Return to Transcripts main page

THE SITUATION ROOM

Stock Prices Plunge 265 Points; Get Ready for Round Two in Debt Crisis; How Biden Helped Lock the Debt Deal; Obama: FAA Stalemate is "Inflicted Wound"; Stock Prices Plunge; 'Drastic' Impact of Debt Deal; Debt Debaters Ask, Where's Romney?; 'Strategy Session'

Aired August 2, 2011 - 17:00   ET

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


WOLF BLITZER, HOST: Brooke, thanks very much.

Happening now, President Obama signs a bill to raise the debt limit, avoiding an economic debt crisis for now. All sides already are bracing for the next round of this ugly battle and many Americans are simply fed up.

Plus, the crisis members -- the crisis that members of Congress failed to prevent before leaving town -- airline regulators are mired in a financial mess that's expected to cost -- get this -- $25 million a day and thousands of jobs.

And a new explosion of violence in Syria at the start of the Muslim holy month. Stand day for the shocking images of an apparent massacre and conflicting reports about who's to blame.

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

We begin with the breaking news -- stock prices take a nose-dive today. The Dow Jones Industrials closing down more than 265 points an hour ago. This losing streak now continuing in its eighth day, continuing even after the federal government avoided default on its debt.

Let's go to the New York Stock Exchange.

CNN's Alison Kosik is standing by with the latest -- a lot of people originally thought that once this deal was done, the president signed it, there would at least be a temporary boost in the stock markets. But it didn't happen.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: And traders were surprised as well, Wolf. They were surprised that we didn't see more of a positive impact on the markets, as well, with that uncertainty off the table with the debt deal. But you know what, for Wall Street, the focus is no longer on the debt ceiling. Investors have moved way beyond that. Now they're worried about a series of weak economic reports that we've been getting. And today, what really spooked the markets was a consumer spending report. We found out that consumer spending fell for the first time in almost two years. It showed that people are saving more because they're unsure of where the economy is headed. And then you throw in the other downbeat reports we've gotten. On Friday, that weak GDP report. It's showing there's just not enough growth out there to create jobs. And also, the manufacturing report that we got yesterday. Manufacturing is actually at its slowest rate of growth in two years, Wolf.

We're at 2009 levels, can you believe it?

The traders regard manufacturing as the sector that really needs to lead the economy out of this stagnation.

But where is that going to come from if -- if consumers, Americans, don't have jobs, if we don't see manufacturing moving?

And I haven't even mentioned the housing market -- Wolf.

BLITZER: And wait until Friday, when the jobs numbers for July come out.

KOSIK: Yes.

BLITZER: That could be another setback, as well.

Thanks very much.

KOSIK: Sure.

BLITZER: We'll check back with you.

Let's get to Washington's hot summer debt drama, ending right up against the deadline with relief and lots of disgust.

The Senate gave final approval to raise the debt limit, cut spending and prevent an historic default on America's bills. The president signed it after complaining that this crisis, in his word, was manufactured, and warning that more tough choices will have to be made this fall.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Everyone is going to have to chip in. It's only fair. That's the principle I'll be fighting for during the next phase of this process. And in the coming months, I'll continue also to fight for what the American people care most about -- new jobs, higher wages and faster economic growth.

(END VIDEO CLIP)

BLITZER: A little over half of the American people disapprove of the debt compromise, according to our brand new CNN/ORC Poll, the first poll since the deal was struck. Forty-six percent approve of the way the president handled the debt negotiations. Democrats in Congress get a 35 percent approval rating, slightly better than Republicans, with 30 percent.

Get this, though -- more than three fourths, more than three fourths of Americans say our elected officials acted like spoiled children during this crisis.

Let's go up to Capitol Hill right now.

Our Congressional correspondent, Kate Bolduan, has been working this story very, very well for us. Lawmakers are already take -- getting ready to move on. But they're going to -- they're fighting even as they're getting ready to move on.

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: Yes. If you can even believe it, Wolf, this Senate vote today brings to a close a one fierce partisan standoff up here. But just as they're finishing one fight, it seems lawmakers are already drawing the battle lines for what could be, potentially, the next showdown. And the focus here is on this new powerful committee set up by this debt deal that is charged with looking for much deeper deficit reduction measures. This -- this special committee is made -- going to be made up of 12 members, evenly divided between Democrats and Republicans. The members are selected by Congressional leaders and are charged with finding $1.5 trillion in deficit savings. Now get this -- they're required to report their recommendations to Congress by Thanksgiving. And Congress has to act then on those recommendations by the end of December. Many people saying that's quite a tall order and quite a short time line for what they're being asked to do.

But even before the lawmaker -- the Congressional leaders have even picked the members of their committee, they're already seeming to be drawing lines in the sand. And this will be no surprise if you've been watching this debt debate. One line in the sand -- taxes.

