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Dow Sinks to 11-Year Low; President Obama Taps Kathleen Sebelius for Health and Human Services; McCain: Spending Bill 'Insulting'

Aired March 2, 2009 - 15:59   ET


WOLF BLITZER, CNN ANCHOR: Happening now, breaking news. A news level of misery for everyone with stock investments. The Dow sinking to an 11-year low, while more of your tax dollars are going to bail out an insurance giant.

Also this hour, the women tapped to overall America's health care system. President Obama finally fills two critical job openings and makes a new investment in keep Americans healthy.

And she's a soldier and a mom, and she was being forced back into the U.S. Army. So she reported for duty with her two children in tow.

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

But let's begin with the breaking news this hour.

Wall Street traders press the panic button again. The Dow Jones industrials closing down, way down, just moments ago, nearly 300 points. Take a look at that right now, 300 points. They're doing the final adjustments. It's the first time in more than 11 years that the index has plunged below 7000.

Let's go to our chief business correspondent, Ali Velshi. He's looking at this.

Wow. People are saying how low can it go? Ali, what's going on?

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Well, these are levels that most people who were wondering how low it can go, these are levels lower than that, Wolf. Let's talk about this for a second.

You and I have been around when we've seen plunges of more than 300 points on the Dow, but never when it's at this level. So, as a percentage of the Dow, and as a percentage of the 401(k)s and IRAs that our viewers are invested in, this is a major, major drop.

Now, it's been, as you mentioned, not since April of 1997 that we've seen these kinds of levels. The Dow down around 300 points. It's basically for two things.

One is that AIG came out with a loss in the fourth quarter of $62 billion. We've just never seen a loss like that in corporate history. HSBC also further exposure to this credit crisis, getting out of the consumer credit business with one of its branches, and laying off 6,000 people here in the United States. It all speaks to the confusion about what this administration is going to do about the banking and credit crisis, and it is a lack of certainly of where the future lies that's causing people to sell their stocks and sit it out -- Wolf.

BLITZER: Ali, hold on for one second. Let's talk about one reason investors are more gloomy.

Today, the U.S. government says it will give the insurance giant AIG another $30 billion in loans as needed, on top of the $150 billion taxpayer dollars already going to bail out the company. That's after AIG reported a staggering $61.7 billion in quarterly losses, the equivalent of $460,000 a minute.

Ali, you had a chance to speak with the CEO of AIG today. What did he tell you?

VELSHI: Well, you know, Ed Liddy is the new CEO. He came in in September. So all the bad stuff happened before he got it.

But, you know, we're in for $152 billion so far, taxpayers are to AIG. A lot of people think that will get to $250 billion. And he said as much when I asked him about that.

I also asked him -- I said, "What is the likelihood of us getting paid back, and when might that happen?: Here's our exchange.


VELSHI: Any idea of when the U.S. taxpayer gets paid back?

EDWARD LIDDY, AIG CEO: Well, I think within the next 90 days or so, we'll be able to take some of our more valuable businesses, transfer them to the Federal Reserve, and the Federal Reserve then will reduce the amount of debt that we owe them. So I think the taxpayer will begin to see some meaningful pay down in the debt that we have outstanding, hopefully within the next, oh, 90 days to 120 days.

VELSHI: And then the rest of it?

LIDDY: Oh, it will take some time. We need -- in some cases we'll sell businesses, in some cases we'll consider an initial public offering. We'll need the market to get a little bit better as we go, but sometimes selling things into the public is actually different than trying to sell it to one company that's got to go out and raise a lot of money, and they may not have the capacity to do that, because they're worried about the capital position they have being adequate to support the business they're in.


VELSHI: So, Wolf, in the course of three months, they're going to give some of their more lucrative businesses over to the government. Talk about nationalization. But he did say it depends on the market getting better. And at this point, we're just not seeing that.

So is AIG going to be on the public payroll for some time? No answer to that just yet -- Wolf.

BLITZER: Three hundred points down today, 6,752 right now, the Dow Jones industrials.

Ali, thanks very much.

AIG's financial crisis is mostly due to bad bets the company made on insuring mortgage-based securities, just one part of its enormous business. But if the insurance giant collapsed, it would touch people all over the world. AIG has 74 million insurance policies in 130 countries, including coverage of cars, homes and other property, accident, health and life insurance, workers' compensation, among other things.

President Obama says reforming health care is a necessity for Americans struggling to pay their medical bills. Today he tapped two women to overhaul the system, a job that all agree won't be easy by any account.

Let's go to our White House Correspondent Dan Lothian. He has more on what the president told us all today -- Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right, Wolf. And it is a big job for those two him, as the president did name his health officials.

