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THE SITUATION ROOM

Planes Come Too Close for Comfort; New Al Qaeda Terror Plans?

Aired August 2, 2012 - 18:00   ET

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


(BEGIN VIDEOTAPE)

KATE BOLDUAN, CNN ANCHOR (voice-over): Happening now: new information about a scary close call involving three planes over one airport.

A major arrest of suspected terrorists -- al Qaeda may be developing a new method of attack.

And Ann Romney's horse debuts at the Olympics and her husband gets judged.

(END VIDEOTAPE)

BOLDUAN: Wolf Blitzer is off. I'm Kate Bolduan. You're in THE SITUATION ROOM.

We start with a major operation against al Qaeda in Europe. Three suspected terrorists have been arrested in Southern Spain. Spanish officials say the men were -- quote -- "ready to act," and they may have been plotting to attack U.S. or British targets using remote-controlled planes or paragliders.

Our senior international correspondent, Nic Robertson, is following this story from London.

Nic, you have been doing some amazing reporting on this. What more are we now learning about this threat?

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: We know the police have seized a computer that they're scanning right now to find out if there's any more information that can give them leads to other people they might want to arrest.

They also believe that a large quantity of explosives is still missing, although they did capture some explosives. They say two of the men that were arrested, believed to be of Chechen origin, had had al Qaeda training in al Qaeda camps Afghanistan and Pakistan.

One of them was a senior al Qaeda figure, that he also had a lot of chemicals experience, and they believe he was sort of a master bombmaker type, that they had experience in making car bombs and shooting, a lot of al Qaeda techniques.

But what is worrying Spanish officials is that these two men were on the road when they were arrested, taken off a bus, they put up a fierce fight before they were arrested. Police believe they were planning to attack a base about 60 miles from where the explosives were found and that they were going to use a motorized paraglider the police believe to deliver these massive amounts of explosives into a joint U.S. and Spanish naval base there.

BOLDUAN: Some of the details are truly amazing. It sounds clearly like the investigation into the threat is just beginning. But I heard you earlier say they have really been tracking these guys for awhile.

ROBERTSON: They have.

And that's really fascinating here. I guess we're learning a lot more over these years how intelligence services work. They don't just -- when they find somebody on their radar, they don't just rush in and nab them. What they did with these guys, we understand that two of them, these two these al Qaeda-trained guys, came from France into Spain, were tracked for a month, and their interactions with a third guy, believed to be Turkish, he had a small apartment not far from Gibraltar, which is where the explosives were retrieved from.

They even bugged that apartment. When this Turkish guy called his wife to clean out the apartment, that's when the police realized they were getting rid of some of the explosives, and that's when they went in. The sniffer dogs detected that some of the explosives were missing, Kate.

BOLDUAN: Nic, great reporting on this. Keep up the good work. Thank you so much. We will talk to you a little later.

Just into CNN, Congress is acting to close a loophole discovered by one of CNN's own. It is a loophole in a law designed to prevent lawmakers from profiting from insider trading. We have talked about this a lot.

Let's bring in our senior congressional correspondent, Dana Bash, who exposed this loophole in an exclusive report.

Dana, what do you have now?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: This is something I should say Deirdre Walsh, our congressional producer that you and I know and admire so much, she uncovered this, we reported it out.

What the it is, is you remember the insider trading bill that was really touted by Democrats and Republicans. The bill was that they made sure there was really no way legally that any member of Congress could use the information that they had and that they get privately and do it for their personal financial gain.

We found a loophole and they closed it today because of our reporting.

Let's give you a little bit on background on what we're talking about first. (BEGIN VIDEOTAPE)

BASH (voice-over): The key to making sure lawmakers don't profit off secret information they learn on the job is based on a new rule. Financial transactions over $1,000 must be reported within 45 days.

ROBERT WALKER, GOVERNMENT ETHICS LAWYER: So that the public could have more real-time understanding of what their members and what senior staff and other high government officials were doing with their finances. What kinds of trades were they making.

BASH (on camera): On the Senate side of the Capitol, the Ethics Committee decided that the new rule must apply to lawmakers and their spouses and children. But over here on the House side, the Ethics Committee told its members something completely different. That spouses and children do not have to report their STOCK trades in a timely way.

SEN. SCOTT BROWN (R), MASSACHUSETTS: Well, I'm obviously deeply concerned about that.

BASH (voice-over): All of this was news to the senators who sponsored the legislation. Needless to say, when we brought it to their attention, they were not happy.

