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THE SITUATION ROOM

Debt Deadline Nears; Norway Terror Suspect in Court

Aired July 25, 2011 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: To our viewers, you're in THE SITUATION ROOM. Happening now, fast changing developments in the debt ceiling impasse with new dueling plans released today. And now, President Obama is scheduled to address the nation and the world tonight.

Also, the suspect in the Norway terror attack appears in court, and now his friends are speaking out describing his chilling transition from endearing to extremist.

Plus, the tax break that almost gave passengers here in the United States a break, a price break, until a move by the airlines that ensured a windfall for them.

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.

All eyes will be on the president of the United States tonight in just three hours. He will address the nation from the White House on the looming U.S. debt disaster. And just two minutes after the president finishes his remarks, we have just learned this, the House speaker, John Boehner, will immediately follow the president with remarks of his own.

Our special coverage will begin in two hours, at 8:00 p.m. Eastern. And these dueling speeches are coming on the heels of new dueling plans released today that would allow the government to continue borrowing and to avoid a default which could happen as soon as one week from tomorrow unless, unless a deal is reached.

Our chief White House correspondent Jessica Yellin begins our coverage this hour.

All right. Jessica, tell us what we're learning right now.

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Hi, Wolf.

Well, first I will begin by giving you the highlights of these two different competing pieces of legislation moving on the Hill. First there is the bill moving by Speaker John Boehner, and his plan would break down in two parts. First, it would cut discretionary spending by $1.2 trillion and raise the debt ceiling by less than $1 trillion. It would require a vote on the balanced budget amendment, which Democrats vehemently oppose. It would create a commission to come up with future savings, some of them through entitlements, but it's left rather vague, and it would increase the debt ceiling again next year by $1.6 trillion. That is the plan Speaker Boehner has proposed.

Over on the Senate side, the Democrat-led Reid plan proposed by Senator Reid would raise the debt ceiling in one vote, slash the deficit by $2.7 trillion, and some of it in spending cuts, but it would also cut $1 trillion from winding down the wars in Afghanistan and Iraq. Republicans object to that aspect of deficit savings.

At this point, Wolf, it is hard to see how either of these bills gets through both houses of Congress.

BLITZER: Jessica, beneath all these numbers, what are the real sticking points here?

YELLIN: So I have been talking to senior policy-makers on both sides, and big picture, Wolf, let's dial it back. For Democrats it is the second vote. Privately, they say they will live with two votes on this issue and they will take another vote in 2012, but they want to avoid this kind of confrontation again.

So they say let's make it a vote of disapproval on the debt ceiling, something that automatically raises it next year without requiring another fight like this. Now on the Republican side they are saying, some at least, they don't want to raise the debt ceiling at all. We're hearing that from some people. Others say they want more cuts immediately, and important to note one key conservative House member just came out against Speaker Boehner's plan.

BLITZER: And more I think will be coming out against it as well. What are your sources telling you, bottom line, Jessica, about what happens next?

YELLIN: Well, you know, the president is giving this speech tonight, and I understand he will be giving the American people a sense of the stakes and what happens if a deal is not reached by next week.

There is a growing sense among some senior policy-makers I have spoken with that some are saying they believe this could extend beyond the deadline, and it could take more time to get this done. They just don't see a solution yet.

One outstanding question I keep hearing today is Senate Minority Leader Mitch McConnell. We have heard a lot about Harry Reid and a lot about John Boehner. The question I keep hearing is, could Republican Leader Mitch McConnell step in and find a way at the very last minute to get Senate Republicans on board to some unknown compromise solution at this point? Who knows.

BLITZER: Who would have thought it would have gotten this far to begin with.

Jessica, thanks very much.

Let's get some more now with our senior political analyst David Gergen and our chief political analyst Gloria Borger.

Gloria, what does the president need to say tonight?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: He's got to keep the pressure on, Wolf. He's got to outline the stakes yet again to the American public, and say, look, I sent these people over the weekend to come up with some kind of a compromise, some kind of a deal. And I heard that they haven't been able to do it and we need to find a way to do it.

And he, of course, is going to say that the Democrats have given. But I think part of it is just to keep the pressure on the Republicans and Democrats to get this done because time is running out.

BLITZER: He will try to do that and then two minutes after he's done John Boehner, David, the speaker of the House, he will address the American people as well.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, the fact that both are speaking shows we don't have a deal and we don't have reconciliation yet. I do agree with Gloria about keeping the pressure on, but, Wolf, I think it goes back to something Jessica Yellin was just reporting on, and that is it's apparent that we have got a train wreck right in front of us. I think there's a very good possibility that the president will try to extend the process now and not end it on...

