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THE SITUATION ROOM

New Candidate For Prime Minister Chosen In Iraq; More Changes Possible In Bush's Staff; CIA Confirmed Officer Has Been Fired For Leaking Classified Information To The Media; Gas Prices Worry Politicians; New Orleans Election Day Hours Away; Movies Poke Fun At President Bush

Aired April 21, 2006 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


WOLF BLITZER, CNN ANCHOR: Thanks very much, Ali.
And to our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time. Standing by, CNN reporters across the United States and around the world to bring you today's top stories.

Happening now, a major new development in Iraq that could affect the future of the U.S. military mission there. It's midnight in Baghdad, where a new candidate for prime minister has just been chosen. Will this jumpstart Iraq's long-stalled political process and finally help bring U.S. troops home?

Also this hour, there is new action over at the CIA in the leak of classified information. It's 4:00 p.m. here in Washington, where one CIA officer has just been fired. Will more heads roll?

And new fuel for the fire. Consumers feel the pinch of soaring gas prices and some shortages. It's all helping drive Democrats' election-year hopes and Republican fears.

I'm Wolf Blitzer and you're in THE SITUATION ROOM.

Iraq may be on the verge of a major breakthrough. There's new hope this hour that a national unity government finally will come together, this on the eve of a critical Parliament meeting and more than four months after historic elections.

Today Shiite leaders chose Jawad al-Maliki as its candidate for prime minister, breaking an impasse in the formation of a new government. He replaces Ibrahim al-Jaafari who effectively agreed to step down yesterday because of opposition by Sunni and Kurdish leaders, as well as some Shia themselves.

This new development could prove to be a major step toward bringing U.S. military forces home -- 2,381 U.S. troops and military civilians have died in Iraq since 2003. Our White House correspondent Ed Henry is standing by live. But let's go to Baghdad first for all these late breaking developments.

Our Ryan Chilcote is on the scene -- Ryan.

RYAN CHILCOTE, CNN CORRESPONDENT: Wolf, as you say, Iraq has a new candidate for the prime minister's post, and with him really its best chance in months at a breakthrough in the political impasse here.

The United Iraqi Alliance -- that's the religious Shiite coalition that has a majority of the seats in the Iraqi Parliament, and with that the right to choose their nomination for the prime ministership -- is saying right now that it is throwing its support behind Shiite politician Jawad al-Maliki and withdrawing its support for the embattled acting Prime Minister Ibrahim al-Jaafari.

Now, the Sunnis, the Kurds and the secular groups have said for the last year while Mr. Jaafari has been in power, that he's an individual they can't work with. They say that he is a roadblock on the road, if you will, to building a government of national unity.

We are hearing a much warmer reception so far for Mr. Maliki. In fact, we've already heard from the main Sunni political party saying that they will support Mr. Maliki's candidacy. We're hearing some encouraging words from the Kurds.

This is really important, Wolf, because the United States says that Iraq needs a government of national unity if it wants to get the situation with sectarian violence and the insurgency under control -- Wolf.

BLITZER: The good news from the U.S. perspective, Ryan, is that the Iraqis may be closer to a national unity government, potentially the bad news the prime minister who will have a lot of power in his hands is like Ibrahim al-Jaafari, someone close to the Iranians, lived in exile there. Do we know if he's a moderate secularist? Is he an Islamist? What do we know about his stance on some of these issues, especially Iran?

CHILCOTE: Well, we know very little. What we do know -- you know, he's sort of been in the shadows of the other leaders like Mr. Jaafari and his own party. What we know is that he has been very active in his party from the very beginning. He left Iraq in 1980, went to Iran. He was living in Iran in exile. He returned after Saddam's ouster in 2003, and he has been a loyal party functionary ever since then.

The interesting thing, however, is that so far the Kurds and the Sunnis are saying the problem was they just couldn't work with Mr. Jaafari. Even if the current candidate Mr. Maliki is a bit pro- Iranian, at least they think that he might be a stronger leader than Mr. Jaafari was -- Wolf.

BLITZER: All right. We'll continue to watch this story unfold. Ryan, thank you very much for that.

Let's go to the White House right now and see if there's some reaction to these late-breaking developments in Iraq. Our White House correspondent Ed Henry is standing by with that -- Ed.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Wolf, the White House is very happy about this development, but they are reacting officially with cautious optimism. They have seen so many fits and starts in this process, that, obviously, they don't want to be doing cartwheels just yet.

But a senior administration official here did tell me that this is an encouraging sign. They feel that the nomination of al-Jaafari had raised so many red flags that the process just could not move forward. This official adding, quote, "this is good news, hopefully this means the government moves forward."

The White House is hoping specifically as early that as this weekend the Iraqi Parliament will move forward on selecting seven key posts, in addition to the prime minister, the president, two vice presidents, the speaker as well as two deputy speakers.

That would form the foundation of this national unity government that you mentioned. It would also basically give the White House that has been desperate for some good news out of Iraq some political breathing room finally -- Wolf.

BLITZER: We'll see how this man unfolds, Jawad al-Maliki, to see if he can really put a government together. He's been described, as we just heard from Ryan Chilcote, as a functionary, someone who is not well-known. We'll see if he has the political strength to get the job done.

