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The Situation Room

What Women Voters Want; Will President Obama Serve Two Terms?; McConnell: GOP Should Be "Humble, Grateful"; New Rules on Gays in the Military; Valerie Jarrett Addresses President's Position, Pentagon's Policy on Gays in the Military

Aired October 21, 2010 - 17:00   ET

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

BROOKE BALDWIN, CNN ANCHOR: Now to Wolf Blitzer in Washington.

WOLF BLITZER, CNN ANCHOR: Thanks very much, Brooke.

Happening now, a CNN exclusive -- we're along for a major Medicare fraud bust. The Feds say it's one of the largest schemes ever to steal from the health care system and some of the most vulnerable patients are being preyed on.

Also, one of the closest and ugliest races in the country right now. Republican Senate candidate and Tea Party favorite, Rand Paul, talks to CNN about his opponent's ad attacks and the allegations about his past.

And what do you think when you see someone in Muslim garb on an airplane?

One journalist admitted on national TV that he gets nervous and now he's been fired.

Did he deserve it or is this a case of taking political correctness too far?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Right now, many of the biggest Senate races in the country are closer than ever. These contests in places like Pennsylvania, Kentucky, Alaska and Washington State could decide if the Democrats lose control of the Senate only 12 days from now. You can bet President Obama is feeling the pressure. He's campaigning out West right now, delivering familiar campaign lines with a scratchy voice and just maybe a little desperation.

Listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Yes. Hey, I -- have you ever noticed, when you want your car going forward, what do you do?

You put it in D. When you want to go backwards, you put it in R. Don't go back in the ditch.

(APPLAUSE)

OBAMA: Don't go back in the ditch.

(END VIDEO CLIP)

BLITZER: He's really losing his voice.

We'll check in with our senior White House correspondent, Ed Henry.

But let's go to the Senate battle in Illinois, as well. It would be especially painful for the president if the Democratic candidate loses his old seat. The state treasurer, Alexi Giannoulias, is in a close contest with Republican Congressman Mark Kirk.

Our Congressional correspondent, Brianna Keilar, is in Chicago working the story for us -- Brianna, tell us what the latest is.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Wolf, it is close and it's gotten very nasty -- some might say quintessential Illinois politics. And what's so interesting about this race in Illinois is that whoever wins here could effect President Obama's agenda pretty quickly because this is a special election. This is one of three Senate races where the winner would take their seat soon after November 2nd, because they would be replacing someone who was appointed to fill a vacancy.

And the other thing here in Illinois is that these are candidates that both really have an Achilles heel, if you will. For the Democrat, Alexei Giannoulias, it's that he spent years working for his family's bank, which just failed this year and which made some bad loans to criminals.

And then for Mark Kirk, a five term congressman from the suburbs north of Chicago, it has to do with his military service. He spent 21 years as a Naval Reserve intelligence officer, which would normally be an asset. But in the past years, he's made some statements, for instance, saying that he received a military award that he did not receive; saying that he was shot at over Iraq, when there's no record that he was. That's something that I asked him about today.

(BEGIN VIDEO CLIP)

ALEXI GIANNOULIAS (D), ILLINOIS SENATE CANDIDATE: I say that's offensive, hurtful, wrong, inaccurate and shameful. No one has ever, ever even suggested the bank has ever done anything illegal, illicit or improper and I'm very, very proud -- very proud of the business that my father started, the community bank that my father started 30 years ago.

(END VIDEO CLIP)

KEILAR: And, Wolf, that was actually Alexei Giannoulias, who was answering for these comments that have been made. His opponent cast him as a mob banker because of that background.

But let's listen to what Mark Kirk said when I talked to him today about his military service and some of his -- what his critics would say, what certainly Giannoulias would call -- embellishments.

Here's what Kirk said to me.

(BEGIN VIDEO CLIP)

KEILAR: Were you careless in your remarks?

MARK KIRK (R), ILLINOIS SENATE CANDIDATE: Absolutely. And -- and you correct that. I misstated parts of my military record. But in the Navy, we're trained to take responsibility and be accountable for your people, for your unit and for your mission. I am accountable.

(END VIDEO CLIP)

KEILAR: And so what you have here is really a narrative. These two candidates, one Alexei Giannoulias, who is being called the mob banker by his opponent. In fact, there's even an ad here running here, Wolf, that says Tony Soprano would be proud of him.

But on the other hand, when it comes to Mark Kirk, you have someone who's being painted as a serial embellisher. And both of these issues are really sticking with these candidates. They just can't seem to outrun them -- Wolf.

BLITZER: It really would be quite a thing for a Democrat to lose this Senate seat in Illinois. This is the seat that the president used to -- used to have.

