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Gadhafi Losing Grip on Power; Uprisings Cause Jump at Pump; President Obama Speaks to Governors

Aired February 28, 2011 - 11:00   ET

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

SUZANNE MALVEAUX, CNN ANCHOR: Live from Studio 7, I'm Suzanne Malveaux.

Let's get you up to speed for Monday, February 28th.

NATO allies are ramping up talk of a no-fly zone over Libya to stop Moammar Gadhafi from bombing his own people.

(CHANTING)

MALVEAUX: Two weeks into the uprising, more soldiers are defecting to the oppositions as rebels tighten their grip on land surrounding the capital, Tripoli. With international pressers coming in waves now, Gadhafi's son still insists his father will not leave.

(BEGIN VIDEO CLIP)

SAIF AL-ISLAM GADHAFI, MOAMMAR GADHAFI'S SON: Listen, nobody is leaving this country. We live here, we die here. This is our country. Libya is our people, and I believe that I am doing the right thing.

(END VIDEO CLIP)

MALVEAUX: In Geneva today, Secretary of State Hillary Clinton convinced the European union to sanction Libya. The penalties mirror those by the United States and the U.N. -- an arms embargo, asset freeze and travel ban on Gadhafi.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE: There are reports of soldiers executed for refusing to turn their guns on their fellow citizens, of indiscriminant killings, arbitrary arrests, and torture. Colonel Gadhafi and those around him must be held accountable for these acts which violate international legal obligations and common decency.

(END VIDEO CLIP)

MALVEAUX: Secretary Clinton plans a news conference in about 20 minutes. We're going to have live coverage of that.

And new turbulence on Libya's doorstep. That, in Tunisia. The country's prime minister quit after violent protests over the weekend. Democracy supporters claimed he was tainted by his long association with the regime that was overthrown last month.

And a third day of protests today in the Gulf kingdom of Oman. Demonstrators set a supermarket on fire and blocked roads. Protesters want government reforms, jobs and higher salaries. Oman's sultan ordered his government to immediately hire 50,000 people.

And the U.S. and South Korea launched military drills today. The annual joint exercises drew a blistering response from the North. North Korean state media put out nine separate statements vowing to engulf Seoul in a "sea of flames."

And school districts across Wisconsin are sending out layoff notices. Officials say that they have got to. The legislature has not passed what the governor calls his budget repair bill.

State workers say the governor is trying to bust their unions. They refused police orders to leave the capitol building last night.

And despite protests and absent lawmakers, Indiana Republicans will try to move forward this afternoon on a bill banning collective bargaining for many workers. That appears unlikely. Democrats are still camped out in Illinois, bringing the Indiana House to a standstill.

(BEGIN VIDEO CLIP)

SCOTT PELATH (D), INDIANA STATE HOUSE: I have never seen such a more committed group of people that believe it's so necessary to stop what they see as a very radical agenda that's transpiring here in Indianapolis. It's really much more expansive than what's happening in Wisconsin. Not only are they trying to dismantle public schools, they're also trying to do away with collective bargaining not in the public sector, but also in the private sector.

(END VIDEO CLIP)

MALVEAUX: President Obama, Vice President Biden and their wives are hosting governors from both parties at the White House this hour. Michelle Obama is speaking at the news conference right now, as you can see. The state leaders are in Washington for their winter meeting, and the governors' budget problems, well, you can bet, that's top of the agenda.

And the government shuts down at the end of the week unless Congress approves another temporary spending measure. Now, Democrats are suggesting they may go along with the Republican plan. It would fund the government for two more weeks, but cut $4 billion in spending.

And now to outer space. Yes, we even go there.

Two Discovery astronauts have just started their first of two spacewalks. Steve Bowen and Alvin Drew plan to be out there for about 6.5 hours today doing a bit of maintenance. You can see it there.

This is Shuttle Discovery's last visit to the International Space Station. It is being retired when it returns home. (BEGIN VIDEO CLIP, "THE KING'S SPEECH")

UNIDENTIFIED MALE: Jack and Jill --

UNIDENTIFIED MALE: Went up the hill.

UNIDENTIFIED MALE: Went up the hill. Little Tommy --

(END VIDEO CLIP, "THE KING'S SPEECH")

MALVEAUX: Hollywood has crowned "The King's Speech" the best picture at last night's Academy Awards ceremony. The picture also earned Colin Firth the best actor Oscar for his portrayal of King Edward VI. The film shows the British monarch's efforts to overcome stuttering.

A complete wrap on the Academy Awards coming live from Los Angeles.

