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Anderson Cooper 360 Degrees

Israeli Forces Surround Gaza City; Obama Touts Economic Stimulus Plan

Aired January 05, 2009 - 22:00   ET

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

ANDERSON COOPER, CNN ANCHOR: I'm Anderson Cooper, coming to you live from the Israeli-Gaza border, where, on this, the third night of the Israeli ground operation in Gaza, the battle seems to be intensifying. Gaza City itself surrounding.
The breaking news tonight, three Israeli soldiers have now been killed through friendly-fire, according to the Israeli Defense Forces -- more than 20 soldiers also wounded in that incident involving an Israeli tank, which inadvertently fired a shell into a position, into a building where Israeli soldiers were.

Israel -- Israel says they have captured dozens of Hamas militants, as the fighting seems to be intensifying, and no sign of letting up.

(BEGIN VIDEOTAPE)

COOPER (voice-over): And incendiary glow over Gaza, as one of the bloodiest conflicts in the region in decades enters an even more dangerous phase.

On this, the third night of the Israeli ground assault, Israeli tanks and troops have pushed deeper into Gaza, slitting it in two, surrounding Gaza City by late Monday. Heavy combat is being reported. Israel now says they have killed or captured dozens of Hamas fighters. One Israeli soldier was killed on Sunday. His funeral has already taken place.

In Gaza, Palestinian medical sources say more than 530 people have been killed, including scores of women and children. Even with Israel's bid to crush Hamas with overpowering air, sea and land might, their rockets continue to rain across the border. At least 87 have been launched since Sunday. The terror threat from above is constant.

(on camera): A Hamas rocket landed in this marketplace a short time ago. Now, you can see the damaged roof. The -- the dangers from these rockets are several fold. There's not just the -- the initial impact, which is what happened right here. This is where the rocket most likely landed.

But, then a lot of times, these rockets are filled with shrapnel, with pieces of metal, ball bearings. And they spray out in all directions. You can see here pockmarks on the ground, where the shrapnel handed.

(voice-over): Hamas rockets have killed four Israelis so far. On Monday, Hamas vowed to shower missiles on Israel for months to come. Its leaders warned, no one will be spared.

MAHMOUD AL-ZAHAR, HAMAS LEADER (through translator): The Zionists have legitimized the killing of their children when they killed our children. They legitimized the killing of their people all over the world when they killed our people.

COOPER: For its part, Israel is digging in, prepares, it appears, for a prolonged military operation.

TZIPI LIVNI, ISRAELI FOREIGN MINISTER: When Israel is being targeted, Israel is going to retaliate. Israel is going to give an answer to it, because this is an ongoing, long battle, war against terror.

COOPER: The conflict is sparking worldwide protests. There are also calls for Israel to allow more humanitarian aid to Gaza, although, today, some 80 trucks carrying food and medical supplies were allowed in.

Both Israel and Hamas face increasing pressure for an immediate cease-fire. French President Nicolas Sarkozy and former British Prime Minister Tony Blair are in the Mideast, trying to broker a peace deal.

But, in a strong show of support for Israel, President Bush says a truce has to be accepted by the group the U.S. considers a terrorist organization.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Any cease-fire must have the conditions in it, so that Hamas does not use Gaza as a place from which to launch rockets.

COOPER: For now, as Hamas rockets continue, and as Israeli forces intensify their fighting in Gaza, any talk of peace will be just that -- talk.

(END VIDEOTAPE)

COOPER: We're going to have a lot more from Gaza throughout this hour. We are going to talk to someone on the ground inside Gaza City itself, find out what life is like for Palestinians on the ground. We are also going to talk to CNN's Nic Robertson, Christiane Amanpour, and Ben Wedeman about -- about the battle which is now raging, on this, the third day of the Israeli ground operation.

Barack Obama made brief comments today about the situation in Gaza. But he has remained largely silent, as he -- as he has much throughout the past week or so of this conflict. He has tried to stay as focused as possible on the economy, talking about tax cuts, which pleased many Republicans today.

But now Gaza is just the latest of one of the many things that is now on Barack Obama's plate when he assumes office some two weeks from now.

Ed Henry takes a look.

(BEGIN VIDEOTAPE)

ED HENRY, CNN WHITE HOUSE CORRESPONDENT (voice-over): On his first full day back in Washington, president-elect Barack Obama immediately jumped into the fray, a series of congressional meetings to show he's all over the economy.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: The most important message today is that the situation is getting worse. We have got to act boldly, and we have got to act swiftly.

HENRY: At a fourth meeting with just his economic team, the president-elect brushed off a reporter's question about whether the crisis in Gaza will distract him from his focus on the financial crisis.

OBAMA: I strongly believe that a president or a president-elect or his team should be able to do more than one thing at a time.

HENRY: Specifically, Mr. Obama vowed he would break the momentum of the recession with a massive $300 billion tax cut. The president- elect campaigned on a tax cut for people earning less than $200,000 a year, $500 for individuals and $1,000 for families.

