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Clinton vs. Obama on Spying; Senator Kennedy Back on Hill; Jesse Jackson's Controversial Comments About Barack Obama

Aired July 9, 2008 - 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, breaking news. Ted Kennedy making a dramatic return to the U.S. Senate even as he undergoes treatment for brain cancer. We're watching this story right now.
Also this hour, Barack Obama and Hillary Clinton divided over spying. She breaks with her party's presidential candidate. He sides with President Bush.

Now we're standing by to hear from Mr. Bush on this politically- charged vote.

And Iran's threatening new test of the United States and the men who want to be commander in chief. Tehran fires missiles. Barack Obama, John McCain fire off very different responses.

And Barack Obama now regrets exposing his children to the news media spotlight. His explanation for letting his family go Hollywood.

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

We're awaiting pictures of Ted Kennedy making a dramatic return to the U.S. Senate only moments ago. We're watching this story. He's come back to vote on an important Medicare piece of legislation.

As soon as those pictures come in, you'll see Ted Kennedy, who has suffered from brain cancer, had brain cancer surgery. This is his first return to the U.S. Senate. That's coming up.

But right now we want to get to your security, your privacy, and the Democrats divided. We're standing by momentarily to hear from President Bush at the White House. He's about to walk down those steps in the Rose Garden and deliver a statement.

A bill overhauling rules on secret government eavesdropping is heading now to his desk. This, after the Senate gave final approval to the legislation just moments ago. The final vote, 69 in favor, 28 opposed.

Barack Obama among those voting yes, together with the president. Hillary Clinton among those voting no.

Let's bring in our senior political analyst, Gloria Borger. She's here. She's watching this story for us.

As soon as the president comes in, we'll listen to what he has to say, Gloria. But this is a major split between these two Democrats.

GLORIA BORGER, CNN SR. POLITICAL ANALYST: Right. The two Democrats, Hillary Clinton and Barack Obama, were on the same side.

BLITZER: Hold on, Gloria. Here's the president. I want to just listen in.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Today, the United States Congress passed a vital piece of legislation that will make it easier for this administration and future administrations to protect the American people. This vital intelligence bill will allow or national security professionals to quickly and effectively monitor the plans of terrorists outside the United States while respecting the liberties of the American people.

This legislation is critical to America's safety. It is long overdue.

Months ago, my administration set out key criteria that this intelligence legislation would have to have before I would sign it into law. The attorney general and director of National Intelligence report that the bill Congress passed today meets these criteria. And therefore, I will soon sign the bill into law.

This bill will help our intelligence professionals learn who the terrorists are talking to, what they're saying and what they're planning. It will ensure that those companies whose assistance is necessary to protect the country will themselves be protected from lawsuits for past or future cooperation with the government. It will uphold our most solemn obligation as officials of the federal government to protect the American people.

I want to thank the members of my administration who worked hard to get this legislation passed. I thank the Democratic and Republican leadership in the Congress for their efforts, particularly House Majority Leader Hoyer, House Republican Whip Blunt, Senators Bond and Rockefeller, Congressman Hoekstra, Reyes and Smith. This legislation shows that even in an election year, we can come together and get important pieces of legislation passed.

Thank you.

BLITZER: All right. So the president making a short statement, welcoming the vote in the U.S. Senate, the vote of 69-28 in favor of this compromise on this surveillance bill.

Once again, Barack Obama voting in favor, in favor of the legislation. Hillary Clinton voting against, against the legislation.

I want to discuss this with Gloria.

But here's a dramatic picture we haven't seen in a while. There he is, Senator Ted Kennedy with his wife, Vicki, walking into the Senate. This is tape that we've just gotten in. As you can see, it's raw tape just coming into THE SITUATION ROOM.

There he is. Senator Ted Kennedy going into the Senate to vote on an important piece of legislation involving Medicare.

They're trying to break the filibuster. The Democrats need 60 votes in order to do so, and they brought him in from his -- literally from his recovery from cancer surgery in order to try to make sure they get those 60 votes.

Ted Kennedy, a dramatic moment right now, returning for the first time to the U.S. Senate since he came down with this brain cancer.

I want to get to that and have more on that in a moment. But let's continue to talk about what's going on with the vote on the surveillance compromise.

Gloria, it was a 69-28 vote. A lot of Democrats voting in favor. Almost all of the Republicans voting in favor. But Hillary Clinton standing against the new leader of the Democrats, Barack Obama.

BORGER: Well, Hillary Clinton wasn't alone in that, I might add. Senator Biden and Senator Dodd, both of whom have been mentioned as vice presidential nominees, Wolf, have also voted with Hillary Clinton against this bill. So he is in many ways shifting to the center of his party. And we've seen that a lot in this presidential race.

He says it's because a compromise has been reached. A lot of people say politically in a way this could be good for him, because, of course, Democrats have a problem on national security. And he's got to show that he's as tough as John McCain.

BLITZER: This is a sensitive vote for both Hillary Clinton and Barack Obama, as you well know. And given the sensitivity, the fact that Barack Obama has been criticized in recent days by a lot of liberals who don't like the fact that he went ahead and decided to support this compromised legislation, I guess the question is, what, if any, fallout will there be in terms of Hillary Clinton eventually, potentially being the running mate for Barack Obama when she decides to split with him on this important vote?

BORGER: Well, I think that if there are issues that would keep her from being on the ticket, this probably wouldn't be at the top of the list. But don't forget, Wolf, right now they're in some very delegate negotiations about her role at the convention, whether a roll call should be called at the convention, how they're going to help retire her debt.

