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House Dems Whip Votes for Health Care Reform; Israeli Ambassador Roils Diplomacy with Further Comments; Toyota Disputes Runaway Prius Charges

Aired March 15, 2010 - 17:00   ET


SUZANNE MALVEAUX, CNN ANCHOR: Happening now, President Obama and Democrats are putting on their game faces and making their final big play for health care reform. This hour, the arm-twisting and the promises going on behind closed doors. And the risks if the president comes up short.

Plus, New York City confesses to a big rip-off. Cab drivers overcharging customers millions of dollars in a matter of months. Could it be happening in your city as well?

And Toyota is now fighting back against one man's claim about his runaway Prius. Did he try to profit off the car-maker's recall crisis? Wolf Blitzer is off today. I'm Suzanne Malveaux, and you're in THE SITUATION ROOM.

Right now the president and Congress are caught up in Washington's version of "March Madness." This editorial cartoon by Bob Gorrell pretty much sums it in, as we begin a climactic week for health care reform. A short while ago the House Budget Committee started -- rather, the controversial process of trying to pass the bill without Republican support.

I want to bring in our congressional correspondent Brianna Keilar. House Democrats are scrambling, scrambling to get the 216 votes they need to pass this reform. They're making fixes to the Senate version of the bill. And basically we want to know, because the White House is pushing this now without the Republican support, what is going to be in this? What's going to be out at this point -- Brianna.

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Well, Suzanne, let's start first with what's going to be peeled out of this bill by the fixes that are being proposed here in the House. First off, remember that so-called "Cornhusker kickback"? It was a sweetheart deal worked out between Democratic leaders in the Senate and Ben Nelson, Democrat from Nebraska.

It would have had the federal government picking up the tab for Nebraska's expenses for expanding its Medicaid rolls. Well, that's going to be peeled out. It has bee much maligned, including now by Senator Nelson himself.

So what's in this? Well, you know that "Cadillac tax" plan, which would have put a tax on some of these high-end insurance plans? That has been adjusted. A lot of unions were very upset with this. So what they've done is they've made it apply to fewer of these Cadillac plans. And it's going to be kicking in later.

The other thing is, there's a fix for the Medicare doughnut hole. A lot of seniors, they get coverage for their prescriptions bur then they hit a point where they don't get any coverage. It's called the doughnut hole. They fall into it. There is going to be a fix for that.

And also something that may sound very strange to you considering this is a health care bill. There's a student loan provision that's going to be attached. Right now private lenders participate in giving out, in lending these federally-backed loans. Well, this provision would change that and put it solely in the hands of the federal government.

And one of the reasons this is being attached is because the reconciliation process, which allows just 51 votes in the Senate instead of 60, this provision Democrats would have a really tough time pushing through the Senate because they don't have support from Republicans, and so they just wouldn't be able to get those 60 votes -- Suzanne.

MALVEAUX: And, Brianna, I want to take a look at the game plan for getting reform passed. Because House members are going to vote on the Senate bill approved in December. That was in Christmas Eve. And then they're going to vote separately on changes made to the bill. Now that process is known as reconciliation.

Now, President Obama, he could sign the Senate version of reform before the Senate approves these fixes to the bill, and sends those to his desk to sign. And, you know, we're getting a sense from the White House that the president obviously is going to stay a couple of more days to try to make sure at least that part one of the job gets done before he goes overseas.

Is there a clear timetable for all this to play out from Congress's point of view?

KEILAR: The hope right now, and we heard this from the number two Democrat in the House, Steny Hoyer, is that there will about vote in the House on Friday or Saturday. This would be a vote on the Senate bill followed by, shortly thereafter, a vote on the packages -- the package of fixes. And so they're hoping Friday or Saturday.

Obviously, President Obama has pushed his trip back from that so that then he can help with some of this arm-twisting. But we just heard from House Speaker Nancy Pelosi a short time ago. Does she have the votes for this? And she said, when this goes to the floor, they will have the votes. We've heard from another Democratic leader they don't have the votes right now, but this week is all about arm- twisting -- Suzanne.

MALVEAUX: A lot of arm-twisting, Brianna, obviously going on on Capitol Hill and obviously the White House as well. And aides I speak to realize that, look, this is on Congress's timetable, as much as the president pushes really, really hard, it's obviously up to lawmakers to make this thing happen. So thank you so much, Brianna, we'll get back to you.

