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Israel Offensive Continues; Family Kicked off AirTran Flight; Tax, Borrow & Cut; Looking Ahead; Seventh Deadly Day; Humanitarian Concerns; Blocking Burris; No Heater, No Problem; London's Black Cabs

Aired January 02, 2009 - 12:00   ET

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

TONY HARRIS, CNN ANCHOR: Israel's warplanes wiping out key Hamas sites. This Israeli defense video shows an airstrike on a mosque. Israel says it was a Hamas stronghold where weapons were being stored.
About 20 homes linked to members of Hamas also hit. Palestinian mourners today flocked to a funeral for the Hamas military leader killed in yesterday's airstrike. He is among more than 420 people reported killed in Gaza in the past week, more than 2,200 others wounded.

The bloodshed not stopping Hamas rocket fire. Israel says more than 30 rockets have landed in southern Israel today. Four Israelis have been killed by Palestinian rockets.

Let's get you right to the region now.

Our Ben Wedeman in the Israeli city of Sderot, just about 2.5 miles from Gaza.

And Ben, if you would, what is the latest on the attacks?

BEN WEDEMAN, CNN JERUSALEM CORRESPONDENT: Well, basically, Tony, that Israeli offensive is continuing, the air offensive. Israelis hitting targets throughout Gaza.

Now, one of those targets was the home of a Hamas militant in the town in Khan Yunis, which is in the southern part of the Gaza Strip. But what happened was, in an adjacent empty lot, there were several boys playing. As result of the explosion, three of those boys were killed, just underscoring the danger of using high explosives in such a crowded area as Gaza.

Also hit by the Israelis was a fuel depot in Beit Lahiya (ph), which is in the northern end of the Gaza Strip. And just moments ago I got off the phone with a friend in Gaza who told me that yesterday's hit on Nizar Rayyan, that Hamas militant, that senior Hamas militant who was killed by the Israelis in an airstrike, has really sent a wave of terror among the population, because many people are afraid that if they live anywhere near the home of a senior or even midlevel Hamas official, that their home may well be destroyed as Nizar Rayyan's was, and the resulting damage could harm everybody in the area. So there's a real mood of fear in Gaza at the moment.

As far as rockets going out of Gaza into Israel, as you said, more than 30. I think we, here in Sderot, experienced the last two about an hour and a half ago, two rockets falling on the outskirts of Sderot. Apparently no casualties or damage from those rockets.

And, of course, this happens as Israeli troops and armor remain massed around the borders of Gaza. But no indication at this point, Tony, when the ground offensive will, or even if it will begin -- Tony.

HARRIS: Sure. And Ben, one more quick question here.

There was a lot of concern that there could be violence in Jerusalem today related to Muslim prayer services. What, if anything, happened in Jerusalem?

WEDEMAN: Well, we were stationed right on a high building overlooking the old city, awaiting, in anticipation, for some sort of violence to occur. There were some mild clashes between Israel riot police and Palestinian stone-throwers near the Al Aqsa Mosque, which is the third holiest site in Islam. And from our vantage point, we did see a group of women, maybe like 20 or so, coming out of the Damascus gate, one of the main entrances to the old city.

They were chanting their loyalty to Hamas, but there were lots of Israeli riot police all over the place. And it seems that their presence, in addition to pretty cold weather, put a damper on what Hamas had vowed would be a day of rage. So it really wasn't much of a day of rage.

There were other clashes to the north of Gaza -- the north of Jerusalem, excuse me. And apparently live ammunition was used by the Israeli forces there, but as I said, not quite the day of raids that Hamas was hoping for -- Tony.

HARRIS: OK. Ben Wedeman for us.

Ben, appreciate that report. Thank you.

Secretary of State Condoleezza Rice says the U.S. is working with international partners toward a cease-fire in Gaza. She stressed the Bush administration's position that any cease-fire hinges on Hamas.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, SECRETARY OF STATE: Hamas has held the people of Gaza hostage ever since their illegal coup against the forces of President Mahmoud Abbas, the legitimate president of the Palestinian people. Hamas has used Gaza as a launching pad for rockets against Israeli cities and has contributed deeply to a very bad daily life for the Palestinian people in Gaza and to a humanitarian situation that we have all been trying to address. But frankly, Hamas has made it very difficult for the people of Gaza to have a reasonable life.

(END VIDEO CLIP)

HARRIS: You can follow what's going on in Gaza, in Israel and the rest of the Middle East 24/7. Just log on to CNN.com for the latest on the crisis.

What if you're at the airport discussing with your family the safest place to sit on the plane? No big deal; right? Wrong. It could be because they're Muslim.

