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Wisconsin Public Workers Revolt; Middle East Protests: How is the U.S. Affected?; Historic Auburn Trees Poisoned; Cartels Go AK-47 "Shopping" in U.S.; Wisconsin Public Workers Revolt; Does Birther Talk Hurt GOP?; FBI "Going Dark" Poses Security Risks; Consumers May Feel New Pinch

Aired February 17, 2011 - 17:00   ET


CANDY CROWLEY, GUEST HOST: Happening now, breaking news, an uprising in America's heartland. A showdown over budget cut is playing out right now in Wisconsin. Are public workers fighting to protect their jobs or being greedy as some critics claim? The White House is weighing in.

Plus, a deadly crackdown against pro-Democracy protesters, this time, it's Bahrain, where unrest is threatening another ridged Arab regime. This hour, a turning point in the uprising and why it could be dangerous for the U.S.

And, read his lips. House Speaker John Boehner invoked Republican fighting words from the past, and he's making it seem more likely that a government shutdown will happen perhaps in a matter of weeks.

Wolf Blitzer is off. I'm Candy Crowley, and you're in the SITUATION ROOM.

Anger over state budget cuts is boiling over in Wisconsin. Thousands are protesting in a state capital again today against a bill that unions are calling an assault on workers' rights. It would strip teachers and other public employees of most of their collective bargaining rights and increase their contributions for benefits.


UNIDENTIFIED MALE: Teachers are already massively underpaid and stripping away the one thing, the benefits that are one of the benefits of teaching, it's just incredible. I fear for the future of education in the state of Wisconsin.


CROWLEY: Wisconsin's Republican governor, Scott Walker, supports the bill as a way to help ease the state's growing budget crisis.


GOV. SCOTT WALKER, (R) WISCONSIN: We've got good decent hard- working people who work in government, but I also recognize to balance the budget. There's got to be some fairness, and we've got to be in balance with where the taxpayers are who foot the bill for all of us in government.


CROWLEY: That controversial bill was scheduled for a vote in the Wisconsin Senate today, but 16 state senators did not show up for work. That leaves the bill's fate up in the air, and Governor Walker is urging Senate Democrats to go to work.

CROWLEY: Joining us now, one of the no-shows, Democratic State Senator Jim Holperin.

Senator, thank you so much for joining us. I wanted to read you a tweet from your new governor who just a little while ago tweeted, "Senate Democrats should show up for work like other Wisconsin taxpayers did today."

I think the question here is, is this democracy at work. The people of Wisconsin had an election, they elected a Republican legislature and Republican governor. They're now going about work, and the Democrats are not showing up to do their part.

JIM HOLPERIN(D-12TH DISTRICT), WISCONSIN STATE ASSEMBLY (via telephone): Candy, the Democrats want to debate the budget cuts, they want to vote and we will vote, just not today. And the reason not today is because we don't believe sufficient time has passed for the people of the state to absorb the far-reaching and unprecedented changes to collective bargaining that the governor is recommending that have nothing to do with budget cuts.

CROWLEY: So you're going to state out until what happens?

HOLPERIN: We would hope the governor of the state would do now what he should have done originally, and that is to sit down with the public employees in Wisconsin and talk this out.

I'm a Democrat, and I support public employees paying more for their pensions, paying more for than health care. I think public employees would agree to help the state out of its budget difficulties, but they were never asked. The governor needs to sit down and talk with them.

CROWLEY: Do you think that state employees would be willing to contribute in these sorts of percentages that the governor is talking about here, doubling their input into health care insurance, for instance? Do you think they would be willing to do that, paying for half their pension?

HOLPERIN: I have spoken to dozens and dozens of public employees over the past three days, who have said, yes. They have conceded that they want to help the state out of its budget difficulties. They will agree to pay more in health care and more in pension benefits.

What they cannot abide, Candy, is for this governor to unilaterally take away their collective bargaining rights forever. CROWLEY: So the sticking point here is not, to you, about paying more into various benefit funds, the sticking point is taking away bargaining ability.

HOLPERIN: That's absolutely correct. The bill that we have is supposed to be a budget repair bill, but that's not all that it does. If all that it did is repair the budget, the Senate Democrats would be on the floor today, voting, debating. We may vote no, but we would be there.

This budget repair bill does far, far more than just balance a budget. It takes away in an unprecedented weight (ph) decades of collective bargaining rights that local employees in Wisconsin have had.

CROWLEY: So where are you now, and how does governor and your Republican colleagues, how do they coax you back to work?

