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The Situation Room

White House vs. Rush Limbaugh; FDA Launches Criminal Probe Into Peanut Plant

Aired January 30, 2009 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: And, to our viewers, you're in THE SITUATION ROOM.

Happening now: President Obama tries to ease a disaster for the middle class. This hour, his new moves on the economy and another wakeup call about the pain and suffering right now.

And behind closed doors of the U.S. Senate, rebel Republicans and Democrats, they are working to slash spending in the economic recovery package.

And the president calls it shameful, but now some people are defending billions of dollars in those bonuses for Wall Street executives -- all of that and the best political team on television.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You are in THE SITUATION ROOM.

President Obama's says the recession is deepening and the urgency of the economic crisis is growing, his response today to a new barrage of grim statistics, an attempt to give middle-class families some help and some hope.

Let's go to our White House correspondent, Dan Lothian, because, as we say, the president is getting very passionate about this issue of the middle class in this disastrous economy.


And, you know, the president realizes that all Americans are being hurt by this tough economy. And that's why he really is pushing that stimulus plan, sitting down and talking with both Democrats and Republicans, trying to strengthen the plan as it makes its way through the Senate.

But, as you mentioned, today, the president was focusing on the middle class.


LOTHIAN (voice-over): Another blow to America's middle class, a shrinking economy, the worst in almost three decades.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This isn't just an economic concept. This is a continuing disaster for America's working families. LOTHIAN: As President Obama signed executive orders that he says levels the playing field between labor unions and employers, he reached out to what he calls the backbone of the country -- middle class families, people White House spokesman Robert Gibbs suggested the Bush administration ignored.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I think one of the critiques that the president had of the previous administration was a tendency to help those that already had done quite well.

LOTHIAN: But Obama says the middle class is in desperate need of help, losing their jobs and homes, unable to afford college tuition for their kids. The American dream in reverse.

OBAMA: When I talk about the middle class, I'm talking about folks who are currently in the middle class, but also people who aspire to be in the middle class. We're not forgetting the poor.

LOTHIAN: Vice President Biden will lead a new middle class task force, looking at creating green jobs, making retirement more secure, and child and elder care more affordable.

JOSEPH BIDEN, VICE PRESIDENT OF THE UNITED STATES: Quite simply, a strong middle class, in our view, equals a strong America.

LOTHIAN: Obama has long focused on the middle class, a frequent theme on the campaign trail.

OBAMA: Middle class families have the kinds of quality of life that has always been the hallmark of the American dream.

LOTHIAN: But beyond setting up a Web site, holding high-level meetings, and going on a national listening tour, will this task force get the middle class closer to the help they need? Gibbs says yes.

GIBBS: I think the beginning of that is in this recovery and reinvestment plan, to ensure that the tax cuts that are contained in it are focused towards those that need it the most.


LOTHIAN: As the president pushes this stimulus plan, senior administration officials say that, next week, the president is expected to roll out this comprehensive plan that looks at the entire financial industry, what went wrong, what needs to be changed, really looking at some reform. It is expected to include a crackdown on those Wall Street bonuses that so many people have been talking about and that has angered so many people, including the president -- Wolf.

BLITZER: Our White House correspondent, Dan Lothian, thanks very much.

Let's go up to Capitol Hill right now. Our senior congressional correspondent, Dana Bash, is standing by.

I take it there are some moderate Democrats, moderate Republicans in the Senate. They're looking for a compromise.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right. If the new president and his team, if they want a bipartisan vote in the Senate, they might want to talk to two senators we spoke with today.

Senate Republicans rushed to the cameras and vowed to oppose Barack Obama's economic plan, just like Republicans did unanimously in the House.

SEN. ROBERT BENNETT (R), UTAH: I am going to vote against this package because it's not going to work.

BASH: But for some GOP senators, that hard-line approach is unacceptable.

SEN. SUSAN COLLINS (R), MAINE: I think it's important that the bill be bipartisan to show the American people that we can work together on the biggest challenge facing our country.

BASH: In fact, behind the scenes, Republican Susan Collins and Democrat Ben Nelson are now working across party lines on a proposal to stimulate the economy. Collins actually likes a lot of what's in the Democrats' bill, but agrees with fellow Republicans that the $888 billion measure includes too much spending that won't stimulate the economy.

COLLINS: There is funding to help improve our preparedness for a pandemic flu. There is funding to help improve cyber-security. What does that have to do with an economic stimulus package?

BASH: Democrat Ben Nelson feels the same way and disagrees with his party's approach.

SEN. BEN NELSON (D), NEBRASKA: It's a mistake I think to mix many good programs that aren't necessarily -- that are only marginally stimulative in a stimulus package. I think you give people reasons not to vote for the package.

BASH: This bipartisan team plans to spend all weekend writing a new economic measure, scrubbing what they call excess spending, things like $1.1 billion for comparative health research, $75 million for anti-smoking programs, or $248 million to consolidate the Department of Homeland Security headquarters.

NELSON: Jobs is the critical word. And so stimulus has to be about jobs, jobs, jobs.

