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President Obama Signs SCHIP Into Law/President Puts Lid on Executives' Pay/Cheney Warns of Catastrophic Attack/From Stand-Off to Love-In/Volcano on the Verge/Something's Better Than Nothing

Aired February 04, 2009 - 17:00   ET

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

OBAMA: Since it was created more than 10 years ago, the Children's Health Insurance Program has been a lifeline for millions of children whose parents work full-time and don't qualify for Medicaid, but through no fault of their own, don't have and can't afford private insurance.

For millions of children who fall into that gap, SCHIP has provided care when they're sick and preventive services to help them stay well. This legislation will allow us to continue and build on these successes.

But, as I think everybody will agree, this is only the first step. The way I see it, providing coverage to 11 million children through SCHIP is a downpayment on my commitment to cover every single American.

(APPLAUSE)

OBAMA: And -- and it is just one component of a much broader effort to finally bring our health care system into the 21st century. That's why the economic Recovery and Reinvestment plan that's now before Congress is so important.

Now, think about this. If Congress passes this recovery plan, in just one month we will have done more to modernize our health care system than we've done in the past decade. We'll be on our way to computerizing all of America's medical records -- which won't just...

(APPLAUSE)

OBAMA: ...it won't...

(APPLAUSE)

OBAMA: ...it won't just eliminate inefficiencies. It won't just save billions of dollars and create tens of thousands of jobs, but it will save lives by reducing deadly medical errors. We'll have made the single largest investment in prevention and wellness in history -- attacking problems like smoke and obesity and helping people live longer, healthier lives.

And we'll have extended health insurance for the unemployed, so that workers who lose jobs don't lose their health care, too.

Now... (APPLAUSE)

OBAMA: Now let me say this. In the past few days, I've heard criticisms of this plan that, frankly, echo the very same failed theories that helped lead us into this crisis in the first place -- the notion that tax cuts alone will solve all our problems; that we can address this enormous crisis with half steps and piecemeal measures and tinkering around the edges; that we can ignore fundamental challenges like the high cost of health care and still expect our economy and our country to thrive. I reject these theories -- and, by the way, so did the American people when they went to the polls in November and voted resoundingly for change.

(APPLAUSE)

OBAMA: So I urge members of Congress to act without delay. No plan is perfect and all of us together -- Democrats and Republicans -- should work to make it stronger. But let's not make the perfect the enemy of the essential.

Let's show people all over our country who are looking for leadership, who are desperate for leadership right now, that in difficult times, we're equal to the task.

Let's give America's families the support they need to weather this crisis. In the end, that's all that people like the Seacrests are looking for -- the chance to work hard and to have that hard work translate into a good life for their children.

I'm pleased to report that the Seacrest story had a happy ending. It turned out that Gregory's two sons were eligible for SCHIP. And they are now fully covered, much to his relief and his wife's relief.

I think Gregory put it best when he said: "Kids look at us and think that we will take care of them."

That's -- every parent here has that experience. You look at your children and you know that they're looking back at you and they're saying, you're going to take care of me, aren't you?

That's our job -- to keep them healthy and to keep them safe and to let them dream as big as their dreams will take them. That's what I think about when I tuck my own girls into bed each night. And that's what I want for every child -- every family in this nation.

That's why it's so important that Congress passes our recovery plan, so we can get to work rebuilding America's health care system.

It won't be easy. It won't happen all at once. But this bill that I'm about to sign, that wasn't easy, either.

(LAUGHTER)

OBAMA: That didn't happen all at once, either. And yet here it is waiting for me to sign. The bill I sign today is a critical first step. So I want to thank all of the state and local officials, all the advocates and ordinary Americans across this great country who fought so hard to get it passed.

I want to personally thank every single member of Congress who is here -- a bipartisan group...

(APPLAUSE)

OBAMA: ...who worked tirelessly...

(APPLAUSE)

OBAMA: ...worked tirelessly for so long that we could see this day. And I want you all to know that I am confident that if we work together, if we come together, we can finally achieve what generations of Americans have fought for and fulfill the promise of health care in our time.

So thank you very much, everybody.

Thank you.

(APPLAUSE)

BLITZER: All right. So the president -- he's shaking hands with some of the members of Congress who have come for his moment. He's about to sit down at that little table and sign this legislation into law. It's called the Children's -- the technical name is the State Children's Health Insurance Program.

Right now, about seven million kids get insurance this way. But the Senate and the House passed legislation to expand it by another four million or so. Maybe 11 million kids will now get this insurance.

It's going to cost taxpayers about $32 billion -- $33 billion over the next five years. But there will be additional revenue coming in from a higher federal tobacco tax.

