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THE SITUATION ROOM

Shoppers Not Buying Economic Recovery; Democrats Feeling Health Care Heat; Air Crash Survival Secrets; Fringe Groups Push Protests; Sarah Palin's Facebook Post; Economy Front & Center

Aired August 13, 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: Americans don't seem to be -- to be buying the experts' claims that the recession is ending.

A day after the Federal Reserve sounded upbeat, we have some downright gloomy numbers to report. This was a surprise. Sales in stores fell in July. Economists had expected an increase after two straight months of gains. Even some cost-conscious Wal-Mart is -- is feeling the pinch. A key measure of its sales unexpectedly dropped that month. That's Wal-Mart. And the number of Americans filing first-time jobless claims jumped last month. Economists did not see this one coming either. They thought jobs claims would go down. Instead, they went up.

Let's bring in Poppy Harlow of CNNMoney.com.

Poppy, recovery, recession, what's going on here?

POPPY HARLOW, CNN CORRESPONDENT: Wolf, let's talk about that, because this is really a mixed picture that we're seeing from the reports that we got today.

Let's talk about weekly jobless claims. When you look at the number that came in, 558,000, that was worse than economists were expecting. And this really is hard news for people to swallow because it comes just about a week or so after we got a July job reports that was actually better than expected, that showed us that unemployment was actually falling.

Now, the job picture shows us that things might not really be getting better. And that is tough news for people to look at. However, on the flip side of that, some good news, Wolf, in the report that we got this morning from the government saying that those continuing unemployment claims are actually falling.

But that number still stands, Wolf, at 6.2 million. That's a high number, Wolf. That tells us the job picture is still very, very bleak in this country -- Wolf.

BLITZER: How do the retail numbers factor into all of this?

HARLOW: Yes, the retail numbers we got this morning, it really cuts to the heart of how consumers are feeling about the economy as a whole, because let's be honest, Wolf. Very few of us need all of the things or even most of the things that we buy. And people feel more confident in the economy, when they feel more confident, they are going to spend more. That was not the case clearly in July.

And in order for the economy to turn around, the consumer has to pick up spending again, because, Wolf, it is consumer spending that fuels 70 percent of all economic activity in this country. It's a huge, huge part of our GDP.

And, Wolf, as you said before, even Wal-Mart saw its sales fall last quarter. That's the first time that Wal-Mart has seen its sales decline in more than a year. So, the bottom line here, we are hearing the Fed talk about recovery. We may be seeing some signs of recovery. The American consumer, Wolf, they're just not feeling it.

BLITZER: A little hesitant. All right, thanks very much, Poppy.

Here is a boost, though, for the economy. Millions of dollars are being spent on TV commercials about health care reform. We have a new breakdown from CNN's consultant on ad spending. Check it out. Supporters of the president's plan are outspending opponents by more than 2-1, the pro-Obama camp spending almost $24 million, the anti- Obama camp spending about $9.5 million.

Another 424 million has been spent on ads by people who aren't necessarily advocating a specific plan. The grand total so far, more than $57 million. And that number is going to be going up and up and up.

And on top of all that, a new $12 million health care ad campaign is starting today. It's designed to support the president's reform efforts. It's paid for by an unusual coalition of medical, pharmaceutical, industry, and labor groups. It's targeting 12 states where there has been opposition to health care reform, including Arkansas. That's the home state of conservative Democrat Mike Ross. He's a Blue Dog, as they call him.

The congressman has been meeting with his constituents today.

Let's go to the scene. CNN's congressional correspondent, Brianna Keilar, is joining us.

Brianna, you have had a chance to speak to the congressman.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Yes, we spoke with Congressman Mike Ross. He has been getting a whole lot of attention as you know, Wolf, because he is one of those several Blue Dog Democrats who forced Democratic leaders to delay a full House vote on health care reform until after Congress returns in September.

Now, Congressman Ross says this has caused him to get heat from both sides, from all around, and he said that's convinced him that he is on the right path.

(BEGIN VIDEO CLIP)

REP. MIKE ROSS (D), ARKANSAS: I have got the extreme right saying that I caved on health care reform. I have got the extreme left saying that I got too much in the agreement and that I have watered down health care reform.

So, you know, it's rare that you get both the extreme right and extreme left mad at you all at the same time. And that tells me that maybe we have found the right balance here. You know, I believe that I'm in the middle. And I believe that's where the majority of the American people are.

(END VIDEO CLIP)

KEILAR: We stopped today on our way here in Hope, Arkansas. That's Congressman Mike Ross' hometown, also the hometown of former President Bill Clinton.

And we asked Ross' constituents what they thought. We spoke with a couple who are not in favor of this current health care reform effort. They call Ross a fence-sitter. We spoke with another man who is in favor of this reform effort. And he said that Congressman Ross is stuck between a rock and a hard place.

