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The Situation Room

Massive Earthquake Hits New Zealand; Hurricane Earl's Path; NASA Tests Next Generation Rocket

Aired September 03, 2010 - 17:58   ET

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

WOLF BLITZER, HOST: As the shuttle program draws to a close, NASA is testing the next generation rocket, but what if it does not make the cut?

Here is CNN's John Zarrella.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Three, two, one, fire.

JOHN ZARRELLA, CNN CORRESPONDENT (voice-over): The test firing of the 154-foot Ares rocket lasted just about two minutes. Pretty cool. Well, enjoy, because this could be the last time that candle is ever lit.

The Ares, built here in Promontory, Utah by ATK Aerospace, was going to be the backbone of the future -- the rocket that propelled astronauts to the Space Station, the moon and some day Mars. The problem is -- and it's sort of a big problem -- no one can agree whether this is the rocket they want.

The White House wants something new, much bigger and cutting edge for deep space missions. So does NASA.

CHARLIE BOLDEN, NASA ADMINISTRATOR: We have always had big dreams, but we have all -- we have also always failed to match the -- the -- the budget or the funding to those dreams. I think, for the first time, at least that I can remember, a president has matched the funding to the dreams.

ZARRELLA: Meanwhile, commercial companies like SpaceX want to take over the shuttle's role of ferrying astronauts to the Space Station.

For its part, Congress is leaning toward continuing the development of Ares, but one more powerful than this one, just in case cutting edge doesn't cut it because it doesn't yet exist.

GEORGE MUSSER, "SCIENTIFIC AMERICAN": It's really a matter of money. If Congress is asking NASA with its own resources to divert some resources to keeping the Ares project alive, something else is going to suffer. It could be scientific missions, Mars missions, for example. ZARRELLA: Greg Kotter runs ATK's Ares rocket program. They've built rockets here for more than 30 years including every space shuttle, solid rocket booster. The Ares is an evolution of that booster, bigger and more powerful. One billion dollars has already been spent on its development and until the funding runs out and someone tells them to stop --

GREG KOTTER, ATK ARIES ROCKET PROGRAM: We're working as if, you know, this is what we're going to do. I mean, that's our direction and what we're under contract to do and how we're behaving.

ZARRELLA: In coming months Ares' future will likely be decided by NASA, Congress and the White House. Aries program supporters say if it's completely abandoned then this test was quite literally your tax dollars going up in smoke.

John Zarrella, CNN, at the Kennedy Space Center in Florida.

(END VIDEOTAPE)

BLITZER: And you are in THE SITUATION ROOM.

Happening now, breaking news: a devastating magnitude-7.0 earthquake causing widespread damage in New Zealand's second largest city. We will get a live update this hour from the scene of the disaster.

Also, new numbers on the U.S. economy are putting new pressure on President Obama and the Democrats, with midterm elections just two months away. What can they do to turn it around?

And a controversial device designed to prevent loitering, we're going to show you how it takes advantage of age to specifically target teenagers.

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

The Labor Day weekend here in the United States is beginning with a washout along the shores of the Northeastern parts of the United States, as Hurricane Earl moves in. It is a Category 1 storm right now packing some high surf and powerful winds, a force of nature that anyone disregards at their own risk.

After some lashing of the North Carolina coast, Earl now poses the greatest threat to eastern Long Island and Cape Cod and then on to Canada.

Our national correspondent Susan Candiotti is joining us now from South Yarmouth, Massachusetts. She is standing by.

Susan, stand by for a moment. I want to get the latest forecast from our meteorologist and severe weather expert Chad Myers over at the CNN Hurricane Center.

What do we know about this hurricane right now, Chad? CHAD MYERS, CNN METEOROLOGIST: Down to 80 miles per hour in the center. That is good.

The problem is still, if you are going to do a vacation this weekend, just don't leave today. Leave tomorrow. This will be long gone. This will be 1,000 miles into Canada by tomorrow night, but from the cape down through Long Island and even into New Jersey, the weather today is not great. Travel is not that good, a lot of rain coming down and there's an awful lot of traffic on the roadways. Give it a day or give it a half a day and it will be great.

It missed Cape Hatteras, thank goodness, because it was a big storm then. It was a large Category 2, small Category 3 at that time. And now it's going to skirt what would be Nantucket and also Cape Cod and here Montauk and into all of Long Island.

And so the good news, the skirt happened because the storm finally did turn. And, Wolf, we talked about this last night; if this storm waited six more hours before it turned, this would be onshore. All of the winds would be significantly higher, probably double. The biggest wind gust we had was about 80. We could have had wind gusts easy to 120 to 130 miles per hour with this system.

