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Obama Pitches Economic Recovery Plan; Ballooning Deficit Left Behind

Aired January 8, 2009 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: President-elect Barack Obama is warning, the United States could stay in recession for years, for years, unless Congress takes immediate, dramatic action to try to fix the economy. But his recovery plan is facing some rather surprising new opposition from fellow Democrats, some of whom are wary of huge new tax breaks.
Our senior congressional correspondent, Dana Bash, is standing by.

But let's go to our senior White House correspondent, Ed Henry, first.

Ed, this was president-elect Obama's most high-profile push yet for his recovery package, and it generated some surprising opposition.


On foreign policy, we have heard the mantra over and over again there's only one president at a time. But it's a much different story on the economy. We're seeing the president-elect be more hands-on, in part because of that opposition out there. He realizes he has a lot on the line, so he's ramping up his sales effort.


HENRY (voice-over): It turns out sometimes there are two presidents at a time, at least when you have a tight window to sell your economic plan.

SEN. BARACK OBAMA (D-IL), PRESIDENT-ELECT: I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible. If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. HENRY: Sounding as if he's already in charge, President-elect Barack Obama used his first speech since the election to make the case the financial crisis is getting worse, blaming it on what he called a culture of anything goes.

OBAMA: We arrived at this point due to an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington, D.C. The result has been a devastating loss of trust and confidence in our economy, our financial markets and our government.

HENRY: Mr. Obama made the pitch that trust could be restored if Congress passes his massive $775 billion recovery package, though he continued to offer few details about the plan.

Republicans say they're encouraged the incoming president seems willing to work with them, but they're raising concerns about the price tag, on top of a $1. 2 trillion budget deficit.

SEN. MITCH MCCONNELL (R), MINORITY LEADER: Well, given the deficit numbers, it really ought not to be a trillion-dollar spending bill. I think we can start by saying that.

HENRY: But New York City Mayor Michael Bloomberg, one of many prominent local officials in the crowd for the speech, said any belt tightening needs to take a back seat to reviving the economy.

MICHAEL BLOOMBERG (I), MAYOR OF NEW YORK: We have no choice but to ratchet up the deficit at the moment, and the president-elect referenced that and said he'd like to do things that have a life span where there's an end to it so he can then address that issue and bring down the deficits in the future.


HENRY: Now, the big-ticket items in terms of dealing with the deficit ARE entitlement programs like Medicare and Social Security. The president-elect said this week he would start tackling that in February.

But, as you know, Wolf, the current president, President Bush, put a lot of political capital on the line after the 2004 election to try and reform Social Security. He got nowhere. This is a sign that there are a lot of big battles ahead for this president-elect. The stimulus bill is just the first of many, many big challenges -- Wolf.

BLITZER: Enormous, enormous challenges for the president-elect, indeed.

Thanks, Ed.

Warnings of a $1.2 trillion deficit for the coming year. For one year alone, those are ominous enough. But many critics say the figure is even more disturbing, given the fact that the United States has gone from a budget surplus eight years ago to a ballooning, ballooning deficit, and the national debt has doubled over the years.

President Bush inherited a projected surplus of more than $200 billion eight years ago. And now he's about to give off a $1.2 trillion deficit to the president-elect and his team.

Let's go to Capitol Hill, where private Democratic worries, though, about the Obama tax cut are now becoming rather public.

Our senior congressional correspondent, Dana Bash, is working the story.

Dana, it was pretty surprising to hear what some of these Democrats, Democrats, are now saying.


Look, the president-elect is blessed with the fact that he has a Democratic Congress. But in talking to multiple Democratic senators today, it's clear it does not mean they're going to give him what he wants.


BASH (voice-over): At the very moment Barack Obama was pushing his economic recovery proposal, several fellow Democrats emerged from a closed-door meeting of the powerful Senate Finance Committee saying they opposed central parts of his tax plan, especially a $3,000 tax credit to businesses for every job they create.

SEN. JOHN KERRY (D), MASSACHUSETTS: I'm not that excited about that.

BASH (on camera): Why?

KERRY: Because if somebody's able to hire, they're probably going to hire anyway.

BASH (voice-over): On the campaign trail, Obama constantly pushed the proposal as an innovative way to create jobs.

OBAMA: And I will give American businesses a $3,000 tax credit for every job they create right here in the United States of America.

BASH: But many in Obama's own party who will actually craft the legislation disagree and say tax credits to businesses in dire straits won't create jobs.

SEN. KENT CONRAD (D), NORTH DAKOTA: I think it is unlikely to be effective. If you think about it, business people are not going to hire people to produce products that are not selling.

BASH: That's not the only Obama tax idea his Democratic brethren are blasting. Another, payroll tax cuts, $500 per person and $1,000 per couple earning less than $200,000 a year, amounting to about $10 to $20 a week.

