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THE SITUATION ROOM
Dow Gains After Massive Sell-Off; Job Gains Amid Market Madness; Help Wanted: Only Employed Should Apply; On the Front Lines with Libya's Rebels; Pentagon: $600 Billion in Spending Cuts?; Interview with Austan Goolsbee; Governor Perry's Day of Prayer; 'Strategy Session'
Aired August 5, 2011 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, HOST: Thanks very much, Brooke.
Happening now, Wall Street pulls back from the brink after the worst sell-off in years. The Dow regained some ground in a volatile day of trading. Many investors can't shake fears that another recession could be around the corner.
In the midst of the market madness, a new jobs report offers the tiniest glimmer of hope. This hour, the president struggles to deal with an economy in turmoil and calm a nervous nation.
And a model airplane, guess what -- it could be a big threat to your privacy. Hackers are now learning how to track you and steal your personal and financial information from 400 feet in the air.
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
A bit of relief for Americans who may have been having a financial panic attack. The Dow Jones Industrials ended the day in positive territory, up 60 points after yesterday's massive 512 point sell-off. But the two major -- other major indices were down. And there were wild swings over the course of the trading session.
The Dow rebounded early, after the release of a better than expected jobs report and then see-sawed throughout the day.
Let's bring in CNNMoney's Poppy Harlow.
She's working this story for us.
Investors feeling a little bit of relief after a tumultuous day up on Wall Street -- Poppy.
POPPY HARLOW, CNN BUSINESS CORRESPONDENT: A whole lot of relief going into this weekend, Wolf.
I just got off the phone a minute ago with a New York Stock Exchange trader, who, needless to say, is exhausted from the week and just the day this has been after today's -- yesterday's massive loss.
He said, though, just to be clear here, we may have ended higher, we are not out of the woods yet. The main problems still exist. We did get a better than expected jobs report. We'll get to that in a minute.
But let's talk about the wild swings in the market, why this is happening.
Two big drivers here. A lot of uncertainty in the marketplace. Markets hate uncertainty. They don't know where all the cuts are going to come from, that debt ceiling deal. They don't like that.
We also have Asian markets, European markets hit very hard. And as the head of PIMCO, the biggest bond fund in the world, told me, there are lots of unthinkables going on in this market. And the -- the harsh reality is that this is a global economy that is now slowing, Wolf.
And I want to get to one very important point, news we're standing by for. There is a chance -- rumors have been circulating that Standard & Poor's may issue a downgrade of the AAA credit rating in this country, which we have never seen before. Obviously, no comment on that from S&P. But the trader that I was on the phone with just told me now that is the risk. That is the fear that they're going into Monday's session with, is that if we do get a downgrade, it's something we've never seen before. And as he called it, Wolf, that's uncharted territory.
BLITZER: Well, if they did that -- it's a good thing they did it after the markets closed...
BLITZER: -- here in the United States and the markets will reopen in Asia Sunday night. That would be a huge, huge development.
But let's talk quickly about the July jobs report -- 170 -- 117,000 jobs, as you know, Poppy, created. They were expecting, some of the analysts, 75,000, 80,000. So this is better than expected. But it doesn't necessarily indicate that, you know, relief is on the way.
HARLOW: It's better than expected and we'll take this number, Wolf. But this is only enough job growth to keep up with population growth. This is nowhere near the amount of jobs added that we need to bring down the unemployment rate.
Now, if you just move past the top line number of 117,000 jobs added, here's the reality. It's a look at the labor participation in this market. This is a more important number. This shows us how many workers are actually out there working and hunting for work. That number is 63.9 percent. That has fallen to the lowest level we've seen since 1983.
And what that tells us, Wolf, is there are so many discouraged workers out there, people that have given up looking for work they've been out of work for so long, and they are counted in the 9.1 percent unemployment rate. So I always think that this number is a lot more important when you talk about jobs in this country than just the top line jobs added or the top line unemployment rate.
Mohamed El-Erian, the head of PIMCO, the biggest bond fund in the world, told me on the phone last night, Wolf, that he believes that unemployment will hit 10 percent this year, that the worst is still ahead of us. So 10 percent unemployment could be ahead when you ask experts.
But we will take this positive job number and we will see what happens with Standard & Poor's over the weekend. Heading into Asian markets opening late Sunday evening, that's going to be critical for us, as we head into the next week on Wall Street -- Wolf.
