BLITZER: And joining us here at the White House, Rahm Emanuel, the White House chief of staff.

Thanks very much for joining us.

RAHM EMANUEL, WHITE HOUSE CHIEF OF STAFF: Thank you, Wolf.

BLITZER: Now that you passed health care, what is the president's number-one priority for this year?

EMANUEL: Well, as it has been since he got into office, getting the economy moving again.

On the legislative front, there's been a post-health care -- in addition to health care, and what's kind of not gotten a lot of coverage, Wolf, is the education, higher education that's part of this legislation.

BLITZER: Is that your top priority?

EMANUEL: Well, that is a top priority and is one -- if you go back to the president's speech at Georgetown, he laid out four things that were part of the new foundation, health care reform, access to college education, the funding for that, which is part of this legislation as well.

There's financial regulation reform. And...

BLITZER: You going to get that passed this year?

EMANUEL: I feel -- well, as you saw probably in the press, even the Republicans acknowledge we're going to get that done. I feel better about it today than before.

But the key goal is putting the right types of reforms, so you have an insurance policy that the kind of problems we had in the past don't repeat themselves, and you have the clear transparency, the enforcement mechanisms and the tools necessary to prevent that, in addition that, stronger education reforms that are necessary to keep America competitive and their kids can get educated, and also dealing with the Supreme Court decision...

(CROSSTALK)

BLITZER: What are you going to do about that?

EMANUEL: Well, there's legislation moving both in the House and Senate to make sure that we deal with a lot of the loopholes that were left in that decision by the Supreme court, which allowed corporate money to run rampant over our campaigns.

BLITZER: But, in this election cycle, that will happen. Do you think that legislation can be passed...

(CROSSTALK)

EMANUEL: Well, we can -- we're going to make a good effort in making sure that our campaigns are not literally -- unfettered access by corporate resources and special interest money into those campaigns.

So, but job one since day one, it will always be true, is getting the economy moving and working for the American people.

BLITZER: If unemployment is at 10 percent in November, how much will you suffer, the Democrats?

EMANUEL: Look, I don't want to make -- it will not be -- obviously, if unemployment's high, more importantly, it won't be good for the American people, so there will be no doubt political impact, but the key priority is reducing the unemployment, keeping the -- and also making sure the economy...

(CROSSTALK)

BLITZER: Do you think it's going to go down, unemployment, between now and November?

EMANUEL: Wolf, I think -- I think this. We had inherited what is known now as the great recession.

When we first got into office, our first task, stabilize the financial system. That has been achieved. The second, we were losing 750,000 jobs a month. We have now gotten about two months where it's at a break-even point. The key goal now is to get that into the positive territory.

The third task is starting was starting to put our fiscal house in order, which is what this health care system -- health care legislation was about, and we have done that and what you have seen is basically reducing the deficit.

BLITZER: I know a lot of Republicans think that's -- it's going to skyrocket the deficit.

EMANUEL: Yes, but you know what? There's a scorekeeper here. That scorekeeper is the Congressional Budget Office. They are clear and unambiguous. And you can't disagree with them -- and you agree with them only when you like it and disagree when you don't like the decision.

BLITZER: Well, they disagree on the assumptions that the CBO was given.

EMANUEL: But everybody's acknowledged that, in fact, it will reduce the deficit, will strengthen Medicare, and will ensure that we reduce the deficit by a little over a trillion dollars.

(CROSSTALK)

BLITZER: Let me ask you this. How do you strengthen Medicare, when you are going to cut, over the next 10 years, a half-a-trillion dollars in projected growth from Medicare?

(CROSSTALK)

EMANUEL: You're going to make sure -- but the projected growth is in expenses. You are going to make sure it's got a 10-year longer lifespan than it had before. And that's an important piece of entitlement reform.

And one other thing...

BLITZER: Because a lot of seniors, you know, are nervous about these Medicare cuts.

EMANUEL: Well, first of all, there's a lot of waste and inefficiencies. And that's what...

(CROSSTALK)

BLITZER: But a half-a-trillion dollars?

EMANUEL: No. And there's a lot of misspendings and mispriorities.

Second is it does strengthen. And third is, if you look at the history, usually, while Congressional Budget Office has ruled that it will achieved X savings, many times, those savings are greater than what Congressional Budget Office originally assumed.

So, the most important thing to know is that this will actually reduce our deficit and begin to put our fiscal house in order.

BLITZER: All right. I know there's a big debate on that, but let me...

(CROSSTALK)

EMANUEL: And that debate will continue.

BLITZER: This new CBS poll says 62 percent of the American public, since the vote Sunday night, want the Republicans to keep on fighting to change this health care bill.