And certainly, Congressman Ross is going to be hearing all of these opinions tomorrow, Wolf. He has a town hall event. We are expecting hundreds of people to attend it.

BLITZER: All right, we will watch that together with you.

Brianna, just explain one thing. He is a congressman from Arkansas. But the event was taking place across the border in Texas?

KEILAR: Yes. We are in Texarkana. It straddles the border between Arkansas and Kansas. He was here at this hospital, CHRISTUS St. Michael, because about 40 percent of the patients who come here are from Arkansas and a lot of the employees here are also from Arkansas, Wolf.

BLITZER: All right. So, but you are in Texas, not in Kansas, right?

KEILAR: In Texas, two miles from Arkansas.

BLITZER: Texas. OK, good.

All right, thanks very much, Brianna. We will check with you.

If you are trying to e-mail your representative about health care reform, you might be having some trouble right now.

Our Internet reporter, Abbi Tatton, is joining us.

Abbi, what's going on?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, so many people have been trying to e-mail their member of Congress about health care this week that the system got overloaded.

This is the page on the House of Representatives Web site where you can do just that. Members of the public can contact their representative directly online. But there has been such a flood of traffic on this site this week with people wanting to make their voices heard about health care reform that House staffers on the Hill are being told that they might find this site now slow and unresponsive.

It isn't the first time this has happened. Earlier this year, House servers crashed. What people were sounding off about at that point was the economic stimulus package -- Wolf.

BLITZER: All right, thanks very much.

Let's move to the trenches now with U.S. Marines in Afghanistan. They are facing tougher-than-expected resistance from Taliban insurgents in the southern part of the country. Elsewhere, one American and three British troops were killed in explosions today.

The defense secretary, Robert Gates, says a new assessment from his commander in Afghanistan won't contain any recommendation for troop increases. The report is expected after an important milestone in Afghanistan, the August 20 presidential election.

(BEGIN VIDEO CLIP)

ROBERT GATES, U.S. SECRETARY OF DEFENSE: Due to some of the military operations that have taken place in the Helmand province and other places in the south, it looks like more Afghans will be able to vote than had been the case before the recent deployment of additional U.S. forces. And, obviously, that's an encouraging development.

In terms of the overall security situation in the country, my view -- and I believe the view of most of our military commanders -- is that we are looking at a mixed picture. In some parts of Afghanistan, the Taliban have clearly established a presence.

(END VIDEO CLIP)

BLITZER: The Afghan president, Hamid Karzai, says he is ordering his security forces to observe a cease-fire on Election Day. He's asking Taliban insurgents to hold their fire during next Thursday's vote.

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

JACK CAFFERTY, CNN ANCHOR: Wolf, a plan to send National Guard troops to the Mexican border is being held up as our government bickers over the cost.

President Obama called for a 1,500-troop contingent to go to the border and help stop violence from the Mexican drug cartels from spilling into the U.S. The temporary boost in troops estimated to cost about $225 million.

Yet, while the president was in Mexico this week, spouting empty rhetoric about the U.S. doing its part to secure the border and stem the flow of drugs and weapons and money, the program to put these National Guard troops on the border is mired in arguments about how to pay for it.

The Pentagon and Homeland Security Department are mostly hung up over the money, although there are also apparently issues about where the troops would be stationed -- How about where the drug cartels are active? -- and what they would do.

This is absurd. This country has done next to nothing meaningful about border security since 9/11. And, as we have been showing on CNN almost every day -- Michael Ware did some excellent reporting on this -- the Mexican drug cartels are becoming stronger and more violent and richer every day.

It is estimated drug violence has already killed 11,000 people. The U.S. border states are frustrated that they haven't gotten these extra troops they were promised, and rightfully so. And our government can't decide who is going to shell out the $225 million to pay for the program.

No one is going to believe anything we say anywhere in the world eventually if this kind of stuff just goes on and on and on.

Here is the question: How serious is the United States about national security if the plan to send National Guard troops to the Mexican border is being held up over money? Go to CNN.com/caffertyfile and post a comment on my blog -- Wolf.

BLITZER: Excellent question, Jack. Thank you.

Some Americans are getting hit with severe penalties for homes they have already lost.

(BEGIN VIDEO CLIP)

DELLIAN SHARP, HOMEOWNER: We could spend 45 days in jail over this housing issue?

ALINA CHO, CNN CORRESPONDENT: Does that seem ridiculous to you?

SHARP: It does to me, because it's, like, we don't own the house.

(END VIDEO CLIP)

BLITZER: If you think things can't get worse than foreclosure, wait until you see what's happening to some people out there across the country.

And in the health care debate, why does Sarah Palin insist on saying something even her fellow Republicans insist is simply not true?

And he is in prison for a notorious terrorist act. He's sick, seeking mercy. And now there is outrage that he may soon be getting out.

