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THE SITUATION ROOM

Judge Rules NSA Wiretapping Unconstitutional; More Work To Be Done in JonBenet Ramsey Case; Lebanese Troops Moving South of Litani River In Accordance With Cease-Fire; Lieberman, As Independent, Leads In Connecticut Polls

Aired August 17, 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, a powerful blow to the president's war on terror. It's 4:00 p.m. in Detroit where a federal judge has ordered the government to stop warrantless wiretaps. Will this first-of-a-kind ruling hold up in other courts? We're examining all the legal and political angles; the ramifications, enormous.

Also this hour, a suspect's stunning public admission in the JonBenet Ramsey case a decade after her murder. John Mark Karr telling the (INAUDIBLE). It's 2:00 p.m. in Boulder, Colorado, where the district attorney is warning the public not jump to any conclusions.

And hundreds of Lebanese troops marching south, reclaiming turf from Israeli forces. It's 11:00 p.m. in Lebanon, where the cease-fire is paving the way for peacekeepers and for commercial planes to fly once again.

I'm Wolf Blitzer in Jerusalem. You're in THE SITUATION ROOM.

The Lebanese army says it hopes to have all 15,000 of its troops deployed in southern Lebanon in the coming hours. We're going to have the latest moves in the Middle East cease-fire a bit later.

First, though, a huge legal and political story back in the United States, with serious implications for the war on terror. A federal judge in Michigan is declaring the Bush administration's warrantless wiretapping program unconstitutional. And she's ruled the National Security Agency, the NSA, must stop monitoring Americans' phone call and e-mail without a court order. This decision is a first, and it's opening the door to more legal wrangling and new political sparring over what was already a very controversial program.

Our congressional correspondent Andrea Koppel is covering the election-year impact. First, though, let's bring in our justice correspondent Kelli Arena with more on the ruling -- Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, Wolf, just to remind viewers, the NSA is monitoring phone calls and other communications between people in the U.S. and people overseas when one of the parties is suspected of a terrorist link.

Well, a federal judge today said that the NSA can't do that because it violates free speech and privacy rights. Now, this suit was brought by the ACLU on behalf of lawyers, scholars and journalists who say that they can't do their jobs well under the threat of having their communications monitored. Now, the ACLU says that this ruling proves that's no one's above the law, not even the president. But the government argues the program is not only constitutional, but it's necessary for national security.

Now, the Justice Department didn't waste any time, Wolf, in appealing this ruling. And it's expected that the judge is going to allow the wiretapping to continue while this case makes its way through the legal system.

BLITZER: Kelli, we're expecting to hear from the Attorney General Alberto Gonzales. He's expected to make a statement anytime. And the White House has just issued a statement suggesting that yes, the program will continue while the appeal process goes into effect. In other words, the enforcement of this judge's ruling will be stayed, if you will. This is good news for the Bush administration.

ARENA: Well, you know, it's as good as it can get when you're facing a ruling that says that a program that you say the president has the authority to implement is unconstitutional. The stay, of course, will be temporary until the appeals process can go forward. But the good news, yes, they can keep it going for now. But as this case and others, Wolf, make their way through this legal system, we'll see where it all ends up.

BLITZER: We'll stand by to hear from the Attorney General Alberto Gonzales, his reaction, and the next legal moves. Thanks very much. Kelli Arena reporting.

The Bush White House says it couldn't disagree more with the ruling against the domestic surveillance program, but Democrats in Congress already are applauding the decision and pouncing on what they call the president's, quote, "power grab."

Let's bring in our congressional correspondent Andrea Koppel -- Andrea.

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT: Wolf, Republicans and Democrats were scrambling this afternoon to review and react to the judge's ruling. With 82 days remaining before the November midterms, both parties are continuing to jockey for position on national security, and this program in particular has been front and center in the debate.

In a statement, Senate Majority Leader Bill Frist said that, "Terrorists are the real threat to our constitutional and Democratic freedoms, not the law enforcement and intelligence tools used to keep America safe. I encourage swift appeal by the government and quick reversal of this unfortunate decision."

Speaker Dennis Hastert echoed those concerns in his statement, saying, "Our terrorist surveillance programs are critical to fighting the war on terror, and save the day by foiling the London terror plot. He hoped that the Democrats will join us in an effort to make sure America continues these vital surveillance programs."

But the top Democrat on the Senate Judiciary Committee, Vermont's Patrick Leahy, indicated that is not likely to happen without a fight. "I have always believed that the Bush/Cheney warrantless domestic spying program violated our laws. By following the Constitution and our laws, we can protect both our security and our American values."

And Democratic leader Senator Harry Reid said the Bush administration's policies have made Americans less, rather than more, secure. "The administration's decision to ignore the Constitution and the Congress has come at the expense of the security of the American people. Instead of being five years into an effective strategy, we're back at square one."

Now, just before the August recess, the chairman of the Judiciary Committee, Pennsylvania Republic Arlen Specter, had tried unsuccessfully get a bill he'd negotiated with the White House approved by his committee. When lawmakers return next month, Specter's going to try again to push that legislation through.