BLITZER: If you get anything on S&P, on Standard & Poor's...
HARLOW: We'll let you know.
BLITZER: -- making a decision on America's AAA credit rating, you'll let us know right away.
BLITZER: Earlier in the week, Moody's and Fitch said they were keeping America at its AAA rating.
BLITZER: Even though there were some warning signs out there.
But we'll see what Standard & Poor's does.
We'll get right back to you.
Poppy Harlow reporting.
As you would expect, President Obama is embracing even a sliver of good news when it comes to the job market. But as always, he's very mindful of all those Americans who are out of work, promising today that, in his words, "things will get better."
Let's go to our White House correspondent, Dan Lothian.
He's watching what's going on -- Dan.
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, yes, the president was sounding very optimistic about the eventual economic recovery, but also pointing out that some big challenges still remain.
His message today was, A, not only of the American people, but at a divided Congress. You heard the president say how both Democrats and Republicans share the responsibility of moving the economy forward. However, there are some who are saying the president needs to do much more in terms of offering new ideas.
LOTHIAN (voice-over): Departing the South Lawn of the White House for a weekend getaway at Camp David, President Obama left behind a rocky economic week that saw a stock market plunge, a debt ceiling deal no one liked and an FAA funding dispute that was only partially resolved.
But better than expected jobs numbers gave the White House a lift.
AUSTEN GOOLSBEE, CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS: Nobody should be patting themselves on the back with this. But it's -- after the heavy blows we took the first half of this year, from gas prices, from Europe, from Japan, this is at least a welcome sign.
LOTHIAN: In addition to the overall numbers, the White House is touting 2.5 million new private sector jobs created over the last 17 months and an unemployment rate that ticked down ever so slightly. But even the president is aware that one set of numbers doesn't erase the effects of a recession overnight.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We need to create a self-sustaining cycle, where people are spending and companies are hiring and our economy is growing. And we know that will take some time.
LOTHIAN: But many Americans are getting impatient. And Republican critics on Capitol Hill, are, too.
SEN. KEVIN BRADY (R), TEXAS: After two-and-a-half years, enough is enough. You've tried and failed to revive this economy. America deserves better than a second rate economy that's held up to ridicule by other nations.
(END VIDEO TAPE)
LOTHIAN: Now, the White House has said time and time again that there is no magic bullet, but there are a series of small steps that they can take that will have big results. And they point to something that the president addressed today, jobs for vets, an initiative that will offer tax incentives to employers who hire veterans who are unemployed -- Wolf.
BLITZER: Lots of work expected in the next few days, weeks and months.
Thanks very much for that, Dan.
The old adage that it's easier to get a job if you already have a job seems to be truer than ever. And that's a huge problem given how many Americans are simply out of work right now.
Let's go to New York.
CNN's Mary Snow is looking into this part of the story for us -- Mary, what are you finding out?
MARY SNOW, CNN CORRESPONDENT: Some pretty disturbing trends, Wolf.
You know, the number of Americans currently out of work right now stands at 14 million. Forty-four percent of them have been out of work six months or more.
Now making things harder for them is the fact that many employers only want to hire people who are currently working. Job placement firms see it, career coaches see it.
And in some cases, it's been documented.
SNOW (voice-over): When one Chicago restaurant looked to hire a manager, it made clear it only wanted candidates currently working or employed within the last three to six months. For other jobs, ranging from insurance agents to paralegals, if you're unemployed, you're disqualified.
The National Employment Law Project has been monitoring the practice and finds that companies are removing these "only the employed need apply" requirements on paper because they are coming under scrutiny. But it finds the practice continuing.
CHRISTINE OWENS, EXECUTIVE DIRECTOR, NATIONAL EMPLOYMENT LAW PROJECT: It's grossly unfair to unemployed workers. We have a huge unemployment crisis in this country. And we're not creating that many new jobs. So getting new jobs, getting reemployed, is really tough for unemployed workers. And any kind of artificial barrier like this that eliminates them exclusively because they're unemployed just adds to the hardships that they are already struggling against. And it really adds to the cost of the unemployment program.
(END VIDEO TAPE)
SNOW: Now while unfair, excluding the unemployed is not illegal. This week, a bill was introduced in the Senate to prohibit employers for discriminating against job seekers who are unemployed. And a similar bill is being considered in the House -- Wolf.
BLITZER: That's an amazing story.
All right, thanks very much for that.
Mary Snow watching that story.