(COMMERCIAL BREAK) BLITZER: This man sits in a jail convicted of one of the most notorious terrorist acts ever, the bombing of Pan Am Flight 103. But after only about eight years in prison, guess what? He may soon be free. Why? And how do the victims' loved ones feel about all this.

We asked CNN's Mary Snow to take a closer look.

Mary, what is going on here?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, Scotland's justice minister says no decision has been made yet on whether to release the man convicted of the 1988 Lockerbie bombing who is now terminally ill. There's sharp division among families of the victims.

In Britain, some feel he should be released. And in the U.S., the families we spoke with are outraged.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Two decades after a bomb blew up Pan Am Flight 103 over Lockerbie, Scotland, killing 259 passengers and 11 people on the ground, wounds have been reopened and anger intensified over the fate of this man, Abdel Basset Ali al-Megrahi.

Al-Megrahi is a Libyan national and former intelligence officer and the only person convicted in the bombing. The Scottish government is considered releasing him on compassionate grounds because he has terminal prostate cancer.

Susan Cohen is horrified. Her only child, Theodora, age 20, was among the 189 Americans killed in the terrorist attack.

SUSAN COHEN, MOTHER OF PAN AM FLIGHT 103 BOMBING VICTIM: He is not going to get forgiveness from me. And as far as I am concerned, he should die in prison and his soul rot in hell. OK?

SNOW: But other relatives of Pan Am 103 victims are divided. In Britain, some question whether al-Megrahi should have been convicted at all.

JIM SWIRE, FATHER OF PAN AM FLIGHT 103 BOMBING VICTIM: As an innocent man who is dying of cancer away from his family, away from his country, I think that reasonable humanity dictates that he should be transferred home as soon as possible.

SNOW: Al-Megrahi, who is 57, was convicted of 2001 of being the man who placed the deadly bomb in a suitcase and is serving a 27-year prison term. But he's maintained his innocence all along and is appealing his conviction for a second time.

Bert Ammerman, who lost his brother Tom, isn't buying it.

BERT AMMERMAN, BROTHER OF PAN AM FLIGHT 103 BOMBING VICTIM: The man was convicted. Follow the legal process. Let's not have revisionist theory on this.

SNOW: And Scotland's justice minister says he is taking all these views into consideration.

KENNY MACASKILL, SCOTTISH JUSTICE MINISTER: I am making sure that all those who have a relevant interest have the opportunity to advise me of their views and their feelings. I am listening to that.

(END VIDEOTAPE)

SNOW: Now, a State Department spokesman said today that the U.S. has made it clear to the U.K. government and others that al-Megrahi should spend the rest of his time in jail -- Wolf.

BLITZER: Mary, thank you -- Mary Snow reporting.

A sign of the times. A new report shows foreclosure filings hit another record high in July, up 32 percent from the year before. There is a new angle to the crisis in the housing market here in the United States that we are now uncovering.

CNN's Alina Cho has a story you will see only here on CNN -- Alina.

(BEGIN VIDEOTAPE)

ALINA CHO, CNN CORRESPONDENT: Hey, Wolf.

This is something that frankly surprised a lot of us around here. People whose homes have gone into foreclosure are finding out months, even years later, that the very banks that seized their homes are walking away from them. It is leaving the homeowner confused and worse stuck with thousands of dollars in bills.

(voice-over): When Dellian and Valerie (ph) Sharp found out the bank was taking possession of their home after they defaulted on their mortgage, they thought it was the worst day of their lives. They were wrong.

DELLIAN SHARP, HOMEOWNER: We could spend 45 days in jail over this housing issue?

CHO (on camera): Does that seem ridiculous to you?

SHARP: It does to me, because it's, like, we don't own the house.

CHO (voice-over): They do own it. In November of 2006, a judge agreed the Sharps' home was the bank's property and should be sold at auction. The couple moved out. But a year later, they learned Bank of America never followed through on the foreclosure.

In a statement, B-of-A told CNN: "The bank has not foreclosed on the property and the customer still holds the title." The Sharps are shocked, and the practice is perfectly legal.

JOSIAH MADAR, NEW YORK UNIVERSITY: A number of the foreclosed properties have very little value left in them by the time they are reaching the end of the foreclosure process. And if it is going to be more expensive to follow the foreclosure all the way through and take the property, they just won't do it.

CHO: It is happening in cities across America, banks walking away from so-called toxic titles. The Sharps are facing thousands in fines from the city of Buffalo, New York, for property violations and unpaid taxes. That's on top of the thousands they have already paid in court fees.

Daniel Benning works as a housing court mediator. He calls the vacant homes vulnerable targets.

DANIEL BENNING, HOUSING COURT LIAISON: These are attractive to persons of criminal intent.

CHO (on camera): Because they're empty.

BENNING: They're empty. The bank refuses to allow anyone to move in, but they refuse to do anything to the property, as you can see. And it affects not only this property, but the properties next to them.

