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THE SITUATION ROOM

Economic Optimism Skyrockets; U.S.-Pakistan Relations Improving; Battling Colorado Wildfires with a Laptop; Iraq Transition Sparks Concern In D.C.; President Obama Scores High On Foreign Policy; Romney To Visit Israel This Summer; U.S. Apology Re-Opens Vital Roads; Oil Embargo Hits Iran

Aired July 3, 2012 - 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: a dramatic shift in how Americans feel about issue number one, the U.S. economy -- just ahead, the skyrocketing optimism revealed in our brand-new CNN/ORC poll and the surprising divide over which candidate they think will do a better job.

Also, a stunning turn in the strained relationship between the United States and Pakistan -- the Pakistani government reopening a critical supply route for the United States and its allies, as the secretary of state, Hillary Clinton, apologizes for the deadly NATO attack that ultimately shut down that supply route.

And it's not a hose or shovel, but it's a laptop -- why computers are now a cutting-edge tool in the battle against the raging Colorado wildfires.

I'm Wolf Blitzer, and you're in THE SITUATION ROOM.

But first, to our brand-new CNN/ORC polls that are just coming into the THE SITUATION ROOM. This is issue number one, the economy, and a surprising jump in the number of Americans who believe the economy will eventually get better.

Take a look at this. When asked about what economic conditions will be like next year, 60 percent now say they believe they will be good, compared to only 39 percent who say conditions will be poorer.

Last fall, when we asked the same question, those numbers were very different indeed, only 39 percent saying things would get better in the year to come.

We sent our own Joe Johns to the key battleground state of Ohio for a closer look at these new numbers. Joe is joining us now from his old hometown of Columbus, Ohio.

What's going on there, Joe?

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: That's right, Wolf.

Well, things are starting to look better here in the Buckeye State, but I have to tell you that CNN/ORC poll indicates that, nationwide, one thing is clear. The number one issue on voters' minds happens to be jobs and the economy.

(BEGIN VIDEOTAPE)

JOHNS (voice-over): The November election may come down to a key question, which candidate is better able to handle the economy? A brand-new CNN/ORC national poll suggests voters haven't made up their minds. President Obama and Republican Mitt Romney are in a dead heat, well within the margin of error.

NARRATOR: What a president believes matters.

JOHNS: Today, the Obama campaign rolled out another ad in crucial swing states like right here in Ohio, calling Romney an outsourcer during his time running Bain Capital.

It's part of a strategy to erode one of Romney's key strengths. But, so far, our polling shows independent voters crucial in this election prefer the presumptive Republican nominee on the economy by 11 points.

Part of the sale the Obama campaign needs to make, especially in the seven key tossup states, is that the economy is getting better or at least that stagnation isn't their fault.

JACK LEW, WHITE HOUSE CHIEF OF STAFF: We have added millions and millions of jobs and the economy is moving in the right direction. Not fast enough. If Congress had passed the proposals the president submitted, there would be a million more jobs today. That's what we ought to be doing.

JOHNS: Of course, the blame goes both ways. Republican Congressman Pat Tiberi, whose district is in Central Ohio, points his finger right back at the White House.

REP. PAT TIBERI (R), OHIO: And he wants to write a check we can't afford, by the way, Because we're borrowing 40 cents of every dollar. People are starting to understand that.

JOHNS: Our poll suggests voters nationwide are not very happy right now; 73 percent say economic conditions are poor vs. only 27 percent who say conditions are good. That suggests awareness of economic improvement hasn't sunk in, especially in states like Ohio, where the unemployment rate has gone down almost a full point in the last year. Just today, Ohio's governor held a conference call to spread the good news.

GOV. JOHN KASICH (R), OHIO: We have seen improvements in our unemployment. We have -- the people of Ohio, the job creators, have created 94,300 jobs. It makes us fourth in the country and first in the Midwest.

JOHNS: But our survey shows that optimism is coming back for next year, something that could give Obama's team some optimism as well; 60 percent said economic conditions will be good in 2013. That's the reverse of where it was last year.

Congressman Tiberi sees the benefit going to Republican governors rather than the White House.

TIBERI: Overall, whatever love there is being directed more toward the state than the federal government in Washington, D.C.

(END VIDEOTAPE)

JOHNS: And this is a very important week in the Buckeye State, as it turns out, President Obama expected to be here both Thursday and Friday. And the unemployment numbers for the month of June also expected to come out at the end of the week -- Wolf.

BLITZER: Very important indeed. And, of course, where you are, Ohio, we all remember no Republican has won the White House without capturing Ohio. That's going to be a fierce battle in the Buckeye State. Thanks, Joe.

With the struggling economy on so many voters' minds and a fierce presidential election battle under way, it doesn't go unnoticed when the candidates go away on vacation even during a holiday week. Here's a video, by the way, that's generating some buzz. It's Mitt Romney and his wife on a jet ski during their family vacation this week in New Hampshire.

