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Dow Plummets 500-Plus Points; Deal Struck in FAA Funding Stand- Off; President Obama Paying for Debt Deal; Double-Dip Recession?; Deaths Pile Up in Syrian Crackdown; Polygamist Leader Found Guilty
Aired August 4, 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.
We're following the breaking news. Stock prices in free-fall right now. The Dow is not doing well. The Dow plummeting more than 500 points as economic fears skyrocket. This hour, your vanishing investments -- hundreds of billions of dollars over the past two weeks, maybe more than a trillion dollars of equity lost. The growing risk of another recession very much on the minds of a lot of investors.
Plus, a break in the costly standoff over the funding of the Federal Aviation Administration. We're going to tell you what this tentative deal should mean for thousands of furloughed workers and for airline safety.
And it's all enough to make the president grow a few more gray hairs. On this, his 50th birthday, America's problems are taking a visible toll.
Will it hurt the president's chances for reelection?
I'm Wolf Blitzer.
You're in THE SITUATION ROOM.
ANNOUNCER: This is CNN breaking news.
BLITZER: Let's get to the breaking news.
When the closing bell rang on Wall Street an hour ago, all the gains made in stock prices this year, all those gains wiped out. The breaking news this hour, the worst sell-off since the 2008 financial crisis. The Dow Jones Industrials plunging more than 512 points tonight.
The Dow has been tanking, though, for two weeks, losing more than 10 percent of its value. The other two big stock indices, the S&P 500 and the NASDAQ, also have dropped more than 10 percent since mid-July.
Let's go to our chief business correspondent, Ali Velshi, who is watching what is going on -- Ali, what happened?
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Wolf, a couple of things happened and they're actually don't have that much to do with the United States.
Earlier, the Japanese central bank decided it wanted to prop up the yen, which had been sort of undervalued. And it put in a lot of money to do that.
It didn't work. It didn't end up succeeding in -- in its efforts.
And then later on in the day, the European central bank announced that it is going to buy bonds back, put more money into -- into the European economy, largely on the basis of troubles in Italy.
That didn't work, either.
And the problem is that both these efforts by central banks to shore up the economies, instead of reassuring investors, gave them a sense that there's a bigger problem underlying those economies. And -- and it caused this global sell-off.
And while it looks like an American problem, this sell-off had taken place in Europe, as European markets were closing. And the U.S. just sort of caught onto it.
Now, the problem we've got now is that we -- we've ended this market on a low note. In about three hours, trading starts in Japan. We want to see whether everybody takes a breath for a little while and system, hold on, this may be overdone.
This is pretty extreme reaction to the news that we heard today. But it is on fears of a global economic slowdown, combined with heavy global debt and whether or not the central banks can actually do enough to get these economies in Europe and here in the U.S., to some degree, out of it.
BLITZER: But, as you know, Ali, it's not just today. This has been going on --
BLITZER: -- what, for nine sessions -- eight of the last nine sessions --
VELSHI: That's right.
BLITZER: -- the market has gone down 10 percent in its value over these, what, nine sessions alone?
VELSHI: That's right.
BLITZER: So it's -- it's not just today.
BLITZER: It's been building.
VELSHI: The trick is, though, that it's not -- it's all interconnected, but I'll tell you what happened. We -- we went into -- you know, we had this Greek crisis. We saw that -- those rioting in the streets, the Greek parliament. That gave us worries about the European economy.
When that finally got settled, we got into the debt -- sort of worst of the debt negotiations here in the United States. Markets took a little while to react to that.
And then suddenly, on Friday, before we had a debt deal -- you remember this, Wolf -- we got a poor GDP number. We revised our previous economic growth lower. So it looks like our economy wasn't doing that well.
Then Monday, we got a weak manufacturing number in the United States. That hurt markets.
Tuesday, we had a weak consumer spending number in the United States. That hurt markets.
So there are questions about the U.S. economy.
So it's a whole bunch of these disconnected things that have been putting downward pressure on the markets. And then, of course, we get this activity in currencies around the world. So it's kind of a whole bunch of uncertainty.
Now, typically, Wolf -- you know this well -- typically, investors move their money from one pile to another pile, from equities or stocks to oil, then to gold, or wherever it might be. Today was unusual in that we saw losses almost across the board, which means that, globally, investors were doing the equivalent of taking their money out and putting it -- putting it in their mattress until they figure out a place to reinvest it.
BLITZER: Yes, cash of Treasuries --
BLITZER: -- being the safest right now.
Ali, thanks very much.
We'll check back with you.
Let's dig a little bit deeper now about this stunning sell-off on Wall Street today. Greg Ip of "The Economist" is joining us right now.
He's the U.S. economics editor.
Greg, thanks very much for coming in.
When I say hundreds of billions of dollars, maybe a trillion dollars lost in equity, the value of these stocks, is that pretty accurate, right? GREG IP, U.S. ECONOMICS EDITOR, "THE ECONOMIST": Yes, that's about right. And so the decline of the stock market has a number of impacts. It wipes out people's wealth. That sort of like hurts their ability to spend. But probably even more important is the confidence effect on people watching this show, opening up their papers tomorrow morning, learning how bad things are out there, are going to be that much less likely to go out and spend, make an investment and buy a car.
