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THE SITUATION ROOM

House Approves Last Minute Budget Deal; NATO Wants More Fighter Jets in Libya; Gadhafi Forces Pound Misrata; Sadat Assassination Conspirator Speaks; Interview With Senate Majority Leader Harry Reid; Senate Passes Budget Deal; Man Allegedly Set up Fake Army Unit

Aired April 14, 2011 - 17:00   ET

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


WOLF BLITZER, HOST: Brooke, thanks very much.

Happening now, a last minute budget deal to keep the government operating just approved in the House of Representatives, but word that it won't immediately save the billions and billions of dollars promised. It's sparking new concern up on Capitol Hill. Ahead, my interview with the Senate majority leader, Harry Reid.

In Libya, NATO's chief is now asking for more fighter jets to protect civilians as Moammar Gadhafi's forces target critical lifeline in deadly new attacks.

And a Chinese national living in California facing an astonishing charge. Ahead, how he allegedly duped as many as 100 people into joining a fake Army Special Forces Unit.

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

But first to Capitol Hill where, just a little while ago, the House approved that last-minute bipartisan deal to keep the federal government from shutting down. The agreement is promising to cut $38.5 billion from this year's budget, but a new report released by the nonpartisan Congressional Budget Office now shows only $352 million of that will actually be slashed this year.

Our senior congressional correspondent Dana Bash, is joining us with the very latest.

These kinds of number games, it's causing a lot of concern out there because people are saying $38 billion, well, maybe just 1 percent of that this year.

What's going on, Dana?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right. That's true. And you know, there already was concern among Republicans here that their leadership cut a deal that has spending cuts that many call -- maybe the best way to say it is -- fuzzy accounting. And Republican leaders went on the offensive today to try to say, no, what they agreed to, what they're voting on were real cuts.

But in the end, Republicans relied on 39 Democrats to pass this bill.

(BEGIN VIDEOTAPE)

BASH (voice-over): The bill keeping the government running for the rest of the year passed the House but with significant GOP defections, 59 Republicans voted no. GOP congressmen like freshman Bill Huizenga, who said he thinks his Republican leadership compromised too much on spending cuts.

REP. WAYNE HUIZENGA (R), MICHIGAN: I just couldn't go back and look at my constituents and say this was the best we can do.

BASH: And it may not just have been the level of spending cuts that caused Republicans to bolt, but questions about the real impact of the cuts. A new report from the Congressional Budget Office said that while the measure does cut $38 billion in spending, only a fraction of those savings will be realized this year, $352 million.

That has to do with arcane budget differences between what's known as budget outlays, how quickly money is spent, versus budget authority, how much agencies are allowed to spend.

But the politics of the that smaller number caused deep concern among rank and file Republicans. GOP leaders scrambled to reassure them with emergency briefings and meetings.

REP. JOHN BOEHNER (R-OH), HOUSE SPEAKER: Well, certainly, it has caused some confusion, but let's understand that we are cutting $38.5 billion of money.

BASH: Still, Republicans like Huizenga seeing that relatively tiny $352 million figure did have an impact on GOP votes.

HUIZENGA: It didn't help the argument.

Now, as you go back into it and dive into it, it's how they account for things and what accounts that they are coming out of.

BASH (on camera): But?

HUIZENGA: But, again, I think it is -- it sends the wrong message to people. It's explainable, but, man, you can't do it in two sentences.

BASH (voice-over): In the face of that kind of concern from some of his restive rank and file, the House speaker laid out his bottom line.

BOEHNER: But I will tell you that this is the best we could get out of divided government.

(END VIDEOTAPE)

BASH: The House Republican leaders are underscoring the fact that this was a bipartisan vote. The reality, Wolf, is that Republicans really did have to rely on significant help from Democrats in order to pass this.

Now it is going to go to the Senate, where we expect that vote to happen perhaps within the next hour, Wolf.

BLITZER: Some call it fuzzy math, as you did, Dana, others call it Washington, D.C. math, because there's a lot of fuzzy math going on, always has been, over the years.

Thanks very much. Good report.

We are going to have a lot more on this looming budget debate. Just ahead, my interview with the Senate Majority Leader Harry Reid, that's coming up this hour.

But turning now to the raging battle in Libya where a fresh round of explosions have just been heard in Tripoli; state TV reporting civilian deaths.

Meanwhile, in the besieged city of Misrata, at least 23 people were killed, more than 100 were wounded when pro-Gadhafi loyalists pounded a critical port and surrounding residential area.

CNN's Fred Pleitgen is in Tripoli, he's joining us now with more on what is going on.

And, Fred, another violent day in your part of the world over there. Gadhafi forces, they're going after the rebels in a major way.

FREDRIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: They certainly are, and, of course, once again Misrata is the focal point of that. Of course, Misrata is sort of a besieged city deep inside Gadhafi-held territory. And as you said, today there were massive artillery tank and also mortar fire going on in that city.

