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THE SITUATION ROOM

FAA Funding Standoff Outrage; Retirees Paying for City's Bankruptcy; 'Horrific' Child Porn Ring Busted; Long-Lost Hitchcock Film Found; Interview With Republican Presidential Candidate Jon Huntsman, Part 2; U.N. Condemns Syria Crackdown; 'Strategy Session'

Aired August 3, 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: Thanks very much, Brooke.

Happening now, thousands of Americans responsible for airline safety are being held hostage by partisan bickering and there's no solution in sight. We're zeroing in this hour on the people hit hardest by another outrageous government standoff right here in Washington.

Also, President Obama now has another crisis on his plate that's costing lots of jobs and a ton of money. This hour, how he's dealing with the new messes that the country simply can't afford right now.

And from the seat of power to an iron cage in a courtroom -- the ousted Egyptian President Hosni Mubarak goes on trial for allegedly ordering the killing of protesters.

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

Hundreds of members of Congress are on sort of a vacation right now. They're on leave while tens of thousands of American workers are going without a paycheck because of their inaction. A lot of new anger and finger pointing over the partial shutdown of the Federal Aviation Administration.

Senators went on break yesterday without extending the agency's funding.

Today, the president is urging them to get back to work and solve this expensive and very embarrassing problem.

Let's begin our coverage this hour with CNN's Ted Rowlands.

He's joining us live from O'Hare Airport in Chicago -- this is an outrage for so many people out there -- Ted, what's it like out there?

TED ROWLANDS, CNN CORRESPONDENT: Well, Wolf, people around the country are absolutely disgusted by this, especially those people who are out of the jobs.

(BEGIN VIDEOTAPE)

ROWLANDS (voice-over): Neil Bolen has been building radar buildings for the FAA for 24 years. He has two kids and a mortgage. But now, without warning, he doesn't have a paycheck.

NEIL BOLEN, FURLOUGHED EMPLOYEE: I'm incredibly frustrated, incredibly disappointed, particularly in our congressmen and in our senators. They went on vacation for four weeks when they could have taken an extra day and finished this job.

ROWLANDS: Neil is one of 4,000 FAA employees who are out of a job until Congress passes a funding extension and millions in much needed federal revenue is gone, all thanks to Capitol Hill's latest game of chicken between the parties.

Both sides, of course, blame each other.

REP. STENY HOYER (D-MD), HOUSE MAJORITY LEADER: Unfortunately, Republicans continue to practice the politics of confrontation and hostage taking. And it is severely damaging our economy and the livelihoods of people across our nation.

REP. JOHN MICA (R), FLORIDA: There hasn't been any clear policy for FAA for four-and-a-half years. That takes a great toll on all of our programs. Someone has to say no.

ROWLANDS: Republicans say the main issue is the subsidizing of rural airports. Democrats say airline employees' ability to unionize is at the core of this fight.

Republicans want to make it more difficult, which Democrats say would help one airline in particular.

SEN. HARRY REID (D-NV), MAJORITY LEADER: The issue is a labor issue, an anti-worker agenda of one airline, Delta Airlines. That's what this is all about.

BOLEN: I am very disappointed.

ROWLANDS: For Neil Bolen and the thousands of others without a paycheck, it's about lawmakers not doing their job.

BOLEN: I'm incredibly disappointed that they would think that this is appropriate that they can go on vacation for four weeks and have a great time, while being paid, and I'm sitting here wondering if I'm ever going to get paid by them.

(END VIDEO TAPE)

ROWLANDS: And with Delta's name surfacing in all of this, Delta did release a statement, Wolf, saying, in part, Delta worked to convince Congress to reach an agreement on an extension. The labor provision is not mentioned in the FAA extension proposed by Congress. The fundamental issue, which is included in the extension, is over the funding of the essential air service markets, which includes three markets that have subsidies of over $1,000 per passenger.

Obviously, all of those thousands of workers that are without a paycheck are hoping that Congress does come back, during this next month-and-a-half, and do something about this problem. BLITZER: Yes, a good point. They're on leave. They're on recess now for not four weeks, but for five weeks, until September 7th, they don't have to be back here in Washington. But they should get back to fix this problem quickly.

Ted, thanks very much.

The president is calling the FAA funding stand-off, in his words, a "lose-lose-lose situation." The Obama White House once again in crisis mode on this day.

Let's go to our White House correspondent, Dan Lothian -- Dan, the president pretty upset about what's going on.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: He is. And, again, you know, Congress is not in town, but there is a lot of finger- pointing going on, yet another deadlock. And this doesn't just impact those FAA employees, but also the thousands of workers who are involved in those airport construction projects.