It's obviously a high-wire act for President Obama, and he is working, you could say, without a net. He flew to Ohio today for another campaign-style pitch for health care reform.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I don't know about the politics, but I know what's the right thing to do. And so I'm calling on Congress to pass these reforms, and I'm going to sign them into law. I want some courage. I want us to do the right thing, Ohio.


MALVEAUX: I want to bring in our senior political analyst, Gloria Borger.

Gloria, we've both been talking to White House folks throughout the day about this process. What struck me about the president's speech is, he says, you know, I'm doing this for Natoma (ph), that woman who has -- who is suffering from leukemia, from cancer, I'm doing this for my mother who died of cancer. Obviously they're trying to put a very personal picture, a very personal spin to all of this. That populist message.

What are you taking away in terms of the stakes here...


GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, you know, I think when they meet with Democrats right now, they are saying to Democrats, what you need, and what the president was talking about today, Suzanne, is you need an accomplishment to take home to the voters.

You've already voted in the House once for this bill. Why cast a tough vote and have nothing to show for it? So what they're talking to Democrats about is something in Washington-speak we call "the deliverable." Sounds like the movie "The Incredibles," right?

Let's take look at some of the deliverables here. OK. First of all, and these are things that would happen in the first six months. They're saying, first of all, eliminate lifetime caps on your health insurance. So for example, if you have a lifetime cap on your policy, right away, that's going to be gone. So if you have been sick a while and you are reaching that cap, you know, this should be very good news for you.

Second thing right away. No exclusion of children with pre- existing conditions if you buy a health insurance plan from now on. That's going to happen within the next six months, if this bill passes. Another thing that's very important to people is dependent children will be covered until the age of 26. So you know, when your kids go out on their own and they're having a rough time, and maybe they can't find a job, they can stay on your policy until the age of 26. Right now they cannot do that.

And the last thing here is small business tax credit so that you can buy health insurance, if you're a small business. They're also going to fix that so-called doughnut hole in Medicare prescription drugs.


BORGER: These are things that will happen right away. So they're telling members of Congress, you need to vote for this, you need to go home, and you need to point to all of these things that are going to happen to people right away and then take credit for it.

MALVEAUX: Now, see, the thing is, though, is that the one thing the president has been emphasizing, he says, OK, you know what, if you guys don't get this done, what's at stake here is that you have got a Democratic majority that's not doing anything. How do you go back to the voters and say -- and convince them?

But it -- doesn't the White House have something at stake here, obviously?

BORGER: Oh, the White House -- you now, I was talking to one White House adviser who said that the risk here and the gamble here, quite honestly, is unprecedented. That was this adviser's word. And you know, this has always been an all-in president, right? He's all- in on the table. But this is the biggest gamble he has ever made. And I think that they understand that if they were to lose this vote they might never get all the Democrats together on anything ever again.

And there's a big agenda out there that they would like to continue and they would like to finish. So would they like to win? Absolutely. Do they think it's important for them to win? Absolutely. And I'm also told, Suzanne, that they think they're going to win. And that House Speaker Nancy Pelosi may have a few votes in her back pocket of people who would like to vote no, but they're saying to her, we don't want to be the votes against that are going to kill health care reform.


BORGER: So if you absolutely need us, we'll be there for you. Otherwise, we're going to flip the switch to no. So she may have a little bit of a cushion there that she's playing with.

MALVEAUX: It's interesting to see how the White House too is trying to build momentum, you know, like this sense of inevitability that this is going to happen. President Bush did that with Social Security, didn't work out so well. So we'll see.

BORGER: We'll see.

MALVEAUX: We'll see how it goes.

BORGER: And, you know, I'm not saying they have it in the bag at this point. But it's clear that they're feeling better about it today than they did at this time last week.

MALVEAUX: OK. Let's check in on Saturday and see how they feel.



MALVEAUX: OK. Thank you.

Toyota is challenging a California man's claim that his Prius sped out of control. Ahead, the car-maker's fight to repair its badly damaged reputation after those massive recalls.

And if you rode in a New York City cab recently -- I know I have, you may want to check out your that receipt. An investigation is under way into a multimillion dollar rip-off. You're in THE SITUATION ROOM.


MALVEAUX: Jack Cafferty is here with "The Cafferty File."

Hey, Jack, good to see you.

