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THE SITUATION ROOM
Mitt Romney Releases Tax Returns; President Obama to Deliver State of the Union; Romney Speaks To Supporters; Boehner: Obama's Politics "Almost Un-American"; Gingrich's Quiet Debate; 16th Body Recovered In Cruise Disaster; Gay Marriage A Step Closer In Washington State
Aired January 24, 2012 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: Happening now: Mitt Romney takes the wraps off his tax returns. He made tens of millions of dollars while paying a lower rate than many middle-class Americans, but Romney is not being defensive at all. He's on the attack against Newt Gingrich and President Barack Obama.
The president is putting on the final touches on tonight's State of the Union address -- why his blueprint for building up the U.S. economy is also a crucial reelection sales pitch.
And Newt Gingrich's stunning surge has made him a lightning rod for a new wave a criticism. Can we keep up his momentum in Florida?
I'm Wolf Blitzer. You're in THE SITUATION ROOM.
Just a few hours from now, the president of the United States goes before Congress and the American people to report on how the nation is doing. His State of the Union address will certain be an important glimpse of his reelection campaign.
President Obama will focus on jobs, income equality, taxes and a whole lot more. That comes as Republican candidate Mitt Romney reveals his own multimillion-dollar income and his very low tax rate. Amid his newly aggressive campaign against Newt Gingrich, Romney is launching a preemptive strike on the president's speech at the same time.
CNN's Jim Acosta is covering the campaign for us. He's in Florida.
Romney, he did well in that debate last night. Everyone seems to agree. Is he back on track?
JIM ACOSTA, CNN CORRESPONDENT: Wolf, we will find out. Right now, he's campaigning in front of the a foreclosed home. It's part of his prebuttal to the president's State of the Union speech tonight.
You could say Mitt Romney is hitting the reset button today. He's attacking the president and attacking his rivals. It's an approach that has worked for his campaign in the past, but Mitt Romney is finding out that hitting the reset button is not exactly hitting the easy button. (BEGIN VIDEOTAPE)
ACOSTA (voice-over): With no campaign music and just a short walk to the teleprompters, Mitt Romney played the role of candidate in chief, delivering a blistering prebuttal to the president's State of the Union address.
MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: High unemployment, record home foreclosures, debt that's too high, opportunities too few. This is the real state of our union.
ACOSTA: It was also an attempt to escape his campaign's state of disarray. After weeks of mounting pressure, Romney released his 2010 and estimated 2011 tax returns. They show over the last two years he made nearly $43 million, almost entirely on investment income and paid an effective tax rate of 14 percent, lower than what many middle-class Americans pay.
The disclosure was welcomed at the White House, which announced the secretary to billionaire investor Warren Buffett, Debbie Bosanek, would sit in the first lady's box at the State of the Union. It's a reminder of Buffett's well-known beef, that he pays a smaller percentage of his income in taxes than his secretary. But team Romney was ready for that one.
ROMNEY: The unemployed don't get tickets to sit next to the first lady.
ACOSTA: As Romney focused on the president, his advisers were throwing punches at Newt Gingrich, demanding that the former speaker reveal more than just a year's worth of documents from his days advising mortgage lender Freddie Mac.
STUART STEVENS, ROMNEY ADVISER: We have released more tax returns than he has released, and his question here is what is his relationship with Freddie Mac all during those years people in Florida were getting crunched by the housing crisis? What advice was he giving Freddie Mac?
ACOSTA: But Gingrich has already moved on his next line of attack, tying Romney to Florida's unpopular former Governor Charlie Crist, who left the Republican Party to run as an independent for the Senate against rising GOP star Marco Rubio. Some of Crist's former staffers now work for Romney.
Gingrich joked that explained Romney's past positions on social issues like abortion and gay rights.
NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: Now, that makes him a moderate in Massachusetts, but it makes him pretty liberal in a Republican primary, which probably explains why he hired Charlie Crist' staff.
ACOSTA: Team Romney was too busy resurrecting this image of Gingrich as a cry baby over his threat to skip upcoming debates if the audiences are asked to keep quiet, as the crowd was told at Monday's debate. Romney's advisers say Gingrich sounds like he's running for pouter-in-chief.
ACOSTA: Now, while the Romney campaign is getting backed to its preferred game plan, it may have lost some of its swagger.
Earlier today a Romney adviser told reporters Florida is not a must-win state. That's a sign that polls may be showing soon that Newt Gingrich may have a sizable lead in this state.
But just a few moments ago, I can tell you that Romney just launched a new line of attack on Newt Gingrich and he just told this crowd here in southwest Florida that he hasn't seen too many historians who make as much money as Newt Gingrich did over at Freddie Mac -- Wolf.
