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THE SITUATION ROOM

Republicans Debate in Washington; Mitt Romney's Controversial Ad; Massive Defense Spending Cuts Looming; Directing Punches at Debates; Super Committee, Super Failure; Obama "Out Doing Other Things"; Checking in One Bag for Free; What's Most Important in a President?; Deadly Political Protests Rocking Cairo; American Students Arrested in Cairo; Interview with Jack Lew

Aired November 22, 2011 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now: the countdown to tonight's CNN Republican presidential debate.

It's the candidates' first match-up in the wake of a major upheaval that now has Newt Gingrich the man to beat tonight.

Also, Democratic outrage at Mitt Romney's first TV campaign ad. It's clearly misleading. We're going to show you what the controversy is all about.

Plus, three American college students arrested in Egypt amid flaring and deadly political upheaval. We're learning more about who these young men are and why their families right now are so frightened over their fate.

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

We're coming to you from Washington's historic Constitution Hall, site of tonight's CNN Republican presidential debate in which we will focus on national security and foreign policy.

In just under four hours, the candidates will walk on the stage. It's been 10 days since their last face-off and in that time, there have been some dramatic changes in the race. Newt Gingrich is now at the front of the pack, according to our new CNN/ORC poll, in a statistical dead heat with Mitt Romney.

And while his new top-tier status puts Gingrich in the spotlight, Romney is also getting a lot of attention right now for his first television campaign commercial, an ad that's misleading at best. Democrats are calling it -- quote -- "dishonest and deceitful."

CNN's Joe Johns is working the story for us.

Joe, what is this controversy all about?

JOE JOHNS, CNN SENIOR CORRESPONDENT: Well, Wolf, this is an ad essentially that was supposed to make the point that it's ironic that the president is defending himself on the economy when he was attacking Republicans on it three years ago. But that idea sort of took a detour. (BEGIN VIDEOTAPE)

JOHNS (voice-over): The magic of television brought to you by Republican presidential candidate Mitt Romney. A slick editing job makes a statement three years ago by Barack Obama sound like his personal belief.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If we keep talking about the economy, we're going to lose.

JOHNS: When it was actually a statement Obama had attributed to the campaign of his Republican opponent.

OBAMA: Senator McCain's campaign actually said -- and I quote -- "If we keep talking about the economy, we're going to lose."

JOHNS: But for the record, the Romney ad never mentions McCain at all. The Obama campaign hit the roof, calling it deceitful and dishonest, but what makes this shining moment in political history harder to believe than the average campaign shenanigans is that the Romney people say they did this on purpose.

That's right. Changing the meaning of Mr. Obama's statement was, in their view, not a mistake, though the explanation they gave us made little sense unless you ignore the truth or don't care about it.

ANDREA SAUL, MITT ROMNEY SPOKESWOMAN: We're on the attack here. We're turning President Obama's attack back at him. He criticized as a candidate his then opponent for not wanting to talk about the economy. And look where we are today. President Obama doesn't want to talk about the economy and his abysmal failed record in getting Americans back to work.

JOHNS: She kept saying that over and over again in the interview with us. The Romney campaign also issued a press release explaining the president's full quote, as if viewers of the ad were going to actually read a press release, as if Romney going on offense entitled him to change the transcript of the last election.

The independent fact checker PolitiFact called the ad ridiculously misleading. We asked the campaign if Romney thinks the guy in the White House should mislead people on TV.

SAUL: We're not misleading anyone. We are turning President Obama's attacks back on him.

JOHNS: So, what were they really doing? The answer might surprise you. Political analysts we spoke to and others said it looked like Romney baiting the Obama administration to come out and fight, and the Obama campaign took the bait.

GLENN KESSLER, "THE WASHINGTON POST": It wouldn't have got near the attention it got if the White House had not directly attacked the ad.

(END VIDEOTAPE) JOHNS: What the Romney people like is that their guy is now sparring with the president and talking about the economy, which makes their candidate look like the guy to take on the president -- Wolf.

BLITZER: Good report. Stand by.

I want to bring in two our of CNN political contributors. Paul Begala, he's a Democratic strategist, also works as a strategist for Democratic fund-raising groups, including Priorities USA and Priorities USA Action. And former Bush White House Press Secretary Ari Fleischer.

Paul, you have done a lot of political ads over the years. What do you think? What do you make? Is this a new low, in your opinion, or there have been a lot worse?

PAUL BEGALA, CNN POLITICAL ANALYST: There have been worse, but it is dishonest.

I have a very wide strike zone, very wide. And I can take advantage of it myself. But this is extraordinary. It's Romney's first major ad of the campaign and he is purposefully lying. He's taking -- the president didn't say today, if I talk about the economy, I'm going to lose. He might well be thinking that, but it's not what he said. He was talking four years ago and quoting a McCain aide.

