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The Situation Room

Plan to Slash Trillions from Deficit; Politics of Slashing the Deficit; President Obama vs. China; Palin Feeding Speculation about 2012

Aired November 10, 2010 - 17:00   ET

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

WOLF BLITZER, HOST: Brooke, thanks very much.

Happening now, a new blueprint for slashing trillions of dollars from the federal deficit. A presidential panel's new draft report puts tax hikes and Social Security cuts on the table. This hour, the proposals and the political infighting surrounding it. It's intense already.

Also, new evidence that a foiled cargo bomb plot was targeting the Eastern United States -- what we're learning right now about the timing and how close Americans came to actually being attacked.

And a dramatic new attempt to make sure smokers understand their health and their lives are at risk. Stand by to see the very graphic labels you could see soon on cigarette packs around the country.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

We begin, though, with a surprise look today at a new proposal to try to get America off the roller coaster of deficit spending. Over the past decade, the national -- the nation has gone from a $269 billion budget surplus to a projected deficit of almost $1.4 trillion this year alone. A draft proposal out today would slash the budget red ink by some $4 trillion over the next 10 years. The blueprint was released earlier than expected by the co-chairmen of the bipartisan panel appointed by President Obama.

Let's bring in Jeanne Sahadi.

She's a senior writer for CNNMoney -- Jeanne, what are the highlights of this proposal?

JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM:

Well, it pretty much touches everything in the federal budget. It reins in spending. In fact, they get to the $4 trillion -- basically, 75 percent of it is through spending cuts. They offer to reform the tax code. That's the other 25 percent of the deficit reduction. They reform Social Security. They -- they speak about health care costs, reining them in and they -- they offer some procedural options to do that.

I -- I should say, though, this is really the chairmen's proposal. It is not the commission's proposal. It's not President Obama's proposal.

So it...

BLITZER: It's because...

SAHADI: -- it's really the framework that the commission is going to be working with.

BLITZER: Right. There's 18 members on this commission.

SAHADI: Right.

BLITZER: And if it's going to be the proposal of the entire commission, 14 -- 14 members have to agree. And that's still problematic.

Jeanne, let's talk a little bit about some of the specifics, because there are some pretty bold proposals to change, first, as far as the tax plan is concerned.

SAHADI: Right. They put forth a number of options to reform the tax code. But broadly, all of them would do the following. They would lower income tax rates. They would reduce -- I'm sorry. They would lower income tax rates and reduce tax breaks -- reduce the value of tax breaks and -- and in aggregate, bring in more revenue. The -- the plan calls for a cap on federal revenue at 21 percent of GDP, which is about 3 percentage points more than -- than the historical average.

The trick, though, is in cutting those tax expenditures, favorite things like the mortgage interest deduction, how -- how deeply you cut into it will determine how low rates -- income tax rates for individuals and businesses can go. So they give a number of different options for the commission members to consider.

BLITZER: Social Security -- it's always the most sensitive area, dealing with what's called entitlement spending. They're proposing some dramatic shifts, though, including the retirement age.

How do they want that to work, the two co-chairmen of this commission?

SAHADI: It's -- it's actually not as dramatic in terms of other retirement age increase proposals I've seen. They want to raise the retirement age from 67, which is where it will be in about 12 years, to 68 by 2050. So over a 40 year period, they want to raise the retirement age by one year. That's about one month every two years. That's a very slow increase relative to some other proposals we've seen. And then beyond that, they would raise it to 69 by the 2070s.

That's one. And then another proposal they make is to -- sorry -- to change the cost of living index. Every year, you know, you hear about seniors getting their benefits adjusted upward according to inflation. That would still happen, but at a slower rate. They would use a new formula to calculate inflation. It's -- some people say it's a more accurate reflection of inflation. Others say it's a less generous one.

BLITZER: And whenever you deal with Social Security benefits, there's going to be a big uproar.

SAHADI: Right.

BLITZER: We're going to have a lot more on this standing by later.

Jeanne, thanks very, very much.

SAHADI: Thank you.

BLITZER: Let's talk about the political realities of this proposal.

We'll bring in our senior political analyst, Gloria Borger -- Gloria, how likely are these proposals going to be to move forward?

