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What Petraeus Knew and When He Knew It; CIA Now Investigating Petraeus; Fears Of All-Out War Escalate

Aired November 15, 2012 - 17:00   ET



Happening now, escalating fears of all-out war looming over the Middle East.

Are Israeli ground forces on the brink of moving into Gaza?

Just minutes from now,

I'll ask the Israeli ambassador to the United States.

Plus, the mystery man who triggered the FBI Petraeus probe revealed. We're getting new information about who this veteran agent is and how he got involved.

And a strong victim -- a storm victim, I should say -- struggling to stay warm with no power for weeks gets a personal visit from the president of the United States.

We want to welcome our viewers in the United States and around the world.

I'm Wolf Blitzer.


ANNOUNCER: This is CNN breaking news.

BLITZER: We've got breaking news. We're getting new information about what then CIA Director David Petraeus knew about the Benghazi attack and when he knew it.

Let's get right to our Pentagon correspondent, Barbara Starr -- Barbara, what are you learning?

BARBARA STARR, CNN CORRESPONDENT: Wolf, I have just spoken to someone, a source, a longstanding source who has spoken to David Petraeus. This is someone on his level professionally. This person is directly familiar, from Petraeus, with his thinking -- with Petraeus' thinking about what he will tell Congress tomorrow about the Benghazi attacks.

David Petraeus wants to tell Congress that he knew almost immediately after the September 11th attacks that the group Ansar Al- Sharia, that all Qaeda sympathizing group in Libya, was responsible for the attacks.

Here's how it goes. In Petraeus' view, there are two questions on the table.

Who was responsible?

And that is Ansar Al-Sharia. He has intelligence, he believes, to back that up.

The second question, what was their motivation?

That is where some of the confusion may lie.

What this source says Petraeus told him is there were about 20 intelligence reports that began to come in blaming that video in -- that anti-Islamic video that sparked the riots in Cairo. That's the confusion -- was it that film or was it a terrorist attack?

They got 20 intelligence reports blaming the film riot in Cairo. But -- and this is critical -- those reports were disproved over time, but disproved after Petraeus made his initial presentation to Congress.

So David Petraeus believes there's a lot of confusion and a lot of misrepresentation of what he originally told Congress when he briefed them after -- initially after the attacks. He wants to go up there tomorrow, sort it all out.

He will also say he had his own talking points separate from U.N. Ambassador Susan Rice. That came from somewhere other in the administration than his direct talking point. So he wants to get all this sorted out. He believes it was the all Qaeda sympathizer group, Ansar Al-Sharia, that was responsible for the attacks.

BLITZER: So the question, Barbara, is he -- he is convinced that the attack on the U.S. consulate in Benghazi had nothing -- nothing to do with that anti-Muslim video that had been posted on YouTube, that this was a terrorist attack by this all Qaeda affiliated organization?

The question, though, is when did he reach that final conclusion?

Did he know that before Susan Rice, the U.S. ambassador to the United Nations, went on those five Sunday show -- shows and insisted that what happened in Benghazi was the result of spontaneous anger from that anti-Muslim video?

STARR: All the I can tell you, Wolf, is this source says the intelligence reports that came in blaming the video, those 20 or so reports, this source says Petraeus had those reports disproved over time, after he testified, or rather briefed, the committee -- committees on Capitol Hill.

When he looks at what Susan Rice said, here is what Petraeus' take is, according to my source. Petraeus developed some talking points laying it all out. Those talking points, as always, were approved by the intelligence community. But then he sees Susan Rice make her statements and he sees input from other areas of the administration. Petraeus presume -- it is believed -- will tell the committee he is not certain where Susan Rice got all of her information. It looks like the business about the video got disproved in the intelligence community at the highest levels -- finally disproved after the fact.

But still, Wolf, the question that hangs out there, could this basically be a combination of a lot of factors?

It gets back to motivation. The group may have been responsible.

What was their motivation?

BLITZER: We're anxiously awaiting his testimony tomorrow. But that's going to be behind closed doors, right?

STARR: Absolutely. It's not supposed to come out in public.

BLITZER: I'm sure a lot of it will, though.

Thanks very much, Barbara, for that.

Even more new information coming into THE SITUATION ROOM about the former CIA director, General David Petraeus.

Let's bring in our intelligence correspondent, Suzanne Kelly, who's working this part of the story -- what are you finding out about, what, yet another government investigation?

SUZANNE KELLY, CNN CORRESPONDENT: Yes, Wolf. I mean this is a bit of a bombshell breaking news this evening. But we're just hearing now that -- from a CIA spokesman, Preston Golson, that there's now going to be a new investigation into the conduct of General Petraeus while he was at the CIA.