BROWN: Let's say that I find out some information and I tell my wife and she goes and trades on it, what's the difference? I mean bottom line is we're supposed to have that level of transparency and not -- and have us be treated like every other member of the United States.

BASH (on camera): It specifically says that members of Congress do not have to have their spouse or their children file.

SEN. KIRSTEN GILLIBRAND (D), NEW YORK: I think it's wrong and I think it's unfortunate because the reality is the whole point of this legislation is that we should play by the exact same rules as every -- every other American citizen. And when all of America looks at Washington, they know it's broken.

(END VIDEOTAPE)

BASH: Now, Kate, our reporting led us to the office of the House majority leader, Eric Cantor, who was in charge of and actually wrote this bill back before it passed. That was the bill that ultimately became law.

When we brought this to their attention, they looked into it, they took about a day to do so, and came back to us and said you know what, you're right. This was wrong, it is a loophole that we intend to close.

And what happened today, right before Congress left town, is the House and Senate passed a fix to it, closing that loophole, making clear that spouses and children also have to file regularly, every 45 days on their major financial transactions to make sure they, too, are not benefiting from information that their spouses get because of their position of power in Congress.

BALDWIN: All done just in time to get out of town. As we like to say, they smell jet fumes.

Dana Bash, great work on this as always. But there's a lot of work to be done once they return in September. I will talk to you soon.

In presidential politics, Mitt Romney is back on the campaign trail after his overseas trip. Right now this hour, he is appearing with Republican governors who are meeting in the battleground state of Colorado. Several of Romney's possible vice presidential picks are there as well, including Louisiana Governor Bobby Jindal.

We're told the head of the V.P. search is also along this trip. At a campaign stop in Colorado earlier today, Romney tried to show voters he is energized about fixing the economy. Listen to this.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: This is important. Getting America working, this isn't a statistic we're talking about; 23 million Americans out of work or underemployed, 23 million, it's a tragedy. It's a moral failing for a country as successful and wealthy as ours to have had policies that kept people from going to work.

(END VIDEO CLIP)

BOLDUAN: President Obama is also talking about the economy today in another key swing state, Florida. There, he accused Republicans of trying to sell the American people on a new version of trickle-down economics. Listen here to the president.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We know better. They have tried to sell us this trickle-down tax cut fairy dust before.

(LAUGHTER)

OBAMA: And guess what? It didn't work then. It will not work now. It is not a plan to create jobs. It is not a plan to reduce the deficit. It is not a plan to build our middle class. It is not a plan to move our economy forward. It takes us backwards to a place we don't need to be.

(END VIDEO CLIP)

BOLDUAN: The president joked with Florida voters that he would like to have their electoral votes as a birthday present. Saturday, he will be 51 years old.

Three planes come dangerously, dangerously close. Just how did it happen? We have new information from federal investigators.

Also, Facebook reveals that millions of its users aren't who they appear to be.

(COMMERCIAL BREAK)

BOLDUAN: Looks like there are more problems for Facebook. The price of its stock sank to a record low for a third straight day. And the social media site is revealing that its global growth isn't what it seems, or may not be what it seems, with millions of duplicate, questionable, or even fake accounts.

(FINANCIAL UPDATE)

BOLDUAN: A bus accident shuts down a major interstate highway in the Midwest.

CNN's Mary Snow is keeping track of that and some of the other top stories coming into THE SITUATION ROOM.

Hey there, Mary.

MARY SNOW, CNN CORRESPONDENT: Hey there, Kate.

We have just received word that one person is dead after a Megabus blew a tire and hit an overpass on Interstate 55 near Litchfield, Illinois, northeast of Saint Louis.

Now, the Illinois State Police tell CNN 25 people were rushed to area hospitals. The spokeswoman at one hospital says injuries range from minor to great. In a statement, Megabus says the bus was part of the Chicago-to-Kansas City route and was booked to have 81 passengers aboard.

The people at Chick-fil-A say the restaurant chain set a sales record on Wednesday. They aren't making the numbers public, but we certainly saw plenty of lines as people heeded conservatives' calls to eat there to support the company's president's stand against same-sex marriage.

Now, the media frenzy is not over. Friday, gay rights activists plan to have a national same-sex kiss day at Chick-fil-A.

You have heard of dodging a bullet. Well, a Brooklyn driver dodged a sinkhole because she had to walk her dog. Take a look at this. The driver tells CNN affiliate WPIX everything was fine when she parked in front of her home. But five minutes later, the ground opened up, and her car was teetering on the edge.