Eight family members and a friend were taken off an AirTran flight from Washington to Orlando yesterday. They were talking about the safest place on the plane to sit. That's when they were overheard by other passengers. The FBI took the family off, questioned them, and then told AirTran airline there was no threat, but AirTran refused to allow the family back on board.

(BEGIN VIDEO CLIP)

ATIF IRFAN, REMOVED FROM FLIGHT: Well, I think for the most part, the marshals and the federal agents that we dealt with were actually pretty kind and pretty generous in how they dealt with us. I think more so the blame falls on the airline, simply because I believe from what we were told, that they initiated the action. That the stewardesses were told by some of the people on the plane -- I think it was two young girls -- that something was going on. And then they initiated it by talking to the captain. And I believe from what the federal agents told us, again, is that it was the captain's final decision whether or not to let us on the plane or not.

(END VIDEO CLIP)

HARRIS: OK. AirTran released a statement this morning. It's a lengthy one, so bear with me here.

Saying in part, "At departure time, the captain of Flight 175 informed the airline that there were two federal air marshals on board who contacted local and federal Washington law enforcement officials for a security-related on board the aircraft involving verbal comments made by a passenger and overheard by other passengers. The airline then advised the Transportation Security Administration it was determined that all 104 passengers on board must deplane and passenger, crew, baggage and the aircraft should be rescreened."

"Later in the day, six of the nine detained passengers approached the customer service counter and asked to be rebooked to Orlando. At the time, the airline had not been notified by the authorities that the passengers were cleared to fly and would not rebook them until receiving said clearance."

OK.

(WEATHER REPORT)

HARRIS: People are out of jobs, and services are being cut by local governments across the country. What kind of economic stimulus is the incoming Obama administration considering, and what will work the fastest?

(COMMERCIAL BREAK) HARRIS: What is a governor to do? California is facing a cash crisis, so Arnold Schwarzenegger plans to cut programs, raise taxes and borrow, borrow, borrow.

(BEGIN VIDEOTAPE)

DAN SIMON, CNN CORRESPONDENT (voice-over): Governor Schwarzenegger says he doesn't have another choice but to raise taxes in California by more than $14 billion over the next 18 months. His plan calls for a 1.5 cent increase to the state's sales tax. Plus, a sales tax would now be added to things like car repairs and veterinary bills. Alcoholic drinks would also cost a little more, too, an additional nickel a drink.

Schwarzenegger's fellow Republicans in the legislature says his plan feels like a bad hangover, but Democrats say additional revenue is needed to fix the state's soaring $40 billion-plus deficit.

KAREN BASS (D), CALIFORNIA ASSEMBLY SPEAKER: Raising taxes during a recession is a very difficult thing to do, but the fact of the matter is, our deficit is so large in the state of California, that it is impossible to cut $40 billion out of the state revenue.

SIMON: Still, the governor's proposal outlines deep spending cuts, $17 billion over the next year and a half. Nearly a third of the cuts would target education. His plan calls for a $5 billion reduction of public schools and would also trim the school year by a week. If that is approved, it will be the first time in state history that California abbreviated its school year.

California would also get a little more cash by borrowing billions against future lottery proceeds. Schwarzenegger's finance director put it this way...

MIKE GENEST, GOVERNOR'S FINANCE DIRECTOR: The worst budget situation the state has ever faced. We're going to have to cut programs, raise taxes and borrow to the tune of $41.6 billion.

SIMON: California's fiscal situation is among the worst in the nation, driven mainly by declining tax revenues from the mortgage meltdown and high foreclosures.

(on camera): Democrats hold majorities in both houses, but Schwarzenegger's plan would need some Republican support. And right now he is lacking that. But lawmakers will have to act in some fashion in about a month, because that's when the state comptroller says California will run out of money and need to start issuing IOUs.

Dan Simon, CNN, San Francisco.

(END VIDEOTAPE)

HARRIS: Well, the financial crisis, of course, is not immune to California. President-elect Barack Obama, though, is taking a different approach nationally.

He wants to spend the economy out of recession to the tune of $775 billion. What are his spending options?

CNN's Brianna Keilar is covering the president-elect in Chicago.

Brianna, good to see you.

And our Christine Romans is at the business desk in New York.

Christine, welcome back.

And Christine, let's start with you. How would the president- elect, then President Obama, spend this stimulus package?

CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Tony, and there's so much money to spend. I will say, rarely have I seen so many economists agree on something.

Conservative or liberal, they agree that you have to spend a lot of money. You have to spend it properly to get the most bang for your buck, literally here, and they're talking about hundreds of billions, maybe $700 billion.

