It will be the ideologically intense, and Rubio will get them.

BROWNSTEIN: You know, the problem with the civil war metaphor is it implies two equal armies contesting on the battlefield. There is not a civil war in the Republican Party.

You have a dominant conservative wing that is a larger share of the Republican coalition, by far, than the liberals are, by the way, of the Democratic coalition. And then you have, kind of, a moderate to liberal -- not even liberal -- remnant that is declining in influence.

And the -- and the ability of the moderate side of the party, I think, to, kind of, shape the definition or the image of the party is very limited.

And I think what you saw -- I agree with you; New York 23 is a conservative place. You can't read too much into it. But I think it is part of an overall continuum in which, after Bush, after McCain, the conservative part of the party is saying, look, we lost not because we were too moderate but because we were -- not because we were too conservative; because we were too moderate.

And I think they will -- I think there is going to be a tight leash on Republican leaders in terms of how far they can deviate from a small government message in the next couple years.

WILL: Independents -- independents are moving to the right in droves. Gallup says the number of Americans who identify themselves as liberal is down 20. Those identifying as conservative, Reverend, are up to 40. That's two times 20.

SHARPTON: Well, I'm a conservative. I want to conserve voter rights. I want to conserve women's rights.

(LAUGHTER)

WILL: You don't want to conserve voting rights for union members.

SHARPTON: I think you've got to redefine what conservatives are, now. I think that a lot of what people who used to call themselves conservatives, they're the extremists. They want to change America as it has become. I think we are now the conservatives. We're trying to conserve the America of the last 40 years that is making the progress you talked about.

STEPHANOPOULOS: One feeling I think a lot of those conservatives have -- I mean, and you see this across the polling -- independents are going up in every poll. But these are, as Ron suggests, is Perot- like independents, really, really angry, right now. And that could cost Jon Corzine from your neighboring state, New Jersey, his race, even though he's ahead right now.

SHARPTON: I think unfairly so. But I think you're right. I think that Corzine was impacted in his tenure as governor by what happened in terms of the national economy and things that were beyond his control.

I have been in New Jersey. And I've been on the ground there, and I think that the problem there is trying to get that message through and to really raise a lot of the things concretely that he did do in the state.

And I think that is going to be a close election. And I think he'll win.

(CROSSTALK)

STEPHANOPOULOS: But in that state, you've also, though, got more of a moderate Republican challenging the Republican nominee, and he's costing Chris Christie, the Republican, how many votes, as well.

GILLESPIE: For right now...

STEPHANOPOULOS: Third party.

GILLESPIE: Yes, a third-party candidate. But, look, independents -- New Jersey's the first state in the union with a plurality of registered independent voters. They tend to be -- have been leaning Democrat for years, but they are fed up with the spending. They are fed up with the taxes. They're tired of seeing businesses run out of the state and they're tired of seeing one-party rule in Trenton.

And what we're seeing now is a reaction to that. And we've got wind at our back for Chris Christie. I think Daggett's numbers will come down between now and Tuesday, and they will accrue to -- they will go to Christie.

BROWNSTEIN: You know, you -- I think you are going to see some warning signs for Democrats out of this election. I mean, you can make too much of these -- these off-year elections, but in 2006 and 2008 Democrats won independents substantially, both in the state races and at the presidential level.

In the last polls these week, in all three, Virginia, New Jersey, and New York 23, independents are moving toward the Republicans, largely, I think, around a size-of-government, scale-of-government, cost-of-agenda argument. I think you're going to see more pressure from Democratic centrists next year as the result for some kind of deficit reduction.

STEPHANOPOULOS: I want to get into that, because...

BROWNSTEIN: Can I just -- one quick point, having said that, President Obama's approval rating has stabilized over 50 percent with unemployment at 9.8 percent. When unemployment hit 9.8 percent under Ronald Reagan in July '82, he was at 41 percent approval. There is still a substantial base that supports Obama that puts him in a different position than Clinton was in, both legislatively and politically heading into that first midterm.

STEPHANOPOULOS: Right now I think that's exactly right. I think the other thing you're going to hear from Democrats, Dee Dee, if, indeed, Republicans win in both New Jersey and Virginia, is that in these off-year elections, those states always go to the out-party.

But if both states, both Virginia and New Jersey, go to the Republicans, that could have an impact on this health care debate.

MYERS: It could. You know, it could make a lot of Democrats -- or moderate Democrats in both the House and Senate very nervous. I mean, there is backlash against -- this can't be completely attributed to a bad economy and to an unpopular incumbent in New Jersey.

There is something afoot in the land that people are uncomfortable about, and one of the issues is spending. And that's probably the biggest issue.

