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THE SITUATION ROOM

Debt Battle Continues; Interview With Pervez Musharraf

Aired July 21, 2011 - 18:00   ET

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


WOLF BLITZER, HOST: And you're in the SITUATION ROOM.

Happening now -- the White House says there is no deal denying one report suggesting Democrats and Republicans are close to an agreement in a mounting debt crisis. We're learning more about a potential plan that's now being discussed. Stand by.

My interview with Pakistan's former president, General Pervez Musharraf. He's weighing in on Bin Laden's death, the whereabouts of al Qaeda's new leader. He's even revealing whom he is convinced is about to announce he's going to be running for president of the United States.

And you may know him as Little Darth Vader. You're going to find out now why this youngster is bringing his force right here to Washington.

We want to welcome our viewers in the United States and around the world. Breaking news, political headlines and Jeanne Moos all straight ahead. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

But first to the intensifying political gridlock over the debt crisis here in Washington, as time runs out for both parties to agree on a solution. Right now, Democratic leaders from both chambers of Congress are meeting with President Obama and Vice President Biden over at the White House.

Sources say a $3 trillion dollar deficit reduction plan is under discussion. But they are stressing that nothing has been agreed to yet.

Let's go straight to our chief White House correspondent, Jessica Yellin. She's working her sources and has the very latest.

What are you learning, Jessica?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Wolf, this debt deal, you could call it Jell-O still that is yet to harden.

Right now, congressional Democrats, as you say, are in their meeting with President Obama. I have been working the phones all day. And I will tell you, many congressional Democrats are frustrated. They feel that the outlines of a possible new deal are coming together too late to get something done.

They fear that based on what they heard so far, they are not exacting enough new revenue from Republicans and they might be forced to take too many concessions at the last minute.

But the White House says that's silly. There is no final deal and anything the president agrees to in the end would ultimately include revenue. As you can see, this is still very much up in the air.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Twelve days from potential default and finally the glimmers of a deal, but it's far from done. According to a new CNN/ORC poll, 61 percent of Americans believe if the debt ceiling is not raised, it will be a crisis or a major problem for the nation...

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: All right, guys.

YELLIN: ... not happy this process has been Washington at its slowest, most gridlocked, and worst.

GEORGIA TAYS, LOS ANGELES: I blame both parties for the stalemate.

VELMA MCKENZIE-ORR, NEW YORK CITY: All of the people who are responsible for this are elected to do a job. See, if I did my job like that, I would be fired.

YELLIN: So, who would get fired first? Our poll shows right now the Republicans are losing the P.R. war. Only 33 percent of the American people believe Republicans have acted responsibly in the debt dealings; 52 percent say the president has acted responsibly.

White House officials say they are confident they will strike a deal in time, but will the president come away from this unscathed? After all, remember this? Candidate Obama promised he would end the polarization in Washington.

OBAMA: Our voices are more powerful than the most entrenched lobbyists in Washington, the most vicious political attacks, the status quo that wants to keep things just the way they are. We will change how politics is done in Washington. It is time for change in Washington.

(END VIDEOTAPE)

YELLIN: We will see if there is any change here tonight, Wolf. So far there is no meeting scheduled between the president and Republican leaders from the Hill. But we will keep you posted if that changes -- Wolf.

BLITZER: Still very much a work in progress. We will stay in close touch with you, Jessica. Thanks.

Let's get to the man now who is behind what many have seen as a major stumbling block in the negotiations, the Republican backlash against any, any form of what is seen as a tax increase. The conservative crusader Grover Norquist sponsored a pledge signed by hundreds of members of Congress to oppose any form of a tax increase. But now that pledge is being called into question.

Let's bring in CNN's Joe Johns. He's working this part of the story for us.

He was here in THE SITUATION ROOM not that long ago, Grover Norquist, but what are you learning?

JOE JOHNS, CNN SENIOR CORRESPONDENT: Interesting guy. He was and still is frankly one of the most powerful guys in Washington you will hardly ever hear about. Today people are asking if Grover Norquist has given Republicans who signed that pledge a way to go back on their promises really without going back on their promises.

(BEGIN VIDEOTAPE)

JOHNS (voice-over): Most but not all congressional Republicans have signed a pledge to oppose tax increases. It's controversial, but now that Washington is desperately trying to increase the debt limit and get a deficit reduction that calls for cutting spending and increasing revenue, all of a sudden the pledge is tying people up in knots.

A tiny bit of wiggle room seemed to appear in a "Washington Post" editorial quoting Grover Norquist, the head of Americans for Tax Reform, the guy who came up with the pledge. Norquist said congressional Republicans might be able to allow the tax cuts passed during the Bush era to expire without technically violating the pledge. His conversation with "The Post" was recorded.

GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM: Not continuing a tax cut is not technically a tax increase.

QUESTION: So it does not violate the pledge?

NORQUIST: We wouldn't hold it that way. A lot of the guys on the Hill do.

JOHNS: Including the head Republican, House Speaker John Boehner.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Listen, I have never voted to raise taxes and I don't intend to.

JOHNS: Democrats pounced.

