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Do Rich Pay Less Tax Than Middle Class?; An Interview with Bill Clinton; Time for the President to Panic?; The End of Don't Ask, Don't Tell; Stonewalling in ATF Gun Probe?

Aired September 24, 2011 - 18:00   ET


WOLF BLITZER, ANCHOR, THE SITUATION ROOM: A predecessor has some advice for President Obama, don't panic. This hour, my interview with former President Bill Clinton. We'll talk jobs, the White House battle with Republicans, and much more.

Also, serious allegations against the Justice Department, accused by one lawmaker of obstructing the probe into the probe into a controversial operation tht put thousands of illegal guns into the hands of the Mexican drug cartels.

Plus, the end of Don't Ask, Don't Tell. With the ban on gays serving openly in the U.S. military now lifted, the U.S. military is facing some major questions.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

The message this week, jobs. The message next week, jobs. President Obama has been relentlessly pushing his jobs bill in Washington and on the road. Sometimes on his top rival's home turf. Our White House Correspond Brianna Keilar is following all the developments for us.

Is the president taking a more aggressive tone right now?

BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: Wolf, there's no doubt about it. Remember during the bruising debt ceiling battle where he was negotiating with top Republicans and Democrats, the president positioned himself very much as the grown-up in the room, the reasonable one, something that the president's advisors thought would help him appeal to the independent voters that he needs if he's going to win reelection next year.

We're seeing a very different tact now. A very aggressive tact, especially after the president saw dismal approval ratings following that bruising debt ceiling battle. We've seen the president taking his message to the home turf, as you mentioned, of his rivals, and calling them out by name. We saw that this past week when he went to the Brent Spence Bridge which is the bridge spanning the home states of House Speaker John Boehner and Senate Minority Leader Mitch McConnell. Here's what he said.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The bridge behind us just happens to connect the state that's home to the speaker of the House.


OBAMA: With the home state of the Republican leader in the Senate.


OBAMA: Now that's just a coincidence. It's purely accidental that that happened.


OBAMA But part of the reason I came here is because yeah, Mr. Boehner and Mr. McConnell, they're the two most powerful Republicans in government. They can either kill this jobs bill or they can help pass this jobs bill.


KEILAR: And, remember, the president's first visit following the unveiling of his jobs plan a couple weeks ago was to Richmond, Virginia, in the home district of Eric Cantor, the number two House Republican. Wolf, this is a White House, this is President Obama being much more aggressive, much more trying to be on the offense than we saw this summer.

BLITZER: That's what the base in the Democratic Party certainly wants to see, Brianna.

So what is he planning on doing next week to continue this push?

KEILAR: A couple things we know he's doing to promote his jobs plan. One will be a Mountain View, California, Silicon Valley, there in northern California. He'll be participating in an online town hall through Linkedin, the social networking job site. He'll also reportedly, when he's in Denver, Colorado, be visiting a school.

A couple of provisions in the jobs plan, one that would give money to states so they could hire teachers who have been laid off, retain teachers who could be laid off, and also money to renovate schools so the construction workers could be put back to work. A couple of events there. He'll be pushing certainly his jobs plan.

But this Western swing that he's going to be on starting in Seattle, Wolf, he'll be not just in Northern California but also San Diego, LA, finishing up there in Denver. A lot of this is going to be fund- raising. He's got a number of DNC events that he'll be going to.

We've seen so far up until now he's only taken the jobs plan message to states that are swing states that he won in 2008 and he is trying to hold on next year. Certainly Colorado is one of those states. But in Seattle, and certainly in California, he's looking to shore up the donor support as his campaign aims to best that of $75 million haul that it brought in last election.

BLITZER: I'm sure he's going to be doing some political fund-raising, while he is out in those rich, relatively rich areas. Brianna, thank you very much.

President Obama's push to turn the economy around amidst mounting Republicans backlash in Washington, is causing some serious concern for a number of Democrats including the former president, Bill Clinton.


BLITZER: Mr. President, good to see you at the Clinton Global Initiative. Another year, it's really moving very quickly. And it's jobs, jobs, jobs right now. This is an enormous crisis. And potentially -- potentially it could get a whole lot worse.