So let me read to you this statement that we really have just briefly. "At the CIA, we're constantly reviewing our performance. If there are lessons to be learned from this case, we'll use them to improve. But we're not getting ahead of ourselves. It's an investigation. It's exploratory and it doesn't presuppose any particular outcome."

But just the fact that the CIA's inspector general is now looking into the conduct of General David Petraeus is -- is another new twist in this tonight -- Wolf.

BLITZER: What are you hearing about what happened during the closed door hearings today on Capitol Hill?

KELLY: Right. Well, as you can imagine, based on the guest list, this was really the first comprehensive account of what officials were doing as events unfolded that night. And a government source tells me that what the committees heard today was a detailed time line of what happened and that they were also shown video of the attack that was recovered from security cameras at the compound. Now I'm told that the video is grainy. It doesn't really spell out exactly what happened. But it does give a better sense of the atmosphere that night -- Wolf.

BLITZER: Will this video be made public?

Will the American public be able to have the chance to see this surveillance video?

KELLY: I know that there is an interest in getting at least getting parts of the video made public. But I'll tell you, it might not be so easy because, of course, this is now part of the evidence that was gathered in the course of that FBI-led investigation -- Wolf.

BLITZER: What are the members of the intelligence community, the FBI, others, trying to do by showing members of Congress, Senate and House, this video?

KELLY: Well, the official I spoke with wouldn't get into detail about what the video actually shows. But it's pretty clear and pretty safe to say that it's being brought out to give the committee members a better sense of what was going on outside the compound that night. Now, an intelligence source tells me that the presentation was expected to clarify some of the mischaracterizations about the nature of the attack, Wolf. And it's probably fair to say, to give people a better sense of -- of the kinds of activity and the levels and how quickly things were picking up.

BLITZER: So during the closed door hearings today, Mike Morrell, the acting CIA director, is appearing. He's testifying before these members. Tomorrow morning, the former CIA director, David Petraeus, will appear.

Do we expect to get conflicting or similar statements from these two men?

KELLY: Well, it's interesting, because you'd think you'd get the same account from both men. But now, based on Barbara's reporting, there might be some different things that -- that he wants to share with the committee members.

But it is true that General Petraeus was the one who took the trip to Libya not too long ago and actually met with people on the ground there and got information about that.

There's a chance that he also may be asked whether his resignation last week, citing an extramarital affair, had anything to do with the Benghazi investigation at all. And I'm not so sure we'll get the answer to that. But I'm sure a lot of the committee members would like to hear that.

BLITZER: Because there was a suggestion in that lengthy, detailed report in "The Wall Street Journal" today that there may have been a connection. But obviously, that's a very, very murky area.

So the status of this current investigation is where right now? KELLY: Well, right now, officials I've spoken with have said that they still have someone in custody, a suspect in custody in Tunisia, that the U.S. has had access to him -- Wolf, it's really tough to sort of nail down those details, because it is an ongoing FBI investigation.

But we also know that there were a number of suspects that were detained by Libyan authorities right after. Apparently there was an intelligence that was gotten from -- from those suspects, as well. So they're still continuing to push forward with that source in Tunisia, too -- that suspect, rather.


Suzanne Kelly, thanks very much.

Lots of news happening right now.

2016, though, is just around the corner, at least to some political news junkies.

Jack Cafferty has that in The Cafferty File -- Jack.

JACK CAFFERTY, CNN CORRESPONDENT: Well, here we go. The Hillary Clinton for president buzz is already loud. And it's getting louder.

Billionaire investor Warren Buffett told CNN there is nobody better qualified than Mrs. Clinton to become president in 2016. Quote, "I like what she believes in. I think she's extraordinarily able and energetic in pushing those beliefs," unquote. And Buffett is just the latest to talk about a potential Hillary Clinton run for the White House in four years. He joins people like Bill Clinton -- no surprise; Nancy Pelosi; Ed Rendell; New York Senator Kirsten Gillibrand; even Republicans, folks like Newt Gingrich and Karl Rove, are talking about it.

Google Hillary Clinton 2016 and you get more than five million hits.

For her part, Mrs. Clinton insists the answer is no. She's finishing her term as secretary of State, leave as one of the most popular members of the Obama administration. Clinton talks about how she's been in the political spotlight for 20 years and she wants her life back.

Fair enough. She says she wants to sleep, relax.


But what about after that?

While Hillary Clinton has repeatedly said she won't run for president again, this is the same woman who said that politics is in her DNA. She is, after all, a Clinton. And with a resume that includes secretary of State, senator, first lady, well, the Democratic nomination is probably hers for the taking if she wants it. Vice President Joe Biden is keeping the door open to a possible 2016 presidential run, although he recently acknowledged it might depend on the economy.