He was also releasing $155 million from the stimulus fund in order to pay for new health clinics. This administration is really taking on this big challenge of reforming health care, while at the same time, sending a warning to critics who might try to get in the way.


LOTHIAN (voice-over): The president's cabinet puzzle is now complete. The final piece, Health and Human Services nominee Kathleen Sebelius.

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: She's forged a reputation for bipartisan problem-solving in her own right. Kathleen also knows health care inside and out.

LOTHIAN: The two-term Kansas governor who campaigned early and hard for Mr. Obama is the second choice. Former Senator Tom Daschle's nomination for HHS was derailed by tax problems. Along with Sebelius, the president named his health czar, Nancy-Ann DeParle, a top health official in the Clinton administration.

The two women will help drive the president's ambitious health care agenda, something the AARP says can't wait.

JIM DAU, AARP NATIONAL SPOKESMAN: You can't get economic recovery without fixing the broken health care system. I mean, it's just that simple.

LOTHIAN: The broad plan, $634 billion over 10 years for a reserve fund to help pay for health care reform; modernizing medical record keeping to save money; and asking wealthier seniors to pay more for their Medicare drug benefits. But some argue the overall health agenda might be too ambitious and is moving along too quickly.

MICHAEL TANNER, CATO INSTITUTE: I think this is going to be very tough to do. I think that we certainly have not even had the type of debate we want to have on health care.

LOTHIAN: White House spokesman Robert Gibbs says Thursday's health summit is designed to do just that.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: This is the beginning of a long process to bring all of those involved together to begin to discuss these problems.

LOTHIAN: To his detractors, the president tried to set the tone early.

OBAMA: There are too many special interests and entrenched lobbyists invested in the status quo. I came here to work for the American people.

LOTHIAN: More than 45 million of those American people are without health insurance. The president says this crisis is punishing families and squeezing states.


LOTHIAN: But some critics worry about the high price of fixing the health care system. And despite the cost savings that the president has laid out in his budget blueprint, there are questions about where the money will come from to pay for it all -- Wolf.

BLITZER: All right. Thanks very much.

Dan Lothian at the White House.

Senator John McCain today unleashed a withering attack on President Obama's decision to sign a spending bill just days after the Republican backed the president in his Iraq exit strategy. Senator McCain says the bill is packed with wasteful spending that he calls insulting. Insulting to the American people. Those projects can be traced to some members of the Obama administration.

In fact, let's go to our Senior Congressional Correspondent Dana Bash with more on this part of the story -- Dana.

DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: Well, Wolf, one of the things that Senator McCain was talking about was the fact that during their presidential campaign, President Obama promised to dramatically reform the earmarking process. And now President Obama is poised to sign a bill from last year that has more than 8,500 earmarks, some coming from members of Congress who are now working for him.


BASH (voice-over): The busy I- 95 corridor in Delaware is about to get some $4 million taxpayer dollars for repairs and upgrades thanks to earmarks from Delaware's former senator, who is now the vice president. In fact, a spending bill now moving through Congress, a holdover from last year, includes millions of dollars in projects from several lawmakers now serving in the Obama administration.

White House Chief of Staff Rahm Emanuel got at least $3.5 million for street repairs in his old Chicago district and $900,000 for a planetarium. Transportation Secretary Ray LaHood has a lot of earmarks for his former Peoria, Illinois, district, including three totaling $440,000 for the Lakeview Museum. Labor Secretary Hilda Solis has earmarks, too, like $380,000 for a hybrid transit system in her old California district.

GIBBS: He doesn't control everything that happened before he became president of the United States.

BASH: At the White House, the president's spokesman shrugged it off as last year's business. And despite billions of earmarks from Democrats and Republicans, said the president will sign the $410 billion spending bill. That prompted a scathing speech from the president's former rival and longtime adversary of pork barrel spending.

SEN. JOHN MCCAIN (R), ARIZONA: To say this is last year's business, we want to just move on, that's insulting to the American people.

BASH: The president's spokesman did signal that Mr. Obama will issue new guidelines to Congress about future earmarks.

GIBBS: You will see and hear outlined a process of dealing with this problem in a different way, and the rules of the road going forward for those many appropriation bills will be done differently.


BASH: Now, it's not clear yet what those rules are going to be that we're going to hear from the White House, but it's not going to be easy for them to get Congress to change its ways.

Wolf, I was told by Democratic sources that at the White House last week, the president did tell Democratic leaders he wants them to do more to limit future earmarks. In what one official described as "intense exchange," Democratic leaders responded that they'll do what they can to make some changes, but they made very clear to the president they believe it is Congress' prerogative to have these earmarks if they're right, and they're going to continue to do it.

