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Newest Member of the Club; Keeping the President Safe; Sneak Attack on the Dollar; Cigarette Tax Soars, Smokers Fume; John McCain's Budget Plan

Aired April 1, 2009 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: None of them likes the president's budget. But Senator McCain has his own plan. He's standing by live.

Smokers are fuming over a huge jump in the federal tobacco tax. Some blame a former smoker, President Obama, himself. But there could be a big payoff for America's kids.

And does -- is there a new threat that does not involve missiles, bombs or bullets?

Is America prepared for a sneak attack on the U.S. dollar?

I'm Wolf Blitzer.


The world's most powerful leaders are gathered in London right now. And President Obama was among the first to meet with Britain's Queen Elizabeth II. The president and the first lady gave the queen an engraved iPod with video of her last visit to Washington. In return, the Obamas received a signed portrait of the queen and Prince Philip.

On the eve of the G20 Summit, the newest addition to the ranks of world leaders is catching on quickly.

Let's go to our senior political correspondent, Candy Crowley -- Candy.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Wolf, for a president who has not yet been in office for a hundred days, it is hard to overestimate how important this trip is. It's not just that people are watching from the U.S. it's that they're watching around the world.


CROWLEY (voice-over): On the streets of London, mostly in the financial district, violent reminders of an unsettled world. Miles away from the protests, a breakfast meeting and news conference with the British prime minister, an agreement with the president of Russia for a summer visit to work on nuclear arms control...

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I'm still working on my Russian. CROWLEY: ...another agreement for a trip to China and the promise of ongoing productive conversations. And then a policy-free protocol heavy audience with the queen of England.

Busy, busy, busy, as the newest member of the world's most powerful club cruised his way through photo-ops and danced through diplomatic hot spots. He both accepted and passed along blame for global economic crisis, for a regulatory system incapable of operating efficiently in a world economy.

OBAMA: The United States certainly has some accounting to do. I think what is also true is that here in Great Britain, here in Continental Europe, around the world, we are seeing the same mismatch.

CROWLEY: The president is a popular figure overseas, but not unchallenged in his approach to the recession. It's a reality he accepts, downplays and dismisses.

OBAMA: To confront a crisis with no borders, we have a responsibility to coordinate actions and to focus on common ground, not on our occasional differences.

CROWLEY: The world is trying to get the measure of this president, with many nations hoping for a new, collaborative approach from a country that remains an economic superpower. He can deal with both.

OBAMA: I came here to put forward ideas, but I also came here to listen, not to lecture. Having said that, we must not miss an opportunity to lead.


CROWLEY: For all the activity on his first day, this was really the easy part. It is tomorrow, when the president sits down with the 19 other participants in the G20 Summit, that it really gets hard.

BLITZER: All right, Candy.

Thank you.

Away from all the protocol, there are the protests -- thousands of demonstrators in London. They're marching for and against any number of causes. They've skirmished with police, including a violent clash outside the Bank of England. And past terror attacks have kept Britain on severe alert.

So how are the security forces keeping President Obama and other world leaders safe?

Let's go over to the magic wall.

Tom Foreman is taking a closer look.

This is a nightmare for a lot of these security services. TOM FOREMAN, CNN CORRESPONDENT: Yes. The people of England have been saying from the front, there's never been anything like this -- this degree of focus, this degree of world concern and all these world leaders in one place.

The president, first of all, you know, is fully covered in all this. The BBC is reporting that he has at least 200 of his own agents on the ground protecting him there. Obviously, he took along that very high tech presidential limo called "The Beast." He has extraordinary things. He's got his helicopter, Marine One. He can go wherever he needs to. And, of course, Air Force One is standing by the whole time to become an instant flying White House if need be.

But, just as importantly, and worth remembering in all of this is the sheer geography of this. You talked a moment ago about all the protests in the financial district. That's over here.

This is where most of the meetings are happening, over here in the Xcel Center -- right in this area right here. And this is the heavily guarded -- the distance from here to over here is about four miles. So there's some separation between the two.

Plus, over here, not only are there hundreds of other security guards who are guarding the other world leaders and the site in general, they've even got protection out here in the river that runs alongside because they're mindful of the fact the attacks in Mumbai, for example, came from the water. So they have boat patrols, scuba divers underneath, keeping track of what's going on so there will be no danger.

And as I said, Wolf, the real -- the real issue here is over in this area, the financial district. Many of you, if you've been there on vacation, you know this area, because it's not far from where the Tower of London is; Buckingham Palace over here; parliament down the river in this area.

