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President Obama Targets Health Care Reform; Will Gays Soon Serve Openly in U.S. Military?

Aired March 2, 2009 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: And happening now: your health in their hands. President Obama finally fills two critical job openings and explains why health care reform is now more urgent than ever.

Plus, John McCain accuses the president of supporting an insult to the American people. That would be a spending bill filled with pet projects linked to top members of team Obama. Plenty of Republicans are also involved.

And a former soldier's powerful protest -- when she was called back to serve, she reported for duty and brought her two young kids along -- all of them and the best political team on television.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

It's a health care emergency. Americans are struggling with every single day, a broken system that's costing millions of people their jobs or their homes or their lives.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: 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 Americans to lose their homes.


BLITZER: President Obama today tapped two women to take on the very, very tough job of reforming health care in the United States.

Let's go to our White House correspondent, Dan Lothian. He's got all of the details -- Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Wolf, it is a tough job indeed. As he named those health officials, he was also releasing $155 million from the stimulus plan to pay for new health centers, the administration really pushing hard on the next big challenge, and that is reforming health care, and, at the same time, warning critics who might try 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 what the president has laid out in terms of cost savings a budget blueprint, there are questions about where the money will come from to pay for it all -- Wolf.

BLITZER: All right, Dan, thank you -- Dan Lothian at the White House. As HHS secretary, Kathleen Sebelius 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 provide health insurance for one in every 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.

The Senate Finance Committee says Ron Kirk, the nominee for U.S. trade representative, owes and will pay an estimated $10,000 in back taxes. The committee says the taxes stem from Kirk's handling of some speaking fees that he donated to his alma mater and for his deduction of the full cost of basketball tickets.

The former Dallas mayor is the latest Obama administration official to face some tax questions. Tom Daschle, as you know, withdrew as health and services nominee. And Nancy Killefer, the pick for chief performance officer, also bowed out. The treasury secretary, Tim Geithner, had some tax problems, but he was confirmed.

Senator John McCain today unleashed a withering attack on President Obama's decision to sign a pending spending bill just days after the Republican backed the president very strongly on his Iraq exit strategy.

McCain says the bill is packed with wasteful spending that he calls -- and I'm quoting now -- "insulting" to the American people.


SEN. JOHN MCCAIN (R), ARIZONA: Here we are promising the American people hope and change. And what have we got? Business as usual.


BLITZER: Let's bring in our senior congressional correspondent, Dana Bash. She's working this story for us.

It's a tough dilemma this president faces. Explain the background, Dana.


Well, during President Obama's campaign against John McCain, then candidate Obama did promise to reform the earmarking process. And now he is poised to sign a spending bill from last year that does have more than 8,500 earmarks in it. Some of them are requests from lawmakers who now work 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.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: 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.

MCCAIN: ... 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: As a candidate, the president did not vow to ban earmarks, but did say this.

OBAMA: We need earmark reform. And when I'm president, I will go line by line to make sure that we're not spending money unwisely.

BASH: Now President Obama through his spokesman is signaling he will soon issue new guidelines to Congress about future earmarks.

GIBBS: A process of dealing with this problem in a different way, and the rules of the road going forward for those many appropriation bills that will go through Congress and come to his desk will be done differently.


BASH: But it is not going to be easy to get Congress -- we're talking about members of both parties here -- to change their ways.

Wolf, I'm told that at a White House meeting last week, President Obama was very clear with Democratic leaders that he wanted them in the future to limit their earmarks. One official described this as a tense exchange and said the Democratic leaders responded that they will try to do what they can, but that they do believe it is the prerogative and responsibility of Congress to have these earmarks in these spending bills -- Wolf.

BLITZER: A real debate going on.

All right, Dana. Thank you.

Another huge blow today to all -- to everyone, in fact, who has stock investments -- the Dow Jones industrials plunging almost 300 points to close at 6763. This is 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 got some -- Ali, I want to say you have got some explaining to do. So, go ahead.


ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Well, listen, you said to all of us with stock investments, and that's so many of us, because our IRAs and our 401(k)s are in the stock market.

Take a look at this. This market was down all day today, right from the beginning, because we started off with bad news from AIG. We expected a big loss, $60 billion for one quarter. That's three months. That's the biggest in U.S. corporate history. The bleeding continues at AIG, and then more job losses over at HSBC. They are getting rid of 6,000 U.S. employees.

