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THE SITUATION ROOM

Obama Faces New Players, Old Problems; Interview with Sherry Rehman, Pakistani Ambassador to U.S.; Cubs' Owners in Political Brawl with Team Obama; Obama's North Carolina Problem; Jordan Taking in Refugees; Cruelty to High-Stepping Horses; Final Frontier Open for Business?

Aired May 18, 2012 - 17:00   ET

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


WOLF BLITZER, HOST, CNN'S THE SITUATION ROOM: You're in THE SITUATION ROOM. Happening now, only on CNN, we're taking you to a secret lot in Pakistan where U.S. supplies for troops are effectively being held hostage in hopes of wrangling an apology out of the president of the United States.

Also an iconic baseball, Wrigley Field dragged into a Chicago political brawl. The owners of the Cubs are facing the mayor's wrath because of a proposed ad attack against President Obama.

And these show horses are prized for their high-stepping gait. But wait until you see what trainers do to get them to perform. Stand by for undercover video.

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

BLITZER: Mitt Romney is accusing President Obama of undermining the NATO alliance, an attack on Mr. Obama's global policy even as he welcomes world leaders to the United States for critical summit meetings. The president met with his new French counterpart, the new French president, Francois Hollande, over at the White House today.

Both men have a lot to prove at the G-8 summit this weekend. One having spent only a few days as president, the other facing a heated re-election campaign. Our White House correspondent, Brianna Keilar is near Camp David in Maryland for the G-8 summit. Brianna, the president heads there in the next hour or so. Tell us what he discussed, first of all, earlier today with the French president.

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: A number of things, Wolf, but two key issues, one being the Euro zone crisis. President Obama has made it clear this is Europe's problem to solve, but of course, there's also this concern that there could be a spillover effect in the U.S.

We know that President Obama supports what the White House has called a more balanced approach, not just cutting spending, but government stimulus, government spending. And, in that regard, he sees a bit of a kindred spirit, I guess, you could say in President Hollande who also supports that approach. So, he's looking for support there. Now, on Afghanistan which we also know they spoke about, they don't quite see eye to eye as much. Hollande ran on a promise to pull out French combat troops by the end of this year. As you know, U.S. troops aren't scheduled to come home until the end of 2014, so a gap to be bridged there.

But Hollande is saying today that France would find other ways, different ways, to support Afghanistan.

(BEGIN VIDEOTAPE)

KEILAR (voice-over): The G-8 is normally a buttoned up high- profile production hosted in resort towns around the world, but this year, the leaders of eight of the world's wealthiest nations will meet at Camp David in the serene mountains of Northern Maryland for a simpler, more intimate affair. And good thing, they've got a lot of work to do.

HEATHER CONLEY, CENTER FOR STRATEGIC AND INTL. STUDIES: The first and, perhaps, the most critical item on the agenda is the global economy, and I think certainly, a very robust conversation about the Euro zone crisis.

KEILAR: The crisis that involves 17 European countries has entered year three, and with Greece on the brink of financial ruin, it's a threat to the fragile, economic recovery of the United States. America is in a tough spot, eager for a solution, but reticent to bail Europe out and without much of a leg to stand on considering how its own economic crisis rocked the world.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Our position is at it was, which is we believe that Europe has the capacity and the will to deal with the sovereign crisis, the Euro zone crisis.

KEILAR: President Obama will welcome two new players on this stage who are key to finding a fix. Mario Monti, prime minister of vulnerable Italy, and most notably, French president, Francois Hollande.

So new to the job, he had his first meeting with Germany's Angela Merkel, head of the Euro zone's biggest economy just hours after taking office this week. One key player is missing. Russian president, Vladimir Putin, blew off the summit at the last minute. He's sending his understudy, Prime Minister Dmitry Medvedev instead.

CONLEY: I think it's quite an extraordinary development when a Russian leader does not accept an invitation by an American president. It also, I believe, sets a clear tone for U.S.-Russian relations in the next six month. I think it sets a frosty tone.

(END VIDEOTAPE)

KEILAR (on-camera): Now, Russia is significant because its resisted, as you know, Wolf, U.N. and us, U.S. attempts to put pressure on Syria and Iran. Syria where casualties continue to mount as government forces take an in armed opposition in Iran over its alleged nuclear weapons program. So, a very key player, and it's really the understudy who is going to be here at Camp David, Wolf.

BLITZER: In the beautiful mountains (ph) of Maryland. Brianna, enjoy a couple of days there. Thanks very much.

The Obama White House has been working feverishly to strike a deal with Pakistan before the NATO summit. The United States wants the Pakistani government to stop blocking key roots for supplies to get to U.S. and NATO troops in Afghanistan. I'll talk about that and more with Pakistan's new ambassador to the United States, Sherry Rehman, in just a moment.