This area quite separate from this. And this is where most of the trouble is -- Wolf.

BLITZER: They used to call it a ring of steel, if you will.


BLITZER: Tell us about that.

FOREMAN: The ring of steel -- it's a great term. The ring of steel was developed in the '90s as a response to IRA bombings. The ring of steel, if we sort of draw it loosely here -- and it will give you an idea -- it's sort of from around here down through this area.

Now, what does ring of steel mean?

Well, ring of steel is making reference to a very high tech group of cameras. I'm going to move this out of the way so I can show you what we're talking about. As I move this aside, we'll show you the same area. Right in here is where the ring of steel is -- right down in here. This is what we're talking about.

All over, they have a very elaborate network of cameras that go all around the edge of that -- thousands of them watching all these entrances and exits to that area. And they're generating images like these. In fact, these are images that were just taken there live not long ago.

It allows them to keep track of everyone who is coming and going. So even when it looks chaotic, Wolf, there are many, many eyes in the sky keeping an eye on what's happening and making sure that it doesn't close that gap between the world leaders and this place and that it stays contained.

BLITZER: They just want to keep all those leaders safe.

All right. Thanks very much for that, Tom.

So who are these people who are protesting in London?

What do they want?

Abbi Tatton has been talking a closer look at that -- the agendas, they're pretty widespread.

ABBI TATTON, CNN INTERNET REPORTER: Yes, Wolf. There are anarchists. There are environmentalists, peace activists -- all trying to get their voices heard on the streets of London today.

About 4,000 people marched under the umbrella group called G-20 Meltdown. Now, there's a clue in that -- they don't like the G20. They want them out of London. They want bankers gone. They want capitalism to be history. And they were all converging on the Bank of England today, facing heavy police presence as they marched.

Then there's a group, the Climate Camp. A very different message here -- a group who want the G20 to be addressing climate change as they meet in London this week. And they are quite literally setting up camp in the financial district. They've been asking on their Web site for people to bring sleeping bags, bring tents, because they want to say there as long as they possibly can.

Also, the Stop The War Coalition. This is a group that started marching today at the U.S. embassy, kept going on to Trafalgar Square. They want troops out of Iraq, troops out of Afghanistan. They've got more planned for tomorrow -- and, Wolf, those are just a few of the things going on today. You also have tens of thousands of people marching peacefully over the weekend and more planned tomorrow.

BLITZER: The key word, peacefully.

Let's hope it stays like that.

All right, Abbi, thanks very much. Let's check in with Jack once again for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: I am so happy that the G20 Summit meeting is in London and not here in New York City.

As states try to deal with their own massive deficits, many are turning to higher taxes on the rich as the answer to their problems.

A proposal here in New York would follow in the steps of California and Maryland in pushing the wealthiest in the higher tax brackets several percentage points above most workers.

New Jersey, where I live, is considering raising its highest bracket to more than 10 percent compared to the 5.25 percent marginal rate paid by most households in the Garden State.

Wisconsin and Delaware are also considering higher brackets for the wealthy.

The head of one political group that supports these higher taxes tells "The Wall Street Journal": "Most people are treading water, others are drowning. That gave politicians the courage to say the rich have to pay their fair share."

But critics say the higher taxes wouldn't only affect those in the financial industry. They say small business owners are concerned because a lot of them report their business earnings on their personal income tax returns.

And the libertarian Cato Institute found that higher taxes hurt economic growth and the places that imposed an income tax to generation revenue ended up with poorer growth rates than places that used other kinds of taxes.

Meanwhile, where's the talk in these states that are considering pushing the wealthy into higher brackets -- where's the talk about cutting spending, firing government workers, consolidating agencies and services?

It's practically nowhere to be seen. The plans seem to be mostly tax wealthy people more and more and more and leave the government bureaucracy pretty much as it is.


Here's the question : Is raising taxes on the highest earners the best way for states to deal with their deficits?

Go to and post a comment on my blog -- Wolf?

BLITZER: Thank you very much, Jack Cafferty.

A controversial new law that some say essentially legalizes spousal rape. And there's much more of the legislation Afghanistan's president signed that has international observers gravely concerned. Also, he's been a sharp critic of President Obama's budget. Now, his former rival, Senator John McCain, is here in THE SITUATION ROOM to advance his own budget proposals. Senator McCain is standing by live.

Plus, a boy's parents donate his organs after his tragic death only to learn later he had cancer -- which was spread to the transplant recipients.

How did doctors miss this?