Meantime, a senior congressional aid tells CNN there will be lots of opportunities next month for Republicans to cast Democrats basically in the light as being weak on security. Now, meantime, a senior congressional aide goes on to say that Republicans plan to remind the American people they are the ones who have a proven record in fighting the war on terror -- Wolf.

BLITZER: Senator Specter will be joining me Sunday on "LATE EDITION," this Sunday coming up. Thank you, Andrea, very much.

Here's some background on the U.S. district court judge behind this wiretap ruling. Anna Diggs Taylor got her law degree from Yale back in 1957. She became a federal judge in 1979 after being nominated by then-president Jimmy Carter. She's the first African- American woman to be appointed to federal judgeship in the state of Michigan.

The plaintiffs in the domestic wiretapping lawsuit include a coalition of civil rights organizations, lawyers, journalists and educators. How is the surveillance program affecting their day-to-day jobs? Our Internet reporter Abbi Tatton is standing by with more on this part of the story -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, today's ruling stems from a lawsuit backed, Wolf...

BLITZER: Abbi, stand by, because the Attorney General Alberto Gonzales is making a statement on this issue. Let's listen in.

(JOINED IN PROGRESS)

ALBERTO GONZALES, ATTORNEY GENERAL: ... the United States has been at war with al Qaeda for almost five years; September 11th, 2001. We have talked about this program on numerous occasions to the American people and to the American Congress. It is a very narrow program, again, focused on communications with al Qaeda, where one end of the phone communication is foreign, outside of the United States.

It has been very effective. We've had numerous statements by leaders of the intelligence community about the effectiveness of this program in protecting America.

We also believe very strongly that the program is lawful. It has been reviewed by a number of lawyers within the administration, including lawyers out at the NSA, including lawyers at the Department of Justice. It is a program that is reviewed periodically for its continued effectiveness. It is reviewed periodically to ensure that it remains lawful. It has been very important for the security of our country.

As you know, today a district court judge in Michigan ruled that the program was unlawful. We disagree with the decision, respectfully disagree with the decision of the judge, and we have appealed the decision. And there is a stay in place. And so we will continue to utilize the program to ensure that America is safer.

With that, I'm happy to take any questions you have.

QUESTION: Mr. Attorney General, in view of the fact that two judges have now found that there's sufficient information on the public record to describe the program, for them to assess it, do you now regret any of the public statements you and the White House have made in describing the program?

GONZALES: Well, obviously, that was a tactical decision that had to be made early in this matter. I think the decision by the president was that it was sufficiently important to reassure the American people -- given the disclosure of the program -- to reassure the American people about the narrow scope of the program; to reassure the American people that the program had been carefully reviewed for its law fullness; to reassure the American people that the program is routinely monitored.

And so, of course, we believe it was the right decision to reassure the American people that the president is doing what he believes is necessary, consistent with the Constitution, to protect this country from further attacks from al Qaeda.

QUESTION: Judge Gonzales, how does this ruling impact your efforts to work with Senator Specter to get a law passed which would resolve the issues that are of concern to the judge in this case?

GONZALES: Well, of course, we continue to believe that the program is lawful and that the legislation is not necessary.

However, we have committed to Senator Specter that, if the legislation is passed, that the president would submit the program to the FISA Court to test its constitutionality. We are still analyzing the opinion of the judge. But it would appear that, if the legislation were passed, that it would address some of the concerns raised by the judge in her opinion.

QUESTION: The plaintiffs, the ACLU, said this afternoon that they think that this ruling will impact the legislative debate on this issue.

QUESTION: And I wondered if you agreed with that.

GONZALES: I think that's a matter -- I think you need to ask members of Congress. Obviously, I suspect it will play some kind of role. But it's kind of hard to predict at this moment, in fact, how it's going to impact the discussion.

QUESTION: Judge Gonzales, do you think this ruling will be upheld on appeal?

And if it is, and if the program has to be terminated, even temporarily, what do you think the impact is going to be on your ongoing intelligence activities?

GONZALES: We have confidence in the lawfulness of this program. And that's why the appeal has been lodged. This is an important program. We have the leaders of the intelligence community who have testified to Congress that it's been effective in protecting America.

And so we're going to do everything that we can do in the courts to allow this program to continue, because it is effective, has been effective in protecting America.

QUESTION: The Specter legislation, as I understand it, authorizes the consolidation of challenges to programs such as this in the FISA Court. And I'm wondering: Was that in an intention to avoid the sort of result that you're presented with today?

And, secondly, are you going to continue to push for that provision, effectively, to nullify the judge's ruling?

Do you think you will meet any resistance, or how are you going to proceed on that?

GONZALES: Well, one of the challenges that we're facing is that we do have multiple litigation around the country on this issue. And it seems to me that it will create confusion if we have judges issuing rulings that are different in scope.

And it's for that reason that we asked for a consolidation. And some of these cases have been consolidated. This particular case was not consolidated. And so we'll have to evaluate what the ramifications are of this decision, vis-a-vis the other cases that have been consolidated.

