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THE SITUATION ROOM

New Comic Book Interprets 9/11 Commission Report; Surprising New Criticism of Bush's Handling of Iraq from Senator McCain; John Mark Karr Waived Extradition; Iran Reportedly Willing To Talk About Nuclear Activities; Some Analysts Forecasting Political Storm This Fall; Some Believe Outing of Valerie Plame Wilson Has Connection to State Department; Growing Concern Over Kidnapped FOX Journalists

Aired August 22, 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: And to our viewers, you're in "THE SITUATION ROOM," where new pictures and information are arriving all the time. Standing by, CNN reporters across the United States and around the world to bring you today's top stories.
Happening now, a nuclear reaction. It's 11:30 p.m. in Tehran, where Iran reportedly now is willing to talk about its nuclear activities. But will it do what the U.S. wants first?

Also this hour, election terror. We have brand new CNN poll numbers on homeland security and the battle for Congress. It's 4:00 p.m. here in Washington, where some analysts are forecasting a political storm this fall.

And we'll speak live with Senator Joe Lieberman, who's fighting for his political life.

And John Mark Karr's day in the U.S. courtroom. It's 1:00 p.m. in Los Angeles, where the suspect in the killing of JonBenet Ramsey faced extradition today. We'll tell you where he and the case are heading next.

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

The Bush administration is calling this a significant moment in the nuclear standoff with Iran. The Iranian media reporting Tehran is willing to return to the serious talks on its nuclear program as early as tomorrow. But Iran's top nuclear negotiator apparently is not saying whether Iran will stop its nuclear activities first, as the United Nations Security Council demands. In Tehran today, Ali Larijani reportedly delivered his country's response to a U.N. package of incentives. The United States now is promising to study Iran's formal response carefully.

Our White House correspondent Suzanne Malveaux is standing by in Minnesota, where she's traveling with the president. But let's go to United Nations. Our senior U.N. correspondent Richard Roth has the latest -- Richard.

RICHARD ROTH, CNN U.N. CORRESPONDENT: Wolf, Iran has not publicly given any indication it is reversing course and willing to do what the Security Council is demanding to freeze its nuclear enrichment program. Despite all the fanfare, there's been no sign that the policy has changed, Iran saying it is willing to engage in serious discussions and negotiations. That may not go down too well in various Western capitals because they'll say they've been through that before, and they've offered a package of economic incentives to Tehran.

(BEGIN VIDEO CLIP)

JOHN BOLTON, U.S. AMBASSADOR TO U.N.: We've made it clear in the Security Council Resolution 1696 that Iran has a choice. They can either take up the very generous offer that the five permanent members and Germany have extended to them -- and if they do, there's a possibility of a different relationship with the United States and others.

(END VIDEO CLIP)

ROTH: But, as Ambassador Bolton says, if Iran does not do that, the United States would make it very clear it's ready to go inside the Security Council chamber and push for economic sanctions against Iran. That, of course, may be also very easy to say at this moment, and face some obstacles with China and Russia lurking. They think it's better, Wolf, to keep talking and not put some sanctions pressure on at this time -- Wolf.

BLITZER: Richard, as you well know, there are a lot of U.S. officials, senior U.S. officials, here in Washington. And I've spoken with many of them personally, who suggest that the Iranians are simply playing for time, trying to run out the clock, trying to enrich uranium, build a bomb, but keep on talking to delay sanctions, keep the West, keep the Europeans, the other members of the Security Council, in this process for the time being, without being punished significantly. What's the sense at the United Nations?

ROTH: Well, one senior political official, when asked about Iran today, almost backed away, saying, listen, we don't need this, we've got North Korea, Somalia, Lebanon, Israel. They would love to make this go away here. But they also know, the way things have been going, that Iran could certainly be playing for time. Some say it was using Hezbollah and the Lebanon situation as a further distraction. It doesn't appear to have worked so far, if the European Union and the United States are ready to go right back to sanctions if they don't like the answer coming from Tehran.

BLITZER: All right, Richard, thanks very much.

Let's check in with our White House correspondent Suzanne Malveaux. She's traveling with the president in Minnesota. What are White House officials saying, Suzanne?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, the White House is really standing firm. We heard from spokeswoman Dana Perino, who is traveling aboard Air Force One with the president, saying that yes, they have received the Iranian statement. The president has yet to get a chance to read through this. She said that has really going to be up to the permanent five members of the U.N. Security Council, plus Germany, to try to parse the language in the next couple of days. But she did say that we want this clear, that the president's position just yesterday still stands. And that is -- of course, she said, we are aware of the rhetoric about a nuclear program, but it would be a big mistake, dangerous to the region and the rest of the world if Iran was to continue with its enriching uranium program. And that is a condition here for these talks.

