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Government Nearing Shutdown; Libyan Rebels in Retreat

Aired April 8, 2011 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: All across the country Americans brace for the impact, government workers, military families, tourists all hostages to a political blame game.

And after days of concern that the Libya fighting has turned into a stalemate, CNN's Ben Wedeman reports from the front line that it may now be worse, worse than that for the rebels.

I'm Wolf Blitzer, and you're in THE SITUATION ROOM.

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

ANNOUNCER: This is CNN breaking news.

BLITZER: Let's begin with the breaking news, a budget battle that is more than just about numbers, the two sides right now in a bitter partisan standoff. As the hours tick away, neither seems ready to budge. The House speaker, John Boehner, and the Senate majority leader, Harry Reid, are the public faces of this fight, but the passions, they run deep among the rank and file.

Boehner says it's all about spending cuts. Reid says it's all about ideology. And that could make a compromise that much harder to achieve.

Let's go live to our senior congressional correspondent, Dana Bash.

Dana, only six hours to go. The stakes right now are enormous. What's the latest you are hearing on Capitol Hill?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: There's a feeling that they're getting closer to a deal, but they are not there yet. Still the negotiations, Wolf, are still intense.

For example, the chief of staff to the Senate majority leader, Harry Reid, and some others were seen walking over to House Speaker John Boehner's suite, which is right behind me, with some paper, clearly just one example of the back and forth, the to-ing and fro- ing, as they try to come to a final agreement.

But even as they are working on that behind the scenes, in public the war of words was incredibly intense, political posturing by each side to put the blame on the other just in case a government shutdown does happen.



BASH (voice-over): From the minute he arrived in the morning, the Senate Democratic leader hit his talking points.

SEN. HARRY REID (D-NV), MAJORITY LEADER: This all deals with women's health. Everything has been resolved.

BASH: Then the Republican House speaker came out to say, not true.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: There's only one reason that we do not have an agreement as yet, and that issue is spending.

BASH: All day, a dizzying number of dueling trips to the camera to try to get the political upper hand if there's a government shutdown.

BOEHNER: Most of the policy issues have been dealt with, and the big fight is over the spending.

REID: They can shut down America's government over women's access to health care. If that sounds ridiculous, it's because it is ridiculous.

BASH: That's a politically potent messages Democrats are seizing on, relentlessly hitting Republicans.

SEN. BARBARA MIKULSKI (D), MARYLAND: They want to take our prenatal care away from us. They want to take our counseling and family planning away from us. And we just say no.

BASH: What's this all about? House Republicans want to eliminate all federal dollars, $317 million, for women's health clinics, known as Title X funding. That includes money for Planned Parenthood. Democrats say no way.

So according to sources in both parties, Republicans instead made an offer to let states decide how to spend it. Again, Democrats say no. They argue it would take away guaranteed federal dollars for women's preventative health, like breast cancer exams and more.

But it's also about abortion. Planned Parenthood insists they use no federal dollars for abortion because it's already against the law, yet Republicans say this.

SEN. JON KYL (R-AZ), MINORITY WHIP: You don't have to go to Planned Parenthood to get your cholesterol or your blood pressure checked. If you want an abortion, you go to Planned Parenthood.

(END VIDEOTAPE) BASH: Now, we should note that Planned Parenthood said that that's not true. Most of their care, most of their services is about preventative care, not abortion.

Now, Senate Democrats think that this is such a politically potent issue for them, they even sent out a fund-raising notice to some of their supporters asking for money talking about this issue. And it's important to note, though, that on the other side of this Republicans say that this is not the last issue, that this is kind of a "Sideshow" from their perspective inside the room, and that it is still about spending cuts, which is the core of what we're talking about, funding the government, keeping the government running, but how much to slice in spending.

And on that issue of abortion and women's health, I have talked to some social conservatives, social conservative lawmakers today who say that they don't think that this is something that they're willing to go to the mat on, that it is spending that matters in the end.

And even Mike Huckabee, the former presidential candidate, who is known as a staunchly social conservative, sent out a notice earlier today, Wolf, saying that he does not believe that his fellow Republicans here should hold this bill up because of anything relating to abortion at all or women's health -- Wolf.

BLITZER: Yes, save that fight for another day.

BASH: Exactly.

BLITZER: The stakes too enormous right now. Thanks very much, Dana. Don't go too far away.

Obama administration officials now say they're more optimistic than they were only a few hours ago about a possible budget deal. The president has shelved some travel plans to stay on top of the budget crisis. We might be hearing from him relatively soon as well.

