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President Present Deficit Reduction Plan; Director of National Economic Council Gene Sperling Interviewed; Palestinian Authority President Announces Plan to Apply to U.N. for Palestinian Statehood; Republicans Blast President Obama on Israel; GOP Action Could Alter Pennsylvania's Electoral Vote Policy; "This is Not Class Warfare, It's Math;" "Like Giving An Addict More Cocaine;" Do Rich Pay Less Tax Than Middle Class?

Aired September 19, 2011 - 17:00   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: Brooke, thanks very much.

Happening now, President Obama says it's time to do what's right, unveiling a

Controversial plan for unveiling the debt, in part, of the backs of the country's wealthiest Americans.

Is this a form of class warfare, as top Republicans charge?

We're drilling down.

Plus, my special interview this hour with the Republican presidential candidate, Michele Bachmann. She's weighing in on the president's plan, as well as the political firestorm she ignited at CNN's Republican presidential debate.

Was it a mistake to suggest the HPV vaccine can cause mental retardation?

And the world takes center stage right here in New York City, where more than 100 global leaders are gathering right now for the 66th annual U.N. General Assembly. Ahead, why the stakes couldn't be higher for the United States.

I'm Wolf Blitzer at the U.N.

You're in THE SITUATION ROOM.

You're looking at a live picture from the United Nations, where all eyes right now are on this year's General Assembly. President Obama and the first lady, Michelle Obama, expected to arrive in New York only minutes from now.

At issue for the United States and much of the world this week, a showdown over the Middle East. The Palestinian Authority president, Mahmoud Abbas, vowing to submit a formal application for statehood to the United Nations' Security Council, a move that could send shockwaves through the peace process and have serious implications for the U.S. relationships with Israel and the Arab world. Much more on this part of the story coming up.

But let's get right now to the president's plan to slash trillions of dollars from the national debt, a plan which he says would do the right thing.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Either we ask the wealthiest Americans it pay their fair share of taxes or we're going to have to ask seniors to pay more for Medicare. We can't afford do both.

Either we gut education and medical research or we've got to reform the tax code so that the most profitable corporations have to give up tax loopholes that other companies don't get. We can't afford to do both.

This is not class warfare, it's math.

(END VIDEO CLIP)

BLITZER: The president is proposing roughly $3 trillion in savings, which includes $1.5 trillion in new taxes, primarily on the wealthiest Americans, as well as a tax surcharge on millionaires named for the business giant Warren Buffett, who says the rich aren't paying enough in taxes.

Also included, $580 billion in mandatory cuts to programs like Medicare and Medicaid and another $1.1 trillion in savings. That would come from winding down the wars in Iraq and Afghanistan.

The president's plan does not include any changes to Social Security or the Medicare eligibility age, both of which are fiercely opposed by Democrats and many Republicans, as well.

Meanwhile, Republicans in the battleground state of Pennsylvania are thinking about changing why electoral votes are awarded in the presidential election. It would be a dramatic move that could hurt President Obama in 2012, or potentially backfire on the GOP.

I'm going to get to much more on that part of the story coming up.

But I want Republican reaction to what's coming up right now, Republican reaction to the president's latest deficit reduction initiative.

Our Congressional correspondent, Kate Bolduan, is standing by with that -- Kate.

KATE BOLDUAN, CNN CORRESPONDENT: Hey there, Wolf.

Well, Republicans -- some Republicans today called the president's proposal "class warfare." And that is just one way House Speaker John Boehner described the president's deficit reduction plan, as he dismissed it today.

(BEGIN VIDEOTAPE)

BOLDUAN (voice-over): As quickly as the president laid out his proposal for reducing the country's deficits, Congressional Republicans were lining up to knock it down.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I understand that it's easier to go out there and talk about taxing of billionaires. Listen, if they want to pay more, there's a special provision in the tax code for them to write a check to the federal government.

BOLDUAN: Speaking to business leaders in Cincinnati, House Speaker John Boehner slammed the president's call for the so-called super committee to approve $1.5 trillion in tax increases.

BOEHNER: At a time when it's spending that's out of control, giving the federal government more money would be like giving a cocaine addict, all right, more cocaine. We've got to get spending under control. And the way to raise revenues is to get our economy moving again and get more Americans off of unemployment, off of food stamps and back doing real work.

BOLDUAN: Adding to the GOP push-back, statement after statement Monday from House and Senate Republicans criticizing the president's pitch.

