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THE SITUATION ROOM

Chemical Fears; No Progress on Fiscal Cliff; NATO OKs Patriot Missiles for Turkey; Interview with Former British Prime Minister Tony Blair; Egyptian Protesters Tear Gassed; For Royals, No More "Boys First"; Fox News Chief Wanted Petraeus For President; Rare Speech For George W. Bush; Twin Rumors Swirl Around Royal Baby

Aired December 4, 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: President Obama says we're out of time for anything but a down payment for solving the nation's tax and spending crisis. We will have the very latest on what he wants to do now.

Amid fears Syria's embattled government may resort to chemical weapons, NATO says yes to giving Turkey Patriot missiles. We are going to talking things over this with the special Middle East envoy the former British Prime Minister Tony Blair. He's standing by live.

As they eagerly await a new heir to the throne, the British consider changing the rules about who can become king or queen.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

We begin with President Obama's latest ideas for getting past the standoff with House Republicans. He now says there isn't enough time left to do a comprehensive deal, including tax reform, fixing Medicare. So he wants Congress to do a down payment on raising tax rates for the wealthy right now and putting of the hard work until next year.

The president and lawmakers have only 28 more days left to make some kind of a deal before the country hits what's called the fiscal cliff. That's a combination of across the board tax increases for everyone, coupled with drastic cuts in federal spending on vital programs like defense, education, health care, and housing assistance.

Let's go live to our chief White House correspondent, Jessica Yellin. She's over at the White House with the very latest -- Jessica.

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Hi, Wolf.

President Obama has now personally turned down Speaker Boehner's opening offer to avert the fiscal cliff. He didn't do it by calling Speaker Boehner. He did it in a TV interview.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): What does President Obama think of Speaker Boehner's proposal to avert the fiscal cliff? BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Unfortunately, the speaker's proposal right now is still out of balance. He talks, for example, about $800 billion worth of revenues, but he says he's going to do that by lowering rates. And when you look at the math, it doesn't work.

YELLIN: And he won't agree to eliminate a tax deduction for contributions to charity.

OBAMA: Every hospital and university and not-for-profit agency across the country would suddenly find themselves on the verge of collapse. So that's not a realistic option.

YELLIN: But the president didn't say all this to Speaker Boehner. He said it in an interview on Bloomberg TV. The last time the two men spoke was almost a week ago. President Obama is focused on the stalemate with Congress over averting the fiscal cliff, but he's just not talking to House Republicans about it.

At the White House, he discussed the issue with a bipartisan group of governors.

UNIDENTIFIED MALE: I know that the president certainly wants a deal and he didn't try to handicap it.

YELLIN: And earlier this week, he told so-called middle class Americans on Twitter, "Keep pressure on Congress." He's even ventured outside the Beltway rallying supporters to do just that.

OBAMA: I'm going to be asking for all of you to make your voices heard.

YELLIN: Why isn't he calling Speaker Boehner over for a White House meeting?

OBAMA: Speaker Boehner and I speak frequently. And I think the issue right now...

QUESTION: But when? When will the two of you sit down in a room?

OBAMA: I don't think that the issue right now has to do with sitting in a room.

YELLIN: In part, the White House was burned by the debt ceiling negotiations of 2011 when lots of meetings failed to stave off a fiscal nightmare.

But there's another strategy at play. Some in the administration say they learned in the first term the best way to break Washington stalemates, rally the public to their cause. Here's how the president put it to CBS News.

OBAMA: So getting out of this town, spending more time with the American people, listening to them and also then being in a conversation with them about where do we go together as a country, I need to do a better job of that in my second term. QUESTION: Better job of explaining?

OBAMA: Yes, well, explaining, but also inspiring.

(END VIDEOTAPE)

YELLIN: Wolf, when it comes to a deal on averting the fiscal cliff, right now, negotiations are on deep freeze. From the White House's perspective, they're simply not going to budge until House Republicans come around to the view that tax rates on the wealthiest have to go up. But you know House Republicans don't want to agree to any kind of deal that includes that. So right now it's a blinking contest.

Of course, the White House thinks it's one they will ultimately win, because in the new year tax rates automatically go up, but only at a huge cost to the nation -- Wolf.