That has the risk -- not the probability, but certainly the risk -- for this to become a self-fulfilling prophecy of pefi -- pessimism.
BLITZER: Because people want to, you know, get their money out --
BLITZER: -- to the sidelines as quickly as they can.
BLITZER: A lot of people are already saying, you know what, we've -- how much have they lost?
A thousand points on the Dow Jones over the past nine sessions --
BLITZER: -- more than 1,000 points.
BLITZER: So that -- so people have lost a lot of money.
IP: But the important thing to emphasize here is that the market is responding to worries about the broader economy. Frankly, the bigger thing that we have to worry about here is not what's happened in stock market, but people with jobs or who are about to lose jobs or income because of the risk that the economy is slowing down, possibly falling into a recession again.
BLITZER: So -- so is this just some sort of correction we're seeing now or is there something -- you -- you raised a question, something a lot more segment, fears of a second double dip recession, if you will?
IP: Well, the first thing that's going on is people are just remarking their forecasts. A lot of people had thought that after some temporary hits to the economy from higher oil prices and the problems in Japan, that the economy would come roaring back in the second half to maybe, say, a 3 percent growth rate.
People are lowering those expectations. They're looking at the latest data. They're saying maybe more like 2 percent, maybe only 1.5 percent. That means that they have to sort of like lower what they think the stock market is worth. So that's the other thing. The other thing going on is that, as you were hearing from Ali, is there's a lot of concern about what's going on in Europe, not just about the problems that Italy and Spain are having, but the inability of the policymakers, whether it's the central bankers or the finance ministers, to deal with them.
And we have a bit of that problem here in the United States, as well. I think a lot of disappointment, we'll, with the debt deal that was announced, for example, this week.
BLITZER: But it would be unfair to say it was strictly the result of the debt deal that caused this big collapse today?
IP: Oh, absolutely. I think that's secondary, if not tertiary. But think about what that debt deal tells us, you know. I mean the dysfunctionality that went on before that was done, I think, undermines people's confidence in the ability of our government to get things done, including addressing the weakness in the economy.
BLITZER: Tomorrow, we're going to be getting the jobless numbers, the unemployment numbers for the month of July, 8:30 a.m. Eastern time tomorrow. People are bracing for not a good number.
IP: This is one of the most important economic indicators we will get all year.
Now, before we get all gloom and doom, we've actually had some positive news on the economy, including today. For the last two weeks, we've had reports that the number of people filing claims for unemployment insurance has dropped. That suggests that the job market might be getting a little bit better.
In fact, if you look at the data carefully, April/May was the worst period for the economy. Things have gotten a little bit better. And it would be really, really nice to have that vindicated by a good job number for the month of July.
BLITZER: So, basically, if you're taking a look at what's going on and you see all this uncertainty, not only in Europe, Italy and Spain, obviously, a lot more serious than what's going on given the enormity of the economies in Italy and Spain compared to Greece and Ireland or Portugal, for that matter.
You have to assume it's going to have a big spillover effect here and people here are nervous about that. Fareed Zakaria, for example, has told me -- and I wonder if you agree -- Italy, unlike Greece or Ireland, is not only too big to fail, it's too big to bail out.
IP: That's right. I think Italy is sort of like too big to save. You know how people say this isn't just a problem for Europe, but the future of the euro itself.
Now, what you see going on, it's not so much people saying, oh, if Europe is weak, that will hurt the American economy. It's essentially people say the world is risky place, I want out of risky things, whether it's European bonds, American stocks or even commodities. We saw a big oil price drop today.
BLITZER: Thanks very much, Greg.
Thanks for coming in.
IP: Thank you, Wolf.
BLITZER: All right. We're going to continue on the breaking news right now.
We're getting a better sense of the feeling on Wall Street.
Let's bring in Dave Howard.
He's an investment adviser with Wilshire Capital.
Dave, the American public is worried right now. A lot of our viewers are wondering, what should they do?
Is it too late to do anything about their 401(k)s, their mutual funds?
What do you think?
DAVID HOWARD, INVESTMENT ADVISER, WILSHIRE CAPITAL: Look, if you're a -- if you're a long-term investor and you've got to stick with your investment strategy, talk to your -- talk to your registered rep, talk to your investment adviser, talk to the people at the firm that you're invested with.
Their long-term strategy has your best interests in mind or that's what -- that's what the American public needs to realize, that -- that their 401(k), I mean, look, there's going to be down days on the market. There's going to be a lot of down days on the market. There's going to up days on the market.
But if you stick with your investment discipline, don't try to act like a trader, don't try to pick the bottom, don't try to pick the top, but stick with your fundamentals, you should be -- you should be all right.
BLITZER: Compared -- you were on the floor today when all of this was unfolding, the 500 point drop.
