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President Bush Rejects Kids' Health Care Bill; Clinton Crushing Rivals; McCain One-On-One

Aired October 3, 2007 - 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: Happening now, a roar of outrage over a quiet veto. Democrats are hammering the president's rejection of a children's health insurance bill. We'll tell you how both sides are using the veto now to try to score some political points.
Also this hour, a presidential campaign stunner. Underdog Republican presidential candidate Ron Paul is giving John McCain a run for his money. We have some brand-new numbers, a brand-new interview as well, with John McCain on the road in South Carolina aboard the CNN Election Express.

And Hillary Clinton reaches a major milestone. We're going to tell you what it is and why it could mean the Democrat will be unbeatable in the primaries.

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

But up first this hour, Democrats are blasting the fourth veto of the Bush presidency in the harshest of terms, calling it "inexplicable," "a disgrace," and "heartless". Some fellow Republicans aren't pleased, either. As expected, Mr. Bush today used his presidential power to scrap a bill to expand a popular children's health care program.

Our congressional correspondent, Dana Bash, is standing by, but let's go to the White House first.

Ed Henry is watching all of this unfold.

All right, Ed, explain what happened.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, it's very simple. Republicans are petrified that conservatives are going to stay home in 2008 like they did in 2006, in part on the issue of runaway federal spending, so Mr. Bush is trying to restore the mantle of fiscal responsibility for Republicans, but that political game may be wiped out by Democratic allegations that he's doing it on the backs of children.

(BEGIN VIDEOTAPE)

HENRY (voice over): In the privacy of the Oval Office, away from the glare of cameras, the president vetoed a bill expanding a popular health program for kids, a move so controversial within his own party, with 45 house Republicans voting against him, the president knew he had some explaining to do at a town hall meeting in conservative Lancaster, Pennsylvania.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I want to share with you why I vetoed the bill this morning. Poor kids first. Secondly, I believe in private medicine, not the federal government running the health care system.

HENRY: Mr. Bush charges the Democrats' $35 billion plan is so massive, middle class children will jump from private insurance to the government dole, leaving poor kids in the dust.

BUSH: The intent of the program was to focus on poor children, not adults or families earning up to 83,000 a year.

HENRY: Eager to restore Republicans' credibility on fiscal conservatism, the president calls the Democratic plan a budget-buster, claiming his $5 billion increase would suffice.

BUSH: We've got to be fiscally responsible, set priorities with your money, and keep your taxes low.

HENRY: But Democrats note the president didn't veto any spending bills when Republicans were running Congress, so he's finding religion a bit late in the game.

REP. PETER DEFAZIO (D), OREGON: After an arrange of borrowing, spending and misspending on many dubious things, his target -- 10 million low-income kids.

(END VIDEOTAPE)

HENRY: Now, the president signaled in his remarks that he might be ready to compromise with Democrats a bit by saying he's willing to put a little more money on the table in negotiations, but Republican strategists privately believe it may take more than a little money, because the pressure, political pressure on Republicans on the Hill, is going to get intense, Wolf.

BLITZER: All right, Ed. Thanks very much.

Congressional Democrats have their own political agenda as they push back hard against the president's veto.

Let's go to our congressional correspondent, Dana Bash. She's watching all of this.

The Democrats, they're responding very forcefully, Dana.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: That's right, because children's health is a policy fight the Democrats think they're waging on their policy turf. It's one they sought, one they relished, and one Democrats are pulling out all the stops on in order to overcome the president's veto.

(BEGIN VIDEOTAPE)

BASH (voice over): Within minutes of the president's veto, battle-ready Democrats unleashed a barrage of criticism.

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: This is probably the most inexplicable veto in the history of the country.

REP. EDOLPHUS TOWNS (D), NEW YORK: It is a shame and a national disgrace.

REP. JAN SCHAKOWSKY (D), ILLINOIS: The president is refusing to spend $7 billion a year on children's health, while insisting on $10 billion a month in Iraq.

BASH: But some of the most stinging swipes at the president came from fellow Republicans who support expanding the children's health program.

SEN. CHUCK GRASSLEY (R), IOWA: From their position, it was either my way or the highway. Well, that's not how the legislative process work.

BASH: In the House, Democrats immediately began a mass scramble for votes to override the president's veto, moving to delay taking up the veto override for two weeks to give Democrats time to pressure Republicans for votes.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: Many of them are very, very uncomfortable about having to make this choice of sticking with the obstinance of the president on this issue and -- or voting for America's children.

BASH: To successfully override the president's veto, Democratic leaders say they need 15 Republicans who opposed expanding SCHIP to change their votes. They're already running radio ads against eight vulnerable GOP congressmen like Randy Kuhl.

