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Feeling the Heat on Health Care; Tracking Your Bailout Money; President Wins F-22 Dogfight; Target: Heroin Heartland

Aired July 21, 2009 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now: A new idea to break the health care logjam has some senators intrigued. Dana Bash is reading the body language on Capitol Hill. I will speak with the Democratic National Committee chairman, the Virginia governor, Tim Kaine.

Marines hit a Taliban safe haven in Afghanistan's heroin heartland. Reporter Ivan Watson is with them. He has a CNN exclusive.

And an update on a young boy who was rescued with family members from a burning vehicle. You're going to hear the emotional thanks to bystanders from a very grateful father.

I'm Wolf Blitzer.


As the president steps up the pressure on Congress to move quickly on health care reform, he's also feeling the heat from a skeptical public. Up on Capitol Hill, senators are behind closed doors. And CNN's senior Congressional correspondent, Dana Bash, is right at the center of it all, outside the office of the Senate Finance Committee chairman.

A lot of stuff going on behind that door behind you -- Dana.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's right, Wolf. And, you know, the Democratic leadership, they had hoped that the work that really has been going on behind these doors for months now would bear fruit in time for the president's prime time news conference tomorrow night. But that is looking very unlikely.

And I can tell you that a senior Democratic source tells CNN that there is some frustration that, in the words of this source, there have been repeatedly missed deadlines. Still, negotiators behind those doors are struggling to give a sense of momentum.


BASH: (voice-over): Sometimes body language is more telling than words.

SEN. MAX BAUCUS (D-MT), CHAIRMAN, SENATE FINANCE COMMITTEE: We're making significant headway. I'm probably more upbeat and optimistic about where we are now compared with earlier. BASH: Senate Finance Chairman Max Baucus wouldn't give details about why he's more upbeat about bipartisan health care talks. But Senate sources say negotiators are considering one new idea for a vexing problem -- how to pay for costly health care reform.

The president and other Democrats have nixed imposing a new tax on some Americans' employer-based health care benefits.

SEN. JOHN KERRY (D), MASSACHUSETTS: A health care plan that actually has transformative...

BASH: Now, instead, Democratic Senator John Kerry is proposing a tax on health insurance companies -- only on their high cost, so- called Cadillac plans. Intrigued Senate negotiators say it could help with two goals -- paying for health coverage for more Americans and reducing medical costs.

SEN. KENT CONRAD (D), NORTH DAKOTA: Economists of every stripe have told us this is one of the things that you need to do to bend the cost curve in the right way to reduce over utilization.

BASH: The president isn't ruling out the idea and even raised it unsolicited in an interview with "The News Hour."


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I haven't seen the details of this yet, but it may be an approach that, you know, doesn't put additional burdens on middle class families.

BASH: But some sources at labor unions, helping block the idea of taxing employee-based benefits, tell CNN they also oppose a tax on insurance companies -- even if it is strictly targeting the most expensive health plans.


BASH: And despite the bipartisan negotiations -- which, again, Wolf, are going on as we speak behind these closed doors -- there does seem to be a sense that health care right now is stymied. The president's top priority is stymied.

In fact, the House majority leader, the Democratic leader over in the House, Steny Hoyer, he admitted today that they're very unlikely to pass health care over there by the time they leave for August break.

And I can tell you that one senior Democratic source told me something that's very interesting. He said that despite the fact that the president is coming out on almost a daily basis and pushing the idea of passing health care, he is not doing very much in terms of specifics. And they are really yearning here for the president to give much more in terms of specifics -- what he wants in -- by way of the proposals he'd like to see coming out of here. And I think that's a big problem still. BLITZER: And that August break, just to be precise, Dana, that's for a month. These lawmakers in the House and Senate, they're going to go back to their states, their districts. And they're going to get an earful from their constituents.

That's one of the fears in Washington right now, isn't it?

BASH: It is one of the fears. And, you know, the flip argument, when you talk to some of the, you know, political strategists up here, is that if they do pass something, it -- you know, it's out there like a pinata, able to be whacked around before they come back and -- and negotiate for, you know, the further talks because whatever the House and the Senate pass, it's going to have to be negotiated into a so- called conference.

So there are lots of different ways, politically, to look at that. But certainly that is one -- one fear that Democrats have.

BLITZER: Dana Bash watching the story for us.

Thank you.

Taxpayers could end up on the hook for trillions -- yes, trillions with a T -- of dollars and guarantees tied to the bailout of big banks.

Want to know what that might mean for you?

A good question. And we asked CNN's Brian Todd to start doing some digging.

This sounds pretty frightening.

BRIAN TODD, CNN CORRESPONDENT: It could be frightening, Wolf, for a lot of us. For millions of you trying to get your own financial house in order, a troubling assessment of how the government is tracking your taxpayer money used to bail out the biggest financial houses.


TODD: (voice-over): Neal Barofsky, the Treasury Department's independent bailout monitor, says in his new report, he's asked the Department to do some basic things to make sure your dollars aren't wasted in the rescue of failed banks. One of them -- make the banks more accountable for how they use bailout money in the so-called TARP program.