Listen here.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: Our first step will be to make sure that Republicans who sit on the powerful cost- cutting committee are serious people who put the best interests of the American people and the principles that we've fought for throughout this debate first.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: This committee that is going to have be appointed, the members, I say here, must have open minds. We've had too much talk the last few days of Republicans, as early as this morning, Republican leaders in the Senate saying there will be no revenue. That's -- that's not going to happen.

(END VIDEO CLIP)

BOLDUAN: Now, as I said, just before, Congressional leaders have not yet made their picks to be on the committee. But, Wolf, the leaders have 14 days before they have to announce -- Wolf.

BLITZER: And the -- the makeup of this committee will be critically important, Kate. As you say, six Democrats, six Republicans, six members of the Senate, six members of the House of Representatives. And if there's someone, for example, who's, you know, adamantly, 100 percent opposed to any tax increases whatsoever, no matter what, and others are adamantly opposed to any cuts in Medicare or Medicaid or Social Security spending, you're going to have a real battle in this committee.

BOLDUAN: Absolutely. Many are saying it's not only the issues that are going to be critical that this committee will be tackling, it's the makeup that the committee -- of the committee -- that will be equally as important. There's some concern that if Congressional leaders, as some are saying, stack this committee with hard-liners in their party, then they'll -- rather than, maybe, members of the Gang of Six, that really came together and worked hard to tackle, in a compromising -- in a -- in a -- in a bipartisan way to find compromise on tough issues, there's some concern that this committee is just being set up for failure.

But, of course, first, we're going to have to see who makes it on the committee -- Wolf.

BLITZER: Yes, but if they fail, there will be across the board cuts that are built in.

BOLDUAN: Absolutely.

BLITZER: That's the trigger. That's holding a sort of a gun to all of their heads right now.

All right, Kate, thank you.

Kate Bolduan doing great work for us up on the Hill.

Vice President Joe Biden is walking away from this debt compromise with a renewed image of -- as being a power player. He had a key role in shoring up support for a deal among his former colleagues in the United States Senate.

Let's go our White House correspondent, Dan Lothian.

He's taking a closer look at this unique role that the vice president -- the role, very significant role, I must say, knowing a little bit of what was going on behind the scenes -- Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right, very significant. And, you know, a lot of people rib the vice president for his gaffes, either falling asleep on camera or using, shall we say, creative language. But getting attention now for something quite different.

I should make the point that a lot of people, not only here at the White House, but up on Capitol Hill, were working around the clock, 24/7, to make this happen. But the vice president is being viewed as the closer, someone who used his deep experience to find common ground.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): When President Obama walked into the Briefing Room Sunday night to announce a compromise deal on the debt ceiling, Vice President Joe Biden was away from the spotlight. He ducked in late, sporting shirt sleeves and sat along the wall. But the role he played in shaping and selling the deal was far from low key, convincing Liberal Democrats like Barbara Mikulski, who found the deal wrenching.

SEN. BARBARA MIKULSKI (D), MARYLAND: He knows the Congress. He knows how -- who we are and how we work. And because he had such a reputation for being faren -- being fair, I think, he brought in a lot of people to the table.

LOTHIAN: Vice President Biden's 36 years in Congress and his firm, but comfortable, negotiating style, was on display, say multiple sources, as he met separately with Democratic Caucuses in the House and Senate Monday for at least two-and-a-half hours.

SEN. JOE LIEBERMAN (I), CONNECTICUT: He basically started by saying he wasn't any happier with the agreement than a lot of members of the caucus were, but it was the best we could do under the circumstances.

LOTHIAN: Senator Patrick Leahy, who had the only camera in this meeting, snapped the photos.

JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: I went to explain and lay out exactly how we got to where we were and why this is important for the country.

LOTHIAN: How they got to where they were Monday came after a flurry of activity between the vice president and Senate minority leader, Mitch McConnell, over the weekend. Sources say Senator McConnell made the call that got the ball rolling.

LIEBERMANN: Senator Mitch McConnell has had a long and good and trusting relationship with Joe Biden. And I think their communication really helped to put this together at critical moments in the last few days, actually.

LOTHIAN: A Democrat familiar with the negotiations said Vice President Biden and Senator McConnell spoke by phone four times on Saturday. Later, countless exchanges, building on talks the vice president started leading back in the spring. This time, with the clock ticking and neither side wanting default, areas of compromise were carved out -- leading to an agreement.

MCCONNELL: I also want to thank the president and the vice president and every one of their staffs who believed, as we did, that despite our many differences, we could all agree that America would not default on its obligations.

(END VIDEOTAPE)

LOTHIAN: Now, in talking to Democrats who were close to the talks, one of the things they said that was lacking throughout this entire battle was that there was not a lot of trust. Each side did not trust the other.

And so Vice President Biden was seen as someone whom they could trust, someone who was able to help bridge that wide divide -- Wolf.