WILL: Well, that's right. I mean they've seen, A, on Friday, we had the biggest contraction of the stock market in six months. The jobs numbers come out, and they say, well, the GDP is growing. People say, well, so what, where are the jobs? We've had "Cash for Clunkers," which was a government-engineered automotive bubble that promptly collapsed.

Our next stroke of genius in managing the economy from Washington will probably be to extend the $8,000 tax credit for first-time or multiple-time home-buyers, which is to say a government subsidy to get people into houses they cannot afford to be in.

GILLESPIE: And by the way, the "Cash for Clunkers," you know, which was a vaunted success supposedly, it turns out each of these cars, apparently, $24,000 per car is the estimated cost of these. The jobs that they attribute to stimulus, $71,500 per job. We're looking at now having $540,000 per household in debt imposed by this administration. That is jarring to people, and the jobs aren't there. The fact is, is that we saw Jared Bernstein, a White House economic adviser, on TV last week say that they expect job creation to begin the second half of next year, eight months from now.

STEPHANOPOULOS: Of course, what the White House says and their economic advisers say is that without these programs that we would have had 2 or 3 percent less...

(CROSSTALK)

SHARPTON: And no one is more concerned about the 9.8 unemployment rate than I am. But at the same time, you have to stop the job loss. I live in New York. People forget that when we saw the Wall Street companies go down, the financial services jobs that ordinary people lost on the ground, we had to stop the hemorrhaging. And I think that a lot of Americans which is why President Obama's poll numbers are staying as high as they are, understand that he inherited a bad hand.

He got the key to the bank with no money in the vault and the people that took the money are asking him, why aren't we making withdrawals? I think he has got to deal with what he was handed, and I think that that it is not just blaming the Republicans, it's reality. He was handed a bad hand.

BROWNSTEIN: You know, there's a short term and a long term arc to be looking at here. I think that in the near term you do have movement among independents toward a -- especially white independents, toward a more skeptical Perot-esque view of government, and you add to that the fact that the electorate in 2010 is going to be older and whiter than the electorate in 2008, and younger and non-white voters are the core of the Democratic Party. That kind of adds up to what could be a difficult election in 2010.

But if you look over the longer arc toward 2012, I do have to wonder if Republicans are drawing the right lessons here, because in some ways they are responding to Obama's effort to expand government by becoming more aggressive in their proposals to retrench (ph) government.

You had four-fifths of House Republicans vote this spring to convert Medicare into a voucher for everybody under 55. And you've had three-quarters of House and Senate Republicans vote this year to lower the top marginal tax rate for the wealthiest to 25 percent, the lowest level since 1931.

Now that's not going to be part of the debate in 2010. It's going to be a referendum on Democrats. But when you get to 2012, if that is the trajectory of the party, I think Obama has an excellent chance of recapturing some of those independents who are skeptical.

STEPHANOPOULOS: A lot will depend on whether health care passes, and what kind of impact it has had on people by 2012, as well. And this week we did see some major movement. You saw the House of Representatives announce their bill, also Senator Harry Reid on this whole issue of the public option, choosing to side with his Democratic base rather than Olympia Snowe, who the president had decided to go with on the public option.

Yet what he couldn't say at the end of that press conference was that he had the votes to get this to the floor and pass it.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: We have 60 people in the caucus, it's -- the comfort level is kind of -- we all hug together and see where we come out.

(END VIDEO CLIP)

STEPHANOPOULOS: A gamble forced by necessity, right, George?

WILL: Yes. Now the president has now declared swine flu an emergency because the government hasn't done very well in coping with an epidemic we saw coming. Now at this very moment we're saying what we ought to do is expand radically the role of government in handling health care.

At the last count I heard, this 15,000 -- 1,500-page bill has the word "shall" in it. "You shall do this." "Government shall do this." "States shall do." That's the polite way of saying, "must," 3,425 times.

WILL: And they say this is not government takeover of the health care system? It's preposterous.

SHARPTON: It is government protection of citizens, 50 million people uninsured, with all of the...

WILL: Fifty? The president says 30.

SHARPTON: Well...

MYERS: Forty-seven.

SHARPTON: ... 47, if you want to be exact. I don't have the exact numbers of how many times "shall" is in the bill, so let me be exact with...

(LAUGHTER)

... 47 million people uninsured who have not been protected and who, I might add, in the Reagan years, Bush senior and Bush junior years, it just sat there.

I think the fact that this president has been able to move a -- a dialogue forward and different manifestations of a health care package to where it has passed five committees and we're on our way to some kind of movement, here, is nothing short of amazing.

And I think that he ought to be saluted for that. The American people should be protected by the government.