The top Republican in the Senate, Mitch McConnell saying, quote, "Veto threats, a massive tax hike, phantom savings and punting on entitlement reform is not a recipe for economic or job growth or even meaningful deficit reduction."

But the president's fellow Democrats were supportive.

SEN. HARRY REID (D-NV), MAJORITY LEADER: It's a strategy to cut the deficit by more than $4 trillion over the next decade and to do it fairly.

BOLDUAN: President Obama seemed to anticipate the sharp criticism from the Republican side of the aisle, turning his focus directly on the House speaker, who just days earlier, made clear tax hikes are still not an option.

OBAMA: So the speaker says we can't have it my way or the highway and then basically says, my way or the highway. That's not smart. It's not right.

(END VIDEO TAPE)

BOLDUAN: Now it seems both men, President Obama and House Speaker John Boehner, have both drawn lines in the sand and at the same time, calling on the other to not do just that.

It's clear that war of words will, no doubt, continue. But the real pressure now, Wolf, is on the so-called super committee. These members have to come up with a deficit reduction plan with more than a trillion in savings that will get majority support this the committee, as well as in the Congress. And they have to do it soon. If today is any signal, that job just got a little harder -- Wolf.

BLITZER: They have to do it by Thanksgiving, by the Thanksgiving break the end of November, so they don't have a lot of time, either, to do all of that.

And very quickly, Harry Reid, the Senate majority leader, is it true he doesn't even want to take up the president's $500 million jobs bill until next month?

Given the urgency of the situation, I was a little surprised to hear that.

What are they saying?

BOLDUAN: There's a lot of conversations about scheduling up here, Wolf. We knew that the -- that Harry Reid has said that he is interested in taking up the measure and looking at the measure, but has said there are many immediate concerns that the Senate needs to take up having to do with some of the issues they dealt with last week. But one of the issues they're really looking at right now, something that both Democrats and Republicans support very much and want to see approved are these three pending trade deals. Both sides have said this will boost the economy. Both sides have said that it's very urgent that the Congress deals with this in a very short -- short matter.

And so we know that the Senate majority leader has said that there are many items lining up that they need to take on. And he -- I think he's trying to deal with that, as well as the politics of the day that you have to deal with everyday up here -- Wolf.

BLITZER: Not an easy chore by any means.

All right, Kate, thanks very much.

Here's a question -- is President Obama right to suggest that the current tax system isn't fair to all Americans?

Our own Lisa Sylvester is drilling down on that part of the president's plan, known as the Buffett Rule -- Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, Warren Buffett has said that the mega wealthy, they actually pay a lower rate of taxes than many of the people who are working for them. And this is something that President Obama has picked up on, saying it's a basic issue of fairness.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Call it the Warren Buffett Rule, Warren Buffet saying his secretary shouldn't pay more in taxes than he does.

But is it true?

Do millionaires and billionaires in this country pay a lower tax rate than middle class families?

Well, it depends.

Let's say you have Sue. She makes a nice salary of $1 million, putting her in the 35 percent tax bracket. Jill makes $50,000 a year, or the 25 percent tax bracket. Between those two, Sue is making more and paying more in taxes.

But now let's add in Rita. She's done very well for herself and doesn't actually have a regular job. She lives off her investments and makes $1 million. She actually pays a lower tax rate than both Sue and Jill, of 15 percent on dividends and capital gains.

That's what President Obama wants to change.

OBAMA: It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.

SYLVESTER: The reality is about 46 percent of American households paid no federal income tax in 2011, in part because of home mortgage deductions, the child tax credit, education credits and credits for the working poor. The true burden of who pays the highest share of taxes in the United States is really the upper middle class and moderately wealthy families.

According to the IRS data, people making between $100,000 and $200,000 a year pay 25 percent of the share of income taxes. People making between $200,000 and $500,000 a year pay about 20 percent of the total. That's almost half of the taxes combined.

But that's not to say the rich get off Scot free.

Scott Hodge, Tax foundation: There are roughly 235,000 millionaires in America. And they paid $177 billion in income taxes in 2009. That's an average tax payment of over $750,000 each.

SYLVESTER: How much money would the president's tax proposal on millionaires raise for the government and what would it look like?

The Obama administration is leaving those questions for Congress.

TIMOTHY GEITHNER, SECRETARY OF THE TREASURY: We're not going to give to the Congress a detailed proposal for how to meet that specific principle now, because there's lots of different ways to do that. But we think it should be the basic foundation of tax reform. And we're going to fight to make sure that's part of what Congress considers and ultimately delivers.