BLITZER: And there could be a recession once again if we go into that fiscal cliff. How worried are officials over at the White House that the president will get a lot of blame for not showing enough leadership in forcing a deal through by the end of the year?

YELLIN: They take the issue seriously, but they're not worried about the politics of it. They're confident on the politics that Republicans will take the blame.

You and I might not be so certain that it will only go to Congress and Americans will only be angry at Congress. But here inside the White House, they are quite confident that will be the case -- Wolf.

BLITZER: Let's see what happens. All right, let's hope we don't go over the fiscal cliff. Jessica, thank you.

So, as things stand right now, the president and the House Republicans, they are backing very competing plans. Republicans want to keep all the Bush tax cuts, but raise $800 billion by limiting some tax deductions, loopholes, et cetera.

They also want to save another $600 billion by cutting health care spending. The president says the Republicans' proposal doesn't work because of the math. He wants to raise $1.6 trillion in taxes, twice as much as the Republicans. And he wants to do it mostly by increasing tax rates on the top, the very wealthy. He also proposes to cut health care spending by $350 billion.

I'm joined now by our chief political analyst, Gloria Borger.

Where do we stand, Gloria, on the expiration of the Bush era tax cuts?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, we are where we are, and what was interesting to me in listening and reading the transcript of that Bloomberg interview today with the president, sometimes you have to listen to what the president did not say.

Of course, he wants the tax rates on the wealthy to go up. Did he specify the 39.6 percent rate of the Clinton years? He did not. So my question, is there a little give ultimately to sort of say, what if it's not -- what if it doesn't go up to 39.6 percent? What if it goes up to, say, 37 percent, is that something the White House would accept?

Also, in that same interview, the president raised the possibility, which is that after you do tax reform and you close loopholes and deductions, that if the rate is raised, the top rate, there's always a possibility that, after you do tax reform, of course, the top rate would then go down again.

So it was -- you have to listen to the president very carefully to see where there might be some give. The problem from my point of view is that everybody knows what's got to be done in the long-term. It's the question of the short-term deal, how do they get from here to there? We're still nowhere on that.

BLITZER: And let's not forget that John Boehner, the speaker of the House, he came up with a proposal. But not all the conservatives in the House and the Senate are on board.

(CROSSTALK)

BLITZER: And listen to Jim DeMint, the Republican senator from South Carolina.

(BEGIN VIDEO CLIP)

SEN. JIM DEMINT (R), SOUTH CAROLINA: This is not a time to negotiate with ourselves. We need to invite the president to work with us. His proposal was so outlandish, I don't think we should go back to the table until he puts something there that we can work with.

The president has known about this fiscal cliff for over a year. And many of his decisions caused us to be in this position.

(END VIDEO CLIP)

BLITZER: How much of a problem does Boehner have with other Republicans potentially?

BORGER: It's a big problem. It's always been his problem. It's been a problem for the Republican Party since they started taking that no tax pledge 30 years ago.

What is a revenue increase? Is closing deductions and loopholes a revenue increase? And if so, do you have to oppose that? I think what we see going on in the Republican Party right now is a fight between the stalwart, sort of Tea Party no new tax whatever conservatives and those who believe that they have a responsibility to keep the country from going over the fiscal cliff in the short term and in the long term.

And as Jessica was pointing out earlier, the White House has a point here. If you look at public opinion polls, by about a 2-1 margin, people say they would blame Republicans more than the president or Democrats if we were to go over the cliff. So if you're Speaker Boehner, this is something you have to think about.

BLITZER: It's a serious problem. Look at this poll, "Washington Post" poll. Will the president and congressional leaders reach a deal before January 1? Forty percent said yes; 49 percent said no.

Do those numbers motivate the folks out there?

BORGER: Well, they should. Look at how pessimistic the country is about whether the president and the Congress can avert a fiscal crisis in this country. When 49 percent say no, they should all be worried about that.

And, of course, they should also understand that pessimism going into the holiday season and uncertainty for CEOs is not a good fiscal environment for the country. So, of course, this should motivate them. The question is, who is going to blink first?