It's by no means a done deal.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: No. And as you pointed out, Wolf, this is a chairman's mark. They wanted to get this out there, to put this on the table. And I think we should give the two chairmen, Alan Simpson and Erskine Bowles, some credit here for putting some really bold, serious ideas on the table.

But it -- but you do need 14 out of 18 members to approve of this in order to get this proposal before the Congress. Given the fact that this has both large spending cuts in it and a change in the tax system, I'm not sure, Wolf, that they can get there. But it's in everyone's interests right now to try and get something before the Congress. So I won't say no. You know, we just don't know at this point.

BLITZER: We're -- we're already, though, hearing loud complaints...

BORGER: Yes.

BLITZER: -- from liberals and from conservatives. I don't think this should be surprising.

BORGER: No, it's not surprising. You know, Wolf, we've been debating these issues for years. They're the same issues. Nancy Pelosi just put out a statement -- I just got it on my BlackBerry -- that called it "simply unacceptable." A lot of the spending caps are going to be unacceptable to Democrats. And the changes in the tax system, particularly eliminating sort of the deductions on mortgage, for example, are going to be unacceptable to Republicans.

But what was interesting to me about looking at this document is there wasn't just one tax option they gave. They gave three different scenarios on the tax front, because it was clear that the chairmen probably couldn't agree on what the tax options should be. And they're giving you a trade-off here. They're saying, if you lose some of your deductions, you're going to get a lower overall tax rate. So say you lose your mortgage interest deduction and you're a wealthy person, your rate is now 39 percent. That -- 39.6 percent -- that would actually drop to 23 percent.

So, again, they're saying to people here, take a look at these. There are trade-offs. This is a very serious problem. We have to deal with it and just don't say no. We have to try and work on this.

BLITZER: For the highest income, right now, it's 36 percent, the rate, under the Bush tax cuts. It would go back up to 39 percent...

BORGER: 39.6...

BLITZER: -- if the...

BORGER: That's right. Sorry.

BLITZER: -- if the Bush tax cuts lapse, it goes back to...

BORGER: That's right.

BLITZER: -- to the tax rates 3.5 percent higher than existed...

BORGER: Right. Sorry.

BLITZER: -- during the Clinton administration. I just want to be precise on that.

BORGER: Right. That's the number they used, by the way, in their -- in their outline, was the 39.6 percent, because, of course, we don't know what's going to happen with that right now.

BLITZER: But -- but Nancy Pelosi and a lot of the liberals...

BORGER: Yes?

BLITZER: -- they don't even want to discuss reducing Social Security benefits.

BORGER: No.

BLITZER: For them, that's a nonstarter.

BORGER: You know, it -- it's interesting, because when you read this very carefully, we've been, again, having this Social Security debate for, what, more than a decade?

And so there aren't that many things that you can do, Wolf.

What's interesting to me here is that these proposals are not really the kind of structural reform that we saw during the Bush years. There's no talk about so-called privatizing Social Security. As you were speaking about before, what they're talking about is raising the retirement rate very gradually. The difference will be that wealthier retirees will get fewer benefits and probably have to pay more in payroll taxes. That may not go over so well.

But what's important here is the money they save on Social Security goes back into Social Security. Liberals have always complained, Wolf, that you save the Social Security money and you put it into deficit reduction, you balance the budget on the backs of the seniors.

And what they're saying here is we're not going to do that. Whatever we save on Social Security goes back into the system to make it solvent.

BLITZER: We'll see if this initial proposal by Erskine Bowles and Alan Simpson...

BORGER: Right.

BLITZER: -- if it gets off the ground, if they get a total of 14 members of their commission on board. We'll see what happens over the next few weeks.

BORGER: It gets the conversation going, Wolf, which is what's important.

BLITZER: And we've just had a little conversation right here, as well.

All right, Gloria.

Thank you.

BORGER: Sure.

BLITZER: Other important news, President Obama -- he's in South Korea right now, meeting with other leaders of the world's biggest economies. Tensions over currency values and trade expected to run high at what's called the G20 summit, especially between the United States and China.

Our senior White House correspondent, Ed Henry, is joining us now from Seoul -- Ed, how much of this summit will be about China for President Obama?

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: Well, Wolf, there has been a lot of pre-game speculation and that's going to be a lot of tension between the U.S. and China here at the meeting of the world's largest 20 economies. U.S. officials are really trying to downplay that and say, look, there may be some raising of these issues, of course, about currency manipulation in particular, and, also, trade imbalances. But they're actually hoping that they may be able to work out some sort of compromise on trade imbalances. And they don't want to turn this into some sort of a huge confrontation or brawl.

