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Spy Swap in the Works?; Survey on "Don't Ask, Don't Tell; Solar-Powered Plane Test Flight Under Way

Aired July 7, 2010 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: And you're in the SITUATION ROOM. Happening now --

Echoes of the cold war in claims that a spy swap is in the works right now between Russia and the United States where 10 ,espionage suspects are due in a New York courtroom tomorrow.

Also, a very unusual cortical (ph) pairing, Democratic Barney Frank and Republican Ron Paul teaming up on what they call a pressing issue with huge ramifications. They'll join us live, together, this hour to talk about that and a lot more.

And breaking news, we're following a desperate search in Philadelphia where a tour boat has collided with a barge throwing dozens of people into the Delaware River. We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in the SITUATION ROOM.

We're following a surprising new twist in the case involving 11 people accused in the United States of spying for Russia. Now, there is word that some or maybe even all of them may be swapped for a Russian researcher convicted of spying for the U.S. CNN's Brian Todd is joining us now. He's beginning our coverage. What do we know, Brian, about this alleged spy swap?

BRIAN TODD, CNN CORRESPONDENT: Wolf, the mother of a researcher who's in jail in Russia says he could soon be part of an exchange for suspects in the spy scandal here in the United States. That Russian researcher's name, Igor Sutyagin. He was convicted by the Russians in 2004 for passing secret data to members of U.S. intelligence services in exchange for money. He was sentenced to 15 years. The state department says human rights groups consider Sutyagin a political prisoner.

His mother says, when this situation came up, Sutyagin was forced to sign a paper in which he pleaded guilty to spying that is something that he has previously refused to do. Sutyagin's family has told CNN, he'll be released from jail on Thursday, tomorrow, and then send to London by way of Vienna, Austria. Is this part of an exchange? Well, we're getting a big round of no comments from the Russian government, from officials here at the White House, state, and justice departments, Wolf.

BLITZER: But things, Brian, are moving very fast for those ten Russian suspects accused of spying against the United States, aren't they?

TODD: That's right. The formal indictment against those 10 suspects accused of spying for Russia against the U.S., that indictment has been unsealed. All ten suspects are expected to formally be arraigned in Manhattan federal court tomorrow afternoon. That's the day we were at the federal court house here in Alexandria, Virginia, when a pretrial hearing was abruptly cancelled. Judges in Alexandria and Boston ordered that five of the suspects who were held in those two cities be moved to New York for more proceedings.

Now, with all 10 of these suspects, if any of them reach a plea deal, that could clear the way for a prisoner exchange, but again, U.S. and Russian officials not commenting on whether that's going to happen or not.

BLITZER: Brian Todd thanks very much. Let's dig deeper on this story with our national security contributor, Fran Townsend. She was the homeland security adviser to President Bush. She also worked in the justice department during the Clinton administration. She's also a member of the CIA's external advisory board. Also joining us, our foreign affairs correspondent, Jill Dougherty, who spent many years in CNN Moscow Bureau and knows the subject very well. Guys, thanks very much.

Fran, I'm suspicious about the arrest. They were supposedly watching these ten suspects for about ten years, seeing what they were doing, all of a sudden, they're arrested, and now, quickly, there are talks of a spy swap. Here's the question, was the arrest designed at this time to set the stage for an exchange?

FRANCES TOWNSEND, FORMER BUSH HOMELAND SECURITY ADVISER: No. I mean, it would inconsistent with everything we know about how the intelligence community operates. Look, let's remember, the people who did the investigation are the Federal Bureau of Investigation, the FBI, part of the justice department, and we know for years that the FBI and the CIA don't always share information on common cases much less -- this would require a level of their coordination to take this thing down in an effort to get another spy operated by the CIA release. That's not how it works.

This has been a long-term investigation. The FBI thought some of them were going to flee, and they decided it was time to take it down. Now, it's not beyond our political system to say, let's take advantage of the situation and see if we can arrange a swap. The sorts of things that Brian talked about, the developments today, are very strong indication that there is something of the sort in the works.

BLITZER: Yes, because it looks like -- and correct me if I'm wrong -- based on the public information that's out there that these ten suspects may have been doing all sorts of things but getting really sensitive classified information or working their way to really sensitive sources were not necessarily among those things that they were doing.

TOWNSEND: That's right, but remember, there's a real value in having people here inside of the United States establishing relationships, going to dinners, influencing opinion makers, influencing journalists. These all sorts of things that they can operate undercover here in the United States, it's useful to the Russian government, and so while it's an expensive way to go about that, it's old trade craft and not unusual.