There is the eye of the cell right there. You can't see the whole thing because it is too far offshore. And we are happy it is offshore. There will be big waves all the way through the weekend all the way down the East Coast.

If you are not a swimmer with a life jacket on, stay out of the water and go swim at the pool, because this is a weekend that will have rip currents all up and down the East Coast, even into Maine, although we don't really have all those sandbars up there, but whole up and down the East Coast, the surf is up for sure.

The storm goes away. Look, by Saturday, this is well past Nova Scotia. So, it's just about done. Still hurricane warnings for the cape, for Nantucket and also almost back to Narragansett, but tropical storm watches, tropical storm warnings have been canceled for the rest of the trip up and down the East Coast. Give it a few hours and make a safe trip tomorrow, rather than try to force it today.

BLITZER: It could have been a whole, whole lot worse.

MYERS: Oh, it would have been.

BLITZER: Chad, thanks very much.

Let's check in with Susan Candiotti right now. She's out on Cape Cod.

What is it like there, Susan?

Unfortunately, we are not hearing Susan.

(CROSSTALK) BLITZER: Susan, we weren't hearing you. Your microphone was not on for some reason, so start again. Tell us what you are seeing and what you are hearing.

SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: OK. Let me know if you are not hearing it yet. And then we will try to switch out microphones for you

BLITZER: We are hearing you fine now.

CANDIOTTI: But if you -- terrific.

If you can see over my shoulder, not too many whitecaps right now. It does not look bad at all. Of course, it's not expected to get bad for another, oh, six eight hours. It's not going to get bad until maybe midnight, 2:00 in the morning. And of course, we will be up for that.

In the meantime, people here are as prepared as they can be. That is because the state worked hand in hand with FEMA to preposition some supplies here, water, food, generators, tarps, just in case. But obviously with the news that Earl appears to be staying offshore and here on the cape, itself, we will probably only be feeling hurricane- force gusts, that means people are breathing a slight sigh of relief. But they still have a full night of pounding surf and high winds to live through.

Undoubtedly, there are going to be power outage. We are probably going to see downed trees and there is going to be flooding, because it floods here when it rains just a little bit. So, we are expecting all of that.

In the meantime, the ports have all been closed since overnight. They have shut down all the ferries, so everyone better be where they are going to be and intend to be for this very long night ahead of them.

The biggest area of concern right now frankly is Nantucket, but it is -- because it is closest to the path of the storm. And we have a crew there that will be watching and waiting to see what Earl has in store for Nantucket Island.

But the people there, I talked with some of the residents, they are safe and secure. Unfortunately, as you said, this is just a bad weekend for the tourism trade here, a mainstay as you know of Cape Cod here. Some hotels have really taken a hit, only 40 percent occupancy. Here on the beach hotels, where we are in this area of Cape Cod, there are 4,000 available rooms. Only 100 tourists so far are in them. And we are part of that 100 number, Wolf -- back to you.

(CROSSTALK)

BLITZER: Hopefully it will be normal, back to normal by tomorrow, Sunday and Monday. It is a long holiday weekend here in the United States.

CANDIOTTI: They expect it to be.

BLITZER: All right, thanks, Susan, very much.

Other important news we are following, unemployment ticking up a notch in August. The Labor Department reporting a 0.1 percent increase to 9.6 percent. The economy shed 54,000 jobs overall, many of them U.S. Census-related jobs, but the bigger picture is not quite as grim.

The critical private sector did add 67,000 jobs, beating analyst expectations. What is not counted in all of this are the millions and millions of Americans who are way underemployed. They may have a job, but it is not the job they were trained for.

CNN's Mary Snow has their story.

Talk a little bit. Mary, you have been doing some checking of what we mean by the underemployed.

MARY SNOW, CNN CORRESPONDENT: Yes, and, Wolf, these are people who have become so discouraged they have either stopped looking for work or they take part-time work while looking for a full-time job.

Now, the ranks of the underemployed can also include workers no longer able to use their skills or who have gotten big pay cuts , like the man you are about to meet. And counting the underemployed gives a fuller picture of the labor market.

(BEGIN VIDEOTAPE)

RICHARD CRANE, UNDEREMPLOYED: I knew things were going to get tough.

SNOW (voice-over): But Richard Crane didn't know it would be this tough. Yes, he has found a full-time job after getting laid off, but he is underemployed. He now earns $16 an hour at Lowe's. He could not find work that used the skills of the job he had at a unit of General Motors operating heavy machines. There he earned as much as $130,000 a year.

CRANE: The overtime people used to make, you know, it is not there. It is not there. It is not. I see it every day. You know, I see it every day. I mean, what are we going to do? It is America. Where's our jobs?