UNIDENTIFIED FEMALE: Congressman Kuhl has a chance to make -- continue to stand with President Bush or with American children.

BASH: Congressman Kuhl calls that crass politics and thinks his constituents won't buy it.

REP. RANDY KUHL (R), NEW YORK: It's not affecting me at this point and I don't expect it will. You know, I believe in basic things, and one of them is, you know, a private health care plan where people have a choice. And that's what this bill does not do.

(END VIDEOTAPE)

BASH: Now, some Republicans do privately admit it's pretty hard to compete with the Democrats' mantra that they're turning their backs on children. Congress Kuhl told us though he does not think that Democrats will get enough Republicans to override the president's veto. And Republican leaders, Wolf, they are really hitting Democrats today for delaying this override vote for two weeks. The leader, John Boehner, saying that the Democrats are playing the kind of political games that voters hate -- Wolf.

BLITZER: Dana Bash on the Hill.

The three other vetoes of George W. Bush's presidency still stand. In July of 2006, the House failed to override his rejection of a bill loosening federal restrictions on embryonic stem-cell research. Supporters of the bill fell 54 votes short of the two-thirds majority vote needed to override in the House.

That -- this past May, moreover, the House fell 67 votes short of overriding the president's veto of a war funding bill that included a timetable for withdrawal of U.S. troops from Iraq.

In June, the president vetoed another stem-cell research bill, but there was no attempt in the Senate, where the bill originated, to override the veto.

I want to go right back to Dana Bash, because there's another story. Dana is over here.

Dana, there's a story up on the Hill that's unfolding right now, a little worrisome. What's going on?

BASH: Well, the story today was that there were actually four small fires in two of the Senate office buildings here on the Capitol complex. They were all in women's restrooms, Wolf. And they were small enough to be put out mostly by the Capitol police. One was generating enough smoke for the police -- or I should say for the fire department to come.

Now, the police chief told CNN that he thinks that this was designed more as a nuisance than actually hurt anybody. They didn't evacuate the building and nobody was injured. But the police chief also warned you never know what's going to happen with fires.

And because there were four fires going on pretty much within a couple of hours of each other, they do believe that they were connected, but they don't really have any leads yet as to who was behind it. But they are looking. They even put out a notice for any staffers here on Capitol Hill who might know anything about it to contact the police officers.

BLITZER: All right, Dana. Thanks very much.

Dana Bash on the Hill.

Let's check in with Jack Cafferty. He's got "The Cafferty File" for us from New York.

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: When it comes to the race for the White House, the Republican contest is still pretty much an unmade bed, if you will. A new "Washington Post"-ABC News poll shows Rudy Giuliani leading the pack of GOP contenders, but a majority of those who support him do so only somewhat, according to the poll.

Consider this -- when Republicans were asked which candidate best reflects the party's core values, there's no consensus at all. On the contrary, 26 percent say John McCain, who split with the party's base on immigration and campaign finance reform. Twenty-three percent say Rudy. Fred Thompson, 21 percent. Mitt Romney, 13 percent.

And that's not all. More evidence for lack of support of the Republican candidates.

Since the beginning of this year, the major Democratic candidates have raised more than $200 million for their campaigns, almost double what Republicans are expected to report raising.

And then there's the threat coming from the Republican base. This is not good, either. A group of influential Christian conservative leaders recently suggested that they might support a third-party candidate who is antiabortion, especially if Giuliani winds up as the nominee.

So here's the question: What do Republicans have to do to turn things around by the election?

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

BLITZER: Jack, thank you.

Hillary Clinton's frontrunner status among Democrats may be more solid than ever. We'll look at a landmark moment for the presidential contender and why history appears -- appears to be on her side.

Plus, he barely registered in the polls, the national polls, but Republican Ron Paul is making some very surprising strides in the campaign money race. Wait until you hear about his third-quarter haul.

And John McCain is taking aim at President Bush, trying to get a bit of a distance from him in a brand new interview aboard the CNN Election Express.

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

(COMMERCIAL BREAK)

BLITZER: Apparently they like her. They really, really like her. That would be Senator Hillary Clinton.

According to a brand-new poll, she's opened up a enormous lead over her Democratic presidential rivals, and now some are wondering if there's any -- any stopping her.

Let's go to our senior political analyst, Bill Schneider. He's watching this story for us.

All right, Bill, why is this poll different than all other polls?

