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Obama's Challenges of Mideast, Europe Trip; McCain Camp Questions Purpose of Obama's Trip; Interview With Nancy Pelosi

Aired July 17, 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, Nancy Pelosi has a very serious message for President Bush. And she's delivering it exclusively right here. Wait until you hear what she has to say about a president whom she's now calling, and I'm quoting her now, "a total failure."
The world awaits Barack Obama, but he'll need to avoid political pitfalls as he plots his foreign trip. And John McCain's campaign certainly eyeing every step he takes.

And as Obama goes abroad, his campaign is doing something rather unusual, possibly never seen before right here at home.

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

The Speaker of the House delivers some major news, a major criticism of President Bush, among other things. And Nancy Pelosi delivers both in an exclusive interview right here.

She says the issue of offshore drilling is now off the table, will not come up for a vote on the House floor. That will surely engage many people, enrage a lot of them as well who don't -- who certainly want that drilling, as they say it could help lower gas prices and help break the nation's dependence on foreign oil.

Meanwhile, regarding the president's criticism that lawmakers aren't getting much done on your behalf, Pelosi blasted right back.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: Bless his heart, the president of the United States, a total failure, losing all credibility with the American people on the economy, on the war, on energy, you name the subject. And for him to be challenging Congress, when we are trying to sweep up after his mess over and over and over again...

(END VIDEO CLIP)

BLITZER: And that's not all the speaker had to say about the president, Iraq, and the economy. You're going to hear the interview. That's coming up here in THE SITUATION ROOM.

It will be one of the most widely watched events of the presidential race, Senator Barack Obama overseas, in the Middle East and Europe. Some people right now saying he'll be greeted with wildly enthusiastic receptions, a very, very warm embrace. But there are some real political challenges, some say expectations, for Obama as he meets with world leaders.

Our senior political correspondent, Candy Crowley, is joining me now. She's watching this story for us.

There are several important things on this mission, Candy, he needs to accomplish.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Absolutely. When he does go to Europe, Barack Obama is trying to do one thing, answer a question: Can you see him in the part?

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): Barack Obama's European trip will be the campaign trail via satellite. From Jordan to Israel, to Germany, France and England, it will be a postcard journey, images for the hesitant to show that this 46-year-old politician, a virtual unknown overseas, can play a lead role on the international stage.

He will not be there to push policy or promise it. This will be about impressions, the ones he leaves, the ones he sends home. Does he seem as though he's tough enough to stand up for America's interests, graceful enough to improve America's image? A potent issue on the Democratic campaign trail.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: People are ashamed. They love this country and they want their cherished values and ideals restored.

CROWLEY: His campaign will be over the moon if Obama returns from his European trip with this kind of buzz.

ROBIN OAKLEY, CNN CHIEF POLITICAL EDITOR: I was talking to a former British foreign secretary this week and he said it's like JFK and Camelot. He said it may not be justified, it may not be sensible, but that feeling is there.

(END VIDEOTAPE)

CROWLEY: Now, this is not a trip without political risk, Wolf. It is coming at a time, although it's been months in the planning, where people are really focused on the mortgage meltdown, on rising gas prices. So Obama risks looking out of touch. And there is always the possibility that he could make a mistake and undermine the whole reason he's going -- Wolf.

BLITZER: So there are pitfalls.

CROWLEY: Absolutely.

BLITZER: There are potential great benefits as well.

Candy, you'll watch it for us.

Meanwhile, John McCain's campaign says Senator Obama's trip won't be about finding facts but finding campaign photo opportunities.

Let's go to Dana Bash. She's covering the McCain campaign for us. What are you hearing from the McCain insiders, Dana, how they're reacting already in advance to this upcoming Barack Obama trip?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: They're trying very hard to get ahead of it. In fact, all you had to do, Wolf, was watch John McCain at his town hall in Kansas City this afternoon. It was billed as a chance to talk about problems close to home, namely the economy. But unprompted, he made a point of tweaking Barack Obama for that upcoming trip abroad.

(BEGIN VIDEOTAPE)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I know that Senator Obama is going to Iraq. I was very interested that he articulated and announced his policies and approach to Iraq before he went.

BASH (voice over): Aides to John McCain may not like it, but they know full well Barack Obama's overseas trip will get a lot of coverage. And the reality is, McCain himself goaded Obama into it.

MCCAIN: It's now coming up on 900 days since he last visited Iraq, since before the surge. I hope that he goes as quickly as possible, with or without me.

BASH: The Republican National Committee still has a running clock on its Web site. Now that Obama is going, it's oppo (ph) time inside Camp McCain. Their central theme: By announcing his war policies before leaving, Obama is embarking on a campaign swing, not a fact-finding mission.

MCCAIN: I've been a lot of trips around the world, usually at your expense. But I usually issue my policy statements when I get back.

BASH: And McCain aides are stepping up their push to highlight Obama's apparent shift in rhetoric on Iraq.

