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The Situation Room

Debt Crisis Escalates

Aired July 29, 2011 - 18:00   ET

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

ANNOUNCER: This is CNN breaking news.

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

Happening now, the breaking news. Delayed for 24 hours amid a struggle for support, the House Republican debt plan is now heading to a vote within the next few minutes. With America heading toward potential default, the last chance for a solution may lie in the Senate. I will speak with Republican Senator Rand Paul and Democratic Senator Sherrod Brown.

Tea Party Republicans are flexing their muscles in this debt ceiling standoff, but their high-pressure tactics could backfire if the American public start to see them as unbending extremists.

And President Obama has the bully pulpit but does he need to be more of a bully when dealing with Congress?

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

After a 24-hour delay, a frantic search for support and new language catering to conservatives, the House speaker, John Boehner, is finally taking his debt plan to the floor for a vote. Listen to this.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I stuck my neck out a mile to try to get an agreement with the president of the United States. I stuck my neck out a mile. Hey, I put revenues on the table in order to try to come to an agreement to avert us being where we are.

But a lot of people in this town can never say yes. A lot of people can never say yes. This House has acted. And it is time for the administration and time for our colleagues across the aisle, put something on the table. Tell us where you are!

(CHEERING AND APPLAUSE)

BOEHNER: And, yes, people can be critical of what we have done, but where are the other ideas? At this point in time the House is going to act and we're going to act again. But it is time for our colleagues across the aisle to tell us what they're for, tell us how we can end this crisis.

(END VIDEO CLIP)

BLITZER: President Obama warned today that the Republican bill in his words has no chance of becoming law and that the action may soon shift to the Senate. Time clearly is running out with America only days away from default. Stock markets plunged once again today here in the United States. Many Americans are getting very nervous.

Let's go straight to our congressional correspondent, Kate Bolduan. She's standing by with the latest.

We're getting ready for this final vote. We anticipate that the speaker has the 216 necessary for passage. Is that right, Kate?

KATE BOLDUAN, CNN CORRESPONDENT: We expect that. The leadership are not going so far as to predict certain victory right now. But I will tell you members that we have talked to say they say that they have the votes.

I'm standing -- where we are this evening is right off the House floor where we are watching the televisions and we're watching to hear when they approaching this vote. They are coming up very near to the time where they will start voting on this, Wolf, a vote that's become much more dramatic since yesterday evening when they had to abruptly pull the bill from the floor and then spend hours trying to twist arms and try to garner more support around House Speaker John Boehner's bill to raise the federal debt ceiling.

But the breakthrough really seemed to come early this morning in a closed door meeting of House Republicans. Republican members emerged and the no votes started becoming yeses and what changed was that the leaders changed the bill. They changed part of the bill having to do with the second debt ceiling extension that would happen early next year. That debt ceiling extension according to this new language is now contingent upon passage by Congress of a balanced budget amendment.

The original bill only called for a vote on the amendment and now it is calling for congressional passage. This comes as a result of all of the pushback they were receiving from House conservatives who were not happy saying the bill did not go far enough and did not have enough deficit reduction measures in it, and so this seemed, as you said earlier, to sweeten the pot enough to get enough members they think on board.

But we will be seeing very shortly as we're watching the clock tick down and we're watching for this vote to take place -- Wolf.

BLITZER: And they are voting now in a procedural vote that the Democrats have put forward. A vote that already is defeated. You can see 216 Republicans voting against this procedural motion. The Democrats will lose on this.

There's only three minutes left. And then, Kate, they will have the final vote on John Boehner's actual legislation that would have this two tiered proposal for raising the nation's debt ceiling and having a second vote early next year that would also include an amendment to the U.S. Constitution that would require the federal government to have a balanced budget, is that right?

BOLDUAN: That's absolutely right. And then, of course, the question for everyone at home is what's next? And the real reality here that people up here will have to deal with pretty soon is that what this -- Senator Majority Leader Harry Reid, he has said that this bill still is dead on arrival in the Senate.

Once this step is passed, then the real negotiations in the Senate and then between the Senate and the House are going to begin because they're going to have to find a way, Wolf, some way to thread the needle enough to find a package that can please the House, can please the Senate and can make it to the president's desk -- Wolf.

BLITZER: Two minutes left on this vote and then the real vote will come up on the substance of the legislation. Kate, we will check back with you.

Let's check in with Senator Rand Paul of Kentucky right now. He's a Republican. He's a Tea Party leader in the United States Senate.

So, assuming, Senator Paul, that this passes, Boehner's legislation passes the House right now -- we believe it will -- it will then come to the Senate, where Harry Reid, the majority leader, says it is dead on arrival. Then what do you do to avert disaster, economic disaster, come Tuesday?

SEN. RAND PAUL (R), KENTUCKY: Well, the first thing you ought to do is the president should take default off the table.

I have been saying for weeks now the president is acting irresponsibly by even insinuating that there could be default. We have plenty of tax revenue to pay the interest on the debt, to pay our Social Security checks and to pay for our soldiers' salaries. We just don't have enough to pay for all of government, but therein lies the problem. About 30, 40 percent of government is overdrawn. We're borrowing from China and that's really the discussion we're having.

BLITZER: But if the U.S. government can't pay its bills to government contractors, to vendors out there, whether from the Department of Education or the Department of Health and Human Services or the Department of Interior, that's going to send a signal to the credit rating agencies that the United States can't pay its bills. How worried are you that America's AAA rating would then go down?

