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What's At Stake If the Debt Deadline Expires?; Interview With White House Adviser David Plouffe; Interview With Republican Representative Jim Jordan; Lawyer: Norway Killer Was On Drugs; U.S. Busts Pro-Terrorist Drug Ring; BP Books Billions One Year After Oil Spill

Aired July 26, 2011 - 17:00   ET


WOLF BLITZER, HOST: Brooke, thanks very much.

Happening now, a dire political crisis here in Washington. Democrats and Republicans seemingly no closer to a deal less than a week before the country is set to plunge into default. And the consequences could potentially be disastrous for all of us.

Just ahead, I'll ask the president's senior adviser, David Plouffe, whether any progress is being made right now.

And jammed phone lines on lawmakers' Web sites crashing on Capitol Hill, as worried Americans across the country scramble to weigh in on this debate before it's too late.

And a disturbing new study revealing a widening gap between minorities and the wealthiest Americans in the wake of a devastating recession.

I'm Wolf Blitzer.


First, to what many say is shaping up to be an economic disaster of nearly unprecedented proportions if -- if Congress doesn't break the deadlock and agree on a deal to raise the debt ceiling only six days from now. The White House warning today there's no more wiggle room and beyond that date, quote, "We lose our capacity to borrow."

If that happens, interest rates could go up, the value of the dollar could go down, individual mortgages, car loans, student loans and a lot more would likely suffer significantly, becoming more expensive. Some financial analysts are even warning of a potential stock market crash. All of that could push the United States into another Great Recession.

Let's go straight to Capitol Hill.

Our Congressional correspondent, Kate Bolduan, is joining us right now with the very latest.

What do we know -- Kate?

What is going on to avert this disaster?

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: A great question, Wolf. Congress is well aware the deadline is approaching. But with both sides still waiting for the other to blink, all eyes now turn to the House and a critical vote tomorrow.

(BEGIN VIDEOTAPE) BOLDUAN (voice-over): With dueling plans and an eye on the clock, the leaders of the House and Senate made their sales pitches Tuesday.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: It's reasonable. It's responsible. It can pass the House . And it can pass the Senate.

SEN. HARRY REID (D-NV), MAJORITY LEADER: The Senate plan is the only real compromise we have in Congress today. And it's the best shot we have to avoiding an economic crisis a week from today.

BOLDUAN: And while Democrats and Republicans battle publicly over the debt limit --

UNIDENTIFIED MALE: Simply stop playing games.

BOLDUAN: As the House prepares to vote on Speaker John Boehner's plan, another battle is underway between Boehner and his own House conservatives.

REP. JIM JORDAN (R-OH), REPUBLICAN STUDY COMMITTEE CHAIRMAN: We advocated something much -- much more in "Cut, Cap and Balance" plan. We advocated something much more in the budget plan that the House passed. So we think there are real problems with this plan.

BOLDUAN: Congressman Jim Jordan leads a key voting bloc of House conservatives. Many have signed a pledge to vote any debt ceiling increase unless it comes with much more dramatic deficit cutting measures. Now, with conservatives unhappy and if Democrats remain united against Boehner's plan, his margin of error is thin. There are 240 House Republicans. It will take 217 to pass the bill. That means Boehner can't lose more than 23 of his own party to succeed. And Tuesday, Congressman Jordan said Boehner didn't have the votes. The speaker himself acknowledged they're not there yet.

BOEHNER: And I do think that we're going to have some work to do to get it passed. But I think we can do it.


BOLDUAN: Add to that this morning, the House majority leader, Eric Cantor, told Republicans in a meeting to, according to sources, "to stop grumbling and whining and get on board with the Boehner plan." Another indication, Wolf, they have their work cut out for them to get this past the House. And that's only the first step.

BLITZER: Yes, and I just want to be precise, it's 217 votes, the majority, because there are two vacant seats in the House of Representatives right now. Normally, the majority requires 218. BOLDUAN: Exactly.

BLITZER: That one vote here or there, given how close this potentially could be tomorrow, could make a significant difference.

Is that what you're hearing?

BOLDUAN: That's exactly right, Wolf. They're counting the votes. And that's why they have to be precise. Every vote could count this time around.

BLITZER: We'll be standing by.

Thanks very much.

And by the way, Congressman Jim Jordan -- you just heard him -- he's broken ranks with the speaker of the House. He'll be joining me live here in THE SITUATION ROOM. That's coming up in a little while.

Meanwhile, over at the White House, there are new signs President Obama could veto the Republican House plan if -- if it were to make it to his desk.

And joining us now from the White House, the president's senior adviser, David Plouffe.

David, thanks very much for coming in.


BLITZER: Are there negotiations involving the president going on right now with anyone on Capitol Hill?

PLOUFFE: Well, obviously, the president has been in touch with leaders for the last several weeks and months on this issue. Our administration is in close contact. So what's required here, Wolf, as the president spoke last night to the country, is compromise. We need compromise to make sure the country doesn't default. We can also, at the same time, get a significant down payment on deficit reduction. And then Congress can work over the next several months on the tougher issues of tax reform and entitlement reform so we can really get this country on the right fiscal path.

BLITZER: As you know, the White House put out a statement saying that the president's advisers will recommend to him that he veto the Boehner proposal if, in fact, that comes to his desk.