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Because in this poll, for the first time, Senator Clinton has reached a significant milestone.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice over): For the first time, a majority of Democrats support Hillary Clinton for the party's nomination. Senator Clinton's support in ""The Washington Post"-ABC News poll has climbed to 53 percent, 33 points ahead of her closest competitor, Senator Barack Obama. That establishes Clinton as the clear national frontrunner. Being frontrunner means being a target of criticism from our Democrats.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: Well, I heard Senator Clinton say on Sunday that she wants to continue combat missions in Iraq. To me, that's a continuation of the war.

SCHNEIDER: It also means being the target of satire on NBC's "Saturday Night Live".

UNIDENTIFIED FEMALE, "SATURDAY NIGHT LIVE": And now a word to my seven fellow Democratic candidates for president, those I am about to defeat for our party's nomination.

SCHNEIDER: But does it mean she's likely to get the nomination? Well, yes, if you look at the record, which we did going back to 1980.

Every candidate who has gotten majority support in polls the year before the election has gone on to win the nomination. Al Gore and George Bush in 1999; Bob Dole in 1995; George H. W. Bush in 1991 and 1987; and Walter Mondale in 1983.

One partial exception. In 1979, most Democrats supported Ted Kennedy for the 1980 nomination until the Iran hostage crisis that November. Then most Democrats switched to Jimmy Carter, who went on to get the Democratic nomination.

What's behind the Clinton surge? Fifty-seven percent of Democrats think she's the candidate with the best chance to win the White House. That number went up 14 points in September. She also leads as the candidate who best reflects the Democratic Party's values.

(END VIDEOTAPE)

SCHNEIDER: In the Republican race, Rudy Giuliani's the frontrunner with 34 percent. Republicans picked Giuliani as the most electable contender, but only 23 percent say he best reflects Republican values. They're really not sure who does.

Now, Giuliani looks like a winner to most Republicans, but many Republicans are not sure he's one of them. That is not a problem most Democrats have with Hillary Clinton --- Wolf.

BLITZER: Bill Schneider, thank you.

Let's talk a little bit more about the widening leads for Hillary Clinton and Rudy Giuliani in this new poll. Joining us, our senior political analyst, Gloria Borger.

What do you make of this, Gloria, when you look at these numbers? First of all, on Hillary Clinton's part?

GLORIA BORGER, CNN SR. POLITICAL ANALYST: Well, take a look at these numbers, Wolf, because 50 percent of Democrats say that she shares that values, and only 23 percent believe that Rudy Giuliani does. That's a big problem for him.

What this means is that Hillary Clinton is really consolidating her base, that she has got most Democratic voters at least believing that she's electable, that she's a strong leader, that she's trustworthy. But he's got some real problems, largely in the conservative base and those evangelical voters. So he has got some work to do.

BLITZER: Because a lot of the pundits, the experts -- and tell me if you think this is true -- they say, yes, these national poll numbers are really important, but you've really got to go into Iowa, New Hampshire, South Carolina, and fine-tune those numbers, because right now the national numbers are not really all that significant.

What do you make of that?

BORGER: That's what the campaigns will tell you, too. And the Giuliani campaign will tell you if you look at how they're doing in those states, they may just be where they want to be.

But Wolf, you have to look at the overall race, because one thing that you'll watch that Rudy Giuliani is doing a lot lately, Wolf, is he is saying, I can beat Hillary Clinton. And that is something that really resonates with the Republican base. When the Republican base talks about electability, they're talking about beating Hillary.

BLITZER: Gloria, thank you.

And there was a stark new reminder of Rudy Giuliani's problems, with some voters focused on faith and values. The archbishop of St. Louis reportedly now saying he'd refuse to give communion to Giuliani.

The Associated Press quoting the archbishop, Raymond Burke, that as a Catholic, Giuliani's support of abortion rights is wrong. Burke, by the way is the same clergyman who said he'd deny communion to the 2004 Democratic presidential nominee, John Kerry. Burke says anyone administering communion is morally obligated to deny it to Catholic politicians who oppose church teachings by supporting abortion rights.

(COMMERCIAL BREAK)

(NEWSBREAK)

BLITZER: Happening now, the House debates a bill to bring all U.S. contractors in a war zone under civilian law. That could close a loophole some say has let some contractors act recklessly.

We're going to have details.

A multibillion-dollar merger with huge national security potentially at stake. We're going to tell you about a deal that could give a company with ties to the Chinese military access to Pentagon information.

And never before seen images of the last few minutes of Princess Diana's life, they show her with her love moments before they died in Paris. A jury now looking at the images must ultimately decide if they were murdered.

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

Some stunning political news this hour concerning Ron Paul. The Republican presidential hopeful is low in the national state polls, but now when it comes to campaign cash, he's standing very tall.