Barofsky is frustrated by Treasury's response.

NEIL BAROFSKY, SPECIAL INSPECTOR GENERAL, TARP: The most alarming thing, to me, is that Treasury continues to refuse to adopt this recommendation, even in light of the proof that we now have in this audit. You know, they continue to tell us that it is a meaningless survey. TODD: Treasury and White House officials say they get enough general information from banks. But they say it's impossible to track every penny.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: It's going to be hard to follow, again, something that's as fungible as money moving from one bank to another.

TODD: Barofsky's report has a staggering figure. He says beyond the $700 billion being given to bail out the banks, the total amount the government has committed to supporting companies and consumers affected by this financial meltdown could total $23.7 trillion -- nearly $80,000 for every man, woman and child in America.

But Treasury says that figure is inflated. And analysts say taxpayers are not really on the hook for all that.

KATIE BENNER, "FORTUNE" MAGAZINE: That is the worst case scenario. But they shouldn't expect to have to -- that all of American will have to chip in $23 trillion. That's very, very unlikely. What is likely, though, is, say, up to $700 billion that was set aside for TARP. We certainly won't recover all of it.


TODD: In fact, analysts say much of that $23.7 trillion is loan money that's already been paid back or will be paid back, Wolf.

But, you know, Tim Geithner and Barofsky are squaring off over some other things -- Barofsky complaining that the Treasury Department is trying to essentially muzzle him to get the legal authority to -- to basically have him report to Tim Geithner. He says if they do that, they're going to be able to shut down any of his audits, any of his investigations. They say he's making way too much of that. But, clearly, a lot of tension between Tim Geithner and Neal Barofsky.

BLITZER: Brian Todd, thanks very much.

Let's go to Jack Cafferty right now.

He's got The Cafferty File -- Jack.

CAFFERTY: Whose cell phone is ringing?

BLITZER: That was Brian's.


President Obama has a lot riding on his health care reform plan. And at this point, it's just too close to call.

The president insists the legislation is not about him or about politics, but rather about a health care system that's breaking America's families, businesses and economy.

Well, actually it's about all those things. Not everybody is buying Obama's argument. The Republicans smell blood on this.

South Carolina Republican Senator Jim DeMint said that stopping President Obama's push for health care reform could be his Waterloo.

Conservative columnist Bill Kristol urging opponents of the president's plan not to let up on their criticism.

Republicans are screaming about the costs, pointing to a report by the nonpartisan Congressional Budget Office that these plans will not pay for themselves and, in fact, will wind up increasing the budget deficit. The chairman of the Republican Party calls Obama's plan socialism.

And it looks like, at this point, Republicans are gaining some traction here. Approval of the president's handling of health care is slipping and Mr. Obama's been forced to take his case directly to the American people with a prime time news conference tomorrow and a town hall meeting on Thursday.

Health care reform, of course, you'll recall, a major part of the president's campaign platform. And if he doesn't get it through now, it is highly unlikely that he'll get it done later -- especially once Congress begins pandering to voters for the midterm elections, which are, of course, next year.

So here's the question -- when it comes to health care reform, how big are the political stakes for President Obama?

Go to and post a comment on my blog.

This is beginning to feel a little like 1992, was it, Wolf, in the Clinton administration, when we had grand hopes of health care reform and it all washed up on some reef somewhere never to be heard from again.

BLITZER: I was the senior White House correspondent -- '93, the first year of the Clinton presidency. Hillary Care, all of us remember -- great expectations but then, poof...

CAFFERTY: And Bill Clinton's...

BLITZER: ...sort of just gone.

CAFFERTY: Bill Clinton survived that quite handily. So we'll have to wait and see what happens if...


CAFFERTY: ...if it doesn't work for Mr. Obama.

BLITZER: Well, it's too early to say it's not going to work by -- by any means.

CAFFERTY: I said if. BLITZER: Yes. It's a huge if.

Thanks very much.

CAFFERTY: Answer the phone.



Democrat versus Democrat on health care reform -- I'll speak with the party's national committee chairman, the Virginia governor, Tim Kaine.

And targeting the Taliban's drug trade -- we're with the U.S. Marines in Southern Afghanistan. It's a CNN exclusive.

And a grateful father thanks bystanders for pulling his family from a burning vehicle. We're going to hear his words and get an update on the condition of his young son.


BLITZER: The Obama administration today won a dogfight with die- hard defenders of the F-22 Raptor, a high tech fighter jet that the Pentagon wants to stop building. The Senate voted 58-40 to strip funding for additional jets from next year's budget.

Critics say a production halt would cost thousands of jobs and undermine national security.

Let's bring in our Pentagon correspondent, Chris Lawrence.

And a fascinating coalition -- the president, the Defense secretary, John McCain. They all said it's time for this F-22 to go bye-bye.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: That's right. True, it didn't break down along party lines this time, Wolf. You know, this all comes down to about $2 billion. The supporters of the F-22 said it's best spent building more of them. The detractors said, no way, we don't need this. That's what the administration was.