And finally, a gentle reminder. Never argue with the umpire. Watch and listen to the tune on the organ.

(BEGIN VIDEO CLIP)

("THREE BLIND MICE" PLAYS)

UNIDENTIFIED MALE: You're done!

UNIDENTIFIED MALE: Oh. (INAUDIBLE) just got tossed. (END VIDEO CLIP)

SNOW: Now, the umpire at the minor league Daytona Cubs game tossed out the stadium deejay. If you can't hear it, he was playing "Three Blind Mice."

He also ordered that stadium sound system shut off for the rest of the game.

BOLDUAN: Wow.

SNOW: ... that umpire.

(CROSSTALK)

BOLDUAN: Yes. That was pretty harsh.

I never knew you could get tossed out as a deejay. I think he's probably learned his lesson, or maybe not.

(LAUGHTER)

BOLDUAN: Mary, thanks so much. We will talk to you a little later.

(CROSSTALK)

BOLDUAN: We have new information about a pretty scary close call involving three planes -- the latest from the airport where it happened coming up next.

(COMMERCIAL BREAK)

BOLDUAN: The man assigned to try to bring peace to a war-ravaged Syria is giving up. Kofi Annan announced today that he is resigning as the U.N. and Arab League joint special envoy.

It's a reflection of the growing bloodshed in Syria and the rising frustration at the United Nations.

Let's bring in our senior U.N. correspondent, Richard Roth, for more on this.

Richard, what does this resignation mean for U.N. peace efforts in Syria, quite simply?

RICHARD ROTH, CNN SENIOR U.N. CORRESPONDENT: They didn't seem to be going anywhere anyway with Kofi Annan, the Nobel Peace Prize winner, at the helm.

And it wasn't his fault, say diplomats here. Deep divisions at the Security Council, says the French ambassador, and Kofi Annan reminded people of that. He wrote an article for "The Financial Times" in which he said there was a striking uselessness of the Security Council and he also added more criticism at his Geneva press conference. (BEGIN VIDEO CLIP)

KOFI ANNAN, FORMER U.N. SECRETARY-GENERAL: At a time when we need, when the Syrian people desperately need action, there continues to be finger-pointing and name-calling in the Security Council.

(END VIDEO CLIP)

ROTH: Annan said he expected much more from Putin and Obama from Moscow to Washington, the White House saying Russia and China are at fault, those two countries three times vetoed resolutions here at the Security Council, would have put more pressure on President Assad of Syria.

Sadness here at the Security Council, not shock really, Kate. They're still going to look for someone to take his place, though the U.N. seems to be sidelined ever more on the Syria crisis -- Kate.

BOLDUAN: That does beg the question. With Annan out and everyone said really if he couldn't do it, it's tough to know who could because people think so highly of him -- is someone going to replace him? Is there any short list of who possibly will replace him?

ROTH: The secretary-general, Ban Ki-Moon, says he is going to look for a successor, along with the Arab League, which appointed Mr. Annan.

It seems like, as Annan himself said, a mission impossible. And Annan in Geneva said, well, maybe there are crazy people like himself who are willing to follow in his footsteps. But Assad didn't listen to him. And despite their words of encouragement, the people in Moscow and Washington, and France and elsewhere really hung him out to dry through different ways.

Annan saw the writing on the wall. He was getting certainly ripped up. His image was getting tarnished, and he called it quits. He will stay on until August 31.

BOLDUAN: Yes, that six-point peace plan sure didn't go anywhere.

Mission impossible possibly. We sure hope not, though.

Richard Roth in New York, thank you so much, Richard.

The U.S. is sending millions of additional dollars in aid to Syria. We will talk about that, as well as the arrests of suspect terrorists in Spain with our security analysts. And they're going to tell us what they're hearing about al Qaeda's new plots.

Also, businesses are bracing for automatic defense spending cuts that could trigger a new recession.

(COMMERCIAL BREAK)

BOLDUAN: The U.S. says it's sending an additional $12 million in humanitarian aid to help the Syrians because of the rapidly deteriorating situation inside the country.

This comes a day after we learned that President Obama has signed a directive authorizing secret non-lethal support for the Syrian rebels.

We are joined now by CNN national security contributor Fran Townsend. She's the former homeland security adviser in the Bush administration. She also serves on the CIA and Homeland Security external advisory boards. She has a longer title than I do. And also joining us from Brussels is CNN terrorism analyst Paul Cruickshank.

Thank you both for coming on.

