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Recession Threatens to Wipe Out Social Security, Medicare Trust Funds; Doctors, Nurses Advocate For Single-Payer Healthcare System

Aired May 12, 2009 - 16:00   ET


WOLF BLITZER, HOST: Happening now, new reason to fear you'll be broke when you retire. The Obama administration confronts a disturbing report on the future of Social Security and Medicare.

Plus, doctors and nurses protesting against the health care system. And it gets them thrown out of the United States Senate.

And why your luggage is worth more than a billion dollars to the airlines. The bottom line on bag fees and whether flyers are being ripped off. I'm Wolf Blitzer in CNN's command center for breaking news, politics and extraordinary reports from around the world. You're in THE SITUATION ROOM.

A new punch in the gut today for Americans who have watched their 401(k) and other retirement savings shrink before their eyes. The recession now is threatening to wipe out the Social Security and Medicare trust fund a lot sooner than expected. Let's go to our White House correspondent Suzanne Malveaux. She's working the story for us. We heard from the Obama administration just a little while ago on what's going on, and it ain't pretty, Suzanne.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: It certainly isn't Wolf. As people earn less money, the government takes in less money and it makes it much more difficult to really save up in the long term. And that is why it is no surprise when it comes to the largest entitlement programs. It was not good news.


MALVEAUX: Brace yourself. More bad news.

TIMOTHY GEITHNER, TREASURY SECRETARY: The longer we wait to address the long-term solvency of Medicare and social security, the sooner those challenges will be upon us and the harder the options will be.

MALVEAUX: Another casualty from the worst recession in decades. Your social security.

GEITHNER: These reports underscore the urgency of action.

MALVEAUX: A report released by the trustees reveals the country's social security and Medicare trust funds will run out of money even sooner than expected. Social security, likely depleted by 2037. Four years earlier than projected. Medicare out of cash by 2017. Two years earlier.

KATHLEEN SEBELIUS, HEALTH & HUMAN SERVICES SECRETARY: Today's report should trouble anyone who is concerned about the future of Medicare and health care in America.

MALVEAUX: The government partly blames the economic crisis. 5.7 million jobs lost since the recession began in December 2007. Unemployment now at a record 25-year high of 8.9 percent. Fewer people working and less tax revenue means less money going into the trust funds for both entitlement programs. President Obama says social security can be fixed. Not by raising the retirement age or cutting benefits. But increasing taxes for the wealthy.

OBAMA: For wealthier people, why don't we raise the cap. Make them pay a little more payroll tax not everybody is wild about this idea. Not surprisingly.

MALMVEAUX: The president says as health care costs skyrocket and the population gets older the greater challenge will be funding Medicare and Medicaid.

OBAMA: Those are the things that are really breaking the bank.


MALVEAUX: And Wolf, that is really why there is such a push here at this White House to reform the health care system, to make it more efficient. Certainly in the long term, you are looking at hard-fought legislation to try to fix this problem. The short term it's easy to say and easy to see that democrats as well as republicans, want this economic turnaround to happen. At the very least it will bring more revenue into the system. Wolf?

BLITZER: Suzanne, we're going to go in depth in a little while with a senior White House official, Melanie Barnes. She's going to be joining us, we've got some good questions to ask her about what's going on. Stand by.

Meanwhile, a U.S. soldier now stands charged with murder in the shooting deaths of five fellow troops in Iraq. He's been identified as army sergeant John M. Russell who was on his third tour of duty in Iraq. We're learning more about the treatment he was undergoing for stress and what appears to have gone horribly, horribly wrong. Let's go to our pentagon correspondent Chris Lawrence. It's a shocking story what happened, Chris. What's the latest?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Wolf, we've now learned that even a week before the shooting, this soldier's commander said that he was not only troubled but thought that he was a threat to himself and other soldiers. And there were ongoing talks between his commanders and the chaplain leading right up to the day of the shooting.


LAWRENCE (voice-over): Sergeant Russell's commander took away his weapon and referred him to Camp Liberty's stress clinic. Russell reported to this clinic Monday but a senior defense official says he became hostile and got into an argument as he was leaving. Another soldier took Russell out of the clinic and drove him back to headquarters. Later, Russell seized another soldier's weapon and vehicle and drove back to the clinic. The soldier Russell assaulted called military police, but it was too late. The defense official says Russell had walked back into the clinic and opened fire. He says he shot and killed two officers and three enlisted men, all fellow American troops.

MAJ. GEN. DAVID PERKINS, MULTI-NATIONAL FORCE-IRAQ: The suspect was apprehended outside the clinic shortly after shots were heard.

LAWRENCE: Like a lot of other soldiers with multiple deployments, Russell was on his third tour in Iraq. About 1 in 5 troops who served in Iraq or Afghanistan experience PTSD. Army commanders say multiple 15-month tours with very little time at home took a toll on the force. But the pentagon has recently added soldiers to the army.

