MAJOR GARRETT, FOX WHITE HOUSE CORRESPONDENT: Mr. President, thank you very much for your time, sir.

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

GARRETT: In your speech this morning, you said the Cold War reached its conclusion because of the actions of many nations over many years. Mr. President, are the Russian sensitivities so fragile that you can't say the Cold War was won? The West won it? And it was led by a combination of Democratic and Republican American presidents?

OBAMA: Well, listen, the -- I think that you just cut out Lech Walesa and the Poles. You just cut out Havel and the Czechs. There were a whole bunch of people throughout Eastern Europe who showed enormous courage.

And I think that it is very important in this part of the world to acknowledge the degree to which people struggled for their own freedom. I'm very proud of the traditions of Democratic and Republican presidents to lift the Iron Curtain.

But, you know, we don't have to diminish other people in order to recognize our role in that history.

GARRETT: In your speech, you mention President Medvedev four times. You did not mention Prime Minister Putin at all. Is that an indirect way of answering the question that you received yesterday, who is really in charge in Russia?

OBAMA: No. I think that President Medvedev is my counterpart, the president of Russia. The prime minister, who I just met today, obviously still has enormous influence.

Interestingly, nothing Putin said contradicted anything that Medvedev has said. It was consistent. And that is that Russia is still in a transition period. It's still growing. Still coming out of some of the legacies of the past.

But, for example, the recognition that rule of law is a critical component of economic growth, and that free markets and diversification of the economy are still important. That Russia can't simply rely on oil exports and gas exports in perpetuity.

Those recognitions are actually ones that I think you will see the Russian government move forward on. Now there is still going to some areas where there are strong disagreement between the United States and Russia with respect to human rights issues or democracy issues. And I'll be meeting with opposition leaders later this afternoon.

But I do sense that President Medvedev in particular is recognizing that the more that Russia reflects transparency, openness, anti-corruption, rule of law, the better off the Russian people will be.

GARRETT: After your meeting, do you still believe the prime minister has one foot stuck in the Cold War?

OBAMA: I think that he would admit that his formative years were...

GARRETT: I mean now, though.

OBAMA: ... shaped in the Cold War, and that some of his continued grievances with respect to the West are still dated in some of the suspicions that came out of that period.

But as I've said, I think he genuinely would like to see U.S.-Russian relations improve. I found him to be tough, smart, shrewd, very unsentimental, very pragmatic. And on areas where we disagree, like Georgia, I don't anticipate a meeting of the minds anytime soon.

On areas where we have common interests, like fighting terrorism, I think that there is great potential for us to do some work together.

GARRETT: So he does or doesn't?

OBAMA: Does or doesn't?

GARRETT: Still have a foot in the -- stuck in the Cold War?

OBAMA: Well, as -- I think that, as I said before, he is...

GARRETT: You said that last week, and then he said he doesn't. And I'd just like to know after your meeting if anything changed?

OBAMA: I think I answered the question, Major. What I said was his formative years came out of that period.

GARRETT: OK.

Christopher Dodd and Sheldon Whitehouse, back in the States, have both said they're disappointed, frustrated with the stimulus, are thinking more actively about a second stimulus. How do you respond to Democrats who are frustrated with the pace of the economic package you put forward and they helped you pass?

And how seriously are you looking at a second stimulus, not only to deal with their concerns, but with state budgets across the country in many cases are imploding?

OBAMA: Well, you know, I don't think that if you look at how this economic tsunami has unfolded that we could have spent money any faster. We had tax cuts, that's about as fast as you can go, and that -- those went out, and are still going out to 95 percent of working families.

You've got a lot of money going to states to prevent the firing of teachers and police officers and firefighters. And so you knew that that was going to be the early money and that you're going to have money that comes out in infrastructure.

And you just can't push that out that quickly, partly not just because the federal government has to process applications, but also because states and local governments have to gear up to get these projects going.

My sense is that we are going to see those projects hit in the second half of the year. We're going to see some improvement in the economy. But you're still going to have high levels of unemployment. And that's something that I said back in January.

Because this economy took an enormous hit. What we've done is, to stop the freefall, the banking sector is not melting down, companies can borrow money again in the corporate bond markets, you know, the stock market has stabilized, and consumer confidence has recovered somewhat.

But the fact of the matter is, is that you had several trillion dollars taken out of the economy, huge amount of de-leveraging, and that is going to take a while to play itself out.

My main concern is to make sure that as the economy recovers, you're actually starting to see job growth again. And the concern that we've got is that the economy has been driven for so long by consumer spending, by debt at every level, if we can't and shouldn't return to that kind of debt accumulation, what's going to drive the economy?

And that's why issues like reforming our health care system, improving clean energy, and generating jobs around clean energy, improving our education system, and medium- and long-term making sure that our fiscal situation is in order, that's why those things are so important, so.

GARRETT: Second stimulus, on the table or off the table?

OBAMA: Well, I don't take anything off the table when...

(CROSSTALK)

GARRETT: Still open to it, as you were about a week-and-a-half ago?

OBAMA: I don't take anything off the table when unemployment is close to 10 percent and a lot of Americans are hurting out there. But I think it's important to understand that we've got a short-term challenge which, no matter how big our stimulus was, was going to be a challenge; partly because we've got fiscal constraints.