JACK CAFFERTY, CNN ANCHOR: Welcome to our little gabfest, Suzanne. Nice to have you with us.

MALVEAUX: Little party here. Thank you.


The American people are getting tired of this crap. That is how Republican Senator Lindsey Graham described the debate over health care reform. What do you know? A politician who speaks plain English. Something that I can understand.

Graham was talking about the Obama administration's dismissal of some Republican criticism of the health care bills. But all the back and forth may mercifully come to an end soon. One way or the other, with the House expected to vote this week on bill that the Senate has already passed.

And after a year, it just seems longer, of arguments from all sides and thousands and thousands of pages of proposed legislation, the fate of health care reform remains very much in doubt this hour. There are several stumbling blocks for the Democrats, both ideological and procedural.

As for what's in the bill, abortion and immigration are most likely to trip up the whole thing. There are several House Democrat who have pledged not to sign on if the House uses the Senate's less strict language on the subject of abortion funding.

When it comes to immigration, there are House Democrats whose disagree with the Senate's ban on undocumented immigrants buying insurance in the new health exchange that would be created under this bill.

Then there's the politics of it all. The details of reconciliation, which chamber votes first, the distrust between the upper and lower houses, and on and on and on. Meanwhile you can expect to see the lobbyists spare no expense this week. It's estimated that these special interest groups will be spending $1 million day on TV ads to try to influence the health care debate.

Anyway, here's the question: Have you lost track of what's actually in the health care reform bills? Go to and post a comment on my blog -- Suzanne.

MALVEAUX: All right. Thanks, Jack. We're going to try to make sure they don't lose track of all this, but it can be confusing. Thank you.

Even as the president is struggling with health care, he has some new international headaches as well. Israel's ambassador to the United States is quoted as saying that U.S./Israeli relations are the worst that they have been in 35 years. That's pretty serious. Republican Senator John McCain today questioned the administration's open criticism of Israel's plan to build new settlements in a disputed area of East Jerusalem.


SEN. JOHN MCCAIN (R), ARIZONA: Don't you think if we want the Israeli government to act in a way that would be more in keeping with our objectives that it doesn't help them to have published -- public disparagement by the secretary of state, by the president's political adviser on the Sunday shows.

On the contrary, shouldn't we lower the dialogue, talk quietly among friends and work together towards the mutual goals that we share?


MALVEAUX: I want to bring in our senior political analyst David Gergen.

David, obviously what we're seeing here over the weekend, Secretary Clinton said it was downright insulting that you had that announcement that came at the time the vice president was visiting. And that she was getting her direct orders, really, the direction from President Obama, who was extremely frustrated at what had happened.

Is the administration being too critical of Israel right now? How risky is this strategy to take that very public critical stand?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, Suzanne, what you find is that this very question splits the Jewish community and the United States. The more hard-line groups are saying that -- agreeing with John McCain that the administration has overreacted and should tone it down. AIPAC came out that way today. That's the American-Israeli Public Affairs Committee, and the most famous of the Jewish lobby groups. Also, the ADL, Abe Foxman came out that way.

On the other hand, a more moderate new Jewish lobbying group called J Group -- or J Streets, said that was up to Israel to calm things down. And Martin Indyk, who is a well-respected former American ambassador to Israel has said basically, Israel has got to realize that America has interests, too.

Now, Indyk, interestingly, said he disagreed with Ambassador Oren it's the worst in 35 years, but he said it is heading in that direction.

MALVEAUX: And, David, I want to talk about China. Obviously, it's having some problems. Officials in Beijing, they are still fuming about the president's recent visit with the Dalai Lama. And China is also balking as well at the U.S. pressure to increase the value of its currency. Do you think that China and Israel feel like they are in a strong position now essentially to bully the Obama administration?

GERGEN: Well, that's a very, very good question, and it's clear that China feels its own power, and is being more assertive. But it also senses, and I think mistakenly, reads President Obama's soft approach to power as weak approach to power. And one sees that same thing in Netanyahu in that both are challenging America, will you stand up against us or not?

So some ways Hillary Clinton's call was the right thing to do to the Israelis, to stand up to them firmly. But there is clearly a need to ratchet it down now in public.

MALVEAUX: And obviously Iran figures into this. The United States needs, obviously, China as well as its other allies. How does that figure into the president's problems with both of those countries, China and Israel?