Defense lobbyists are on a mission here in Washington. They're fighting the very real possibility of big spending cuts over at the Pentagon. We're going to tell you who they are and how they're pressuring Congress. Plus this...
MICHAEL HOLMES, CNN SENIOR INTERNATIONAL CORRESPONDENT: The rebel commander we're with says if we drive down that road, we will be seen by Gadhafi forces and they will open fire.
(END VIDEO CLIP)
BLITZER: We're up close with Libyan rebels looking for an opening to attack.
Stay with us.
You're in THE SITUATION ROOM.
BLITZER: Libya's government is denying rebel claims that a NATO air strike has killed the Libyan leader Moammar Gadhafi's son, Khamis Gadhafi. If the claims are true, that would be a huge blow to Gadhafi's efforts to hang onto power. His son commands some 10,000 elite soldiers. But the Libyan regime says the air strike that actually killed a woman and her two young sons.
Libya's rebels, meanwhile, have their sights set on the capital of Tripoli. But first, they must enter a key city where they say Gadhafi's forces are using women and children as human shields.
CNN's Michael Holmes is on the front lines with the Libyan rebels.
HOLMES (voice-over): Two thousand years ago, so the locals say, this crumbling structure was an observation post for Berbers on the lookout for invading roman armies. Today, it's a lookout for a whole new war -- rebel fighters watching over the Gadhafi-held city of Tiji, a few kilometers away.
Rebels have it sealed off on three sides. On the fourth, to the northeast, Tripoli.
(on camera): The rebels are calling, Tiji, the town behind me, a gateway city. That's because, they say, if they take that and the nearby town of Badr to the east, then there's going to be very little standing between them and the doorstep of Tripoli.
(voice-over): Talking about taking Tiji and actually achieving it are different things. Rockets arrive daily from the city and into the nearby town of Kabaw. But rebels are not returning fire at the moment. That's because when they advanced on the city and engaged Gadhafi troops in a fierce firefight earlier this week, they saw families, including women and children, running into houses. And so they withdrew. TAREK ZAMBOU, MILITARY COUNCIL HEAD: This situation we're facing is a big problem because Gadhafi forces and Gadhafi mercenaries used people and civilian people as a human shield.
HOLMES: That's a claim we can't independently verify, but it is clear that after making significant gains last week, seizing half a dozen towns beneath Nafusa Mountains, the advance here has stalled at this key city.
Rebels say they've gotten word to the remaining residents to leave and leave soon.
ZAMBOU: We go in, but we try, as we can, you know, to avoid the civilian people. But we should be gone, you know, because we give them the -- the chance.
HOLMES: During our visit to this observation post, anti-aircraft fire -- ineffective from this distance, could be heard coming from the city. Zambou says he likes that sound. It is, he said, the sound of Gadhafi fighters wasting ammunition.
(on camera): And this I is as close to the front line as we'll get today. The rebel commander we're with says if we drive down that road, we will be seen by Gadhafi forces and they will open fire on us and on his men.
(voice-over): With the prize that is Tiji so clearly in their sights, the rebels say it won't be long before they're firing back again.
Michael Holmes, near Tiji, Western Libya.
(END VIDEO TAPE)
BLITZER: In the wake of the debt deal mandating big spending cuts here in the United States, the Pentagon is trying to keep itself out of the firing line.
Let's bring in our Pentagon correspondent, Barbara Starr.
This is a tough mission for the Pentagon.
BARBARA STARR, CNN PENTAGON CORRESPONDENT: It is, Wolf. The action really is shifting from the Pentagon up to Capitol Hill.
STARR: (voice-over): At more than $100 million apiece, this new F-35 fighter jet could be grounded, possibly the military's first victim of Washington's budget cutting favor. Manufacturer Lockheed Martin is one of just dozens of companies trying to make sure its projects are not cut.
The Pentagon is a prime target for Congress, now slicing $1.5 trillion from the federal budget. Up to $600 billion could come from defense spending. JIM DYER, LOBBYIST PODESTA GROUP: It's some place we've never been before, in terms of the depth of the cuts.
STARR: Jim Dyer, A former Hill staffer and now a lobbyist, has just been hired by the Podesta Group, a major Washington lobbying firm, to convince Congress to not cut defense spending.
(on camera): So how many defense lobbyists are there in Washington?
DYER: I don't think there's a firm count. I could speculate on a number, but I suspect that within an hour in this broadcast, that number would have changed and probably gone up.
