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The Situation Room
Economy Rebounding?; Postal Service Delivers Debt
Aired July 31, 2009 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ARWA DAMON, CNN CORRESPONDENT: Hey, John.
And here is the timeline as we know it. These four Americans actually started out their journey in Syria. Two of them are believed to be students there. From Syria, they then traveled to Turkey. And, on the 28th of July, they crossed into northern Iraq, the Kurdish north.
They first went to the city of Irbil. And then yesterday they traveled over to Sulaimaniyah checking into a hotel at around 2:00 p.m. local time. Then, early this morning, three of them -- one of them was sick and stayed behind -- three of them then traveled to an area called Ahmed Awaa, very, very close, right up against the Iranian border.
This is a very popular tourist destination, beautiful natural scenery, mountains, waterfalls. They stayed in touch with their friend who was ill and stayed behind, calling, telling stories about what a wonderful time they were having.
Then everything took a turn. The last thing that the friend who stayed behind heard from the three was a phone call at 1:30 p.m. local time saying, we are surrounded by the Iranian military. The three have not been heard from since.
Now, tourist police at this area of Ahmed Awaa said that they did run into the three and warn them about the proximity that they were in to the Iranian border, saying, look, you're not Iraqi. You're American. These are very tense times. The fourth American, the one who stayed behind, left the hotel about 4:30 p.m. today. At 6:00 p.m., Kurdish security forces went into the hotel and took his belongings. Kurdish officials do believe that the three are now being held with the Iranians -- John.
JOHN KING, CNN ANCHOR: And, Arwa, help us understand. What do we know about communications cross-border? Do the Kurdish authorities, the Iraqi authorities in those areas, do they have a relationship with the Iranians across the border? And do we know of any conversations taking place?
DAMON: Well, John, what we do know is that into the very late hours and still ongoing are meetings being held with senior Kurdish officials trying to figure out exactly how to track down these three missing Americans and how to help them get back home safely.
One can only assume that there are some sort of cross-border relations that do take place. And to give you an idea of the layout of the land here, the border between Iraq and Iran is very undefined. It's a natural border. There's no fence separating the two.
The concern is that these three Americans may have accidentally strayed into Iranian territory. At the same time, we're still trying to confirm a lot of this information, the U.S. Embassy just saying most recently that they are still trying to track these three down.
So, a lot of this remains up in the air. But what we do know is that the three have been missing, not heard from since 1:30 p.m. today, the last phone call saying we're surrounded by the Iranian military.
KING: Arwa Damon on top of this breaking story for us in Baghdad.
Arwa, we will check back with you as developments warrant.
And three missing American students along the Iraqi-Iranian border means a headache and a surprise to the Obama White House.
Let's go straight to our correspondent Dan Lothian.
Dan, what do they know at the White House?
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right. Certainly a headache and a surprise, so officials are looking into this case.
Now, I did talk to a senior administration official who told me that the embassy in Baghdad is investigating this report. He says, we're using all available means to determine the facts in this case. This official went on to say that they take all detention cases very seriously and finally added that the safety and security of U.S. citizens remains the U.S. government's top priority.
Now, I did ask the official if, perhaps, the Swedes or the Swiss were being brought in to help out in this case. This official said that, at this point, this was all they were willing to say.
Now, I must point out that the Swedes and Swiss have played a key role in other incidents like detention incidents both in North Korea and Iran, so perhaps they will be brought in as well here, John.
KING: Dan Lothian with the latest from the White House.
Dan, we will check back with you and give us a shout if anything else comes up. Thanks very much.
And, today, President Obama is proclaiming America has put the brakes on recession and he's taking a big chunk of the credit for it. He's pointing to this, a new measure of overall economic growth. The gross domestic product has been on a mostly downward plunge since the end of 2007, when the recession began. It's still in negative territory, but it only shrank 1 percent in the second quarter of this year, a smaller decrease than many economists had expected.
(BEGIN VIDEO CLIP) BARACK OBAMA, PRESIDENT OF THE UNITED STATES: In the last few months the economy has done measurably better than we had thought, better than expected. And as many economists will tell you, that part of the progress is directly attributable to the Recovery Act.
(END VIDEO CLIP)
KING: The president clearly connecting the dots there between the Recovery Act, stimulus program, and improvements now in the economy.
Our chief business correspondent, Ali Velshi, is here with a reality check.
Ali, can the president connect those dots?
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: He can. I would say he's mostly right on that one.
This economy is governed by consumer spending. And when this recession hit, consumers backed off on their spending, consumers and businesses. Take a look at that, the second quarter of this year. That's March until the end of June. Business spending was down almost 9 percent. Consumer spending was down 1.2 percent. This is compared to the same period last year.
Government spending -- look at that -- up almost 11 percent. So, basically, where consumers have pulled out, the government has stepped in. Some of that is stimulus money. Some of it is other spending. But, yes, the president's mostly right in saying that the -- this administration and its extra spending has made up for some of the lack of spending. And that's why GDP decreased by a smaller amount than was expected.
KING: All right, Ali, let's look even a little deeper. The president cited other steps he's taken that he says have eased the recession.
