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Stimulus Compromise; Bailout Backlash

Aired February 11, 2009 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: And the CEOs of big banks face some furious lawmakers and bailout backlash. They're confessing to mistakes and vowing to regain the public's trust -- all of that, plus the best political team on television.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

House and Senate negotiators struck a compromise on the economic rescue plan with lightning speed, and they solved the last-minute glitch quickly as well. The breaking news this hour, a new $789 billion deal is moving forward and getting closer and closer to landing on the president's desk.

Let's go to our senior congressional correspondent, Dana Bash. She's working the story for us.

Pretty exciting day up on Capitol Hill today, Dana.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Exciting, there's no question about that, and really unprecedented, the kind of money we're talking here. Hard to wrap your mind around $789 billion. But that's precisely what they are back on track to try to work out in the next couple of days.

It is really a fast track to get this done. And Democratic leaders came out here with those three crucial Republicans that they have on board in the Senate to make this happen. And they made very clear why they think this is necessary.

Listen to the Senate majority leader.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: This bill creates 3.5 million jobs. More than one-third of this bill is dedicated to providing tax relief for middle-class families, cutting taxes for 95 percent of American workers.

We all agreed we cannot shortchange our future, which is why we're giving states the critical help they need to strengthen education and invest in our communities.

(END VIDEO CLIP)

BASH: Now, there was a last-minute snag over an issue on education, how education money would be spent. But it appears, according to Democratic sources, that they have worked that out.

And just down the hall from me, Wolf, there is a meeting going on, where they're actually starting to literally put this together, the official meeting to try to write this legislation, again, to try to get this on the floor of the Senate and the House in the next couple of days.

BLITZER: Not easy, hundreds and hundreds of pages. Give us some of the details, what they compromised on.

BASH: Sure. Let's start with the biggies. And that is for jobless Americans, it is going to expand unemployment benefits, food stamps and health coverage as well.

There is a lot of money in here for the states to come up with their shortfalls, for example, $90 billion in increased federal money to help states with Medicaid, and, also -- this is the crux of this for -- especially for those Republicans -- infrastructure spending. You have heard a lot of terms like shovel-ready. Well, $150 billion or so is going to go directly for building roads and highways and things like that. So, that's on the spending side.

And I can also tell you, Wolf, that 35 percent of this is tax breaks, including President Obama's signature tax break to really -- at least it's supposed to go for middle-class Americans. They did pare that back a little bit, but it is still in here.

BLITZER: Thanks very much, Dana, for that.

Dana's working the story. We're going to get back to her.

But I want to go over to the White House right now. Our correspondent right now, Dan Lothian, is getting reaction from officials over there.

What are they saying, Dan?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, just as you come to me here, I'm getting an e-mail from the White House with reaction to what happened up on Capitol Hill today.

Here's the statement from the president, saying -- quote -- "I want to thank the Democrats and Republicans in Congress who came together around a hard-fought compromise that will save or create more than 3.5 million jobs and get our economy back on track. Just today, the CEO of Caterpillar said that if this American recovery and reinvestment plan is passed, his company would be able to rehire some of the employees they were forced to lay off. It's also a plan that will provide immediate tax relief to the families and businesses, while investing in priorities like health care, education, energy."

It goes on, Wolf, and we will be bringing that to you no doubt throughout this hour here. But that is the latest statement from the White House, reaction to what happened on Capitol Hill.

Now, while all of this was taking place today, the president was outside of Washington, just a few miles away in Springfield, Virginia. He was at a construction site. And he was really trying to show Americans how the money from the stimulus bill can be put to work quickly.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): Overdressed for a dusty, windy construction site, the president used this backdrop to make a visual point. This is where the stimulus plan meets the road.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: There's a lot of work that needs to be done on our nation's congested roads and highways, crumbling bridges and levees, and crowded trains and transit systems.

LOTHIAN: The president says, with money flowing from the stimulus bill, infrastructure projects in Virginia and other states will create millions of jobs.

GOV. TIM KAINE (D), VIRGINIA: Here on this project, we could add hundreds of on-site construction jobs.

LOTHIAN: Vice President Joe Biden was also on the road and on a bridge in Pennsylvania that's in need of repair.

JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: This is a significant move on the road to creating the 3.5 to four million jobs that we need.

LOTHIAN: And in a final push, the White House invited top transportation officials from nearly every state to Washington, leaders who say they can put stimulus money to work quickly.

WILL KEMPTON, CALIFORNIA DEPARTMENT OF TRANSPORTATION: Our nation's economy is burning down. We're the firefighters that are going to be asked to put that fire out.

LOTHIAN: Even as the White House was talking up infrastructure projects that will benefit from the stimulus bill, Press Secretary Robert Gibbs was facing tough questions about Tuesday's rollout of the bank bailout plan, a day that saw the stock market plunge by nearly 400 points.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The plan that was outlined was ready. Yesterday's speech and framework were not designed for a one-day market reaction.

(END VIDEOTAPE)

LOTHIAN: And Gibbs again was saying that what happened yesterday was really a snapshot in time, and that what they're doing is looking long term, what is good long term for the health of the economy for this country.

And, Wolf, I just wanted to again pick up on this statement that the White House just put on -- put out there, reaction to what happened up on Capitol Hill, the president saying -- quote -- "I'm grateful for the House Democrats for starting this process and for members in the House and Senate for moving it along with the urgency that this moment demands" -- Wolf.