And so there you're seeing these live pictures of the president signing this legislation into law, recalling that the former president, George W. Bush, vetoed the legislation. Republicans were critical, by and large, of the legislation, saying that it would take an estimated two-and-a-half million children who otherwise have access to private insurance and, in effect, force them to join the State Children's Health Insurance Program. They also said it was way too expensive.

But in -- under any circumstances, in any case, this is now becoming the law of the land. And there it is. The president finished signing it. He'll give those pens out to some members of Congress and others as souvenirs and then he'll get on with the business.

Meanwhile, the public spoke and the president listened to the outrage. Today, he put a lid on pay for top executives at firms taking federal bailout funds. The new limit -- half a million dollars in salary.

Let's go to Mary Snow.

She's working this story for us.

He did this earlier in the day and he was clearly passionate when he -- when he announced his intentions.

MARY SNOW, CNN CORRESPONDENT: And, Wolf, it was an answer to the public fury over Wall Street excesses. And for executives used seven figure salaries, this could mean big cuts.

(BEGIN VIDEOTAPE)

SNOW (voice-over): President Obama calls the new salary rules basic common sense. They follow the backlash over billions in bonuses doled out to financial executives while their firms take in taxpayer bailout money.

OBAMA: And we certainly believe that success should be rewarded. But what gets people upset -- and rightfully so -- are executives rewarded for failure.

SNOW: The $500,000 cap would apply to top executives at firms getting what the president described as extraordinary help from taxpayers. Anything on top of that would have to be given in the form of restricted stock that could only be paid out after the company pays the government back with interest.

One compensation expert calls the bonus cap draconian, saying many underlings make more than that.

JAMES REDA, JAMES F. REDA & ASSOCIATES: There's about a thousand people at those companies that actually make $500,000 or more. So it's not -- it's a very low starting point.

SNOW: The new rules don't apply to money already given out. Citigroup, Bank of America and AIG are among the biggest bailout recipients so far and needed the money to survive. If these companies took more money federal money, here's how a $500,000 salary cap compares to what CEOs at these companies made in the past, including bonuses.

Bank of America's CEO earned more than $23 million in 2007. The new rules would mean a drop of more than $22 million.

AIG's CEO, in 2007, earned more than $10 million.

Citigroup CEO's, who took over at the end of 2007, made more than $3 million.

The salary caps are tough to swallow on Wall Street.

ANDY SERWER, MANAGING EDITOR, "FORTUNE": The fear by the banks is that this top talent will simply leave the banks and go to hedge funds or even any other institution that's not overseen by the government. (END VIDEO TAPE)

SNOW: Now, Wolf, there was also some talk today that the new caps might have the unintended consequences of having companies not accepting TARP money, hence slowing down the recovery process. But many say the writing is on the wall for these firms.

And at the financial firms we just mentioned, the CEOs have said either they won't take bonuses this year or they're working on a $1 salary -- Wolf.

BLITZER: Mary Snow, thanks very much.

Let's check in with Jack.

He has The Cafferty File -- Jack.

CAFFERTY: Despite all the lofty talk during the election about change, hope and ushering in a new era in Washington, most people don't think it's happening.

A new Gallup Poll shows only 21 percent of Americans think the tone and level of civility between Democrats in Washington and Republicans in our nation's capital has gotten better since President Obama came into office last month. Twenty-three percent actually think things have gotten worse. And more than half, 51 percent, say they've stayed the same.

The poll also found that Democrats are more likely to say things are improving -- not surprising, since they have one of their own in the White House. While Republicans are more likely to say things are getting worst. Independents about evenly split.

Last week's party line vote in the House of Representatives on the economic stimulus package was the nation's first look at how Washington might operate during the Obama administration. And the partisanship looked a lot like what we saw under President Bush, didn't it?

This vote came despite the president's efforts at bipartisanship, including a stop on Capitol Hill to meet with Republican leaders and hosting a bipartisan Super Bowl party at the White House.

"The New York Times" reports Republicans have been scoring invitations to the White House almost as often as the Democrats have. One Republican Congressman who went to the Super Bowl party said: "Such meetings humanize and personalize your opponent and that helps put people -- helps people," rather, "put politics aside."

So the question is this -- what is your prescription for ending the bitter partisanship in Washington, D.C. ?

Go to CNN.com/caffertyfile, where you can post a comment on my blog -- Wolf.

BLITZER: Jack, thank you. Jack Cafferty with The Cafferty File.

Former Vice President Dick Cheney raising eyebrows only weeks after leaving office, with a highly unusual slam against the new president. He says the Obama administration has him worried about a terror attack.

Also, the first lady, Michelle Obama, raising her own public profile -- her visit to the Housing Department today and her call for critical action.