The White House is not abandoning that position that it has to freeze that program first, before it sits down and participates in those talks. And, as Richard had mentioned before, the real challenge for this administration, whether or not that they pull this off, is getting Russia and China on board with those tough economic sanctions. A lot of tough talk from the Bush administration, but very unclear whether or not it's going to get those key allies on board with the sanctions.

I should also let you know, Wolf, too, that the Bush administration is also buying a little bit of time here, stressing that the August 31st deadline. And the reason why is because they want to get all of the members on board, the international body speaking with one voice. And secondly, they don't want to picture this -- or paint this picture, rather, as the United States versus Iran in some sort of standoff. They want the U.N. Security Council as a united body to respond at the end of the month -- Wolf.

BLITZER: And Suzanne, do senior officials, White House officials, think under any circumstances Iran is going to abandon its quest for a nuclear bomb?

MALVEAUX: The people that I speak to really do not believe that Iran is going to do that. They don't believe that Iran, ultimately, is going to cooperate. It certainly paints -- puts Iran in a box, if you will, in a corner. It puts more pressure on Iran.

But what they are trying to do at this point is really put the pressure on Russia and China and some of its key allies to convince them that this is a regime that is so dangerous with a nuclear weapon that you have to do something -- you have to do something more drastic than you did before, and that means tough economic sanctions. So look for the diplomacy in that area specifically -- Wolf.

BLITZER: Suzanne, thanks very much.

Let's turn now to another threat and its possible impact on the November elections. Brand new CNN poll numbers out this hour, suggesting Republicans are benefiting from a renewed focus on security and the war on terror.

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

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Wolf, in politics, you have to frame the debate. That's what both parties are trying to do right now.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Republicans want to frame the debate around the war on terror. Why? Look at the latest CNN poll, conducted by the Opinion Research Corporation. Americans believe the Republicans in Congress would do a better job dealing with terrorism than the Democrats.

Democrats want to frame the debate around the war in Iraq. Why? Americans believe Democrats would do a better job dealing with Iraq.

Public opinion is becoming more and more critical of the war in Iraq. Only 35 percent of Americans now say they favor the war, the lowest level of support ever. Criticism of Iraq may be shaping the public's view of the war on terror.

DAVID DRUCKER, "ROLL CALL" MAGAZINE: As long as the war in Iraq is difficult, I think voters are going to feel more insecure about the terrorist threat.

SCHNEIDER: Just over one-third of Americans believe the U.S. and its allies are winning the war on terror. The prevailing view -- neither side is winning. President Bush is trying to reverse that process. He wants the public's view of terrorism to shape their opinion of Iraq.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'll repeat what our major general said -- leading general said in the region. He said if we withdraw before the job is done, the enemy will follow us here. I strongly agree with that.

SCHNEIDER: Does the American public agree with that? No. Fifty-two percent believe the war in Iraq is a distraction from the war on terror. Forty-four percent agree with President Bush that Iraq is an essential part of the war on terror.

(END VIDEOTAPE)

BLITZER: The campaign is just beginning, but so far, Iraq is framing the debate more than terrorism. Take people who believe the U.S. is winning the war on terror, but who oppose the war in Iraq. Which opinion matters more? Apparently, Iraq, because their view of President Bush is 2-1 negative -- Wolf.

BLITZER: Bill Schneider reporting for us. Thank you very much.

And there's another reason today that Republicans in Congress may be feeling a little bit more hopeful about their prospects in November. Take a look at this. A new "USA Today"/Gallup poll shows Democrats now holding just a two-point advantage over Republicans among registered voters asked to name their choice for Congress. Our CNN survey, released yesterday, shows Democrats with a nine-point advantage over Republicans. And that helps explain why many members of the president's party are running scared.

Our congressional correspondent Andrea Koppel has more.

(BEGIN VIDEOTAPE)

REP. EMANUEL CLEAVER (D), MISSOURI: I'm telling you, we have 202 Democrats in the House. It ain't enough!

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT (voice-over): Enough for House Democrats would be to pick up at least 15 seats this November, just enough to give them a majority for the first time in 12 years. And with 232 seats, Republicans are bracing for their biggest battle in years, but predicting they'll hold on to power. Some analysts aren't as optimistic.

(on camera): How worried should Republicans be?

AMY WALTER, COOK POLITICAL REPORT: They should be very worried, looking into what right now what is a category 5 type of political storm. Every diagnostic indicator suggests there are real troubles for Republicans this fall.

KOPPEL (voice-over): Indicators like President Bush's continues low approval ratings while anti-incumbent sentiment remains high. Growing pessimism about Iraq and bread and butter issues like high gas prices. And those sentiments are playing out in at least three dozen hotly contested races with the northeast and the Midwest at the vortex of this growing storm.