HOLPERIN: Well, we're not that far from the capital. We are at an undisclosed location, but we could arrive in a very short time.

I think if the governor would agree to just meet and talk with public employee employees, I'm not at liberty to speak for all Democrats, but I think for myself, that would be something that would need to be done.

CROWLEY: And just quickly, sir, in a yes or no. Do you think that the governor is trying to destroy public unions?


CROWLEY: Wisconsin State Senator Jim Holperin, we appreciate the brevity. Thank you so much for being with us.

HOLPERIN: You're welcome, Candy.

CROWLEY: Here in Washington, the head of the House Budget Committee, Wisconsin Republican, Paul Ryan, is comparing the protests in his home state to those in Egypt. This may be a state fight, but battle lines are being drawn here in Washington as well.

We want to bring in CNN's Kate Bolduan at the White House. The president is weighing in on this.

KATE BOLDUAN, CNN CORRESPONDENT: He absolutely is, Candy. This is playing out far from Washington, but they're definitely taking notice here at the White House and watching the drama unfold at Wisconsin State Capital, watching it unfold very closely.

As you said, it's the drama has made it all the way here to the White House. President Obama in an interview with CNN affiliate, WTMJ, criticized the budget bill that you were just speaking about, saying that it seemed to like it was, quote, "short-sighted thinking" on the part of the governor. Listen here to President Obama.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I would say, as a general proposition, that everybody's got to make some adjustments to new fiscal realities. We had to impose, for example, a freeze on pay increases for federal workers for the next two years as part of my overall budget freeze. On the other hand, some of what I've heard coming out of Wisconsin, where you're just making it harder for public employees to collectively bargain generally seems like more of an assault on unions.


BOLDUAN: The president through Press Secretary Jay Carney, he reiterated his boss's point, saying that the president doesn't think this is the right way to fix a budget shortfall, but on the other end of Pennsylvania Avenue, Candy, House Speaker John Boehner is also weighing in criticizing the president and defending Republican governor, Scott Walker.

In a statement that he released, he said in part, quote, "Rather than shouting down those in office who speak honestly about the challenges we face, the president and his advisers should lead. Until they do, they are not focusing on jobs and they are not listening to the American people who put them in power."

A very interesting budget battle playing out far away from Washington, far away from this White House, but it seems clear that this White House, Democrats and Republicans are jumping on it very quickly, Candy, to kind of stake their position maybe a little foreshadowing of the budget battle to unfold very soon here in Washington over the federal budget and federal deficits -- Candy.

CROWLEY: I think you're right. I think this is the federal budget battle rich small in Wisconsin at this point, if you will. Thanks so much, Kate Bolduan. Appreciate it.

Now, to those battles over the federal budget and the threat of a government shutdown in just a couple weeks. In the middle of this drama, we heard a blast from the past today with the new House Speaker borrowing a page from the first President Bush. Remember this?



REP. JOHN BOEHNER (R-OH), HOUSE SPEAKER: Our goal here is to cut spending, but I am not going to move any kind of short-term CR at current levels. When we say we're going to cut spending, read my lip, we're going to cut spending.


CROWLEY: We want to bring in our senior congressional correspondent, Dana Bash. It's an interesting choice of words, Dana, simply because we should also mention that George W. Bush lost his reelection bid, and a lot of people think it was, in large part, because he broke that promise. So, it's a dangerous kind of blast from the past, isn't it?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: It sure is. And you know, Boehner's aid I asked some about that, and they said, you know, you can be sure, from their prospective that John Boehner will not break this pledge, which is to cut spending, but that vow that we heard today, Candy, that he won't extend even for two or three weeks the current spending levels has certainly ratcheted up the talk and the drama about a government shutdown here big time.

And let me show you a calendar to explain what we're talking about with how the government is running and when it runs out. First of all, this, today, probably, the House Republicans will likely pass a measure to keep the government running for the rest of the year but cut $61 billion out of it. And we know that Senate Democrats who still run the Senate say that that is far too drastic.

But guess what, next week, next week, Congress will be gone. They're going to be in recess. So, it is the following week that we have to look at that is going to be critical because they just have those couple days, up until March 4th, to come up with a solution to bridge this huge gap, the $61 billion gap, because March 4th, Candy, is the day that the current spending bill runs out. It is that day that the government will shut down, unless, there is some kind of coming together.

Now, traditionally, as you know, when this kind of showdown looms, except for 1995 when there was a government shutdown, both sides say let's just do this temporarily in order to keep negotiating. Well, by John Boehner saying today that he won't do that at current spending levels, that caused Democrats to say this.