A memo to the vice president -- it might also depend on Hillary Clinton.

Here's the question, is Hillary Clinton the answer?

Go to and post a comment on the blog, or go to our post in THE SITUATION ROOM'S Facebook page.

It's never too early to start this speculation, is it -- Wolf.

BLITZER: Especially for those of us that are political news junkies. I've been saying for a while -- no inside information -- I suspect she still has that passion, that desire to be the first woman president of the United States.

CAFFERTY: If she gets a little rest, a little time off...

BLITZER: Yes, let her rest.

CAFFERTY: -- she's liable to come back with a vengeance.

BLITZER: She can write a book, give a few speeches, enjoy...


BLITZER: -- whatever she wants to do. And then...

CAFFERTY: Raise a few dollars.

BLITZER: Yes. She's -- she'll be fine.

Thanks, Jack.

CAFFERTY: All right.

BLITZER: The Middle East under attack right now. Up next, we're going live to our reporter on the scene. Rockets are falling inside Israel.

Plus, a looming fiscal showdown on Capitol Hill -- we're going to tell you what it could mean for your wallet.


BLITZER: Sirens and screams of terror as scores of rockets and shells light up the skies over Israel and Gaza. The Israeli prime minister, Benjamin Netanyahu, was in a -- a building at one point that had to be evacuated in the crossfire. Israel is now moving thousands of troops to the border. And concerns of an imminent ground assault are growing.

CNN's Frederik Pleitgen has just arrived in Southern Israel, an area that has born the blunt of the rocket attacks from Gaza. Fred joins us from Ashkelon right now. Fred, what are you seeing? What's going on?

FREDERIK PLEITGEN, CNN INTERNATIONAL CORRESPONDENT: Well, what's happening in Ashkelon, Wolf, is that there were about 20 rocket attacks on this town throughout the course of the day, and we talked to people who said that they're absolutely in fear, especially of course, small children in places like Ashkelon as well.

And this is also a place where only a couple of miles away from here, three people were actually killed when a rocket hit their house. It's also quite interesting, Wolf, in that this is one of the areas in Israel that's equipped with a missile defense system called the Iron Dome. And the Israeli government says that, so far, the Iron Dome system has already intercepted more than 130 rockets coming out of Gaza.

Nevertheless, they also say that, of course, these systems cannot pick off all the rockets. That is why they're stepping up their air campaign as well. We're seeing -- we're hearing war planes overhead from where we are. And we're also hearing a lot of explosions inside Gaza. It's just a couple miles from where we are. It looks to us though as the conflict here is escalating -- Wolf.

BLITZER: You're hearing those explosions, Fred, right now? Is that what you're saying?

PLEITGEN: Absolutely. We're hearing those explosions. They're somewhat in the distance. It's about eight miles, I would say, to Gaza. But we are also hearing war planes overhead. It's been basically the past couple of hours that we're able to hear very, very prominently those explosions in the backdrop. But also, there appears to have been fire coming out of Gaza as well.

So, it seems like both sides are really stepping up their campaigns. The Israeli government saying that since the operation began about 300 rockets have been fired out of the Gaza strip and the Israelis have taken out more than 100 rocket positions. So, certainly this is a conflict that is going at a very high pace. It really does not look like either side at this point is going to take its foot of the gas.

In fact, the Israelis are saying that they are more than willing and able to widen the operation. As you said, a ground offensive is very, very much in the cards at this point -- Wolf.

BLITZER: Fred Pleitgen is in Southern Israel for us watching what's going on.

In the last hour, we spoke to Sara Sidner, our correspondent, who's in Gaza right now. But let's bring in the Israeli ambassador to the United States, Michael Oren, who's obviously watching closely what's going on as well. Are Israeli troops, tanks, armored personnel carriers, poised to move into Gaza?

MICHAEL OREN, ISRAELI AMBASSADOR TO U.S.: Wolf, good to be back. Israel will take whatever measures are necessary to defend its citizens. As of tonight, Wolf, there are 4.5 million Israelis under rocket fire. That's more than half the population of the country. I was on this program last night on the SITUATION ROOM.

Since then, they fired 240 rockets out of Gaza at our citizens. One of those rockets as you heard Fred mentioned killed three adults last night, wounded two infants. We have 150 casualties, so far. So, we're going to take any measures necessary to stop this rocket fire and to protect our citizens, including the possibility of ground action.

There have been reserves that have been called up. But we hope we don't have to get there. We hope that Hamas will internalize the strong message we sent, and that they'll step down.

BLITZER: Is there any indication that's happening?