Were you on the floor?
HOWARD: I -- I actually was not. I was upstairs watching.
BLITZER: All right. But give me a little comparison, if you will, what happened today, 512 points down, compared to October 2008. Remember that one day, it dropped more than 700 points. I assume you were in New York then.
HOWARD: Nine hundred -- yes, exactly. Absolutely. No, you know, this -- the -- the feeling wasn't as -- as doom and gloom. Granted, this is a -- this is -- this is coming on a long stretch of down days. Granted, this was -- this was a very large drop mar -- you know, going into the close. It was on the lows.
The feeling on -- the feeling here and the feeling with traders was almost that we expected the correction. We expected the correction because of the stagnation within our own government and then the news coming out. It was almost like it was -- it was -- it was anticipated.
BLITZER: Thanks very much, Dave.
We'll continue this conversation.
Dave Howard, an investment adviser with Wilshire Capital in New York.
Much more on the breaking news coming up.
But there's another important story we're following. Members of Congress, finally -- finally striking a deal to end the partial shutdown of the Federal Aviation Administration and put tens of thousands back to work.
Joe Johns is up on Capitol Hill -- Joe, what have they decided?
How did they reach this agreement?
JOE JOHNS, CNN CORRESPONDENT: Well, they basically decided to push it through the United States Senate, a bill that was sent to the Senate by the House of Representatives. And any other problems they have with that, at least as it comes to essential air service for regional airports, let the secretary of Transportation, Ray LaHood, decide.
Now, a bit of background on this, Wolf. As you know, this is one of those strange situations that shows, some say, the dysfunctionality of the United States government. Four thousand FAA employees furloughed, tens of thousands of construction workers furloughed, with Congress on its way to a five week vacation. The fix essentially in to go ahead, as I said, let the secretary of Transportation decide to get the funding going back for the FAA in the short-term, only extending it until about the middle of September.
There were two key issues here. One, of course, was the airports. The other was a collective bargaining rights issue, trying to determine how to allow voting in union ballots to go forward. That, of course, is something that is being kicked down the road. And that will be decided some time, perhaps in September, sometimes perhaps later than that.
This, of course, is one of those issues that's very important to, Democrats and Republicans, but even more important to those thousands of people who might not have gotten a check if Congress didn't do something and fast -- Wolf, back to you.
BLITZER: Fortunately, they did the right negotiating, finally. A little late, but they finally are doing the right thing.
Thanks very much, Joe.
Joe Johns up on Capitol Hill.
Later here in THE SITUATION ROOM, I'll speak with the secretary of Transportation, Ray LaHood.
We'll talk about what happened, lessons learned. As you probably know, he's been very outspoken in his anger at Congress over what happened. Ray LaHood will be joining me later here in THE SITUATION ROOM.
There's not a lot for President Obama to celebrate on this, his 50th birthday. He's seeing fallout from the recent debt deal and now the massive sell-off on Wall Street.
We'll talk about the dangers for his reelection bid. Stand by.
And she allegedly smuggled high-powered ammunition in clothes and even in food. We'll tell you what happened.
BLITZER: Let's get right to Jack Cafferty for "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN CONTRIBUTOR: It's not exactly a slow news days, is it?
CAFFERTY: The old saying is you can't fight city hall. Well, the country's city hall is Washington, DC. And the frustration that is felt by Americans with that city is palpable. We are lied to and pandered to and taken advantage of and taken for granted. In election after election after election, we sit and watch the quality of our lives and our country to continue to ebb away. Most of us feel powerless to do anything about it.
Enter the Tea Party. Love them or hate them, they're making a difference. They've changed the debate.
When the conservative faction of the Republican Party was formed, they subscribed to a set of principles that -- surprise -- they continue to cling to today.
They said they would go to Washington, work for smaller government, lower taxes, less spending and a general disengagement of the federal government from our everyday lives.
Now, granted, their recipe for success doesn't appeal to everyone. Au contraire. But t point worth making here is this -- it is possible to fight Washington, DC. They just finished doing it with the debt ceiling fiasco. The government was brought to its knees and made to look absolutely silly by a small group of representatives -- just 60 out of the House of Representatives' 435 members.
They came to Washington and did exactly what they said they were going to do. And that doesn't happen very often in Washington.
There's a lesson here for all of us. Vote in enough numbers for the people you believe in and can trust, and who knows what might be possible?
Here's the question -- what's your impression of the effect the Tea Party has had on the federal government?
Go to CNN.com/caffertyfile and post a comment on my blog -- Wolf.
BLITZER: Jack, thank you.
President Obama told the nation he'd prevent financial Armageddon. But look at this -- the breaking news this hour, the worst sell-off of stocks since the 2008 financial crisis. The Dow plunging 512 points despite -- despite the recent deal to raise the federal debt limit.
Let's bring in our chief White House correspondent, Jessica Yellin, who's looking at this story for us.
Even before this huge sell-off, there were concerns about what was going on, from the president's perspective. But now they've been intensified.
JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: It's right, Wolf.