(CROSSTALK)

BLITZER: But Timothy Geithner keeps saying that August 2, they don't have enough money to pay all the bills.

GERGEN: Well, I think what the president would require before -- the president could go to the Congress and say, look, I'm willing to accept a two-week or three-weeks or whatever the number is extension, lift the debt ceiling for that while we get this settled because you have got a situation now where you have got the Reid bill competing with a Boehner bill and there's a good possibility neither will pass.

And given that they will have to find this new alternative and that will take some days.

BORGER: I think what they need to look for is really a mechanism, as Jessica was talking about earlier, some kind of mechanism that allows for an automatic extension of the debt ceiling so you don't have to go through this again in six months down the line.

BLITZER: Tea Party activists in the House won't accept that.

BORGER: Well, it depends, if it is accompanied by spending cuts that would kick in. I mean, you could make the point here that the Republicans have gotten everything that they asked for. They get spending cuts and they got no tax increases.

GERGEN: Yes, but they haven't got much in spending cuts and that's the point.

BORGER: Right.

BLITZER: And what Harry Reid's plan doesn't include, David, he doesn't include any entitlement cuts, no Social Security, Medicare, Medicaid, which is what a lot of the Republicans want.

GERGEN: I don't think there's a chance in hell that the Reid plan gets passed in the House. But it's not even clear it can pass the Senate, that it can get past -- they have got the 60 votes to get it done in the Senate, because it sounds good on the surface, but as Jessica reported, there is $1 trillion in the Reid plan which is seen as phantom savings by a lot of people who look at it.

BORGER: Because of the wars?

GERGEN: Because we're not going to be fighting in Afghanistan and Iraq, we save $1 trillion. Well, nobody ever planned to be fighting...

(CROSSTALK)

BORGER: Well, and when you say that to Democrats, this is not real, they say it was in Paul Ryan's budget, so Republicans voted for it.

(CROSSTALK)

GERGEN: That's gamesmanship. The S&P won't count it as serious deficit reduction.

(CROSSTALK)

BLITZER: Because even if they do work out some sort of deal to at least, you know, get the debt ceiling raised, the AAA rating the United States has may not be AAA when all the dust immediately settles.

GERGEN: I think the chances of that are more than 50/50 now.

BLITZER: And the ramifications for our viewers who are watching here in the United States and indeed around the world are very significant if the value of the dollar goes down, interest rates go up, if there is inflation. There's some serious potential economic problems out there if they don't get this done.

BORGER: And that's why public opinion has shifted on this. I mean, Wolf, when we started talking about this a couple months ago it seemed that most of the American public didn't really care whether the debt ceiling got raised. Now the American public really understands and cares whether it gets raised and looks at Congress as dysfunctional.

BLITZER: Very quickly, David.

GERGEN: But even if they get the debt ceiling raised, S&P could still downgrade our debt. That's a real possibility.

BLITZER: Yes. And that explains why the value of gold, the price of has been going up as it has over these months. All right, guys, thanks very much.

GERGEN: Exactly.

BLITZER: The debt battle isn't just playing out here in Washington. It's all being waged on TV with special interest groups adding their voices to the mix through more than a dozen ads.

Let's bring in CNN's Lisa Sylvester. She is working that part of the story for us.

So what are you finding out, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Wolf, with Congress prepared for deep cuts to the budget, these special interest groups, they have launched an all-out lobbying effort. That includes spending millions on political ads.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): The ad wars have begun.

UNIDENTIFIED MALE: I'm a grandfather, a retired teacher and I count on Social Security. Here's what I'm not, a pushover.

NARRATOR: America's debt has never been higher, $14 trillion and rising faster than ever.

NARRATOR: Unemployment up 25 percent, the national debt up 35 percent, the price of gas up 104 percent.

SYLVESTER: More than a dozen such pitches have hit the airwaves, special interest groups shelling out millions to tilt the deficit reduction debate in their favor.

Ken Goldstein (ph) tracks political ads.

UNIDENTIFIED MALE: The weather is not only hot, but we're starting to get a lot of hot political activity, both across this very high-stakes budget deal and the debt ceiling increase, and we're starting to get the incipient first shots at the presidential air war. And that election is not going to happen for another 15 months.

SYLVESTER: The AARP fighting to ward off changes to Medicare and Social Security.

NARRATOR: You have worked hard your entire life.

SYLVESTER: The Club for Growth going after Republicans who might be on the fence.

NARRATOR: Tell Republicans in Congress no debt limit hike without real spending cuts and a balanced budget amendment.

SYLVESTER: And the Service Employees International Union shows a car being recklessly driven on a winding road, the ad lambasting Republican lawmakers.

NARRATOR: They are willing to risk it all to protect tax breaks for millionaires, oil companies and CEOs who fly around in corporate jets.