Ron Paul's campaign reports the congressman from Texas raised $5 million over the past three months. That's in the same neighborhood as what rival John McCain is expected to report and it's five times -- five times what former Arkansas governor Mike Huckabee reportedly raised. It's also more than $3 million more than Paul raised over the first six months of this year. Paul can partially credit his big bucks to a strong following on the Internet.

John McCain's less than impressive fundraising is just one of the hurdles he's trying to overcome on the campaign trail. The GOP presidential candidate took time out from his stumping in South Carolina today to take a ride on the CNN Election Express. It's a symbol's of CNN's commitment to covering the 2008 presidential race by bringing the campaign to you, the people.

McCain spoke with our chief national correspondent, John King.

And John is joining us now from the Election Express.

John, give us some of the headlines, what Senator McCain had to say.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, Wolf, Senator McCain has been struggling. Not only in raising money, but he has struggled a bit in the polls. But he feels he has hit bottom and he's now going back up.

He says he feels more confident by the day. He knows how important South Carolina is. And as you mentioned, he took a little time off of his but today so he could climb aboard ours.

(BEGIN VIDEOTAPE)

KING: Let's start with an issue in the news today. The president vetoes the SCHIP program and the Democrats say these coldhearted Republicans are trying to deny children health care. How could they possibly do this, right?

Call for the president a bad call? SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: A right call by the president. It's a phony smoke-and-mirrors way of paying for it.

We've laid a debt on these same children that we're trying -- that we're saying we're going to give health insurance to. The American people have rebelled against out-of-control spending. If they can find a legitimate way to pay for it, I would consider it, but it's also now what it was supposed to be for low-income Americans is now up to 400 percent of the poverty level, just like the Medicare prescription drug program, an unfunded liability.

KING: Some of your Republican friends, some who support the president's veto, some who are critical of it, say it's a harder message though politically, because in their view -- and these are Republicans -- they say the president has not laid the predicate on the spending issue by vetoing other bills before. So that when he says, I'm a fiscal conservative, I have to do this, they say he's a Johnny come lately.

Is that fair?

MCCAIN: Yes, it's fair.

KING: You have been in the news in recent days, somewhat controversially, because of a statement you made in response to a question about whether this nation would have a Muslim president, whether you think this is a Christian nation.

You're rolling a eyes a bit at the controversy. I know you were answering a question. I want to give you a chance to sort of lay out your views on this question.

MCCAIN: My views are is that this nation was founded by our -- our founders, who were formed by Judeo-Christian values. I believe that, and I think it's evident by reading the Federalist Papers, the Declaration of Independence, and our Constitution.

And, yes, I believe a Muslim could be president. I believe anybody can be president in America. And I, again, believe that our country was founded and informed by Judeo-Christian values. And I believe that. And that's fundamentally all, really, I can say on it, except that that's my views and belief.

KING: Also controversial in the news right now is this whole Blackwater controversy. And you were just speaking to reporters outside, and you laid the blame for this, the root of it, at the feet of Donald Rumsfeld, saying, if we had had enough troops in Iraq to begin with, perhaps we wouldn't need these private contractors, or certainly as many as these private contractors -- is it also fair to say, then, if it's Secretary Rumsfeld's fault, that it's his boss' fault as well, that the president should have overruled his defense secretary?

MCCAIN: Sure. We should have listened to General Shinseki. We should have listened to all of those people in the military and, if I may say, a bit egotistically, to me. I came back in August 2003 and gave a speech that we don't have enough boots on the ground. We don't, and we're going to fail, and we need more.

And the former secretary of defense and the administration, Wolfowitz, the president, the vice president, and -- continued to say things like, a few dead-enders, stuff happens, last throes. And Americans, for nearly four years, finally became frustrated and angered and saddened.

KING: Another dust-up in recent days has been Harry Reid, demanding an apology from Rush Limbaugh calling a remark about phony soldiers. Rush says he was taken out of context, and was criticizing one person who lied about Iraq.

MCCAIN: I'm a little disturbed about bringing that aspect into the political arena. But they are citizens, and they have the right to vote, obviously.

But, on the issue, I don't know exactly about what -- the back- and-forth between Senator Reid and Rush Limbaugh. I did issue a statement saying that I thought it was inappropriate. And perhaps Mr. Limbaugh didn't mean it, but he should not have said it.

I also criticized the -- the ad on General Petraeus. I also criticized the attack on John Kerry's record. I also criticized the attack on Max Cleland's record. So, I'm -- I regret that people are in any way criticized or assaulted because of their service in the military.