PAUL: Well, I am worried about our AAA rating going down. And I think it goes down regardless of whether we raise the debt ceiling by August 2.

I think we are going to be downgraded because what we're proposing to do is not adequate. The proposals from Republicans and Democrats never balance. They both will add $7 trillion to $8 trillion. In fact, they will be raising the caps that were previously set in the House. We already have caps set in the House. This bill is going to raise the only -- the caps they are currently abiding by.

BLITZER: Would you vote for Boehner's legislation if in fact it were to come up for a vote in the Senate?

PAUL: It's gotten better because they have attached the balance budget amendment passing, but only with a second set of debt.

It's gotten closer to the original bill which we already passed with 234 votes, which included some Democrats, which was Cut, Cap and Balance. So I'm a little bit -- I don't quite understand why we're passing a second piece of legislation, because Harry Reid said he wouldn't touch Cut, Cap and Balance and he's not going to touch this one either. So I have kind of been wondering why all the fuss over this bill because it has as much chance of passing over here as Cut, Cap and Balance did.

BLITZER: Which was tabled as they say. I think it was a 53-47 vote along party lines. This one probably will be tabled as well. So what do you do if you are a leader in the United States Senate and you got this problem here?

PAUL: Well, I think ultimately they will raise the debt ceiling. I think the two sides will come together. The reason I won't support either of those plans though is because they will add too much debt to the country.

I think we should freeze spending -- or actually I'm for the penny plan, which would cut it by 1 percent. I think the American people realize that it would be reasonable to cut one penny out of every federal dollar that we spend. I see that as eminently reasonable. It balances the budget in seven to eight years.

And that's what we really need to have a debate over, but not some false plan that will not ever balance the budget.

BLITZER: You know, the Dow Jones, they suffered -- the Dow Jones this week here in the United States suffered its worst week, six consecutive losses in more than a year.

How worried are you that your constituents, your constituents in Kentucky, their 401(k)s, their life savings, they could lose a lot of money if interest rates go up and if the stock market continues to go down?

By the way, they just started voting on the legislation in the House of Representatives. We will keep it up on the screen for our viewers, 14 minutes left to go.

PAUL: Well, here's what I would say is that I am concerned about my savings, my family's savings, my constituents' savings, but you know why the Dow Jones went down this week?

Because the economy is in the pits. We're not growing. We're not creating jobs. It's an economic slump. It's an economic recession worse than any recession since the Great Depression and this president has done nothing but make it worse since he came into power. That's why the stock market is slumping. It has nothing to do with August 2. The debt ceiling will go up, and still we will be in this malaise that the president doesn't seem to have the capability of getting us out of.

BLITZER: But if America's AAA rating goes down, if the interest rates go up, that's going to be a further strain on this very fragile economic recovery, if we can call it a recovery.

PAUL: But the thing is, is the rating agencies are telling us they may downgrade it not because the debt ceiling is not going up, because the debt ceiling is going to go up. They still may downgrade us because they think it's inadequate what we're doing to fix the problem, that we're not showing any signs that we are going to get us out of this fiscal mess where we keep adding trillions of dollars of debt every year.

BLITZER: And we're looking at the vote right now. You see the Republicans now have 171 in favor, 174 opposed. Looking at the tally. They need 216 votes in order to get this done.

You know, as I look at this vote, Senator Paul, and I remember what your father, Senator Ron -- Congressman Ron Paul of Texas, has said over the years, did you ever expect to see something like this unfold in your first year in the United States Senate?

PAUL: No. And it has been an unusual vote, because in the past Congress has been a rubber stamp usually for borrowing.

And I think good points have been made and good history has been reiterated. You know that they raised it 18 times under Reagan. It shows that we have been fiscally irresponsible through Republican administration, Democrat administration. Our fiscal problems are bipartisan. But that's why we can't keep doing the same thing we have been doing, and that is just raising the debt ceiling. And that's why I was for drawing a line in the sand here.

And I think they are going to raise the debt ceiling, but my fear is that we are not going to get significant enough reform and that they may downgrade our debt even if we raise the debt ceiling.

BLITZER: One hundred and ninety votes right now in favor of Speaker Boehner's resolution language, the legislation, 186 opposed. Still time to go, 12 minutes, the magic number 216. We're watching it very, very closely, 216.

Senator Paul, thanks very much for joining us.

PAUL: Thank you, Wolf.

BLITZER: Let's bring in John King. He's up on Capitol Hill watching all of this unfold.

It's dramatic, 193, John, to 190 right now. I assume the speaker managed to get guarantees of 216 votes. Otherwise he would not have allowed this vote to even happen. JOHN KING, HOST, "JOHN KING, USA": We have to assume that, Wolf, as we watch the final numbers come on. The speaker was embarrassed on Wednesday. The vote was initially then. He postponed it.

He was publicly humiliated yesterday. You can't call it anything but. He was walking around the halls saying it's a zip-a-dee-doo-dah day. He had a public event to say the House will pass this measure and then he had to pull it from the floor just before midnight because he couldn't round up the votes. You have to assume the speaker triple-checked, not just double-checked, his math today as we watch this go forward.

Your conversation with Senator Paul is a fascinating snapshot of the big question. Where do we go next? Let's assume in just a moment or two the House will pass this plan. We already know the president says he would never sign it. We already know it is most unlikely to escape the Senate. In fact by tonight or tomorrow could be voted down in the Senate.

