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THE SITUATION ROOM

Deadline to Leave Iraq Angers President; Fifteen British Marines Seized by Iran; Can Secretary Rice Close a Mideast Deal? Was Al Zubaie Assassination Attempt an Inside Job? Interview with Congressman John Murtha

Aired March 23, 2007 - 1900   ET

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


WOLF BLITZER, CNN ANCHOR: Thanks, Lou.
Happening now, it's a new deadline to get out of Iraq backed by Congress that's making the president angry. Where is this Iraq showdown heading right now? I'll ask Democratic Congressman John Murtha.

Authorities find a banned chemical in that killer pet food. How did it end up in the bowls of America's cats and dogs?

And they may be California dreaming, but White House hopefuls get a wakeup call from Governor Arnold Schwarzenegger. His state wants a piece of the action.

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

Tonight it's an order for President Bush to pull U.S. combat troops out of Iraq by the end of next summer. The House passed a $124-billion emergency war funding bill to pay for the war operations this year, but it sets a deadline for American troops to leave Iraq next year. Passing the bill was sweet victory for the House speaker who says it sends an important message.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: Oh, I think the message is -- there's many audiences for this message. I hope the first message goes to the American people that we know that they have lost confidence and faith in the president's conduct of the war.

(END VIDEO CLIP)

BLITZER: President Bush says this House still has absolutely no chance of surviving his veto pen.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The purpose of the emergency war spending bill I requested was to provide our troops with vital funding. Instead, Democrats in the House in an act of political theater voted to substitute their judgment for that of our military commanders on the ground in Iraq.

(END VIDEO CLIP) BLITZER: Our White House correspondent Suzanne Malveaux is covering the story. What's the strategy, Suzanne, behind the White House's tough talk right now?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Wolf, what you're seeing actually is the president here trying to set the terms of the debate by characterizing, painting the Democrats' actions today as really a betrayal to the troops, politically motivated, even theatrical, if you will. He's also today trying to send a very clear message to the Senate which is going to take up the spending measure next week saying, look, it's futile here because I'm ultimately going to veto this legislation. And finally, Wolf what, seems to be happening here is despite the fact it's going to be the president who vetoes the spending measure, they are trying to really paint this as a fight between the Democrats and U.S. troops.

BLITZER: Is the White House though behind the scenes, Suzanne, that it might lose this fight with the Democrats?

MALVEAUX: They are not scared yet here because they still have enough Republicans on their side. It is still veto-proof legislation here. They are going to start to worry, White House officials, when some of those Republicans actually side with the Democrats and if they perhaps lose that vote, or enough votes to make it veto-proof, but so far they don't feel like that's going to happen.

BLITZER: Suzanne Malveaux at the White House. Thanks very much.

Indiana Republican Congressman Mike Pence says this is not an emergency war funding bill but in his words and I'm quoting now, "salad bar at Denny's". That's because the bill includes money for things for spinach, shrimp and peanuts, specifically $120 million for the shrimp industry, $74 million for peanut storage, $25 million for spinach farmers, and $252 million for the milk industry, all that included in this House bill.

A dramatic and dangerous escalation, meanwhile, in the Persian Gulf today, 15 British Marines from the HMS Cornwall inspecting a merchant vessel were surrounded and seized by Iran's Revolutionary Guard. There are already some hair-trigger tensions over Iran's nuclear program. Britain is not taking this one lying down at all.

CNN's Becky Anderson is in London -- Becky.

BECKY ANDERSON, CNN CORRESPONDENT: Wolf, I'm here outside 10 Downing Street as every effort is made to affect the safe return of the 15 British servicemen and their equipment currently in Iranian hands. The reaction from the U.K. government has been unequivocal. The foreign secretary, Margaret Beckett, says she is very disturbed by the events.

They summoned the Iranian ambassador here in Britain to the foreign office today. The discussions lasted about 30 minutes. They said they were brisk and cordial, but the message was absolutely clear. Return those servicemen and return them swiftly -- Wolf.

BLITZER: All right, Becky. Thanks.

This is the region, by the way, where tensions have suddenly escalated. The Shatt Al Arab (ph) is a river that flows through the Persian Gulf forming part of the border between Iraq and Iran. A source for disputes for centuries, it was one of the flash points for an all-out war in the 1980's during which both Iran and Iraq attacked international shipping. Two decades later, the allies now patrol the area with the blessing of the United Nations.

What might those British Marines be facing right now in the hands of the Revolutionary Guard? Let's get some specific answers to that question from our Brian Todd -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, to find that out and learn how those Royal Marines might be dealing with it we spoke with former British and American military officers, some who have trained servicemen for this experience, some who have gone through it.

(BEGIN VIDEOTAPE)

TODD (voice-over): Blindfolded and huddled, one indication of what the British Royal Marines might be facing. These British servicemen, seized by the Iranian Navy off the coast of Iraq in 2004, later released. A retired American Special Forces officer, who was briefly detained in the Middle East, says the Royal Marines in this case are likely being held in a police or military facility, their possible interrogation.