And get tough on the opposition with weapons. That is what two U.S. senators say the Obama administration should do when it comes to Libya.

Which brings us to today's "Talk Back." Carol joins me right here in Atlanta.

Hey, Carol. Good to see you.

CAROL COSTELLO, CNN CORRESPONDENT: It's an interesting idea, isn't it?

MALVEAUX: And controversial.

COSTELLO: Controversial, to say the least. All of that.

It's kind of like the same old song. A cruel dictator clings to power, and President Obama is criticized for being slow to act.

He did say Libya's Moammar Gadhafi's must go, but it wasn't fast enough or strong enough, even though some say President Obama is treading carefully because there are still Americans in Libya.

That's not stopping Senators John McCain and Joe Lieberman though. Lieberman told CNN he understands why the Obama administration waited, but now we ought to provide the Libyan rebels with arms. McCain said the president should push for a no-fly zone over Libya so Libyan pilots cannot attack their own people.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: Get tough. And I understand that the security and safety of American citizens is our highest priority. It's not our only priority.

(END VIDEO CLIP)

COSTELLO: Both senators stopped short of saying U.S. troops ought to be used to help topple Gadhafi. Tough choice, because who really knows who is leading the opposition in Libya?

Former CIA officer Jamie Smith (ph) says there is no coherent alternative to the Gadhafi regime. Will they become our friends or turn on us like, say, Saddam Hussein, or the Afghan rebels, who morphed into what is now al Qaeda?

So, "Talk Back" today: Should the U.S. arm the Libyan rebels? Facebook.com/CarolCNN. And I'll read some of your comments later on in the hour.

MALVEAUX: The prospect of a power vacuum is so scary, but then to imagine folks with arms and you don't even know who is in charge.

COSTELLO: Exactly. And even this idea of the no-fly zone, who exactly would enforce it? How would it be enforced? And would it be ultimately effective? We just don't know the answers to those questions.

MALVEAUX: All right. Looking forward to what people have to say.

Thank you, Carol.

COSTELLO: Sure.

(NEWSBREAK)

(COMMERCIAL BREAK)

MALVEAUX: We are looking at live pictures now from our affiliate, WOIO. This is out of Cleveland, Ohio, and you are literally seeing some of these houses that are under water, massive flooding.

You see a basketball net there. It looks like it's several feet high. And just amazing pictures that we are getting from our affiliate now of the kinds of flooding that is taking place in this particular neighborhood.

You see that house that's to the right. It looks like it's almost completely under water. A lot of people paying very close attention to what is taking place out of Cleveland there as folks are trying to deal with all of that water.

Well, there's wacky weather right now.

(WEATHER REPORT)

MALVEAUX: Day 14 of the relentless uprising in Libya. A humanitarian crisis is developing along its borders. The U.N. High Commission for Refugees says that about 100,000 people have fled to Tunisia or Egypt. Thousands of them are gathered at the borders, many without food or water or shelter.

And the U.S. and other countries have evacuated now their own citizens. Two Americans who were ferried out to Malta spoke earlier on CNN.

(BEGIN VIDEO CLIP)

YUSRA TEKBALI, AMERICAN EVACUATED FROM LIBYA: I'm OK. I feel a little disoriented. I feel a lot safer being here in Malta. But at the same time, I almost feel guilty for being safe here. So a lot of mixed emotions going on with me.

SALAM TEKBALI, AMERICAN EVACUATED FROM LIBYA: We are happy to be safe, happy to be alive, but the situation on the ground in Libya and in Tripoli is definitely concerning to us. We're in constant contact with family, we're constantly watching the news, reading social networks, blogging, just trying to figure out what's going on and what we can do to help.

(END VIDEO CLIP)

MALVEAUX: The opposition appears to be closing in on Moammar Gadhafi.

Our senior international correspondent, Ben Wedeman, he's joining us by phone from an opposition-controlled area in eastern Libya.

Ben, tell us what it's like there now. Are they emboldened? Do they feel they have made some progress over the weekend?

BEN WEDEMAN, CNN SR. INTERNATIONAL CORRESPONDENT: They're feeling a bit frightened (ph) at the moment, Suzanne, because about two hours ago, we were in the area of Adabia (ph), which is about an hour and a half's drive to the west of Benghazi, when we heard an airplane overhead and then some very large explosions. It was a Libyan air force jet that dropped four or five bombs on a military base are that is now under the control of opposition forces. It's a base where there's a lot of ammunition and a lot of heavy explosives between tanks and armored personnel carriers.