Look at that.

Our White House correspondent, Dan Lothian, is joining us now to take a closer look at the politics of presidential vacations. He's joining us now from the White House.

It's always a difficult decision in an election year for a president seeking reelection or for a challenger to decide where they want to go on vacation.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: You are correct. There had been a lot of speculation about whether the president and the first family would return to Martha's Vineyard for their summer vacation. They had been going there now for the past three years.

But a senior administration official telling me they will not be returning to Martha's Vineyard this summer, in fact will be take some shorter trips. Unclear when those trips will take place and unclear where they will go, but we just have to look back to former President Bill Clinton. He used to vacation on Martha's Vineyard quite frequently, but during his reelection year instead went out to Wyoming.

Richard Benedetto, he covered Reagan, the two Bushes as well and Clinton and he said it would have been a tricky situation for President Obama to return to Martha's Vineyard, a place that is known as a playground for the wealthy, for the famous, at a time when the president is trying to paint his opponent as an out of touch elitist.

(BEGIN VIDEO CLIP)

RICHARD BENEDETTO, FORMER WHITE HOUSE REPORTER: Politically, they can be double-edged swords, because you're vacationing at a time when things aren't good, doesn't look good to the public. You have to be very careful of what kind of an image you do project.

(END VIDEO CLIP)

LOTHIAN: Mitt Romney is making no changes to his vacation tradition. As you pointed out, Wolf, he's up in New Hampshire on a lake at their expensive vacation home there on the water with his wife.

And also they do what we're told are Olympic Games, family-style Olympic Games there, Benedetto saying this is really an effort by Romney to sort of showcase the fact that he's a family man, something that can really resonate with the voters.

BLITZER: Dan, a quick question, these vacation plans, they occasionally can backfire for a president, for a challenger, if you will. What are you hearing? What are you seeing about that?

LOTHIAN: That's right.

Just have to look back to 2004. Remember John Kerry when he was off Nantucket on a wind surfer, a wind sail, he was having fun, something that is seemingly harmless, but it was during the Republican Convention. And Republicans pounced on that because they used it to play into this narrative that he was a flip-flopper, that he could shift with the winds.

And so they made that video of him out there on that wind surfer as sort of part of their narrative that he changes on the issues. And it was a big blunder for him, certainly something that I think he would have taken back after the fact, Wolf.

BLITZER: Dan Lothian, good point. Thanks very, very much.

Let's get a little bit more on this and what's going on. Joining us, our CNN contributor Ryan Lizza. He's also the Washington correspondent for "The New Yorker" magazine.

These are never easy decision for a president or a candidate, Ryan, is it?

RYAN LIZZA, CNN CONTRIBUTOR: No. It's not.

Wolf, you remember back in the '90s when Bill Clinton actually had Dick Morris poll where he should go on vacation. It became such a fraught issue for President Clinton.

On the comparison with Kerry and Romney, on the one hand, it's very similar, two men of great wealth doing this sort of these expensive water sports. The thing though with Kerry, that only became an issue when they used the wind surfing as an advertisement to get at this attack on Kerry that he didn't have any core convictions and he was a flip-flopper. It was a devastating ad watching Kerry go back and forth.

And just from the video that you have shown, I don't know if that YouTube clip of Romney jet skiing quite has the same impact. You know, it might. There's obviously a line of attack that Obama and Democrats have been going after Romney on as a man of wealth and someone who is out of touch with average Americans.

And, you know, to the extent that jet skiing on a lake at your expensive summer home plays into that, perhaps it's somewhat damaging for Romney. But I don't know. I tend to think this is not a major problem for Romney.

BLITZER: Yes.

I always thought let these guys -- they work hard. Let them vacation wherever they want with their families. Take a few days off. Recharge their batteries, although you're right.

LIZZA: I agree.

BLITZER: When I was the White House correspondent back in the '90s, in '96, when Bill Clinton was running for reelection, he had been vacationing, and I covered his vacations in Martha's Vineyard, they decided in '96 Martha Vineyard's not the place. They went to Jackson Hole, Wyoming, instead. I went out there to Jackson Hole, Wyoming, because you're correct, Dick Morris was doing some polling, saying get away from Martha's Vineyard, maybe Wyoming might be a better place, which raises the question.

We don't know yet other than he's not going to Martha's Vineyard, where the president will spend his vacation this summer. My gut tells me it might be in one of those battleground states. But maybe I'm just over-reaching.

LIZZA: Yes. Virginia's nice this time of year. Ohio is very nice. Las Vegas, I understand has a lot of entertainment options.

(CROSSTALK)

BLITZER: Colorado.

LIZZA: Colorado's beautiful. Aspen -- maybe he will stay away from Aspen.

