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Terrorist Attacks in India; New York City on Alert; Changes in Status of Prisoners in War on Terror; Deficit Falls; Court Rules Search of Congressman Jefferson's Office Legal

Aired July 11, 2006 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: Thanks Susan, and to our viewers, you are in THE SITUATION ROOM where new pictures and information are arriving all the time. Standing by CNN reporters across the United States and around the world to bring you today's top stories. Happening now, terror abroad prompts a security alert on New York City subways. It's 1:30 Wednesday morning in India where bombs ripped through crowded commuter trains at rush hour. We'll have live reports on the deadly blasts there and on the fear right here in the United States as a result.
Also this hour, new marching orders for the U.S. military and the treatment of prisoners at Guantanamo Bay. It's 4:00 p.m. here in Washington where the White House is now responding to a defeat in the U.S. Supreme Court and laying groundwork for action by Congress.

And is a political war brewing between President Bush and Ronald Reagan's widow Nancy? It all stems from the battle over embryonic stem cell research. We will tell you what's new today in this life and death debate. I'm Wolf Blitzer. You are in THE SITUATION ROOM.

We begin with a bloody new reminder that commuter transit systems are prime and vulnerable targets of terrorists. Last year it was in London. The year before Madrid and today at least 145 people were killed in a series of bombing on commuter trains and stations in the Indian financial capital of Mumbai, formerly known as Bombay.

Right now in New York City police are beefing up subway security for the evening rush hour in response to the terror in India. Our Mary Snow is standing by for a live report from New York but let's go to Alex Perry of our sister publication, "Time Magazine." He's joining us on the phone now from Mumbai. Alex?


BLITZER: Give us a sense of what happened today and what's happening right now.

PERRY: Well, at about just before 6:30, the first bomb exploded on a crowded commuter train in Bombay. And within 11 minutes there were seven more, all exploded, all on the same line, on the western railway line, which is an incredibly crowded commuter route for Bombay. About 6.5 million people take that line every day. So it was timed for maximum effect and maximum carnage. So far close to 150 people have been confirmed dead and somewhere between 250 and 400 injured. BLITZER: This seemed to be a sophisticated attack Alex. Has anyone claimed responsibility, yet?

PERRY: Nobody said they carried it out but all fingers point at a sort of loose Jihadi alliance between Pakistan based militant groups, particularly one called the Lascoratoyba (ph) that sits in Kashmir and also has carried out a number of bombings for many years across India, and home-grown Muslim radicals in India. India has the world's second largest Muslim population of 150 million and there is a group in particular called Simi (ph) which is a radical student group that have worked in collusion with the LET for a number of years. In fact, Bombay once before, in 2003, had nine bombing in all in which they killed nearly 60 people.

BLITZER: But Alex it seems like the motus operandi in this particular series of attacks, very similar to what happened in London last year, the simultaneity of the attacks and in Madrid the year before. Is there a sense in India right now that these could be al Qaeda copycats or sympathizers?

PERRY: Well, India for years has been saying look, we are victims of this same terror, too, and the international community has largely discounted that, and has seen it more as a local conflict between India and Pakistan. I think this will certainly bolster India's case. Not the least because the L.E.T., the Pakistani group definitely has links with al Qaeda.

BLITZER: Alex Perry from our sister publication "Time Magazine," on the scene for us. Alex, thanks very much. The attacks in India are being felt right now in New York City. Hundreds of extra police officers are being positioned in the subways and random bag searches are being stepped up. Let's go to New York. Mary Snow has our "Security Watch." What's the latest Mary.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf because the bombings did happen during evening rush hour. The city's police commissioner, Ray Kelly saying that he's he's taking these steps out of an abundance of caution for the 4.5 million people who ride the city's transit system every day. What the city is doing is doubling its number of random bag searches. Hundreds of extra police officers will be on the subways during the evening rush hour. Also explosive detection units are going to be used, sweeps by police officers. And we are also hearing from Atlanta that it too is going to be adding extra security. Also, once again, saying there are no specific threats, this is just being done out of precautionary measures, and in Los Angeles some officers are being redeployed to busier sites. We will have more the next hour. Wolf?

BLITZER: Is there a sense this is simply being done in New York in an abundance of precaution or is there any intelligence that New York City police department, other authorities are picking up that New York presumably could be a target.

SNOW: Wolf the police commissioner and the mayor have repeatedly stressed throughout the afternoon that there's no specific information that New York is a target. They say that they are doing this because they want to take extra precautions.

BLITZER: Alright, Mary, I know you will stay on top of the story. We will get back to you soon. Thank you very much. And to our viewers, stay tuned to CNN day and night for the most reliable news about your security.

Lots more on this important story coming up right here in THE SITUATION ROOM.

But we will shift now to the Bush administration's policy on Guantanamo Bay prisoners. A new memo says all detainees in U.S. military custody are, in fact, now entitled to the protections laid out in the Geneva Conventions. This comes on the heels of the Supreme Court decision blocking the president's plans for military tribunals. Now Congress is beginning a politically charged debate on how detainees should be treated and tried. Let's bring in our congressional correspondent Andrea Koppel, Andrea.