There are some hard feelings on both sides of these campaigns that remain, particularly among fund-raisers. And so I think what you're seeing is Hillary Clinton, who made a promise on this issue, and had voted one way, and is sticking with what she said, she can just say, look, this has nothing to do with Barack Obama. This actually has to do with me and my word.

BLITZER: And let's talk about the other story that's happening right now, a very dramatic return to the U.S. Senate by Senator Ted Kennedy to vote on this Medicare legislation to try to break a filibuster. They will need 60 votes. And we've got some videotape, as you can see, that just came into THE SITUATION ROOM of him arriving on Capitol Hill, together with his wife Vicki.

For him to come back to Washington on this vote underscores the importance that he sees to Medicare, health insurance in general.

BORGER: Right. I mean, these are Ted Kennedy's signature issues. Health care for decades has been his signature issue. And it's a sign of how important he believes this Medicare measure is that he would actually make a dramatic return to the Senate.

I think it's going to be very important to every senator there, because of their affection for Ted Kennedy, quite frankly, to see him come back on the Senate floor for this important vote.

BLITZER: It's good to see Senator Kennedy back in Washington. We, of course, hope he has a very, very speedy recovery from his surgery.

BORGER: Absolutely.

BLITZER: And we'll continue to watch this vote. There's enormous ramifications on Medicare as well. That's why he's come back to Washington.

Gloria, stand by.

I want to get right back to Barack Obama's vote on the surveillance bill and the fallout he's getting from the left, and from John McCain.

CNN's Tom Foreman is joining us.

This is proving to be a tough vote for a lot of people, Tom.

TOM FOREMAN, CNN CORRESPONDENT: Yes, it is, Wolf. Not the kind of vote that Barack Obama wanted to face right now, for sure, because the simple truth is, the left has been very concerned about this issue. And a lot of the country may not overall understand it. But they will understand when McCain says he's flip-flopping.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Three-fifths of the senators duly chosen and sworn have voted in the affirmative. The motion is agreed to.

FOREMAN (voice over): The vote put Barack Obama in the spotlight. The senator from Illinois -- you may also know him as the presumptive Democratic nominee for president --- voted in favor of the bill, which, among other things, likely protects from lawsuits the telecommunications companies that help the government snoop on Americans without court approval.

Last year, Obama vowed to fight such a provision. And he did so today, trying to strip it from the bill. But he did vote in favor of the overall legislation.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I made a judgment that at this point it was important for us to go ahead and get that program in place. That doesn't represent a huge shift in position, it represents an assessment of a compromise that was the best that could be done right now, and whether it was more important for us to have that program in place.

FOREMAN: But his rival for the White House, John McCain, says Obama's flip-flopping.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: He was opposed to FISA in the past, and opposed to that, and now he is supporting it. Not the first change in position.

FOREMAN: And it's not just the right. Obama is also feeling the heat on his vote from the left as well.

ABBI TATTON, CNN INTERNET REPORTER: This has been a big issue for liberal bloggers, and one that's been taken right to Barack Obama's own Web site. More than 20,000 people now joining a group there, urging the senator to get FISA right. The group getting so much attention, that the senator himself went online to respond to them.

FOREMAN: Obama says he is not moving to the middle.

OBAMA: This whole notion that I am, you know, shifting to the center, or that I'm flip-flopping, or this or that or the other, you know, the people who say this apparently haven't been listening to me.

(END VIDEOTAPE)

FOREMAN: Again, one of the saving graces on this, Wolf, for Obama may be that a lot of people in the country will simply have trouble sorting through all this arcane language to understand precisely what this means. But those people Abbi mentioned, the bloggers out there who have been angry over this for weeks and weeks, they have a very strong sense of how they feel about it, and they're not going to quiet now, that's for sure.

BLITZER: Tom Foreman reporting for us.

I want to get to CNN's Don Lemon right now. He's following another important story we're watching.

The Reverend Jesse Jackson caught in an open mike with some very, very disparaging words about Senator Barack Obama. And now Jesse Jackson is expressing deep distress.

Don, give our viewers the background, what exactly Jesse Jackson said, what he's saying now, because this has that potential, as you well know, to cause a huge uproar out there.

DON LEMON, CNN ANCHOR: Absolutely. And we've heard everything having to do with the Reverend Jeremiah Wright and so forth, and how just a contentious election this has been on both sides here. Very touchy, especially for African-Americans.

I was on the phone with Reverend Jesse Jackson just a short time ago, and according to him, he says, "You know what, Don? I'm not exactly sure what I said, but it was something like this..." He didn't want to repeat. And he said it was "crude and hurtful."

And what he said was something to the effect of this -- and this is not verbatim, but close to this -- that the senator was cutting off his, you know what, with black people and the black church. Now, here's what he said.

He said he was -- he said this, and he thought it was a private moment. And it is a private conversation that he would like to have with Senator Obama.

He said that, "Lately, the senator has been giving moral lectures to black churches and black people," and he feels like it has to be broader than what Barack Obama is doing now. Again, he says it was a private moment. He thought -- he didn't know the mike was on, and of course, he has released a statement.

And in that -- this was during my show. In that he said, "I want to get it out there that I have been an adamant supporter of Senator Barack Obama." As a matter of fact, on July 8th he wrote something in "The Chicago Sun-Times" supporting Barack Obama, and that he has been a big supporter of Barack and Michelle Obama.

