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THE SITUATION ROOM

Many Lawmakers Outraged At Phone Record Tracking; Bipartisan Senate Deal On Stalled Immigration Bill; Jane Harman Issues Statement On NSA Report; Howard Dean Under Fire From Fellow Democrats

Aired May 11, 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: 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. President Bush insists your privacy is being protected, but many lawmakers are outraged by a new report that millions of Americans' phone records are being tracked. It's 4:00 p.m. here in Washington, where the Bush administration's national security tactics are under scrutiny again.

Also this hour, a Senate compromise in the immigration wars. After weeks of massive protests, is reform bill now a real possibility? And whose version of reform would it be?

And get this. Howard Dean versus fellow Democrats. Who has a beef with the party chairman now and why? Details ahead on a Democratic party apparently divided.

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

Up first this hour, the new bombshell involving the National Security Agency's domestic surveillance program. A published report today says the NSA has been tracking the records of millions of Americans' phone calls since the 9/11 attacks. "USA Today" says the spy agency is using the data to analyze calling patterns in an effort to try to track terrorist activity. The newspaper reports the program did not involve listening to or recording any conversations.

On Capitol Hill, the fall-out already is fierce. Senate Judiciary Committee Chairman Arlen Specter says he'll call the three telecommunications firms that provided the phone records to testify before his committee. And this report is already adding to the controversy over General Michael Hayden's nomination to be the CIA chief. Hayden used to oversee the NSA surveillance program. President Bush went before the cameras today, wasted no time defending the surveillance program, calling it a vital tool against terrorists.

Our senior political analyst Bill Schneider is standing by. So is our congressional correspondent Andrea Koppel. But let's go to our White House correspondent Elaine Quijano. She's traveling with the president today in Mississippi.

Elaine, what do they say?

ELAINE QUIJANO, CNN CONGRESSIONAL CORRESPONDENT: Good afternoon to you, Wolf.

President Bush just wrapped up a commencement address here in Biloxi, Mississippi, to graduates of Mississippi Gulf Coast Community College, a college that was hit hard by Hurricane Katrina, but which reopened its doors just 17 days after the disaster struck.

Now, back in Washington, though, President Bush sought to head off a brewing storm on the political front over the NSA surveillance program before he left the White House without confirming or denying the details. In that "USA Today" report, Mr. Bush made some brief remarks about the NSA surveillance program. Here now is a large portion of what he said.

(BEGIN VIDEOTAPE)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: First, our intelligence activities strictly target al Qaeda and their known affiliates. Al Qaeda is our enemy, and we want to know their plans.

Second, the government does not listen to domestic phone calls without court approval.

Third, the intelligence activities I authorized are lawful and have been briefed to appropriate members of Congress, both Republican and Democrat.

Fourth, the privacy of ordinary Americans is fiercely protected in all our activities. We're not mining or trolling through the personal lives of millions of innocent Americans. Our efforts are focused on links to al Qaeda and their known affiliates.

So far, we've been very successful in preventing another attack on our soil. As a general matter, every time sensitive intelligence is leaked, it hurts our ability to defeat this enemy. Our most important job is to protect the American people from another attack, and we will do so within the laws of our country.

(END VIDEOTAPE)

QUIJANO: Now, these developments are coming just about a week ahead of scheduled confirmation hearings for General Michael Hayden for that top CIA post. Aboard Air Force One after the president's remarks, White House Deputy Press Secretary Dana Perino told reporters that she believes he's had a good start to his confirmation process, that feedback has been positive and the White House is quote, "full steam ahead on his nomination" -- Wolf.

BLITZER: Elaine, thanks very much.

Let's bring in our Andrea Koppel. She's watching all of this from the Hill. What's the reaction there, Andrea?

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, it was short, it was sweet and it was to the point. It was also very sudden, out of the blue. About an hour ago, General Michael Hayden suddenly appeared on the Hill. By his side was Mitch McConnell, the majority whip.

This after the White House suddenly cancelled General Hayden's meetings on the Hill, an apparent attempt now by the White House to put to rest the impression that they were trying to keep the general lying low in the face of these latest reports. As you might imagine, General Hayden, who only took one question press corps, forcefully defended the program.

(BEGIN VIDEO CLIP)

GEN. MICHAEL HAYDEN, CIA DIRECTOR NOMINEE: Everything that NSA does is lawful and very carefully done, and that the appropriate members of the Congress, House and Senate, are briefed on all NSA activities.

(END VIDEO CLIP)

KOPPEL: Now, every day this week, General Hayden has been here in the Senate, meeting with various senators, trying to allay their concerns about his military background and about that NSA program. The timing of this news report clearly not going to help matters. In fact, one of those who had been sort of an early supporter of the general, Democrat Dianne Feinstein, suggested today that things could get ugly.