BASH: So, their bipartisan alternative would limit the spending to things like infrastructure, education, and training, and extending unemployment insurance and benefits to jobless Americans.


BASH: Now, both Senators Collins and Nelson hope to have their proposal ready to go to shop to other Democrats and Republicans next week as the Senate starts debate. And we are told that there probably a handful of Democrats and Republicans, Wolf, who may be open to this kind of compromise.

BLITZER: We will see if it will spread. All right, thanks very much.

Dana is up on the Hill.

Let's check in with Jack. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The Pew Research Center asked where would Americans most like to live and how do they feel about the place they currently call home?

The bottom line, of course, is the grass is always greener on the other side of the fence. They surveyed 2,000 adults and found that 46 percent of them would rather live in a different type of community than the one they live in. City people want to be the country. The country folks want to live in the big city.

And when it comes to those big cities, what do people have in mind? Well, Denver, San Diego and Seattle are the cities most people said they would like to live in. Also high on the list, Orlando, Tampa, San Francisco, and Phoenix, while Detroit, Cleveland and Cincinnati, not so much. Those are cities most people say they don't want to live in.

Even though people are longing to live elsewhere, eight out of 10 people in the survey said that they are very pleased with where they currently live. They rate the area as excellent.

Of course, the Pew folks break this down in every possible way, so we find out things like more men than women want to live in Las Vegas. Duh. And younger adults would rather live in Los Angeles than New York and so on.

Hey, it's Friday. What do you want from me?

Here's the question: Where would you live if you could live someplace else? Go to and post a comment on my blog.

BLITZER: It is Friday. All right, Jack, thanks very much.

The president speaking out on the economic nightmare.


OBAMA: It's like the American dream in reverse. It is the families who have by no fault of their own been hit hardest as the economy has worsened.


BLITZER: President Obama on what he calls a deepening recession and a continuing disaster for many Americans. We're going to hear extensively from him this hour.

Also, how the recession is playing outside the Washington beltway, specifically in Peoria. Our John King, he is just back in Washington from Peoria, the hometown of Caterpillar, where job losses are devastating.

Plus, Congress moving one step closer to insuring millions of kids -- why President Obama won't do what President Bush did.

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


BLITZER: Another staggering round of grim economic news today, another a body-slam for American workers. The latest figures showing the economy shrank by 3.8 percent in the last quarter of the year. That gross domestic product number not as bad as some expected, but economists say it could get worse. And the economy right now bleeding jobs.

There were more than 145,000 layoffs announced this week alone. Just today, Caterpillar announced an additional 2,110 layoffs. That's on top of the 20,000 the company announced on Monday. Wow.

Let's bring in our chief national correspondent, John King.

You just were reporting yesterday from Peoria, the home of Caterpillar. Here's the question. How much time does President Obama have realistically -- and I know you spoke to people out there -- to turn this economy around?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: It's a fascinating question, Wolf.

I just flew back from the Peoria area and the factory floor we were on yesterday, some of those 2,100 jobs you just mentioned were lost there today. And that's one of the most successful factories Caterpillar has. They say simply they don't have the orders to keep those people working.

How long does Obama have? It's a fascinating question. I had breakfast this morning with four John McCain voters in a rural county out in farm country near Peoria, but about an hour away.

Even they all said, look, we didn't vote for the guy, but he's our president. You have to give him a chance. But they already are criticizing a lot of these spending proposals in the stimulus bill, saying that to them doesn't translate into jobs. It translates into Democratic priorities and pork barrel spending.

So, the patience of Republicans, even though they have goodwill, is already wearing thin. The blue-collars workers at Caterpillar, most of them are union workers. Most of them voted for Obama. Most of them say, Wolf, we will give him two years. This is a mess. He didn't create it. But the question is, will that patience hold? Because many of them get 13 weeks of unemployment benefits. I spoke to a married couple last night. It's heart-wrenching. They both lost their jobs at Caterpillar. Today was their last day at work. They have three kids, two cars and a mortgage.

The husband said, if necessary -- he's in the National Guard -- if they can't get a job in a month or two, he will volunteer to go back to Afghanistan or Iraq simply to keep his children fed and his house, the mortgage paid.

So, as unemployment benefits runs out and as people can't find jobs, because there are none to find, will their personal situation overcome their political goodwill for President Obama? I think that's the question we will ask over the next several weeks.

BLITZER: And I know you're going to be doing more reporting on this Sunday on "STATE OF THE UNION." Who are your guests?

KING: We have several members of the United States Senate to conversation the conversation you were just having with Dana Bash about dissatisfaction in some quarters with the stimulus plan. How will they change it.

Also going to talk to two governors who are right out there on the front lines, Jennifer Granholm of Michigan, the highest unemployment rate in the country, terrible out there, and a Republican, Tim Pawlenty of Minnesota, two Midwestern governors, industrial states, who have very, very different views about what to do about this troubled economy and whether the new president has it right.

BLITZER: "STATE OF THE UNION" airs Sunday morning from 9:00 a.m. Eastern to 1:00 p.m. Eastern.

