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President: American Dream Isn't Dead; Voters Turned off by Tax War; A New Contract with America?; Rumsfeld Memoir Hit Stores in January; Lady Gaga Rallies Senators on Gay Rights; Recession's Expiration Date

Aired September 20, 2010 - 17:00   ET

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

WOLF BLITZER, CNN ANCHOR: Brooke, thanks very much. Happening now, President Obama insists the American dream is not dead, but he's getting an earful today about the American public's economic pain. This hour, the president and the voters sounding off about tax cuts.

Class warfare and the looming battle for Congress.

Also, critics are likening it to a fishy Frankenstein monster. Would you eat salmon that had been genetically altered to grow faster? A lot of questions are being asked right now about food, science, and safety.

And bewitched, new comments from the Delaware Senate candidate Christine O'Donnell about her past remark that she dabbled in witchcraft when she was young.

I'm Wolf Blitzer, you're in "The Situation Room."

Behind the scenes, White House aides and reporters closely watched President Obama's performance at a town hall meeting in the economy today.

They know that every word out of the president's mouth could influence anxious voters only 43 days before the election. The president was asked about big issues that may decide whether his party keeps control of Congress from jobs and tax cuts to the anti- government mood in America.

Listen to the president's response at the CNBC forum when he was asked what his administration will do if Tea Party activists get elected.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The problem that I've seen in the debate that's been taking place and in some of these Tea Party events is I think they're misidentifying sort of who the culprits are here.

As I said before, we had to take some emergency steps last year, but the majority of the economists will tell you that the emergency steps we take are not the problem long term. The problem long term are the -- are the problems that I talked about earlier.

We've got -- we had two tax cuts that weren't paid for, two wars that weren't paid for. We've got population that's getting older. It's -- we're all demanding services, but our taxes have actually substantially gone down.

And so the challenge for the tea party movement is deny what will you do? It's not enough to just say get control of spending. I think it's important for you to say, you know, I'm willing to cut veterans' benefits or I'm willing to cut Medicare or social security benefits or I'm willing to see these taxes go up.

(END VIDEO CLIP)

BLITZER: The president clearly zeroing in on the topic of tax cuts. He once again extended his push to extend the Bush-Era breaks only for the middle class.

He accuses Republicans of holding those tax cuts hostage by insisting that wealthy Americans get that extension too. We want to know how that strategy is playing with voters. Our White House correspondent Dan Lothian is joining us. Dan --

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Wolf, White House aides say the strategy of going after Republicans singling some of them out by name, especially on the issue of tax cuts for the wealthy, is working. But as we found out, some Americans have turned off by all of the finger pointing.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): From a Latin bistro to a spice and tea exchange to a hair salon, small business owners across the country are more focused on paying the bills than pondering politics.

MARGARITA FERNANDEZ, ORLANDO SMALL BUSINESS OWNER: We're paying taxes. We're paying all of these extra life insurance and everything they're adding on to us daily.

LOTHIAN: They're struggling in a tough economy as Washington debates tax cuts. And to make matters worse, some say, the president is picking a fight with a Republican most Americans say they barely know.

PRESIDENT OBAMA: Mr. Boehner. Mr. Boehner. Let me be clear to Mr. Boehner.

LOTHIAN: Do Americans really care about this finger pointing? It's a public tit for tat played out in the White House briefing room, on morning news shows, and on Twitter.

MARGIE VARNEY, ORLANDO SMALL BUSINESS OWNER: People just don't care about all of the in-fighting.

LOTHIAN: To flesh that out sentiment, we sent producers to three cities, Orlando, Philadelphia, and Los Angeles, and met people like Margarita Fernandez who owns the Orlando Latin Bistro.

FERNANDEZ: It's somewhat of a disappointment. I mean, it's not doing nothing for our country.

LOTHIAN: She's turned off by the bipartisan rhetoric and says it's a waste of time that could be better spent talking about solutions. Jeffrey Schrader who owns a spice and tea shop agrees.

JEFFREY SCHRADER, ORLANDO SMALL BUSINESS OWNER: It seems childish. It seems -- it's exhausting. People who are making decisions or who are there to make decisions are fighting amongst themselves and you wonder how anything is getting done.

LOTHIAN: Across the country, Los Angeles hairstylist, George Carroll is a bit more forgiving. He understands how drawing sharp contrast in politics can be effective.

But as the line of customers coming in to his business thins and more people he knows lose their jobs, the bipartisan debate, he says, has become a distraction.

GEORGE CAROLL, LOS ANGELES SMALL BUSINESS OWNER: It's jobs, stupid! It's the economy, stupid. What can Washington do to create -- to put people back to work?