Let me make the turn, the sharp turn, to what's behind you, the White House, the shake-up, we saw part of it unfold this week. There are now reports out there that Harriet Miers, the White House counsel, might be going. She, of course, had been the president's nominee for the Supreme Court. What are you hearing?

HENRY: Well, we're told that this morning the White House chief of staff Josh Bolten was very strong with senior staff in trying to shoot down a "New York Times" report that basically said Harriet Miers is on the way out the door, that Bolten is not happy with her performance.

But I can tell you other Republicans are thinking this may be a trial balloon, that it may have been Bolten's way of trying to give Harriet Miers a bit of a push. And some Republicans say they think Harriet Miers may be thinking of leaving on her own, and that this could play out just as it did with Scott McClellan, where once word started leaking out that maybe Bolten wanted to go in another direction, McClellan decided to get out on his own before there was sort of any kind of confrontation.

That brings to mind the fact that the next shoe that may drop in all of this could be the selection of McClellan's successor as early as next week. All signs really pointing toward Tony Snow, the Fox News anchor, as well as conservative radio talk show host.

Officials here basically say would be a no-brainer if Tony Snow wants to do it, that basically this is an intimate of the Bush family. He served in the first Bush administration as a speech writer, also clearly a skilled communicator but I can tell you that is the big question, whether or not Tony Snow wants to do it.

Today on his radio show, he was openly agonizing saying that he has already got a good job. He's not sure if he wants to take on this new challenge. He sees two good opportunities staying with what he's doing or taking on this new challenge. And the other big factor, of course, is Tony Snow's health. He had a bout with colon cancer. He's waiting for a clean bill of health from his doctor before he moves forward on such a tough challenge, Wolf.

BLITZER:: A tough, agonizing decision for Tony. We wish him good luck either way. Thanks very much for that. Ed Henry at the White House.

Now to a developing story we're following here in Washington. We learned just a little while ago a CIA officer has been fired for leaking classified information.

Our justice correspondent Kelli Arena is joining us. She has details -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, the CIA has confirmed that an officer has been fired for leaking classified information to the media. Now, a senior government source tells us the firing has to do with a leak to the "Washington Post" regarding a story on secret CIA prisons in Eastern Europe for terrorism detainees.

And another U.S. official says that the officer only admitted to leaking after failing a polygraph test. Officials will not identify that officer, though. Justice Department officials had no immediate comment. A senior source, though, tells CNN that an investigation has already been initiated. Federal law enforcement officials indicate that no criminal charges are imminent.

CIA director Porter Goss told the Senate back in February, Wolf, that leaks of classified information to the media have caused severe damage to national security. All this being taken, obviously, very seriously. We'll see where it goes.

BLITZER: We'll watch it together with you. Kelli Arena, thank you very much.

Let's turn now to some gas prices. No matter where you live, there's a good chance that the price you pay at the pump could be going up. AAA reports gas prices shot up today to a nationwide average of $2.88 a gallon.

Here in Washington and some other big cities, drivers are paying more than $3 a gallon. Crude oil prices are shooting up as well, briefly reaching a record high today -- get this -- $75 a barrel. It wasn't that long ago it was $30 a barrel.

To make matters worse, there are reports of scattered gas shortages on the East Coast. Experts tell CNN the disruptions are, quote, "normal" as stations try to make the switch to cleaner burning, ethanol-based fuel. But any time a gas station runs out of gas it's a disturbing sight for many Americans and for the powers that be right here in Washington.

Let's bring in our Congressional correspondent Dana Bash. She is joining us live with more -- Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, we went to Pennsylvania's Sixth Congressional District this week, and yesterday you and I talked briefly about the growing anger there about gas prices. Well, we were with the incumbent Republican as he started to see the storm over the issue coming.

(BEGIN VIDEOTAPE)

BASH (voice-over): Just hopping in the car these days is a reminder of a growing problem for Republican Congressman Jim Gerlach. Spiking gas prices are adding more anger and volatility to an already dicey political climate.

REP. JIM GERLACH (R), PENNSYLVANIA: Yesterday we find out that the retiring CEO of ExxonMobil is getting a retirement package of nearly $4 million. And that drives people nuts. It drives me nuts.

BASH: No wonder he is worried. He's a Republican in a tight race this year and this constituent is asking about a letter Democrats sent the president on the issue.

UNIDENTIFIED MALE: He put some pressure on the oil companies to reduce their profit a little bit to help ease the gasoline pricing. Do you know anything about that? Or is there anything being done?

BASH: He tries to turn the question to his advantage saying he hopes concern about gas prices now will help spur long-term changes.

GERLACH: I think we have a major opportunity now with gas prices going so high to say wait a minute, we shouldn't have to rely on foreign oil for our energy needs.

BASH: Gerlach is one of many endangered Republicans on the defensive back home about prices at the pump.

UNIDENTIFIED MALE: The price of gasoline is going up, up, up.

BASH: Democrats are encouraging candidates to hold campaign events at gas stations. This one in New Jersey.

UNIDENTIFIED MALE: On the creation, on the producer, all the way through the process.

BASH: And a four-page strategy memo tells Democrats how to take advantage of the issue, "pledge that as a member of Congress, you will fight for families in your district, not the oil and gas executives for which this Republican Congress has fought so hard."