GERGEN: Well, in both cases we need something from them as well as them needing something from us. And in the past, the U.S. hasn't needed so much. But here we need the Israelis to show restraint with regard to Iran. Not, you know, be heavily militaristic about it. At the same time, we very much need China's help to apply sanctions. And of course, need China's help on a variety of things.

So that's why it's important to try to get these relationships re-aligned in a more harmonious way because we do have interests as well. But a lot of this has to be done in a diplomatic way, Suzanne, calm down the rhetoric, OK, take a couple of shots at each other, but get it calmed down and then try to get re-aligned on policy.

MALVEAUX: I know White House officials are trying to take a little bit of time to slow this thing down a little bit for everybody to, as you say, calm down. Because this is a very -- very critical relationships with these nations.

GERGEN: Both relationships are very critical.

MALVEAUX: Thank you so much, David.

GERGEN: Thank you, Suzanne.

MALVEAUX: We are about to get outside of Washington's Beltway, our Tom Foreman has found a place where they're building up America, generating real jobs and turning one city's river front into a must- see destination.

And later, reports of palace intrigue at the White House. David Axelrod says Rahm Emanuel's job is safe, he's the chief of staff. Well, we're going to ask James Carville, who knows them both, what's the real story.


MALVEAUX: Mary Snow is monitoring some of the other stories that are coming into THE SITUATION ROOM right now.

Hey, Mary, good to see you. What are you working on?

MARY SNOW, CNN ANCHOR: Good to see you, Suzanne.

Well, hundreds of thousands of people in the Northeast are still without power after that fierce weekend storm. Heavy rain and hurricane force winds blew down trees and power lines. Authorities are linking at least seven deaths to the Nor'easter. The National Weather Service says flood warnings are in effect from Northern Virginia to southern Maine.

And Phillips-Van Heusen is moving to become the world's largest apparel-maker. The company announced plans today to buy Tommy Hilfiger in a deal worth about $3 billion in cash and stock. Phillips-Van Heusen already owns Calvin Klein, Izod, and Arrow. Tommy Hilfiger will stay on as a principal designer for the line.

And get this, you know, so many young people have never known a life without the Internet. But on this day 25 years ago there was only one dot-com domain on the Web. It was the very first one and it was called

By the end of 1985, there were six dot-com Web sites and 100 within two years. After that, the Internet revolution took off. The rest is history. By 1995, there were 18,000 dot-com sites registered. Today, there are more than 80 million.

And, Suzanne, more than 200 million Internet Web sites in all and counting.

MALVEAUX: I can't keep up with all of them, Mary. I have to tell you, they all feel like they're coming through my BlackBerry here.

SNOW: All at one time.

MALVEAUX: Thank you, Mary.

SNOW: Sure.

MALVEAUX: Well, it's a big week for Alabama cash registers as students on spring break flock to the beaches. But catching tourist dollars is not just a priority along the coast. The cities and towns all over, they're refurbishing, they're renewing, they're turning themselves into places people want to go and spend some money.

Right now our CNN's Tom Foreman, he's looking at places where they are building up America. And today it takes him to Montgomery's river front.

Hey, Tom. What are you going to show us?


You know, I was thinking about that story a minute ago about dot- coms and how they grew up. In many ways what we're seeing as we travel the country is bricks and mortar operations trying to do that themselves now based on that model. What they've done here is establish sort of a beachhead along the river front, because they're downtown, like many downtowns have been struggling. And that's where they have started this hard business of building up, and it looks like it's working.

Take a look.




FOREMAN (voice-over): When the weekend is rolling, Dreamland BBQ is rocking.

MILLER: Hamburger, french fries, chicken fingers, we do it all here, man.

FOREMAN: And you'd never know a recession was in swing...

MILLER: All right, all right, all right. How y'all doing?

FOREMAN: ... with Bert Miller working the floor.

UNIDENTIFIED MALE: Doing good. We've been very blessed.

FOREMAN: Despite state-wide unemployment over 11 percent above the national rate, Montgomery's river front is building up even as the economy stays down. The result of a concerted effort to bring government, private industry and consumers together.

(on camera): The economy is such now that no town is an island. REB. BOBBY BRIGHT (D), ALABAMA: No.

FOREMAN: No state is, either.

BRIGHT: That's exactly right, Tom.

