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THE SITUATION ROOM

Pentagon Acknowledges 2,500 U.S. Troops Have Died in Iraq; House of Representatives Debates Republican Resolution to Declare Iraq War Part of Overall War on Terror; Bill Gates To Focus More on Bill and Melinda Gates Foundation

Aired June 15, 2006 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: And to our viewers, you're in THE SITUATION ROOM, where new pictures and information are arriving all the time, standing by, CNN reporters across the United States and around the world to bring you today's top stories.
Happening now, bitter words over Iraq. House Republicans and Democrats are debating the state of the mission and the future of the troops. It's 4:00 p.m. here in Washington, will today's fight help decide another battle for control of Congress?

A sobering milestone for U.S. forces. It's midnight in Iraq where the troop death toll has hit a staggering level. We will consider the political toll on the commander-in-chief and on public opinion about the war.

And heading for the border. It's 1:00 p.m. in Arizona where National Guard troops are joining a security crackdown. We are following new developments in the immigration wars and whether there will be a clear winner in November.

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

Political tensions that have been building since start of the Iraq war are exploding right now on the floor of the House of Representatives. Members are debating a Republican resolution supporting the Iraq mission and rejecting demands for a timetable to bring the troops home. Democrats are denouncing it all as an election year stunt.

This comes on the same day that the Pentagon announced a grim new death toll in Iraq, 2,500 U.S. men and women -- service men and women have been killed since the start of the war.

The House and the Senate held moments of silence in honor of the fallen troops. But then it was back to the heated battle over whether to stay the course in Iraq or to start a pull-out. Our White House correspondent Suzanne Malveaux is standing by. She is over at the White House. Let's go up to Capitol Hill first, our Andrea Koppel has all the latest.

Lots of action on the Hill today, Andrea.

ANDREA KOPPEL, CNN CORRESPONDENT: Yes, there has been, Wolf. The decision by House Republicans to devote 10 hours to -- a very unusual decision, that is, to devote 10 hours of debate to a single issue has Democrats crying foul.

(BEGIN VIDEOTAPE)

REP. JOHN MURTHA (D), PENNSYLVANIA: I know standing here does not solve the problem and it hasn't gotten better, it's gotten worse. That's the problem.

KOPPEL (voice-over): Emotions were high on both sides.

REP. MIKE ROGERS (R), MICHIGAN: You know, our enemies do not have a first Tuesday in November plan, they have a plan for a caliphate. They have well-established themselves to murder Christians, Jews, Muslims, women, children. They will behead you, they will shoot you, they will blow you up. They've don't care.

KOPPEL: The battle lines were drawn.

REP. TODD TIAHRT (R), KANSAS: If we leave now, it would be giving them a victory and we would be once again putting another picture on the board here saying we should have fought harder, we should have stopped it back in 2006.

REP. LLOYD DOGGETT (D), TEXAS: Instead of staying the course, we need to chart a smarter course. It's not weakness or retreat to recognize the administration offers us only an endless spend and bleed policy.

KOPPEL: Republicans say Democrats who support withdrawing U.S. troops want to cut and run.

REP. DENNIS HASTERT (R-IL), SPEAKER: It is not enough for this house to say "we support our troops." To the men and the women in the field, in harm's way, that statement rings hollow if we don't also say, we support their mission.

KOPPEL: Democrats accused Republicans of playing politics by falsely linking the war in Iraq to the broader war on terror.

REP. LOUISE SLAUGHTER (D), NEW YORK: It's a day designed to provide the majority with chance to make cheap political attacks against Democrats in anticipation of upcoming midterm elections.

(END VIDEOTAPE)

KOPPEL: Now, before today's debate began, both Republican and Democratic leaders in the House circulated talking points to their members, and so in a way did the Pentagon. They sent around this 74- page, what some call a prep book on Iraq policy from the Pentagon, basically saying that they are laying out what the Pentagon's position is, trying to rebut, point by point, a lot of what the critics have said about the Iraq war, Wolf.

But one Republican aide who spoke to CNN expressed frustration and said that he felt that this document had crossed the line from a statement of administration policy basically to a Pentagon playbook for political purposes -- Wolf. BLITZER: I suspect there will be some fallout on that. There is -- and in addition to the furious debate on the floor of the House of Representatives, there's been a surprising twist on the same subject over in the Senate. What's going on?

KOPPEL: That's right, Wolf. What we have seen is that Senate Democrats have been trying to make political hay over some comments that were reportedly made by Iraq's prime minister about giving amnesty to insurgents or those who may have attacked U.S. troops.

Now despite the fact that the Iraqi government and Republicans are saying that he was misquoted, Republicans have been trying to force Democrats' hands, and change the subject to, really, what John Kerry was planning on doing today, introducing an amendment calling for the immediate withdrawal of U.S. troops from Iraq by the end of this year.

Now, there was a vote that was called on a similar measure, to back this amendment, and they forced a vote, that vote failed by a vote of 93-6 -- Wolf.

BLITZER: So John Kerry himself didn't introduce it. Mitch McConnell, the Republican whip in the Senate actually introduced it to try to embarrass the Democrats.

KOPPEL: Exactly. He didn't introduce John Kerry's amendment. Obviously that's something only the senator himself could have done, but he introduced another similar amendment. And that was what was voted on. They voted to table that measure -- Wolf.