BLITZER: It could set up a confrontation not only between the president and Republicans, but his own Democrats as well down the road. He'll sign this one, but he says that's it, no more down the road.

We'll see how that works out.

Dana, thanks very much.

"Don't Ask, Don't Tell" possibly at the beginning of the end. There is a fresh push against the policy regarding gays in the military. With President Obama in office, opponents may just get their wish.

The so-called "Oracle of Omaha" sees an alarming future. Wait until you hear what Warren Buffett's prediction is for the economy, for this year, and beyond.

And are President Obama's budget predictions realistic, or are they overly optimistic? I'll ask a noted economic expert.

All that coming up right here in THE SITUATION ROOM.


BLITZER: Let's go back to the top story, the economy, what's going on.

The Dow Jones ending below 7,000 today, dropping another 300 points. This, as the AIG bailout gets bigger and bigger and bigger.

Let's bring in Greg Ip. He's the U.S. economics editor of "The Economist" magazine.

Greg, thanks for coming back.


BLITZER: How low can it go, this Dow Jones?

IP: Well, it can certainly go lower, but what you have going on here, Wolf, are two factors that are driving stocks lower. One is the fact that the economy -- the news just keeps getting worse. We had a 6 percent annualized decline in the fourth quarter, and if you look at the terrible construction data that the government released for January today, it looks like the first quarter won't be much better.

Now, that said, stocks are still very cheap when you compare them to things like dividends and earnings, and they're getting cheaper. Why is that? Because there's so much uncertainly out there, especially surrounding the way Barack Obama's administration is going to go about things like the fiscal stimulus, home ownership foreclosure prevention, and most important of all, the bank stabilization plan.

What is he going to do? And will it work? And...


BLITZER: So is that uncertainly driving this market right now? Because people want to know what's going on.

IP: Absolutely. When people are uncertain, they just want to withdraw, they don't want to own stocks in that kind of environment. And that's essentially what we've got here, an environment where people just -- all they want is safety.

BLITZER: Is the market dropping today because of the fourth quarter 6 percent negative growth, a reduction in the fourth quarter of last year, or is it more the AIG bailout that seems to be bigger and bigger and bigger?

IP: It's impossible, Wolf, to disentangle all the various factors. Certainly the news this morning on construction that suggested that the fourth quarter and the current quarter will both be worse than expected is a factor. The fact that the AIG bailout is growing suggests that policymakers still don't have a firm grip on how big these problems are.

I'd add that the international situation looks very grim. European policymakers broke up after a meeting this weekend still unsure how to rescue the troubled economies of Eastern Europe. So there's just uncertainty on all fronts.

BLITZER: Explain to a lot of frustrated Americans right now who are wondering, why is the U.S. government spending all this money to shore up, to bailout AIG, what would happen if AIG just went under?

IP: AIG wrote a lot of insurance and sold it to a lot of banks, and with that insurance, banks went out and made a lot of loans, such as to companies and homeowners. And if AIG went under, the banks would suddenly say, holy cow, those loans we made, they're no good any longer, and they would sustain very large losses and they would withdraw from lending.

In the credit crunch that is under way right now, the one that is causing home builders and businesses and people who want to buy homes to lose their ability to get loans, it would get much worse. So, unfortunately, we're just throwing more bad money after bad, because the alternative is probably even worse.

BLITZER: It's going to get worse, as they say, before it gets even worse.

Listen to the CEO of AIG, Ed Liddy, who spoke with our Ali Velshi earlier today. Listen to this.


LIDDY: We can't have people standing in front of banks wondering whether they can make deposits. We can't -- or withdrawals. We can't have people standing in front of life insurance companies wondering if their policies are safe. We need to keep some confidence in the system.

(END VIDEO CLIP) BLITZER: And that's why, presumably, the U.S. government is spending all these tens and tens of billions of dollars, more than $100 billion already?

IP: Oh, yes, and actually wants to spend more. I mean, that was kind of the most important element, in my view, of the budget last week, even though there was very little attention given to it.

Obama wants to borrow up to $750 billion more to safeguard the financial system. Again, because the alternative seems so much worse. But you know, Wolf, we're in this environment where there's so much anger among voters and among Congress about the fact that we're in this situation, that bankers did so well while they were, like, creating the seeds of this crisis. It raised some big questions about whether, even if borrowing that money and using it as the right thing, whether the Barack Obama administration can actually pull it off.

BLITZER: Are the assumptions that President Obama include din his forecasted budget that there would be not this year, but next year, a 3 percent growth, the years after at least 4 percent growth, are those overly optimistic, or are they realistic?

IP: They're optimistic, but they're not overly optimistic. I mean, the irony here, Wolf, is that if you look at it carefully, it's a very conventional forecast.