FOREMAN (voice-over): Congressman Bobby Bright was mayor when the city launched the plan, convinced that growth, even on the outskirts, would suffer if the city center continued to struggle.

BRIGHT: The suburbs tend to be driven by private developers.

FOREMAN (on camera): But if the center isn't solid...

BRIGHT: But if the center is not solid, then the services of that core, of that city, they weaken, they thin, and sometimes they thin to the point of being ineffective.

FOREMAN (voice-over): So the local governments, the chamber of commerce, and developers started building around a river front stadium and a popular minor league baseball team, refurbishing old warehouses, luring new businesses with opportunity and tax incentives.

For developers like Jerry Kyser, it was a breakthrough.

(on camera): How much has this area changed?

JERRY KYSER, JERRY KYSER BUILDING INC.: Up until about two years ago, this was just two railroad tracks, dilapidated buildings, and nothing going on down here.

FOREMAN (voice-over): But now...

KYSER: This is going to be a restaurant.

FOREMAN: The spaces are filling in with meeting rooms, luxury apartments, restaurants, a Hank Williams museum. All drawing tourists, locals and, dollars.

(on camera): The economy in this country is not good right now.

KYSER: That's correct. I can't imagine if we had not had this downturn in the economy what we would have down here right now. We have got a great, great start. We have created a lot of jobs in here. So if we can make this happen now, man, we are going to be on easy street when this thing is over.

FOREMAN (voice-over): And for a lucky few that already feels like their address.


FOREMAN: So you can see what we're talking about here. This is just a small area geographically, but it has become very important to this bigger effort to build up the downtown and restore areas that have been hit hard by the recession and by years of struggles. What they're trying to do there is expand that effort, this combination of government, civic involvement, and private business, and saying a block at a time, let's build out and build up their part of America.

And I have to tell you, Suzanne, having been a reporter here about 30 years ago, I've seen many efforts to recover down in this area, this is the first one I've seen that really looks like it could work.

MALVEAUX: Looks like very successful model. Thank you, Tom.

Well, there is a new plan that's on the table for the biggest overhaul of financial regulation since the New Deal. Our Jessica Yellin is standing by and will tell what this could mean for your finances.

And later, ever wonder if your taxi driver was overcharging? Well, guess what, if you've been a passenger in New York, you may have indeed been ripped off.


MALVEAUX: You're in THE SITUATION ROOM. Happening now, one man's dramatic story is now being questioned. Toyota is casting doubts on the claim of a Prius racing out of control.

And a brazen attack in Mexico's drug war. Families of U.S. consular employees are the targets as they leave a children's birthday party.

And a growing scandal confronts the pope. A German priest from his old archdiocese is suspended amid hundreds of allegations of sexual abuse of children.

Wolf Blitzer is off today. I'm Suzanne Malveaux, and you're in THE SITUATION ROOM.

At the height of the Wall Street bailout and financial meltdown, President Obama had high hope, big plans, for overhauling the system. Well, today what a somewhat less ambitious version of banking reform is now on the table. It could still make big changes for Wall Street and for everyday American. Our national political correspondent Jessica Yellin is following the story. Give us details here. Obviously, it is not what the president had hoped for initially, but something that's a little more scale down.

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: It's different from what the white house proposed, you're right Suzanne but let's take it in perspective. Almost a year and a half ago is when it all began, when Lehman Brothers collapsed. There was that failure. Remember, Congress bailed out the banks and promised they will never allow too big to fail problems to happen again. Well, 15 months later, that's how long it took for the House of Representatives to pass their version of Wall Street reform, but we're still waiting for the Senate to take action. Today in the Senate banking committee, Senator Chris Dodd who runs it introduced his proposal. Now, what's important to know is that it has zero Republican support. Not one Republican signed on. Without that it's going nowhere. So Senator Dodd has made some compromises to woe Republicans and that means he has a bill that some Democrats and some Republican are going to criticize. Let me introduce to you the piece that relates most directly to you and me. The bill would create a new agency designed just to protect consumers. Here's Senator Dodd speaking about it.


SEN. CHRIS DODD (D-CT), BANKING COMMITTEE CHAIRMAN: This legislation will create a strong and independent consumer protection watchdog. This crisis started when people were given mortgages he didn't understand and could never afford. If there was a watchdog on duty, it didn't bark. We need to strengthen not only its bark but also its bite.