Let's listen.
(BEGIN VIDEO CLIP)
OBAMA: We took unprecedented action to stem the spread of foreclosures by helping responsible homeowners stay in their homes and pay their mortgages.
(END VIDEO CLIP)
KING: Put that one to the test. Is he right?
VELSHI: Half right on that one. They did take unprecedented measures. They put a lot of money into it.
Let me tell you, though, home foreclosures are still on the rise. We are still at record levels. Here's where the difference is. In some of the hardest-hit metro areas, including Detroit, including Stockton, California, where those foreclosure numbers had just been going higher and higher, they have started to taper off. We have seen small decreases in those places.
But across the country foreclosures are still on the rise, so I would say the president has that one half right.
KING: All right, let's put one more to the test. Listen to the president here touting another step he says has been helpful for the economy.
(BEGIN VIDEO CLIP)
OBAMA: We helped revive the credit markets and opened up loans for families and small businesses.
(END VIDEO CLIP)
KING: Has he got that one?
VELSHI: He's got that one half right as well.
If you will recall, last September, October, November, we were in a credit crisis. That meant companies couldn't borrow money. Banks couldn't lend to each other. That is eliminated. Banks are now fully able to -- to lend money to each other at low rates.
Here's where the problem is. Those same banks are not offering as much credit to consumers or to small businesses. So, the credit crisis that was has been eliminated. The credit crisis for American citizens and small-business owners has not gone away. So, once again in terms of easing the credit crisis I would say the president is half right that his administration has helped the situation -- John.
KING: Ali Velshi putting it all to the test for us.
Ali, thank you.
And you may not have Ali's cool graphics and that excellent meter there, but many of you are grading the administration. Next week we take note of 200 days in office for the Obama White House. CNN's anchors, analysts and many of you will grade the president on the economy, on health care reform, foreign policy and other issues you care about.
Special coverage of this national report card starts next week, right here, on CNN.
And Jack Cafferty joins us this hour with "The Cafferty File."
Hi, Jack.
JACK CAFFERTY, CNN ANCHOR: Related subject, John. Millions, millions of Americans lost their jobs since the recession began officially in December of 2007.
The unemployment rate is expected to top 10 percent before the end of this year. The harsh reality is that a lot of these people have been out of work for a very long time and many of the businesses that used to employ them, the auto industry, finance, real estate, construction, they're not hiring.
They have been hard-hit by the recession. But other fields, like health care, clean energy, computer science, and government, well, they are expected to grow a lot in the years to come. "USA Today" did a piece that shows millions of Americans making dramatic job changes. A survey by CareerBuilders showing 71 percent of workers who were laid off and haven't found other jobs say they're looking for work outside their career fields.
This could mean the unemployment rate stays higher for longer because workers have to get trained and then find jobs in the new field, and that takes time. The transitions aren't always easy either. Sometimes, the unemployed have to decide to spend thousands of dollars of their own money getting the training to learn the skills needed for the new career, only to find then that they have to take a pay cut.
The government's trying to help. The economic stimulus package included $4 billion over three years to help to retrain and place unemployed people in new jobs. The question is this. Has the economy forced you to consider a career change?
Go to CNN.com/caffertyfile and post a comment on my blog.
Fortunately, it hasn't done that to me, and that's a good thing, because this is all I know how to do.
KING: And you're pretty good at it.
CAFFERTY: Well, you're very kind.
(LAUGHTER)
KING: That's a great question. That's a great question. I look forward to this one. Jack, thanks so much.
Nobody wants to be sick, but if you do fall ill, this is among the best hospitals to be sick in. It's cutting costs, improving quality. Check this out. It will even give you a warranty for the care you receive.
Now, no free lunch. Some business executives who ate at the White House pay their own way. Wait until you find out why.
And it brought back memories of 9/11. Now we're seeing actual photographs of the presidential plane incident that some call scare force one.
Stay with us.
(COMMERCIAL BREAK)
KING: You know the drill. When you buy a car, you get a warranty to protect you in case something goes wrong. Same thing when you get a new oven or that high-definition TV screen you have been wanting.
So, what if you got a warranty from your doctor? That's actually happening. It's part of a unique approach to providing better medical care for less money.
Let's bring in our national political correspondent, Jessica Yellin.
Really?
JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Really. It is pretty remarkable, John. One medical organization in rural Pennsylvania has found new ways to bring down the costs of health care and they have been passing on those savings.
In fact, the local school district saved so much money on their health care, they gave their teachers a $7,000 raise, all from health care savings. Now, that hospital has become an Obama administration poster child for health care reform.
(BEGIN VIDEOTAPE)
YELLIN (voice-over): Cardiologist Peter Berger is looking inside a patient's heart and getting graded on his work.
UNIDENTIFIED MALE: We're in the heart and we're taking some pictures.
YELLIN: The grade is based not just on the success of this procedure, but on the overall care his patient receives, sometimes up to months later.
DR. GLENN STEELE, CEO, GEISINGER HEALTH SYSTEM: Everybody that's involved in the care is focused on the outcome, not their piece of the action.
