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THE SITUATION ROOM

Interview with President Obama; Perry: Fed Chief Might Commit "Treason;" U.S. Diplomacy, military in Hot Seat; 'Strategy Session'; 'Made in China' Good for Americans?

Aired August 16, 2011 - 17:00   ET

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


WOLF BLITZER, HOST: Brooke, thanks very much.

Happening now, President Obama on America's economic mess and the risk that he'll be a one term president. Stand by for my interview with him right here in Iowa. I'll ask whether he plans to create a Department of Jobs and why his call for hope and change in Washington hasn't really happened.

Republican Rick Perry is warning the Federal Reserve chairman not to try to help the president get reelected. We're looking the White House candidate's fiery remarks about the economy and what he calls a "treasonous act."

And you're going to find out how America is profiting from products made in China. We're going to let you in on a little known secret that could change the way you buy.

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

President Obama tells me that one of the best parts of his job is coming to places like this, right here in Iowa, where he can talk to everybody and talk to everyday Americans. But he knows there's certainly plenty of fear and anger right here in America's heartland and, indeed, across the country right now.

I sat down with the president just a little while ago for an in- depth interview about jobs, the economy, the 2012 campaign, the war on terror and a lot more.

And I tried to get him to be specific -- specific about his short-term plans for boosting the economy and how it could make or break his reelection campaign.

(BEGIN VIDEOTAPE)

BLITZER: When you took office, you said this -- and I'm sure you remember -- you said, if I don't have this done in three years, then there's going to be a one term proposition, meaning you're going to be a one term president.

Do you remember that?

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Well, here's what I remember, is that when I came into office, I knew I was going to have a big mess to clean up. And, frankly, the mess has been bigger than I think a lot of people anticipated at the time.

We have made steady progress on these fronts. But we're not making progress fast enough. And what I continue to believe is that ultimately the buck stops with me. I'm going to be accountable.

I think people understand that a lot of these problems were decades in the making. People understand that this financial crisis was the worst since the Great Depression. But ultimately, they say, look, he's the president, we think he has good intentions but we're impatient and we want to see things move faster. And I understand that. I'm sympathetic to it. And we're going to just keep on putting forward ideas that are going to be good for the country. We're going to need a partner from Congress.

And we're going to need folks to move off some of these rigid positions they've been taking in order to solve these problems.

BLITZER: I want to go through some specifics on that. But let's talk about some things that you need to do. You've -- you yourself have said you support modest modifications in Medicare.

OBAMA: Yes.

BLITZER: Give me specifics.

OBAMA: Well, what I'm going to do, I'm not going to make news here, Wolf, in terms of what a comprehensive plan would look like. But what I've consistently said is that Medicare health -- and health care costs generally are out of control, that the health reforms that we initiated are starting to reduce those costs. But we're going to have to more, particularly around Medicare and Medicaid.

BLITZER: Changing the Cost of Living Index?

OBAMA: Well, what we --

BLITZER: Which would reduce the amount of money for Medicare --

OBAMA: The --

BLITZER: -- and Social Security recipients?

OBAMA: As much as possible, what we'd like to do is actually reduce the costs of health care, as opposed to just shifting the costs from the government to seniors. But that --

BLITZER: But a change in the --

OBAMA: -- that doesn't --

BLITZER: Cost of living, is that something you're open to?

OBAMA: The -- the problem with some of the proposals we've seen, including some of the proposals coming out of the House of Representatives and the Republicans there is they don't really address what -- what it takes to reduce costs. What they say is senior citizens, we're going to voucherize it and whatever inflation there is, you're going to have to cover out of pocket. So seniors may have to spend $6,000 more.

What we say is are there modifications that can change the delivery system and how health care is delivered so that you don't have to take five tests, you take one; so that providers are not ordering unnecessary procedures, but focusing on what actually works?

The more we can do those kinds of changes -- and, in some cases, you know, that -- that involves empowering consumers to make better choices, then we can hopefully control these costs without seeing any radical change to the basic structure of Medicare.

(END VIDEOTAPE)

BLITZER: All right. There's a lot more of the interview coming up here in THE SITUATION ROOM. The president gets emotional at one point when speaking about what he considers to be the most difficult part of his job. That's coming up and a lot more, as well.

But I want to bring in our White House correspondent, Brianna Keilar.

She is here in Iowa with us.

The president is continuing this bus tour. But he's -- it's -- clearly, he's got some substantive issues. But it clearly has the feel of a campaign.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: It does have the feel of a campaign. And, also what he said to you in your interview, something we've been hearing here for the past couple of days, that he feels Republicans -- he says, Congress, right, but he says Republicans are getting in the way of his jobs ideas.