CONRAD: Twenty dollars a week?

BASH (on camera): Twenty dollars a week.

CONRAD: I don't think that will be effective either. I think that is, in terms of this economic impact, very much like what happened with the rebates.

BASH (voice-over): Several Democrats warned that Obama tax cut will have the same disappointing effect as last year's rebate. People will save the money or use it to pay debt, not jump-start the economy by spending it.

SEN. RON WYDEN (D), OREGON: Just giving people $500 and $600, while certainly welcome when there's all this economic hurt, may not be the best use of stimulus.


BASH: Now, a meeting of all Democratic senators and members of Obama's economic team just wrapped up moments ago here on Capitol Hill. Multiple senators coming out of that meeting said that they made their concerns very clear to members of Obama's economic team. Two of them told us that their team was -- quote -- "noncommittal." But another said that the message was received loud and clear -- Wolf.

BLITZER: Thank you.

Let's check back with Jack. He has "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: You have got to love these congressional types, who have a collective approval rating with the public of 9 percent, I think, offering up already criticisms of the plans that this man who was elected to be the next president has to try and turn this country around. It's mind-boggling.

In 12 days, Barack Obama will be sworn in. He will be the 44th president of the United States. He has huge challenges in front of him, starting with the crumbling economy and those two wars. Hopes are high that he will be able to turn things around. Indications are that he may be able to do just that.

According to a new Gallup poll, 65 percent of Americans are confident in president-elect Obama's ability to be a good president. This is down a little from 70 percent a week ago, but still pretty good.

Last month, a CNN opinion poll found that 82 percent of Americans approve of how Obama is handling his transition to power. Since returning from his Hawaii vacation, Mr. Obama has encountered a couple of bumps in the road, the situation in Gaza, which he stayed away from by deferring to President Bush, criticism of Leon Panetta as his choice to head the CIA, Bill Richardson having to withdraw his nomination for commerce secretary, and official statistics from the Congressional Budget Office that project a deficit of $1.2 trillion for this year -- all this before he's even moved into the Oval Office.

And he's got members of his own party out in front of the TV cameras carping about his economic recovery plan.

Here's the question: Has your confidence in Barack Obama declined any since the election?

Go to and post a comment on my blog.

It's going to be very interesting once he is ensconced in the job to see how he handles this carping from members of his own party.

BLITZER: Yes, he's got a huge, huge challenge out there. We will watch it really closely, Jack. Thanks very much.

CAFFERTY: Sure. BLITZER: All right, take a look at this.

These are live pictures coming in from a Illinois House committee that's been investigating the controversial Governor Rod Blagojevich. They are about apparently to get ready to recommend that he be impeached. They're about to pass a resolution that would move this process one step closer to the full house in Springfield, Illinois, going forward.

We're taking a closer look. We will have much more on this.

In fact, let's listen in briefly for a second.

UNIDENTIFIED FEMALE: Thank you, Madam Chairman.

I want to say that I am certainly very grateful to David Ellis, the attorney, to our chairman, because every piece of evidence that we wanted, they made every attempt to make sure we got an opportunity to preview. Many of us read articles in the newspaper or we heard rumors. But sitting on this committee...

BLITZER: All right, we're going to take a closer look and see what's going on. We will wait for the vote in this house panel, see what happens, at issue, the impeachment of Rod Blagojevich. Stand by for more on that.

We will take a quick break. We will be right back.


BLITZER: As you have been seeing in Illinois right now, Springfield, the capital, a panel of lawmakers expected to recommend any minute now that the full statehouse vote to impeach the governor, Rod Blagojevich.

Earlier, the impeachment committee heard testimony from the governor's disputed choice to fill Barack Obama's former Senate seat, the same seat he is accused of trying to sell to the highest bidder.

Let's go to CNN's Susan Roesgen. She's working this story in Chicago.

All right, Susie, update our viewers on what's happening right now.

SUSAN ROESGEN, CNN GENERAL ASSIGNMENT CORRESPONDENT: Well, this investigative committee, Wolf, has 21 representatives from the statehouse, and they are taking an oral vote right now as we speak. I would say about half of them have already voted. I have not heard a single no vote.

I have heard most of them talk about how terrible they believe the governor has been for this state. And they are voting yes that they want to send a resolution, a recommendation to the full statehouse, and have the full statehouse vote to impeach him. Now, that vote, Wolf, will probably happen tomorrow morning. After that, if the full house does vote to impeach the governor, then it will go on to the state senate. They will have some hearings, and then they, too, will have a vote. So, this thing could be drawn out a little bit longer.

But the first major hurdle to impeaching the governor in this state is just about to pass here. And we believe that the house will vote tomorrow also to impeach him.

