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The Situation Room

No New Jobs; Tropical Storm Targets Gulf Coast

Aired September 02, 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 you are in THE SITUATION ROOM.

Happening now: no new labor on this Labor Day weekend. A bleak unemployment report is casting a shadow over President Obama's coming jobs initiative.

Also, a warning to Americans around the world about al Qaeda just over a week from the 10th anniversary of 9/11.

And warnings to millions of Americans at home as well. Tropical Storm Lee is aiming at the Gulf Coast. States of emergency already in effect.

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.

This Labor Day holiday weekend here in the United States is kicking off with a dismal labor report that shows hiring in the United States ground to a halt in August. New government numbers reveal the U.S. economy basically added no -- repeat -- no jobs last month, leaving unemployment at a dismal 9.1 percent.

And the news comes less than a week before President Obama unveils his new plan to try to put Americans back to work.

Our White House chief correspondent, Jessica Yellin, is joining us now with more on the numbers.

The numbers pretty bleak right now, Jessica. What's the reaction from the White House?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Well, as you know, Wolf, this weekend the president is heading off to Camp David and he will be putting finishing touches on his jobs proposals and working on his joint session speech.

Now, White House officials say the unemployment numbers will not change his jobs plan, but it certainly steps up the already intense pressure for the president to deliver in his speech next week.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): President Obama heads off to Camp David under a cloud of more bad economic news. In a blog post, a White House economist calls the latest unemployment figures unacceptably high and this administration official says Americans are suffering because of Washington politics.

HILDA SOLIS, U.S. SECRETARY OF LABOR: As soon as a campaign season starts and sets in, that there seems to be a different tone. It's unfortunate because we are hurting millions and millions of families.

YELLIN: The numbers are fodder on the campaign trail for the president's Republican opponents.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: There is zero faith in Barack Obama because he has created zero jobs last month.

JON HUNTSMAN (R), PRESIDENTIAL CANDIDATE: We are totally stalled out. We are totally in neutral. We have got people suffering out there.

YELLIN: The current Republican front-runner, Rick Perry, insists, "Our country cannot afford four years of economic misery."

But it's not just Republicans who are down on the economy. Just listen to the president of the AFL-CIO.

RICHARD TRUMKA, PRESIDENT, AFL-CIO: At this employment rate, you won't get back to pre-recession levels of employment for eight or 10 years. That's totally unacceptable.

YELLIN: The latest CNN/ORC polling shows Americans are not feeling too optimistic -- 82 percent believe the economy is in a recession -- 68 percent say it's important for the Obama administration to work on creating jobs. Only 30 percent say the president's priority should be reducing the deficit, one reason the president is building so much momentum for the jobs plan he will unveil late next week.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: If enacted this plan will have a positive impact on growth and a positive impact on job creation.

YELLIN: Given the gridlock in White House, it's a prediction the White House may never see tested.

(END VIDEOTAPE)

YELLIN: Now, multiple Democratic officials confirmed to me that the president's jobs plan will be written as actual legislation, legislative language that the White House is going to send up to the Hill after the president's speech -- Wolf.

BLITZER: After. So in other words, he will basically introducing it big picture sort of, not get into all the legislative details Thursday night before the joint session of Congress and then submit a piece of paper with actual words on it that will...

YELLIN: Detailed language to Congress and say pass this, if you will.

BLITZER: And then the Congressional Budget Office will be able, as they say, to score it and do all these things.

He hasn't done that kind of work, legislative detail, so far, but this is going to be a new venture for him.

YELLIN: Not with jobs. They did do it with some of the Wall Street kind of legislation, but nothing directly from the president.

(CROSSTALK)

BLITZER: I'm talking about with jobs. It's the first time he is actually submitting specific legislation to try to get the jobs recovery going.

(CROSSTALK)

YELLIN: That's right.

BLITZER: Thanks very much, Jessica.

YELLIN: Yes.

BLITZER: Ahead of the president's jobs speech, experts are warning there is no quick fix to the U.S. unemployment crisis.

CNN's Mary Snow spoke to some of them and to some of those discouraged job seekers.

Mary, what are you hearing?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, they are not holding out their breath that the jobs picture will improve any time soon -- 14 million Americans are unemployed right now and at one job center we visited, we didn't find much faith that the government can actually make a difference.

(BEGIN VIDEOTAPE)

SNOW (voice-over): August's dismal jobs report comes as no surprise to 24-year-old Nekiah Hemphill. Two years out of college with no permanent job, she is ditching her dream of a filmmaking career. She has come to this jobs center to consider becoming a firefighter.

NEKIAH HEMPHILL, UNEMPLOYED: We don't know when next year is going to be. Next year might be more scarce than what it is now. Just jump on something and hold it and learn it and try to like it.