Plus, Denny's Grand Slam giveaway -- it had people across the country lining up for a free breakfast.

But will the massive marketing plot pay off?

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Just two weeks out of office, the former vice president, Dick Cheney, is already suggesting the new administration may not necessarily be up to the task of protecting Americans against a catastrophic terror attack.

We've asked Brian Todd to look into the story for us -- pretty stunning comments from Dick Cheney.

What exactly did he say that's causing this kind of uproar?

BRIAN TODD, CNN CORRESPONDENT: Really getting on this administration for it reductions to handle a terrorist attack, Wolf.

The timing and content of Dick Cheney's remarks very surprising. Now a little more free to speak his mind, he unloads on the terror threat and the ability of this White House to handle it.

(BEGIN VIDEOTAPE)

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: The Senate will be in order, please.

TODD (voice-over): In striking, blunt language, Dick Cheney gives a chilling threat assessment. In an interview with Politico, the former vice president warns there's a high probability that terrorists will try to use the world's most destructive weapons against the United States.

CHENEY: A nuclear weapon or a biological agent of some kind. The potential ability of an Al Qaeda organization or an al Qaeda group to get their hands on that kind of weapon and deploy it in the middle of one of our own cities. That's the ultimate threat.

TODD: How does Cheney think the new administration is handling the threat?

CHENEY: When we get people who are more concerned with reading their rights to an al Qaeda terrorist than they are we protecting the United States against people who are absolutely committed to do everything they can to kill Americans, then I worry.

TODD: Who precisely in the Obama administration would be more concerned about reading Al Qaeda its rights than protecting the U.S. against terrorists Cheney never mentions.

Cheney called Guantanamo "a first class program," said protecting the country is a "tough, mean, dirty, nasty business."

He didn't single out President Obama personally, but suggested there's a naive mindset in the current administration.

Contacted by CNN, the White House wouldn't comment.

Analyst David Gergen says it's understandable for Cheney to defend his own record, but says he may be pre-judging the president.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST, FORMER PRESIDENTIAL ADVISER: He has said, yes, he wants to close down Guantanamo, but he wants to wait a year -- up to a year to figure out how to do it. He's not rushing into or willy-nilly trying to close down and let people free.

(END VIDEO TAPE)

TODD: Still, Cheney didn't reveal any doubts about the policies he was associated with as vice president, saying if it hadn't been for enhanced interrogation or the surveillance program: "We would have been attacked again" -- Wolf.

BLITZER: Speaking his mind, the former vice president.

I suspect he's going to be doing a lot more of that.

TODD: Right. Not retiring into the shadows here.

BLITZER: No. Not -- not by any means.

Thanks very much, Brian, for that.

It may not necessarily be a love fest just yet, but suddenly there's a little bit of that chill that's off of the U.S.-Russian relationship.

Here's CNN's international security correspondent, Paula Newton -- Paula.

PAULA NEWTON, CNN INTERNATIONAL SECURITY CORRESPONDENT: Wolf, you know, Obama's been talking about clenched fists, outreach hands. Well, Russia seems to be listening.

(BEGIN VIDEOTAPE) NEWTON (voice-over): Just months ago, some wondered if we were headed for a new cold war. Russia was pounding Georgia, a close American ally. It was starting to deploy nuclear missiles at its European outpost, Kaliningrad, rattled over U.S. plans for a missile shield in Europe. And then Russian President Dmitry Medvedev chimed in, greeting the Obama victory by calling America "dangerous and egotistical."

But from the big chill, there could now be a nearly instant thaw. And the new tone is matched by new moves. Russia says it's ready to deal on a whole new era of arms control talks. The U.S. administration confirmed it's fast-tracking the renewal of the Strategic Arms Reduction Treaty, or START -- the landmark cold war arms control treaty.

ROBERT WOOD, STATE DEPARTMENT SPOKESMAN: I'm not going to get into specific numbers, but the administration is very serious about further reductions in nuclear weapons.

NEWTON: That backs up what secretary of State Hillary Clinton said during confirmation hearings -- she wants Russia to know she's serious.

HILLARY RODHAM CLINTON, SECRETARY OF STATE: To get America back in the business of engaging other nations to reduce nuclear stockpiles.

NEWTON: The love-in continued in Moscow. In an interview earlier on Wednesday, Agence France-Presse, Russia's deputy prime minister was quoted as saying: "We welcome the statements from the new Obama administration that they are ready to enter into talks and complete within a year, in this very confined time frame, the signing of a new Russian-U.S. treaty on the limitation of strategic attack weapons."

Just last week, out of the blue, Russia reversed itself and said those missiles pointing an American allies in Europe won't be deployed to Kaliningrad after all.