The president is repeating what we've heard now over the last several weeks, that this is also about politics.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): President Obama ducked out of the White House for an unscheduled lunch with the top advisers who helped him resolve the debt ceiling crisis.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Lettuce, tomato and (INAUDIBLE).

LOTHIAN: But one day after signing the bill into law, there's another impasse with Congress over routine funding for the Federal Aviation Administration. President Obama scolded lawmakers during a meeting with his cabinet.

OBAMA: The Congress has decided to play some politics with it and, as a consequence, they left town without getting this extension done. This is a "lose-lose-lose situation" that can be easily solved if Congress gets back into town and does its job.

LOTHIAN: The president's Transportation secretary, Ray LaHood, was even more blunt in his criticism of Congress.

RAY LAHOOD, TRANSPORTATION SECRETARY: End your vacation for a couple of days, get off the beach, get out of your mobile homes or whatever you're traveling in, come back to Washington, pass a bill.

LOTHIAN: In addition to the 4,000 FAA employees being furloughed, the government is paying a high price, too, because it can't collect lucrative airline fees.

OBAMA: It's priced into their tickets, but they're not turning them over to the federal government and the federal government is -- stands to lose $200 million a week. LOTHIAN: That adds up to more than a billion dollars, while Congress is out on break, and puts pressure on the struggling U.S. economy.

It also means more people out of work, as the president gars up to push jobs on a Midwest bus tour in less than two weeks.

But Republican critics say that's only more window dressing for a White House that hasn't been able to deliver on its numerous job creation promises.

DOUG HEYES, REPUBLICAN STRATEGIST: There's a real problem for the administration. They have to demonstrate that they know how to, on a day to day basis, focus on this issue and really do something about it. That just hasn't happened so far.

LOTHIAN: Responding to that criticism in his daily briefing, White House spokesman, Jay Carney, appeared annoyed.

JAY CARNEY, WHITE HOUSE SPOKESMAN: The air of cynicism is quite thick. The idea that the president of the United States should not venture forth into the country is ridiculous.

(END VIDEO TAPE)

LOTHIAN: Now, the president said that he's been reaching out to Congressional leaders to find a way to get this resolved, even without, perhaps, having them return here to Washington.

In the meantime, the administration is also looking at options to see if those FAA employees can still get paid -- Wolf.

BLITZER: Yes, 4,000 FAA employees, Dan, who are furloughed for now. But tens of thousands of construction workers, basically, are being told, you know, to stop working, because you're not going to get paid. And that could go on for five weeks if they don't get back to town.

LOTHIAN: That's right. And, you know, that's always the ripple effect of any measure that is not, you know, taken care of by Congress. There's the direct impact on the employees of whatever it might be, in this case, the FAA, but, also, all those other construction workers in this case who are involved in these projects all around the country. And more than 20,000 of these workers, who also, there's no funding for them, so they can't show up for work -- Wolf.

BLITZER: Everyone stresses, though, Dan, that it's still safe for everyone to fly. They don't have to worry about that part of the story, right?

LOTHIAN: That's right. In fact, Ray LaHood was saying that, that the safety system is still very secure. But there's still a lot of concern. They would love for that funding to come through to make sure that those -- you know, to make sure that those employees -- those FAA employees, all of them, get their paychecks. BLITZER: Yes. It's ridiculous. The government -- the taxpayers -- $1 billion. Think about what $1 billion could do for a problem that could be resolved easily.

Thanks very much.

Dan Lothian over at the White House. Republicans, by the way, are pushing back hard against the Democrats, who are trying to blame them for this FAA shutdown.

Senator Orrin Hatch tells me that members of the president's party could have easily ended this standoff if they backed down on provisions to make it easier for airline workers to unionize.

(BEGIN VIDEO CLIP)

SEN. ORRIN HATCH (R-UT), JUDICIARY COMMITTEE: You know, they just think they've got a good political issue here. And they're crazy. They're the ones that are costing $30 million a day. And they're the ones that won't budge. They're the ones who want -- and it's all over that -- that improper change of labor law, the usurpation of the power of the -- the United States Senate and House, where bureaucrats just determine to overturn the law.

(END VIDEO CLIP)

BLITZER: Senator Hatch blocked a compromise agreement that could have been worked out yesterday. He'll be here.

We'll have more of the interview in the next hour here in THE SITUATION ROOM. He'll explain why he decided to do that.

Now another kind of financial crisis -- a city going bankrupt. And its workers are being asked to sacrifice a big chunk of their retirement nest eggs. It's a nightmare we could see in more and more communities across the United States.

Let's go to CNN's Mary Snow.

She's in Central Falls, Rhode Island, watching what's going on -- Mary, what's it like there?

