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THE SITUATION ROOM

President Bush and Prime Minister Tony Blair Feel Sting Over Iraq; Israel's Prime Minister Weighs In On Iraq Study Group's Report; Controversy Over Discounted Fuel From Venezuela For America's Poor

Aired December 7, 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, President Bush and Prime Minister Tony Blair feel the sting over Iraq. Together, the U.S. and British leaders respond to the Iraq Study Group's rebuke of the war.

Is Mr. Bush willing to say he got it wrong?

The Study Group's chairmen are getting flak, as well. They're facing some critics in Congress and some of their key proposals are being panned by Israel.

Plus, a Kennedy gets heat for his plan to help needy Americans stay warm.

The source of the controversy?

Venezuelan leader and Bush-basher, Hugo Chavez.

I'll ask former Congressman Joe Kennedy about his Chavez connection and the backlash.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Twenty-four hours after the Iraq Study Group hit him where it hurts, President Bush may be feeling even more political pain and pressure right now.

With British Prime Minister Tony Blair at his side, Mr. Bush was pummeled with questions today about whether he made mistakes in Iraq and is prepared to take a brand new approach.

At around the same time, the Democratic co-chairmen of the Study Group told senators the situation in Iraq is, and I'm quoting now, "perilously close to hopeless."

Let's go to our White House correspondent, Ed Henry.

He's standing by with the latest -- Ed. ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Wolf, this is a president who does not like to admit mistakes and you could see his frustration today as reporters pressed that point about mistakes one day after the release of the Iraq Study Group's report, which was blistering about the Iraq War.

Of course, the architects of that, both Mr. Bush and Mr. Blair, asked by an American reporter if his approach in Iraq has failed, as evidenced in this report, Mr. Bush came as close to an admission of a mistake as he comes, saying: "I believe we need a new approach in Iraq."

Then a British reporter pressed the president and suggested that some people believe he's still in denial about how bad it is in Iraq. Mr. Bush snapped, "It's bad, does that help?"

The reporter pressed ahead and said, "Why did it take others to say it before you acknowledged it?"

The president got fired up.

(BEGIN VIDEO CLIP)

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: Make no mistake about it. I understand how tough it is, sir. I talk to the families who die. I understand there's sectarian violence. I also understand that we're hunting down al Qaeda on a regular basis and we're bringing them to Senator Cornyn. I understand how hard our troops are working. I know how brave the men and women who wear the uniform are, and therefore they'll have the full support of this government.

I understand what long deployments mean to wives and husbands and mothers and fathers, particularly as we come into a holiday season. I understand.

(END VIDEO CLIP)

HENRY: Now, Mr. Bush and Mr. Blair both heaped praise on the Iraq Study Group report in general, but in particularly, the president, for the second straight day, would not endorse any specifics. He did leave the door open for the possibility of getting combat troops out of Iraq by early 2008, but, again, added the condition he always adds, which is it depends on the facts on the ground.

Secondly, on the issue of whether or not he would endorse direct talks with Iran and Syria, he still will not endorse that, but suggested he would be supportive of them joining some sort of a regional summit if they stopped their bad behavior.

And, finally, the president did acknowledge the sort of speculation we've been hearing, that he's preparing some sort of a speech to lay out a new approach in Iraq. Aides say that could be by the end of December -- Wolf.

BLITZER: All right, Ed, we'll stay on top of that story. We'll stay in touch with you.

Thank you for that.

The co-chairmen of the Iraq Study Group took their 79-point plan to Capitol Hill today. They got an earful from fans and from some skeptics on the Senate Armed Services Committee.

Our Congressional correspondent, Dana Bash, reports.

(BEGIN VIDEOTAPE)

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT (voice-over): From the Republican chairman of the Iraq Study Group, a warning -- if the president accepts some but not all of their key recommendations to fix Iraq, the plan won't work.

JAMES BAKER, IRAQ STUDY GROUP CO-CHAIRMAN: I hope we don't treat this like a fruit salad and say I like this, but I don't like that. I like this, but I don't like that.

BASH: But Jim Baker's appearance before the Senate Armed Services Committee brought ample proof Republicans and Democrats in Congress have just as many doubts as the White House about some of the biggest recommendations, especially engaging Iran and Syria.

SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: I'm skeptical that it's realistic to think that Iran wants to help the United States succeed in Iraq. They are, after all, supporting Hezbollah, which gathers people in the square in Beirut to shout, "Death To America!"

BASH: Baker said he met with a senior Iranian official with the White House blessing a part of the review.

BAKER: And they, in effect, said we're not in -- we would not be inclined to help you this time around.

BASH: Still, he and his Democratic co-chairman said in their view, it's worth a try.

LEE HAMILTON, IRAQ STUDY GROUP CO-CHAIRMAN: Syria and Iran have very great influence over events within Iraq, particularly Iran; but also Syria. And I just don't think you can avoid that.

BASH: On the military side, the report calls for phasing out the U.S. combat role in Iraq by 2008 and rejects an idea championed by Senator John McCain to add more U.S. troops because they aren't available.

