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THE SITUATION ROOM

Outsourcing Debate; North Korean Mystery Woman; Congress Probes Cover-Up of Filthy Hospital; It's The Middle Class, Stupid!; The Obama Campaign's Biggest Mistake; Consumer Watchdog Versus GOP Moderate; Armstrong Team Members Banned; Stocks Slide Ahead Of Corporate Reports; Standing Could Add Years To Life; North Korea's Mystery Woman

Aired July 10, 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:

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Governor Romney has experienced owning companies that were called pioneers in the business of outsourcing.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: If there's an outsourcer in chief, it's the president of the United States, not the guy who's running to replace him.

(END VIDEO CLIP)

BLITZER: Mitt Romney turns the tables on President Obama. But they're both missing an important point about outsourcing.

Also, the men who told us it's the economy, stupid, just updated their iconic slogan. James Carville and Stan Greenberg, they are here in the studio to tell us what every politician should be saying right now.

And the whole world's buzzing, buzzing about a North Korea mystery woman. She's always by the side of the new leader there. Nobody seems to be saying who she is.

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

President Obama's been hammering Mitt Romney for sending U.S. jobs overseas during the years he rain Bain Capital. This afternoon in Colorado, Romney turned the tables labeling the president as the outsourcer in chief.

Our White House correspondent, Brianna Keilar, is following all this back and forth.

Brianna, the Obama team, are they worried about this new Romney line of attack?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, I think they would much rather be talking about tax cuts for the middle class. That's why President Obama went to Iowa today.

And certainly this new Republican attack line is stealing some of that spotlight.

(BEGIN VIDEOTAPE)

KEILAR (voice-over): President Obama took the fight over the Bush era tax cuts from the White House to the McLaughlins' house, meeting with a middle class family in Cedar Rapids, Iowa, to promote his new push to renew the Bush era tax cuts only for American families earning up to $250,000.

OBAMA: The Republicans in Congress and Mr. Romney disagree with me. And that's what democracy's all about. They want more tax cuts for the wealthiest Americans. On top of the existing Bush tax cuts, they want to give $5 trillion more in tax cuts.

KEILAR: Following weeks of attacks from the Obama campaign accusing Mitt Romney of supporting outsourcing while he ran Bain Capital and served as governor of Massachusetts, President Obama hit Romney again.

OBAMA: Governor Romney has experience owning companies that were called pioneers in the business of outsourcing. My experience has been working with outstanding members of labor and great managers to save the American auto industry.

KEILAR: But shadowing the president in Iowa, RNC Chairman Reince Priebus, unveiling a new Web site, ObamanomicsOutsourced.com, and a new Republican attack line that Obama himself outsourced jobs by giving stimulus money to foreign renewable energy companies.

And across the country in Colorado, Mitt Romney piled on at a town hall meeting.

ROMNEY: This president has been outsourcing a good deal of American jobs himself by putting money into energy companies, solar and wind energy companies that end up making their products outside the United States. If there's an outsourcer in chief, it's the president of the United States, not the guy who's running to replace him.

(END VIDEOTAPE)

KEILAR: Now, Wolf, there is more than meets the eye to this new argument that Mitt Romney and the RNC are leveling at President Obama.

Some foreign companies did receive stimulus funds, some foreign renewable energy companies. They received stimulus funds. But the administration and campaign argue that it was to create jobs here in the U.S. Now, when you talk to experts, they will tell you that it likely created jobs overseas as well, but doesn't exactly meet the exact definition of taking a job here in the States and moving it overseas, Wolf.

BLITZER: So do you get the sense that the White House officials, Obama campaign leaders are beginning to feel a little heat on this sensitive subject?

KEILAR: Well, I think it distracted today from what President Obama wanted to talk about, because obviously talking about the tax cuts for those making under $250,000 really moves they feel forward his message about fairness and fighting for the middle class. I think this is a distraction.

But I also think we're waiting to see how long this continues to get attention. And then we will really see if they're very concerned about it, Wolf.

BLITZER: Brianna Keilar over at the White House. Thanks.

Let's dig a little bit deeper with Gloria Borger, our chief political analyst.

Are we going to get some more pushback, you think, from the White House on this whole issue of the president being outsourcer in chief?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes. I think you're going to get pushback from the White House.

I also think you're going to see more push from the Romney campaign on this. I spoke to a source close to the Romney campaign who said this is just the beginning of their significant pushback on outsourcing. You know, this is part and parcel of the attacks the White House has been waging on Mitt Romney as the head of Bain Capital, also as somebody who's wealthy and doesn't understand about the middle class.

And the White House believes that they were actually gaining some traction on this in key battleground states. If you look at the polls though, Wolf, the people they're gaining traction with in those battleground states are the soft Democrats.