CHO (voice-over): The city of Buffalo even filed a lawsuit alleging 37 banks that walked away from foreclosed homes are responsible for the city's loss in property tax revenue and an increase in police and fire costs. As for the Sharps...

SHARP: When you look and you find that something you thought was gone is still there, OK, now it's, what's next?

CHO (on camera): Well, what is next?

SHARP: We have no idea.

UNIDENTIFIED FEMALE: No idea.

SHARP: We have no idea.

CHO (on camera): As I mentioned, this is happening across America. But hardest-hit, Rust Belt cities like Detroit and Flint, Michigan, Buffalo, and Cleveland, Ohio, places that have older housing stocked with declining value. So, the banks essentially don't think it is worth their wile to pay all of the legal and administrative fees that come with foreclosing on a home. So, Wolf, they are simply walking away -- Wolf.

(END VIDEOTAPE)

BLITZER: Wow. What a story that is. That's amazing.

Thanks very much. I did not know that.

Sarah Palin rails against death panels, but is she betting any possible political future on what even some fellow Republicans are characterizing as a wild rumor?

And the basketball coach Rick Pitino apologizing for a six-year- old episode of extramarital sex. Is that good enough for the University of Louisville?

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: The next time you get on an airplane, remember this.

(BEGIN VIDEO CLIP)

BRIAN TODD, CNN CORRESPONDENT: Tell me about the myth and about how you want to dispel it.

NORA MARSHALL, NTSB: Well, one of the myths is that, if you are involved in an airplane accident, you are not going to survive. And we know that's not true.

(END VIDEO CLIP)

BLITZER: Brian Todd helps uncover the secrets of surviving a plane rash. This is information you need to know if you are planning on flying. It's a SITUATION ROOM investigation.

And Sarah Palin is at it again. She is defending her claim that the president's health care reform plan would create death panels. We are checking her facts.

(COMMERCIAL BREAK)

BLITZER: The wreckage of a small plane pulled out of the Hudson River this week along with nine bodies victims of a collision. It's a very different picture than this one, the so-called miracle on the Hudson back in January.

Many of us can't help but wonder when we get on the plane, how will the flight end?

Our Brian Todd has a Situation Room investigation that could save your life -- Brian.

(BEGIN VIDEOTAPE)

TODD: Wolf, at this training center, NTSB officials look at everything from that Minnesota bridge collapse a couple of years ago -- here is some real wreckage from that -- to plane crashes all over the United States.

And there's one small team here that is dedicated to dispelling one of the most common myths about aviation disasters.

(voice-over): Sifting through twisted metal.

(on camera): And this is all about impact. This is all about kind of blunt force, G-force...

(CROSSTALK)

UNIDENTIFIED FEMALE: Right. And this is like documenting.

TODD: Acting like a CSI detective on a crash-tested seat.

UNIDENTIFIED FEMALE: We could say the taller person is on this side.

TODD: We are behind the scenes at the NTSB's training center in Northern Virginia, where an elite go team of investigators has one mission, figure out why people live and die in plane crashes.

Nora Marshall leads the Human Performance and Survival Factors Division.

TODD (on camera): Tell me about the myth and about how you want to dispel it.

MARSHALL: Well, one of the myths is that, if you are involved in an airplane accident, you are not going to survive. And we know that's not true.

TODD (voice-over): Even horrific crashes, like this one in Sioux City, Iowa in 1989, Marshall says, are survivable. About two-thirds of the people on this plane got out alive. These days, one key reason you can make it out these days, equipment enhancements, passenger air bags now on some smaller planes could soon be recommended for wider use.

(on camera): Has this proven to actually prevent injury?

MARSHALL: There has been a lot of testing done that show that these really do provide protection.

TODD (voice-over): But Marshall says they will likely only be in seats that don't have cushions in front of them, like at bulkheads. We asked former NTSB official Peter Goelz about other ideas. Flight attendants have shoulder straps. Why not passenger seats?

PETER GOELZ, FORMER NTSB MANAGING DIRECTOR: There's a little bit of a technological challenge to put in three point belts on all the seats.

TODD: Goelz says the NTSB once looked at outfitting planes with smoke hoods for passengers, but nixed that.

GOELZ: Once you had a plane on the ground and if there was the threat of fire, we wanted everyone to be focused on getting off the plane in 90 seconds or less. We did not want people fumbling around in their seats looking for a smoke hood to put it on.

TODD: But Goelz and Marshall say the innovations that have made it into passenger planes over the past two decades have been crucial.

GOELZ: They have redesigned the interior of the planes so that the materials used do not emit toxic gases when they -- when they're burning or smoldering.

MARSHALL: We've improved the chance of survival by improving seat strength, by building airplanes that can withstand crash forces.

TODD: An example of that that Marshall's team cites in training -- Little Rock, June, 1999. Landing in a thunderstorm, American Airlines Flight 1420 slides off the runway, impacts a light structure, splits open. Fire breaks out in the aft section. But look at the seats. With the fuselage breached, much of the cabin destroyed, many of the seats remain relatively intact.