YELLIN: It's part of a radical new approach to medicine that's made Geisinger Health System an Obama administration poster child for reform. Geisinger has cut costs and improved quality by standardizing how procedures are done, developing a team approach, and emphasizing preventative and follow-up care.
STEELE: All of those things are thought or have been proven to be related to the probability of you having a perfect outcome.
YELLIN: Some of their innovations? Checklists. The medical team follows steps to ensure there are no mistakes, like making sure the right patient is on the table.
UNIDENTIFIED MALE: Can you tell me when your birthday is?
YELLIN: Another innovation? A warranty. Instead of charging for each test or procedure, patients can pay a flat fee for treating their heart condition. If there are any complications, the patient gets follow-up care for free.
DR. PETER BERGER, CARDIOLOGIST: This warranty system just provides additional incentive for us to do the right thing.
YELLIN: A third innovation? Patient partnering. A nurse is assigned a patient with a chronic condition and checks in regularly. Nurses can even get a readout of a patient's weight every day. If he gains weight...
JAMES CONNELLY, PATIENT: Dan's going to be on the phone the next morning looking for an explanation.
YELLIN: According to Geisinger, partnering has led to a huge decrease in hospitalizations.
Dr. Berger says these innovations have helped make his patients healthier. And Geisinger says in some instances they have saved up to 7 percent a year.
(END VIDEOTAPE)
YELLIN: Now, the question is, can this be duplicated nationally? Geisinger's doctors say, well, some parts more easily than others. For example, it should be easy to get doctors around the nation to adopt electronic medical records, but probably harder to get primary care physicians and nurses and specialists all coordinating their care together and changing the way they practice medicine.
KING: So, the -- the warranty program.
YELLIN: Yes.
KING: Money-loser?
YELLIN: Not for them, they say, because it incentivizes the doctors to provide better care. The doctors are more thorough, make sure they follow up with the patient, and there are fewer times a patient needs to come in for follow-up care.
KING: The longer the health care debate goes on the more we get to look at interesting programs like this. Jessica Yellin, thanks so much.
We mentioned before members of the House, well, I would say they fled for the exits today. They began their August break without voting on health care reform, but they expect to get an earful back home from constituents and from advocacy ads flooding the airwaves.
When is the last time you mailed a letter? Postal carriers apparently could use more work.
(BEGIN VIDEO CLIP)
BRIAN TODD, CNN CORRESPONDENT: What is the volume like now compared to what it was before?
UNIDENTIFIED MALE: Well, about -- I would say about a third to a half it's dropped off.
TODD: In how long?
(END VIDEO CLIP)
KING: Our Brian Todd out there in-depth into why the U.S. Postal Service is bleeding money.
Plus, there's no such thing as a free lunch for a group of executives who dined at the White House. Was it good P.R. or bad protocol?
And wait until you hear how this tow truck -- that's a swimming pool -- wound up in the swimming pool. We will tell you. Stay with us.
(COMMERCIAL BREAK)
(NEWS BREAK)
KING: And if you have been noticing on the bottom of the screen, you just might have seen President Obama walking on the grounds of the White House. He's heading across the street to Blair House, the president bringing in members of his Cabinet and team to discuss what's gone right in the first six months and what they might be able to do a bit better. We will keep watching that.
We're also following breaking news this hour. Three American tourists reportedly strayed across the Iraqi border and are now in Iranian custody. We will bring you the latest and map out just how this might have happened.
Plus, the flyover that sent some New Yorkers running in fear. We now have dozens of photos taken that day, an embarrassing day for the White House.
And your mailman may not come around as often, and it's your fault, because of all those e-mails you send.
Stay with us. You're in THE SITUATION ROOM.
(COMMERCIAL BREAK)
KING: And more now on our breaking news -- three American tourists in the custody of a frequent American antagonist, Iran.
We're told they were hiking in the mountains of northern Iraq and may have wandered across the border, easy to do in that rugged area.
Let's bring in our CNN Pentagon correspondent, Barbara Starr.
And, Barbara, let's go to the map and take a look. We heard from Arwa Damon at the beginning they started in Syria, they went up into Turkey, and then crossed out into Iraq. And let's stretch this out a little bit, so we can see this a little bit better. Let's just start with a basic. We will get to these towns in a minute. They came. They went to Irbil. They then came down here and somewhere, here in Kurdish-controlled -- they were on a hike and either they wandered just across or they were close enough to the border that we believe based on what we know now they went into Iranian custody.
Let's just start with what we know about this border in terms of security.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: Very rugged area but a very tense border at times. This is the Kurdish area of Iraq, which is supposed to be the peaceful area, and it has been relatively peaceful for years. In fact, the U.S. hasn't had that much of a military presence along this border.
But you don't want to wander into Iran. This is not something that any American citizen wants to do. The Iranians don't take to it kindly. They react very quickly. And none of the details are confirmed yet, but it does look like these people are in Iranian custody. And, you know, this could be the August surprise that no administration wants ever.
KING: And, as we look for more details, just generally, obviously it's a border. Now, many countries have conversations with the people across the border. Maybe there's border crossings or there are police on this side and police on that side. Do we know much at all about Kurdish relations with the Iranians on this side?