And, you know, that's helpful to the campaign. But expect the Romney campaign to continue -- and you saw that today with the candidate himself and Reince Priebus, the chairman of the RNC -- pushing back against the White House on this on another issue, trade, because they believe that this president's trade policies have taken American jobs overseas.

BLITZER: Good substantiative issues to have a good debate on.

BORGER: Exactly. Exactly.

BLITZER: Because these are important matters.

Look at this new ABC/"Washington Post" poll -- 92 percent according to this poll of registered voters, they basically have made up their minds. And 79 percent say they will definitely vote for a candidate, a specific candidate and 13 percent unlikely to change their mind, 92 percent already locked in.

So, what, they're playing for 8 percent who may switch or who are still undecided? BORGER: Yes. We're playing at the 48-yard line here, Wolf. The people who are undecided are those independent voters.

But if you look at the independent voters, about a third of them are Democrats and a third of them are Republicans. And then there are those who are in the middle of the middle. These people largely believe the country is on the wrong track. They're very soft on whether they approve of the way the president is doing his job. They see the economy as issue number one.

They're more women than men. But, as you know, Mitt Romney does better with married women. Barack Obama does better with single women. They're younger. They're more educated. Those are the people the campaign is spending tens of millions of dollars to go after right now in the battleground states.

By the end of this campaign, they will have spent billions for these few voters.

BLITZER: So what's it going to take to get out these people to actually show up, to show enthusiasm for either candidate?

BORGER: Right. This election in a way may be less about persuasion than it is about motivating people in your base to go out. And we have seen what the Obama campaign has done.

They have with their executive order on immigration, for example, talked to Hispanic voters. They have talked to gay voters about same- sex marriage. Women, students, student loan program renewal. They're picking off each part of their base. The Romney campaign on the other hand believes that the anger towards the president will bring out their voters.

Six out of 10 Romney voters say their vote is against President Obama and not necessarily for Mitt Romney. They believe that will get out their voters and also the state of the economy will get out those voters to win for Mitt Romney.

BLITZER: John Boehner, the House speaker, was pretty blunt the other day when said a lot of these Republicans they're not going to love Mitt Romney, but they're going to go out and vote because they don't want Barack Obama.

BORGER: They will take it any way they can get it.

BLITZER: Gloria, thank you.

Jack Cafferty's here with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, barring some cataclysmic surprise as Election Day gets closer and people decide who they're going to vote for, it will likely come down to what it always comes down to , which is the answer to that eternal question: How am I doing?

In 2008, President Obama won by promising to change America. And he has. Trouble is some people think he's changed it for the worse.

Mitt Romney remains pretty much an unknown, except for his time as governor of Massachusetts.

He wants lower taxes, fewer regulations, more defense spending, and an end to what he calls the "kick in the gut" of 8.2 percent unemployment.

The wild card for whoever wins the presidency, of course, is Congress.

The Democrats control the Senate. The Republicans control the House. And unless that changes, it's doubtful whoever wins is be able to get a whole lot done.

But one thing's for certain: This is not the same country anymore that President Obama took over when he was inaugurated in January of 2009.

Our standard of living continues to decline and our National Debt has passed the point of no return.

The middle class is rapidly disappearing and the hope that President Obama spoke of along with change is increasingly tough to come by.

The fact is the U.S. may have changed forever. And not for the better.

Here's our question: What kind of change did President Obama deliver?

Go to CNN.com/caffertyfile. Post a comment on my blog. Or go to our post on THE SITUATION ROOM's Facebook page -- Wolf.

BLITZER: All right, Jack, thank you.

The men behind one of the most memorable slogans in U.S. political history, they are here in THE SITUATION ROOM today. They have just changed it's the economy, stupid, to something new. Stand by for that.

And, later, why an Egyptian couple -- get this -- they packed their baby in the luggage, literally.

And, right now, Congress is asking questions about an alleged cover-up. We're getting an exclusive look at the filthy, horrifying conditions inside a hospital supported by millions, millions of your tax dollars.

(COMMERCIAL BREAK)

BLITZER: Truly amazing image alerted security officers in the United Arab Emirates that something was really, really bad.

And Mohammed Jamjoom is joining us from Abu Dhabi right now.

Mohammed, this is a pretty shocking story. They put a little baby, what, 5-month-old baby through the X-ray machines in an airport? What was happening? What happened here?

MOHAMMED JAMJOOM, CNN CORRESPONDENT: Well, Wolf, it is shocking.

And according to the police in charge here in the UAE, they say that the family arrived last Friday, that when they tried to enter the UAE that they were told that their 5-month-old baby didn't have a visa and that it would take at least two days for them to get paperwork processed and that they'd have to wait at the airport.