(END VIDEOTAPE)

BASH: Now Republicans are scrambling to respond. CNN has learned there were a series of meetings today between the White House, House and Senate Republican staff, and they came up with an initial strategy in an attempt to be more proactive on the issue. First, House Speaker Dennis Hastert and Senate Majority Leader Bill Frist will send a letter to the president Monday to make sure the Department of Justice and the Federal Trade Commission are investigating possible price gouging.

Second, they are going to look into whether certain areas of the country can get waivers from requirements to use cleaner but more expensive blends of gasoline, and the speaker spokesman Ron Bonjean tells us the House will, quote, "go after the oil companies to try to find out what they are doing with their profits," that probably means hearings with oil executives in the House, especially when it comes to ExxonMobil to ask that company why the departing CEO had a $400 million retirement package -- Wolf.

BLITZER: All right. We are looking at some of those live pictures from Los Angeles. Check this out, $3.15 for regular unleaded gas, goes up to $3.35 for premium.

Dana, thank you very much for that report.

BASH: Thank you.

BLITZER: Prices at the pump aren't the only numbers driving the politics of gas.

Our senior political analyst Bill Schneider is joining us now with more on this part of the story -- Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Wolf, high gas prices certainly are a serious problem, but gas shortages, that would be a crisis, as we know from experience.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): As if things were not bad enough with gas at three to four bucks a gallon, we're now hearing about spot shortages at gas stations along the East Coast.

PHIL FLYNN, ENERGY ANALYST: What we're seeing here in the futures market with oil prices at all-time high and demand still running pretty strong in gasoline supplies are evaporating almost over night. It's going to be a very difficult summer.

SCHNEIDER: As angry as people may get over high gas prices, there is one thing worse, gas lines, shortages. We learned that in the 1970s. Democrats smell an opportunity.

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: I think the gasoline issue is something that is out there, and we have virtually no action by the White House. There is a great deal that the president could do.

SCHNEIDER: President Bush can't run for reelection, but the issue could really do damage to his party this year. Among voters who say the rising gasoline prices is not causing them financial hardship, 43 percent intend to vote Democratic for Congress. Those who say gas prices are causing some hardship are voting 53 percent Democratic. And those who say gas prices are causing serious hardship are voting 64 percent Democratic.

(END VIDEOTAPE)

SCHNEIDER: A week ago, 44 percent of Americans said gas prices were causing them serious hardship. And that number is likely to go up, especially if more and more Americans find gas difficult to obtain at any price -- Wolf.

BLITZER: Bill, thanks very much.

And remember, Bill Schneider is part of the best political team on television, CNN, America's campaign headquarters.

Jack Cafferty is part of that team, as well. And he's joining us now from New York with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: How you doing, Wolf?

It is time for all of us to be very afraid. Congress is coming back from spring break next week. They have much to do, all the stuff they didn't bother with so they could go on vacation, everything from immigration reform to the budget to health care, and they only have 72 working days in which to do it then it will be time for another vacation.

The only thing worse than Congress not doing anything is Congress doing something. The American public is fed up with the whole lot of them. The authors of a new poll say this is especially bad news for the Republican Party. The Pew Poll shows 41 percent of Americans say that Congress has accomplished less than usual. That compares to 27 percent who said that in 2002 and just 16 percent in 2000.

More importantly, 56 percent say they will consider which party controls Congress when they vote in November. The best part of all, maybe there's hope for the country after all, 53 percent of Americans say they don't want most lawmakers re-elected this year. Not good news for the current crop down there.

So here's the question, how can Congress change its dysfunctional image? E-mail us at caffertyfile@CNN.com or go to CNN.com/caffertyfile.

BLITZER: Certainly does have that image out there. Thanks Jack, very much.

Coming up, election eve in New Orleans. It is 3 p.m. in Louisiana, where mayoral candidates are making their final appeal to voters. We'll meet the leading candidates and listen to their last minute shots.

Also coming up, should web sites have ratings like movies? We'll get the situation on line.

And later, a White House shake-up, the war in Iraq and a host of other troubles all hurting the president and congressional Republicans in the polls. We'll convene a special session of our "Strategy Session" here in THE SITUATION ROOM to talk about Republican Party woes. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

In New Orleans right now, the voters and the candidates are just hours away from election day. It's the first vote since Hurricane Katrina and a major test for the city and its political figures.

Our Gulf Coast correspondent Susan Roesgen is live in New Orleans. She is joining us right now -- Susan.

SUSAN ROESGEN, CNN GULF COAST CORRESPONDENT: Wolf, I'm in a downtown hotel that's been turned into the election command post. Here is how it is going to work on Saturday night. The election commissioners will come through these two doors after the polls close, doors guarded by two Louisiana state troopers. And the commissioners will be carrying the actual cartridges off the backs of the voting machines, the cartridges that contain the encoded votes themselves.

They will carry these cartridges across this hallway right to this room that says no authorized entry. This is the actual counting room. Now by Louisiana law, I won't be allowed to be in this room on Saturday, so let me give you a little peek inside. This will be your only look at this room.

It is a pretty ordinary hotel meeting room. But this is where they are going, to this room that says no unauthorized entry. This is the actual county room. Now by Louisiana law, I won't be allowed to be in this room on Saturday. So let me give you a little peek inside. This will be your only look at this room.