BLITZER: There he is. He's speaking live right now, Mitt Romney, in Florida. Let's listen in briefly, hear to what he has to say.
(BEGIN LIVE SPEECH)
(JOINED IN PROGRESS)
ROMNEY: If we were to reelect Barack Obama a year from now he would stand up and talk about all the things he's done, cap and trade, and card check and stopping Solyndra and Obamacare and his stimulus. He would talk about all those things and how they're working just fine, how they're taking just a little longer than he expected, but they're working just fine.
We would hear more of the same. The candidate who campaigned on change would be talking about how he's keeping things the same. This same policy has not worked. If I'm the president of the United States, I would be talking about a new way forward for America. We will have a new president with new excitement in America.
We will get America on track with jobs, with home prices rising again. It is my commitment, I will use every ounce of my energy to make sure we're fighting for your job, not my job, we're fighting for you your home, not my home. We will do everything to get America moving again.
I love this country. I love this country. I have to tell you, I get the chance to go up and down America. It's so much fun to see folks like yourself that come out and say hello and pay attention to the political process. But you love this country.
As a boy I got taken around by my parents to the national parks. They took me in the Rambler. It's amazing we made it. I fell in love with the beauty of the land. My mom used to sing some of the national hymns, if you will, oh, beautiful for spacious skies, for amber waves of grain, for purple mountains majesty above the fruited plain. I got to see those mountains and was in awe.
(END LIVE SPEECH) BLITZER: Now he's in his stump speech. We have heard this part of his speech many times before. Earlier he was directly going after the president of the United States, who will deliver the State of the Union address.
Jim Acosta is on the scene for us still.
Jim, is he getting a big crowd there, little crowd? Set the scene for us.
ACOSTA: It's a good-sized crowd, Wolf, I have to tell you and one of the things we should mention is the backdrop that Mitt Romney is using at this event. He's standing in front of a foreclosed home. Earlier today he was standing inside an abandoned drywall factory on the outskirts of Tampa.
These are sort of postcards from the edge of the weak American economy right now. It's really a signal that perhaps the Romney campaign has sort of reached a turning point, and they have realized that maybe these days and days of attacks going after Newt Gingrich with really nothing else to talk about may not be working for this campaign.
So getting back to the economy, back those bread and butter issues may work well with voters. I talked to a voter here on the scene just before this event got started. He appreciates Mitt Romney coming to this house and standing in front of it, addressing this crowd here because he's seen squatters coming into this hour, pulling out the copper wiring, pulling out the plumbing, that sort of thing.
It's one of those bread and butter issues that people really feel personally on the ground in places like southwest Florida. I talked to one gentleman who was glad to see Mitt Romney out here today, Wolf.
BLITZER: It certainly underscores the opportunity for Mitt Romney to once again hit Newt Gingrich on that $1.6 million contract he had from Freddie Mac and the whole housing industry, gives him an opportunity to talk about that. Jim Acosta, thank you.
Gingrich, by the way, is in a knockdown, drag-out fight with Romney, as you know, and he's also throwing some sharp jabs at President Obama today. Gingrich is working the crowds himself in Florida.
CNN's Shannon Travis is covering him.
Shannon, what's going on?
SHANNON TRAVIS, CNN CORRESPONDENT: That's right, Wolf. Mitt Romney isn't the only one throwing jabs today.
Newt Gingrich is as well. I'm here at an airport hanger in Sarasota, Florida. It may be empty now, but I can tell you just a short while ago this hanger was packed with throngs and throngs of loyal Newt Gingrich supporters. Obviously here in this area of Florida and the South-Central coast, there's a lot of conservatives and a lot of Tea Partiers, so it was a friendly crowd.
But he also in addition to Romney took a chance to prebut President Obama's State of the Union address. Take a listen to something that Newt Gingrich said pretty much right off the top and listen to the crowd reaction as well.
(BEGIN VIDEO CLIP)
NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: Gathered as we are on the day that the president is going to speak about the State of the Union, I thought I might suggest a few things that would improve the state of the union. You always have to wonder when Obama speaks which country he thinks he's talking about. You also have to wonder what his source material is.
(CHEERING AND APPLAUSE)
(END VIDEO CLIP)
TRAVIS: Wolf, you heard some boos here. That might be not ordinary in ordinary times for Americans to boo when mentioned about the State of the Union.
But obviously a lot of conservatives here obviously have very little love for the president and they feel like his State of the Union speeches have become increasingly political.
One other thing of note. Newt Gingrich is also striking hard against Romney. We heard a little bit of that in Jim Acosta's report. But he also talked about the debate last night as Romney was going after him, after Newt Gingrich with political attack after political attack.
