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President Obama Gives Pep Talk on Economy; The Obamas Meet Queen Elizabeth

Aired April 01, 2009 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: Thanks very much.

Happening now: President Obama looks the presidents of Russia and China in the eye. In London, he's reaching out to former enemnies.

Plus, reports of a shocking law in Afghanistan allowing husbands to rape their wives. New questions about the Hamid Karzai government and what U.S. troops in Afghanistan are fighting for.

And it's a prospective college student's worse nightmare come true. Thousands received letters that seemed to show they were accepted to a California university until the school said never mind. I'm Wolf Blitzer in CNN's command center for breaking news, politics and extraordinary reports from around the world. You're in THE SITUATION ROOM.

In London this hour, riot police are out in force after a day of protests surrounding the H-20 summit. Thousands are venting their anger about the global financial meltdown, issue number one for President Obama and other world leaders. Right now, the president is having a busy day of diplomacy, by taking part in a working dinner with other G-20 members. Let's begin our coverage this hour with our senior White House correspondent Ed Henry. He is joining us in London. The agenda was chock full of stuff today. It was jam packed, Ed.

ED HENRY, CNN CORRESPONDENT: That's right, Wolf. The whole point of this trip for the president and chief goal is to try and show he's all over this financial crisis and he's also trying to convince European allies that they should focus on common ground instead of small differences.


HENRY (voice-over): The president and first lady's real debut on the world stage came at 10 Downing Street, the official residence of British Prime Minister Gordon Brown. Later, they rubbed elbows at Buckingham Palace for an audience with the queen.

In between, Mr. Obama got down to business on the financial crisis, trying to defuse tension with France and Germany over how much stimulus should be pumped into the world economy and how broad new regulation should be.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: History shows us that when nations fail to cooperate, when they turn away from one another, when they turn inward, the price for our people only grows. That's how the Great Depression deepened. That's a mistake that we cannot afford to repeat.

HENRY: With the streets of London filled with protesters angry with the G-20 leaders on a series of issues, the president and Mr. Brown urged their colleagues to come together.

OBAMA: We've passed through an era of profound irresponsibility, now, we cannot afford half measures.

GORDON BROWN, BRITISH PRIME MINISTER: This summit cannot simply agree to the lowest common dominator. We must stand united in our determination to do whatever is necessary.

HENRY: And the president declared despite the U.S. facing blame for the crisis and questions about its leadership abroad, America will rise to the occasion.

OBAMA: I came to put forward ideas, but I also came here to listen. Not to lecture. Having said that, we must not miss an opportunity to lead.


HENRY (on camera): Now what the president is really saying when he focuses on listening and not lecture is that he's trying to turn the page from the Bush years. But that doesn't seem to be working with some European allies and the French president, Nicolas Sarkozy as well as German chancellor, Angela Merkel. They held a joint presser today saying they are not going to give any ground over the next couple of days unless there is really serious financial regulation of both hedge funds and overseas tax havens. So it's going to be a thorny issue for this president to deal with, Wolf.

BLITZER: And stand by, Ed, because I want to come back to you shortly. We're going to talk about what happened when the president of the United States met with the president of Russia today. Ed is standing by here in the United States. We're now beginning the 17th month, 17th month in recession. That makes it official. This is now the longest economic downturn in the country's history since the Great Depression of the 1930s. Poppy Harlow of is joining us. Show us this recession, Poppy, as compared to others.

POPPY HARLOW, CNNMONEY.COM: Sure, Wolf. We're going to show you this bar chart here. Because it really puts it in perspective for you folks. When you look at the Great Depression, that lasted 43 months. We're nowhere near there, but we are far beyond what we saw in the recession of the '70s ending in 1975 and the recession ending in 1982. We're beyond that now. April 1st, marking the 17th month of this recession.

The big question, when do we pull out of this, or what are some positive indicators? Folks, we have seen some. We're going to pull them up for you. Very positive readings on the state of the housing market in terms of construction and home sales in February. That was better than expected. Also, when you look at consumer confidence, we just learned yesterday that consumer confidence rose in March from a record low level. That's a big indicator. And also, the stock market boost. This week has been volatile, Wolf, but going into Monday's session, the Dow Industrials were up 17 percent in just three weeks. That's the best run for stocks, Wolf, since 1982. Three very strong indicators that we could be emerging at least from the depths of this recession, Wolf.

BLITZER: Maybe just the end of the beginning as somebody said today. Those are positive signs but there's still plenty to worry about, isn't there?