ANDREA KOPPEL, CNN CONGRESSIONAL CORRESPONDENT: Wolf that's right. Today the Senate Judiciary Committee opened the first of several hearings that will happen this week, both in the Senate and the House, to try to decide what kind of legislation might be needed, might be necessary to alloy the Bush administration to move forward with giving hundreds of detainees in Guantanamo and elsewhere their day in court.


SEN. ARLEN SPECTER (R), SENATE JUDICIARY COMM.: We're not going to leave it to the Department of Defense or give the Department of Defense a blank check. We will establish the standards and the policy, but we want your input before we do it.

KOPPEL (voice-over): The chairman of the judiciary committee laid out a marker telling two government witnesses it will be up to Congress, not the Bush administration, to lay down the law. At issue, how the Pentagon should try suspected terrorists captured overseas. Vermont Democrat Patrick Leahy argued after four and a half years, existing military tribunals have yet to try or convict a single Guantanamo detainee and were in his words fatally flawed.

SEN. PATRICK LEAHY (D), VERMONT: I find it hard to fathom that this administration is so incompetent that it needs kangaroo court procedures to convince a tribunal of United States military officers that worst of the worst prisoners in Guantanamo Bay should be held accountable.

KOPPEL: A top Pentagon attorney defended the use of military commissions over the options of a military court-martial.

DANIEL DELL'ORTO, DEFENSE DEPT. LAWYER: Full application of court-martial rules would force the government either to drop prosecutions, or to disclose intelligence information to our enemies in such a way as to compromise ongoing or future military operations, the identity of intelligence sources and the lives of many.

KOPPEL: But Wisconsin Democrat Russ Feingold sounded unconvinced.

SEN. RUSS FEINGOLD (D), WISCONSIN: Unfortunately we have already heard some members of Congress argue that Congress should simply authorizes the president's existing military commission structure. I think that would be a grave mistake.

KOPPEL (on camera): And there's evidence that this matter is spilling over into other issues here on the hill today. The Senate Judiciary Committee also held a hearing on the nomination of William J. Haines, President Bush's nominee to go to the fourth district court. We have heard from Chuck Schumer, Democrat of New York, that this nomination is in deep trouble Wolf because of his current job as the Pentagon's top counsel on issues that had to do with detainees. In fact, he was instrumental in writing some of the policies on how prisoners could be treated.


BLITZER: Major shift coming in today from the Pentagon on the Geneva Conventions. Thanks very much, Andrea for that. Let's go back to New York. Jack Cafferty is standing by with the "Cafferty File," Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Wolf it was another horrible day in Iraq. Attacks near the green zone in Baghdad killed between 5- 16 people, 10 others died carrying a body to Najaf for burial. An Iraqi diplomat was kidnapped in Baghdad. The U.S. military is condemning a video posted on Islamic websites that claims to show the bodies of two U.S. soldiers kidnapped, killed and mutilated last month in Iraq. And this all comes as the House holds a hearing to evaluate the Bush administration's national strategy for victory in Iraq. Meanwhile a recent Gallop poll found that about two out of three Americans want a U.S. withdrawal from Iraq and 31 percent want it to start immediately.

Here's the question: at what point can the U.S. claim victory in Iraq? E-mail your thoughts to or go to Just horrible over there today, Wolf, 10 people killed while carrying a body for burial in Najaf. I mean, that's an ugly place.

BLITZER: It's been horrible now for several days. In fact, I guess you could go on and say for several weeks. Some people suggesting, Jack, they're teetering on the brink of civil war.

CAFFERTY: Yes, that's come up again. The sectarian violence certainly isn't going down, it's getting worse it seems.

CAFFERTY: We're going to speak in the next -- a couple of days with Zalmay Khalilzad, the U.S. ambassador in Iraq. He's back in Washington. That will be coming up on Thursday here in THE SITUATION ROOM. Jack, thank you very much.

And coming up, is President Bush looking at the economy through rose-colored glasses? We're going to tell you why he's upbeat today and why his critics are not. And I'll ask the White House budget director Rob Portman about the nation's overall financial debt, which is increasing and increasing.

Plus, will push come to shove over embryonic stem cell research? We'll take a closer look at the latest political wrangling, including a presidential veto threat that puts Mr. Bush at odds with Republican royalty.

And Condoleezza Rice's fans still won't take no for an answer. We'll catch up with the die-hard campaign to try to get the secretary of state to run for the White House. Stay with us, you're in THE SITUATION ROOM.


BLITZER: Welcome back. Let's turn now to America's economic security. President Bush today is celebrating a revised forecast for this year's budget deficit that's $127 billion smaller than he previously estimated. But critics say the government still is awash in red ink and that's leaving a huge mark on the middle class in the United States. Let's check in with our White House correspondent Ed Henry -- Ed?

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Wolf, the president touting good news. Democrats saying it's not good enough. All this kicking off an election year showdown over the president's economic record.


HENRY (voice-over): The president's tone was, "I told you so," reminding Democrats he predicted cutting taxes would spark economic growth and end up slashing the deficit.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: You know, some in Washington say we had to choose between cutting taxes and cutting the deficit. Today's numbers show that that was a false choose. The economic growth fueled by tax relief has helped send our tax revenues soaring. That's what's happened.

