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THE SITUATION ROOM

Rick Perry to Run for President; Wall Street Rebound

Aired August 11, 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: And, to our viewers, you are in THE SITUATION ROOM.

Happening now, breaking news: a Wall Street rebound. Stocks soar, back from their latest plunge. So what drove the market today and where might it head tomorrow?

Also, details of what Mitt Romney did as Massachusetts governor that is now coming back to haunt him as a presidential candidate.

And a Republican wild card to make it official. We now know when the Texas governor, Rick Perry, will announce his bid for the White House. We will tell you what we know.

We want to welcome our viewers in the United States and around the world. Breaking news, political headlines and Jeanne Moos all straight ahead. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Just 24 hours ago, it was nowhere to be found, but today optimism returned to Wall Street. Stocks surged on positive earnings reports, with the Dow up 423 points, the S&P up 57 points, the Nasdaq up 118 points in the market's latest dizzying swing. It's left investors big and small relieved for the moment, but dazed and uncertain about what the next bell will bring.

And joining us now from London, our own Richard Quest.

Richard, these wild fluctuations, down 600, up 400, down 400, up 400, have you ever seen anything like this before?

RICHARD QUEST, CNN CORRESPONDENT: No. And this is the first time in history that there has been four successive days of 400 points moved in any direction. And that tells you just something. Even the heady days of 2008, we weren't seeing this sort of volatility.

And it's not just the share market. We had wild moves on the bond market too. We also saw on the currency marks with the Swiss franc, we saw some dramatic movements. And we saw the VIX index, the volatility index, also move sharply.

What all these markets are saying is that the fear and uncertainty goes both directions and we are in unprecedented times.

BLITZER: All right, so I know you are speaking with investment advisers. What should people be doing with their money right now? QUEST: Well, that's a very good question. If you have already got shares and you're already in the market, you probably stay there, because there is nothing worse than selling into a down market.

You have to look for a trend. And the one thing more than anything else that is missing at moment is a trend. These 400-point gyrations tell us that the market hasn't tested the lows and found them to be steady and then come back up again. Keep an eye on fundamentals, but until you see that trend, it would be a fool who takes a major -- ordinary investor who takes a major trading decision.

BLITZER: Because if we are looking at a trend, at least from this week, tomorrow, there should be a 400- or a 600-point drop once again. But who knows.

QUEST: Absolutely.

And take gold, for example. Gold today, into that maelstrom of market mayhem that we had today, gold went up over $1,800, but then came back down again. And there are still people who say that gold will hit $2,000 by year's end. It's really not a market for the amateur. Absolutely not. This is -- it's not even a market for the professional. Because too many people have got no idea frankly of which way or what is moving the market.

BLITZER: Richard, I want you to stand by.

All right, with wild market fluctuations, high unemployment and sluggish growth, President Obama is under pressure to help create jobs and turn around the economy. But those hoping for a grand plan from the president have so far been disappointed.

Our chief White House correspondent, Jessica Yellin, is joining us now with more.

Jessica-, the president was in Michigan today. He was talking about jobs and he sounded a bit more riled up than he has in days past.

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: That's right, Wolf.

With flashes of what appeared to be anger, the president blamed Congress for the business community's lack of confidence in Washington, but he resisted pressure to change course and propose any kind of bold new economic plan which is what some in the business community have called for.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): After touring a hybrid battery plant, an impassioned President Obama told workers:

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: There is nothing wrong with our country; there is something wrong with our politics.

(CHEERING AND APPLAUSE)

YELLIN: And he blamed Congress for the recent credit downgrade.

OBAMA: It was a self-inflicted wound.

(CHEERING AND APPLAUSE)

OBAMA: It's why people are frustrated. Maybe you hear it in my voice. That's why I'm frustrated.

YELLIN: If only these batteries could rev up our stalled economy.

ROBERT KAPLAN, HARVARD BUSINESS SCHOOL: We're in a fragile period here, and it's going to last a while.

YELLIN: Author and Harvard Business School professor Robert Kaplan teaches CEOs about leadership. And he says they want more economic leadership from the president.

KAPLAN: They want to see an integrated plan from the president of the United States. And I think they are not sure what his plan is. They don't quite understand not putting a plan out there because you are afraid the opposition would shoot it down. They are not into the political tactics. They want to see a vision.

YELLIN: Instead, the president now vows each week he will highlight specific policies that could boost the economy. So far the administration has called for tax credits to encourage hiring and training of recent war veterans, announced a new effort to take government-backed homes facing foreclosure off the market by turning them into rental properties, and lowering Americans' gas costs by improving fuel efficiency in cars and trucks of the future.