SEN. JOHN MCCAIN (R), ARIZONA: There's only one thing worse than an over stressed Army and Marine Corps, and that's a defeated Army and Marine Corps. We saw that in 1973. I think there's a disconnect between what you are recommending and the situation on the ground.

BASH: Skepticism, too, of a recommendation to embed more U.S. troops with Iraqi units as part of accelerated training. SEN. SUSAN COLLINS, (R-ME), SENATE ARMED SERVICES COMMITTEE: I'm just wondering as a practical matter whether that isn't an invitation to attack American troops that are one by one in small units.

HAMILTON: That will have some risks to it and there will be some American casualties there, but not like I think we're now suffering.

(END VIDEOTAPE)

BLITZER: Lee Hamilton, the co-chairman of the Iraq Study Group.

That report from our Dana Bash on the Hill.

We want to thank Dana and Ed Henry.

They are part of the best political team on television. And remember, for all the latest political news at any time, check out our Political Ticker at CNN.com/ticker.

Israel's prime minister is weighing in today on the Iraq Study Group's report and he isn't finding much good to say about it.

CNN's Atika Shubert reports from Jerusalem.

ATIKA SHUBERT, CNN CORRESPONDENT: Wolf, Israel's prime minister made his first official reaction to the report. He clearly did not agree with several recommendations.

(BEGIN VIDEOTAPE)

SHUBERT (voice-over): In the U.S. the release of the Iraq Study Group report was met with much fanfare. "The Way Forward," as it was titled, said any solution to Iraq had to address the wider Arab- Israeli conflict, as well.

But in Israel, Prime Minister Ehud Olmert says "The Way Forward" reached the wrong conclusion.

EHUD OLMERT, ISRAELI PRIME MINISTER:

SHUBERT: The problems in Iraq, serious as they are, are entirely independent of the controversies between us and the Palestinians.

SHUBERT: The report recommends opening a dialogue with Iran and Syria. It calls for the return of the Golan Heights to Syria, territory captured by Israel in the 1967 War, in exchange for Syrian concessions in Lebanon and with the Jewish state. But Olmert rejects talks with Syria, saying Israel has tried that before, without success.

He questioned what Syria could bring to fresh talks.

OLMERT: Is it reasonable to expect that the Syrians, in response to -- in the context of peace negotiations, will also agree to change their strategy with regard to Iran, with regard to the Palestinian terrorist organizations, with regard to the Hezbollah and the terror in Iraq?

SHUBERT: Olmert made clear that for his country, "The Way Forward" is not the right direction.

(END VIDEOTAPE)

SHUBERT: Now, President Bush has yet to commit to the Study Group's recommendations. It seems Israel's prime minister is relying on the president to share his opinion -- Wolf.

BLITZER: Atika Shubert, thanks very much.

Atika Shubert our new Jerusalem correspondent.

And despite Israel's reservations, President Bush today appeared to endorse the Study Group's conclusion that any resolution of the Iraq conflict is, in fact, tied to trying to reduce tensions between Israelis and the Palestinians.

The British prime minister, Tony Blair, has long held that position and Blair supports another proposal that has Israel worried -- opening a direct dialogue with Syria and Iran, with no preconditions attached.

Mr. Bush has rejected that idea in the past; did, as well, today. Continued to sound skeptical, saying they have to stop doing certain things, in Iran's case going forward with enriching uranium, before the United States is going to engage in that kind of direct dialogue with Iran.

Let's check in with Jack Cafferty for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, here's how you can tell who wants to run-for president in 2008. New Mexico-Governor Bill Richardson says a fence along the Mexican border gets in the way of U.S.-Mexico-relations.

Say what?

He says the first step to fixing immigration is for Congress to reverse the legislation that was signed by President Bush authorizing the building of a fence along 700 miles of our border with Mexico. Richardson says the fence "flies in the face of America as a symbol of freedom" and that it's unpopular in the border towns of Texas and New Mexico.

Now, here's the way it works, boys and girls. To hell with what the American public wants.

Democrats want the illegal aliens to vote for them.

Every public opinion poll done in this country running up to election said close the borders, do not do amnesty for the 12 million illegal aliens that are already here and start enforcing the laws against hiring them. None of that is getting done. None of it.

Richardson says we need four things here on the immigration issue.

Secure the border. Well, excuse me, governor, that's what the fence is supposed to do. That hasn't been done in the five years since 9/11 and Homeland Security says they'll need at least another five years to do it. The public wants the borders closed.

Two -- Richardson's plans -- stop employers from hiring illegals. Well, it's already illegal to hire illegals, but nothing is being done about that either, for the same reason mentioned above. Just like border security. What the public wants doesn't matter, apparently.

Three, make a path to legalization. That's amnesty, and the public is dead set against it. Every poll that's done says no amnesty. We tried it in 1986. It didn't work then and the public doesn't think it'll work now.

And, four, increase legal immigration.

So here's the question -- will a border fence get in the way of U.S.-Mexico-relations?

E-mail your thoughts to CaffertyFile@CNN.com or go to CNN.com/CaffertyFile.