SEN. CHARLES SCHUMER (D), NEW YORK: Grover Norquist, the hall monitor when are it comes to enforcing the Republican Party's anti-tax pledge, has given House Republicans a hall pass.

JOHNS: CNN asked Norquist to clarify, but his office said he was too busy. Americans for Tax Reform put out a statement saying, "It's violation of the Taxpayer Protection Pledge to trade temporary tax reductions for permanent tax hikes."

At least one rank and file Republican freshman we spoke with said the voters will give him a pass on the pledge he signed. REP. STEVE WOMACK (R), ARKANSAS: At the time a lot of those pledges were signed, we were not talking about the nation defaulting on this credit obligations, a potential downgrade to our creditworthiness.

(END VIDEOTAPE)

JOHNS: But on the issue of raising taxes, whatever you want to call it, we will just have to watch and see how many House Republicans might take a second look at their positions as the pledge and other things sort of crash up against this August 2 deadline.

BLITZER: Because it gets a little complicated. The current Bush taxes which are in effect, the highest rate is 35 percent. If it goes back to what it was, if it expires, during the Clinton administration it goes up to 39.6 percent, so wouldn't that be an increase in taxes?

JOHNS: It's hard to dispute. What else will you call it? It's certainly not a tax decrease, right.

BLITZER: That's why it's so intriguing that Grover Norquist to "The Washington Post" said it wouldn't be a tax increase necessarily.

JOHNS: Sure. And you would love to hear a little bit more from him about his reasoning. It did seem, though, he really sort of -- he didn't exactly back away from it, but he sort of distinguished it and said I would oppose it if this happens, nonetheless, so kind of talking out of both sides of his mouth a little bit.

BLITZER: All right, Joe, thanks very much.

Let's get a little bit more on what's going on. Joining us now, our chief political analyst Gloria Borger, and the managing editor of "TIME" magazine, Rick Stengel. You can see the cover. I will show the cover of the new issue of "TIME" magazine. There it is. "Chore War," it's a fabulous story that is in the new issue of "TIME" magazine, our sister publication.

Let's talk a little bit, Gloria, first. What are the House Republicans, what are they up to right now? Because it's getting more confusing and it's certainly in my mind, I'm sure in yours, those House Republicans are key. Not the Senate so much, not the president, the House Republicans have the power.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, Wolf, you were just talking to Joe about the question of the expiration of those Bush tax cuts for the wealthy. That's very important here. And it's very clear that House Republicans would not like to see those expire in a perfect world.

But, in fact, they are due to expire in 2013. And yesterday I spoke with the chairman of the House Budget Committee, Paul Ryan. He made the case to me that if they expire, well, there you are, Republicans have given on a tax increase. Take a listen to this.

(BEGIN VIDEO CLIP) BORGER: But compromise, what about compromise?

REP. PAUL RYAN (R-WI), BUDGET COMMITTEE CHAIRMAN: All for compromise, but let's not forget the fact that balance has already occurred with respect to taxes because a massive increase is already scheduled to occur in 2013. Don't forget the fact that a new $1.5 trillion tax increase because of the last two years of Congress is kicking in, in a little over a year.

(END VIDEO CLIP)

BORGER: Now, Wolf, of course, that is likely to happen if President Barack Obama is reelected. And while I don't think that Paul Ryan is willing to concede the next presidential election to Barack Obama, he certainly sounded as if he was kind of factoring that into his budget equation, saying, OK, we already gave at the office on taxes. So don't talk to us anymore about it.

BLITZER: Let me bring Rick Stengel into this conversation.

What do you make of this, Rick?

RICHARD STENGEL, MANAGING EDITOR, "TIME": Well, it's funny.

Washington-speak is a language of its own. The expiration of tax cuts is not a tax hike. Remember in Washington people always say the reduction in the rate of increase is a cut. It's not. This is something that Republicans have to get used to and we as Americans have to get used to. To reduce the debt ceiling it has to be a combination of revenue enhancement and reducing the debt.

These negotiations are not a suicide pact. I think both parties will realize that eventually they have to come to some sort of agreement and somebody will swallow something that they don't like. That's just inevitable. That's politics.

BLITZER: But, Rick, there are some Democrats right now very, very nervous, liberal Democrats, that the president maybe in the end he will agree to the spending cuts and defer what's called the revenue or the tax increases down the road in order to avert a disaster, which would be a default. What do you make of that?

STENGEL: Right.

I know Leader Reid is concerned about that. Democrats are concerned about that. Everybody has their own interest here. And their interests are not aligned. The Senate's interest and Barack Obama's interest are not necessarily aligned. Barack Obama could do a deal like that that would help his reelection. It wouldn't necessarily help Senate Democrats. That's the problem here, that everybody sees it from a different perspective.

BLITZER: Are we any closer to a deal, Gloria? Because I know you have been working your sources.

BORGER: Well, that's the big question. Jessica earlier called it Jell-O. I think it's true.

I think what we see right now with all of these numbers that are being floated is that more and more things are getting put on the table and that the leaders are taking them back to their membership. The president is now meeting with Republicans separately from Democrats. So that's a key, because he needs to see what each side is willing to give on.