SNOW: In his new job, Crane has taken a pay cut of almost $100,000. He is struggling to keep his house and provide for his son, now 14, and his wife, who is battling cancer. He has given up second jobs to spend more time at home. His story of taking a job below his skill level is all too familiar, but it is largely untold.

HEIDI SHIERHOLZ, ECONOMIC POLICY INSTITUTE: I can't hazard a guess on what percentage of the labor force is facing that right now, but we do know that it is sizable and it is really impacting families.

SNOW: Heidi Shierholz is a labor economist with the Economic Policy Institute who says that what is measured are discouraged workers who have given up actively seeking employment and part-time workers looking for full-time jobs.

And that amounts to an underemployment rate that stands at 16.7 percent. While she expects the labor force to recover to pre- recession levels, she say has the effects of losing a job have a lasting impact.

SHIERHOLZ: So people like Richard are in the situation where they are likely to face that earning hits that can last for decades.

SNOW: And for Richard Crane, his goals are forever changed.

CRANE: When I was working for GM, I was looking forward to turning 56 and retiring, and, you know, maybe try doing something else or even go until I'm 62. Now, we are just -- there's no real plan. It's -- our plan is to get from month to month.

(END VIDEOTAPE)

SNOW: And as for Americans living month to month, consider this. According to the Labor Department, one in six Americans are currently either unemployed or underemployed -- Wolf.

BLITZER: All right. Sad, sad situation indeed for so many millions of Americans. Mary, thank you.

Jack Cafferty is off today.

Among the stories we are working on right here in THE SITUATION ROOM, President Obama dogged by a stagnant economy, so what should he do right now? I will ask the former Labor Secretary Robert Reich and "The Wall Street Journal" columnist John Fund.

Also breaking news, we are getting new details right now of that magnitude-7.0 earthquake that caused extensive damage in New Zealand's second largest city. We are going there for a live update.

And the new drill that could -- could potentially cut the rescue time for those trapped miners in Chile, maybe even cut that time in half.

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN breaking news.

BLITZER: Incredible images now coming out of New Zealand coming into THE SITUATION ROOM, one man saying a powerful earthquake literally turned his house upside-down. The 7.0-magnitude quake rocked the country's second largest city of Christchurch, demolishing buildings, causing injuries.

I am now joined on the phone by Amanda South of Newstalk ZB.

Amanda, tell our views what you felt, what you saw, what you heard. AMANDA SOUTH, REPORTER: Well, as you said, this quake struck us at about 4:30 this morning.

So, of course, we were all still in our beds. The impact was immediate and terrifying. I bounced literally up and down on my bed. There is a cabinet in my room, china smashing everywhere. You go into a sort of vortex. You don't actually understand what is happening around you at the time.

Now, of course, it was dark then, and we are starting to realize what has happened. As you say, some buildings have collapsed. Some have partially collapsed. The facades on them have broken. Particularly brick buildings are suffering the worst here.

BLITZER: What are you hearing, Amanda, about casualties?

SOUTH: At the moment, we understand that there have been no fatalities. There have been some serious injuries, some people taken to intensive care having been injured, most of them brick chimney pieces falling down on them.

One person has been hospitalized because of that. We understand that a lot of the brick chimneys in some suburbs have destroyed cars as well, that they have done a lot of damage with those chimneys falling down, but so far, fortunately, not a huge amount of serious injuries coming through at this point.

BLITZER: Are there reports that people are trapped in the rubble as is often the case with these kinds of earthquakes in urban areas?

SOUTH: Yes.

What the fire service and search and rescue experts are doing at the moment is they are clearing the zones that have fallen down, the buildings that we know have fallen down, which we can't number at the moment. But our -- not among more than -- you know, there are not a huge amount of them that we know of.

And so they are doing just what they would do anyway in searching and checking. A lot of buildings have suffered varying degrees of damage. And so the ones that have fallen down are few and far apart at the moment. And those ones are being cleared.

BLITZER: Amanda South of Newstalk ZB on the phone for us from Christchurch in New Zealand.

Good luck, Amanda. Good luck to all our friends there. Thanks very much.

SOUTH: Thank you. No problem.

BLITZER: A huge, huge new drill could soon make all the difference in the world for those 33 miners trapped thousands of beneath ground for nearly a month.

CNN's Karl Penhaul is at the site of the collapsed mine in northern Chile.

(BEGIN VIDEOTAPE)

KARL PENHAUL, CNN CORRESPONDENT: You can see that these are scenes almost of jubilation, because what is arriving now is a new drill. This is the drill for the so-called plan B.

