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The Situation Room

Debt Disaster Looming; Rupert Murdoch Scandal Expands

Aired July 18, 2011 - 18:00   ET

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

WOLF BLITZER, CNN ANCHOR: And to our viewers, you're in THE SITUATION ROOM.

Happening now: a wave of high-level resignations as the hacking scandal engulfing Rupert Murdoch's media empire spreads to Britain's police force and a major American newspaper, now an unexplained death.

Also, Republicans rally behind a new plan to avoid a U.S. debt disaster. Details of what they are demanding and why the president and the Democrats are dismissing it. Two lawmakers are here to debate cut, cap and balance this hour.

And the home invasion robber who chose the wrong victim, a congressman who fought back.

We want to welcome to our viewers in the United States and around the world. Breaking news, political headlines and Jeanne Moos all straight ahead. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

A deadly twist to the News Corporation hacking scandal following a wave of high-profile resignations, British media now reporting that the reporter who blew the whistle on phone hacking at the "News of the World" has been found dead, with police calling his demise unexplained, but not suspicious.

It's a shocking development and the scandal of stunning proportions that's claiming careers at the highest levels, including that of most -- some of the most powerful women in British media.

CNN's Brian Todd is tracking these developments for us.

Brian, update our viewers on what the latest is.

BRIAN TODD, CNN CORRESPONDENT: Wolf, right now all eyes are on the British Parliament, and its hearings tomorrow featuring Rebekah Brooks as a new ex-Murdoch executive. A spokesman for Brooks tells us she will simply answer their questions the best she can, but the focus now is on what she may or may not reveal about the Murdoch empire and who could be next to fall.

Arrested, questioned for nine hours and then released, Rebekah Brooks could play a key role in the investigations into the phone hacking scandal. For weeks, she was the firewall between the public's furry and Rupert Murdoch's family. Now that she's an ex-Murdoch employee who faces more scrutiny from police and Parliament... (on camera): Can Rebekah Brooks, will she bring someone else down in News Corporation?

SARAH SMITH, ITN REPORTER: It's difficult to see how Rebekah Brooks has any interest in blaming anybody else in News Corporation. She will fight very hard to clear her own name and make sure that she's not held responsible for knowing about any of the phone hacking that went on.

TODD (voice-over): ITN correspondent Sarah Smith says that is because Brooks still values her ties to the Murdochs or may have her eye on a future editing job elsewhere. Brooks' spokesman says she will answer investigators' questions to the best of her ability. He wouldn't comment on reports that she has got several million dollars coming in severance pay.

In any case, the list of casualties in this scandal appears to be inching closer to News Corporation's powerful ruling family.

(on camera): From the outside, top police officials Paul Stephenson and John Yates have resigned over their handling of the scandal. There is Andy Coulson, out years ago as "News of the World" editor, out as Prime Minister David Cameron's spokesman this year, arrested earlier this month.

Les Hinton, chief exec of Dow Jones and publisher of "The Wall Street Journal," is gone. "News of the World" has closed down. Now that Rebekah Brooks has resigned and been arrested, many observers say James Murdoch, youngest son of Rupert Murdoch, chairman and CEO of News Corp.'s divisions in Europe and Asia, is on the firing line.

(voice-over): It may come down to where else James Murdoch's fingerprints can be found.

CHARLES BECKETT, LONDON SCHOOL OF ECONOMICS: Well, James Murdoch has already made it very clear that he paid off a huge amount of money to Gordon Taylor, who was a trade unionist who had his phone hacked, and James Murdoch has made it clear now that he regards that as an error on his part and he much regrets it.

TODD: If it's found that James Murdoch knew more about the hacking than what's been revealed so far, Smith says shareholders, board members may force his father's hand.

SMITH: If they were to really demand that James no longer be the heir apparent, that he changed the way the company is structured to stop James from taking over, he'd have to listen to them.

(END VIDEOTAPE)

TODD: There are other reports that independent board members of News Corporation are going even further than that, questioning whether a change of leadership is needed, in other words, maybe replacing James Murdoch altogether. I spoke to a member of the board this afternoon. He called those reports -- quote -- "total crap" -- Wolf.

BLITZER: What about the British prime minister, David Cameron? Is he in any jeopardy now?

TODD: When this scandal really blew up a couple of weeks ago, most observers would say, no, he's not, but some observers are now saying that this is very embarrassing to him. One of them said it's now lapping at the door of 10 Downing Street. It's embarrassing because of his ties to that editor Andy Coulson and others. It's now not out of the question that he could suffer at some other level. Whether it takes him down or not, that is probably doubtful, but he could suffer politically here.