And as you know, the internal physics of this is that there is never a deal until there is a deal. And I spoke with one Democrat who is close to the negotiations who said to me, Gloria, next week at this time, we will be a little closer.

BLITZER: Rick, take the big picture for us for a moment. Step back. How does this whole debate that is unfolding right now with the possibility -- and it is a real possibility in my opinion -- of default look to the American public?

STENGEL: Well, I think the piece that you did earlier, I think people look like that this is the gang that couldn't shoot straight from both sides, that they elected politicians to solve problems precisely like this.

If you look at the really -- the macroeconomic picture, the amount of taxes that Americans are paying as a percentage of GDP is one of the lowest amounts since World War II. There is lots of flexibility here and I think the American public wants politicians to work together. That is a no-brainer.

BORGER: And, Wolf, in the end, I think public opinion is probably going to make this deal get cut. Because the American public believes that politicians are not behaving and Republicans are getting much more blame than Barack Obama.

Barack Obama's numbers are not great, but Republican numbers are worse. And so in the end, it's going to be in everyone's self- interest, not only the country's interests, but their political self- interest, to get something done.

BLITZER: Gloria Borger, Rick Stengel, guys, thanks very much for coming in.

The former president of Pakistan, Pervez Musharraf, he is weighing in on that U.S. raid that killed Osama bin Laden. You will find out what he says is extremely embarrassing about it. My interview with General Pervez Musharraf, that is coming up.

And you probably know him from his now famous Super Bowl ad, but you might not know the very touching reason why this little Darth Vader is about to come right here to Washington.

(COMMERCIAL BREAK)

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

JACK CAFFERTY, CNN ANCHOR: An appeals court in California has overturned a man's two convictions for threatening to assassinate President Obama. The grounds? Freedom of speech.

In 2008, two weeks before Barack Obama was elected the first black president in this nation's history, a California man posted violent, racist messages about Obama on an online message board: One posting said, "Shoot the 'blank,'" using a racial slur to describe Obama. Another post said Obama would end up with a -- quote -- ".50- caliber in the head soon" -- unquote.

The Secret Service tracked down this clown down, as you might imagine, a guy named Walter Bagdasarian. Within weeks, he was in custody. It turns out he had a .50-caliber rifle, five other guns and ammunition in his possession when they found him. He was arrested, and after waiving his right to a jury trial, Bagdasarian was convicted by a federal judge of two felonies for threatening to kill a presidential candidate.

But yesterday, a court of appeals in -- wait for it -- San Francisco overturned that decision.

In a 2-to-1 ruling, the court said his actions were protected by the First Amendment and that, while his words were alarming and dangerous, they were not illegal. The court also said Bagdasarian expressed no intent to act on his words. He had guns that he talked about in his possession.

The prosecutors in the case can now either ask the appeals court for a rehearing or appeal the decision to the U.S. Supreme Court.

After Bagdasarian was initially convicted in 2009, he apologized for his actions, said that he had posted the messages while drunk. Apparently in his mind that made it OK. He was sentenced to two months in a halfway house in addition to the 24 days that he had already served in jail.

Here's the question: Should calling for the assassination of the president of the United States be protected as free speech?

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

Here's a hint: No -- Wolf.

(LAUGHTER)

BLITZER: All right, Jack, thanks very much.

Cuts to health care programs like Medicaid are some one of the hottest issues emerging in the escalating budget debate, but behind the numbers are real people.

Our chief medical correspondent Dr. Sanjay Gupta spoke exclusively with a young man you just might recognize -- Sanjay.

(BEGIN VIDEOTAPE)

DR. SANJAY GUPTA, CNN SENIOR MEDICAL CORRESPONDENT: Next week Washington is going to feel the force, so to speak. He's a little guy with a big mission. Take a look at who I met when I was out in L.A.

MAX PAGE, BORN WITH CONGENITAL HEART DEFECT: Dr. Gupta.

GUPTA: Yes, sir.

PAGE: You're it.

GUPTA: I'm it.

PAGE: Yes.

GUPTA (voice-over): Max Page only knows one speed, full speed ahead.

(on camera) I don't know if I can keep up with this kid.

GUPTA (voice-over): You've probably seen Max before even though you might not know it. Remember this Volkswagen ad from super bowl XLV? Darth Vader -- no. Just Max.

PAGE: Yes, we have access.

GUPTA: Within mere seconds of meeting him, Max was asking about my daughters.

(on camera) Three girls.

PAGE: Let me guess -- four-year-old, two-year-old, six-year-old.

GUPTA: You got it. How did you know?

(voice-over) We're at the children's hospital of Los Angeles with Max and his brother Els to see Dr. Michael Silka.

UNIDENTIFIED FEMALE: You're going to get a pacemaker check.

GUPTA: That's right, Max has a pacemaker. Actually it's his third, and he's only six-years-old. For parents Jennifer and Buck, the first sign of trouble came before Max was even born.

JENNIFER PAGE, MAX'S MOTHER: My 38-week appointment we found out that Max had structural damage to his heart. They couldn't get a good heartbeat. They took an emergency C-section, born in a whirlwind.

BUCK PAGE, MAX'S FATHER: The last feeling I remember is it's almost hopelessness because it's out of my hands as a dad, and as a dad that's not something you're used to.