HARLOW: There is. And it's really important to look at Friday morning. Because before the market opened, eyes around the world will be on one number. That is the March jobs' report. More than 650,000 American jobs expected to have been lost last month. The unemployment rate expected to surge to 8.5 percent and then in just a few weeks, we're going to be in the middle of earnings. We want to hear what the financials have to tell us. Citigroup, Bank of America, I pull these up because these companies told us that they made money in the first two months of this year, Wolf, but two months is one thing, we want to see their quarterly numbers. Both of those indicators, still waiting to see what happens there. Some positive signs, a lot of questions out there still, though, Wolf.

BLITZER: We'll stand by and we'll stay in touch with you, Poppy. Thanks very much.

Let's check in with Jack Cafferty right now for "The Cafferty File". Jack?

JACK CAFFERTY, CNN ANCHOR: With President Obama's tough talk for General Motors and Chrysler, a bankruptcy of one or both companies is now a distinct possibility. And if it happens, the ripple effect on this economy of ours would be serious. Everybody from car owners to dealers, auto workers, suppliers, lenders and of course the American taxpayer would be affected. The government insists it will stand behind the warranties for new GM and Chrysler cars, but that's not going to help someone who is trying to sell a discontinued model, for example.

And if either company goes belly up it could create a shortage of new cars and that could mean it would cost a lot more to buy one. For dealerships, bankruptcy could create a problem getting financing to buy the cars that they hold in inventory on their lots. The government might have to step in here, too. Once again, forcing taxpayers to dig deeper.

Suppliers could also be in trouble. Only those suppliers that a bankruptcy court judge determines to be critical vendors would be eligible to get their money back. As for investors, forget it. In the case of GM, the shares would become pretty much worthless. That's as opposed to the what is it, $1.80 they closed at today.

Finally, it is possible that bankruptcy could cost more than the $21.6 billion the car companies are asking for to stay out of bankruptcy. So it's not a very pretty picture any way you look at it. Here's the question: What would it mean if General Motors or Chrysler or both go bankrupt? Go to and you can post a comment on my blog -- Wolf?

BLITZER: Jack, did you ever hear me say on the air that CNN, that our coverage -- has the best political coverage out there? That we're part of the best political team on television?

CAFFERTY: I never heard you utter those words more than 2 or 3 million times.

BLITZER: Last year, we won an Emmy Award for our political coverage ...

CAFFERTY: I remember.

BLITZER: And today, do you know what the announcement was?

CAFFERTY: I do actually. But go ahead.

BLITZER: Take a look at this Peabody Award - CNN coverage of the 2008 presidential primary and campaigns and debates, we've now been honored with a Peabody Award. Very prestigious in our business as you know.

CAFFERTY: Well, you know, I mean, this is not a very good parallel, but an Emmy compared to a Peabody, that's like a Schwinn bicycle next to a Bentley. A Peabody, those are tough to come by.

BLITZER: Very tough to come by and I'm thrilled that CNN has been honored with a Peabody Award. You know what? We are part of the best political team on television.

CAFFERTY: How about that?

BLITZER: Not only us, other people believe it as well. Thanks, Jack.

CAFFERTY: OK. All right.

BLITZER: President Obama gave Queen Elizabeth an iPod today and walked away with great snapshots and memories. CNN's Richard Quest is about to take us through the photo album and the meeting with the queen.

And it's a startling reversal of fortune for a former Republican senator. The charges against Senator Ted Stevens have been dropped by the Obama administration months after his conviction.

And Sarah Palin is out as the headliner at a big Republican dinner here in Washington. What does that say about her future? James Carville and Alex Castellanos, they are standing live this hour for our strategy session.

(COMMERCIAL BREAK) BLITZER: President Obama tackling a major problem on his first overseas trip as president. The global economic crisis front and center at the G-20 financial summit in London. And even though the talks don't officially begin until tomorrow, meetings and discussions are well under way now.

President Obama was asked what people can do to help the economic recovery.


QUESTION: Mr. President, you just spoke about looking forward and not backward, and you also referenced the voracious appetite of the American consumer. What role should the European and American consumer then play in the quarter that starts today? Should they be spending or saving to alter the velocity of what you just called a slow-rolling crisis?

OBAMA: Well, I think that each family's got a look at its circumstances and make those determinations. You know, obviously, there are a lot of people who are concerned about their job security or they're concerned about seeing their savings having diminished if they were in the stock market. And I think it's an understandable response to be somewhat cautious in the midst of this kind of uncertainty.