Here's one survivor's account.

(BEGIN VIDEO CLIP FROM JUNE 7, 1999)

JEFF ARNOLD, SURVIVOR, FLIGHT 1420, LITTLE ROCK: There was a gap in the side of the fuselage, a big old gash. Outside of that, I found two people in a field strapped in their chair that had apparently been thrown through that. They were both alive and doing OK.

TODD: Martial and other NTSB officials make it clear the crashes you won't survive are those where planes break up at high altitude, like the TWA Flight 800 accident or when there's high velocity impact with the ground, like the 1996 ValuJet crash in the Everglades. But those accidents, they say, are very rare in major commercial aviation.

MARSHALL: There are far more accidents where there are survivors and there are chances for people to survive.

TODD: Like hard landings, such as this 2002 Iberian Airlines emergency touchdown at JFK.

UNIDENTIFIED MALE: Make room.

TODD: Nearly 400 on board, everyone out alive. Runway overshoots -- ground collisions are also more common. Crucial to survival -- human behavior. Flight crews are better trained than ever to get people out.

Marshall pointed (AUDIO GAP) on takeoff in Denver, the 2005 overrun of an Air France jet in Toronto and the Hudson River landing. The number of people killed in all three accidents -- zero. But she says passengers still need to be sharper in the cabin. The former flight attendant takes me through an evacuation drill.

MARSHALL: Release seatbelts. Get out.

Why are you blocking your aisle to get your carry-on?

TODD: (on camera): OK.

MARSHALL: OK. Your closest exit, right here.

TODD: So two things -- I went the wrong way.

MARSHALL: How do you open that?

OK, did you look at your briefing card?

Do you know how the exit opens?

TODD: No, I don't know.

MARSHALL: Did you know there was an exit right behind you?

TODD: No.

(voice-over): In about 20 seconds, I've made three very common mistakes that could get me and others killed. But many passengers do get it. In Little Rock, 134 out of the 145 people on board survived, including one man who scrambled out with the seat still on his back.

MARSHALL: He crawled away from the airplane and it wasn't until he got to this area that he realized he hadn't even unfastened his seatbelt.

(END VIDEO TAPE)

TODD: There seems to be one central takeaway lesson from all of this. NTSB officials telling us that major commercial airline accidents are still very rare. But if it does happen to you and you survive the initial impact, there are very simple factors under your control -- very simple steps you can take to improve your odds dramatically -- Wolf.

BLITZER: Good information.

Brian Todd, thanks very much.

Sarah Palin issues a Facebook manifesto against those so-called death panels.

But is she just stirring up a health care rumor?

The best political team on television standing by.

(BEGIN VIDEO CLIP)

SARAH PALIN (R), FORMER GOVERNOR OF ALASKA: My family and I, we join you in honoring the heroic efforts of our servicemen and women.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Health care town halls -- are they dominated by so- called fringe groups?

Let's talk about that and more with David Frum, former speechwriter for George W. Bush. He's a fellow at the American Enterprise Institute; our CNN senior political correspondent, Candy Crowley; and Politico White House correspondent, Nia-Malika Henderson.

But first, our national political correspondent, Jessica Yellin, with some background -- Jessica. JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Wolf, you remember when town hall events were dull gatherings where people asked questions and then listened to the answers, maybe occasionally a lone protester would get escorted out. Well, that seems so quaint compared to this.

(VIDEO CLIP)

YELLIN: Funny, they don't sound like they're there to listen and learn. Today's town hall shout fests don't leave much room for discussion, often. And that's because the loudest folks -- the ones getting the most attention -- are often arriving with their minds made up.

Many were encouraged to attend by groups on the left or the right.

On the left, some of those helping to get people out, MoveOn.org, ACORN and labor unions.

On the right, Americans for Prosperity, Freedom Works and Tea Party Patriots, among others.

Now, these groups have used e-mails, online campaigns, even TV ads, not just to campaign on health care reform, but to promote or oppose the president's larger agenda.

So, sure, the town halls are polarized, but does that mean the country is as a whole?

That leads to this question -- are fringe groups taking over town square and is this good for our country -- Wolf?

BLITZER: A good question.

Let's ask David Frum.

DAVID FRUM, FORMER BUSH SPEECHWRITER: Well, I think one of the -- President Obama must be regretting right now that he didn't get himself a little bipartisan insurance, that the bill that is before the country is the House bill, which was done by Democrats with very little Republican input -- zero.

There is, as yet, no finished -- no agreed upon Senate bill that would have been a more consensual process. Had the president been able to go out there and say, look, there are a lot of people on all sides of the aisle who agree there are some modest, necessary reforms here, he'd be stronger today. And I think there would be a ready answer for the angry people.

