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THE SITUATION ROOM

Devastation in Central Florida; Showcase for Democratic Presidential Hopefuls; New Evidence on Dire Situation in Iraq

Aired February 2, 2007 - 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: I'm Wolf Blitzer here in Washington.
We're gouging to continue to follow the devastation in central Florida. It's happening right now. The killer storms wiping out most everything in their paths. Now the search and rescue operations priority number one.

Were state and federal officials ready for the worst?

We're following this part of the story.

Also this hour, there is stark new evidence that the situation in Iraq is dire and that it is deteriorating. The report from the president's own intelligence team put Mr. Bush's back against the wall and it's fueling doubts that an influx of troops will make a difference.

Also, it's the first big showcase for the Democratic presidential hopefuls and for their stands on Iraq.

Are they beating up on the president or on one another?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

We're following two huge stories today. Both are powerful and painful in very different ways.

Right now, four counties in central Florida are under a state of emergency. A series of storms barreled through overnight, packing a devastating tornado.

Reuters is now quoting emergency center spokesmen as saying the death toll has risen to 19. Hundreds of homes are simply blown to pieces. Thousands are without power, their lives shaken to the very core.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: All I heard was trees breaking and pine tree smell, glass breaking and people screaming at 4:05 this morning.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP) UNIDENTIFIED FEMALE: I went through three hurricanes sitting right here. And I was scared, but nothing like this. Nothing like this.

(END VIDEO CLIP)

BLITZER: We're going to have much more on the storm devastation, the search and rescue efforts that are currently underway, including a live report from central Florida. That's coming up momentarily.

But I also want to get to that grim new assessment of the situation in Iraq coming from America's spy agencies. This report suggests Iraqi leaders will be hard-pressed to stabilize their country in the next year-and-a-half. That will likely make -- that it will likely make it more difficult for U.S. troops to leave any time soon.

Our White House correspondent, Ed Henry, has more on the report and its impact on the administration's strategy.

What is -- first of all, update our viewers, Ed, on what the bottom line of this intelligence estimate is and what they're saying at the White House.

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Just a blistering assessment in the president's own National Intelligence Estimate, the so-called NIE. We've heard this before from outside groups like the Iraq Study Group, that the situation on the ground in Iraq is deteriorating. But now we're hearing it from the president's own intelligence advisers.

What they're saying is that the cycle of violence in Iraq is likely to get worse over the next year or so and also that the chances of political reconciliation, such a critical factor there on the ground in Iraq, those chances are fading fast.

Now, the White House strategy basically is to play the only card they have here, which is to say that the situation is, in fact, so desperate, that the president needs time to try to play out his plan of increasing troops to Iraq, that he needs more time.

But the bottom line is even the White House is acknowledging that plan may not work.

Here's the White House national security adviser, Stephen Hadley.

(BEGIN VIDEO TAPE)

STEPHEN HADLEY, NATIONAL SECURITY ADVISER: The intelligence assessment that is reflected in this NIE is not at war with the new approach or new strategy the president has developed, but I would say explains why the president concluded that a new approach, a new strategy, was required, explains a number of the elements of that strategy and generally supports it.

(END VIDEO CLIP) HENRY: But this new report also challenges the president very directly on some other key points, such as the fact that the president, the White House advisers still continue to refuse the word -- refuse to use the term civil war to describe the situation. This report says the term does describe "key elements of this conflict."

Also, the president, as you know, has been increasingly pointing the finger of blame for the violence in Iraq square at the Iranians. This report does acknowledge Iranian influence, but says that the outside actors are not the most critical factor -- Wolf.

BLITZER: The bottom line from this report, Ed, is that these are 16 intelligence agencies in the U.S. government. This is their consensus, although in the classified version, there are varying dissenting opinions that we don't know about because it's classified, is that right?

HENRY: That's right. Now, I've spoken to some analysts who say that the disagreements among intelligence analysts were limited in this particular case. But you're right, there are more classified -- there's a classified version with a lot more detail.

But the bottom line is that this is the president's own intelligence team, those 16 spy agencies that you noted, saying that the situation is desperate -- Wolf.

BLITZER: All right, let's go up to Capitol Hill.

Andrea Koppel is up there.

What's the reaction from members of Congress -- Andrea.

ANDREA KOPPEL, CNN CORRESPONDENT: Well, Wolf, six months after Massachusetts Democrat Ted Kennedy led the charge and called on the intelligence community to put together that new assessment, a hard copy of the highly classified version of the NIE finally arrived here on Capitol Hill this morning.

(BEGIN VIDEO TAPE)

KOPPEL (voice-over): Congressional Democrats seized on the report as further proof the president's plan to send more troops to Iraq won't work.