And having lived in Chicago and knowing all the players here involved, Wolf, the families live in the same neighborhood. Not far from each other. The Reverend Jesse Jackson's daughter, Santita, very good friends with Michelle Obama. Sort of growing up together, if you will. One of his sons is head of a committee for Barack Obama, Jesse Jackson, Jr.

So there is sort of this family dynamic between these two people that sort of comes out here, and that has been coming out really on the campaign trail. Not that Jesse Jackson has any sort of hatred, but it's sort of a family dynamic that would play out in any families.

But sadly, he says that it came out in a place that he thought was private, an open mike that he thought was not on. So there you go.

He is apologizing profusely. And I asked him to come on. He is considering that, but he wanted to get the story out there first, Wolf, before he actually came on our air to talk about it.

Of course, the Obama campaign at this point is saying they have no comment.

BLITZER: And like you, Don, I spoke with Reverend Jackson on the phone just before our show here in THE SITUATION ROOM. And I must say, I've spoken to him many times over the years, and he was extremely contrite. I could audibly -- I could hear how upset he was.

Like you, I invited him to come into THE SITUATION ROOM, and he said maybe not today. Maybe tomorrow. He was just sort of heartsick that he was caught saying really ugly things about Senator Barack Obama.

LEMON: Right. And Wolf, you're exactly right. When he called me, I had to say, "Can you guys let Kyra handle this part?" because I wanted to talk to him.

And I said, "Are you OK?" And he goes, "I'm OK, Don."

And you know the Reverend Jesse Jackson has been a civil rights leader, an activist for years, and is really fearless. But I have never personally heard him sound this contrite or this sorrowful. So, obviously he knows the potential of this story to really take on legs and wings beyond his control and really the control of the media -- Wolf.

BLITZER: All right, Don. Thanks very much.

Don Lemon doing some good reporting for us, as he always does.

Let's go to Jack Cafferty. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Barack Obama and Hillary Clinton may be fund-raising and campaigning together, but behind the scenes there are some nasty wounds that are a long way from being healed.

"The New York Times" reports that many Obama donors are not eager to help Clinton pay off her $23 million campaign debt. Some are saying things like, not a penny for that woman or her husband or, God forbid, Mark Penn.

Obama's asked his top donors to help Clinton retire her campaign debt. But Clinton officials say so far they've come up with less than $100,000, and one Clinton adviser describes that as a paltry sum.

Obama's donors say they think Clinton racked up most of this debt after it was mathematically impossible for her to win the nomination, and that she simply spent additional time and money doing damage to Barack Obama. His campaign also says it's unclear how much money from Obama supporters will be enough to satisfy the Clinton camp.

Meanwhile, Clinton's people think Obama has been halfhearted in his fund-raising efforts on her behalf and should do more to include Hillary's people in his campaign. Some of them are also complaining Obama has not asked his 1.5 million small donors to kick in to the Clinton campaign debt.

It's a delicate dance for Obama in many ways. If he's seen as being unhelpful to Hillary, then Hillary and Bill Clinton and their supporters might not be as eager to jump aboard his campaign.

Here's the question then: How much money should Barack Obama be expected to raise to retire Hillary Clinton's debt?

Go to cnn.com/cafferty file and you can post a comment on my blog -- Wolf. BLITZER: Jack, thanks very much.

Ted Kennedy is now walking into the floor of the U.S. Senate. He's getting a standing ovation from his Republican and Democratic colleagues. You can see these live pictures coming in from the U.S. Senate right now. An enthusiastic, robust round of applause.

In fact, let's listen in for a second.

(APPLAUSE)

BLITZER: And there he is. He's just waving his hands. You can sort of see him in the middle of the screen.

Kate Bolduan is up on Capitol Hill watching all of this.

Kate, we had been tipped off that this could happen, that he would return from his recovery from cancerous brain surgery. He's there. What a dramatic moment.

KATE BOLDUAN, CNN CORRESPONDENT: What a dramatic moment is right, Wolf. I mean, you can see, this is a rare moment of bipartisan togetherness here on the Senate floor.

We had -- our congressional producer, Ted Barrett, had heard earlier today that they were considering that the senator was weighing the option of coming back. But his family was concerned about his health and that he wasn't really healthy enough quite yet to make the trip from Massachusetts. But we can see that, clearly, that he did make it here.

You know, as you know, Senator Kennedy is a longtime champion of health care, so we can understand that he would want to be here for this vote.

Wolf, this is significant, because Democrats fell one vote shy of the numbers they needed to get Medicare legislation passed. And as we can see right now in these live pictures, they're taking this vote up right now. And I believe as we were looking there, we saw Senator Kennedy cast his vote in support of this legislation. So it seems that he wanted to come back to be a swing vote here in order to get this legislation through.

BLITZER: Do we know yet, Kate, whether his vote was decisive in breaking that Republican filibuster? In other words, did they get the 60 votes they need?

BOLDUAN: We don't know quite yet. We'll have to see as this vote plays out.

They obviously wanted him back because they wanted him to be that decisive vote. And pretty symbolic, because he is such a champion of health care.

But it still has to play out to see if Democrats have the 60 votes that they need to overcome this filibuster. If they do, then the Senate will go to vote for final passage. But as we always say, you never know until the votes are all in. So we'll wait and see.

BLITZER: And we'll see what happens, if other Republicans who originally voted together with the Democrats decide now to change their mind under pressure from the Republican leadership.

BOLDUAN: Exactly.

BLITZER: Kate, stand by. We'll get back to you. We'll follow this dramatic story as well.

Also, new questions about progress being made in Iraq. I'll ask a leading anti war figure, Democratic Congressman John Murtha, to clear up some of the confusion. Does he still think the so-called surge has worked or not?