BLITZER: The U.S. military and the intelligence services -- they work very hard to stay on top of new threats, like long-range weapons in the hands of America's foes. But the United States may also have to prepare for another kind of attack -- on its currency, the U.S. dollar.

Let's go to Mary Snow in New York.

She's working this story for us -- all right, Mary, explain what's going on.

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, a panel of experts met recently for what was called the Unrestricted Warfare Symposium at Johns Hopkins. And a case was made that the U.S. needs to add the dollar on its list of things to watch.


SNOW (voice-over): A potential attack would not involve bullets or soldiers. Instead, the opening salvo could be a simple piece of paper. The seriousness of the situation was made in this fake press release from the Central Bank of Russia, saying it has arranged long term use of vaults in Zurich and Singapore, capable of holding up to 10,000 metric tons of gold.

Translation -- the dollar is under attack.

Analyst James Rickards calls it the dollar Pearl Harbor and he presented the scenario to a recent conference looking at national security implications of economic threats.

JAMES RICKARDS, OMNIS INC.: I'm not predicting this attack. I'm really just warning. I'm saying if we keep going down the path of debasing the dollar, this is something that could happen.

SNOW: Rickards envisions a potential attack driving down the value of the dollar by 75 percent, triggering an even larger economic meltdown. His warning -- the dollar is vulnerable.

RICKARDS: There's almost a kind of arrogant assumption that because the dollar has been king for a long time, it will always remain so. But history says the opposite. SNOW: Concerns over the dollar arose just last week when China suggested using a new currency to replace the dollar as the world standard. Some who monitor currency markets say there are vulnerabilities, but play down the chances of an outright attack.

GREG IP, "THE ECONOMIST": Driving the dollar down would hurt them more than it hurts us. For example, China -- the United States is perhaps their single most important market and they like the dollar to be strong against their own currency, because it makes their exports cheaper to us.


SNOW: And, Wolf, China holds about $1 trillion worth of U.S. debt. And while it's worried about the dollar, some say China's investment in the U.S. also ensures for China that there is a market for its consumer goods -- Wolf.

BLITZER: Good point, Mary.

Thanks very much.

Mary Snow is in New York.

Smokers are fuming over a huge jump in the federal tax on cigarettes and some are blaming President Obama -- himself a known smoker, at least in the past.

CNN's Jim Acosta has the latest -- Jim.

JIM ACOSTA, CNN NATIONAL CORRESPONDENT: Wolf, the federal government is raising tobacco taxes like never before -- starting today. And on this April Fool's Day, smokers are not laughing.


ACOSTA (voice-over): Smoke them if you've got them has become smoke them if you can afford them.

UNIDENTIFIED FEMALE: I can't do it anymore. I'm done. I'm done. I'm not smoking anymore after this cigarette.

OBAMA: There you go.

ACOSTA: Last February, when President Obama signed a law that expanded health care coverage for millions of children, he did so on the butts of millions of smokers.

OBAMA: In a decent society, there are certain obligations that are not subject to tradeoffs or negotiations. And health care for our children is one of those obligations.

ACOSTA: To pay for all of that new health care coverage, starting today, the federal tobacco tax on a pack of cigarettes is going up big time -- from 39 cents to $1.01. Anti-smoking activists who have been fighting the likes of Joe Camel for decades like the smell of that.

UNIDENTIFIED MALE: All the research, all the evidence shows that one of the best ways to reduce smoking, particularly among kids, is to increase price. Our model suggests that almost two million kids will be prevented from becoming smokers just from this price increase.

OBAMA: Over the next two years...

ACOSTA: But critics argue it's a promise broken for President Obama, who has said he would only raise taxes on the wealthy and it's the poor who smoke the most.

UNIDENTIFIED MALE: If you're a pack a day smoker, that -- this 62 cents per pack increase is a $225 a year federal tax increase. For people with moderate income, that's a pretty big hit.

ACOSTA: And the tax is not a big hit with the dwindling number of restaurants that still sell tobacco products, like this Washington cigar bar just a few blocks from the White House.

UNIDENTIFIED MALE: If we get a dramatic increase in a particular brand or a particular line of cigars, we will be forced to -- to increase the price somewhat in order to -- to maintain our margins. So, yes, if there's dramatic increase in a particular item, we will pass that on somewhat.

ACOSTA: The big cigarette makers have done just that -- raising their prices before the hike. Public health advocates say add that to the list of reasons for smokers to kick the habit.

UNIDENTIFIED MALE: Yes. It's probably time to stop. It's just getting out of hand.