What we are hearing from residents on the ground there is that 20 people have been killed, at least 20 people, also 20 further people have been wounded. And they say a lot of these mortars and artillery shells actually fell on residential areas, which is, of course, something that can cause a lot of carnage very easily.

But you said it absolutely correctly, a lot of it, a lot of the fighting was also centered around the very vital port area there in Misrata. What we are hearing is that at least one aid ship was not able to get into the port because of the firing that was going on, also a cement factory in part of the port was destroyed as well.

And one of the things also that we have to keep in mind, Wolf, is that in the area leading up to the port, the road leading up to the port there are still thousands of foreign migrant workers there trying to get out and they are, of course, right in the path of those artillery shells.

So a very dangerous situation, one that, as we see, is causing a loft carnage there in Misrata -- Wolf.

BLITZER: Fred, put this into perspective for us. How important is Misrata in this bigger fight between Gadhafi's forces and the opposition?

PLEITGEN: I couldn't hear that question, Wolf, because my line here is breaking up, but I think you were asking why the port is so vital?

BLITZER: If you can hear me now, what I was asking, give us a bigger perspective why Misrata is so important in this fight.

PLEITGEN: I can't make it out, I'm sorry.

BLITZER: All right, we'll try reconnect maybe in the next hour.

Fred Pleitgen on the scene for us.

I can tell you Misrata is very important in this fight right now and the fighting is very, very intense, as you just heard from Fred.

Here in the United States there is increasing talk about the possibility of arming Libyan rebels with a new line of defense, billions in dollars in Gadhafi's frozen assets here in the United States.

Lisa Sylvester is working this part of the story for us.

What is the latest?

LISA SYLVESTER, CNN CORRESPONDENT: Well, Wolf, some $30 billion is what we are talking about. The Treasury Department, in early March, froze the personal accounts of Moammar Gadhafi and his four children, funds from the central bank of Libya and the country's sovereign wealth fund. Now there is an international discussion on whether part of that money can be given to the rebels.

(BEGIN VIDEOTAPE)

MARK TONER, STATE DEPARTMENT SPOKESMAN: Good afternoon, welcome to the State Department.

SYLVESTER (voice-over): The State Department says it on board with the NATO-led coalition exploring the idea of transferring part of Moammar Gadhafi's frozen assets to the rebel's governing body, the Transitional National Council.

The U.S. alone has frozen $30 billion in accounts controlled by Gadhafi and his family, money that could be used for humanitarian aid or even to allow the rebels to purchase weapons to defend themselves.

But right now, it's just an idea.

TONER: I don't want to get ahead of ourselves here. What we talked about in DOHA, what was agreed upon by the parties there was to explore this type of mechanism.

Certainly, I think this is borne out of a recognition that the Transitional National Council does need financial wherewithal if it is going to operate and sustain itself. SYLVESTER: International representatives and rebel leaders met Wednesday in DOHA for a conference on the country's future. Germany and Italy's foreign ministers saying the billions of dollars now frozen should be channeled to the Libyan people.

GUIDO WESTERWELLE, GERMAN FOREIGN MINISTER: One thing is absolutely clear, no doubt about it, this money belongs, if it is state money, if it is government money, to the people of Libya and we have to find ways that this money will reach the people of Libya.

FRANCO FRATTINI, ITALIAN FOREIGN MINISTER: People need food. People need, I would say, products or first need or they need to pay salaries to official, to workers in the region in the cities.

SYLVESTER: But figuring out a way to transfer the money from Gadhafi's accounts to the rebels faces legal and diplomatic challenges.

First among them, making sure the rebel's governing body represents a wide enough swath of the Libyan people.

If so, does the U.S. government have to officially recognize the group as the official government of Libya before assets can be released?

And what about potential ties between some of the rebel fighters and al Qaeda?

JAMES PHILLIPS, THE HERITAGE FOUNDATION: There's a strong concern that some of the forces fighting Colonel Gadhafi's regime have ties to al Qaeda. It's not believed that they are represented on the political level within the Libyan opposition, but they do appear to be on the ground.

SYLVESTER: Working through some of those questions could take time, maybe weeks or months, but the rebels are pleading for help now.

(END VIDEOTAPE)

SYLVESTER: But it is a question -- is this even legal?

I spoke to Congressman Dennis Kucinich who is raising questions on this issue. He said the frozen assets are being held in trust right now. He points out, though, the rebel group, the Transitional National Council, is not a real government, it was not elected. And he said the choice to give them some of Gadhafi's money, that is a political decision, but at the end of the day, Wolf, that still has to be consistent with the law.

BLITZER: Wait till you hear what the Senate majority leader, Harry Reid, has to say about all of this and how some of that money should be used to reimburse American taxpayers for the cost of this military operation that NATO and others are engaged in. His interview is coming up late they are hour.