It's a pretty ordinary hotel meeting room. But this is where they're going to count the votes for this very critical election. In 60 years, Wolf, an incumbent mayor in the city has never lost a reelection bid, but Mayor Nagin could be the first. He's in a tough fight in a rock 'em, sock'em race.

(BEGIN VIDEOTAPE)

MAYOR RAY NAGIN, NEW ORLEANS: You know, I'm tired of sitting in these debates, listening to all this crap. Let's talk real.

ROESGEN (voice-over): In the last few days before the election, the candidates have gone after each other.

LT. GOV. MITCH LANDRIEU, NEW ORLEANS MAYORAL CANDIDATE: Is that a fact or not? Did you or did you not propose a tax increase on business? Yes, you did.

ROESGEN: And everyone's going after the mayor.

REV. TOM WATSON, NEW ORLEANS MAYORAL CANDIDATE: Mitch just said you're lying. You're lying on Blanco.

NAGIN: You've got to be kidding me. WATSON: You're lying.

NAGIN: Pastor, no, bless you.

WATSON: I rebuke you. You're being rebuked tonight because you're lying to the community.

ROESGEN: Pretty wild stuff but Louisiana political analyst Jeff Crouere says that's what happens when candidates get desperate.

JEFF CROUERE, POLITICAL ANALYST: People are throwing caution to the wind and they realize that we're getting close and they realize that they don't have a chance of winning, so we might as well go out swinging.

ROESGEN: Crouere says when it comes right down to it, only these three candidates have a shot, incumbent mayor Ray Nagin. Katrina left him struggling against business man Ron Foreman and lieutenant governor Mitch Landrieu. Most local political analysts expect Landrieu and Nagin to wind up facing each other in a runoff election a month from now.

UNIDENTIFIED MALE: Landrieu appeals equally to African-American and to white voters. So he hurts Ray Nagin in his African-American base. He hurts Ron Foreman in his white base. That's why Landrieu should have enough to get into a run-off.

(END VIDEOTAPE)

ROESGEN: Wolf, political analysts say that there could be a last minute bombshell in the election like a drug arrest or an illegitimate child, maybe, that could tilt the election, but nothing like that so far.

BLITZER: All right, Susan, thanks very much. We'll be watching together with you tomorrow, the elections in New Orleans. We want to update you now on the early and absentee voting in New Orleans. So far more than 20,000 votes have been cast ahead of tomorrow's election. More than 6,000 of those votes or 32 percent have been cast by white voters. More than 13,000 or 65 percent have been cast by African-Americans.

As the candidates count down to the formal election day tomorrow our, CNN political analyst Donna Brazile is in New Orleans. We're going to check in with her in the next hour of THE SITUATION ROOM. Donna, right here, from New Orleans.

Zain is off today. Carol Lin is joining us from the CNN global headquarters in Atlanta with a quick look at some other stories making news. Hi, Carol.

CAROL LIN, CNN ANCHOR: Hey there, Wolf. Two Atlanta men are in custody in a federal investigation into an alleged plot to attack U.S. targets. Twenty-one-year-old Georgia Tech student Syed Ahmed has pled not guilty to charges of material support for terrorism. A second man was arrested in Bangladesh and is being flown to New York. The FBI says he and Ahmed met with Islamic extremists in Canada to talk about attacking military bases and refineries right here in the U.S.

Wolf, that's it from here for now.

BLITZER: The president has just arrived out in Moffett airfield out in California. That's near San Jose. The president is going to be spending a few days out in California. You see him there. Arnold Schwarzenegger, the governor of California, up for reelection this year is on the tarmac, together with others, receiving the president. They are going to be going over to an event at Cisco Systems in San Jose, an event on American competitiveness. The president very interested in that subject as is the governor of California.

This is a photo that the governor and the president carefully coordinated. The governor presumably knew what he was doing when went out to meet with the president on the air field. He's up for a tough reelection, but he decided that he wanted to be seen with the president, wanted to invite the president to California.

The California presumably -- in California the president presumably is going to be doing some moderate campaigning for the governor as well, the incumbent Republican governor of California. You see him on the left of your screen there -- well you just saw him on the left. But there in the middle of the screen there is the president and the secretary of transportation is right in the middle of the screen, Secretary Mineta right there.

They're going to be getting into the limos, they're going to go to Cisco Systems in San Jose. We'll continue to watch these events. The president and the governor together in the limo. I'd like to hear what they are going to be saying to each other. We'll have more on the story coming up.

If it's up to the Bush administration, Web site operators will be required to implement government ratings or possibly face jail. The Attorney General Alberto Gonzalez says it will go a long ways toward stomping out child pornography. But the proposed law goes much further. Our Internet reporter Jacki Schechner is standing by with details -- Jacki.

JACKI SCHECHNER, CNN INTERNET REPORTER: Wolf, when it comes to child pornography, the attorney general wants to triple the current fines. If an Internet service provider doesn't report that there's child pornography on the system, they could pay up to $150,000 for the first offense, $300,000 for subsequent offenses.

But the proposed bill actually goes one step further and it deals with sexually explicit content. What they'd like to do is have Web sites like this that have sexually-explicit content be coded on the back end so that they can be easily filtered.

It would also deal with Web sites having an extra page so you don't accidentally pull up something that could be graphic. You have to click through to get to another page. Fines on these sorts of things could be up to five years in prison. Now we had reaction today from the Internet Content Rating Association, Wolf, and they essentially say that they think voluntary labeling and voluntary regulations would be more successful.