Well, Newt Gingrich today said that apparently Mitt Romney has hired a new debate coach to teach him to utter untruths as fast as he can -- Wolf.
BLITZER: And the question is still out there -- and we will assess it later -- is why did Newt Gingrich lie down, if you with, and not respond to the amazing assault from Mitt Romney in that debate last night. Shannon, stand by. We will have much more on this part of the question coming up.
They may be hammering President Obama today, but in last night's debate, it was Republican vs. Republican and Mitt Romney really for the first time in a major debate really went after Newt Gingrich. He didn't hold back at all. Listen to this.
(BEGIN VIDEO CLIP)
ROMNEY: I worked very hard to promote a conservative agenda. We cut taxes 19 times. We balanced the budget every year, put in place a rainy day fund of over $2 billion by the time I left. We were also successful in having English immersion in our schools, driving our schools to be number one in the nation. GINGRICH: I helped pass the Reagan economic program when I worked with the National Security Council on issues involving the collapse of the Soviet empire.
I then came back, organized a group called GOPAC, spent 16 years building a majority in the House for the first time since 1954, the first re-elected majority since 1928, developed the Conservative Opportunity Society, talked about big ideas, big solutions.
So I think it's fair to say I have spent most of my lifetime trying to develop a conservative movement across this country.
(END VIDEO CLIP)
BLITZER: Let's bring in Gloria Borger, our chief political analyst.
That debate last night was fascinating, because Mitt Romney came out swinging and really hit Newt Gingrich hard, but Newt Gingrich almost played dead. He said I don't want to get into a big fight.
Who won that debate last night?
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: It's kind of interesting.
I think Newt Gingrich's strategy was to start behaving like the front-runner, which is to attack Barack Obama, rather than attack Mitt Romney.
BLITZER: That didn't work in Iowa. He collapsed in Iowa.
BORGER: Right. He did. But he's got more money now. And he's got super PAC ads now.
And this question that we just showed was sort of a battle of mirror, mirror on the wall, who is the most conservative of them all. In this round in particular, I would have to say that Newt Gingrich did a better job of explaining the roots of his conservatism.
I think Mitt Romney still has a bit of a problem explaining just how deeply conservative he is because of his history of a governor of Massachusetts. And I think it points to why lots of Republicans are kind of skeptical about Mitt Romney, because the question is, OK, will he defend our conservatism if he gets to the White House?
BLITZER: But he was in fire yesterday the first 20 minutes of that debate. And Newt Gingrich was not responding, which is unusual.
BLITZER: I had thought he learned his lesson from Iowa when he didn't respond to the enormous negative attack ads and he collapsed in Iowa. This time he just sort of turned the other cheek, if you will.
BORGER: But at first he said I'm not going to respond to every little thing that Mitt Romney says...
BLITZER: He was hammering him. He was really drilling him.
BORGER: ... that's not true about me.
And then at the end, after the exchange went on and on, it ended for the evening and then they went on to other things, but I think Romney did exactly what he came there to do, which was to lay a glove on Newt Gingrich.
BLITZER: Gingrich last week released his taxes for one year, made more than $3 million. Romney released his this morning. Is this issue now put to rest?
BORGER: Made a lot more than $3 million.
BLITZER: Well, he made over $40 million over two years.
BORGER: Right, and gave $7 million away, $4 million to the Mormon Church.
Look, this is an issue that in a Republican primary to say I had unearned income, I paid a low rate on it because it was not earned income, it was capital gains, and that's OK. That's fine.
BLITZER: That's the law of the land.
BORGER: Right. And Newt Gingrich even suggested in this debate last night that Mitt Romney should pay no taxes on it, because Newt would like to get rid of capital gains taxes for everybody.
And Romney seemed a little surprised about that, because that's not his proposal. So I think in the Republican primary, it's OK. The question is he still seems different from everybody else because he's so wealthy. My question is, will he get more comfortable in talking about his personal wealth? Will he be able to joke about it a little bit?
And will he be able to say, look, that doesn't keep me from relating to middle-class Americans and to the pain you're feeling right now, for example, in the state of Florida? And I think the jury is still out on that one.
BLITZER: Newt Gingrich did release some documents about his consulting with Freddie Mac, but that is not -- that issue is not going away either.
BORGER: No, it isn't. And you just heard Jim Acosta talk about the housing issue, as you point out, whether he was a consultant. Romney now uses the phrase "influence peddler." He still was on the payroll of Freddie Mac, and his consulting group was, and you can be sure that Romney is going to hit him over and over again and try to tie Newt Gingrich to those shaky mortgages that were handed out by Freddie Mac and then helped cause the decline of the housing market.