They basically see the economy taking four years to return to full strength, which is historically more or less what it has done. But here's the catch. This is not a conventional recession. We have not seen anything like this in 75 years.

There are enormous risks, and they're all the to the downside. And that's where the exposure is for the administration here. If the economy does worse, they are not going to get the tax revenue that they're counting on to do all the ambitious things that Obama wants to do.

BLITZER: Greg Ip is the U.S. economics editor for "The Economist" magazine.

Greg, thanks very much.

IP: Good to talk with you, Wolf.

BLITZER: It's bitter cold out there, but these people are hot. Environmental activists angry over what they say Congress is not doing about global warming. Wait until you see their protest right here in Washington.

And when billionaire Warren Buffett speaks, people listen. That's why his alarming new prediction for the economy, it's a bit of a shock to a lot of folks out there.

We'll tell you what he's saying, right here in THE SITUATION ROOM.



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

Happening now, Gaza in shambles and in need of rebuilding. Secretary of State Hillary Clinton pledges almost $1 billion to the region. One condition, Hamas keeps its hands off the cash.

A Republican battle pitting Rush Limbaugh against the new GOP chief, Michael Steele. Who's in charge?

And one man is found today clinging to an overturned fishing boat off the coast of Florida. The search is now still on for his three missing friends, including two NFL players.

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

Right now there's fresh pushback against the government's "Don't Ask, Don't Tell" policy, and new efforts to ban that ban on gays in the military.

Let's bring in our Brian Todd. He's working this story for us.

All right. What's going on, on this front, Brian?

BRIAN TODD, CNN CORRESPONDENT: Wolf, you remember well when this thing went into effect, when you were covering the White House. Back then, it was several years before 9/11. Many believe now that it's outdated and counterproductive, but for President Obama, "Don't Ask, Don't Tell" could still be a political tripwire.


TODD (voice-over): Alex Nicholson is openly gay now, but wasn't when he worked in Army intelligence. Then, he says, someone outed him.

ALEXANDER NICHOLSON, DISCHARGED UNDER "DON'T ASK, DON'T TELL": They had to discharge me, and so the Army lost a multilingual human intelligence collector that speaks, among other things, Arabic.

TODD: That was right after 9/11, when the military desperately needed Arabic speakers. Nicholson was among thousands of gay service members discharged under the "Don't Ask, Don't Tell" rule.

Democratic Congresswoman Ellen Tauscher is now pushing a bill to overturn the ban on gays serving openly in the military, saying too many good people have been lost in the 16 years it's been around.

REP. ELLEN TAUSCHER (D), CALIFORNIA: They weren't taking their sexuality to work with them, they weren't taking it to the battlefield, but they just weren't going to deny it anymore. And they found it to be absolutely crosswise with what they were fighting for, which was the liberty of people to be who they are. TODD: Those who support the ban say it worked well to remove any possible conflicts over a service member's sexuality. And if the ban's removed...

LT. COL. ROBERT MAGINNIS, U.S. ARMY (RET.): You have forced intimate situations where you say, look, you know, you're going to room with this person, and that's an order. Then, in fact, you can begin to have the residuals, the morale issue, the whole issue about retention and recruitment come up.

TODD: President Obama supports overturning the ban, but some analysts say he could get dragged down politically if this is revived now, when the U.S. economy is his focus.

CRAIG GORDON, POLITICO: He does not want a distraction like that, kind of get the cultural issue riled up so early in his presidency. And I feel like he's trying to learn the lesson of President Bill Clinton and not taken it on so forcefully right at the start of his presidency.


TODD: Many are seeing those same pitfalls for Mr. Obama that Bill Clinton fell into -- a new president with an economy to fix. Some believe Clinton got knocked off message early in his presidency over a dispute which made him look indecisive and damaged him, but gay rights activists and others who want this overturned say now is the time to do it, when President Obama has political capital with the military that Bill Clinton doesn't have. And Ellen Tauscher herself says it will be President Obama that dictates the pace of this, Wolf.

But the -- the White House is saying, you know, not everything is going to get done in the beginning. They're hinting they may not want to do this right away.

BLITZER: Those who support overturning the ban on gays in the military say there are -- there are some other factors that are helping them right now as well.

TODD: That's right.

They point to Colin Powell, who was Joint Chiefs chairman when -- when this went into effect, who said recently that the law ought to be reviewed. He didn't really take a position on reversing it. He says it should be reviewed.

Also, a poll that CNN did back in December said, 81 percent of respondents favor overturning the ban. There's clearly political momentum now.

BLITZER: We will see if it happens now, or if they wait a little -- a little while.

TODD: It will not happen right away.

BLITZER: He certainly, the president, does want to change it and get rid of it. We will see how long it takes.