BILL CLINTON, FMR. PRESIDENT OF THE UNITED STATES: It could. And it could get better. And, you know, what we're trying to do here is just to come up with concrete things that can be done not just in the United States, but elsewhere, to put Americans back to work.

And when we met in Chicago, in June and July, we talked about how to put America back to work. And today we had a good manifestation of that with the announcement by ALF-CIO and the American Federation of Teachers, if they were releasing a lot more money to try to put their members, and other people, construction workers back to work retrofitting buildings. They're going to create an enormous number of jobs doing this.

BLITZER: You know there is political gridlock in Washington. The president comes up with these initiatives, these plans, as he's done this week. But you know it's not going to go anywhere as far as the Republican majority in the House of Representatives is concerned.

CLINTON: Well, I think it's sad. But the people -- they were elected by the American people, essentially on the promise of doing nothing, except to try to, you know, give us a lot less government. And then in the Senate, I think they'll block anything because they're afraid it will work.

BLITZER: You need 60 votes.

CLINTON: Yes. Senator McConnell says his main goal in life is to defeat the president for re-election. It is what it is. It this president had to propose these things and ultimately the American people are going to have to decide what kind of country they want, and vote for it. They voted now for -- in 2006 and 2008, they voted for one kind of country to take a move away from the policies of the previous several years.

Then in 2010, they voted to take a U-turn. I don't think they really think like that. They think we need more of this and less of that. They voted for quite a radical departure. And, so, you know, it's -- it's interesting to me to see the voters sit around and condemn the politicians that they elected who are doing what they promised to do during the elections.

BLITZER: My sense is -- and you and I, we have different jobs -- but '95 and '96, when the government was shut down, as bitter as the acrimony was in Washington then-and I covered it. I was the White House correspondent covering your administration. I think it's worse now. You tell me what you think.

CLINTON: It could be. I don't know. You would know better than me. I'm not there all the time. I think basically -- but the American people, all I'm saying is they keep giving Congress low ratings and the White House low ratings. They need to take a little ownership here. Every one of these people got in power because they were voted for.

BLITZER: They were democratically elected.

CLINTON: Yes. And none of them - there's now determined effort to restrict the franchise and kind of thwart the meaning of democratic elections but all these people were. And you know -- you should pay attention to what people say when they run for office. They pretty much try to do what they say they're going to do. I will give it to the Tea Party Republicans; they, if you have paid attention, they're doing what they said they were going to do. And the voters now seem to be upset by it.

BLITZER: Did you see that debate I moderated, in Tampa?

CLINTON: I did. I saw some of it, yeah.

BLITZER: What did you think of those guys, up there on the stage?

CLINTON: You know, there's a range of what I think. The more moderate ones as you might imagine are the ones that I think will be better presidents. I was like a lot of people, quite disturbed at there were those who were cheering when you asked if a man who needed life saving care but didn't have health insurance should be allowed to die. And there seemed to be cheering. But it's all political theater now.

Look at the difference in what we're doing here and what happens in the campaign. I sympathize with you. You got to run all these news programs. It looks to me like what's good politics in the modern world, at least when times are tough, is conflict. And it also makes for edgier news coverage and-yet in the real world, where jobs are created, what works is cooperation. So it's not the government versus the private sector. It's what they can do together to create prosperity.

If you look at -- let's take San Diego, center of biotechnology in America. More Nobel prize winning scientists than any other American City. No longer primarily a Navy city. It's a biotech city. The Silicon Valley is back. Orlando has 100 computer simulation companies. Pittsburgh is trying to go from being the city of steel to the city of nano technology. Cleveland is using the Cleveland Clinic to try to retrofit, if will you, not buildings, the workforce.

So there are these centers of prosperity in America. Every one of them works because people cooperate, not because there's conflict. But conflict is good politics. That's how you get elected. BLITZER: You said some of the republican candidates are more moderate than the others. Let's talk about that for a second. Who do you like and who you are concerned about? Not from the political standpoint, but from the standpoint of America's future.