YELLIN: Okay. So the bill, it does create this new consumer protection bureau, it's called, which would have the power to look at credit card contracts, mortgages, payday loans and basically ban abusive practices. Some Democrats will be happy, because it's independent and because it has the power to enforce its rules. But unlike the white house proposal, it's placed inside the Federal Reserve. That matters because the fed had the power to protect consumers for all these years and it fell down on the job. The fed's first responsibility is to keep banks stable and profitable. It exists to protect the banks which could conflict with protecting consumers. That has Democrats upset. On the flip side, most Senate Republicans object the idea of it at all. They say it's just another layer of relation. What's needed is better enforcement, not a new agency or bureau.

Moving on, how would this bill prevent a future meltdown? Well, one, would it prevent too big to fail institutions from developing? Lawmakers said they'll never let companies get too big again. This bill doesn't do that. We could still have too big to fail companies. It creates new council permitting power to force big companies like AIG to shrink if they're on the verge of collapse. Okay. That's one. Two, the counsel would allow - oh they would allow companies to go bankrupt instead of holding the economy hostage. No more bailouts. There could still be bailouts but banks have to pay into their own bailout fund. It they ever have to get a bailout they're not taking taxpayer money. Finally, the risky trades like betting on mortgages. Will they still exist? Yes. You're still allowed to have the risky trades, but now it will be done in a more public way so more people can watch what the banks are up to. There's still a lot exceptions, this one is murky. Suzanne, a lot of points, but bottom line, trying to move forward. It's not what the white house asked for.

MALVEAUX: Jessica, thank you so much for that detailed explanation. A lot of work went into that. Thank you so much, Jessica.

Well from reform to a major rip-off, New York City says it's investigating taxi drivers who illegally overcharge riders. Victims of the scam may be able to get their money back, hopefully. Our Mary Snow in New York with some of those details.

MARY SNOW, CNN CORRESPONDENT: Yeah, and Suzanne, it's something anybody can really relate to. If you visit New York, chances you popped in a cab. If you ever thought you were you ripped off in a New York City yellow cab you may well have been. The city found that taxi drivers overcharged passengers to the tune of $8.3 million over the last 26 months. Here's how it worked. Drivers were charging riders the rates that they're supposed to used out of the city. That's double the normal fare. On average, people were overcharged $4.45 per ride. Now the city is looking to see if it can reimburse people. You'd have to have a huge credit card.


MAYOR MICHAEL BLOOMBERG (I), NEW YORK: I don't know how practical it is to get rebates for people, but we'll certainly try to do that. We do have records. Keep in mind, we can only hold, under the agreement, we can only keep the records for credit card charges for 30 days.


MALVEAUX: So, Mary, a lot of cab drivers implicated and a lot of victims. Give us a sense of the scope of all this?

SNOW: At this point the city says 36,000 drivers overcharged on 1.8 million cab rides. However, the organization that represents cab drivers is crying foul. The head of the taxi workers alliance is disputing that $36,000 number. Take a listen.


BHAIRAVI DESAI, NYC TAXI WORKERS ALLIANCE: We're deeply angry. This is such an attack on taxi drivers. It's going to affect the drivers with every interaction with passengers, the back seat. You know when at the end of each fare. These are men and women who work 12-hour shifts on a daily basis in one of the most dangerous jobs of this country.


SNOW: The city says the worst offenders were a group of about 3,000 cab drivers. Right now an investigation is underway. Finding out who was scammed won't be easy. On average, there are about 360 million cab rides in New York City every year.

MALVEAUX: I'm one of those. I take cabs all the time in New York City. Use a credit card. Hopefully, if I've been scammed I'll be able to follow-up.

SNOW: You might be seeing a check.

MALVEAUX: Great. Thank you.

A new wake-up call about the American dream, and whether it still exists. Could it say a lot about the problems President Obama is facing right now? James Carville is standing by for our strategy session along with Kevin Madden. And new developments within a sexual abuse scandal with the Catholic Church and the link to Pope Benedict.


MALVEAUX: Mary Snow is monitoring some of the other top stories coming into THE SITUATION ROOM right now. Hey, Mary what are you looking at?

SNOW: Hi, Suzanne.