Let's go to our White House correspondent, Dan Lothian.

What are you hearing? I expect that, at some point, the president will address the nation and tell us deal or no deal.

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right. We're being told by a source here at the White House there's a good chance that we will hear from the president today.

And, as you pointed out, Wolf, the president did clear his schedule, so that he could really focus on the ongoing negotiations. First of all, today he was supposed to have been in Indianapolis, Indiana, for an energy event. That was canceled yesterday. And then also today, we found out that the president's weekend getaway with the first family to Colonial Williamsburg was also canceled, so the president could really focus on these negotiations.

As you pointed out, they're optimistic here at the White House that a deal will get done. In fact, earlier, one source telling me that they're more optimistic now than they were about four hours ago. The White House teams continue to work behind the scenes. The president did reach out to the congressional leaders this morning.

It's part of the effort to continue applying the pressure to get a deal done. But this has not been the sole focus for the president today. I'm told that he's also been dealing with other domestic issues, also national security issues. But no doubt this is the major crisis for this administration, as they try to get a deal before that midnight deadline.

One thing I can tell you, that, behind the scenes, there is a lot of frustration that this deal has not been done and that there continues to be this sort of ramped-up rhetoric that we saw today, a lot of finger-pointing, and a lot of confusion for the American people, because you're hearing different stories from Republicans and Democrats.

So, the hope is that everyone can get on the same page some time tonight, Wolf, and get this deal done.

BLITZER: Let's hope, because, as I say, a lot of -- millions and millions of Americans are waiting desperately. They want to make sure there's no government shutdown.

Let's dig deeper right now with our national political correspondent, Jessica Yellin.

Jessica, all of a sudden the debate in the final stretch, if you listen to Harry Reid, the Senate majority leader, boils down to abortion rights for women, abortion rights in the District of Columbia, Planned Parenthood. When all these other issues are out there, all of a sudden it's down to these issues?

JESSICA YELLIN, CNN NATIONAL POLITICAL CORRESPONDENT: Right. Why did a spending fight become fundamentally about these issues?

In part, because they speak to beliefs passionately held by a vocal minority of each party. Republicans, they are insisting that Democrats should give on these issues to keep government running. Democrats say the Republicans are sacrificing women's rights to serve a social agenda that has nothing to do with spending. And it's gotten emotional.


REP. JEAN SCHMIDT (R), OHIO: The answer is cutting unnecessary spending in Washington. That's what the people at the kitchen tables of America are wanting us to do. They're demanding us to do it. And to put something else out there and saying that's the only reason why we can't receive -- can't come to a deal is absolutely wrong.

MIKULSKI: We are heading to a shutdown not because of a debate over money, not because of a debate over cuts, but because the Republicans continue to want to push a radical agenda against women.

(END VIDEO CLIP) YELLIN: Radically different points of view from a Republican and a Democrat there.

But let's consider two political aspects of this fight. One, if Speaker Boehner does cut a deal with Democrats for less than the Tea Party wanted, for fewer cuts than the Tea Party wanted, he's bound to lose the support of some Tea Party Republicans.

And for him, it was good to show that he's been working for social conservatives' causes, so he can keep their votes. Also, you have got to consider we're entering an election year. Energizing social conservatives around the country is essential for the Republican Party. And on the other side, Democrats need to woo as many women voters as possible if they plan to hold the White House and the Senate in 2012.

So, bottom line, Wolf, there's political calculus on this on both sides of the fight.

BLITZER: Where do the American people stand on this issue?

YELLIN: Well, there's some good polling numbers that tell us. Take a look at this poll from the NBC/"Wall Street Journal"'s newest number -- 53 percent of Americans think it's unacceptable, unacceptable to eliminate funding for Planned Parenthood and family planning and preventive health they provide -- 45 percent say it's acceptable.

How about the question of abortion? We ask because Planned Parenthood, well, they get $360 million from the federal government. That money, it is used to test and treat people for sexually transmitted diseases, offer contraception, health exams. But Republicans say the group also performs private abortions, and they believe federal money could indirectly support those abortions.

There's also a separate measure to prevent federal funds for abortion in the District of Columbia. Polling shows only 20 percent of Americans say it's very important for the president and Congress to deal with abortion. And that number places at 14 of 15 priorities, behind the economy, Wolf, behind unemployment, health care, the deficit, Social Security.

Even within the Tea Party, which has propelled this effort for cuts, only 26 percent consider abortion a top priority. So, very clearly, the abortion fight, Wolf, it isn't even close to issue number one for most of this country.