SNOW: Recent job fairs like this one in Atlanta and Los Angeles underscore the difficulties millions of Americans face in finding employment. As the president gets ready to outline his ideas on creating jobs, economist Lakshman Achuthan says don't expect a quick fix from government policy.

LAKSHMAN ACHUTHAN, AUTHOR, "BEATING THE BUSINESS CYCLE": There can be things done. But you are talking about education and infrastructure and other business regulations that could potentially increase the pace of growth of the United States, but that's something that can happen in five or 10 years after a lot of investment and changes are made.

SNOW: Achuthan says the economy is close to sliding back into a recession. But not all economists believe there was even a recovery.

KENNETH ROGOFF, ECONOMIST, HARVARD UNIVERSITY: Most Americans believe we have never left the recession and they are right.

SNOW: Kenneth Rogoff is a former IMF economist. He thinks it's a good idea for the government to invest in infrastructure projects, as long as the government is not overpaying for them, but he also thinks the overall economy could be helped by addressing personal debt.

ROGOFF: Having some way are reducing the mortgage debt, either through restructurings of the payments, through possibly forgiveness in some cases, although with some quid pro quo, these are ideas that need to be looked at.

SNOW: Helping shrink personal debt, he says, could boost consumption, which makes up the lion's share of the economy.

As ideas are talked about, Nekiah Hemphill is not holding out much hope that lawmakers in Washington will make a difference.

NEKIAH HEMPHILL: It's like a whole bunch of high school kids just like going back and forth, like they can't make up their mind, this and that, like back and forth.

(END VIDEOTAPE)

SNOW: And last month's job report shows that six million Americans have been out of work for more than six months. And they account for roughly 43 percent of the unemployed -- Wolf.

BLITZER: Very depressing numbers. Thanks very much for that, Mary.

Let's dig deeper with our chief political correspondent, Candy Crowley. Her show the "STATE OF THE UNION" airs Sunday mornings 9:00 a.m. terrible.

I know you will have a lot more on this coming up Sunday morning, but you have spoken with economists and they are looking closely at the numbers inside this latest report.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: My question was, what sets your hair on fire at this point?

And one of the things that an analyst told me was that the number of hours worked per week is getting shorter. And he said, why is that bad news? Because the first thing companies do before they lay off is shorten the hours. And so it could be a harbinger of more layoffs. Because right now it's not that people are laying off, it's they are not hiring enough. So it is disturbing, at least to this one analyst, that in fact the workweek is getting shorter. Another said, here's the problem. And when you look at what do we need people to do, consumers need to buy so that companies will hire because there is increased demand. But what's happening is because there so few jobs out there and so many people looking for them, wages are flat.

BLITZER: But some of these companies are making huge profits right now, but they are not hiring people. And that is something that is so frustrating.

(CROSSTALK)

CROWLEY: And I have asked about that sort of repeatedly. I say, I know you haven't. People say, wait a second, they're sitting on cash, yes.

BLITZER: Billions, yes.

CROWLEY: And they said because they don't know what is going to happen next. And I said, well, this is always the case. You never know what is going to happen. There is always an election coming up.

And they said, yes, except for they have sort of lost faith. There was a time three or four months ago that it looked as though things were getting better. And business, like consumers, have begun to lose faith. So they're sitting on it because they don't want to hire and then have to dial it back. It's easier to move forward than have to dial it back.

(CROSSTALK)

BLITZER: Because the way I see it, the millions of people who are unemployed, we know that. Then there are millions more are underemployed who have accepted a job maybe at half the pay they used to make, but they are considered employed.

And then there are millions who have just given up. They are not even part of these statistics because they have run out of unemployment and they have run out of any hope of finding a job. They are just running around. And then on top of all of that, Candy, and you and I know these people, there are so many millions of people who have jobs who are so nervous they will lose their jobs.

CROWLEY: Right. And it becomes a chicken and an egg thing. Because you have -- companies want people to buy before they hire, but people don't want to buy something when they are not sure they will keep their jobs. It feels like as though we are in this sort of circular thing that is driving us into the ground.

BLITZER: Does it make any difference, we have had a few days to digest this now, if the president makes this proposal before a joint session of Congress or if he would have let's say gone into the Oval Office and delivered a speech from the Oval Office?

CROWLEY: People -- after discussing these horrible numbers for people without jobs, people hate this kind of thing, but optics matter in politics. You know optics matter in politics.

It seems to me that when the president in a joint session of Congress does indeed put himself up there as presidential, I'm the grownup here -- I think they selected this for that reason, that this is the president. We need to all work together. It gives him a chance to be the grownup in the room. The Oval Office certainly is -- give you the seriousness of a State of the Union, but this gives the president sort of a foil. So, yes, it does matter. Optics matter.