John, thanks very much.

KING: Thank you.

BLITZER: The same army of online supporters that helped President Obama win the election now being called upon by the Democratic Party to help with the economic recovery plan.

Let's go to our Internet reporter, Abbi Tatton.

Abbi, what are they being asked to do?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is the first call to action since the inauguration. They are being asked to host a house party to push the stimulus bill.

This is an e-mail that went out to the most dedicated of President Obama's supporters, asking them to put together one of these gatherings in their communities, invite their friends, neighbors and get them talking about President Obama's economic agenda. There's a Web site that will have video, materials to support them, and the people that are being targeted are the people that have done this before, those that organized house parties of this type during the election for President Obama. This is the first challenge issued by the group Organizing for America that President Obama announced a couple of weeks ago.

It is a place that now houses this 13 million-strong e-mail list that was built up during the campaign. It is now an arm of the Democratic National Committee and they are hoping that thousands of these events will be organized for the stimulus package next weekend -- Wolf.

BLITZER: Abbi, thank you.

President Obama by the way could sign a bill as early as next week providing health care benefits to some four million uninsured children. Today, the White House is hailing the Senate's passage of the legislation last night by a vote of 66-32. The measure would dramatically expand the State Children's Health Insurance Program by more than $32 billion over five years.

The House of Representatives is expected to approve the bill next week after recently passing a similar version. President Obama says this represents a down payment on his promise to ensure every American has access to affordable health care. President Bush vetoed two similar children's health care bills back in 2007.

Small business owners are having a particularly tough time in this troubled economy and many say despite drastic government action things are not getting any better for them right now.

CNN's Mary Snow has more -- Mary.


MARY SNOW, CNN CORRESPONDENT: Wolf, billions from Uncle Sam pumped into banks were intended to get them lending. But small business owners are asking where is the money going?

(voice-over): Phil Chianetta spends more time in his office running his electric company and less time in the field where we met him back in September.

PHILIP CHIANETTA, CEO, SAL ELECTRIC CO.: I have never seen anything like this.

SNOW: Back then he was hoping government money given to banks would unfreeze credit markets. But four months later he sees little signs of lending and says it's having a direct effect on the business.

CHIANETTA: Projects are waiting for funding from the banks.

SNOW (on camera): And they didn't get it, so they canceled?

CHIANETTA: The funding has not been approve and they had to cancel the project.

SNOW (voice-over): Chianetta had to shrink his work force from 110 to 82. He says his cash flow has dropped dramatically and he is getting closer to having to tap into his credit line, something he fears.

CHIANETTA: What I'm afraid with my bank is that they would turn around and say instead of giving you X amount that you presently have, we are tightening down. We're going to cut that in half.

SNOW: That fear of a bank cutting a credit line says one analyst is justified.

JEFF FISCHER, MOTLEY FOOL: We have seen signs of that happening frequently with solid businesses too that have good credit ratings. When they go to tap their credit lines, they are actually told that their credit lines have been cut or even suspended for now.

SNOW: Because of tight lending, independent bookstore owner Peter Soter has put off turning to a bank until now. He's hoping to consolidate his loans. To get by in recent months, he sold Obama T- shirts. With cash flow tight, he has relied on his credit card.

PETER SOTER, OWNER, MORNINGSIDE BOOKSHOP: This is for emergencies and for a quick 30-day turnaround. But now it's become a way of extending a bill longer. And it's not a way to run a small business.

SNOW (on camera): The National Business Association says of the 250 small businesses it surveyed, it found nearly half used credit cards in the past year to finance their businesses -- Wolf.


BLITZER: Mary, thank you.

Big bonuses for those Wall Street executives are stirring outrage here in Washington.


SEN. CLAIRE MCCASKILL (D), MISSOURI: We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer.


BLITZER: But some people actually think the bonuses are defendable. We're looking at both sides.

And it's been just days since the nation's first African-American president took office. Now the Republican Party elects its first black chairman and he issues an immediate challenge.

And President Obama in his own words on the crisis for America's middle class. (BEGIN VIDEO CLIP)

OBAMA: This is not just an economic concept. This is a continuing disaster for America's working families.



BLITZER: If you are a Wall Street executive who got a big fat bonus last year, it seems everybody, including the president, has turned against you. In these tough economic times a lot of people are complaining about greed, especially to those firms that are taking billions in government bailouts.

Are these bonuses defendable? Let's go to our national political correspondent, Jessica Yellin, who has been looking at both sides of this story.

Jessica, what are you finding?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, Wall Street executives say we just don't understand. They say unlike regular folks, most of their pay comes not in their salary, but once a year in their bonus. Here's their defense for keeping it.


YELLIN (voice-over): Twenty billion dollars in Wall Street bonuses during a financial crisis? There is outrage in the White House.

OBAMA: That is the height of irresponsibility. It is shameful.

YELLIN: And in the media.

ANDERSON COOPER, CNN ANCHOR: We're talking about naming names and holding these culprits accountable.