So what a lot of people expect is that first, you're talking about a housing and jobs stimulus part of this. You're talking about tax credits, perhaps. And the second part of this is the public works projects. That's a nationwide road and bridge-building program; public buildings, making them more energy efficient; updating and upgrading some of our schools; installing computers in classrooms; Internet access across the country; also talking about maybe modernizing and putting technology into medical records; a lot of infrastructure-type build-outs there.

Three's a lot of challenges here, Tony, because even as Joe Biden, the vice president-elect, has said, you don't want this to turn into some kind of congressional Christmas tree where everyone puts all their fancy little favorite projects on here.

HARRIS: Right.

ROMANS: So, Larry Summers, who will run the president's National Economic Council, and Joe Biden, the vice president-elect, they both say they're going to be very careful of the oversight of this, Tony, so that it's not just a spending spree that doesn't do it what it's supposed to do.

HARRIS: Yes.

And Brianna, let me loop you into this conversation.

Harry Reid and Nancy Pelosi to meet with Obama next week to talk about Obama's early legislative agenda. At the top of the list, obviously, the stimulus package.

First of all, are we even sure that the meeting is going to take place?

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Well, according to the Obama transition team, they're not confirming that this meeting is going to be taking place, but congressional sources are telling us that, yes, Obama will be meeting with Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi. That's according to one congressional Democratic source.

We're also hearing from sources on both sides of the aisle on the Hill that there's also going to be a meeting with Republicans. That they're -- after they talk with Democrats, they'll be bringing Republicans into the fold. But we're still waiting exactly for what the details are of the stimulus plan, as you know -- Tony.

HARRIS: Yes.

And Christine, look, who will be overseeing this spending? I know Congress clearly has a role. Is there a White House team that will be assigned to this? And how important is tight oversight on the spending?

ROMANS: Pretty important. And Brianna is right, we really don't know what's in here yet.

I mean, that's one thing -- when I ask economists, "Hey, tell me, is it going to work? What are we going to do? What are we going to see?" They're like, "Well, we haven't really seen the blueprint yet."

HARRIS: Yes.

ROMANS: We don't know exactly what he's going to do. We can only at this point speculate about what he said on the campaign trail he thinks is important and about what economists who are close to Larry Summers and close to the people around the president think are important.

When will we know? I don't know. Brianna will know that better.

What kind of oversight will there be? There has to be good oversight.

HARRIS: Yes.

ROMANS: Because, you know, people are weary of all of this spending so far, especially since there has already been criticism about how we spent the money on the TARP, the bank bailout. People want to make sure that this is spent properly, and it's a lot of money.

When you're talking about public works projects of this magnitude, some folks have told me, imagine the number of hands that will go through a road-building project, how many levels there will be for -- frankly, for money lost, for a graft (ph), all that kind of stuff.

HARRIS: Right.

Hey, you know, Brianna, a final question to you. What kind of real power do Republicans have, congressional Republicans have right now, to kind of slow the Obama train on this stimulus package? You're starting to see some pushback from Senate Minority Leader Mitch McConnell. Congressman Eric Cantor is also weighing in, saying that, look, we were just tired of all of the bailouts.

I'm wondering were from a congressional point of view, what kind of options are available to congressional Republicans?

KEILAR: Well, you really hit the nail on the head there, Tony, when you said the kind of power they have to slow this down because that's really the type of power they do have. They have enough votes to filibuster, should they want to. But the question is, could they prevent the final -- could Republicans prevent the final passage of a bill like this?

You're looking at some Republicans in states like Ohio or other states that are really suffering economically. And the thought is that in a final vote on an economic stimulus package, Democrats will be able to pick up, you know, certainly a fair number of Republicans so that they can get this through.

The power that Republicans have is really to delay this and some preliminary votes. And the concerns that you hear Republicans raising is, one, they're concerned about the size of this economic stimulus package...

HARRIS: Yes.

KEILAR: ... especially on the heels of that Wall Street bailout, but also on the speed.

I mean, we're hearing from House Democrats. They're talking about moving this through the House as soon as the second week in January. That's something that's not sitting well with Republicans in the House or the Senate.

They say they want more oversight, that they're worried about it moving so fast. And they're worried that some of the problems we've seen with that financial -- the Wall Street bailout, in terms of oversight, that you're just going to add that on to this gigantic economic stimulus package if you don't kind of pull in the reins a little bit.

HARRIS: Brianna Keilar and Christine Romans, nice discussion. Appreciate it. Ladies, thank you.

KEILAR: You're welcome.

ROMANS: Thanks, Tony.

HARRIS: The Obamas head to Washington this weekend. And CNN will bring you live coverage of the president-elect in the nation's capital all next week, right here in the CNN NEWSROOM.

We know young people are going to inherit this financial crisis, but they're also inheriting two wars and worrying about U.S. security.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I understand diplomacy, but sometimes you can't sit down with bin Ladens, you can't sit down with Vladimir Putinss because those people...