But to be honest, I think it's almost worse when you spend a vacation at Martha's Vineyard for a few years and then, in the election year, say, oh, the optics of that aren't good. I kind of like the fact that Romney's just doing what he's always done, going to places he's always been, and for better or worse, that's who he is. Voters -- authenticity's always the best way to go if you're a politician.

BLITZER: I agree completely. If the Obama family likes Martha's Vineyard, you know what? Go back to Martha's Vineyard and enjoy a little time off with the girls and have some fun.

I agree. Authenticity is very important. He winds up in one of those battleground states, it's nice to visit those battleground states, but it may not feel as genuine as he probably would like. That's just me and you. And we have obviously no say... LIZZA: Yes. No, I agree.

BLITZER: ... in what the Obama family decides to do.

Ryan, thanks very much.

LIZZA: Thanks, Wolf.

BLITZER: Crews are fighting the Colorado wildfires, and they're going high-tech.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: My main piece of equipment is this laptop.

(END VIDEO CLIP)

BLITZER: You're going to find out why a computer can be just as important as a hose in battling those wildfires.

And the United States told Pakistan it's sorry today. One of my guests this hour thinks it should have never happened in the first place, what's going on. Stand by.

And a frustrated customer trashes a mobile phone store. You're going to find out what set him off.

(COMMERCIAL BREAK)

BLITZER: Residents of Colorado are cheering firefighters on as they make gains in an agonizing struggle to put out the raging wildfires. But they're warning it still could be mid-July before most of the destructive inferno is fully under control.

CNN's Martin Savidge got a behind-the-scenes look at one of the critical tools being used in this battle. We're not talking about water or shovels. We're talking about a computer.

(BEGIN VIDEOTAPE)

MARTIN SAVIDGE, CNN CORRESPONDENT (voice-over): It's morning at the base camp of the Waldo Canyon Fire. Close to 1,500 wildland firefighters get up and head out. As they leave, they pass a reminder of what's at stake.

(CHEERS)

SAVIDGE: Residents come to cheer and thank these men and women who daily go out and risk their lives to try to save their town.

The fire crews and hot shot teams fight the fire with shovels and hoses. While plains and helicopters drop water or fire retardant. When the fires like this one become monsters, covering thousands of acres, there are never enough people or planes.

Last Tuesday's fire storm demonstrated it can be devastating and imperfect work.

But it's the way wildfires have been fought for decades. Rick Stratton (ph) is changing that.

UNIDENTIFIED MALE: My main piece of equipment is this laptop.

SAVIDGE: Wendell Holmes Middle School in Colorado Springs is the fire command center. School's out for the summer, so Stratton and his team have taken over Mrs. Wilson's science class, which seems only appropriate because what Stratton is doing is cutting-edge and until very recently unthinkable. He can predict where the fire will be not tomorrow, but in five days, 10 days, even 21 days.

The benefit is obvious. If you know where the fire is going, then you can strategically place your limited resources to stop it.

Eight years ago, Stratton became part of a team that worked to come up with a computer program that would predict the fire's future. He's a self-professed fire nerd.

UNIDENTIFIED MALE: Because it's high-tech and it's cool, man.

SAVIDGE: Fires are propelled by three basic things, weather, fool and topography. Sounds simple, but just one look at a computer map of the winds interacting in the mountains and you can see just how complicated it gets, which is why Stratton doesn't work alone. There's Julia Ruterford (ph), the IMET or incident meteorologist. She studies the weather. Wind shifts kill fire crews. And predicting them is her job.

UNIDENTIFIED FEMALE: If I see anything on the radar, I'll let you guys know as well. Have a very safe day out there.

SAVIDGE (on camera): When did the fire burn through here?

UNIDENTIFIED MALE: That was about four or five days ago.

SAVIDGE (voice-over): Rudy Rodriguez is also part of the team. We follow him into the fire. He sets up remote automated weather stations or RAWS.

UNIDENTIFIED MALE: Everybody calls it the lunar lander.

SAVIDGE: These robot weather observers constantly update conditions, even as the fire burns all around. With a few keypunches, he gets the station to talk to me.

VOICE: Air temperature 71.5 degrees.

SAVIDGE: Then there's Ashley Whitworth (ph), a fuel technician. She takes samples of trees, bushes and grass near the fire and is reminded of the urgency when a giant helicopter hovers almost overhead and drops water on a sudden blaze nearby.

At a lab, she dries and analyzes the samples to see how quickly each will burn.

Then there's 6'5" Nate Orsburn (ph).

UNIDENTIFIED MALE: The whole time we're walking we're taking a log.

SAVIDGE: It's his job to record and photograph where the fire's already been. And he often works alone, hiking miles from the nearest road.

Stratton himself goes into the field. He follows the fire from the ground. Then he takes me with him to look at the fire from the air.