Fran, I want to first ask you to dig into this issue of Syria, as we are learning so much more now. So sources are telling us the president signed this directive really allowing for covert support of the Syrian rebels. We're not getting a lot of detail of what that means.

In your experience -- and you have a lot of it -- what does -- this intelligence finding, what does that entail?

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: Well, it authorizes our intelligence community to, one, collect critical intelligence in support of U.S. foreign policy, but, more directly, Kate, it allows them to do things like provide advice and assistance.

It allows them to work with our allies throughout the region. It allows us -- what's being reported now is this is a non-lethal finding. They're allowed to provide support like communications and financial aid, like the $12 million in humanitarian aid the president announced today, but not provide arms and lethal -- anything that could involve lethal support to the rebels.

Frankly, it is fascinating, because when you look at this, this is the sort of activity we expect our intelligence community to be engaged in, in furtherance of U.S. foreign policy, but that alone won't be enough. You need things like the sanctions the administration has imposed, like humanitarian aid.

You have to work with your allies in foreign intelligence services around the world. But it also involves -- what we really need is also public support for the rebels.

BOLDUAN: Well, and that really begs my next question. And I want to read you something that a U.S. official told reporters today about why -- when asked why are we not taking the next step of increasing involvement with the opposition, this U.S. official said the following.

Quote: "We are going to get there. We want to get there in a way that's a softer landing. We don't want the institutions to just melt away."

What do you read from that? So, what's the next step realistically in your mind? TOWNSEND: Well, what that sounds like they're saying is they agree actually privately that the rebels need lethal support. They just are afraid if they provide that now, that there isn't a sufficient infrastructure inside Syria for the day after, what they call the day-after scenario.

When Assad falls, what will be created, what will rise up in the wake of that? And they're afraid to provide lethal support, although acknowledging privately that it is necessary, because there isn't the day-after plan and there isn't a plan that they're comfortable with, and what they fear most is, if there's a vacuum, extremists like al Qaeda will come in behind and try to fill that vacuum and create something that could be worse.

BOLDUAN: Right. That's obviously a huge concern.

But, still, people are dying. So many people are dying every day as we continue this conversation.

But I want to turn now to talk about the other lead story this hour. The arrest of three suspected terrorists in Spain, billed as a major operation against al Qaeda and Europe. The investigation is in its early stages, they admit. But Spanish officials say that the men were, quote unquote, "ready to act" and that they may have been plotting to attack a U.S. naval base or British interests in Spain.

And Spain's interior minister says the suspects had information about remote-controlled airplanes, which I really just found fascinating, and that they were also mastering the art of flying motorized paragliders, nonetheless.

And Paul, this begs the question to you: the Spanish interior minister called this one of the biggest operations against al Qaeda in Spain. You've done some great reporting on this. Why are these arrests so significant in your view?

PAUL CRUICKSHANK, CNN TERRORISM ANALYST: Well, that's right, Kate. This is a very significant plot, the Spanish are telling us, a plot which may be linked to either al Qaeda or a Pakistani militant group called Lashkar-e-Taiba. A very significant arrest coming today and in the last 44 -- 48 hours in this plot.

And it seems that their target may have been a U.S. naval base in southern Spain. The three men involved in this plot, some of them are believed to have received training in Afghanistan, received training in Pakistan. This is not some sort of homegrown plot, but this is a sort of old-fashioned al Qaeda style of plot, where operatives are actually dispatched to the west to launch strikes. So the Spanish treating this very seriously, Kate.

BOLDUAN: And you think of this kind of from the larger view here. You talked about the group that they're linked to, Lashkar-e- Taiba. What do these arrests tell you, then, about the strength of al Qaeda affiliates? Because there's a lot of talk about that.

CRUICKSHANK: Well, it shows that perhaps al Qaeda itself despite all these drone strikes in Pakistan, is still a somewhat resilient organization. It shows that affiliates of al Qaeda groups like Lashkar-e-Taiba, which may have some sort of link, the Spanish are saying in this plot, also are a threat to the west. This particular group, Lashkar-e-Taiba, has not carried through with a plot yet against the west. This may be the first example of this.

And if it is indeed linked to Lashkar-e-Taiba, then that's going to be very concerning to U.S. counterterrorism officials, because this is one of the strongest jihadist groups in the world. It has reached right across Pakistan, and they're a very dangerous entity.

BOLDUAN: And Fran, one of these fascinating details here, the fact that they're using remote control, they were trained in using remote-control airplanes and getting -- mastering the art of flying motorized paragliders. Have you seen anything like this before?