BLITZER: Appreciate it.

The man called the oracle of Omaha has a vision. And when Warren Buffett talks, people certainly do listen. What he's writing now about the economy may surprise you.

Let's go straight to CNN's Mary Snow. She's got the story for us.

Mary, what's he saying?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, that vision you just mentioned, Warren Buffett's outlook, is one of the worries weighing on Wall Street today. It underscores the uncertainty about when things may turn around.


SNOW (voice-over): It's just one line, but it hit the markets with a thud. Billionaire Warren Buffett, in an annual letter to shareholders of his Berkshire Hathaway company wrote: "The economy will be in shambles throughout 2009 -- and, for that matter, probably well beyond."

ART HOGAN, CHIEF MARKET ANALYST, JEFFRIES AND COMPANY: Warren Buffett typically has been more optimistic than most. And he has always had a long-term projection. So, to hear him use the term -- the terms that he used in describing the -- the U.S. economy, I certainly think it was eye-poppingly surprising.

SNOW: Buffett's forecast comes after the Federal Reserve chairman struck a more optimistic note last week, saying there's a reasonable prospect the recession would end this year. That echoes what President Obama's budget director had to say about when the economy would bottom out.

PETER ORSZAG, DIRECTOR OF OFFICE OF MANAGEMENT AND BUDGET: Somewhere towards the end of next year or early next year.

SNOW: But some economists are growing more pessimistic.

Mark Zandi of say there's now a one-in-four chance of a mild depression. There's no official definition of a depression, but Zandi defines it as double-digit unemployment for more than a year, but he says conditions would not sink to the depths of the Great Depression.

MARK ZANDI, CHIEF ECONOMIST, MOODYSECONOMY.COM: So, this is something different than a recession. And economists are struggling with what to call it. And the word depression is now creeping into the -- into the -- into the language. And I think it's fair to say that we're in a very severe recession, and the odds or risks of depression are now rising and quite high. SNOW: But other economists predict a turnaround as early as this summer.

MICHAEL MUSSA, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: We have had a lot of experience with recessions here and around the world, and they do one come to an end, and deep ones tend to be followed by steep recoveries.


SNOW: But economists agree on thing, and that is that things will get worse before improving. And one big measure of the economy Friday, when February's unemployment report is released. It's suspected to reveal 615,000 jobs were lost last month -- Wolf.

BLITZER: Mary Snow, thank you very much.

President Obama says he thinks the time finally has come to overhaul the nation's health care system.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Health care reform that reduces costs, while expanding coverage, is no longer just a dream we hope to achieve. It's a necessity we have to achieve.


BLITZER: All right. Stand by. You're about to hear the president explain his vision for health care reform unfiltered, in his own words.

The differences between President -- Presidents Obama and Bush, as described by the defense secretary who served them both. Wait until you hear what Donna Brazile and Tony Blankley have to say about Secretary Gates' remarks.

And an American journalist missing in Iran after apparently being jailed for buying a bottle of wine.

Stick around. You're in THE SITUATION ROOM.


BLITZER: Many Americans desperately call for reform in the nation's health care system. That's the issue that President Obama discussed today.

Just before he announced his pick to become the next secretary of health and human services, as well as his new White House health reform czar, the president explained why fixing health care is such an urgent matter.


OBAMA: Last week, I unveiled a fiscal blueprint for America's future, one that reflects the stark reality of our financial crisis while laying a lasting foundation for our common prosperity.

It makes both the sacrifices and the investments necessary to tackle the great challenges of our time, challenges we face today as a consequence of decisions we deferred yesterday. One of these great challenges is health care.

The good news is that we have already done more to advance the cause of health care reform in the last month than we have in the last decade. We've provided and protected health insurance for 11 million children whose parents work full time. We've invested in preventive care to help keep people from having to go to the doctor in the first place and in electronic health records and new technology that will ensure privacy while saving billions of dollars and countless lives.

And today, I can announce that under the recovery plan we put into action, $155 million will go towards supporting 126 new health centers across America. These health centers will expand access to care by helping people in need, many with no health insurance, obtain access to comprehensive primary and preventive health care services.

That helps relief the burden on emergency rooms across the country which have become primary care clinics for too many who lack coverage, often at taxpayer expense. This action will create thousands of new jobs, help provide health care to an estimated 750,000 low-can income Americans across the country, and take another important step toward affordable, accessible health care for all.

But our current economic crisis has only heightened the urgency of our health care challenge. In the last eight years, premiums have grown four times faster than wages. In each of these years, 1 million Americans have lost their health insurance. The crushing costs of health care causes a bankruptcy in America every 30 seconds, and by the end of this year, it could cause 1.5 million Americans to lose their homes.

