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THE SITUATION ROOM

President Obama Targets Federal Contracts; Hillary Clinton Visits West Bank

Aired March 4, 2009 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: Will a company get nearly a million taxpayer dollars because of a campaign contribution?

President Obama is promising to save billions by ending blank checks to federal contractors. But critics say he's not cutting waste; he's conducting business as usual. We will tell you what we know.

And Mr. Beef's beef with Congress -- a desperate restaurant owner complains he should be getting a slice of the financial bailout -- all of that 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.

Another big push today by President Obama to be seen as the commander in chief of fiscal responsibility. He's targeting the way federal contracts are awarded, in hopes of slashing wasteful spending.

Let's go to our White House correspondent, Dan Lothian. He's standing by with details -- Dan.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, today, the president promised to overhaul a system that he currently calls unacceptable.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): Trying to boost America's confidence in Washington, President Obama vows to slash government waste and save taxpayers up to $40 billion each year.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We are spending money on things that we don't need, and we are paying more than we need to pay. And that's completely unacceptable.

LOTHIAN: The president pointed to federal contract ins Iraq, buildings that weren't completed, services never performed, and even companies that "skimmed off the top." Mr. Obama also took a swipe at the Bush years, saying that government contracts had doubled over the last eight year to more than a half-trillion dollars, often with no accountability.

OBAMA: It's time for this waste and inefficiency to end. LOTHIAN: Pushing for new guidelines, the president is calling for an end to outsourcing services that could be performed in house, no more unnecessary no-bid contracts, and he wants more oversight to boost accountability.

The White House trotted out the heads of Homeland Security and Agriculture to show how they're already on the hunt for waste.

TOM VILSACK, AGRICULTURE SECRETARY: We have identified a number, the most recent of which was a $400,000 consulting contract which career employees felt was inappropriate. That contract has been canceled.

LOTHIAN: But some watchdog groups, while applauding this effort, say other administrations have tried this and failed when they ran into government bureaucracy.

TOM SCHATZ, CITIZENS AGAINST GOVERNMENT WASTE: The systems that are spread throughout various agencies make it very difficult even for well-intentioned bureaucrats to move ahead quickly and get things done efficiently.

LOTHIAN: And with all this talk about cutting government waste, some critics are asking why the administration isn't fighting to clean up the omnibus spending bill now before Congress. It's loaded with $8 billion in earmarks.

Spokesman Robert Gibbs says the president is concerned, but he called that last year's business.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: The president believes that we can work with Congress to reduce wasteful spending in the future.

(END VIDEOTAPE)

LOTHIAN: While it's technically last year's business, the president still could intervene. He could push to have those earmarks removed, or he can veto the bill once it lands on his desk. But right now, it appears that the president will stay on the sidelines, a political battle he doesn't want to wage -- Wolf.

BLITZER: At least for now.

Thanks very much, Dan Lothian.

A new bipartisan effort today to try to cut wasteful spending by giving the president a line-item veto that the Supreme Court might accept, the legislation being pushed by the duo who championed campaign finance reform, Senators Russ Feingold and John McCain.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: We want to get around the Supreme Court decision that ruled the last line-item veto unconstitutional. We have consulted a broad array of constitutional authority -- people who are authorities on the Constitution, who tell us that this is, indeed, even though it's not exactly a line-item veto, it's a rescission bill that is constitutional.

So, is it going to be hard to get this passed? Yes.

(END VIDEO CLIP)

BLITZER: Now another source of outrage over those so-called pet projects tucked into a spending bill before the Senate right now. Questions are being raised about links between some of the specific projects in that legislation and contributions to lawmakers.

Let's go to our senior congressional correspondent, Dana Bash. She's got the details -- Dana.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, Wolf, if you take a look at the Senate floor, they are voting as we speak on a measure to strip about $2 million out of this spending bill, because they are earmarks, according to one Republican senator, that smell of potential impropriety.

He says he's not sure if there is impropriety, but he also says, in this age where the American people are upset about corruption, why take the risk?

(BEGIN VIDEOTAPE)

BASH (voice-over): AlphaMicron, a high-tech company in Kent, Ohio, is slated to get 951,500 taxpayer dollars, thanks to an earmark from Democratic Congressman Tim Ryan. But it's one of a dozen earmarks Republican Senator Tom Coburn wants to kill because of alleged ties to a lobbying firm, the PMA Group, raided by the FBI last year as part of a federal investigation.

SEN. TOM COBURN (R), OKLAHOMA: If you look at the lobbying efforts of the PMA firm, and then you look at campaign contributions in the Congress, you can see a very worrisome pattern.

BASH: He says, in Congressman Ryan's Case, AlphaMicron, which got the earmark, had paid PMA $140,000 for lobbying services, and that PMA gave Ryan $64,250 in campaign contributions.

COBURN: Impropriety, at the least, and, at the worst, quid pro quos.

BASH: Ryan emphatically says his campaign contributions from PMA had nothing to do with the earmark, telling CNN, "I supported a company that is working on revolutionary technologies that will create jobs in my community."