John McCain says -- and I'm quoting him now -- "The one thing that has people enraged is the sleazy backroom deals, sausage-making that is going on."

And John Boehner, the Republican leader in the House, calling this Armageddon, goes on to say this:

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: Look at how this bill was written.

Can you say it was done openly?

UNIDENTIFIED PEOPLE: No.

BOEHNER: With transparency and accountability?

UNIDENTIFIED PEOPLE: No.

BOEHNER: Without backroom deals and struck behind closed doors, hidden from the people?

UNIDENTIFIED PEOPLE: No.

BOEHNER: Hell no you can't!

Have you read the bill?

UNIDENTIFIED PEOPLE: No.

BOEHNER: Have you read the reconciliation bill?

UNIDENTIFIED PEOPLE: No

BOEHNER: Have you read the manager's amendment?

Hell, no you haven't!

(END VIDEO CLIP)

BLITZER: What do you say to John Boehner?

EMANUEL: Well, first of all, I think -- I mean I don't -- I have not heard him call it Armageddon. I -- I think that we've had a long debate in this country about health care. This year alone, over a year. But it's been a big debate, not just this year, about how best to reform health care.

I think that it is important now to implement this correctly and make sure that the benefits get to the American people. I'll give you an example. One of the first things that's going to happen, there's going to be a tax credit for small businesses. There's about four million small businesses that don't provide health care who will now have a tax credit to provide that. I don't think that's a right thing to want to repeal or call Armageddon.

The next thing kind of -- coming up, Wolf, is helping seniors pay for their prescription drugs. I'm not sure that's a place where I would go calling it Armageddon or want to repeal it. And that's not a special deal except for...

BLITZER: But you think it will -- the positive things this year will help you going into November?

EMANUEL: Not only -- it's -- it -- A, it's not, first and foremost, Wolf, about November. Obviously, there may be political benefit. But the primary thing is dealing with the problems in the health care system.

And let -- and, third, what also will happen quickly is the insurance reforms that will make sure that insurance agencies and -- insurance companies, rather -- do not control access to a doctor and the health care decisions that patients and doctors make.

BLITZER: Big picture, you there were in '93-'94 during the Clinton administration when health care failed...

EMANUEL: When I had a head full of black hair.

BLITZER: When -- you were a young guy and I remember covering you then...

EMANUEL: You sure did.

BLITZER: I was a younger guy, but you were a young guy.

EMANUEL: Wolf, a lot of people say we've traveled many miles but then you I haven't gone very far.

BLITZER: But it failed then, during the Clinton administration.

EMANUEL: Yes.

BLITZER: It passed now during the Obama administration.

Why?

EMANUEL: Well, a couple -- first, there's -- there's some fundamental -- there are some differences. I will say this, as -- as President Obama said to President Clinton when he thanked him and -- and the Secretary of State is -- you probably couldn't have gotten to this point if it wasn't for the -- at least the effort tried in '93-'94. That was an important precedent. It was part of clearing the air of the debate and also understanding kind of the dimensions of how you do this. There were things that were done different that were important lessens to be learned from that (INAUDIBLE).

BLITZER: Some lessons -- and you learned those lessons personally...

EMANUEL: Well...

BLITZER: -- and you helped this president get it through?

EMANUEL: Well, there -- there's no doubt -- I mean there's simple things like when President Clinton gave -- launched health care, he started with a major speech in a joint session. For us, that didn't come until the back kind of third of this process, which was when we hit the impasse, that giving a speech and giving new energy to it.

The idea of doing a bipartisan conference to begin it -- begin the process and a bipartisan meeting at the Blair House that we did just a couple weeks ago to also give it another sense of energy.

Also, while some have criticized it, the difference of involving the Congressional committees in writing and drafting the legislation on the front end rather than giving them a product, I think...

BLITZER: You think

EMANUEL: so...

BLITZER: You think that was a good idea?

EMANUEL: Well, in the end of the day, you've got the legislation.

BLITZER: It took 13 months -- it took 13 months, though.

EMANUEL: Wolf, it did take 13 months.

Do you unders -- do you remember how long it took Social Security from beginning to end?

BLITZER: I wasn't around.

EMANUEL: OK. Well, in the history books -- I'll -- I'll help you on this one. It was 24 months for that, about 20 or 18 months for Medicare. And so when you look at the frame in historical context, this is kind of...

BLITZER: But the...

EMANUEL: -- do or die. But the thing...

BLITZER: I know you don't want to talk about politics, but in these 13 months, the presidents job approval rating went from about 70 percent down to the 45, 46, 47 percent. He took a -- he took a personal...

EMANUEL: And he...

BLITZER: -- political toll on this.