STARR: I don't think we have a very good feel for that, John. There is some communication certainly, but here's the difference. The Kurds and the Iranians may talk, but these people are Americans.
And the Iranians know if they have Americans in their custody, they have a propaganda tool. Very tough for their families right now to be listening to all of this, very uncertain about where they are or what's happening to them.
But the Iranian regime to have Americans in their custody is -- it's a propaganda victory, if nothing else. We have seen it in the past. Remember Roxana Saberi, the American journalist that was held by Iran for sometime. A couple years ago we saw a number of British naval forces held by Iran, paraded on TV multiple times, and there is, of course, an American businessman still for two years missing in Iran.
KING: All right, I am going to stretch this area out just a little bit so people can see what we're talking about.
Here's Baghdad. Here's (INAUDIBLE) and words you have heard a lot. Kirkuk, you have heard a lot during the Iraq war. Shrink it back down a little bit, so you get a sense of the region. Iran over here. Again, they started in Syria, were hiking in Turkey, came down into Iran.
Barbara, when we look at this here knowing what we know about the state of U.S./Iranian relations, which are pretty bad, in the Bush administration, when there were incidents, whether it was about IEDs, whether it was about security here, there at times were secret conversations and then at other times there were conversations that were made public. Even though there were no direct relations, there were some direct conversations at a lower level.
What is the state of play now in terms of the relationship?
STARR: Well, here's the real problem in dealing with the Iranians. Which Iranians may have them? Is it the regular Iranian government, if you will? Is it the regular Iranian security forces? Or is this something involving the Republican -- the Revolutionary Guard or some other potentially rogue element of the Iranian security services that even their own government doesn't have much control over or know what's happening?
This will become more difficult as the days go on. If somebody can get these Americans back very quickly, situation defused, it's all over. If this drags on and becomes an incident between Washington and Tehran, it could go on for some time.
KING: And let me ask you lastly, because of the stakes. And we want to be very clear we don't have many details. But go back through those other incidents you have mentioned in the past and take a bit more time to explain sort of how they might offer clues, what we know has happened in the past, the track record, to what we hope is happening right now or we might expect in terms of the dialogue or lack thereof.
STARR: Well, the track record that we usually see is the Iranian regime when it has these people parade them out and make them a propaganda tool, if you will.
Recall, we saw the British naval forces paraded on TV several times, Roxana Saberi, the American journalist. The one that's interesting is we haven't seen this American businessman who disappeared a couple of years ago.
But, John, all of this against the bigger backdrop, U.S./Iranian relations tense since that disputed election and the violence that's broken out across that country and, of course, still overhanging everything, the nuclear question -- John.
KING: Barbara Starr with her unique insights into what is a dicey situation -- a breaking news situation. Three Americans believed now held just across the border in Iran.
Here's a scene that's still giving the Obama administration flashbacks. This was about three months ago. A jumbo jet buzzed over New York City. Lots of people panicked here, fearing it was 9/11 all over again. Then they got angry when they learned it was all part of an elaborate photo-op -- a shoot for one of the planes used as Air Force One.
The White House apologized. And we've been waiting ever since to get our hands on more of the pictures taken that day. Our homeland security correspondent, Jeanne Meserve, has them right now -- Jeanne.
JEANNE MESERVE, HOMELAND SECURITY CORRESPONDENT: John, you know, back in April, when this happened, as you said, the White House released only one photograph. But three months later, the Pentagon has put out 146 documenting the infamous flight of what came to be called "Scare Force One."
So you can see what your taxpayer dollars bought, we have compressed them into 20 seconds.
Voila.
(VIDEO CLIP)
MESERVE: That is not the photographs we had hoped to show you.
Let's see if they come up.
Here they are.
(VIDEO CLIP)
MESERVE: It's very fast, but all 146 of them.
(VIDEO CLIP)
MESERVE: Now, the administration says the photographer piggybacked on what would have been a scheduled training flight. The price tag -- $328,000, which comes to about $2,247 per photograph. Of course, it also cost the director of the White House Military Office his job and some loss of face for the administration -- John.
KING: Some loss of face, indeed.
Indeed, as we look at the photographs and put them together, it gives you dramatic images. In addition to the photographs, the Pentagon also released some documentation about this today.
What did it show?
MESERVE: Well, it shows that before the flight, officials were aware and concerned about what were called "the sensitivities in the New York area." But as we all know, the public wasn't warned, outrage ensued and the papers show an administration struggling to contain it: "Damage control requires timely counter information. No positive spin is possible. Admit mistake," says one of the Air Force documents.
One White House official writes: "Any way you cut it, this was a moronic idea."
And the commander of the Presidential Airlift Group sends an e- mail apologizing for the incident, saying his real intent was to honor New York, not cause mass chaos. Oops -- John, back to you.
KING: Oops. Oops, to say the least.
Jeanne Meserve, a fascinating look there.
Jeanne, thank you very much.
Almost 30 billion fewer pieces of mail in the past two years.
In this era of e-mail and online bill paying, is the handwriting on the wall for the U.S. Postal Service?
Plus, guess what?