YELLIN: As the titans of boom are increasingly discredited.

UNIDENTIFIED MALE: I made a mistake.

YELLIN: So, what does Wall Street have to say for itself?

UNIDENTIFIED MALE: We can't comment on...

YELLIN (on camera): Why is that?

UNIDENTIFIED MALE: We're under a contract not to talk about...

YELLIN (voice-over): At this Wall Street lunch spot, there some willing defenders.

(on camera): Do you think bonuses should be abolished?

UNIDENTIFIED MALE: No, bonuses are part of the pay that they get. They get bonuses. That's how they get paid.

YELLIN (voice-over): An unpopular point of view, to be sure, but here is the case for nice Wall Street bonuses.

One, eliminating bonuses will hurt the economy.

RUDOLPH GIULIANI (R), FORMER NEW YORK MAYOR: It really will create unemployment. It means less spending in restaurants, less spending in department stores. So, everything has an impact.

YELLIN: Already, sales are down for mega yachts, Bulgari jewels, and even for Porsches. Unthinkable what could follow.

Two, you need to pay for talent. Bailout culprit AIG which gave hundreds of millions in bonuses as it took a massive government handout says they had to pay big bonuses to keep the Michael Jordans of the insurance business on their team.

Then there is the we didn't start the fire defense.

Jordan Shriber (ph) has been in finance for almost 40 years. He says Wall Street is being scapegoated.

UNIDENTIFIED MALE: They are trying to find blame, to target blame. And the blame should be pervasive. It should include the American public that had a zero savings rate for quite a few years.

YELLIN: And on the cocktail party circuit, he says his friends worry about losing their jobs.

UNIDENTIFIED MALE: They hope they are not next.


YELLIN: Now, Wolf, with so much unemployment on Wall Street, you have got to ask, well, where would these superstar executives go if they didn't get such big bonuses?

AIG, the insurance giant, well, they figured out those big employee bonuses they paid before other firms started their layoffs and they say their executives were being courted by other firms -- Wolf.

BLITZER: Jessica, but aren't their base salaries pretty impressive to begin with?

YELLIN: Well, they would argue that their base salaries might be impressive compared to everyone else's in America, but it's not impressive compared to what they expect to get on Wall Street and they get what they expect to get in the form of a bonus.

BLITZER: All right, Jessica Yellin, thanks very much.

President Obama reached out to middle-class families with one hand today and to union workers with the other.


OBAMA: I do not view the labor movement as part of the problem. To me, it's part of the solution.


BLITZER: All right, we are going to listen to the president of the United States at length and unfiltered here in THE SITUATION ROOM. That is coming up next.

And the president vs. Rush Limbaugh. Are Democrats giving the conservative commentator more influence than he already has? James Carville, Gloria Borger, Tara Wall, they are all standing by live. And they will tell us what they think Mr. Obama did right or wrong during his second week in office.

Stay with us. You are in THE SITUATION ROOM.


BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now: The Food and Drug Administration has launched a criminal investigation into that Georgia plant linked to salmonella outbreak from peanuts. The Associated Press reports that Canada rejected a shipment of chopped peanuts from the plant in April because of filth.

New Illinois Governor Pat Quinn says he is ready to in his words fumigate state government. The state Senate ousted former Governor Rod Blagojevich yesterday for abuse of power.

And the State Department will not renew the Iraq contract for Blackwater Worldwide. The Iraqi government had already declined to renew the firm's license because of that shooting incident in 2007 that killed 17 Iraqi civilians -- all of this coming up, plus the best political team on television.

I'm Wolf Blitzer. You are in THE SITUATION ROOM.

President Obama says he's going to bat for the middle class, but at the White House today he also said the recession is worsening. The nation expects Washington in his words to act boldly and swiftly.

And he launched a new middle-class task force to tackle the problem. Here it is in President Obama's own words.


OBAMA: Today we learned that our economy shrank in the last three months of 2008 by 3.8 percent. That's the worst contraction in close to three decades.

This isn't just an economic concept. This is a continuing disaster for America's working families. As worrying as these numbers are, it's what they mean for the American people that really matters and that's so alarming: families making fewer purchases, businesses making fewer investments, employers sustaining fewer jobs. The recession is deepening and the urgency of our economic crisis is growing. Yesterday, we reached a new threshold -- the highest number of Americans receiving unemployment benefits on record.

Every day, it seems there is another round of layoffs, another round of jobs lost and families' lives turned upside down. And we lost 2.6 million jobs last year and another 2.8 million people who need and want full-time work had to settle for part-time employment.

So this is a difficult moment.

But I believe if we act boldly and swiftly, it can be an American moment, when we work through our differences together and overcome our divisions to face this crisis.

While our GDP may have grown smaller, it's undiminished when it comes to our innovative spirit, our work ethic, our values and our resolve and resilience as Americans.

For two years, I traveled across this country. I met thousands of people -- hard-working middle class Americans -- who shared with me their hopes and their hardships. These are the men and the women who form the backbone of our economy -- the most productive workers in the world. They do their jobs. They build the products and provide the services that drive America's prosperity.