HENRY: But the president's celebration reminded some budget experts of another moment in his presidency when the champagne may have been popped a little early.

STAN COLLENDER, BUDGET EXPERT: This is the budget equivalent of the president landing on an aircraft carrier and declaring mission accomplished. They're taking a lot of good news, short term, without really thinking the long term or asking anybody to think past today.

HENRY: It's still the fourth largest deficit in American history, $296 billion this year, forcing the president to get a little creative.

BUSH: We are cutting the federal deficit faster than we expected.

HENRY: That's only because the administration itself had set expectations by projecting the annual deficit would be $423 billion. And what the president didn't mention is the overall national debt has soared by $3 trillion since he took office, a sharp reversal from the Clinton years that Democrats are eagerly pointing out.

SEN. HARRY REID (D-NV), MINORITY LEADER: We brought down the national debt by about a half a trillion dollars. So please, let's not boast about a $300 billion deficit.

HENRY: What neither party wants to talk about is that a collective failure to rein in federal spending has left the nation with a bleak long-term outlook.

COLLENDER: There's a fiscal train wreck about 15 years from now. That is, as Social Security starts to run a deficit as opposed to the current surplus it has, and as baby boomers retire and the cost of Medicare get much, much bigger.


HENRY: The president did try to tackle Social Security reform, but it hit a brick wall of opposition, mostly from Democrats, but from some Republicans, as well. He's not likely to stake anymore political capital in that battle. That means it's very likely that this problem is going to get kicked to another administration and another Congress, Wolf?

BLITZER: Ed Henry reporting for us at the White House -- Ed, thanks very much.

For most of us, it's tough to fully comprehend the idea of nearly $300 billion or what a deficit of that size actually means for the nation. CNN's Andy Serwer tries to put it into perspective. Andy?

ANDY SERWER, CNN CORRESPONDENT: Wolf, the president today pointed out that the budget deficit projection had been reduced by $100 billion to around $300 billion. It's a big number, but what does it really mean and is it too large?

Well one way to think about it is that the federal government is much like a family, or a homeowner as the president himself pointed out. So let's say that a family has a $250,000 mortgage. Now, is that too big? It depends on the family's circumstances. If the homeowner has a $20,000 a year salary and no assets in the bank, a $250,000 mortgage is very large. On the other hand if this homeowner had, say, $80,000 of assets and makes $100,000 a year, a $250,000 mortgage is not that much.

So going back to the $300 billion deficit that the president spoke about. He talked about it relative to the size of the overall economy, being only about two percent of the overall economy. Historically, that's not large. On the other hand, the president himself says we need to reduce the budget deficit and members of his own party say the same thing.

So maybe not too big, especially during war time, but certainly something that the president and members of his own party as well as Democrats would like to reduce. Wolf? BLITZER: Andy Serwer, thanks for that explanation.

And joining us now, the director of the Office of Management and Budget, the former U.S. trade representative, former congressman, Rob Portman joining us from the White House. Thanks very much for joining us, ambassador.

I heard the former President Bill Clinton speak the other day. He suggested that the Bush administration's budget priorities were really wrong in the sense that you refused to support a Democratic proposal, for example that asked for $648 million so that all of the port containers would be inspected.

Yet, at the same time, you have a budget that would welcome the elimination of the estate tax, what the president calls the death tax, which would cost hundreds of billions of dollars and would benefit less than one percent of the American public. What's wrong what he's saying?

ROB PORTMAN, WHITE HOUSE BUDGET DIRECTOR: Well, I didn't hear the whole speech, Wolf, but I will tell you that on port security, as you know, we've increased funding and increased it fairly dramatically and will again this year. The president's budget provides for more funding and congress is likely to act on that. In terms of the death tax, as you know, that death tax does get reduced over the next four or five years and then in 2011, it comes back to where it was even before 2001. That's kind of an absurd outcome, so I think everybody feels you do need to get the death tax resolved. I would think even former President Clinton would.

So, in terms of budget priorities, what this president has said is we have to keep spending under control but we need to be sure that we are protecting our homeland and that's why we've increased spending there and be sure that our troops get what they need and that's why defense spending has increased as well. But even so, we have kept the day to day appropriations spending, which is the annual spending that Congress approves just below inflation. Where we haven't done as good a job is on the entitlement side, which is now about 40 to 50 percent of the budget and that's Medicare, Medicaid and social security, that's grown at more than twice inflation.

BLITZER: Why did you reject that $648 million request that would provide security for 100 percent of those containers.

PORTMAN: Well you know, that's a question that I'm probably not the right one to ask. But, I will tell you that what I know about it is that no one believes in the security business that looking at every single container is the right way to do it, but rather you come up with a more intelligent way to look at the intelligence coming over, to be able to stop some of these potentially dangerous transports coming over in foreign ports and to be able to do it in a smarter way.

So the bottom line is we have increased funding in this area. We think we are doing it in a better and smarter way. We are always open to suggestions, even from President Clinton, certainly. It's a question of how best to get at a very real problem which is protecting our borders, and protecting our ports.