BLITZER: Yes, but it's going to be a fight. There's no doubt about that. Even if it's resolved today...

YELLIN: It's a flash point issue.

BLITZER: It has been for years and years and will be for many years to come. Thanks very much.

YELLIN: Yes. BLITZER: The impact of a government shutdown will be felt from coast to coast, from national parks to health services to install business loans. We will take a closer look at how people are bracing for the worst.

Also, numbers vs. ideology. We will debate the budget battle with Republican Congressman David Dreier of California and Democratic Congressman Anthony Weiner of New York.

Plus, Libyan rebels making some significant gains one day, only to retreat the next. What was a stalemate may now be something much more decisive.


BLITZER: We're now less than six hours away from a possible government shutdown. The impact will be felt from coast to coast. Health services, small businesses, America's most famous monuments will be all impacted, along with U.S. national parks.


DAVID MATTINGLY, CNN CORRESPONDENT: I'm David Mattingly in the Great Smoky Mountains National Park.

All national parks across the country will have to close if the government shuts down. And here, already, we're seeing signs of this. These barricades are in place ready to deploy if that shutdown happens. That will affect 800,000 people a day who visit these national parks all across the country, people like this who have come here to see the vista here, this overlook, one of the many attractions in this park.

These areas will all be sealed off. Campgrounds, people who have set up there, they will be asked to leave as these parks shut down. So, what we're looking at now is also the furlough of 17,000 park employees across the country, 20,000 employees who are concessioners, people who run businesses inside the park.

There will be a very immediate economic and human impact if these parks close, and everyone here watching hoping that this park remains open tomorrow.



ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: I'm Allan Chernoff at Battery Park, where tourists have been flocking to get onto the ferry to Liberty Island out there in New York Harbor, because this may be the last day they can do that for quite sometime.

The Statue of Liberty is an absolutely essential tourist destination. But the people who work for the National Park Service, well, they are considered nonessential. Tourists here have been saying they're mystified that Washington can't seem to cut a budget deal to keep the government operating. Most upset of all, though, are the National Parks Service workers over here, who may temporarily be out of work.



KATE BOLDUAN, CNN CORRESPONDENT: I'm Kate Bolduan outside the Department of Health and Human Services, where more than 60 percent of the employees here, that's more than 47,000 people, will be told to stay home if the government does shut down.

That not only impacts employees, but also impacts significant operations at the various agencies here, which include the Food and Drug Administration, the National Institutes of Health, and the Centers for Disease Control and Prevention.

What does that mean? Well, food and drug inspections and reviews will be slowed or delayed. At NIH, new clinical trials will not be allowed to start and new patients will not be accepted. And some studies will come to a halt.

But Medicare and Medicaid services, they will continue. Providers will continue to get payments. So they will be operational. And that means the Medicare and Medicaid services' employees, they will be bulk of the people that will be working in this building if the government does shut down.



ED LAVANDERA, CNN CORRESPONDENT: I'm Ed Lavandera in Justin, Texas.

And you're probably wondering what this wide-open field here in the small town of Justin, Texas, north of Fort Worth has to do with the government shutdown. Well, there's a woman by the name of Cami Stewart, who lives out here who is trying to open up a restaurant on this very ground. She has applied for a loan from the Small Business Administration, but all of that could very much be up in the air right now.

CAMI STEWART, BUSINESS OWNER: It's going to be hard for us to close by the end of the month anyway. And so if the government does shut down, then that will delay us even further. And like I said, if we lose our land contract, then, you know, we're pretty much starting all over.

LAVANDERA: The Small Business Administration says it processes some $400 million worth of loans every week, and all of that could be brought to a standstill with this government shutdown.


BLITZER: CNN's Ed Lavandera, thanks to you and thanks to all of our reporters.

We're keeping a very close eye on several international stories right now as well, including Libyan rebels retreating as their outrage against NATO increases. What are they doing about it?

And as the budget negotiations continue in these final hours, we are bringing you a heated debate between two top lawmakers in the House of Representatives.


BLITZER: Deal or no deal, we should be finding out pretty soon. We expect at some point to be hearing from the president of the United States. Of course, we will have his remarks soon. As soon as the president speaks, you will hear it, you will see it live here in THE SITUATION ROOM on CNN.

We're waiting to see if there will be a government shutdown or not.


BLITZER: Meanwhile, last-minute efforts to avoid a partial government shutdown. Why can't Democrats and Republicans reach a deal to avoid it?

