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Scraping By In Poverty; Medical Alert: More Uninsured; President To Tap Consumer Protector; Tax Cut Fight; Creating Jobs or Exporting Them; Is Obama Trade Policy Bizarre?

Aired September 16, 2010 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: Rick, thanks very much.

Happening now, more Americans than ever are poor and in need. This hour, startling new figures on the economic crisis in the country. We'll hear how families are struggling to survive every single day.

Also, made in America -- President Obama sets a new goal for selling U.S. products to other countries.

Will his trade policy create more work at home or will it send jobs overseas?

And a papal trip 500 years in the making -- the pomp and the controversy surrounding Pope Benedict's visit with Queen Elizabeth.

I'm Wolf Blitzer.


There is powerful new evidence today of how much Americans are hurting and why so many voters are so anxious just weeks before the midterm election. The government reports -- look at this -- 43.6 million people were living below the poverty rate in 2009. That's the highest number ever recorded. And the number of people without health insurance climbed last year, for the first time in two decades, to 50.7 million. Lenders are -- have repossessed more than 95,000 homes in August. That's another record high, although the number of properties entering the foreclosure process dropped.

A new attempt today to ease some of the economic pain. After months of debate, the Senate passed a $42 billion bill designed to increase hiring by small businesses. It's a hard-fought win for the White House -- probably the last legislative victory before election day.

Let's talk about what's going on and what it's like to live below the poverty level. For a family of four, it means surviving on less than $21,954 a year.

Poppy Harlow of CNN Money has been talking to people who have to struggle every single day.

She's joining us from Coney Island in New York -- it's very depressing, Poppy, to hear how folks are struggling. And the numbers keep going up and up and up.

POPPY HARLOW, ANCHOR, CNNMONEY.COM: They do, Wolf. It's an incredibly hard reality to digest. But it is the reality here for so many Americans. As you said, 44 million Americans, nearly, living in near poverty every single day. But those numbers do not even begin to tell this story. Some of them are your neighbors, some of them even your colleagues -- working Americans making hardly enough to live on.

We spent this afternoon a named Ann Valdez.

She lives right across the street here in this public housing. She has three children and she's fighting her way out of poverty.


HARLOW: President Obama said today the number of people living in America, in poverty, is unacceptably high.

ANN VALDEZ: This is true. Poverty is really very serious. It's -- it's very demoralizing. It's made to feel demoralizing, hurtful. There's too much going on and there's no jobs available. No one wants to live the way we have to live.

HARLOW: How do you get by every day, Ann?

I mean what do you live on?

A. VALDEZ: I live on approximately $5,000 a year and sometimes I have to skip a meal to make sure I can save the money so that my son Brian has what he needs. And if it wasn't for my sister, my son would not have half of his school supplies or any of his clothing for school.

HARLOW: Joseph, how has it been for you?

Do you feel like you grew up in poverty?

JOSEPH VALDEZ: Yes. But I wasn't deprived a good childhood, so I'm very happy. It doesn't matter where you come from, if you have a good childhood, money isn't an issue.

A. VALDEZ: I gave everything I can to my children.

J. VALDEZ: Yes, you did.

A. VALDEZ: If I had to go without, it's OK, as long as my children had.

HARLOW: If you could have one message to send to the people watching, what would it be?

A. VALDEZ: My message would be never judge a book by its cover. Never make assumptions. Come outside. Meet the people in your community where you live. Meet the people in the communities where you work. And meet the people in the communities where you represent.

HARLOW: See the face of poverty.

A. VALDEZ: See the face of poverty.


HARLOW: And, Wolf, that's just one story of nearly 44 million Americans going through this as we speak. Ann has been looking for work since 2005. Her unemployment benefits ran out four years ago. She has two years of college experience, can't get a job. And I think the most troubling statistic that we got in the Census report today, Wolf, is the fact that the biggest increase we saw in poverty was among children in this country -- people under 18 years old. More than one million American children now living in poverty, Wolf. And the concern is that as the government runs out of money to pay for programs that help people in poverty, what is to come?

Is there worse ahead -- Wolf.

BLITZER: And so many millions of American families surviving simply on food stamps from the federal government.


BLITZER: Poppy, thanks very much.

Another enormous financial burden weighing on millions and millions of the people in the country right now. As we told you, the number of people without any health insurance has gone up for the first time in two decades.

Here's our senior medical correspondent, Elizabeth Cohen.

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Wolf, the number of uninsured Americans is now at its highest since 1987.

Let's take a look at the new numbers that just came out today.

In 2008, there were 46.3 million uninsured Americans. That number went up in 2009, to 50.7 million uninsured Americans.