Even some economists acknowledge there is only so much the president can do on his own.

MICHAEL ETTLINGER, CENTER FOR AMERICAN PROGRESS: He cannot spend money without the authority of Congress. And Congress is not giving him the authority to do the kinds of things we really need to be doing.

(END VIDEOTAPE)

YELLIN: Wolf, that doesn't stop some of the critics for calling for president to push for bolder, more aggressive economic initiatives, an integrated plan, as you heard professor Kaplan call for there.

Now, officials here at the White House and the administration broadly says they are not going to do the equivalent, the economic equivalent of midnight basketball or school uniforms. You will recall that's what Bill Clinton did to some political success with domestic policy when he faced a Republican Congress back during his administration. Administration officials here say they don't want to play political games like that, Wolf. BLITZER: Yes, I remember those days very vividly, Jessica.

Now, the Congress is in the midst right now of a five-week recess. The president made it very clear today he has no intention of asking them to break that recess and come back to Washington, right?

YELLIN: That's right.

The bottom line on that, Wolf, is there is no advantage in bringing Congress back here unless there is a clear legislative agenda that they can move forward with. Why bring them back here for more gridlock? Here's how the president put it when he was in Michigan.

(BEGIN VIDEO CLIP)

OBAMA: The last thing we need is Congress spending more time arguing in D.C.

(CHEERING AND APPLAUSE)

OBAMA: That's why I'm here. That's why I will be traveling to a lot of communities like this one over the next week. That's what Congress should be doing -- go back home, listen to people's frustrations with all the gridlock.

(END VIDEO CLIP)

YELLIN: Now, in fact, the president is actually in New York City, where he attending two high-dollar fund-raisers, including hosted by the movie mogul Harvey Weinstein -- Wolf.

BLITZER: Yes. He's been spending a lot of time raising money for his reelection campaign and for Democrats.

But he made a good point, noting that -- I think he was referring to the fact that S&P downgraded the U.S.' creditworthiness in part because of all the gridlock and all the fighting, the political bickering here in Washington. And that's why he doesn't that necessarily would be useful right now.

YELLIN: It's a commentary on the lack of confidence in Washington's ability to get business done, exactly as you said, less about the economic picture of America and more about their prognosis about Washington's ability to do its job. Absolutely right, Wolf.

BLITZER: Jessica, thanks very much. Jessica is over at the White House.

In London, a massive police presence is helping keep some of the streets largely peaceful tonight after four nights of rioting and looting that spread to other major cities and caused more than $161 million in damage. The prime minister, David Cameron, told lawmakers today that London law enforcement initially waited too long to arrest rioters when the first violence broke out following a controversial police shooting. And he said thugs used that as an excuse to rampage.

(BEGIN VIDEO CLIP)

DAVID CAMERON, BRITISH PRIME MINISTER: What we have seen on the streets of London and other cities and across the country is completely unacceptable. And I'm sure the whole house will join me in condemning it.

PARLIAMENT MEMBERS: Hear, hear!

CAMERON: Keeping people safe is the first duty of government. The whole country has been shocked by the most appalling scenes of people looting, violence, vandalizing and thieving. It is criminality pure and simple and there is absolutely no excuse for it.

This is a time for our country to pull together. To the law- abiding people who play by the rules and who are the overwhelming majority in our country, I say the fight back has begun. We will protect you. If you have had your livelihood and property damaged, we will compensate you. We are on your side.

And to the lawless minority, the criminals who have taken what they can get, I say this. We will track you down, we will find you, we will charge you, we will punish you. You will pay for what you have done.

(END VIDEO CLIP)

BLITZER: And Richard Quest is joining us from London once again.

What's been the reaction? Strong words from the prime minister, Richard. Did he say what the people of Britain wanted him to say?

QUEST: Yes, because there is now a general acceptance that the vast majority of the looting and the rioting was as the prime minister and the opposition both agree, just sheer wanton criminality.

But he has to walk a fine line and he did in his speech to parliament today did admit that although it was criminals involved, there is a wider picture involved, the disenfranchised, those people who feel they don't belong to society.

With so much austerity in Britain at the moment, he cannot simply be seen to blame criminality when there are legitimate people saying actually society might be a little bit broken because of the government policies.

BLITZER: The riots seemed to have calmed down a bit today, but I assume, Richard, the frustration level is intense.

QUEST: It is intense. And I think people are -- there have been some extraordinary actions of heroism. There have been magnificent acts of bravery. One father of somebody who died in the riot came out and called for calm.

In this environment, look, frankly, Wolf, the British people are shocked. They are shocked at the way this has blown up so fast. They are shocked at the way the police failed to get control of it quickly and they are shocked at the way in which the politicians seem to have handled it. In that scenario, they don't believe this is Britain as they know it. And they are turning to the politicians to say, what are you going to do to put it right, both criminally and politically?

