Transcript: Gen. Casey, Steele vs Kaine

Photo: This Week guests, RNC Chairman Michael Steele and DNC Chairman Tim Kaine

ABC NEWS, THIS WEEK WITH GEORGE STEPHANOPOULOS INTERVIEW WITH CHIEF OF STAFF OF THE ARMY GENERAL GEORGE CASEY, RNC CHAIRMAN MICHAEL STEELE AND DNC CHAIRMAN TIM KAINE.

GEORGE STEPHANOPOULOS, HOST: At 11:15 last night, the gavel came down. With only two votes to spare, the House had passed reform of health care. President Obama summed it up in three words: "This is history." At least one Republican called it a wrecking ball to the economy. We'll take on that debate in just a moment with the party chairs and our powerhouse "Roundtable."

But we begin with the latest on last Friday's mass killing at Fort Hood. Flags at the White House and all government buildings remain at half staff today. The Obamas will attend a memorial service at Fort Hood on Tuesday. And we are joined here in the studio this morning by the Army's chief officer, General George Casey.

Welcome to THIS WEEK.

GEN. GEORGE CASEY, ARMY CHIEF OF STAFF: Thank you, George.

STEPHANOPOULOS: And let me begin by offering our condolences to you and all of the families at Fort Hood. I know you just returned...

CASEY: Thank you very much.

STEPHANOPOULOS: ... from there. And you were able to spend some time with the wounded. What were you able to learn about what they saw and what they did when the shooting broke out?

CASEY: I'll tell you that my trip there on Friday with secretary of the army, John McHugh, was at once gut-wrenching and uplifting. And in talking to the wounded soldiers and in talking to the medical providers and soldiers who are at the site, I came away with what a horrific experience it was for them.

But also I was uplifted by the -- by what they did for each other. And when you talk to the wounded soldiers, the one thing that they all stress was how -- was their reaction, and their reaction in support of each other.

STEPHANOPOULOS: It was immediate.

CASEY: It was immediate. And just stories like medics who were next -- in another building next door at a graduation, their graduation, running from the building toward the crime scene in their caps and gowns, ripping them off as they went so they could get there to support their fellow soldiers.

STEPHANOPOULOS: Let's also get to the latest on the investigation. It's my understanding that Army investigators have concluded that Major Hasan was the only gunman?

CASEY: That is where they are now. But I don't -- I mean, I don't -- I think as the investigation continues, other things could evolve. But I think that is where they are today.

STEPHANOPOULOS: So you believe it was the only gunman right -- at least for right now, not conclusive, are you confident that he acted alone, that there were no other co-conspirators?

CASEY: George, I can't comment on the ongoing investigation. And those facts will come out over time here. We need to let the investigation take its course. And as I said, that will evolve over the coming days and weeks here.

STEPHANOPOULOS: But do you have any better understanding of why the first reports suggested there were two or three attackers?

CASEY: My understanding from being down there and talking to the investigators and General Cone was there were two or three soldiers that were seen running from the area, and people assumed that they were running from the police. And they just checked them out and have since decided that they weren't part of this.

STEPHANOPOULOS: And that's why they were released.

CASEY: Yes.

STEPHANOPOULOS: You say you can't talk too much about the investigation, but we are learning a fair amount about Major Hasan in the last couple of days. And it appears that there were several warning signs they either could have or should have been caught.

His fellow students and here in Bethesda, Maryland, say that he had anti-American rants at various presentations. The FBI has found some Internet postings by a man with Mr. Hasan's name, very inflammatory, praising suicide bombers.

And one of the major's fellow students has been especially concerned by what he said. He said that it was very clear to him, and his name is Val Finnell, that -- and that he had complained to administrators at a military university about these anti-American rants. And the AP story that quotes him goes on to say that Hasan's fellow students complained to the faculty about Hasan's anti-American propaganda, but said a fear of appearing discriminatory against a Muslim student kept off the students from filing a formal complaint. Is that true?

CASEY: I think we need to be very careful here about speculating based on anecdotes like that. We are encouraging all of our soldiers and leaders that may have information pertaining to the suspect to come forward with that information to the criminal investigation division and to the FBI. So, I realize there is a lot out there. We all want to know what happened and what motivated the suspect, but I think we need to be very, very careful here in these early days to let the investigation take its course. These are professionals and they will sort through this.

STEPHANOPOULOS: So it's fair to say that right now, you can't rule out anything. We don't know if this was an act of premeditated political terror, or if this was a case of someone who just snapped.

CASEY: I think you are exactly right, and I don't think we should speculate on one or the other or any other possibilities.

STEPHANOPOULOS: One of the things this does raise, though, is the special challenge paused to all of you by Muslims in the military. There are only about 3,000 Muslims in the military right now, and on the one hand, you want to recruit Muslims. There is a great need for Muslims in the military right now. On the other hand, this is not the first case we've seen of fratricide by someone with a Muslim background in the military. How do you deal with this challenge?

CASEY: Again, I think that's something else we need to be very careful about, and I think the speculation could potentially heighten backlash against some of our Muslim soldiers. And what happened at Fort Hood was a tragedy, but I believe it would be an even greater tragedy if our diversity becomes a casualty here. And it's not just about Muslims. We have a very diverse army. We have a very diverse society. And that gives us all strength. So again, we need to be very careful with that.

STEPHANOPOULOS: You say it gives us strength. We also have more and more signs that the military right now is under great stress, and military families under great stress, with repeated deployments both to Iraq and Afghanistan. It was pretty clear that one of the things on Major Hasan's mind was the fear of being sent, as he would be, for the first time, to Afghanistan. But is this something we're going to -- and I know you are addressing it every single day -- but is this something that we're going to be paying more attention to? And what more can be done to prevent something like this in the future?