SEN. HARRY REID (D-NV), MAJORITY LEADER: We're terribly disappointed that Speaker Boehner can't control the votes in his caucus to prevent a shutdown of government. And now, he's resorting to threats to do just that without any negotiations. That is not permissible. We will not stand for that. He's wrong.


CROWLEY: Dana, you know, the thing is, Democrats sort of seem to be relishing the idea that Republicans might shut down the government, because of something that kind of backfired in 1995, cost them an election, certainly cost them control of the House, so what -- you know, is there anything different this time? It seems to me the Republicans must think so.

BASH: The Republicans might think so, but I tell you, the Democrats definitely think so even more. As you said, Candy, Democrats have been talking about Republicans threatening a government shutdown more than senior Republicans really have because, as you know, Democrats think that that would be politically terrible for Republicans if we came to that.

But what does seem to be different today, Candy, to answer your question, is that it was always assumed that Republicans, if they can't come to some agreement, would at least go for a two-week, maybe three-week temporary stop-gap measure to keep the government running while they negotiate.

And by John Boehner saying today, I'm not going to do that, unless, there are some cuts even in that, and on the other side, you have Harry Reid also telling us in the hallway, I'm not going to go for anything that has any cuts even in the short-term. They're both backing themselves into corners. They're both dug in, and the clock is ticking toward that March 4th deadline.

CROWLEY: A rock and a hard place, and you're up there watching for us. Thanks so much, Dana Bash. Appreciate it.

BASH: Thanks, Candy.

CROWLEY: We are following protests across the Muslim world as well, but the uprising in Bahrain could hold special danger with United States.

And Mexican drug cartels are buying assault weapons by the dozens right here in the U.S.

Plus, police nab a suspect accused of trying to poison a campus landmark.


CROWLEY: It happened in the middle of the night, police swooping in on protesters camped out in the capital of Bahrain, firing rubber bullets, pellets and tear gas. At least three people were killed and more than 200 injured. Now army vehicles are patrolling the streets, and the United States is warning Bahrain that it's deeply concerned about the crackdown on pro-democracy protesters. This puts long-time Arab leaders, including some critical U.S. allies, even more on edge after the revolts in Egypt and Tunisia.

We want to bring in our Pentagon correspondent Chris Lawrence.

The U.S. has a considerable naval presence in Bahrain, Chris. What are you hearing in those halls over at the Pentagon?

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, I'm hearing that they're definitely concerned, first about the naval base there in the capital of Bahrain. You've got about 6,000 American troops, civilians and their families. One source said right now that they're not seeing any sort of specific threat directed at those Americans, but the fact remains a lot of them do live off-base in the community and they're being told not to go anywhere near the area where the protesters are.

The other concern is strategic, because Bahrain is the base for the 5th Fleet. That's the reason that Defense Secretary Robert Gates called the crown prince this morning and also spoke with some of the Bahrain's senior military leaders about the security threat there.

CROWLEY: Chris, is this different from Egypt --


JAMES CARAFANO, THE HERITAGE FOUNDATION: As for, you know, sustaining the Egyptian military, this is different. The Bahrainians are really giving us something, and the reason why they're giving it to us is not because they're nice guys, but because they realize that the ability of Iran to dominate that region, that is not in anybody's interests. Having the U.S. military presence there is kind of a -- you know, it's a deterrent effect of a cop on the block thing. It gives all the Gulf Coast states and the Saudis, you know, they rest a lot easier because of the U.S. presence there.


CROWLEY: Chris, how is this different from Egypt? Or is it?

LAWRENCE: It is. It is. The way the U.S. sees it, it's going to be much harder to abandon this government in Bahrain. One reason is the 5th Fleet. Another is that the U.S. is still dealing with the fallout from Egypt where some of the allies in the gulf feel that the U.S. was too quick to cut ties with Hosni Mubarak.

So some factors there including the factors of Iran's presence there in that area as well.

CROWLEY: Our Chris Lawrence, thank you very much. Appreciate it.

A quick check of the rage that's spreading across the Muslim world right now.

In Libya, anti-government protests seem to be intensifying today, with some turning violent. There are also reports of at least 17 deaths in the demonstrations against Libya's strongman, Muammar Gaddafi, but we have no independent confirmation of that.

Hundreds of protesters reportedly clashed with security forces in the Kurdish region of northern Iraq. We're told that nine people were killed there. Authorities imposed a full curfew over night.