But first, we take you to ground zero in the fight over supply roots and Pakistan's demand for a formal apology from President Obama. CNNs Reza Sayah has the story you will see only here on CNN.

(BEGIN VIDEOTAPE)

REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT (voice-over): In a secret lot in Karachi, Pakistan, millions of dollars into American- made NATO supplies, once bound for Afghanistan, sit stranded and unused.

The supplies now an ideal home for nature's critters. Pakistan shut down NATO supply routes here last November after a NATO air strike killed 24 Pakistani soldiers, plunging U.S.-Pakistani relations to maybe their lowest point in more than ten years.

(on-camera) Both the U.S. and Pakistani government say the equipment that comes through Pakistan is non-military. That means you're not going to find any tanks and weapons here, but you will find plenty of these armored vehicles designed to be equipped with weapons. This is a brand new Humvee, but that's a tourette up there designed to be equipped with a machine gun.

This sticker (inaudible), this left the city of Baltimore in the state of Maryland in the U.S. came to Karachi in September 2011. So, this thing has been sitting here collecting dust for months.

(voice-over) We found at least 20 Humvees here at roughly $140,000 each. That's nearly $3 million in dust-covered armored vehicles.

UNIDENTIFIED MALE: Obama must apologize.

SAYAH: Kandel Han (ph), head of a local truckers union says the block aide has caused thousands of Pakistani drivers their salary of about $100 a month and hundreds more in daily storage fees. Still, he says the supplies shouldn't be delivered without a U.S. apology.

(on-camera) If Mr. Obama doesn't say sorry, you will not let these containers go?

UNIDENTIFIED MALE: It would be impossible.

SAYAH (voice-over): Under pressure from that kind of public fury, Islamabad has demanded an apology. Pakistan also wants an end to U.S. drone strikes and transit fees for each truck to reopen the supply routes. Washington has hit back with threats to cut billions in aid.

The standoff is now in its six-month. At stake for the U.S. is a key partner in its fight against extremists. At stake for Pakistan, billions in aid and the backing of the world's military super power.

(on-camera) Do you think Pakistan and the U.S. will ever be good friends?

UNIDENTIFIED MALE: They can be good friends.

SAYAH: But will they?

UNIDENTIFIED MALE: The mutual understanding.

SAYAH: But will they?

UNIDENTIFIED MALE: Friendly understanding.

SAYAH: Will it happen?

UNIDENTIFIED MALE: I can't say. I can't say.

SAYAH (voice-over): The two sides say they're talking and hopeful for a resolution. For now, the NATO supplies remain stuck in Karachi, a symbol of the bad blood between two countries who say they're partners.

Reza Sayah, CNN, Karachi.

(END VIDEOTAPE)

BLITZER: And joining us here in the SITUATION ROOM is the Pakistani ambassador to United States, Sherry Rehman. Ambassador, thanks very much for coming in. It's a pretty tense period in U.S.- Pakistani relations as we just saw from Reza Sayah's piece right now.

We have learned earlier today four trucks were finally allowed to leave Pakistan and bring some supplies to the U.S. embassy in Kabul and Afghanistan. Is this a major shift in Pakistan's strategy right now?

SHERRY REHMAN, PAKISTANI AMBASSADOR TO U.S.: I think, Wolf, we've been allowing diplomatic cargo through the airlock which is the airlines --

(CROSSTALK)

REHMAN: As far as I know, truck cargo was suspended. Some humanitarian supplies may have drifted through, you know, and those as you know, are humanitarian supplies. But really, no serious material that had been crossing over unsuspended for six months. So, this is a new beginning, and obviously, it brings good tidings.

BLITZER: Well, does this mean you're about to resume the normal arrangement allowing trucks from Pakistan to bring supplies to U.S. and NATO troops in Afghanistan?

REHMAN: Yes, I think that we are looking at a conversation which is a very positive. We have negotiating things that are trying to operationized (ph) an agreement, a memorandum, perhaps, that can be transparent.

BLITZER: Can that come as early as this weekend when presidents are -- your president goes on Chicago, meets -- I assume he'll meet with President Obama, right?

REHMAN: Of course, this is a big summit where, I think, all leaders, especially Pakistan and Afghanistan, will be conferring to bring stability and peace to the region. We have joint goals that can converge, but we have, as you can see, the relationship's been in a bad place for over six months.

BLITZER: You're still demanding a formal apology from the United States?