(END VIDEO TAPE)

SYLVESTER: Conservatives and Republicans argue the reason the capital gains tax rate is 15 percent is because it's supposed to encourage investment and savings and the last thing you do is create a disincentive. The other argument that you're going to be hearing from Republicans is that, yes, there is a 15 percent rate on capital gains, but for wealthy individuals who have their own corporations, essentially your Warren Buffetts of the world, well, their income -- their company's income has already been taxed at a 35 percent rate and then on top of that, there's the 15 percent capital gains.

You know, of course, Wolf, Democrats have a very different perspective on this and that is where the fault line is -- Wolf.

BLITZER: They certainly do. This debate is only just beginning. We've heard a lot, but we're going to hear a lot more.

The president's debt plan already making big waves out there on the campaign trail, as well. The Republican presidential candidate, Michele Bachmann, says -- and I'm quoting her now -- "If Warren Buffett believes he doesn't pay enough taxes, then he should write a check today to the U.S. Treasury."

The Texas governor, Rick Perry, calls it -- and I'm quoting him -- "A bait and switch strategy that penalizes investment."

Mitt Romney says "This higher taxes means fewer jobs. It's that simple."

We're going to have much more from Michele Bachmann. She'll be my guest here in THE SITUATION ROOM. That's coming up in the next hour.

Coming up right now, Jack Cafferty.

He's here in New York with The Cafferty File -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Texas Governor Rick Perry loves to talk about all the jobs he's created in Texas. But that's only part of the story And it's a bit misleading, at that.

The other part of the Perry job story is that nearly one in five Texans in the state where the governor lives, live below the poverty line And that poverty rate is growing faster in Texas than the national average.

CNNMoney has got a story that Texas ranks sixth in terms of people living in poverty.

Both demographic and economic factors play into the high poverty rate. More than half the the people in the state are minorities. Many Texans have little education, especially in Southern Texas.

A lot of families live a shanty housing -- no electricity, no indoor plumbing.

This is 2011.

Also, the poor in Texas don't get much help. The state has one of lowest rates of spending on its citizens per capita and it has the highest share of those without health insurance. Relatively few in Texas collect food stamps, even though many more qualify for them. And receiving cash assistance is difficult.

The experts say that part of the reason more people don't seek help in Texas is the mentality down there that you ought to pick yourself up by your own bootstraps.

For his part, Governor Perry says creating jobs is the best way it help his citizens. And it's true that Texas has created 40 percent of all of the job added in the country over the last two years.

But a lot of these new jobs are low paying ones. More than half a million workers in Texas last year were paid at or below the minimum wage of $7.25 an hour. That's just $15,000 a year for someone working full-time.

Texas has the highest percentage of minimum wage workers in the country, tying Mississippi, at nearly 10 percent.

With jobs and the economy sure to be issue one during the campaign next year, Here's the question -- How much will it hurt Rick Perry than nearly one in five Texans is living in poverty?

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

BLITZER: All right, Jack.

Thanks very much.

A good question.

By the way, I'm going to have a chance to ask the former president of the United States, Bill Clinton, about all of this, including U.S. poverty, the president's deficit plan, the Palestinian bid for statehood here at the United Nations, tomorrow here in THE SITUATION ROOM. I'll be interviewing the former president, Bill Clinton.

Meanwhile, growing concern the president's contentious debt plan is only going to lead to more political gridlock in Washington.

Just ahead, my interview with one of the president's top economic advisers, Gene Sperling. He's standing by live over at the White House.

Plus, protests here in New York on Wall Street entering a third day.

Should New Yorkers be worried at all about what's going on?

I'll ask the New York City police commissioner, Ray Kelly. He'll join us live here in New York, as well.

(COMMERCIAL BREAK)

BLITZER: President Obama unveiling his debt plan earlier in the day just as protests here in New York on Wall Street enter a third day. Hundreds turned out for the so-called "Occupy Wall Street" demonstration, an effort targeting what they describe as corporate greed.

Let's get some more on the president's latest debt plan. Joining us from the White House, the director of president's National Economic Council Gene Sperling. Gene, thanks very much for coming in. Lots to discuss, not a whole lot of time. So let me go right to the issue of Social Security. A lot of reform ideas. But he didn't touch Social Security at all. Why?