(BEGIN VIDEO CLIP)

SEN. DIANNE FEINSTEIN (D), INTELLIGENCE COMMITTEE: I happen to believe we're on our way to a major constitutional confrontation on fourth amendment guarantees of unreasonable search and seizure. And I think this is also going to present a growing impediment to the confirmation of General Hayden, and I think that is very regretted.

(END VIDEO CLIP)

KOPPEL: Now, although most Democrats seemed eager to pounce on this story, there were Republicans on the other side who quickly came to General Hayden's defense; among them, Jon Kyl from Arizona.

(BEGIN VIDEO CLIP)

SEN. JON KYL (R), ARIZONA: This is nuts. We are in a war and we've got to collect intelligence on the enemy. And you can't tell the enemy in advance how you're going to do it. And discussing all of this stuff in public leads to that.

(END VIDEO CLIP)

KOPPEL: Now, next week, the Senate Intelligence Committee is supposed to hold the confirmation hearing on General Hayden. And we heard today, Wolf, the chairman of the Senate Judiciary Committee, Arlen Specter, say that he wants to hold hearings on this. But just a short time ago, the Majority Leader Bill Frist seemed to cast a little doubt on that, saying he's not so sure that should happen. Clearly, there's still some -- quite a bit of behind the scenes negotiating that needs to take place -- Wolf. BLITZER: Andrea Koppel on the Hill. Thanks, Andrea.

Some lawmakers may be up in arms about the NSA's domestic spying program, but will this new report get the American people all riled up? Let's bring in our senior political analyst Bill Schneider.

Bill, what are you picking up?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Well, Wolf, in the debate between fighting terrorism and protecting civil liberties, the public is divided. Will the latest revelations tip that division one way or the other?

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): The revelations last winter were about wiretaps of international calls with people suspected of terrorist activities. The public was divided. In one poll, slightly opposed. In another poll, slightly in favor. Now new revelations are being reported.

LESLIE CAULEY, BUSINESS REPORTER, "USA TODAY": They are collecting what is known as call detail records, and this is simply the listing of the actual numbers dialed. Incoming, outgoing, are being tracked.

SCHNEIDER: "USA Today" says the government is keeping records of domestic calls made by ordinary citizens, not just people suspected of terrorist activities. Is it listening to those calls?

BUSH: The government does not listen to domestic phone calls without court approval.

SCHNEIDER: So it's not eavesdropping, but according to the newspaper report, it is snooping. What is the government doing with all that information? That's not clear.

CAULEY: The explanation put forth by NSA is simply that they are -- it is part of a counterterrorism campaign.

SCHNEIDER: In polls taken over the last four years, Americans have said, by two to one margins, that the government should not take steps to prevent additional acts of terrorism if they would violate people's basic civil liberties. As of February, however, the public did not think that it happened. Over 60 percent said government anti- terrorist programs had taken away very little or none of their privacy. The new revelations could change that.

The president also made this point.

BUSH: So far, we've been very successful in preventing another attack on our soil.

SCHNEIDER: Does the public believe government wiretaps of overseas calls involving suspected terrorists have prevented some acts of terrorism? Yes, it does. But it may be harder to convince people that collecting records of domestic calls between ordinary citizens will do much good.

(END VIDEOTAPE)

SCHNEIDER: The president said, quote, "We are not mining or trolling through the personal lives of millions of innocent Americans." He did not say what they are doing -- Wolf.

BLITZER: Bill Schneider, good report. Thank you very much. Bill Schneider, Andrea Koppel, Elaine Quijano, part of the best political team on television. CNN, America's campaign headquarters.

There's another new development today in the controversy over spying by the NSA. A Justice Department office has informed Congress the department cannot investigate the role of Justice Department lawyers into authorizing the NSA surveillance program.

The disclosure came in a letter to Democratic Congressman Maurice Hinchey. He and other House Democrats had been pressing for an investigation. Government officials would not give any more details about the decision.

Let's get some words of wisdom from Jack Cafferty. He's in New York right now -- Jack.

JACK CAFFERTY, CNN ANCHOR: I don't know about wisdom, but you'll get a little outrage. We better all hope nothing happens to Arlen Specter, the Republican head of the Senate Judiciary Committee, because he might be all that is standing between us and a full-blown dictatorship in this country.

He's vowed to question these phone company executives about volunteering to provide the government with my telephone records and yours and tens of millions of other Americans. Shortly after 9/11, AT&T, Verizon and BellSouth began providing the super-secret NSA with information on phone calls of millions of our citizens. All part of the war on terror, President Bush says.

Why don't you go find Osama bin Laden and seal the country's borders and start inspecting the containers that come into our ports? The president rushed out this morning in the wake of this front page story in "USA Today" and declared the government is doing nothing wrong and all this is just fine.