BLITZER: The "New York Times," you may have seen the editorial today, which railed against these numbers that the president supported, praised earlier today. Let me read an excerpt from the "New York Times" editorial, "earlier this year the administration conveniently projected a highly inflated deficit of $423 billion. With that as a starting point, the actual results, $296 billion, can be spun to look as if they are worth cheering."

Did you inflate that earlier estimate in order to make this current number look so much better?

PORTMAN: No, absolutely not. It's not based on any facts. I woke up this morning to that editorial. I was, to say the least, a little surprised and disappointed. The figures in February, as you know Wolf, were based on the professional career people at the Treasury Department, telling us what the revenues were likely to be this year. That was 6.1 percent. Now they are telling us, because of the actual receipts coming in in the first eight months, that it's likely to be 11.4 percent. That results in 90 percent of the very great news that we got today which is the deficit is going to be 30 percent lower. If, at the time, in February, the career professional folks had said 12 percent, of course we would have cheered.

It would have been much better news for the administration. Why would we have done that? Why would we have overinflated at that time? No, we rely on the professionals to give us the estimates on revenues. The "New York Times" knows that, that's why I thought that editorial was rather unusual. And this year we have seen higher revenues than expected. And it's base the economy is growing and growing strongly. We are seeing these receipts come in from payroll taxes, individuals and corporations as their profits have increased.

BLITZER: The critics though point out that when the career professionals at OMB and Treasury were estimating $423 billion budget deficit. The Congressional Budget Office, which is not partisan, was projecting $337 billion in the deficit. That's given fuel to this allegation put forward by the "New York Times."

PORTMAN: Actually, that's not accurate. The CBO projection was 371 and actually only about $20 billion off on taxes, as I recall, and this is, as you know, minor compared to overall spending in this country. So, we were very close to CBO, 371 to 423, and also, as you know, very close to the other projections, including the consolidated blue chip projection which was at about 400. So again Wolf, if we had better numbers, we would have used them when the whole nation was focused on the budget in February. We were relying on what the career folks said about the tax revenues and they were very close to what CBO was also estimating was going to be the revenue coming in, in '06.

We were also very close to them on spending. But we assumed that there would be a little more spending, they thought there would be a little less spending. It turns out the major difference though was revenue. We have seen an increase in the economic growth, thanks in part to the tax cuts, and that has resulted in more revenue coming in. So, this notion that we would have inflated the numbers then just doesn't make much sense.

BLITZER: I just want to ask you one quick question, because we are almost out of time ambassador, is there any date you can project right now when the deficit will be eliminated and the budget will go into surplus.

PORTMAN: I think it's probably not responsible to look that far forward. I can tell you that over the next few years, which is what we focus on, it looks as though revenues will continue at about historic levels, not as high as they have been this year or last year. If that happens, if we keep spending under control, as we talked about earlier, we will see the deficit go down to 1 percent of our GDP by 2009. We'll also be able, as you know, to the president's goal a year earlier of cutting the deficit in half by 2008.

So it looks very good short term. Our deficit picture is improving greatly. Our fiscal house is in order short term. The problem is longer term and the president did talk about this today. And that again is the entitlement spending I talked about earlier. That is increasing at unsustainable rates. That will come back to cause us great budget problems over the next 20, 30 years unless we resolve those issues and do so in a bipartisan way soon.

BLITZER: Yes, it's one of the most difficult and arguably most important jobs in the administration. It affects the lives of every single American. Rob Portman, the budget director, thanks for joining us. Appreciate it very much.

PORTMAN: Thank you.

BLITZER: And still ahead, is President Bush about to get Nancy Reagan riled up? There's new political sparring over embryonic stem cell research and new scientific moves as well.

And the election year debate over prisoners at Guantanamo Bay. Is it an open and shut case? The new moves by the White House and the Congress, that's coming up in our "Strategy Session," stay with us.


BLITZER: Welcome Back. It's one of the most passionate battles under way in the culture wars with life and death implications. Congress is pushing ahead with legislation to increase federal funding for embryonic stem cell research, but the Bush administration is sticking fast to a presidential veto threat. Let's get the latest from our Brian Todd. He's standing by, Brian?

BRIAN TODD: Wolf, the showdown looms as early as next week. The president ready to pull the veto pen out and likely cause a stir in his own political ranks.


TODD (voice-over): Willing to use his first veto, a move that might anger Republican royalty like Nancy Reagan, the president stands firm. Mr. Bush's top political strategist Karl Rove says his boss is emphatic. He will veto an upcoming bill in Congress that would give more money to embryonic stem cell research. It's a threat the president has made before.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The use of federal money, taxpayer's money to promote science which destroys life in order to save life is, I'm against that.

TODD: President Bush supports the government paying for research on long-existing embryos but is against killing new embryos to create stem cells, research that scientists believe might eventually care cancer, diabetes, alzheimer's. European researchers have just discovered that sperm, grown from embryonic stem cells, can possibly help fertility patients. These advantages and the question of whether embryos are alive are where some scientists split from the president.

IAN WILMUT, UNIVERSITY OF EDINBURGH: The embryo from which we derive stem cells just doesn't have a nervous system. And, so, I -- I -- I cannot imagine how it could be aware of -- of anything. And -- and, so, to me, it's at a very different stage of -- of human life.

