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THE SITUATION ROOM

California Wildfires Still Raging; New Democratic Tax Plan

Aired October 25, 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, Californians face the charred ruins of their homes and their lives. The massive wildfires are easing, but the death toll is actually rising. President Bush is on the ground right now getting a firsthand look at the devastation.
Republicans are calling it the mother of all tax hikes, but House Democrat Charlie Rangel says the new trillion dollar plan would give middle-class Americans a huge break. This hour, the new war over your taxes.

New evidence that the mob once plotted a hit on Rudy Giuliani, and the Republican presidential candidate is more than happy to let voters know about what happened. I'm Wolf Blitzer, you're in THE SITUATION ROOM.

In southern California, a grim reminder in the ashes that the massive wildfires have destroyed more than homes and offices and possessions. They have also taken lives. Two bodies were found in the burnt-out home in the city of Poway. That number -- brings the total number killed directly to the wildfires up to three. Seven other deaths though are being called fire-related. 14 wildfires still are burning across the region in southern California, as firefighters begin to get a handle on the inferno that's raging on for a fifth day. Officials say 17 other fires are contained. That's good news. There's also late word that all residential areas in the city of San Diego are now open and people are being allowed to return to more than a dozen other communities in San Diego County. But nearly 20,000 people still are in shelters. Our correspondents are standing by across the fire zone, following all the new developments.

President Bush is getting a firsthand look at what he calls a sad situation in southern California. His trip to the fire zone is raising more questions though, about the federal government's response now compared to the response to hurricane Katrina. Our White House correspondent Ed Henry is traveling with the president. Ed, tell us about the devastation that the president has seen today.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Wolf, it's interesting, the president today here on the ground in San Diego tried to dismiss all comparisons between hurricane Katrina and these wildfires, saying he'll leave that to historians, but in reality this trip is partly about trying to exorcise those demons from Katrina. So unlike that infamous fly-over where the president flew over New Orleans in the immediate aftermath of Katrina and didn't stop on the ground, here he came down on the ground, he did a helicopter tour, but then went out in the streets, in the neighborhoods. The White House gave us images of the comforter in chief, if you will, trying to console people, but also going behind closed doors with other state, local, federal officials trying to show him in command, taking charge of the situation. And then after Governor Arnold Schwarzenegger praised President Bush's leadership, he returned the favor with this shot at the Democratic governor of Louisiana.

(BEGIN VIDEO CLIP)

BUSH: I said earlier when we were at the neighborhood, you know, there's no hill he's not willing to charge, no problem he's not willing to solve, and we've got a big problem out here. I appreciate his leadership. It makes a significant difference when you have somebody in the statehouse willing to take the lead.

(END OF VIDEO CLIP)

HENRY: The president getting out on the ground. I can tell you what he could see and smell. When we landed this morning and even into the afternoon there's this stench here in San Diego that goes through your body. You can feel that and taste that charred smoke, burnt wood, and there also have been plumes of smoke all around us in San Diego. I can tell you even in the early morning hours when we were flying over Phoenix, Arizona, we saw what we thought maybe was cloud cover, we asked the pilot, he said it was not cloud cover it was actually some remnants of the smoke making their way all the way from San Diego to Phoenix, Arizona. It gives you an idea of the scope of this devastation. Wolf?

BLITZER: So what is he doing now? I guess this was just a day trip for the president? Is that right?

HENRY: That's right. Very shortly, you can still see in fact Air Force One behind me, but the president in a short time will be heading back to Washington to get back to the White House. He has some meetings tomorrow. But what he's doing is he's still meeting with local, state officials, getting more briefings, again, trying to show that he's in command. What local and state officials here are saying is what they think works so far is the fact that the state of California took the lead, had it all together and only used the federal government as a secondary source of help, not the primary source of help, and maybe that might be a model for other communities around the country in terms of disaster preparedness. Wolf?

BLITZER: All right, Ed Henry out in California near Air Force One. Many California residents are stunned and heartbroken as they get the first look at what's left of their homes. Still, some are determined to try to rebuild. Let's head out to Rancho Bernardo, Brian Todd is standing by out there. What's the situation? It looks awful behind you, Brian.

BRIAN TODD, CNN CORRESPONDENT: It looks awful behind me, Wolf, but this neighborhood just got a lot busier. Just moments ago the mayor of San Diego, Jerry Sanders, lifted the evacuation order for San Diego proper. At least he ordered that the neighborhoods that had been closed or residents who had fled the fires are now reopened. This was one of them in Rancho Bernardo, this is part of the incorporated part of San Diego. I'm going to ask our photographer Tony Armani to pan down the street here. You've got a lot of activity. People are just now streaming into this neighborhood after not being able to just to return home for several days. Some of them you can tell, their jaws are dropping as they look at houses that they haven't seen, that are devastated. A lot of these people are from houses that were intact and are just coming back for the first time. You know, we talked to a couple of them as they got out of their cars. Here's what one of them said.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: It's still standing and --

UNIDENTIFIED FEMALE: We're one of the lucky ones. We are. When we got out -- when we got the pets and ourselves out of the house, we figured that was all that was important. I can't believe what everything looks like. I really feel for the people whose houses are not standing.