BLITZER: He had brought Andy Coulson into his government as director of communications.

TODD: That's right.

BLITZER: All right, thanks very much, Brian Todd, for that.

Meanwhile, the scandal has grown closer to Rupert Murdoch himself as Brian reported with the arrest of his deputy and protege Rebekah Brooks.

CNN's Atika Shubert has more on her meteoric rise and stunning fall.

(BEGIN VIDEOTAPE)

ATIKA SHUBERT, CNN CORRESPONDENT (voice-over): In the cozy world of British politics and media, Rebekah Brooks was at its very center. She wined and dined the rich and powerful on behalf of her boss and mentor, Rupert Murdoch.

(on camera): From ambitious journalist to arguably the most powerful woman in British news media, now arrested by British police investigating allegations of phone hacking and police payments by Murdoch newspapers. Just how did Rebekah Brooks get to this point?

Brooks first came to News International as a secretary at "News of the World." She quickly developed a reputation for her tenacity as a journalist, reportedly once disguising herself as a cleaning lady to scoop a competitor. Described as both ruthless and charming, she was soon the youngest editor of "The News of the World," and shortly after that, "The Sun" -- both owned by Murdoch's News International.

She spearheaded a controversial campaign to, quote, "name and shame" alleged pedophiles, publishing their names and addresses in the paper.

As the editor of "The Sun," Brooks testified to parliament that her paper had paid police officers for information. And it was under her editorship that "The News of the World" allegedly paid a private investigator to hack into the voicemail messages of Milly Dowler, the 13-year-old girl murdered in Britain whose investigation and court case made front page headlines.

Those allegations did not come to light until almost a decade later, after Brooks had scaled the corporate ladder to become chief executive of News International, a position she resigned last week. Brooks has denied having any knowledge of any phone hacking by her staff.

It was Brooks who cemented a relationship with Prime Minister David Cameron, inviting him to lunches at her country home with the head of News Corporation Rupert Murdoch's son, James.

There have been several arrests in the phone hacking scandal so far, but Rebekah Brooks is the highest profile yet, and the one closest to Rupert Murdoch himself.

Atika Shubert, CNN, London.

(END VIDEOTAPE)

BLITZER: And Rebekah Brooks is only 43 years old.

More on the story later, but other news.

The U.S. general who is now in charge in Afghanistan is warning his troops there will be tough days ahead in the war. And a brazen assassination of President Hamid Karzai's trusted mentor is making that crystal clear.

Let's go to our Pentagon correspondent Chris Lawrence. He is following developments.

What else is going on there, Chris?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, an unofficial motto of the Marine Corps is to do more with less, and General John Allen is the first U.S. Marine to run the war in Afghanistan or Iraq. So if this latest killing is any indication at all, he's going to have to live up to that motto.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): General John Allen has no illusions about assuming command of the war in Afghanistan.

LT. GEN. JOHN ALLEN, INTERNATIONAL SECURITY ASSISTANCE FORCES COMMANDER-DESIGNATE: There will be tough days ahead.

LAWRENCE: Look at day one. As General David Petraeus was handing over control to Allen, Afghan officials were preparing to bury Jan Mohammad Khan, a mentor to president Hamid Karzai. Two men climbed his outside walls Sunday negotiate and assassinated Khan in his own home.

JEFFREY DRESSLER, INSTITUTE FOR THE STUDY OF WAR: I think it demonstrates, whether the Taliban is responsible or not, that there is a sustained campaign to go after those closest to President Karzai and try to both break him and to affect the security situation.

LAWRENCE: Last month, Taliban fighters stormed the Intercontinental Hotel in Kabul, and were not defeated until coalition helicopters flew in to take them out. Then a trusted guard assassinated the president's half-brother Ahmed Wali Karzai.

Analyst Jeffrey Dressler says it proves both Kabul and Karzai are not immune and could be Taliban attempts to improve their negotiating power with the Afghan government.

DRESSLER: Creating a security vacuum that they can fill and thus at the end of the day securing better deals for themselves.

LAWRENCE: Allen will have far less resources to improve security than his predecessor. When President Obama announced his decision to withdraw one-third of American troops by next fall, a senior administration official said that was one of the options General Petraeus offered, but apparently that's not true, as General Allen admitted to Senator Lindsey Graham.

ALLEN: It is a more aggressive option than that which was presented.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: My question is, was that a option?

ALLEN: It wasn't.

DRESSLER: So General Allen is going to have to figure out how to have a successful fighting season next year, even though he won't have as many resources as he does this year.

(END VIDEOTAPE)

LAWRENCE: Some of the military officials I spoke with say Allen has never been as public as Petraeus, but one of the reasons he was picked for the job is, they believe he has the communications skills to muster support for the war back home among ordinary Americans.