Now, we arrived (INAUDIBLE). No one was killed or injured in these attacks, but it really has set nerves afire in this area where, what happened was, within minutes of the bombs going off, several trucks with anti-aircraft guns approached the area and started to fire wildly into the air. It starts to remind these people here that even though they ousted Moammar Gadhafi's forces in this part of the country, he's still able to reach here with his air force -- Suzanne.

MALVEAUX: Ben, thank you so much. I know we're having a bad connection, but I believe you were talking about the fact that Gadhafi's own military, actually dropping artillery on their own weapons so that the opposition would not be able to get to that kind of artillery and that weaponry.

Ben Wedeman, thank you. We appreciate it.

We're going to bring you a view from inside the Libyan capital in the next hour. Our senior international correspondent, Nic Robertson, he's going to be joining us live from Tripoli.

And uprisings in the Middle East are causing -- well, to some -- an uprising at the pump. We're going to take a look at just how high gas prices are getting and where you can go to fill up for less. (COMMERCIAL BREAK)

MALVEAUX: The Middle East is erupting in upheaval, and it's having an effect at the pump and the markets as well.

Our business news correspondent, Alison Kosik, she joins us from the New York Stock Exchange.

Alison, tell us what's going on in the markets today. How is this impacting the markets?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Hi, Suzanne.

Right now, actually, we are seeing a rebound after the big drop that we saw last week because of what's going on in Libya. We watched the major averages fall about two percent. Oil hit about $100 a barrel, and analysts say we could actually see the market keep rising only if the geopolitical situation doesn't get any worse. But, Suzanne, that is a big "if" -- Suzanne.

MALVEAUX: A big "if," I know.

And what about oil? It hit $100 a barrel last week. We're certainly feeling it at the gas pump. Do you think Wall Street is as concerned about it as we are?

KOSIK: You know what? I think Wall Street is really concerned, Suzanne, about these higher oil prices because they can eat into consumer spending.

What that does is translate into higher gas prices. And if consumers are spending more money on gas, that means they could be spending less money on other things. It could hurt the overall recovery.

Now, not many big red flags are going up just yet because oil prices are easing a bit today. They're hanging out around $97 a barrel.

But if you look at the overall situation, at this chart here, oil prices are still really high. This is where we have been in just 30 days, up eight percent for oil prices.

You know, the St. Louis Fed president came out today saying right now, these high oil prices aren't a big drag on the economy. But if these prices stay high for a sustained period, then it could become a big spending issue and could hurt the overall economic recovery -- Suzanne.

MALVEAUX: Alison, thank you.

So, just how high is the price of gas going to go? Well, the national average for a gallon of regular is up for the sixth consecutive day. So we're talking $3.37.

After Hawaii, California is getting hit the hardest, with $3.76 a gallon. The whole country right now is over the $3 mark.

So where is the cheapest gas in your neighborhood? That's the question. There's a couple of good Web sites to help you find out.

Well, you can check out gasbuddy.com, fuelmeup.com, and automotive.com before your next fill-up.

And it's now your chance to "Choose the News." We're going to tell you about three stories. You know how it works. You vote text message for the one that you want to see in detail in the next hour, and we will give it to you.

First up, the debut of Seattle's first-ever farmer's market for marijuana. Yes, that's right, marijuana. It's not exactly legal. Not everyone can get in. Hear why so many are taking the risk.

Here's your second choice. Thousands of foreign workers are stranded at a Libyan port, and they're waiting for their home countries to get them out. But food is running very short.

And our third choice, a CNN reporter spends a day in the life of Princess-to-be Kate Middleton. From her London Fog jog, to her facial treatment, to the shop that that carries her now famous blue dress.

And we're going to take you real quick here directly to President Obama, who is speaking before the governors in Washington at the White House.

(JOINED IN PROGRESS)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: -- already making Americans' paychecks bigger and are allowing businesses to write off major investments. These are tax cuts and changes in the tax credit system that are going to spur job creation and economic growth, and I'm proud that Democrats and Republicans worked with each other to get it done.

In the long term, however, we need to address a set of economic challenges that, frankly, the housing bubble largely papered over for almost a decade. We now live in a world that's more connected and more competitive than ever before.

When each of you tries to bring new jobs and industries to your state, you're not just competing with each other, but you're competing with China, you're competing with India, you're competing with Brazil, you're competing with countries all around the world. And that means that we as a nation need to make sure that we are the best place on earth to do business.