These are the folks who approached me on the campaign trail, in union halls and church basements, in coffee shops and VFW halls and shop floors. And they told me about jobs lost and homes foreclosed, hours cut and benefits slashed, the costs of life slowly slipping away and shipping away at the hopes of affording college or a new home or retirement.

It's like the American dream in reverse.

These are the families who have, by no faults of their own, been hit hardest as the economy has worsened.

They need action -- now.

They need us to pass the American Recovery and Reinvestment Plan, a plan that will save or create more than three million jobs over the next few years and make investments that will serve our economy for years to come. We intend to double our capacity, generate renewable energy, while redoubling our efforts to use energy more efficiently.

We will rebuild crumbling roads and retrofit aging transit systems and renovate 10,000 schools for our children. We will bring health care into the 21st century by computerizing medical records, counting -- saving countless lives and billions of dollars.

I am pleased that the House has acted with the urgency necessary in passing this plan. I hope we can strengthen it further in the Senate.

What we can't do is drag our feet or delay much longer. The American people expect us to act and that's exactly what I intend to do as president of the United States.

But passing my plan is not the end -- it's just the beginning of what we have to do.

We know we need to create jobs, but not just any jobs. We need to create jobs that sustain families and sustain dreams; jobs in new and growing industries; jobs that don't feel like a dead end, but a way forward and a way up; jobs that will foster a vibrant and growing middle class. Because the strength of our economy can be measured directly by the strength of our middle class.

And that's why I've created the Task Force on Middle Class Working Families and why I've asked my vice president, Joe Biden, to lead it.

There's no one who brings to bear the same combination of personal experience and substantive expertise. Joe's come a long way and has achieved a great deal, but he's never forgotten his roots as a working class kid from Scranton, Pennsylvania. He's lived the American dream and lived and worked to make that dream a reality for others.

This task force will bring together my economic advisers and members of my cabinet to focus on policies that will really benefit the middle class -- policies to create jobs that pay well and provide a chance to save; to create jobs in growing fields and train workers to fill them; to ensure that workplaces are safe and fair, as well as flexible for employees juggling the demands of work and family.

And I think I should note that when I talk about the middle class, I'm talking about folks who are currently in the middle class, but also people who aspire to be in the middle class. We're not forgetting the poor. They are going to be front and center because they, too, share our American dream. And we're going to make sure that they can get a piece of that American dream if they're willing to work for it.


BLITZER: President Obama speaking at the White House earlier today.

We're going to discuss what we just heard and more. James Carville, Gloria Borger, Ted Rowlands -- they're standing by live.

He's the new chairman of the Republican Party and he has a special message to send.


MICHAEL STEELE, RNC CHAIRMAN: For those of you who wish to strut, get ready to get knocked over.


BLITZER: Republicans make history of their own, electing the first African-American chairman.

So how will this change the GOP?

Plus, President Obama warns Republicans they can't just listen to Rush Limbaugh.

Stay with us.



BLITZER: All right, let's bring in our panel. Joining us now, our senior political analyst, Gloria Borger; our CNN political contributor Tara Wall of "The Washington Times;" and Democratic strategist James Carville. They are part of the best political team on television.

This has been Barack Obama's second week as president of the United States.

Was there a key defining moment in week two for you -- Gloria?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: For me, it was the vote on the stimulus package. Obviously, Barack Obama was happy because he won. But he was not happy with the way he won it. He would have liked to have had more Republican votes on that. He had a big fat zero on that. They believe they're going to get Republican votes when they get a compromise package through. But it wasn't a great start to bipartisanship.

BLITZER: What was the defining moment for you -- James?

JAMES CARVILLE, CNN CONTRIBUTOR, CLINTON SUPPORTER: Yes, I agree, the number zero. You know, one of the great inventions in the history of civilization was the invention of the number zero. The Romans, though, didn't have it when they did a lot of engineering. And the fact that zero Republicans voted -- I've got to tell you, as a Democrat, as an American, it probably wasn't a good thing. But I think as a Democrat, the Republican Party sent out a message loud and clear that Rush Limbaugh is running this party, he's in charge and we're not going to go along with anything.

And I think the country is not very impressed with that. But we'll...

BLITZER: Tara, was there a...

CARVILLE: ...see what happens in the Senate.

BLITZER: Was there a defining moment for you -- Tara?

TARA WALL, DEPUTY EDITOR, "THE WASHINGTON TIMES": Well, the "I won," I think, was the defining moment. And that might have done it for some Republicans that...

BLITZER: When Barack Obama, the president...

WALL: When Barack Obama...

BLITZER: ...said that, you mean?

WALL: Yes, the president.

BLITZER: Explain what you mean.

WALL: Well, when President Obama said, "I won," I think that may have been the impetus for some Republicans, anyway, other than the fact that it was too large a package. For some of them, it could have just been the evidence for them to say that's -- you know, you've made up your mind. You've said, you know, you want to work with us, you want to meet with us, but you've already made up your mind. You've won. You don't won't want to bend on the tax cuts.