Personally, I think they all ought to get in a room and just figure it out.

BLITZER: Just work it out and maybe go to Camp David and spend a few days there, come up with an idea or two.

BORGER: Or come in THE SITUATION ROOM.

(CROSSTALK)

BLITZER: We will put them on television if they want. Thank you.

We're moving on to today's other very important developments, including Syria's bloody civil war. NATO is loaning Patriot missiles now to Syria's neighbor Turkey. Will that keep the violence from spreading?

The envoy for the Middle East, the former British Prime Minister Tony Blair, he is standing by to join us right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Today, NATO approved Turkey's request for Patriot missiles to defend its border with Syria. The decision comes amid fears the Syrian government may be preparing to use chemical weapons in the country's civil war.

But NATO insists the deployment is defensive and not part of any planning for a no-fly zone over Syria.

We are going to talk about all of this with the former British Prime Minister Tony Blair shortly.

Our foreign affairs correspondent, Jill Dougherty, is at the NATO meetings though right now in Belgium.

(BEGIN VIDEOTAPE)

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Wolf, NATO insists that the deployment of Patriot missiles is defensive only, not part of any plan for a no-fly zone over Syria.

(voice-over): At NATO headquarters in Brussels, the alliance gives the green light for deploying Patriot missile air defense systems to Turkey to protect that ally against possible attack from Syria, including any possible use of chemical weapons.

UNIDENTIFIED MALE: The NATO ministers unanimously expressed grave concerns about reports that the Syrian regime may be considering the use of chemical weapons. Any such action would be completely unacceptable and a clear breach of international law.

DOUGHERTY: The move comes amidst U.S. concerns that the Assad regime may be, quote, "cooking up recipes, mixing materials for chemicals". That possible preparation is taking place at more than one chemical plant in Syria, officials say.

U.S. intelligence shows nothing has been moved out of the facilities, however. And officials say there is no indication Syria is on the verge of using chemical weapons.

In Turkey Monday, meeting with the Turkish president, Russian President Putin called the deployment of Patriot missiles unnecessary. Syria, he said, is far from plotting any attack on its neighbors. It is absolutely realistic.

But Tuesday at NATO, Russia's foreign minister, Sergey Lavrov, said any use of chemical weapons has grave implications, while downplaying reports about Syria.

SERGEY LAVROV, RUSSIAN FOREIGN MINISTER (through translator): We can call them rumors, we can call them leakage, that Syrian authorities are moving a stockpile of chemical weapons or that they want to use them. As soon as we hear such messages, we engage in responsive demarches and every time we get confirmation that nothing of that sort is being prepared.

DOUGHERTY: Secretary of State Hillary Clinton spent the day meeting with her fellow ministers as they approved a plan to provide Turkey with the missiles. NATO says the number of Patriot missiles and their precise location along the Turkish border still needs to be worked out. It could be weeks before the equipment is in place.

(on camera): U.S. officials insist the intelligence about Syria's chemical weapons was strong enough to warrant President Obama's warning. But they say at the moment, there is no imminent planning for any U.S. military action -- Wolf.

(END VIDEOTAPE)

BLITZER: Jill Dougherty, thank you. Jill reporting from NATO headquarters in Belgium.

So will Patriot missiles keep the Syrian civil war from destabilizing more of the Middle East, including the NATO ally Turkey? In just a minute, we'll ask the special Middle East envoy Tony Blair. We'll talk about that and we'll talk about the violence in Egypt, what's going on in the Israeli-Palestinian peace process.

A lot more when we come back.

(COMMERCIAL BREAK)

BLITZER: Growing unrest in Egypt right now as protesters and police clash over at the president palace in Cairo.

Kate Bolduan is here. She's monitoring and some of the other top stories in THE SITUATION ROOM right now.

These images, these pictures are very powerful.

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: That's right. I was going to say, Wolf, the video that we've been seeing is really amazing. Egyptians protesting President Mohamed Morsy broke through barbed wire at the palace and threw chairs and rocks at police, who in turn tossed tear gas into the crowd.

