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Human Rights Groups Criticize New Libyan Government over Possible Abuses; White House Domestic Policy Director Melody Barnes Interviewed; President Announces Plan to Ease Debt Burden of Student Loans; Turkey Continues to Recover from Devastating Earthquake; 'Stunning' Increase in Espionage Attacks; Mitt Romney Doing Well in Polls

Aired October 26, 2011 - 17:00   ET

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

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

Happening now, disturbing allegations of atrocities in Libya not by Moammar Gadhafi's regime but by fighters loyal to the new Libyan government. This hour new information about dozens of bodies found in the area where Gadhafi was killed.

Also, the U.S. military's secret underwater weapon. The Pentagon says international spies and thieves are trying harder than ever to get their hands on this new technology.

And Mitt Romney scores big with Republicans in a pivotal early voting state, but he also may see some caution flags in our brand new poll. Stand by for details.

We want to welcome our viewers in the United States and around the world. Breaking news, political headlines, and Jeanne Moos all straight ahead.

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

Up first this hour, Libya stained with blood and uncertainty even now that Moammar Gadhafi is dead and buried. We're getting new information just coming into THE SITUATION ROOM about the hunt for Gadhafi's once powerful son Saif al Islam and about possible war crimes committed in the fight to topple the Gadhafi regime.

CNN is using its unique global resources to cover the aftermath of the Libyan revolution in depth. Our senior international correspondent Dan Rivers is joining us now from Tripoli. Dan, what are you hearing first of all about Saif al Islam Gadhafi?

DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, since this Reuters wire dropped on the system, they were quoting an Abdel Majid Mlegta, an NTC official. We've been able to get not a single other NTC official to confirm this. No one has heard about it. We've had no suggestion of any confirmation from the ICC either. So at the moment, this is looking like it is yet another rumor concerning Saif al Islam, a rumor that is just completely unable for us to pin down.

There's been a different rumor about him almost every day this week, some suggesting his convoy was surrounded, some suggesting that he had been injured, some suggesting he tried to cross the border into Tunisia, and none of them have panned out to be true, and so far we have no evidence that this is has either.

BLITZER: What's the latest, Dan, on all these human rights concerns that are now suddenly emerging?

Dan, I don't know if you can still hear me, but if you can, what's the latest on all the human rights concerns now emerging? All right, obviously we've lost our contact with Dan Rivers, but he did file this report.

(BEGIN VIDEOTAPE)

RIVERS: As the dust settles on the Libyan conflict, there are increasing questions about the atrocities that appear to have been perpetrated by militias loyal to the transitional government. These are just some of the bodies found around Gadhafi's convoy. Some were killed in a battle, but some appear to have been executed as prisoners, contrary to the Geneva conventions.

(on camera) Plenty of evidence around here of other bodies here, some of which human rights watch claim were also executed. They say there are 95 bodies in this area and at least 10 of them have been shot at point-blank range.

(voice-over) We witnessed this during the battle for Sirte. Piles of bodies with their hands bound behind their backs. Shot through the head, with no clear sense of who they were or who shot them. The bodies lay here for days without any revolutionary forces attempting to bury them.

But now Human Right Watch investigator Peter Fukar says he's found clear evidence some of the victims were Gadhafi officials, and he is concerned they may have been executed by revolutionary forces. This is the aftermath of a massacre at the hotel in Sirte, 53 bodies with evidence on the walls that this hotel was occupied by revolutionary brigades before the people were killed.

PETER BOUCKAERT, HUMAN RIGHTS WATCH: We're very disappointed that the NTC still hasn't sent anybody down to Sirte to investigate and their failure to investigate risks invoking the jurisdiction of the international criminal court. This is a war crime.

RIVERS: Transitional government has promised to bring those responsible to justice.

AHMED BANI, NTC MILITARY SPOKESMAN (via translator): I assure you that we will not turn a blind eye or forgive any crime that might have been committed during this time.

RIVERS: But the true scale of the killing in Sirte is only now become clear. Some 300 bodies have been found so far with no one with the transitional government attempting to gather evidence before the bodies are removed. (END VIDEOTAPE)

BLITZER: Dan Rivers reporting. We'll stay in touch with him.

Meanwhile, here in Washington the 12 members of the so-called super committee in Congress have less than a month left to slash the federal deficits by more than $1 trillion. Today they held a rare public hearing, but the real news happened behind the scenes.

Our Congressional correspondent Kate Bolduan has been digging on that for us.

Kate, the Democrats on the panel offered a new proposal. Tell us about it.