We need a skilled and educated workforce, a commitment to cutting-edge research and technology, and a fast and reliable transportation communications network. That's how we're going to bring new jobs to America and that's how we're going to win the future.

Now, making these necessary investments would be hard at any time, but it's that much harder at a time when resources are scarce. After living through a decade of deficits and a historic recession that made them worse, we can't afford to kick the can down the road any longer. So the budget debate that we're having is going to be critical here in Washington. And so far, most of it's been focused almost entirely on how much of annual domestic spending, what in the parlance we call domestic discretionary spending, that we should cut. And there's no doubt that cuts in discretionary spending have to be a part of the answer for deficit reduction.

And that's why as a start, I've proposed a five-year spending freeze that will reduce our deficits by $400 billion. The budget that I sent to Congress cuts or eliminates more than 200 federal programs, and it reforms dozens of others from health care to homeland security to education, so that rather than throwing money at programs with no accountability or measured results, we are committed to funding only those things that work.

All told, the budget cuts I proposed will bring annual domestic spending to its lowest share of the economy since Dwight Eisenhower. Let me repeat that. Under my budget, if it were to be adopted, domestic discretionary spending would be lower as a percentage of GDP than it was under the nine previous administrations, including Ronald Reagan's.

But we know that this kind of spending, domestic discretionary spending, which has been the focus of complaints about out-of-control federal spending, makes up only about 12 percent of the entire budget. If we truly want to get our deficit under control, then we're going to have to cut excessive spending wherever it exists -- in defense spending -- and I have to say that Bob Gates has been as good a steward of taxpayer dollars when it comes to the Pentagon as just about anybody out there, but we're going to have to do more-- in health care spending, on programs like Medicare and Medicaid, and in spending through tax breaks and loopholes.

Now, that's going to be a tough conversation to have, but it's one we need to have, and it's one I expect to have with congressional leaders in the weeks to come.

Those of you who are in this room obviously are on the front lines of this budget debate. As the Recovery Act funds that saw through many states over the last two years are phasing out -- and it is undeniable that the Recovery Act helped every single state represented in this room manage your budgets, whether you admit it or not -- you face some very tough choices at this point on everything from schools to prisons to pensions.

I also know that many of you are making decisions regarding your public workforces, and I know how difficult that can be. I recently froze the salaries of federal employees for two years. It wasn't something that I wanted to do, but I did it because of the very tough fiscal situation that we're in.

So I believe that everybody should be prepared to give up something in order to solve our budget challenges, and I think most public servants agree with that. Democrats and Republicans agree with that. In fact, many public employees in your respective states have already agrees to cuts. But let me also say this -- I don't think it does anybody any good when public employees are denigrated or vilified, or their rights are infringed upon. We need to attract the best and the brightest to public service. These times demand it.

We're not going to attract the best teachers for our kids, for example, if they only make a fraction of what other professionals make. We're not going to convince the bravest Americans to put their lives on the line as police officers or firefighters if we don't properly reward that bravery.

So, yes, we need a conversation about pensions and Medicare and Medicaid and other promises that we've made as a nation. And those will be tough conversations but necessary conversations.

As we make these decisions about our budget going forward, though, I believe that everyone should be at the table and that the concept of shared sacrifice should prevail. If all of the pain's born by only one group, whether it's workers or seniors, or the poor while the wealthiest among us get to keep or get more tax breaks, we're not doing the right thing. I think that's something that Democrats and Republicans should be able to agree on.

Now, as we begin to get our budgets under control, the other thing we can't do is sacrifice our future. Even as we cut back on those things that don't add to growth or opportunity for our people, we have to keep investing in those things that are absolutely necessary to America's success -- education, innovation, infrastructure.

On education, our approach has been to partner with you, to offer more flexibility in exchange for better standards, to lift the cap on charter schools, to spur reform -- not by imposing it from Washington but by asking you to come up with some of the best ways for your states to succeed. That was the idea behind Race to the Top. You show us the best plans for reform, we'll show you the money.

We're also working with you and Congress to fix no child left behind with a focus on reform, responsibility, and most importantly results. And we're trying to give states and schools more flexibility to reward good teachers and stop making excuses for bad teachers because we know that the single-most important factor in a child's success other than their parents is the man or woman at the front of the classroom.

And I had a chance to see this recently. I went over to Parkville Middle School in Maryland, where engineering is now the most popular subject, mainly, thanks to some outstanding teachers who have inspired students to focus on their math and their science skills. So we know teachers can make a difference and we want to help you have the very best teachers in the classroom.