The question, Wolf, is after we go through the rituals, the House Republicans plant their flag right now, then the Senate Democrats plant their flag, when will the real negotiations begin? Many people will tell you they can see the broad outlines of a deal. It's somewhere in the numbers around the Reid plan, $2.4 trillion, $2.5 trillion. You would get the cuts. You would do it one time, not two, like the House Republicans do, and you could have cap in that plan, you could have triggers for additional cuts in that plan if say the savings the Democrats say would come from Iraq and Afghanistan don't materialize, and votes on a balanced budget amendment.

But what the Democrats refuse to do is tie an increase in the debt ceiling to passing the balanced budget amendment. You can see the rough outlines of a deal. The question is any deal would have to go back to the House. Would these conservatives, especially the Tea Party members that Speaker Boehner had to make these concessions to, what would they do if it comes back say Monday night just hours before the deadline? Would they vote for that?

BLITZER: Two hundred and one votes in favor of this legislation, right now 196. But take a look, John. As of now 12 Republicans have bolted from the leadership, from John Boehner, the speaker, and Eric Canto, the majority leader, Kevin McCarthy, the majority whip.

Right now 12 Republicans have voted against and still not there, 216. There is still time left, plenty of time left, the nine minutes plus for this vote to conclude. It's a fascinating development as you say.

By the way, we're told that John Boehner was walking around, mulling around, didn't seem overly concerned but it is still not a done deal yet.

Once this does pass, John, assuming it passes, gets the 216 votes necessary, it will go to the Senate as we know. The Senate could consider it or they could do what they did with the Cut, Cap and Balance legislation, simply table it. KING: We heard from have Speaker (sic) Reid's office he does have several options. He could just push this aside. He could bring up his own plan and not bring up the House plan.

But the Democrats are determined, Wolf, to make a point. Unless Senator Reid has a last-minute change of heart, his intention is to bring this to the floor and table it, essentially to vote to kill it. He can do that with 51 votes. And more than that, enough Democratic and the two independent senators signed a letter saying they would never vote for the House Republican plan.

Now, it's been tweaked a little bit since then but in their view it's been tweaked to make it even worse because it requires passing the balanced budget amendment before you get the second installment of the debt ceiling increase. There's no question that on this night Harry Reid has votes to kill this plan.

And we have heard from a number of Democrats that they want to do just that and do it pretty quickly to make the political point to the House of Representatives to say, fine, you passed your plan, guess what? It's dead. We killed it in the Senate. The president wouldn't sign it any way. Now it's time to have a real conversation about what to do.

All this playing out, Wolf, this is why the White House -- the White House doesn't like this plan. They don't like the revised plan even more. The White House would have liked this vote to take place on Wednesday or Thursday because eventually everyone will have to get in a room, see if they can figure out a compromise and the closer we get to Monday night and Tuesday morning, the more dicey everything gets.

BLITZER: Yes, 207 votes in favor of Boehner's legislation, 200 opposed.

Kate Bolduan is up on the Hill. We're watching closely.

A fascinating number here -- 19 Republicans still have not voted. Seven Democrats, Kate, have still not voted. So they still need up to 216. It's up to 208 right now. So they still have a little ways to go.

BOLDUAN: They still have a little ways to go. As we always say, you can never call the vote until the last vote is counted because members can switch and they can change their mind while time is still on the clock.

But throughout these discussions as we were heading towards this vote even yesterday, everyone knew that if the Democrats could pull off what they wanted, which was unanimous opposition to House Speaker John Boehner's bill, Boehner's margin of error was going to be thin, something around he could only lose about a couple dozen votes if he was going to be able to do this with only Republican support. We have 216 seems to be the magic number. Of course, that's the -- the way it works in the House as you well know, Wolf, it's the majority of all members present and voting. They need to be in the chamber and voting and it's the majority of people who are in the chamber. We're obviously watching that.

But I will tell you, a good moment just now House Speaker John Boehner walked past. He has a longstanding policy of not talking in the hallways to reporters. But he just walked past me and I yelled, Speaker Boehner, are you confident? And all he gave me is a thumbs up. So you can read into that what you will.

BLITZER: Well, he still needs six votes and there's 15 Republicans who have still not voted. I suspect some of them are waiting to see if they get over 216 so then they can vote no and not necessarily undermine the speaker of the House. Some of them want to wait until the very last moment. This is a very, very difficult vote for some of those -- especially those freshman Tea Party activists who don't necessarily like this vote but may in the end have no choice but to help the speaker get over 216.

Gloria, they are getting close. They need five more. I suspect they will get it. But there's, what, just under six minutes left to go, five minutes plus before the clock winds down.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yes. I think, Wolf, you're right. There are going to be these holdouts who just want to -- who have probably told the speaker we will be there if you need us, absolutely, but we would rather vote against it.

You're just seeing the people kind of hanging back waiting to see if the speaker needs them. I don't think the speaker would have given Kate a thumbs up unless he really knew that he had those votes in his pocket. It's always good to go into a vote like this knowing that you have got a few extra votes to pad with and I think that's probably what's going on here.

But it does give you an indication, Wolf, of how difficult a job Speaker Boehner had. This was not easy for him. It was not like he had things to give to these people. Here's an earmark here, an earmark there. He had to talk them into doing this so that Republicans could go on the record and say, yes, we voted for something that would lead to a lifting of the debt ceiling and we are responsible.

