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THE SITUATION ROOM

New Talk of Deal on Bush Tax Cuts; Iraq: Deal or No Deal?

Aired November 11, 2010 - 17:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


T.J. HOLMES, CNN ANCHOR: Paul Vercammen, we do appreciate you.

Appreciate your reporting today for us.

Thank you so much. So, again, a good ending to that story. It could have ended much differently.

Thank you for being here -- with me here in the CNN NEWSROOM.

I'm T.J. Holmes handing this thing over to Wolf Blitzer in THE SITUATION ROOM now.

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

Happening now, more on that crippled cruise ship finally back home and passenger horror stories.

Plus, it could be the president's first big concession to Republicans since their election triumph. This hour, his stand on extending Bush era tax cuts for the wealthy -- why some Democrats right now fear the president may cave in to the Republicans.

Also, the political power struggle in Iraq that could affect the fate of U.S. troops and plans for a final withdrawal. Just when a new government seemed to be in reach, new arguing breaks out. We're going live to Baghdad.

And it's a real life version of the armor worn by the comic hero, Iron Man. And it could someday be a staple for U.S. troops.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

President Obama is busy defending his economic policies overseas. But here at home, new questions whether he's ready to give in on the politically charged issue of tax cuts.

His senior adviser, David Axelrod, is speaking out about Bush era tax breaks and whether they should be extended for the wealthiest Americans. The Huffington Post reports Axelrod is signaling that the White House is willing to consider an across the board extension, including for the wealthy. Axelrod notes that Republicans have won control of the House, telling the Huffington Post, quote: "We have to deal with the world as we find it, the world of what it takes to get this done." Let's bring our senior political analyst, Gloria Borger, who just spoke with Axelrod, and our White House correspondent, Dan Lothian. He's with the president in South Korea -- but, Gloria, first to you.

What did David Axelrod tell you?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, he said that this is, quote, "not news." Let me -- let me read to you what he said. He said: "I simply said what we've said before, the middle class tax cuts should be extended permanently, but we can't afford to borrow another $700 billion to permanently extend cuts to the wealthiest. But we're willing to sit down when Congress returns and figure out a way forward that makes sense.

So, Wolf, what we're talking about here are smoke signals. You'll recall in the president's first press conference after election, when he was asked whether he was willing to negotiate with Republicans on this, his answer was, "Absolutely." They don't want to get too far out in front of this story, because, obviously, their liberal base is going to be upset. So we saw Axelrod trying to clarify what he said.

But, you know, it's very clear that if you needed any signals here that, that this is a White House that understands there's a new political reality out there. They don't control the House of Representatives, and that, at some point, if I were betting, I would bet that they would end up with some kind of temporary -- not permanent, but temporary -- extension of those tax cuts for the wealthy, along with a permanent extension of the tax cuts for the middle class.

BLITZER: Because Nancy Pelosi and a lot of liberals in the House, especially, are saying that if you -- if you provide those -- a continuation of the Bush era tax rates for the wealthiest, that's $700 billion over the next 10 years...

BORGER: Right.

BLITZER: Let me bring Dan Lothian in.

He's with the president in Seoul.

What are White House officials saying?

What was their reaction when this Huffington Post interview with David Axelrod came out -- Dan?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, White House aides here echoing what David Axelrod is now saying, that there's nothing new here, that the president, after the election, talked about being open to compromise on these tax cuts. White House Deputy Communications Director Jen Psaki saying that this remains a top priority for the president, extending those tax cuts for middle class Americans, but that, she pointed out, the president is still concerned about the cost of this. And so he is looking forward to sitting down with Republicans next week, when he gets back from this overseas trip, to hash this all out -- Wolf.

BLITZER: Is -- is -- so what's likely, Gloria, to happen over this lame duck session?

Because if -- if they do nothing between now and January 1st, everyone's tax rates are going to go up.

BORGER: Right. Look, Wolf, they have to do something. They all acknowledge that. And they all agree on a permanent extension of the tax cuts for the middle class, those earning $250,000 or less. It's when you come to the wealthy that there is a problem.

And when you look at the -- the room for compromise here, the clear room is if the Democrats are concerned about extending these tax cuts for wealthier Americans permanently because of what it would add to the deficit -- don't forget, Republicans are concerned about the deficit, as well -- one way to get out of it would be to temporarily do it for one year, two years, maybe three years, you know, depending on what political environment they want to put themselves into when these tax cuts for the wealthy would expire.

BLITZER: Is this issue sort of dominating the president's visit to Seoul right now?

He's there, Dan, with the G20 summit leaders, but -- but a lot of concern right now for the tax rates, especially for the middle class, potentially going up if Congress does nothing?