That's right, there's no free lunch. Jessica Yellin tells us why a bunch of CEOs who dined at the White House had to give staffers their credit card numbers.
(COMMERCIAL BREAK)
KING: There may come a time when mail carriers are like milkmen -- a relic of the past. All of us who can use e-mail probably guess why.
But this drives it home. About two years ago, the U.S. Postal Service delivered 213 billion pieces of mail. That's expected to fall to 175 billion this year and to keep falling in the years ahead.
Our Brian Todd has been looking in depth at the U.S. Postal Service and its cash crisis.
BRIAN TODD, CNN CORRESPONDENT: John, there is no way to nuance this. The Postal Service is hemorrhaging money and is likely about to make some very drastic changes. That's going to affect everyone from you and me to a gentleman who faithfully works his route every day.
(BEGIN VIDEOTAPE)
TODD: (voice-over): For almost three decades, Delvin Johnson has been unloading, sorting, hoofing it house by house, becoming a fixture on his Northwest Washington beat.
DELVIN JOHNSON, WASHINGTON, D.C. MAIL CARRIER: All right. OK.
UNIDENTIFIED FEMALE: (INAUDIBLE) paying my bills.
JOHNSON: All right.
UNIDENTIFIED FEMALE: OK. Thanks a lot.
JOHNSON: Thank you.
TODD: He survived the anthrax scare at his local station and other perils of the job.
(on camera): So in 30 years how many dog bites?
JOHNSON: Just one. TODD: One?
JOHNSON: Just one, yes.
TODD: Only one?
JOHNSON: After 28 years.
TODD: You went 28 years without one?
JOHNSON: Without one, yes.
TODD: And just got one (INAUDIBLE)?
JOHNSON: Yes. Yes. But like you say, it comes with the job, though.
TODD: (voice-over): For mail carriers like Delvin, dog bites may be the least of their worries these days. The U.S. Postal Service is now on the government's list of high risk agencies. It's projected for a net loss of $7 billion this fiscal year alone. We're all simply doing more e-mailing and online bill paying. And that means a lot less physical mail to and from your doorstep.
(on camera): What is the volume like now compared to what it was before?
JOHNSON: Well, about, well, I'd say about a third to a half it's dropped off, you know.
TODD: In how long?
JOHNSON: In about a year-and-a-half to a year. Yes.
TODD: Is that the most drastic it's been for you?
JOHNSON: The most drastic, yes.
TODD: (voice-over): It's drastic all over the postal system, which was built to handle so much more and is now oversized, antiquated and considering cutting benefits and workforce. As for our mail, the service has drawn up a list of nearly 700 post offices for possible closure and...
(BEGIN VIDEO CLIP FROM JULY 30, 2009)
JORDAN SMALL, U.S. POSTAL SERVICE: Mail volume levels can no longer sustain six day a week delivery.
(END VIDEO CLIP)
TODD: Back in that D.C. Neighborhood, we asked Janet Bachman about that.
(on camera): They're talking about cutting it from six days to five days. JANET BACHMAN, WASHINGTON, D.C. RESIDENT: It wouldn't bother me at all. In fact, I personally think that for residential mail delivery today, three days a week is sufficient.
TODD: (voice-over): Another story for small businesses on Delvin Johnson's route. Dave Lesser helps run a non-profit that promotes nutrition. He says his operation sends out hundreds of pieces of mail each week to places like doctors' offices.
His clients, he says, count on them.
DAVE LESSER, PHYSICIANS COMMITTEE FOR RESPONSIBLE MEDICINE: People are really interested in having something solid that they can hold onto, that they can look at, flip through the pages.
TODD: Still, it now looks like the icon that never stopped for snow, rain, heat or gloom of night is about to become much less a part of our lives. Neighborhood resident Patrick Basse, who grew up in France, offers some perspective.
PATRICK BASSE, WASHINGTON, D.C. RESIDENT: Where I come from in Europe, the mailman used to sit at our table. And -- and then here, it's -- it is very nice, too. But it tends to disappear.
(END VIDEO TAPE)
TODD: Now, as for Delvin Johnson, he's been offered early retirement twice. He's held it off each time and he'd like to go at least three more years, until the mandatory retirement age of 55, because he's got a daughter getting ready to go to college -- something we can all identify with -- John.
KING: Absolutely, you can identify with that.
Now, Brian, I want you to take us through an eye-popping graphic that really lays out this decline you're talking about.
TODD: This is from the Government Accountability Office. Unbelievable. If you look at the ups and downs over the past 20 years -- you know, clearly ups and downs there, fairly consistent. And then you see a precipitous drop between 2007 and 2009. Twenty-eight billion pieces of mail down in that period, about -- a drop of about 15 percent. The post office projects it will go down even more in the coming years.
It is staggering. I mean it's going to really be reduced, the service.
KING: That chart looks like my 401(k) last year.
TODD: Yes, right.
KING: All right, Brian Todd.
That is stunning.
Thank you very much, Brian.
TODD: Thank you.