ACOSTA: And Congress isn't finished with the tobacco industry just yet. The House is set to vote on a bill that would give the Food and Drug Administration the power to regulation the products for the first time. It's a big leap forward from those days of smoke-filled rooms up on Capitol Hill -- Wolf.

BLITZER: All right. Jim Acosta, thanks very much.

The new tax, by the way, pushes the national average price of a pack of cigarettes to $5. Here's the breakdown. A $1.01 federal tax as of today; an average of $1.21 state tax per pack; an average state sales tax of 23 cents; an average of $2.25 to the manufacturer; and the profit for distributors and retailers, an average 30 cents per pack. That's where the money goes.

Senator John McCain -- he's standing by live. We're going to talk about his new budget that he's unveiling right now -- an alternative to President Obama's. And the former Republican presidential candidate will answer questions on other subjects, as well. Our interview with Senator McCain -- that's coming up next.

Plus, the first lady, Michelle Obama, in the global spotlight -- how is she doing on her first overseas foray as first lady?

We're checking the world reviews.


BLITZER: Republicans in the House and Senate certainly don't like President Obama's budget, but they've been quarreling among themselves over what to do about it.

Let's bring in Senator John McCain, Republican of Arizona, the former Republican presidential nominee.

Senator McCain, thanks for joining us.


BLITZER: I've interviewed some of your colleagues in the Senate, Senator Ensign, for example, from Nevada. He says what the Republicans should do is propose amendments to the Democratic budget and argue that way.

You don't think that's necessarily such a great idea. You want to have a formal Republican response.

MCCAIN: Well, I think we should have both, Wolf. And I am confident that Senator Ensign and the overwhelming majority of Republican senators will vote for our alternative.

But I do believe that it's important to have an alternative. We had an alternative to the stimulus. We had an alternative to the Omnibus Bill. The role of the -- of the loyal opposition is not just to oppose, but to have our own agenda and vision for the future, as well.

BLITZER: Because the White House and the Democrats, they keep harping the Republicans are simply the party of no -- no, no, no.

And you say yes, there should be an alternative.

But do you have the leadership of the Republican Senate leadership with you, like Senator McConnell, for example...


BLITZER: -- your colleague, Senator Kyl.

Are they proposing a formal alternative to the Democrats?

MCCAIN: We -- I will be introducing it this evening and I'm -- and I have their support. And I'm sure we'll have their votes, as well.

BLITZER: What does your proposal do for the working class, for the average American, that President Obama and the Democrats' proposal doesn't do? MCCAIN: Well, I don't know anything that -- that the other proposal -- the president's proposal does, except that saddle our kids and grandkids with a mountain of debt. We freeze discretionary spending except for defense and veterans. We set up a bipartisan commission to address Social Security and Medicare, which, according to all observers, is going to go broke and is unsustainable. We don't raise anybody's taxes, no matter who they are. And we reduce the deficit dramatically so that we're not laying a multi-trillion dollar debt on future generations of Americans.

BLITZER: So what's the bottom line number that you have?

What, he has -- he proposed $3.6 trillion.

What's your number?

MCCAIN: Ours is 3.3 to start -- 2.3 to start with. But the point is over cumulative, over time, ours is 3.3. Over time, it mounts up to a multi-trillion dollar deficit...

BLITZER: It's...

MCCAIN: -- difference.

BLITZER: Multi-trillion, over 10 years, let's say.


BLITZER: Is that what you're saying?

MCCAIN: Yes. Yes. And the present budget proposal we are considering is only for five years. And that's because they're putting off the tough decisions that are going to have to be made during the next five years.

BLITZER: The Republicans have 41 votes in the Senate, as you know.

Is there really, realistically, is there any chance your alternative could get 50 or 51 votes?

MCCAIN: No. But I think it presents our vision for the future of the country. I think that it is a basis for negotiations. I hope that, for the first time, really, on a major issue, that the administration and the Democrats will sit down with us and try and negotiate a budget that is truly bipartisan, which we haven't done for years -- either Republican or Democrat. But also, this, I hope, sparks a debate all over America about what we need to do for our futures, as well as the present.

I believe that this kind of, as I say, the staggering debt, is generational theft.

BLITZER: The Democrats think they have the votes in the House, certainly, and in the Senate, to get their budget passed on Thursday. That would be tomorrow. Do you think they do?

MCCAIN: That they do in the Senate?

BLITZER: That they -- that they have 50 votes in the Senate?

MCCAIN: I'm -- I'm sure that they will -- I'm -- that we will pass the -- it's very likely we will pass the Democrat budget proposal tomorrow night or Friday.

BLITZER: The Democratic version?