MCCAIN: I think it's a new level of...

BASH: Earlier this week, McCain declared Obama a flip-flopper for changing statements on the success of the surge. Now McCain's campaign made this eight-minute video aimed at illustrating Obama's contradictory statements on Iraq.

OBAMA: What I've said is that we've got to make sure that we secure and execute the rebuilding and reconstruction process effectively and properly. And I don't think we should have an artificial deadline when to do that.

BASH: That was 2004. Obama now calls for all combat troops out in 16 months.

(END VIDEOTAPE) BASH: And the Obama campaign quickly responded with a lengthy statement suggesting Senator McCain has, for the most part, been in lockstep with President Bush on the Iraq war and that McCain's position keeps troops there indefinitely. But notably, Wolf, the response did not address McCain's central charge that over the years, Obama's Iraq position has shifted with the politics of the moment.

BLITZER: Dana's watching the McCain campaign for us.

Thank you, Dana.

And you can certainly expect to see a lot more of Senator McCain in the battleground state of Missouri, where he is today. It's considered a tossup right now.

Missouri has 11 electoral votes and is one of the most reliable bellwether states. Get this -- over the past century, it's voted for the winning presidential candidate in every single election except one, going for Adlai Stevenson against -- over Dwight Eisenhower back in 1956.

In 2004, one of the areas with the most population, that would be St. Louis, voted overwhelmingly for John Kerry. But President Bush won the southwest, north and southeast of the states by a big, big margin. The St. Louis suburbs and the Kansas City area, by the way, were both split.

Let's check in with Jack. He's got "The Cafferty File" for another day.

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: Hi. With all due respect to the upcoming interview with House Speaker Nancy Pelosi, Americans are up to their eyeballs with Congress. And why wouldn't they be?

A new Gallup poll shows Congress' approval rating 14 percent, the lowest it's been in 30 years. One of the reasons has got to be the legislative branch's refusal to exercise any sort of oversight on the executive branch of government which they are specifically charging our constitution with doing.

In fact, President Bush has learned that he can simply thumb his nose at Congress because they won't do anything about it. And so he does. Over and over and over again.

Yesterday, President Bush claimed executive privilege yet again in refusing to hand over the transcript of the FBI interview with Vice President Dick Cheney about the CIA leak case. Congressman Henry Waxman stomped his feet and said he's going to move forward with a contempt citation against Attorney General Michael Mukasey. But so what? Haven't we been there before? Of course we have.

Multiple White House staffers have simply ignored congressional subpoenas in the last few years. These folks include Karl Rove and former counsel Harriet Miers, and chief of staff Josh Bolten, and former attorney general Alberto Gonzales. And nothing, nothing was done to any of them.

Meanwhile, Congress bowed to King George's demands, passed that new FISA surveillance bill, patted themselves on the back big-time, too. But they never did anything about the breaking of the law that occurred under the old FISA law.

They continue to approve more money for the war in Iraq. Most recently, another $162 billion, no strings attached, despite promising -- remember this -- to cut off funding for the war back in 2006.

A new book titled "The Dark Side" by "New Yorker" writer Jane Mayer, suggests top administration officials, including President Bush, Vice President Cheney, Don Rumsfeld and others may be guilty of war crimes. But Congress has chosen to simply look the other way. A good lawyer might be able to make the case that Congress has been criminally negligent.

Here's the question: Why does Congress continue to allow President Bush to get away with so much?

Go to CNN.com/caffertyfile. You can post a comment on my blog.

It's disgraceful -- Wolf.

BLITZER: You're going to be interested in what Nancy Pelosi says, because we posed that question to her. So stand by. That interview is coming up, Jack. I think you and our viewers will be interested.

Also, Barack Obama is doing something right now that no other presidential candidate possibly has done before. You're going to find out what it is, and if John McCain should be worried at all.

And we'll have my exclusive interview with Nancy Pelosi. She blames President Bush for terrorists counting one place as their recruiting ground.

And to help you get lower gas prices, the House speaker delivers this message to the president...

(BEGIN VIDEO CLIP)

PELOSI: Mr. President, free our oil from the Strategic Petroleum Reserve.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: You just heard a little bit of my interview with the House speaker, Nancy Pelosi. During this interview, you'll hear viewers like you question the House speaker. They sent in their questions via our CNN iReports.

In our conversation today, Pelosi says the issue of offshore drilling will not -- repeat, not -- come up for a vote on the House floor. Advocates of that drilling say it could help lower gas prices and help break America's foreign oil addiction.

So, who is to blame for the nation's current energy crisis?

(BEGIN VIDEOTAPE)

BLITZER: Madam Speaker, thanks very much for joining us.

PELOSI: My pleasure.

BLITZER: Back when you wanted to be in the majority, you issued a press release on April 24, 2006. At that time, the price for a gallon was $2.91.