The payoff of any new relationship -- Russia could have a hand in solving stubborn security problems, like neutralizing the Iranian nuclear threat.

JOE CIRINCIONE, NUCLEAR WEAPONS EXPERT: It's very difficult to envision a solution to the Iranian problem without Russia's active participation.

(END VIDEO TAPE)

NEWTON: And not just Iran. With America and Russia heading back to the negotiating table, other peace dividends could be possible -- Wolf.

BLITZER: All right, Paula.

Thank you.

Paula Newton reporting.

Long waits for benefits, poor medical care -- all while the Veterans Administration drowns in paperwork.

(BEGIN VIDEO CLIP)

ERIC SHINSHEKI, VETERANS AFFAIRS SECRETARY: You would see individuals sitting at a desk with stacks of paper that go up halfway to the ceiling.

(END VIDEO CLIP)

BLITZER: The new head of the Veterans Administration, General Eric Shinseki, on the daunting task of reforming a struggling agency.

Plus, the controversy pitting a well-known actress against former vice presidential candidate, Sarah Palin. Now the governor says Ashley Judd is part of an extreme fringe group.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: They're apparently getting ready for a volcano in Alaska.

Let's go to Sterling, Alaska right now.

Jim Spellman is standing by -- I take it Iditarod dogs -- and there are some near you -- they're being evacuated.

What's the latest -- Jim?

JIM SPELLMAN, CNN CORRESPONDENT: Well, Wolf, as you may know, dog sled racing is quite a big deal up here in Alaska. I'm at a mixture (ph), mixed (INAUDIBLE) dog sled operation here. And the Iditarod starts in just four weeks. And these dogs are out here training every day.

And if the ash starts to fall, they've got to get them out of here. They've got to get them somewhere they can keep training.

So they've got their trucks and trailers lined up. There are probably about 100 dogs here. And they're ready to hit the road and fall back to other spots in Alaska, and all the way to Anchorage, if they have to, so that they're ready for the big race in four weeks.

BLITZER: All right. Be careful over there, Jim.

We'll check back with you tomorrow.

Jim Spellman is up in Alaska getting ready for a volcano.

Remember that Super Bowl commercial -- this one? (BEGIN VIDEO CLIP FROM COMMERCIAL)

UNIDENTIFIED MALE: Isn't it time for a serious breakfast?

This Tuesday, from 6:00 a.m. To 2:00, Denny's is giving a free Grand Slam to everyone in America.

(END VIDEO CLIP)

BLITZER: Two million people take up the restaurant's chains offer of a free meal.

But will that very expensive marketing ploy pay off?

And stacks of paper reaching halfway to the ceiling -- that's new Veterans Affairs secretary describes his department -- what he plans to do about it.

Plus, is the stimulus package spanning out of control?

Can President Obama rescue his rescue plan?

James Carville is standing by.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, a bizarre bombing in Arkansas -- police say an explosive device ripped through a doctor's car today, critically injuring him. A federal investigation is now underway.

Warnings unheeded -- a whistleblower tells Congress banking regulators let Bernard Madoff get away with fraud for years. His fiery accusations coming up.

And Michelle Obama addressing one of the country's most pressing problems -- foreclosure. The first lady tells Housing Department employees more needs to be done to keep Americans in their homes. We'll hear at length from Michelle Obama. Also, Soledad O'Brien is standing by live.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Let's get back to the economic stimulus plan right now, which seems to be in serious trouble in the U.S. Senate. Unclear whether right now the president of the United States and fellow Democrats have the necessary 60 votes to see it passed.

Let's go to our senior political analyst, Bill Schneider. He's taking a look at how the American public feels about this stimulus plan -- Bill, what are you seeing?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Cautiously favorably, cautiously optimistic.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): What does the public think Congress should do with President Obama's stimulus plan?

The "USA Today"/Gallup Poll just asked them.

Just 38 percent said Congress should pass the plan basically as President Obama has proposed it. Another 37 percent said pass it, but only after making major changes. Only 17 percent want Congress to reject the president's plan.

Add the top two responses, and you get three quarters of Americans who say pass something -- but maybe not exactly this.

The president himself said he's open to making changes to get bipartisan support.

OBAMA: There are going to be a whole host of good ideas out there. And we welcome all of them.

SCHNEIDER: But are Republican voters open to a stimulus bill?

Yes, they are. Only 35 percent of Republicans just say no.

SEN. OLYMPIA SNOWE (R), MAINE: We need a stimulus package. Of that, there's no dispute.

SCHNEIDER: The prevailing view among Republicans -- make major changes.

SEN. JOHN ENSIGN (R), NEVADA: We think we could dramatically improve the bill. We don't need to have everything that Republicans want.

