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Interview with John Chambers of Standard & Poor's; S&P's Downgrade of U.S. Credit Rating Sends Shockwaves Through Financial Industry, U.S. Government; Egypt's Mubarak on Trial in a Cage; The Secret to Hitting 100 Plus; The Singing Construction Worker

Aired August 6, 2011 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR, THE SITUATION ROOM: To our viewers, you're in THE SITUATION ROOM. Happening now: America's credit rating gets a downgrade. Standard & Poor's says Washington is to blame, too much debt and political gridlock. How the decision will affect the nation, the markets, and your own bottom line.

Also, tragic news coming from Afghanistan; 30 U.S. forces killed, including 22 Navy SEALS when their helicopter goes down in a fire fight. It's the single deadliest incident in more than a decade of war.

We want to welcome our viewers from around the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

It's an unprecedented move that could have far-reaching affects on the U.S. economy and on every American's personal finances. The long-term impact of Standard & Poor's decision to downgrade America's credit rating from AAA to AA+ is not known but there are growing concerns about the potential for serious consequences in Washington. Indeed, across the nation.

CNN's Christine Romans has been analyzing S&P's decision, its impact. She is joining us now from New York.

Christine, first of all, why did S&P do this?

CHRISTINE ROMANS, CNN FINANCIAL CORRESPONDENT: Because America faces an uncertain financial future, and the only certainty is there is acrimony in Washington and an inability, it seems, on the surface for these problems to be solved in a meaningful way.

S&P going out of its way to keep pointing out the brinkmanship in Washington as a hurdle, or a roadblock, against real reform. S&P also saying that it would have liked to see more than $2.5 trillion in cuts. It would like to have seen a bigger deal to get America's debt smaller, as the size of the overall economy, than it will be here.

So, Wolf, clearly this is something that many people had feared. It's a day that Ken Rogoff, a very important economist told me, will be in the history books. This has never happened before. Not since 1917 has that AAA credit rating been downgraded, Wolf.

BLITZER: Yes, as a lot of people have pointed out, the U.S. AAA rating survived the Great Depression, World War II, The Korean War, the Vietnam war, everything in between. And now suddenly it goes down according to S&P, to a AA+.

All right. So, we're going to have to wait until Monday in Asia, Sunday night here in the United States, for the world markets to react. I guess the question, no one knows the answer right now, but how bad could it be?

ROMANS: Yes, no one does know that answer. We've already had a very rough week in the markets. We've lost all of the gains in stocks for the year. You have interest rates in the United States, ironically, very, very low, near record low interest rates. And that's because all of this unease around the world and in Europe, by the way as well, Europe's debt crisis. You have investors flooding into Treasuries, the very thing that we're talking about here. The uncertainty of being paid back on those Treasuries. So that is the irony. But the safe haven status of Treasuries could mean that interest rates actually go down in the near term. We just don't know.

I will point out, though, Wolf, it's a fragile time right now for the U.S. economy. It's a fragile time for the world economy. Very concerned about what is going on in Europe with its own debt situation. So all of this doesn't come at a very good time in general for financial markets and investors.

BLITZER: Christine is going to be joining me for a one-hour special report at the top of the hour. We will co-anchor what is going on. Christine, thanks very much. I'll see you in less than an hour.

Let's get some more now about the decision that S&P came forward with the downgrade of the U.S. credit worthiness. John Chambers is joining us from New York. He is head of sovereign ratings for S&P.

Mr. Chambers thanks very much for coming in.

JOHN CHAMBERS, HEAD OF SOVEREIGN RATINGS, S&P: Well, thanks for having me.

BLITZER: Quick, first question: You've had 24 hours to think about this controversial decision. Any second thoughts?

CHAMBERS: No. You know, we come to our decisions by applying our criteria. Our criteria has been in the public domain for almost 20 years. It has recently been updated. Our decision to lower the rating to AA+ from AAA was really motivated by two things.

One is the increasing political polarization which we think is going to impeded the ability of policymakers to act proactively to get our public finances in order. And the second really is the public finances themselves. You know the current level of debt is high. The projected deficits are going to remain in the high single digits as a share of GDP. And our ratings horizon, the debt to GDP ratio is going to continue to rise.

BLITZER: The Treasury Department and the Obama Administration say you made a $2 trillion mistake in your calculations. John Bellows, the acting assistant secretary for economic policy at the Treasury Department said the magnitude of this mistake and the hast with which S&P changed its principle rational for action when presented with this error raised fundamental questions about the credibility and integrity of S&P's ratings.