Now, before this vote started, Wolf, of course, we had Roland Burris, the man who was appointed by Governor Blagojevich to take the Senate seat held by Barack Obama, he had to give testimony about his financial connections to the governor, and whether there was anything improper in his appointment.

Afterwards, there were hugs and handshakes with the members of the committee. But it didn't start out that way.


UNIDENTIFIED MALE: At any time, were you directly or indirectly aware -- aware of a quid pro quo with the governor for the appointment of this vacant Senate seat?


UNIDENTIFIED MALE: (OFF-MIKE) arrested, had you had any conversations with the governor about your desire to be appointed to the seat?



ROESGEN: Now, Wolf, from what I heard from the Burris testimony, I didn't hear anything potentially damning in there, nothing that I would think would give the U.S. Senate pause.

There were times when Roland Burris seemed to say he couldn't remember some things. But, again, members of that committee actually hugged him and gave him handshakes, most of them, not all, after his testimony.

So, that's what you have now. And we look to see what the statehouse will do here tomorrow morning.

BLITZER: We will watch it very closely, together with you. Thanks, Susie. We will stay on top of this. Let us know when that panel actually votes.

Other breaking news right now: word of an agreement over at the United Nations Security Council on a cease-fire resolution for the Gaza conflict. Western and Arab diplomats are circulating a text expressing grave concern at the escalation of violence, heavy civilian casualties and a deepening humanitarian crisis, calls for a cease-fire which would lead to full withdrawal of Israeli forces from Gaza. The language could still change, and there may not be a vote tonight. We're watching this closely.

As Israel and Hamas traded fire, though, there was another brief pause for humanitarian relief in Gaza earlier. But the United Nations says Israeli forces opened fire on one of its convoys, killing an aid worker.

Let's go live to our international correspondent, Nic Robertson. He's on the scene for us.

Nic, any sign of an actual letup of the fighting on the ground?


Right behind me in the northern end of the Gaza Strip, just in the last few minutes, we have seen tracer fire. We have heard huge explosions, seen the flashes illuminate the sky, heard Israeli artillery being fired into that area. There were rockets being fired out of the Gaza Strip into Israel within the past few hours as well, so no indications on the ground.

We have also heard some heavy explosions, some big dull thumps further south perhaps coming from around Gaza City. So, right now, it seems to be continued ground operations -- Wolf.

BLITZER: The situation, the humanitarian situation, inside Gaza, what are you hearing on this day?

ROBERTSON: Well, the U.N. has said that it will suspend its relief operations, that they have lost their confidence in the Israeli security forces, despite the fact they have agreements on the cease- fire to deliver aid.

Their workers, at least one, quite possibly two aid workers, killed while delivering relief supplies. That means, with that suspension, that three-quarters-of-a-million Gazans -- and there are 1.5 million Gazans -- so, that means half the population of Gaza -- won't get U.N. relief supplies.

They also won't be getting relief supplies from all the NGOs who distribute or at least bring aid into Gaza, because those NGOs rely on the U.N. as well for distribution.

However, the World Food Program does deliver food to about 300,000 people in Gaza. And they at the moment still appear to be going ahead with their deliveries. But the conflict at the moment appears very much set to push further into the urban environment.

I heard from -- I talked with an Israeli minister earlier today, who said they now control 75 percent of all the Hamas rocket firing positions. The rest are in built-up areas. And that's where they expect they may have to go into -- Wolf.

BLITZER: Nic Robertson is on the scene on the border between Gaza and Israel for us. Thank you.

Her confirmation hearings don't start until next Tuesday, but Hillary Clinton is reportedly putting together a new team to join her at the State Department. According to the Associated Press, she wants James Steinberg, a former Clinton administration deputy national security adviser, to become the number-two man at the State Department, the deputy secretary of state.

She wants the former U.N. Ambassador and veteran Democratic troubleshooter Richard Holbrooke as a special adviser for Afghanistan and Pakistan, and the longtime former Middle East negotiator Dennis Ross as a special adviser for that region as well.

And this just coming into THE SITUATION ROOM: President-elect Obama plans to meet with President Calderon of Mexico in Washington, D.C., next week, on January 12. That's next Monday.

In a statement that's just been released by the Obama campaign, it says this: "There is a longstanding tradition since 1980 of U.S. presidents meeting with the Mexican president prior to being sworn in to underscore the important relationship between the United States and Mexico. This meeting," the statement says, "is in keeping with that tradition."

So, a meeting between the president-elect and the president of Mexico in Washington next Monday.

Dire warnings from the president-elect, Barack Obama, a recession that he says could linger for years, and double-digit unemployment -- why he says the time to act is now.