BLITZER: All right. Interesting story. I guess we're going to recreate these stories in the weeks and months to come. There are going to be many more battles looking ahead.

Thanks very much, Dan, for that report.

Another standoff on Capitol Hill hasn't been resolved -- one lawmaker calling it a tragedy about ego that's costing big money and lots of jobs.

And anti-government protests in Syria give way to new violence. We're going to show you some startling new images just coming in of an apparent bloodbath.

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

(COMMERCIAL BREAK)

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

JACK CAFFERTY, CNN CONTRIBUTOR: The debt ceiling crisis proves once again it doesn't really matter who's in charge in Washington, Democrats and Republicans both treat the public with the same disregard, lack of respect, contempt even.

The hasty vote in the House to raise the debt ceiling by as much as $2.4 trillion breaks a Republican pledge to post the bills online for three days before voting. The complicated 75-page document was written Sunday night, posted early Monday morning and voted on late Monday afternoon. That means, yet again, members were voting on something most of them hadn't even read.

It's a bill that includes complex structures for raising the debt ceiling. There's also the possibility of amending the Constitution by creating a supper committee with special powers, changing the historic strength of the Senate filibuster. But that didn't stop them. Oh, no.

Remember back when the Democrats shoved health care through Congress? That was a 2,200-page monstrosity. And then House Speaker Nancy Pelosi said, quote, "We have to pass the bill so you can find out what's in it," unquote.

Republicans, of course, were outraged then at the lack of transparency and the closed-door dealings, and they were right. But here we are once again, members of Congress up against the hard deadline had no time to let this bill go through the regular process of hearings, getting outside opinions, et cetera.

You know, the date that the debt ceiling expired, they've known about that for a good long while now, haven't they? Instead, we get another bill crafted by a handful of members of Congress under a cloak of secrecy with party leaders and the White House.

It is disgraceful. And no wonder a new CNN/ORC poll shows Congress with a measly 14 percent approval rating.

That's probably too high actually.

Here's the question: When it comes to the federal government what will stop the madness?

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

BLITZER: Did you notice, Jack, that as soon as the vote occurred in the House of Representatives last night, they went into recess until September 7th. The House is now in recess. Senate now is going to go into recess until September 7th. So there's going to be a five- week break. They ran to the airports -- Reagan National, Dulles, Baltimore-Washington International Airports -- as quickly as they could get out of -- I write about this on my blog today on our SITUATION ROOM blog. I want you to read it and let you know what you think.

CAFFERTY: Good day to be long airline stocks, which are probably the only thing that went up. Did you see the stock market reaction to all of this today? Threw up all over itself.

BLITZER: I did. All right, Jack. Thank you.

At the White House today, President Obama said another stalemate in Congress is putting thousands of aviation and airport construction jobs at risk just when the economy can least afford it.

Let's bring in our homeland security correspondent Jeanne Meserve for some details.

Jeanne, what's going on?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Wolf, it is a game of chicken of the Federal Aviation Administration budget, and even at this late hour, it hasn't been resolved.

(BEGIN VIDEOTAPE)

MESERVE (voice-over): For 10 days, 4,000 FAA employees have been furloughed, and more than 200 airport construction projects stopped, putting an additional tens of thousands of out of work. Meanwhile, the FAA has been unable 20 collect taxes on airline ticket sales, losing $25 million each and every day.

RANDY BABBITT, FAA ADMINISTRATOR: I've been around this business a long time. I have never seen anything like this. And I find it appalling, candidly.

MESERVE: The FAA has not had a new budget authorized since 2007, but 20 extensions have kept the agency operating. The 21st, however, contained something new, language inserted by House Republicans cut off money subsidizing air travel to three rural airports in states with Democratic senators, including Nevada, home of Senate Majority Leader Harry Reid.

REP. JOHN MICA (R), FLORIDA: Someone has to say no. No to wasteful spending, no to subsidies of $3,700 per ticket.

MESERVE: For days, the chambers have failed to compromise on the issue, much to the dismay of some members.

SEN. KAY BAILEY HUTCHISON (R), TEXAS: I cannot think of anything more fiscally irresponsible.

MESERVE: The underlying issue causing rancor between the parties, a labor ruling that favored union efforts to organize airlines. Republicans want to reverse it in the FAA authorization bill.

SEN. JAY ROCKEFELLER (D), WEST VIRGINIA: It's a tragedy about ego, about bullying, about an attempt to prove one side would cave.

(END VIDEOTAPE)

MESERVE: Well, no one has caved yet, and that leaves open the possibility that the FAA extension will not pass until mid-September. That would leave thousands out of work and result in $1.2 billion of lost revenue. And this at a time when they're talking about trying to save money in Washington.

BLITZER: Did you say billion?

MESERVE: Billion with a "B."

BLITZER: One point two billion.

MESERVE: Yep.