He was here today for this Rural Economic Council. He unveiled some new proposals -- increased lending for farmers and small businesses, increasing technology access to small -- or, pardon me, rural areas for businesses.

But you can't ignore how significant the state of Iowa is, first in the nation caucus. This gave President Obama a win here in 2008. It gave him a lot of early momentum. And it also caused a lot of problems, Wolf, in the midterm elections for Democrats.

So the president finds himself -- or certainly rural areas gave Democrats some problems in the midterm election. So this is an area that the president really has to focus on if he is hoping to achieve that second term, as he told you.

BLITZER: Yes. He started off yesterday in Minnesota, came here to Iowa.

What's next?

KEILAR: He heads now to his home state of Illinois. He'll be going for two town hall meetings. We saw two yesterday. It will be similar. He's probably going to be hitting on the same things, that Republicans, he feels, are getting in the way of his jobs -- job creating strategies, as we've heard here in the last couple of days.

And what's interesting, though, is Illinois has the highest unemployment rate of any of the states that he's visiting. 9.1 is the na -- 9.1 percent is the national average. Illinois is 9.2 percent. But both of the counties that he'll be visiting tomorrow have unemployment rates in the high sixes.

So one of the things the White House has said they wanted to do is kind of marshal some of that optimism, certainly, from these areas that have lower unemployment rates. We'll be seeing some of that, as well.

BLITZER: All right. Tell us about the piece that you're working on that we're going to air here in THE SITUATION ROOM later, because it's fascinating.

KEILAR: The president has a new ride. And this is getting a whole lot of attention. He's been rolling through the Midwest in a bus that we have not seen before. It's a $1.1 million bus. It kind of looks a little like a bus version of "The Beast," which is the presidential limousine -- very sleek, very black, darkened windows and it's kind of stealth looking, as we see it rolling through the Midwestern countryside. We'll be taking a closer look at that.

We'll also tell you exactly where the Secret Service purchased it, a place that also sells buses that big, for instance, musical or country music acts have owned.

BLITZER: Yes. There's an Air Force One. There's a Marine One. There's The Beast, which is the car. What are they --

KEILAR: Yes.

BLITZER: -- what are they calling this, the black monster?

What are they calling this one?

KEILAR: I -- there is no name yet. I'm just calling it the Beastly Bus.

BLITZER: The Beastly.

We'll look forward to your report.

Thanks very much.

And we're going to have a lot more coming up later from my interview with the president of the United States. Stand by. At one point, he does get emotional, as I say.

We also speak about my concerns and his concerns about 9/11, the 10th anniversary of 9/11.

Could there be an effort by Al Qaeda or some sympathizers of Al Qaeda to launch some sort of spectacular attack, seeking revenge for the killing of bin Laden?

You're going to be anxious to hear what the president has to say.

But let's move on to some politics right now. Republican presidential candidate Rick Perry was practically breathing down President Obama's neck today. While Mr. Obama was here in Peosta, Iowa, his newest GOP rival was campaigning in Dubuque, Iowa. It's only about 12 miles away.

On the trail, Perry is hammering and hammering. He's hammering away at the Obama economic policy. And he's going a dramatic step further, warning that the Federal Reserve chairman, that he'd better not commit what Mr. Perry calls an act of treason -- treason.

CNN's Joe Johns is looking into this part of the story for us.

What's going on here -- Joe?

JOE JOHNS, CNN SENIOR CORRESPONDENT: Wolf, treason or treasonous is just one of those words that's gotten thrown around in politics for years. But when a guy running for the Republican nomination for president hurls this word at a high ranking government official, it's got people asking whether the rhetoric is starting to go a little too far.

(BEGIN VIDEOTAPE)

JOHNS (voice-over): Just in the race and he's had plenty to say and just as quickly stepping over the line, going after the chairman of the Federal Reserve with words that once -- and some say even now -- would be considered a vicious personal attack.

GOV. RICK PERRY (R), TEXAS: If this guy prints more money between now and the election, I don't know what you all would do to him in Iowa, but we'd -- we would treat him pretty ugly down in Texas. I mean printing more money to play politics at this particular time in American history is almost treasurous -- or treasonous.

JOHNS: Treasonous, seriously?

Treasonous means betraying one's allegiance to the country, a word reserved for spies, enemies of the state, assassins.

Should a presidential candidate really be talking like this?

A former Bush administration official, Tony Fratto, Tweeted that Rick Perry's comments were "inappropriate and un-presidential." Fratto said Perry we do have to work with Bernanke if he wins. And a top GOP strategist said this.

ALEX CASTELLANOS, REPUBLICAN CONSULTANT, CNN POLITICAL CONTRIBUTOR: You've got to watch that line between acceptable and colorful political language and becoming extremist. No one wants a scary extremist in the White House from either party. The president is the head of the political household. The president has got to bring everybody together.