Among other things, you said then, "Democrats have a commonsense plan to help bring down skyrocketing gas prices by cracking down on price gouging, rolling back the billions of dollars in taxpayer subsidies, tax breaks and royalty relief given to big oil and gas companies, and increasing production of alternative fuels."

That was then. You've been in power now as the majority for more than a year and a half. The price of a gallon of gas is more than $4. In some parts of the country, including in your area, closer to $5 a gallon. And there's no relief in sight.

What are you doing to fix this? Because a lot of people are disappointed in the record so far.

PELOSI: Well, we have passed in the House of Representatives every one of those initiatives. They've run into a brick wall with the Republicans in the United States Senate and with the president of the United States. But in passing our energy bill, we were able to achieve with public support and outcry...

BLITZER: So it's all the fault of the Senate?

PELOSI: Yes, absolutely.

BLITZER: As simple as that?

PELOSI: Every single one of these bills passed the Congress of the United States. The price of oil is at the doorstep. Four dollars-plus per gallon per oil is attributed to oilmen in the White House and their protectors in the United States Senate.

Make no mistake, all of these initiatives have passed. We get to the Senate, 59 votes on the -- repealing the subsidies, 59 votes on renewable electricity standards, 59 votes...

BLITZER: And in the Senate they need 60 to break a filibuster.

PELOSI: Thank you for calling that to everyone's attention. You need 60 in order to have a bill even brought up.

But these are the things that we have to do. We have to protect the consumer and we have to increase domestic production. And that means not only in oil and gas, but also into renewable energy. BLITZER: There are a lot of people out there, including plenty of Democrats, who say one of the most important things to do right now is to resume offshore drilling off the coast of California, Florida, elsewhere around the United States. Take a look at this poll that CNN/Opinion Research Corporation recently did.

"Do you favor offshore drilling?" Seventy-three percent said yes. "Do you oppose offshore drilling?" Only 27 percent.

You're among the 27 percent. What's wrong with letting the oil companies go ahead and develop those offshore oil drilling opportunities?

PELOSI: Well, there are 33 million acres offshore that all of these companies have the opportunity. These are for lease, and many of them with the environmental approvals to go forward.

That's why in the House on Thursday, today, we have the drill bill. Drill responsibly in leased lands. This does not mean go into protected, environmentally-protected areas and drill.

The impression that the White House would give you is that if you could drill in these protected areas, the price of gasoline will come down. Even the president, in his press conference the other day, acknowledged that that was not the case.

BLITZER: There's a huge potential for domestic oil production that would reduce our dependence on foreign imports.

PELOSI: Absolutely. Yes. There are 68 million acres in the lower 48, that's why we're saying the drill bill.

All of these people are saying drill in the protected areas. We're saying you have 68 million acres right here in the lower 48, as we say, and many more millions of acres in the -- in Alaska.

BLITZER: But the oil companies say the opportunities offshore are much better, much more robust, the potential is greater there than it is in the lower 48.

PELOSI: Thirty-three million acres offshore are allowed for leasing. And we're saying to them, use it or lose it. You have the opportunity to drill there.

When you have exhausted those remedies, then you can talk about something else. But let's be clear about this. It will take at least 10 years from any of that oil to get to the pump. And at that point it will save about 2 cents on the gallon.

What we're saying is, Mr. President, free our oil from the Strategic Petroleum Reserve. There are over 700 million barrels of oil in the Strategic...

BLITZER: That's supposed to be used for dire emergencies.

PELOSI: Yes, and we are in one -- 97.5 full the SPRO is. A larger supply than ever there. And we're saying let's take 10 percent of that, which has been paid for by the American taxpayer, and use that to put on the market so that we increase supply, reduce price. And when the price comes down, we can buy back the oil at a lower price, put it in the SPRO, use the spread for renewable energy resources.

BLITZER: John Boehner, who's the Republican leader in the House, he says you have to let this come up for a vote. He says that you're walking your blue dogs, who are the moderate and conservative Democrats, and other vulnerable Democrats off a cliff by not allowing this to come up for a vote, the offshore oil drilling legislation.

PELOSI: Is that right? Well, you know, just because John Boehner, who is my friend and whom I respect, says it, doesn't make it so.

The fact is, 68 million acres in the lower 48, many millions of acres more in Canada -- excuse me, in Alaska. We're saying to the petroleum companies and to the federal government, instead of talking about the ANWR, which is a protected area...

BLITZER: That's the Alaska National Wildlife Refuge.

PELOSI: Thank you for...

BLITZER: But you oppose drilling there.

PELOSI: I oppose drilling there, but near there, west of there, and in a bigger supply, billions of gallons of oil -- billions of barrels of oil is the National Petroleum Reserve, Alaska. And we're saying drill there. Drill there. You have no reason to say you want to drill in an environmentally sensitive area, and so you have drilled every place else that you can drill.