I think it makes sense, if we can get these questions before one central court like the FISA Court and we can have one decision, I think that would be beneficial. BLITZER: All right, so the attorney general of the United States Alberto Gonzalez making clear he disagrees strongly, as the White House did earlier, with this ruling by a federal judge in Michigan saying the warrantless wiretapping program of the National Security Agency unconstitutional, but it will continue at least for the time being.

Let's get some analysis from our senior legal analyst Jeff Toobin. A major defeat, potentially, for the Bush administration, although in the short term they did get a stay. They are not going to force the government from stopping to implement these warrantless wiretaps. How does that happen if the judge, Jeff, rules that it's unconstitutional, why then allow it to continue as the appeals process goes forward?

JEFF TOOBIN, CNN LEGAL ANALYST: Well judges understand that declaring a major government program unconstitutional is a tremendous, important step. And they are usually willing to let the appeals process play out rather than shut a program down initially and that's what happened here.

BLITZER: Because that, clearly, is something that at least a short-term gain from the administration's perspective. Walk us through the process. How is this legal battle going to unfold right now? Will it wind up, presumably, at the Supreme Court?

TOOBIN: You know, I think almost certainly. Because this is such a sprawling and disorganized series of lawsuits at this point, all based to try to determine the same thing, whether this warrantless wiretapping program is unconstitutional. This judge, today's opinion, said it was unconstitutional in very scathing terms. But this was a very liberal judge. You look at the sources she cites in her opinion. She almost exclusively cites other liberal judges. I am virtually certain that other courts will see this differently. And the only way to resolve those sorts of differences is to have it wind up in front of the U.S. Supreme Court.

I think what's even more likely is that the Supreme Court may say, refuse to deal with this issue on the merits and say, look, we are going to let Congress deal with this, try to sort it all out, then figure out what's going to happen rather than decide a case of this magnitude on the very sketchy facts that are available about this program. Because still, to this day, not a lot of detail is known about what kind of surveillance goes on in this warrantless way.

BLITZER: Well, one way of resolving it would be for Congress to enact new legislation giving the executive branch this kind of authority to go forward with the warrantless wiretaps. That's what Senator Specter, the chairman of the Judiciary Committee, wants to do but we just heard Alberto Gonzalez say they think this program is legal and no additional legislation is necessary. Who's going to win that fight?

TOOBIN: Well, I do think that this opinion will strengthen Senator Specter's argument that Congress needs to step in and make a clear rule that is, without a doubt, constitutional, but Wolf, as you know better than I, Congress is not doing much these days leading up to the election. It's very hard to get Congress to agree on anything, much less something as controversial as the struggle between individual liberty and national security. The odds against Congress coming together on something of that importance, at the same time, they have to deal with the question of how to handle the inmates at Guantanamo because of the Supreme Court decision, another legislative project that looks like it is going nowhere fast.

Even though this will be a spur to Congress to try to resolve it, there doesn't seem to be much chance that Congress actually will resolve it before the election, which is only 80-some days away.

BLITZER: Jeff Toobin, thanks very much. Jeff is going to be back with us later this hour.

Let's check in with Jack Cafferty. He's in New York with the Cafferty File, Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, you know, it seems like we are having this discussion about this judge's ruling sort of in the abstract, as though there's no precedent for what the judge decided. The judge, in effect, upheld the ruling of the FISA court, which says if you want to wiretap phones, you need a warrant to do so. The court was created by Congress in 1978, I think it was. And the law of the land says get a warrant.

The actions of the administration have ignored the law of the land in that regard. So it's not a discussion in the abstract. It's not hypothetical. There are laws on the books against what the administration is doing and it's about time somebody said it out loud. This federal district judge ruled today President Bush is breaking the law by spying on people in this country without a warrant. The judge said the president is violating the first amendment to the constitution, the fourth amendment to the constitution and the Foreign Intelligence Surveillance Act, FISA, passed by Congress in 1978, specifically to prevent this kind of abuse of power. It was being done before. That's why the FISA court was created in the first place.

So what does this mean? It means President Bush violated his oath of office, among other things, when he swore to uphold the constitution of the United States. It means he's been lying to us about the program since it started, when he's been telling us there's nothing illegal about what he's been doing. A court has ruled it is illegal. And it means a 75-year-old black female judge in Michigan has finally stepped in and done the job that Congress is supposed to do, namely oversight of the executive branch of government. But the Congress is controlled by the Republicans and they are controlled by the president and they have done nothing in the way of oversight.

I hope it means the arrogant inner circle at 1600 Pennsylvania Avenue may finally have to start answering to the people who own that address, that would be us, about how they conduct our country's affairs. But we want to know what you think. Here's the question, what does a federal judge's ruling that the NSA spying program is illegal mean for President Bush. E-mail your thoughts to CaffertyFile@CNN.com or go to CNN.com/CaffertyFile, Wolf.

BLITZER: Jack, thanks very much. We're also going to speak in the next hour with the 9/11 co-chairman, the 9/11 Commission co- chairman, Tom Kean, Lee Hamilton get their thoughts on this judge's ruling, and the entire domestic spying program.

Also coming up, much more on our top story. Today's stunning ruling on domestic wiretapping -- what does it mean for the war on terror and the political battle over national security? Bill Bennett and Donna Brazile, they're standing by for today's "Strategy Session."