OREN: On the contrary, they're escalating. Just this afternoon, they fired rockets that hit in the vicinity of Tel Aviv. And you and I remember the last time rockets hit in Tel Aviv in 20 years ago during the Gulf War, the first gulf war. They were fired from Iraq. It's the first time rockets have been fired from Gaza hitting in the vicinity of Tel Aviv.

BLITZER: It was south of Tel Aviv.

OREN: south of Tel Aviv. And though, the prime minister, as you mentioned, Prime Minister Netanyahu was in a bomb shelter.

BLITZER: He was in one of these towns where a rocket hit? Is that what you were saying?

OREN: As a precaution, they moved the prime minister down. He was in Tel Aviv at the time.

BLITZER: And so what happened?

OREN: Well, they moved him into the bomb shelter. They went down to a bomb shelter.


OREN: -- has to into a bomb shelter. Imagine if the president of the United States had to go into a bomb shelter. Imagine what the equivalent would be in the United States 150 million Americans were under rocket fire, what kind of steps the United States would take to ensure the safety of its citizens? Those are the type of steps that we are going to have to take to ensure the safety of our citizens.

BLITZER: So, right now, just to be precise, there's no letting up at all. The Hamas attacks continuing. Israel's launching air strikes, also from the sea strikes into Gaza. But so far, no Israeli ground troops have moved into Gaza.

OREN: So far, no. And again, we hope we do not have to reach that point. We want Hamas to internalize the hard message, to step down, stop firing rockets at millions of Israelis.

BLITZER: I read a tweet from a spokesman from the Israel defense forces that said this "We recommend that no Hamas operatives whether low level or senior leaders show their faces aboveground in the days ahead." Are you targeting right now more Hamas leaders? You killed the head of the Hamas military command yesterday.

OREN: Certainly, it's our right and our duty to protect our citizens and to protect our citizens from those terrorist leaders who are shooting hundreds, and over the course of months, thousands of rockets at our citizens.

BLITZER: You know, the innocent civilians, though, Palestinians, are dying in the process. We've been getting these horrible stories, including an 11-month-old son of a BBC journalist who was killed in one of these Israeli strikes.

OREN: We deeply regret any loss of civilian life. And we take extraordinary measures to avoid them. We had one reporter that Israeli pilot targeted a long-range missile and then aborted his mission because he saw there were children in the vicinity. One of those missiles hit outside of Tel Aviv today. So, we pay a price.

But let's be honest, we're facing an enemy that is shielding itself behind its own civilian population. They're firing these rockets from inside schools, inside playgrounds, even inside mosques. And that's the difference between us. They're trying to maximize the number of Israeli civilians they kill. And they hope that we'll kill civilians on their side.

BLITZER: Are you familiar with this 11-month-old child?

OREN: I'm familiar with the case.

BLITZER: It's a very sad story, obviously.

OREN: It's a terrible story. But we are doing our utmost to try to avoid this. Keep in mind, Hamas has not just a military strategy, it has a media strategy.

BLITZER: Do you know who the target in that attack was?

OREN: I do not. But it was near an asset, near a missile site. And, again, doing our utmost to avoid these casualties. They have been low. In fact, most of the casualties on the Palestinian side have been armed terrorists.

BLITZER: Because you've been to Gaza. I've been to Gaza. This is one of the most densely populated areas in the world, what, about 1.5 million Palestinians in a very, very small area. If you move in there with tanks, artillery, there are going to be a lot of innocent civilians who are going to be dead.

OREN: We hope not to reach that point. We don't want to inflict any civilian casualties. They are doing their utmost to inflict the maximum number of casualties on our side. They're trying their best to kill Israeli civilians. We're trying to avoid harming Palestinians. That's the difference between a democratic state and a terrorist organization.

BLITZER: I know the prime minister, Prime Minister Netanyahu was down in a bunker today for himself has been on the phone with the president of the United States. That was yesterday. Have they communicated today as well?

OREN: Not today directly, but the message from the White House, from Congress, from both parties has been unequivocal support for Israel's right to defend itself and condemnation of Hamas terror.

BLITZER: Here's what really worries me as well, the collapse of the Israeli/Egyptian peace treaty. I witnessed the signing of that peace treaty in 1979. You remember, you've written books about it. Is the Israeli/Egyptian peace treaty, they have now pulled their ambassador out of Tel Aviv, you've pulled your ambassador out of Cairo. Is that peace treaty between Israel and Egypt on the verge of collapse?

OREN: The Egyptian's really (ph) peace is vital not just for Israel, and Egypt is vital for the entire region, for the world. We understand this. We think that the Egyptians understand this full well. And, the Egyptians have played a constructive role in the past mediating --

BLITZER: What about now?

OREN: I think they can play the similar role today.

BLITZER: Are they?

OREN: I think they can.

BLITZER: But are they?

OREN: That's all I can say right now is I think they can play a constructive role. And we hope they will.