We also have to invest in innovation, in American research and technology, in the work of our scientists and engineers, and in sparking the creativity and imagination of our people. A lot of this obviously, is done in the private sector. But as much as the private sector is the principle driver in innovation, it's often hesitant to invest in the unknown, especially when it comes to basic research. Historically, that's been a federal responsibility. It's how we ended up with things like the computer chip and the GPS. That's how we ended up with the internet. It's also how a lot of your states are already attracting jobs and industries of the future.

I went to Wisconsin, for example, a few weeks ago and I visited a small company called Orion that's putting hundreds of people to work manufacturing energy efficient lights in a once darkened plant. They benefitted from federal research. In Ohio and Pennsylvania, thanks in part to federal grants, I saw universities and businesses joining together to make America a world leader in biotechnology and in clean energy.

And if you have any doubt about the importance of this federal investment in research and development, I would suggest that you talk to the cutting-edge businesses in your own state. They will tell you that if we want the next big breakthrough, the next big industry to be an American breakthrough, an American industry, then we can't sacrifice these investments in research and technology.

Now, the third way that we need to invest in is our infrastructure, everything from new roads and bridges to high speed rail and high speed internet, projects that create hundreds of thousands of private sector jobs. And I know that in some of your states, infrastructure projects have garnered controversy. Sometimes they've gotten caught up in partisan politics. This hasn't traditionally been a partisan issue.

Lincoln laid the rails during the course of the Civil War. Eisenhower built the interstate highway system. Both parties have always believed that America should have the best of everything. We don't have third rate airports and third rate bridges and third rate highways. That's not who we are. We shouldn't start going down that path.

New companies are going to seek out the fastest most reliable ways to move people, goods or information, whether they're in Chicago or they're in Shanghai, and I want them to be here in the United States.

So to those who say that we can't afford to make investments in infrastructure, I say we can't afford not to make investments in infrastructure. We've always have had the best infrastructure. The notion that somehow we'd give up that leadership at this critical juncture in our history makes no sense.

Just ask folks that I met up in Marquette, Michigan. I was talking to Rick Schneider (ph) up in the Upper Peninsula. This is a town of 20,000 people far away from the hustle and bustle of places like Detroit or Grand Rapids. But because of the wireless infrastructure that they have set up, they've now got the local department store, third generation family-owned department store has been able to hook up with the university and have access to wireless. And they are now selling two-thirds of their goods online. They're one of the 5,000 fastest-growing companies in America, up in the Upper Peninsula because the infrastructure was in place to allow them to succeed. You've got kids in school houses in even more remote areas were able to plug into lectures and science fairs anywhere in America because of the infrastructure that was set up. That's a smart investment for every state to make and the federal government wants to be your partner in making those investments.

These are the kinds of investments that pay huge economic dividends in terms of jobs and growth. They are the fundamentals that allow some states to weather economic storms better than others. They're the fundamentals that will make some states better positioned to win the future than others. These investments are not just critical for your state's success, they're critical for America's success, and I want to be a partner in helping you make that happen.

Which brings me to the final topic that's going to help determine our ability to win the future and that's getting control of our health care costs. Now, I am aware that I have not convinced everybody here to be a member of the Affordable Care Act fan club, but surely we can agree that for decades our governments, our families, our businesses watched as health care costs ate up more and more of their bottom line.

There's no disputing that. That didn't just happen last year. It didn't just happen two years ago. It's been going on for years now. We also know that the biggest driver of the federal debt is Medicare costs. Nothing else comes close. We could implement every cut that the House of Representatives right now has proposed, and it would not make a dent in our long-term budget. Wouldn't make a dent in our long-term deficits because of health care costs.

We know it's one of the biggest strains in your state budgets. Medicaid. And for years, politicians in both parties promised one thing -- real reform. Everybody talked about it. Well, we decided to finally do something about it. To create a structure that would preserve our system of private health insurance, would protect our consumers from the worst abuses of insurance companies, would create competition and lower costs by putting in place new exchanges run by the states where Americans could pull together to increase her purchases power and select from various plans to choose what's best for them, the same way that members of Congress do, the same way that those who are lucky enough to work for big employers do.

And the fact is that the Affordable Care Act has done more to rein in rising costs, make sure everyone can buy insurance, and attack the federal deficit than we've seen in years. And that's just not my opinion, that's the opinion of the Congressional Budget Office, nonpartisan, the same one that puts out numbers that when it's hands to go after me people trot out and say, boy, look at these numbers.