JENNIFER PAGE: I just said, please, just save my son. That's all we're here for. I don't even know what you just said. I don't understand anything you're going to do. I just need you to save my son. I need to have a chance to know this kid.

GUPTA: It's hard to imagine, but for mom and dad it was all a blur. Max was born with a heart condition that's rare that includes four separate problems in the heart which leads to a lack of oxygen in the blood. Without a pacemaker and eight major operations so far Max probably wouldn't be here.

(on camera) Can you feel it, Max, can you feel the pacemaker?

PAGE: If you like touch it or like something hits, it it's kind of when I feel it.

DR. MICHAEL SILKA, CARDIOLOGIST, CHILDREN'S HOSPITAL OF LOS ANGELES: It's like the movie "Cars," they show the pistons and engines going around. You want them working together. You don't want one going like this and others at a different rate. You need them working together.

GUPTA: Something like this for Max or any child like Max should be cared for in a children's hospital? Could any hospital --

SILKA: No, no. This is a fairly sophisticated, fairly subspecialized area of medicine. I'm with -- I'm a pediatric electrophysiologist. There's probably slightly over 100 of us in the country. So there aren't that many people who really do what we do.

GUPTA (on camera): And it's that skill that Max needs. Wolf, there only 56 of these specialized children's hospitals in the whole country. And as Washington talks about budget cuts, the programs that train these doctors are on the chopping block. So little Max is headed out to Capitol Hill next week to lobby for that program and also to argue against cuts to Medicaid, which helps tens of millions of other kids.

We will see how it goes -- Wolf.

(END VIDEOTAPE)

BLITZER: Sanjay, thanks, a really inspiring story. And thanks to Max as well.

This note to our viewers -- you can see the rest of Dr. Gupta's report on mini-Darth Vader -- Max Page, we're talking about -- on this weekend's "SANJAY GUPTA, M.D.," "Washington Feels the Force." That's this Saturday, this Sunday 7:30 a.m. Eastern only here on CNN. I recommend you watch.

The assassination of Osama bin Laden was very embarrassing to the Pakistanis. The former President Pervez Musharraf long denied that bin Laden was even in Pakistan. In an interview, I asked him whether his own government was shielding the al Qaeda leader. Stand by.

(COMMERCIAL BREAK)

BLITZER: Fragile U.S. tensions with Pakistan are taking center stage only months after the death of Osama bin Laden. Now there are new signs the United States could soon be dealing with a whole new leader in the country, a leader it has dealt with before.

Here's CNN's foreign affairs correspondent, Jill Dougherty.

(BEGIN VIDEOTAPE) JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT (voice-over): U.S.-Pakistan relations, here's how Pakistan's former President Pervez Musharraf sees it.

PERVEZ MUSHARRAF, FORMER PAKISTANI PRESIDENT: Playing games, rigidity, arrogance, insensitivity to each other's national interests.

DOUGHERTY: It wasn't that way when he was president, Musharraf says. And he wants his job back.

MUSHARRAF: The next election is going to be the mother of all elections.

DOUGHERTY: Musharraf lives in self-imposed exile in London, where he moved after resigning in 2008 to avoid being impeached. This past February, a Pakistani court issued an arrest warrant for him in connection with the 2007 assassination of opposition leader Benazir Bhutto.

But Musharraf claims his popularity back in Pakistan is growing and he is vowing to return to run in the 2013 election.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: President Musharraf is a courageous leader and a friend of the United States.

DOUGHERTY: In 2001, the man former President George W. Bush once called "my buddy" took a political risk at home to support the so- called war on terror.

But after the U.S. operation this spring that killed Osama bin Laden in Pakistan, U.S. and Pakistani relations are on the razor's edge. Musharraf, in his speech at the Woodrow Wilson Center in Washington, D.C., forcefully denied that he or the Pakistani intelligence service, the ISI, knew bin Laden was in his country. He chalked it up to negligence of the highest order.

MUSHARRAF: I confidently and surely say that it was not complicity, because I'm very sure of one thing, that I didn't know, whether one believes it or not.

DOUGHERTY: Musharraf blames the United States for abandoning Pakistan in the late 1980s and switching sides to Pakistan's enemy, India. He says the U.S. is insensitive to Pakistan's concerns.

MUSHARRAF: The violation of our sovereignty, the drone attacks, the indiscriminate drone attacks, causing collateral damage of women and children, and also (INAUDIBLE) attitude towards our nuclear capability.

DOUGHERTY: Musharraf visits Washington, D.C., on a regular basis. The head of the Woodrow Wilson Center, Jane Harman, a former congresswoman, says the jury is still out on whether Musharraf can reclaim Pakistan's presidency.

JANE HARMAN (D), FORMER U.S. CONGRESSWOMAN: Oh, I think he will have to explain a lot more about what he did and what he didn't do in order to persuade his country.

DOUGHERTY: Jill Dougherty, CNN, the State Department.

(END VIDEOTAPE)

(BEGIN VIDEOTAPE)

BLITZER: And joining us now, the former president of Pakistan, President Pervez Musharraf.

Mr. President, thanks very much for coming in.

