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THE SITUATION ROOM

New Info on Debt Limit Talks; Spending a Fortune to Sway Debt Talks; Utilities at Risk of Attack; Kenya's Dry, Desperate Season; Terror Threat on 09/11/11; Interview With Homeland Security Secretary Janet Napolitano; Drone of the Future Tested; Two Suspicious Deaths In One Home

Aired July 21, 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: All right, Don.

Thank you.

Happening now, recession roulette -- the White House says negotiators aren't even close to a deal to raise the debt limit only 11 days before the deadline. We have some new information coming in about a possible framework and the sticking point. Stand by.

Power, water and waste plants across the United States may be vulnerable to a terror attack from within.

I'll ask the Homeland Security secretary, Janet Napolitano, about her department's disturbing new warnings.

And I'll ask the former Pakistani president, Pervez Musharraf, if he knew Osama bin Laden was hiding in his homeland and what he knows about terrorists who may be holed up in Pakistan right now.

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

But first, a powerful reminder today that if negotiators don't reach a deal to raise the debt limit in the next 11 days, all hell could break loose in the U.S. economy. Standard & Poor's is now warning that the nation could be shoved back into recession very soon after the August 2nd deadline passes. And with clock ticking and the stakes rising, our own Jessica Yellin just learned that Democratic House and Senate leaders plan to meet this hour at the White House.

We're also learning a good deal more about where the talks stand right now.

Let's go to Capitol Hill.

Our Congressional correspondent, Kate Bolduan, has the very latest -- Kate, what do you know?

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: Hey there, Wolf.

While both sides, all sides, really, are cautioning and threshing -- stressing that there is no deal, we're learning that President Obama and House Speaker John Boehner are making a fresh drive to at least strive for a big deal, to make one maybe last effort at this. And part of the discussion, we're starting to learn some of the details of what some of the ideas are that are being talked around.

This could include $3 trillion in debt reduction over 10 years. And in that, that could include spending cuts of possibly a trillion dollars or more, entitlement reform that could possibly include changing the age eligibility for -- of Medicare. And also on the issue of revenues, there's discussion of whether the Bush era tax cuts for higher income earners should expire and also whether there should be a promise, a commitment to broad -- to a broad tax overhaul, as part of this -- as part of this discussion.

But I'll tell you, when word of these little details, of these ideas, came out, House Speaker John Boehner went on the Rush Limbaugh radio show very quickly, really, in an effort, it seemed, to tamp down expectations. And he said very clearly while all lines of communication remain open, he said, there is deal -- no deal publicly, no deal privately.

And House majority leader, Eric Cantor, he echoed what John Boehner really said in saying to reporters that he's unaware of any deal that has been struck. But he did add there are all kinds of options on the table.

And those options, Wolf, are getting a lot of attention today.

BLITZER: And, Kate, you're getting some new information on the Republicans, what's called their "Cut, Cap and Balance" legislation. It passed the House earlier in the week.

BOLDUAN: Right.

BLITZER: It's now supposed to go to the Senate.

What are you picking up?

BOLDUAN: It passed in the House and it was -- it moved over to the Senate to be voted on. It was -- it already had a veto threat from President Obama, even it would have passed the Senate.

But we're now hearing that House -- Senate Majority Leader Harry Reid, he has now moved and said that he wants to vote on this tomorrow to -- he's, of course, been opposed to this all along. I mean we heard from one leadership aide that the vote that they could be moving toward could effectively table -- effectively killing this legislation.

Harry Reid wanting to move on to possibly his fallback plan or moving this discussion forward.

BLITZER: Yes. It doesn't look like they have 60 votes in the Senate that would pass -- that would enable it to pass.

BOLDUAN: Right, Wolf.

BLITZER: And even if it did, the president has threatened he would veto it.

All right, thanks very much, Kate Bolduan.

Now, most Americans say they fear a crisis or major problems if the debt limit isn't raised by the August 2nd deadline. But look at this brand new CNN/ORC Poll. About a third of those surveyed say they prefer budget plans with only spending cuts. But almost twice as many say they'd prefer a mix of spending cuts and tax increases.

Clearly, there's an enormous amount of pressure on the White House and on members of Congress right now, as this debt drama plays out. A lot of that pressure is coming from lobbyists, who are spending a fortune to try to influence the negotiations.

Our own Lisa Sylvester has been investigating this part of the story for us.

You had an excellent piece yesterday.

What's the latest?

LISA SYLVESTER, CNN CORRESPONDENT: Wolf, you know, lobbyists are required to register and report spending with the Senate Office of Public Records. And we now have information on the most recent quarter that ended in June. And in a three month period, an astonishing amount of money was spent on lobbying. And one of the biggest issues -- the debt ceiling negotiations and potential fiscal cuts.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Senate lobbying disclosure records show more than 140 groups, including aircraft owners, farmers, unions, physicians, oil companies and realtors, all lobbying to save tax breaks or prevent spending cuts. Stakeholders in the debate are spending millions.