CASEY: I'd say two things to that. First of all, we in the Army will take a very hard look at ourselves and ask ourselves the hard questions, because we want to, as everyone else wants to make sure that nothing like this ever happens again.

The second thing you asked, can we do more to help the stresses and strains on the soldiers and families. And I can only say we will continue to do whatever it takes. And we've made great strides in the last several years in increasing what we're doing from -- the mental fitness of the force. In 2007, we had an Army-wide stigma reduction campaign, that actually we saw the benefits right away in the 40-percent increase in the number of soldiers who came forward and said they were suffering from post-traumatic stress. We have gone after the suicide problems they were having very hard. We've contracted with the National Institute for Health for a five-year, $50 million study of suicides. It's not only going to help the Army, it's going to help the country. And recently, we just implemented a program called comprehensive soldier fitness, which is designed to work on the front end of this, to give our soldiers, civilians and family members the resilient skills they need to make it through these tough times, and that's a $125 million program here that's going to unfold here over the next several years.

Tomorrow, 150 sergeants and family members will begin a master resilience trainer course at the University of Pennsylvania, and we -- our goal is by this time next year to have a master resilience trainer in every battalion in the Army.

STEPHANOPOULOS: OK, General Casey, thanks very much. Our thoughts and prayers are with you and all Army families this weekend.

CASEY: Thank you, George.

STEPHANOPOULOS: We're going to go straight to our exclusive debate with the party chairs. As they take their seats, here is a sampling from yesterday's House debate on health care. Seemed like kiddie's day in Congress.

(BEGIN VIDEO CLIP)

(UNKNOWN): This is Mattie. Mattie believes in freedom. Mattie likes America because we have freedom here, and Mattie believes in patient choice health care. She asked to come here today to say she doesn't want the government to take over health care.

(UNKNOWN): I encourage each of my colleagues to join me in voting yes, and I can assure you these guys aren't going to have to pay for it in the future.

STEPHANOPOULOS: I am pretty sure we have no kids on the set this morning, but we are joined by the two party chairs, Democrat Tim Kaine of Virginia, Republican Michael Steele.

Welcome to both of you.

STEELE: Great to be here.

KAINE: Great to be here, George. Thanks.

STEPHANOPOULOS: And thank you for not bringing any props.

(LAUGHTER)

And, Governor Kaine, let me begin with you because it appears that the Republicans -- and a lot of Republicans I talk to are saying that this is going to be a Pyhrric victory for the Democrats, that what you have here on the health care bill is $400 billion in tax hikes, $400 billion in Medicare cuts. And that's going to spark a backlash that's going to haunt Democrats at the polls next year.

KAINE: George, of course, Republicans are saying that. They've been trying to block this all year. They've said that they want to beat health care reform as a way to break the president.

But there's no denying that this was a historic passage last night, on an issue that President Teddy Roosevelt, the Republicans started 100 years ago, that now is moving forward in all the committees, and now, with the House vote of historic importance.

And what this bill does is it provides security for the four-fifths of Americans who have health insurance so that they can't get abused by, really, predatory insurance company practices.

It provides a path to affordable coverage for uninsured Americans for the first time in the history of this country. And then it does significant work to start to break the unsustainable growth in health care cost that is breaking the bank for families and businesses.

We think this was a big and historic win into the week in a great way.

STEPHANOPOULOS: When you hear Governor Kaine talk about, it sounds...

STEELE: Well, it sounds...

(CROSSTALK)

STEPHANOPOULOS: ... only one Republican voted for it.

STEELE: ... not. No, look, you know, Teddy Roosevelt probably didn't have this in mind. And certainly, this would have been one of those things he would have hunted on the big -- big range and shot dead.

(LAUGHTER)

KAINE: Teddy wouldn't have wanted insurance companies to be running...

(CROSSTALK)

STEELE: The reality of it is we don't want the government running things, either. And so -- and that's what this amounts to. This is a government takeover of our health care system. It is unnecessary. Republicans have not blocked -- tried to block this for the purposes of saying no to health care reform. We've been trying to block it to bring some common sense, and so we could sit down and have a discussion.

Republican leaders, in a letter to the president in April of this year, requested a sit-down, face to face, let's talk about your agenda and ours and where we can find consensus.

They're still waiting for that meeting. They've been blocked from putting, I think, real form, into this bill. All their amendments were rejected in committee.

They didn't have the chance to really debate this last night. You're doing this at 11 o'clock on a Saturday night? America's watching?

STEPHANOPOULOS: The debate did stretch...

KAINE: Yes, I mean, George, the debate stretched on -- the debate stretched on for months. The Republicans had plenty of advance notice.

This isn't a government takeover of health care.

STEELE: It is -- it is very much a government takeover.

KAINE: What it is -- it is an effort by the Republicans to just basically shill for the insurance companies.

STEELE: Oh, please. You know that...

KAINE: The issue -- no, just -- the issue in this bill that is so important to most Americans is that you're not going to get your policy pulled out from under you when you get sick. And when you change jobs, which a lot of Americans do, seven or eight times in life, you won't get turned down for a pre-existing condition.

STEPHANOPOULOS: But that's until 2013.

KAINE: When the Republicans...

(CROSSTALK)

KAINE: Just hold on. When the Republicans put their own plan on the table this week, they didn't tackle pre-existing conditions. We're starting right away...

STEELE: They did -- we did, too.

(CROSSTALK)

STEELE: ... pre-existing conditions. Where's your tort reform? Where's your portability? Where's your -- where's your small-business pools? Where's your program for health savings accounts?