The health ministry says 50 ambulances have been sent throughout Cairo where hospitals are on high alert. President Morsy was away in the palace. The protests come as Egyptians count down to a public referendum on a new constitution. Much more to come on that.

In South Carolina, parents who camped out for days to get first choice where they kids go to school -- see what just happened -- suddenly found themselves in a stampede. You can see the mob rush as thousands raced to get in line. One parent was knocked down ands injured but not seriously, fortunately. School officials obviously are re- evaluating their plan. Parents, they're much caring about their children's education.

In Nashville, anger and shock after police mistakenly declared a woman dead after a traffic accident. The 30-year-old mother of three was struck by a car while crossing the street. What police call an oversight, they told the victim's family that she had died. Their calls to the hospital found her very much alive but in critical condition.

And is President Obama possibly considering "Vogue" editor-in-chief Anna Wintour as U.S. ambassador to the United Kingdom or France? "Bloomberg News" says the 63-year-old was among a handful of top Obama fund-raisers interested in the post. Wintour has said to have inspired the book and film "The Devil Wears Prada." She's also said to have some competition from other big campaign fundraisers.

That would be very interesting.

BLITZER: It would have been tough there on London and Paris.

BOLDUAN: Yes.

BLITZER: She knows both cities very well.

BOLDUAN: She knows both of those cities well, and she has quite a reputation for being a tough negotiator. BLITZER: She's a tough editor, we know that.

BOLDUAN: Yes.

BLITZER: Not that I've ever worked for her. Just what I heard.

BOLDUAN: You didn't?

BLITZER: No.

BOLDUAN: OK. I was wondering.

BLITZER: Thank you.

The special Middle East envoy Tony Blair, he's standing by to join us live. We're going to talk about the international suspicions that Syria's regime may be preparing to use chemical weapons against its own people.

(COMMERCIAL BREAK)

BLITZER: Joining us now from New York is the former British prime minister, Tony Blair. He's now the special envoy to the Middle East for the U.S., Russia, the European Union and the United Nations, that group collectively known as the Quartet.

Prime Minister, thanks, as usual, for joining us.

TONY BLAIR, SPECIAL ENVOY TO THE MIDDLE EAST: Thank you, Wolf.

BLITZER: It was good to see you the other day in Jerusalem. But let's talk about -- a little bit about what's getting -- what's happening in the Middle East right now.

The U.S., the Obama administration, NATO now, obviously very concerned about the regime of President Bashar al-Assad potentially using chemical weapons, poison gas, against its own people.

Here's the question, what is the difference, killing civilians in Syria with bombs from MiG jet fighters or attack helicopters, as opposed to using, let's say, poison gas or chemical warfare?

BLAIR: Well, that's a good question. I mean, in one sense, in moral terms, there is no difference and almost 40,000 people have died in Syria already.

But I think the use of chemical weapons and poison gas, I mean, I think the fatalities will be very much greater. And it does kind of cross a line. So, you know, these aren't -- you know, these aren't judgments that you can make in any particularly scientific way.

But I think what your administration, what the international community is signaling to President Assad is, if you cross that line, there will be a sharp and strong reaction. And there should be, by the way.

BLITZER: Well, and those were tough words coming from President Obama yesterday, from Secretary Hillary Clinton, from the NATO secretary- general today in Brussels. But is that enough to Bashar al-Assad from using poison gas or chemical warfare, just threats, shall we say? Or is there something else tangibly the international community should be doing?

BLAIR: Well, it's important -- and I'm sure this is being conveyed in many different ways to him -- it's important that he understands that that response is going to be emphatic. So you know, the -- it won't be, in other words, that we issue a strong statement. There will be some action that will follow.

And I -- look, I think he will appreciate that. But the real question is how do we bring this appalling disaster, which is unfolding in Syria, to an end, to try and get a situation where you move to a different type of constitution in which the people can have a say in electing their government and where, you know, the country's then are put on a more stable footing?

Because one of the issues, obviously, is once Assad goes, then what? So this is fantastically difficult. You know, again, what we've seen in the Middle East, we saw it Iraq; we see it now in Syria, is once you lift the lid off these very repressive regimes and out comes all this religious, ethnic, tribal tension.