COL. PATRICK LANG (RET.), FORMER SPECIAL FORCES OFFICER: Bring somebody in, in isolation from his comrades, sit him down and start asking detailed questions, and ask them over an over again, have several people ask the questions in hopes of tripping the person up.

TODD: In 2001 Shane Osborn piloted a U.S. reconnaissance plane that collided with a Chinese fighter jet. After managing to land on a Chinese island, Osborn and his crew were held for 11 days. He says they weren't tortured but...

SHANE OSBORN, FORMER NAVY PILOT: They used sleep deprivation on myself and tried to get certain information that we weren't willing to give up and the crew stuck together and made it through, but it was a pretty scary situation.

TODD: How to prepare? Osborn and other former U.S. servicemen tell us about a program called SERE, survival, evasion, resistance, escape, trainees dumped in the wilderness. Those who can't evade capture taken to a mock POW camp, bound, hooded and...

UNIDENTIFIED MALE: And they locked you up in little cages and very, very hostile interrogations, people screaming and yelling at you. And they hung people up by the thumbs for a while.

TODD: How are British servicemen trained to resist in captivity?

COL. BOB STEWART, BRITISH ARMY (RET.): They make you very cold. They take your clothes away. Sometimes they take your clothes off. They leave you out in the open. They chain you to the ground. They make you kneel with a sandbag over your head with your hands on your head for a very long period.

(END VIDEOTAPE)

TODD: That British officer says in his training, if he gave away any information beyond name, rank, serial number and date of birth, he was considered broken. The Americans say they were given fake intelligence and when put through all that mental and physical torture in their training they were tested to see how long they could hold it in -- Wolf.

BLITZER: The standoff continues. In the meantime, Brian, thanks.

Iran already in a tense standoff with the world community over its nuclear program, and now the president, Mahmoud Ahmadinejad, has dropped plans to fly to New York ahead of a U.N. Security Council vote on new sanctions. That vote could come as early as tomorrow.

He had asked to speak to the council before the balloting but Iran says U.S. visas arrived too late for his flight crew to make the trip. Let's go to Jack Cafferty. He's already in New York. He's standing by.

I guess you're not going to have Ahmadinejad to receive tomorrow, Jack.

JACK CAFFERTY, CNN ANCHOR: I hadn't planned on it even if had he had been successful in getting here, Wolf.

Tax time only three weeks away now, that means that there will be a lot of folks this coming weekend probably gathering receipts and filling out forms and trying to figure out which number goes where and just generally driving themselves up the wall, as they try to get square with Uncle Sam for another 12 months.

Some taxpayers in Nebraska decided to give the internal revenue system an audit of its own. What they did was they had a forum that let people voice their complaints, suggest changes and ask questions about internal revenue. People talked about everything from long wait times on the phone to ask an IRS agent a simple question to why the IRS doesn't provide computer software so people can file online for free.

The Nebraska meeting was one of three held around the country. A taxpayer advocate who moderated says that she's in charge of telling the IRS 20 things it can change or improve each year. So here's your chance. The question is -- what's your biggest beef with the internal revenue service?

E-mail us at CaffertyFile@CNN.com or go to CNN.com/CaffertyFile. Did you do your taxes yet, Wolf?

BLITZER: Not yet, but I've got an appointment with my accountant next week. CAFFERTY: Are you a procrastinator, one of those guys who waits until the last minute?

BLITZER: I wait until April 15. I suppose you do, too.

CAFFERTY: Oh, yes.

BLITZER: OK.

CAFFERTY: They ain't going to get my money a day early.

BLITZER: Like a lot of us, Jack. Thanks very much.

Coming up, a war with the president.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: He's overspent and now he wants us to get him out of the hole. He's trying to blame us for his problems. This is the president's problem. He needs the money, and he's going to have to deal with us.

(END VIDEO CLIP)

BLITZER: Congressman John Murtha all fired up over the funding of the war. Why he says the blame of Iraq rests squarely with President Bush.

Plus, Secretary Rice slammed by her critics just as she's trying to save the Middle East. Why there are now new doubts she can actually close the deal.

And killer pet food, answers for millions of pet owners worried about that nationwide pet food recall. What you should be asking your vet right now. Information you need to know.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Can she go from meet-and-greet handshakes to the kind of handshake that actually seals the deal? Secretary of State Condoleezza Rice begins yet another Middle East mission today, but there are growing doubts in the region about her chances for success. Are the odds stacked against the secretary?

Let's go to our State Department correspondent Zain Verjee -- Zain.

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, Condoleezza Rice keeps a hectic travel schedule but critics wonder what results she's getting.

(BEGIN VIDEOTAPE)

VERJEE (voice-over): She's logged more than half a million miles as secretary of state. Now she's heading back to the Middle East for the third time this year.

CONDOLEEZZA RICE, SECRETARY OF STATE: I think it is extremely important to continue to show American commitment.

VERJEE: She's looking to nudge Israelis and Palestinians toward a final peace deal, give them hope and keep America's Arab allies happy.