Here's what a few groups shelled out in just a three month period, from April to June, lobbying the government on various issues, including the debt ceiling. The U.S. Chamber of Commerce, $9 million; the AARP, $4.6 million; ExxonMobil, $3.8 million; Pfizer, $3.5 million; America Bankers Association, $2.3 million; AFL-CIO, $880,000; the Aircraft Owners and Pilots Association, $730,000; and the American Farm Bureau, $560,000.

The Sunlight Foundation, a government watchdog group, says there's a lot riding on the deficit negotiations.

BILL ALLISON, SUNLIGHT FOUNDATION: Basically, Washington spends a lot of money. It's the biggest customer in the world. So businesses, labor unions, all kinds of other interests, they want the spending to continue.

SYLVESTER: Mary Kate Thatcher is a lobby is lobbyist with the American Farm Bureau. Farmers are staring at a potential cut in government subsidies ranging from $11 billion to $30 billion. MARY KAY THATCHER, AMERICAN FARM BUREAU: Well, it's tough to keep up on. And, certainly, we're worried about how much gets cut. We're very much for getting a lot closer to a balanced budget, but we'd like to only give our share and not more than our fair share.

SYLVESTER: The National Association of Realtors spent $7.1 million lobbying in the second quarter of this year. That's nearly double what they spent over the same period last year. Realtors are worried the mortgage interest deduction for homeowners could be eliminated.

PAUL BISHOP, NATIONAL ASSOCIATION OF REALTORS: Well, if the mortgage interest deduction went away or were severely curtailed, it would just add one more level of uncertainty to an already uncertain housing market. And we'd likely see home prices decline even further if homeowners and homebuyers couldn't take advantage of the deduction going forward.

SYLVESTER: With potentially $3 trillion in federal deficits cuts on the line, special interest groups are angling to have their say on what is in and what is out.

(END VIDEO TAPE)

SYLVESTER: Now, these lobbying spending numbers are through June, of course. In the last couple of weeks, there has been a frenzy of lobbying activity going on on Capitol Hill. The Sunlight Foundation anticipates that when the next quarterly reports come out in the fall, that they will also show a huge bump-up in the amount of money spent on lobbying on this issue.

BLITZER: And these lobbyist are only just getting started right now.

SYLVESTER: Yes.

BLITZER: Thanks very much for that, Lisa.

We'll have much more on this part of the story later in THE SITUATION ROOM.

But right now, a chilling new warning about terror on U.S. soil. The Department of Homeland Security alerting law enforcement officials about possible threats to utilities across the country -- plants that are vital to our way of life.

Let's bring in our national correspondent, Susan Candiotti.

She's got the latest -- Susan.

SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Hi, Wolf.

Well, this new bulletin from DHS was sent Tuesday to law enforcement agencies around the country about an ongoing threat to the U.S. infrastructure.

(BEGIN VIDEOTAPE)

CANDIOTTI (voice-over): Trespassers planning attacks on gas, water and other power plants are one thing, but in a post-9/11 world, danger can also come from within. A new Department of Homeland Security bulletin obtained by CNN warns, quote, "Insiders pose a significant threat to private and public utilities."

This spring a disgruntled employee at a Mesa, Arizona wastewater plant allegedly managed to shut down a system that could have caused a massive sewage backup. Authorities say the suspect made this bizarre 911 call.

UNIDENTIFIED MALE: I have basically taken the plant hostage.

CANDIOTTI: Last January, gas service was cut off to almost 3,000 customers in Illinois when a recently fired employee broke into a monitoring station and cut off a valve.

DHS has not linked either case of sabotage to Al Qaeda. But the bulletin refers to a New Jersey man suspected of ties to terrorism. Sharif Mobley worked at five nuclear power plants doing maintenance work, then moved to Yemen to follow al Qaeda leader, Anwar al-Awlaki. Mobley was named in a Nuclear Regulatory report after he allegedly expressed militant Islamic views. Mobley admits he admires al-Awlaki, but denies any ties to terror. He has not been charged with any U.S. crime, yet authorities singled out the case to warn utilities that al Qaeda uses publications like "Inspire" magazine to encourage attacks on sensitive locations.

(END VIDEO TAPE)

CANDIOTTI: A U.S. officials says this week's warning is not based on new intelligence nor from the treasure trove of material confiscated from Osama bin Laden's compound. DHS tells CNN there is no credible imminent threat.

However, the several previous incidents named in the bulletin illustrate an ongoing need to be on guard -- Wolf.

BLITZER: Good -- good advice indeed.

All right, thanks, Susan.

Thanks very much.

And later this hour, I'll be speaking with Homeland Security secretary, Janet Napolitano, about the threat to America's utility plants; also, about concerns of a terror attack exactly 10 years after 9/11. Stand by for that interview.