BLITZER: If there were swap and we anticipate there will be one probably, maybe even as early as tomorrow, Jill, there's a long history of the United States and the former Soviet Union now Russia exchanging alleged spies?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Right, there is. You know, it's an ancient tradition, but I think the overall question is, you know, what would it do to the relationship? And that's what we're looking at. The U.S. and Russia now have this reset. Things are looking better, but I do think that -- so, I think that plays into what they are doing. They want this to go away. I think both sides want it to go away, and there is some value to these people. That's the problem.

The question to me, is why are we still doing it? You know, after all of these years. This began back in the Soviet days, apparently, at least 20 years ago. They must feel, the Russians must feel that there was some value if, indeed, these people are guilty, that there was some value to doing this, but in this day and age, you begin to wonder whether that's really money well spent.

BLITZER: But none of us should be surprised, Fran, that the Russians are spying on United States or the U.S. is spying on Russia or a lot of other countries for that.

TOWNSEND: Right. Our friends and allies are not always everything they seem to be, and so yes, this is welcome to the business of espionage, spying each other.

BLITZER: That's what happens. All right. Guys, thanks very much. And I know that there's a tradition in the U.S. intelligence community if there is an American is being held or someone who worked for America, the goal is to get that person out as quickly as possible, and this might happen if they're going to get somebody who worked for the United States.

TOWNSEND: That's right.

BLITZER: Several spy swaps took place during the cold war, and one of the most notable was in 1962 when KGB agent, Rudolph Abell, was freed by the U.S. in exchange for Francis Gary Powers, and American U- 2 pilot shot down and imprisoned by the Soviet Union. In 1969, Britain exchanged Soviet's spies, Peter and Helen Kroger for Gerald Brooke, a British national jailed by the Soviet Union. And in 1986, a different twist, Soviet decedent, Natan Sharansky was included in a swap for several KGB agents, the exchange like the one for powers took place at the Glienicke Bridge connecting Potsdam east Germany to what was then known as West Berlin.

Jack Cafferty is coming up next with the "Cafferty File." Then Congressmen Barney Frank and Ron Paul. They're joining forces to call for major cuts in U.S. military spending. What will it mean for the wars in Afghanistan and Iraq? They're standing by together to join us this hour.

And breaking news, the search for victims on the Delaware River where a Philadelphia tour boat has collided with a barge.

And cording (ph) a basketball superstar with the power to bring millions and millions of dollars to a new hometown. We're going to show you where Lebron James maybe is heading.


BLITZER: Jack Cafferty is here with the "Cafferty File" -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Wolf, it's a joke. It's not funny, but it's a joke. When it comes to reforming Wall Street, Congress decided a big part of the solution is ordering up studies, lots and lots of studies. reports the Wall Street reform legislation which passed the House last week and will likely pass the Senate soon orders various government officials to conduct 68 studies. 68! The topics of these studies include ethical standards for financial planners, short selling, improved insurance regulation, private student loans, and making it easier to sue lawyers, accountants and brokers or bankers who help to commit securities fraud and on and on and on and on.

Lobbyists for the financial sector insist that since this bill is so far-reaching, it requires more studies adding that it's better to take time to do a study than make very important (ph) decision and get it wrong. That's one explanation, but don't kid yourself. Ordering studies is what politicians do when they don't have the guts to make difficult or unpopular decisions. See, the general theme of studies is to delay or kill. It's a strategy that's taught on K-street. That's where the lobbyists make their home. The worst kinds of studies are those that don't require any follow-up or have any deadlines. And many of these so-called studies in the financial reform legislation, well, they fall into that category.

And if you'd like to know how much all of the studying is going to cost, don't bother asking. Congress didn't appropriate any money for the 68 studies nor did they breakdown how much those 68 studies will cost. It is getting to be way past time for the revolution. Here is the question, is the answer to reforming Wall Street another 68 government studies? Go to and post comment on my blog -- Wolf.

BLITZER: Good question, Jack. Thank you. We're following a developing story in Philadelphia where two people are still missing after a tour boat collided with a barge in the Delaware River throwing dozens of people into the water. Commander Ben Cooper of the U.S. coast guard is joining us on the phone right now. Commander, walk us through what we know about what exactly happened?

VOICE OF CMDR. BEN COOPER, U.S. COAST GUARD: Wolf, thank you for having me. What we know is about 2:39 this afternoon, on the Delaware River, a duck boat was hit by the tug and barge. And we're still in the early stages of the investigation on what exactly happened, but we do know like you said, that approximately 37 people were on board at the boat at the time, two, unfortunately, are still unaccounted for and remain missing. Immediately, when that happened, we floated as many resources to the scene, boats and helicopters to the scene as quickly as we could, and it's a multiagency effort.

It was Philly police department, Philly fire, coast guard, New Jersey state police, Camden fire, and the U.S. navy had a boat in the area. They were there as well, and the coast guard helicopters as well.