And to leave that out, even for a guy with a wide strike zone, that's a really deceptive tactic.

BLITZER: Does he say at the end of the ad, "I'm Mitt Romney and I approved of this ad"?

ARI FLEISCHER, FORMER GEORGE W. BUSH WHITE HOUSE PRESS SECRETARY: I didn't hear if he did or if he didn't.

BLITZER: I think he does.

FLEISCHER: Wolf, there's no question the ad took the president's remarks out of context. They easily could have put into the ad, as he said about John McCain, and then showed the quote.

But it also reminds me kind of like the old adage a broken clock is still right twice a day. This ad doesn't get it right in that literal sense, but it is probably right that if Barack Obama is still having to talk about this economy from a year from now, he is in huge trouble, less than a year from now. He will be a former president.

BLITZER: Isn't it normal for these kinds of ads where they distort and take something totally out of context for some other outside group to do it, a supporter, if you will, but not the candidate himself who want to be president of the United States?

JOHNS: Absolutely.

And I remember occasions when something like that has happened and somebody has come out and at least made out like it was a mistake, even though they wanted to get this kind of a distortion out because they wanted it in people's heads.

This takes it a step further, really, by sort of saying, yes, we put it out there. It wasn't the way he said it, but here's what he said. And they actually put out a press release, which turns everybody's antenna up, yes.

BLITZER: Because they knew this was going to cause some controversy. So they were explaining in advance why they decided to do this.

BEGALA: In that sense, it's extraordinarily cynical, because they're now they're manipulating the media, because we want to cover the fight, we have to cover the fight. The Obama campaign says it's a lie. The Romney campaign says it's not.

But there's on objective reality here. It like if they went out and said the moon is made of green cheese, and the Obama campaign said, no, it's a rock. And we would say, candidates clash on lunar landscape.

No, it is a rock. This is a lie and I think we should say so.

(CROSSTALK)

FLEISCHER: In the course of a Republican primary, what he has done today is make this all about him vs. Barack Obama. Barack Obama's going to New Hampshire today and this coverage is not about his message in New Hampshire. It's about him being protested by Occupy Wall Street, his embracing them for protesting him, and then Mitt Romney.

Not a bad day for the Romney people when you add it all up, though.

BLITZER: The ThinkProgress, a liberal group, they put out a little parody of all of this. Let me play a little clip.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: We would just raise everybody's taxes.

There's nothing unique about the United States.

Government knows better than a free people how to guide an economy.

Fiscal responsibility is heartless and immoral.

Let us just raise your taxes some more. We just need a little bit more.

America's just another nation with a flag.

(END VIDEO CLIP)

BLITZER: "All quotes accurate by the standards of Mitt Romney."

What do you think of that? It's satire. It's cute. FLEISCHER: Yes, it's satire. It's funny.

But like I said, the thing about the Romney ad is, like a broken clock, it still is right about Barack Obama. He shouldn't have done it in the way he did it. He set himself up for criticism, but it's not that bad.

(CROSSTALK)

BLITZER: ... take quotes out of context?

BEGALA: You know, I hope not. This is again -- it's a bit of a character test for the Romney campaign. I think he's failed. If he should become president, you don't want to become president having proven you're not trustworthy. That's a bad thing.

And, yet, it's also a character test for the press, because instead of just holding their coats and saying you guys fight it out, I think responsible media -- and they are doing this today -- are saying this is a lie or this is deceptive, because it is. And there's been maybe some question as to whether TV stations will run it knowing that it's dishonest and deceptive.

BLITZER: All of stand by for -- you have another thought?

(CROSSTALK)

JOHNS: Just the notion and the question of whether the Obama campaign sort of ran into a trap by jumping out there and responding to this, rather than just letting it go, a lot of people say, if they hadn't responded to it, it would have been hardly a one-day story.

BLITZER: Guys, stand by, because we have a lot more to discuss. We're going to come back to Paul and Ari later here in THE SITUATION ROOM.

We will talk about Newt Gingrich. He is apparently the candidate to beat right now. Will he come under attack from his rivals at the debate later here tonight? Stand by.

And Gingrich's front-runner status is only part of the story coming in from our latest polls. Jack Cafferty is looking at what Republicans are saying about moral character.

Plus, we're learning more about three American college students arrested amid the deadly political protests in Egypt. Their families are now speaking out.

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

(COMMERCIAL BREAK)

BLITZER: Getting ready for the big Republican national security debate here at Constitution Hall. Stand by for that.

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

JACK CAFFERTY, CNN ANCHOR: Look forward to it, Wolf. Thanks.

As Newt Gingrich continues his meteoric rise in the polls, there's one key issue that could hold him back: character. Or will it?

