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latest jobless numbers, and they run similar to the state of indiana. what do you see is happening? >> stabilize might describe it. i would be very cautious about seeing anything else. i do not see it on the ground. i talk to businesses all the time, and while it here and there i do find firms who say thei quarterr is are pretty strong, they are pretty cautious. -- who say their workers are pretty strong, they are pretty cautious. we are going to need to seek more evidence before we conclude anything like a recovery is under way. >> i have to us about politics

of all this. we sought an increase of 162,000 jobs in the country. that has been disputed on the nuances, but on politics, do you think that changes things for barack obama and washington and the political dynamic? >> we could not even have two substantive questions before we got into politics? >> politics is substantive. >> i do not know. if you had a sustained run of significant improvement, i would be glad -- i do not know about the politics. i sense there would still be a very healthy debate this fall, even if we have seen economic improvement, which has been a long way coming. there is a lot to debate, but i will speak for myself and i think most people in our state.

we are rooting hard for economic recovery, and let the politics the what they will be. >> you are critical of the climate change bill and what it would mean for the indiana economy. i wonder if you are more optimistic about the approach the senators are taking where they are looking at a national cap on carbon but applying it to different parts of the economy differently. do you see things that would help us in terms of climate change and energy efficiency without hurting the economy? >> you could not do worse than the original legislation. in terms of our national economy, certainly in indiana, that was a formula for driving jobs offshore and for much higher utility rates on people in this state who griffin sell- afford it, so any alternative to

the region who could ill-afford it--for people who could ill- afford it. the economy was about to be hit by new cost of health care plan, so i would commend these folks for looking for a new and perhaps a better way, but i do hope to be very careful and remember that we do not have all long time of very sustained economic growth. we do not have a prayer of paying our bills, let alone listing the -- listing the intolerable burden placed on younger americans already. -- lifting the intolerable burden placed on younger americans already carry a >> what do you see on the energy efficiency side? >> energy efficiency has a lot to recommend it. the best way is, maybe everyone could agree to address our environmental issues with a

effective conservation, but on terms of climate change, everyone would be well-a device to take a substantial time out. -- well-advised to take a substantial time out. there has been nothing but deviousness, and we are still left with the situation where even if the zealots had their way, even by the most extreme methods, we do not move the thermometer at all. i think conservation is a better topic to were gone and the so- called climate change approaches -- to work on then the so-called climate change approaches. >> you mentioned health care. do you stand with those five said they want to run on the campaign of appealing -- those

that say they want to run on the campaign of rep feeling the plan? >> i think you have to answer first in terms of policy but then in terms of tactics. in policy, it is a disaster. it takes the worst features as a whole and makes them all larger and more expensive, so tweaking it or working along the edges of this approach, i do not think has anything to recommend it. far better of course has been to replace the employer-provided health care with its subsidies to help low incomes and its encouragement to overconsumption and high prices, to replace it with an individually-based system, which enables every american to be covered and make their own decisions and act like good consumers, and i do not think you can get to that

more sensible position without a please repealing large portions if not the entirety of the thing region without at least appealing large portions if not the entirety of the thing just passed. the responsible course is to have a better answer, and in the case of health care, i think we do, so i would approach it tactically in terms of replacement as opposed to repeal for its own sake. >> you have president obama who would veto any major change that could get through congress. do you think it is worth republican time to try and get something through on capitol if we have -- capitol hill if we have increased majorities? >> i do, because it might set up an eventual displacement of this tragically wrong headed and expensive bill later on. it would help people understand a much better way, frankly that

is vastly more reformist and different from the current system. the obama which currently observes the worst -- which observes the worst of the current system and makes it more expensive, so i think it is a debate worth having, even in the face of the obvious technical hurdle you just pointed soup. >> i want to ask about medicaid. you have been particularly critical of the role of medicaid in indiana, and your estimates are much higher than the projected increase nationally, and the difference seems to be your actuaries estimate nearly everyone will become -- who will become eligible will sign up for it. that is not happening now, but some of the people are not on medicaid, and half of those people get coverage through their employer, so why do you think under this system, that will change, and those who will become eligible for medicaid

will sign up for it? >> if they do, it will expose another fallacy of this bill. they claim everyone is going to be insured, so this simply puts the administration at its worst. if they want to express failure that a lot of people will not be insured anyway, they need to say that. we have made conservative estimates of this point. we are continuing to discover new costs. it is not just the cost that will be visited upon some future governor to pick up hundreds of thousands of people on our medicaid system. we have already been hit with $25 million bills from the federal government for rebates. we did a good deal with the drug companies, but they are going to take the benefit away immediately. we also see a huge administrative costs coming, when we have to supervise a huge expansion of medicaid and

shoulder the administrative cost of the new exchanges. it could be a very expensive thing for taxpayers here and every other state, and that should not cramdown tax increases. it is just another example of the dishonest accounting with which it was sold. >> have you begun to decide how you will pay for it? >> we are beginning to think about it. we are confronting the immediate cost impact we did not see coming, and we are trying to figure out a winay to deal with that. we still have reserves. this does not make it any easier, but we are beginning to think we can lead to our successors in a few years, as the biggest impact of the bill are visited upon us.