Now, we're almost jaded, Wolf, that we don't think about 6,000 as a lot, given that we have seen days where 70,000 people were laid off, but that's 6,000 families that are not putting into the economic system now. And that is 6,000 more jobs away from a recovery in this environment.

So we're down to 6763 on the Dow. That's more than a 4 percent loss on the Dow. The S&P 500, which is a broader look at stocks, that's 500 stocks, had a similar drop today.

Part of this is that we are just not sure what is going on with the financial sector yet. The government has committed another $30 billion to AIG. So, we are now into AIG for more than $152 billion.

And I spoke with the CEO earlier today, and he said it actually could go further than that, as many analysts actually predict -- Wolf.

BLITZER: I want to point that out, Ali. As you point out very, very well, a major, major reason why investors at least on this day are more gloomy apparently than ever, the U.S. government says it will give AIG another $30 billion in loans as needed, on top of the $150 billion, taxpayer money, already going to bail out the company, all that after AIG reported a staggering $61.7 billion in quarterly losses. That's the equivalent of $460,000 every minute.

As you point out, Ali, you spoke with the CEO of AIG today. I guess we should say he has some explaining to do.

VELSHI: He does have explaining to do.

And I should point out that Ed Liddy, the CEO of AIG, is the new CEO. He came in after all of the mess. That said, he still presides over a company that is the biggest recipient of financial money of any of them.

Really, the question I put to him is about the timing. We have already sort of accepted that we're giving AIG this money. There's some chance we're going to get it back.

Here's our exchange.


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

EDWARD LIDDY, CEO, AMERICAN INTERNATIONAL GROUP: 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: You heard what he said in there. We have to depend on the market getting better.

And with this market right now, it's not all that hopeful. So, we're in a wait and see mode with respect to AIG and how much more money we may have to put into this -- Wolf.

BLITZER: Ali, thanks very much.

Ali is watching the story for us.

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.

Listen to this. AIG has 74 million insurance policies in 130 countries, including coverage of cars, homes, and other properties, accident, health and life insurance, workers' compensation. They are all over the place.

If some people get their way, gays may soon be serving openly in the United States military. There's a new push for that. And supporters have a friend in the president of United States.

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

And caught between service to the nation and caring for her children -- an angry mom is called back to duty and says she has no choice but to take her children with her. We have the latest on this developing story.

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


BLITZER: 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 serving openly in the United States military.

Let's bring in Brian Todd. He's got the latest for us -- Brian.

BRIAN TODD, CNN CORRESPONDENT: Wolf, you remember it well, a controversy that generated just immense political fallout for Bill Clinton when you were at the White House.

It's a rule that went into effect several years before 9/11. Many believe it is outdated, counterproductive. But, for President Obama, don't ask/don't tell could still be a political trip wire.


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: 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 didn't have at that time -- Wolf.

BLITZER: It's a tough decision. We will see what happens, the timing of this. Thanks very much, Brian.

A female soldier is called back to Army duty, and she showed up at the U.S. military base with her children.

Our Pentagon correspondent, Chris Lawrence, has the latest on this developing story.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Yes, Wolf, this military mom wanted to be discharged from the Army, and it now looks like she's going get her wish. But there's still one question left to be answered.


LAWRENCE (voice-over): Her first stint in the Army lasted over three years. Her second may not last three days. The Army is discharging a military mom who reported for duty with her kids.

LISA PAGAN, REPORTED TO DUTY WITH CHILDREN: That is what of all this is all about, is just them, what's in the best interests for them.

LAWRENCE: Army Specialist Lisa Pagan's active duty ended in 2005, but as part of the Ready Reserve, she was eligible to be recalled until 2010.

The North Carolina mother was ordered to report to Fort Benning, Georgia, by Monday.

PAGAN: Am I the only soldier that -- they can't find anybody else?

LAWRENCE: Now a civilian, but also eligible to be recalled, Pagan's husband travels constantly for work, sometimes days at a time.

PAGAN: 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: Their families live out of state. So, when she was ordered to report to Georgia, Pagan wondered how she could serve her country and care for her kids. So, she took them and national media attention with her, driving four hours on snowy roads to Fort Benning.

Pagan's attorney said, when she met with commanding officers, they told Pagan the Army is starting the process to discharge her.

Mark Waple tells CNN: "It is an unusual situation. I think this should have been resolved in July 2008."