It is called a Schramm T130 drill. And it is normally used for drilling water holes. But the engineers believe that they can use this drill to drill down to the shelter where the 33 miners are in almost half of the time that they can do with the so-called plan A drill.

In reference to the plan A, engineers have told us that in the first three days of drilling, that drill has only drilled 41 meters, about 120 feet. And that, engineers say, is slower than expected. And so now the Schramm T130 drill is arriving. And this is why there are scenes of jubilation.

(END VIDEOTAPE)

BLITZER: Karl Penhaul reporting for us. We hope that drill works and those miners come up. Those 33 miners, we are hoping and praying for all of them.

Highway drivers witness a fiery airplane crash. A UPS 747 cargo plane goes by near the Dubai International Airport with two pilots on board. Now federal investigators from here in the United States are heading to the crash scene. We will have the latest.

And we are also monitoring Hurricane Earl. FEMA warning right now, don't, repeat, don't let your guard down. It is still a potentially deadly storm.

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

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: Extending tax cuts, getting another stimulus spending bill through Congress? What else can President Obama do to try to turn around the lackluster U.S. economy?

Also, a different kind of mosquito, this one specifically designed to annoy teenagers and keep them from loitering.

Plus, the debate fumble that has gone viral.

(COMMERCIAL BREAK)

BLITZER: Can a second economic stimulus package help turn around the U.S. economy? The White House is shooting down reports it is considering an additional cash infusion on top of last year's controversial $800 billion package. Let's discuss what is going on with the former Clinton Labor Secretary Robert Reich. His new book is entitled, "Aftershock: The Next Economy and America's Future." Also joining us, "The Wall Street Journal" columnist John Fund.

Guys, thanks very much for coming in.

You wrote, Robert Reich, in the "USA Today" editorial pages today that you would like to see another economic stimulus package to sort of jump-start the economy. What are you talking about?

ROBERT REICH, FORMER U.S. LABOR SECRETARY: Well, I do think we still have a big gap between what the economy can produce at or near full employment, Wolf, and what the economy is producing, because there is just not enough demand.

Consumers and businesses are still technically -- the technical term is de-leveraging. They're getting out from a lot of debt. Businesses are not going to invest in new jobs as long as there are not going to be customers there. And so that gap has got to be filled in somehow.

And whether you are on the right or the left or ideologically a supply-sider or a Keynesian, you just have to fill it in, whether it is tax cuts or more government spending. There has got to be enough to fill in the gap by government. Otherwise, we're going to be having just a continuation of this great jobs depression.

BLITZER: But, just to be precise, Robert Reich, what you are talking about are hundreds of billions of additional dollars in spending to try to get new infrastructure programs or whatever?

REICH: Well, it could be spending or it could be tax cuts, look it, anything that's going to get consumers to spend. And at the last resort, I think it is necessary to have a WPA-type program and just hire people.

We cannot possibly go on with 15 to 20 million Americans sitting on their hands and not doing anything, and there not being jobs for them.

BLITZER: You got a problem with any of that, John Fund?

JOHN FUND, COLUMNIST, "THE WALL STREET JOURNAL": Well, I think, first of all, we should have some humility, after the first stimulus package didn't deliver as advertised.

We were told it would keep unemployment under 8 percent. It clearly did not do that. So, moving forward, let's talk to small business, which employs 80 percent of the American people. The NFIB, the largest small-business group, surveyed its members, and they said, what are your major concerns?

Well, first of all, declining sales. Duh. But the second biggest problem they cite is uncertainty about economic policy. They can't plan for the future. They don't know whether or not there's going to be a climate change bill. They don't know the full implications of the health costs being dumped on them. And, of course, all of these tax cuts expire on December 31.

So, I think, if we listen to small business that creates jobs, we should extend the tax cuts as much as we possibly can, increase certainty, and decrease unpredictability in the economy.

BLITZER: Is that a good idea, Professor Reich?

REICH: Well, of course. I mean, everybody wants more certainty.

But as the survey showed, the number-one problem for small businesses, as it is for large businesses, is not enough sales, not enough demand.

So, we have got to tackle that, number one. In terms of extending the Bush tax cuts, I think that almost everybody, including the administration, wants to extend them for 98 percent of Americans. The big question is whether you continue to extend them for people who are very wealthy, the top 2.5 percent, who basically there is nothing wrong with rich people, obviously, but they save more than they spend. They have already got a huge windfall from the Bush tax cuts.

FUND: But, Bob...

REICH: And so why should -- if we are concerned about deficits, why should we extend the tax cuts for them?

FUND: Well, the most important reason is about half of the small business income in this country is channeled through individual income tax returns. That means that those 2.5 percent or many of them are small business people, 750,000. They hire people.