KING: In the headlines this week was a meeting in Salt Lake City where several conservative leaders, Dr. Dobson of Focus of the Family, Richard Viguerie, longtime conservative activist, the head of the Family Research Council, they had a little side meeting to talk about the possibility of a third-party candidacy, a pro-life, social conservative candidacy, in the event that Mayor Giuliani -- or perhaps someone else, but they were specifically focused on Mayor Giuliani -- captures the Republican nomination.

Is that an appropriate step, do you think? Is -- should somebody, if they're -- if they're so principled, as they say, on that issue, to launch a third-party candidacy? And what would it do to the Republican Party?

MCCAIN: Well, first of all, I think, obviously, it would hurt the Republican Party if there was some breaking off. I think that's obvious.

And I respect any individual or group's right to do whatever they want to do. But I'm a Republican. I believe in Ronald Reagan's 11th commandment. And I believe that, if it is a fair and open contest -- and I have every confidence it will be -- that we should support the nominee of our party, if we are Republicans.

Now, if you're not a Republican or something else, then you -- obviously, that's not the case. But I would hope that we could support whoever the nominee of our party is.

(END VIDEOTAPE)

KING: Now, Wolf, Senator McCain says, as you noted -- as he noted there, he would support Rudy Giuliani if he was the nominee. But the senator says he believes he still has a fairly good chance. He says recent history since 1980 shows you have to win two of the first three, Iowa, New Hampshire, and South Carolina.

And he said as he left us today for more campaigning, he remains confident he can do that -- Wolf.

BLITZER: John, how does it happen, John -- and you have been covering politics for a long time -- that someone as well known and experienced and as highly regarded as John McCain, certainly a household name, raises $5 million in the last quarter, and Ron Paul, a little-known congressman from Texas, also raises $5 million in the last three months?

What's going on, on the Republican side?

KING: Well, it is a stunning number, Wolf, Ron Paul's campaign is reporting. We are told the McCain campaign hasn't put its final number out, because it believes the final total will be a bit closer to $6 million. So, they believe they will surpass Ron Paul.

But, look, Ron Paul is shaking up the Republican race. It should be noted he was the Libertarian Party's candidate for president once. So, he does have a network of supporters around the country. And he has made very good use of the Internet fund-raising. It guarantees he will stay in the Republican race.

And, as you have seen in the debates, that's problematic for some of the leading-tier candidates, if you will, because he gives them fits with his criticism of the war, his criticism of U.S. foreign policy. But, as you travel the country, you see his supporters everywhere -- Wolf.

BLITZER: John King, with the CNN Election Express, thanks very much.

And look for our state-of-the-art bus, the CNN Election Express, on the road this campaign season. It's a TV studio on wheels that gives our correspondents and analysts new freedom to cover campaign news as it happens and where it happens.

On our road map, by the way, for the days and weeks ahead, the Election Express will be in Las Vegas next month for our Democratic presidential debate, also in Saint Petersburg, Florida, for our new CNN/YouTube Republican debate.

The CNN Election Express, we're very proud of it.

Senator John McCain's daughter is following dad on the campaign trail and writing about it online. Her new blog says it will cover all the behind-the-scenes actions, from the stale doughnuts to the fabulous shoes.

Let's go to our Internet reporter, Abbi Tatton. She's watching all of this for us.

What else can you tell us about this new site, Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is from Megan McCain, recent Columbia graduate and, she says, Scorpio.

We have already seen her out on the campaign trail. Here she is on the follow John McCain blog. But now daughter Megan debuts on her own site as an unofficial campaign blogger, or McCain blogette. She's joined by two friends. There they are, one a self-described political fashionista. They promise a fresh perspective on what they say can be perceived a stale and boring process.

Now, in terms of Republican candidates' offspring blogging, well, in this Internet-heavy election, we have seen that already. From the Mitt Romney campaign, his five sons run the Five Brothers blog. Political fashionistas, maybe not. Their focus is more on family fun on the campaign trail.

People associated with the McCain blogette venture says their effort is to draw some younger voters into the process. And blogging starts Friday -- Wolf.

BLITZER: Thank you, Abbi, for that.

U.S. forces on the attack in Iraq. Check this out. We're getting new details on what this blow-up was all about. The U.S. military's chief spokesman in Iraq standing by to join us.

Also, it's the fourth veto of his presidency. Did the president help or hurt his fellow Republicans with a swipe of his pen?

Paul Begala and Terry Jeffrey, they are standing by for our "Strategy Session."

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

(COMMERCIAL BREAK)

BLITZER: Machine guns blaring in Iraq, it's video that came into THE SITUATION ROOM as the U.S. military continues its march on al Qaeda in Iraq.

More on that coming up in just a moment, but, first, the controversy over private security contractors in Iraq.