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: Hey, there, Wolf, According to both Democratic and Republican sources, we're told that Democratic members of the super committee during a closed door meeting on Tuesday offered a proposal to slash the federal deficit, which is really their charge, the charge of this so-called super committee.

According to sources, this plan was presented by Democratic Senator Max Baucus, and it would include slashing if deficit by up to $3 trillion over the next 10 years. The deal would also include significant entitlement cuts, including to Medicare and Medicaid. Democrats say that is a major concession on the part of their party.

The deal would also include very significant new revenue, $1.2 trillion to $1.3 trillion in new revenue. Probably not surprisingly on that point Republicans on the committee, including according to sources, Republican Senator Jon Kyl quickly rejected this deal, one Republican source calling his plan a nonstarter as Republicans on the committee and in Congress remain very much against tax increases, as they say, in the time of an economic downturn.

Not surprisingly, also both sides are pointing fingers at each other, saying that the other is the source of tweaking the information in order to win political gain in these very sensitive negotiations.

But, quickly Wolf, on the part of Democrats, they say essentially what this is and what they're trying to do is pick up where President Obama and House Speaker John Boehner left off over the summer when they were trying to negotiate that grand bargain that we spoke so much about. Those negotiations obviously fell apart during the debt ceiling negotiations.

But this development, while of course I'm saying that Republicans rejected it, is significant for the mere fact that this is the first time since this committee began meeting months ago in these closed door negotiations almost exclusively that we're learning of a plan being offered by any member of this committee. Of course we'll be tracking closely what impact this has on negotiations going forward, Wolf.

BLITZER: When you say the Democrats proposing $1.3 billion in new revenue, that's new taxes, tax increases on richer Americans. But the Republicans have made it clear they're going to oppose any new taxes. So why should anyone be surprised that the committee appears deadlocked right now if part of the Democratic strategy is to increase taxes? The Republicans are going to go along with it.

BOLDUAN: I want to make sure I said it the right. It's $1.2 trillion to $1.3 trillion in new revenue. I just wanted to make sure I didn't misspeak.

BLITZER: You didn't. I did.

(LAUGHTER)

BOLDUAN: OK. But on that point, I'm hearing from both sides on this very issue. Republican sources saying that's exactly why this is a nonstarter. They say that if Democrats were serious on really reaching a deal in order to not have this committee fail, they wouldn't come to the table saying they want such a big increase in taxes, such a big increase in new revenue coming in.

On the flipside, Democrats say they are offering a major concession on their part in talking about cutting entitlements, which is much they say a concession on the part of Democrats which the very don't want to agree to. And so they say if we're offering entitlements, Republicans have to offer up some revenue, which of course means taxes, tax increases, in order to really get this big deal to stabilize our debt situation, of course, try to calm wary markets. Wolf?

BLITZER: They have until Thanksgiving to come up with a deal. If they don't achieve their agreement, there's going to be across the board cuts that are already in the works. Thanks very much for that.

Jack Cafferty is standing by with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN CONTRIBUTOR: It's called a middle class squeeze, and if it keeps up the United States might not have a middle class one day fairly soon.

A "USA Today" analysis of census data finds there are 150 areas nationwide where the share of income going to the middle class shrank between 2006 and 2010. Middle class households generally means making between $21,000 and $100,000 a year. It includes the three fifths of households sandwiched between the rich and the poor.

Experts say this trend dates back to the 1970s. Back then 53 percent of the nation's income went to the middle class. In 2010, it was 46 percent. The recent recession has only made things worse, employers cutting jobs and hours, furloughed workers and frozen salaries. All the while, the value of a family's assets, things like homes and investments, down.

The scariest part is there doesn't seem to be any relief in sight. Take for example, my hometown, Reno, Nevada. Unemployment is at 14 percent, up from four percent in 2006. Median income has dropped 10 percent in the same time, foreclosures among the highest in the country. In order to make ends meet, many middle class Americans are cutting back, selling their possessions, cars, furniture, moving in with roommates or living with family members, cutting cell phones and cable service, shopping at consignment stores, bringing their own lunch to work, doing their own household repairs, and cutting back on contributions to their retirement plans. It's a sad statement on the middle class that helped build this once great nation.

Here's the question -- what's the United States going to be like if there is no middle class? Go to CNN.com/Caffertyfile and post a comment on my blog, or go to the post on our SITUATION ROOM Facebook page and put your comments there.

BLITZER: As thousands of people do every single day. Jack, thank you.