BLITZER: Good summation, indeed.

Richard, thanks very much.

So what tech giant Apple is doing that other companies can learn from as it reaches a major corporate milestone, stand by for that.

And Mitt Romney touting a tax increase? A Republican presidential candidate who may be haunted by his past.

(COMMERCIAL BREAK)

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

JACK CAFFERTY, CNN ANCHOR: Looks like some Democrats are having buyer's remorse when it comes to President Obama, wishing they had gone with Hillary Clinton instead.

The recent negotiations over the debt ceiling are being seen by many as the lowest point in Mr. Obama's presidency. And it's not just Republicans who are comparing Barack Obama to Jimmy Carter or saying that he'll be a one-term president.

One Democratic strategist told the British newspaper "The Telegraph" that Democrats are worried that the president -- quote -- "looks weak. He doesn't say anything that grabs you, and people are looking for some kind of magic." That's a quote.

Apparently some Democratic activists are asking if the party needs someone tougher to fight against the Tea Party, someone, say, like Hillary Clinton. They point out that Hillary, like her husband, Bill, has tougher political instincts than President Obama.

During the campaign in 2008, Hillary Clinton claimed that although then-candidate Obama might be able to inspire the masses, and he did that, she was the one who had the experience to get the job done.

Hindsight is always 20/20. It's easy to see why some Democrats are nervous now about the president's reelection chances. His approval ratings are at or near all-time lows for his presidency and only one-third of Americans approve of how he's handling the economy, which of course is the No. 1 issue.

What's more, one recent poll showed 44 percent of registered voters said they are more likely to vote for a generic Republican in 2012, compared to 39 percent who say they're more likely to vote for Mr. Obama.

When you lose in a hypothetical matchup against an unknown opponent, well, that's not a good starting point from which to seek to be reelected. So here's the question: Would Hillary Clinton have been a better choice for the Democrats?

Go to CNN.com/caffertyfile. Post a comment on my blog or go to our post on THE SITUATION ROOM's Facebook page -- Wolf.

BLITZER: Good page indeed. All right, Jack, thank you.

Apple is making headlines not necessarily with a new product out today, with a new milestone that is making it more than ever the envy of the corporate world here in the United States and indeed around the world.

CNN's Mary Snow More is joining U.S. from New York with more on what's going on with Apple.

All right, Mary, explain.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, Apple took a new crown Wednesday when it jumped over oil giant Exxon to become America's most valuable company. Now, today, Apple slipped back to the number-two slot.

The neck-and-neck race, though, between oil and innovation is gaining a lot of attention.

(BEGIN VIDEOTAPE)

STEVE JOBS, CO-FOUNDER, APPLE: We think the solution is our next big insight.

SNOW (voice-over): It's become a big event each time Apple unveils new products. And those products have now catapulted Apple to the ranks of most valuable company, even surpassing ExxonMobil Wednesday as the two jockey for the number-one slot.

The ranking is based on market value, which doesn't count a company's cash or debt. Still some who cover the tech industry see Apple's overshadowing Exxon as significant.

MARTIN GILES, "THE ECONOMIST": I think the fact that Apple is 14 years ago practically bankrupt -- indeed, Michael Dell of Dell Computer basically was asking what he thought Apple should do. And he said I think it should shut its doors. Well, it didn't. And look where it is today. That's a phenomenal achievement.

SNOW: One thing seen as hurting ExxonMobil right now are lower oil prices. And for Apple, unlike other tech giants IBM and Microsoft, which rely on corporate customers, Apple built its fortune on consumers. Compare that, says one oil industry analyst, to consumers for oil and gas.

PHILIP WEISS, ARGUS RESEARCH: They need the product, but they want to pay as little as they can because they want to have more of their budget that they can spend on things that they want.

SNOW: And the things they want and are shelling out money for are things like iPads. So what can other companies learn?

Martin Gartenberg is an analyst of Consumer Technology.

MICHAEL GARTENBERG, CONSUMER TECHNOLOGY ANALYST: Well, I think they can learn a number of things. One is that you have to be bold. Fortune does favor the bold.

SNOW: But there is always the chance that what is bold today will be old tomorrow.

GILES: It's not the only company out there that is doing this. It faces stiff competition. There's no guarantee that in the next 14 years Apple will remain top of the pile.

(END VIDEOTAPE)

SNOW: You know, Wolf, we talked about it here last month. Apple made headlines for having more cash than the U.S. government. At last count, back in June, it had $76.2 billion, nearly $2.5 billion more than Uncle Sam.