BLITZER: Is it your information that these two individuals who are still missing in the search is continuing for them were definitely on that duck boat, that tourist boat, and maybe in the water right now? Is that your working assumption?

COOPER: Yes, sir, it sure is. That's our working assumption. We believe that the two missing people missing were on board. They were traveling with the tour group, and we are still out there searching for them right now.

BLITZER: Were the tourists wearing life jackets?

COOPER: I don't believe so, sir. I think they had life jackets on board. In fact, I know they had life jackets on board the vessel, but they were not wearing them at the time to the best of my knowledge.

BLITZER: The captain of the barge, have you spoken with him? What does he say?

COOPER: I believe the captain of the duck boat we have done a brief interviews, but I think, actually both folks have been pretty shooken up, and we're gathering information at this time.

BLITZER: Is there a history of trouble here in the Delaware River in Philadelphia with these boats?

COOPER: What I can tell you is that we do safety inspection every year on these vessels. We do a very extensive exam, including checking their navigation, and drills, and exercises, firefighting capability. We inspect the vessels to make sure they're running the drug testing program. So, we believe these vessels were safe. If they weren't safe, we would not give them a certificate to operate.

BLITZER: We're praying for these two individuals who are missing. It's a 20-year-old and a 16-year-old, is that right?

COOPER: Yes, sir, that's the best of our information.

BLITZER: Let's hope for the best. Good luck Commander Ben Cooper of the coast guard. We'll check back with you.

COOPER: Thank you, Wolf. BLITZER: Congressman Ron Paul and Congressman Barney Frank, two politicians who don't always see eye-to-eye, in fact, they're rarely see eye-to-eye on lot of political issues, but now, they are forging an important alliance to deliver a pointed message about U.S. military spending. They're both standing by to join us together.

And some fishermen helping with the oil cleanup are getting sick, and their ailments caused by -- are their ailments cause by the contact with the spill? Our own Dr. Sanjay Gupta is investigating.

And Lebron James, the world is waiting and watching to see where the NBA star will play next. He will be revealing his decision fairly soon. We'll tell you what we know right here in the SITUATION ROOM.


BLITZER: Lisa Sylvester is monitoring some of the other top stories in the SITUATION ROOM right now. Lisa, what else is going on?

SYLVESTER: Hi, Wolf. The pentagon is asking rank and file troops of what they think about repealing "don't ask, don't tell," and the policy which President Obama wants revoked bans gays and lesbians from serving openly in the military. The Pentagon is sending out a survey asking soldiers if a repeal would impact moral and troop readiness. Several members of the joint chiefs say they want to see survey results before offering advice on a repeal to President Obama.

Militant attacks against the Shiite pilgrims in Iraq are escalating despite tightened security there. Today, at least 33 people were killed in bomb attacks, more than 100 others were hurt. Officials say that the deadliest attack was carried out by a suicide bomber who targeted pilgrims walking to a holy shrine.

And a triple-digit health threat in the Northeastern U.S., temperatures exceeded the 100-degree mark for a second consecutive day from North Carolina to New Jersey. People are trying to keep cool, anyway. They can head (ph) to the beaches, pools, and water parks. The heat advisories are in effect in several states until tonight. At least two deaths are blamed on the heat wave.

And a solar powered plane which one day may circle the globe is now more than half way through of pivotal test flight. Solar impulse is equipped with about 12,000 solar cells and four electric engines. It began a 24-hour test flight early this morning in Switzerland, and if it is successful, project organizers hope to fly the aircraft around the world in 2012. That will be something else, a solar- powered plane, Wolf.

BLITZER: I'm not ready to go in that plane yet. But let's see how nicely it works. Thanks, Lisa. Thanks very much.

Some gulf fishermen helping to clean up the oil spill now say that the work is making them sick. Shortness of breath, dizziness, just a few of the symptoms. Our chief medical correspondent, Dr. Sanjay Gupta, is investigating their complaints. He spoke exclusively today with the head of BP's medical team in New Orleans. Sanjay, what did you learn? What's going on here

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Yes. I mean, he finally sat down and talk to us. Wolf, obviously, a lot of people have been wanting to talk to him for some time. First, he gave us some numbers which were a little higher than the numbers that I've heard before. He says these BP-run clinics, they hire doctors, the BP has sort of overseen -- have treated around 1,500 patients. These are workers, Wolf, as you mentioned. So, that was a pretty high number and that's only here in the state of Louisiana alone. Up those, more than 100 have had more significant illnesses. You know, there has been a lot of concern, Wolf, really surrounding a couple of major issues, the use of respirator masks and ultimately (ph) use of a certain dispersant initially known as Corexit.