You are not just attacking people with yachts and mansions. You're attacking people with small businesses who file individual returns. We should extend the tax cuts at least for a year or two on those people as well, because they create jobs.

Other tax cuts like a temporary payroll tax cut for only a year really would not give that kind of oomph to the economy and certainly not very much certainty.

REICH: Well, let me just respond to that by saying that all we know is that about 2.5 percent of small businesses, actually, the owners do earn more than $250,000. But, remember...

(CROSSTALK)

FUND: But they represent 50 percent of small business income.

(CROSSTALK)

REICH: Just let me finish the sentence.

Just going back to the Bush marginal tax cut, the Clinton marginal tax cuts -- tax rates -- that is only on over $250,000. That is a marginal tax rate over $250,000. And if you are concerned at all about future deficits, I don't understand how anybody on the supply side or any conservative can say, let's just extend everybody's tax cut, even though they don't need it.

(CROSSTALK)

BLITZER: Let me get in, get involved in this, Robert Reich.

Mark Zandi, the economist who is sort of in the middle on all of these issues, has represented or advised Democrats and Republicans, he says that at least wait a year to go back to that 39.6 percent tax rate for the wealthiest Americans. It's right now about 35 percent. Because at a time of economic distress, you didn't want to start raising taxes in 2011. Wait at least until 2012 or 2013.

ROBERT REICH, FORMER LABOR SECRETARY: Well, look it, I don't want to pick on Mark Zandi. He was McCain's -- one of his economic advisers and very good, but he's one economist.

I mean, the fact of the matter is there is a certain amount of hypocrisy here, Wolf. I mean, a lot of people, a lot of Republicans are saying we have to worry about the budget deficit. That's a huge problem. But at the same time they are saying, let's extend the Bush tax cuts for the very wealthy even though we're talking about a marginal tax cut, even though we're talking about going back to the Clinton days that were pretty good days.

And that means next year alone, next year alone, millionaire families would get $31 billion that they wouldn't otherwise have that would otherwise bring down the deficit.

BLITZER: Well, John, to the deficit issue, by allowing those rich people to stay at the same tax rate next year, it's going to increase the deficit?

JOHN FUND, "WALL STREET JOURNAL": Well, small people business create jobs. As for the Clinton years which Robert Reich goes back to, remember during the true Clinton boom years, discretionary federal spending only went up two percent a year. Spending restraint, as well as capital gains tax cuts, as well as infrastructure spending were part of the Clinton mix.

Now, I think, if we only had spending brought back to only 2 percent a year growth, we could -- we could reduce those deficits very dramatically. In addition, what does Robert Reich think we should do about the capital gains, the death tax and the estate tax that are all set to go up dramatically on December 31. That kind of uncertainty is certainly bad for small business, certainly bad for job creation. And I don't know of a single school of economic thought, not one that says you raise taxes in a recession.

REICH: Well, you raised a couple of issues, John Fund. The best issue you raised, and I agree with you on this, is that Congress, when it comes back, should immediately clarify the estate tax and say, effectively, we are going back to what it was last year. Maybe retroactively we're going to set the limit at maybe a million dollars with a 45 percent estate tax over $1 million estates. That seems to me fair, and that's...

FUND: What about capital gains and dividends? A lot of people...

REICH: Well, capital gains, I think, ought to go to 20 percent as it was under Bill Clinton.

FUND: Well, let's do something then. We only have -- we only have four months left. This kind of uncertainty has retarded job creation for the last year and a half, because nobody knows what's going to happen.

REICH: John -- John Fund, I think, you know, the irony here is that it's the Republican Party that has been stonewalling and not allowing anything to move forward. I mean, obviously -- obviously, you want more definitiveness...

BLITZER: Gentlemen, I've got to cut this short, unfortunately, but John, give me a final thought, because I let Robert Reich start. Give me one final quick thought.

FUND: Look, every one needs certainty right now. There's a capital strike in this country. There is hundreds of billions of dollars sitting on the sidelines, because people don't know what the economic future holds.

Let's give them as much certainty as we can. Let's decide quickly that we want a tax policy that helps create jobs. If we don't have that, this uncertainty is going to consume us all with more stagflation.

BLITZER: Robert Reich and John Fund, a good serious debate which will continue, I am sure. Guys, thanks very much. Have a great weekend.

REICH: Good-bye, Wolf, and John.

BLITZER: The struggling economy played into the Democrats' hands back in 1992. Now President Obama is getting poor marks on his handling of the issue. Will Republicans benefit this time around?

And meet the mosquito, although you may not want to. It's a high-pitched sound, that device that literally drives young people away.