And I think that was probably the argument that he had to use over and over and over again -- we had to go on the record as House Republicans.

BLITZER: It's 213. They need 216. They need three more -- 11 Republicans still have not voted. Five Democrats interestingly have still not voted either. So far no Democrats have voted in favor of Speaker Boehner's legislation to raise the nation's debt ceiling.

Five -- I suspect some of them, Gloria, may be very conservative Democrats. There aren't a whole lot of them left in the United States House of Representatives right now.

(CROSSTALK)

BORGER: There are about five. (LAUGHTER)

BLITZER: It's interesting they don't -- they haven't voted yet either -- 214. They need two more.

But I want to caution even if they reach that 216 number if there's time remaining on the clock -- and you can see the time remaining right now, just over four minutes -- they can still change their mind. They are allowed to change their mind.

Jessica Yellin is over at the White House, our chief White House correspondent.

They must be watching this closely at the White House, Jessica, even though the president has said this is really a waste of time because it won't go anywhere in the Senate, he would veto it.

(CROSSTALK)

BLITZER: By the way, Jessica, let me hold off. There it is, 218. So they now have more than 216. So unless, unless someone decides in the next three-plus minutes to change their mind, this has passed. The speaker has managed to get his legislation through the House of Representatives, legislation that will now go to the United States Senate, where the Senate majority leader, Harry Reid, says it's not going anywhere so the negotiations will resume.

Now that, Jessica, this has passed the House of Representatives, you can see 218 votes right there, I assume the president of the United States will get more actively directly involved in talking to the Democratic and Republican leadership. He only has got a few days left before the deadline occurs.

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: The White House has made it clear that he could well call leadership here to the White House, but they have also made it clear that they think this is essentially the Hill's problem in a sense, that they have to solve this issue because they have tried and tried again to broker some kind of compromise and time after time it's broken down.

The White House has also made it clear that at some point this is just an obstacle. The Boehner bill has been an obstacle to progress and the president essentially said as much today. This isn't going to get majority of any of the Senate, so let's get past it and move on.

And in a way I suspect they will find this a relief. It's over. They didn't want it. But it's done. And they will be relieved that it can be past them and move on. That's my word, not theirs, but they can move on to the Senate. The hope now will focus on the Senate. Can a deal be brokered there, Wolf?

BLITZER: Yes. It's a critical moment.,

John King, it's a huge relief I'm sure for the speaker of the House, John Boehner, but to a certain degree the White House, the Democrats, they need a strong speaker right now who can deliver enough Republican votes in the House of Representatives if they are eventually over the next three days or so there's going to be a final deal that allows the nation's debt ceiling to go up.

KING: And, Wolf, you look at this dramatic moment, yes, the speaker will get victory tonight. The question will be at what price. He had to change the bill in a way that makes it even more unacceptable to Democrats in the Senate, even more unacceptable to the Democratic president and the speaker by having to twice delay the vote has been weakened a bit.

Can he rebound? We will see in the days ahead. But he's weakened a bit. Look at public opinion polling. Largely because of the state of the economy, not this fight, but largely because of the state of the economy the president's standing is down as well. At a time when the country needs leadership and the two most important people here are the president of the United States and the speaker of the House, both of them are a bit weakened, at a time the country needs two strong leaders to find a way to get through this difficult and in some ways intractable differences.

A lot of people at home probably wonder why does Washington have to work this way. I was just in communication with a top Senate aide saying anything going on behind the curtain, any conversations everyone says they see the broad outlines of how this could or should turn out, so why aren't they talking about it now even as these votes play out?

I was told, no, that first the House will vote and then Leader Reid in the Senate will put the Democratic strategy in place. Only after some votes in the Senate will perhaps the vice president come up and perhaps the president get involved, perhaps the D's start talking to R's about what might be possible before Monday night.

A lot of people at home would think if they know these two plans are unacceptable, why don't they start working on that now? Well, Wolf, we're caught up in the politics and the rituals of Washington right now and the clock is ticking toward that August deadline.

BLITZER: Yes, 218 that is where it stands right now, 30 seconds or so left remaining in this vote. We will hear the official announcement once the time runs out.

It goes to the Senate. There will be votes in the Senate as you point out. In the end, though, John, if there's going to be a deal, I suspect moderate Democrats will have to align with moderate Republicans and get it passed.

KING: But the speaker of the House has to bring it to the floor. That's one of the problems. Yes, if you negotiated this deal in the center, you could get it done probably tomorrow if not a week or two ago.

The problem is the speaker of the House and the majority leader in the Senate have power about what comes to the floor. Now, are they going to stop something to come to the floor? Probably not. But are they going to want to be in the negotiations? Yes. I think they're gaveling the bill passed here.

BLITZER: Hold on. Hold on. Hold on.

UNIDENTIFIED MALE: ... laid upon the table. The unfinished business is the question on suspending rules and passing...

BLITZER: All right, so there it is. It's official. It passes. The House passes John Boehner's Republican plan to raise the nation's debt ceiling and an historic moment right now.

But as we say -- and let me bring Gloria Borger back into this conversation -- the Democrats in the Senate including Harry Reid, they say never mind. It's not going anywhere.

BORGER: They say they are going to table it. They could possibly use this as a vehicle to put their own measure on and get that done a little sooner.