And in Yemen, hundreds of pro and anti-government demonstrators faced off in the capital, some throwing stones at one another. An opposition lawmaker tells CNN at least 20 people were hurt we're told.

We want to bring in CNN national security contributor Fran Townsend.

It's a little hard to know where to start here, but Bahrain seems particularly troublesome now, particularly because there's been a considerable crackdown.

FRANCES FRAGOS TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: Well, you know, Candy, what's sort of mystifying is the king of Bahrain really seemed to be managing this. They were going to prosecute the two policemen who had killed protesters, and it seemed he had given space for them to protest. So this morning's crackdown is really quite stunning and it's a dramatic development.

I think it's an indication that the king of Bahrain is hearing from his neighbors, who are very, very worried. If he gives way in Bahrain, if he provides quarter to the protesters and the pro- democracy movement there, what is the next step before it presents to other pieces of the Gulf? And so, I think there's been tremendous pressure put on him to take this quite seriously, and help and assistance has been offered by his neighbors.

That said, we do have to be careful about what role the United States plays. We can be advocates for fundamental freedoms, like freedom of press, freedom of speech, freedom of religion, without taking sides between protesters and regimes.

And I think we've got to be careful. We don't necessarily help folks by us making clear what our preference is. It's not really ours to decide. We have to be seen as advocating for values, as opposed to particular regimes.

CROWLEY: It's not ours to decide, but here again, as in Egypt, we have an ally that presumably we have some leverage with in some way -- although, it appears he has more leverage with us -- but nonetheless, what is the message behind the scenes? What can you imagine -- what are they saying? Like, same thing in public? Or is more going on there?

TOWNSEND: No, we should expect that there's a good deal more going on behind the scenes. Frankly, I think some of the criticism we heard privately from our neighbors in that region and our allies is we were saying too much publicly the last time when it came to Egypt. We looked to be abandoning an ally.

And now I think what you're going to see is a move -- there's a lot of pressure on the U.S. administration, if you want to speak to the king of Bahrain, do it privately, but be careful about what you're saying publicly. And I think there's still a good deal of anger and mistrust with our allies in the region over how we handled Egypt.

CROWLEY: I want to show you also about a report that showed up in "The New York Times," today, and it was about -- you know, saying, well, the president did ask for a report for people to look into, kind of set up a separate committee it almost sounds like, what is the potential for unrest in this area, that there was specific attention paid to Egypt.

What do you make of that leak? What do you make of that story?

TOWNSEND: One, the timing is a little bit bizarre. If that had been the case, why weren't we hearing about this after the events in Tunisia, or after the events in Egypt. The notion that we're so far into the spread, if you will, of a pro-democracy movement and we're only hearing now that they were anticipating is odd. And the story also reports that the president signed a presidential security directive asking for this activity to begin. If that's the case and there is such a directive, the White House could certainly declassify it and make it public. There would be no more any reason for this to be kept secret. Certainly, if there were parts that they didn't want declassified, they could redact it and we've seen them do that, White Houses, including the Bush administration, do that in the past.

And so, I would encourage the White House, if there's such a directive that the president signed, declassify that of which you can, certainly as it relates to -- the directive itself, there's no reason it couldn't be declassified, and the answer perhaps that he got back, you could declassify portions of it.

CROWLEY: Fran Townsend, always fun. Always learn something. Thank you so much.

TOWNSEND: Good to see you.

CROWLEY: Iraqi officials call it, quote, "economic and moral damage." Ahead, why Baghdad expects $1 billion and an apology from the United States.

Plus, Buckingham Palace is already gearing up for a royal wedding this spring. Now news of a state visit from President Obama and the first lady.


CROWLEY: Iranian warships put Egypt in a tricky position. Lisa Sylvester is monitoring that and other top stories in THE SITUATION ROOM right now -- Lisa.


Egypt says that Iran has officially asked to move two of its warships through the Suez Canal. One official tells CNN they will likely grant permission. Egypt is bound by a treaty to allow the ships to pass, but Israel, Egypt's peace treaty partner, has called it a provocation.

Honoring the slain federal judge John Roll. President Obama has signed a bill to name a federal courthouse in Arizona after Roll. The 63-year-old was gunned down in Tucson last month while attending an event for Congresswoman Gabrielle Giffords. Roll was appointed by President George H.W. Bush and quickly became the state's top federal judge.

And it is a sad day at Alabama's Auburn University. Police have arrested a man for allegedly poisoning the school's landmark oak trees. Auburn fans have flocked to these 130-year-old trees to celebrate victories for generations. One Auburn professor says he's not hopeful about the trees' survival.