It's a crisis punishing families, battering basis, squeezing our states, and increasingly imperiling our own budget. Health care is one of the fastest growing expenses in the federal budget, and it's one we simply cannot sustain.

That is why we cannot fail to act yet again. If we're going to help families, save businesses, and improve the long-term economic health of our nation, we must realize that fixing what's wrong with our health care system is no longer just a moral imperative but a fiscal imperative.

Health care reform that reduces costs while expanding coverage is no longer just a dream we hope to achieve; it's a necessity we have to achieve.

Today, I'm proud to announce key members of the team I'm assembling to help do just that: Kansas Governor Kathleen Sebelius for my secretary of health and human services and Nancy-Ann DeParle as director of the White House Office for Health Reform.

Now, there's no easy formula for fixing our health care system. There will be many different opinions and ideas about how to achieve this reform. And that's why I'm bringing together business and labor, doctors and insurers, Democrats and Republicans, as well as ordinary Americans from all walks of life to the White House this Thursday for a historic health care forum.

What is required, however, is a commitment to reform that focuses not on Democratic ideas or Republican ideas, but on ideas that work to rein in costs, expand access, and improve the quality of health care for the American people.

Let me close by saying one last thing. I realize that there are those who simply don't believe Washington can bring about this change, and the odds are long. It's failed too many times. There are too many special interests and entrenched lobbyists invested in the status quo. That's the conventional wisdom, and I understand those doubts.

But I also know this. I didn't come to Washington to take the easy route or to work for the powerful and the well-connected interests who have run this city for too long. I came here to work for the American people. I came here to deliver the sweeping change that they demanded when they went to the polls in November.


BLITZER: As HHS secretary, Kathleen Sebelius, by the way, would oversee a budget of more than $700 billion a year, almost a quarter of all federal spending.

Most of that money goes to Medicare benefits for senior citizens and Medicaid benefits for the poor. Together, those programs alone provide health insurance for one in four Americans. HHS also oversees the nation's front-line defenses against disease and bioterrorism, research into cures for cancer and other illnesses, and regulation of food and drugs.

By the way, coming up in the next hour, we are going to be speaking about this and a lot more with the former chairman of the Democratic Party, the former Governor Howard Dean. He's standing by live. He would have liked to have been secretary of health and human services. We will talk about that and more -- Howard Dean coming up right here in THE SITUATION ROOM.

A top official compares his past and current bosses. Defense Secretary Robert Gates calls President Obama more analytical than former President Bush. What might that mean for Iraq and for Afghanistan?

And the first African-American president talks about some tough times for African-Americans. You're going to find out what the president is saying.

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


BLITZER: Let's get right to our "Strategy Session" right now. Joining us, the Democratic strategist and CNN political contributor Donna Brazile. And Tony Blankley, he's a Republican strategist, former press secretary for the former House Speaker Newt Gingrich.

Guys, thanks very much for coming in.

I'm going to play a little clip of what the defense secretary, Robert Gates, who served for President Bush, now serves President Obama, what he said on "Meet the Press" yesterday.


ROBERT GATES, U.S. SECRETARY OF DEFENSE: Probably, President Obama is -- is somewhat more analytical. And he -- he makes sure he hears from everybody in the room on an issue. And, if they don't speak up, he calls on them.


BLITZER: What did you think about that, Tony, when you heard him say that President Obama more analytical, wants more people involved in these war -- in these war-related issues and -- and questions?

TONY BLANKLEY, REPUBLICAN STRATEGIST: Well, it's not unknown in this town for Cabinet members to speak favorably of their president.

I, on occasion, met with President Bush, never worked for him. When I said something he disagreed with, he seemed perfectly capable of tough analytical responses.

But I don't doubt that Obama does have a strong analytical skill. I don't know where it takes us, beyond a complimentary statement of -- of the president.

BLITZER: How did you read that statement?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, first of all, no two men are alike, Wolf. Most women know that.

But I think what the secretary was talking about was the president's governance style, and the fact that he likes a lot of different opinions in the room, a diversity of opinion. And he's -- he's quite a remarkable person, in the sense that he's a former law professor. And I'm sure he likes calling on people to get, you know, more information.

BLANKLEY: I will make a prediction, though, that, as he spends more years on the jobs, he probably will ask for less responses. As he forms his opinions, he knows where he's going.

Right now, at the beginning of a presidency, he's still seeking out. He should be. But, two, three years from now, or six or seven years from now, he will probably have a pretty clear view. And he may not want to hear from...


BLITZER: And, in fairness to President Bush, Gates was not the defense secretary at the beginning of his eight years.

BLANKLEY: No. No. He was...


BLITZER: He was the defense secretary at the end...