SCHNEIDER: Does the public think the president's stimulus plan would help the economy?

A little. Only 17 percent say it would make the economy a lot better. And 17 percent say it would make the economy worse. Fifteen percent don't think the president's plan would have any affect at all.

The president himself doesn't promise a quick recovery.

OBAMA: It's going to take some time. And I think the American people recognize that.

SCHNEIDER: And the voters don't expect a quick recovery. Even among those who believe the plan will make the economy better, 85 percent think it will take longer than a year. (END VIDEOTAPE)

SCHNEIDER: The president doesn't have to go for a bipartisan stimulus plan, but he wants one and so does the public. Wolf?

BLITZER: All right Bill. Thanks very much.

Let's assess what's going on. Joining us now, our CNN political contributor, the democratic strategist James Carville and the republican strategist Tucker Eskew. Thanks very much for coming in.

Here's what Maureen Dowd, James, wrote in "The New York Times" times today among other things, "the democratic president has been spending so much time trying and failing to win over republicans that he may not have noticed the disillusionment in his own ranks." Is there a serious disillusionment among the democrats?

JAMES CARVILLE, DEMOCRATIC STRATEGIST: I don't think it's disillusionment. I think there's a sense we need to get started. I thought he made a good point today. The republicans have been in denial about this economy for a long, long time. It's their policies that caused this. If they want to help, come on. The prime minister of Britain said we're in a depression. You have men testifying on Capitol Hill today for eight years they're trying to beat down the door to republicans Security and Exchange Commission and got knighting but a bunch of deregulatory pats. So these are the kind of people, they start a fire and are bringing the fire trucks in and they're blocking the streets. The extent the republicans want to grab a hose and try to get this thing going, that's fine. The ones that don't, I think democrats say let's get moving without them.

BLITZER: Tucker, did the president and his fellow democrats have the 60 votes they need in the Senate to get this legislation passed?

TUCKER ESKEW, REPUBLICAN STRATEGIST: They don't have those votes. James is in Louisiana. Senator Landrieu is opposed as it stands. Senator Nelson from Nebraska is opposed.

BLITZER: Those are both democrats.

ESKEW: Both democrats. James did a good job of turning it on to republicans, but let's not forget it's your friends that do the most harm to you in politics and the democrats in the house side and some in the senate are harming President Obama's chance to get this passed. It turned from a Christmas tree into a sloppy kitchen's garbage can. It's so overloaded. The republicans and democrats are very skeptical.

BLITZER: Go ahead James.

CARVILLE: I find it amazing that the republicans wasted $3 trillion on the Iraq war and we're trying to get around a trillion dollars to stop a depression. I don't think it's sunk into the republicans in Washington. I'm in Louisiana. People understand what's going on. Let me clue you guys in. The times are bad out here. People are losing their jobs. People are afraid that, they're losing their 401(k)s and it's time for you guys to get out the way and let the fire truck come in and put this fire out.

ESKEW: The people are afraid the fire truck's about to run them over, James. Bill Schneider's a king analyst but he missed the fact that only 30 percent of the people in that Gallup poll believe the plan that's currently constructed will actually help them and be effective. I think that's a troubling indictment. President Obama should have higher numbers than that for his main initiative and I think building on some of what he's done in the way of outreach, holding out off some of his left wing, not listening to the "New York Times" editorial page on this and driving up the middle could produce some strong bold results and republicans do.

BLITZER: Well that raises the question, James, whether the president was badly served by some of the more liberal members of the house including the speaker Nancy Pelosi.

CARVILLE: I don't know. But I don't know this. The editorial page of the "New York Times" didn't cause this recession. Republican policies did. This sort of philosophy that you just let these guys on Wall Street have anything they want, that's put us behind the eight ball here. I think there are things that we can do and we need to do fast. We're sitting here like we have all kinds of time here. Things are deteriorating rapidly in this county and we've got to get something out there fast. I was glad to see the president is talking in terms of if we don't do this, we'll be facing a catastrophe which everybody understands is the case. This is a sound economy in September, they're not, I don't think it's really sunk in what we're faced with.

BLITZER: And Tucker, as gloomy as the president is in talking about a catastrophe out there, it was only a few weeks ago that the Bush treasury secretary Henry Paulson was saying even worse that the country was on the verge of another great depression unless it acted very quickly in bailing out those big banks.

ESKEW: I heard James say both things, that Americans understand and republicans don't. I think republicans are Americans who understand the gravity of this situation and want something bold and something actually that would be more akin to what President Obama initially proposed, which is front load this spending so republicans can hold their nose and favor an 18-month timeline then pack in a bunch of broad tax cuts. Something like suspending the payroll tax and help all workers, suspend corporate capital gains tax.