CLINTON: Well, it appears that Governor Huntsman and Governor Romney at least have not come out and just flat out deny climate change. It appears that -- I mean governor Huntsman said he supported the compromise to raise the debt ceiling because America couldn't afford the economic consequences of debt default. That used to be the position of every responsible American. That now passes for a moderate to liberal position in the Republican party. That's the only candidate for president who supported, you know, not defaulting on our debt.

So, you know, I don't have anything against the others. I admire a lot of things about the other candidates. I think that there is no evidence anywhere in the world of a successful country that has such a bitter anti-government philosophy.

BLITZER: Like Rick Perry has?

CLINTON: Yeah. He's said, get America, get Washington as far away as possible. It's interesting because an enormous percentage of the jobs created in Texas since the financial meltdown, not before, before they really were doing great. But he's done pretty well with government funding. Closing his budget gaps, creating public jobs. Nonetheless he's anti-government; this whole anti-government thing. And it sounds so good. But there's not an example of a successful country. You look around the world, the countries that are growing faster than we are, have lower unemployment rates than we do, have, you know, less income and equality than we do. Without exception they have a good government and a good economy. They don't run against the government. The use-the government and the economy work together. So, what's good politics for them is -- there's just not any example in the world of the country working better, doing what they advocate. Not a single one.

BLITZER: What I hear you saying is you'd be happier if Romney or Huntsman got the nomination than Rick Perry.

CLINTON: It's not up to me to pick. That's -- they'll both lose if anybody thinks I've endorsed them. I'm just saying that I appreciate the fact that they're trying to navigate the landscape that bears almost no relationship to what's produced successful economies in the world. And there are lots of countries that are now doing better than we are in some areas because of the very ideas, that apparently you have to support to get the nomination.

And it bothers me because I think we need a Republican-Democratic debate and discussion about how best to change the way we produce and consume energy. And how best to revive the economy. And how best to incorporate the need for cultural norms like the value of working family as well as government programs to help get through this tough time. And we can't get it because you're either for or against the government. And if you're anti-government guy, you have to be saying every tax is bad, every regulation is bad, every program is bad. First, it's factually not true and secondly it is really distorting our politics.


BLITZER: We'll have a lot more with the former president of the United States. That is coming up later this hour.

Also, a question from a gay soldier booed a Republican presidential debate. The latest a series of controversial audience reactions. Could they end up hurting the Republican Party in the general election?

Who really pays more taxes? Would it be the middle class or the super rich? We're checking the facts.


BLITZER: In my interview with former President Bill Clinton, he suggested Republican presidential candidate Rick Perry as being hypocritical for railing against the federal government while at the same time gladly using federal resources to help his home state of Texas.

Let's talk about that and a lot more with our CNN chief political correspondent and anchor of the show "State of the Union", which airs Sunday mornings, Candy Crowley, and our Senior Political Analyst Ron Brownstein.

Guys, thank you very much for coming in.

What about that point that the former president, Candy, is making against Rick Perry? He wants federal money, but he still continues to rail against Washington.

CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: I think the standard answer that you'll probably get, if Perry should answer it, is what most Republicans say and what most Republicans governors said when the stimulus money was being handed out in the first year of the Obama administration that is, it's there, and I'm going to take it. Yes, there's hypocrisy there. But hypocrisy and politics are those things that go hand in hand. I'm not sure it's a game changer for Perry at this point, who at the moment is leading in the Republican polls. That may not last long.

BLITZER: Whether you say -- I want to go to Ron in a second -- that may not last long, you're referring to his latest performance in that Republican debate this week? He is being criticized pretty severely.

CROWLEY: He scared a lot of Republicans. There were just moments there, when he was lost in the moment. I'm sure you're e-mails as well as mine from various Republican types, going, oh, my goodness, he just was not strong. Didn't seem all that strong on the facts and didn't even seem all that strong on the politics. One of the things he got lost in was just a fairly standard slam against Romney flip- flopping. He couldn't get it out. There are a lot of Republicans out there today thinking uh-oh.

BLITZER: People don't realize, Ron, that he's run for office many times. He's never lost an election. But he really hasn't done a whole lot of debating other candidates.