(END OF VIDEO CLIP)

TODD: That was some of the more relieved and happy moments that we witnessed just a moment ago. We also had a lot of sadness, people coming back to burned houses, and realizing what they lost. We're going to tell you a little bit about their stories in the next hour. Wolf?

BLITZER: All right Brian, thank you.

And to our viewers, if you want to help the victims of the fires out in California and want to impact your world, you can do so simply log on to cnn.com/impact, instructions on how you can help.

Arson investigations are under way in Orange and Riverside counties in connection with some of the wildfires. The Orange County Sheriff's department is offering a $150,000 reward for information leading to an arrest. Let's check in with our justice correspondent Kelli Arena. What are you learning about these investigations, Kelli?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Wolf, the ATF, FBI and the governor's office each pitched in $50,000 each for information leading up to an arrest. This investigation is entirely focused Wolf on the Santiago fire, that's destroyed about 25,000 acres and 14 houses. Investigators say it was definitely arson, that there was evidence recovered from the scene, but they didn't offer any details about what that evidence was. Currently they're running down more than 250 tips from the public, but the bottom line here, Wolf, they have no suspect. As you know, federal law enforcement on the ground to help out state and local investigators. ATF national response teams are there, they're fully loaded Wolf. They have forensic chemists, specially trained canines, profilers, veteran fire investigators, the FBI's evidence response team also there on the ground, but officials say do not expect a quick resolution, arson is a very difficult crime to solve, Wolf, and right now they don't have a whole lot to go on. BLITZER: Kelli Arena, thanks very much. Kelli watching this part of the story.

Let's check in with Jack Cafferty, he's in New York he has "The Cafferty File." Jack, I can't understand, what would motivate some jerk to go start lighting fires in what clearly are really, really dangerous situations, and in the process create this kind of situation that has developed?

JACK CAFFERTY: I don't know, but if they can ever track down whoever is responsible, I've got some suggestions on how he might be punished. They're not fit for a family broadcast, however. Several lawmakers are wanting a crackdown on sanctuary cities, these are places where critics charge shield many of the millions of illegal aliens in this country. Michigan, New Jersey, Wisconsin are all considering following in the steps of Colorado, which adopted an anti- sanctuary law last year. The law denies some money to communities that prevent police and other local officials from cooperating with immigration authorities. On the national level, some members of congress want to withhold or revoke homeland security funds from sanctuary cities. And presidential candidates like Mitt Romney and Fred Thompson are also speaking out on this, saying that some federal money should be denied to cities that harbor illegal aliens. All this is very ironic when you consider that the country wouldn't be crawling with illegal aliens if the federal government did its job and secured our borders and enforced the laws already on the books against illegal immigration, but of course they won't do that. "USA Today" reports there are at least 82 separate policies around this country that limit the enforcement of our immigration laws by state and local authorities, 82. So here's the question -- should lawmakers crack down on sanctuary cities? E-mail your thoughts to caffertyfile@cnn.com or go to cnn.com/caffertyfile. Wolf?

BLITZER: Jack, thank you. Republicans say the top tax writer in the House is giving them a political gift. Coming up, Congressman Charlie Rangel's new trillion dollar tax plan. Would it make the system more fair or would it raise your taxes?

Also coming up, the battle over children's health care. House Democrats are challenging a presidential veto threat again. We're going to tell you what's happening right now.

The vote that almost got Rudy Giuliani killed. New details about the presidential candidate's bad blood with the mob. That, a lot more, including more on the California fires, when we come back.

(COMMERCIAL BREAK)

BLITZER: They beat back 17 blazes, but they have 14 more to go, as parts of California continue to burn, exhausted fire crews are working around the clock to try to save some property and a lot of people. Joining us now is Brian Fennessy, the San Diego Fire Department's deputy chief. He's joining us from the Qualcomm Stadium, which is still sheltering a lot of people. First of all chief, thanks very much for joining us and thanks for all the good work you and your men and women are doing. BRIAN FENNESSY, SAN DIEGO FIRE DEPT.: We certainly appreciate it. Thank you.

BLITZER: How's it going right now? Update us on what we know right now about the state of these fires, what still needs to be done.

FENNESSY: Well, speaking specifically for the city of San Diego, which is a part of the larger witch fire, the fire itself is more than 200,000 acres at this time. Within the city of San Diego, we're at 8,000 acres plus. The fire spread itself within the city or the western front, the direction which the fire was heading, has been stopped. Weather is playing a part, the humidities have come up, we're getting more of our normal coastal influence, so that's having a significant effect on the fire spread on that west side within the city of San Diego. I don't know at this time what's happening on the east side, but the information I do have indicates that at least on this fire, the witch fire is starting to look significantly better. The fires north of us in the Palomar Mountain area, and south of us, the Harris fire, it's a different story. What I'm hearing is there are still several structures threatened, there has been structure loss, it's just an unbelievable experience.

BLITZER: Are your fellow firefighters exhausted right now because we've heard stories of them working 20 hours out of 24? Give us a little sense of what kind of work these heroes have done.