In Connecticut, three moderate Republicans face tough challengers, as do several Republicans in Pennsylvania, including 20- year veteran Curt Weldon. While in Ohio, a member of the Republican leadership, Deborah Pryce is one of at least three vulnerable incumbents.

According to Amy Walter, it's a recipe for Republican angst.

WALTER: Voters have become calcified in their beliefs about this election. I don't think that there's any speech or piece of legislation that a Republican incumbent can give to change voter's perception about this election.

KOPPEL: What they can do, says Walter, is to try to drive up negative feelings about their Democratic challengers while highlighting a Republican strength, national security. And so in Web ads and e-mails, Republicans plan to paint Democrats as weak and too liberal to lead the war on terror.

REP. ROY BLUNT (R-MO), MAJORITY WHIP: It makes such a big difference who sets the agenda, who is the majority in Washington. We need to make that case, the difference in Speaker Pelosi and Speaker Hastert is going to be a pretty big difference.

(END VIDEOTAPE)

KOPPEL: But for the first time in a dozen years, Democrats feel the political winds are finally blowing in their direction and privately some senior Republicans agree. Says one senior aid, "We know there's a hurricane out there. What do we do? We board up the windows, put out the sandbags, and get ready." Andrea Koppel, Capitol Hill.

BLITZER: Andrea Koppel, Bill Schneider and Susan Malveaux are part of the best political team on television. CNN, America's campaign headquarters.

Are Americans ready for a 9/11 comic book? The events of that day have been re-enacted for film and television. Now the details of the 9/11 Commission report are being transformed into a new illustrated book. How is it being received? Our Internet reporter Abbi Tatton has the story -- Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, in turning the 9/11 Commission report into a much shorter, illustrated version cartoonists Ernie Colon and writer Sid Jacobsen have said that they aim to clarify what's essentially a complex read.

The result -- out today is the "9/11 Report: A Graphic Adaptation" serialized online at Slate.com. Even though there are cartoons in here, the images are still jarring. The text in this graphic adaptation is taken from the original 9/11 Commission report. A phone call from United flight 175 here, appearing in the original report appears in this graphic adaptation in a speech bubble.

The chairs of the 9/11 Commission have praised this graphic adaptation for its close adherence to the original report. Now this is not the first time the events of September 11th have been illustrated in graphic form. Author Art Spiegelman produced a memoir, "In the Shadow of No Towers" in 2004. But this adaptation out today is based on the original 9/11 Commission report. That report, when sold, some of its profits went to charity. Spoke to the publisher today of this graphic adaptation who said no final decision has yet been made on what to do with all the proceeds -- Wolf?

BLITZER: Abbi, thank you. Now more than ever, you need to know your enemy. Tomorrow night see stories only CNN can tell you about the man who became the world's most wanted terrorist. Join us when "CNN PRESENTS: In the Footsteps of bin Laden." That airs tomorrow night nine p.m. Eastern, six Pacific, only here on CNN.

Meanwhile, new marching orders today in the war on terror and the war in Iraq. The U.S. Marine Corps says it will recall up to 2,500 inactive service members in the next year and a half. They'll fill troop shortages created by the missions in Iraq and Afghanistan. It's the marine corps' so-called involuntary recall since the U.S. invasion of Iraq back in 2003. We're going to have a full report, a live report from the Pentagon coming up in our next hour.

And some rather surprising new criticism today of the president's handling of Iraq from a staunch defender of the war, that would be Republican Senator John McCain. In Ohio today, the possible 2008 presidential contender accused the White House of not telling the American people how difficult the Iraq mission would be.

Among other things, the senator blasted the so-called "mission accomplished" catch phrase and Vice President Dick Cheney's claim that the insurgency was in its, quote, "last throes." McCain is quoted as saying that such talk "has contributed enormously to the frustration that Americans feel today because they were led to believe this could be some kind of day at the beach, which many of us fully understood from the beginning would be a very, very difficult undertaking."

Strong words from John McCain. Let's get some strong words from Jack Cafferty. He always has some strong words. Jack?

JACK CAFFERTY, CNN ANCHOR: The IRS is getting ready to hire private companies to collect taxes. Federal budget deficits at record levels and the government wants to pay outside debt collectors to do its job. It gets better. These private companies will get to keep almost a fourth of the tax money they collect. The IRS acknowledges it will pay these outside companies more than it would cost to hire additional collection agents.

And if this is the first you heard about this program, well, it's because the government isn't exactly going out it's way to let us taxpayers know what it's doing. The IRS says they have money allocated to hire outside collection firms, but don't think they could get money from Congress to hire more government workers. So if you owe internal revenue, a few bucks in back taxes, didn't be surprised if a leg-breaker named Vito shows up on your porch demanding money.

Here's the question. Should the IRS hire private companies to collect federal income taxes? E-mail your thoughts to CaffertyFile@CNN.com or go to CNN.com/CaffertyFile.