BLITZER: Gloria, thanks very much. This important note to our viewers: I'll be moderating CNN's next Republican presidential debate. It will be in Jacksonville, Florida, Thursday evening, 8:00 p.m. Eastern, just days before the pivotal Florida primary, only here on CNN.
The State of the Union speech still a few hours away, but the House Speaker John Boehner isn't waiting to unleash some sharp new criticism of President Obama, including one thing about the president that Boehner calls, quote, "almost un-American". We'll tell you what it is.
And his super PAC instills fear and loathing in Democrats. We got a rare access to the group founded by Karl Rove, American Crossroads.
Stay with us.
BLITZER: Jack Cafferty is here with "The Cafferty File" -- Jack.
JACK CAFFERTY, CNN ANCHOR: Wolf, billionaire investor George Soros is warning that a class war, including riots in the streets, is coming to the United States. Soros told "Newsweek" the Occupy Wall Street movement will grow and will eventually turn violent. He says the response to the unrest could become an excuse for cracking down, using strong-armed tactics to maintain law and order. If things go far enough, Soros suggests it could bring about a repressive political system in this country.
It might be a stark view of where the U.S. is headed, but this idea of class conflict is growing these days. When President Obama pushed for higher taxes on the wealthiest, part of his plan to cut the deficit last fall, he insisted that those tax hikes were not class warfare, but not everybody agrees.
And you can bet the same income inequality will be a part of the theme tonight during President Obama's State of the Union address. The president is set to talk about a government that should ensure, quote, "a fair shake for all," unquote.
Mr. Obama said that the system is rigged against the nation's middle class, and he wants to work for an America where, quote, "everyone engages in fair play, everyone gets a shot, everyone does their fair share," unquote.
There's no doubt Americans are feeling this clash between the rich and the poor. A recent poll shows a large majority of Americans see class warfare with two thirds saying they're very strong or strong class conflicts that currently exist.
Here's the scary part: The clash between rich and poor now ranks as this country's greatest social conflict, topping conflicts between immigrants and native-born Americans or even conflicts with blacks and whites -- something to think about.
Here's the question: how concerned are you about class warfare in this country? Go to CNN.com/CaffertyFile, post a comment on my blog, or go to our post on THE SITUATION ROOM's Facebook page -- Wolf.
BLITZER: Jack, thank you. Good question.
President Obama certainly will be in the spotlight tonight, with the State of the Union address. But the House Speaker John Boehner did grab at least some of the spotlight for himself today. He met with reporters in his office and he unleashed some sharp new criticism of the president.
Our senior congressional correspondent Dana Bash was there.
Dana, the speaker will be setting directly behind the president, along with the vice president, during the speech tine. They've had a rather rough year. But what's their working relationship like now?
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, he actually said on a personal level that he and the president had a pretty good relationship. He said that you'd be surprised at our back-and-forth.
But to answer your question on the working relationship, he was pretty harsh on the president. He said, you know, we know that they, of course, had some intense negotiations over spending, especially over that ill-fated debt ceiling deal.
Look at what he said about the president. Speaker Boehner said, "It was like negotiating with someone who never negotiated anything." He went on to say, "At some point, someone has to say yes."
Now, another thing I thought was interesting was that he said he hasn't spoken to the president, Wolf, since December 23rd, that's more than a month ago. So, yes, Congress was gone for most of that. But still, if they have a good relationship, why haven't they spoken in a month?
BLITZER: You know, I think if you go to the White House and you speak to folks over there, they agree that the president likes John Boehner. They have a good relationship on a personal level. But he just feels that Boehner can't deliver, he can't control his own caucus.
What are they saying there?
BASH: Well, certainly, John Boehner -- I asked John Boehner about that question, about the fact he has been speaker for a year now, and he has had some interesting times with his own conference. The fact of the matter is, he's got lots of people who are elected and not to compromise and to say compromise be damned, we came here on principle, particularly cutting spending and cutting the government.
He said that in his retreat last week, told, he talked to his rank-and-file members and he told, when you push for too much, you actually get less than you would have sometimes.
BLITZER: Is there any indication that they're going to get anything done at all this year? A lot of people are really angry at Congress right now.
BASH: Of course. A lot of people are angry. We talked about the fact that Congress has the lowest approval rating in history. Washington in general does as well.
You know, I certainly didn't leave this breakfast this morning with the House speaker thinking that we should see a lot getting done this year. Look, that always happens in an election year. He did say that he has told his members that they have to try to find a way to find common ground and try to get some things done this year.