We're also getting new information and a new tally of what taxpayers lost by bailing out Chrysler. The price tag is big.

And we've been using CNN's global resources to expose the heartbreaking famine in Somalia. Now see how neighboring Kenya is suffering, as well. Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

JACK CAFFERTY, CNN CONTRIBUTOR: Wolf, when it comes to the debt ceiling debate, members of the so-called Tea Party, particularly those in the House of Representatives, have taken a very hard line and they're not budging from it -- deep spending cuts, no new taxes or no deal.

Their unwillingness to compromise has not only hurt the chances of a deal on the debt debate, it's also damaged the negotiating power of their own party. Leaders like House Speaker John Boehner and Senate Minority Leader Mitch McConnell, who have grown more open to compromise as the clock continues to tick toward a deadline.

It's a tough place to be for the Republicans, who aren't buying the Tea Party message. And there are some, particularly those in the Senate, who have shown indeed in the Gang of Six bipartisan compromise. The compromise isn't on the Tea Party agenda. And the passage of the so-called "Cut, Cap and Balance Bill" in the House earlier this week proves that. The bill requires steeper spending cuts and pushes for a constitutional amendment that would require a balanced federal budget deficit. Of course, the bill has little or no chance in the Senate and the president says he'll veto it if and when it ever gets to his desk, which it won't.

Meanwhile, that clock is still ticking.

In the end, House Republicans may be forced to vote for a short- term agreement on the debt ceiling in order to avoid a government default and to save face with constituents. Either way, if a deal is reached on the debt ceiling by August 2nd, well, we'll find out just how much or how little power the Tea Party really has, depending on what form the deal takes.

Here's the question, then -- will the Tea Party's hard line on the debt ceiling ultimately help or hurt them?

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

David Gergen wrote a nice column that's on CNN.com and its -- and the slug is, "This is no way to run a country."

Boy, is he right.

BLITZER: He certainly is.

All right. Thanks very much, Jack, for that.

In Southern Somalia right now, it's the worst famine in years. And people are on the verge of starving to death. Many already have. And in a remote region of neighboring Kenya, chronic drought is creating similarly desperate conditions.

CNN's David McKenzie is on the scene with details.

(BEGIN VIDEOTAPE)

DAVID MCKENZIE, CNN INTERNATIONAL CORRESPONDENT (voice-over): Driving through bone dry northern Kenya deep into Turkana. In the remote village of Kapur (ph), they're angry. With the world focused on famine in Somalia, they want to tell their stories.

Outside of the media glare, people like Alice Kordet are barely surviving. She lost all her livestock months ago to the drought. A proud nomadic herder her whole life, now, she depends on food aide.

"This is the worst year that I've ever seen," she says. "There's been no rain and because of that, no water. The animals have all died. Now, there's no food."

It's so bad she must feed Emanuel (ph) wild fruit and dirty water, which makes him sick. He was born with a twin sister, Miriam. She died in May.

"I'm doubly cursed," says Alice, "because I gave birth to twins during a drought. And Miriam died because of it. She died of hunger."

(on camera): The world is focused on this drought in the Horn of Africa. But here in Northern Kenya, it's part of a downward spiral. The rains are becoming less frequent here, the droughts more often. This is a chronic emergency.

(voice-over): Tony Lake, the head of UNICEF, says we need to focus on the big picture.

ANTHONY LAKE, UNICEF EXECUTIVE DIRECTOR: While there are a lot of lives that are in danger here, there's also a way of life that's endangered here, as well. And it's a damn shame.

MCKENZIE (on camera): It would seem like, to me, that this is an extremely vulnerable population when compared, say, with the world's population.

How would you assess the pastoralists of the Horn of Africa?

LAKE: This is the most fragile situation I've seen anywhere.

MCKENZIE (voice-over): The dry season will last here for several more months, at least. And the longer term view is also grim. So the people of Turkana are asking one thing -- don't forget them. David McKenzie, CNN, Turkana, Kenya.

(END VIDEOTAPE)

BLITZER: Tony Lake was President Clinton's first national security adviser. He now runs UNICEF. I want to thank him and everyone else who is helping. And you can help, as well. To find out what you can do to make a difference, to help these victims of famine in East Africa, visit our Impact Your World page. That's at CNN.com/impact. Go there and do something. This is a horrible story.

We're going to stay on top of it here in THE SITUATION ROOM.

It's been one of the main sources of financing insurgents. Now opium poppy seeds -- a very large cache of them have been seized after a raid in Afghanistan.

And the government ends its bailout of Chrysler. But taxpayers still incur a huge loss. We're going to tell you just how much.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now, including the latest on the NFL.

What's going on?

SYLVESTER: Yes, that's right, Wolf.

The four-month-old NFL lockout could be nearing an end. The league's 32 team owners are meeting in Atlanta today, where they are expected to vote on a new labor agreement with the players union. The players are also planning a vote. But NFL Players Association executive director, DeMaurice Smith, says there are still some outstanding issues left to resolve.

