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No Vote Yet on Boehner Debt Plan; Stocks Fall Amid Debt Stalemate; Fort Hood Soldiers Targeted; New Poll Suggests Obama Support Slipping; TSA's New Behavior Detection Plan; Dow Sinks as Default Closes in; Debt Cutters Racking Up Debt; TSA to Fight Terror with Talk; Pres. Obama Speaks 10:20 AM ET

Aired July 29, 2011 - 09:00   ET

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

KYRA PHILLIPS, CNN ANCHOR: It's 9:00 a.m. on the East Coast, 6:00 a.m. out West coast. I'm Kyra Phillips. Thanks for joining us.

A stunning setback in the race against the debt deadline. A revolt among House Republicans forces a critical vote to be delayed.

Police in Texas say a Muslim American soldier confessed to plotting an attack on Fort Hood just two years after a Muslim officer shot to death 13 people on that same base.

Tropical storm Don could hit the south Texas coast tonight and drought-stricken farmers are welcoming the prospect of up to seven inches of rain.

We begin this morning with that sobering reality check on the debt crisis and just how daunting the challenge has become. In less than four days, the federal government could run out of money and default on its bills. But on Capitol Hill, the process has taken a huge step back.

House Speaker John Boehner abruptly delayed a vote on his debt plan because of a revolt within his own party.

Joe Johns is in Washington with more on the political battle and Ali Velshi in New York waiting to see how the markets will react.

Ali, let's start with you and the new GDP number that just came out moments ago.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes. This is going to add a whole new wrinkle. We've just seen futures tank this morning after a very unexpected and not very good result.

Let me just explain to you. GDP is the biggest measure of our economy and we measure how much it's increased over a year, what the increase, what the rate is. Every three months we measure the rate. Well, this -- for the second quarter, GDP for the United States increased at 1.3 percent.

Now that is substantially less than what we were expecting. We were expecting to be 1.8 percent. So that's bad news. But here's really the bad news. They revised several quarters before that. The first quarter, the first three months of this year, we thought that the economy had risen 1.9 percent.

Take a look at it over there. Turns out that it was just up 0.4 percent. So that is -- that is disappointing. It means that the economy was much slower in the first quarter than it was -- that we expected it to be. It does mean that it picked up a little bit in the second quarter.

OK. Let's put that aside for a second. It is affecting markets right now. Markets that are already down. The Dow more than 450 points for the course of the week.

This is it, Kyra. This is as far as the markets are going to let this go. If there is not some sense over the weekend that there is a deal and that there is going to be a debt ceiling increase, I think you're going to see the patience in the markets and the bond markets which are twice as big as global stock markets start to run out of patience and investors will send the message to Washington that you have got to sort this out.

One way or another that debt ceiling has got to be increased and you got to figure out how to negotiate on your budget. Otherwise they'll be running out of patience.

PHILLIPS: So --

VELSHI: I think that the idea that there might be a vote today will buy them some time.

PHILLIPS: Is it fair to say this is a sign of a double-dip recession?

VELSHI: Well, it's a sign that there was a soft patch in the first quarter of this year. And that it may have recovered. Remember, the first quarter was growth of 0.4 of a percent, the second quarter was growth of 1.3 percent.

So it looks like we may have gone down and then started to come back up again. So for now, let's call it a soft patch. I want to go through the entire details. This report just came out. I want to see what else has happened in here. But the first look at this suggests something softened in the first quarter of this year, the first three months of this year, and started to come back again.

PHILLIPS: All right. Ali, we'll be talking a lot today. Thank you so much.

And you know this time yesterday, its passage seemed imminent. Now it's a major obstacle to Tuesday' deadline as conservative Republicans seem more unwilling than ever to compromise.

(BEGIN VIDEO CLIP)

REP. STENY HOYER (D-MD), MINORITY WHIP: And a party that is divided itself has difficulty working with the president or working with us, and that's unfortunate and the country is the poorer for it. REP. JOE WALSH (R), ILLINOIS: We need to get this right. We need a balanced budget amendment. If it takes us a few days more to make sure we get it right, let's do it.

(END OF VIDEO CLIP)

PHILLIPS: Joe Johns, do you have any idea if we're going to see a vote today?

JOE JOHNS, CNN SENIOR CORRESPONDENT: Well, we're certainly not going to see one before 11:00 Eastern and other than that, there aren't a lot of predictions I'd make from this desk.

There are some Republicans from the House of Representatives saying they do believe there's going to be a vote and the bottom line really is -- they may have to go in and change the bill a little bit.

You heard that sound bite about getting a balanced budget amendment. This is not something that's going to happen during 2011 in all likelihood because even if you did it in the House and the Senate, it would have to go out to the states and so on.

