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THE SITUATION ROOM

Reality Check From Baghdad; Cheney's Secrets

Aired July 24, 2007 - 17:00   ET

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


WOLF BLITZER, HOST: Thank you, Jack, for that.
And to our viewers, you're in THE SITUATION ROOM.

Happening now, President Bush mentions Al Qaeda 95 times in linking the war in Iraq to the war on terror.

Did he make his point?

We'll get a reality check from Baghdad.

He's the most powerful vice president, arguably, in modern history.

But did Dick Cheney wield that influence behind closed doors?

We're going to go inside those doors for a closer look at Cheney's secrets.

And who moved the meter in the Democratic debate?

We measure the reaction among voters -- scowls, smiles and finger pointing -- what were the candidates saying with their body language?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Al Qaeda in Iraq behind the bloodiest, most spectacular attacks, the mass slaughter of civilians. President Bush today went all ought to boost his case that the war in Iraq is part of the broader war against Osama bin Laden's terror net.

(BEGIN VIDEO CLIP)

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: The Iraqi people know they are Al Qaeda. People across the Muslim world know they are Al Qaeda. And there's a good reason they are called Al Qaeda in Iraq -- they are Al Qaeda in Iraq.

(END VIDEO CLIP)

BLITZER: In fact, as we mentioned, the president used the name Al Qaeda some 95 times today in that speech, and it was probably no coincidence. He spoke in Charleston, South Carolina, where an underlying theme of last night's Democratic presidential debate was a troop pullout from Iraq.

Did the president make his case?

And joining us now from Baghdad, our correspondent, Michael Ware -- Michael, you spoke earlier and suggested that President Bush's speech on Al Qaeda in Iraq, in your word, was rudimentary.

What did you mean?

MICHAEL WARE, CNN CORRESPONDENT: Well, it -- the president's speech, to me, was breathtaking in the fact he was giving us an ancient history lesson, so to speak. What the president was highlighting and emphasizing over and over again is clearly well established and unequivocal fact, that Al Qaeda in Iraq is a part of the broader Al Qaeda network has never been in question. That Abu Musab al-Zarqawi, the man who created it, and his successors, have aspirations beyond Iraq, particularly targeting America, have never been in doubt. They spelled it out from the beginning. And that it's a foreign run organization with foreign leadership and foreign suicide bombers, again, is common knowledge.

That it really makes one wonder why the president is hammering this point home when he just glosses over the fact this war is creating more Al Qaeda jihadis rather than reducing the number. And the only success America has had in blunting Al Qaeda is by unleashing the Baathist insurgents in a crude alliance.

BLITZER: What's a bigger problem, the Al Qaeda operation in Iraq or the sectarian violence?

WARE: Well, it's much of a much, because they both feed on each other. Now, what you need to bear in mind, that in terms of the total fighters in combat against U.S. forces and government troops, Al Qaeda makes up probably about 1 percent. And the foreign fighters probably make up about half of 1 percent of the total fighters in this country. Yet they're spectacular in the dimensions of their attacks, and particularly inflammatory.

They go out and slaughter Shia civilians, principally to provoke rage. And it feeds on each other. And Iran, at the same time, is manipulating the situation from inside, as well.

It's two enemies -- Wolf.

BLITZER: Iran met with the U.S. in Baghdad for some seven hours today.

Is Iran part of the solution or part of the problem?

WARE: Look, it's safe to say that Iran has legitimate national interests in this country, Iraq. Yet their interests not only do not align with America's, but are opposed to America's. Iran sees an opportunity to hammer America and they've been doing that. We had two historic meetings between U.S. and Iranian diplomats. In the two months since the first meeting, the attacks have gone up by Iranian- sponsored surrogates. And while the American ambassador is sitting there talking about Iranian special forces units helping Iraqis to kill Americans, he is talking to an Iranian ambassador who is a member of that Iranian special forces unit, according to Western intelligence.

It's quite a conundrum -- Wolf.

BLITZER: Michael Ware watching all of this unfold for us.

Michael, thanks.

WARE: Thank you, Wolf.

BLITZER: While the U.S. ambassador of Iraq was sit downing with his Iranian counterpart today to talk about security, was Iran busy stepping up its aid to militants targeting American troops?

Let's go to our Pentagon correspondent, Barbara Starr.

She's just back from the region.

She's done some excellent reporting on this for us -- Barbara, how deeply involved, based on all the information you're collecting from a wide variety of sources, how deeply involved is Iran with the violence in Iraq?

BARBARA STARR, PENTAGON CORRESPONDENT: Well, Wolf, consider this -- all of the top U.S. military commanders we spoke to in Iraq just a few days ago, all of them believe Iran is going to cause more trouble, and plenty of it.

(BEGIN VIDEO TAPE)

STARR: (voice-over): Tense moments and heated exchanges when the U.S. sat down with Iranian diplomats in Baghdad, according to U.S. ambassador to Iraq, Ryan Crocker.