But Giannoulias, that whole bank -- his family bank issue, how big of a problem is this turning out to be for him?

KEILAR: It is turning out to be a problem for him, because it's something that he can't outrun and it's allowing his opponent, Mark Kirk, to say, look, this is sort of typical Illinois politics.

At the same time, though, you have Giannoulias saying I've done nothing wrong. And then what you hear his opponent saying in reverse is this is someone who isn't taking responsibility for their mistakes, really trying to paint him, in contrast to Kirk, because Kirk's M.O., as you can see there, is really to kind of do a mea culpa and say I made mistakes and I'm -- I'm going to be accountable for them.

BLITZER: All right, Brianna.

Brianna is watching this important race in Illinois for us.

Thank you.

Stay with CNN, by the way, on election night, November 2nd, for up to the minute results -- the kind of analysis you can get only here on CNN. I'll be manning our CNN election headquarters, along with the best political team on television.

With only about 12 days to go before the contentious midterm elections that could potentially change the face of power here in Washington, there's a major race brewing on the other side of the country. And it could potentially offer something unique.

Here's CNN's special correspondent, Soledad O'Brien.

(BEGIN VIDEOTAPE)

SOLEDAD O'BRIEN, CNN CORRESPONDENT (voice-over): Linda Lovejoy is the face of history in the making -- a woman who will change politics come November 2nd. But she's not a candidate in the midterm Congressional elections, she's running for president.

LYNDA LOVEJOY, CANDIDATE, NAVAJO NATION PRESIDENT: When I first ran four years ago, people were shocked when I won the primary.

O'BRIEN: Lovejoy is favored to become the first female president of the Navajo Nation, the largest tribe in the United States. If she defeats the current vice president, Ben Shelly, she'll become steward of a $96 million budget at a time of 50 percent plus unemployment.

KEVIN GOVER, DIRECTOR, SMITHSONIAN MUSEUM OF THE AMERICAN INDIAN: Being the president of the Navajo Nation really is the equivalent of being the governor of a Western state. The Navajo Nation government, of course, is responsible for law and order, education, public safety, health.

O'BRIEN: About 300,000 Navajo occupy 27,000 square miles across Utah, Arizona and New Mexico. At the Navajo Nation's fair, Lovejoy was treated like royalty.

But not all Navajo are ready for a female president.

UNIDENTIFIED MALE: The Navajos always had a tradition of saying that a man should run the -- be the president to run the Navajo Nation.

GOVER: The cultural base...

O'BRIEN: Kevin Gover says electing a woman is as much a flash from the past as a window on the future.

GOVER: Because a woman plays a key role in the very creation of the people themselves. But all of that was sort of cast to the -- cast to the side as the U.S. set out to Americanize tribal cultures. The traditional roles that -- that women played were obliterated.

O'BRIEN: With term limits preventing the current president from seeking reelection, infighting among tribal leaders has some calling for a return to those times when Navajo women maintained a tight-knit culture.

UNIDENTIFIED FEMALE: She's going to clean house because she's a woman. The woman is stronger than the man. UNIDENTIFIED FEMALE: The Navajo Nation is ready for a change.

O'BRIEN: Lovejoy is no political novice. A New Mexico state senator, she's well versed in telecommunications and utility issues and wants to bring that experience back to the reservation.

LOVEJOY: We are still living in the 18th century circumstances -- no running water, no -- no electricity.

O'BRIEN: She might get her chance, if the Navajo people decide to take Navajo politics back to the future.

(END VIDEO TAPE)

BLITZER: Soledad O'Brien reporting for us.

Lovejoy's opponent, by the way, Ben Shelly, is the current vice president of the Navajo. He said he has no issue with Lovejoy's gender. But Shelly says her experience in the New Mexico legislature doesn't make up for her lack of experience in reservation politics. Lovejoy often notes she was raised speaking Navajo in a two room tepee. A poll by a Navajo newspaper has her leading by 17 percent.

Be sure to tune in later tonight for the CNN "Black in America" special, "Almighty Debt." Soledad examines financial crisis from the pull it -- the pulpit. That airs tonight, 9:00 p.m. Eastern only here on CNN.

There's new evidence that Americans have serious doubts about President Obama and whether he'll stick around the White House very long.

And a new claim that Bill Clinton lost one of the most important things in a president's possession.

(COMMERCIAL BREAK)

BLITZER: The president of the United States heading out to Seattle, Washington, eventually. He's going to be at a rally to get out the vote for Senator Patty Murray.

She's in a tough, tough battle right now.

Let's go to or senior White House correspondent, Ed Henry, who's working the story for us.

Ed is in Seattle.

Set the stage for us -- Ed, because I know the president is going to make a direct appeal to women to get out and vote.