GEN. GEORGE CASEY, U.S. ARMY CHIEF OF STAFF: We have made progress, but we are not out of the woods yet, and the next 12 to 18 months is going to be -- are going to continue to be difficult for us because we will actually increase the numbers of forces we have deployed.


LAWRENCE: Just because they're going to be increasing the forces in Afghanistan before the Iraq drawdown starts. Now the ultimate goal is to get troops to and even three years at home for every one year that they are in combat. And some veterans groups are pushing to have mandatory mental health screening across the board figuring that if everyone is screened, there's no stigma for anyone. Wolf?

BLITZER: I had heard a report suggesting that of the five soldiers who were killed and three wounded, some of them actually may have been working in that same stress department over there in Baghdad trying to deal with soldiers who have stress related problems?

LAWRENCE: That's right, Wolf. We believe that at least two of the five who were shot were actually working at the clinic, were officers who were working there at the clinic at the time trying to help some of the other soldiers deal with their stress and get through it.

BLITZER: What a tragic story. Our Chris Lawrence at the pentagon. Thanks very much.

CNN has just spoken to the father of army sergeant Russell charged with the murder of his fellow troops. CNN's Ed Lavandera is joining us now from Sherman, Texas. What a sad story this is. What did the father of this soldier tell you?

ED LAVANDERA, CNN CORRESPONDENT: Wolf, it's actually a very fascinating situation here. We spoke with Sergeant John Russell's family here in Sherman, Texas, just a short while ago. A rather lengthy conversation not only with his father but his only son as well. They paint a very different picture from what we've been initially hearing so far. The father and son describing the story to us just a short while ago that Sergeant Russell was not driven to this necessarily by combat stress or combat situations. That his son believed that he was being pushed out of the army, that the stress tests were being forced upon him and for some reason that set off this trigger. So clearly the interview raising a lot more questions as to what exactly was going on with Sergeant Russell.

But the family here believes that he was put into a situation that he was driven to do this, but that this was not combat related. As we've mentioned, Sergeant Russell had already done three tours. He was coming to the end of this. But the family says that in no time during those three tours had he exhibited any strange behavior or talked about any psychological problems or that they had noticed any change in his behavior. They say that this was driven -- he was driven to a breaking point by a situation in the army that he was afraid he was being pushed out of the army, coming at the very end or coming several years away from his retirement. That's what he was afraid and angry about.


WILBURN RUSSELL, FATHER OF SGT. JOHN RUSSELL: Stress is what they put him through. They tell him, you're stupid. 16 years and you're only a sergeant. We don't need your kind now.

LAVANDERA: And this just started happening recently?

RUSSELL: Oh, that happened yesterday --

LAVANDERA: As he was going through these stress tests?

RUSSELL: Yes. That's exactly what happened and they turn him loose with a guy with a gun. (INAUDIBLE) he beat the crap out of a guy and took the gun away from the guy. Got charged with one case of assault, five cases of capital murder.


LAVANDERA: Now we're here in this neighborhood in Sherman because just before Sergeant Russell deployed for Iraq last summer, he had bought a house here in this neighborhood. His parents and only son have been living in that house in the meantime, while he was out on this deployment. So they also describe a situation where, as I mentioned, that they had not described any kind of psychological problems. They had not noticed any difference in his behavior. In fact, his son tells us that on April 25th, his father had e-mailed him saying -- wishing him a happy birthday and saying that he was looking forward to being home in less than two months after the end of his deployment.


RUSSELL: He told him. You're an idiot. You don't belong in here. We're going to break you. We're going to get you out of here.

LAVANDERA: That's what other army officers were telling him?

RUSSELL: No, that's what the stress test technicians were telling him. They just follow orders, you know. I don't know if they had a psychologist in the room with him. They probably have one in charge of it. But he probably made up the repertoire. But he wasn't there to intercede. And they didn't make any effort whatsoever to put him back together.


LAVANDERA: So, Wolf, again, very interesting that a lot of this, the stress and the breaking point that they say Sergeant John Russell reached was not driven by what he had seen in the field in Iraq. He was an electrician technician working out in the field. They do say that over the years he had seen what they believe was probably very scary things, very harrowing scenes but that he rarely talked about it. But they say it was not those combat situations that drove him to this. They believe it was internal politics within the military that drove him to do this. Wolf?

BLITZER: I assume the father says that all of this -- what he believes happened came from directly from his son. This is what John Russell was telling his dad. Did he say how often they actually communicated?

LAVANDERA: He said he spoke every two or three months. There were times the majority of the conversations from what we understand happened between Sergeant Russell's father and his wife who lives in Germany where he was stationed out of. So we're hearing this through the father based on his conversations with his son's wife. And she is in Germany right now. So that's what those conversations are based upon. They say that they had just recently heard about Sergeant Russell being taken to these stress tests. They didn't think it was anything that he needed or anything that he would have wanted to have done.