But I think, as John was pointing out, there's a bit of a Kabuki sort of going on here, because each house has to kind of work its will. And you have the leaders who really want to get down to negotiations, but they couldn't negotiate while these bills were pending.

If you are Senator McConnell, Republican leader of the Senate, you are not going to be really negotiating behind closed doors when you are supporting John Boehner's bill. So you have to let that kind of work its way.

So I was told by somebody close to McConnell that there have been talks, but no negotiations. Now, in Washington that makes a difference, because they really couldn't negotiate until this got done. So, as Jessica was saying earlier, the White House is probably happy to get this over with and have it move to the Senate and then be able to speed up some actions.

BLITZER: Yes, they are doing some other procedural votes right now. But the major vote has occurred. It has passed the House of Representatives.

Kate Bolduan is our congressional correspondent.

Kate, you have got some of the color, if you will, of some of the drama as it unfolded on the floor of the House.

BOLDUAN: Yes, from my colleagues that were in the House chamber kind of coming in and out and we actually will probably see maybe some members walking past us as they are leaving the chamber.

My colleague Ted Barrett tells me that members were watching with high interest the vote board that's kind of above on the wall and it kind of keeps the tally of where the votes stand and you can see kind of as things tick off and as things change and that a hush kind of came over the crowd, if you will. But it came over the chamber when they passed that threshold of 216. And as we now know, that held and it passed and they were able to squeak it by with 218 votes, I believe, is where it fell. High interest obviously in the vote, as you can see, many people walking out now.

And, of course, the question lends to what's next and all eyes are now turning on the other side of the Capitol behind me to the Senate -- Wolf.

BLITZER: Yes, You will be over there pretty soon, I'm sure. Kate, stand by.

I want to go to the Senate. Democratic Senator Sherrod Brown of Ohio is joining us live right now.

Senator, what's going to happen? Now that the House of Representatives has passed this legislation, it's your turn next. What happens?

SEN. SHERROD BROWN (D), OHIO: Well, most people realize the House's action was a bit of a waste of time, because it's a political statement to get their members on board. They were finally able after three days to do it.

The Senate will vote to reject that. And then the Senate -- Mitch McConnell, the Republican leader, and Harry Reid, the Democratic leader, will work out something bipartisan that believes in -- that will make sure we don't default, something that our government, our country has never done through presidents of both parties with much more cooperation than this, but we will do that.

We will deal with the budget deficit. We will begin paying down -- or we will work obviously to move towards, more towards a balanced budget. And then we can go back to really focusing on jobs, which is what we ought to be doing.

People in my state are hurting. And they can't believe this kind of game-playing in the House of Representatives. They want to see us come together and then really put our efforts into job creation, making sure we enforce trade agreements, do infrastructure, banks, help small businesses, all of those things.

BLITZER: But you see the Republicans in the House. They want a second vote next year, early next year on a balanced budget amendment if the debt ceiling is going to be further raised to allow this to go forward.

Is there any way you could accept a balanced budget amendment to the Constitution, so that the country never has to have deficit spending again?

BROWN: I supported a balanced budget amendment a dozen years ago when I was a member of the House. In those days, we actually got to a balance budget because we did the hard work, not just the "sending out news release" kind of work.

I could support a balanced budget if it really was shared sacrifice. But they want to set it up another way. But put that aside. I'm willing to -- if they were just asking, to keep us out of default, to vote on a balanced budget amendment, I think that all of us in the House in both parties says let's -- or in the Senate -- say let's do that.

But we will get to an agreement in the Senate with the Reid and McConnell in both parties. We will do what we need to do. We need to get -- there's just -- when I look at what the House did, they want to go through this again in six months. I don't know a businessperson from Toledo to Dayton to Youngstown to Akron, Ohio, that think that it makes any sense for our country to go through this again in six months.

It just freezes -- it freezes any kind of activity or investment or job creation when you do this. It injects more uncertainty into an already uncertain economy. And going through this again in six months would be just such an irresponsible thing to do.

And I don't under -- I mean, I don't think senators -- I think senators understand that. I'm not sure why John Boehner's troops in the House think that it makes sense to do this again in six months.

BLITZER: In terms of the Senate's action, it's now Friday night, what happens tomorrow, Sunday, Monday, how quickly does this go through the process in order to avert an economic disaster on Tuesday?

BROWN: We're working late into the night tonight, late into the night tomorrow night. We'll be here Sunday and I think the timetable is such with the way Senate rules work that unless we get unanimous support or what's called unanimous consent, Wolf, to send it to the House Monday morning.

We would like to do it earlier. I think the House then will get a lot of pressure from Main Street, from their business community, saying you don't want to go into default. You're not going to vote to go into default, right?

You don't want to put us through this in six months. We're doing good deficit reduction and we're doing this in the right way in the Senate. I think the House ultimately under pressure and under appeal to patriotism that this is the right thing for the United States of America not to put this blot on our international reputation.

And hurt the value of the dollar and reputation of our country and cause interest rates to go up. I can't imagine in the end that for an ideological check in the box that Republicans in the House of Representatives will do that. I think the Senate will do this right. I think the House will follow.

BLITZER: You're confident, Senator Brown, that Harry Reid, the Democratic leader, and Mitch McConnell, the Republican leader, they will both forge something. Both of them will support that will pass the Senate?