The Obama administration will try to overhaul the no child left behind education law by sending its own plan to Congress. No child left behind was a signature policy of the Bush administration establishing reading and math tests to identify failing schools. Critics say it lacked adequate funding. Mr. Obama's plan rewards schools with successful reform. However, the nation's largest teachers' union says it's disappointed with the new proposal.

The Northwest Airlines pilots who overflew the Minneapolis destination last year are dropping their appeal. The Federal Aviation Administration reached a settlement with the pilots. They won't contest having their licenses revoked and they'll be allowed to reapply for them in 10 months instead of 12 months. At the time the pilots told investigators they became distracted by an airline scheduling system on their laptop computers.

And there's no such thing as a free lunch on Continental Airlines anymore. The carrier is ending its free food for many of its passengers to start a food for sale program. An airlines spokesman says Continental expects a $35 million boost annually from cost savings and extra revenue. Suzanne?

MALVEAUX: Thank you, Mary.

What's the truth behind reports of palace intrigue at the Obama white house? Presidential strategist David Axelrod says, we should discount the whispers that chief of staff Rahm Emanuel is in trouble. James Carville who knows them both is going to weigh in, next.


MALVEAUX: A lot of people seem to think that the American dream is slipping away. Here for today's strategy session to discuss the latest polls and politics our Democratic strategist and CNN political contributor James Carville, and Republican strategist Kevin Madden who now works for the communications and public relations firm Jim Dike and Associates. Thanks for being here with us in THE SITUATION ROOM.

First about this poll from Zaider University, this is out of Cincinnati, Ohio, not New Orleans, James. This poll shows here that the first question, is it easier or harder to reach the American dream today than for your parents? 33 percent say easier. Harder, 60 percent say harder. What do you think this mean for politicians in terms of gaining the American people's trust? When they don't believe they've got a fighting chance to do better. I'll start with you, James.

JAMES CARVILLE, DEMOCRATIC STRATEGIST: First of all, let's remember that we're in a recession that started in December 2007. So maybe they'll say we are out of it now but if we are by not very much. You would expect to the see something like this. These are very, very difficult times. Most people think this is the most difficult economic times since the great depression. We shouldn't be surprised if we see these numbers and hopefully it's starting to turn around and will continue to turn around. It's been a rough go for over two years now.

MALVEAUX: What do lawmakers need to do Kevin to try to turn that sentiment around?

KEVIN MADDEN, REPUBLICAN STRATEGIST: Well, yeah. I think the biggest problem Suzanne is the fact that the way voters are looking at the next generation, their hope for their children. Right now, it tracks closely with the Americans viewpoints on right track/wrong track. Now also saying they don't think it's going to get any better. So Washington and all of the institutions whether banking institutions or government institutions, they have to try and close this disconnect right now with individuals. Right now people feel like that Wall Street's not looking out for them. People feel that Washington, D.C. is not looking out for them. Anything they can do to inform or educate voters and customers that they care about the individual's worth as part of their business or as part of their worth and the American dream it will help repair this really big divide that has grown.

MALVEAUX: James, do you think the Obama administration has taken the right approach so far?

CARVILLE: Let me say I agree with Kevin. I agree with that. I think the policies that Obama administration's, I concur. When a president has maybe fallen short in the past is he hasn't given us the sense he has a plan. I think he's doing that a little more now and, in fact, if things continue, things will start to turn around some and maybe the numbers will change, but people, for reasons that are completely understandable in many ways justifiable feel a disconnect with wall street. Feel a disconnect with Washington. They feel a disconnect with most institutions. When you've had over 10 percent unemployment for this length of time, people are hurting.

MALVEAUX: Real quick.

CARVILLE: Sometimes people don't realize it.

MALVEAUX: I want to do a quick follow-up. This is important. When you break it down by race, African-Americans, Latinos and new immigrants have a more positive view of the American dream. You look at it and it says it is easier or harder to reach the American dream than parents? Whites, 30 percent, easier. Blacks say 52 percent say easier. Latinos, 38 percent say it's easier. What do you make of that? Kevin?

MADDEN: I think what's changed is that when you ask many of these Americans of color this question, a lot of them are seeing greater opportunities. Greater opportunities in education. Greater opportunities in housing. There's more of an ownership society than there has been in the past. So they're a little bit more hopeful about their role in achieving the American dream. I really have a hard time trying to explain why it is that whites are more pessimistic.