BLITZER: Jack, thank you. Jack Cafferty with some strong words, as I said. And if you want a sneak preview of Jack's questions plus an early read on the day's political news and what's ahead in THE SITUATION ROOM, sign up for our daily e-mail alert. Just go to CNN.com/SITUATION ROOM.

Coming up, John Mark Karr is about to board another plane. We're going to tell you where the man suspected of killing JonBenet Ramsey is headed next.

Plus, much more on our new poll numbers. I'll ask Paul Begala and J.C. Watts which party is winning the political fight over the war on terror. Stick around for today's "Strategy Session."

And he's under attack by his own party as he fights to save his political life. Senator Joe Lieberman joins us live right here in THE SITUATION ROOM. That's coming up in the next hour. Stay with us.

(COMMERCIAL BREAK)

BLITZER: John Mark Karr's bizarre journey continues right now. The man suspected in the 1996 killing of child beauty queen JonBenet Ramsey will be taken to Boulder, Colorado to face charges, possibly as soon as today. He appeared at an extradition hearing in Los Angeles just a few hours ago.

(END VIDEO CLIP) JUDGE LUIS LAVIN, LOS ANGELES SUPERIOR COURT: Mr. Karr, I am holding up a waiver of extradition, do you see that?

JOHN MARK KARR, SUSPECT: Yes, Your Honor.

LAVIN: Did you read and understand the form?

KARR: Yes, Your Honor.

LAVIN: Do you understand that by signing this form you are agreeing to be extradited to Colorado?

KARR: Yes, Your Honor.

LAVIN: All right, the court finds that the defendant knowingly and intelligently waived his rights through the issuance and service of the governor's warrant. He is remanded into custody without bail and the defendant shall be returned to the state of Colorado.

(END VIDEO CLIP)

BLITZER: Let's get to more now from CNN's Dan Simon in Los Angeles.

DAN SIMON, CNN CORRESPONDENT: As expected, John Karr waived his extradition which now means the Los Angeles phase of this case is over and the focus is now squarely on Boulder, Colorado.

Now, I was up in the courtroom. I had a clean view of John Karr. At least from my vantage point, he seemed to be somber, he seemed to be taking these proceedings very seriously, and that he had respect for the process.

At one point, his public defender asked that John Karr be able to wear civilian clothing. The judge turned down that request. Sometimes defense attorneys will make that request so a potential jury pool isn't influenced by seeing a defendant wearing jailhouse clothes. In any case, the judge said no.

In terms of where we go from here, bottom line, everything is now over here in California as far as the local folks are concerned. Everybody now watching Boulder, Colorado to see where this case now goes.

Dan Simon, CNN, Los Angeles. Wolf, back to you.

BLITZER: All right, Dan. Thank you.

Let's check in with Zain Verjee. She's watching some other important stories making news. Hi, Zain.

ZAIN VERJEE, CNN ANCHOR: Hi, Wolf.

Emergency officials are now saying all 170 people aboard a commercial airliner that crashed in eastern Ukraine are believed to be dead. The pilots of the Tupolev Tu-154 reportedly sent word of a fire on board and heavy turbulence shortly before the plane disappeared from radar screens. The plane was flying from a Ukrainian Black Sea resort town to the Russian city of St. Petersburg.

Italy says it's willing to lead a contingent of international troops to be deployed to southern Lebanon. The Italian prime minister's office says the country is also ready to contribute as many as 3,000 troops to the U.N. force. Both the Israeli and Lebanese governments reportedly asked Rome to take a leadership role after France offered only 200 troops to the contingent.

Sporadic fighting is being reported in Gaza as Israeli troops, backed by troops and helicopter gunships, conduct sweeps and carry out searches. Palestinian and Israeli sources are confirming that three militants were killed when Israeli troops opened fire near a border crossing. Separately, Palestinian sources say five Palestinians were wounded. Israeli officials say at least five militants were arrested.

A top British commander says Iran is helping to incite sectarian violence in Iraq. Just a short while ago, a Royal Marine lieutenant, General Sir Robert Fry (ph), the deputy commander of the multinational force in Iraq, told reporters that Tehran has a clear role in, quote, "stoking up the violence." He says Iran is contributing arms, money and possibly training to Shia militias in Iraq. Iran has denied that -- Wolf.

BLITZER: Zain, thank you very much. Zain Verjee reporting.

Up next, as Democrats and Republicans battle for Congress, will the war on terror be the deciding factor? I will ask two experts: Paul Begala and J.C. Watts. They are standing by live.

Plus, is the White House at a disadvantage as it deals with the Iranian nuclear crisis because of the war in Iraq? Find out in today's "Strategy Session." Stay with us. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back to THE SITUATION ROOM. I'm Wolf Blitzer in Washington.