Some people are so distressed in this global financial crisis, they're killing themselves, literally. How can such tragedy be avoided?

And confirmation hearings beginning for Barack Obama's Cabinet picks, first up, the Health and Human Services nominee, Tom Daschle.

Stick around, lots of news happening today right here in THE SITUATION ROOM.



BLITZER: I want to go back to Capitol Hill.

Dana Bash is working another story for us.

Dana, a surprising piece of opposition all of a sudden announced on Capitol Hill to Dr. Sanjay Gupta, our chief medical correspondent, potentially becoming the nation's surgeon general.

What's going on?

BASH: What's going on is that there was a letter that was released from the House Judiciary chairman, the Democratic chairman of the Judiciary Committee, John Conyers, who made it abundantly clear that he does not think it is appropriate for Sanjay Gupta to become the U.S. surgeon general.

And I will read you part of the letter that he wrote to his colleagues. It says: "It is not in the best interests of the nation to have someone like this who lacks the requisite experience needed to oversee the federal agency that provides crucial health care assistance to some of the poorest and most underserved communities in America."

Now, in this letter, he talks about -- he actually has some quotes from some people inside the service expressing their concerns. Of course, the Public Health Service has about 6,000 employees. And they are a service that apparently has some concerns.

It is very, very, I think, probably the best word is odd that this is coming from the House Judiciary chairman. He has absolutely nothing to do with the fate of Sanjay Gupta, if -- and we should say if -- he were to appointed to surgeon general. This is something that goes through the United States Senate. It would be a confirmation process in the Health Committee, or -- as it's known, the Health Committee.

So, it is a little bit out of left field why this letter came out, but it is very strong. And it is very clear that this particular member of Congress thinks it's a bad idea.

BLITZER: Well, John Conyers certainly outspoken on a lot of issues, and this one showing he continues to be outspoken.

All right, Dana, thanks very much.

Some victims of alleged Wall Street swindler Bernard Madoff are scrambling to keep the money they have left.


UNIDENTIFIED MALE: If I got all my money out of Bernie Madoff's firm within the last six years, I would be speaking to a lawyer right now.

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Because the trustee is going to come after your money?

UNIDENTIFIED MALE: Very likely. And very likely it is going to happen soon.


BLITZER: Wow. The outrage keeps coming over one of the worst allegations of fraud in Wall Street history.

Plus, the economic crisis takes the ultimate toll, stress, depression, and even suicide. Crisis centers are on alert right now.

And the flooding in Washington State, major highways under water, and avalanches feared.

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


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

Happening now: an urgent warning from president-elect Barack Obama about the U.S. economy. Things look bad now, but he says they could get even worse and sacrifice an entire generation.

Democrats revolt. Some top senators aren't all that happy with everything the president-elect is proposing for the economic recovery. Will Barack Obama have to turn to the GOP for some critical support? We're taking a closer look.

And desperate measures -- some of the world's wealthiest are taking their own lives in the wake of the global financial crisis -- all of this, plus the best political team on television.

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

Just revealed, what prosecutors found in Bernard Madoff's desk after they arrested him last month for allegedly running a huge Ponzi scheme, signed checks worth more than $173 million, checks Madoff was ready to send to his closest family, friends and employees.

And now his victims are getting yet another shock. The scandal could cost them even more money. And we're talking about the victims.

CNN's Allan Chernoff has been on this story from day one.

Allan, it's shocking every day what we're hearing and seeing. What's the latest?

CHERNOFF: The latest, Wolf, is that some of Bernie Madoff's victims may be getting a very unwelcome demand for money from a court- appointed trustee, whose job it is to collect all Madoff assets.


CHERNOFF (voice-over): David Berger, father of six children, entrusted Bernie Madoff with his money for 27 years. For the last decade, he and his family have been living off their Madoff returns.

DAVID BERGER, MADOFF VICTIM: It's devastating because, you know, I've always been a provider to my family. And I've always been, you know, their foundation. And it's devastating. I'm going to be 60 years old and I live in Sarasota, Florida. And I'm not really marketable, job-wise, down here. I've been retired for a couple of years and it's -- it hasn't totally sunk in yet.

CHERNOFF: The nightmare could get even darker for Berger and other victims, who may be asked to pay money to a court-appointed trustee responsible for recovering assets which would ultimately be distributed to all victims. ROSS INTELISANO, SECURITIES LAWYER, RICH & INTELISANO: It could be multiple nightmares for investors who took out partial redemptions -- as they lost $10 million that they had in there, but took out $3 million over the life of those years. They can be asked to throw that $3 million back, which is horrendous.

CHERNOFF: Intelisano represents victims of another investment fraud -- Bayou Management. In that case, the trustee required only investors who pulled out all their money within the six year statute of limitations to give it back.