Does that automatically mean the president has already made up his mind to veto or simply that the advisers are recommending that he veto?

PLOUFFE: Well, listen, the president was clear last night. He does not support an approach that would have this debt ceiling drama hanging over the country and our economy in five or six months. Our chief of staff said clearly Sunday the president would not sign that. So now it sounds like it's -- this is sort of a hypothetical question because the Boehner proposal doesn't look like it has any chance of passing the Senate. So, as the president said last night, we're going to be at stalemate. And we need the House and Senate to come together to compromise. And the truth is the Boehner and Reid proposals have quite a bit of similarities. So we ought to be able to do something that reduces spending, that sets up a process so we can do more deficit reduction in months ahead and make sure that what's hanging over the economy isn't a debt. It's clear this debt ceiling drama has not been good for the economy or the country.

Why we would want to have it again in five or six months kind of defies logic.

BLITZER: So, basically, what -- what you're -- what you're suggesting, at least if I'm hearing you correct, is that Boehner get together with Harry Reid and they work out some sort of compromise between the two of them.

But one of the bottom lines for you and for those at the White House is there shouldn't be another vote raising this issue next year. That should wait until 2013.

Is that the big stumbling block right now?

PLOUFFE: Well, I don't know. Boehner -- Speaker Boehner and Senator Reid did not have an agreement. Far from it. Senator Reid has said he clearly does not agree with John Boehner's approach.


BLITZER: But there are some similarities, though.

PLOUFFE: Well, in terms of some of the spending cuts, not all, some of the spending cuts. Both proposals have this Congressional committee that's going to be charged with trying to identify additional deficit reductions.

So you can see how there could be the contours of compromise. But it's -- the president has said he doesn't think it's good for the economy. But listen, Eric Cantor, Speaker Boehner, other Republican leaders have said frequently through this whole process they do not think we should extend the debt ceiling over the short-term. Business leaders have spoken to that across the country. It would not be good for our economy. It would not be the responsible thing to do.

What we need to do is come together, compromise, get us through this period of imminent crisis, where we don't want the country to default. Let's get a good down payment on deficit reduction that both parties can agree to and then let's move on, first of all, to focus in on the economy and jobs, but finish the job of deficit reduction in the months ahead.

The speaker of the House, John Boehner, and the president were having very, very, I think, productive discussions about areas of potential common ground. And we hope some of that work, in terms of tax reform and entitlement reform, will provide the foundation for what Congress does down the road here.

BLITZER: So you're ready to go along -- and yesterday, you suggested to those at the White House that you're ready to accept the Reid plan even though it doesn't include any increased tax revenue, which so many Democrats, and including the president, have always wanted?

You're ready to go along with Reid's proposal, that doesn't include any additional tax changes, reforms, anything like that?

PLOUFFE: Well, the -- this would have an initial amount of spending cuts. The -- the larger issues -- entitlement reform and tax reform, even in the discussions we're having with Senator -- with Speaker Boehner, those details would be filled in down the line, because that's going to require a lot of work. So we were not willing to accept a huge deficit reduction package that would cut Medicare, make changes to Social Security, huge spending cuts without any revenues.

What Senator Reid's proposal is, is still a lot of spending cuts. And -- and it's going to make, I think, a lot of difference in terms of the deficit. But the larger dollar amounts, in terms of entitlement reform and tax reform, would still -- would still to come. And the president made the point last night, the other reason that he opposes having the debt ceiling hanging over our economy in the next five or six months is let's say this Congressional committee, which we all hope works and provides deficit reduction, but what if it stalemated?

The Republicans in the House would say, well, now we need $1.8 trillion in spending cuts alone. And that's not something the president would ever support.

The American people have made it pretty clear, they support President Obama's approach, which is we want to cut spending, we want to deal with entitlement reforms in a smart way, but we also want to make sure loopholes are closed and that the wealthiest in this country are also contributing.

BLITZER: In your last proposal with Speaker Boehner, how far was the president willing to go in entitlement cuts, reductions for Medicare, Medicaid, Social Security?

Was there a figure that the president was willing to accept over the next 10 years?

PLOUFFE: Well, the president, I believe on Friday -- at his press conference on Friday, he even laid it out -- laid this out in great specificity. You know, we were talking about, you know, deep spending cuts, obviously, in domestic programs -- hundreds of billions of dollars, potentially, in savings and entitlements.

Speaker Boehner and the president were talking about $800 billion in revenue that you would get through tax reform.

So there was a lot of good common ground found. We hadn't resolved every issue. But hopefully, once we get through this default over the next week, let's make sure Congress does its job. Let's compromise. Let's make sure the country doesn't default. Let's get a good down payment on deficit reduction. And then we can focus on the entitlement reforms and the tax reforms.

BLITZER: All right.

PLOUFFE: And the truth is, we ought to be able to get this done, because there's a lot of people in both parties, joined by the American people, who want us to do deficit reduction in a smart and balanced way.

BLITZER: And just to be precise, if, by next Tuesday, there's no deal, but you're working on it, you're getting closer, would the president be open to a two or three week temporary extension in order to get the job done?

