Return to Transcripts main page

THE SITUATION ROOM

$3.6 Trillion Spending Plan; Pentagon Lifts Ban on Coffin Images; Small Defense Boost in Budget

Aired February 26, 2009 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now, a $3.6 trillion plan unveiled -- President Obama's first budget calling for massive spending and an unprecedented deficit. It's under fire from Republicans. The White House budget director -- he's here standing by live to defend it.

Also, the fight to save the Pentagon's F-22 fighter jet -- a plane that's never actually seen combat, but that generates thousands and thousands of jobs.

What's going on?

And a state's struggle with financial crisis -- should coaches at their public universities be making millions of dollars?

One heated exchange thrust the issue into the spotlight.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

President Obama's budget for 2010 is now out. It's breathtaking in size -- repugnant to a lot of Republicans. They're deriding it as government simply run amok. But the White House calls its massive spending and unprecedented deficit necessary evils that will put the country back on the road to fiscal health.

Let's bring in our senior political correspondent, Candy Crowley.

She's got details.

It says a lot, also -- this new budget blueprint -- of the new president.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Budget blueprints are largely political documents. And you're right, they definitely tell you in which direction the Obama administration is headed. And that is a very different one from the Bush administration.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): There are 134 pages in the budget book, with eye-popping numbers. The bottom line is this -- $3.5 trillion in spending for the next fiscal year. It includes enormous amounts of new spending for education, energy and a 10 year, $634 billion investment in health care.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Because of crushing health care costs and the fact that they drag down our economy, bankrupt our families and represent the fastest growing part of our budget, we must make it a priority to give every single American quality, affordable health care.

CROWLEY: The 10 year budget outlook pays for new spending with surcharges on polluters, program cuts and tax hikes on households making more than $250,000.

Thanks say the country has passed this way before.

REP. JOHN BOEHNER (R-OH), MINORITY LEADER: The American people know that we can't tax and spend our way to prosperity. And it's just the formula that it appears the president's budget is relying on. I mean, the era of big government is back and Democrats are asking you to pay for it.

CROWLEY: The deficit spending is jaw-dropping. Red ink this fiscal year is expected to be $1.75 trillion.

OBAMA: While we must add to our deficits in the short-term to provide immediate relief to families and get our economy moving, it is only by restoring fiscal discipline over the long run that we can produce sustained growth and shared prosperity.

CROWLEY: The president says he can the deficit in half by the end of his term. Republicans believe he'll have to do more to raise taxes to get there.

SEN. JUDD GREGG (R), NEW HAMPSHIRE: There is no fiscal restraint in this budget. There is no attempt to address the spending side of the ledger in any aggressive way.

(END VIDEOTAPE)

CROWLEY: So far, as you might imagine, the Democrats have a much different view of this budget outline. But as you know, Wolf, this is still the outline. When you get down to specific programs that the president wants to drop or define, then you can run some real risks of picking off some of those Democrats who may not like it, because, in the end, budgets are geographical things more than they are party things.

BLITZER: And it's just a recommendation from the Obama administration. Now it goes -- has to go through the lengthy appropriations and authorization process in the Senate and the House. And it could change dramatically.

CROWLEY: Absolutely.

BLITZER: It always does.

Thanks very much, Candy. The Pentagon is reversing a controversial policy banning the news media from showing coffins of service members arriving at Delaware's Dover's Air Force Base. President Obama asked the Defense secretary, Robert Gates, to review the rules.

(BEGIN VIDEO CLIP)

ROBERT GATES, U.S. SECRETARY OF DEFENSE: After receiving input from a number of sources, including all the military services and organizations representing military families, I have decided that the decision regarding media coverage of the dignified transfer process at Dover should be made by those most directly affected, on an individual basis, by the families of the fallen. We ought not presume make that decision in their place.

(END VIDEO CLIP)

BLITZER: Many of you probably remember our senior White House correspondent, Ed Henry, asked the president about this very sensitive issue at that first prime time news conference only a couple of weeks ago.

Let's bring in CNN's Susan Roesgen.

She's standing by live in Chicago.

She's got more on this debate -- and it's a very painful debate for a lot of folks out there -- Susie.

SUSAN ROESGEN, CNN GULF COAST CORRESPONDENT: It really is, Wolf. Strong feelings on both sides over this ban that had been in place for nearly 20 years.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: To go forward.

ROESGEN (voice-over): This was a live news draft in 1989. The U.S. had invaded Panama to remove military leader Manuel Noriega and the first President Bush was holding a news conference. But when he was done speaking, the mood changed.

UNIDENTIFIED MALE: Yes. The president is in excellent health.