SYLVESTER: High stakes with an impending deadline and billions riding on it.

Mary Kay Henry with the SEIU says her group is not letting up.

MARY KAY HENRY, SERVICE EMPLOYEES INTERNATIONAL UNION: It's running in six cities. We have hundreds of thousands of our members phoning in to Congress. We are doing demonstrations at congressional offices. We have been turning up the heat on the Republican leadership.

SYLVESTER: This is only the beginning. A 2010 Supreme Court ruling that upended a ban against corporate political spending as a violation of free speech opened the floodgates for these kinds of ads.

UNIDENTIFIED FEMALE: Special interests have gotten a lot stronger post Citizens United, the Supreme Court decision which allows them to weigh in specifically for or against a political candidate and spend unlimited sums from -- generated from unlimited and sometimes undisclosed sources.

(END VIDEOTAPE)

SYLVESTER: Now Democrats are for the most part going after Republicans in their ads. No surprise there. But GOP groups are not only going after Democrats in their ads; they are also targeting Republicans with messages like don't cave. Of course, Wolf, both sides are trying to win over public opinion -- Wolf.

BLITZER: That's what they do. Thanks very much, Lisa.

Once again, our special live coverage of the speeches by President Obama and the House speaker John Boehner starts later tonight. Our coverage will begin 8:00 p.m. Eastern right here on CNN.

I will be anchoring our coverage.

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

JACK CAFFERTY, CNN ANCHOR: While lawmakers continue to play games with the debt ceiling deadline, the quality of millions of people's lives is hanging in the balance and the clock is ticking.

Republican Congressman and presidential candidate Ron Paul thinks that time may have already run out. On the floor of the House last week Paul said -- quote -- "When a country is indebted to a degree that we are indebted, the country always default. We will default because the debt is unsustainable" -- unquote.

Meanwhile, no deal still as our politicians continue to appear to have lost sight of what they were elected to do in the first place. They argue, they grandstand, they posture, all the time with one eye cocked on whether or not they will be reelected, but nothing is decided. What they are really good at is what matters to them. Yesterday, House Minority Leader Nancy Pelosi left the debt ceiling negotiations in Washington so she could go to a fund-raiser in Connecticut for a friend of hers and fellow congresswoman who is up for reelection next fall.

When she was asked about her decision to choose a fund-raiser in Connecticut over the debt ceiling negotiations, Pelosi said -- quote -- "Sunday morning is sort of a time-out."

Really?

There's a general sense of pessimism in this country now, something that I don't remember at least to this degree in my lifetime, and it's not just about the nation's debt. We're in deep trouble. The economy is gasping for air. Millions and millions of people are out of work, some of them for a long time, and the future of a once proud and thriving middle class is sinking into quicksand. While Washington may be out of touch the rest of us are aware of how bad things are.

According to a new CNN/ORC poll, 84 percent of Americans, 84 percent say the economy is in poor shape; 59 percent still think the economy will still be poor a year from now. It's the 14th year CNN has asked this question, and this is the first time that a majority has been pessimistic about the country's economic future.

That brings us to the question, which is this. Are America's best days behind it? Go to CNN.com/caffertyfile and post a comment on my blog -- Wolf.

BLITZER: You might be interested, Jack. The president did have two fund-raisers he was supposed to attend tonight, but he's canceled his participation in them to deal with this crisis. He's sending the vice president, Joe Biden, instead. Did you know that?

CAFFERTY: I didn't, but now I do, and I thank you for that.

BLITZER: Now you do. Everybody else does as well.

All right, Jack, thank you.

A government default and lowered credit rating, what would it all mean for investment, and what should we be doing with our money right now? We're going to hear what some experts are saying.

Also, longtime friends are giving new details about the suspect in the Norway terror attacks as he appeared in court today. And we will also explain how the price of airline tickets almost, almost went down until the airlines made a calculated move.

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

(COMMERCIAL BREAK)

BLITZER: The suspect in the Norway terror attacks was in court today. The judge says Anders Breivik acknowledged carrying out Friday's mass shooting and bombing, saying they were necessary to stop what he called a Muslim colonization of Norway.

Breivik was ordered held until his next hearing in eight weeks. Meanwhile, officials have revised the death toll from the attacks down to at least 76 now. And now some of Breivik's friends are speaking out describing a man very different from the one the world now knows as a suspected mass killer.

Our senior international correspondent, Nic Robertson, is in Oslo.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: On his way to solitary confinement, Anders Behring Breivik is rushed from a rare closed-door session of court, journalists and public locked out of the hearing, where authorities say he admitted he carried out the killings.