President Obama is offering young voters something new. We're going to take a closer look at his just announced plan to ease the burden of student loans. And I'll talk to his domestic policy adviser Melody Barnes. She's standing by in THE SITUATION ROOM. Plus, we'll take you to one of the villages hardest hit by that earthquake in Turkey. And the Pentagon's worst fears about international spies getting a hold of its top secret underwater weapon.

(COMMERCIAL BREAK)

BLITZER: President Obama has just landed in Washington after a western swing designed to promote his economic policies and his reelection campaign. His latest proposal unveiled today aimed at college graduates in the midst of an early snowstorm in Denver. Our White House correspondent Dan Lothian has been traveling with the president.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Wolf, more and more college students are getting sticker shock. A new study from the College Board shows the average costs of tuitions and fees at four year public institutions jumped 8.3 percent this year. That's more than double the rate of inflation. For many, that translates into bigger loans at a time when it's hard to find a job after graduation. So President Obama is pushing a plan he says could help 1.6 million people.

(BEGIN VIDEOTAPE)

LOTHIAN: As the first snow of the season fell across the Denver campus of the University of Colorado we ran into Rita Whittington, a special education major who seems to have already earned a degree in student loans.

RITA WHITTINGTON, STUDENT, UNIVERSITY OF COLORADO, DENVER: It's quite a burden. I have taken out extensive loans. At first I educated my children. Three of them I sent to college. So I have their loans, and now I have student loans. So this is extremely costly for me.

LOTHIAN: The costly burden of a college education is weighing on students across the country where earning a diploma is followed by this reality, an average debt of nearly $23,000.

ANTONIA VALENZUELA, STUDENT, UNIVERSITY OF COLORADO, DENVER: Truthfully, it's a silent killer because you never actually see the money. It's usually financial aid and things like that, or loans that you take. So kind of never having it in your hands makes it difficult to conceptualize how much the debt is.

LOTHIAN: Attempting to lighten the load, President Obama went to Denver to tout his plan that sidesteps Congress.

BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: We can't wait for Congress to do its job. So where they won't act, I will.

LOTHIAN: The president aims to speed up a plan that was already in the works. For example, beginning next year, the repayment amount of a federal loan will be limited to 10 percent of discretionary income and after 20 years, five years sooner than current rules, all debts will be forgiven. In addition, the program will make it easier to consolidate student loans.

But in a statement, Tennessee Republican Senator Lamar Alexander offered another solution. Quote, "The real way to reduce the burden of student loan debt is to slow down the growth of tuition." And he suggested that could be done by reducing health care costs and mandates that are soaking up state dollars that could be used for education.

Back in snowy Denver, Whittington is cautiously optimistic the plan will help students like her shoulder a burden.

WHITTINGTON: I think in the long run, it is good for us to put ourselves in a better place for the future.

(END VIDEOTAPE)

LOTHIAN: The president admitted these small steps are no substitute for Congressional action, but they will make a difference. Meantime, Republicans are criticizing the president for what they view as campaigning and trying to save his own job instead of getting the ailing economy back on track. Wolf?

BLITZER: All right, Dan, thanks very much. Dan Lothian on the scene for us in Colorado.

Let's dig a little bit deeper right here in THE SITUATION ROOM. Joining us, the White House domestic policy director, Melody Barnes. Thanks very much for coming in.

MELODY BARNES, WHITE HOUSE DOMESTIC POLICY DIRECTOR: It's a pleasure to be here. Thanks for having me.

BLITZER: React quickly to what Lamar Alexander, a former education secretary himself, just said, that the real problem is tuition prices are going up and up and up, and for a lot of people out there it's not even worth it going to college anymore because they're not even going to make back all the money that they're going to spend on tuition. BARNES: Well, two things, two reactions to that. First of all, he's right. Tuition costs are going up. In fact the College Board just put out a report talking about that today. And if you look at things we've done since day one in the White House, expanding Pell grants, the American Opportunity Tax Credit, those things, even though costs have gone up, have managed to stabilize costs for families. The problem is as people are struggling, they're having to borrow more.

BLITZER: To help then replay those loans, but the point he's making is that tuition is going up because of the federally required mandates on these universities and colleges that they have to raise tuition. How do you ease some of those regulations and burdens to keep the tuition down?

BARNES: Well, tuition is going up because state budgets are also feeling the crunch. But I also heard what Senator Alexander was saying. He was talking about costs like health care. I hope that means he is now becoming a fan of the health care reform bill that we passed, because we know that that's starting to bring health care costs down.