FENNESSY: You bet. And that's the right word "heroes." They're just beat down. The fire front that came through the city of San Diego was overwhelming. Twenty out of 24, that's not accurate. Try maybe 48 out of 48, maybe 60 out of 72. These firefighters, you know, just unbelievable effort. We were prepared this time. Unlike 2003 when we got surprised when the Cedar Fire came into the city of San Diego and burned hundreds of homes, we anticipated this fire coming and in fact, we determined it a threat to the city when it was 20 miles away and five hours away. It beat our timeline. It got here in three hours, but this time we had equipment in place ready to meet that fire front head on. I'm not overemphasizing or exaggerating when I tell you about the heroics. Not only the firefighters here in the city of San Diego, but our police officers. I'm hearing stories about doors being kicked down, people being drug out of their homes, animals being drug out of homes. If you can imagine chaos, the firefighters couldn't see -- we're talking 60-mile-an-hour winds plus, smoke to the ground, embers catching on them, cars flying by, people panicked, surreal. And one of the more important things is we don't have any injuries The evacuations went very, very well.

BLITZER: It was amazing work. One quick question before I let you go chief, I know you still have a lot of work to do. You've been fighting fires for a long time. What would motivate someone to start a fire like this? Because they suspect arson in at least some of them.

FENNESSY: I'll tell you what, it gives me chills just to hear that. You know, I can't tell you what motivates people to do that. I know our arson teams have a number of reasons why people would do that, but it's just unfathomable. That Harris fire, before the witch fire started, our fire department helicopter was on, and we air evac'd several of the firefighters that were burned, and are currently in the burn ward. And I'll tell you what, if those arsonists could see those people and see the pain that they're in now and that their families are in, it's just unimaginable.

BLITZER: Chief Brian Fennessy, the deputy chief of the San Diego Fire Department. Once again, thanks to you and all your men and women for doing this excellent work. Appreciate it.

FENNESSY: Thank you so much for the support, we appreciate it.

Coming up, we're going to continue to monitor all the latest developments in this continuing tragedy out in southern California. Also coming up, want to pay lower taxes? Some Democrats say they have just the plan for you. You're going to find out if you'd really save, and how much under their new plan.

The mob does not take kindly to aggressive prosecutors. We're going to tell you how some mob bosses wanted to actually kill Rudy Giuliani years ago. We've got the story for you right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Carol Costello has the day off. Brianna Keilar is monitoring some other stories incoming into "THE SITUATION ROOM" right now. Brianna, what's going on?

BRIANNA KEILAR: Wolf, before the day is over, Iowa's Democratic Party is expected to decide that January 3rd is a fine date to hold presidential caucuses. Iowa's Republicans have already picked that date and Democrats are set to talk this over during a statewide conference call tonight. January 3rd would be the earliest the Iowa caucuses have ever been held.

And European petroleum giant BP will pay the U.S. government $373 million in fines and restitution. The agreement announced today settles charges from a series of incidents, including a 2005 explosion at a BP refinery in Texas, oil leaks in Alaska, and an effort to manipulate propane prices.

Also, more fallout from Nobel Laureate James Watson's disparaging remarks about the intelligence of black people. Today he resigned from his post at New York's prestigious cold spring harbor laboratory. Watson of course discovered the structure of DNA. He has apologized for telling an interviewer that black people are not as intelligent as others.

And the world's biggest, fanciest airliner made its firs commercial flight today. It's brand-new double-decker airbus A380 super-jumbo jet. A super jumbo name there. And this plane comes complete with luxury suites and double beds. It flew from Singapore to Sydney, Australia today with 455 passengers. According to the "Wall Street Journal," a one-way first-class ticket cost about $6,000. One-way business class, a shade over $4,100. Wolf?

BLITZER: Do you fly first class? I was in Singapore Airlines, you get a suite you just don't get a nice comfortable chair. It's pretty impressive. All right, but a lot of money in the process as well.

GIBSON: Thanks Brianna very much.

Your money and your taxes. Some Democrats say they have a plan to keep more money in your pockets and out of the government's hands. But Republicans are blasting it, and I'm quoting now, as the largest individual income tax increase in history.

And our House Democrats playing politics with the California Wildfires. That's what some Republican critics are charging. In the middle of this argument, this issue coming back. Health care for America's children. Stick around, you're in "the situation room." >

(COMMERCIAL BREAK)

BLITZER: Happening now, the U.S. puts more muscle where its mouth is regarding Iran. It just slapped Tehran with a harsher punishment for its nuclear activities and alleged acts that are said to cause the death of U.S. troops in Iraq. A full report coming up.

Also, she said she was secretly serving her country until she was betrayed by the White House. The former CIA operative Valerie Plame Wilson, she'll be here to talk about her life as a spy and how she was outed.

It could be a grueling and very dangerous way of life, but many firefighters battling the California blazes say they do it for a very important reason. You're going to hear directly from some of them. I'm Wolf Blitzer, you're in THE SITUATION ROOM.

Some Californians are finding it more than they can bear. They're running to their burned-out homes they can barely recognize. The city of San Diego and more than a dozen other nearby communities are letting residents back in as more wildfires are contained. CNN's Reggie Aqui is joining us now from Rancho, Bernardo. What's the scene like in the area where you are, Reggie?