But, yes, they're going to try again and they may have to change the bill a little bit to try to get the votes they need in the House.

PHILLIPS: All right. Joe, thanks.

Well, he went shopping at a gun store via a taxicab. Just one suspicious move that got police thinking something just wasn't right. Now the AWOL army private is in jail suspected of plotting to kill Fort Hood soldiers.

CNN's Ed Lavandera is in Killeen, Texas.

Ed, the cop also -- the cops, rather, also found enough materials to make two bombs. Tell us more about this guy.

ED LAVANDERA, CNN CORRESPONDENT: Well, that is the frightening aspect of this story which is eerily similar to what happened here two years ago when Major Nidal Hasan gunned down 13 soldiers. Authorities here in Killeen say Private Naser Abdo had plans of even killing more Fort Hood soldiers.

GREG EBERT, GUNS GALORE SALESMAN: It's a Springfield XD.

LAVANDERA (voice-over): From the moment Greg Ebert set eyes on Naser Abdo, he says something didn't seem right.

EBERT: He shows up here in a taxicab. How many people go shopping at gun stores in a taxicab?

LAVANDERA: The army private spent about 20 minutes inside the Guns Galore gun shop in Killeen, Texas. Ebert says Private Abdo acted very guarded and asked odd questions.

EBERT: He selects the six canisters, brings them to the counter, sets them down, and that's when he asked Kathy what is smokeless powder. Well, hello? Why are you buying this if you don't know what it is?

LAVANDERA: Ebert says Abdo then spent almost $250 on a handgun magazine, three boxes of shotgun shells, and six pounds of smokeless gun powder.

EBERT: Rang it up, he paid cash, took his bag and left without the receipt or his change.

LAVANDERA (on camera): Left without his change?

EBERT: Yes. It wasn't much, you know, like 18 cents, 20 cents.

LAVANDERA (voice-over): Ebert is a retired 20-year law enforcement veteran. It was that old cop's hunch that convinced him to report the suspicious customer to local police. Within 24 hours, officers hunted him down and say they unraveled Abdo's horrifying and deadly plan.

DENNIS BALDWIN, KILLEEN POLICE CHIEF: We have interviewed him and we have the information as a result of that interview as well as other leads that we're following up on that gives us --

UNIDENTIFIED REPORTER: During the interview --

BALDWIN: Let me finish -- let me finish my statement. That leads us to believe that military target -- personnel was targeted.

LAVANDERA: But police say this attack wouldn't have occurred inside Fort Hood like the deadly massacre in 2009 where Major Nidal Hasan allegedly gunned down 13 soldiers. Instead, authorities say Abdo planned on attacking soldiers in popular gathering spots around Killeen just outside Fort Hood.

UNIDENTIFIED REPORTER: How close was he to pulling this off?

BALDWIN: That's a good question, and I can tell you that we would probably be here today giving a different briefing had he not been stopped.

LAVANDERA: Law enforcement sources tell CNN bomb-making materials were found in Abdo's room inside this Killeen, Texas, hotel. Another source says Islamic extremist literature was found in his backpack.

Fort Hood is still hurting from that deadly massacre two years ago and Greg Ebert can't help but think about what might have happened this time had he not called police.

EBERT: I would be devastated, especially considering that I might have played some role in someone being injured, seriously injured or killed. That would be very unsettling.

(END VIDEOTAPE) LAVANDERA: Kyra, right now, the -- that army soldier is being kept here at the Killeen Police Department. But we anticipate that federal charges -- we've been told to expect federal charges to be filed at some point and that could happen today -- Kyra.

PHILLIPS: I'll tell you what, that cop's hunch, I think, paid off big-time.

Ed, thanks so much.

Paul Steinhauser joining us now for our political ticker.

So, Paul, more evidence that next year's presidential election could be too close to call?

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: Yes. Yes. Still a long way away but two now -- two polls in the last week showing the same thing, that battle next year for the president, the Republican candidate, all tied up basically.

Look at this. Pew Research Center. This is -- the president versus a no-named Republican candidate, generic candidate. You can see right there. It's basically all tied up with the president with support of 42 percent, 41 percent going for the -- or 40 percent going for the Republican.

Look how it was back in May, though. What a difference it was back then. Eleven-point advantage for the president.

But, Kyra, I'll say one thing about these numbers. Remember, the election is over a year away. Things change, people change their minds. But what's the big factor in all this? The economy, the economy, the economy. You were talking about it with Ali and this very, very slow recovery.

All right. Let's talk about Governor Rick Perry. We do it almost every morning. He's thinking about maybe jumping into that race for the Republican presidential nomination. He speaks at a summit, Western Conservative Summit, in Denver kicks off tonight. About 900 conservative activists there.

And guess what? They vote in a straw poll which Perry will be on on Sunday. So we're going to keep a close eye on those results and we will report back to you.

