Democrats suffered "a real body blow" in the Nov. 2 elections -- when the party lost seats in the Senate and control of the House -- in part because Obama didn't prioritize or communicate effectively, Powell told CNN's Larry King Monday.
"He should have focused on the economy ... to the exclusion of most everything else domestically," Powell said. "When you're starting out as a president, you have to figure out (what) is most important."
Powell, 73, said he speaks regularly with "authorities within the administration and the president," including conversations about its approach to Afghanistan.
The moderate Republican gave credit to Obama for stabilizing the economic system, and "doing a good job in ... a number of directions with respect to Iraq and Afghanistan."
Powell had mixed reviews on Sarah Palin, former Alaska governor and 2008 Republican vice presidential, saying she was a "fascinating individual, ... a political celebrity (and) a political force," but her positions "are not very specific as to what she would cut and what she would eliminate."
Palin and Tea Party-supported politicians elected to Congress must offer specifics about which programs they would eliminate from the federal government to lower the federal deficit, freeze spending and cut taxes -- all at once, Colin told King.
"How do we solve that equation, governor?" said Powell.
Powell said he was optimistic about the future of the country.
"American people still believe in this country," he said. "What they're waiting for is for the political leaders in Washington to get on with the solution to problems and not continue to argue with each other. The next year is going to be important."
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