BLITZER: Are you afraid if this comes up for a vote in the House you will lose, given the support for offshore oil drilling among these so-called blue dogs, or moderate Democrats, who will join with Republicans?

PELOSI: Afraid is not a word that is in my vocabulary.

BLITZER: Will you let it come up for a vote?

PELOSI: You know, I mean, the point is, is we are putting forth the alternatives that we need to put forth, and that is, drill, use it or lose it. And in that bill, we're saying, and you're not allowed to export any of this oil to China, Japan or any other countries. We're saying build the pipeline from Alaska down.

Let's put this in a perspective for a moment, Wolf, because I think it's important to note what this is about.

We have had seven and a half years of failed energy policy by the Bush administration. We have a faltering, downturning economy. The president needs a decoy, so he's going out there -- he's even had the nerve to say the economy would be better off if we could drill in protected areas offshore.

He even again had to pull back on his statement that drilling in these protected areas would bring down the price at the pump. What brings down the price at the pump in 10 days would be to release oil from the SPRO, the Strategic Petroleum Reserve. What takes 10 years is drilling anyplace.

BLITZER: So let me get -- will you allow this issue, offshore oil drilling, to come up for a vote on the floor of the House?

PELOSI: We're going to exhaust our other remedies in terms of increasing supply in America by...

BLITZER: So the answer is no?

PELOSI: I have no plans to do so.

(END VIDEOTAPE)

BLITZER: And there's much more of my interview coming up with the Speaker of the House, Nancy Pelosi. Among other things, we'll talk about President Bush. She has some very harsh words about him and how she explains the really low approval ratings that Congress is getting right now. That's coming up after a short break.

And it looks like there could be a major change in U.S. policy toward Iran. There are reports right now, the Bush administration is considering setting up a diplomatic mission in the Iranian capital. Why the sudden turnaround? And what the White House might be planning.

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

(COMMERCIAL BREAK)

BLITZER: You just heard the House speaker blame high gas prices in part on the U.S. Senate and what she called the two oilmen in the White House. And she issued this message to President Bush -- I'm quoting now -- "Free our oil" regarding the release of the oil from the Strategic Petroleum Reserve.

Now let's get more of my interview with the House speaker, Nancy Pelosi, and what she thinks about Congress' rather low approval rating.

(BEGIN VIDEOTAPE)

BLITZER: Let's talk about Congress right now. The latest Gallup tracking poll numbers when asked, "Do you approve or disapprove of the way Congress is handling its job?" Fourteen percent. And that's a record low in these Gallup numbers going back almost 30 years. Fourteen percent approve of the job Congress is doing, 75 percent disapprove.

That's even worse than the numbers for President Bush right now. PELOSI: Well, let me say this: I think that is largely because we have not ended the war. Everything I see says this is about ending the war.

I disapprove of Congress' performance in terms of ending the war. We in the House, of course, have over and over, five or six times, sent to the Senate legislation for a time certain to reduce our deployment in Iraq and bring our troops home safely, honorably and soon. We haven't been able to get it past the Senate or the president of the United States.

So on the basis of that, count me among the 70-some percent. But that is one measure.

The other measure that I'm more interested in is the one that talks about, what is their view of Democrats? And the generic, who do you prefer to run the country on all of these issues?

We're in double digits in any poll that you can take. In fact, more like 15 percent most of the time -- health, the environment, the economy, the economy, the economy.

So those are the numbers that I watch. I hope that we can lift Congress, and I'm sure we will when we have a new president who is willing to work with Congress to end this engagement in Iraq.

BLITZER: And you say either Obama or McCain, a new president, you expect to be able to work better with the new president as opposed to the current president?

PELOSI: Well, I'm counting on it being President Barack Obama who is committed to a redeployment of our troops in a safe, honorable and responsible way out of Iraq.

BLITZER: Here's what President Bush said on Tuesday about your leadership, not just you personally, but the Democrats' leadership in Congress.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There are just 26 legislative days left before the end of the fiscal year. This means that to get their fundamental job done, Congress would have to pass a spending bill nearly every other day. This is not a record to be proud of. And I think the American people deserve better.

(END VIDEO CLIP)

BLITZER: Do you want to respond to the president?

PELOSI: Well, you know, God bless him, bless his heart, the president of the United States, a total failure, losing all credibility with the American people on the economy, on the war, on energy, you name the subject. And for him to be challenging Congress when we are trying to sweep up after his mess over and over and over again, at the end of the day, Congress will have passed -- honored its responsibility to pass legislation starting with our Department of Defense bill.

The president knows it. He needs something to talk about because he has no ideas.

BLITZER: You worked very cooperatively with him on the first economic stimulus package which passed very, very quickly.

PELOSI: Yes.

BLITZER: He's open, he says, to a second economic stimulus package, although others in the administration seem skeptical that it would do much good right now. You're pushing hard for one. How much money do you want in a second economic stimulus package?