Senate Majority Leader Harry Reid called it "the latest in a long line of bleak assessments," indicating the president's plan is "flawed and failing," while Congressman Ike Skelton, the chairman of the House Armed Services, said: "The NIE makes it more clear than ever that the president's plan has little chance of success."

Oregon Democrat Ron Wyden predicted the report would boost support for a bipartisan Senate resolution opposing the president's plan.

SEN. RON WYDEN (D), OREGON: Clearly, a civil war is very bad. This appears to be even worse. The intelligence community is saying that there is a level of chaos that has completely infected the region. And that's why I believe a different policy is needed.

KOPPEL: The non-binding measure co-sponsored by key Republicans like John Warner and Chuck Hagel, as well as senior Democrats Carl Levin and Joe Biden, could go to a vote as soon as next week.

But even Republicans who support the president's plan didn't find much good news in the intelligence report.

SEN. KIT BOND (R), MISSOURI: There are lots of bad alternatives. The president's plan seems to me to be the only one that offers a prospect of hope, although it is a difficult one.

(END VIDEO TAPE)

KOPPEL: And now just within the least hour, Republicans have announced that they are going to block a vote on the Warner-Levin resolution, which was supposed to happen next week, unless Democrats agree to debate and vote on at least two, but perhaps three alternative resolutions, Wolf, one of which is being offered up by Senator John McCain and is in support of the president's plan to boost the number of troops in Iraq -- Wolf.

BLITZER: To get that vote, they would need 60 members of the Senate, Andrea.

Does the measure by Warner and Levin -- do they have the 60 votes to break a filibuster?

KOPPEL: They do not. In fact, because we heard Senator McCain, who is the minority leader, just within the last hour, say that he has gotten assurances from all 49 Republican senators that they will not vote to cut off debate -- Wolf.

BLITZER: Andrea, thank you for that.

Andrea is up on the Hill.

The National Intelligence Estimate outlines three worst case scenarios that could make the bloodshed, the instability and the suffering ongoing in Iraq right now even worse.

The first, chaos leading to partition of the country. The report acknowledges that fighting could split Iraq into three antagonistic parts, a collapse that could lead to even greater violence for the -- for at least several more years.

The second worst case scenario, emergence of a Shia strongman. The report says a security implosion in Iraq could lead the nation's patrol most powerful group, the Shia, to assert its latent strength.

And the National Intelligence Estimate warns of a total anarchy and a fragmentation of power as its third nightmare scenario. The report says a checkered pattern of local control would present the greatest potential -- the greatest potential for instability in Iraq.

We're going to have much more on this report and the reaction. That's coming up.

Let's check in with Jack Cafferty.

He's got The Cafferty File -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Well, that's just great. This is a 90-page document you're talking about and we've been able to read three-and-a-half pages of it so far.

And on another front, here we go again. President Bush wants another $100 billion to fund the wars in Iraq and Afghanistan this year. That's in addition to the $70 billion that he's already asked for and he says he's going to need another $145 billion for 2008.

That's another $245 billion to flush down the toilet in support of one of the great foreign policy blunders of the last hundred years or so. Remember, American taxpayers have already forked over $400 billion for this debacle. And remember this, too -- the war funding is not part of the budget. It's off the books, supplemental appropriations.

So when Washington tells you the deficit is shrinking, they're lying.

The latest National Intelligence Estimate on Iraq paints, as Wolf was telling you, and Ed Henry and others, a bleak picture of the future there, saying if the United States pulls out, things could actually get worse.

Meanwhile, $245 billion could go a long way here at home.

How many problems in this country need fixing?

Here's the question -- how could $245 billion for the war be better spent?

E-mail your thoughts to caffertyfile@cnn.com or go to cnn.com/caffertyfile.

I wonder what's in the 86-and-a-half pages of that report we haven't been allowed to see -- Wolf.

BLITZER: I'm told a lot more detail and a lot of stuff that is very, very disconcerting. You know, here's the problem. If you read the declassified three-and-a-half pages, single spaced that you and -- you have read and I've read, it basically says if the U.S. stays in Iraq, it's going to be bad. It's going to be horrendous over the next year to year-and-a-half. But if the U.S. were to pull out, it would also be horrendous. It would be horrible.

It looks like a Hobson's choice there.

CAFFERTY: Yes. The bad news is there is no good news, apparently.

BLITZER: Yes. There's a limited opportunity and so much depends on what the Iraqis themselves do, especially the Shiite-led government of Prime Minister Nuri Al-Maliki. And if you read this report, even the declassified version, it doesn't lay out a lot of hope there.

CAFFERTY: Well, that's a very fragile government, at best. And a lot of people suggest it's being held up by Muqtada al-Sadr and his Mahdi Army. And the minute the United States pulls out of there, Muqtada al-Sadr and his lads will just run rampant over the place.

BLITZER: Jack, we'll get back to you in a little while.