A new Quinnipiac poll shows the former House Speaker scores higher than Mitt Romney on most key leadership traits, except for personal character.

For example, Republican voters say Newt Gingrich is a stronger leader than Romney by a margin of 34 percent to 24 percent.

They say he's stronger on foreign policy 46 percent to 16 percent.

And they say Gingrich has the right "knowledge and experience" to be president by 48 percent to 22 percent. These are huge margins.

But Gingrich trails Romney 32 percent to 9 percent when it comes to who has a "strong moral character."

A lot of that likely goes back to Gingrich's personal baggage, including his three marriages and his infidelity.

Overall, Gingrich is at the top of the Republican pack in this poll, 26 percent, compared to Romney's 22 percent, and the rest are also- rans. In a head-to-head matchup, Gingrich does even better. He tops Romney by 10 points.

But it might not matter. Even though Republicans find Gingrich competent and ready to deal with the nation's problems, they worry about his character, the family values party and all that, you know.

And this is at least part of the reason why by a double-digit margin, Republicans say that Romney has the best chance of beating President Obama; and by an overwhelming margin, they say Romney is most likely to be the Republican nominee.

It's interesting that at a time when our nation is facing a boatload of very, very serious problems, from the national debt to the economy, unemployment, the wars, a lot of people are more hung up on personal character on the ability to lead.

Here's the question: When it comes to being president, which is more important: the ability to solve the country's problems or personal character?

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

He's -- Gingrich has got to be causing some unease in the Romney household these days.

BLITZER: I think he's causing a lot of heartburn out there. You're absolutely right, Jack, and a great question. Anxious to hear what our viewers think about that as well. Thank you. CNN's Erin Burnett is here with me at Constitution Hall. We're counting down to the big debate tonight.

You will be broadcasting from here as well.

National security defense and yesterday, because of the failure of the super committee, we know there's supposed to be $600 billion over the next 10 years, starting in 2013 defense cuts. So you've been looking at this part of the story. What do you see?

ERIN BURNETT, HOST, CNN'S "ERIN BURNETT OUTFRONT": All right. So, you've got to add that to the cuts they've already agreed to. So, you get somewhere around $1 trillion. And that, of course, is what Defense Secretary Leon Panetta says is just absolutely unacceptable and would cost what he calls a howling out of the force.

Now, I've talked to a lot of defense analysts today. There would be real cuts, Wolf. We could see cuts of 100,000, 150,000 people in our Army. We could see cuts to Joint Strike Fighter, a new ground combat vehicle for the Army.

So, there would be real cuts, but there's also a lot of waste. When you look around the world, $1.5 trillion of spending a year on defense, more than half of that is spent by this country. We spend 10 times more than China, six times more than Russia. We spend a lot, so we can afford to make the cuts.

BLITZER: I think yesterday, Chris Lawrence, our Pentagon correspondent's piece, he said we spend more on defense in the United States than the next, what, 16, 17 countries combined.

BURNETT: It is. It's amazing. When you look at it that way and say, all right. We can -- we can make cuts and there's a lot of places you can identify.

But then there's another way to look at it, which is to say, well, defense is really important to the United States of America, to our economy. The military industrial complex provides a lot of jobs. So, when analysts look at these numbers and they look at the cuts, they say, you could see a cut to growth of a full percent, that's to say in 2013.

When you're looking at an economy right now that's barely struggling to grow at 2 percent, 2.5 percent, you realize that whether you like or not, defense is really important to economic growth. So, that's also important.

BLITZER: And this $600 billion cut, if it happens, and there are efforts to try to derail that even a year before they're supposed to begin, but remember, it's supposed to be over 10 years and it doesn't say that the defense cuts would have to take place in year one, year two. They could have modest cuts in years one through five and by then, and more significant.

(CROSSTALK) BLITZER: And by then, the whole political climate could change. So, I've been watching supposed defense cuts over the years going back to when I was a Pentagon correspondent. It never happens.

BURNETT: One thing that's interesting when you look at defense, though, the one area that they've been unable to touch is health care. And this is -- it's a third rail topic, but it's a topic that everybody says we have to address. When you talk about military members who come home or not injured, it goes into a certain budget. They see no increase in 10 or 15 years.

President Obama's trying to do it. President George W. Bush tried to do it and it didn't work. That is a huge amount of money every year. So, you're going to start to see defense -- health care tackled.

BLITZER: And in the next hour, we're going to be speaking with the chairman of the House Armed Services Committee. He says this $600 billion will never be cut. He's going to stop it. Do whatever he can to do it. We'll talk to him.

BURNETT: Boxing gloves with him versus the president, right?

BLITZER: Let's see what happens on that.

BURNETT: All right.