RON BROWNSTEIN, CNN SR. POLITICAL ANALYST: And, in fact, he's also mostly ascended in a state that has really tilted to becoming a one- party state. Early in his career he did have to win some tough elections in 1990 and 1998. But since he's been governor, Wolf, Republicans have thoroughly dominated the state of Texas. No Democrat has won a statewide election since 1994.

He's been operating with an enormous tailwind, and I think some of the things you see in Perry, some of the strengths, and especially some of the weaknesses, are really reflection of someone who has operated in a one-party state without a meaningful opposition. The kind of tough questioning that he faced, even from his Republican opponents yesterday ,is not something that has been routine for him, certainly at the highest level of his career as governor over the past decade.

BLITZER: At this point, you're not ready to write him off, by any means, are you, Ron?

BROWNSTEIN: No. No, not at all.

BLITZER: He's still got time.

BROWNSTEIN: Look, as far as the obvious, Rick Perry is probably closer in tune ideologically to the median Republican voter at this point than Mitt Romney. Although does he does have some glaring ideological vulnerabilities. I was struck at that debate, like your debate in Tampa, that Perry supported in-state tuition for illegal immigrants was more the center of attention than Romney's support for the individual mandate on health insurance. That doesn't mean that Romney solved this problem on health insurance. It just means that's where the focus is now. I think Perry does have probably a clearer ideological connection with a majority of the Republican electorate.

But also, clearly, I think Romney at this point is a much smoother, confident, and assured performer. Even with some of the ideological hurdles, you can see the trajectory seems to be moving back in his direction after Perry rocketed to the top.

BLITZER: This Republican debate, Ron, this week was the third and almost as many weeks. There seems to be at every one of the debates a moment where the audience plays a significant role. You remember that debate where they spoke about the executions in Texas. The audience was cheering. At the debate that I moderated in Tampa when I asked Ron Paul about somebody who was uninsured, what do you do if they get into a catastrophic injury, or whatever? Let him die, I asked? There was some cheering in the audience. Yeah, let him die. In this debate, there was this question from a U.S. soldier, who is gay.


UNIDENTIFIED MALE: In 2010 when deployed to Iraq, I had to lie about who I was because I'm a gay soldier. I didn't want to lose my job. My question is under one of your presidencies, do you intend to circumvent the progress that's been made for gay and lesbian soldiers in the military?


UNIDENTIFIED MALE: Yeah. I would say any type of sexual activity has absolutely no place in the military.


BLITZER: All right. You heard some of the booing going on, Ron. What, if any, impact will this have on the image of the Republican Party in a general election?

BROWNSTEIN: Look, an election involving an incumbent president is first and foremost a referendum on the performance of that president. Nothing is going to change that. But the booing that you heard, and like the comments at your debate, is a reflection of the enormous centrifugal force that is operating now in the Republican electorate. Over three quarters of Republican -- of self identified Republicans now call themselves conservatives. As Candy noted, the energy in the party is with the Tea Party voters. Very militantly anti-government voters who really surged into the party in 2010. The electorate is getting older, more blue collar, more conservative.

I think you see this had in a diminished flexibility for the candidates to take position that's might reach out to the middle, while alienating some of that base. The fact that they're so harshly pummeling Perry for support of in-state tuition for illegal immigrants, is an indication of how difficult they will find it in some areas to reach out to Hispanics. The fact that Perry and Romney are battering each other over who is less committed to Social Security is something, again, that Democrats probably watch with some anticipation.

Again, none of that doesn't change the fundamental reality this is primarily a referendum on President Obama's performance. You can see in those kind of audience reactions the pressures that are moving these Republican candidates pretty much to the right, although Romney and Perry, both in some cases are trying to resist that. That is the overall current.

BLITZER: Candy, you know, the notion that a soldier served in Iraq being booed at one these debates by some of the Republicans in the audience, you know, who would have thought we would ever see that?

CROWLEY: Sure. And we should point out again that generally we're talking about a very few people in the audiences. People do things in crowds that they might not do individually. Nonetheless, in answer to your question, it doesn't help. You already have Republicans out there who have sort of publicly pushed back Perry saying we can't be looking like the party that wants to get rid of Social Security. We want to be the party that saves Social Security. So there's already concern among traditional Republicans that the image of the Republican Party, which has always fought this kind of harsh imagery, that the image is taking a battering. And this is more drips on top of it.