BLITZER: Dan Lothian reading from his BlackBerry. What would we do without our BlackBerrys?

(LAUGHTER)

LOTHIAN: That's right.

BLITZER: All right. Thanks very much for that.

Treasury Secretary Timothy Geithner went before Congress today to defend plans to overhaul the bailout of the financial industry. Lawmakers told Geithner they expect the administration to ask for more money after it spends the remaining half of that $700 billion bailout. Geithner left the door open to that possibility, that he would have to come back and ask for more.

(BEGIN VIDEO CLIP)

TIMOTHY GEITHNER, U.S. TREASURY SECRETARY: Now, my judgment is, to get credit flowing again and to restore confidence in our markets, to restore the faith of the American people, we're going to have to fundamentally reshape the government's program to repair the financial system.

And I want to be candid. This is going to cost substantial resources. It's going to involve risk to the government. And it's going to take some time.

(END VIDEO CLIP)

BLITZER: Geithner says the administration will provide more information on its revised bailout program, including costs, as quickly as possible.

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

JACK CAFFERTY, CNN ANCHOR: All right, Wolf. It was on. Then it was off. Now it's on again.

At this moment, the stimulus package is a done deal. And as top Democrats and a select few Republicans work to get this compromise done, other lawmakers were saying this afternoon that the stimulus package amounts to little more than theft.

Democratic Senator Byron Dorgan points out it's more money than has ever been contemplated in the history of our country. It's a bit of a stretch, but he is proposing the government come up with a system to show how every penny is spent, adding that the real scandal is not knowing how the money is being managed -- quote -- "Letting the banks be run like casinos on their own account, is that theft? You're damn right it is" -- unquote. Then there is Republican Senator John "the fundamentals of the economy are strong" McCain, who is calling the bailout "generational theft." McCain says we're robbing future generations by laying such astronomical debt on their shoulders. That in addition to the TARP bailout, which McCain voted for, and the hundreds of billions of dollars that McCain supported spending to prosecute the war in Iraq. All that debt goes on those kids' shoulders, too. But it's this bailout package that he's upset about.

Anyway, these critics are right. The numbers are staggering, the president's package more than $800 billion, on top of the $700 billion TARP bailout plan under Bush. Tack on trillions of dollars the government has promised in loans and potential spending to loosen up the credit markets.

But here's the catch. Many of the brightest economic minds suggest the risk of doing nothing is more costly than this mind- boggling price tag.

So, here's the question: Do you agree with lawmakers who say the stimulus plan is theft? Go to CNN.com/caffertyfile. You can post a comment on my blog.

A little disingenuous of Senator McCain to be arguing about generational theft in light of his support of both the war in Iraq and the TARP bailout, I think.

BLITZER: I know you do.

Jack, thank you. See you in a few moments.

It's your money from your taxes. Some lawmakers demand banks put more of it in your hands.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Start loaning the money that we gave you. Get it on the street. And don't say, oh, well, we're not using that money for bonuses. Come on.

(END VIDEO CLIP)

BLITZER: Some bank CEOs face very angry words from inside and outside Capitol Hill. Wait until you hear them explain how they're helping you.

Also, they were convicted of crimes and now say what's happening to them should be criminal. Prisoners fighting disease and disgust in packed California prisons, should some of them be set free immediately?

And, attention, President Obama. Although Iran's president may denounce the U.S., everyday Iranians want you to know how they feel. We're going to Tehran.

Stay with us. You're in THE SITUATION ROOM. (COMMERCIAL BREAK)

BLITZER: They're likely responsible for your home loan, your credit cards, other financial products. So, what exactly are they doing to help you?

That's one grilling the CEOs from eight top banks faced from lawmakers earlier today, and they're forced to respond to the very angry words that are being hurled against them.

Let's go to our congressional correspondent Brianna Keilar. She was listening and watching all day.

What happened, Brianna?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Wolf, this was actually an act of contrition on the part of these CEOs. Yes, they defended themselves a little bit, but they spent a lot of time listening, as members of Congress vented.

(BEGIN VIDEOTAPE)

KEILAR (voice-over): Outside, angry protesters, inside, angry lawmakers...

UNIDENTIFIED MALE: None of us. America doesn't trust you anymore.

KEILAR: ... fed up with the CEOs of Wall Street's biggest banks, banks that received billions in taxpayer dollars, like Vikram Pandit, Citigroup, $45 billion, John Stumpf, Wells Fargo, Lloyd Blankfein, Goldman Sachs, $25 billion each.

And, still, credit is frozen, amid reports some of these banks spent big bucks on executive pay and corporate perks, like Citigroup's purchase of a $50 million foreign-made corporate jet.

VIKRAM PANDIT, CEO, CITIGROUP: We did not adjust quickly enough to this new world. And I take personal responsibility for that mistake. In the end, I canceled delivery. I get the new reality, and I will make sure Citi gets it as well.

KEILAR: A pledge to lawmakers, like committee chairman Barney Frank, still working to convince Americans of this new reality.

REP. BARNEY FRANK (D-MA), FINANCIAL SERVICES COMMITTEE CHAIRMAN: In an effort to get the credit system functioning, things will be done that will be to the benefit of the institutions over which you preside, because there is no alternative. But you need to understand, as I think many of you do, how angry that makes people.