MUSHARRAF: You're welcome, Wolf.

BLITZER: I'm very worried that al Qaeda, under the new leader of al Qaeda, Ayman al-Zawahiri, is plotting something spectacular to try to get revenge against the United States for killing bin Laden around the time of the 10th anniversary of September 11th.

How worried should I be, should all of our viewers be right now?

MUSHARRAF: I think they should be worried, because al Qaeda definitely has threatened action in Pakistan or in the United States, also; elsewhere in the world, also. So everyone must keep their guards up and take special security measures.

BLITZER: What about Ayman al-Zawahiri, the new leader of al Qaeda? He was the number two, the Egyptian-born al Qaeda terrorist. Everyone believes he's in Pakistan hiding out right now. Do you believe that?

MUSHARRAF: Well, a lot of aspersions have been cast about my statement that I -- I always said Osama bin Laden is not in Pakistan. Every time people ask me this question, I just -- I don't know.

Now Zawahiri, I don't really know.

BLITZER: Do you suspect he is in Pakistan?

MUSHARRAF: Could be, could be, but I don't know.

BLITZER: Most of the U.S. experts think he is in Pakistan, and that he, like bin Laden, they believe, is being protected by elements of the Pakistani military or intelligence service, the security services, somewhere in Pakistan.

Do you believe that?

MUSHARRAF: No, I don't believe that, no. That I don't believe.

BLITZER: But bin Laden was protected.

MUSHARRAF: No, I don't believe that.

BLITZER: You believe that five, six years he was hiding out in the middle of Abbottabad, which is a military town, the West Point of Pakistan is there, and no one knew about it?

MUSHARRAF: Yes, I believe that. I really believe that because, first of all, if he was there for five years, that means two years out of that five years was during my time.

BLITZER: That's right.

MUSHARRAF: So -- so, I...

BLITZER: And you had no -- have you been to Abbottabad?

MUSHARRAF: Yes, many times. Many times.

BLITZER: Tell us about that place, because it was a big mansion he was living in within walking distance from all these military outposts.

MUSHARRAF: Yes.

(CROSSTALK)

BLITZER: And no one knew who was living inside?

MUSHARRAF: Nobody -- nobody around, thousands of people living around there. No of them knew that he was inside. Nobody knew about him.

BLITZER: You did not know? You can look at me directly and say, "I had no idea that bin Laden was hiding out in Abbottabad"?

MUSHARRAF: Absolutely. I had no idea that he was living in Abbottabad.

BLITZER: Do you believe no one in your government knew?

MUSHARRAF: No. No. Whether there was a possibility that the army or ISI was hiding from me, I don't believe that also.

BLITZER: Why don't you believe that?

MUSHARRAF: I don't believe that, because they are my people. I'm from them. Even if there was some policy from the top that he has to be protected and hidden.

BLITZER: Maybe they didn't -- maybe they didn't trust you.

MUSHARRAF: No. The second and third tier would have come and told me.

BLITZER: Maybe they wanted to protect you and say, "You know what? He's better off not knowing."

MUSHARRAF: No. If I was complicit or the government or the army was gone, would we keep them there without any security and without any guards there so that he could come and go any time? Was this a person who could be used for -- for any kind of leverage or any kind of a bargaining chip? I think it doesn't stand to reason at all.

BLITZER: How embarrassed, when all is said and done, should Pakistan be that bin Laden had been hiding there in the middle of this town for five years, maybe six years in plain view?

MUSHARRAF: Very embarrassing. Extremely embarrassing. It's the case of utter negligence of the highest order and should be investigated. But we have to decide whether there was complicity or negligence. Now, if there was complicity, (UNINTELLIGIBLE) it's an issue. And it is absolutely going against Pakistan and the United States relation.

Let us be very clear that there -- whether there was complicity or negligence. Pakistan must convince the world and the United States against this issue, that it was a case of negligence, not complicity.

BLITZER: You know, I've been told by the highest levels of the U.S. government that if they find out where the new al Qaeda leader is, Ayman al-Zawahiri, in Pakistan, or for that matter, anywhere else, assuming he's hiding out somewhere in Pakistan, they are not going to inform the Pakistani government, but they're going to do to him exactly what they did to bin Laden: kill him.

MUSHARRAF: Well, I always have said this is a very irresponsible thing.

BLITZER: Why would that be irresponsible?

MUSHARRAF: Irresponsible because this violates our sovereignty.

BLITZER: But they don't trust the elements of the Pakistani government.

MUSHARRAF: Whether you trust or can't trust, you can't violate the country's sovereignty.

BLITZER: But they do that all the time with these drone attacks.

MUSHARRAF: Exactly what people are disliking. That is why the hatred against the United States. Why do you want to continue doing something where the public starts hating you so much?

BLITZER: I'll tell you. I'll you why. Because there have been several incidents that the U.S. intelligence community had information about terrorists plotting certain actions against U.S. troops or others. They informed the Pakistani government, but when the Pakistani government goes in a few days later, all those people are missing. They're gone already. Somebody tipped them off that the military forces were here.