There are some eye-catching numbers for the president in this new Quinnipiac Poll from Florida. Now, that is a crucial state for the president to win.
And we're looking at Independents. Now, those are those key swing voters that the president has to get to get reelected.
First, before the debt deal, he -- they were asked, 42 percent of Independents approved of how the president was doing his job. Fifty - 52 percent said they disapproved. After the debt deal went down, 33 percent say they approve, 61 percent say they disapprove.
Now, that is a huge drop in a very short period of time. And it would look like he's taking a very serious hit with Independent voters, who are exactly the voters who want to end the partisan gridlock, want him to break through the way Washington has done business as usual.
So they would seem to be judging him for that.
But we should keep in mind that there is plenty of time for him to get distance from this deal and from Congress before the next election.
And then there's this twist that we should keep in mind. This is an interesting -- a different poll. We keep talking about how liberal Democrats are upset with the deal. But this new poll out of Gallup shows us something a little bit different. When asked, do you approve or disapprove of the debt deal agreement, Democrats, 28 percent disapprove; Independents, 50 percent disapprove. Now, that could be a problem for the president.
Sixty-four percent disapprove.
So based on these numbers, conservatives seem to have the biggest objection to this deal, not liberals.
BLITZER: So is there a plan that the president has to win back some of these voters that, at least for now, he's lost?
YELLIN: There is always a plan, isn't there?
The phrase they keep using is pivot to jobs. They're going to refocus on jobs. And, in fact, when you're on White House grounds and you ask folks, hey, what are you up to, they say, oh, we're pivoting to jobs.
So that is the new focus. And week, the president is going to a hybrid battery plant in Holland, Michigan. He's going to highlight fuel-efficiency standards in Springfield, Virginia.
But then there's going to be the big push later this month on a bus tour through the Midwest. And that will include battleground states, those key states he has to win for the election. He'll talk about the economy.
The point there is, you can't land Air Force One in some small towns. And this way, he can visit rural communities. You've heard the president make the case, he did not create this economic mess, but he's been trying to fight it. And we'll hear him argue, as he did during the debt deal, that he feels he could do more on jobs if Congress doesn't block him.
BLITZER: He's going to go to states that he will desperately need if he wants to be reelected, Virginia, for example, went for him the last time. He needs Virginia. He needs Michigan --
BLITZER: -- Ohio, Pennsylvania.
BLITZER: These are the states where we're going to see the president spending a lot of quality time.
YELLIN: A lot of them.
BLITZER: And you'll be there with him.
YELLIN: On that bus.
BLITZER: Thank you.
BLITZER: Good luck.
Amid reports that Syria has stepped up a deadly crackdown on protesters, the Obama administration is warning the country's president.
Is the United States changing its strategy toward the government of President Bashar al-Assad?
And a suspected bomb that was strapped to an Australian teen's neck -- why authorities are calling it an elaborate hoax.
BLITZER: We've got a statement just coming in from the White House. The president of the United States welcoming this agreement by Congress to allow the Federal Aviation Administration to go ahead and do its business: "I'm pleased that leaders in Congress are working together to break the impasse involving the FAA so that tens of thousands of construction workers and others can go back to work. We can't afford to let politics in Washington hamper our recovery. So this is an important step forward."
And, indeed, it is.
And the secretary of Transportation, Ray LaHood, will be joining us live here in THE SITUATION ROOM.
We'll talk about lessons learned to make sure the country avoids this kind of situation down the road.
Lisa Sylvester, meanwhile, is monitoring some of the other top stories in THE SITUATION ROOM right now -- Lisa, Vice President Biden is on a trip?
What's going on?
LISA SYLVESTER, CNN CORRESPONDENT: Yes, that's right, Wolf.
Well, Vice President Biden, he'll be traveling to China, Mongolia and Japan this month. The trip will be the first of planned reciprocal visits between the U.S. and China. And during his visit, Vice President Biden will meet with China's president, Hu Jintao, and premier, Wen Jiabao, on a broad range of bilateral, regional and global issues.
A U.S. woman is charged with attempting to smuggle high powered ammunition into Mexico. Mexican authorities have identified the woman as Gwendolyn Maruffo Sanchez. Mexican soldiers found the ammunition hidden in food and clothes in Sanchez's possession while searching a bus that she was on that was traveling from El Paso, Texas.
And police in Australia say a man was attempting serious extortion when he broke into a home and strapped a fake bomb on a teenager's neck. Explosives experts spent 10 hours yesterday trying to free 18-year-old Madeline Pulver from the suspicious device. Pulver wasn't hurt in the I could. A police superintendent says a letter that was attached to the fake bomb made serious demands, but he did not elaborate on the letter's contents -- Wolf, can you imagine that, 10 hours in the living room (INAUDIBLE) --
BLITZER: Imagine how scared she must have been?
BLITZER: Her parents must have been -- what an awful, awful situation. Fortunately, it turned out OK. She's fine.
Thanks very much.
We're digging deeper into a mysterious $1 million to the Republican presidential candidate, Mitt Romney.