BLITZER: Hard to believe. All right, thanks very much, Mary, for that report.

Researchers are reporting potentially promising results from an experimental new leukemia therapy. We will tell you about it.

And we are just learning the Texas governor, Rick Perry, will formally jump into the Republican presidential race this Saturday. Should the rest of the Republican field be worried? I will ask the managing editor of "TIME" magazine, Rick Stengel. He's here. He just interviewed Rick Perry. Stay with us. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: It's tantamount to heresy among Republicans, but now Mitt Romney's old remarks on taxes may be coming back to haunt his presidential campaign.

And Romney is about to get some major new competition. We have learned details about an imminent announcement by the Texas governor, Rick Perry.

Plus, CNN's chief medical correspondent, Dr. Sanjay Gupta, he is in Kenya with an up-close look at the horror and the heartbreak of the famine that is devastating the region.

(COMMERCIAL BREAK)

BLITZER: You would be hard-pressed to find a Republican today saying anything positive about taxes, especially among the presidential candidates. And that is putting Mitt Romney in a rather awkward position, haunted by his past as the governor of Massachusetts. Our Lisa Sylvester is back. She's been working this part of the story for us.

What have you found out this, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: This is really interesting, Wolf.

Mitt Romney is proud of the fact that, as Massachusetts governor, he improved the state's finances and the state's credit rating was raised on his watch. But the question is, how did he do it? Did he back then advocate raising taxes? Well, there are some new documents that have come to light.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Mitt Romney in Iowa gave his best soapbox speech, but the crowd gave it back to him.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: All right, let's -- OK, let's let him finish. Let's let him finish. Let's let him finish.

UNIDENTIFIED MALE: What are you going to do to strengthen Social Security, Medicare, and Medicaid without cutting benefits?

ROMNEY: The way this is going to work is that you get to ask your question and I get to give you my answer. If you don't like my answer, you can vote for someone else.

SYLVESTER: Romney is being asked by liberals, will he defend Social Security? He is also being pinned down by conservatives. Will he not raises taxes?

Romney, playing to the GOP base, says he opposes raising taxes, but records obtained by the news organization Politico show that in 2004 then Massachusetts Governor Mitt Romney touted the tax revenue raised by the state as part of a pitch to Standard & Poor's to lift their credit rating.

ROMNEY: I would love your support. How are you, sir?

SYLVESTER: The debate is relevant because Romney is now taking potshots at President Obama for having the U.S. credit rating downgraded.

Politico reporter Kasie Hunt says Romney had more leeway back then.

KASIE HUNT, POLITICO: Once House Republicans stepped out and said that every -- every cut had to be matched dollar for dollar, that really tied President Obama's hands. And they changed the template that they were using to negotiate. And Romney had more options at his disposal, and clearly not only used them, but was proud of them and took it to the S&P ratings agency.

SYLVESTER: Romney's administration closed a budget deficit by raising $271 million in fees and another $269 million closing tax loopholes. Andy Roth with the fiscally conservative group Club for Growth says Romney has done a lot of flip-flopping on taxes.

ANDY ROTH, CLUB FOR GROWTH: He was against the 2003 Bush tax cuts, and then now he's for them. He didn't sign the tax pledge, and then now -- and then he has. He said that he didn't raise taxes, but he raised fees. And a lot of fiscal conservatives, including in the Club for Growth, believe that that's raising taxes because it's not pro-growth.

SYLVESTER: Romney's press secretary, Andrea Saul, disagrees, saying, quote, "Romney never advocated, never favored and never signed a tax increase into law."

(END VIDEOTAPE)

SYLVESTER: Romney's press secretary also said that he cut taxes 19 times as government -- governor and says Romney closed these corporate tax loopholes, and that according to her, is not raising taxes. But as the Romney camp puts it, it is instead tax enforcement -- Wolf.

BLITZER: Tax enforcement. Thanks very much for that.

The Texas governor, Rick Perry, will make it official this weekend. A Republican familiar with his plans telling CNN Perry will announce he's running for president this Saturday in South Carolina, where he'll be speaking at a conservative conference.

CNN's Jim Acosta has been following the story for us, the race for the Republican nomination. Jim, we have a new poll out today, and Perry is doing relatively well.

JIM ACOSTA, CNN CORRESPONDENT: That's right, Wolf.

Rick Perry jumps into this race as a near front-runner. If you look at the latest CNN/ORC poll, it is pretty startling as to the effect Rick Perry has on this field. He comes in in second place behind Mitt Romney, nipping at Mitt Romney's heels. Seventeen percent for Mitt Romney, 15 percent for Rick Perry.