LOTHIAN: That's right. Well, you know, the trade issue and not being able to lock in that deal with South Korea really is the big story here. But this also is sort of the next story behind that. But, clearly, the -- you know, White House aides have been pummeled with questions about it throughout the evening.

The bottom line, though, Wolf, is what this shows, it's sort of the first test for this White House. The president, after the election, talked about sitting down, working with Republicans and compromising. So this is the first test to see if Republicans and Democrats, the president himself, can find common ground.

BLITZER: There are some new -- two poll numbers that just came out, Gloria, today -- a CBS News poll: "Should Republicans in Congress stick to positions or compromise?"

Seventy-two percent of the American public wants them to compromise.

"Should President Obama stick to positions or compromise?"

Seventy-eight percent want the president to compromise. So that sounds great. But you know, things aren't -- aren't always done that way in Washington, as you well know.

BORGER: No. No, they're not. And -- and it's clear what the public wants. I think what you're hearing from the president lately is that he's beginning to hear that and understand that. And, again, it may be more difficult on the deficit cutting issues, on the future of Social Security, on the future of -- of our tax system, for example, on -- on mortgage deductions and all the rest.

On this particular issue, though, there seems to be a way out for everyone. Again, the liberal base of the Democratic Party may not be happy with it, but at this point, I think it's in everyone's self- interest to get this issue resolved, to give people a sense of permanency and sort of understanding where they're heading in the future in terms of their own personal taxes and get it over with relatively quickly in this lame duck session, which starts next week.

BLITZER: All right. It's going to be an interesting few days next week...

BORGER: Yes.

BLITZER: -- in Washington. Then they'll take another break for Thanksgiving.

Dan Lothian in Seoul, thanks very much. Safe trip over there.

Gloria, you'll be back.

Thank you.

BORGER: Sure.

BLITZER: In Iraq, meanwhile, an apparent step toward the goal U.S. troops have been fighting for for more than seven years. Leaders cobbled out a power sharing agreement designed to pave way for a new government. But all of a sudden, the bickering that's paralyzed Iraq's political system for months -- the bickering has broken out again.

Let's go to Baghdad.

CNN's Arwa Damon is standing by, joining us now live.

What happened?

Has it all unraveled -- Arwa?

ARWA DAMON, CNN INTERNATIONAL CORRESPONDENT: Well, Wolf, it most certainly appears as if it is beginning to all unravel. Just when the Iraqis were thinking, finally, we have a power sharing agreement that could see a new government of national unity being formed, we then had a walkout by most members of the Sunni-backed Iraqiya bloc. Now, that is the bloc that is headed by former Prime Minister Ayad Allawi. He is a Shia, but he has received the support of most of Iraq's Sunni population.

The walkout sparked after an argument as to whether or not parliamentarians should vote on a number of key issues that have to do with this power sharing agreement. At one point, even the speaker of parliament himself, also a member of Iraqiyah, walked out after he said he felt that the widespread trust was not going to lead to anything conclusive.

Now, he did return and those parliamentarians who were left did end up electing a new -- a president, Jalal Talabani, for a second term. He then chose Prime Minister Nouri Al-Maliki as his prime minister; again, told him to delegate a cabinet.

But this is all very, very disturbing, because what happened is that you have the government beginning to form without the inclusion of many of its Sunni-backed politicians -- Wolf.

BLITZER: And that, potentially, could set the stage for a new round of insurgency, even more terrorism. In the last few days, as you well know, Arwa, better than anyone, because you're there, there have been horrendous terrorist attacks, including at several Christian churches in and around Baghdad.

What's it like right now?

DAMON: Well, Wolf, the situation is fairly tense. I mean many Iraqis that we were talking to following all of that violence were saying that they were blaming the political vacuum for it. And many were hoping that having some sort of an inclusive power sharing government could bring about a certain level of stability.

Now, a U.S. diplomat has called today's developments a minor hiccup. But in the past, many observers and officials have warned against forming a government that would exclude Iraqiya and Iraq's Sunnis, because that, in the past, has led to violence.

There are that following today, Iraq's sectarian tensions could be reignited. That could lead to even more violence, especially coming against the backup of a heightened threat from Al Qaeda affiliated insurgents -- Wolf.

BLITZER: It's been, what, seven, eight months since the elections, still no new government. A lot of U.S. officials, I have to tell you, Arwa, here in Washington, are really concerned about the role Iran is playing inside Iraq right now. And they're not very happy with what they're seeing. They're -- they're concerned Iran could emerge as a major winner when all the dust settles.