JOHNS: The Obama White House has also weighed in, advising that candidates think about the impact of their words on the campaign trail.

We asked Perry to clarify his remarks and he doubled down, telling CNN, quote: "I am just passionate about the issue and we stand by what we said."

But Castellanos says it likely won't hurt Perry, at least in the race for the nomination.

CASTELLANOS: If you want to win a general election, you've got to watch your language. You -- you're going to scare soccer mom. You're going to scare those voters in the suburbs that you need to swing your way. But in a Republican primary, that's like ringing the dinner bell. That kind of language, it could get you all the way.

(END VIDEOTAPE)

JOHNS: The fact is the Federal Reserve and its policies have been a source of real anger for conservatives and politicians with Tea Party support. For example, Republican presidential candidate Michelle Bachmann today said today she's been a leading voice in criticism of the Fed because she says it's not transparent enough -- Wolf.

BLITZER: But she never, Joe, used the suggestion that Ben Bernanke is acting in a treasonous way, has she?

JOHNS: No. I don't know whether she's actually word -- used the word treason, quite frankly. I've looked for it. I have heard this word used in the campaign trail before. But I haven't heard it directed at Ben Bernanke before.

BLITZER: And in the interview that I just did with the president -- we're going to air it soon -- you can get the whole interview, Joe. I get to the president to react to Rick Perry's other controversial comments that the men and women of the United States military would respect him more than President Obama because he served in the U.S. Air Force and wore the uniform. And I asked the president if he feels that Rick Perry's remarks were disrespectful of the current commander- in-chief.

And you'll hear what President Obama has to say about that.

Joe, thanks very much.

Iowa, by the way, has six electoral votes at stake in 2012. It's become more of a swing state in recent presidential elections. President Obama easily won Iowa back in 2008. But the state went Republican four years earlier, with George W. Bush eking out a slim victory. In 2000, Democrat Al Gore narrowly beat Bush here in Iowa. All right. So stand by with more of my interview with the president. That's come up.

And the informal moments that we had -- we chatted about his job, his daughters and when he's going to let me visit his Situation Room. Stand by for that.

Plus, two of the most powerful members of the Obama cabinet open up about their limitations -- the secretaries of State and Defense, Hillary Clinton and Leon Panetta together for a rare question and answer session.

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

(COMMERCIAL BREAK)

BLITZER: We're here in Peosta, Iowa, Iowa right now, on the campus of the Northeast Iowa Community College. A beautiful spectacular day here in the nation's heartland.

Let's go to Jack.

He's got "The Cafferty File."

Jack, you spent some quality time here in Iowa. You know this state. The people are great.

JACK CAFFERTY, CNN CONTRIBUTOR: It's a wonderful place. I worked at WHO in Des Moines for two-and-a-half years, back right after they invented television. It was a long time ago, 1974 maybe.

But the people of Iowa treated me and my family extremely well. The highest literacy rate in the nation. Good folks. And you're in good company out there.

As the race for the Republican nomination heats up, there is one candidate who has been largely ignored by the mainstream media. Shame on us. He deserves more attention from us than he's getting.

Ron Paul makes a lot of sense and more people ought to listen to him.

The Texas congressman has visionary ideas about where the country ought to be going and what sea changes are necessary in order for the U.S. to continue being a superpower.

When Ron Paul ran for the Republican nomination in 2008, he talked about the economy imploding, the untenable nature of the national debt, the eventual destruction of our currency and a limited role for government. He showed tremendous fundraising ability and had an absolutely rabid base of support. The problem was, it was too small.

In the four years since then, a lot of the things Ron Paul warned us about have happened. We're deeper in debt, a lot deeper. The dollar is worth quite a bit less. The federal government increasingly dysfunctional. And the country is more divided maybe than at any time since the Civil War.

Yes, Ron Paul is a conservative. But he's not one of those who goes around hitting people over the head with his bible. And looking at the current batch of Republican wannabes, we support in light of some of the stuff that has come out of Michele Bachmann and Rick Perry's mouth in the last 24 hours, Ron Paul stands out as maybe the only adult in the room.

In politics, just like in life, it's often the timing that makes the difference. In the case of Ron Paul, it seems events over the last four years have finally caught up with the candidate. Paul's message hasn't changed, but the urgency of what he's saying has increased dramatically. And it seems like this time more people may be listening.

He came within an eyelash of finishing first in the Iowa Straw Poll, less than 200 votes behind Michelle Bachmann out of nearly 17,000 votes cast -- again, a fact that was largely overlooked by the mainstream media.

Michelle Bachmann has no chance of being the next president of the United States. Maybe Ron Paul should be.