What's going on?
We'll tell you.
(BEGIN VIDEO CLIP)
MITT ROMNEY (R), PRESIDENTIAL CANDIDATE:
It's an honor to be here today.
(END VIDEO CLIP)
BLITZER: One top money manager says there's total fear in the markets right now.
Let's get back to the breaking news this hour -- stock prices nosedive. All three major indices took a big hit today, with the Dow plunging a stunning 512 points. This, despite the debt deal meant to prevent an economic meltdown.
CNN's Fareed Zakaria writes about the debt crisis in the new issue of "Time" magazine.
The host of "FAREED ZAKARIA GPS" joins us now -- Fareed, what happened today?
Because it looks like it's not just the United States, it's the whole world, the fear out there that, what, we may be about to go into a double dip recession?
FAREED ZAKARIA, HOST, "FAREED ZAKARIA GPS": I think there's a fear around the world that the global growth, that the growth all over the world is experiencing problems in many different ways. But it's happening all over the world. So that if you think about this year, it started out strong for the United States. But you had oil spikes. You began to see inflation in China and India. Then Europe started getting yet another replay of its debt troubles. And then you get the United States with its budgetary squabble.
So, in a sense, you went from China and India worrying about inflation, which got the markets worried; Europe cratering with regard to Greece, and now Italy and Spain. And the United States, our debt problems and our debt wrangling was probably the straw that broke the camel's back, but it's now happening everywhere.
It's Europe, the emerging markets, the United States. All seem for different reasons to have experienced serious economic troubles, and the market is finally sort of catching up with that in a sense.
BLITZER: Because some of the analysts have suggested, you know what? It's one thing for Greece, one thing for Portugal, one thing for maybe Ireland to be having some severe economic dislocation, but when Italy and Spain start going through that, and fears about their viability begin to surface, that really could have a spillover effect not only on the United States, but indeed the rest of the world.
ZAKARIA: Absolutely. Remember, Greece is about two percent of the Eurozone's economy. In other words, it's a nano state. It doesn't really matter.
Italy, on the other hand, is one of the largest economies in Europe. If Italy -- and Italy has huge public debt. So, if interest rates on Italy's debt continue to rise as they are now, frankly it means the end of the euro, because Italy is too large to bail out.
Italy is literally too big to fail, but it's also too big to bail out. Even Germany does not have the resources to do that. The only solution would be a breakup of the euro, Italy would get back to the lira, devalue its currency, which would be a cataclysmic event for global markets.
Fareed, you have written the cover story on the new issue of "TIME" magazine, "The Great American Downgrade: Why the Debt Crisis Has Hurt Growth and Our Position in the World." Let me read a line from the article, because it's very, very poignant -- controversial I should say as well.
"People have to cooperate for anything to get down. That is why the Tea Party's insistence on holding the debt ceiling hostage in order to force its policies on the country, the first time the debt ceiling has been used this way, was so deeply un-American."
You're getting some feedback on that, some reaction. Un- American?
ZAKARIA: I'll explain why.
First, understand how unprecedented it was. The debt ceiling has been raised 78 times since 1960. It has never been used this way, essentially as blackmail. It was not -- the Democrats did not use it during the Vietnam War. It was not used this way during civil rights legislation.
So nobody has ever held a country hostage and said, if you don't pass our policies, we'll blow up the economy, we'll blow up the credibility of the United States. The reason I say it's un-American, Wolf, is because the American system, unlike European parliamentary systems, the American system is built on shared powers, overlapping authority. No one is in control in America.
You know, there's the president, there's the Senate, there's the House of Representatives, the state governments. And the founding fathers designed it that way because they wanted there to be an effort to create policies through compromise, through consensus.
So if you take the position that it's your way or the highway, that you will literally not give an inch, what you're doing is really against the spirit of the American republic, against the spirit of what the founding fathers wanted.
BLITZER: Is the United States on the verge potentially of no longer being the world's economic superpower?
ZAKARIA: No, because I think we're in a race for most financially irresponsible superpower, and right now Japan and the European Union are probably winning. You know, at the end of the day, you can only beat something with something else.
So the dollar will remain the reserve currency of the world, and U.S. treasury bills will remain a safe haven as long as there's no other alternative. But the important thing to realize is we are developing alternatives.
There will not be a single alternative. This is why in my book I call it the post-American world. But you are getting these baskets of currencies, where people are increasingly looking and thinking to themselves, what they can do is we can buy a few, you know, Swiss francs, and English pounds, you know, and perhaps one day the Chinese yuan will be a currency you can buy, and there will be those kind of mixed alternatives. And that is the picture of the world we're entering, a world in which the United States is not as dominant, but there are a kind of group of countries that become a substitute.
It's a very messy world, because it means there's no leader, and we're going through a period like this, where there's nobody that is able to lead us out of the this global economic crisis, out of these global -- the recessionarary times. It used to be that the United States was the engine, was the motor of global growth. We're not. Right now it isn't clear anyone else can pick up the slack.