There are, of course, several reasons for this increase. One of the main ones is that millions of people lost their jobs in 2009, and with those jobs, their employer-related health insurance. And, of course, as the economy got worse in 2009, fewer people could afford to buy their own health insurance.

Now, of course, health care reform was passed earlier this year and it gets implemented starting this month. It will be interesting to see, in 2010, if those numbers go down because of health care reform -- Wolf.

BLITZER: Elizabeth Cohen, thank you.

CNN has learned that President Obama will officially make a rather controversial appointment tomorrow. He's expected to name Harvard Professor Elizabeth Warren as a special adviser to help set up a new consumer protection agency. Instead of making a formal nomination, he's creating the role especially for her so she can build the agency from scratch.

The move is ticking off, though, many Republicans and even some Democrats, who say Warren is too liberal and lacks government experience. Some Democrats, as I said, aren't very happy, either.

Our national political correspondent, Jessica Yellin, has been spent a lot of time working on this story.

First of all, this appointment will affect a lot of Americans?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Yes. This agency, Wolf, is designed for anybody who has a credit card, a car loan, a mortgage. It is supposed to give -- create this agency that has broad powers to check on financial firms and make sure that they are protecting consumers and kind of avoid the kind of mortgage crisis we just went through.

BLITZER: It would have been, though, much more controversial if the president formally would have nominated her to be the director of this agency.

YELLIN: Right, Elizabeth Warren. Now, Elizabeth Warren, I've interviewed her many times. I've been talking to her about this for more than a year, because she came up with the idea -- the plan for this very agency. And she's beloved by progressives.

But the White House knew that if they nominated her for the job, she would face a fierce Senate confirmation. It could drag on for lord knows how long. And then, the White House says, she wouldn't have been able to help set up the agency at all. So this way, she has a role and it avoids a confirmation hearing.

BLITZER: So is anyone happy right now?

YELLIN: That is the question of the day. The answer is, it looks like this could make both sides pretty unhappy. So progressives are OK with it now, because they think that, really, this is a back doorway of giving Elizabeth Warren the director job, but avoiding confirmation.

I've been on the phone with progressive activists all day, who say that if someone else is eventually nominated for the director job, they're going to be very upset and the president will have upset the base.

Now, moderates in the president's own party, like Chris Department of Defense, well, they're saying the president better nominate someone director fast so it doesn't look like he's skirting the Senate approval process. So, eventually, the president is either going to have to name Warren, which will upset one side, or not name Warren, which will upset progressives. It looks like he's kicked that can down the road. But it will be a fight someday.

BLITZER: When we say progressives, we're meaning liberals out there who -- who support her and really wanted her to be formally nominated?

YELLIN: Yes. Yes.

BLITZER: Thanks very much, Jessica, for that.

A doctor shot inside one of the most prestigious hospitals in the nation -- it's one of our top stories.

And you're going to find out why former President Jimmy Carter is pointing a direct finger of blame at the late Senator Ted Kennedy.

Stay with us.



BLITZER: Let's go to Jack.

He's got The Cafferty File right now -- Jack.

JACK CAFFERTY, CNN CONTRIBUTOR: Most Americans, Wolf, think that the United States is stuck in a recession and they don't think this economy is going to improve any time soon.

A new "USA Today"/Gallup Poll shows 82 percent of those surveyed say the economy is still in a recession. Fifty-four percent expect things to be the same or worse in a year. That number is up sharply from 35 percent who felt that way a year ago. Forty-five percent say the economy will be better or fully recovered in a year. That number is down from 65 percent a year ago.

The poll shows Americans' negativity about the economy has grown, with Republicans, Independents and Democrats all sounding more pessimistic about the future of the economy than they did a year ago.

And you don't have to look very far for the reasons either. Although the economy has posted four consecutive quarters of growth, the growth has been sluggish and inconsistent and weak. Then there is the continuing high unemployment rate -- close to 10 percent -- and soaring underemployment. Some say it's close to double that.

As we told you yesterday in The Cafferty File, poverty is now reaching record levels not seen in decades in this country.

All this goes to show why Americans see the economy as the most important problem facing the country. "It's the economy, stupid" -- and the most important issue in the midterm elections.

No doubt, President Obama and the Democrats facing an uphill battle to prove to the voters ahead of those midterms that the billions and billions of dollars spent to help jump-start the economy are actually doing that.

So here's the question: Are we stuck in a recession that's not going to end any time soon? Go to and post a comment on my blog -- Wolf.

BLITZER: A good question, Jack.

Thank you.

The House speaker, Nancy Pelosi, is predicting today Congress will extend tax cuts for the middle class. But she's getting push back from within her own party, some members facing tough reelection fights. The 31 House Democrats are now siding with the Republicans, urging the speaker to extend the Bush era tax breaks for people of all income levels, including the wealthy.