These sort of isolated incidents inside the debates that are going on. And I think it does hurt them around the margins even as sort of mainstream Republicans are saying hold on, hold on, we don't -- you know, we don't want to get rid of Social Security. We do have a heart. You're hearing Mitt Romney and Perry talk about who has a heart and who doesn't have a heart. And sometimes when you listen to the Democrats, that's exactly where they go. What do the Democrats say when they criticize Republicans? They don't like old people. They want to get rid of Social Security. They want to ship everybody out of the country that's an illegal alien. It plays into it. It plays into an existing problem for Republicans. I think it hurts them.

BLITZER: Candy, thank you. Ron Brownstein, thank you, as well.

Fears of an economic disaster sweeping parts of Europe right now. It could spill over to the United States? The former President Bill Clinton says he's concerned. We'll have more of my interview Bill Clinton. That's coming up.

Also, is President Obama right to suggest the current tax system isn't fair to all Americans? We're fact checking his own debt plan.


BLITZER: Is President Obama right to suggest that the current tax system is not fair to all Republicans? Our Lisa Sylvester is drilling down on part of the president's plan, that part being called the Buffet Rule.

Lisa, what's going on over there?

LISA SYLVESTER, CNN CORRESPONDENT: Hi, Wolf. Well, Warren Buffett has said that mega wealthy pay a lower rate of taxes than the people working for them. And that's something that President Obama has picked up on saying it's a basic issue of fairness.


SYLVESTER (voice over): Call it the Warren Buffett rule. Warren Buffett saying his secretary shouldn't pay more in taxes than he does. But is it true? Do millionaires and billionaires in this country pay a lower tax rates than middle class families? Well, it depends. Let's say you have Sue. She makes a nice salary of $1 million, putting her in the 35 percent tax bracket. Jill makes $50,000 a year, or at the 25 percent tax bracket. Between those two, Sue is making more and paying more in taxes. But now let's add in Rita. She's done very well for herself and doesn't actually have a regular job. She lives off her investments and makes $1 million. She actually pays a lower tax rate than both Sue and Jill, of 15 percent on dividends and capital gains. That's what President Obama wants to change. BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It is wrong in the United States of America a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling $50 million.

SYLVESTER: The reality is about 46 percent of American households pay no federal income tax in 2011. In part because of home mortgage deductions, the child tax credit, education credits and credits for the working poor.

The true burden of who pays the highest share of taxes in the United States is really the upper middle class and moderately wealthy families. According to IRS data people making between $100,000 and $200,000 a year pay 25 percent of the share of income taxes.

People making between 200,000 and $500,000 a year pay about 20 percent of the total. That is almost half of the taxes combined, but that's not to say the rich get of scot free.

SCOTT HODGE, TAX FOUNDATION: There are roughly 235,000 millionaires in America and they paid $177 billion in income taxes in 2009. That's an average tax payment of over $750,000 each.

SYLVESTER: How much money would the president's tax proposal on millionaires raise for the government and what would it look like? The Obama administration is leaving those questions for Congress.

TIMOTHY GEITHNER, TREASURY SECRETARY: We're not going to give the Congress a detailed proposal for how to meet that specific principle now because there are lots of ways to do that. But we think it should be the basic foundation of tax reform and we're going to fight to make sure that's part of what congress considers and delivers.


SYLVESTER: Conservatives and Republicans, they are arguing that the reason the capital gains tax rate is 15 percent is because it's supposed to encourage investment and savings. And the last thing you want to do is create a disincentive.

The other argument that you're going to be hearing from Republicans is that, yes, there is a 15 percent rate on capital gains. But for wealthy individuals who have their own corporations, essentially Warren Buffetts of the world, their company's income has been taxed at a 35 percent rate.

So then on top of that there's the 15 percent capital gains. Of course, Democrats have a very different perspective on all of this and that is where the fault line is. Wolf --

WOLF BLITZER, CNN ANCHOR: Going to be a huge, huge debate over tax reform in the years to come. It doesn't look like it's going to happen any time soon. All right, thanks very much for that.