ROESGEN: The president appeared to be smiling at the same time viewers were seeing the first invasion casualties being brought to Dover Air Force Base in Delaware. The Defense Department won't confirm it, but it's been widely accepted that this is what led to the ban.

And in the next military conflict, the first Gulf War, the Pentagon banned anymore media coverage of coffins at Dover.

But now, some families say it's time to lift that ban.

KAREN MEREDITH, SOLDIER'S MOTHER: His Hawaiian shirt over full body armor. That's the kind of soldier he was. ROESGEN: Lieutenant Ken Ballard left for Iraq on Mother's Day, 2003. He came home in a casket on Memorial Day, 2004.

MEREDITH: I wanted the nation to grieve with me -- to grieve the loss of my only child. And if we don't see those images, then we don't know that these young men and women are dying. And to me, it's an honor to have an honors guard at Dover when they bring these young men and women back.

ROESGEN: But others say that honor should be private. Vince Rangel, a former Army Ranger captain in Vietnam, says he still thinks about the soldiers who were killed in his platoon.

VINCE RANGEL, FORMER ARMY RANGER CAPTAIN: When they come off the plane, these are anonymous caskets.

And, you know, what is the greater good of that?

I would rather that they take that attention and give it everything it deserves at the grave site, in the communities where you can get all the information, so people can understand these people as human beings, not just as a flag-draped casket that comes off a plane.

ROESGEN: Two different views of how to give the dead the dignity they deserve.

(END VIDEOTAPE)

ROESGEN: And, Wolf, this debate will probably continue even now, because a lot of families say that there are many unanswered questions, such as how close can the media get to the families at one of these returning caskets there at Dover and what will happen if a political group gets a hold of some of these pictures and uses it for political purposes?

Will the media be allowed to actually interview the families when they're there?

So a lot of unanswered questions that make, still, a lot of military families nervous about the lifting of this ban.

BLITZER: Susie, thanks very much.

A very sensitive subject.

Two thirds of Americans, by the way, were already on board with the policy change. In CNN/Opinion Research Corporation poll conducted last week, 67 percent said the government should allow the public to see photos of caskets of U.S. troops; 31 percent did not.

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

JACK CAFFERTY, CNN ANCHOR: Wolf, worldwide economic jitters now ranking very high on the CIA's list of priorities. The spy agency has begun briefing the White House daily about the global financial crisis and it's ripple affect on the stability of various countries around the world.

The CIA is now giving an economic intelligence briefing to top officials in addition to daily round-up of terrorist attacks, surveillance reports, etc.

This suggests the global economic crisis is a top concern now when it comes to our national security. CIA Director Leon Panetta says the White House requested these daily economic briefings. He talked about the impact of the recession around the world and said now U.S. officials won't be surprised by the aftershocks from bank failures and rising unemployment elsewhere.

The agency is focusing on many areas, including East Asia and Latin America. They're in crisis because of the economy.

Dennis Blair, the new director of National Intelligence, said earlier this month, economic issues have pretty much replaced terrorism as the country's top intelligence and security challenge. He pointed out three European governments have fallen because of economic issues. The economic crunch overseas now joins a long list of global concerns confronting President Obama, including the resurgence of Al Qaeda and the Taliban in Afghanistan, winding down the war in Iraq, and, of course, the never-ending conflict between the Israelis and the Palestinians.

So here's the question: Which is a bigger threat to America's national security -- the global financial crisis or terrorism?

Go to CNN.com/caffertyfile, where you can post a comment on my blog.

Pretty serious stuff when the CIA is doing a briefing for the White House every day on this.

BLITZER: Yes. It certainly is, because you never know what's going to fall out as a result. But it's very worrisome.

Jack, thank you.

President Obama's first budget -- critics say it's simply a return to big government. The White House budget director, Peter Orszag, he's standing by live here in THE SITUATION ROOM. He'll defend the president's new spending plan.

Also, the Pentagon is spending hundreds of millions of dollars on a fighter jet that's never fought. As many as 100,000 jobs could ride on the future of the F-22, now threatened by the budget ax. We'll tell you what's going on.

And chilling new video just emerging apparently showing terrorists in the middle of their deadly attack in Mumbai.

Stick around.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: President Obama's $3.6 trillion budget barely out to press. It's coming under some very sharp criticism already.

Peter Orszag is here to defend it.

He's the director of the White House Office of Management & Budget -- the man largely reasonable for putting the blueprints together.

Peter, thanks very much for coming in.

PETER ORSZAG, WHITE HOUSE BUDGET DIRECTOR: Good afternoon.

BLITZER: Why raise taxes during an economic recession?

ORSZAG: Well, that's not what we're doing. And I think this has been repeated so often that it -- it really does need to be corrected.