House Republican Leader John Boehner says Pelosi should allow an up or down vote on extending all the tax cuts.

Let's bring in our senior political analysts, Gloria Borger and David Gergen -- Gloria, "The New York Times" had a poll asking if it was a good idea or a bad idea for the Obama proposal to let the tax cuts for the wealthy -- those earning more than $250,000 a year -- expire. Fifty-three percent thought it was a good idea. Thirty-eight percent thought it was a bad idea. Although I take it both sides think they have politics on their side.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Right. Well, you know, Democrats -- and rightly so -- are glomming onto those polls and saying, look, the public really supports us in this. They care about tax cuts for the middle class. They don't care about extending tax cuts for the wealthy.

Democratic pollster, Geoff Garin, sent a memo to Democrats saying, turn this into an issue of priorities and we say our priorities are with the middle class, not the wealthy.

But the Republicans I talk to are scratching their heads, saying why in the world would Democrats talk about tax increases for anyone, even if it's the wealthy, this close to an election?

They think it's right in their wheel house and they're happy to have the argument.

BLITZER: Because if you don't extend the tax rates for the wealthiest 2 or 3 percent, you increase the debt -- the national debt by $70 billion over the next 10 years. That's the counterargument.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: That's -- well, that's the long-term. But I think -- I think you have to distinguish between the national polls and what actually is going on in some districts, where a tax increase is going to be unpopular for a conservative Democrat.

That's why 31 Democrats in the House signed that letter yesterday. And what they pointed out is that a third of the people who would be affected by this tax increase are small business owners.

That's right. And they said, look, you know, maybe only 3 percent of the population is paying this tax but they account for 25 percent of national consumption and consumption is what drives this economy.

So you know, there are these counterarguments out there for some Democrats and some districts make it very difficult.

Gloria, I think you feel that there's no majority for anything out there.

BORGER: I don't -- I don't think there is. If you were to talk to people in the Senate and say, OK, what's going to pass and what's not going to pass, you'll have Mitch McConnell who says let's extend the tax cuts for everyone, Harry Reid who says let's just do it for the middle class.

Folks I talked to -- so there aren't the votes for either of those measures --

BLITZER: Before November 2nd.

BORGER: -- so that you could wind up having this in a -- talking about --

BLITZER: And let's be precise. If they don't pass legislation before January 1st the tax rates will go up for everyone.

GERGEN: Wolf, I think it's a slam-dunk guarantee that they will do something about the middle class tax cut before January 1. I don't think taxes are going to go up on the middle class. I think there are a lot of these other issues that will are going to be very, very contentious.

BORGER: And don't forget. You have the deficit commission that's got a report.

GERGEN: Right.

BLITZER: In December.

BORGER: In December. And that -- you know that may play into this a little bit because, don't forget, there is a deficit issue. And again it's an issue the Democrats are trying to use against the Republicans. So if you care so much about the debt --

BLITZER: So who wins going into November 2nd on this issue? If there's no -- there's no legislation passed, there's no decision, who wins? The Democrats or the Republicans?

GERGEN: The national polls certainly suggest this is, in general, a good issue for Democrats even though in some districts it's not. But you know there is one other thing about it. This is taking the tension away from Tuesday night and the Tea Party.

And do you really want to lose that argument as a Democrat? Don't you want to keep that up on the front page? Civil war?

BORGER: Talking about the Tea Party.

GERGEN: Yes. Extremists, you know, we got to man the barricades, the barbarians are coming. If you're a Democrat, don't you want to be arguing about that, too?

BORGER: Well -- and then Republicans are talking now about civil war in the Democratic Party, right?

GERGEN: Yes, yes, exactly. Exactly.

BORGER: because the Democrats don't agree on this tax cut issue.

GERGEN: So glance that issue but I think overall it's good for most Democrats.

BORGER: It's probably -- good for them. I don't think it's a game-changer, though, for the midterm elections.

GERGEN: I think that's right.

BORGER: I don't think it's a game-changer the Democrats wanted to --

BLITZER: The game-changer is jobs, jobs, jobs.

GERGEN: Exactly.

BLITZER: There's no increase in jobs.

GERGEN: And we've got another jobs report before the election.


BORGER: Right. Right.

BLITZER: That's a huge issue, guys. Thanks very much.

We're monitoring some of the other top stories out there including the latest on a raging wildfire in Southern California. It's threatening hundreds of homes and prompting new evacuation. Stand by.

And will President Obama's controversial trade policy end up creating more work at home or will it send jobs overseas? We are digging deeper.