Creating jobs at home is the reason Democratic Congresswoman Marcy Kaptur and Republican Senator George Voinovich say they want $1.2 million for Ohio's Sunlight Corporation, another PMA client. Kaptur got $41,500 in campaign contributions from PMA, Voinovich, $9,000. SEN. GEORGE VOINOVICH (R), OHIO: But I tell you, but I don't even know who PMA is.

BASH: We caught up with Voinovich in a Capitol hallway. He said he's just helping a growing Ohio company.

VOINOVICH: They were taking and hiring a lot of people from the automobile industry that were out of work.

(END VIDEOTAPE)

BASH: Now, just as we were speaking there, the Senate actually defeated the amendment to kill those dozen or so earmarks. They defeated it by a vote of 34-61, probably because 61 senators agreed with something that the Appropriations chairman said on the Senate floor.

And he said, we should not convict clients and members and enact a punishment before we even know if a crime has been committed here.

And I should tell you, Wolf, that we did try to reach the PMA lobbying firm for a statement about the investigation, and didn't get a call back.

BLITZER: Well, if you get something, let us know, Dana. Thanks very much.

On Wall Street, a break in the five-day losing streak, the Dow and S&P bouncing back from 12-year lows. The Dow jumped 150 points. The S&P 500 rose 16.5 points.

Meanwhile, the Ford Motor Company hopes to cut some of its losses. Today, the car company said it's approved a plan to convert debt into stock, an attempt to cut up to $10.4 billion in debt. Ford will offer debt holders cash and stock.

The British prime minister today urged the U.S. Congress to help his country and the world recover from an economic hurricane. Gordon Brown played up by the special relationship between the U.S. and Britain before a joint meeting of the Congress.

(BEGIN VIDEO CLIP)

GORDON BROWN, BRITISH PRIME MINISTER: America knows from its history that its reach goes far beyond its geography. For a century, you have carried upon your shoulders the greatest of responsibilities to work with and for the rest of the world. And let me tell you that now more than ever, the rest of the world wants to work with America.

(END VIDEO CLIP)

BLITZER: The prime minister also announced that Senator Ted Kennedy has been awarded an honorary British knight for his contributions to peace in Northern Ireland, as well as his work on health care in the United States.

Senator Kennedy is suffering from a brain tumor. He was not able to attend the speech, but he did receive a standing ovation.

Let's go back to Jack Cafferty. He has "The Cafferty File."

I hope he gets better, Senator Kennedy.

JACK CAFFERTY, CNN ANCHOR: I hope he does, too, although in cases like his, that tends not to be the outcome.

The California woman who had those octuplets to go with the six kids she already had continues to stir up debate around the country. The latest comes from Georgia, where lawmakers want to prevent the same thing from happening in their state.

A state senator in Georgia has introduced a bill that would limit the number of embryos that can be implanted in a woman's uterus during in vitro fertilization. He doesn't want taxpayers to have to end up paying for raising kids that result from multiple births if the parents can't afford to do it themselves.

The limits in Georgia, if this would ever become law, would be two embryos for a woman under 40, and three for a woman older than 40. The numbers are slightly lower than what's considered normal by most in vitro doctors. Breaking the law could result in a fine of up to $1,000.

And it's not just Georgia either. Missouri is considering a similar bill. And there are laws just like this already on the books in both England and Italy. Some fertility doctors suggest the proposed legislation would hurt a woman's chances of getting pregnant, that there are special cases where they need to implant more than three embryos.

Critics also suggest this bill is a backdoor effort to ban abortion. That's because the bill says -- quote -- "A living in vitro human embryo is a biological human being, who is not the property of any person or entity" -- unquote.

It's not likely to pass in Georgia anytime soon, because of an overcrowded legislative calendar. But the fact that it's being discussed at all is cause for alarm in some circles.

And that brings us to the question: Should the government limit the number of embryos a woman can have implanted?

Go to CNN.com/caffertyfile and post a comment on my blog -- Wolf.

BLITZER: Jack, thank you.

Are you trapped in a cycle of economic fear? Are you looking for guidance?

(BEGIN VIDEO CLIP)

ALAN VALDES, HILLIARD LYONS: Well, now we have more directional finding, more a of laser idea of where we're going from the administration, from Tim Geithner, from Larry Summers, which we haven't gotten yet.

(END VIDEO CLIP)

BLITZER: Many on Wall Street and many of you are looking to Washington for some clarity to ease economic anxiety. Stand by.

She's a powerful person in the new Obama White House. You're about to meet her. Her work affects all Americans. With that kind of pressure, how does she start her days? We will tell you. It's yoga.

And Mr. Beef goes to Washington. A small business owner fights for himself and others. He's urging more help from banks that have received bailouts.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Over roughly the past year-and-a-half, as the Dow Jones stock market index has fallen and fallen, your level of confidence in the overall state of the economy has also been going way down. And that's prompted many of you to be spending a lot less. How might that change?

Let's go to New York. CNN's Mary Snow is taking a closer look -- Mary.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, beyond the policies and proposed solutions to address the nation's economic problems, there's also the issue of tackling fear.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Even on a day when stocks rebounded following big losses, few on Wall Street have confidence the gains will last.

(on camera): How bad is the fear factor?