REGGIE AQUI: Well, all day long, Wolf, it's been media, police, some folks from the city, but finally about an hour ago, they started to let the folks who live here come home. So they're getting a first look at this, homes, cars that are completely destroyed next to homes that are still standing. I'm going to swing you around here for a second, past our live truck, to show you up there on that hill, that's where I spent most of the day. You can see what remains of the home there, really nothing. I'm talking about not even photos that you can pick out of the rubble there. Take a look at some video that we shot just a few minutes ago. We were standing there Wolf actually doing a live shot for CNN when this family came home for the first time since the fire. They told me that they were in bed at the time, 5:30 in the morning or so, they didn't get any warning, no reverse 911 call, no one knocking on their door. They woke up to a phone call from a friend who said you need to get out of there. They looked at their deck and it was on fine. They tried to gather some stuff but by the time they did, their whole house was on fire. They were able to bring out nothing. We're talking about a family of seven or eight people. Wolf, a lot of people have been talking about how affluent this area is, and certainly that's true, but as I talked to this family, they told me they're from the Philippines originally, they have a real estate and insurance company they've been running for 20-plus years. That woman you're seeing crying there, she is the matriarch of this family. She tells me she's worked very hard here in America for more than two decades, to have the home that she purchased, and she really can't bear to see what's happening now. She told me that she is going to contact her insurance company, she does have fire insurance, but she doesn't know how much, but Wolf, as you might imagine, she's not sure even if financially she can make it, if emotionally at this point in her life, if she's up to rebuilding from scratch essentially. As you've probably heard throughout the day, the fire in this area is still going. We're talking about a 20 percent containment at this point. When you hear these numbers, Wolf, of so many people out of their homes, it's overwhelming. Then you see this one family and it really hits home what this all means.

BLITZER: When you multiply that by a few thousand, that's what's happening.

Reggie, thank you very much. The Harris fire has burned more than 80,000 acres in San Diego County and it's only 10 percent contained right now. The entire thing is being monitored in real time by cameras, on top of a mountain and it's all available online. Let's bring in our internet reporter Abbi Tatton. Abbi, what doe the cameras actually show?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is the very latest. I've just grabbed these pictures online from the last couple of hours. These four cameras atop Lyons Point, this is about 30 miles to the east of San Diego, right now showing much calmer images than some them we've see in the last few days. A bit of smoke there, but in the last few days, they've been with -- these cameras have been recording the Harris fires sometimes from the very midst of it. Take a look at yesterday morning here. The cameras first of all recording the flames coming within a few feet and then exploding all around them. This is time lapsed video so you can see the progress of the fire as it turns into daytime. These cameras are part of a publicly funded research project led by a research scientist at the University of California San Diego. Hans (INAUDIBLE) says in the last few days it's been local firefighters that have been consulting this web site to look at the progress of the fire around there. What you're actually looking at right now is a video that's been posted onto Youtube by a San Diego resident Zach Gambino who added a lot of these images all together. This is very popular video online right now. This is the Harris fire or part of it which has burned more than 80,000 acres. Wolf?

BLITZER: What a picture, Abbi thank you very much. We'll have more on the fires.

Coming up, other important news we're following right here in THE SITUATION ROOM. Some Republicans now accusing Democrats here in Washington of playing politics with the horrible tragedy of the California fires. It involves a health care proposal for many American children. The House and the Senate recently passed a bill regarding the state children's health insurance program, better known as S-CHIP, but the president quickly vetoed that legislation. Today the House is voting on a revised version. Republicans though are charging that now is not the right time to do so. Let's go to Capitol Hill, our congressional correspondent Jessica Yellin is standing by. What's the story I hear Jessica? What's going on?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, a lot of Republicans are in a very tough position today. The ads are running against them at home because they voted against the original version of this children's health insurance bill. And now Democrats are making them take another very tough vote today.

And, again, the president has threatened to veto the latest bill that's on the floor today. And House Republicans are complaining about everything from the substance of the bill to the timing of this vote.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Republicans are fuming that today's vote is happening while seven of their members are in California responding to the fires.

REP. BRIAN BILBRAY (R), CALIFORNIA: I just can't picture that -- that Speaker Pelosi would be doing this if it was San Francisco burning.

YELLIN: But even Republican leaders admit those seven votes wouldn't be enough to block the bill. And Democrats point out Congress didn't shut down when Katrina hit.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: We can multitask as a Congress.

YELLIN: Democrats say they have made real changes to the bill. They say the latest version sets new income limits to ensure well-off families aren't enrolled. It moves adults out of the program more quickly and tightens identification requirements to keep illegal immigrants from receiving benefits.

Democrats say these changes address all the concerns laid out in this letter from 38 wavering House Republicans.

REP. RAHM EMANUEL (D), ILLINOIS: They wrote it down in a letter. And by item by item, whether it was illegal immigrants, answered. Check. Adults, check. Income cap, check.

YELLIN: But some of those Republicans say the changes don't go far enough.

REP. VIRGINIA BROWN-WAITE (R), FLORIDA: You can take horse manure and roll it in powdered sugar, and it doesn't make it a doughnut. That, ladies and gentlemen, I think is kind of what we have here today. It's a magnet for illegal aliens. REP. TOM PRICE (R), GEORGIA: We have got a diagnosis for what's going on here today. It's called a crying shame, a crying shame.