REHMAN: I think that is not going to go off the table. Twenty- four coffins draped with our flag, killed at the hands of not an enemy, but a friend, has caused national fury (ph) in Pakistan, if you must understands that. And you know, had we done this by any accident or confusion in the tug of war --

BLITZER: But U.S. is ready to express condolences, express regret --

REHMAN: I think that's important, and I think we will calibrate that as part of our deliberations.

BLITZER: You want the word apology.

REHMAN: Well, Pakistan had the parliament -- we have done a full spectrum review, and the parliament has asked very clearly for a formal apology.

BLITZER: So, until there's a formal apology, the trucks won't resume?

REHMAN: I think that while our groups are talking, there has been some movement forward. And as you know, our participation in the NATO summit hasn't been unconditional. The invitation was unconditional. Our participation has been unconditional. So, these are important breakthroughs.

And I think it would be premature to say when the trucks resume, but there is no fit of peak against the United States. We're not doing a full spectrum review because, you know, it's some irrational moment of pause. It is because, as you saw, the Pakistani people are looking for some restitution.

BLITZER: But you saw "The Wall Street Journal" report today, and it says that you want a 30-fold increase in fees to allow these container trucks to resume going from Pakistan to Afghanistan, used to cost $200 a container. Thirty-four, that would be $6,000 per container. Is that what you're asking the United States to pay?

REHMAN: I'm really not looking at the nuts and bolts of the agreement. Those are teams on the ground that are empowered to wade through the complex choreography of frameworks that we have to built, but, perhaps, if you look at the end root where your trucks move through much longer, but I believe the double of that amount is paid.

I wouldn't be sitting here haggling on the price. That's not my remittal (ph) mandate. I think what's important for us is to keep our eye on the bigger picture where strategic decisions have to be made. So, the price of a -- is not really what I'm sitting here to talk to you about.

BLITZER: Because as you know, the relationship, really, has been strained going back more than a year now to when the U.S. killed Bin Laden in Abbottabad, Pakistan.

REHMAN: And they gave us (ph) episode.

BLITZER: And the suspicion, of course, that some element within the Pakistani military or intelligence community may have been protecting him for those years, a suspicion that you deny.

REHMAN: Look, I think that we've been -- we've put our entire commission, as an Abbottabad (ph) commission, as you know, that is investigating this. Even I've testified in front of it. Many people -- it is empowered and it is, I think, almost complete in its deliberations. You do know the 9/11 commission took over a year.

If these things are to be peril (ph) and mean something, then it's important that we give a due process, but you know, having said that, nobody wanted to see Osama Bin Laden or any member of al Qaeda in Pakistan or even friendly terrain next to us.

The point here is that Pakistan has cooperated in every effort to hunt down, degrade, destroy and disable al Qaeda. And your military acknowledges that. They say that we are the most -- the partner that has been most active and valuable.

BLITZER: And disappointed, though, that the Haqqani network which supports the Taliban in Afghanistan seems to have some free reign in Pakistan.

REHMAN: Well, you know, the Haqqani network has become a catch word to judge this relationship. The entire relationship cannot be predicated on the head of the spin. If the spin is so important, then I think that there has to be an anvil to Pakistan's hammer. It's a very porous, very treacherous, open border. And we need to police this and interject on both sides.

BLITZER: Good to have you. The Pakistani ambassador to the United States. You've only been here a few months. You got a tough assignment ahead of you.

REHMAN: Absolutely.

BLITZER: We'll be staying in close touch.

REHMAN: Thank you.

BLITZER: On this note, Monday, I'll be reporting fro Chicago at the NATO summit. I'll have an exclusive interview with the president of Afghanistan, Hamid Karzai. The interview, you will see it in the SITUATION ROOM. Monday, we'll be reporting from Chicago.

Authorities in Chicago, meanwhile, say they're armed and ready for protest around the NATO summit Sunday and Monday amid fears of violence. One FBI official warning and I'm quoting him now, "expect the worse."

Also in Chicago, the mayor, Rahm Emanuel, is defending his old boss, President Obama, and taking on a billionaire whose family happens to own the Chicago Cubs.

And we could see a new first in outer space. A company is trying to launch a mission only a few countries in the world can do.

(COMMERCIAL BREAK)

BLITZER: The city of Chicago is in security lockdown as protesters gather for the NATO summit that begins Sunday. The world will be watching President Obama's hometown and law enforcement officials acknowledge they're preparing for the worst.

Let's go to CNNs Ted Rowlands. He's on the scene for us. Ted, what's going on?

TED ROWLANDS, CNN CORRESPONDENT: Well, Wolf, a few thousand nurses showed up. They marched and held a rally here in Chicago. No arrests, no problems, but of course, they're not concerned about nurses. They are concerned about people coming to the city to cause trouble.