Here's the question, is Ron Paul the only grownup running for president on the Republican side?

Go to CNN.com/caffertyfile and post a comment on my blog or go to our post on THE SITUATION ROOM'S Facebook page.

You know, the media has got to start listening and covering this guy a little bit more, Wolf. He may be a player this time around.

BLITZER: Well, he already is a player. Ron Paul certainly has influenced the other Republican candidates. Four years ago, as you correctly pointed out, he was basically saying the same thing. But now more and more Republicans are beginning to say the same thing that he's been saying for a while.

All right. You're going to get a ton of answers -- a ton of views on this question, Jack.

Stand by. I'm anxious to hear what our viewers think.

But let's get to the escalating deadly brutality that's exploding across Syria and other parts of the Middle East and North Africa right now.

The topic certainly was front and center today at an extraordinary gathering in Washington, with the Defense secretary, Leon Panetta, and the secretary of State, Hillary Clinton.

Our Pentagon correspondent, Barbara Starr, watched the whole thing take place.

She's joining us now with details -- Barbara. BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Wolf, whether it was Libya, Syria, Iraq -- both secretaries made clear, they are on the same page.

(BEGIN VIDEOTAPE)

STARR: (voice-over): The latest Syrian government siege is underway in the town of Latakia. Gunfire and shelling rings out across the city. Several civilians are dead.

In Washington, the question keeps growing -- why hasn't President Barack Obama directly said Syrian president, Bashar al-Assad, should leave office?

In a rare joint appearance with Defense Secretary Leon Panetta, secretary of State Hillary Clinton made clear she's still after a much broader condemnation.

HILLARY RODHAM CLINTON, SECRETARY OF STATE: What we see happening in Syria is galvanizing international opinion against the Assad regime. And that is a far better landscape for us to be operating in than if it were just the United States, if it were just maybe a few European countries.

STARR: Clinton noted King Abdullah of Saudi Arabia, the Arab League and other nations are joining the international chorus against the Syrian leader.

CLINTON: If King Abdullah says it, if other people say it, there is no way the Assad regime can ignore it.

STARR: Clinton's appearance with Panetta was part Washington politics, to show the two are close colleagues. But much of the talk was about the limitations of U.S. diplomacy and military firepower.

CLINTON: Part of leading is making sure that you get other people on the field.

STARR: Panetta also faced questions about the months long NATO bombing campaign against Libyan leader, Moammar Gadhafi. He believes opposition forces are closing in on Tripoli.

LEON PANETTA, DEFENSE SECRETARY: I think the sense is that Gadhafi's days are numbered.

STARR: On Iraq, where U.S. limitations are also emerging, both secretaries made clear they still expect U.S. forces to be out of combat operations by the end of the year.

PANETTA: Their main goal right now is to get the kind of training that will allow them to improve their defense capability.

(END VIDEOTAPE)

STARR: But can Iraq stand on its own? A senior U.S. military official today said that the biggest threat to Iraq's security right now is Iran, Iranian-backed militant militia groups with thousands of fighters, cash and weapons operating inside Iraq -- Wolf.

BLITZER: Barbara Starr, thanks very much for that report.

All right, stand by for more of my interview here in Iowa today with the president of the United States. I asked President Obama if he thinks Rick Perry is being disrespectful on his role as commander- in-chief.

And when you buy items that say they're made in China, the money may be staying closer to home than you might think.

(COMMERCIAL BREAK)

BLITZER: Welcome back to Iowa, a state that will likely play an important role in deciding whether President Obama gets reelected.

I sat down with the president a short while ago here in Iowa to talk about the political challenges he faces in the 2012 campaign, including his newest Republican rival, Texas Governor Rick Perry.

(BEGIN VIDEOTAPE)

BLITZER: Rick Perry, the governor of Texas --

OBAMA: Right.

BLITZER: -- Republican presidential candidate now, says the men and women of the United States military want someone who's worn the uniform. He says he served in the Air Force.

Do you see a comment like that that he makes referring to you as disrespectful to the commander-in-chief?

OBAMA: You know, Mr. Perry just got into the presidential race. I think that everybody who runs for president, it probably takes them a little bit of time before they start realizing that this isn't like running for governor or running for senator or running for Congress. And you've got to be a little more careful about what you say.

But I'll cut him some slack. He's -- he's only been at it for a few days now.

BLITZER: Mitt Romney says corporations are people.

Does he have a point?

OBAMA: Well, if -- if you tell me that corporations are vital to American life, that the free enterprise system has been the greatest wealth creator that we've ever seen, that there are corporate CEOs and folks who are working in our large companies that are creating incredible products and services and that is all to the benefit of the United States of America, that I absolutely agree with. If, on the other hand, you tell me that every corporate tax break that's out there is somehow good for ordinary Americans, that we have a tax code that's fair, that asking oil and gas companies, for example, not to get special exemptions that other folks don't get and that if we're closing those tax loopholes somehow that that is going to hurt America, then that I disagree with.