He takes all of the information from Julia, from Rudy, from Ashley, from Nate and others and punches it into the computer. The end result is a color-coded map that tells fire commanders with varying degrees of probability where the fire is headed and when it will get there.

And it works.

RICH HARVEY, INCIDENT COMMANDER: We planned based on what this was telling us. It's going to go this way. Then we came in here. It's still pretty hot in here, but it's holding. And we're going to catch it here.

SAVIDGE: Like all firefighters here, Stratton's exhausted. When I asked what keeps him going, he suddenly forgets the data and talks in very human terms about what he saw when he fought on the line.

UNIDENTIFIED MALE: I've witnessed firsthand people coming to their destroyed home and the agony. It's probably the sickest I've ever felt in my life, hearing cries and seeing their sorrow.

SAVIDGE: For Stratton, there are no cheering crowds. But he is every bit a wildland firefighter who uses a laptop instead of a shovel.

(END VIDEOTAPE)

SAVIDGE: Wolf, there is good news to report. The fire is now 70 percent contained. They still have some way to go. They hope to have it fully contained by this weekend. More good news, rain, substantial rain, expected Thursday and Friday. It's all welcomed -- Wolf.

BLITZER: Hope it pours out there. They need the water.

We keep seeing, Martin, some of those awful pictures of homes destroyed. Are you getting a better sense now how bad the damage actually has been?

SAVIDGE: Yes, 350 homes were lost. And it is as well as lives a terrible, terrible tragedy, authorities know. But they also say when they watched that firestorm sweep in a week ago today, they thought the toll was going to be much higher. In fact, they feared as many as 1,000 homes might have been lost. Three hundred fifty is not a good figure, but it's a lot better than they originally feared, Wolf.

BLITZER: It could have been even worse.

All right. Martin, thanks very much.

And this note to our viewers: in our next hour, we're going to take you behind the fire lines with flames whipping around the firefighters. You're going to see the unbelievable images that made them shed tears as they dug in against the destruction. That's coming up here in THE SITUATION ROOM in our next hour.

The U.S. certainly paid a huge price in both blood and money to liberate Iraq from Saddam Hussein. We're about to talk with a rising star in the Republican Party who is deeply worried all of it may have been to waste.

What's going on? We're going to find out what set off some monumental temper tantrum as well. It's something that may have happened to you? Standby for that.

To our viewers, remember, you're in THE SITUATION ROOM. We've added a brand new 6:00 p.m. Eastern hour as well. That's a third full hour, live news you need to know right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Now that U.S. troops are out of Iraq, there's also been a very sharp increase in violence.

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

Lisa, what's going on?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, at least 37 people died in a series of bomb blasts across Iraq today. Thirty of the deaths came when a truck packed with explosives went off at a vegetable market in a city south of Baghdad. At least 100 people were wounded in that attack. Today's bombings mostly targeted Shiite areas and Iraqi security forces.

And even though power company repair crews are working around the clock, just under 1.5 million people are coping through their fourth day without electricity. A ferocious storm Friday night knocked down trees and power lines across 11 states in the District of Columbia. Folks are packed into libraries to cool off as well as to charge their phones and their laptops.

And admit it, we've all had bad days. But there may have been times when you felt like doing this. Over the weekend in Manchester, England, a frustrated man who says he was denied a refund trashed a T- Mobile store, tearing down displays and even spraying the place with a fire extinguisher. Wow. A T-Mobile spokesman tells "The Daily Mirror" newspaper the man's contract clearly stated he wasn't due a refund.

(BEGIN VIDEO CLIP)

ANNOUNCER: "The Andy Griffith Show" starring Andy Griffith.

ANDY GRIFFITH: You're supposed to make him sideburns. (INAUDIBLE) with a hole on his ear. You see that right there?

(END VIDEO CLIP)

SYLVESTER: Actor and comedian Andy Griffith died today. If you are of a certain age or watched a lot of re-runs on cable while you were growing up, well, the characters from his 1960s show are instantly recognizable. Griffith, also played "Matlock" in '80s and '90s is in the TV Hall of Fame and received a Presidential Medal of Freedom back in 2005.

Andy Griffith was 86 years old -- Wolf.

BLITZER: I loved growing up with Andy Griffith. Great, great, great actor. Sorry to see him go. Our condolences to his family. But he certainly left his mark on our culture and our entertainment here in the United States.

SYLVESTER: Yes, brings back a lot of memories just hearing that theme song. I'm sure that's true for a lot of our viewers out there, Wolf.

BLITZER: It certainly is. Thank you for that, Lisa.

New concerns meanwhile that the United States is being treated badly by the Iraqis just months after the end of a deadly war. So, should U.S. taxpayers still be footing the bill for billions of dollars in aid to Iraq? I'll ask a key lawmaker.

And a stunning turn in a strained relationship between the United States and Pakistan. We had hints of it last night. Today, confirmation. Details on a surprising apology from the Secretary of State Hillary Clinton.