Jack Cafferty with The Cafferty File.

By the way, if you want a sneak preview of Jack's questions, plus an early read on the day's political news, what's ahead here in THE SITUATION ROOM, you can sign up for our daily e-mail alert. Just go to cnn.com/situationroom.

Coming up, a path of destruction and a state of shock in central Florida.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: For a minute there, it just got -- it seemed like not even a minute, maybe a second -- and it got very, very quiet and then all of a sudden, bam, it was just a big, big explosion. And, you know, I didn't know what was going on, to tell you the truth.

(END VIDEO CLIP)

BLITZER: And when we come back, I'll speak with Congressman John Mica about the devastation in his district in central Florida.

Also coming up, the National Intelligence Estimate and the grim picture it paints of Iraq. The defense secretary, Robert Gates, delivers his take on the situation in Iraq.

And later, plenty of posturing and postulating. Democratic presidential hopefuls get their first big shot at showing their stuff at the party's winter meeting. It's happening here in Washington. But as CNN's Candy Crowley found out, it all comes down -- at least to now -- for -- or to Iraq.

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

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the hot shots coming in from the Associated Press right now.

These document the aftermath of a series of powerful storms packing tornado-force winds in central Florida. In New Smyrna Beach, firefighters sift through wreckage searching for survivors. In Lady Lake, a 12-year-old girl carries her baby brother from their mobile home. In a retirement community, a man spray paints the name of his insurance company on the front of his damaged home. And in Delan, Florida, a man looks at the remains of his bedroom. Some of these ours, hot shots, pictures often worth a thousand words.

Right now we go to the storm -- the storm zone in central Florida. Those four counties ravaged by a fierce weather system, including a powerful tornado.

Our CNN meteorologist, Rob Marciano, is right in the center of the destruction in Lake County -- Rob, first of all, give us a sense of what's behind you, what you see, the devastation. It looks so awful.

ROB MARCIANO, CNN METEOROLOGIST: It is awful, Wolf. And when you're on the ground, when you get a close-up look at what we've been seeing in aerial shots from above, it's really, really shocking.

This is a home, this is a brick home -- what's left of it -- after the tornado came through last night. You see the walls completely caved in, the 2 x 4s, the studded walls that were bolted down to this concrete foundation also torn apart.

This room right here, this corner room you're looking at is where an elderly woman was sleeping, on this bed, when the walls came crashing down on her, burying her in debris as the tornado continued on its path beyond the home and into that field.

Her husband, sleeping in the room next door, you can see that through that door right there, the same situation. Roof and wall completely collapsed on his bed. He managed to crawl out from underneath that wall -- underneath that collapse wall, get to his wife and pull the debris and the wall and the 2 x 4s and the studs off his wife and get her to safety.

Miraculously, this couple, just some bumps and bruises and a couple of cuts and scratches. They survived this storm.

Beyond -- beyond the house, it continued down that -- that open field, where debris from this house and others is literally banked up against the tree line. And utility crews continue to work to restore power here in this community of Lady Lake in Lake County, the hardest hit.

They're calling this the worst disaster ever in this county and when you see it close-up, Wolf, you can certainly understand why.

Miraculous, to say the least, this couple extremely grateful for their lives today, even though they've lost pretty much everything they owned with this tornado ripping through the area late last night -- Wolf.

BLITZER: Are they in the hospital? What kind of injuries did this couple sustain?

MARCIANO: Yes, they're fine. They're -- we just talked to them on here a little while ago. They're here with members of their church who helped them -- are helping them go through their home and pick up valuables. The home obviously is totaled, but they're picking up what they care about most and the valuables that they can find.

But they're all -- they're in very, very good spirits because they've survived this -- cuts, bruises, but no serious injuries.

And you know what?

I have a sense this is not the only story like this around here, with all the destruction. Certainly survivors have lots of stories to tell, and we're going to try to get to as many of them as possible -- Wolf.

BLITZER: It certainly is miraculous.

Good word, indeed, for that.

Rob, stand by, because I want to come back to you in a moment.

As you just saw, you just witnessed here a slice of central Florida is in crisis right now. It's been torn apart by this deadly tornado -- a string of tornadoes, apparently. Here are some of the snapshots from the path of destruction.

In Lady Lake, Florida, a 31-year-old church built to withstand 150 mile an hour winds is now demolished. Parishioners gathered amid the ruins today, vowing to rebuild. You just heard Rob talk about it.

Not far away from that church in Lady Lake, we take on the scene on Griffinview Drive. It's a bird's eye view of a community in ruins. Homes are reduced to fragments of wood and metal. Access to parts of this neighborhood has been closed off because of the danger from ruptured power and gas lines.