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, he already -- yes, he did that, Wolf, at a backyard event earlier today with Senator Murray. And the bottom line is, the White House put it -- put out this report basically saying women are critical to the workforce. And they say the president's policies are helping them. White House Spokesman Robert Gibbs insisted this was not a political move or a political document. So it must have been an interesting coincidence then that it just so happened to come out today -- the same day that the president is campaigning here with Patty Murray, the self-proclaimed mom in tennis shoes, who needs these votes from women to get the -- the strong female turnout to turn back this tough challenge from Republican Dino Rossi.

The president also today at a doughnut shop, doing a little bit more of the retail politicking we haven't really seen him do as president, as he governed. Now he's really getting out there here in the final two weeks.

And what they're also trying to do is close that so-called enthusiasm gap by bringing in the young people. On Sunday, I was with the president at Ohio State. He had 35,000 people when he came out with the first lady. Today here at the University of Washington, he just wrapped up that rally you were talking about. The president had 10,000 people in a basketball arena. They needed overflow at football stadium behind me, about 3,000 more people. And there, the president's strategy was all about taking advantage of early voting.

(BEGIN VIDEO CLIP)

OBAMA: If you haven't already voted for Patty Murray, let me be clear -- you need to go right after this rally, fill out that ballot and mail it in -- today, not tomorrow, not the next day, but today.

(END VIDEO CLIP)

HENRY: Now the president is leaving Seattle now, heading to San Francisco, then on to L.A. in the morning, a big rally for Barbara Boxer; on to Vegas after that, later tomorrow, helping Harry Reid.

So many Senate Democratic incumbents in deep trouble, especially out here in the West. The White House is trying to build a firewall to offset some of the other Senate losses they expect elsewhere in the country. Critical to try and protect Murray, Booker and Reid -- Wolf.

BLITZER: When you speak with White House officials, Ed, do they think the president is making much of a difference?

HENRY: They do. They -- senior advisers of the president believe that he's closing that so-called enthusiasm gap -- all the talk about how Republicans are more motivated to vote. We've seen in Pennsylvania, for example, the president had a big rally a couple weeks back, all of a sudden Joe Sestak, who was given up for dead in that Senate race, now it's a dead heat in Pennsylvania. They think the president had an impact there.

But you also have to leaven that with the fact that the president had a rally last night in Portland, Oregon, where he was talking about early voting, and he asked people in the crowd, thousands of them, how many of you have the early ballots and how many of you have not mailed them in. About 70 percent, 80 percent of the people in the crowd -- I saw them -- raised their hands. These were hardcore Democrats at a presidential rally, they had the ballots, still had not mailed them in.

That's the big question. He can draw people to the big rallies, how many of those people will turn out on November 2nd? How many of those people are going to mail in the early ballots? Still remains to be seen, Wolf.

BLITZER: Big questions. All right, Ed, thanks very much.

Ed covering the president on this West Coast swing.

More than half of the country now says President Obama should be a one-term president, that according to a brand new Gallup poll. Look at this, only 39 percent of Americans say he deserves to be reelected. That's compared with 54 percent who say he don't deserve to be reelected.

Let's talk about that and more with our senior political analyst, David Gergen and Gloria Borger.

David, to give you some context, and you well remember this, in '94 when President Clinton was in deep trouble in the first midterm elections, he had basically the same number in this same Gallup poll. He came back two years later to beat Bob Dole and get himself reelected. So President Obama has plenty of opportunity right now to turn things around.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: He does. And President Obama, even though he has low ratings, is ahead of Ronald Reagan at this point two years in. So he can look at the Clinton and Reagan experiences and say it's possible to bounce back.

But, Wolf, neither of them had an economy with unemployment stuck above 9 percent. And talking to a economists in the last few days, I don't find a lot of optimism that it's going to go a lot lower over the next two years. So, dealing with that, I think, makes it very tough for him.

BLITZER: There's no doubt.

Gloria, if the unemployment rate is above 9 percent in 2012, this president will be in deep trouble.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes, he will be. But if you look to history again, you mentioned Bill Clinton, lost both houses of Congress, so did Truman, so did Eisenhower, they both went on -- they all went on to win reelection.

And you know, there is a big question mark here, which is opposed to whom? Who are the Republicans going to run? Is it going to be Halley Barbour, now head of the Republican Governor's Association and a governor of Mississippi? Is it going to be John Thune, a senator? Mitch Daniels, a governor? We don't know. Could it be Sarah Palin?

So right now, Barack Obama's not popular. It seems to be a low point. He could potentially lose the House, control of the House of Representatives. It also depends on how he behaves after this election. Does he become Bill Clinton and learn how to work with Republicans or try and work with Republicans, or does he become Jimmy Carter?