INTELISANO: If I got all my money out of Bernie Madoff's firm within the last six years, I'd be speaking to a lawyer right now.

CHERNOFF (on camera): Because the trustee is going to come after your money?

INTELISANO: Very likely. And very likely it's going to happen soon.

CHERNOFF: Trustee Irving Picard refused comment.

Berger has hope he can get money back from the government -- millions in taxes he paid on capital gains Madoff was reporting to him. But some accountants say there may be no refunds.

MARJORIE HORWIN, MBAF ACCOUNTING FIRM: There have been many cases that have gone against the taxpayer, have been very pro- government and refunds have not been easily obtained.


CHERNOFF: If victims can't get refunds, accountants say they should at least be able to get tax deductions for the payments that they've made to the IRS, as well as deductions for the apparent losses -- the theft losses that they've suffered.

By the way, the IRS has provided zero guidance on this, saying only: "The IRS is aware of the situation, but we have no further comment" -- Wolf.

BLITZER: Allan, thanks for that report.

What a story this has developed into.

And amid this global cash crisis, the vast majority of the people hurting are doing whatever they can to survive. But there are some people who feel so strapped, so hopeless, they feel there's simply no way out.

Let's bring in our Brian Todd.

He's looking at this really sad part of this story -- Brian.

BRIAN TODD, CNN CORRESPONDENT: The ultimate in desperation, Wolf. We've seen it repeatedly as this financial crisis has progressed. And experts say it may go on -- touching potentially anyone, from single homeowners to the top of the financial chain.


BLITZER: Unfortunately, we seem to have a technical problem with that piece.

But what we were talking about, Brian, is basically some high profile individuals -- some fabulously wealthy who have taken their own lives.

TODD: That's right. There was a gentleman in Germany who was the manager of a large fund there who took his own life. He stepped in front of a train recently. He was very overleveraged and his assets were being seized -- a lot of them -- and he was losing a lot of his business.

There was a gentleman in Chicago, a real estate mogul, who killed himself, as well as one of the people connected to the story that Allan just reported on -- one of the fund managers connected to the Madoff investments. He killed himself.

And experts are saying, you know, for these gentlemen, it became kind of a loss of self-esteem. And their loss of status was such that they felt like they just couldn't go on anymore. But part of our piece was that -- you know, this also affected normal homeowners. There have been repeated reports in the news about homeowners facing foreclosure and other financial meltdowns taking their own lives just ahead of the banks, you know, foreclosing on their homes.

So it's become a very, very desperate situation. And people are kind of monitoring this. Mental health experts say that the calls to the suicide hotlines across the country have gone way up between 2000 seven and 2008. They've gone up almost 25 percent. And a lot of people calling, they say, are pointing to their economic situations as the reason they're calling.

BLITZER: And a lot of people are certainly drawing some parallels to what happened during the Great Depression, when several -- a lot of people took their own lives, as well.

All right, Brian.

Thanks very much.

Apologize that we didn't have that piece ready for our viewers.

A dire economic warning from the president-elect.


OBAMA: If nothing is done, this recession could linger for years. The unemployment rate could reach double digits.


BLITZER: A major speech on the economy -- did Barack Obama rally Americans behind his cause?

The best political team on television standing by to weigh in.

Plus, a major highway closed and thousands of people are urged to flee -- we're going live to some of the worst flooding on record in the State of Washington.

Stay with us.




OBAMA: I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible. If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity, which translates into more than $12,000 in lost income for a family of four.

We could lose a generation of potential and promise, as more young Americans are forced to forgo dreams of college or the chance to train for the jobs of the future. And our nation could lose the competitive edge that has served as a foundation for our strength and our standing in the world. In short, a bad situation could become dramatically worse.


BLITZER: President-Elect Barack Obama issuing a very dire warning of grim consequences unless dramatic action is taken quickly on the economy.

Let's discuss that and more with our CNN senior political analyst, Gloria Borger; our CNN political contributor, Dana Milbank of "The Washington Post;" and our CNN political contributor, Tara Wall of "The Washington Times."

Gloria, it's pretty surprising. He's not even been sworn in, but Democrat versus Democrat already.

What's going on here?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: They are Democrats, Wolf, after all.


BORGER: I think, you know, actually, that what the Democrats are saying is we're not going to be a rubber stamp. And you can -- it's no surprise to anybody that some liberal Democrats may oppose some corporate tax cuts. For example, conservative Democrats don't want to overspend. But, you know, in the end, Barack Obama is doing what he has to do to try to and get a package through the Congress. BLITZER: Do you remember anything like this happening, Dana, during a transition before the guy even becomes president from his own party?