BLITZER: He thinks it's going to make it go up. A lot of Republicans believe that.

BARNES: But just look at the data. In the course of this past year, we've got a million young people who now have access to health care that didn't before because of the Affordable Care Act. We're bringing health care costs down. We're going to see that happen over the next several years.

BLITZER: Let's talk about some of the criticism you're getting from the Republican leadership in Congress right now. Speaker Boehner said this today. I'll play it for you.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, (R) HOUSE MAJORITY LEADER: We passed many bipartisan bills that are out of the House that are sitting over in the United States Senate at least 15 bills thus far that would help America's job creators if the United States Senate would act.

(END VIDEO CLIP)

BLITZER: All right, so why not do what's doable?

BARNES: That's a great plan. That's why we've taken the American jobs act apart and we are trying to move it piece by piece. Remember, we put this bill together using bipartisan ideas, ideas that had been voted on and supported by Republicans and Democrats in the past. The question is, why can't we get Republicans to support ideas and initiatives that they've supported in the past? It's unconscionable that we can't move forward to address the needs of the American people.

BLITZER: The argument that they're making -- Paul Ryan, the chairman of the House budget committee, made it once again today, is that you guys, meaning the White House, the president, are not really serious about this. You just want to have a little, give them hell, Harry, all that stuff. Listen to what Paul Ryan said today. He had some pretty strong words about the president.

(BEGIN VIDEO CLIP)

REP. PAUL RYAN, (R) WISCONSIN: The president has opted for divisive rhetoric and the broken politics of the past. He's going from town to town, impugning the motives of Republicans, setting up straw men and scapegoats, and engaging in intellectually lazy argument as he tries to build support for punitive tax hikes on job creators.

(END VIDEO CLIP)

BLITZER: "Intellectually lazy arguments," is that the president of the United States that you know?

BARNES: Absolutely not. And it's not the president of the United States that the people voted for and that the American people are looking towards for leadership. We have spent a lot of time working day after day to come up with solutions to address the needs of the American people. We started with the Recovery Act that created or saved 3.5 million jobs. We are addressing the needs of the people with health care reform. We're doing it with education reform and initiatives like the ones that we proposed today.

The reason why we have to move forward with these executive actions, the reason the president has asked Secretary Duncan to do what he's done in terms of student lending is because we've got a Republican Congress that's recalcitrant, that wants to play political and partisan games as opposed to addressing the needs of the American people.

BLITZER: They will make the exact same argument about the White House, it's all politics.

BARNES: But I think the facts bear something different. When we work together, when the president has put forward ideas and we've had the opportunity to work together, we've passed international treaties. We got a deal last December in the lame duck that put more money in the pockets of the American people, something that people said couldn't be done. But that's because the president pressed forward. He extended his hand and he said to people, let's work together.

BLITZER: Are they talking at least now, the president and Boehner? They played golf a few months ago. Is the president speaking with McConnell, the Republican leader in the Senate?

BARNES: The president is speaking to leaders in the house Senate, but most importantly, the president is out across the country. It's perplexing to me that the idea that the president of the United States is talking to the American people, going to North Carolina, going to Virginia, going to Colorado, talking to people and engaging them to hear what their concerns are and taking steps to address them, and that wouldn't be considered anything but what the president of the United States should do. BLITZER: That's really good politics, but to get legislation passed, they've got to work together in Washington and they've got to come up with a deal.

Here's what came out of this super committee, as it's called. Kate Bolduan reported on it earlier this hour. The Democrats are proposed new tax increases, $1.2 trillion to $1.3 trillion. They're called revenue, but that's really tax increases. You know Republicans are not going to go along with that. So what's the point?

BARNES: The point is this, and the president has said it time and time again -- we have big problems, challenges. The only way we're going to address them is if we have shared responsibility and shared sacrifice. We aren't going to do this on the backs of the middle class who have taken punch after punch after punch year after year. We're not going to do it on the backs of the most vulnerable.

But at the same time he said I'm willing to take tough positions, I'm willing to do difficult things, I'm willing to do things that everyone in my party doesn't support. But what I'm saying is we can't continue in the same way that's caused us with problems we have today. We've got to do something different and that's the shared sacrifice. That's the plan he has sent to the super-committee and has said please go forth and bring these ideas back to me so we can move forward as a nation.

BLITZER: We're out of time, but, quickly, why are you leaving the White House? I was surprised the other day when you decided it's over.