TODD: Politically, analysts say, going against Republicans like Nancy Reagan, Senate Majority Leader Bill Frist and California Governor Schwarzenegger will cost Mr. Bush.

STUART ROTHENBERG, "THE ROTHENBERG POLITICAL REPORT": It's going to give Democrats a lot of ammunition. You know, they are going to go at this White House, paint the president as a prisoner of the extreme religious right. And that's not a good environment for a party that is trying to hold onto the House and Senate.


TODD: But analysts also say the president needs to shore up his conservative base before appealing to moderates for the midterm election campaign. They say the White House may feel this is the time to do that with a bill that may not have the votes to override Mr. Bush's first veto -- Wolf.

BLITZER: All right, Brian, thanks very much.

In our "Strategy Session," that, the brewing debate over embryonic stem cell research, and the debate over what to do about Guantanamo Bay -- we are joined by CNN political analyst, former Republican Congressman J.C. Watts, and Democratic analyst Bill Press.

J.C. Watts, this, potentially, as Brian just reported, a huge political problem for the president, for Republicans, given the fact there are some very prominent Republicans on the other side.

J.C. WATTS, CNN POLITICAL ANALYST: Well, any issue that you deal with, Wolf, you can find prominent Republicans on -- on both sides.

I think the president has been very consistent in this -- in this area, concerning embryonic stem cell research, that he would veto that. I think, you know, he feels like you can do as much -- and so do I -- with the umbilical chords, with -- with adult stem cell research.

I saw the scientists making arguments. You can find scientists on either side of this issue. So, I do think the president will veto the bill, which he should. And I think he's been very consistent in that.

BLITZER: Smart for the president to do that?

BILL PRESS, RADIO TALK SHOW HOST: I think it's dumb as hell. You know, he can't even get a veto right, Wolf.

I mean, this legislation is about saving lives. It's about curing disease. It's supported, as Brian pointed out, by Bill Frist, by Orrin Hatch, you know, by Mike Castle in the House -- he's a co- sponsor of the legislation -- by Nancy Reagan, by 70 percent of the American people.

And George Bush would rather go with Jerry Falwell on this issue and the extreme religious right. I think he's making a big mistake. And I think he's putting Republicans in a position of defending an indefensible measure, when they are up for reelection this year, and he's not.

BLITZER: But if -- but if he goes ahead and uses his first-ever veto since becoming president on this issue of embryonic stem cell, it doesn't look, right now, that the supporters of this research have the votes to override his veto.

PRESS: I don't think it matters whether or not they have the -- I hope -- I hope they have the votes to override. I don't...

BLITZER: You need two-thirds...

PRESS: I don't...

BLITZER: ... majority in both houses.

PRESS: Yes. I doubt that they do, because Republicans will probably stick with the president, you know, just out of loyalty.

But it creates an issue. It hands an issue to Democrats to run against these conservatives who are saying -- they say they are compassionate. They are not compassionate. They are even against Nancy Reagan on saving lives. Again, I think it puts them in an impossible position.

BLITZER: A lot of -- a lot of scientists, J.C., they point out. Alzheimer's, spinal cord injuries, Parkinson's, these are diseases that potentially -- that could be cured with this embryonic stem cell research.

WATTS: But, Wolf, and -- and, Bill, you can find scientists, I think legitimate scientists, not -- not quacks, but legitimate scientists, that will say the same thing concerning adult stem cell.

And I -- in all due respect, Bill, I -- I am respectful of Bill Frist and Orrin Hatch, but that doesn't make an issue right or wrong because J.C. Watts or Bill Frist supports it or -- or we don't support it. So, you know, the president has been very consistent on this. He had this position before the last election. It did not hurt him with Republicans. It did not hurt him with Democrats. He got reelected. Republicans are still in the majority.

PRESS: He's consistently wrong. You are right about that. He's consistent.

WATTS: Well, but he's...


PRESS: He's consistently wrong on the issue.

WATTS: He has consistently won.

PRESS: And, J.C., you can get scientists -- you can have scientists who tell you the Earth is flat, too. That doesn't mean they are right.

There are scientists...

WATTS: That's right.

PRESS: ... who say there's no such thing as global warming. They're nuts.

The science -- the overwhelming majority of scientists are on the side of embryonic stem cell research...


PRESS: ... for the purpose of saving lives.

WATTS: They're overwhelmingly wrong.


BLITZER: We are going to move on.

Thomas Friedman of "The New York Times" says the world is flat. But that's another matter.


BLITZER: Let's talk a little bit about this major decision today coming from the Pentagon, this memorandum from Gordon England, the top -- a top official there, suggesting that the Geneva Conventions, international law, do in fact apply to these al Qaeda suspects, these detainees being held at Guantanamo Bay -- a pretty big reversal on the part of the Bush administration.

WATTS: Well, first of all, Wolf, I think we need to understand, the terrorists did not sign the Geneva Convention or the Geneva accords, nor do they abide by them. Now, there are some -- there is some speculation as to who is being held in -- in these -- in these prison camps. Now, if there's speculation about someone being a terrorist, then I -- I think their fate needs to be determined. However, the great majority of these people are -- are terrorists. And I think we need to be careful that we don't complicate things for those who are out there...