LOTHIAN: In Philadelphia, Shana who runs a dance academy has tuned everything out. She's become cynical about the blame game, but struggles to come up with the alternative.

UNIDENTIFIED FEMALE: If I knew the answer to that question, I would be making a lot more money than I'm making now.

(END VIDEOTAPE)

LOTHIAN: A White House official says the president will continue to make the case that the Republicans are putting up roadblocks, a charge they denied and that Democrats are offering real solutions - Wolf.

BLITZER: Dan Lothian, thank you. Let's get to the Republican's campaign strategy right now.

GOP leaders are set to unveil their blueprint for reclaiming control of the House on Thursday. Our senior congressional correspondent Dana Bash and our congressional producer Deirdre Walsh, they broke the news first here on CNN.

Dana is joining us right now. Dana, a lot of comparisons between what the Republicans are planning to do this week and what they did back in 1994.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Right, you remember the images from 1994, right? It was the big, dramatic ceremony on the steps of the capital. You can see Newt Gingrich back then.

That was their -- of course, their attempt after being in the minority for 40 years in the House to unveil their ten-point contract with America, legislation they promised to pass if in charge.

Well, what House Republicans plan to do this coming Thursday is the same concept laying out an agenda for how they would govern if they're in charge, but it will look and feel very different.

You will see the faces of the House Republican leadership. I think they have them. There you go. That's who you're going to see this coming Thursday.

They're going to be not on the steps of the Capitol, but in a hardware store in northern Virginia. It's by design emphasizing the issue, jobs and the economy.

BLITZER: What do we know about what's going to be in their agenda?

BASH: Five major themes. We have them here. The five major themes are going to be jobs, spending, health care, national security, and reform of Congress itself.

Specifics on these things are not holding them close to the vest so far, but the economy is definitely going to be the top issue. There's no question about that.

And, you know, it's very interesting that there's a not, we're told, from GOP sources to Tea Party voters this year. Not just a promise to repeal the health care bill, but also we're told there's going to be a legislation at least a promise to scrutinize legislation to make sure it's constitutional.

And one more thing, another nod to the dominance of the economy as an issue this year. We're told not to expect much by the way of social issues in this Republican agenda, meaning abortion and gay rights and things like that.

BLITZER: So they're going to avoid that. Why is it so important to the Republicans right now to be unveiling this new agenda?

BASH: You know, Wolf, Republican strategists, we talked to them for months and months. They have said they understood that the missing ingredient in their push to get elected and take control of Congress has been that they haven't offered voters a look at what they're for.

And they're not just doing enough to say be against the Democrats. But, still, some Republicans told us today that they're actually wary of veering from what GOP sources called their 80/20 rule.

They believe that this election in the words of one strategist is 80 percent about Democrats, the president, the House speaker, and 20 percent about us, meaning Republicans.

And what they're going to do on Thursday is try to fill in that 20 percent. But, the fact that they're going to do it in this relatively low-key way is very interesting and really telling that they still think that the dominant issue, the issue, is anger towards the Democrats.

BLITZER: We're going to talk about this tomorrow with the former President Bill Clinton who knows about what the Republicans did in 1994 when the Democrats lost control of the House and Senate. We'll get his perspective, our special interview with him that will be tomorrow. Dana, thanks very much.

The controversy surrounding Republican Senate candidate Christine O'Donnell has only grown since an old clip surfaced of her talking about dabbling in witchcraft when she was young. Brian Todd is in Delaware right now. He's investigating.

Also, Lady Gaga's main event. The music superstar is putting new pressure on two U.S. senators in her campaign to get rid of "Don't Ask Don't Tell."

Wait until you hear how a big wild fire in Utah got started.

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty here with the "Cafferty File," Jack.

JACK CAFFERTY: Wolf, Democratic candidates who are up for election in November are spending three times more money advertising against President Obama's Health Care law than they are for it.

The president told all of us over and over again during the heated health care debate that reform would mean lower health care costs. Well, so far, it's not happening.

Start in California. Regulators there have now cleared all four of the state's major insurers for rate hikes. These four companies controlled 90 percent of California's individual health insurance policies.

"The Los Angeles Times" reports that Aetna was the last company to be approved with rate hikes averaging 19 percent. The company is defending the rate hikes saying they're necessary to keep up with rising health care costs like hospital care, prescription drugs, doctor visits, etc.

They say the maximum increase for some of the members will be 30 percent. Some policy holders are rightfully concerned that they soon will not be able to afford health insurance at all.

