DIANE SAWYER, ABC’S “WORLD NEWS” ANCHOR: Mr. President, thank you.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Thank you.

SAWYER: So, looking back a year, going before a joint session of Congress. What’s the biggest difference in going this week?

OBAMA: Well, you know, this may seem counterintuitive, but the biggest difference is that I was more worried about where the country was going a year ago than I am now. Keep in mind that when I made that joint session speech, we still didn’t know whether the financial system was going to stabilize. We still were looking at five, six, seven hundred thousand jobs per month being lost. It still wasn’t clear whether or not we were going to be able to generate economic growth again.

And so, the steps that we took at the beginning of this year have meant that the potential meltdown of the economy has gone away. What hasn’t gone away is the desperation that people are feeling who were one of the 7 million who lost jobs during that period, and so right now, I think there’s frustration and anger about why can’t we get this thing moving faster? And it’s a frustration that I feel as well…

SAWYER: Republicans are already out today saying what you’re talking about so far for Wednesday night is not going to create any new jobs.

OBAMA: The — well, I would suggest that they save the rebuttal for after the speech. They haven’t really heard what we’re proposing.

SAWYER: But what is it going to be? New stimulus money — as we know, in the House, they have talked about $170 billion or so for new stimulus money…

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OBAMA: Here’s what we’re going to talk about. We’re going to talk about how we can first of all, focus on job creation and growth. And I’ve met with the Republicans, by the way, several weeks ago. So, I have their ideas. I know what they’re proposing. And some of the things we propose are things that actually should get some strong bipartisan support.

We’re also going to make sure we’re focused on some issues that have been burdening the middle class well before the crisis hit. You know, what’s happening in terms of affordability of college. How can people save for their retirement in a more secure way? How do they deal with both child care and elderly parents that they’ve got to take care of?

So, there are going to be a set of proposals that we put forward that help to stabilize the situation and deal with the growing insecurity and anxiety of people who, even if they haven’t lost their job, are still feeling squeezed by their incomes shrinking and their costs going up.

SAWYER: But a year ago, you said the first item on the agenda, a year ago, jobs.

OBAMA: Absolutely.

SAWYER: Painted a picture of jobs from coast to…

OBAMA: Well, now, Diane, I think that’s not fair. Here’s what I said…

SAWYER: A hope for jobs, at least, infrastructure…

(CROSSTALK)

OBAMA: Here’s what I said, was that our number one priority was stopping the economic contraction and putting people back to work. Now, we have stopped the economic contraction. The economy is growing again, and we did create or save several million of jobs. That’s not my opinion. That’s the opinion of conservative economists as well as liberal economists, was that the Recovery Act, which is a combination of tax cuts, infrastructure improvements, helping states stabilize their budgets — all those things helped to lessen the fall.

But we’ve still lost 7 million jobs. So, I understand why the American people, their attitude is not “It could have been worse.” Their attitude is, “How do we make sure we keep on making it better?”. And that’s what we’ll be talking about on Wednesday.

SAWYER: New proposal? Something surprising?

OBAMA: Well, you know, I’ll let you guys judge whether it’s surprising or not. There’s going to be consistency though in the sense that my first job coming into office was to rescue the economy from great peril. My second job was to make sure that we create a new foundation for economic growth.

Here’s part of what happened. Over the last decade, even when people were saying that the economy was doing fine, it was one of the first times in history where the middle class actually saw its incomes decline. We actually saw very little job growth during that period. And on a whole host of measures from health care cost, college affordability, people were having a harder and harder time getting by. So what I’ve said is we can’t go back to the same pattern where you’ve got bubbles, whether it’s in housing or the dot.com boom that are fueling a lot of speculation, making a lot of people a lot of money, but leaving a lot of people in the middle and low-income people behind.

What we have to have is a foundation that’s built on a good education system, a sound energy policy, a health care system that works for everybody, financial regulations that ensure we don’t have this crisis again, and those foundations for long-term economic growth are going to be my focus this year. They’re going to be my focus next year. They’re going to be my focus the year after that because if we don’t get that stuff right, then it’s going to be very difficult for us to answer the anxieties that people feel over the long-term.

SAWYER: A couple of quick news questions if I can. Fed Chairman Ben Bernanke going to be confirmed. Do you guarantee the markets that he’s going to the Fed chairman?

OBAMA: He has my strongest support. I think he’s done a good job. What we’ve seen is not only Democratic leaders, but also Republican leaders say that he should be confirmed and I’m confident that he will be confirmed.

SAWYER: Even though Barbara Boxer, John McCain have come out and said look — John McCain said he’s the guy who steered into the iceberg. Barbara Boxer said we need a representative of Main Street on the Fed.

OBAMA: What we need is somebody at the Federal Reserve who can make sure that the progress that we’ve made in stabilizing the economy continues. And I think Bernanke is the best person for that job.

SAWYER: Secretary Geithner and Economic Chairman Summers, have you asked them to stay until the end of 2010? Have they said yes?