BLITZER: All right, we're going to have much more on this story, much more on all the news in Washington coming up. Also, some other news, Jeanne, including eight years after one of the saddest days for the U.S. Space Shuttle program, a sobering reminder of the Space Shuttle Columbia disaster. We're going to show you where the debris from the doomed space shuttle has been found.

And millions of Somalia's children could face starvation from a punishing drought. We'll tell you how the United States is trying to make sure terrorists don't keep them from food.

(COMMERCIAL BREAK)

BLITZER: The United States is trying to ensure that food reaches Somalia's starving people, even though al Qaeda-linked militants are standing in the way.

Lisa Sylvester is monitoring that, some of the other top stories in THE SITUATION ROOM right now. Lisa, what's going on?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, as a disastrous famine grips parts of Somalia, the U.S. is reassuring aid groups that they will not be prosecuted for distributing relief if it falls into the hands of al Qaeda-linked militants. It is believed that the militant group Al-Shabaab has been diverting supplies and demanding money before it will allow the aid to reach those who need it most. U.S. officials say right now their number one goal is to save lives.

And the White House wants to limit the sale of ammonium nitrate. The explosive substance was used in the bomb that gutted the Murray Federal Building in Oklahoma city back in 1995, and reportedly also in the deadly bomb that tore through central Oslo, Norway a few weeks ago. Proposed rules would require anyone who buys at least 25 pounds of the material to register with the federal government. Their names would be run by the FBI through its terrorist screening data base.

And Tropical Storm Emily could drench Florida's east coast by this weekend. Right now, no watches or warnings are up for the U.S. mainland. Emily is churning westward toward the northeastern Caribbean with winds of 45 miles an hour, and it is expected to gain strength and speed in the coming days. A tropical storm watch is up for the U.S. Virgin Islands and Haiti's government is on alert for possibly dangerous flooding and mudslides -- Wolf.

BLITZER: Thank very much. We'll check back with you. Let's hope for the best on that front.

Meanwhile, the budget axe is falling and Americans are about to pay a price. Education, highway construction, food inspections, a lot more, they are all targeted in the newly signed debt deal.

And if the debt deal didn't calm the financial markets, what will? I'll talk about today's plunge and what could happen for tomorrow. CNN's Richard Quest, he is standing by live right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: I'm Wolf Blitzer. Stories we're working on for our next hour.

Will the president and Congress pay the price with voters for the lengthy debt ceiling battle? We'll have the first national poll on where Americans are, what they are saying; stand by.

And Congresswoman Gabrielle Giffords receives a standing ovation when she cast her vote on the debt deal. What's she planning for the future?

And new details of the daring raid to capture and kill Osama bin Laden.

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

(MUSIC)

BLITZER: Let's get back to the breaking news right now, the breaking news from Wall Street. Stock prices are tanking for the eighth straight day even though the danger of the United States defaulting on its debt has now been lifted at least until the beginning part of 2013.

CNN's Richard Quest is here, he came in all the way from London to join us.

Richard, you've been here for a few days now. You know, a lot of people are just shocked. They thought for at least a few days this removal of the threat to the U.S. economy would give Wall Street a badly needed boost.

RICHARD QUEST, CNN INTERNATIONAL ANCHOR: I told you the relief rally was an inch thick and a mile wide, and today it went down the plug hole. And the reasons were not just about U.S. debt, U.S. economic growth, manufacturing numbers, the terrible consumer confidence numbers, the consumer numbers here at home in the U.S.

Italy and Spain, bond yields, both rose dangerously over 6 percent. Those countries are now under attack in the bond markets. We saw gold at record prices again. The Swiss franc is at record. You're seeing a flight to quality, and in that environment, what you've seen is the Dow also -- or the U.S. markets also get clobbered.

BLITZER: Eight straight days in a row. I must say I was surprised. I thought there would at least be a little bump as a result of the deal. Didn't happen.

So is this just the beginning?

QUEST: Volatility. I'm not going to say -- the Dow is still up for the year. We've lost about 5 percent, 4.5 percent since July 21, still up for the year. But the hallmark, particularly here in the U.S., as you've got the super committee getting underway with all those implications, the hallmark of the next few months is going to be a volatile autumn. September and October will be very rocky.

BLITZER: And you know, even as we're paying, at least on this side of the Atlantic, so much attention to what's happening to the American economy, we should also be paying some attention to what's happening in Europe, not just in Greece, but in Italy and Spain, because the spillover effect here could be enormous.

QUEST: What happened today in Europe was dangerous. We thought it was contained with the last euro deal by the commission to bail out Greece for the second time. But we thought Portugal was to one side and Ireland was to one side. But now it looks as if Spain and Italy are in the market's guns.

Now, those two economies, look, they can't be bailed out as easily as Ireland or Portugal. So keep your eye on Europe, particularly the southern European countries, and watch what happens there, because the spillover effects will be here.