Plus, what some are calling "bittergate" is back. How John McCain is trying to use Barack Obama's past words against him and win battleground states along the way.

And Obama says he got carried away. His second thoughts about letting his daughters give an interview.

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

(COMMERCIAL BREAK)

BLITZER: You saw it live here in THE SITUATION ROOM. These are live pictures from the U.S. Senate, where Senator Ted Kennedy only moments ago returned from his recovery for a cancerous brain tumor in order to vote on this Medicare funding legislation. He and the other Democrats trying to break a Republican filibuster. They need 60 votes to do so. Unclear if they've succeeded.

But we're watching this very closely. We'll get back there as soon as we can.

Other important news we're following, the Iraq war remains a very powerful issue in this election year, as Barack Obama prepares for a highly anticipated visit to Baghdad this summer.

Joining us now to discuss what's going on, a U.S. congressman who has been a leading Democratic voice against the war. That would be John Murtha of Pennsylvania.

Congressman, thanks very much for coming in.

REP. JOHN MURTHA (D), PENNSYLVANIA: Nice to talk to you, Wolf.

BLITZER: All right. You caused some confusion out there by telling one of your Pittsburgh local affiliates that the surge seems to be working now. I want you to explain to our viewers where you stand, because as you said -- as I said, that caused some confusion about your opposition to the surge, opposition to the war.

What's going on?

MURTHA: Yes, the surge you have to measure. The incidents are down. But let me tell you the facts as I see them.

We're spending $343 million a day. We've got over 300,000 soldiers that have Post-Traumatic Stress. We have the most instability in the Middle East we've had. Our credibility is in the tank.

In other words, the least credibility the United States has ever had. And the Iraqis are calling for a timetable to get out.

Just a year ago, the national security adviser for Iraq was in my office. He said, "We don't want a timetable." I said, "You need a timetable in order to create incentive for you folks to get the American troops out."

Now, they don't want us to occupy their country. The American public -- your own polls show 68 percent of the American public want us out. I want us out. I believe that Barack Obama wants us out. And I think we have to start the movement.

If this is going as well as they say, then now's the time to reduce the forces in Iraq.

BLITZER: Here's what you said to Pittsburgh station KDKA. I'm going to play this sound bite. You were specifically asked, did the surge work? Listen to this.

(BEGIN VIDEO CLIP)

MURTHA: I think for the short term it certainly reduced incidents. I'm not sure whether it's because the Iraqis are just worn out, but certainly the way they're doing it today makes a big difference.

(END VIDEO CLIP)

BLITZER: All right. Explain exactly what you mean by that, because I was a little confused. The Iraqis -- you mean, the insurgents, I assume, that they're worn out? What's going on?

MURTHA: I think it's a combination of things.

First of all, the tactics have changed substantially. They're even training the Marines and soldiers to are more considerate of the Iraqis. Every time we kill somebody over there, inadvertently, even, it causes enemies.

The civil war between the two factions has slowed down. So, there's a lot of elements that you have to talk about when you talk about the surge.

What I've said over and over again, we cannot continue to bear the burden and the cost of this war -- emotionally, mentally, the brain damage caused to these troops. And I go out to the hospitals all the time to see the physical damage to our troops.

Our troops have done everything possible. Militarily, they've done everything. Incidents are down, but as I go over the details of long term, we've got to look beyond Iraq.

We've got to rehabilitate the military, and it's time to have a timetable. It's time to start reducing our presence.

BLITZER: Let me interrupt, Congressman.

If the military commanders, General David Petraeus, among others, say, you know what, this is working, they see some light at the end of the tunnel, just give us some more time to get the job done and emerge victorious, what's wrong with that?

MURTHA: Let me tell you something, Wolf. We've been there five and a half years. I heard the same thing in Vietnam. I heard the commanders say the same thing.

The commanders make recommendation. The president has to set the policy. The president has to make a decision.

It's time for -- the Iraqi people want us out. They don't want us occupying their country. The American people want us out.

We're spending $343 million a day. We're in the lowest credibility worldwide. We have to start to restore our credibility worldwide, and we have to work with the international community.

Those are the things we haven't done. And the military leaders don't look at that. They look at purely military, and they don't recognize sometimes the consequences it's causing back at home.

BLITZER: What they say, Congressman, is, you know what, a speedy withdrawal or a precipitous withdrawal will reverse all those gains that even you now acknowledge have been achieved. And it will have all been for naught.

MURTHA: Well, wait a minute. That's short-term gains.

Now, I just listed the things that are long-term problems we have, Wolf. I talked about the amount of money we're spending. I talked about the disarray in the Middle East. I talked about the Iraqis want us out of there.

I talked about the American people want us out. I talked about this tremendous cost to the military.

So, you know, short term, the incidence has decreased, and I applaud the military for that. I applaud what they have done. But this is a combination of things, a change in tactics.

And listen, every time in Vietnam -- and it took me 20 years to realize that we should have gotten out of Vietnam earlier than we did -- they said the same thing in Vietnam. We stay a little bit longer, everything will be all right. That's what the military commanders said. The political leaders have to make a decision, is the cost we bear, physically, emotionally and financially, is it worth the stay?

Wolf, we can stay there 100 years like John McCain says, and we'll still have a problem. They have to have an incentive to realize they have to take over. I think they're beginning to recognize that incentive. And they want us out.

You're going to see that they're not going to want the U.N. mandate extended. So I am absolutely convinced that we're going to be -- 160,000 contractors there. You know, we put less money in for contractors last year and they increased the number of contractors.