(COMMERCIAL BREAK)

BLITZER: Growing outrage among many folks here in Washington. People are growing increasingly upset at how the United States is being treated by Iraq since the end of the war last December, a war Americans fought to free Iraq from Saddam Hussein.

Walter Pincus asked in today's "Washington Post" why are U.S. taxpayers shelling out more than a billion dollars a year for continued economic and military aid while the Iraqis have an enormous budget surplus right now.

I'm being told by my own sources that the government in Baghdad has grown increasingly nasty to the thousands of Americans still serving at the U.S. embassy in Baghdad.

Joining us now to discuss what's going on is the Republican congressman from Utah, Jason Chaffetz. He chairs the House Subcommittee on National Security, Homeland Defense and Foreign Operations.

He recently held a congressional hearing addressing these very issues. And I was alerted by Walter Pincus of the "Washington Post," Congressman, about that hearing you had last week.

So here's the first question, why is the United States -- why are U.S. taxpayers still shelling out a billion dollars a year in economic and military aid to the Iraqis when their oil exports surplus is enormous?

REPRESENTATIVE JASON CHAFFETZ (R), UTAH: Well, that's the big question, Wolf. If oil is more than $70 a barrel, you see a tremendous surplus in the funds going to Iraq, which is great. We want them to thrive and we want them to do well.

But at the same time, the degree in which our assets are being treated is very troublesome. There are some $50 billion worth of projects that the American taxpayers has footed, everything from police stations to other things.

Other assets that we're turning over to or have turned over to Iraq, and yet when we try to go through checkpoints and try to travel within the country and do other types of things, we're at a very difficult time.

And there's a lot of concern from the inspector generals and the others that are out there on the ground -- and then State Department personnel who are trying to operate in this situation.

BLITZER: So do you support continuing to provide a billion dollars a year in economic and military aid to the Iraqis?

CHAFFETZ: No. It begs the question -- we have 2,000 people in our State Department. It's huge. It's the most massive interest that we have worldwide. It's the biggest embassy --

BLITZER: Let me correct you on one thing, 2,000 maybe diplomats in at the U.S. embassy, in the green zone in Baghdad, but more than 16,000 employees at this huge embassy, the biggest embassy ever in the world. Why does the United States need 16,000 personnel embassy in Baghdad?

CHAFFETZ: Well, that's the point I was trying to make. It takes 14,000 contractors to support the 2,000 people that are trying to operate there.

We're spending more than 93 percent of our budget that we're spending there is on security, and security alone. So now we have less than 300 troops there on the ground.

But what we've done is created this private army that's operating under the State Department is literally thousands and thousands of people, which we've been highly critical of in the past.

And it begs the question of what are we doing, how are we doing it there, why should we be pouring more than $375 billion into USAID projects when our own USAID people can't even travel out to go see what they're helping to build?

BLITZER: You know, a lot of these people who have served there recently have come back and told me they're not very happy, they're not being treated very well.

But here's what irks them the most and I think it irks you and me a lot as well, this when Prime Minister Nuri Al-Maliki Shiite-leg government in Baghdad is dramatically warming up to the neighboring Shiite government in Iran. What's going on here?

CHAFFETZ: Well, that's the concern is the Iranian influence particularly in the southern part of the country. It's a very volatile part of the world.

The Curdish seems to be doing better than most. But if you look at what's happening, raided Baghdad property, look what's happening to the south, the attacks we're taking with 37 deaths I think CNN just reported in the segment just before this.

There's a lot of concern. We're still pouring billions of dollars in. It begs the question of, what are we really getting out of this? And why is the government itself treating us so poorly when we're doing nothing, but helping at this point.

I don't care where you are at in the war and whether or not we should have gone there, but the fact we're there, doing this USAID work. We're helping out their military. We're giving over $50 billion worth of projects there to the Iraqi government. You'd think we could get through a checkpoint or two. But at this point, it's very difficult to do so.

BLITZER: Yes, it's getting ridiculous when you think about it that huge embassy compound. The Bush administration, as you remember spent nearly a billion dollars, $1 billion building that embassy in the green zone in Baghdad.

The 16,000 people are working there still. You know, I went up to Northwest Washington on Massachusetts Avenue where the Iraqi embassy here in Washington -- there it is.

It's one little house on Massachusetts Avenue. Maybe a couple dozen diplomats serve there. So why does the U.S. government need thousands of people in Baghdad and the Iraqis have a couple dozen in Washington?

CHAFFETZ: It really begs the question. I don't think there's a good answer to that. We certainly didn't get a good answer from that and a good feeling about literally what are these 2,000 people doing there?

And again, supported by 14,000 people and contractors, everything from the people that help us with our food service contracts, but mostly security.