GENE SPERLING, DIRECTOR, NATIONAL ECONOMIC COUNCIL: The president made clear in his remarks today that he does consider one of our great long-term challenges to protect the sol solvency of Social Security and make sure it is there, a progressive rock solid benefits to come. But long-term solvency over 57 years within, he wants to work with Democrats and Republicans.

This plan is about making sure that as we have a powerful plan for job creation and growth, with the American jobs act, we also have a plan for long-term confidence we are getting our fiscal house in order. Living within our means and bringing our debt down as a percentage of our economy. That's what this plan does together. That's exactly what our economy needs at this moment.

BLITZER: The republicans saying the president punted effectively as well when it comes to Medicare and Medicaid, the other major entitlement expenditures which amount it a huge percentage of the U.S. annual budget that the recommendations of the president made were relatively modest. I want you to respond to that criticism which is already coming in.

SPERLING: I don't think that many people would think that proposing $320 billion of Medicare and Medicaid savings in the next ten years is modest. It is significant but let's be clear. We are trying to save the Medicare as we know it, not end Medicare as we know it. We are put programs that will reduce waste, that will reduce unnecessary costs we do not need.

The president has showed a lot of political courage and being willing to say, that those under 60, new beneficiaries and they retire, they might have to face slightly better incentives to make sure they're not overusing Medicare costs. So I think it's a comprehensive plan, 320 billion, specifics, details. I think is very important and it will increase the solvency, life of Medicare.

BLITZER: Yes, I guess what they are complaining about is no specific recommendations to raise the retirement age for eligibility for Medicare from 65 to 67 or change their cost of living index to make -- to save somebody that way or means testing for that matter. In other words, richer recipients would get less than middle class recipients. You've heard those criticisms as well.

SPERLING: That's just saying we didn't do one two of their ideas. It doesn't mean the president doesn't have a specific and details and courageous plan. He does ask in this plan those who are in the top three or four percent, Medicare beneficiaries, couples making over $170,000, they have to pay pour more for their Medicare in the future. He was clear on that. He said that people in my age, when we get in Medicare, we have to pay a little extra if we want to get a Medigap a policy that will cover all our costs and encourage overutilization. Those are very specific plans. And I have never seen any democratic president or Republican president for that matter talk about at the level of detail he did.

So just because he didn't agree with some of their proposals to maybe turn Medicare into a voucher or raise retirement to age 67 does not mean he did not put forward a very strong plan that is going to get a lot of criticism from other corners because he is being specific in detail.

But the president says no sacred cows. He was willing to do savings in Medicare just as he was willing to call for months most well off to pay their fair share as part after shared responsibility and bring our deficit down as we create jobs in the short term.

BLITZER: The president did make a very dramatic veto threat in his remarks today in the rose garden, saying he would veto anything -- I want you to elaborate for viewers out there, precisely what he wasn't when he said would he veto any cuts or any changes that entitlement spending, Medicare, Medicaid unless there were appropriate increases in taxes on wealthy Americans. But explain the nature of this veto threat.

SPERLING: The president always his number one principle is shared sacrifice and shared responsibility if we have shared prosperity. So the president again took on a lot of his own supporters in putting forward adjustments to Medicare for future beneficiaries. He was willing to do that because he thought it was part after responsible package.

But what he was making clear is that he is not going to make adjustments to Medicare beneficiaries if it is not part after package that asks the largest corporations and most well off Americans to be part of this deal.

So somebody comes and says, we're just going to cut benefits from Medicare, we will just make those adjustments, and then ask changes and potential sacrifices from seniors or the middle class and not sat same time ask the most well off to do their share. That's not acceptable. He will veto that.

But the president is also making clear as he us a have that we need a grand compromise. We have shared sacrifice. And I think the president led on this, and I will say the American public is overwhelmingly with him. They do not believe we should tame our debt on the backs of the seniors, middle class and poor. They think there should be shared sacrifice. And that does include asking those more well off, making $1 million or more, to pay their fair share. We will all benefit together if we can jump-start jobs and have a long-term plan to bring down our deficit.

BLITZER: We are out of time, Gene. But this does set the stage potentially for more gridlock in Washington, given the Republicans, especially if the House, their adamant refusal for any tax increases at all.

SPERLING: Let's just remember, speaker of the House had been willing to put revenue on the table in negotiations with the president. Over in the Senate there are many Republicans who have been willing to be part of the gang of six process, willing to put revenues on the table.