BLITZER: He's got a few Republicans and there's a little -- a little glimmer of hope they might be on board -- Olympia Snowe or Susan Collins, and maybe even Chuck Grassley. But that's a glimmer.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: It is a glimmer. I was with Chuck Grassley in four town hall squares, actually, yesterday. And the fringe didn't take over. They were, in fact, pointed, but they were not hostile. I mean what -- there were people who got up and said listen, we'll put you out if you don't -- if you support this. But it wasn't in some like crazy, yelling manner.

So I think, by and large, we can assume that most of the town hall meetings -- and there must be hundreds of them going on this August -- are fine, pointed. People are upset. People are looking at major things.

But I think what's interesting now is as we are now looking -- and I'm sure you've gotten this in your e-mails, as well, at -- at what I think is a shift in how the Democrats are approaching this.

It used to be this is the fringe, these are crazy people, these are the tea bag people, these are the birthers. And now it's, you know what, most of the town hall meetings are just fine. Because I think what they've seen is that these town hall meetings that we're showing and these people screaming have moved the Independents and they've moved more against it than for it (INAUDIBLE)...

BLITZER: And the White House, Nia, is definitely becoming much more assertive.

NIA-MALIKA HENDERSON, WHITE HOUSE CORRESPONDENT, POLITICO: They are. I mean, David Axelrod sent out a six page e-mail this morning -- essentially a viral e-mail -- refuting a lot of what they called myths about health care.

BLITZER: And asking recipients to keep forwarding it to their friends and neighbors.

HENDERSON: Forwarding it along. Forwarding it along. Yes. So they are kind of stepping up their offensive, using the play books that they used from the campaign, going viral. And we'll see the president tomorrow out in Montana and Colorado doing the same kind of town hall he did -- he did before. And they're even trying to open these town halls up so they can, you know, refute these claims that they're stacking these town halls with their own people.

So -- so they're definitely going on the offensive now.

BLITZER: Here's a question that always intrigues me. At these town halls, these lawmakers, they go out there, they have these exchanges with their constituents.

Is it more likely that the lawmaker changes the view of the constituent or the constituent changes the view of the lawmaker?

FRUM: It sounds -- I think the way you set out the question tells us the answer. The lawmaker comes back and thinks, I've got some information. Because politicians -- you know, they're magical thinkers. I mean there they are in their offices. They don't know what's going on. They have these polls. They have these wizards who come in and tell them they know what the public is thinking.

Here's a dose of reality. Sometimes they over rely on the reality they see in their immediate environment.

BLITZER: Because I suspect a lot of these lawmakers will come back to Washington in September with different views than they had in early August.

CROWLEY: Certainly, they'll know about the concerns out there. I don't know if, ultimately, it will change their vote, but they've got some concerns that they want to address. And, frankly, woe be to the lawmaker that doesn't listen to his constituents, because that's what you call an ex-lawmaker.

BLITZER: Or her...

(CROSSTALK)

BLITZER: That's right, Candy.

All right, stand by, guys. We have more to talk about.

Sarah Palin pushing new rumors about so-called death panels and health reform.

Could her claims come back to hurt her politically?

And real people talking about the reality of the recession -- our Ali Velshi is taking the pulse of America in the heartland. He's aboard the CNN Express.

(COMMERCIAL BREAK)

BLITZER: Sarah Palin detailing her claims about so-called death panels in a proposed a health care overhaul.

We're back with David Frum, Candy Crowley, Nia-Malika Henderson and Jessica Yellin, who's going to give us some background.

YELLIN: Yes, Wolf, Sarah Palin stepped down as governor, but that has not stopped her from jumping feet first into the health care debate.

Her target -- what she calls death panels.

Last night, she was at it again, posting on Facebook what looks like a term paper, complete with 11 footnotes. She was quoting statements about rationed care by left-winging columnists and Democrats. Now, Palin was defending a claim that she originally made last week, when she first said that if health care reform passes, her parents or her baby with Downs Syndrome would be required to, "stand in front of Obama's death panel so his bureaucrats can decide whether they are worthy of health care." Fact check -- not true. There is no panel that would decide whether the weak live or die. Even some Pal -- some of Palin's Republican colleagues are slamming her for promoting a rumor that they call nuts and that they say will, "gin up fear."

Now to be clear, Palin says, in part, she is referring to a provision in one of the House bills that would allow Medicare recipients to get counseling on things like hospice care or living wills.

According to a Republican senator, even that's been taken off the table in the Senate. Finance Committee.

So this death panel rumor has caught on and it's put Palin squarely back in the news.

And the question is, is Sarah Palin helping or hurting her political ambitions by grabbing the spotlight when the facts are not on her side -- Wolf?

BLITZER: Well, Candy Crowley, Jessica, is just back from the heartland. You spoke to a lot of folks about these so-called death panels.

What are they saying?