That's when the Army denied Pagan's first appeal for an exemption. But that's not always the case. Since September 11, 2001, the Army has recalled about 25,000 soldiers. Nearly half requested a delay or a full exemption, which the Army granted more than six out of 10 times.


LAWRENCE: Now, it's going to take a couple days to finish up the paperwork. And Pagan's attorney said he's still waiting to find out if she's going to receive an honorable discharge or a general discharge under honorable conditions, not that much difference between them, perhaps some difference in maybe some -- receiving some G.I. Bill benefits.

But, overall, in her case, there won't be much of a difference, other than how she's classified, her Army career. And, again, of course, that decision should come down within the next few days -- Wolf.

BLITZER: And they have ruled out a dishonorable discharge, I take it?

LAWRENCE: Yes. Yes. Yes. that's not going to happen.

BLITZER: OK. Good. All right, thanks very much, Chris, for that.

It's less than regulators wanted, but a major airline is slapped with a big fine for missing some safety checks on dozens of airplanes.

Also, as embattled Senator Roland Burris makes plans for an election campaign, the other senator from Illinois says race was a factor in seating him. The best political team on television standing by to weigh in.

And President Obama says the nation just can't wait any longer on one critical issue.


OBAMA: Health care is one of the fastest growing expenses in the federal budget, and it's one we simply cannot sustain.




BLITZER: President Obama says reforming health care is a tough job, but his administration simply has to do it and must do it now.


OBAMA: 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.


BLITZER: Stand by to hear the president explain at length why reform can't wait.

Plus, is Kansas Governor Kathleen Sebelius the right person to take on the enormous task of fixing the nation's health care system? We're taking a closer look at her experience.

And he's accused of trying to sell a Senate seat to the highest bidder. Now the disgraced Illinois governor -- former governor, I should say -- apparently has found a new way to make a profit.

We will explain what's going on -- right here in THE SITUATION ROOM.


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

Happening now: Southwest Airlines comes to terms with the government. The carrier will pay a $7.5 million fine for missing critical safety checks on 46 of its planes.

The disgraced former governor of Illinois lands a six-figure book deal. A publicist says Rod Blagojevich will write about the dark side of politics and about how he picked President Obama's Senate successor, Roland Burris.

And winter packs a punch as it moves north. A snow emergency was declared here in Washington, D.C. Up to 15 inches of snow is forecast for parts of New England. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

So many Americans desperately want reform of the nation's health care system. That's the issue President Obama was discussing today. As he announced his pick to be the next health and human services secretary, 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. And 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.

And that helps relieve 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 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, one 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 businesses, 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: President Obama speaking earlier today.

Let's get some more now to our top story -- President Obama picks another candidate to help fix the broken health care system.

Our national political correspondent, Jessica Yellin, is taking a closer look at this new nominee.


Today, President Obama praised Governor Sebelius' work in Kansas on health care. But her critics point out that as governor, she actually was not able to get a lot of her goals on health care reform accomplished. (BEGIN VIDEOTAPE)

YELLIN (voice-over): Kansas Governor Kathleen Sebelius got know then candidate Obama when she endorsed him early in the campaign.

OBAMA: I just love your governor in Kansas.

YELLIN: She is a rare breed -- a popular Democrat in a very red state. She has so much bipartisan appeal, two prominent Republicans turned out for her White House announcement. Throughout her career, Sebelius has championed health care reform. As state insurance commissioner, she won a battle with Blue Cross/Blue Shield to keep premiums down. And as governor, she's made expanded coverage a top priority.

OBAMA: She fought to guarantee Kansans access to quality, affordable health care.

YELLIN: But her appeal has limits. In her six years in office, she's been unable to enact the sweeping health care reform she's called for. She lost two efforts to finance expanded coverage through a cigarette tax. And almost 13 percent of Kansans are uninsured.

Say state Republicans...

CHRISTIAN MORGAN, KANSAS REPUBLICAN PARTY EXECUTIVE DIRECTOR: She promised a lot of reform when it comes to getting people insured in the State of Kansas. And that number is static.

YELLIN: Critics add she has no experience working with Congress and she's a lightning rod for some Catholics. A Catholic herself, Sebelius has drawn the wrath of the church for her views on abortion, in particular, for her veto of a late-term abortion bill.