During the recession, we have the Recovery Act which cuts taxes. That's appropriate as we're trying to jump-start the economy.

As we emerge from the recession and in 2011 and thereafter, there are some tax changes that we are asking for in order to help fund key investments and also get our country back on a sound fiscal path. This is exactly what the president campaigned on.

But, again, I want to emphasize, given how much confusion there's been, there are no tax increases in 2009 or 2010.

BLITZER: No tax increases for even those making more than $250,000 a year?

ORSZAG: Correct. So this charge that we're raising taxes during a recession is just actually wrong.

BLITZER: What about the hedge fund guys?

Because they're supposed to be taxed according to their income, as opposed to just capital gains.

When does that go into effect, the increase in taxes for them?

ORSZAG: I have to check. I believe that's either in 2010 or 2011.

BLITZER: So they would get a tax increase?

ORSZAG: I'm not sure. I'll have to, again, check.

But even take that -- take that example. Whenever -- if a movie actor earns a performance-based bonus or, you know, a worker at CNN got a bonus for doing a good job, they're taxed as ordinary income. A hedge fund manager receiving a performance-based package -- a performance package, gets a preferential tax treatment, which doesn't seem to make a lot of sense. BLITZER: The seniors who make more than, what, $150,000 a year, their prescription drug rates are going to go up.

When would that take effect, according to your blueprint?

ORSZAG: That's, again, delayed in 2011 or 2012.

BLITZER: So not this year or next year...

ORSZAG: Right.

BLITZER: ...but eventually.

Judd Gregg, who you wanted at one point to be your Commerce secretary -- the president, at least, wanted the Republican from New Hampshire -- he's obviously not very happy with what you put forward.

Let me read to you from a statement he released just a little while ago: "Unfortunately, this budget plan is once again a missed opportunity for American taxpayers. It raises taxes on all Americans, implements massive new spending and fails to make any tough choices to control the deficit and long-term fiscal crisis posed by the huge entitlement programs."

He knows a lot about this kind of stuff. He's the ranking member on the Budget Committee.

Do you want to respond to what he suggests?

ORSZAG: I sure do. I have a lot of respect for Judd Gregg. But let's just look at the facts.

We're inheriting a deficit that amounts to $9 trillion under current policies over the next decade. We have $2 trillion of deficit reduction in this -- in this budget, including $1 trillion in spending reductions and a trillion dollars in additional revenue.

So this -- the claim that we're raising spending just doesn't make sense relative to where we're headed under current policies.

Furthermore, and I think more important than anything, we are making investments in improving the efficiency of the health system that are absolutely key to our long-term fiscal future. The single most important thing we can do to get the budget under control over the long-term is slow the growth rate of health care costs. And that's exactly what we're doing, with the top priority of getting health reform done this year.

BLITZER: The assumptions that you put in looking ahead, in the years to come, you assume that the country is going to go through a rough year this year, but next year, there's going to be economic growth, more than 3 percent. That's your assumption.

In the years that follow, at least 4 percent economic growth. And some economists are saying that's wildly optimistic -- rosy scenarios.

What do you base those assumptions on?

ORSZAG: Well, Christie Romer, who chairs the Council of Economic Advisers, leads a team of professional economists who put together that forecast. One of the things that happens when you go through a very deep recession, like we are now, is that as you emerge from the recession, the economy temporarily grows faster than normal just because your starting point is so low.

BLITZER: So you think that the economy is going to bottom out when?

ORSZAG: Somewhere toward the end of this year or early next year. That's consistent with what Chairman -- Chairman Bernanke was also saying yesterday.

BLITZER: So you agree with him.

And in 2010, you think the economy is going to become robust, instead of losing jobs that we're going to start creating jobs?

ORSZAG: Well, the labor market actually lags behind. Even after the economy starts growing again, the unemployment rate can remain elevated and job losses can continue for some period of time. That's what all the evidence suggests about what happens, even as the economy starts to recover.

Unfortunately, it takes yet more time to feed into jobs in the labor market.

BLITZER: The health care package you put together is pretty staggering, I guess a lot of people would say.

Listen to what the Republican leader in the House, John Boehner, said.

(BEGIN VIDEO CLIP)

BOEHNER: A way of government bureaucrats looking at treatments that patients get and trying to determine which ones are more effective than others. In other words, getting ready to tell doctors and patients that this is the cure, regardless of what the doctor may think.

(END VIDEO CLIP)

BLITZER: Is he right when he makes that charge?