BLANKLEY: ... at the end.


BLITZER: ... of his eight years.


BLITZER: So, that's a fair point -- a fair point you make.

BLANKLEY: Bush was set on his policies by then.

BLITZER: Guys, hold on a second.

I want to go over to the White House. Our senior correspondent, Ed Henry, is standing by. He's getting some word of a -- what, another possible tax problem for a member of the -- the Obama team?

What's coming up, Ed?

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: That's right, Wolf, some new information.

The nominee to be the U.S. trade representative, Ron Kirk, now has some tax issues that were discovered by the Senate Finance Committee.

But the bottom line is, White House officials are saying they're confident he still will be confirmed. It involves about $10,000 in back taxes that Ron Kirk, the former mayor of Dallas, you will remember, he -- he has now agreed to pay. It involves charitable contributions that he made to his alma mater, Austin College.

Essentially, what happened was, from the tax years 2004 through 2007, we're learning from White House officials that, basically, Ron Kirk gave some speeches, received honoraria, and directed that these various organizations give the money directly to a scholarship fund he had set up at his alma mater.

The Senate Finance Committee has taken a look at that, and determined he that should have accepted those -- that money himself, paid federal taxes on it, and then given it to the scholarship fund.

White House spokesman Ben LaBolt telling CNN -- quote -- "The mayor is working with the Finance Committee on a few minor issues, mostly relating to a scholarship fund he set up at his alma mater, Austin College. The nomination is on track. The committee has scheduled a hearing for next Monday."

So, they believe this is still moving forward. But, obviously, coming on the heels of the Tom Daschle tax issue, Nancy Killefer, who was supposed to be the chief performance officer -- and she had to step aside -- of course, Treasury Secretary Tim Geithner had a major tax issue. He was still confirmed by the U.S. Senate.

This is not what the White House wanted to deal with now. Nevertheless, they're confident that Ron Kirk is going to deal with issue -- this issue -- and still be confirmed as the U.S. trade rep -- Wolf.

BLITZER: But is it true, Ed, that the person who -- the accountant who prepared his taxes himself thought that this was totally appropriate, that, if he's going to be speaking at his alma mater, he doesn't want to accept any money, but he says go ahead and give the -- keep the money on campus in some sort of scholarship fund.

That -- that sounds like it's a judgment call that accountants would come up with potentially different interpretations.

HENRY: That's right, Wolf. That's our understanding at this moment, that his tax preparer looked at this in years back -- previous years -- and basically determined that he didn't have to pay the federal taxes, that it could be earmarked, directed directly to the college.

The Senate Finance Committee obviously handles the tax laws. They have taken a look at it. They have come to a different conclusion. And we should note that Ron Kirk has agreed to pay those back taxes. So, he's not contesting this. And that's the key point moving forward.

So, maybe the White House believes that, if he deals with this now, it will relatively minor, and he will be confirmed -- Wolf.

BLITZER: Ed Henry, thanks very much.

Tony (AUDIO GAP) sounds like a technical -- a technical issue, not a big deal. But what do you think?

BLANKLEY: Well, I mean, beyond the obvious embarrassment for Obama, given all the precedents, it's an interesting cultural thing we're observing, how many pretty successful people, suddenly, when put under the microscope, aren't paying their taxes.

I mean, we hear rumors that they're having trouble finding sub- Cabinet people at Treasury, because of tax issues.

BLITZER: But if the accountant who's preparing your taxes says...


BLITZER: ... this is totally legal, wouldn't you do what that accountant says? BLANKLEY: Yes. In any given situation, we can argue the facts. We don't know the facts.

But, collectively, as the public watches this, it tells us something about, not just -- I'm not being partisan -- it tells us something about that culture of people, not just Democrats, but people at a pretty good level in life, seem to be chiseling the tax code a lot.

BLITZER: What do you think, Donna?

BRAZILE: I don't think so. I don't think -- I mean, I know Ron Kirk personally.

And, so, this is a man who would give his left arm to help a young person, especially his alma mater. So, this is clearly a technicality. But, yes, it's an embarrassment. I don't think there's any cultural issue here.

I think what's happening is that these individuals have huge lives. I mean, he's a former lawyer. And I'm sure, when they start combing through anybody's record, they're going to...


BLITZER: But I think that's the point Tony was making. If they went through your tax returns, yours or mine, and they had experts from the Senate Finance Committee reviewing it, they could find some issue that...


BLANKLEY: No, no, I was making a different one.

I think the average middle-class American taxpayer sweats the details and files an honest return. And people at a higher level maybe are a little bit more casual with it.

And, so, I think there is something to the -- the beautiful people being a little too casual with things.