In today's "Strategy Session," will voters cast their ballots this November based on which party they think can better wage the war on terror? And could Iran's nuclear stance result in political fallout?

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

I want you guys to check out these new CNN poll numbers that just came in today. The chances of a terrorist attack if Democrats win control of Congress are higher, 24 percent; no effect, 56 percent; lower, 17 percent, so a majority, 56 percent, say it will have no effect whether there's another terror attack if the Democrats win control of Congress. Who does a better job dealing with terrorism? Republicans, 48 percent, Democrats, 38 percent, still a 10-point advantage the Republicans have on this issue, Paul.

PAUL BEGALA, CNN POLITICAL STRATEGIST: Right, but down from an 18-point advantage they had in '04, and I think it was higher in '02, but I didn't have time to check, to tell you the truth.

The Republicans ought to still be worried. Democrats should always worry about national security. It's not their forte, traditionally. But imagine if the Democratic advantage on say, the environment, healthcare, education -- traditionally Democratic issues -- had dropped from 30 or 40 points down to 10, we would be through.

And my Republican friends, I think, fear that their ability to play the sort of fear card on terrorism has played itself out, or as we say back home in Texas and they say in Oklahoma, that dog don't hunt no more J.C.

BLITZER: It may not hunt anymore because of the failures in Iraq. Is that a fair assessment?

J.C. WATTS, CNN POLITICAL ANALYST: You know, Wolf, I think it's unfortunate that we have to talk about the war against terror in these terms, in terms of Republican and Democrat politics, but it is a reality that we have to deal with that.

I do think, you know, those numbers are going to fluctuate back and forth. When something happens like here a couple of weeks ago when we thwarted the British bombing of those planes coming into the United States, the president got a bump out of that.

But I think all in all, I do believe and it's consistent over the years that people feel better when Republicans are in charge of national security, military issues, et cetera, and I think Republicans will continue to benefit from that.

BLITZER: And you don't think the competence issue, the way the president, the vice president, the secretary of defense, have handled the war in Iraq, that that's going to undermine Republicans?

WATTS: Well, obviously, there's been some mistakes, and I think the administration benefits when they say, hey, we haven't done everything perfectly. But you have to recognize this: We can thwart terrorist attacks the way we saw two weeks ago and still fight the battle in Iraq. And we can still make sure that nothing happens to the American people on U.S. soil. I think that's going to be a big plus for the president, that nothing has happened since 9/11.

BLITZER: All right.

You want to respond to that?

BEGALA: I think Democrats are simply going to say, if you are satisfied with that, if you are satisfied with the course that we are on, in Iraq, in the war on terror, or domestically, you need to vote Republican.

But, if you think we can do better, if you think we need a new direction, you need to vote Democratic. Those are -- that's the sort of fundamental...

(CROSSTALK)

BLITZER: In other words, the old question that was asked: Are you better off today than you were four years ago?

BEGALA: Right.

There's really only two messages in American politics: Stay the course, and, it's time for a change. OK? This is an -- this is a classic "time for a change" election year. And that's bad news for the party in power, the Republicans.

BLITZER: Go ahead.

WATTS: Well, I think the American people are saying, we are not so sure that we want Democrats handling this, because of all that they have said, all that they have done. They make us nervous handling security of the -- of our homeland.

BLITZER: I want both of you to listen to what Senator John McCain, who has been a very, very strong supporter of the president's policies in Iraq, the war in Iraq. He's had criticisms. But I want you to listen to what he has just said, because this is a powerful statement he makes.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: Stuff happens, mission accomplished, last throes, a few dead-enders. I am more familiar with those statements than anyone else, because it grieves me so much that we have not told the American people how tough and difficult this task would be.

(END VIDEO CLIP)

BLITZER: He's on the campaign trail, you saw, with Mike DeWine in Ohio, trying to get him reelected.

But when he says, stuff happens, mission, accomplished, last throes, a few dead-enders, those are not just words. Those are words associated with the president, the vice president, the secretary of defense, in talking about this war. And he's basically saying: You know what? They should have never used those phrases.

BEGALA: Well, it's one of the most interesting things in American politics today. The American people really hate this war in Iraq. They have turned against it in record numbers.

Our new poll says, 61 percent, the highest ever, 61 percent of Americans oppose the war. And, yet, the most popular politician in America is John McCain, who is the strongest supporter of this war. And I think the reason for that dichotomy is what we just saw. John McCain, unlike the president and the vice president and Secretary Rumsfeld, has not simply been a cheerleader. He has told people a lot more of the truth: This is going to be hard, bloody, awful, but still worth it

The president seems to always reflect back to his old days as a cheerleader at Andover. And he says, rah-rah, we're winning. And that engenders cynicism.