DAMON: Yes, Wolf. And those are very real concerns, as well. It was, in fact, deals that were largely brokered by Iran that propelled and pushed and strengthened current Prime Minister Nouri Al- Maliki's hand. His political bloc basically came out a close second to that of former Prime Minister Ayad Allawi, the Iraqiyalist. But it was deals that were brokered after these elections that were largely -- that largely came into effect because of Iranian influence that then allowed Prime Minister Nouri Al-Maliki to form alliances with some of the other Shia political party, which then propelled him into a position of power, where he is basically able to hold onto the premiership.

Part of this whole power sharing agreement was also the formation of a new council. The -- this council was supposed to have the ability to pass binding legislation. It was supposed to be headed by former Prime Minister Ayad Allawi, the head of the Iraqiyalists. And it was intended to curb some of President Nouri al-Maliki's powers.

We don't know, at this point in time, whether or not any aspects of these agreements are going to be honored, whether Iraqiya is going to decide to boycott the entire political process. Everything, at this stage, Wolf, is pretty much up in the air.

BLITZER: Up in the air, one way of expressing it. Some say it's just -- it's very much a mess right now.

But the stakes, obviously, for the Iraqi people, for the U.S. and for the -- the rest of the world, enormous right now.

Arwa, we'll stay in close touch with you.

Arwa Damon on the ground in Baghdad for us.

US troops forced to stay in the U.S. military longer than they thought. They could get some payback, though, if they hurry. Chris Lawrence is standing by.

And the battle over write-in ballots in the Alaska Senate race could come down to spelling. Stand by to see some of the creative ways voters wrote Lisa Murkowski's name.

And airline pilots now are being urged to skip a key part of airport security. We'll tell you why.

(COMMERCIAL BREAK)

BLITZER: The vice president, Joe Biden, led Veterans Day ceremonies at Arlington National Cemetery today. The vice president took part in a wreath laying ceremony at the Tomb of the Unknowns. He called the more than 23 million surviving American veterans -- and I'm quoting him now -- "the heart and soul, the very spine of this nation."

Veterans Day originated as a commemoration of Armistice Day, which marked the conclusion of World War I.

(END VIDEO CLIP)

BLITZER (on-camera): To returning combat veterans, the phrase stop loss was one, they almost always didn't want to hear, but it turns out, there's some good news for those troops forced to stay in the U.S. military. For many of them, it could mean thousands of dollars in bonus pay, but time is quickly running out to claim the money. Our Pentagon correspondent, Chris Lawrence is here with the story. Chris, there's a lot of money that's out there if the folks simply step up and ask for it.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Wolf, it's literally the government begging you to take this money. You know, with all this talk of budget cuts and debt reduction, this is the government trying to give away about $530 million, and right now, less than half of it has been claimed.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): It's like a winning lotto ticket that's about to expire. The government's got half a billion dollars to give away but can't find enough troops to claim it.

IAN SMITH, IRAQ WAR VETERAN: I was immediately suspicious about it. It seemed like another -- another scam that a lot of people prey on soldiers with.

LAWRENCE: But it's not. Ian Smith earned that money so did other soldiers and marines. When their enlistment was up, the Pentagon forced them to stay in.

UNIDENTIFIED MALE: You have orders to report duty, First Brigade.

UNIDENTIFIED MALE: Not me, I'm getting out today.

UNIDENTIFIED MALE: You leave on the 22nd, shipping back to Iraq. You have been stop loss.

LAWRENCE: Like the fictional soldier in "Stop Loss," Ian Smith finished his enlistment including a brutal tour in Iraq.

SMITH: I could not bring myself to acknowledge all the horrors. We had daily memorial services for people that were dying in atrocious ways.

LAWRENCE: Ian works at a veteran outreach center in St. Louis but still remembers when the army told him you're going to back to Iraq.

And they were just saying, stay another month or 60 days?

SMITH: Right. Or it's going to be a surge tour. It's going to be 15 months instead of 12. It was probably the worst news that I could have heard at the time.

LAWRENCE: Troops like Ian put off school or new jobs. Some lost relationships. So, Congress authorized $500 for any month they were held over. In Ian's case, it was nearly $7,000, but thousands of veterans forgot to fill out paperwork or just thought it was too good to be true.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: As your commander in chief, I'm here to tell you that this is no gimmick or trick.

LAWRENCE: Even after the president implored vets to get their money, there's still nearly $300 million unclaimed, and vets must apply by December 3rd.

Did you ever think it would be this hard to give away money?