(CROSSTALK)

(END VIDEO CLIP)

HARRIS: Heading back to class to hear what these high schoolers have to say about war and peace. That's next.

(COMMERCIAL BREAK)

HARRIS: The United States is getting ready to send at least 20,000 new troops to southern Afghanistan to help fight the Taliban. The U.S. military says the first wave will arrive in the spring.

More U.S. troops died in Afghanistan in 2008 than any of the seven years since the invasion to oust the insurgents. U.S. officials warn violence will probably intensify this year.

As the U.S. takes on terrorism in Iraq and Afghanistan, young people in classrooms around the country are thinking about war, peace and U.S. security.

As part of my "Class in Session" series, I headed back to class to hear their arguments.

(BEGIN VIDEOTAPE)

HARRIS: Do you believe...

UNIDENTIFIED FEMALE: I think we're being a little bit hypocritical.

UNIDENTIFIED MALE: There are people in the Army that...

HARRIS: I'm curious to your thoughts on war and peace. We've got our nation now fighting two wars.

MICHAEL, 10TH GRADE: When I think of Afghanistan, the war in Afghanistan, I think of bold people that had the audacity to steal our airplanes, threaten lives of Americans, run them into American assets, and cause chaos across the American country. And once you do that, you deserve what's coming to you.

UNIDENTIFIED MALE: No! No!

STEPHANIE, 10TH GRADE: How can you say that it's necessary to go bomb another country just because they "messed with us?" That, to me -- that doesn't just give you automatic justification to do whatever you want to the another country. Violence, pointblank, is wrong.

HARRIS: How many in the room believe it was appropriate for the United States to respond in Afghanistan after 9/11? Tell me why.

MICHAEL, 12TH GRADE: The government does have a fundamental responsibility to protect its citizens. And the point at which people in other countries have caused the death of American citizens, we need to act, and we need to ensure that that does not happen again.

CAROLINE, 12TH GRADE: I think we're being a little bit hypocritical. I absolutely -- I support the -- I support invading Afghanistan, and I support our troops. And I think it's absolutely wrong that Americans were killed.

But we have supported 14 coups in other countries in the past 100 years. We have killed -- I think in August we killed 60 civilians, 30 of which were children. Something like that, in Afghanistan. And so we kill people, too.

TAYLOR, 12TH GRADE: Us killing other people won't justify anything. I think that we did that out of anger. (INAUDIBLE) going over there was appropriate. I think that us doing that only caused more problems in the United States and endangered our lives even more, because we don't even know what we're going over there and doing.

HARRIS: What are your expectations for the Obama administration?

MICHAEL, 12TH GRADE: One of the things that he's promised to do is ramp up our force levels in Afghanistan. And the question, the ultimate question that I have with that, is how realic is it?

Do we expect to do in Afghanistan what 60,000 soldiers, 30,000 of whom can't even fight, with utmost humanitarian concern, what the Russians couldn't do with 115,000 soldiers and the utmost barbarity of brutality? I don't see the realistic possibility here.

TAYLOR, 12TH GRADE: It seems to me like our politicians are afraid to talk to these people. If they want to indirectly talk to them, whereas it takes getting on a plane, going to their country and sitting in their houses and in their government and talking to them...

MICHAEL, 10TH GRADE: I understand diplomacy, but sometimes you can't sit down with bin Ladens, you can't sit down with Vladimir Putins, because those people...

(CROSSTALK)

MICHAEL, 12TH GRADE: I want to (INAUDIBLE) that I'm distancing myself from the position of a nuclear war with Russia. I am not in favor of this.

HARRIS: All right. We'll take this and we'll take this one off line.

Thank you very much.

(END VIDEOTAPE)

HARRIS: Oh, boy. These young people really thinking about these issues, and deeply.

Next Friday you will hear our conversation on race in America. Will inaugurating a black man as president really make a difference? You are not going to want to miss this one. That is next Friday at noon Eastern, right here in the CNN NEWSROOM.

What will happen if Governor Rod Blagojevich's choice for the Senate shows up at the Capitol to claim his seat?

(COMMERCIAL BREAK)

TONY HARRIS, CNN ANCHOR: Well, today marks the first trading day of the new year on Wall Street and investors are certainly hoping 2009 will be better than 2008. It certainly can't be much worse, huh? Stephanie Elam is at the New York Stock Exchange now with more on what we hope will be a less nerve-racking 12 months.

Stephanie.

STEPHANIE ELAM, CNN CORRESPONDENT: Tony, don't tease fate and say that it can't get much worse than last year. We don't want to find out if it can.

HARRIS: That's true.