And somehow we have got to find a way of bringing the bloodshed to an end and stabilizing the situation.

BLITZER: Elsewhere in the region -- and you're watching it very closely -- Egypt right now, we're seeing these protesters, these anti- Mohammed Morsi protesters, now moving closer and closer towards the presidential palace in Cairo, huge numbers. You can see some of the pictures.

Their police had to use tear gas to disperse these protesters. They're concerned about what Morsi is doing as far as democracy in Egypt is concerned.

How worried are you about the situation in Egypt?

BLAIR: I think Egypt is absolutely key to the region, so the answer is you've got to be extremely worried when you see instability affecting Egypt.

And, look, this is -- this is -- again, these are the birth pains of proper democracy, in some ways, but this struggle is immensely important, because you -- obviously what is important in these countries where they've moved to a democratic system is that there is a clear understanding, if you like, that democracy is not just a way of voting, it's a way of thinking.

And part of that way of thinking is that you've got to protect minorities. You've got to -- I mean, democracy doesn't function unless it is accompanied by an open mind.

And so you can understand there is a lot of anxiety in Egypt about the constitutional changes proposed. And, you know, even as the international community obviously applauded Egypt's efforts in bringing about the cease-fire in Gaza, there is concern and anxiety about what's happening there now. And I hope it can be resolved in a way that gives Egypt the balanced democratic constitution that I'm sure most Egyptians want to see.

BLITZER: I hope they can indeed.

Your main job is trying to revive the Israeli-Palestinian peace process. There hasn't really been a peace process, as you know, over the last few years.

Now in the aftermath of the United Nations General Assembly resolution declaring Palestine a non-observer -- a full non-observer state, if you will, of the United Nations, there's the Israelis reacting with announcing more settlements, including along areas that could isolate the contiguity of a Palestinian state on the West Bank.

Is it over with as far as you're concerned, the peace process?

BLAIR: No, it's not -- it's not over with. I mean, it's very tough right now, and, you know, I understand the frustrations that led the Palestinians, the U.N.; I understand the frustrations of the Israelis and the present situation.

But the fact is, when all of that frustration is through and done, you have got to get back to the reality.

And the reality is there is only one way of stabilizing the situation, and that is getting back to a credible negotiation, probably with some sort of framework shaping it that allows us to negotiate the two-state solution that I still believe, despite, you know, people say, well, there's no way it can happen now, it's the only answer.

The alternative, which is a one-state solution, is an alternative that, frankly, you know, a moment's deep analysis shows you won't really work.

BLITZER: But is there any hope in the immediate future, those talks, direct face-to-face negotiations between the Israelis and the Palestinians are going to get off the ground?

BLAIR: Well, it's possible. I mean, look, you know, we've discussed this many times, Wolf. And it's -- most of the time we've been talking about the latest impasse.

But President Obama has been re-elected here in the U.S. I know he feels deeply about this issue. He regards peace between Israelis and Palestinians as a genuine strategic interest of the United States.

And, you know, we're going to have, I think, a fresh opportunity to go back to this issue to try and grip it and frame it in the right way and we've got to try. I mean, I always say to people, you know, we spent decades trying and failing in Northern Ireland and then finally we got a process that worked. And there isn't an alternative except to come back and try again. And that's what we've got to do. Because by the way, as the region is in turmoil, so -- although in one sense it becomes harder for the parties to see a way through, it's more important that the Israeli-Palestinian issue is put in a place where there's some hope and progress because otherwise it could, especially with the other changes in the region, get mixed up in the politics of the region in a way that puts us even further back.

BLITZER: I know you're watching, as all of are, what's going on with these so-called fiscal cliff negotiations here in the United States. And as concerned as we are here in the United States, your concern also is there could be serious international ramifications if the U.S. does, in fact, go over the cliff.

Explain your concern.

BLAIR: Well, the concern people have is the world economy is in a very fragile state right now. And I don't have to say what the problems of the Eurozone are; they're very manifest. But actually in the global economy as a whole, there's a lack of confidence, there's a worry about where it's going.