MARY SNOW, CNN CORRESPONDENT: Well, you know, there -- there's really a lot of concern. This is a very rare move, Wolf, to file for bankruptcy. This is Rhode Island's poorest and smallest city. But state officials here are saying the failed retirement system should serve as a warning, particularly to other cities.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Fire Chief John Garvey heard the warnings about pension problems. But he says they were down the road and he expected that road to be a long one.

BATTALION CHIEF JOHN GARVEY, CENTRAL FALLS FIRE DEPARTMENT: There was always idle talk around here about the pensions. But we never thought it would come to this. We always thought that there would be enough there.

SNOW: But now, there isn't. It follows years of fiscal mismanagement and declining revenues for Rhode Island's smallest city. Troubles with its schools were so severe, all its teachers were fired at one point. Central Falls' schools are now run by the state and volunteers operate the library.

It was the city's pension obligations that put it over the edge and into bankruptcy court. Central Falls' pension fund is underfunded by an estimated $80 million. Retirees now face the possibility their pensions will be cut in half and they will be required to pay more for health benefits. They don't collect Social Security.

Chief Garvey feels cheated. He's been on the force for 25 years, long enough that his son has joined him. And his retirement plans are now shelved.

GARVEY: I don't really feel as though it was my fault. You know, my contributions came out of my paycheck ever since day one.

So why it shouldn't be there, unless somebody else did something wrong?

SNOW: There's anger. But long time residents like Paul Landry say it's hard to point blame. Landry has worked at his family's hardware store for 50 years and says everyone paid for promises the city couldn't keep.

PAUL LANDRY, BUSINESS OWNER: One mayor after another mayor and another mayor, another mayor and then they just pushed aside. And no one's accountable for what they have.

SNOW: State officials say Central Falls, population 18,000, should serve as a cautionary tale. Other cities in Rhode Island may also be vulnerable. And this small state has one of the most expensive retirement systems in the country -- something the state treasurer is tasked to fix.

GINA RAIMONDO, RHODE ISLAND GENERAL TREASURER: Nobody wants to make the tough choices. Central Falls proves that these choices will be made for you. If you don't act quickly enough, the consequences will be devastating. And so as hard as this is now, for me, for the governor, for union leaders, to come to the table to fix it, it is much easier to fix it now than when you're at the brink of bankruptcy.

(END VIDEO TAPE)

SNOW: And, Wolf, Central Falls' official motto is "the city with a bright future." But now, lawyers for very -- various interested parties are fighting over its dwindling assets -- Wolf.

BLITZER: So what's next for this city now that it's filed for bankruptcy?

SNOW: Well, first, it is expected that there is going to be legal challenges to these proposed cuts. But basically, the lawyers for all parties involved were in court today at the first bankruptcy hearing. The economy had to come -- there has to be a restructuring plan presented within 30 days. And what this means is a cut of a third of the city's spending, which is going to mean more lay-offs.

BLITZER: Mary Snow in Central Falls, Rhode Island, a city that has filed for bankruptcy.

All right, thanks very much, Mary.

That's a city that could be a prelude to other cities all over the country.

Meanwhile, a lot of nervous eyes today on the New York Stock Exchange. We're going to tell you how the markets closed after days of painful losses.

And a final push by the Syrian military in a city that spilled the most blood in the anti-government uprising, terror and cries that, "the tanks are attacking."

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

JACK CAFFERTY, CNN CONTRIBUTOR: Wolf, in case you needed it, here's another sign just how bad this economy is: Illegal aliens are leaving the United States and returning to Mexico in search of a better life.

That's correct. One Mexican official told "The Sacramento Bee" newspaper Mexico has, quote, "Become a middle class country," unquote, where it's now easier to buy homes on credit, get higher education and find a job.

Not so here in the Colonies where the employment picture remains grim, indeed. Major American corporations are announcing another round of layoffs, companies like Cisco, Goldman Sachs, Lockheed Martin and Merck. Thousands of American jobs being eliminated.

And a report from payroll processor ADP shows that although the private sector added jobs in July, the growth was well below what's needed for a steady economic recovery.

Meantime, as we await the monthly jobs report from the government due Friday morning, consider this. Mexico's unemployment rate, 4.9 percent. The U.S. unemployment rate, 9.2 percent. You do the math.

It's estimated that about 300,000 illegal aliens have left California alone since 2008. Experts say the weaker U.S. economy along with rising deportations, tougher border enforcement means fewer illegal aliens, but there have also been significant improvements in Mexico. That country's economy is now growing 4 percent to 5 percent. According to the U.N., Mexico's average standard of living, which includes things like health, education and per capita income, is higher now than in Russia, China and India. Turns out, Mexicans might just have better luck achieving the American dream south of the border in their own country.

Here's the question: What does it say that illegal aliens are leaving the United States and going back to Mexico in search of a better life?

Go to CNN.com/Cafferty File, post a comment on my blog.