BLITZER: And, in fairness to McCain, also, in addition to being very critical of Rumsfeld over these past three years or so, from the beginning, he said: Not enough troops were deployed. If you are going to do it, you got to do it full-speed ahead. You can't just do it sort of half-measure.

WATTS: That's right.

And, Wolf, thank you for saying that. We were listening to that story in the green room earlier. And that's exactly what I was saying, that this is nothing new with John McCain. He has been very consistent, in saying that, hey, we were arrogant. He has been -- he has not been a defender of Donald Rumsfeld.

I think that's fair to say. But, at the same time, as I said earlier, I think it helps when the president says, you know, hey, we didn't do everything the right way, but we are doing the right thing in being in Iraq, fighting in the war against terror, and making sure that nothing happens at home.

BLITZER: Some have suggested -- many analysts, Paul, have suggested that the threat to the United States and its friends in the region, in Europe, from potentially a nuclear-armed Iran is a lot greater than the threat from Saddam Hussein in Iraq ever was. Yet, the U.S., in dealing with Iran right now, moving to enrich uranium, potentially getting ready to build a bomb, the U.S. hands are tied, to a certain degree, because of the mistakes in Iraq.

BEGALA: I think those analysts are correct.

The -- a nuclear-armed Iran is the real nightmare scenario. And, before the war in Iraq, a member of the Senate, the former chairman of the Senate Intelligence Committee, Bob Graham, then a senator from Florida, said this.

He said: I don't want this war in Iraq, because Iran is really the emerging threat.

Had the president listened to Senator Graham, had the Congress listened to Senator Graham, America would be stronger today to confront this threat in Iran. But now we are bogged down and bloodied, militarily, in Iraq. We are discredited diplomatically. No one wants to be our ally anymore.

And, so, our options, both the carrots and sticks that we have to confront this very real menace, are -- are greatly diminished. And I think President Bush is going to go down in history as the guy who let Iran, potentially, get the bomb.

BLITZER: What do you think?

WATTS: Well, Wolf, the bottom line is this.

This isn't a U.S. -- Iran is not a U.S. problem. When the president said the three axes of evil, Iran, Iraq, North Korea, man, people were critical, said, you -- you shouldn't have said that. But it is what it is.

And I don't think this is a U.S. problem. I think this is a world problem. And I think, you know, those nations, those six nations, Germany, China, Russia, U.S., others, those six nations that's trying to deal with Iran, I think they must continue to do so.

I -- you know, the world can't say, this is a U.S. problem, because the president didn't use the right language. I think they have got to keep that pressure there, bring pressure to bear, and get Iran to fall in line.

BLITZER: All right. We will see what happens.

Guys, thanks very much.

BEGALA: Thanks, Wolf.

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

Up next: new speculation today about who may have been behind the CIA leak story. We're going to have the latest developments in the investigation.

Plus: new numbers in the political battle in Connecticut. We're going to take a closer look at who is on top in this race involving Joe Lieberman and Ned Lamont.

And Lieberman will be standing by to join us live in the next hour.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

There's renewed speculation about the controversial leak of a CIA's operative's identity. Did the outing of Valerie Plame Wilson have a connection to the State Department?

Our Brian Todd is covering the latest developments in the leak case -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, that question comes up today because of new links between one of the key reporters in this case, an important date in the investigation, and the man the reporter apparently met with on that date.

(BEGIN VIDEOTAPE)

TODD (voice-over): The former number-two man at the State Department speaks only briefly with reporters, commenting only on his state of fitness.

RICHARD ARMITAGE, FORMER DEPUTY SECRETARY OF STATE: I'm working out.

UNIDENTIFIED MALE: Yes. Good for you.

TODD: Richard Armitage won't comment on a report of his meeting with "Washington Post" reporter Bob Woodward that has been linked with the CIA leak investigation.

Through a Freedom of Information Act request, the Associated Press obtained Armitage's State Department calendar entry from June 13, 2003. From 2:00 p.m. to 3:00 p.m., it says "Private appointment, Bob Woodward."

Contacted by CNN, Woodward would not comment on the AP report. But he has previously said that, in mid-June of 2003, he met with a Bush administration official, who talked to him about CIA officer Valerie Plame, the wife of former U.S. Ambassador Joe Wilson.

(BEGIN VIDEO CLIP, "LARRY KING LIVE")

BOB WOODWARD, "THE WASHINGTON POST": At the end of a very long interview, substantive interview, for my book "Plan of Attack," a source had, when I asked about Joe Wilson, told me that Wilson's wife worked at the CIA as a WMD analyst. At that point, and on your show, I didn't know what that meant at all, because it was such a casual, offhand remark.

(END VIDEO CLIP)

TODD: Woodward has said, his source released him from a confidentiality agreement to speak with investigators about that conversation, but not to disclose the name publicly.