And the new break in the JonBenet Ramsey case -- the suspect's stunning confession and what prosecutors are now saying about doing in Colorado. We're going to have a live report.

And next, Lebanese troops moving south. We will go live to Beirut to see if this fragile cease-fire right here in the Middle East will hold.

Live from Jerusalem, you are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

We turn now to a very different kind of legal drama, a stunning arrest and confession in the 10-year-old murder of a child beauty queen. John Mark Karr is being held in Thailand where he told reporters he was with JonBenet Ramsey when she died, and that her death was an accident. But authorities in Colorado caution today there is much more work to be done in this case.

CNN's Ed Lavandera is joining us now live from Boulder -- Ed.

ED LAVANDERA, CNN CORRESPONDENT: Hi, Wolf.

Well, if Boulder prosecutors had their way, nobody would be talking about John Karr today, but that's certainly not the case anymore after he was paraded before those cameras in Thailand and essentially confessing to the murder of JonBenet Ramsey.

But prosecutors, given every opportunity to say that this is their man, that this is the person they've been looking for for 10 years, didn't even come close to saying that. In fact, tempering much of the public opinion here in Boulder, saying that everyone needs to slow down, take a step back and let the legal process work its way out.

(BEGIN VIDEO CLIP)

MARY LACY, BOULDER, COLO., DISTRICT ATTORNEY: We should all heed the poignant advice of John Ramsey yesterday. He said, "Do not jump to conclusions, do not jump to judgment, do not speculate. Let the justice system take its course."

(END VIDEO CLIP) LAVANDERA: And there's a lot of questioning going on right now as to the credibility of John Karr. One thing in particular that's interesting to look at is that, according to a police general in Thailand who told CNN that he had been told by an American investigator that John Karr admitted to drugging and having sex with JonBenet Ramsey before she was accidentally, quote, "killed," but according to the autopsy report from JonBenet Ramsey 10 years ago, it showed there were no drugs or alcohol in her system.

That's one of the things out there that is poking a little bit of holes in the credibility of John Karr at this point. Of course, it's very early and there's still a lot of work to be done as prosecutors here in Boulder are saying today -- Wolf.

BLITZER: So, Ed, so what you are suggesting in terms of the credibility is that there's some sense out there -- and correct me if I'm wrong -- that maybe this guy just made it up, claims to have murdered JonBenet Ramsey when, in fact, he didn't?

LAVANDERA: Everyone is reading between the lines here with the prosecutors being very tempered in their comments today, JonBenet Ramsey's father being very tempered, others who have had communication with John Karr. No one coming out and saying that this is the guy. Everyone saying let's, you know, slow the process down here.

That has really turned the attention back onto John Karr and saying all right, what is he saying exactly and what proof does he have that he was the one that did this, besides being the one that's in front of the cameras, essentially confessing to such a crime. So really the focus has really kind of turned around here today onto him.

BLITZER: Thanks very much, Ed Lavandera on the scene now. We're going to continue to watch the story. By the way, the public got a first glimpse of John Mark Karr in a remarkable and chaotic appearance before reporters in Thailand. With no lawyer on hand, Karr answered questions about where he was when JonBenet died and what happened to her. Take a listen. Here's some of what he said.

(BEGIN VIDEO CLIP)

JOHN MARK KARR, SUSPECT IN RAMSEY CASE: I love JonBenet and she died accidentally.

QUESTION: Are you an innocent man?

KARR: No. Her death was an accident.

QUESTION: So you were in the basement?

KARR: Yes.

(END VIDEO CLIP)

BLITZER: And we will have more on this case, the JonBenet Ramsey case, coming up in the next hour here in THE SITUATION ROOM. Other important news we are following, especially here in the Middle East, the Lebanese army now making good on a key provision of the cease-fire agreement between Israel and Hezbollah. About 2,000 troops marched across the Litani River today into areas of southern Lebanon that had been held until now by Israeli forces. Army officials say they hope the full contingent of some Lebanese 15,000 troops will be deployed in southern Lebanon by tomorrow morning.

Another sign of the truce still holding, the first commercial flight landed back at Beirut International Airport since the war broke out. Israeli airstrikes have destroyed the runways -- the airport's three runways during a month of fighting.

Let's go live to Beirut, CNN's Jim Clancy on the scene for us with other developments -- Jim.

JIM CLANCY, CNN CORRESPONDENT: All right. Good evening from the Lebanese capital, Wolf.

What the world saw today in Lebanon was really more the deployment of a country's political will than any military force. As you I said, thousands of troops fanned out south of the Litani River. We could see those troops all over Lebanon making their way to the Bekaa Valley.

They will go down southward from there and deploy at Marjayoun and other locations, some of that deployment already completed. UNIFIL troops moving forward to take over Israeli positions, all of this aimed, in a way, to help the Israeli troops get out of Lebanon.

The Lebanese soldiers were greeted with rose water and rice, flowers thrown at them in some places, applause from people that lined the roads. Many people believe that these troops should have been deployed six years ago when Israel initially withdrew from southern Lebanon.