So if you in America -- and, by the way, people have a lot of confidence in America in this regard -- if you can sort out this issue, then, even though that doesn't sort out all the problems of the American economy or the global economy, it would be a big boost, I think.

It would give people a sense of confidence that there was a -- you know, you guys have got your act together. The decisions were being taken, and I think it will be good for you and good for us.

So I hope you do it. I believe you will. I know right now there's bound to be very tough negotiations and everyone will be laying out positions that seem quite far apart. But you know, the president has been re-elected and I think that gives the situation its own special momentum. And I hope you resolve it and then we're going to have to take some tough decisions over our way, too.

BLITZER: I hope we resolve it as well.

Very quickly, there was a cute video of Hillary Clinton at the Saban Forum here in Washington over the weekend, and it had a clip from you in there. I'll play that little clip.

(BEGIN VIDEO CLIP)

(MUSIC PLAYING)

"You're amazing, just amazing just the way you are."

BLAIR: I just have an instinct the best is yet to come.

"Yes."

(END VIDEO CLIP)

BLITZER: All right. You said you have an instinct the best is yet to come.

What did you mean by that?

BLAIR: Well, I think, Wolf, sometimes when you make an enigmatic comment, you're best to leave the enigma floating there.

BLITZER: I understand completely what you're saying.

One final question before I let you go. The royal baby, as that baby is now being called in Britain, do you fully appreciate, do you understand? Because I'm a little bit confused about the succession issue in England, where the baby or babies, if there are twins, for that matter, where they would stand, because I know there's -- some significant changes are in the works right now.

BLAIR: Well, the significant changes are really to do with the fact that, whether it's a boy or a girl, they're going to be treated equally from now on. I mean, that's the basic agreement, which is --

(CROSSTALK)

BLITZER: Is that a done deal and does it have to be ratified by a whole bunch of various international groups?

BLAIR: Well, I hope not various international groups, but I think it is a done deal, yes. I think so. I'm not totally up to speed with it.

But basically, the country will be extremely excited about it. And I find that even a certain level of excitement here.

But the essential thing is the baby will be in line for the throne and there will be, for the first time, I think, not discrimination against -- I think it's no discrimination, boy and girl; no discrimination religiously, either. So this is progress.

BLITZER: It certainly is. And we wish the royal couple obviously only, only the best.

Prime minister, thanks as usual for joining us. We got through a lot of different issues during this brief interview. Appreciate it very much.

BLAIR: Thanks, Wolf. All the best.

BLITZER: By the way, we're going to be going live to London later to get an update on what's going on at the hospital there as well. I think our viewers are very interested.

Meanwhile, the Fox News chief may have had his own favorite for the White House and it wasn't necessarily Mitt Romney. We're going to tell you how Roger Ales apparently tried and failed to recruit then General David Petraeus.

(COMMERCIAL BREAK) BLITZER: Did Fox have a horse in the presidential race? New report says the network's founder, the current Chairman Roger Ailes, wanted then General David Petraeus, to make a run for the Republican presidential nomination.

CNN's national political correspondent Jim Acosta is joining us now. Pretty I guess bombastic report out there, with a lot of details.

JIM ACOSTA, CNN NATIONAL POLITICAL CORRESPONDENT: That's right. This all goes back to the fact that some Republicans were longing for alternatives to the official GOP candidates in the 2012 race.

And as an audio recording reported by "The Washington Post" reveals, Fox News Chief Roger Ailes appears to step out of the traditional role of news executive to recruit a candidate, David Petraeus.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): Before the extramarital affair that just last month forced David Petraeus to step down as director of the CIA, he was so popular in Republican circles that Roger Ailes, the chairman of Fox News, tried to enlist the four-star general to run for president back in 2011 according to a recorded conversation obtained by "Washington Post" reporter and author Bob Woodward.

UNIDENTIFIED MALE: I'm not running.

ACOSTA: Making the pitch to Petraeus is K.T. McFarland, a Fox News national security analyst. McFarland tells the general that Ailes was willing to give up his job at the network to run a Petraeus campaign.

GENERAL DAVID PETRAEUS: If I ever ran I'd take him up on his offer. He said he would quit Fox and bankroll it.

