MR. GREGORY: Good morning. Another attempt this weekend by BP to contain the oil spill in the Gulf of Mexico. The cap catching some of the oil was removed in an effort to replace it with an improved version to try to capture all of the oil. In the meantime, you can see, the oil is now flowing once again freely into the gulf.

Joining us this morning for an exclusive interview, White House press secretary Robert Gibbs.
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Welcome back to MEET THE PRESS, Robert.

MR. ROBERT GIBBS: Good morning.

MR. GREGORY: Good to have you.

MR. GIBBS: How are you?

MR. GREGORY: This developing story is one that you're obviously tracking very closely. The president said to the country that by the end of June we'd see containment of the oil. What's happening now...

MR. GIBBS: Right.

MR. GREGORY: ...and what level of concern does it give you, or optimism does it give you?

MR. GIBBS: Well, we're at a very critical point in the containment efforts. The sealing cap will double our capacity. There's another procedure called the Helix that could take 25,000 barrels a day out. That should be online we hope later today. Obviously, the timeline got pushed backwards because of hurricane and tropical weather in the gulf that made things more difficult. But understand that we were pulling about 25,000 barrels per oil--25,000 barrels of oil a day in a containment procedure. When all of this is online--the sealing cap, the Helix, the Q4000, which is burning oil even as we speak, so some oil is being contained--we'll have a containment procedure that will be between 60 and 80,000 barrels of oil a day. The sealing cap will also help in the next step, and that will be getting the relief well finished, shoving the mud and the cement down both the relief well and through the blowout preventer and sealing that well once and for all.

MR. GREGORY: You're confident, the president's confident in how BP's handling this phase of the operation?

MR. GIBBS: Thad Allen and our federal onscene coordinator approved BP going ahead with the procedures that they're working on now. Those pictures--again, that--the top hat that has been on there for several weeks that collected 700,000 barrels of oil is off. But the new containment procedure will more than triple our capacity when it's all said and done.

MR. GREGORY: Let me talk about politics, and the president's campaigning. In effect, it's the October in July in some ways, the president on the campaign trail this week. And he, he attempted to frame the debate for the fall. He was in Kansas City, Missouri, on Thursday, and this is what he said.
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(Videotape, Thursday)

PRES. OBAMA: You're going to face a choice in November, and I want everybody to be very clear about what the--that choice is. This is a choice between the policies that got us into this mess in the first place and the policies that are getting us out of this mess.

(End videotape)

MR. GREGORY: The policies getting us out of this mess is the claim. Those are the president's policies. It's what Democrats would be running on. And yet this is where the public is. The president's approval rating is upside down, according to our most recent poll, approving, 45 percent; disapproving, 48 percent. And a sense of whether the country's on the right track, look at this, pretty sour mood out there: 62 percent in our poll saying it's off on the wrong track. So, contrary to what the president is saying, the public seems to be in a different place.

MR. GIBBS: Well, David, I don't think it's surprising that the American people are frustrated after having lost eight and a half million jobs. But that's exactly the argument that he's making. Understand, the last six months of 2008, right, we saw an economy that shed three million jobs. The first six months of 2010, this economy has created 600,000 private sector jobs. The, the point the president was making and the point that the president will make this fall is, do you want to go backward to an economy that led us into this mess, that saw the greatest financial calamity since the Great Depression, that turned record surpluses into record deficits? Or do you want to continue on the track that the president has put us on, that has started to create private sector jobs.

The president will travel this week to Holland, Michigan. Michigan, everybody in this country knows, is, is, is home to auto manufacturing in a big way. But what the president's going to go visit is the ninth of nine advanced battery manufacturing plants--this will be a ground breaking--that will create jobs, that will supply advanced batteries for the Chevy Volt, an electric car that Chevy's going to manufacture and will get a hundred miles on a single charge. This is the ninth of nine that's are--as a result of that recovery act plan. Just in 2010, we produced 2 percent of the world's advanced batteries. In other words, to produce something like the Chevy Volt, we were going to have to bring batteries in from overseas. As a result of this Recovery Act investment that is met with private capital, in just five years, by 2015, we'll manufacture 40 percent of the world's batteries. That creates the jobs of tomorrow. So we have a choice. Are we going to go back to the movie that we've already seen and we know the results, or are we going to look forward?