I think the best advice I would have would be to say that despite the current hardships, we are going to get through this, and so you should plan, sensibly, in anticipation that this economy is going to recover. And new families -- young families are going to want to buy new homes, and sooner or later that clunker of a car is going to ware out and people are going to want to buy a new car. And, you know, so that basing decisions around fear is not the right way to go.

We are going to get through this difficult time. And I think it is sometimes important to step back and just have some perspective about the differences between now and the Great Depression, when there were no social safety nets in place, when unemployment was 25 or 30 percent. I mean, this is the difficult time, but it's not what happened to our grandparents' generation.

And so, you know, I would ask people to be confident about their own futures. And that may mean, in some cases, spending now as investments for the future.

There's been a debate back home about our budget. In the midst of this crisis, should we deal with health care? Should we deal with energy? Should we deal with education. And one analogies I've used is a family who is having a difficult time.

And I actually get letters like this occasionally from voters. You know, one of our parents has lost their job, savings have declined, and so I'm wrestling with whether or not I should go to college, because that will require me taking out a lot of debt. And maybe it would be more responsible for me to, you know, go find any job that I can to help the family. And when I write back to those families or those individuals, I say, you've obviously got to make these decisions yourself, but don't shortchange the future because of fear in the present. Now, that, I think, is the most important message that we can send not just to the United States, but around the world.


BLITZER: One of the highlights of the president's day, certainly meeting the queen over at Buckingham Palace. Here's what he had to say just hours before that historic event.


OBAMA: As I said, everybody's worked extraordinarily hard to make this successful. We are very grateful for the hospitality.

There's one last thing that I should mention that I love about Great Britain, and that is the queen. And so I'm very much looking forward to meeting her for the first time later this evening. And as you might imagine, Michelle has been really thinking that through because, you know, I think in the imagination of people throughout America, I think what the queen stands for and her decency and her civility, what she represents, that's very important.


BLITZER: So how did the meeting over at Buckingham Palace actually go?

Who better than our Richard Quest to join us now live to help us better understand how it went?

Richard, how did it go?

RICHARD QUEST, CNN CORRESPONDENT: It went extremely well. The Obamas arrived and were welcomed by -- once they got into the audience room -- by Her Majesty the Queen and her husband, Philip, Duke of Edinburgh.

On the key question, did they or didn't they bow -- people get terribly excited about whether or not Americans ever vow to Her Majesty -- if you look at the tape, Wolf, you'll see that there was a firm handshake. And I would say that there was a respectful nod of the president. And if you look at Her Majesty, there was a respectful nod back again.

So, not so much a full-scale bow, but certainly an acknowledgment of two equal heads of state saying hello.

BLITZER: Yes, he did drop his head just a little bit, as you say. He sort of nodded in deference to the queen of England.

What actually, Richard, is the protocol when someone, a commoner, actually meets the queen? QUEST: There is no protocol. I mean, there's a famous case of an Australian prime minister who put his hand around the queen and shepherded her along and all hell broke loose. You thought he had done something disgusting on the palace carpet. It was nothing like that.

These days -- and I speak from experience -- I've met Her Majesty -- they don't tell you to bow and they don't tell you not to. They don't particularly want you to grab her arm and give it a good, hard shaking, but that's because she shakes thousands, tens of thousands of hands every year.

Remember Nancy Reagan had problems with her fingers because of the thousands of hands that she had shaken over the years. So there's no protocol other than respectful decorum. And that is what President Obama said, the queen is noted for her decency, her civility. And, of course, remember one other thing. She has met 10 presidents. In her reign, the only one she hasn't met or didn't meet was LBJ.

BLITZER: Good point. In fact, we're going to explain that right now a little bit more.

Richard, stand by. We're going to be getting back to you.

As Richard says, as of today, Queen Elizabeth has met now with 10 U.S. presidents since taking the throne back in 1952. That was before Barack Obama was even born.

Her first, Dwight Eisenhower, seen here with the queen in 1952. Elizabeth previously had met Harry Truman while she was still a princess.

The queen danced with Gerald Ford at a White House dinner in 1976. There was some embarrassment though when, at one point, the U.S. Marine band played "The Lady is a Tramp."

Elizabeth had a warm relationship with Ronald Reagan. The horse lovers bonded on a ride over at Windsor Castle back in 1982.

And most recently, the queen met with George W. Bush here in Washington during her visit to the United States in 2007.

As President Barack Obama right now dining with G-20 leaders at Number 10 Downing Street, it's ladies' night next door as the wives meet for a spouses' dinner as well.

Let's bring in our own Abbi Tatton.