So these are all big question marks now. The poll is not a surprise to us, but I don't think it's indicative of what's to come.

BLITZER: Yes, go ahead, David.

GERGEN: I was just going to say, I do think there's a danger in this kind of poll and that is it obviously reflects much of what we know, but when Republicans look at this and see it's by 54 to 39 people do not think he deserves reelection, there is going to be a temptation after the election is over to say there's blood in the water, let's take this guy down. We can get the White House back if e just steadily work against him.

And what that could produce is a lot more gridlock in the next two years, even if he reach out to Republicans -- and I'm not sure he will, I hope he does. But they may have incentives.

I talked to a major figure last week in Chicago who said the most important thing we have to do is not cooperate with him the next two years so make sure he does not win reelection two years from now. I worry a lot about the governors --

(CROSSTALK)

BLITZER: Although there was this statement that Mitch McConnell told the "National Journal." He's the Republican leader, minority leader, sort of urging caution on the Tea Party activists. He said, "One of the things we will have to remind newcomers and those who have supported them is that even though we will have a larger Republican conference, we do not control the government and cannot control the government when the president holds the veto pen."

So basically, Gloria, they can say we're going to repeal health care, but the president can veto that. Then you need two-thirds majorities to override a veto, which is unlikely.

BORGER: Wolf, you know, the worst thing you can do in politics is overpromise and underdeliver. And I think what Mitch McConnell is saying here to folks is don't overpromise because we're not sure what we can deliver.

And I think he understands that if the Republicans win a lot of seats in Congress, they have been given a temporary license, but anybody can revoke a temporary license if you don't drive the right way or if you wreck the car.

And I think he's kind of saying, you know what, slow down here, folks, because we're not going to be able to repeal health care right away. There are a lot of things we're not going to be able to do right away.

And the public is watching, to David's point, to see if Republicans can govern when they have some responsibility. BLITZER: Let's wait to see the elections first, and then we'll see about governing and all of that.

Guys, thank you very much.

BORGER: We're ahead of ourselves.

BLITZER: David and Gloria, two of "The Best Political Team on Television."

We're monitoring other top stories, including an explosive new book alleging that while Bill Clinton was president he lost top secret codes needed to launch an attack.

And a new program sparks outrage in Britain. It looks at what would happen, could happen if Britain's Prince Harry were taken hostage by the Taliban while serving in Afghanistan.

(COMMERCIAL BREAK)

BLITZER: More recalls from Toyota. Fredricka Whitfield is monitoring some of the top stories in THE SITUATION ROOM right now.

Fred, what's going on?

FREDRICKA WHITFIELD, CNN CORRESPONDENT: Hello to you, Wolf. Hello, everyone.

Well, Toyota is recalling more than 700,000 vehicles sold in the U.S. because of potential brake problems. This recall effects certain Avalon, Highlanders and Lexus models. Toyota says the problem is related to using non-Toyota brake fluid. It says dealers will replace the brake master cylinder cup for free. Since last year, Toyota has recalled more than 8 million vehicles.

Meanwhile, Honda says it is preparing to announce a similar recall for brake problems. It will include models of the Honda Acura and Odyssey.

And many Brits are outraged over a new movie called "The Taking of Prince Harry." It's airing tonight in Britain. It's a fictional film about what might happen if the prince were taken hostage by the Taliban while serving in Afghanistan.

Britain's army chief wanted the program banned saying it puts all troops at risk, but the show's producers say they are hardly giving the Taliban new ideas. Prince Harry secretly served in Afghanistan back in 2007. He has said that he actually wants to go back.

And a new book claims that while Bill Clinton was president he lost a card with the top secret codes needed to launch a nuclear attack. General Hugh Shelton who was then joint chiefs of staff writes the so-called biscuit was missing for several months. He said it was, quote, "a big deal, a gargantuan deal" unquote.

Another book published several years ago claims Clinton officials realized that the biscuit had gone missing after the morning after the Lewinsky scandal broke -- Wolf.

BLITZER: That's quite a revelation. All right, thanks very much for that, appreciate it.

It's being called one of the largest schemes to defraud Medicare in history. Stand by for our exclusive look at the bust and the allegations that vulnerable patients are being preyed on.

And is President Obama sending mixed messages to gays in uniform? I'll ask his senior White House adviser, Valerie Jarrett. She's here in THE SITUATION ROOM, she'll respond to those who say they feel resentful and betrayed.

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN breaking news.

BLITZER: This is just coming in to CNN right now, new word from the Pentagon about its rules on gays serving openly in the United States military. Our Pentagon correspondent Chris Lawrence is standing by with the details.

