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Government Shutdown Looming?; Possible Terror Plots Against U.S. in the Works?

Aired April 5, 2011 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now: growing concern al Qaeda is taking advantage of political unrest in Yemen to plot new attacks on the U.S., so-called terror chatter said to be increasing also.

The FBI now said to be interviewing Libyans here in the United States, possibly, possibly by the thousands about threats to Americans.

And an Oval Office meeting fails to break the budget impasse. A government shutdown looming, President Obama visibly frustrated.

Breaking news, more political headlines all straight ahead. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Weeks of protest in Yemen against three decades of rule by the president, Ali Abdullah Saleh. Right now, his future is questionable, but deep concern about al Qaeda in Yemen is not. There are reports chatter from the terror network's most active branch has increased, raising fear of a possible plot in the works.

And, today, the Pentagon said the U.S. will continue military aid to Yemen, calling it essential to fighting al Qaeda.

Our Pentagon correspondent, Chris Lawrence, is join us now with more on the impact that this unrest is having, unrest in Yemen is having on this whole area of counterterrorism -- Chris.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, for all the attention that we pay Tunisia, Egypt, even Libya, nothing may have more direct consequence to the security of the United States than what is happening right now in Yemen.

A U.S. official says al Qaeda planning there may have gone beyond just aspiring to attack. He says something may be afoot. But, right now, there's nothing concrete on time, place, or type of attack.


LAWRENCE (voice-over): A U.S. official says Yemen's government is preoccupied with political unrest and little is being done to find and capture terrorists.

An American counterterrorism official says the government's ability to check travelers, screen cargo, and work immigration issues is all in question right now. And that should matter to Americans because the al Qaeda group based there is considered the number-one terrorist threat to the United States.

MARK TONER, STATE DEPARTMENT SPOKESMAN: We do believe that they have taken advantage of the insecurity and poor governance in some regions of Yemen.

LAWRENCE: And if the government falls...

JAMES CARAFANO, SENIOR FELLOW, HERITAGE FOUNDATION: It wasn't that great a government to begin with.

LAWRENCE: Analyst James Carafano argues that even if the opposition topples President Ali Abdullah Saleh, the risk to U.S. interests is somewhat mitigated.

CARAFANO: Because most of the cooperation is with the military and intelligence services, some of that can continue to go on regardless who's in charge of the government.

LAWRENCE: Last year, Defense Secretary Robert Gates approved doubling the U.S. military aid to Yemen to $150 million. Despite the instability, Pentagon officials say they have not suspended that aid.

GEOFF MORRELL, PENTAGON SPOKESPERSON: As far as I know, it has not been.

LAWRENCE: The Pentagon says Yemen's embattled president and the U.S. military still have common goals.

MORRELL: We both still face a threat emanating from Yemen that needs to be dealt with.

LAWRENCE: Carafano says there's a chance a new government in Yemen could be better than the present one.

CARAFANO: I mean, there are ways we can get counterterrorism operations in the country without relying on essentially a two-bit dictator to get you there.


LAWRENCE: On the other hand, those leaked WikiLeaks cables reveal just how closely the U.S. has been working with Yemen's president. One quoted him as saying that he would keep claiming that the attacks on al Qaeda there in Yemen were being done by his forces, not the Americans. Of course, the revelation of those cables has come back to hurt him politically during this current unrest -- Wolf.

BLITZER: Lots at stake in Yemen now. Chris Lawrence, thank you.

Let's get to the conflict in Libya right now. A law enforcement source tells CNN the FBI is now interviewing thousands of Libyans living in the United States about possible terror threats to Americans.

Brian Todd is here. He has been digging deeper into this story for us.

What are you finding out, Brian?

BRIAN TODD, CNN CORRESPONDENT: Wolf, the law enforcement official who gave us this information describes this process as a proactive effort spurred by the revolt in Libya. The follow said the FBI has no specific intelligence to indicate that Libya is planning any terror attacks, but the source said -- quote -- "We are making contact with Libyan visitors to determine whether there is a threat to Americans here in the U.S. or abroad."

Now, the FBI started the interviews this week and is going to concentrate on the parts of the U.S. with the highest concentrations of Libyans. And it could end up speaking with thousands of people living or visiting in the U.S. They want this cooperation to be voluntary, but just in case, the Islamic relations group CAIR, the Council on American-Islamic Relations, Wolf, is issuing an alert reminding American Muslims of their rights if law enforcement officials comes to call. They're bracing for this a little.