MR. GREGORY: You're talking about a future market for an energy independent market, which is certainly very important. There's a lot of agreement about that. But the president's talking about his particular record that he wants to run on. And there are some facts. We know that private sector hiring has been extremely flat. We know that the mortgage market is still a mess. After that first time tax credit was expired, first-time home sales plummeted by a third. And we know that there's a sense that even the stimulus is not producing the jobs that it was promised to; 9.5 percent unemployment now. The original reporting was we'd keep unemployment with the stimulus at 8 percent.

And here's Politico just this morning, Jonathan Martin writing about some of the feeling among Democrats, let me put it up on the screen. "While almost uniformly grateful for the financial windfall they enjoyed from the stimulus legislation, the Democrats," some Democrats, "believe it wasn't sold well to the public and more still has to be done to revive the lagging economy. `I think the bottom line is they're not seeing the jobs that should have come with it,' said West Virginia Governor Joe Manchin," now running for Senate, "explaining why voters in his state were dissatisfied with the massive spending bill. `Are we just protecting government or are we really stimulating the economy?'"

MR. GIBBS: Well, let's take a look at it. Again, the quarter before--the, the two quarters of economic growth that we had before the president came to office, our economy was contracting by 6 percent. Now we're growing by 3 percent. David, I'm not here to unfurl the "mission accomplished" banner, OK? We've got a lot of work to do, and the president understands that, and we're working every day to increase small business lending, to make sure that we don't lay off teachers and firefighters that we know are essential in what we do every day. But the president's going to lay out a choice: Look back to where we came from and look back to where--and look forward to where we're going. And I think if by any definition of that, of that, you will see that we know what happened. We know the policies that led us into a financial calamity, massive budget deficits, not paying for programs that this government wanted to start, and a future-oriented growth agenda that this president instituted. We've definitely had to make tough choices.

Like I said, it's understandable that people are frustrated given where we are in unemployment. We lost eight and a half million jobs. There--it's going to take some time to fix. But, David, we think if you look at where we were and where we are--you say that employment is flat. We've created 600,000 private sector jobs in the first six months. We were losing 700- to 800,000 jobs a month just a short time ago. So there's no doubt that things are getting better. The economic recovery is no doubt fragile. The president and his team will continue to strengthen that. And we've got a long, long way to go. But we think if you take a look backwards and look forwards, there's no doubt that we're on the right path.

MR. GREGORY: But, but how much of what happened over the previous eight years is something that's still legitimate to consider? When do you really have to own what you've tried and what you've accomplished?
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MR. GIBBS: Oh, there's no doubt we, we, we have the responsibility for fixing the mess, right? But as the president said, don't drive the car into the ditch, right? Don't drive the car into the ditch and then now want the keys back, because we know how you drive, right? We understand what got us there, OK? The president has had to make a lot of tough decisions. The car's out of the ditch, the car's back on the road. The question is, are you going to give the keys back to the Republicans and let them drive it back into the ditch again?

MR. GREGORY: And yet you have Democrats attempting, it seems, to localize a lot of these races. They're a little worried about running with the president in a midterm race. The Wash--excuse me, The Wall Street Journal reported on Friday a little bit about that localizing strategy. I'm going to put it up on the screen. "The effort [to shift voters' attention away from Washington] is designed to prevent Republicans from turning the fall elections into a national referendum on President Obama and Democratic leaders in Congress, whose popularity among swing voters has been in sharp decline over the last year. Instead, Democrats are trying to turn each race into a unique, one-on-one matchup between local candidates." And yet, here is a president who achieved health care reform, who's on the brink of achieving financial regulation. Do you think it's an unwise strategy for Democrats to try to separate themselves from the president, from Democratic leaders in Washington?

MR. GIBBS: Well, look, let's take financial recovery as something were, again, we can look backward and we can look forward. John Boehner, who would be the speaker of the House if the Republicans were to take the House back over, last week equated the wreckage that was left as a result of the financial calamity to an ant, OK? The president has made some tough decisions that we have a financial reform bill, a Wall Street reform bill, that's--puts in place the strongest rules that we've had since the Great Depression, and almost uniformly you've got Republicans in the House that have said no. I think that is a great issue both at a national and a local level for people to go to their constituents and go to their voters and say, "Do you think that the rules that we had in place in September of 2008 that caused this financial calamity, we should have those rules in place? Or should we put new tough rules...(unintelligible)...so the banks can't cause that again?"