So, there's 140,000 troops, 160,000 contractors there. So we're in a process, in my estimation, that we've got to reduce and start to spend the money at home, where it should be spent.

BLITZER: All right. I think you've clarified the confusion, Congressman.

MURTHA: Thank you, Wolf. Always good talking to you.

BLITZER: Thank you. Thanks very much for joining us.

We want to get right back to another story we're following, breaking news.

The Reverend Jesse Jackson saying some very, very disparaging words about Senator Barack Obama, even though he supports him for president of the United States.

CNN's Don Lemon has been working this story, together with a lot of us.

First of all, Don, I know you're watching this story. Senator -- Reverend Jackson is about to join us on the phone. But just remind us before you start talking to Reverend Jackson what exactly he said on an open mike that's causing so much distress right now.

LEMON: Well, what he said to me earlier -- and we're going to talk to him in just a little bit, we've just got him on the phone, Wolf -- he said that he made some crude -- what he called crude and hurtful comments that he much rather have made to the senator in private. He did not know the microphone was open. He said it was a hot mike, didn't realize it.

And what he said was that he wanted to -- he thinks that the lectures that Barack Obama has been giving lately to black churches and to black people, he thinks it needs to be a broader context. It's much broader than what the senator is saying.

But what is much better is probably that we get the words from the Reverend Jesse Jackson right now.

Reverend Jesse Jackson joining us from Chicago.

Thank you very much, sir.

REVEREND JESSE JACKSON, FOUNDER, RAINBOW/PUSH COALITION: Well, Don, how are you?

LEMON: I'm doing well. How are you is the question.

But, first, I want to ask what you said, and why did you say it?

JACKSON: Well, you know, let me say first, this is a sound bite within a broader conversation about urban policy and racial disparities.

And I feel very distressed because I'm so supportive of this campaign and what the senator has done and is doing. I was in a conversation with a fellow guest at FOX on Sunday. And he asked about Barack's speeches lately at the black churches.

I said he can come off as speaking down to black people. The moral message must be a much broader message. What we need really is racial justice and urban policy and jobs and health care. That's a range of issues on the menu.

And, frankly, I think that is his basic urban policy position. No one else put one together except him in this situation. And then I said something I thought regretfully crude. It was very private and very much a sound bite in a live mike.

And so, I feel -- I find no comfort in it. I find no joy in it. So, I immediately called the senator's campaign to send my statement of apology for any harm or hurt that this may have caused this campaign, because I support it unequivocally.

LEMON: OK, Reverend. And Barack Obama's campaign, of course, is saying that they don't have a comment now. And you know how quickly this spreads.

I got the word through another source and then called you. And Wolf Blitzer also tried to get you on the phone. And Wolf has some questions for you as well -- Wolf.

BLITZER: Reverend Jackson, why did you say these things? Because it's so crude, we can't even repeat it on the air right now, what you said on this open mike. What was going through your mind?

JACKSON: Well, when I was asked about it, there's already some kind of firm reaction.

The appeal in black America is record levels of unemployment and home foreclosure crisis, record levels of murders, and all kind of reprehensible action toward black America.

A million blacks in jail even as we talk today, and 900,000 young black men. So, we have some real serious issues, and not just moral issues. They're structural inequality...

BLITZER: Let me interrupt, Reverend Jackson. Reverend Jackson, let me interrupt. Are you suggesting that Senator Obama isn't concerned about these issues? Is that what you're saying?

JACKSON: By no means. I say he has dealt with then more effective than anyone else has. Each time he gives one of these messages at a black church, it appears to be targeted, and the media takes and runs with it as in the solution to a structural crisis is moral behavior.

To me, it's like putting a size 10 foot in a size 8 shoe. You need some structure, not just challenges on behavior, which he understands so well. And that's why I regret so much this statement, which could be exploited or be used to exploit our relationship and the campaign.

LEMON: Reverend, and I want to jump in here and ask you question, because there has been some talk in the media and also on the blogs about the reverend -- about Barack Obama playing to the middle, and not necessarily addressing issues that are important to the black community as sternly and as matter of factually as he should.

And in some way -- and I don't know if this is your opinion -- that he may be shying away from this because he's concerned that it might hurt him in his run for the presidency.

JACKSON: You know, the basic issues he raises about urban policy and jobs that no one else has addressed has broad application.

The crisis we have face today, besides, you know, behaving better and doing the right thing, is jobs and investors leaving and drugs and guns are coming. The murder rate is up, taxes up, services down, first-class jails, second-class schools.

That requires some real heavy lifting that has to take place. And whether you are speaking to a black church or to a labor hall or to a university, I'm appealing really for a much broader discussion. And I would say it to him privately because of my regard for him and the campaign. And I would hate it to be lifted out of context really on a live mike statement.

BLITZER: Reverend Jackson, we're out of time, but a very quick -- if you could right now, speak directly to Senator Obama from your heart, what would you say to him?

JACKSON: That any hurt or harm I caused his campaign, I apologize, because I have such high regard for him and this historic redemptive moment. I'm a part of it. And I cherish his (INAUDIBLE) in making the nation better he's played in making the nation better and making the world rejoice.

BLITZER: Reverend Jackson, thank you for joining us for a few moments.

We will continue to watch this story.

Don Lemon, thanks to you as well.

This is a story that clearly is going to cause some controversy out there. LEMON: Thank you, Wolf.

BLITZER: Thank you.