And with the U.S. now spending $10 billion every month on the war, that ability could be just as important as his strategic skills on the battlefield -- Wolf.

BLITZER: All right, thanks very much, Chris Lawrence at the Pentagon.

The debate is raging behind closed doors over at the White House over the looming U.S. debt disaster. Is the latest Republican proposal the answer? We will have more on that. That's coming up this hour.

Plus, the 77-year-old congressman who wrestled a home invasion robber.

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

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty is here with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, on August 3, a scant couple of weeks away, the U.S. government is scheduled to pay out $23 billion in Social Security benefits. But if a deal isn't reached in Congress to raise the debt ceiling, there's a chance those checks won't go out. That's because only $12 billion in revenue is expected to come in that day, and that would leave the Treasury a cool $11 billion short, according to Politico. com.

Without an agreement on the debt ceiling, the federal government's line of credit will run out, and so will its options to write those checks. And when you include other payments due to be paid for that same day, well, the federal government will be $20 billion short. Wonderful.

That's just one scenario, of course. Talking heads from Washington to Wall Street have weighed in with all kinds of predictions on what will happen if a deal isn't reached, everything from a financial apocalypse to nothing.

The administration has used words like "calamitous," "catastrophic" and "Armageddon." A handful of vocal Republicans say the administration is exaggerating the situation. They claim not a whole lot would happen if an agreement isn't reached by August 2.

By and large, most economists say if the U.S. defaults on some of its loans, interest rates will likely shoot up, the dollar would plummet, stock markets around the world would react negatively, and our very fragile economic recovery would suffer a mighty blow. Suffice it to say there doesn't appear to be a lot of upside to Uncle Sam defaulting on his obligations.

Here's the question. What is your greatest fear if the U.S. fails to raise the debt ceiling?

Go to CNN.com/caffertyfile and post a comment on my blog.

I think we can safely say, Wolf, that the federal government is now dysfunctional. This has been coming on for months, and now we're days away and nothing has been done.

BLITZER: Yes, it's really so annoying.

CAFFERTY: It's pathetic.

BLITZER: But it's a lot more than annoying, I must say, because it's really dangerous.

CAFFERTY: Well, it's outrageous.

BLITZER: And people are going to suffer, average people, poor people, middle class, rich. Everyone is going to suffer. It's going to be a disaster. They have got to reach some...

(CROSSTALK)

CAFFERTY: Well, these people in Washington are playing with the future of this country. They are not entitled to do that.

BLITZER: Yes. Yes. All right, Jack. Thank you.

Let's dig deeper right now on this debate. Our chief political analyst, Gloria Borger, is here.

Gloria, the Republican presidential candidates, and what, there's eight or 10 of them already officially in the race, are they having an impact on this debate?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: It's interesting, Wolf. A week ago I would have said to you they are completely irrelevant, because you had candidates like Michele Bachmann and Tim Pawlenty out there saying do not raise the debt ceiling under any circumstances, while you had congressional leaders here in the Republican Party trying to work on some kind of a deal.

But now we have this cut, cap and balance vote that's going to occur in the House tomorrow, and that is something that Republican presidential candidates have been talking about, so now you have the campaign trail and the Congress meshing. Listen to Michele Bachmann.

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: The principles that are found in the cut, cap and balance pledge will put us in the right direction for fundamentally restructuring the way that Washington, D.C., is currently spending our tax dollars.

(END VIDEO CLIP)

BORGER: By the way, Wolf, Michele Bachmann was against this pledge before she was for it. She also made a point today of saying it doesn't go far enough for her. She's signing it anyway because she wants it to repeal Obamacare, but at least right now the candidates and the congressional leaders and the House Republicans seem to be on the same page.

BLITZER: Does the American public believe, as the president says, there will be Armageddon if there's no deal?

BORGER: No, no. It's interesting. The American public is pretty divided on this. Take a look at this new Pew poll released today.

Voters were asked whether it's essential to raise the debt limit by August 2. Yes, 40 percent. No, 39 percent. So that's pretty conflicted, but when you look inside the numbers, Wolf, you see that Republicans say it will not be a major problem, most Republicans. Most Democrats say it will be a major problem. ]

But to me the issue is, why haven't our politicians communicated more about what could happen, as Jack Cafferty was just talking about, if we don't raise the debt ceiling? One of the reasons I was told by someone inside the administration is you don't want to spook the markets. Well, look, the market is down 95 points today. And remember what happened when the president said you might not get your Social Security checks. He was accused of fear-mongering. BLITZER: The point is though that the president at that news conference last week said he wouldn't accept any short-term stopgap measure, 30 days, 60 days, 90 days, not even 180 days.