RYAN CROCKER, U.S. AMBASSADOR TO IRAQ: We made very clear in today's talks that over the roughly two months since our last meeting, we've actually seen militia-related activity that can be attributed to Iranian support go up and not down.

STARR: Commanders worry in the weeks before the September progress report, even more U.S. troops will die at the hands of Iran's deepening involvement inside Iraq, especially from Iran's armor penetrating bombs, EFPs.

LT. GEN. RAYMOND ODIERNO, U.S. ARMY: We're getting reports that, in fact, they're trying to export more EFPs in here over the next 60 days -- as many as they possibly can -- and get them in the hands of these Shia extremists in order to use specifically against coalition forces.

STARR: And Odierno says in recent weeks there has also been a sharp increase in more accurate rocket and mortar fire against the highly secure Green Zone by Shia militiamen trained in Iran earlier this year. ODIERNO: It's clear to me that not only are the rockets and mortars being used, but that these individuals who are shooting them were trained in Iran, I believe, with the Quds force.

(END VIDEO TAPE)

STARR: So, Wolf, if U.S. troops are at more and growing risk from Iran, what is the Bush administration going to do about it?

Don't look for a change in strategy, Wolf. They will continue to pursue the diplomatic course. U.S. troops will chase down Iranian weapons and operatives when and where they find them, but only inside Iraq. There is absolutely no plan to cross the border -- Wolf.

BLITZER: And you heard Michael Ware report from Baghdad just now, based on the information he's collecting, that the Iranian ambassador in Baghdad, with whom the U.S. ambassador sat down today for some seven hours of talks, that he, himself, is directly involved in this Iranian covert operation designed to funnel in weapons and other sophisticated material into these Shiite militias. That's a pretty significant development, if true.

STARR: Well, I think there is little doubt in the minds of top U.S. military commanders and intelligence officials that basically the Iranian al-Quds force is rampant, if you will, inside of Iraq, inside the Shia militia groups, inside what they call the special groups of the Jaish al-Mahdi, completely inside some of these Shia militia groups that are launching these attacks against U.S. forces and killing so many U.S. troops.

Wolf, right now, 80 percent of the U.S. troops that die in Iraq die from IED explosions. Hard to say how many of them are actually Iranian, but it shows how deadly it is -- Wolf.

BLITZER: Barbara, thanks very much.

Thanks for the good reporting the last week from the region, as well.

Let's go to Jack Cafferty.

He's in New York with The Cafferty File -- you know, Michael Ware reports that the Iranian ambassador with whom the U.S. ambassador sat down today, he's directly involved in these covert Iranian shipments of weapons to Shiite militias, among others. That's a pretty significant development.

CAFFERTY: Yes, I would say that's significant.

The other thing that I found interesting, you reported that President Bush mentioned Al Qaeda 95 times in his speech today.

Did he also mention that there was no Al Qaeda in Iraq before the United States invaded that country?

BLITZER: He sort of said, you know, some are complaining that there wasn't much of an Al Qaeda in Iraq before, but he sort of glossed over that point.

CAFFERTY: Oh, well, what a surprise.

All right, on to other things.

I wonder if we could get the Lindsay Lohan DUI arrest out of the teleprompter and put my script in it.

Is that possible?

Here's some -- apparently it's not.

Here's some encouraging news. Muslims around the world are increasingly rejecting suicide bombings and other violence in the defense of Islam. A new poll by the Pew Research Center taken in 47 countries found that in places like Lebanon, Bangladesh, Pakistan, Jordan and Indonesia, the number of Muslims who see these attacks as justified has now dropped by half or more over the past five years.

And it gets better. The survey also found there is now less support for Osama bin Laden in many of these countries. And growing numbers of Muslims in the Middle East and beyond are rejecting Islamic extremism.

Now, the director of the Pew Center says that economic growth in some of these developing countries is encouraging people to become more satisfied with their personal lives and their own situations.

It's not all good news, though. The survey shows 70 percent of Palestinians think suicide bombings against civilians can often be justified or sometimes can be justified.

So the question is this -- what does it mean if Muslims around the world are increasingly rejecting suicide bombings and Islamic extremism?

E-mail caffertyfile@CNN.com or go to CNN.com/caffertyfile -- Wolf.

BLITZER: Thank you, Jack.

Jack Cafferty will be back later.

Up ahead, shades of Vietnam, as one Democratic candidate in last night's debate pulls no punches when counting the cost of the U.S. mission in Iraq. Mike Gravel's grim prediction in his own impassioned words.

President Bush's No Child Left Behind program took a big hit from the Democratic presidential candidates last night. Today a top Democrat defending the education blueprint. My interview with Senator Edward Kennedy. That's coming up this hour.

And later, the new strategy against Iran. Several states now deciding to slow the country's cash flow. We'll explain what's going on. Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: He has more clout than any other vice president in modern history. But Dick Cheney wields his influence largely behind closed doors.