So they're saying we're saving one trillion bucks because of this Act, on our health care costs. Otherwise we'd be $1 trillion more in the red. That's something that we should build on, not break down. That doesn't mean that the job of health care reform is complete. We still have to implement the law and we have to implement it in a smart and non-bureaucratic way. I know that many of you have asked for flexibility for your states under this law. In fact, I agree with Mitt Romney, who recently said he's proud of what he accomplished on health care in Massachusetts and supports giving states the power to determine their own health care solutions. He's right. Alabama's not going to have exactly the same needs as Massachusetts or California or North Dakota. We believe in that flexibility.

So right now under the law, under the Affordable Care Act, Massachusetts and Utah already operate exchanges of their own that are very different. Operate them in their own way and we made sure that the law allowed that. The same applies for other requests, like choosing benefit rules that meet the needs of your citizens, or allowing for consumer-driven plans and health savings accounts.

This recognition that states need flexibility to tailor their approach to their unique needs is why part of the law says that beginning in 2017, if you can come up with a better system for your state, to provide coverage of the same quality and affordability as the Affordable Care Act, you can take route instead. That portion of law has not been remarked on much. It says by 2017, if you have a better way of doing it, help yourself, go ahead, take that route.

(VIDEO GAP)

(END COVERAGE)

MALVEAUX: We just lost the picture there. We are getting some guidance from our Dan Lothian at the White House, what the president was about to say, and he is talking about accelerating a program to allow states' governors to apply for waivers. He was talking about 2017, if the governors have a better idea of providing affordable health care to their citizens, they can apply for waivers to do so under the health care legislation that was passed, the controversial legislation. The president, we are being told, is going to accelerate that timetable, allow those governors as early as 2014 to apply for those waivers.

Let's take a listen.

(RESUME COVERAGE)

OBAMA: If your state can create a plan that covers as many people as affordably and comprehensively as the Affordable Care Act does, without increasing the deficit, you can implement that plan and we'll work with you to do it.

I've said before I don't believe that any single party has a monopoly on good ideas and I will go to bat for whatever works no matter who or where it comes from.

I also share your concern about Medicaid costs. I know this has been a topic of significant conversation over the last couple of days. We know that over half of all Medicaid costs come from just five percent of the enrollees. Many of whom are what's called dual eligibles, seniors in Medicare, as well as in Medicaid. The Affordable Care Act helps to address this by changing the incentives for providers so that they start adopting best practices that will work to help reduce costs while improving quality. But we understand the pressure you're under. We understanding that we've got to do more.

So, today -- and I mentioned this to Christine last night -- I'm asking you to name a bipartisan group of governors to work with Secretary Sebelius on ways to lower costs and improve the quality of care for these Americans. And if you can come up with more ways to reduce Medicaid costs while still providing quality care to those who need it, I will support those proposals as well.

So here's the bottom line. Once fully implemented, I'm convinced the Affordable Care Act will do what it was designed to do -- cut costs, cover everybody and the worst abuses in the insurance industry and bring down our long-term deficits.

I am not open to refighting the battles of the last two years or undoing the progress that we've made. But I am willing to work with anyone, anybody in this room, Democrat or Republican, governors or members of Congress, to make this law even better, to make care even better, to make it more affordable, and fix what needs fixing.

You see, part of the genius of our founders was the establishment of a federal system in which each of our states serves as a laboratory for our democracy. And through this process, some of the best state ideas became some of America's best ideas.

So whether it's through Race to the Top, or improving the Affordable Care Act, or reforming the way we approach social programs by ensuring that spending is sighed to success, our approach has been to give you the flexibility that you need to find your own innovative ways forward.

In fact, this week I'm issuing a presidential memorandum that instructs all government agencies to follow this flexible approach wherever the law allows. Even as we pursue the freedom and diversity that is at the heart of federalism, let's remember that we are one nation, we are one people.

(END COVERAGE)

MALVEAUX: President Obama appealing to both Democratic and Republican governors there at the State Dining Room at the White House saying that he is willing and flexible to listen to ideas coming from both sides, from both parties, when it comes to providing health care, affordable health care.

Also making a bit of news in his announcement when he says he is accelerating the timetable allowing states, those governors to apply for waivers to come up with their own plans in providing affordable health care.

Well, on to another story. The army is investigating allegations involving military mind games. We're going to talk with an officer who says he was ordered to manipulate American lawmakers visiting Afghanistan.