BLITZER: All right, let me ask you, quickly, before I let you go. I know you've got to go vote...

MCCAIN: By the way, I'm sorry to say it.

BLITZER: Yes. I know you're sorry to say that.


BLITZER: But they do have the votes.


BLITZER: That's what happens in parliamentary democracies...


BLITZER: -- if you will.

All right, let's talk about the G20.

So far, what you've seen, do you like what you've seen President Obama do so far or not so happy?

MCCAIN: I like it. I think he's having a whirlwind series of meetings which are very helpful. I think that the agreement of the Russians to pursue nuclear strategic weapons agreements is an important step forward.

I want to support this president. I want him to succeed. I think there are some really strong and fundamental differences between ourselves and the Europeans on a variety of issues. But I wish him every success.

BLITZER: Senator McCain, as usual, thanks very much for joining us.

MCCAIN: Thanks a lot, Wolf.

BLITZER: OK. Go ahead and vote now.

MCCAIN: Thanks. BLITZER: Bye-bye.

GOP Chairman Michael Steele tells Republicans to stop whining and be like -- more like him -- unconventional.

Could that turn the party's fortunes around?

And she's taking Europe by storm -- Michelle Obama on the world stage.


UNIDENTIFIED FEMALE: She's very stylish. And she's a good right hand woman to have for Barack Obama.

UNIDENTIFIED FEMALE: We think she looks very good.




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

Happening now, the second quarter starting with a bang of sorts up on Wall Street. Housing and manufacturing reports were better than expected. That helped push all three major indices higher. The Dow was up more than 2 percent.

A critical new development in a tense waiting game -- North Korea now fuelling a long-range missile it says will carry a satellite into orbit. But the U.S. fears the mission could be more sinister.

And the first lady takes Europe by storm -- Michelle Obama, an international sensation on this, her first official trip overseas -- what people are saying out on the streets.

I'm Wolf Blitzer.


Could President Obama end up taking a backseat to the first lady of the United States on this, their first visit to Europe since taking power?

CNN's Alina Cho takes a closer look.


ALINA CHO, CNN CORRESPONDENT (voice-over): America's fascination with the First Lady has been well documented. But across the pond, Michelle Obama is a brand new star. The headlines say it all.

UNIDENTIFIED FEMALE: She's so stylish and she's good right hand woman to have. UNIDENTIFIED FEMALE: We think she looks so good.

CHO: As America's First Lady embarks upon her first trip to Europe, America is watching the royal family of the United States.

ALLAN LICHTMAN, AMERICAN UNIVERSITY: How the royal family, and not just the head of government is received, is very important for perception here at home.

CHO: Most of all, the First Lady. What will she wear? How will she act? On today's schedule, tea with the queen. Insiders say the queen and America's queen bee will be fast friends.

TINA BROWN, CO-FOUNDER, THE DAILY BEAST: The queen likes authentic women. Women who are strong, unpretentious and into their family.

CHO: When Ms. Sarkozy met the queen, they went mad. This time, she's a no-show. And don't forget, the French First Lady is a former supermodel. In 1961, Jacqueline Kennedy wowed with her flawless French.

LICHTMAN: Kennedy said at one point, I am the man accompanying her to Paris.


CHO: President Obama often jokes that Michelle is the boss. Historians say as America tries to rebuild its image on the world stage, Michelle Obama will be key. Visiting schools and hospitals, showing off her style is the ultimate sell.

Alina Cho, CNN, New York.

BLITZER: Let's discuss this and more with our Democratic strategist and CNN contributor, Donna Brazile and Republican strategist Kevin Madden. He was the press secretary for Mitt Romney presidential campaign.

Should the president of the United States be at all concerned that the First Lady might upstage him?

DONNA BRAZILE, DEMOCRATIC STRATEGIST: I don't think President Obama's worried that Michelle Obama will upstage him. Look, she is a woman of tremendous grace and while being First Lady, I think she has really come into her own. We are finally getting to see the person and not the caricature developed during the campaign.

BLITZER: Everybody's talking about that J. Crew outfit she was wearing today. You know, it's part of the territory. They're not talking about the suit the president was wearing. They're talking about her outfit.

KEVIN MADDEN, REPUBLICAN STRATEGIST: These are always about the images. Millions are watching these images and they're seeing a level of sophistication and elegance. That's what Europeans really react to when the look at American first ladies and I think that's why she's being received so positively. I know how President Obama feels because I'm the man who's accompanied Donna Brazile on THE SITUATION ROOM. Very tough thing to do.