All right, Abbi. Let's go to the guest list, because it's a pretty impressive list.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, it's being dubbed "The First Wives Club." This is being hosted by Britain's Sarah Brown, wife of the prime minister, seen at the end there with the first lady.

The G-20 spouses all at Downing Street right now for a dinner of their own. Spouses from Canada, India, Indonesia, all on the guest list and all wives. There are two G-20 husbands of Argentine and German leaders, but they are not expected at the summit or at the dinner.

Also on the guest list tonight, some prominent British women, which makes for an interesting seating plan. You have Michelle Obama, the first lady, ,sitting next to author J.K. Rowling of "Harry Potter" fame. Her family known to live those books.

On the other side of her, Olympic athlete Dame Kelly Holmes. And across the table from her, British supermodel Naomi Campbell, most recently noted in the news for her anger management issues.

They will be dining on a menu from British celebrity chef Jamie Oliver. They've got Scottish salmon, Welsh lamb. And for after, baked well (ph) tart, one of your favorites.

BLITZER: Baked well (ph) tart? What does that mean?

TATTON: It's like almond, sponge and jam. I promise it's good.

BLITZER: It's an English type of...

TATTON: Very, very English type of thing.

BLITZER: You grew up eating that, right?

TATTON: My mom's. Not Jamie Oliver's.

BLITZER: How did she do? How did she make it?

TATTON: Very, very well. She should be there.

BLITZER: She should have been.

Thank you, Abbi.

North Korea right now fueling more anxiety over its missile power and its threat to the world. We have new details coming in.

And new reason for many Americans to second-guess the U.S. mission in Afghanistan. The country right now reportedly has a brand new law. Get this -- allowing men to rape their wives.

What's going on?




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

Happening now, reports of a new law in Afghanistan triggering outrage. Critics say it legalizes rape and is worse than anything the Taliban ever imposed. What's going on?

President Obama's aunt in court today, a native of Kenya who's been in this country illegally for years. She's now trying to stay here. An immigration judge makes a ruling on her fate.

And parents donate the organs of their dead son, but their incredible act of compassion turns tragic. We're going to tell you what happened.

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

Right now, the Russians are practically beaming about President Obama's impact on U.S. relations with Moscow. Mr. Obama held his first one-on-one talk with the Russian president in London today. He also met with China's leader as well.

Let's go back to our Senior White House Correspondent Ed Henry. He's traveling with the president in London right now.

A lot of talk about a new era potentially, superpower cooperation, Ed. Tell us what happened today.

HENRY: That's right, Wolf.

These were two major problems this president inherited. Relations with Russia and China had become quite testy in recent years. And White House officials are already touting the fact that the president is cranking up the diplomatic effort and appears to be getting some early results.


HENRY (voice-over): Following through on his pledge to hit the reset button on their tense relations, President Obama announced a breakthrough after his first face-to-face with Russian President Dmitry Medvedev, the two leaders agreeing to start negotiations on a new arms control treaty that could drastically cut each nation's nuclear warheads.

OBAMA: I think that over the last several years the relationship between our two countries has been allowed to drift. And what I believe we've begun today is a very constructive dialogue.

HENRY: The leaders also pledged broad agreement to work together on Afghanistan and battling Iran's nuclear ambitions, though they still have sharp differences like the U.S. plan to build a missile defense shield in Eastern Europe.

U.S. officials acknowledge, hammering out an actual deal on reducing nuclear arsenals will be tough, but they're hopeful.

OBAMA: I have agreed to visit Moscow in July, which we both agreed was a better time than January to visit.

HENRY: The joking continued when Mr. Obama tried his hand at some Russian, a sing the relationship may be thawing. OBAMA: (SPEAKING RUSSIAN) I'm still working on my Russian.


OBAMA: The president's English is much better.

HENRY: Not as much jocularity in the president's one-on-one with Chinese President Hu Jintao, but the meeting was warm.

Mr. Obama also agreed to visit China later this year.


HENRY: Now, the relationship with China is particularly sensitive because the Chinese have bought up about trillion -- a trillion dollars in U.S. debt. If they were to stop doing that, it would make it much harder for the Obama administration to continue to borrow money to fight this financial crisis -- Wolf.

BLITZER: Ed Henry watching all this unfold in London, thank you.

Let's go right to -- back to London.

Joining us now is the president's deputy national security adviser for strategic communications, Denis McDonough.

Denis, thanks very much for coming in.


BLITZER: Is the U.S. going to go ahead and build this missile defense shield in Poland and the Czech Republic which so angers the Russians?

MCDONOUGH: You know, Wolf, the president's been pretty clear about that throughout the course of this effort.