Is it? Is it legal? Then why did the Justice Department suddenly drop its investigation of the warrantless spying on citizens? Because the NSA said Justice Department lawyers didn't have the necessary security clearance to do the investigation.

Read that sentence again. A secret government agency has told our Justice Department that it's not allowed to investigate it. And the Justice Department just says, OK, and drops the whole thing. We're in some serious trouble here, boys and girls.

Here's the question: Does it concern you that your phone company may be voluntarily providing your phone records to the government without your knowledge or your permission? If it doesn't, it sure as hell ought to. E-mail us your thoughts at caffertyfile@CNN.com or go to CNN.com/caffertyfile -- Wolf.

BLITZER: Words of wisdom, as I said. Jack outraged as you clearly are. Thanks very much.

And if you want a sneak preview of Jack's questions plus an early read on the day's political news and what is ahead in THE SITUATION ROOM, sign up for our daily e-mail alert. Go to CNN.com/situationroom.

Coming up, the political fight over immigration. The Senate hammers out an agreement. But will the bill be dead on arrival over at the House of Representatives?

Plus, Republicans gather to celebrate. Well, what is the party all about? Find out in today's "Political Radar."

And we have got some new poll numbers on Hillary Clinton as she makes her run for reelection in New York state. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back. There's a new development today in the immigration wars. There's a new bipartisan Senate deal on a stalled immigration bill. Is it likely to lead to action with reform or another high stakes showdown?

Our Kathleen Koch is covering the story for us. She is joining us here in Washington -- Kathleen.

KATHLEEN KOCH, CNN CORRESPONDENT: Wolf, the top Senate Republican and Democratic leaders announced the deal this morning, and it preserves a politically divisive proposal to give millions of illegal immigrants a chance to become American citizens.

(BEGIN VIDEOTAPE)

SEN. HARRY REID (D-NV), MINORITY LEADER: We try very, very hard to move things along, and it's not easy with the political atmosphere we find in the country today.

KOCH (voice-over): The Senate immigration bill had been in limbo for weeks. While hundreds of thousands of immigrants and their supporters took to the streets, the Senate plan gives the demonstrators some of what they want, a path for illegal immigrants who have been in the United States more than five years to earn citizenship and a guest worker program.

Reopening debate on the bill puts the Senate back on a collision course with the House, which approved a get-tough bill that focuses on border security.

REP. TOM TANCREDO (R), COLORADO: I think that the compromise is not a good one, from what I understand. Anything over on the Senate side that has guest worker is also an amnesty bill. KOCH: The Senate deal struck today limits the number of amendments or changes that can be made to the bill, which Senate leaders say they hope to pass by Memorial Day. It also includes a compromise on the negotiating team that will try to bridge the huge gap between the Senate's final immigration bill and the House version. The conference committees will be made up of senators more supportive of the key provisions of the Senate bill, something Democrats wanted.

SEN. BILL FRIST (R-TN), MAJORITY LEADER: We both anticipate a lot of challenging times over the period which will begin in all likelihood on Monday.

(END VIDEOTAPE)

KOCH: And challenging may be an understatement, given the competing election year politics at play. House conservatives are demanding a hard line on illegal immigrants, while other Republicans fear a backlash from Latino voters. Well, Democrats, meanwhile, they are all too happy the let the Republicans fight it out and to peg them as the opponents of immigration reform -- Wolf.

BLITZER: Thanks, Kathleen, for that.

On our "Political Radar" this Thursday, right now the Senate is nearing a vote on a $70 billion tax cut package. The House gave its approval yesterday. The bill extends lower tax rates for investors and offers some breaks to some middle class taxpayers.

Some Republicans began celebrating even before the vote. Top Senate Finance Committee members are predicting the bill will pass. That would be a rare victory for President Bush in this Congressional election year.

The Senate Judiciary Committee today approved White House aide Brett Kavanaugh's nomination to be an appeal's court judge. The party line vote was 10-8. Democrats had argued the White House aide was too partisan and inexperienced to be a judge.

Republicans had hoped the return to the fight over judges would help their election-year standing. The full Senate is considered likely to give final approval to Kavanaugh's nomination. We'll see.

A powerful House Republican today is blasting a published report that says he's a target of a federal investigation of his ties to lobbyists. Congressman Jerry Lewis of California is denying any wrongdoing, and he says he hasn't been contacted by federal authorities about any probe.

The "Los Angeles Times" reports prosecutors are investigating Lewis' relationship to a Washington lobbyist linked to former Congressman Randy Duke Cunningham. Cunningham now is in prison for accepting bribes.

Senator Hillary Rodham Clinton is still in the driver's seat when it comes to her bid for reelection in New York State. In a new Marist poll, the New York Democrat is far ahead of all three of her possible Republican challengers. Not a big surprise there.