BLITZER: Here's...

WATTS: ... trying to protect us.

BLITZER: Here's how Gordon England, the deputy secretary of defense, put it in a memo to senior Defense Department officials: "The Supreme Court has determined that Common Article 3 to the Geneva Conventions of 1949 applies, as a matter of law, to the conflict with al Qaeda." He then goes on to say, "You will ensure that all Defense Department personnel adhere to these standards."

So, they -- the al Qaeda detainees at Guantanamo may not have signed the Geneva Conventions, like uniformed military personnel of standing armies of nations, but they are going to get the protection of the Geneva Conventions.

PRESS: And they should. And I would hope that we would hold ourselves, J.C., to a higher standard than what the terrorists do.

Look, Wolf, this is a stunning reversal. I mean, just two weeks ago, the positions of this administration in the memo of Alberto Gonzales, who was then White House counsel, is that having to abide by the Geneva Conventions was obsolete and quaint.

Now they are saying they apply, which as close as we will ever get to George Bush admitting that he was wrong. He didn't say that. But, in effect, he says it.

But I don't think this goes far enough, because Gitmo is still there. It's still an embarrassment. It's still a black mark on the soul of America. The president has said many times he would like to shut it down. I think this is his opportunity.

BLITZER: Go ahead, J.C.

PRESS: Shut it down.

WATTS: Well, Wolf, and -- and, Bill, we can't assume that all of these inmates, or prisoners, have been treated inhumanely. I mean, we -- we shouldn't paid with a broad brush like that.

I think there has been some problems, but I'm not willing to paint with a broad brush and say that all of our military, all of our generals, all of our people trying to protect us...

PRESS: But, J.C., don't you think...

WATTS: ... that they were involved in treating people inhumanely. (CROSSTALK)

PRESS: Here's the thing. I didn't say that.


WATTS: One -- one more point.

PRESS: But...

WATTS: The Bush administration has -- they have submitted all along that they have treated people inhumanely.

PRESS: But...

WATTS: I think that general -- that memo...

PRESS: We...


WATTS: ... today was just reminding them that that's what they...

PRESS: Wait. Wait.

WATTS: ... should be doing.

PRESS: We have seen the evidence that that's not true.

But my point is this.

WATTS: But you can't paint with a broad bush like that.

PRESS: My point -- my...


PRESS: My turn now, OK?

We have American prisons on American soil. We have an American system of justice. Gitmo, Guantanamo Bay, is a big embarrassment. It's hurt us all around the world.

BLITZER: All right.

PRESS: Close it down. Bring them here. Give them a fair trial. And you're done.

WATTS: Because we had a -- we had an injustice or two, don't paint with a broad brush and say that all of our military people are like that.

BLITZER: We are out of time, guys.

PRESS: Shut it down. BLITZER: J.C. Watts, Bill Press, thanks very much.

PRESS: Thanks, Wolf.

BLITZER: Up next: Who will have the last word on the raid on Congressman William Jefferson's office? A ruling yesterday hasn't necessarily ended the legal maneuvering. We will bring you up to speed.

And Congress deals a new blow to Internet gambling. We're going to tell what that means for the millions of people who place bets online.

Stay with us.


BLITZER: Welcome back.

Let's go to Zain Verjee. She's joining us now with a closer look at other important stories making news.

Hi, Zain.


Representative William Jefferson is appealing yesterday's decision upholding the search of his Capitol Hill office. Lawyers for the Louisiana Democrat today filed papers to keep materials seized from his office sealed, while the appeals process goes forward.

The unprecedented search was conducted as part of an investigation into alleged bribery. It sparked protests from both parties.

Iraq's prime minister is dismissing fears that his country is on the brink of civil war, despite the deaths of more than 40 people today. Bands of gunmen attacked everything from cars to buses to contracting companies. The area around Baghdad's fortified government compound that is known as the Green Zone came under attack today from suicide bombers and a roadside bomb. Roughly 100 people have died in sectarian bloodshed since Sunday.

More action today in the push to neutralize the growing insurgent threat in Afghanistan -- U.S. and Afghan forces stormed a southern Taliban sanctuary today. The U.S. military says the target was a Taliban commander in the region. Now, it's unclear if he was among the 30 militants reported killed in the raid -- Wolf.

BLITZER: Zain, thanks for that.

And, in just the last hour, the House of Representatives passed legislation that would prevent Internet gamblers in the United States from cashing in over the Web. The bill's sponsors have tried for years to fight what is largely an offshore industry.

Let's bring in our Internet reporter, Abbi Tatton.

What has happened, Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, these Web sites here are all based overseas, but it's estimated that half of the revenue from this $12 billion industry actually comes from the United States.

Because these sites are offshore, it's very hard to -- to regulate them. The House bill that's just passed goes after online gambling by prohibiting credit card and U.S. bank account payments to these sites. It would also update existing laws on gambling to include the Internet.

Now, opponents, including the Poker Players Alliance, has said it's better to regulate and tax the industry -- other opponents in the House today saying that, actually, this legislation doesn't go far enough.