They are anxious to contain his message of hate, one that is already spreading in a 1,500-page justification posted online that reads in part like a murderer's manual. Contrary to his earlier claims, Breivik now says he wasn't acting alone. This part of the horrible tragedy, that he was not alone, not a surprise for this woman who knows him.

MARIT ANDERSEN, FRIEND: He's not the loner. He's not the person who was struggling, who had no friends. I mean, he had friends. He was smart. He did well in school.

ROBERTSON: Marit Andersen was a high school friend that is beyond belief that the man she remembered as an entertainer turned out to be a brutal assassin.

ANDERSEN: He would do little dances and he would say funny things. You know, it was something that, yes, it was atypical for somebody who looked like that and would sort of make fun of himself in a way, and that was very endearing.

ROBERTSON: The attacks have the whole nation reeling, but the ramifications of the killings and his online ramblings don't stop at Norway's shores. The ripples risk spreading.

DR. LARS GULE, OSLO UNIVERSITY COLLEGE: Not necessarily Norway. A copycat could emerge anywhere actually. And that is really a problem, not least because this is what Breivik wants. ROBERTSON: Gule tracks right-wing radical through their online postings. He's never seen anything as dangerous as Breivik's diatribe. Thousands in Norway share his anti-Islamic sentiment, he says, and discuss their views in Internet chat rooms.

GULE: The right-wing Web sites, they provide a greenhouse for extremist ideas because they become isolated. People who do not share these ideas, they tend to stay away, which means that there's no opposition. There's no contrary arguments, so they feed upon themselves.

ROBERTSON: Marit Andersen, Breivik's high school friend, says she tried to be that moderating voice, stepping in when she saw his anti-Islam sentiment harden.

ANDERSEN: Later it became more extreme, and I remember after we all got on Facebook, we became -- I became friends with him there, and he had some rather outrageous statements there, that, you know, you can't say stuff like that. That's completely unacceptable.

ROBERTSON (on camera): That Breivik's extremism was not caught in some greater safety net will undoubtedly become a point of contention. What is beyond doubt is that this nation is changed forever and the closing of the court to the public is just the first manifestation of the price this peaceful, tolerant nation will be paying.

Nic Robertson, CNN, Oslo, Norway.

(END VIDEOTAPE)

BLITZER: The clock keeps ticking on the U.S. debt crisis. The uncertainty has investors on edge and wondering what to do next. Is there anywhere your investment dollars are safe right now? We're looking at some options.

And later, a groundswell of calls to resign as another United States congressman falls from grace under allegations of sexual misconduct.

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

(COMMERCIAL BREAK)

BLITZER: We're just about two-and-a-half-hours away from President Obama speaking to the nation from the White House about the impasse over raising the U.S. debt limit. And his remarks at 9:00 p.m. Eastern will be followed immediately by remarks from the House speaker, John Boehner.

I will be here for live coverage. Our coverage will begin an hour earlier at 8:00 p.m. Eastern.

Among the many people who no doubt will be listening carefully, investors fearful of a possible government default and probable credit downgrading if, if a deal isn't reached very soon. CNN's Mary Snow is working that part of the story.

Mary, you have been talking to some experts. What advice do they have for investors?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, their advice is simple. Don't panic, but be smart. As one financial adviser put it, at this point tweaks may be necessary to investments, but not major changes.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Wall Street is warily watching the high- stakes political battle in Washington over raising the debt ceiling. As the August 2 deadline inches closer with no deal, investors are growing edgy turning to financial advisers like Greg Olsen.

GREGORY OLSEN, LENOX ADVISORS: They are asking, what effect will the budget impasse have on their portfolio.

SNOW (on camera): And what are you telling them?

OLSEN: Most likely nothing.

SNOW (voice-over): Olsen says for long-term investment likes 401(k)s, investors should ignore the headlines and leave their money alone, but for money need sooner than that:

OLSEN: If there is money that they are going to need in the short term, a year, two years, that's money that most likely should not be invested in equities at this point.

SNOW: So where should they put it if not stocks? Cash, says Olsen, is one option. Bonds are another. But with the U.S. facing the threat of a credit downgrade, he is looking towards bonds outside U.S. borders.

OLSEN: Australia, Australian bonds paying 5 percent for government bonds and they are AAA rated, and the Australian economy is doing very, very well because of their exposure to China.

SNOW: Many other investors are turning to gold, which reached a new record. Even with those highs, money manager and author Stephen Leeb still thinks it remains a safe haven.

STEPHEN LEEB, ECONOMIST: Yes, in this market, in these times, it is.

SNOW (on camera): Even hitting record highs?

LEEB: Yes, yes, absolutely. It's sort of like saying is Amazon a safe haven or was Amazon a good stock at $100, which was a crazy price? Now it's at $240.