And get this -- Kinky Friedman says he's got what it takes to run for governor of Texas. The musician and mystery writer today turned in petitions with nearly 170,000 signatures, petitions that he hopes will put him on the ballot. Independent candidates needs to hand in a minimum of 45,000 signatures by today. Friedman's petitions must still be verified by state officials.

Up next, much more in our top story. I'll speak live with Senator John Cornyn about the government's secret efforts to keep tabs on your phone calls. Plus, tough talk from Iran's president. We'll tell you what Mahmoud Ahmadinejad is saying today. Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Let's go to Zain at the CNN Center in Atlanta for a closer look at some other stories making news. Zain?

ZAIN VERJEE, CNN ANCHOR: Wolf, while he continues to defy the world and gush red-hot rhetoric against the United States, Iran's president now says he wants to talk things over. Today President Mahmoud Ahmadinejad says he seeks dialogue with the Bush administration over a nuclear standoff and Ahmadinejad says that his recent 17-page letter to President Bush is simply a way to spark discussion.

Targeting U.S. soldiers, even killing workers who pick up the trash in the streets. Iraq seeing another chaotic day of violence. Today five garbage collectors are dead after a roadside bomb exploded as they collected trash in the streets of Baghdad.

Southwest of Baghdad three U.S. soldiers died in separate roadside bombings. So far, there have been 2,430 U.S. military fatalities in the Iraq war. Meanwhile, a top U.S. military official says there's been a spike in attacks against Iraqi civilians. Major General Rick Lynch says suspected terrorist Abu Musab al-Zarqawi has inflamed much of that violence.

And it's the people versus the police in Egypt. The two sides clashed over a controversial case in a Cairo court. Judges on a disciplinary panel are refusing to hear a slander case against some of their fellow judges. Those judges had accused the Egyptian government of rigging last year's presidential and parliamentary elections through fraud and abuse. The disciplinary panel could have removed the judges from their post for those accusations but they chose not to -- Wolf.

BLITZER: Zain, thanks for that.

And we're just getting this in on our lead story. A statement from the ranking Democrat of the House Intelligence Committee, Congresswoman Jane Harman of California, referring to this new report about widespread surveillance and tracking of phone calls in the United States. She says this, "Last week I said the CIA was in free fall. Now I think the White House is in free fall and paying the price for refusing to obey the National Security Act and brief the full intelligence committees in detail on the NSA program. Americans are alarmed and rightly so because this administration continues to operate parts of the NSA program in violation of FISA (the Foreign Intelligence Surveillance Act) and the Fourth Amendment."

Harman goes on to say that "Today 14 members of the House Intelligence and Judiciary Committees introduced legislation to require all aspects of the NSA program to comply fully with FISA. The drop in the president's poll numbers," she says, "is no accident. Americans have lost trust in a White House which refuses to brief Congress and insist it is above the law."

That statement from the ranking Democrat on the House Intelligence Committee. Let's bring in a dissenting view, a different view. Republican Senator John Cornyn of Texas, a member of the Judiciary Committee, is joining us from Capitol Hill. Senator, thanks very much for joining us.

Basically Jane Harman, who is supposed to be briefed on all of this as the ranking Democrat in the House Intelligence Committee -- says this is a violation of the National Security Act and what was reported today in "USA Today." What do you say?

SEN. JOHN CORNYN (D-TX), JUDICIARY COMMITTEE: Well, I think that Jane Harman, as ranking member of the intelligence committee in the House, has got classified briefings that unfortunately -- or maybe fortunately none of the rest of us had access to.

But I wish she wouldn't make this a partisan issue. The fact is the Constitution confers authority upon the president of the United States. He is not subservient to Congress. The executive branch is a co-equal branch under the Constitution and there are ways that the president can exercise his authority and has to to keep us safe under this terrorist surveillance program that does not derive strictly from the Foreign Intelligence Surveillance Act.

BLITZER: But you're not suggesting, Senator, that the president is above the law?

CORNYN: Absolutely not. No one is. But the most fundamental law of the land is the Constitution. It's not only the laws that are passed by the Congress and the legislature.

BLITZER: It's not just Democrats. The chairman of your committee, the judiciary committee, Arlen Specter expressed alarm earlier today as well. I want you to listen to what he said he's now planing on doing about this.

(BEGIN VIDEO CLIP)

SEN. ARLEN SPECTER (R-PA), CHAIRMAN, JUDICIARY COMMITTEE: We will be calling upon AT&T, Verizon and BellSouth as well as others to see some of the underlying facts. When we can't find out from the Department of Justice or other administration officials, we're going to call on those telephone companies to provide information to try to figure out exactly what is going on.