That is to say that he wants this to be a threat-based system that is proven to work and that is cost-effective. So, he talked today with President Medvedev about our shared concerned about Iran's technology, Iran's capability, Iran's interest in this illicit nuclear program.

And, so, that's going to be one of the factors that drives this, along with a very real test of that system and assessment of whether it's cost-effective for our taxpayers. So, that's the kind of the rigorous analysis -- analysis this president will apply...


MCDONOUGH: ... question.

BLITZER: Did he buy that -- did Medvedev buy that explanation?

MCDONOUGH: Well, you know, I'm not going to get in the business of characterizing another president's views of a particular system.

But I can tell you that I think President Obama was -- President Obama was pleased to hear some of what President Medvedev had to say about his concern also with Iran and its pursuit of this technology.


MCDONOUGH: So, this is just an opening effort here. And there's a lot of work yet to be done. We will see where it gets to.

BLITZER: Is Iran building a nuclear bomb?

MCDONOUGH: I think that every indication is that they continue with a nuclear program, that, heretofore, they have not given proper access to the International Atomic Energy Agency.

And, so, what -- one thing we would like to do is to be able to answer that question. And the only way to definitively do that is for the IAEA to have the kind of unfettered access that it's sought to have. So, that's what we're hoping to see happen.

BLITZER: But, based on everything you know, is it your conclusion, the U.S. government's conclusion, the NSC's conclusion, that they're building a bomb?

MCDONOUGH: You know, Wolf, I just -- as I just indicated, I think there's a lot of questions out there.

Obviously, the program continues apace, notwithstanding very clear expressions of concern from the international community, from everybody from the United States to Russia to China to all of our Western European allies and many of Iran's neighbors.

So, the bottom line is, I think we have to see a lot more openness and transparency from the Iranians on exactly that question.

BLITZER: North Korea is said to fueling its intercontinental ballistic missile. They say this is a missile that is supposed to launch a commercial satellite into space.

We heard the other from the defense secretary the U.S. has no plans to shoot it down. Has that stayed the same?

MCDONOUGH: I think that, yes, this is another issue the president discussed with President Hu of China today and with President Medvedev of Russia today. And it will be a subject of his discussions tomorrow with the Koreans and others.

The fact is that we have been very clear that such a launch, if it were to happen, would be a violation of U.N. Security Council resolutions. The fact is that it's not the kind of act that we would expect to see from a Korea that would want -- a North Korea that would want to see an improvement in relations.

And, so, we will continue to make that case. And, hopefully, they see -- see better of it. BLITZER: Can we still assume you're not going to shoot it down?

MCDONOUGH: You know, Wolf, I'm not going to get into any of those kind of hypotheticals.

But what I am going to say is that it would be very clear such an act would be a violation of North Korea's international obligations, would be a provocative act. And I think that's something they ought to very carefully reconsider.

BLITZER: But if the defense secretary, Robert Gates, said last Sunday that they have no plans, the U.S. has no plans to shoot it down unless it were moving toward Hawaii or something like that, I assume his statement represents the Obama administration's stance.

MCDONOUGH: You know, Wolf, I'm not going to get in the position of either arguing with or confirming the secretary of defense's comments.

I think the president's been very clear, as has the secretary of defense, and others, secretary of state, and others, that such an act would be provocative, would be inconsistent with North Korea's obligations, and would be a violation of U.N. Security Council resolutions, including 1718.

So, we think that the North Koreans ought to think twice about it.

BLITZER: Let's stay in touch throughout the course of this visit overseas.

Denis McDonough is the deputy national security adviser for strategic communications.

Thanks for coming in.

MCDONOUGH: Thanks for having me, Wolf.

BLITZER: A startling legal turnaround for a convicted former U.S. senator. A Democratic administration drops the corruption case against the former Republican Senator Ted Stevens. So, what happens now?

Plus, Republicans unveil a detailed alternative to the president's budget, widening their divide with the Democrats.

And, later, smokers now have to pay more for a pack of cigarettes. Is it fair to blame President Obama? We will tell you what is going on -- right here in THE SITUATION ROOM.


BLITZER: The longest-serving Republican senator in U.S. history says he always knew that his corruption conviction would somehow go away. Guess what? The Justice Department now is abandoning the case against the former Alaska Senator. Let's go to Jeanne Meserve. She's working this really startling development for us.

What happened, Jeanne?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: It really is a remarkable turnaround, Wolf, in an extraordinarily high-profile case featuring a rare intervention by the attorney general.


TED STEVENS (R), FORMER U.S. SENATOR: Nice to see you. I will have comments later.