PELOSI: I would hope that we could have about a $50 billion -- there are others who want more -- but I think in these stimulus packages, you have to look at what helps stimulate the economy without spending more money than you should, because you weight the economy down by going deeper into debt. So you have to make that calibration.

BLITZER: But that $50 billion would come from going further into debt, right?

PELOSI: But if it stimulates the economy, that is its purpose. And there is also a countercyclical going against a downturn in the economy opportunity -- in fact, responsibility...

BLITZER: Do you believe that you have the votes in the House and then in the Senate and for the president to work together and get something like that done?

PELOSI: Yes, I think so. Well, we hope that the -- we have to have the president's signature.

Everybody has to remember, Congress can only do so much. We need the signature of the president of the United States.

Elections have serious ramifications, and that's why in November it's very important to elect a president and to elect Barack Obama president of the United States, because then we will go in a new direction, where the people's interests, not the special interests, are being served.

BLITZER: Madam Speaker, we invited viewers to send in their questions for you via our CNN iReports.

Jordan Klein of Los Angeles is a 16-year-old high school student, and has this question.

(BEGIN VIDEO CLIP)

JORDAN KLEIN, LOS ANGELES, CALIFORNIA: Dear Madam Speaker, if you're wondering why Congress' approval ratings are at a record low, look no further than your counterpart, Harry Reid, in the Senate Democrats. While you and the House Democrats have worked endlessly to challenge the Republicans, the Senate has repeatedly caved in to them on the countless issues like the war and FISA. Reid claims that he needs 60 votes to get anything done, but that excuse isn't going to fly.

My question to you is, how disappointed are you in Reid and the Senate, and what can we expect from them in the future?

Thank you.

(END VIDEO CLIP)

PELOSI: That's quite a question from a 16-year-old.

BLITZER: He's a smart kid.

PELOSI: He is indeed that.

Well, the 60 vote is -- I agree with him in that frustration with the 60 vote. The public doesn't want to hear about our process and why we can't get something done.

But it is a fact. And those 60 votes are hard to achieve, because the Republicans in the United States Senate are guarding the gate of the president of the United States. If they voted with us, and we put these issues on the president's desk, they would receive much more visibility the president's vetoes would be much more damaging to the Republican Party.

So, that's a part of what's at work. Senator Reid is a staunch, committed Democrat working for working families in America. He has to deal with the 60 vote. In the House, the power rests in the speaker, the power of recognition, of setting the agenda...

(CROSSTALK)

BLITZER: Very different rules.

PELOSI: Very different rules.

So -- but, you know, when we have a Democratic president, I think some of these Republicans in the Senate will no longer be guarding the gate, and we will have more bipartisanship there. But, in terms of the war, when people have spoken out so clearly in their opposition to it, it is a giant tragedy, because this is -- this war in Iraq is the worst national security blunder you could ever recognize in the history of our country.

BLITZER: All right. We're...

(CROSSTALK)

PELOSI: And the Republicans in the Senate have perpetuated this war on behalf of the president. We're there two years longer than we were in World War II.

BLITZER: We're going to talk a little bit more about that coming up. PELOSI: But I thank him for his question.

BLITZER: We have more I-Report questions coming up.

But, quickly, the last time we met in February, I asked you if you thought we were in a recession right now. You were reluctant to say the country's already in a recession.

Over the weekend, Senator Obama said this.

(BEGIN VIDEO CLIP)

OBAMA: I have little doubt that we have moved into recession at this point.

(END VIDEO CLIP)

PELOSI: The -- we are in a recession. The only reason it's not there, technically speaking, is because of the stimulus package that we passed in February. It has given a boost to the second quarter.

BLITZER: Has it done what you wanted it to do?

PELOSI: Well, it has done what we wanted it to do, but there are other things that should have happened, and the price of oil, the price of groceries, and price of groceries, cost and education and health care and all the rest, have offset what it would have done. It would have been worse without the stimulus, but I think we have given it enough chance to see its impact, which has been positive, but not enough to -- to help the American people.

So, we need some of the initiatives that the president didn't want to have first time around, like food stamps, assistance to the states in terms of Medicaid, building infrastructure...

(CROSSTALK)

BLITZER: Increasing unemployment benefits, too?

PELOSI: We did that in the supplemental. And we will take a measure of that when -- as we get toward the end of those.

BLITZER: All right.

(END VIDEOTAPE)

BLITZER: We're going to have more of my exclusive interview with Nancy Pelosi, more of your I-Report questions for her as well. That's coming up later in THE SITUATION ROOM.

But, happening now: There seems to be a major shift in U.S. foreign policy. As the United States sends an envoy to join nuclear talks with Iran, does the White House also have a plan to set up a diplomatic post in Tehran?

And thawing relations between Bill Clinton and Barack Obama -- after a bruising Democratic primary, the former president now stepping back into the spotlight. We will tell you how he plans to help the Barack Obama campaign.