>> you are opposed to this bill, and the attorney general is joining, questioning the constitutionality, and you mention the state will have a big role in the setting up of insurance exchanges. now how is that going to affect the approach you're going to take in the state's role in implementing this legislation? >> i do not think it will affect it at all. we will do what we are commanded to do, and we will do it as well as we can by the citizens of our state. i will be serving and other two and a half years. taxes are immediately, so whatever it is worth, there is a lot of time to plan for its implementation. >> i have been to india with president obama, who made health care -- to india with president obama, who made health care costs for both -- to indiana with president obama, who made

health care costs and a touchstone. do they see this as a total separation between the economy on the ground and what is going on in washington? >> i do not think they see much impact of a positive nature of anything does happen nationally. i could give you the good news, which is unemployment has dropped several%. now i do not a great any of it to activities fiscally in washington -- who do not attribute any of interactivity cicely and washington. -- attribute any of this to activities fiscally in washington. i think it is much more about the indian economic environment and long-term advantages we have already seen in anything

washington has done. >> you are dealing with the state's budget problem. states have enormous fiscal challenges, and they cannot deal with them the way washington deals with the, by borrowing money from the chinese, so how do they plan to get their house in order at a time unemployment is so high and there are economic challenges? >> you do what you have to do. we entered this recession having come from a bankrupt situation four or five years ago, and thank to news winner in the situation we were in. we had -- thank goodness we are in the situation we are in. we will use our rainy day reserves, and i believe they will last until the end of the cycle, but we are operating

with nine% less revenue than a year ago, and even if it is a pretty decent recovery, when we write the next budget, we will be dealing with your dollars and then we were in 2005 -- if you were dollars then we were in 2005, recent -- with fewer dollars and we were in 2005. i think you know why governors of both parties take a jaundiced view of what washington in both its branches is doing financially. >> i want to ask you about the economic impact on indianapolis, and is correctit you did not see butler in the final -- is it

correct you did not see butler in the final four. >> we are very thrilled about it. we think nobody does it better and think the n.c.a.a. agrees, but i have to tell you it is a very special thing to have not just a homegrown team but a team of student athletes who are academic all americans, and team grade point average over three, math majors, computer engineering majors -- this team was in class monday and day before the final four game. that is what college ought to be. >> it is early to ask this question, but it is never too early. we're turning our attention to the 2010 cycle and also the 2012

cycle. you are mentioned as one that might be among the republican candidates for president. you see yourself among the field for 2012? >> i told one of your colleagues there has never been a president of the united states in my bathroom mirror, and there was not this morning either. now it is almost as a realistic question to be asked -- a surrealistic question to be asked. i have a duty here, and any governor has his or her hands full trying to do right by the citizens of the state. i have some ideas of how the party might make more positive presentation. i have some deep views and alarms about the condition and direction of our country, but there are other ways to have an impact on this thing other than running. i do not think i will have a

different answer, but ask me in a year. >> you're leaving a little wiggle room. do not expect me to run is not the same as i will not run. >> i gave an answer like that, and somebody interviewing my wife said, it sounded like you crack the door open of it. when he gets home tonight, it might not be cracked open. >> governor, the republican national committee has had a rough week once again with some scandals over spending and the way in which money was spent, including perhaps expenses for a night club with questionable i've seen in it, and i am wondering how you think -- questionable acts in it, and i am wondering how you think that changes people's perception of the party.

>> it is embarrassing, and there is nothing more to say other than that. it is not important in the larger scheme. i think the biggest issue we face are what will we stand for? what will we present to americans? are we prepared to step up in an adult fashion to the unconscionable and nation- threatening debt that has been and is presently in routes to our children -- en route to our children. are we prepared to keep this country truly safe and world of terrorism and new technologies that could literally mannes millions of them? -- menace millions of them? that is where our attention should be, and anything that disrupts from that is truly

unfortunate. >> you agree with some of the conservative christian leaders who say their followers ought to not donate money to the republican national committee and they should instead find additional candidates they like and support? you think it is time for donors to stop supporting the rnc an? >> i would hope immediate financial disciplinary action be taken against whoever it was houmas be saved, get rid of them, and move forward, -- whoever it was, get rid of them, and move forward. >> indiana's primary is in about a month, and you have got some competitive primaries with open seats as well as incumbents. i am wondering if you see this as an anti-incumbent year or an anti-party in power year or a

larger dynamic like that, and i wonder what role you think the key party will play in the elections, particularly the primary -- the tea party will play in the elections, particularly the primary. >> i think they will have much more to worry about. they represent the explosion of spending, the proliferation of debt. the health-care bill by itself, that i think is the primary motivator of people, so it may fall out of people who are seen as washington careerists, regardless of party, but at least for the moment, it is much more likely to be a problem for the party in total power in washington. as for the tea party, i think anything that brings new energy to the process has something to recommend it, and i think these folks that perform a very important service by focusing the attention on morthe