(BEGIN VIDEO CLIP) QUESTION: From my understanding, I think there's about a 1 percent to 2 percent chance that trees could survive. Are you now ruling that out? Are we sure that they are, in fact, going to die?

PROF. STEPHEN ENLOE, AUBURN UNIVERSITY: It's an emotional question. I always want to hold out hope. Based upon the technical experts I have consulted with around the country, the concentration of spike basically found within the soil would suggest there is a very low probability.


SYLVESTER: It's a very emotional subject for folks at Auburn University and tree farmers and experts around the country have been offering help, Candy.

CROWLEY: He does make is sad. It is sad.

SYLVESTER: Yes, he's breaking up. It's been around for generations, these trees, and it means a lot to a lot of people there.

CROWLEY: Thank you so much, Lisa Sylvester.

The FBI calls it "going dark" and it's making it tougher for agents to keep tabs on criminals.

Plus, weapons of the drug war, Mexican cartels are going on a virtual shopping spree right here in the U.S.


CROWLEY: U.S. officials say Mexican drug cartels are arming themselves with AK-47s bought in Arizona. The alleged operations can be especially hard to crack, because, as CNN's Casey Wian reports, anyone who passes a background check is allowed, under U.S. law to buy the high-powered rifles by the dozens.


DAVE LARUE, LEGENDARY GUNS: This would be the standard gun.

CASEY WIAN, CNN CORRESPONDENT (voice-over): The AK-47 was developed after World War II for the Soviet Army.

LARUE: It's probably the most produced and reliable weapon in the world today.

WIAN: More than six decades later, Kalashnikov-style rifles remain in demand from collectors, gun enthusiasts and Mexican drug cartels.

WIAN (on camera): Why would a drug cartel member want to be armed with an AK-47?

LARUE: High capacity in the magazine and extreme reliability. WIAN (voice-over): The semiautomatic version can be purchased legally in most U.S. states, but in Arizona, federal officials say, that's become a problem.

DENNIS BURKE, U.S. ATTORNEY: The drug cartels go shopping for their war weapons in Arizona.

WIAN: Last month, federal authorities announced they broke up a major weapons trafficking ring, supplying hundred of high-powered rifles to a Mexican cartel. All of the 34 people charged are either U.S. citizens or legal residents accused of acting as so-called straw purchasers.

BURKE: Around August 2010, defendant Ria Patino (ph) purchased 12 - 12 AK-47 type rifles from a gun shop in Glendale. Three days later, federal agents found all 12 of the purchased rifles concealed in a stove and a television in an attempt to smuggle them into Mexico from the United States.

WIAN: Prosecutors say the weapons were discovered here at the Lukeville, Arizona border crossing, but allegedly bought here at a suburban Phoenix gun shop.

WIAN (on camera): Prosecutors say that during the course of their investigation, suspects allegedly bought hundreds of AK-47 rifles, the weapon of choice for Mexican drug cartels, from the Lone Wolf Trading Company, along with assorted other guns. Although purchasers say the suspects bought weapons in batches as large as 40, they say the gun dealer broke no laws.

WIAN (voice-over): Other Arizona gun dealers say the often suspect customers may be working for drug traffickers.

LARUE: We make quite an effort to ascertain that's not the case, and if we have suspicions that that is the case, we terminate the sale. And I'll bet we've done that a hundred times, probably more than that.

LARRY KAUFMAN, WINDSOR ARMS CO.: If I had an AK-47, I'm thinking I sold it to an individual who went through a background check and so on, I considered I could go to sleep at night. But if I'm buying the stuff by the cratefuls, wait a minute, something stinks here.

WIAN: In Arizona, it's legal to buy as many high-powered rifles as you want for your own personal use, but lying about buying them for someone else is a federal crime.

BILL NEWELL, ATF SPECIAL AGENT IN CHARGE: Individuals for who money lie on the ATF forms in the acquisition of firearms and knowingly do that, and then knowingly put those firearms, many times tens if not hundreds of firearms, in the hands of individuals who they probably have a pretty good cause to believe are taking those firearm south, in my opinion, have as much blood on their hands as those individuals that ultimately pull the trigger.

WIAN: The ATF says gun dealers often cooperate in identifying suspected straw purchasers, but the agency would not discuss the role of the Lone Wolf Trading Company in its weapons trafficking investigation.

We tried to speak with the store's owner. He would only provide a prepared statement, reading in part, "We have worked closely in conjunction with several federal agencies, including the Phoenix office of ATF. Due to the sensitive nature of any ongoing federal investigation, we are obviously precluded from making any further statement."