BLITZER: There's been some speculation the FBI is also interested in maybe -- I don't know if this is true -- getting some military-related information from Libyans here in the United States that might help the NATO airstrikes, for example, go on in Libya?

TODD: That's right. "The Wall Street Journal," which first reported the story, is reporting that that is part of what U.S. officials are after. The source who we dealt with couldn't confirm that, but the source did say that if Libyans who are interviewed want to offer that kind of information, of course they're going to accept it.

BLITZER: There's also a history of Gadhafi retaliating. And that's raised a lot of concerns, I'm told, among counterterrorism authorities here in the United States.

TODD: Clearly, his pattern is one of retaliation. And you remember these stories so well. After that 1986 bombing of the Berlin discotheque, just a couple of weeks later, the U.S. bombed his compounds in Tripoli and other installations, by many accounts killing one of his daughters.

Two years later, Gadhafi and his aides are widely linked to the plotting of the bombing of Pan Am 103 over Lockerbie, Scotland. That killed 270 people. There was also a border war with Chad. France helped Chad defeat Libya in that war. Well, just after that, a French airliner was bombed over Niger. Gadhafi and his regime were linked to that bombing as well.

Look at him now. He's clearly boxed in, maybe more than he's ever been. He's under pressure from the U.S. and its allies. His aides are defecting, Moussa Koussa and others. He's boxed in, and in those positions, clearly he has lashed out. The question is, what assets does he have in the United States to maybe unleash some kind of an attack? That's what U.S. officials have got to be after. BLITZER: Yes, they're worried about that. And let's not forget that disco in Germany, that's where a lot of American soldiers used to hang out. And some of them died in that attack that led to the U.S. response and then more and more...


TODD: That's right. Tit for tat all along, right.

BLITZER: Thanks, Brian. Thanks very much.

If Libya right now, opposition leaders are rejecting any effort to have one of Moammar Gadhafi's sons succeed him, saying flatly there will be no concessions.

CNN's Reza Sayah is in Benghazi. He spoke to one of the top opposition leaders.


REZA SAYAH, CNN CORRESPONDENT (voice-over): This was the happiest of homecomings, family, friends, and loved ones.

(on camera): The regime has suggested they're open to a deal whereby Colonel Gadhafi would step aside, and his son Saif Gadhafi would take over power. Would you consider this deal?

ABDUL HAFIZ GHOGA, LIBYAN OPPOSITION SPOKESMAN (through translator): We will not accept Gadhafi or any of his sons or aides ruling us ever again for even one hour.

SAYAH: What concessions is the opposition prepared to make to end the bloodshed?

GHOGA (through translator): We ask that Gadhafi and his family leave Libya and that he step down from power. We want him to be put on trial for the horrific crimes that he has committed.

SAYAH: Those don't sound like concessions. They sound like demands. What concessions are you prepared to make?

GHOGA (through translator): What kind of concessions can we offer a regime that's killing its people? We will either win or the other side will defeat us. We have no other option.


BLITZER: Reza Sayah is joining us now on the phone.

Reza, I take it you're in Benghazi. Is that right?

SAYAH: I am, Wolf.

BLITZER: All right, tell us about the opposition right now. It looks based on the reporting we have heard all day, including from our colleague Ben Wedeman, it looks like Gadhafi's forces are on the offensive. They're really going after the rebels right now. They're making dramatic inroads, and NATO for whatever reason seems to be MIA, missing in action, on the battlefield right now. What's going on?

SAYAH: Man, this was a rough, rough day for the opposition and its fighters. They lost key territory, getting pushed back by the regime forces, back from Brega westward towards Ajdabiya. They came under heavy fire, gunfire, artillery fire, mortars by the regime forces.

And you can sense frustration is growing among the opposition leaders, even though they're trying to keep upbeat. And for the next couple of days, I would really keep my eye on the relationship between the opposition and (AUDIO GAP) we're hearing growing criticism on the part of the opposition and its leadership aimed at Turkey.

Of course Turkey, a NATO member state, it really wasn't on board early on with the aggressive airstrikes, the coalition airstrikes. The opposition leaders are blaming Turkey for what they call a decrease in airstrikes. And that criticism is growing louder and louder.

So I would really keep my eye on the relationship between the opposition and Turkey, and, in extension, the opposition's relationship with NATO. They have had a honeymoon period, but you can sense the frustration and the growing criticism. It could signal a rough patch coming up, Wolf.