Again, the supporters saying, well, how can you even think about cutting a program like this in this economy, losing those jobs?

It did not break down along party lines. You had Republicans backing the president and Democrats lining up to fight it.


SEN. CHRIS DODD (D), CONNECTICUT: The secretary of Defense and the administration have decided this program isn't worthy of our support. So explain to those 90,000 people, once they lose their jobs, get laid off -- and they will.



SEN. JOHN MCCAIN (R), ARIZONA: Would you ask yourselves why the F-22 has never flown over Iraq or Afghanistan?

It's been in production for nearly five years. It's never flown over Iraq or Afghanistan.


LAWRENCE: And its detractors say there have been more battles over the F-22 than with the F-22.

Supporters said, we were fighting a cold war 30 years ago and you don't know who the U.S. will be fighting 30 years from now. And these systems take so long to put together, that it really puts America at a disadvantage, because you're cutting it off now.

Again, Wolf, this was just an incredible fight. But the detractors of the F-22 won out. And now it looks like most of the money will be going toward the F-35, which is that Joint Strike Fighter which the U.S. military sees as its future.

BLITZER: I know that the secretary, Robert Gates, he was adamantly opposed. It looks like he's going to get his way.

But you know what, Congress still has...



LAWRENCE: And the president threatened to veto this if it comes to his desk.

BLITZER: Yes. They tried to kill the Osprey, as you know, for years and years, never were able to, even though the president, the vice president, the Defense secretary, over the years, they wanted to kill it. That plane -- that helicopter/plane is still in business right now.

LAWRENCE: Yes. And they're spread out over so many states, it's -- they -- they build this consensus, because the -- the planes are built and shipped from so many different locations.


LAWRENCE: Everybody's got a stake in it.

BLITZER: They've got a lot of constituents out there.


BLITZER: Thanks very much.

The lobbying is intense, as well.

Let's check in with Betty.

She's monitoring some other important stories incoming into THE SITUATION ROOM right now -- Betty, what's going on?

NGUYEN: Hi, there, Wolf.

The Senate Judiciary Committee is postponing the confirmation vote on Supreme Court nominee Sonia Sotomayor for a week. Republicans have been demanding more time to examine her record.

Nevertheless, committee Chairman Patrick Leahy is confident how the vote will go in committee and in the full Senate.

Take a listen.


SEN. PATRICK LEAHY (D), VERMONT: She will be on the Supreme Court when the Supreme Court comes back in September. She will be. She'll be there with a bipartisan vote. It is unfortunate we have to wait another week, but she will be there. She will be confirmed.


NGUYEN: All right.

Well, in other news, a 4-year-old boy is in serious but stable condition after being rescued from his mother's burning SUV on Sunday. Just look at this video. Off-duty firefighters in Milwaukee pulled David Harper's mother and 2-year-old sister from the car, but they had to frantically cut David's seat belt just to get him out.

Doctors say David has burns over 20 percent of his body and some of them are deep. The boy's father expressed his gratitude.


JAMES HARPER, DAVID HARPER'S FATHER: There's so many people at the scene. And I just wanted to express our gratitude and how grateful we are. The words can't express how the citizens of Milwaukee have helped us so far.


NGUYEN: The off-duty firefighters who helped in that rescue suffered burns on their hands and forearms.

And, Wolf, I know you're a die-hard Harry Potter fan. So listen to this. A cast member of the Harry Potter films will perform 120 hours of community service for growing pot. That's right. Twenty- year-old Jamie Waylett plays the school bully, Vincent Crab, in the Potter movies. And British prosecutors say they found 10 marijuana plants at Waylett's mother's house. Though producing pot carries a 14 year sentence, the judge said he took into account that Waylett was growing a small amount for his own use -- Wolf.

BLITZER: I'm not a big Harry Potter fan.

NGUYEN: I know you're not.

BLITZER: But I know millions of people are and I applaud them for it.

NGUYEN: All right.

BLITZER: Thanks very much, Betty, for that.

An apparent shift in strategy -- we have an exclusive look at how the U.S. Marines are going after the Taliban in Afghanistan and the source of their funding -- the Taliban's funding.

Stay with us.



BLITZER: Now to a CNN exclusive -- U.S. Marines are on a search and destroy mission in Southern Afghanistan. Right now, they're targeting the Taliban's drug trade.

Afghanistan produces 90 percent of the opium that feeds the world's heroin habit and the bulk of those opium poppies are grown in Helmand Province.

CNN's Ivan Watson is with the Marines.


IVAN WATSON, CNN CORRESPONDENT: Summer is the season for fighting in Afghanistan -- and it's been a bloody summer. Four American soldiers killed on Monday by a deadly roadside bomb which hit their vehicle in Eastern Afghanistan and one British soldier killed on Monday, as well, here in Helmand Province, where we're located.