In December, ATF proposed new regulations that would allow it to track sales of two or more rifles to the same person within a five-day period, similar to existing requirements for handguns. The White House has not acted on the proposal.

BURKE: The idea that anybody can just go in on any day and buy 20 AK-47s and the person doesn't have to explain anything other than the fact that they have to say is that for yourself or not, which is the legal hook we have of the federal crime they committed, that something's lacking there.

WIAN: Casey Wian, CNN, Phoenix.


CROWLEY: A new warning about U.S. relations with Pakistan from America's top military officer.

And the unrest in Libya. Can Muammar Gadhafi survive the anti- government protests that have spread to his country?

And Sarah Palin finds a new forum to slam President Obama.


CROWLEY: An honor for a man who sparked a revolution.

Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now. Lisa, what have you got?


Tunisia has renamed one of its main squares after a vegetable seller whose suicide sparked the recent protests. Mohamed Bouazizi set himself on fire in December when police confiscated his belongings. That act started protests in Tunisia that eventually toppled the regime. It also helped inspire Egypt's uprising.

The U.S. is very unpopular in Pakistan once again. That's according to the chairman of the Joint Chiefs. Admiral Mike Mullen says U.S. assistance during recent Pakistani floods had improved America's image, but recent murder accusations against a U.S. embassy employee have reversed those gains.

And Baghdad wants the U.S. to apologize and pay $1 billion for damages. Iraqi officials cite damage done to their capital by miles of concrete blast walls and the potholes caused by U.S. Military humvees. They call it economic and moral damage. No mention, though, of the destruction caused by bombings.

And the White House has announced that President Obama will make an official state visit to the U.K. this spring. The president and first lady will stay at Buckingham palace from May 24th to May 26th.

That's true. They're going to have a break. (INAUDIBLE).

CROWLEY: Is that before or after the wedding?

SYLVESTER: That's after the wedding. The wedding's in April.

CROWLEY: OK. So they'll see the new couple.

SYLVESTER: Yes. Presumably so, Candy.

CROWLEY: Thanks. Lisa Sylvester, appreciate it.

Workers are revolting in the streets of Wisconsin, and frustration is growing around the country. Can states really make the tough choices needed to solve their budget woes?

Plus Sarah Palin calls it "The Road to Ruin," slamming President Obama on the budget, and much more. Ahead, the new hints she's dropping of a potential presidential bid.


SARAH PALIN (R), FORMER ALASKA GOVERNOR: -- to the presidency, but, my goodness, I'm watching President Obama tell the American public and the press as well --



CROWLEY: Tough budget choices now trickling down to the state level. Joining us in today's "Strategy Session", two CNN political contributors, Democratic strategist Hilary Rosen, and Republican strategist Mary Matalin.

Listen, watching this play out now in Wisconsin, Mary first to you, it just strikes me that we really are watching the - the budget - the federal budget fight smaller in Wisconsin, and there just doesn't seem to be any place where there is compromise.

MARY MATALIN, CNN POLITICAL CONTRIBUTOR: Well, actually writ larger, Candy, in the real sense because unlike the feds the states have to balance their budget. They can't print money. They can't have these fake discussions.

As - as Speaker Boehner said, we need to have an adult conversation, and I think the teachers' wildcat striking is not the adult conversation that voters or the - the public want. This - we are - union - public employee unions are bankrupting the country, and in the case of teachers, it's - public education is in a state of child abuse today.

So I don't think voters are going to support this - this strike, and they're going to support those governors, Republicans and Democrats, because - we're almost saying this in New York, and Jerry Brown is saying it in California, and Rahm is saying it in his campaign in Chicago and I'm certain he's going to be elected, they have to push back - pull back on these greedy and parasitic and selfish public employee union dos and - and programs.

CROWLEY: Hilary, let me - I want you - you know, I know you want to respond here, but let me just put this in a - in political terms here, because the people on the streets are saying, you know, this is the Republicans protecting their tax cuts for corporations, trying to get their agenda through union busting. Can you not look at the other side and say, yes, and this is the Democrats protecting their unions.

So, in the end, aren't we just having a political fight here that's outside the realm of the fiscal problems?

HILARY ROSEN, CNN POLITICAL CONTRIBUTOR: Well, it's not - it's a political fight because it's not an adult conversation. In the case of Wisconsin, I'll just - you know, we can move to the bigger picture, but people should just know that the Wisconsin teachers' unions have tried to meet with the governor 17 times since he's been in office. He's refused to meet with them.