Let's move on to Delan, Florida now in Volusia County, where we see another hard hit patch of destruction. You're looking at a trailer park simply blasted to its foundations. Authorities say the damage goes on for some two miles. But a nearby middle school apparently came out of the storm intact. Thank god for that.

Elsewhere in Volusia County, more heartbreaking images, though -- home after home after home simply flattened. The lives people led inside those homes shattered, as well.

Joining us now on the phone from Deland in Florida is Congressman John Mica.

Congressman, I know this is your district. You've just toured the area. Give us a sense of what you have seen and what is going on.

REP. JOHN MICA (R), FLORIDA: Well, Wolf, it's pretty devastating. Unfortunately, my district was hit in the northern part of the city here at Christmastime by another tornado. We've had three very serious hurricanes in the last couple of years. And today catastrophic damage.

So a lot of folks are reeling from those natural disasters and the -- the disaster and this hit is -- is almost unbelievable. BLITZER: We've confirmed here at CNN, Congressman, that 19 people are now confirmed dead. I don't know if you have any different numbers than that.

MICA: No. Actually, the governor just arrived here and one of his aides had told me that before I started talking to you. And our hearts and prayers go out to all of those folks that have lost life.

Now, we have been most fortune in Volusia County and here in Deland. We have not had any fatalities to date. I think the rescue efforts are about completed. The sheriff and other first responders have told me that. So we've been particularly blessed and people can put their houses and their lives back together.

But, again, we're -- we're just grateful for that and thinking about those who were far less fortunate.

BLITZER: Yes, we've heard really, really heartbreaking stories, Congressman, about children who survived but both of their parents killed. I'm sure you've -- you've heard those stories, as well.

MICA: Well, here in Deland, I had one lady I met this morning. She lost her house at Christmas and today she lost her job. Where she works is literally blown away.

So people have taken some pretty heavy hits.

But I'll tell you what. People are remarkable. The folks that I've met are hugging their kids and grateful that they're alive and those that have lost their homes and businesses are already out there planning to rebuild. And we're going to try to help them.

BLITZER: Is the federal government, FEMA and other federal agencies, already doing what you want them to do? Or are they not responding as quickly as you'd like?

MICA: Well, Wolf, we've had a rough week and I started out last Friday, a week ago, getting a rejection letter from FEMA on a disaster declaration for the Christmas tornado. So since Monday, with the governor, with the head of FEMA, we're making an appeal on that one.

So we got hit there. This is, of course, just an incredibly disastrous event. I predict we'll qualify. I've been assured by everyone up and down the chain of command that we will be eligible for immediate assistance. And we intend to receive that.

BLITZER: Our heart goes out to all your constituents there who have suffered, and everyone else in Florida, as well.

Congressman John Mica, thanks very much.

MICA: Thank you, Wolf.

BLITZER: We'll get back in touch with you.

MICA: Bye now. BLITZER: In the midst of the devastation, Floridians are sending us pictures of their ravaged communities.

Our Internet reporter, Abbi Tatton, standing by with some of them -- Abbi.

ABBI TATTON, CNN CORRESPONDENT: Wolf, a number of the photos that CNN is receiving today through our too, I-Report, are from a large retirement community called The Villages in central Florida.

That's where this photo was taken by Susan St. Amour, who is staying there right now with her father. This was the country club at Mallory Hill. And Susan has been heading out and taking photos of some of the homes nearby. I can zoom in on that one and show you inside that home just what people are dealing with today.

Another house almost unrecognizable there.

Another resident of this community here, Rhett Boswell, whose own home escaped damage, has been cycling around his neighborhood, recording the damage to roof after roof after roof. Rhett tells CNN that residents there just were not prepared for this. In the summer, everyone thinks about hurricanes, but in February, just no one was anticipating these kind of storms -- Wolf.

BLITZER: I know we're going to be getting more of those pictures in, Abbi, and we'll get back to you to share them with our viewers, as well.

Still ahead, orphans of the storm and amazing survival stories after tornadoes rip through central Florida.

Also, other news we're following -- some Democrats say there's a wave of public anger in America.

But what are people angry about and how does the party plan to capitalize on it?

Lots of things happening on this day.

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

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM, and it's happening right now. A rising death toll in storm ravaged central Florida. Reuters quoting an emergency official as saying 19 are now dead. CNN has confirmed that number.

A powerful tornado and storm system pummeled four counties overnight, reducing hundreds of homes to rubble.

Also this hour, the president's national security adviser says the latest intelligence on Iraq convinced Mr. Bush to change his war strategy. A newly declassified report from America's spy agencies suggests the security situation is likely to deteriorate in the coming months.

A dire new warning about global warming is prompting calls for drastic action. A new United Nations report is blaming humans for much of the climate change over the past 50 years. The Bush administration is offering a cautious response, calling for what it says is a global discussion that is necessary.