ORSZAG: Absolutely not. Your doctor will still make all the decisions and you are -- you along with your doctor will make decisions about your health care. The thing we have to realize is doctors in different parts of the country -- and even doctors within the same hospital -- are practicing medicine in dramatically different ways. And what happens when you show them these different practices that they are undertaking, they tend to get together and study what works and what doesn't themselves. That's what we're looking to do -- basically, to have the medical profession itself examine what works and what doesn't so that you get the most effective, high quality care possible and that -- and that incentives for your doctor and your providers are geared toward higher quality care rather than just more care. Because it's not always better just to get more tests and stay in the hospital for longer.

BLITZER: Peter Orszag is the director of Office of Management & Budget.

Peter, good luck.

ORSZAG: Thank you very much.

BLITZER: An unprecedented terror attack that lasted for days and claimed more than 160 lives. And now there's new surveillance video that may show the killers as they strike.

Plus, new rules prompted a user revolt at Facebook. And now a newer rule brings democracy to one of the Web's most popular social networks. We'll tell you what's happening right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's check in with Zain Verjee.

She's monitoring some other important stories incoming into THE SITUATION ROOM right now -- Zain, what's going on?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, what appears to be chilling new surveillance video of last November's deadly Mumbai attacks are surfacing. The video appears to show gunmen walking inside the lobby of the Oberoi Trident Hotel, one of several hotels attacked. CNN can't independently verify the authenticity of the video. CNN's sister network, CNN IBN, says it received the video from police. More than 160 police were killed when 10 gunmen terrorized India's financial capital. A lone surviving gunman is in custody.

Protests in the streets of Islamabad, Pakistan. Take a look at this, Wolf. Supporters of the opposition leader, Nawaz Sharif, took to the streets. They were torching tires and just stoning shops. They're furious because Pakistan's supreme court says neither Nawaz Sharif or his brother Shahbaz can hold elected office. They were also outraged over President Asif Ali Zardari's decision to impose executive rule in the state of Punjab. And that just happens to be the power base for Sharif's party. The two men have been enemies for a long time -- political enemies.

The financial meltdown has claimed another victim. Colorado's oldest newspaper, "The Rocky Mountain News," will publish its final edition tomorrow. The paper is less than two months from its 150th anniversary. The efforts to find a buyer just didn't work out. The paper had been operating under a joint agreement with "The Denver Post" -- Wolf. BLITZER: For all of us who love newspapers, that's a heartbreaking story in and of itself. Unfortunately, a lot of other newspapers around the country in trouble right now.

Zain, thank you.

The budget ax may be hanging over a key weapons system. We're going to tell you what it is and what the fallout could be.

Also, is he a modern day Robin Hood?

President Obama wants to tax the rich to pay for health care. We're going to talk about it.

And rocking the house -- President Obama honors one of his musical heroes at the White House and a concert breaks out.

(MUSIC)

(COMMERCIAL BREAK)

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

Happening now, President Obama's prescription for the United States' beleaguered health care system -- he wants to slash payments to private insurance plans.

Is he facing a fight, though?

G.M.'s money woes -- the losses mounting by the day for the big three automakers.

So where are all the bailout billions going?

And she's photographed everyone from Demi Moore to Queen Elizabeth to Molly Syrus -- so why is one of the world's most famous photographers, Annie Leibovitz, hurting for cash and putting her pictures up as collateral?

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

A modest increase in defense spending in President Obama's budget. He's proposing more than $533 billion for fiscal year 2010 -- an increase of roughly $20 billion in 2009, or 4 percent. There's also a separate request for $130 billion for the wars in Iraq and Afghanistan.

But the budget ax is hanging over the Pentagon's F-22 program.

Let's go to our Pentagon correspondent, Chris Lawrence.

He's got more on this story -- enormous issues at stake -- Chris.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Yes, Wolf. And when the defense budget is released in April, this jet will be one of the president's and Pentagon's tough choices.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): Will President Obama keep the F-22 flying (AUDIO GAP) or shut the line down?

(AUDIO GAP) Yesenia Perez is a single mom who builds parts for the F-22 in Florida. She'll likely lose her job if production stops. Each jet costs taxpayers $140...

(END VIDEOTAPE)

BLITZER: There's something go on over there. I want to make sure we cue up that tape appropriately -- Chris, while we do that, I just want to remind our viewers, this F-22 is this new generation fighter. It hasn't seen any action. The Air Force loved it.

But it's enormously expensive, isn't it?

LAWRENCE: Exactly, Wolf. This is costing taxpayers about $143 million a plane -- $350 million if you roll in all the research and development costs.

What the advocates will say is, yes, they're not using it now. It has never been used in Iraq. It has never been used in Afghanistan. It's never even fired a shot at an actual enemy...

BLITZER: All right...

LAWRENCE: And so let's take a look at exactly what the issues are.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): Will President Obama keep the F-22 flying or shut the line down?