Meanwhile in Connecticut just up the road a piece here, regulators have approved rate hikes of 20 percent of the state's largest health insurer that would be Anthem Blue Cross/Blue Shield.

The "Hartford Current" reports increases will vary depending on the plan. The costs will go up due to rising medical costs and the benefits from health care reform.

This includes things like covering young adults until they turn 26, and covering full costs of preventive care, like mammograms or colonoscopies. These rate changes mostly affect new customers buying individual plans not those who are already insured through an employer.

The question then is this, do you think your health care costs will rise under President Obama's new health care law? Go to cnn.com/caffertyfile to post a comment on my blog.

BLITZER: A lot of people already do think that they're rising even right now, Jack.

CAFFERTY: Indeed they are. In fairness, all of the provisions of the new law don't go into effect until 2014, but that was a gift to the insurance companies, wasn't it?

BLITZER: Yes, OK. All right, Jack, thank you.

Republicans are tentatively calling it their commitment to America. We heard earlier about their upcoming plan for winning back and governing the House of Representatives.

Let's talk about with our senior political analyst, Gloria Borger. You know, this is sort of like the 1994 contract with America, we heard Dana Bash talk about it. How important is this to the Republicans and their strategy?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, I think -- I met with some senior Republican House strategists today and they say, look, it's important because you have to tell people what you're going to do.

It's different from 1994, Wolf. In 1994, the Republicans had health control for 40 years in the House so they kind of had to remind people and say, this is what we stand for.

Right now, they feel that they've got a terrific issue set already out there. They say the stimulus package, they can talk about that. Health care reform, they can talk about that. The president's energy policies, they can talk about.

So they consider this to be more of a governing document, if you will, than a campaign document. They believe, look, it's fine for us to do it, but we don't all need to tie ourselves to the establishment in Washington, our candidates are just fine on their own. Happy to have it. Don't need it.

BLITZER: What other Republicans target of opportunity in the House?

BORGER: Well, I spoke to them today. They divided it to three groups. First of all, freshmen and sophomores, you know, that big group that came in, in the election of 2006 and 2008, those Democrats in swing districts, more than 50 of them.

Secondly, long-time Democrats, establishment Democrats they have been trying to knock off for years, lots of them, they think they have a shot at them. Also Democrats in the northeast, Republicans have had a very difficult time in the northeast. They say they're about seven to eight seats each in New York State and Ohio, for example, that they consider to be targets of opportunity. And don't forget, there are 48 Democrats right now who are in districts that John McCain won. That's a real target of opportunity.

BLITZER: We must not forget also they need 39 to become the majority in the House of Representatives. Now, if the Democrats supposedly nationalized this election, how do the Republicans respond to that?

BORGER: As George Bush once said, bring it on. They're very happy to nationalize the election. You know, they say it may work in some Senate seats for Democrats, run against the Tea Party, et cetera.

But in House races, they say what this is going to do is bring out the Republican base because they're not going to be happy to see anyone demonizing anybody in the Republican Party.

They say it will only help them locally in their elections. So if they want to make it about Barack Obama, that's what the Republicans want so fine with them.

BLITZER: Gloria, thanks very much.

BORGER: Sure.

BLITZER: The worst economic downturn since the great depression has now officially been declared over. So how does President Obama plan to raise consumer confidence? I'll ask Mark Zandi. That's coming up.

And a heightened concern in the U.S. that the country could pose a major nuclear threat -- we're talking about Iran. The Iranian President Mahmoud Ahmadinejad, he is in New York. He's got a message for President Obama.

And the former president of the United States, Bill Clinton, he's sitting down with me right here in "The Situation Room" at his Clinton Global Initiative tomorrow. That interview coming up in "The Situation Room" tomorrow.

(COMMERCIAL BREAK)

BLITZER: Kate Bolduan is monitoring some of the other top stories in "The Situation Room" right now. Kate, what's going on?

KATE BOLDUAN, CNN CORRESPONDENT: Hey there, Wolf. Well, the Utah governor said the raging wild fire started by National Guard ammunition could soon be out.

Authorities are optimistic that winds have shifted and temperatures have dropped. The fire has burned about 10,000 acres and evacuation orders remain in place for some 5,000 people, although residents with specific needs are being allowed in briefly. Four homes were destroyed. And a weakening Hurricane Igor is now moving away from Bermuda after hammering the island. The storm took down a number of trees and left 2/3 of the area without power. There were no serious injuries or deaths. Thankfully high surf advisories have been issued for most of the seaboard as Igor heads north and a tropical storm watch is in effect for parts of New (Finland).