But, Wolf, when we tried to get into the specifics, it didn't sound like a lot was going to happen. He, of course, blamed the president, said he's, quote, "been AWOL since Labor Day," is in full campaign mode. He even, Wolf, said that the president is -- his speech tonight was written by his presidential campaign.
One other interesting thing that I want to note, and that is, you know, the president is already campaigning about Democrats being the party for the middle class, Republicans being those for the wealthy. Here's what he said about that. John Boehner said, "This is a president who said I'm not going to be a divider, I'm going to be a uniter, and running on the politics of division and envy," he said, "to me it's almost un-American."
Pretty tough stuff from this House speaker about the president just hours before he sits right behind him in the House chamber.
BLITZER: But did he say, because they're -- I think they were upbeat at the White House that it may be ugly, it may be bloody, but by the end of February, they will extend the payroll tax cut for the middle class. They will extend unemployment benefits for those who have unemployment for a long term.
What did Boehner say about that?
BASH: He said he's hopeful. But, of course, the same issues are on the table now that were problems are on the table now than they were before, when they couldn't get this year-long payroll tax cut done, which is the fact that they want to cut spending to pay for that and they still have to find a way to do. They're actually having the very first meeting of the negotiators today to try to find a way to do that. He says that they're hopeful, but it's hard to imagine this is not going to go down to the wire in February, just like it did last time.
BLITZER: Dana is going to be busy tonight. She's going to be in the chamber for the president's address before the joint session. Thanks, Dana. Thanks very much.
And please be sure to watch CNN for special coverage of the president's State of the Union address. Our coverage will begin live here 8:00 p.m. Eastern on CNN.
Did a change in format change the outcome of the latest presidential debate? Paul Begala and Mary Matalin, they're both standing by live for our strategy session.
Plus, new concerns about that cruise ship disaster as yet more bodies are found.
BLITZER: Let's get back to our big story. The Republican presidential candidate Mitt Romney yielded to growing pressure, and released his income tax returns today, revealing a relative low tax rate, 14 or so percent and more than $42 million of income over two years.
Let's go inside the numbers with CNN's Erin Burnett, the host of "ERIN BURNETT OUTFRONT," weeknights, 7:00 p.m. Eastern here on CNN.
Erin, nothing illegal about this. All above board, all very, very legal. What jumps out at you? I know you studied his tax returns pretty closely.
ERIN BURNETT, HOST, "ERIN BURNETT OUTFRONT": I did. Now, 500 pages, Wolf. It's kind of a pain to go through, let me be honest with you.
But we actually commissioned six former IRS attorneys and tax specialists to go through this and to go through various parts, from the Swiss bank accounts, also offshore accounts, to blind trusts.
A couple of things stand out, Wolf. First, in terms of these blind trusts, not something that's really standard for wealthy or not wealthy Americans, but it is standard for politician or people who want to run for office because it basically gives you the ability to say, hey, look, I didn't make a decision on whether to bet against the housing market. I'm not saying Romney did, but that would be an example. Someone else did. So that actually is a pretty standard part of what a politician might do.
One thing that stood out to me, especially though, Wolf is carried interest. This is something that I personally have been very curious about for the past several years. What it is, is that when someone for private equity fund, you Wolf Blitzer invest in that fund and the person managing the fund gets a 20 percent cut of whatever money he makes for you.
That cut is taxed at the capital gains rate of 15 percent. Now there are so many industries who defend it. There are many who see it as a loophole, but Mitt Romney benefited from it significantly.
The $12.9 million of his income over the two years that he released came from that carried interest alone. He paid $1.9 million in taxes on it. If it had been taxed at the ordinary income rate of 35 percent, he would have paid $4.5 million.
So big gap, as you've said, very above boor and very in line with the rules, but it does, of course, raise issues of fairness as to whether it's a loophole. Today, Karl Levin saying this is a loophole.
If we got rid of it, it would contribute to -- maybe we wouldn't have to cut that $1.2 trillion from the "Super Committee." I have to be honest though with you, Wolf, it maybe a loophole worth closing, it may be an issue for Mitt Romney.
But according to the Obama administration's numbers how much it would raise eliminating that loophole, 1.5 percent of the $1.2 trillion, $20 billion so raising serious issues perhaps for Mitt Romney, but not something that would really move a needle at the federal level.
BLITZER: Well, most of the income wasn't through that loophole. It was regular dividends, capital gains, interest, stuff like that, which is taxed at 15 percent, but the capital gains long-term rate.
BURNETT: That's right. The same as carried interest, $47.2 million the total income over the two-year time frame. Most of that as you said, Wolf, right around that 15 percent rate, but $12.9 million of the $47.2 million was just from carried interest.