Aides say some form of that plan will be included in the overall $775 billion economic stimulus package, though Republicans are raising sharp concerns about the price tag.

REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: It's being paid for by our kids and grandkids. And, so, while we want to get the economy moving again, the overall size and how we craft this is going to be very important.

HENRY: That's why the president-elect is sweetening the package with business tax breaks aimed at winning over Republicans, and made a big show of reaching out to the other side.

OBAMA: We are in one of those periods in American history where we don't have Republican or Democratic problems. We have got American problems.

HENRY: And then there are political problems, starting with an abrupt Cabinet shakeup.

New Mexico Governor Bill Richardson is denying any wrongdoing, but says a grand jury probe would have been a distraction. While team Obama is downplaying the exit, the president-elect vowed just last month Richardson would be key to selling the economic plan.

OBAMA: I think the notion that, somehow, the commerce secretary is not going to be central to everything we do is fundamentally mistaken.

HENRY (on camera): Then, there's the timetable for the economic package. Obama advisers had originally hoped the new president could sign it as early as inaugural week and score a quick victory. Now they're saying it may be February, a sign they're already scaling back expectations.

Ed Henry, CNN, Washington.

(END VIDEOTAPE)

COOPER: Christiane Amanpour has been monitoring the situation today from the border. She is in Jerusalem right now, looking both at the diplomatic efforts and also at the timing of this Israel -- this Israeli incursion.

Let's go to her live -- Christiane.

CHRISTIANE AMANPOUR, CNN CHIEF INTERNATIONAL CORRESPONDENT: Anderson, indeed, this will also be landing right on president-elect Obama's plate, because this is not ending any time soon.

The Israeli government has said that it won't be swift and it won't be easy. And, indeed, they are continuing to push their fight against Hamas, despite the growing calls for a cease-fire and an end to this around the world.

Of course, the pictures, the reality that the civilian casualties in Gaza are mounting is causing a great deal of pressure on Israel. The foreign minister, Tzipi Livni, told me that she understood that that would be bringing pressure on Israel in the next few days.

And, to that end, there has been a huge flurry of diplomatic activity here in Israel and around, as they try to figure out a way to end this, but not just in a cease-fire, but one with a political framework.

We're told that they're trying to figure out a way to have monitors to make sure that there is no further incursion of weapons or smuggling of weapons from the Egypt side of the Gaza Strip into the Gaza Strip, and that they want to really take this fight to Hamas to end its capability, or at least severely weaken the capability of it firing rockets into Israel, but, also, most importantly, to end its motivation and the will to fire those rockets.

Now, how exactly to get to an end, interesting, because, of course, Israel will not be engaging with Hamas at all. So, it looks like Egypt is going to resume its role as the mediator between Mahmoud Abbas, who is the elected president of the Palestinians, of the Palestinian Authority, mediate between Palestinian Authority and Hamas, and then have the Palestinian Authority negotiate with Israel.

Of course, the United States heavily involved in this, along with Egypt and the parties. The French president was here. The former British prime minister is here. And we will be talking to him tomorrow to find the very latest on the diplomatic efforts -- Anderson.

COOPER: Christiane, we will talk to you later throughout this broadcast, as well as CNN's Nic Robertson and Ben Wedeman, for the latest on the -- on the fighting that is happening right now, just over my shoulders, a few miles there into Gaza. Also tonight, big news. Bill Richardson, who was supposed to the commerce secretary, today officially withdrew his name from the nomination. We are going to talk about that with our panel coming and have the latest details on that.

Also, the latest on the -- the tragic death of John Travolta's son, what we now know about what may have killed him and what the family is saying about the -- the autopsy that will be conducted.

We will also have more on the ground in Gaza City. We will talk to a resident to show you what life is like for civilians there. And, also, Ben Wedeman takes a look at the military capabilities of Hamas on the ground right now in Gaza.

Our coverage continues live from the Israeli-Gaza border in a moment.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Right now, the most important task for us is to stabilize the patient. The economy is badly damaged. It is very sick. And, so, we have to take whatever is -- steps are required to make sure that it is stabilized.

(END VIDEO CLIP)

COOPER: President-elect Barack Obama speaking out today about his economic plan, talking about what he wants to do some two weeks from now when he takes office. He met today in Washington, as we mentioned, with top leaders, both Republicans and Democrats, trying to sell his -- his economic stimulus plan, talked about tax cuts, as well, which pleased many Republican listeners.

I want to talk about that with CNN's chief business correspondent, Ali Velshi, author of the new book "Gimme My Money Back. Ali joins us tonight from New York.

Ali, what are the details of this plan?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Well, let's known -- work our way through it.

We think that the plan is going to be worth about $750 billion. And this is how it's going to break down. About 60 percent of it -- or $450 billion -- will go toward the spending side of the stimulus package, which is where we thought most of the money would go.