BLITZER: Jacki, thanks.

Up next, is the president a political burden on his party? Will Republicans be able to hold on control of the Congress? I'll ask three of our top Republican political analysts Bill Bennett, Torie Clarke, J.C. Watts. They're standing by.

Plus, she was the heckler heard around the world. And today she found herself in court. But there's more to this story. Stick around. We're going to tell you what is going on. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. The Bush White House took a big step this week in hopes of trying to repair the president's political problems and regrouping before the midterm elections. The deputy chief-of-staff Karl Rove lost his policy-making duties. The press secretary Scott McClellan heading for the exit door.

With so much happening right now, we decided to try something new in our "Strategy Session." We're bringing together three Republicans: CNN political analyst Torie Clarke and J.C. Watts and CNN contributor Bill Bennett, to discuss what the administration might be doing, offer some advice for the president and other Republicans.

I want to get to that in a moment. But there's news today on the CIA front. Not the CIA leak involving Valerie Plame Wilson, but another leak to "The Washington Post," a reporter for "The Washington Post," Dana Priest who got information about alleged secret U.S. prisons for terrorist suspects in Europe.

The other day, Bill Bennett, on your radio program, "Morning in America," you said this. And I will read it to our viewers: "I don't think what they did is worthy of an award."

She got a Pulitzer Prize for this.

"I think what they did is worthy of jail. And I think this investigation needs -- needs to go forward. They shouldn't be given prizes and awards for this."

You were referring to not only Dana Priest of "The Washington Post," who broke that story on the prisons in Europe, but James Risen and Eric Lichtblau of "The New York Times..."

BILL BENNETT, CNN CONTRIBUTOR: Right. Right.

BLITZER: ... who broke the story on warrantless surveillance here in the United States. You want to revise or amend any of those words?

BENNETT: No, no, no.

There are two reasons for saying it. One, I don't think these reporters should be treated any differently than Judy Miller was treated. And if they are to be asked, in the course of an investigate, who leaked the information to you, and they are to say, we are not -- I'm not going to tell you, they would be in contempt, or could be found in contempt...

(CROSSTALK)

BLITZER: But, as far as we know, right now, they haven't been asked.

BENNETT: Well, we -- well, we don't know. We really don't know.

But, if they were asked and did the same thing they should be treated the same way. Second, there is the Espionage Act, which says it is illegal, it is against the law to publish classified information.

BLITZER: So, you still stand by your assertion...

BENNETT: Yes. Sure.

BLITZER: ... that they should go to jail, these three Pulitzer Prize-winning reporters?

BENNETT: Well, we get -- the situation we have now is that Dana Priest has won the Pulitzer Prize. The guy who leaked to her has been fired from the CIA and may be subject to a prosecution.

He gets prosecution, fired from the CIA. She gets the Pulitzer Prize. I think there's something a little wrong with that.

Certainly, an inquiry on this -- and, as the inquiries go along, Wolf, often, in these cases, they end up -- the Justice Department proceeds with the agencies first. Then, they tend to go to the reporters. If they go to these reporters, and the reporters obstruct the criminal investigation, which is what found -- they found Judy Miller was doing, she -- they should be treated exactly the same.

BLITZER: What Bill is suggesting, as a reporter, is very, very dangerous, very slippery. But you used to be the press...

(CROSSTALK)

VICTORIA CLARKE, CNN CONTRIBUTOR: ... wouldn't look good in horizontal stripes.

(CROSSTALK)

BLITZER: Yes. You used to be the press secretary, the press spokesperson...

CLARKE: Right.

BLITZER: ... over at the Pentagon. You agree with those comments?

CLARKE: I hesitate to disagree with him, because he's so smart. And I appreciate the seriousness with which he treats this.

But I have always thought there should be more emphasis in these matters on the people in government who sign papers, saying, "I will never reveal classified information, and I take these responsibilities seriously," et cetera, and they do it.

I always wish there was more emphasis on that side of the fence. Now, the broad...

BLITZER: And these reporters for "The New York Times" and "The Washington Post" never signed any confidentiality agreements. They don't work for the government. They are just reporters out there trying to do their job.

BENNETT: Well, let me defend myself.

You say it's serious, going after reporters. Of course it's serious. But reporters have to obey the law as well. The First Amendment doesn't say you are free to obey -- disobey the law. And while it is serious to go after reporters, it's very serious to release classified information.

BLITZER: Let's let J.C. weigh in.

BENNETT: But that's why the Justice Department goes after the leakers first and the reporters second.

J.C. WATTS, CNN POLITICAL ANALYST: Well the espionage law, that act, you know, Wolf, I think the reporter does have some responsibility.

And I think he or she understands what they are receiving from the person that is leaking. So, do they not have a responsibility to say, I am...

(CROSSTALK)

WATTS: You know, this is breaking the law? This is illegal?

I mean, we just seem -- there just seems to be no boundaries anymore. And I think we have to take this seriously, just to...

CLARKE: They will...

WATTS: ... establish some boundaries.

CLARKE: They would push back on you and say, look, on both of those stories, we worked with people, we worked with government officials on what they didn't think was so offensive, and we actually held back some information that we thought...

(CROSSTALK)

CLARKE: ... and they thought was very, very sensitive and might really put lives at harm, those sorts of things.