ELAM: We just need to keep moving upwards now. And, you know, it's always hard to predict what a new year may hold for the stock market. At the start of 2008, not many of us could have imagined that we'd see the collapse of several Wall Street titans, the government takeover of many more and in the wake of all of that, 2 million job losses.

So, for now, a lot of economic forecasters say the overall economy may not recover until 2010 and that the recession will, at the very least, continue until the latter half of '09. That means we're likely do for more months of job losses and rough corporate earnings. Some unemployed workers are actually taking significant pay cuts. We're talking like 30 percent to 50 percent. And, in some cases, as much as 70 percent less than what they received at their old job just to get work.

The good news is that the stock market typically rebounds before the economy does as it anticipates a turnaround. That's a good thing for investors to hear. So while Wall Street analysts do expect more wild market swings, eventually there's likely to be a recovery, especially if construction and housing and retail sales begin to show improvement. We keep showing that. But the consumer, that is two- thirds of what drives the economy. So if people are spending, it's good for the economy.

HARRIS: And I'm wondering, Stephanie, it would seem to reason that all of this uncertainty has investors feeling pretty hesitant?

ELAM: Oh, for sure. That's definitely the case. Despite all of the, "now's the time to buy" advice that investors are guesting, many are still pulling their money out of the stock market and putting it into the safety of Treasury bonds. They don't know what 2009 will hold and history doesn't give us too much to go on because there's really no pattern about what happened after a really bad year for the market.

But I can tell you today, halfway through the trading session, things are looking up. Let's take a look here. The Dow is gaining 148 points, 8,925. The Nasdaq better by 30 at 1,607. So hopefully, Tony, hopefully we'll at least be able to put the first day of '09 -- of trading in '09 down in the plus column. We're working on it.

HARRIS: There you go. All right, Stephanie, thank you.

ELAM: Thanks, Tony.

HARRIS: You know, we are also keeping a close eye on the situation along the Israeli/Gaza border. Let's check in, once again, with Errol Barnett on our international desk.

And, Errol, what are you following this hour?

ERROL BARNETT, CNN CORRESPONDENT: Well, Tony, at the international desk, we're following everything. We have correspondents in Jerusalem, but we don't have access yet to Gaza. So we're trying to keep an eye on Arab language network broadcasting from Gaza. We actually have one I want to pull up for you now.

Pull up router (ph) 87 here. This al Aqsa you're about to see. It's essentially Hamas television. And what you're seeing now is the al Qassam (ph), that's the armed wing of Hamas.

Now this is a network available in the region, but not readily available elsewhere. They know it. So some of these videos are actually being posted on YouTube. Let me show you this one. It's posted today.

This is video from the rocket attack in Ashkelon in southern Israel that hit a private residence. We translated the headline over here on the side of the page and it says, "direct hit by grad (ph) rocket on private residence."

Now it looks pretty dramatic, what you see here. But we reached out to Nic Robertson, our correspondent in the field. He says he's been to that house and the family is actually safe. They were able to get into the basement before the rocket hit.

But on the Israeli side, they're also using YouTube. This is the IDF, the Israeli Defense Forces YouTube page. They're posting video from air strikes, as well as video of their humanitarian efforts. You see that down here.

We're also keeping an eye on blogs. This one is called mideastyouth.com. I can read a headline here posted today, "protesting for Gazan rights in Israel." On the Israeli side, though, there's also juicy.com (ph). The headline here, "Hamas as a political failure." So this is a conflict taking place on the ground, but it's also a battle happening on the web.

Tony.

HARRIS: OK, Errol, appreciate it. Thank you.

With the Mideast crisis entering week two, the U.N. is urgently pushing for a cease-fire. A news conference at the U.N. headquarters wrapping up just moments ago.

(BEGIN VIDEO CLIP)

ROBERT SERRY, U.N. COORDINATOR FOR MIDEAST PEACE PROCESS: It is now more vital than ever that Israeli/Palestinian peace is achieved. The underlying issues must be addressed. End of conflict and of occupation and the creation of the Palestinian state, alongside a secure Israel.

(END VIDEO CLIP)

HARRIS: OK. Live now to CNN's senior United Nation's correspondent Richard Roth.

And, Richard, what is being done at the U.N. regarding Gaza? The secretary-general certainly wants an immediate cease-fire. It certainly hasn't happened yet.

RICHARD ROTH, CNN CORRESPONDENT: I think the diplomatic focus, Tony, will be moving here to New York in coming days. The president of the Palestinian people will be here for talks. The Arab countries will be pushing a resolution designed to put pressure on Israel.

But already that U.N. official we just heard from, you get the sense, they're looking at the end game already no matter what happens on the ground. You're hearing more and more talk about monitors to be between Hamas and Israel. The U.N. official there said what Hamas has been doing with its rocket attacks is irresponsible, but he also said what Israel's response has been has been excessive.