KEILAR: The eight CEOs tried to quell the outrage, calling some of it justified.

UNIDENTIFIED MALE: From Morgan Stanley's point of view, you know, if you go back and play the clock over again, you definitely would do it differently.

KEILAR: It wasn't enough.

REP. GARY ACKERMAN (D), NEW YORK: We listen to you, and we hear words, words, words, and no answer. It seems to me and -- and to some of us that this money hasn't reached the street, that you are not loaning it out.

(END VIDEOTAPE)

KEILAR: These CEOs insist they are lending money, and lending more money than they would without the bailout funds -- Wolf.

BLITZER: Brianna Keilar, up on the Hill, thank you.

Meanwhile, there's outrage in California, where a federal court order could soon force the state to release as many as 57,000 prisoners.

CNN's Ted Rowlands explains why.

(BEGIN VIDEOTAPE)

TED ROWLANDS, CNN CORRESPONDENT: We're inside San Quentin Prison. And, as you can see, this is an old gymnasium which has been converted to house about 300 inmates here. A lot of states have problems with overcrowding. But a federal ruling has decided that California's problems are so bad, they may have to release thousands of inmates.

IVAN WATSON, INMATE: This is my bed right here.

ROWLANDS (voice-over): Ivan Watson is one of about 300 inmates living in the gym at San Quentin Prison, instead of a cell.

WATSON: No human being is really supposed to be living in a gymnasium. They have a lot of like diseases going around, staph infections. And you get sick real easy. It's not very sanitary.

ROWLANDS: Right now, there are about 155,000 inmates in California's 33 prisons, nearly double the amount they were meant to hold. A tentative three-judge federal court ruling says the system is so bloated, the level of health care is unacceptable.

The panel says the only way to fix the problem is to release between 37,000 and 57,000 prisoners.

MICHAEL BIEN, ATTORNEY: It's a significant moment of hope for California prisoners who have been deprived of their basic constitutional rights for adequate medical and mental health care for too many years.

ROWLANDS (on camera): Following the ruling, the state of California came out swinging, saying they will take this case all the way to the Supreme Court before they release anybody. MATTHEW CATE, CALIFORNIA CORRECTIONS AND REHABILITATION DEPARTMENT: The case isn't about overcrowding. The case is about providing constitutional care to our inmates at any level of overcrowding. If we can provide constitutional care, then the state of California has a right to keep these inmates in prison. And it's our position we're providing that level of care now.

ROWLANDS (voice-over): San Quentin inmate Mark Mallard disagrees.

MARK MALLARD, INMATE: I have never had staph in my life, and all of a sudden I come here and I get staph right here.

ROWLANDS: At this point, there's no timetable. If the ruling stands, it would still be likely years before prisoners would actually be released. Another potential solution, according to the court ruling, build more prisons.

Ted Rowlands, CNN, San Quentin.

(END VIDEOTAPE)

BLITZER: President Obama said he is open to speaking with Iran. Now some everyday Iranians are speaking to him.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: There are no Iranian troops anywhere near the United States. And Iran poses no threat to the country. How would the United States feel if it was otherwise and that large numbers of Iranian troops were stationed anywhere near American borders?

(END VIDEO CLIP)

BLITZER: We're sampling opinion inside Iran, getting greetings for the president from the streets of Tehran. We will go there.

Plus, Republican Arlen Specter went to bat for the president's stimulus plan, but could he strike out right now with his own party?

And President Obama's already looking ahead to signing the rescue package. You will hear what he had to say today. That's coming up, in his own words, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The day after Israelis went to the polls, the leaders of Israel's two largest parties are locked in a virtual tie, each claiming a mandate to govern.

Moderate Tzipi Livni is on track to win 28 seats in the Knesset, Israel's parliament, one more than conservatives Benjamin Netanyahu. But Netanyahu might find it easier to put together a ruling coalition, since some of the right-wing parties would hold a parliamentary majority. Israel's president, Shimon Peres, will give one of those two a chance to form a government. The process could take weeks, weeks to play out.

President Obama has said he's open to speaking with Iran. Now some everyday Iranians are speaking directly to the president.

CNN's Reza Sayah is in Tehran -- Reza.

(BEGIN VIDEOTAPE)

REZA SAYAH, CNN CORRESPONDENT: Wolf, this week, Iran marked the 30-year anniversary of the Islamic Revolution. For those three decades, Tehran and Washington haven't spoken with one another. But President Barack Obama says he wants to try diplomacy. He says he wants to listen to Iran. So, we found some Iranians who would like President Obama to know who they are, what they think and what they want.

(voice-over): A professor.

UNIDENTIFIED MALE: Hello, Mr. President.

SAYAH: An economist.

UNIDENTIFIED MALE: Hello, Mr. President.

SAYAH: And some everyday Iranians.

UNIDENTIFIED FEMALE: Hello, Mr. Obama.

UNIDENTIFIED FEMALE: Hello, Mr. Obama.

UNIDENTIFIED MALE: Hello, Mr. Obama.

SAYAH (on camera): First off, Mr. President, we find Iranians are a little tired of the name-calling, the axis of evil, the terrorist nation.

UNIDENTIFIED FEMALE: It really makes me sad, because we are not terrorists.

UNIDENTIFIED MALE: We deserve more than that.

UNIDENTIFIED FEMALE: We want to be friends with all the people in the world.