BROWN: Yes, I'm confident because for a lot of reasons. But the most recent reason I ran in the hallway earlier and ran into a Republican senator who's been here for a while from the south. I don't want to mention his name because it was a private conversation.

A southern senator whom I like and whom I've worked with on other issues and he says we're this close between what McConnell and Reid want and what he and I want and I think he's pretty representative of large swath of Republicans as I am a large swath of Democrats. Main stream senators that will get this done right because I mean, it really so clearly is the best thing for our country.

BLITZER: And if it does pass the Senate and goes to the House, it will pass the House if a large number of moderate Republicans and moderate Democrats support it in order to get the 216 votes they need. Do you think that combination will work in the House of Representatives?

BROWN: Well, I would add it in a slightly different way. I would say probably 160, 170 Democrats will vote for it. I think a small number of Democrats will vote no. So they only need a third of the Republicans.

And I think Speaker Boehner could bring a third of his caucus together to join overwhelming numbers of Democrats joining both parties in the Senate because I think that's the mainstream view that people certainly in my party and enough Republicans reflect that will do the right thing come Monday by noon or so.

BLITZER: Let me leave you, Senator Brown, with some of the frustration that the American people are feeling right now. I'm sure your office is getting swamped with calls because people are angry all over the country that's gotten to this level.

We have an I-Report from Marie Cox of North Canton, Ohio, an area you probably know. Listen to Marie.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Let's stop the bickering. Let's stop the show of disrespect between the different parties as well as the parties and the president and get down to business. Let's get out of this mess that we're in regardless of who got us here and how it happened.

(END VIDEO CLIP)

BLITZER: I'm sure you're getting a lot of frustration --

BROWN: Not only do I hear her. I read a couple of letters on the floor today. One from Northern Ohio and one from Northeast Ohio, same kind of letters saying they want a shared kind of sacrifice here.

We should do what the Senate is going to do and putting this together bipartisanly. I'm sorry I didn't hear Irene's last name. I would call her by that if I did. She's right and I think that's what we're going to do in the next 48 hours.

BLITZER: Marie Cox, North Canton, Ohio. She's a constituent, Senator. BROWN: Thank you.

BLITZER: Thanks very much, Senator Sherrod Brown of Ohio, offering a hopeful assessment that in the next few days the House and the Senate can avert economic disaster.

We're watching breaking news in the House. The process will move to the Senate. Much more of our coverage right after this.

(COMMERCIAL BREAK)

BLITZER: The House of Representatives has now voted to raise the nation's debt ceiling, the proposal legislation introduced by House Speaker John Boehner. The vote, 218 in favor. They needed 216, 210 against. No Democrats in the House of Representatives voted for the legislation.

Twenty two Republicans voted against the legislation and voted against the speaker. Hovering over all of this is the possibility that the first time in almost a century the United States' AAA credit rating could be damaged if no deal is struck.

Let's go to CNN's Mary Snow. She's working this part of the story for us. A new recommendation from one of those credit rating agencies, Moody's. Explain to our viewers, Mary, what Moody's is saying about America's AAA rating.

MARY SNOW, CNN CORRESPONDENT: Wolf, Moody's came out late today saying that it expects to affirm the AAA rating. However, this means that likely there will be no immediate downgrade. But it is also warning that it expects to put the U.S. on a negative outlook.

So it's not ruling out a downgrade saying that it is still a possibility in the next year and in this report that it issued it made it clear that it really wasn't sold on either plan put forth by Republicans or Democrats saying that there had been better options earlier this year, but that they were not adopted.

So that is why it came out with this report and is also saying that it still maintains this negative outlook so it's not completely ruling out a downgrade, but no immediate downgrade likely. This is one of three credit rating agencies.

And just to give you a little bit of perspective about what some of the other ones -- investors I talked to or traders I talked to are most concerned about S&P because Standard & Poor's had indicated that it was looking for cuts of $4 trillion.

That is still yet to be seen whether or not S&P would downgrade, but apparently right now Moody's is expecting to affirm that AAA credit rating, Wolf.

BLITZER: The key is right now to raise the nation's debt ceiling by Tuesday and now it's going to go to the Senate and then back to the House. We'll see if they can work out some sort of compromise. Mary, thanks very much. Good explanation. Let's bring back Gloria Borger. She's watching this part of the story.

You heard Senator Sherrod Brown, Democrat of Ohio, Gloria, suggest that, you know what, he's relatively optimistic that this deal can now be worked out not that House has done its job. He thinks cooler heads will prevail in the Senate and eventually there can be bipartisan support of the House.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Well, I think at least now people can start talking to each other about what can be achieved. It's very clear as you know when this goes back to the House. The speaker is probably going to lose half of his caucus any way.

But as Sherrod Brown said, he probably only needs a third of it because the Democrats will supply most of the votes to raise the debt ceiling so it gives the speaker a little bit of negotiating room.

What the speaker has done with this vote though is he sat down a marker and he said this is what my Republicans wanted and if you even want a third of my Republicans or a half of my Republicans, you're going to have to give me a chunk of what we voted for in the House.

So they believe it gives them a better negotiating position and they are right with the Senate because the House has voted.

BLITZER: All right, Gloria, stand by because we're going to continue the breaking news coverage. We're also taking a closer look at the Tea Party Movement in the House of Representatives.

How does it emerge from this current debate? Our Brian Todd has been investigating. Stand by. The breaking news coverage continues right after this.