So why should we vote for this?

BORGER: But he said that in a very joking way in the meeting. From the people I was talking to in the meeting, he said, "I won and I think I'm going to trump you on that." And it was kind of jovial and it was not an "I won" and I'm right...

WALL: Well, it didn't...

BORGER: ...and you're wrong.

WALL: But it didn't have to be.

BORGER: It was a...

WALL: It didn't have to be, I think, for some. For some. I mean, overall, again, I think it was the -- what was in the package and the amount of the package that did it for most Republicans.

BORGER: Right.

BLITZER: James, how did that...

WALL: But again...

BLITZER: ..."I won" comment strike you?

CARVILLE: It's a fact. I mean, he did. And the issue was -- is that one of the great lies that the Republican Party tells is that people -- that poor people don't pay taxes. And I think that was the issue that he was talking about.

WALL: Yes. Yes it was.

CARVILLE: And this president is committed, as he well should be, to -- if there's going to be some relief, it's going to be for people making $15,000 or 20,000 a year. And every economist in the world knows that as soon as these people get money, they're going to spend it in the economy.

And, actually, it -- he's gone out of his way -- no president has gone further to try to work with the opposition than this president.

But there's not going to be -- I mean the House Republicans sent a pretty clear signal, I thought.


CARVILLE: And I think they're quite satisfied with themselves and Rush is very pleased with them. And so they're happy.


BLITZER: All right. Let's see what happens in the Senate.

All right. There's -- Tara, there's a new chairman of the Republican National Committee, the former lieutenant governor of Maryland, Michael Steele, the first African-American to lead the party.

You used to work at the RNC.

What's the significance of this?

WALL: I did and Michael is a very good friend of mine. And I stayed -- I had to stay neutral during this whole thing. But I am very, you know, pleased that he was selected, he was voted in. I think it is a good sign for the party. I think it will hopefully quell, number one, some questions about the party's inclusiveness going forward.

But it is a big job for him. One thing, if I could use the words of Malia Obama, you know, the first black chairman better be good, because he has got a lot of work to do. And it's going to be about regaining some House and Senate seats, governor's races.

He does have a big task. It goes beyond the race issue. But I think certainly inclusiveness, coalitions, reaching out to youth voters -- that's something that came out of discussions...

BLITZER: And he promised...

WALL: ...yesterday quite a bit.

BLITZER: He promised right away, Gloria, the Northeast -- he's going back after those Republican votes...


BLITZER: ...which largely disappeared in much of the Northeast.

BORGER: Yes. And it's going to be interesting to see what happens to immigration reform as an issue in the -- in the Republican Party, because that has split the party down the middle and it will be interesting to see which way Michael Steele takes the party. BLITZER: James, how...

WALL: Well, he's...


BLITZER: How formidable of a leader for the GOP will -- will Michael Steele be?

CARVILLE: Well, I've met him on a couple or three occasions. And he's a very personable guy. He's a very good communicator.

To the extent that a party chair can make a difference, I think he looks like he's a fine choice for them.

He's -- he ran for the Senate in Maryland. He didn't do that that well, but that's a pretty tough state for Republicans anyway. I think they've made their choice. I don't think party chairmans matter a great deal, but what -- my personal contacts with him and what I know about him, he seems like a fine guy.

BLITZER: And we hope he'll join us next week right here in THE SITUATION ROOM.

All right. Senator John McCain, earlier today was on Fox and said this about Rush Limbaugh.

Listen to this.


SEN. JOHN MCCAIN (R), ARIZONA: Mr. Limbaugh is a voice of a significant portion of the -- of our conservative movement in America. He has a very wide viewing audience. He is entitled to his views. And he's -- he has a lot of -- a lot of people that listen very carefully to him. So I don't know why the president would, you know, take him on.


BLITZER: All right, James, why would President Obama even talk about Rush Limbaugh in that -- in that closed door meeting?

CARVILLE: Because he is the most powerful leader of the opposition party. The president has an opposition party in a democracy. He has to deal with it as it is. Rich Limbaugh is the de facto head of the Republican Party right now. You see these congressmen just groveling.

And he and Rush himself has admitted that he's more powerful, than, say, Mitch McConnell or John Boehner.

And so we don't -- it's not the Democrats or the president that are elevating Rush Limbaugh. It is the Republican officeholders who have deemed him his daddy. He is the daddy of this Republican Congress right now. WALL: President -- president...

CARVILLE: And so we ought to acknowledge that.

WALL: President Obama...

CARVILLE: We should acknowledge Rush's position.

WALL: President Obama elevated him by engaging him. Make no mistake about that. It's something that in -- you know, in recent history, I don't know of any presidents who have done that.

Listen, Rush Limbaugh may be very popular within the Republican Party and among Republican ranks, but he certainly does not enact policy. And I think that it's better served for the president to discuss policy and bipartisanship among members who are actually voting members and who do actually enact and develop policy.

BORGER: Can I just say that I was stunned to hear John McCain defend Rush Limbaugh?