The NATO forces here -- the U.S. forces have hit record numbers of casualties for the month of July. They have broken records for this eight year long war. And this month is still far from over, as more troops continue to pour in from the U.S. military. They're trying to double the number of troops on the ground since last year, as part of a major offensive to try to rout the Taliban.

Now, the Marines that I'm with now, from the 2nd Armored -- Light Armored Reconnaissance Battalion, rather -- they took a step this week that they believe will try to limit the number of deadly roadside bombs that the Taliban has access to. They have been moving through a nearby market and gathering tons -- literally tons of poppy seeds for that cash crop, which grows opium and can be used to make heroin. It's a $3 billion industry here in Afghanistan. And the Taliban is believed to use these revenues to recruit fighters and to make weapons, as well. And we saw in a ceremony today the Marines send out a message -- a spectacular message with this explosion during a series of airstrikes. Let's take a look at this.


WATSON: Those are 1,000 pound bombs dropped on more than 1,600 sacks of poppy seed. It's going to definitely put a dent into the poppy harvest here in Southern Afghanistan, which can be described as the opium capital of the world.

Now, I talked to America's top coordinator for economic and development affairs here, Ambassador Tony Wayne. And I asked him whether or not the U.S. military is now getting into the business of Poppy eradication.

Here's what he had to say.


AMB. TONY WAYNE, COORDINATOR FOR ECONOMIC AND DEVELOPMENT AFFAIRS, AFGHANISTAN: Well, we realize there's a nexus between Poppy growing -- drug trafficking and money for the insurgency. So when there's opportunity to find stashes like this that was discovered, part of the mission is to destroy that -- to take it and destroy it.


WATSON: Now, the big challenge here is if you take away the poppy business, the opium business, what kind of money earning enterprise will be left for the poor farmers in this impoverished country?

Ambassador Tony Wayne -- he says that the U.S. government is funneling hundreds of millions of dollars to Southern Afghanistan alone to help with agricultural aid. He says agricultural experts are coming in. He says there are work projects being set up and vouchers for farmers to buy fertilizer and seeds for legal crops to be put on the ground here.

But he says the big challenge is getting Afghan partners to work in conjunction with these international projects on the ground. That is going to be a big challenge, because any Afghan that you talk to will say that the credibility of the central Afghan government is really in question right now. The government often being accused of corruption and even being involved in this very harrowing business -- the very same heroin business that is booming in Afghanistan.

And that government's credibility will be tested on August 20th in presidential elections.

Ivan Watson, CNN, reporting from Helmand Province in Southern Afghanistan.


BLITZER: New polls show new doubts on health care reform.

How can the president sell his reform effort to increasingly skeptical Americans?

I'll ask the Democratic National Committee chairman, Governor Tim Kaine.

And Hillary Clinton says the United States is back.

Is that a swipe at the previous administration?

Donna Brazile and Kevin Madden -- they're standing by live.



Happening now, racial tension resurfaces -- the strong feelings that are stirred after the arrest of a Harvard scholar.

Charges of crossing the line -- parents say their special needs children aren't being disciplined, they're being abused. We're about to examine one case.

And extending the week long rally -- good earnings news sends the Dow Jones Industrials up 68 points, to close at 8916.

I'm Wolf Blitzer.


Another obstacle for President Obama in his race to push through health care reform. A new poll showed half of all Americans disapprove of the way he's handling the issue. But if it's any consolation to the president, the "USA Today"/Gallup Poll shows Congressional Republicans faring even worse.

Let's bring in our senior political correspondent, Candy Crowley.

She's watching all of this for us -- Candy.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: You know, Wolf, presidents don't talk every day about something that's going well. They talk every day about things that aren't going well. So for the fourth time in five days, the president was in front of the cameras talking health care reform.


CROWLEY: (voice-over): Behind closed doors on Capitol Hill, Senate moderates -- Republicans and Democrats -- are struggling to put together a way to reform health care that is mutually acceptable.

Elsewhere, Washington is a Tower of Babel -- a president looking for public reinforcement, complaining that unnamed critics are trying to kill his efforts to remake the system. OBAMA: These opponents of reform would rather score political points than offer relief to Americans who have seen premiums double and costs grow three times faster than wages.

CROWLEY: And a Republican leader trying to stand firm without looking obstructionist.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: This is not about winning or losing. This is about getting it right. And we saw with the stimulus -- the effort to rush and spend -- what can happen.

CROWLEY: Differences over the role of the federal government and the costs of reform do not split evenly along party lines. Conservative Democrats have some of the same objections as their Republican colleagues -- too pricey, too fast.

There's nothing like partisanship to rev up the faithful. So the president and friends are framing Republicans as tools of big business.

SEN. HARRY REID (D-NV), MAJORITY LEADER: Republicans aren't interested in working with Democrats to fix this problem. That's pretty clear. They simply want to maintain the status quo and keeping the insurance industry in charge of health care delivery.

CROWLEY: And Republicans are accusing Democrats of trying to ram through a bad bill for victory's sake.