There are a few people in this country that benefit significantly from that one particular provision, and Mitt Romney is one of them.
BLITZER: Erin will have a lot more on this at 7 p.m. Eastern later tonight setting the stage for the "State of the Union" our coverage at 8 p.m. Thanks very much.
BURNETT: All right. See you, Wolf.
BLITZER: Appreciate it. Let's dig a little bit deeper right now in our "Strategy Session." Joining us our CNN political contributors, the Democratic strategist, Paul Begala and the Republican strategist Mary Matalin. What did you think about that explanation from Erin? Paul, first to you.
PAUL BEGALA, CNN POLITICAL CONTRIBUTOR: Well, you know, this is Erin's background. She knows this stuff better than I ever will. I know she's right about it.
What's interesting though politically is we just saw a little bit earlier a live shot of Mitt Romney in Florida speaking, and he has this phrase, I love America. Of course, he does. We know Mitt Romney loves America.
So does my mother, we're not going to make her president, but his political opponents can seize on that and say, well, you know, Mitt, if you love America so much, why were you investing in the Cayman Islands, in Swiss bank accounts, in Luxembourg, in Ireland.
In all of these sorts of these shadowy things that middle-class folks don't have a Swiss bank account, Mitt and if you love America so much, why weren't you investing in America. I think it's enormous --
BLITZER: What about this explanation, Paul, that he had a blind trust and investors were doing that for him?
BEGALA: Sure, but you can give the blind trust parameters and say only invest in America. He has to explain to us why he was investing -- and by the way, what about before he had this blind trust?
Why won't he release earlier tax returns? Were there some years he paid less than 14 or any years when he paid zero? This thing is not just going to go away just because he released --
BLITZER: Mary, what do you think? Is it going to go away? Is it over with? Newt Gingrich just released one year as well and the other two Republican candidates, they haven't released anything.
Santorum says he has to go back home and get it from his personal computer and Ron Paul makes no bones about it. He says, none of your business.
MARY MATALIN, CNN POLITICAL CONTRIBUTOR: You know, the Republicans should stop taking this bait. It's political contrivance and it's a recent relatively recent one. You learn way more about what you need to know about a candidate by what's in their FEC reports not in their tax reports.
But what Romney -- and as wonderful as Erin Burnett is and that was a great explanation, I doubt the selection will be held on carried interest, except to the extent there are all sorts of neech loopholes.
All the Republicans are saying close all the loopholes then we can lower all the rates for everybody. We need a big debate on the tax for the Republicans will win that.
It got seven times more words than the bible and that's what Romney should say and he should pivot to reforming the tax codes instead of getting in the weeds about what's in his particular tax reports and all the Republicans should do that too.
BLITZER: Paul, you watched the debate last night. Mitt Romney came out swinging. Newt Gingrich not so much. In fact, at one point, he said this.
(BEGIN VIDEO CLIP)
NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: I'm not going to spend the evening chasing Governor Romney's misinformation. He just said at least four things that are false. I don't want to waste the time on them.
(END VIDEO CLIP)
BLITZER: Was that a blunder on his part? What do you think, Paul?
BEGALA: Yes, rising above it will never be Newt's strength. By the way, neither is being the attack puppy that Mitt tried to be. Neither of those guys was in their wheelhouse last night.
You know, Mitt, I think he dumped the entire opposition research file on Newt's head. I'm not sure if Newt what quite what to do with it. I was surprised.
I think part of it was that the audience was caused to be quiet. And Gingrich like all bullies is fed by the mob and when the mob was silent, I think he might have lost his nerve.
BLITZER: Did you think he made a mistake by not responding because the fierce attack from Mitt Romney on Newt Gingrich, Mary, was very intense.
MATALIN: No, it's part necessity, as Paul says, by virtue in the hall and the rules, but it's also strategic.
BLITZER: The rules were basically Brian Williams, the host of that debate, he didn't want any applause, and there was no applause, no cheering, no cries, nothing along those lines, but the rules are if you're attacked, you can attack back. In this particular case, Newt Gingrich decided not to attack back.
MATALIN: Well, let me be more clear. The way he has been attacking, as Paul has suggested, is in the theatrical way, which would have been by virtue of that hall and those rules would have been discordant.
So it just would have not worked, so Paul's exactly right on that. But more strategically and a greater imperative is after several debates of unleashing the fury, he as his campaign has said he needs to go into the presidential mode.
He needs to show that he can be temperate, steady and calm and contemplative and get in that quiet room where big decisions and adults have conversations. So it was part strategic, and finally what's he going to say?