And then you have some -- some Republicans who really benefit from name recognition, Rudy Giuliani and Sarah Palin. We're not getting any strong indications of their jumping into this race. And then Ron Paul and Michele Bachmann falling pretty heavily in our latest polling. We're not sure why. It might be the Rick Perry factor.

And then if you pull Rudy Giuliani and Sarah Palin out of the mix, what happens to the numbers? It gets very interesting and almost becomes a Mitt Romney versus Rick Perry duel for the nomination. And this is essentially what a lot of folks have been seeing in terms of Rick Perry's impact on this race. Mitt Romney is really more the establishment Republican candidate in this field. Rick Perry is the Tea Party candidate if he can stay in this field and continue to do well as the days go on, Wolf. BLITZER: How did these Republican front-runners compare in a hypothetical contest against President Obama?

ACOSTA: Well, that's what a lot of Republicans want to know, right? Who can beat Barack Obama? And at this point, according to the latest polling from CNN and ORC, it is Mitt Romney still doing the best against the president.

Take a look at these numbers. Rick Perry also doesn't do so well -- doesn't do so badly either, but Mitt Romney is right there within the margin of error. Forty-nine percent for President Obama, 48 percent for Governor Romney. And then you through Rick Perry in. He's very close, as well, Wolf, only 5 points behind. And that is why he has already gotten the attention of Democrats today. I talked to a Democratic source earlier today who described Rick Perry as all hat and no cattle -- Wolf.

BLITZER: Help to explain why the president is spending so much time fundraising. He's gearing up for a touch reelection campaign. Jim Acosta, thanks very much.

This week's issue of our sister publication, "TIME" magazine, features an interview with Governor Perry, who says he's confident in his presidential bid.

(BEGIN VIDEO CLIP)

GOV. RICK PERRY (R), TEXAS: Yes, I'm kind of getting to the all- in point and the idea that this is what I'm supposed to be doing. I mean, this is -- this is starting to get to that comfort level, and I got the calmness in my heart. Indeed, that was a bit of a hurdle initially. But I'm very calm in my heart that this is what I'm supposed to be doing.

(END VIDEO CLIP)

BLITZER: Looks pretty confident. Let's get some more with "TIME" magazine's managing editor, Rick Stengel.

Rick, he said this could be a game changer, I think, for a lot of the Republican contestants. How big of a deal is it that Perry is going to announce on Saturday?

RICK STENGEL, MANAGING EDITOR, "TIME" MAGAZINE: I think it's a big deal, Wolf. He kind of catapults himself into the top tier. Your poll suggests that. He's doing -- even when he doesn't have a lot of national name recognition. So I think it does. It rejiggers everything. He's a southern governor. Republicans like southern governors and Americans like southern governors. If you look at all the presidents since '92, most of them are southern governors between Bush and Clinton.

So I think it makes a big difference. He's thrown that rock in the pond, and it's upsetting everything.

BLITZER: Does he hurt Michele Bachmann more than Mitt Romney, shall we say, at least in the short-term. He competes with a lot of those same potential voters, Tea Party supporters.

STENGEL: Yes, but I think he has -- he has a wider ambit than Michele Bachmann. I mean, he was, of course, one of the early supporters of the Tea Party. He really cottoned on to what they were up to and thought they would make a big national difference. So he's a favorite of the Tea Party, but he has other things that, you know, could get him support beyond that.

BLITZER: He's got a lot of -- a good record in Texas in creating jobs. I read one statistic the other day; what, half of the jobs created in the United States recently were in Texas?

STENGEL: The statistic in our story, Wolf, is that a third of the jobs created in the U.S. over the last two years were in Texas. And he does. There's a quote in a story when he talked to our own Mark Halperin. He said to his donors, he said, "If people ask me what time it is, I'm going to talk about jobs, jobs, jobs."

BLITZER: Does he have any strong weaknesses as far as your reporting has shown?

STENGEL: You know, everybody's strength is also their weakness, Wolf. So a lot of those jobs are low-paying jobs. Texas is a state with no income tax. It's not like the rest of America. You know, he said some things that people, you know, object to like maybe Texas should secede from the union. But most importantly, Wolf, he has presidential hair. And that's going to work for him very well.

BLITZER: Very good hair. But Mitt Romney has pretty good hair. A lot of those guys in politics have pretty good hair.

Let's talk about the new issue of "TIME" magazine, because you have an intriguing cover, and I'm going to put it up on the screen. I want our viewers to take a closer look at it. There it is: "The Decline and Fall of Europe." What does that mean?