BLITZER: Thank you very much, Andrea Koppel, on the Hill, reporting for us.

Meanwhile, an emergency spending bill that includes funding for the war in Iraq now is headed toward the president's desk for his signature. The Senate gave final approval today to the $94.5 billion measure. It also contains money for the Afghanistan mission as well as for hurricane relief.

The vote comes a day after the Senate approved an amendment introduced by Senator John McCain. It would require future funding for wars to go through the regular appropriations process instead of being put into emergency spending bills. The House hasn't voted on that measure yet.

Let's go over to the White House now and reaction to the new death toll in Iraq, the lives of 2,500 U.S. troops lost.

I understand though, first, Suzanne, you have just come from a briefing with the president's national security adviser, Stephen Hadley.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, yes, Stephen Hadley is still briefing reporters at this moment, initially, of course, to talk about the president's upcoming trip, the E.U. summit in Austria as well as Hungary. But all of the questions -- many of the questions dealing with Iraq.

And Stephen Hadley essentially talking about al-Zarqawi, the top al Qaeda terrorist in Iraq, his death and capture, saying that it was a very significant development, that this was an individual who not only was a leader within Iraq, but also globally, that he had information as well as planning about possible attacks not only in Iraq, but outside of Iraq, and even possibly in the United States.

He also talked about some documents that were seized in that attack from that capture, saying that it was very significant, the kind of intelligence that they were giving and actually receiving.

The other thing, of course, here, is there's been a lot of talk about who is going to replace al-Zarqawi indefinitely. A prominent figure being talked about, but he downplayed that, saying essentially it's not yet clear who is taking charge, al-Zarqawi's place, that they do not believe that that really is something that is very clear at this moment.

They are still trying to figure all of that out. And all of this, as you mentioned, of course, Wolf, comes on a very important day, an historic day, more than 2,500 U.S. troops killed since the U.S. invasion today, while U.S. officials say, of course, they mourn the loss of every single soldier, they were downplaying that benchmark.

(BEGIN VIDEO CLIP)

TONY SNOW, WHITE HOUSE PRESS SECRETARY: It's a number and every time there's one of these 500 benchmarks, people want something. The president would like the war to be over now. Everybody would like the war to be over now.

(END VIDEO CLIP)

MALVEAUX: So the message from the White House, of course, is what the president essentially was outlining yesterday, is that al Qaeda is real, that he understands the stakes of this war, but it's going to be a long, tough haul -- Wolf.

BLITZER: Suzanne Malveaux, at the White House, thank you, Suzanne, for that.

Suzanne Malveaux and Andrea Koppel are part of the best political team on television, CNN, America's campaign headquarters.

Zain Verjee is off today. Fredricka Whitfield is joining us now from CNN Global Headquarters in Atlanta with a closer look at some other important stories making news.

Hi, Fred.

FREDRICKA WHITFIELD, CNN ANCHOR: Hello to you, Wolf.

Well, he could be the new face of terror in Iraq, Abu Ayyub al- Masri. Today U.S. military officials unveiled his picture as the man they believe is taking over for Abu Musab al-Zarqawi as the head of al Qaeda in Iraq. Al-Zarqawi was killed last week in a U.S. air strike. Al-Masri is an Egyptian, and a senior member of al Qaeda who officials say has been a terrorist for over 20 years.

Meanwhile, after that strike that killed al-Zarqawi, Iraqi officials say they found computer records revealing some of al Qaeda's intentions. Today, Iraq's national security adviser said the records show that militants wanted to sow seeds of discord between the United States and Iran.

In the documents, al Qaeda is said to have thought that its situation in Iraq was bleak. The Iraqi national security adviser said the documents could prove significant.

(BEGIN VIDEO CLIP)

MOWAFFAK AL-RUBAIE, IRAQI NATIONAL SECURITY ADVISER: We believe that this is the beginning of the end of al Qaeda in Iraq. We believe al Qaeda in Iraq was taken by surprise. They did not anticipate how powerful the Iraqi security forces are, and how the government is on the attack now.

(END VIDEO CLIP)

WHITFIELD: That Iraqi national security adviser is also denying a report that Iraq will free prisoners responsible for killing American troops. There is an amnesty program to free prisoners who have not committed crimes against Iraqi civilians, but the Iraqi national security adviser says the program will not free prisoners that did kill Americans. The denial comes after a report in The Washington Post. It quotes a top adviser in Iraq as saying the amnesty program will likely include those who attacked U.S. troops.

And it's unclear how many hours their bodies lay unnoticed, but today 10 men were found dead in Baquba. They were between the ages of 20 and 40 years old. Iraqi police say gunmen shot and killed them on a bus in the western city. The 10 men are just part of the 24 people who died in violence around Iraq today -- Wolf.

BLITZER: Still a very, very dangerous place. Fred, thank you very much for that.

We're going to have a lot more coming up on what's happening in Iraq in our next hour.

Other news we are following here in Washington, less than an hour from now, House Democrats plan on meeting behind closed doors to consider action against one of their own, Congressman William Jefferson of Louisiana. He's the representative under investigation for bribery who allegedly had $90,000 stashed in his freezer.