SAYAH: Iranians also say you're not going to improve things with heavy-handed messages. They say economic sanctions haven't worked and U.S. military force in the region has only made things worse.

UNIDENTIFIED MALE: Sanctions, threats, economic sanctions, and then incentives, the sticks and carrots, it's very insulting.

UNIDENTIFIED FEMALE: The war of Iraq, the Afghanistan, the poor people, the killing, I think it's not good. UNIDENTIFIED MALE: There are no Iranian troops anywhere near the United States. And Iran poses no threat to the country. How would the United States feel if it was otherwise, and that large numbers of Iranian troops were stationed anywhere near American borders?

SAYAH: And then you have perhaps the biggest obstacle of them all, Iran's nuclear program. Many here say Iran has a right to a peaceful program, and the accusations coming from Washington are unfair.

UNIDENTIFIED MALE: Nobody talks, for example, in Washington about the Israeli nuclear warheads.

UNIDENTIFIED FEMALE: All the countries in the world have this right to have the nuclear energy.

UNIDENTIFIED MALE: There's no reason why the Iranian government, which is an independent government, should bow down to American pressure.

SAYAH: So, Mr. President, if you really want to engage Iran, it looks like you have to win over a lot of hearts and minds. But many here are excited about the possibilities.

UNIDENTIFIED MALE: I'm so happy that you have been elected as the president.

UNIDENTIFIED FEMALE: I hope we have good relations.

UNIDENTIFIED MALE: The best approach, to bring the nice American history, the culture of American history, the sincerity of the people into foreign policy.

SAYAH: Just a little taste of what Iranians want President Obama to know -- Wolf.

(END VIDEOTAPE)

BLITZER: Reza Sayah, in Tehran for us, thank you.

President Obama says, highway construction projects will help put America on the road to recovery.

(BEGIN VIDEO CLIP)

OBAMA: My plan contains the largest investment increase in our nation's infrastructure since President Eisenhower.

(END VIDEO CLIP)

BLITZER: All right, you are going to hear the president in his own words on where the stimulus money will go.

Plus, aid to states vs. tax cuts, which would give the economy a bigger, more immediate boost? We're digging deeper into the debate.

And the Las Vegas mayor accusing President Obama of saying something harmful and outrageous. He wants an apology.

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

(COMMERCIAL BREAK)

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

Happening now: Vice President Joe Biden is pitching the economic stimulus plan in Pennsylvania by focusing in on the hard numbers. He told officials today the package will be worth about $16 billion for that state.

Investigators in Massachusetts say Bernard Madoff's wife withdrew more than $15 million from a brokerage firm linked to the disgraced financier's New York company. The bulk of the money was reportedly taken out the day before her husband turned himself in on fraud charges.

And the president's choice to become the CIA director is a step closer to getting the job. Today, the Senate Intelligence Committee unanimously voted in favor of Leon Panetta's nomination -- all of this, plus the best political team on television.

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

Lawmakers say it will immediately help provide jobs and ease the recession. We're following the breaking news. House and Senate negotiators resolve a snag over the economic recovery bill and reach agreement, the price tag, $789 billion. Lawmakers hope they can send it to the president for his signature very soon, within the next few days.

And the president hopes to sign it. Listen to him earlier today in Virginia.

(BEGIN VIDEO CLIP)

OBAMA: We've passed a version of the American Recovery and Reinvestment Plan through the House. Yesterday, we passed a version through the Senate.

Now, we've got to get a final version to my desk so that I can sign it and so that here in Virginia and across the country, the people can use it.

In Virginia, the unemployment rate has surged to its highest level in more than a decade. And it might have been a lot worse, were it not for the leadership of Governor Tim Kaine and former governor, now senator, Mark Warner.

Unemployment claims have doubled in recent months compared to last year. Nationwide, we've lost 3.6 million jobs since this recession began, nearly 600,000 this past month alone.

These are the people I talked to Elkhart, Indiana, on Monday, which has lost jobs faster than anyplace else in America, with an unemployment rate of over 15 percent.

They are the people I met yesterday in Fort Myers, Florida, which has been among the places hardest hit by the foreclosure crisis.

These are the folks looking for work, and these are the folks who want to work.

At the same time, look around us. Look at this construction site right where we're standing. We're surrounded by unmet needs and unfinished business -- in our schools, in our roads, in the systems we employ to treat the sick and the energy we use to power our homes. And that's the core of my plan -- putting people to work doing the work that America needs done.

We're here today because there's a lot of work that needs to be done on our nation's congested roads and highways -- crumbling bridges and levees and crowded trains and transit systems. Because we know that with investment, we can create transportation and communication systems ready for the demands of the 21st century. And because we also know what happens when we fail to make those investments.

We've seen the consequences of a bridge collapse in Minneapolis. We've seen the consequences of levees failing in New Orleans. We see the consequences every day in ways that may be less drastic, but are nonetheless burdens on local communities and economies -- time with family lost because of longer daily commutes, roads held back by streets that can't handle new business, money wasted on fuel that's burned in worsening traffic. These are the problems that people of Northern Virginia understand acutely.

Governor Kaine understands it acutely. And your governor has worked valiantly to relieve these transportation pressures, while at the same time facing enormous budget pressures.

What's worse, now states are facing acute new responsibilities during this recession. Local governments are sealing -- seeing more people filing unemployment claims, signing up for Medicaid, requesting government services. And all the while, people are spending less, earning less and paying less in taxes.