Perry says he could decide on a race for the White House maybe later this month or in September -- Kyra.

PHILLIPS: All right. We are also keeping a close eye on Jersey Governor Chris Christie, out of the hospital, right? Is he back to work?

STEINHAUSER: Yes, out of the hospital and back to work this morning. His spokeswoman, I spoke to her this morning and she said that the governor is feeling and ready for whatever Trenton throws his way after a restful night. Now he was released from the Somerset Medical Center early last night. He suffers from asthma. He was admitted to that medical center earlier in the day after his inhaler didn't give him the kind of relief he normally gets from -- when he uses it. He said he had some breathing -- problems breathing.

At a press conference yesterday he said that he plans to work on his weight in the future to avoid this -- Kyra.

PHILLIPS: OK. Paul, thanks.

We'll have your next political update in just about an hour. And a reminder, for all the latest political news just go to our Web site, CNNPolitics.com.

All right, coming up, don't be surprised if you run into some pretty talkative TSA officers at security and don't think they're just being friendly either. New anti-terror techniques about to roll out.

And a Michigan pilot crashes his plane into Lake Michigan. We will tell you how he survives straight ahead.

(COMMERCIAL BREAK)

PHILLIPS: And this just in. We're being told President Obama is going to make comments about 10:20 Eastern Time, just about an hour from now, on the debt ceiling. As soon as he takes it to the mike, we'll take it live.

Checking stories "Cross Country" now.

Let's go ahead and start in Oshkosh, Wisconsin. An X-16 fighter jet slides off the runway at an air show crashing into the grass. Pretty scary moment. Don't know yet what caused it. But the pilot thankfully was able to walk away from it and nobody else injured.

In Michigan another lucky pilot. After 15 hours of treading water, Michael Trapp survives after crashing his plane into Lake Huron.

(BEGIN VIDEO CLIP)

MICHAEL TRAPP, PILOT: About six boats went by me after I crashed. I just was waving my sock at this boat going by and by the grace of God, they slowed down. I about started crying when they slowed down. I was like, oh, my god, yes, yes, thank you, thank you.

(END OF VIDEO CLIP)

PHILLIPS: Amazing. He's still in the hospital and expected to be fine.

In Orlando, former astronaut Lisa Nowak is being kicked out of the Navy. You remember her. She was the one that was busted for confronting a romantic rival after driving cross-country with a car full of adult diapers. She's receiving an -- other than an honorable discharge.

TSA officers are going to fight terrorism by talking more. The agency is expanding its Behavior Detection program. What exactly does that mean? Well, more interaction with you.

Mary Schiavo, a former inspector general at the Department of Transportation. She now works for a law firm that sues the airlines.

Mary, haven't we actually tried this before?

MARY SCHIAVO, FORMER INSPECTOR GENERAL, TRANSPORTATION DEPARTMENT: We have tried this before, on September 11th, 2001. One of the security measures in place was a passenger prescreening program, but it was run by airline personnel.

And indeed Mohammed Atta and others were picked out as being suspicious but nobody acted. So we tried it before and we put far too much reliance on it. It could be effective in a different way.

PHILLIPS: But we are waiting in such huge lines more often than not. So, isn't just this going to bog down the security lines even more?

SCHIAVO: No, not if the TSA does it right and, obviously, our safety depends upon them doing it right. What these officers will do, and it's important that they are trained officers for two reasons. One, they need the training to actually be effective, and two, they need to be officers so people can respond to them, but they need to fan out throughout the airport.

They won't be slowing people down in the waiting line. They might question you while you're waiting in line to go through security. They can question you at the ticket counter when you're unloading your car. The point is they are able to talk to people all throughout the airport if they think anything is suspicious and the second important is they will be empowered to act.

That's the problem on September 11th, 2001. People found things suspicious about passengers but they didn't act and didn't feel empowered to act.

PHILLIPS: So, Mary, if we are adding this extra layer of screening, if you will, could that possibly mean we would have fewer metal detectors, maybe a little less TSA touchy-feely moments?

SCHIAVO: No. The important thing about our security program, because we are so large. Everybody talks about it's great but they are tiny compared to us. We have, you know, 450 airports and millions more passengers every day.

So, what it will mean as we are adding additional layers and that's our whole philosophy. We have a layered security approach if terrorists get through one layer the next layer will catch him or her. And that's the important thing. We want all measures in place. So, if one doesn't get you, the other one will, and that's the whole theory behind our security.

PHILLIPS: Mary Schiavo -- Mary, thanks.

SCHIAVO: Thank you.

Coming up: Amy Winehouse parents head back to her home and surprise the singer's fans with some very special gifts.

And he's got looks and fame and money. Now, Prince Harry has got his own comic book. The royal wrap-up is next.