BLITZER: Ed Lavandera, we're going to check back with you. A lot to digest here. What a tragic story this is, indeed, all around. Ed Lavandera on the scene in Texas for us.

Let's check in with Jack Cafferty right now, he's got "The Cafferty File." Jack, it's a pretty horrible story any way you cut it.

JACK CAFFERTY: Well, it is. But it occurs to me that millions of men and women have been subjected to the politics of the armed forces over the years and have survived it just fine. Based on what happened in this particular case, if anybody was a subject for a stress test, perhaps it was this soldier. The health insurance drug and hospital industries are promising they can save $2 trillion over the next 10 years in order to reduce the cost of health care for millions of Americans. Now there is some good news, right? Some steps they'll take include cutting excessive administrative costs, making sure patients take the proper medicine. They'll come by your house at night and dose it out for you, and greater collaboration among the providers.

President Obama calls this agreement to work toward affordable and high quality health care a watershed event. Some experts say it's unprecedented the president has been able to keep these interest groups at the table. Especially when you consider some of these groups are the very same ones that derailed previous attempts of health care reform. One health economist who worked on Clinton's failed attempt at health care reform back in the early '90s tells the "Los Angeles Times" things are different this time around. He says in the '90s, the mood was negative and skeptical, whereas now, there is a real sense of momentum and people don't want to give up. However, some people are not convinced, and that would include me, about the commitment of these industries. They say the groups aren't offering enough detail on how they'll contain rising health care expenses. Others aren't so sure how long the cooperation will last once the president and congress start asking specific groups to make specific cuts. So far, this is all voluntary. And there is absolutely nothing binding on any of these groups to force any sort of compliance whatsoever.

In fact, the skeptics think that some industry leaders are only staying at the table because they are afraid if they leave, lawmakers will put the wood to them. Here's the question. How much do you trust health care groups to voluntarily save $2 trillion over the next decade. Go to and post a comment on my blog. I ain't buying it.

BLITZER: Good question, Jack. Thanks very much.

The last sound was a scream and then a Continental connection plane went down near Buffalo, New York. Stand by for new information just coming into THE SITUATION ROOM on the chilling final moments before the deadly crash.

Are moderates like Florida Governor Charlie Crist the solution to the Republican Party's problems? Crist fields his own political plans in the midst of a lot of hand wringing going on within the GOP.

And dozens of schoolgirls suffering from a mystery illness in Afghanistan right now. Is it a coincidence or could Taliban militants be to blame?


BLITZER: The power struggle within the Republican Party on display in Florida today. The Governor Charlie Crist made it official announcing he won't run for re-election as governor but will be up for an open U.S. senate seat. Let's go to our national political correspondent Jessica Yellin. Jessica, how does Governor Crist figure into this GOP fight to try to regain political influence?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Well Wolf, Governor Crist is a formidable candidate and one of the more popular republican governors in the whole country. He is a moderate in a state that President Obama won and he has crossover appeal. So many national republicans are hopeful that Crist's entrance will keep the seat in republican hands and add another centrist to the pool of senate republicans. But Florida conservatives still plan to mount an aggressive primary challenge.


YELLIN: With Florida still reeling from a battered economy and budget cuts, Governor Charlie Crist says he can best help by changing jobs.

GOV. CHARLIE CRIST, (R) FLORIDA SENATE CANDIDATE: I understand that the challenges we face are national issues, national problems. We have to understand that. I want to serve where I can serve the people of my state the very best. And I believe that to be in the United States senate.

YELLIN: A moderate, Crist enraged conservatives by backing the White House's stimulus plan. Even appearing at this rally with the president.

OBAMA: I want to give a special thanks to your governor, Charlie Crist, for joining us here today.

YELLIN: Crist's republican opponent, former house speaker Marco Rubio wasted no time using that image to rally his base -- conservatives.

UNIDENTIFIED MALE: Mountains of debt for our children and a terrible threat to a fragile economy. Today, too many politicians embrace Washington's same old broken ways.

YELLIN: Crist playing on his cross-party appeal is unapologetic.

CRIST: I think regardless of party, we have to work together to get things done. And that's what I'd like to take to Washington, D.C.

YELLIN: In an unusual move, the national senate republicans have immediately endorsed Crist in this primary. Analysts say it's because he's clearly the man to beat.

JENNIFER DUFFY, COOK POLITICAL REPORT: Crist is a very strong candidate. He's got a very high job approval ratings, very high favorable ratings. Voters like him very much.

YELLIN: So far keeping his silence is RNC chairman Michael Steele who had previously threatened to withhold support from any candidate who backed the president's stimulus. A spokesperson for the RNC says the party will support whichever republican wins the primary.


YELLIN: And, Wolf, the national democrats have already created an ad against Crist. The ad was up even before the governor announced for senate. Now that is a sign of just how important and expensive both sides expect this Florida senate race to be. Wolf?