Did you think you'd hear that story, Wolf?

BLITZER: It's rough out there for everyone.

CAFFERTY: Pretty amazing stuff.

BLITZER: Pretty amazing, indeed.

All right, Jack, thank you.

The attorney general of the United States, Eric Holder, announcing the bust of a huge child pornography ring accused of unspeakable crimes. Some of the alleged victims of sexual exploitation were babies.

Our homeland security correspondent Jeanne Meserve is here, she's got some shocking details -- Jeanne.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Yes, and this is a disturbing story, just to warn our viewers here.

U.S. officials say one of the worst instances of Internet child abuse they have ever investigated and also one of the most sophisticated.

(BEGIN VIDEOTAPE)

MESERVE (voice-over): Thumb drives, hard drives, cameras -- the kinds of technology exploited by cyber-forensic investigators to uncover the members only online bulletin board for child pornography called Dreamboard. Officials describe the images as horrific.

JANET NAPOLITANO, HOMELAND SECURITY SECRETARY: The board may have been the vehicle for the distribution of up to 123 terror bytes of child pornography, which is roughly equivalent to 16,000 DVDs.

MESERVE: Of the 72 people charged so far, 52 have been arrested in 14 countries. The investigation is continuing. More than 600 Dreamboard members were required to post images every 50 days or risk expulsion, officials say. The more they posted, the more access they got to material on the site.

NEIL O'CALLAGHAN, FEDERAL CYBER CRIMES CENTER: The payment system, if you will, would be a barter system. MESERVE: The government says members were encouraged to create porn, instructed to keep the children 11 or younger; some were just infants.

One part of the board mandated that children be in pain, quote, "If the girl looks totally comfortable, she is not in distress, it does not belong in this section."

O'CALLAGHAN: This is an encouragement of the torture of children for sexual gratification.

MESERVE: The board told members how to mask their identities and erase their Internet footprints; it used encryption.

Experts at the Immigration and Customs Enforcement Cyber Crime Center that investigated the case say the use of sophisticated passwords has made cracking porn cases more difficult, and ever larger hard drives are making it harder to find evidence.

DOUG SKINNER, FEDERAL COMPUTER FORENSICS AGENT: The haystack was the size of my fist. Now the haystack's huge because technology.

(END VIDEOTAPE)

MESERVE: The Center and Missing and Exploited Children says it is significant that law enforcement was able to penetrate this ring, but the center says the problem of child porn is vast and they believe it is growing -- Wolf.

BLITZER: Probably just the small, small part of this problem.

Thanks, thanks very much, Jeanne.

A high school student's 10 hours of terror. A man reportedly broke into her home and tethered her to a suspected bomb. You're going to find out who came to her rescue.

And he's known as the master of suspense, but Alfred Hitchcock may have a final surprise for film buffs even after his death.

(COMMERCIAL BREAK)

BLITZER: The Dow snaps it eight-day losing streak. Lisa Sylvester is monitoring that, some of the other stories in THE SITUATION ROOM right now -- Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, for most of the day, it looked like the Dow would close down again and match its longest negative streak since 1978. It plummeted as much as 166 points today. But in the trading day's final hour, the Dow reversed direction and shot up 29 points. The S&P 500 also rallied closing up six points.

In Sydney, Australia, a teenage girl is safe after a harrowing 10-hour ordeal. Bomb squad police swarmed her house after receiving a call the 18-year-old was trapped with an explosive device. It's not confirmed if the suspected bomb was actually strapped to her neck as part of a possible extortion plot. The incident is under investigation.

And an incredible discovery for film buffs. Researchers combing through a vault in New Zealand have found a long-lost film by the legendary Alfred Hitchcock. Hitchcock helped direct, design the sets and edited "The White Shadow" back in 1923 when he was only 23 years old. Only three of the film's six reels survived, so it's ending, fittingly for the director of "Vertigo," "Psycho," and "The Birds" is a cliffhanger. So we don't know what he intended or how that movie will end.

BLITZER: Still, I'm sure a lot of people will want to see.

Thanks very much, Lisa.

Republican presidential candidate Jon Huntsman is getting more aggressive about criticizing his primary rivals. He tells me how he compares to his toughest competitors and whether the Tea Party deserves to have so much influence.

And a bloody new offensive in the crackdown in Syria. The United Nations now taking a stand, but is it too little, too late?

(COMMERCIAL BREAK)

BLITZER: I'm Wolf Blitzer.

Stories we're working on in our next hour. Stand by.

Stunning images of the man who once ruled Egypt with an iron fist. Hosni Mubarak locked up in a cage and facing a potential death sentence.

Also, uncovered, one of the biggest cyber attacks in history. An international hacking plot targets the U.S. and some of the most powerful companies in the world.