BLITZER: Because it looks like Gadhafi's forces, they are moving on Al Brega. They could threaten some of the other towns on the way to Benghazi.

And there are literally hundreds of thousands of people in Benghazi, who are deeply worried right now. And they're wondering, whatever happened to NATO? I understand that NATO has to operate under the consensus rules, that if one NATO ally opposes something, they can -- they can stop it from happening.

Is that what opposition figures there are saying; Turkey is standing in the way of NATO doing a robust job trying to protect civilians in Libya?

SAYAH: Two senior leaders that we spoke to in the opposition said exactly that. They're directly blaming Turkey.

We spoke to Abdul Hafiz Ghoga, the number-two men of the opposition. We also heard from the opposition's top military official, and they directly blame Turkey for what they call a drop in airstrikes, since airstrikes have been critical for the opposition forces. And the real progress that they made (INAUDIBLE) so criticism is growing on Turkey.

There was some talk that the consulate in Turkey today, there was going to be protests there. So indeed Turkey's being the target of some frustration, some growing criticism on the part of the rebels -- Wolf.

BLITZER: Reza Sayah, thanks very much. We will stay in touch with you.

It's precisely what John McCain, Lindsey Graham, the two senators, had warned about the other day when Robert Gates, the defense secretary, was up on Capitol Hill. They said that if NATO takes command, as opposed to the United States, it will simply weaken that entire airstrike capability, threatening civilians in Libya, specifically the civilians who are fighting Gadhafi. We will stay on top of the story and see what's going on. Much more coming up later this hour.

Meanwhile, a Florida pastor burns a copy of the Koran, sparking protests in Afghanistan that have left more than a dozen people dead. "The New York Times" columnist Roger Cohen is outraged. He says there's blame to go around. Roger Cohen will join us live from London.

Also, a frustrated President Obama makes a surprise appearance as new efforts to avoid a government shutdown fail.

And Southwest Airlines finds cracks in more planes, cracks like the one that opened up in a gaping hole in one jet in mid-flight.


BLITZER: Jack Cafferty is thinking ahead to the 2012 election. Who isn't?

Jack is here with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Well, you have been on it since they closed the polls in 2008.

BLITZER: Since 2001, yes. I have been thinking about it for a long, long...



BLITZER: Since the millennium, if you remember.

CAFFERTY: I know. This stuff's in your blood.

A radio host in Southern California, a fellow named John Phillips, wrote kind of a fascinating piece in "The Los Angeles Times" titled "Why Hillary Clinton Must Run in 2012" -- not should run, must run.

In the piece, he lays out why he thinks Hillary could win the Oval Office this time. He points to approval ratings, President Obama at am measly 42 percent in a new Quinnipiac University poll, Secretary of State Clinton 66 percent in a similar poll done by Gallup. Phillips also talks about dissatisfied Clinton backers from 2008, who never really fell in love with Obama. To quote Phillips, "They just fell in line." And Phillips suggests that these people are so fed up with Obama, they could be persuaded to vote for a Republican, rather than vote to reelect the president.

Why is Hillary Clinton suddenly so much more attractive as a candidate? Well, Phillips says the military action in Libya was Hillary's "I told you so" moment, with -- quote -- "Hillary serving as the realistic, aggressive war hawk, and Obama being a not-ready-for- prime-time waffler" -- unquote.

While Phillips might be on to something here, the secretary of state has said repeatedly said she is not interested in making another run at the White House

When Wolf asked her in Cairo a few weeks back if she'd want to be president in 2012, she quickly said no.

What about 2016? She said this: "I am doing what I want to do right now, and I have no intention or any idea even of running again. I'm going to do the best I can at this job for the next two years" -- unquote.

Of course, 2012 is still a ways off, and in politics, as we have seen, stranger things have happened.

Here's the question: Do you think Hillary Clinton could beat President Obama next year?

Go to Post a comment on my blog.

I think she could.

BLITZER: Yes, well, get ready, Jack. You're going to get a lot of e-mail on this one, tons.

CAFFERTY: What do you think?

BLITZER: I don't think she's going to challenge the president of the United States for the Democratic nomination.


CAFFERTY: That was not the question.

BLITZER: I don't know what would happen if she did. I will give you that answer.


BLITZER: But I don't think she will. But, as you say, strange things are in politics -- happen in politics all the time.