BLITZER: Who is on "STATE OF THE UNION" Sunday?

CROWLEY: James P. Hoffa, number one, Labor Day, head of the Teamsters, obviously, and also Jim DeMint, who you know is having that big session on Monday with a lot of the Republican presidential hopefuls, talking about who has got the better plan for creating jobs.

BLITZER: Nine a.m. Eastern Sunday morning. We will be watching. Candy, thanks very much.

The federal agency overseeing Fannie Mae and Freddie Mac is suing some of the biggest U.S. financial institutions, saying they misrepresented risky mortgage investments. The Federal Housing Finance Agency is hoping to recover some of the losses that helped put Fannie Mae and Freddie Mac into conservatorship in 2008.

Among those being sued, Bank of America, Citigroup, Goldman Sachs, and J.P. Morgan Chase.

Just hours before today's dismal jobs numbers came out, President Obama decided to back down on tougher new clean air regulations, citing economic reasons. He is ordering the Environmental Protection Agency to withdraw, withdraw tighter new standards for how much ozone can be in the air. Republicans and business interests had been attacking the new regulations for weeks now as job killers.

The EPA says the regulations would have reduced illnesses and saved 4,300 lives a year, a very controversial decision by the president today.

Poll surprises. As Americans speak out about the unemployment crisis, we will talk about that and more with the former Clinton Labor Secretary Robert Reich and Stephen Moore of "The Wall Street Journal" editorial page.

And details of the al Qaeda travel alert going out to millions of Americans around the world right now as we approach the 10th anniversary of 9/11.

And states of emergency as TROPICAL STORM LEE threatens holiday havoc along the U.S. Gulf Coast.

(COMMERCIAL BREAK)

BLITZER: With the 10th anniversary of 9/11 approaching, the State Department has a message for Americans around the world. Be on alert from the threat from al Qaeda. The State Department suggesting it's very real.

CNN's Brian Todd is joining us now with more on what is going on.

What else does this State Department say, Brian?

BRIAN TODD, CNN CORRESPONDENT: Wolf, it says al Qaeda has demonstrated the intent capability to carry out attacks the U.S. and its interests around the world and that terrorist groups sometimes plan their attacks to coincide with significant dates on the calendar. Essentially, for Americans abroad on that date, it's saying make sure your radar is very finely tuned.

(BEGIN VIDEOTAPE)

TODD (voice-over): It's one of America's most somber and emotionally charged anniversaries. It's also one of al Qaeda's coveted opportunities to attack again.

Now, as we approach the 10-year anniversary of September 11, the State Department has issued a rare worldwide travel alert, reminding Americans living and traveling abroad of al Qaeda's continuing threat, saying terrorist groups often plan attacks to coincide with significant dates on the calendar.

(on camera): How extraordinary is it to have this worldwide travel alert?

TOM FUENTES, CNN CONTRIBUTOR: I think it's very extraordinary. I don't know of a previous occasion where they issued an alert like that. I know a couple of years ago, they issued a general alert for Europe and for Americans in Europe to beware. And there were specific investigations ongoing that kind of led to that worry that something might happen in Europe.

TODD: CNN contributor Tom Fuentes, a former assistant FBI director, says the new alerts from the State Department and Homeland Security are so vague, they have questionable value.

Both departments say there is no specific credible threat of a terror attack on the anniversary, but security is predictably tightening, more police and security patrols, extra screening at airports. Warnings are everywhere. If you see something, say something.

Expert say U.S. officials, confident of security measures in place at home, are now trying to think like terrorists, trying to figure out where they will try to hit Americans.

(on camera): Tom Fuentes has same basic tips for Americans traveling abroad around that anniversary. He says don't make yourself look overly American with a college logo or an American flag on your clothing. He says carry your passport with you, but leave a copy at the hotel or with someone you trust. Leave a copy of your itinerary with your family.

Have the phone numbers of the local U.S. embassy or consulate with you all the time. And he says if you have a particular medical condition that requires medication, have about a month's supply of it.

(voice-over): Intelligence reports says at the time of his death, Osama bin Laden had ideas to attack America on the 10-year anniversary of 9/11. But with al Qaeda now weakened...

(on camera): Is the lone wolf now more of a threat than the coordinated attack?

TOM FUENTES, CNN CONTRIBUTOR: Yes, I think it is. Al Qaeda, because of loss of its safe havens, doesn't have the same ability to plan a major attack like it could in the past.

(END VIDEOTAPE)

TODD: Brian Fishman says what al Qaeda often does instead is encourage individuals to take matters into their own hands. That leads to more attempts like the Christmas Day bombing airline -- airline bombing attempt almost two years ago, that flight that flew into Detroit -- Wolf.