WILLIAM DONOHUE, CATHOLIC LEAGUE: She is one of the most radical, pro-abortion zealots in the United States.

YELLIN: But Sebelius is a star in the Democratic Party -- so much, she made a splash in her hometown paper for this photo in "Vogue." And now leading Democrats are praising this choice.

JOHN PODESTA, FORMER WHITE HOUSE CHIEF OF STAFF: She's a skilled manager. She's good at politics. She will, I think, be very well- respected up here on Capitol Hill.


YELLIN: And now while the president and his team will focus heavily on health care reform this week, the reality is that Democrats in Congress are pushing to get energy reform and even climate change legislation done first. Some Democrats say they're aiming for a health care bill around late summer, so they might rub up against the White House on the timing -- Wolf.

BLITZER: He's trying to do so much, it's unbelievable.

YELLIN: A lot at once.

BLITZER: OK. Thanks very much, Jessica, for that.

President Obama says he's gearing up for a fight with lobbyists and special interests, as he seeks dramatic change here in Washington and across the country.

But what is his strategy and is he underestimating his opposition?

The best political team on television is standing by.

Plus, the next chapter in the country's economic crisis -- the billionaire investor, Warren Buffett, sends some shockwaves through the financial world with his forecast. We'll tell you what he's predicting right here in THE SITUATION ROOM.



OBAMA: I know these steps won't sit well with the special interests and lobbyists who are invested in the old ways of doing business. And I know they're gearing up for a fight as we speak. My message to them is this -- so am I.


BLITZER: The president of the United States in his weekend Internet address.

Let's talk about that with our senior political analyst, Gloria Borger; our chief political correspondent, Steve Hayes, of "The Weekly Standard;" and our political analyst, Roland Martin. They're all part of the best political team on television.

You almost hear the president saying to those special interests and lobbyists, bring it on.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, it's exactly what he was saying. It's his version of bring it on. Look, President Obama has essentially staked his entire presidency on these plans that he's going to be rolling out. He's done the budget. He's done the stimulus package. We're going to be hearing about energy, health care. And I think he's saying if you folks are up for a fight, so am I, because this -- he wants his presidency to be transformative. And they believe over there at the White House that the only way is to do that is to create opportunity out of the crisis we're in right now.

BLITZER: Can he beat...


BLITZER: Can he beat, Steve, these special interests and lobbyists?

You often hear presidents saying they're going to do it.

Is this a winnable war for him?

STEPHEN HAYES, SENIOR WRITER "THE WEEKLY STANDARD": No, I don't think he can beat them, because I think, in many respects, he's with them on these things. You remember, this is the same candidate in March of last year who stormed off the campaign trail and said he was going to sponsor or co-sponsor an earmark moratorium for the fiscal year 2009.

Now, you've got his administration saying they're going to sign a bill with 8,500 earmarks, many of which...

BORGER: Picking his (INAUDIBLE).

HAYES: ...many of which were put there by these special interests that he's decrying. At some point, we've got to say, look, I mean this guy -- I liked -- I liked his rhetoric during the campaign trail, but people have to wake up. I mean this guy is not the reformer he says he is.

BLITZER: It is true...

MARTIN: Hey, Wolf...

BLITZER: Roland, he is going to sign this spending bill into law, even though it has thousands of these so-called earmarks. In this initial confrontation over earmarks between him and the Democrats and Republicans in Congress, he blinked.

MARTIN: Well, first -- here's the deal.

Why are we sitting here playing games?

Republicans and Democrats love earmarks. And you know what?

The taxpayers sitting at home, they don't mind them, either. This is that little game they play in Washington, D.C. . I happen to live in America. But we understand a little game being played.

So you know what?

Take them off the table.

Here's the deal with...

BORGER: Well...

MARTIN: No, no, no, no, no, no.

HAYES: No, no. That's total nonsense.

MARTIN: But no, no, no, wait.


BLITZER: Let him finish.

MARTIN: No, Steve...


BLITZER: Let him finish.

MARTIN: No, Steve, it's not nonsense. And here's the...

HAYES: Yes, it is.

MARTIN: And here's the deal when it comes to health care, OK?

When he's saying we're gearing up, what he is actually doing -- and he is saying I'm going to pit the American people and my supporters against the lobbyists. He is trying to get them geared up, as well, as opposed to him battling.

BORGER: You know...

MARTIN: And so you're going to see him talking to the people, saying they are keeping this from happening. That's the strategy here.