YESENIA PEREZ, F-22 WORKER: It's pretty scary, you know, to think that your whole life -- your daily bread, you know, can be -- just rely on somebody's decision.

LAWRENCE: Yesenia Perez is a single mom who builds parts for the F-22 in Florida. She'll likely lose her job if production stops.

Each jet costs taxpayers $143 million. And the Pentagon already has or is building nearly 200 Raptors. The defense secretary says he doesn't need more, but half of Congress disagrees.

SEN. JAMES INHOFE (R), OKLAHOMA: If you want our kids that we send off to battle to have the best equipment, we need to have F-22s.

LAWRENCE: CNN obtained letters signed by nearly 200 House members urging the president to keep building raptors. 44 senators signed a similar letter. More Democrats than Republicans argue more jets are need to maintain America's air dominance and fight unemployment. SEN. SAXBY CHAMBLISS (R), GEORGIA: We're looking at somewhere around 100,000 jobs that are going to be lost all across the country.

LAWRENCE: But a lot of those jobs wouldn't be lost. Some suppliers we called wouldn't fire workers at all. Just move them to other projects. In an economic study at the University of Massachusetts found education, mass transit and infrastructure all generate more jobs than military spending.

DANIELLE BRYAN, PROJECT ON GOVERNMENT OVERSIGHT: I think it's crazy to be making national defense decisions based on job programs.

LAWRENCE: Although it's adding air to ground capability, the raptor is designed for dog fights with other jets. Even manufacturer Lockheed Martin admits it's never been used in Iraq or Afghanistan.

Has the F-22 actually fired a shot in battle?

LARRY LAWSON, LOCKHEED MARTIN: We have not. The air force has not employed the F-22 in an operational theatre yet.

(END VIDEOTAPE)

LAWRENCE: But advocates say we were fighting a cold war 30 years ago and no one can protect what enemies will be in 30 years from now. They say it takes so long to build these weapons, you can't wait until the moment that you actually need them. Wolf?

BLITZER: All right Chris. Thank you very much.

Let's get back to our top story. The president's new budget blueprint. Joining us now, our CNN political contributor Hillary Rosen, the Democratic strategist, and Republican strategist, Mary Matalin. Guys, thanks very much for coming back.

What's wrong, Mary, with giving those who can afford it the most, people earning more than $250,000, a little bit of an increase in taxes so that poorer people can get what they need as far as health care is concerned?

MARY MATALIN, REPUBLICAN STRATEGIST: If that's what was happening, it would be possibly OK, but that's not what's happening. Everything that this $4 trillion budget and stimulus and everything that's been poured into the economy since the election of Barack Obama, he says he's going to pay for it with tax increases on the wealthy. If he used every piece of earnings, not just tax increases but every piece of earnings, he wouldn't pay for less - he'd be able to pay for less than half of what he said should be paid for. So it's the cumulative cost to the sector that has been and will continue to unless they're tax consists create the greatest number of jobs.

BLITZER: Is it all phony numbers?

HILARY ROSEN, DEMOCRATIC STRATEGIST: It's not true. What we just heard in your interview with Peter Orszag, the budget director, was that they have a very specific plan for growing the economy and then eliminating the tax cuts that the wealthiest Americans got several years ago. By doing that, they're investing in places that businesses need investments to make jobs work. We're going to energy independence. We're going to health care. When you talk to businesses today, they're not complaining.

BLITZER: Those are lofty goals, education reform, health care reform, energy independence. You can't complain about the goals.

ROSEN: People aren't complaining about them.

BLITZER: You're in the complaining, but Mary's complaining.

MATALIN: They want everything, OK? I want three houses. Everybody wants a lot of stuff, but we can't afford a lot of this and we're in the middle of a recession. We went from an economic advisor, Christina Romer, who said tax increases were contractionary. We contract this economy and that's exactly what they're going to do. You say the same thing about the tax cuts for the rich. The greatest percentage of tax deductions went to the lowest bracket under George Bush.

BLITZER: The only people that are going to have any tax changes two years from now --

BLITZER: No what he says, they'll get additional tax cuts, the middle class. He's says they're going to get additional tax cuts. They're not only lose the tax cuts from the Bush administration, they're going to get more.

MATALIN: I'll say this again. You cannot tax anymore than they're already taxed to pay for even half of what he's suggesting needs to be paid for. When he does the cap and trade, that's going to be a tax on every single person and highly regressive because everybody's going to have to pay more for energy and the low-end earners will have to pay more as a percentage of their income.