There isn't just any for any Republican who was involved in it, and the other attack is you're unreliable. What is he going to say? No, I'm not and demonstrate it by flying of the handle?
So I think strategically he did not make a blunder, and Mitt has other issues he has other issues to deal with. Everybody did great last night is my bottom line for the debate.
BLITZER: We'll see how they both react Thursday night in Jacksonville. I'll be moderating the next Republican presidential debate right here on CNN. Stand by, guys. It's certainly one of the big moments of his presidency and his re-election campaign, so what does President Obama need to say in tonight's "State of the Union" address. Our "Strategy Session" with Paul and Mary will continue.
BLITZER: Let's get back to our CNN political contributors, Democratic strategist, Paul Begala and Republican strategist, Mary Matalin.
Both of whom have worked in the White House. In the scheme of things, if the president wants to get himself re-elected, how important is tonight's "State of the Union" address, Paul?
BEGALA: It's huge, it's big. You know, it's the biggest thing you know is going to happen. Presidential campaigns always turn on these moments of strength. Sometimes they're unpredictable, you don't know when they're going to happen, but sometimes they are.
Tonight, the president has the chance. This is for an old White House aide like me, and I'm sure for Mary, this is like the Super Bowl of the World Series and Willie Nelson concert rolled all in one. I'm thrilled. I was even thrilled to see Republican presidents give the speech.
BLITZER: Tens and millions of Americans will be watching tonight, a lot more Americans, Mary, you'll be watching the president deliver this 45-minute or so speech tonight as opposed to watched last night's Republican debate or any of the Republican debates, for that matter.
MATALIN: Yes, that's right, but although they are big speeches and they are the political junky's Super Bowl -- go Giants, didn't want to miss that opportunity -- no one will make their decision tonight how they're going to vote in the fall.
No matter how great the speech and I don't doubt the president will give yet another wonderful speech, they're looking at their lives, and three quarters of Americans think their future will not be brighter.
And that Obama, well, it's not his fault, he has made economic circumstance worst that's his biggest challenge for the year. By definition, "State of the Unions" in a campaign year in are a frame- up, and he will do that and do it well.
I don't know that it's going to have legs beyond next week the way this campaign has been unfolding.
BLITZER: We'll soon find out. Guys, thank very, very much, Paul and Mary, our political strategist.
It's a "Super PAC" founded by Karl Rove dedicated to defeating President Obama. We're about to get a rare look inside.
Coming up in our next hour right here in THE SITUATION ROOM, we'll hear from two Republican lawmakers who say they feel Newt Gingrich was lobbying them. New voices in the ongoing debate that's dogging Gingrich's campaign.
BLITZER: Democrats may be even more worried about the powerful Republican fundraising groups than they are about any of the Republican presidential candidates.
All week we're going in depth looking at the powerful "Super PACs" on both sides. How they get their money, how they use it and how they impact the campaign. Our chief White House correspondent, Jessica Yellin reports.
JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT (voice-over): He's the man Democrats love to hate.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES OF AMERICA: Two groups funded and advised by Karl Rove.
UNIDENTIFIED MALE: An interesting group can give millions to Karl Rove secretly.
YELLIN: What's up with that?
UNIDENTIFIED MALE: President Obama will have the cash, but he can't win by running on his record.
YELLIN: Karl Rove is the most public face on American Crossroads and Crossroads GPS. Outside spending groups devoted to electing Republicans and blocking the president's agenda. The man who runs it all is Steven Law. His offices are just a few blocks from the White House.
STEVEN LAW, PRESIDENT, AMERICAN CROSSROADS AND CROSSROADS GPS: It's kind of shockingly spare, really. We have holes in the wall. It's not particularly a high-end kind of place.
YELLIN: But don't let that fool you.
LAW: Our goal is to race between $240 million and $300 million.
YELLIN: Because the Obama campaign is so good at raising money, he's convinced as soon as there's a Republican nominee the Democrats will --
LAW: Try to make them unelectable prior to the conventions. Our nominee will not have resources and groups like American Crossroads can come in and fill that gap.
YELLIN: Law's groups can collect sometimes multi-million dollar checks in two ways. For donors who don't mind giving publicly there's American Crossroads, the "Super PAC" can made hard-hitting political ads.
For donors who want no fingerprints, this is Crossroads GPS. Contributions here are kept secret. The group has to make so-called issue ads, meaning they could say vote for or against a candidate, but can you tell the difference?
PRESIDENT OBAMA: Shovel ready was not as shovel ready as we expected.
UNIDENTIFIED FEMALE: The 14 million out of work, America drowning in debt.
YELLIN: It's GPS does more than TV. They also invest in other groups on the right, kind of a venture capital fund for politics.