(COMMERCIAL BREAK)

PHILLIPS: Let's hit some showbiz headlines for you.

Amy Winehouse's parents shock her fans. They started handing out the singer's clothes and shoes to the crowds still gathered outside her home. Her dad Mitch told them, quote, "This is what she would have wanted."

Ashton Kutcher is front and center in CBS's new "Two and a Half Men" promo. The shot was him sandwiched in between his co-stars there and a pose similar to the show's old title sequence with Charlie Sheen.

Speaking of Sheen, his ex, Denise Richards, just dissed about their marriage, to CNN's Piers Morgan. She said the actor had been sober for three years when they met and fell in love, totally different from his recent bizarre behavior. She says if anyone can make a comeback, Charlie can.

Super-man, Spiderman, the Hulk and, now, "The Hunk."

Zain Verjee has got the hottest new comic book.

Well, is he a hero or is it more just about his life? Zain, tell us more.

ZAIN VERJEE, CNN INTERNATIONAL ANCHOR: It's about his wildlife. Well, you know, Kyra, Blue Water Production is saying it's time to focus on the willed child. He has been making waves around the world and it's about time he got his own comic book. You know, he has his own castles and his own horses, but he's got to have his own comic book.

They actually came up with one about Prince William and his bride, Kate Middleton, as well. So, this is going to be his royal hotness Harry -- a comic book for himself. It's going to cost almost $4, 32 pages. And we'll see if he is a hero or not but he is a hunk, right, Kyra?

PHILLIPS: Royal hotness, I like that. That's the new term.

Now, speaking of hotness -- I mean, you know, there is all of this talk about Prince Harry and Pippa Middleton. Any more scoop there? I know you've been on this beat.

VERJEE: Yes, following this beat very closely. By the way, Pippa Middleton's nickname here -- you know what they call her in the tabloids, P. Middy.

PHILLIPS: P. Middy. I love it. Does she rap?

(LAUGHTER)

VERJEE: This is a documentary that is going to air on TLC on Tuesday of next week, August the 9th and it's called "Crazy about Pippa" and they're saying all of these salacious, juicy details about her relationship with Harry where he apparently calls her a "Foxy Filly." Now, I don't know if it gets more salacious than that, right?

But it will be interesting to watch. You know, her friends are talking about her. She is going to be the sister for the future queen of England. So, people are interested ever since the royal wedding, you know, that Pippa has been such a big hit. They're calling her "her hotness" and we'll see what comes out in that documentary.

I mean, they are both denying there was anything between them. There is no romance. It's just not happening.

PHILLIPS: It does seem like another great couple. And, you know, we can talk about how beautiful she is. We should point out she is also extremely bright. So, you know, shout out to that.

All right. Zain, thanks.

Well, the nation's debt crisis, another setback, another reason for investors to worry. Minutes from now, we're going to go to Wall Street for the start of another pretty nervous day.

And a New York couple says that Americans shouldn't depend on Congress to solve the debt crisis. They want the public to step up and help out.

(COMMERCIAL BREAK)

PHILLIPS: Checking top stories.

Next hour, President Obama plans to give a statement on the status of the debt crisis. This comes after John Boehner called off a vote on his plan after it appeared he didn't have enough votes.

In Norway, holding a national memorial service for the 76 people killed in last week' bombing and shooting massacre.

And new dosing labels for Tylenol this fall. The makers of the painkiller recommending the maximum dose that extra strength Tylenol be lowered in order to help prevent accidental overdosing of acetaminophen.

Well, it will likely be a working weekend on Capitol Hill as lawmakers race to get a debt deal completed by Tuesday and it's a challenge that faces long odds. GOP infighting in the House has delayed a critical vote now. And the process -- well, it has gained little ground, shall we say in the weeks that we have been covering this story.

Dan Lothian at the White House.

So, Dan, we just heard the president will speak next hour. What do you think he'll say?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, he is going to be talking about the latest developments, if there are any, in this debt crisis. You know, the president has been criticized over the last few days for not being more engaged by some Republicans up on the Hill.

The White House has pushed back saying the president has been very involved in the very beginning. You heard from chief of staff, Bill Daley, yesterday saying essentially how much more could he get engaged than he already is?

So, the president coming out after the 10:00, around 10:20 or so to make this statement on the latest movement in the debt negotiations.

What I can tell you is -- according to a senior administration official -- is that conversations continue. We tried to pin him down what that exactly means. Are they having sort of negotiations on another plan? Is this more than just talks? All they are telling us, the conversations continue between the White House and Capitol Hill.

But the sense here is that there is room for compromise, that they can find something between what the Republicans are pushing and what the Democrats are offering.

Take a listen to what communications director Dan Pfeiffer had to say.