STARR: (voice-over): Podesta Group's clients have including Lockheed Martin and Boeing.
The Center for Responsive Politics estimates there are more than 1,000 registered defense lobbyists. There's already an initial $350 billion in military cuts on the table. The chairman of the Joint Chiefs opposes additional cuts, but put a marker out on what's at risk.
ADM. MICHAEL MULLEN, JOINT CHIEFS CHAIRMAN: I think programs that can't meet schedule, that can't meet costs -- their costs and schedule requirements -- are very much in jeopardy.
STARR: Republicans mainly have received the largest political contributions from defense companies. Lockheed Martin the biggest contribution. Dyer says lobbyists will have to make a nonpolitical case for jobs and the economy.
(on camera): Is it taking members to lunch, to dinner?
Is it TV commercials?
What's it going to look like?
DYER: Well, they're changing ethics rules, so we're dining less and less these days. We're -- my personal belief is that you get the most done in a business like setting.
STARR: And Dyer, who has negotiated with Leon Panetta on Capitol Hill in years past, thinks the new Defense secretary may be a valuable ally.
DYER: He's a man who comes and sits at the table and doesn't get up until evening is done.
(END VIDEO TAPE)
STARR: So start looking for those television commercials, advertisements and even new Web sites from defense contractors and their lobbyists, making the case, Wolf, that their programs are military -- militarily essential and good for the economy, that they will keep jobs in place. And it's very interesting, the long time Democrat, Leon Panetta, may wind up being their biggest ally, maybe, in fact, the lobbier-in-chief.
BLITZER: Yes, interesting, indeed. And he's got a tough assignment ahead of him given how much money the Pentagon has, how big that Pentagon budget is and how, I guess, it's a target rich environment, you could say...
STARR: They're trying to hold onto it.
BLITZER: In terms of trying to save some money.
Thanks very much, balanced budget amendment, for that.
BLITZER: Floodwaters are surging out of nowhere in Charlotte, North Carolina. The high waters are trapping people in their homes and their cars. We're going to have the latest own the efforts to get them out of harm's way.
And it's been one year to the day since 33 Chilean miners were first trapped deep underground. Their subsequent rescue was a global sensation.
We're going to tell you how Washington is honoring them today.
BLITZER: Massive flash flooding in North Carolina.
Lisa Sylvester is monitoring that and some of the other top stories in THE SITUATION ROOM right now -- Lisa, what do you have?
LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.
Well, check out this video from a hotel lobby in Charlotte. Floodwaters coming in through the roof turned it into a waterfall. Officials in Charlotte say the flooding prompted rescue operations and evacuations. At least 16 motorists were rescued from flooded cars and two neighborhoods were evacuated. It's estimated as much as six inches of rain fell in parts of that city.
President Obama has signed legislation to temporarily restore full funding to the FAA. The Senate passed the measure today. It allows about 4,000 federal employees to go back to work, along with tens of thousands of people in the construction industry. The two parties still disagree about some of the key issues.
And more drama from a Texas courtroom, where polygamist sect leader, Warren Jeffs, will no longer be representing himself. A jury is deliberating the fate of Jeffs, who was found guilty of sexual assault. He faces a maximum sentence of life in prison. Jeffs was convicted yesterday of sexually assaulting two girls, 12 and 15 years old, who were his, quote, "spiritual wives." And the Army is reducing most Afghanistan deployments from a year to nine months. The move should help U.S. soldiers deal better with stress and reduce family problems at home. Studies show that long, repeated deployments can lead to increased rates of suicide and divorce. This new policy will go into effect next April.
And today is the one year anniversary of the Chile mine collapse that was a disaster that trapped 33 men for 69 days. You might remember that. Well, the miners, they were saved in a miraculous rescue that made headlines worldwide. Now, many of them have since traveled the globe, although some are reporting money troubles now. Four of the miners are marking the day right here in Washington at the Smithsonian exhibit that is in their honor -- Wolf.
BLITZER: A fascinating exhibit.
Thanks very much for that, Lisa.
Many companies in the United States are making huge profit right now, but they still are not hiring. I'll ask one of the president's top economic advisers, Austan Goolsbee, about the problem.
Can the White House do anything about that?
And heartbreak in the heat wave -- get this, an elderly woman's death is blamed because someone stole her air conditioner.