JON ALTERMAN, CTR. FOR STRATEGIC & INTL. STUDIES: Israeli politics are in free-fall. Palestinian politics are in free-fall. The president of the United States is so pre-occupied with Iran and Iraq.

VERJEE: Rice has come under fire from critics, including former secretaries of state accusing her of only talking to friends, not enemies. Even diplomatic outsiders are taking shots.

DONALD TRUMP, THE TRUMP ORGANIZATION: She waves. She sits down with some dictator, 45-degree angle. They do the camera shot. She waves again. She gets back on the plane. She waves. No deal ever happens.

VERJEE: Some experts say hold on, the administration does deserve credit.

ALTERMAN: They engaged with Libyans diplomatically. They have been engaging with North Koreans. They have been engaging very impressively on Iran sanctions and keeping a very unlikely coalition of diverse countries on board with Iran.

VERJEE: The secretary of state remains the most popular member of President Bush's cabinet, even more popular than her boss.

(END VIDEOTAPE)

VERJEE: But the diplomatic clock is ticking with only 21 months left on the dial for Rice and the administration -- Wolf.

BLITZER: All right, Zain, thank you.

Nine people were killed and Iraq's deputy prime minister, Salam al Zubaie, was wounded today when a suicide bomber blew himself up in al Zubaie's compound.

CNN's Michael Ware is in Baghdad. What's your sense on the assassination attempt that we saw today involving the Iraqi deputy prime minister? It looks like there was an element of an inside job there.

MICHAEL WARE, CNN CORRESPONDENT: Oh, without a shadow of a doubt and in most of these bombings there are inside jobs. I mean there's inside jobs within inside jobs in this country. But here clearly what happened is we had a suicide bomber wearing a chest vest, penetrated right into the compound of the deputy prime minister, detonating himself, killing nine, wounding at least 15. A second car bomb reportedly explodes on the outside of the perimeter of the compound. Now this fits into a much broader dynamic, Wolf. Now the investigation is underway, but this is a Sunni prime minister. He has been a part of marshalling these very tribes we just talked about, who are pro-U.S., who are doing America's dirty work in hunting and killing al Qaeda with full license and authority of the coalition forces in Anbar province, so I think that we will find that it would be not be surprising if this turns out to be al Qaeda striking back.

BLITZER: The accusation being this deputy prime minister himself a Sunni, being quote, "a collaborator with the U.S." is that why they would go after a fellow Sunni?

WARE: Absolutely, Wolf, and we've seen time and time again from the Islamic state of Iraq, essentially the broad umbrella group or construct that al Qaeda has put together here in Iraq, condemn over and over and over this deputy prime minister because, in their eyes, he sold out. He sold out Islam, and he sold out Iraq by cooperating, working with, not just the occupying force, but the crusader, infidel occupying force, so to al Qaeda this man is worse than anything. He is a traitor.

BLITZER: All right, Michael. Thanks very much. Michael Ware reporting from Baghdad.

WARE: Thank you, Wolf.

BLITZER: And the Iraqi prime minister, Nuri al-Maliki, visited his wounded deputy prime minister over at the hospital in Baghdad today. He was informed that Salam al Zubaie was in stable condition, would not have to be transferred outside of Iraq for further treatment.

Still ahead tonight here in THE SITUATION ROOM drawing the line with President Bush.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: These political speeches don't solve the problem. We have to work together, but he can't spend more money than he's been authorized and appropriated and then expect us just turn around without any accountability. He's going to be accountable for every cent.

(END VIDEO CLIP)

BLITZER: We're going to find out why Congressman John Murtha is furious over the president's veto threat. Also, hear why one Republican wants Alberto Gonzales fired and it's not over the prosecutor firings.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check in with our Fredericka Whitfield for a quick look at some other important stories making news -- hi, Fred.

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

A former Navy sailor accused of supporting terrorism will remain behind bars. Assam Abu Jihad (ph) of Phoenix did not enter a plea during today's hearing in federal court in Connecticut. The judge did not set bail. Prosecutors say the former sailor disclosed the location of Navy ships to terrorists and told them the best ways to attack the ships.

An unusual proposal aimed at reducing the number of abortions. A Texas state senator wants the state to pay pregnant women considering abortion $500 if they agree not to end their pregnancies. Republican Dan Patrick is also a conservative radio talk show host. He says the money might convince pregnant women considering an abortion to have babies and then give them up for adoption. The legislature has not yet voted on that proposal.

And relatives of the late Harry Houdini are hoping to work some magic and find out how he died. They plan to seek permission next week to have the escape artist's body exhumed from a cemetery in Queens, New York, and test it. Houdini died in 1926. The accepted view is that he died from a ruptured appendix after being punched in the stomach unexpectedly, but a biography published last year says Houdini's enemies may have poisoned him -- Wolf.

BLITZER: Thanks, Fred, for that.

Still ahead, blame for the Iraq war. A decorated veteran, an outspoken war critic lashes out at President Bush.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This president is always blaming somebody else. First he blamed Saddam Hussein, then he blames the Iraqis, then he blames the Democrats and then he blames me.