And here's why. U.S. officials are saying privately that they expect the president to announce here that he's going to welcome President Hu of China to Washington for an official visit as early as January. And so they don't want this to become a big brawl on the eve of that. They want to try to make a little bit of incremental progress here and then sit down for face-to-face talks back in Washington in the next couple of months and try to move forward on some of these big issues -- Wolf.

BLITZER: Germany and Britain are pressing the United States right now to cut down on the debt -- the enormous debt the United States has. We've been talking about these new debt proposals that these commissioners have come up with.

What are you hearing there?

What's likely to happen at the G20, if anything?

HENRY: Well, it could strengthen the president's hand in some ways. If you look at what with his own fiscal commission coming out with some -- a -- a proposal, anyway. That is not done yet, obviously -- far from that.

But painful cuts proposed, because you have countries, you know, like British prime minister, David Cameron, he's put some real cuts on the table, austerity measures, to show that Britain is serious about getting their debt under control. Others here in Seoul are wondering when the U.S. is going to do the same.

So that -- that could sort of strengthen the president's hand, depending on what he says if he's asked about it here in the next couple of days.

The other issue to look at is the fact that, look, this president is entering this G20 under a much different political standing than the first one in London that he attended in early 2009. There he was basically treated look a rock star and it was all about economic stimulus to stave off another Great Depression.

Now here we are, fast forward about a year-and-a-half. The president's political standing is much different. And instead of talking about stimulus, it's all about cutting debt here. And so it's a much different position for this president to deal with -- Wolf.

BLITZER: Ed Henry traveling with the president in Seoul, South Korea.

We'll stay in close touch.

Thank you.

Fire and rage -- we're going to tell you what set off this angry student protest on the streets of London.

Stand by.

And passengers stuck on a crippled cruise ship finally know when they'll reach land and finally end their nightmare.

And Sarah Palin adds a little sugar to her mama grizzly style of politics and the speculation about whether she'll run for president.

(COMMERCIAL BREAK)

BLITZER: The president and his predecessor -- Jack Cafferty is here with The Cafferty File -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: George Bush is out peddling a new book and suddenly the former president is everywhere. He's all over the newscasts. He was even on "Oprah's" couch. Two years later, it seems worth comparing the former occupant of the Oval Office to the current one.

Howard Kurtz writes in his "Daily Beast" column that the contrast between Presidents Bush and Obama in recent appearances could hardly be sharper. Kurtz calls it the decider versus the agonizer. Bush always talks in short, clipped, declarative sentences, appears to be very sure of himself, even on the weighty issues like waterboarding, Saddam and WMDs. On the other hand, Kurtz writes that President Obama's finally rendered prose and meandering around any topic makes him sound more like a think tank analyst.

Howard Kurtz points out Bush doesn't have nearly as much on the line here except maybe some image rehab. He compares the man who approved torture to the man who tortures himself.

After eight years of President Bush, it felt like most of the country couldn't wait to be rid of him, "Bring them on, wanted dead or alive, and I'm the decider" had pretty much gotten on everybody's nerves, including mine. Much of America welcomed the more intellectual and eloquent Barack Obama with open arms.

But this new love affair could be shaping up to be a bit of a one- term, one-night stand. Forty-five percent of those surveyed in a recent CNN/Opinion Research Corporation poll says Bush was a better president compared to 47 percent who feel that way about President Obama. A year ago, only 34 percent thought Bush had been a better president, 57 percent thought so about Mr. Obama.

At this point, the trend is not President Obama's friend.

Here's the question, two years later: do you ever miss President Bush?

Go to CNN.com/CaffertyFile. Post a comment on my blog.

WOLF BLITZER, CNN ANCHOR: All right. Jack, thank you.

No matter how you feel about Sarah Palin, most would probably agree she doesn't shy away from a fight. In recent days, she's taken on the "Wall Street Journal," the Federal Reserve chairman, and now -- get this -- she's going after the enemies of sugar.

Let's bring in our national political correspondent, Jessica Yellin. She's out in California.