TED WEISBERG, SEAPORT SECURITIES: I think it's pretty bad. I mean, certainly, the lack of confidence is pervasive, and it's a big -- clearly a big, big problem for the stock market.

SNOW (voice-over): As Wall Street sends anxious signals about the future, in Washington there are efforts under way to address those fears. Even British Prime Minister Gordon Brown spoke of the American psyche in hard times while addressing Congress.

BROWN: But what mattered more was this endearing truth that you, the American people, at your core, were, as you remain, every bit as optimistic as your Roosevelts, your Reagans and your Obamas.

SNOW: Tuesday, President Obama addressed the market hitting 12- year lows.

OBAMA: What you're now seeing is profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it.

SNOW: While the administration has been offering a steady stream of boosts to the economy, including today's $75 billion plan to help homeowners, it's done little to soothe the anxiety. Those who watch the market say on top of the bad economic news, the fear compounds the problem.

MARIA FIORINI RAMIREZ, ECONOMIST: Well, I think that we are caught in quite a cycle. I think it's sort of, you know, spiraling down the last two years.

SNOW: To break that cycle, traders here say they're looking to Washington.

ALAN VALDES, HILLIARD LYONS: For now, we have to get more directional finding, more of a laser idea of where we're going from the administration, from Tim Geithner, from Larry Summers, which we haven't gotten yet.

(END VIDEOTAPE)

SNOW: Some on Wall Street say what they haven't seen yet is a clear path out of the financial mess, and, until that happens, that cycle of fear won't be broken -- Wolf.

BLITZER: Mary, thank you. It's certainly a sign of the times.

A struggling Chicago restaurant owner went before Congress today complaining that his bank got a break, but ought to give him one as well.

CNN's Ted Rowlands has our story -- Ted.

(BEGIN VIDEOTAPE)

TED ROWLANDS, CNN CORRESPONDENT: Wolf, Mr. Beef is an institution here in Chicago, has been for the last 30 years. People come here for their famous Italian beef sandwich. It's packed every day here at lunch.

But Mr. Beef is facing possible foreclosure. The reason, according to the owner, his bank won't lend him money.

UNIDENTIFIED MALE: Young lady, what are you going to have?

ROWLANDS (voice-over): It's lunchtime at Mr. Beef on Orleans Street in Chicago.

UNIDENTIFIED MALE: What was that on the Italian beef, sir? Hot peppers?

ROWLANDS: Despite its popularity, Mr. Beef is facing a possible court-ordered foreclosure. Restaurant owners are in default on more than $660,000 in loans. Joe Zucchero, AKA Mr. Beef, testified on Capitol Hill in front of a House panel looking into the financial rescue plan, known as TARP. He thinks his bank, which just received nearly $85 million in TARP money, should be using those tax dollars to help him and other small businesses that need loans.

JOE ZUCCHERO, OWNER, MR. BEEF: Congress needs to take action. Congress needs to know that small businesses drive the economy, that we are fighting every day to keep our doors open and keep our people employed.

ROWLANDS: Zucchero says Mr. Beef's financial woes are due in part to a new restaurant he opened last year and the loss of a financial partner, obstacles he's confident he can eventually overcome in time.

ZUCCHERO: I do not need the bailout from the taxpayers. I only want the banks to be fair.

ROWLANDS: Representatives from Zucchero's bank, Midwest Bank, told us they can't discuss customer information, but issued a statement which includes this on foreclosures -- quote -- "Midwest Bank would only take such action after it has carefully reviewed and considered all material aspects of the particular loan in question and explored other viable options."

Some people say Mr. Beef made a mistake by opening the other restaurant, and banks shouldn't be forced to lend to anybody.

UNIDENTIFIED MALE: Well, I really have no comment on that. I mean, that's -- that was a business decision. And it was 2005 and 2006, and everything was rolling fine.

ROWLANDS: Customers say they're hoping something can be done to keep Mr. Beef afloat.

UNIDENTIFIED MALE: I love these sandwiches.

ROWLANDS (on camera): Wolf, some customers are so desperate to keep this place open, they have organized a benefit concert for next week called Beef Aid. The owners obviously are hoping, though, to restructure their loan, so that they can stay in business -- Wolf.

(END VIDEOTAPE)

BLITZER: All right, Ted, thanks very much. It's certainly a sign of the times, as we have been saying here in THE SITUATION ROOM.

Hillary Clinton gets a closer look at Middle East realities. The secretary of state pays a visit to the West Bank and delivers a message to Palestinians.

And a Vermont patient lost her arm after a botched injection. The jury gave her millions. Now the U.S. Supreme Court weighs in on the case.

Plus, President Obama says the government's contracting system is simply broken and he's moving quickly to try to fix it. (BEGIN VIDEO CLIP)

OBAMA: It's time for this waste and inefficiency to end. It's time for a government that only invests in what works.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: The secretary of state, Hillary Clinton, says the United States will wait until Israel forms a new government before raising key issues in the stalled peace process.

In the meantime, she paid a visit to the West Bank today and got a closer look at the realities there on the ground.

CNN's foreign affairs correspondent, Jill Dougherty, is traveling with the secretary.