Democrats are resuming debate on a motion to strip him of a plum position on the powerful House Ways and Means Committee. Jefferson denies any wrongdoing and says there are two sides to the allegations against him. But even his supporters think he is likely to lose his fight to keep that committee post. We are going to have a live report right at the top of the hour when the meeting is scheduled to begin.

Jack Cafferty is off this week, he will be back here in THE SITUATION ROOM on Monday.

Coming up much more on our top story, the political battle over the war in Iraq. I will speak live with Democratic Congressman Marty Meehan this hour. And next hour I will speak live with the Senate majority leader, Bill Frist. Both of them will join us here in THE SITUATION ROOM.

Plus, the great debate over immigration. This may be the first election where it's a national issue but which party benefits? We will find out.

And President Bush gets up close and personal with the families of those who lost loved ones in one mine accident, all that coming up when we return. Stay with us.

(COMMERCIAL BREAK)

BLITZER: Welcome back. New developments today in the immigration war as the first Arizona National Guard troops are heading to the Mexico border today. They are part of President Bush's plan to bolster security. Immigration continues to be a major issue in this midterm election year. But will it be a deciding factor in November? Let's bring in our senior political analyst Bill Schneider, he's looking at the numbers, getting some thoughts on that -- Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Wolf, 2006 is likely to be the first election in which illegal immigration is a national issue. Which party will benefit? That's not clear.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): One thing is clear, Americans want to reduce the number of illegal immigrants in the United States. But how? By securing the nation's borders? Yes. By deporting illegal immigrants? Yes. By giving illegal immigrants who have been here many years a path to citizenship? Yes. Polls show strong popular support for all those policies.

Here's how the public divides on the issue. About a third would like to see all illegal immigrants removed from the U.S. They are the hard-liners.

SEN. CONRAD BURNS (R), MONTANA: It is not too much to ask for our law enforcement agencies to find, detain, and deport those who have broken the law.

SCHNEIDER: A third take, a moderate position, they want to see the number of illegal immigrant decrease but do not feel it's possible or humane to remove them all.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There is a rational middle ground between granting an automatic pass to citizenship for every illegal immigrant and a program of mass deportation.

SCHNEIDER: Just over a quarter of Americans feel the number of illegal immigrants should remain the same. They are sympathetic and want policies that reflect...

SEN. BARACK OBAMA (D), ILLINOIS: Confidence that we can ensure that everybody that lives within those borders has the right to a life that is full of opportunity.

SCHNEIDER: Moderates and sympathizers joined forces to support the Senate immigration bill.

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: We welcome the opportunity to work with the president, to bring us all together.

SCHNEIDER: That coalition excludes hard-liners who are outraged and energized. They were the key to Republican Brian Bilbray's victory this month in a special election for a California House seat.

REP. BRIAN BILBRAY (R), CALIFORNIA: The people in the 50th district wanted something done. They wanted a job and a message sent to Washington that now and here is the time to address illegal immigration.

(END VIDEOTAPE)

SCHNEIDER: The message to Republican candidates was loud and clear: defy President Bush on immigration and you just might survive -- Wolf.

BLITZER: How partisan of an issue has immigration become here in Washington?

SCHNEIDER: Not very. We asked people which party do you think would do a better job securing the nation's borders? About a third say Democrats, a third say Republicans, and a third say they don't know. And what about those immigration hard-liners? They split exactly the same way -- Wolf.

BLITZER: All right, Bill, thanks very much, good solid report.

A busy day for President Bush with action on a number of fronts. He signed legislation hiking the top fine for an obscene broadcast to $325,000, that is up from $32,000 per violation. That capped a two- year effort to crack down on indecent material. It was sparked by singer Janet Jackson's so-called wardrobe malfunction at the 2004 Super Bowl.

Later the president signed what he called the most sweeping overhaul of mine industry safety in nearly three decades. The lone survivor of the deadly Sago Mine explosion in West Virginia was at the signing ceremony. Mr. Bush told Randall McCloy that his fallen mining brothers also were there in spirit. The president then went to the crowd of mining families and promised them he would do everything possible to prevent future mining accidents and to protect their loved ones. Some critics say the bill doesn't go far enough to make mines safer.

Yet another bill signing today, Mr. Bush enacted legislation creating the world's largest marine sanctuary. The measure gives greater protection to rare species living within a stretch of Hawaiian water equal to the distance, get this, from Chicago to Miami. Amazing.

Let's go to Ali Velshi with amazing numbers, up on the markets today as well. Ali, how good of a day was it for the markets?

ALI VELSHI, CNN CORRESPONDENT: Unbelievable. You take yesterday's gain, which was 110 points, and today's gain, which looks to be settling in, about 198 points on the Dow, you have got the best two days we have seen since November of 2004. Look at that, 198 points higher on the Dow to 11,015, 58 points higher on the NASDAQ, that's a gain of 2.8 percent to 2,144. Even the S&P 500, which is 500 stocks, 2.1 percent higher, 26 points to 1,256.

This is an across-the-board gain, every one of the Dow 30 stocks, save for one, was up. And the one that wasn't up was Procter & Gamble, and it just lost 5 cents today. Caterpillar gained almost 5 percent, Hewlett-Packard gained almost 6 percent. Across-the-board major, major gains, two days in a row now. The NASDAQ has had its best one-day gain in two years.

Strong day all around. And, Wolf, it wasn't just here, it was around the world. We also have a slight gain in the price of oil to $69.50; gold, lots of people making money today.