BLITZER: We'll look forward to "FAREED ZAKARIA: GPS," right here on CNN, Sunday morning, 10:00 a.m., replayed 1:00 p.m.
Fareed, thanks for coming in.
ZAKARIA: Always a pleasure, Wolf. BLITZER: Syria's deadly crackdown on protesters has the Obama administration very, very worried. Is the United States ready to break ties with the Assad regime? Stand by.
And for his birthday, President Obama rakes in more campaign cash, but he's facing what increasingly looks like an uphill battle for re-election.
BLITZER: New reports of a bloodbath in Syria. An activist group says more than 100 people died today in and around the city of Hama, a top target of the government's brutal military crackdown against protesters.
CNN can't independently confirm that because Syria has restricted journalists' access to the entire country, but the Obama administration is sounding increasingly worried about what's happening.
Let's bring in our foreign affairs correspondent, Jill Dougherty, for the latest.
What is the latest, Jill?
JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, you know, Wolf, honestly, if you thought that Libya was tough getting rid of Moammar Gadhafi, Syria is a whole other ballgame. It's much tougher, and the U.S. has very little influence there.
But now international pressure may be building.
DOUGHERTY (voice-over): The slaughter in Syria is galvanizing the Obama administration.
HILLARY CLINTON, SECRETARY OF STATE: We think to date, the government is responsible for the deaths of more than 2,000 people of all ages.
JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Assad's action placed Syria and the region on a very dangerous path. Assad is on his way out.
DOUGHERTY: So far, officials stop short of calling for Syrian president Bashar al-Assad to step down. A senior administration official tells CNN top aides want President Obama to say those magic words, but the State Department is holding back, concerned that if the president publicly makes that demand, and Assad stays in power, Mr. Obama and the U.S. could end up looking weak.
CLINTON: I come from the school that actions speak louder than words.
DOUGHERTY: Meanwhile, after a brief confirmation hearing in Washington --
ROBERT FORD, U.S. AMBASSADOR TO SYRIA: The Syrian government is unwilling to lead the Democratic transition that the Syrian people themselves demand.
DOUGHERTY: -- U.S. Ambassador Robert Ford is on his way back to Syria.
In early July, Ford infuriated the Assad regime by visiting opposition centers like the city of Hama, but some in the U.S. Congress want to pull Ford back to Washington. Keeping an ambassador in Syria, they argue, just rewards the Assad regime.
Senator Robert Casey thinks recalling Ford is a bad idea.
SEN. ROBERT CASEY (D), PENNSYLVANIA: As long as we can keep him safe and the embassy folks safe, I think it's important that he stay there, that he keep engaging, keep putting pressure on, and keep building within the country the kind of coalition you need to bring about the kind of substantial change that has to happen in Syria.
DOUGHERTY: Pressing Syria at the United Nations, the administration helped convince Security Council members to condemn the Syrian government's attacks on protesters. The test for the administration now, get Assad out of the way before the company spirals into civil war.
HUSSEIN IBISH, MIDDLE EAST ANALYST: It has the ability to destabilize all of these countries, Iraq, Lebanon, Turkey, et cetera, and to have a huge impact. And the potential for sectarian and civil conflict there is so great, and it seems not only possible, but maybe increasingly probable, that this is probably the greatest source of anxiety. It's also the place where the United States has the least leverage, the least influence.
DOUGHERTY: And Secretary Clinton admits it's taking time to lobby other countries, to pull them together, to introduce new sanctions and put pressure on the Assad regime. The action at the United Nations could be the first indication that that strategy is beginning to work -- Wolf.
BLITZER: That was a presidential statement, not a formal resolution.
DOUGHERTY: Right. They didn't get that far.
BLITZER: Which isn't as strong. And no sanctions were actually imposed, it was just, as Hillary Clinton says, words.
DOUGHERTY: That is true. However, words are changing. I was just looking a couple of minutes ago at statement by Dmitry Medvedev, the Russian president, who's saying their view on this could be changing, so there could be stuff happening.
BLITZER: But she says actions speak louder than words.
BLITZER: Words are one thing, actions something else.
Thanks very much.
The stock market free-fall. A 500-point drop in the Dow fuels new fears about the fragile economy. CNN's Erin Burnett, she's standing by live. We'll talk about the potential for a double-dip recession.
And the Republican Party's message to President Obama on this, his 50th birthday. Guess what, Mr. President? They say there isn't much to celebrate.
BLITZER: All right. There's been a verdict in a high-profile trial going on.
Let's bring in Lisa Sylvester to give us the decision.
What happened, Lisa?
SYLVESTER: Hi there, Wolf.
Well, polygamist sect leader Warren Jeffs was just found guilty on two counts of sexual assault. Those charges are aggravated sexual assault of a child under 14. It carries a potential term of anywhere from five to 99 years. The other charge was sexual assault of a child under 17, which carries a possible term of between two and 20 years.