And hamburgers and fries with the president. As a reward for getting the debt deal done, he takes top staffers out to lunch.

You're in THE SITUATION ROOM.

(MUSIC)

BLITZER: Republican presidential candidate Jon Huntsman is in the midst of a five-day campaign swing through New Hampshire. He's strongly defending his status as the only major Republican contender to support the debt legislation signed by President Obama yesterday. It's a sore subject for many Tea Party activists who fiercely oppose the compromise.

I spoke with Huntsman recently about the Tea Party and his opponents.

(BEGIN VIDEOTAPE)

BLITZER: Does the Tea Party have too much power in Washington right now?

JON HUNTSMAN (R), PRESIDENTIAL CANDIDATE: The power that the Tea Party has is commensurate with the voice of the people who put them there. The voice of the people who elected members of the Tea Party caucus are outraged at where we are in terms of our fiscal situation, as well they should be.

So they elect people, send them to Congress, send them to the Senate, and folks are now, I think, expressing the aspirations and the goals of the Tea Party voters who put them there. I think it's an expression of our democracy. People are outraged and members of Congress who were put there by Tea Party voters I think are right in expressing that outrage, as well.

BLITZER: But do you see yourself as an advocate of the Tea Party?

HUNTSMAN: Listen, on the financial and economic side, when you look at cutting, when you look at tax reform, when you look at balancing the books, I think we're all together on that.

BLITZER: I want to get to a little politics right now. I'm going to name three Republican candidates, three of your rivals, and you tell me why you're more qualified to be president than them.

Mitt Romney.

HUNTSMAN: I have a real record as governor. We were number one in terms of job creation in this country as a result of record tax cuts, regulatory reform, getting back on our feet. I think Massachusetts was about number 47 in terms of job creation. I think that's material.

Also, we live in a very unpredictable world. I think having some knowledge of how the world operates and having some knowledge of our largest trading partner, our most significant challenge in the years to come, which is China, I think is very material to the voters.

BLITZER: Michele Bachmann.

HUNTSMAN: Well, I have been governor, I've been a chief executive, I've got international experience, and I think people will compare and contrast and see that we're both good people, we're both willing to serve our country, but in terms of the background we bring to the table, there will be some clear differences.

BLITZER: Texas Governor Rick Perry.

HUNTSMAN: He's a good man. I've got real business experience that I think is absolutely needed in today's environment.

You have got to understand the environment in which jobs are created. It helps having been governor, and Rick's been a good governor. And he's a good friend on top of that. But it also helps to have been in the private sector, where you actually are working with the banks and customers and supplies and making a company go. And that I have, and I don't see a whole lot of other people in the field who can say that.

BLITZER: We're getting ready to wrap this up, but three issues. Quickly tell me your stance so viewers out there and voters know where you stand. Abortion rights for women?

HUNTSMAN: I am pro-life, have been from the very beginning. If you look at our record in the state of Utah, you'll see I signed legislation that backs that up like few other elected officials.

BLITZER: Would you agree with Rick Santorum that doctors and nurses who perform abortions should be criminally charged?

HUNTSMAN: I wouldn't go that far.

BLITZER: How far would you go? Are there any exemptions as far as abortion rights for women, life of the mother, for example?

HUNTSMAN: If you look at the legislation that I signed, which gives education to those who would seek an abortion, that puts in place a trigger -- if ever Roe v. Wade is overturned, which I hope is the case some day, that the state of Utah can immediately back out, those are the kinds of policies I'm interested in as it relates to life. But I have got a firm, solid, commitment to life. I have unwaveringly so from the very beginning.

BLITZER: Gay marriage?

HUNTSMAN: I believe in traditional marriage. I don't think you can redefine marriage from the traditional sense.

I'm for civil unions. I came out for civil unions a while ago. I think we can do a better job as it relates to overall equality, specifically as it relates to reciprocal beneficiary rights.

BLITZER: But you agree that states like New York or Iowa should have the right if they want to have gay marriage? They should have that right?

HUNTSMAN: Of course. That's absolutely their right. This is an issue more and more that should be driven at the state level.

BLITZER: Comprehensive immigration reform?

HUNTSMAN: As it relates to immigration reform, I would do one thing before even taking on the 12 million or 13 million who are here illegally. I would simply secure the border. We can't have a legitimate conversation about this issue -- people are too fired about it -- until we can prove that we can secure the border.

BLITZER: And then would there be a pathway to citizenship for the 12 million or so illegal immigrants in the United States? HUNTSMAN: Well, then you have to deal realistically with the fact that you have got 12 million people here who have broken the law. I think fines are in order. I think coming up with a process whereby they pay fines, they learn English, other criteria must be met. But there would be some sort of legitimate pathway that brings them into some safer status and out from the shadows.