When 93 percent of your budget over there is being spent on security, there's a problem there. Maybe we don't need as big of a footprint.

We were also going to have different consulates around the country. That has proved to be impractical and undoable at this point. So it's a very volatile situation.

We do have trade going on with Iraq now. We're more than 30 percent of imports are up more than 30 percent with Iraq this year over last year. But there's no easy solution here.

BLITZER: We're out of time, Congressman. One final question, give me a yes or no. Looking back with hindsight, did the Bush administration blunder, A, by going to war in Iraq? And, B, by developing this massive embassy compound there?

CHAFFETZ: Two different questions. A, I think we look back we should not have gone to war though we did. That's my own personal opinion.

And I think this embassy is too massive of a mission. There are core things, let's focus, do those things right. But I'm tired of giving them aid when we can't even get through a checkpoint.

BLITZER: Especially the time when they have a budget surplus of billions and billions thanks to their oil exports. Congressman, thanks for coming in.

CHAFFETZ: Thanks, Wolf.

BLITZER: We're going to have a lot more on this very, very critical issue coming up in our brand new 6:00 p.m. Eastern Hour. Standby for that.

On one vitally important front of the 2012 presidential campaign, President Obama and the Democrats are way, way behind. In our "Strategy Session," we're going to take a closer look whether they have any help of catching up when it comes to fundraising.

Also, you're going to find out why the United States has now formally apologized to the government of Pakistan. It's getting something -- it's getting something important in return, but sensitivity's abound.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session." Joining us, two CNN political contributors, the Democratic strategist, Paul Begala, he's a senior strategist, by the way, for the Democratic fundraising group "Priorities USA" and "Priorities USA Action."

And joining us as well, Republican strategist, Mary Matalin. They're also friends even though they --

MARY MATALIN, CNN POLITICAL CONTRIBUTOR: Happy Independence Day. PAUL BEGALA, CNN POLITICAL CONTRIBUTOR: Look, we're matching here.

BLITZER: Good to have you both here. You know, it's interesting, Republicans almost always used to score better on national security, foreign policy than the Democrats did.

But in our brand new, Mary, CNN/ORC poll, we asked registered voters who would better handle foreign policy? President Obama got 53 percent, Romney 41 percent. What do you make of that?

MATALIN: I make a couple of things of it. First and foremost, this president has had some foreign policy successes not least taking out UBL and continuing to take out these terrorists via drones, assassination by drone as opposed to enhanced interrogation, which produces a lot more intelligence.

But most of his successes policies put in place by his predecessor, President Bush. Those that are happening on his watch, which he said he would move to improve, our relationship to Russia to the detriment of us or the de-nuclearization or the aspirations of Iran.

They're as dangerous, if not more so, but I think what that poll shows is we haven't talked about foreign policy yet enough.

BLITZER: You know, in fairness though, foreign policy, if there's a war, if there's terrorism. It's an important issue in a presidential race, but if it's relatively quiet, it's the economy as you well know.

And on the economy in this new poll that we had, the two candidates basically are about even. Who can better handle the economy among all registered voters, Romney does better among independents.

BEGALA: He does. I bet when we tighten the screen down as we will I think we get closer to election that will favor Romney even more on likely voters.

So that's where the battlefield will be. Mary's got a point. The president's foreign policy successes have taken those issues off the table. I have to say the Democrat -- I'm a little amused when Mary says the Obama foreign policy successes where he changed policies like going after Bin Laden.

That credit should go to Bush, but of course, the economic collapse that Bush caused that shouldn't be -- that we should blame Obama for that but whatever, it's going to be about the economy.

Mr. Romney is running as the CEO candidate and we're seeing polling now, my PAC is running ads attacking his business record. And they're working, Wolf.

We're seeing his business record as a net negative. That doesn't generally happen with business people because generally we're a pro-business country. But this thing is hurting him. Romney is losing credibility as a businessman in the economy. BLITZER: That's one of the strengths supposedly going in. But what do you make -- we reported it yesterday, Romney to the Obama presidential playbook of 2008.

In July this month, he's going to go to Israel and make a visit to the prime minister of Israel, Benjamin Netanyahu. Is that significant in a state, let's say Florida, where there's a significant Jewish population.

MATALIN: It's significant not just politically. It's significant for all kinds of reasons. The president has been to 30 countries but not Israel.

This is Governor Romney's fourth trip. Putin's been to Israel twice. Symbolism in foreign policy is important. Israel is important as our -- we should be supporting their economic liberty, their religious liberty, their political liberty in a region, which his fraught with none of the above and that he hasn't been there and has turned his back on beating Netanyahu.

So it's a very, very important issue on all kinds of front not least political.

BLITZER: On this issue, the president not as president he went in July 2008 when he was running, his decision not to visit Israel since becoming president of the United States, it's irritated a lot of Israel supporters out there who voted for the president in 2008.