BLITZER: "The New York Times..."

CLARKE: It's very muddy.

BLITZER: ... sat on that surveillance story for a year.

CLARKE: Right.

(CROSSTALK)

BLITZER: ... before they went out and published it.

WATTS: Classified information.

BENNETT: I'm sorry.

And then they let it out.

BLITZER: All right.

BENNETT: And the president still asked them not to.

BLITZER: Let's...

CLARKE: One oft ways...

BLITZER: Let's move on, because we...

CLARKE: OK.

BLITZER: We have a limited amount of time. And I really want to pick your brains on what the president and other Republicans should be doing right now.

His job approval numbers in our -- in the last Gallup poll, 36 percent approval. It's lower in some other polls. Congressional job approval -- and the Republicans are on top in both the House and the Senate -- only 23 percent approval.

If you had one single piece of advice to the president and other Republicans right now, what do they need to do?

CLARKE: First of all, I cringe at the thought of -- you know, it's so easy to stand here with you and give advice to the White House. It's much harder for the people who are actually there. So, let's just keep that as a backdrop.

But I actually -- it's a jointed piece of advice. And one is kind of general and one is kind of specific. I would sit down with the entire Cabinet and the Cabinet senior staff and say, the information environment is so competitive now, and it's hard so hard for us. Every single one of you and every single one of your senior staff has a role in this.

I want to see you out there aggressively working with the media, the public, finding every new communications vehicle possibility. So, that's one very general tack. And the other one -- and this goes to long-term plans, which is not necessarily what you want to embrace, when you have got two years left in a troubled administration -- I challenge Congress to work with me in the private sector on creating the 21st century version of the USIA. Everywhere you go, you hear about, our image abroad is taking a beating, for a variety of reasons.

BLITZER: I thought Karen Hughes was doing that.

CLARKE: She is working on it. She is going to need a lot of energy and a lot of support and a lot of push from Congress and others.

BLITZER: What do you think, J.C.?

WATTS: Well, I would add to Torie's statement in this respect.

In terms of having the Cabinet members out there, I would put them out there, but that's one of the problems with the administration. You don't see any of the Cabinet members out there. Why not? And I think they are a real asset. They need to be out there.

I think the president has...

BLITZER: Some of them are pretty weak, though, you have got to admit.

WATTS: Well, you have got Alphonso Jackson. You have got Education. You have got Commerce. I mean, all those are very critical departments. And good things are going on. They can be out there talking, but they are not. The White House needs to unleash them.

I think there's four different things, relationships, policy, politics, and communications. They are going to get a new communications director. But they have to give him or her something to communicate.

We're on -- we are on our heels right now. We have never played -- we hadn't played offense in six months.

BLITZER: All right.

WATTS: Now, policy, you know, I think Josh Bolten will take care of that.

Relationships with Congress, I think Rob Portman will be good there. So, I think they are making some changes, in terms of politics.

BLITZER: Bill...

WATTS: Put Karl over there, where he's good at, and he can focus on politics.

BLITZER: You served in two administrations...

BENNETT: Right.

BLITZER: ... Republican administrations. So, you have a unique perspective right now on the enormous problems the current team is facing.

BENNETT: And I offered my advice, even when I wasn't asked, believe it or not.

(LAUGHTER)

BENNETT: This time, at least I'm being asked.

(CROSSTALK)

BENNETT: I know you may find that shocking, but Jack Kemp and I used to speak up, even when we weren't asked about these things.

WATTS: Jack is pretty good at that as well.

BENNETT: First of all, in deference to my colleagues, start with the press secretary. This would be great appointment right here, Torie Clarke.

BLITZER: She has already turned it down.

CLARKE: So not happening.

BENNETT: I know. I know. But I'm -- last chance here.

(LAUGHTER)

BENNETT: Second, he stole my line.

The only thing I know for sure about Washington is, you're on offense and or you're on defense. And this president is on defense. And he has got to go on offense.

He's doing -- trying to do too many things, too many town-hall meetings about too many things. Sit down, have a kind of Council of Trent, you know, where the church decided, what are our doctrines? What are the most important things we're talking about?

I think they are terrorism. I think it's the borders of the United States. He can say something about drugs, which he hasn't said in a long time. This child pornography thing and the Web is deeply troubling to a lot of parents.

Stand up for four or five things, as J.C. was saying, that are important, that matter to people. Redefine, remind people who you are, and what those convictions are. And stop scattering yourself all over the map with too many diffuse issues.

(CROSSTALK)

WATTS: You know, this poor communications person, if it is Torie, I want to tell you...

(LAUGHTER)

WATTS: ... you got to give...

CLARKE: It's really easy to do that job from right here.

WATTS: You know, whoever that is, you have got to give them something to talk about. And -- and, right now, all we're talking about is the war. We have got to change the...

BENNETT: Throw deep, like he couldn't do. He could run.

(LAUGHTER)

BENNETT: No, he could throw deep.

(LAUGHTER)

BLITZER: Former...

(CROSSTALK)

WATTS: But I scored.

BENNETT: Yes, you scored.

BLITZER: All right, guys, thanks very much.

BENNETT: He sure did.

BLITZER: And we want to thank Torie and J.C. and Bill. They're part of the best political team on television, CNN, America's campaign headquarters.