Where are the various programs that you don't need 2,000 pages to get done? You don't need to overhaul the entire system the way the Democrats have put forth last night.

STEPHANOPOULOS: But, Mr. Steele, aren't you concerned now?

You've got the -- the stimulus bill earlier this year, no Republican votes in the House, three in the Senate; one Republican vote in the House, here, that, to a lot of people who are hurting right now, that this is going to seem like the party -- the Republican Party is the party of no?

STEELE: Look, we -- I appreciate that perspective, and that's the image that the Democratic Party would like to have us see. But the reality of it is, and I go back to this point, that Speaker -- Speaker...

(LAUGHTER)

... Leader Boehner and Leader McConnell both have had opportunities to put bills out there, to make amendments, all of which have been rejected.

So the reality of it is, now we've got an opportunity to compare and contrast their bill to our alternative.

(CROSSTALK)

And the reality -- the reality still remains -- the reality still remains that, at the end of the day, this thing grows the size of government; it inserts the government between the doctor and the patient. It now requires mandates on states that can't afford, and it cuts $500 billion from a Medicare program that everyone in this country knows is on the road to bankruptcy.

And the final point is, all of this is prepaid by taxpayers today for a program that they won't even begin to access for four years. Now, let me ask you this.

(CROSSTALK)

KAINE: George, I've got to...

(CROSSTALK)

STEELE: No, no, let me make my one last point, here; then you can...

STEPHANOPOULOS: Ask the question. Then you can respond.

STEELE: Let me ask you this. Would you buy a car today -- put the money on the table today and take deliver four years from now? Because that's exactly what you're doing with this health care system.

(CROSSTALK)

STEELE: And this is not a great car.

KAINE: I'm going to let Michael be the used car salesman. I'm going to talk about health reform.

(CROSSTALK)

KAINE: ... overwhelming majority of Americans want to see this. And what the Republicans are doing -- party of no on the stimulus.

They were letting the economy go into a free-fall, not willing to do a single thing about it, losing 800,000 jobs a month, GDP down by 6.5 percent at the end of the Bush administration. They stood back, they were going to let it collapse.

Thank goodness the Democrats and the president put a Recovery Act in place that has GDP growing again. Party of no on health care, only one vote...

STEELE: Well, look...

(CROSSTALK)

KAINE: I'm not done. Only one vote...

STEELE: I'm not going to let you do...

(CROSSTALK)

KAINE: Only one vote.

STEELE: Sorry, Governor...

KAINE: Ninety percent of them voted against equal pay for women.

STEELE: ... you may be a governor but you're not going to filibuster this issue here, I'm sorry.

KAINE: Ninety percent of them voted against expanding health insurance for youngsters in the SCHIP re-authorization.

STEELE: You can check off the talking points...

KAINE: These guys are getting excellent at the no game.

STEPHANOPOULOS: I've heard from both of you on this issue. I do want to move on to the elections, because Michael Steele had a bit of a Freudian slip there where he called -- said "Speaker Boehner." Maybe he was looking out at the election returns on Tuesday, forecasting it into next year...

KAINE: Well, we won two House seats on Tuesday, George.

STEPHANOPOULOS: Two House seats on Tuesday, the margin...

KAINE: Five for five.

STEELE: And you lost...

STEPHANOPOULOS: ... of victory last night. But let me look -- dig into the numbers a little bit more from Tuesday night. One of the things you saw in both Virginia and New Jersey is those new voters that President Obama brought to the polls last year in Virginia and New Jersey, under 30s, way down, half the share of the electorate that they were in 2008.

And then on independents, look at these numbers, first of all, in Virginia. President Obama last year, Democrats won 49-48. This year Republicans two to one, 66-33 among independent voters in Virginia. New Jersey much the same story, 51-47 last year under President Obama, this year Republican Chris Christie gets 60 percent of the independent vote, Democrats get only 30 percent of the independent vote.

That is a huge flashing light for next year, isn't it?

KAINE: Well, George, let me tell you something, you know, and your viewers probably do too that for 24 years, the way the White House goes, both of these governorships go the other direction. In Virginia it has been 32 years.

STEPHANOPOULOS: True, but that is a massive swing among independent voters.

KAINE: But it's not a swing away from the president. The president is popular with independents nationally, Washington Post/ABC poll a week ago, 55 percent approval -- job approval among independent voters. That's north of where he was on Election Day last year.

His job approval in New Jersey, 61 percent, in Virginia, 57 percent. So it is the case that the historic trend in these governors races was cutting against us. And it is the case that independents supported Republican candidates.

But independents nationally and independents in both of these states are strong for their president. That's why we...

STEPHANOPOULOS: So nothing to worry about.

KAINE: Well, no, we're going to look at everything. We wanted to win those races...

STEELE: They have a lot to worry about, George...

KAINE: But -- no, let me finish.

That's why we won the two congressional races. The only national races Tuesday, on national issues were the races in Congress. We won them both.

(CROSSTALK)

KAINE: And we are five for five in congressional races.

STEELE: OK. We are 18 of 29 in special elections this year...

KAINE: Not in Congress, you haven't won a congressional race.

STEELE: Of all special elections, all special elections.

KAINE: But none in Congress.

STEELE: Well, look, it's -- that's not the point. When you lose the governorship of New Jersey, you had better be paying attention. And there is a reason why you lost, and it has nothing to do with the president's popularity. Independents came to Chris Christie and Bob McDonnell because they had something to say. They talked about the issues that they were confronting every single day.