And, when we come back, show them the money, Hillary Clinton and Barack Obama teaming up again. This time, they're looking for money to help him and her.

And John McCain hopes to turn Barack Obama's words against him. He's trying to keep alive the controversy over Obama's description of -- quote -- "bitter voters."

(COMMERCIAL BREAK)

BLITZER: An ominous new dividing line between John McCain and Barack Obama. Iran test-fired today and warned the nation's finger is always on the trigger, a direct quote. U.S. officials are responding with a new sense of urgency about Iran's nuclear threat.

But that's pretty much where the agreement between Barack Obama and John McCain ends.

Let's go to CNN's Dana Bash. She's working this story for us.

Dana, it's a new test for the candidates on how they would deal with adversaries.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: That's right. This is one of those international incidents, Wolf, that sent both candidates scrambling to say what they would do as president. And for voters looking for differences between the candidates, look here.

(BEGIN VIDEOTAPE)

BASH (voice-over): Menacing images from Iran, multiple missile tests, Iranian saber-rattling that one of these two men will be in charge of responding to in just six months. And they are quite different.

MCCAIN: It's time for action.

BASH: John McCain call Iran's new test proof of a need to build a missile defense system in Europe and join allies to impose tough sanctions.

MCCAIN: It's time to make the Iranians understand that this kind of violation of international treaties, this kind of threatening of their neighbors, this kind of continued military activity is not without cost.

BASH: Barack Obama wants to talk to Iran with direct diplomacy.

OBAMA: We haven't shown a willingness to engage in the sort of direct negotiations with Iran that would give them carrots and sticks for a change in behavior. BASH: The reality is, both candidates support diplomatic efforts with Iran to halt its nuclear program. But their difference in approach is a major campaign flash point.

Obama said, as president, he would sit down with Iran's leaders.

OBAMA: The notion that somehow talking to countries is punishment to them, which has been the guiding diplomatic principle of this administration, is ridiculous.

BASH: McCain mocks that as naive and stokes concerns in a Jewish community and elsewhere about Obama's commitment to protecting Israel.

MCCAIN: Why does Barack Obama, Senator Obama, want to sit down with a state-sponsor of terrorism? What does he want to talk about with Ahmadinejad, who said that Israel is a stinking corpse, who said that he wants to wipe Israel off the map?

(END VIDEOTAPE)

BASH: Well, Obama said the U.S. must gather European allies, the Russians, and the Chinese to offer incentives to pressure Iran to change its behavior. The McCain campaign quickly responded that the Bush administration has been trying to do that, to no avail -- Wolf.

BLITZER: Dana Bash working this story for us -- Dana, thank you.

From now on, Barack Obama will essentially be telling reporters this: Don't expect to be asking my children questions, this after the Obama family sat down for a TV interview. The presidential candidate says it will be the children's last interview.

Carol Costello has been working this story. She's got details. He expressed some deep regret about what happened, Carol.

CAROL COSTELLO, CNN CORRESPONDENT: Oh, he did, indeed, Wolf.

The Obamas have been protective of their children, asking the ever-present press corps not to take pictures of the kids. But on a rare day of family fun, Senator Obama gave in, and allowed his kids to be interviewed. He now says that was a mistake.

(BEGIN VIDEOTAPE)

COSTELLO: Ten-year-old Malia Obama is now a bona fide star, so articulate at advising her dad on how to greet children, bloggers wondered if this little girl was too grown.

MALIA OBAMA, DAUGHTER OF BARACK OBAMA: He was like, hi. And, so, he shook her hand. And I was like, you know, daddy, you really don't shake kids' hands that much. You shake adults' hands. And he was like, then, what do you do? And I was like, you know, you just wave or say hi.

COSTELLO: On the pro-Obama Web site, MichelleObamaWatch.com, bloggers called the girls terrific, full of self-confidence, real. But, a day later, for dad, it was too real.

B. OBAMA: I think that we got carried away in the moment. We wouldn't do it again. And we won't be doing it again.

COSTELLO: That, too, caused a stir. On "The Chicago Tribune"'s blog site, "The Swamp," more than one blogger wrote, he's even flip- flopping on this.

But psychiatrists say Obama made the right call by saying never again.

DR. GAIL SALTZ, ASSOCIATE PROFESSOR OF PSYCHIATRY, THE NEW YORK PRESBYTERIAN HOSPITAL AT WEILL-CORNELL SCHOOL OF MEDICINE: It is a slippery slope. And I think that both parents ought to be concerned about protecting their children. They are young kids. I think that, when you draw a line, if you make it a fuzzy line, people will step over that line.

COSTELLO: And that can mean your kids become fair game, as Malia certainly has become. Obama's campaign told CNN today the whole family got carried away in the fun of the day. They had been celebrating Malia's birthday when "Access Hollywood" showed up with an interview with the senator and his wife only, and things just happened.

Senator Obama told reporters later, his little girl said it was the best birthday ever.

B. OBAMA: I don't know whether she was just telling us what we wanted to hear, but I can tell you, from my perspective, it was one of the best times I have had in a long time.

COSTELLO: But, from now, Malia's birthday won't include an interview with any TV type.

(END VIDEOTAPE)

COSTELLO: You got that right.

Keep in mind, Senator Obama sees his family maybe once a week, if he's lucky.

So, on Malia's birthday, they were feeling the family love, his campaign telling me again today Obama is a dad first. He's protective of his girls. And he doesn't want them to worry about TV cameras or politics, so no more interviews -- Wolf.

BLITZER: All right, good.

Thanks very much for that, Carol.