SNOW (voice-over): While Leeb leans to the bullish side, he thinks investors should have a whopping 25 percent of their portfolio in gold and related investments, whereas Greg Olsen thinks it shouldn't be more than 5 percent. Both though echo what many on Wall Street believe. The thought of no agreement on raising the debt ceiling is inconceivable.

OLSEN: No one is going there because we don't want to think about it. After we went through with the Lehman crisis, no one wants to think that our elected officials are dumb enough to let this happen.

(END VIDEOTAPE)

SNOW: And, Wolf, that sense on Wall Street that a crisis will be averted might explain what happened in the markets today. Stocks did not see the steep losses that were predicted over the weekend when lawmakers failed to reach an agreement on raising the debt ceiling -- Wolf.

BLITZER: All right, Mary, thanks very much.

Let's get some more now with senior political contributor John Avlon. He's a senior political columnist for TheDailyBeast.com. And CNN.com contributor David Frum of FrumForum.com, he's also a former Bush speechwriter.

John, you said this in your last column over at CNN.com. You said: "Let me get this straight. The people who have been preaching the most about the dangers of an American decline are right now helping to hasten American decline."

Explain.

JOHN AVLON, CNN CONTRIBUTOR: Well, look, if we default on our debt, all of a sudden we get a much deeper fiscal hole overnight, all of a sudden the full faith and credit of the United States will be questioned by our allies.

And so this is not a game that we're playing. That's the problem. This is not a fiscal crisis so much as it is a political crisis. And it's creating fundamental problems for the United States. We need to wake up. We need to address that, and we need to raise the debt ceiling and then begin to deal seriously with our deficit and our debt.

BLITZER: And you're obviously very concerned that this whole thing could still wind up a disaster?

AVLON: Absolutely. And look, even if we don't default, the rating agencies could decide to downgrade the United States because of our inability to deal with this political problem. We are losing the ability to reason together, and that will end up being a strike against us. We need to assert American leadership by dealing with this problem.

BLITZER: All right, hold on for a moment. I want to bring David Frum in, in just a moment.

But Brianna Keilar is standing by over at the White House, our White House correspondent.

Brianna, I understand you're getting some specifics of what we might be hearing from the president tonight.

BRIANNA KEILAR, CNN CORRESPONDENT: Wolf, I've been speaking with some Democratic officials who are familiar with the president's speech, and they say that when he addresses the nation tonight at 9 p.m. during primetime, he is going to underline that the nation is in imminent threat of default. He's going to underline, as well, that this is a congressional stalemate.

And, Wolf, that is a talking point that you're going to be hearing much more from the White House starting tonight with the president and in coming days, that this is a congressional stalemate and that the only answer here is compromise.

This is coming to us from Democratic officials who are familiar with the president's speech. They say that will it run about 15 to 18 minutes. The president is still working on this speech. There is a rough draft of it, but he's tweaking it, as we speak.

Is he going to outline, Wolf, a plan for default, because it is long seen that, if the White House specifically talks about a contingency plan if there is a default, that that's a very bad sign. No, the president will not outline that plan.

Also something that I found very interesting talking to these Democratic officials familiar with the president's speech, he's not going to issue a veto threat or underline a veto threat of the Boehner plan that we've heard put out that would essentially be a -- a first set raise of the debt ceiling in one part, Wolf, and then it would leave another raise to take place in the winter. He's not issuing an outright veto threat of that, but these officials say the president has made it clear that he will veto any short-term plan, but I still think that's a pretty significant point, Wolf.

BLITZER: And there's obviously a very significant point if you're hearing from your sources, and I just jotted it down, the president is suggesting -- if he suggests tonight, Brianna, that the nation, the United States is in imminent threat of default. That is a huge, huge fear that's going to go out there. The Asian markets, which are getting ready to open out in Asia, it's going to -- it's going to scare a lot of people because until now both the president, the Democratic leadership, the Republican leadership, they've all made the point that the United States is not going to default. They just have to work out some sort of deal.

But this sounds like this is getting ominously dangerous towards default.

KEILAR: Wolf, the president is very much trying to push Congress. That's obviously why the rhetoric is being ratcheted up here. This is a very significant thing that the president is going to say.

We also expect that he will again restate his endorsement of the Reid plan which we've talked about, Wolf, which would be a two-point -- or to hear Reid describe it would be a $2.7 trillion in cuts, deficit savings over ten years without any tax increases, without any entitlement reform.

But the president will also make the point, Wolf, that not dealing with tax reform or entitlement reform also don't deal with the tough questions that you need to answer in order to get deficit reduction.