BLITZER: The queen would love Donna, too. No doubt about that. You worked for Mitt Romney in the last campaign and now, there's speculation, Romney versus Palin to 2012.

MADDEN: I'm not the best analyst on this as far as objectivity, but I do think a lot of this is premature but allow me to engage in it anyway. I think what you see is Romney is popular with strength on the economy. Sarah Palin is popular because she's had great success with grass roots. You take two of those and you have a political mix. There's always going to be speculation about it. I think both are very busy, you know, Sarah Palin is busy running the state of Alaska. Romney is busy writing a book and helping Republican candidates and there's going to be so much time between now and when the decision actually has to be made.

BLITZER: Donna, you're a great political strategist. Was it smart for her not to come to Washington next month for this big Republican Party fund raising event and stay in Alaska, do the work as governor, or should she have come back to Washington?

BRAZILE: I believe she should have showed up. Simply because 2010 is a big political year with 26 gubernatorial seats up including her own as well as 36 Senate seats and all the members of Congress. This would have given her an opportunity to build some tips with the members of Congress and I think it was a mistake. She could have delivered a really strong message at a time the Republican Party is trying to find a message.

BLITZER: She wants a huge Republican Party future, maybe she should have come.

MADDEN: Looking at the infrastructure of how you run a presidential campaign now, this is where you spend that time. If you are looking at very seriously the possibility of 2012, that's where you have to seed the organization now and it's always a good time to do it. I think one of the disadvantages she is some other candidates have started that or already have a base and infrastructure in place.

BLITZER: Michael Steele, the chairman of the Republican Party, the former lieutenant governor of Maryland, he's causing a little commotion out there. He says this quoted in the Annapolis Maryland Capital, "Quite frankly, I'm a little sick and tired of the finger point and the name calling and the blaming and the whining be it a little unconventional. I want you to do, from time to time, just for the heck of it, the unexpected." What do you think?

MADDEN: I don't think anybody really disagrees with the substance of his argument. I think it's how he says it. I think rather than the unexpected and the I forget what it was, unexpected and --

BLITZER: He said the finger pointing, name calling, be a little unconventional.

MADDEN: I think what we have to do is focus more with our party about our message and how to modernize it. That's how we win elections. I also do agree that this isn't the time for fighting. We have to work with a unified voice to rebuild our party.

BLITZER: He's got a strategy. He says all the things he's doing are well thought out.

BRAZILE: I don't see the thread that connects anything Chairman Steele is doing now. He's the gift that keeps on giving for the Republican Party. He needs to focus on his job as strategist for the party, the person who puts in place the campaign to win in 2010. Florida, Missouri, New Hampshire --

BLITZER: Is it a big or little deal, the race in New York state replacing now Senator Gellibrand, Hillary Clinton's successor, it's too close to call between the Republican candidate, the Democratic candidates, counting absentee ballots?

BRAZILE: I think it's an important indicator to both parties. This was pro-Obama, pro-stimulus, versus anti-stimulus. I think this is a great indication.

MADDEN: I think more important for Republicans is what it would do for our psyche. We really need a win. We had a tough 2008 and we are in the middle of an ideological battle within our own party, a reawakening, a rebuilding. One win under our belt would do a lot.

BLITZER: Even by just a dozen votes? Could take a couple of weeks for those absentee ballots to be counted. We'll see what happens. Thanks very much.

As we've been reporting here in THE SITUATION ROOM, North Korea plans to launch a rocket in the next few days. What do you think the U.S. response should be if North Korea does launch that missile? Submit your video comments to Watch tomorrow's show to see if your video makes it on the air.

A law some say legalizes rape. It's actually now in effect in Afghanistan. There's international outrage. It's building. We're investigating.

Plus, unimaginable generosity turns to unspeakable tragedy. A boy's donated organs spread cancer to the recipient.


BLITZER: Dinner in London at number ten Downing Street. Gordon Brown hosting a dinner. The president of the United States there, you can see, with Michelle Obama. Just a few moments ago, they were -- they just continued walking on this, the first full day of their overseas trip. Let's check in with Mary Snow.

Mary, we're going to have a lot more on the president's trip coming up. Tell us other important news going on. MARY SNOW, CNN CORRESPONDENT: Taliban leaders are claiming responsibility for the deadly mission in Afghanistan. The attackers were dressed in army uniforms and stormed a government building where provincial leaders were meeting including the brother of President Hamid Karzai. At least 14 people were killed including the bombers. Karzai's brother left the meeting just minutes before. He says he was the target.