BLITZER: Because I've been getting some e-mails, some investors, people who really know what's going on, and they say exactly what you just said, Spain and Italy is important.

QUEST: Huge. Huge.

BLITZER: As important as Greece might be, Ireland, Spain and Italy, that's a whole different ball game.

QUEST: And Italy's debt is over 120 percent of GDP. So Italy's got a vast debt. Well, it's over six percent. If it stays over six percent, they're going to have to refinance and -- I mean, if they need a bailout, then we're in a very different game.

BLITZER: Yes. All right. Richard, thanks for joining us. Appreciate it very much.

Richard Quest, here in THE SITUATION ROOM.

Meanwhile, new photos from the White House of the behind-the- scenes talks that prevented the United States, at least for now, from an historic default on its debts. We're learning more about who will feel the pinch from the bill to raise the debt limit and cut spending. The bill, signed into law by the president today over at the White House.

Lisa Sylvester is joining us now with more on this part of the story -- Lisa.

SYLVESTER: Hi there, Wolf.

Well, $2.1 trillion in cuts, and the first wave of that actually starts in fiscal year 2012. Now, congressional appropriators, they are going to have to take out their red pens and decide exactly how to cut billions from the budget.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): The debt ceiling deal swings a big ax up front that grows even bigger over time. Starting next year, $25 billion will be cut from discretionary spending, the government's day- to-day operating budget. The cuts grow larger until 2021, reducing the deficit by $917 billion.

So who will likely be impacted? At the top of the list, federal workers who are already operating under a two-year pay freeze.

John Gage, the president of the American Federation of Government Employees, is anticipating layoffs.

JOHN GAGE, PRESIDENT, AMERICAN FEDERATION OF GOV. EMPLOYEES: This is pretty drastic stuff. And I don't think an agency can simply -- you know, these cuts, for them to be enacted, have huge implications for the agencies. And they can't be -- they can't be met by freezing travel or training. You know, this is really to the bone stuff in getting rid of thousands of federal employees.

SYLVESTER: Government services will likely be scaled back, everything from food inspections to hurricane tracking, highway construction, education programs for children, air traffic control, border security, law enforcement, and health research, will all be on the table for slashing.

CHRISTIAN WELLER, CENTER FOR AMERICAN PROGRESS: There's a bunch of program that fall into this big category called non-defense discretionary spending which will be cut by about 11 percent under this cut, under this first installment of the deal.

SYLVESTER: The bill, only about 70 pages long, does not spell out many specific cuts. That's largely being left up to congressional appropriators.

CRAIG JENNINGS, OMB WATCH: Congress has to go back and take these top-level numbers and decide which programs, which agencies are going to get how much. So it's completely unknown right now what's going to cut or what might actually see some funding increases. So we're kind of in a situation where anything is possible.

SYLVESTER (on camera): But there are programs that are safe. Social Security and Medicare will not see any cuts in the first go- round. And the Pell grant program which helps low-income families send their kids to college will actually see a $17 billion increase over the next two years.

(voice-over): But to pay for that increase in Pell grants, the government is eliminating subsidized loans for graduate students. That takes effect in July of next year.

(END VIDEOTAPE)

SYLVESTER: And this is only the first wave of cuts that we're going to see. A bipartisan super committee of Republicans and Democrats have been tasked with finding even more places to cut another $1.5 trillion -- Wolf.

BLITZER: There's going to be real pain in all these cuts. There's no doubt about that, Lisa. Thank you.

The Republican presidential front-runner, at least for now, stands accused of being a Johnny-come-lately in the whole debt crisis debate. We're going to have the fallout for Mitt Romney. That's coming up.

And what's next for Congresswoman Gabrielle Giffords after her surprise appearance on the House floor last night? Our own Dr. Sanjay Gupta is standing by live. We'll talk about Congresswoman Giffords' remarkable recovery from a bullet to the head.

(COMMERCIAL BREAK)

BLITZER: Mitt Romney and other Republicans certainly hope that President Obama pays a price for the ugly fight over raising the nation's debt limit, but it's costing the Republican presidential front-runner right now within his own party as well.

CNN's Jim Acosta is here in THE SITUATION ROOM, and he's getting ready to explain what's going on -- Jim.

JIM ACOSTA, CNN CORRESPONDENT: That's right. His critics are starting to milk the issue, you might say, Wolf. With a few exceptions, the GOP presidential candidates haven't said much about each other during this campaign, but what is starting to change is the debt ceiling debate. Just ask Mitt Romney.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): It was just hours before the voting began, and Republican presidential front-runner Mitt Romney finally put out a statement on the agreement to raise the debt ceiling saying, "I personally cannot support this deal." He was one of the last GOP contenders to do so.

The conservative "Daily Caller" pounced, posting this milk carton on its Web site showing Romney's picture under the caption "Missing leadership." One of Romney's rivals who backed the debt deal, Jon Huntsman, all but asked, "Got Mitt?"