(BEGIN VIDEO CLIP)

DAN PFEIFFER, WHITE HOUSE COMMUNICATIONS DIRECTOR: We are spending hour after hour here waiting for the Republicans to twist arms for a vote that is essentially irrelevant, because as soon as they pass it, if they are able to, the Senate will vote it down and we'll have to get right back to the table and get something done.

(END VIDEO CLIP)

LOTHIAN: The mood here at the White House, according to a senior administration official, is one of frustration. They saw yesterday as essentially wasted time, that the clock continues to tick and that there was no big movement that took place.

And one official here at the White House confirming that the president has been getting no sleep at all, as he really tries to figure out what are the options that they have available to them to prevent the nation from going into default.

PHILLIPS: Dan Lothian at the White House, thanks.

And as Dan just mentioned, next hour, we're going to hear from President Obama. He is due to speak on the debt crisis and the rapidly approaching deadline.

So, 10:20 Eastern, we will carry that live.

Allan Chernoff is at the New York Stock Exchange where investors are getting a pretty big report that looks how the entire economy is doing.

Allan, good? Bad? Kind of in between?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Not too good, Kyra. We are slowing down. A lot of people suspected this was happening, but we got a terrible revision, in fact, first quarter.

Let's break it down, OK? First of all, let's have a look at a graphic. The economy grew at a 1.3 percent annual phase (ph) in the second quarter of the year. That is slower than expected and it's also way slower than normal growth for the economy and much, much slower than we need to grow jobs significantly.

Even worse, have a look at that first quarter revision. Down to a growth rate of just 0.4 percent. That is a major revision, because the prior estimate had been growth of nearly 2 percent, so that's a big pull-back and shows that things were not very good during the first quarter at all and what happened there is that consumer spending really pulled back, gas prices were high, the Japanese earthquake hit, that also hit the auto sector.

So we had a lot of trouble during the first quarter. Not looking too good right now either -- Kyra.

PHILLIPS: All right. And we are looking now at the opening bell ringing just behind you and we will see how the markets respond. Of course, the Smurfs! Could we expect nothing less?

CHERNOFF: No doubt there!

PHILLIPS: Yes, exactly!

CHERNOFF: At least we're getting a little happiness from the Smurfs. We are going retro here on the New York Stock Exchange! That's taking us both back, Allan. All right. We'll be talking again in a little bit.

Real quick, though, you want to check on the markets before we go? They're already down, yes?

CHERNOFF: That's right. The Dow is off at the moment by 78 points, but keep in mind, it takes a few minutes to open all of the stocks on the exchange so we haven't felt the full impact. And as I'm speaking, more stocks are opening. The market is moving lower -- obviously, as investors anxious, not only about the economy, but very much so about the debt ceiling stalemate. It's becoming a serious problem for investors.

The beginning of the week? They were confident a deal would be struck. Now? Not so much.

PHILLIPS: Dow Industrials down 98 points there.

All right. Allan, thanks.

A New York couple said they are fed up with the games in Washington so come up with their own plan to budget the country's budget.

Seth and Terry Eisenberg (ph) have created a nonprofit organization asking Americans to donate money to help lower the nation' debt. Then said, in turn, they will just send the checks straight to the Treasury Department.

Take a listen.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I felt like we were used as pawns in their chess game and I felt Americans needed to unite together to help resolve the situation. If one out of every four Americans gave up a couple of cups of coffee every month and donated about $5 a month to reduce the national debt, we could raise $4 billion a year.

The Eisenbergs say in the past month, they have already received thousands of hits to their Facebook page, not to mention donations.

The welcome mat is out along the Texas Gulf Coast for tropical storm Don. But will it be enough to quench the drought-stricken state? We are live from there next.

Also, sighting of polar bears in Arctic waters. A biologist writes about his observation. Now, there's a report he's been suspended over it. Find out why after the break.

(COMMERCIAL BREAK)

PHILLIPS: Checking stories cross country.

JetBlue is rolling out new all-you-can-fly travel packages. The blue passes are actually tailored to business people flying out of Boston and Long Beach. Cheapest cost is about 1,300 bucks.

In New York, police say a man dressed as an armored truck driver robbed a check cashing store of almost $15,000 without arising suspicion -- that was until hours later when the real armored truck officer arrived for the scheduled pickup.

And north of the border new dad David Webber won't forget the day his daughter Annabella was born. He rushed his wife to the hospital at speeds of more than 100 miles an hour for an emergency C- section. Guess what? Got a hefty fine and a license suspension in the process.

Well, doctors even told the judge his wife's pregnant was high- risk. But the judge was unmoved.

Rarely will you see people put out the welcome mat for a rain- soaking tropical storm you but folks along the drought parts Texas Gulf Coast are doing exactly that for tropical storm Don.

