Transcript: Sens. Kent and DeMint

Sens. Kent Conrad Jim DeMint/ABC News

GEORGE STEPHANOPOULOS (voice-over): Will delay kill Obama-care, or give time to get it right? Is the president's plan what America needs now?

Questions this morning for our headliners, Democratic Senator Kent Conrad and Republican Jim DeMint, our THIS WEEK debate.


UNIDENTIFIED MALE: This man clearly was a rogue police.

PRESIDENT BARACK OBAMA: The Cambridge police acted stupidly.

UNIDENTIFIED MALE: He's way off base, wading into a local issue without knowing all of the facts.

STEPHANOPOULOS: Defending a friend, President Obama sparks a national debate on prejudice and policing.

That and all of the week's politics on a special expanded "Roundtable" with George Will, Donna Brazile, Paul Krugman, Arianna Huffington, and David Brooks.

And, as always, the "Sunday Funnies."

CONAN O'BRIEN, HOST, "THE TONIGHT SHOW": Obama says the conversation went well. But there was an awkward moment when the cops arrested Obama.


ANNOUNCER: From the heart of the nation's capital, THIS WEEK with ABC News chief Washington correspondent George Stephanopoulos, live from the Newseum on Pennsylvania Avenue.



After a week of dueling press conferences and closed door negotiations, it's clear now that Congress will not meet the president's August make-or-break deadline for health care. The Senate put off votes until September.

And while House Speaker Nancy Pelosi holds out some hope for a vote next week, House Democrats have not yet agreed on an approach. That guarantees several more months of struggle. So both sides are buying new ads to shape the battlefield.


UNIDENTIFIED MALE: When your representative comes home, ask them a simple question: Before you voted on health care, did you even read the bill? That's it, Congressman. Did you read the 1,017-page before you voted?

Now the Republicans say Congress should slow down? That's because when something goes slow enough, it's easy to kill it dead in its tracks. Tell Congress you want health insurance reform now.


STEPHANOPOULOS: And with that, let me bring in two senators at the center of the debate, Senator Kent Conrad, the chairman of the Senate Budget Committee; also Senator Jim DeMint, the chairman of the conservative Senate Steering Committee and the author of a new book called "Saving Freedom: We Can Stop America's Slide into Socialism."

You've got that vivid rhetoric there. And you've also gotten into a bit of a war of words with the president in the last couple of weeks when he said the health care issue could be Obama's Waterloo and that his plans will destroy America's health care system.

But his allies argue that the plan will provide real benefits to your state. Let me show you what they're saying, the House Energy and Commerce Committee, that the president's plan could provide tax credits for up to 92,200 small businesses in your state.

It will provide $648 million for doctors and hospitals in your state, and get access for about 669,000 people who don't have health insurance now in South Carolina. They say you're standing in the way of what your state needs.

DEMINT: Well, they gave a similar numbers with the stimulus and promised our unemployment wouldn't go above 8 percent. And now in South Carolina, it's over 12. So the numbers are hard to trust, George.

This is not personal against the president. I like the president, but he is out of control and he has been leading a stampede of more spending and debt and taxes and government takeovers.

He has taken a bad economy and made it worse. He used a lot of false promises and bogus numbers and panic to push through the stimulus. And the promises have not panned out. And now he's trying to use the same strategy on health care.

And what I'm trying to do and I think even Kent has had reservations, let's slow down and get this right. My goal is to protect the right of every American to make their own health care decisions.

And if we can do that, we can come up with a bill.

STEPHANOPOULOS: Slow it down and get it right. Is there any meeting of the minds here?

CONRAD: Look, the critical thing is that we do get this right. This is going to affect every American. Very few legislative initiatives affect every single American. And it's one-sixth of the national economy. So it's critically important we get it right.

But that shouldn't be used as a pretext to kill it. I mean, Jim, I think, has been very clear. He wants to kill it. And I think that would be a tragedy, because we've got a crisis here for the country.

Not only are we spending one in ever six dollars in the economy, we're headed for a circumstance in which we'll spend one in every three dollars in health care. That would be a disaster for families, for businesses, and the government itself.


STEPHANOPOULOS: Both you and President Obama have really said that the number one priority has to be to get costs under control. And the president endorsed a proposal this week for an independent Medicare commission that would really look hard at and crack down on payments to doctors and hospitals.

But the head of the Congressional Budget Office put out a letter yesterday where he said the savings -- the 10-year savings for that proposal would be only $2 billion over 10 years. And he went on to say the probability is high that no savings would be realized.

So do you have to go back to the drawing board?

CONRAD: No, because in the plan that we're working on, you know, there are six of us on the Finance Committee, three Democrats and three Republicans who have been given the responsibility to come up with a proposal for our colleagues.

And in the effort that we're making, we've recognized that there would be savings in this area, but that they would be relatively modest. But the two big drivers are delivery system reform -- so we've got...


CONRAD: Well, we look around the country. What is working? The Mayo Clinic model, the Cleveland Clinic, Intermountain out in Utah. They are teams of doctors that are patient-centered, that share diagnostics, that share administrative staff. They save money. They get the best health care outcomes. That's what we've got to replicate all across the country.

The second big driver is the income tax subsidy to have health care, $2.4 trillion over the next 10 years, virtually every economist that has come before us has said, you've got to reduce that tax subsidy to health care to reduce over-utilization.