BLITZER: We remember that, Brian, of course.

Those attacks, by the way, are a lot harder to detect and to prevent, right?

TODD: That's right.

Security experts tell us that the only way lone wolves are often detected before they strike is when people observe them doing some kind of training for an attack or buying supplies for it. Otherwise, very, very hard to detect beforehand.

BLITZER: Brian, thanks very much.

Let's a little bit dig deeper now with our national security contributor, Fran Townsend. She's a member of both the CIA and Homeland Security Department external advisory boards.

Fran, it's just a precaution out of an abundance of caution shall we say, or is there some real suspicion out there? Some evidence that, you know what, revenge is a factor for al Qaeda and its sympathizers and the worldwide American community should be prepared?

FRANCES TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: Wolf, people have been worried about a revenge attack since the killing of bin Laden.

But as you talk to people, Department of Homeland Security put out their worldwide, their sort of annual homeland warning for the 9/11 anniversary this week. And this is sort of an extension of that and we should expect to hear other warnings. I wouldn't be surprised if the FBI were talking and did a warning to state and locals.

It is sort of customary now around the anniversary, because we worry about large public gatherings being an attractive al Qaeda target and it being 10 years is significant. But I will tell you, in talking to authorities today, they say to me, we feel pretty good about our heightened state of vigilance and alert inside the United States.

When we look at where are Americans more vulnerable than inside the United States, we worry about Americans traveling.

BLITZER: But the difference between this anniversary of 9/11 and all the other anniversaries of 9/11 is that the U.S. killed bin Laden. And this element of revenge is obviously on the minds of some either lone wolf sympathizers of al Qaeda or others. That's why I have been told there is even greater concern.

TOWNSEND: That's absolutely right, Wolf.

And what we see now is as the U.S. government has been effective against al Qaeda core, the number two was just killed in addition to the killing of bin Laden, the affiliates, those people, al Qaeda in the Arabian Peninsula, al Qaeda in the Islamic Maghreb, Maghreb being North Africa. We saw the attack in Nigeria by a group that certainly had al Qaeda support. We have seen al Qaeda in the Arabian Peninsula try to target the United States, the attempted Christmas Day bombing and the cargo plane attempted bombing. The affiliates in particular acting outside the United States do pose a threat to Americans.

BLITZER: Should people cancel their trips around the world?

TOWNSEND: No. Tom Fuentes talked about the right steps. Try not to sort of advertise that you are an American, carry your passport with you, know where the embassy is and the phone number, how to contact them, and leave an itinerary with loved ones.

BLITZER: Good advice. Fran, thanks very much.

What should President Obama do about the U.S. jobs crisis? What can he do? I will ask the former Clinton Labor Secretary Robert Reich and Stephen Moore of "The Wall Street Journal" editorial page. They're both standing by live.

And why armed federal agents raided an iconic U.S. guitar maker again.

And CNN's Nic Robertson goes inside the former home of Moammar Gadhafi's notorious playboy son. You might be surprised what books he found sitting there right on his desk.

(COMMERCIAL BREAK)

BLITZER: A daunting backdrop for President Obama's jobs speech to Congress and the nation next Thursday. New numbers show zero -- repeat -- zero job growth in August and a steady and dismal 9.1 percent unemployment rate across the United States.

Let's talk about it with a former Clinton labor secretary, Robert Reich. His latest book is entitled "Aftershock." It's a book on the economy. And Stephen Moore is the senior economics writer for "The Wall Street Journal." Professor Reich, I will start with you. What is the single most important thing, one thing you want to hear the president of the United States say in his address before a joint session of Congress Thursday night?

ROBERT REICH, FORMER U.S. LABOR SECRETARY: I want his jobs plan to be big and bold enough, Wolf, that it is commensurate with the size of the jobs crisis we now have.

BLITZER: Well, give me an example. How would that satisfy you? What would he have to say?

REICH: I think he would have to call for in total an amount of new spending approximately $500 billion this year, including a WPA, a new WPA, a Civilian Conservation Corps, loans to the state governments so they don't have to continue laying off workers and local governments as well.

There are many things the federal government can do. Infrastructure. The information is crumbling. But it's got to be enough of an initiative to overcome the extraordinary shortfall in consumer demand. Consumers, their spending is now 70 percent of the total economy.

And also businesses are not going to hire if consumers are pulling back. The government has got to be proactive in a very large and significant way.

BLITZER: Steve, is there any chance Republicans would approve a half-a-trillion-dollar spending increase this year, as Professor Reich is recommending?

STEPHEN MOORE, SENIOR ECONOMIC WRITER, "THE WALL STREET JOURNAL": Probably pretty close to zero, Wolf.