What's Palin saying now, Jessica?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Wolf, the latest is she's taking on the Pennsylvania education officials' fight against obesity. OK, the context: she was speaking at a fundraiser at a private school in the state and she addressed a newspaper report that said public schools in Pennsylvania are considering a ban on having sweets like cookies, cake and cupcakes at school parties. Palin didn't like that idea and this was her response:

(BEGIN VIDEO CLIP) SARAH PALIN (R), FORMER ALASKA GOVERNOR: I brought dozens and dozens of cookies to these students. I had to shake it up for you guys, especially the press, OK? Because I wanted these kids to bring home the idea to their parents for discussion, who should be making the decisions what you eat and school choice? Should it be government or should it be the parents? It should be the parents.

(APPLAUSE)

(END VIDEO CLIP)

YELLIN: But, Wolf, it turns out that newspaper report wasn't correct. State officials say they're considering ways to encourage healthier food choices, but there is no outright ban, whoops!

Now, Palin did make news in other ways when she was asked if she'd run for president, she said, she'll take it under prayerful consideration. But then -- get this -- she said if she does run, quote, "I'd be in it to win it." Now, you remember that line. It was from then-candidate Clinton when Clinton announced she was running for president.

It's interesting that she's looking to Hillary Clinton for inspiration or for fun with references -- Wolf.

BLITZER: Doing the Hillary Clinton's playbook for the political process right now. She's also really over the press right now. She's specifically taking on one of her -- one of her critics.

YELLIN: That's true. Yes. As you know, she's launching her new reality show this weekend and she's also in "People" magazine promoting it. But in that "People" magazine article, she speaks directly back to Karl Rove, who has criticized her, saying that her new reality show does not lend her the gravitas needed to win for a run for president. So, responding to Rove, she says in "People" magazine, quote, "I'd like Karl Rove to come up to Alaska and see me being in a man's world."

Well, that's an interesting turn of phrase because it does play into a theme we heard a lot from conservative women this cycle that you need to be like a man to win office, man up, be man enough. It seems to be becoming part of the mama grizzly theme and something to talk about in the months to come, Wolf.

BLITZER: And you know we will, Jessica. Thanks very, very much.

The battle for the U.S. Senate seat in Alaska turns into a legal fight right now. Alaska election officials are counting write-in ballots despite a court challenge by the Tea Party-backed candidate. We're going to live to Juneau, Alaska. Stand by.

The federal government pushing a much more in-your-face approach to cigarette warnings. What they want smokers to know and see -- straight ahead.

(COMMERCIAL BREAK)

BLITZER: The House is moving forward with plans right now to put a prominent member on trial.

Kate Bolduan has that and other stories in THE SITUATION ROOM now.

What are we just learning, Kate?

KATE BOLDUAN, CNN CORRESPONDENT: Hey there, Wolf.

You know, we've been tracking this and we're now just got -- we just got word that the House ethics hearing for Congressman Charlie Rangel will start this coming Monday at 9:00 a.m. The House Ethics Committee has charged the New York Democrat with 13 counts of wrongdoing, mostly involving his fundraising and finances. The panel's plans to put Rangel on trial on November 15th had been called into question when Rangel fired his lawyers and said he might represent himself.

Some other things we're watching -- this was the scene today in London.

(VIDEO CLIP)

BOLDUAN: A group of demonstrators broke into the headquarters of Britain's governing Conservative Party. They sprayed anarchy symbols and set off flares, and then set fires outside. They're angry about a government plan to help cut the deficit by allowing public universities to nearly triple tuition rates.

Eight people suffered minor injuries. At least 32 protesters were arrested.

And an extremely controversial measure raising the minimum retirement age in France became law today. French President Nicolas Sarkozy signed the pension reform bill officially pushing the country's retirement weight age from 60 to 62. The proposal sparked massive protests across the country over the last two weeks. Sarkozy says the move was needed to cut France's deficit and protect retirement and pension levels.

And in China, a Chinese court sentenced a consumer activist to 2 1/2 years in jail. What was his offense? Setting up a support group for victims of the country's tainted milk scandal. That's right, a support group.

At least six children died and hundreds of thousands of others got sick in 2008 and 2009 from the milk laced with the chemical melamine. The activist started an online support group after his own son got sick. He was convicted of disturbing the social order, Wolf. Just for starting a support group.

BLITZER: Yes. Well, that doesn't make any sense at all, you know? That's ridiculous.