BLITZER: Fredricka Whitfield is monitoring some of the other top stories in the SITUATION ROOM right now.

Hi, Fred. What's going on?

FREDRICKA WHITFIELD, CNN CORRESPONDENT: Hello to you, Wolf. Hello, everyone. Well, police have just identified the suspect in a shooting at Johns Hopkins University Hospital in Baltimore, Maryland. Police say Paul Warren Partis shot a doctor after receiving bad news about his mother's condition.

The doctor's injuries were nonlife threatening. Authorities say Partis then fatally shot his mother before killing himself.

And Tropical Storm Karl is now a hurricane in the Gulf of Mexico. The category 1 system could intensify before reaching the Mexican coastline. It is forecast to make landfall along the coast tomorrow night. Hurricane warnings are in effect for parts of the region.

And officials say a raging wildfire in Southern California is now 65 percent contained. The fire, which has burned more than 8,000 acres and destroyed at least one home, is prompting evacuation.

Another 250 structures are being threatened. The governor has declared a state of emergency.

And the mother of the late pop star Michael Jackson has filed a wrongful death lawsuit against the company behind his planned comeback tour in the UK. In the suit, Katherine Jackson claims that AEG Live was responsible for her son's health because it hired and directed his doctor Conrad Murray.

Murray is facing an involuntary manslaughter charge in Jackson's 2009 death. AEG has not commented on the case -- Wolf?

BLITZER: Sure this is not the last of it. There'll be much more.

Thanks very much for that, Fred.

With the United States' economy down in the dumps, why is the United States' government now loaning money to other countries?

And Pope Benedict lands in London. It's an historic visit for the Catholic Church and for the people of England, and it's causing, though, some major controversies.



Happening now, a new government study reveals disturbing new data about the rising use of illegal drugs in America. Is the talk of legalizing marijuana be party to be blamed? Jeanne Meserve is investigating.

Their candidates running for political office, some of them recruited from the streets, now some Democrats allege they're part of a major GOP sham.

I'm Wolf Blitzer. You're in THE SITUATION ROOM. The closer we get to Election Day the more President Obama is talking about unemployment. Today he is zeroing in on jobs and products made in America. But critics say there's a flaw in his strategy that could actually put Americans to out of work.

Brian Todd has been looking into that for us.

So, Brian, what are you finding out?

BRIAN TODD, CNN CORRESPONDENT: Wolf, we all know the pressure the president is under to create more jobs. He is looking for ways to do that. One of his key ideas is to boost exports, but one of the president's proposals for doing that is getting some real brush back.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: America is going to bat as a stronger partner and a better advocate for our businesses abroad.

TODD (voice-over): The president's goal? Get American exports to double in just five years with government help, but one controversial part, more trade pacts.

President Obama is hoping to get Congress to approve a free trade with Colombia and South Korea, but not everyone is sold that free trade means more jobs.

Here's how the debate shapes up. On one side, you've got a new study trumpeted by unions and consumer advocates saying this.

TODD TUCKER, PUBLIC CITIZEN: The net impact of the U.S./Korea and U.S./Colombia trade deals is expected to be negative, both for the U.S. trade deficit and for U.S. jobs.

TODD: The study from the group Public Citizen claims when America has signed free trade agreement, the trade gap has only gotten worse faster, making unemployment even worse.

TUCKER: Over the last decade, the U.S. has lost nearly 5 million manufacturing jobs. NAFTA and trade agreements like the World Trade Organization as well played a key role in aggravating these global imbalances.

TODD: On the other side, the U.S. Chamber of Commerce, which hopes trade deals would mean more exports of U.S. goods. They say the Public Citizen's study is specifically flawed.

JEFF SCHOTT, THE PETERSON INSTITUTE: Trade agreements create a lot of new opportunities and a lot of new jobs. On balance, we have a net plus, but we're not very good at helping those who are disadvantaged and lose their jobs. And because of that, this is a big backlash.

TODD: Also proposed by the president, an increase in loans to foreign companies to buy American products, like helping a foreign airline buy a Boeing. But does that amount to U.S. taxpayers helping foreign airlines compete against American carriers?

SCHOTT: There is a net gain for doing this and this is a way of catching up to what other countries are already doing.


TODD: The president is trying to get a free trade deal with South Korea done by November when he's going there for a summit, but the administration may already have its hands full during the final push of a campaign season focused on whether the Democrats have done enough to create jobs -- Wolf.

BLITZER: And amidst all of this the Treasury secretary was up on Capitol Hill today -- Timothy Geithner -- and there was criticism on his strategy, how tough the U.S. should actually get with China.