ROSEN: In 1992, this is the same argument Republicans gave when Bill Clinton went and said we have a lot of investment to make to grow jobs and grow this economy. We're going to have a modest tax increase on the wealthiest Americans. We went to the 39% tax bracket where Barack Obama is likely to get to in two or three years and what happened? We created 22 million jobs and we had the longest prosperity ever and until you know, the Bush administration spent that on a war and more tax cuts for wealthy. This is a chance.

BLITZER: Go ahead, Mary.

MATALIN: And Bill Clinton and I remember it well. Apologize for that tax increase. It was a highly different economy. It was the beginning of the tech explosion that was put in place because of Reagan's tax cuts which unleashed capital into the economy. Completely different situation. Yes, he did. He did apologize for those tax increases. Yes, I know my history.

ROSEN: The fiscal conservative attitude was responsible for the growth that we saw. BLITZER: It was a partisan vote, as all of us remember. Some of the Democrats wound up losing in 1994 in the mid term elections because they voted with him. All right. We're going to go back and do some fact checking. Thanks very much for coming in. An important day here in Washington.

He's the highest paid state employee in Connecticut and he says he's not giving back a dime despite the state's failing economy.

Plus, government workers get a pep talk from first lady, Michelle Obama.

MICHELLE OBAMA, FIRST LADY: There's a lot riding on your shoulders. As Lisa said, what are you doing here? But I know that you are up to the challenge.

(COMMERCIAL BREAK)

BLITZER: The University of Florida professor accused of defrauding NASA, the FBI raiding his office. Brian Todd is here to explain what's going on.

BRIAN TODD, CNN CORRESPONDENT: Well Wolf, NASA's not saying too much about this professor's background, but when it comes to Billing, he's accused of lining his pockets at taxpayer expense.

(BEGIN VIDEOTAPE)

TODD: America's storage space agency, allegedly ripped off to the tune of several hundred thousand dollars by a college professor and his wife. Samim Anghaie, a nuclear radiologist who's done propulsion research for NASA is accused of over-billing the agency for employees he never hired. On Wednesday, federal officials from the FBI and NASA raided his office at the University of Florida campus and a suburban home making no arrest, but seizing several items. Agents returned for the second time Thursday, but university officials aren't giving details.

STEVE ORLANDO, UNIVERSITY OF FLORIDA SPOKESMAN: We can't discuss anything as far as the nature of the investigations or what the subject of it is.

TODD: Anghaie's firm, New Era Technology, has been paid $3.4 million by the government for contracts in the last eight years but court documents allege the firm submitted fraudulent invoices to NASA for alleged employees, those include family members. Prosecutors want to seize properties, six cars and several bank accounts alleging they're the proceeds of fraudulent income. One government watchdog group says when an agency like NASA pays for research, it's harder to verify than a vehicle or building purchase.

SCOTT AMEY, PROJECT ON GOVERNMENT OVERSIGHT: The government is buying more services and that's very hard to quantify. We're buying performance. Are we getting the return on that performance? Are we getting return on research?

(END VIDEOTAPE)

TODD: Professor Anghaie has been put on administrative leave with pay. CNN has been unable to reach him or to determine whether he even has a lawyer despite emailing him and calling his office and home phones several times.

BLITZER: Brian, stay on top of this story for us. All right. Thank you.

There's a new little uproar involving the University of Connecticut's men's basketball coach, Jim Calhoun. His team is number two in the nation right now. Let's go to Mary Snow. She's working this story and it involves his salary as a state employee.

What do we know?

MARY SNOW, CNN CORRESPONDENT: Well Wolf, it all started with an angry exchange and it sparked a heated debate about coaches at state schools and whether they're paychecks should come under scrutiny when state's are facing such tough economic challenges.

(BEGIN VIDEOTAPE)

SNOW: University of Connecticut coach Jim Calhoun marked a milestone Wednesday with game victory 800 but it's another number, his salary, that's gained attention. He was asked last weekend about being Connecticut's highest paid employee despite the state being in the red.

JIM CALHOUN, UCONN MEN'S BASKETBALL HEAD COACH: Not a dime back. I'm getting tight.

UNIDENTIFIED MALE: Do you think 1.3 million is enough?

CALHOUN: I'm sorry. I make a lot more than that.

SNOW: And the exchange intensifies.

CALHOUN: We make $12 million a year for this university. Get some facts and come back and see me. My best advice, shut up.

SNOW: The question, an unusual one for a post game press conference, came from a freelance journalist/activist.

PABLO TORRE, SPORTS ILLUSTRATED: The guy's method maybe wasn't the most tactful, but people are talking how much is Jim Calhoun being paid and if this state is running $1 billion deficit, is that really adjusting.

SNOW: A former sports agent says he thinks Calhoun's salary is justified and says coaches bring a lot of revenue to universities.