BORGER: You know, here's the -- here's the problem, Wolf. I mean, obviously, they made a political calculation at the White House that that is a fight they don't want to engage in. They want to go forward and this is -- this is looking backward.

However, when you are pure about earmarks, you have to be pure all the time. And this gives Republicans, like John McCain, an opening to say you know what, President Obama looks a little bit hypocritical here. You either are opposed to them or you're -- or you're going to let them go through.

BLITZER: Senator McCain today...


BLITZER: ...Steve, said this is an insult to the American people, what President Obama is about to do -- sign this spending bill into law with all those earmarks.

HAYES: Well, it is. And, Roland, if anybody is playing a game here, it's President Obama. I mean, sure, fine. We can all concede that there are games being played in Washington. This happens all the tile.

But he ran as the guy who was going bring an end to the game playing. And he is now the guy who is going to sign a bill with 8,500 earmarks.

MARTIN: He has to live with that...

HAYES: And it's at least...

MARTIN: Yes. And he has to live with it. When you... HAYES: It's at least a contradiction.

MARTIN: Yes. And when he runs for office again in four years, he's going to get nailed on it.

BORGER: Right.

MARTIN: But what I am saying is I don't sit here and play this little game of, oh, earmarks are so bad, but we all like them. That's the problem I have. If a child is behaving, everybody loves them. And people at home, they don't mind them...

HAYES: I don't like them.

MARTIN: ...even when they say they don't like them.

HAYES: I don't like them.


HAYES: John McCain doesn't like them.

BLITZER: Well, let me...


BLITZER: Let me press on you that, Steve.


MARTIN: I've never heard anybody give the money back.

BLITZER: This is what you hear from David Obey and other members of the Appropriations Committees in the House and the Senate. They say what's wrong with letting members of Congress determine precisely where the money should be spent, as opposed to anonymous bureaucrats in the executive branch of the government?

HAYES: Well, of course, I would rather have all the money spent at the local level and not have the federal government doing this as favors or naming buildings or naming...

MARTIN: They do it on the (INAUDIBLE)...


HAYES: ...sidewalks after themselves.


BORGER: Well, look, you know, you can't...


BORGER: You just can't have it both ways. President Obama bragged that the stimulus package was passed without any earmarks in it. And I say bravo on that.

However, now you've got this coming up and it's got however many earmarks in it. And, you know, you have to be consistent here. Even though he is saying that's part of the past and I don't want to have that because I've got so many other fights on the horizon I've got to deal with...

BLITZER: Yes. And the last thing...

BORGER: I understand that but...

BLITZER: The last thing he needs now is a fight with his fellow Democrats in the House and Senate...

BORGER: Right, but...

BLITZER: ...when he needs them so desperately on these other huge issues...

BORGER: Consistency is important.

MARTIN: Wolf...

BLITZER:, education, health care, the stimulus.

Go ahead, Roland.

MARTIN: Wolf, I would love to see the same people who crow about earmarks give the money back. You know what, people never do that. They never do it. They complain about it. But when they get it, thank you very much. That's the game they play.

BLITZER: See you guys tomorrow.


BLITZER: Guys, thanks very much.

So what's next in the economic crisis?

The billionaire investor, Warren Buffett, he has a forecast that one analyst calls an eye-popping surprise. We have details of what the "oracle of Omaha" is foreseeing.

And for sale -- three bedrooms, a luxury bath and gourmet kitchen -- the housing market may be slumping, but the cave market is doing very well.


CURT SLEEPER, OWNER, CAVE HOUSE: I have phone call, e-mails. My Web site was shut down 20 times in the first day.


(COMMERCIAL BREAK) LOU DOBBS, CNN ANCHOR: Coming up on "LOU DOBBS TONIGHT" at 7:00 Eastern, we'll have much more on the stock market's plunge today -- at levels now not seen in more than a decade. The Dow Jones Industrials losing more than 300 points amid new concerns about the economy and the government's response.

Also, British Prime Minister Gordon Brown -- he's about to visit the president. He says he's got a plan to fix the world's economy and all he needs is all of the American money he can get. A global New Deal in the works to end the global economic crisis -- paid for of course, by this country. Two of the country's best economic thinkers join me to tell us about whether the prime minister's plan is simply politics or madness.