(BEGIN VIDEOTAPE)

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT (voice-over): A motorcade from Jerusalem to Ramallah in the Palestinian territories, past the security wall constructed by Israel, and on through a checkpoint, the quandary of bringing peace to the Middle East suddenly physically real.

The U.S. secretary of state strongly endorsing Mahmoud Abbas, the Palestinian president, locked in a power struggle with Hamas, which the U.S. considers a terrorist organization.

HILLARY RODHAM CLINTON, U.S. SECRETARY OF STATE: The United States supports the Palestinian Authority as the only legitimate government of the Palestinian people and as a partner on the road to a comprehensive peace which includes a two-state solution.

DOUGHERTY: Abbas says his government is carrying out its commitments to peace, and the new Israeli government, still to be formed, should do the same.

At the podium with Clinton, Abbas demands the Israeli government be committed to the road map plan and to the vision of the two-state solution. It also, he says, must stop settlements in Palestinian territories and remove barriers to free movement for Palestinians.

Another flash point, Israeli demolition of Palestinian homes in East Jerusalem -- Secretary Clinton calling that unhelpful to the peace process.

(on camera): Politics is part of the equation here in the Palestinian territories. The other is economic opportunities. And that is the message this secretary of state is delivering.

(voice-over): At a school in Ramallah, Secretary Clinton meets with students, many of them refugees, studying English through a U.S.- funded program. The State Department, she announces, is giving more money, more programs, and grants for Palestinian students to study at American universities, the U.S., she says, ready to do whatever it can to prepare the next generation of Palestinian leaders.

Jill Dougherty, CNN, Ramallah.

(END VIDEOTAPE)

BLITZER: President Obama's new effort to try to clean up federal contracts could hit the Pentagon rather hard.

(BEGIN VIDEO CLIP)

OBAMA: But I reject the false choice between securing this nation and wasting billions of taxpayer dollars.

(END VIDEO CLIP)

BLITZER: Stand by to hear the president of the United States. He will be speaking at length about ways he wants to get rid of waste.

Also ahead, one of the most powerful White House insiders that you have probably never even heard of -- you're going to meet a health care reformer whose political career was actually launched by cupcakes.

And they hit the jackpot, to the tune of $216 million.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I called my wife, and I told her that we had won. She thought I was joking.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

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

Happening now: The U.S. Supreme Court is upholding a $6.7 million jury award to a patient in Vermont. She lost her arm after a botched injection of anti-nausea medication. Wyeth Pharmaceuticals unsuccessfully argued that federal approval of its drug should shield it from lawsuits.

President Obama is nominating a Republican as the new head of FEMA. Craig Fugate has been a director of Florida's Emergency Management Division since 2001.

Ten co-workers at an insurance company in New Jersey say they have won the $216 million Mega Millions jackpot. It's the second largest lottery jackpot in New Jersey history.

All of this, plus the best political team on television.

I'm Wolf Blitzer. You're in THE SITUATION ROOM. President Obama is counting the ways he says he's trying to save taxpayers money. He spoke at length today about his campaign against wasteful spending in governments contracts and in the federal budget.

(BEGIN VIDEO CLIP)

OBAMA: The budget plan I outlined last week includes $2 trillion in deficit reduction. It reduces discretionary spending for non- defense programs as a share of the economy that -- by more than 10 percent over the next decade to the lowest level in nearly half a century.

I want to repeat that. I -- I want to make sure everybody catches this, because I think sometimes the chatter on the cable stations hasn't been clear about this.

My budget reduces discretionary spending for non-defense programs as a share of the economy by more than 10 percent over the next decade. And it'll take it to the lowest level in nearly half a century.

In addition, today I'm announcing that part of this deficit reduction will include reforms in how government does business, which will save the American people up to $40 billion each year.

It starts with reforming our broken system of government contracting. There is a fundamental public trust that we must uphold. The American people's money must be spent to advance their priorities, not to line the pockets of contractors or to maintain projects that don't work.

Recently, that public trust has not always been kept. Over the last eight years, the government spending on contracts has doubled to over half a trillion dollars. Far too often, the spending is plagued by massive cost overruns, outright fraud and the absence of oversight and accountability. In some cases, contracts are awarded without competition. In others, contractors actually oversee other contractors. We are spending money on things that we don't need and we are paying more than we need to pay. And that's completely unacceptable.

This problem cuts across the government. But I want to focus on one particular example and that is the situation in defense contracting. Now, I want to be clear. As commander-in-chief, I will do whatever it takes to defend the American people, which is why we have increased funding for the best military in the history of the world. We'll make new investments in 21st century capabilities to meet new strategic challenges. And we will always give our men and women the -- in uniform -- the equipment and the support that they need to get the job done.

But I reject the false choice between securing this nation and wasting billions of taxpayer dollars.

And in this time of great challenges, I recognize the real choice between investments that are designed to keep the American people safe and those that are designed to make a defense contractor rich.

Last year, the Government Accountability Office, GAO, looked into 95 major defense projects and found cost overruns that totaled $295 billion. Let me repeat. That's $295 billion in wasteful spending. And this wasteful spending has many sources. It comes from investments in unproven technologies. It comes from the lack of oversight. It comes from influence peddling and indefensible no-bid contracts that have cost American taxpayers billions of dollars.