Here's the surprise. Up to 40 percent of it is going to go toward tax cuts. Let's describe what these tax cuts look like. They divide up between individual and business tax cuts. For individuals, we're going to get $500 per individual, or $1,000 for households and families, up to a certain income cap. We don't know what that income cap is just yet. Businesses will be able to write off their losses from 2008 and 2009, and, hence, claim a little bit more tax money back. They will also get a tax credit if they create jobs or reverse they some -- some layoffs that they have had in the past. That could stimulate some hiring, maybe not a bad idea.

The tax cuts for individuals, though, Anderson, it didn't work last time around. If it did last spring, we wouldn't be in a recession. Let's take a look quickly at the 60 percent that's going to go to spending. Those are what we thought the original stimulus package would probably be.

It will be a focus on alternative and renewable energy and conservation by converting some existing buildings into buildings that are more energy-efficient, building and repairing infrastructure, roads, bridges, things like that. That's your typical infrastructure program. The government will pay contractors, who will employ people to do that work.

It's going to computerize the health care system, automate -- automate certain records. That's one big area of saving in the health care system that's probably worth investing in. And upgrading educational facilities, labs, classrooms and things like that. So, that's the spending part of it.

We still don't have the final details on how much the whole package is going to be. But we think it will be somewhere around $750 billion.

Anderson, I want to tell you one other thing. We finally got the numbers for how bad the year was for automakers in the United States. And this isn't just the U.S. automakers. Everybody who sells cars in the United States, the drop compared to the year before was more than 30 percent. This is the worst year for auto sales and the biggest drop since 1992.

The biggest loser in the United States, Chrysler, whose sales were down about half compared to a year ago -- Anderson.

COOPER: Yes, no good news in sight for the auto industry on that.

Ali, thanks very much.

When we come back, we're going to talk more about the economic issue with our political panel. We will also talk about Bill Richardson. Exactly why did he remove his name from nomination to be the commerce secretary?

And a new name suggested to be head of the CIA proposed by Barack Obama, a surprising name. We will tell you who it is and get the reaction on that from Capitol Hill.

Also ahead tonight, big news in Washington, big news from the Obama family -- Malia and Sasha Obama have started school today. We will show you what their day was like. And we will have the latest developments from on the ground from here, along the Gaza-Israeli border, and from inside Gaza itself -- when we come back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

(EXPLOSION)

(END VIDEO CLIP)

COOPER: With that massive blast, Israel launched its ground offensive in Gaza on Saturday, taking its war against Hamas to a new level. After a third night of intensive fighting, neither side is giving any ground right now. Israeli troops and tanks today pushed deeper into Gaza, effectively splitting the terribly in two.

Tonight, they have surrounded Gaza City. Israel is not allowing reporters inside to Gaza, despite growing pressure. We're near the border, as close as we can get. Two weeks from tomorrow, this bloody, complicated mess becomes Barack Obama's to deal with.

Let's talk strategy now with CNN senior political analyst Gloria Borger, along with Joe Johns and Ed Henry.

Gloria, this obviously is going to be a major issue, probably the first foreign policy issue Barack Obama has to deal with.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes, it will.

And -- and, as you know, Anderson, he's being very quiet about it. I think there's a real sense among the people who work for him that this is not a moment to kind of dip his toe into the Middle East -- you really can't do it that way -- and that he's got to wait two weeks, until he sizes up the situation for himself, although, I will tell you, from talking to transition people, that the Bush administration is keeping the president-elect's team in touch with everything that's going on every step of the way.

COOPER: Joe, how big of a surprise was it for the Obama team that -- that -- that Bill Richardson basically had to pull his name from nomination?

JOE JOHNS, CNN SENIOR CORRESPONDENT: Well, they knew that there was a problem there. They knew there was an investigation going on. It involved a company from California that got a contract with the New Mexico State government. And they knew there were questions about the involvement of the governor or his staff.

But, apparently, they did not know how serious it was. So, there's an issue here about vetting. There's an issue about looking very carefully at the individual you want to put up for commerce secretary.

To their credit, and the story that's making the rounds now is that they looked at the situation and decided, OK, Richardson has to go.

But, yes, there's still a question about vetting. In the long run, it could have been a lot worse. It could have come up and really made a mess of confirmation hearings or, God forbid, even come up as a big issue with him as the sitting commerce secretary. This is drama the administration certainly does not need, the incoming Obama administration. And they decided, we're going to -- to walk away from this.

COOPER: Well, Ed, I mean, this is a man who was also considered to be secretary of state, if Hillary Clinton hadn't gotten the nod. How did this happen?

I mean, the Obama campaign made such a big deal about their -- their vetting procedures. And -- and, you know, we all heard about the extensive list of questions that were asked of any potential candidate.

HENRY: You're right, Anderson. And it had been a relatively flawless transition, until this slip-up.