What are you learning, Chris?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, it's now going to take a higher authority to kick openly gay troops out of the military.

We just saw a memo from Defense Secretary Robert Gates to the heads of all the branches. And basically now he's telling them it is now going to take the secretary of the Army, the secretary of the Navy or the secretary of the Air Force, it's going to take that authority to kick a troop out of the service because of "Don't Ask, Don't Tell." They would also have to consult with the Pentagon's top lawyer before taking that action.

A senior defense official told me basically, this decision used to be in the hands of lots and lots of people. It was different for each branch at which level someone can make the call. He said, we wanted this decision in the hands of fewer people.

We also know that the Pentagon has been pushing the idea or at least top officials have, of repealing "Don't Ask, Don't Tell" through a congressional act. Now we're being told that the Pentagon, because of the uncertainty legally, that although they still prefer to repeal "Don't Ask, Don't Tell" through Congress, they are now looking at other possible ways in which it might be repealed. The word I'm getting from this senior defense official is that, we are planning for multiple scenarios.

So again, two big things. The authority level to kick gay troops out has been raised. The Pentagon now looking at other possibilities other than an act of Congress. We know this probably will not satisfy some of the gay troops that we have spoken with who expressed to me personally just a couple hours ago disappointment that President Obama has not taken a greater lead in pushing this forward, Wolf. BLITZER: All right, so these three secretaries will personally have to sign off on kicking someone out of the military, and the secretary of the Navy oversees the Navy and the Marine Corps.

LAWRENCE: Marine Corps.

BLITZER: That's why there are three.

All right, thanks very much, Chris, for that.

The president's senior adviser Valerie Jarrett is here in THE SITUATION ROOM.

Let's talk about this, but before we do I want to play this clip because former U.S. Army Lieutenant Dan Choi, a West Point grad, served in Iraq, an Arabic linguist, he was on "AMERICAN MORNING" here on CNN earlier this morning after you were on CNN, and he had some strong words. He's deeply distressed about the Obama administration and what is going on as far as gays serving openly in the U.S. military.

(BEGIN VIDEO CLIP)

LT. DAN CHOI, DISCHARGED UNDER "DADT": I just heard Valerie Jarrett talk to you guys and I'm so absolutely upset at the things that she could be saying at this moment.

Yesterday, when President Obama, after "Don't Ask, Don't Tell" has been dead for a week, no enormous consequences, no people quitting the military because of honest soldiers, and all of a sudden you see this president want to give mouth to mouth resuscitation to discrimination and injustice.

Valerie Jarrett said that gay people, some of us should try to understand the politics and that we are a nation of laws. Well we understand that, we don't need a lecture from Valerie Jarrett on that. Civics, day one, American government, checks and balances, when Congress enacts a law that's unconstitutional who strikes it down? The courts.

I understand the judicial branch is the only branch of government is fulfilling its mandate to the Constitution. And that the president is not able to do that upsets me. I'm resentful, absolutely.

JOHN ROBERTS, CNN ANCHOR: But do you understand the administration's position? That they say that they're committed to repealing "Don't Ask, Don't Tell" but they want to do it through Congress --

CHOI: No they're not.

ROBERTS: -- they don't want to do it through the courts.

CHOI: I don't think they're committed at all.

(CROSSTALK) ROBERTS: You think this is just lip service?

CHOI: I think this is just politics. This is a midterm election calculation from the politicians in the White House and the administration.

ROBERTS: So you don't trust them.

CHOI: I do not.

And actually, at this point I have a message for Valerie Jarrett and all those people that are -- those politicians in the White House, you've lost my trust. You've lost my trust and I'm not going to vote for Barack Obama after what he did yesterday.

(END VIDEO CLIP)

BLITZER: You know, you hear that from a lot of activists in the gay community right now. They're very, very upset.

VALERIE JARRETT, SENIOR ADVISER TO PRESIDENT OBAMA: Listen, Wolf, first of all, it's a pleasure to be here. Thank you for inviting me on. And this is an important issue and I'd like to just address it directly.

The president has said that during his term in office, as soon as possible, he would like Congress to repeal "Don't Ask, Don't Tell." It's legislation that was passed by Congress. He can't simply sign an executive order to revoke it or he would have. And so, we're asking Congress to repeal it.

And until then, the justice Department has no choice but to defend the laws that are on the books and that's what the Justice Department is doing. But we want it to end and end as soon as possible.

BLITZER: Can -- one legal scholar suggested today that perhaps the president could go ahead do what he needs to do, but at the same time make it clear to everyone that he thinks this law is unconstitutional.

JARRETT: He has done that. He did that as recently as last week when he was at a town hall meeting. He said he thinks that this law should be absolutely repealed. He doesn't believe in this law.