They're a big part of our workforce today. In the state of Utah, you can see some of the legislation most recently that they did very pragmatically recognizing that you have got a whole lot of illegal people in the state who are part of the workforce. You just can't wish them away and expect the economy to continue succeeding.

But first and foremost, we've got to secure the border. It's an 1,800-mile border. You have got to work with the four border governors in terms of getting their verification that, in fact, you've secured the border.

It's probably $2 million per mile in order to get it fenced. I think you can fence a whole lot of it, using technology as well for gaps here and there. And then you've got the National Guard that probably can supplement that, as well. We have got to prove the point that we can secure the border.

BLITZER: So, the pathway to the nomination for you doesn't necessarily run through Iowa, but really starts in New Hampshire. Is that what you're saying?

HUNTSMAN: We love Iowa, we love the people of Iowa. I don't have a geographic advantage there.

I'm not a supporter of ethanol subsidies. You have limited financial resources, limited people you can deploy in these early states. And I say we want the best return on investment.

If you look at it as a business proposition, so if we deploy in the early primary states of New Hampshire, South Carolina and Florida, I'm here to tell you, based upon what I see today, we have got an excellent presence on the ground, we've got terrific people who have signed up and who are endorsing us. We can get there, and it starts in New Hampshire.

BLITZER: I don't know if you -- we have some video of what happened yesterday when you were on Capitol Hill. A lot of Chinese tourists spotted you, they saw you, and they were pretty excited.

There it is. You can see it right there. You can see some of that video. They were pretty happy.

You had a good time in China, huh?

HUNTSMAN: Well, I've lived in Asia four times, and the last two years, of course, in China, seeing the rise of China to the world stage. But I had someone yesterday comment on your name recognition needs to go up in some parts of the country. And I say, that's interesting you would say that, because I'm only known by a quarter of the world's population -- about 300 million people who know who I am.

But we've got work to do here. We're doing it diligently and enthusiastically, and there's a pathway toward getting to victory.

BLITZER: Good luck.

HUNTSMAN: Thank you, Wolf.

BLITZER: Governor Huntsman, thanks.

HUNTSMAN: An honor to be with you.

(END VIDEOTAPE)

BLITZER: Check out my blog at CNN.com/situationroom. I write a little bit about Governor Huntsman today. You can check out that blog every day. Lots of good video, lots of good stuff there, CNN.com/situationroom.

President Obama is taking a page from Bill Clinton's playbook. Will his planned bus tour convince Americans he's focused like a laser beam on jobs?

And a massive assault by the Syrian military on a city that has been pounded and bloodied. Could this be the final push against anti- government protesters?

(COMMERCIAL BREAK)

BLITZER: As the death toll spirals upward in Syria, the United Nations Security Council condemning the government's violent crackdown. But will the Security Council's statement make any difference at all on the ground?

CNN's Arwa Damon is joining us now live from Beirut. She's watching what's going on.

The Syrian military, Arwa, making a major push, some say perhaps a final push, on Hama. What's going on?

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: That's right, Wolf.

And it would be quite shocking if this presidential statement from the United Nations made any sort of difference when it comes to the way that the Syrian government is deciding to deal with these demonstrators. What we saw taking place in Hama today, most certainly incredibly disturbing as it seems, the Syrian government and its military apparatus trying to deal that restive city a final blow.

(BEGIN VIDEOTAPE)

DAMON (voice-over): The voice says, "The tanks are attacking Hama."

It began at daybreak on Wednesday, the Syrian military offensive everyone warned of and feared. Communications and power, cut off. The crackdown documented in videos like these, shot by residents hiding in buildings, surrounded by plumes of smoke. The sounds, unmistakable.

Residents say there are many snipers and they are even unable to bury their dead. CNN cannot independently verify the authenticity of these videos and is currently not allowed to report from Syria. But all the evidence points to a massive show of force by the regime.

The voice on this clip says, "1982 is repeating itself and you Arabs are silent."

(on camera): In 1982, the current president's father launched a bloody crackdown against an armed uprising by the Muslim Brotherhood in Hama. Many thousands were killed, according to human rights groups. Huge swathes of the city razed to the ground.

(voice-over): But Hama remained hostile to the regime. After deadly demonstrations in early June, and an apparent shift in strategy, Syrian security forces largely withdrew from the restive city, ceding it to the demonstrators. It became the beacon of the Syrian uprising, often compared to Egypt's Tahrir Square.

Activists say tens of thousands took to the streets on Friday, demonstrating peacefully. Some even declared that Hama had been liberated.

Small-scale military incursions failed to scare people off the streets. So, with massive demonstrations planned for the holy month of Ramadan, the crackdown began on Sunday. And on Wednesday morning, the lethal blow. The Syrian military entered and occupied the city. Many unable to escape.