BLITZER: Ali, thank you very much. Ali Velshi reporting for us.

Up next right here in THE SITUATION ROOM, the political battle over the war in Iraq is happening right now on Capitol Hill. But are Democrats divided or united in this debate? I will ask Congressman Marty Meehan, he is a House -- a top House Democrat. He's standing by live to join us.

Plus a moment of silence in Congress as U.S. troops reach am grim milestone in Iraq. But will today's news change the debate over the war? Jeff Greenfield will weigh in on that. Stay with us. You are in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back to THE SITUATION ROOM. I'm Wolf Blitzer in Washington. The heated debate over the war in Iraq is happening right now on Capitol Hill. But are Democrat divided over the conflict on when to bring American troops hope? Joining us here in THE SITUATION ROOM is Congressman Marty Meehan. He is a Democrat from Massachusetts. He's a member of the House Armed Services Committee.

Congressman, thanks very much for coming in.

REP. MARTY MEEHAN (D-MA), ARMED SERVICES CMTE.: Great to be here, Wolf. BLITZER: Here's what the resolution that you are debating -- House Resolution 861, says, among other things. It says: "It is not in the national security interest of the United States to set an arbitrary date for the withdrawal or redeployment of United States armed forces from Iraq." Will you vote yea or nay?

MEEHAN: Well, I am personally going to vote no on it, because I think, frankly, we should have had a discussion about the war in Iraq. We should have discussed oversight of the war in Iraq and we should have had a real debate. There are no other options. It's not a debate when the Republican leadership that control the Senate, the House, and the White House say, you vote up or down.

BLITZER: So do you support an arbitrary date? Do you want all troops out by the end of the year?

MEEHAN: Certainly not arbitrary, but I believe that we could redeploy troops by the end of this year...

BLITZER: All troops?

MEEHAN: Not all troops, we are going to have to have some kind of presence. But we could redeploy them. And I think that process should begin in October. There are some Democrats who believe it should begin in December, some in a year or so.

BLITZER: So you are basically pretty much in-line with Congressman John Murtha?

MEEHAN: Yes. In fact, like many Democrats, I submitted a plan sometime ago to begin the drawdown of troops, because our occupation -- the very occupation is fueling the insurgency. Even General Abizaid, if you look at some of his comments, says that we have to make our footprint smaller in Iraq and get the Iraqis up front. That's the only way that you are going to stop the insurgency. It has to be done by the Iraqis.

BLITZER: The other argument that supporters of the president's policy make is if you tell the insurgents, you tell the terrorists in Iraq when the United States is pulling out, they are simply going to wait for that day and then hold their fire.

MEEHAN: There hasn't been a plan really right from the beginning, Wolf. And that is -- Democrats are united on that. The fact is the status quo is not going to work. It hasn't been working. There have been mistakes made. There is no oversight by the Congress. In other wars, the Congress has played a meaningful role in terms of providing oversight. No hearings, no real debate, no real oversight. That's part of the problem when you have one party with no checks and balances.

BLITZER: What do you say to the democratically-elected new government of Iraq? These Iraqis -- the prime minister, the defense minister, these guys are nervous that the United States is going to pull out and their forces are not necessarily going to be ready to deal with the aftermath. MEEHAN: Well, that's what the administration says. The reality is...

BLITZER: That's what Iraqi leaders say too.

MEEHAN: But we need to force them to run their own country, because as long as we are there, sitting ducks for insurgency, and as long as they think that we are going to take care of the problems, we can't afford to stay any longer. We are stretched to the limit. We are losing a battalion a month in terms of injuries and deaths to our soldiers. We need them to take the responsibility for security in their country. And, frankly, we need some accountability in the Congress.

BLITZER: I want you to listen to what Congressman Charlie Norwood, a Republican of Georgia, how framed this debate earlier. Listen to this.

(BEGIN VIDEO CLIP)

REP. CHARLIE NORWOOD (R), GEORGIA: This debate is absolutely essential to preserving the victories of our troops that they have won with their blood and their lives. It is time to stand up and vote. Is it al Qaeda or is it America? Let the voters take note of this debate.

(END VIDEO CLIP)

BLITZER: All right. So he said it's a stark, stark contrast.

MEEHAN: What terrible disservice on the part of the Republican leadership to combine the war on terrorism and the war in Afghanistan with the war in Iraq. They are totally separate wars. Al Qaeda...

BLITZER: But let me...

MEEHAN: ... was barely in Iraq until we -- until the president said, bring it on, bring it on.

BLITZER: But hasn't al Qaeda established a foothold in Iraq right now, that's a major thrust of the al Qaeda focus inside Iraq right now?

MEEHAN: Well, sure. About 8 percent -- 8 to 10 percent of the insurgency actually are terrorists from outside, and I think we fuel that situation. We are helping recruitment because of the war in Iraq. Al Qaeda is promoting our presence and occupation of Iraq in order to get more people to join al Qaeda all over the country.

BLITZER: Don't you want to crush al Qaeda in Iraq?

MEEHAN: We want to crush al Qaeda everywhere.

BLITZER: All right. But in Iraq...

MEEHAN: Everywhere. We ought to track down Osama bin Laden. The attacks against our troops in Afghanistan are getting more sophisticated every day. The Taliban is coming back into power. That's what 9/11 was all about, going to Afghanistan and eliminating the al Qaeda terrorist network.