(END VIDEO CLIP)

BLITZER: He's clearly frustrated by this report which must have been news to him.

CORNYN: Well, the intelligence community -- the NSA in this case has briefed the gang of eight, the bicameral, bipartisan leadership of the intelligence oversight committees in the House and Senate. They have not briefed Senator Specter or me because we're not members of that committee.

But the problem is the more the president and the executive branch, the more the intelligence community briefs members of Congress, the more these things are leaked into the public domain, notifying our enemies. They change their habits. We lose that actionable intelligence and unfortunately I think that makes us less safe.

BLITZER: Are you suggesting this leak to "USA Today" came from Congress as opposed to the executive branch of government or as opposed to the business community, the telecommunications firms that were involved? How do you know it came from Congress?

CORNYN: It beats me. No I wasn't making reference to this specific story. I'm just saying that the -- there's really a conundrum here because the members of Congress who clearly like to know more about the program -- the problem that the intelligence community has is the more congresspeople they brief, the more likely it is congressmen and women will leak to the public, thus diminishing the effectiveness of the program.

So I'm not necessarily suggesting where this came from -- I don't know. All I do know is that it does not reveal conversations between people. It strips the information of personal identifying information. And it's part of this terrorist surveillance program that's designed to detect and deter terrorism, not just punish it in a court of law, after people have already been killed.

BLITZER: So, basically, you're comfortable with what you know about it?

CORNYN: Well, I want to know more.

All I know is the reports. Sometimes, newspapers get it right. Sometimes, newspapers get it wrong. But I don't think this is cause for partisan attacks. I would hope we would return to the days where partisanship ends at our water's shore, at our land's shore, and we are unified on this war on terror. This should not be about election- year politics or partisan attacks, I would hope.

BLITZER: Let me switch gears just for a moment. And we are almost out of time, Senator Cornyn. You have been designated one of the Senate conferees to work out a deal with the House on Immigration Reform. I know you're concerned about allowing 10 or 12 million illegal immigrants eventually to work their way towards citizenship as part of a guest-worker program. This is what your leadership, the Republican and Democratic leadership, have worked out.

It's fiercely opposed by many Republicans in the House. Are you upset by what Senator Frist, the majority leader, has now worked out together with Senator Harry Reid?

CORNYN: Well, Wolf, I support comprehensive immigration reform. I know the House has a different idea. They focus strictly on border security and enforcement.

The Senate has a different idea. We believe that we need to deal not only with the security needs of our country, but also the economic and work force needs, in order to then let our law enforcement officials focus on the bad guys, and not just the people who want to come here to work in an illegal system.

I think I can help be a bridge as a border state senator. I have been to the border. I have -- you know, unfortunately, I think we need to have people involved in this process who know more about the border than they have learned in just reading in books or watching in movies. And I think I can be part of a solution. And that's what I hope to be.

BLITZER: But you oppose the Frist-Harry Reid compromise?

CORNYN: Well, there's two main parts of it.

One is, I want to make sure that the temporary-worker program restores the circular migration pattern; in other words, we don't have a permanent influx of workers that, when our economy is bad, will be competing with American workers. So, I want to have a temporary- worker program.

And I also want to make sure, as regards to the 12 million people who are here currently out of status, that we don't repeat the mistake of the amnesty in 1986. I'm for giving them a second chance, but not a complete pass and with unknown consequences to our country financially and otherwise.

BLITZER: Senator John Cornyn, always good to have you here in THE SITUATION ROOM. Thanks very much.

CORNYN: Thanks, Wolf.

BLITZER: And if the telecommunication companies are sharing phone records with the NSA, what does this mean for the privacy of tens of millions of customers?

That scenario is playing out in California right now, where a group of AT&T customers are suing their provider for violating their privacy. Our Internet reporter, Abbi Tatton, is following the story -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, we have seen civil- liberties groups suing the government over the surveillance programs.

The Center for Constitutional Rights and the ACLU have both filed lawsuits against the NSA over the program. This lawsuit goes after AT&T. It was brought by the Electronic Frontier Foundation on behalf of some AT&T customers who use AT&T's Internet service or their long- distance telephone service.

Court documents, you can see, allege that the -- AT&T provided the government with direct access to both domestic, international and foreign Internet and telephone communications. Plaintiffs say that they have proof. Court documents show a former AT&T technician describing a signal that he saw, a signal of Internet data, split, with one exact copy going directly to the National Security Agency.

AT&T has said that they will not comment on issues of national security. But they say they do protect customer privacy and operate within the law. The NSA has not commented.

Now, the Department of Justice, if they have their way, will not let this lawsuit go ahead. The DOJ has said that they will seek to dismiss this lawsuit, on the grounds that it deals with state secrets -- Wolf.