JONATHAN COLLEGIO, AMERICAN CROSSROADS: We should expand the playing field. Make sure that the groups that are doing effective things are getting money.
YELLIN: In 2010, they wrote fat checks to organization fighting tax increases and President Obama's health care law. Crossroads also hosts a regular lunch here to coordinate strategy with other "Super PACs" on the right.
LAW: It's totally appropriate for us to communicate with other groups like that.
YELLIN: Law says Crossroads was created to counter the influence of labor unions on the left, but one watch dog sees big differences between the two.
PAUL SEAMUS RYAN, THE CAMPAIGN LEGAL CENTER: I think labor unions improve democracy. America Crossroads simply isn't the key. They represent a very small number of billionaires. That's less democratic by definition.
YELLIN: Wolf, now labor unions also object to the comparison to Crossroads for another reason. Labor unions have much more rigid disclosure reels. They don't just have to report their political activity to the Federal Election Commission. They also have to report it to the Department of Labor.
But you know what Steven Law points out that if labor unions and other Democratic groups don't like how secret Crossroads GPS is, they can start a group themselves, and guess what? Democrats are starting those kinds of groups.
BLITZER: Bill Burton, a former White House aide to the president together with our own Paul Begala, they have a very similar group to this one.
YELLIN: That's just one example of some of the new Democratic groups like that, exactly.
BLITZER: I suspect they are going to be a lot more. All right, Jessica, good report. Thanks very much.
The search continues about the capsized crew ship, but there's another urgent concern off the coast of Italy. We'll explain.
And a painful reality is slowly setting in for storm-ravaged Alabama residents. We're going back to look at the loss of a 16-year- old girl.
BLITZER: Lisa Sylvester is monitoring some of the other top stories in THE SITUATION ROOM right now. What do you have, Lisa?
LISA SYLVESTER, CNN CORRESPONDENT: Hi, there, Wolf. This just into THE SITUATION ROOM, some eye-popping new numbers from Apple. The company is reporting a quarterly profit of $13 billion an all-time record revenue of $46.3 billion. And no surprise that Apple has its wildly popular iPhones and iPads to thank. Sales of the devices have more than doubled.
Crews have recovered another body from the Costa Concordia raising the confirmed death toll now to 16 with the same number still missing. Two bodies were found yesterday and two more over the weekend. Environmental risk is also becoming urgent with 2400 tons of fuel oil still on board the stricken ship.
Washington is one step closer to becoming the seventh state to legalize gay marriage. A 25th state senator has announced her support for the bill giving it enough votes to clear the Senate. A majority of State House members already support it and Governor Christie and Greg War has said he'll sign if it passes -- Wolf.
BLITZER: Lisa, thank you. Your e-mails is coming up about class warfar. Jack Cafferty is coming up next.
And coming up at the top of the hour, what the president will say in the "State of the Union" address. Tonight, we're getting new details.
BLITZER: Jack's back with the "Cafferty File" -- Jack.
CAFFERTY: Question this hour is how concerned are you about class warfare in this country? Richard writes, "Worried? You bet I am. The divisiveness that feels like the '60s civil and racial underpinnings is a silent undertone not spoken about in polite circles.
But it's very much out there. I for one have been waiting and fearful for a class that will take to the streets, something on the order of the Occupy movement, but something a whole lot worse."
Tom writes, "No civilization in recorded history has ever survived the type of centralization of power and wealth that we now have in this country. If we don't start paying attention, I'm afraid pitchforks could be replaced by weapons far more deadly. George Soros is right."
Keith writes, "What is old becomes exaggerated again. Class warfare appears to be a beefed-up term for reorganizing the inequities that exists in our country. I don't believe most Americans begrudge those who are wealthy or those who work within legal parameters to keep their wealth. Thus we don't have class warfare concerns. We have concerns related to who advocates for the average American."
Dee in Texas writes, "Jack, it's been obvious for a long time. Why do you think there are so many weapons and ammunition being sold lately?
Sarah writes, "There's a fine line between hard-working middle- class citizens and people who freeload off state and federal social service programs."
Herman writes, "Jack, my hope is that class warfare card will sink the titanic. I think this is truly liberal rhetoric destructive to the value of all Americans. We all should have an equal opportunity to be successful. Why take the incentive out of the equation? No one should be targeting the success or the opportunity to be successful in America."
John writes, "It's about time, bring it on." If you want to read more about this, scary stuff, go to my blog, cnn.com/caffertyfile or through our post on THE SITUATION ROOM'S Facebook page -- Wolf.
BLITZER: Will do, Jack. Thank you.