JON HUNTSMAN (R), PRESIDENTIAL CANDIDATE: So to dodge the debate, or to wait until the debate is over, effectively, and to take a side, I don't consider that to be leadership.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: The answer for the country is for the president to agree to cut federal spending, to cap federal spending, and to put in place a balanced budget amendment. And that is the answer for the debt limit.

ACOSTA: The Romney campaign has said for weeks its position has always been clear, that the former governor supported a bill tying an increase to a balanced budget amendment known as Cut, cap and Balance.

ROMNEY: My view is that we should have a president who agrees to cut, cap and balance the federal deficit.

REP. MICHELE BACHMANN (R), PRESIDENTIAL CANDIDATE: I will not vote to increase the debt ceiling.

ACOSTA: But contrast that with another GOP contender, Michele Bachmann, who took a stand in her first TV ad nearly a month ago. Politico quipped, "The front-runner might as well be in the Mittness protection program." But flying below the radar just might pay off in the long run.

Note the latest Quinnipiac poll in Pennsylvania, a Democratic firewall state where Romney is beating President Obama.

RON BONJEAN, REPUBLICAN STRATEGIST: Washington, D.C., right now is like political quicksand to 2012 presidential candidates. If you get involved, it's going to be hard for you to climb out of it.

ACOSTA: But conservatives complain it's another example of malleable Mitt, a candidate who insisted the president made the economy worse in June --

ROMNEY: What this president has done has slowed the economy. He didn't create the recession, but he made it worse and longer.

ACOSTA: -- only to contradict himself a few weeks later.

ROMNEY: I didn't say that things are worse. What I said was that the economy hasn't turned around.

ACOSTA: For some Republicans, it could be a reminder of the shifting positions that dogged Romney in the '08 campaign.

SEN. JOHN MCCAIN (R), ARIZONA: We disagree on a lot of issues, but I agree, you are the candidate of change.

(END VIDEOTAPE)

ACOSTA: In a nod to the GOP base, Romney named conservative hero and failed Supreme Court nominee Robert Bork to a judicial review panel for his campaign. And the GOP contender is ramping up his campaign in the months ahead with a slew of events in New Hampshire and Iowa, where voters will have plenty of chances to pin him down -- Wolf.

BLITZER: We've repeatedly invited him to join us here in THE SITUATION ROOM. We hope he will accept --

ACOSTA: We hope he will.

BLITZER: -- sooner, rather than later.

Thanks very much.

ACOSTA: You bet.

BLITZER: In the aftermath of the debt limit fight, President Obama says he's focusing now on jobs. But is it too late for millions of Americans with no paycheck in sight? We'll take a closer look and a hard look at that in today's "Strategy Session."

And we're also learning about a crucial moment in the raid to capture and kill Osama bin Laden. We're going to tell you about the split-second decision that changed the course of history.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session."

Joining us, the Democratic strategist Jamal Simmons. He's a principal over at The Raven Group here in Washington. Also joining us, our CNN political contributor, the Republican strategist Alex Castellanos.

Guys, thanks very much for coming in.

The White House has been releasing a bunch of still photographs of the president during critical moments in the debate. Look at this picture. I want to put it up on the screen.

There you see over at the White House, the president and John Boehner, the Speaker of the House. I think they developed a sort of good relationship during the course of these tough negotiations. Boehner yesterday announced this in explaining why he thought it was a good deal when all was said and done. Let me play it for you guys.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: You look at this final agreement that we came to with the White House, you know, I got 98 percent of what I wanted. I'm pretty happy.

(END VIDEO CLIP)

BLITZER: All right, 98 percent. Not much of a compromise if the president only got two percent.

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: Well, you talk to a lot of progressives and liberals out there, they would probably agree with John Boehner that he got 98 percent. You know, progressives really wanted to see some revenues in this deal.

BLITZER: Which means tax increases.

SIMMONS: Tax increases, or at least loopholes closed. You raise the revenue. People wanted to see that. And what the president did do was he protected Medicare, Medicaid and Social Security.

BLITZER: At least for now.

SIMMONS: For now, which is a big deal. I think he's going to hang his hat on that as he --

(CROSSTALK)

BLITZER: So why do so many conservative Republicans hate this deal if the Speaker, the leader of the Republicans in the House of Representatives, if the Speaker says he got 98 percent of what he wanted?

ALEX CASTELLANOS, CNN CONTRIBUTOR: Because a lot of Republicans are concerned that the debt ceiling was a problem, but the actual debt was the real crisis. And they wanted to make a bigger impact on that.

BLITZER: Why didn't they realize that if you let the debt ceiling collapse, in effect, and there's a default, then you're going to have an even bigger debt problem because interest rates will go up, the value of the dollar will go down, unemployment will go up? There's going to be a lot more spending, if you will.