BLITZER: Abbi, thank you for that.

Up next, is Howard Dean facing an intraparty fight? We are going to tell you about some divisions within the Democratic Party and what that may mean come November.

Plus, we will have much more on our top story, the NSA keeping tabs on your phone calls. Paul Begala, J.C. Watts, they're standing by in today's "Strategy Session."

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. I'm Wolf Blitzer in Washington.

Democratic Party Chairman Howard Dean is under new fire from fellow Democrats. He reportedly was challenged last week by the Democrats overseeing the battles for the House and the Senate. They are questioning his tactics and accusing him of undercutting Democrats' hopes of reclaiming control of the Congress.

Let's bring in our senior political correspondent, Candy Crowley.

What are you picking up? What happened at these meetings, supposedly, Howard Dean on one side, and the chairmen of the committees and the House and Senate to get Democrats elected, Chuck Schumer and Rahm Emanuel, on the other side? CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: And this is an ongoing situation that goes back, you know, six months. They have had meetings periodically.

This happened last Thursday, I'm told by a variety of sources. And they said the discussion was that Rahm Emanuel and Chuck Schumer, who are fighting for control of the House and the Senate, want Howard Dean and the DNC to kick in some money for get-out-the-vote efforts, that they want him to use that money in '06.

So, this has been an ongoing discussion. Howard Dean is spending it more at the state level. One -- one Democratic source that I talked to said, look, they asked him for money, and, in the end, he summed up the meeting saying, Dean, the chairman of the DNC, was intransigent, and Rahm Emanuel got up and left.

Now, whether he got up and left to go vote, as some people claim he did, or whether he got up and left spewing expletives as he walked out the door, everybody agrees this is a very intense argument that's going on between these Hill entities, election entities, and Howard Dean.

BLITZER: But isn't it part of a bigger picture, also? Howard Dean has this 50-state strategy to try to win support for Democrats. And Schumer and Rahm Emanuel right now, they don't have that big strategy. They want to narrowly win the control of the House and the Senate, and they want Democratic money to be focused in that direction.

CROWLEY: Absolutely.

I mean, it's and it's also -- it's a difference in emphasis. I mean, neither side says the other side is full of it. I mean, Howard Dean says he recognizes, you know, that they have to win elections.

But what this comes down to, said one Democratic aide, was that Dean is -- quote -- "fixated" on a 50-state strategy, whereas Rahm Emanuel and Chuck -- Chuck Schumer believe Democrats have got to be where you actually have a race.

So, they say, listen, you know, it's great to say that you are building the party infrastructure in 50 states. But, you know, you spend $100,000 to get organizers in Idaho, when we would like to spend some money on a race in Ohio.

BLITZER: We are out of time. But is Howard Dean's tenure as chairman of the DNC in trouble?

CROWLEY: It doesn't look like it. One person said to me, look, there's no divorce here. We're just having words.

There's no doubt there are some people that want Howard Dean out as DNC chairman. But Howard Dean has the support of those state party chairmen and most of the people who put him in office in the first place. It looks like he's there to stay for a while.

BLITZER: Candy Crowley.

Now our viewers know as well what we all know: She is part of the best political team on television -- CNN, America's campaign headquarters, just reinforcement of that.

Coming up: The National Security Agency surveillance program is coming back to haunt President Bush again. But how much fallout will he face? Paul Begala and J.C. Watts, they are standing by to weigh in on that report that millions of Americans' phone records are being tracked.

And she is first in the White House popularity contest. But can Laura Bush -- can she -- some of her mojo rub off on her husband?

That story is coming up in our next hour. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

Today, in our "Strategy Session," a new report that millions of Americans' phone records are being tracked. And it's created a firestorm of controversy already. Did the president misjudge the fallout? Will this create problems for the president's pick to lead the CIA?

Joining us now, our CNN political analysts, Democratic strategist Paul Begala and former Republican Congressman J.C. Watts.

Let me play this brief clip on the how the president justified this -- this story today. Listen to this.

(BEGIN VIDEO CLIP)

BUSH: Our intelligence activities strictly target al Qaeda and their known affiliates. Al Qaeda is our enemy, and we want to know their plans.

(END VIDEO CLIP)

BLITZER: All right, what is wrong, Paul, with that?

(CROSSTALK)

BLITZER: I mean, the president wasted no time coming out.

PAUL BEGALA, CNN POLITICAL ANALYST: Right.

BLITZER: A smart strategy, I assume.

BEGALA: Well it tells me that they think this is a big problem, right? You don't put the president out unless you have some real damage to contain or -- or a real victory to celebrate.

BLITZER: So, they saw this was a potential problem? So, they got him out there quickly.

BEGALA: They got him out quickly. Good for them.