First of all, do you acknowledge that there was a $2 trillion accounting error that you made?

CHAMBERS: You know, we use assumptions in our calculations and we had a discussion with the Treasury and the CBO, over which baseline assumption would be most consistent with the scoring done by the CBO. We decided to use the standard baseline assumption, which assumes current that law will remain in place. It doesn't really change the facts on the ground. The facts on the ground is the deal that we have for the Budget Control Act is $2 trillion. It's going to take a deal about twice the size of that to stabilize the debt to GDP. Current level of debt is quite high and under anyone's plausible scenarios, it's going to continue to rise as a share of the economy.

BLITZER: So does that mean that you did make a mistake? Or you didn't make a mistake?

CHAMBERS: And in terms of acting in haste, you know-I 'm sorry?

BLITZER: Does that mean you did made a mistake or you didn't?

(CROSS TALK)

CHAMBERS: No, our figures that we published are accurate and our analysis is sound.

BLITZER: All right. Let's talk a little bit about --

CHAMBERS: In terms of acting in haft --

BLITZER: Finish your thought and then I'll ask the next question.

CHAMBERS: In terms of acting in haste, first of all, we've been writing about this since 2005. We gave the negative outlook to the U.S. government rating on April 18th of this year, indicating a one in three chance of a downgrade, over a six to 24-month time horizon. On the 14th of July we went to credit watch negative, indicating a one in two chance at least of the downgrade over the next 90 days. And we've been clear in our analysis and where our concerns are, which are on the political side, and on the fiscal side. So I don't think anyone can really be taken by surprise by the action that we took.

BLITZER: What would it take for S&P to bring the U.S. back up to AAA status?

CHAMBERS: Well, first of all, that's happened five times to five different governments. One did it within nine years, the longest took 18 years to get back to AAA. And it's going to take a committee to see that the debt to GDP is on an downward slope. That a fiscal correction has been implemented and has some track record behind it. And it is going to take some confidence that policy makers across the political spectrum can come together to put the country first.

BLITZER: Did I hear you say it could take nine years? It could take nine years for the U.S. to go back to AAA status?

CHAMBERS: Well, I'm just giving you five historical precedence, which ran anywhere from nine years to 18 years. The future could be different for the U.S.

BLITZER: Do you want to see more spending cuts as far as the U.S. government is concerned, but also coupled with tax increases, in other words what the president of the United States calls a balanced approach, spending cuts, and increased tax revenues?

CHAMBERS: What we said is that we won't take a position of whether the mix should be on the spending side or on the tax side. We have said that it's important to have bipartisan support so that whatever agreement you have, you can have some confidence that it sticks. So for example, in 1983, you had the Greenspan Commission, took some very difficult decisions on the parameters of Social Security. It was a bipartisan agreement, but once it was reached, no one ever talked about undoing it, because it had broad bipartisan support.

BLITZER: Would it be important, or not that important, for Congress to pass a balanced budget amendment to the Constitution?

CHAMBERS: In general, we think that fiscal rules like these just diminish the flexibility of the government to respond. Also, when Congress has a long track record of trying to bind itself with various rules, but the rules when it comes to - when push comes to shove, they don't bind very much. So, it would be-even if you had a balanced budget amendment you have some questions about its credibility. And it would just reduce your flexibility in a crisis.

BLITZER: The whole notion of linking spending cuts to raising the nation's debt ceiling, it really was-this was the first time that something along those lines happened. The Tea Party movement here in the United States largely pushed that. Was that a critical factor in your decision to go forward and reduce America's credit rating?

CHAMBERS: You know, we have very few other governments, of the 126 central governments that we rate, that separates the budget decision from the funding decision. This Congress passed a budget late, but they passed it in April and that budget entailed consequences because it was a deficit, a deficit that had to be funded.

So it was very unusual to come back on that decision and to have a debate on raising the debt ceiling. And to come within 10 hours of having a major cash flow problem at the federal government level is something that we don't observe with other AAA sovereign credits.

BLITZER: So what I hear you saying is France and Britain, for example, you think that they have-they are more credit worthy than the United States of America, right now because they still have their AAA status?