What I'm being told by various Democratic officials is, as Joe reports, they were aware of this problem, but they were -- it was suggested to them by Bill Richardson and his people that it was going away, it was no big deal, that they had answered all the questions, this grand jury was going away.

And, as it was not going away, they started pressing him for more information. And they weren't getting good answers. And that's when they started getting alarmed.

And I'm told that, while Governor Richardson is now out there saying, basically, that he jumped, that he didn't want to cause any problems for the president-elect, instead, he was actually pushed. And these Democratic officials are saying that a big reason why is that this is a pay-to-play scandal in New Mexico, as they call it. That's the same thing we saw play out in Illinois with Governor Blagojevich.

And the Obama team basically made a political calculation. They didn't need two pay-to-play scandals going on. Even though he is not -- the president-elect has not been implicated, we should point out, but people around him or connected with him being involved in these kinds of scandals runs completely counter to the change message -- Anderson.

COOPER: Gloria, what do we know about John Podesta (sic)? We know he was obviously chief of staff under Clinton. He has now been named as Barack Obama's nominee to -- to head the CIA. What's the reaction been?

I mean, I -- I understand, on Capitol Hill, there's been a -- a lot of surprise among current and former folks who deal with intelligence.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: You know, it's interesting, because, on the -- on the merits, Leon Panetta is somebody who is very well respected on Capitol Hill. He's got experience at all levels in government. He's considered to be bipartisan.

And, most of all, Anderson, he's considered to be a terrific manager, somebody who brought some order, for example, into the chaotic Bill Clinton White House. But what the Obama team did is fail to inform or even to sort of ask the incoming chairman of the Intelligence Committee, Dianne Feinstein, or the outgoing chairman, Senator Rockefeller, two Democrats.

And, you know, this is kind of congressional prerogative here, Anderson. You don't surprise your committee chairmen. And I think that both of them were personally offended. The Obama folks that I talked to who were involved in the transition say that it was a real mistake on their part, and they're upset about it, and they're trying to make amends. But it's a problem.

And, then, on the substance, Anderson, some people feel you need to have somebody inside the CIA who understands the way that it operates, rather than taking somebody from the outside, like Leon Panetta.

COOPER: Ed, how big a problem does the Obama campaign think it is?

HENRY: I think they believe it's a short-term problem, that some feathers have been ruffled on the Hill, as Gloria points out, but that, in the long run, Democrats are going to come around, and Leon Panetta will get through, because he's -- he will be confirmed, because he is widely respected in both parties.

And there is a push and a pull here on the substance, which is that, post-9/11, a lot of people realize the CIA in particular needs a heck of a lot of reform. There were a lot of mistakes pre-9/11, post- 9/11, also the alleged torture, the enhanced terror interrogation techniques.

And there are so many issues that need to be dealt with. And, while there are some experts who say, look, you need someone from inside that community to fix it, what the Obama people are saying, in their defense, is, look, if you just pick another former CIA official to run it, not a lot is going to change. Instead, you need an outsider who, as Gloria said, is a tough, good manager, and they need to shake it up, that the CIA needs a lot of reform.

I mean, look at the intelligence failures leading up to the Iraq war. It needs a lot of reform -- Anderson.

COOPER: All right.

Joe Johns, Ed Henry, Gloria Borger, thanks for your perspective.

Tonight, when we come back, we're going to take a look at on the ground, inside Gaza City. Hamas militants, Israeli now says they have captured several dozen of them. Ben Wedeman takes a look at the tunnels Hamas has been using to resupply over the last several years and what the capabilities -- the military capabilities they have on the ground right now.

We will also take a look at the latest in the tragedy for the Travolta family, what we now know about the death of John Travolta's teenage son Jett.

(COMMERCIAL BREAK)

COOPER: Looking at night-vision images, the battle inside Gaza.

It is very frustrating for a reporter to try to cover this conflict. Israel -- Israel is not allowing foreign reporters on to the ground inside Gaza. Where we are right now, in this border region, is about as close as we can get.

Over my shoulder, throughout the night, you can see explosions on the ground. You can hear warplanes firing overhead, Hellfire missiles. You can also hear unmanned drones firing overhead. But you actually can't see the fighting. We rely on reports from sources inside Gaza itself, as well as Israeli military sources.

We hope, in the coming days, that may change, and we may be able to -- to get closer to the action, though we're not exactly counting on that anytime soon.

Tom Foreman now takes a look at the -- at Gaza itself. We want to take a look visually at a map of it and give a sense of what the Israeli strategy has been thus far.

(BEGIN VIDEOTAPE)

TOM FOREMAN, CNN CORRESPONDENT: For more than a week, Israel has been launches airstrikes against Hamas throughout Gaza. But the purpose of all of this has been cutting supply lines, disrupting communications, and preparing the battlefield up north.