You know, he really tried to address these issues. He said, look, you know, the respirator masks are not being use widely. He says sometimes they can pose more of a problem, and they can be beneficial especially in the heat. Although, a lot of workers say they wish they had had them (INAUDIBLE). Again, this is the dispersant, Wolf, that a lot of people were talking about, something not used in Europe. This doctor was pretty candid. He said, yes, there were concerns about that. It contains a particular substance that has no known safe level. So, there's just no exposure to this is considered safe. And that is something else that they're dealing with.

But they're seeing a lot of patients over here, Wolf, coming off the boats, describing the symptoms that you just described, headaches, dizziness, vomiting, sometimes rashes that are persistent, fatigue, and some of them ended up in the hospital as a result. There's also no specific protocol, Wolf, which really surprised me. You got these clinics all over the place. The patient comes in, and one place they make a different treatment than another place. They make a different testing over here versus another place. So, that was also a little bit of lack of coordinated response, Wolf, but that's sort of the medical picture as things stand right now.

BLITZER: Very worrisome development. I know you're going to have a lot more on "AC 360" later tonight, Sanjay. Thanks very much. We'll be watching 10:00 p.m. eastern.

They disagree on most issues, but their teaming up on one that has major, major implications for the wars in Afghanistan and Iraq as well as for the U.S. economy. Congressmen Barney Frank and Ran Paul, they're standing by together to talk to us about their unusual political pairing. Stay with us.


BLITZER: You'd have a hard time finding two lawmakers here in Washington farther apart on the political spectrum than Democratic Congressman Barney Frank and Republican Congressman Ron Paul, but now they are teaming up big time to call for substantial cuts in U.S. military spending.

They write this in a joint article. "We may not agree on what to do with the estimated $1 trillion in savings, but we do agree that nothing either of us cares deeply about will be possible if we do not begin to face this issue now." Representatives Frank and Paul are joining us together from their respective states.

Congressmen, thanks very much for coming in. How did you guys team up to call for this massive cut in U.S. military spending, Congressman Paul?

REP. RON PAUL (R), TEXAS: Well, the two of us have talked about this over the years, but actually Barney was motivated to come to me and ask me about this, about setting up a commission to do the study and set out a program. And it is not going to happen tomorrow. It is a 10-year program. And he asked me if I'd be interested in doing a little bit more work.

And I obviously agreed to do that and I think it is a great idea, because that is what I have been arguing for a long time. And I'm always looking for an opportunity to bring progressive Democrats together with some conservative libertarian types, because there are places where we can agree. And I think this is a very important place to start.

BLITZER: And let's talk about some of the specifics that you have in mind, Congressman Frank. For example, you want the U.S. troops out of Afghanistan, out of Iraq, but you also want U.S. troops out of Germany, out of Japan, out of South Korea, and you think if you start doing this, together with eliminating some expensive military systems, you can save $1 trillion in U.S. tax-payer money over the next 10 years, is that right?

REP. BARNEY FRANK (D), MASSACHUSETTS: Absolutely. What Ron Paul and I are saying, and we have worked together on some other issues, we've both been defenders of people's right to make their own choices without the government dictating to them in a number of areas, whether we think the choices are wise or not.

Leaving aside both Iraq and Afghanistan -- now both Ron and I opposed the war in Iraq and it seems to me that the argument for us staying in Iraq solely to mediate the electoral disputes among the various political parties and religious groups in Iraq has no value.

But over and above Iraq and Afghanistan, you know, NATO was a wonderful accomplishment in 1949. In the years since, Western Europe has gotten strong, the military threat to Western Europe, the Soviet Union, has disappeared. We continue to subsidize the budgets of Western Europe.

There was a degree of interventionism in American foreign policy, the notion that we must be the superpower and we have to intervene everywhere, that Ron Paul and I both think makes no sense. We are committed to defending America's legitimate strategic interests, but we have got a military establishment that has been -- it's not their fault, it's the fault of the political leadership, projected into the worldwide situation far beyond our legitimate military needs.

BLITZER: Here is what the president of the United States said the other day, Congressman Paul, in justifying why the United States right now has nearly 100,000 troops in Afghanistan. I will read it to you. We don't have the clip.


BLITZER: "Our nation is at war, we face a very tough fight in Afghanistan, but Americans don't flinch in the face of difficult truths or difficult tasks, we persist, and preserve. We will not tolerate a safe haven for terrorists who want to destroy Afghan society from within and launch attacks against innocent men, women, and children in our country and around the world."

You don't buy that, do you?

PAUL: No. As a matter of fact, I did a speech last week -- a five-minute speech on the House floor, it was called "The War that Is not a War." And I made the point, it was not a war, it wasn't declared. How can it be a war, we are not fighting against a government? We are fighting against a group of people that don't have planes or tanks or ships or missiles or anything.