BLITZER: President Obama is telling Americans the economic pain -- the economic pain, "that we are going to get through this together." A direct quote from the president.
He's welcoming some badly needed gains in the jobs market and renewing his push to create more work as the presidential election year gets closer and closer.
I spoke today with the outgoing chairman of the Council of Economic Advisers, Austan Goolsbee.
BLITZER: Thanks very much for coming in.
AUSTEN GOOLSBEE, CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS: Great to see you again, Wolf.
BLITZER: All right, 117,000 jobs created last month. In order just to stay even -- and you're an economist at the University of Chicago -- how many jobs does the country need to create every month, just to stay even, given population growth?
GOOLSBEE: Well, that's a little bit of a trick question, because it depends what happens to labor force participation. In this report, the unemployment rate went down slightly, even though it was at 117. But the best thing to say about this report is it was well above what was expected. And that's -- that's encouraging. But you don't want to make too much out of any one month's report.
And it should be obvious to anyone looking, we've got a long way to go. We're trying to deal with some fairly heavy blows that we took the first part of this year, from gas prices, from Europe and from the events in Japan.
So I'm not -- I'm not trying to make it out that this jobs report is -- is the solution to our problems, by any means.
BLITZER: No, but I've heard economists suggest that just to stay even, you really need somewhere from 125,000 to 150,000 new jobs a month. But to make a dent on unemployment, you really need 200,000 jobs a month to make a dent.
Is that a fair economic assumption?
GOOLSBEE: Well, as I say, it depends on what happens to the labor force participation and whether you put the dent in the unemployment.
BLITZER: You mean if people are just giving up looking for a job?
GOOLSBEE: Yes. If that happens, then they don't count as unemployed. So it's a little bit hard to just answer it directly.
I'll say the most important thing over an extended period is to ask, how many jobs are we creating, and particularly in the private sector? So this month was more than 150,000. They revised up some of the bleaker months of the last two rather significantly.
Overall, the last 17 months we added 2.4 million, which is a good start, but we're coming out of the deepest hole since the depression. We've got a lot more that we've got to add, and to do that we've got to get the growth rate up.
BLITZER: Because you're right, it's a long, long slog. Even if you were to create 200,000 or 250,00 jobs a month, it would take years, many years, to get back to where the United States stock market was before the start of the great recession. Is that right?
GOOLSBEE: Yes, look, I think that's accurate. But we need to start doing that.
I mean, we've got to get the growth rate up, and let's start adding jobs. This is an encouraging report. Every month I tell you, don't pay too much attention to any one report because they are variable. But we've got to see more like this and more like the ones we saw before the heavy blows of the first part of this year.
BLITZER: Private companies are making record profits, they're sitting on literally trillions of dollars, but they're really not hiring people. Why?
GOOLSBEE: Well, they were. I mean, it has been a puzzle, why they have not been both investing and hiring. And most folks -- and you see that pattern in U.S. companies, but also in companies in countries like the U.K. and other places.
To me, that makes it suggest that it has nothing to do with the policies in these countries, because the policies are very different. It has to do with them being very uncertain about how is the world economy doing and holding on to their money because they're nervous about it.
Now, previous to the slowdown at the beginning of this year, companies were hiring. That's a distinction I would like to make.
As I say, in the 17-month period, we added almost 2.5 million jobs, which is a respectable year. It's not gangbusters, but it's not bad. What has happened in the last few months is that we took these blows and the growth rate slowed down. And when growth is slow, we're not going to add any jobs.
BLITZER: Let me read to you from what one economist has now said. And I'll put it up on the screen.
"It's not just the threat of a double-dip recession has become very real. It's now impossible to deny the obvious, which is that we are now and have never been on the road to recovery."
Do you have any idea who said that?
GOOLSBEE: I do. My old teacher, Paul Krugman.
What I will say is the following: let's not just jam everything together and conflate it. Let's try to recognize where we are.
The data came out and was revised. The period in which the president comes into office was bar none the worst period that we have had in the economy since they began keeping records in the 1940s.
It could have turned into a depression. The shock that we faced was every bit as big, and in many cases bigger, than the one in 1929.
It was an achievement to avoid cataclysm. It was then followed by a fairly moderate-paced recovery where we add more than two million jobs in the private sector, and then at the beginning of this year, another slowdown. And that slowdown comes from these heavy blows, as I mentioned, that we took with gas prices and some other things.