They were concerned about how you leverage what is happening here in Washington with what is going on in my state. You're talking about health care, there is a downward pressure on my economy, in my neighborhood, in my household. So people made this convergence, this connection between the so-called national issues and the kitchen table issues. That's number one.

Number two, the Democratic Party had better pay attention to what the people out here are saying. You can no longer dismiss people by sitting on your cell phone when they're talking to you or calling them un-American or making them feel like you don't give a heck about what they're concerns are.

That's what the voters laid on the table this year. And you walk into 2008 thinking you're going to wrap it all around the president's popularity, call Speaker Boehner Speaker Boehner now, because it's going to happen.

STEPHANOPOULOS: What do you think independents were saying? There is an awful lot of evidence, the polls that I've seen, that they were concerned about the economy and that they were concerned that there -- that the deficit is going to grow and cripple the economy even more in the future.

KAINE: George, what I think independents were saying is what they said in exit polls, which is, in governors' races, they view them as local and state races. They don't nationalize them. Even with the strong independent approval of the president, they said they cast these votes in these state races based on state issues.

But again, all of the races and all of the changes in Congress this year, where they are federalized, we've won five congressional races. Every special election since Inauguration Day in the House has gone to a Democrat, including in some very tough Republican areas.

And we picked up two Senate seats. Chairman Steele and others chased Arlen Specter from the Republican Party to the Democratic Party, and we won the recount for Al Franken and he took over Norm Coleman's seat. Every change in the Hill has gone to the Democrats since President Obama came into office.

STEELE: And that hasn't made things any better for the American people. So you can tout bringing all of these Democrats to Washington and look what you get. You get a 2,000-page bill with 2,000 reasons to vote against it. You're talking about your...

KAINE: You get GDP growing again for the first time in two years.

STEELE: You talk about a national -- you talk about -- look, that's a blip on the screen. Let's see what happens as we go forward because all of this -- all of this infusion of trillions of trillions of spending by this administration and this Congress comes home to roost.

And you know where it roosts, George? It roosts in the back pockets of small business owners in this country, which this administration has done zip for.

STEPHANOPOULOS: But there was a warning...

KAINE: Now that's complete...

(CROSSTALK)

KAINE: That's completely inaccurate.

STEPHANOPOULOS: ... sign for Republicans...

STEELE: What jobs are small business owners creating right now? We have a 10.2...

KAINE: I'll talk about it. Let me answer it...

STEELE: Excuse me, no. We have...

KAINE: You just asked me a question. Let me answer it.

STEELE: I am going to answer it for you...

STEPHANOPOULOS: That's the question you answered...

(CROSSTALK)

STEELE: We have a 10.2 unemployment rate right now. Where do you think that comes from?

KAINE: Let me answer.

STEELE: That comes from small business owners who can't hire. That comes from small business...

KAINE: OK, now do I get to answer the question?

STEPHANOPOULOS: Let him answer the question.

STEELE: No, wait, Governor, you filibustered on the federal stuff. Let me talk about where (ph) the real people are.

KAINE: OK, I'm going to answer. George, I'm a governor.

STEELE: The reality of it is...

KAINE: I am a governor, and we have got small businesses all over...

(CROSSTALK)

KAINE: ... small businesses all over Virginia that are doing infrastructure projects because of this stimulus bill. Water and treatment, water and sewage treatment plants, roads. A great example...

STEELE: A government contract work. That's not creating jobs!

KAINE: Are you kidding me?

STEELE: That's not...

KAINE: Innovation and construction is very, very important to the economy. GDP is growing again...

STEELE: What about the brother on the corner with his...

KAINE: GDP is growing again...

STEELE: ... grocery store?

KAINE: ... for the first time in two years. At the end of the Bush administration, fallen by 6.5 percent a year. Now it's going up by 3.5 percent a year. I know Michael wants to explain it away, but that's a good thing.

(CROSSTALK)

STEPHANOPOULOS: I want to ask Michael Steele about this race up in New York, the special election where Republicans did lose. And that seemed to be a race where Republicans pushed their candidate out of the center, (inaudible), the Democrat, Bill Owens, is a member of Congress today. How concerned are you by this dynamic that seems to be developing not only in that race but a lot of Senate primaries around the country, where conservative candidates are pushing moderates out of the middle?

STEELE: Well, my concern in New York 23 was a process. I mean, it was a failed process from the very beginning. The reality of it is, this was a play to grab a state Senate seat. It wasn't about electing a Republican or a Democrat necessarily to the United States Congress. The local party, 11 county chairmen, made the decision who they wanted. They drew Senator Owens out into the race. He ran, and then that opened up the Senate seat. The reality of it was, it was not a reflection of what the people in that community wanted. You saw the primary eventually played out between the moderate and the conservative Republican in that district...

STEPHANOPOULOS: And they elected a Democrat.

STEELE: And they elected a Democrat. And guess what, we'll get the seat back, because this Democrat in the first 24 hours of taking office has broken four of his pledges, first starting by saying he wasn't going to support this monstrosity of a health care bill. The reality of it is, with a better, cleaner process there, where the people actually get to make the choice of who they want and you don't have back-room bosses making those decisions, you'll get the kind of results that will sustain us in that seat.

KAINE: George, let me talk about New York 23, because it is a gift that keeps on giving and it's going to play out forward. The year for the GOP started when the chairman said he was going to come after any Republican that voted for the stimulus. Senator Specter said I'm not going to wait, I'm going to join the Democrats right away. The year is ending with Dede Scozzafava, a Republican elected official that the party unified behind, the party, the DNC and the RCC, gave her $800,000. Then they let right-wing radio and talk show hosts chase her out of the race, with Sarah Palin, and she ended up supporting us. That's the first time I've been happy that they're good fund-raisers.