So across the country, states need help. And with my plan, help is what they will get.

My plan contains the largest investment increase in our nation's infrastructure since President Eisenhower created the National Highway System half a century ago. We'll invest more than $100 billion and create nearly 400,000 jobs rebuilding our roads, our railways, our dangerously deficient dams, bridges and levees.

Here in Virginia, my plan will create or save almost 100,000 jobs -- doing work at sites just like this one. Where we're standing, that could mean hundreds of construction jobs. And the benefits of jobs we create directly will multiply across the economy. For example, this kind of infrastructure project requires heavy equipment. Caterpillar, which manufacturers the machines used in this project, has announced some 20,000 layoffs in the last few weeks. And today, the chairman and CEO of Caterpillar said that if the American Recovery and Reinvestment Plan passes, his company would be able to rehire some of those employees.

(END VIDEO CLIP)

BLITZER: And even as the president was speaking, making his pitch, there is a debate raging here in Washington -- indeed, across the county.

What's more effective in stimulating the economy?

Would it be more tax cuts or aid to these states?

We asked our national political correspondent, Jessica Yellin, to look into this. It's a sensitive issue, but very important.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: It really is, Wolf. And it's going to be at the heart of the argument you're going to hear over the next three days as members of Congress debate this stimulus deal.

Again, the question, which is the best way to jump-start the economy -- more tax cuts or more spending for states?

(BEGIN VIDEOTAPE)

YELLIN (voice-over): President Obama argues that money to states will help people who are losing their jobs now.

OBAMA: Local governments are seeing more people filing unemployment claims, signing up for Medicaid, requesting government services.

YELLIN: Maryland Governor Martin O'Malley knows this firsthand. His current budget calls for slashing at least 700 state jobs.

GOV. MARTIN O'MALLEY (D), MARYLAND: We're forced to cut aid to counties, cut aid to municipalities, lay off hundreds or thousands of workers at the state level and contribute to a rising unemployment rate.

YELLIN: He says more federal money will staunch the bleeding by letting him hire workers to resurface roads, refurbish bridges and train stations, prevent lay-offs at police departments or cuts to Medicare.

But not everyone agrees.

REP. JOHN CULBERSON (R), TEXAS: The fiscal conservatives in the House have laid out a thoughtful alternative based on tax cuts where you keep your money immediately to invest, spend, save as you wish.

YELLIN: Conservative economists believe business tax cuts better address the root causes of this crisis.

BILL BEACH, HERITAGE FOUNDATION: It echoes into states and it echoes into local economies and it operates immediately.

YELLIN: But experts disagree whether business tax cuts create new jobs and if they could do so quickly. But governors say they can't wait for help. Right now, 21 states have unemployment rates above 7 percent. Forty-two have budget shortfalls and by law, will have to make cuts to balance the books.

So Congress has decided on a spending mix -- some tax cuts, more aid to state. Members hope this will help in both the short and the long-term.

O'MALLEY: To do tax cuts alone, without getting the oars of the 50 states in the water to pull us through this recession is not going to have the desired effect.

(END VIDEOTAPE)

YELLIN: Now, in the deal Congress just cut, one third of the stimulus dollars goes to tax cuts, two-thirds to spending -- including money for states. Now, that's a compromise that's making partisans on both sides unhappy. But, Wolf, it is the compromise that they believe will get this bill passed.

BLITZER: And it's going to happen within the next few days. And we'll see what happens then.

Thanks very much, Jessica, for that report.

He broke party ranks to back President Obama's stimulus plan.

(BEGIN VIDEO CLIP)

SEN. ARLEN SPECTER (R-PA), JUDICIARY COMMITTEE: Well, I understand the peril. But I didn't run for the United States Senate to further my own political interests.

(END VIDEO CLIP)

BLITZER: The question now, what kind of fallout will Senator Arlen Specter face as he fights for re-election next year?

And how is President Obama handling the stimulus package -- two new and very opposing views.

We'll discuss all that and more with the best political team on television.

(COMMERCIAL BREAK)

BLITZER: Let's get right back to the best political team on television.

Joining us, our senior political analyst, Gloria Borger; CNN political contributor, Steve Hayes, of "The Weekly Standard" and our national political correspondent, Jessica Yellin. There were dueling op-eds in "The Washington Post" today. Ruth Marcus writing this: "To everyone out there despairing or rejoicing about the Obama administration's supposedly rocky start, settle down. It's actually going rather well."

Let's talk about that for a second.

Is it actually going rather well?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, if you look at the broad sweep of history, Wolf, it is. When you go back to President Bill Clinton, he had trouble getting a stimulus package passed six or seven months into his term.

BLITZER: He couldn't.

BORGER: And that was $16 billion. So fast forward to President Obama. He's about to get an $800 billion package passed. And some would argue he's had to step in as president before he was even inaugurated.

BLITZER: Kathleen Parker, the columnist, writes this, though: "The first however many days of Barack Obama's presidency have been a study of amateurism. Many suspected that Obama wasn't quite ready, but kept their fingers crossed. Optimistic disappointment is the new holding pattern."

Is she right?

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": I think that's right. I mean, even if he had his legislative success on this stimulus bill, look at what we've spent, you know, really the better of his first time in office speaking about it. We've been talking tax problems with his cabinet nominees. We've been talking about other bumps in the road that I think, collectively, make it look like a very rocky beginning.