In Iraq, too much money has been paid out for services that were never performed, buildings that were never completed, companies that skimmed off the top.

At home, too many contractors have been allowed to get away with delay after delay after delay in developing unproven weapons systems.

It's time for this waste and inefficiency to end. It's time for a government that only invests in what works.

And what's encouraging is that there is broad, bipartisan consensus on behalf of reform and we are committed to taking swift action that changes our system of contracting to save taxpayers money.

(END VIDEO CLIP)

BLITZER: The president speaking earlier today.

Meanwhile, it's time to meet another power player on Team Obama -- this one juggling the very health of the nation with her own wedding plans.

Our national political correspondent, Jessica Yellin, is about to tell us who we're about to meet.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: I'll tell you, Wolf, tomorrow President Obama starts a national debate about health care reform with a televised summit. The person he turned to run it all is a woman named Melody Barnes. She's in charge of domestic policy in the White House, but it's not all she has on her plate.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Melody Barnes may be one of the most powerful inside players you haven't heard of.

Her job this week?

Get the country so excited about health care reform, Congress is forced to act.

MELODY BARNES, WHITE HOUSE DOMESTIC POLICY ADVISER: This has to happen. If we are going to fix our economic circumstances, health care reform has to be addressed.

YELLIN: It's a tall order. Anti-reform forces are gathering for a fight. But Barnes, the White House domestic policy director, is adamant.

BARNES: Our top priority is to get it done and to make sure that it happens this year.

YELLIN: A lot of that pressure will rest on her shoulders, which means lots of West Wing meetings plotting strategy.

BARNES: You notice it goes through Saturday and Sunday.

YELLIN: Barnes starts her day doing what she says the White House chief of staff does -- yoga.

BARNES: Yoga is very, very important. It keeps me centered. I know that yoga is also something that Rahm practices.

YELLIN: She's not your average policy wonk. She jumped into politics in an unusual way.

BARNES: Selling cupcakes when I was eight for George McGovern.

YELLIN: "Washingtonian" magazine named one of the city's best dressed. And last year, she was the voice of a liberal satellite radio show.

(BEGIN AUDIO CLIP)

BARNES: Join me to discuss those issues and more on "The Progressive Beat."

(END AUDIO CLIP)

YELLIN: Barnes has also been a senior aide to two liberal powerhouses, Senator Ted Kennedy and Obama transition chief John Podesta.

JOHN PODESTA, CO-CHAIRMAN, OBAMA TRANSITION TEAM: I think you'll see her out up on Capitol Hill, speaking to the public, traveling the country.

YELLIN: As an African-American woman working in a White House where male aides hold a great deal of power, so far, she says she and her female colleagues have not had a problem being heard.

BARNES: But the president sends the signal.

YELLIN: She has one other challenge to navigate. In the middle of it all, she's planning a June wedding.

So when does she find the time?

BARNES: Very, very late at night.

(LAUGHTER)

(END VIDEOTAPE) YELLIN: And now Barnes doesn't only work on health care reform. She's also in charge of other domestic issues, like education and immigration. Essentially, it's up to her to coordinate the policy. Wolf, that means making sure the entire administration has a consistent position. A big job.

BLITZER: And she's got a cute name, Melody. That's a nice name, indeed.

YELLIN: Yes.

BLITZER: All right.

Thanks very much.

Good luck with her wedding.

YELLIN: She'll need a wedding planner,, as you pointed out.

BLITZER: Maybe we'll help -- we'll help.

YELLIN: We'll help her.

BLITZER: The British prime minister offers a pep talk to America -- why aren't U.S. leaders doing the same?

The best political team on television is here to discuss.

As well as, John McCain. We'll be talking about that, as well. He's warming up to President Obama one day, but blasting him the next.

Is he a friend?

Is he a foe?

What's going on?

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: President Obama signing documents cracking down on waste and fraud in government contracting. Certainly a favorite cause of his former rival, Senator John McCain. The senator cheering the president on today. Only two days ago, though, Senator McCain was railing against the president.

(BEGIN VIDEO CLIP)

MCCAIN: I just went through a campaign, Mr. President, where both candidates promised change in Washington -- promised change from the wasteful, disgraceful, corrupting practice of earmark pork barrel spending.

(END VIDEO CLIP)

BLITZER: So is John McCain a friend or a foe to the president?

Let's talk about that and more with our CNN senior political analyst, Gloria Borger; our CNN political contributor, Steve Hayes, of the "Weekly Standard;" and our chief national correspondent, John King.

He is the host of "STATE OF THE UNION," which airs every Sunday morning. They're all part of the best political team on television.

It was, in part, the old John McCain teaming up with Carl Levin on procurement issues, with Russ Feingold -- teaming up with him on a new line item veto to eliminate some of this pork barrel spending.

What's going on here?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, you asked, is he friend or foe?

The answer is yes, he's both to Barack Obama...

(LAUGHTER)

BORGER: ...because, on the one hand, he's going to disagree with him on those fiscal issues that he believes he has a lot of credibility on. And he was against the stimulus package. He's against this new budget. But he's going to team up with him when it comes to curbing waste, fraud and abuse. He's with him so far on the war in Iraq and Afghanistan. He might be with him on climate change.