BLITZER: See you at 7:00 p.m. Eastern.

BURNETT: Good luck tonight, Wolf. We'll be counting on you.

BLITZER: Thank you very much.

Did Republican presidential candidate Michele Bachmann get dissed during an appearance on comedian Jimmy Fallon's talk show last night? You'll about to see the video. You'll decide for yourself.

Plus, a tear gas attack during a meeting of parliament.

That and more top stories when we come back.

(COMMERCIAL BREAK)

BLITZER: A dramatic new development in the growing Penn State University child sex abuse scandal.

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

Lisa, what's going on?

LISA SYLVESTER, CNN CORRESPONDENT: Hi, Wolf.

Well, this just into CNN: Two new cases of alleged child abuse against Jerry Sandusky have been opened by Children and Youth Services in Pennsylvania -- this according to sources close to the investigation. The cases were reported less than 60 days ago and it marks the first time cases involving Sandusky and currently underage children are being investigated. Sandusky is currently facing a number of other child sex abuse charges.

The Pakistan Taliban is unofficially declaring a ceasefire in one area of Pakistan. Taliban commanders tell CNN anonymously that it is in South Waziristan, the group's suspected leadership headquarters. They say it follows backchannel peace talks between intermediaries for the Pakistani government and Pakistani Taliban.

The Pakistani Taliban's official spokesman denies talks are taking place from the Pakistani government. They are also denying reports of talks.

South Korea's governing party managed to pass a controversial free trade agreement with the United States today despite scuffles and a tear gas attack in parliament. The U.S. ratified the agreement last month. South Korea estimates the trade deal will help boost its gross domestic product. But critics there argue it takes away the country's economic sovereignty.

And comedian Jimmy Fallon's band, the Roots, is getting heat for the song it played on last night's show to bring out guest, GOP presidential candidate Michele Bachmann. Watch and listen.

(BEGIN VIDEO CLIP)

JIMMY FALLON, COMEDIAN: Please welcome to the show, Minnesota Congresswoman Michele Bachmann.

(BAND PLAYING)

(END VIDEO CLIP)

SYLVESTER: OK. We are not going to tell you the full title of the song, but you might be able to figure it out. The song is Fishbone's "Lyin' expletive expletive". Roots' drummer Questlove tweeted before the show, quote, "You love it when we snark. This next one takes the cake." Today, Jimmy Fallon is tweeting. Quote, "@questlove is grounded."

So, there you have it, Wolf.

BLITZER: Got to be really careful with the music and the sound and the whole nine yards. It's very sensitive stuff out there. Thanks very much for that, Lisa.

Just a little more than three and a half hours from now, that's the start of tonight's Republican presidential debate on national security. You'll see it, hear it here on CNN. Will the candidates gang up on Newt Gingrich now that he is the front-runner? At least a front runner.

Paul Begala and Ari Fleischer, they are both coming back. Part two of our strategy as we get ready for the CNN national security debate from Constitution Hall here in Washington.

(COMMERCIAL BREAK)

BLITZER: You're looking at live picture of Constitution Hall here in the nation's capital, historic Constitution Hall. Every U.S. president since Calvin Coolidge has come here to Constitution Hall. We're only, what, a few, half a block or so away from the south lawn of the White House, not far away from the Washington Monument.

Eight Republican candidates will be up on the stage with me tonight, answering questioning on national security, foreign affairs and the economy. That debate coming up, 8:00 p.m. Eastern.

The Republican battle for the White House is shaping up to be anybody's game right now while Mitt Romney has been consistently at the front of the pack. A number of others are getting their time in the spotlight. And whoever is up at the moment seems to be the one that gets hit hardest in a debate.

In August, Michele Bachmann took the blow. Listen to this.

(BEGIN VIDEO CLIP)

TIM PAWLENTYY (R), FORMER PRESIDENTIAL CANDIDATE: She said she's got a titanium spine. It's not her spine we're worried about. It's her record of results. If that's your view of effective leadership with results, please stop because you're killing us.

(END VIDEO CLIP)

BLITZER: Pawlenty later dropped out.

In September, it was Rick Perry's turn. Look at this.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: The question is, do you still believe that Social Security should be ended as a federal program as you did six months ago when your book came out and return to the states or do you want to retreat from that?

GOV. RICK PERRY (R-TX), PRESIDENTIAL CANDIDATE: I think we ought to have a conversation.

ROMNEY: We're having it right now, Governor. That's -- we're running for president.

PERRY: If you'll let me finish, I'll finish this conversation.

(END VIDEO CLIP)

BLITZER: And in October, the punches were thrown at Herman Cain.