UNIDENTIFIED MALE: It's difficult to know what the number of dead people or wounded people because snipers are rising here, and so we cannot go outside our homes. I cannot go outside my area because there's no communication with others.

DAMON: Food and medicine in short supply. Residents say they fear a humanitarian crisis and a massacre and echoes of 1982.

(END VIDEOTAPE)

DAMON: And, Wolf, we just managed around an hour ago to get back in touch with a resident of Hama who have been speaking to the outside world through the use of a satellite phone. You can just imagine how dangerous that is, because to get a signal, one actually has to stand outside.

But he was telling us that, still, he could hear the sound of sporadic gunfire. It does seem as if the military crackdown is continuing hours after it began. We also just received an e-mail from the Syrian Observatory for Human Rights saying that four people had been killed in other parts of the country.

BLITZER: Arwa Damon, thanks very much for that report. I suspect that presidential statement from the U.N. Security Council is not going to make much of a difference on the president of Syria, Bashar al-Assad.

Arwa, thank you.

They're images that are shocking the world today. Egypt's former all-powerful president locked up in a cage at his own trial. But even facing charges that could bring death, Hosni Mubarak remains defiant.

And Sarah Palin knocks a potential White House rival. You're going to find out who she says lost her respect in the debt limit debate.

(COMMERCIAL BREAK)

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

Joining us, our CNN political contributor, the Democratic strategist, Donna Brazile. Also, our CNN political contributor, the Republican strategist, Alex Castellanos.

Guys, thanks very much for coming in.

Alex, I'm going to start with you, and I want you to react. Sarah Palin was on Fox last night. She's a Fox News contributor. And she had this to say about Mitt Romney's sort of last-minute decision to oppose the debt ceiling compromise that was approved.

Listen to how she reacted.

(BEGIN VIDEO CLIP)

SARAH PALIN (R), FMR. VICE PRESIDENTIAL CANDIDATE: Doggone it, I want these candidates who are in there -- I want them to not be sitting back. And bless his heart, I have respect for Mitt Romney, but I do not have respect for what he's done through this debt increase debate. He did this -- he waited until it was a done deal, that we would increase the debt ceiling and more money would be spent, more money borrowed and then spent on bigger government, and then he came out and made a statement that, oh, he didn't like the deal after all.

(END VIDEO CLIP)

BLITZER: She kept raising her finger and looking which way the wind was blowing.

Does she have a point?

ALEX CASTELLANOS, CNN CONTRIBUTOR: Well, I want to defend Mitt Romney here, even though I'm not supporting Mitt or any other Republican candidate, just whoever is going to run against Barack Obama. But, you know, Wolf, what the debt ceiling debate really needed? It needed more politics. Right?

It needed more presidential campaign politics to -- it just wasn't chaotic enough without it. I can understand why it wasn't a good idea, I think, for the country or for Mitt Romney's campaign for him to object himself.

He took a stand early. He said he was for Cut, Cap and Trade (sic), the first Republican plan which passed the House. That was probably enough.

She does have a point, though, about Mitt's campaign, that he hasn't really defined himself. You know, a lot of people look at Romney and say, who is he? What does he stand for? And so he does need soon to fill the vacuum that's out there on the Republican side.

BLITZER: Cut, Cap and Balance.

CASTELLANOS: Cut, Cap and Balance.

BLITZER: I just want to be precise on the lingo.

On a broader picture, though, Donna, does she sound like someone who might decide, even at this relatively late stage, to run?

DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Well, as you well know, Wolf, regardless of her intentions to seek the presidency, or just continue to blow hot air on Fox News, Sarah Palin still has a large following. But I want to also defend Mitt Romney because, look, the last thing we needed during this entire hostage-taking negotiation over paying America's bills was to hear from another politician with nothing to say.

I think it's important to understand that while Sarah Palin did chime in from time to time, it was often to criticize Republicans, or to tell them to hold their ground and not pay America's bills and let the country go into default. I think going forward, it's important for these candidates, whether they are running to win the Republican nomination, or just running to keep their mouths running, they need to decide what they are for.

It's not good enough just to say that you are opposed to Barack Obama in 2012. What are you going to do to help create jobs and get this economy back on track in 2012?

BLITZER: Alex, you're a Republican. Does she sound like a candidate to you? Is she going to run?

CASTELLANOS: I don't think so, Wolf. Not everyone has a personal ambition to be the president of the United States. Some people actually think they can do a lot of good for their country, they care about their country, and I think Sarah Palin has smartly figured out that she is more powerful being the power behind a lot of thrones than trying to sit in that big chair in the Oval Office.