Former Defense Secretary Donald Rumsfeld is speaking out. He isn't holding back. His long anticipated memoir is set to be released in January. The book entitled, "Known and Unknown" is a play on his infamous 2002 quote referring to the war on Iraq. Rumsfeld is expected to reveal new details about the Bush administration, 9/11, and the wars in Iraq and Afghanistan.

And music star Lady Gaga is making headlines again today. She's making a last-ditch attempt at rallying support for a key Senate vote on the military's controversial "Don't Ask Don't Tell" policy.

The entertainer appeared in Maine today to pressure the state's two GOP senators to vote to begin debate on a defense spending bill that includes a repeal of the provision.

So far, it hasn't worked. Democrats are falling short of the 60 votes needed to open the debate. And the vote is set for tomorrow. And right now, woman, our Capitol Hill unit says the vote is too close to call.

BLITZER: So Susan Collins and Olympia Snowe, the moderate Republican senators from Maine are not going to listen to Lady Gaga. Is that what you're saying?

BOLDUAN: So far indicating they're indicating that they're sticking with their party. Lady Gaga is out there making an attempt. The Capitol Hill unit says it's right now too close to call. We'll be watching it for tomorrow.

BLITZER: We'll watch it closely tomorrow. Kate, thanks very much.

BOLDUAN: Of course.

BLITZER: Critics say President Obama is pitting the rich against the middle class. We'll talk about the risks of the Democrat's tax cut policy, the danger turning off wealthy voters.

And a CNN exclusive interview with the French first lady, Carla Bruni. She's setting the record straight about what Michelle Obama told her about life in the White House.

And remember, be sure to join us tomorrow for my one-on-one interview with the former President Bill Clinton. We'll talk about his global initiative, politics and a whole lot more.

(COMMERCIAL BREAK)

BLITZER: You're in "The Situation Room." Happening now, the French first lady, Carla Bruni, now speaking out exclusively to CNN. She's trying to set the record straight on what Michelle Obama told her about life in the White House. Stand by.

You can't find it in the water, but someday it could be on your dinner table. Just ahead, the growing debate over genetically engineered salmon.

I'm Wolf Blitzer. You're in "The Situation Room."

We received an official end date today for the worst economic downturn since the great depression. The National Bureau of Economic Research says the recession that began back in December of 2007 lasted 18 months and ended in June of last year.

That's cold comfort, though, for millions of Americans who are out of work or suffering financially in some way. Let's talk about some of the big questions about the economy and jobs as Election Day approaches with Mark Zandi. He's the chief economist for Moody's.

Mark, thanks very much for coming in.

MARK ZANDI, CHIEF ECONOMIST, MOODY'S: Thanks, Wolf.

BLITZER: This horrible 18-month recession, it seems so much longer because of the joblessness that's out there. Is it fair to say that this is a jobless recovery?

ZANDI: I think that's fair. I think this proclamation that the recession ended just over a year ago, something only an economist can appreciate. You know, the value of all of the things that we produced, GDP, has been growing, and, thus, the end of the recession.

But it's not been growing fast enough to get businesses to go out and hire, certainly not hire enough to bring down unemployment. Until unemployment is falling, I don't think anybody is going to feel really good about this.

BLITZER: Economists define a recession as two consecutive quarters with negative economic growth. In other words, six months of negative economic growth. We haven't had that since June of last year. Will we have it again? In other words, do you foresee a double dip recession?

ZANDI: No, I don't think so. I think the recovery will remain intact, but it is very fragile. Economic growth is slow. As I said, not fast enough to bring down unemployment.

With a 9.6 percent unemployment rate that's likely to move higher, there really is no cushion here. If anything goes wrong, we will be back in to that double dip.

But, barring that kind of scenario, barring getting hit from left field, I think we have enough staying power here to make our way through and by this time next year, hopefully the expansion will take hold. BLITZER: The Republicans argue that unless you keep the tax rates the same for everyone, middle class and the wealthy, then you have a greater chance of getting that double dip recession.

The Democrats including the president say let the tax rates stay the same for the middle class, 97 percent of taxpayers out there. But for the wealthiest, those making more than $200,000 or $250,000 a year, let it go back down to the tax rates of the '90s. What would be the impact of either scenario on the possibility of another recession?

ZANDI: Well, if the tax cuts expire for everybody, which neither the president or the Republican Congress is saying, but, you know, that's a possibility given the political vitriol that we're seeing in Washington, that would be fodder for a double dip recession. That would do it.

If the president's proposal is adopted and tax rates rise for upper income households, I don't think it will be enough to push us back in to recession, but it would be a weight on the economic recovery which, as I said, is very fragile. I wouldn't take that chance.