So it's the old John McCain. He'll be with him when he agrees with him.

BLITZER: Those phrases sort of make some conservatives crazy, McCain/Feingold, McCain/Levin, McCain/Kennedy. You know the history.

STEPHEN HAYES, SENIOR WRITER "THE WEEKLY STANDARD": Yes, they do make some conservatives crazy. I think Gloria is right, though. I mean he's likely to just pick sort of issue by issue, going down the menu and be with Barack Obama -- with him sometimes and not with him other times. It's going to depend on the issue.

But on procurement reform, John McCain has been sort of banging this drum for, what, 20 years or so, looking for some reform on this.

BLITZER: You've covered him a long time, John. You did an excellent documentary last year on him, when he was a presidential candidate.

Are you surprised by this John McCain who has emerged since the inauguration?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Not at all. I think he is trying to find his voice again in the Senate. He believes the president's position on this, what we call in Washington an omnibus spending bill, which is loaded with these earmarks -- he believes it's a copout for the White House to say that's last year's problem, we're going to sign this bill and move on. So he is in Barack Obama's face on that point, because he think it's a copout.

But as everyone has noted, he will go on an issue by issue basis. Remember, he's up for election in two years, as well. And he should win his seat. It should always be safe. But Arizona is trending Democratic. So he needs to prove his own credentials in the Senate, number one.

I would watch the climate change debate. Cap and trade has become controversial among a lot of Republicans and even some Democrats. I would watch him as the budget goes forward. And then health care -- another big issue where Barack Obama is going to need Republican votes.

Will John McCain play with this Democratic White House on the issue of health care, where they need him?

They need someone who can bring over a handful -- six or eight Republican votes. It's fascinating to watch.

BORGER: And, you know, as you have this fight in the Republican Party over who is the leader of the Republican Party, you've had the question is it Rush Limbaugh, is it Michael Steele, the head of the Republican National Committee.

I think there are lots of people, particularly people who supported John McCain, who believe that maybe he should be the head of the Republican Party when it comes to railing against earmark spending and...

KING: And remember how much Rush railed against McCain...

BORGER: That's right.

KING: ...on immigration...

BORGER: That's right.

KING: ...on some of these other issues.

BLITZER: Rush Limbaugh never liked John McCain.

HAYES: Right.

BORGER: He didn't support him in the primaries.

BLITZER: That was obvious.

(CROSSTALK)

HAYES: Just to add to John's list, too, I mean, you have to add Guantanamo Bay to that.

KING: Right. HAYES: I mean they were in the same position, John McCain and Barack Obama, on Guantanamo -- on the closing of Guantanamo Bay. But they were different when Barack Obama announced that he wanted to close it.

John McCain said look, that announcement is premature until you've figured out what exactly what you're going to do with the detainees. He was quite critical on that. And I expect him to continue to be.

BLITZER: Steve, we heard something extraordinary today from the British prime minister, who was addressing a joint meeting of the Congress. And, in effect, at the end, he sort of gave a pep talk to Americans.

Let's listen to this.

(BEGIN VIDEO CLIP)

BROWN: You, the American people, at your core, where as you remain every bit as optimistic as your Roosevelts, your Reagans and your Obamas.

(END VIDEO CLIP)

BLITZER: He got a big round of applause, as well. You know, here he is. He comes to the United States and he's telling the American people be optimistic, because there's a lot of gloom right now.

HAYES: Yes. Parts of the speech I wanted to stand and start singing "The Star-Spangled Banner."

(LAUGHTER)

BORGER: Right.

HAYES: You know, I think he's been -- he's been more optimistic in his public statements over the past couple of weeks than Barack Obama has. But I also think we've seen a shift from the president in the past two weeks, really since Bill Clinton sort of needled him publicly and said, look, it's fine to be realistic and describe the problems we're having, but you also need to add this element of hope, which is sort of your signature -- your signature issue.

BLITZER: Were you surprised yesterday, he went one step further and said maybe it's a good time for younger people who have a long time ahead before they retire to go out and buy some stocks?

KING: Well, in Gordon Brown's case, remember, he was the Treasury secretary, essentially, in Great Britain -- the kind of the secretary of the Exchequer, I guess they call it, beforehand. So he is in a lot of political problems back home.

And that speech I took as proof -- the European Union having trouble. The different countries working out a broad plan for Europe. I took that as proof that he believes, as many around the world do, that the United States, in many ways, our economy led the global recession -- led the other countries into a global recession because of our financial problems.

That was a speech in which he said, you're going to have to take the lead in getting us out. And part of that is confidence in your ability to do so. He said he is one of many politicians around the world who are being dragged down by this recession.

BLITZER: It's true, because they used to say, when the United States sneezes, the rest of the world has pneumonia.

BORGER: Well, but that's why...

(LAUGHTER)

BORGER: That's why they want the United States to be optimistic, because it does help them back home.

BLITZER: Right.

BORGER: But President Obama is walking this fine line, because he's got to tell people how -- what a dire situation we're in because we've got to do so much and his plans are so ambitious. And so far, if you look at the public opinion polls, people have taken toll of his sort of emotional temperament and they kind of like it at this point.