A high-stakes, high-level meeting at the White House today between President Obama and congressional leaders, but still no agreement on a budget for the rest of this fiscal year, and the clock is tick toward a potential government shutdown this weekend.

Let's go straight to our White House correspondent, Dan Lothian. He's working the story for us.

All right, Dan, what's going on?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, first of all, Wolf, the president is blaming politics. He said that there are things that you can't control. You can't control an earthquake. You can't control a tsunami, but that this is not one of those problems.

So, today, the president told congressional leaders that he is prepared to meet for as long as possible in order to get this budget resolved.


LOTHIAN (voice-over): Racing against a deadline that could shut down the federal government, President Obama met with key lawmakers at the White House for about one hour to find compromise and a deal.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We are now closer than we have ever been to getting an agreement.

LOTHIAN: But it's difficult to determine how close "close" is. The Oval Office session with House Speaker John Boehner, Senate Majority Leader Harry Reid, and the two appropriations chairs ended without resolution. And the temperature of Speaker Boehner's optimism appeared lukewarm at best.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: We're fighting for the largest spending cuts possible. And we're talking about real spending cuts here, no smoke and mirrors.

LOTHIAN: The notion of smoke and mirrors did not sit well with the president.

OBAMA: Everybody has got to take a haircut. And we've been willing to do that.

LOTHIAN: As negotiations continue, the Obama administration is bracing for a possible shutdown. An internal memo from the Office of Management and Budget reads in part, "Given the realities of the calendar, we continue to work with agency leaders to refine and update their contingency plans."

While the memo did not spell out specifics, it offered guidance. "These communications should be focused on the logistical and managerial issues related to a potential shutdown."

Everyone wants to avoid that. History offers the best lesson on the consequences. During the last government shutdown, then-President Clinton made this appeal.

(BEGIN VIDEO CLIP, 1996) BILL CLINTON, PRESIDENT OF THE UNITED STATES: I challenge all of you in this chamber, let -- never, ever shut the federal government down again.



LOTHIAN: But that remains a real possibility that White House spokesman Jay Carney says the country can't afford.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: That would obviously be harmful at a time when we are beginning to see some real progress in terms of economic growth, sustained growth, and sustained job creation.


LOTHIAN: So, the president said that, if differences are not resolved, if they don't make real progress today, then he wants to have another meeting with the same players who were there today. He wants to have another meeting tomorrow, and if they still can't come to any sort of resolution, a meeting after that.

Now, one other interesting point, Wolf, I asked Jay Carney, the White House spokesman, why is it that they always come down to the wire on all these issues? We saw that in the lame-duck session of Congress. Now we're seeing it again with the budget. He said -- quote -- that they don't endorse this kind of approach. It would be better if they were able to get this deal two, three, or even four months ago.

BLITZER: As you know, John Boehner, the speaker, says, you know what, if they can't reach a deal in the next few days, they could pass another weeklong what's called continuing resolution, so they will have a little bit more time to avoid a government shutdown.

LOTHIAN: That's right. And that's not something that the president seems to support. He said they have had two other C.R.s recently. He said that's not the way to run government.

He did leave the door open a bit for a short-term, maybe two- or three days, if they do reach a deal and they need to button things up. Then he does support something like that. But he does not want another weeklong C.R. here, Wolf.

BLITZER: All right, thanks very much. We will stay in touch, in close touch. We will see what happens.

The Supreme Court is making a habit of stopping executions. The same week it granted a stay for a condemned prisoner in Arizona, the justices show some mercy on a convicted murder in Texas.

And France is ready to retrieve the remains of 50 people killed when their airliner went down in the Atlantic. The father of two victims is begging them not to. We will explain why. Stay with us. You're in THE SITUATION ROOM.



BLITZER: The burning of a Koran in Florida has lit a fire of furious protests in Afghanistan. But while one pastor ignited the turmoil, he wasn't the only one responsible for the deadly violence that followed.

And will President Obama's next run for the White House drive a stake through the heart of a public campaign financing law? Stick around.


BLITZER: Kabul University in Afghanistan, the scene of the latest protest against the burning of a copy of the Koran by a Florida pastor last month. About 1,000 people took part in this mostly peaceful demonstration.

But other protests have turned deadly, including one last Friday in which a mob killed seven United Nations workers.

Roger Cohen of "The New York Times" is angry about all of this. He says there's plenty of blame to go around. Roger is joining us now from London.

Roger, thanks very much for coming in.