REP. JOHN BOEHNER (R-OH), MINORITY LEADER: Mr. President, it's time to scrap this bill. Let's start over in a bipartisan way. And I'm encouraged that there are members on my side of the aisle working with Democrats, trying to find a way forward.

CROWLEY: A new Gallup Poll shows half of all Americans disapprove of the president's handling of health care, 44 percent approve. It explains the new edge to the conversation about health care. The stakes are high hurricane, the public is uncertain.


CROWLEY: And that's why members of Congress are uncertain, many members of Congress. House Democratic leader Steny Hoyer told reporters it's not just the Blue Dogs, that is conservative Democrats, it's progressives and everybody in between who have concerns. No wonder tomorrow the president goes to the Cleveland Clinic to talk health care.

BLITZER: Thanks very much for that. Is that tomorrow or Thursday?

CROWLEY: It's only Wednesday.

BLITZER: Thursday. Yes, tomorrow's Wednesday.

CROWLEY: Wednesday is the press conference, right?

BLITZER: Wednesday is prime time news conference.

CROWLEY: Oh. Sorry.

BLITZER: Thursday, he goes to Cleveland.

CROWLEY: You got it.

BLITZER: Thanks very much, Candy, for that.

So how can the president sell his health care proposals to an increasingly skeptical American public? Let's talk about that and more with the Democratic National Committee chairman, the Virginia governor, Tim Kaine.

Governor, thanks very much for coming in.

GOV. TIM KAINE (D), VIRGINIA: Hey, great to be with you, Wolf.

BLITZER: Why do you believe, in a nutshell, more Americans now disapprove of the way the president's handling health care reform than approve of the way he is handling health care reform?

KAINE: Well, Wolf, you know, the president's popularity generally is still pretty high but there's been a lot of, you know, smoke and noise about the health care debate. The thing that I look at is what do the American people think about the issue? Do they want the health care system to be reformed?

And the polls that I'm seeing suggest that they do overwhelmingly. They understand...

BLITZER: But even the Republicans say they want health care reform, they just don't like the way the Democrats are proposing it.

KAINE: Well, you know, you hear that but then you hear them say in closed door sessions we're going to use this to break the president. We want to delay everything. We want this to be his Waterloo.

You know we live in a society where just 15 years ago, over 60 percent of the people who worked with small business had health insurance. Now only 38 percent of small businesses insure their employees, and the number is dropping like a stone.

BLITZER: So in a nutshell...

KAINE: So the notion that we want to use this for political points to score something on the president ignores the fact that American public wants to see reform and wants this Congress to work with the president to make that happen.

BLITZER: So, what does he need to do right now to turn the tide the other way?

KAINE: Well, it's a matter of first, you know, in my role, I'm out talking to folks all over the country who want to see reform and we are wanting to see our citizens and those who care deeply about reform communicate with their members of Congress. That's very important.

It's not just the president's job. It's also our job as citizens to let our elected representatives know, hey, the time for change is long overdue. Presidents have talked about this since Harry Truman. Let's show that we can act and let's see good faith action and the sense of urgency from those in Congress.

BLITZER: All right...

KAINE: So that's what we need to do and then the president and his team, they need to continue to do what they have been doing, talking to the public but then also in those closed-door sessions, you know, reaching out to key committee members to find the way forward to make this happen.

BLITZER: Here's what your counterpart, the Republican Party chairman Michael Steele, told me last week when he was here in THE SITUATION ROOM. Listen to this.


MICHAEL STEELE, RNC CHAIRMAN: What we're trying to get the American people to appreciate is that there is a better way to do this, that we do not have to tax and spend our way to better health care. We do not have to tax and spend our way to deal with the costs.

Where in American history or anywhere for that matter have you saved money by spending more money?


BLITZER: All right. That was his question. You got a good response for him?

KAINE: Well, he said there's a better way but I sure didn't hear any, and I haven't heard any from him or really from the folks on his side other than, you know, his statement and Senator DeMint that we're going to try to break the president over this, that it's going to be their Waterloo.

You know the issue is we've got -- Wolf, this Friday, in a couple of days, I'm going to an event in Wise County, Virginia, in Appalachia, the southwestern corner of our state, where for three days there's a health clinic to provide free dental and health care to people.

And they do it once a year. And you walk through the parking lot, there's cars from Oklahoma in this Virginia parking lot. From Florida, from Georgia -- people in the most powerful and the greatest nation on earth driving all over the eastern United States so they can get a tooth pulled or get health care treatment.

Every other industrialized nation can do this and we're good enough to do it, too. We just have to put past some of the -- you know the inertia that's bogged us down and act in the interest of the American public.

BLITZER: Here's a question that one of our iReporters sent us to, Monica Toups of Jacksonville, Florida. She voted for President Obama. Listen to this.


MONICA TOUPS, CNN IREPORTER: Doing it right means taking your time and I'm willing to wait, President Obama. I'm willing to wait a little longer to have it done right.


BLITZER: What do you want to say to Monica?

KAINE: Well, I want to do it right and the president does, too. And I think what the president wants is he wants each House to give it their best and pass bills out of the House by recess.