BLITZER: That suggests to me they're not yet doing that.

OREN: Well, right now, the situation's very fluid on the ground. And, Hamas shows every intention of escalating further. It's not stepping down.

BLITZER: Mr. Ambassador, thanks very much for coming in. We're watching this situation very, very closely.

OREN: Thank you, Wolf.

BLITZER: Michael Oren is the Israeli ambassador to the United States.

In our next hour, we're going to take a look at what the U.S. -- if the U.S. can do anything about this escalating violence that's going on, the tensions escalating between the Israelis and the Palestinians in Gaza. Much more of our coverage when we come back.


BLITZER: A major court decision comes down on affirmative action. Lisa Sylvester's monitoring that and some of the other top stories in the SITUATION ROOM right now. What's the latest, Lisa?

LISA SYLVESTER, CNN CORRESPONDENT: Wolf, the state of Michigan's ban on affirmative action in college admissions has been declared unconstitutional. Six years ago, state residents voted to approve a proposal two. That's a ballot initiative that ban race as a factor in selecting students and hiring public employees.

The six U.S. Circuit Court of Appeals said today that the admissions aspect should be debated at each public university rather than be decided by a constitutional ban.

And the FDA is investigating 13 deaths that may be tied to the popular caffeine boost five-hour energy as first reported by the "New York Times." Since 2009, there have been 90 reports of incidents linked to the drink.

More than 30 were deemed serious, including heart attacks, convulsions, and one spontaneous abortion. Last month, the FDA said it was investigating five deaths tied to monster energy drinks.

And Disney's magic kingdom is about to get a lot more magical. CNN affiliate, WESH, got a sneak peek of the newest addition to the park and expanded fantasy land. It's nearly double the size of its current home in the park, and it's the largest expansion in the park history. Officials say the expansion costs more than $400 million and that it created 1,500 jobs, which I think is really good for the economy especially in that area, Wolf.

BLITZER: A lot of kids are going to be happy to see it.

SYLVESTER: Yes, we're actually going to Disney at the end of next month. So, I think my little kiddos will be happy to see that as well.

BLITZER: Get ready to wait in line.


SYLVESTER: I think so, too.

BLITZER: It'll be fun. Enjoy.

As the ripples grow from the David Petraeus affair, we're getting a better picture of the FBI agent who actually launched this entire investigation. Who is he? Why did he get involved? We have new details.


BLITZER: We can now put a name and a face with the mysterious FBI agent believed to have triggered the investigation that uncovered General David Petraeus' affair.

Our crime and justice correspondent Joe Johns is getting new information about just who Frederick Humphries is and the nature of his relationship with the Tampa socialite Jill Kelley.

Joe Johns is here with us in THE SITUATION ROOM.

The story gets murkier and murkier all the time.

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: Every day it certainly does, Wolf.

Frederick Humphreys is the veteran FBI agent at the center of the scandal described by some as a strong-willed lawman on a mission who brought down the director of the CIA. Others call him an obsessed government agent who went too far.

What he had to know was that his actions and methods could launch an internal FBI review into whether he acted appropriately and we're told that review is going on now according to a law enforcement official.


JOHNS (voice-over): This case is not the first time FBI agent Frederick Humphries has gone against the grain. In the investigation of the so-called millennium bomber Ahmed Ressam who plotted to blow up Los Angeles airport in 1999, Humphries said this of the would-be terrorist.


FREDERICK HUMPHRIES, FBI SPECIAL AGENT: I think Ahmed Ressam started on an adventure that he never fully understood until he found himself in Port Angeles on December 14th, 1999.

UNIDENTIFIED REPORTER: When did you get a sense that he had a significant animus against the United States?

HUMPHRIES: Not particularly.

JOHNS: Which foreign FBI agent might have sounded almost like heresy to his colleagues. Humphries finds himself at the middle of a scandal that takes a flowchart to track. Last spring Petraeus' biographer and mistress Paula Broadwell allegedly wrote an anonymous e-mail to top Afghanistan General John Allen warning him about Tampa socialite Jill Kelley. Allen forwarded the e-mail to Kelley. Kelley told Humphries who told Republican Washington state, Congressman Dave Reichert. Just days before the November election, Reichert arranged for Humphries to talk on the phone with Republican House majority leader, Eric Cantor, who took the story to FBI Director Robert Muller.

REP. ERIC CANTOR (R), MAJORITY LEADER: The information that was sent to me sounded as if there was a potential for a national security vulnerability. JOHNS: Humphries had known Kelley socially for some time previous to the scandal. According to a source close to Kelley, in July Humphries told Kelley he'd been taken off the case and that he's going to or already has spoken to members of Congress and that he's going to pursue this because he thinks there is something wrong going on.