(BEGIN VIDEOTAPE)

ROWLANDS (voice-over): The city of Chicago is getting ready for this, the kind of violence that hit NATO three years ago in France and destroyed parts of Seattle at the 1999 WTO. The last time anything like this happened here in Chicago was in 1968 at the Democratic convention.

ROSS RICE, CHICAGO FBI: Expect the worst and hope for the best, I think, is the best way to characterize how we hope the weekend plays out.

ROWLANDS: A security zone which includes these eight-foot metal barriers around the meeting site is part of the plan to protect world leaders, a plan that is being handled by the secret service. They started towing people's cars from the area earlier this week.

ROGER GOODS, SECRET SERVICE: We plan for things that no one else would really even think of. ROWLANDS: Chicago police will control the protesters. They have new riot gear and two of these noise canons which can transmit commands or piercing high-pitched sounds to protesters.

(on-camera) The actual NATO summit is taking place at a building behind this white building. And this is the edge of the security zone, meaning, that none of the protesters will be able to get any closer to the NATO leaders which they are not happy about.

NATALIE WAHLBERG, OCCUPY CHICAGO: Rahm Emanuel and his red zone and his sit down and shut up ordinances are aimed at silencing the people of Chicago of Occupy Chicago. And, it's not fair at all.

ROWLANDS: Many of the protesters are from occupy movements from around the country. We met John Hill here on Tuesday. He's from Nashville. He believes that the fear of violence is being overblown.

JOHN HILL, NATO PROTESTER: I mean, it's impossible to say. But I think, all in all, it's going to be peaceful.

(END VIDEOTAPE)

ROWLANDS (on-camera): And that, of course, Wolf, is what everybody is hoping. There are a few scheduled events tonight and tomorrow. Then, there's the big rally scheduled for Sunday when the NATO summit begins -- Wolf.

BLITZER: I'll be there. Monday, I'll be reporting from Chicago with you by exclusive interview with Hamid Karzai, the Afghan president. We'll have that Monday for our viewers. Ted, see you soon.

Al gore has a girlfriend. Next, we're going to tell you who she is.

And a Texas boy suspended from school for his haircut meant to look like his favorite NBA player, but there is a happy ending to this story.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in the SITUATION ROOM right now. What else is going on, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf. Well, three people are dead and three more are injured after a shootout in Louisville, Kentucky.

(BEGIN VIDEO CLIP)

(GUNFIRE)

(END VIDEO CLIP)

SYLVESTER: You hear the gun fire there. It erupted in two places yesterday afternoon in a crime-ridden part of the city. Officials say they are stepping up security. They're also asking for the public's help. It's not clear if the shootings are linked.

And in follow up to a story we did earlier of this week, Health and Human Services secretary, Kathleen Sebelius, got heckled today during her commencement speech at Georgetown University.

(BEGIN VIDEO CLIP)

KATHLEEN SEBELIUS, HEALTH AND HUMAN SERVICES SECRETARY: I was really delighted to be invited to speak to you, the public policy graduates, having spent my entire life in public service --

(HECKLING)

SEBELIUS: I spent my entire life in public service --

(APPLAUSE)

(END VIDEO CLIP)

SYLVESTER: Protesters shouting about abortion interrupted her address. Catholic institutions have been critical of the Obama administration for requiring many employers to provide birth control to their employees.

And this is a two-alarm fire according to the Pasadena, Texas Fire Department. You can see the church's roof even fall over from all the flames. The fire is still raging at this hour according to our affiliate, KHOU. So far, no injuries reported, and they've evacuated the day care next to this church just in case.

Well, Al Gore has a new girlfriend. "The Washington Post" reports the former vice president is dating Elizabeth Keadle. She is a Democratic donor from California who's also devoted to the environment.

Keadle, apparently, accompanied Gore to Antarctica in January on a trip to raise awareness about climate change. It's been almost two years since Al and Tipper Gore separated after 40 years of marriage.

And the 12-year-old Texas boy suspended for shaving his head to look like the face of his favorite NBA player. Now, check out Patrick Gonzalez's (ph) haircut of the San Antonio Spurs center, Matt Bonner. Gonzalez's school called it a distraction, and he had to shave it off, shave off that design.

But the Spurs, they gave him free tickets to last night's playoff game. Gonzalez met Bonner who is a redhead like him. And Bonner said it is the nicest thing any fan ever did for him. They kind of match there. As you can see, of course, there's a huge height difference, but that's pretty cool that they gave --

BLITZER: Maybe he'll grow up to be an NBA star.

SYLVESTER: Yes. So, it was a nice thing that they did, that the organization gave him free tickets --

BLITZER: The least they can do for that. Thanks, Lisa. Thanks very much.