The police say that, by the next day, that the father had grown really impatient and that he persuaded his wife to try to smuggle the baby into the country, to put the baby into carry-on luggage, and then put it through the X-ray machine, hoping that the security there at the airport wouldn't notice.

But there's this amazing picture that was captured from the X-ray scanner where you can actually see the outline of the baby. You very clearly see the baby's legs in that handbag. The police have said it's the most surprising thing they have ever seen at the airport. They can't believe that the parents did it.

And they're just happy that, thankfully, that infant is safe and sound -- Wolf.

BLITZER: That infant very, very young. Going through an X-ray machine like that can be dangerous.

How is the baby doing, based on the reports you're getting?

JAMJOOM: Well, one of the things we saw clearly in the statements issued by the police today was that they were heralding the fact this baby was spared anymore radiation. You know, the suggestion that this baby could have been -- could have been exposed to a lot of radiation going through this X-ray scanner if it hadn't been caught at the time that it was caught. So there was concern for the baby's safety.

But the police saying that the baby is safe and sound. The parents are being charged. They're being charged for endangering the life of that 5-month-old and also for trying to smuggle it into the country.

BLITZER: The story has shocked folks not only where you are but all over the world. Mohammed, thanks very much for updating us.

JAMJOOM: Thanks.

BLITZER: And happening now: a congressional hearing to allegations the Pentagon tried to cover up horrifying conditions at an Afghan hospital, a hospital that the United States sank at least $100 million of your tax dollars into. You're looking at live pictures of the hearing.

We want to warn you, CNN's Pentagon correspondent, Barbara Starr's exclusive report contains pictures that are very disturbing.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice-over): Afghan soldiers, starving, lying in dirty beds with festering wounds, denied pain killers. All of this at the Kabul National Military Hospital, a hospital the U.S. paid more than $100 million to help the Afghans run.

SCHUYLER GELLER, RETIRED AIR FORCE PHYSICIAN: Things as simple as dressing changes are not done. Patients become infected and they die.

STARR: These days, a world away, Schuyler Geller, a retired Air Force doctor, tends to his Tennessee farm.

GELLER: This will be kind of a little haven.

STARR: From February 2010 to February 2011, he oversaw training of Afghans at the hospital. These photos were taken by his American military staff.

GELLER: There are patients that are starving to death because they can't buy the food. They have to bribe for food. They have to bribe for medicine. Patients were beaten when they complained about no pain medicine or no medicine.

STARR (on camera): And you're not supposed to worry about that.

GELLER: That's what we were told.

STARR (voice-over): Pentagon officials do not dispute that the photos from 2010 show hidden, but deliberate abuse by Afghan staff. But they insist that after a U.S. inspection, conditions have improved significantly.

In this memo to Congress, Geller alleges, two senior U.S. generals who oversaw Afghan training, Lieutenant General William Caldwell and his deputy, Brigadier General Gary Patton, in 2010, delayed bringing in Pentagon investigators because of their political concerns over the looming midterm U.S. elections.

Geller says Caldwell was angry his staff wanted the inspector general to investigate. And that Patton ordered a delay out of concern it would embarrass the Obama White House.

GELLER: And then he said, "But we don't want to do -- we don't want to put that request in right now, because there is an upcoming general election. And we wouldn't want this to leak out."

REP. JASON CHAFFETZ (R), UTAH: That's just not acceptable.

STARR: Congressman Jason Chaffetz's House Oversight Subcommittee is investigating the general's alleged behavior.

CHAFFETZ: That's a very serious allegation. But it didn't come from just one high-ranking military official on the ground; it didn't come from just two. We have several of them who have stepped forward and said, "Yes, this was indeed the case."

STARR: Geller says he wants the truth to come out.

GELLER: The biggest frustration is our own leadership's response, and how slow that was and how inadequate that was.

(END VIDEOTAPE)

BLITZER: Barbara Starr's here with us in THE SITUATION ROOM right now.

So this investigation in the House of Representatives is ongoing right now. What do they hope to achieve?

STARR: Well, also ongoing in the Pentagon, Wolf, and General Caldwell and Patton have declined to comment because of that. But at this hearing right now, even though they're not commenting, a number of members of Congress are. And I want you to listen to what one member, Congressman Coffman just had to say about his view of General Caldwell.

(BEGIN VIDEO CLIP)

REP. MIKE COFFMAN (R), COLORADO: The problem really rose to the top, in my view. And (AUDIO GAPE) that he's still serving today in the United States Army after all that has occurred here.

(END VIDEO CLIP)

STARR: Pretty serious set of --

BLITZER: Damning indictment of General Caldwell. I know him quite well. I know he's an excellent military career until this. But this is hugely, hugely embarrassing.