So, I don't think that it's proper to think of this as, well, we went down and we just stagnated and nothing ever improved, because that's not true. Remember, when we came in, we were losing 800,000 jobs per month.
And we then go into a moderate growth period where we add more than two million. And now our challenge is to get past the kind of dysfunction of the beltway that was evidenced in that debt ceiling debate and get back to some of the bipartisan growth plan, things we were talking about before we got pulled into that silliness.
BLITZER: Austin Goolsbee, good look back at the University of Chicago. Thanks very much.
GOOLSBEE: Thanks, Wolf. It's been great talking to you all these months. Keep in touch.
BLITZER: We'll continue this conversation, you as a private citizen, down the road.
GOOLSBEE: That's right.
BLITZER: Appreciate it.
BLITZER: A possible White House contender is going forward with a controversial day of prayer. Will it help Governor Rick Perry of Texas politically or will it hurt him? Stand by.
And it looks like a toy, but it's designed to be a powerful weapon for hackers to spy on you and steal from you.
BLITZER: Republican Governor Rick Perry of Texas is turning to a higher power as he weighs support for a possible presidential bid.
Let's go to Houston. CNN's Jim Acosta is standing by, where I think it's well over 100 degrees out there.
But politically, how hot is it?
JIM ACOSTA, CNN CORRESPONDENT: Well, this is a big moment for Rick Perry, Wolf. Just as Republicans are sizing him up as a potential presidential nomination, he is planning to speak at a prayer event that is likely to generate as much heat as the triple-digit temperatures here in Houston.
GOV. RICK PERRY (R), TEXAS: This is Governor Rick Perry.
ACOSTA (voice-over): A Texas governor who says he feels called to run for president, Rick Perry has issued a call of his own, for people across the country to fill this stadium in Houston this weekend to pray for what organizers believe is a nation in crisis.
PERRY: With the economy in trouble, communities in crisis, and people adrift in a sea of moral relativism, we need God's help. That's why I'm calling on Americans to pray and fast like Jesus did.
ACOSTA: Organizers hope the event dubbed "The Response" will kick-start a sluggish economy, to pray away the malaise. But critics argue Perry's leadership role as initiator of a gathering featuring a Christian-only lineup tears down the walls separating church and state.
BARRY LYNN, AMERICANS UNITED FOR SEPARATION OF CHURCH AND STATE: Many people love a little slogan down in Texas called "Don't mess with Texas." It was a very effective campaign. I would say to the governor, don't mess with the Constitution.
ACOSTA: But Perry is up front about his Christian faith. The governor called for days of prayer earlier this year to end the drought in Texas, and he once told a televanglist he believes the recession serves a higher purpose.
PERRY: I think we're going through those difficult economic times for a purpose, and to bring us back to those biblical principles.
ACOSTA: Questions are also being raised about statements made by some response planners and official endorsers. A spokesman for one key organizer, the American Family Association, has compared gay rights activists to Nazis.
BRYAN FISCHER, AMERICAN FAMILY ASSOC.: If you have religious views about homosexual behavior, you are squashed. I mean, Ladies and Gentlemen, they are Nazis. Homosexual activists, when it comes to freedom of speech, are Nazis. When it comes to freedom of religion, they are Nazis.
ACOSTA: Doug Stringer, the national mobilization coordinator for "The Response," defends the governor's handling of the event.
(on camera): The governor is holding a Christian event.
REV. DOUG STRINGER, "THE RESPONSE": Now, the governor is not holding the event.
ACOSTA: He's the initiator of --
STRINGER: He trumpeted and made a declaration of we need a day of fasting and prayer and asked the church to respond to that. The church is doing what we should be doing anyway, responding to that trumpet call.
ACOSTA (voice-over): A call that could work with a key Republican voting bloc -- Christian conservatives. The trick for Perry is what happens if he wins the GOP nomination.
BILL MARTIN, RICE UNIVERSITY: Having an event like this will be brought up again and again by his opponents to say Governor Perry does not represent the separation of church and state.
ACOSTA: The other big question for "The Response" is the response. Only 8,000 people have signed up online to attend this event. That's at a venue that fits up to 70,000 people. And Governor Perry has also called on governors across the country to come to Houston to take part in this event, but, Wolf, only one, Kansas Republican Sam Brownback, has said he may come -- Wolf.
BLITZER: You're going to stick around and watch it for us over the weekend?
ACOSTA: We're going to be here on Saturday, all day long, watching the event. Governor Perry is expected to talk somewhere around noon Central Time. And we'll let you know what he says.