James Carville says it's time for President Obama to panic. His former boss Bill Clinton says Carville is wrong. We'll have more of my interview with the former president of the United States much that's coming up next.


BLITZER: It's been a very busy week here in New York. President Obama was here for the United Nations General Assembly. At the same time, former President Bill Clinton was presiding over his Clinton Global Initiative.

I sat down with him for a wide-ranging interview and I asked him about a controversial remark by one of his former top campaign advisors.


BLITZER: You know, James Carville, a man you know well, our CNN contributor, Democratic strategist, worked with you for a long time. He says it's time for the president and the White House to panic, to fire people, to indict people. He's just seeing what is happening on special election here in New York City. You think Carville is right?

BILL CLINTON, FORMER U.S. PRESIDENT: No. I think that, first, it's never a good thing for the president to panic. I think they need to focus as much as they can on like what we did now when we just announced at the AFL-CIO and the American Federation of Teachers and their pension funds and their allies are doing what the banking system should be doing.

They're out there -- they are funding major building retrofits. They're going to put thousands and thousands of people to work and that's what I think we should do.

BLITZER: If you're talking about Pittsburgh and San Diego, Orlando. And what you're doing here, it seems to be the exception. These are isolated incidents that are positive, but the rest is --

CLINTON: Exactly. So what should we be doing? What I'm trying to do is figure out how you can get more of the centers of prosperity? How can you take things that are working like this on shoring and not off shoring jobs and jobs from Missouri? How can we do this in other places?

I spent an enormous amount of time trying to figure out how to get this to work. One thing I'm certain of a Washington food fight won't create a job. And I think -- I personally believe the president did the right thing by offering the Republicans a plan that included things they had already supported.

BLITZER: They're not going to support tax increases even on --

CLINTON: They don't support tax decreases. Look, the so-called "Buffet tax" is really what you might call an alternative minimum tax on millionaires.

BLITZER: Do you think that's a good idea?

CLINTON: Well, I would support it and I would pay it probably although I probably meet the alternative minimum already. But the point I want to make is it's a minor distraction. And none of it would be done until the big long term debt reduction plan starts coming in.

I'm talking about right now, right now he's trying to lower payroll taxes. I think a very intelligently designed plan that even Mark Zandy, one of Senator McCain's advisors in 2008, which is now a professional economic analyst says if the Obama plan passed, it would reduce unemployment by producing a 1.3 percent to 2 percent growth in GDP by producing another one to two million jobs.

This is a well-conceived deal. I think putting out $50 billion in already existing infrastructure channels, that's not a bad thing to do. We have plenty of work to do. It's OK. They can do this without any tax increases. This is for right now.

BLITZER: Did the president miss an opportunity in entitlement reform this week? Because he really didn't touch Social Security at all and the changes, the cuts in Medicare and Medicaid in a while significant still in a big picture relatively modest not raising the eligibility age from 65 to 67, for example for Medicare. Was there an opportunity he should have gone and really come up with a grandiose plan?

CLINTON: Well, first of all, my view of what a grandiose plan and yours are might be different. I think what he wanted to do this week was to fill in the blanks on the $3 trillion he was talking about with the Congress.

Because if you remember, the Republicans in Congress were saying well, he said he's for $3 trillion in, but what are they fill that, OK. So I think he did that. Now here's what I think about your specific question.

I kind of like what the Simpson-Bowles Commission did on social security. Because they actually saved a couple hundred billions over a decade, but they did it in a way that actually gave more money to low-income Social Security recipients to surviving spouses and the disabled.

BLITZER: But the president never accepted that Simpson-Bowles Commission.

CLINTON: I understand that.

BLITZER: The Republicans, there were Republicans like Paul Ryan who rejected it, Democrats rejected it.

CLINTON: Ryan rejected it because it was against their theology. Because it had both new revenues and spending -- but all I can ask the American people to do is to, you know, inject some reality into this.