TOWNSEND: Well, you know, we heard concern out of the Department of Homeland Security and other federal agencies that we would see the use by our enemies of these sort of drone-like capabilities.

The other thing we should mention, Kate, is remember over the past year, at least two public advisories, warning Americans about plots in Europe by al Qaeda and their affiliates, targeting Americans and American interests.

You know, the other al Qaeda affiliate our viewers are familiar with is Al Qaeda in the Arabian Peninsula, the group in Yemen, also very active. And so to Paul's point, right now, it seems the greatest threat to the U.S. and to our interests around the world are these affiliates which have been very active.

BOLDUAN: And I want to get you both to weigh in finally, then, on -- the State Department released a report just a couple days ago on terrorism. And one of the key lines that's getting a lot of news, it said the following. It said the loss of bin Laden and these other key operatives puts the network on a path of decline that will be difficult to reverse. But then with today's news, do you think this changes anything, Fran?

TOWNSEND: Well, look, it's -- I think that that's an aspirational statement. I'm not sure that -- and we'll see what Paul thinks. But I think that these affiliates, and if you talk to John Brennan, the White House homeland security and counterterrorism adviser and the head of the National Counterterrorism Center, all of them reiterate and underscore the threat of these affiliates. And so I don't think that they think those are at all under the climate, at least not yet.

BOLDUAN: And Paul, another part of this report also talks about concerns over the reach of al Qaeda into Syria. And Fran was talking about the problem when there is a vacuum in a country that is in civil war. How big of a concern is al Qaeda in Syria, do you think?

CRUICKSHANK: Well, it's a very opaque situation in Syria right now. But there's no doubt that al Qaeda has a growing presence over there, some operatives have come in from al Qaeda and Iraq. some operatives may have come in from Lebanon. There's also some Syrians who have been recruited and so al Qaeda has been responsible for a number of suicide bombings over there.

And what now we're hearing is the leader of al Qaeda sees Syria as a very big opportunity for the terrorist groups. Only the biggest opportunity since the Arab Spring, perhaps even since the Iraq war in 2003, because al Qaeda in Syria can cast itself as the protectors of Sunnis against this Alawi regime, and that gives it a chance to get a populist standing again in an Arab country, and that's a very dangerous scenario.

BOLDUAN: Very, very interesting and very troubling, as well. We're going to have to leave it there, unfortunately. Paul Cruickshank, thank you so much. Fran Townsend, great to see you as always. Thank you both very much.

We have new information about a scary close call involving three planes. The latest from the airport where it happened coming right up.

(COMMERCIAL BREAK)

BOLDUAN: Federal authorities say a full investigation is under way into a dangerous mistake over Reagan National Airport here in the Washington area. A plane coming in for a landing got alarmingly close to two other jets taking off.

Our Brian Todd is at Reagan National. Brian, explain exactly what happened here.

BRIAN TODD, CNN CORRESPONDENT: Well, Kate, this drama played out virtually in the air space right above us here at Reagan National Airport. A miscommunication between two air-traffic control centers led to a close call involving three passenger aircraft.

(BEGIN VIDEOTAPE)

TODD (voice-over): A typically busy summer afternoon at Reagan National Airport. Several inbound planes are lined up to land, flying south to north over the Potomac River.

But an approaching storm causes the wind to shift.

(on camera) At that point, a regional air-traffic-control center miles away from here makes the call to switch directions, to route planes to take off and land this way, from north to south, at this end, opposite end of the same runway.

(voice-over) But there's a miscommunication. The Reagan control tower clears two planes for takeoff in the wrong direction, right toward the incoming jet. The outbound planes, taking off one after the other are both off the ground, heading toward the approaching plane, when the controller realizes the mistake.

UNIDENTIFIED FEMALE: 29, 3329, turn south heading 180.

TODD: The controller orders the incoming plane to veer right. The pilot does that but is confused.

UNIDENTIFIED MALE: We were cleared of the river back there. What happened?

UNIDENTIFIED FEMALE: Thirty-three twenty-nine, stand by, we're trying to figure this out, too.

TODD: The three planes, all U.S. Airways regional flights, avoid each other and eventually land safely. But that close call this past Tuesday over the nation's capital has America's top transportation officials on the defensive, calling a rare news conference to address just one incident. Pushing back on at least one media report that called this a near collision between three planes.

MICHAEL HUERTA, FAA ADMINISTRATOR: The planes were on different headings and at different altitudes, so they would not have collided.

TODD: And they say none of the plane's cockpit alarms which warn of collision went off. But they do say this.