He agrees that there are gay men and women serving in our military, proudly defending our country, putting their life on the line every single day and that this law has no place in country. But it is an act of Congress and Congress should repeal it.

BLITZER: But as you know, after the elections, almost certainly there are going to more Republicans and conservatives in the new Congress than in the current Congress. So here's --

JARRETT: This shouldn't be a Republican or Democratic issue.

BLITZER: It shouldn't be, but it could be between liberals and conservatives.

Here's the question -- will you push for repealing "Don't Ask, Don't Tell" during the lame duck session?

JARRETT: I know that the president has said he wants it repealed as quickly as possible. I think if you look at any kind of surveys, the vast majority of American people want it to be repealed, so it shouldn't be a partisan issue and we do fully intend to push forward.

And we share the frustration of people who think it should be done right away. We wish it that it had been done sooner, but we are determined to get it done.

BLITZER: So if Dan Choi were here, what would you say to him cause you can see how upset he is?

JARRETT: I appreciate his frustration. I share his frustration. And I understand that for somebody who has served proudly in the military that he thinks that this is an outrage. We think this is an outrage, too, and we think that focus should be directed at Congress. Cause Congress is the one that passed it in the first place, Congress is the one who should repeal it.

BLITZER: All right, let's talk a little bit about this new Gallup poll.

Fifty-four percent in this new poll say they don't think the president should be reelected right now, that he doesn't deserve to be re-elected. What's happened over these past two years?

JARRETT: We are a long way before the president's election is up and so I think our focus should be on the midterms now.

But the fact of the matter is our country has been through an economic crisis. Lots of people have lost their jobs. It's more sluggish than we would want, but we are certainly moving in the right direction. But until every single person can feel it in their own household, they will have frustration and they're going to have anger.

And we share that frustration and anger, but let's put in context, Wolf. When the president took office, we had just lost in the prior six months 4 million jobs. His first month over 750,000 jobs. The next month, 600,000 jobs.

But what we have seen in the last nine months is nine straight months of private sector job growth --

BLITZER: Do you think over the next two years, between now and the 2012 election, the economy, the unemployment, all of that will significantly improve?

JARRETT: Well I'm not the economist, but what I can assure you we're going to do is every single day we are going to be moving to push it forward in the right direction.

You've seen over the last couple months the president has announced several new initiatives to stimulate the economy. There are over 3 million people working today who would have lost their jobs had it not been for the Recovery Act. The Small Business Tax Bill will reduce the cost for small businesses so that they can grow and expand.

Our efforts to try to invest in research and development and new forms of technology and partnering with the private sector, our community colleges will be revamped to try to help have the private sector help us design the curriculum so that there will be real jobs at the end of those programs.

So we have a wide range of initiatives, not the least of which are the ones we talked about today targeted to women.

BLITZER: Let's talk about that, cause this new report that you have suggests there is still a lot of work to be done to make sure women are on the same playing field, earn the same amount for the equal amount of work that men do.

Right now, women still earn only about 80 cents for about every dollar that a man earns for exactly the same job. I know the president signed certain legislation into law already. Give me one example of what else the president can do right now to improve the situation for women.

JARRETT: Well let's just take a step back and make sure that everybody has the facts.

As you said, women earn 77 cents on the dollar. Also importantly, two-thirds of families now are either headed by a single mom or have two working adults in the household. So the contribution that women are making is more important than ever but yet, it's still not an even playing field.

If you look at the Recovery Act, the Small Business Act, the great resources that our SBA Administration is putting into women- owned businesses, 12,000 loans already leveraging $3 billion worth of capital to small businesses, and we know from many studies that capital is important for all small businesses, but particularly for women. So we have a wide range of initiatives and we're not going to stop at that.

The SBA is looking to expand their programs. We had a symposium, a forum in the White House about a month ago where we focused on women entrepreneurship and what could we do to provide them the tools need to expand.

And we also had a forum several months ago on work place flexibility. A lot of women in the work force have challenges balancing the work life. Men do, too. What the report we released then showed is that employers who provide flexibility actually have more productivity.

So we have a wide range of initiatives and we're always looking for more to help women be in the work force, start their own businesses, thrive and grow and contribute to our economy.

BLITZER: I hope you're earning the same as a male senior adviser to the president.

JARRETT: We all make the same under this president. I can assure you of that.

BLITZER: I hope there's no discrepancy.

JARRETT: There's no discrepancy in the White House.

BLITZER: Are you sure?

JARRETT: I'm positive.

BLITZER: All right then. We will double check as well.

Valerie Jarrett, thanks very much for coming in.