STENGEL: Well, what it means, I mean, we've been very worried during the debt ceiling about how America is and how -- what's happening with America's debt. But the real problem I think, Wolf, that we're seeing in the world economy is not America. It's Europe. I mean, you know, if we're weak, you know, Europe is catatonic. And the, you know -- the debt issues in Italy, in France, in Spain, those are real issues.

We never had a problem in being able to pay our debt. We had a political problem in getting to raising the debt ceiling. They had real problems in paying their debt. And part of what Europe is counting on, Europe being our largest trading partner, Europe being China's largest trading partner, is the idea that America would recover first and everybody else would get well. Well, America isn't recovering so fast.

BLITZER: Because in parentheses, underneath the headline of the cover "The Decline and Fall of Europe," and then in parentheses, you have "And Maybe the West." STENGEL: Well, you know, there's a changing of the old order, Wolf. And -- and Europe and America have always been linked. I mean, we've been -- we are each other's largest trading partners, and there are weaknesses in all of our economies. Those rising economies, those economies like -- like Brazil and China and India, who are investing in infrastructure, they are -- they have some advantages now that we don't have.

BLITZER: Rick Stengel is the managing editor of "TIME" magazine. Thanks very much, Rick, for coming in.

STENGEL: Great to be here, Wolf. Thank you.

BLITZER: See you back here next week.

We now know the names of all 12 members of Congress who have the weight of America's debt on their shoulders. House Democratic leader Nancy Pelosi revealed her three picks for the bipartisan super committee, as it's called, on deficit reduction. They are Congressman James Clyburn, Xavier Becerra, and Chris Van Hollen.

The panel's daunting task: find a bipartisan way to cut $1.5 trillion from the deficit by Thanksgiving and get it passed by Congress or trigger across-the-board spending cuts in defense spending and domestic spending. We'll stay on top of that story, as well.

Meanwhile, the United Nations now says prospects for famine victims in the Horn of Africa may be even worse than previously believed. We're going to tell you about a new appeal, and we're going to get enough close look at the tragedy from our own Dr. Sanjay Gupta.

And what's being called the fastest aircraft ever takes to the sky. Details just ahead.

(COMMERCIAL BREAK)

BLITZER: A look now at the staggering toll of famine in East Africa. According to the United Nations, nearly three million people are in need of immediate assistance in southern Somalia alone. And it's received only about half of the $2.5 billion need to cope with the crisis. Many of those at risk the most are children. CNN's chief medical correspondent, Dr. Sanjay Gupta, takes us inside a refugee camp in Kenya.

(BEGIN VIDEOTAPE)

DR. SANJAY GUPTA, CNN CORRESPONDENT: Wolf, you've heard the numbers now for some time, 2,000 people coming in a day to this camp, the largest refugee camp in the world. They come here in search of a better life. That's not always what they get, as we learned. In fact, for some people, their troubles have just begun. And for some parents, they're forced to do the unthinkable.

(voice-over) The kids here will melt your heart.

UNIDENTIFIED MALE: How old are you? GUPTA (on camera): Wow. How old am I? I'm 41.

(voice-over) They're impressed me with their English. So I spoke a little Somali to them. They loved it.

(on camera) (SPEAKING FOREIGN LANGUAGE) Is that good?

UNIDENTIFIED MALE: Yes.

GUPTA (voice-over): Rare smiles in a place too full of heartbreak.

Amin (ph) and her one-month-old daughter, Addison (ph), came here in search of a better life, fighting so hard not to starve to death. But in the end it made little difference. Amin (ph) lost the one thing in the world she cared about more than anything else. We are walking to her daughter's grave.

They are really just piles of dirt with no name plate, no flowers, no reminders of their lives. Just small sticks with colored plastic trash blowing in the wind.

She says she brought her healthy baby girl here with dreams of new beginnings, but Addison (ph) died within a month.

(on camera) What went wrong?

(voice-over) "She started vomiting," she said, "then diarrhea and wouldn't stop for days and days." Diarrheal illness, it has been the major reason 30,000 kids have died here over the past three months. So many tiny little graves like this one.

(on camera) Part of the problem is even after you get to one of these camps there's still not enough food here, not enough water. And there's plenty of infectious diseases. There's viral illnesses. There's also diphtheria. There's pertussis.

And I want to show you something else, something that's very frightening in a camp like this. This is Osmond. He's 14 years old, and as you can tell, he really doesn't feel well. People were concerned here that he has measles. He had a high fever. He had the characteristic rash and he had conjunctivitis in his eyes. He never got vaccinated. He never got any sort of treatment. And measles, as you know, is very, very contagious. He has nowhere else to go.

(voice-over) And so hundreds of thousands more of these adorable children, unvaccinated are at risk of the same fate as Amin's (ph) daughter.

(on camera) Is there anything anybody can do? "It is with God."