HUERTA: There was a loss of separation.

RAY LAHOOD, TRANSPORTATION SECRETARY: That means all three planes were too close, falling below standards of safety for altitude and distance. We pressed officials, what happened between the regional control center, called TRACON, and the Reagan National control tower?

(on camera) Was it the error of TRACON in relaying the order to Reagan National? Was it the...

LAHOOD: We're going to find that out.

TODD: Well, or was it combination of both? Did both miscommunicate?

LAHOOD: There was definitely -- look, there was a miscommunication. We've -- we've admitted that.

TODD (voice-over): The transportation secretary promises a thorough investigation, with interviews of everyone involved. One of those people, the controller at Reagan, is for the moment drawing praise for her response during difficult maneuvers.

WILLIAM VOSS, FORMER AIR-TRAFFIC CONTROLLER: I have to tell you, this is one of the toughest things you can do as an air-traffic controller or as a manager is try to negotiate one of these changes during these busy arrival times.

(END VIDEOTAPE)

TODD: Another issue here, Transportation Secretary Ray Lahood says officials learned about this incident from a reporter, not from air-traffic controllers. He says that's a problem and they're investigating -- Kate.

BOLDUAN: Brian Todd, that's a great report. Talk to you soon. Thank you so much.

So it is official. Lawmakers are on vacation, and they left some pretty big business behind at the office. Coming up next, how companies are bracing for impact if there's no deal to avoid the so- called fiscal cliff.

And the video is going viral. But do you know the real story behind it? You will if you stick around.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Yes, listen to that bell. Take a look at that! Oh, my God! Woo! Listen to that horn! Oh, my God!

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BOLDUAN: And away they go. Lawmakers came streaming out of the Capitol today as they start a five-week break from Washington and they're leaving plenty of business undone. That includes making a deal to avoid the impending so-called fiscal cliff.

Our Mary Snow is joining me now.

So Mary, it's a long list. They have some businesses pretty worried, eh?

MARY SNOW, CNN CORRESPONDENT: They are, Kate. And they're getting antsy.

Planning ahead is key to growth, and their outlook is clouded now because of fears the U.S. will hit the fiscal cliff. That's a series of events that will trigger tax increases and spending cuts unless Congress acts.

Now, it's five months away, but companies are bracing.

(BEGIN VIDEOTAPE)

SNOW (voice-over): For a small business that counts the Defense Department as one of its main customers, just the possibility of the country falling off the fiscal cliff is making an impact.

CRAIG PARISOT, CHIEF OPERATING OFFICER, INVERTIX CORPORATION: We're all feeling as if we're working down, we're heading down the runway here and we're running out of -- out of cement in order to see whether or not this aircraft of change is going to get off the ground here.

SNOW: Craig Parisot is the cheap operating officer at Invertix, which develops technology solutions. He says his company is hitting the pause button on long-term projects because of the uncertainty of next year. That's when tax increases and automatic spending cuts would trigger if Congress doesn't act. Next year alone, those cuts would amount to $110 billion, with half of them coming from the defense sector. And major military suppliers have been sounding the alarm.

ROBERT STEVENS, CEO, LOCKHEED MARTIN: The impact on our industry would be devastating.

SNOW: How devastating to the industry? It's hard to say. But to the economy, the Congressional Budget Office projects that, if the stalemate isn't averted, growth could fall to just .5 percent in 2013, and that could mean a recession. Because it would be a dramatic drop from this year's projected growth of 2 percent. And that's with the economy already facing strong head winds.

The political fiscal fight, says one Wharton professor, is taking a toll now.

PROF. PETER CAPPELLI, WHARTON SCHOOL, UNIVERSITY OF PENNSYLVANIA: So if you're a business person, one of the things you really don't like is uncertainty. And if you think there's a pretty good chance that, even if we don't go off the cliff January 1, but that they'll be big changes in spending patterns or tax patterns, you might want to hold off until you see what those are before you decide how to place your investments.

SNOW: Which could mean a pullback on hiring or worse.

PARISOT: Our country is facing -- facing a cliff. And we just -- we're all concerned, and we do not want to -- want to fall off the -- fall off the edge here.

(END VIDEOTAPE)

SNOW: Now, as the policies stand now, $7 trillion would be taken out of the U.S. economy over the next decade -- Kate.

BOLDUAN: That's a very serious issue, Mary. I know I'm talking about it a lot when I'm on Capitol Hill, but they're not doing a lot of work on it quite yet. But obviously, the pressure is on.