CHAMBERS: That's right. We believe that their ability and willingness to service their debt is slightly higher than that of the U.S. The U.K. is in the midst of a fiscal consolidation plan, of 7 percent of GDP. That is three times the size that is on the table here for the United States. France just raised its retirement age by two years on statutes and effectively a little bit more than that, because they will be discouraging early retirement. That markedly improved the inner temporal solvency of the state.

BLITZER: Is it possible that you could further downgrade the U.S. credit rating from a AA+ status to something less?

CHAMBERS: It is possible. We have a negative outlook on the AA plus rating. That speaks, again, to a six-month to 24-month time frame. If there's further fiscal slippage, then you could see the rating come down again.

BLITZER: But you say that's not going to happen for less than 24 months? Did you say that?

CHAMBERS: Well, the time frame is normally sis months to 24 months. It could happen in a shorter time period. But under our current assumptions, this would be a decision that would be probably towards the end of that time frame.

BLITZER: Mr. Chambers, thanks very much for joining us.

CHAMBERS: Thank you.

BLITZER: John Chambers is the chairman of the Sovereign Ratings Committee for the Standard & Poor's.

S&P says there's plenty of blame to go around, as you just heard. But it hasn't taken long for lawmakers to start pointing fingers at each other. Let's bring in our Chief Political Analyst Gloria Borger.

Gloria, I've got to say, this has got to be a wake-up call for everyone here in Washington, Democrats and Republicans, liberals and conservatives, and Tea Party activists and non-Tea Party activists.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: It's as if Standard & Poor's has just kind of noticed the dysfunction that has been going on in Washington for quite some time. And clearly the debate over the debt ceiling and the fact that we went right up to the edge and didn't get a large deal had an awful lot to do with this. As he said, it was about the increased polarization.

What is stunning, to me though, it seems to be that the real question here is whether the Bush tax cuts for the wealthy will expire in 2012. In their baseline assumptions, they did not assume that the tax cuts would expire. And that would give you $950 billion over a 10-year period. And I think that's the difference in the baseline between- part of it-between White House and between Standard & Poor's, because the White House has said those tax cuts are going to expire. We're going to veto any effort to do anything else but they said they changed their assumption on this because a majority of the Republicans in Congress continue to resist any measure that would raise revenues. So it seems to me that while he wouldn't say it to you overtly, that they are worried there's no way out of this because you need to talk about revenues.

BLITZER: And politically that may not be possible given the split within the executive branch and the legislative branch.

BORGER: Exactly.

BLITZER: And we don't know how that's going to play out after the next election November 2012. But you can't ignore the fact, Republicans keep saying this, that this downgrade, the first time ever, happened on President Obama's watch?

BORGER: And obviously presidential candidates, right and left, are saying that this happened on President Obama's watch. But some of those Republican presidential candidates, you'll recall, someone like Michele Bachmann, for example, Tim Pawlenty, for example, thought it would be OK if we didn't raise the debt ceiling. Given what S&P is saying, they are saying one of the reasons we decided to do this is because you marched right up to that precipice, and it seems like you're ready to jump off. So it is interesting that they are blaming Barack Obama when it seems that S&P is actually saying to Republicans, you need to show a little flexibility here.

BLITZER: It's going to be a painful, painful experience for Washington, for the United States, right now. But some silver lining, maybe a wake-up call for the country-

BORGER: For all of them.

BLITZER: to get, or the politicians to get their act together and really deal with these issues.

BORGER: And a joint committee that we have, that has to report by Thanksgiving now has an awful lot more pressure on it to really produce.

BLITZER: 12 members, six Democrats, six Republicans, everyone will be watching them. Gloria, thank you.

BORGER: Sure.

BLITZER: Gloria is sticking around.

We'll have much more on the debt downgrade, including the reaction from some of the Republican presidential hopefuls. And the latest of the downing of the U.S. military helicopter in Afghanistan. More than two dozen Americans are dead. We'll have an update just minutes from now. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It is being called the single deadliest incident since the U.S. war in Afghanistan began almost a decade ago. A United States Army Chinook helicopter carrying 30 American service members, a civilian interpreter and seven Afghan commandos, went down early today. Our Pentagon Correspondent Barbara Starr is here with the latest.

A lot of those who died were U.S. Navy SEALS.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Absolutely, Wolf. This is just such a tragedy; 25 Special Operations Forces, 22 of them Navy SEALS, most of them, Wolf, part of the Navy's covert SEAL operations, the very type of SEALS that went in on the Osama bin Laden raid. Not the same guys, they have checked all the names, none of them were on the bin Laden raid. But this is really a very serious blow to Special Forces, Special Operations Forces. The Navy SEALS had been called in actually to help another team of troops on the ground. They were engaged in a fire fight, they were running into trouble. They called for backup. The navy SEALS came and by all accounts they were shot down by enemy fire. That is the working assumption of the U.S. military at this hour.