(COMMERCIAL BREAK)

BLITZER: The breaking news, the House of Representatives has passed legislation introduced by John Boehner, the speaker that would raise the nation's debt ceiling, a two-pronged process, two tiered process including another vote early next year on a balanced budget amendment.

The legislation passed by a vote of 218 to 210. No Democrats voted for it. Twenty two Republicans voted against it. They need 216. They got 218. The Tea Party Republicans have been flexing their muscles in this debt ceiling standoff, but their strong arm tactics some would call it could backfire if the American public comes to view them as unrelenting extremists. Brian Todd has been taking a closer look at this phenomenon. What have you learned?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, as you know, the Tea Party's influence in this House vote. How much they've swayed John Boehner, a huge story this week in the debt ceiling debate.

They've been unified and uncompromising. An effective performance no doubt, but some believe this could have been a dangerous political play for them. (BEGIN VIDEOTAPE)

TODD (voice-over): You've seen it on John Boehner's face when he emerged from the meetings with his party, the strained look of the speaker who has been pushed and pressured into a debt ceiling bill that's left little room for compromise.

Who's done the pressuring? A relatively small, but very powerful group of Republicans, the Tea Party.

(on camera): How does the Tea Party shaped this debt debate in Washington?

DARRELL WEST, BROOKINGS INSTITUTION: The Tea Party has forced Speaker Boehner more to the right that involves deeper spending cuts and also support for the balance budget amendment. So they have had disproportionate impact on the entire congressional debate.

TODD (voice-over): Extraordinary considering the portion of the House they make up.

(on camera): The Tea Party caucus in the House has 60 members. That's a quarter of the total number of Republicans in the House. But when John Boehner had to delay the vote on his bill to get more votes, the Tea Partiers made up more than half of the Republicans who were prepared to vote no.

(voice-over): It's a continuation of the momentum triggered last fall when the Tea Party captured political lightning in a bottle and helped elect dozens of new congressman. They came in on a promise to shock Washington into spending less and cutting more.

Their unwillingness to compromise has changed the way the government handles its debt. But now even Senator John McCain, a budget hawk himself, says they risk overreaching if they never compromise.

SENATOR JOHN MCCAIN (R), ARIZONA: To hold out and say we won't agree to raising the debt limit until we pass a balanced budget amendment to the constitution. It's unfair. It's bizarro.

TODD: Are Tea Party lawmakers playing with fire?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: If they take us into default, the Tea Party is going to pay a huge price.

TODD: It may already be paying that price. In CNN ORC polling since January of last year, public disapproval for the Tea Party has been steadily growing from 26 percent to 47 percent now.

Analysts Darrel West say that may not hurt Tea Party congressman themselves in their next elections because many come from safe districts but --

WEST: The Republican presidential nominee may end up suffering the consequences because Obama certainly is going to tie that GOP nominee to the more extreme elements within the Republican Party in Congress.

(END VIDEOTAPE)

TODD: But many Tea Party lawmakers seem to relish the fight saying voters sent them to Washington on a mission and they're more worried about cutting spending than winning a popularity contest, Wolf.

BLITZER: Despite this decrease in popularity in the national polls, some analysts are suggesting, you know what? They could even do better. They could win some more seats next November.

TODD: They could. I have spoken to Stu Rothenberg, political analyst that tracks these races very closely. He says there are at least three House seats now held by Democrats, they're in Arkansas, Oklahoma and Indiana where those Democrats aren't going to run for re- election next year.

Those are areas of the country where the Tea Party has had support. They could place candidates in there and probably will and may win them. So they may gain House seats and gaining power.

BLITZER: Stu Rothenberg, he knows this. He's been studying it for a long time. Brian, thanks very, very much. This programming note for our viewers, they're going to be working all weekend, Saturday, Sunday, here in Washington to make sure they get some sort of deal.

They're going to try to do it. We're going to be covering it every step of the way. I'll be back Saturday night 6:00 p.m. Eastern. Tomorrow night we'll have a live "THE SITUATION ROOM" right here in Washington.

Sunday night, by the way, from 9:00 p.m. Eastern until 11:00 p.m. Eastern two-hour special report countdown to debt crisis. I'll be co- anchoring that as well. We'll be working hard all weekend for you.

We'll take a quick break and go back to the White House and get reaction from the president of the United States and what are he and his top aides thinking when we come back.

(COMMERCIAL BREAK)

BLITZER: You are looking at live pictures of the United States Senate. You see Harry Reid bottom left hand corner of your screen. We expect -- he is going to be speaking soon now laying out what happens now.

Now that the House of Representatives has passed its legislation approving an increase in the debt ceiling, a legislation supported by the House Speaker John Boehner he's going to explain the process of what happens in the Senate.

Once he starts speaking, we will bring you to you live. In the meantime, let's go to the White House. Right now Brianna Keilar, our White House correspondent is standing by. Any reaction yet from the White House officials, Brianna, to what happened in the House?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: You know, no, Wolf. So far, we are awaiting that information. Right now, I think the White House is staying pretty mum on this. They are kind of watching certainly the developments because even with this vote in the House of Representatives, the waiting game continues to see what happens in the Senate.

One of the things we have been looking for, Wolf, from the White House is information about what happens. It seemed that the clock is ticking so much. What happens, who gets paid, who doesn't get paid in the case of a default, should there be one, even though the White House insists that Congress will ultimately increase the debt ceiling.