So, when same-sex marriage is an issue on the ballot, it often energizes voters on the right. What will happen this November? Stand by for our "Strategy Session."

Plus, in the battlefields of Afghanistan, CNN is on the scene right now, as potentially deadly bombs are found and disarmed.

And a plane mystery -- claims that a bird crushed the nose of a jet just won't fly.

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

(COMMERCIAL BREAK)

BLITZER: The U.S. Senate has just passed legislation with the help of an ailing Senator Ted Kennedy that would ease cuts on Medicare funding, the final vote 69-30 -- Senator Kennedy making a dramatic return from his recovery for cancerous brain tumor surgery, Senator Kennedy being warmly received with enthusiastic applause when he finally voted aye in favor of the legislation.

Republicans have sought to filibuster. The Democrats brought Senator Kennedy back thinking they needed his vote in order to break that 60-vote necessary element to break the filibuster. Senator Kennedy came back. And, only moments ago, the Senate went ahead, after breaking the filibuster to approve this legislation 69-30, a dramatic win for the Democrats, a setback for the Republicans.

Senator Kennedy actually spoke about this, and we're going to hear from him right now.

(BEGIN VIDEO CLIP)

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: Good to see you. Good to see you. Feeling better.

(APPLAUSE)

KENNEDY: Looking forward to coming back to the Senate sometime, hopefully not too far away.

UNIDENTIFIED MALE: Go get them, Ted. Go get them.

KENNEDY: OK.

(APPLAUSE)

(END VIDEO CLIP)

BLITZER: There he is, Senator Kennedy making a dramatic return to the U.S. Senate, voting to help pass this Medicare funding legislation. We will continue to watch this story for you.

Meanwhile, John McCain is on the campaign trail right now in the important swing state of Ohio. He began his day in the battleground state of Pennsylvania, where Barack Obama once suggested that rural voters were bitter. It's a comment McCain certainly hasn't forgotten.

Our senior political analyst, Bill Schneider, is joining us.

They call it bitter-gate. At least his critics do. It seems to be back in the news right now thanks to John McCain. Is that right? WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: That is true. And it's because the McCain campaign still sees some political mileage in the issue.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Remember the controversy back in April, when Barack Obama described small-town voters in Pennsylvania and the Midwest as bitter? Well, it's back.

MCCAIN: We are going to go into small towns in the state of Pennsylvania, and we're going to tell them we don't agree with Senator Obama when he said that they cling to guns and religion because they're bitter about the economy.

SCHNEIDER: Obama's opponents call him elitist.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: People don't need a president who looks down on them.

SCHNEIDER: In the Democratic primaries, Hillary Clinton ended up beating Obama 2-1 among white non-college voters. How is Obama doing with those voters against John McCain? Not too well. McCain is winning white non-college voters by 13 points.

MCCAIN: We're going to tell them we love them and we appreciate them in the heartland of America.

SCHNEIDER: The lingering effects of bitter-gate? Maybe not.

In 2004, long before bitter-gate, John Kerry lost white non- college voters by 23 points. In fact, Democrats don't usually do very well with white working-class voters anymore. Jimmy Carter lost them in 1980. So did Walter Mondale in 1984 and Michael Dukakis in 1988, and Al Gore in 2000 and Kerry in 2004, by 22 points on the average. All those Democrats got defeated.

The good news for Obama is that he's not doing as badly as they did with the white working-class. The only Democrat who's won since 1980 is Bill Clinton.

How did he do with white working-class voters? Nearly a tie with the first President Bush in 1992 and again with Bob Dole in 1996.

(END VIDEOTAPE)

SCHNEIDER: To keep his blue-collar support down, Republicans are trying to paint Obama as a social elitist, in the tradition of Michael Dukakis and John Kerry. To pump it up, Obama is running as an economic populist in the tradition of Bill Clinton. So, a lot of Democrats think putting Hillary Clinton on the ticket could help Obama with those working-class voters -- Wolf.

BLITZER: Fascinating material. Bill, thank you -- Bill Schneider reporting. In our "Strategy Session," we're going to be talking about Hillary Clinton and Barack Obama. They're flying to New York with an interesting person on the plane. That would be Caroline Kennedy. What does all this mean?

And could a ban on gay marriage be on your ballot when the elections take place in November? And how could that impact the race for the White House? Donna Brazile and John Feehery, they are standing by here in THE SITUATION ROOM.

And so many of the things we use and buy come from China. But what is all this American capitalism doing to the country? An incredible inside look with journalist Ted Koppel, that's coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: We're just learning right now that Hillary Clinton and Barack Obama are flying to New York, flying to New York with Caroline Kennedy on board. She's one of those charged with trying to come up with a good vice presidential running mate for Barack Obama.

So, what does this all mean?

Let's discuss in our "Strategy Session."

Joining us now, our Democratic strategist Donna Brazile and John Feehery, our Republican strategist.

Are we reading too much into these tea leaves? Hillary Clinton, Barack Obama, they're going to a fund-raiser in New York, and Caroline Kennedy happens to be alongside.

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, Senator Clinton clearly knows Caroline Kennedy. They're all great friends. And I'm sure this is an opportunity for them to catch up and perhaps get her advice on the V.P. selection. I don't know if she's under any consideration. That's clearly Senator Obama's decision.

But I'm glad to see that the two candidates are going up there to raise money. This is a very important moment for both Senator Clinton, to retire her debt, Senator Obama, to expand his war chest.

BLITZER: What do you think?