(END VIDEO CLIP)

BLITZER: My interview with the outraged Democratic Congressman John Murtha. That's coming up here in THE SITUATION ROOM.

And California Governor Arnold Schwarzenegger puts GOP presidential hopefuls on notice. Will his advice help Republicans keep the White House?

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, not on his watch -- the Bush administration says it's not likely to close the U.S. military prison at Guantanamo Bay in Cuba before the president leaves office. Officials say terror detainees there must face legal proceedings, and that will take a long time.

One day after John Edwards' wife Elizabeth announced her cancer is back, another political figure announces potentially disturbing news. The White House press secretary, Tony Snow, saying he'll undergo surgery to remove a small growth from his abdomen. Snow's a colon cancer survivor, says that will happen on Monday and he'll quote, "be back soon." We hope he will be, making a speedy recovery.

And in Somalia, many are running for their lives amid fighting between Islamic militants and Somali and Ethiopian troops. In one incident, a plane with 11 people helping African peacekeepers crashed and burst into flames in Mogadishu.

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

President Bush says he won't stand for Congress ordering him to pull U.S. combat troops out of Iraq by the end of next summer. This after the House passed a $124-billion emergency war funding bill that orders him to do exactly that. My next guest voted for that bill, Pennsylvania Democrat John Murtha. I spoke with him just a short while ago.

First your reaction, Congressman Murtha, to the president who says what you have done today is in his words is political theater.

REP. JOHN MURTHA (D), PENNSYLVANIA: Well I want to tell you something. This is really disturbing, that a president has overspent by $100 billion the original budget that he had affected to him. He's asking us for money and he's saying this is theater. Let me tell you, we had quite a number of veterans who are elected. All of us believe the same thing. You take care of the troops.

He has forced, this president has forced, his commanders to send troops back before they are ready, without the training they need, without the equipment they need. He's forced the troops not to spend a year at home. He's forced the troops to be -- he's forced commanders to extend the troops in order to follow his policy.

This is not Petraeus' policy. This is not Casey's policy. This is the administration's policy. He's overspent, and now he wants us to get him out of the hole. He's trying to blame us for his problem. This is the president's problem. He needs the money, and he's going to have to deal with us.

BLITZER: He says you've abdicated your responsibility because you know he's going to veto this and so why go forward with this when you know in the end it's not going to go anywhere in any case?

MURTHA: I'll tell you something, Wolf. He may say he's going to veto this. He's the one that's overspent. He's the one that spent too much money. He's the one that needs the money. This president is always blaming somebody else. First he blamed Saddam Hussein. Then he blames the Iraqis. Then he blames the Democrats. Then he blames me.

This is a bill we feel very strongly about. What he's done is forced this country to make sacrifices, meaning the troops make sacrifices; these troops are doing everything they can do. He said mission accomplished. He said so many things during this whole thing it's hard to know when you believe what's going on.

For instance, he said mission accomplished. The mission hasn't been accomplished, and he needs the money, so he's going to have to deal with us on this issue. He's going to have to find a way to have benchmarks. We want the Iraqis to take over this war.

Let me tell you my great grandfather, Wolf, served in the Civil War. I've got his hat in my office, and we fought our own civil war. You can't -- our troops are caught in a civil war.

BLITZER: Practically speaking, Congressman, the secretary of defense, Robert Gates, other administration officials, say if you don't have this money passed, the spending bill, $120 billion or so passed by mid-April, he's going to have no choice, he says, but to keep U.S. troops deployed in Iraq even longer because you won't have the funds to train new ones.

MURTHA: Wolf, he's the guy that's put the -- the president is the person that has put us in this spot. He's the one and now he's trying to insist that we pass this legislation. I mean, look, we're willing to take care of the troops. We put more than the money that he requested in this supplemental. We put $4 billion more, but he can't have it all his way.

He gets out there and he says, OK, we're going to veto this bill. Well I'm going to tell you. He has to deal with us. It's not that easy, and we're going to come up with a bill that we can live with, and that he can live, and we're going to take care of the troops but it's not going to happen on his terms.

BLITZER: What do you say to the president who spoke about what he called your pet spending projects, money that has nothing to do with the war in Iraq or Afghanistan, but for fishermen, peanut storage, spinach farmers, the milk industry, that you've attached all this other funding into this legislation which has nothing to do with the emergency spending needed for the war?

MURTHA: This was all left over from the last Congress, the Republican-controlled Congress. This was all left over. Katrina spending, the Iraq spending. All these things were left over, and he's trying to blame the Democratic Congress from funding things that needed to be spending in an emergency fashion.

Let me tell you something. This -- these political speeches don't solve the problem. We have to work together, but he can't spend more money than he has been authorized and appropriated and then expects us to just turn around without any accountability.

He's going to be accountable for every cent. I was falling all over contractors in Iraq the last time. We took 5 percent, which is $800 million out of contractors. We want to know how many contractors. We want to know how they are spending this money. We want to make darn sure he's accountable to the American public. That's our job under the Constitution.