MESERVE (voice-over): A 40-year veteran of the U.S. Senate, Ted Stevens, convicted last October for failing to list $250,000 in gifts and renovations to his Alaska home on financial disclosure forms.

Now, the Justice Department, which prosecuted the case against Stevens, has pivoted and dropped all charges because of prosecutorial missteps by its own lawyers. Stevens' attorney says prosecutors violated the Constitution to obtain an unlawful verdict.

BRENDAN SULLIVAN, ATTORNEY FOR FORMER SENATOR TED STEVENS: We were sickened by it because it clearly told the story of government corruption, as they were hell-bent on convicting a United States senator.

MESERVE: During the case, Judge Emmet Sullivan repeatedly scolded government lawyers for failing to hand over key evidence to the defense, finally finding them in contempt.

The Justice Department eventually removed them from the case, but the damage had been done. The prosecutors' conduct was so problematic, Attorney General Eric Holder determined, "It is in the interest of justice to dismiss the indictment and not proceed with a new trial."

RICHARD SMITH, FORMER FEDERAL PROSECUTOR: What Mr. Holder did today is to send a clear signal to prosecutors in this country that prosecutorial misconduct will not be condoned.

MESERVE: Wednesday, Stevens said, "It is unfortunate that an election was affected by proceedings now recognized as unfair."

And he echoed his final goodbye to the Senate.


STEVENS: I look only forward. And I still see the day when I can remove the cloud that currently surrounds me.


MESERVE: And that day has come. There will be a final hearing April 7. Meanwhile, the Justice Department's Office of Professional Responsibility will review the conduct of the prosecutors. They could face penalties, from a reprimand, to a recommendation for dismissal -- Wolf.

BLITZER: Jeanne Meserve, thank you.

During the 40 years he was in the United States Senate, Ted Stevens served in some powerful posts, including GOP whip and as chairman of the committee that works to elect Republicans to the Senate. But his experience couldn't save his job.

A closer look at his defeat last year, Stevens lost to Democrat Mark Begich by under 4,000 votes.

A new move today by Republicans to reject suggestions that they're simply the party of no.

Let's go to our congressional correspondent, Dana Bash. She's looking at this story for us.

The GOP, they're coming up with an alternative budget, Dana, aren't they?


You know, Republicans know that, for all of their relentless criticism of Democrats, they do have to tell Americans, voters, most importantly, what they would do differently.

So, today, House Republicans released this. It is basically a 53-page road map of their ideas.


BASH (voice-over): A carefully choreographed walk down the Capitol steps, Republican en masse displaying unity against any Democratic budget.

REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: It taxes too much and it borrows too much from our kids and grandkids.

BASH: So, what would Republicans do? Well, unlike last week...

BOEHNER: Here it is, Mr. President.

BASH: ... when the House GOP leader unveiled a thin alternative, with almost no specifics, now a political course correction.

UNIDENTIFIED MALE: We are here offering up our Republican budget alternative. This is our budget with real policies and real numbers.

BASH: And real stark differences for Democrats.

First, House Republicans would freeze most spending for five years, no increases in everything from education, to health care, to transportation, where Democrats significantly boost funding. And the historical divide with Democrats over taxes is as wide as ever.

UNIDENTIFIED MALE: The Republican budget knows you don't raise taxes on anybody.

BASH: So they would keep Bush tax cuts, including those for wealthy Americans Democrats want to do away with, cut taxes for businesses, and offer the option of a simplified tax code, a 10 percent rate on the first $100,000 of income.

But the most radical change Republicans are proposing to save money is overhauling Medicare. Under their plan, Republicans would dismantle the current system for anyone under 55, and instead give subsidies for private insurance.

UNIDENTIFIED MALE: It's tax reform elected by each individual taxpayer to help create jobs and to help families in this difficult time.


BASH: Now, the reality is, this Republican document has virtually no chance of being law. And it is just basically a political document for people to see, in terms of where their ideas are.

Still, Wolf, the White House took no chances. Even before we got this plan from Republicans, today we got a statement from the White House. And, in fact, I will put up on the screen a quote from a spokesman, Ken Baer, of the Office of Management and Budget.

He said: "If you expected a GOP alternative to the failed policies of the past that got our country into the worst economic crisis since the Great Depression, then I have two words for you: April Fool's" -- Wolf.

BLITZER: All right, thanks very much.

This note: Senator John McCain, he is standing by. He's going to join us live here in THE SITUATION ROOM. We're going to be talking about those Republican budget proposals and more.