The theology of the modern Republican Party, it's an ideology, is that every tax is bad especially if an upper income person has to pay it. And everybody even the moderates, David Brooks has a column today, you know, acting like the president wants to restore the tax rates that existed when I was president. We have a record number of millionaires and billionaires. Everybody was doing fine and then we got five tax cuts and were the only beneficiaries in the economy the last decade. Now this is not class warfare to say we're going to have to pitch in here. Everybody has to give a little.

Those of us that gained the most and paid the least in the previous decade should view our report. But that is -- let's talk about the other thing, the Medicare. Here's the problem, for example, with raising retirement age on Medicare difference with Social Security.

BLITZER: Social Security has already been raised.

CLINTON: Yes, and it can be raised again over time, you know, like the Simpson-Bowles Commission recommended. But if you raise the retirement age on Medicare, the eligibility age for Medicare, you will save money for the budget.

But you won't save any money for the health care system. You'll cost the health care system more. Since 1970, annual cost of Medicare after inflation have gone up 400 percent. Since 1970, annual cost of private for private health insurance after inflation had gone up 700 percent.

So what the president has to do here is to make sure that if that whatever he does to save money on Medicare also helps the private insurance system because we're spending about $850 billion a year if we had any other country's health insurance system.

That hurts our economy. It keeps wages down. It keeps investment for business down. I think he may get better results out of this Medicare than you think.

BLITZER: Here's what I'm concerned about. I may be more concerned about the economy than you are. It could affect the Clinton Global Initiative, all the important good work you're trying to do.


BLITZER: Europe, it's a disaster what's happening. Not just Greece but other countries. It's spilling over. It could cross the pond and come over here as well and affect whatever you're trying to do through CGI.

CLINTON: Well, let's look at that. It could affect America's economic recovery.

BLITZER: You're not as worried about that as I am.

CLINTON: Yes, very. I think it's important that your viewers understand why it could affect America's economic recovery. Let's give them a minimum on it. The euro is formed, the European currency unit.

And if you join, you have to agree to follow certain rules of financial responsibility. Greece joins. They're among the -- their incomes are lower and budget deficits are higher than the wealthier countries, Germany, Netherlands, all that.

So when the economy is rising, it's fine. Everybody does well. But when the economy is falling, it puts countries on the low end of this common currency in a terrible bind. Why could that affect us? A lot of American banks have invested in European banks, which in turn have bought Greek securities.

BLITZER: I'm concerned about that.

CLINTON: Yes, you should be.


BLITZER: The former president of the United States, Bill Clinton speaking with me in New York this past week at his Clinton Global Initiative Conference.

A congressman accuses the Justice Department of stone walling his investigation into the government's controversial "Fast and Furious" operation. Details, that's next.


BLITZER: History was made this week for the nation's arms forces with the end of "Don't Ask, Don't Tell." That's a policy many in the U.S. military learned to loathe.

For the first time gay servicemen and women can admit their sexual orientation without fear of persecution. CNN Pentagon correspondent Chris Lawrence has more.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Yes, Wolf, "Don't Ask, Don't Tell" may be a thing of the past, but fully integrating gays and lesbians into the military that raises some serious problems that have not been resolved.


LAWRENCE (voice-over): "Don't Ask, Don't Tell" is dead. And just like that, it's okay for some troops to stop hiding who they are.

SARAH PEZZAT, U.S. MARINE CORPS: I'm 31 years old. I'm a woman. I'm United States Marine and I'm a lesbian. And prior to today, if I had said that, I could expect to be discharged from the military.

LAWRENCE: The Pentagon has trained 97 percent of the troops on the new policy and expects 100 percent compliance.

LEON PANETTA, DEFENSE SECRETARY: With regards to, you know, the possibility of harassment, look, we have a zero tolerance.

LAWRENCE: Jeremy Johnson's re-enlistment paperwork was reprocessed today, but he is one of the fortunate few discharged under "Don't Ask, Don't Tell."

JEREMY JOHNSON, RE-ENLISTING IN U.S. NAVY: I'll be honest. I've talked to people who wanted to go back in and they started making phone calls to recruiters and found out that there are a set of circumstances just wouldn't allow it and there's letdown. I mean, you can hear it in the voices.