While reports have characterized Humphries as obsessed with the case, his lawyer asserts that proper protocols were followed. In a statement, Lawrence Berger said Humphries reported it to the proper channels and had no further part in the case.

In any event, the source close to Kelley said the agent never asked the socialite if it was OK to clue Congress in. The source said, quote, "He tells her that there will be congressional hearings, that there's going to be publicity. And Jill didn't get into this for publicity." As it turns out, not even the Justice Department went to Congress or the president about it because the attorney general said there was no reason to.

ERIC HOLDER, ATTORNEY GENERAL: There was not a threat to national security.


JOHNS: Humphries is also said to be the agent who sent a shirtless photo of himself to Kelley though the source close to Kelley said too much has been made of it. The one picture we know that fits this description is the agent standing in line with two torso dummies used in FBI training. Our source said it was clearly meant to be humorous and not sexually suggestive.

BLITZER: And do we know why he sent this picture to Kelley?

JOHNS: It sounds like a joke. And that's about all we know. The word we got was it was a joke.

BLITZER: Geez. All right. Thanks very much, Joe Johns, reporting.

Lawmakers have less than two months to figure out a deal to avoid sending the country over the so-called fiscal cliff. So what does it mean for you and your savings if they don't?

Lisa's back with details when we come back.


NALINI NADKARNI, PIONEER IN TREE CANOPY RESEARCH: This right here in this spot, this forest, on this branch, with these mosses is where I feel most at home. My enthusiasm in spreading this is because, you know, like a religious evangelist, if you know you have the truth, you want to make sure everybody has it.

UNIDENTIFIED MALE: It's not for the faint of heart climbing up in these big trees. She's got boon for science and she's a boon for science education.

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: I'm Dr. Sanjay Gupta. This Sunday on "The Next List," queen of the treetops, Nalini Nadkarni.


BLITZER: When it comes to the so-called fiscal cliff, you've seen the charts, you've seen the line graphs, the illustrations, you've seen the serious faces of President Obama and members of Congress as they stand in front of the cameras. And you've watched the stressed-out traders trying to figure out their next moves on Wall Street.

But what is the impending fiscal cliff really mean for you?

Lisa Sylvester's here. She's been checking this part of the story.

It means a lot. Tell our viewers.

LISA SYLVESTER, CNN CORRESPONDENT: Yes, Wolf. You know, when we talk about the fiscal cliff, there are really two parts. One is a sharp reduction in government spending. That will hit hard particularly the defense industry. There are contractors and subcontractors all around the country. The second part is the expiration of tax cuts that would likely mean less money in your pocket.


SYLVESTER (voice-over): At the Whitlows on Wilson Restaurant in Arlington, Virginia, plenty of food and drink. But there's something else cooking up. Worry. Co-owner Jonathan Williams, concerned about the pending government fiscal cliff.

JONATHAN WILLIAM, PARTNER, WHITLOWS ON WILSON: There's a real simple correlation, people have jobs, they spend money. If people are worried about losing their jobs or don't have a job, then they're not going to go out that much. They're going to cook at home or stay at home.

SYLVESTER: Just a couple of miles from the Pentagon many of the patrons here work directly or indirectly for the Defense Department and its contractors. The Defense industry is facing $55 billion in discretionary spending cuts next year unless Congress acts to avert the so-called fiscal cliff. In addition several key tax benefits are scheduled to expire at the end of the year that will have a direct impact on the pocketbooks of many Americans.

Take a couple with one child living in New York earning $100,000. Their tax rate jumps from 25 percent to 28 percent. They could be hit by the alternative minimum tax, the child tax credit drops from $1,000 to $500 and payroll taxes could be $2,000 more next year.

For a single 25-year-old in Michigan who works full-time earning $30,000 a year and going to school part-time, his tax rate would stay the same at 15 percent, but he would lose the American Education Tax Credit and have to pay more than $600 in payroll taxes.

And even though it's weeks before the changes would take effect, the impact is already being felt because of uncertainty. 401(k) plans are taking a hit. The stock market down more than 700 points in the last nine days. Several companies have put a freeze on hiring. And the next thing to watch for, the retail sector, which makes most of its money in the final weeks of the year.

Black Friday is already next week. And retailers are just hoping it doesn't turn into bleak Friday.

UNIDENTIFIED MALE: I'm shortening down the list a lot. You know? Just doing the essentials. Taking care of the priorities first. And then trying to be, you know, penny wise and not dollar stupid.


SYLVESTER: And the National Retail Federation, they did a survey that 64 percent of Americans are watching very closely the negotiations in Washington over the fiscal cliff. And a lot of consumers are taking a wait-and-see approach. And right now they are just simply reluctant to go on a spending spree -- Wolf.