CARVILLE: Let me tell you what. Don't worry, folks, they're going to give you a capital gains tax cut. I'll tell you this Tucker people are not getting any capital gains out there. I'm going to shock you with this, but the stock market is down 40 percent. A capital gains tax cut is not going to stimulate anything just to let you know just in case you didn't know.

ESKEW: I'll teach you a little on economics another time.

BLITZER: Guys, listen to the former vice president, Dick Cheney, gave an interview to the Politico website and among other things, James, he said -- listen to Dick Cheney. DICK CHENEY, FMR. VICE PRESIDENT: I'd start to worry about it if I were a democrat. Because there's nothing more dangerous in the political wars than hypocrisy. At some point, we're going to hit critical mass especially after we've had all this talk about I'm never going to hire a lobbyist, there aren't going to be any lobbyists working in government in this administration."

BLITZER: What do you think about that? Some advice for the former vice president?

CARVILLE: Anytime that the vice president wants to go on TV and give the republicans advice, I guess is he trying to subplant Rush Limbaugh as their chief strategist? I understand they have Joe the plumber there giving advice today. The vice president's retired. He's a highly partisan republican and he's certainly entitled to give his opinions.

ESKEW: Look, from my perspective, I think that republicans and Americans respect the fact that this administration kept Americans safe. There's a lot to differ over. We did keep Americans safe. Dick Cheney had a major role in that. We commend him for that. His place on the stage, he would agree. He's carried out his term. Republicans are coming up, coming forward in this party, our new party chairman Michael Steele and others will be strong voices for a strong defense and I hope President Obama will heed some of what republicans call for.

BLITZER: He's certainly meeting with enough republicans. He's hearing from a lot of them. We'll see what he does. All right. Good discussion, thanks very much.

ESKEW: Thank you.

BLITZER: An actress, activist, singles out the former republican vice presidential nominee Sarah Palin.

UNIDENTIFIED FEMALE: When Sarah Palin came on the national scene last summer, few knew that she promotes the brutal aerial killing of wolves.

BLITZER: Now Sarah Palin is firing right back. We have details of what she's saying about Ashley Judd.

Plus, the first lady Michelle Obama drops in and says hi. But she also delivers a serious message at the housing department. The first lady in her own words raw and unfiltered, that's coming up. So is Soledad O'Brien.

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

(COMMERCIAL BREAK)

BLITZER: The battle is on between Governor Sarah Palin of Alaska and the actress Ashley Judd over Alaskan wildlife. The governor says Judd is part of an extreme fringe group. Let's go to our internet reporter Abbi Tatton. She's going to explain what is really going on. What is going on Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, it's because of this. A new environmental ad campaign that puts the actress against the governor. Take a listen.

ASHLEY JUDD, ACTRESS: This is Ashley Judd for Defenders of Wildlife Action Fund. When Sarah Palin came on the national scene last summer, few knew she promotes the brutal aerial killing of wolves.

TATTON: Judd, who campaigned for President Obama, is referring to a controversial practice in Alaska that allows aerial wolf hunting to protect moose and caribou. The ad is from the Defenders of Wildlife Action Fund and now Governor Palin has hit back calling the makers an extreme fringe group that distorts the goal of Alaska's programs. The issue of predator hunting also came up last year on the campaign trail. Governor Palin then called it a big darn controversial deal up there in Alaska adding it's just quote, Far East Coast politicians, end quote, who think it's politically incorrect. Wolf?

BLITZER: We'll watch the story, Abbi. Thanks very much.

The retired, four-star army general who has taken over as secretary of veterans affairs is vowing what he calls a brute force effort to reform his department. Let's bring in our Pentagon correspondent Chris Lawrence.

General Shinseki, he's not mincing any words on Capitol Hill.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: It shouldn't be Wolf. Right now, the veterans are waiting six months or more for the government to process their claims, which everyone agrees is unacceptable.

(BEGIN VIDEOTAPE)

LAWRENCE: Veterans go broke waiting for benefits and injuries go undiagnosed. These are problems the VA is supposed to solve, but here's how its new chief describes a typical VA office.

ERIC SHINSEKI, VETERANS AFFAIRS SECRETARY: You'll see an individual at a desk with stacks of paper halfway up to the ceiling. As they finish one pile, another comes in.

LAWRENCE: Eric Shinseki told congress it takes 11,000 workers to sort through those piles, enough to staff the 82nd airborne.

SHINSEKI: And as they finish one pile, another pile comes in.

LAWRENCE: Shinseki says he's committed to Obama's goal of going paperless by 2012, but the VA has had problems with electronic data, paying $20 million to settle a lawsuit after a VA laptop was stolen with personal information on 26 million troops. UNIDENTIFIED MALE: Everything's electronic. It's a database that can be hacked into to get medical records. I don't want my medical records and social security number given out.