BLITZER: Amateur hour?

That's a pretty tough phrase.

YELLIN: It's a little unfair. What he's had is a learning curve. And Obama set up such high expectations because he was known as this great communicator. His difficulty communicating these first two weeks he was in office about the stimulus made many very angry, especially House Democrats -- really angry with him. And that's a problem he's going to have to deal with going forward with these next legislative battles.

BLITZER: He's going to get the stimulus package.

BORGER: Right. Right.

BLITZER: On the other side, the money for the financial sector, there was a lot of disappointment in the way the Treasury secretary yesterday, Timothy Geithner, rolled that out. BORGER: Yes, there was. But the administration was clearly looking for a way not to have to go back to the well and ask Congress for more money. So what they've come up with is this Private-Public Partnership that's very complex. And what the Treasury secretary said is, look, we can't right this thing overnight.

But the markets reacted very badly.

That's a -- you know, that's a problem for them.

BLITZER: Was it a mistake for them not to be able to release the whole -- all of the details, because there were a lot of unanswered questions in that plan yesterday?

HAYES: Well, I think you had to release more than they did, certainly.

BORGER: Right.

HAYES: You had to give people some idea of a -- of what was coming, or at least a better idea of what was coming. And we saw that when you have people speak at some length without really saying much, you saw how the markets reacted.

YELLIN: Or at least wait.

BORGER: Or hold off.

YELLIN: I mean, what was the need to...

BORGER: That's the thing.

YELLIN: ...release not much -- an uncooked plan yesterday or...

HAYES: Right.

YELLIN: Why not wait and release a done deal?

BORGER: Exactly. Yes.

BLITZER: I guess the fear is a lot of these backers fear they're on the abyss, right -- the edge of the abyss right now. And they need help and they need it right away.

BORGER: You know, there is this sense in the new administration that trust us. We know what's best. We're the best and the brightest. We don't want any lobbyists in our government. They got hoist by that petard.

YELLIN: They did.

BORGER: We know what's best for Wall Street. So there's a little bit of a sense that...

BLITZER: But we said -- we heard the same thing from Henry Paulson, the Treasury secretary during the Bush administration. BORGER: Yes. Yes. Yes. But there is that sort of attitude that...

HAYES: But -- and that's also -- I think that's a very key point. I mean, if you're looking at the beginning of the Obama administration, you judge them based on what they told us coming in -- we are the best and the brightest. We will be the most ethical. We will communicate better. We will take -- we will be the most transparent.

Then I think it's a really rocky start.

BLITZER: How much trouble is Arlen Specter, the senator from Pennsylvania -- the senior senator, a Republican -- in, in terms of facing a Republican primary challenge -- he's up for re-election next year -- as a result of his joining the two Maine senators in supporting President Obama's plan?

BORGER: Well, it could really be a problem for him. There is some talk that he may not face as tough a primary challenge as we thought or any at all, because the person who was thinking of challenging him might decide to run for governor. So we don't really know.

If he doesn't face a problem from his right, then he's making a good decision to run to the middle, because he'll be -- he'll be challenged by Democrats.

BLITZER: Pennsylvania is a pretty a Democratic state.

BORGER: Sure.

HAYES: Yes. It's moving -- it's certainly turning bluer. But he will -- I would expect he will get a challenge from the right. I don't think, though...

BORGER: We don't know how strong.

HAYES: ...as a party, the Republicans are going to do anything. Republicans -- George W. Bush and the RNC supported Arlen Specter against Pat Toomey, a conservative with good credentials, last time around.

BLITZER: And he won, Arlen Specter...

HAYES: He did.

BLITZER: And then he got himself reelected.

Guys, thanks for coming in.

BORGER: Sure.

BLITZER: Lou is getting ready for his show that begins right at the top of the hour.

He's got a little preview.

What are you working on -- Lou?

LOU DOBBS, CNN ANCHOR: Wolf, thank you.

Coming up at 7:00 Eastern here on CNN, we'll have much more on the Democrats' last minute deal to ram that huge borrowing and spending legislation through Congress. Democrats agreeing with Democrats. But one Republican accusing the Democrats of making shady deals behind closed doors.

And guess what?

Transparency and openness taking a bit of a holiday today in Washington, D.C.

Also, lawmakers who are disgusted with Wall Street and the government's massive bailout today hammered the CEOs of eight banks on Capitol Hill. We'll have the story.

Were they being fair?

And the nationwide salmonella outbreak has claimed another life. And the peanut company owner at the center of this outbreak refuses now to testify in front of Congress.

We'll have that special report.

And we'll be examining some startling comments by Senator Chuck Schumer on pork. He says Americans don't care about what he calls tiny porky amendments.

Oh, really?

We'll be setting the good senator straight here tonight.

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

BLITZER: Lou, we'll see you in a few moments.

Thank you.

A mayor and fellow Democrat is demanding an apology from President Obama over this remark.

(BEGIN VIDEO CLIP)

OBAMA: You can't go take a trip to Las Vegas or go down to the Super Bowl on the taxpayers' dime.

(END VIDEO CLIP)

BLITZER: The mayor of Las Vegas calls that outrageous. He has a message for the president. Plus, Kellogg's dropped Mark -- Michael Phelps for smoking pot. Now growing calls for consumers to drop Kellogg's. We're following the situation online.