I spoke today with the chief U.S. spokesman for the multinational forces in Iraq, U.S. Army Major General Kevin Bergner. And I asked him what would happen if the U.S. were forced to give up private security contractors and the U.S. military had to protect American diplomats.

(BEGIN VIDEOTAPE) MAJOR GENERAL KEVIN J. BERGNER, SPOKESMAN, MULTI-NATIONAL FORCE- IRAQ: This is a very serious issue, and it's one where the government of Iraq and our own State Department and U.S. Embassy share a mutual concern, a mutual seriousness about the issues at hand.

And, so, that's why they have established this joint commission, where the minister of defense and the deputy chief of mission here will co-chair a panel to look at all those kinds of issues that need to be addressed.

And it's why the secretary of state has personally communicated with the prime minister and is addressing those concerns as well. It would have an impact. The private security companies are important, both to the movement of some organizations here and to the static security of facilities here as well.

BLITZER: On September 20, General, you arrested what you described as a senior officer of the Quds Force of the Iranian Revolutionary Guard. And you have been talking to him. What are you learning from this guy?

BERGNER: Well, Wolf, we have learned a significant amount about this senior Quds Force officer, whose name is Mahmudi Farhadi. He's an intelligence operative who has actually operated in Iraq, we think, for some 10 years.

He was one of three subordinate commanders of what is known as the Ramazan Corps, which is the over-arching Quds Force network here in -- in Iraq. And, as -- in that regard, he oversaw the operations in north-central Iraq and was responsible for the movement of weapons, funding and of personnel that were contributing...

BLITZER: What are you going to do with him, General?

BERGNER: Well, we continue to question him. We continue to learn more about the circumstance he was in. And we're going to -- we're going to follow up and exploit that information, just as you would expect us to.

BLITZER: And is there a connection to Hezbollah forces in Lebanon now directly involved in the fighting against you in Iraq?

BERGNER: Well, remember, in March of this year we captured a man named Ali Mussa Daqduq, who was a Lebanese Hezbollah operative who was really serving as a proxy or a surrogate for the Iranian Quds Force operations here.

And, so, we know that, at least at that level, there has been involvement that was being used by the Iranians, actually, to fulfill their -- their objectives here.

BLITZER: We're just getting some new video here into THE SITUATION ROOM from the Pentagon, from the Department of Defense. It looks like an attack. It's described as an attack by U.S. forces on an al Qaeda in Iraq van in Iraq.

We're showing it to our viewers right now. It's about to be exploded. There it is.

What can you tell us about this video?

BERGNER: Well, Wolf, that's -- that's a piece of video that you're receiving from a -- from a different source. I don't have it in front of me right now.

I will tell you that we have conducted a number of operations against the al Qaeda in Iraq network. One particularly of importance was against a man named Muthanna, who was a foreign terrorist facilitator operating in northwestern Iraq.

And we have learned a great deal as a result of that operation, captured quite a lot of intelligence associated with it, particularly about the foreign terrorist networks that are supporting al Qaeda operations elsewhere, and feeding into their efforts here inside Iraq.

BLITZER: Can you give us a few examples -- a little example of what you have learned?

BERGNER: We have -- we have about 500 names, Wolf, of al Qaeda operatives who are parts of different networks. We also have found 143 names that include biographical information, their photographs, their -- their routes in transit, their financing, of how these individuals either have arrived in Iraq or were planning to arrive in Iraq.

So, this is going to help us a great deal in working with the countries that some of these individuals were passing through, as well as with our own counterterrorism folks in -- in interdicting these kinds of movements.

BLITZER: General Bergner, thanks very much for joining us.

BERGNER: Thanks, Wolf. It's good to be with you.

(END VIDEOTAPE)

BLITZER: In our "Strategy Session": the showdown over the government's role in children's health care insurance.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Policies of the government ought to be to help people find private insurance, not federal coverage.

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: I think that this is probably the most inexplicable veto in the history of the country. It is incomprehensible. It's intolerable. It's unacceptable.

(END VIDEO CLIP)

BLITZER: But, as both sides dig in their heels, will they suffer the consequences with the voters? And Ron Paul and his presidential campaign's $5 million haul, what does it mean for the Republicans' presidential field? We will talk about that, a lot more. Paul Begala and Terry Jeffrey, they are standing by, right now, live in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Democrats call it heartless and a disgrace.

Let's get some more on this story, President Bush's veto of a bill to expand a popular children's health care program.

Joining us now in our "Strategy Session," CNN political analyst and Democratic strategist Paul Begala and conservative commentator Terry Jeffrey. Terrible is also editor in chief of the Cybercast News Service.