LERNES HEBERT, SR. PENTAGON PERSONNEL OFFICIAL: Well, if you can imagine someone coming to you and telling you that without any strings attached that they're going to pay you thousands of dollars. LAWRENCE: The Pentagon's Lernes Hebert says the VA did direct mailings, and the Pentagon advertised it on every website it could. Even with all that outreach, Veteran Mike Pereira is rushing to finish his paperwork in time.

MIKE PEREIRA, IRAQ WAR VETERAN: I hope that I don't miss out on the opportunity, especially had I known sooner that I would be able to prep a little better.

LAWRENCE: In just a few weeks, it will be too late.

HEBERT: If anybody even suspects they might be eligible for this payment, we want them to apply.

(END VIDEOTAPE)

LAWRENCE (on-camera): The thing is all they've got to do is go to defense.gov and get the application filed by December 3rd. You know, all that stuff with documents and things like that, Wolf, there are ton of folks standing by who can process that and work out those kinks after the deadline passes.

BLITZER: Can they file online, too?

LAWRENCE: Yes, can do it all. Or get it postmarked by December 3rd. They just need to get something in the mail or something filed by that date.

BLITZER: It's not that complicated, isn't it?

LAWRENCE: No again, if they're missing a document, an enlistment form or something, they can work on it after the deadline, but again, after December 3rd, by law, because of our Congress passed this law, they can't take any more applications.

BLITZER: Oh, we just tell our viewers. If you or one of our viewers, you know someone who was affected by the stop loss policy, thousands of dollars potentially. I'm sure a lot of these troops --

LAWRENCE: Can use the money.

BLITZER: Oh, certainly.

LAWRENCE: Yes.

BLITZER: Thanks, Chris.

The first lady, Michelle Obama, paid a surprise visit to U.S. troops stationed at the Ramstein Air Base in Germany today. She told troops that Americans are grateful to them as well as to their families. The first lady helped serve a special Veterans Day steak dinner. It was delicious, everyone agrees. Mashed potatoes included. Later, she visited wounded troops at nearby medical center. Good for her.

Passengers finally make it off that disabled cruise ship. Wait until you hear, though, some of their accounts of the conditions on board.

And retailers are already unveiling their plans to attract holiday shoppers and the deals may be better than ever. Stick around. You're in the SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's get the latest on that disabled cruise ship off the coast of California. Alina Cho is monitoring that and some other top stories in the SITUATION ROOM right now. It finally got to shore, Alina. How is it working out?

ALINA CHO, CNN CORRESPONDENT: Well, they're ashore now, Wolf, 3,300 passengers aboard. That Carnival cruise ship finally made it to land today. It has been a long three days. That's how long they were stranded at sea without power off the coast of Mexico. Some on board called the ordeal an adventure, while others weren't so nice.

They described the awful conditions, including overflowing toilets, rotten food and no hot showers. Carnival, get this, is offering a free replacement cruise and a refund. The National Transportation Safety Board is investigating the fire that caused the power outage.

Thousands of pilots are being urged to avoid full-body scanning at airport security checkpoints. Pilots unions for U.S. airways and American airlines say they're worried about the health risks that are caused by repeated small doses of radiation. They're also apparently concerned that full body scanning is intrusive. The unions are urging pilots, instead, to go through standard metal detectors. The Transportation Safety Administration says it welcomes further discussions with pilots.

More discouraging news on the housing front. The National Association of Realtors reports that home sales plummeted more than 25 percent last quarter. Although, housing prices only dropped slightly, the big drop in volume is certainly not a good sign. Experts say there has rarely been a better time to buy, between low interest rates and lower home price.

And with Christmas just about six weeks away, six weeks away, we started shopping yet, Wolf, the holiday bargains are already upon us. Wal-Mart has announced free online shipping for holiday purchases no matter how small the price, and Toys "R" Us says it will be starting its black Friday door busters a day early. That would be on Thursday. In fact, the toy chain will open nationwide at 10 p.m. on Thanksgiving Day.

And, Wolf, it plans to offer about 150 deals. Now, you know I love a little retail therapy, but I can't imagine something I'd rather not do after two to three servings of turkey than go shopping.

BLITZER: I know. That's not exactly when you want to try on those beautiful designer gowns and dresses that all of us love seeing you, right?

CHO: Oh, God. I don't know what you're talking about, Wolf.

BLITZER: OK. Thank you, Alina. Best-dressed woman in television, Alina Cho. Stand by.

CHO: Thank you.

BLITZER: A stern warning for President Obama today in the midst of his many meetings at the G-20 summit in South Korea. Stand by.

Also, we have an update on the write-in ballot count that will decide the Alaska Senate race. New information coming in. We're going there.

And it's high-tech armor like you might see in the movie "Ironman," but this is very, very real. And someday, American lives could depend on it.