KING: And now, an Obama administration idea that succeeded beyond expectations -- but that has become an embarrassing problem. Right now, the White House can only guarantee the Cash for Clunkers rebate will continue through this weekend. Again, the new program burned through most -- maybe all of its billion dollar budget -- in a matter of days. Americans pouncing on the chance to get up to $4,500 for trading in their old vehicles for more fuel-efficient ones.
Members of the House scrambled to approve another $2 billion for the program today, before they headed home for the summer break.
CNN's Kate Bolduan is here now -- Kate, what about the Senate?
Is it going to buy in?
KATE BOLDUAN, CNN CORRESPONDENT: Oh, it is not a slam dunk, John.
The deal in the Senate is that the bill has to extend the cash. It still needs to pass through the Senate. But on the right, fiscal conservatives, they don't want to spend more taxpayer money. And on the left, some don't think the program goes far enough to increase fuel-efficiency.
Senate aides tell CNN that it's simply too soon to tell if the Senate will act next week or, John, a bill that need to be waiting until September, when they come back after the August break.
KING: So that's the debate under the dome. You went to an auto dealer today.
What's the sense out there?
BOLDUAN: We -- we did. It was really great to get out there and really talk to the dealers. We went to a dealership -- a Koons Automotive dealership in -- in Virginia. And they say that thanks to the Cash for Clumper -- Clunkers program, they have sold 290 cars at their 16 locations. And I asked Alex Perdikis, a Koons executive, what those numbers mean for them right now.
(BEGIN VIDEO CLIP)
BOLDUAN: What was the reaction amongst you and your employees when this program really started moving?
ALEX PERDIKIS, KOONS AUTOMOBILE: Well, when we saw the influx of business, the people coming in that were actually ready to buy, it was very exciting. I mean we had a huge weekend. So I think the numbers tell -- you know, really tell the story. I mean we had one of the largest weekends we've seen in years.
(END VIDEO CLIP) BOLDUAN: They've definitely seen a bump in sales. But what's frustrating, they say, is the paperwork. Perdikis says it's taken up to six hours to submit for approval on one deal. And that's a hefty proposition when you're talking about almost 300 deals and concerns over how long the money will be available.
But he says, really, to be quite honest, they'll deal with that headache because right now it's bringing in business and they don't like the alternative.
KING: I am shocked. A government program has a lot of paperwork. I'm stunned by that.
BOLDUAN: That's what I said to him -- are you surprised?
KING: Kate Bolduan, thanks for looking.
It's a fascinating one.
We'll keep on top of what the Senate does and whether it adds more money.
Thank you.
So what happens to that old clunker of yours when you trade it in for the cold, hard cash?
We went to a car dealer in New Rochelle, New York to find out.
(BEGIN VIDEO CLIP)
ANTHONY CACCIOLA, SERVICES DIRECTOR, PREMIUM NISSAN: We empty the oil first from the car inside the shop, draining all the oil from the car.
UNIDENTIFIED MALE: All right.
CACCIOLA: Once we park it in a secure place, where we're ready to leave it, we put the mixture into the engine, making sure that we wore protective gear. We put about two to three quarts in. That's all you really need. Once you start the car, you let it run from anywhere from three to seven minutes at about 2,000 RPMs and then the engine just dies on its own. From here, the car will be towed by a company called A&M and it will be taken, if I'm not mistaken, directly to a -- a junk yard.
UNIDENTIFIED MALE: OK.
CACCIOLA: And it won't be sold -- resold.
(END VIDEO CLIP)
KING: All righty then.
An online market analysis found that about 100,000 car shoppers put off -- put off buying a new vehicle until the Cash for Clunkers program kicked in.
In these tough economic times, chief executives are left to pick up the tab after a power lunch at the White House.
(COMMERCIAL BREAK)
KING: We're back with the best political team on television -- CNN's Gloria Borger, Ed Henry and Dana Bash.
But Jessica Yellin starts us off -- Jessica, nice place.
JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Right. John, you know that saying, there is no free lunch?
Well, a bunch of CEOs who lunched with the president at the White House last month really learned that. They had to give White House staffers their credit card numbers to pay the cost of their meals. Call it recession hospitality.
Clearly, the Obama administration is taking pains to make sure they are not seen as being easy on business executives. Now, that's all about political perception.
But let's talk reality -- Wall Street reality. A new report from the New York attorney general, Andrew Cuomo, says that most of the nine original banks that received money from the government ended up paying out billions in bonuses last year. That's right, just like AIG.
Take Citigroup, for example. It suffered $27 billion in losses, but gave employees more than $5 billion in extra pay.
Now, you'll remember, in January, President Obama called these bonuses shameful. It's clear other firms still followed AIG's example.
So where's the outrage now from the White House?
The White House proposed sweeping financial regulation and, yes, today one piece restricting executive pay did pass the House. But the whole package has gone nowhere. And any of it hasn't touched the Senate. So the White House, meantime, is making executives pay for lunch.
The question is, is the White House so focused on the small stuff, they're letting Wall Street go back to its old ways -- John.
KING: Jessica Yellin, thank you for that.
And let's bring it up right here at the table. And I'm going to start with you -- Ed Henry, you work at the White House. You have that big fancy tie. You don't have to swipe your credit card going to work every day, do you?
ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: No, I don't.
(CROSSTALK)
HENRY: Yes, I feel honored compared to these CEOs.
I think there's only one way to solve this, really. We need a second Cash for Clunkers program.
(LAUGHTER)
HENRY: That's working, so try it with the bonuses. There are clunkers on Wall Street.
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Right.
HENRY: The government gives them $4,000 for each Wall Street firm. Turn in those clunkers. I mean, to me, that's the bottom line.
How are these guys still getting bonuses when they sank the economy?
That's the bottom line.
BORGER: You know, how about tying bonuses to performance over the long-term?
I know that's a shocking idea.
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Wow!
BORGER: Wow! What a concept.
Why not try and do that on Wall Street?
I mean isn't that what the administration is talking about?
And isn't that what makes sense in the real world...
KING: But when all...
BORGER: ...as opposed to what (INAUDIBLE)?
KING: ...when all the guys you cover up under the Capitol Dome start talking about this, I mean there's a legitimate question here.
BASH: Right.
KING: There's legitimate outrage, but there's also a legitimate question -- should the government -- is this the government's job?
Isn't this supposed to be the free market?
BASH: It -- right. And, you know, that's -- it's actually interesting you say that, because just today -- it's a coincidence, really. But just today, the House of Representatives passed a bill that essentially says that the federal government is going to dictate whether or not a firm can give a bonus or whether or not that will actually hurt the economy. It was a total party line vote. Despite all the outrage about bonuses, it was a party line vote. Almost all the Republicans voted against it, because they said the federal government is still not their role, unless companies are getting federal dollars.
So despite all the outrage, it still does seem to be not going very far in terms of overall reform of the system.
KING: And the key from the White House's standpoint -- from a policy standpoint, is Kenneth Feinberg has been appointed the pay czar...
BORGER: Right. The czar.
KING: ...at the Treasury Department. And he's a very well known attorney in Washington who handled coming up with difficult issue, obviously, compensation for the families of 9/11 victims -- how do you put values on a life. And he won wide bipartisan praise for figuring it out.
It's going to take all those skills to figure and navigate this, because, you're right, it's a free market. And while we want to -- you know, it's easy to beat up on folks who messed up on the economy, on one hand. On the other hand, if the government cracks down too much, it could cause a -- a backlash.
BORGER: You just don't want to encourage pay incentives that encourage them -- people to take more risks than they should and get a quick reward and then -- and then get a quick bonus.
But can I say one thing?
This charging the CEOs at the White House, I -- did the president charge his guests the other day for a beer?
Did he make them pay the few bucks for that?
I don't know.
Ridiculous, right?
KING: Right. He had me over for lunch twice.
BORGER: Ridiculous.
KING: Now, he's going to send me a bill.
(LAUGHTER)
BASH: Right.
BORGER: Sometimes you can take this perception thing just a little too far.
KING: Well, on the popcorn -- let's stay on the perception front. I was traveling in California and Idaho and Oregon. I turned the car radio on and mostly even people imitating Barack Obama's voice, saying, "come buy a car," "take advantage of the Clash -- Cash for Clunkers rebate program. So they put a billion dollars up. It goes like that. The House votes today to add $2 billion, is that right, $2 billion?
BASH: Right. (INAUDIBLE) going.
KING: And now the Senate is here for another week.
How can they move so quickly on something like this and decide let's put more money in, when -- pick another issue -- whether it's health care reform or a nominee for some agency or anything, and it takes forever?
BASH: Well, I mean, because it's -- this is pretty simple. You know, obviously, something like health care reform or pretty -- or pretty much anything else is either complex or controversial. This is not. This is actually the one area that was working. Now, certainly there are...
KING: Working, but we have record deficits.
BASH: No. The -- no question. But it's something -- actually a government program that -- that showed some success. Obviously, it showed success. They ran out of money. So that's why I think this -- this is able to -- to go fast.
But you know watching Washington and you know watching Congress, that it is really remarkable how things can be stuck and it can be stalemated and then boom, something happens where they get -- they get calls from their constituents and all of a sudden the floodgates open.
BORGER: You know, Congress is a lagging indicator. People like it...
(LAUGHTER)
BORGER: People like it, they will do it, OK?
KING: Right.
BORGER: So they already...
BASH: Yes.
BORGER: ...they already got a great response on it so, hey, we've got do it.
BASH: Exactly. Very easy.
KING: Help me on this one, Ed, finally.
(LAUGHTER)
KING: What is the fear at the White House? He's more upbeat about the economy today because the news last quarter was less bad. It's not great news, but it's less bad that the quarter before.
Do they have an eggshell sense over that that we want to start being upbeat, because the biggest thing that drives this economy is consumer spending?
HENRY: Right.
KING: And that's lagging still a bit. But they have to be thinking, if we get too optimistic, where's the trap door?
HENRY: Right. They're very worried about getting too optimistic, most because of the jobs numbers. There's more job numbers coming out next Friday, in fact. And Robert Gibbs today anticipating there's going to be really bad numbers. We could get up to 10 percent in unemployment.