It's one of America's iconic ballparks. Now, Wrigley Field is being dragged into a Chicago brawl spark by a proposed Super PAC -- Republican Super PAC ad attack on the president.

And is Mayor Rahm Emanuel going too far in defending his old boss, the president of the United States? Stand by.

(COMMERCIAL BREAK)

BLITZER: The Chicago mayor, Rahm Emanuel is sending a message to the family that owns the Cubs, don't mess with Team Obama. The family's billionaire patriarch was -- had been linked to a proposed Republican ad attack against the president. Joe Ricketts, however, says he has rejected the idea, but that certainly hasn't prevented a political smack down in the president's hometown. Lisa is back. She has got more on this story -- Lisa.

LISA SYLVESTER, CNN CORRESPONDENT: Hi, Wolf. Well this is a story that involves a controversial preacher, a successful entrepreneur and one of America's favorite teams, the Chicago Cubs. At the center of it is a man named Joe Ricketts, the founder of Ameritrade. His family owns the Cubs and he's the force behind a Super PAC called the Ending Spending Action Fund that has now come under fire.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Joe Ricketts is a self-made billionaire who co-founded the firm now known as TD Ameritrade. He believes passionately in a limited role of the government and lower government spending.

UNIDENTIFIED MALE: When our free enterprise flourishes, everybody flourishes. Everybody does well.

SYLVESTER: But it is this proposal which Ricketts' aides say was never seriously considered that has put him at the top of the headlines and launched a battle in the hometown of the president of the United States. Ricketts' super PAC has come under fire for a proposed ad campaign leaked to "The New York Times" that would have revisited controversial remarks of the Reverend Jeremiah Wright and linked them to President Obama.

It's caused a major backlash for the Ricketts family which owns the Chicago Cubs. It's been in talks with the city of Chicago for a $150 million grant to renovate Wrigley Field, but now that's in jeopardy. Obama's former chief of staff, Rahm Emanuel, now the city's mayor, reportedly is not returning the family's phone calls and had this to say.

MAYOR RAHM EMANUEL (D), CHICAGO: America is too great a country with too great a future for the content that they're talking about and it's insulting to the president. It's insulting to the country.

SYLVESTER: Brian Baker, the president of Ricketts Super PAC says they've been blindsided by the controversy. Baker says the PAC requested a proposal focused on fiscal responsibility. He insists they never asked for an ad campaign on character issues.

BRIAN BAKER, PRES. ENDING SPENDING ACTION FUND: We didn't ask for this proposal. We didn't author it. We didn't fund it. We didn't suggest it. We never approved it. The minute we saw it I was troubled by it. Mr. Ricketts and the Ricketts family would never do anything to divide our country socially or culturally. Everything that our Super PAC is focused on is the fiscal responsibility issue.

SYLVESTER: Joe Ricketts' daughter Laura is also politically active, but working for Democrats. A co-owner of the Cubs she is one of President Obama's biggest campaign fund-raising bundlers, so how did this controversy even get started?

(on camera): So you guys have had to have had this discussion. Who do you think leaked this report? I mean it hadn't even been decided on, so who leaked the report then to "The New York Times"?

UNIDENTIFIED MALE: I don't know. That's a million dollar question.

(END VIDEOTAPE)

SYLVESTER: Brian Baker when originally asked by "The New York Times" about the story said, quote, "no decision had been made on the proposal". He now says he wishes that he had been clear a little firmer that when he said those comments that he meant quote, "that we are not moving forward" and I think that could have maybe nipped this all in the bud at least a lot earlier but now it's a full-blown controversy at this point --

BLITZER: Or he wishes he would have just said then to "The New York Times" when they asked him for his initial contact -- comment he should have just said you know what, it's a nonstarter and we're not involved in this and that didn't happen and obviously this story has blown up as a result. Thanks very, very much for that.

Let's discuss what's going on with two CNN political contributors, the Democratic strategist James Carville and the former Bush White House speechwriter David Frum. What do you think James, first to you, what do you think about this?

JAMES CARVILLE, CNN POLITICAL CONTRIBUTOR: I think that's a man that got religion fast. He got a bunch of phone calls and in fact that was pretty fast and it's kind of understandable like every family's got a grandpa and it gets out there pretty far, and I suspect these people are like everybody else and the family is split like a lot of families, like mine and I think the guy that runs the PAC he saw the light and got out pretty quick and tried to get in front of this thing.

BLITZER: What do you think, David?