Thanks very much. Meanwhile, we are getting new firsthand information about recent reports that Qatar is arming Libyan rebels. Listen to what the country's leader, the emir, Hamad bin Khalifa al-Thani, just told me in an exclusive interview.

(BEGIN VIDEO CLIP)

BLITZER: You are allowed to provide weapons, you say, to the opposition, but can you tell us if you are, in fact, doing that?

EMIR HAMAD BIN KHALIFA AL-THANI, QATAR: If they asked for weapons, we are going to provide them.

BLITZER: Have they asked?

AL-THANI: Well, of course, they asked, but it will take some time, some training and it depends if we are going to push for this fast or not, because such weapons, it need a lot of training.

BLITZER: Because, Your Highness, you know that there are reports that French-made, anti-tank weapons you have already provided to the opposition. Is that true?

AL-THANI: It might be it arrived to them in the last two days possible.

(END VIDEO CLIP)

BLITZER: The interview coming up in the next hour here THE SITUATION ROOM, my exclusive interview with the Emir of Qatar. He, earlier today, met with the president in the Oval Office.

There could be other ways to put Gadhafi's billions to good use. What about giving some of that back to U.S. taxpayers? That's going to be coming up in my other big interview of the day with the Senate majority leader, Harry Reid. He likes the idea. Stand by for that.

And just weeks after the former Egyptian President Hosni Mubarak was thrown from power, we are learning new details about the assassination of his predecessors, Anwar Sadat, nearly 30 years ago. An accomplice in that murderer is just out of prison and he's now speaking exclusively to CNN.

And a Chinese national living in California facing a shocking charge. You're going to find out how he allegedly started a fake Army Special Forces Unit.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty is here with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN CONTRIBUTOR: Wolf, at least one in six people in the United States gets government handouts -- unemployment insurance, food stamps, Medicaid, rent subsidies, aid to dependent children, you name it. Lots of Americans get money for more than one of these programs at the same time.

Republican Congressman Ron Paul of Texas says we simply cannot afford all of the entitlement and welfare programs that we currently have. Ron Paul is one of the few voices of reason in Washington when it comes to our debt crisis. He is predicting an end to the nanny state in this country.

Paul wrote this on his website Tuesday, quote, "Instead of dealing seriously with our situation, so many in Washington would rather allow the chaos that will ensue when all of the dependent people are suddenly cut off. It's better to tell people the difficult truth, that government is simply not capable of managing people's lives from the cradle to the grave as was foolishly promised," unquote.

I think he is right. Think about it, when many of our ancestors came here generations ago, there were no welfare programs, no food stamps, no rent subsidies, and yet the poor and the uneducated from places like Italy and Ireland, people, some of them who didn't even speak English, came to this country, managed to survive and in time, actually thrived and prospered.

Back when we had no federal Department of Education, our schools were the best in the world. Now they are among the worst.

Before the Department of Housing and Urban Development, our cities were bustling centers of progress and economic growth. Now, a lot of them are in decay and decline with growing poverty, shrinking opportunity; see Detroit.

But when people like Paul Ryan talk about cutting government spending on some of this stuff, the Democrats get downright apoplectic.

Here is the question: Is the end of the nanny state in the United States inevitable?

Go to CNN.com/CaffertyFile and post a comment on my blog -- Wolf.

BLITZER: All right, Jack, thank you.

Jack will be back shortly.

Other news we are following.

Nearly 30 years ago, the Egyptian President Anwar Sadat was gunned down during a military procession. Now, one of the conspirators his killing is out of prison, released by the new military government in Cairo, and he is talking to CNN's Ivan Watson about the assassination and some controversial theories about who was really responsible.

(BEGIN VIDEOTAPE)

IVAN WATSON, CNN INTERNATIONAL CORRESPONDENT (voice-over): October 6, 1981, this was supposed to be a celebration. Instead, moments after triumphant jets roared overhead, assassins struck.

Four Egyptian soldiers turned their guns on the main pavilion, targeting the president of Egypt, Anwar Sadat. They unloaded their weapons into the president and the dignitaries seated around him, killing the man who led Egypt to war against Israel in 1973 and who is six years later signed a peace treaty with Israel that won him the Nobel Peace Prize.

ABOUD EL ZOMOR, SADAT ASSASSINATION CONSPIRATOR (through translator): The idea was just change to provide an alternative leader that could save Egypt from the political dead end we were living n.

WATSON: Aboud el Zomor is one of the men convicted of plotting Sadat's assassination. This former Egyptian intelligence officer says he wanted to start an Islamic revolution.

In his first sit-down interview with a western TV news crew, Zomor reluctantly described his role in the assassination.

ZOMOR: Our role was a facilitator, not a decision maker. All we did was provide the ammunition.

WATSON: Egyptian authorities released Zomor last month after he spent nearly 30 years in prison. A crowd of supporters gave him a hero's welcome.