Here's the problem that I have, that this is just the tip of the iceberg, Barbara. You know this, I know this. The inspectors general who have investigated not just $100 million wasted in this hospital, U.S. taxpayer money that could have been used building a hospital in the United States, but hundreds of more billions of dollars built on roads that aren't used, built on schools that aren't used, built on all sorts of infrastructure in Afghanistan. Billions and billions and billions of U.S. taxpayer dollars over the past 10 years gone, wasted for no good reason.

And it's just so frustrating, so irritating f you read these reports, not many do from the inspectors general you see what's going on.

STARR: Well, you know, the Pentagon will give you the traditional line that they're making progress. But Congress clearly is getting irritated with it. A series of hearings now about -- can the Afghan government really stand up and properly look after itself?

I just very quickly also want to credit one of my colleagues, Maria Habib of "The Wall Street Journal." she started bringing much of this terrible situation at the hospital to light over the last several months. This is a story that's not going away.

BLITZER: A huge source of waste. And think about it. The next two and a half years while the U.S. maintains a presence in Afghanistan, $2 billion a week, $100 billion a year, more than $200 billion is going to be spent. And who knows how much of that is simply going to go down the drain like in this hospital that you report on.

STARR: Very tragic situation.

BLITZER: Terrible, terrible.

(AUDIO GAP) military, we're digging deeper into the possible mandatory defense cuts scheduled to come into effect. What it could mean for America's security. We have a lot more on that coming up in our brand new 6:00 p.m. Eastern hour later today. Standby for that.

Air traffic comes to a standstill in Newark. Why a control tower had to be evacuated. And a ground stop ordered at the busy airport.

And buckle up, it's a wild ride through San Francisco.

(COMMERCIAL BREAK)

BLITZER: (INAUDIBLE) on Egypt, Lisa Sylvester's monitor that and some other top stories in THE SITUATION ROOM right now. What's the latest, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, the power struggle between Egypt's president and military is growing. The higher constitutional court halted President Mohamed Morsi's order calling parliament back into session. The court also affirmed its decision to dissolve parliament. The parliament convened for nearly an hour today in direct opposition to the military which had taken over legislative powers.

And planes are flying once again at Liberty Airport. But the FAA halted operations earlier when smoke was reported in the elevator shaft at the air traffic control tower. The tower was evacuated and controllers began working from an alternate site.

And in scenes that scream "don't try this at home", a professional rally car driver tears across San Francisco. See the pictures here. In his new Internet film, Ken Block takes a seriously souped up Ford Fiesta for trolley cars racing up and over the city field (ph). This was filmed over four days. And not surprising it has become an Internet sensation.

And Queen Elizabeth welcomed the Olympic torch at Windsor Castle today. Heavy rain gave way to sunshine as the queen watched the relay. The torch started the day in Oxford carried by Sir Roger Bannister who broke the four-minute mile barrier there in 1954. The queen will declare the summer games open in 17 days. And we will have more on this in our next hour -- Wolf.

BLITZER: We certainly will. Thank you, Lisa.

Everybody knows the political slogan "It's the economy stupid." The men who thought it up, they are here in THE SITUATION ROOM next to explain why they've just changed that slogan.

And in our brand new 6:00 p.m. hour, the Chicago Mayor Rahm Emanuel and his city's police, they are feeling the heat of public outrage right now. We're taking a closer look at why nobody seems able to stop this summer's plague of deadly shootings in Chicago.

(COMMERCIAL BREAK)

BLITZER: One of the most iconic slogans in politics made famous by the men who helped Bill Clinton win the White House. Listen to this.

(BEGIN VIDEO CLIP)

UNIDENTIIFED MALE: It's the economy, stupid.

(END VIDEO LCIP)

BLITZER: Now take a listen to see how that slogan has been updated.

And James Carville, our political contributor, the Democratic strategist, is joining us right now. The co-author of the new book, Stan Greenberg -- he was the lead pollster for the Clinton campaign back in '92 -- is joining us as well.

Congratulations to both of you on the new book. It's got a lot of really good things inside. But let me start, James, with you and the title, "It's The Middle Class Stupid!"

You used to say you coined the phrase "It's The Economy Stupid" back in '92. What's changed?

JAMES CARVILLE, CNN POLITICAL CONTRIBUTOR: Well, I think what's changed is we've had a deterioration of the middle class over a long period of time.

And people falling out of middle class, having trouble hanging on to the middle class and very much aware of what's happening in our lives.

And notice this over a period of time he wrote an earlier book called "Middle Class Dreams." So we really wanted to bring this attention to the forefront. And that was the rationale and reason behind the book.

BLITZER: Is it your sense, Stan, that the Obama campaign is not focusing enough on the middle class?