And there is a reprieve today for President Obama's Kenyan aunt. She will be allowed to stay in the U.S. until next February when an immigration judge will hear her appeal. She's been living here illegally since 2004 when her asylum request was rejected and she was ordered to leave. The white house says it has not been involved in the case.

Federal marshals are now seizing assets from Wall Street swindler Bernard Madoff. First on their list, his 55-foot yacht confiscated by court order today at a marina in Fort Lauderdale, Florida. The marina's owners described the boat as an immaculate antique worth some $800,000. Madoff pleaded guilty to running a massive ponzi scheme. He is now awaiting sentencing.

And a robot that acts on your thoughts. Take a look at this. Scientists at Tokyo's Honda Research Institute are showing off their advances and they're pretty incredible. A special helmet reads electric currents in cerebral blood flow and then translates them into simple commands which are transmitted wirelessly to the robot. Eventually, the technology may be used to help disabled persons do common tasks. Pretty amazing stuff Wolf.

BLITZER: Amazing indeed. All right. Thanks very much Mary.

Organ transplants that went terribly wrong. The recipients, all, got cancer. The parents are suing the New York hospital and several doctors. Let's bring in our senior medical correspondent Elizabeth Cohen. Elizabeth, what happened? How could this happen?

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: That is a good question because this was such a well-intended act that ended up with two people dead and two people terribly sick.


COHEN (voice-over): Like any child, as Alex Koehne was growing up, his parents had big hopes and dreams for him. Those dreams ended March 30th, 2007, when Alex died at a New York hospital at the age of 15. His parents Lisa and Jim said doctors told them it was bacterial meningitis. They donated Alex's organs to four people. That decision was easy they said. Alex would have wanted it that way.

JIM KOEHNE, PARENT: He had a lot of love for people. He cared a lot about people.

COHEN: But the act turned into a tragedy. An autopsy revealed Alex didn't have bacterial meningitis, he had cancer. By then, it was too late. His kidneys, pancreas and liver had already been donated. Two recipients have since died of cancer. The other two have been treated for cancer.

LISA KOEHNE, PARENT: We were floored.

COHEN: The Koehnes filed a lawsuit two weeks ago against six doctors involved in their son's treatment, as well as South Hampton hospital. The hospital had no comment. The Koehnes are now trying to change the way or arguens are screened.

KOEHNE: Our reach is to try to better the situation, to better the protocols of doing this and making sure no other family goes through what we've been through.


COHEN: Now, I talked to a pediatric disease expert and he says that what he thinks went wrong is that meningitis can be caused by cancer. So it appears Alex did have meningitis, but --

BLITZER: Let's just hope people learn from this mistake and it doesn't happen again. Elizabeth, thank you very much. What a heartbreaking story.

Critics say it legalizes rape within marriage, a new law sharply limits the rights of women in Afghanistan and America's key ally there is accused of acting like the Taliban. What's going on?

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


BLITZER: America's key ally in Afghanistan now accused of acting like the Taliban. A new law sharply limits the rights of women in Afghanistan and would cross the line into actual brutality. What is going on? We asked our Brian Todd to investigate.

Brian, what have you learned?

BRIAN TODD, CNN CORRESPONDENT: Wolf, the new law has human rights groups here and in Afghanistan very worried. The question they're asking, has President Hamid Karzai dialed his nation back to those dark days for political gain.


TODD: He speaks proudly of how far his country's progressed since Taliban ruled.

PRES. HAMID KARZAI, AFGHANISTAN: Taking steady steps towards democracy and the rule of law.

TODD: But human rights groups and a female member of Afghanistan's parliament tells CNN President Hamid Karzai recently signed a law that threatens women's basic rights. Two British newspapers report that under the new law, women cannot leave their homes without their husband's permission. And cannot refuse sex with their husbands. T. KUMAR, AMNESTY INTERNATIONAL: In a nutshell, President Karzai's legalizing a law that is legalizing rape in Afghanistan.

TODD: U.N. and British officials tell CNN they're waiting to get more detail op the new law. But they sent us a statement saying they're seriously and gravely concerned about some of its provisions. One of those clauses, according to an Afghan activist --

ORZAIA ASHRAF, AFGHAN WOMEN'S NETWORK: If a woman is asking for divorcers the child has to go automatically to the father's family.

TODD: Our repeated calls and e-mails to Afghan officials in Kabul and Washington were not answered or not returned. Does the new law legalize rape? The leader of the largest mosque in America disputes reports that interpret this new measure as based on Islam religious law.