And bracing for record electric bills. The high cost of fuel isn't just hitting people at the pump -- why experts say Americans could see some widespread power outages or brownouts very soon.

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

(COMMERCIAL BREAK)

BLITZER: Barack Obama's vowing to challenge John McCain in his own backyard in states that traditionally have been strong political wins.

Let's go to our senior political analyst, Bill Schneider. He is working the story for us.

So, is the Obama campaign on to something different right now, Bill?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: It sure is, Wolf. They're running ads in the red states.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): The Obama campaign is doing something unprecedented.

EVAN TRACY, CHIEF OPERATING OFFICER, CAMPAIGN MEDIA ANALYSIS GROUP: Obama's buying right now in over 20 states. And these states include states like North Carolina, Georgia, North Dakota, Montana, states that you just don't talk about Democratic presidential candidates targeting.

SCHNEIDER: The Obama campaign has spent at least $1 million so far on TV ads in Georgia, Indiana, and Virginia. The McCain campaign? Nothing in Georgia, nothing in Indiana, less than $1 million in Virginia.

Does Obama really expect to carry those states? Well, maybe. A Republican administration that's this unpopular creates opportunities for Democrats everywhere. But there's another reason: money. Obama's fund-raising is far outpacing McCain's.

In June, Obama raised $52 million, McCain $22 million. McCain is accepting public funding for the general election, which means, after the Republican Convention in September, McCain's spending will be limited. For the Obama campaign, the sky's the limit.

TRACY: If he can make these states competitive and John McCain has to spend money or time in places like North Carolina, Georgia, Montana, North Dakota after the Republican Convention, that's time and money he can't spend in the must-win battleground states, like Ohio, Pennsylvania and Michigan. SCHNEIDER: Right now, McCain has slightly more cash on hand than Obama because of Republican Party money. McCain is outspending Obama in the traditional battleground states, like Ohio, Michigan and Pennsylvania. McCain wants to keep the playing field as small as possible.

MARK PRESTON, CNN POLITICAL EDITOR: When the playing field is smaller, John McCain will only -- John McCain will be able to not match, but at least compete vigorously with Barack Obama in just a few states that might determine the election.

(END VIDEOTAPE)

SCHNEIDER: So far, McCain is not taking the bait. He's not running defensive ads in those red states. But, if Obama succeeds in pulling ahead in some of those states, McCain may have to start spending his money there -- Wolf.

BLITZER: Money, it's a big part of this whole process.

Bill Schneider working the story.

Let's go to Carol Costello. She's monitoring some other important stories incoming to THE SITUATION ROOM right now.

What is going on, Carol?

CAROL COSTELLO, CNN CORRESPONDENT: Well, Wolf, the nation said goodbye to a friend today and a CNN contributor.

President Bush spoke at Tony Snow's funeral, saying, the life of his former press secretary was far too brief. The pews at the Basilica of the National Shrine here in Washington were filled with White House advisers, correspondents, former colleagues, and family members. Tony Snow died Saturday of colon cancer. He was just 53. He leaves behind a wife and three children.

Immediately following that service, President Bush boarded Air Force One for California. Mr. Bush will be seeing the Northern California fires firsthand, and then taking an aerial tour with Governor Arnold Schwarzenegger. The fires have scorched hundreds of square miles and stretched firefighting resources.

The District of Columbia has begun registering handguns this morning, the first day for registration since the Supreme Court overruled D.C.'s gun ban. The plaintiff in the court challenge was one of the first in line. But published reports say D.C. denied him, Dick Heller, of registering his handgun due to technicalities in the registration process. So, I guess his fight goes on.

A new Harvard report says tobacco companies adjusted menthol levels to appeal to younger or older smokers. The study shows that lower levels were used for younger smokers. And then, when smokers got accustomed to menthol, the companies increased menthol amounts to lock in lifelong adult smokers.

Philip Morris, the largest cigarette maker, said the study's conclusions are unsupported by facts.

That's a look at the headlines right now, Wolf.

BLITZER: But the important thing is, don't even start smoking, and you will be much better off.

COSTELLO: Absolutely true.

BLITZER: Thanks, Carol. Thanks very much.

Right now, here in Washington, the Republicans and Democrats are getting ready to do battle, not on Capitol Hill, but on a baseball diamond. And Democrats hope to change history. We will explain.

Al Gore says something about the environment that might box Barack Obama in, should he become president.

And, when it comes to the so-called dream ticket of Barack Obama and Hillary Clinton, Nancy Pelosi, in our exclusive interview, is explaining why she thinks that's not going to happen.

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

(COMMERCIAL BREAK)

BLITZER: Here's today's Political Ticker right now.

And people on part of both of the presidential campaigns, do they need to brush up on their history? You remember John McCain talked about Czechoslovakia in some recent comments. Now Democratic former Senator Sam Nunn has done the same thing. Nunn is often mentioned, by the way, as a possible running mate for Barack Obama. Both he and McCain mentioned Czechoslovakia, which has not, of course, existed since 1993. It's now split between the Czech Republic and Slovakia.