STEELE: No.

KAINE: She put that money behind our candidate. We won for the first time since 1870 in that district.

STEELE: The reality...

KAINE: And you're seeing the same dynamic play all over the United States.

STEPHANOPOULOS: You got the first word, you get the last word.

STEELE: The reality of it is, you know, hang your hat on that hook. I take the hat back come next November. Your problem right now, Governor, is that you lost New Jersey, you lost Virginia -- your home state. You could not deliver. And the Democrats can't deliver and that's what the American...

KAINE: We delivered in every congressional...

(CROSSTALK)

STEELE: I had the last word, Governor. I had the last word.

(CROSSTALK)

STEELE: You've got to deliver something. And what you delivered is a 2,000-pound baby that nobody wants.

(CROSSTALK)

STEPHANOPOULOS: You guys continue that in the green room. We're going to be right back with the roundtable and later the "Sunday Funnies."

(BEGIN VIDEO CLIP)

(UNKNOWN): And in breaking news, the House passed the health care reform bill at 11:07 this evening by a vote of 220 to 215. Nancy Pelosi was said to be so emotional, she was on the verge of blinking.

RONALD REAGAN, FMR. PRESIDENT OF THE UNITED STATES: Unemployment hangs over the lives of 11 million of our friends, neighbors, and family.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Our unemployment rate climbed to over 10 percent, the sobering number.

REAGAN: We're going to keep inflation, interest rates, and government spending, taxing, and borrowing, down and get Americans back on the job.

OBAMA: Additional investments in our aging roads and bridges, incentives to encourage families and businesses more energy efficient, additional tax cuts for businesses to create jobs.

REAGAN: This time, we're going to get the job done, and get it done right.

OBAMA: I'm confident that we're moving in the right direction.

(END VIDEO CLIP)

STEPHANOPOULOS: Barack Obama facing the highest unemployment since Ronald Reagan was president back in 1983. We'll talk about that and all the week's politics, here in our roundtable.

I'm joined, as always, by George Will, Republican consultant Frank Luntz, the author of "What Americans Really Want -- Really!"

Is that the right way to pronounce that? The right inflection?

(LAUGHTER)

Democratic strategist Donna Brazile, Sam Donaldson and Cokie Roberts.

And George, so much happened in the political world this week, but that unemployment rate on Friday, 10.2, probably the most significant development.

GEORGE WILL, ABC POLITICAL CONSULTANT: Three digits is a lot more than two when unemployment is concerned. Adding those who are either discouraged and left the job market, or are underemployed, you're at about 17.5 percent. Given the fact that you have to create 100,000 new jobs a month, in this economy, just to stay even with population growth, you can see the kind of whole we're in.

And as this is happening, small business, and others, who do the hiring and job creation, look around and they see card check, coming that would make it easier to unionize. They see a 12 percent increased in domestic spending planned for 2010. And they see the raft of regulations and the costs and taxes in the health care bill and they get discouraged.

SAM DONALDSON, ABC NEWS CONTRIBUTOR: Yes, but they saw all that in Reagan's day. His popularity went down to 37 percent, at one point. But guess what, we came out of that recession. Thanks to Paul Volcker, wringing out inflation the old-fashioned way, by jacking up interest race at the Fed. And it was morning in America again.

So, I say to people, anyone who thinks that Barack Obama isn't kind of odds on, for re-election, must not think we're going to come out of this recession. Because of assuming we do, and I think, we are going to by 2012, it will be morning in America again.

(CROSSTALK)

COKIE ROBERTS, ABC NEWS: I think that's right.

STEPHANOPOULOS: How long will it take though?

ROBERTS: I think that's right, though.

(CROSSTALK)

ROBERTS: I mean, when you look at the -- since you did that nice Reagan analogy, 1982 was a terrible year for Republicans. They lost 26 seats in the House, and 4 in the Senate. Everybody was saying, ah, see, the Reagan landslide really wasn't what it looked like, and all of that. 1984, a very different story. And what we really had in 1980, with that Reagan election, was a realignment that lasted for a generation.

And I basically think that despite what happened on Tuesday, and what I think is likely to happen in 2010, I think we probably did see a realignment in 2008.

STEPHANOPOULOS: And what we saw, also, on Tuesday night, Frank, is really a primal scream, from the voters on the economy.

(LAUGHTER)

And 85, 90 percent of the voters worried about the economy. Almost half of that, very worried.

FRANK LUNTZ, REPUBLICAN POLLSTER: Now, you understand why there's so much anger; 72 percent of Americans define them as, quote, "mad as hell". And not going to take it anymore. Every age group, except for 18 to 29 year olds, ethnicity, it doesn't matter, there's this level of frustration and anxiety. But I compare this not to Regan in '82, I compare this to 1994. And it was on this show -- I'm sitting next to him -- when this whole thing happened. And I said, look at the health care bill that we're frustrated with, look at all the wasteful Washington spending and the crime bill, back at that time. The right direction, wrong track, numbers were awful. The president had lost significant support after being elected to unite the country. The same numbers exist today that existed in 1994.

STEPHANOPOULOS: Democrats are banking on those, that's a year away, Donna.

DONNA BRAZILE, ABC NEWS CONTRIBUTOR: Well, first of all, I don't think it's '94, because in '94, we also had some potential disastrous that happened that caused Democrats to lose so many seats.

First of all, we had a great deal of retirements in the Congress, we had the bank scandal, the post office scandal. I was a House employee, so I can go down the scandals.