Because Rush Limbaugh was out there opposing John McCain in those Republican primaries, saying some pretty tough stuff about John McCain. And suddenly to see John McCain out there defending him was sort of interesting.

BLITZER: Go ahead, James.

CARVILLE: Yes. It is not -- it is the Republican who have elevated Rush Limbaugh. We're just -- this guy Gingrich, some congressman from Georgia, the man is peeling him off the wall, he was apologizing so profusely to Rush.

He is the person that they have elevated. Rush acknowledges his position as the most influential Republican. We don't pick Republican leaders, just like Michael Steele. We didn't pick Michael Steele. We deal with him.

The elected Republicans have said that Rush Limbaugh is an effective leader.

You heard John McCain. His voice was quaking he was so scared when he was talking about him...

WALL: I don't...


CARVILLE: And you know John McCain is a very brave man.


BLITZER: All right...

WALL: ...engaging liberal talk show hosts...

BLITZER: All right.

WALL: Al Franken and others.

BORGER: Well, in fact, McCain has been...

WALL: I don't...

BORGER: ...has been at the receiving end of Rush Limbaugh. He has.

BLITZER: Guys...

WALL: Well, he recognizes how popular he is in the party.

CARVILLE: Again, I...


CARVILLE: ...I congratulate Rush on his position as the number one Republican in the country.

BLITZER: All right, guys. We'll leave it on that note.

Thanks very much.

We'll get ready for Super Bowl Sunday.

Let's check in with Lou to see what's coming up at the top of the hour.

What are you working on -- Lou?

LOU DOBBS, CNN ANCHOR: Well, this was very timely, Wolf, because we will be talking about Rush Limbaugh. And we'll be talking about the effort by and the Obama administration to drive a wedge between the most powerful voice in communications for the Republican Party and the Republican Party rank and file, as well as the Republicans on Capitol Hill. It is a coordinated attack on one of the country's most popular talk show hosts. We'll be talking about that.

And President Obama and Vice President Biden launching a task force to help our middle class.

Is it going to be enough?

We'll have complete coverage.

And we'll also be helping out that new task force with a -- with a little research.

And outrage tonight over the huge amount of stimulus money being spent on creating government jobs, but not private jobs. And we'll have that in our special coverage, Lou's Line Item Veto.

Also, big business and ethno-centric special interest groups combining, trying to destroy the most effective government program against illegal immigration. It's called eVerify.

What will the Obama administration do?

Will it surrender to special interests?

We'll have that report.

And two leading senators join me -- one Republican, one Democrat. Senator Jeff Sessions and Senator Ben Nelson will be talking about eVerify and this $1 trillion spending -- at least right now -- spending and borrowing legislation.

Join us for all of that and more at the top of the hour -- Wolf, back to you.

BLITZER: We'll see you then, Lou.

DOBBS: You got it.

BLITZER: Thank you.

And speaking of Rush Limbaugh, he's going after our own Ali Velshi. They're going head-to-head over tax cuts, with Limbaugh calling our chief business correspondent, Ali Velshi, not such nice names. We'll tell you what's going on because Ali is standing by live. He's going to be responding to Rush Limbaugh.

That's coming up next.


BLITZER: All right. There's a story just developing.

I want to bring back our senior Congressional correspondent, Dana Bash.

It involves the nominee to become the secretary of Health and Human Affairs, Tom Daschle -- Dana, what are you picking up?

BASH: Well, this nomination has been delayed for some time. Tom Daschle has not even had a confirmation hearing before the committee that will confirm him. And now we know at least part of the reason why.

And that is that Tom Daschle was lent a car and driver by a friend for years and he did not declare it on his income taxes, as he should have.

Now, we understand that since -- since -- I believe the vetting process has begun, he has paid what he owed. But this has been part of the reason why his nomination has been held up. And, in fact, the Senate Finance Committee is going to hold a closed door meeting on Monday at 5:00, which Daschle may actually attend, to discuss this matter that has obviously put a kink in his nomination and his confirmation. I can tell you that this is just one of the issues. Another is -- a committee source actually confirms to us that they are looking into a relationship he also had with an education loan company.

So these are just a couple of reasons why Tom Daschle has not become the HHS secretary to date. And there certainly is going to be a meeting on Friday to look into whether or not these are issues that really hinder his -- his confirmation.

BLITZER: All right. We'll stay on top of this.

Dana, thank you.

Meanwhile, a very public difference of opinion is brewing between CNN's chief business correspondent, Ali Velshi, and the popular radio talk show host, Rush Limbaugh.

At issue, just how effective are tax cuts?

Here's what Ali said last night.


ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: When companies take tax cuts, the idea is they use the savings to reinvest, build factories and pay people and get going.


VELSHI: You know what happens in a recession?

Any cash that they get, any savings that they get, many companies will just hold. Many individuals -- that's why they won't spend the money.

BROWN: Right.

VELSHI: They'll hold it to prepare for the worst. You know that on the other side of the recession, business is good. But you may not spend it until then. So anybody who tells you this is how it works is lying. We don't know how it works. We have never seen anything like this before.