BLITZER: It's going to be a tough race. All right, we'll watch it closely with you, Jessica, thanks.

Betty Nguyen is monitoring some other important stories incoming into THE SITUATION ROOM right now. Betty, what's going on?

BETTY NGUYEN, CNN ANCHOR: Wolf, Nazi war crime suspect John Demjanjuk is now in Germany after being deported from his home in Ohio. The 89-year-old's lawyer has filed a challenge to the arrest warrant that led to his deportation. Demjanjuk is wanted by German authorities German for his alleged involvement in Nazi death camp killings in Poland during World War II. He says he was a prisoner of war not a death camp guard. We'll be following that.

Also this, Pope Benedict is visiting some of Jerusalem's holiest sites. He stressed the common threads of Judaism, Christianity and Islam saying quote, "In the holy land, there is room for everyone." He visited one of Islam's holiest shrines, making him the first hope ever to step inside the holy site.

And check this out. An incredible story out of Los Angeles International Airport. Look at that right there. Makes you wonder how in the world did that happen. A metal baggage container was sucked into the engine of a Boeing 747 as it was leaving the terminal. The FAA says a baggage cart was being towed at the same time as Japan Airlines flight was pus pushing back from the gate. No one was injured but the plane was taken back to the terminal. Federal investigators are examining the jet. Wolf, we may have found your lost luggage.

BLITZER: Yeah, I imagine if it can suck in a huge thing like that, if people are walking around any place, don't even get near those engines. Obviously that's pretty dangerous stuff. Betty thanks very much.

An Iranian-American journalist today is thanking everyone who helped win her freedom after four months in a Tehran prison. Roxana Saberi spoke out in Iran for the first time since her release yesterday.


ROXANA SABERI, FREED IRANIAN-AMERICAN JOURNALIST: I am of course very happy to be free and to be with my parents again. And I want to thank all the people all over the world, which I am just finding out about really who, whether they knew me or not, helped me and my family during this period. I don't have any specific plans for the moment. I just want to be with my parents and my friends and to relax. Thank you very much.


BLITZER: Saberi's lawyer reveals that she was convicted of spying for the United States in part because she had a copy of a confidential Iranian report on the U.S. war in Iraq. On Sunday, an appeals court accepted her explanation. She didn't pass on the information and her sentence was suspended. Very happy. She is going to be heading back to North Dakota. She's a former Miss North Dakota. And you don't see this very often. Doctors and nurses protesting on Capitol Hill. They voiced their anger and then were arrested. Their complaint concerns your health care.


BLITZER: There were some protesters, doctors and nurses, up on Capitol Hill today. They were protesting the president's proposed health care reform initiative. So what is going on? We asked CNN's Elaine Quijano to find out.


ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT (voice-over): The demonstrators protested quietly at first. 20 nurses in red scrubs wearing signs supporting a single payer government-run health care system. But then --


UNIDENTIFIED FEMALE: The people at this table have failed Americans for 30 years.

QUIJANO: Camouflaged within the crowd, other more vocal protesters.

UNIDENTIFIED FEMALE: No more Aetna or Cigna bosses -- we want guaranteed health care.

QUIJANO: One by one as Capitol Police moved in --

UNIDENTIFIED FEMALE: Why aren't single payer advocates at the table.

QUIJANO: The demonstrators asked why the senators had no single payer advocates at the witness table.

UNIDENTIFIED MALE: You've been entrusted with doing the people's work.

QUIJANO: Deborah Burger's group, the California Nurses Association, helped spearhead the demonstration.

DEBORAH BURGER, CALIFORNIA NURSES ASSOCIATION: It sends a message to us that it's a done deal. They are trying to cut out the nurse's voice in providing safe, healthy, effective health care reform.

QUIJANO: The head of the finance committee, democratic senator Max Baucus, told the group he respects all views and pledged this.

SEN. MAX BAUCUS, (D), MONTANA: I will meet with anybody who wants to meet with me.

(END OF VIDEOTAPE) QUIJANO: Now top Democrats have signaled they don't believe a single payer system is a practical solution. But those behind today's coordinated protests say they'll keep pushing to at least make it part of the discussion.

BLITZER: We're going to be talking about this with Melanie Burns, she's standing by at the White House, the top adviser to the president. Elaine, thanks very much for that.

It's a chilling account of a doomed plane's final moments. Just moments before a plane literally fell from the sky. We're finding out exactly what the pilots were thinking and screaming.


BLITZER: To our viewers you're in THE SITUATION ROOM. Happening now -- a new strategy to stop the killing, fighting and the terror. The war in Afghanistan will likely look drastically different now that the top U.S. military commander there has been fired. But is his replacement the right man for the job?

In Afghanistan right now, Taliban extremists don't like young girls attending school, any school. Are they poisoning them so they'll stay away?