TALAT SADAT, ANWAR SADAT'S NEPHEW: He think that he's hero. Hero for what? For what? For kill Sadat? This is not hero. Not hero.

WATSON: Talat Sadat a nephew of the murdered president. He went to prison in 2006 for announcing his conspiracy theories about the assassination on Egyptian TV.

(on camera): You accused Hosni Mubarak of killing your uncle?

SADAT: Yes. Yes. Yes.

WATSON: You believe that?

SADAT: The minister of defense. Yes. Yes, of course.

WATSON: And what happened after you said this on television?

SADAT: Next day, I go to the military court.

WATSON (voice-over): Mubarak was Sadat's vice president, the assassination propelled him into the president's chair for the next 30 years until he was toppled by popular protest.

Last month, Sadat's daughter, Rolyiah (ph), filed a case in court, accusing Mubarak of complicity in the plot to kill his predecessor.

Hatred of Mubarak, one thing Sadat's relatives and his killer seem to agree on.

ZOMOR: Turned to out Sadat was more merciful than Hosni Mubarak. The Sadat era was much better than the Mubarak era, which was more oppressive.

WATSON: But that's the closest Zomor comes to apologizing for the assassination. But he says he has renounced violent jihad and now wants to form a political party to compete in future Egyptian parliamentary elections.

He will have a hard time winning votes from Egyptians who still come to pay tribute at the grave at the assassinated president.

UNIDENTIFIED MALE: Zomor killed one of the best presidents in the Arab world, and in my opinion, he was the best one, not one of the best.

WATSON (on camera): The pavilion where Anwar Sadat was murdered 30 years ago still stands in Cairo today across a busy highway from Egypt's tomb of the unknown soldier where Sadat was buried. The inscription on his grave calls him a hero of war and peace, a martyr who died for his principles.

Ivan Watson, CNN, Cairo.

(END VIDEOTAPE)

BLITZER: A check on the day's other top stories is coming up next. Then --

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV) MAJORITY LEADER: We will find out if there's anyone courageous enough who's a Republican who will vote for it. It won't be -- Democrats won't vote for it because it just wipes out Medicare.

(END VIDEO CLIP)

BLITZER: All right, you're going to hear what else Harry Reid has to say about Republican Paul Ryan's proposals to cut trillions from the deficit. My interview with the Senate majority leader, Harry Reid, that's coming up.

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

(COMMERCIAL BREAK)

BLITZER: Japanese regulators are downplaying concerns about possible damage to spent fuel rods at one of the reactors at the Fukushima Daiichi nuclear plant.

Lisa Sylvester is here. She is monitoring that, some of the other top stories THE SITUATION ROOM right now.

What's going on? SYLVESTER: Hi there, Wolf.

Well, regulators say high radiation levels recorded at the number four reactor this week are probably coming from debris from earlier explosions, not damaged by spent fuel rods. A top nuclear safety official reports that a sample taken from inside that reactor this week indicated, quote, "no particular damage to the spent fuel."

More fallout from the revelations that several air traffic controllers have fallen asleep on the job this year. The Federal Aviation Administration official in charge of air traffic control systems is now stepping down. The FAA has disclosed that at least six air traffickers have fallen asleep on duty this year. Transportation Secretary Ray LaHood calls the trend, quote, "absolutely unacceptable."

And Ford is recalling 1.2 million pickup trucks because their airbags could go off when not needed. The problem involves an improperly placed wire that can short circuit. The recall applies to F-150s built between 2003 and 2006, and some Lincoln Mark LTs built in 2008. The company -- excuse me -- issued much smaller recall over this same issue in February.

And it is the end of an era for daytime television on ABC. Say it isn't so. The network is canceling the celebrated soap operas "One Life to Live" which began airing way back in 1968, and all "All My Children" which launched in 1970.

So what are you going to be watching instead? An hour-long show called -- about food called "The Chew" and a show tentatively titled "The Revolution," which the network slays focus on health and lifestyle transformations.

And I know, out there, there are a lot of people bumming, a lot of people saying don't mess with my soaps, Wolf.

BLITZER: A sign of the times perhaps.

SYLVESTER: Yes, it is.

BLITZER: Thanks very much.

SYLVESTER: The emir of Qatar is here THE SITUATION ROOM with some very, very tough words for the Libyan leader, Moammar Gadhafi. You're going to see more of my exclusive interview with the emir, that's coming up.

Also, a harsh assessment of Donald Trump's presidential prospects in my interview with the Senate majority leader, Harry Reid.

(COMMERCIAL BREAK)

BLITZER: That last-minute bipartisan deal to keep the federal government open now about to be voted on in the Senate, after just being approved by the House of Representatives a little while ago.

But is the deal all that it's cracked up to be?

(BEGIN VIDEOTAPE)

BLITZER: We're with the Senate Majority Leader, Harry Reid.