DANA MILBANK, CNN CONTRIBUTOR "WASHINGTON POST": I'm very surprised, Wolf. It should be a point of his maximum political capital -- maximum political advantage. I just spent the day on Capitol Hill there. It's mayhem. Everybody's saying this is what the proposal is going to be. No, we're going to have tax increases, forget it until the end of February. It really -- it's as if the Democrats in Congress feel, OK, we have the big fat majority, we're calling the shots, listen, Mr. President-Elect, you listen to us.

BLITZER: Is it likely -- is it out of the question, Tara, that Republicans are going to come to Obama's rescue?

TARA WALL, "WASHINGTON TIMES": Well, you know, I think -- it is ironic. I think, first of all, Democrats are marking their little territories, their little spots in the sand or in the grass, if you will, of here's my space, this is my part, this is my territory.

But at the same time, it's not surprising. I mean I thought early on -- you know, when he started talking about tax cuts I knew, Pelosi, for example, was against the Bush tax cuts and Republican tax cuts. So I knew that there was going to be a little bit of back and forth because, quite frankly, as was mentioned, there are many liberal Democrats who are -- who, you know, are not going to swallow this. And there are conservatives who are concerned about -- conservative Democrats who are conservative about the big spending.

And, yes, there probably will be some Republicans that come to his side as a result.

BLITZER: You know, he gave the speech at George Mason University in Northern Virginia right outside of Washington, D.C. , Gloria, earlier this morning. He's a great speaker, as all of us know.

What did you think of the speech -- the tone, the substance, the presentation?

BORGER: Well, I thought it was stark, sober, serious, less inspirational, in a way, that we're sort of used to from Barack Obama -- rather more of a sort of scared straight kind of speech, saying unless we do something now and we do something big and we take this seriously, the problems are only going to get worse.

It -- it was quite dramatic to me to hear this from somebody who has not yet taken the oath of office.

BLITZER: I don't think we've heard this kind of dire economic speech from an American president or president-elect since FDR, Dana.

WALL: Right.

BLITZER: What do you think? MILBANK: Well, and perhaps not even then, since there was a lot less reassurance in there. I was a little bit surprised by the tone of it, in the sense that Americans know that we're in a real mess here. He has a lot of support for the idea of a stimulus. So I -- I'm a little surprised that he's spending the emphasis on the lofty rhetoric, as opposed to getting up there on the Hill and banging heads together and saying here is you guys are going to do.

WALL: Yes.

BLITZER: He had some proposals, Tara, in there. But he wasn't as specific as some would have liked.

WALL: I think that's part of the problems with Democrats is they weren't -- they were concerned because there weren't a lot of specifics. I mean, he talked about things like Internet for rural areas and more government -- rebuilding of government infrastructure and things like that. But it was a little vague. It was very vague.

And I think that that was -- that gives some folks pause.

I concur with what Dana said, too, is that, to me, the speech just seemed very -- quite frankly, depressing. I mean no less than six dozen times he said could, could, could -- you know, it could get worse. We could be in a recession -- it could just -- it could all go to hell, basically, you know. And I think that at a time -- it is tough times, but Americans still need that sense of hope and optimism, quite frankly. It is tough, but it can and it will get better.

BORGER: You know, I think -- I think what he was doing, though, was really going over the heads of Congress to the American people to tell the American people that they needed to kind of support the kind of measures that he's going to propose. It's very Reaganesque to go do that.

He did end with -- with a positive note by saying, look, if we get together and we do this, we can -- we can fix these things. But I think he -- he clearly wanted to sort of set the stage for -- for the stimulus package. And it's going to be a sustained public relations campaign that he's going to wage with the people so the people can tell the Congress that they support it.

BLITZER: Yes. I think it...

WALL: I just don't think it boosted the confidence in folks -- and not that it needs to be boosted -- to give people that hope and inspiration that it will get better.

BLITZER: Let's switch gears for a moment, Dana. The Republicans -- they've lost a lot of House seats, a lot of Senate seats in 2006 and 2008. And now, today, another Republican incumbent senator who was up for election in 2010, Kit Bond of Missouri, says he's not going to seek re-election. Mel Martinez of Florida already said the same thing. It's not necessarily already boding well for Republicans in 2010.

MILBANK: No, it's not at all. And each time you have one of these incumbents that open -- drops out and opens up the seat, it means the Republicans are going to have to spend a lot more effort and a lot more money to defend those.

This is just the time when you want to be recruiting your best candidates. So if people are getting the perception that these guys are abandoning a sinking ship, that's going to be very damaging in terms of recruitment for them.

BORGER: Well, you know, welcome to the world of the minority...

BLITZER: Tara, what do you...

WALL: I don't know...

BLITZER: Tara, what do you think?