Woodward has said he does not believe a crime was committed when the official told him about Plame, whose identity was classified at the time. And prosecutor Patrick Fitzgerald has never indicated that Woodward or Armitage were targets of his investigation.

Woodward has said he does not believe his source was part of any White House campaign to discredit Wilson for criticizing the administration's case for the Iraq war.

(END VIDEOTAPE)

TODD: Woodward is believed to be the first member of the media to have discussed Plame with an administration official.

And Woodward's former boss at "The Post," Ben Bradlee, has speculated that Armitage was that source. Again, neither Woodward, Armitage, nor the current executive editor of "The Post," Leonard Downie Jr., would comment on any of this. Was Armitage also the source for columnist Bob Novak, when he revealed Plame's identity? Novak also wouldn't comment today -- Wolf.

BLITZER: All right, Brian, thank you very much.

For more now on the newly released State Department calendar, let's bring in our Internet reporter once again, Abbi Tatton -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, we have linked to that meeting schedule online here.

In it, you can see June 13, that hour-long private appointment with "Post" reporter Bob Woodward. And, interestingly, a week before that, there's a 15-minute appointment here with Scooter Libby, Vice President Dick Cheney's former chief of staff.

Now, the calendar doesn't list anything about what was discussed in any of these meetings. And it does list many other meetings that Armitage had, including, interestingly here, an appointment with Tom Cruise and Church of Scientology director Kurt Weiland.

You can find this entire calendar linked online at CNN.com/SITUATIONREPORT -- Wolf.

BLITZER: Thanks, Abbi.

On our "Political Radar" this Tuesday: the ups and downs of Democratic Senator turned independent candidate Joe Lieberman. A new American Research Group poll of likely Connecticut voters shows Lieberman just two points ahead of the man who defeated him for the Democratic nomination, Ned Lamont. The Republican candidate, Alan Schlesinger, barely registers in the survey. Another poll out just last week showed Lieberman 12 points ahead of Lamont.

I am going to be asking Lieberman about his battle for political survival and the backlash within the Democratic Party. The senator joins us live. That's coming up in the next hour, right here in THE SITUATION ROOM.

It's primary day in Alaska and Wyoming. And a Republican governor is struggling to hold on to his office. Alaska Governor Frank Murkowski is facing two challengers in today's GOP primary. He's pinning his hopes for a second term on a plan to build a $25 billion natural gas pipeline to Canada. His opponents have tried to blame Murkowski for a partial shutdown of the nation's largest oil field in Alaska.

Take a look at this. Wyoming's most powerful Republican -- that would be the vice president, Dick Cheney -- cast a ballot today in his home state's primary out in Wyoming.

Coming up: the fate of two FOX News journalists kidnapped more than a week ago now in Gaza. Is there any word on who took them and why? We're going to have a report from the region. And should Uncle Sam outsource the collection of federal income taxes? Jack Cafferty back with your e-mail -- all that coming up, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

VERJEE: Wolf, in a Baghdad courtroom today, Saddam Hussein cross-examined two people who offered grisly accounts of alleged chemical attacks on their villages during a campaign by Iraqi troops 18 years ago.

The former Iraqi leader questioned the validity of their testimony and asked why one of the witnesses who claimed to be illiterate had documents in front of her. Separately, two of Hussein's co-defendants argued that Iraqi troops were fighting Iranian troops and Kurdish rebel fighters, not civilians, during the campaign.

North Korea's state-run media is reporting that the country has the right to launch a preemptive attack in response to joint U.S.- South Korean military exercises. The North Korean news agency is calling the exercises a -- quote -- "undisguised threat and a war action."

Now, this kind of rhetoric is really nothing new from North Korea. The annual joint military exercises began on Monday.

Violence is surging in southern Afghanistan. At least 15 people were killed in a series of attacks today. Canadian soldiers were the focus of two of the attacks. Six Canadian troops were wounded. Overall, more than 100 people, including four U.S. troops, have been killed in the past three days -- Wolf.

BLITZER: Zain, thank you very much.

Coming up: thousands of inactive U.S. Marines preparing to be recalled, involuntarily. In our next hour, we will have a report from the Pentagon on the orders and the fallout.

Plus: Is Iran giving any ground in the nuclear standoff with the West? We will talk about Tehran's reported response with a former State Department official.

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 at the Associated Press, pictures likely to be in your hometown newspapers tomorrow.

Baghdad: Saddam Hussein adjusts his headphones, as he listens to a witness, during his latest genocide trial.

In Ireland, New York Mayor Michael Bloomberg holds an American bald eagle during a ceremony.

Cedarburg, Wisconsin: Eighty-five-year-old Benjamin Steinbach hits the town on his riding lawn mower, because the state took away his driver's license. It may be the last time he does this. The police have told him, taking his lawn mower to the corner store is prohibited as well.