There's a lot of things that unions can do to be at the table, but - but taking away all of their rights and firing people willy- nilly does not help the children of Wisconsin, does not further education, and making a scapegoat of - of solid working people who are devoting their lives to making their community better in - in these jobs is simply not the answer.

CROWLEY: Mary, you know, a lot of people said, look, this is just pure and simple union busting. You take away their collective bargaining rights and teachers really are sort of left to the mercy of the states and become kind of budget fodder.

MATALIN: That's - that's such a specious argument, because there's no - there's nothing in it for states or the country to ill- educate their children. They are our future.

My sister's a teacher. James has five sisters, most of them are teachers.

But why we are making gains in New Orleans and those places that are making gains in education, this is the right and the left are converging on this, is where principals have the ability to hire and promote teachers of merit and to fire the ones that aren't educating our kids. That is precluded by union - it's not representation for the children, it's representation for the retirement of these teachers, not the futures of these kids. And this is a right-left consensus building, and it is - it is a sham what public education has become, and that is where we are going to have an adult conversation.

ROSEN: I'll just say that it is union busting, and - and there are places where it's most successful, where education is most successful is where there's collaboration.

But let's look at the bigger picture here I think of where the Republicans are going on the budget, and you can see it on the House of Representatives Floor, which is, you know, we are throwing four million children and - out of Head Start, out of the very poorest kids trying to be prepared for school, cops being thrown on the streets, home heating oil. I mean, the Republicans want to do something about the deficit? So do Democrats.

What Democrats want to do is not hurt the most vulnerable first. And the Republicans are not doing anything to protect that. And it's just appalling, I think, to most people, that where they're starting their efforts is the people who have the least ability to fight back. If Republicans really wanted to be tough and courageous, they would be standing up to their corporate contributors and - and fighting back on some of those subsidies rather than on poor people.

CROWLEY: Let me just say - we should say that the president is also wanting to cut some of the programs that you just mentioned, the home heating assistance and some community block programs, but I want to move you onto something else.

ROSEN: But nowhere to the degree that the Republicans -

CROWLEY: You're right, but he has gone at those programs.

But let me - let me move you on to another question, and that is it keeps coming up, so much so that whenever it comes up - we're talking about for the show (ph), I think, I just don't want to discuss that again, but I want you all to hear this.

And the questions to two leading Republicans were about the president's faith and where the president was born. And I want you to hear the response of Speaker Boehner and congresswoman Bachmann.


REP. JOHN BOEHNER (R), HOUSE SPEAKER: But the president says he's a Christian. I accept him with his words.

REP. MICHELE BACHMANN (R), MINNESOTA: That isn't for me to state. That's for the president to state. And I think that when the president makes -

UNIDENTIFIED MALE: Do you believe it?

BACHMANN: -- when the president makes his statements, I think they need to stand for their own.

UNIDENTIFIED MALE: But he has said it very clear. I'm just asking if you believe it.

BACHMANN: Well, I think we should take the president at his - at his word.

(END VIDEOTAPE) CROWLEY: Mary, is this - I just can't help but believe this is hurting the Republican Party, as it tries to reach out to Independents that you can't get two people to say, yes, I think the president is a Christian. Yes, I think he was born in Hawaii. Why don't they do that?

MATALIN: Well, they - they said they take him at his word. I don't - Candy, I'm so with you on this. But Republicans are talking about - and I'm talking about people on the ground here, too. They're talking about their president's leadership and priorities or lack thereof. I don't have - I haven't had a single conversation with any Republican or any Independent that about his - where he was born or what religion he practices.

The press keeps asking these questions of these Republicans and they keep saying we take him at his word. How do - yes, he's a Christian. I don't - how would you rather want that answered?

ROSEN: Well, I think it's because the press picks up on this sort of sotto voce campaign that goes on right-wing radio and then circles that undermines the very, you know, passiveness that you just talked about, Mary.

But, I mean, I'm with you. I wish that people would stop doing it in national mainstream media, because it's frustrating, but there's no question that there is a committed effort to try and undermine the president's credibility by labeling him a Muslim.

CROWLEY: Hilary, Rosemary Matalin -

MATALIN: And just like - just like this crazy liberal crackpot bloggers out there who undermine Republicans at every turn. They do not represent any mainstream thinking of either party, I believe.

CROWLEY: OK. Let me hold you there. Mary Matalin, thank you so much. Hilary Rosen, we'll have you back and continue, but not on that subject. I promise. Thanks so much.

ROSEN: Thank you.