Now, Jeffs was charged with sexual assault after a raid on a ranch -- this was back in 2008 -- near El Dorado, Texas, that his church used to operate. That church, the Fundamentalist Church of Jesus Christ of Latter-Day Saints, is the church that he headed.
It took the jury roughly about three-and-a-half hours to render this decision. And the next phase is the penalty phase, and the same jury will decide his fate -- Wolf.
BLITZER: All right. Thanks very much. Lisa, thanks for that update.
Whether it's dealing with wars, a tough economy, or the sheer weight of the office, the gray hairs certainly come quickly for a president of the United States. Look at this.
During his eight years in office, Bill Clinton's hair turned almost completely why. A similar story for George W. Bush during his two terms. And as President Obama celebrates his 50th birthday today, he's noticeably grayer than when he took office just two-and-a-half years ago.
Let's talk about what's going on in our "Strategy Session.". Joining us, our CNN contributor, the Democratic strategist, Paul Begala. He's a senior strategist for the Democratic fund-raising groups Priorities USA and Priorities USA Action. And the Republican strategist, Tony Blankley, of Edleman public relations.
Guys, thanks very much for coming in.
You can identify. Your hair is in pretty good shape.
PAUL BEGALA, CNN CONTRIBUTOR: I have very little left. I know half of Bill Clinton's gray hairs came from Wolf Blitzer, who was covering him at the White House.
Giving him hell every day, Wolf.
BLITZER: You know what? I may have given him a few gray hairs, but he gave me -- when I was a senior White House correspondent, when I started back in those days, I had almost red hair.
TONY BLANKLEY, REPUBLICAN STRATEGIST: Reagan's stayed orange throughout the entire eight years.
BLITZER: You should take a look at me before and after covering Bill Clinton, but that's another story. It's not about me.
All right. He celebrated his 50th birthday today. The Republican National Committee released a birthday card showing a nice picture of the president happy.
"Here are 50 things to ponder on your birthday": $14.3 trillion current national debt; $3.7 trillion added to the national debt since Obama took office; $2.6 trillion true cost of Obamacare once fully implemented. Obviously, 50 not such nice things that they're telling the president about.
BEGALA: I know. You know, JFK famously, on his birthday, got serenaded by Marilyn Monroe at Madison Square Garden. President Obama gets a perfectly legitimate -- I mean, it's not anything unfair.
BLITZER: It's politics.
BEGALA: It's politics, it's fair. But he gets a little tougher treatment. And much worse, he gets --
BLITZER: Well, Jennifer Hudson last night sang "Happy Birthday" to the president.
BEGALA: She's great. I'm a huge fan, but he also, more importantly, gets this terrible day in the stock market.
BLITZER: It's not a happy birthday for the president then.
BLANKLEY: No. I mean, the president is in a very tricky situation right now.
He's got to show by his actions that he is in command, that he knows what he wants to do to take the country forward. I think he has to be careful not to talk too much. He has to have some plans. And he doesn't have them.
You saw yesterday at the cabinet meeting, he said, well, there were forces beyond our control, the Arab Spring and the tsunami. That may be true at some level, but the president should never say that it's not within our power.
BLITZER: Well, he did outline eight or nine specific steps the other day when he was in the Rose Garden, you'll remember, continuing the payroll tax reduction.
BLANKLEY: But it clearly was not persuasive as a new big plan to get something done, because the country is scared and should be.
BLITZER: There's a limit of how much he can do in terms of a big -- there's not enough money right now to do another stimulus.
BEGALA: He could create at least one job, which is hire Tony Blankley as a senior adviser. I think Tony is right. He needs a jobs package. He has a lot of --
BLITZER: Where do you get the money for a jobs package like that?
BEGALA: We have to spend now in order to pay down the deficit. We will never pay down this defici8t with 15 million people unemployed.
BLITZER: I know, but the other side argues they tried -- when he did his initial $800 billion stimulus package --
BLANKLEY: The danger for the president is if he says there is nothing I can do, the Republican response is going to be, well, if you don't want to use the presidency to save the country, we do. Please give it to us. And so he has got to be not reactive. He's got to have his own action plan. And if he was going to be inconsistent with what he said three weeks ago, or three months ago, if I were advising him at a communications level, I'd say you have got to get out there and propose something that's plausible, because he's going to melt otherwise.
BEGALA: We cannot afford to shrink the economy any more right now. And that's what austerity does.
His own Commerce Department says 1.2 percent reduction in the GDP in the last quarter because of austerity by government. The Economic Policy Institute says that the debt deal they struck the other day will cost us 1.8 million jobs.
We need to do something right away. You know, we had the Bush recession, then we did have a bit of the Obama recovery. Now it looks like we may get the Tea Party recession.
BLITZER: Wait until the jobless numbers come out tomorrow morning for the month of July, 8:30 a.m. Eastern. We'll have those on CNN's "AMERICAN MORNING."
But that number probably -- I don't know what it's going to be -- is not going to be all that encouraging either.
BLANKLEY: But this is disturbing. I was with Reagan, on Reagan's staff, when the market dropped 500 points in '87.