And, in Garden City, Kansas, two river otters take it easy after a swim -- some of today's "Hot Shots," pictures often worth 1,000 words.

Right now, still more questions than answers in the kidnapping of two FOX News journalists in Gaza. There's growing concern about their safety.

CNN's Paula Hancocks has the latest now from Jerusalem -- Paula.

PAULA HANCOCKS, CNN CORRESPONDENT: Wolf, the longer nothing is heard about the fate of two FOX journalists kidnapped in Gaza, the more concern about their safety is mounting -- still no claim of responsibility and still no demands.

(BEGIN VIDEOTAPE)

HANCOCKS (voice-over): It's the ninth day since two FOX journalists were kidnapped in Gaza -- still no word on who took them and why.

Thirty-six-year-old cameraman Olaf Wiig and 60-year-old American reporter Steve Centanni were abducted by masked men in the center of Gaza City. Both men are well-respected, experienced journalists who have worked for a number of broadcasters, including CNN.

UNIDENTIFIED MALE: Other brother, Steve Centanni, was kidnapped on August 14, last Monday.

HANCOCKS: Families of both have made televised appeals for their release. The brother of Centanni made a statement on Arab network Al- Jazeera.

The wife of cameraman Wiig met protesting mothers of Palestinian prisoners being held in Israeli jails.

ANITA MCNAUGHT, WIFE OF KIDNAPPED JOURNALIST OLAF WIIG: In Gaza today, it's like a prison.

UNIDENTIFIED MALE: (SPEAKING ARABIC)

MCNAUGHT: And now my husband, his colleague Steve, and I are all in prison with you.

HANCOCKS: But, still, no contact has been made by the kidnappers.

The press freedom organization Reporters Without Borders says it's becoming increasingly concerned that no group has claimed responsibility for their abduction, despite the many appeals for their release.

Palestinian journalists took to the streets of Gaza over the weekend, saying, coverage of the Palestinian cause would be severely damaged if abductions continued.

A New Zealand diplomat, Peter Rider, met with the Palestinian Prime Minister Ismail Haniyeh. Haniyeh gave a personal commitment to do all he could to secure the journalists' release.

PETER RIDER, NEW ZEALAND DIPLOMAT: Gaza is a very confused place. That's why it's so difficult to get leads. It's not an ordinary city, where ordinary policing works in a normal way. It's much more going to be somebody coming to tell somebody something, because they think that's the right thing to do. So, I would ask them to come out and tell us if they do know anything.

HANCOCKS: Palestinian security sources say, an unnamed militant group has warned all foreigners to leave Gaza, threatening abductions.

At least 26 foreigners have been kidnapped in Gaza over the past two years, nine of them from the media. Hostages have usually been released within hours.

(END VIDEOTAPE)

HANCOCKS: Only once before has a journalist kidnapped in Gaza been held for so long. A sound engineer from a French television network was taken for nine days this time last year, the same amount of time that Steve Centanni and Olaf Wiig have been held -- Wolf.

BLITZER: Paula, thank you very much.

And we certainly hope that Steve and Olaf are freed as soon as possible. We wish them only, only the best.

Up next: Should the IRS pay someone else to collect your money? Jack Cafferty will be back with that taxing question.

And, in our next hour, Senator Lieberman, he joins us live, right here in THE SITUATION ROOM. Can he overcome his primary defeat and his party's anger to win reelection in November?

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Let's check in with Jack Cafferty once again. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question is, should the Internal Revenue Service be hiring private collection companies to collect federal income taxes?

Tim writes from Massachusetts: "Jack, it's called tax farming. And practically every empire in decline has resorted to it -- just one more indication that this country is in huge trouble." Steve in Hawaii: "No. Why add another layer to an already antiquated system? There isn't a need for the IRS today. And, honestly, this country needs to pull away from this annoying tax system and move toward a flat tax."

Nathan in Denver writes: "By no means should the government be doing this. Not only is it a waste of taxpayer money, but, with the widespread prevalence of identity theft going on, introducing three- party agencies into the collection process will make it even more difficult for our citizens to know who they should trust."

Mike in Illinois: "I happen to own a collection agency. I think it's a great idea for Internal Revenue to get outside help. Not only will they save on hourly wages. They will also save a fortune on benefits that they would have to pay the IRS employees."

M. writes: "A collection agency has been hounding me relentlessly for nine months for $28 for a book I had already paid for. God help us if these bloodsuckers get together with the Internal Revenue."

Walter in Florida: "Never mind the IRS. Congress should hire some outside people to run the government."

And Rory in Minnesota: "Did I hear you right? The IRS is going to hire outside, private companies to collect taxes? Wow. I didn't even know Halliburton did that kind of work" -- Wolf.

BLITZER: Jack, thank you.

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