BLITZER: And we're here with John Thune, the Republican senator from South Dakota.

Senator, thanks very much for coming in.

SEN. JOHN THUNE (R), SOUTH DAKOTA: Nice to be with you, Wolf.

BLITZER: Are you seriously thinking about running for president in 2012?

THUNE: Right now I'm seriously trying to elect Republicans to the House and the Senate in the midterms. Like a lot of people, I'm interested in public service and want to do as much as I can to change the direction of this country and will give some consideration to that after midterm elections.

BLITZER: Because I know you've discussed it with your wife.

THUNE: Well, this is true. Anytime you talk about something of this consequence, that's -- she's one of my closest advisers, obviously, and somebody I would consult on everything.

And we've had a good amount of encouragement from people in our state, as well as others around the country who are looking for someone to step up, and I think there are a lot of folks who are very interested in changing the direction of the country and that's what I hope to do. And whether that means me being out there or others, we're certainly going to be involved in that.

BLITZER: Well, walk me through a little bit, your decision making process. What goes into a decision like this to run for the Republican presidential nomination?

THUNE: I think that -- and, of course, I've not been through this process before, but just in terms of -- as people have talked to me, encourage me, my colleagues, as I said, people in my state, people elsewhere around the country, you want to know, obviously, that there are people out there who think that you are up to doing the job. And then, obviously, you have to ask yourself, do you really want the job?

And clearly, there's a tremendous amount of work that goes in, not only to run in the campaign, but if you were successful, this is going to be a very hard job. There are going to be hard decisions ahead in that job. And so you have to -- that's the first question you have to answer.

And then, secondly, I think you have to make sure that your family is on board with that if that was something you were going to entertain doing.

And then I think you have to get down on a very practical level and say, can I raise the money. Is there support out there? Do I see a pathway to get there?

And those are all questions I think any candidate has to content with or deal with if they're thinking about particular race.

BLITZER: And presumably you'd make a decision shortly after the midterms early next year?

THUNE: I think early next year probably would be more likely. I think there will be a lot of -- there will be a huge vacuum after the midterms and people will be rushing to fill it and you'll have a lot of candidates.

And there could be a very big field. Like I said, I have not made any decisions about this. But my guess is that there will be a lot of folks who will be snapping up personnel in Iowa and New Hampshire and other places like that and taking very assertive steps in that direction.

But I think that, you know, sometime next year is plenty early. I think these campaigns get very long. I think people get very weary of them, and I think it's probably an advantage not to launch too early.

BLITZER: Would it be a factor if Sarah Palin announces? In other words, would you want to be challenging her?

THUNE: I think that if she were to get into the race, it would clearly change the equation for a lot of people. I mean, she is --

BLITZER: Explain how that would happen.

THUNE: I think that she is someone who has a tremendous following out there. And particularly in some of the early states, this is not a campaign where you start out and you run nationally right away. It's all sequence and you have to get through certain states, and she has a big following.

But if I were to decide to do it, I would go all out. I'm not sure that at that point you can change or make a decision predicted upon who else may be in the field. But she clearly is a formidable individual and someone who, if she got into the race, would have a tremendous presence in it.

BLITZER: And would discourage, do you think, other Republicans from getting into the race?

THUNE: I think it -- I'm not sure that it would discourage. It might discourage some because there's so much space out there, and I think people fill different space sort of on the political continuum in Republican Party politics.

And so, it could be -- she clearly would have an impact. Whether or not she would discourage others from running, I don't know.

BLITZER: What you're biggest problem with President Obama right now?

THUNE: Well I think the problem with President Obama -- and I like him personally, I came into the Senate with him -- is his agenda. If you look at what's happened in the last 18 months, government has expanded at a greater rate, a more dramatic rate, literally than any time since the 1960s. And I think he views government as really being the solution and being the answer.

BLITZER: You know the national debt doubled during the eight years of the Bush administration.

THUNE: Well, I think Republicans can be -- I mean, there's plenty of blame to go around. Republicans, obviously, contributed to where we are. But the President can't divorce himself from what he's done since he's been in office.

And in the last 18 months, if you look at the massive health care plan, the stimulus bill, the cap and trade bill, a lot of policies have been put in place, or at least proposed that I think are very detrimental to job growth and economic growth. Right now, that's the thing I think most Americans are most concerned about.

BLITZER: You say you knew him in the Senate. Did you know him well?

THUNE: We worked together on some issues. I didn't know him well, he wasn't there that long. But we did come in together and like I said, I think he's a -- personally, I like him, but I think he has a very different view about how to solve problems and how to get the economy back on track than I do.

So there's a clear contrast, I think, in terms of where he wants to lead the nation and where many Republicans, who may decide to challenge him in 2012, would lead the nation.

BLITZER: Do you believe he's a Christian?

THUNE: Sure. Yes, I believe that.

BLITZER: Do you believe that he was born in the United States?

THUNE: Yes.

BLITZER: Why do so many Republicans according to all of these polls not believe, A, that he's a Christian, or that he was born in Hawaii?

THUNE: Well that's a really good question and I'm not sure I know the answer to it. But I think most people that I encounter accept that.

To me, that's not the issue. The issue is his policies, what he's doing to create jobs, grow the economy and deal with what I think is a major issue in the minds of most Americans. And that is the growth of government and the size of government.

BLITZER: I want to get to that in a moment. Do you think Republican leaders have a responsibility to be more assertive and dissuading Republicans from believing he is not a Christian? He wasn't born in the United States?

THUNE: I think one when the issue comes up, my answer certainly is, you know, look, those issues -- those issues are settled. Let's talk about his agenda and let's talk about why it is important that we set a different direction for the country. That's what we ought to be focused on.