BLITZER: Where's the compromise on this, because obviously in the end you're going to have to fund the troops. Where do you -- in the Senate you're are going to have to reconcile your language with the Senate language, it will go to the president. He's threatening a veto. Where do you see this ending?

MURTHA: Well, I'll tell you, he needs the money. He has to have the money. He's the one that puts the troops over there. He's the one that overspent the amount of money that he had coming to him. So he's the one that is going to have to decide what the compromise is. We're willing to compromise, but I'll tell you this., we're not going to compromise on his terms.

BLITZER: Well, what happens in this scenario. He vetoes the legislation. The troops suffer. Are Democrats nervously going to await the reaction?

MURTHA: Whoa, Wolf, wait a minute -- wait a minute, Wolf. He's the one who put us in this position. He's the one who overspent. He's the one whose policy has forced the commanders to break the very rules -- the guidelines that they have set forward.

For instance, the troops have a guideline, being home for a year, being trained and equipped before they go. They are going to send troops into combat that aren't trained and equipped. That's unacceptable to the Congress and the public -- 80 percent of the public supports what we're trying to do in the Congress, and we'll go face this in conference. I'm looking forward to a good, solid political conference.

BLITZER: We'll see what the Senate comes up with. They have their own problems on the other side of Capitol Hill. Congressman Murtha, always good to have you here in THE SITUATION ROOM.

MURTHA: Good to talking to you, Wolf.

(END VIDEOTAPE)

BLITZER: The White House (sic) may have set an Iraq deadline but will the Senate follow suit? Our senior national CNN correspondent John Roberts is here in THE SITUATION ROOM..

You spoke with one Democratic senator who doesn't like this idea.

JOHN ROBERTS, CNN SENIOR NATIONAL CORRESPONDENT: Sort of a Democratic senator, kind of an independent who caucuses with Democrats, Senator Joe Lieberman. We talked to him for our "THIS WEEK AT WAR" program, which is going to air tomorrow night. Of course, he's against attaching any of this stuff to the spending bill. He thinks that the spending should be passed.

And he said, hey wait a minute, give the people in Iraq, particularly General Petraeus, who is the new commander over there, a break. He says Petraeus doesn't know now if this program is working. He'll know in maybe four to five months, so why all this talk right now about cutting funding or at least pulling the troops out without cutting the funding, because he has got a real issue with that, why not let this program take place in Iraq and see if it works?

And on that particular point, Lieberman doesn't like the way that the Democrats are playing fast and loose here. They are holding back funding because the president can't sign this bill, but at the same time they are not exercising their constitutional power which is to end a war by cutting funding.

He has suggested that lacks a certain sense of political courage. Listen.

(BEGIN VIDEO CLIP)

SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: If somebody is really against the war, and there are people around here in Congress who are sincerely against the war, then they ought to do what the Constitution gives Congress the power to do which is to stop the funding of the war. The rest of this is a nuisance but will not change at all the course of what's happening in Iraq.

(END VIDEO CLIP)

ROBERTS: So that's the criticism against Democrats here, that they know that this isn't going to pass because the president will veto it or they won't have the votes to do it in Congress, so, you know, rather than making a lot of noise about something that the president owns, if you want to take ownership of it, better to take ownership of it yourself, really stand up for principle.

BLITZER: And quickly, John, as irritated as Senator Lieberman is with his fellow Democrats, did you get any sense from him that he's still holding out that threat he could become a Republican which would have enormous ramifications in the Senate?

ROBERTS: We didn't actually talk about it, and I don't necessarily know that he's going to go down that route, but he's clearly not happy with what the Democrats are doing. And as we've seen in the past, you push somebody hard enough and sometimes they do go to the other side.

BLITZER: He's not completely ruling it out. At least he hasn't in the past. We'll see what happens. John, thanks very much.

This important note to our viewers, John Roberts hosts "THIS WEEK AT WAR," Saturday at 7:00 p.m. Eastern, also Sundays at 1:00 p.m. Eastern, right after "LATE EDITION," John Roberts "THIS WEEK AT WAR," coming up this weekend.

Up ahead tonight, Arnold Schwarzenegger is demanding a starring role for California. I wonder why. We'll find out why he's taking on members of his own party in the race for the White House.

Plus, the sex change scandal that could cost a longtime civil servant his job. We're awaiting word on a key decision. Stick around. You're in THE SITUATION ROOM. (COMMERCIAL BREAK)

BLITZER: In the next few hours, a city official is speaking right now as planning a sex change -- he's planning a sex change. He's going to find out in the next few hours whether that will cost him his career. CNN's Carol Costello is in Largo, Florida. She's following this story for us.

Dramatic developments happening right now -- Carol.

COSTELLO: Oh, it's an extraordinary public hearing right now, Wolf. I'm inside city hall. Steve Stanton, the city manager, is talking to hundreds of citizens, trying to convince them why he still would be a good city manager even though he wants to transform himself into a woman. He just said, Largo is my passion, one does not easily replace my passion. But he will have to say more than that, Wolf. It's going to be a tough sell.