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN (R), PRESIDENTIAL CANDIDATE: If we give Congress a 9 percent sales tax, how long will it take a liberal president and a liberal Congress to run that up to maybe 90 percent? (END VIDEO CLIP)

BLITZER: All right, let's get back to our strategy session. Joining us once again, our CNN political contributors, Paul Begala and Ari Fleischer.

So, I guess with Newt Gingrich surging and he is surging dramatically, does he come in planning to get hit by some of the others?

PAUL BEGALA, CNN CONTRIBUTOR: I suspect so. I think this is better terrain to focus on foreign policy for Newt. I mean, he was speaker of the House, had access to the highest levels of national security at the time, served -- I believe -- on a defense review board when President George W. Bush was president. Again, had access to highly classified information.

So, he's got a base of knowledge that exceeds most the rest of those folks on the stage. Probably the only one who can match at all or compete at all is Jon Huntsman, a two-time ambassador, who's just back from his tour of duty in Beijing as our ambassador.

BLITZER: Santorum knows a lot, too. He was on the armed services committee. He's pretty well burse.

BEGALA: Santorum, I think watch for him to attack tonight on Iran. He has been in the hawkish field, the most hawkish on Iran. I don't know if he'll find room to attack Newt on that.

BLITZER: Do they go after Newt at their own peril? You worked in the House of Representatives when he was speaker I believe, is that right?

ARI FLEISCHER, CNN POLITICAL CONTRIBUTOR: Yes, and you know, what's interesting in these debates, if they keep going after the number two and the number one, Mitt Romney keeps skating by because no one has really taken him on with force. If you shoot at the number two guys -- musical chairs. That was -- that was Pawlenty with the lawn mother and Pawlenty's gone.

BLITZER: No, talking about when Rick Perry complained about the lawn service. That was not very effective.

FLEISCHER: You know, the trick of the debate is you've got to it with the right touch. One of the reasons Newt has risen to the top is because he's resisted doing that. I'm not going to go after him. There's a time and a place to take your opponents down. It's always trickier to debate when it's in person and you've got to do it well.

BLITZER: Does Romney stay above the fray if he can or does he go on the attack?

BEGALA: He has done well in all of these debates. I've been impressed. Each debate, he seems to do better. He's an outstanding debater. He would do well to float about it.

If I were advising the other Republicans, I'd say there are two slots ultimately coming out of this. Not this debate, but this early primary season. Romney and the anti-Romney, the anti-Romney right now has got three-fourths of the party.

So if I were advising, Santorum or Newt or Congresswoman Bachmann or Rick Perry, I would say go after Mitt. Don't go after your fellow conservative. Go after the one who the base fears is a little too modern.

FLEISCHER: And if my friend Paul were advising a Republican candidate, Barack Obama would win. Here is why that's wrong. They would do best by going after Barack Obama tonight.

There is a real sense of whatever can take the fight best against Barack Obama is who Republicans are looking for. So that's a real opening on foreign policy to talk about strength, not letting Iran --

BEGALA: Killing Bin Laden.

FLEISCHER: You want to talk about what Barack Obama's silence on Iranian protest. You want to talk about Barack Obama in Israel and how he's perceived to be shaky about Israel.

A lot of openings for Republicans against Obama and the Republican base want to hear who's most articulate and who can take the case to Barack Obama. That's why it's a Republican debate. Not a Democratic debate.

BLITZER: Got a good point. I think they'll all try to go after President Obama and his national security defense strategy. We'll see how they succeed on that if they do. Guys, thanks very much.

So, why did Congress's so-called "Super Committee" fail to reach a deal on cutting the deficit? Should President Obama have done more? We'll talk about that and more with the director of the White House Office of Management and Budget, Jack Lew. He is standing by live.

Plus, the push to do away with airline baggage fees. Will the United States Congress now intervene?

(COMMERCIAL BREAK)

BLITZER: Exactly 24 hours since the congressional so-called "Super Committee" turned out not to be not very super. The "Super Committee" on deficit reduction as it was called announced it failed to reach an agreement on slashing more than a trillion dollars from the U.S. debt.

The question is why couldn't this bipartisan panel of 12 members, six Democrats, six Republicans strike a deal? Let's talk about it with Jack Lew.

He's the director of the White House Office of Management and Budget. Mr. Lew, thanks very much for coming in. What do you think happened here? Why did this "Super Committee" turn out to be so weak?

JACK LEW, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Good to be with you, Wolf. You know, I actually was an optimist until the end because it seemed so obvious to me that it was the right thing to do for the committee to reach an agreement. I think the problem is we saw a replay of what we experienced in June, July and August when the president was engaged in day to day, hour to hour negotiations. There was a willingness on the part of Democrats to give on key issues.

On the part of Republicans, there was not a willingness to give in the end on the fundamental question of would there be a fair distribution of burden and would the wealthiest Americans be asked to have a fair sharing of the sacrifice.