BARNES: Well, first of all, it isn't over. I will continue to work on the issues that I care about. I will continue to support this president. He has to be reelected. But at the same time, there are responsibilities to family. I've been in the White House for three years. It's been an honor to serve the American people. But the husband that I married after I got into the White House would actually like to see a little bit more of me.

BLITZER: That wedding, I remember reading about that wedding. Good luck in the future.

BARNES: Thanks so much, Wolf.

BLITZER: Highly classified U.S. military technology under attack. You're going to find out why spies are reportedly desperate to uncover the secrets of underwater drones.

And later, a dramatic and unprecedented show of outrage in Yemen. The pictures are amazing. Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Two earthquake victims have been found alive in Turkey three day days after the deadly earthquake hit the country. A teenage boy was pulled from a collapsed building. And six hours later, a 27-year- old woman was found alive under the debris. The 7.2 quake has left the area in ruins. And as CNN's Diana Magnay reports, survivors are now overwhelmed.

(BEGIN VIDEOTAPE)

DIANA MAGNAY, CNN INTERNATIONAL CORRESPONDENT: Children play in the rubble of what was once their homes. This was one of the villages hardest hit by Sunday's earthquake. Most of the houses were destroyed. The rest aren't fit to live in.

Sulei (ph) Balen (ph) is the village elder man. He built this house for his wife and 10 children. Now they sip tea in front of its ruins. There's enough food and water to go around and a makeshift space to cook, but the nights are tough. The family sleeps cramped inside a Red Crescent tent. Balen (ph) says he's just grateful they all survived.

"We're all in the village is very bad" he says, "because we have both loss of life and material loss, though of course that's not so important. But we had ministers and officials come and promise us shelters and we'll have them by spring, but winter will be long and cold."

Aid is arriving. A daily chore for the village kids to bring the bread back home. But growing bones need shelter as well as food. Tents are in short supply, and livelihoods are destroyed. Much of the shelter for the animals the gone. This family lost their home and three cows in the earthquake. Now they say they are desperate. "This is our income source. This is all we have," the son tells me. They'll get compensation for each animal they lost, but nothing can compensate for the loss of human life."

And as the women mourn, there is also an uncertainty which hangs over their children's future. Life now, a question of day-to-day survival as the winter draws in.

Diana Magnay, CNN, Guvecci (ph), Turkey.

(END VIDEOTAPE)

BLITZER: Certainly a heartbreaking story.

To find out how you can help all those devastated by the earthquake in Turkey, visit our Impact Your World page. That's at CNN.com/impact. You certainly can have an impact.

It's some of the U.S. military's most critical classified technology, underwater drones. But according to a new Pentagon report, it's under constant attack by foreign spies.

Our Pentagon Correspondent Barbara Starr is over at the pentagon. She's got the details.

Barbara, a lot of people didn't even know there were underwater drones. What's going on?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, you know, Wolf, this is some of the military's most closely-held technology. This new report is warning defense companies, foreign countries are trying to come after it.

(BEGIN VIDEOTAPE)

STARR (voice-over): They glide deep under water, no crew on board. Sensors gather intelligence about everything from the movement of warships to port security.

The U.S. military leads the world in developing these classified, unmanned, underwater vehicles. Other nations, especially in Asia, are urgently trying to get their hands on them, according to a new Pentagon report. Targeting the U.S. with industrial espionage is a global program.

In 2010, the Pentagon witnessed a stunning increase of over 140 percent in attempts to get military information of all types. Industry reports everything from phone calls asking for pricing and technical information, to cyberattacks aimed at outright stealing.

JOHN PIKE, GLOBALSECURITY.ORG: If it's a choice between stealing our technology and developing your own, it's a lot cheaper to try to steal our good stuff than try to develop it with your own money.

STARR: Weapons expert John Pike says China is most likely behind much of the effort to steal the U.S.'s underwater secrets.

PIKE: The Chinese are interested in underwater drones for the same reason that everybody else is. Over the last decade, we've seen this explosion of activity in aerial drones, and everybody believes that underwater drones are going to be the next great thing.

STARR: The Pentagon found more than 70 percent of all attempts to get access to this technology came from East Asian and Pacific nations, but the report does not name countries. It's a region getting increased military attention.

Defense Secretary Leon Panetta, now in Asia, promises stronger ties in the face of growing Chinese military power and an unstable North Korea.

LEON PANETTA, DEFENSE SECRETARY: We're going to maintain our presence. We're going to not only maintain our presence, but we're going to strengthen our presence in the Pacific region.