Rob Marciano is live on Padre Island. What do you think? Still a midnight ETA?

ROB MARCIANO, AMS METEOROLOGIST: That's about right. And, you know, this is one of the few times, Kyra, where we're putting a -- we got a positive spin on a landfall tropical cyclone because we do need the rain, as you mentioned. And tourists here -- I mean, sun is out.

Just gives you an idea of how strong the storm is going to be -- not very as far as winds are concerned. These are storm lookers. These are people who are on vacation. So, nobody has evacuated the beaches if they have come here to soak in the Gulf and the clouds have yet to arrive here.

But they'll be coming in this afternoon as will the rainfall -- the beneficial rainfall. Let's take a look at the satellite picture and show you the whereabouts of tropical storm Don which has winds now currently at 50 miles an hour. It's been very slow to organize. Got some things working against it, but it's over some warm water now.

So, we do expect it to strengthen somewhat, but should remain below hurricane status. Right now, about 250 miles away from the coast where I stand and moving in this direction.

Here is the ETA, the forecast from the National Hurricane Center. The track brings it somewhere between here and Brownsville around midnight tonight. Just below hurricane strength and moving off into west and central parts of Texas.

So at this stage of the game, Kyra, it looks like a coastal impacts from wind and storm surge and will be minimal. The beneficial impact of seeing some rainfall inland -- well, they won't be maximum, but they will get a little bit and they need it as you mention.

Yes. We'll keep talking, Rob. Thanks.

Getting America's financial house in order -- all of the bickering.

(BEGIN VIDEOTAPE)

REP. JOE WALSH (R), ILLINOIS: Thank God congressmen like me were here. Imagine -- step back and imagine if the Republicans hadn't taken over Congress. This city would have raised the debt limit, who knows how much!

(END VIDEO CLIP)

PHILLIPS: Here is the problem. Some of these guys aren't practicing what they preach. We'll tell you about that, straight ahead.

And don't forget, if you're walking away from the TV, it doesn't mean you have to stop watching. You can keep streaming us live on your phone, your computer, your iPad, CNN.com/video. Or you can just download the new app and go.

Yes, you're seeing a little bit of a delay, but, basically, you go to CNN.com and you'll hit live TV and choices pop up, and hit CNN NEWSROOM and there you go.

All right. Let's listen in to Harry Reid. I'm being told he just took to the floor talking about debt ceiling. Let's go.

SEN. HARRY REID (D-NV), MAJORITY LEADER: No one knows what the interest rate will be tomorrow. So the Republican plan is not a solution. As experts say, all too soon, we would be back in the midst of partisan wrangling with our economy once again held prisoner by extremists and the party, the Republican Party, led by the Tea Party.

Mr. President, our economy cannot bear this kind of uncertainty any longer. Congress and the White House are on lockdown and the business the country is not being conducted.

I say no, not again will we fight another battle like the one in which we are now engaged. We can't do that. That's why a short-term extension is not what we need and it's not what this Congress will do.

You know, Mr. President, default is not an option either. But we cannot wait for the House any longer. It's time for Republicans to stop the political games and embrace compromise. No matter how long Republicans delay, a deadline will not move.

We have hours -- I repeat, hours left. That's why, by the end of the day, today, I must take action on the Senate's compromised legislation. A legislation point would cut $2.5 trillion dollars for debt over the next decade and avert default on national debt. It will protect Social Security and Medicare without raising a penny of revenue.

The question, will today's Republicans break away today from the shrill voice of the Tea Party and return to the Republican Party of Ronald Reagan?

This is likely our last chance to save this nation from a default. I've invited Senator McConnell to sit down with me and negotiate in good faith, knowing the clock is running down and I hope he'll accept my offer.

I can't do this alone. But it's only 53 of us and under the rules that Republicans have put in place, used sparingly but used all the time now, we need 60 votes. The majority is not good enough.

I know the Senate compromise bill Democrats have offered is not perfect in the eyes of the Republicans, it's not certainly perfect in the eyes of the Democrats. But together, we must make it work for all of us because it's the only option. Settlement on the table will never give either party everything it wants but it already meets Republicans demands.

John McCain, Republican senior senator from Arizona and President Obama's opponent in last presidential election, has asked his party to compromise and here on the Senate floor. He said it is not fair for the American people to hold out and say we won't agree to raising a debt limit. He called the radical Republican approach unfair and bizarro. It's time we listen to the markets, he said. It's time we listen to the American people and sit down and seriously negotiate.

Former Senator Fred Thompson, who I served here in this body, a Republican, asked members of his own party to come to their senses. Quote, "I respectfully suggest that you rake in your chips and stuff them in your pockets." That was his quote. He believes they already won -- all discretionary spending, no revenue.