Also, something that these officials told me, Wolf, when it comes to the Boehner plan, which as I mentioned would have a short-term raise of the debt ceiling, at least short-term compared to what the president wants which is beyond the 2012 election, White House officials, the White House, they're confident that as the week goes on and they're bracing themselves for, really, economic turmoil this week, as the week goes on, they are confident that that argument that Republicans are making, they say, will become a very unattractive argument to make, that we should be in this same position here in several months going through the exact same very chaotic debate, Wolf.

BLITZER: All right. Thanks very much, Brianna. Don't go too far away.

David Frum is still with us.

David, this is pretty scary stuff when you hear the president of the United States, if he's going to say that the nation, the United States is in imminent threat of default

FRUM: I think there are four things that people need to keep in mind as they watch the president's speech.

First as John Avlon said, this is a political crisis, not a debt crisis. For all that you hear of the unsustainability of the debt, this is a planet full of people ready to lend the United States government money for ten years at 3 percent. The lenders are confident. It's the borrowers that are a problem -- are a problem.

Second, people need to understand it is not the debt that is causing our economic problems, and you will not solve the economy by fixing the debt. In fact, it's the other way around. It's the economy that's causing the debt problems. It is driving collections down and forcing expenses up. When the economy is better, the debt situation is better.

I think, third, people need to bear in mind that the president's behavior, as bad as the Republicans have been, is now getting as bad. The threat to veto a short-term increase in the debt ceiling, that is putting his political calendar ahead of the needs of the country.

And the final thing to keep in mind is that this problem is something that really can be solved inside the Republican Congress. It is a test of John Boehner's leadership. I think he wants to do better than he's doing. It is his -- this is really a crisis of followership as much as leadership.

BLITZER: David Frum, don't go too far away.

John Avlon, don't go too far away.

We'll have special coverage. Our coverage will begin at 8 p.m. Eastern. The president will address the nation, 9 p.m. Eastern. The House speaker, John Boehner, will address the nation two minutes after the president finishes his remarks.

The stakes for all of us, everyone in the United States indeed, investors around the world, enormous right now

Another lawmaker caught up in a sex scandal and resisting calls to step down.

Plus, product placement, movie quotes and much more. Details of the NASCAR prayer that's causing an uproar. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Political stalemate here in Washington has left U.S. airlines unable to charge many taxes which should make tickets cheaper, but guess what? In reality there's no savings at all for passengers.

Let's go to CNN's Jeanne Meserve. She'll explain what's going on here -- Jeanne.

JEANNE MESERVE, CNN CORRESPONDENT: Wolf, funding for the Federal Aviation Administration was cut off Friday night because of a disagreement between the House and Senate, but one group is benefiting. That is the airlines.

(BEGIN VIDEOTAPE)

MESERVE (voice-over): What might have been a windfall for air travelers is instead a gold mine for the airlines. The failure of Congress to reauthorize the Federal Aviation Administration has left the agency unable to collect about $200 million a week in taxes. That could reduce the price of an airline ticket by about $25 to $50, but most consumers are not seeing the savings, because airlines have seized an opening to increase fares.

RAY LAHOOD, TRANSPORTATION SECRETARY: They're charging the public for a tax that doesn't exist.

MESERVE (on camera): And pocketing the money.

LAHOOD: And putting it on their bottom line. And almost every airline, except for one, made money last year because of baggage fees, because of pillow fees, because of blanket fees, because of food fees. And what I've said to the airline association is you need to start thinking about the customer.

MESERVE: A handful of airlines, including Spirit and Alaska Air, are passing savings along to consumers, and one travel expert believes those who have increased ticket prices will eventually have to change course.

RICK SEANEY, CEO, FARECOMPARE.COM: My guess is going into the fall season, which is a little bit softer, they would almost be forced to drop their airfare prices back down.

MESERVE: The reauthorization impasse is not impacting flight scheduling or safety. Air traffic controllers remain on the job, but the FAA has furloughed about 4,000 other employees and halted airport projects around the country, jeopardizing construction jobs.

The main obstacle to an agreement is a program that helps maintain service to out-of-the-way airports. A key House Republican says the FAA essentially subsidizes tickets up to the tune of $3,700 per passenger.

REP. JOHN MICA (R), FLORIDA: The problem with the FAA and this extension is the same problem we face in Washington. No one wants to stop spending. No one wants to stop wasteful programs.

(END VIDEOTAPE)

MESERVE: Secretary LaHood counters that the issue of subsidies should be dealt with separately from the reauthorization extension, but most experts we talked to today believe Congress isn't going to revisit the issue of the FAA until they resolve the much larger dispute over the debt ceiling -- Wolf.

BLITZER: All right, Jeanne, thanks very much. Jeanne Meserve reporting for us.

Charges of inappropriate advances have an Oregon congressman in hot water and facing a possible ethics investigation. He says he's staying put.