Congressman David Dreier and Congressman Anthony Weiner, they're here. They will debate. Stand by for that.

Also, the sinking fortunes of Libyan rebel forces. Now they're retreating from key positions. We will go there live.

And disturbing allegations of Iranian exiles massacred by Iraqi forces. What's going on in Iraq? We have a full report.


BLITZER: As a government shutdown looms, let's take a closer look at what's dividing the two sides right now.

The House speaker, John Boehner, says it's the budget numbers.


BOEHNER: These discussions continue to be respectful. We continue to work together. Most of the policy issues have been dealt with. And the big fight is over the spending.

You've heard me say time and time again that we've got to cut spending if we're serious about creating an environment for job creators in America to do what they do best, and that's to create jobs.

I'm also hopeful that we'll be able to come to some agreement. But we're not going to roll over and sell out the American people like has been time and time again here in Washington.

When we say we're serious about cutting spending, we're damn serious about it.


BLITZER: The Senate majority leader, Harry Reid, says they have reached an agreement on the numbers. The fight now, he says, is about social issues.


SEN. HARRY REID (D-NV), MAJORITY LEADER: The House leadership, with the speaker, have a very clear choice to make. And they don't have much time to make that choice. They can keep their word and significantly cut the federal deficit or they can shut down America's government over a woman's access to health care.

If that sounds ridiculous, it's because it is ridiculous. All this to stop women from getting the regular tests and preventative services that they need.

Ninety percent of Title X money is for preventative health services. It is against the law that any money be spent for abortion and that -- and they're not. It's against the law. This is all a loss leader they have.

If Speaker Boehner can't sell that to his Republicans in the next few hours, it will be crystal clear to the American people that Democrats were reasonable and the Republicans are responsible for shutting down the government.


BLITZER: All right, let's discuss with two guests, Republican Congressman David Dreier of California, Democratic Congressman Anthony Weiner of New York.

Congressman Dreier, is -- is the -- is the Senate majority leader right that it's not about money anymore, it's simply about funding for Planned Parenthood?

REP. DAVID DREIER (R), CALIFORNIA: You know, Wolf, I listened to both John and Harry there and it sounds to me like we're on the exact same page. It's about the issue of spending. John Boehner said that the -- the policy issues have been, by and large, addressed. And Harry Reid said pretty much the same thing, it sounds like to me.

And so this issue is about spending. Last November 2, the American people sent a very strong message. And we've been able to be successful at changing the trajectory, having gone through an 82 percent increase in non-defense discretionary spending under Speaker Pelosi's leadership.

So we've changed that. I don't know exactly what the number is going to end up being. We'll find out in the next few hours. But I'm optimistic. I believe that we can, in fact, avoid a shutdown, which, I think Democrats and Republicans alike have concluded would not be good for us.

BLITZER: All right, so I just want to be precise, Congressman Dreier, you will vote for it, assuming the number is there, even if it includes funding for Planned Parenthood?

DREIER: Listen, you know, again, the policy issues have been addressed. I'm planning to support this package that John Boehner comes back with. I believe that he's been representing the interests of the American people, Democrats and Republicans alike, in this effort to deal with this.

And remember, it was -- he said this earlier today to -- to some of us. We've got the president of the United States, the vice president of the United States, the Democratic leadership of the United States Senate, three to one. And I think that John Boehner is doing very well standing up for the American people.

On this issue of spending, job creation and economic growth is what we want to do. We want to move on next week to the budget, where we can bring about $6.2 trillion in spending cuts and implement a very strong, pro-growth economic package --

DREIER: I don't want to point fingers at anybody --

BLITZER: All right --

DREIER: I just want us to get this thing done.

BLITZER: And Congressman Weiner, David Dreier is a member of the leadership in the House of Representatives on the Republican side. It sounds like you guys have a deal, pretty much, wrapped up, if you -- if you listen to what he just said.

REP. ANTHONY WEINER (D), NEW YORK: Well, if the voice of David Dreier, and, frankly, if John Boehner's voice, if they were the ones that were prevailing in the Republican Caucus, we would have had a deal a while ago. These are reasonable guys who want to do the right thing.

The problem is, it does seem like the straw that's stirring the string are the Tea Party extremists, who very much want to keep this language in about -- about a woman's right to choose and try to litigate whether the Environmental Protection Agency can have oversight over the environment.

These things, the very fact that they're on the table should raise questions in the minds of the American people.

Why are these the issues are even being considered in the context of keeping government up and running?