PLOUFFE: Well, it shouldn't come to that, because we still have plenty of time to do our job. I think the administration said last week, you know, if the deal was tied up and folks needed a -- a day or two to dot the Is and cross the Ts, of course you do that. But we have a hard deadline here. And -- and everybody in Congress understands that. Everybody is working back from next Tuesday.

And so over the next seven days, Congress needs to compromise, find common ground, so that we can make sure that the country doesn't default for the first time. And that would have catastrophic consequences for our economy.


BLITZER: David Plouffe.

We'll have more of my interview with him in the next hour.

Much more ahead on the looming debt crisis, including a separate battle going on inside the Republican Party.

Why are some conservative lawmakers taking issue with their own speaker's plan?

I'll ask Republican Congressman Jim Jordan. That's coming up.

And an avalanche of phone calls and e-mails flooding Capitol Hill. Just ahead, what worried Americans want their lawmakers to do to solve the crisis.


BLITZER: Jack Cafferty is here with The Cafferty File -- Jack.

JACK CAFFERTY, THE CAFFERTY FILE: A crisis of much smaller proportions, but the Post Office is in big trouble.

The U.S. Postal Service announced today it's going to close 3,700 post offices in 50 states and the District of Columbia. The closings will occur mostly in rural areas and involve outlets that don't get a lot of foot traffic. The closings will save about $200 million. That's not much compared to how much they're losing.

The move shouldn't come as a surprise. The postal system has been bleeding cash for years. The volume of first class mail down 28 percent over the last four years thanks to the Internet and stuff. More and more Americans send e-mails and pay their bills online.

Last year, the U.S. Postal Service lost $8.5 billion. That compares to a loss of just $3.8 billion only two years before in 2009.

And things don't look any better this year. This quarter alone, this last one, the Postal Service has already wracked up over $2 billion in losses.

A lot of people in the communities, though, that are set to lose post offices are up in arms. The Postal Service says that village post office kiosks are going to be created in grocery and convenience stores in the next year to fill the voids in those towns where the Post Offices will close. You'll be able to buy stamps and mail packages there. And that might be the future of post offices all over the country.

The Postal Service plans to review half of its existing 32,000 post offices over the next 10 years for possible closure in order to stay in business.

Legislation already proposed in Congress could provide more help to the ailing agency. It would relieve the agency of paying into a retirement fund for future retirees' health benefits and it would reduce mail delivery from five days -- or to five days, I should say, from six. That would save an additional $3 billion a year. But that's not going to be enough.

The question is this, how much do you rely on the U.S. Postal Service?

Go to and post a comment on my blog.

You know, the post office is kind of like those old crank telephones and the party line. I mean it just -- it just doesn't fit that much with today's technology. So --


CAFFERTY: I don't --

BLITZER: It's changing. The whole world is changing.

Jack, thank you.


BLITZER: We just heard from the president's senior adviser, David Plouffe, on where the debt talks stand.

Let's get a different perspective from the Republican side.

Joining us is Ohio Republican Congressman Jim Jordan.

He's the chairman of the very influential Republican Study Group.

Congressman, thanks very much for coming in.

JORDAN: Good to be with you, Wolf.

BLITZER: Why do you oppose your House speaker, John Boehner's, proposal that he wants a vote on tomorrow to deal with this crisis?

JORDAN: Well, Wolf, I mean, look, we appreciate the speaker's hard work he's been doing, the fact that there aren't tax increases in this plan, I think that's a -- that's great step in the right direction. But we've always maintained that let's take this moment to ultimately fix the problem and for the first time in American history, get a balanced budget amendment sent out to the states.

Every family, every business, every township, every country, every municipality, every state, everyone has to comply with a balanced budget requirement except, oh, by the way, the one entity that has a $14 trillion debt. And we're getting ready to raise that a couple trillion dollars more.

So let's put that requirement in place. That's the long-term game changer that can ultimately fix the country.

BLITZER: You tried that last week. It was defeated in the Senate. And even if it passed the Senate, the president says he would have vetoed it. So -- so you've got to deal with reality now.

JORDAN: Well, but -- but, Wolf, remember this, the president is saying the same thing about the -- the proposals on the table now and -- at least the "Cut, Cap and Balance" plan actually passed the House. It's the only plan put on paper --


JORDAN: -- the only plan available that's passed the House.

BLITZER: Republicans only -- only have a majority in the House. They don't have a majority in the Senate.

JORDAN: Obviously --

BLITZER: They don't have a majority in the executive branch of the government. You've got to deal with the hand you're dealt. And you can pass anything you want in the House, but if it doesn't pass in the Senate, it's not going anywhere.

JORDAN: Well, the -- the bill that's supposedly being talked about sending over to the Senate tomorrow, Senator Reid is against it. And the president said he's going to veto that, too. So at least one bill has been through the House, one body of Congress --

BLITZER: But it's been rejected in the Senate.

JORDAN: It hasn't been rejected, it's been tabled.

BLITZER: But that's the same thing --


BLITZER: -- for all practical purposes --

JORDAN: No it isn't. No it isn't.

BLITZER: Procedurally, it -- it's not going anywhere right now.

JORDAN: Well, maybe not right now, but who knows what happens down the road here.

The other -- Wolf, this is the thing, it's laid on the table. They didn't have a debate. Put a debate -- let the American people watch. The most deliberative body in the world is supposed to be the United States Senate. Allow it to be debated.