MR. GREGORY: But you're making--you're sort of making the case--you're making the case, but, but the issue at hand is you have a lot of Democrats who are saying, "Let me try to keep my distance from the national party and from the president." Is that unwise?

MR. GIBBS: Well, no, look, a man far smarter than me said, "All politics is local." And having worked on a number of races, I think that's the truth. But there's no doubt that there are obviously larger national issues, financial recovery being, certainly, one of them, whether it is the investments that had to be made short-term that are creating jobs and had this economy moving in the right direction, positive growth for the first time, adding jobs in this economy vs. looking backward; or are we going to have a financial reform that puts--that solidifies for Wall Street the rules that we had that caused this mess, or are we going to put rules in place that finally, finally, once and for all, put Main Street in the driver's seat, not at the whims of Wall Street?

MR. GREGORY: Let me ask you a broader question that I posed in the open, and I think you should have an opportunity to respond to, which is on a lot of the issues that you face right now from the oil spill to the economy, to the war in Afghanistan, is the president and his team falling short, or are we in a situation where expectations were set too high?

MR. GIBBS: That's a good question. Look, I think on either, either one of these things, the time frame on--look, the time frame on the war in Afghanistan, we've been in Afghanistan for almost 10 years. The president has obviously added a number of new troops, both at the beginning of 2009 and certainly last winter, and those troops are coming in. But this is always going to take some time. We knew it was going to take some time. Sometimes the time for Afghanistan or the time for financial recovery may not perfectly line up with the 2010 elections, and we understand that people are frustrated. Everybody's frustrated. Look, the president is frustrated that we haven't seen greater recovery efforts. But that doesn't stop us from doing what we know is right, instituting the policies that we know will bring this country back and put it on a pathway forward that lets our economy grow or creates stronger security for our country.

MR. GREGORY: A few, a few quick ones on the economy. Will you let the Bush tax cuts expire, in effect creating a tax hike on Americans?

MR. GIBBS: The president is not going to, at a time of economic crisis, raise taxes on the middle class.

MR. GREGORY: So he will not let them expire for the middle class...

MR. GIBBS: For the middle class.
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MR. GREGORY: ...but for wealthier Americans.

MR. GIBBS: Well, for, for, for those that weren't asking for them when they got them and didn't necessarily either need or deserve them, they're not going to have their tax cuts extended.

MR. GREGORY: So should--will Congress take this up before the fall elections? Because they'd been suggesting that they would put it off.

MR. GIBBS: Look, I don't know what Congress' schedule is. I know what the president has in mind, and that is for middle class Americans who have borne the brunt of this economic calamity, we're certainly not going to raise taxes on them.

MR. GREGORY: What about the capital gains tax? Will the president like to see it stay at 20 percent?

MR. GIBBS: Well, again, I think that's going to be part of the discussion that we have to have to make sure that in a fragile economic time we don't, we don't choke off any recovery.

MR. GREGORY: The, the housing mess is still a mess.

MR. GIBBS: Right.

MR. GREGORY: The mortgage market is still in a lot of trouble. And, as I mentioned, first-time home buyer sales fell off a third after the government stopped propping it up with the, the first-time--the tax credit. Mortgage modification, a plan highly touted by this administration...

MR. GIBBS: Right.

MR. GREGORY: ...proved unsuccessful. And the, the two largest former private companies and now quasi-government agencies, Fannie Mae and Freddie Mac, they guarantee 90 percent of the mortgages in this country.
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MR. GIBBS: Right.

MR. GREGORY: They have yet to be reformed; and yet, the--one of the president's top economic advisers, Larry Summers, is one of the most vociferous critics of those two companies.

MR. GIBBS: Right.

MR. GREGORY: So where is the plan here to deal with what is still the heart of the financial crisis?

MR. GIBBS: Well, let's understand that the mortgage modification program that you talked about has helped hundreds of thousands. Understand in a, in a hard economy it is, it is difficult in, in any sense to create a program that helps somebody stay in their house if they're losing their job, right? So we're working on both keeping people in their houses, again, those that should be in their houses. There are, no doubt, David, people that got loans over the course of this economic boom that ended in bust that, quite frankly, shouldn't have gotten loans, right? Those are not the people that the president wants to protect. But those that are making their mortgage payments, that's what the president is working on. When it relates to Fannie and Freddie, you hear this a lot from Republicans in Congress, there's no doubt that this is something that has to be reformed. The secretary of the Treasury and our economic team are working on that. That will be the next step in financial reform once we get the legislation through Congress.