Mary Snow, thank you so much.

SNOW: Sure.

BOLDUAN: It's competition day for Ann Romney's horse, but the mare is taking center stage in the race to the White House, as well. Is it smart politics?

(COMMERCIAL BREAK)

BOLDUAN: Mitt Romney's campaign is promising 12 million new jobs in a first term. Do the numbers add up, though? CNN's Erin Burnett is going "OUTFRONT" at the top of the hour. So Erin, what all are you looking at here?

ERIN BURNETT, CNN ANCHOR: Well, we're actually -- Kate, we're going to go through it and see whether it adds up. Exactly how many jobs Mitt Romney would have to create every single month. And the numbers are pretty stunning, Kate.

Plus, is there any historical precedent for this sort of accomplishment? It's a pretty interesting, pretty damning deconstruction, shall we say? But we're going to get to the very bottom of whether that promise is possible and under what circumstances.

Plus, we're going to talk about the Colorado shooter. As you know, it turned out that his psychiatrist has said she thought he was capable of doing something violent, perhaps killing people. But that warning went nowhere. Well, we looked into it. How often do people make those sorts of threats, and other people are aware of them, and warn people, and nothing happens? Trying to understand whether there was a huge, huge opportunity missed to save so many lives.

That coming up top of the hour. Back to you.

BOLDUAN: Yes. Lots to talk about there. "ERIN BURNETT OUTFRONT" coming up at the top of the hour. Thanks so much, Erin.

So today was the first day of Olympic competition for Ann Romney's horse. And you might soon be seeing a lot more of this horse on your TV, thanks to some liberal groups and their -- and their political ad teams. Our Tom Foreman has been keeping an eye on the politics at play here, so what do you have, Tom?

TOM FOREMAN, CNN CORRESPONDENT: Well, Tom, we're going to have -- Kate. Saying my own name. We'll have a spoiler alert in a minute. We'll tell you how the dressage competition went, which is what this horse was in.

But first of all, think about how the politics might play around this event.

(BEGIN VIDEOTAPE)

FOREMAN (voice-over): Dressage is one of the oldest sports in modern Olympics, going back a century, with origins in the training of military horses. It is considered one of the most technically demanding equestrian sports. Horse and rider must perform a series of complicated, precise maneuvers, which much like gymnastics, are rated by judges.

ANN ROMNEY, MITT ROMNEY'S WIFE: Pretty good therapy.

FOREMAN: Ann Romney's involvement with dressage began when she was diagnosed with multiple sclerosis 14 years ago. She turned to riding as therapy to build muscle and fight the disease.

A. ROMNEY: The thought of getting on a horse was so exciting to me that I forced myself out of bed, and I came out here to trot maybe once around the arena, and then I'd be finished and exhausted, but I'd feel great. FOREMAN: She's also good at it, repeatedly winning high honors in competitions. Her candidate husband acknowledged her deep commitment to the sport on NBC's "Today Show."

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: My sons gave you a box that said if you wear this, mom will pay more attention to you. I opened it; it was a rubber horse mat.

FOREMAN: Still, a great dressage horse easily costs six figures. So the money, the obscure nature of the sport and the attire have made Mitt Romney's connection to it a natural for comedy.

STEVEN COLBERT, HOST, COMEDY CENTRAL'S "THE COLBERT REPORT": No surprise, the "liberal critics" call dressage elitist, just because the uniform makes you look like Lady Mary's suitor from "Downton Abbey."

FOREMAN: And that has played perfectly into Democratic attacks on Romney as a rich elitist, out of touch with normal Americans.

UNIDENTIFIED FEMALE: The Romneys spend $77,000 a year on my upkeep. And after Mitt Romney repeals health care and ships your job overseas, I dare say your life will not be merely as pampered as mine. After all, you're not one of his horses.

(END VIDEOTAPE)

FOREMAN: The Europeans are really great at all of this. Here's the spoiler on all of this. In the results today, Ann Romney's Rafalca did not do particularly well; finished about 13th in this preliminary round. We'll have to see whether or not it gets to the Grand Prix round and does any better, Kate.

But we'll see how the politics play, as well.

BOLDUAN: Yes. That will be going on for a little longer than I think the Olympics will be.

But I do know that dressage is not the only thing that you're keeping your eye on today. So fill us in on all of the big Olympic events, plus the spoiler alert.

FOREMAN: Yes. This is the spoiler alert. Turn away, turn your sound down if you don't want to know it. But big news today in swimming. Michael Phelps finally edged out Ryan Lochte to get his first individual gold of this games.