BLITZER: Do you -- do you trust Eric Cantor, the majority leader?

Because he says you and your fellow Republicans who are opposing the speaker right now are just whining and not dealing with reality, the economic crisis that could develop next Tuesday.

JORDAN: I have great respect for Speaker Boehner and Leader Cantor. They've got a tough job. They've got to deal with the president of the United States, who's spending his time out there scaring senior citizens instead of reassuring the country that there will be enough money in August to take care of our bond holders, to take care of our senior citizens, to take care of our troops in the field.

So I have a great deal of respect for them. I appreciate the fact that they fought and don't have tax increases in any of these proposals. But we still think, let's put together a plan that ultimately fixes the problem.

There's only plan on the table that would prevent a downgrade. That's the "Cut, Cap and Balance" plan. There's only one plan on the table that has support of the American people, as evidenced by your poll. A CNN poll said 66 percent of Americans like our plan.

So why in the world would we not go with the American people on a plan they support, and, frankly, a plan that fixes the problem?

You know, here's the thing Washington always misses. Washington always wants a deal. America wants a solution. Americans sent us here to solve problems. Our plan solves the problem. It's the smart thing to do. It gives the president the debt ceiling he needs so we can have time to work out of this. But it puts on us the right path by ultimately getting that balanced budget amendment --


JORDAN: -- sent to the states.

BLITZER: The U.S. Chamber of Commerce just put out a statement -- it's not necessarily a liberal Democratic group, as you well know -- backing Speaker Boehner's proposal, saying this, "This legislation is critical. Default on debt obligations is not acceptable option. The time for Congress to act is now."

JORDAN: Wolf --

BLITZER: That's the U.S. Chamber of Commerce.

JORDAN: Wolf --

BLITZER: It's not -- it's not the Democratic Party.

JORDAN: You know -- you know there -- that there is not a default problem. We are not going to default on --

BLITZER: Most economists --

JORDAN: -- August 2nd.

BLITZER: Most economists say --

JORDAN: No, no, no, no, no.

BLITZER: -- come August 2nd, Congressman, the U.S. will have a limited amount of money. They'll have to pay the bills, but there will be --

JORDAN: Right.

BLITZER: -- a shortfall and there will be a lot of bills that won't be paid. Maybe they will pay the bills to China and to Saudi Arabia and the United Arab Emirates, but they might not --

JORDAN: Wolf --

BLITZER: -- pay bills to your constituents --

JORDAN: Wolf, there is enough --

BLITZER: -- who need some Social Security payments.

JORDAN: So now you're -- now you're engaged in the scare tactics.

Wolf, remember this, there is enough money in the month of August to pay the bondholders, to pay Social Security recipients and to pay our troops. Now after that this -- BLITZER: But there will be a lot of people that won't get paid. You know that.

JORDAN: And -- and -- and (INAUDIBLE) --

BLITZER: And a lot of parts of the government --

JORDAN: Wolf --

BLITZER: -- will have to shut down.

JORDAN: -- Wolf, even after paying those three that I just described, there's still money to pay other things. But the president would have to actually make some decisions. He would actually have to lead.

He would actually have to prioritize, imagine that?

But there's enough money in August that -- that we can pay the troops, pay Social Security recipients and pay the bondholders to service the debt.

BLITZER: You voted last week for the proposal, the "Cut, Cap and Balance" proposal.

JORDAN: Sure did.

BLITZER: As you know, the speaker himself said on Sunday, he is ready for $800 billion in increased tax revenue as part of the deal. And he also said on Sunday that proposal that he made to the White House still is on the table.

You hate that proposal, don't you?

JORDAN: Well, we're not for tax increases. And there's been no indication that that proposal is still on the table. But I --

BLITZER: He said it was on the table Sunday.

JORDAN: Yes. He said that Sunday, but there's been no indication of that this week. We're -- I'm against tax increases. I think there's a huge majority of Republicans that are against tax increases. I think the American people are against raising taxes on the job creators out there.

So that -- that proposal -- tax increases aren't going to fly in the United States Congress.

BLITZER: Here's what -- a recent CNN/ORC poll asked this question: ""Are Republicans in Congress cooperating enough with President Obama?"

Thirty percent said yes; 68 percent said no.

So I know you have your supporters out there, but this poll shows that they're in the minority. JORDAN: Wolf, the American people sent us here last fall to do the big bold things that will fix the country. There's only one plan on the table that does the big bold things that addresses the problem and provides a solution -- not a deal, but a solution for the American people. That's the plan that passed last week that's sitting on the table in Harry Reid's Senate.

Have him bring it up for a debate. Let the American people watch the debate. I'm -- I'm -- maybe, call me optimistic, but I actually think if the American people could see that debate, they would say to their member of the United States Senate, vote for the "Cut, Cap and Balance" plan.

BLITZER: And just to be precise -- I want to be precise, if there's nothing passed between now and next Tuesday, you're willing to take that chance, whether it's default or not default, you're willing to avoid raising the debt ceiling and let the chips fall where they might?

JORDAN: It's not about falling where they might. Of course we want to get something done before August 2nd. But we want to do the right thing.

Just doing something is not going to prevent a downgrade.