(END VIDEOTAPE)

YELLIN: And, Wolf, that vote is going to happen in the next 20 minutes or so. The bill is expected to pass, just as it passed last time. The question is, how many new Republican votes will the Democrats pick up? They say they only need about a dozen to get a veto-proof majority, but, until they get that veto-proof majority, this issue just remains a political hot potato.

BLITZER: The Democrats have that veto-proof majority in the Senate, but not yet in the House. We will see if their new strategy works this time.

Jessica, thanks very much.

Let's get a closer look at this SCHIP proposal. SCHIP, as you know, stands for the State Children's Health Insurance Program. The current bill and the one Mr. Bush vetoed both would expand the SCHIP program to cover more than 10 million children, about four million more than are covered right now. The bills would increase funding for the program by $35 billion over five years, and they would increase taxes on tobacco products to help pay for insuring these additional millions of children.

Now to another important issue affecting all of us, how much we pay in taxes. Right now, some congressional Democrats say they have a plan to save tens of millions of people a staggering amount of tax money. And, yet, some Republicans are calling the plan -- and I'm quoting now -- "the largest individual income tax increase in history."

Our congressional correspondent Dana Bash is on Capitol Hill. She's watching this story for us.

Dana, what will -- the new plan was unveiled today. Give us a sense of what it entails.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, you know, Wolf, Democrats rode into power last year vowing to restore fairness in the tax code, especially when it comes to the squeezed middle class. They say this is exactly what this massive tax bill does. But Republicans call it a political godsend.

(BEGIN VIDEOTAPE)

BASH (voice-over): A trillion-dollar Democratic proposal would give tax breaks to low- and middle-income Americans and pay for it with a tax hike on high-income earners.

REP. CHARLES RANGEL (D-NY), HOUSE WAYS AND MEANS COMMITTEE CHAIRMAN: We have attempted to restore equity and fairness to the system.

BASH: The top House Democrat on tax issues calls it the mother of all tax bills. Republicans race to give it another name.

REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: The mother of all tax bills has turned out to be the mother of all tax hikes.

BASH: At the heart of the plan is a repeal of the so-called AMT, a tax intended for the wealthy, but hits the middle class. The bill would also increase deductions for married couples and individuals, and reduce the corporate tax by nearly 5 percent.

All that would cost over a trillion dollars. To pay for it, taxes would go up for higher-income Americans, a 4.6 percent tax increase on couples earning over $500,000 and individuals making more than $250,000. And profits for Wall Street investment managers would be taxed at a higher rate.

RANGEL: Some people have been able to manipulate the system to get tax advantages in the code.

REP. ADAM PUTNAM (R), FLORIDA: The impact of Democratic leadership on our economy means higher taxes, less growth, and more regulations.

BASH: GOP lawmakers, who have been on the defensive on issues from Iraq to children's health, were downright giddy, eager for an old-fashioned fight over taxes, sending some 60 press releases hitting Democrats in fiscally conservative swing districts, and this one, asking if Hillary Clinton agrees with supporter Charlie Rangel's trillion-dollar tax attack.

REP. ROY BLUNT (R-MO), HOUSE MINORITY WHIP: You know, very seldom in politics do your opponents give you this kind of gift.

(END VIDEOTAPE)

BASH: Now, the reasons Republicans see this as a political gift is because GOP voters are incredibly disillusioned right now. And few things gin up Republicans more than the threat of a Democratic tax increase.

Now, this is not going to be voted on until at least next year, but, Wolf, that's just fine with Republicans, they say, because it's closer to Election Day -- Wolf.

BLITZER: Dana, thank you -- Dana Bash on the Hill.

He took on drug dealers and violent mobsters as a prosecutor. Now it appears some of them actually plotted to kill Rudy Giuliani years ago. We are going to tell you who that was and why.

It's said to be the biggest crisis during his governorship, so how is Arnold Schwarzenegger handling the devastation brought on by the California fires?

And guess who's coming to Hillary Clinton's birthday party? Some of your favorite celebrities. You are going to find out who. And wait until you hear about the gifts they're giving to help her campaign. Hillary Clinton turning 60 years old -- that, a lot more, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Drug dealers, mob members, presidential candidate Rudy Giuliani battled all of them back in the 1980s as a federal prosecutor.

Now it appears some members of the mafia actually wanted to kill him. We're watching a story that talks about assassination plots against Rudy Giuliani many years ago.

CNN's Deborah Feyerick is joining us from New York. She's been working on the details, some of those pretty disturbing details.

What have you come up with, Deb?

DEBORAH FEYERICK, CNN CORRESPONDENT: Well, Wolf, you know, when you go after the mob, chances are they might go after you. And, if you do survive, it's a pretty good story, especially if you're running for the White House positioning yourself as tough on crime.

(BEGIN VIDEOTAPE)

FEYERICK (voice-over): It happened some 20 years ago, mafia boss John Gotti trying to convince his fellow crime bosses to put out on a hit on a young, ambitious federal prosecutor now running for president who at the time was making life difficult for the crime syndicate.