BLITZER: But I assume...

MEEHAN: They are in Iraq because we are in Iraq.

BLITZER: ... you want to find Osama bin Laden who may be in Afghanistan or Pakistan along some of that tribal...

MEEHAN: He is not in Iraq, that much we know.

BLITZER: Right, you won't find him there. But what about the al Qaeda remnants that have come into Iraq and want to establish a base there?

MEEHAN: It is more like -- first of all, we give the Iraqis what they need. We have to have economic development assistance for them. We need to give them military expertise. We have to help them with their policing so that they can keep their own country safe.

However, this notion that al Qaeda is only in Iraq because we are in Iraq because the president said bring it on and they brought it on. The reality is we should have an antiterrorism program that focuses on Afghanistan or anyplace else in the world where al Qaeda is. Al Qaeda is all over Europe and all over the place. They have been -- really increased all of their recruitment because of our presence in Iraq.

So we needed -- this policy has failed. And I think Republicans privately will tell you that they think our policy in Iraq has failed. And if people vote for this resolution, basically they are saying, status quo, we are not going to question the administration, continue what we are doing.

BLITZER: They presumably have the votes, though, the Republicans.

MEEHAN: Oh, they sure do.

BLITZER: Marty Meehan is a Democrat from Massachusetts: Congressman, thanks for coming in.

MEEHAN: Thank you, Wolf.

BLITZER: And in the next hour we'll get a very different perspective, the Senate majority leader, Bill Frist, he will join us live right here in THE SITUATION ROOM.

Meanwhile many Americans are joining members of Congress today in a moment of silence and sadness over the rising troop death toll in Iraq. Let's bring in our senior analyst Jeff Greenfield. He is in New York. He's got more on this -- Jeff.

JEFF GREENFIELD, CNN ANALYST: Wolf, it will inevitably be tagged a grim milestone. The death toll for U.S. forces in Iraq has hit 2,500. After a week of upbeat news, the death of Zarqawi and capture of insurgents and of intelligence, a snap presidential visit, does this number carry weight?

(BEGIN VIDEOTAPE)

GREENFIELD (voice-over): By historical standards, Iraq has been much less costly in lives than others, though it's lasted longer than the war in Korea, that war took more than 33,000 American lives. Vietnam, where the fighting lasted well over a decade, took more than 55,000.

And at its peak, Vietnam cost 543 American lives in a single week. Nor did earlier grim milestones, the 1,000th death, the 2,000th death does it produce sharp change in U.S. public opinion. Instead what we have seen is a slow, steady erosion of support.

Just after the invasion, 3/4 of Americans said it was not a mistake to have sent troops. When the 1,000th death was recorded, the majority still thought the decision was right. By the time the death toll reached 2,000 in October, 2005, opinion was evenly split, 49-49.

In fact, except for a small bump at the end of last year, the decision to invade has won approval of fewer and fewer Americans. Today, 55 percent think it was a mistake. Why this pattern?

In because there has not been a single massive loss of American life as happened in Beirut in 1983 when 241 marines were killed in their barracks.

Nor has there been a more dramatic shocking example of casualties as in Somalia in 1993, the Black Hawk down incident when 18 soldiers were killed and their bodies triumphantly displayed by their killers.

(END VIDEOTAPE)

GREENFIELD: Those events did have the power to rapidly affect public opinion. Presidents Reagan and Clinton removed U.S. forces from those regions. What's happened in Iraq is something different. The gradual erosion of optimism based on the persistence of murderous violence and chaos.

The future of public opinion it seems depends more on whether those conditions change, thus strengthening the case that the sacrifice of lives and treasure has been worth it -- Wolf.

BLITZER: Jeff Greenfield thank you very much for that. Up next much more on our top story. The fight back here in Washington over the war in Iraq, our political experts James Carville and Bay Buchanan standing by to weigh in.

And minutes from now, Democrats take their battle over Congressman William Jefferson behind closed doors. But will the scandal over Jefferson's ethics hurt the Democratic Party? That's coming up in our "Strategy Session" as well. Stay with us.

(COMMERCIAL BREAK) BLITZER: There's breaking news involving the world's richest man, Bill Gates and Microsoft. Let's bring in our Ali Velshi. Ali, tell our viewers what's going on.

ALI VELSHI, CNN ANCHOR: Just got confirmation from the company, Wolf, that Bill Gates is starting to move right out of Microsoft. He has announced a two-year transition plan after which he says he will have no day-to-day role at Microsoft. He will spend more time at his global education and health work with the Bill and Melinda Gates Foundation. This announcement being made right now.

The chief technical officer, Ray Ozzie will assume the title of chief software architect, which is the job that Bill Gates now holds and chief technical officer Craig Mundy will take on the role of chief research and strategy officer, those two guys will replace Bill Gates in the role that he has had in the last couple of years.

He will continue as chairman of the company but will have no day- to-day role as of July 2008. The shares did fairly well in Microsoft today but the shares are in fact down in after-hours trading on this news.

The world's richest man, the head of Microsoft, the architect, the man who invented Microsoft now stepping away from the company. He says it's going to take two years to ensure a smooth transition, and he says everything should be OK at Microsoft. Steve Ballmer remains as the man in charge of the company -- Wolf.