Bob Reich I think forgets something. We had a big election in 2010. And the theme of that election was, stop the spending and stop the debt. I don't think Republicans will go for another spending program. I think the other problem with that idea quite frankly, Bob, is, look, we did this; we did this in 2009 and we had the $830 billion stimulus plan. We had cash for clunkers. We have had Obamacare.

We have had $400 billion in mortgage modification programs. None of this has seemed to work and I think what Republicans, Wolf, will say is, wait a minute. What's different about this than what we have already tried, that that didn't create many jobs in the first place.

BLITZER: Practically speaking, Professor Reich, if the Republicans are not going to vote for additional spending, where do you go from there?

REICH: I think the president has to take it to the public. He's got to explain to them that the only way of overcoming this huge shortfall in consumer spending and also with regard to the private sector businesses is by government being the spender of last resort, as the government has been in previous recessions, certainly was getting us out of the Great Depression in terms of World War II.

And the scale again has got to be significant.

Steve Moore, I agree with you. I don't think Republicans are going to go along. But I think the president has got to challenge them and fight for this. Otherwise, what is the alternative?

BLITZER: Well, let's get the alternative.

(CROSSTALK)

BLITZER: From your perspective, Steve Moore, and you are more of a conservative, obviously, what is the single most important specific initiative you would like to hear the president outline Thursday night?

MOORE: Well, he did one very positive thing just this week where he suspended some of those EPA rules which is going to free up a lot of jobs. Now is not the time to be regulating.

I would like to see us blow up the tax code and just start over. I think you could potentially, Bob, get a bipartisan agreement where you could lower those tax rates, which I think would cause growth, and maybe get rid of some of those loopholes so companies like GE pay taxes.

But this discussion we are having, the three of us, and between Bob Reich and I, this is a kind of microcosm of what's going on in Congress. Quite frankly, I don't agree with anything Bob Reich said. I would do just the opposite. I think we need to get some spending discipline.

And my point is this is the Grand Canyon difference between these two parties right now on what to do about the economy.

BLITZER: Here's our CNN/ORC latest poll, Professor Reich. Is the economy in recession?

Now, technically, we know economists say it's not in recession, because there haven't been six months, consecutive six months of negative growth. But 82 percent say yes, the economy is in recession -- 18 percent say no.

Does that number at all surprise you?

REICH: It doesn't surprise me at all, Wolf.

I think that in many respects, the economy has still not emerged from the great recession that began at the end of 2007. The problem with -- and I completely respect Steve Moore's position and the Republican position, but the problem is it's not really dealing with the essential problem, which is on the demand side of the equation.

Businesses, they don't need more tax cuts. They are sitting on $2 trillion worth of cash. They are not willing to use it for new jobs because there not customers out there to buy the goods and services businesses otherwise could provide.

(CROSSTALK)

BLITZER: I want you to respond, but listen to this as you think about responding.

In the same poll, our new CNN/ORC poll, we asked the American people, what's more important for the Obama administration, to create jobs or to reduce the deficit? Sixty-eight percent say create jobs; 30 percent say reduce the deficit.

MOORE: No, I agree with that. I think the top priority right now is to create jobs. It's a question of how we do it.

Look, we have had $4 trillion in Keynesian deficit spending in the last three years. That's an all-time record outside of World War II. And yet we still have 9 percent unemployment rate three years later. So I guess the point is, why don't we try something new?

I had a piece in "The Wall Street Journal" last week just comparing where this economic recovery is at this stage, where the Reagan economic recovery was. Because you know, when you mention those recessions we've had in the past, you left out the '81/'82 recession. We had a booming economy by this time in the Reagan expansion. We had 5 or 6 percent growth.

So Bob, why don't we try what we know works, which is deregulation and getting control of spending and cutting taxes?

REICH: Well, the answer is that the recession of 1980 and '81 was extraordinarily different than the recession we just had. The recession we just had emerged from the bursting of a huge asset bubble, a housing bubble; $7.7 trillion of home values vanishing. I mean, this is like -- the only analogy we have is the Great Depression and the extraordinary crash of 1929.

You can't, on the basis of that kind of blow up, a massive bubble, you can't expect that one original stimulus is going to be enough to get people back to work. It was too small. Consumer spending dropped much, much larger and faster to a much greater extent.

MOORE: But Bob, you and the president and the vice president are changing their story here. I mean, when you sold the $830 billion stimulus back in 2009, you said by now -- well, not you specifically but the White House said -- you remember this, Wolf -- we will have an unemployment rate less than 8 percent. We'll create three million jobs. We've only created 1/3 of the jobs. I mean, back in the last three months, we've been losing jobs.