BLITZER: I remember that.
BLANKLEY: And I ran down to the library to see what Herbert Hoover said that day. And he said, "The fundamentals of the American economy are sound."
I passed that phrase up. Let's not repeat what Herbert Hoover said.
It turns out, that's about all you can say when you've got troubles. You say the fundamentals are sound. Although Bill Clinton had the great line which is, "There's nothing wrong with America that can't be fixed with what's right with America." That was a great line.
BLITZER: Since April, the Dow Jones has dropped almost 1,500 points. In terms of equity value, that's well more than $1 trillion.
Forget about eight of the last nine session, but we have seen a steady drop. People are losing confidence. They are afraid of a double-dip recession.
BEGALA: And what have we done this year? A massive tax cut that the president signed in December. Right? And then --
BLITZER: A continuation of the Bush tax cuts.
BEGALA: A continuation -- an $858 billion continuation of the Bush tax cut and some others. Then, more spending cuts in April, $35 billion, if memory serves, to keep the government open. And now even more.
So we have been trying the Republican agenda: cut taxes, principally for the rich, and cut spending. And it is not working for this economy. We need to go back to where Obama was in the first days of his presidency, where he was actually priming the pump and creating jobs again. That's what we need to be doing.
BLITZER: You think so?
BLANKLEY: Not as a policy basis, but as a political move. The president risks having a leadership crisis for himself at the same time we've got an economic crisis. He's got to avoid that.
BLITZER: These new numbers -- and I write about it in my blog today, CNN.com/SituationRoom -- 46 million Americans now on food stamps. That's almost double from only a few years ago. You know, $200 a month to buy food. These people, a lot of them, would starve if they didn't get food stamps.
BEGALA: That's right. And so it's a myth when people say Republicans hate poor people. They love them because they've created so many of them.
BEGALA: But as far as Newt, I was raised not to speak ill of the dead, and the Newt Gingrich campaign is dead. And so I don't want to say anything more about it.
BLANKLEY: I think you just did.
BEGALA: But Newt has still -- he has been gray ever since we remember.
But how about you? We're talking about --
BLANKLEY: Newt came out with a nine-point program to create jobs. Just one of them is an interesting one. He said let's take all the unemployment insurance, continue to support people so they can pay their mortgages and stuff, but let's have job training. Prepare people for the jobs of tomorrow.
BEGALA: We do have a (INAUDIBLE), but I do want to bring back what you looked like back in the day, Wolf, because our producers said they have -- there he is.
BLITZER: That's what happens.
BEGALA: You look just the same. You haven't aged a day.
BLITZER: That's when I was at the Pentagon, and then I went to the White House. And you can take a look and see what happens.
BLANKLEY: You look wiser now.
BLITZER: Yes. A lot whiter.
BLANKLEY: No, wiser.
BEGALA: So the president is not the only one who's got a few more gray hairs. Huh?
BLITZER: Thank you.
All right. One of the worst days ever for the United States stock market, with the Dow closing down more than 500 points. CNN's Erin Burnett, she's standing by live. We'll discuss what happened. We're going to sort it all out. And there's finally a deal to end the partial shutdown of the FAA. We'll get reaction from some of the agencies, workers, and from the secretary of transportation, Ray LaHood.
BLITZER: Let's get right back to Jack for "The Cafferty File" -- Jack.
CAFFERTY: The question this hour, Wolf, is: What's your impression of the effect that the Tea Party has had on the federal government?
Ed writes from Sacramento, "Unless you fear democracy, then a third party or a reform party within the established system is good. Maybe you meant to ask if we like what they stand for. In that case, my impression of the Tea Party is not so good."
Mark in Las Vegas writes, "The Tea Party has left the impression on me that the majority no longer rules in the United States. The minority now rules. The Tea Party has cost the United States a great deal when it comes to our reputation of being able to rule ourselves. The rest of the world is looking at us like we're freaks."
Walter writes, "I'm so tired of hearing about how the Tea Party has taken over the government. As Cafferty mentions, it's only 60 out of 435 House members. If people don't like what the Tea Party is doing, they should blame their fellow liberals in the House, the Senate and the White House who apparently have no backbone."
Jean writes on Facebook, "It turned a dysfunctional government into a non-existent one. Due to their antics, the country is headed downhill faster, with no hope for any intervention. I'll never look at a cup of tea the same way again."
John says, "It's about time we had another party stand up and make a difference. Keep it up and we'll finally change the way our government does business. Our lawmakers might finally think about the people instead of just keeping their jobs."
And Janice writes from Texas, "Did we want them to stop the government? Changing the conversation is one thing, being able to listen to and work with others, and not discount that their ideas may have some validity is another thing. 'A' on changing the conversation. 'F ' on being able to work with others."
If you want to read more on this -- got quite a bit of mail -- find it on my blog, CNN.com/caffertyfile, or through our post on THE SITUATION ROOM'S Facebook page -- Mr. Blitzer.
BLITZER: Good idea. Thank you, Jack.