They believe -- he's very popular. They believe that he's calm and cool. Now, that could turn at any point when they decide they don't like his policies or when the economy doesn't seem to be changing. But so far, what he's doing seems to be working, for him, at this point.

BLITZER: For the president of the United States.

BORGER: Exactly.

BLITZER: Because he remains very, very popular right now.

BORGER: Exactly.

BLITZER: And the public is more than anxious to give him a chance.

HAYES: Yes. And I talked to a Republican strategist last week who said, look, the entire country, in a sense, is rooting for him -- even the people who disagree with his policies. Republicans are rooting for him. And I think that's why you've seen Republicans be a little bit reluctant to take him on frontally. Now that's starting to change, too.

BLITZER: We'll leave at that note, guys.

Thanks very much.

An apology mocked coast to coast -- the Republican chairman's effort to make up with Rush Limbaugh fuels some late night TV and even a new Web site.

And a special delivery for the first daughters, Sasha and Malia Obama. Something fun arriving at the White House. We'll tell you what it is, right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

LOU DOBBS, CNN ANCHOR: Coming up at the top of the hour, we'll be reporting on President Obama's struggle to convince Americans that his economic policies will work. Americans are increasingly concerned about bigger government, globalization and the president's tax, borrow and spend policies. One of the best economic thinkers, Niall Ferguson, joins us with his perspective.

Also, troubling new evidence of Wall Street's efforts to buy influence in Washington. And it's paying off. They spent $5 billion in a decade. They got back trillions. We'll have a special report -- "The Best Government Money Can Buy."

And the Obama administration and left-wing groups launching a concerted campaign targeting radio talk show host Rush Limbaugh -- a one man enemies list. Two leading political analysts join us to talk about whether this campaign will backfire on the Obama White House.

We'll examine a startling prediction that this country is on the verge of collapse.

Join us for all of that, all the day's news and much more, at the top of the hour on "LOU DOBBS TONIGHT."

THE SITUATION ROOM continues next.

(COMMERCIAL BREAK)

BLITZER: A beautiful shot of the White House here in Washington, D.C. .

Let's go back to Jack.

He's got "The Cafferty File" -- Jack.

CAFFERTY: That is pretty, isn't it?

BLITZER: Yes.

CAFFERTY: The question this hour: Should the government limit the number of embryos a woman can have implanted?

Kat writes from Austin, Texas: "Implant as many as you want, as long as you can prove that you can provide for them without government assistance.

If you expect the taxpayer to help you out, then the taxpayer should get a say in the situation."

Derek writes from Grundy Center, Iowa: "The answer is almost -- ." Let me start over: "The answer to almost every question that begins, "Should the government?," is no. The states debating this issue would be better off changing their welfare programs to cover only one or two kids in a family and then let people deal with the consequences of their actions."

Kasey writes: "Yes, this woman" -- talking about the octo mom -- "this woman is completely insane. She's burdened taxpayers with raising her children. To have one child through this process is one thing. Raising a litter on the taxpayers' dime should be a crime."

Ray writes: "There should be zero in vitro fertilizations. There are too many adoptable kids out there who need a home and love. When that supply is exhausted, then maybe in vitro could be considered."

Kevin in Indiana says: "Why not pre-qualify potential mothers, similar to the way we do with adoptions? Insure the ability to properly care for the child by the mother before moving forward with any fertility procedures."

Laura writes: "No. The government limiting the number of embryos would be the start of a slippery slope. At what point do we allow the government to make medical decisions for patients and for the medical profession? Where would be line be drawn and for whom?"

Joy in Tennessee says: "Jack, it's most difficult to say that the government should have control over a woman's body.

However, when you have a nut like the octuplet mom and apparently a doctor with no scruples, it begs for intervention. Thus, my opinion is conflicted."

And Cliff writes: "No, the government should not limit embryo implants, doctors should."

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 of others.

See you tomorrow -- Wolf.

BLITZER: Jack, thanks very much.

That's good work.

A political apology takes on a life of its own.

CNN's Jeanne Moos takes a "Moost Unusual" look.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Finger wagging, chest thumping, fist bumping Rush Limbaugh.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: Rev it up. (END VIDEO CLIP)

MOOS: ...has revved it up all right. He's on the receiving end of an orgy of apology turned mockery.

(BEGIN VIDEO CLIP COURTESY HEADZUP/YOUTUBE)

UNIDENTIFIED MALE: Oh, God, I'm sorry, I'm sorry, I'm sorry, I'm sorry. I didn't mean to say that. I'm the leader, you're the leader, you're the man.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP, COURTESY THEYOUNGTURKS/YOUTUBE)

UNIDENTIFIED MALE: And then you come hat in hand, oh, I'm so sorry. I didn't mean it.

(END VIDEO CLIP)

MOOS: "Groveling apology, wimp sucks up" -- critics are reveling in the Republican National Committee chairman's backpedaling on what he said about rush.

(BEGIN VIDEO CLIP FROM "D.L. HUGHLEY BREAKS THE NEWS")

MICHAEL STEELE, RNC CHAIRMAN: Rush Limbaugh is an entertainer.