It is an insurgency. And the insurgency is all because we are over there. They don't like foreigners, and we were part of their insurgency when the Russians were there and the Soviets were there. We joined Osama bin Laden and we joined them in trying to get rid of them. At that time they were called the mujahedeen and now they are called the Taliban.

No. It makes no sense whatsoever, it's not in the interest of our national security. Even our CIA now says there are very few if any al Qaeda in Afghanistan. They've chased them all over to Pakistan. Where are you going to chase them to? Take over Pakistan? Then Yemen and then Somalia? We just don't need to be the world's policeman. I think we are digging a hole for ourselves.

BLITZER: But, Congressman Frank, the argument is that if the U.S. pulls out 100,000 troops or whatever the U.S. has right now from Afghanistan, the Taliban will almost certainly take over and recreate the situation that existed before 9/11, allowing al Qaeda to come back in and train and...


BLITZER: ... their plans against the United States.

FRANK: I have two responses, Wolf. First of all, you are focusing much too much on Afghanistan. And if you read our letter, we say we are talking about making reductions on a worldwide basis in wealthy nations, Marines in Japan, troops in Germany, other than Afghanistan. That is a separate but legitimate debate.

My own view is that the ability that we might have had to win in Afghanistan -- and I voted for it originally, was dissipated when we then made a major effort in Iraq.

And Ron Paul makes a very important point. If we are to be told that, well, we have to do this to keep this from being a base for terrorism, well, Sudan will be a base for terrorism, Somalia, Yemen, other countries. Frankly, if we were to withdraw the troops from Iraq and Afghanistan and spend about 2 percent of what we spend on those troops in bolstering national security here at home, we would be safer.

But, again, I want to stress, even if people want to stay in Afghanistan, and I think that it is time to withdraw, there are tens and tens of billions of dollars being spent in military scenarios that have nothing to do with Afghanistan, nothing to do with terrorism.

I wish you could defeat them with nuclear submarines, because then we would have beat it, because we have all of the nuclear submarines. The major part of our weapons spending and our military commitment overseas has nothing to do with terrorist and little to do with making us safer.

BLITZER: We are only just beginning, but very quickly, Congressman Paul, why are you and maybe Michael Steele, the chairman of the Republican Party, almost basically the only major Republican figures who are saying what you are saying? Because almost all of the other Republican leaders totally disagree with you?

PAUL: Well, who is going to define the public leadership? You know, there are several Republicans like Walter Jones and Jimmy Duncan and a few others that are opposed to it too. So there are some others.

But it is true, a large number of Republicans, the other night in a debate, they said, oh, 66 percent of the Republicans agree with the party that we have to stay there forever. Well, I mean, that means that 30-some percent of the Republicans are questioning this.

And, of course, there has been several of us who have been questioning it for a long time. And I make the point that this has been questioned by Republicans, this type of policy for many, many years. I often make the point that George Bush ran on a non- interventionist, humble foreign policy, no policing, in the year 2000, because he was tired of Clinton doing it.

BLITZER: But that was before 9/11.

PAUL: Well -- well, why should a tooth be removed? I mean, I don't think you have to change your mind about foreign policy...

BLITZER: because he is the first one who says that...


BLITZER: Hold on, hold on, guys, hold on, one second. I want to take a break, but I don't want you to leave, because we're going to continue this conversation. I was just going to make the point that President Bush always said that everything for him changed as a result of 9/11, but we will pick up that point.

We are going to continue this conversation. There are plenty of pressing issues that Ron Paul and Barney Frank, by the way, don't necessarily agree on, including how to fix the economy. We are going to weigh in on some other topics as well right after this.


BLITZER: We are back with Democratic Congressman Barney Frank and Republican Congressman Ron Paul.

Congressman Frank, the Pentagon's budget for 2010 almost $700 billion, in your estimation, what should it be?

FRANK: Well, for this year, I would like to cut it about 50. And I want to stress, Wolf, I don't want this argument hijacked. The case that Ron Paul and I are making, along with Representative Walter Jones, a Republican, Ron Wyden, a Democrat, is separate, to a great extent, from Afghanistan.

People can differ about Afghanistan. I voted to go in, I think it is bogged down. But we are talking about useless expenditures which are, for geopolitical reasons that I don't think are valid, in NATO, in Japan.

We had, against the Soviet Union, three ways of dropping thermonuclear weapons on them when we were at the height of this war with them. We have all three: nuclear submarines, intercontinental ballistic missiles, Strategic Air Command. I want to be very radical and say to the Pentagon, pick two. I don't think you have to worry about the Soviet Union as much.

So I want to make it very clear, we are talking about NATO. NATO was a wonderful idea. It was formed in 1949. We are as far away from NATO as NATO was when it was done in time from the presidency of Grover Cleveland.