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

Checking some of the latest developments in the storm zone in Florida, the governor, Charlie Crist, has declared a state of emergency in four counties. Some 10,000 families are without power. An emergency official says some 20 square miles of Lady Lake, Florida were hammered by the deadly storm system overnight.

Local residents are being cautioned to boil water and throw out food in their refrigerators, which most likely has spoiled.

Now we want to check in on the federal government's response to the devastating storms in Florida. It's a new test for emergency officials in the wake of the Hurricane Katrina debacle.

Let's bring in our homeland security correspondent, Jeanne Meserve -- Jeanne.

JEANNE MESERVE, HOMELAND SECURITY CORRESPONDENT: Wolf, I've just been told by a senior FEMA official that FEMA Director David Paulison and a small contingent of FEMA staff will be heading down to Florida this weekend to take a look at the damage.

Right now, the agency is in something of a wait and see mode. It has some teams on the ground in Florida. Others are on the way to help assess the damage. The agency is also sending in a federal incident response support team to help expedite the delivery of aid, if and when it is sent.

FEMA Director Paulison has talked with the governor, Governor Crist, as has Homeland Security Secretary Michael Chertoff.

But there is a protocol for federal aid to flow in. The governor has to make a request. Then those FEMA assessment teams go out and take a look at things. They report back to FEMA and FEMA makes a recommendation to the White House, and then the president decides whether or not FEMA disaster aid will be provided.

The states do not always get what they want. As you heard from Congressman Mica a few minutes ago, Florida, for instance, did not get the aid it requested after the Christmas Day tornadoes. Just this week, Governor Christ sent a letter to President Bush appealing that decision.

But as for today's twisters, supplies are ready to go, but not moving yet -- Wolf.

BLITZER: Are they indicating -- assuming the president signs off on this -- how long this bureaucratic process could take? MESERVE: You know, I've asked how long it would take. They would not give me a time frame. I think, Wolf, that it can move very quickly if they decide that the need is great enough.

BLITZER: I think you're right. He's just got to make a political decision, or at least an important decision, that the need is there, and then things will begin to flow.

All right, Jeanne, thank you very much for that.

We are going to stay on top of this story. We're not going to leave for very long. The pictures are devastating. The stories are heartbreaking. We will update you on what is happening in central Florida.

But there's other big news we're following today, as well, including that very grim new assessment of the situation in Iraq offered by the president's own intelligence team.

As details of that report emerge, the defense secretary, Robert Gates, went before reporters.

Let's get some specific details, what he said, from our senior Pentagon correspondent, Jamie McIntyre -- Jamie.

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, Wolf, you know that the strategy in Iraq, the new strategy implemented by President Bush, hinges almost entirely on the performance of Iraqi troops and the commitments of the Iraqi government.

And this new report has a very gloomy forecast for how it thinks both the government and the troops will perform. One of the things it says, for instance, is that, despite real improvements, the Iraqi security forces will be -- quote -- "hard-pressed to execute significantly increased security responsibilities or operate independently against Shia militias over the next 12 to 18 months."

That is, of course, something that would be key for success in Iraq. And it, in fact, is much more pessimistic than what General George Casey just told Congress yesterday, that Iraqi security forces would be ready to assume control by the end of the year, assuming the violence is under control.

The other thing this report says is that all this debate about whether there is a civil war in Iraq, it says, yes, there is a civil war. But, today, Defense Secretary Gates said, that's true, but it's much more complex than just a single civil war.

(BEGIN VIDEO CLIP)

ROBERT GATES, SECRETARY OF DEFENSE: I believe that there are essentially four wars going on in Iraq. One is Shia on Shia, principally in the south. The second is sectarian conflict, principally in Baghdad, but not solely. Third is the insurgency, and fourth is al Qaeda. And al Qaeda is attacking, at times, all of those targets. (END VIDEO CLIP)

MCINTYRE: Now, Wolf, the report isn't all gloom and doom. It does hedge its bets, and suggest that are some things that could reverse the downward spiral, including if the Sunni were to accept the government and if the Shia and Kurds were to make some major concessions -- Wolf.

BLITZER: He could have added a fifth war, too, Jamie, the criminals there, who are apparently in an enormous sense of power. They're -- what they're stealing, and they're killing. That's a whole different aspect of this war as well.

MCINTYRE: Well, Wolf, you know, a lot of that criminal element is interwoven with the four wars that he outlined.

BLITZER: I think you're right. I think that's a fair assessment, too.

Jamie, thanks very much. We are going to stay on top of this story.

Up next, though: At the Democrat's party winter meetings, the front-runner for the party's presidential nomination is having to field some pretty tough questions.

And, in the Republican field, there are some very interesting new numbers out. It looks like the race may be a dead heat.