BLITZER: Sometimes you do have to compromise.

JORDAN: But, Wolf -- but, Wolf (INAUDIBLE) --

BLITZER: It sounds you don't even want to compromise.

JORDAN: We want -- we want to compromise.

What do you mean compromise?

We -- we raised the debt ceiling $2.4 trillion, which is what the president wanted. What we're saying is let's put a balanced budget amendment out there so the American people can say, you know what, let's ultimately fix the problem long term and secure a bright future for our kids and our grandkids.

BLITZER: All right, well, we'll see what happens. The vote tomorrow.

You're definitely voting against the speaker, right?

JORDAN: I'm not voting against the speaker, I'm voting against this plan. I think this plan doesn't solve the problem. It's got good things that it keeps out of there, like tax increases. But I'm -- I'm voting against the plan.

BLITZER: And you don't think he has 217 votes to pass it in the House?

JORDAN: I don't think so now.

BLITZER: All right, Congressman.

Thanks very much.

The whole country is watching very closely.

Appreciate it.


BLITZER: One problem with the threat of default is that no one is quite sure what would happen, as we just heard from the congressman. Economists can guess at the consequences of running out of cash, but would lessons learned -- would lessons learned mean anything right now?

We're taking a closer look at what's going on.

Stay with us.


BLITZER: Americans across the country are heeding President Obama's call to make their voices heard in the bitter debate over the debt. Ever since the president's speech, members of Congress have been flooded with a sea of e-mails and phone calls.

Let's go to Capitol Hill.

CNN's Brian Todd is working the story for us -- Brian, what -- what is happening with the -- the phone system, the computer system, the e-mail system up on Capitol Hill?

BRIAN TODD, CNN CORRESPONDENT: Wolf, we've been all over Capitol Hill today. Members and their aides telling us their phone systems, their e-mail servers have been inundated all day since late last night. And they don't expect it to taper off until later tonight.


UNIDENTIFIED FEMALE: Good morning, Speaker Boehner's office.

How may I help you?

TODD: (voice-over): This is what an avalanche looks like on Capitol Hill -- phone switchboards are jammed -- staffers inundated at House Speaker John Boehner's communications center.



ANDREWS: On hold.

TODD: On an average day, there are about 20,000 calls an hour to offices of House members. On this day, that's nearly doubled. Out of nearly 300 members' Web sites we sampled, more than a third were inaccessible for at least part of the day because of volume.

Much of can this can be attributed to a few simple words from another part of town.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If you want a balanced approach to reducing the deficit, let your member of Congress know.

TODD: That triggered calls from millions of Americans worried about possible default and angry at the political posturing, but also this --

ANDREWS: A lot of this has been, you know, stand strong. You know, we support your plan.

TODD: And this at the office of Democratic Senator Bill Nelson of Florida.

UNIDENTIFIED FEMALE: I really need him to support the president on this.

TODD: We pounded it on Capitol Hill, sampling mostly Republican offices. Freshman Republican Frank Guinta of New Hampshire says his voice-mail box was filled when he first got in this morning.

REP. FRANK GUINTA (R), NEW HAMPSHIRE: Generally speaking, people want to see an agreement done, but they don't, at least in New Hampshire, want to see taxes raised. And they don't want to see the debt ceiling raised without some sort of spending reform.

TODD: (on camera): But are they expressing frustration at you, at others?

GUINTA: Well, there --

TODD: --

GUINTA: -- there is some frustration at the process, this back and forth. You know, we've heard some things about doing press conferences.

TODD: Coming from Congressional offices on Capitol Hill to a prayer vigil right over here. This is an interfaith service calling for a solution to the budget crisis that does not place a burden on the backs of the poor. But the mood here not so charitable to politicians on either side.

(voice-over): People here know the clock is ticking and are fed up.

MICHAEL NEUROTH, ATTENDED BUDGET PRAYER VIGIL: I think we're all disappointed that both sides seem so locked into their own narrative.

SHANTHA ALONSO, ATTENDED BUDGET PRAYER VIGIL: There is a sense of anger that I've sensed. There's also a sense of weariness that I've picked up on. TODD: You want weary? Just glance at young Congressional aides who've been fielding these messages all day. Congressman Guinta takes a lot of calls himself and seems to thrive on them.

REP. FRANK GUINTA, (R) NEW HAMPSHIRE: Democracy is worth the time and the energy and effort that I and others put into it.

TODD: Do you think you'll feel that way in a week?

GUINTA: Yes, I will. I will.

TODD: Confident?

GUINTA: Yes, very.


TODD (on-camera): Now, despite the inundation, this does not appear to have been a record day. The average rate of calls per hour today still about 15,000 fewer per hour than at the peak of the health care debate -- Wolf.

WOLF BLITZER, CNN ANCHOR: Still, there has to be a real sense of urgency right now in these callers, these e-mailers, as to what's going on.

TODD: Everywhere we went, Wolf, there was that sense. Every call, every voicemail we've heard, even e-mails, you can see it in print practically. They're all saying, get this done. Members realize that they know their constituents are very impatient. That seems to be reaching critical mass today on Capitol Hill.

BLITZER: Certainly the feedback we're getting as well on our SITUATION ROOM website, Brian, thanks very much.