Mr. Leader, thanks very much for joining us.

SEN. HARRY REID (D-NV), MAJORITY LEADER: Well, it's my pleasure.

BLITZER: Let's tie up a few loose ends. First of all, we remember last Friday night. We were up until midnight waiting for this budget deal. It was supposed to cut $38 billion, a record amount.

But all of a sudden the Congressional Budget Office comes out with their report saying not exactly. It's only going to cut this year, the remainder of this fiscal year, $352 million. You're only off by, what, $38 -- almost $38 billion. This raises questions about --

REID: The -- the Congressional Budget Office does -- they do excellent work. But we cut $38.5 billion, and it won't all happen by the end of this year. Some of this stuff spills over into the next fiscal year.

But the money is cut. It's on paper. It's been filed. The whole country can look at the cuts --

(CROSSTALK)

BLITZER: Cause the CBO says this year the actual amount that will be cut will be $352 million. The rest will be spread out not just next year, but for many years. Some -- some of those cuts for 10 years.

REID: But the most important thing is that it lowers the base of domestic discretionary spending, and any future money that we provide through the appropriation process has to be based on the lower floor that we created with this deal that we made. So it -- we create -- we have saved the country $38.5 billion.

BLITZER: So, can we assume that whatever was cut in this last- minute deal, that's going to be cut for the next many year?

REID: Yes. And we are going to now -- as soon as we finish this -- I spoke to Senator McConnell today -- are going to get our appropriations process going again. And all those bills -- it doesn't matter which one of the 12 bills we do -- we will start at a lower base than we would have done had this not been done.

BLITZER: And you have no doubt the Senate will pass what you agreed to last Friday night?

REID: Well, the Senate's an unusual place. There will be enough Democratic votes to pass this. I've been told by Senator McConnell we'll each provide about the same number of votes. So I feel comfortable it will pass.

BLITZER: There won't be a filibuster or anything like that?

REID: Oh, no, that's locked out. We've taken --

BLITZER: It should be 51 votes?

REID: No, it will be 60 votes.

BLITZER: You will get 60 votes?

REID: Yes, we can do that.

BLITZER: OK. So let's move on, talk a little bit about the president's speech yesterday.

A lot of Republicans, as you know, especially Paul Ryan, the chairman of the House Budget -- they are furious that the president was so political, so partisan, accusing them basically of wanting to end Medicare as we know it, changing the country. The rhetoric was pretty intense.

Did the president go too far?

REID: Well, I think Chairman Ryan should look at his own budget that he produced. For the viewers, he is the chairman of the House Budget Committee, and he produced a document that is -- oh, he'll have a vote over here, and we'll find out if there is anyone courageous enough who is a Republican who will vote for it.

Democrats won't vote for it because it just wipes outs Medicare. It takes it away from the system that we have he's known for all these years. It changes Medicare, that has been such a safety net for poor people. So what Obama did is recognize that we are going to have to make some cuts with our health care delivery system as it relates to health care -- as it he relates, I'm sorry, to Medicare and Medicaid, and we can do that without turning it over to the private sector.

BLITZER: I'll tell you what the concern was, that Paul Ryan, Jeb Hensarling another Republican leader, they were sitting there at George Washington University when the president basically accused them of doing all these things against old people and sick people. Last January, January 29th, the president said this at a retreat with House Republicans present --

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We're not going to be able to do anything about any of these entitlements if what we do is characterize whatever proposals are put out there as, well, you know, that's the other party's being irresponsible. The other party's trying to hurt our senior citizens, that the other party is doing X, Y, Z.

(END VIDEO CLIP)

BLITZER: Didn't the president do exactly that yesterday?

REID: The president's right. What we have to do, we have a very serious discussion that's going to take place. It's going to take place because we have the security, the safety and the financial responsiveness of this country's dependent (ph) on our raising the debt limit. These are bills we have already created, and we have to do this.

And so I agreed with the president when he said (ph) this background. I agree with anyone that thinks that it should not be a time where we are seeing who can have the best --

(CROSSTALK)

BLITZER: Because he said, I want to talk to you guys. We've got Joe Biden -- the vice president's going to come up, he is going to negotiate with Harry Reid and John Boehner. But did he set the stage for serious negotiations by being that partisan?

REID: I think that this is an excuse for running away from the issue.

Listen, we are in some serious times here, and this isn't a time we're going to be patting each other on the back saying, "Way to go." This is the Congress of the United States. We're trying to work through some difficult issues. There's two different ways of doing this, and what we are going to have to do is come somewhere in the middle.

BLITZER: But what about the debt ceiling, raising the debt ceiling? Will you allow the Republicans -- a lot of the Republicans want to add conditions in order to raise the debt ceiling. Originally, the Democrats, the president said, just have a clean bill, raise the debt ceiling, as has been done many times in the past.

Will you allow legislation to come up in the Senate that adds conditions to raising the debt ceiling?