BLITZER: It's interesting, they of course wait to make this announcement until the markets close. The markets closed a half an hour or so ago at 4:00 p.m. Eastern, then they make this bombshell announcement trying to set the stage for his departure. But as you point out, it's going to be over two years.

VELSHI: Yes, and Bill Gates has done everything in a very planned way so this is what they are saying today. They know people react on the market. Bill Gates is the brains behind Microsoft. And he is saying he is going to train two people to replace when he leaves and he will stay on as chairman.

So he's trying to cushion this as much as possible, but when you think Microsoft, you think Bill Gates, you think, the world's richest man, and that is going to make some people think twice about their investments in Microsoft. They are trying to say it's all OK.

BLITZER: And has he offered - beyond saying he really wants to spend more time or almost all of his time on his other initiatives, his philanthropy around the world, the various projects that he's been involved in, oftentimes working with former President Bill Clinton and others, beyond that is there any other explanation, public explanation that he offered?

VELSHI: As you know, I spoke to Bill Gates in March and we were talking about some of his other initiatives. Whether it's Bill Gates or Bill Clinton or Bono. These are three people have been very, very serious about their education and health initiatives around the world. Bill Gates has take this very seriously. He is one of the world's foremost philanthropists. And knows that he's got influence.

He does seem to be more impassioned about the changes he can make around the world and in the United States and he I think he does need the time to do it. They do donate a great deal of money so it does seem like Bill Gates is committed to this. He has been for some time. People who have observed Microsoft and Gates have said this is where Bill Gates' passions lie, he thinks he can make a difference. He feels like he's made his difference at Microsoft.

BLITZER: How much of a hands-on role, Ali, has Bill Gates actually played in Microsoft in recent years?

VELSHI: Well, when he stepped out for Steve Ballmer to take over a few years ago, he created the role of chief software architect. People we have spoken to sort of feel that it was a way to keep a day- to-day role without really having that much hands on at Microsoft. Steve Ballmer has been running Microsoft for a few years. But the markets also then believe that if Bill Gates leaves, particularly after that long court case that Microsoft had gone through, it would rattle the company.

So Bill Gates has really been in transition out of Microsoft for some years. He doesn't need to make any more money off of it. He will still be a chairman of the company. But this is an icon of American entrepreneurship. He is one of those people you think of as leading the charge into when the world thinks of America and successful business, Bill Gates is that face. So he can't really just walk out of it and it looks like he's still not really walking out of it.

BLITZER: He's a relatively young guy, isn't he?

VELSHI: Yes. When I met with him I realized he was so young when he started the company, that now he's at the age that people are still doing well and active in their businesses and he's retiring. But he's very active, he's always traveling, he's always on the road and he does carry a great deal of influence. So I don't think Bill Gates is disappearing from the public eye at all. I think he's just taking one more step to remove himself from the actual day-to-day fortunes of Microsoft Corporation.

BLITZER: When you sat down with him and we remember the interview we did with him. We aired it right here in THE SITUATION ROOM. When you sat down with him that day, did he give you a hint that this was in the works, that he was thinking about reducing, if not completely eliminating his connection with Microsoft?

VELSHI: It's interesting because when I spoke to Bill Gates about the other company that he founded many years ago, the Digital Imaging company, we got him off track and he started talking about his initiatives and he started talking about the need for better public education and better training and honestly that's where he gets impassioned, that's where Bill Gates gets excited, when he talked about challenges of educating the world, of getting computers to people in the world of where technology and education comes together. It's very clear when you talk to Bill Gates that that is his passion, and we have actually got Bill Gates commenting right now at the press conference he's holding with Steve Ballmer. Clearly you can see he's trying to convince everybody who is watching this that he is not deserting the company and the company is in good hands and it's going to be a smooth transition.

BLITZER: Ali, let's listen to Bill Gates for a few moments as he explains to his employees what's going on.

BILL GATES, CHAIRMAN OF MICROSOFT: Even as I prepare to shift my focus in July 2008, I know Microsoft is well-positioned for success in the years ahead. Our core businesses are strong and we have a clear vision of how we will meet new challenges and opportunities. We just had our first $12 billion quarter and we continue to generate almost $1 billion in frost every month. We are about to launch break-through versions of Windows, Office and Exchange which are already generating a lot of excitement.

Six years ago, Steve and I made a major transition when he stepped up to be CEO. He has done a fantastic job by every measure, whether it's the people he's brought in, the new ways he's running the company or just the objective results like doubling our sales and profits during that time.

Steve has driven us to make bold bets, things like Xbox, real time communications, business applications, IPTV and many others, including the live platform.

Steve is the best CEO for Microsoft I could imagine. He is changing the company in ways it needs to be changed. He is bringing in new leadership at all levels and he's focused on the long term -- how to make Microsoft the great company not just for today but for decades to come.

The change we are announcing today is not a retirement. It's a reordering of my priorities. There's a common thread through my different work at Microsoft and at the foundation. It's a sense of optimism that smart, committed people with the right support and vision can have a huge impact.

It's about using technology not just for the privileged few, but for everyone. The road ahead will let me take on new challenges while keeping my connection to this great company. The road ahead for Microsoft is as bright as ever. The dream of what software can do is just beginning. We see it day by day as we are revolutionizing business and entertainment.