MR. GREGORY: Mm-hmm.

MR. GIBBS: But getting that legislation through Congress is a massively important step in that financial recovery, and you hear Republicans in Congress saying, "Well I can't be for that because it doesn't include Fannie and Freddie." Well, we're going to reform Fannie Mae and Freddie Mac. As you said, we have a very volatile housing market and we have to do that in the right way; but that's not an excuse to leave in place the rules that brought us this financial calamity. And I think...

MR. GREGORY: Right.

MR. GIBBS: ...we're--Democrat and Republican candidates will be able to have a great debate about that in the fall.

MR. GREGORY: But can you say that the president's focused like, like a laser beam on the economy if he hasn't really zeroed in on the housing problems? With, with the kind of--and you have, you have agencies that take on, guarantee 90 percent of the mortgage debt and you're still not reforming them.

MR. GIBBS: Well, again, there's a process that's under way, David, to do that. But understand, in a fragile economy and, certainly, as you mentioned, a fragile housing market, we can't do everything at the same time. We put in place a financial recovery plan that is growing the economy and is adding jobs. We're on the verge of passing financial reform, which will put new rules in place, and the next step of that will be reforming Fannie and Freddie.
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MR. GREGORY: Big story this week was the Russian spies swap. A lot of Americans saying, "Wow, what a," you know, "what a thrilling story out of a spy novel itself." And it seemed like the priority here was U.S.-Russia relations. But the question still outstanding is, what kind of threat does Russia pose with its espionage against the United States?

MR. GIBBS: Well, let's step back for a second and understand that I think this is a great credit to our law enforcement. We, we made arrests, the law enforcement community made arrests. These individuals have been monitored for quite some time. They tried, but they never got classified information and intelligence, and now they've left the country, which, again, is a big win for our law enforcement community. I set that aside. I think our relationship with Russia is, is no doubt improving if you look at where it was just a few years ago. The economic discussions that President Medvedev and President Obama had just recently and the progress that we've made in reducing nuclear weapons--and hopefully we'll get a treaty through the Senate this summer that will further reduce nuclear weapons--means our security is stronger and safer and our relationship is stronger.

MR. GREGORY: More broadly on foreign policy, I can remember back two years ago, as you certainly can, July of 2008, the president giving a major foreign policy speech in Berlin. Still a candidate and yet really well received. This was, in effect, an attempt to show the world a new face of foreign policy that would happen under President Barack Obama. And yet, as the president tried to do a 180 from Bush foreign policy, you find how difficult it is. The promise to close down the prison at Guantanamo Bay, yet it's still open. The Afghanistan war is not scaled down, it's been escalated. This administration has upheld the state secrets exemption in its pursuit of terrorists legally. It appears the worst-kept secret in Washington is that there appears to be abandoned plans to put Khalid Sheikh Mohammed in front of a civilian trial. Same strategy for North Korea and Iran basically.

MR. GIBBS: Well, hold on, let's...

MR. GREGORY: Yeah.

MR. GIBBS: I hate to interrupt, but let's understand this. We have the toughest sanctions on North Korea that we've ever had as a result of unanimous U.N. Security Council resolution.

MR. GREGORY: Same strategy. Same strategy.

MR. GIBBS: Same strategy...

MR. GREGORY: Pursued by the Bush administration.

MR. GIBBS: More important, better tactics. We've got the strongest sanctions regime on Iran that has ever been in place. And, David, go back...

MR. GREGORY: Same strategy as the Bush administration.
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MR. GIBBS: But, but understand--let's go back to the Bush administration.

MR. GREGORY: Yeah.

MR. GIBBS: You brought this up. I know the next panel's going to say I blamed this all on the Bush administration...

MR. GREGORY: No, no, no. But can I just finish?

MR. GIBBS: But--let me...

MR. GREGORY: The predicate here, which is, is it harder to do a reversal from Bush foreign policy than you originally thought?