I think that the important thing coming out of the "Super Committee" is, yes, that they failed, but also there's work to be done. As the president said yesterday, there's no easy off rep.

There is still in place a system of automatic cuts to take effect in January 2013 and there's a year for Congress to act to avoid that. And Congress needs to come back from Thanksgiving and back to work.

BLITZER: You won't be surprised to know that a lot of these Republican presidential candidates who are here, all of them, all eight of them, will be at the debate that I'm moderating at Constitution Hall later tonight.

They're really blaming the president, President Obama, for missing a golden opportunity once again. I want you to listen to one of the frontrunners, Mitt Romney, what he says about President Obama.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: What's most disappointing about that is that our president has had no involvement with the process. I find it extraordinary that they would be set up a committee with such an important mission as finding a way to provide fiscal sanity in America.

And with the penalty if that fiscal sanity is not found of a $600 billion cut to our military. I would have anticipated that the president of the United States would have spent every day and many nights working with members of the "Super Committee" to try and find a way to bridge the gap, but instead, he's been out doing other things, campaigning and blaming and traveling.

(END VIDEO CLIP)

BLITZER: Why wasn't the president more involved in twisting our arms, dealing with these 12 members of the "Super Committee?"

LEW: You know, Wolf, I think the president has been deeply involved in the fiscal policy debate for the whole year. You know, from June through August, the whole country saw a day-to-day negotiations. Soon as the "Super Committee" was convened, the president sent 70-page document, line by line detail. He showed the committee what he would do in a compromise. That was the summer.

What he would dough on his own. The "Super Committee" knew exactly what the president thought was the right thing to do. The problem was not the president's involvement.

The problem was that the "Super Committee" and particularly, the Republicans were not able or willing to move on the fundamental question of balance, fairness and whether the top 2 percent should be asked to participate in the shared sacrifice.

When Congress comes back, the important thing is not to keep going over what they did or didn't do in the "Super Committee." That work remains to be done. The president's made clear that the sequester should stay in place and the threat of the cuts that nobody thinks is the right approach should hang there.

And Congress should make an alternate set of policy decisions to get the work done. But in addition to deficit reduction, there's some business before the end of the year that Congress has to get back to.

There's a payroll tax that goes up on Americans on January 1 if Congress fails to act. For the average family, it means a $1,000. Congress has to come back from Thanksgiving and get to work. The American people have to do that. Congress has to also.

BLITZER: Well, looking back with hindsight and all of us are smarter with hindsight, wasn't it a blunder for the president to reject what's called the Simpson-Bowles Commission's recommendations, $4 trillion in savings that almost a year ago in December of last year.

His own commission came up with that. It would have been over if he would have accepted that and tried to push it through Congress. Was that a mistake?

LEW: You know, I've heard a lot of people ask that question, Wolf, but I'm not sure how many people have gone through and said for each of the provisions in that report that that's where they want to go.

I've heard Republicans raise that question, but they're not willing to do a level of tax increases that's far below Bowles Simpson. I've heard others say the defense cuts in the sequester are too deep.

But that the Bowles-Simpson defense cuts are even deeper. I think the question, the president embraced Bowles-Simpson broadly and said it was the right approach. It was balanced. It put everything on the table. He raised concerns. He said that he thought the defense cuts were deeper than we can do and protect our national security.

It should have been the basis for coming together and working on a bipartisan basis to agree on a balanced approach. The president was willing to do that. He was willing to put everything on the table.

Unfortunately, the Republicans were not. This hard line issue of the tax burden on the wealthiest Americans is something that stood in the way of getting a balanced agreement.

BLITZER: We're out of time, but how worried are you that it will be another downgrading of the U.S. credit rating as a result of this failure of the "Super Committee" to come up with a deal? LEW: I think it was important yesterday to look at what Standard & Poor's wrote because they wrote they were not going to downgrade and the reason they weren't going to downgrade is precisely because the automatic spending cuts are staying in place.

I think when the president said yesterday, there's no easy off ramp, that was an important signal to the Congress and an important signal to the markets that we are going to continue on the path of reducing our deficit.

The right way is to sit down and have a balanced approach. The right way is to agree on extending the payroll tax cuts so that we give the economy boost and we don't raise taxes on working Americans in January. The president remains ready to work on a bipartisan basis to do that.

BLITZER: Jack Lew, the head of Office of Management and Budget, thanks very much for coming in.

LEW: Good to be with you, Wolf.

BLITZER: A fourth straight day of deadly political upheaval in Egypt. We're going live to Cairo for the latest.

Also, why three American college students, exchange students are now under arrest in Cairo and their families are so worried.