BLITZER: The clock is ticking, ticking, ticking right now.

SYLVESTER: So many people with so much riding on this right now. And again, you've got the holiday shopping season, so retailers, they really want to see a fix right away.

BLITZER: It's that uncertainty that's really causing the stock market, for example, right now to go down, down -- that's 700 points since Election Day.

SYLVESTER: And that affects all of our 401(k) plans as we well know.

BLITZER: People will pay for that. Thanks very much.

Mitt Romney ignites a new political firestorm with comments about President Obama's re-election victory. Up next you're going to find out what he said that even has some of his own supporters outraged.


BLITZER: Mitt Romney has been staying out of the spotlight since he lost the election nine days ago, but in a phone call to top donors this week he laid out one explanation for his defeat.


MITT ROMNEY (R), FORMER PRESIDENTIAL CANDIDATE: What the president, the president's campaign did was focus on certain members of his base coalition, give them extraordinary financial gifts from the government and then work very aggressively to turn them out to vote.


BLITZER: Let's bring in our CNN senior political analyst Ron Brownstein, he's the editorial director for the "National Journal."

Ron, pretty shocking comments that even some Republicans like Bobby Jindal are saying are outrageous.

RON BROWNSTEIN, CNN SENIOR POLITICAL ANALYST: Extraordinary. I mean I was trying to think you probably have to go back to Richard Nixon, you won't have Richard Nixon to kick around anymore, his press conference in 1962 to find comments quite so bitter from a loser in a major race. And basically Mitt Romney was returning to the argument of the 47 percent.

You know, he said that 47 percent of the country was essentially being bought off by government benefits. He renounced that during the campaign. Well, in that phone call he renounced the renunciation.

BLITZER: Why is he doing that? I mean, is it his way of, you know, suggesting maybe this is why he failed at his bid for the presidency?

BROWNSTEIN: Yes, I mean, look -- I mean, he was fundamentally defeated by the emergence of the next America. He ran about as well as you could run among white voters. In fact, he ran as well as any Republican challenger ever among white voters and still lost 332 electoral college votes largely because he performed so poorly among minorities and young people, many of whom are minorities.

And in this I thought he expressed extraordinary contempt for those voters rather than focusing on some other explanations, for example, that his campaign had no effective outreach to nonwhite voters and that he alienated not only Hispanics but it appears Asians with his talk about immigration and self-deportation during the primaries.

So, I mean, this is kind of like not only was it bad politics, it was bad analysis.

BLITZER: Paul Ryan, the Republican vice presidential running mate, also speaking out. I'm going to play a little clip of what he told one of our local Milwaukee TV affiliates.


REP. PAUL RYAN (R), FORMER VICE PRESIDENTIAL CANDIDATE: When we saw the kind of turnout that was occurring in urban areas, which were really fairly unprecedented, it did come as a bit of a shock. So those -- those are the tough kind of losses to have, the ones that catch you by surprise.


BLITZER: Unprecedented turnout in urban areas. Is that another way of saying what Romney said?

BROWNSTEIN: It's a different version. And of course Paul Ryan in his speeches has often made the argument about makers versus takers and whether there's a tipping point in effect where the people dependent on government out-vote those who pay taxes.

Look, Republicans face a choice here. Mitt Romney, as I said, just kind of maxed out on white voters and still lost 332 electoral college votes. The overwhelming evidence, Wolf, is that unless they expand their reach, their bandwidth, and attract more minority voters, they are facing really kind of a hill. Democrats have won the popular vote in five of the last six presidential elections. That's what Republicans did from '68 to '88.

It's not a coincidence. This coalition, as it currently stands, this coalition of the ascendant among Democrats, these are majority coalition. And Republicans have a choice, they can either crack it or rage against it. And what you saw both Romney and Ryan is more raging than reaching out.

BLITZER: You make a good point because in 2000, even when Al Gore lost --

BROWNSTEIN: He won the --

BLITZER: He had a half a million more votes nationally than George W. Bush.


BLITZER: Thanks very much.

BROWNSTEIN: thank you.

BLITZER: Ron Brownstein.

Jack is back with "The Cafferty File." Jack?

JACK CAFFERTY, CNN CONTRIBUTOR: Following up on what you're talking about. The question this hour is Hillary Clinton. The answer might not make any difference what the Republicans do between now and the next election.

Bob in Florida writes, "The last thing we need is another liberal know-it-all with zero business, financial or economic experience. Someone who's never created a job, balanced a budget or met a payroll. Remember who spearheaded the first attempt at universal health care. Fortunately we stopped that one."