So this is not a program that's working. I still think, Bob, when you've got $4 trillion in debts and spending, do you really believe another half trillion dollars of deficit spending is the solution? Most people would say, "Hell no. Let's get the spending under control." REICH: Well, getting spending under control, if that means continually cutting state and local and federal jobs, and federal programs, and state and local teachers and firefighters and everything else, if that cutting is your way of getting more jobs, I don't understand it. It doesn't -- it doesn't make sense.

MOORE: You've got to tie that with the tax reduction and regulation reduction and I think you will get jobs. I really do.

BLITZER: We'll see what the president does if he listens to Steve Moore, if he listens to Robert -- if he listens to Robert Reich or sort of blends both of these very smart guys' ideas into one.

Guys, thanks very much.

New Orleans has weathered bigger and badder storms than Lee before, but the storm churning off the Gulf Coast right now poses a unique threat to cities all along the shore. Stand by. We'll update you on what's going on.

And did you ever wonder what life was like for Muammar Gadhafi and his family? In one building, CNN's Nic Robertson found luxury that would have been unimaginable for your average Libyan. We're going inside.

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

(COMMERCIAL BREAK)

BLITZER: Tropical storm warnings are up from Texas to Mississippi as Lee threatens to wash out the holiday weekend for millions and millions of Americans.

States of emergency have already been declared ahead of a possible 15 inches of rain near-hurricane force winds. Meteorologist Karen Maginnis is tracking Lee in the CNN hurricane center.

Karen, what are you seeing right now?

KAREN MAGINNIS, CNN METEOROLOGIST: It is not a very well- organized tropical system at all. As a matter of fact, we're looking at convection mostly along this eastern edge. Virtually none over here.

But in spite of the fact it does not have a very well-defined eye and it is not supporting winds or very high tropical-storm-force winds, but nonetheless, we're still going to see an impact because it is moving so slowly. So slowly, in fact, that it's going to take some time for this to make landfall.

When do we anticipate landfall and where? Well, right now, the computer models, you can see, they're all over the place. Some bring them in along the western edge of the Louisiana coast. There's one that brings it in along the Texas coast. But generally, the trend has been more towards the Louisiana coast. Now, that's a broad area.

And yes, there have been some evacuations. They've been voluntary. They are not mandatory evacuations.

But yes, we are looking at the possibility that this is going to make landfall along the Louisiana coast and produce 10 to 20 inches of rainfall. And there can also be a storm surge between 2 and 4 feet. There you see in this white-shaded area, right around Lake Charles and into New Orleans, even over towards the panhandle of Florida, the rainfall could be heavy at times.

Now, there, as I've mentioned, have been some evacuation orders, but what we've also seen have been some tornado warnings that have been issued. Not a tornado watch; this is warning, which means that meteorologists or radar have detected some circulation.

That's the kind of thing that we're looking at over the next 24 and indeed 48 hours. But really in 72 hours, look at what happens. It just kind of jogs along the coast, makes its way towards the east. And then we think eventually it will wind its way across the southeast. This may actually have a mutually beneficial effect and produce some much-valued, much-desired rainfall across the very dry southeast -- Wolf.

BLITZER: Karen, thanks very, very much.

On top of all that, we're watching Katia in the Atlantic Ocean as well.

More storms may be on the way, but the East Coast hasn't even recovered yet from Hurricane Irene. More than half a million people from North Carolina to Maine are still sitting in the dark, waiting for power to be restored. That's an improvement from the height of the outages, when 6.4 million people were sitting in the dark.

FEMA officials, meanwhile, worry about the agency's $800 million disaster relief fund, which is nearly depleted.

Gibson Guitars is sounding a defiant note in a legal battle with the U.S. government. Hundreds of factory jobs are at stake right now. The company's CEO says Washington is to blame.

And anti-Gadhafi forces try to snuff out some support for the former leader, even as we are learning how Muammar Gadhafi and his family indulged their every desire.

(COMMERCIAL BREAK)

BLITZER: Let's get to Libya right now where we're following reports that Muammar Gadhafi's son, Saif al-Islam, is boasting that pro-Gadhafi forces will retake the capital city of Tripoli. Our senior international correspondent, Ben Wedeman, is in Tripoli for us right now. Ben is joining us live.

What are you hearing in the Libyan capital, Ben?

BEN WEDEMAN, CNN CORRESPONDENT: Well, what we're hearing this evening is a lot of celebratory gunfire. People have come out by the thousands, possibly the tens of thousands, to what used to be known as Green Square which has been renamed as Martyr Square, where they are celebrating the ouster from Tripoli, at least, of Muammar Gadhafi.

And as far as the claims by Saif al-Islam coming via Moussa Ibrahim (ph), the spokesman for the former Libyan government, that there's going to be some sort of counter offensive to retake Tripoli, you might say that they are smoking crack, frankly.