And then as you know, Wolf, that isn't the end of the process. That still means there's significant work to be done to reconcile the two House bills to find new strategies to bring them together to include all voices.

My concerns, frankly, when I read comments like the Waterloo comment is that there are a lot of folks out there whose interest isn't doing it right, it's just delaying to the point where it doesn't get done at all.

We can't continue to see small businesses drop health insurance on their employees or premium rise so much faster than family wages. The system is becoming unsustainable. And it's going to take bold action. This is heavy lifting.

BLITZER: All right.

KAINE: I'm the father of three. You know, in my experience, the last few hours of a nine-month pregnancy are the hardest. And I think that's where we are. But we've gotten bills out of committees in both Houses. That's never happened before. Let's keep the pressure on and make the change that the American public deserved.

BLITZER: Here's one of the problems that you have as leader of the Democratic Party. Fellow Democrats, especially in some states like Virginia or North Carolina, Indiana, states where a lot of these moderate or conservative Democrats are queasy, to put it mildly, about the president's plan and fellow -- some of the liberal plans that are going through Congress right now.

You, the chairman of the DNC, you've got some ads running in some of these states. I'm going to play a little clip.





UNIDENTIFIED FEMALE: It's time for health care reform.

UNIDENTIFIED MALE: The Democratic National Committee is responsible for the content of this advertising.


BLITZER: All right. Tell us the truth. Are these ads designed mostly to influence Republicans or Democrats?

KAINE: These ads are designed to get citizens engaged to call their representatives. And because what we...

BLITZER: But to call Democratic representatives or Republican representatives?

KAINE: I want them to call all their representatives because -- and we're doing -- Wolf, these ads are part of a whole set of strategies that we're doing in every state and every congressional district to engage citizens because what we believe is look, the reason that health care hasn't happened in the past is because -- you know, people are nervous and they need to know that their constituents will support them.

When I see a poll that says 71 percent of the American public believes we ought to have health care reform with a public option that would inject some real competition in the insurance market, that tells me the American public wants this change.

What we need to do is we just need to let members of Congress know that if they support change of this kind, that the American public wants, their constituents will be standing right with them if they do. That's the kind of encouragement that I think and -- you know, help us break the logjam.

BLITZER: You certainly got your hands full right now. Governor, thanks for coming n.

KAINE: OK, Wolf. Thanks.

BLITZER: Tim Kaine is the governor of Virginia and the chairman of the Democratic Party.

She says the United States is back. Is Hillary Clinton taking a swipe at the previous administration?

And South Carolina's governor tries to hold a news conference but is bombarded with questions about his affair.

Donna Brazile and Kevin Madden, they're standing by live. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK) BLITZER: The governor of Alaska back in the news right now. Just in to CNN, let's go to our national political correspondent, Jessica Yellin.

All right. What's going on this time, Jessica?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Wolf, the latest is that the Associated Press is now reporting an independent investigator has found evidence that Governor Palin may have violated ethics laws by accepting private donations to pay her own legal fees.

Now this is based on an April 27th complaint that we have. It accuses Palin of using her official position for personal gain. That's a quote. It also says, quote, "that she's purged to improperly receive an enormous amount of money for herself and her family."

Now recall, Wolf, that when Palin announced that she's stepping down, she cited, in part, the endless ethics complaints against her, which she called frivolous and she said that the legal bills were more than $500,000.

In all, there were more than 20 ethics complaints filed against her, most of them were dismissed, but now again, the Associated Press reporting that in one instance, an independent investigator may have found some wrongdoing.

We, of course, have reached out to Governor Palin and her official office and have not yet had comment back from them. But we'll bring it to you when we do, Wolf.

BLITZER: All right. When you get it, let us know. Thanks, Jessica.

Let's talk about this and more with our CNN political contributor, the Democratic strategist, Donna Brazile, and the Republican strategist, Kevin Madden.

And what's your immediate reaction to that story just coming in?

KEVIN MADDEN, REPUBLICAN STRATEGIST: It's another day of news for Sarah Palin and it doesn't change anybody's opinion about her. I think the people that like her are going to continue to like her and the people that don't like her are going to continue not to like her. It won't change a thing.

BLITZER: What do you think?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: Well, I think this complaint, if it is true, it's going to follow her even when she leaves public office.

BLITZER: Which is in a few days.

BRAZILE: That's correct, because, Wolf, I think the people of Alaska is owed an explanation of whether or not these charges are -- you know, are true. BLITZER: All right. Let's move on right now to the former senator from New York, the current secretary of state, former Democratic presidential candidate, Hillary Clinton. She is saying this and I want to play this little clip.


HILLARY CLINTON, SECRETARY OF STATE: On behalf of our country and the Obama administration, I want to send a very clear message that the United States is back, that we are fully engaged and committed to our relationships in Southeast Asia.


BLITZER: She is visiting India right now, and that's where she said that. When you hear that, it sounds like a swipe at previous administrations or at least an administration when she says the United States is back.