STAN GREENBERG, DEMOCRATIC STRATEGIST: I think they're focusing like a laser right now. That's, you know, I think we're -- I think the both of us are impressed where they have come out both on policy terms and on focusing on the middle class and looking at the proposal they've done on the tax cuts.

So we're pleased because we think this is the center of the election. You know, we came together, you know, around with Bill Clinton, forgotten middle class. That was a particular moment in time.

And Bill Clinton kind of represented the kind of identification with and would fight his heart out for those people. But what we found, people now recognize this is like a three-decade period of income decline, jobs going overseas, personal debt and public debt.

And it's -- you know, people know there's a big long-term problem. And they're looking for the elites to pay attention and I think they're paying attention.

I think when Mitt Romney says now it's a kick in the gut when he looks at the job reports for the middle class and the president is now speaking to the middle class. I think we have an election that's about them.

BLITZER: Here's what you write in the book, James, you write, maybe Obama needs to go to the convention in Charlotte and say to his opponent, let's concede he will not raise taxes on the wealthy and I will.

He's not taken any positions yet and in fact he's promised to cut taxes on the wealthy. I will raise taxes on the wealthy. Is it ever smart to tell the American people you're going to raise taxes?

Because all of us remember Walter Mondale in 1984 when he said Reagan says he won't raise taxes, I say I will. That didn't work out so well for Mondale.

CARVILLE: Well, he didn't have to wait to Charlotte. He said it two days ago that he wanted to end the taxes on the wealthy. By the way, that's been a consistent position of President Obama. It was his position in 2008.

And now he's saying something different that if they don't raise taxes on top earners, that he's going to veto the whole bill. Certainly, he should say that in Charlotte. He said it two days ago very clearly --

BLITZER: Yes, but, Stan, you know the Republicans will use this --

GREENBERG: Please.

BLITZER: Obama only wants to raise taxes, raise taxes, raise taxes. They seem to be pretty happy with his latest statements. GREENBERG: I think it's an old song and I think if, you know -- look, right now this is a consensus position. There's something like 75 percent of the country that think we need to raise taxes in particular on the wealthy.

It runs across all parties. This is like one of the few non- polarizing consensus issues in the country. The country's desperate for it. They want to see that everybody is contributing.

There are big problems to address. And raising taxes on the wealthy is a precondition for doing the deficits in the right way, addressing health care, addressing the needs of the middle class. And so I think it's the right starting point and it's the right choice.

BLITZER: Because the argument that the Democrats are simply tax and spend, you'll hear that. But you write this in the book, James. Let me read another line from the book.

You write, "My biggest complaint with this president is that there's a narrative in front of him and he refuses to drive it," explain.

CARVILLE: Well, first of all, I have been very impressed with the campaign in the last three to four weeks. And I think they're starting to develop one.

But what Stan and I have been concerned about for some time is, is that they need to focus on the next four years as opposed to the previous four and need to put the middle class front and center.

I think the president and his team have done a real good job. I think tactically and strategically they're moving in the right direction. They're starting to develop this narrative. I think it has a good chance to be successful also.

BLITZER: James, about six months ago there was a sort of panic that was the recommendation he made, Stan, you probably remember that as well. You're one of the best pollsters out there. You're a great political strategist.

GREENSBERG: Appreciate that.

BLITZER: Stan, so give us one piece of advice. The most important thing you think that President Obama and his campaign need to do right now over the next four months in order to get re-elected.

GREENBERG: I think he needs to drive the story that this election is about the fate of the middle class and it's about the future. You know, we listen to people, it is tough out there.

They made enormous adjustments to survive this financial crisis and also the long-term economic decline. And they are looking to leaders and I think they're looking for frank ideas, boldness.

They want leaders that will tell them where they're going to take the country. He needs to focus on the future, focus on the middle class, focus on the future and pose the choice with Mitt Romney.

BLITZER: The poll numbers basically haven't changed much over these past few months. Take a look at this. This is the new "Washington Post"/ABC poll back in May, 46-49, Romney -- Obama -- 46 for Romney, 49 for Obama, 47-47 right now.

There's not a whole lot of movement among registered voters nationally. Wrap this up for us, James, with the most important thing you think that the president needs to do.

CARVILLE: I think he's moving on what we've been stressing. I think his second term is about putting middle class front and center. He's going to go to work on the strategy to help rebuild the middle class. Frame everything within that issue and I think that's the winning strategy here.

You know, I had not been reluctant to criticize the president's re-election campaign when I thought it was in the wrong direction. I think it's in the right direction now.

I'm very happy to be able to say I really like the way this camp -- the direction this campaign is going in. I like the aggression coming out of Chicago.