I would -- I would allow no tax cuts, no tax increases, I should say, for 2011, when the recovery is so fragile. Wait until 2012, 2013, when the economy is on sounder ground. At that point, we can think about letting those tax rates rise to address our long-term fiscal problems. But not in 2011, I think the recovery is too fragile to take that risk. BLITZER: So what I hear you saying is that if the tax rates stay the same throughout 2011, that's better for job creation than if you -- if you increased taxes for the wealthiest?

ZANDI: Yes. That is true. I think that is clearly the case and now as we get to 2012 and 2013 when the economy is improved and we need to begin to focus on how we're going to bring down our long-term budget deficits and get that debt low down. At that point, I think it would be OK to allow those tax rates to rise to generate the revenue that we need to address that problem, but not in 2011. I just think that it's taking too big a chance with this very weak recovery.

BLITZER: Now, as you know, a lot of major companies out there, they're sitting on a lot of cash. They're making money. They have profits, but they're reluctant to go out and hire a lot of people right now. What if anything can the president do to strengthen their confidence that this is a good time to take that cash, remove it from the sidelines and start hiring a lot of people?

ZANDI: You make a really good point. And the profits of big and mid-sized companies is the most fundamental reason for optimism here. It's really no longer a question can these businesses go out, expand and hire. It's really a question of are they willing and that's a very important distinction. So, we're just about there. We just need those businesses to engage and begin to hire.

And I think the key impediments are one credit for small businesses. They are having a tough time getting credit. And the other is confidence. And part of that goes to the policy uncertainty. So, the most important thing Congress and the administration I think can do is nail down what we think about these tax cuts, because this uncertainty that its creating is causing businesses to remain cautious and not deploy all that cash they have on their balance sheet.

BLITZER: We know that the Republicans and the Democrats, they're going eyeball to eyeball on these tax rates right now, because everybody's taxes will increase if the Congress doesn't do something. They have to do something by the end of the year in order to allow the Bush tax cuts to continue. How do you see this playing out?

ZANDI: Well, you know, I'm an economist, not a political strategist. So, that question is a little bit out of my strike zone, but let me say, the economic logic would argue nobody's taxes rise in 2011 because we need to make sure that the recovery is in full swing. By 2012, 2013, allow the tax rates and upper income house holds to revert back to where they were in the 1990s.

I don't think, at that point, the tax increases would be significant enough that it would change their spending, saving, and working behavior and we need those revenues to address our long-term fiscal problems because that is going to be our next big problem.

BLITZER: Paul Krugman, your fellow economist, wrote in "The New York Times" today, this, put it up on the screen, "the rich are different from you and me: they have more influence. It's partly a matter of campaign contributions, but it's also a matter of social pressure since politicians spend a lot of time hanging out with the wealthy. So, when the rich face the prospect of paying an extra 3 or 4 percent of the income in taxes, politicians feel their pain - feel it much more acutely, it's clear than they feel the pain of families who are losing their jobs, their houses, and their hopes."

You agree with that assessment?

ZANDI: You know, I don't know. I mean, I would say that these elected officials have to get votes from high income households and a lot of those from middle income households and more middle income households. And you know, I think they're listening to everybody. They're trying to do what's best.

You know, everyone has different perspective on this. And these are very uncertain times. So, you know, I don't think I described those kinds of motivations to the decisions being made. I think these are earnest people trying to make tough decisions in a very difficult time.

BLITZER: Mark Zandi is the chief economist for Moody's. Mark, thanks very much for coming in.

ZANDI: Thank you.

BLITZER: In our top stories, a new milestone in the war in Afghanistan. We'll check in on what's going on there.

And we're also learning about a small plane crash on a major interstate highway. Stick around.

(COMMERCIAL BREAK)

BLITZER: Check back with Kate. She's monitoring some of the other top stories in the SITUATION ROOM right now. Kate, what else is going on?

KATE BOLDUAN, CNN CORRESPONDENT: Well, Wolf, just in to CNN, the FAA confirms that a small plane crash on a busy section of an interstate in the Atlanta area. We're seeing pictures right there. IT'S not clear if it went down during takeoff or landing were pulled. The Piper Saratoga was licensed to a rental company in Georgia. And good news, the pilot appears to be OK.

A suspected serial stabber jailed in Michigan could face new charges as soon as today. Elias Abu el Azam is expected in court on one count of premeditated murder and four counts of assault. He's suspected of stabbing eight people in three different states. Five of whom were killed. Many believe the attacks targeted African- Americans. The suspect's lawyer says there is little evidence against his client.