BLITZER: Some sort of shoulder fired missile, or something along those lines?

STARR: They are not saying at this point. There was very heavy action in the area at the time. Reports of enemy activity and several sources saying to us they believe at this point it was brought down by some sort of enemy action.

BLITZER: This was in the eastern part of Afghanistan, not far from the Pakistani border?

STARR: Absolutely. This is where U.S. Special Forces had been in heavy combat for months, day in, day out. In fact, one of the top commanders recently said, most Americans don't realize they are doing thousands of these helicopter assault missions every year. There may be a drawdown in regular conventional forces coming home from Afghanistan, but Special Operations Forces are really going to be on the leading edge of this for some time.

BLITZER: Do we know the status of the other U.S. and NATO forces who were in that firefight on the ground, these Navy SEALS were going to try to them.

STARR: Right.

BLITZER: What is their status?

STARR: Well, what we are told is that there were no additional fatalities from the troops on the ground. We should, of course, take a moment to say that the remains of those who were lost on this day are due back at Dover Air Force Base in the coming days. And the Navy and the U.S. military are sending casualty assistant officers to families and home towns now, across this country, with 30 dead. They have a job ahead of them to get to the families, to offer them any assistance they can, and the condolences.

BLITZER: Now just to be precise, this was not a mechanical failure or human error, or an accident? This was enemy fire that brought down this Chinook helicopter?

STARR: There will be a full investigation. They will look at everything. But I have to tell you that our sources are saying that there was enemy activity in the area. At the time, combat was under way, and they have reason to believe that it is very likely it was brought down by insurgents.

BLITZER: We'll get more on this tragic story. Barbara, thanks very much. Thanks for your good reporting throughout the day.

Republican presidential hopefuls are weighing in on the debt downgrade of the United States. We're going to tell what you they are saying. Stand by for that.

And a city is brutalized and bloodied as the Syrian military sends in tanks against civilians. Is this the final push against the anti- government protesters?

(COMMERCIAL BREAK)

BLITZER: More deaths are being reported in Syria where a bloody and ruthless crackdown on anti-government demonstrators shows no sign of easing. CNN's Arwa Damon is monitoring developments for us, from in nearby in Beirut.

Arwa, set the scene for us. What do we know now?

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Wolf, it's so incredibly difficult to get through to anyone in Hama but there are a handful of activists who have satellite phones. We've been able to reach them on a number of occasions. And it most certainly seems that this military crackdown shows absolutely no sign whatsoever of letting up.

We're still hearing reports of tanks fanned out throughout the entire city, snipers on rooftops, no power, no communications. Food supplies running very low, water shortages as well. And then, of course, incredibly important, a shortage in medicines and various reports about the state of hospitals there. Some say that some hospitals are entirely surrounded by the military, other say that because of the power cuts and those that are opened, the wounded are dying. There is a lack of medical staff. Many people have fled.

I mean, this is such a desperate situation that is being painted for us. And the only real window that we are getting as to what is transpiring in Hama is coming out with these YouTube videos that really shows what seems to be an intense assault by the Syrian security forces. And then, of course, Wolf, we have Syrian state television's version of what is taking place and that is that it is simply targeting these terrorist-armed gangs.

BLITZER: Is there any indication, Arwa, that the international condemnation, the presidential statement for example, coming from United Nations Security Council this week, or some tougher language coming from Washington, the Secretary of State Hillary Clinton, for example, or the president of the United States, any indication that it is having any impact on President Bashar Al Assad? DAMON: Absolutely not, Wolf. We have to remember that this is a regime that is literally fighting for its life. The Assad family has been in power for around 40 years and never have they been challenged in such a way. And the last time there was an uprising in Syria in the early '80s, the current president's father crushed it militarily. That also happened in Hama, where the death toll goes up to 40,000 by some estimates, huge areas of the city were raised back then.

And it most certainly seems as if this current president is intent on taking that very same path. It appears as if he is trying to blast his way into forcing the demonstrators off the streets. But at the same time, Wolf, let's go and look at the concessions that the government is making. They recently passed these two laws. A new electoral law and this multiparty political law. This, although the activists are calling it window dressing is still significant in that it is evidence that the regime feels like it's truly shaken. These demonstrations are having an impact, although not quite the impact, they haven't quite reached their overall goal.