I find it patently absurd that we should care at all about U.S.- Mexico-relations when the borders are open, the terrorists are free to come in, the drugs come in every day, the criminals come in every day, the American money goes back to Mexico-every day, the public says close the borders, the public says stop all this stuff and the politicians worry about relations with Mexico. Unbelievable.

BLITZER: Our viewers are going to have a chance to respond in their e-mail to you, Jack.

And in the next hour, I'll be speaking live with Governor Bill Richardson. He's coming here right to THE SITUATION ROOM. We'll give him a chance to weigh in on this sensitive subject, as well. Stand by for all of that.

And coming up, why would a former congressman and member of the Kennedy family link himself with a dictator who has nothing but bad things to say about President Bush?

I'll ask Joe Kennedy about what he's doing, what he's thinking. He's standing by live to speak with us.

Plus, will the Iraq Study Group's recommendations become reality or simply fade away?

Paul Begala and Bay Buchanan will hash over what comes next, and what happens if nothing happens. And talk about a reversal of fortune -- they one were seen as possible presidential material. Now they're leaving Congress on a wave of Republican defeat. We'll tell you what's going on.

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

(COMMERCIAL BREAK)

BLITZER: Let's check in with Carol Costello for a closer look at some other important stories making news -- hi, Carol.

CAROL COSTELLO, CNN ANCHOR: Hi, Wolf.

Hello to all of you.

More grim violence across Iraq today, as U.S. senators heard from the Iraq Study Group about its report. Bombings and shootings have killed at least 23 people. West of Baghdad, coalition and Iraqi forces have been battling insurgents in Ramadi. A U.S. service member and 14 insurgents died in the fighting there yesterday. Ten other U.S. troops were also killed in Iraq in one of the worst spates of violence suffered by U.S. forces.

Violence also flaring in southern Afghanistan. NATO says a suicide bomber attacked a NATO convoy in Kandahar today. At least one civilian was killed. There have been several suicide bombing attacks in the area recently. The Taliban trying to regain control there.

Pakistan's foreign minister arrived in Kabul today for talks aimed at stopping this unrest.

In Saudi Arabia, two Saudi security guards are dead after unknown gunmen opened fire on them. It happened outside of a prison in the Red Sea port city of Jeddah. Police are searching for the gunmen. There are reports two suspects have now been arrested. On Saturday, Saudi security officials announced they had foiled a planned terrorist attack and had arrested 139 suspected Islamic militants.

Sixty-five years ago today, Japanese war planes bombed Hawaii's Pearl Harbor. Nearly 500 survivors gathered to mark the anniversary of the date FDR said will live in infamy. They held a moment of silence and laid wreaths to remember the 2,390 Americans killed in the surprise attack on December 7, 1941. Japanese veterans also paid respects -- back to you, Wolf.

BLITZER: Thanks very much, Carol, for that.

Standing shoulder to shoulder with one of the staunchest allies in the war in Iraq, President Bush says he's disappointed by the pace of success there.

So might this signal a bold change in U.S. strategy in Iraq?

Joining us now in our Strategy Session, CNN political analyst, Democratic strategist Paul Begala, and Bay Buchanan, the president of American Cause. Listen to this little clip from what the president said at his news conference with Tony Blair at the White House earlier today.

(BEGIN VIDEO CLIP)

BUSH: Historians will look back and say how come Bush and Blair couldn't see the threat? That's what they'll be asking. And I want to tell you I see the threat. And I believe it is up to our governments to help lead the forces of moderation to prevail.

(END VIDEO CLIP)

BLITZER: The president making the point if the U.S. were to precipitously withdraw, it would be a disaster for generations to come.

PAUL BEGALA, DEMOCRATIC STRATEGIST: That may well be, but the current policy is a disaster for today and for generations to come. And I watched that press conference today, Wolf, and, you know, I went over to England and met with Tony Blair five years before he became the prime minister. And his associates were friends of mine who helped plan that new Labor. I admire him so greatly.

And then he came to America on September 20th, after 9/11, September 20th of 2001, and stood so solidly. And the two of them were the great hopes of the civilized world.

And today they're two crushed men, two failed leaders of a calamitous policy. It's a heartbreaking thing to see.

BLITZER: The British tabloids call him "Bush's poodle" in London...

BAY BUCHANAN, CNN POLITICAL ANALYST: That must make him feel real good.

BLITZER: Yes. It is sad to see what has happened, though, in terms of the collapse of this strategy.

BUCHANAN: There's no question. It's sad because we find ourselves as Americans with young people over there in a terrible situation where it doesn't look like there's a good way out.

But what the president had to say has real merit. Whether we should have gone or not is for yesterday -- is yesterday's debate. We are there and the situation, as we keep saying, well, we're going to pullout if this government doesn't get things under control.

Well, if they can't get things under control and then we pull out, how bad is it going to be?

BLITZER: But his critics -- and you're one of them -- suggest he's still in a state of denial.