LAWRENCE: For some troops, there is still a stigma with asking for help with post-traumatic stress disorder.

UNIDENTIFIED MALE: A lot of injuries that happen in wartime that aren't obvious or aren't physical. Also, people have seen some pretty nasty things that would make most of us sit down and cry.

LAWRENCE: Shinseki said since the VA started screening all Iraq and Afghanistan veterans, it's diagnosed 43,000 cases that had not been tracked before and more than a quarter were confirmed as traumatic brain injuries.

SHINSEKI: We still don't understand enough in this area. We're still learning.

LAWRENCE: The committee chairman told Shinseki, some troops lie on the self-evaluations to go home. They all need to be evaluated by a doctor.

REP. BOB FILNER (D), VETERANS AFFAIRS CHAIRMAN: The numbers are too high, the denial too great and the problems are overwhelming us in the civilian world.

(END VIDEOTAPE)

LAWRENCE: The VA is going to hire more than 1,000 workers this year but it's still got to get a handle on its budget. Just a few weeks ago, the Government Accountability Office found that the VA is still low balling its budget estimates to congress. Now Wolf that means tens of thousands of patients might be left without care.

BLITZER: They've got to do something to help these vets. There's no doubt about it. Stay on top of the story for us. All right, Chris? Thanks very much Chris Lawrence our Pentagon correspondent.

The first lady dropping in on workers at the housing department and getting a rock star reception. We're going to play for you her remarks. Stand by. That's coming up.

Plus, it's a questionable marketing plan but Denny's free breakfast is a huge hit with diners.

UNIDENTIFIED MALE: My grand slam is delicious. My grand slam has two butter milk pancakes, two strips of bacon, two eggs over medium. My grand slam is out of this ballpark.

(COMMERCIAL BREAK)

BLITZER: Want to check in with Ed Lavandera. He's got a story that's fascinating a lot of people out there. It involves a restaurant chain Denny's and the decision to give away free breakfast. What's going on?

ED LAVANDERA, CNN CORRESPONDENT: You give away free food anytime and that brings people out of the woodwork. But the question is will this strategy help turn around a struggling company and our viewers out there will be happy to know that the grand slam jokes in this story have been kept to a minimum.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Isn't it time for a serious breakfast? This Tuesday, from 6 a.m. to 2 Denny's is giving a free grand slam to everyone in America.

LAVANDERA: Tens of millions of people saw that commercial during the super bowl and on Tuesday, Denny's official said 2 million people nationwide showed up for a free $6 breakfast including some of CNN's I-reporters.

UNIDENTIFIED MALE: I'm trying to show you the lines that are present here at Denny's.

UNIDENTIFIED MALE: My grand slam has two fluffy butter milk pancakes, two strips of bacon, two eggs over medium.

LAVANDERA: We'll let those I-reporters simply the cheesy one- liners. Denny's says the commercial and free food cost the company roughly $5 million. The restaurant chain reported a 6 percent drop in sales in the fourth quarter of last year and has been losing customers. Now, the restaurant is looking to bring people back.

DAN HOWARD, SMU MARKETING PROFESSOR: I thought it was an excellent commercial especially for these economic times.

LAVANDERA: Southern Methodist University marketing professor Dan Howard says nothing works better than free samples, but also the most expensive form of advertising.

HOWARD: It does not appear to be a cheap promotional ploy. There are a lot of people who appreciate that free meal and it's something they will remember in the future.

LAVANDERA: Even most customers who waited in line for an hour left happy.

UNIDENTIFIED FEMALE: You're always going to be thankful for somebody giving you that free breakfast.

UNIDENTIFIED MALE: It buys Denny's a lot of good will in terms of being sensitive to the times.

LAVANDERA: Was it money well spent? The day after the free breakfast giveaway, the line at this Denny's was gone.

(END VIDEOTAPE)

LAVANDERA: Now some marketing experts say it will take several months to figure out if it pays off for Denny's but wait, there is more. The International House of Pancakes said on February 24th, they will be giving away free pancakes all day long.

BLITZER: All day long? Not just for breakfast.

LAVANDERA: All day long, 7 a.m. to 10:00 p.m.

BLITZER: Wow. OK. Thanks very much. We will see who follows after that, Ed Lavandera reporting.

Let's check in with Jack for the Cafferty file.

Jack?

JACK CAFFERTY, CNN CORRESPONDENT: The question this hour is what is the prescription that you would recommend for ending bitter partisanship in Washington, D.C.?