At the same time, as you noted, another sign Israel is easing up on Lebanon, at least in the air blockade, there were flights flying in and out of Beirut International Airport this day.

One of them, a Middle East Airlines -- that's the Lebanese flag carrier flight -- coming in from Amman, Jordan with passengers and cargo. It made a round trip flight back out to Amman. We understand Royal Jordanian is going to be flying in here soon and there could be scheduled flights as soon as next week.

One sad note in all of this, Wolf, and that is that there were two more casualties today, two children killed by a cluster bomb down very close to the border at Nahura (ph). That according to the United Nations. Back to you.

BLITZER: Thanks very much, Jim Clancy in Beirut with the latest, a very important story we're watching.

Coming up, do stories like today's ruling on domestic wiretapping and last week's foiling of the airline terror plot have a political impact? We will take a closer look and see if either party is profiting right now.

Next hour much more in our top story. I will ask the two top members of the 9/11 Commission about the domestic spying ruling. Stay with us. You are in the SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Back now to our top story. The Justice Department is appealing a court ruling today that the National Security Agency's warrantless wiretapping program is unconstitutional. It's a considerable legal and political blow to President Bush at a time when Americans are zeroing back in on the war on terror.

The plaintiffs in the domestic wiretapping lawsuit include a coalition of civil rights organizations, lawyers, journalists and educators. How is the surveillance program affecting their day-to-day jobs? Let's bring in our Internet Reporter Abbi Tatton.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, the ruling today stems from a lawsuit filed in January by groups and individuals who believe their communications were being intercepted by the NSA affecting their ability to do their jobs properly.

These individuals and groups who regularly communicate internationally. Defense lawyers, some of whom represent people overseas suspected of terror crimes. Also a writer and author of a book on the NSA who regularly communicates with the sources in the Middle East and also conducts research online on Jihadist web sites.

The court ruled today that the surveillance program has scared off some of these clients, and sources, making it hard for these individuals to do their job.

As we heard the Justice Department is appealing. We put the lawsuit and today's ruling online, CNN.com/situationreport -- Wolf.

WOLF: Abbi, thank you.

The war on terror has moved to the front burner as an issue in the congressional elections, but come November are voters likely to cast their ballots with Homeland Security in mind? Our Congressional Correspondent Dana Bash is joining us now with some brand new poll numbers -- Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Wolf, as soon as the news of the London terror plot broke, candidates in both parties started trading jabs, trying to take political advantage. We now know Americans paid more attention to that foiled plot to blow up airplanes than any terror-related event since 9/11. Yes, politicians may be surprised to learn this, the public is interested, but attitudes about terrorism haven't changed.

(BEGIN VIDEOTAPE)

BASH (voice-over): According to a new poll from the Pew Research Center 54 percent of Americans say they followed the London story very closely. With that kind of public focus and both parties trying to capitalize, you would think the latest threat would make Americans more worried about terrorism. But it hasn't.

Just 23 percent say they are very worried about a terror attack in the U.S. now, virtually the same as last summer. So far it hasn't changed the dynamic of the election some 80 days away. A political indicator on the issue, approval of how the president is handling terrorism went up only slightly, 50 percent now, versus only 47 percent in June.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The essential front on the war on terror now is Iraq.

BASH: Ironically the problem for Republicans is that line may be sticking. Pollster Andrew Kohut says Americans do see terrorism as intertwined with Iraq. A war they monitor closely and now a mission they are more pessimistic about than ever before.

ANDREW KOHUT, PEW RESEARCH CENTER: The war on terrorism was a predicate of public support for the war in Iraq, but with the war in Iraq not going well, it's another way of the public looking at the situation and saying, Well, the war on terrorism isn't going all that well.

BASH: Nearly seven in 10 people say they worry if Republicans keep control of Congress the U.S. will become involved in too many military operations overseas. That's why Democrats continue to beat the political drum on Iraq.

This new Internet ad slams GOP candidates for supporting Bush's "stay the course" message. But there's a warning sign for Democrats, too. The strategy Republicans used to win the last two elections, painting Democrats as weak on national security still resonates; 57 percent say they are either very or fairly concerned that Democrats would weaken efforts against terrorism if they controlled Congress. That's why you are going to keep hearing this:

BUSH: They want us to leave, they want us to cut and run.

(END VIDEOTAPE)

BASH: In a tough political environment for Republicans, national security is still the area in which they fare the best. But this poll shows voters are more interested this year about domestic issues, especially ones that hit their pocketbook the most, like gas prices, Wolf.

BLITZER: Dana, thank you.

Today some Democrats may be rethinking the Connecticut senator's race and the message it's sending about the politics of the war in Iraq. A new poll shows Democrat turned Independent, Joe Lieberman with a double-digit lead over Ned Lamont, who beat him in last week's Democratic primary. Let's bring in Mary Snow -- excuse me -- Mary.