With the national debt climbing, as we speak, there's this footnote. According to the Congressional Research Service, the debt ceiling has been raised 74 times since March 1962, 10 of which have occurred since 2001.

It's only happened a few times in recent years, a country defaulting on its loans, and the United States, the world's largest economy is on the brink of potentially doing just that. What would it look like? Stay with us.


BLITZER: Lisa Sylvester is monitoring some of the other top stories in the SITUATION ROOM right now, including word that the man accused of the Norway terror attacks took drugs to make him stronger, more awake during the rampage.

What do we know here? LISA SYLVESTER, CNN CORRESPONDENT: Yes, Wolf, you know, that news is from the suspect's lawyer who added that his client may be insane. The lawyers say it's too early to claim if he'll use that as a defense. He says his client surprised that the plan succeeded.

After a hearing yesterday, the judge said the suspect admitted to carrying out the attacks, saying they were necessary to prevent the colonization of Norway by Muslims. President Barack Obama visited the Norwegian ambassador's resident today to offer his condolences.

Prosecutors have arrested four men accused of plotting to fund terrorists by smuggling drugs into the U.S. and Europe. The money and weapons were meant to go to Taliban militants in Afghanistan and Hezbollah fighters in Lebanon. One indictment describes a heroin deal that grew into a $9.5 million arm sell, including a 148 surface air missiles and 6,000 firearms.

An Atheist group is suing to block the display of what's known as the World Trade Center cross at a Ground Zero memorial site. The American Atheist say the cross display is, quote, "an impermissible mingling of church and state." The cross consists of two intersecting steel beams. It was found among the wreckage of the Twin Towers and moved to the memorial on Saturday.

And one year after the worst oil spill in U.S. history, BP's bottom line is looking pretty good. The company announced $5.3 billion in second quarter profits. That's a $22 billion turnaround from the same period last year. BP has paid almost $7 billion to repair environmental and economic damage in the Gulf Coast region. $22 billion swing the other way. Now, they're posting $5 billion more profit.

BLITZER: As you know, they got a lot of subsidies like ExxonMobil, other big oil companies from the U.S. government certainly helps their bottom line in the situation likely.

SYLVESTER: Yes. A lot of people are going to be looking at the second quarter profits going on right now.

BLITZER: As you know, the president and some other Democrats, especially, they want to remove some of those subsidies to the big oil companies like BP and ExxonMobil, but lot of Republicans are resisting it. (INAUDIBLE). Thanks very much.

Player or spectator? Just ahead, we're tracking the president's changing role in the debt talks and whether he can really be sidelined.

Plus, fast and furious up on Capitol Hill. Why a controversial ATF gun program is sparking new outrage today in Congress.


BLITZER: All right. Let's get right to our "Strategy Session." Joining us are CNN political contributor, the democratic strategist, James Carville, also joining us, our CNN political contributor, the Republican strategist, Alex Castellanos.

Alex, how come none of the Republican presidential candidates right now are really players in this huge debate that's going on in Washington over raising the debt ceiling and a potential crisis, because, you know, they're sort of talking amongst themselves, but they're not really involved directly in this debate.

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: A couple of reasons, Wolf. Remember Michael Jordan when they asked him why he didn't take sides, Republicans or Democrats, he said, well, I have to sell sneakers to everybody. And right now, Republican candidates, they want to appeal to the base of hunk of which does not want to see the debt ceiling raised, unless, we get a balanced budget amendment.

And some who, I think, are willing to take just spending cuts and no tax increases. So, that's, I think, a big part of it. It's a political calculation, but also, this is a Congressional responsibility and a presidential responsibility. And none of our candidates are not president yet.

BLITZER: Yes, but want to be.

CASTELLANOS: They're not president or king, I think, either.

BLITZER: But Mitt Romney specifically, James, that he's the front-runner by all accounts, at least, according to almost all of the polls. If he wants to be the next president of the United States, the leader of the Republican Party, shouldn't he be more directly involved in at least speaking out affirmatively, negatively about what's going on?

JAMES CARVILLE, CNN POLITICAL CONTRIBUTOR: Well, first of all, Michele Bachmann is very far out there. She says she's not voting to raise it under any circumstances, so not all of them.

BLITZER: She's an actual member of the House, and she had voted against the cut, cap, and balance plan last week.

CARVILLE: If you're running for president, you're supposed to have an opinion on everything. This is the biggest issue that this country is facing now. It could be the biggest issue we ever face. It would be interesting to know what Governor Romney's position is on this. What was he thought? That's not an unfair question. That is totally fair to ask him, what would you do? You're running for president.

CASTELLANOS: Sure. And it's totally fair for someone like Mitt Romney to say, you know, right now, there still is in flux, and right now, dividing our party is not what we want to do. We want to bring it together behind a responsible approach. So, it's not exactly leading from behind like our president does on occasion, but it is responsible.

CARVILLE: But you're governor, so you would say that it's OK for Mitt Romney to say, I just don't have a position on this? I don't think that people would like that too much, Alex. I think they want to hear from their presidential candidates what their positions are.

CASTELLANOS: And I think they will, but I think it's also responsible right now not to do. Mind to your party (ph), when the speaker especially is doing a terrific job of bringing the Republicans together. He's moved the debates. So, we're talking about tax cuts -- no tax increases and spending cuts. You know, he's done a terrific job. It makes me want to wear a green tie and paint my face orange.