(END VIDEOTAPE)

STARR: And, of course, there are commercial uses for this type of underwater technology -- monitoring fisheries, offshore oil drilling, and even searching for old shipwrecks -- Wolf.

BLITZER: What a story. All right. Thanks very much for that, Barbara.

A new show of burning anger in the Middle East, women taking part in an unprecedented protest.

Also, a new piece of Blackbeard's legacy, and it's real. And our new polls show Mitt Romney is the Republican to beat in four critical states.

Stand by.

(COMMERCIAL BREAK)

BLITZER: An historical treasure is brought up from the ocean floor. Lisa Sylvester is monitoring that and some of the other top stories in THE SITUATION ROOM.

What's going on?

LISA SYLVESTER, CNN CORRESPONDENT: Yes, this is actually pretty cool, Wolf.

Crews have recovered a cannon from the pirate Blackbeard's ship. The one-ton cannon was brought to the ocean's surface today, 300 years after the ship wrecked off North Carolina. It will be displayed at a maritime museum before being taken to the lab for research.

And the U.S. Supreme Court will announce next month whether it will consider a constitutional challenge to President Obama's health care reform law. There are several appeals pending, and it's almost certain the court will accept at least one of the cases. Oral arguments would likely be held in February or March, with a ruling expected in June.

And an unprecedented act of defiance in Yemen. For the first time in the nine-month uprising, thousands of women burned their veils today to protest the government's anti-democracy crackdown. They say government forces are killing women and children, and they're calling on tribal leaders to speak out against the attacks.

And check out these new images from space of Hurricane Rina, fast approaching the coast of Mexico. It is expected to make landfall tomorrow near Cancun. Stranded tourists are having trouble though finding flights out, but there is some good news. Rina has significantly weakened to a Category 1 storm -- Wolf.

BLITZER: That is a little bit of good news. We'll continue to track it, watch it, make sure it will be all right.

Thanks very much.

We're getting an early read on the Republican presidential race in four critical states, but the fight for the GOP nomination is still very much up for grabs. We'll crunch our brand new poll numbers. Stand by.

And candidate Rick Perry is revisiting the controversy over President Obama's birth certificate again.

(COMMERCIAL BREAK)

BLITZER: It's looking pretty good for Mitt Romney in four early voting states that will be critical in deciding who wins the Republican presidential nomination. Our brand new CNN/'TIME"/ORC poll shows Romney narrowly leading the GOP pack in Iowa, with Herman Cain a close second. The former Massachusetts governor is a whopping 27 points ahead in New Hampshire. Romney narrowly edges out Cain for the top spot in South Carolina and holds a significant lead in Florida.

It helps explain why Romney is looking down the road and trying to stay focused on President Obama.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Look, it's very clear to the people of America that President Obama, while he's a nice guy, is just over his head, that he doesn't have a plan to get America back to work. And he's talking about a new stimulus. The first one didn't work. Why in the heck would we adopt his second stimulus when we saw the results of his first stimulus?

(END VIDEO CLIP)

BLITZER: Our Chief Political Analyst Gloria Borger is here in THE SITUATION ROOM.

These early poll numbers, pretty good for Romney. And you're looking deeper. Why is he doing this well?

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: He is clearly the beneficiary of Rick Perry's decline.

When you look deeper into our numbers, you see that he is even making inroads -- get this -- with Evangelical voters in states like Iowa and South Carolina. That would seem to be Rick Perry territory, but it is really moving over to Romney.

When you consider Iowa, Wolf, four years ago, when Romney ran, he was defeated there. It was a big problem for his campaign. He's been a little bit nervous about whether to make a play in Iowa this time.

But if you look at our poll, he's doing so well. I would bet now that he actually goes into Iowa, because even if he comes in second, he can still spin it as a victory.

So these numbers are quite good for him.

BLITZER: Yes, very good.

Herman Cain does well in Iowa. What about these other three states?

BORGER: He's holding up, but he's going in the wrong direction. And, for instance, let's take the state of Florida, a very important, early state.

Two weeks ago, in the NBC/"Wall Street Journal" poll, Romney and Cain were actually tied. But if you look at our poll over there, you see now Romney ahead by 12 points up on Herman Cain. Digging deeper into the numbers, Romney and Cain are actually tied with Tea Party voters, which is really incredible.

As for Perry, at 9 percent, it looks like Florida's senior citizens are abandoning him. You find that Mitt Romney has three times as many seniors supporting him as Perry.

So, you see that that whole notion of Social Security being a Ponzi scheme, not so popular with seniors in the state of Florida, and a huge opportunity for Mitt Romney there.