The vote by the five capos turned out 3-2 against whacking Rudy Giuliani. Here is how he described it this morning on a syndicated radio talk show.

(BEGIN AUDIO CLIP)

RUDOLPH GIULIANI (R), PRESIDENTIAL CANDIDATE: That was one vote I won, I guess.

UNIDENTIFIED MALE: Thankfully. I mean, that's a vote you want to win.

(END AUDIO CLIP)

FEYERICK: The claim that New York City's five mafia bosses, known as La Cosa Nostra, talked about sanctioning a hit on Giuliani came to light Wednesday during the Brooklyn trial of a former FBI supervisor.

Lindley DeVecchio is accused of helping arrange four gangland murders by leaking information to a mob informant. According to the informant's file -- quote -- "John Gotti and Carmine Persico were in favor of the hit. The bosses of the Luchese and Bonnano and Genovese families rejected the idea, despite strong efforts to convince them otherwise by Gotti and Persico."

Giuliani, who says the FBI told him about the hit years ago, has told a similar story before. (BEGIN AUDIO CLIP)

GIULIANI: The one that really embarrassed me, Mike, was, when I was first U.S. attorney, they put out a contract to kill me for $800,000. After five-and-a-half years of being U.S. attorney, they put out another contract to kill me, another group, for only $400,000.

UNIDENTIFIED MALE: That's all you're worth? Come on.

GIULIANI: So, I thought, my goodness, my value -- if I were a company, my market cap would have been cut in half.

(LAUGHTER)

(END AUDIO CLIP)

(END VIDEOTAPE)

FEYERICK: And that was the mayor talking on a radio show this morning.

Now, many people in the Giuliani orbit here in New York have known about the alleged hit. This is the first time, however, that anyone has heard it was supposedly discussed by the five crime bosses. The Giuliani campaign had no comment, nor, for that matter, did any of the half-dozen mob experts we reached out to -- Wolf.

BLITZER: Deb Feyerick, thank you.

She's a senator and a Democratic presidential front-runner, but, in a matter of hours, Americans can call Hillary Clinton something else, a 60-year-old.

We have some brand-new poll numbers to mark this occasion.

Let's bring in our senior political correspondent, Candy Crowley.

So, how is the senator, the Democratic presidential front-runner, celebrating?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: She will celebrate this evening on the eve of her birthday, which is tomorrow, up in New York. She be will be feted by her husband, comedian Bill Crystal, and singer Elvis Costello, among others.

It is a million-dollar bash. And that's not the cost of it. That's the take for her campaign coffers. The gifts just keep on coming.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): Sixty years old, a mile-marker birthday in a so far so great career year for Hillary Clinton, the consistent Democratic front-runner.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: Now, I have noticed that, the last couple of weeks, I have been getting a lot of attention from the men in this race.

(LAUGHTER)

CLINTON: And, at first, you know, I didn't know what to make of it.

And then a good friend of mine said, you know, when you get to be our age, having that much attention from all these men...

(LAUGHTER)

CROWLEY: It is vintage Clinton 2007, a year dedicating to flexing her foreign policy muscle, while reshaping her public image from humorless, wild-eyed liberal to a approachable, reasoned politician.

DOUG HATTAWAY, DEMOCRATIC STRATEGIST: I think this really long campaign season has really benefited Senator Clinton. It's given voters a chance to see her for who she really is, not some caricature created by the right-wing attack machine.

CROWLEY: It has brought her many happy returns. The latest CNN/Opinion Research Corporation poll of registered voters shows 68 percent sees Clinton as a strong leader. Sixty-three percent find her likable. Sixty-one percent believe she can work with both parties. Fifty-seven percent say she cares about people.

HATTAWAY: In the debates, she's been commanding. On the trail, she's been very personable. And that's a really powerful combination.

CROWLEY: She has shaken off her yes-vote on the Iraq war, weathered fund-raising problems, and stiff-armed current questions on her approach to Iran. Not to say Clinton can blow out the candles and call it a day. When it comes to issues, honesty, shared values and admiration, voters are split, in large part because Clinton is viewed far more favorably by women than by men, a challenge for her 61st year.

(END VIDEOTAPE)

CROWLEY: That male/female gap is striking on down the line. Asked, for instance, if they admire Clinton, 57 percent of women said yes. That is 15 points than men. Does she share your values? Fifty- five percent of women said yes. And that's compared, Wolf, to only 45 percent of men.

BLITZER: And remember what her husband, Bill Clinton, said when he turned 60 a year or so ago. He said, remember, 60, he said, is the new 40.

CROWLEY: Absolutely.

(LAUGHTER)

BLITZER: All right. Candy, thanks very much. While California has been burning, the governor, Arnold Schwarzenegger, has been front and center. Has he put enough muscle into the rescue and recovery efforts?

Bill Bennett and Paul Begala, they're standing by for our "Strategy Session."

And later, why is the Bush administration getting tougher with Iran right now? We will have a full report on some stiff new sanctions announced today.

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

(COMMERCIAL BREAK)

BLITZER: As some people suggest, it could be very well his biggest crisis any time since taking office, the governor of California. And now many are wondering how well Arnold Schwarzenegger is actually handling the tragedy and the devastation in California.