CARVILLE: And he's getting advice from Rush Limbaugh. Why didn't he get advice from Mitt Romney?


BLITZER: I want to get to Rush Limbaugh in a moment, but when you say he's doing a terrific job uniting the Republican Party, we just heard from Congressman Jim Jordan, Republican of Ohio, he's the chairman of the key conservative bloc in the House, and he hates what the speaker is bringing up tomorrow. He's going to vote against it, and he's predicting that the speaker doesn't have the 217 votes necessary to pass it in the House.

CASTELLANOS: Which is why right now is not the time to try to further divide the Republican Party. And I think hate is a pretty strong word, Wolf. Most Republicans would love to have what your guest, Congressman Jordan was talking about which is a balance budget amendment. Not everybody thinks we're going to get it this time.

So, yes, tactically there may be some differences, but Republicans behind -- I think the speaker all want exactly the same thing, real spending cuts and a long-term solution to the problem which is what the president is not putting on the table.

BLITZER: You know, James, let me bring in Rush Limbaugh to this conversation, because yesterday, he said this on his radio show about a phone call that he had received a little while earlier. Listen to this.


RUSH LIMBAUGH, HOST, THE RUSH LIMBAUGH SHOW: Well, this morning, about an hour and 15 minutes ago, I answered the phone. And on the other end of the phone line was the speaker of the House, John Boehner. And Congressman Boehner, the speaker, filled me in on what is the latest proposal on the table.


BLITZER: All right. James, Rush Limbaugh is obviously a very influential conservative radio talk show host. Anything wrong with the speaker calling Rush Limbaugh, briefing him on his proposal, trying to generate support among Rush Limbaugh and his listeners out there?

CARVILLE: It's not wrong, but it's an interesting piece of relevant information that this is who is reaching out to. I come back to the fact that we're not supposed to discuss things that might divide the Republican Party. I mean, I would be interested in Mitt Romney's position. I would be interested in Tim Paw's position.

I'd be interested in Rick Perry's position, but I guess the doctrine now is if it's a difficult issue for Republicans, we shouldn't talk about it. Well, I just don't buy that. I don't buy that at all.

CASTELLANOS: James, you wouldn't make a very good Republican. This is going to come as a shock, I guess. And James, just because you make stuff up does not mean it's true. For example, when you said that Speaker Boehner called to get directions or instructions from Rush Limbaugh, no. I think Wolf just pointed out, his largest radio audience in the country. And it's the Republican base. And explaining our position to them is a pretty good idea.

CARVILLE: Again, I think Rush Limbaugh is the most powerful person in the Republican Party. I think he's probably the person that has the greatest intellectual sway in modern Republicanism. Again, probably should call him. I just think it's an interesting thing to see who the speaker is speaking to in the middle of this crisis. That's all. And I think the public will find this interesting, I know I do.


CARVILLE: I'm not saying it's wrong. I don't think it's immoral, it's illegal. I just think it's interesting.

BLITZER: You've got to give the speaker, Alex, and I think you do, credit for going up against some of the tea party activists in his own party. And Eric Cantor as well has been complaining that these guys like Jim Jordan are just wining right now. There is a crisis that is about to happen in this country within a few days, unless, they raise that debt ceiling, Alex. And unfortunately, there are some people out there who just don't believe it.

CASTELLANOS: No, I don't think that's the case, Wolf. I think every Republican understands how serious this is, and nobody wants, if they have their chance to default on the debt. The problem is there's not one crisis. There's a debt crisis raising the debt ceiling crisis, but the big crisis is we're spending ourselves into insolvency.

We're following the path of Greece and now Italy. And nobody wants the United States to be that, and nobody wants to put a band-aid on that today and pass that problem onto our kids. It's responsible for Republicans to do what they're doing right now. You know, one man's intransigence is another man's courage. And I think republicans are being tremendously courageous right now.

CARVILLE: Well, I'm sorry, but Jim DeMint said it wouldn't be that bad a thing. Pat Toomey said it wouldn't be that bad a thing. Donald Trump today said it wouldn't be that bad a thing.


CARVILLE: So, there's a lot of Republicans out there that are saying that default would not be that bad a thing. An idea that there are no Republicans out there is just not true, Alex.

CASTELLANOS: I take exception with them.


CASTELLANOS: But I understand their point of view. Some Republicans understand that this long-term debt crisis, President Obama has made even worse is such a serious problem that they think --

BLITZER: Very quickly, James, you applaud the speaker of the House, John Boehner for willing to agree for being ready to increase taxes by $800 billion?

CARVILLE: Well, it is, if that's -- as I understand it, it's not clear if that was going to be kind of enhanced revenues. If he did --

BLITZER: That was a tax increase for all practical purposes as defined by Grover Norquist --

CARVILLE: Grover Norquist does not define (ph) to me what the tax increase is.

BLITZER: Well, the speaker himself says it's a tax increase.

CARVILLE: Again, might be defined as --


BLITZER: Just say you appreciate that.

CARVILLE: Yes, I kind of like him. He's got a little Eddie Haskell over there sticking a knife in his back every time he turns around. I don't mind Boehner.