(voice-over) It is with God, and so there's nothing else these kids can do but laugh and play, surrounded by the dead.

(on camera) Wolf, it's tough to think about, but it's happening way too often out here. Parents being forced to bury their children. We also learned, Wolf, that it's not just about food and water. It's also about medical care. It's also about vaccinations. It's about making sure people get those things early that can make a huge difference.

Wolf, back to you.

(END VIDEOTAPE)

BLITZER: Sanjay, thank you. And thanks to your excellent reporting.

If you want to find out more about how you can help with the crisis in Somalia, go to CNN.com/Impact. You can impact your world. And you can watch a special edition of CNN's "SANJAY GUPTA, M.D.," "Frontlines of Famine" this Saturday and Sunday, 7:30 a.m. Eastern.

Military researchers are reporting a setback during a test flight of what's believed to be the fastest aircraft ever launched. Lisa Sylvester is monitoring that and some of the other top stories in THE SITUATION ROOM right now.

What do you have, Lisa?

SYLVESTER: It's not going so well. According to the latest tweets from researchers at Vanderburg Air Force Base in California, they have lost contact with the unmanned aircraft over the Pacific Ocean.

It's known as the Falcon hypersonic test vehicle, and it's said to be capable of flying 20 times the speed of sound. That works out to about 13,000 miles per hour. And at that speed, friction would cause the temperature outside the plane to reach about 3,500 degrees. A test flight last year also ended with engineers lost contact, and that plane crashed into the Pacific.

Teen star Miranda Cosgrove broke her ankle when her tour brush crashed in southern Illinois today. Now, Cosgrove was reportedly one of five people on the bus. Her representative says that she will be fine, but that her tour has been postponed until further notice. Eighteen-year-old Cosgrove is a singer, as well as the star of the Nickelodeon hit show, iCarly.

And dramatic video out of China -- check this out -- capturing a truck loaded with 20 tons of garlic and onions overturning. In just seconds, a woman was buried under the rubble. The whole thing happened so fast, even the camera didn't catch it all. And get this: she is still alive and well today with only a few bruises. The driver of the truck also survived. The cause of this accident is being investigated.

Also, an amazing transformation more than two years in the making for a woman mauled by a friend's pet chimpanzee. Doctors at Brigham and Women's Hospital in Boston have released the first photos since she underwent a full face transplant in May.

This is what she used to look like before being attacked in 2009. The mauling left her, though, virtually unrecognizable.

And check out this video. In Canada, a British daredevil escaped from a strait jacket while dangling upside down from a helicopter. Pretty amazing stuff. Speaking to reporters before the stunt, he called it, quote, "the chance of a lifetime." His main concern was passing out from hanging upside down too long, but in the end he pulled it off with -- in just about a minute and a half. There, he did it. He did it. Out of the strait jacket, dangling from a helicopter. So we call him a dare devil.

BLITZER: Yes.

SYLVESTER: Not sure what other people would call him, but...

BLITZER: A paraphrase. People do the darnedest things. I don't know why.

SYLVESTER: Exactly right. Because they can, Wolf.

BLITZER: Thank you.

Jack Cafferty is coming up next with "The Cafferty File." He would never do that.

And Jeanne Moos on Bert and Ernie. "Sesame Street" putting out a statement to settle a debate.

(COMMERCIAL BREAK)

BLITZER: All right. Let's check back with Jack for the "Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour is: "Would Hillary Clinton have been a better choice for the Democrats?" Some Democrats seem to think she might have been.

Dave in Orlando writes, "Hindsight is so clear. I remember 2008, how much hope we had. How relieved that we all felt that our long national nightmare was over, only to slowly come to the realization we had inadvertently reelected an imposter and incompetent to serve as Bush's third term."

Randy writes, "Simply put, yes. She's more than a speechmaker. Obama is better suited to selling Sham-Wow's."

Alex in Washington: "No, Jack, Hillary Clinton may be a much better negotiator than President Obama, but she never would have won. I voted for President Obama, but I would have voted for John McCain, had Clinton won the nomination."

Nelson in Florida writes, "In retrospect Hillary definitely would have been a better choice than the man with the plan. All Obama seems to do is give speeches that mean absolutely nothing. As to Hillary, I don't understand why she doesn't resign her position now and challenge him for the Democratic nomination." Larry on Facebook, "Whoever was elected Republican or Democrat would have had a problem. I think the economy was in really poor shape. Nothing was going to fix that overnight. I don't think Hillary could have done any better. McCain would have been much, much worse."