MARY SNOW, CNN POLITICAL CORRESPONDENT: Wolf, fresh from his defeat in that Democratic primary comes a dramatic turn for Senator Joseph Lieberman. Who now leads in a poll gauging the general election. But also we are seeing the divisions over Iraq are growing sharper.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Shedding his Democrat-only coat, Senator Joseph Lieberman, as an Independent, now has a 12-point lead over Ned Lamont, the Democrat who beat Lieberman in last week's primary.

SEN. JOE LIBERIAN, (D-CT): I am encouraged, but I am ready for a tough fight.

In a new poll, Joseph Lieberman leads the three-way race with 53 percent of the vote. Ned Lamont, 41 percent, among likely voters. Republican Allan Schlessinger trailed with only 4 percent. The poll also shows Lieberman with overwhelming support among Republicans and a large lead among Independents.

STU ROTHENBERG, ROTHENBERG POLITICAL REPORT: The Connecticut general election is really about independence. Lieberman has to appeal to Independent voters, he has to get their support, and he has to continue to display his independence from both parties.

SNOW: Political observers say there is a risk to Lieberman if he appears too cozy with Republicans, and what appeared to be national GOP support is certainly drawing attention. This week the White House declined to endorse the Republican candidate in the Connecticut Senate race; it's not endorsing Lieberman, but Vice President Dick Cheney went out of his way to praise the Senate veteran and take a jab at the Democrats who defeated him.

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: The Dean democrats have defeated Joe Lieberman. Their choice instead is a candidate whose explicit goal is to give up the fight against the terrorists in Iraq.

SNOW: That sparked a strong reaction from Ned Lamont.

NED LAMONT, (D-CT), SENATE CANDIDATE: I think I would just tell Vice President Cheney that we don't need any sermons on the meaning of 9/11.

SNOW: Lamont blasted Lieberman and Republicans for tying last week's thwarted terror plot to the Iraq war.

At a rally last week, Lieberman said, quote, "If we just pick up like Ned Lamont wants us to, get out by a date certain, it will be taken as a tremendous victory by the same people who wanted to blow up these planes."

(END VIDEOTAPE)

SNOW: And as Lamont fights back against a perception that Democrats are soft on national security, he's getting some support from some prominent Democrats. Later, here, today in New Haven, he will be joined by former Senator John Edwards and Senator John Kerry also launched an online fundraising effort for Lamont -- Wolf.

BLITZER: Mary, thank you very much. Mary Snow and Dana Bash are part of the best political team on television, CNN America's campaign headquarters.

Up next, will Joe Lieberman have the last laugh over his fellow Democrats. Donna Brazile and Bill Bennett, they'll hash out the Connecticut Senate showdown in our "Strategy Session". And they will consider the political impact of the new ruling that the president's domestic spying program is unconstitutional.

We're live from Jerusalem and you are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It's unconstitutional and it has to stop. That's what a federal judge says about the NSA's warrantless wiretapping program. The government says it couldn't disagree more. Joining us now from Washington, in our "Strategy Session", CNN Contributor and Democratic Strategist Donna Brazile and CNN Contributor and "Morning in America" host, Bill Bennett of the Claremont Institute.

What do you make -- let me start with you, Bill, of this federal judge's ruling saying this whole NSA domestic surveillance program is unconstitutional and must stop?

BILL BENNETT, CNN CONTRIBUTOR: It's one judge's ruling. They've got to stay on it. It will go on appeal. My prediction, pretty confident it will be turned down. Richard Posner and other judges have said this program is legal.

I don't think Democrats want to make an issue of this. Your own Jeff Toobin said this was a liberal judge, quoting other liberal judges.

The reality of it, quite apart from the politics, is that we run programs which are more restrictive, more tight, not as liberal as what they do in England. England can do far more things that we can. They just broke that plot.

We got a judge saying we have to be more restrictive than we are? I don't think it will fly in the courts, and don't think it flies in the court of common sense.

BLITZER: Well, we asked the American public about this program back in May, Donna; 44 percent thought the Bush administration wiretaps of suspected terrorists without court order were right; 50 percent thought it was wrong. The country almost evenly split on this issue, pretty much divided.

DONNA BRAZILE, CNN CONTRIBUTOR: Wolf, there's no question this is a set back for the Bush administration for the second time this year, they heard from a federal judge that they need to get their secret programs under law.

Arlen Specter, who is a Republican and chairman of the Judiciary Committee, is trying to work out a compromise with the White House. At the same time the White House should read this ruling and see some of the flaws in the program and bring it under the law. So that we can continue to monitor the terrorists, but at the same time we should do it with the basic framework of our civil liberties intact.

BENNETT: Well, I mean, you saw.

BLITZER: The whole -- yes, go ahead and respond.

BENNETT: You saw how quickly the Justice Department got after this in response. This is a fight the Justice Department would seek.

You know, some of those early polls, people thought this was a program in which the government was listening in on all their telephone calls. When things were clarified, polls looked a little better. But, again, look at the context. Look at the situation, which we are in. Do we want to give the government the opportunity to listen to calls, to intercept calls between Americans and people overseas who are suspected of terrorism.

I mean, I just think this is -- whatever the polls say, and the polls, I think, when people understand will be slam dunk, to use that expression again, for the president. Apart from the reality, the dictates of the current situation, terrorism, require us to do this kind of thing.