STEPHANOPOULOS: Democrats are convinced that failure here is not an option and that victory will put to rest a lot of the anxiety that people have right now. Yet, at the same time, you're likely to see, if this bill does go through, at least over the next year or so, premiums continue to go up. Yet voters will also, for the first time, say they can't be denied health insurance if they're sick.

So how does that trade-off work?

GILLESPIE: I think -- George, I am stunned by this, I have to say. I always thought, and I've said, you know, before, here, that I thought that they would get to a bill that they could pass that had bipartisan support, that was scaled back, that didn't have the public option.

They have gone whole hog. This bill is a monstrosity. And from a Republican perspective, if you look at the mandates in it, the taxes in it, the cutting of Medicare for seniors, the federal funding of abortion, it is -- I feel like one of those old game shows, where you take the shopping cart down the aisle and try and scoop it all in, in terms of trying to pick out, where do you hone in on this...

STEPHANOPOULOS: Yes it is rolling toward passage.

MYERS: It is rolling toward passage. And I think, you know, Senator -- what are Senator Reid's motives in approaching the public option this way?

Well, part of it is back-home politics. He's in a very tough re- election. His state supports the public option, so he's taken a more aggressive position.

I don't think anybody believes there's enough votes in the Senate to pass this. So what's the fall-back plan? An opt-in, which brings back Olympia Snowe. I think it's entirely possible that they pass this.

GILLESPIE: But if they vote in the House on this bill, let me tell you, it would be like the BTU of '93. And I've got to say...

(CROSSTALK)

MYERS: They're a little smarter about that now.

GILLESPIE: I've never felt this -- this is the first time I've thought of this, but I've got to tell you something. I know that they were willing to sacrifice 20 conservative Democrats, or moderate Democrats, to get this done. I think they risk losing the House if they try to pass this bill and they jam it through the way it's written.

(CROSSTALK)

MYERS: That's not going to pass the Senate, so we know that's not going to...

(CROSSTALK)

GILLESPIE: But it's going to pass the House, and those House members are going to have voted for all these things.

MYERS: It will depend on what gets worked out in the Senate before they go to vote in the House.

BROWNSTEIN: Can I just make two quick points?

I mean, your point about, sort of, the throwing everything in the shopping car -- the core of this bill, an individual mandate, a mandate on individuals to buy insurance in return for fundamental insurance reform, paid for by slowing the growth of Medicare spending is the John Chafee/Bob Dole alternative to Hillary Clinton in 1993.

And it says something about the evolution of the party that, regardless of what else was in there, the individual mandate by itself would be a bridge too far for almost...

(CROSSTALK)

STEPHANOPOULOS: Just stop there one second. Because I want -- that's -- you're right. On the other hand, now let's go hardball politics. When this is in an election context next year, what you have for the House members to (inaudible) they're going to be saddled with $400 billion in Medicare cuts, and if this tax on high-priced insurance plans passes, something that a lot of their own supporters will call a middle-class tax increase.

How do you fight that?

BROWNSTEIN: Yes. The heart -- the heart of the choice is going to be whether George or Al are right -- Reverend Sharpton -- is right about what Americans want from government.

Because what you are saying is that there's a fundamentally Reaganite moment, here, in which people are saying, look, government is just doing too much and we want it rolled back.

What you're saying is that people are angry that government seems to be protecting the rich and not doing anything for me. And to the extent that Obama and the Democrats can portray health care as something that's not for Wall Street but helping to provide security for middle-class Americans, they have a better chance of selling it than it might now appear.

WILL: Here is why we have two parties. The Reverend Sharpton say the American people need protected by government. Some of us think we need protected from government.

BROWNSTEIN: And that's the core of the argument.

(LAUGHTER)

WILL: In this...

SHARPTON: But you guys lost the election a year ago, so I think the American people have spoken on that...

(CROSSTALK)

WILL: The Constitution is very picky about this. We keep having elections.

(LAUGHTER)

SHARPTON: Every four years. We have three left.

WILL: Two years -- every two years.

STEPHANOPOULOS: So are you worried about this wave, if Ed Gillespie -- is Ed Gillespie right, if this passes, that Democrats could lose the House?

SHARPTON: I think that I'm concerned how it comes out. I think Dee Dee is right. I don't think that it will out in the hard lines that it is outlined. I'm sure that he will portray it that way.

(LAUGHTER)

I think that it will not be that way, and I think that, at the end of the day, it will come down to what George Will just said. Americans will say, does government -- is the government's role to protect us or to protect us against government? And I think more Americans have seen those that have had this rhetoric of protect us against government hasn't worked.

(CROSSTALK)

STEPHANOPOULOS: That will have to be the last word. You guys have a lot more to say. Say it in the green room.

END

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