Guys, thanks to both of you for coming in.

This is really -- isn't -- well, let me rephrase the question. Terry, is this a no-win veto for the president?

TERRY JEFFREY, EDITOR IN CHIEF, CYBERCAST NEWS SERVICE: I think it's a great move by President Bush. And I think it's a great issue for the Republicans. They need to get their tail out from between their legs.

Wolf, this is about socialism. Socialism means the government owns something, rather than private individuals. The question here is whether families are going to own the health care of their own children. According to the Congressional Budget Office, 5.8 million new children will come on to the SCHIP program under the new bill.

Two million of those kids will be middle-class kids that right now have private health insurance. That means taking them out of private health insurance that their parents control and determine, and giving Hillary Clinton or someone else control of their health care.

BLITZER: OK.

What do you think?

PAUL BEGALA, CNN POLITICAL ANALYST: Well, this is the fight the Democrats want.

They want a fight over who is going to help the middle class. What President Bush has done is veto legislation -- Terry is right -- that would help middle-class families. So, if you have -- if you're a family of four, you're making $40,000 a year, you're in the middle class, but Mr. Bush says you're too wealthy.

Now, Mr. Bush makes $400,000, and he takes government health insurance. So, you know, Gandhi said you should become the change you seek. If all of a sudden, Mr. Bush is so against government health care, he gets $400,000, plus public housing. He ought to turn away his government health care he's turning down to middle-class families. (CROSSTALK)

BLITZER: But, Terry, you have studied this. Is this government- financed health insurance for kids or is it government-run health insurance for kids?

JEFFREY: Well, it's both. What happens is, the federal government...

(CROSSTALK)

BLITZER: Isn't the federal government just guaranteeing the funds to make sure they can go out and get the health insurance they need?

JEFFREY: The federal government sets a certain set of rules for how the funds will be spent. The states are then sent to the states. And the states construct the programs.

But Paul is exactly right. This is about whether middle-class families that now are getting their insurance from the private market and control it are going to have the government control their health insurance in the future.

Look, and to put it bluntly, who do you want making health decisions for kids? The Democratic Party is pro-abortion. They think it's OK to take the life of an unborn child. They make health care decisions that are not only wrong, blatantly immoral. We want to give that institution control over health care decisions in the United States?

BEGALA: I -- well, first off, it's not about control.

JEFFREY: Sure it is.

BEGALA: It's certainly not about abortion.

It's about whether Mr. Bush finds the money, $700 billion, for a war in Iraq, $35 billion he finds for subsidies for oil and gas companies, billions for no-bid contracts for Halliburton. So, all of a sudden, when middle-class kids and poor kids need health insurance, he can't find the money.

By the way, we save a ton of money on the Children Health Insurance Program. It was put together by President Clinton when I worked for him with a Republican Congress. We save a ton of money on it, because kids get better health care. They have better outcomes. They lead healthier lives. They have fewer trips to the emergency room. It's a very good deal for the country.

BLITZER: All right. I want to move on to the subject I just discussed with John King. How is it possible that Ron Paul and John McCain both raised $5 million in the last quarter, at a time -- and just to give it some perspective, Hillary Clinton raised, what, $27 million, and Barack Obama raised $20 million.

What -- what's going on?

JEFFREY: Well, you know, Wolf, I think both John McCain and Ron Paul have excited some passions among certain voters.

Unfortunately for John McCain, especially because of his pursuit of his immigration reform proposal earlier this year, he angered the grassroots of the Republican Party. Ron Paul has a constituency of people who are old-time Libertarians -- they believe in limited government -- plus people who aren't Democrats who are very opposed to the Iraq war. They're excited about the message he's delivering. So, they're ready to subsidize him.

BLITZER: How do you see this phenomenon, the Ron Paul phenomenon, now $5 million? John McCain, maybe he will get a little bit more, but it's roughly in the same ballpark.

BEGALA: He's even roughly in the same essential ballpark as Fred Thompson, who is I think more fizzle than sizzle so far starting out his campaign.

And I think Terry has a good take on it. I think there's a lot of power in the anti-war message even in the Republican Party. And I think Republicans ought to take a real hard look. Mr. Bush's career is over. Many believe, most believe, he is a failed president. Does the Republican Party really want to go off that cliff with him? Or is Ron Paul showing them that they can be strong...

(CROSSTALK)

BEGALA: ... anti-war.

BLITZER: Because Ron Paul, as we have all seen in all of the debates, he is ardently against this war. And he wants those troops home as quickly as possible.

JEFFREY: The truth is, Ron Paul is more anti-war than Hillary Clinton or Barack Obama or John Edwards.