But this, at the end of the day, is a regime that analysts will tell you is at a complete loss as to what to do. Unsure of what steps it can take to stay in power, and that is also why we're seeing it beating down this military track, as well, because at the end of the day, that's really all that this government knows, brute force.

BLITZER: Arwa Damon, thank you very much. Arwa reporting for us from Beirut.

Coming up, more reaction to the U.S. credit rating downgrade. Some Republican presidential hopefuls are sensing political opportunity. We are going to tell you what they are saying today. And we'll get some insight from our political analyst Ron Brownstein. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The decision to lower the U.S. credit rating set the Republican presidential campaigns on fire. Many of those candidates clearly sense political opportunity in this unprecedented move by Standard & Poor's.

Our Joe Johns is at the CNN Center in Atlanta. He's working this part of the story for us. Lots of tough talk coming from those Republicans, Joe.

JOE JOHNS, CNN ANCHOR AND CORRESPONDENT: Wolf, that's for sure. What we've been looking for is reaction to the downgrade, specifically from the Republican presidential candidates and clearly if Standard & Poor's sent a message to the U.S. last night, it was that it needs to get its politics under control.

But that message was not fully acknowledged on the campaign trails, the attacks on the president from Republicans have been pretty blistering frankly, even though the poll shows the public places blame on both parties for the embarrassing performance of the government in the crisis. So you can say generally with some exceptions that the presidential candidates just don't get it for the most part, at least not yet. Tim Pawlenty is one example said it was about big government and President Obama. Take a listen.

(BEGIN VIDEO CLIP)

TIM PAWLENTY (R), PRESIDENTIAL CANDIDATE: What he doesn't understand is that all of this talks of the full faith of credit in the United States government. He needs to be reminded that we need to have a president who understands we need to put our full faith in credit in the America people.

His vision for America is to take things out of the private sector and put it into the government. What they need to be doing is taking things out of the government and putting it back into the private sector, trusting the people of this country.

(END VIDEO CLIP)

JOHNS: Now, Michele Bachmann said that the president has destroyed the credit rating of the United States and says the treasury secretary needs to resign. And said Mr. Obama needs to balance the budget to do and turn the economy around.

Rick Santorum, another presidential candidate, called the downgrade another example of the president's epic failure in leadership and says it was a blow to our national image.

And Mitt Romney issued a statement saying, America's credit worthiness just became the latest casualty in President Obama's failed record of leadership on the economy. Standard & Poor's rating downgrade is a deeply troubling indicator of our country's decline under President Obama.

Interestingly former ambassador to China, Jon Huntsman who used to work for the president echoed some of the same sentiments as the others, saying in a statement that for too long we have let reckless government spending go unchecked and the cancerous debt afflicting our nation has spread.

We need new leadership in Washington committed to fiscal responsibility, a balance budget and job friendly policies to get America working again.

So, Wolf, it's not all that surprising, of course, because these are people that are running for the Republican nomination and they don't necessarily need to get brownie points when it comes to being nice to the president of the United States. It's just a fact of life in American politics right now, Wolf.

BLITZER: It's politics as we know it. All right, thanks very much for that, Joe for that. Let's bring our CNN political analyst Ron Brownstein who is joining us.

Ron, any objective reading of that S&P document, and if you listen to what their representatives are saying, they seem to be a lot closer to the president's so-called balanced approach to dealing with a spending as opposed to the Republicans, especially the Tea Party?

RON BROWNSTEIN, CNN POLITICAL ANALYST: Absolutely. First of all, the idea of setting up the rating agencies as paragons of virtue and kind of White House responsibility is a little jarring after their performance during the financial crisis in which almost every investigation talked about them having a key role in precipitating that catastrophe.

BLITZER: Badly.

BROWNSTEIN: Badly. Secondly, your point is correct. If you read the document and the arguments for the downgrade, it's closer to President Obama's arguments.

There is a concern that this Super Committee that Congress has established simply will be stalemated and will not achieve the big deficit reduction that is possible under it, given the expedited rules it has.

But having said all of that, the president is in office and the president does take the blame when things go badly, and gets the credit when things go well.

This is something that I think is going to be a powerful symbol that Republicans will be able to put on him in 2012. There's no doubt about it.