OBAMA: You know, we haven’t had the conversation because my presumption is that they are staying. There’s a lot of “hue and cry” in Washington because this is what happens. The political season is starting a little bit early this year. But the fact of the matter is that when you look at the cards that we were handed at the beginning of last year and where we are now, a lot of that has to do with sound, steady economic leadership. And they’ve been terrific advisers for me and I think they will continue to be terrific advisers.

SAWYER: To all the people terrified about the deficit, $1.5 trillion more this year than taken in expected next year. Can you guarantee them still that there will be no taxes on anybody who makes under $250,000 a year? That’s still the absolute rule?

OBAMA: I can guarantee that the worst thing we could do would be to raise taxes when the economy is still this weak. So we’re going to be rolling out our budget. I’m not going to be giving you too many previews of the State of the Union, but I think it’s important to understand that No. 1, I haven’t raised taxes on anybody, I’ve cut taxes. Ninety-five percent of working Americans have gotten a tax cut, partly because it’s the right thing to do because of the recession, partly because it’s just something I campaigned on. So that’s point number one.

Point number two in terms of the deficit. Understand where our deficit index comes from. When I walked into office, we had a $1.3 trillion deficit. We also had $8 billion (sic) — $8 trillion worth of national debt that had been accumulated from the previous administrations, cutting taxes during war time, a prescription drug plan that wasn’t paid for. The only additions that we added were the stimulus package last year, which amounted to $1 trillion. Now that’s a serious amount of money to rescue the economy. But it pales in comparison to the structural deficit that’s built into our budget right now, that is a problem that is long running and we’re going to have to solve.

And we’re not going to solve it easily. There aren’t any magic solutions to it. It’s going to be a slow chipping away, and what I’m going to do is propose a series of measures that show we are serious about it. That I, the president, am willing to not just point fingers, but actually make some tough choices myself. My hope is that both Democrats and Republicans on Capitol Hill will join me in this effort of solving the problem, instead of trying to kick the can down the road and blame somebody else.

SAWYER: Health care — going forward, should all the conversations, all the meetings be on C-SPAN?

OBAMA: You know, I think your question points out to a legitimate mistake that I made during the course of the year, and that is that we had to make so many decisions quickly in a very difficult set of circumstances that after awhile, we started worrying more about getting the policy right than getting the process right. But I had campaigned on process. Part of what I had campaigned on was changing how Washington works, opening up transparency and I think it is — I think the health care debate as it unfolded legitimately raised concerns not just among my opponents, but also amongst supporters that we just don’t know what’s going on. And it’s an ugly process and it looks like there are a bunch of back room deals.

Now I think it’s my responsibility and I’ll be speaking to this at the State of the Union, to own up to the fact that the process didn’t run the way I ideally would like it to and that we have to move forward in a way that recaptures that sense of opening things up more.

SAWYER: A lot of people think you must say at the end of the day, this is not who I was in 2008, these deals with Nebraska, with Florida…

OBAMA: Let’s hold on a second, Diane. I mean, I think that this gets into a big mush. So let’s just clarify. I didn’t make a bunch of deals. There is a legislative process that is taking place in Congress and I am happy to own up to the fact that I have not changed Congress and how it operates the way I would have liked. So that’s point number one.

Number two is that I think it is important to know that the promises we made about increased transparency, we’ve executed here in 1600 Pennsylvania Avenue. I mean, this is the first White House in history where you know anybody who has walked into my office, anybody who has walked into the White House, you actually have a record of who comes in. We have put more stuff on the Internet than ever.

We’ve eliminated lobbyists from all the boards and commissions that historically, you know, they dominated in this town. So it’s not that we haven’t made significant progress, but we haven’t changed it as much as we needed to.

Now, in terms of the health care bill, the product of making sure that we got historic insurance reforms that people have been fighting for years so that insurance companies can’t take advantage of people, making sure that we’re bending the cost curve, and — and actually starting to reduce health care inflation in this country, which is a huge problem, making sure that 30 million people have access to health insurance, making sure that small businesses have tax credits — it’s important that people look at the core elements of what both the House and the Senate passed.

And every health economist out there, who’s serious about this stuff, will tell you it’s a vast improvement over the status quo. It doesn’t — that doesn’t excuse the stray cats and dogs that found their way into legislation. It is point out that as we move forward, we’ve got to make sure that we’re focused on what is actually helping the American people deal with what is a very serious problem.

SAWYER: A personal question, if I can, because a lot of people heard you in the Baptist church say sometimes in these buzz saw bruising seasons…

OBAMA: Right.

SAWYER: … you sit and confront your own doubts…

OBAMA: Yes.

READ the rest of the interview, here.

WATCH Obama: ‘We Started Worrying More About Getting The Policy Right Than Getting The Process Right’, ABC News interview with Barack Obama by Diane Sawyer, Talking Points Memo, January 25, 2010 — 2:01

Obama: I’d rather be
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