And I think that, you know, corporations serve an important benefit, but ultimately, we've got to look at what's good for ordinary people. You know, how do we create jobs, how do we create economic growth. And a lot of the special interest legislation we see in Washington, it isn't benefiting ordinary people.

BLITZER: What do you think of that Republican field lining up to challenge you?

OBAMA: You know, I haven't been giving it too much thought. I -- I figure that I'll let them winnow it down a little bit. When they -- when they decide who they want their standard-bearer to be, then I'll be ready for them.

(END VIDEOTAPE)

BLITZER: All right.

Let's bring in our senior political analyst, David Gergen -- David, we're going to have the whole interview that we're going to play at the top of the hour.

But what did you think of what he had to say about what a lot of people think will be his two main Republican potential challengers, Rick Perry and Mitt Romney?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST, FORMER PRESIDENTIAL ADVISER: I thought he was wise to pull his punches a little bit, Wolf. You know, that this has gotten to be a pretty slam bang affair already. And I do think he wants -- this was like a more presidential interview.

And I -- you know, he could have taken a real shot at Rick Perry over that comment that you talked about earlier in the program, that -- Rick Perry's comment about what Ben Bernanke did on quantitative easing was, you know, almost treasonous. He could have taken a real shot, because that's getting a lot of buzz out there. And instead, he -- he didn't.

I think he -- I think he also knows, Wolf, that others will do the work for him, that they're going to go after these candidates, as Karl Rove, you know, seemed to be taking shots at Rick Perry there. That's really interesting, George Bush's top guy taking a -- you know, there's been a long-time rivalry there and tension there, as you know, But still, to go out after Rick Perry, as he did today, it was pretty interesting.

BLITZER: Yes. And even Karl Rove seeming to suggest that maybe other Republicans will still join this Republican field. Paul Ryan, the congressman from Wisconsin, the chairman of the House Budget Committee, for example. And maybe even Chris Christie, the governor of New Jersey.

GERGEN: I think Sarah Palin's day has probably come and gone. We'll have to wait and see. She's unpredictable, as you know. But if Rick Perry were to stumble a couple of times here in the next couple of weeks, yes, I think there's somebody else who might get in, because there are a lot of Republicans out there who would like more choices.

If he, on the other hand, gains his footing -- and the president said it's hard, it's not like running for governor. It's hard the first time out. Rookies make mistakes. But if he gains his footing, then I think it makes it less likely, because there are serious people who look at Rick Perry's record in Texas, where claims that a third of all the new jobs during the Obama years have come in Texas, that's a pretty strong claim in a climate where people are desperate for new jobs.

So I think he was getting some traction. Rick Perry is getting some traction with some heavy hitters in the last few days. We'll have to see how it goes now.

He is under scrutiny. And I think President Obama, in your interview today, was very careful to thread through this in a way that he didn't want to go overboard himself. And he was very careful in what he said.

And this is classic Obama, the way he dealt with your questions about Mitt Romney and calling corporations people. He carefully delineated, very thoughtful, didn't make any headlines. But yet, hey, guys, if you're going to run against me, you've got to meet a pretty high standard.

BLITZER: And, you know, the Republicans are really going after him. Not just Mitt Romney and Rick Perry, but the other candidates. They're really slamming him. We get into this in the interview, and you'll see it at the top of the hour. This president is under enormous pressure right now to respond, but I think he's holding back a little bit, even though I think this trip through the Midwest right now, Minnesota, Iowa, and on to Illinois, is a turning point.

This campaign is really full throttle right now, David.

GERGEN: Yes, it sure seems to be, doesn't it? A lot of rough and tumble.

And my sense about the president was that he went (INAUDIBLE) yesterday, he did punch back. He was not going to allow himself to be a punching bag for the Republicans.

But when he sat down with you, he put on his presidential hat. And he was calmer, and it wasn't the sort of outdoor rally kind of conversation. And he was very careful about what he said.

I thought it was a good interview. I've been reading the transcript. I'm really looking forward to seeing it here at the top of the hour.

BLITZER: All right, David. Thanks very much.

And to our viewers, stand by. We're going to have much more of the interview. In fact, the entire interview coming up at the top of the hour, including the president's concerns about a possible revenge attack next month, 10 years after the 9/11 terror attacks. You're going to hear what the president has to say about that.

Also, Republican presidential candidate Michele Bachmann gets it wrong when it comes to Elvis. We'll have details of a flub on the campaign trail today.