(COMMERCIAL BREAK)

MALVEAUX: Well, it's a disturbing allegation. The claim by a military officer that he was ordered to use mind games, known as psychological operations to manipulate U.S. lawmakers. The Pentagon is investigating the allegation by Lieutenant Colonel Michael Holmes. And we're going to talk with Holmes in just a minute. He says he was told to use the tactic on lawmakers visiting Afghanistan.

Our Pentagon correspondent Chris Lawrence has done some digging into this story

And, Chris, bring our viewers up to speed.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: First off, Suzanne, let's really get clear exactly what we're talking about here.

Lieutenant Colonel Michael Holmes is involved in what's called in the Military called, information operations. The key difference between that and just being, say, a spokesman or public affairs officer is that he's not required to tell the truth. In other words, he can use deception and things like that to get the enemy, so to speak, to behave in a certain way.

That's the distinction, and what Lieutenant Colonel Michael Holmes is saying is that under that job, it's an illegal order for the Military to ask him to sort of come up with information and prepare briefs on some of the visiting American senators, that someone in his job should not be doing that.

Who were some of the people who were targeted by this, so to speak? Senator John McCain, Senator Carl Levin, a lot of the very important senators. On their front a lot of them are saying they're not sure why they were even included on this list because they're already big backers of the war.

Senator Levin put out a statement saying nobody had to necessarily convince me to send more money to train more Afghan troops or to try to increase that force. I've always been behind that.

And then Lieutenant General William Caldwell, the man who was in charge of this --

MALVEAUX: Right.

LAWRENCE: -- and who Holmes sort of accuses of giving this order, he is categorically denying this and says that he was not giving Holmes an illegal order.

MALVEAUX: All right. Chris, we're going to get back to you.

I want to bring in the man at the center of the story Army Lieutenant Colonel Michael Holmes. He's in Tucson, Arizona.

First of all, Colonel, I want to thank you for joining us. There are a lot of allegations here that are flying back and forth from both sides. But we have few specifics and we would like for you to help us with that, provide some specifics on this.

The Military denies that you were ordered to try and manipulate visiting lawmakers in Afghanistan using psychological operations. And here's the statement that they put out.

This is Lieutenant Colonel Shawn Stroud who says, "I categorically deny the assertion that the NATO training mission in Afghanistan used an information operations cell to influence distinguished visitors. The evidence provided in the 'Rolling Stone' article is misleading at best, outright false in many places."

Colonel, do you stand by your allegations today?

LT. COL. MICHAEL HOLMES, U.S. ARMY: I do and I stand by the "Rolling Stone" article and I stand by the "St. Pete Times" article that Bill Lobeck (ph) wrote a day later. Those are the only two written articles that I've seen that actually have the data or were based on the data that I provided to Chris over the weekend.

MALVEAUX: Now, you say that -- I'm sorry -- you say the top brass ordered you to gather information in a way that was over the line.

How so? How is this illegal?

HOLMES: It's not gathering information and it's not preparing briefs. And it's not doing the daily staff work that makes any headquarters run. We did that. We did that completely legally and within the bounds of what is ethically right and proper from December through March of 2010 last year. It was on the 22nd of March when we received a written order that I thought was over the line because --

MALVEAUX: Specifically what did they ask you to do?

HOLMES: Well, it went from just gathering information on and presenting just normal facts and data from the command, to actually then looking at what the -- these distinguished visitors and think tanks were going to do or had done once they left us. And saying what effect we had on them, what they had taken away, and then further what it was we could do to provide to them to get them to see things the way the command wanted them to see them and whether that was the think tank writing papers on what we were doing or whether it was a senator or congressional delegation voting the way that we wanted them to vote.

MALVEAUX: So you're saying beyond just collecting homework on these visiting senators and presenting position papers, things that were in the public domain, they specifically asked you to follow up on the impact of whatever kinds of information that these conversations generated?

HOLMES: Yes. And I took that order. First I said I can't do this. It's illegal. And they said, well do it. And so I took the order to the command's own J.A.G. officer. It's been falsely reported that I took it to an attorney in Texas. I never spoke to an attorney in Texas. I took it right next door to Captain John Scott, who was the J.A.G. officer for the command, and he was the J.A.G. officer that I was referred to by the command lawyer saying he's a specialist in this area.

MALVEAUX: Were you ever asked for any kind of --

HOLMES: A few days later --

MALVEAUX: -- manipulative type of activities? Were you asked to lie, to deceive, to give misinformation? Or was it simply to collect information and to report back to your superiors?

HOLMES: In that particular order on the 22nd of March, we were asked to analyze the information, what the impact had been on those distinguished visitors and then provide an assessment of what we could do moving forward.