And President Obama's political future, will it be limited to just four years in the White House? Some say he could very well be a one-term president. In fact, Alex Castellanos says that. And he's standing by live to join us with James Carville.

And Sarah Palin, once a shining star in the GOP, now possibly getting the cold shoulder by some members of her own party.

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


BLITZER: Let's get right to our "Strategy Session," the man who's questioning the president's staying power, Republican strategist Alex Castellanos. In fact, he's here with James Carville, our Democratic strategist, both part of the best political team on television.

Did I mention that we won a Peabody Award for our political coverage? And thanks in part to both of you guys and all of our analysts.



BLITZER: "CNN, with state-of-the-art technology and a small army of reporters, producers and analysts, CNN gave viewers unparalleled coverage of an historic presidential election process."

Congratulations to all of us.


BLITZER: All right, let's talk a little bit about Alex Castellanos.

You have an article on People can go read the whole thing. But it sort of elaborates on what you said the other day, that you suspect President Obama could be a one-term president, based on the dramatic policies that he's enacted over the first several weeks.

"The candidate who campaigned as a new leader," you write, "beyond partisan politics and ideological conflict, has become a president whose has put bipartisan cooperation out of reach with stunningly left-of-center European-style agenda that no Republican can embrace and fewer Americans will endorse when they judge it in due time at the ballot box."

You want to just explain?

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: Well, first of all, he's still a tremendously inspirational figure. I think the most inspirational candidate last election was not John McCain, even for Republicans, many of us. It was Barack Obama.

But it was because he promised change. Instead, now, he's gotten to Washington, and we have seen a lot of the same old Democratic orthodoxy. If Barack Obama had said before the election, a week before, even after the meltdown, "Here's what I'm going to do; I'm going to take over the auto industry, nationalize banks, health care, energy; I'm going to double the debt in this country; I will triple the deficit; I will raise taxes in a recession; I will do all these things in my first 60 days," he wouldn't have gotten elected.

BLITZER: All right.

CASTELLANOS: His popularity is up here. His policies' popularity is down here.

BLITZER: James, you read that article. You read that article line by line by line.


First of all, the American people haven't got the memo yet. The right-track number is up about threefold...


BLITZER: On the right track/wrong...



BLITZER: What he means is that, when President Bush left office, only about 8 percent or 9 percent thought the country was moving in the right track. Now it's gone up into the mid-40s.

CASTELLANOS: Americans are hopeful.


CARVILLE: And consumer confidence is starting to rise a little bit. I mean, we're seeing some news that this stuff is starting to kick in.

But, secondly, we knew exactly what his tax plan was when he was running, that he was going to give 95 percent of the people a tax cut, that, yes, he was going to keep -- the rate was going to go back to what it was under the Clinton years for the top tax earners, by the way, times that we had balanced budgets.

So, the president, in terms of the auto industry, he made some serious demands before they got more taxpayers' money. There are some people that say he should have made more demands on the banking industry, too. He's dealt with the housing crisis, dealt with the banking crisis very forcefully. This is a very forceful president.

And, by the way, he -- he told everybody that his tax policy was to cut taxes for 95 percent of the people in America.


BLITZER: He did live up to his promise of a middle-class tax cut for the next two years, as part of his economic stimulus package.

CASTELLANOS: Well, yes, he did. But there are also equally valid promises on the other side.

He also said, for example, he would go for pay-as-you-go budgeting. This is the opposite. It turns out that the only new idea Barack Obama has is more spending. And 80 percent of the people are now saying they're worried that this government to going to spend too much.

CARVILLE: Look, first of all, he inherits this thing.

And if you look at this Republican plan, they have a Hoover plan. What they say to do, in the middle of the...


CARVILLE: ... in the middle of the worst economic times since the Great Depression is, they say, freeze everything.


CARVILLE: That's an absurd -- yes, of course.


CASTELLANOS: That's not right.

CARVILLE: It was just on television.


CARVILLE: But -- they didn't say they were going to freeze health care, they were going to freeze transportation, and they were going to...


CASTELLANOS: I can help you with that.

CARVILLE: Help me. Go ahead.

CASTELLANOS: I can help you with that.

We want some spending to get us out of this recession, too. The big difference is, you want Washington to do the spending. We want the American people to the spending, get more money in their hands.


CARVILLE: Did you just see the piece? Did you just see the piece?

BLITZER: Dana Bash's piece.

CARVILLE: Ninety-five percent of the people under Obama get a tax cut. That's putting money right in their hands.


CASTELLANOS: That's not even in the budget that is before the House.

CARVILLE: Well, sure it is.