(COMMERCIAL BREAK)

BLITZER: The mayor of Las Vegas is sending a message to President Obama -- don't pick on my city. The dust-up coming after the president complained about corporate junkets to Vegas at taxpayer expense.

Brian Todd is working this story for us -- Brian, what happened?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, we all know the various reputations that Las Vegas has. Now, one that it's reeling from right now is the perception that it's the Mecca for the wasteful corporate junket. That is something that President Obama has hit on during the debate over the stimulus and he's getting some real brush back for it.

(BEGIN VIDEOTAPE)

TODD (voice-over): On its face, it seemed like the president was just stepping up again for us taxpayers -- hitting execs whose companies are taking the bailout money for those pricey corporate trips.

OBAMA: You can't go take a trip to Las Vegas or go down to the Super Bowl on the taxpayers' dime. There's got to be some accountability and some responsibility.

TODD: But a fellow Democrat who runs Las Vegas isn't buying in.

OSCAR GOODMAN (D), MAYOR OF LAS VEGAS: That's outrageous. And he -- he owes us an apology. He owes us an -- a retraction.

TODD: Mayor Oscar Goodman's town is reeling. Las Vegas reports a heavy drop-off in visitorship from last year, layoffs at casinos and one of the country's highest foreclosure rates.

Wells Fargo, Citibank and Goldman Sachs -- all of whom are getting TARP money -- recently pulled out of meetings in Las Vegas. And the mayor says they can't afford more cancellations.

GOODMAN: If they change their mind and go someplace else, if they cancel -- and at the suggestion of the president of the United States -- that's outrageous.

TODD: Mayor Goodman wrote a letter to the president and separately said he'd ask the entire Nevada congressional delegation to get Mr. Obama to "stop this kind of talk."

At least one member of that delegation, a Republican, sides with the mayor.

SEN. JOHN ENSIGN (R), NEVADA: Business meetings are a important -- are an important tool. Let's just make sure that we don't leave common sense off of the agenda.

TODD: So far, no formal response from the White House. But Senator Majority Leader Harry Reid, another member of that Nevada delegation, said White House Chief of Staff Rahm Emanuel clarified the president's remarks to him.

SEN. HARRY REID (D-NV), MAJORITY LEADER: President Obama's criticism was aimed at the potential use of taxpayers' funds for junkets. Now, we gave a lot of money to these banks. They shouldn't be taking junkets with any of that money.

(END VIDEOTAPE)

TODD: Still, what riles the mayor is the perception issue -- the assumption, he says, that all so-called incentive travel to Las Vegas is wasteful. He's asking the president to, in the future, refrain from calling out individual cities or destinations to make his point -- Wolf.

BLITZER: Well, he's making -- he's got a fair point, right?

TODD: He does.

BLITZER: OK. Thanks very much, Brian, for that.

Let's go out to Jack.

He's got "The Cafferty File" -- Jack.

CAFFERTY: Stop whining.

The...

(LAUGHTER)

CAFFERTY: The question this hour is, do you agree with lawmakers -- I mean Obama doesn't tell the guy how to run the City of Las Vegas, you know what I'm saying?

The question this hour is: Do you agree with lawmakers who say this $800 billion stimulus bill is theft?

Ray in Danville, Virginia: "Yes, it's theft -- theft from our children and grandchildren. Politicians in Washington only consider today's problems. They never consider the mess they're creating for the coming years. Paying the interest on the debt each year on all the borrowing they're doing will take trillions of dollars and the debt will never be paid. Next year, the interest payment on the $12 trillion debt they are approaching now will be $500 billion. And it'll grow every year."

Colleen in North Carolina: "I do believe it's theft and very obviously so. However, I don't have an alternative solution and something has to be done to stop the hemorrhaging of jobs and turn the economy around in general. No, I don't have an alternative plan and neither does John McCain" -- one of the critics. "So until he can be more productive and offer an option to stimulate the U.S. economy, he should be quiet, like me."

Al in Lawrence Kansas writes: "Doing nothing would be the real theft. The economic collapse is robbing people of their homes, their jobs, their retirement. These people calling it theft are the same people who caused this. They're the ones who stole our homes, our jobs and our savings. Giving them any credibility in this crisis is just plain dumb." Tony in Michigan says: "If there's no accountability or transparency, then it's theft -- much like the $700 billion TARP bill. If the government is spending money to honestly help American taxpayers then, no, it is not theft."

And Angela in Tacoma, Washington: "No. But I feel like I was robbed eight years ago and I just found out."

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

BLITZER: We shall do so.

See you tomorrow, Jack. Thank you.

After Kellogg's decided to drop Michael Phelps from cereal boxes following his run-in with marijuana, an online movement led by marijuana activists to boycott the company now growing.

Our Internet reporter, Abbi Tatton, is following this story -- Abbi.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, it's been a week since Kellogg's announced there would be no more of this on their cereal boxes. And since then, groups and sites like this one have been springing up online.

Marijuana legalization groups have been urging their members to call Kellogg's and protest the company on their discussion. On Facebook, 10,000 or more people -- members -- have been joining groups like this one. And on The Huffington Post, a petition has sprung up complaining: "Kellogg's has profited for decades from marijuana using Americans with the munchies."

We called Kellogg's today asking for a response to the boycott. They had no comment.