And look closely. You haven't seen this in years and likely won't for years to come. A former head of one branch of government answering questions from an equal branch. You're going to find out what Jimmy Carter the former president told senators. I'm Wolf Blitzer, you're in THE SITUATION ROOM.

Confusion, fear and frightening screams. Minutes before a doomed plane plunged to the ground, the pilots are fearful about what's happening.

Then, hysterical at the moment they realize the plane is about to crash. We're learning this from a transcript of the final moments released today as the hearing investigates how this plane fell from the sky. Our senior correspondent Allan Chernoff is in New York working the story for us. We're getting new details every single day. And they're all, Allan, understandably, very disturbing.

ALLAN CHERNOFF, CNN CORRESPONDENT: Indeed, Wolf. In fact at this very moment, the National Transportation Safety Board is questioning officials of Colgan Air which operated flight 3407, they're trying to determine exactly why the aircraft went down.


CHERNOFF: "Jesus Christ, we're down," exclaimed pilot Marvin Renslow. Then first officer Rebecca Shaw screamed as Flight 3407 crashed into a private home near Buffalo-Niagara International Airport.

Those are the final 20 seconds of the cockpit voice recorder. Only minutes before, Shaw told Renslow of her fear of crashing in icy conditions. That was a violation of cockpit rules, requiring all discussion to focus on landing the aircraft.

Why couldn't Captain Renslow save the plane? The National Transportation Safety Board is examining Renslow's training at Colgan air, the regional carrier that operated Flight 3407. Renslow never received hands-on experience with the safety system in the Bombardier Q400 aircraft called a stick-pusher that activated to prevent the plane from stalling.

UNIDENTIFIED MALE: Do you know of any stick training or stick- pusher training that was done in the actual Q400 prior to the accident?

PAUL PRYOR, COLGAN AIR: In the simulator, no. In the ground school portion, it is covered.

UNIDENTIFIED MALE: So, it's information that's not practical experience with handling anything, right?

PRYOR: Correct.

CHERNOFF: Anne Marie Russo, whose daughter Madeline died on Flight 3407, watched the hearing Tuesday, and suspects airline cost- cutting played a factor in the fatal crash.

ANNE MARIE RUSSO, MOTHER OF CRASH VICTIM: Maybe the training does have to be more satisfactory or safer for the public.

CHERNOFF: Captain Renslow was fully FAA-certified, but he had failed five pilot tests, three of which occurred before he joined the airline. Colgan Air says Renslow revealed only one of those failures to the airline.

Those facts left the safety board to ask an official from the aircraft's manufacturer if a more experienced pilot could have saved the plane.

UNIDENTIFIED MALE: Do you believe this was a recoverable stall?

WALLY WARNER, BOMBARDIER: My opinion is yes.


CHERNOFF: Pilot fatigue is another issue the NTSB will be looking into. The captain, apparently, had 22 hours off before reporting to work at Newark Airport that day, where the flight began, but he was seen sleeping in the crew room at Newark Airport.

And the first officer, Rebecca Shaw, she apparently had commuted through the night to get to Newark for that flight that she was on -- Wolf.

BLITZER: What a -- a sad story, indeed. All right, hopefully, we will learn lessons from this, so it won't happen again.

Allan Chernoff reporting. Another story we're watching right now involving air travel -- the next time you pack for a flight, pack some extra cash as well. You will probably need it to pay for the extra money that's required to get those bags on board. Those few dollars add up to big bucks for the airlines.

CNN's Mary Snow reports.


MARY SNOW, CNN CORRESPONDENT (voice-over): Fifteen dollars for a bag here, $25 to check a second bag there, for the airline industry, it added up to $1.1 billion last year. And, for some passengers, it's added up to aggravation.

ANGELA KING, AIRLINE PASSENGER: I think it's horrible that they are charging the fees, especially in this economy.

ANUBHAV JAIN, AIRLINE PASSENGER: It's frustrating, yes, because, you know, they -- they take over your choices, and so you have to eventually pay for. It doesn't matter who you fly.

SNOW: American, U.S. Airways and Delta top the industry list of collecting the most in baggage fees, fees that were put in place last year to offset record fuel prices. And, though fuel costs have since dropped, the airline industry defends the fees, saying they "have helped many carriers weather the economic downturn, high fuel prices and reduced demand for travel. This revenue stream has proven to be a critical and necessary means of working towards sustained profitability."

But one passenger advocacy group is furious.

KATE HANNI, FLYERSRIGHTS.ORG: They really did snow the flying public with this whole idea that they were only charging for baggage because of the rising cost of fuel. Clearly, that's not an issue now, so why don't they remove the charges?

SNOW: American Airlines, for one, says it never claimed the fees were tied only to higher fuel costs. And some airline analysts say the industry needs the income from these fees because the economic downturn is hurting both leisure and business travel.