BLITZER: Well, I don't know if Ron Kirk is one of the beautiful. He's a former mayor of Dallas.



BLANKLEY: I think financially beautiful.


BLITZER: I don't -- I don't think he's a fabulously wealthy guy, Ron Kirk, but I could be wrong. You know him better than I do.

BRAZILE: No, he's not, but he's worked very hard for the little money he has earned. I can tell you that much.

BLITZER: All right, we will leave it on that note. And we will see what happens.

But you're -- you're both right. It is an embarrassment, coming on the heels of all these other audited -- Tom Daschle, and some of the others, Timothy Geithner. It's a further embarrassment. And I'm sure it's something the Obama White House would -- would like -- would have liked to have avoided.

BRAZILE: But the fact is, is, he is going to pay the money, although he never received it. That's -- that's interesting, too.



BLITZER: OK, guys, thanks very much.

BLANKLEY: Thank you.

BLITZER: A former soldier being forced to return to the U.S. Army apparently got her desperate message across by reporting for duty with her kids.

Plus, the possible power grab by the Afghan president, Hamid Karzai -- even as the U.S. rushes thousands more troops to his country.

And why Dodger Stadium could be a field of dreams for thousands of people competing for some low-wage part-time jobs. What is going on? We will tell you -- right here in THE SITUATION ROOM.


BLITZER: A female soldier is being called back to the -- to U.S. Army duty. And she showed up at the military base with her children.

Let's go to CNN's Pentagon correspondent Chris Lawrence. He picks up the story.

There are new developments only in the past few moments. What do we know?


Yes, I just spoke with this woman's attorney, who says she currently is at Fort Benning. She's already had her first meeting with the chain of command there. And they have indicated to her that they will start the process to discharge her, so she would not be eligible to be called up anymore.

Again, this is a first step. She had her initial counseling session late this morning. We understand that she's been staying in a hotel in the Fort Benning area, that she will make some provisions to move onto the base for the rest of the week, because it's going to take at least a few days to get the paperwork going on this.

But the long story short is, this was an active-duty soldier, served three years as a truck driver in the Army. She was honorably discharged from her active-duty assignment back in 2005. She's got a couple kids. Her husband also had served in Iraq.

In his civilian job, he travels constantly. She felt that returning to duty would mean there would be simply no one available to care for her kids. She appealed and appealed. It was denied and denied.

Finally, when she was finally supposed to report for duty, she decided to take her kids, and, of course, all this national media attention with her, and the Army has decided to discharge her -- Wolf.


LISA PAGAN, REPORTED TO DUTY WITH CHILDREN: Am I the only soldier, that, you know, they -- they can't find anybody else?

My husband has been -- he's been to Iraq. You know, it's not like our family hasn't already given -- have sacrificed many things. He missed, like, almost the first year of his daughter's life, you know, just like many other soldiers.


LAWRENCE: The one big question that still remains, she is still waiting to hear whether -- whether she will be granted an honorable or a general discharge from the -- from the Ready Reserve -- Wolf.

BLITZER: Well, let's hope it's honorable, given her -- her commitment and what she's already done, serving her country. These seem to be extraordinary circumstances. But we will see what happens, honorable or general, or dishonorable. We will see what follows.

You will -- as soon as you know for sure, you will let us know, OK, Chris?


BLITZER: OK, good, Chris Lawrence, our man at the Pentagon.

Powerful winter storms up and down the Eastern Seaboard, other parts of the country.

Let's go our severe weather expert, Chad Myers.

Is it going on right now, Chad, or is it basically over?

CHAD MYERS, CNN METEOROLOGIST: It's finally going away, Wolf, yes.

But there have been some places that have piled up snow you don't like in March. I'll tell you what. Old Saybrook, you are the winners, or the losers, depending on your point of view, Connecticut there, 14 inches, even around D.C., six to eight inches around there.

But, Royalston, Mass., had over a foot. And Peterborough, New Hampshire, now you're over a foot, and then a little bit, then some, the baker's dozen at Mount Sinai. The snow tapering off, but, literally, if you're trying to get in and out of the Northeast, there haven't even been planes out of the West Coast trying to get there today. They have just said, no, not even going to try it. We can't get you and leave you in the air, because we don't know what is going to happen to the airport when you get close enough.

Still snowing in the Hamptons, although Jersey City, down to about New York City, a little bit better than we have been for most of the day.

Now, the problem is, the airports, they're not taking very many planes. This is La Guardia.

Is there a problem here, Wolf? Do you see any problem? Only 23 planes in the air. There should be 130 -- so, very few people getting to their destination in the Northeast, I'm afraid, right now -- Wolf.

BLITZER: All right, we will watch the weather with Chad.

Thank you.

MYERS: You bet.

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