I don't think it's about making money for her. She is a principled person who thinks that she may not be the best candidate to beat Barack Obama. But she is actually very powerful as an endorser, as a validator of Republican credentials, almost like a Rush Limbaugh, another person who is never going to be president, but is very powerful to Republicans.

BLITZER: All right.

Let's talk a little bit about President Obama. He is running for re-election, as you well know.

They announced at the White House today he's going to start a bus trip through the Midwest, states to be announced shortly, on August 15th for about a week. It sort of reminds me -- Donna, you'll remember this -- when Bill Clinton and Al Gore went on their bus trips when they were seeking re-election back in' 96.

Is he going to the Bill Clinton playbook on this one?

BRAZILE: I don't know if it's Bill Clinton's playbook or some other playbook from the past, but I can tell you one thing, the American people are concerned about job creation. And he should start his bus tour right there at Reagan airport, or Dulles, or BWI, to encourage the Republicans to stop holding our aviation industry hostage so that we can get those construction workers and those air controllers back on the job.

As you know, Wolf, thousands of them have been furloughed. The construction workers are now stalled. Let's start with those who are simply waiting for Congress to act.

So, it's a good time to get out of Washington, D.C. I'm out of Washington, D.C.

Alex, the weather is good out here. Come on out to California. I'll even buy you lunch and pay for it.

CASTELLANOS: It sounds like a deal.

BRAZILE: But it's important for the president to get out there and start creating those jobs.

And Wolf, let me just give you three things. The president said we needed to get this infrastructure bank (ph) acted upon. We need these free trade agreements, three of them. There are some other initiatives that he has put forward.

It's time that the Republicans and the Democrats come together to create jobs for the American people.

BLITZER: Well, he wants to make sure he still has his job, so he's going to be campaigning in Pennsylvania, Ohio, a lot of these states that could go either way, Alex. He doesn't have an opponent for the Democratic nomination, but he's out there very busy raising lots of money and doing what a candidate does.

CASTELLANOS: And it's interesting, Wolf. Ordinarily, the greatest asset that an incumbent president has for re-election is his stature as president. That's why you stay in the Rose Garden as long as possible.

Becoming a candidate, as opposed to a president, is usually something you want to delay. Not necessarily for Obama though.

He has been all politics all the time since he's been in the White House. So continuing to campaign, in effect, doesn't change that.

And I think it's actually a smart thing for him to get out of Washington, D.C., leave the Washington establishment, and start talking about jobs, something he really hasn't focused on for a while. I think he is going to call his bus the Unemployment Express.

BLITZER: I don't think he will, but we'll cover it.

BRAZILE: Alex, that's not true. He's going to call this bus America in the 21st Century Job Creation Number One. He is ready to get the jobs agenda back on the American agenda.

CASTELLANOS: I wish Hillary was driving.

BLITZER: All right. Donna and Alex continuing this conversation during the commercial break.

Guys, thanks very much.

Nuclear missile training colliding with religion? The Air Force suspends an ethics course that cites bible passes.

And the blame game over the funding standoff that's left thousands of airline safety workers without a paycheck. Republican Senator Orrin Hatch tells me the Democrats could have and should have solved this problem a while ago.

Stay with us.

(COMMERCIAL BREAK)

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

CAFFERTY: The question this hour is: What does it say that illegal aliens are leaving the U.S., returning to Mexico in search of a better life? Three hundred thousand of them have left California since 2008.

Phillip writes, "Can you imagine truckloads of middle class Americans sneaking into Mexico for a better life? It may be the only way to save the middle class in this country."

Richard in Pennsylvania, "Jack, it says that things are looking up. More jobs for Americans, fewer drugs for Americans, fewer drugs and murders, and maybe this will have a positive effect on the border states. Politicians won't do anything to protect our border, so the slumping economy will do the job. How ironic."

Dave in Orlando writes, "It says we're officially a third-world country. We have been driven into the ground by special interests, philandering, pandering, bribe-taking lawmakers, a do-nothing president good only at making speeches, and a top court populated largely by people intent on revoking the U.S. charter. Even the illegal aliens are jumping ship."

Gerald writes on Facebook, "No work, no health care, no education. Might as well go back. Now, where do the rest of us go?"

George in Pennsylvania, "I just went to Sears to buy a Wet Vac. I found it was made in Mexico. Maybe they've got something there."

Parah Salin writes -- I don't believe that -- "Ain't free trade great? Waiter, another round of cat food. Any chance in the next election we'll get what we vote for?"

Tim in Colorado, "It says they're tired of THE SITUATION ROOM."

Well, you're wrong, Tim. That's not it at all.

And Dan writes, "Take me with you, amigos."

If you want to read more on this, go to my blog, CNN.com/CaffertyFile, or through our post on THE SITUATION ROOM'S Facebook page -- Wolf.

BLITZER: Jack, thank you.