BLITZER: And Perry made some dramatic proposals to change Social Security yesterday. I write about it on my blog, on THE SITUATION ROOM blog, if viewers want to check that out.

BORGER: It may not help him.

BLITZER: You know, there's still a couple of months until January 3rd, which is the Republican caucus in Iowa. And a week later, the New Hampshire primaries. So not a whole lot of time.

BORGER: Right.

BLITZER: But it seems there's enough time for these numbers to change.

BORGER: Right. Republican voters this time around have been quite fickle.

It's clear that they are auditioning people. This is a field with candidates they don't know. You have Tea Partiers who are saying we're not so sure about Mitt Romney, so we want to take a look at these other candidates.

But look at these numbers on voters who might change their minds. We asked, "Could you change your mind?"

Florida, 50 percent; Iowa, 62 percent; New Hampshire, 48 percent; South Carolina, 56 percent. In these four early states, Wolf, absolutely nothing is settled. And as you say, 10 weeks before the Iowa caucuses.

BLITZER: Not a lot of time.

BORGER: Not a lot of time.

BLITZER: And these numbers, as you and I know, a lot more important than the national numbers, because these are where the early votes will be.

BORGER: Right. So good news for Romney, but it doesn't mean that he's going to win these four states by a long shot.

BLITZER: He's still got a lot of work to do.

BORGER: You got it.

BLITZER: Shouldn't be overly confident. Watch this next report. Rick Perry appears to be trying today to move beyond what he calls a distraction for his presidential campaign. The Texas governor now says he has no doubt -- repeat, no doubt -- President Obama is in fact a United States citizen. Governor Perry created a stir by echoing Donald Trump's concerns that the birth certificate the president released may not be valid.

(BEGIN VIDEO CLIP)

GOV. RICK PERRY (R-TX), PRESIDENTIAL CANDIDATE: I don't think I was expressing doubts. I was having some fun with Donald Trump.

UNIDENTIFIED MALE: Are you comfortable that he's an American citizen?

PERRY: Oh, yes. And look, it's fun to, you know, lighten up a little bit.

UNIDENTIFIED MALE: So, you have no doubt he's an American citizen?

PERRY: I have no doubt about it.

(END VIDEO CLIP)

BLITZER: Perry may be backing down on that, but Donald Trump says he's still skeptical about the birth certificate that the president released. The real estate mogul and TV celebrity spoke to CNN's Piers Morgan about the controversy and the possible fallout for Governor Perry.

(BEGIN VIDEO CLIP)

PIERS MORGAN, HOST, "PIERS MORGAN TONIGHT": Do you accept that what he produced is valid? Do you --

DONALD TRUMP, CHAIRMAN & PRESIDENT, TRUMP ORGANIZATION: No, I don't necessarily accept it.

MORGAN: But do you believe he probably was born in America now?

TRUMP: I say he might have been.

MORGAN: But what does your gut tell you? Because you are a smart guy.

TRUMP: My gut tells me a couple of things. Number one, it took a long time to produce this certificate. And when it came out, as you know -- you check out the Internet, many people say it is not real. OK? That it's a forgery. That's what they say.

(CROSSTALK)

TRUMP: You know what? OK, fine. But they go over it, and lots of different things and lots of different reasons.

And the other thing is, nobody has been able to see -- the day of his birth, they had twins born, they had the other one born. Nobody has able to find any records that he has been born in that hospital.

MORGAN: But some of this -- do you think politically, for Rick Perry --

TRUMP: I think it's a positive for him.

MORGAN: Is it a sensible thing for him to do?

TRUMP: Well, I think it's good for him in the Republican primary. I don't necessarily know if it's good in the general election.

(END VIDEO CLIP)

BLITZER: By the way, you can see Donald Trump's full interview with Piers tomorrow night, right here on CNN, 9:00 p.m. Eastern.

Getting all fired up over a Herman Cain campaign ad. Plenty of comedians are. Parodies of the presidential candidates. Unusual spot. That's coming up.

And what will the United States be like if there's no middle class? Jack Cafferty and your e-mail, and a lot more news, coming up, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

CAFFERTY: The question this hour is: What will the United States be like if there is no middle class?

David in Florida writes, "No place I'd want to live in. It will be a cross between a Banana Republic and Europe during the Dark and Middle Ages: an entrenched, inherited social and economic elite, and the rest of us with nowhere to go. The middle class has always been the vibrant lifeblood of this country. Take out a supporting pillar like that, things change, generally for the worse."