(BEGIN VIDEOTAPE)

(END VIDEOTAPE)

COSTELLO (voice-over): After 14 years as manager of Largo, Florida, Steven Stanton could face the end of his political career tonight.

STEVEN STANTON, FIRED LARGO CITY MANGAGER: it's real important to me, whether I win or not, the opportunity to have this discussion in an environment that's educational and not hysterical.

COSTELLO: But whatever happens, the person emerging on the other end of this once-in-a-lifetime political showdown will be called Susan.

STANTON: Two years from now I see myself as a very happy, well- adjusted person that is going to look back upon all of this and knowing that it was all worth it.

COSTELLO: By all accounts Stanton has been a beloved public servant who had recently gotten a raise. He was a husband, a father, an honest public citizen, but it all fell apart when the media forced him to reveal his secret. This 48-year-old man was planning to become a woman.

Public reaction was fierce.

UNIDENTIFIED MALE: Terminate, Mr. Stanton.

UNIDENTIFIED MALE: The ethics bothers me a lot.

UNIDENTIFIED MALE: And everybody in this City of Largo is just supposed to roll over and accept that.

UNIDENTIFIED FEMALE: This is wrong.

COSTELLO: Although several commissioners had promised their support, they voted to fire him. Tonight, it's his chance to appeal that decision. He only needs to sway one vote to keep his job, but as early as 2:00 p.m. people were lining to speak out on his controversial case.

UNIDENTIFIED FEMALE: I feel that it isn't the matter of whether he wants to be a woman or a man, it's what's in his heart and what he's done for our city for the last 14 years.

UNIDENTIFIED FEMALE: God doesn't accept everyone, but we are told to try to help other people and to love other people, but, again, to me it goes deeper than just him, you know, changing sexes and losing his job. I think it's a character thing.

(END VIDEOTAPE)

COSTELLO: Say it's a character thing, a lot of people upset about what Steve Stanton is doing to his family. He has a wife and a 13-year-old boy. Interestingly enough, his wife did appear with him today, although she did not walk beside him. Inside of that hearing, she did not sit beside him, but she has been in hiding these past several weeks, ever since Steve Stanton's secret came out -- Wolf.

BLITZER: When do we expect to get the final decision? Is that going to be definitely tonight?

COSTELLO: Hopefully tonight, but this hearing is going to go on well into the night, because after Steve Stanton gets done speaking, then hundreds of people have signed up to speak. Each will get three minutes, and when that's all over, the commissioners are supposed to take a vote, and that will be the deciding factor.

BLITZER: All right. We'll stay on top of this story with you, Carol. Thanks very much.

Arnold Schwarzenegger lets loose. The California governor sounds off on his fellow Republicans and on Washington. CNN's Sumi Das is in Los Angeles with details -- Sumi.

(BEGIN VIDEOTAPE)

SUMI DAS, CNN CORRESPONDENT: Wolf, California Governor Arnold Schwarzenegger is putting GOP presidential hopefuls on notice.

(voice-over): Governor Schwarzenegger wants his state to have a starring role in the 2008 elections and is telling candidates they must address issues key to Californians.

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: We don't want to hear the regular rhetoric, which is, you know, we should be firm and compassionate. It's a great line, but what does it really mean?

DAS: Talking points won't cut it. As promises are made on the campaign trail, Schwarzenegger wants in on the action. That includes getting more bang for California's big bucks.

SCHWARZENEGGER: For every dollar that we send to Washington in federal tax, we get 79 cents back. We know that in the '90s we got 95 cents back on the dollar. Why is it only 79 cents? What would they do? Do they believe that California should get more money? Let them say that. Let them commit to that, yes, I believe California should get 85 cents or 90 cents on the dollar.

DAS: With an earlier state primary set, Schwarzenegger says Republicans eyeing his state's prized 55 electoral votes need to court voters in a state the GOP hasn't won in nearly 20 years.

SCHWARZENEGGER: Immigration reform, health care reform, education, climate change, infrastructure, Social Security, water, energy, and, of course, how do we get more independent of fossil fuel? These are very important issues in California.

DAS: At times the actor-turned politician was unapologetically harsh in his criticism of Washington.

SCHWARZENEGGER: The federal government hasn't shown any leadership in health care. I mean, they have talked since 1912, since Teddy Roosevelt -- he has talked about universal health care. Where's the action?

DAS (on camera): Wolf, it remains to be seen whether or not Governor Schwarzenegger's squeaky wheel tactics will be effective in getting GOP attention. The last time Californians voted for a Republican president was in 1988 for Bush 41 -- Wolf.

(END VIDEOTAPE)

BLITZER: Sumi Das in L.A. for us. Thanks for that.

Up ahead, killer pet food. We'll find out why scientists think they have now found a deadly toxin.

And a Republican congressman calls on the attorney general of the United States to resign, but not because of the scandal over the fired prosecutors. Find out why Tom Tancredo really wants Alberto Gonzales out. Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: There's a major new development in that massive pet food recall. Authorities now saying pet food may have been tainted with rat poison. The product leaving at least 16 dogs and cats dead, many more seriously ill. CNN's Mary Snow is in New York, and she's joining us now.