WALL: I don't think that -- I don't -- well, I don't think it's abandoning a ship. I think that, you know, Kit Bond said, you know, he was the youngest Missouri governor and he didn't want to be the oldest senator. I think, you know, look, the out with the old, in with the new, so to speak. There are some folks that are coming up through the ranks. I think that you will see that will pose interest in these positions in Florida. Mark Rubio, the former House speaker there -- young, energetic.

In Missouri, Roy Blunt, probably Jim Talent may make another go at it.

So I think there are some folks in the wings there. It's just part of the process. And Republicans will tell you they believe that these were going to be competitive states anyway.

BORGER: But it's more likely that you lose people when you're in the minority than when you're in the majority. People like to run the place. And, you know, the Republicans are understanding now what it feels like to be the minority.

BLITZER: All right.

WALL: Yes.

BLITZER: We've got to leave it there, guys.

Thanks very much.

Lou Dobbs is getting ready for his show that begins right at the top of the hour -- Lou, what are you working on?

LOU DOBBS, CNN ANCHOR: Well, Wolf, you know, on that issue, 22 of the folks in the Senate -- 22 out of 100 serving senators are 70 years of age or more.

Isn't that amazing -- 70 years old or more.

Well, coming up tonight at the top of the hour, more on the president-elect's appeal today to Congress to support his economic stimulus plan.

Will the president-elect win over skeptics in his own party?

Will he overcome Republican opposition?

We'll have complete coverage of the political and economic effect of that plan.

Also, the State of California -- they're thinking about drastic measures to tackle a worsening budget crisis, including -- get this -- the possibility of giving taxpayers IOUs instead of tax refunds. We'll be reporting that.

And an outbreak of salmonella spreading to more than 40 states now. More than 400 people been taken ill. We'll have a special report on this outbreak and whether anyone is protecting you from dangerous diseases in this federal government.

We'll also have the latest on the political circus over whether to allow Roland Burris to be seated as the junior senator from Illinois. We'll have the latest for you.

Please join us for that and all the day's news at the top of the hour -- Wolf, back to you.

BLITZER: All right, Lou.

Thank you.

Battered by snow and rain, now Washington State faces flooding worse than anyone can remember. We're going there live.

And Barack Obama and three-legged dog. It's a "Moost Unusual" story that has our own Jeanne Moos written all over it.

Stay with us.


BLITZER: An Illinois House panel has just voted unanimously -- 21-0 -- to impeach the Illinois governor, Rod Blagojevich. The full House in Springfield, Illinois, the capital, will vote on this matter tomorrow. They're expected -- expected to follow suit. Stand by for that. We'll be all over this story tomorrow.

Another important story we're following right now -- first came record snow, then heavy rain. Now Washington State is seeing some of the worst flooding anyone can remember. And thousands of people are being urged to simply flee their homes. A 20 mile section Interstate 5 closed south of Seattle. That's the primary route between Oregon and Washington State.

CNN's Ted Rowlands is joining us now live on the scene -- Ted, tell our viewers how bad this is.

TED ROWLANDS, CNN CORRESPONDENT: Well, Wolf, it is getting better, in the sense that the rain has stopped, which is great news. But the trouble continues. You can see behind me, this area is normally completely dry. But it is completely under water right now. And this river -- this area where we're at, north of Seattle, is expected to crest within the next hour. So people are feverishly trying to sandbag. You see the guys behind us here sandbagging a bank here.

There are a number of businesses in this area. Everybody has been cleared out. Even though the rain has stopped, clearly the problems have not and won't for a while.

And this has been the case across the region. This morning, in Shelton, Washington, near Olympia, a man had to be pulled from a car that was in a ravine. His car was swept off of a road that was overcome by water. And this problem is not only in Washington, but it's in Oregon, as well. You mentioned Highway 5. There are a number of highways that have been closed off, which has basically kept people either in their homes or out of their homes.

The ones that were able to get out are out and the ones that -- but there are a lot of people that are trapped in their homes.

Luckily, at this point, officials say nobody has been seriously injured or killed. The rain, as we said, has halted for now. And they're hoping that these water levels will drop and allow people to get back into their homes and start to clean up -- Wolf.

BLITZER: All right. Let's hope -- let's hope for the best.

Ted, thank you.

Let's go back to Jack for "The Cafferty File" -- Jack.

CAFFERTY: The question this hour -- and we got several thousands responds just to this one questions: Has your confidence in Barack Obama declined any since the election? Connor writes from Chicago, where they have other issues: "I don't think confidence has declined. I think reality has set in. People who didn't like Obama are starting to see reasons to like him a little. People who worshipped Obama are finding out he's not a messianic figure who's going to sort everything out in a week. And those of us who are in the middle are simply seeing the reality of an Obama administration -- lots of good ideas, untested results and uncertainty all around."