(CROSSTALK)

UNIDENTIFIED MALE: ...the Republican Party. Right.

STEELE: Yes, it's incendiary. Yes, it's ugly.

(END VIDEO CLIP)

MOOS: "I'm so sorry that I called you ugly," just happens to be among the multiple choice options at the I'm Sorry, Rush Web site the Democrats gleefully set up -- calling it a secret Republican apology machine. "My comments were be inarticulate." "What I meant to say is that you are worthy of enormous respect."

All quotes from Steele's actual apology.

(BEGIN VIDEO CLIP FROM RUSHLIMBAUGH.COM)

LIMBAUGH: It is funny.

(END VIDEO CLIP)

MOOS: Headlined hilarious, Rush put a link to the "Dear Rush" letter on his own Web site.

As for Michael Steele...

(BEGIN VIDEO CLIP) STEELE: You know, there's a lot of popcorn going around for folks who are watching this and enjoying it. There are a lot of opinions out there.

(END VIDEO CLIP)

MOOS (on camera): Hmm, enjoying it.

(voice-over): David Letterman went off with his opinion.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, HOST "THE LATE SHOW WITH DAVID LETTERMAN: What about this bonehead Rush Limbaugh?

Honest to God.

(END VIDEO CLIP)

MOOS: A lot of attention was focused on Limbaugh's shirt.

(BEGIN VIDEO CLIP, COURTESY COMEDY CENTRAL)

JON STEWART, HOST "THE DAILY SHOW": Where Rush Limbaugh, wearing an outfit color-coordinated with his soul.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

LETTERMAN: And it's unbuttoned like, oh, yes, when you think Rush Limbaugh, you think, ooh, let's see a little flesh.

(END VIDEO CLIP)

MOOS: Rush really became a lightning rod when he said to save the country from President Obama's big government policies...

(BEGIN VIDEO CLIP FROM C-SPAN)

LIMBAUGH: I want Barack Obama to fail

(END VIDEO CLIP)

MOOS: The next thing you know, NakedBoyNews was saying...

(BEGIN VIDEO CLIP FROM YOUTUBE.COM)

UNIDENTIFIED MALE: I hope Rush Limbaugh fails.

(END VIDEO CLIP)

MOOS: And Jimmy Fallon was joking on his brand new late night show.

(BEGIN VIDEO CLIP) JIMMY FALLON, HOST "LATE NIGHT WITH JIMMY FALLON: Just before I went on, Rush Limbaugh called me up and said he wants me to fail.

(END VIDEO CLIP)

MOOS: Editorial cartoonist Clay Bennett turned the classic Obama hope into "hope for failure." The rush of commentary about Rush...

(BEGIN VIDEO CLIP FROM HEADZUP/YOUTUBE)

UNIDENTIFIED MALE: All hail the mighty Limbaugh.

(END VIDEO CLIP)

MOOS: ...has sure brought out the anatomical references.

BILL PRESS: Michael Steele and now you are just kissing Rush Limbaugh's butt.

(BEGIN VIDEO CLIP FROM RUSHLIMBAUGH.COM)

LIMBAUGH: The brilliant butt boy, David Shuster.

(BEGIN VIDEO CLIP FROM THEYOUNGTURKS/YOUTUBE)

UNIDENTIFIED MALE: After you went and handed your (EXPLETIVE LANGUAGE) in a jar to Rush Limbaugh.

(END VIDEO CLIP)

MOOS: Just so they keep them in a jar.

Jeanne Moos, CNN, New York.

(END VIDEOTAPE)

BLITZER: A big surprise for Sasha and Malia Obama. We're going to show you what they found over at the White House when they came home from school today.

And in London, Prince Charles and Camilla -- they're seen at a Hindu festival throwing flowers. Just one of our Hot Shots -- pictures often worth a thousand words.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some "Hot Shots" coming in from our friends over at the Associated Press -- pictures likely to be in your newspapers tomorrow.

In Washington, college students wear orange jump suits as they attend a Senate Judiciary Committee hearing.

In London, Prince Charles and Camilla throw flower petals during a Hindu festival.

In Connecticut, a dump truck flips backwards after hitting an exit sign.

And in Kathmandu, Buddhist monks play a game at a monastery.

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

They still don't have a puppy, but the first daughters, Malia and Sasha Obama, they did get something else today -- a brand new swing set. There it is. Their parents arranged for it to be installed today on the White House grounds, while the girls were at school.

A spokeswoman for the first lady says Malia and Sasha squealed with delight when they saw the swing set. They played on it for almost an hour, despite the very chilly weather.

And guess what?

It's all within sight of the Oval Office. A really nice swing set at the White House. Happy for those girls. We'll be happier once they finally -- finally get that little puppy. And that should be relatively soon. We'll update you on what we know.

Remember, we're here in THE SITUATION ROOM Monday through Friday, from 4:00 to 7:00 p.m. Eastern. We're also back with a special weekend edition Saturdays, 6:00 p.m. Eastern. That's coming up this Saturday.

Until tomorrow, thanks very much for watching.

I'm Wolf Blitzer in THE SITUATION ROOM.

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