And Uncle Sam is no longer a stakeholder in Chrysler. The taxpayers did end up losing an estimated $1.3 billion in the government bailout of the automaker. And the government recently sold its remaining 6 percent stake in Chrysler to the Italian automaker, Fiat, for $560 million. The government originally loaned Chrysler $12.5 billion, $11.2 billion of which was repaid by the automaker.

And almost half a million pounds of opium poppy seeds have been confiscated in Southwestern Afghanistan. The find was the result of a joint raid by NATO and Afghan security forces. Opium poppy can be used to make heroin and other drugs and is considered a main source of funding for insurgents.

And at least 22 deaths are being blamed on a blistering heat wave that's covering much of the United States. The National Weather Service says 55 record highs were broken yesterday. Triple digit temperatures are expected to remain across the Eastern U.S. through Saturday.

In Chile, however, it is cold weather that is causing problems there. Chilean officials declared a catastrophe after a heavy snowstorm left roads blocked in several communities. You can see all that snow in Chile that we're having these record high temperatures.

BLITZER: Because it's winter there now -- SYLVESTER: Yes, exactly.

BLITZER: And it's cold.

SYLVESTER: Yes.

BLITZER: It's summer here, so it's hot. That's --

SYLVESTER: But it's --

BLITZER: (INAUDIBLE).

SYLVESTER: We're getting --

BLITZER: That's what happens.

SYLVESTER: -- the extremes, though.

BLITZER: Yes. It's hot in the summer, cold in the winter.

All right, thanks.

Since the death of bin Laden, is the U.S. gunning for its most warranted terrorist dead or alive?

I'll ask the Homeland Security secretary, Janet Napolitano.

And with time running out for a deal on debt talks, will there be any winners if America defaults?

(COMMERCIAL BREAK)

BLITZER: I'm Wolf Blitzer.

Stories we're working on in our next hour. Pakistan's former president, Pervez Musharraf, speaking out to THE SITUATION ROOM about why Osama bin Laden was able to hide out in his country for five years.

Could there be an opening for Republicans in the debt stalemate, after new signals from one of the party's leading anti-tax activists about the Bush era tax cuts?

And our own Dr. Sanjay Gupta meets up with a mini Darth Vader, whose mission it is to keep Washington from implementing cuts in Medicaid. It's a CNN exclusive.

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

Well, right now, the nation is nearing a dark milestone -- 10 years since the terror attacks that changed America forever. And as we get closer to September 11th, there's a lot for the Department of Homeland Security to worry about, including its brand new alert about possible threats to utility plants across the country.

(BEGIN VIDEOTAPE) BLITZER: And joining us now, the secretary of Homeland Security, Janet Napolitano.

Madam Secretary, thanks very much for coming in.

JANET NAPOLITANO, HOMELAND SECURITY SECRETARY: Oh, thank you.

BLITZER: And there are fresh concerns as we speak right now that terrorists or terrorist sympathizers may have infiltrated utility power plants here in the United States, including nuclear power plants.

Is that true?

NAPOLITANO: Well, I think what that report is based on is an information sharing report of the type that we -- we put out in the normal course of business, just reminding our private sector partners, utilities and the others, of things they need to be watchful for, watching out for. But we have nothing specific, credible or current. It's more by way of background information.

BLITZER: Well, we do know one individual was arrested and he's -- and he managed to infiltrate, what, five nuclear power stations in America?

NAPOLITANO: Indeed. That's why our utility operators need to be constantly vigilant, just as our other private sector partners need to be constantly vigilant. And there are lots of things that we need to be watchful for.

So we are required or asked by the -- the Congress, asked by the 9/11 Commission, to keep information flowing out to the private sector, out to the public. This was part of our information sharing responsibility.

BLITZER: I hope they intensify those background checks to make sure that terrorists don't infiltrate. That's the goal.

NAPOLITANO: Indeed.

BLITZER: All right, let's talk a little bit about the 10th anniversary of 9/11 that's coming up. My sources are telling me that we should be deeply concerned because al Qaeda may be looking for revenge, retaliation for kill -- for the U.S. Killing bin Laden.

How concerned should the American public be right now, that in -- in or around 9/11 -- on or around 9/11, al Qaeda could retaliate in a major way.

NAPOLITANO: Look, you know, immediately after the death of bin Laden, there were lots of speculation about retaliatory attacks. But there was nothing specific or credible, so we didn't raise the nation's alert level at that time.

We continue to watch, to listen, to observe. If there's something specific or credible that comes in, we'll be able to raise an advisory and tell people what it is that we know.

BLITZER: Because they're very patient and they -- they look at this in terms of long-term, Ayman Al-Zawahiri, the number two, now the number one of al Qaeda, at least I've been told by knowledgeable sources, he wants revenge in some way. I don't know what his capability is to engage in another 9/11. Does he have that capability?