All right. Thank you.

BOLDUAN: Thanks, Wolf.

BLITZER: The president says he's worried that America's bleak jobs picture is becoming, quote, "the new normal." I'll ask the economist Mark Zandi if Mr. Obama is right.

And a new sign of progress for putting the defendants in the 9/11 terrorist attacks on trial.

Plus, the mystery of that orange streak over California. Guess what? It has now been solved.

(COMMERCIAL BREAK)

BLITZER: You're in THE SITUATION ROOM.

Happening now:

Chilling new details about the failed terror plot uncovered last month in Britain. Officials say explosives sent from Yemen on a cargo plane probably would have exploded over the Eastern Seaboard of the United States if they hadn't been discovered in time.

Plus, they're counting write-in ballots for the U.S. Senate race in Alaska right now. Something Tea Party candidate, the Republican Joe Miller, wants stopped. And he's going to court to try to do it.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

(MUSIC)

BLITZER: To President Obama right now, there is no escaping the economic misery that helped cost his Democratic Party control of the House of Representatives. He's in South Korea right now for the G-20 Summit. But back here at home, there is a lot of debate and division over tax cuts, spending and the federal deficit.

Joining us now is Mark Zandi. He's the chief economist for Moody's Analytics.

Thanks very much, Mark, for coming in.

Quickly, your reaction to these deficit recommendations -- these deficit cut recommendations that this commission, at least the two co- chairmen of the commission, put out today. Dead on arrival or is it going to go somewhere?

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: I hope not, Wolf. I think they're courageous. You know, they have recognized that we have a very serious problem and they put forth proposals, both in terms of spending -- federal government spending restraint and tax increases. I think we need both. They laid out a pretty credible path. I think they have done a pretty good job of laying the foundation for better discussions going forward. Obviously this will be a long arduous debate and I wouldn't anticipate any solutions coming to fruition quickly. I think this is good for a start.

BLITZER: But the Republicans at least most Republicans are never going to support what you just said yourself, tax increases. And most Democrats are not going to support cuts in social security and Medicare. And if you want to deal with the long-term debt, you got to take those kind of tough decisions.

ZANDI: You do. You have to do both. I think ultimately both Republicans and Democrats are going to recognize that and come together and make some hard decisions. And actually some of the proposals made today are quite creative. On the tax side, they propose limiting tax deductions. And by doing so, they're able to generate enough revenue to lower marginal tax rates for individuals and businesses. So I think they can gain support from Republicans by doing something like that. And on the spending side, they have done some pretty creative things about addressing the problems with social security, making it more means tested, making it so that if you really need to benefit, you get it. I think that will help satisfy some of the concerns of the Democrats. I think the details of this are quite creative and hopefully we'll get Democrats and Republicans coming together and solving this problem.

BLITZER: You may be a little bit more optimistic about this than I am but that's a subject for the debate. Let's talk about what the president said the other day, that there could be a new normal, that these big corporations, these big companies they simply get used to dealing with fewer workers and that this economic recovery is going to be a jobless economic recovery. That's what keeps them up at night worrying, worrying maybe the companies will do better but they're not going to go hire a lot more people.

ZANDI: It should keep him up at night. Even under the most optimistic of forecasts it will take years to get back the 8 million jobs we lost during the recession. It is going to take a good solid, four, five years to get unemployment back to where we would consider it to be close to full employment. I am optimistic in this regard as well that I think, you know, American businesses, if they survive what we went through, they must be doing something right. They either have a market niche or they're very cost competitive, their earnings are strong, balance sheets are strong. I think with a little bit of policy certainty and a little bit of time between the great recession, I think they'll get their groove back, we'll get more jobs. And we'll be headed in the right direction. But, you know, it is going to take under any circumstances going to take a number of years to get back to where we're all going to feel comfortable about the way things are going.

BLITZER: Members of the House and Senate are coming back to Washington next week. The old members, the losers, those who are retiring, they still have a few weeks of work left before the new Congress come in in January. One item they have to deal with, the Bush tax cuts that were passed in 2001 and 2003, they do nothing it goes back to the tax rates that existed, the higher tax rates during the Clinton administration. What do you think they're going to do? What should they do?