BLITZER: And he then quickly made the case: You know what? We're trying to prevent another 9/11.

BEGALA: Well, and, in fact, he went on to say -- and I wrote this down -- we're not mining or trolling through the personal lives of millions of Americans.

Now, that's extraordinarily defensive, first off. Second, I wonder if this is going down in history with the statement, for example, that he made on May 23 of 2003, when he -- May 29 -- when he said, we have found the WMDs, or when he said, major combat operations are over. In other words, he has a credibility problem.

The problem with putting him out now vs. a few years ago, when he was popular, is, Americans don't trust him. Now he is saying: Trust me. We are not data-mining. We are not stealing your personal records.

Well, you know what? The American people don't trust George W. Bush right now. And his words today, I think, are going to come back to haunt him.

BLITZER: Smart strategy for him to come out so quickly?

J.C. WATTS, CNN POLITICAL ANALYST: Wolf, again, think about this.

The last four or five months, the White House, they have been behind two steps on everything.

I think it was a good strategy to put him out, Paul. I have all along that, you know, you don't, you know, wait, you know, four or five days to try to address this. I think you get out there. They had some trouble with this in the past, so they knew what kind of firestorm this would create. So, they put the president out there to talk about it.

The president said he was not, you know, rolling through numbers. And I called someone over at the -- in the House today that I -- who I trust them, and I put a little credibility in what they say, said, no U.S. citizens rights were violated. It was done in the framework of the law. Appropriate people in Congress were informed.

That has been the framework of supporting this thing all along. So, it doesn't seem to be anything different than what we were arguing about two months ago.

BLITZER: I was surprised, as a result of what you just said and what a lot of others have said, by what the House majority leader, John Boehner, said earlier this morning. I want to play that clip. Listen to this.

(BEGIN VIDEO CLIP) REP. JOHN BOEHNER (R-OH), HOUSE MAJORITY LEADER: I am concerned about what I read with regard to this NSA database of phone calls. I don't know enough about the details, except that I'm going to find out, because I'm not sure why it would be necessary for us to keep and have that kind of information.

(END VIDEO CLIP)

(CROSSTALK)

BLITZER: He's the majority leader.

WATTS: But I think he didn't -- he hasn't said anything inconsistent than what I think we have all talked about.

Yes, we don't know a lot of the details. But, again, I think it gave me some confidence in talking to the people in the House, the people who are in the intelligence community, that said it was within the framework. No Americans were violated. Members of Congress and the appropriate places, they were briefed on this issue.

BLITZER: All right.

WATTS: So, that gives me a little more comfort, in spite of the fact I don't know the details.

BLITZER: You want to respond?

BEGALA: Here's the risk. We don't know the details. I suspect it is worse, not better, than what we already know. But there's no way to really know that right now.

But if, in fact, "USA Today" is right -- and the White House doesn't deny this, that the number is in the tens of millions -- published public intelligence reports suggest that al Qaeda has maybe 20,000, maybe 50,000 people in the whole world, most of them not in America. How the heck do you justify going through the phone records of tens of millions of Americans...

BLITZER: Here's the...

(CROSSTALK)

BEGALA: ... to try to get one 6'5'' Arab hiding out in Pakistan?

BLITZER: Hold on. Hold on one second. Here's the problem that Democrats face right now. And we saw it in Bill Schneider's poll numbers, that the American public is pretty much split on this issue about domestic surveillance, the warrantless wiretaps.

There have been no polls on this latest development, but on that.

BEGALA: Right.

BLITZER: The argument is, if it is going to prevent another 9/11, Americans are willing -- at least a lot of Americans are willing to let some of their privacy lapse.

BEGALA: That's a very good point.

And the Democrats are going to have to point out that this is a classic Republican move, not a national security move. Big government is getting into bed with big business. We're talking about AT&T, Verizon and BellSouth. AT&T, by the way, wants to take over the Internet and start charging for access to the Internet, which Internet pioneers desperately oppose.

So, now, if you are running AT&T, and the president of the United States comes to you and says, hey, why don't I spy, why don't I snoop through your files there, and you want him to give you permission to control the Internet, that's a really lousy alliance politically for the Republicans, to be seen as big government in bed with big business.

BLITZER: Is it going to hurt Michael Hayden, General Michael Hayden, who ran the NSA for years, and is now up for CIA director?

WATTS: Well, Wolf, I think this obviously gives opposition more fodder, if they want to make hay with his nomination.

However, I think you're going to see Hayden standing on those three pillars. They didn't violate any American citizen. We did it within the boundaries of the law. And we informed the appropriate people in Congress on the Republican and the Democrat side.

Now, Paul, you're talking about big business. How many people do we have in this country? Two hundred and eighty million people?

BEGALA: That's right.

WATTS: You know, if they sold those numbers to the government -- and did they sell the numbers to the government?