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

(COMMERCIAL BREAK)

BLITZER: At least 19 people are confirmed dead in that string of tornadoes that ripped through a path in central Florida overnight. We're watching this story. New details are coming in. We're going to go back there live shortly.

But there's other news we're following as well: on the road to the White House today, the first major showcase for Democrats who want the top job. It's the party's big winter meeting that is taking place right here in Washington.

Our senior political correspondent, Candy Crowley, is here.

You're following the drama here at the Democratic meetings.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: You know, Wolf, they talked about education, and they talked about health care. They talked about the budget crisis. But, mostly, they talked about the war in Iraq.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): Carrying the baggage of her yes-vote on the Iraq war, she pushes back. SEN. HILLARY RODHAM CLINTON (D), NEW YORK: If I had been president in October of 2002, I would not have started this war.

(CHEERING AND APPLAUSE)

CROWLEY: The '07 winter meeting of the Democratic Party gives the rank-and-file their first side-by-side comparison of their '08 presidential candidates. From any angle, it's clear the senator from New York is vulnerable on the war. And, while her main opponents name no names, she is the subtext of their arguments.

SEN. BARACK OBAMA (D), ILLINOIS: I was opposed to this invasion, publicly, frequently, before it began. I thought it was a tragic mistake.

CROWLEY: And, where she defends a Senate resolution expressing opposition to putting more troops into Iraq, former Senator John Edwards calls the resolution a betrayal.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: We cannot be satisfied with passing nonbinding resolutions that we know this president will ignore.

(CHEERING AND APPLAUSE)

EDWARDS: We have the power to stop the escalation of this war.

CROWLEY: And, where she opposes cutting off funds for the war, Dennis Kucinich, the war's original protester, objects.

REP. DENNIS KUCINICH (D-OH), PRESIDENTIAL CANDIDATE: If we give the president the money to continue the war, the Democratic Party will have bought the war.

CROWLEY: Ditto, Senator Chris Dodd.

SEN. CHRISTOPHER DODD (D-CT), PRESIDENTIAL CANDIDATE: Frankly, I am disappointed that we can't find a way to do more than send a meaningless message to the White House.

(CHEERING AND APPLAUSE)

CROWLEY: She remains the clear and early front-runner in the Democratic race for president. But Iraq is a clear problem. She promises a different future.

CLINTON: If we in Congress don't end this war before January 2009, as president, I will.

(CHEERING AND APPLAUSE)

CROWLEY: The risk is that each day of the war seems to increase the number of get-out-now Democrats. For them, 2009 may not be soon enough to win their votes.

(END VIDEOTAPE) CROWLEY: The focus on Senator Clinton's past vote is almost solely a product of her front-runner status. Of the four other lawmakers running for president, Dodd, Biden, Kucinich, and former Senator Edwards, only Kucinich voted against the war -- Wolf.

BLITZER: And, is it my imagination, or are these Democratic candidates increasingly becoming much more anti-war, almost with every day?

CROWLEY: Oh, absolutely. I mean, it's -- it's -- it's amazing.

I mean, I listened to Senator Clinton over the weekend. I listened to her today. You know, it's the same message, but it does seem that not just her rhetoric, but the rhetoric of the Democrats in the -- in the party that are running for president, has ratcheted up.

Now, part of this is, it's reflecting the base of the party, which, as this war goes on, as we get new information, like the NIE estimate today, it just increases that base of get-out-now people.

BLITZER: Candy, thanks for that.

Candy going to continue to cover the story for us.

The Web is offering a glimpse of what happened behind closed doors over at that Democratic National Committee meeting.

Our Internet reporter, Jacki Schechner, has some more -- Jacki.

JACKI SCHECHNER, CNN INTERNET REPORTER: Wolf, the DNC has already put video from today's winter meeting up on their Web site. In addition to this, they're planning to have speeches from all of the '08 hopefuls archived on -- online.

Now, you can also find a full photographic photo book essay, slide show. It really will give you a sense of what it was like to be in that meeting. Now, they also have a blog that they are keeping track of what is going on. They have invited big bloggers as well, some of the national names you have heard of, like mydd.com, and some smaller-known local blogs, like Blue Jersey.

Now, they say that a lot of the candidates and potential candidates made their way through what they are calling bloggers alley. Here, you can see Dennis Kucinich talking to some of them. And it was really an idea for them to get some independent voices out.

They say they had 47 bloggers that were invited or credentialed. And they were from 47 distinct blogs -- Wolf.

BLITZER: Jacki, thank you.

Coming up: America votes 2008, the road to the White House. Has the mess in Iraq given the Democrats a chance to take back the Reagan Democrats, as they used to be called?

And Giuliani vs. McCain, we have new poll number results. Who is ahead? Who is more likable? You will want to stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Some critics of the federal government argue there is a war under way here in Washington on America's middle class. That theme is picking up political steam in the halls of power.