And British forces in Afghanistan are handing over responsibility of a major Taliban strong hold to U.S. marines. The transfer in the Helmand province district was first announced by British authorities in July. It comes amidst heavy losses in the region. A NATO official says the handover was made possible by the increase of U.S. troops in the country.

And, Wolf, my dear, you know you're my BFF, but you may be surprised to find out that that is one of the newest entries in the New Oxford American Dictionary. Yes. Joining best friend forever in the big book are other texting and e-mail short cuts including LMAO. Anyone? Well, that means laughing my "buns" off. And we can probably thank Sarah Palin for another edition of "hockey mom."

This may be the biggest addition of web speak and slang words ever in the Oxford Dictionary. Wolf, ttyl, talk to you later. That is also on list. Who's big day (ph)?

BLITZER: OMG.

(LAUGHTER)

BOLDUAN: OMG.

BLITZER: LOL.

BOLDUAN: LOL.

BLITZER: Are those on the list too?

BOLDUAN: I'm going to check.

BLITZER: Check to see if OMG and LOL --

BOLDUAN: I will, I promise.

BLITZER: Thank you, get back to me.

BOLDUAN: OK.

BLITZER: The Obama family makes a rare church visit. Could it be a political move? We'll talk about that and a lot more in our "Strategy Session."

And Delaware's a controversial Republican Senate candidate now scrambling to answer some embarrassing questions about her past. Brian Todd is live at Christine O'Donnell's campaign headquarters.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session." Joining us now, two CNN political contributors, the Democratic strategist, Donna Brazile, and the Republican strategist, Ed Rollins.

Let me start with you, Ed. Sarah Palin, she was in Iowa over the weekend, giving arousing speech there. Is it fair to say right now if she decides to run for the Republican presidential nomination, goes to Iowa, there might be three or four or five other Republican candidates, white guys running, and her, she is the front-runner to capture the Iowa Republican caucuses?

ED ROLLINS, CNN POLITICAL CONTRIBUTOR: She certainly is the most significant Republican on the scene today. I mean, obviously, Mike Huckabee decided to give up his Fox show and go back and be a viable candidate. And I have to preface it by saying I was his chairman.

But, you know, he went on. He won that last time. She got to run a grassroots campaign. She can't just bop in a couple of times and make speeches. It reminds me of Ronald Reagan in 1980. Ronal Reagan was the great love of Iowa having been a radio announcer and everything.

The strategist of this campaign, which I was not the principle at that point in time argued he didn't have to go to Iowa. George Bush went to Iowa and did all the kinds of things that he had to do, and he won that and lost his career. So, if Sarah Palin wants to be a viable candidate, she's going to go in and then work for the next year like any other candidate to get those Iowa votes.

BLITZER: Yes, not just Mike Huckabee, but Sarah Palin would have to give up her Fox career as well. She's a contributor to Fox. If she does win Iowa, and I think a strong case could be made, Donna, that she could win the Iowa caucuses. I'm not sure she can win the New Hampshire primary, but I think she could then win the South Carolina primary where she's very popular among that conservative Republican base. If she wins two of those first three contests, does she get the Republican nomination?

DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Wolf, we're a long way from the February 6, 2012 caucus, but -- BLITZER: I know we are, but what do you think? Because historically, whoever the Republican is who wins two or three of those first contests gets the nomination.

BRAZILE: Look, she's a woman -- she's a woman, and we all know that woman candidates face some unique hurdles. There's no question that she's filling a lot of air time. She is the social media queen of the moment. If she tweets, everybody, you know, overanalyzes her remarks. But I still believe Ed is absolutely. The folks out in -- in Iowa wants -- they want to hear from you. They want you to work it.

They want you to come to those -- those festivals, those county fairs. And If Sarah Palin is willing to put in the work, then she will reap the harvest in terms of the votes. But, look, the Republican primary may reward the most conservative person in the room, but you know New Hampshire is unpredictable. Those voters up there sometime do not like to endorse the winner of the Iowa caucuses.

So, it's going to be a tough primary for Sarah Palin if she decides to run. And right now, those guys are not putting a glove on her. But come 2012, come the moment after this election season, they're going to start knocking Ms. Palin around.

BLITZER: Remember, the presidential season will begin the day after the November 2nd midterm elections. November 3rd, the race to Iowa, New Hampshire, South Carolina, Michigan, that begins for the Republicans. Same question to you, Ed, if she wins Iowa and South Carolina and the stage is set for Michigan, does she win the Republican nomination?

ROLLINS: She'd be awful hard to stop if she won those two. You know, at the end of the day, she wants to run a real campaign, she's going to be a real serious candidate, no matter who else is in the race. I guess, the question is, is she going to put operatives together? Is she going to go raise money?