BLITZER: One final question because we're out of time, James. So when the Republicans say that you're only proposing class warfare, what say you?

CARVILLE: Warren Buffett said there's been class warfare going in this country for a long time and his class is winning. The middle class has been under siege in this country for over 30 years.

GREENSBERG: They are looking for leaders that will speak up for them. If that's class warfare, I think that's the best strategy for winning in November.

BLITZER: Stan Greenberg and James Carville, the new book entitled "It's The Middle Class Stupid!" Huge exclamation point after the word stupid. Guys, thanks very much. Congratulations on the book.

In a tough congressional battle in Massachusetts, one issue refuses to go away. Elizabeth Warren now admitting to CNN she was slow to respond to the tax on the ancestry she claims. Our own Dana Bash takes a closer look.

And searching for medical answers on what's killing children in Cambodia in our brand new 6:00 p.m. Eastern Hour, a live report from our own Dr. Sanjay Gupta. He's over at the hospital in Cambodia.

(COMMERCIAL BREAK)

BLITZER: November's election is absolutely crucial to the balance of power in Congress. Right now, Democrats effectively hold a 53-47 majority in the Senate because both independent senators vote with the Democrats. One of their biggest hopes to pick up a Republican seat though is in Massachusetts. That's where moderate Republican Senator Scott Brown is being challenged by consumer advocate Elizabeth Warren in a race that is surprisingly tight.

Our senior congressional correspondent, Dana Bash, is here in THE SITUATION ROOM just back from Massachusetts where you had a chance to take a close look.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right. And you're right. This race is neck-and-neck and probably the most closely watched Senate race this election year.

There are two nationally known figures attracting a lot of national attention, but each trying to keep it local.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Senator from Massachusetts Scott Brown.

BASH (voice-over): Main Street in Cape Cod with Senator Scott Brown. The breezy every-man persona got the Massachusetts Republican elected in an upset two years ago still on display.

UNIDENTIFIED MALE: Thank you.

UNIDENTIFIED FEMALE: Absolutely. Thank you.

UNIDENTIFIED MALE: Keep your eyes on the road, will you?

BASH: Brown is keenly aware that recapturing the Senate seat held by Democrat Ted Kennedy for nearly half a century means distancing himself from fellow Republicans whenever possible. Most Republicans boast about blocking the president's agenda. Brown brags about helping.

SENATOR SCOTT BROWN (R), MASSACHUSETTS: I can name a litany of Democratic sponsored bills that I've done that never would have passed had it been for me. And the president had called me and the vice president calls me and Secretary Clinton calls asking for my vote all the time.

BASH: Republicans jumped on the Supreme Court decision calling the federal health insurance mandate a tax, but Brown voted for a mandate in Massachusetts and says neither is a tax.

BROWN: What the party leaders and others say in Washington really has no bearing on what I'm doing.

BASH: Still Brown was elected vowing to help Republicans block the president's health care plan and wants to repeal it. His Democratic opponent of course does not.

UNIDENTIFIED FEMALE: Hi. I'm Elizabeth Warren. It's very nice to see you.

BASH: Brown's challenger is a liberal icon.

UNIDENTIFIED FEMALE: We're here for the chicken.

BASH: President Obama's high profile consumer advocate and former Harvard law professor.

ELIZABETH WARREN (D), MASSACHUSETT SENATE CANDIDATE: I never thought I would run for public office, but I got pulled into this because of the urgency of this moment. Families are getting hammered and they can't take it much longer.

BASH: The first-time candidate was a quick study on pressing the flesh.

WARREN: Wonderful. Fabulous. Shake my hand.

BASH: And she's got her message against Brown down.

WARREN: Scott Brown stands with the billionaires and says they shouldn't have to pay more in taxes. Scott Brown has been standing against working families.

BASH: But Warren has stumbled over an issue she admits tripped her up. When she applied to teach at Harvard, she identified herself as Native American. Brown pounced saying there's no evidence.

WARREN: I was really surprised that anyone wanted to make this a political issue. I was really surprised by that and very slow to respond to it. I'm like every other kid. I learned about my family from my parents.

BASH: Brown won't let it go accusing her of claiming minority status to advance her career.

BROWN: When you run for high elected office, you have to pass a test. And that test is one of honesty and credibility and trustworthiness and truthfulness and she's failed that test.

BASH: Harvard administrators say they didn't know Warren claimed Native American heritage before hiring her. It's still raw. Warren bristles at whether she considers herself a minority.

(on camera): So you don't want to put a label on it?

WARREN: No, this is part of who I am. This is who I am.

BASH: Warren says Brown is distracting from what matters. We put that to Brown.

(on camera): There are big issues facing this country.

BROWN: I deal with them every day.

BASH: And that Republicans are engaged in divide and conquer politics.