TODD: That's right. China is a key component of all this. Geithner moving a little bit closer to getting tougher, not officially closer yet. He did say that China's currency is undervalued but he's not going as far right now as to say they are currency manipulators. Not yet. But that may be coming.

BLITZER: It's a debate. All right. Thanks very much, Brian.

There are a lot of questions about the president's trade policy right now and whether it will protect America's interests.

And joining us now, Fred Hochberg. He is the chairman and president of the Export-Import Bank of the United States.

Fred, thanks very much for coming in.


BLITZER: You saw that article that Dinesh D'Souza wrote in "Forbes" magazine. Among other things, he wrote this. An article about the president, what he thinks. The president's actions, he says, are so bizarre that they mystify his critics and supporters alike. The administration supports offshore drilling but drilling off the shores of Brazil. Not so the oil ends up in the United States. He is funding Brazilian exploration so that the oil can stay in Brazil." Now, the export/import bank is involved in this. What is going on here?

HOCHBERG: What the export/import bank does, Wolf, we make loans so that American companies can sell products overseas. We make loans that sell American products, create American jobs, whether they be in Brazil, Mexico, India, throughout the world. Sometime they use an oil ex-sport racial, sometimes using it to build railroad station, airports, the full range of goods and services.

BLITZER: So the purpose is to get these foreign companies to buy U.S. products to increase American ex-sports and create jobs, but there's no guarantee that they are going to do that these foreign countries, right? HOCHBERG: The only way -- the loans we make stay in America. They buy goods, they buy services, they buy -- in the case of offshore drilling, helicopters, boats, drill bits, the whole range of services, they buy them here and we ship those goods overseas. If we sell them $2 billion worth of product, that creates about 15,000 jobs in America. This is about creating jobs here.

BLITZER: And you are a firm believer in what's called free trade, the NAFTA agreements, CAFTA.

HOCHBERG: Free trade, worldwide, this year become 600 free trade agreements are going to be signed throughout the entire world from Latin America, between Latin American countries, Latin American Africa, Asia, different countries. The world is increasingly dropping trade barriers to increase the flow of trade.

BLITZER: But the concern is that American jobs are being exported, that states like Ohio or Michigan are losing manufacturing jobs because the United States, in effect is helping these other countries take these manufacturing jobs.

HOCHBERG: Yes, I don't see it that way. First of all, what is hard for people to remember, we are the largest manufacturer of goods and services in the entire world.

BLITZER: We have lost a lot of jobs.

HOCHBERG: We may have lost a lot of jobs, we make more goods and more services, more than china, more than Germany, we don't expert enough. We make more goods, make more service. They export faster than we are. What we make is capital goods. We make farm and commodities, we export a lot of commodity, we export airplanes, farm equipment, construction equipment, power plants, import television, ties, clothing, sneakers, stuff like that.

BLITZER: You saw the studies that came out by Public Citizen, a left-leaning group, which said the countries which we have free trade agreements, they are hurting us more than the countries that we don't have these free trade agreements.

HOCHBERG: I have seen the reverse. I have seen the reverse. That in countries where we actually have free trade, ultimately trade improves, trade increases a greater flow of goods and service. Increasingly, Wolf, we are seeing manufacturing goods, components from one country, assembled in another country and the manufacturing has been completed. The trade barriers and the tariffs simply impede what business is doing. As a businessman, I se that happening all over the world.

BLITZER: But meanwhile, our trade deficit increases and increases. You wrote a piece in Huffington Post this week where you said, you know what that is not that important this number of the trade deficit. But if you tell union workers and others, it is pretty important --

HOCHBERG: No, what's important, Wolf, is the exports. Exports are up 18 percent since January. 18 percent. I can't think of another time in U.S. history where exports have are grown so much.

BLITZER: But imports have grown even more.

HOCHBERG: But what we are going to do to fix exports and we're doing to fix imports are entirely separate things. Exports, we have to get U.S. companies out there bidding for jobs. 1 percent of U.S. companies export. We have got to get more companies out there selling their goods and services.

BLITZER: There was one comment on Huffington Post reacting to your article. "What a rosy picture, our trade imbalances on the incredible one-sided trade agreements we have destroyed our manufacturing base and are exporting jobs much faster than products."

HOCHBERG: We are -- well, we have gone through a bad period there is no doubt about t we have gone through a period, not known how to create jobs, probably for 20 years in this country. We are now reversing it the national export initiative today, the president announced is a push, a push for exports, a push for manufacturing, we just helped ford motor company with as 250 million loan to export Ford Taurus and, blowers to Mexico Escanaba and at rest of the world. We are, for the first time, make cars the world wants to buy. We are making airplanes, Boeing is still the world leader of aircraft. We make better construction equipment, four major tractor and construction companies in the world, three of them are American, made here. So, the problem we see in our daily lives consumer products, as I said, televisions, clothing is all imported. What we are selling, the infrastructure that powers the world is American goods and services.