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BLITZER: Another member of the United States Congress with allegations of sexual impropriety. Seven-term Representative David Wu of Oregon is resisting calls for his resignation. Brian Todd is here and is working the story for us. What happened here, Brian?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, this congressman remains in office, but the pressure is mounting on him to resign. Congressman Wu has been troubled by reports of erratic behavior, run- ins with his staff, and now an unwanted sexual encounter with a young girl.

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REP. DAVID WU (D), OREGON: An embattled congressman sees his own party's support quickly slipping away over alleged sexual misconduct. David Wu of Oregon faces a possible House ethics investigation requested by fellow Democrat, House minority leader Nancy Pelosi. He's also fighting off calls to resign, this after a report in "The Oregonian" newspaper saying a young woman had called Wu's office in the spring accusing him of aggressive and unwanted sexual behavior. Jessica Brady has been reporting on Wu's behavior all year for the newspaper "Roll Call."

JESSICA BRADY, REPORTER, "ROLL CALL": We know that she is about 18 years old, that she called Mr. Wu's congressional office back in -- back in the state, sounded very distraught on the phone, and said that she was the subject of an unwanted sexual encounter with him. She's the daughter of one of his old college friends and a campaign donor.

TODD: "The Oregonian" reports that, according to an unnamed member of his staff, when he was confronted by his aides Wu admitted a sexual encounter but said it was consensual. Despite our repeated attempts, Wu's aides said he didn't want to speak to us on camera.

He did issue a statement saying, "This is very serious, and I have absolutely no desire to bring unwanted publicity, attention or stress to a young woman and her family."

(on camera) This is only the latest twist in a pattern of trouble for Congressman Wu. Earlier this year he admitted that he sought medical help after some strange behavior during his re-election campaign last fall that he said was brought on by the stress of being a single parent and the death of his father.

(voice-over) Back in the fall he sent this picture of himself in a tiger costume to his staff. He reportedly it was around Halloween and he was joking with his kids. But a report in "The Oregonian," citing anonymous sources within Wu's congressional office and his reelection campaign, said his staff became so concerned with what they described as his erratic behavior in public and private, that they urged him to seek psychiatric treatment. The paper says he refused.

(on camera) How toxic is he right now for the Democrats?

MARK PRESTON, CNN SENIOR POLITICAL EDITOR: They moved very quickly which just goes to show you they are trying to distance themselves from Wu. Look, they remember what happened with Anthony Weiner just about a month ago when that dragged out and it was a really drag down on Democrats. They want to cut this off as quickly as possible.

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TODD: Now, although Congressman Wu has so far resisted calls to resign, there are reports that he won't run for re-election next year, and, Wolf, his troubles go back to 2004 and way beyond that.

Back in 2004 "the Oregonian" reported that he had forced a former girlfriend -- tried to force a former girlfriend to have sex with him. He admitted to it back in 2004. This was back in the '70s this incident occurred. Back in 2004, he admitted it and took responsibility for it. That was three weeks before the election, and he got re-elected. So his troubles go back kind of a long way.

BLITZER: We'll see what happens this time. All right. Thanks very much, Brian, for that. A prayer unlike any other we've heard in a long time. What one pastor said at a NASCAR race.

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BLITZER: The death of singer Amy Winehouse remains a history at this hour. Lisa Sylvester is monitoring that and some of the other top stories in THE SITUATION ROOM right now -- Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, it could be up to four weeks before we learn what killed Winehouse. The London coroner's office today announced an autopsy of the British singer-songwriter did not establish a formal cause of death. Winehouse's parents mingled today with their daughter's fans outside her London apartment where the 27-year-old blues artist was found dead on Saturday.

And are you ready for some football? Well, members of the NFL Players Association today unanimously ratified a new deal with league owners, ending a players' lockout imposed in March. The owners approved the new agreement last week, and the pact will last through the 2020 season, so mark your calendar. The regular season starts September 8. What is it, Wolf, "Go Bills," right?

BLITZER: Go Bills, go Redskins, go all my teams. All right. Thanks very much.

Let's check with Jack. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: The question this hour is: "Are America's best days behind it?"

Russ in Pennsylvania writes, "Probably. The country has spent too much, has thrown away resources on empire building and wars, has promised too much in order to manipulate a population. The best days can only be ahead when Americans realize that government promises are just as empty as the government wallet."

Jane writes, "It sure seems like it. Unless you're a wealthy person in this country, life is a constant struggle. If I was a young person I would seriously consider immigrating to a country that cared about all of its people, not just the privileged."

Ginger in Texas says, "Is the U.S., like Rome, collapsing from the inside? It sure looks like it."