BEGALA: He should go. He should have gone as president. That's right. But George W. Bush should have gone in his first term too and he did not.

So he's simply repeating the mistake that his predecessor made. I think that it is a valid criticism. The American president of either party needs to go to Israel, stand with Israel, and support Israel.

BLITZER: There are pictures when he was there in July 2008 as a candidate. But as president, Mary, he didn't go to Israel. He went to Egypt. He went to Turkey. He went to a whole bunch of other countries.

BEGALA: But Bush was not anti-Israel even though he didn't go his first term. President Obama has been very strongly supportive of Israel as president and he will be if and when he gets a second term. That's the most important.

MATALIN: That is not the reflection or the opinion of those who know the most about Israel. They do not think he's been strong on Israel. And I'd like to remind everybody what's happening in the first term --

BLITZER: I will say as someone who studied the U.S.-Israeli relationship for a long, long time on a military to military relationship to intelligence is very strong right now between the United States and Israel. There may be some personal irritation between Netanyahu and President Obama, but on substantive issues, it's a very strong relationship.

MATALIN: I don't think they're very happy. You can validate or not confirm this. They're not very happy about our leaks, which the president says he has nothing to do with but everybody else --

BLITZER: You mean about the cyber warfare in Iran?

MATALIN: All of that, yes, exactly that. They're not happy about sharing intelligence like that. They're not very happy in our attitude about what we would do with Iran.

They're not very happy what we're not doing in Syria. So at -- is it still connecting at some level with people who professionally do that? Yes. Do they think this is the worst president for Israel since Jimmy Carter? Yes.

BEGALA: I have to defend my president here.

BLITZER: Go ahead.

BEGALA: Go and look at the speech that the Israeli president, Perez, I think he's a guy who cares about Israel. He came to America. He spoke at APEC, a group that I support.

He gave the most powerfully pro-Obama as well as pro-American speech. Go look at what, Ahud Barack, the defense minister, the most highly decorated soldier in the history of the Israeli defense forces.

Look what he's said about our president. Contrast that, by the way, with Mitt Romney who's idea of foreign policy --

BLITZER: We're out of time. Mary, did you serve in the first Bush administration?

MATALIN: Yes.

BLITZER: Do you remember James Baker, the secretary of state?

MATALIN: Yes, I do. I just saw him at a Romney event. He's supporting Governor Romney.

BLITZER: Mary, do you remember what James Baker said before testifying in Congress when the prime minister of Israel just passed away, Israeli was asking for loan guarantees to resettle and Baker said, you know what, we're not going to do that.

Here's the member of the White House when the Israeli are ready to free settlement activity on the West Bank, East Jerusalem, Gaza at that time, call us and we'll give you money to resettle some Soviet Jews in Israel.

They were coming in huge numbers. That was a pretty rough moment in U.S.-Israeli relations. And as tough as the relationship has been in the last years, that was one of the roughest moments in the history of the United States and Israel.

MATALIN: And James A. Baker is not running for president.

BLITZER: But you said the worst since Jimmy Carter as far as Israel's concerned. Not necessarily.

MATALIN: OK.

BEGALA: Just ask Shimon Perez. Ask Defense Minister Barack.

BLITZER: Remember those tense days.

BEGALA: I was working on the Hill at the time. It was really tense. It was very hot and I think America was wrong. We should have been standing with Israel back then.

BLITZER: Later, they did. They provided the loan guarantees, but that was a very, very rough moment. You can imagine if Hillary Clinton or Barack Obama would say before Congress, here's the number of the White House, call us when you're ready to free settlement.

MATALIN: Do you think that Israel is in a safer place today under this administration's policies than it was under H.W. Bush's policies?

BLITZER: I think the Israelis militarily are very strong right now. They can defend themselves, the Israelis. I'm very confident that they have that capability.

If you've seen or spoken to Israeli military intelligence officials, leaders, I think they're not incapable of taking care of themselves. They have a very strong military. Guys, good discussion. Thank you.

BEGALA: Thank you.

BLITZER: Secretary of State Hillary Clinton apologizes to Pakistan today. But the United States is getting something very, very important in return. Standby.

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BLITZER: A huge announcement from Secretary of State Hillary Clinton today. She says Pakistan's reopening vitally important supply routes into Afghanistan.

This will save U.S. taxpayers millions and millions of dollars. Our foreign affairs correspondent, Jill Dougherty is joining us now to explain why the Obama administration though paying a very high political potentially (inaudible) a U.S. apology. Tell us what's going on.

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, you know, Wolf, apologizing really wasn't such a big deal. I mean, this administration made it one, made it a matter of principle and so did the Pakistanis.

(BEGIN VIDEOTAPE)

DOUGHERTY (voice-over): For seven months trucks carrying critical supplies for NATO troops from Pakistan to Afghanistan have stood idle covered with tarps gathering dust.