Joe writes from north of the border in Canada: "I'm seeing a lot of support for Obama on the blogs. Those that oppose his plans don't seem to have any better suggestions and are being shot down pretty quickly by the others. It looks like you've got a winner."

J.D. in New Hampshire: "Absolutely not. This must be the media's scandal du jour. Poor Obama hasn't even been sworn in. Apparently, according to the talking heads, he's made a mess of his chance to lead the country. Give it a rest. Let's be optimistic for a change. Maybe we can turn this thing around. Obama is probably the most intelligent being to inhabit the White House and could be one of our very best leaders." Jack writes from Princeton, New Jersey: "The guy will have the toughest job on the planet, cleaning up after the carnage of Bush and the Republicans. He is exceeding expectations."

And Dave writes from St. Louis: "Absolutely not. I had no confidence in him to begin with. He has nowhere to go but up."

If you didn't see your e-mail here, you can go to my blog at and look for yours there among hundreds of others.

Good luck to you and Ellen later.

BLITZER: Thank you very much, Jack, for that. I'll need it.

All right. We're chasing the story of the future first dog and looking at the president-elect's close encounter with a very unusual canine.

Stick around.



BLITZER: In today's "Hot Shots," we take a closer look at some of the handmade portraits of President-Elect Obama submitted to

This mosaic, "Change for Obama," is made out of real change. It was made by Ted Stanke from New York.

Kurt Williams from Alabama sends us this work made entirely of crayons. It took him five months.

This is "Barack in A Box" from Heather Courtney in California.

And this one from Todd W. Evans is made entirely of drier lint.

If you have original artwork that you'd like to share, please send a picture or a video to

She's cute, cuddly and a celebrity. In fact, Baby, the three- legged dog, is turning into such a big star, she's even upstaging President-Elect Barack Obama.

CNN's Jeanne Moss has this "Moost Unusual" report.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): From behind, she looks A-OK. But this is a story that has legs -- three of them. Her name is Baby.

JANA KOHL, AUTHOR/ANIMAL RIGHTS ACTIVIST: I swear to you that Baby's toes smell like fresh popped popcorn. MOOS: But that's not her latest to fame -- this is -- the cover of "The American Dog" magazine in the arms of Barack Obama.

KOHL: They bonded, yes. They definitely bonded.

MOOS: Now, Baby is not destined to become the first three-legged first dog, but since the Obamas have expressed a preference for a shelter dog...

OBAMA: A lot of shelter dogs are mutts like me.

MOOS: ...animal activists like Baby's owner are thrilled. Baby, tattooed number 94, was rescued from a so-called puppy mill, where dogs are sometimes caged 24 hours a day for breeding. She was debarked.

KOHL: They stuck a scissors down Baby's throat and they cut out her vocal cords so they wouldn't have to be annoyed listening to the dogs barking.

MOOS: And lost her leg from being caged and constantly bred. But the poodle has become a star with her own book and her own theme song.


MOOS: She had her own bus tour, did talk shows, posed with celebs ranging from Jane Fonda to Patti Labelle.

KOHL: We have a plush toy in Baby's likeness.

MOOS: With three legs. Sure, there are more famous dogs with even fewer limbs. For instance, Faith, whose owner trained her to walk like this by holding peanut butter above her. Another two-legged rescue dog's exploits have been set to music on the Web.


MOOS: And Dominic (ph) here does stare -- something Baby is only now starting to master. But Baby has legislation named after her that's been introducing Congress aimed at puppy mills.

KOHL: Let them out of their cages for 60 minutes of exercise a day, which is, in my mind, a baby step.

MOOS (on camera): Now, the anti-puppy mill folks do have a bone to pick with Vice President-Elect Joe Biden.

KOHL: We were upset.

MOOS (voice-over): Upset that he recently got a German Shepherd pup from a breeder rather than a shelter. But a Biden spokesperson says he's got a 100 percent rating from the Humane Society and plans on getting his next dog from a shelter.

Baby will be panting down the administration's neck, making sure they walk the walk. Jeanne Moos, CNN, New York.


BLITZER: And that Baby, it's one adorable little doggie.

All right, thanks very much, Jeanne.

We want you to check out our political pod cast. To get the best political team to go, subscribe at

I'm Wolf Blitzer in THE SITUATION ROOM.

Up next, "LOU DOBBS TONIGHT" -- Lou.

DOBBS: Thank you, Wolf.

Tonight, President-Elect Obama makes his most direct appeal for Congressional and public support for his economic smells plan. But the president-elect's plan facing rising opposition already from within his own party.

And tonight, a key committee of the Illinois General Assembly has just voted unanimously to recommend the impeachment of Governor Rod Blagojevich.