CASTELLANOS: Wolf, they did realize that. But, you know, why would you say drive a car 100 miles down the highway endangering yourself and perhaps others? Only because you think there could be a bigger problem. Your child is sick in the car. You've got to get them into the hospital. Republicans think that the long-term debt structure in this country is going to devastate us all. And this was their way to put pressure on Obama and the Democrats to cut spending. And guess what? They got a lot of what they wanted.

BLITZER: And they did secure the agenda, if you will. They got the president of the United States to walk away. Even as recently as a week ago Monday, he was saying there had to be some "revenue," meaning tax reform.

SIMMONS: Well, you know, the Republicans are very good at adding more conditions to the deal every time a deal is going to get close enough to grab. They add another condition and --

BLITZER: They played their hand well.

SIMMONS: -- they played their hand well. I've got to admit it.

BLITZER: So you think they're better negotiators than the Democrats?

SIMMONS: Well, I think in this -- in the last couple of negotiations, they had figured out a spot to get the president in a corner. And they came out of the deal pretty well.

But the problem is the American people haven't come out very well, because most people, according to a "New York Times" poll a little while ago, 53 percent of Americans think the economy and jobs are the number one issue. And we have yet to see a jobs bill out of the Republican House. We have yet to see an economic stimulus package, or some kind of economic package that would boost the economy out of the Republican House. And a lot of people are waiting to see that, and we're hoping the president gets back to that.

BLITZER: The president spoke about that. He immediately pivoted at the White House today when he went out in the Rose Garden to speak right after the bill passed the United States Senate. He immediately focused attention on what everyone could do to create some jobs.

I'll play this clip.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We've got to do everything in our power to grew this economy and put America back to work. That's what I intend to do, and I'm looking to working with Congress to make it happen.

(END VIDEO CLIP)

BLITZER: And he outlined, what, seven or eight specific steps that he thought could be taken relatively quickly to put people back to work?

CASTELLANOS: Nice for the president to show up on that. I thought the other thing he did though today, 10 minutes after the last war was over, he started a new one.

He declared war again on upper-income taxpayers, job makers, entrepreneurs. That's not how you grow the economy.

If American businesses out there are sitting on piles of cash. Why? Because they don't know how much Barack Obama is going to raise their taxes, they don't know how much his health care plan is going to cost.

And what does Barack Obama do today? He looks them right in the eye and says, buddy, you better save that money because I'm coming after you. That's an anti-stimulus.

SIMMONS: What American businesses want is demand from consumers. What they want are people who are out there buying products.

And I will tell you, if a company had more demand for their products, which means more people have jobs, people are using their income from those jobs to go out and buy things, they wouldn't be worried as much about taxes and these other issues. If they have demand, they will sell.

BLITZER: What I heard the president say today is he wanted another one-year extension of a tax cut, a payroll tax cut for middle class families. That's not a tax increase. That's another extension of a tax cut.

CASTELLANOS: He's still talking about millionaires and billionaires. He's still talking about taking the most successful people in the economy and pretending they're the enemy.

SIMMONS: How about they participate?

CASTELLANOS: They are participating right now. They're paying the best part of -- the largest part of taxes.

Look, Ronald Reagan cut taxes on the rich. The share of federal taxes they were paying went up. John F. Kennedy cut taxes on the rich. The share of taxes they paid went up.

That's the way -- George Bush, by the way, cut taxes on the rich. And after the Bush tax cuts, we had 52 straight months of economic growth. Government revenues increased and the share the rich paid --

BLITZER: But then everything collapsed under those lower tax rates.

CASTELLANOS: We had eight years of growth.

SIMMONS: And we bailed out the banks and they gave themselves bonuses. We bailed out the auto companies, the auto companies are starting to make money again.

When is it when the American people get to participate in the economic recovery? That's what the American people want. That's what Democrats are focused on. And I think the Republicans are in a bad spot trying to defend millionaires and billionaires.

BLITZER: The issue is going to will be jobs, jobs, jobs.

(CROSSTALK)

BLITZER: And we'll continue this. And how to create those jobs. And there's a good debate that will continue as well, guys.

Thank you.

CASTELLANOS: Thank you.

BLITZER: It was remarkable, I must say, to see Congresswoman Gabrielle Giffords on the floor of the House of Representatives looking so good just about seven months after taking a bullet to the head. Can she return as an active member of the United States Congress? She voted last night. Stand by.

And the unrest in Syria takes an awful turn for the worse as the Muslim holy month begins. We have fresh claims of shocking brutality.

(COMMERCIAL BREAK)

Let's get right back to Jack for "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: When it comes to the federal government, when will the madness stop? Or what will stop the madness?

L. writes, "Nothing. We keep thinking al Qaeda is the enemy. After today, they have now slipped into the number two spot. The real enemy is Washington. The real terrorists are the ones we elected to mind the best interests of this country and who only pay attention to their political aspirations. Our trust has been broken."