But take a listen to their phone line over the last few days. It sounds like they've been getting some calls.

(BEGIN AUDIO CLIP)

UNIDENTIFIED FEMALE: Thank you for calling the Kellogg Company. If you would like to share your comments regarding our relationship with Michael Phelps, please press one to speak to a representative.

(END AUDIO CLIP)

TATTON: That recording has been taken off the phone line now. Kellogg's said last week that Phelps' recent behavior was not consistent with their image -- Wolf.

BLITZER: Thank you, Abbi, for that.

America's new top dog -- a Sussex Spaniel named Stump.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT: Stump doesn't do steps?

SCOTT SOMMER, HANDLER/CO-OWNER: Yes, he can do the steps. I just thought I'd save him a trip.

(END VIDEO CLIP)

BLITZER: A really pampered pooch -- and for good reason. He made history over at the Westminster Dog Show.

We're going to tell you how.

(COMMERCIAL BREAK)

BLITZER: We've been waiting for this story. Making history over at the Westminster Dog Show -- a Sussex Spaniel named Stump did just that by becoming the oldest champion ever.

CNN's Jeanne Moos reports on his "Moost Unusual" victory.

(BEGIN VIDEOTAPE)

MOOS (voice-over): He sure doesn't look like a senior citizen Spaniel.

(on camera): He doesn't color his hair, does he?

SOMMER: Oh, no.

UNIDENTIFIED FEMALE: He has no gray hair.

UNIDENTIFIED FEMALE: He has no gray hair.

MOOS (voice-over): But winning Westminster...

(BEGIN VIDEO CLIP, COURTESY USA NETWORKS)

UNIDENTIFIED FEMALE: The Sussex.

MOOS: ...at the dog age of 10 -- around 70 in people years -- well, he deserves a lift up the stairs.

(on camera): Stump doesn't do steps?

SOMMER: Yes, he can do the steps. I just thought I'd save him a trip.

MOOS: Hey, an older guy should be allowed to nap during his media tour. (BEGIN VIDEO CLIP FROM "TODAY," COURTESY NBC)

UNIDENTIFIED FEMALE: And we're going to catch up with the champion. He should be awake.

UNIDENTIFIED MALE: You know what, stand him up a little bit so people can see him.

UNIDENTIFIED FEMALE: Come here, baby.

UNIDENTIFIED MALE: There. Has someone...

(END VIDEO CLIP)

MOOS: You stand up, I'm sitting down.

Clean his eyes, arrange his ears, wipe his mouth. There was interview after interview via satellite from the best in show brunch at Grand Central.

For a while, his name had us stumped.

(BEGIN VIDEO CLIP FROM "THE EARLY SHOW," COURTESY CBS)

UNIDENTIFIED MALE: Stump.

UNIDENTIFIED MALE: Stump.

(END VIDEO CLIP)

SOMMER: Because he's got little stumpy legs.

MOOS: Even the judge who rewarded Stump best in show didn't know how old he was.

SARI TIETJEN, WESTMINSTER JUDGE: I was floored when I found out afterwards.

MOOS (on camera): Really?

TIETJEN: Yes.

MOOS: Floored?

TIETJEN: Yes, floored.

MOOS: You can't tell when you -- like I can't tell. He feels silky. I was just touching him and he felt silky and nice. He felt young to me.

(voice-over): As young as all those other dogs at the brunch.

UNIDENTIFIED MALE: Here's a beautiful full-sized white Lab.

MOOS: The place was crawling with dog mannequin centerpieces -- tricky to talk through. (on camera): This one's beautiful.

UNIDENTIFIED MALE: This is a full-sized Greyhound and a Gray Wool.

MOOS (voice-over): But they weren't the ones eating celebratory steak in front of a pack of photographers. Stump's age prompted Dr. Ruth Westheimer to paraphrase the old adage...

DR. RUTH WESTHEIMER, PSYCHOSEXUAL THERAPIST: Old dogs can learn new tricks.

MOOS: She also showed Stump a copy of her latest book, "Dr. Ruth's Top 10 Secrets for Great Sex."

(on camera): Now, do you have any advice for the dog sex-wise?

WESTHEIMER: No. I'm not interested in bestiality.

MOOS (voice-over): With age come manners. Unlike his younger rivals, Stump didn't scratch when the judge was watching. Nor did he answer nature's call on national TV, like Sadie the Scottish Terrier.

(VIDEO CLIP)

MOOS: For a second, we thought we stumped Stump's co-owners with our last question.

(on camera): Does he do anything that seems like an older dog?

SOMMER: Not really.

UNIDENTIFIED FEMALE: He snores.

UNIDENTIFIED FEMALE: Yes, he snores.

MOOS (voice-over): And now talk show hosts are talking baby talk to an old man.

(BEGIN VIDEO CLIP FROM "THE EARLY SHOW," COURTESY CBS)

UNIDENTIFIED MALE: Hey, Stumpy.

UNIDENTIFIED MALE: Look at those ears.

UNIDENTIFIED MALE: (INAUDIBLE).

(END VIDEO CLIP)

MOOS: Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Congratulations, Stump.

We want to remind you, THE SITUATION ROOM is on now six days a week, Saturdays at 6:00 p.m. Eastern.

We'll see you tomorrow right here THE SITUATION ROOM.

I'm Wolf Blitzer reporting.

Up next, "LOU DOBBS TONIGHT" -- Lou.

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