EMANUEL: And, as he said repeatedly, which is a sign, he was willing to spend, quote, unquote, "the political capital" to get something done that was materially and politically -- policy-wise -- important for the American people. And if you asked him today even -- or a week ago, pre the bill -- was it worth the political capital spent, he would say yes. And -- and every time he has made that decision, he thought this was important for the United States.. It was key for our economic competitiveness. It was key for the benefits for the American people and putting our fiscal house in order. And given that, he would spend more political capital to get it done.

(BEGIN VIDEO CLIP)

OBAMA: One of the best speakers the House of Representatives has ever had, Speaker Nancy Pelosi.

Mr. Harry Reid.

Kathleen Sebelius.

And one of the unsung heroes of this effort, an extraordinary woman who led the reform effort from the White House, Nancy-Ann DeParle.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: I know you worked really hard over these 13 months. No one in the White House -- no one in the administration worked harder. That's why I was surprised when the president was thanking everyone the other day for what they did, he didn't -- he didn't give you a shout-out.

EMANUEL: So?

BLITZER: Do you care?

EMANUEL: No.

BLITZER: It doesn't mean anything?

EMANUEL: No.

BLITZER: Did he give you one of those 22 pens?

EMANUEL: No. No, I mean, because...

BLITZER: Because you worked really hard to get -- I mean you had the connections in the House and in the Senate.

EMANUEL: First of all, he didn't do it -- I didn't do this so I would get thanked at -- at the signing or anything else.

Let me say this, if that's the question, you should know the night that it passed -- or the day it passed, he and I -- he came by. He gave me a high five. I have no doubt of my role in this and I feel quite good about that sense of it.

(END VIDEO TAPE)

BLITZER: Amid the health care reform victory, a very serious foreign relations crisis, as ties between the United States and Israel suddenly turn sour. That and more -- my interview with Rahm Emanuel continues, right after this.

(COMMERCIAL BREAK)

BLITZER: More now of my interview with the White House chief of staff, Rahm Emanuel. While the administration is celebrating its health care reform victory, it also faces a very sudden and serious strain in relations with a critical U.S. ally.

(BEGIN VIDEOTAPE)

BLITZER: Let's go through some quick issues because I know your time is really limited.

Israel, right now. The president of the United States meets with the prime minister of Israel. He comes to the White House -- no photo opportunity, no news conference, no statements. Basically, he got in, got out.

What is going on in the U.S.-Israeli relationship right now?

EMANUEL: Wolf, first of all, they're solid relationships. This is two people, two countries that have a shared set of values. America is committed to Israel's security, as it has always been and will continue to be. And this was a working meeting in the sense of dealing with a -- a particular point and a particular -- a particular time where there's some differences here to work through. And good friends can have that.

BLITZER: You can't even get a picture with the president and the prime minister together?

EMANUEL: (INAUDIBLE).

BLITZER: I mean, I've covered this story, as you know, for a -- a long time. It's pretty shocking.

EMANUEL: Well, we're at a point, as you know, the prime minister -- we had -- it is not a hidden secret -- a disagreement as it related to the settlements in Jerusalem...

BLITZER: And you -- is that disagreement still there or was there any progress...

EMANUEL: Well. We're working through the (INAUDIBLE)...

BLITZER: -- in resolving it?

EMANUEL: There is progress. We're working through the issues. And the most important thing is not to work this through this issue, it is to work through so we can get the peace process back on track, because that's a key part of the security interests and making progress in the Mideast.

BLITZER: No -- no chief of staff has served more than one term.

What about you?

EMANUEL: Wolf, first of all, it's -- you know, I'm happy doing what I'm doing. We just got done with health care. I am going to make -- you know, this is a decision the president and I will make and he can make it any time. My intention is to continue to work...

BLITZER: You want to stay?

EMANUEL: -- and serve him.

BLITZER: You like this job?

EMANUEL: Yes, I do. Very much.

BLITZER: Ever miss being a member of the House?

EMANUEL: It's like, you know, it -- that's comparing -- look, here is the deal, Wolf. Congress was a great job and a very interesting job. This gives you a wider scope of things to work on, a -- a much more diverse kind of a part of your life. It is, at one level, you give up your independence.

On the other hand, you have a greater scope of things that you will work on. And it's also nice to have my family in the same city, where while Congress was also a little easier on the family, I was gone four days.

On balance, I am having a great life. And I will always look back at the time either in the Clinton White House, Congress or here that I've done something with my life where I can feel -- look back and say I made a contribution to the country.

BLITZER: Rahm Emanuel, thanks very much for joining us.

EMANUEL: Thanks, Wolf.

BLITZER: Good luck.