In the Senate, the main proponent and the person that has been spearheading legislation on online gambling in the past is Republican Senator Jon Kyl. A spokesman for Senator Kyl said today they are now looking at the best way to move forward on legislation -- Wolf.

BLITZER: Passes the House -- still has to pass the Senate. The president would presumably have to sign it into law -- still a ways to go, but significant information for those of you who bet online.

Abbi, thank you very much.

Coming up: The Condinistas, as they're called, political activists who believe Condoleezza Rice is the Republicans' ticket to winning the White House in 2008, why can't they accept her insistence that she's not in the running?

And the pain at the pump keeps on coming. But is President Bush feeling it? Jeff Greenfield takes a closer look at the political fuel for presidential critics now and in the past.

Stay with us. You're in THE SITUATION ROOM.


BLITZER: Welcome back.

On our "Political Radar" this Tuesday: the movement to draft Condoleezza Rice as a presidential candidate -- you have got to give those Republicans behind the campaign points for persistence. She keeps on saying, no, no, no. They keep on saying, yes, yes, yes.

Let's bring in our senior political analyst, Bill Schneider -- Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Wolf, President Bush has no heir apparent for the Republican nomination in 2008, or does he?


SCHNEIDER (voice-over): Who will carry the Bush legacy in 2008? Dick Cheney says he won't run. Republicans are having nightmares about another President Clinton.

Who will save them? How about the most popular current public official in the country? That would be Secretary of State Condoleezza Rice.

JESSIE DUFF, AMERICANS FOR DR. RICE: She's already been trained to run the White House. She knows how it operates. She knows how it works.

SCHNEIDER: Retired Officer Jessie Duff is head of Americans For Dr. Rice.

DUFF: When I served on active duty, I was so impressed with her, as a United States Marine, that I said, that lady could be my commander in chief.

SCHNEIDER: Organizations are springing up to try to persuade Rice to run. They appear to be genuine grassroots efforts, according to this seasoned political professional.

CHARLIE BLACK, REPUBLICAN STRATEGIST: I think it's pretty much an amateur operation by sincere people. I can't find any of the professionals that I know who are playing the Wizard of Oz here.

SCHNEIDER: Secretary of Rice has said she has no interest in running for president. She has avoided taking stands on controversial social issues. Would she be acceptable to conservatives?

BLACK: A lot of conservatives are not as demanding as they used to be about people coming down on their side 100 percent of the time. Witness the fact that Senator McCain is getting a lot of conservative support in the early going.

SCHNEIDER: Rice might be able to help, even if she is not at the top of the ticket.

BLACK: The eventual Republican nominee is almost certain to have her very high on the list for vice president.

An SCHNEIDER: African-American woman on the Republican ticket could shake up a lot of political assumptions.


SCHNEIDER: Secretary Rice has one huge problem. She's the bearer of the Bush legacy in world affairs. That means the war in Iraq -- Wolf.

BLITZER: Bill Schneider reporting -- thanks. Good report, Bill.

And thanks to Bill Schneider, who is part of the best political team on television -- CNN, America's campaign headquarters. Did the embattled governor of Kentucky, Republican Ernie Fletcher, block specific Web sites in government offices? That is what one blogger is now complaining in a lawsuit.

Let's bring in our Internet reporter, Jacki Schechner -- Jacki.

JACKI SCHECHNER, CNN INTERNET REPORTER: Wolf, liberal blogger Mark Nickolas has now filed a lawsuit against Governor Ernie Fletcher, saying that the governor blocked access to his and other liberal blog sites from state government offices.

Now, at the time that this happened, back in June 20 or 21, we spoke to the Kentucky state government. They said they were trying to block all blogs, both liberal and conservative, because employees were spending too much time reading them during work hours.

Now, as part of the lawsuit, Nickolas' attorney file this report, saying it's a Web filtering report for the Kentucky state government, and that blogs aren't listed anywhere in here.

We spoke to the Kentucky state government, and they said that blogs were not their own category. They fell under other categories of where employees were spending their time. We also spoke to the company that makes the filtering software, and they say that's definitely a possibility.

As for the lawsuit itself, Wolf, the Kentucky government is not commenting. They have yet -- yet to be officially served.

BLITZER: Jacki, thanks for that.

And still to come right here in THE SITUATION ROOM: the politics of fossil fuel. Jeff Greenfield examines the impact of gas prices on presidents, past and present.

And up next: Amid the violence and horrors of Iraq, Jack Cafferty wonders, at what point can the U.S. claim victory? Your e- mail when he comes back.

Stay with us.


BLITZER: Jack is back with "The Cafferty File" -- Jack.


The question is: At what point can the U.S. claim victory in Iraq? Things are just horrible over there these days.

Lou writes in Tucson, Arizona: "Jack, I don't think there will be a victory in Iraq any time in the future. We overthrew Saddam. That is what our soldiers were supposed to do. The rest of this facade is using our troops for police and will never end until they leave the area." Sylvia in Berrien Springs, Michigan: "I suppose the U.S. can claim victory as soon as we drain every last drop of crude from that wretched sandbox. After all, that's why we're there."