James writes, "I voted for Obama, but I'm having a little bit of buyer's remorse. As a Democrat, I'm still waiting for Obama to do something Democratic. I don't understand why he's following Republican ideas like the Bush tax cuts that we know will do nothing to help the country. If Obama's going to lose the next election, I wish he would at least lose it on Democratic principles. I don't believe Hillary would have backed down so easily to the Republicans."

And Stacy in Dacula, Georgia: "Jack, 18 million of us were not wrong. It would have been much better to have had the pants suit rather than the empty suit."

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

BLITZER: I love our viewers. They are so clever.

CAFFERTY: Aren't they great? They're terrific.

BLITZER: All right, Jack, thanks very much. Jack Cafferty with "The Cafferty File."

Flash mobs in Philadelphia where a kid as young as 11 was arrested after attacks on innocent bystanders. So, what's behind the unrest? The police commissioner, Charles Ramsey, is standing by to join John King on "JOHN KING USA." That's coming up for our North American viewers.

And get this: do Ernie and Bert have a secret? CNN's Jeanne Moos she'll have a report on an attempt to out them on the Internet.

(BEGIN VIDEO CLIP)

I want to read right now, okay?

OK, Bert.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: Let's take a look at this hour's "Hot Shots."

In India, students protest alleged government corruption at a rally in New Delhi.

In Japan, a jeweler holds up a bar of gold. The price of gold has skyrocketed during the economic downturn.

In Florida, the Space Shuttle Endeavour has moved to another building at the Kennedy Space Center to be decommissioned.

And also in Japan, look at this, telescope-eyed goldfish swim in a tank as part of an art exhibit in Tokyo.

"Hot Shots," pictures coming in from around the world.

Will the new law legalizing same-sex marriage in New York mean wedding bells will soon be ringing on "Sesame Street"? CNN's Jeanne Moos has that.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Do Bert and Ernie have a secret? Are the "Sesame Street" Muppets coming out of the closet?

JIMMY KIMMEL, HOST, "JIMMY KIMMEL LIVE": What if they are gay? What if they're neck deep in each other's fuzz every night?

MOOS: A gay buzz has been around for years but now there's an online petition asking "Sesame Street" to let Bert and Ernie get married. The petition was dreamed up by gay activist Blair Scott.

BLAIR SCOTT, GAY ACTIVIST (via phone): When I was 9 years old I wondered if they were a gay couple.

MOOS: There's been a lot of purely circumstantial evidence.

SCOTT: They sleep in the same room.

MOOS: They take baths together. Look at the photo on their wall.

UNIDENTIFIED MALE: That's our picture.

MOOS: Oh, sure, there are also counter indications.

KIMMEL: Let's talk about Bert's eyebrow. No self-respecting homosexual would leave a unibrow like that unplucked. If there's one things gays do, it's pluck.

MOOS: They've been together more than 41 years, and just as folks speculated that Tinky Winky, the purple Teletubby with the purse was gay, rumors have swirled around the roommate Muppets.

UNIDENTIFIED MALE: Bert not gay, Ernie very gay. And no matter how hard you try, Ernie, and I've tried, believe me, you can't twist them.

MOOS: The petition to let Bert and Ernie marry has spawned petitions to stop them.

(on camera) "New York Daily News" even wrote an editorial on the subject entitled "They're just Muppets."

(voice-over) It sarcastically asks, why stop there? Why not march Yogi Bear and Boo-Boo down the aisle, too. Funny, but not applicable.

BLAIR: That's more of a mentoring situation.

MOOS: The creators of "Sesame Street" are not budging. They say Bert and Ernie are best friends. "They remain puppets and do not have a sexual orientation." Denials don't stop suggestive songs like the one for the show "Avenue Q."

UNIDENTIFIED MALE (singing): If you were gay that would be OK.

MOOS: The petition organizer knew when he was 5 years old...

BLAIR: That I had an attraction to Tarzan.

MOOS: He wants role models for other young gay kids watching TV.

Though chances for a wedding for Bert and Ernie seem nil, still someone joked, "Will the reception be in Oscar's can?"

CARROLL SPINNEY, VOICE OF OSCAR THE GROUCH (singing): I love trash.

MOOS: Ernie may proclaim who he's true to...

JIM HENSON, ORIGINAL VOICE OF ERNIE (singing): Rubber ducky, you're the one.

MOOS: ... but gay spoofs keep bubbling up.

UNIDENTIFIED MALE: It's fun to stay at the YMCA.

MOOS: Jeanne Moos, CNN...

UNIDENTIFIED MALE: YMCA.

MOOS: ... New York.

(END VIDEOTAPE)

BLITZER: Leave it to Jeanne Moos.

Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM.

For our international viewers, "WORLD REPORT" is next. In North America, "JOHN KING USA" starts right now.