JARRETT: My pleasure. Thank you, Wolf.

BLITZER: Remarkable video of a man falling off the subway tracks. We'll show you what happened.

And a praying dog makes a big splash on the internet.

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BLITZER: A strong earthquake hits Mexico. Let's bring back Fredricka Whitfield. She is monitoring that and other top stories. What happened, Fred?

WHITFIELD: Well, a lot. This is incredible. A 6.9 magnitude effort quake struck Mexico's Gulf of California today. The U.S. Geological Survey said the quake was about six miles deep. There are no immediate reports of damage. That's the good news. Many people were shaken up and schools were let out for the day. Very frightening moment there.

Amazing video of a dangerous rescue on the Washington metro system. Take a look. First, the man on the left in the white, you can see, he falls down into the train tracks. As the railcar approaches, frantic passengers wave their arms, try to point the man to the crawl space under the tracks. The man in blue then jumps down into the tracks, crawling over the electrified third rail to rescue the fallen passenger. While this story had a happy ending, as you can see there, it all turned out well. You should never climb into the tracks. The third rail carries enough electricity to kill you.

This story of inspiration. It's already an internet situation. The video of disabled veteran Steven Boyd who taught his dog to say grace. Yes, listen.

(BEGIN VIDEO CLIP)

STEVEN BOYD, DOG OWNER: Father, I do ask a special prayer that you help me to not chase the neighbor's cat and to listen to my master whenever he asks me to do something.

(END VIDEO CLIP)

WHITFIELD: Boyd has received more than 5,000 messages from people all over the world. But there's more to this heart warming story. Boyd rescued Jango from an animal shelter the day before he was scheduled to be euthanized in six months he transformed this aggressive dog into a loving one, as you see there. Boyd credits Jango and god for saving his life. For more on this story and all religion news go to CNN's belief blog at cnn.com/belief. You can't help but love that dog and that relationship.

BLITZER: The belief blog is good stuff. Dog likes to pray. Good for that dog. Jango, good work.

WHITFIELD: I love that.

BLITZER: The alleged drunken wife of a prominent judge sparks an international incident in the skies. Our Jeanne Meserve has the details.

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BLITZER: A dust-up with an alleged unruly passenger on a U.S. commercial flight bound for Brazil comes to a dramatic and surprising ending for two federal air marshals. Let's bring in our homeland security correspondent Jeanne Meserve. What happened Jeanne?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: An international dust-up that began October 1st on Continental flight 128 from Houston to Rio. During the flight, sources say, two air marshals broke cover to subdue a female passenger who appeared drunk and had gone to the plane's galley to make herself drinks. The woman resisted and bit one of the air marshals. They put her in handcuffs. When the flight arrived in Rio, the air marshals expected to hand her over to local authorities, but instead the air marshals were charged with assault, had their passports confiscated so they could not leave the country and a hearing date was set. The woman was the wife of a prominent Brazilian judge.

BLITZER: Are the air marshals still in Brazil?

MESERVE: No, they are not. They used alternative documents to quietly slip out of Brazil but the legal matters are not resolved. Brazilian court officials say they have contacted the U.S. embassy in an effort to track down the air marshals. We are told air marshal operations to Brazil have been impacted. The incident raises serious questions about international law enforcement cooperation. The president of the union which represents air marshals says in theory we're all working together to combat the threat of terrorism and we should not let egos or marital relations impact proper procedure and legal protocols. Sources say discussions between the governments of Brazil and the United States have not resolved this matter.

BLITZER: Sensitive diplomatic issue between these two countries, thank you very much.

It's a massive effort to defraud Medicare. Our next report on an alleged scheme that may hit you right in your paycheck.

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BLITZER: There is a crackdown that is causing us billions and billions of dollars. CNN's John Zarrella is joining us with a major government crackdown under way. What is going on, John?

JOHN ZARRELLA, CNN CORRESPONDENT: Wolf federal prosecutors say this was one of the largest schemes of its kind ever. The defendants according to federal prosecutors scammed Medicare for nearly $100 million.

(BEGIN VIDEOTAPE)

ZARRELLA: Meet Larry Duran in this YouTube video he claims to be seeking help from a Miami Congresswoman to increase Medicare benefits for mental health patients.

LARRY DURAN: Their voice, those parents, it is sometimes muffled and we want her to help us out.

ZARRELLA: A noble cause, right? Not according to the federal investigators. Thursday morning they swept down on his company American Therapeutic Corporation and its seven offices, making arrests, and seizing boxes of evidence, and dozens of computers. Duran has been charged with a dozen counts of healthcare fraud.

LANNY A. BREUER, ASST. U.S. ATTORNEY GENERAL: The alleged illegal conduct here charged in this indictment is in many respects unlike anything that we have seen before in terms of the nature and the size of the scheme.