(LAUGHTER)

We also had Democrats running for other seats. That created this environment for Republicans. We also had a Republican Party that had ideas. We had a Republican Party that was a lot more viable and had plans to help solve some problems. We don't have that Republican Party today. What President Obama must do, once this healthcare business is done, is to get back to work and creating jobs for the American people. Productivity is up 6 percent. We know that's one sign that the economy might be coming back. More people are being hired for part-time work.

LUNTZ: But nobody sees (ph) this.

BRAZILE: Well, Frank, it will come. I am one of those who hope it comes sooner than later.

(CROSSTALK)

ROBERTS: But you know, the other thing is true, about true, Donna's point about the Republican Party. We're seeing Republican I.D. numbers at the lowest -

STEPHANOPOULOS: 20, 23 percent.

ROBERTS: In one poll, 17 percent of people saying that they are Republicans. While conservative numbers are up. So, I think what you're seeing, you showed with the party chairman, those independent numbers. What you're seeing, is independents being considerably more conservative than they were two years ago, because a lot of the people who used to call themselves Republicans, are now calling themselves independents.

DONALDSON: Yes, but Cokie, independents, I think, in Virginia and New Jersey, prove that they're also moderates. That is why they're independent. They are neither one side, nor the other side. And the Republican candidates who ran in those two states ran as moderates. Now, never mind what they truly may be, but Bob McDonnell, maybe his thesis that was uncovered by "The Washington Post", but he didn't run that way. He didn't call anyone a Nazi. And he ran a positive campaign, rather than a negative campaign. And he's a nice guy. That is the way he projected. So, moderates said, wait a second, Frank's right, we're made as hell. This guy sounds all right to us. We don't even know this other --who is this person, Creigh Deeds? And they voted for him.

WILL: Nothing makes middle-class nation angrier faster than inflation.

(UNKNOWN): Right.

WILL: Now, this week ...

DONALDSON: We have no inflation.

WILL: This week, Sam, when the price of gold at one point on Friday hit $1100 an ounce, the government of India brought 200 tons of gold. Why did they do that? It is only $7 billion. But still it is a sign that the holder of dollar denominated assets are diversifying out of dollars into other, better stores of value. That is their judgment that inflation is coming.

DONALDSON: Well, then we had better throw Ben Bernanke and the Fed out, because they say there is not only no inflation now. They're predicating their policy, for the next months, on the fact that there will not be any inflation.

WILL: They might be wrong.

ROBERTS: The fact that there possibly not be inflation --

(CROSSTALK)

DONALDSON: They could be wrong. That's why I say, if they're wrong, let's get rid of them now, before they do further damage.

LUNTZ: But the public is more upset and more angry about wasteful Washington spending than any other issue. And that is what brings out the anger in them. If I may give you a preview of 2010, the Democrats in Congress passed a $1 trillion health care bill, last year. Remember that? A $1 trillion? So, tell me, are paying less today than you did a year ago? Is your health care better today than it was a year ago? Is it really worth $1 trillion and higher taxes, higher spending and higher debt for your children? Yep, the Democrats made you spend $1 trillion on health care. Remember that when you go to the polls on Tuesday.

(CROSSTALK)

STEPHANOPOULOS: Donna Brazile?

BRAZILE: Well, but if we have created jobs and we put the country on a better economic foundation for the future, and the Republicans just said no, crying and whining and screaming along the way, I think Democrats will get the benefit of the doubt.

But look, historically speaking, Democrats will face some losses next year. I think we all know that. Franklin Roosevelt in '34 did not. George Bush in 2002 did not. But that aside, I think Democrats shouldn't take the wrong lessons from Tuesday. Lesson, I think, is that, yes, swing voters, independents, behaved as Republicans. There were soft Democrats in '06 and '08; they gave the Republican s some love this time. But that love as we all know is in short supply because what they want, they want change and they want someone who can deliver.

ROBERTS: But, you see, Frank's point is to a real dilemma for the administration. Because they know they've got to get more jobs out there. And the president keeps saying give me ideas for job creation. Give me ideas, give me ideas.

STEPHANOPOULOS: After health care.

ROBERTS: After health care.

But government spending is very unpopular. So, how do you do it? How do you find some sort of stimulus for jobs without adding to the deficit? And that is --

DONALDSON: You can't. I mean -- you have to sometimes...

(CROSSTALK)

ROBERTS: You have to find a way to make people less made about the deficit and that is not going to be easy.

DONALDSON: Paul Krugman is often on this program, "The New York Times" columnist, and I think he's right. We are going to have to have more stimulus, more spending. You say, well, that is terrible. Frank, you say you hand it to the Republicans.

(CROSSTALK)

DONALDSON: We don't come out of the recession. Oh, good. Tremendous. In other words, which is worse? More spending, more debt -- which we have got to take care of -- but we come out of the recession because of it. Or let's just stay with a lot of people out of work.

STEPHANOPOULOS: George, the Democrats seem to have concluded that even though there's a lot of qualms in their caucus on this health care bill, that falling to act, failing to address this problem that people are concerned about, is much more, more worse.

WILL: You mean health care?

STEPHANOPOULOS: And they have to take the risk.

WILL: I think, A, Donna is right. Health care is about fourth on the list of what caused the problem in 1994. Not the least 30, 40 years, I guess it was, of Democrat control in the House of Representatives. Yes, their argument seems to be we have to pass the bill because we started to pass the bill. That's not a very powerful argument.

DONALDSON: That's not the argument. Their argument is -- if you don't buy it, fine -- that we need to have more Americans covered so that more Americans can have better health care.

LUNTZ: But everyone agrees with that. Republican s and Democrats agree with that. It's the solution that's a problem. I'm going to throw, another issue that no one has talked about.