BORGER: Right.

BLITZER: He said he wouldn't go along with that, but if he's forced to do so, he may have to reconsider.

BORGER: Yes. What we hear is the sound of concrete cracking, I think Ronald Reagan said. Yes, I think the short-term deal, in fact, may be the best the president can get. Maybe they can get something in three stages that can get them through the election.

The deal they are working on in the Senate could give everybody a little bit of what they want.

BLITZER: The McConnell deal.

BORGER: The McConnell-Reid deal. The president could get a debt ceiling that could go through the election.

The onus will be on him, but he can still get it, giving the markets and business some certainty. The Republicans get to vote against the debt ceiling, still knowing that it's going to pass, and the country gets the debt ceiling and the certainty that that provides. Big question, Wolf, is, would this compromise measure include $1 trillion or more worth of spending cuts? And will the House Republicans vote for it? Don't know.

BLITZER: And will some Democrats vote for it, too? We will see.

BORGER: Yes.

If they don't see Republicans voting for it, they are not going to vote for it

BLITZER: We will see what they do. All right, Gloria.

And congratulations.

BORGER: Thank you.

BLITZER: Just want to alert our viewers Gloria today was nominated for an Emmy for an excellent interview you did last year.

BORGER: Thank you.

BLITZER: Tell our viewers what it was for.

BORGER: It was with Ted Olson David Boies, who are both the attorneys fighting Proposition 8. You remember them, Wolf, from Bush v. Gore.

BLITZER: Of course we do. BORGER: They were on different sides, Republican and Democrat, and now they are on the same side. Maybe folks in Washington can take a little bit of a lesson from that.

BLITZER: The Emmy-nominated Gloria Borger here in THE SITUATION ROOM.

(LAUGHTER)

BLITZER: Congratulations.

BORGER: Thank you, Wolf.

BLITZER: We hope you win.

BORGER: Thank you.

BLITZER: Are Republicans risking it all with voters in the next year's presidential election by digging in their heels in the fight over America's debt limit? Stand by.

And members of the band Cheap Trick, they are lucky to be alive after their stage collapses.

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

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: It's the new catchphrase in the ongoing debt crisis debate. What is cut, cap and balance, and could it be the solution to avoiding a financial disaster?

And a 77-year-old man targeted for robbery, but he decides he's not going to be a victim. He also just happens to be a United States congressman.

(COMMERCIAL BREAK)

BLITZER: If you haven't heard the phrase cut, cap and balance before, you're going to be hearing a lot about it in the coming days. It's the latest proposal for trying to fix the U.S. debt crisis as the clock ticks, ticks, ticks towards a possible, possible government default.

Our chief political correspondent, Candy Crowley, shows us what it's all about.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): Buzzword alert.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: Cut, cap and balance gets us out of debt over a long period of time? CROWLEY: Cut a substantial amount of spending to bring down the roughly $1.5 trillion deficit expected this year. Cap federal spending at 18 percent of gross domestic product. It's at 24 percent of GDP now. Pass a balanced budget amendment to the Constitution that includes spending caps and makes it difficult to raise federal taxes.

Cut, cap and balance, CCB, is all the rage in some Republican quarters.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: The answer for the country is for the president to agree to cut federal spending, to cap federal spending, and to put in place a balanced budget amendment.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: The House will be in order.

CROWLEY: This week the Republican-controlled House will likely pass a cut, cap and balance bill as a prerequisite to raising the debt ceiling. There are mighty objections from Democrats on the Hill and in the White House.

JACOB LEW, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: What these amendments do is not just say you have to balance the budget, but it puts in place spending limitations that would force us to cut Social Security and Medicare more deeply than even the House budget resolution did.

CROWLEY: What the House will almost surely approve the Senate almost surely will not, leaving the debt ceiling issue precisely where it's been for months, unresolved.

(on camera) If you cannot get the Senate to pass what the House surely will this week, you will allow the U.S. to go in default, or you will go to a Plan B?

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: I'm going to focus on Plan A. That to me is the only plan that will work. It's the real deal, not a big deal.

CROWLEY (voice-over): The most probable deal still in the works would cut spending by $1.5 trillion over ten years and let the president raise the debt ceiling through the 2012 election. Congress could stop him, but only in the unlikely event of a veto-proof majority vote in both houses. Everybody gets off the hook, and it avoids economic chaos.

SEN. JON KYL (R), ARIZONA: At the end of the day Republican leaders have made it clear that we will not be the ones who put the government in default.