So let's just be clear. The president represents the main stream who wants a balanced plan that includes higher revenue and includes spending constraints. If there are some who don't want to do that, it is them, they who do not represent the spirit of compromise that the president is trying and I think the public is asking for.

BLITZER: General Sperling, the director of the National Economic Council at the White House. Gene, thanks very much.

SPERLING: Thank you.

BLITZER: Republican presidential candidates see a golden opportunity to get millions of votes they might not normally get. We will discuss what is going on in our strategy session.

Plus, President Obama may encounter an unexpected election challenge in a key battleground state. We'll explain what's going on. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: President Obama and other world leaders are coming here to New York for the 66th annual United Nations General Assembly. Secretary of the State Hillary Clinton is already here in New York. She is working furiously to try to avoid a high stakes international clash, international clash I should say, over Palestinian statehood. The Palestinian Authority President Mahmoud Abbas said today he will submit an application for statehood to the United Nations Security Council on Friday.

Joining us here in New York is our senior United Nations correspondent Richard Roth. Richard, walk us through as the stakes are really enormous right now, what we expect will happen in the coming days.

RICHARD ROTH, CNN SENIOR UNITED NATIONS CORRESPONDENT: Well, we got a big clue today that meeting you just saw of Secretary-General Ban Ki- moon, with Mr. Abbas, the leader of the Palestinians. According to the U.N., Abass will present his formal application for membership of Palestinians in the U.N. Friday, which is when the Palestinians plan to speak.

So nothing is expected, unless there is some dramatic development, until Friday. And he seems content, as he told the U.N. in effect, going to the Security Council, where a United States veto does loom.

The British foreign secretary, today, though, saying, Maybe you don't have the nine votes that you need -- nine yes votes, before there's any consideration of a veto. And the U.S. would certainly love to avoid putting the veto hammer down and inflaming Palestinians as they defend Israel. So we're not going to see any action until Friday. But as Secretary of State Hillary Clinton said a short time ago, a lot of negotiating and perhaps pressure is on the way headed for the Palestinians.

BLITZER: Are there nine members of the U.N. Security Council out of the -- you need nine, you said, right?

ROTH: You need nine "yes" votes.

BLITZER: Yes. Are there nine who will say no to the -- because, effectively, that tells the Palestinians, no formal recognition of a Palestinian state. Are there nine members of the Security Council? I know the United States will, but are there nine that will do that?

ROTH: It's very hazy. Not all of these countries have come out and said we want a Palestinian state. They may be supportive of a Palestinian state. They know what a diplomatic hot potato this is.

You've got European countries there, you've got African countries. The U.S. can lean on them. It hasn't always worked. That's what's happening.

BLITZER: You'll stay in touch with us throughout the week. We'll be here, you'll be here. We'll see what happens. The stakes are enormous, because clearly, if the U.S. does go ahead in the Security Council and vetoes such a resolution, there could be a very angry response throughout North Africa, the Middle East, throughout the Arab world. In fact, much of the world, and Obama administration very, very worried about that right now.

The president, by the way, has just landed in New York. He's going to be here at the United Nations this week as well.

The administration's commitment to Israel though, at the same time, is being questioned out there on the political campaign trail as Republican presidential candidates try to win over pro-Israeli voters.

CNN's Jim Acosta is picking up this part of the story for us from Washington -- Jim.

JIM ACOSTA, CNN CORRESPONDENT: Wolf, Republicans are trying to make the case President Obama has gone soft on Israel, and they would like to use the issue as a wedge to crack open a crucial voting bloc that largely sides with Democrats.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): When Republicans celebrated last week's special election victory in a heavily Jewish and normally Democratic congressional district in New York --

GOV. RICK PERRY (R-TX), PRESIDENTIAL CANDIDATE: The voters in New York sure got the message.

ACOSTA: -- Rick Perry was also cheering. He, like many Republicans, saw a golden opportunity -- the prospect attracting millions of Jewish voters who may be questioning the president's handling of Israel.

DAVID HARRIS, AJC EXECUTIVE DIRECTOR: There is elasticity. There are those who think that the president has not been close enough to Israel, has made some missteps, hasn't shown enough warmth toward Israel.

ACOSTA: Perry is using some tough Texas talk to criticize this week's expected Palestinian attempt to seek statehood at the United Nations General Assembly. In an op-ed to "The Jerusalem Post" and "The Wall Street Journal," Perry wrote, "Errors by the Obama administration have encouraged the Palestinians to take backward steps away from peace."