Plus, possible relief for passengers fed up with airline baggage fees on this, the eve of a huge travel day.

(COMMERCIAL BREAK)

BLITZER: There's a new effort on Capitol Hill to do something about airline baggage fees. Our own Lisa Sylvester has the details -- Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Wolf, it seems like the Thanksgiving rush has already started, so if you need to get to the airport, give yourself plenty of time.

One reason is that the lines might take you a while to get through the security lines because many people are opting to carry on their bags to avoid hefty baggage fees.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Remember the days of flying on Pan Am? Air travel has taken a decidedly different turn and many passengers aren't happy about it. What's most annoying, being charged for a checked bag.

GAIL PERRYMAN, TRAVELER: It takes forever to get on and off the plane because of the people who carry on bags because they don't want to pay the checked bag fees.

ELIZABETH MUELLER, TRAVELER: I think it would be great to not have to pay. I'm always prone to take Southwest over any other airline just because they're free.

SYLVESTER: Southwest is one of the exceptions. Most airlines faced with rising fuel prices and slacked travel demands started three years ago charging customers for checked in bag. Typical fees are about $25 for the first bag, $35 for a second bag.

So more people are opting to carry on their bags that means longer lines at security and a mad dash on the plane to get precious overhead bin space.

Senator Mary Landrieu of Louisiana says travelers are tired of being nickel and dimed. Landrieu has introduced a bill that would let passengers check in one bag for free.

SENATOR MARY LANDRIEU: They're tired of this travel experience, which is getting to be more of a hassle. I believe that when you purchase a ticket to fly anywhere, it should come with at least a seat, free water, access to a restroom and at least one, you know, checked bag for free.

SYLVESTER: More carryon bags mean more work for the Transportation Security Administration. The Department of Homeland Security says their costs have gone up $270 million a year since the baggage fee changes.

But the airline industry argues their profit margin is already razor thin and Congress has no right to but in here.

SEAN KENNEDY, AIR TRANSPORT ASSOCIATION: No one tells the hotel whether or not they should have free bottles of water or free of Wi- Fi. No one tells a bus what services they should offer for free.

Again, this should really be up to the carriers, to the airlines should be able to decide what they're going the charge for and consumers will be able to decide who they think is the best option for them.

(END VIDEOTAPE)

SYLVESTER: So, these days, flying is a very different experience. There are the checked bag fees. Those snacks on the planes that used to be free, that's no longer the case. If you want preferred seating, you'll also have to pay for that and of course, Wolf, there are the security lines -- Wolf.

BLITZER: Certainly thanks very much, Lisa. Jack Cafferty is back with the "Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Congress ought to just stick with trying to decide whether pizza is a vegetable. Anything else is beyond their skill set.

The question this hour is, when it comes to being president, which is more important, the ability to solve the country's problems or personal character? Perry writes, "The ability to solve problems. Nothing else matters. This is not the Miss America pageant." Dee in North Carolina, "I'd choose character over ability because ability based on lies, manipulations and backroom deals is not worth the price we all pay in the end."

Emmett, Alabama, "Jack, solving problems is more important. Richard Nixon would make a better president today than most of the characters who want to be president now. America has too many idealistic, political morons who are ruing the country. Where's Theodore Roosevelt when we need him?"

Bradley in Philadelphia writes, "Without personal character, people appear to try to solve problems by looking good rather than doing good and that does no good at all."

Tony says, "While Obama's star quality and personal character got him elected and look where we are today. He's in way over his head. We need a problem solver in 2012."

Silvia in San Diego writes, "The ability to solve the country's problems by far outweighs personal character. Do you think the Kennedys or Clintons with their personal baggage could get elected today? Bottom line is I'm tired of incompetence. We need somebody in the White House who knows how to run a country."

And Ron writes, "This is a he can't walk and chew gum at the same time kind of question. History is filled with ruthless thugs who made the trains run on time and with nice incompetence. Why can't we have both for once?"

If you want to read more on this, go to the blog, cnn.com/caffertyfile or go to our post on THE SITUATION ROOM's Facebook page -- Wolf.

BLITZER: Good work, Jack. Thank you.

Meanwhile, another day of bitter chaos in Egypt. We're going live to Cairo for the latest. And three American college exchange students arrested amid the clashes. We have details.

(COMMERCIAL BREAK)

BLITZER: For a fourth straight day, Egyptian forces are using tear gas and rubber bullets against peaceful protesters in the streets around Tahrir Square in Cairo.

Meantime, thousands of people are joining what's been dubbed the million man sit-in. CNN's Ivan Watson is right in the middle of the chaos.