The Mitt Romney in a campaign ad in the fall of 2012 even though the argument really is a warning to the parties to try to get out of this hyper-partisan rot that they are stuck in.

BLITZER: It's going to put enormous pressure on the Super Committee of 12 members, six Democrats, six Republicans to come up with a bold and vicious plan. It will put enormous pressure on everyone to accept it for all practical purposes.

You just heard John Chambers of S&P say that it's possible, possible, if they don't do it right, they could further downgrade U.S. credit worthiness.

BROWNSTEIN: Well, that's the best thing I think has come out of this decision by S&P because it does increase the pressure on Congress to seize the opportunity of the Super Committee, which is itself probably the best thing that came out of this debt ceiling fiasco.

You know, they've created, Wolf, some extraordinary rules for this committee, which bring its recommendations to the floor of the House and the Senate without a filibuster and without the formal majority of the majority rule in the House, which keeps ideas going to the floor unless a majority of the majority party supports it.

That means you can pass this with any majority in either House, 50 votes in the Senate, any 218 in the House. It gives you the best chance you're probably going to see for several years to do a serious attack on the deficit problem and comprehensive way.

But right now the expectations, as you know in Washington are very limited because the assumption is the Republican leaders will appoint members adamantly oppose to tax increases. Democrats will then pull back on entitlements and we'll end up with a minimalist package. S&P is saying that that is not a pain-free course.

BLITZER: Well, you just heard, Mr. Chambers say here that even with the so-called balanced budget amendment to the constitution not necessarily something they would welcome S&P because it would hamstring the U.S. in dealing with these credit issues.

BROWNSTEIN: You know, we've had three major looks at the deficit crisis. If we count the Boehner Obama talks, we've had four. We've the (inaudible) panel. We've had the Simpson-Bowles panel. We've had the gang of six panel.

They each come back with the same broad set of recommendation, discretions, slowing discretionary spending, which they done already and then linking entitlement reform with tax reform that raises revenue while lowering rates by eliminating loopholes.

That I think everybody kind of understands. That is the kind of balanced package you're going to need to really make progress on this problem. Politically it doesn't seem that we can get there.

I think as you say the S&P report is a warning that if we continue to gridlock, which is most people are expecting today from the Super Committee. There could be more financial consequences down the road.

BLITZER: S&P says that clearly one issue that hurt the United States credit worthiness was the linkage of raising the debt ceiling to spending cuts.

The Tea Party Movement largely responsible I think for all practical purposes for pushing that. Here's the question. Does what has just happened by S&P help or hurt the Tea Party Movement in terms of political support?

BROWNSTEIN: We've raised the debt ceiling over 100 times since 1940 and I think it's fair to say that every moment along that way there was at least one issue that was a beef between a majority of the House or the Senate and the president.

There's always a beef of some sort. Never before had anyone been willing to raise the debt ceiling as a point of leverage to try to advance their goals. Now, Mitch McConnell is saying that this is the new normal and it did work in the sense of allowing Republicans to drive this agenda and really change the national conversation.

But, again, when you look at the reaction of S&P and our creditors abroad, and that's a reality that the U.S. now faces, it's clear that this is playing with fire. It's kind of the general collapse of the Geneva Convention of politics.

Any weapon that can be used is modern politics must be used. I think this does hurt the Tea Party. It's clear in polling that their image has gone down.

But in a different sense, they do feel like they are getting their agenda advanced and I think that will embolden and mobilize them.

BLITZER: The S&P decision, does that help any one particular Republican presidential candidate more than the others?

BROWNSTEIN: I think it probably, you know, helps all of them in the sense that it is something for Obama to bear. I mean, Obama has had a very mixed -- coming out of this debt ceiling crisis on a very mixed way.

On the one hand, polls show people found him more reasonable, more flexible, more balanced than Republicans and people like the idea of a balanced response. That's a majority position.

On the other hand, he didn't look strong and his approval rating has gone down. That helps all of the Republicans, not any one more than the other except Mitt Romney who has the strongest argument as an economic manager.

BLITZER: Ron Brownstein, thanks very much.

BROWNSTEIN: Thanks, Wolf.

BLITZER: A shocking scene in Egypt. The former President Hosni Mubarak who is a close U.S. ally for decades is rolled into a court in a hospital bed and placed on a cage on trial for his life.

And the images of their once powerful leader now humbled and helpless are having an extra ordinary impact on Egyptians. We're going to hear what some of them have to say?