MADDEN: Well, I also think it was a very negative view of the United States. I would disagree that the -- America was ever gone and that it needed to come back. I think that was probably a very awkward way of saying that we have a new administration, a new focus, a new posture towards Southeast Asia.

That's a perfectly adequate argument to make and I think that is where, you know, the focus of her remarks ought to be. But I don't see it as very hyper political. I think the gripes that a lot of Republicans have with the State Department is that we always saw the State Department as serving as an ambassador of the world's views to America when it ought to be vice versa.

And that's just a simple disagreement, but Democrats won and we lost in the last election. So those will be it.

BLITZER: Because in Southeast Asia, which is India, Afghanistan and Pakistan, since 9/11, the U.S. has been pretty active there, you've got to admit.

BRAZILE: Yes, but we forgot about Thailand and Indonesia, and some other parts -- that part of the continent that we have strong regional bilateral relationships. And she went on to say that she wants to resume our alliances, strengthen them and to ensure that the United States is a full partner in terms of the bilateral talks.

One thing I'm interested in, of course, is that North Korea is sending someone to -- I think it's Azerbaijan, but you pronounce these things much better than me, Wolf.


Someone from North Korea will be there. So I'm interested in seeing how -- you know, how her body language tomorrow when she...


BRAZILE: ... meets those...

BLITZER: But she did specifically say Southeast Asia, not Southwest Asia, so we're talking about the eastern part of the continent. Those were her words.

Let's move on and talk right now about the governor of South Carolina. Held a news conference, wanted to talk about real ID, substantive issues, but he got bombarded with questions from reporters about you know what.


GOV. MARK SANFORD (R), SOUTH CAROLINA: Let me turn it to you this way, have you made a mistake, large or small in your life?


SANFORD: No, I'm asking you.


BLITZER: All right. And then there were question after question after question. Here's the question to you, Kevin. Can he continue effectively as the governor of South Carolina when you know every time he's going to meet with reporters, they are going to ask him questions?

MADDEN: I think he can, because I think there's a departure receipt now, there's a big gap between where the public is viewing this story, which is increasingly personal and the way that the media now has conducted themselves at that press conference and the way that they're approaching it down there which is that they're making it very personal.

And I think that if he can go out and concentrate from 9 to 5 on being the best governor and then go home and take care of his family there is a way that he can win this. I think every day that passes by, he has a better chance to weather this politically.

But this is increasingly become a personal story and I don't have any advice for somebody personally. I can -- the best advice I can give to Governor Sanford is be the best governor you can be.

BLITZER: Because we know of another politician who survived a sex scandal and that was Bill Clinton in the White House. People were writing him off, saying he was about to go. You know what? He not only survived, when he left the White House, his job approval numbers were very high.

BRAZILE: And we also have politicians who are currently serving on Capitol Hill that are involved in some measure of sex scandals and they are surviving. But, look this is a distraction right now, Wolf, because he made it a distraction. He used taxpayers' money to fly down to Argentina, and of course he had a public melt own when he came back to try to explain it. And he left the state with nobody in charge. I think the public has every right to know exactly what's going on but at some point, they'll move on and the press will let him move on as well.

BLITZER: So do you think there's going to be a backlash, a sympathy factor for him in South Carolina?

MADDEN: I wouldn't go as far as calling it a sympathy factor. But I think when you started asking questions about where is your wedding ring? Where are you spending time with your family this weekend? That is probably -- I think there is a difference, there is a gap there between what the public cares about, what the media cares about.

So I think if you can continue to go out there and just talk about his job as governor and try and take care of the personal stuff when it's not 9 to 5 and he's not governor there is a way that he can weather this.

BLITZER: Kevin -- Donna?

BRAZILE: I think there'll be more of an empathy factor than sympathy.

BLITZER: Key word. Empathy.

MADDEN: Right.

BLITZER: Guys, thanks very much.

MADDEN: Thanks.

BLITZER: Parents are saying their special needs children are at risk in public schools.


UNIDENTIFIED FEMALE: And I'm going to have to live with this guilt. I know everybody says there's not -- you should not feel guilty, but this is my boy.


BLITZER: She sent her son to a school for kids with autism but she says instead of receiving specialized attention, he was abused.

And explosive tests with an eye toward improved security. What the government is trying to try to keep air travel safe. Stay with us. You're in THE SITUATION ROOM.


BLITZER: Right back to Jack Cafferty for "The Cafferty File." Jack?

JACK CAFFERTY, CNN ANCHOR: The question this hour is when it comes to health care reform, how big are the political stakes for President Obama?

Jeff in Cleveland. "The stakes aren't as high for Obama as they are for the congressional Republicans who are showing what hypocrites they are. Why is it they never balk at costs of war but they immediately label any program like universal health care that could help less privilege people as too expensive? Voters will see that all the Republicans care about is preserving big profits of big business and that they don't care how much common individuals suffer."

Phil in California says, "This will define much of his presidency the way it did during Clinton's first term. Ultimately, Obama and his socialistic health care plan will be monumental failures."