BROWN: Listen, with all due respect, I'm evidence of the fact I'm getting things done.

BASH (voice-over): To be sure, Democrats have their own arsenal against Brown. He touts this.

BROWN: I was the tie-breaking vote on Wall Street reform.

BASH: But the "Boston Globe" reported after the bill became law, his aide e-mailed the Treasury Department to try to loosen restrictions on big banks.

BROWN: The e-mail was merely making sure that the Treasury did in fact what Congress wanted it to do.

BASH: With the sagging economy driving voters in Massachusetts like everywhere else, it's unclear how much Brown's Wall Street ties or Warren's heritage will matter. What is clear, retail politics does still matter in New England.

WARREN: Good to see you. I like your shirt, very handsome.

BASH: Politics and baseball.

(END VIDEOTAPE)

BASH: Now, Scott Brown and Elizabeth Warren have agreed on something that's interesting. They made a deal to discourage outside groups like "Super PACs" from running ads in Massachusetts.

So far by and large it's working. That means each candidate can better control their message, but it also means they have to raise a lot of campaign cash themselves.

And Elizabeth Warren is doing quite well in that department. She announced this week, Wolf, that she raised $8.6 million just in the second quarter. That's on top of nearly $2 million in the first quarter.

As for Scott Brown, we haven't gotten those numbers yet. His campaign says they're not releasing them, but in the first quarter he did pretty well $3.5 million.

BLITZER: Yes. I'm sure they're both spending a lot of money. Here's a question. You were just up in Massachusetts. This is incredibly tight, the Senate race.

But on the presidential level, the president -- President Obama is beating Mitt Romney, the former governor of Massachusetts decisively. Why is that?

BASH: You know, first of all, I think the short answer is by and large, Massachusetts, this is not a news flash, people, it's a blue state especially so on a presidential level.

It's voted Democratic on a presidential level for years and years and years. When it comes to the Senate and it comes to other, you know, statewide races, Massachusetts voters tend to be a little bit more independent.

You think of Massachusetts as a liberal state and it is that on the presidential level, but in the Senate level you saw with Scott Brown, not necessarily so.

What I'm looking for and what other people are looking for, Scott Brown had a surprising win two years ago when there was no one else on the ballot. The question is whether or not the president is doing so well there drag Scott Brown down.

BLITZER: The president's coat tails could help Elizabeth Warren.

BASH: Exactly.

BLITZER: Thanks -- thanks very much. Interesting, good report.

Every week, by the way, in our new 6:00 p.m. Eastern hour we're trying something new among other segments. There's a segment we're calling "Ask Wolf." That would be me.

Send me a question using Facebook, Twitter, I-Report, whatever, I'll try to answer a question or two 6:00 p.m. Eastern right here in THE SITUATION ROOM.

No one knows who she is, but she's capturing the world's attention right now. What one woman's sudden appearance beside North Korea's mysterious leader may mean.

(COMMERCIAL BREAK)

BLITZER: Some of Lance Armstrong's former team members are targeted. Lisa Sylvester is monitoring that and some other top stories in THE SITUATION ROOM right now. What's going on, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Hi, Wolf. Well, the U.S. Anti- Doping Agency is issuing lifetime bans to two doctors and a team trainer. The agency says it was part of what they called a sophisticated far-reaching doping conspiracy.

Armstrong is accused of using performance enhancing drugs. Yesterday, a federal court judge dismissed his lawsuit against the agency.

Stocks closed sharply lower today in anticipation of disappointing corporate earnings report. Analysts are expecting earnings to drop off compared to the first quarter. Results from JPMorgan Chase and Wells Fargo are due later this week.

And for this next story, maybe you better stand up. Researchers say Americans might live up to two years longer if they sat less. The report in the British Medical Journal says we need to reduce sitting to less than three hours a day.

Limiting the time in front of the television to two hours a day could also extend our lives. And I know, Wolf, you're standing right now. There you are. So here's to a long life, Wolf. BLITZER: I hope. All of our viewers as well. Thank you, Lisa. Jack Cafferty's here with "The Cafferty File." Jack, I hope for a long life for you as well.

JACK CAFFERTY, CNN ANCHOR: Yes, but I mean, what's it worth if you have to spend all those extra years standing on your feet.

BLITZER: It could be worse.

CAFFERTY: I guess, that's true. The question this hour is what kind of change did President Obama deliver?

Todd writes from Arizona, "More illegal immigrants rights, more racial tension, more debt to China, more taxes for his health care fiasco. Shall I continue or were you looking for positive points? None come to mind."

Dave in Seattle writes, "The biggest change will not be seen in his lifetime. It's the inspiration he gives young African-Americans to achieve and become great leaders."