(COMMERCIAL BREAK)

BLITZER: The last big cliff hanger of the 2010 election may drag on longer than some people thought. The tally of write-in votes in the U.S. Senate race is moving slowly forward in Alaska and the final outcome could hinge in part on whether people know how to spell the incumbent, Lisa Murkowski's name.

Our political producer, Shannon Travis, is following the vote count from the capital in Juneau. He's in Alaska. Shannon, give us the latest on the actual count. What do we know?

SHANNON TRAVIS, CNN POLITICAL PRODUCER: Well, just look at this actual count here, Wolf. The numbers are not really much changed from our last count, but let's break them down. Out of 30,000 write-in ballots that they've counted, Lisa Murkowski is getting, is seeing about 89 percent of the ballots sorted in her favor. We want to make sure that we remind our viewers that these are unofficial tallies.

These are not being added to Senator Murkowski's actual result, but they're basically being placed in stacks saying, hey, these are clear and unambiguous votes for Senator Murkowski. What does that mean? She is holding, since these last three releases, numbers that we are going, holding a solid 89 percent lead that looks really good for her if these numbers hold up and possibly could spell a lot of trouble for Miller. Why? Because even if the challenge ballots, even if all of the challenge ballots in a wild scenario are thrown out, she could still win this race based on these figures alone.

BLITZER: The challenges are significant right now. Miller is launching a major campaign, trying to verify ballots and the counting. What is the latest on the legal front?

TRAVIS: The latest on the legal front is that the injunction at the Miller campaign sought yesterday to stop the counting of a lot of these misspelled ballots did not come. Basically, the judge said, hey, I'm not going to stop the counting of those ballots but both sides will go to court next week and argue their cases for whether these misspelled or somehow incongruous ballots should be counted or not.

BLITZER: It is going to take a while at least until they resolve this matter close touch with you, Shannon, Shannon on the scene in Alaska.

Now that the Congressional election is over, we are combing through campaign records to se who spent what and for what. Number of members of Congress had their spouses on the payroll. Brian Todd is here in THE SITUATION ROOM, been looking into this. What are you finding out?

BRIAN TODD, CNN CORRESPONDENT: We have to clarify here this is not from taxpayer money but from campaign funds but it still raises a lot of ethical questions. These are from campaign funds or PAC money, political action committee money, but a number of candidates we found did employ family members for their campaigns this cycle. For example, FEC records from the federal elections commission showed that Congressman Bobby Rush, a Democrat of Illinois paid his wife $103,000 over the last two-year cycle and Jesse Jackson Jr. of Illinois paid his wife's consulting firm $101,000 over the past two years.

Now, a spokeswoman for Jackson said Jackson's wife is a highly regarded political consultant and former DNC employee and she was paid a fair market rate for her work on fund-raising and strategy. Now, on the Republican side, Congressman Dana Rohrabacher of California paid his wife $73,000 over the past two years. His chief of staff told us she was his campaign manager since before they got married an she is not going to stop now and also Joe Barton, Republican from Texas, paid his daughter $72,000 over the past two years. A spokesman for Barton told us the Congressman's daughter was a key campaign staffer who served a critical function. Now, we have to point out, all of these expenditures are no secret and no allegation of wrongdoing. This is legal. And of course, who would be more committed to working their heart out for your campaign than your own family member?

BLITZER: How widespread is this situation where these campaigns employ spouses or relatives of the candidates?

TODD: We found that over the past three years, there was a study three years ago by the group C.R.E.W., the Citizens for Responsibility and Ethics in Washington, found that more than 60 members of Congress had their spouses or other family on their campaign payrolls, that is about one in seven representatives, not insignificant.

BLITZER: These records all come from the federal election commission filings, so I assume it is OK with the FEC?

TODD: That's right. Not everyone is thrilled with the idea. You talk to watch dog groups and they have a different take on this. I asked Dave Levinthal of the watchdog group the Center of Responsive Politics for it ethical concerns about all of this take a listen.

DAVE LEVINTHAL, CENTER FOR RESPONSIVE POLITICS: You have to ask the question, well, these family members, are they actually benefit the person giving them the money? If by giving you 1,000, 10,000, $100,000 what the sum may be, is the member of Congress, him or herself actually getting a benefit from it? It is difficult to argue in certain circumstances.

TODD: So we are saying essentially the Congressman in question may be getting some kind of personal benefit from the campaign money given to a relative because that money could be part of his household income, even if it is given indirectly. All this is legal and the FEC told us two main rules it has to be for bonafide campaign work and the rate of pay must be fair market value. You cannot overpay a family member or that consulting work.