BEGALA: Yes. And we'll see. He told us today, you know, a British reporter asked him, are you capable of changing? That was an insulting question. First, off, he was a man who was, you know -- he'll tell you this -- drunk every day of his adult life until age 40 and hasn't had a drop since.

BUCHANAN: That's irrelevant.

BEGALA: I think it's highly relevant because it shows he has the character that has the capacity to change. I find that very hopeful as an American, that he turned his life around on a dime.

I still have hopes, and mostly expressed in prayers, that the president can do this on Iraq. But it is more based on hope than experience. This is a president that has been very hard-headed pursuing a failed policy.

BLITZER: What would be the smart strategy for the president right now, having just received this Iraq Study Group report, waiting for the Pentagon to weigh in, the State Department to weigh in?

In the next few weeks, he's supposedly -- before the end of this year -- going to be delivering a major speech outlining to the American public what his new strategy is.

BUCHANAN: He's got to do one thing that's critical -- he's got to make sure the American people know he is in charge of this policy. He cannot -- like Jim Baker is up there saying take all of it or none of it, all of it or none of it.

Who is Jim Baker?

He was not elected president of the United States. The commander-in-chief is the president and the American people have to feel he is in charge. He has to respond to what happened in November. He has to let them know, I understand things aren't going well. I've got to look at different ideas here. I've got to do something.

But if he seriously believes the worst thing that could happen is that we pull out precipitously, then he can't pull out precipitously, whether we want to or not, because he's the commander-in-chief. He has to do what's right.

BLITZER: The report came out yesterday. Ten members of this Iraq Study Group -- five Democrats, five Republicans -- pretty well received, at least the first day, although now there is increasing skepticism coming in from some quarters.

I don't know if you saw the front page of the "New York Post" today.

Let's put it up. Take a look back there. You'll see it right there: "Surrender Monkeys" -- Iraq panel urges U.S. to give up. And the pictures of Baker and Hamilton in monkey outfits.

It's a pretty nasty front page of the "New York Post."

BEGALA: It is. And it's a paper that ought to be ashamed of itself. The same paper ran a very similar front page when America was going to the United Nations to seek approval for this war, and there were many members of the United Nations that opposed the war and they caricatured them as weasels then and called them "Axis of Weasels."

Well, guess what?

The people the "Post" called weasels were right. The war was unwise. It was unjust. It was unwarranted.

Guess what?

Mr. Hamilton and Mr. Baker are right about this. Our policy has failed. And the "New York Post" may not like it, but we got into this policy, in part, because of cheerleading from right-wing newspapers like the "Post."

BUCHANAN: But, you know, but -- there is a point being made here. This is a committee, a group all came together. We have a consensus. And they are naive in this regard. They say this government has to take charge, they have to take charge.

What if the government cannot?

They have tried. They're tried. They've tried with our help, they've tried it by themselves. They've tried with some of our people.

What if they cannot, Mr. Baker?

BEGALA: That's right.

BUCHANAN: What is that going to -- what -- I don't see any answer here in your report.

BEGALA: You know why?

BUCHANAN: And so it's naive. They should...

BEGALA: No, it is not naive...

BUCHANAN: ... the president is the one that's going to have to make the call.

BLITZER: But what she's suggesting was that a lot of people feared that events on the ground may simply outpace any of these recommendations...

BUCHANAN: Precisely.

BLITZER: ... any of these new steps.

BEGALA: And believe me, Jim Baker, Bill Perry, Leon Panetta, all the -- they understand that. Believe me, they understand it. But I think we're at the stage like Jack Nicholson in "A Few Good Men," where we can't handle the truth. The truth is -- you read the report carefully and the indictment is so compelling and so thorough and searing and searching. And the prescription is, you know, pretty, pretty limp, because the truth is no matter what we do, we're screwed and Americans don't like to hear that.

BUCHANAN: Then why didn't they say that?

BEGALA: Because we don't like to hear that.

BUCHANAN: But that was their job.

BEGALA: They want to have one last shred. I admire them for having one last shred of hope.

BLITZER: They said this is -- they basically said this is the last chance...

BEGALA: Right.

BLITZER: ... to really see if something positive can be salvaged out of this situation. They said there's no guarantee it's going to work...

BUCHANAN: Right.

BLITZER: ... but if you don't try it, then it's going to collapse.

BUCHANAN: But they say you have to do it our way and no other way, and that's just not the kind of message you can...

BLITZER: No, they didn't say that. They said there could be other ways that might be better, but at least these are the recommendations of these 10 men and women.

BUCHANAN: Well, Jim Baker said you have to take them all. You have to take them all. You can't just do -- take a few, what did he say, a fruit salad here?

You have to do them all. And I think that's where he's made his mistake. The president is going to try to do his best. He's going to get advice from the people on the ground, the generals and others. And then he has to make the decision and we have to move forward.

BLITZER: All right, we're going to take a break.

But thanks very much, guys, for coming in.

Paul Begala, Bay Buchanan.

Coming up, a former U.S. congressman being accused of spreading propaganda for Venezuela's controversial leader.

I'll ask Joe Kennedy about the heat he's getting over his heating oil program.