John writes, "Zero. He promised a new brand of politics based around the people and he delivered politics as usual. Instead of doing what he said he would do in reaching out to experts outside the normal political circles.

He reached out to the likes of Nancy Pelosi and Barney Flank and pulled out the same old tired liberal Democrats playbook to try and solve our problems. President Obama has proven himself to be a typical politician, promising everything, delivering nothing."

Gerry in Indiana writes, "The change Obama delivered has been a huge increase in our national debt, a huge tax increase and the guise of Obama care and the worst economy in my memory."

Larry in Texas writes, "He ended our wasted efforts in Iraq, he got Bin Laden, he kept the tax cuts, he passed the health care law. All things considered over the last two years with the Republicans main goal to destroy everything in order to defeat him, I give him an A plus."

And S writes, "Loose change. Most people all over the world are now counting their pennies."

If you want to read more on the subject, go to the blog cnn.com/caffertyfile or through our post on THE SITUATION ROOM's Facebook page. That concludes the segment. I'm sitting down.

BLITZER: Sit down, please. You are sitting right now.

CAFFERTY: I am.

BLITZER: Appreciate it.

You're going to stick around. I want you to see this next report though. Her identity is unknown, but many believe her recent appearance besides the new leader of North Korea is rather significant. We have new information.

And the miles are piling up. It's a marathon diplomatic mission for the Secretary of State Hillary Clinton. Is she feeling the strain?

(COMMERCIAL BREAK)

BLITZER: There's a look at this hour's "Hot Shots." In India, activists demonstrating against a pharmaceutical company in New Delhi. In France, a tight rope walker practices his balancing act in a park.

In Australia, look at this. Children spin circles around their parents at an ice rink on the beach. And in England, three Yorkshire terriers getting drenched. "Hot Shots," pictures in from around the world. Love those.

Meanwhile, there's a new mystery involving a rather secretive nation. A woman has begun appearing beside the new North Korean leader Kim Jong-Un at all sorts of public events.

That sparked a flurry of speculation. We asked our own Brian Todd to take a closer look. Brian, what do we know about this mysterious woman?

BRIAN TODD, CNN CORRESPONDENT: Wolf, there's very little that western analysts or even intelligence agencies know about her. It's mostly speculation.

In fact, the reporting goes back and forth on whether this woman is romantically involved with Kim Jong-un or whether she's his sister.

(BEGIN VIDEOTAPE)

TODD (voice-over): The face that launched a thousand rumors. North Korea watchers are abuzz over this young woman seen twice in recent days next to the country's new leader, Kim Jong-un.

She was spotted once at a high profile musical performance seen on state TV, which happened to include Disney characters that Disney didn't authorize.

Then she was seen at an event paying tribute to Kim's late grandfather.

(on camera): Who do we think this mystery woman is?

VICTOR CHA, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES: The short answer is we don't know for certain.

TODD (voice-over): The speculation is rampant and centered on two possibilities. One South Korean newspaper said the woman seemed to be Kim Jong-un's younger sister.

Victor Chu, former National Security Council official who dealt with North Korea thinks that would be unparalleled. CHA: There's only one leader in North Korea. There's only one leader. And this fella who's been the anointed person, so for them to then suddenly put a younger sister right next to him to make her look at least almost like a co-leader would be highly unusual and give you the sense they're not doing things the way they have been in the past.

TODD: The other possibility, a prominent South Korean newspaper citing South Korean intelligence officials identifies the woman a former singer for electronic music band.

(on camera): That band was hugely popular in North Korea, had hit songs with titles like "I love Pyongyang" and "Excellent Horse Like Lady." We're not making this up, how could we?

(voice-over): That newspaper reports they became romantically involved about a decade ago. But that his father objected. She then married someone else according to the paper. As if you need another twist, there's a family pattern.

CHA: When the father, Kim Jong-il was around the same as the leader, he became interested in a young female reporter also married to somebody else. That person no longer was relevant. In the Kim family, if they want you, they have you.

(END VIDEOTAPE)

TODD: Victor Char and other analysts say the North Koreans have an interest in projecting this woman as a possible wife for Kim Jong-un if she's romantically involved with him.

Not only to make him seem more human, but also to show there will be another generation of the Kim family after this one. That the dynasty will continue. It's crucial for the regime to project that kind of strength -- Wolf.

BLITZER: Given history, even if she emerges some day as his wife, we probably won't learn much more about her.

TODD: That's right. Analysts say the wives of his grandfather and father were never ever mentioned in the North Korean media. Their existence was barely even hinted out. There's very little even we know about him. We know he's in his 20s, he went to school in Switzerland, but that's about it right now.

BLITZER: Late 20s right now, that's about it. That's all we know. Brian, thanks very much.