ZARRELLA: Prosecutors allege that ATC altered patient files and medications, and therapists' notes and paid halfway houses and assisted living facilities to provide patients and even pay kickbacks to some patients.

CHRISTOPHER DENNIS, OFFICE OF INSPECTOR GENERAL, HHS: They prey on the most vulnerable citizens and those patients as it relates to community mental health centers are demented patients and can't take care of themselves.

ZARRELLA: Prosecutors say that the Miami case is the latest in a litany of schemes run nationwide to defraud Medicare and in essence, you. We, legitimate taxpayers are paying for the fraud schemes?

UNIDENTIFIED MALE: That is right. It is money you and I work for coming out of our paychecks.

ZARRELLA: It is estimated that Medicare fraud amounts to $60 billion -- that is right, billion every year. But the feds are fighting back. This team that took down American Therapeutic Corporation is part of a multi agency Medicare fraud strike force operating in seven U.S. cities. One of their tools is data mining, the strike force looking for spikes, unusually high claims in a region or from an individual provider, and they are able to access that data almost as soon as the claim is filed.

GARY CANTRELL, OFFICE OF INSPECTOR GENERAL, HHS: We can see the trends as they happen instead of six months or a year down the road after the program has been taken advantage of.

ZARRELLA: In recent weeks, they have broken up schemes in Detroit, Los Angeles and New York. The problem, federal agents say is that as soon as they bust one operation, another pops up. The reason? For too long, Medicare has been a cash cow that keeps on giving.

(END VIDEOTAPE)

ZARRELLA: Of that $100 million defrauded, Wolf, the federal prosecutors say that $77 million is already dissipated for BMWs, Harley's, Land Rovers, a Macerati, private school tuition and I talked to Duran's attorney late this afternoon and he said he could not comment on his client's case.

BLITZER: Shocking story for us. Thanks for bringing us to us, John Zarrella with the exclusive report.

Has political correctness gone amuck? The controversial firing of a popular commentator is raising that question.

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BLITZER: In Michigan right now the ailing economy is giving Republicans a pretty good shot at reclaiming the governor's office. Polls showing that Republican Rick Snyder with a double-digit lead over the Democrat. Our Mary Snow is looking at the contest for us and joining us now live with more. What is going on?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, many other candidates are tapping into anger against the government, this Republican is dialing it back and trying it with a different approach.

(BEGIN VIDEOTAPE)

RICK SNYDER (R), MICHIGAN GOV. CANDIDATE: Let's go out and make Michigan a great state. So, thank you so much.

SNOW: Despite the country's rising tide of tea party conservative candidates, Republican Rick Snyder is chosen to pick the governor's race as a moderate.

SNYDER: I don't get into the labels at all. I don't see the value in, that because it is again, about a state going through a devastating economy and we have a broken government.

SNOW: Home to the ailing auto industry, Michigan's unemployment rate is near 13%, and people want change.

UNIDENTIFIED MALE: He is one tough nerd.

SNOW: The former Gateway CEO proclaims himself as one tough nerd, and he even has a nerd mobile that supporters can sign. He has never held public office, touting his outsider status and attracting voters like this long-time Democrat.

DEAN PARSONS, DEMOCRAT: When he announced he was running, I said, this guy is not a politician, but a man.

SNOW: If Snyder's is a nerd, his Democratic opponent is anything but.

VIRG BERNERO (D), MICHIGAN GOV. CANDIDATE: I was dubbed the angry mayor because I'm angry about this. I'm angry the government isn't working. I'm angry at what Wall Street has done, but I'm not content to be angry. I'm making a difference.

SNOW: Part of Bernero's fight, lobbying Congress to bail out the auto industry.

BERNERO: We support billions of dollars for Wall Street, and then you want to balk at the people who work everyday and actually produce something in this country.

SNOW: But Democrats in this blue state have political baggage. Two term Governor Jennifer Granholm is unpopular. Trailing in the polls, Bernero is targeting his opponent's lack of experience by promoting his own.

BERNERO: We've secured half a billion dollars in new investment in my city. Six thousand new jobs

SNOW: Meanwhile, Snyder is sticking to his strategy and projecting confidence.

RICK SNYDER (R), MICHIGAN GUBERNATORIAL CANDIDATE: Let's be proud of what we accomplish. Let's learn our lessons. Let's move the talent we have and take it into this new era with a positive attitude.

(END VIDEOTAPE)

SNOW: What helped Snyder in Michigan, the state has an open primary. He beat four conservatives because he had the backing of Democrats and independents. It is those voters, analysts say, that are still with him in the general election -- Wolf.