He praised Israel for helping send aid and medicine into Gaza while attacking it. But what you're going to see is a search, a desperate quest for some sort of comprehensive solution so that this doesn't happen again. But with the Middle East, things like that can be quite illusive. But maybe more on the Hezbollah/Israel model, where the U.N. beefed up forces along the border to try to keep more of the peace there.

HARRIS: All right. Richard Roth for us.

Richard, appreciate it. Thanks you.

Illinois Governor Rod Blagojevich is set to call a special election to fill a vacant congressional seat. Rahm Emanuel resigns today. He is moving on to the White House to serve as chief of staff. Most likely the special election will be set for early spring. And there is this from a Democratic congressional aide. Roland Burris, the man Rod Blagojevich named to replace Barack Obama in the Senate, will likely show up on Capitol Hill Tuesday for Congress' opening session. Senate leaders say they won't seat Burris because Blagojevich is facing criminal charges. The aide tells CNN, the Senate doorkeeper will block Burris from the chamber. If Burris persists, Capitol Police would be called.

The aide says the leadership is also preparing for what they call the radioactive scenario, Governor Blagojevich himself shows up at the Senate door. Are you kidding me here? It is going to be quite a showdown if Burris shows up on Capitol Hill. But what, if anything, can the Senate really do to block him, other than calling in the Capitol Police and physically removing him? Joining me now is Martin Kady, congressional correspondent with politico.com.

Martin, what is going to happen here, in your estimation?

MARTIN KADY, POLITICO.COM: Well, this isn't exactly the message that the Democrats wanted, you know, for next week.

HARRIS: No.

KADY: It's supposed to be their crown and glory. They come in with a new Democratic majority. They're about to inaugurate President Obama. And here they have this wild and strange controversy over this tainted Senate appointment.

Are they really going to arrest him at the Capitol Door? I think not. Nobody wants that to happen. I suspect that there's some back channel negotiations that have to be going on now so that they can go somewhere in between tossing this guy out on the Capitol steps and admitting him as a full member of the Senate.

Now, I don't know where that sort of wiggle room is. There's some technical possibilities. But this is strange constitutional territory. We have constitutional scholars, if you've been following all of the media reports on this, who disagree over exactly what the Senate can and can't do on this.

HARRIS: So there is one tactic that I read about this morning. I'll share it with you. You've probably been talking about it already. For Senate Democrats to refer Burris' credentials -- you can help me here -- to the rules and administration committee for review, but aren't Burris' credentials essentially unassailable?

KADY: Well, yes, I mean he's constitutionally qualified to be a U.S. senator.

HARRIS: Yes.

KADY: Now, this referring the appointment to the rules committee, that's sort of like a four corner stall tactic. They could say, come back in 60 days to 90 days after which we hope that Blagojevich has been impeached or left office or convicted or something so that they can have a do-over. But Blagojevich moves, say what you want about it, it's been fascinating to watch unfold because he appointed a guy, an African- American gentleman, who is qualified, seems to have a clean record. And then Bobby Rush, the congressman for Illinois, came in and said -- raised the specter of Will Conner (ph) and George Wallace (ph) blocking the schoolhouse doors. So they're making -- they brought a racial element into this, which makes Democrats very uncomfortable, if they really want to haul off and block this guy from walking into the Senate.

HARRIS: Martin, if Rod Blagojevich weren't in the legal jeopardy that he's in right now and he had appointed this man, Roland Burris, to the seat, this would be -- there would be no challenge in this man's credentials. Isn't that true?

KADY: Yes. It would be a non-story.

HARRIS: It would be a non-story.

KADY: Frankly, if Blagojevich had no scandal, we would probably be profiling him as, who is Roland Burris? He's a 71-year-old gentleman, a former state attorney general. We might frame him as a potential caretaker for the seat, depending on whether he wanted to run again in a couple years when the Obama Senate seat is up in the election cycle. It would be sort of a gentle profile, here's a new guy that we don't know much about. We'd be on with it. We wouldn't be talking about it.

HARRIS: And let's listen to, together here, to Roland Burris defending his position. He wants this seat and he feels he's entitled to it.

(BEGIN VIDEO CLIP)

ROLAND BURRIS, (D) FORMER ILLINOIS ATTORNEY GENERAL: Why those persons will not seat me is a question that they really are going to have to answer because I have done no wrong. And they're going to deny the people of Illinois a qualified person to go in and help carry out the duties and responsibilities to represent them because of another matter that has nothing to do with my serving? I think that they're, you know, situations where the individuals are caught up in the problems with the governor, which are not the problems of Roland Burris.