You may not know it, but Barack Obama is running for something on the treadmill and on the basketball court. Senator Obama exercises regularly. This morning and yesterday, he worked out with a friend at his gym. Obama also frequently plays basketball. Now reporters are half-jokingly asking the campaign if Barack Obama is using the gym to meet secretly with potential vice presidential candidates.

And tonight, here in Washington, the pursuit of glory and the chance to change history -- the Democrats and the Republicans are about to do battle on the baseball field. It's an -- it's an annual game for congressional teams. Democrats have never won the series since President Bush took office.

But, tonight, they unveil their new secret weapon. That would be Congresswoman Linda Sanchez of California. She will start as the designated hitter, apparently, the first time a Democratic woman has done that.

Remember, for the latest political news any time, you can check out CNN.com/situationroom. That's also where you can download our new political screen saver and read our daily blog as well. In our "Strategy Session": former Vice President Al Gore's bold challenge today for America.

(BEGIN VIDEO CLIP)

AL GORE, FORMER VICE PRESIDENT OF THE UNITED STATES: Today, I challenge our nation to commit to producing 100 percent of our electricity from renewable energy and truly clean carbon-free sources within 10 years.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

BLITZER: But has he put Barack Obama in a renewable energy lockbox?

And John McCain highlights Senator Obama's position on abortion. Why now? James Carville and Alex Castellanos are both standing by for our "Strategy Session" -- here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Al Gore's ambitious goal for the next president, convert to 100 percent clean energy in 10 years.

Let's discuss that and more with our Democratic strategist, the CNN contributor James Carville, and Republican strategist Alex Castellanos.

What do you think? Is he sort of, Al Gore, putting Barack Obama in what some might call a lockbox by saying, 10 years, only clean energy?

JAMES CARVILLE, CNN POLITICAL ANALYST: Well, I think, no.

First of all, I think that Al Gore's completely consistent on this. He did the movie and everything else. And I suspect -- it would be nice if we could do that. But I think he's more setting a goal here.

And I think, if you line up Senator Obama's environmental policy against Senator McCain, he's going to do quite well. But that seems to be, I don't -- I'm not an energy guy -- I mean, a guy, but that seems pretty ambitious.

BLITZER: He's very passionate, as you know, about this issue, Al Gore.

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: He is. He's also very politically correct.

And this is Al Gore's politically correct energy independence plan, that you can have any energy you want, as long as it's OK with him. Americans don't want politically correct energy. They want comprehensive energy reform from all sources. And, yes, I think he's putting Barack Obama in an energy lockbox here.

(CROSSTALK)

CARVILLE: I think he's politically correct. I think he's correct on the issue, that people want to move to clean and alternative...

(CROSSTALK)

CASTELLANOS: Everybody wants to do that.

(CROSSTALK)

BLITZER: Here's the question.

He was, by most accounts, a pretty good vice president for eight years. Would it be smart for Barack Obama to say, you know what, Al Gore would be a good running mate?

CARVILLE: I have always thought that. I suggested it on this show before. I think it would show a real commitment to the sort of whole question of energy use, energy independence. It would make a very, very serious case.

BLITZER: Smart move for -- do you think?

CARVILLE: He's rehabilitated himself, I think, quite a bit.

But, at the end of the day, the old Al Gore, the one who has -- who lost last time on his own, if he wants to give political advice to Barack Obama and help him with the ticket, maybe it will help Barack Obama just as much as it helped Al Gore.

BLITZER: He lost the election, but he did get half-a-million more votes in the popular count.

CARVILLE: Yes.

(CROSSTALK)

CASTELLANOS: I think it shows the weakness of the Democratic bench if they go to Al Gore.

CARVILLE: Right. I think -- I think Al Gore has been correct about more things in my life than anybody else. I'm not going to get in an argument about 2000. I happen to think that he won the election. I will leave it go at that.

But I think it would be move to show that there's real seriousness about approaching this energy issue, which I think is...

(CROSSTALK)

BLITZER: You heard the news from my interview with Nancy Pelosi, among other things, saying she's not going to let this offshore oil drilling even come up for a vote on the House of Representatives -- in the House of Representatives.

CASTELLANOS: America has more oil and gas than Saudi Arabia has energy. And we want to take what we have, our greatest asset, and sideline it, put it on a shelf. Over 70 percent of the American people don't want to do that. They want -- yes, everybody wants new energy sources. Of course we do. But why do you want to sideline our greatest energy resource? We want energy independence sooner, not later.

CARVILLE: I think, if they came up with a plan that involved alternative energy, that involved CAFE standards, where we got serious about conservation -- and this is what the Republicans and all companies want the most. I think that there's some bartering to do there.

And I think, if they do a comprehensive thing, it might not be a bad idea. It's going to be seven years before you get a drop of oil by anybody's estimate.