BLITZER: Fred Hochberg, chairman and President Of the export/import bank of the United States. Good luck.

HOCHBERG: Thank you. Thanks, Wolf.

BLITZER: There may be some sputtering going on right now in the Obama administration's efforts to jump start Middle East peace talks.

And a high-speed chase leads to a beating by police all captured on videotape. Stand by for the shocking images from Dallas. Some of our top stories, just ahead.


BLITZER: Fredricka Whitfield is monitoring some of the other top stories in THE SITUATION ROOM right now. Fred, what else is going on?

FREDRICKA WHITFIELD, CNN CORRESPONDENT: All right. Middle East peace talks have hit a potential roadblock. Secretary of state Hillary Clinton is proposing that Israel extend the moratorium on controversial settlement construction for another three months. The Palestinians are threatening to stop the talk it is that doesn't happen. Reuters reports that Arab league is now pack backing Palestinians' refusal. The moratorium is scheduled to end next week.

And new concerns about the virus that causes AIDS. Scientists at the University of Arizona and Tulane University have found that an ancestor of the virus which infects monkeys thousands of years older than previously believed and therefore, isn't likely to stop killing humans in the near future much the research appears in tomorrow's issue of the journal "science".

And this 19th century painting is now the subject of a dramatic New York mystery. According to the "New York Times," the half-million dollar portrait of a girl disappeared, then resurfaced this week with. A doorman says he found the artwork in the bushes outside his building. Police believe his story but the bigger question about initially happened to it remains unanswered.

Take a look at this don't adjust your television set. Measures just 33 inches from hind to foot it is the world's smallest cow. And it is just one of many unusual characters that made it into the 2011 edition of the "Guinness Book of World Records" released today. Take a look at this picture of the longest dog tongue. Who knew there would be a record for something like this. And the largest collection of Smurf memorabilia. So, a little bit of everything for just about everyone, Wolf.

BLITZER: These people have a lot of free time, I guess, to check all that stuff out. All right. Look at that. Thanks very much. Thank you, Fred.

A startling new report shows that poverty on the rise in the United States of America. We are going to show you the conditions some people are living in not very far from the White House.

And former president Jimmy Carter points blame at the late Senator Ted Kennedy over health care. You are going to want to hear what he is saying. You are in THE SITUATION ROOM.


BLITZER: Let's get right to our strategy session. Joining us are two CNN political contributors, Democratic strategist James Carville, the Republican strategist, Alex Castellanos. Guys thanks very much for coming in. James, I will start with you. Jimmy Carter, the former president in a new interview with "60 Minutes" is reviewing history and he is going after the late Senator Ted Kennedy for killing health care reform back when Jimmy Carter was president. Listen to the former president.


JIMMY CARTER, FORMER PRESIDENT OF THE UNITED STATES: The fact is that we would have had comprehensive health care now had it not been for Kennedy's blocking the legislation I proposed in 1978 or '79. It was his fault. Ted Kennedy killed the bill.


BLITZER: Pretty strong words. You remember those days. He blames Ted Kennedy because he was competing for the Democratic presidential nomination in 1980 and he said Kennedy simply did not want with to give Jimmy Carter a victory.

JAMES CARVILLE, DEMOCRATIC STRATEGIST: That is odd. What I have learned in politics is we think there is this bitter innocence general elections between Republicans and Democrats. The truth of the matter is these primaries can be even more bitter than the general elections. I don't think that President Carter is over the fact that Senator Kennedy challenged him 30 years ago. I think he still thinks there's unfinished business there. It is a remarkable piece of history. And it is going to be interesting to see the reporting on that and what really -- how it really transpired back in 1978, '79. I think had is a hangover from a primary challenge.

BLITZER: It does underscore the bitterness in these primaries, but Senator Kennedy, Alex, he is not around to give his side of the story.

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: Seems a bit graceless for President Carter to rehabilitate himself as his image as president this way. You know, he is 85 years old out there and we still see him had building houses, I guess when you are a less-than-successful president, maybe they take away your pension, but it is unfortunate. I think important thing about Jimmy Carter today, he is still relevant, even in this election, in the sense that the contrast between Carter and Reagan may be give us a view into the next election. Carter said America was in a funk in a malaise, that our best work to have learn to live with less and share scarcity a very depressing message, and dark message. That, to some degree, is a little bit what we are hearing from the Obama administration now. Reagan's message was that America has a rendezvous with destiny, we can do everything, that was a very yes we can message. That was Obama's message as candidate. He was Reagan then, he's Carter now.