DAVID FRUM, CNN POLITICAL CONTRIBUTOR: Look, this stadium deal is either a good thing for Chicago or it's not a good thing for Chicago, but if it's a good thing for Chicago, and have the mayor say I'm not going to talk to the people involved because I don't like the way they're exercising their First Amendment rights that is a little spooky and nobody has to like the way they use their First Amendment rights, but for a public official to say there will be public policy consequences, financial consequences, he will not be able to have a deal with your city government because of the way you participate in politics that is a little disturbing.

(CROSSTALK)

BLITZER: Some people will think (INAUDIBLE) disturbing. James, what do you -- you know Rahm Emanuel and you've known him for 20 years plus and he's not a shy guy, as you know.

CARVILLE: No and I am not -- I am not shocked and this is Chicago. And you know if you don't -- if you are afraid of wolves, don't go in the woods. I mean if you own the Chicago Cubs and you know I just think it was brouhaha and now they're saying they never even considered it. You know this is dangerous stuff they were playing with in a very diverse city and it's -- thank God we're not playing with this kind of nitroglycerin (ph) anymore.

FRUM: But James, at other times if a Republicans were to say well that Obama team, it's all about Chicago politics you would be offended and you just used that same talking point as an excuse for something that really is disturbing.

CARVILLE: Well I don't -- I'm not disturbed -- I was more disturbed by the reports (INAUDIBLE) the Ricketts' family has you know apparently split on this and that everybody's happy. They -- according to the gentleman that runs the Super PAC what are we talking about they never even considered it so let's take him at his word.

BLITZER: And let's not forget that the daughter, Ricketts' daughter is a major bundler for President Obama, so the family is divided --

CARVILLE: Right.

BLITZER: -- on this issue. All right guys stand by. We have a lot more to talk about including one Democrat who tells me it's her job to quote, "peel folks like James Carville off the ceiling". Debbie Wasserman Schultz (ph) said that. I'll ask James to respond. Does he still think Democrats need to panic about November? And Syrians (INAUDIBLE) under fire, CNN taking you to a border checkpoint for an unprecedented look at the refugee crisis. Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It's becoming more clear than ever that President Obama has a serious problem in North Carolina and holding the Democratic Convention in Charlotte in early September may not necessarily fix it. Let's bring back our CNN political contributors James Carville and David Frum. I don't know if you saw Peter Hamdi (ph), our political reporter's piece at CNN.com, CNN.Politics.com, James, but he went there and the numbers certainly don't look good for the president right now in North Carolina. He barely carried the state as you remember four years ago.

CARVILLE: Right. He won by 7.3. He carried the state by 14,000 votes. Of course it's 47-47; he's not doing that well in North Carolina. The bad news is we're not doing that great in North Carolina and the good news is we don't have to win North Carolina to win the election, but I mean that's stating the obvious and my good friend Jerry Pierce (ph) was quoted extensively (INAUDIBLE) acknowledged that North Carolina is going to be a tougher state for the president. Look, if he wins North Carolina this thing is going to be a blowout, and I don't think anybody thinks it's going to be a blowout any time soon.

BLITZER: He's got to win Ohio though. He's got to win maybe Virginia, don't you think?

CARVILLE: Well yes. Well look he's got to win you know 270 electoral votes, but North Carolina is at the far end of that equation is my point. My point is it's (INAUDIBLE) Ohio, Virginia, (INAUDIBLE) Colorado you know could go through them and Florida and all of the other states that you really need to win. North Carolina is not a state that a Democrat really needs to win to win the presidency. It's certainly a state that the Republicans have to win. If they lose North Carolina there's no way they're going to win, but I'm not surprised at all that the president carried the state by you know a tenth of a percentage point, why he won by 7.3 is having a tough go at it this time when the race is essentially even. That's nothing shocking there.

BLITZER: David, Romney is going to have some troubles out west in some of those states where there are significant Hispanic voting blocs. I'm talking about Arizona, New Mexico, Nevada, Colorado, for example, given the overwhelming support that the president has among Hispanics as opposed to Romney.

FRUM: Let's remember Hispanics though they're an increasingly important part of the population, remain a fairly small part of the electorate and that is especially true even in the southwest, but the basic fact of this election is this is a (INAUDIBLE) economy and incumbents to go back to the country under tough, tough circumstances like this have a problem. The core argument for an incumbent after four years is things are better than they were when I was elected and President Obama is going to be able to go back and say probably.

Things were better than they were when I was inaugurated, but worse than they were when I was elected. That -- the election is going to turn on what do the voting customers think is the crucial data point and the other question of course is what happens on global markets. This I think is the election the most since 1980 that is going to be decided outside of the United States not inside, decisions in Berlin and in Brussels that are going to determine whether we have a second relapse in the global recession this summer and fall and if they make the wrong decisions it's going to be tough for the American economy and also tough for President Obama. BLITZER: James you've been saying now for months that the Democrats don't have a lock by any means. Indeed you suggested a few months ago it's time to panic. I asked Debbie Wassermann Schultz, the chair of the Democratic Party about what you've been saying and she said this, listen.