JOHN FEEHERY, REPUBLICAN STRATEGIST: I think this is to help Hillary Clinton with her money problems. I'm not actually frightened of a Hillary Clinton/Barack Obama ticket.

(CROSSTALK)

BLITZER: Or do you mean a Barack Obama/Hillary Clinton ticket?

FEEHERY: That's what I meant to say.

(LAUGHTER) FEEHERY: I don't think Republicans should be frightened about that. I think it actually combines all of the liabilities of both candidates into one big package and it actually makes it easier for independents to vote Republican. So, it doesn't scare me.

But I do think that this is why they're flying up there. I think this is a money problem that they're trying to...

BLITZER: But, so far, Donna, as you know, not a whole lot of Barack Obama supporters are contributing to Hillary Clinton's campaign to try to repay her debt. And there are plenty of Hillary Clinton fund-raisers who are still avoiding contributing to Barack Obama.

BRAZILE: I think this is much ado about nothing.

Look, there's still passionate supporters on both sides. But some of the main fund-raisers are out there now setting up events, working together. And I know, in the weeks to come, that you will see more events being held to retire Senator Clinton's debt and continue to build Senator Obama's war chest.

BLITZER: What is going to happen if in fact these proponents of constitutional amendments banning same-sex marriage get to have this on the ballot -- I know they're working hard now in Arizona, California and Florida -- in November? What does that mean for the base of the Republican Party and turnout?

FEEHERY: Well, I think it will help with the evangelicals, who will come out. They're not all that excited about John McCain.

You know, it's funny. If you look at Barack Obama and same-sex marriage, he says he's against gay marriage, but then he says he want the people to decide. And then he says, well, actually, I don't want the people to decide in California.

So, it's another kind of example of Barack Obama trying to straddle the issues. How it plays out, it's unclear, because, in the last election, it helped George Bush definitely in some states. It helped also with a lot of African-American voters. And now, obviously, African-American voters are probably going to go for Barack Obama. So, I don't think it has that same impact.

(CROSSTALK)

BLITZER: Should Democrats be nervous about these initiatives in these states and potentially other states, in fact, as John says, in energizing that Republican base?

BRAZILE: No. This is an old failed strategy to divide and to try to stoke up the right-wing base.

Look, in 2004, these measures were on the ballot in 10 states. Of the 10 states, John Kerry was competitive in three. He beat George Bush in two states. In Michigan and Oregon and Ohio, we know it was a narrow loss for John Kerry. So, I don't think these measures will have any impact on the election. Governor Schwarzenegger opposed the measure. Senator Obama opposed the measure. Senator McCain just flip-flopped. He now supports the measure. He's voted against the marriage amendment twice, the federal marriage amendment, in the United States Senate.

BLITZER: Because Senator McCain has opposed the constitutional amendment on the marriage -- what's called the marriage amendment.

FEEHERY: You can be against the constitutional amendment and also be for this state measure, because you're wanting the people to have a decision.

Obviously, for someone like John McCain, who is a tolerant, a very tolerant person and wants to have that, he is also someone who believes in the Constitution and doesn't want to go around amending the Constitution. So, that doesn't surprise me at all.

BLITZER: All right, you want to make another point?

BRAZILE: No, Senator Obama supports several civil unions and he's been a strong supporter of gay civil rights.

BLITZER: We will leave it on that.

BRAZILE: Thank you.

BLITZER: Thanks, guys, very much.

Let's go back to Jack. He has got "The Cafferty File" -- Jack.

CAFFERTY: How much money should Barack Obama be expected to raise to retire Hillary Clinton's campaign debt?

David in Wisconsin says: "Not a dime. Hillary threw the kitchen sink at Obama and now that she needs him, she and her campaign expect him to come to the rescue. Here's a message for you Hillary: Karma does exist."

Stacy in Virginia writes: "How did it become Obama's responsibility to retire Senator Clinton's debt? She should have to get a second job, take a second mortgage, work longer hours, and sell her valuables on eBay, like the rest of the Americans who are in debt up to their eyeballs. Nothing sickens me more than someone who creates a big mess, then stands above it and says, boy, that stinks. Who is going to clean this up? I guess it does take a village to clean up her poor planning and overspending that her campaign came to represent."

J. in South Carolina writes: "I think Obama should help Hillary 100 percent with her campaign debt and then follow that with an offer to be vice president. He can't help out less than that, and then drop her. No way. He owes his nomination to her."

Not sure I understand that.

T. writes: "Even the suggestion that Obama help pay Clinton's debt is sickening to me. She put herself in debt. She spent her own money. Nobody owes her a dime. Why isn't Obama paying my student loans, or my mortgage, or for my vacation? Because I didn't spend it on a national advertising campaign for public office? Get real."

Gary writes: "It appears the HillRaisers are trying to extort a V.P. job or several million dollars in campaign funds from Senator Obama. Who's in charge of Hillary's campaign, Tony Soprano?"

Jennifer writes: "How many times did we hear about the 18 million Hillary supporters from Hillary herself? Where are they? Where is the little boy who sold his bike to donate to the Hillary campaign? Doesn't he have a train set he could sell to help her out?"

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. Look for yours there, among hundreds of others.

BLITZER: Jack, thank you.

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

Happening now: a remarkable twist in one of the most notorious murder cases of the last two decades -- what new DNA tests reveal about who killed JonBenet Ramsey.

Also, new tension in an already troubled region, the surprise missile test by Iran and this ominous warning from Iran: Our finger is always on the trigger.

And a major split between Hillary Clinton and Barack Obama, at odds on a critical anti-terror bill, what does it say about their future?

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

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