Paul in Ontario: "The seeds of America's destruction were planted in the 18th Century by the Founding Fathers, because they based your country on the rights of the individual, not the collective. Canada has fared better in these hard times, because our Constitution aims at peace, order and good government, which has so far saved us in a selfish world."

Simon in Florida, "Writes without a control of government spending and the rise of the crushing national debt, it's all downhill from here. I think people have no idea how bad it's going to get. It will be a government takeover of everything, including their money through oppressive income and excise taxes."

Pat in Michigan writes, "You've been around long enough to know, Jack, yes, our best days are behind us until the next revolution when we take back the country."

And Lou writes, "I think the idea of America being the center of the universe is behind us. We've been programmed to believe America is the greatest country on earth all our lives. With increased information at our fingertips, we become more analytical and aware about our place on this planet full of other people. We're pretty great, but we aren't perfect."

If you want to read more about this subject, go to my blog: CNN.com/CaffertyFile -- Wolf.

BLITZER: See you tomorrow, Jack, thank you.

President Obama right now is getting ready to address the nation tonight as lawmakers on Capitol Hill rule out dueling debt plans. We'll iron out the scramble. That's coming up at the top of the hour for our North American viewers on "JOHN KING USA." Stand by for that.

Just ahead here in THE SITUATION ROOM a NASCAR race prayer that left lots of people laughing.

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JOE NELMS, PASTOR: Lord, I want to thank you for my smokin' hot wife tonight, Lisa.

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BLITZER: Opening prayers are typically very solemn moments, so here's a question: why did NASCAR drivers, pit crews and racetrack -- a racetrack full of spectators get the giggles in Nashville on Saturday? Here's CNN's Jeanne Moos.

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JEANNE MOOS, CNN CORRESPONDENT (voice-over): It was the best of prayers; it was the worst of prayers.

NELMS: Lord, I want to thank you for my smokin' hot wife tonight.

MOOS: It was a prayer unlike any other.

UNIDENTIFIED FEMALE: Lord in heaven.

UNIDENTIFIED MALE: Hail Mary, full of grace.

MOOS: This prayer was full of cars. NASCARs. NELMS: So we want to thank you tonight for these mighty machines that you brought before us.

MOOS: Baptist Pastor Joe Nelms was in Nashville giving the prerace invocation.

(on camera) Some are calling it the first sponsored prayer, brought to you by...

NELMS: Thank you for the Dodges and the Toyotas. Thank you for the Fords. Thank you for Sunoco racing fuel and Goodyear tires.

MOOS (voice-over): As one critic posted on YouTube, "I am certainly not a religious man, but I'm pretty sure product placement in a prayer equals a straight ticket to hell." But Pastor Nelms isn't bothered.

NELMS (via phone): I can assure you there was no endorsement deals, but I am not against them. Any of them that want to send some money to our church, we'll be happy to use it.

MOOS: Wait until you hear how he ended the prayer.

NELMS: In Jesus' name, boogity, boogity, boogity, amen.

MOOS (on camera): But what does "boogity" mean?

NELMS: It means go get after it, boys. It's southern for "get to it."

MOOS (voice-over): It's the catch phrase used by a well-known NASCAR announcer to start a race, but the prayers started critics' engines. "It's making a mockery of prayer." "He's just being a clown." "He is being sacrilegious."

Pastor Nelms says he just wanted to get folks who don't go to church thinking.

NELMS: Hey, maybe not all Christians are a stick in the mud.

MOOS: Admirers called it the best prayer ever. "This is awesome." "Putting the fun back in fundamentalism."

NELMS: Lord, I want to thank you for my smokin' hot wife tonight, Lisa.

MOOS (on camera): That "smokin' hot wife" part sure rings a bell.

(voice-over) Will Ferrell playing racecar driver Ricky Bobby...

WILL FERRELL, ACTOR: Dear Lord, baby Jesus.

MOOS: ... thanking the Lord in "Talladega Nights."

FERRELL: And of course, my red hot smokin' wife, Carly, who is a stone-cold fox.

MOOS: Pastor Nelms confesses he recently saw "Talladega Nights" on TV and got the idea to use it. As for his wife, she said this to someone who called to complain about the prayer.

NELMS: "I'm the smokin' hot wife, and I don't care how many times he says it to a big crowd or a small crowd. I'm enjoying it."

MOOS: This pastor has no issues with the separation between church and track. Jeanne Moos, CNN...

NELMS: In Jesus' name, boogity, boogity, boogity. Amen.

MOOS: New York.

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BLITZER: Thanks very much for that.

That's it for me. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM. I'll be back in one hour, 8 p.m. Eastern, to anchor our special coverage before President Obama's address to the nation.

For our international viewers, "WORLD REPORT" is next. Here in North America, "JOHN KING USA" starts right now.