HUNTER KEAY, STIFEL NICOLAUS: Bag fees and -- and other such ancillary fees like are -- are an absolute life-saver at this point, and they can't be understated. So, fuel has definitely declined substantially, but we're in a different demand environment right now than we were when they were first imposed.


BLITZER: CNN's Mary Snow reporting. She will have more on this story coming up later.

President Obama is gearing up for another trip abroad. What should he have learned from his first overseas tour? Stand by. Our "Strategy Session" coming up.

And, later, swarms of Taliban suicide bombers on the attack in Afghanistan.


BLITZER: President Obama is taking new steps this week toward finally achieving health care reform here in the United States. But he's facing some harsh economic realities along the way, including new word that the recession is taking a huge hit on Social Security and Medicare, the trust funds involved.

Let's talk about this and more with the director of the White House Domestic Policy Council, Melody Barnes.

Melody, thanks very much for coming in.

MELODY BARNES, DIRECTOR, DOMESTIC POLICY COUNCIL: Thank you so much, Wolf. It's a pleasure to be here with you.

BLITZER: There -- there was a protest on the Hill today. Some doctors and nurses, they want a single-payer system.

Has the president completely ruled that out, along the lines of what's in Britain or some of the other European countries, or Canada, for example? Is that off the table?

BARNES: The president believes strongly that we have to build on the system that we already have. He wants to move quickly and efficiently to get health care done, make sure that it's quality and affordable for all people.

So, in doing that, we believe that we have to build on the system. But we have heard from people who care deeply about moving forward with a single-payer system. They were involved in our health care reform here at the White House.

I met with some people out in Michigan. My colleagues have done the same in other parts of the country. So, we have heard from them. We understand their interest and their concerns. But, at the same time, we believe that we have to move forward.

And I think there are many members of Congress who have been longtime supporters of a single-payer system who would say, I believe in that, but I believe that we have got to build on the employer-based system that we have today.

BLITZER: All right, so that's an answer there.

Max Baucus, he chairs one of the key Senate committees that's taking a whole look at this. He thinks you should consider taxing some of the health benefits that employees get from their employers. Sort of like -- just like income, in fact. Listen to what he says.

(BEGIN VIDEO CLIP) SEN. MAX BAUCUS (D), MONTANA: We should look at ways to modify the current tax exclusion so it provides the right incentives. And we should look to ways to make it fairer and more equitable for everyone.


BLITZER: Are you open to taxing those kinds of health benefits that so many of us receive from our employees -- employers?

BARNES: Right. Wolf, well, as I'm sure you remember from the campaign, the president expressed very serious concerns about taxing health care benefits provided by employers. And the president still has those concerns. He said, "Look. Let's bring everyone around the table. Let's put all the issues on the table and have a full debate about these issues."

But he still has those concerns. He recognizes that we have to pay for this system. He's made that commitment. He made it in his budget. He's working with Congress to get it done. But he's got concerns about that approach.

BLITZER: So I will take that as he's going to try to resist any such urge from -- whether Senator Baucus or anyone else. Is that right?

BARNES: Well, he's got -- he still has the same concerns that he expressed on the campaign trail.

BLITZER: All right. Let's talk about what they call tort reform. Are you open to limiting the opportunity for individuals through their attorneys suing doctors and hospitals, seeking medical malpractice, in order to try to bring down the overall cost of medicine in the country?

BARNES: This has certainly been a hotly debated topic. I remember the debates when I was up on the Hill working on this issue.

And we recognize that there are some doctors in some parts of the country that are paying high medical malpractice premiums. At the same time, we know that that's a relatively small amount in the overall health care system.

What we believe is that we have to address these issues on the front end, that we have to make sure that people are getting quality health care from the beginning, and then also work with Congress to find ways to address this problem.

Again, the president has said let's put all the issues on the table. He's not trying to stifle the debate. But he believes that there are a lot of different ways to approach this problem.

BLITZER: We heard some very disturbing numbers about Social Security, the trust fund. The Medicare trust fund. Given the recession, what's going on, the limited amount of money coming in to the system. A lot of the money going out of the system. It looks like it could go broke a lot sooner than we had anticipated. Is the Obama administration open to the idea of raising the age limit, the age requirement, to be eligible for Social Security and Medicare from 65, 66, raise it to 67, 68 or 69, something like that, in order to deal with the fundamental economic problems?

BARNES: Well, you're exactly right, Wolf. When we saw these numbers, the trustees' report, we were very concerned about them.

At the same time, we recognize that this -- really what this means is that we have to get health care reform done. And because of the sagging economy, there's fewer coming -- less coming in, which means we have this concern about these two trust funds going down faster than we had anticipated.

This means health care reform is absolutely necessary. This is a way to drive down costs. This is a way to address some of the problems in the system. And coupled with the proposals that the president has already made in his budget -- looking at the Medicare Advantage system, so that we're not paying a middleman to provide health care to our seniors...