BLITZER: Thank very much. Jim Acosta in Houston, where it's very, very hot.
There's a laser-like focus here in Washington right now on cutting the debt. Here are two more areas where we can possibly save a few more billion dollars in the coming weeks and months. I write about this on my blog.
The Obama administration and the Iraqi government appear right now to be close to a new deal that will allow thousands of U.S. troops to remain in Iraq after the end-of-year deadline, when all U.S. forces are supposed to be gone. Right now there are still about 45,000 American troops in Iraq.
If they do reach an agreement to maintain an American military presence long term in Iraq, beyond the deadline, make sure the Iraqis pay for most of it, just as Germany and South Korea pick up a lot of the tab for much of the American military presence in their countries. If thousands of U.S. troops remain in the years to come, we're talking obviously about billions of dollars.
Iraq can now afford to help out. It's a major OPEC oil exporting country, and it's pocketing billions of dollars with the price per barrel so high now. Remember, since the war started in 2003, American taxpayers already have spent hundreds of billions of dollars liberating Iraq.
The second source of possible revenue for American taxpayers, I've harped on this before, is Libya. The U.S. still has in its hands about $33 billion in frozen Libyan assets. Deduct the approximate $1 billion the U.S. has already spent at trying to liberate the country from Gadhafi's rule before handing over the remaining funds to the transitional rebel authority.
I suspect Democrats and Republicans, liberals and conservatives up on Capitol Hill will be very receptive to both of these proposals given the hard economic times the United States is going through right now. But let's see if the Obama administration is receptive to those ideas as well. So far, top officials have not committed to either proposal.
John Kerry slams the Tea Party, accuses them of having absurd ideas and calls on the media to stop giving them equal time. Is he crossing the line? We're going to explore in today's "Strategy Session."
And deadly violence raged across Syria today. Is the regime getting ready for a final showdown against opposition protesters?
BLITZER: Let's get right to our "Strategy Session."
Joining us, our CNN political contributor, the Democratic strategist, Donna Brazile, and the Republican strategist, Rich Galen, of Mullings.com.
Guys, thanks very much for joining us.
Senator John Kerry, he was forceful in speaking out against the Tea Party, its role in this entire debt ceiling debate. Let me play a clip and then we'll discuss.
(BEGIN VIDEO CLIP)
SEN. JOHN KERRY (D), MASSACHUSETTS: What we had was a group of people who are completely unaware or didn't care about the consequences of their actions. They were actually arguing for a default.
The media has got to begin to not give equal time or equal balance to an absolutely absurd notion just because somebody asserts it, or simply because somebody says something which everybody knows is not factual. It doesn't deserve the same credit as a legitimate idea about what you do.
(END VIDEO CLIP)
BLITZER: All right, Rich. Does he have a point?
RICH GALEN, REPUBLICAN STRATEGIST: No. He's -- first of all, he's confusing the fairness doctrine, which doesn't even exist anymore, with the equal time rule, which has its grounding in broadcast, not cable or press. So, A, he doesn't know what he's talking about.
B, I don't think he's correct in the fact that these people don't have any standing. There are 84 Republican freshmen.
Just to be on the safe side, let's say half of them, 42, adhere to the principles of the Tea Party. Forty-two members of Congress is a big number. How big? There are 41 members of the Congressional Black Caucus and only 31 members of the Hispanic Caucus.
So, to use John Kerry's formulation, we should no longer cover anything that the Congressional Black Caucus wants to say because there's just not enough of them.
BLITZER: All right, Donna. Go ahead and respond.
DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Well, first of all, I think what Senator Kerry was trying to say -- and I agree with a lot of what he said in that piece -- is that when we're presenting facts to the audience, whether it's on broadcast, the networks, cable, it's important that the facts get out.
It is true that members -- some members of the Tea Party Caucus advocated shutting down the government, defaulting on our obligations to pay our bills. In fact, Michele Bachmann, who is running for president, carried that message loud and career.
The truth is, Wolf, is that the Tea Party was elected to represent their constituents, and they are doing that. They are a very principled group of people. I disagree with them. Campaigning is one thing, governing is another thing.
I would hope that in the future, that we don't continue to take the American economy hostage simply because one side believes that they should get everything that they want when you're sitting at a table trying to come up with a compromise to avert a fiscal calamity.
BLITZER: Let me get Rich back into this conversation.