So many of the seeds we have planted whether it's gaming or TV or development or communications have just started to grow and the biggest impact is yet to come. As Steve Ballmer comes up to share his thoughts, I want to say one of the hardest things about my decision is that a couple of years from now I will miss working with Steve every day as I have for the past 26 years. I couldn't ask for a better business partner or a better friend. BLITZER: There it is, Bill Gates, 50 years old announcing two years from now he's going to step back as the chairman of Microsoft. There's Steve Ballmer who has been his partner, as he just said, for 26 years.

Ali Velshi, it's really important for our viewers, so many of them have investments, portfolios. They may not even know some of their portfolios have Microsoft stock included. So this represents an issue that is clearly important to millions and millions of people, how Microsoft does down the road with or without Bill Gates.

VELSHI: I want to remind people, on average about 90 million shares of Microsoft get traded every day, your IRAs, your 401(k)s, people have invested this as a proxy for American business as their own stocks. There are some who only own a couple of stocks.

Maybe they have GE or General Motors. Microsoft has always been one of those names. It is the success story of America, this is a man who started this operation with some buddies out of his garage and made it into the world - at many points in the last ten years, the world's biggest company.

Every computer - not every computer, but many computers in the world run Microsoft software and despite all of the challenges and all of the developments in the world of technology and computing, this has been the story that's been with us every step of the way, so this man is widely regarded as a genius.

And despite all the evil ideas people have tried to associate with Microsoft over the years in terms of controlling the market and being a cartel, he has emerged as a man who has dedicated his riches to helping the world and making it a better place and to excelling in America. So there are a number of people who tie the fortunes of Microsoft to Bill Gates.

Bill Gates has to take a long time to leave Microsoft so that Americans don't fear -- investors all over the world don't fear that this company fails without him at the helm or without him connected to it.

BLITZER: Ali, stand by. Andy Serwer is on the phone, our contributor from "Fortune Magazine."

What's going to be the impact of this, Andy in terms of Microsoft and all of us who have come to rely on Microsoft? I don't hear Andy Serwer, we are going to try to reconnect with him.

ANDY SERWER, CNN CORRESPONDENT: Yes. I'm here.

BLITZER: Andy, are you there?

Never mind. Let's go back to Ali. Ali, let me ask you that question, the impact on all of us who use Microsoft.

VELSHI: Well, Microsoft, Steve Ballmer who you are seeing on the screen right now, took over from Bill Gates some years ago as the boss, the head of the company, he's done quite a job, they assured investors and users that the company will run effectively.

Steve Ballmer has done a very, very good of running Microsoft effectively and keeping up with the competition, but this company is under more pressure than ever before because there are so many competitors and so much going on in the world of technology and computing.

So the problem that Microsoft has now is -- does it have the brain power to go ahead? On paper it surely does. It employs many, many of the smartest people in the world. But Bill Gates was the visionary behind it. Is Steve Ballmer able to carry that on his shoulders going forward? So far the market seems to indicate, yes, the shares are not down, in fact they're up a little bit from where they closed so it looks like their strategy, at least for now, is succeeding, Wolf?

BLITZER: All right, Ali. Our Internet reporter Jacki Schechner is watching this dramatic news unfold as well online.

What are you picking up?

JACKI SCHECHNER, CNN CORRESPONDENT: Well, Microsoft has put its full press release and information online, you can see the announcement for plans for the transition in July of 2008, if you click on this picture here it will show you all the big players together that we're talking about.

Steve Ballmer, Bill Gates, Craig Mundy, Ray Ozzie, and you can also take a look on this Web site at Bill Gates' bio and you can pull that up there and see what his history is with the company, and what you can do is stream this video, this press conference live. I'll tell you, the video does buffer, which means it starts and stops a little bit, but you can follow through Microsoft's Web site, Wolf.

BLITZER: Jacki. Thanks very much.

Ali stand by. We are going to continue to cover this story. Lots more coming up. A bombshell announcement, Bill Gates announcing two years from now he's going to step down from Microsoft, a company he founded and worked to develop for 26 years, much more on this story coming up.

Also we are going to get back to the political battle over the war in Iraq. It's happening right now here in Washington on Capitol Hill. Are Democrats divided or united in this debate? James Carville and Bay Buchanan in today "Strategy Session." That's coming up.

(COMMERCIAL BREAK)

BLITZER: The breaking news that we've been following. Bill Gates, the founder of Microsoft after 26 years, just announcing moments ago, he will be stepping down in July 2008 as the chairman. He will be succeeded -- you see Steve Ballmer there, he's been his partner over these past 26 years. Bill Gates and Microsoft ending it over the course of the next two years. He's explaining now why there's going to be a steady and seamless transition over the next two years.

Let's talk a little bit about that and politics, James Carville and Bay Buchanan are here. Bill Gates and Microsoft what an impact he has had!

JAMES CARVILLE, DEMOCRATIC STRATEGIST: Wow! That's why we need to protect Social Security so it will be there when Bill Gates retires.

BLITZER: He's going to need it.

CARVILLE: Look. I think the man obviously from a distance is very passionate about his foundation and what they are a doing, and he wants to focus his energy there, and I think Charles De Gaulle is right, the graveyards are full of indispensable people. And I suspect that Microsoft will be fine after he leaves ...