This is Gaza City. It is a stronghold for Hamas and believed to be the source of the rockets that have been fired into Israel in recent months. So, the Israelis have bombed strategic targets here, including the Islamic University, which is right over in this area. They have also hit Hamas government offices and the various homes and offices of Hamas officials.

And now Israeli ground troops have moved in, seizing the main entry into Gaza. They have also taken the main north-south road and they have set up an east-to-west barrier as well, so that they can surround the city and project their power in. And they are digging in to these positions.

You see the effect. Gaza City is being sealed off from outside help. But that doesn't mean that Hamas is helpless. Remember, despite all of this, Hamas rockets are still falling on Israel. To control this area, Israeli troops may have to engage in dangerous house-to-house fighting. That will limit how much power they can use. Hamas will also be on its home turf, where they're believed to have hidden weapons and tunnels. And this is how this battle is likely going to shape up. You're going to see Israel saying, let's put a lot of pressure in on Hamas and hope they collapse, and Hamas saying, let's hold out as long as we can, in hopes that the world will demand peace.

(END VIDEOTAPE)

COOPER: Tom, thanks for that.

While this battle has been going on, the air campaign and the ground campaign, for under two weeks now, both sides have actually been preparing for it for months.

CNN's Ben Wedeman now takes a look at both sides, Israel and Hamas, at their preparation and their capabilities.

(BEGIN VIDEOTAPE)

BEN WEDEMAN, CNN CORRESPONDENT (voice-over): Israeli forces are deep inside Gaza. Tanks have reached the Mediterranean Sea south of Gaza City. They're now at the edges of the major urban centers where Palestinian fighters are in waiting.

Israel's armed forces, the strongest in the Middle East, have been training for years for a major incursion. Not far from Gaza, the Israeli army, with help from the U.S. Army Corps of Engineers, has constructed what looks like a Palestinian town, complete with minarets. It's the Army's urban warfare training facility. I went there two years ago and saw how they simulated conditions that sound a lot like Gaza.

BRIGADIER GENERAL UZI MOSKOVICH, ISRAELI ARMY: (UNINTELLIGIBLE) Suburban areas. More, I would say, highly dense urban areas.

WEDEMAN: This facility, no doubt, busy in recent months.

The Israeli army believes Hamas hasn't wasted time either.

AVITAL LEIBOVITCH, ISRAELI ARMY SPOKESWOMAN: We estimate that Hamas invested a lot into their infrastructure and this includes, of course, booby traps, explosives everywhere.

WEDEMAN: From a once highly secretive collection of small cells, the movement's military wing has taken on many of the characteristics of a regular army, with intensive drilling and plenty of on-the-job training provided by countless Israeli incursions.

Hamas has studied the lessons learned by Hezbollah in the 2006 war with Israel, during which Hezbollah made Israel pay a high price in lives and equipment for, at best, modest gains.

Hamas's exiled leader, Khaled Mashaal, insists his men are ready to put up a fight. "If the enemy go into Gaza," he says, "our people will fight from one street to the next, from one house to another, and on every inch of the land."

In the past militants set up obstacles on main roads. Israeli and Palestinian sources say Hamas has also dug an extensive tunnel and bunker system inside Gaza, which might protect the movement's fighters and leaders while the rest of the densely-packed population remains above ground and exposed.

The militants have land mines, IEDs, rocket-propelled grenades and automatic rifles: light weaponry compared to Israel's modern, largely American-made arsenal.

They have the advantage of fighting on their home turf, which as one Hamas spokesman recently vowed, will turn into fire and volcanoes until the feet of the invaders.

So far Israeli forces have suffered relatively light casualties and few deaths. When they battle their way inside Gaza, that could change.

(END VIDEOTAPE)

COOPER: No one covers this region better or longer than CNN's Ben Wedeman has been.

Ben, you've been in incursions in the past with Israeli forces on the ground. What should they expect? Right now Gaza City is said to be surrounded. If they move into Gaza City itself, what should they expect?

WEDEMAN: Well, what they can expect is there's going to be a lot of fighters all over the place. I mean, and not only Hamas. There's all sorts of different factions. And you can go from street to street and find one faction is here and another is there.

What they can expect is fighters with RPGS. What they can expect is booby traps. Oftentimes, when there's an expectation of an incursion, they'll put dirt blockades, or build up sand on the street and stop them with land mines, waiting for them to come in.

So they can expect stiff resistance. But at the end of the day a Merkava (ph) tank against a guy with an AK-47 and an RPG, there's no real mesh.

COOPER: How does this compare to the kind of ground we saw during the fight against Hezbollah two years ago?

WEDEMAN: Completely different terrain, for one thing. You've got the mountains, the mountainous Southern Lebanon is a different sort of environment.

And in addition to that, Hezbollah was much better armed. They were much better prepared. They had a higher level of training. At the end of the day these guys were really just guys of the neighborhood who have got guns, got some weapons. Not a lot of training. So they -- Hezbollah and Hamas, apples and oranges.