(CROSSTALK)

CASTELLANOS: But I think Pelosi -- Pelosi is putting the Democrats also in a little bit of a box. You know, if they become the -- the problem with -- the way to resolve $5-a-gallon gasoline is to have less American oil and gas? You know, we're going to have $10-a- gallon gasoline.

And that's going to hurt Democrats in November. All Republicans have to do is stand at the gas pump and say, thanks, Nancy Pelosi.

CARVILLE: It's simply because, in seven years, you will get your first drop of this.

(LAUGHTER)

CASTELLANOS: Seven years is going to come anyway. The question is, when it does come, are we going to have American energy?

(CROSSTALK)

BLITZER: There was something very interesting, different for John McCain. Even though he's got a longstanding, virtually perfect record as far as opposing abortion, he rarely raises the issue himself.

But, today, he did. And I want you to listen to what he had to say.

(BEGIN VIDEO CLIP)

MCCAIN: He voted against a ban on partial-birth abortions. My friends, that's a hideous procedure. It should never be allowed anyplace on Earth.

UNIDENTIFIED MALE: That's right.

(APPLAUSE)

MCCAIN: Now, that's a great difference, it's a great difference between -- between the two of us. And you can count on my active advocacy for the rights of the unborn.

(END VIDEO CLIP)

BLITZER: All right, James, what do you think?

CARVILLE: Well, first of all, to be fair to Senator Obama is that he supports a ban on partial-birth, but that has health-of-the- mother exception.

The Republicans -- Senator McCain doesn't support having birth control pills as part of health insurance, while he supports having Viagra as part of health insurance. He opposes equal pay. This is a consistent -- a consistent Bush/McCain view. And, so, Senator Obama does support the ban. He wants a health-of-the-mother exception.

BLITZER: Are you surprised he went -- went out of his way to raise this issue today?

CASTELLANOS: No, I don't think so, because Senator Obama, we actually don't know what he supports, because in the Senate in Illinois, there was a bill that says, you know, a child out of the womb who had, I think -- quote -- "a beating heart" should be protected.

Senator Obama first voted present, which was not a very courageous vote, and then he voted no. And that's not pro-choice or pro-life. That's just an extreme position. And, so, right now, like on a lot of other things, we just don't know where Barack Obama stands.

CARVILLE: Yes. We have talked about that before. The nurse that brought up this thing was actually fired from the hospital. There's a lot of controversy in that.

I think Senator Obama's been very clear that, with the health-of- the-mother exception, that he would support a ban on the so-called partial birth abortion.

BLITZER: All right. We will leave it -- we will leave it right there.

This is a major difference, the whole issue of abortion, between these two presidential candidates.

Guys, thanks for coming in.

CARVILLE: Thank you.

BLITZER: Stories we're working on here in THE SITUATION ROOM: We're going to bring you the first exclusive look at video that shows the kind of capability U.S. commanders are crying for in Afghanistan. And former President Bill Clinton says he's ready to campaign for Barack Obama, and he unveils a new effort to fight malaria around the world. Is this the new-look Bill Clinton?

Also, more of my exclusive interview with the House speaker, Nancy Pelosi. She blames President Bush for creating a new place for terrorists to recruit.

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

(COMMERCIAL BREAK)

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

CAFFERTY: The question this hour is, why does Congress continue to allow President Bush to get away with so much?

Michael in Texas writes: "You've got me. I have been screaming about this until I turned blue in the face. The mounds of evidence are all right there. The claims of executive privilege are B.S. The American people are screaming for impeachment, but I don't for the life of me understand why Pelosi won't let the gloves come off. If Bush is given a free pass, it sets the bar so low for future presidents, we might as well abolish Congress and give the president a crown."

Bill writes: "A combination of reality and politics. In reality, we have a Bush toady for an attorney general, an overload of conservatives in the Justice Department because of unfair hiring practices, and a conservative Republican-appointed Supreme Court there to uphold any unfair decisions. Politically, the Dems are about to win back the White House. There's no way they want to make waves right now. I think it's the right move. There will be plenty of time for accountability once John Edwards is President Obama's attorney general."

In Houston, Texas, Nuwan writes: "What you have in the Congress, regardless of their party, are not leaders. They are merely politicians. Politicians put their own self-interest before the country. That is why they are -- that's what they are, whether we like it or not. So why would we expect them to do anything different? We, the American people, lose every time we trust their election promises."

Ron in Arkansas writes: "I think Congress, much like the rest of us, in thinking by reelecting this bozo as our leader, we are as much to blame as anybody for his actions. The goal now is merely to keep him contained, hope he doesn't do any more damage until we can get rid of the -- get rid of him in the White House."

And Jim writes, "I bet the president is wondering the very same thing."

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. A little later, when we have some time, I have got a question for you about the Nancy Pelosi interview.

BLITZER: All right, I will look forward to it, Jack. Thank you.

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

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