CARVILLE: Well, yeah. Because I think that whites perceive that they're parents were in sort of a better place where if you're a minority, gee, my parents didn't have it so good. Maybe I have a chance to have it better. Stop and think about it, these numbers are totally rational and pretty explainable here. I'm not -- I mean, I'm glad some people feel like things are getting better. My sense is that maybe they think they're getting better but not so much they have such a great shot at it, but their parents didn't have a very good shot at it.

MADDEN: Very right. There seems to be a pessimism about America's preparation for the future. They may feel that we don't have the educational institutions and we're not as competitive as we may have been in the past and so they're a little more pessimistic about our future in a global economy.

MALVEAUX: Okay. I think probably the fact you have an African- American president in the white house is a good sign for many minorities. Thank you very much.

CARVILLE: Could be.

MALVEAUX: Appreciate it.

Sarah Palin's dad is giving advice to voters who are a long way from Alaska, of course. We'll tell you why he's getting involved in a high-profile race.

And there are plenty of Toyota horror stories, but was one man's chilling story about his runaway chilling story about a Toyota Prius just a prank? The carmaker is raising doubts and asking some tough questions.


MALVEAUX: Jack joins us again with the Cafferty file. Hey, Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Suzanne, the question this hour is have you lost track of what's actually in the health care reform bills?

Ernie in Naples, Florida writes, "I never knew what was in it in the first place. I just know if the government came up with it, it can't be good."

Joe in Houston writes, "Not necessary that the commoner know or understand what's in the centrally planned nationalized programs, only the commissars need this information to better design our collective future."

Ann in South Carolina writes, "The only crap I'm tired of is the misrepresentation of the health care bill being put forth by those opposed to health care reform. I think the basic reforms of the bill have remained the same throughout the debate. What has gone all over the place is the distortions."

John writes, "Yes, I lost track the day after the president took office. Why can't we use what's working elsewhere? You know, France, Germany, England?"

Lawrence in Alabama writes, "How can I lose track of what's in the health care bill when I didn't know what was in it to begin with. I'm generally a proponent of health care reform but I refuse to actively support it until someone shows me a clear summary of what's actually in the bill with a nonpartisan discussion. Is that too much to ask for? The days of politicians getting away with just trust me are over."

Carol writes, "I understand it better than I did, and I feel it's essential that it be passed as soon as possible. Too many people are uninsured, have premiums rising unrealistically, and have no preventative care, which will lower the cost for all of us, eventually."

Carol in California writes, "Yes, I've lost track. However, it doesn't matter. This is a major part of Obama's strategy to redistribute wealth from those who work and pay taxes to those who don't. I'm against it, and I'm against any legislator who votes for it."

And Layne writes, "Jack, it's hard to lose track of something that smells this bad."

If you want to read more on the subject, find it on my blog at You go all the time, don't you?

MALVEAUX: Absolutely. Thanks, Jack.

Lots of questions and outrage about a bloody ambush just south of the U.S. border. Next, what we are learning from the investigation of a drive-by shooting that claimed the lives of three people connected with the U.S. consulate in Juarez, Mexico. And also a story about what the future pope knew in the '70s and '80s about an abusive priest in his old diocese.


MALVEAUX: On our political ticker, Senate candidate Marco Rubio is pushing back. Florida newspapers say two days spent in the Florida legislature spent heavily on operating costs and payments to his relatives, but did little to help other Republicans seeking office. During a stop in South Carolina today, Rubio told CNN the whole story is based on false premises. Nevada voters are getting advice from Sarah Palin's father. Chuck Heath is doing a radio ad for one of the candidates in Nevada's Republican primary to pick a challenger for Senator Harry Reid. Heath asked voters to support Danny Tarkanian, the son of Las Vegas basketball coach Jerry Tarkanian. Palin herself has not endorsed any candidate in the race.

And Illinois voters will soon be tuning into the first commercial by Mark Kirk, the Republican nominee for President Obama's old U.S. Senate seat. Kirk points to what he calls a thoughtful, independent and effective record of standing up to special interests and party leaders. His commercial talks about fighting corruption, while it shows pictures of current senator Roland Burris and former governor, Rod Blagojevich.

Senator Harry Reid's wife Landra is out of the hospital after suffering a broken back and nose in a traffic accident. Doctors say she will not be paralyzed. Both Reid's wife and adult daughter were hurt when their minivan was rear-ended by a tractor-trailer Thursday.