BLITZER: So, do I -- am I hearing you say you are going to be opposed to any raising of the age?

BARNES: Well, the president has said on issues of Social Security that he wants to work with Congress and others to address those problems. And he's open to listening to their suggestions.

But we already believe that we've put a number of proposals on the table to address the problem that the trustees' report reflects today.

BLITZER: Melody Barnes is the director of the Domestic Policy Council.

Even more important, she's getting ready to get married pretty soon.


BLITZER: Congratulations, Melody. Have a wonderful honeymoon.

BARNES: Great. Thanks so much, Wolf. Take care.

BLITZER: Thanks -- thanks for coming in.

The Obama administration has plans for your health care. But are they really doable? Straight ahead, we have a reality check on that and more.

And how much is your home worth? Home prices are falling, even faster in some cities. So, why? And do you live in one of those cities? (COMMERCIAL BREAK)

BLITZER: A serious battle is brewing in the Republican Party. We have been reporting on it for days now, on the one side, moderates more tolerant on fiscal and social issues, on the other side, staunch conservatives who don't want the party to become more moderate.

Let's go to our senior political analyst, Gloria Borger. She's here joining us.

This could play out, this battle, in several future races, Gloria.


You know, Wolf, we have this theoretical argument going on at the national level, as you point out, about whether the Republican Party should go more to its conservative base or whether it should be a big tent Republican Party. But, at the state level, where they are now recruiting Senate candidates if you drill down, what you see, lots of very pragmatic choices that are being made by the Republican Party.

Let's take a look at the state of Connecticut, for example. You have a vulnerable senator there, Senator Chris Dodd, because of his issues relating his to the chairmanship of the Banking Committee. And that's a state that Obama won by 23 points.

So, Republicans need to put up a moderate candidate in that state to go against Chris Dodd. One of the people they are looking at is Rob Simmons, who is a moderate pro-choice Republican. And so you have got conservative recruiters in the Republican Party saying, we need moderates in the state of Connecticut.

Same thing going on in the state of Delaware, a state that President Obama won by 25 points. There's a possibility that Beau Biden is going to run to try and take that seat in Delaware. And they are actively lobbying now a moderate Republican, Congressman Mike Castle, to go up against Beau Biden, because Republicans understand, and even conservative ones understand, that it's their only shot of winning the state of Delaware.

So, whatever the argument is on the national level, on the state level, they just want to level the playing field.

BLITZER: So, are the Republicans having any success in recruitment?

BORGER: Well, it's kind of mixed success.

For example, when Arlen Specter decided that he was going to become a Democrat, they had to scramble in the state of Pennsylvania. And they tried to get former Governor Tom Ridge to run. And, in the end, he decided not to. So, now they have got a conservative candidate, Pat Toomey, out there as a Republican. And that hurts their chances a bit in that state.

But, overall, Republican recruiters say it's easier for them now than it was when George W. Bush was president.

BLITZER: All right. Don't go away. Don't go too far...


BLITZER: ... because we're going to continue this conversation.

But let's get to our "Strategy Session" right now.

Joining us, the Democratic strategist Karen Finney, a former spokesperson for the Democratic National Committee, and Republican strategist John Feehery, used to work on the Hill for a long time.

How much opposition to this health care initiative that the president is putting forward -- you just heard Melody Barnes, a senior adviser to the president, explain it -- do you expect the Republicans to put up in Congress?

JOHN FEEHERY, REPUBLICAN STRATEGIST: I think Republicans are going to put up their own alternative. I have not seen it yet. I hope it's a -- a better alternative than what the Democrats are coming up with.

The fact of the matter is, we're going broke as a nation. You said it yourself, the Medicare trustees report, the Social Security report. And what the Obama administration, I think they have in their mind is a big package that's going to cost a lot of money.

They are pushing for a public option. The public option is going to cost a lot of money first. And, second of all, it's going to move a lot of people off the health care they have right now, because big companies are going to try to say, you know, get -- let's get them off our -- our -- our rolls and put them on the public -- it's really going to be a big thing.



KAREN FINNEY, FORMER COMMUNICATIONS DIRECTOR, DEMOCRATIC NATIONAL COMMITTEE: You know -- you know I'm not going to let you get away with that.


FINNEY: I find it absolutely outrageous that we're hearing from Republicans that they are opposed to actually letting Americans have a choice of their health care with a public option.

FEEHERY: No, no.


FINNEY: That's what a public option means.

(CROSSTALK) FEEHERY: No, no, no, it does not.

FINNEY: A public option means, as an American, if I -- what Obama's plan says, if I like my plan and I want to keep the insurance I have, I can. If I can't afford another plan, I can go with the public option.

I mean, it's about choice. Do we want the GOP and the insurance companies choosing your health care, or do we want people to have their own choice?