I think the ore point to look at is what the president was saying about the sort of revision of -- of the growth numbers from late last year. He jumped on fact that it turns out it was much worse than we anticipated. That's very politically advantageous for him to say, look, I pulled us back from the abyss, George Bush left me this big mess.
It's funny, on national security, the president is always saying, I'm looking forward, not backward. But on the economy, he looks backward a lot.
UNIDENTIFIED FEMALE: Yes.
KING: All right. We're going to call it quits there.
Ed Henry, Gloria Borger, Dana Bash -- if you want to put up your credit cards, you can stay a little bit longer.
BORGER: Oh, please.
HENRY: You didn't give us any food, so I mean...
KING: I didn't give you any food, no.
BASH: There was no (INAUDIBLE).
KING: Has the economy forced you to consider a career change?
Jack Cafferty will have your e-mail.
Stay with us.
You're in THE SITUATION ROOM.
(COMMERCIAL BREAK)
KING: Fredricka Whitfield is monitoring stories incoming into THE SITUATION ROOM right now -- Fred, what do you have?
WHITFIELD: Hello again, John.
Well, former Philippine President Corazon Aquino has died at the age of 76. Her son announced that she died of cardiac arrest after battling colon cancer for more than a year now. Aquino's People Power movement swept away the 20 year rule of dictator Ferdinand Marcos. She was president of the Philippines from 1986 to 1992, fighting off seven coup attempts in six years.
Here in this country, Governor Arnold Schwarzenegger wants cash- strapped California to consider rolling back its pension benefits for public employees. California has at least $63 billion in unfunded pension liabilities. Schwarzenegger says the state could save $95 billion over 30 years by lowering benefits for new employees. Critics say the move would make it harder for California to attract qualified workers.
And Michael Vick's creditors will vote on a new bankruptcy program. A judge rejected an earlier plan from the former Atlanta Falcons quarterback back in April. Now, Vick has proposed selling more assets and giving creditors a bigger cut of his future earnings.
Several teams have already said they're not interested in signing Vick. Less than two weeks ago, he finished serving 23 months for running a dog fighting ring. While many players or teams have said they don't want him, there have been a few who said they do. So we'll find out if he does, indeed, get signed.
KING: Several maybes out there. You're dead right on that one.
WHITFIELD: Yes.
KING: Fredricka Whitfield.
Fred, thank you very much.
And Jack Cafferty joins us again -- hi, Jack.
CAFFERTY: John, the question this hour is, has the economy forced you to consider a career change?
Dan in Santa Barbara, California: "I used to be a guest services manager at a local hotel. I'm almost finished with a hospitality management course now. But I'm working as a night clerk in an independent living facility for seniors in conjunction with the housing authority and looking at more training in social services. I expect more job security and standard benefits in that field, which is lacking in many hotel jobs. Overall, it's been a good thing for me."
Keith in Florida says: "Yes, I had a 30 year career in consulting corporations and companies in trouble. I was laid off in December of '08. There are still no indications when I'll have work any time soon. So I'm searching for management positions at a considerable cut in salary and no benefits just in order to survive. I have sent out over 600 resumes since December." Mare writes: "My training is in three industries -- film, graphic design and interior design. And all three of those fields that I'm trained in have been dealt severe blows here in Los Angeles. I'm considering not only a change of career, but also a change of states."
Jake writes: "I've had the ill fortune to have graduated with a degree in architecture in August of '08. And a year later, almost to the day, I'm still without work, surviving only on the good graces of my parents. It's been a humbling year and certainly I wish I had chosen nearly any other field."
And Nelson in Somerdale, New Jersey writes: "With what I owe, the costs of my medications and little prospect of finding employment, I am seriously considering a career as a medical school cadaver."
If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile and look for yours there among hundreds of others.
What would you do if you weren't doing this?
KING: I used to be a bartender. I also once moved pianos, but I don't think I could do that anymore.
CAFFERTY: No, no. You're too old to be moving pianos, but not to tend bar.
KING: Amen for that.
Jack, have a great weekend.
CAFFERTY: See you later.
KING: We want you to check out our political podcast. To get the best political team to go, subscribe to CNN.com/situationroom.
I'm John King in THE SITUATION ROOM.
Join Wolf on Saturday.
Right now, though, let's go to "LOU DOBBS TONIGHT."
Kitty Pilgrim sitting in -- Kitty.
KITTY PILGRIM, GUEST HOST, "LOU DOBBS TONIGHT": Thanks, John.
Good evening, everybody.
President Obama and his cabinet tonight begin a two day strategy session. Now, this comes at a potentially defining moment for the Obama administration, as the president's poll ratings sink.
Congressmen heading out of town for their August recess. Democrats are likely to face a barrage of protests from opponents of President Obama's health care plan. And Congress rushes to bail out the Cash for Clunkers program before it runs out of money. But that program could be benefiting foreign carmakers more than American companies.
But first, President Obama tonight is launching a sweeping review of his administration's performance. The president is holding a two day strategy session with his cabinet to discuss the administration's priorities. Now, this review comes as the latest polls indicate the president's approval ratings have slumped to just over 50 percent.