Our senior political analyst, Bill Schneider, is watching this story -- Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Wolf, you don't usually see populist politics when the economy is doing OK. But that may be changing.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): The statistics sound good.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Our economy has created nearly 7.2 million new jobs.

SCHNEIDER: Sixty-three percent of Americans say the country's economy is in good shape, the highest number since before 9/11. But Democrats are sensing a lot of middle-class anxiety.

Senator Chuck Schumer just wrote a book about it.

SEN. CHARLES SCHUMER (D), NEW YORK: They are unsure of their footing in an economy and a world that is about change, technology, and even disruption.

SCHNEIDER: The middle class feels buffeted by large and powerful forces, like globalization.

GARY BURTLESS, SENIOR FELLOW IN ECONOMIC STUDIES, BROOKINGS INSTITUTION: We have not invented for middle-class households very much in the way of new protection arrangements that keep their health insurance going when they lose a job, that help buffer them against big ups and downs in earned income when they lose their jobs or they have to accept a major pay cut.

SCHNEIDER: Middle-class wages have gone up, but the rich have made much bigger gains. And middle-class people often don't see their gains.

BURTLESS: Our employers are putting more money in our health care plans than they had to in the past. It means that our paychecks aren't rising as fast as our compensation is.

SCHNEIDER: Democrats sense a wave of public anger at those large and powerful forces.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: We cannot allow America's health care policy to be set by big insurance companies and big pharmaceutical companies.

SCHNEIDER: Is President Bush aware of the new populism?

BUSH: The fact is that income inequality is real. It's been rising for more than 25 years.

SCHNEIDER: He said that? Yes. And this, too, to Wall Street.

BUSH: You need to pay attention to the executive compensation packages that you approve.

(END VIDEOTAPE)

SCHNEIDER: Democrats like Senator Schumer believe it's opening a new role for government, protecting the middle class -- and not just Democrats. Governors, like Arnold Schwarzenegger, are responding with ambitious energy and health care plans -- Wolf.

BLITZER: Lots going on, Bill. Thank you.

On our "Political Radar" this Friday: The two top Republican presidential contenders vie for the best of honors in a new poll. The Gallup Organization asked Republicans and independents who lean Republican to rate former New York Mayor Rudy Giuliani and Senator John McCain.

Who did they say was most qualified? Senator McCain by a nine- point margin. Who is the most likable? Giuliani wins that hands down, by more than 50 points. Who is the best public speaker? Again, Giuliani comes out way ahead of McCain. On the issues, Giuliani trumps McCain on terrorism, the economy, crime and most other domestic issues. McCain comes out ahead on -- ahead of Giuliani on Iraq, moral values and international relations.

And, finally, who has the best chance of winning the Republican presidential nomination? Take a look at this. It's a dead heat, with Giuliani getting 47 percent, McCain getting 46 percent -- statistically, a dead heat.

Up next in our "Strategy Session": Does a new report on Iraq make the president's case for more troops? Standing by , Paul Begala and Michael Steele -- that's coming up next.

(COMMERCIAL BREAK)

BLITZER: Now that bombshell report on Iraq and the consequences for President Bush.

Joining us now in our "Strategy Session": Democratic strategist Paul Begala and GOPAC chairman, the former Maryland lieutenant governor, Michael Steele.

Guys, thanks very much for coming in.

(CROSSTALK) BLITZER: This national intelligence estimate, among its conclusions -- let me read a line to you -- "Iraqi society's growing polarization, the persistence weakness of the security forces, and the state in general, and all sides' ready recourse to violence are collectively driving an increase in communal and insurgent violence and political extremism."

This is a very dire conclusion.

PAUL BEGALA, CNN POLITICAL ANALYST: It is.

And the parts that have been declassified that we have seen also say the situation is deteriorating, that the Iraqis' leadership is weak. And it's -- it's unrelenting bad news there. And this is very consonant with what the Iraq Study Group found, with what other experts have found, what troops are telling us as they come home.

It seems the only person who thinks things are going well there is Dick Cheney. When you interviewed him last week, Wolf, he was like Mr. Happy. You know, and Dick -- you know, Dick Cheney never been accused of being, like, a sunshine boy, but he's the only person left in the world who thinks things are going great in Iraq.

BLITZER: It does paint a pretty serious situation.

MICHAEL STEELE, GOPAC CHAIRMAN: No, it does. It -- it does.

BLITZER: And the president's challenge right now is to deal with a series of effectively bad choices.

STEELE: Well, exactly right.

I heard earlier someone say that, you know, the good news -- the bad news is, there is no good news. And that is the reality of Iraq right now. And what the administration has to do is take reports like this, take the assessments of the troops on the ground and coming home, the generals, and then put the strategy to work.