(COMMERCIAL BREAK)

BLITZER: What a week it has been. Let's bring in John king and Candy Crowley.

Candy, have the Democrats really run out of time over the next two months between now and the midterm elections to avoid a political bloodbath?

CANDY CROWLEY, CNN CORRESPONDENT: OK. The overall answer and the PC answer is you never run out of time until it's election day. The realistic answer is I think we know from a lot of the campaigns in the past that people basically make up their minds about the state of the economy by mid-summer. And as we're past mid-summer, so I think basically the economy is set. And the administration has said they expect unemployment to maybe reach 10 percent by the end of the year.

BLITZER: The Democrats, a lot of Democrats are so nervous right now, John, because they don't -- they don't believe the administration has a good handle on what to do next.

JOHN KING, CNN ANCHOR: They don't believe the administration has been consistent and with clarity about specifically about what to do next. You just had a very healthy debate about it, and John Fund's point about certainty is something, if you travel the country, you talk to small business, even Democratic small business owners, they say they would like to know from Washington what's it going to be like next year.

The Democrats running the big campaigns, they've all said they wish the president would talk about the economy more, would talk more broadly about where we're going, and would be more specific. Although some Democrats also say, you know, you talked about the small business bill today. Some of them say why Harry Reid call the Senate back sooner and just make it a daily issue, try to bring it to a vote every single day and force the issue, to at least give voters some contrast to reinforce the Democratic argument, the only one they have, that the Republicans won't let us do it.

BLITZER: There is a debate among Republicans, whether they should come out with a formal plan of their own, or simply hammer away at the Democrats.

CROWLEY: And generally, when that's the choice, people hammer away at the opposition. Because you put something out there, it becomes a target.

And I think when you look at the president talking about these small business tax cut, the ones that are already up there, the ones that he may yet introduce, basically when you look at how long those tax cults have lingered up on Capitol Hill, particularly in the Senate, this is a political move to me.

Now they want it, but in the end, at least they can come away saying, "Well, the Democrat -- the Republicans first opposed us on this, and then we gave them tax cuts which they were asking for, and they opposed that, too."

BLITZER: And as you know, John, big business, little business, all sorts of people who are higher people, they just want to know for sure what the game plan is. As you point out, the uncertainty is really killing them and telling them, don't hire the new people.

KING: That's definitely part of it. The uncertainty is definitely part of it. And there are some Democrats who say a lot of these businesses are hoarding money, because they had a couple of really bad years with their shareholders, a couple of really bad years with their stockholders and dividends that they want to hold the money to have bigger profits for a couple of years to prove they're back. That's frustrating, too.

But the bottom line is, even if the president could somehow sign everything he wants to do into law tonight, it wouldn't affect the economy fast enough to change the dynamics that people will know when they go on that election day and pull the lever.

BLITZER: Both of you are going to have a lot more on this coming up. At We the top of the hour on "JOHN KING USA"; certainly Sunday on "STATE OF THE UNION," 9 a.m. Eastern. We'll be watching.

This is the sound of controversy. Listen to this.

(BEGIN VIDEO CLIP)

(BUZZING NOISE)

(END VIDEO CLIP)

BLITZER: If it sounds annoying to you, it's working. It's designed to target teenagers in public places. Some people say that's unfair.

(COMMERCIAL BREAK)

BLITZER: Little bit of optimism, at least by some, about the newest round of Middle East peace talks after the first two days of meetings right here in Washington, D.C. But what's the view in Israel?

And joining us now from Jerusalem, Yonit Levy. She's the anchor of the evening news on Channel 2 in Israel.

Yonit, thanks very much for coming in. I want to play this clip, this exchange you had in July when you interviewed President Obama here in Washington.

(BEGIN VIDEO CLIP)

YONIT LEVY, CHANNEL 2: There are people in Israel who are anxious about you.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Right.

LEVY: And who -- you know, I'm quoting their sentiment -- feel like you don't have a special connection to Israel. How do you respond to that?

OBAMA: Well, you know, it is interesting. This is the thing that actually surfaced even before I was elected president in some of the talk that was circulating within the Jewish-American community.

(END VIDEO CLIP)

BLITZER: The question, Yonit, have attitudes toward President Obama changed in Israel over the past few months, especially since your interview, the first and only interview he's done with Israel media?

LEVY: Well, Wolf, I think that the effort was acknowledged by the Israeli people, and I think that they listened very carefully to what he said in that interview. They appreciated his candor in that interview.

Obviously, one conversation doesn't change everything, and you know the relationship between President Obama and Prime Minister Netanyahu has been rocky, to say the least, in the beginning, but there has been a change of tone.