MUSHARRAF: I don't -- Wolf, I don't know what has been happening in these three years, but if you're talking of my time, look at Ayman al-Zawahiri and Osama bin Laden. Khalid Sheikh Muhammad, Abu Zubaydah, Abu Farraj (ph)... BLITZER: You did help -- you did help capture these...

MUSHARRAF: Three, four five, and up to 50. All of them have been caught by us. Who has been keeping them...

BLITZER: Why is there this mistrust now between the United States and back to the point that recently the U.S. suspended $800 million in military aid to Pakistan?

MUSHARRAF: Well, that is unfortunate. It carries a very wrong perception. But let me talk of that $800 million. I believe, I am told that this $500 million of services provided, reimbursement of services provided, $300 million for training and equipment for the training which will come back to the United States. This figure is not that great, and it's unfortunate.

But as far as lack of trust now, I don't know. There should not be lack of trust.

BLITZER: The other source of deep concern is Pakistan's nuclear arsenal. How secure is it from terrorists?

MUSHARRAF: They are very secure.

BLITZER: Are you worried at all about the security of Pakistan's nuclear arsenal?

MUSHARRAF: They are extremely secure. We will only lose them or they can get into the hands if they are terrorists or religious extremist groups takes over Pakistan and governs Pakistan. At this moment, politically, it is not possible.

BLITZER: But it's -- it's a fear?

MUSHARRAF: It is a fear if the stability or integrity of Pakistan is no more.

BLITZER: How many nuclear bombs does Pakistan have?

MUSHARRAF: I don't know.

BLITZER: About?

MUSHARRAF: No idea.

BLITZER: A hundred?

MUSHARRAF: Well, I don't know. I don't know.

BLITZER: But you knew when you were the president.

MUSHARRAF: Oh, no...

BLITZER: You wouldn't even know that as president of Pakistan?

MUSHARRAF: No, not at all. They don't give me that figure. I mean, why am I concerned whether it is 98 or 89 or something? I am not concerned about the figures.

BLITZER: Let me...

MUSHARRAF: What difference does it make if we are 94 or whether it's 54 or 94 or 150 or -- what does that mean?

BLITZER: Let's talk a little bit about something unrelated. You recently met with the governor of Texas, Rick Perry. Is that right?

MUSHARRAF: Yes.

BLITZER: What was that about?

MUSHARRAF: Nothing. He wanted to meet. Maybe exchange views on exactly what it would be. Talking of...

BLITZER: Did you get the impression he's thinking of running for president?

MUSHARRAF: Well, I think I did, yes.

BLITZER: You did?

MUSHARRAF: Yes.

BLITZER: So you think he will?

MUSHARRAF: You need to ask him, but I think -- I thought I did get that impression.

BLITZER: I mean, I agree with you. I think he will run for president, too, but I just -- I haven't met with him personally. You did. But you came away from that meeting thinking he's going to run?

MUSHARRAF: Yes.

BLITZER: Let's talk about you a little bit, your health. How do you feel?

MUSHARRAF: I hope I am not violating his code of confidentiality that he wanted to maintain about this...

BLITZER: If you did violate, it's already been violated. Let's talk about your health. How are you feeling?

MUSHARRAF: Very good.

BLITZER: Everything OK?

MUSHARRAF: Excellent.

BLITZER: Are you getting ready to go back to Pakistan to run for president once again?

MUSHARRAF: We have a parliamentary system, and we need to -- my party needs to win the election. And then one decides whether they want to be the prime minister or the president. But the first aim is to win in the next election.

BLITZER: And that's in 2013?

MUSHARRAF: 2013.

BLITZER: Always good to speak with you, Mr. President. Thanks very much for coming into our SITUATION ROOM.

MUSHARRAF: Thank you very much, Wolf.

BLITZER: And good luck to you, and good luck to all the people of Pakistan.

MUSHARRAF: Thank you very much. It's always a pleasure.

BLITZER: Thank you.

MUSHARRAF: Thank you, Wolf.

(END VIDEOTAPE)

BLITZER: So what's the best way to sell jihad to impressionable children? Al Qaeda is asking that very same question. The answer is appalling and shows just how low they'll go to try to recruit new terrorists.

(COMMERCIAL BREAK)

BLITZER: Companies have long used cartoons to try to market their products to children. Now, shockingly, terrorists could be adopting the same tactics. They're thinking of making their pitch with cartoons, hoping to hook kids early and teach them to embrace a life of violence. Brian Todd is here with more on the sinister plot.

What's going on?

BRIAN TODD, CNN CORRESPONDENT: Wolf, U.S. officials have said they have done significant damage to al Qaeda recently. Now maybe out of desperation, maybe out of a desire to tap into the next generation of terrorists, al Qaeda is making an animated pitch to a younger demographic.

(BEGIN VIDEOTAPE)

TODD (voice-over): It's described as Disney-like, with slickly- produced images of boys in battle fatigues and head scarves, brandishing AK-47s and a rocket launcher. You're looking at still frames of a terrorist recruiting movie aimed at children. Supporters of al Qaeda say they're producing an animated film glorifying its operations, according to online terror trackers.

An online posting says it features "heroic actions of the Mujahideen, raids, armed clashes and assassinations." I spoke about the proposed film with terrorism analyst, Brian Fishman. (on camera) What does it say about al Qaeda at this point?