The GOP front-runner is no stranger to Israel.

PERRY: I hope most Americans realize that there's a part of the world where children are still being victimized.

ACOSTA: He is one of many leaders Republicans to make trips to the Jewish state, part of what some in Washington call the Israel primary. Mitt Romney, Mike Huckabee and Sarah Palin have all made pilgrimages this year.

SARAH PALIN (R), FMR. ALASKA GOVERNOR: I'm so excited to get to be here.

ACOSTA: When President Obama proposed last spring that Israel give up land and return to borders dating back to the 1967 war with its neighbors --

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The borders of Israel and Palestine should be based on the 1967 lines with mutually agreed swaps so that secure and recognized borders are established for both states.

ACOSTA: -- Huckabee pounced on his TV show.

MIKE HUCKABEE (R), FMR. ARKANSAS GOVERNOR: His shocking betrayal of Israel all but told them that the one friend they could count on had decided to take sides with the terrorists.

ACOSTA: For Republicans, it's also appeal to Christian conservatives who see themselves as defenders of the Holy Land.

UNIDENTIFIED MALE: It's very clear it say that day America turns its back on Israel, God will turn its back on America.

ACOSTA: President Obama won nearly 80 percent of the Jewish vote in 2008. According to the latest Gallup poll, that support is down to 54 percent. But the drop mirrors the president's decline among all voters.

The White House maintains its support for Israel is rock solid.

THOMAS DONILON, NATIONAL SECURITY ADVISER: The United States is absolutely committed to the security of Israel.

(END VIDEOTAPE)

ACOSTA: Rick Perry is expected to sound off once again on the Palestinian issue tomorrow. He is traveling to New York to meet with Jewish leaders, and he's going to be taking this race to the Israel primary to a big international stage at a delicate time for Mideast peace -- Wolf.

BLITZER: It's a sensitive moment, indeed.

All right. Thanks very much, Jim, for that.

I'll get a chance, by the way, to speak about this and a lot more with the former president of the United States. Bill Clinton will talk about a Palestinian bid for statehood and much more tomorrow, right here in THE SITUATION ROOM. He is hosting his Clinton Global Initiative during this week in New York as well.

Just days after a horrific crash at an air show out in Nevada, investigators are hoping that new evidence will show them what happened. We have details on what they've already found.

And after making headlines a year ago, the staff of the controversial Islamic Center near Ground Zero says it's taking a huge step forward. What they're doing less than 48 hours from now, we'll have that and much more right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: We're getting some new information into THE SITUATION ROOM just now on the fate of a death row inmate in Georgia.

Lisa Sylvester is monitoring that and some of the other top stories in THE SITUATION ROOM.

What's the latest, Lisa?

SYLVESTER: Hi there, Wolf.

Well, this just in. The fate of this man, Troy Davis, is now in the hands of a Georgia parole board. In 48 hours, Davis is set to die by lethal injection for the murder of a police officer 22 years ago.

The prosecution wrapped up its argument as supporters gathered outside the hearing. Since his conviction in 1991, though, several witnesses have recanted or contradicted their testimony, and his execution has been delayed three times.

At least three people are dead after a 5.8 magnitude earthquake rattled Guatemala this afternoon. A spokeswoman for the president says people are buried in the rubble. The U.S. Geological Survey says the quake struck about 32 miles southeast of the capital.

And the death toll is rising after a horrific crash at an air show in Nevada. A 10th person has now died after a World War II airplane plummeted into the crowd Friday. Investigators with the National Transportation Safety Board say the plane had data and video recorders and that they have found several memory cards in the debris. And they hope it will determine why the plane crashed.

And one week after the unveiling of the World Trade Center Memorial in New York, another grand opening is happening just a few blocks away, and it is stirring controversy. The first part of a planned Islamic center is set to open this week with an art exhibit. The center caused a heated debate last year over whether it was insensitive to those so close to where the twin towers once stood -- Wolf.

BLITZER: Lisa, thank you.

Millionaires and billionaires paying a smaller tax rate than their secretaries. That's the message in President Obama's debt plan. Is it a winning political strategy right now?

Stand by. We'll discuss.

And stories of dramatic infighting and indecision inside the Obama White House. Ahead, we have details of an explosive new book.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session." Joining us, the Republican strategist Mary Matalin and CNN political contributor Roland Martin.