Richard in Kansas writes, "Imagine futile America, the rich living in castles, surrounded by high walls and protected by well-armed security, while the rest of us toil away and struggle to survive in our crime-ridden ghettos. It sounds silly, but we're not so far from that right now. I only hope (INAUDIBLE) will find the courage to take up our pitchforks and torches and storm the castle gates before it's too late."

Sam writes, "The U.S. will be a lot like a lot of places overseas, mansions and penthouses in one area, slum houses and garbage dumps in another."

Joe on Facebook writes, "We'll have our own Arab Spring. The Occupy movement is just a spark away from turning into a civil war."

Paul in Texas writes, "All we need to do is look at Mexico today. It has very little, if any, middle class, and we can also expect the same problems they're having to deal with -- huge gangs in control of entire states, lawless thugs in control of almost everything. If we lose the middle class, the backbone of the United States will be gone."

Roy in Florida writes, "Simple, Jack. Catch a flight to Havana. You'll see and experience what it's like first hand."

Larry in Denver, "You must have missed the latest news reports. There is no middle class. While we talk about the 'what ifs,' it's already happened. You're either very, very rich or you can't get by. That's poor. It means the middle class just became poor."

You ought to ask the question, what will happen if the middle class can't return in the next generation? It's just around the corner."

And John writes, "A Republican paradise."

If you want to read more on this, go to my blog, CNN.com/caffertyfile, or through our post on THE SITUATION ROOM'S Facebook page -- Wolf.

BLITZER: Thank you, Jack. See you tomorrow. Thank you.

A political ad so unusual, some thought it was actually a hoax. Now Herman Cain's campaign ad showing his chief of staff smoking is all the rage on late-night TV. The best parodies and more, coming up next.

(COMMERCIAL BREAK)

BLITZER: Herman Cain's smoking campaign, I should say -- the commercial, I should point out -- is a comedian's dream.

CNN's Jeanne Moos hands out the award for best parody.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Suddenly, everybody is pretending to smoke. And it's all because this man, Herman Cain's chief of staff --

MARK BLOCK, HERMAN CAIN'S CHIEF OF STAFF: We can take this country back.

MOOS: -- with one little drag in a campaign ad.

JIMMY KIMMEL, HOST, "JIMMY KIMMEL LIVE": It's two years (ph), right?

BLOCK: You know, I'm not the only one that smokes in America, for God's sake.

MOOS: Now everyone is inhaling his smoke. One parody even paraphrases Charlie Sheen.

UNIDENTIFIED MALE: I'm on a drug, and it's called Herman Cain. Herman Cain has tiger blood.

MOOS: That's from a left-leaning political group in South Carolina asking Herman Cain, "What are you smoking?"

Not since the famous witch ad --

CHRISTINE O'DONNELL (R), FMR. SENATORIAL CANDIDATE: I'm not a witch.

MOOS: -- have we seen a political spot so parodied. So we thought we would hand out the silvery Smoke Ring Awards to some of our favorites.

(on camera): We award one measly Smoke Ring to "The Letterman Show" for its video parody.

UNIDENTIFIED MALE: Rich Lowry here, chief economic adviser for Herman Cain.

UNIDENTIFIED FEMALE (singing): I am America

MOOS: And for all those who replaced the cigarette with booze, we award two Smoke Rings.

Our three Smoke Ring Award goes to Conan's show for most imaginative prop.

We award Jimmy Kimmel and his crew four Smoke Rings for inventive voiceover.

UNIDENTIFIED MALE: I'm Herman Cain, and I approve cigarettes. And if that doesn't make me sound crazy, check out this smile.

MOOS (voice-over): Herman Cain's smile, that takes eight seconds to develop, prompted Stephen Colbert to challenge Cain to a small smile contest.

STEPHEN COLBERT, HOST, "THE COLBERT REPORT": Go.

MOOS: Colbert managed to stretch his smile 25 seconds.

COLBERT: We'll be right back.

MOOS (on camera): The coveted five Smoke Rings Award goes to "The Colbert Report" for replacing smoking with sniffing.

UNIDENTIFIED FEMALE: I'm Herman Cain's personal assistant. We hope you share our vision.

MOOS (voice-over): By the way, we'd like to bestow a shortened Lifetime Achievement Award to the human smoke machine who provided us with our smoke screen.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: Leave it to Jeanne Moos.

Thank you very much, Jeanne.

That's it for me. Thanks very much for watching.

I'm Wolf Blitzer, in THE SITUATION ROOM.

The news continues next on CNN.