NAPOLITANO: No. When you look at pre-9/11 and post-9/11 United States, you realize, you know, how far we have come both in terms of intelligence gathering, information sharing, passenger screening, vetting within the airports themselves, arming of airplanes themselves, the cockpit doors, the ability to exchange communications between military, air traffic control and the like. Much different now than we were prior to 9/11.

BLITZER: So, has there been a shift in their strategy going for less ambitious killings, if you will, smaller scale operations?

NAPOLITANO: Well, I think the kind of massive international plot that led to 9/11 would be very difficult to accomplish today. So, yes, what we see are smaller plots involving fewer people, more difficult to interrupt, but we've seen, you know, several. We've seen the attempt on flight 253 on Christmas Day of 2009.

We saw the attempted cargo bombings in October of this past year. So, different types of plots, constantly evolving. We have to constantly evolve, and we have to have multiple layers at the same time so that if one layer misses, there's another layer there to pick up.

BLITZER: And just to be precise on the 10th anniversary of 9/11, as of now, you're not planning on raising the threat level, are you?

NAPOLITANO: Right now, we have no specific credible intelligence that would suggest that we should.

BLITZER: Even out of an abundance of caution given the fact that the U.S. found information in Bin Laden's compound that he wanted to do something spectacular on the 10th anniversary?

NAPOLITANO: Look, aspiration versus ability and an actual plot are very different things, but should we evaluate in the whole picture and decide, yes. In the context of the entire picture, we should raise the alert level, we will do so.

BLITZER: If the U.S. had credible information where Ayman al- Zawahiri, the new al Qaeda, is hiding out presumably in Pakistan or someplace, would you, would the president authorize killing him like he did with Bin Laden?

NAPOLITANO: Well, the president has those options. They're very carefully circumscribed, but our whole goal is to make sure that the American people remain safe, not just from core al Qaeda but all the other al Qaeda groups, AQAP, for example.

BLITZER: Al Qaeda in the Arabian Peninsula.

NAPOLITANO: Exactly right. AQIM, another, al Shabaab another one, and also, we now have the phenomenon of home-grown terrorism, and we have to be alert to that as well.

BLITZER: Like what they call these lone wolves?

NAPOLITANO: Lone wolves which are particularly difficult, because, by definition, they're not plotting with anybody, and therefore, there's no communication to intercept.

BLITZER: But they are inspired, if you will, by someone like Anwar al-Awlaki, the American born cleric in Yemen. You, meaning the United States government, you tried to kill him after Bin Laden, but narrowly missed, right?

NAPOLITANO: They are inspired. It is that ideology, and Awlaki has been a potential - you know, a very active propagandist as it were for al Qaeda and its ideology.

BLITZER: He's wanted dead or alive, right?

NAPOLITANO: He is wanted. Yes.

BLITZER: Dead or alive?

NAPOLITANO: Yes.

BLITZER: Even though he's an American citizen?

NAPOLITANO: This has been of concern, but yes, he is a very active member of al Qaeda.

BLITZER: Let met read to you from this new report that the Department of Homeland Security came out with today implementing 9/11 commission recommendations, one of your conclusions.

"While America is stronger and more resilient as a result of these efforts to strengthen the Homeland Security enterprise, threats from terrorism persist and continue to evolve. Today's threats do not come from any one individual or group, they may originate in distant lands or local neighborhoods. They may be as simple as a homemade bomb or as sophisticated as a biological threat or coordinated cyber attack."

And I know you're concerned about cyber-warfare right now. I didn't see in that conclusion concern about a nuclear, some sort of nuclear threat, a nuclear device being used against the United States. Is that unrealistic or realistic?

NAPOLITANO: You know, the conclusion is meant to suggest that we can't be focused just on one thing or one group. We have to focus on many different types of tactics, many different types of techniques, many different types of groups or individuals, and so, we do have concerns and work done in the nuclear realm, the biological realm, the chemical realm, all of the different tactics that could potentially be used by a terrorist.

BLITZER: Are these terrorists any closer to getting their hands on some sort of biological or nuclear device?

NAPOLITANO: You know, I think biological is somewhat of a greater concern, the nuclear in that particular sense, chemical as well, and, you know, different types of poisons, different kinds of things that could be used to attack an innocent citizenry. And so, there are different things that we have to be able to do. We have to be able to collect intelligence.

We have to be able to share intelligence, internationally, and share it in real time basis across the country. These are things, that ability to share, collect, share, spread across the country, receive intelligence back didn't exist prior to 9/11. We have it now.

BLITZER: Good luck.

NAPOLITANO: Thank you.

BLITZER: We're counting on you.

NAPOLITANO: Thank you.

BLITZER: Madam secretary, thanks for coming in.

NAPOLITANO: You bet.