And a change of tone from Washington meant, first of all, obviously, this interview, but also basically, you know, a very friendly back to the friendly tone that the Israelis have been used to. So, on the whole, I would say, yes, that made -- that made a difference to Israelis.

BLITZER: The president also told you in July, he thought there could be a peace agreement between the Israelis and the Palestinians during his first term in office. Do people in Israel believe that?

LEVY: Well, Wolf, I think that, you know and a lot of people know Israelis are quite cynical. They're quite skeptic, and maybe they have reason to be that way. They've seen so many ceremonies and launching and re-launching and pomp and circumstance. You know, Israelis have had their own version of the Iraqi banner, "Mission Accomplished." They've seen it over and over.

So they're skeptic. I don't know to say that they're not hopeful or they're not interested, but they are a skeptic when you see the leaders walking into the room in the State Department and you think to yourself, you know, they're like students walking into an exam where they know all the questions beforehand, but still they managed to fail. I would say that Israelis are pretty skeptic to make a short answer to your question.

BLITZER: And finally, can Netanyahu deliver? Will the Israeli people go along with him if he signs a peace agreement with the Palestinians that will be painful on many of these sensitive issues?

LEVY: That's a very big question I think that Israelis are asking themselves is Netanyahu willing and able? And when you listen to this man speaking in Washington, this is the man who for years said to the Israeli public, "I want to talk peace, but there is no partner on the other side."

And suddenly, he's sitting in Washington, turning to President Abbas and saying, "You are my partner." So there's a shift in tone. There's a shift in rhetoric. Does that mean that there will also be a shift in -- a dramatic shift in policy? Does that mean that, if Netanyahu wants to, he will be able to pass a peace agreement with his right-wing government?

Well, I would say that the sentiment, the general sentiment in Israel is that if Netanyahu truly wants to bring -- Prime Minister Netanyahu truly wants to bring peace, he will be able to construct a reality that will enable him to achieve his peace as leaders have done before him, right-wing leaders in the country have done before.

BLITZER: Yonit Levy is the anchor of the evening news on Channel 2 in Israel. Yonit, thanks very much for joining us.

LEVY: Thank you, Wolf.

BLITZER: And next week we'll get the view of a Palestinian journalist here in THE SITUATION ROOM, as well. Stand by for that.

It's a controversial anti-loitering device designed to take advantage of age.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We're going to play a setting now for people 50 years old and younger.

UNIDENTIFIED FEMALE: I hear that.

UNIDENTIFIED MALE: I can hear that, too.

(END VIDEO CLIP)

BLITZER: We put the so-called mosquito to the test on THE SITUATION ROOM staff.

And a governor goes silent in the middle of a televised debate. CNN's Jeanne Moos takes a most unusual look.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Stop. It will make your job a lot easier.

GOV. JAN BREWER (R), ARIZONA: Basically, because we talked about terrorism.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: In D.C., police have recently had to deal with some crowd control situations involving violent teenagers. Now a controversial noise device just may do some work for them. Let's find out more from our own Brian Todd.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT: Wolf, this Gallery Place section of Washington is very popular with young people because of all the trendy bars and restaurants around here. But recently, property managers have complained about loitering. There was recently a street brawl that took place. We're told it started down here in this Metro station and spilled over onto the street . It was a real mess.

Since that time property managers have placed this device up on the wall right next to the metro station. This is called a mosquito. It emits a high-pitched sound designed to keep loiterers away, but the question is does it unfairly target young people?

(voice-over) It can cause a high pitched headache. And that's by design. Just outside the Gallery Place subway stop in Washington, the mosquito beeps often. But is it indiscriminate?

This anti-loitering device was placed here after a big street brawl. But the property managers and the distributor both tell CNN the noise maker doesn't target young people. Still, the distributor says teenagers happen to do the most loitering. And he says the sound is most effective for the stage of life when humans can hear the highest pitches.

MIKE GIBSON, MOVING SOUND TECHNOLOGIES: The Mosquito, when activated, emits a sound at 17.5 kilohertz, which is at the end of the youth hearing range, 13- to 25-year-old hearing range. When -- when a youth hears the sound, they find it extremely annoying and will leave the area in a few minutes.

TODD: At Gallery Place, we saw some young people getting irritated.

UNIDENTIFIED MALE: Probably wouldn't shop at any of these shops if I heard it again.

TODD (on camera): Why not?

UNIDENTIFIED MALE: It's just -- it's too annoying. It gave me a headache.

TODD (voice-over): There are settings on the Mosquito that can be heard by older age groups. I played the sound off a computer in our newsroom near several people in their 20s, 30s and older. I didn't tip them off before hand. On settings for people 25, 30, 35 and younger, no one reacted. Then...