BLITZER: Among other things -- I read your column in "The New York Times" this morning -- you ended it by saying: "This column is full of anger, I know. It has no heroes. I'm full of disgust."

Why are you so angry about what happened in Afghanistan?

COHEN: I just think there's so much stupidity to go around here, starting off with Terry Jones, the pastor, in Gainesville, Florida, burning a copy of the Koran. What could be more provocative than that? And, to me, religion has to be related with mercy, with compassion, not with these kinds of acts of provocation.

Then, Hamid Karzai, the Afghan president, picks up on this, talks about it to the nation. Here's this mini-church. There were maybe 35 people present when this happened. The president of Afghanistan draws attention to it. Then the imams in Mazar-e-Sharif in Northern Afghanistan, they talk about it, whip these people into a frenzy.

And out goes this mob and kills seven United Nation workers in Afghanistan who are trying to work for the good of the country. And it's just an example of a great deal of stupidity all around, resulting in these tragic deaths.

BLITZER: And you've got to obviously blame those who actually killed these United Nations workers. And you write about some of these U.N. Personnel who were killed. They all go over there. They think they're doing important work on behalf of a cause. And then for no reason whatsoever, an angry mob goes ahead and kills them. As bad as it is to, obviously, burn the Koran, it's very bad to kill innocent human beings.

But let's talk about Hamid Karzai, a man I've known now for ten years. Why would he do this? Why would he whip up a crowd like this, knowing what the result is going to be?

COHEN: You know, Wolf, Karzai is underwritten by the west. He wouldn't be there without the west, in all likelihood. But he knows that there's a great deal of hostility to the U.S. and western presence there. And so he feels it's an incumbent on him, in order to preserve his power, to be critical of the west, to point to acts like this that showing disdain for Islamic culture, Islamic teaching, and this is the balancing act he does. And it's a measure, I think, of some of our powerlessness in Afghanistan that we have to tolerate this.

I also think it's interesting that where has the great outcry been over this stupid act of Jones in Florida? It hasn't actually been in the Middle East. I think that extreme Islamism, Jihadism is today, Wolf, much more president in the so -- much more present in the so-called Af-Pak theater, in Afghanistan and Pakistan, than it is in some of the rest of the Middle East.

BLITZER: And what worries me and I assume worries you, as well, is that for ten years almost the U.S., its coalition of partners have spent hundreds of millions of dollars -- billions of dollars in Afghanistan. They've lost a lot of lives trying to help the people in Afghanistan. Hamid Karzai depends on the United States for his support.

But then he goes and seemingly ignores the U.S., which raises questions to me about what's going to happen in Afghanistan when the U.S. and the others pull out. Will all of this work, this enormous work, be for naught?

COHEN: It's a legitimate question, Wolf. You know, I can't help thinking that what I just said, that this Jihadi feeling is stronger in Afghanistan and Pakistan than, say, in Egypt or even in Libya.

That has to do with that very U.S. and western presence. It is we're trying to do good, but the longer this goes on, the more it's perceived by local people often as a provocation.

Look, I think there has been tremendous progress on many fronts in Afghanistan, starting with a country that was pretty much in a stone age. There has been headway.

But I think, you know, we have to define victory downward and keep defining it downward to the point where our minimum demand there has to be simply that it cannot be any longer al Qaeda central. They cannot be a base from which attacks against the west are planned. I don't know how many troops are required for that, but I think beyond that, our presence at a certain point just becomes counterproductive.

BLITZER: Well, you think about it, $2 billion a week the United States is spending in Afghanistan, $100 billion a year, 100,000 U.S. troops. Should the U.S. simply cut its losses and get out of there as quickly as possible?

COHEN: Yes. I think -- think how many schools could be built in the United States with that money or improved with that money.

No, I don't think we cut and go after all this like that. But as I just said, I think we have to be looking for the exit. Here in the U.K., Prime Minister David Cameron has been absolutely firm. The U.K. is out of there in -- in 2015, four years from now. I don't think the United States can be far behind.

Leaving does not mean that there aren't any U.S. personnel left in the country. We can leave some behind. But I think the overarching operation currently being led by General Petraeus, that has to be at the back end now, moving toward a conclusion.

BLITZER: With all due respect to the U.K., they're not spending $2 billion a week in Afghanistan like the United States.

COHEN: They are not, no.

BLITZER: All right. Roger, thanks very much. Roger Cohen is a columnist for "The New York Times." Thank you.