BLITZER: As you correctly point out, Democrats do it and Republican does it something both sides of the aisle do.

TODD: They are very good at looking at these rules, these laws and kind of getting around them, not disobeying them but certainly using them to their advantage.

BLITZER: Thanks, Brian, for that.

Hillary Clinton is offering a new forecast for Middle East peace after meeting in New York City today with the Israeli prime minister. We will update you on what happened.

Relief appears to be in sight for people who fled the volcano danger zone in Indonesia.

We will tell you where a suicide bomber has struck with deadly consequences.

(COMMERCIAL BREAK)

BLITZER: A deadly truck incident in Israel. Alina Cho is monitoring that and other top stories THE SITUATION ROOM right now. What is going on Alina?

CHO: Police say one person is dead after a truck plowed a crowd of people in northern Israel today. At least eight others were injured, some of them critically. Official do not suspect terrorism. They say the truck driver was seeking some sort of revenge.

When it comes to the stalled peace talks between Israel and the Palestinians, secretary of state Hillary Clinton says, "We are going to find a way forward." Clinton met with Israeli Prime Minister Benjamin Netanyahu in New York. The meeting comes a day after Clinton said the U.S. was deeply disappointed with Israel's decision to build new housing settlements in east Jerusalem. The Palestinians say such construction will derail the peace talks.

To Indonesia now, where officials believe the worst of the volcanic eruptions may finally be over. They say Mount Merapi has passed its dangerous phase. The recent eruptions started and continued ever since October 26th. They have killed nearly 200 people, injured nearly 150 more and displaced more than 344,000 residents much the Indonesian president called the volcanic eruptions a crisis.

Wolf, I know you are back in Washington, D.C., but you were in Atlanta last night, right, bringing a little SITUATION ROOM to the Soul Train Awards?

BLITZER: A lot of fun over there. A nice little picture, my new best friend, Doug E. Fresh, doing a little Dougie. I didn't realize there was a dance called the Dougie.

CHO: You got to learn how to do the Dougie.

BLITZER: I don't know. You are in New York. Doug E. is in New York, too.

CHO: I understand you presented an award for Eminem.

BLITZER: I accepted an award.

CHO: Accepted. Sorry.

BLITZER: My other best friend, Eminem, we are very, very close.

CHO: I didn't realize you were so tight.

Going to have more. Tony Harris, who was there, we're going to talk to him about it in the next hour. Stick around. You will enjoy.

The tea party favorite Michele Bachmann will not be part of the GOP leadership of the House after all. What does it say about how much real party the tea party will have? We will talk about that in the strategy session that is coming up.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our strategy session, joining us, the Democratic strategist and CNN contributor, Hilary Rosen and CNN political contributor, Republican strategist, Alex Castellanos a big deal or a little deal that Michele Bachmann, a tea party favorite, will not be the Republican leadership after all?

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: It is not that big a deal. The Republican Party is the tea party in the sense we have seen a big study that says tea party voters are Republican primary voters, they are interchangeable. The tea party is so well represented in the Republican Party right now, because what are they about? Cutting spending, reducing the size of government and getting government out of your lives, cutting the debt.

BLITZER: A lot of tea party-backed candidates went after the established Republican candidate, including some conservative incumbents who lost in the Republican primaries.

CASTELLANOS: That's what happens in Republican primaries, they act just like Republican primary voters, which by the way, most of the people in the Congress feel very comfortable with so no it is not that big a deal. What happened to Michele Bachmann is simple. It happened to Nancy Pelosi. When you are the leader of a movement, you take a lot of the arrows. That is what happened to Michele Bachmann.

HILARY ROSEN, DEMOCRATIC STRATEGIST: OK. See the kumbaya messaging of Republicans that is what there is, that there's no difference, we are all working together but these guys are totally unnoticed. The Michele Bachmann story is they didn't want her anywhere near the leadership because she is not controllable. She is very radical. She has got a -- she loves the sound of her own voice and consistently steps on their messaging. So they did not --

CASTELLANOS: Tea party -- that is not because she is a tea party member, but because she is Michele Bachmann.

BLITZER: Somebody aggressively involved with the tea party movement who is going to be in the Republican house leadership?

CASTELLANOS: There is a lot of Republican leaders from -- in the Senate and the House, from, you know, got Ron Johnson the Senate, Marco Rubio, you have got a lot of the House members, very comfortable with the tea party.