BLITZER: All right. Stand by. We are going to find out if Senator Thune thinks President Obama is doing anything right. More of the interview coming up. Inside Rahm Emanuel's exit as chief of staff at the White House; we'll have the latest on his possible replacement and how the White House will change.

(COMMERCIAL BREAK)

BLITZER: Members of the U.S. Senate are leaving Washington D.C. to hit the campaign trail back home but there's a taxing issue hanging over them. More now of my interview with Republican senator and possible 2012 presidential hopeful John Thune.

(BEGIN VIDEOTAPE)

BLITZER: Let's focus on tax cuts for a moment. You adjourned. You didn't extend continued the Bush tax cuts for the middle class before leaving for this recess. The president says you are holding that hostage to keeping these tax rates for those making more than $250,000 a year, the rich, the top 2 or 3 percent of earners in the United States. Does he have a point?

THUNE: I think that if they had wanted to do that they could have. The house can pass it. The house has a rules committee. They could have brought a bill to the floor that shielded people under $250,000 from tax increases, passed it through the house, sent it to the Senate. We would have had a debate about it at the Senate because many of us believe we ought to extend the tax relief for all Americans, not just those at that income tax level because you impact so much of the small business income at the higher two top marginal income tax rates. But I can't -- I don't think you can blame Republicans for that. The Democrats control Congress. They have huge majorities in both the House and Senate. If they wanted to do that they could have. I think the reason they didn't Wolf is because they are very divided on this issue.

BLITZER: If - it would have been a vote. Let's continue the Bush era tax cuts for those making under $250,000 a year, which I suspect most people of South Dakota and will leave aside the 2 or 3 percent the richer Americans. How would you have voted on that?

THUNE: I think in the Senate, the House is very different, obviously. They are going to have a structured approach. The Senate is very free flowing. We would have offered amendments to extend it for everybody. It is a hypothetical to suggest that we - you might have just had a vote on limiting the tax increases to those that are above that income threshold. I represent a lot of small businesses and even though you say 3 percent, that's still 750,000 small businesses across the country and it will impact a lot of small businesses in my state.

BLITZER: You are concerned about the national debt, the big budget deficit. What, if anything, are you ready to deal with social security, Medicare, defense spending?

THUNE: I think that all areas of the budget have to be scrubbed. Clearly the entitlement issues have to be reformed and that's an issue that's going to require I think some strong bipartisan cooperation and leadership. And the discretionary side of the budget, I propose going back to 2008 levels, indexing it for inflation. You save half a trillion dollars just by doing that. That's a small part of the budget. The big part of the budget now is the entitlement programs and that issue has to be addressed. I think defense budget, Secretary Gates said he wants to find $100 billion in savings and they're scrubbing that budget. There are things we can do better and more efficiently and the acquisition process that -- I think would need to be very strategic about how we spend military dollars and make sure --

BLITZER: Most federal spending goes to Medicare, social security, and the Pentagon. And national security. If you don't deal with those three areas, you are not going to save a lot of money.

THUNE: I think that if Republicans are given the reins of leadership in the House or Senate or both, we will have to govern in a way -- at least put forward solutions whether or not the president goes along with them or not, that deal with these long-term challenges.

BLITZER: What would you do differently than the Bush administration over eight years and six of which there were Republican majorities in the house and Senate? What would you do differently next time around?

THUNE: I think that -- clearly the spending issue was something that Republicans sort of lost their way on. I think we are going to have to make hard decisions and there are good examples of how that has been done. Chris Christine in New Jersey has made some hard choices. I think the people of his state support it because they know it is necessary. I think the people of the country now know if they didn't know before it is necessary because of the huge deficits.

BLITZER: Biggest change you would do would be -- you would be willing to cut spending more than President Bush and the Republican leadership did then.

THUNE: We have to. We have to join the debate on entitlement reform and hopefully we can get bipartisan cooperation on that because it will take that. These issues are to big now, consequences are too great. If we don't get things turned around we are at a tipping point in my view. I think we have about five years to correct some of these budget issues or this debt is just going to overwhelm us.

BLITZER: The tea party movement, are you with the tea party movement? Are you part of the tea party movement?

THUNE: I don't know what it means to be a part of it. I certainly agree with most of the things they are for. I think they bring great energy to our party and to our candidates. And I think that the things they want to see accomplished are things we agree upon. Yes, I agree with them on -- maybe not on every policy position but certainly most.

BLITZER: What, if anything, has President Obama done that you like? THUNE: I think the president has -- done things in a few areas. Some of the things he is trying do in education are really good. I think that, you know, calling for accountability and trying to Arne Duncan has done a nice job over there. I think in terms of some of the foreign policy issues, a lot of support from Republicans with respect to Afghanistan. There are a lot of areas where he has demonstrated weakness on foreign policy. But I think that the president - there are certainly areas where I agree with him. I just think if you look at it in the totality, the big issues facing the country today which are jobs and economy, spending and debt and some of these national security issues that we're headed in very different directions.

BLITZER: He is 49 and you are 49. He was a first term senator when he ran. You are a first term senator. You're up for re- election. You don't have an opponent right now. You might be running. There are a lot of similarities. Do you think you are ready to go on a one-on-one debate with the president of the United States?

THUNE: I think if I made a decision to do that and I haven't, I would be ready. Absolutely. I think that this is -- politics is a tough business. I describe it as a full contact sport. You have to be prepared to get in there and mix it up. I have been through a couple of hard-hitting bare-knuckles Senate campaigns so I'm not unaccustomed to that level of debate. If I decided to move forward with that I certainly would be prepared for it.

BLITZER: Senator, thanks for coming in.

THUNE: Nice to be with you, Wolf. Thank you.

BLITZER: Good luck with that decision.

THUNE: All right. Appreciate that. Thank you.

(END VIDEOTAPE)