Mary, what are you learning?

MARY SNOW, CNN CORRESPONDENT: Wolf, investigators are saying this is an important clue, but finding the exact source is proving to be difficult. The Food and Drug Administration says it's still looking into other possible causes but says it's very interested in the discovery of rat poison by labs in New York.

(BEGIN VIDEOTAPE) SNOW (voice over): How did rat poison wind up in pet food? That is still uncertain. But investigators in New York say what they do know is that they found a toxin called aminopterin in samples of pet food suspected of being tainted. The toxin is not a legal pesticide in the U.S. Doctors say it can be found in some forms of cancer treatments.

PATRICK HOOKER, NEW YORK STATE AGRICULTURE COMMISSIONER: This is one step in a long process that will lead all of us to know what has happened.

SNOW: The CEO of Menu Foods, the company that recalled over 90 brands of dog and cat food, says he's both relieved and happy investigators found the problem during what he called an unprecedented search.

PAUL HENDERSON, CEO, MENU FOODS: Our hearts go out to the thousands of pet owners across Canada and the United States for their losses and their worries.

SNOW: But the CEO says he is at a loss to explain where the toxin came from, and he says the company will test raw products to trace the origin.

Veterinarian Dr. Ann Hohenhaus says knowing that rat poison is involved can prevent animals from dying if they are suffering from kidney failure.

DR. ANN HOHENHAUS, NEW YORK ANIMAL MEDICAL CENTER: Sounds to me like giving fluids intravenously or maybe by other routes is going to be key to trying to prevent or fix this problem.

SNOW: But, she adds, there are a new set of worries.

HOHENHAUS: We don't know what the long-term effects are on their kidney function, and only time is going to answer that question.

(END VIDEOTAPE)

SNOW: And another question, in terms of compensation for pet owners who lost a pet, the CEO of Menu Foods says the company will take financial responsibility if it can be shown that medical costs are linked to the tainted pet food -- Wolf.

BLITZER: What about human food? Is it absolutely being ruled out, Mary, that that's involved?

SNOW: Well, you know, the likely suspect of this tainted food is wheat gluten, and because that's used in human foods, the FDA is saying it absolutely cannot rule out any harm to humans, but it says it has no reason to believe that there's any risk at this point.

BLITZER: All right, Mary. We'll stay on top of this. Let's get some more information. How do you know if your pet food is actually safe or potentially deadly? All the information actually is online. Our Internet reporter Jacki Schechner is watching this part of the story for us -- Jacki.

JACKI SCHECHNER, CNN INTERNET REPORTER: Wolf, Mary mentioned Menu Foods taking responsibility for pets that have gotten sick or passed away. They may be getting a call from Orson's (ph) owner. This is Orson, he passed away earlier this week. His owner says that their vet confirm it was in fact the tainted food that caused his kidney failure. Collette is getting better. This is Tabitha here. Tabitha, she says, is getting worse.

What you need to do if you have a pet and you feed it wet food, is go to menufoods.com. They have all of the recalled information there. We are talking about different kinds of cat food and dog food, 95 of them. It is 42 different kinds of cat food, 53 different types of dog food. This affects wet food only, the cuts and gravy style in cans and pouches.

If you feed your pet dry food, they are not affected by this. Also they want you to call the FDA, that is where they are collecting reports and complaints -- Wolf.

BLITZER: And that Web site again, Jacki?

SCHECHNER: Menufoods.com/recall, that has all of the information.

BLITZER: Good. All right. Useful information from Jacki. Let's find out what's coming up right at the top of the hour. That means Paula is standing by -- Paula.

PAULA ZAHN, HOST, "PAULA ZAHN NOW": Hi, Wolf, thanks so much. Coming up, we're going to keep following that meeting where a city official is trying to convince officials he shouldn't be fired because he wants a sex change, this after getting a big fat raise and a lot of positive reviews for his job.

Also, a quiet but very scary national crisis. Recent mortgage meltdowns, they cost you more than just your house.

And you're not going to believe what some radio shock jocks want their listeners to do. It's all "Out in the Open" coming up at the top of the hour -- Wolf.

BLITZER: All right. Sounds good, thanks, Paula, for that. Still ahead tonight here in THE SITUATION ROOM, breaking Republican ranks. Congressman Tom Tancredo wants the U.S. attorney general to go. I'll ask him why.

And Jack Cafferty wants to know what's your biggest beef about the IRS? Stick around. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: There's a significant new development tonight into the investigation of the firing of those eight federal prosecutors. The former chief of staff to the attorney general, Alberto Gonzales, is now set to testify before the Senate Judiciary Committee next week. Kyle Sampson resigned two weeks ago as the controversy was just heating up, and that comes as some Republicans are now calling for Gonzales to resign, including Congressman Tom Tancredo of Colorado.

(BEGIN VIDEOTAPE)

BLITZER: You've parted ways with the White House on this issue, suggesting it's time for the attorney general to go. I want you to hear what he has just said. Listen to the attorney general.