Plus, a new twist in that bizarre case of the Australian collar- bomb suspect just a day after his arrest. We'll have the latest on that as well.

(COMMERCIAL BREAK)

BLITZER: A dramatic new development here in the United States in the case of the Australian collar-bomb suspect.

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

Lisa, what do you have?

SYLVESTER: Hi there, Wolf.

Well, Paul Douglas Peters, who is accused of strapping a fake bomb around the neck of a woman in Australia and threatening her, has been ordered to remain in federal custody until at least October. Peters was arrested yesterday in Kentucky, where his ex-wife lives, following a joint investigation. They'll seek his extradition on kidnapping and other charges. Peters maintains his innocence.

British lawmakers investigating the mass hacking scandal could call News Corp. executive James Murdoch back to testify following the release of what are described as explosive new documents suggesting hacking may have been more widespread than he indicated. Murdoch first testified before parliament last month. Now, according to new documents, a former correspondent said hacking was widely discussed.

And it was one of the most talked about campaign ads of the 2010 midterm election season.

(BEGIN VIDEO CLIP)

CHRISTINE O'DONNELL (R-DE), SENATORIAL CANDIDATE: I'm not a witch. I'm you.

(END VIDEO CLIP)

SYLVESTER: Well, now, former GOP Delaware Senate candidate Christine O'Donnell is admitting that infamous attempt at distancing herself from pass comments about dabbling in witchcraft, well, she's now saying that was a mistake. The Tea Party favorite upset party- backed Mike Castle in the GOP primary, but she lost the general election to Democrat Chris Coons.

And a flub on the campaign trail today from GOP presidential candidate Michele Bachmann.

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: Before we get started, let's all say happy birthday to Elvis Presley today. Happy birthday!

We played you a little bit of "Promised Land" when we pulled up. You can't do better than Elvis Presley. And we thought we would celebrate his birthday. As we get started the celebrating, take our country back to her.

(END VIDEO CLIP)

SYLVESTER: Only problem about that, Wolf, is she was about seven months too late. His birthday is actually in January, and today is the 34th anniversary of Presley's death. So she missed that one just by a little bit -- Wolf.

BLITZER: Ouch. That's not good.

All right. Thanks very much, Lisa. We'll get back to you shortly.

President Obama got a less-than-warm welcome here in Iowa from Republican presidential candidate Mitt Romney. The campaign fireworks, ahead. That's coming up in our "Strategy Session."

And if you're committed to buying American, you may want to reconsider some products made in China. We'll explain.

(COMMERCIAL BREAK)

BLITZER: Republican presidential candidate Mitt Romney is taking a fresh swipe at President Obama's bus tour through Iowa today. Listen to this new Romney campaign ad.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Nothings worse than --

UNIDENTIFIED MALE: Oh, much worse. I just think Obama needs to learn how to lead.

UNIDENTIFIED MALE: I am really frustrated with Congress in general and our president.

UNIDENTIFIED FEMALE: The little people, the people that have, you know, no jobs and are trying to get jobs --

UNIDENTIFIED MALE: I mean, it's like everywhere else. Everybody has just got to scrape a little harder to get by.

(END VIDEO CLIP)

BLITZER: All right. Let's discuss it in our "Strategy Session."

Joining us, our CNN political contributors, Democratic strategist Donna Brazile and Republican strategist Alex Castellanos.

Alex, let me start with you. Is that an effective strategy for Romney right now, to direct his fire at President Obama, as opposed to his other Republican challengers?

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: It's classic challenger strategy, Wolf. The best way to separate yourself from your competitors in the Republican primary is to crawl into the ring with the heavyweight champion. It must mean you're the number one contender.

So, instead of competing with Rick Perry, he pulls himself up to compete with Obama. Very effective.

And he's having real people do his work. You know, politics is so distrusted right now. Politicians have credibility ratings somewhere below zero on the Kelvin scale where nitrogen freezes. So, by using real people to level his charges, he makes a very effective ad.

BLITZER: They seem, Donna, to be competing with each other, all the Republican candidates, to say as nasty things as possible against the president of the United States. Is that going to potentially backfire, though?

DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Well, in the short term, Wolf, they're trying to appeal to the Tea Party and other conservative members of the Republican Party. They're not really coming up with a message or even an economic plan to appeal to the Independents or swing voters or disaffected Democrats.

In the short term, that might get the Tea Party members shouting about one of the candidates. After all, their only goal is to defeat President Obama. They're not interested in long-term economic growth or even short-term economic growth.

I think the important thing to understand is that, as governor of Massachusetts, Mitt Romney had one of the lowest growth rates, and as the president of Bain Capital, he was also accused of outsourcing American jobs and losing American jobs. So he's the last person that should be giving President Obama or anyone else a lecture about job creation.