BLITZER: Rush Limbaugh immediately took issue with Ali's comments, even calling him on it by name.


RUSH LIMBAUGH, RADIO TALK SHOW HOST: In fact, Mr. Velshi, the entire economy -- the GDP rose 1.3 percent for all of 2008. It was down 3.8 percent in the fourth quarter, but it grew 1.8 percent the whole year. Now, Mr. Velshi, after calling me a liar -- and I'm not even a business reporter, but you pretend to be. 1986, GDP down over 6 percent. We were in a recession.

What was the centerpiece of Mr. Reagan's economic recovery plan, Mr. Velshi?

Let me spell it for you -- T-A-X space C-U-T-S.


BLITZER: All right, let's go to Ali right now -- Ali, what do you make of all of this?

VELSHI: Well, it's a common argument. It's growing less common -- people who think that tax cuts are the only solution. Now, I've never come out against the idea of tax cuts, Wolf. I'd like to pay less taxes myself.

The issue is this. Unlike 1986 or 1982 or -- or any other time, we have never had a near complete freeze of credit.

What that means is that companies cannot raise money easily. That's why interest rates are so low, because nobody actually wants to borrow and nobody wants to lend.

So this is an environment where people are not necessarily taking their money.

I don't think, on a long-term basis, tax cuts are a bad idea. I don't know that they are the answer.

But I was just making the point that it is not a widely held opinion that that is the only solution in a recession. This is very different. There are many, many measures by which this recession and this economic crisis we're in are very different from prior recessions.

So, you know, it's a thing that people can disagree on. But that's the point I was making. And, clearly, Rush Limbaugh doesn't agree with that -- Wolf.

BLITZER: Clearly. And Ali is going to have a lot more on this in an hour on Campbell Brown's "NO BIAS, NO BULL." That's coming up at 8:00 p.m. Eastern.

Let's check back with Jack Cafferty once again for "The Cafferty File" -- Jack.

CAFFERTY: Something considerably less weighty. The question this hour is where would you like to live if you could live somewhere else?

Daniel wrote from Budapest, Hungary: "The only city I always wanted to live in is where you're seated in front of the camera right now. New York is the greatest place on earth. It's not a question for me. I wish I had a green card to work there or was a millionaire and could buy a condo on Fifth Avenue with a view of Central Park."

Chris in California writes: "Anywhere I can find a good job."

Charlie in Belen, New Mexico: "I'm already there, Jack. I used to have to shovel snow. Now when it snows, I sit on my retired keister and by the time I finish my cup of coffee, it's melted. I go outside at night and I see a sky full of stars. And I can stand on the road and look out over an area larger than the State of Connecticut. What else would I want?"

Ann in New Hampton, New Jersey says: "Since I live in the State of New Jersey, that has the highest tax rate and not much else, probably down South somewhere, where the living is easy and the taxes are low."

Mary Alice in Columbus, Ohio: "After the week we've had, I would like to live in any city that actually understands the concept of snow and ice removal."

Dave writes: "Jack, I'd like to live over a deli."

Frankie says: "In the sixties, Jack. Peace and love."

And Casey says: "I'd like to live with you, Jack, in order to brighten your day."

If you didn't see your e-mail here, you can go to my blog at and look for yours there among hundreds of others.

BLITZER: Have a great weekend, Jack.

Thanks very much. See you back here on Monday.

Jack Cafferty with The Cafferty File.

In Florida, two players for the Arizona Cardinals share a laugh as they get ready for Sunday's Super Bowl. It's one of our "Hot Shots," pictures often worth a thousand words.

And we're going to have a special word for you about Saturday night, 6:00 p.m. Eastern. THE SITUATION ROOM goes six days a week. We'll tell you what's going on, right after this.


BLITZER: Here's a look at some of the "Hot Shots" coming in from our friends over at the Associated Press -- pictures often worth a thousand words.

In Japan, a crew member checks on a new jet powered partly with biofuel.

In England, autoworkers leave after a plant is temporarily shut down until June.

In Brazil, Indians from the Amazon attend the World Social Forum, with hopes of preserving the homeland.

And in Florida, look at this -- two Arizona Cardinal football players exchange laughs while prepping for the Super Bowl, which happens to be, as you know, this Sunday.

Pictures among our "Hot Shots" -- pictures often worth a thousand words.

Please be sure to catch THE SITUATION ROOM tomorrow, 6:00 p.m. Eastern, Saturday night. We're starting six days in THE SITUATION ROOM.

Among our guests tomorrow, the former president, Jimmy Carter; the new chair of the Senate Intelligence Committee, Senator Dianne Feinstein; and Gwen Ifill. She's got a new best-seller on -- about President Barack Obama.

We want you to join us tomorrow. THE SITUATION ROOM, 6:00 p.m. Eastern.

Until then, have a great weekend.

Thanks very much for joining us.

I'm Wolf Blitzer in THE SITUATION ROOM.

Up next, LOU DOBBS TONIGHT -- Lou?