Growing concern about hundreds of Boeing 737s. The roof of one plane ruptured in mid flight. Now cracks have been found in five more jets.

And the 2012 presidential campaign on track to be the most expensive in history. Why would a candidate take millions of dollars when they can raise billions?


BLITZER: Southwest Airlines now says cracks have been discovered in five of its planes. Cracks like the one that led to a five-foot hole opening up on one flight the other day. CNN's Jeanne Meserve is following the investigation for us. It's pretty scary stuff, Jeanne.

JEANNE MESERVE, CNN CORRESPONDENT: Yes, and the Southwest announcement isn't all. Boeing says that 570 aircraft were manufactured with the same design as that Southwest jet that lost part of its roof last Friday. Eventually, all of them will need special inspections for metal fatigue and cracking.


DEBORAH HERSMAN, NATIONAL TRANSPORTATION SAFETY BOARD: This is a Southwest 737, and the rupture occurred on the left side, over here. MESERVE (voice-over): The National Transportation Safety Board investigation into what caused the roof to rip on a Southwest Airlines flight Friday night is still in its early stages. The torn section of fuselage is now back in Washington for analysis at an NTSB laboratory.

HERSMAN: We have to identify the origins and the extent of this cracking and what similarities this aircraft design might have to others.

MESERVE: The Federal Aviation Administration has ordered emergency inspections of 175 planes worldwide, all older Boeing 737 models with more than 30,000 takeoffs and landings. Inspections must be repeated at frequent intervals.

Boeing says eventually 570 planes with the same design will need a closer look.

The company had anticipated that the skin and joints on one of these planes would not need special scrutiny until it reached 60,000 takeoffs and landings, but the plane that was damaged Friday had only 39,000. And now Southwest's inspections have discovered five others in its fleet with subsurface cracks.

An aviation expert explains information about how to best service an airplane evolves over time.

MIKE BOYD, BOYD GROUP: As an airplane gets older, mechanics know what to look for. They know what components will start to wear out early. They know what components might be deficient in terms of performance.


MESERVE: Boyd insists that flying is still safe and says he's more worried about the drive to the airport. But others say there is much more to learn about and from Friday's frightening events.

BLITZER: Yes. I hope they learn it quickly, too.


BLITZER: Thanks very much.

NATO was once seen as the savior by Libya's rebels. The alliance owns the skies, but it's taking flack right now from the men and women fighting Muammar Gadhafi who want to know why NATO isn't doing more.

And 617 million of your tax dollars will go to financing presidential campaigns over the next decade. We're getting -- are we getting our money's worth? There's a debate. Stick around. You're in THE SITUATION ROOM.


BLITZER: For decades, presidential hopefuls have had the option of relying on public funding. But we're now in the era of a billion- dollar campaign that some are questioning whether we're approaching the death of public financing in the United States.

Lisa Sylvester is here. She's been looking at this story for us. It's staggering the amount of money that's going to go into this next presidential race.

LISA SYLVESTER, CNN CORRESPONDENT: Yes. An enormous sum of cash is what we are talking about, Wolf. 2012 is expected to be the most expensive presidential race ever. President Obama alone is hoping to raise $1 billion. His Republican contenders will likely raise another billion.

And then there's the outside groups and the parties. They could raise yet another a billion dollars, making what could be potentially a $3 billion race. And this is raising the question: is public financing of presidential campaigns still relevant?


SYLVESTER (voice-over): President Obama will be very busy in the next few months as candidate Obama. He has a lineup of fundraising events over the next two months as his campaign hopes to raise $1 billion for his re-election campaign.

That's putting pressure on Republican challengers to decline public campaign funds, a move which would allow them to raise an unlimited sum of private money, making this potentially the costliest presidential race ever. The casualty in all of this could be the decades' old presidential public financing system.

Republican Congressman Tom Cole introduced legislation in the House to kill the program.

REP. TOM COLE (R), OKLAHOMA: What we're doing is spending tens of millions of dollars to finance very long-shot candidates. That's a pretty privileged little elite. Why should we spend $600 million when it doesn't educate one American, it doesn't build one mile of road, it doesn't defend the country, doesn't educate a kid?

SYLVESTER: The public financing system was born out of the Watergate scandal, a way to clean up Washington. Taxpayers are asked if they want to donate $3 from the U.S. Treasury to fund the presidential races. Candidates who accept public money also must accept spending limits.