unsustainable fiscal half our leaders have placed us on -- fiscal path our leaders have placed a song. we have to come together as americans, everyone who is willing. we're talking about a very different set of spending initiatives and then we can afford. >> this happens because it is popular with the people who send politicians here, and i wonder if you feel there has been a significant -- an efficient change of attitude toward the debt, and if not, what will it take? >> this is a central issue and the most important question facing our entire democracy very good we have had skeptics about democracy -- our entire democracy very we have had skeptics about democracy -- our

entire democracy in. we have had skeptics about democracy. sooner or later, people will lose their chance of discipline democracy requires. i am personally optimistic. i am out all the time visiting, and i get asked now and then, and when i say to people, why should we send a pension check to warren buffett? why should we pay for bill gates health care? it does not make common sense to them. they are prepared to make those changes. when i say to people, why don't we bifurcates these systems and provide total protection to everyone who is currently or in the next year is going to benefit but have a new compacts of the younger people who are going to pay all the bills -- this does not strike people as radical. tens of millions of americans

are already in that situation. we have a teacher's retirement plan. eventually, the actuaries said it is unsustainable. it was kept in place for existing beneficiaries, and the new plan was put into place for those who came after that point. many millions of americans, surely confronting the rest of we are confronting, we can summon the common purpose of americans and make changes like that. >> we have about two and a half minutes left. >> history does not really agree with you on social security in particular. politicians who have tried to rein in social security have faced tough political dynamics after touching the third rail in politics. do you think the republican party should run in 2010 or 2012 on a platform of change in social security in a way you described?

>> we have a saying in indiana. i was born at night, but not last night. i know the third rail realities you're talking about. we have all seen the grandy card played in demagogues -- granny card played in demagogues. we're going to have to spend less on medicare somehow, but i am not pessimistic this will always be the case. if so, we are going over the cliffs. i will say this. i think it is equally obvious. these problems could be best dealt with by the democratic party. they have the position politically to do it and to deal with those that are always steve -- to tell those that are always demanding more money i am going to have to draw the line, but if they will not do it, our party

will have to step up. this will be our responsibility as loyal opposition, and if the people are not ready for it, so be it, but that is no excuse for not trying. >> you were president bush's first budget director, and karl rove came up with his first book since leaving the administration. you were not mentioned in the book. are you disappointed in that, and what should have been included? >> i am always happy not to be mentioned in these things. i would like to think it was not because i did not perform some useful service while i was there, but having read the book, i am sure i will learn some good things about it. they just will not be about me. >> have a good basketball weekend. thank you so much for spending time with us. let me turn to you for a little about what we heard from the governor. first of all, on the substance

surrounding the constitutionality of the health plan -- is in fact the state attorneys general are successful in questioning the individual mandate, that is only one portion of a much larger plan. it takes out the leavening of expenses. what are we left with a lot of that challenge is successful? >> the fight is whether or not the government can tell every american you can have -- you have to have health insurance. we tell people you have to have car insurance, but if you do not want a car, you have to have -- you do not have to have car insurance. not quite the same for health care regan -- health care. it is structured as a tax to get around some constitutional issues, but if that is thrown out, that is going to be the guts of this health care bill. i do not know how you can structure this deal in which they bring in millions of new customers to the insurance

companies at the cost of also being in some with pre-existing conditions and other expenses. if you do not bring the healthy people in, the deal does not work and becomes very challenging. >> that was one of the insurance company's main arguments. their argument was that the bill would not bring in enough people to offset the higher costs of covering pre-existing conditions and regulations they are going to after me, so they already are critical not enough people will be covered. the governor said the administration was claiming everybody would be covered. that is not the case. they have said there will be millions of people living in the united states who are not covered. some of those will be people who are not here legally. already, we are having the insurance companies say they are not going to expand the pool large enough to extend the cost,

and if you take it away it will be that much worse. >> let's talk about 2010 politics. he said he was critical about his own party on the medicare debate and talk about the experience -- talk about the experience from the governor's perspective. what does that mean for candidates running for federal office? >> i was struck by what he said on social security. when he talked about we should not be paying for warren buffett's retirement, what he is talking about is the idea that we should not pay of full social security for people at the top of the income scale. that is a fundamental reinvention of know what social security has three doing for a generation. -- what social security has been doing for a generation. when he talks about playing the granny card, any time you get

people proposing anything like this, politicians on both sides say, you are going to hurt granma. historically, it has been a loser to offer any kind of change. >> this party seems to have a real challenge on the issues of debt and spending. you mention a number of races coming up in indiana. how interesting will they be for the parties? >> that is a good question. it is one of the first states with returns to come in, so on election night it is often looked at. you have an early primary, so one reason it will be interesting to steve -- to see is the republican primary for the open senate seen at after bayh