I mean, there are a whole bunch of critics out there who said we shouldn't have any stimulus at all. And in fact, some of the same folks who are now saying "where are the jobs?" don't really have a recipe a recipe other than doing nothing for the economic circumstances that we're in.

And there is going to be a certain amount of lag time between getting shovels on the ground, out on rebuilding roads and bridges, and actually seeing job numbers improve.

But even as we're thinking short term on how to relieve the very real burdens that American families are feeling, the question I have to wrestle with, and we have to wrestle with now is, how are we going to get the economy on a growth track that is sustainable over the long term?

And that's where this debate around health care, energy, education, and the shape of our government long term, that's going to be so critical.

GARRETT: Two questions on nuclear weapons and ballistic missile defense. How serious are you and how serious do you perceive the Russians are about collaborating on ballistic missile defense in Europe? You said in your Novoya Gazeta interview that you hoped that you would cooperate.

Secondly, the U.S. delivery systems are more varied than the Russian. And our warheads are more modern than theirs.

OBAMA: Yes.

GARRETT: Is there any risk that we run in reducing the number of delivery systems and warheads? That they are going to be retiring near-obsolescent warheads and we're going to be retiring dual use delivery systems in ways that could hamstring our own national security posture separate from the nuclear equation?

OBAMA: Well, let me answer the second question first. Everything that we're doing is being thoroughly scrubbed by our nuclear experts, by our Defense Department. We will not doing anything that endangers our national security. So that would be point number one.

Point number two, it is true that the United States and Russia have different configurations. And that has to be taken into account in the negotiations around this treaty. That's why right now you're still seeing ranges, right?

We're talking about 1,500 to 1,675 on warheads; a huge range, 500 to 1,100 when it comes to launchers. We are going to have to work through in very great detail all of these questions about configurations to insure that even as we're lowering the total number of warheads and launchers, that we're doing so in a way that doesn't advantage one country or another, given their particular configurations.

In terms of missile defense, I think there is a genuine potential for collaboration on this issue. Now, we will make our own individual determination about what is required for our national security.

And that's why we're in the process right now of examining the existing missile defense configurations that we talked about in Poland and in the Czech Republic to see, is that the most effect way for us to block a potential missile launch from an Iran or a North Korea or other countries?

And once we've completed that assessment, then I think that we take a look at what Russian security interests are and we see if there is some sort of convergence. If there is, our position would be stronger if we've got Russian involved, if we've got Europe involved, in part because those are the same partners that we're going to need if we are going to be able to pressure Iran to go through the path of peacefully resolving this nuclear issue and having them relinquish capacity to develop a nuclear weapon.

The more that Russia, as well as the rest of Europe, are invested in that process, the stronger hand that we can play in potential negotiations.

GARRETT: One last one on Pope Benedict. Today he is supposed to release an encyclical on social and economic justice. First of all, will you discuss that with the pope? And, broadly speaking, Mr. President, do you believe social and economic justice is best achieved through the mechanisms of the state, the individual, or religious institutions?

OBAMA: Well, I suspect that I will talk about this with the pope. I look forward to reading the encyclical.

And, you know, I think that there is a strong tradition of social justice in the Catholic Church that had a profound influence on me. You know, my early organizing work was with a lot of Catholic churches in Chicago. I've spoken in the past of my admiration for Cardinal Bernardin, who was somebody who was steeped in that tradition.

I think the holy father has consistently spoken out on these issues. I'm sure he will again. In terms of my own personal views, I -- you know, it's sort of an abstract question.

Specifically I think that social justice derives from individuals having the freedom to pursue their own ideas of happiness and pursue prosperity using their blood, sweat, and tears. I also think that opportunities are provided to individuals through civic institutions like religious organizations. And I also the government plays an important role.

And, you know, we were just discussing Russia here earlier. If there, on the one hand, you have a state that is so oppressive that people can't exercise their skills, then you're going to see a failed economy and a lot of unhappy people.

On the other hand, if you have complete disorder, where a state is not protecting property rights and corruption is rampant because you don't have a court system that works, then that's not going to be providing social justice either.

So, you know, I think that what we want is a government that is limited, that provides for rule of law, that provides the kinds of structures that allow people to advance based on their own hard work and talent and skill.

And I always think that Abraham Lincoln described this best. And I'm paraphrasing a little bit here. But he basically said, look, I think anything that the individual can do well by him- or herself, he should do by him- or herself; then those things that we do better collectively, we should do together.

You know, fighting fires, providing for the mutual defense, I would include making sure that kids have a decent education, and in a society as wealthy as ours that we make sure that everybody has...

GARRETT: Tempering the excesses of the free market?

OBAMA: ... a chance to get -- definitely financial regulation. I mean, I think that -- it's very hard, I think, to argue that capitalism and free markets are not better off because of FDIC insurance, you know, requirements for transparency in the stock market, making sure that there are rules against fraud and Ponzi schemes.

And the question now is, how do we update those regulations to make sure that they match up with the 21st Century? You know, our efforts on financial regulation, it's interesting so far, we've been criticized from the right and we've been criticized from the left, and that tells me we're probably in about the right place.

GARRETT: Are the girls enjoying Camp Obama?

OBAMA: They have fun everywhere they go. I'm still trying to figure out what their secret is. Maybe being 11 and 7 helps.

GARRETT: Based on my children's experience, I'd say it probably does.

OBAMA: Yes. Thank you.

GARRETT: Mr. President, thank you very much for your time.

OBAMA: Appreciate it, Major.