(END VIDEO CLIP)

HARRIS: And, Martin, it's hard to believe he does not understand the position he finds himself in with this appointment. So what are we looking at here from Roland Burris? And does he run the risk of sort of sullying his reputation by moving forward?

KADY: Well, I don't know if he sullies his personal political reputation. He's had a number of failed statewide bids for office in Illinois. So, obviously, he couldn't get himself on the ballot for governor and -- or senator I guess.

HARRIS: Well, that's true. That's true.

KADY: But you have to wonder what the motivation is. Danny Davis, another African-American congressman from Chicago, reportedly turned down this appointment. So Blagojevich went -- basically found a guy who would accept it and, you know, potentially enjoy the controversy.

I mean I've seen Burris making the rounds the last couple of news cycles. He's been on every channel. He looks like he's enjoying the spotlight. He told "The Wall Street Journal" today, I am the senator and it sounds good.

HARRIS: Yes.

Martin, appreciate your time.

KADY: Thanks.

HARRIS: Martin Kady with us. Appreciate it. Thank you.

Wait a second. We are not finished with politics just yet. Remember this race? The one from Minnesota's U.S. Senate seat still undecided? Democrat Al Franken has a slim lead. About 50 votes. Over Republican incumbent Norm Coleman. Today, the state's 87 counties must identify improperly rejected absentee ballots and turn them into the secretary of state's office to be counted.

Forget the furnace. Some people are staying warm without one. Find out how in today's "Energy Fix."

(COMMERCIAL BREAK)

HARRIS: In Kingston, Tennessee, it is a case of bad news and, well, sort of good. First, the Environment Protection Agency says that huge coal ash spill shows more than 100 times the safe level of arsenic. More than a billion gallons spilled from a retention pond in mid December. The so-called good news, an EPA spokeswoman says Kingston's water, safe to drink. The city's mayor agrees. Watch this.

(BEGIN VIDEO CLIP)

MAYOR TROY BEETS, KINGSTON, TENNESSEE: And I'm going to be fine. I've been doing this since the spill. I have complete confidence in our water department in Kingston. Our city manager, who happens to be probably the best in the state regarding water issues, assures me that the water is safe. I'm drinking it. My grandchildren, my great- grandchildren are drinking it.

(END VIDEO CLIP)

HARRIS: Well, it is that time of year when homeowners crank up the thermostat. But what if you could heat your entire home without even turning on a furnace? Not only is it possible, it is being done. Cnnmoney.com's Alison Kosik is with us. She has our "Energy Fix."

Alison, good to see you.

ALISON KOSIK, CNNMONEY.COM: Good to see you, too, Tony.

You know, who wouldn't like to get rid of their home heating bill altogether? That's what's going on in Germany. Thousands of passive homes have been built and they don't use a furnace at all. Instead, the home is heated mostly by the sun and heat given off by people and electrical appliances.

Now here's how it works. That heat stays inside because a passive home is virtually airtight. To keep the air from becoming stale and unhealthy, a ventilation system constantly brings in fresh air and heats it up. And, yes, on nice days you can even open the windows and shut off that ventilation system. So, Tony, you have options.

HARRIS: Well, Alison, you mentioned Germany. But are any of these homes being built here in the United States?

KOSIK: Yes, you'll only find a handful in the U.S. Here is a picture of a passive home in Minnesota. Take a look. One obstacle is location. Passive homes can't be shaded and they need big, southern- facing windows it get solar heat. Design is also an issue. Passive homes are fairly flat and can't have dormers. They're also small. Around 1,000 square feet because bigger homes are too hard to seal, insulate and heat. So there are a few issues, Tony.

HARRIS: Yes, yes. How about cost? That's always an issue.

KOSIK: Of course. The passive homes in Germany cost about 5 percent more to build than a traditional home. And in the U.S., it's likely to be even higher. Demand isn't as strong here. And those high-tech windows and ventilation systems aren't readily available here. But proponents point out that in the long run you will save on energy costs.

And for more energy fixes, go to cnnmoney.com.

Tony, back to you.

HARRIS: Alison, appreciate it. Thank you.

KOSIK: My pleasure.

HARRIS: You know, they're an inspiration to kids around the country, and to adults, too. You remember these young people who wrote and performed a song before the election right here in the CNN NEWSROOM? Yes, yes, that was good there. They just got a huge Christmas present from the queen of talk.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

KIDS, (singing): Obama on the left, McCain on the right. We can talk politics all night. And you can vote however you like. (END VIDEO CLIP)

HARRIS: So how could we forget these great kids? It's impossible. They became overnight stars performing their political rap song during the presidential campaign. They're kids from the Ron Clark Academy in Atlanta. Well, Oprah Winfrey, apparently, couldn't forget them either, sending their school a fat check for $365,000. Heidi Collins spoke with Ron Clark about his reaction to the gift earlier this morning.