BLITZER: That was in the stimulus plan.

(CROSSTALK) CARVILLE: ... stimulus plan. People are getting tax cuts.

What the Republicans are proposing is exactly what Hoover did, to freeze -- to freeze spending...


BLITZER: Well, the big mistake that Hoover did was protectionist policies that exacerbated the Depression.


CASTELLANOS: Look, it depends who you want to freeze. We would rather freeze Washington and let Americans spend. You would rather freeze Americans and let Washington spend.

CARVILLE: No, we're giving Americans a tax cut.

BLITZER: All right, hold on a second.

I want to just move on, because, obviously, you're going to disagree on this, which is fine.


BLITZER: You're both part of the best political team on television, still.


BLITZER: Sarah Palin apparently out, Newt Gingrich in as that -- going to be a big Republican fund-raising dinner in Washington. Sarah Palin says she's busy in Alaska, she's got to do state business, can't come to Washington.

Take us inside the Republican Party right now, as only you can, Alex, and tell us what's going on.

CASTELLANOS: Well, they were going to serve turkey, and she didn't want to come.



What happened is -- and there's confirmation of this -- that she actually -- Governor Palin actually accepted and agreed to speak at the dinner. Her staff confirmed it. It's in writing.

And, evidently, I don't know what the problem occurred, but, somehow, that -- her acceptance was withdrawn. Now, there are some people who feel that she is overexposed, she should step back. I happen to be one of them. I think she needs to get out of the public spotlight and demonstrate a little time in the wilderness and grow before she comes back.


CASTELLANOS: But she shouldn't accept, and then pull back.

BLITZER: How worried are you about Newt Gingrich right now? Because you remember, '93, '94, he became a pretty formidable challenger to then President Bill Clinton.

CARVILLE: I'm not one of these people that believe that Sarah Palin should step back.


CARVILLE: I think she should come and speak more.


CARVILLE: If we could her and Michael Steele and Rush...


CARVILLE: No, but the speaker, of course, I have a bit of a conflict, because, as we reported, he was at my class at Tulane (INAUDIBLE) coming Tuesday night.


CASTELLANOS: James is learning from Republicans. That's always good.



CARVILLE: I think it's a smart move for the Republicans to replace here with Newt Gingrich right now.

BLITZER: He's a very good speaker.

CASTELLANOS: We need lots of leaders now. There isn't a leader of the Republican Party. We're out in the wilderness. Newt Gingrich is one of them. Palin is one of them. But we need a lot more.

CARVILLE: We want more Sarah Palin.


BLITZER: Thanks, guys.

CARVILLE: All right.

BLITZER: Thanks very much.


BLITZER: What would it mean for the nation if GM and Chrysler went bankrupt? That's Jack's question. He's standing by with your e- mail.

Plus, will the president's aunt be allowed to stay in the United States, after all, or will she be deported? The hearing and the questions it raises about special treatment.

And a dead child's organs donated to others in need, it seemed like an extremely generous gesture, until a tragic discovery.


BLITZER: Let's check in with Jack Cafferty for "The Cafferty File" -- Jack.

CAFFERTY: What would it mean if GM and/or Chrysler both go bankrupt?

Richard in Kansas: "It would mean that we let the free market system work. No need for the government to step in here. Let them fail, and someone new will come along, buy up their assets for pennies on the dollar, and do a better job of being a car manufacturer. It's simple capitalistic Darwinism, and we should let it work."

Sharon in Rockford, Illinois, says: "I don't think the people really understand just what this is going to do to our country. They can talk about legacy costs, but if these companies go away, the costs will now be on everyone's backs. I'm a widow of a retired Chrysler worker. I get a whopping $700 a month for the 30 years and four surgeries that my husband underwent while working there. He died a little over a year from the date that he retired."

Carlos in San Diego: "The bankruptcy of GM and Chrysler would be progress for hardworking consumers who deserve better cars."

Joanne in New York writes: "It could be very ugly for the economy if GM goes into bankruptcy. Let's spend the money to try to keep it from happening, whatever it takes."

Zane writes: "Maybe it is time to reinvent personal transportation. Did the horse whip and buggy companies get a government handout in the early 1900s? Bring back the street cars. It sounds like Darwinism at its best."

And George in Canada writes: "There's an economically simple, yet philosophically complex response to your question of what happens if GM and/or Chrysler go belly up. To paraphrase an old song lyric, and the world will be better for this. I have always liked GM's product, but let's get on with a more constructive future, instead of beating these two horses beyond death."

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

BLITZER: All right, Jack, thank you.

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