NATO has served its purpose. And I don't -- The New York Times had a very interesting article a couple of weeks ago about the extent to which Europe -- Western Europe, wealthy nations, facing no real threat, can afford very, very good expenditures for social welfare, because America...


BLITZER: So basically, what both of you are saying, bring the troops home from Germany, from Japan, from South Korea, bring them home...


BLITZER: ... from all over the world. It is a waste of money.

FRANK: No, not all over the world. Excuse me, Wolf, I don't argue in extremes. Not all over the world. There are parts of the world where I think...

BLITZER: Where? FRANK: ... there needs to be -- well, for instance, I do want sea and air power to confront the People's Republic of China. I don't want Taiwan overrun. And I think sea and air power can help with South Korea. But South Korea is larger than North Korea, and can put its own troops in. Fifteen thousand Marines in Okinawa are irrelevant to what we want to do with China.

We're not going to land Marines on the Chinese mainland. So yes, there are parts of the world where our presence would be useful, but -- and I think we have to be very clear that we would be there militarily to confront Iran. But it is not any longer reasonable to have troops virtually everywhere.

The general view is America must be the superpower and be everywhere. And that exacerbates our national security, doesn't help it.

BLITZER: All right. I know you agree with that, Congressman Paul, but give me a number that you think would be realistic from your vantage point for the Pentagon's annual budget.

PAUL: Well, you can't do it in one year, but I think we could probably do it with about 30 percent of what we have if we had a non- interventionist foreign policy. And I agree with Barney on his argument, this project that we are dealing with, and I agreed to join in, it does not deal with bringing troops home with -- who are active in battle in Afghanistan. So that is the case.

But I have also made the case that I want to distinguish between military spending and defense spending. We are mostly talking about some military spending. And Barney makes this very important point that we are subsidizing other rich nations for this, and I think that is very important.

Defense spending is very, very important, I believe in defense. It's just that I think the intervention, as a matter of fact, undermines our defense. And that is where I find the problem.

But, right now, I think that this is, to me, you know, a modest approach, but that is where you start. My goals might be slightly different than his goals, but this is a modest approach that we can agree on.

FRANK: One last point, Wolf.

BLITZER: Go ahead.

FRANK: We could save, I believe, tens of billions of dollars by withdrawing immediately from Iraq as soon as possible. There is no logical military or national security justification. We were told that we were going to pull out of Iraq, but because the Iraqi parliament can't come together on a government, we may have to stay longer.

That just is nonsense and we are spending money on their infrastructure, we are spending money mediating their political situation. So, yes, I believe we could save upwards of $10 billion from what is now planned if we simply said, all right, we now begin an orderly withdrawal from Iraq to protect the troops and then we get out.

BLITZER: Because the president says that combat forces will all be out by the end of August and all U.S. troops will be out by the end of next year. That is not good enough, Congressman Frank?

FRANK: No. You know how much it will cost us? You asked me for a figure? do you know how much it will cost us to keep all of the troops there next year? And if there aren't any combat troops, what are they, crossing guards?

By the way, there is also a problem with the definition of "combat troops," as The New York Times points out. There will be troops there that will be engaged in firefights alongside the Iraqis. You know, the Iraqis don't face an external enemy. The Iraqis ought to be able to deal with it themselves, and if they can't, we got rid of Saddam Hussein, there were never any weapons of mass destruction, but, yes, to keep troops there for another year-and-a-half will probably cost $20 billion.

You want a number? There is one. And I don't understand why we should be paying it.

BLITZER: Have you spoken, Congressman Paul, with the chairman of your party, Michael Steele, since his controversial comments came up?

PAUL: No, I have not spoken to him. I went to his defense because I thought he blurted out the truth and I was very pleased with him, and I wanted to encourage him. Of course, the political pressures are such that these things have to adjust a bit.

But let me tell you, there are a lot of people who agreed with what he said and a lot of Republicans agreed. And I think the non- interventionist foreign policy under the stress of this economy, not only is it a necessity, it makes good common sense that we quit doing this. I think I'm going to win this argument long-term.

Our empire is going to end. Our troops are going to come home. I want them to come home in a more calm, deliberate fashion. But I don't want them coming home like they did in the Soviet system, with a total collapse of the system.

Our empire is going to end because we can't afford it. I mean, we are running up these trillions of trillions of dollars worth of debt. And when you look at the total debt, what we are talking about here, what we're saving over a 10-year period, this is a modest suggestion, and there shouldn't be any reason why anybody should disagree with this.

And I find tremendous support, especially with the young people who are inheriting this budget and this debt. They are sick and tired of it, and they don't want to have any part of all of this foreign fighting and militarism that is going on.