Mary, forget about the substance, the economic substance, for a moment. Let's talk about the politics of it right now. Is it a winning strategy for the president to say, you know what, there should be a Buffett Rule that millionaires don't pay a lower tax rate than their secretaries?

MARY MATALIN, CNN POLITICAL CONTRIBUTOR: Well, it's a class warfare message. And I believe the White House has not only signaled, they said they need to reactivate and reenergize their base.

Is it a winning strategy? They need to get their base to add on to, so it probably does energize their base. But as Mark Penn, who is a longtime Democratic strategist said, that class warfare reelection strategy has not worked, did not work for Kerry, or Gore before him, or Mondale way back when.

The only reelection strategy that's worked for Democrats in the 20th century since FDR is the one that President Clinton did for his reelection, which was to pull away from class warfare language. So if the Democratic strategists are to be believed, it might be good short- term base politics, but not a good long-term reelection strategy.

BLITZER: All right.

Roland, do you agree?

ROLAND MARTIN, CNN POLITICAL CONTRIBUTOR: First of all, quoting Mark Penn, that's the last person anybody should quote when it comes to a winning strategy. Ask Senator Hillary Clinton how that went.

Look, the bottom line is here -- a new CNN poll is very clear when it comes to this. Should the deficit reduction bill increase taxes on businesses and higher income Americans? Sixty-three percent in this poll say yes.

The problem you have is you have Republicans who say forget anything else, we simply want everything that we desire and not you. And the president made the effort when it came to the debt ceiling debate and they still said no.

And so this is smart move by the president. And again, polling is there, but also, you have Americans out there who are saying, wait a minute, stop trying to say cut, cut, cut to the poor and the middle class when you want to sit here, the GOP. Defend fat cats. Absolutely, it's a smart political move.

BLITZER: The polls do show, Mary, that this issue of raising taxes for the rich, eliminating some of those corporate tax breaks for big corporations, on these issues, the overwhelming majority of American public is with the president and the Democrats, as opposed to the Republicans.

MATALIN: If you ask the same Republicans, particularly if you ask Independents, would you want to raise taxes on job creators, those numbers would absolutely flip. If you ask them, do you want to penalize self-made successes like Roland Martin, they would say absolutely not.

These are the same policies that this president opposed only nine months ago because he said they would hurt the recovery. We are in less of a recovery than we were when he previously opposed raising taxes.

You don't raise taxes in a recession. So it's a political message. I get it, but it's very bad economic policy and it's not going to go anywhere.

BLITZER: Roland, will this latest proposal that the president put forward today, his jobs creation plan last week, is this going to solidify his base, get all those nervous Democrats on his left back in the fold, if you will?

MARTIN: Well, first of all, Democrats, part of the problem is they are always nervous Nellies and they have no ideas when it comes to unification. And so there is no doubt it's going to help the base. But also, Wolf, this is the most important -- this is also going to resonate, I also believe, with Independents.

And I think the president and his administration should do something different. Don't just go to Ohio or go to North Carolina or go to Florida or Pennsylvania. Last week, the Census Bureau talked about the 10 poorest states in the union, and most of those are red states.

So I say to the president, take the message to Mississippi, to Alabama, Louisiana, West Virginia. Take it to those states -- Alaska. Those are the bottom 10 poor states, and tell the GOP, to those people, defend the rich in the face of the very people who keep putting you in office. Be more aggressive with that kind of messaging, and I think he will gain some traction with Independents.

MATALIN: I say, you know what? Come on down. Roland, come on down, and you say to these hardworking people who know --

MARTIN: It's a poor state, Louisiana.

MATALIN: -- who is providing jobs if they want to tax those job creators out of existence -- because a lot of Obama's policies have done that in this state -- then they say no. If you think he's going to get support in these states, come on down. Come on down.

MARTIN: And I'm sure the poor in Louisiana are sitting here saying to the people who keep sitting here cutting their jobs, oh, yes, we're going to keep supporting you. I say be aggressive and challenge them on their own turf and say you have no plan when it comes to the poor, you have no plan when it comes to helping the middle class, but what you are using are simply poll-driven phrases like "class warfare," like "job-killing regulations," in order to appeal to the same very people.

BLITZER: A bold proposal by Roland Martin.

Roland, don't be surprised. I suspect the president and his Democratic strategists are not going to follow your advice, but we'll see.

(CROSSTALK)

MARTIN: They should. They should.

BLITZER: Guys, thanks very much. Mary, Rolland, good to have you both here in THE SITUATION ROOM.