Is she going to do the things -- it's easy to tweet and whatever else she does, but getting into the trenches and working hard and getting the daylights beat out of you and going 16-hour days is a tough trench to go through as we all have done it. But I certainly think she takes all of the oxygen out of the air next year if she thinks that --

BRAZILE: And Wolf, I don't want to use boxing metaphors with women because I'm (ph) knocking her around, dragging her -- these are metaphors that we use in politics, of course, but we all know in presidential politics that it's down and dirty. And if -- if you're not ready to go out there and really get yourself devoted to spending weeks at a time in those various counties, it's very tough to win those Iowa caucuses. It's not as easy as you think.

BLITZER: I'm not saying it's easy at all. I'm just asking the questions. But here's the question for you, Donna. The president and the first family, they went to church yesterday here in Washington, the first time in a long time they were visibly seen going into church. Is this a deliberate new political strategy? What's going on here?

BRAZILE: You know, President Obama's devotion to his Christian faith has been maligned and distorted by his critics. He is devoted to strengthening not only his Christian faith, but Wolf he goes to church when he's at -- when he's at the place in Maryland -- what do you call it -- look, I got --

BLITZER: Camp David.

BRAZILE: Camp David. Thank you, Lord, 50 years old, I have to watch it now. But -- and he has a circle of Christian pastors and advisors. We all know that President Obama would like to spend more time, you know, visiting -- meet at a church community across the city of the District of Columbia.

But, Wolf, every time president Obama leave the White House, the Obamas, they tie up traffic. So, he's decided that, you know, the best way to show his devotion is to not only just walk across the street, do it inside the White House, do it at Camp David, but he's devoted to his Christian faith.

BLITZER: Yes. He walked with the family across Lafayette Park from the White House to this church. Ed, very quickly, a thought.

ROLLINS: Listen, it's been 17 months. The great churches in Washington, D.C., great African, white churches, he should join a church. He should practice his Christian faith publicly. It's a very important part of the president's inspirational role. If you do that, all this other stuff would have gone away a long time ago.

BLITZER: All right. Guys, thanks very much. Donna Brazile and Ed Rollins.

Jack Cafferty is asking do you think your health care costs will rise under President Obama's new health care law?

Also, there's always some fireworks seems to be when the Iranian president comes to New York to address the United Nations. What will Mahmoud Ahmadinejad do this time, this week, in New York?

And in our top stories, what happened after a fire shut down a commuter train -- a bridge, commuter train bridge in New York?

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BLITZER: Jack is back with the "Cafferty File" -- Jack.

CAFFERTY: The question this hour is do you think your health care costs are going to rise under President Obama's new health care law? They've already begun to in some places.

Chuck writes, it's sure looking that way. This is what happens when you only do a job halfway. Republicans should have put their country ahead of themselves and allowed this bill to pass as intended. Democrats forcing this bill through should have gone the full nine yards or not done it at all. Thanks a lot, guy. Your bickering once again comes back to hurt all of us.

Jorge in New Mexico writes, I don't know if you're being disingenuous or not, but almost none of the health reform law takes effect until 2014, which was a mistake in its own right. All those rate hikes and increase costs you mentioned are happening under the old system, the one Obama wanted to change and the one that Republicans and some conservative Democrats want to keep.

If anything, all these rate hikes argue for reform, not against it, although reform might make a convenient scapegoat for the insurance companies as they go about their annual gouging of the customers.

Lori in Pennsylvania writes, in all the debates about the health care reform bill, I never once heard that anything would be done about how much health insurance companies could and would charge. Under Obama's health care law with health insurance companies having to accept people with preexisting conditions, of course, they will rise. That is reason to once again up health insurance rates.

Al writes, yes, but not as much as they would have without the new law.

David says, absolutely. You can't add coverage for 30 million new people and risk and not see cost rise. I mean, I learned that in the 7th grade.

And Elyce writes, last year, our health insurance went up 25 percent. We're under a federal employee health insurance plan. I'm scared what this year is going to bring.

If you want to read more on this, go to my blog, CNN.com/CaffertyFile -- Wolf.

BLITZER: A lot of people are nervous out there, Jack.

CAFFERTY: Absolutely.

BLITZER: Thank you.

It looks like salmon and we're told it tastes like salmon, but is it safe to eat fish that have been genetically engineered? The FDA is asking some questions, so are we.

And a new book about the French first lady, Carla Bruni, has created a stir for what it says about Michelle Obama and her life in the White House. Carla Bruni is now speaking out in an exclusive CNN interview.