CROWLEY: It's uncertain whether Republican rank and file will follow their leaders. The idea comes from Senate GOP leader Mitch McConnell, who has been trashed by conservatives ever since.

REP. JIM JORDAN (R), OHIO: We're in big trouble, so let's have that national debate, not some copout like the McConnell plan. CROWLEY: Sources say the last-ditch McDonnell plan could be on the Senate floor this week.

(on camera) But a Republican source believes before the McConnell bill the Senate will take up cut, cap and balance because, even if CCB doesn't pass, it has endless possibilities as a CBS, campaign bumper sticker.

Candy Crowley, CNN, Washington.

(END VIDEOTAPE)

BLITZER: All right. Let's get some more on this whole debt stand-off. Joining us, Democratic Congresswoman Jan Schakowsky of Illinois. She's deeply involved in this issue.

Are you going to vote on this legislation that's called cut, cap and balance when it comes up tomorrow? Are you going to be in favor of it, or are you going to vote against it?

REP. JAN SCHAKOWSKY (D), ILLINOIS: Well, this is a completely reckless and dangerous proposal. Of course I'm going to vote no. The Republicans are trying to hold us all hostage, and offering completely unacceptable choices, irrational choices, to say, "Either we're going to let the whole, full faith and credit of the United States go down. We're not going to pay our bills," with disastrous consequences, which they ought to know are real. This is not rumor or theory. It's arithmetic, that maybe the Social Security checks won't go out and the deficit will certainly be increased.

Or -- or you pass this -- this plan that is certain to force cuts in Medicare and Social Security without touching a hair on the head of any billionaire.

BLITZER: What's wrong with a balanced budget amendment to the Constitution, because clearly Democrats and Republicans, they have failed over these many years to balance the federal budget?

SCHAKOWSKY: Well, first of all, that's just not true. It's only a little over ten years ago that President Clinton handed George Bush not only a balanced budget but a surplus in the -- in the budget, and he managed to -- to squander that, and so memories are very, very short.

Democrats have never rejected sitting down at the table to deal with these hard issues and to be fiscally responsible. Having a balanced budget amendment, which as they propose would limit spending, would force absolutely draconian cuts and never let us invest in the kinds of things that will dig us out of a recession, the kinds of investments we need to make in education and infrastructure. It puts our whole economy in further jeopardy.

BLITZER: A lot of polls over these many months, they say the American public though, Congressman [SIC], would like to see a balanced budget amendment, which most of the governors have to deal with, a lot of local governments have to deal with. An NBC/"Wall Street Journal" poll was out earlier in the year. Do you favor or oppose a balanced budget amendment to the U.S. Constitution? Sixty- one percent favor, 28 percent oppose. Two percent "depends," 9 percent unsure. It looks like you're in the minority on that question.

SCHAKOWSKY: Well, actually, it depends how you phrase the question. If you say should we have a balanced budget amendment that is going to force cuts in Social Security or Medicare or programs that help the middle class, I want to tell you that I feel that the big crisis that we face right now is not so much the long-term debt which, of course, we have to deal with. I was on the president's commission on fiscal responsibility.

But we have a jobs crisis right now. We have a disappearance of the middle class crisis right now, and federal spending actually is the thing that can help dig us out right now. We need to make some investments in the economy and not devastate the middle class and our seniors with the cuts that they propose.

BLITZER: Are you with the president, Congresswoman, when he says in terms of a big deal, he would be willing to cut Medicare, Social Security, the entitlement programs in certain ways that are -- would be politically difficult for a Democrat? Are you with him on that?

SCHAKOWSKY: I'm not in favor of those cuts, but what the president has said that nothing is agreed to until everything is agreed to. And he has asked for revenues.

And as I said, they will not cut one red cent from the wealthiest Americans who are paying the lowest tax rates in the last half century but want to put the retirement and the well-being of our seniors and persons with disabilities and middle class Americans on the line.

And so, you know, they're not putting what they need to do on the table. This isn't a real discussion. This is about politics. It's very reckless. It is very dangerous, and it's totally irrational.

BLITZER: The president did say last week, as part of a big deal he'd be open to a major change in Social Security and Medicare, I should say, means testing. In other words, richer elderly people would have to pay more than poor or middle class elderly. Are you with him on that?

SCHAKOWSKY: I am not, but I think that what he has really said is that those kinds of conversations are on the table.

I actually think that Medicare and Social Security need to be on a separate table all their own to talk about how we make sure we have long-term solvency without harming the benefits of older Americans, who rely on these programs more than they ever did because private pensions are disappearing, health-care costs are going up, and -- and their savings are going down. So, no, that's not acceptable, I don't think, to me.

But I proposed an alternative plan to the Simpson-Bowles where we could achieve a balanced budget without harming the middle class, taking it out on the backs of these people who have sacrificed. There is no equal sacrifice here. They are protecting the wealthiest Americans, the millionaires and the billionaires and large corporations like G.E...

BLITZER: All right.

SCHAKOWSKY: ... that aren't paying any taxes and getting rebates.

BLITZER: Congresswoman Schakowsky, thanks very much for coming in.

SCHAKOWSKY: Thank you so much, Wolf.

BLITZER: I should point out we invited Congressman Jason Chaffetz of Utah, a Republican, to join us, as well. Unfortunately, he's stuck in a committee hearing, couldn't join us. We'll have him here in THE SITUATION ROOM down the room.

An armed intruder invades a congressman's home, but he's no match for 77-year-old Representative Leonard Boswell, who wrestled him to the ground.

And this looks like an ordinary doll. Is it? You're going to find out what this doll does and why there's some controversy.

(COMMERCIAL BREAK)

BLITZER: There's lots of buzz across the country today about a home invasion robbery in Iowa. But it's not because it happened in one of the safest communities in the country. It's because the victims were a congressman and his family. CNN's Lisa Sylvester is back. She's got the details.

Lisa, what happened?

LISA SYLVESTER, CNN CORRESPONDENT: Wolf, we are learning some new details here. The congressman actually had a broken rib from this fight, and the suspect was wearing a black ski mask.

The family was preparing to go to bed for the evening when the intruder broke in and grabbed the congressman's daughter and pointed a gun at her. Take a listen to what happened next.

(BEGIN VIDEOTAPE)

SYLVESTER (voice-over): Seventy-seven-year-old Leonard Boswell is an eight-term Democratic congressman. He's had his share of skirmishes on the political field.

But Saturday night he was with his family at his rural vacation home in Southern Iowa when an intruder broke in, physically assaulted the congressman's daughter, pointed a gun at her, and demanded money. Boswell heard his daughter's screams, and the lawmaker, who we should tell you has served two terms in Vietnam, didn't hesitate. The congressman told reporters, quote, "There was an assailant with my daughter on the floor, hand on her throat and a gun to her face."

UNIDENTIFIED MALE: Entered the walkway of their house and immediately just went for the guy's gun and was wrestling with him. And I think at one point they were both on the ground.

SYLVESTER: Boswell suffered a broken rib in the altercation. Boswell's 22-year-old grandson, hearing the fight, grabbed a shotgun from another room and pointed it had at the man, who ran off into the fields near the house.

UNIDENTIFIED MALE: This has made national headlines, and, you know, they have friends from all over the country. They have been fielding calls from -- all day from friends and family from around the country, just making sure that they're all right.

SYLVESTER: Robbery appears to be the motive in a county that doesn't see a lot of crime. On a 100 index scale, the risk of a robbery in the state of Iowa is a 24. In Decatur County, it's an 8.

The FBI is helping state and local authorities with the investigation as they comb the farmhouse for clues.

UNIDENTIFIED MALE: You can't, obviously, enter a residence without leaving some evidence behind.

SYLVESTER: Right now authorities believe it to be a random crime, and the suspect may not have even known the house belonged to a member of Congress.

(END VIDEOTAPE)

SYLVESTER: And the suspect has not been caught, but it is a federal offense to assault a member of Congress.

By the way, Wolf, we should say that was his chief of staff who was speaking in that piece, Sylvester Hafferty (ph).

BLITZER: He's heroic, that congressman. You've got to give him a lot of credit.

SYLVESTER: Yes. This was a major scuffle. It was a major fight. We're now learning the details.

BLITZER: He's got broken ribs.

SYLVESTER: Yes. He has a broken rib. I mean, there were bruises. There were scrapes, but it was a pretty -- it sounded like it was a pretty dramatic thing that happened.

BLITZER: Well, I'm glad that he and his family are OK, and I hope they find this guy very, very soon. Thank you.

A mass execution carried out by the Taliban, and all of it recorded on video. Stand by.

And a baseball legend hospitalized. The latest on Nolan Ryan's condition.

Plus, an amazing story of survival by an iPhone.

(COMMERCIAL BREAK)

BLITZER: Let's get right back to Jack for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Question this hour is a subject that's been going on for weeks now. "What's your greatest fear if the United States fails to raise the debt ceiling?"

Paul writes "Higher interest rates, higher debt, higher unemployment, lower tax revenue, lower consumer demand for pretty much everything. It's a big chain of dominoes, where you're free to pick the one that frightens you the most, but at the core of it for me would be the run on job losses again from the new recession that will be born."

Kelly writes, "Severe poverty breeds crime, disease, suffering and insurgency. We know this. Hey big business. If we don't get paid, you don't get paid. Capish?"

B.J. in Illinois writes, "I'm disabled. My Social Security check is the only thing that I live on. If I don't get my check, I'll have nothing to live on. I imagine this applies to thousands of people."

Carol in Massachusetts: "As a former international banker, I'm not scared at all. It's a global economy. We all need each other. Rating agencies have become meaningless. Life will go on. What scares me is how dug in the Tea Party is in trying to eliminate government. But don't take away their Medicare."

Jim in Colorado writes, "Jack, losing my house, potentially my job and seeing years of hard work building my life flushed down the toilet by a bunch of selfish ideologues who are not representing the majority of citizens in this country. This nation has lost the principle of 'we, the people,' something that our elected officials should be reminded of come election time."

Dave in Tennessee writes, "No fear, Jack. Think back to when you refused to raise the curfew for your daughters. They huffed and puffed for a while, but they all turned out just fine." Indeed they did.

Paul in Florida writes, "My fear? Streets filled with formerly wealthy privileged people, zombies without a clue how to survive lost in a poverty-stricken world. Suddenly they are unwelcome members of a class of Americans whose existence they previously refused to acknowledge."

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

BLITZER: I know the answer to this, Jack, but should members of Congress get their paychecks if the U.S. government has to stop some of those other paychecks?

CAFFERTY: I -- I'm of a mind to suggest that members of Congress shouldn't get paid, period, based on the performance that we've seen from them so far.

BLITZER: I knew the answer to that question. Jack Cafferty, thank you.

CAFFERTY: OK.

BLITZER: All right. We're following another twist in the News Corporation hacking scandal. The Twitter feed of one of the company's newspapers has now itself apparently been hacked by a rather notorious group. Brian Todd is working this story for us.

Brian, what's going on here?

BRIAN TODD, CNN CORRESPONDENT: Wolf, throughout the spring and summer we've followed this group. It's called Lulzsec. It looks like they might have turned the tables on Rupert Murdoch's group, Lulzsec now posting on Twitter a feed saying, quote, "We have joy, we have fun, we have messed up Murdoch's 'Sun.'" And it appears that they have. We're unable to reach Lulzsec right now. We've never really been able to reach them in the course of reporting on them.

But if you go to "The Sun's" Web page -- it's www.thesun.co.uk -- it switches over to the Lulzsec Twitter account. It switches right over to that. You see that message that you see there plus other tweets from them and from followers of them just saying how funny they think this is.

Now Lulzsec, you know, as I mentioned, we've been reporting on them all spring and summer for some notorious hacking incidents. This is a group that has claimed responsibility for hacking into the CIA's Web site, for the U.S. Senate's Web site and hacking into PBS's Web site, among other things. It's a group of people. Nobody knows who they are or how many are in their group. But they have now turned the tables on Rupert Murdoch's "Sun" Web site at least for now. Usually, these things last a few hours, maybe, and then they get back to normal. But it's reeking havoc right now, Wolf.

BLITZER: Another dramatic twist in a story that's had a lot of twists. Thanks very much.

From Pakistan, meanwhile, a very graphic video released by Taliban fighters, showing at least 16 men executed. It reveals a lot about the bloody fight against the Taliban right now. CNN's Reza Sayah is in Islamabad.

(BEGIN VIDEOTAPE)

REZA SAYAH, CNN CORRESPONDENT (voice-over): Wolf, this is a graphic look at how brutal and ugly Pakistan's war against the Taliban can get. We warn you, this is exclusive video. Some of you may find this very disturbing. If you'd like to turn away, this is a good time to do so. Let's walk you through this video. It was released by the Taliban, posted online. It shows at least 14 men lined up, all of them wearing traditional Pakistani garb, all of them with their hands tied behind their back.

In front of them, you see three armed men. We assume these are Taliban fighters. One of them is scolding the men who are lined up, accusing them of being enemies of Islam, saying that these executions are about to take place in revenge for six children who were allegedly executed by Pakistani security forces in the Swat Valley, a former Pakistani Taliban stronghold. Now, the military here vehemently denies those executions took place.

After the scolding is over, that's when you see and hear the gunfire. During the gunfire, you see these men topple to the ground, some of them moaning and writhing in pain. What we're not going to show you is what happens next. That's when at least one, maybe two of these gunmen walk up to these victims and shoot them again, sometimes in a head, in an apparent effort to make sure that they're dead.