Here's another question. How much will it hurt Rick Perry that nearly one in five Texans are living in poverty? That's Jack's question. He's coming up with your e-mail.

And could massive riots break out in New York over the struggling economy? The city's police commissioner, Ray Kelly, he's standing by to join us live.

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty's back with "The Cafferty File" -- Jack.

CAFFERTY: The question this hour, Wolf, is: How much is it going to hurt Governor Rick Perry of Texas that nearly one in five Texans is living in poverty?

Tom in Texas writes, "Twenty percent in poverty? It looks to me like Perry is cooking the books to try to look good. Unfortunately, he apparently thinks 20 percent in poverty is OK." "In the decade we've been subjected to him, I believe it's gotten worse. Perry seems to want to reduce the rest of country to the 20 percent poverty level he's worked so hard to create here. Perry is nothing more than George W. Bush with some personality."

Laura writes, "You could afford to live in Texas on lower wages. That's what the New York/D.C. media don't understand. You may not have noticed, but the Bureau of Labor Statistics breaks down the unemployment by educational attainment."

"The unemployment rate for people with no high diploma, 14.3 percent. The unemployment rate for people with a four-year college degree, 4.3 percent. For which group do you think jobs need to be created?"

"The jobs needed are more of the lower-paying jobs. And Perry's state, Texas, may be creating the jobs that need to be created."

Janne in North Carolina writes, "Rick Perry is only responsible for the poverty in one state. How much does it hurt Obama that the percentage of Americans living in poverty nationwide last year rose to the highest level since 1993? I don't think poverty levels increasing is a fight the Democrats really want to have."

Shannon on Facebook writes, "I doubt it will hurt Perry in the Republican primaries because they'll believe anything that he feeds to them. However, it will hurt him big time in the general election because Independents like myself pay close attention to things like that."

And John in Alabama, "Let's do the math. Twenty percent of the population of Texas lives below the poverty line. One in four Texans has no health insurance. The entire state just burned to the ground. I think the governor of Texas might want to improve the lives of Texans before he moves on to bigger and better challenges."

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

BLITZER: Thanks very much, Jack. Stand by also.

Meanwhile, a possible rules change in a key battleground state, how that potentially could hurt President Obama's reelection effort. We have some new information for you.

Plus, new details on an explosive new book which paints a picture of infighting, insubordination inside the Obama White House.

(COMMERCIAL BREAK)

BLITZER: Republicans in the battleground state of Pennsylvania are proposing changes which would be a dramatic move to try to hurt President Obama's re-election chances in 2012. Potentially, though, they could also backfire on the Republicans.

CNN's Tom Foreman is joining us to explain this complicated story. All right, Tom. Go ahead and explain.

TOM FOREMAN, CNN CORESPONDENT: Well, in a nutshell, Wolf, what they're saying is that they want to change their state from a winner- take-all system in the electoral college to dividing it up by congressional districts. Only two places do that right now, Nebraska and Maine, but that could have a real impact.

Look at the last election. Think about 2008. Barack Obama won 365 electoral votes; John McCain, 173 votes. A clear victory there, but let's look more specifically at what happened in Pennsylvania.

There, President Obama, because it was a winner-take-all system, got all 21 electoral votes. John McCain received zero votes here. They now have 20 electoral votes in Pennsylvania, by the way, after the Census, but they had 21 back then. This is what happened.

Look what happens though if you break it down by congressional district. Then you get a different picture.

John McCain won a lot of the real estate in this battleground state, but Barack Obama won these big population centers. Under this proposal by Republicans up there, which the governor likes, as well, they would say we're going to give each candidate one electoral vote for each congressional district that he or she wins, plus two additional votes for whichever candidate wins the popular vote in the state.

So, under that equation, instead of Barack Obama getting 21 votes, what would have happened is you would have had John McCain getting 10 electoral votes for what he won, Barack Obama getting nine electoral for the districts he won, then an additional two for winning the popular vote in the state, so 11, a net gain of one electoral vote.

You can see what a huge impact this would make. In fact, if Florida had this system back in 2000, Al Gore would have won the electoral vote and won the nation. Still, it's creating a big stir among Democrats and Republicans, not only for the obvious political implications, but because doing this, some would say, would make Pennsylvania no longer a big battleground state because it would be so balanced -- Wolf.

BLITZER: Tom Foreman, thank you.

And you're in THE SITUATION ROOM.