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UNIDENTIFIED FEMALE: But I do live in France, and France is a free country.

(END VIDEO CLIP)

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BLITZER: A major week getting under way in New York City right now as leaders from around the world gather for the United Nations general assembly. Among those taking the international stage, a rather controversial U.S. adversary, the Iranian president, Mahmoud Ahmadinejad. Let's bring in our foreign affairs correspondent, Jill Dougherty. She's getting ready for a very busy week in New York -- Jill.

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Right Wolf. We know President Ahmadinejad always seems to make headlines when he's here at the U.N. He's likely to face criticism on his human rights stand, but this time, he's trying to change the dynamics, depicting himself as a humanitarian, but his critics aren't buying it.

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DOUGHERTY (voice-over): Anti-Ahmadinejad demonstrations on a roll on the streets of New York. The Iranian president is here for the U.N. general assembly. Outside his hotel, his critics want the management to kick him out of his room.

UNIDENTIFIED MALE: We don't believe in peace with the Iranian government.

DOUGHERTY: Four blocks away, the no to Ahmadinejad committee says Iranians ought to kick him out of office.

UNIDENTIFIED MALE: We've seen over the past year that people come to the streets and demand these changes, and all they faced was execution.

DOUGHERTY (on-camera): Organizers are planning a demonstration against President Ahmadinejad. It's going to be taking place on Thursday at the United Nations just about a block down from here. And it would be taking place at the very time that President Ahmadinejad addresses the United Nations general assembly. Organizers say they hope to bring 20,000 people into the streets.

DOUGHERTY (voice-over): This week in New York, Ahmadinejad is on a PR offensive, addressing a session on tackling world poverty, giving interviews, trying to prove he's not the monster his critics make him out to be. Telling ABC news that after he helped free American hiker Sarah Shourd, there should be some payback from President Obama.

PRES. MAHMOUD AHMADINEJAD, IRAN: So, I believe that it would not be misplaced to ask that the U.S. government should make a humanitarian gesture to release the Iranians who were illegally arrested.

DOUGHERTY: The U.S. says those cases have nothing to do with each other. For the Obama administration, the real showdown here is over Iran's nuclear program. President Obama told a CNBC town hall he's hoping tough sanctions will work before Israel takes matters into its own hands. BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We don't think that a war between Israel and Iran or military options would be the ideal way to solve this problem, but we are keeping all our options on the table.

DOUGHERTY: But between hanging tough on nukes and his brutal crackdown on the opposition since last year's election, Ahmadinejad has few friends left at home or abroad.

TRITI PARSI, NATIONAL IRANIAN AMERICAN COUNCIL: Well, he certainly has an increasingly small circle of people that he, himself, seems to trusts and that are willing to support him.

DOUGHERTY: But he can count on some world leaders here this week who are willing to hear him out, such as Venezuela's Hugo Chavez and the leaders of Turkey and Brazil, two growing powers trying to mediate his stand-off with the west.

(END VIDEOTAPE)

DOUGHERTY (on-camera): Ahmadinejad insists sanctions aren't going to work. He is prepared to talk about his nuclear program, he says, but only under respectful conditions. U.S. officials don't expect any major breakthroughs this week, but they do tell us they expect things to happen in the not-so-distant future. And there could be some movement behind the scenes this week to help that happen -- Wolf.

BLITZER: When you say behind the scenes, what does that mean? What types of scenarios are you hearing?

DOUGHERTY: Well, it could be, you know, talking that there actually is some willingness. You're hearing some of that from President Obama today that they're willing still to engage, you know, much more positive words that you might have expected from the president coming out today. So, behind the scenes, it could be let's get real, let's begin to really talk. It depends a lot, of course, on both sides.

BLITZER: Jill Dougherty, thanks very much.

Major world leaders will also be gathering in New York City this week for the Annual Clinton Global Initiative Meeting. The former president, Bill Clinton, will be my special guest right here in the SITUATION ROOM tomorrow. We'll talk about his initiative. We'll talk politics. We'll talk about a whole lot more. That's tomorrow right here in the SITUATION ROOM.

And you're in the SITUATION ROOM. Happening now, new political star, Christine O'Donnell says she once dabbled in witchcraft, but some Delaware voters may be more bothered and bewildered by serious questions about her finances. Why her campaign is suddenly scrambling. Stand by.

Lady Gaga leads the charge to get rid of the military's "Don't Ask, Don't Tell" policy, but can the pop star convince a couple of U.S. senators to go along?

And a CNN exclusive this hour. The French first lady, Carla Bruni, tells you what Michelle Obama really told her about life in the White House.