So, I hope, my friends, Senator McConnell will come to me by the end day and indicated what constructive ideas he has to move the process along.

My door is open. I'll listen to any idea that prevents a default and a dangerous downgrade to America's -- to our country's credit rating.

Time is present and it's short and that is an understatement. Too much is at stake to waste even one more minute.

The last train is leaving the station. And this is our last chance to avert a default.

The vote on this compromise will determine whether we enter the frightening world of default. A vote for the Senate compromise vote on the financial obligations of this great nation to pay the bills.

I would ask my friends, my Republican friends, break away from this thing going on in the House of Representatives. They are voting at 4:30 yesterday, 6:30, 7:30, 8:30, 9:30, 10:30, finally quit.

Rumors flying around, Mr. President, rumors flying around. "Wall Street Journal" said they put too much money on Pell grants, they're going to take that out. Rumors flying around they need a balanced budget amendment, (INAUDIBLE). Rumors the speaker seen in my office, which he didn't come.

All of these rumors, Mr. President, that made no sense. And the scariest thing is late last night, leader Cantor said from the House, he said you have three choices, Boehner, cut, cap, and balance, or default. That's a second ranking member in the Republican leadership said that.

We need to honor the financial obligations we have as a country. So a vote against the compromise that I've talked about -- now listen to what my compromise is, Mr. President. No revenue, Congressional Budget Office has scored more than $2.4 trillion dollars which will take probably -- not probably -- will take us to March of 2013. We can do the country's business.

There is a joint committee that will be set up to see if we can do some good work on a more long-term approach. And get back to work doing our country's business. I repeat. CBO, OMB has scored our bill for more than $2.4 trillion dollars -- not billion, trillion dollars. It's dollar-for-dollar -- as the speaker said he wants to reduce the debt.

So a vote against this compromise will be a vote to default on the full faith of credit of the United States. I repeat to everyone within the sound of my voice, we have the framework of a bill. We are going to change it. I have some ideas that we need to change and I want to discuss them with the Republican leader. If anyone has any other ideas, come to me.

But the time has come to make a decision. The time factors are very clear. Why am I planning tonight on my bill? Why? There is no more time. I have to do it tonight. Would I like to wait until tomorrow to if there is some goodwill that comes from the Republican side? Of course, I would.

But I would suggest to my friends on the other side of the aisle this is a pretty good deal. They, in effect, as Fred Thompson said, have gotten everything they want and should put those chips in their pockets and walk away and declare victory.

There will be no time left to vote on another bill or consider another option here in the Senate. This is our last best chance to preserve the character and credit of our great nation.

UNIDENTIFIED MALE: With my colleague.

SEN. CHUCK SCHUMER (D), NEW YORK: Our leader yield for a question?

REID: Be happy to hear from my friends in New York.

SCHUMER: I thank our leader.

And Leader has outlined it well. The House for all its machinations, delays, struggles is pursuing a path to nowhere because their bill will not pass not become law 53 of the 53 Democrats have signed a letter saying they won't vote for it. The President has said he'll veto it. All for a very simple reason and that is because if you do this short term, you don't calm the markets.

PHILLIPS: Take a look at that as we are live from the floor. If you are watching the numbers as Senate Majority Leader Harry Reid was speaking the numbers just continue to tank. Dow Industrials down 140 points right now.

You heard Harry Reid there is no more time he says, this is a pretty good deal. He was just reiterating how the House plan is doomed in the Senate. Default is not an option here and that it's time that we must embrace compromise.

You're just watching and as you can see starting this -- Joe Johns, you're probably following this as well out of Washington. You saw as Harry Reid started talking and as -- as he started talking more about a doomsday scenario, the numbers were just tanking more and more.

It goes to show Americans paying very close attention to what this all means for our pocketbooks.

JOE JOHNS, CNN SENIOR CORRESPONDENT: Yes, absolutely. And the thing he also talked about was trying to go to the Republicans on the Senate side and get some kind of an agreement. He also made some reference to what was going on over in the House side.

And they do have sort of some basics that they can work on. I mean its stuff like whatever plan they -- they get can't have any tax increases in it. Whatever plan they get -- I have a little list here -- don't touch entitlements is something the Democrats say. The Democrats say we can't have a two-step process where we got to go back and revisit this thing again.

So there are the outlines of things they can agree on. And while the House is still trying to get its act together, obviously, Senator Reid has said it's time to move, because there is no more time. And so he is reaching out to Senator McConnell, the Republican leader, saying it's time for us to strike our deal because August 2nd is fast approaching.

PHILLIPS: Yes.

And the President of the United States set to talk about the debt ceiling 10:20 Eastern Time. Joe, you'll be watching it and we'll be watching it and of course we'll take you live for our viewers at just about a half an hour away.