(COMMERCIAL BREAK)

BLITZER: In Cairo this week, an absolutely extraordinary scene that sums up just how much the Arab world has changed in the recent months.

The ailing former President Hosni Mubarak, a close American ally who ruled Egypt for decades with a tight grip was brought into court in a hospital bed, placed in a cage on trial for his life.

In the Middle East, it's being called the trial of the century and millions have been riveted by the proceedings. CNN Fred Pleitgen has the story.

(BEGIN VIDEOTAPE)

FREDERIK PLEITGEN, CNN CORRESPONDENT (voice-over): These images shocked viewers in Egypt and around the world. Former president and strong man Hosni Mubarak wheeled into the courtroom in Cairo unable to walk on his own, his demeanor frail, his voice weak as he denied all of the charges against him.

UNIDENTIFIED MALE (through translator): What do you say?

UNIDENTIFIED MALE (through translator): I deny all these charges completely.

PLEITGEN: Mubarak remained in the gurney throughout the proceedings. A lawyer for the prosecution later said he wasn't surprised.

KHALED ABOU BAKR, PROSECUTOR: No, no. I imagined the situation, yes, but I think that we are in a good way. We would like everything to go with respect to the law in Egypt.

PLEITGEN: To the prosecution, that would mean a death sentence for Hosni Mubarak and some of the other co-defendants in the dock accused of being responsible for the deaths of more than 800 protesters during the revolution in Egypt.

Mubarak and his sons could also face jail time for corruption. Mubarak state's on Wednesday a far cry from the man who ruled this country with an iron fist for 30 years. The trial is politically charged. Demonstrators clashed at the courthouse in the morning.

(on camera): Before the court even came into session, riots broke out between pro and anti-Mubarak protesters who were hurling rock and bottles at each other. It took a large police presence to set them apart.

(voice-over): It's unclear how long the proceedings will drag on. For now, the trial against the man who once caused fear in people for so long has been adjourned until August 15th. Fred Pleitgen, CNN, Cairo, Egypt.

(END VIDEOTAPE)

BLITZER: During his decades of rule, the iconic images of Hosni Mubarak competed with pictures of the farrows, the symbols of Egypt. Now millions of Egyptians have another image of their former president.

CNN's Mohammed Jamjoom has been getting reaction on the streets of Cairo.

(BEGIN VIDEOTAPE)

MOHAMMED JAMJOOM, CNN CORRESPONDENT (voice-over): Shock and disbelief. We thought we might just see a picture of Mubarak in the courtroom, not actually see him in the courtroom.

Outside the venue where the former Egyptian President Hosni Mubarak is being tried, the crowd simply can't believe their eyes.

Until 9:00 this morning, he says, I was certain that Mubarak would not show up, let alone be in the cage, the defendant's cage. Heavy steel bars that separate those on trial from the rest of the onlookers, standard protocol in the Egyptian courtroom.

This man came out to honor the memory of his brother who was killed on January 28th while protesting in Cairo. He calls his brother a martyr and says Mubarak deserves this treatment. A person who thought of himself a God and that all beneath him were slaves, who thought himself a pharaoh.

After seeing him in the cage today, we have to thank the supreme military council and our judicial system. His mother, meanwhile, sits with other women, all grieving children that they lost during Egypt's revolution. She wants justice.

Even if they gave us all of the money in the world, we don't want it. We want to avenge the victims. We want blood. Whoever kills must be killed.

(on camera): It's a tense scene outside of the police academy. Right now to my left we have demonstrators chanting that martyrs would not have died in vain. That the martyrs will be avenged and Mubarak will be brought to justice.

But this is the dividing line because just over here to my right, you see the riot police and beyond that gate, those are pro Mubarak demonstrators.

(voice-over): Throughout the day, clashes erupt between both factions, rocks thrown, and riot police deployed and several injured and arrested. Passions run high, but cool down long enough for the spectators to turn their attention to court proceedings being displayed on a screen.

In the past here, says this woman, if we had even dreamed that Hosni Mubarak would be put trial and be in that cage, they would have tried and executed us.

But today it's Mubarak who is forced to defend himself, pleading not guilty to the crimes he's been charged with including corruption and ordering the killing of anti-government protesters. A scene so surreal many here simply haven't been able to fully process it. Mohammed Jamjoom, CNN, Cairo.

(END VIDEOTAPE)

BLITZER: She's 104 years old and going strong. Now a new study is shedding the light on the secret to her longevity.