REID: I met with Senator McConnell today. Both of us understand.

We have a different political philosophy, each of us, but we both understand how important it is that we get this debt ceiling raised. And I'm willing to look at anything that's reasonable. I don't think we should draw any lines in the sand and say, I won't accept this or I won't accept that. I want to work with everybody and try to get something done as quickly as possible.

BLITZER: A bunch of senators, including some Republicans like Mike Lee, Lindsey Graham, Rand Paul, they are saying Social Security, you've got to raise the eligibility age to 70.

Are you open to that?

REID: Why would anybody talk about this when we are talking about the debt of this country? Social Security has not created one penny of debt, not a penny. What is wrong with you? Why do you keep talking about?

BLITZER: A big percentage of the budget goes to Social Security.

REID: But it's all paid for. That is a deal we made in 1983 with President Reagan, with Tip O'Neill.

Now, if people want to look at Social Security past the 30-plus years that it's going to be sound and secure now, and look at it after that and have a separate organization set up to take a look at it, they want to finance it for 75 years, I'm happy to do that. But this discussion should not be part of deficit reduction, because it has nothing to do with the deficit.

BLITZER: A quick -- on this deficit reduction, the so-called "Gang of Six," three Democratic senators, three Republican senators, they are about to come up with their own ideas. We know that Republicans have theirs, the president has his. Now these senators are going to come up, we assume, with a bipartisan plan.

Are you willing to let that plan come up for a yea or nay vote on the Senate floor?

REID: I am supportive of the Gang of Six. Now, I don't know what their product is going to be, but one of my best friends I have in Congress and the world is Dick Durbin. I put him on the debt commission. It was something I'm not sure that he realized how much work it would be, but I wanted to have a progressive on there because I had two --

(CROSSTALK)

BLITZER: So, if he signs off on this Gang of Six plan, I assume you will be with him?

REID: Well, I have to look at it first, but I'm glad it's happening. I'm glad there is serious discussion.

You have Coburn from Oklahoma, really conservative, really has focused on the debt since he came here to Washington a number of years ago. And you've got Durbin, who is one of the more progressive people we have in the entire Congress. I'm glad they are working together, and they've talked to me about what some of their ideas are. I think their ideas are decent, but I want them to leave Social Security alone.

BLITZER: Because it sounds to me like if they can -- if Coburn and Durbin and the others can reach an agreement, that sounds like that could be an opening.

REID: That is the point. If you can get two people as ideologically different as Durbin and Coburn to work together for a product that's going to help us get this debt done, then I think we have something we all should look at.

(END VIDEOTAPE) BLITZER: And they're voting right now on the Senate floor on this final version. The House of Representatives passed it just a little while ago. This will keep the government open. Once the Senate passes it, it will go to the president and he'll sign it into law, and there will be no government shutdown the rest of this fiscal year, which ends September 30th.

Much more of my interview coming up with the Senate majority leader. Just ahead, you're going to hear what he has to say about Donald Trump, why he hopes Trump -- yes, hopes Trump -- gets the Republican nomination for president.

(COMMERCIAL BREAK)

BLITZER: They are still voting on the floor of the United States Senate. They're about to pass the spending bill that will keep the government open for another six months. The House of Representatives passed it a couple of hours ago. It will then be sent to the president for his signature.

No government shutdown. It will be official.

Meanwhile, the escalating battle in Libya is costing the United States lots of money. I spoke about that and much more. Here's part two of my interview with the Senate majority leader, Harry Reid.

(BEGIN VIDEOTAPE)

BLITZER: You know the United States has frozen $33 billion in Libyan assets, Gadhafi's money, basically, here in the United States. U.S. taxpayers so far have spent about $600 million to $700 million launching Tomahawk cruise missiles, fighting the Gadhafi forces on behalf of the rebels, if you will.

Should the U.S. keep a running tab of how much it's costing American taxpayers to liberate Libya and deduct whatever it costs from that $33 billion? Would you be open to that?

REID: Not only the United States should do this, NATO should do it, France should do it, the countries that are involved there on the ground and in the air. Yes. The answer is yes.

BLITZER: Yes, but that's huge development. I mean, if you support whatever it costs to liberate Libya, reducing it from the Libyan -- the $33 billion asset fund, that's a big development, if you support that.

REID: Well, Wolf, you know I, for a long time, advocated -- and it's been lost in the shuffle -- that the wealth of Iraq -- and it's a wealthy country -- they should, with their oil resources, be paying us back for what we've done.

BLITZER: Why don't they?

REID: Well, I have a tried. They should. BLITZER: That's a lot of money. And they are making a lot of money right now. And the U.S. has spent hundreds of billions of dollars, maybe $1 trillion, in Iraq.

REID: What people don't realize is, Iraq is still making a lot of money --

BLITZER: That's correct.

REID: -- and we should get part of it for what we've done there.