Kim in Kansas writes, "Too early to tell, Jack. She should at least be the minimum standard of talent, experience and popularity required to be a candidate. Republicans will have their revengeful axes sharpened in 2016. If you think the old white men were desperate this time, just watch what happens in four years."

Mitchell says Hillary Clinton was the answer four years ago. She would certainly be the answer for this country in 2016. I only hope that she has the sense to take on the challenge and go fix what has been done so far."

Paul in North Carolina says, "How can we know if Hillary is the answer when we don't know the question. The 2016 election is a long way off. No reasonable person would even attempt to predict what the issues might be by then. Let's wait and see what the world looks like in the spring of 2016 before trying to decide who has the right answers."

Gary in Arizona says, "Well, we seemed to have tried everything else. White men, black men, Catholics, Protestants, so why not a woman? But of those available I would prefer Condoleezza Rice to Hillary Clinton. Her resume is certainly equal to Clinton's. I'm for Rice with Rubio as the vice president. Those two on the same ticket would certainly change the image of the Republican Party."

And Mike in Minneapolis says, "Oh, good. It's time to start talking about the next election because it's been about an hour since the last one."

If you want to read more on the subject, go to blog,, or through our post on THE SITUATION ROOM's Facebook page -- Wolf.

BLITZER: Jack, thank you.

They no electricity and they're living gallon to gallon with their generator providing the only heat for their home. Their face- to-face encounter today with the president of the United States.


BLITZER: President Obama visited New York City today to get a first-hand look at the devastation left behind by the superstorm Sandy. He vowed that FEMA will be there as long as it takes to get people back on their feet.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: As you travel around parts of Staten Island, as we flew over parts of -- other parts of the city and the region that had been impacted, there's still a lot of cleanup to do. People still need emergency help. They still need heat, they still need power, they still need food, they still need shelter.


BLITZER: The president spoke with several families, including one couple. Our Mary Snow spent the day with. Mary is joining us now.

Mary, this Sandy really took a toll on this family.

MARY SNOW, CNN CORRESPONDENT: It did, Wolf. And this family has stayed in their home since Sandy tore through 17 days ago. They have no power, they say they've been robbed once, they're afraid to leave behind what little they have left, and they say they -- they are hoping that the president's visit today was not just a photo-op.


SNOW (voice-over): Nick Camerada's mission now is keeping the heat on in his family's Staten Island house. Paying little notice as his community readied for a visit from the president to view the damage of one of Sandy's hardest hit areas. Camerada was more concerned with working on the boiler he was able to rig up just Wednesday to provide heat.

NICK CAMERADA, STATEN ISLAND RESIDENT: Put a generator into your bedroom with an electric oil heat, it's not enough heat to survive. It's -- you know, can I have left the house and went into a hotel? They wanted to give us something somewhere in Jersey. You can't walk away from your house.

SNOW: CNN first caught up with the Cameradas last week as Nick described his harrowing experience.

CAMERADA: I went through the most pain that I ever went through in my whole life. From being electrocuted trying to get back into my house to watching -- all my possessions and my family practically almost dying.

SNOW: Since then the Cameradas have been getting offers of help. To get through each day, they rely on friends and relatives who've been delivering gasoline for the generator. They plan to rebuild, but they say the $19,000 they've been told they can get in government aid won't be enough and feared the president wouldn't see how bad the damage really is.

CAMERADA: Everything is all cleaned up, the streets, you know, look pretty. It wasn't pretty like this. Up until the last two days they cleaned up now because the president's coming down to see. You know, the progress that was made down here.

SNOW: As the president arrived, Nick and Diane decided to try and see if they could reach him. They stood in a small crowd waiting and they were able to speak with the president.

OBAMA: But here's what I -- my commitment to you is I'm going to stay on it. I'm not going to be a stranger and suddenly forget all about it.

SNOW (on camera): Does it change anything for you?

CAMERADA: Well, we're going to see.


CAMERADA: We're going to see down the road. I mean --

D. CAMERADA: We'll see if -- CAMERADA: You know, down the road, there's always a road to recovery and, you know, down that long road to recovery, we're going to see the real Barack Obama. You know, his true colors.

SNOW (voice-over): With a little more hope, they head back to what's left of their home .


SNOW: But today, Wolf, came another potential setback. They learned that the gas lines may be shut off while repairs are done. Leaving them in the cold, once again -- Wolf?

BLITZER: What a heartbreaking story. Mary, thanks very much.

Happening now, the political brawl over the attack on the United States diplomats in Libya gets angrier as lawmakers see a very disturbing video from the scene.

Plus, we're learning what General David Petraeus will say to the U.S. Congress about the Benghazi attack. We're told he wants to set the record straight.

And rising fears right now of all-out war. Israel expands its deadly offensive against militants in Gaza. Will either side blink?

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