COOPER: Why is it that Israeli forces won't allow reporters onto the ground in Gaza?

WEDEMAN: Well, we can only speculate. They've told us for safety reasons. Others have told us because they believe that, over the years, our coverage of Gaza was not balanced.

But at the end of the day, what is obvious is they don't want us in there reporting directly. We have to depend on our Palestinian stringers who are very good. It's just not the same as if you or I were in there as opposed to our local Palestinian stringers.

COOPER: All right. Ben Wedeman, appreciate it. Thanks very much, Ben.

When we come back, we're going to talk to CNN's chief international correspondent, Christiane Amanpour, who is in Jerusalem. We'll talk about the diplomatic efforts. We saw a lot of diplomatic efforts under way today. We'll talk about that ahead.

Let's talk about Bernie Madoff. He is back in court, the head of an alleged Ponzi scheme. What happened to him in court today?

And good news for the Obama family. Sasha and Malia Obama head to school today. We'll show you what their day was like.

(COMMERCIAL BREAK)

COOPER: Welcome back to our continuing coverage, live from the Israel-Gaza border, on this, the third night of Israel's ground incursion into Gaza.

We are continuing to see missiles being fired into Gaza from the Israeli side. We've seen a number of explosions in the distance just on the hill top where we are overlooking the border right now. Throughout the night we've seen a number of explosions kind of lighting up the night sky. You see the explosions first before you actually hear the percussive blasts, because we're several miles awe way from where the missiles are actually landing.

But coming up we're going to talk to a civilian inside Gaza City.

The city itself right now is surrounded. I don't know if you can hear that. There's another explosion just right there over my shoulder. The city of Gaza City itself is surrounded. We'll talk to a civilian about what life is like for the civilians in that zone.

First, though, let's talk about diplomatic efforts. We saw a flurry of diplomatic activity today. France's president, Nicolas Sarkozy, was here, as well as Britain's former prime minister, Tony Blair, as well as a high-level E.U. delegation, which is right now in the city of Jerusalem.

And that's where we find CNN's chief international correspondent, Christiane Amanpour.

Christiane, despite all the sort of flurry of European activity among diplomats, there's no sign yet of anyone being close to any kind of a cease fire?

CHRISTIANE AMANPOUR, CNN CORRESPONDENT: Well, that's right. Israel has, in fact, been dropping several batches of new leaflets, telling the residents of Gaza that, in fact, Hamas has been engaging them. And they will continue to make Hamas feel the pain, quote unquote.

They've also been dropping leaflets telling the residents of Gaza to anonymously contact the IDF, the Israeli Defense Forces, if they have any knowledge of rocket launches or rock emplacement. They say to those residents who are cowering in Gaza, basically your fate is in your hands now.

With that, the question is what is the future going to look like? Obviously, Israel's stated objective is to get the rocket-launching capacity of Hamas to stop and to get Hamas -- to break its will to fire rockets into Israel.

But then is the further aim to cripple Hamas? Already the attacks are crippling and destroying Hamas's ability to rule, because they have really gone after the institutions there.

And so the question is, how does this end? Obviously, people are looking towards a political agreement. But since nobody will engage with Hamas, Hamas remains the big elephant in the room. The room in which Israel has -- rather the Palestinians elected Hamas three years ago, but that it has no international legitimacy. That's the crux of one of the ways they're trying to figure out how to have a cease fire and a political solution to this, as well.

COOPER: Christiane, is it possible that by damaging Hamas, this actually bolsters the more modern Fatah Party?

AMANPOUR: Well, that's what Israel is saying, and that's what others are saying. Again, it has to be handled very delicately, according to people who have been briefing me and who are working on this political solution.

It's not going to be OK just to say, "All right, we've crushed Hamas. Now Abu Mazen, Mahmoud Abbas, let's take you back on the back of the tank into Gaza and put you back as the full unified head of the Palestinians."

If it's possible that Mahmoud Abbas, the Palestinian Authority head, is able to secure the cease-fire, if the arrangements are made so that it's possible for him to be able to do that and then, potentially, be able to negotiate, you know, with Israel and move the political situation forward, then perhaps some -- you know, those involved in this, perhaps they think that there's a chance that it could strengthen Mahmoud Abbas and the more moderate Palestinian Authority.

But it's a very difficult and very careful game that's being played.

At the same time, you know, Arab leaders are calling for immediate truce. And yet, they're also giving the nod and the wink that, in fact, they would certainly also like to see Hamas dealt a good body blow. There's a feeling Hamas is linked to Hezbollah, linked to Syria, linked to Iran and that this may be a chance to really weaken that off.

There was the same intention back during the Hezbollah war with Israel in 2006. And it didn't turn out that way. So this is a very delicate situation, a very delicate process that they're -- that they're waging.