And you won't believe what state and local governments in this country are planning to tax now -- everything from pornography to iPods to plastic bags. We'll have a special report on the crazy ideas state legislators and governors are coming up with.

Join us for all of that, all the day's news and much more at the top of the hour.

THE SITUATION ROOM continues with Wolf Blitzer next.


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

Let's go straight to CNN's Mary Snow.

She's in New York watching the story.

A lot of people are listening and paying attention to what he's saying.

MARY SNOW, CNN CORRESPONDENT: And worrying, Wolf, because 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's always had a long-term projection. So to -- you know, 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 says there is 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've 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: Economists do agree on this, though, that things will get worse before they get better. And more dismal news is anticipated Friday, when the February unemployment report is released. It's expected to reveal more than 600,000 jobs were lost last month -- Wolf.

BLITZER: All right. I don't know how much more bad news we can all sustain, Mary.

Thanks very much.

Mary Snow watching the story for us.

Has the mortgage crisis got you down?

If you're looking for an alternative, you may just find it on eBay -- eBay.

Fair warning -- you may have to go underground.

CNN's Jeanne Moos looks at a "Moost Unusual" home for sale.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): If the economic meltdown has you feeling like crawling into a cave, have we got a deal for you.


MOOS: A unique cave home for sale on eBay. The latest bid...

C. SLEEPER: I had an offer for $450,000 show up in an actual contract form.

MOOS: Curt Sleeper needs to sell or refinance because he can't come up with the $83,000 balance he needs to pay off by May.

In the words of his son...

PERRY SLEEPER, SON: EBay having to sell the cave, that would kind of suck, because look at it, it's amazing.

MOOS: Sure, naysayers laughed when Sleeper first said he would turn this cave in Festus, Missouri into a home five years ago.

C. SLEEPER: And all those same people now look at the house with you know...


MOOS: Three bedrooms, gourmet kitchen, luxury bath.


C. SLEEPER: Ted Nugent, Bob Seger, MC5...


MOOS: There's even a stage used for concerts back in the '70s. Now that 215 Cave Drive -- yes, that's it's actual address -- is up for sale, Sleeper is being deluged with inquiries. People make cave puns without realizing it: "What is your rock bottom price?"

Joked another: "This will go great with my Bat Mobile."


UNIDENTIFIED MALE: To the bat cave.


MOOS: Those two were always sliding down the bat poles and zooming out of the bat cave.

Actually, the bat cave entrance isn't nearly as impressive as this one. Sleeper is a Web site developer. Irony alert -- developing Web sites out of a cave.

(on camera): Now, who would be in the market for a nice cave?

An experienced cave dweller. I've got just the guy.

(voice-over): We kid. But the most common kidding Curt Sleeper gets is about his kids.

C. SLEEPER;. Do you name your children Bam-Bam and what was the girl's name?

MOOS: Don't throw pebbles at people that live in glass caves.




MOOS: Jeanne Moos, CNN, New York.


BLITZER: We want to go right back to Zain Verjee.

She's getting more on those missing NFL stars and another man off the coast of Florida.

What's the latest -- Zain?

VERJEE: Well, Wolf, as you know, one of four missing boaters was found clinging to an overturned fishing vessel just off of Florida's Gulf Coast. As you know, the search for the other three, including two NFL players, is going on.

And what we're just learning from the Coast Guard is that the search is going to be going on through the night. The Coast Guard is going to fly a C-130 overnight. They'll be using thermal imaging equipment. The seas have calmed down, so the Coast Guard says that it should help the search effort -- Wolf.

BLITZER: Let's hope they find those three guys.

Thanks very much, Zain.

We'll stay all over the story.

Heavy snow along most of the East Coast now. But the winter storm can't stop this student in Baltimore. It's just one of our Hot Shots -- pictures worth a thousand words.

We'll be right back.


BLITZER: Here's at look at this hour's "Hot Shots."

In Switzerland, revelers wear costumes during a carnival parade.

In Germany, California Governor Arnold Schwarzenegger and the German chancellor, Angela Merkel, officially open a technology fair.

In Afghanistan, a man makes pottery in his workshop.

And in Baltimore, a student makes her way to class despite the snowfall.

Some of this hour's "Hot Shots" -- pictures worth a thousand words.

That's it for us today.

I'm Wolf Blitzer in THE SITUATION ROOM.

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

DOBBS: Thank you, Wolf.