Terry in Indiana said, "If the economic stimulus package was what it should have been to begin with, Obama would have gotten bipartisan support. Why didn't he realize Democrats were filling it with things they haven't gotten for the last eight years like a bunch of kids who hadn't seen Santa Claus for eight years. My prescription is make it what it should be and get the home mortgage situation settled and do what's necessary to get people back to work and cut the rest of the crap."

Dan in Oregon, "Send a copy of a check made out to the other party to the local congressman or senator. Tell them it's going to go in the mail at the end of the month if there isn't change. Dems need to call out Dems and Repubs need to call out Repubs."

Tim writes, "I think the change has to come from the ground up. Politicians have to make choices that keep their constituents happy or they lose jobs this. This generally means speaking out against the other side and working against them. If we can find the strength to be more patient with elected our representatives, maybe it would give a chance to work towards compromises with the other side without the fear of losing their jobs."

Marie writes, "Term limits, term limits, term limits."

Donna in Wisconsin, "Remind the congressman with a big neon sign daily. Obama is in the white house because we liked what he had to say and believe in him. Republicans don't get it. If we liked their eight years of economic ideas we would have voted for McCain."

Karen in Florida writes, "To the dreamers who is think it's just the republicans, think again."

Tracy said, "How go about good old fashioned Canadian apathy."

If you didn't see your email here, you can go to my blog at CNN/CaffertyFile. Look for yours there among hundreds of others.

BLITZER: All right Jack thank you. The first lady warning workers over at the housing department there is critical work ahead. Michelle Obama in her own words, that's coming up.

The whistle blower who says he warned authorities about what could be the world's largest scam ever.

UNIDENTIFIED MALE: I gift wrapped and delivered the largest ponzi scheme in history and they couldn't be bothered to conduct a thorough and proper investigation.

(COMMERCIAL BREAK)

BLITZER: First lady Michelle Obama is carrying out a new tradition that is by carrying agencies to meet and greet workers. First stop with the education department on Monday, today it was the department of housing and urban development.

MICHELLE OBAMA, FIRST LADY: I'm visiting, trying to visit all the agencies here to say a few things. One to say hello. I want to learn, listen, know what's going on from you. But I also want to say thank you, on behalf of my husband, my family, and this country. Because what we do know even though this is a brand-new administration, the folks working in this department, many of you have been here for decades working hard on the issues that impact our communities, say yes. I can get an amen on that, right?

At times like these, we know times are hard right now. There so many families who have lost their homes. And millions are struggling to keep up with their mortgages. You know this firsthand. You and your colleagues are going to be asked to do even more. That's for sure. It's a critical importance that we stem the tide of foreclosures and find a way to keep people in their homes because what we do know is that homeownership, at least as I know it, growing up on the Southside of Chicago has always been one of the building blocks for strong neighborhoods, for strong schools and strong families.

BLITZER: The first lady speaking earlier today. Let's bring in Soledad O'Brien.

Soledad, I think it's obvious she will be a huge asset for her husband not only here in Washington, but around the country.

SOLEDAD O'BRIEN, CNN CORRESPONDENT: That's why you see her out. If it's sort of if it's Wednesday, it must be the department of housing and urban development. As you mentioned on Monday it was the department of education.

The first lady kind of sticking to the same script, Wolf. A welcome tour of the federal agencies and thank you and now we have to do more. You saw the cheers. People were waiting in some cases more than an hour. She's a rock star. Just to get in and see her. She is addressing them, but because it's televised, the message is bigger than that 600 or so person audience. Her job is to pitch the stimulus package. Her job is to name the name of that new cabinet secretary, Shawn Donovan, now running HUD, and her credibility is in her story. When she talks about education and Greg up in the Southside and the schools she went to. Now about homeownership on the Southside of Chicago. When you look at the dire statistics, you see Chicago is certainly hard hit and foreclosures predicted that 2.2 million homes will be in foreclosure in 2008. That's a likely number and one in 10 Americans. In 10 is either in foreclosure or they are delinquent in payments. She is tapping into something dire that is happening, but she is a rock star and the administration is using her to sell the message.

BLITZER: She speaks with credibility because she is a mother and a daughter and brings that to the table.

O'BRIEN: Absolutely. I mean when she talks about communities and buildings and strength in a community, every single mother out there and every parent nods their head. How can you be against building resilience in a community? It's not possible. They understand the value for her.

It was interesting to see the people holding up phones trying to take a picture while they were talking. These are the employees but really they understand she has this value and this credibility, not only to those 600 or so people at the housing and urban development offices there, but outside, much bigger than that. They will market the credibility to try to push through the stimulus as much as they can.

BLITZER: As we say, she's emerging as a major asset for her husband and this administration. Soledad, thanks very much.