BOB BOLAND, FORMER SPORTS AGENT: This is a way for your university, if you're on a televised basketball game or a televised football game, to be seen by millions of viewers. It can also attract thousands of student applications. SNOW: Agents say competition is fierce. The University of Southern California's football coach is the highest paid employee at a private university, making more than $4 million. At state schools, the University of Florida's men's basketball coach makes more than $3 million and the University of North Carolina's basketball coach makes more than 2.7 million. With states in financial trouble, the debate could widen. In Connecticut following the Calhoun dust up, one lawmaker who applauds Calhoun's work says with the state facing such a difficult time for him to consider a pay cut isn't out of the question.

MARY ANN HANDLEY (D), CONNECTICUT STATE SENATE: I think it's certainly fair to ask him to think about it.

SNOW: She says the fact that debate has made it to the college basketball arena speaks to the country's dire economic situation.

(END VIDEOTAPE)

SNOW: We reached out to Coach Calhoun. The University of Connecticut spokesman says the coach does not want to comment on this and that he is focusing on basketball. Wolf?

BLITZER: Mary Snow, thanks very much.

So what do the rich and famous do when they're strapped for cash? We'll tell you about the pawnshop for the wealthy.

And Barack Obama honors one of his musical heroes.

(COMMERCIAL BREAK)

BLITZER: President Obama has honored Stevie Wonder at the White House, a tribute that turned into a full scale concert. Our CNN entertainment correspondent Brooke Anderson is here with more -- Brooke?

(BEGIN VIDEOTAPE)

BROOKE ANDERSON, CNN ENTERTAINMENT CORRESPONDENT (voice-over): Wolf, President Barack Obama is usually the one being introduced and applauded, but last night, the commander in chief honored a man he has called his musical hero.

B. OBAMA: Please give it up for Mr. Stevie Wonder.

ANDERSON: He's one of President Barack Obama's favorites. Stevie Wonder, the guest of honor at the White House. Wonder, who's won 25 Grammy's during his career, can now add what's considered the nation's most prestigious award for pop music, the library of Congress prize for popular song.

STEVIE WONDER, MUSICIAN: I want to first of all thank God for this moment.

ANDERSON: Talking quickly turned to full-on grooving as Wonder performed a number of his hits including one of the president's campaign theme songs. Mr. Obama, who calls Wonder's music the sound track of his youth, admits he owes a lot to him personally.

B. OBAMA: Had I not been a Stevie Wonder fan, Michelle might not have dated me, we might not have married. The fact that we agreed on Stevie was part of the essence of our courtship.

ANDERSON: Their love of the music legend brought Wonder's talents to the Democratic National Convention, the inaugural Lincoln Memorial concert and their wedding 17 years ago.

OBAMA: Barack and I chose the song, "You and I" as our wedding song.

ANDERSON: The president's taste in music harkens back to growing up in the 70s.

JOE LEVY, EDITOR-IN-CHIEF, BLENDER MAGAZINE: Earth, Wind and Fire, Stevie Wonder, Elton John, the Rolling Stones. These are all artists he shouted out in the past. He also listens to jazz.

ANDERSON: On his Facebook page, Mr. Obama also lists Bob Dylan, Johan Sebastian Bach and the Fugues as some of his top artists.

LEVY: He seems to gravitate towards music with a message. His favorite Rolling Stones song is "Give Me Shelter."

ANDERSON: A number of the president's favorites played during his inaugural festivities. Aretha Franklin, Sheryl Crowe, U2, demonstrating a mutual admiration.

LEVY: Obama is attracted to them because of their message and they're attracted to him for the same reason.

(END VIDEOTAPE)

ANDERSON: The Stevie Wonder tribute will air tonight on PBS -- Wolf?

BLITZER: Brooke Anderson, thanks very much. He's got good taste in music.

Let's go to Jack Cafferty. Jack, he likes the same music I like.

CAFFERTY: That's why you said he had good taste. I'm -- I've got this thing.

BLITZER: All of those groups they mentioned, I love.

CAFFERTY: Earth, Wind and Fire. A few days ago. He's threatening to turn that place into Woodstock on Pennsylvania Avenue. Maybe you can sing for us sometime.

BLITZER: No.

CAFFERTY: Good. The question: Which is a bigger threat to America's national security, the global financial crisis or terrorism?

Brittany in Florida writes: "When things get this close to a boiling point, I'm sad to say I fear the financial crisis more than terrorism. I have more of a day-to-day fear of people having tough times, resorting to robbery, homelessness and crime than I do of the terrorists. When things are more stable, the lofty thoughts of what's going on in the rest of the world were much easier. Now I can't take my eyes off my bank account."