(on camera) We're going to play a setting now for people 50 years old and younger.

UNIDENTIFIED FEMALE: I hear that.

TODD: I can hear that, too.

(voice-over) Still, some believe this device does target teenagers unfairly.

(on camera) Among the community leaders who have concerns about this device, Judith Sandalow of the Children's Law Center here in the Gallery Place.

Judith, there are problems with violence and loiterers driving away customers from businesses that count on that business in this area. Wouldn't any little thing like this help?

JUDITH SANDALOW, CHILDREN'S LAW CENTER: I'm sympathetic to businesses being able to engage the most customers in the best possible way. I'm sympathetic to that. This isn't the best solution. We need to have better programs for youth. We need to engage them in activities.

TODD: Believe it or not, young people have been able to use this device to their advantage. We're told by the distributor that that high-pitched sound it emits has made its way onto the Internet. He says that young people have been able to download that noise onto their cell phones to use as ring tones, so that when their cell phones ring they can hear it, but their parents and their teachers cannot -- Wolf.

(END VIDEOTAPE)

BLITZER: Wow. Brian, thanks very much.

The Arizona governor, Jan Brewer, says it was the longest 16 seconds of her life. Her campaign debate pause is already going viral. Will it prove to be a game changer, though, with voters? Stay with us. You're in THE SITUATION ROOM.

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BLITZER: Everyone certainly has that moment they'd like to forget, but for the Arizona governor, Jan Brewer, that moment came before the cameras and lots and lots of voters. Jeanne Moos has this most unusual campaign pause.

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JEANNE MOOS, CNN CORRESPONDENT (voice-over): Rarely have so few words inspired so many.

KEITH OLBERMANN, MSNBC ANCHOR: Jan Brewer's meltdown.

ANDERSON COOPER, CNN ANCHOR: A strange meltdown.

UNIDENTIFIED MALE: She had a little meltdown.

CHRIS MATTHEWS, MSNBC ANCHOR: A brain freeze.

UNIDENTIFIED MALE: Certainly make you wince.

UNIDENTIFIED FEMALE: At a loss for words.

UNIDENTIFIED MALE: But wow.

RACHEL MADDOW, MSNBC ANCHOR: Amazing.

MOOS: With a hand clapped to the mouth, let's go to the videotape replay for another squirm.

BREWER: We have done everything that we could possibly do.

MOOS: Arizona's governor was speaking, or more accurately not speaking...

BREWER: We have -- uh...

MOOS: ... at a debate.

BREWER: ... did what was right for Arizona.

MOOS (on camera): It may well have been the longest brain freeze in the annals of televised debate, though the media couldn't quite agree on its length.

OLBERMANN: That 10-second period of silence...

MOOS (voice-over): Timed with a helpful on-screen stopwatch. It was even more painful when digitally ticked off.

BREWER: We have -- um -- did what was right for Arizona.

MOOS: On a KTAR interview afterwards, Governor Brewer had her own time estimate.

BREWER: The longest 16 seconds of my life.

MOOS: Even right-wing Web sites called it painful to watch, but endearing, too.

There have been other awkward pauses lately. For instance, from a rookie Senate candidate in South Carolina.

And even pros have deer-in-the-headlight moments.

UNIDENTIFIED FEMALE: Do you think (UNINTELLIGIBLE)?

MOOS: John McCain's "Viagra moment" was used against him in a commercial after it took him eight seconds to answer a question on whether insurance companies should cover birth control, as they do Viagra.

Jon Stewart imitated McCain. And when President Bush was asked...

UNIDENTIFIED MALE: What would your biggest mistake be?

MOOS: His response was famously hesitant.

GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: You know, I just -- I'm sure something will pop into my head here, in the midst of this press conference. All the pressure of trying to come up with an answer. But I hadn't yet.

MOOS (on camera): But there are worse things that can happen than just clamming up in a brain freeze. Sometimes, when your brain stops, so should your tongue.

CAITLIN UPTON, MISS SOUTH CAROLINA TEEN: Like such as in South Africa and Iraq, everywhere, like such as.

MOOS: Jeanne Moos, CNN...

UNIDENTIFIED MALE: Anyway, moving on... MOOS: ... New York.

(END VIDEOTAPE)

BLITZER: Remember, you can always follow what's going on here in THE SITUATION ROOM. I'm on Twitter. You can get my tweets on Twitter.com/WolfBlitzerCNN, @WolfBlitzerCNN, all one word.

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I'll see you tomorrow in THE SITUATION ROOM, 6 p.m. Eastern. Till then, thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM. "JOHN KING USA" starts right now.