BLITZER: Here is the other issue, Afghanistan right now, $2 billion a week -- $100 billion a year the United States is spending in Afghanistan. A hundred thousand U.S. troops are there, are going to stay there, at least through the end of 2014 -- not all 100,000 but a significant number.

Is that money well spent?

REID: The president has indicated as commander in chief he is going to start drawing down the forces this summer. It's a huge amount of money.

BLITZER: A huge amount of money.

REID: And we went into this unpaid war in Iraq and Afghanistan, and we had all these tax cuts that were unpaid for. That's what we're talking about with this budget stuff. There simply is not enough of shared sacrifice.

BLITZER: Are you confident that it's going to work in the end, Afghanistan? Because it looks like a mess over there.

REID: I don't think -- I'm not confident that it's going to work. I'm happy to see that -- I have talked to General Petraeus in the room next door here a couple of weeks ago, and he think things are going well. I have great respect for him. I hope it's going well.

But the American people have, and rightfully so, a very short attention span. We cannot continue to keep dumping this money.

The military, Wolf, spends $700 billion a year on what they do, $550 billion just to keep the door open at the Pentagon, plus $150 billion in war fighting. That's a lot of money for the American people to support.

BLITZER: You think about what the U.S. could be doing with $2 billion a week, $100 billion that's being spent in Afghanistan, that's a huge amount of money.

REID: Think of what that would do for renewable energy for this country.

BLITZER: It's amazing.

All right. We're out of time. Two final questions. General Electric, they made $14 billion in 2010 around the world. They made a profit of $5 billion in the United States alone. They paid zero in taxes to the federal government.

Is that fair?

REID: It is a perfect example of our broken tax system it. We tax people to the tune of about $1 trillion a year. We give tax benefits of $1 trillion, $100 billion. It's not a very good system. We've got to change it.

BLITZER: Are you going to fix that?

REID: Oh, we're going to do our best. I think tax reform is so important, that I have asked Senator Baucus, the chairman of the Finance Committee, to hold weekly hearings on this to see if we can move this down the road. We have to do something. And if there were ever something that is bipartisan, it should be that.

BLITZER: One final question now, a political question. Donald Trump, all of a sudden, in our new CNN poll, he is tied with Mike Huckabee as the top contender for the Republican presidential nomination.

Would be a formidable opponent to President Obama?

REID: Oh, do I wish he would get the nomination.

(LAUGHTER)

BLITZER: Why?

REID: Donald Trump running for president of the United States? I mean, I like the man just fine, but he is not presidential caliber.

BLITZER: Well, you tell it like it is. Thanks very much for joining us.

(END VIDEOTAPE)

BLITZER: All right. They just passed legislation on the floor of the United States Senate. They got more than 60 votes.

Dana Bash, our senior congressional correspondent, is over up on Capitol Hill.

Dana, it's a done deal now. The House has acted, the Senate has acted. The president will sign it into law. No government shutdown.

DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: That's right. That is the headline.

The Senate is actually officially still voting, but our producer Rachel Stripefeld (ph) is in the room, and she says she has counted over 60 votes. So we do expect this to pass, as we did before. As you said, this is this end of a very bruising battle, very, very tough negotiations that led to this compromise, $38 billion in cuts. Some concerned about what many are calling fuzzy math. But the bottom line is, this battle is done and the war over trillions of dollars is going to begin tomorrow on the House floor, on the House Republican budget.

BLITZER: Yes, that's going to be a real, real fight. This is going to be child's play compared to what we can expect not only on the budget, but also on raising the debt ceiling. You're going to be a busy lady up on Capitol Hill, Dana. Thanks very much.

BASH: Thanks, Wolf.

BLITZER: Senator Reid's opinion of Donald Trump, by the way, isn't stopping the so-called Donald. The move Trump is now making in primetime television that puts him one step closer to a run for the White House.

Plus, from a military officer's uniform to an orange jumpsuit, the big hoax a California man is accused of pulling off on a number of small towns.

(COMMERCIAL BREAK)

BLITZER: Let get right back to Jack for "The Cafferty File" -- Jack.

CAFFERTY: The question this hour -- and we got a lot of e-mail, people very passionate about the question -- Is the end of the nanny state in the United States inevitable?

David writes from California, "Not until the dollar totally collapses. As long as over half the population pays no taxes, the politicians will continue to buy their votes with the other 49 percent's money. When it takes a wheelbarrow full of money to buy a loaf of bread, then things will begin to change."

Roy in Florida says, "It's amazing that this nation that was built upon its citizens carving out homes, farms and businesses in the wild wilderness on their own grit and determination now has about half its citizens on federal handouts at the expense of two percent of its fellow citizens. We've become a group where a small group of enablers" -- read that "politicians" -- "thinks they have the right to take other people's money, give it away to others, solely for the sake of themselves acquiring and keeping power."