BEGALA: We don't know.

WATTS: Well, if they did...

BEGALA: I bet you they gave them.

(LAUGHTER)

WATTS: I want my one-280-millionth of that paycheck.

(LAUGHTER)

BLITZER: Very quickly, is Howard Dean in trouble?

BEGALA: No. I think Candy's report was spot on.

He -- yes, he's in trouble, in that campaign managers, candidates, are really angry with him. He has raised $74 million and spent $64 million. He says it's a long-term strategy. But what he has spent it on, apparently, is just hiring a bunch of staff people to wander around Utah and Mississippi and pick their nose. That's not how you build a party. You win elections. That's how you build a party.

BLITZER: All right, we got to leave it there, guys, because we are out of time. Paul Begala...

WATTS: I can't comment on the good one?

(LAUGHTER)

BLITZER: No. Next time.

BEGALA: On my party's problems.

(LAUGHTER)

BLITZER: Paul Begala and J.C. Watts are part of the best political team on television -- CNN, America's campaign headquarters.

Thanks, guys.

Coming up, does it concern you that your phone company may be providing your phone records to the government without your knowledge or permission? It sure concerns Jack. He's standing by with "The Cafferty File."

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Let's check back with Jack. He's got "The Cafferty File" in New York -- Jack.

CAFFERTY: Wolf, the question is this: Does it concern you your phone company may be providing your phone records to the government, without your knowledge or your permission? Duh.

Jane (ph) in Silverton, Oregon: "This is not your father's America. Real American values have gone the way of homemade ice cream."

J.R. in Orlando, Florida: "Does it concern me? Yes. One has to wonder, at what point will the Bush administration have enough tools with which to fight the war on terror?"

Jane in New York: "Today's NSA news has answered a question for me. I have always wondered how wireless companies name their cell plans. My Verizon plan is 'America's Choice.' Doesn't that really mean 'Bush's choice'? Maybe I should cancel the Verizon account and stick with Alltel. They have a 'Total Freedom' package."

Ken in Tulsa, Oklahoma: "Chill out, Jack. My personal phone records probably are viewed by several people before they're transmitted to me by my phone service providers. With nothing to hide, I see no harm in letting the government access them as part of an important program to deter terrorists." Mark in Fort Lauderdale: "The good news is, we are all 22 years younger. It is 1984 now, isn't it?"

Alessandro in Massachusetts: "Never before has a U.S. administration so blatantly violated the freedoms and rights this country was founded on, and for which our service men and women continue to die for on foreign soil."

And Scott in Virginia Beach, Virginia: "Relax, Jack. Nobody cares about your 1-900 calls."

(LAUGHTER)

BLITZER: Thanks, Jack. See you in a few moments.

CAFFERTY: Yes.

BLITZER: Still to come here in THE SITUATION ROOM: President Bush did more today than talk about domestic surveillance and privacy. We're going to hear what he had to say in Mississippi.

And much more ahead about the NSA and how it may be tracking your phone call records right now. We are going to have a live report from our national security correspondent, David Ensor.

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

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the "Hot Shots" coming in from our friends over at the Associated Press, pictures likely to be in your hometown newspapers tomorrow.

In Egypt, plainclothes policemen drag off a woman protesting for government reform.

In Baghdad, residents line up for fuel rations. They get eight gallons every two weeks. And it's mostly used for powering generators, due to recent electricity cuts.

To Gaza City now, where a boy takes part in protests against food shortages, with the words "I'm hungry" written on his chest. The shortages are the result of Western aid cuts and Israel's closing of cargo terminals.

To the boxing ring now, where Floyd Patterson hits Archie Moore with a stinging left hook and becomes the 1956 heavyweight champion of the world. Patterson died today at the age of 71.

Those are some of today's "Hot Shots," pictures often worth 1,000 words.

Let's check back with Zain for a quick look at some other stories making news -- Zain.

VERJEE: Wolf, President Bush is on the Gulf Coast. Today, the president gave the commencement address at the Mississippi Gulf Coast Community College.

Mr. Bush told the graduating students, their efforts to rebuild their lives after Hurricane Katrina are an inspiration to the nation.

(BEGIN VIDEO CLIP)

BUSH: There has never been a more hopeful day to graduate in the state of Mississippi.

(APPLAUSE)

BUSH: I am proud to stand before some of the most determined students at any college or university in America.

(APPLAUSE)

BUSH: Over these past nine months, you have shown a resilience more powerful than any storm.

(END VIDEO CLIP)

VERJEE: Meanwhile, President Bush's one-time presidential rival is also giving a pep talk to students. Democratic Senator John Kerry of Massachusetts spokes at American University in Washington -- Wolf.

BLITZER: Zain, thanks.

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