BLITZER: You keep hearing that from Republicans, James, that President Obama is another Jimmy Carter.

CARVILLE: You know, you hear that and keep saying, god, you blaming Bush, talking about Bush, Jimmy Carter was president in the '70s. Bush was president two years ago. Kind of hilarious that you ask about something that happened in 1980 and we figure a way, let's connect to -- well, as long as you are blaming Carter, we will blame Bush.

CASTELLANOS: I was trying to be helpful.

CARVILLE: Right. I got that.

CASTELLANOS: Obama something as a candidate he has not had as president and that is that sense of optimism and what happened to the yes we can?

BLITZER: Do you believe it's possible, James that Christine O'Donnell, the Republican Senate nominee in Delaware can win, can beat the Democratic candidate, Chris Koons, on November 2nd?

CARVILLE: You know, she is a derelict, best I can see. She doesn't pay her taxes, doesn't pay her mortgage, doesn't pay her student loans. You know, maybe people -- maybe this tide is so big that, you know, I will say one thing. He is against taxes, she is against paying them. And maybe this tide is so big it will take her through but it is going to be interesting to see.

BLITZER: Is answer, yes, you think she can win?

CARVILLE: Look, I don't taking any for granted this cycle. You got Jan Brewer, 18 seconds, can't think of anything to say, Sharron Angle who thinks it is wrong to wear black football jerseys. Look, I said on this program that Edward Bennett Williams said you could indict a ham sandwich. The Republicans are trying to elect some ham sandwiches to out there.

CASTELLANOS: James if Christine did that bad on tax, maybe she could take Charlie Rangel's job?

CARVILLE: Maybe so. Maybe so.

CASTELLANOS: It is very tough for her to win in Delaware, James, I think you are right about that. She is -- in Delaware there are 300,000 registered Democrats, only 182,000 Republicans. Republicans are going to need huge turnout and a slice into the independent vote. Here's the good news. Recent turnout in these primaries, Democrat turnout was 12 percent. Republican turnout was in the low 30s, 32 percent. So, there is intensity on the Republican side.

BLITZER: How do you energize the Democratic base, get them enthusiastic? So far, James, the Republicans are showing all the enthusiasm?

CARVILLE: That is absolutely true f that enthusiasm gap doesn't close, look, it could be a very, very bad night for Democrats. I -- I can't deny it. I think if they tried and putting the vice president to out there, but there has to be some kind of sense that Democrats get out and vote and it is absolutely true that more Republicans vote in these primaries and Democrats the first time since 1930 and, you know, the Democrats are going to have to do something to excite their people between now and November.

CASTELLANOS: And these personal attacks sometimes whether they are from Republicans or Democrats, they really motivate these outsider candidates and their bases. So, that actually sometimes helps.

BLITZER: We know Joe Biden --

CARVILLE: People are motivated by somebody welching on their mortgage or welching on their student loan, more power to them. That is just a fact. I understand it.

CASTELLANOS: Charlie Rangel --

CARVILLE: I agree, Charlie had tax issues.

BLITZER: We know Biden is heading back to Delaware to help the Democratic candidate, Chris Coons, we will see how that works out. Guys, thanks very much. Jack Cafferty is asking, are we stuck in a recession that won't end any time soon? Jack and your e-mail coming up.

The pope begins an historic trip to England, talking about a very sensitive issue, now some of his critics are pouncing.

And what you vote for a taxi driving former homeless man who does spiritual healing on the side? There may be more to the crop of unusual recruits on the ballot in Arizona.


BLITZER: Just word of a tornado warning in New York City. Back to Fred. Fred, what is the National Weather Service saying?

WHITFIELD: Yes, well, you don't hear that paired up the big apple and a tornado warning. The National Weather Service is saying that there is a tornado warning in effect right now as you look at the live pictures, and pretty ominous looking of the skyline there of New York. A warning for Queens County in the southeast portion of New York as well as Kings County of most notably known as the Brooklyn area. What is also coming with the tornado warning is the threat of thunderstorms for the area, and of course, a reminder to people of exactly what to do if a tornado comes in your area, and you need to try to take cover and go to a closed room, and anywhere away from windows, and I know that is tough to do in New York City, but surely maybe a public restroom or whether it be a powder room in a building, those are the areas that you need to take cover, because of course, we are dealing with the metropolitan area, and there would likely be a lot of glass damaged if indeed a tornado warning becomes something much more severe than that. A tornado in and of itself, so for now, the warning is being doled out from the National Weather Service to give people a head's up to take cover and be careful in the Manhattan area. Hard to believe, isn't it, Wolf?