CASTELLANOS: Wolf, let's not --

BLITZER: What's interesting, Alex -- Alex, hold on a second. What's interesting is that Rick Perry is not reluctant at all to criticize Mitt Romney, but Mitt Romney is trying to take the high road. Let me play this little clip. Here's Mitt Romney.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Governor Perry and I are going to have plenty of opportunities to contrast our experience and our vision for the nation when we have our debates. There are going to be a lot of those. My guess is 10 or 15 before this is over.

But at this stage, all I've got to say about Governor Perry is he's a fine guy, a fine governor. I respect him. I look forward to seeing him on the trail and at the debates.

(END VIDEO CLIP)

BLITZER: So, Alex, is that smart for Rick Perry? He's already punching to a certain degree Mitt Romney. And Mitt Romney is saying he's a fine guy, he's a great guy, not really responding in kind. Is that smart on the part of Mitt Romney?

CASTELLANOS: It's smart on the part of Romney and Perry. Perry is trying to crawl into the ring with Romney and get that debate going. And, of course, what's Romney doing? Turning his back on that and getting the spotlight on the contest between him and the president.

So, yes, it's kind of classic politics. But one thing -- as much as I love Donna, which I do, let's not say that Republicans don't care about the economy and Republicans want to push the economy off the cliff for political gain. That's no different than Rick Perry saying that someone is treasonous. Let's all agree that we have good motives here, we just have very different ways that we want to grow this economy, Republicans do, than a president who seems to want to spend it into prosperity, and Republicans think the opposite.

BRAZILE: Well, you know, Alex, one of the frustrations I think many Democrats have been experiencing is that the Republicans will lie in order to try to get to the truth. The truth is, is that we've created two million private sector jobs. But with all of the focus on cutting spending, slashing programs, we have lost hundreds of thousands of public sector jobs.

So, if the Republicans are interested in working with this president on job creation, then come back and stop all of the fussing, no more hostage-taking. Go ahead and pass some of these initiatives, whether it's the trade agreements, patent reform, the payroll tax. I think the president has to go beyond that and use every tool available in the economic recovery box, but if the Republicans are interested, then they need to put up and just stop complaining as well.

BLITZER: All right.

Alex, listen to Michele Bachmann talking about the economy, because she's saying, you know what? This is not brain surgery or anything. Listen to this.

(BEGIN VIDEO CLIP)

BACHMANN: The good news in all of this is this: it really isn't that hard to turn the economy around. It seems like it's so complicated, but quite honestly, it would be a pleasure. All you have to do is prioritize spending and put a cap on it and say that's it and no more!

(END VIDEO CLIP)

BLITZER: Alex, what do you think about that, it's really not that hard to turn the economy around?

CASTELLANOS: I think Michele Bachmann is primarily a social conservative, and when she gets out of her range into the economy, she doesn't appear to be that comfortable or competent in it.

The point she's trying to make, and I think a opponent that addresses Donna's concerns, Republicans do have an idea about how to grow the economy and how to turn this thing around. And the big things are actually very simple and straightforward things.

Instead of sending our money to Washington and trying to grow the economy politically and artificially from there, let's leave the money in people's pockets, take money from Washington, and try to grow the economy bottom-up, naturally and organically. Republicans do have a way to, I think, address exactly what Donna's talking about.

And it turns out to be the president who said he's going to -- when he gets back from his bus tour in September, that's when he'll have some real ideas. Right now he's riding around in a bus that's empty of deliverables, and I don't think it's helping him politically.

BLITZER: All right.

BRAZILE: Well, let me just say this about Michele Bachmann.

BLITZER: All right. Go ahead, Donna, very quickly.

BRAZILE: She can't figure out the truth. When all of these cuts finally go through, non-defense discretionary spending will be back to what it was in the 1950s. That should give Republicans some comfort because they like to look backwards.

The truth is, why don't we stop shipping jobs overseas, close all these corporate loopholes? Let's focus on the private sector. Let's see if the small businesses can create more jobs. One job, every small business in this country, that's six million Americans put back to work.

Let's look at the infrastructure. The private sector is willing to invest with the government. There are lots of ideas on the table. We need to put aside partisanship, ideology, and focus on the American people.

That's all we're talking about, Alex.

(CROSSTALK)

BLITZER: All right. Hold your thoughts. Hold your thoughts, guys, because we've got to move on.

Alex, Donna -- guys, thanks very much.

More of my interview, a candid conversation I had with the president of the United States today, including what he plans to get Sasha and Malia -- when, he says, not if -- when he's reelected. The full interview coming up right at the top of the hour. Stand by for that.