The military here believes these men who were killed were police officers kidnapped during a cross-border attack on June 1. On that day, militants crossed over from Afghanistan and attacked a village on Pakistani soil. The military believes the gunmen were members of the Pakistani Taliban in the Swat Valley again, a Pakistani Taliban stronghold in 2009 until the military operation here chased them away. We cannot independently verify the identity of the gunmen or the victims.

The military here says this is clearly an effort by the Taliban to intimidate security forces and local villages, a tactic they say will not work -- Wolf.

BLITZER: Reza Sayah, reporting from Islamabad, thank you.

High-level U.S. and Libyan official meet in secret in Tunisia. We're looking at a first step to getting Gadhafi out of power. Much more coming up for our North American viewers at the top of the hour on "JOHN KING USA."

And a child's doll unleashes a storm of controversy.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now.

Lisa, what else is going on?

SYLVESTER: Hi, there, Wolf.

Well, baseball great Nolan Ryan is undergoing medical tests today. The president and chief executive of the Texas Rangers was hospitalized in Houston yesterday. Doctors think he may be having a recurrence of a heart condition. The Rangers say Ryan likely will be released in a few days. During his 27 years of the major leagues, the hall of famer threw a record 5,714 strikeouts.

And how about this one? A sky diver's iPhone 4 cracked when it was just knocked off a bathroom shelf. So what do you think happened when he accidentally dropped it 13,500 feet in mid-air? Broken, right?

Well, the owner parachuted onto a roof to retrieve it, and it was shattered. But a friend watching from the ground two stories below called and what do you know, Wolf? It rang.

BLITZER: Pretty amazing.

All right. Thanks very much, Lisa Sylvester. See you tomorrow.

A new doll is about to hit store shelves. Here's CNN's Jeanne Moos.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Used to be dolls just wet their pants.

UNIDENTIFIED FEMALE: With Ideal's Betsy Wetsy.

MOOS: Or cried

UNIDENTIFIED FEMALE: Why are you crying?

MOOS: But now...

(on camera) ... the breast milk baby.

UNIDENTIFIED FEMALE: Oh, wow. Uh-huh.

UNIDENTIFIED FEMALE: I don't believe it.

MOOS (voice-over): Breast feeding is believing. The child has to wear a special halter.

(on camera) There are two strategically located magnetic sensors in the halter top. When the sensor in the baby detects the sensor in the top, the baby makes a sucking sound.

(voice-over) If this sounds vaguely familiar, maybe you heard about it when the dolls first appeared online, sold by a Spanish company. Well, now the dolls are coming to a store near you.

UNIDENTIFIED MALE: We're hopefully going to have breast feeding babies all over the states really soon.

MOOS: A prospect some may not be ready for, judging from their faces.

(on camera) A little girl puts on a halter top that has these little flowers. And they have sensors in them.

UNIDENTIFIED FEMALE: Oh.

MOOS: The doll maker says it's just teaching young kids nurturing skills.

UNIDENTIFIED MALE: There's absolutely nothing sexual about breast feeding. It's good for mommies. It's good for her babies. It's good for society.

MOOS (on camera): I am not putting this thing on. OK. It's on. But I am not nursing that baby doll. Don't look at me that way.

(voice-over) The women we talked to looked askance at the idea.

UNIDENTIFIED FEMALE: I don't think I'm crazy about this doll.

UNIDENTIFIED FEMALE: She seems to be feeling that physically.

UNIDENTIFIED FEMALE: I think it's ridiculous. Come on, let them be little girls.

UNIDENTIFIED MALE: There's actual breast milk that comes out of this?

MOOS (on camera): No, there's nothing comes out.

(voice-over) But the doll's intended demographic called it cool.

UNIDENTIFIED FEMALE: A cool doll.

MOOS (on camera): You would like to have this?

UNIDENTIFIED FEMALE: Yes.

MOOS: What do you think?

UNIDENTIFIED MALE: No.

MOOS (voice-over): The doll does require juice.

(on camera) Sad news when you need batteries to breast feed.

(voice-over) Is AA a battery or a cup size?

(SFX: BABY CRYING)

MOOS: The doll maker says even God supports the breast milk doll, what with all those depictions of Mary breast feeding a baby Jesus.

But this mother was unconvinced.

UNIDENTIFIED FEMALE: You know, girls are very delicate at that age. And they're dealing with the breast just budding and all that. I don't think that they should have to think about breast milk. MOOS: "What natural part of life will they simulate next?" wondered someone on Facebook.

By the way, the breast milk baby's price is being reduced to $69.99, batteries not included.

(on camera) I'll burp you but I won't nurse you.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: That's it for me. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM. For our international viewers, "WORLD REPORT" is next. In North America, "JOHN KING USA" starts right now.