Brian in San Diego, "The only thing which can stop the madness is what got us into it in the first place -- the voters. The only way to move past this era of extremist partisan deadlock is for the voters to elect more moderate representatives who are willing to seriously work toward bipartisan deals."

Ann in Cincinnati writes, "There now cowboys left in Congress. Only aliens."

Tony in Topeka, Kansas, "I'm just wondering if the madness hasn't been around since the very first Congress was in session. It's just that we have more access to it now thanks to you guys, Jack, and all the social media that's available."

Ron in Nebraska writes, "Term limits are a good start. I think three terms are more than enough. One term in office, two terms in prison for all the wrong done during the first term. And I think that should be retroactive and it should start now."

Dennis in Florida writes, "Thomas Jefferson said we ought to have a revolution about every 20 years, start over with a completely new government. Well, we are about 10 revolutions behind schedule."

And Bryan in Colorado Springs, "The madness will never stop. Shut up and eat your peas. Please, sir, may I have some more?"

If you want to read more on this, you can go to my blog, CNN.com/CaffertyFile. You'll find a lot of madness there -- Wolf.

BLITZER: Sort of relieved though, Jack, I've got to say, that at least for now, until the beginning of 2013, this fear of a U.S. government default, at least that has gone away. A lot of other problems out there, but at least we don't have to worry about that.

CAFFERTY: Well, let's wait and see what this super commission comes up with. I mean, we don't know what's going to come out of their little bag of tricks yet, do we?

BLITZER: No. We have no idea who is going to be on that committee. We have no idea what they're going to do.

They may not be able to do anything when all is said and done given the very different stance that Republican conservatives have and liberal Democrats have. They may not be able to do anything, at which point there will be across-the-board almost cuts in defense spending, non-defense spending, which will be painful, but necessary.

All right, Jack. Stand by. We're going to get back to you.

I want to move on though right now, another important story we're following.

The United Nations says the world is watching what's happening in Syria now as the regime brutally suppresses unrest. We need to warn you, the images you are about to see are extremely graphic. Activists say this day has brought dozens of deaths in the Syrian city of Hama.

CNN's Arwa Damon is following developments for us in Syria. She's in nearby Beirut, Lebanon.

(BEGIN VIDEOTAPE)

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Wolf, disturbing video on YouTube could perhaps be signaling yet another dangerous turn of events in the uprising in Syria. Meanwhile, it is the residents that continue to bear the brunt, they say, of the military's crackdown in Hama.

(SCREAMING)

(voice-over): "Lucky you. You have gone to join your father." This woman wails over her dead son's body in the city of Hama. Her husband, killed, according to a voice on the clip.

Residents and activists say that Syrian security forces are indiscriminately firing at homes, hospitals and mosques, part of a renewed crackdown that began on Sunday. A warning, activists say, that the regime will not hesitate to spill blood. Even during the holy month of Ramadan in its bid to rest control.

Forcing residents to set up makeshift barricades and defend themselves however they can. But Syrian state TV offers a very different narrative of events in Hama.

The anchorwoman presented this clip as evidence that armed gangs are responsible for the killing and destruction. The video shows men whose faces are concealed, firing weapons. Their target is unclear.

(on camera): CNN is currently not being allowed back into Syria. We cannot independently verify any of these videos or either account of what is happening inside Hama. But what is indisputable is that the situation in Syria is growing more brutal and complex.

A graphic video that I should warn some viewers may found unsuitable was posted to YouTube, and it illustrates that brutality.

(voice-over): The posting to YouTube claims the video shows Assad thugs cursing as they throw dead bodies off a bridge in Hama. Syrian state TV aired the same clip, but the banner states that it was armed gangs tossing the bodies of martyred security personnel.

One activist questioned the video's authenticity.

RAZAN ZAITOUNEH, ACTIVIST: (INAUDIBLE) has been right for a while. It hasn't been running for a while. So there is (INAUDIBLE) about this vide, who is behind it, who is really those people who are dumping the killed people in various places (ph).

DAMON: Another prominent Syrian activist told CNN he was 100 percent confident that the video is authentic, this was the river near Hama, and that the dead are Syrian intelligence killed by a local Syrian fundamentalist group that fought in Iraq and takes pride in showing such images. But, he adds, "They are not at all representative of the democracy-seeking demonstrators."

Despite the very different narratives, an indication perhaps that the situation in Syria could be spiraling dangerously out of everyone's control.

(on camera): The activists who we spoke to said if in fact it does turn out that it was this small fringe element that was responsible for those atrocious images, the responsibility would then lie with the demonstrators to create a general awareness about the existence of these types of groups. And then, he says, they should take out to the streets in even greater number, not just to call for the downfall of the regime, but also with a unified voice to condemn this type of violence, to make it perfectly clear that this is not the type of Syria that they are looking for -- Wolf.

(END VIDEOTAPE)

BLITZER: Arwa, thank you.