Pat in Michigan, "It better be done or we're done for you. You've got to work for your supper even if you take less to start with."

Don writes, "The nanny state is an absolute requirement for a just society. The recent proposals by the rich and powerful to dismantle the most basic social programs, if implemented, will almost certainly cause chaos and widespread civil disobedience in America. Corporate tax evasion and grossly low income taxes for those with an easy ability to pay are chipping away the social safety net through the back door."

Kevin in New Hampshire, "Before the nanny state can end, we're going to have to go back to the world that our great grandparents knew, a local community that needs everyone to produce its own food, its own services, its own transportation, its own education. That gives everybody a job and a very modest livelihood."

"Goodbye interstates, massive corporations, and everything being bought at Wal-Mart. You can't have one without the other."

And Luke writes, "Open your eyes. Hello? Most civilized, developed countries are doing fine. Except us."

"Look at Canada, Norway, et cetera. They pay taxes, they live without the damn drama. I'm tired of all this right-wing stuff. I'm willing to pay more taxes to be civilized and compassionate. Are you?"

And if you didn't see your e-mail and you want to read more, go to the blog, CNN.com/caffertyfile -- Wolf.

BLITZER: Jack, thank you.

New information on Iran's role in the Middle East uprising. Specifically, what Tehran may be doing to try to help Syria crackdown on dissidents.

And the emir of Qatar, a key U.S. ally, has his own take on Iran's role that may surprise you. Stand by for our exclusive interview.

And is he a real Army officer? The unbelievable hoax a California man is accused of masterminding for lots of money.

(COMMERCIAL BREAK)

BLITZER: A Chinese national is accused of creating a fake Army Special Forces unit outside Los Angeles. Prosecutors say the 51-year- old fooled recruits with fake IDs, uniforms, even marched in a parade.

Let's go to CNN's Ted Rowlands.

TED ROWLANDS, CNN CORRESPONDENT: Wolf, investigators say the defendant in this case, David Deng, had about 100 followers in his so- called Army. They say that he convinced them he was affiliated with the U.S. government, and if they joined his Army, it would be a path to citizenship.

(BEGIN VIDEOTAPE)

ROWLANDS (voice-over): Fifty-one-year-old Yupeng David Deng was in court to answer to 13 counts of theft for allegedly starting his own Army. Deng, who investigators say referred to himself as "The Supreme Commander," allegedly duped as many as 100 Chinese nationals, most of them new arrivals to the U.S., into paying him to join his group. In return, they would be given preferred status to become U.S. citizens.

MICHAEL YGLECIAS, PROSECUTOR: What we have is individuals who are basically told train, rehearse, march, and act as if you are part of a military-type unit.

ROWLANDS: Investigators say Deng operated out of this office with the U.S. Army logo on the floor where he allegedly gave recruits uniforms and fake ID cards. Deng's Army even marched in this community parade last year with other military groups.

Prosecutors say Deng charged between $300 and $450 to join, then another $120 a year, plus an additional fee for promotions. One of Deng's attorneys acknowledges his client charged the members of a fee, but that it went for expenses, he said, for their opportunity to "volunteer." He says Deng didn't intentionally do anything wrong.

Deng's other defense attorney told us this on camera --

DARREN CORNFORTH, DENG'S ATTORNEY: They have one opinion as to what the facts are going bear out, and I think there is some misunderstanding about what was going on in this case. And I think that's going to come to light.

(END VIDEOTAPE)

ROWLANDS: Investigators say Deng's scheme unraveled when one of his recruits apparently tried to pay his renewal fee at an actual U.S. Army installation. That launched an FBI investigation back in 2008.

During a search of Deng's home last week, investigators found child pornography. Deng is now facing some child pornography charges, along with these theft charges. He is due back in court next week -- Wolf.

BLITZER: Thanks very much.

First, several air traffic controllers fell asleep on the job. Now one of their top bosses is looking for a job of his own.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now.

What's going on, Lisa?

SYLVESTER: Hi there, Wolf.

Well, Republican Congressman Ron Paul filed documents with the IRS allowing him to accept donations to be used for a White House campaign. Though he hasn't formally established an exploratory committee, a spokesman says the likelihood Paul will run is better than 50/50.

It remains to be seen whether real estate mogul Donald Trump will prove himself to be the master of politics, but there is little doubt he does know a thing or two about publicity. The news from the Trump camp is that he will use the final episode of "Celebrity Apprentice" in mid-May to announce when he is going to announce his intentions about running for president.

And actress Catherine Zeta-Jones has checked herself into a mental health center for treatment of a form of bipolar disorder. A representative says she suffers from bipolar 2 -- that's a less severe form, and that her stay will be brief. He mentioned that she has been under stress. Last fall, her husband, the actor Michael Douglas, was diagnosed with throat cancer.

And we wish them both the best -- Wolf.

BLITZER: Absolutely. Thanks very much for that.