DREIER: I think it's been clear that they don't seem to be the issues any longer. They seem to be resolved, according to Speaker Boehner.

WEINER: I heard -- I heard Wolf ask you a direct question about whether or not you would vote for the thing if these things are taken out. We need people just to say, let's -- and by the way, some of the more extreme voices in the Republican Caucus, even they have said enough of dealing with all of these riders. Michelle Bachmann, who's hardly a mainstream person, even she says take these things out. I think here's what would be the most...


DREIER: ... needs to be resolved.

BLITZER: Let me interrupt for a second. Congressman -- Congressman, let me interrupt for a second. The issue of the Environmental Protection Agency, the issue of NPR, all that has been removed. The only issue that the Democratic leadership says remains is this issue of Planned Parenthood and abortion in the District of Columbia. That's the issue, apparently, if you believe Harry Reid, the Senate majority leader, that's still out there. Everything else basically has been worked out. Is it your understanding, Congressman Weiner, that they do have an agreement, basically, on the number, on the budget cuts?

WEINER: Well, it's a little hard to say, because at every point that a number has been articulated by Mr. Boehner, it has been agreed to in some form by the Democratic leadership, and then they've moved the number. I don't know exactly what the number is any more than, frankly, you do.

But I am suspicious of this whole idea that what Speaker Boehner is saying is true: "Oh, we're not fighting over the riders any more." If that's the case, say so. Say so clearly that we're taking those things off the table, because certainly you don't have -- the votes are not going to appear, and the president's not going to sign a bill that takes away a woman's right to choose.

DREIER I think he did say that. This is not about a woman's right to choose. This is about something that Harry Reid, Joe Biden and Barack Obama have all supported, and that is ending taxpayer funding of abortion in the District of Columbia.

WEINER: No, it's not.

DREIER: Let's not talk about those issues, because Speaker Boehner has said they have been, by and large, resolved. They're doing it. So we're not in the business -- neither Anthony Weiner nor David Dreier can put things on or take them off the table. That's been resolved. This is about spending. And frankly, on the Tea Party issue, you've got -- the Tea Party has nothing to do with these -- these rider issues. The Tea Party stands for "Taxed Enough Already." They want to reduce the size and scope of government, reduce the tax burden on working Americans so we can get the economy growing. Those are the people who I believe -- I think that's representative of Democrats and Republicans across this country.

BLITZER: Well, the Tea Party Caucus is going to be with you, David Dreier? Is that what you're saying?

DREIER: Well, you know what? I mean, it sounds to me as if we can focus on getting a good strong number, which John Boehner has been fighting for since day one. Then I think that we can have very broad support across the spectrum within the Republican conference.

WEINER: Well, first of all, to say that these riders are not the reason we're sitting here at the 11th hour is just to ignore what's going on. I mean, frankly...

DREIER: That's what John Boehner said, isn't it?

WEINER: Yes. That's also -- Harry Reid said something different. And our intuition about what's going on tells us something different, since the number hasn't been the hang-up since word go. We reached the number four or five times, and four or five times Mr. Boehner has left the table saying, "I need to work on these riders." Now, he says they're resolved. I don't know, frankly. We're hearing a lot of people say that that's the last remaining holdup, including our friend Wolf Blitzer, who just said it.

DREIER: Now Anthony Weiner, you know very well that you should have much more confidence in something said by a member of the United States House of Representatives than the United States Senate any day of the week.

WEINER: I guess you do have me there. Usually, they're not steering us in the right direction.

But look, let's be clear about this. I do believe that there is a fundamental center in Congress and in the American people who are looking to say, "Let's not let these ideological issues get in the way of getting this done."

DREIER: And they haven't. They've been resolved, according to the guy who's our House colleague here, Anthony." And so let's not talk about that any more. Let's talk about how we can, in fact, bring about spending.

And I congratulate you, if you're going to support this package at the end of the day, for bringing in -- helping us bring it into that trajectory of dramatic increase in spending and actually focusing on reducing the size.

BLITZER: I think it's fair to say, gentlemen, if it were just you Anthony Weiner and David Dreier, there would have been a deal a while ago.

DREIER: Yes. Get out of the way, Wolf. Get out of the way, Wolf.

BLITZER: It's not just the two of you. There are a lot of others. Gentlemen, thanks very much.

DREIER: And that's how James Madison wanted it. BLITZER: Thanks very much for coming in. We expect to hear from the president relatively soon. I'm hoping, and I'm sure both of you are hoping it's good news that a deal has been struck. No government shutdown. But we'll hear it soon enough. We're standing by for that. Congressmen, thanks very much for coming up in.