And so we wanted to break it down for our viewers like this. First off, you have holders of U.S. debt, this would include China, of course, and interest would need to be paid to these debt holders.

You also have recipients of government benefits and there are a lot of them, 80 million receiving checks in a month, Social Security recipients, physicians that receive Medicare payments, active duty military, veterans, disabled Americans, a lot of people.

And then there are also government contractors, companies, vendors who do business with the U.S., Wolf, who would need to be paid. One of the ones that we've heard, White House officials refer to would be those who provide services for troops overseas, Wolf.

BLITZER: Yes, we are taking a close look at the Senate floor as you speak right now. We see Harry Reid at the bottom left hand corner of the screen. We think he is going to be speaking fairly soon explaining what's going on.

Once he does speak, Brianna, we will bring it to the viewers. You see him speaking right now with John Kerry, the senator from Massachusetts. We'll take a quick break. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: The United States Senate, the floor of the Senate, Harry Reid, the majority leader expected to speak. Once he does, outlines of what happens next to the Senate now that the House has acted. We will bring it to you. Stand by for that.

Here's a question, is President Obama tough enough to get the debt ceiling raised? It's the question some people are asking right now. He certainly does have the bully pulpit, but does he need to be more of a bully when dealing with this Congress?

Jim Acosta has been looking closely into this part of the story. What are you finding out?

JIM ACOSTA, CNN CORRESPONDENT: Other presidents have been bigger bullies. Wolf. Much as they made this week of the challenge to Speaker John Boehner's leadership, but Mr. Obama's credibility could also be on the line as this could be one of those defining moments that make or break a presidency.

(BEGIN VIDEOTAPE)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: So please to all the American people, keep it up.

ACOSTA (voice-over): President Obama started his day with another call to Americans to crash the phones in Congress.

PRESIDENT OBAMA: Let your members of Congress know. Make a phone call, send an e-mail, tweet, keep the pressure on Washington and we can get past this.

ACOSTA: It's a sign that as the clock ticks down on the debt ceiling deadline. The president is at least publicly staying on the sidelines, leaving the fight to leaders in Congress. Jim Kouzes who counsels CEOs on their leadership styles says the executive in the White House needs to step it up.

JIM KOUZES, SANTA CLARA UNIVERSITY: He needs to demonstrate that, yes, he is involve in this and he is willing to roll up his sleeves and get engaged.

RONALD REAGAN, FORMER U.S. PRESIDENT: I have only one thing to say to tax increases, go ahead, make my day.

ACOSTA: There have been no make my day moments, no Linden Johnson arm twisting.

LARRY SABATO, UVA CENTER FOR POLITICS: To Barack Obama, a threat is calling on Americans to e-mail their congressmen. That doesn't affect congressmen. That isn't the hammer.

REPRESENTATIVE DEBBIE WASSERMAN SCHULTZ, DEMOCRATIC NATIONAL COMMITTEE CHAIR: There is leader for every season and president Obama is the right leader for the season that we are in.

ACOSTA: In a season of hyper-partisanship, DNC chairwoman Debbie Wasserman Schultz says cooler heads like that of the president must prevail. The side she adds it's hard to lead when the other side won't meet you half way.

SCHULT: They are playing chicken with the economy. It's dramatically irresponsible, Jim.

ACOSTA (on camera): Is this kind of a blood sport that they are playing? They are trying to bring down the president and this is their way of doing it? Is that what you think?

SCHULTZ: They have made it clear that their number one goal is to bring down this president.

ACOSTA (voice-over): A Gallup survey finds only 41 percent of Americans approve of the president's handling of the crisis. Better than the marks for Speaker John Boehner and Senate Majority Leader Harry Reid. But the president could shoulder more of the blame if the U.S. fails to raise the debt ceiling. One major bank Credit Suisse warns the stock market could drop by 30 percent if the U.S. would have default on its debt obligations.

A crash that would be many times worse than the frightening day on Wall Street in 2008 after Congress initially rejected the financial bailout plan.

(END VIDEOTAPE)

ACOSTA: As for the president's Twitter challenge to Congress, it may have backfired. The president's re-election campaign Twitter account have been sending out tweets all day targeting GOP members of Congress and according to the web site, that account has lost thousands of followers today, Wolf.

BLITZER: They will probably pick up some followers as a result of the White House or at least @barackobama sending out the names, the Twitter names of a lot of these Republicans that he wants people to start tweeting.

ACOSTA: A lot of people feel like they have been spammed all day long. They're have been GOP lawmakers crying foul over this and as a result as of just a little while ago, on the last half hour, we checked, it's about 30,000 followers of the president's re-election campaign Twitter account has lost today.

BLITZER: Really? All right, very good report. Thanks very much. I just want to remind our viewers, Harry Reid, the Senate majority leader. We expect him to be making a statement on what happens next in this process now that the House of Representative has acted.

Of course, we will have full coverage throughout this evening, obviously throughout the entire weekend. I'll be back 6:00 p.m. Eastern tomorrow night for a special live SITUATION ROOM, Sunday night, 9:00 p.m. Eastern, we'll be live as well.

I'm Wolf Blitzer in THE SITUATION ROOM. Stay with CNN for continuing coverage of this crisis. For our international viewers, "WORLD REPORT" is next. For North Americans viewers, "JOHN KING USA" starts right now.