BLITZER: As far as the broader war on terrorism, Donna, that Pew Center poll, that came out recently, asked if the American public was concerned that the Democratic Congress would weaken the U.S. on terrorism; 57 percent said, yes, and 40 percent said, No. On this issue of being tough and fighting terrorists. The Democrats, at least, historically have been perceived as having a problem.

BRAZILE: Well, Wolf, first of all, we have narrowed the gap. For a long time the Republicans had almost a 30-point advantage on be national security. Today, in some polls, I have seen, we are down 8 points on national security.

Look, Democrats will not be swift voted (ph) on national security. Democrats are prepared to not only challenge the administration on their record on fighting terror but also offer our own ideas on ways we that can bring our troops home safely, as soon as possible.

But back to this ruling, I've just got to say on thing. We are a nation of laws, and while this program is important to the country, and important tool in fighting terrorism, it's important that it's also under some law, and FISA is the law, and that's the law the administration should protect and uphold.

BENNETT: The Constitution is not ...

BLITZER: Bill Bennett, let's talk about the Lieberman race.

BENNETT: Sure. BLITZER: The Lieberman-Ned Lamont race in Connecticut; the new Quinnipiac poll out today has Lieberman at 53 percent; Ned Lamont at 41 percent. The Republican candidate down at 4 percent, Schlessinger barely showing up at all.

What do you see unfolding from Lieberman's defeat in the Democratic primary, though, now he appears to be the front-runner?

BENNETT: Is that for me?

BRAZILE: Yes.

BLITZER: Yes.

BENNETT: For me.

Well, Stu Rothenberg was just on your show, Wolf, talking about how this was a race for the Independent voter. Could you have a better designed candidate for the Independent voter than Joe Lieberman? That's what he appeals to.

He's obviously not a loyal Republican on every issue and obviously not a loyal Democrat on every issue. So, if this is a race for the Independent, Joe Lieberman is in very good shape. The Republican's not going anywhere.

By the way, just one last thing. We are a nation of laws, but Justice Jackson said the Constitution is not a suicide pact. It isn't. And I think this court -- this decision will be reversed.

BLITZER: All right, Donna, I'll give you the last word on the Lieberman/Lamont race.

Some are already suggesting if this poll holds up this is a win- win for the Democrats if Lamont wins, he's a Democrat, if Lieberman wins, he may technically be an Independent, but in his heart, he's also a Democrat. What do you think?

BRAZILE: First of all, let me just say that Ned Lamont is rallying Democrats, but in addition to bringing Democrats back to the table, those who supported Joe Lieberman, it's clear that he has to go after the Independents and any disaffected Republicans that might appeal to his message on so many issues.

But I think this is going to be a dogfight to the bitter end. And I do believe that Ned Lamont will come out victoriously, if he can reach out.

Now, I have to say, going back to this decision, there's no question that the judge's ruling is very broad, very comprehensive, but she said that the president's powers are also derived from the Constitution. So, I am going to stick with the Constitution and not with the Bush administration on this one.

BENNETT: Constitution is what the last judge's appealed stated (ph). BLITZER: Donna Brazile and Bill Bennett, we have to leave it there.

BENNETT: OK.

BLITZER: Bill, we have to leave it there.

BENNETT: OK, OK.

BLITZER: Both of you are part of the best political team on television, CNN, America's campaign headquarters.

A story just coming into CNN here in the SITUATION ROOM. Zain Verjee is watching it.

Zain, what's going on?

ZAIN VERJEE, CNN ANCHOR: Wolf, the Associated Press is reporting that a spokesman for the FBI is saying now one of two containers that tested positive for explosives at Tri-State Airport, in Huntington, West Virginia, contained a gel-like facial cleanser.

Now, the FBI is saying that the female passenger carrying the items is just being questioned for now. This person has not arrested.

As you know, Wolf, the airport was evacuated on Thursday, after the woman's carry-on luggage tested positive for explosives. About 100 people or so were evacuated. She was trying to board a plane, a US Airways to Detroit.

We will bring you more details about this story when we get them, Wolf.

BLITZER: Thank you, Zain for that.

Coming up a deadly bombing in Baghdad as Iraq's government releases new figures about the toll of violence. And the toll is enormous. We're going to tell you what's going on. Stay with us you are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We are following other stories making news right now, including in Iraq. On a sweltering, sweltering day in Baghdad, a bomb ripped through a marketplace in a Shiite neighborhood today.

The attack killed three people. This comes as the Iraqi health ministry released figures showing more than 3,400 were killed last month. That makes July the deadliest month for civilians since the Iraq war began back in March 2003.

A roadside bombing kill a U.S. soldier south of Baghdad today. The number of U.S. military deaths in Iraq, now stands at 2,604.

Up next, is the Bush administration's wiretap program unwarranted or is it an essential tool on the war on terror. Your thoughts about today's court ruling and what it means for President Bush. That's coming up next in "The Cafferty File".

And has a ten-year murder mystery finally been resolved? The latest in the JonBenet Ramsey investigation and the suspect in custody. All that is coming up in the next hour, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's go to Jack Cafferty in New York. He's got "The Cafferty File" -- Jack.