(LAUGHTER)

BEGALA: He may be.

JEFFREY: All of whom told Tim Russert last week that they can't guarantee they would have U.S. troops out of Iraq by 2013.

BLITZER: Let's talk a little bit about this archbishop in Saint Louis, the Roman Catholic archbishop, Raymond Burke, saying he would deny communion to Rudy Giuliani, just as he would deny communion to John Kerry when he was the Democratic presidential nominee.

What do you make of this phenomenon because of Rudy Giuliani's support for abortion rights for women?

BEGALA: Right.

There are particular doctrinal problems that Rudy Giuliani has, as a divorced and remarried Catholic. No Catholic who is remarried outside of the church is allowed to receive any of the sacraments, certainly not communion. So, that may be different.

But, if this -- what -- this report is true, that he's saying, because of his political on an issue, he is going to be denied the body of Christ, as a faithful Catholic, I find that appalling. The body of Christ is not meant to be a weapon in political wars. It's a sacrament, and it's a communal sacrament. And I think it's appalling that a bishop would do that.

JEFFREY: No. What Archbishop Raymond Burke, who is an excellent man, is trying to do is protect the Eucharist, which we Catholics literally believe, through transubstantiation, is the body and blood of Christ.

And we believe that you have to be in a state of grace to receive it. And Rudy Giuliani, by publicly advocating legalized abortion, which means, as we understand it as Catholics and as the Catholic Church teaches, the deliberate taking of an innocent human life, is not only giving scandal, but is giving public evidence that he is someone not worthy to receive the body and blood of Christ.

BLITZER: If he gets the Republican nomination, will there be a third-party anti-abortion candidate who will emerge?

JEFFREY: Well, there are some conservatives who are saying they would not vote for Rudy Giuliani if he were the nominee, and they would like to see a third-party candidate.

I think it's quite possible there would be a third-party candidate. I also think, Wolf, there would be a lot of conservatives who would want to make a prudential judgment about that possibly leading to Hillary Clinton being the person who names Supreme Court justices.

BLITZER: Because that would guarantee, I assume, Hillary Clinton or any Democrat's election, if the Republican vote was split like that.

BEGALA: Well, certainly, the left was foolish enough to give Ralph Nader enough votes to ensure that George Bush got close enough to let the Supreme Court steal it. Those thieves in black robes who stole the election in 2000 were only able to steal it because Ralph Nader put them in the position of thievery.

JEFFREY: It wasn't stolen.

(CROSSTALK)

BLITZER: All right, guys. On that note -- we're not going to -- we're not going to look at the history right now, because we got to run.

(CROSSTALK)

BLITZER: Thanks very much, Paul and Terry. Good discussion. (CROSSTALK)

BLITZER: What do Republicans have to do to turn things around by the election? Jack Cafferty standing by with your e-mail.

Also ahead, a megabucks business deal that some fear could expose U.S. military secrets to China.

And newly released pictures of Princess Diana only moments before her death, what will jurors make of these pictures as they weigh allegations that Diana's car crash was no accident?

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

(COMMERCIAL BREAK)

BLITZER: (AUDIO GAP) Cafferty for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour is, what do Republicans have to do to turn things around by the election?

George writes from New Hampshire: "Here are some ideas. Support Bush on his health care veto, while 72 percent of Americans are against it. Tell us we should stay in Iraq, while most of us want out now, and last, but not least, get those Diebold voting machines working, like they did in 2000, 2002, and 2004."

Jabriel in Washington: "They need a revolution within. It was founded as a protest party, protesting the perversion of democracy caused by slavery. Now we are faced with another perversion of democracy. Maybe we will be lucky. History will repeat itself. The new Whig Party, the GOP, will dissolve, as its predecessor did, and those who emerge from the ashes will reclaim the mantle of defender of our Constitution."

Brad in Florida: "What do they need to do? Stop marginalizing the smartest among them, like Ron Paul. They also need to stop giving evangelicals more power than their numbers warrant.

Max in New York writes: "The Republicans will do what they always do: rove around in the muck to monger some fear and conjure some lies about their opponents. After all, they can't possibly run on their record, a doomed war, no-bid giveaways to their corporate puppet masters, corruption, an astronomical deficit, and blind obedience to the worst president to ever stain the White House."

And Mike in California writes: "It's going to take the Republican Party to understand what real morality is, things like health care for the nation's children, a moral issue, saving our planet, making the air clean, a moral issue, not starting unjust wars, a moral issue, helping the nation's poor families, a moral issue, tolerance of all walks of life, a moral issue, and, most of all, realizing that being pro-life doesn't end at birth" -- Wolf.

BLITZER: Jack, thank you.

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