DREIER: Thank you, Anthony.

BLITZER: We're going to go a little bit deeper coming up. We'll speak to Candy Crowley and David Gergen. They're standing by for some expert analysis of what's happening.

Plus, a mysterious code that even FBI experts said they were baffled by. Could it hold the key to a murder mystery? We'll have that report, as well.

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BLITZER: The U.S. government is scheduled to partially shut down at midnight tonight unless -- unless congressional Democrats and Republicans reach a budget deal.

Let's talk about the politics of all of this with our chief political correspondent, Candy Crowley. She's the host of "STATE OF THE UNION," and our senior political analyst, David Gergen.

Candy, as we take a look at this eyeball to eyeball, there are several options. The president could come out and address the nation and say deal. He could say there's no deal. The third option is he can come out and say, "You know what? We're very, very close. We just need a few more days. We'll pass some sort of temporary legislation and then we'll resolve it." CANDY CROWLEY, HOST, "STATE OF THE UNION": And I continue to think the least likely option will be no deal. I just -- when you look at -- this town has to be parsed politically, particularly in the presidential and congressional election seasons. There are very few people up on Capitol Hill who are going to gain, no matter how many times they try to spin it, they're going to gain by Washington shutting down the government.

And so there's no -- there's nothing political in it for most folks on Capitol Hill, so I think they're going to get a deal.

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: I think they're going to get a deal, too. And it's been interesting the way, Wolf, that we've actually seen some conservatives now calling for a deal.

We've been talking and talking, talking about the Tea Party is going to hold the Republicans hostage. Michelle Bachmann has been tweeting today time to cut a deal. Tom Coburn, big conservative in the Senate, time to cut a deal. Mike Huckabee, very, very pro-life, as you know, says we need to cut a deal. I think under those circumstances -- and clearly, I think the Democrats want to get this done. The president wants to get it done.

BLITZER: Given all the publicity, Candy, that we've heard over the past few days about Planned Parenthood and the whole issue of abortion, if in fact, there is continued funding in this legislation to continue funding for the current fiscal year that includes the millions of dollars for Planned Parenthood, will that be, for a lot of these conservative social Republicans, shall we say, social-issue Republicans, a deal-breaker?

CROWLEY: For some of them, but not for enough of them to kill the deal. I mean, there will be some people that are going to vote against it, and they're going to vote against it because it includes money for Planned Parenthood, if it does, or because it doesn't cut enough money, or because it cuts too much money. But in the end, they just need the magic numbers.

And I think that John Boehner, the speaker, the Republican speaker, has been able, pushing this way up to the deadline, has been able to go back and say, "This is what I can get."

You know, if you listen to his rhetoric from the last couple of weeks, it's been, "OK, we're like one half of one-third of the government here." There's only -- you know, he's been lowering expectations in terms of "we can't get everything." I think he's at that point where he said, "I fought for everything. Here what we can get."

GERGEN: But the other part of this is, OK, they don't get everything they want on the social issues, but if you look at the spending from a Republican standpoint, they've got much deeper cuts than we ever could have imagined. I think we would have all predicted they'll come in at maybe 30, maybe. And apparently, it's up to 38 or so, and they've already got, you know, $10 billion they've saved already in various extensions. If you look at it, $48 billion in cuts is a big number.

BLITZER: In perspective, though, given the cuts they're going to have to make in the years to come, it's small, small potatoes.

GERGEN: But in terms of this negotiation...

BLITZER: In terms of this negotiation, for these guys that like to spend, it's obviously a significant amount of money.

GERGEN: That's right.

BLITZER: Only in Washington is, you know, a billion here, a billion there real -- you'll eventually get to real money, guys.

Thanks very much. Don't go too far away.

Candy, by the way, is going to have much more on the potential shutdown on "STATE OF THE UNION" Sunday morning, 9 a.m. Eastern. Among her guests: the White House senior adviser, David Plouffe. That will be a good show.

There's been lots of concern that the Libya fighting has turned into a stalemate. But guess what? It may now be a lot worse than that for the rebels. CNN's Ben Wedeman reports from the front lines for us.

And chilling allegations that Iraqi security forces, close allies of the United States, have killed dozens of Iranian exiles in Iraq. What's going on?

Stick around. You're in THE SITUATION ROOM.


BLITZER: Slowly but surely, Muammar Gadhafi's forces are grinding down Libya's rebels. The opposition fighters are trying to hold onto a key city a day after an accidental NATO air strike killed several rebels. CNN's Ben Wedeman reports from the front lines, which keep moving to the east.