ZANDI: Well, I think the economic recovery is still very fragile. I don't think it can digest higher tax rates. I think it would be prudent to extend the tax cuts for at least one more year. And, in fact, I think that's what's going to happen. I think policymakers are coming to that conclusion. I think in 2013 when the economy is in a better place, I think it can digest higher rates of particularly upper income individuals but not in 2011. I don't think that would be prudent. I don't think they'll do it.

BLITZER: Will they continue the unemployment benefits for 2 million unemployed workers whose benefits are about to expire? It could cost about $34 billion over six months.

ZANDI: Yeah. There too, going back to the weak recovery, I wouldn't do anything to jeopardize that. So I think it would also be prudent to extend those emergency benefits. At least for another several months. Say, three months. And that would get us into next year. And hopefully by then we sort of seem some better job creation. At this point, you know, if we want to address our long-term fiscal problems, we have to have an economy that is growing. We can't go back into a recession. The risks are still very high that we might so we have to do everything to ensure that it won't happen. That means no tax increases in 2011. Let's give a little bit more to the unemployed workers so they don't pull back on their spending and we get this recovery moving forward.

BLITZER: Very quickly, you're a forecaster, now the unemployment rate is 9.6 percent. If it is anywhere close to that, in two years, when President Obama is up for re-election, he'll be in deep trouble. Where realistically will the unemployment rate be in two years?

ZANDI: I think it will be closer to 8.5 percent to 8 percent. We will be creating a lot more jobs by then, the economy will be headed in the right direction, still, 8.5 percent is a high rate of unemployment, but I don't think the economy is going to be in the face of incumbents, it will be to their back.

BLITZER: Mark Zandi, thank you very much.

ZANDI: Thank you.

BLITZER: There is a new crack in NASA's plans to send the shuttle "Discovery" on its final missions. We have the details.

It is being called the biggest change in cigarette packaging in a quarter century. The grim new warnings you will potentially be seeing very soon.

(COMMERCIAL BREAK)

BLITZER: Kate Bolduan is back with some other top stories in THE SITUATION ROOM right now, including a proposal to put dramatic warnings on cigarettes. What is this all about?

KATE BOLDUAN, CNN CORRESPONDENT: This is really interesting. We want to tell you about this one. Today the federal government unveiled what could be the biggest change in tobacco health warnings in a quarter century. Under the new rule, cigarette ads and packages would have to include nine large warning statements along with colored graphic images showing the negative consequences of smoking. The public may weigh in on the exact images used until January 9th. And the new labels will begin to appear on packages in two years.

Also, we'll soon know where the alleged 9/11 mastermind Khalid Shaikh Mohammed will be tried. Attorney General Eric Holder says that administration officials are close to making a decision on the trial location. Holder's initial plan to try him and four other 9/11 suspects in New York was put on hold after officials in New York and some members of Congress objected. They wanted the suspect to be tried in military court outside of New York.

The poor shuttle, can't get a break. NASA technicians have found two cracks on the shuttle "Discovery's" external fuel tank. Engineers are now examining the brakes to figure out the best way to repair them. A scheduled launch last week was postponed after crews discovered a gas leak. The earliest possible liftoff attempt is now set for the end of the month.

And a majority of people in New Jersey support Republican governor Chris Christy's decision to shelf the nation's largest infrastructure project, a second-rail tunnel between New York and New Jersey. This has gotten a lot of attention. A Quinnipiac University poll out today shows voters support the move by a 53 to 57 percent margin. A federal stimulus fund paid for part of it, but Christy says his state couldn't afford to pay $5 billion in the potential cost overruns. That governor, he's gotten a lot of attention recently.

BLITZER: He's a rising star in the Republican Party because he knows any government project and you know this too, there are always cost overruns. What starts off as a $5 billion deal turns out to be a $10 billion deal. You know that will happen. So he's doing what he's doing. Thank you very much.

Now that he's endured a midterm shellacking, his word, should President Obama follow the Bill Clinton playbook and move toward the middle to work with the Republican-dominated House of Representatives? You're about to hear what the Secretary of State Hillary Clinton says about that. That's coming up after the break.

And new pictures of supplies being loaded on to that cruise ship stranded off the coast of Mexico. Pictures you will see only here on CNN.

(COMMERCIAL BREAK)

BLITZER: Come January, President Obama will be dealing with a Republican dominated House of Representatives. So should he follow the playbook of former President Bill Clinton and move to the middle politically to try to get some things done? Here's what his wife, the secretary of state, Hillary Clinton, had to say about that.