COOPER: Delicate, indeed. Christiane Amanpour reporting from Jerusalem tonight. Christiane, thank you very much.

When we come back, we'll talk to a resident of Gaza City. A Palestinian American who has been living in Gaza City for the last couple years, trying to start a business. We'll talk to him about what life is like on the ground right now for him and other civilians.

Also a look at what life is like for kids on both sides of the border tonight.

And also the latest on what happened to John Travolta's teenage son, Jett. What we now know about his medical condition, when we come back.

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COOPER: One of the difficulties for reporters covering this conflict is finding out exactly what the situation is on the ground in Gaza and in Gaza City. As we said, the Israeli government won't allow foreign reporters to actually enter Gaza at this stage of the conflict.

We are told the city of Gaza itself, Gaza City, is surrounded. There have been conflicting reports about whether Israeli troops have entered the city. There were some eyewitness reports earlier in the day about tanks seen in two Gaza City neighborhoods. Israeli Defense Forces wouldn't comment on that.

The breaking news tonight: three Israeli soldiers have been killed in what the Israeli Defense Forces say was a friendly-fire incident. And more than 20 Israeli soldiers were wounded in that same incident.

Let's talk to a resident, though, of Gaza City. I'm joined on the phone by Sami Abdel-Shafi, a Palestinian resident of Gaza City.

Sami, what is the situation where you are right now? What can you see? What can you hear?

SAMI ABDEL-SHAFI, GAZA CITY RESIDENT: In Gaza City, I and the rest of the city have been hearing almost constant bombardment and machine gunfire, shelling by artillery. Jets (ph) over the city of Gaza, particularly late last night, which went back and bombarded previous -- some of the sites previously bombarded.

The situation is very tense. Ambulance cars are being hit. Civilians are being -- are being impacted, and hospitals are reportedly full with the dead and injured. It's a very difficult situation.

COOPER: Sami, for you personally, for the people in your building, for the people around you, how do you -- how are you eating? How are you getting supplies?

ABDEL-SHAFI: We -- we have had to ration whatever we have of the basic necessities, like whatever, cheese or bread or what have you. But we are much, much better off than the majority of the residents of the Gaza Strip, because they are far more impoverished. They have nothing to rely on.

People -- people are so scared for their lives. They don't dare to step out of their homes. And they're scared for their -- for their lives, in fat, because they know that there are no medical emergency services available. Because many ambulance cars have been hit or affected by -- by the attack. And hospitals are full to a point where many patients are laid on bare floor. So people feel as though they are hanging in the air with no safety net underneath.

COOPER: We know more than 530 Palestinians have so far been killed. Doctors say as many as 100 of those are women and children. Some 2,750 have been wounded at this point.

Sami, in terms -- Israel has said they have dropped leaflets repeatedly, warning Palestinian civilians, most recently today, to leave residential areas and move to the center of the city. Does that make sense to you? Where would you go if you were to try to leave?

ABDEL-SHAFI: It doesn't make sense for most people who receive those leaflets. They have nowhere else to go. The -- the Israeli military is giving them very, very difficult choices: either to stay in their homes and probably be affected directly or indirectly by what is going on, or go out on the street which could even be more -- more dangerous and, quite frankly, inhuman. Because where -- will they sleep in open air? They shouldn't.

To think of it, Anderson, it is very, very unfair for anyone to ask a civilian to leave his home. So that is -- that's a series of tough choices. But this is very much like all of the difficult and impossible choices that the residents of the Gaza Strip have constantly been under in the siege and the crippling blockade that has been imposed on the Gaza Strip for a long, long time that preceded the breakout of this war.

This is a very negative stalemate that needs to be broken. The root causes must be addressed, and we should go back to addressing peace.

COOPER: Well, Sami, dawn is just a few hours away. We wish you well in the day ahead, and we hope to check in with you throughout this week. Thank you very much. Stay safe, if possible.

Nic Robertson joins us now.

Nic, you've been covering this, really, from the beginning of this conflict. Today we saw some 40 rockets landing on the Israeli side. No reports of any fatalities here on the Israeli side. But -- and more than 40 attacks by -- some 50, I think, strikes now by Israeli forces over the last 24 hours on the Gaza side.

NIC ROBERTSON, CNN CORRESPONDENT: And that's the way that it's been going. I mean, the Israeli Defense Forces have said that their aim here is to stop these rockets being fired. But every morning, standing here, you watch Hamas come out and fire more rockets. Three the other day, one this morning, just an hour after daylight, almost as if they know we're here, and they're hoping to send that message to the Israeli Defense Forces: "You haven't got us. We can -- we can still fire."

And those -- those rockets that can affect about a million people in the south of Israel. The schools around here are all closed: 300 -- 300,000 children have been sent away from school. One kindergarten was actually hit today.

COOPER: On the Israeli side. It was empty, thankfully.