MR. GIBBS: No, because I think you've greatly oversimplified it. It--if you ask Ed Gillespie, ask any of the folks that you had right now, if in September of 2008 or October of 2008 or November of 2008 whether China and Russia were going to come on board for strengthening sanctions against Iran. The answer to that would be a flat no. You wouldn't have gotten to the security council because you would have had at least two countries raise their hand to veto those. This president has put together a coalition that includes Russia and China, that's actually strengthened our sanctions regime on South Korea***(as spoken). We have better relationships with virtually every country in the world as a result of the president's foreign policy outreach. We're reducing nuclear weapons in this world that we know can cause the type of calamity, whether, whether they accidentally launch or whether they fell, fell into the hands of a terrorist. There's no doubt, David, that we have taken foreign policy in a different direction. We have improved relationships with countries, but not just as a means to an ends. That's actually making our country safer and more secure as a result. I, I think you created oversimplified sort of what the president is trying to do, because the things that he's instituted couldn't have been done in the last administration.

MR. GREGORY: Right. But those are all accurate issues? I mean, I didn't misstate any of that, did I?

MR. GIBBS: Well, I think I--I think you and I had a little interchange there on North Korea and Iran because, again, whether you go through the same strategy is not necessarily what is at case here, and that is we have built--and the president has taken a different strategy with Iran, right? He said to the world, "I'm happy to discuss Iran with Iran if its--if it will come to the table and live up to its obligations." That's what brought the Chinese and the Russians to the table at the United Nations. That's what showed the world that it wasn't, it wasn't anything that had to do with American or our allied aggression toward Iran, it was that Iran was hiding a secret nuclear weapons program. And if Iran is unwilling to, in front of the world, discuss that, as the president invited them to do, then it becomes clear for everybody in the world that this is an Iranian secret nuclear weapons program. That's why everybody's at the table, and that's what we have the strongest sanctions regime on Iran that we've ever had.

MR. GREGORY: Two final points. First of all, I want to get a prediction from you on, back on the political debate. Is the House in jeopardy, the majority for the Democrats in the House, in jeopardy?

MR. GIBBS: I think there's no doubt that there are a lot of seats that will be up, a lot of contested seats. I think people are going to have a choice to make in the fall. But I think there's no doubt there are enough seats in play that could cause Republicans to gain control. There's no doubt about that. This will depend on strong campaigns by Democrats. And again, I think we've got to take the issues to them. You know, are--do you want to put in, in to the speakership of the House a guy who thinks that the, the financial calamity is, is tantamount to an ant? The guy who's the ranking member of the Energy and Commerce Committee, Joe Barton, started his congressional testimony of the CEO of BP by apologizing, not to the people in the gulf, but to the CEO. I think that's a perfect window, not into what people are thinking, but the way they would govern. Joe Barton, John Boehner, those are the type of things you'll hear a lot, I think, from both the president and local candidates about what you'd get if the Republicans were to gain control.
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MR. GREGORY: Finally, perhaps an issue a little bit easier to pin you down on, and that would be another showdown, potentially, with LeBron James. I don't know if you heard, but LeBron James is going to the Miami Heat. He's leaving Cleveland.

MR. GIBBS: I had not heard that.

MR. GREGORY: Yeah, I know, a lot of people had missed that. And when he spoke to ESPN on Thursday, this is what he said about the president's game, OK? He said, "I think President Obama would hold his own" if they went one-on-one. "I've seen him shoot the ball - he's a lefty, too. You know, pretty much all lefties can shoot." Might we see a one-on-one showdown at the White House, since, after all, James disappointed the president...

MR. GIBBS: Yes, he did.

MR. GREGORY: ...by not going to Chicago.

MR. GIBBS: Yeah. He disappointed the people in Ohio, he disappointed the people in Chicago. Look, I, I can only imagine if the president had an opportunity to play against LeBron James, he would take it. I don't know that we would make the game public or the outcome of the score public because, let's just say, somebody who's 6'8", quite that size, starts with an advantage that is hard for the president to, to make up.

MR. GREGORY: We can probably agree, as I think the world can agree, that we've spoken enough about LeBron James this week.

MR. GIBBS: Amen.

MR. GREGORY: Robert Gibbs, thank you very much.

MR. GIBBS: Thank you, David.

MR. GREGORY: Appreciate it.