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE: Can Obama pull a Clinton? Well, I think he can show clearly the leadership that the country expects from him and which he's providing.

UNIDENTIFIED FEMALE: Your husband moved toward the middle.

CLINTON: You know, I think that's -- that's sort of the conventional wisdom. But I don't think that Bill changed his principles or changed his objectives or reversed course in any way. I think what he did was take a very clear-eyed assessment of what was going to be possible with the Congress after the election, and moved on every front that he could to get things done and I think that's what you'll see President Obama doing.

(END VIDEO CLIP)

BLITZER: Let's discuss in our strategy session. Joining us the Democratic strategist and CNN political contributor James Carville and the Republican strategist and conservative commentator Rich Galen. You're a friend of Bill, a friend of Hillary, used to work for the former president. Do you think this current president will go to the Bill Clinton playbook and move towards the center?

JAMES CARVILLE, DEMOCRATIC STRATEGIST: Well, I think that the secretary of state said he didn't do that. And my recollection is they shut the government down and the triangulators said you ought to make a deal with the Republicans. And he held firm and the Republicans caved. He also vetoed welfare reform twice before he got the piece of legislation that he wanted. So the secretary disputes the move to the center as sort of narrative here and I think there is something to that, yes. You had the reality that he had to work with him to get things done. Of course, and he did get some things done and they were awarded him by impeaching him. But most people in Clinton land remember him standing fast on the government shutdown and not moving as some people urged him to do.

BLITZER: But a lot of us remember, I covered the white house in those days and you remember, James, his liberal base was really upset when he went forward with that welfare reform legislation. Even as revised, they weren't happy with him at all.

CARVILLE: Right, he vetoed it twice. And the part I was unhappy about is the legal immigrants were being denied benefits and he assured he would fix that and as you recall, he did fix that. That was the most egregious part of the legislation and it was later fixed. So I don't -- I understand that, and I think the secretary was quite clear that he stuck to these things. You know, Bill Clinton was never overly a liberal Democrat. He -- we ran for a spot that we ran in 1992 was on welfare reform but there was a certain type he was committed to and he ultimately got that kind of welfare reform.

BLITZER: Let me bring Rich in and ask is Barack Obama the president of the United States a so-called new Democrat, a middle of the road Democrat along the lines of Bill Clinton?

RICH GALEN, REPUBLICAN STRATEGIST: No absolutely not. And James is quite correct. I mean, president Clinton was a DLC, Democratic leadership counsel moderate Democrat from the start, he didn't veer very far from that at any point through. I was thinking when I was listening to Secretary Clinton, she in the olden days of the Watergate days we would have called that a non-denial denial. She was clever in the way she posed her answer both about President Clinton and President Obama. But here is the problem that I think President Obama has. He is not a middle of the road Democrat. He is a liberal elitist Democrat. He can't look at Reagan to see how he recovered from the 1982 drubbing that he got because Reagan depended on what we later called Reagan Democrats in the house and the Senate. There are no Obama Republicans. So I suspect that when they finish playing nice with each other that what the president and his people are going to do is they're going to return to the Harry Truman model back in '46 to '48 when Truman successfully by the way ran against a Republican "do nothing Congress" and Republicans lost 75 seats in the '48 blowout.

BLITZER: We'll soon find out if the president of the United States is a DLC so-called new Democrat or not. That will become obvious in the next several weeks and months. Guys, thanks very much.

Jack Cafferty is asking, two years later, do you miss -- do you ever miss President Bush? Jack will be back in a moment with your e-mail.

And we have an exclusive new look at that crippled cruise ship that has been stranded now for days.

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BLITZER: Here a look at some hot shots. On a foggy day in Germany, cyclists cross an overpass with the city of Dresden in the background. In China, a colorful underneath a bridge to celebrate the upcoming Asian games. On a cloudy day in Australia, Tiger Woods plays a tee shot before the Australian masters. And in East Berlin, Germany, a flock of geese waddle across a farm. Hot shots, pictures worth a thousand words.

Jack Cafferty is here with the Cafferty File. I know you like those hot shots Jack. That's why we do them.

JACK CAFFERTY, CNN CORRESPONDENT: When is the last time we did them two days in a row? It has been months.