CROWLEY: I did. And some of them actually had not heard, at least directly, about what Sarah Palin had said. There are, particularly seniors, who I tell you, say -- said to me, listen, here's how we look at it. And, in fact, this was in a column today that a Republican -- a leading columnist wrote. They said if you have a bill that purports to cut down on costs and inside that bill you say, listen, we're going to pay doctors to give end of life counseling every five years, except for if they get sick and then you can do it more often than that, you can understand how seniors might think, really?

And, you know, so there is definitely that fear out there.

Now, it's stoked by things like this, because, it's not true that there's some panel somewhere that's going to go, OK, let her die, let him die. That's not true. It's about paying doctors for end of life. And I had nurses say to me why, you know, doctors have -- you know, say, house -- house -- not house calls, but doctors have office visits with Medicare patients.

Why can't they tell them in those office visits?

Those are reimbursed.

Why is there a separate thing for this end of life care counseling?

BLITZER: You understand the concern out there, because a lot of folks say you know what, doctors should be talking to their patients, especially as they get older, about living wills or hospice care. These are end of life considerations that folks would like to speak to a professional about.

FRUM: I -- I think there's a difference in speaking to a professional and having the professional speak to you. One's...

BLITZER: But this is all voluntary, right? (CROSSTALK)

BLITZER: You don't have to do this.

(CROSSTALK)

CROWLEY: But the thing is, the bill doesn't say that.

FRUM: The bill would authorize the -- the professional to initiate the conversation. But, you know, I think Candy is onto something. I mean the -- the core of this is -- the Obama -- the House -- the House plan and the president's ideas contemplate taking a lot of money out of the future growth of Medicare.

Now, the question I would have for Sarah Palin and those who like her, is it the Republican position that there must never be any restraint on the growth of Medicare ever?

I thought the Republican Party was the party that wanted to see government spending slowed. And Medicare and Medicare and other health care programs are the most important drivers...

BLITZER: Especially if there's...

(CROSSTALK)

BLITZER: ...inefficiency, Nia, in -- in some of the Medicare expenses right now and you can cult without really hurting seniors or anyone else, you can cut some of those -- some of those expenditures by simply eliminating some of the waste.

HENDERSON: Yes, not that -- I mean, I think that's true. And that's one of the things that -- that the White House is saying that they wanted to eliminate some of this waste in -- in health care, in Medicare. And that's one of the ways they feel like they're going to pay for this -- this health care insurance.

BLITZER: Although it is a powerful argument that Republicans, including Mitch McConnell, the Republican leader in the Senate, and others, are making when they say the Democrats want to cut $500 billion of your Medicare over the next 10 years. It gets people scared.

HENDERSON: It gets seniors very scared. And you saw some of that in some of the town halls -- people having signs saying, you know, grandma is going to -- they're going to pull the plug on grandma.

I think we're -- I mean giving (INAUDIBLE) to Sarah Palin and her kind of ginning this up, I mean, she's clearly trying to, you know, kind of play for a larger stage here, I mean. But, I think, in large part, she really is kind of playing for a small stage and that, you know, she has the support, you know, among the Evangelicals, but, also, I think, that her support is essentially slipping among a lot of folks. BLITZER: Candy, knowing the Congress as you do, if the House version has the end of life counseling provision in it, the Senate version does not, when they get together and try to forge some sort of compromise, who -- who wins?

CROWLEY: Well, it depends on who -- who needs the votes. I mean, in the end, this is a (INAUDIBLE)...

BLITZER: It's clear that the White House has a much tighter option in the -- in the Senate than in the House.

CROWLEY: Yes. And -- and they -- they need -- at this point, the Senate is the big hurdle, unless they use a procedural mechanism to just need the 51 votes. But it seems to me that, at this point with this bill, the Senate has got to say, I can't pass this thing unless you all take this out or put this in.

BLITZER: We'll leave it on that note, guys.

But we'll see you back here tomorrow.

Let's check in with Lou to see what's coming up at the top of the hour -- Lou.

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Wolf, thank you.

We'll have the latest on the showdown over health care -- the Obama White House and powerful special interest groups joining forces now, attacking the opponents of the president's health care initiatives. The offensive coming as polls indicate large numbers of Independents are simply deserting President Obama. A rising number of Americans are fighting back against the Democratic Party's assault, refusing to be silenced or marginalized.

They're demanding instead the right to be heard at town hall meetings across the country and in a barrage of e-mails targeting members of Congress. We'll have that special report.

And in our Face-Off debate tonight, we examine the issue of whether government has a moral obligation to provide health care. We'll have that debate, all the day's news and much more.

Please join us for that at the top of the hour, of course -- Wolf, back to you.

BLITZER: Thanks very much, Lou.

We'll see you then.

Let's check in with Jack right now for The Cafferty File -- Jack.

CAFFERTY: The question this hour, Wolf, is how serious is the United States about national security if the plan to send National Guard troops to the Mexican border is being delayed over money?