BEN WEDEMAN, CNN CORRESPONDENT (voice-over): The defenses of Ajdabiya are lightly manned. An anti-aircraft gun is maneuvered into place and testing. It's been a rough week for the opposition fighters, between retreats and NATO friendly fire. But the way they talk, you'd think victory is just around the corner, but for a few shortcomings.

"We could go all the way to Bab Al Azizia," says Saad (ph), a fighter, referring to Gadhafi's compound in Tripoli. "The most important thing we need is weapons. We don't need NATO or anything else."

Others are much more aware of their strength. UNIDENTIFIED MALE: The Gadhafi troops have heavy, heavy weapons and heavy leadership, good leadership. The troops -- the troops of Gadhafi have good weapons, heavy weapons, and have planning and have leadership and have experience.

WEDEMAN: It all adds up to an unequal balance of power in which one side is pushing ahead.

(on camera) Some people might call this a stalemate, but what it really is is a slow, chaotic and gradual retreat. The opposition fighters made it all the way just to about 40 kilometers outside of Sirte, and gradually, they've been pushed back and back and back to here at the gates of Ajdabiya, and there's no guarantee they won't be pushed back even further.

(voice-over) Minutes later we're on the run again. The western entrance of Ajdabiya came under artillery bombardment.

The fighters call what's going on qur wafur (ph), Arabic for "hit and run." But it's more like get hit and then run. They lose ground one day, and may regain it the next, only to lose it again.

The road to Benghazi is scattered with the burned carcasses of Libyan army tanks taken out by coalition aircraft three weeks ago, but loyalist troops have changed their tactics, moving about in pickup trucks and civilian vehicles indistinguishable from the opposition fighters. There's little to stop Gadhafi's forces on the ground, and seemingly in the air, from racing down the long and empty road to Benghazi.

Ben Wedeman, CNN, outside Ajdabiya, eastern Libya.


BLITZER: We're just getting this in from our senior White House correspondent, Ed Henry, on the prospect of a government shutdown at midnight tonight.

A senior Democratic source telling Ed that negotiators are now focusing in on a proposal that would keep the government open for three days while leaders try to finish up a broader budget deal this weekend. It would be a last -- last ditch effort to stave off a shutdown, a crisis.

The proposal would not include any controversial legislation riders, as they're called, on issues like abortion, but the Democratic source cautioned it is not yet clear that the plan, this three-day extension, could pass the House and Senate by the midnight deadline to keep the government running.

It's important to note that the White House on Thursday said President Obama could sign another short term continuing resolution, as it's called, if broader negotiations were making progress, and there was light at the end of the tunnel. So maybe they found a way to keep the government in business for another three days, avoid a shutdown at midnight tonight, let the negotiators talk tomorrow and Sunday, and see if they can reach a complete deal by Monday. This way, at least, there wouldn't be a shutdown over the weekend.

Ed Henry will have much more on this part of the story coming up. Significant developments.

Other important news we're following, including in Iraq. Vastly different accounts of what happened inside a camp housing Iranian dissidents. Was it just a disturbance? Was it a massacre?

Plus, the FBI is now asking for your help to crack a mysterious code that may hold the key to solving a cold case.


BLITZER: There are reports coming out of Iraq about a disturbing incident at a camp housing Iranian dissident refugees. Iraq portrays it as a scuffle. The Iranian exiles who oppose Ahmadinejad in Tehran are calling it a massacre.

CNN's Brian Todd is investigating for us. Brian, really disturbing information we're getting. What have you learned?

BRIAN TODD, CNN CORRESPONDENT: Wolf, there's still confusion over exactly what happened at this camp today. The State Department acknowledges there was loss of life there, and U.S. officials are pinning the blame squarely on the Iraqis.


TODD (voice-over): For decades they've opposed one of America's bitter enemies. The People's Mujahedeen of Iran, long a thorn in the side of Iran's Islamic regime. For years, thousands of Mujahedeen members have been given refuge at a place called Camp Ashraf in neighboring Iraq.

Those Iranian exiles now say Iraqi security forces, who are close allies of the U.S., attacked the refugee camp and killed at least 30 people on Friday. They say women are among the dead.

The People's Mujahedeen posted videos online of what appear to be Iraqi troops shooting at crowds, and at least one case of a military vehicle ramming into a man. CNN could not confirm that the videos, which are edited, were filmed at the camp.

I spoke with Ali Safavi, who's with a group allied with the People's Mujahedeen.