Cutting the program would save taxpayers $617 million over the next decade, according to the Congressional Budget Office.

Supporters of public financing acknowledge problems with the system. The group Common Cause argues tweak it, don't kill it, saying doing so will open the floodgates to special interests controlling Washington.

MARY BOYLE, COMMON CAUSE: Wealthy special interests are getting what they want out of government. And regular people are not. And so, you know, the amount of money that's involved for public funding is miniscule in terms of the whole federal budget. And it's something that's well worth the expense for -- for the public.

SYLVESTER: Representative Cole's legislation passed the House by a vote of 239-160, largely along party lines. It faces a tougher battle in the Democratically-controlled Senate, and President Obama says he opposes it. But fewer and fewer Americans are opting to check off the box on their tax forms saying they want money from the treasury to go to finance presidential races, only 7.3 percent in 2010. That's down from 28.7 percent back in 1980, Wolf.

BLITZER: And as you know, the last time the president, when he was running for the White House, he opted out of the public financing. He raised his own money. McCain took the public financing. This time almost certainly the president in his re-election bid is going to opt out. For all practical purposes, it's the Democratic president who's killing this -- this option right now.

SYLVESTER: Yes. In fact, that is something that Republicans will point out, that ironically, that if you look back at the death of a public financing -- in fact, if it does indeed die, that it will be President Obama that people will point to as sort of the starting point, Wolf.

BLITZER: Is he reject -- he's rejecting it, the Republicans might want it. But that's a fascinating development. Thanks very much.

Jack Cafferty's back. He's got your e-mail. He's asking, "Do you think Hillary Clinton could beat President Obama next year?" That's his question.

And it takes guts to build a rocket. Even more to build the biggest one the world has seen since the moon landing. We have details right here in THE SITUATION ROOM.


BLITZER: Back to Jack for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The question this hour -- when he did it in 2008, it was one of the epic battles for the nomination in modern history. The question is, "Do you think Hillary Clinton could beat President Obama next year?"

Pat writes, "Yes. And regardless of what she said about running for president, I think she would make a far better president than Obama has."

Ray in Knoxville, Tennessee: "She has improved her image immensely by her work as secretary of state, and President Obama has alienated the Democratic left. So she could win the nomination."

Susan in Oregon: "Sure, but why should she? Never send a man to do a woman's job. Don't expect a woman to come in and clean up the mess after he screwed everything up. She busted her butt as first lady, senator and secretary of state. It's her call, but yes, it would be a shellacking." A.B. writes, "Jack, despite the poll numbers favoring Hillary Clinton, she's no match for Obama. And if she runs against him again, she will be beaten into bankruptcy and a nervous breakdown. Hillary made the great mistake of underestimating the political savvy and acumen of Obama, and I don't think she'll make that mistake again."

Scott writes, "Yes. I think Hillary could make a viable run in 2012. Some 2008 Obama campaign workers here in western Washington state are still asking, why the escalation of the war in Afghanistan? Why is GITMO still open? Where's the public option? Little missteps by President Obama seem to mount. With so many substantial problems unresolved, a lot of voters I talked to are grossed out by the announcement already that he's going to start raising $1 billion for his campaign next year. It may be time for a change."

Diana writes, "I think, like millions of Americans, she's the best. I'm a Republican, but if she runs for president, for the first time in my life, I will vote Democrat. Hillary is prepared and ready to run this country."

And Bill writes, "Yes, she could. And it would be different. The question is, would it be better?"

If you want to read more on this, you go to the blog. We've got a lot of mail. We always do when we talk about Hillary. That was -- that was really one of the epic battles ever staged for a presidential nomination.

BLITZER: Yes. I remember. I remember that, of course, only a few years ago. But you and I are old enough to remember when there was a Democratic incumbent president seeking re-election. His name Jimmy Carter, 1980. And Ted Kennedy, the Democratic senator from Massachusetts, challenged him for the Democratic presidential nomination. It was an epic battle between Kennedy and Jimmy Carter...


BLITZER: ... and weakened Carter badly. Guess who won, in 1980, the presidency?

CAFFERTY: Yes, Reagan. And it was the only time in modern history that an incumbent Democratic president has been voted out after one term.

BLITZER: Yes. Well, that's, you know, something that this president doesn't want to see. Doesn't want to be challenged in his bid for re-election.

CAFFERTY: I'd love to see...