Plus, the little known secret behind products that are made in China and what it could mean for you.

Stay with us. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: There's been lots of backlash here in the United States against buying goods with the label "Made in China," but a new report finds most of the money tied to those products is actually winding up in American hands.

Mary Snow is joining us from New York. She's got details -- Mary.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, these findings seem to buck conventional wisdom. This study was done at the Federal Reserve Bank of San Francisco. One of its authors says while it might seem surprising at first glance, a closer look shows that not as much money goes to China as you might think.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Walk through a toy store like this one and just about everything here seems to be made in China, even Captain America.

(on camera): How many of the products that you sell are made in China?

DONNA SCHOFIELD, OWNER, STATIONERY & TOY WORLD: I would probably say about 90 percent.

SNOW: Ninety?

SCHOFIELD: Yes, made in China. Everything is made in China. It's cheaper to produce and manufacture the stuff in China, and I guess that's where everybody goes.

SNOW (voice-over): And while everything from toys to electronics are being made in China, not as much money as you might expect goes abroad. That's according to economists at the Federal Reserve Bank of San Francisco. They found that Chinese goods ranging from furniture to clothes and shoes only make up 2.7 percent of U.S. personal consumption expenditures. Economists say most of the money goes to the U.S. because of the services tied to those goods.

GALINA HALE, FEDERAL RESERVE BANK OF SAN FRANCISCO: When the goods arrive, it needs to be transported, it needs to be insured, it needs to be shelved, stored. And people who do it need to be paid, and the retail space needs to be paid for it.

SNOW: Economist Galina Hale says for every dollar spent on a product made in China, 55 cents goes toward those services produced in the U.S., while 45 cents goes to China.

But not everyone is buying it, including Michael Mandel of the Progressive Policy Institute, who calls the data misleading.

MICHAEL MANDEL, PROGRESSIVE POLICY INST.: The data that the San Francisco Fed economists were using seems to show that the impact of imports on the economy is not as big as people think, but the fact is all you have to do is look at the lost jobs and you understand that the impact is quite large.

(END VIDEOTAPE)

SNOW: And, in fact, jobs lost to China are not part of this study. San Francisco Fed economists say they only looked at consumer consumption and that they stand by their numbers, saying they wanted to provide calculations on how consumer spending is distributed -- Wolf.

BLITZER: Mary Snow in New York for us.

Thank you.

Stand by for more of the substance and the flavor of my interview with President Obama.

(BEGIN VIDEO CLIP)

OBAMA: Wolf.

BLITZER: Mr. President.

OBAMA: Good to see you.

BLITZER: Welcome to Iowa.

(END VIDEO CLIP)

BLITZER: After our initial warm-up, some tough questions, including the risk of a terror attack in this country.

Stand by. The full interview coming up right at the top of the hour.

And on a lighter side, President Obama reveals the present he'd give his two daughters if he wins reelection

(COMMERCIAL BREAK)

BLITZER: We're back in beautiful Peosta, Iowa, where we were watching the president of the United States.

Let's go to Jack Cafferty though. He's got "The Cafferty File" -- Jack.

CAFFERTY: A bucolic setting.

The question this hour: Is Ron Paul the only grownup running for president on the Republican side?

Jaret writes, "Yes. The real question is, are Americans ready to put on their big boy pants and accept some of the truths Ron Paul has been telling us for decades? We're broke, our wars are a racket, the Fed is destroying our currency, the Congress is ripping us off, the threat of terrorism has been exaggerated. We're never going to agree on everything, so let's focus on agreeing on one thing, that we should all be free."

Andy writes, "The only grownup? I don't know. What I do know is he gets little or no media coverage even after he practically tied Michele Bachmann in the Ames Straw Poll, and that's her home turf."

Jeff writes, "An adult would not advocate some of the insane policies that Ron Paul does, though he is deserving of respect for the consistency of his views."

Tony writes, "Not only is Dr. Paul the only grownup in the race, he's the only candidate who is mature enough to tell us the truth, even if it's unpleasant. After listening to him, I'm reminded that there are still good leaders out there who actually want us to be free and live in peace. Refreshing to hear an honest, unscripted, heartfelt candidate who speaks passionately and truthfully about the issues that matter to us all."

Tommy writes from North Carolina on Facebook, "Ron Paul is not the only adult in the Republican race, just the only honest one."

And Tony in Topeka writes, "He might not be the only adult, but I can't think of another. By the way, Jack, I think the real question should be: Why is the media not covering Congressman Paul?"

"Jon Stewart did an amazing piece on his 'Daily Show' last night. Sometimes I wonder whose side the media is on."

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

BLITZER: I know he has a lot of ardent, passionate supporters. I hear from them every single day, Jack.

Thanks very much for that question.