Today, we did it a little differently, our Republican analysts. Down the road, we're going to bring in our Democratic analysts for -- to offer some advice on what the Democrats should be doing as well.

Coming up, it's Friday. And that means it's time for our "Political Play of the Week." Bill Schneider will reveal the winner.

Up next, a developing story on Capitol Hill. Will the ethics scandal in Congress claim a top House Democrat?

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: There has been a new development involving ethics and ethical problems up on Capitol Hill.

Our congressional correspondent, Andrea Koppel, is on the phone. She has got the story.

Andrea, what do we know? ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, the Democratic leader, Nancy Pelosi, has just released a statement today, saying that she has agreed to accept the decision by Congressman Alan Mollohan of West Virginia to temporarily step aside as the ranking member on the House Ethics Committee.

Mollohan has come under investigation in recent weeks, after a conservative group known as the National Legal and Policy Center released a 500-page report which raised questions about Congressman Mollohan's personal finances. It's now under investigation by federal investigators with the U.S. attorney for the District of Columbia.

While Mollohan, his name is being cleared, the Democrats say, they have asked Congressman Howard Berman of California to fill in temporarily as the ranking member. These are all charges that have been denied by Congressman Mollohan to date -- Wolf.

BLITZER: Andrea, thanks very much.

Coming up, heckled to death? We will examine the fallout from the protester who caught the presidents of the United States and China off guard.

And have members of Congress put the fun in dysfunctional? Some critics would say yes. What do you think? Jack Cafferty reading your e-mail.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Now diplomacy and politics -- those two worlds collided for the Bush administration this week.

Let's bring back our senior political analyst, Bill Schneider -- Bill.

SCHNEIDER: Wolf, how can a disaster be the "Political Play of the Week"? Just watch.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): A high-level diplomatic visit by the president of the People's Republic of China, welcome relief from the stories about a White House in turmoil -- then, diplomatic disaster.

UNIDENTIFIED MALE: Ladies and gentlemen, the national anthem of the Republic of China.

SCHNEIDER: Wrong country. The Republic of China is Taiwan. Yikes.

Then this:

WANG WENYI, JOURNALIST: (SPEAKING FOREIGN LANGUAGE).

SCHNEIDER: "President Bush, make him stop prosecuting Falun Gong," Wenyi Wang shouted. "Stop him from killing."

JEFFREY BADER, DIRECTOR, BROOKINGS INSTITUTION CHINA INITIATIVE: The ceremony was interrupted by a practitioner of Falun Gong, which is a -- kind of a Chinese -- it's a sect in China based on some ancient Chinese, Buddhist and Taoist traditions.

Well, the Chinese have outlawed Falun Gong, because they are concerned about their -- the spread of their religion within the Communist Party. And, as a result, Falun Gong follows Chinese leaders around the world and harasses them, in the way you saw this morning.

SCHNEIDER: When the protest started, the Chinese government blocked CNN's transmission of the ceremony to China. So what?

MIKE CHINOY, CNN SENIOR ASIA CORRESPONDENT: In the Internet age, these faux pas will go around the Chinese blogosphere like wildfire.

SCHNEIDER: That, in turn, could feed the Chinese sense of grievance.

CHINOY: There is a perception among many in China that, even though the government needs and wants better relations with the U.S. for economic reasons, that the U.S. wants to contain China, wants to prevent it from rising, doesn't want to give it the respect it's due. And these protocols issues are all about respect.

SCHNEIDER: One woman's protests turns a diplomatic breakthrough into a diplomatic disaster. That certainly makes a statement and a "Political Play of the Week."

(END VIDEOTAPE)

SCHNEIDER: President Bush had to apologize to his guest. So, the week ended the way it started, with one more story about a White House in disarray -- Wolf.

BLITZER: Bill, thanks.

A quick update now on that heckler who disrupted the arrival ceremony for President Hu. Wenyi Wang was charged today in federal court with harassing, intimidating or threatening a foreign official.

We're taking a look at a live picture outside the U.S. district court here in Washington. We are awaiting an attorney representing Ms. Wang. And we will bring you the latest developments once those happen. We're waiting for a statement from her attorney. A spokesman for the U.S. attorney's office here in Washington says the misdemeanor charge carries a penalty of six months in jail.

Up next, a lot of you are giving a thumbs-down to Congress. So, what would it take for our elected senators and representatives to change their image? Is it even possible? Jack Cafferty weighing in with your e-mail.

And gas prices soared this week. The summer driving season might be even worse. We're looking into whether the oil companies are pocketing profits, at your expense. That's coming up next, in the next hour, right here our SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Jack is back with "The Cafferty File" -- Jack.

CAFFERTY: Congress back from spring break next week. We all should maybe turn out at the airport to meet them.

Everything from immigration reform, to the budget, to health care on the table, and not a lot of time. Seventy-two days, they go on vacation again. Meantime, the polls show the voters are fed up with the Congress.

The question is: How can these folks change their dysfunctional image?

Richard in Larchmont, New York: "Congress and its image? What's that? The only way to change anything in Congress is to have 435 brand-new faces."

Mike in Hot Springs, Arkansas: "Perhaps they could try something new: Stay in Washington. Work until something is accomplished. I think the American people would appreciate a group of people who worked late in to the night week after week, trying to seek appropriate legislation that would solve some of our problems."