(BEGIN VIDEO CLIP)

RON CLARK, FOUNDER, RON CLARK ACADEMY: I saw the big box of mail. We get letters from teachers all over the country. And I saw this letter and it said "attention Ron Clark." And I opened it up. And it said, Ron, I've been to your web site. I've seen your video about your school. I love it. You're dynamic. You know, motivated for what education can be. Bravo. Bravo. My good friend, Oprah Winfrey.

And my eyes got really big. And then I looked. And a sheet of paper fell out and I picked it up and it was the check for $365,000. And I didn't even know people sent checks like that in the mail. And I just freaked out. And there was no one to tell. I was running around. No one was there. It was outstanding.

HEIDI COLLINS, CNN: Who was your first phone call?

CLARK: Kim Bearden. She's the co-founder of the school. She was the National Middle School Teacher of the Year. She just (ph) out of school as well and we just cried and cried.

COLLINS: Oh, I bet you did. Well, what kind of message does something like this, though, give to the students and the staff at your school?

CLARK: It's validation for us. Our teachers, we put passion and energy and creativity into all of our classrooms. And not only do we work to lift up our kids, but we work to educate teachers as well. We have teachers visit us from all over the country to spend time in our classrooms, to watch us teach and to learn from us. So it's validation that we're doing something right. And it's an endorsement from Oprah. And it gets no better than that because hopefully if Oprah is endorsing our school, others will join aboard. And, who knows, maybe we could get some more surprise checks out of this. Who knows.

(END VIDEO CLIP)

HARRIS: All right. By the way, the kids are mostly from the inner city. It costs $2.4 million a year to run the Ron Clark Academy in Atlanta. And it relies mostly on donations to operate. The middle school has been praised for bringing test scores way up and turning out wonderful little graduates.

A London cab. It's an icon. Is it about to become an endangered species? (COMMERCIAL BREAK)

HARRIS: You know, they're yellow in New York. In London, they're black. Hailed as much as the royal family. But as CNN's Jim Boulden found, London's black taxis have hit a bump in the road -- the global economic crisis.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN CORRESPONDENT, (voice over): This is Coventry, England, where the London taxi is built. And this is the man who was brought in to save the venerable black cab.

JOHN RUSSELL, CEO, LONDON TAXIS INTERNATIONAL: Our business has been difficult for the last 12 months. Partly because the taxi trade is slightly down in our major markets, particularly in London, but mainly because of a confidence issue and people postponing purchase.

BOULDEN: Add to that the latest model from London Taxi International, or LTI, had to be recalled because of engine fires. Who should compensate drivers for lost hours is an ongoing headache.

London taxis neither have to be black or this traditional shape. And, in fact, LTI now has competition in the form of a silver Mercedes taxi.

RICHARD BELASCO, LONDON CABBIE: It drives like a limousine, feels like a real limousine. It's a bigger vehicle to work with in London, as you can appreciate.

BOULDEN: Richard Belasco was the first London cabby to get the modified Mercedes Veto (ph) when it was launched in June.

BELASCO: Servicing, which is your main cost that you need to cut down on when you drive a taxi in London. Is it serviceable? And that's where the cost is going to be cut.

BOULDEN: The London taxi is steeped in history and myth. The cab no longer has to have an extra high ceiling. Once upon a time, needed for a man's top hat. But that still has benefits.

RUSSELL: The height also gives us good wheelchair access. And in (ph) the city today, if you like the high hat has been replaced by the need to make it accessible for the disabled. So, you know, wheelchair accessibility is one of our great strengths.

BOULDEN: LTI's Russell says there are no plans to change the shape. And, by the way, a wide variety of colors are available.

The taxi's come in 12 colors, but you wouldn't see any white ones in London. In fact, these are for LTI's newest customer. An order of 200 taxis for Bahrain.

The international market is now key for LTI's growth plans. It also builds London taxis in China. Just in time, perhaps, as more Mercedes cabs can now be seen on the streets of London. BELASCO: All the drivers I speak to, a big percentage of them, are really considering buying this vehicle as opposed to the other one.

BOULDEN: Workers here are hoping you'll be able to hail one of these where you live some day soon.

Jim Boulden, CNN, Coventry, England.

(END VIDEOTAPE)

HARRIS: Leaving you in the capable hands of an excellent driver.

FREDRICKA WHITFIELD, CNN ANCHOR: Sure.

HARRIS: CNN NEWSROOM continues right now . . .

WHITFIELD: You see me drive?

HARRIS: With Fredricka Whitfield.

WHITFIELD: OK. Thanks so much, Tony.