John writes, "Jack, the short-term handicap the Republicans are imposing on President Obama is just that. Short-term. Long-term, Obama has much more to lose by not pushing health care reform through and with over 60 percent of bankruptcies being caused by health care related costs, so do we."

Kyle writes, "There's nothing wrong with our current system that provides the best care on the planet. 80 percent of people are satisfied with the care they receive. Why scrap a system that has an 80 percent approval rating? Obama is trying to turn us into some sort of socialist utopia. And the people are starting to wake up to it."

Lou writes, "Poll after poll show the majority of Americans want some type of government involvement in health insurance. If passage fails, it isn't Obama that will go down. Republicans need to be listening to the voters rather than the big insurance lobbyists on this issue."

And Leonard in San Clemente, California, "Jack, it's the whole enchilada. If the president fails to pass health care reform, not only will he become the Republicans' pinata, but his main street Democratic support will most certainly begin to fail. It's amazing to me a health care option similar to that enjoyed by members of Congress is such a difficult sell to the American people."

If you didn't see your e-mail here, go to, which is my blog situation, and look for it there. You may find it or you may not.

BLITZER: A lot of people writing in today, Jack?

CAFFERTY: A lot of e-mail, Yes. Especially on the health care thing. Feelings running pretty high on that.

BLITZER: Yes. Not surprised at all, Jack. Thanks very much.

The charges are dropped but bitter feelings of racial bias remained. The aftermath of a Harvard University scholar's arrest at his home in Cambridge. What both sides are saying.

And thinking like a terrorist. Our government experts are now trying to build bombs to keep air travelers safer. We have the report right here in THE SITUATION. (COMMERCIAL BREAK)

BLITZER: California's rank and file lawmakers will decide Thursday whether to approve a plan to close a $26 billion budget shortfall. The governor, Arnold Schwarzenegger, is backing the compromise which cuts spending to 2005 levels but doesn't raise taxes. Critics say public safety and health care will suffer in the process.

Let's go to CNN's Dan Simon is following all these developments in San Francisco. Dan?

DAN SIMON, CNN CORRESPONDENT: Wolf, to make this budget work, the agreement calls for $15 billion in cuts and billions of dollars more taken away from local governments. The pain is going to be far reaching. And what we've done, Wolf, is highlight just a few examples.


SIMON (voice-over): Agencies throughout the state are bracing to see exactly how Sacramento's $15 billion in cuts will affect their operations or service.

The Venice Family Health Clinic in Southern California offers free medical services to the low-income and uninsured. 20 percent of its funding comes from the state. Clinic officials are expecting cutbacks. And there's fear that patients will ultimately suffer. But to what degree, they're not sure.

LIZ FORER, VENICE FAMILY CLINIC: Essentially, the state is balancing its cash flow needs on the backs of agencies that serve the poor and poor people themselves. So the long-term effect is that we, in many ways, are serving almost like the banks in California.

SIMON: Healthy Family is a state program that provides health insurance for nearly a million low-income children is having its funding cut by $124 million. The net effect says California's speaker of the House.

KAREN BASS, CALIFORNIA ASSEMBLY SPEAKER: That means the children for the first time in over 10 years are going to have to be on a wait list. And so at a time when the debates are going in Washington about health reform, in the state of California, our children, we are actually going in the opposite direction.

SIMON: And nowhere are the dollar losses felt more than in California classrooms. $9 billion cut from education. The reality, according to the California Teacher's Association, school districts largely prepared for the cuts when planning for the fall. As many as 18,000 teachers had already gotten pink slips.

The CTA says thousands of support personnel also face being laid off in addition to everything else.

DAVID SANCHEZ, CTA PRESIDENT (via phone): They have eliminated all summer school classes in the state of California. There will no longer be art, drama, music. Some PE classes have been eliminated.


SIMON: But under the deal, the $9 billion taken away from education will be repaid once the economy improves. Of course, Wolf, there's no timetable for that.

We should point out that there is some good news to this budget deal, if you can call it some good news. Governor Schwarzenegger had actually proposed eliminating the state's welfare program entirely. About half a billion dollars will be cut from it but the program will remain intact by and large.

And also there've been a lot of concern in California about public parks closing. For the most part, the parks will remain open. Wolf?

BLITZER: What a mess out in California. Dan, thanks very much.

And to our viewers, you're in THE SITUATION ROOM. Happening now only on CNN, airplanes blown to bits to beat the terrorists at their own deadly game. The Feds exploring new ways right now to smuggle explosives past security using suitcases, liquids and even candies.

CNN's Jeanne Meserve on science that could stop airline bombers from striking again.

Also, this hour, a SITUATION ROOM investigation. Children with special needs in danger at schools that are supposed to keep them safe. Shocking allegations of physical restraints misused and young people abused.

CNN's Abbie Boudreau reveals one family's nightmare and why it should scare all of us.

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.

First, this hour, a new day for the health care reform debate or is it Groundhog Day? Once again, President Obama declaring just a short while ago that America is closer than ever before to fixing the medical system.