Plus, Jeanne Moos introduces as to the crooning construction worker. Stay with us.

(COMMERCIAL BREAK)

BLITZER: The secret to a long life may not be so secret after all. Diet and exercise certainly do help, but there may be something else that is even way more important. Our senior medical correspondent, Elizabeth Cohen, has more. Elizabeth --

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Wolf, you might think you have to be a health nut to live a long life. But a new study says, that's just not true.

(BEGIN VIDEOTAPE)

COHEN (voice-over): Guess how old this woman is, 80? 90? 100? Nope. Think higher. Dory is turning 104 today.

UNIDENTIFIED FEMALE: Congratulations. I hope I make it to 104.

COHEN: Dory is what scientists call a super ager.

UNIDENTIFIED FEMALE: She has all her marbles.

COHEN: She lives on her own independently in Florida.

UNIDENTIFIED MALE: Dory has to go to work.

COHEN: And once a week she even delivers mail at Memorial Regional Hospital.

UNIDENTIFIED FEMALE: I'll slow down if you want me to.

COHEN (on camera): You're all over this place. You're walking here, you're walking there.

UNIDENTIFIED FEMALE: Yes.

COHEN: Where do you get the energy at 104?

UNIDENTIFIED FEMALE: I don't know. I often wonder, you know. I feel good.

COHEN (voice-over): At 104, most people are, well, dead. So what's kept dory not just alive, but alive and thriving? It hasn't been exercise.

(on camera): No running, no working out at the gym?

UNIDENTIFIED FEMALE: No, no.

COHEN: It hasn't been diet.

UNIDENTIFIED FEMALE: Every day I eat cookies, every single day.

COHEN (voice-over): A new study reported in the journal of the American Geriatric Society said that what keeps super agers like Dory alive so long seems to be their genes.

The study looked at nearly 500 people 95 to 112 and found their lifestyles were really no different than anybody else's. Similar diets, similar exercise patterns.

They were just as likely to be overweight and to drink alcohol, all that makes sense to Dory. Her mother lived to be 99, her daughter is 76, but looks way younger.

(on camera): You've got some pretty good genes?

UNIDENTIFIED FEMALE: I have some very good genes, yes.

COHEN (voice-over): A genetic blessing that may be the most important secret to an exceptionally long life. UNIDENTIFIED FEMALE: Many more, Dory. Many, many more.

(END VIDEOTAPE)

COHEN: Studies show that centenarians often have genes that protect them against cardiovascular disease so they can afford to have a few bad habits. But for those of us who don't have those genes, we'll we really do need to watch what we need and how much we exercise, Wolf.

BLITZER: Good advice. Thank you, Elizabeth. We'll take a quick break. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Singing sensation in an unlikely location. Here's CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): What does a New York City construction worker have in common with Frank Sinatra?

Nothing blue about this guy, except partially his eyes, but unlike old blue eyes, Gary Russo's stage isn't Carnegie Hall, it's a construction site at New York 2nd Avenue where a subway line is being built.

And these aren't backup singers. They're actual sand hogs, the guys who dig the tunnel while other guys eat during their lunch break. Gary decided to drag out a mic and sound system and sing. How do the buddies react?

GARY RUSSO, CONSTRUCTION FOREMAN: They loved it from the first time. The tough guys are going, you're going to sing at lunch? I was like, yes.

UNIDENTIFIED MALE: I want to be just like him when I grow up. I'm not going to lie to you. This guy is a real class act.

MOOS: Can't hold these guys back. The construction hasn't been sweet for residence, so much disruption, noise.

UNIDENTIFIED FEMALE: They tell me it's going to go on for eight or nine years. I won't be here, so I don't care.

MOOS: But Gary cares.

(on camera): They're calling you any funny nicknames or anything?

RUSSO: The second half of new Sinatra.

MOOS (voice-over): His brush with fame came thanks to this passerby.

UNIDENTIFIED MALE: You've got to be a star.

MOOS: David Fischer shot some video and put it on Youtube. The media ate it up. RUSSO: I'm overwhelmed.

MOOS: Now passersby are singing along. Porter grabbed a partner. People who stumble on the noon concert seem stunned to see a construction foreman crooning.

He says he just wants to make folks smile. I feel like I'm with the village people. It takes a village to build a subway. Who would imagine Second Avenue Sinatra would blow into town. Jeanne Moos, CNN.

(END VIDEOTAPE)