(BEGIN VIDEOTAPE)

IVAN WATSON, CNN CORRESPONDENT: These are the front lines of the running battles over here. The police have set up a barricade in this direction. The police have been throwing rocks at them. The tear gas is coming constantly. You can see the corrosive effects of it. Everybody is showing these shells that they pick up and many of them claiming they're made in the USA. In fact, this is made in Jamestown, Pennsylvania, riot smoke.

That's made a lot of anger against the U.S. The crowd here is angry, young, furious at the loss of life here over the course of the past three days, demanding that the supreme council be involved in a sit- down.

The soldiers around the corner here, the army has set up barricades along one road, but it's riot police that they're facing off against. If we turn in this direction, it's riot police down here.

This is one pocket of turmoil in the center of the Egyptian capital, but it is throwing the entire country into a political crisis just days before elections are scheduled to be held, and that's called into question whether those elections can be held at all. Ivan Watson, CNN, in Cairo.

(END VIDEOTAPE)

BLITZER: Amidst all of this, three American college students taking in the protests in Cairo have been arrested. Egyptian authorities accuse them of throwing Molotov cocktails.

CNN's Brian Todd is working this part of the story for us. Brian, what do we know about these young students?

BRIAN TODD, CNN CORRESPONDENT: Wolf, we know they were spending the semester abroad at American University in Cairo. We also know their program there might be interrupted because prosecutors there will be investigating them.

(BEGIN VIDEOTAPE)

TODD (voice-over): His sister says 19-year-old Derek Sweeney, on the far right, looks absolutely terrified. Sweeney and two other American students stand shoulder to shoulder in a Cairo holding area, in detention, accused of throwing Molotov cocktails during the deadly protest in Tahrir Square.

On display with them, clear bottles and various forms of American I.D. We're told they have been questioned by Cairo police and will face additional questions by prosecutors. Not much information coming from the State Department.

UNIDENTIFIED FEMALE: Are they safe, can you tell us that?

VICTORIA NULAND, STATE DEPARTMENT SPOKESWOMAN: I don't think we have any information to indicate otherwise.

TODD: The three are identified as Sweeney, from Georgetown University, 19-year-old Gregory Porter who goes to Drexel University in Philadelphia and 21-year-old Luke Gates from Indiana University.

Officials at American University in Cairo say they were spending the semester there as part of a study abroad program. Social media posts appear to show Gates and Sweeney in the thick of the recent protest in Cairo.

In messages posted last weekend from a Twitter account with Gates' name and a photo resembling one of the men in the police video, there are references to rubber bullets, a charge and retreat.

One posting says, quote, "we were throwing rocks and one guy accidentally threw his phone." CNN could not independently confirm the authenticity of those posts.

(on camera): Here at Georgetown University, one Arabic professor says he had Derek Sweeney in his class for about six hours a week one year and he is shocked by Derek's arrest.

(voice-over): Amin Bonnah taught an intensive Arabic class. He describes Sweeney in glowing terms.

PROFESSOR AMIN BONNAH, GEORGETOWN UNIVERSITY: Derek was one of my best students in every respect. He was a good, excellent, actually, student. Got A's. He was an outgoing, pleasant person.

TODD: Bonnah says Sweeney believed to be shown here in a Facebook posting labeled Tahrir Square embracing other cultures is a, quote, "socially peaceful person." Consistent with how Sweeney's mother described him.

JOY SWEENEY, DERRIK SWEENEY'S MOTHER: I don't believe he would intentionally try to harm anybody. He may have been with people that through them, I don't know, but that does not sound like something my son would do.

TODD: I asked Professor Bonnah who's from Egypt what his former student is facing.

(on camera): What are your concerns for Derek right now?

BONNAH: I think my concern is only the hardship and the fear he will have to face and a system where we don't know what's happening. What's going on.

(END VIDEOTAPE)

TODD: Luke Gates' father, George Gates says he learned of his son's detention in a call from American University in Cairo. George Gates said, quote, "It was a hard call to get." Officials at all three U.S. based colleges tell us they're working with American University and U.S. authorities to try to get the young men released -- Wolf.

BLITZER: Brian, any word on possible charges against these three young students?

TODD: Well, there's no word yet. We're told they're being held, that prosecutors are looking into this case. At one point, we believe they may have been held in a courthouse in Cairo, but no word yet on possible charges. Worth noting here that these young men took a pretty big risk if they did go out to Tahrir Square just in joining protests. Around 30 protesters have been killed since Saturday nearly 1,800 people have been injured.

BLITZER: They may have just gone though to see what was going on and got caught up. I assume U.S. embassy officials in Cairo are trying to get them out if they can.

TODD: That's right and we're told that U.S. officials in Cairo, in the United States, have been in contact with their families, working with the schools also to try to get them out. Also try to find out more of what's going on.

BLITZER: Brian Todd will keep us informed. Thank you, Brian.