(BEGIN VIDEO CLIP)

REP. DEBBIE WASSERMAN SCHULTZ, DNC CHAIRWOMAN: It's my job to peel folks like James Carville off the ceiling because it's certainly not time to panic.

(END VIDEO CLIP)

BLITZER: Are you going to be peeled off the ceiling, James?

CARVILLE: Well no, you could have fooled me. I thought her job was to elect Democrats, but anyway I like Debbie fine. Look it's my job when I see lethargy out there and people say we have this in the bag to say are you losing your mind? Name me an incumbent anywhere in the world that's winning and by the way, the only other great Democrat that agrees with me is Peter Hart (ph) who is probably the senior sage of our party and hardly needs being peeled off a wall, sometimes I might say things a little more colorful, but I think anybody, any incumbent in this world that thinks that they're a shoo in for -- I don't think the president does, but anybody that thinks an incumbent in this world is a shoo-in for re-election does not live in the same world that James Carville is living in, I can tell you that right now.

BLITZER: Are you living in that world, David?

FRUM: It is a bad world for incumbents, but some incumbents do better than others. If those -- there are economies that are growing. The Polish economy is growing. The Canadian economy is growing. Those economies that are doing well have incumbents that are more secure. The American economy has not done that well over these past four years and as tough as it was at the start the growth path trajectory has been really disappointing.

BLITZER: David and James --

CARVILLE: OK, I just have to point out that Obama's private sector job creation is better than Bush's and he hasn't been in office for four years and two-thirds of the jobs created since 1960 have been by Democrats. I don't know where these Republicans get off talking about sorry job numbers, but everybody is entitled to their own opinion --

FRUM: I beat the spread isn't much of a reelection argument.

BLITZER: All right. Unfortunately, we are out of time, but this discussion will continue. Guys thanks very much. Have a great weekend.

A cruelty to show horses, we have some disturbing video from an undercover investigation that shows how some trainers get their horses ready to compete. It includes putting chemicals like diesel fuel on the animals.

And is the final frontier open for business? We're taking a closer look at the first signs of commercial space travel.

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BLITZER: We have an amazing peek at the drama unfolding along the Syrian-Jordanian border. As Syrian forces shoot at their own civilians, Jordan is taking in refugees and trying to keep some peace. We found our Pentagon correspondent Barbara Starr right on the border.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Wolf, I want you to see what's going on right here on this road. This is another taxi coming out of Syria across the Jordanian checkpoint into northern Jordan bringing in -- it looks -- this one is bringing in sodas and other commodities. This is a very busy commercial checkpoint between Syria and Jordan.

Just beyond it the no-man's-land, but cars are coming through on a regular basis. Make no mistake, however, out in the desert tens of thousands of Syrian refugees have been escaping for the last several months. Many of them shot at by their own Syrian security forces as they try and escape here into Jordan. Jordan is accepting these refugees, but it is putting a lot of pressure on this important Middle East ally. They are already under the crushing burden of Palestinian refugees, Iraqi refugees, and now Syrians, so the Jordanians here are in a tough position. They want Bashar Al-Assad out of office, but they do not want to see a shooting war erupt and they want to keep peace on this very sensitive border -- Wolf.

BLITZER: Barbara Starr along the border for us. Thank you. Let's go to an investigation now exposing the very disturbingly certain show horses are trained. The Humane Society has released undercover video to prove its claim of cruelty. Images some people will find disturbing. Our Brian Todd is over at a horse farm where they have horses similar to the ones at the center of this investigation.

BRIAN TODD, CNN CORRESPONDENT: Wolf, this is Grady, a six or seven-year-old Tennessee walking horse who has been through several competitions. The treatment of horses like Grady is the subject of an investigation, an undercover investigation by the Humane Society and they produced a video recently. We have to warn viewers, some of you might find the content of this video disturbing.

(BEGIN VIDEOTAPE)

TODD (voice-over): It's called the big lick, an exaggerated gait that's prized at walking horse competitions. Sometimes this is how trainers get their horses to do that high step. It's called soring (ph), the application of chemicals like oil of mustard (ph) and even diesel fuel to the ankle areas just above their hooves. It's illegal. This is undercover video shot last year by investigators from the Humane Society of the U.S. allegedly showing trainers at a stable in Collierville (ph), Tennessee applying those agents to show horses, wrapping their ankles with tape and cellophane (ph) to cook the chemicals into their skin, putting heavy chains on the horse's feet, the animals are clearly in discomfort, the result, a big lift of the feet, but that's not all.