Mike in Florida writes: "None of the recent administrations, Republican or Democrat, has been truly interested in securing the Mexican border. There are several common reasons, not the least of which is votes. Others include the economic impact on Mexico by reducing the amount of money sent by illegal immigrants here to their relatives there; the economic impact on the U.S. if employers had to pay Americans instead of hiring illegals; and last, but not least, a lack of cojones on both sides of the political aisle."

Peter in San Diego: "Here in San Diego, they've never been serious about controlling the border. Just last night, a van carrying 42 illegal aliens drove through the border going north in the southbound lanes. Our borders and ports ought to be a high priority. A fence is just not enough. We need troops and we need them now."

Ruth in Portland writes: "All the troops in Iraq and Afghanistan ought to be brought home and put in charge of taking care of America, such as on the Mexican border. There's a lot for them to do right here at home."

B. writes: "The U.S. isn't serious at all about any border security. Are you kidding? I guess we don't have enough illegals here already -- or drugs, for that matter. Our national security is a joke in the eyes of other nations and in my eyes, as well."

Tom in Florida writes: "It shows we're not serious about protecting our borders. U.S. corporations don't want to hear that they would lose a source of cheap labor. We have all the money for the Iraq and Afghanistan borders, but not for our own borders. This nation is at its end. Obama is a fraud."

And Bruce writes: "Not very, it seems. Maybe somebody will actually read the 1,000 page health care bill and find a measly $225 million somewhere in there."

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.

Good night, Mr. Blitzer.

I'll see you tomorrow.

BLITZER: Always a pleasure, Jack.

CAFFERTY: All right.

BLITZER: thanks very much.

How are economic concerns impacting the scene at the Missouri State Fair?

We're going to catch up with CNN's Ali Velshi. He's aboard the CNN Express.

And a dramatic rescue from flooding in Taiwan -- we'll show you that and more in tonight's Hot Shots.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the Hot Shots coming in from our friends at the A.P.

In Taiwan, a villager is rescued using the cable sling as floodwaters rage.

In India, amid swine flu fears, this soccer player balances a ball while wearing a mask.

In Russia, the president, Dmitry Medvedev, signs his autograph on a construction worker's shirt while visiting an Olympic construction site.

And in Ohio, check it out -- one lone fisherman waits in the fog for the fish to start biting.

Hot Shots -- pictures worth a thousand words.

The latest stop for CNN -- the CNN Express is in Missouri for the Missouri State Fair.

And CNN's chief business correspondent, Ali Velshi, is finding that despite indications that the recession may be nearing an end, a lot of folks still have the economy on their mind.

(BEGIN VIDEOTAPE)

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: When do you guys open up?

It's really (INAUDIBLE). It's a little early yet, day one of the Missouri State Fair. And I read somewhere that it's $1 corn dog days. You can get a lot of things for a dollar here, including admission.

Wow! That's unbelievable.

(VIDEO CLIP)

VELSHI: Have you seen any change because of the economy and things like attendance or participation?

Why -- does it look different than it did maybe last year, before we had gone through the financial crisis?

MARK WOLF, DIRECTOR, MISSOURI STATE FAIR: Well, you know, I think what's happened is people are maybe staying a little closer to home. And they're looking for a value package for an end of the summer vacation.

UNIDENTIFIED MALE: We come every year.

UNIDENTIFIED FEMALE: It's a fun time. It's (INAUDIBLE) the family.

UNIDENTIFIED MALE: My daughter's first visit to the state fair and we're having a great time.

UNIDENTIFIED MALE: There's so much to do and so many things to buy. We -- we didn't have the money, of course.

VELSHI: I was looking through the program. I actually saw a lot that had to do with the economy. You have sort of tips for people on coupon clipping or -- or saving money.

Is that something that typically happens at the fair?

WOLF: Yes, well, it is and we just took advantage of something that's kind of new out there, a new term called rural lifestyles.

UNIDENTIFIED FEMALE: We come because my family has showed cattle here for many years and my dad sells John Deere tractors. And so it's a business opportunity for him.

UNIDENTIFIED FEMALE: We traditionally come and show our hogs for the last 22 years, in the swine barn. And my kids and my grandkids are now showing.

WOLF: If you want to learn how to do gardening or container gardening, we're going to show you how. If you want to learn how to can what you grow, we're going to show you how. If you want to learn how to coupon and cut your grocery costs, we're going to show you how.

VELSHI: All right, Wolf, and we've also been talking about the economy a lot with people. And while folks are thinking that things might be getting better, to suggest that the economy is fully on the mend right now, well, that might be a bit of a stretch -- Wolf.

BLITZER: A cute little giraffe over there.

All right, Ali is going to continue with the CNN Express. He's making his way this weekend to Iowa and the state fair there. We'll check in with Ali tomorrow and see what's going on across the country.

We want you to check out our political podcast. To get the best political team to go any time, this is what you do. You subscribe at CNN.com/situationroom.

I'm Wolf Blitzer in THE SITUATION ROOM.

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

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