(END VIDEOTAPE)

BLITZER: Is the U.S. military's -- it's the military's drone of the future, shall I say, and it's being tested right now. Our Brian Todd got an inside look.

And will Washington officials throw a Hail Mary pass to prevent the U.S. from plunging into a debt disaster? Donna Brazile and Alex Castellanos, they are standing by for our "Strategy Session."

(COMMERCIAL BREAK)

BLITZER: It's the latest in drone technology, and it sounds something like straight out of a sci-fi movie. It's in the testing stages right now.

Our own Brian Todd got a firsthand look.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT: Wolf, we're here to test out the propulsion capability of the next wave of unmanned aerial vehicles, UAVs, and this is a model of it. It's called the AD-150 made by American Dynamics Flight Systems.

What's going to be unique about this vehicle is its ability to lift off the ground vertically like a helicopter, then turn, and fly forward. It's going to do that with the capability of this thing called a nacelle.

It's like a propeller. It'll enable the craft to lift off, as we said, and then, it turns to enable it to fly forward. And what we're testing out today is its capacity to actually make that transition, will have the propulsion capability to make the transition from vertical to horizontal flight without this vehicle crashing.

This vehicle will be similar to other UAVs and that it will have avionics, it will have intelligence-gathering capability, weaponry on it, and it will have a pay hold of up to 1,000 pounds if that's needed.

They also want this to be able to fly on missions ahead of the osprey helicopter, the osprey carries payload. It picks up and drops off soldiers. And they want us to be able to fly ahead of the osprey and be able to gather intelligence, maybe strike targets.

So, this is going to be a crucial test. What they're going to be testing out here is the ability of this piece of machinery here. It's called the nacelle, just this propeller system here on the end of the wing to lift and then transition.

We're here at the Glenn Martin Wind Tunnel at the University of Maryland to do this. This tunnel generates winds of up to 240 miles an hour, but for this test, we're only going to go at about probably 30 miles an hour, so just again to see if it has that ability to make the transition. So, we're going to go into the wind chamber and test that out.

Into the wind chamber now, they're using smoke so that they can visualize the airflow, see if this thing does have that capacity to transition from vertical horizontal flight.

This is a scaled-down version of the nacelle. The real ones are actually a lot bigger because the UAV we're talking is about 17 1/2 feet from wing tip to wing tip. We're going to now talk to Wayne Morse, the CEO of American Dynamic to see how this thing is performing.

OK. Wayne, you've seen it in wind chamber now. You've tested this out in the computer. Does this have the capacity to transition from the vertical to the horizontal flight?

WAYNE MORSE, AMERICAN DYNAMIC FLIGHT SYSTEMS: Most definitely. The results we're getting from this test right now we're extremely encouraging.

TODD: The military is going to want to put wounded soldiers, possibly a human payload on UAVs in the future. Will this have the capacity to do that?

MORSE: Most definitely. With a 1,000-pound payload that the AD- 150 has, it can certainly do that mission. We may have to do some additional testing, but by all means.

TODD: All right. Well, Wayne, thanks very much. Good luck. The makers say that they want to have the first flight for this new UAV, the AD-150 ready by January 2013. Each one of these vehicles can cost the military a few million dollars, but the makers say that's a lot less than the average a UAV of similar size -- Wolf.

(END VIDEOTAPE)

BLITZER: Brian Todd with an amazing story, thank you.

Time is running out for a deal on lifting the country's debt limit. Are there enough votes in Congress to avoid a government default?

And the ugly feud between two members of Congress from Florida. Republican, Alex Castellanos, and Democrat, Donna Brazile, they are here to talk about that and more in our "Strategy Session." That's next.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session." Joining us our two CNN contributors, the democratic strategist, Donna Brazile, and Republican strategist, Alex Castellanos. Guys, thanks very much for coming in. What's the latest? What are you hearing? Is the president getting ready to what some Democrats fear, sell out the liberal base of the Democratic Party?

DONNA BRAZILE, CNN CONTRIBUTOR: Well, I don't believe he's trying to sell out anybody at this time.

BLITZER: But in order to avoid default?

BRAZILE: Well, you know, Wolf, I think there's still many options on the table. Maybe, the Republicans are going to finally come to their senses. The Senate Democrats will vote down the ridiculous bill that the house Passed yesterday. And hopefully, sometime late tonight, tomorrow morning, the speaker and others will be able to get back with the president and come up with a deal that will put this country on a great fiscal path.

BLITZER: If they don't, I'll tell you what I'm concerned about that, there may not be enough votes in the House of Representatives. There will be in the Senate, in the House, but even that fail-safe McConnell/Reid position to avoid a default. I worried about that.

ALEX CASTELLANOS, CNN CONTRIBUTOR: Wolf, you should be. I talked to a Republican congressman not long ago, one of those congressmen who just does not want to vote for raising the debt ceiling. He said, look, we get it. We understand this could be Armageddon. We understand this could push us over the edge. We understand this could -- no Social Security checks, all these terrible things. Shouldn't we step in front of the that bullet now?