(on camera): What are they doing here?

KEITH DANE, HUMANE SOCIETY OF THE U.S.: This is an example of a practice called stewarding. It's teaching the horse to stand still when they do a mock inspection of the horse's feet and if they won't stand still, if they flinch in response to the pain then they get hit in the head and it teaches them not to respond to the pain.

TODD (voice-over): The trainer in this video, Jackie McConnell (ph) and three others were named in a 52-count federal indictment this year. His lawyer tells us McConnell (ph) will soon plead guilty to one count of conspiracy to violate the federal Horse Protection Act.

UNIDENTIFIED MALE: He's young at heart.

TODD: Dave Turner owns a boarding and breeding farm outside Washington. He says he used to train walking horses but stopped years ago because of the practice of soring (ph).

(on camera): What does the soring (ph) do to these horses long- term?

UNIDENTIFIED MALE: It puts them in agony for the entire show career. They keep them for weeks before a show sore so that when they get to the show grounds they will do the performance they want.

TODD (voice-over): Turner says soring (ph) can leave permanent scars.

(on camera): I took Grady for a spin around Turner's pasture. He's a disciplined, content creature. Experts say these Tennessee walking horses have a naturally high-stepping gait anyway. So Dave, is soring (ph) that technique, is it even necessary in some of these competitions?

DAVE TURNER, HORSE FARM OWNER: Absolutely not. They have got a nice stepping gait that is crowd pleasing.

TODD (voice-over): But it's these exaggerated gaits he says that win big prizes at competitions. An official at one of those events, the Tennessee Walking Horse National Celebration, says the abuse in this video is inexcusable.

(on camera): And this is still a moneymaking enterprise.

TURNER: On a small scale for a couple of thousand people. I think we can shut this thing down finally.

TODD: Dave Turner says the people who still use soring techniques are increasingly becoming pariahs in the horse community. PepsiCo has said that it's pulling out as a sponsor of the Tennessee Walking Horse National Celebration this summer. It's one of the biggest competitions around. When asked if that decision was related to this video just out by the Humane Society, a PepsiCo spokesman wouldn't say -- Wolf.

(END VIDEOTAPE)

BLITZER: Brian Todd with that story, very, very sad. Thank you. Only five nations in the world can do it. Now a private company wants in on a rather risky space travel business.

(COMMERCIAL BREAK)

BLITZER: To boldly go where no company has gone before. Commercial companies preparing to take over a critical space shuttle role from NASA and it might just be the precursor to you and me potentially flying into space one day. CNN's John Zarrella has details of one risky attempt.

(BEGIN VIDEOTAPE)

JOHN ZARRELLA, CNN CORRESPONDENT (voice-over): The mission is unprecedented. It is for many in the space business, hold your breath and cross your fingers time. After months of delays, a commercial company's spacecraft is attempting to make history. There is says Space X CEO Elon Musk both excitement and high anxiety.

ELON MUSK, SPACE X CEO: We've done everything we possibly can think of to ensure the success of this mission. Despite that there's still significant risk.

ZARRELLA: Risk because only a handful of nations have ever done this before and before now no commercial company has ever attempted it. Once in orbit the unmanned Space X Dragon (ph) capsule will head for a rendezvous with the International Space Station. If all is well after a series of system's checks and maneuvers, NASA astronaut Don Petit (ph) will use the station's robotic arm to reach out, grab hold of Dragon (ph) and berth it to the station.

UNIDENTIFIED MALE: It's been a very hard technology to develop. And of course, we need to prove that we've done it correctly. And I think there's a good chance that we don't quite succeed on the first time. But I'm confident we'll succeed on -- if it's not the first, it'll be the second or third.

ZARRELLA: There is, quite literally, a lot riding on this. With limited dollars NASA decided to retire the shuttle, develop a new rocket to take humans on deep space missions, say, to Mars and turn over to commercial companies the job of ferrying cargo and eventually astronauts to the station. Several companies are developing vehicles for the job. Space X is the first ready to try.

UNIDENTIFIED MALE: So it can actually carry the same number of people as the space shuttle.

ZARRELLA: Last year Musk showed off his Dragon (ph) spacecraft that successfully orbited the earth, a precursor to the upcoming mission. Musk, the billionaire co-founder of Paypal has no illusions when it comes to rocket science. MUSK: When I started Space X I sound as though I thought rockets were easy. I mean I didn't think they were very hard. But I would say it ended up being even harder than that.

ZARRELLA: Just exactly how hard will be answered very soon.

John Zarrella, CNN, Miami.

(END VIDEOTAPE)

BLITZER: That's it for me. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM. The news continues next on CNN.