Ron in Canton, Georgia: "I doubt those polls means much, Jack. Our congressman will be reelected because he wants to ban a woman's right to choose and ban same-sex marriage. And nothing else matters much in my district."

That would be Canton, Georgia.

Elizabeth in Merritt Island, Florida: "Vote all of Congress out of office and start over. There would be term limits. For example, 44 years for Ted Kennedy, way too long."

Tom in Lincoln, Massachusetts: "While everybody says, 'Throw the bums out,' everybody also feels that all the rest are bums, but not mine. So, be assured, almost all will get reelected. It happens every time. What we need is another political party, or two or three. But that won't happen, because the only thing the Democrats and Republicans agree on is that they don't want any more parties."

And, finally, Ike writes: "Before stepping on to the jet to leave for their next break, they will advise us all to conserve."

This weekend, on "IN THE MONEY," gas prices heading toward $4 a gallon in parts of the country. We're going to find out what it means when OPEC says oil prices are too high. Seventy-five bucks a barrel, it closed out today.

And we're going to talk to a woman who was fired by Woody Allen, and turned that experience into a cottage industry.

"IN THE MONEY" airs Saturdays at 1:00, Sundays at 3:00 Eastern time.

And, Wolf, I find it amusing that Woody Allen, he told this woman on the set of a movie that she looked retarded. And then he fired her.

And Woody Allen telling anybody else in the human race that they look retarded, to me, is a bit bizarre.

BLITZER: He's a great -- he's a great, great talent, though, you have got to admit.

(LAUGHTER)

BLITZER: You love those old Woody Allen movies.

CAFFERTY: Yes. Talk to Soon-Yi about Woody.

(LAUGHTER)

BLITZER: All right.

Thanks, Jack.

(LAUGHTER)

CAFFERTY: Goodbye.

BLITZER: Still to come, President Bush is in the Golden State -- that would be California. Right now, he's meeting with the Terminator. We saw him in the limo with Arnold Schwarzenegger just a little while ago. Will Governor Schwarzenegger find what he needs from the president when they have their little conversation? That's coming up.

Also, now playing at a theater near you, biting spoofs of George W. Bush. The Hollywood entertainment industry may be more open than ever to lampooning the sitting president. We will tell you what is going on, on that front as well -- all that coming up, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: On the big screen right now, two new movies that poke some serious fun at the president of the United States. And the White House, though, probably isn't all that amused.

Our entertainment reporter, Brooke Anderson, is joining us now live from Los Angeles -- Brooke.

BROOKE ANDERSON, CNN CULTURE AND ENTERTAINMENT CORRESPONDENT: Hi there, Wolf.

Well, we will have what the White House thinks about all this in just a second.

But, first, we have seen Hollywood during previous administrations take aim at the White House. For example, during the Clinton years, the movies "Primary Colors" and "Wag the Dog" seemed to reflect the man in office. What may be different now is just how barbed the attacks really are on President Bush.

(BEGIN VIDEOTAPE)

ANDERSON (voice-over): As if sagging poll numbers weren't enough for President Bush, he's also taking a beating at the box office.

WILLEM DAFOE, ACTOR: The only demo where you have an approval rating above 30 percent is with children under the age of 5.

ANDERSON: Two new comedies lampoon the president, including "American Dreamz," opening this weekend.

DENNIS QUAID, ACTOR: Did you know that there are two kinds of Iraqistanis? I mean, actually, three.

ANDERSON: And, in a scene evoking the documentary "Fahrenheit 9/11," "Scary Movie 4" parodies the president's immediate reaction to the 9/11 attacks.

(BEGIN VIDEO CLIP)

UNIDENTIFIED ACTRESS: A girl had a pet duck.

UNIDENTIFIED ACTOR: Mr. President, the planet is under attack by aliens.

LESLIE NIELSEN, ACTOR: Well, I will handle that in a minute. Right now, I want to see what happens with the duck.

KURT LODER, MTV NEWS: The more vulnerable George Bush becomes, and the lower his ratings sink, I think the easier it is to come out and sort of attack him.

ANDERSON: But conservative blogger Jason Apuzzo says Hollywood's presidential potshots could backfire by alienating some moviegoers.

JASON APUZZO, CO-FOUNDER AND CO-DIRECTOR, LIBERTY FILM FESTIVAL: It is, in effect, just, you know, alienating half your audience. And I don't, frankly, see the compelling reason to do that, unless you're just trying to make a cheap political message.

ANDERSON: Besides moviemakers, some recording artists also are taking aim at President Bush.

UNIDENTIFIED FEMALE (singing): I'm not ready to make nice.

ANDERSON: New music from the Dixie Chicks and Neil Young take the president to task.

It's enough to leave a president, fictional or otherwise, confused about why his popularity has slipped.

QUAID: There are some -- some things that kind of seem pretty black and white, and now they are kind of becoming a little gray seeming.

DAFOE: Are you getting toasted again? Do you have a bottle hiding...

(END VIDEOTAPE)

ANDERSON: Now, this all comes at a time when the new issue of "Rolling Stone" magazine boldly asks on its cover, "The Worst President In History"? So we asked the White House for a response to the salvos from the entertainment world, and were told, quote, "the White House is not in the business of doing movie or music reviews" -- Wolf.

BLITZER: Brooke, thanks very much.

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