FRANK: And by the way, if...

PAUL: I would just like it to happen a little smoother than what is going to happen if we don't do something.

FRANK: And if you don't do what Ron Paul and I suggest, again, aside from Afghanistan, reducing the thermonuclear arsenal to destroy a non-existent Soviet Union, and letting NATO defend itself, then you are going to have to either have a degree of tax increases that could damage the economy and impinge on people, or make cuts in vital domestic programs that impinge on the quality of life. And I don't understand why we should continue to subsidize Western Europe and Japan, leave aside Afghanistan.

BLITZER: Congressmen, a good discussion. We are going to continue this discussion down the road. Barney Frank, Ron Paul, thanks for coming into THE SITUATION ROOM.

FRANK: Thank you.

PAUL: Thank you.

BLITZER: It is a decision that could bring hundreds of millions of dollars to a cash-strapped city, so where will NBA free agent Lebron James decide to sign?

And a family feud fizzling out as Levi Johnston apologizes to the Palins. Jeanne Moos takes a most unusual look.


BLITZER: The NBA star Lebron James is about to answer a question that a lot of people have been asking for months now. Will the two- time MVP free agent stay in Cleveland or take a multimillion dollar offer from another team? James will reveal the decision in an unprecedented TV program tomorrow night. Mary Snow is standing by with the latest information we are getting. What do we know, Mary?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, we do know this, that the announcement is going to come tomorrow on ESPN during an hour special. Just about everybody is weighing in. President Obama is hoping that Lebron James will pick the Chicago Bulls, but the guessing game continues and earlier today in Ohio, James did not offer any clues.


SNOW: It was a young assignee he made up his mind after being courted by six NBA teams or not. While Lebron James looked relaxed at his basketball camp in Akron, Ohio, Cleveland is on pins and needles waiting to hear if he'll stick with the Cavaliers or pack his bags.

GREG BRINDA, ESPN CLEVELAND: If he goes, the mood is going to be really, really bad. Right now, people are just, you know they can't wait for the hour to come to finally know what he is doing.

SNOW: Despite Ohio's begging where the governor joined the chorus, speculation turned south to Miami where two of James' NBA friends are heading. On YouTube, Dwayne Wade said he and Chris Bosh will sign with the Miami Heat.

DWAYNE WADE: At the end of the day my heart led me back here to Miami.

SNOW: Fox Sports radio show host Steohen Smith is convinced James will follow.

What will it mean for the city of Miami if he goes there?

STEPHEN A. SMITH, FOX SPORTS RADIO HOST: Instant millions. You're talking about paraphernalia being sold. You're talking about hotels being filled and the restaurants being filled and the whole night scene improving dramatically and millions and millions upon dollars generated for the respective city.


SNOW: That is one reason why cities like New York tripped over themselves to court Lebron James. One University of Illinois economics professor did the math on potential revenue for cities assuming James brought his team deep into the playoffs. The larger the population, the higher the number; Cleveland by his estimate $100 million; Miami, $275 million. Chicago and New York stand to gain even more. Cleveland has already felt the financial impact.

BRINDA: You are probably getting 6,000 to 7,000 more fans per game after Lebron than before Lebron, and that is a lot more money that they are generating per game.

SNOW: While Cleveland is crossing its fingers, what does Miami think?

UNIDENTIFIED FEMALE: I am tired of hearing the name Lebron. It is over. It is played out. It is -- he is milking this for all he is worth.

UNIDENTIFIED MALE: My friend just called me and he's like I'm buying Heat season tickets, because that is just with Dwayne Wade and Chris Bosh and I can only imagine when Lebron James comes. It will be amazing.


SNOW: Well, Wolf, don't count out New York, because the hopes for the Knicks were live on Wall Street and shares of Madison Square Garden Incorporated which is the company who owns the Knicks, those shares were up 6 percent with speculation that Lebron James will go to the Knicks.

BLITZER: Well, it is going to be a great story once we know where he is going. Too bad he is not coming to Washington, because the Wizards could have used him, but I suspect that is not going to happen. All right Mary. We'll check back with you tomorrow to get some more information. Jack Cafferty is coming up next with your e-mails. And Levi Johnston apologizes for a youthful discretion but which one? CNN's Jeanne Moos is going to take a most unusual look.


BLITZER: Time to check back with Jack for the Cafferty file. Jack?

JACK CAFFERTY, CNN CORRESPONDENT: Question this hour, is the answer to reforming Wall Street another 68 government studies?

Randy writes, "No, but it's the answer lulling the public to sleep while Congress and their corporate masters walk away with our treasury. Do we need any more evidence that the game has been rigged ever since FDR?"