We have seen the huge numbers of children, of women being -- being killed on -- in Gaza. You see the pictures from the hospitals.

ROBERTSON: And that's really been a change from the early phase. The early phase there was sort of the air campaign. There were a lot more Palestinian Hamas security officials and policemen who were killed. I think there was a parade ceremony in Posnare (ph) for police that was the target.

So in the early phases, it was many more Hamas and Hamas security that were hit. But as it entered this ground phase, the ground campaign, it's become much more deadly for civilians. About 100 people have been killed so far in the past 2 1/2 days in the ground campaign. And doctors say almost 100 percent are civilians. Thirty of that hundred were children; 20 of that hundred were women. That just gives you some idea, as it goes into the -- into the houses now, not the big-name Hamas targets. This is where women and children are suffering.

COOPER: And that's where the situation seems to be Gaza City itself, said to be surrounded. The question remains over the next 24 hours: wills the Israeli forces move deep into Gaza City itself? And we'll have to wait and see.

Nic Robertson, appreciate your reporting.

When we come back, we'll take a look at the latest on Bernie Madoff. He was in court today. We'll show you what happened to him.

Also tonight, the latest on the tragedy John Travolta and his family are now facing: the tragic death of their son, Jett, on Friday. What we now know about his health condition before he died.

And good news for the Obama family. Sasha and Malia heading to school for the first time in Washington. We'll show you what their day was like, ahead. Stay tuned.

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COOPER: Let's get a quick check of the day's other top headlines with Randi Kaye in New York -- Randi.

RANDI KAYE, CNN CORRESPONDENT: Hi, there, Anderson.

Disgraced financier Bernie Madoff was back in court today in New York. Prosecutors want him behind bars until his trial on charges he bilked investors out of $50 billion. They claim he violated a court agreement by mailing jewelry and other assets to relatives. The judge has yet to rule on that request.

Al Franken is one step closer tonight to becoming a Minnesota senator. The state-certified results showing Franken beat Republican Norm Coleman by 225 votes, which works out to a margin of victory of -- get this -- just about seven one-thousandth of one percent. Got that?

But Coleman has filed a lawsuit challenging the results.

And Sasha and Malia Obama were all smiles as they headed off to their new school today. The first daughters are attending Sidwell Friends. That's a private school in Washington. Sasha is in the second grade, and Malia is in the fifth.

And according to "Radar" magazine, a doctor was performing CPR on an unconscious Jett Travolta when paramedics arrived at his family's residence in the Bahamas. Sources tell the magazine actor John Travolta and his wife, actress Kelly Preston, were with 16-year-old Jett Travolta in the ambulance as it drove to the hospital, with the actor holding his son's hand, saying, 'Come on, Jett."

And there is more.

(BEGIN VIDEOTAPE)

KAYE (voice-over): A family of four, suddenly three. The question is, why? The death certificate lists seizure as cause of death. But we may never know the details. Forensic pathologist Larry Kobilinsky says the autopsy, now complete, likely focused on Jett's brain.

LARRY KOBILINSKY, FORENSIC PATHOLOGIST: A seizure can result in stiffening of muscles and loss of consciousness, and a person would simply collapse. That could result in what we call the subdural hematoma, which is a bleeding underneath the skull. And that leads to a build up of pressure.

KAYE: Resulting in death. Jett died suddenly Friday while the Travolta family was vacationing in the Bahamas. The Bahamian minister of tourism escorted the actor's family to the morgue.

OBIE WILCHCOMBE, BAHAMIAN MINISTER OF TOURISM: His words were, "That is my son." And then he asked for some moments, he and his wife, to spend with Jett. And they stayed in the morgue for several hours.

KAYE: The funeral director in the Bahamas says there was no sign of head trauma. But Travolta's lawyer said Jett fell to the bathroom floor, striking his head on the bath tub.

(on camera) The lawyer said the nanny found Jett and that he may have still been alive when his father started CPR. Jett was pronounced dead at the hospital. But the lawyer told "Us" magazine he believes John Travolta had a chance to say good-bye, that Jett may have died in his dad's arms.

(voice-over) After Jett's death, the family released these pictures. Happier times. A father who adored his son. A son who adored his father.

And this statement: "Jett was the most wonderful son that two parents could ever ask for and lit up the lives of everyone he encountered. We are heartbroken that our time with him was so brief."

The seizures, Travolta's lawyers told TMZ.com, were like a death each time, with Jett losing consciousness and convulsing. The lawyer said Jett was on anti-seizure medication for years. It reduced the seizures initially, but eventually, they returned. It's unclear if any medicine could have prevented the seizure that killed him.

Randi Kaye, CNN, New York.

(END VIDEOTAPE)

COOPER: So sad for the Travolta family.

When we come back, we'll have the latest on the situation in Gaza. What's happening right now, Gaza City itself said to be surrounded. The battle intense, intensifying as we speak. We'll be right back with our live coverage.

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