That starts off today's "Strategy Session."

Joining us, our political analyst and Democratic strategist Paul Begala, and our CNN contributor Bill Bennett, also of the Claremont Institute.

By almost all accounts, the governor of California is doing exceedingly well. Listen to what the president said today.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I said earlier when we were at the neighborhood, you know, there's no hill he's not willing to charge, no problem he's not willing to solve. And we got a big problem out here, and I appreciate his leadership. It makes a significant difference when you have somebody in the statehouse willing to take the lead.

(END VIDEO CLIP)

BLITZER: Sounded like a backhanded criticism of Governor Kathleen Blanco of Louisiana.

But what do you think of Schwarzenegger's performance so far on this crisis?

(CROSSTALK)

PAUL BEGALA, CNN POLITICAL ANALYST: Well, you can't fault his image management or -- I think most people in California, even the Democrats, are not attacking him.

There's some criticism that he had promised more funds for fire trucks and firefighting equipment, hasn't delivered on that, but that's kind of small potatoes compared to what we're seeing played out there. I will bet you he wasn't thrilled, actually, to have the least popular person in California praising him. It was almost like a Brownie thing, but I think the more interesting criticism, which could become a national issue, is this question of diverting resources of the National Guard.

California Senator Barbara Boxer mentioned this. It turns out California has 3,000 National Guardsmen in firefights in Iraq, and only 1,500 fighting fires in California. Senator Boxer says half of their equipment is in Iraq, the National Guard's. So, that's a story I think that Democrats might pick up on, a storyline.

BLITZER: What do you think?

BILL BENNETT, CNN CONTRIBUTOR: I think they will try to pick up on that story.

But, in response to your question, Schwarzenegger is doing a very good job. And what everyone says about the comparisons between Katrina and the fires -- and a lot of this really is heterologous. It's very different situations, very different scales, very different.

It's very hard to do it without good local people, local people, state people. And when they are doing a good job, it really makes a tremendous difference. I think he's done an excellent job, and has been pretty much free of criticism. And they're starting to get this thing under control.

BLITZER: Here's what "The Los Angeles Times" wrote about him today.

They said: "At every turn, he has drawn an unspoken contrast between his on-the-spot presence and the failures following Hurricane Katrina, emphasizing that the state has done everything in its power to help, and making public his letters and personal entreaties to Bush."

So, he's getting pretty reviews from the -- he can't run, though, for president, because he wasn't born in the United States.

BEGALA: Right.

BLITZER: If he constitutionally were allowed to run, he could potentially be a candidate, don't you think?

BEGALA: Absolutely. And it's a dreadful provision in our Constitution. I think the founding fathers didn't want Alexander Hamilton, who was born in the West Indies, to run. Hamilton can't run now. It's OK. I would like to see our Constitution changed and let people like Arnold Schwarzenegger run. He's as American as I am, even though he wasn't born here.

BLITZER: What do you think?

BENNETT: All things considered, he has had a good life, guys.

(LAUGHTER)

BENNETT: Came as an immigration, not a bad record.

Oh, sure, I think he should be allowed to run, too. And he would probably do very well in a general.

By the way, I think I'm the only guy on your political news team who has worked fire lines in California...

BLITZER: What's it like?

(CROSSTALK)

BENNETT: ... couple summers.

It's very, very tough work. We were digging the fire lines. And then you would work for five or six hours. The fire would jump, and you would have to start...

(CROSSTALK)

BLITZER: Some day, you are going to have to tell me how a kid from Brooklyn winds up working the fire lines in California. But that's for another day.

BENNETT: You got it, 3,000 miles to get a job.

(CROSSTALK)

(LAUGHTER)

BLITZER: Let's talk about Hillary Clinton.

I know you support her. You admire her a great deal.

BEGALA: I have contributed to her, in fact.

(CROSSTALK)

BLITZER: She's getting decent numbers in this new poll that we have done, our CNN/Opinion Research Corporation poll. Strong leader, 68 percent agree. Likable, 63 percent. And you can take a look at the other numbers.

Is it a forgone conclusion right now that she is going to be the Democratic presidential nominee?

BEGALA: You know, it's not forgone, but it's certainly more likely than not.

What's impressive is, this is registered voters, not just Democrats. And I'm not surprised. I saw Candy as she finished that report. I'm not surprised -- I said to her -- that 68 percent see her as strong, or that a majority see her as somebody who cares about people like me. It's those other numbers. Can she work with the other party? It turns out, yes. Is she somebody who's likable? Sixty-three percent said yes. That's a wonderful birthday present for Hillary Clinton, one that she earned, though, by hard work.

BLITZER: What do you think of these numbers?

BENNETT: Let your heart speak, Paul.

Yes. Yes.

BEGALA: I love her.

BENNETT: No, we know you do.

No, she's doing very well. You know, that's not my cup of tea, but she's doing very well. She's not going to the left. This is not a John Kerry campaign. She's reassuring people. Therefore, she's getting criticized by the left. I guess there are going to be a bunch of new ads or something, attack ads from the left criticizing her on the war and the resolution on Iraq. But she's right where she wants to be. She's way out in front, and we're about -- you know, we're three months from the general.