Carol writes from Massachusetts, "As am erstwhile managing director of one of the largest banks in the world, I welcomed as many studies as possible. That would give me plenty of time to make gobs of money unfettered by those annoying regulations."

Reid writes, "If we didn't vote a complete, and that means total change of Congress in November, we deserve everything we get including more studies."

Tammy writes, "How much studying does it take to figure out that bankers and traders on Wall Street are greedy and corrupt? I'm pretty sure it's a no-brainer. Maybe they ought to conduct a study on how fed up Americans are with their huge bureaucratic bought and paid for government. I'm sure the results of that study would be mind blowing."

Jason writes, "Congress ought to authorize a study that examines the utility and feasibility of a nation firing an entire inept and cowardly elected assembly through a quick online vote. I can't say I have a plan for their immediate replacement, but if we woke up tomorrow and there was no Congress, how many of us would really notice?"

Phil in Florida writes, "We all know Congress is owned by corporations and Wall Street. They must not hinder the money getting to the rich. Having studies makes it look like they care."

Tim says, "I'll have to study that and get back to you."

If you want to read more on this, you'll find it on my blog,

BLITZER: All right. Jack, thanks very much. See you back here tomorrow.

A call to arms by the editor in chief of the Huffington Post. Arianna Huffington wants Americans to punish big banks who played a role in the financial meltdown. She explains how at the top of the hour on "JOHN KING USA." And a most unusual connection between Lindsay Lohan and Levi Johnston. Both are profusely apologizing. We're going to tell you why right after the break.


BLITZER: Here's a look at some Hot Shots. In London, mourners laid flowers at a memorial to bombing victims. Today marks the fifth anniversary of the terrorist attack by suicide bombers in the London subway.

In Kabul, a woman travels through crowded city streets while carrying her child.

In Moscow, children keep cool in a fountain as temperatures approach 90 degrees.

In Germany, look at this, an octopus correctly predicts Spain's victory over Germany in today's world cup match. This was his sixth correct world cup prediction. Spain will play the Netherlands in the world cup finals. Hot Shots, pictures worth a thousand words.

A tale of two apologies, Levi Johnston and Lindsay Lohan. CNN's Jeanne Moos takes a most unusual look.


JEANNE MOOS, CNN CORRESPONDENT: Remember the days when the televised feud between Levi Johnston and his almost stepmother was hot?

LEVI JOHNSTON: Sarah really didn't like me.

MOOS: Hot.

SARAH PALIN: I hear he goes by the name Ricky Hollywood now.

MOOS: Hot.

JOHNSTON: I have things that would get her in trouble and could hurt her.

PALIN: He doesn't have anything on me.

JOHNSTON: I'm taking it off.

PALIN: I call that porn. Yes.

MOOS: Now he's gone from pornographic to apologetic. Levi told "People" magazine, "I publicly said things about the Palins that were not completely true." The trouble is, he didn't specify which things were what he called youthful indiscretion. Leaving us to ponder which ones were lies. For instance, was this one true or false?

JOHNSTON: Sarah was never home. Todd was always out doing his thing. So there was very minimal parenting in that house. MOOS: Or maybe he made up this one.

JOHNSTON: When she called her kid retarded.

PALIN: That's heartbreaking to know he would say such a thing and that's not true.

MOOS: Or maybe this was the whopper.

BARBARA WALTER: One of the worst things he said about you again and again is that your marriage is terrible and that you're on the verge of divorce.

PALIN: Yeah, I don't know how he'd be making that one up.

MOOS: Or could he have been lying when he answered this question about Sarah Palin --

UNIDENTIFIED MALE: And do you think she's an honest person?

JOHNSTON: Yes, I do. For the most part.

MOOS: Now the feud seems to be between Levi and his sister, Mercedes. She says he won't let her seat baby if he doesn't stop blogging about the Palins. Levi's sister seems to think he's lying about lying. She blogged, "Not only is he being controlled like a puppet, but saying that all his comments and stories were lies is absurd." But Levi's not the only one groveling these days. There was Lindsay Lohan groveling at her sentencing for violating probation by missing alcohol counseling sessions.

LINDSAY LOHAN: I respect you and I've been taking it seriously.

MOOS: She'd be taking it more seriously if folks hadn't noticed.

UNIDENTIFIED FEMALE: On her fingernail the middle one.

MOOS: The f-bomb on both middle fingers. Was it a message for the judge, the press? A spokesman for the judge said the nails don't warrant a reaction. Still, f-bombs on your fingers make crib notes on your palm seem downright quaint.

Jeanne Moos, CNN, New York.


BLITZER: Remember, you can always follow what's going on here in THE SITUATION ROOM behind the scenes. I'm on twitter. Follow my tweets at WolfBlitzerCNN all one word. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM. "JOHN KING USA" starts right now.