BLITZER: You said yesterday you liked them.

CAFFERTY: Yes, I think we should do them everyday. They're terrific. Oh, the question, sorry. Two years later do, you ever miss President Bush?

Wilson, "As a Texan I should have some fondness for the former president and seems to be a good man, but not up to the task and surrounded himself with the worst team at the worst possible moment. Miss him? I can't afford to. Jack, you seem to want to have the Bush years to be nostalgic to fawn over the recent elections where we gave the keys back to the kids who wrecked the car in the firsts place."

Suzanne writes, "President Bush is a man who is comfortable with who he is, and he is a man with integrity. He was a president who had to deal with difficult circumstances and I always felt he had America's best interest at heart. You can see it in his eyes. I miss him as our president."

Ken in Maryland, "People in this country have incredibly short memories hence the return to Republican power last week. Bush was a disaster for this country. Do I miss him? Not for a second." Duane writes, "Yes, I miss him. He was straight forward and he didn't beat around the Bush, no pun intended. When he told the nation something, he said what he meant. There haven't been many presidents like him."

Scott writes, "Absolutely not. In fact, I'm quick to the draw when the ex-president appears on the television in order to change the channel to skip the last eight years."

Jerry in California, "Absolutely. Compared to what we've seen from Obama to date, there is no comparison. Bush was honest and forthright with the welfare of the people as goal number one. Obama is a political hack with people surrounding him who put politics ahead of governing the country for the good of its people."

T. in Michigan, "Every single day."

And Pete writes, "Sure I do and admit it Jack, you do too. The never- ending supply of material he provided kept you employed for eight years."

If you want to find more on the subject, you can find it on my blog CNN.com/CaffertyFile.

BLITZER: Candy Crowley is going to interview him Sunday night after the state of the union.

CAFFERTY: And Jeb Bush is going to be on there as well.

BLITZER: And Candy will do a terrific job as she always does.

CAFFERTY: She is terrific.

BLITZER: All right Jack. Stand by.

There is new fuel for the debate over how to cut the soaring federal deficit. We will talk more about the new recommendations of a presidential panel and whether they can actually work and even get off of the ground.

And is the secret to making tastier beef letting the cows booze it up?

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BLITZER: The popularity of U.S. beef is on the rise in South Korea. People like the taste and the price which is making South Korean ranchers nervous. CNN's Paula Hancocks reports.

(BEGIN VIDEOTAPE)

PAULA HANCOCKS, CNN CORRESPONDENT: It is lunchtime at this South Korean farm, and there is a definite whiff of beer in the air, but don't look at the owner, because it is the cattle who like to indulge three times a day -- breakfast, lunch, dinner all mixed with alcohol fermented feed. No expense spared to make these cows happy, which is a breed particular to South Korea. Farmer Young Kil Park says that the alcohol relaxes them making the meat more tender. He says that I have a wife and kids, but these cows are almost the same to me. They are like family. But all of this tender loving care is not just for the sake of the cow, the fact is that Hanoo beef here in Korea sells for three times the price of U.S. beef.

Competition between U.S. and Korean beef is fierce, literally. Farmers rioted two years ago when the South Korean government lifted a ban on U.S. beef imports after the meat was declared free of mad cow disease. The Korean barbeque using Korean beef is a source of national pride. But this restaurant in Seoul is going against the grain. One of the only ones selling just U.S. prime aged steak, and the Korean owner Ian Kim says that the business is booming.

IAN KIM, KOREAN RESTAURANT OWNER: Right now, we are doing more than we have, and if we are using the Korean, it is too much marbling, and it is perfect for the Korean barbeque, and great for the thick steak.

HANCOCKS: And many of the Korean customers agree with the U.S. choice.

UNIDENTIFIED MALE: It is sweet. It is easy to chew.

UNIDENTIFIED FEMALE: I like Korean barbeque, but I can't give up the steak.

UNIDENTIFIED MALE: Very nice.

HANCOCKS: Okay. I have tried Korean and now I am going the try the U.S. prime, and this has taken 30 minutes in order to cook, so I am looking forward to this. That is good. But you know what, if someone said to me, if you prefer Korean or American beef, there is no way I would step foot in that mine-field.

Paula Hancocks, CNN, enjoying my job an awful lot in Seoul, South Korea.

(END VIDEOTAPE)