James in Powell, Tennessee: "Jack, you probably won't even read this, but the answer is when we win. Win at all cost. We have a lot invested in Iraq now, and we can't cut and run, like some think we should. You can put this in file 13, like you do with the rest of the stuff I write you."

Connie in Harpers Ferry, West Virginia: "We cannot declare victory or, for that matter, leave Iraq until Halliburton completely drains the U.S. Treasury. Dick Cheney has to have enough money to retire on."

Mark in Fort Lauderdale: "Bush and his ilk can claim victory when Jack Cafferty sprouts a full head of black hair and shows off a body like the incredible Hulk. Don't bet on any of this happening, ever."

And Theresa in Petal, Mississippi: "I thought we already claimed victory. Wait. That was mission accomplished. So, if victory wasn't the mission we were trying to accomplish, then -- oh, hell, forget it, Jack. I'm still trying to work what the definition of is is."



BLITZER: All very creative writers there. Thanks, Jack.

CAFFERTY: They are good.

BLITZER: See you at the top of the hour.

And still to come: searching for Osama bin Laden. There are new insights into the shutdown of that only unit whose sole purpose was to try to find the al Qaeda chief. I will go one-on-one with a former CIA insider.

And the trickle-down effect of prices at the pump -- as they rise, what political price can the president expect to pay?

Stay with us. You are in THE SITUATION ROOM.


BLITZER: Here's a look at some of the "Hot Shots" coming in from our friends at the Associated Press.

Kiev in Ukraine: A brawl breaks out in the parliament again. One legislator may have wound up with a broken nose.

Denia, Spain: a different take on the Running of the Bulls -- check this out. In this town, the bulls are actually chased into the Mediterranean. The animals will later be tugged back to shore by boat. Moreland Hills, Ohio: A show horse is given a bath.

Back in Ukraine: a beautiful sunset set against a 1,000-year-old monastery -- some of today's "Hot Shots," pictures often worth 1,000 words.

When most Americans assess their economic situation, they are far more likely to consider the cost of gas than the size of the federal deficit. But does that translate into fuel for the president's critics?

Let's bring in our senior analyst, Jeff Greenfield -- Jeff.


JEFF GREENFIELD, CNN SENIOR ANALYST: Wolf, the president was celebrating good economic news today, but there's a cloud over the numbers on jobs and growth, a gas cloud.

The Energy Department said yesterday that gasoline prices were close to setting a record. And therein may lie a political tale.

(voice-over): The average price of a gallon of regular gasoline hit $2.97 last week, only a dime below what it was last September, when Hurricane Katrina took out about a third of the nation's refining capacity.

Even adjusting for inflation, that's edging up to the $3.12 consumers were paying in real dollars in 1981. If it's any consolation, the average price of gas in much of Europe, where it's heavily taxed to pay for social programs, approaches seven bucks a gallon.

If these high prices have got Republican strategists nervous, there's good historical reason. The price at the pump is, for millions of us, the most direct, visceral economic information we get.


UNIDENTIFIED MALE: Israeli Phantom jets penetrate enemy skies.


GREENFIELD: Back in October 1973, the international oil cartel OPEC punished the United States for its support of Israel in the Yom Kippur War with an embargo -- the result, huge jumps in prices, long lines at the pump, and more trouble for President Nixon, already embroiled in Watergate.


RICHARD NIXON, PRESIDENT OF THE UNITED STATES: I shall resign the presidency, effective at noon tomorrow.

(END VIDEO CLIP) GREENFIELD: While there's little doubt that the scandal was the key to Nixon's political woes, the impact of the embargo, a rise in inflation, a sagging economy, helped seal his fate.


JIMMY CARTER, FORMER PRESIDENT OF THE UNITED STATES: ... to use car pools or public transportation whenever you can.


GREENFIELD: You can see this even more dramatically with President Jimmy Carter, whose presidency had nothing like a Watergate scandal.

But, in June of 1979, OPEC imposed a major price increase, which again led to shortages, lines at the pump. And Carter's job approval, which stood at 50 percent at the start of the year, hit 28 percent by July, a political hit from which he never recovered.




GREENFIELD: By contrast, look what happened to a scandal-plagued Bill Clinton in the absence of an economic hit. The Lewinsky scandal broke in January of 1998, when Clinton's approval ratings were 59 percent. By year's end, with a booming economy, his rating was 73 percent, the key to why he survived impeachment.

BUSH: When I came to Washington, taxes were too high.

GREENFIELD: So, what does this tell us for this president and his party?

Well, more than 60 percent of Americans do hold Bush wholly or partly responsible for gas prices. But, unlike 1973 or 1979, there are no shortages, no lines at the pump, no daily migraine-inducing hassles. That may lessen its political impact.

(on camera): And there's one more point worth mentioning here. Across the political spectrum, there's a widespread belief that the most effective way to encourage conservation, reduce dependence on foreign oil, and promote alternative energy is to raise the price of energy, and to raise it substantially.

Unless Ross Perot decides to run for something this year, that fact is my best bet for the least likely point anyone will be making on the stump this fall -- Wolf.


BLITZER: Jeff, thank you. And, to our viewers, you're in THE SITUATION ROOM.