FEEHERY: I think the big issue -- I think the big issue is what big businesses are going to do is, they're going to say, let's just give them the public option. We have a public option.

And for all of you who already have health care and are satisfied with their health care, this should be concerning.

FINNEY: Well, again, Chuck Schumer has a bill that's he looking at in terms of, how do we level the playing field to make it so that the public option is, you know, fair and plays by the same rules as, you know, some of the private companies.

But I think we can't say -- you know, again, Republicans are coming into this debate starting with all of the things we can't do, all of the reasons we shouldn't. And we know that, even though, in '93, maybe the process was, you know, difficult, the idea was right. You have more people uninsured, and it's crippling our businesses.

BLITZER: Here's -- here's the problem the Democrats seem to have on the Hill right now, in the House, more than the Senate. A lot of those so-called Blue Dog Democrats, moderate Democrats, they feel that they are being left out of this process, because some of the very liberal chairmen of these committees, whether Henry Waxman or Charlie Rangel or George Miller, they are taking the initiative.

And they -- they just wrote a letter saying, "Why don't you include us?" about 45 of these moderate Democrats, who want to have a say at the table. And they feel they don't have a say.

FINNEY: Right.

Well, look, I think everyone is going to have a say. I think that was part of what the president was trying to do yesterday in bringing these executives to the table to say, going forward, here are the goals that we have for this process. We know it's going to be a lengthy process throughout the summer and probably into the fall.

But, again, Wolf, I think the point here -- and I think Melody was making this point -- from an economic standpoint, we can't afford not to do this.

BLITZER: You know these guys, because you worked in the House for a long time. You worked for Dennis Hastert when he was speaker of the House.


BLITZER: Charlie Rangel, Henry Waxman, George Miller, they're -- they're all pretty liberal on the House side.

Can they put together the kind of legislation that will unite, first of all, the Democrats, but also bring in some of the Republicans?

FEEHERY: Well, uniting the Democrats is the hard part.

I was there at '93...



FEEHERY: I was there at '93, '94, when Bob Michel put together a package that was superior to the Clinton package. And that's why the Clinton package didn't pass.

I also will say, Republicans were very successful in the '90s and 2000, Medicare, health care portability. They passed a lot of important health care legislation. And I will tell you what. Democrats have not shown that they can do it yet. And we will see if they can.

BLITZER: All right, we will see what the leadership of the White House does, too, because, right now, they have sort of punted...

FEEHERY: Absolutely.

BLITZER: ... and told members of the House and Senate, you come up with the legislation, and then we will talk about it.

But, right now, we will see what they do when the dust settles.

FEEHERY: Absolutely.

BLITZER: All right, guys, thanks very much.

FEEHERY: Thank you.


BLITZER: It's a huge issue that we're going to be paying a lot of attention to in the coming weeks and months.

It affect yourself savings and your retirement plans, even your cash on hand, your home's value. Guess what? It's falling, even faster in some cities. Find out if you live in one of those cities.

In Afghanistan right now, are extremists actually poisoning -- poisoning young girls to keep them from going to school? There's a mystery unfolding -- unfolding -- and Brian Todd will have details. And it happens so rarely. It hasn't happened in, what, 35 years? A former president appearing before Congress. You are going to find out why senators wanted to talk to Jimmy Carter and what Carter told them.


BLITZER: Let's get right back to Jack Cafferty for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour is, how much do you trust health care groups to voluntarily save $2 trillion over the next decade?

Scott in Dallas: "I trust the health care groups to act in the best interests of the health care groups. They want a seat at the reform table, only to make sure their racket doesn't get too heavily tampered with. Trust is not a word I would use in conjunction with big pharma, health organizations, and insurance companies."

Peter writes: "They have no choice. The Obama administration has them in a choke hold. They will cough up or they will be run over. It is that simple."

Teanne writes: "No way. It was self-serving, profit-making corporations that caused Enron, the financial crisis we're in now, robbing us of our 401(k)s, out-of-control health care costs, and fraud and theft of funds as war-profiteers. Now we can trust corporations? No way."

Glenn writes: "It can easily be done, by shifting to health care rather, than sick care, which is our current standard. If we focused on preventative care and medicine, it would be easy to project a $200 billion-a-year reduction in costs. However, it's going to take sacrificing some things like political correctness. If a person is fat, his HMO should be able to tell him, 'You're fat,' and give him a financial incentive to lose weight."

Rachel writes: "Trust is earned. I work in a hospital where, for every bed, there is an administrator, but there is one nurse for every eight patients. They have a long way to go."

And Steve in Sun City Center, Florida: "They can. The question is, will they? After I shook the hand of any health care executive, I would count my fingers."



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

A lot of the folks watching are not exactly trusting when it comes to believing these big corporations. That's a shock, don't you think, Wolf?

BLITZER: There -- there's a history, I think, there, Jack.



BLITZER: Thanks very much.


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

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