REP. TOM TANCREDO (R), COLORADO: All right.

(BEGIN VIDEO CLIP)

ALBERTO GONZALES, ATTORNEY GENERAL: I accept responsibility for the mistakes that were made in the implementing of the decision, but at the end of the day, what I want to reassure the U.S. attorney community and the American people, is that there was nothing improper. No improper motives in connection with the removal of these political appointees.

(END VIDEO CLIP)

BLITZER: All right. Are you ready to reconsider?

TANCREDO: No, I want him out of there, and it has absolutely nothing to do with that particular issue. As I said, I don't care -- I wish he would have fired nine, at least one more would have been OK with me. The U.S. attorney down there in the Texas area that has been prosecuting the border patrolmen and the deputy sheriffs down there.

No. The reason why I want Mr. Gonzales gone has nothing to do with that, because I think this is all a very political issue. I don't think that there has been any wrongdoing here. What I'm saying is that he has not enforced the law. He has in fact ignored the laws that are on the books with regards to illegal immigration in about 10 different ways. That's why I believe he should be gone.

He has misused the resources of his office. He has used the money in his office to actually go after drug dealers in Mexico, bring them back here to testify against border patrolmen.

That's, I think, completely against what his oath of office really demands of him. So, that's why I wanted him to go. It has got nothing to do with these eight people who, you know -- you know what? If he did anything wrong here, it was probably because he mishandled the way he fired them, not because he fired them.

(END VIDEOTAPE)

BLITZER: Tom Tancredo, Republican congressman from Colorado, also a Republican presidential candidate.

Let's check in with Jack Cafferty once again for "The Cafferty File" -- Jack.

CAFFERTY: Wolf, it's getting to be that time of the year, so we asked, what's your biggest beef about the Internal Revenue Service.

Marilyn writes from Denton, Texas: "Intimidation tactics, lack of knowledgeable customer service. We're their customers not their lackeys. Without taxpaying citizens, they wouldn't have a job and we would have more peaceful life."

Marie writes from Des Moines, Iowa, where I used to live and work, as a matter of fact: "When you fall on hard times and agree to a payment plan, the penalties and interest they demand make it impossible to ever pay them in full. I've come to terms with the fact that I'll be a payment plan with Internal Revenue forever."

Dave, a disabled veteran, Crescent City, California: "Could you please remind all of the taxpayers why we file annually. Has it occurred to anyone how simple a national sales tax would be?"

Gary in Lincoln, Michigan: "The IRS doesn't seem interested in collecting taxes from all of the illegal aliens in this country and working with other government agencies to identify them and get them out of this country."

Mikki in Michigan: "Cancelled checks, no longer proof you donated to any charitable tax-exempt cause. You must now have a receipt from the charity, guess how many will stop giving and how many people will suffer. Good job, 'Infernal' Revenue."

And Doug in West Virginia writes: "My biggest problem is the morons in Washington get the money in the end. I can save IRS time and paperwork and just promise to flush my money down the toilet."

And Sara writes from Sherwood, North Dakota: "I love everything about the IRS and my return will be sent in next week."

If you didn't see your e-mail here, you can go to cnn.com/cafferty file where we post more of these, along with video clips of "The Cafferty File" -- Wolf.

Let's get back to that house bill that was passed today. Emergency funding for the wars in Iraq, Afghanistan. But you saw all sorts of money going for shrimp, for peanuts, for milk subsidies. What do you make of what's going on?

CAFFERTY: Well, we did that question, I think, earlier this week and our viewers had a lot of thoughts about it. I think they are trying to buy some votes, buy some support for the bill. My question is, if that bill should pass the Senate -- everybody says it won't because they need 60 votes, but if it passed the Senate with that rider attached that you've got to withdraw the troops by next year in order to get this money, and then the president vetoes the bill, what happens then?

BLITZER: Good question. Jack, have a good weekend. I will see you back here on Monday. Jack Cafferty with "The Cafferty File."

Let's close this hour a closer look at some of the "Hot Shots" coming in from our friends over at The Associated Press, pictures likely to be in your hometown newspapers tomorrow.

In Baghdad, an Iraqi girl watches a U.S. Army soldier as he searches a house in a Sunni neighborhood.

In Pennsylvania, college athletes in what is known as the other basketball tournament, the Intercollegiate Wheelchair Basketball Championships.

In China, Joint Chiefs Chairman Peter Pace stands at the Great Wall.

And in Germany, Knut, a 15-week-old polar bear rolls in the sand during first public appearance at the Berlin Zoo. The cub has been dubbed "Cute Knut" by the German news media.

Some of this hour's "Hot Shots." Pictures often worth a thousand words. I'll be back Sunday for "LATE EDITION," the last word is Sunday talk. Among my guests, the Iraqi ambassador to the United States, Samir Sumaidaie.

Until then, thanks very much for joining us. I'm Wolf Blitzer in THE SITUATION ROOM. Up next, "PAULA ZAHN NOW" -- Paula.

ZAHN: Wolf, thanks.

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