CAFFERTY: Wolf, nice new jacket you have on there. Your wardrobe is improving the longer you are in Jerusalem. I like that.

Question this hour: What does the federal judge's ruling that the NSA spying program is illegal mean for President Bush? We got a ton of mail.

Donna in New York: "It's about time someone pointed out that the emperor has not clothes. Now if only Congress will do it's job and stop this abomination, this assault on our Constitution. We are less safe under this administration. The systematic destruction of our rights will do more to destroy America than any terrorist."

Carla in Alabama: "If his flunkies can have the ruling overturned, it means nothing to him. However, he's a fool if he doesn't realize that the American people know what he's been up to and that a majority of us resent his continual efforts to strip away our freedoms. No matter what the courts say, Bush and those like him are on their way out."

Bob in Virginia: "It should not mean anything but politics by Judge Taylor, who was, surprise, appointed by President Carter. The same president who fathered the ousting of the Shah and the beginning of the Islamic Revolution."

Laura in Connecticut: "That a federal court has now paved the way for the impeachment of President Bush. He better find himself a really, really good attorney."

Tom in Connecticut: "Jack, you are so biased and off base the ruling means nothing because the appeals process is not complete. Sit tight. I'm sure you'll be proven wrong."

Jim in Pennsylvania: "I don't know what they feed you on that vacation of yours, but the whole nation could use a shot of it. Way to go!"

And Woodford writes: "Jail to the Chief" -- Wolf.

BLITZER: Thanks. Glad you like the jacket. Jack Cafferty we will continue this conversation in the next hour. We'll take a quick break. There's been a development the Barry Bonds case, that's coming up. Zain Verjee standing by. We are in THE SITUATION ROOM. Stay with us.

(COMMERCIAL BREAK)

BLITZER: With the fall elections, and 2008 in mind, one political party is stepping up the criticism of the nation's largest company, our Senior Analyst Jeff Greenfield has the story -- Jeff.

JEFF GREENFIELD, CNN SENIOR ANALYST: Wolf, it may not be the most noble of notions, but one of the most useful assets for any politician is the adversary.

Illegal immigrants, corporate polluters, street criminals, lazy bureaucrats, welfare cheats, rich tax cheats, sure, but what about a store.

(BEGIN VIDEOTAPE)

SEN. JOE BIDEN, (D), DELAWARE: Wal-Mart's formula as to how they can survive is a race to the bottom.

That is Senator Joe Biden, potential presidential candidate. He appeared at a rally in Des Moines, Iowa, site of the first presidential caucuses, not so incidentally.

The day before, Senator Evan Bayh, another likely presidential candidate, also denounced Wal-Mart's wage and benefits structure as emblematic of the middle class squeeze.

Senators John Kerry and John Edwards have also been critical. And Senator Hillary Clinton, who was once on the board of Wal-Mart, back in her former Arkansas home, returned a $5,000 contribution from the company.

The targeting of the nation's largest private employer has gone beyond political sound bytes. State and local governments, Chicago, New York City, Maryland, for example, have passed so-called big box laws that would require huge stores, often affecting only Wal-Mart or one or two others, to provide higher wages and health benefits to their workers.

A judge has struck down Maryland's law saying it violated a federal employee benefit rule. And Mayor Daley has hinted he will veto a the city council's bill in Chicago.

Wal-Mart, for it's part, calls these efforts a short-sided political strategy that will backfire. And pointedly notes that it is our responsibility to let our employees know when a politicians speaks for or against our company.

So, what's going on here? On the one hand lower-income shoppers benefit from the Wal-Mart's low prices. On the Friday after Thanksgiving last year, 10 million Americans shopped at Wal-Mart in six hours.

On the other hand, Wal-Mart's wage and benefits structure and its troubles over hiring illegal immigrants, and charges that some workers have been forced to work off the clock, have made it, and it's 1.3 million workers target No. 1 for organized labor. Unions have seen a sharp decline in their roles in recent decades, especially among private sector workers.

And organized labor, in return, remains one of the key elements of the Democratic Party's financial and voter turn-out base. And as for the Democrats, they've seen a steady erosion in their blue-collar, working class support. Once upon a time Democratic icons trumped their opposition to wealthy interests.

UNIDENTIFIED MALE: Yes, the money changers have fled from their high seats in the temple of our civilization.

GREENFIELD: After President Kennedy battled U.S. Steel over price hikes, he said this when asked if he was worried that big business had him where they wanted.

JOHN F. KENNEDY, FORMER PRESIDENT OF THE UNITED STATES: I can't believe I'm where business -- big business wants me.

GREENFIELD: But in recent years, national security and traditional values issues have changed voter patterns. In 2004, Bush beat Kerry among blue collar low and middle income white, 54 to 46.

(END VIDEOTAPE)

GREENFIELD: This year, Democrats seem to believe they can win back many of these voters by hitting basic bread and butter issues: low wages, healthcare, and they appear to believe they can turn the symbol of low prices into a symbol of economic injustice -- Wolf.

BLITZER: Thank you, Jeff.

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