And a Democrat goes public with his concerns about Hillary Clinton's possible presidential bid. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time. Happening now, the Iraq Study Group is urging the U.S. to open direct talks with Iran and Syria to help stop the surging violence in Iraq. But even the co- chairman of the Iraq Study Group admits he's skeptical Tehran would be willing to assist Washington there.

Six overseas ports will start screening cargo before it goes total United States. They'll check for nuclear and radiological material. The inspections will happen in England, Pakistan, Honduras, Singapore, Oman and South Korea.

We'll have a live report from our Jeanne Meserve on this story.

That's coming up in the next hour right here in THE SITUATION ROOM.

And NASA gets ready for a rare nighttime shuttle launch. The Shuttle Discovery set to lift off at 9:35 p.m. Eastern tonight. But low clouds could force a delay until Saturday.

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

We're seeing a lot of former U.S. Congressman Joe Kennedy on television lately. He appears in an ad promoting a program that provides discounted heating oil to Americans who really need it. But some critics are calling the spots propaganda for the Venezuelan leader, Hugo Chavez.

I'll be speaking with Congressman Kennedy in just a moment.

First, though, let's turn to CNN's Carol Costello for a little background on this controversy -- Carol.

COSTELLO: Yes, Wolf, that program is expanding this winter, and today it was Baltimore's turn. The first of 15,000 needy families there received their discounted fuel courtesy of Citgo and the government of Venezuela. Some call it a grand gesture; others, anti- American.

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): His is the mouth that roared, delighting in referring to President Bush as a madman, a tyrant. And while at the United Nations, the devil.

PRES. HUGO CHAVEZ, VENEZUELA (THROUGH TRANSLATOR): Yesterday, the devil came here.

COSTELLO: Name calling that, in part, scored Hugo Chavez another big presidential win in Venezuela. And some political watchers say, oddly, Chavez's name calling didn't put a stop to a program he says comes from his big heart.

(BEGIN VIDEO CLIP FROM TELEVISION AD)

JOE KENNEDY, CITIZENS ENERGY CORPORATION: I'm Joe Kennedy. Help is on the way. Heating oil at 40 percent off from our friends in Venezuela and Citgo.

(END VIDEO CLIP)

COSTELLO: Former U.S. Representative Joseph Kennedy now runs the Citizens Energy Corporation, a non-profit heating assistance program that's advertising its relationship with Citgo via television ads. Citgo, an oil company operated in the USA but owned by the government of Hugo Chavez, is paying for the commercials.

It's an arrangement some find appalling.

JOHN FUND, COLUMNIST, "WALL STREET JOURNAL": I mean you not only get oil, you get cheap, free propaganda.

COSTELLO: John Fund is with the "Wall Street Journal."

FUND: This is a temporary reprieve from what people believe are high fuel prices because Chavez wants to score cheap propaganda points.

UNIDENTIFIED MALE: All right.

COSTELLO: But Kennedy seems unconcerned by the criticism, here he is in New York pumping the first delivery of discounted oil for this coming winter.

KENNEDY: It is the leadership of President Hugo Chavez, who has recognized the struggles of so many poor people, that we need to be grateful. In 30 years, there was only one country -- only one country -- that ever gave us a price break. And that is the Venezuelans.

COSTELLO: What matters, he says, is the disadvantaged, like those depicted in Citgo's commercial.

(BEGIN VIDEO CLIP, AD)

UNIDENTIFIED MALE: I wear two pairs of long underwear and a jacket. And that is inside my house.

(END VIDEO CLIP)

COSTELLO: They will get help, despite critics who say the real price is too high to pay.

(END VIDEOTAPE)

COSTELLO: Chavez has reportedly offered discounted oil to other countries, namely Britain. And, as I have told you, Citgo has now expanded its discounted program here in the United States -- Wolf.

BLITZER: All right, Carol, thank you.

And joining us now from Boston, the former Congressman Joe Kennedy. He is the CEO of Citizens Energy Cooperation.

Congressman, thanks very much for doing this.

I guess the logical question, how comfortable are you dealing with Hugo Chavez, given his record?

KENNEDY: Well, Wolf, first of all, first and foremost, I should just point out that Citizens Energy has been in the business of delivering inexpensive heating oil and natural gas, electricity, and a range of other services for 25 or 30 years to low-income people in many states all across the country, not just in Massachusetts.

But, in all the years that I have been doing this, I have never once been able to buy discounted oil. The only country that ever offered us that was Venezuela. And for those people who say that this is simply a -- some sort of propaganda item to try and offset the speech that -- the famous speech that he gave last fall, I would point out that we were running this program with the Venezuelans all last year. And nobody mentioned it that -- at that point.

And I further would point out to those who say these -- you know, that I'm being used as a propaganda arm of -- for the Venezuelans, look, at the end of the day, if you have a problem with the fact that the Venezuelans are providing the poor of the United States with inexpensive heating oil, first of all, the Bush administration has supported it.

Secondly, we should recognize it. If that's what your problem is, then, you should have a problem with the entire 588 million barrels of oil that the Venezuelans sell to the United States every year.

BLITZER: Here is the problem that some Americans have. And...

KENNEDY: Sure.

BLITZER: And I'm not referring to a conservative or Republican. I'm referring to Charlie Rangel, a man you used to serve in the Congress with. He's a very liberal Democrat.

KENNEDY: Sure.

BLITZER: He's going to be the chairman of the House Ways and Means Committee, a veteran. He represents a poor district in Harlem, as you also know. And they're grateful for any breaks they can get on heating oil.

But he issued a press release condemning Hugo Chavez because of this attack on President Bush, his personal attack, comparing him to the devil. Then, he was on this program, here in THE SITUATION ROOM, and he made this point.

(BEGIN VIDEO CLIP, "THE SITUATION ROOM") REP. CHARLES RANGEL (D), NEW YORK: This is one country, whether we're Democrat or Republicans. And to come here, at the invitation of our people, and insult the president of the United States, you insult the flag; you insult the president; you insult the country; and you insult my constituents.

(END VIDEO CLIP)

BLITZER: So, he is pretty angry about all of this.

KENNEDY: Well, I mean, no one -- I'm certainly not going to defend the speech that President Chavez made in -- at the U.N.

I also don't, you know, support the fact that the Bush administration was -- had its hand in the attempted coup against President Chavez. I don't condone the -- that fact that one of President Bush's major contributors and supporters in this country called for President's Chavez assassination, long before those speeches.

So, there is a lot -- at the end of the day, Wolf, there's a lot of rhetoric that's way too hot on both sides. We have to remember, Venezuela -- in the OPEC oil embargoes against the United States, the only country that -- the OPEC country that continued to support the United States was Venezuela.

In our own revolution, they...

(CROSSTALK)

BLITZER: Well, that was long -- that was long before Hugo Chavez became the president.

KENNEDY: Well, but my point is that -- just that, that the relationship between the United States and Venezuela is a lot deeper than...

(CROSSTALK)

BLITZER: It used to be a very strong relationship.

(CROSSTALK)

KENNEDY: But it is -- it still is.

No, Wolf, wait. Hang on. Last year, GM and Ford sold 300,000 cars in Venezuela. We have imported 588 million barrels of oil. Should we say -- if you have got a problem with this, then, you should say, oh, no, Ford and GM, you can't sell any more cars down there. Oh, and, by the way, we shouldn't drive any cars that are using Venezuelan gasoline. We shouldn't fly any jets, whether they be "The Wall Street Journal"'s or anybody else's, that is using Venezuelan jet fuel. We shouldn't be using any trucks.

BLITZER: But...

KENNEDY: Oh, no. Come on, Wolf.

BLITZER: I'm not...

(CROSSTALK)

KENNEDY: If it's goose -- good for the goose, it's good for the gander.

BLITZER: But...

(CROSSTALK)

KENNEDY: So, don't just complain about a program that's helping the poor, and then give everyone that's helping the rich off the hook.

BLITZER: I...

KENNEDY: That's the dilemma.

BLITZER: I'm...

(CROSSTALK)

KENNEDY: And that is what is unfair.

BLITZER: I'm not complaining about anything. I'm just asking some questions.

KENNEDY: Sure. Let's go.

BLITZER: Let me read -- let me read to you -- and I'm sure you saw that editorial in "The Wall Street Journal."

(LAUGHTER)

BLITZER: "In his eight years in power, Mr. Kennedy's business partner has also polarized Venezuela with his class warfare. Freedom House now ranks Venezuela's -- Venezuela 34th out of 35 countries in the Western Hemisphere in press freedom. Only the Cuban press is more repressed. But Mr. Kennedy keeps on trucking."

I know you saw the editorial. It was a very nasty editorial, directly accusing of you, in effect, of being a propaganda tool of Hugo Chavez.

KENNEDY: You know, I have had so many negative editorials written about me by "The Wall Street Journal." It's like water off the back.

You know, I -- it -- the -- that isn't the point, whether or not they attack me personally, or anything else. The crucial issue is whether or not we're going to say, we have, as a nation, a problem with Venezuela, because of a speech that the guy made, and so, therefore, we're going to cut off all business relationships with the Venezuelans. Or is it somehow righteous to say, no, let's just focus on the one country that is actually providing a little help and assistance to the poor, to help them pay their energy bills.

And, if that's the problem, then, what we should do is, we should say, we're going to stop dealing with them altogether. And, in that case, we shouldn't be using their oil. We shouldn't be having our banks operate in their country.

But why is it that I am the only focus of this? How come these discussions -- how come "Wall Street Journal" doesn't go after its own? How come they don't go after all the corporations that are making so much money out of the Venezuelans? How come they only went after a program that is designed to help? And it's a nonprofit.

We don't make a dime off of this. Everything gets passed through to the poor. So, my only point is, it's duplicitous. It is, you know, people who have power who are threatened, those who have the capitalist system, who are threatened by a kind of compassionate capitalism that looks out after the poor and the vulnerable.

That's what we're trying to do with Citizens Energy. And, if we can get some help and assistance from OPEC -- you know, I don't see the Saudi Arabians offering us this. I don't see the Kuwaitis offering us this. But I sure see an awful lot of business that goes on with these countries.

Why is it that it's just the -- the Venezuelans that we -- that we are content to go after?

BLITZER: All right.

KENNEDY: We're content to do it because it's easy. That's why "The Wall Street Journal" did it. It's easy.

(CROSSTALK)

KENNEDY: It's -- anyway, Wolf, that -- that's obviously my...

(CROSSTALK)

BLITZER: I -- you know, I hear your argument.

You know, it's interesting. If you see behind you, near Fenway Park, you see a huge Citgo sign right behind you. It's a coincidence. We didn't deliberately put you in that location. But you can clearly see Citgo right behind you.

Why is it, though, that you have asked all these other oil companies, these oil-producing companies, to do what the Venezuelans, what Hugo Chavez and Citgo are ready to do, give a discounted price for poor people in the country? What is their response to you when you say, why not follow Hugo Chavez's lead?

KENNEDY: You know, Wolf, it really is eye-opening. They -- you get a letter back. I write to the CEOs of the companies. You get a letter back from a mid-level bureaucrat, saying, you know, that they're doing something to help out with some illness or some, you know, disease or something like that.

But, you know, Citgo gives $80 million to muscular dystrophy. Nobody is saying, hey, give the money back to muscular dystrophy. Then, when they give money to the Baseball Hall of Fame, nobody says, give money -- the money back to the Baseball Hall of Fame.

It's just when it helps the poor. Why -- Exxon Corporation, last year, in one quarter, made $10 billion. Their CEO himself made $1 billion. And, yet, what has he done? He's sat by and allowed the price of oil to skyrocket, from $25 a barrel to almost $60 or $70 a barrel. They haven't done a darn thing better.

BLITZER: All right.

KENNEDY: And, yet, what they're willing to do is take those profits, make themselves a boatload of money, and basically let the poor be damned. And that is just -- it doesn't feel right, Wolf. It just doesn't feel right.

BLITZER: Former Congressman Joe Kennedy, making his case, and doing it well, as usual, appreciate it very much.

KENNEDY: Nice to be with you, Wolf.

BLITZER: All right, good.

KENNEDY: Thank you.

BLITZER: I suspect, though, the story is not going to go away.

Coming up: Three top Republican senators are saying farewell to Capitol Hill, at least for now. But they're not all going out silently. We are going to let you what they're -- let you know what they are telling fellow lawmakers and voters, as they prepare to leave.

And a blistering new book accuses top Democrats of trying to steal Christmas. But this book is aimed at kids, not adults. We're going to take a closer look at it.

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

(COMMERCIAL BREAK)

BLITZER: On our "Political Radar" this Thursday: Senator John McCain is filling more top staff positions in his possible 2008 presidential campaign.

Sources close to McCain tell CNN he has tapped Terry Nelson, a key operative from President Bush's political team, to be his campaign manager. And McCain's political director will be a man who helped -- helped him engineer his New Hampshire primary victory back in 2000, Mike Dennehy.

Former Secretary of State Colin Powell apparently is willing to offer his advice to Senator McCain and other presidential prospects. Powell reportedly told an audience in Pittsburgh last night he doesn't have a future in elective politics, but he offered to provide guidance to McCain or Democratic Senators Hillary Clinton or Barack Obama. Powell weighed a presidential bid back in 1996, but eventually decided against it.

New Jersey Governor Jon Corzine is publicly questioning Hillary Clinton's electability. He talked about his fellow Democrat's White House prospects with radio host Don Imus this week. Corzine said, Senator Clinton is articulate and disciplined, but not charismatic. He says he thinks the New York Democrat will have a hard time getting elected.

Corzine went on to say that, if Senator Clinton were to win the White House, he thinks she would do -- and I'm quoting now -- "an outstanding job."

Remember, for all the latest political news at any time, check out our Political Ticker. Simply go to CNN.com/ticker.

Coming up: A new kids book takes direct aim at Hillary Clinton and what it considers extreme left-wing liberals -- their words -- why it says they are Grinches who want Christmas done away with.

And three for the road -- a trio of exiting senators say so long to their colleagues and, presumably, to their White House dreams.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: The midterm elections changed not only the congressional, but also the presidential landscape.

Our senior analyst, Jeff Greenfield, takes a look at a group of former wannabes who might now be making other plans for 2008 -- Jeff.

JEFF GREENFIELD, CNN SENIOR ANALYST: Wolf, if you want to know why the current presidential speculation should be taken with a ton or two of salt, just think back to a year ago. Three Republican senators were then in the forefront of such speculation. This week, they're all saying goodbye.

(BEGIN VIDEOTAPE)

SEN. RICK SANTORUM (R), PENNSYLVANIA: And the American public has no appetite.

GREENFIELD (voice-over): There was Rick Santorum, two-term senator from Pennsylvania, a hero of social conservatives for his staunch opposition to abortion, stem cell research, and gay marriage. What's more, he has been elected twice from the battleground state of Pennsylvania. But, with Democrats clearing the field for State Auditor Bob Casey Jr., a pro-life Democrat, and with an anti-Republican tide running especially strong in Pennsylvania, Santorum lost by a wide margin.

In Wednesday's speech, Santorum focused on the threat of what he called Islamic fascism. He was also one of only two senators to oppose the nomination of Robert Gates as defense secretary, largely because of Gates' idea that it was time to talk to Iran and Syria.

SEN. GEORGE ALLEN (R), VIRGINIA: Patriots, all!

GREENFIELD: Then, there's Virginia Senator George Allen, former governor, another hero of social conservatives, who, unlike Santorum, seemed assured of a huge reelection victory, setting himself up for a presidential run that he had already begun to plan.

But an untoward remark in front of an amateur video camera...

ALLEN: This fellow here, over here, with the yellow shirt, macaca, or whatever...

GREENFIELD: ... turned Allen into the YouTube victim.

He lost to James Webb by the razor-thin margin of 7,200 votes, and said farewell Tuesday with a Reaganesque declaration of optimism.

ALLEN: The sun is still rising on a bright American morning.

GREENFIELD: Finally, Majority Leader Bill Frist, he decided not to seek reelection to spend full-time preparing for a presidential run, but his Senate tenure proved fractious.

SEN. BILL FRIST (R-TN), MAJORITY LEADER: ... deriving stem cells and...

GREENFIELD: He angered social conservatives by supporting expanded stem cell research...

FRIST: Give Terri Schiavo another chance.

GREENFIELD: ... angered more socially liberal voters by supporting congressional intervention in the Terri Schiavo case. Frist decided it was time to return to his medical and charitable work, at least for now.

It was left to former Senator Alan Simpson to sum up the changing fortunes.

ALAN SIMPSON, FORMER U.S. SENATOR: Since leaving public life and this chamber, where I was the toast of the town one day and toast the next...

(LAUGHTER)

SIMPSON: ... it's a strange place. (END VIDEOTAPE)

GREENFIELD: So, when you read and hear the breathless handicapping of a contest that is more than a year away, remember the political fate of this trio, and remember a fact about politics that is apparently just too complex, too subtle for experts to grasp: Things change -- Wolf.

BLITZER: Thanks, Jeff, for that.

Things change in politics every single day.

Up next: Do fences make good neighbors? Or would a new divider on the border get in the way of U.S. relations with Mexico? Jack Cafferty with your e-mail, that's coming up.

And training and trust -- they could help determine the future of Iraq. We're going to show you what U.S. troops are learning about that at Fort Riley. Our Brian Todd is on the scene.

Stay with us.

(COMMERCIAL BREAK)

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

CAFFERTY: Elections haven't been over an hour-and-a-half. One of the biggest issues for Americans going into that election was to secure the borders.

Now we have New Mexico Governor Bill Richardson wanting Congress to reverse the legislation that was signed by President Bush just before the election, as a blatant political move to try and pacify some of these people who want these borders closed. He wants that reversed. It authorizes the building of a fence along 700 miles of our border with Mexico.

Governor Richardson says, that border fence will get in the way of U.S.-Mexico relations. Our question is: Do you agree with that?

Randy writes from Carson City in my home state of Nevada: "Jack, the only thing a fence along our border with Mexico will get in the way of is some Mexicans, and maybe a terrorist or two. We're still fighting a war on terror, aren't we? What is more important, the safety of our nation or Mexico getting fat off American dollars that are being sent back home?"

Alan in New Castle, Pennsylvania: "Who cares? We have means to obtain temporary visas and methods for legal immigrants that follow the rules to become citizens. These have been on the books for years. Why can't they learn to follow the procedures, like everyone else, or like we do when we go to another country?"

Dicky in Corpus Christi, Texas: "You're wrong about the fence. It's a bad idea. It would hurt relations with Mexico. Not important? You're wrong about that, too. We need to do more to improve the economies of Mexico and Latin America for the poor and disenfranchised. They need to be able to support their families there, or there will never be a solution for this problem."

P.J., Tacoma, Washington: "We can only hope it will get in the way of our relations with Mexico. It's all one-sided, in favor of Mexico. I'm sorry to hear Richardson said that. I thought he had his head screwed on right."

Dale in Philadelphia: "The only thing we need between Mexico and the U.S. is a high wall topped with barbed wire, behind a moat, and protected by armed border guards, holding snarling, snapping German shepherds at the end of a leash. Believe it or not, Jack, I'm a rather liberal Democrat."

And Terry writes: "Are the politicians servants of the people, or are we their slaves? Close the 'blankety-blank' border" -- Wolf.

BLITZER: Jack, Governor Richardson is going to be here in THE SITUATION ROOM in this next hour. We are going to talk to him about what you just read from our readers, and what you think as well.

Thanks very much for that.

Still to come: The Iraq Study Group report has everyone talking about the way forward. Even our Jeanne Moos has caught forward fever.

Stay with us.

(COMMERCIAL BREAK)

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