BLITZER: Well, you don't often hear about a tornado warning in New York City. Thank you, Fred. If you get more information, more pictures let us know.

We will stay in New York, and Jack Cafferty is there with the Cafferty file. That's a pretty ominous situation, Jack?

CAFFERTY: Well, it has calmed down a lot. About 15 minutes ago we had a rock 'n' roll show going on with one of the hot dog carts, the wind ripped the umbrella off of the top of it and we had lightning and wind and people scurrying around trying to get out of the way and a violent thunderstorm cell that passed right over the southwest corner of central park and right out of the window from Time Warner Center, and this whole newsroom was lined up looking out of the window and we were all grateful to be inside and that is some of the double double-paned glass between us and the elements, and it has passed to the Queens and/or Brooklyn.

Also, we got a little correction, Wolf. When we talked about the question if we were stuck in a recession that won't end anytime soon, we had a Gallup poll. We had a graphic on the air that was wrong, and the graphic said that people feel better about the recession than a year ago and it should have indicated that people feel worse about the recession than they do a year ago. My apologies for that.

Here is the e-mail,. A. writes: "It appears we are, Jack. We have come to the place where the Obama administration is touting slight declines in first-time jobless claims as a sign of an improving economy and not the statistic that matters, significant increases in private sector jobs. Instead, we hear the reports that jobs are growing in D.C., great. Well that's just great, more bureaucrats to tell us what to do, and when to do it and how to do it.

Bud writes from Washington: "Yes, we are, history lesson, FDR threw everything including the kitchen sink at the depression for ten years, ten years, and what finally got us out of the ditch? World War II. That is a fact, Jack."

Rick writes: "No, we are stuck in a depression with no end in sight, and the politicians won't call it what it really is a bona fide depression. Maybe not as bad as the great depression, but a depression nonetheless, and the reason it has no end in sight is because there are no jobs and little prospect of any being created."

Jeff writes: "Yes, as long as we ship the jobs overseas and employee the illegal workers at less than minimum wages, it will continue until doomsday. The first step to turn it around though will come in November."

Olga in Austin, Texas: "Most of us are afraid pure and simple. Failing to realize that fear paralyzes, we tend not to buy, not to borrow, not to lend, not to support and not to grow. When you don't move, even the body atrophies. Seems to me it explains fully why our nation is inert."

And C. writes from Colorado: "While we are seemingly stuck in a recession for the time being, and it will certainly take longer than most think to get out, please remember that it is simply resembles dieting, it look a long time to put the weight on, so if you stick to the program, it will gradually come off."

If you want to read more go to my blog at Jack Do I get extra money for doing the weather?

BLITZER: No. But we'll talk about a little later.

CAFFERTY: I thought it didn't hurt to ask.

BLITZER: Well, stunning new figures show illegal drug use on the rise in the United States. We will look at why.

And a disturbing outcome to a high-speed police chase. We will show you what happened.


BLITZER: Pope Benedict is in the United Kingdom and the first papal visit to the country in almost 30 years, but as CNN's Phil Black explains the trip is not without controversy.

PHIL BLACK, CNN CORRESPONDENT: After all of the speculation in the country about whether or not the pope would be welcomed here, Pope Benedict the XVIth had a very good first day on his tour of Britain. It ended here at Glasgow, between tens of thousands of people who gathered here to share mass with the pope. They were thrilled, this crowd, to have the opportunity to spend that time in his presence and speaking to them, none of them seemed to be at all concerned by the problems, the shadow that hangs over the church, especially regarding the child sex scandal. The pope's day began earlier in Edinburg, and arriving from Rome, he was taken by Prince Philip to royal house where he was officially welcomed by the queen. There he gave his opening address or the first address on the formal state visit.

POPE BENEDICT XVI: As we reflect on the suffering of the past century, let us never forget how the exclusion of god, religion, and virtue of public life leads to an ultimate truncated vision of man and society and to a person and the destiny.

BLACK: The pope spoke about the country's Christian traditions and the role they played in building Britain today, but he also spoke about what he calls a growing form of secularism which no longer tolerates the traditions. Because it was a state visit, he was speaking to a country of not just 6 million Catholics, but to all Britains. He did not avoid the child sex scandal as an issue altogether. In fact, he addressed on the flight from Rome to Edinburg. Speaking to journalists, h spoke critically of his church's lack of vigilance in detecting the problem and also lack of speed in responding to it more decisively.

He said this is a time of great humility for the church. But that issue remains at the core of opposition to those who believe that the pope does not deserve the full honor of a state visit, and those words, in and of themselves, are unlikely to appease that anger.

Phil Black, CNN, Glasgow.