Right now, a lot of governors, Democrats and Republicans, are having to release prisoners because they can't afford to house them. They can't build new prisons. What is that going to do in 2010, when one, or two, or ten of those people commit crimes?

(LAUGHTER)

DONALDSON: That's Michael Dukakis, all he had release on the weekends, for that (ph).

LUNTZ: We are in a serious situation where, not just presidents, and Congress, but governors are faced with tough decisions. And I think, George, that they are making the wrong ones, which is why 2009 may not be an anti-Democratic year, but it most certainly was an anti-incumbent year. And that will be the same.

ROBERTS: But you see, which is -- which is why I think, in the long run, Democrats are in OK shape. Because the anti-incumbency comes and goes, depending on what's going on. But the demographics are inexorable.

And what you've got -- yes, the young people didn't show up in an off-off-year, hardly a surprise. And you -- you still saw, in Virginia, that McDonnell got no Hispanic Votes, no black votes. I mean, he won with an overwhelming white vote. And whites are just a smaller and smaller percentage of the electorate.

STEPHANOPOULOS: Structural problem for the Republican Party.

ROBERTS: That's right. Unless they can get -- unless they can get to Hispanics, especially, and win some of those votes...

(CROSSTALK)

ROBERTS: ... they are not going to get there.

BRAZILE: He won the women's vote, which is the first time in a long time.

ROBERTS: And working women. He won working women.

(CROSSTALK)

STEPHANOPOULOS: I want to bring Cokie's point to George. Because that does seem to be a structural problem to the Republican Party going forward. All the fastest-rising voter groups are going Democratic. The Republican Party...

ROBERTS: Going overwhelmingly Democratic.

STEPHANOPOULOS: Yes, even though they didn't show up this year, is older and whiter and more male.

WILL: That is true and that is a problem. And what you have to do is address the slur hurled by my friend Donna at the Republican Party...

(LAUGHTER)

BRAZILE: What slur?

WILL: ... as a party without ideas. I mean, the Republican Party has plenty of ideas and I think they will, in time, sell.

But, speaking of what's growing, what's really growing is Fairfax County, Virginia. It's, sort of, the dynamic heart of America at this point. Obama carried it by 21 points. He lost it this year -- not he, but the Democrats lost it this year to McDonnell. So there's a lot of flux.

DONALDSON: For reasons we've discussed. But let me tell you, the wake-up call for the Republicans was in New York's 23rd.

Just as Rush Limbaugh couldn't prevent the party from nominating John McCain, despite his best effort, Glenn Beck, Sarah Palin and the gang could not prevent that district, for the first time in 100 years, from going Democratic. Because they had a candidate -- well, he wasn't a Republican; I understand that -- who was the Sarah Palin values, the robocalls and all of that. It didn't resonate. It doesn't resonate with independents.

If the Republican Party follow the course of Palin and Beck and company, it's doomed.

STEPHANOPOULOS: Let me pick up on that because I want to bring this to Frank because he's -- they're not alone, Palin and Beck.

DONALDSON: No, I didn't mean to single those people out.

STEPHANOPOULOS: There was also a protest on...

DONALDSON: They're the visible voices.

STEPHANOPOULOS: ... on the capital grounds this year.

(CROSSTALK)

DONALDSON: Here's a sign saying "Health Care in Dachau."

STEPHANOPOULOS: ... and also Jon Voight. Take a look.

DONALDSON: All right.

(LAUGHTER)

(BEGIN VIDEO CLIP)

JON VOIGHT, ACTOR: His only success, in his one-year term as president, is taking America apart, piece by piece.

(APPLAUSE)

Could it be he has had 20 years of subconscious programming by Reverend Wright to damn America?

(END VIDEO CLIP)

STEPHANOPOULOS: Let me bring this to you. Sam mentioned New York 23. We do see the influence of Palin and Beck and Limbaugh. Michael Steele dismissed this pretty much as a problem -- New York 23 as a problem for the Republicans. But what risk do they run in seeming to be guided by their most inflammatory voices?

LUNTZ: The risk out there is not to understand what is at the core of this anger. And there are two statistics for Americans really want that I want to put forward.

Fifty-seven percent of Americans now think that this country that they inherit will be worse for their kids than it was for them. And only 33 percent believe that their children will have a better quality of life than they did. That loss of intergenerational confidence transcends partisanship and ideology.

They look at discussions like this and they want answers, not philosophy. And they're so afraid that their kids are not going to enjoy the benefits that they had. And so both political parties have to address that or we lose that American exceptionalism.

ROBERTS: Part of the exceptionalism is an optimism.

LUNTZ: Right...

ROBERTS: And hearing these -- this kind of voice, I don't think -- I think it's cringe-making to hear somebody saying that he's been programmed by Reverend Wright to damn America. I mean, that is just -- it's not -- it makes you just feel very uncomfortable.

(CROSSTALK)

ROBERTS: And that is not where -- where the future of any party is.

WILL: Political nature abhors...

ROBERTS: ... that kind of rhetoric.

WILL: ... abhors a vacuum. And there's a vacuum in the Republican party right now, as there is in every party the first year after a presidential loss. And we're waiting for new leaders to emerge. And they're out there.

(CROSSTALK)

BRAZILE: And there's a void of ideas, George. And look at the Republican health care plan. I'm sorry to go back to your favorite subject, but, I mean, they put forward a plan this week at the 11th hour that only covers 3 million people -- the Democrats, 36 million -- that only takes care of $68 billion of the deficit; the Democrats, $129 billion over 10 years.

So, again, it's -- it's not just leadership; it's ideas.