Here's the amazing part about this. Look at this. This is his medal count in a lifetime: 16 gold, 20 Olympic medals, which means, you know, compared to me, Kate, that's a 20-medal lead so that's pretty big.

And there are some other big wins out there today that are really worth looking at. In gymnastics, Gabby Douglas won the all-around, tremendous, tremendous job there. We also had wins in judo, some more wins in rowing, some more wins in swimming. A really big day out there. And the overall count -- this is the big one -- the big count in the whole thing, look at that. We're edging out China now, 37-34. Same number of gold medals -- Kate.

BOLDUAN: I dare say, Tom Foreman, you're getting pretty good at this.

FOREMAN: I'm pretty excited about it.

BOLDUAN: We'll check back in with you.

All right. A video going viral is ginning up some over-the-top enthusiasm for trains. Jeanne Moos is up next. Stay with us. You're in THE SITUATION ROOM.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Take a look at that. Oh, my God! Woo! Listen to that horn! Oh, my...

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BOLDUAN: Finally tonight, all aboard for Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): This is a choo-choo story that ran off the tracks.

UNIDENTIFIED MALE: Oh, my God! Woo! Listen to that horn.

MOOS: The excited train guy was so exciting...

UNIDENTIFIED MALE: That horn just gives me the chills.

MOOS: ... that the video chugged from Web site to Web site. C

UNIDENTIFIED MALE: Tons of BL2 (ph), too!

MOOS: "Double trainbow," some called it, comparing it to this.

PAUL "BEAR" VASQUEZ, RAINBOW ENTHUSIAST: Oh, my God. Oh, my God.

MOOS: The train even made a stop at "The Today Show."

UNIDENTIFIED FEMALE: Now there's excited train guy. Crazy.

UNIDENTIFIED MALE: Made a big caboose out of himself.

MOOS: Well, actually, the caboose is anyone who thought this was real. UNIDENTIFIED MALE: This is special.

MOOS: The guy who voiced it didn't intend to cause confusion, but he's enjoying it.

UNIDENTIFIED MALE: I guess it's cool.

MOOS: Steve Turico (ph) is the general manager of a tourist railway called Saratoga North Creek Railway. He was just trying to gin up interest by making a funny video inspired by the real excited train guy.

UNIDENTIFIED MALE: People like me are called foamers.

MOOS: As in foaming at the mouth. Sixteen-year-old Mark McDonough (ph) was genuinely overexcited when he took this video six months ago.

UNIDENTIFIED MALE: I am finally going to get a heritage unit on camera.

MOOS: Sound familiar?

UNIDENTIFIED MALE: Woo! Yes!

MOOS: The general manager of the tourist railway says he was inspired by Mark's enthusiasm...

UNIDENTIFIED MALE: That is special and that whistle gave me the chills.

MOOS: ... to do a humorous remake.

UNIDENTIFIED MALE: That horn gives me the chills.

MOOS: Which was labeled "Movie Magic" on the railway's Facebook page. Mark was impressed.

UNIDENTIFIED MALE (via phone): Good job. Well done.

MOOS (on camera): OK.

UNIDENTIFIED MALE: You nailed it.

MOOS (voice-over): Commenters describe the parody video as a traingasm. Mark chuckled as he watched it online for the first time.

UNIDENTIFIED MALE: Wow.

MOOS: He says he got flack when he first posted his train video.

UNIDENTIFIED MALE (on camera): Ah, she's a beauty!

MOOS: Some rail fans said he was giving them a bad name.

UNIDENTIFIED MALE (via phone): I'm an embarrassment to them is what they said.

MOOS: But now people are praising his passion, being a foamer is contagious.

(on camera) Oh, wow! It's a C train. It's a beauty. The air gives me chills.

(voice-over) Mark's imitator watched the video ten times to emulate it.

UNIDENTIFIED MALE: I've been waiting for this for months! Heritage equipment! Got to wipe the foam off your face there.

MOOS: Better foam than egg on your face for falling for the wrong excited train guy.

UNIDENTIFIED MALE: Oh, she is beautiful!

MOOS: Jeanne Moos, CNN...

(TRAIN WHISTLE)

UNIDENTIFIED MALE: Oh, my gosh, she's beautiful!

MOOS: ... New York.

(END VIDEOTAPE)

BOLDUAN: You got to love the excitement and the passion. That's all for us tonight. I'm Kate Bolduan here in THE SITUATION ROOM.

"ERIN BURNETT OUTFRONT" starts right now.