CASTELLANOS: Listen, it's a shame right now that we've gotten to this point.

BLITZER: Yes, it is.

CASTELLANOS: And remember we have tripled the debt that George Bush left us under Barack Obama.

BLITZER: We'll talk tomorrow, guys. Thanks very much.


BLITZER: CNN is learning, by the way, new details, exclusive details, about what happened in Norway, the Norway attacks. Did the accused killer plan more bombings? Nic Robertson is digging. He's on the scene for us. We'll go there live to hear his new information. Stand by.


BLITZER: If the United States does default on its debts, it wouldn't be the first country to do so, but previous examples don't necessarily offer much guidance about what would happen here and around the world for that matter. Lisa Sylvester is back. She's monitoring this part of the story for us. Describe the possible impact of a default.

SYLVESTER: Yes. There's a huge possible impact and implications if we default, but the markets haven't really been rattled, so far, by the debt ceiling standoff, and the main reason is because everyone believes something will get done, and that it is unimaginable that the U.S. government would actually default, but governments do default, and it has happened in the past.


SYLVESTER (voice-over): Default. The credit rating agency, Standard & Poor's defined a sovereign (ph) default when the central government either fails to pay scheduled debt service on the due date or tenders an exchange offer of new debt with less favorable terms than the original issue.

(on-camera): Between 1983 and 1998, there were no countries that defaulted, but since then, there have been a dozen country that are failed to meet its debt obligations. Argentina had the largest default back in 2001. That's $82 billion. Ecuador has defaulted not once but twice, but it's not the only country that has done that. On the other side of the globe, Ukraine has also defaulted twice back in 1998 and 2000.

(voice-over): When a country defaults, its credit rating is sharply downgraded. For Standard & Poor's, that's a D rating or ST rating for selected default, but it's hard to even compare the United States situation to other countries that had defaulted in the past. Those nations had no choice. No option to raise outside money or increase revenue. Unlike the U.S., they can raise its debt ceiling.

JOE GAGNON, PETERSON INSTITUTE: You cannot put in Argentina or Ukraine or even Russia in the same category as the United States, because nobody trusted the Russian government to even, you know, a small degree to the extent which they trust the U.S. government. That's just universally accepted. So, a default for the U.S. is just as Secretary Geithner says, unthinkable, in the literal sense. Markets have not thought it even possible to this day.

SYLVESTER (on-camera): But what will it mean if the U.S. government actually defaults? Well, it will make it more expensive for the government to borrow money, will lead to a loss of. It will cost more for credit cards, lower home values as well as reduce retirement savings.

(voice-over): It's a hard scenario to actually imagine, but if the U.S. defaults, it would have a catastrophic effect not just in the United States, but around the world, pushing up interest rates and possibly triggering a global recession.


SYLVESTER: International economists say even if the U.S. doesn't raise the debt ceiling, that the U.S. will still have a lot of money coming in, and the very first in line to get paid are U.S. creditor creditors. The United States will not default on its debt obligations.

Now, you might have federal workers not getting paid and that would likely knock the U.S. from its AAA rating, but it's not exactly the same thing as a complete government default, Wolf

BLITZER: Until recently, it was unthinkable, but now, unfortunately, it's at least thinkable. I read about this on my blog at I want our viewers to check it out if they got the time. Thanks very much.

President Obama's role is shifting in all these debt talks as Republicans try to keep out of the conversation, but can he really be sidelined?

Plus, Jack Cafferty is asking how much do you rely on the U.S. postal service? Stick around. Your e-mail and Jack coming up next.


BLITZER: Jack Cafferty is back with the "Cafferty File" -- Jack.

CAFFERTY: How much do you rely on U.S. postal service? They're going to close 3,700 post offices, they say.

Joyce in Texas, "Not much. Modern technology allows you to do quickly what you couldn't do except by mail before. If the postal service will just end our junk mail, we'd be fine without all that paper."

Nathan in Indiana, "I don't use the post office often, but it's still very convenient to have in most towns. If thousands of post offices close, it will make it very difficult for folks like me to use them as needed. I'd rather spend $1 for a postcard than to see even one post office close."

Denny in Washington, "Many senior citizens who are computer illiterate depend greatly on the postal office. All of my banking and bill payments are being done electronically, so I can do without the junk mail, but if it keeps someone employed like my son-in-law, I'm all for it."

Alex in Washington, "Call me old-fashioned, but I still receive and pay bills via the mail. I don't trust the new-fangled systems enough to put my money in the clouds."

Rick in Michigan, "Today's paper mail is the same as the Pony Express was when the telegraph was invented. The rebellious Pony Express riders would go across the prairie tearing down the telegraph lines so they could keep their jobs, but technology won out, and this will be the same thing that happens again with e-mail."

Jim in Reno writes, "I rely on the post office for bill paying and occasional letters. I guess, I can go fully electronic, do without the mailman. Truth is, I enjoy picking up the mail and looking at what surprises may come my way." And Loren writes, "Very funny, Jack, rely on the postal service. Next thing you know, you're going to ask us how often we ride our horses to work. You're such a kidder."

If you want to read more, go to the blog, We're late (ph), here's Wolf.

BLITZER: Thanks, Jack.