STEPHANOPOULOS: Now the president has taken that off of the table. But administration officials quoted in the Politico today saying that he is now open to taxing the "Cadillac plan," he calls them.

One of the examples they give is the Goldman Sachs partners have a $40,000 plan. You're saying tax those?

CONRAD: Yes. I think we've got to. Again, virtually every economist that has come before us has said, you've got to reduce that tax subsidy as part of an overall strategy to really contain costs.

STEPHANOPOULOS: What's wrong with that?

DEMINT: Well, I can tell a lot of these folks have not been in business. So if you tax the insurance companies, it's going to affect the cost of every policy. This is not about the numbers. Republicans, including me, have introduced lots of health care reform proposals.

I introduced a tax equity which would allow people to deduct the cost of their health insurance. The president and Senator Conrad voted against it. I had a proposal that would allow people to buy health insurance in any state, not just a single state monopoly. The president and the Democrats voted it down.

I had a proposal that would allow individuals to use their health savings account to pay for a premium. They voted it down. They even voted against allowing small businesses to come together and buy their health insurance.

So, George, what we've seen is that Republicans do want reform that will make health insurance more affordable and available. But the only proposals we're getting from Democrats is more government control of health care.

STEPHANOPOULOS: So what's wrong with the Senator's proposal?

CONRAD: Well, the senator's proposal, the DeMint proposal in itself would be a proposal. It has no insurance market reform. In fact, it's kind of a protection for the insurance, private insurance companies, the DeMint plan. In addition to that, it would force millions of people out of employer-based coverage, onto some kind of government health. That could conceivably cost $2 trillion for the government. In addition, he's going to give you a voucher, $5,000 in...

STEPHANOPOULOS: That's a tax credit.

CONRAD: Yes. He's going to give a voucher worth $5,000 when health care costs $20,000. That's in 2016. It doesn't sound like much of a deal to me.

DEMINT: I'm afraid he didn't describe it right. The Healthcare Freedom Plan, George, that I introduced, would not take anyone off of their current plan. It wouldn't bother people on Medicare. You keep your coverage you have at work. What we do is give fair treatment to those who don't get their health care at work, and that would be a $5,000 a year health care voucher for every family.

STEPHANOPOULOS: But how about the point that most plans cost far more than $5,000?

DEMINT: Well, they wouldn't, if we would allow interstate competition. They think we have to have a government plan to have competition. But the president and Senator Conrad have voted to maintain a state by state monopoly by insurance companies instead of allowing a national market for insurance plans. There are plenty of products out there that could get people insured for $5,000 and if we allowed employers to put money in health savings accounts and let the individual use that to pay for a premium, people could buy more expensive policies. But we don't impact anyone who has insurance now.

STEPHANOPOULOS: Senator Conrad, let me bring it back to these bipartisan negotiations you talked about, because that really is the big game in town right now to the Senate Finance Committee. You've got three Democrats, three Republicans, but a Republican senator, Orrin Hatch, dropped out of the negotiations this week. And you've got a dilemma. Senator Chuck Grassley, the Republican ranking member in the committee says he's going to need some guarantees that the deal you strike here is going to survive all the way to the president's desk. You've got your own Democrat warning you not to give away the story. Chris Dodd in the "New York Times" this morning saying "If they overstep the line in these negotiations," talking about his fellow Democrats, "to bring three or four Republicans along, there will be a reaction among Democrats unlike anything you'll hear among Republicans." So how do you solve that dilemma?

CONRAD: You know, you've got to keep putting one foot in front of the hour and try to have a plan to propose to our colleagues that can win their support, Republicans and Democrats. Look, there are not the votes for Democrats to do this just on our side of the aisle. This is going to require...

STEPHANOPOULOS: So it's not possible to have a Democrat-only bill.

CONRAD: No, it is not possible and perhaps not desirable either. We're probably going to get a better product if we go through the tough business of debate, consideration, analysis of what we're proposing. It is so important we get this right and that it's sustainable.

If I can just come to back to Jim's point, the $5,000 voucher as he has proposed, he says there are a lot of plans out there that have $5,000. Yes, there are, but what are they? They don't cover much of anything. In fact, they work not to provide you coverage. That's why they only cost $5,000. And his plan is to provide you $5,000 out years from now, when the cost of health care will have gone up even further. So that really is not a serious option for American families.

STEPHANOPOULOS: Senator DeMint, is there a chance that these bipartisan negotiations can get broader Republican support? There are three Republicans talking with the Democrats in the Finance Committee. What if the broader pool of Republicans are open to the kind of bipartisan compromise they're working on?

DEMINT: Well, Republicans want to protect the right of Americans to make their own health care decisions, to pick their own doctors and their own plans. We can do that and I'm afraid the senator is not representing my ideas correctly, but we could have a plan in a few weeks, George, if the goal is not a government takeover. We've never seen the government operate a plan of any kind effectively and at the budgets we talked about.

This is about the most personal service that Americans have. We don't want to put a bureaucrat -- as the president talked about the other night, he was talking about taking a red plan, a red pill or a blue pill. He was accusing doctors of taking out children's tonsils just to make a profit. He doesn't have the right respect for doctors and how the industry works.

STEPHANOPOULOS: You know, Senator Conrad, it seems pretty clear that one of the red lines that Senator DeMint is identifying here at minimum is that this idea of a public health insurance option, which matters so much to many of your Democratic colleagues, is something that is going to guarantee you limit Republican support to three or four, maybe zero, Republican senators. So are you telling your Democratic colleagues that is simply not going to happen?

CONRAD: What I am telling them is there is an alternative that tries to capture the best of both sides. I have put forward a cooperative approach, cooperative business model as successful all across America. You know, Ace Hardware is a cooperative. Land O'Lakes is a cooperative. We have group health out in Washington that's a cooperative. It's not government run, it's not government controlled, it's membership run and membership controlled and that is a model that would provide additional competition for for-profit insurance companies. And half the states in the country, there is no affective competition.

One place where Jim and I probably can agree is more competition is a good thing. More choices for consumers is a good thing. And that's what we're trying to provide, not a government run system -- a membership controlled, membership run that will provide additional competition.

STEPHANOPOULOS: What's wrong with that?

DEMINT: What the senator is talking about having a Fannie Mae or a Fannie Med type organization in every state, a government sponsored organization that decides what insurance you can have and what you can't have. It makes no sense when all we have to do is take these barriers away from interstate competition of insurance plans. We can have dozens and dozens of insurance companies competing for business and my children and his children. We don't need the government to take this over.

STEPHANOPOULOS: We're going to have to leave it there, but very quickly, Senator Conrad, are you going to finish your negotiations by August 7th?

CONRAD: You know, we're going to finish when we're finished and we're going to do everything we can to get it right. We're moving with dispatch. We meet hours every day. We've got the best analysts in the country helping us. We'll be ready when we're ready.

STEPHANOPOULOS: OK senators, thank you both very much. We're going to go straight to "The Roundtable" and as our team takes their seats, think about this question. On health care, whose fate will President Obama emulate?


LYNDON B. JOHNSON, FMR. PRESIDENT OF THE UNITED STATES: No, longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings they have so carefully put away over a lifetime.

WILLIAM J. CLINTON, FMR. PRESIDENT OF THE UNITED STATES: I still believe our country has got to move toward providing health security for every American family. But I know that last year, as the evidence indicates, we bit off more than we could chew.


STEPHANOPOULOS: And with that let me bring in the "Roundtable". I am joined, as always, by George Will, David Brooks, of "The New York Times", Arianna Huffington of the Huffington Post, also the paperback edition of -we have vividly titled books today, on the program -"Pigs at the Trough: How Corporate Greed and Political Corruption Are Undermining America"; Nobel Laureate Paul Krugman, also of "The New York Times" and Princeton, and Donna Brazile.

Welcome back.

So, George, you see Lyndon Johnson signing Medicare, President Clinton giving his mea culpas on health care back in 1995. Which fate does Obama have in his future right now?

GEORGE WILL, SYNDICATED COLUMNIST: Bill Clinton's fate, it seems to me. Because of Bill Clinton's experience, which they sometimes ascribe this White House to the fact that it took so long to get to it. The White House, the Obama White House, has been saying speed is essential. And they're right, for the reason that Emerson said, that "when skating on thin ice, speed is essential".

STEPHANOPOULOS: So the strategic decision they made early on to go for everything was the right decision?

WILL: Well, they should go for this, but not go for it with cap and trade and new energy-wise and all of this thing. The country has a sense, I think, of overload.

The president has 60 senators. He has a 70-vote majority in the House of Representatives and he blames Republicans. That's not the problem. His difficulties extend from the Mayo Clinic to the Congressional Budget Office, which just yesterday said of the president's latest proposal, a panel, a magic silver bullet to constrain costs, that it would save maybe $2 billion. But for four years, beginning in 2016, and that's a rounding error on the GM bailout.

PAUL KRUGMAN, "THE NEW YORK TIMES": I think I should say something about that CBO thing, which really surprised a lot of people.

STEPHANOPOULOS: Because it was important and interesting timing.

KRUGMAN: Well, and also most of the health care economists I talked to think that the Medpac reform, that having these judgments, would actually be quite important, especially going for the long run. So they were really kind of surprised. And there was a kind of sense that CBO, faced with the -- no one could put a hard number on this. The CBO sort of said, well, if we can't put a hard number on it, we're going to say it's zero. And that seems to be wrong. There is every reason to think that being more careful about what Medicare is going to pay for can save a lot of money. And this was a kind of destructive comment by Doug Elmendorf at CBO.

DAVID BROOKS, "THE NEW YORK TIMES": Actually, if you follow (ph) on the substance of it, the health care economists do think it is bigger, but the political reality is the CBO out rules, they are the arbiter.

Now, think I disagree with George. I think something is going to get passed. A lot of critics of the plan are doing end zones dances. I think the Democrats are so scared of failure, that they will pass something. Now, my question is whether they will actually control costs while they're doing it. You showed LBJ. When Medicare was pass they projected, what will this program cost in 1990? They came up with a budget of about $12 billion. It ended up costing nine times that, and we can't afford that. So the real question is, do they actually tackle costs. And that is something they have not done in a serious way.

STEPHANOPOULOS: But that is what Senator Conrad and his bipartisan group are trying to do. And let me bring Arianna in on this because David said something that is interesting. Democrats, he says, are so afraid of failure that they'll pass anything. It seems like the White House is actually banking on that, as well. That they work -- that they get behind the Senate Finance Committee deal, when there is one, eventually. And the rest of the Democrats, even if there is no public health insurance option, even if there is more Medicare cuts than they like, even if there is a tax on some health care plans, the Democrats will go along, because they are afraid of failure.

ARIANNA HUFFINGTON, HUFFINGTON POST: And that would be a major problem. And that has been really a problem with the Obama style of leadership, which is let's pass something, even if it does not include the things that he considers most important; the public option, for example, or negotiating with the drug industry to bring down costs. His effort and his lobbying to reconcile everybody, and bring everybody together, sometimes makes it impossible to get what he needs out of the primary players here.

The drug industry gave up something, but they haven't given up on the negotiation for real lower prices with Medicare and Medicaid. And that's a major issue.

STEPHANOPOULOS: But, Donna, is it political necessity? I mean, can the president hold the Democrats together only if some of those moderate Democrats, Blue Dog Democrats, have Republicans covered?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: Well, George, I think August was always the goal, but it wasn't the only goal. The other goal was to make sure that he would get a bill that was deficit neutral and reduce the costs. And the Blue Dogs will go along once the Blue Dogs feel that they have had sufficient cover with some of the concerns that they have. I think the president should use this opportunity to retool his message to convince the American people why we really need health care reform. Right now many people are worried they may lose something in this reform and therefore, I think, this is an opportunity for the president to go out there and retool and

STEPHANOPOULOS: So far he trained all of his fire on the status quo, making that a plan. That's really the goal of the press conference Wednesday night.

BRAZILE: And, as we all know, that press conference wasn't a game change, and some things happened later at that press conference that really just obliterated his message. But this is an opportunity for the president really come down hard on those wavering Democrats. And I do believe that he not only is providing that cover now, but is inside helping them negotiate.

WILL: I think the Democrats are afraid of failure. But they're much more afraid of their constituents. What they're hearing from their constituency is increasing anxiety about the unknown. And the Republican theory in Senate is simply this: If they get no Republican senators they will loose some Democratic senators. Therefore, Republican unity will drive this.

KRUGMAN: There is strong possibility, I don't think any of us knows for sure, that all of that we're seeing, all of the Sturm und Drang, and all of that is actually just Kabuki; that in the end, the Democrats will come together. What we're seeing is jostling for the shape of the final outcome. And that in the end, everybody will come on board, the Blue Dogs will come onboard, the progressives will come onboard, because of the fear of failure.

STEPHANOPOULOS: That's what I want to press -- I mean, I don't necessarily disagree on the politics, but it depends on how much has to be given away in these bipartisan negotiations? What price these three or four Republicans are demanding? And that's sort of what I want to press you on. What would you consider a bottom-line victory?

KRUGMAN: You know, there is this jostling, which comes from, "you can't say that in advance". In a way, since I have my own goals on health care, I can't say what my final, you know --what's the least I'll accept, because that then becomes negotiating point.

But the point is -

STEPHANOPOULOS: That's what the president is doing, basically.

KRUGMAN: Yes, but you know in the end, I think, I think the Democrats understand that the constituents might be angry over what's in the bill, but they mostly will vote against people they perceive as losers. If the Democrats don't pass this thing, they'll be seen as losers. So, in the end they have to move forward.

STEPHANOPOULOS: Do you agree with that?

HUFFINGTON: But is has been -- it has been a sort of standard process, for all the lobbies, for all those trying to derail reform, to pick the one element that is the central element of reform, and right now I believe it is public option, because it would allow the kind of competition that will put the private insurance on the defensive and not allow them to continue the way they have been. And if that is eliminated, which is very likely, and Tom Daschle, and then Rahm Emmanuel, in a way telegraph that they may be willing to give that up, then it is going to called reform, but it's not going to be real reform.

BROOKS: I don't think that's central. Whatever you think of the public option, it's not going to have a huge cost effect. This is a debate over costs. The only thing that really is big enough to change the provision of health care is getting rid of, or seriously capping, the exemption on health benefits.

STEPHANOPOULOS: And that is now clearly back on the table. Senator Conrad told us that this morning.

BROOKS: Right. And most health care economists think it is absolutely essential. And the White House and the chairman on Capitol Hill have been loathe to talk about it. But that, to me, is the core.

STEPHANOPOULOS: How much trouble is that going to cause for the president? Now that it does appear that its creeping back into these negotiations?

BRAZILE: It's a price that nobody wants to see being paid, by the president, or anyone else, because as you well know this is one of those non-negotiables from the Democratic side.

(UNKNOWN): Especially labor unions.

BRAZILE: I mean it's progressive -- absolutely. I agree with Arianna, the public option is what many of the constituents, who voted for change, and rallied around the president. That's what they want, they want their public option. When you come to taxing the benefits of employees, I think that's going to be a very tough call.

STEPHANOPOULOS: Do you agree with the power of that proposal, on the taxing benefits?

KRUGMAN: No, I don't think it has very much effect on the costs, actually. I don't think it's -- the idea is that -health care is not like buying bread. It's not something where marginal rates (ph) will make a lot difference. Marginal rates (ph) is at the individual level, to make a lot of difference. It's not a big deal on controlling costs. It is, however, a possible source of finance. That is, it is reasonably fair and it's internal.

Let me say something about cost control. There is a theory, which I subscribe to, that if you get universality, costs control will follow through the political mechanism. Massachusetts has universal health care system that has zero cost control. It was a disaster from a cost control point of view. Now Massachusetts is getting serious about cost control because once you've established that you no longer have the safety valve of dealing with rising costs by making more people uninsured, then you have to deal with the problem. So, this has to happen.

BROOKS: Wouldn't you say that's because they are actually changing the delivery of health care, what they are trying to now?


BROOKS: And whatever you think of how they're doing it, the current bills on Capitol Hill do not fundamentally change that.

KRUGMAN: But the original Massachusetts health care reform didn't do anything about that either, and


BROOKS: And we're modeling reform after that.

HUFFINGTON: Well, I believe (ph), it's going to be impossible to have costs control without some emphasis on prevention. And that's really one of the problem here. Even the tax on soda, which is so basic, so elementary, given the trends toward obesity and diabetes, it is basically not going to happen.

STEPHANOPOULOS: And I was going to say, because it is so basic, because it is so easy to understand, it is not going to happen.

We actually want to take a quick break here, but I heard, George, you say no bill this year.

You say the president, very quickly, the president signs something by December?

HUFFINGTON: Very watered down, not good enough.

KRUGMAN: Yes, he signs something.

BROOKS: Yes, he will sign something.

STEPHANOPOULOS: I think so, as well, but it's hard to know what's going to be in it.

We're going to come back to the debate the president didn't want this week, race, police and profiling.

And later, "The Sunday Funnies".


DAVID LETTERMAN, THE LATE SHOW: If we had wanted a president who looked good in pants we would have elected Hillary, you know what I mean?





UNIDENTIFIED MALE: What it made me realize was how vulnerable all black men are. How vulnerable all people of color are.

OBAMA: Any of us would be pretty angry. The Cambridge police acted stupidly.

UNIDENTIFIED MALE: The apology won't come from me. I've done nothing wrong.

OBAMA: You probably don't need to handcuff a guy, a middle-aged man, who uses a cane, who is in his own home.

UNIDENTIFIED MALE: The president should make an apology to all law enforcement personnel.

OBAMA: I could have calibrated those words differently. And I told this to Sergeant Crowley.


STEPHANOPOULOS: Crowley, Gates and Obama will be sharing a Blue Moon beer, sometime soon, at the White House. Let me bring our "Roundtable" back in. George Will, David Brooks, Arianna Huffington, Paul Krugman, Donna Brazile.

And, George, the president said also, in that surprise press conference Friday afternoon, that he wanted this to be a teachable moment. So what did we learn?

WILL: That presidents should know that some things are not any of their business, such as local police disputes in Cambridge, Massachusetts.

Now, George, look, when you are a highly paid, much honored tenured professor, at the richest university in the world. In a city with a black mayor, a state with a black governor, in a country with a black president, it is hard to get coveted status of victim. And Mr. Gates got the coveted status of victim with the help from the president. Because when the president said, the police behaved stupidly, he could not escape the belief that what -there is a name for what the president was doing, it's called racial profiling. The distinguished black man, white policeman, the policeman must be in some inferential way, a racist.

BRAZILE: I think the president was very measured in his initial comments and perhaps the word "stupidly" caused some to believe he was attacking the character of the police department.

But, George, there remains in this country a history of painful, shameful history of racial profiling. And it's not that black people walk around waiting to be called victims, it's because it is the dreadful fear.

I'll never forget the lessons my parents would teach my brothers, not us, but the boys, that no matter what happens, if you are stopped by the police, do whatever you're told. Put your head down and just wait. Don't say nothing. It is painful. It is shameful.

And I think the president was trying to raise a much larger issue, but unfortunately, his word choice got in the way.

BROOKS: I guess, I would say, what we saw is that you cannot see one event through multiple prisms. That event could be seen through the race prism, which Donna, just described the history of, frankly, picking on black men in particular. There's also the class prism. There has been a history of condescension in this country. And you can also see it through the prism of a cop versus a Harvard law professor, who is backed up by a Harvard law graduate. And using the word "stupidly" sounds condescending. So those multiple prisms conflicted.

And I thought by the end of the week, what you just showed in that little montage, there, it was like a sitcom. By the end of the week, I think Obama got to the right place. They both overreacted. He didn't quite say it, but sort of, I overreacted. And now let's talk this out over a beer. His final statement was pretty good.

STEPHANOPOULOS: It did seem, Arianna, like this was as much about, as David said, sort of gender, and class, as anything else. You've got two guys there, who have their backs up, neither one felt they were getting the respect they deserved and they just went off.

HUFFINGTON: There was a lot of (inaudible) testosterone. The fact that he has come from a long flight from China, but beyond that, I think, there are two teachable moments. And I think it is more of an August Wilson play than a sitcom, because of the richness of the characters.

But the first teachable moment is the obvious one. The president did what he does best. Gracefully and with humility....


HUFFINGTON: On Friday, yes. He basically apologized and asked them to the White House for a beer, perfect.

The bigger teachable moment is the one that Donna alluded to. Because the fact is that right now, if you are black, or Hispanic, you have a much greater chance of being arrested, of being subjected to force, particularly when it comes to the war on drugs. It is really stunning that only 15 percent of the top drug population -- drug offending population is African-American. And yet you have 74 percent of them who wind up in jail.

STEPHANOPOULOS: Arianna, brings up a couple of important points there.

Paul, Glen Laurie (ph) points out, in "The New York Times" this morning, on the Op-Ed Page, that since 1980, the number of people in American prisons has quintupled. It has gone up five times, and three quarters of those in state and local prisons are blacks and Hispanics.

KRUGMAN: Yes, although, I'm not sure if it has that much to do with this case.

Let me say two things about this. First, it is the old line. The definition of a gaff is when a politician accidentally tells the truth. I mean, what Obama said was perfectly reasonable, but he shouldn't have said it.

The second thing is, we are kind of losing sight of -

STEPHANOPOULOS: You think he was reasonable.

KRUGMAN: I think it was.

But look, did Gates -- he was unwise. He was rude. He was yelling. Did he commit a crime? Did he do anything that you could plausibly say you should slap handcuffs on? Right?

And there's a really peculiar thing here, which is, think about how conservatives reacted. Over the last few weeks we've been hearing, endlessly, conservatives talking about how Obama, the Obama administration is tyranny, it's a police state. You know, where it's fascism. It's awful. But they think it's perfectly reasonable to slap handcuffs on a middle-aged man who walks with a cane because he said something rude to a policeman.

My God, I mean, you know, it's -- yes, Gates behaved stupidly no question. There were -- tempers were rising, but you know, a policeman is supposed to say, is this a crime?

WILL: I would like to come back to the question of how did this become a presidential level subject of conversation? I try -- ask you to imagine, A, Dwight Eisenhower being asked a question about a local police episode in Cambridge, Massachusetts, or, B, Dwight Eisenhower being foolish enough to answer the question. There are some...


KRUGMAN: In a way, this is a follow-up. We had -- you know, this is the president that is giving a conference on health care reform. Why was a question about Skip Gates on there? You know, the president -- when the president was in Moscow, he was asked about Michael Jackson.

This is a part -- this about our profession behaving badly.

WILL: This is -- but the press reflects the country. And the country is in the grip of a cult of the presidency. The president is our all-purpose teacher, tutor, moral auditor, philosopher. The president is everywhere. This president is ubiquitous.

Now somewhere between the remoteness of Charles de Gaulle and the ubiquity of Barack Obama there is a happy medium.

HUFFINGTON: Oh, but really this is not about Barack Obama. I mean, this has been happening...

WILL: It's entirely about Barack Obama.

HUFFINGTON: ... going back to Bill Clinton and being asked what kind of shorts he wears. I mean, this is not a new phenomenon.

WILL: And he answered.

HUFFINGTON: Yes. But my point -- precisely, this is not a new phenomenon. I think in fact all of the best presidents we've ever had have been moral leaders. And you know that. I mean, from Abraham Lincoln to FDR, I mean, the things that they are remembered for are -- is not much what they've said as what they did.

WILL: You're talking about slavery and the dissolution of the Union, not a minor police matter in Cambridge.

HUFFINGTON: But you oppose the whole idea of the president being a moral leader, which goes contrary against American history.

WILL: I opposed extravagant investments of faith, hope, and charity in the president.


BRAZILE: ... also someone that the president knew personally, Skip Gates, and could speak a little bit to his character, but also I think that the president, having, you know, had the experience that many black men in this country of being stopped, of being somewhat looked at suspiciously, maybe this was a matter of his heart over his head, but I still believe that the end of the day the president was right in answering in the measured way that he did, the semantics.

Besides, the president of the United States of America is someone that people look up to and they expect that the president can somehow teach us about how to get...

WILL: About everything?

BRAZILE: No, not everything. And this...

WILL: Is there nothing that is done that a president...


STEPHANOPOULOS: But is there a constructive conversation to be had on this going forward? Now that the incident has blot it all out, whether he should have spoken to this particular incident or not, it did raise a broader conversation.

How does he build on it, or not at all?

WILL: Not at all.

BROOKS: Well, I guess -- let's not forget the narcissism of the educated class here. Last night there were probably a thousand guys who were hassled by police who no one is going to talk about because they don't happen to go to Harvard, they aren't known by the media class and the political class. They don't summer with them on the Vineyard.

So this was an overexposure of this one issue, forgetting the other much larger issue, which, you know, we don't know those people is essentially the...

HUFFINGTON: But maybe to George's point, it happened. Now that it happened, can we get something good out of it and actually put the spotlight on the bigger problem that we had begun to address, that this is going on all of the time and that many people end up in jail while if you happen to be white, you would not have ended up in jail for the same crime.

STEPHANOPOULOS: And you said it first, it wasn't all that relevant, but do you think there's a conversation to be had there?

KRUGMAN: You know, I'm not -- I share this much with George Will, I don't necessarily believe in those kinds of conversations, certainly as led by the president. I think it best if we put this behind us. So what we really need to do is make this a better society. And you don't do that by having conversations, you do that through policy.

BRAZILE: I don't -- well, I don't think that the president necessarily should lead the conversation, but the conversation will be held if -- maybe it will start in Cambridge. But, George, I...

STEPHANOPOULOS: They actually said today that they are going to have some community forum in Cambridge about this.

BRAZILE: And there is no reason for us to sweep it under the rug. For too long in our history, we have just not wanted to have this conversation. We can have a very constructive, face-to-face conversation, pull the resentment, the fear, so that people can come to a point of tolerance and acceptance.

That's all we're -- I think that's what the goal of the conversation will be.

WILL: I have a news bulletin. The American people have conversations all of the time without any help from Washington, backward reels the mind to the 1990s when Bill Clinton had an epiphany. We should have a national conversation about race.

We converse about race too much.

BRAZILE: And it remains, as Condoleezza Rice said some time ago, our birth defect, because we won't have a real honest, candid conversation, George. And that's the problem.

HUFFINGTON: And it doesn't have to be with the president. It can be among ourselves. I mean, nobody is saying that the president needs to keep talking about it. But we in the media need to keep talking about it so that we can actually make it more likely there will be some policy changes.


KRUGMAN: ... we actually made progress. We are much less racist society than we were 25 years ago because of the individual conversations, because of the conversation right in the media, probably the president...


STEPHANOPOULOS: Barack Obama was just elected president.

KRUGMAN: I think so, yes.


STEPHANOPOULOS: But you bring up another point, George, the ubiquity of President Obama. And he was everywhere this week. And Mark Knoller, who has been covering the White House longer than just about everybody for CBS News, and is a great statistician, he's like the box score man in the White House press corps, has said that the president is just shy now of 100 interviews in the first six months or so in office, more than any other president in the first six months.

One of them this week was with Katie Couric where the president and Katie Couric ended up getting in a big discussion about you, David Brooks. Let's take a look.


KATIE COURIC, CBS ANCHOR: He says Democrats are losing touch with America because, quote, "the party is led by insular liberals from big cities on the coasts"...

OBAMA: This was a really long question.


COURIC: ... "on issue after issue." It was a pretty...

OBAMA: Are we going to read the whole column here?

COURIC: I'm just curious, A, have you read it, and, B, what's your response?

OBAMA: You know, I don't spend a lot of time reading columns, Katie.


STEPHANOPOULOS: I'm not sure that's exactly true. But he certainly is spending a lot of time with journalists on television giving interviews over the last couple of weeks. And, David, it has led to this discussion that George started, about whether the president is overexposed.

The White House says in response, they have no option in a fractured media universe. The president has to be out there all of the time. He is the best salesman for their policies and there is no substitute.

BROOKS: Yes, first, I'm willing to go read him the columns.


BROOKS: Maybe while he shaves. I'll just read him Paul's column, not even my own. I actually don't think he's overexposed. He is their best spokesman. Now there is a problem that there are no other spokesmen. They can't send out other people.

But I happen to think he is the best thing they've got. If you look at the polls, what you see is people like Barack Obama...


BROOKS: They disagree with the policies. There has been a sharp slide in support for the policies. Health care, he is now under 50 percent, 66 (ph) percent of independents thinks too much big government. But they still like Barack Obama.

So if you've got this unique person who is selling your product, don't give up on him. So I actually -- I see no evidence that he is overexposed.

STEPHANOPOULOS: So not at the point of diminishing returns yet, do you agree?

HUFFINGTON: No, absolutely not. I think this is his capital. His approval rating is his major political capital. The key question is, how is he going to spend it? I don't think he is really spending it enough in terms of making it safe to go...


STEPHANOPOULOS: Don't you think he is spending it on health care?


HUFFINGTON: No, no, but in general, health care -- not to make it bold enough, George. Because if it's not going to be bold enough, it's not going to contain cost enough. And that includes prevention, that includes other things that he cannot achieve simply by having endless meetings in the White House with private insurance and hospital providers and the (INAUDIBLE) industry.

Because basically ultimately he will have to confront them. You know, just think of it, he has been trained by Saul Alinsky, right? The great community organizer who wrote about political reform.

In four stages, that's how he saw it. And the final stage was reconciliation. My problem with the Barack Obama style is that he wants to move to reconciliation too fast. And you can't pretend that there is no conflict. And people are going to be upset if there is real health care reform.

WILL: Ronald Reagan, who understood the theatrical dimension of politics, understood the first rule of entertainment, which is the leave the audience wanting more, not less of you. This president has grabbed the country by the lapels and shaken it and talked to it and lectured it and there will be a time when the novelty is gone. You can only be a novelty once in the cabinet and people will use the fundamental instrument of modern life, the remote button, and push the mute.

HUFFINGTON: But George, he probably would have left you wanting less a long time ago. So you know, you are not the typical American.

STEPHANOPOULOS: That may be, Arianna, although one of the things we did see this weekend and maybe because it's the middle of the summer, but Paul Krugman, the number of people who tuned it for the president's press conference is down about 15 percent from the last time around, in part because Fox was playing something else. But we have seen a steady slide over the six months on things like that.

KRUGMAN: That's going to happen. First of all, there are other things going on and also, a little bit of the novelty is wearing off. But you know, he needs to be out there. What he needs to do is be focused. I'm not sure that his foreign trip was a good idea. That may have been that he really -- that he really needed to be here pushing health care. He needs to be doing more, almost rally style events. You want to think about -- he needs to be selling his policies and right now, health care is make or break.

STEPHANOPOULOS: You know, the White House says the president is going to be going back out there, he'll be on the road this weekend, a little bit more in August as well. But Donna, I wonder if the problem with the press conference -- I know the White House, they were upset. The Gates thing got so much attention. On the other hand, perhaps the press conference was mistimed. It was clearly probably originally scheduled at a time they thought the president was going to be selling one bill in the House and one bill in the Senate, but the process just wasn't there.

BRAZILE: Well, the timing might have been off, George, but we also know and I guess because I'm also in the cable business, that people need to fill some of the hours on TV. Remember "The Fly" episode of the mosquito that was killed and that was three to five days on TV. I had to go out and find some other stuff to do because I heard that I couldn't kill my flies and mosquitoes.

I don't think it's a question of overexposure or bad timing because I think when the president speaks, he's often refreshed, he's calm, he's thoughtful, but he's not always focused. And I think that causes some of the problems that we're not seeing with the health care debates. He needs to be a little bit more politically focused. Not partisan, but to make sure that the American people...

STEPHANOPOULOS: On what he wants and that's been a big question. I mean, he clearly knew what he was talking about on Wednesday night, but he didn't know exactly what he was pushing for.

BROOKS: This is endemic in the structure of the way he's running policy, which is that he has some vague ideas, which are noble. Then he hands power up to Capitol Hill, and they've got all the policies so when he goes to the press conference, there are 8 million ideas floating around and four or five different committees. He doesn't want to tip the scales on any of those, so he has to be extremely vague. And meanwhile, he can't answer the fundamental questions which people are asking.

One, how do you cut costs while adding an entitlement? How do you change the health care system without asking for sacrifice? And unless you can answer those two questions...

KRUGMAN: I think that's totally unfair. I think the health care plan, the basic outlines are extremely clear. You know exactly -- there are four components and all the plans. We understand how they're all going to work. He's been quite clear, certainly his officials have been quite clear about how you're going to cut costs. He was perhaps not that good at conveying all of that in the press conference.

I mean, I liked it. I thought it was crystal clear, but that's because I've been following the subject. But you can't accuse of him having vague ideas, vague policies. This is the clearest policy initiative I've ever seen in my life.

STEPHANOPOULOS: But he's clear on explaining the problem. He was clear on the benefits of some of the things he was calling for, but he couldn't come down and say, "This is what I must see in the final bill." The only two red lines he drew on Wednesday night were, it's got to cost cuts and it can't increase the deficit.

KRUGMAN: There's a negotiating problem which is he can't say this is my minimum because -- but and maybe he didn't do a good job of explaining the plan, but the basics of the plan are actually extremely clear. It's not the case that this is on foreign policy. Maybe he's not explaining it as well as he should, but the policy is very well-formed.

WILL: Well Paul, by saying it's well-formed, but we're in a negotiating process, so a strategic reticence is required. And David, by saying these are terrible problems and he doesn't have answers, sounds to me like two good arguments for silence on his part. Get out of the way. The big question in the country right now really is should Brett Favre sign with the Minnesota Vikings as quarterback? And I will wager that before the week is out, the president will have weighed in.

STEPHANOPOULOS: Actually, the really big question from the country and it affects all of this right now is, is this recession over or not? And the "Newsweek" cover -- "Newsweek" weighed in today. They had the cover saying the recession is over. They said be careful about what's coming next. So Paul, you're the Nobel Prize laureate in economics. In the recession over?

KRUGMAN: Probably, in a very limited sense. The numbers right now look a lot like November 2001, which is the date that retrospectively was considered to be the end of the 2001 recession. It looks like we're probably going to be positive economic growth in this current quarter. We're probably going to be seeing some rise in industrial production, so the business cycle committee. America, the official definition of a recession is it's a recession if the business cycle meeting committee is at a recession. They will probably retrospectively say that the recession ended in July.

STEPHANOPOULOS: And that we're kind of growing now a little bit.

KRUGMAN: But the thing about November 2001 is although the recession officially ended then, unemployment kept rising for another year and a half. And that's what we're looking towards, most likely. We're looking towards a period when the economy is growing, there's more GDP, you wouldn't call it a recession exactly, but it's going to feel like a recession because in fact the job market is getting worse.

STEPHANOPOULOS: And what's likely, George, is unemployment will continue to go up and the deficit will continue to go up, and we're going to see the numbers on that as Congress comes back to deal with health care.

WILL: That's right and it's interesting. I don't know why they did it, perhaps Paul knows. They have delayed releasing the usual July report on the budget outlook.

KRUGMAN: That's normal for the first year.

WILL: If the recession is over, let us know. And particularly if it ended in July, it ended before 8 percent of the stimulus, more than 8 percent of the stimulus had been spent. So let's cancel the other 92 percent.

HUFFINGTON: This is a surrealistic debate. How can we say the recession is over when unemployment is expected to go over 10 percent, foreclosures keep growing at the rate of -- beyond what anybody expected.

STEPHANOPOULOS: I want you all to answer that in the green room, continues the debate there. We're going to be back with "The Sunday Funnies." But as we take a break, take a look at this week's happiest video. To St. Paul, Minnesota, the rollicking wedding of Jill and Kevin Heinz. It's gotten more than 6 million hits on YouTube and it's guaranteed to make you smile.