Using our routes cost U.S. taxpayers $100 million more a month. All that largely because the U.S. refused to say one simple word, sorry. Regrets, condolences, but not sorry for a U.S. Air strike in November that killed 24 Pakistani soldiers.

Tuesday in a written statement, Secretary of State Hillary Clinton finally apologized. Foreign minister and I acknowledge the mistakes that resulted in the lost of Pakistani military lives, she said.

We are sorry for the losses suffered by the Pakistani military. We are committed to working closely with Pakistan and Afghanistan to prevent this from ever happening again.

The statement was diplomatically sensitive. Clinton's press secretary stuck closely to the script.

VICTORIA NULAND, STATE DEPARTMENT SPOKESWOMAN: I think the intent here is that we are both sorry for the losses suffered by both our countries in this fight against terrorists.

DOUGHERTY: The apology opens up ground supply lines into Afghanistan with Pakistan agreeing not to raise fees of $250 per truck. At one point, Pakistan demanded $5,000 for each vehicle.

It also may help mend relations between the two countries ripped apart by anger over the U.S. use of drones and the killing of Osama Bin Laden on Pakistani soil.

Pakistan's ambassador said she was glad the breakthrough was not part of any transaction. That she appreciates Secretary Clinton's statement and hopes that the bilateral ties can move to a better place from here.

The U.S. says one expert hurt itself by making the apology a big deal, but this may help put relations back on track.

VALI NASR, FORMER SENIOR ADVISER TO U.S. ENVOY TO AFGHANISTAN/PAKISTAN: We made a mountain out of a mole hill and the damage to our own interests in Afghanistan and across the region is far higher by this relationship failing and by actually acknowledging that mistakes were made.

(END VIDEOTAPE)

DOUGHERTY: So this is good news for both sides. Those U.S. supply convoys can start rolling back into Afghanistan. And Pakistan could get up to $1.1 billion from the U.S. for the counterterrorism efforts by its military -- Wolf.

BLITZER: Jill, thank you. We just heard Vali Nasr in Jill Dougherty's report. Vali is joining us right now. Congratulations, the new dean of Johns Hopkins University School of Advance International Studies, my own alma mater, former advisor to the late U.S. envoy for Afghanistan and Pakistan, Richard Haldbrook and author, by the way, of several books including "Forces of Fortune, The Rise of the New Muslim Middle Class and What It Will Mean For Our World." Why did it take seven months to resolve this matter?

NASR: Well, because both sides essentially dug their heels in. The U.S. said it would not apologize to Pakistan because it was not happy with Pakistan.

And there was also domestic pressure on the president not to apologize. And the Pakistanis had their own domestic public pressure that they had to get some kind of closure for the deaths of 24 soldiers. The two sides didn't seem to be able to bridge this difference until today.

BLITZER: So when the secretary of state in her statement says we are sorry for the losses suffered by the Pakistani military, you view that as a formal apology.

NASR: It is a formal apology at least to the extent that that's what the Pakistanis need in order to be able to tell their public that they have got something from the United States and that gives them political cover now to open the supply routes and begin cooperating with us.

BLITZER: Let's turn to Iran for a moment. You saw that lead story in the "New York Times" today. The Iranians are launching their own exercises, missile deployments, the U.S. is beefing up its presence in the Persian Gulf. How bad is this situation unfolding right now?

NASR: I don't think it's as bad as it sounds. I think both sides are following the same strategy, which is to use pressure to get leverage at the talks. We threaten military action in order to get the Iranians' attention.

The Iranians are threatening closure of the Straits of Hormuz and military exercises in order to get our attention. So what we're seeing is what we usually see in diplomacy. When diplomacy begins to slow down, both sides begin to flex muscles just to alert the other side to what the consequences will be.

BLITZER: You think these painful sanctions posed on Iran by the international community now in the end will stop them from going forward with a nuclear weapons program?

NASR: No. I think the sanctions will bring them to the table. They're not going to settle unilaterally. We have to have something to put on the table in order to engage them in a deal.

If your expectation is that the sanctions will by themselves get the Iranians to give up the nuclear program, we may end up being disappointed.

BLITZER: Will the Israelis be patient during this long drawn out process do you think?

NASR: I think the Israelis are patient for now to see where we're going to end up. They're also cognizant of the fact that it's an Election Year in the United States there are certain domestic pressures here.

And they also understand what is happening with Iran is not happening in a vacuum. There's a whole Arab world falling apart and Israeli action could have ramifications for the region way beyond Iran alone.

BLITZER: Vali Nasr, thanks for coming in. Once again, congratulations of being the new dean of science. Great school.

NASR: Absolutely. Thank you.

BLITZER: We're getting our first look at some incredible pictures shot by Colorado firefighters who brought their own cameras to the fire lines. And only now they have time to share some of the stories behind what they recorded.

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