And again, honestly, it doesn't really matter what I thought was legal or illegal or what the command thought was legal or illegal. What matters is that on the 27th of March. Captain Scott came back with an opinion that said, this isn't proper. Don't do this. It's against doctrine. It's against law and we shouldn't be doing these things.

MALVEAUX: But according to the Military, if I can interrupt, according to the Military, they looked at what you are saying, they investigated it and they said in order to collect, analyze, and share publicly available information about distinguished visitors is a lawful order. This would not be considered intelligence activity.

HOLMES: That's two days later after Captain Scott's opinion that came to me and the order was, quote-unquote, "clarified." And we took out the parts to actually report back on the impact and report -- and to assess and analyze what to do forward. And we did carry that out. And we carried that out for several weeks.

But the thing that's really frustrating about this is we got this order, their own lawyer said it was illegal. It was later clarified and we took out the parts that were deemed to be illegal and then 10 days after that the command launches an investigation against us and then, furthermore, the command has now also launched an investigation against Captain Scott.

MALVEAUX: So that do you feel you're being targeted at this point? Where do you take this from now?

HOLMES: Absolutely. And I think that's the thing that we need to talk about.

The command did not end up doing anything illegal because we did not let them. We were the ones who blew the whistle and pulled the flag on that. And then they investigated us and went after us and threw a bunch of allegations that are circling the internet now that weren't even in their final conclusion by the way.

And they've gone after Captain Scott and they're investigating him and I don't know, I don't know what the details are on that. What's even more, the team that came in behind us, Lieutenant Colonel Tim Kirk and Captain Felicia Dirude (ph) have four investigations that the command launched --

MALVEAUX: Colonel, we're going to have to wrap it there, leave it there. Obviously General Petraeus is investigating what took place, what has happened here. And, clearly, you stand by your story so we'll continue to follow it.

Thank you so much for joining us.

HOLMES: Thank you, ma'am.

MALVEAUX: And we'll have more after this break.

(COMMERCIAL BREAK)

MALVEAUX: I want to go to Hollywood, where the stars were out for the Academy Awards. Entertainment correspondent Kareen Wynter takes a look at some of the big winners.

(BEGIN VIDEOTAPE)

STEVEN SPIELBERG, PRESENTER: And the Oscar goes to "The King's Speech."

KAREEN WYNTER, CNN CORRESPONDENT (voice-over): "The King's Speech" reigned supreme at the Oscars and conquered the night's top prize.

HELENA BONHAM CARTER, ACTRESS: My husband has mechanical difficulties with his speech.

WYNTER: The small-budget movie about King George VI royal battle to overcome a speech impediment grew into an inspiring success. Academy voters crowned the film's star Colin Firth best actor.

COLIN FIRTH, BEST ACTOR: I have a feeling my career's just peaked.

WYNTER: Gold prize in hand, first play the part of a very humble Oscar king.

The evening's hosts, James Franco and Anne Hathaway served as court jesters, poking fun at Hollywood hits and themselves.

ANNE HATHAWAY, HOST: The dance of the brown duck.

WYNTER: Hathaway and Franco are the youngest hosts in Oscar history brought in with the hope of attracting a more youthful Oscar audience.

FRANCO: Anne, I must say you look so beautiful and so hip.

HATHAWAY: Oh, thank you, James.

FRANCO: Yes.

HATHAWAY: You look very appealing to a younger demographic, as well.

FRANCO: Thank you. Thank you very much.

WYNTER: From comical moments to sentimental. Natalie Portman took home the Best Actress Oscar for her performance as a ballerina breaking down in "Black Swan." The mother to be teared up during her emotional acceptance speech.

NATALIE PORTMAN, BEST ACTRESS: My beautiful love, Benjamin Millepied, who choreographed the film and has now given me my most important role of my life.

WYNTER: From sweet to salty. Best Supporting Actress winner Melissa Leo honored for her work as a tough-talking Boston mother in "The Fighter" dropped an accidental "F" bomb under the stress of the spotlight.

MELISSA LEO, BEST SUPPORTING ACTRESS: When I watched Kate two years ago, it looks so -

WYNTER: Leo's "Fighter" co-star Christian Bale had an easier time getting through his acceptance speech for Best Supporting Actor with less colorful language.

CHRISTIAN BALE, BEST SUPPORTING ACTOR: Well, a room full of talented and inspirational people, and what the hell am I doing here?

WYNTER: Hollywood royalty celebrating a golden night.

Kareen Wynter, CNN, Hollywood.

(END VIDEOTAPE)