LAWRENCE: Some are to old now or their specialties are no longer needed. The Pentagon isn't giving them any waivers so they're in the same boat as any other former service member. Openings are hard to come by given the bad economy. More troops are staying in, even as the military downsizes due to the budget crunch.

PANETTA: Defense is taking, you know, more than its share of the cuts. We're doing in excess of $450 billion.

LAWRENCE: Like all troops, gays and lesbians will be able to designate anyone as a life insurance beneficiary or caregiver. But the military does not recognize gay marriage because the defense of marriage act is federal law.

ADMIRAL MIKE MULLEN, JOINT CHIEFS COMMITTEE: We're going to follow that law as long as it exists. Certainly we're aware there are benefits, which do accrue to this change very specifically and directly.


LAWRENCE: So same sex partners are not eligible for the service member's pension or dependent health care benefits. And unlike other federal agencies, the military makes marriage an incentive. Married members get paid more and they have access to better housing. Wolf --

BLITZER: Chris Lawrence, thank you.

Mexican cartels armed with illegal American guns as a result of a secret ATF operation. Now, there's controversy in the investigation.


BLITZER: Mexican cartels armed with assault-type weapons illegally sold as part of an ATF operation and now the man leading a congressional investigation has fresh criticism of the U.S. Justice Department. Our Brian Todd spoke with him. Brian --

BRIAN TODD, CNN CORRESPONDENT: Wolf, Congressman Darrell Issa is using words like stonewalling and obstruction to describe what he's getting from the Justice Department.

Issa and his investigators say several hundred of those weapons are still out there unaccounted for. They fear the casualty list could climb and they're pressing hard for answers from Justice.


TODD (voice-over): From one of the lead congressional investigators looking into the ATF's "Fast and Furious" program, serious concerns about the Justice Department's inspector general. Republican Congressman Darrell Issa says this about the office tasked with the internal probe into the operation that allowed thousands of weapons purchased illegally to be carried into Mexico.

(on camera): How would you describe the cooperation from the Justice Department right now?

REPRESENTATIVE DARRELL ISSA (R), OVERSIGHT AND GOVERNMENT REFORM CHAIRMAN: I'd describe it as stonewalling. In this case, the IG has compromised sensitive material that we've gained through discovery by making sure it got to one of the objects of our investigation.

TODD (voice-over): Issa, head of the House Oversight and Government Reform Committee has sent a letter to Cynthia Snader, Acting Inspector General at Justice. Issa wants to know why her office prematurely gave audiotapes that were critical to the investigation over to a person a target of the probe someone who Issa says worked at the U.S. attorney's office in Arizona.

ISSA: Literally giving somebody their own recording so they would be able to prepare before they ever testify with us.

TODD: In his letter, Issa says the disclosure undermines our ability to assess the candor of witnesses in our investigation and thus obstructs it. Contacted by CNN, the Justice inspector general's office would only say it's received Issa's letter and is reviewing it.

Issa says the inspector general has indicated to him that she turned the tapes over to assist that person in the discovery process. "Fast and Furious" was an ATF program designed to take down big weapons trafficking operations.

But ATF whistleblowers say in the process they were forced to watch as up to 2,000 guns were allowed to be taken into Mexico. Some wound up in the hands of drug cartels and two weapons linked to the program were found near the scene where border patrol agent Brian Terry was murdered last December. ATF personnel based in Mexico have testified before Issa's committee.

CARLOS CANINO, ACTING ATF ATTACHE TO MEXICO: ATF agents were actually following known gun traffickers away and letting them go. That is insane.


TODD: ATF officials based in Mexico during the "Fast and Furious" program last year have said they were never told about it at the time.

And a Mexican official familiar with the case tells us the Mexican attorney general's office says it was not informed of the program while it was going on. We could get no response from the Justice Department to that. Wolf --

BLITZER: Brian Todd, thanks very much. That's all the time we have. Thanks very much for watching. I'm Wolf Blitzer. Join us weekdays in THE SITUATION ROOM from 5:0 to 7:00 p.m. Eastern, every Saturday at 6:00 p.m. Eastern right here on CNN, and at this time every weekend on CNN International. The news continues next on CNN.