BLITZER: All right. Governor, Senator Grassley, you know him. He sounds pretty upbeat about a bipartisan piece of legislation.

Are you ready to get on board?

GOV. TIM PAWLENTY (R), MINNESOTA: No. We've got to be very careful about keeping the main thing, the main thing, Wolf, and that is, if you're making the case that we have to do something to control costs in the health care system, and your answer to do that is the federal government just to spend more money, that does not solve the problem. That's like you're saying you're going to balance the checkbook by writing more checks.

So, I appreciate the two pieces of progress Senator Grassley flagged, but there's a more fundamental problem with this, which is it's going to break the bank. BLITZER: Well, he actually mentioned three, including the cooperatives. Is that something, a cooperative, that you think would save the American public money? Because a lot of folks aren't happy with their insurance companies right now.

PAWLENTY: Well, we have a couple things going on.

Number one is, for those who don't have insurance, expanding access is a worthy goal. But for the vast, vast majority of Americans, they do have insurance, and their main concern is they want cost containment.

There's a variety of ways to do that. One of the ways we do it in Minnesota is, start the process of paying for better health and outcomes and results, rather than just paying for volumes of procedures, because if you pay for volumes of procedures, you're going to get more procedures, and that's a big part of what's wrong with the current system.

BLITZER: And you've got a good hospital there, the Mayo Clinic, that a lot of people are looking to for some guidance on what to do nationally.

Let's talk about the economy right now. Do you see this recession based on what you see every day in Minnesota, this recession coming to an end?

PAWLENTY: Well, what we see in Minnesota and I think across the country is that it's getting worse less rapidly, but it's still not yet bottomed out. We're hopeful that we'll see that bottoming out in the beginning of a recovery this fall or winter, but it's too early to tell. And that's speculative. But the stock market is bullish right now, so that may be a leading indicator.

BLITZER: Because in terms of the recovery funds, the economic stimulus money, the Congress provided almost $4 billion for Minnesota, $3.8 billion -- $2.7 has already been allocated, and $735 million has already been spent.

I assume that money is helping the people of Minnesota dramatically?

PAWLENTY: Well, as you probably know, Wolf, the GAO did a report on the stimulus bill that said of the nearly $800 billion that's being spent; only about $160 billion is actually simulative.

And if it turns out in retrospect that the recession is not over or will soon be over, you're going to have -- the Obama administration's going to have the uncomfortable phenomena of having the recession ended before most of the stimulus money was even spent. And so that's another validation of the fact that it was probably misguided or at least untimely efforts.

BLITZER: Are you ready to give the president any credit if -- if this recession ends relatively soon? PAWLENTY: Well I think President Obama inherited a very challenging situation. But if you're going to do a stimulus package, it should have been targeted at things that got money into the taxpayers' pockets right away, like reducing the payroll tax for employees and employers and focusing on non-porking infrastructure projects.

But that's not what this bill was. And as that GAO report highlighted, that was a very small portion of the bill. The rest of it was largely sustaining government bureaucracies and that's not simulative.

BLITZER: All right. You're at the Republican National Committee meeting out in San Diego. A lot of speculation about you right now, a lot of buzz that this is your "coming out." You're getting ready to think, at least, seriously, about running for the Republican presidential nomination in 2012.

Are you?

PAWLENTY: Well, I got a year and a half left to be a governor in the state of Minnesota and that's going to be the focus of my attention. But I am in Minnesota and elsewhere going to try to speak to how my party can do a better job.

Obviously we got our tails kicked in the last two elections, Wolf. We need to do a better job. I think I have got some ideas to share. But that's really going to be focused on how we can do better in 2010. I'm not thinking beyond that.

BLITZER: Well, it sounds like you're at least thinking about it. At least you're open to the idea, you're not ruling it out. A lot of people remember, I do especially, that you were what, the first runner up for that Republican vice presidential nomination back in St. Paul. But we don't have to go through the ancient history.

I do want to throw this sound bite to you. What your fellow now, former governor Sarah Palin said in announcing one of the reasons why she was quitting.

(BEGIN VIDEO CLIP)

SARAH PALIN (R), FORMER ALASKA GOVERNOR: It is because I love Alaska this much, sir, that I feel that it is my duty to avoid the unproductive typical politics-as-usual, lame-duck session in one's last year in office.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: All right. Well, you're in that situation. You've announced you're not seeking reelection a third time. So, you're a lame duck right now.

How does that make you feel when you hear her speak about you like that?

PAWLENTY: Well, I don't know that she was speaking about me necessarily. I consider Sarah Palin a friend, and a colleague, and somebody that I thinks been a remarkable leader for Alaska. And I think for her that she just felt in her situation in Alaska, she was an impediment to getting things done. Or her situation was an impediment to getting things done. And so she stepped aside and that's her call.

But I think it's probably limited to the unique circumstance in Alaska. You can't have people who just say anytime that you have any time left on your term. You're not going to serve out your term. Otherwise you'd have office holders, you know, for example, the governor of Virginia, who has only one term as a matter of Constitution is always a lame duck.

So is that person supposed to resign in the first couple months of office?

BLITZER: Well, I just want to be clear. You have no plans to quit?

PAWLENTY: I don't. No.

BLITZER: OK. Governor, thanks very much for coming in.

Good luck.

PAWLENTY: All right, Wolf. Thank you very much.