CROWLEY: Criminals are finding new ways to use technology to hide from the FBI.

And the price of inflation. We'll look at what's driving up the cost of your food.


CROWLEY: Going dark. That's the FBI's term for the growing challenge of monitoring suspected criminal activity in a new technology-driven age.

CNN Homeland security correspondent Jeanne Meserve is here with the details. It just gets more complicated.

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: It does, Candy. You know, it seems like every week there's a new innovation in communications technology. It can be terrific thing for users, but law enforcement says it is posing a threat to public safety and national security.


MESERVE (voice-over): Facebook, MySpace, Twitter, iPhones, iPods, Skype, online gaming, all let you and your friends talk directly to one another, sometimes with encryption. But bad guys are using the new technologies, too, to operate beyond the reach of court ordered wiretaps.

VALERIE CAPRONI, FBI GENERAL COUNSEL: We've got criminals running around that we can't arrest and can't prosecute because we can't actually execute a wiretap order. And that criminal might be a massive drug dealer. They may be an arms trafficker. They may be a child pornographer or a child molester.

MESERVE: In one case, the Drug Enforcement Administration was able to take down a cocaine smuggling operation, but the same criminal organization is still trafficking weapons because its electronic communications could not be intercepted and used to build a case.

One idea now being debated to close the gap would impact person- to-person communications like texting. Instead of having one computer talk directly to another, providers would have to route traffic through a server. There, the provider could get access and then give intercepts to law enforcement.

But if something along those lines is mandatory, industry says it could stifle innovation, hurt competitiveness and open a whole new can of worms.

GREG NOJEIM, CENTER FOR DEMOCRACY AND TECHNOLOGY: Every time you build in a point of access for the FBI, you build in a point of vulnerability that can be exploited by identity thieves, hackers, foreign governments, and spies.

MESERVE: The issue also raises the hackles of privacy advocates like the American Civil Liberties Union, which says that technical fix will give the government, quote, "a master key to our online communications."


MESERVE: The FBI says they will only monitor communications when it has a court order to do so. The problem is how to do it and quickly when new communications technologies are being spawned at a breakneck speed.

The communications industry says there is no 100 percent solution, and as of now, law enforcement has not put any specific proposal on the table - Candy.

CROWLEY: The bottom line is the tech industry can innovate a lot more quickly than we can legislate. MESERVE: That's absolutely true.

CROWLEY: Thanks, Jeanne. Appreciate it.

MESERVE: Got it.

CROWLEY: Economic times are already tough, and now the pinch could tighten. And, a day of rage in Libya.

Many Americans are struggling now.


CROWLEY: Many Americans are struggling now. New signs we could soon feel more of a pinch, especially when it comes to the basics - eating, driving, even dressing.

Here's our Lisa Sylvester.

SYLVESTER: Candy, you know unemployment is at nine percent, jobs are still hard to come by, and now consumers have a new worry. The prices of basics - basic goods and services are on the rise.


SYLVESTER (voice-over): No, it's not your imagination.

UNIDENTIFIED FEMALE: Grapes right now are so incredibly expensive.

SYLVESTER: The price of groceries really is going up. So is the price of just about everything else from gas to clothing to used cars. The Consumer Price Index which measures the price of goods and services that we buy went up 1.6 percent in the last year. Meat, poultry, fish and eggs up 6.2 percent, energy 7.3 percent, gasoline 13.4 percent, and airline fares up 9.8 percent.

PROF. PETER MORICI, UNIVERSITY OF MARYLAND: This is a very crucial time. The economy is finally starting to show some muster, and now it's getting hit between the eyes by rising commodity prices.

SYLVESTER: What's driving the price hike? It's actually happening globally. The World Bank says food prices increased 17 percent at the end of last year. Bad weather in corn, wheat and sugar-producing countries has limited supplies. Couple that with strong demand for basic commodities from China, and the prices are shooting through the roof.

Martin Baily, former chairman of the Council of Economic Advisers, predicts inflation will stick around as the global economy continues to recover.

MARTIN BAILY, FORMER CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: We all consume food and energy, and we're feeling the pain at the gas pump, people trying to heat their houses. So all of those things are - are affecting us. I think rents are going to start to rise as the - as the housing market begins to recover. So those are painful parts of inflation.


SYLVESTER: Now, as the prices of basic things like food go up, well, consumers are going to start making changes. Folks, for instance, they may put off things like auto repairs or buying that new appliance. And also, they will start switching from name brands to more generics - Candy.

CROWLEY: Thanks so much, our Lisa Sylvester.