Jerry in Toronto: "One begets the other. It is like a merry-go- round. The U.S. pays through the nose for oil imported from the Middle East, borrows the money from China to pay for it and the profits from the oil and the borrowing in turn pay for terrorism."

Jaz in San Francisco: "Jack, it's all so interlinked that they're equal threats. Poverty and economic upheaval are a big part of what drives so many young men to turn to al Qaeda and their ilk to begin with. Our own woes could potentially render us unable to detect, prepare for and fight the next terror attack. President Obama is doing the right thing trying to deal with both these issues at the same time."

George in Florida says: "That's a no-brainer. The people that caused this problem are, too. If we can't fix things financially, we're not going to be able to afford a war on terrorism. You see, Bin Laden accomplished just what he said out to do, and that was to put a hurting on our financial system."

And David in Mississippi says: "Isn't the global financial crisis terrorism? I'm being attacked from all fronts; my job, my investments, my home, and my taxes. It's time for the Bill Gates and Warren Buffetts of the world to Rambo up and come to our rescue."

If you didn't see your e-mail here, you can go to my blog at CNN.com/CaffertyFile and look for yours there, among hundreds others. Rock on, Mr. Blitzer.

BLITZER: I'm going to rock and roll. All right. Thank you.

It's one of the most popular social networking websites but Facebook angered many of the users with a rule change. Now there's a new rule, but will it keep them happy?

And Michelle Obama, the first lady of the United States, delivering a personal message to government workers today. Extended remarks by the first lady in her own words. That's next.

(COMMERCIAL BREAK)

BLITZER: Michelle Obama taking out a goodwill mission, unprecedented for a new first lady. She's visiting various agencies in her husband's administration to meet and greet government workers and encourage them on their jobs. Today's stop, the Environmental Protection Agency. Here's her message in her own words.

(BEGIN VIDEO CLIP) M. OBAMA: This is what it is all about, the future. And in many ways, it starts with all of you. You ensure that the water we drink is safe, that the air we breathe is clean, and that the polluted fields and abandoned factories in our neighborhoods all over this nation are cleaned up and restored.

Having grown up on the south side of Chicago and spent a good part of my career working to help families in low-income communities where I've seen brown fields piling up and affecting kids all over this nation, I know firsthand the role the EPA has in reducing illnesses, such as asthma, and lead poisoning that can start in childhood, but have a long-lasting effect in adulthood. There are thousands and thousands of children across this country that are affected each and every day. This new era also puts the EPA at the center of President Obama's highest priorities. Securing America's energy independence, and securing the future of our planet by combating climate change. We now have a president ho is going to put science at the heart of our environmental policies and decisions. By doing so, the president, the EPA and other agencies working on energy and the environment are going to start to champion bold policies, and make smart investments, that are going to do a lot of things.

First, create more energy-efficient buildings. See, now, that's exciting. And you know you are at the EPA. Make our cars and trucks more fuel efficient. And double the nation's supply of renewable energy in the next three years. Your work will not only save our planet and clean up our environment, it's going to transform our economy. And create millions of well-paying jobs.

You know this better than anyone in the country. So there is a lot riding on your shoulders. So as Lisa said, what are you all doing here? But I know that you are up to the challenge.

(END VIDEO CLIP)

BLITZER: First Lady of the United States. Let's check in with Lou. He's got a show coming up in one hour at the top of 7:00 p.m. eastern. You're dealing, among other things, Lou, with the rights of the American people.

LOU DOBBS, CNN ANCHOR: Absolutely, Wolf. Tonight we will be focusing on Americans' individual rights and freedoms. Those rights and freedoms under assault. To begin with, upholding the bill of rights and defending this country's most precious and individual freedoms, responsibility of the president and his administration. Instead, parts of his administration appear focused on undermining those rights.

The Obama administration is now accused of assaulting freedom of speech and the right to own and bear arms, both enshrined in our bill of rights. The Senate today voted against the first amendment, where reporting to you tonight on what some call diversity and ownership and the fairness doctrine and the country's top law enforcement officer, Eric Holder, not only thinks we're a nation of cowards when it comes to the issue of race, but cowards and fools when it comes to the defense of our second amendment rights. Will Americans stand up and be counted when it comes to the right to bear arms, and support our constitution? We'll be exploring those issues.

Please join us, 7:00 p.m. Eastern, right here on CNN. Wolf, back to you.

BLITZER: See you in one hour, Lou. Thank you.

And to our viewers, you're in THE SITUATION ROOM.

Happening now, more than $3 trillion worth of spending and scrutiny. President Obama calls his very first budget blueprint a responsible. His Republican critics say it lacks restraint.

The president's opening bid on overhauling hemt care in the country. What's in the budget and what reforms might really go forward this time around?