BRIAN FISHMAN, TERRORISM ANALYST: Well, Al Qaeda is looking for ways to get its message out to more people. Right? So its core thesis stays the same, and it tries to sell this mythology of violence.

TODD (voice-over): A U.S. official cautioned CNN that at this point the movie appears to be only in the idea stage. But the official said it shows the despicable depth they're willing to go to manipulate children. CNN contributor Fran Townsend agrees.

FRAN TOWNSEND, CNN CONTRIBUTOR: Al Qaeda is taking this propaganda video and targeting children shows you how desperate they are for recruits, frankly. The United States government, working with allies, has been very effective against foot soldiers, using drones, allies. And so I think they're desperate for recruits and this is just evidence for that.

TODD: The jihadist producing the film says he'll submit it to the group al Qaeda in the Arabian Peninsula for approval. That affiliate managed to get an underwear bomb onto a plane to Detroit and toner cartridge bombs on cargo planes.

(on camera) That group has also been a leader in propaganda with videos from the charismatic American born jihadi Anwar al-Awlaki. And high-quality productions like "Inspire" magazine, published online in English. Another extremist group has published an online women's magazine with beauty and marriage tips.

But experts say there's a risk to producing a children's movie.

How can a campaign like this maybe backfire on al Qaeda?

UNIDENTIFIED MALE: Part of al Qaeda's argument is that people that are motivated to go fight for jihad should not listen to their parents. I mean, it is a direct affront to a traditional family system that I think not just Muslim Americans, not just Muslims around the globe, but most people find offensive.

(END VIDEOTAPE)

TODD: And there's already been some brush back. When the filmmakers released a few images of the movie online, they asked for input. Online terrorist monitors say some people replied that they should avoid using the specific name al Qaeda in the film, fearing that it would alienate supporters. Al Qaeda, Wolf, not as popular as it once was.

BLITZER: Electronically targeting children by al Qaeda for jihad, it's not entirely new, is it?

TODD: No, it's not. Brian Fishman said that al Qaeda has in the past produced video games, of all things. He said they once took a code off western video games, replaced some of the images. They produced a video called -- this is a strange title -- "Night of the Bush Capturing." You as the player would go around shooting and killing figures with President George Bush's head on them or the Ayatollah Khomeini's head on them. Very strange, but this was effective in recruiting younger terrorists.

BLITZER: Interesting stuff. All right. Very worrisome as well. Brian, thank you.

A check of the day's other top stories coming up next. Then, the Casey Anthony case touched a nerve in America and infuriated lots of people. A dunk tank in Kentucky helped some people work out their anger in a perhaps more healthy fashion. Stand by. We'll tell you what happened.

(COMMERCIAL BREAK)

BLITZER: This just coming into THE SITUATION ROOM right now, an historic announcement tomorrow over at the Pentagon. Lisa Sylvester has those details and some other top stories in THE SITUATION ROOM. What's going on?

LISA SYLVESTER, CNN CORRESPONDENT: Now that's right, Wolf. Well, this is just in.

Pentagon officials tell CNN that Friday they'll announce the official repeal of "Don't Ask, Don't Tell." That's the policy prohibiting openly gay men and women from serving in the U.S. military. A bill repealing the policy passed last year, but it doesn't take effect until the president, defense secretary and chairman of the joint chiefs of staff certify that a repeal won't harm military readiness.

Even after certification, there will be a 60-day waiting period before full implementation.

And an epic adventure in space flight is over. The Space Shuttle Atlantis landed early this morning, ending a program that began 30 years ago. The drama of the moment didn't escape notice of mission control or the shuttle's commander.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Having fired the imagination of a generation, a ship like no other, its place in history secured, the space shuttle pulls into port for the last time, its voyage at an end.

CAPTAIN CHRIS FERGUSON, SHUTTLE COMMANDER: Mission complete, Houston. After serving the world for over 30 years, the space shuttle earns its place in history and has come to a final stop.

(END VIDEO CLIP)

SYLVESTER: What a moment there. Well, Americans are deeply divided about the decision to end the program. In a CNN/ORC poll conducted this week, half of those polls said the program's end was bad for America. An equal percentage believe it was good or would have no impact.

And this turtle isn't exactly hell on wheels, but he still gets around pretty well. Veterinarians replaced his left -- his front left leg with a swiveling wheel you can see there. The 12-year-old African tortoise suffered a severe burn that forced vets to amputate his leg. And they weren't sure how he would respond to the new wheel which was glued to his shell after the surgery. But they say that he is moving well and certainly moving on with his new life. Getting around a little slow, but then they were slow to begin with. So...

BLITZER: Never been too fast. Good for -- good for them.

SYLVESTER: I don't know if he's winning any races.

BLITZER: I hope he enjoys whatever life he has. Thanks very much.

Jack Cafferty is asking, "Should calling for the assassination of the president be protected as free speech? Your e-mail coming up.

Plus, dunking Casey Anthony. CNN's Jeanne Moos has a look.