We'll be right back. More from the CNN NEWSROOM straight ahead.

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PHILLIPS: Well, we may have a hard time giving you a fresh take on the debt ceiling debate, but not late night comedians.

(BEGIN VIDEO CLIP)

CONAN O'BRIEN, COMEDIAN: The U.S. government is just a few days away from running out of money to pay its bills. It's unbelievable. You know this is how crazy it is getting. Congress's latest plan is to see how much cash they can get for John McCain on antiques road show.

(END VIDEO CLIP)

PHILLIPS: One-liners aside, there are some members of Congress that are just not practicing what they preach at this time.

Brian Todd explains.

(BEGIN VIDEO CLIP) UNIDENTIFIED MALE: It would have saved our country.

BRIAN TODD, CNN CORRESPONDENT (voice-over): They're the fire brand class, deficit hawks in Congress taking a hard line on the debt ceiling talks. Some are Tea Party favorites who rail at Congress for past spending like Republican Senator Mike Lee of Utah.

SEN. MIKE LEE (R), UTAH: Congress debt for decades has been burying our children and our grandchildren both born and unborn under a mountain of debt.

TODD: But according to recent disclosure forms, Senator Lee's racked up significant personal debt of his own, at least $65,000 worth from a credit card and a line of credit. The forms released last month show there are a few Republicans who are demanding a hard line on cutting the nation's debt but have plenty of debt on their own. Nonpartisan spending watch dog Taxpayers for Common Sense --

RYAN ALEXANDER, TAXPAYER FOR COMMON SENSE: I think this raises the questions about are you walking the walk while you're talk the talk about getting the debt down.

TODD: Senator Lee's argument, you have to put this in context.

(on camera): An aide to Senator Lee said the senator couldn't do an interview with us on this, but the aide did push back hard saying the scrutiny is quote, "crackpot". The aide says the Senator has his finances in order, is managing his debt responsibly and that if he's doing that, who are the critics to question his role in the budget debate?

(voice-over): Tea Party supported Republican Congressman Joe Walsh has played a prominent role in that debate.

REP. JOE WALSH (R), ILLINOIS: Thank God Congressmen like me were here. Imagine, step back and imagine if the Republicans hadn't taken over Congress. This city would have raised the debt limit who knows how much.

TODD: But Walsh's ex-wife says he needs to pay up on a big debt, more than $117,000 in child support according to a lawsuit. We couldn't reach Walsh's attorney for comment. But he told the "Chicago Sun Times" Walsh doesn't owe that amount. Walsh says the attacks against him in this case are false, but also says this.

WALSH: I'm the most openly-vetted candidate in the world. I have had financial troubles and I talked about them throughout the campaign. This is where real America is.

(END VIDEO CLIP)

PHILLIPS: Well, real America listening to the floor right now as Mitch McConnell now takes -- takes to the mike.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The Democratic Majority here in the Senate has been wasting precious time rounding up no votes to keep this crisis alive. Rather than being responsible and doing their duty and come up with a bill that can actually pass, they've been busy signing people up for the not good enough caucus and ginning up opposition to everything else.

Lawmakers should be working a solution to the crisis, not a blocking strategy. Our Democrat friends here in the Senate have offered no solution to this crisis that could pass either chamber, not one. Instead all day long yesterday we got chest-thumping comments about how we're going to kill any piece of legislation that comes over from the House, that it's dead on arrival.

Democrats are out bragging about how they're going to prolong the crisis instead of doing the hard work of trying to solve it. And that includes the President. Look, if the President hadn't decided to blow up the bipartisan solution that members of Congress worked so hard to produce last weekend, we'd be voting to end this crisis today.

Instead, Democrats in Congress are still talking about blocking a solution to the crisis and the President rolling out new mileage standards today. Let me repeat that. Here we are a few days from when the Secretary of the Treasury says we will be in a default situation and the President of the United States is rolling out new mileage standards today.

How about this? How about a plan from Democrats in Washington that can pass both chambers, prevent the crisis and protect Americans from a worsening economy? I would suggest to my friends on the other side this morning they start taking their responsibilities as the majority party a little more seriously because at this point the only people who are disregarding the consequences of default are Senate Democrats, not the Republicans in the House, but Senate Democrats.

Republicans have been doing the hard work of governing this week. It's about time our Democratic friends joined us. Mr. President, I yield the floor.

UNIDENTIFIED MALE: President -- Mr. President the Majority Leader, I really appreciate --

PHILLIPS: Well, you heard Harry Reid, now Mitch McConnell, the back and forth as you can see the DOW industrials up and down, still no solution to the debt crisis.

The President of the United States speaking in about 20 minutes live. We will take it for all of you to hear.

A quick break, more from the CNN NEWSROOM, straight ahead.

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