BLITZER: And right now it doesn't look like Hillary Clinton or anyone else is going to seriously challenge him for the Democratic nomination.

CAFFERTY: I'd love to see her do it, though. I mean, do you know how much fun we'd have here for another 15 months? BLITZER: It would liven up the campaign season.

CAFFERTY: It would be great.

BLITZER: Moderate some of those debates between Hillary Clinton and Barack Obama. It's not going to happen, Jack. I've got to, you know, disappoint you. I don't think it will happen.

CAFFERTY: No. I think you're probably right, but we can dream.

BLITZER: Now there will be debates between Haley Barbour and Tim Pawlenty. I know you're getting excited thinking about that.

CAFFERTY: Yes. And maybe somebody will ask about Mike Huckabee what happened to the records from when he was governor of Arkansas. I understand they're missing.

BLITZER: That will happen. All right, Jack. See you tomorrow.

Libya's rebels cheered the news that NATO would intervene in their war. Now many of the desperate fighters say the alliance isn't doing enough to help them. On "JOHN KING USA," right at the top of the hour, the first American female general to command an air combat campaign will join John.

And as NASA prepares to shut down the shuttle program, a private company is picking up the slack. We're taking a closer look at its ambitious plan for a massive rocket.


BLITZER: A commercial space company aims to build a better rocket, one that can carry more cargo into orbit than any built since NASA's Saturn 5. CNN's John Zarrella is joining us now from Miami with more on this project.

John, what's going on?

JOHN ZARRELLA, CNN CORRESPONDENT: You know, Wolf, Elon Musk never ceases to amaze us. His name has become synonymous with the commercial space program, and he's at it again in Washington, D.C., today, announcing that Space X is going to build a rocket that can, as you mentioned, carry more cargo into space than anything ever built except for a Saturn 5 report. It should be able to fly in the next couple years and eventually could carry humans back to the moon and on to Mars.

Now, I caught up with Musk a little while ago in Washington, and we talked about some of his other space successes.


ZARRELLA (voice-over): Elon Musk is like a big kid with a new toy.

ELON MUSK, CEO, SPACE X: We designed this to be super tough. I mean, so -- I mean, you can beat the snot out of it and it will work.

ZARRELLA: Musk's toy just happens to be a spacecraft. He sunk $100 million of his own money into developing it. We caught up with Musk and his Dragon capsule in Washington, D.C., where it was on display. The first commercially-owned vehicle to ever circle the earth and land safely back.

MUSK: The guy who designed the 747, when he saw that thing take off, he says, "I can't believe it works."

ZARRELLA (on camera): You said the same thing.

MUSK: That's how I feel.

ZARRELLA (voice-over): Musk's company, Space X, is considered the leader in what is quickly becoming a commercial race to space.

MUSK: Races are good.

ZARRELLA: There's little doubt the race is now on. ATK, the company that builds the shuttle's solid rocket boosters, announced it's going to build a rocket called Liberty, bigger ATK boasts, than Musk's Falcon 9.

And this month, NASA is expected to announce the names of half a dozen commercial companies getting seed money to start developing vehicles to replace shuttle for carrying astronauts to the International Space Station.

CHARLIE BOLDEN, NASA ADMINISTRATOR: Ideally we would like to have multiple competitors who come down to at least two that we can use so that we always have an alternative, should one falter or one fail.

ZARRELLA: The Space X Dragon would be modified to carry astronauts.

MUSK: It's highly likely that we will get one of the contracts for NASA to launch astronauts. And I'm also confident that we'll be the first to do so.

ZARRELLA: Space X already has a contract for a dozen cargo flights to the station starting next year.

This summer, the company expects to make its last Dragon test flight, which is likely to be a docking with the space station. And as long as you're going, don't show up empty handed.

MUSK: We're carrying, I think, mostly food and water.

ZARRELLA (on camera): Right, right.

MUSK: That's stuff that has high value once you're in orbit. But, you know, if you blow up a cheeseburger, it's not that bad.

ZARRELLA: Musk says, despite the surprises so far, a failure along the way would not be a surprise. This is, after all, rocket science.


ZARRELLA: I talked to Musk on the phone this afternoon after their announcement. And he told me in order for commercial space to be successful, advancements have to be revolutionary, not evolutionary. Makes sense -- Wolf.

BLITZER: Certainly does. All right. We'll continue to watch this story with you.


BLITZER: John Zarrella, reporting for us from Miami. Thanks very much.

That does it for me. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM.