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THE SITUATION ROOM

Obama Accused of Allowing Waste; StateEconomic Problems

Aired March 11, 2009 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: And airline passengers trapped on the tarmac for hours, they're hungry, thirsty and angry. A watchdog group is now naming the worst offender accused of treating fliers and I'm quoting now, "Like dirt." I'm Wolf Blitzer, you're in THE SITUATION ROOM.

President Obama's facing new criticism that he's putting off until tomorrow what he should have done today. He signed off on billions of dollars of spending in thousands of pet projects, while promising something different in the future. Let's go to our White House correspondent Dan Lothian, he's got the information for us. Only moments ago, he signed the legislation into law. Dan?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right and you know some people that the president really was sending mixed messages here, that he really had the opportunity to go out there and veto this bill, take a stand against what he called fraud, waste and abuse but he didn't.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): President Obama essentially held his nose and signed what he called an imperfect spending bill, $410 billion that keeps the federal government running.

OBAMA: You can't have congress bogged down at this critical juncture in our economic recovery.

LOTHIAN: It was a day of contradiction. The bill is loaded with 9,000 earmarks, what some considered pet projects or pork. At the same time, the president is calling for earmark reform, strict new guidelines to prevent future abuse.

OBAMA: The future demands that we operate in a different way than we have in the past.

LOTHIAN: One republican couldn't resist poking the president in the eye.

REP. JEFF FLAKE, (R) ARIZONA: This gives voice to St. Augustine's le meant, give me sobriety but not yet.

LOTHIAN: White House officials say they're moving beyond the past to focus on the economy and recovery efforts. And part of the strategy is a PR offensive to showcase a fully engaged economic team. Treasury secretary Timothy Geithner was on the "Charlie Rose Show" on Tuesday. Then, for the first time, reporters and cameras were given access to the oval office after the president's daily economic briefing. And on Friday, the president's top economic adviser Larry Summers will be making a major speech on the economy.

JOSH GOTHEMER, BURSON MARSTELER: They need to convince people like with any marketing campaign, that they can feel more comfortable, that the future is better even if there are going to be some bumps ahead.

(END OF VIDEOTAPE)

LOTHIAN: As part of the earmark reform Wolf, the president wants lawmakers, if they have earmarks in a bill, that they should post those earmarks on their websites so that the public can take a look at it. And this administration saying that if anything is found to be not of value, that is not legitimate, it will be eliminated. Wolf?

BLITZER: He seemed to almost want to signal that he was signing this $400 billion spending bill almost like holding his nose. He did it behind closed doors, no camera. Has he done that so far?

LOTHIAN: Not unavailable. We have not seen that done since he became president. Robert Gibbs was asked about that at the press briefing today and he kind of had a trite answer where he said sometimes things are signed in public and sometimes they aren't.

BLITZER: Dan Lothian thank you.

Senator John McCain meanwhile is blasting the president for failing to limit lawmakers' pet projects now. The republican says his former rival's vow to reform the process in the future is in his words, business as usual. Senator McCain says, and let me continue to quote, "The president could have resolved this issue in one statement - no more unauthorized pork barrel projects - and pledged to use his veto pen to stop them. This is an opportunity missed."

Let's walk over to Tom Foreman right now. He's got a closer look at some of the worst places to live, right now some of the best places to live if you're out there looking for a job. Tom, the unemployment numbers state by state, you have them.

TOM FOREMAN, CNN CORRESPONDENT: Exactly. The Bureau of Labor Statistics, they broke it down by every state and it really does tell you something. We put it into the map to show you in a very unique way. If you look up here, if you want a job, this is Wyoming. It's the only state in the country that's gaining jobs right now. Everything else, people are losing.

I'm going to tilt the map here and show you what we've got. We've given them both not only a color but also an elevation. So you can see the states that are the highest have the most problems, the lowest the least problems. The green states here, relatively good. They're not losing a whole lot of jobs, the gray states a little bit more, the yellow states like Nevada out here, that's not very good. And California, we have four states that are over 10 percent unemployment. What's happening out in California out there? They have lost a lot of construction jobs, they lost exporting jobs, tech jobs. They also lost retail jobs. This is a huge economy in California. One of the 10 largest economies in the world for this state. And of course when the Christmas season passes, the holidays are over, a lot of retail people are let go. So they got hit -- many states were hit by that.

Another huge loser in these latest numbers, up here, we look at Michigan. Michigan of course, we all know what the story is there. Manufacturing, manufacturing, manufacturing, hit very badly. Little Rhode Island over here, interestingly enough, Rhode Island is nestled in the northeast, which is generally holding its own in these latest numbers, but they're also above 10 percent in unemployment. Michigan was above 11 percent. That's the worst. But these are the worst ones by far.

Then let's move down here to the Carolinas. North Carolina, South Carolina, particularly South Carolina, they have been hammered by a combination of losses in manufacturing, retail sales, business services, travel and leisure services. They've really been hit hard. One little county right down in this area called Allendale County has close to a quarter of its people unemployed. That is depression-level unemployment. Right now all we're talking about though is one little county, but you get a picture as you look at this and you see the height and the colors here, look at your own states and you'll have an idea of where you stand right now. Wolf?

BLITZER: All right Tom, thank you.

Let's focus in on South Carolina a little bit more right now. We sent our national political correspondent Jessica Yellin down to South Carolina. The governor, Mark Sanford, is rejecting at least some of the economic stimulus package passed by congress, signed into law by the president, despite the fact as we just saw that the state has been so hard-hit. You had a chance to speak with him today Jessica. What did he say?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Wolf, you might think that with the state so hard hit by unemployment as you mentioned, that the governor would want more money for his state, but he's saying no. In fact, he says it's irresponsible for the state to take money that it doesn't have. He's making some pretty extreme comparisons. He says if the U.S. keeps printing money we don't have, that we're in for third word style inflation and even compared the U.S. to Zimbabwe. Just last year Zimbabwe had, get this, 11.2 million percent inflation. Here's the governor.

(BEGIN VIDEO CLIP)

GOV. MARK SANFORD, (R) SOUTH CAROLINA: What you do is you buy into the notion of if we just print some more money that we don't have, send it to different states, we'll create jobs. If that's the case, then why isn't Zimbabwe a rich place? Why isn't Zimbabwe just an incredibly prosperous place because they'll print money we don't have to spend around their different -- I don't know the towns in Zimbabwe, but that same logic is being applied there with little effect. (END OF VIDEO CLIP)

YELLIN: And he says because he doesn't want that to happen to the U.S., he is going to refuse the money unless President Obama lets him use some of the stimulus funds to pay down his debt, which is not likely to happen. Wolf?

BLITZER: As you know, some people are just accusing him, his critics, we should say, but be more interested in perhaps a run for the presidency in 2012 than in the welfare of his own state. That's a pretty strong criticism. Did you have a chance to ask him how he feels about that?

YELLIN: I did. I asked him that directly and he said it's not right to question his motives. He says he's always been worried about irresponsible spending but he also added that when it comes to a run for the presidency, he won't rule anything in or out. Wolf?

BLITZER: What about what Jim Clyburn, the congressman from South Carolina who is the number three in the House of Representatives. He suggests that there's an element of racism here because those suffering the most in South Carolina are African-Americans. I know in the past, he's rejected that charge at least his press secretary has. Did he say anything about that today, because that's a stinging accusation?

YELLIN: He rejected that again, Wolf. He says that the tax burden that South Carolina's residents face affects black and white and it's not a race question, it's about the future of the debt in this nation. Wolf?

BLITZER: Jessica Yellin, thank you for that.

We just want to be clear as Jessica just pointed out, referring to the governor's reference to Zimbabwe, the country does have a stratospheric inflation rate, one of the worst in world history if not the worst. Check this out. It's a $100 trillion bill, yes, a $100 trillion bill.

All next week here on CNN, unprecedented reporting on the money meltdown it's changing your life. Road to Rescue, the CNN survival guide, all next week right here on CNN. Timely stuff.

Let's go to Jack Cafferty, he's got the Cafferty file. You got any of those hundred trillion dollar bills Jack?

JACK CAFFERTY: What can you buy with one of those do you suppose?

BLITZER: Probably a stick of gum or something.

CAFFERTY: I mean if it was like in American dollars, you could buy Zimbabwe and maybe a couple of other countries too. I thought a hundred trillion dollars, I never heard of such a thing. It's crazy, specimen. All right. You got to hand it to President Obama, seems like he's following through with a lot of his campaign promises, even if it means taking on traditional democratic voting blocks. The president's criticizing our public schools and vowing to change them, in part by rewarding good teachers and replacing the bad ones, something that doesn't usually sit well with the teachers' unions or the public school systems. The president says the good teachers will get pay raises if students succeed and will be asked then to take on more responsibility. But the bad ones should be removed, quote, "I reject a system that rewards failure and protects a person from its consequences," unquote. You mean like the banks and Wall Street.

The president to the American Federation of Teachers embraced the goals outlined by the president that said, as with any public policy, the devil's in the details and says it's important for the teacher's voices to be hard in this process. This comes at a time when public education is set to get about $100 billion from the economic stimulus package and the president's making a point to link a stronger educational system to future success for our sagging economy. The president's willingness to go against the traditional democratic constituency, like the teacher's union is refreshing and it's not the first time Mr. Obama recently irked a lot of democrats with his plan to keep between 35 and 50,000 residual U.S. forces in Iraq following the draw down.

So here's the question. Is merit pay for teachers a good idea even if it means the president taking on one of his biggest groups of supporters? Go to cnn.com/caffertyfile and post a comment on my blog. I wonder if you bought like a pack of cigarettes, what kind of change you'd get for your hundred trillion dollar bill.

BLITZER: Half a hundred trillion dollar bill I guess. Jack, thank you.

One of President Obama's closest advisers and friends, as he outlines new efforts to help women and girls, does she take offense to an Obama supporter grading it with a D or an F? Valerie Jarrett from the White House, she's standing by live.

The man who went on a murder spree apparently had a plan. Officials say he kept a revenge list. Meanwhile, witnesses recall the horror.

And President Obama's being pressured to help protect your money and fire a government watchdog.

(BEGIN VIDEOCLIP)

UNIDENTIFIED MALE: Apparently, Mr. Cobb thought that he was supposed to be the lap dog rather than the watchdog of NASA.

(END OF VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: President Obama says he's not just the leader of the free world, but he's also a husband, a father and a son of a loving mother. Today, highlighting the women and girls in his life, he created the White House Council on Women and Girls. His senior presidential adviser Valerie Jarrett is the chairperson of this new panel, she's joining us from the White House. Valerie, thanks for coming in.

VALERIE JARRETT, SENIOR PRESIDENTIAL ADVISER: My pleasure, good afternoon Wolf.

BLITZER: Why do we need this new council, a council on women and girls?

JARRETT: You know we're celebrating international women's history month here and there's no better way to do that than to decide if the federal government is going to do its part to really focus and make sure that we're doing everything we can to improve the lives of women and girls. Women are still being paid only 70 percent of what men make. So, although we've made a lot of strides in our country, we still have a long way to go.

Being a single mom, knowing what it's like to try to balance the work life, seeing how it takes so many people to help support our children, we thought it was important to make sure that the federal government is doing our job. We're going to have every agency in the federal government, as well as the folks working in the White House, to really analyze our programs and measure their success by the stick is to whether or not they are supporting the way of improving a lot of the women and girls in our country.

BLITZER: Is it just in our country, just in the United States or will your job also be to help women and girls around the world? I'm referring specifically to some of these horrible stories we've heard recently about the Taliban in parts of Pakistan or Afghanistan throwing acid on the faces of girls, who simply want to go to school and learn.

JARRETT: Absolutely. So we certainly are looking beyond our country. We have every department involved, the state department, the defense department, the U.N. ambassador. And so yes we are looking -- the United States though is a role model for women around the world. And so if there are atrocities anywhere, that's certainly something that we want to examine and see what we can do at the federal level to address those atrocities.

BLITZER: The president just signed legislation into law making it illegal for women to be paid less than men for comparable jobs. How do you plan on enforcing that? Specifically, what are you going to do?

JARRETT: You're mentioning the Lilly Ledbetter legislation. It was really the first bill he signed into law and it's a very important law to make sure that we hold our businesses accountable. And so to the degree that companies don't comply with the law, we're going to seek sanctions against them and prosecute them. We've got to be sure that women are treated on parity with men and the Lilly Ledbetter act which was pending in congress for years and was signed under President Obama. We've got to make sure that we enforce it.

BLITZER: We invited our viewers to send in iReport questions and comments. We asked them yesterday to grade the president. This one iReporter, David Seaman of New York, he's an independent but he voted for President Obama, he says he's going to give the president a D or maybe even an F and here's why. Listen to this.

(BEGIN VIDEO CLIP)

DAVID SEAMAN, VOTED FOR PRES. OBAMA: I would like the president to simplify whatever the government is doing into a few talking points that every American can understand. That's one of the things that the republicans are so good at.

(END OF VIDEO CLIP)

BLITZER: Are the republicans beating you at that game?

JARRETT: No, I don't think so. Look, Wolf, the American people understand that our economy is in the middle of the worst downturn in the history of our country practically since the depression. We didn't get in this shape overnight and we're not going to get out of it overnight. I think what the American people take heart in is knowing that they have a president that puts the economy first. He and his economic advisers are working every day to try to turn our economy around. That's why he was able to pass the stimulus package, the recovery act, a $780 billion package that's going to create 3.5 million jobs.

Just last Friday, we were with the president in Columbus, Ohio. There are now 57 police officers on the street today who wouldn't have been able to be there but for this package. And so we have to take a short term objective and that's the recovery bill is there for. But Wolf we also have to take a longer term view as well.

BLITZER: Is the president taking on too much right now?

JARRETT: No, he is absolutely doing what's necessary to address the short term needs as well as the long-term needs. They're all connected. And so it all ties back to the economy. If you look for example, health care, unless we reduce our costs in the health care arena, every business will tell you, unless we reduce those costs, every person who's trying to struggle to figure out how when the their income is staying the same or going down, and their health care costs are going up by four fold, what are they going to do? So that's tied to the economy.

We have to reduce our dependence on foreign oil, that's tied to the economy. Yesterday the president gave a speech about education. Everyone will tell you that in order to compete in a global world, we have to have a better public education system. All of these are inextricably linked back to the economy.

BLITZER: Valerie Jarrett, thanks for coming in. Good luck.

JARRETT: Thank you very much Wolf, take care. BLITZER: Thank you.

A special thanks by the way also to everyone who submitted iReport questions grading President Obama's first 50 days. You can check out ireport.com/situationroom for tomorrow's assignment. Keep watching right here, we have more of your iReport video comments and questions that are coming in and we'll have more of them later today.

A deadly rampage and a quest for revenge. A survivor of a shooting spree in Alabama tells her terrifying story of dodging bullets and saving a baby.

Plus, do credit card companies make the same mistakes as banks? And could they be the next to fall apart? Stay with us, you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Zain Verjee's monitoring some other important stories incoming into THE SITUATION ROOM right now. Zain, what's going on?

ZAIN VERJEE: Wolf, more details are emerging about the man who went on a deadly shooting spree through three Alabama towns. Authorities say 28 year old Michael McClendon shot and killed 10 people yesterday, including several family members before turning the gun on himself. A woman who survived the shooting saved a baby as bullets were just flying around them.

(BEGIN VIDEO CLIP)

ALINA KNOWLES, SURVIVED SHOOTING: I ran over there to see if there were any survivors. Found the baby, picked her up. Came between the two vehicles of theirs, saw him coming up the road, ducked so he wouldn't see me. As he was coming up this way, I ducked, still ducking and moving around their van, trying to keep him from seeing me with that baby.

(END OF VIDEO CLIP)

VERJEE: Authorities are trying to figure out what triggered the shooting rampage, the worst ever in Alabama history.

Another horrifying shooting spree, this time in Germany. It began today at a school near Stuttgart. Police say a former student shot and killed at least a dozen people, both students and teachers. Then left, killed three more people and injured two police officers before apparently killing himself. Police say the 17 year old gunman seemed to open fire at random, the motive unknown.

Two of Saddam Hussein's half brothers have been sentenced to death for crimes against humanity. Iraq's highest court also sentenced former deputy prime minister Fariq Aziz to 15 years in prison for his role in the 1992 execution of more than 40 merchants. He's on the right side of your screen and there on the left, one of Saddam Hussein's cousins known as chemical Ali, he also got 15 years for those crimes. Wolf? BLITZER: Zain, thank you. Some lawmakers say to President Obama, fire this man. You may not know his name, but you should care. Some lawmakers say he could waste up to $1 billion of your money. We'll tell you what's going on. We have a CNN exclusive.

And secretary of state Hillary Clinton says something surprising. Wait until you hear what she says about the possibility of a North Korean missile launch. Stay with us you're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers you're in THE SITUATION ROOM. Happening now, a shocking warning about home grown terrorism. U.S. officials say young men in the Midwest are being actively recruited by Islamic extremists in East Africa. They're concerned the recruits will return to the U.S. to stage attacks.

Engaging Iran, President Obama may do that by putting pen to paper. Sources say he's considering writing a letter to Iran's supreme leader. A potentially history making move by the U.S. if it happens. American athletes on the other hand are already making their moves on the wrestling mat. Long time foes come together for a rare athletic showdown in Tehran. We're going to take you there. I'm Wolf Blitzer, you're in THE SITUATION ROOM.

Right now, some lawmakers are turning up the pressure on President Obama. They're urging him to fire a government watchdog that former President Bush got into office then refused to fire. Why should you care? Because some say this watchdog could waste up to a billion dollars of your taxpayer money. Our CNN special investigations unit correspondent Abbie Boudreau has this exclusive report. What's going on Abbie?

ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT: Wolf, the new money designated for NASA is reigniting an old controversy about the inspector general. He's responsible for making sure NASA spends all of its money wisely but critics say that's just not happening.

(BEGIN VIDEOTAPE)

BOUDREAU (voice-over): The bipartisan criticism of Robert Moose Cobb has been blistering.

UNIDENTIFIED MALE: Apparently, Mr. Cobb thought that he was supposed to be the lap dog rather than the watchdog over NASA.

BOUDREAU: Congressman Bart Gordon says he's worried there's no one to keep watch over the way NASA will spend the extra $1 billion it will get from the stimulus package.

REP. BART GORDON, (D) TENNESSEE: His own peers said that he wasn't doing his job, that he didn't understand the audit process. And that he was not carrying out the investigation process.

BOUDREAU: Gordon, who chairs the house committee on science and technology, and fellow democrat, Brad Miller, sent a letter to President Obama, calling for him to fire Cobb. The letter reads, "NASA cannot afford another four years with an ineffective inspector general." Citing a December GAO report about NASA, the letter states Cobb's office was one of the least productive and NASA's audit operation is not working.

SEN. CHARLES GRASSLEY (R), IOWA: Inspector general are the first line of defense against the waste of taxpayers' money. And if he's not doing his job, and you stick another billion dollars into it, then you just know that there's another billion dollars, that -- that there could be a lot of waste of it.

BOUDREAU: A 2006 investigation by a presidential integrity committee found Cobb engaged in abuse of authority and had a close relationship with the former NASA administrator that compromised his independence, playing golf and traveling together on NASA aircraft for official business.

Cobb declined a CNN interview, but he appeared before a joint House-Senate committee in 2007 to defend himself.

ROBERT COBB, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION INSPECTOR GENERAL: At NASA, I have taken the responsibilities of office under the Inspector General Act seriously and without compromise to root out and prevent fraud, waste and abuse.

BOUDREAU: Several former employees told the committee a different story, how Cobb routinely called his staff names we cannot use on TV.

DEBRA HERZOG, FORMER DEPUTY ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS, NASA OFFICE OF INSPECTOR GENERAL: In an ensuing monologue loudly peppered with profanities, Mr. Cobb insulted and ridiculed me.

BOUDREAU: That joint committee asked President Bush to remove Cobb. That never happened.

UNIDENTIFIED MALE: President Obama needs to replace Mr. Cobb as quickly as possible with someone that can do the job.

(END VIDEOTAPE)

BOUDREAU: We contacted the Obama administration, and officials there had no immediate comment on the calls for Cobb to be fired. We also asked Cobb's spokesperson whether Cobb was prepared to oversee the extra $1 billion from the stimulus package. But he would not comment -- Wolf.

BLITZER: I take it this has been a campaign against him for some time now, at least the past couple years. But given the fact that there's a new president, a new administration, that's why it's sort of been revived right now? Is that what's -- that's what is going on, Abbie?

BOUDREAU: Exactly. And we know that those lawmakers did submit that letter to President Obama, so it will be interesting to figure out -- to find out over the next couple of, you know, months or over the next period of time how President Obama will handle this. There is a lot of smoke there. We will see what the president does about this...

BLITZER: All right.

BOUDREAU: ... if anything.

BLITZER: He's got a lot on his plate, as we know. All right, thanks very much, Abbie, for that.

Meanwhile, something else for NASA to worry about -- the space shuttle Discovery is apparently leaking gas now -- NASA scrubbing Discovery's launch that was supposed to happen tonight. The worry concerns the spaceship's external fuel tank. Discovery's trip to the International Space Station is already a month late because of other problems. NASA hopes to launch Discovery tomorrow.

Some of you could be caught between a major battle between employers and employees.

Let's bring in our senior political analyst, Bill Schneider. He's watching a story for us.

It's a coming showdown between business and labor unions. The stakes are pretty significant. What's going on, Bill?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, it's about card check. Now, the issue sounds technical, but the debate sounds like a matter of life and death.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Are we going to let that happen?

CROWD: No!

SCHNEIDER (voice-over): A power struggle is looming between business and labor. The Chamber of Commerce has predicted a firestorm, bordering on Armageddon. Unions see it as a matter of life and death.

KAREN KYLE, LABOR SUPPORTER: The Free Employee Choice Act, which would allow members and people to organize a union without fear and intimidation from the boss.

SCHNEIDER: The issue is card check, a proposed law that would allow workers to organize a union without a secret ballot. A majority of workers could sign a card signaling their support for a union. Both sides are spending millions of dollars on the campaign. Opponents say it's about protecting the secret ballot.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The secret ballot is appropriate for American elections for everything from class president in the first grade to president of the United States. And, of course, we have been preaching secret ballots to the rest of the world for over a hundred years as an indispensable component, part of any democracy. And now we want to take away democracy, in effect, from the workplace.

SCHNEIDER: Supporters say the current process of union elections is open to abuse by employers, even with a secret ballot, since employers control the workplace.

REP. ROBERT ANDREWS (D), NEW JERSEY: There were 31,000 findings of intimidation against people in the process of choosing whether or not to be in a union.

SCHNEIDER: Business supporters argue that a petition process is more open to abuse.

REP. TOM PRICE (R), GEORGIA: If all you have to do is sign a petition, then, that's where you get the coercion and the influence that comes from either side, frankly.

SCHNEIDER: Since 1990, more than 90 percent of labor's political contributions has gone to Democrats, but opponents of the legislation have found support in some surprising places.

(BEGIN VIDEO CLIP, AD)

UNIDENTIFIED MALE: I have always been a champion of labor unions, but I fear that today's union leaders are turning their backs on democratic workplace elections.

(END VIDEO CLIP)

(END VIDEOTAPE)

SCHNEIDER: Now, the legislation was introduced this week with 223 co-sponsors in the House and 40 in the Senate. That is fewer than in 2007. Some former supporters may be wavering. They could vote for the bill in 2007, knowing President Bush would veto it. President Obama says he will sign it. Some legislators are worried the bill will raise business costs during a downturn.

Supporters argue unions will protect workers in a recession. Let the battle begin -- Wolf.

BLITZER: And the battle is intense already.

Thanks very much, Bill Schneider, for that report.

A warning to President Obama: The economic meltdown is not a test. In our "Strategy Session": Is the commander in chief taking the crisis seriously enough?

And nightmare flights that take hours to get off the ground -- a watchdog group now says one airline in particular is treating passengers like dirt. And he was once locked up at Guantanamo Bay. Now he's back in Afghanistan threatening to kill U.S. troops. How did this happen? We will tell you right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Secretary of State Hillary Clinton is saying something surprising. It's about the possibility of a North Korean missile launch.

Let's go to our foreign affairs correspondent, Jill Dougherty. She's listening and watching the secretary of state.

All right, what did she say about this possibility, Jill?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, essentially, she's -- you know, North Korea has really been threatening for weeks to launch a long-range missile. It's been making a lot of countries nervous. But Secretary Clinton said today, essentially, go ahead. It's not going to change our policy.

(BEGIN VIDEO CLIP)

HILLARY RODHAM CLINTON, U.S. SECRETARY OF STATE: It is important to recognize that the North Koreans entered into obligations regarding denuclearization that we intend to try to hold them to. And that is something we're going to do, regardless of what happens with their -- with what they may or may not launch in the -- in the future.

(END VIDEO CLIP)

BLITZER: So, in effect, Jill, is she giving them a free pass?

DOUGHERTY: Not really, Wolf.

Clinton is calling their bluff. They have been getting a lot of attention with this threat. But, essentially, she's saying, you can act out all you want, but we're still going to push you to give up your nukes, and we're going to do that with the six-party talks.

Also, she said, by the way, her envoy to North Korea was all set to go to North Korea. He wasn't invited, and the U.S. is disappointed -- Wolf.

BLITZER: A little bit more tension, just what the country doesn't need.

All right, thanks very much, Jill Dougherty.

An op-ed page article accuses the Obama White House of playing -- quote -- "politics as usual."

Our political strategists will discuss that and more.

And Which airlines earn the worst grade when it comes to keeping you waiting? You're about to find out -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

ANNOUNCER: This is CNN breaking news.

BLITZER: Freddie Mac is asking the governor for billions and billions more money.

Let's go to Zain Verjee. She's working the story for us.

All right, Zain, what are we learning right now?

ZAIN VERJEE, CNN STATE DEPARTMENT CORRESPONDENT: Wolf, we're just getting this information into CNN.

Mortgage company Freddie Mac reported today a $23.9 billion loss for the fourth quarter of 2008. And, yes, they're asking for more money. The company says that it's requesting an additional $30.8 billion in funding from Treasury and that it expects to receive those funds this month -- Wolf.

BLITZER: Zain, thanks very much.

Let's talk about this and more with our Democratic strategist Paul Begala, Republican strategist Kevin Madden.

Paul, you know a lot about Freddie Mac. You were once a consultant way back when for Freddie Mac. But what does this mean to you, the fact that they're coming back to ask the taxpayers now for more money? This is a partially government-operated mortgage finance company.

PAUL BEGALA, CNN POLITICAL ANALYST: Well, it is now, yes. I mean, the government has essentially taken it over.

And, I mean, obviously, that's terrible news. And it's a sign, I think, that the housing economy has cratered, and it doesn't look like we're in an upturn yet. I mean, I don't think there's any end in sight. I'm not an economist. And I did communications for them back in the day, not -- not finance, you will be happy to know.

But it's -- it's bad news. Look, the -- I think, with the little that I know, the fundamentals of the economy that are so bad rest right there in the housing market. And if, in fact, Freddie Mac needs another $30 billion of taxpayer money, that's terrible news.

BLITZER: So, should the government go ahead and give them another $30 billion?

KEVIN MADDEN, REPUBLICAN STRATEGIST: Well, I think that's a -- that's a question for Congress. I don't have that answer right now.

I do think that Paul's right. This is indicative of -- you know, we have a cratering confidence problem here in the economy. And when news like this keeps occurring, it doesn't do anything to help it. And that's probably what's really hurting the economy more than anything right now, is that people have this lack of confidence, and people don't feel like we have really hit the bottom yet.

And bad news upon bad news keeps adding to this confidence deficit.

BLITZER: And it's interesting it's announced right after the markets close, 4:00 p.m. Eastern, obviously -- for obvious reasons.

Let's talk about what Thomas Friedman wrote in "The New York Times" today.

Among other things, he -- he wrote this is an article entitled: "This Is Not a Test." "This Is Not a Test."

"Friends," he wrote, "this is not a test. Economically, this is the big one. This is August 1914. This is the morning after Pearl Harbor. This is 9/11 (sic). Yet, in too many ways, we seem to be playing politics as usual."

Is he right?

BEGALA: Yes. In short, yes.

I mean, it actually can't, quite literally, be 1914 and 1941 and 2001. But I think I get his point. And I have got to say, I think the president is acting like there's crisis. In fact, many of his critics say, oh, he's speaking too -- too gloomily.

Well, no, I think he's being a realist, not an optimist and not a pessimist, but a realist. And the news we just got from the housing market suggests that that's the case.

But look at what he is doing. He's got his own plan to try to help the mortgage industry and the housing industry. He's got a -- a plan to try to jump-start the economy that has already passed, his economic recovery plan.

Education, health care, energy, he's trying to move the country. And I have got to say this. The Republicans have been no, no, no on all of it. If they had new ideas, bring them to the field. But, basically, they have been the party of no.

(CROSSTALK)

BEGALA: And, in fact, Friedman pointed out today -- he does point out, my friend Rush Limbaugh, Friedman calls him -- not Begala -- Friedman calls him in that same column, Rush Limbaugh, the de facto GOP boss.

So, you know...

MADDEN: Well, a couple things.

BLITZER: You're -- you're shaking your head.

MADDEN: Yes, a couple things with that.

I mean, first of all, the -- the -- the very fact that anybody's astounded -- I'm astounded by the fact that people are astounded that politicians engage in politics.

It's the war of ideas up on Capitol Hill right now. Republicans have -- and I disagree with Paul vehemently -- but Republicans have gone out there and put out their vision for turning -- turning around the economy. We don't want to stimulate the government. We would rather stimulate the economy. We want to put more money back into taxpayers' pockets.

There are fundamental differences. And those are being waged on Capitol Hill. I think this is largely the result of the fact that we don't send economists to Washington. We send lawyers. We send schoolteachers. We send businessmen. And, right now, that's probably where the -- the -- some of the trouble up on Capitol Hill has arisen from.

But I do have to argue with a point that Mr. Friedman made. He talks about this is all very trite and trivial politics. And, yet, then he goes and makes a very trite and trivial argument about Rush Limbaugh being the de facto leader -- leader of the Republican Party, when, in fact, this party is run by grassroots activists across the country. And we're -- and we're voicing ourselves through our elected representatives, like Eric Cantor and other leaders up on Capitol Hill.

BLITZER: Because a lot of people say, well, why pay so much attention to Rush Limbaugh right now? The country is in dire straits. And you have got to think big term, not little term.

BEGALA: Right.

Why, when one of three Republicans in America supports President Obama's economic program -- it's only one out of three, but, still, that's al other -- why does only one out of 100 in Washington?

Well, there's a disconnect between the real Republicans in America, most of whom want the president to succeed, and the Washington Republicans, who do seem to be taking their marching orders from Mr. Limbaugh.

And there's a new poll out today from Democracy Corps. My buddy Carville and -- and Stan Greenberg have a new poll out, suggests this is very damaging for the Republicans. I also saw another poll out from McClatchy news service said the same thing.

BLITZER: All right.

BEGALA: Limbaugh is having a real effect on the Republican...

(CROSSTALK)

BLITZER: All right. We are going to speak to James in the next hour and Stan Greenberg tomorrow. BEGALA: Democracy Corps...

(CROSSTALK)

BLITZER: So, we will hear all about that stuff.

(CROSSTALK)

BLITZER: In a private meeting with moderate Democrats, the president reportedly said, "I am a new Democrat." Didn't say he was a liberal. Didn't say he was a conservative or moderate. He said, "I'm a new Democrat," which has a history, that term. Bill Clinton used to say he was a new Democrat.

MADDEN: Well, I think it's kind of like The Who song. This new Democrat looks like the old Democrat.

And he -- and it's a departure, because I think, during the campaign and in his career in the state senate, he said that he was a progressive. I think that his policies -- and if you look at his -- all we have to really judge him on is his record and the policies that he's advancing right now, he's a progressive, liberal Democrat.

(CROSSTALK)

BLITZER: On foreign policy, on national security?

MADDEN: I believe across the board.

BLITZER: On Iraq and Afghanistan, where he's getting praise from John McCain?

(CROSSTALK)

MADDEN: I think he's getting praise from John McCain when he's right.

But I think, if you look at the totality of his arguments that he's advancing and the policies he's advancing, he's a liberal.

BLITZER: Is he an old-school liberal, or is he a new moderate Democrat, along the lines of your former boss Bill Clinton?

BEGALA: Yes. Bill Clinton was sort of the original new Democrat. I think that President Obama's very much in that mold.

But what's interesting about him is, he's united my party. The most liberal factions of the party support him strongly...

MADDEN: For now.

BEGALA: ... and the most...

MADDEN: For now. For now.

BEGALA: But this is what leaders do. This is what leaders do. Democrats are very hard to unite and organize. We have a dominant and defining figure in my party. It is President Obama.

Look at -- if you want to see a new Democrat idea, look in his budget. He has a making-work-pay tax credit. OK? This is a very traditional value, rewarding work over welfare, done through very progressive means.

So, I think this is -- the heart of being a new Democrat is trying to accomplish progressive goals without bureaucracy.

BLITZER: And some say...

(CROSSTALK)

BLITZER: ... what he announced yesterday on education, saying that teachers could be fired, which a lot of labor unions, teachers unions, don't like, would suggest he's in that so-called new Democrat...

(CROSSTALK)

BLITZER: Hold -- hold that thought.

MADDEN: Sorry.

(LAUGHTER)

BLITZER: I get the last word, but you guys will be back.

BEGALA: It's your show.

(LAUGHTER)

BLITZER: Thanks very much.

(LAUGHTER)

BLITZER: Still a lot of -- a lot of job openings over at the White House. And, today, the vice president, Joe Biden, was hiring. We will tell you who's on tap to join team Obama right now.

And the president has left the door open to new contacts with Iran, and he's ready to put it on paper.

And a different kind of outreach toward Iran made by U.S. wrestlers. They're there in Tehran, taking them down right now.

(COMMERCIAL BREAK)

BLITZER: Now to a flying horror story. A watchdog group is rating the airlines right now for how long they keep passengers as virtual hostages on the tarmac.

Let's to CNN's Samantha Hayes. She's got the details for us.

Sam, what's going on?

SAMANTHA HAYES, CNN CORRESPONDENT: Well, Wolf, this particular organization has been pushing for new laws it says would protect passengers from alleged abuses by the airlines.

(BEGIN VIDEOTAPE)

HAYES (voice-over): (AUDIO GAP) ...dot-org, an air passengers rights group.

(BEGIN AUDIO CLIP)

"BRIAN," PASSENGER: I have been stuck on a plane on the tarmac for nearly four hours now. Both lavatories are broken. They have offered us about a quarter-cup of water and two cookies.

(END AUDIO CLIP)

HAYES: Kate Hanni, who heads up Flyers Rights, uses reports like that, government statistics, and news accounts to grade the airlines. And she says tarmac delays of three hours or more happened 1,232 times last year, and that Delta Air Lines was the worst in that category and overall.

KATE HANNI, EXECUTIVE DIRECTOR, COALITION FOR AN AIRLINE PASSENGERS BILL OF RIGHTS: The absolutely worst airline fit three criteria, the longest stranding event, the most stranding events, and the worst hygiene on strandings. The name of our award is, when you're on the ground, they treat you like dirt. And, for Delta Air Lines, we award this bucket of dirt.

KAYE: But aviation consultant Terry Trippler says the so-called report is incomplete.

TERRY TRIPPLER, AIRLINE INDUSTRY ANALYST: That's out of over nine million flights in the U.S. Now, I realize even one and two is too long, but it's getting better.

HAYES: Hanni is pushing for a passengers bill of rights.

HANNI: So, we believe that Congress needs to mandate by passing some basic minimum standard regulations, such as allowing passengers off a plane optionally within three hours.

KAYE: Similar legislation failed in Congress last year and may face a another tough fight this time.

TRIPPLER: If you're in line to take off, to have to get out of line and go back to the terminal because two or three or four people want off the plane, and then go back and get in line, you're going to have a plane of unhappy passengers.

(END VIDEOTAPE)

HAYES: And that's essentially what Delta Air Lines told me when I spoke to a spokesperson there today. They dispute the data that this organization has come up with to make these claims.

And, when it comes to delays, Delta says that they have a customer commitment, they work hard to support not only "our customers' needs," but also, their overwhelming desire to reach their intended destinations -- Wolf.

BLITZER: Still, it's still so annoying to sit on the tarmac, sometimes for hours.

HAYES: Yes.

BLITZER: Thanks very much, Sam, for that.

Fewer people are flying in these tough economic times. And airlines are scrambling right now to cut costs. Delta just announced a 10 percent cut in its international service beginning in September, flying smaller planes, or cutting flights altogether.

United says it expects to make similar cutbacks. Demand for international flights fell by more than 5 percent in January, with travel to Europe and Asia especially hard-hit.

On our "Political Ticker" right now: the newest edition to team Obama. The Seattle police chief, Gil Kerlikowske, has been tapped to be the national drug control policy chief. The vice president, Joe Biden, made the announcement today, saying Kerlikowske brings a lifetime of work on drug policy issues to the job.

A Detroit city councilwoman has a bone to pick with Jay Leno. She says Leno's plan to hold a free concert for the jobless in her city next month is a great idea, but she is ticked that Leno actually plans to perform in Auburn Hills, a well-to-do Detroit suburb. She and wants Leno to change the location. But, as far as we know, Leno doesn't have any plans to do that.

Remember, for all the latest political news any time, check out CNNPolitics.com.

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

JACK CAFFERTY, CNN ANCHOR: Wolf, is merit pay for teachers a good idea, even if it means that President Obama's taking on one of his biggest groups of supporters? That would be the teachers union.

John in New Hampshire writes: "It's time we valued good teachers, like good doctors, lawyers and other professionals. Pay them more money. But make it a lot easier to get rid of the deadwood. And that, my friends, is where the president and the unions will come to blows. The union protects mediocrity and opposes rewarding anyone who rises -- teaches -- above that level."

Lynn in Missouri says: "Interesting. He rejects rewarding failure and protecting people from consequences, and, yet, that's exactly what he's doing with the financial institutions and the automobile industry. It sounds like a double standard to me. Every student is different. Teachers should not be punished for getting uninterested students. You can't force an unwilling kid to learn. He should be working on the kids, not the instructors. Most teachers care, or they wouldn't take such low-paying jobs."

Tom in Texas writes: "All compensation should be based on merit. I understand the reason behind tenure, but no job should be a free ride for life. I knew teachers who had a pint of booze in a drawer, some who smoked pot during a break. The automobile industry also had that job-for-life concept."

Richard in Orlando writes: "As a current teacher, I don't agree with the president's merit pay proposal. On my annual evaluations from my principal, she ranks me as one of the best in her school. I chose to teach in an inner-city school with high levels of poverty and most of the students coming from broken families. I know I have a great impact on the students there, and I feel it would be unfair for my salary to be based on their achievements."

And Ronald in Kansas City writes: "I recall the president saying during the campaign that he is going to tell us what we need to her, not what we want to hear. And I can't agree more. Merit pay should apply to all individuals -- teachers, politicians, et cetera -- that get paid with taxpayer money."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. Look for yours there, among hundreds of others -- Wolf.

BLITZER: All right, Jack, thank you.

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