(COMMERCIAL BREAK)

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

CAFFERTY: The question this hour, Wolf, is should calling for the assassination of the president be protected as free speech. An appellate court in San Francisco said yes, it's covered under free speech. Some of you disagree.

A.J. In Nebraska: "Yes it should. Free speech is free speech. There's no gray. However, saying you're going to kill someone is a threat, and that's illegal. Saying you wish or would like to see someone else kill a certain individual is perfectly OK."

Kathy writes, "This type of speech is worse than yelling 'fire' in a crowded theater, and these idiots ought to be prosecuted to the full extent of the law."

Joe in New York writes, "Calling for the assassination of the president should be treated as treason. There's no room for free speech when the agenda is to annihilate the symbol of our nation."

Kevin in New Mexico: "No, it should not be protected as freedom of speech. It ought to be considered a terrorist threat to take a life. If you're not happy with who the president is, then wait until the next election and vote for someone else."

Will in Montana writes, "My brother suffers from paranoid schizophrenia. He threatened President Reagan's life on two occasions, and he served two years each time in a penitentiary. The authorities deemed his threat real enough to put our family under scrutiny for years. It made it difficult for me to get a secret clearance while in the military. My mail never arrived unopened, and after 9/11 I was on a threat list and forced to fly the day after my scheduled flights."

Kirk in Minnesota writes, "If we want to pretend the Constitution actually means anything, then, sadly, the answer is yes. However, I'm fairly sure the fanatical right will only say that it's free speech as long as it only pertains to President Obama."

James in Ohio says, "No way can it be protected speech. No way, no way. Also I believe that burning our flag should not be protected speech. Call me old fashioned. I don't care."

And Ray in Tennessee writes, "Yes, it should, Jack. There's nothing in the Constitution that says free speech shouldn't apply to idiots, too."

If you want to read more on this, go to my blog: CNN.com/CaffertyFile. I'm going to venture out into this torrid heat wave, and I'll see you Monday.

BLITZER: See you Monday, Jack. Thank you.

Dunking booths work best when they feature a well-known villain. This one found a way to make money with a look-alike for one of the most hated women right now in the United States.

(COMMERCIAL BREAK)

BLITZER: Lots of people wish they'd been on the jury that found Casey Anthony not guilty. As CNN's Jeanne Moos shows us, though, a dunk tank in Lexington, Kentucky, gave them the next best -- best thing.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Step right up, folks, and dunk Casey Anthony.

UNIDENTIFIED FEMALE: All right, guys.

MOOS: Actually, don't bother. The dunking booth has already been shut down, but don't blame it on the Casey Anthony look-alike.

UNIDENTIFIED FEMALE: You hear the good news? I'm innocent!

MOOS: She knew how to taunt her tormenters.

UNIDENTIFIED FEMALE: There were tougher girls in prison than you.

MOOS: Oh, yes? The Lion's Club in Lexington, Kentucky, decided to give the Casey Anthony dunking booth a try for their bluegrass fair.

UNIDENTIFIED FEMALE: I think it's going a little bit too far, because she's already suffering and God is the one who's going to give her the punishment.

UNIDENTIFIED MALE: I think it's funny, and I think it attracts a lot of people. It doesn't offend me at all.

MOOS: But within a day the Lion's Club decided to ditch the dunking booth, saying it was distracting from their mission of making money for charity.

(on camera) Whether you think it's funny or tacky, the dunking booth wasn't the only example of black humor at Casey Anthony's expense.

(voice-over) A deli in Seattle has attracted attention with this sign: "Casey Anthony says, 'City Market Deli deals are so good, I feel like I'm getting away with murder.'"

CAIN MOREHEAD, OWNER OF CITY MARKET DELI (via phone): People love it. They take pictures of it. They laugh at it.

MOOS: Deli manager Cain Morehead has been making signs linked to news and scandals for seven years. Fans have compiled them on sites like Flickr, from Charlie Sheen to Prince William to Rupert Murdoch.

MOREHEAD: Only thing he wants to hack into is one of our corn dogs and maybe he can choke on it.

MOOS: Morehead says the only complaints of bad taste he's gotten about his Casey Anthony sign came from two Florida tourists.

(on camera) You don't feel at all, like, tacky about it?

MOREHEAD: No. I walk the line of -- of taste on these signs.

MOOS: But where in the world is the real Casey Anthony? We know one place she's not.

(voice-over) There were rumors she was hiding on Geraldo Rivera's sailing vessel.

GERALDO RIVERA, FOX NEWS ANCHOR: She's not on my boat. She's not on my island. She's not in my home.

MOOS: But his wife came home telling him plans for their daughter's birthday party were in jeopardy.

RIVERA: Three of the moms at camp said they're going to have difficulty coming over if she's here. I said, "Honey, are you buying into this ridiculous rumor? It is preposterous."

MOOS: Preposterous, but not likely to be the last ridiculous rumor of Casey Anthony resurfacing.

Jeanne Moos, CNN...

UNIDENTIFIED FEMALE: That's the best you can do? You must be a Florida prosecutor.

MOOS: ... New York.

(END VIDEOTAPE)

BLITZER: That's it for me. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM. For our international viewers, "WORLD REPORT" is next. In North America, "JOHN KING USA" starts right now.