ROSEN: The big question is whether the Republicans are going to be able to co-opt the tea party message. Now, let's remember the message, which is a definite conflict. They say they want to cut spending and they want to cut taxes. You can't do both, because there is just not enough money in the federal budget to do that they could privatize social security, they are going to cut defense, cut Medicare. They are going to be confronted very quickly with this intense conflict they have between the tea party messaging and long- term --

CASTELLANOS: Not at all. Because the tea party messaging is cut spending, reduce the debt and make government smaller that is the Republican message and besides that we are united by the real leader of the Republican Party, Barack Obama. Who has done more to unite Republicans than anybody since Ronald Reagan?

BLITZER: There was a tea party backed candidate in the state of Delaware. You might remember Christine O'Donnell.

ROSEN: We still talking about her?

BLITZER: We're still talking about her because she was on "The Tonight Show" with Jay Leno last night. I will play you a little clip. Listen to this.

(BEGIN VIDEO CLIP)

CHRISTINE O'DONNELL, FORMER SENATORIAL CANDIDATE: I'm not necessarily interested in a reality show unless it is something like we did a 30-minute ad for our campaign that highlighted how these issues impact people's lives. I would like to do something like that like a watchdog type-type show.

(END VIDEO CLIP)

BLITZER: I suspect she will do a reality type of show, whether it is called a watchdog type show or something. She has probably got a pretty good future in that area, don't you think? ROSEN: Fox News clearly has openings for failed Republican candidates. I'm sure there's one there for her. I think is a candidate who got an inordinate amount of attention, brought virtually nothing to the ideas table. It is to Chris Coons and the new newly elected senator from Delaware's credit that he was able to get his message out. I think the Republican Party; keep nominating these kinds of candidates and Republican --

BLITZER: You agree, Alex if Mike Castle had been the Republican nominee in Delaware that would have been a pickup for the Republicans, yes or no?

CASTELLANOS: That may have been a pickup but --

BLITZER: Delaware? Would it have been a pickup?

CASTELLANOS: Probably would have.

BLITZER: All right. What about in Nevada, somebody other than Sharron Angle would have challenged Harry Reid works that have been another pickup for the Republicans?

CASTELLANOS: You know, probably yes, because an acceptable Republican-would have beaten an unacceptable Democrat, Harry Reid, however, right now, you know, again Republicans have never been as united, why we are looking for all these divisions, tea party candidates versus the Republican establishments is just not there.

BLITZER: Democrats can be disunited or can disagree, Republicans can as well.

ROSEN: There's no question that Republicans are trying to put forward this united front. Let them have it. I think they will come up quickly against conflicts. You know Barack Obama has said he wants to work with them you about this is not a Republican party messaged on wanting to work with the president, their leadership has said our goal is to stop the president. That is going to be the test.

BLITZER: McConnell said the goal not to get re-elected. That's the primary goal right now. Hold your fire, guys.

CASTELLANOS: Not all our candidates can be as good as Howard Dean.

BLITZER: Guys, thanks very much.

An American could face execution in Yemen what is going on? A behind-the-scenes look at the defendant and the murder charges against them.

(COMMERCIAL BREAK)

BLITZER: Yemen has delayed the trial of a U.S. citizen accused of killing a guard while trying to escape after being arrested as a terrorism suspect. Sharif Mogley is a former worker at a nuclear power plant in New Jersey. He was among suspects arrested in the Yemeni capital in early March. CNN's national correspondent Susan Candiotti has details.

(BEGIN VIDEOTAPE)

SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: In private home videos obtained by CNN, Sharif Mogley enjoys wedding cake with his bride. Five years later, a world away from New Jersey, 26-year-old Mogley sits in a Yemen prison facing trial and possible execution for killing a security guard.

CORI CRIDER, REPRIEVE OF LONDON: At this point, not surprisingly, he is in a pretty traumatized state.

CANDIOTTI: How did a seemingly happy family man wind up fighting for his life? Before leaving for Yemen, he worked at several U.S. nuclear power plants and according to a recent U.S. nuclear regulatory commission report, expressed militant Islamic views to co-workers. In 2008, he moved with his wife and young daughter to Yemen to study Arabic at this school. But the FBI suspects Mogley developed ties to al Qaeda. Though he has never been charged, his father denies his son is a terrorist. An imam says that the Mogley he has known does not fit the profile. Mogley asked him about moving to Yemen.

Simply put, what was your advice to him?

SHEIK ANWAR MUHAIMIN, QUBA INSTITUTE: Our advice was not to go there, do not go to Yemen, it is unstable, and there are a lot of rogue elements within Yemeni society.

CANDIOTTI: The U.S. considers militant Yemeni American cleric Anwar Al Awlaki one of the rogue militants who influenced suspected and known terrorists. Mogley's lawyer acknowledges Mogley sought medical and religious advice from al Awlaki before leaving the U.S. and met with him after arriving in Yemen.