ALI SAFAVI: In my mind this is a definitive crime against humanity.

TODD: Iraqi army officials confirm there was a conflict at the camp, but say Iranian exiles armed with shovels and stones provoked it, a charge denied by the exiles.

The Iraqis also say they didn't use live ammunition.

The State Department says, while U.S. officials don't know exactly what happened at Camp Ashraf, "this crisis and the loss of life was initiated by the government of Iraq and the Iraqi military."

But Safavi also has accusations against the U.S., saying an American military unit had been inside the camp just before this incident.

SAFAVI: Unfortunately, it was ordered out of the camp hours before the attack took place on the residence.

TODD (on camera): Who ordered them to leave?

SAFAVI: Their commander in Baghdad.

TODD (voice-over): In a statement to CNN, an official with U.S. forces in Iraq says, "The claims being made that a U.S. battalion was ordered away from Camp Ashraf are completely false. There was never a battalion there."

That Iranian exile group has been on the State Department's list of terrorist organizations. I asked analyst Ken Robinson why.

KEN ROBINSON, TERRORISM ANALYST: Assassinations. Targeted political assassinations.

TODD (on camera): And have they since renounced all that?

ROBINSON: They have. I don't have any credible reports that say they participated in that type of behavior in years.


TODD: There had been widespread bipartisan efforts in Washington to get the People's Mujahedeen removed from the terrorism list. A State Department terrorism report indicates the last time that group engaged in terrorist activities was in 2003 -- Wolf.

BLITZER: The -- this Camp Ashraf in Iraq, it's been a boiling point for a long time.

TODD: That's right. The Iranian regime has been pressuring -- pressuring the Iraqis to dismantle the camp. The people in the camp say that, if that happens, they're going to get deported to Iran and maybe killed.

The Iraqi regime has actually considered doing it. They haven't obviously done that yet.

The People's Mujahedeen told us they believe that the -- the Iraqis, Nuri al-Maliki and his government, are taking their marching orders from Iran with regard to this camp and all the actions that have happened there. An Iraqi official we contacted said that's preposterous. Not happening.

BLITZER: They have had good relations, though, the Iraqi government and the Iranian government.

TODD: That's right, they have. BLITZER: Thanks, Brian. Thanks very much. Stay on top of the story for us.

The countdown to a possible government shutdown continues right at the top of the hour on "JOHN KING USA." Stand by for that.

But first, a mysterious code found in the pocket of a possible murder victim.


BLITZER: Mysterious death and even more mysterious code that may be a key to solving an apparent murder. CNN's Jeanne Meserve is here with more -- Jeanne.

JEANNE MESERVE, CNN CORRESPONDENT: Wolf, you know, code breaking is located in a lot of thrillers. Think "Da Vinci Code" or "National Treasure," but at the FBI laboratory in Quantico, Virginia, there's a small band of people whose real-life job is unlocking encrypted communications. Right now they are stumped, and they're asking for your help.




MESERVE: I'm sorry. We seem to have a technical problem there. This is about a murder that took place in 1999 -- or I should say a suspected murder. A body was found in a field in its pocket or a couple of encrypted notes.

At the FBI laboratory in Quantico, Virginia, they have been trying to decode those. They say this is something very unique, unlike anything they've seen before, and they're asking for the public's help in cracking this. At this point in time they've gotten more than 2,000 tips; some from e-mail, some from letters. As yet, no key yet to Ricky McCormick's death more than ten years ago, Wolf.

BLITZER: It's causing great amount of interest, though, Jeanne, if we take a look at this whole notion of cracking the code. Take us a little bit deeper into this story.

MESERVE: Well, it's a really fascinating thing. They've got these two pages of notes. There are letters. There are numbers. They've been slicing and dicing and trying to put them all together and figure out what it -- what it means. They've been doing this intermittently now for ten years at the FBI lab, and they still just haven't been able to crack it.

They're hoping that someone out in the public will look at this and say, you know, "This reminds me of a game I used to play, maybe a job I had, a hobby I'm interested in" and maybe those sorts of insights will help unlock the code. It was written by the guy whose body they found. This was a guy who didn't have a lot of education, but the head of the unit down there says he was clearly quite bright and came up with this very unique, very idiosyncratic code -- Wolf.

BLITZER: We'll see if it solves this mystery.

Jeanne, thanks very, very much. That's it for me. Thanks very much for watching. I'm Wolf Blitzer in THE SITUATION ROOM.

"JOHN KING USA" starts right now.