A new biography pulls aside that veil of secrecy. It's entitled, "Cheney: The Untold Story of America's Most Powerful and Controversial Vice President."

Joining us now, the author, Steve Hayes.

Steve, thanks for coming in.

STEPHEN HAYES, AUTHOR, "CHENEY: THE UNTOLD STORY": I'm happy to be here, Wolf.

BLITZER: All right, you had incredible access to the vice president. He gave you a lot of his time. You interviewed him a lot. And he does acknowledge in the book, in the interviews he did with you, mistakes -- mistakes that he made involving Iraq.

One of them on page 439. You quote him as saying: "I think we should have gone with the provisional government of the Iraqis from the very outset, maybe even before we launched. I think the Coalition Provisional Authority was a mistake, wasted valuable time."

He's referring to Ambassador Paul Bremer's whole operation for a year or so where he, in effect, was in charge of what was going on in Iraq.

Is that the biggest mistake he suggests to you that was made?

HAYES: He did. I mean he suggested several. That was actually the biggest one. It seems to me he didn't hold Paul Bremer responsible for this, but just the overall process.

BLITZER: Well, who made that decision?

HAYES: Well, I mean one can only assume that the president did --

BLITZER: That --

HAYES: -- which is one of the reasons that I thought this was such an interesting -- an interesting thing for him to have said.

BLITZER: But did he distance himself from that decision, if you will?

HAYES: I don't think he did it on purpose. It came in the middle of a long conversation that we were having about Iraq and how things went after the war, what they expected. He told me that it was much more difficult than he had thought. I mean it's not a major acknowledgement. I think everybody would agree with that. But --

BLITZER: What -- what other mistakes did he acknowledge?

HAYES: Well, one of the things that he said that I thought was very interesting was that the leftover, the residual distrust or mistrust from the Shiites, from the first Gulf War, the decision to ask them to rise up against Saddam Hussein after that war -- which I'm sure you remember well -- and then to not get their back when they did, he said, has left sort of simmering anger and mistrust against the United States.

BLITZER: Because I remember, he was the defense secretary during the first Gulf War. I was the Pentagon correspondent. And afterwards, for a long time, throughout the '90s, he strongly defended that decision to liberate Kuwait and then stop -- not go all the way to Baghdad to get rid of Saddam Hussein.

So what changed in his mind, because he and Colin Powell were -- who was chairman of the Joint Chiefs, as you remember -- pretty much strongly opposed that throughout the '90s?

HAYES: You're right. Vice President Cheney gave a speech when he was finishing up his term as secretary of defense in 1992 in Seattle in which he walks through the reasons, very carefully, very meticulously, why.

BLITZER: Because he was criticized for that.

HAYES: He was criticized for it. At the time, there were a lot of second guessers saying we should have gone. We should have removed Saddam Hussein --

BLITZER: Finish the job, yes.

HAYES: -- when we had the opportunity. And he was arguing for a limited mission.

BLITZER: So what changed?

HAYES: I think September 11th changed him. The nature of the threat --

BLITZER: But did he really believe that Saddam Hussein and the Iraqis had anything to do with 9/11?

HAYES: I think initially that, you know, he and the president both thought there was a possibility that Saddam Hussein had had some role in the September 11th attacks. But, really, beyond that, it was more this broad threat of Iraq, on the one hand, a state that he thought -- and pretty much everybody thought -- had weapons of mass destruction, and these terrorist groups that were, in some cases, had overlapping relationships with Saddam and his intelligence -- and his intelligence services.

BLITZER: So it's fair to say he was pretty much surprised at all the post-mortems that have done -- that have occurred in more recent years, that there was no Saddam connection to 9/11, no weapons of mass destruction?

A lot of the stuff that's come out pretty much, I assume, in the conversations you had with him, he acknowledged that he was pretty much surprised.

HAYES: Yes. I think he -- you know, he, like everybody else, or most everybody else, thought certainly that we'd find stockpiles of weapons of mass destruction. So I think it's fair to say that that was a surprise.

BLITZER: And does he look back and try to, you know, get some lessons learned from his own involvement?

Because as you point out in the book, and as others have pointed out, he was deeply involved in all the details going into the war and the immediate aftermath.

HAYES: Yes, he said that to me, actually. I put that exact question to him. And he said, you know, one of the lessons here is not to underestimate this kind of an undertaking, which is, you know, a tacit admission that they did underestimate, in certain respects, what would be needed to keep Iraq together.

BLITZER: The book is entitled "Cheney: The Untold Story of America's Most Powerful and Controversial Vice President."

The author, Steve Hayes.

Thanks for coming in, Steve.

HAYES: Thanks for having me.

BLITZER: Good luck with the book.

HAYES: Thanks.

BLITZER: And coming up, a New Orleans jury decides the fate of a doctor accused of killing patients during Hurricane Katrina.

And who moved the meter in last night's debate?

We're going to show you how some voters reacted in real time. The results may -- may surprise you.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Our Carol Costello is monitoring stories coming into THE SITUATION ROOM right now -- Carol, what do you have?

CAROL COSTELLO, CNN CORRESPONDENT: A couple of things, Wolf.

A grand jury in New Orleans will not indict a surgeon accused of killing four seriously ill hospital patients after the onslaught of Hurricane Katrina. Dr. Anna Pou and two nurses were arrested last summer, accused of giving the elderly patients a "lethal cocktail at the height of the disaster." The charges were recently dropped against the nurses.

On the heels of a recent disastrous crash, Brazil's TAM Airlines diverted or canceled 90 flights at Sao Paulo's airport because of heavy rain. Other airlines continue to fly into and out of Brazil's busiest airport. Almost 200 people were killed when one of Tam's planes crashed in the rain last week.

Here in the United States, air traffic controllers describe less than healthy working conditions at the nation's airport towers. They say poor upkeep and aging facilities could endanger the flying public. In testimony to a House panel, controllers complained of leaky pipes, mold and pest infestation. Their union leader says the Federal Aviation Administration was failing to make maintenance a priority.

A word of warning from a new study on soda drinking -- you might want to cut back, even if it's diet soda. Researchers at Boston University say those who drink one sugar-free soda a day develop the same heart disease risk as people who drink regular soda. They do say they aren't sure why, but speculated it triggers cravings for more sweets. The study described as large, but inconclusive. So I guess drink at your own risk -- Wolf.

BLITZER: Apparently no difference between diet or regular, either, in that report.

Carol, thanks very much.

Major flooding in Britain is taking its toll. Three people are dead. Hundreds of thousands are without power or running water or both, and damage estimates now running into the billions of dollars. A bad situation, but nothing approaching past U.S. disasters.

In 1993, flooding from the mighty Mississippi River wreaked havoc on nine states, breaching hundreds of levees, killing 50 people, causing up to $15 billion in damage.

The worst flood disaster, of course, though, was Hurricane Katrina two years ago, that killed 1,800 people in five states, displaced as many as a million people, at least initially; half million long-term. Ran up a damage tab of at least $25 billion. But some people say a lot more than that.

Coming up, a chief architect takes on critics of President Bush's No Child Left Behind education overhaul. My interview with Senator Ted Kennedy. That's coming up.

And the questions from last night's CNN/YouTube debate were a huge hit. Now we're going to show you some of the questions you and the candidates didn't hear.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, the Treasury Department clamping down on Iran- based foundations suspected of supporting Hezbollah. Agents searching officers of The Martyrs Foundation, a goodwill charitable organization of Dearborn, Michigan. A Treasury spokesman saying -- and I'm quoting now -- "We will not allow organizations that support terrorism to raise money in the United States."

A top adviser to potential Republican presidential candidate Fred Thompson has quit. He's a campaign veteran hired to assemble Thompson's campaign. GOP sources tell CNN he was growing frustrated and did not see eye to eye with Thompson's wife, Jerri.

And the NBA commissioner says allegations of gambling by a former league referee is an isolated case. The FBI investigating whether Tim Donaghy bet on games he called over the past two seasons. Donaghy resigned this month.

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

Has the war in Iraq, the loss of so many American lives, been all for nothing?

One Democratic presidential hopeful touched a nerve last night, comparing that conflict to an earlier war.

Let's go to CNN's Brian Todd.

He's watching the fallout today -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, Mike Gravel joined those who are sending more ominous warnings about the road ahead in Iraq. And in doing so, he hit on a very sensitive point.

(BEGIN VIDEO TAPE)

TODD: (voice-over): Nobody wants to believe it, few people will say, it except for presidential candidate Michael Gravel.

MIKE GRAVEL (D), PRESIDENTIAL CANDIDATE: Our soldiers died in Vietnam in vain. You can now, John, go to Hanoi and get a Baskin Robins ice cream cone.

TODD: Or you can do what President Bush did and visit the stock exchange in Ho Chi Minh City.

So what's the point?

Why does the ability to eat ice cream or trade stocks with a former enemy mean American troops died in vain there?

Gravel says Vietnam would have turned out that way whether U.S. troops had been there or not. And, he says, so will Iraq.

GRAVEL: Let me tell you, there's only one thing worse than a soldier dying in vain -- it's more soldiers dying in vain.

TODD: A comment that offends America's veterans, including this general who fought in Vietnam.

BRIG. GEN. DAVID GRANGE (RET.), CNN MILITARY ANALYST: In Iraq, soldiers are providing, I think, an opportunity for the Iraqis to have a better life. You can argue whether it's our business or not. But so far, I don't think soldiers have died in vain.

TODD: What are the human costs of withdrawal? Hundreds of thousands of Vietnamese died after U.S. forces pulled out in 1973. In Iraq, the civilian carnage is forecast to be worse.

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: We walk away from Iraq now, we risk a failed state in the heart of the Middle East, a haven for international terrorists, an invitation to regional war in this economically vital area and a humanitarian disaster that could involve millions of people.

(END VIDEOTAPE)

TODD (on camera): Mike Gravel doesn't buy that. He told me that if the U.S. gets out of Iraq quickly, its neighbors like Iran, Syria and Jordan will do what's best for them, which Gravel says is to stabilize Iraq. Wolf?

BLITZER: I know you've also been doing, Brian, some reporting on how the U.S. might stage a withdrawal from Iraq.

TODD: Right. And there are warnings about that, too. One former intelligence officer who served in Vietnam says you can with draw under a negotiated peace, very, very likely here or under military conditions, much more likely. And that means a slow, gradual pullout that will be very bloody just like it was in Vietnam.

BLITZER: All right, Brian, thanks very much.

Moving on to some other news. The state of education. It was a big sticking point last night during the Democratic presidential debate. The candidates were pretty much in agreement about President Bush's so-called No Child Left Behind initiative. Some wanted it overhauled, others simply wanted it scrapped altogether. At least one Democratic presidential candidate expressed regret for voting for it.

(BEGIN VIDEOTAPE)

SEN. JOE BIDEN, (D) PRESIDENTIAL CANDIDATE: The reason I voted for it, against my better in instinct, is I have great faith in Ted Kennedy who is so devoted to education.

BLITZER: And joining us now is Senator Kennedy. You heard that exchange last night on the president's No Child Left Behind. You worked very closely with President Bush on that, got members of the Senate and the House to support it. It became the law of the land but last night there was a lot of second guessing, a lot of regrets over this whole education initiative. What do you think about this?

EDWARD KENNEDY, (D) MA: I think every parent in this country want a strong public school system. I think that's what the president wants, that's what I want. I think we've got a bipartisan group in the United States Senate that is going to work to try and achieve that. I think there are ways that we can strengthen the No Child Left Behind. I think changes should be made in that program but 1965 was the year that we passed the Title I program and that was the national commitment that said we as a country are going to reach out to the neediest children in this country and we're not going to leave them behind.

BLITZER: But what do you say to Senator Biden who feels that it was a mistake and several of the other Democratic presidential candidates think it was a mistake looking back now as well?

KENNEDY: I say that they ought to work with us to try and accept the challenge and get a program that is going to have accountability and that it's going to recognize growth models, that it's going to understand that we have to do better dealing with the disabled children and also the children with limited English speaking. We have to do better, rather than labels, we have to get more help and assistance to the schools.

But the idea of accountability, the idea of having well-trained teachers in every classroom, the idea of having supplementary services for children that are falling behind, the idea of involving parents in those schools, those are all valid ideas and so ...

BLITZER: If you had to do it over, senator, worked with President Bush on this, if you had to do it over you would do exactly the same thing?

KENNEDY: No, as I say, I think we always learn, we always learn from the past experience. I think there are going to be changes that are going to be made in this legislation. I hope we're also going to get the resources that are going to be necessary. We left 3 million children of the No Child Left Behind, they were really left out and I don't think that that's acceptable so we have a challenge that's out. We understand that but we are interested in trying to do what all parents in this country want to do and that is strengthen our public education system and do it well. Make sure that we're going to have a quality education system.

We're living in a global economy. Knowledge is the key. Education is the key to hope and opportunity and public high school systems are certainly a very important part of it.

BLITZER: On this day, senator, that the minimum wage increase goes into effect and you worked for some 10 years to try to make that happen, you're also now working on trying to get college education more affordable to working class families, poor Americans.

Knowing what you know now about the experience that you had with President Bush on No Child Left Behind in education, do you think you can work with this White House to achieve your current goals?

KENNEDY: Well, today, as you mentioned, the Senate of the United States on the reauthorization of the Higher Education Act, passed that unanimously and last week we passed a very important bill, 78-18, strong bipartisan support, that will provide the greatest help and assistance for young people that are going to college since the GI Bill of World War II.

Basically what that legislation is saying, we don't care where you come from, it is where you want to go. What are your hopes and what are your dreams? And we are committed to try to say to every young person that has ability and a commitment that the fact that you don't have money shouldn't leave you behind in terms of higher education and we made a very important down payment on that and we provided other provisions that will help young people achieve their goals by doing public service with loan forgiveness.

That is very important and I think that that's - and we have simplified the process. This is an enormous kind of investment in the children and the middle class of this country. Education, the GI Bill, made the middle class of America.

BLITZER: But can you work with President Bush on this?

KENNEDY: Well, I am hopeful. He has indicated that he preferred the Senate bill to the House Bill. I think with the votes, that it was virtually unanimous today. I think if you were down in the White House you would say that's a pretty good vote. They've got Republicans and Democrats. They could certainly override a veto if we were to give it but I'd hope that he would sign on to it for the difference that it would make for families, the greatest help and assistance for needy families really that we've had in the last 40 years.

(END VIDEOTAPE)

BLITZER: And we're going to have a lot more of this interview with Senator Kennedy. That will come up during our 7:00 p.m. Eastern hour right here in THE SITUATION ROOM. That part of the conversation involves Iraq, the Democrats' effort to change the course of the war in Iraq. What's going on right now, part two of the interview on Iraq with Senator Kennedy in our 7:00 p.m. Eastern hour.

Up ahead -- hitting Iran where it hurts. Several states taking action right now. We are going to tell what you they are doing and if your state is among them.

Also, often what a candidate doesn't say in a debate may say a lot more than the actual words. Carol Costello standing by with a look at the Democratic presidential candidates' body language. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Which candidates scored and which ones tanked during last night's Democratic presidential debate? It depends whom you ask, political analysts or mainstream American voters.

Let's go to CNN's Mary Snow. She is getting the view from both perspectives. Is there really a difference, Mary, in these respective viewpoints?

MARY SNOW, CNN CORRESPONDENT: Now, Wolf, there is a sharp divide at times between pundits and the public. We saw it first hand as we watched the debate with a focus group in the early primary state of New Hampshire.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Watch what happens when 24 undecided Democrats and independents in New Hampshire react as Senator Hillary Clinton answers whether she would meet with leaders of countries like Iran and Syria.

SEN. HILLARY CLINTON, (D) PRESIDENTIAL CANDIDATE: I will not promise to immediate with the leaders of these countries during my first year. I will promise a very vigorous diplomatic effort.

SNOW: As that reaction line dipped, compare it to how the crowd responded when Senator Barack Obama said he would meet with those leaders.

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: Ronald Reagan and Democratic presidents like JFK constantly spoke to Soviet Union at a time when Ronald Reagan called them an Evil Empire.

SNOW: So who fared best? This crowd chose Obama overall, a surprise says this political consultant hired by CNN to gauge reactions. Before the debate, these voters expected Clinton to win.

RITA KIRK, SOUTHERN METHODIST UNIVERSITY: One of the people said I'm not sure it was that Hillary performed poorly, but other people performed better than we thought they would.

SNOW: But to hear professional political observers tell it, it was Clinton who won, exhibiting experience.

DONNA BRAZILE, DEMOCRATIC STRATEGIST: I think her debate performance was spectacular.

DAVID GERGEN, FORMER PRESIDENTIAL ADVISER: And I must tell you, I think these debates are helping her a whole lot.

SNOW: The New Hampshire crowd thought the debates helped John Edwards the most. Strong responses helped boost his favorability rating.

JOHN EDWARDS, (D) PRESIDENTIAL CANDIDATE: We have got to stand up to the insurance companies and the drug companies that Barack just spoke about. It is the only way we are ever going to bring about real change.

(END VIDEOTAPE) SNOW: Now, another candidate who fared well with this New Hampshire group was Senator Joe Biden. Of course, these findings are unscientific. But you definitely get a sense from these voters, yes, they know Senator Clinton is considered the front runner, but want to hear more from the other candidates. Wolf?

BLITZER: What did this group also respond to, Mary?

SNOW: The more specific the answer to a question, the more the meter did move. And in talking to people they said they just don't want to hear generalizations to questions.

BLITZER: Mary Snow, watching this fascinating material, thank you, Mary.

This shrug, they sigh, sometimes they glance at their watches, they roll their eyes in debates. What the candidates don't say can often say a lot. Let's go back to Carol Costello, she was watching last night's debate, as well. What did the candidates' body language, Carol, tell us?

COSTELLO: Well, you know, Wolf, those who study these things say body language is sometimes more important than what you hear the candidates say. I sat down with Jo-Ellan Dimitrius who by trade is a well-known jury consultant who is an expert in determining what people are really saying.

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): Body language matters, especially when it's bad. 1960, Nixon sweats opposite a cool JFK. That was bad enough. But imagine if he faced questions from a snowman?

Well, welcome to 2007 and a new kind of debate. Experts say body language in this forum means even more because candidates faced you, who demand it's real.

UNIDENTIFIED MALE: How are you going to be any different?

COSTELLO: So who projected real? Let's start with dress. Our experts says dark suits, intimidating. Bright jacket, fresh, feminine, a winner, despite John Edwards gentle jab.

EDWARDS: ... sure about that coat.

COSTELLO: Hands clutching the podium were in pockets scream I need a safety zone. Hands on top of the lectern say open, friendly, big gestures in contrast to controlled? Defensive. Someone should have told Mike Gravel angry only works in small doses.

MIKE GRAVEL, (D) PRESIDENTIAL CANDIDATE: Has it been fair thus far? Every single day.

JO-ELLAN DIMITRIUS, JURY CONSULTANT: Gravel only knows one speed and it's in your face about whatever question he's being asked. What was your first cat? It was Spot. COSTELLO: Barack Obama? Great eye contact. Chris Dodd looked as if he were pontificating on the Senate floor. As for subtle digs? Clinton imagined to build an imaginary wall between herself and Obama.

DIMITRIUS: When other candidates are speaking, Hillary will oftentimes nod in agreement. She will never do that with anything that Obama says.

COSTELLO: And that and more worked for Hillary Clinton who our experts said won the body language debate.

(END VIDEOTAPE)

COSTELLO: So there you have it. How this will translate in the voting booth, well, it is still early. And of course, candidates have plenty of time to adjust. Wolf?

BLITZER: They like it when the candidates are flailing their arms instead of keeping them in their pocket?

COSTELLO: No. They don't like it when candidates are flailing their arms. John Edwards was standing next to Hillary Clinton who has controlled body language. And it just made him seem like, pay attention to me. It seemed like she was standing there calmly accepting his arguments so she could argue back.

BLITZER: I thought the pink jacket was nice.

COSTELLO: I did, too.

BLITZER: Thank you.

Of the close to 3,000 questions sent into YouTube, CNN played 39 of them last night to the Democratic presidential candidates. What about the video that didn't actually make the cut? Let's go back to our Internet reporter, Jacki Schechner. Jacki, what are they saying about that online?

JACKI SCHECHNER, CNN CORRESPONDENT: Well, Wolf, everybody wants to see their own video. There were so many great ones. This is one that didn't get played last night.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This my shower curtain and I'm sitting here thinking, if we already have military bases in the Gulf States, Afghanistan, Kyrgyzstan, Turkey, Kosovo, then why do we need permanent bases in Iraq?

(END VIDEO CLIP)

SCHECHNER: Now there are also people who are sending us I- Reports saying there are themes they would have liked to have heard last night.

(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: ... I was disappointed on was there was no questions regarding impeachment and removing the president from office. That was disappointing.

(END VIDEO CLIP)

SCHECHNER: Now the theme of impeachment has actually come up online throughout the week on this one online community, Community Counts. They actually voted on the question they wanted asked. And that was the number one question. So a couple of the candidates, in particular we had John Edwards and Senator Chris Dodd answer these questions online after the debate. Here is part of their answers.

(BEGIN VIDEO CLIP)

EDWARDS: Key to this is to have the Congress hold him accountable, hold him responsible for what he's done. And move on on the big changes that this country needs so badly.

(END VIDEO CLIP)

SCHECHNER: And here's Dodd's response. They had the same or similar format.

(BEGIN VIDEO CLIP)

DODD: (Inaudible)

(END VIDEO CLIP)

SCHECHNER: You are listening to both clips at the same time, unfortunately. But the idea was to get as many responses in as possible. You can go online to cnn.com to see the full debate and all sorts of extra accoutrements that we put online if you missed any of it last night and also on youtube.com/debates. Almost 3,000 videos in their entirety.

BLITZER: I liked Chris Dodd's video on his white hair. I thought that was clever and distinctive. Thank you, Jacki, very much.

Up ahead, quiet influence on foreign policy in Iran. It's target, Iran's pocketbook. Money talks. But who would have thought it comes from deep in the heart of Texas?

And later in our 7:00 p.m. Eastern hour, right here in THE SITUATION ROOM, scandal hits the sports world this time. This time it's the NBA and a referee accused of gambling. Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Lou Dobbs getting ready for his show that begins right at the top of the hour. He's standing by to tell us what he's working on.

Hi, Lou. LOU DOBBS, CNN HOST: Hi again, Wolf. Coming up at 6:00 p.m. Eastern here on CNN, we are reporting on new evidence linking communist China and Mexico with our national crisis over drug addiction and illegal immigration. Federal agents arresting a Chinese-Mexican fugitive in Maryland, a suburb of Washington, DC, accused of amassing the world's biggest stash of drug money.

Also outrage after a city in Connecticut becomes the first community in the nation to give illegal aliens identity cards. Those cards give illegal aliens many of the same privileges as U.S. citizens. Well have a live report tonight from New Haven.

And new concerns about our government's failure to protect us from dangerous food imports. Consumer groups saying new government tests on seafood from communist China are simply inadequate and will do nothing to protect American consumers.

And I'll be joined by four of the nation's top radio talk show hosts. They'll tell us who in their opinion won that CNN-YouTube presidential debate and they will explain what this government of ours is doing, at least from their perspective.

Please join us for all of that, all the day's news and more. Join us at the top of the hour. Wolf, back to you.

BLITZER: Thank you, Lou. Thanks very much.

A number of states have now figured out a way to try to hit Iran where it hurts, in the pocketbook. They are working to cut off financial ties with the Islamic Republic. Let's go to CNN's Ed Lavandera who joining us in Dallas right now. Texas, I believe, is part of this push, is that right, Ed?

ED LAVANDERA, CNN CORRESPONDENT: One of the latest states to join into it. You know, Wolf, it might not sound like a sexy topic, but there are thousands of firefighters, police officers, teachers around the country whose retirement money is quietly influencing what's happening in Iran. And they are probably not aware of it.

(BEGIN VIDEOTAPE)

LAVANDERA (voice-over): You won't think a boot-wearing Texas governor could stomp on Iran, but Rick Perry is sending a financial strike at what he calls a notorious regime. He wants the state's public retirement funds to dump all investment in companies doing business with Iran. Just Texas' move would cost those companies hundreds of millions of dollars. Five states have already made their decision to make Iran pay. Nine others are considering. Together they could take billions of dollars from Iran's economy.

MITT ROMNEY, (R) PRESIDENTIAL CANDIDATE: We also have to be imaginative in the way we pressure Iran economically.

LAVANDERA: On the campaign trail echoes of support from Republicans Mitt Romney and Democrat Barack Obama and support from allies like Israel which inspired the decision. BENJAMIN NETANYAHU, FORMER ISRAELI PRIME MINISTER: The world that didn't stop the Holocaust last time can stop any attempt the future Holocaust this time.

LAVANDERA: But isolating Iran economically could backfire, fuelling more anger at the United States.

UNIDENTIFIED MALE: We call it chicken soup diplomacy. It makes you feel better, but fundamentally it doesn't really make a difference in the situation.

(END VIDEOTAPE)

LAVANDERA (on camera): And another drawback critics say is that this actually gives states a little bit too much influence over American foreign policy and actually complicates the matter for President Bush as he tries to work in the region. Wolf?

BLITZER: If Texas gets involved in this, could Iran retaliate presumably against Texas in some way?

LAVANDERA: There is no legal recourse for Iran to do anything against these states in the U.S. like Texas that are trying to follow this. The only thing they can do is put political pressure on some of their allies in the region to return that political pressure on the U.S.

BLITZER: Ed Lavandera reporting. Thank you, Ed.

And as Ed notes, those divestment efforts target international companies, for the most part it's illegal for Americans to do any business with Iran. In 2000 sanctions were eased to allow citizens to import Iranian carpets, nuts, dried fruit and caviar. Otherwise corporate penalties for violating these sanctions range up to half million dollars, while individual penalties can reach $250,000 and 20 years in jail.

Up next, Jack Cafferty wants to know what it means when a new survey shows Muslims around the world increasingly rejecting suicide bombings and Islamic extremism. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Time now to go back to Jack Cafferty for "The Cafferty File." Jack?

CAFFERTY: The question this hour, what does it mean in Muslims around the world are increasingly rejecting suicide bombings and Islamic extremism?

Darrel writes from Eagle Point, Oregon, "It means there is hope, Jack. Maybe America can begin to do the right things and encourage more Muslims to reject the terrorist philosophy in favor of democracy, peace and religious freedom." Gitana in Mexico. "It means that Muslims are tired of getting a bad rap because of the Allah forsaken, Koran-thumping criminals. Terrorists hurt their own people more than they hurt the people they claim to hate."

Peggy in Missouri. "Jack, people are people no matter what their religion. Muslims are no different. Most people the world over want the same things. The freedom to get on with their lives and raise their family in a secure and peaceful environment."

Jon writes from Philadelphia, "What it means they are finally waking up and seeing the truth. Extremists are killing more of them than they are us. Another factor may be that most people see we are not that bad. It's our leaders who are terrible, not our people. Muslims of good faith are smart enough to understand that."

Ed writes from Hollis, New Hampshire, "Jack, if we had taken half the money that we've spent on the war in Iraq and used those funds to improve the economic condition of Muslim countries, they would love us and al Qaeda would be out of business."

Ross writes from Nova Scotia, "The Muslims polled are now more against suicide bombings because they are getting blown up, too. Not just Americans anymore. It's hard to be for suicide bombings when you don't know if you might be next."

If you didn't see your e-mail here you can go to cnn.com/caffertyfile where we post more of them online along with video clips of "The Cafferty File." Wolf?

BLITZER: We're going to have part two of my interview coming up in the 7:00 p.m. Eastern hour of the situation room with Senator Ted Kennedy. He is really fired up on what's going on in Iraq right now, Jack, I know you're going to want to hear what he has to say.

CAFFERTY: Well, he's not alone. There are a whole lot of people who think this has been a very long trip to nowhere and are getting a bellyful of the results over there. So maybe at some point we'll change course.

BLITZER: In the nearly four decades he's been in the Senate, he says that was the best vote he ever had when he voted against authorizing President Bush to go to war against Saddam Hussein. But that interview, Jack, coming up in one hour right here in THE SITUATION ROOM.

Jack will be back as well. Until then, thanks very much for watching. I'm Wolf Blitzer in Washington. LOU DOBBS TONIGHT starts right now. Lou?

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