Do we want to pass that along to our kids? These problems are really -- I believe Barack Obama is right. We have to do something now. And that's why Republicans are -- you know, one man's intransigence is another's courage. Republicans are really motivated to do something big here and reduce spending.

BLITZER: Because the former president, Bill Clinton, he agreed with some when he said the other day, if necessary, to avoid default, the president should invoke the 14th Amendment to the constitution and just do it, without any formal legislation. You think that's a good idea, if necessary?

BRAZILE: First of all, I like what the president said. Unfortunately, I took a look at the legal implications of that and read what Laurence Tribe, who's a constitutional scholar said, and Congress has the authority to raise the debt ceiling. Look, the Republican --

BLITZER: Let me read from the 14th Amendment to the constitution, and all of us legal scholars will discuss.

(LAUGHTER)

BLITZER: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions, and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Now, some have interpreted that as saying the president has that authority, if necessary, to avoid this kind of disaster to just do it.

CASTELLANOS: He may, but even if he does, it would be such a disaster and a such precedent-breaking action that that would still roil the markets. So, that's not the answer. Barack Obama wants to get re-elected. He doesn't have a problem on his left. Chances are they're going to vote for Barack Obama next election and not the Republican.

His problem is in the middle. If he can become the president that actually does something about the deficit and the debt, that actually puts us on a curve down to reduce that problem, it's the best single thing he can do for his re-election, and that's what he's doing right.

BRAZILE: I think the president overarching concerned is not his re-election, though, that is important. It is to make sure that we save the world's best economy from default. We've made these bills. Alex and I were talking the other day. I said, Alex, we both went to the bar. We had a great time. You walked out. I have to pay the bill. That's not the way it worked. We both have to pay this bill --

BLITZER: I thought you were buying.

BRAZILE: No, we were not buying. It's your turn to pay the bill, too.

BLITZER: This fight between Debbie Wasserman-Schultz, the congresswoman from Florida, the chair of the Democratic National Committee, and Allen West, the Republican congressman, also from Florida. It is so ugly and nasty, but what is intriguing today is now both of them are using this fight. He called her vile, and repugnant, whatever he said about her. They're using this for fundraising purposes.

Steve Israel, who chairs the Democratic Congressional Campaign Committee, "Congressman West thinks he can attack a respected legislator like Congresswoman Wasserman-Schultz with this kind of hate-filled screed. Allen West has shown us his true colors. Now, let show him ours. Contribute right now to help thro Allen West and his Tea Party colleagues out in 2012."

Now, he's got his own fund-raising e-mail, this from Allen West. "Her agenda isn't to improve the lives of Floridians or to stand on principle. She's an attack dog for the liberal progressive wing of the Democratic Party, plain and simple, and it's times like this that I need friends with me. Please make a donation of $25 or more at my website right now." I don't remember a personal, bitter feud emerging like this in a long time. Do you?

BRAZILE: Oh, yes. I mean, this is politics.

BLITZER: Where they somebody called another member of Congress vile?

BRAZILE: Well, look, I think Representative West, I heard a lot. But, I think, Representative West needs to, you know, back down a little bit.

BLITZER: He's not apologized to her.

BRAZILE: No, of course, and he should apologize. And let me just say, the DNC has a link.

CASTELLANOS: Treat a woman like a lady even when they aren't.

(CROSSTALK)

CASTELLANOS: It's understandable why she got under his skin. Remember, she's the one who, I think, went on Roland Martin (ph) show and said Republicans wanted to bring back Jim Crowe. Allen West is a black Republican. You can probably accuse him of a lot of things, but probably not that.

BRAZILE: She was referring (INAUDIBLE) to deny people the right to vote by forcing to show a voter ID.

CASTELLANOS: Nevertheless.

BRAZILE: First of all, the DNC is not raising money off of this. Debbie has moved on.

BLITZER: I didn't say the DNC, I said the CCC.

BRAZILE: Well, the DNC has not, and she used to chair the Democratic National Committee. So, she's not fundraising off of this. And she can, she's the chair.

(CROSSTALK) BRAZILE: It's not her brother. The CCC. The second thing, Wolf, if you take a look at what Representative West has said in the past against his other opponents including -- he's always -- he's constantly going-over the edge with some of these attacks. He needs to hold back. She was referring to his vote on Medicare.

CASTELLANOS: Just when we thought no one would ever replace Nancy Pelosi in the heart of all Republicans along comes Debbie Wasserman-Schultz. She has got to be careful. She is very effective in raising dollars, and she is a very good attack dog. She could become the Alan Grayson in Florida.

BRAZILE: The only thing Republicans know how to do and do well is attack women.

BLITZER: All right.

BRAZILE: And we're sick of it.