BLITZER: If she gets slammed from the left part of the Democratic Party, the way Giuliani is getting slammed from the right part of the Republican Party, is that good or bad for Hillary?

BEGALA: It's bad. It's bad, if they're attacking her, as I think they are, on Iran.

You know, she voted for a resolution that named the Iranian Revolutionary Guard as a terrorist entity. I think most experts would say that's true, that they do sponsor terrorism.

The problem for her politically is, the left in my party sees that not just as a resolution about this allegation, but in fact as opening the door to another Bush/Cheney war in the Middle East, something my party finds catastrophic. And I think that has real potential to hurt her. And I think she's reacting to it.

BLITZER: What do you think?

BENNETT: I guess I disagree.

Paul is the political analyst of longer standing, but I think, if she hangs on, I think the more criticism from the left, the more it helps her in the general election. And I don't think there's enough criticism on the left to take her down or even to wound her seriously in the primary season.

BLITZER: Bill Bennett, Paul Begala, thanks, guys, very much.

BENNETT: Thank you.

(CROSSTALK) BLITZER: If a former actress can run, why not a comedian? That's what Stephen Colbert wants to know. He says he wants to be president, but can he run legally?

Also, a revealing interview with a former secret spy. The former CIA operative Valerie Plame Wilson here in THE SITUATION ROOM to talk about serving her country and how in her words she was betrayed by the White House.

And the U.S. slaps Iran with a harsh punishment for its nuclear activities and the alleged acts that are said to cause the deaths of U.S. troops in Iraq and Afghanistan. We're going to tell you what this latest punishment is all about.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: On our "Political Ticker" this Thursday: Republican John McCain is using a new presidential campaign ad to draw contrast between himself and Democrat Hillary Clinton. The spot pokes fun at Clinton's support for a plan to spend $1 million to build a museum at the site of the 1969 Woodstock rock festival in New York State.

That PRESS: oposal was since scrapped. McCain notes that, during Woodstock, he was a prisoner of war in Vietnam. The ad starts airing today in New Hampshire.

Republican Rudy Giuliani now is seeking the endorsement of a former presidential campaign arrival. Giuliani is meeting today with Senator Sam Brownback, a fierce opponent of abortion. Brownback tells CNN he's not likely to back the former New York City mayor unless he can get the abortion rights supporter to see the issue his way. Brownback dropped out of the race for the White House last week, facing low poll numbers and a lack of fund-raising.

A new opinion today on whether the comedian Stephen Colbert's presidential run in South Carolina is legal. Questions have been raised whether a ban on corporate sponsorship of candidates would apply to Colbert. Colbert appears on the Comedy Central network owned by Viacom. Comedy Central says it believes Colbert's candidacy would be within the rules.

Colbert hasn't yet submitted petitions to be on the South Carolina ballot, but he says he hopes to run in the state as both a Republican and a Democrat.

Remember, for the latest political news at any time, you can always check out our Political Ticker at CNN.com/ticker.

Let's go back to Jack in New York for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour is, should lawmakers crack down on sanctuary cities, those cities that provide shelter to illegal aliens? Robert writes from California: "I live in one of those so-called sanctuary cities, and I think it's a disgrace. They keep saying they can't just go out and ask people if they're legal or not. Well, when they have those big marches down the middle of street for amnesty, put a big fishing net out there and scoop them all up. And, then, as you let them out, check their status. That's just my opinion, of course."

Gail in California: "Sanctuary cities are in direct violation of the immigration laws of this country. The Catholic Church, as well as all other churches involved and employers of illegal aliens, all should have any tax-exempt status removed and suffer the criminal penalties also imposed by the law."

Richard in New York: "The federal government should enforce the laws, and not allow sanctuary cities. The invasion of our country needs to be stopped, not promoted."

Oscar in Texas: "Illegal immigrants should be allowed to stay, as long as they contribute something positive to the U.S. They helped rebuild New Orleans after Katrina, and they will help rebuild California. We shouldn't treat them like pests."

Paul in Virginia writes: "Why don't we just list the sanctuary cities that want to protect the illegals, so then the cities and states that want to enforce the laws will know where to send them? That way, the sanctuary cities can use their tax dollars and resources to provide schools, medical treatment, welfare benefits for illegal aliens, while the Americans who want to enforce the law can use their tax money to provide services for law-abiding citizens and legal residents."

And Robert in California writes: "Jack, they should, but they won't. Congress is so busy trying not to offend the minority viewpoints, that they have stopped caring about what the majority wants" -- Wolf.

BLITZER: Thank you, Jack.

And, to our viewers, you're in THE SITUATION ROOM.

Happening now: California authorities on the hunt for arsonists, and they're raising the reward, confirming that at least one big fire was deliberately set.

And, by the thousands, evacuees now making their way back home, but, for many, there's nothing left.

The U.S. slaps sanctions on Iran's Revolutionary Guard, accused of backing terrorists and building a nuclear weapons program. Will the Islamic republic give in to the pressure?

And her identity was a secret until she was outed in a Bush administration leak. I will speak this hour with former CIA operative Valerie Plame Wilson about her life as a spy and what she calls her betrayal by the White House.

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

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