But, in fairness, it was my understanding what Michele Bachmann and other Tea Party activists were suggesting was not for the United States to go into default, not to pay its bills to Saudi Arabia or China, or other foreign creditors of the United States. They could pay the bills, but not necessarily pay some of the domestic spending that would have come due in August. That technically wouldn't be a default. It would just mean a cut of certain payments.
Is that right?
GALEN: Yes, that is more correct. And we have fought that fight, so let's let that one go.
But I think Senator Kerry is way, way, way off base in trying to determine the sole arbiter of what is a legitimate discussion point and what's not. And if he's going to be secretary of state, or whatever his next role is going to be, I think he needs to be a little more cautious about trying to wreck the First Amendment rights of a significant proportion of the American voting public.
BRAZILE: Well, Rich, you might take exception with what he said, but the truth is, is that many of those Tea Party leaders and Michele Bachmann, they did advocate for the country to default on its obligation to pay bills. Never before in the history of our country --
GALEN: And do you think it shouldn't be covered, Donna? I mean, I'm not saying I agree with them. I'm just saying that they have a legitimate point to make the case.
BRAZILE: No. No. Look, you compare the Tea Party -- I have never, ever advocated that the Tea Party should not have a seat at the table.
All I am saying is that when you are at the table, we should be able to find ways to come together to compromise. But to hold the economy hostage -- and yes, many of them -- I mean, there is a list of them that went on record saying default. They didn't believe that this was the "Armageddon." And you have seen what has happened over the last couple of days. But at this point --
GALEN: Somebody forgot to tell turmoil we need the deal.
BRAZILE: You know why? Because the deal was not a balanced approach to fixing our long-term problems. We kicked the can down the road. We still have the fiscal year 2012 budget to get approved by September 30th. So let's see if the Tea Party can come to the table like all other sensible Americans would. Put what they want on the table, but learn how to compromise.
GALEN: Donna, when Budget Chairman Paul Ryan put a plan -- not "the" plan, not written in stone, but a plan on the table to begin doing exactly what you are suggesting, the Democratic National Committee couldn't have run an ad out fast enough saying that Republicans want to steal Medicare from senior citizens. So, if you want to get the balance, let's be balanced.
BRAZILE: Do you remember the last election and what the Republicans said about -- Rich, did you remember the 2010 election and what the Republicans said about Democrats and Medicare?
So, look, when it comes to running ads, we both understand that that's the political game. That's not the issue here.
The issue is the full faith and credit of the United States and putting the economy on life support while the Tea Party and the others figured out if they could extract more so-called cuts. I mean, come point. At some point you've got to know how hold and know how to fold.
BLITZER: Hold your thought for a second.
GALEN: Nevertheless, you still get to have your say under the First Amendment, especially when you have 84 members.
BRAZILE: Thank the Lord. And if it's 44 members of the Black Caucus, 31 of the Hispanic, you know what? The truth is, all those lawmakers are hired to represent their constituents. And I have no problem with that.
BLITZER: All right. In our recent CNN/ORC poll, guys, we asked, "How is Congress handling its job?"
Fourteen percent said they approve of the job Congress is doing. Eighty-four percent disapprove of the job Congress is doing.
Donna, first to you, who suffers more as a result of only 14 percent liking what Congress is doing going into the next election, Democrats or Republicans?
BRAZILE: Well, Wolf, if you look at it, the Republicans have taken a huge beating for their performance, the president has taken a beating, the Democrats are taking a beating. So Congress is as popular as a root canal right now.
I think it's important that members of Congress return from their long vacation and decide that, you know what? We have got to get some things done. I understand everybody is preoccupied with the 2012 election, but the American people, they are preoccupied with jobs and economic growth.
BLITZER: All right.
GALEN: You know, there is a very famous song by Shel Silverstein sung by the Kingston Trio way back when, and it ends with, "And I don't like anybody very much." And I think that's what the American people are saying.
Everybody needs to do I think what Donna was suggesting. You can sit at the table, but you have to sit at the table and be constructive, not sit at the table and try to fling peas at each other.
BLITZER: I want to meet those 14 percent who approve of the job that Congress is doing.
Guys, thanks very much for coming in.
Another volatile day for the markets and huge fears of another recession. We are looking at the danger signs when and if the economy takes a big turn for the worse.
And voters try to recall a political titan who pushed for the toughest immigration laws ever seen in the country.