Clearly, the capital is under the control of the rebel forces. They do have the pro-Gadhafi forces, the so-called loyalists, really hemmed in in a few areas of Sirte, which is, of course, the birth place of Muammar Gadhafi, the town of Benewalid (ph) and possibly somewhere in the south of Libya. But certainly, it's clear that the tide has turned, and the rebels do control the capital. They control the eastern part of the country and most of the coast. Certainly, Gadhafi's forces at this point appear to be on the run.

BLITZER: Ben, you just returned to Tripoli. Give us an eyewitness account, some new eyes in the Libyan capital. What's it like in Tripoli right now?

WEDEMAN: It's really a mixed bag. Coming in, we saw hundreds of cars lined up to get fuel. There is a shortage of fuel. There's problems with the water supply, power, medicine. There are shortages here that are making the life of ordinary Libyans very difficult.

At the same time, there's a real sort of joy, an ecstasy so to speak that Muammar Gadhafi's rule, which yesterday would have marked its 42nd anniversary has come to an end. It appears that almost all the people in the streets of Tripoli are more than overjoyed by the fact that Gadhafi is no longer their leader.

They realize, of course, that life is difficult, that this is a transition from one form of rule to what is not altogether clear is another. But certainly, you cannot deny the fact, just listening to this celebratory gunfire in the background, that most Libyans are more than happy that Muammar Gadhafi is no longer their leader -- Wolf.

BLITZER: Ben Wedeman was in Tunisia when that regime went down. Later in Egypt when the Mubarak regime went down. He's now in Libya, where Gadhafi's regime is down. I'm anxious to find out where you're going to be next. But we'll stay in close touch. Thanks very, very much.

Ben Wedeman on the scene for us, as he always is.

After weeks of war, Gadhafi's final downfall was swift. His vanishing act has given us a peek, at least, at the life of a tyrant and his family. CNN's Nic Robertson had a chance to see for himself when he returned and he ventured into the home of Gadhafi's son. A soccer player, a soldier and a notorious playboy.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN CORRESPONDENT: This is Saadi Gadhafi's former office building. I know because I've been in here to meet him before. The door has been latched, heavily bolted. Somebody has tried to break in here, but they can't get in. But just to the side here, somebody smashed their way through the window into the building. We're going to go take a look.

We used to meet him in a room just up these stairs. It was this sort of office study sort of relaxing type area. A lot of these different rooms here were very ornate. He had a football or soccer trophy from his days playing soccer for an Italian team here on this bar. The bar is still here. The trophy is missing. And there was a wide-screen TV up on the wall here.

And coming in here, the dinner table, amazingly, is still laid for dinner as if there were guests expected here. The napkins still on the plates. A look at the plates. This is sort of gold finish and the ornate glasses. This is where he'd come in an entertain his business clients. Just walked away and left, like he was planning to come back.

And his desk here provides an amazing insight into what Saadi Gadhafi was reading and perhaps thinking at the time: "The Art of War for Executives." This one: "Leadership Secrets of Colin Powell." And here's one. Look. This -- this is perhaps, wow, the most telling: "Killing Hitler." This is sitting on Saadi Gadhafi's desk at his right hand, perhaps the most recent book that he was reading before he left here, the killing of Hitler.

This is important to what's happening right now. Saadi Gadhafi has got a document in here that explains the relationships between various tribes, between Gadhafi's tribe and other tribes in the country. This was what he was reading on his desk in the last moments before he ran away, and this is what's so important to them right now. They need to keep the tribes on their side. The National Transitional Council needs to win theses tribes away from them. That seems to be why he was reading this document. Critical to their survival.

(END VIDEOTAPE)

BLITZER: Nic Robertson, fascinating, fascinating material for us. Our reporters in Libya are doing an amazing job, I think you will agree, all of them, not only Nic, but Ben and everyone in Libya right now. Fred Pleitgen is there for us, as well. We're really proud of the work that they have done and will continue to do for all of our viewers here in the United States and around the world.

Gibson Guitars raided not once, but twice by armed federal agents here in the United States. We're getting new details of what was seized.

Plus, what researchers discovered that can make dormant follicles grow hair again. Check it out.

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BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now, including federal prosecutors taking another swing at the ex-baseball star Roger Clemens.

Lisa, what do you have?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

That's right, prosecutors struck out in their first attempt to convict the former pitcher, but a second trial is now set to begin April 17. Clemons is accused of lying to Congress during its investigation of steroid use in baseball. A judge declared a mistrial in July after prosecutors showed inadmissible evidence in court. Clemens denies using performance-enhancing drugs while in the major leagues.