Look, you're looking at a six-to-eight-month period. The president is going to move forward with the surge. It's going to happen, no matter what the Congress says, no matter what the Congress does, no matter how it feels. The president is going to take a leadership position, and he's going to move forward.

He knows this is a huge risk. The Republican members of the House and the Senate are sitting there very nervously, hoping that this thing works, as are many who are looking at '08. And the reality of it is, the ball is in the president's court. And he is sharing that ball with the Iraqi government and the Iraqi people.

BLITZER: You know...

STEELE: And they better step up.

BLITZER: ... the Democrats are divided right now: How far do they go in expressing their opposition, with this nonbinding resolution as a starting point? Or Chris Dodd now is saying, Kucinich is saying, Feingold is saying, you know what, you have just got to cut the -- cut the money.

BEGALA: Well, they are less divided, the Democrats are, than the Republicans are.

I mean, you have Chuck Hagel, who is in open revolt against his president. Other Republicans -- Walter Jones in the House, for years now, has opposed the war. So, actually, I think that the Republicans are more divided.

But, within the Democratic Party -- you're right -- there is this division. There are some who want to cut off the funding right away. As you said, Kucinich has called for that. Others want to cap the troops, Senator Clinton, Senator Dodd.

And I think that all of that can be very healthy for the Democrats, if they say, we're the one place where people are talking about how to get us out of this thing.

STEELE: Well, Paul is being very nice and soft-pedaling the division in the Democratic Party. That division is...

BLITZER: The Republicans are divided, too.

STEELE: Yes, the Republicans are divided, and the Democrats are just as divided. So, you can't soft-pedal it on either side.

The reality for both parties is, come 2009 a Democrat or Republican president is going to have to deal with the aftermath of Iraq. And that is what this report is talking about now. And that is what this election is going to be about.

BLITZER: The challenge for the Democrats is to do something that will -- especially the Democratic presidential candidates -- that's going to satisfy the base of the party, which seems to be a lot more anti-war than some of the -- the leadership.

BEGALA: That's right.

And the other challenge -- part of that challenge is to simply tell the truth. And the truth is, we're screwed. OK? We're in a quagmire. The definition of a quagmire is, there's no way out.

It's like the great philosopher Joe Strummer from The Clash. He wrote that song, "Should I Stay or Should I Go." "If I leave, there will be trouble. If I stay, it will be double."

There is no good solution. And I -- I worry that our president, for -- destroyed his credibility by saying: Everything is great. It's going to be easy, cake walk. We're going to win.

I don't want my party to pretend that pulling out tomorrow will somehow make every -- all the bad go away.

STEELE: And that is the danger they have, because that -- that is the underlying tone that the base is pushing and that the Democratic potential nominees are going to have to deal with.

The reality of Iraq is, there is no easy, clean or pretty solution.

BLITZER: And -- and, certainly, that's the bottom line, if you read this national intelligence estimate...

STEELE: That's right.

BLITZER: ... the -- the declassified version, the three-and-a- half pages we all read today.

Guys, thanks very much, Paul and Michael, for coming in.

Still to come: Governor Bill Richardson, right here in THE SITUATION ROOM. He's a Democrat from the Southwest who has an eye on the West Wing.

And how could $245 billion for the war be better spent? Jack Cafferty with your e-mail -- all coming up.

(COMMERCIAL BREAK)

BLITZER: Let's go to New York and Jack for "The Cafferty File" -- Jack.

CAFFERTY: Wolf, the question this hour: President Bush says he needs another $245 billion this year and next year for the wars in Iraq and Afghanistan. We said, how could you better spend that money?

John in San Marcos, California: "My first thought is education. A lot of children are being left behind, as we make 'guns or butter' spending choices that are leaving them behind."

Gloria in Las Vegas: "If I didn't use the money on rebuilding the levees in New Orleans, or America's aging infrastructure, or America's Border Patrol and fences, or America's underfunded school system, or maybe paying back the money that has been stolen from Social Security, or funding decent health services, and repaying our military with proper benefits, I would burn the money before I would give one more dime to this war."

James: "If we spent the money to subsidize the purchase of electric cars or plug-in hybrid electric, we could substantially cut our imports of oil. And oil is, after all, the only reason that we're in the Middle East."

Jim in Toronto: "How about spending it on breakfast for every kid in America who needs one, university tuition for every person who wants a better education, but can't afford to go, maybe prescription relief for the elderly who don't have millions socked away and can't afford health benefits?"

Barb in Rockville, Colorado -- Rockvale, Colorado: "Mere pocket change -- my pocket, your pocket, all the taxpayers' pockets, our grandchildren's pockets. Why don't these dumbbells in Washington get a reality check?"

Now, there's a question -- Wolf.

BLITZER: Jack, thank you.

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