(CROSSTALK)

WILL: ... rise to a point of order.

(LAUGHTER)

The -- three Republican ideas that the vast majority of the country support and you people won't tolerate.

BRAZILE: OK.

WILL: One is tort reform. Your party's in such (inaudible) to the trial lawyers, you can't stand tort reform that would reduce the $100 billion cost of defensive medicine.

BRAZILE: OK, that's 1 percent of medical costs.

(CROSSTALK)

WILL: You won't equalize...

(LAUGHTER)

WILL: But it's a much larger percentage of Democratic contributions.

You will not equalize the tax treatment of health care purchased in the private market with those who get it through their employers as untaxed compensation.

And most of all, you will not tolerate the idea of people being allowed to buy health care across party lines.

BRAZILE: State lines.

(CROSSTALK)

WILL: If I live in New Jersey, I can buy a car in Pennsylvania. I can buy a mortgage in Wyoming. Why can't I buy health care?

BRAZILE: It's simple, George. Because in certain states, you know, what we're going to do to is open it up, the market, to insurance companies that don't give you the same coverage, the same level of coverage or the same options.

(CROSSTALK)

BRAZILE: So I don't have a problem with portability, George. But if it doesn't mean better quality and better access, then it's not real...

(CROSSTALK)

BRAZILE: ... then it's not real choice.

(CROSSTALK)

WILL: You can't trust the individuals to shop for their health insurance?

ROBERTS: Democrats, on these issues, have the voters. The -- and the independents. I mean, on the issues, right now, the majority of people are with the Democrats.

DONALDSON: You say there's a vacuum in the party. You say there's a vacuum in the parties.

LUNTZ: But to go back to the polling numbers, Obama's favorability, approval, on things like the budget, taxes, the deficit and debt, are now in the 30s. And on health care, it's in the very low 40s.

STEPHANOPOULOS: Well, health care's right down the middle.

LUNTZ: He did have it. They did have it before, but they've been dropping.

And when you introduce a bill that is, no exaggeration, this tall off the ground, and you expect, because the American people really do want to read this stuff, it's 1,900 pages, you can't get through it, the public looks at that legislation and, frankly, it makes them nervous.

DONALDSON: It looks like Reagan's bill in the House in 1981 to lower interest rates. They even had in the margin people's telephone numbers.

You talk about a vacuum in the party. When I came to this town, there were people in the Senate, Republicans, Leverett Saltonstall, John Sherman Cooper, Clifford Case, later Tom (inaudible), Hatfield from Oregon, Chafee.

Where are they today? They're not there. Because your party has driven out the moderates from the party. And you can't have a party that represents this country with the kind of people that now seem to be the voices for the Republicans.

ROBERTS: You know, it's interesting because it used to be that the Democrats had also driven out the moderates from the party.

DONALDSON: Yes. It works both ways.

ROBERTS: But last night's vote really did show you that the Democratic moderates have a tremendous amount of leverage in the House...

STEPHANOPOULOS: Especially on the issue of abortion.

ROBERTS: ... on the issue of abortion, in the House of Representatives. And much to the dismay of some of the liberals, they -- they held sway on the question of keeping abortion...

DONALDSON: Good point. Because parties can't exist in this country -- thank goodness -- without attracting the great center.

STEPHANOPOULOS: Donna, I want to ask you about that because that was what finally put this bill over the top.

On Friday, Speaker Nancy Pelosi realized that she had to give the pro-life Democrats, led by Bart Stupak, what they wanted, much tighter restrictions on public funding of abortion. They worked out a compromise with the U.S. Catholic bishops.

But Speaker Pelosi did face a lot of anger from her pro-choice activists in the -- in the conference. Will this hold all the way through the process?

BRAZILE: Well, it -- it might hold, George. But it will not be a pretty vote for many pro-choice Democrats.

Look, this pretty much outlaws abortion for even people with private insurance. It's one thing to -- the existing federal law, the Hyde amendment, I thought was sufficient. But, clearly, many of the pro-life Democrats thought that they needed to go further and deny women the ability to purchase this on the exchange, even using their own private funds.

So this is an onerous burden on women for their reproductive health care. And I hope that they can get it removed in the Senate and also in conference.

ROBERTS: But I think that's unlikely.

WILL: I hope they can get it removed, too. That would be the end of the bill.

(LAUGHTER)

ROBERTS: It's very unlikely.

LUNTZ: I feel sorry for Evan Bayh and for Blanche Lincoln, senators from Indiana, Arkansas. I know Nebraska, Ben Nelson.

ROBERTS: Mary Landrieu

LUNTZ: Mary Landrieu of Louisiana. These states do not want this legislation. And they don't want it because of the personal costs and the costs to the deficit. They're conservative states, economically. And a lot of senators are going to have to cast some very difficult votes in the next couple months.

STEPHANOPOULOS: Because they're going to be facing the argument that, if they don't cast a yes vote, they're going to bring down the entire Democratic administration that President Obama...

(CROSSTALK)

LUNTZ: But then they may -- then they have to go back to their constituents and explain why they added a trillion dollars to the debt.

BRAZILE: But, you know -- but you know what...

STEPHANOPOULOS: Donna...

BRAZILE: These are the same Democrats who supported the tax cut that put $5 trillion on the -- on the federal books.

STEPHANOPOULOS: I want you to answer that...

BRAZILE: And I'm sorry. They need to help people.

STEPHANOPOULOS: I want you to answer that in the green room. That's where you guys are going to have to continue this debate.

BRAZILE: I'm sorry.

STEPHANOPOULOS: You can get political updates all week long from us on ABCNews.com. Coming up here, the Sunday funnies.

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