President Barack Obama's helicopter trip to Camp David had an unexpected detour today. Marine One diverted to an alternate landing site on the way to the presidential retreat outside of Washington. He took a motorcade the rest of the way. The White House said stormy weather led to the last-minute decision.

And could stem cells hold the key to reversing baldness? Yale researchers believe they just might. In their study, scientists found that stem cells can reactivate dormant follicles to make them grow hair again. But don't hold your breath on this one. The study, apparently it worked in mice, but there's no evidence that it will help men, too.

And Hurricane Irene has claimed a tree linked to the Kennedy family. The Arlington Oak was knocked over by last weekend's storm. The oak was estimated to be 220 years old. You see a picture of it there. It shaded an area near the graves of the Kennedy family members at Arlington National Cemetery.

President Kennedy is said to have remarked during a 1963 visit there that a view which included the tree was so magnificent that he could stay there forever.

What a loss, 220 years old, Wolf.

BLITZER: Stuff happens, I guess. Sad. All right, Lisa, thank you.

The feds say Gibson Guitars here in the United States has to face the music. But the company isn't playing along and says the government isn't playing fair. Details when we come back.

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BLITZER: Here in the United States, Gibson has been making guitars for more than 100 years, but it's now facing a new threat, not from a competitor but from the federal government. The issue is a rare wood Gibson uses to build its one-of-a-kind guitars. David Mattingly explains what's at stake and why Gibson's CEO is so furious with the feds.

(BEGIN VIDEOTAPE)

DAVID MATTINGLY, CNN CORRESPONDENT: Wolf, it's OK (ph) to the classic made-in-America product at odds with Uncle Sam over how U.S. law is enforced.

(voice-over) He makes guitars that make America sound cool. But Gibson's CEO, Henry Juszkiewicz is being ordered to change his tune.

(on camera) Sounds almost a little ironic that you're playing the blues.

HENRY JUSZKIEWICZ, CEO, GIBSON GUITARS: I got the blues.

MATTINGLY (voice-over): That's because in late August, armed federal agents raided his Tennessee factories for the second time in two years, alleging the illegal importation of rare protected wood, in this case ebony and rosewood from India.

An affidavit filed by the U.S. Fish and Wildlife Service alleges Gibson falsely labeled the wood shipment to make it sound it legal and suspiciously omitted the company's name as the recipient. But so far, no charges have been filed.

(on camera) It almost sounds like this company was engaged in smuggling these raw materials into the country.

JUSZKIEWICZ: Well, we were not engaged in smuggling. We have been buying finger board stock on a regular basis from India for 17 years.

MATTINGLY: On the neck of a guitar, the tropical hardwood is prized for its look and durability, but it's subject to a law called the Lacey Act, aimed at fighting black-market trade in protected animal parts and plants, and anything made from it.

(on camera) But the material is made in (UNINTELLIGIBLE) India, nothing like this.

JUSZKIEWICZ: Very similar.

MATTINGLY (voice-over): Juszkiewicz says the finger boards Gibson imported from India were confiscated as illegal wood by the federal government.

JUSZKIEWICZ: The law says that if a guitar or an instrument of any kind crosses a border, you have to know the species of wood that every component is made of and where it came from.

MATTINGLY: If this is true, could hundreds of international stars like Paul McCartney and B.B. King risk seeing their Gibsons confiscated at the border?

JUSZKIEWICZ: Michelle Obama gave a Gibson guitar to the wife of the president -- or prime minister of France. Just a year ago.

MATTINGLY (on camera): The first lady may have broken the law?

JUSZKIEWICZ: Yes.

MATTINGLY (voice-over): The Lacey Act does give federal agents broad authority to pursue smugglers, but if you own a Gibson, don't worry. When we asked the U.S. Fish & Wildlife Service for clarification, it released this brief statement: "We target corporations and individuals who are removing protected species from the wild and making a profit by trafficking in them."

And right now, in spite of Juszkiewicz's strong claim of innocence, Gibson is a target.

JUSZKIEWICZ: Nightmare. It's a nightmare.

MATTINGLY (on camera): It took almost a week before Gibson got back into full operation, but the damage had already been done. Just the shutdown of that one day, with the materials that were taken, cost the company over a million dollars.

(voice-over) And now the maker of the guitars that have commanded the spotlight for over 100 years has no choice but to play along and wait for its day in court.

(on camera) And no word yet from U.S. Fish and Wildlife Service, Department of Interior, or the Department of Justice about when or if charges might be filed -- Wolf.

(END VIDEOTAPE)

BLITZER: David Mattingly, thank you.

That's it for me. I'm Wolf Blitzer in THE SITUATION ROOM.

For our enter international viewers, "WORLD REPORT" is next. In North America, "JOHN KING USA" starts right now.