CRIDER: Well, if that isn't in itself some kind of a nefarious plot, they should have arrested him.

CANDIOTTI: Mogley's lawyer says he was questioned during repeated visits to the U.S. embassy trying to get a passport home. Soon after, outside this convenience store in Yemen's capital, Mogley was arrested during a sweep for possible al Qaeda suspects. His lawyer says Mogley was shot by masked gunmen and beaten and jailed and prevented from contacting his wife. American agents visited him in custody and his attorney says did not mince words.

CRIDER: We are here to talk about Yemen and tell us who the extremists are, or you are not going the walk.

CANDIOTTI: Later, Mogley says he does not have information and who was desperate to see his family, tried to escape and allegedly killed a guard in the process. He is very sad, his lawyer says, and very scared.

(END VIDEOTAPE)

CANDIOTTI: And neither Yemen officials nor the FBI will comment on Mogley period. His wife and children have returned to Yemen from the U.S. for his trial and in a statement to CNN his wife is asking the U.S. embassy to do what it can to get her husband a fair trial, but it appears, Wolf, he on his own.

BLITZER: It's a dangerous place in Yemen. Thank you, Susan Candiotti.

Chris Lawrence, our Pentagon correspondent, steps into the future of warfare. He is going to take you inside of a revolutionary new suit of armor that may one day may have the U.S. soldiers looking like iron man.

And more on the top story, the White House is hinting at a possible compromise on extending the Bush era tax cuts for all Americans for the wealthiest included. We will tell you where the situation stands right now.

(COMMERCIAL BREAK)

BLITZER: Just days after the FBI conducted a nationwide child prostitution sting, we are taking a closer look at how one city is addressing the enormous problem. CNN's Dan Simon is joining us from Oakland, California. Dan, what are authorities doing to get these kids off the streets?

DAN SIMON, CNN CORRESPONDENT: Well, Wolf, let me tell you where we are. First of all, we are on International Boulevard. This street extends from downtown for miles outside the city limits. This is considered a major thoroughfare, a major hub for child trafficking here in Oakland. We went along with Oakland police to get a feel for how big the problem truly is.

(BEGIN VIDEOTAPE)

SIMON: At any time of the day, day or night, you can find working prostitutes on Oakland's International Boulevard. And police say that they are finding that more and more of them are children. We recently went on a police ride along and were shocked to find how many girls were on the street, and how young they looked. This girl only 16 was picked up by an undercover cop.

HOLLY JOSHI, OAKLAND POLICE: The younger girls are probably being paid $100 for sex and $60 to $80 for oral sex.

SIMON: Authorities say that child prostitution has become such a big business in Oakland that drug dealers are increasingly turning to pimping.

SHARMIN BOCK, ALAMEDA DISTRICT ATTORNEY'S OFFICE: Why? Because drugs you can only sell once, and children, you can sell over and over again.

SIMON: Local prosecutor Sharmin Bock says a pimp with four girls who each bring in $500 a day are earning more than $600,000 a year tax-free. We're told some are forced to begin working as early as 12 years old. Most of them are runaways who are lured by the pimps with the promise of a good life. Instead, they are forced to have sex many times a day, and they keep none of the money.

BOCK: It is slavery when at the end of the day, you are out there all day and you make the $500 quota and you don't get one penny of it. Even if they were paid, it is still exploitation in the purest form, because of the manipulation that occurs.

SIMON: Oakland has gained national recognition for its efforts to curb the problem. Police here often conduct undercover operations to get the girls in custody who are treated not as criminals, but as victims. In the last four, years the Alameda District Attorney's Office, which handles Oakland, says it has taken more than 100 pimps off the streets. It also fought for a law that allows California's D.As. to charge pimps with human trafficking, a felony. With child prostitution expanding into other Bay Area cities, the Alameda D.A.'s office is setting up a regional coalition with one goal, to help as many of the girls as possible and put the pimps in jail.

REP. JACKIE SPEIER (D), CALIFORNIA: The numbers are staggering. It is estimated that across the country there are as many as 300,000 youngsters. These are young kids between the ages of 12 and 18, who are part of this sexual enslavement going on in this country.

SIMON: Authorities say the rising numbers are in large part due to the internet and the ever-increasing trend of sex related web sites.

(END VIDEOTAPE)

SIMON: I think that what is surprising a lot of people here is that these are American children, and that this is happening in America and not some foreign land, and also that human trafficking is considered the fastest growing criminal enterprise in the country. Wolf?

BLITZER: All right. Dan, thank you.

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