CASTELLANOS: I like women.

BLITZER: All right. Thanks very much.

An anti-tax guru may be trying to give lawmakers a lay out of the stalemate over the Grover Norquist surprising new definition of what is in the tax hikes. Stand by.

And the former president of Pakistan, Pervez Musharraf, he has some unexpected insight into the presidential race right here in the United States.

(COMMERCIAL BREAK)

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

CAFFERTY: Question this hour, Wolf, is: Will the Tea Party's hard line negotiating position on the debt ceiling talks ultimately help them or hurt them.

Larry writes, "The Tea Party hard line position -- pardon me -- will take its toll in 2012. Americans want leaders to leave with reasonable solutions and sensible compromise. The Tea Party mantra of our way or the highway has run its course. Our rights, I think, people who weren't paying attention are paying attention now. And they see the agenda of the radical Republicans for what it is, destroy Social Security, destroy Medicare, and protect their rich pay masters at any cost. They'll get the blame if this economy crashes as a result of their stupidity."

Carl in Pahrump, Nevada, little tiny spot out the middle of nowhere, "The Tea Party is making the Republicans look like the party of deadbeats that don't pay their bills or honor their obligations. They're making a Republican Party obsolete."

Bizz writes from Pennsylvania, "I think it will definitely hurt them. When you refuse to negotiate and act like a spoiled child, it only hurts your cause. House Speaker Boehner has no say. He's a puppet on strings. I actually feel sorry for him having to deal with such a group."

Barbara in North Carolina, "They're not thinking about what's best for this country, they're thinking about how they can get rid of President Obama.

Alex in Washington writes, "Hard line purity will ultimately hurt them in this nation founded on political compromise. For centuries, the process has been based on negotiation and compromise. The Tea Party ideologues have gridlocked the process of governing and threatened to drive the economy off a cliff. A lot of Americans such as disabled veterans, poor children, and the elderly will be hurt if the Tea Party gets its way."

And Jim in Colorado writes, "It's going to hurt them, and hopefully, it causes some of those extremists to be voted out in 2012. Every time I hear one of them on the news, it makes me wonder what they have been putting in the tea they're drinking."

If you want to read more on this, you find it on my blog, CNN.com/caffertyfile -- Wolf.

BLITZER: Thanks, Jack.

Now, life and death inside a wealthy Southern California community. A family's bloody nightmare creating shock and suspicion.

CNN's Sandra Endo is in Coronado, California.

SANDRA ENDO, CNN CORRESPONDENT: Wolf, it's a puzzling mystery in this ocean-front community. This historic mansion behind me, a possible crime scene.

(BEGIN VIDEOTAPE)

ENDO (voice-over): It started last Monday when police say six- year-old Max Shacknai fell down the stairs of this 27-room mansion near San Diego and was rushed to the hospital. Two days later, 32- year-old Rebecca Zahau was found naked, hanging from a second story balcony in the home. Her hands and feet tied together.

What strikes you as most unusual about the case?

ROY FRANK, SAN DIEGO SHERIFF DEPARTMENT: The case is suspicious. There's no question about it. Any time that you have a female that's found in a back yard or a courtyard unclothe and her feet and hands are bound, that becomes concerning.

ENDO: Pharmaceutical company CEO, Jonah Shacknai is Max's father and Zahau's millionaire boyfriend. His son later died from the injuries. Shacknai said he wasn't there when Zahau died and what happened to her is still a mystery.

FRANK: In this case, you know, suicide and homicide at times can look very, very similar. And it's important to really take your time process that evidence, and usually, that evidence will solve the mystery.

ENDO: But Zahau's sister is telling people she doesn't believe Rebecca would take her own life. She told CNN affiliate, KFMB, "My sister did not commit a suicide. My sister was not depressed. My sister was not frantic. My sister was planning to call my parents the next day and planning to keep me posted about Max, the next day."

It's a sentiment other people who knew the victim also tell CNN. More than 15 detectives are working on the case, and officials say they are taking the accounts of people who knew her very seriously. As for max's death, the police are preliminarily calling it an accident, but they say, it's definitely part of the equation when considering Zahau.

FRANK: Any time there is a death such in Rebecca's case, we always look at victimology. What happened, you know, days before or weeks before or even months before. So, Max's case would be of interest to us.

ENDO: Arizona police records show a rocky relationship between Jonah Shacknai and Max's mother, Dina, with both filing domestic disturbance reports in 2008 and 2009. But the two issued a statement Monday downplaying those records saying, "While our marriage did not work out as either of us had hoped, it did produce a wonderful son, Max, who both of us loved very much. His loss is unimaginable."

(END VIDEOTAPE)

ENDO (on-camera): Local law enforcement official say they're waiting for what could be the missing pieces to this puzzle, the forensic reports and that could take a matter of weeks -- Wolf.

BLITZER: Sandra Endo, thanks.