BLITZER: There's no doubt he's changed the world.

BAY BUCHANAN, PRESIDENT, AMERICAN CAUSE: You know, he's been a great inspiration for so many young people, there's more than been way to make it. Look, there's more than one way to make it. You've got some ideas and some creativity, you are willing to work hard, you don't have to go the route of school, etc.

I think he's been terrific. I know one of my sons in particular who is not interested in school but is very smart uses him saying look, we can do it another way.

BLITZER: He'd like to be worth $100 billion.

BUCHANAN: He makes a lot more than those lawyer (ph) friends of his.

BLITZER: Let's talk about what's happening here in Washington today. How divided, James, are Democrats in the House and the Senate right now in terms of setting a date, a target date for withdrawal of U.S. troops from Iraq.

CARVILLE: About as divided as the company. This is one of the problems, when you start a war, the justification falls apart, the planning was horrible, the execution pathetic and the country doesn't like it and the Democrats -- the truth of the matter is there is no good solution to Iraq, if there was one somebody would have thought about it a long time ago.

The Democrats have a lot of different ideas, very few Democrats say we should stay the course. Obviously what we're doing is not working. We haven't drawn down the first troop. We are now talking about a troop commitment of at least 50,000 people for 10 more years. This was not part of the bargain when we did this so obviously we need some fresh ideas. The Democrats have a lot of them.

BLITZER: Increasingly we are hearing grumbling even among conservatives that this war was a mistake and it is time to cut losses. BUCHANAN: No question the country is divided as James said as Republicans and Democrats are as to whether we should have gone, whether we should have gone or not. But the key is, I think there's less division as to what we do now. I think most Americans would like to see us succeed, we see real progress in the last week, and you see a new government over there, the president very bold saying look, it's time for you guys to take the reins, we'll give you the support to do that but you have got to start taking them. But I think there's a possibility. The prime minister says 18 months. Give us at least 18 months and I think the American people will support that.

BLITZER: Here's how Dennis Hastert, the House speaker framed it earlier today. Listen to this.

(BEGIN VIDEO CLIP)

REP. DENNIS HASTERT, (R) HOUSE SPEAKER: I came home from my Iraq believing more strongly it is not enough for this House to stay "We support our troops." To the men and the women in the field in harm's way, the statement rings hollow if we don't also say "We support their mission."

(END VIDEO CLIP)

BLITZER: What do you think about that? The way he's framing it clearly designed to put Democrats on the defense.

CARVILLE: As we know now John Boehner, the majority leader, wrote an entire memo how to frame this and how to take political advantage of it. I don't think there's a person in America that has an IQ of over four that doesn't see right through all of this. The truth of the matter if this administration and this Congress spent as much time worrying about a strategy for the troops as they do a political strategy which this is all about, and if the speaker spent as much time on that as he did making money on land deals, it would be a lot better.

BUCHANAN: The Democrats spend week after week hammering the president on how he's implemented, they pounded him month after month and so often, every six months, Republicans finally say let's put it on the record, fellows, let's put a vote on this and see where we stand, and the Democrats complain, that's what happens, they don't want to be on the record.

CARVILLE: There's a whole memo from John Boehner talking about how to politicize this. The Democrats don't want is on the day that they have 2,500 troops that have been killed Iraq and the administration refers to it as just a number, to sit here and have a political debate forced on you. And neither does the country want this. That's why the country is tired of listening to Denny Hastert making millions on land deals and coming around and trying to make political hay out of Iraq.

BUCHANAN: Personally attacking Denny Hastert doesn't change the facts.

CARVILLE: It's not a personal attack.

BUCHANAN: It doesn't change the fact that the Democrats are divided on this, they don't want a vote, the don't want to be on the record. They just want to hurt the president on the issue of the war. That's all they want to do.

They're the ones that have made political.

CARVILLE: The first congressman to call for withdrawal was Walter Jones, a Republican from North Carolina. Camp Lejeune is in his district.

(COMMERCIAL BREAK)

BLITZER: Guys we have to leave it there because of the breaking news, Bay and James, thanks very much and as you saw earlier, not only Bay and James but Jeff Greenfield and Bill Schneider, they are all part of the best political team on television. CNN, America's campaign headquarters.

Coming up much more on our breaking news out of Washington State. Bill Gates will give up his day-to-day roll in Microsoft. Much more on that coming up. Plus Cher comes to Washington, we'll tell you why the world famous entertainer is on Capitol Hill. All that coming up on our political radar. That's next.

(COMMERCIAL BREAK)

BLITZER: Welcome back on our political radar this Thursday. A pop music icon takes center stage on Capitol Hill to campaign for a favored cause.

Cher appeared at a hearing on the use of combat helmets. She's teamed up with a group called Operation Helmet. It's dedicated to supplying U.S. military forces with padding that improves their head gear. She didn't actually testify. Instead, she let her presence make a statement.

The Senate majority leader Bill Frist election year campaign to protect the American flag cleared a hurdle today. The Senate Judiciary Committee voted in favor of a constitutional ban against burning of the start and stripes. The measure goes to the full Senate.

It's already passed the House by the required two thirds margin. Coming up, I'll speak about that and lots more with Senator Bill Frist, the political motives behind his push for a flag burning ban. And some other hot button social issues backed by conservatives right now. All that coming up.

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