IMAM SAYED HASSAN AL-QAZWINI, ISLAMIC CENTER OF AMERICA: For a wife to turn her husband down without having an excuse, and when we talk about excuse, again, it could be a medical necessity, or it could be the monthly cycle, then, again, it is seemed as a sin. The husband cannot use force to have his wife abide by the law.


TODD: That Imam said the husband can ask his wife to stay home but only if he is at home at the time. He said the husband cannot use force in that request either. He said he's not sure how the Afghan government is interpreting this. And some Islamic governments have abused these laws for their own gain in the past.

BLITZER: Why is Hamid Karzai doing this now?

TODD: He is in a re-election fight in August. He's running for reelection and it's expected to be a very tough fight for him. Published reports say he is doing this to apiece a group of Afghan Shia clerics who influence about 10 percent of the voters in Afghanistan, that he's doing it to win favor with them. We tried several times to reach Karzai's government here and in Kabul. We've heard nothing back.

BLITZER: You could not get in touch with the Afghan ambassador here?

TODD: We could not. He's usually up front in regarding anything with his country, but he was unavailable today.

BLITZER: If you hear anything from them, let us know. I want to make sure we follow up on this story.

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

Jack, this is a country, Afghanistan, we've got tens of thousands of U.S. troops there, another 20,000 or so on the way. Billions of dollars it's costing. This is not exactly what a lot of us had in mind. CAFFERTY: Well, it's interesting that political expediency is driving -- apparently driving Hamid Karzai to make a decision like this, which puts the women in his country at greater risk than they already are. This isn't a civilized society to begin with, women walking around in burkas, and they have to ask their husbands' permission to eat, I think. It's nonsense we would sit down and negotiate with people that have that kind of mentality, in my humble opinion.

The question this hour: Is raising taxes on the highest earners the best way for states to deal with their ever growing deficits?

Paul in Phoenix says: "Raising taxes on the upper class is a way for the states and Congress at the federal level to use class warfare which leads to public outrage to cover their own inability to create a budget and then manage that budget. In short, no. Raising taxes is a copout for the government.

Ryan writes: "Redistributing the wealth of the rich will not create the new kind of economy that Obama envisions for America. Having successful individuals give more money to the states will only limit discretionary spending and stifle small business expansion. Two things this economy desperately needs."

Ruth in Indianapolis says: "Yes, raise taxes on the rich, conservatives call this socialism. It's not. It's merely a correction for a little of the skewed distribution of wealth in this country."

Mitchell in Arkansas: "No, we can just keep taxing poor people who happen to smoke or drink. In the meantime, drug cartels operate tax-free, because of prohibition."

Ryan writes: "It's called Hauser's law. Raising tax rates has never produced higher government revenues. It only inhibits economic growth. Just don't tell the crazy Keynesians running the Obama administration."

And Pat in New York writes: "Raise the highest earners' taxes. They can contribute like the little people have been doing. The working class in this country has been taxed to death making us eat baloney and cheese while the rich eat caviar and get bailouts. Tax them again and tax them some more."

If you didn't see your e-mail here, you can go to my blog at and look for yours there among hundreds of others.

BLITZER: Pat wants to tax them. No doubt about that.

CAFFERTY: And tax them some more.

BLITZER: And then again. Jack, thank you.

The president and queen, America's first couple welcomed warmly over at Buckingham palace. We'll find out what the cameras didn't capture. Our own Richard Quest is standing by in London.

You've heard President Obama weigh in on basketball. What does he have to say about the world cup? The European reporters put the president on the spot.


BLITZER: A flurry of questions for President Obama from the English press. But there's one he chose to side step for good reason, refusing to weigh in on English football and the world cup. Listen to this.


UNIDENTIFIED MALE: As president who won with a land slide, have you got any advice for Gordon Brown, the prime minister? Secondly, what are the things you like most Great Britain and London? And lastly, the qualifying match, is soccer a game you love? Have you got any good luck message for the English teams tonight?

OBAMA: Well, let me take all these in turn. I have had enough trouble back home picking my brackets for the college basketball tournament that's taking place there, called March madness, stirred up all kinds of controversy. The last thing I'm going to do is wade into European football. That would be a mistake. I didn't get a briefing on that, but I sense that would be a mistake.


BLITZER: Turns out England didn't need the president's well wishes. They beat Ukraine 2-1 in their World Cup qualifying match.

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

President Obama works into the night with world leaders on fixing the economy and repairing America's image. On this the eve of the G- 20 summit, how much has he already accomplished?

And a royal welcome for the president in London. We're taking you inside the Obamas' private meeting with Queen Elizabeth. Was there anything to be embarrassed about?