K.T. MCFARLAND, FOX NEWS NATIONAL SECURITY COMMENTATOR: Bankroll it?

PETRAEUS: Or maybe I'm confusing that with Rupert.

MCFARLAND: I know Roger has done OK. Bankrolling it is the big boss. Big boss is going to bankroll it. Roger's going to run it and the rest of us are going to in house it.

ACOSTA: That big boss, she says, was Rupert Murdoch, head of Fox News parent company "News Corporation." But Petraeus repeatedly shoots down the idea.

PETRAEUS: My wife would divorce me.

ACOSTA: After Petraeus later accepted the job at the CIA, McFarland went on Fox to talk about her conversation with the general, but she never mentioned the Ailes' offer.

MCFARLAND: I think that Petraeus doesn't want to run. I asked him that question and he said I'm not running for president.

ACOSTA: Ailes told the "Washington Post," he did ask McFarland to approach Petraeus, but added it was more of a joke, a wiseass way I have. I thought the Republican field needed to be shaken up and Petraeus might be a good candidate. It sounds like she thought she was on a secret mission in the Reagan administration. She was way out of line.

CNN media critic Howard Kurtz says one part of the Petraeus pitch is plausible.

HOWART KURTZ, HOST, CNN'S "RELIABLE SOURCES": The idea that Rupert Murdoch would bankroll the Petraeus candidacy is not that far-fetched when you consider that Murdoch has given on a couple of vacations, seven-figure sums to the Republican Party.

ACOSTA: Murdoch repeatedly injected himself into race, saying on Twitter last July, Mitt Romney last week. Tough Chicago pros will be hard to beat unless he drops old friends from team.

And Romney people upset at me. Of course, I want him to win, save us from socialism. Republican operatives say they had a sense during the campaign that some at Fox had their favorites.

JOHN BRABENDER, FORMER SANTORUM CAMPAIGN ADVISER: You do have people over there that had candidates they weren't shy about saying stuff about.

(END VIDEOTAPE)

ACOSTA: By the way, that operative you just saw, John Brabender, works for Rick Santorum who meets with none other than Roger Ailes later this week. As for Ailes, we reached out to the network for a comment, but did not get a response.

BLITZER: And as you know, you covered the Republican campaign throughout. There were a lot of people, Republicans and Democrats, who thought that Fox News was playing a direct role in that campaign.

ACOSTA: They did. And actually, Wolf, I had one of the final candidates in the race come up to me during the Republican convention and say basically that he felt that Fox was a little too much in the tank for one of his rivals.

Obviously, that's something that certain candidates might feel from time to time if things aren't going their way, but I was surprised to hear that from one of the final candidates in the raise that he felt that things weren't being handled that fairly overtime.

BLITZER: All right, thanks very much, Jim Acosta, for that. Let's dig a little bit deeper on this story with our "Strategy Session" guests. Joining us, our CNN contributors, the Democratic strategist Paul Begala, and the Republican strategist, Mary Matalin.

All right, assuming the Bob Woodward story in the "Washington Post" is accurate and we do assuming that the audio is accurate. Paul, what do you make of this?

PAUL BEGALA, CNN CONTRIBUTOR: Well, look, first off, everybody knows that Roger Ailes is a conservative. Everybody knows he is a Republican. They also should know that he's a genius. He is one of the smartest people I've ever come across in politics and media.

He helped create President Nixon and President Bush Senior. He helped create Fox News. That guy is a genius, but it doesn't take a genius to know this Republican field was very weak. I'm quite sure Roger is telling the truth when he says I was trying to shake up the field.

It was a very shockingly weak field and it was a smart play. Getting General Petraeus would have I think helped the Republicans enormously. So, you know, good for Ailes. I think I'm not generally one to probably praise the head of Fox News, but good for him. I think he was right about this.

BLITZER: Quickly, Paul, do you think there was any difference substantively between Roger Ailes potentially encouraging someone to run for the Republican nomination as opposed to let's say Oprah, who encouraged Barack Obama to run for the Democratic nomination?

BEGALA: Not in an important way. Fox News is a dominant player in the Republican Party. It's a misnomer to call it a news channel, at least in the opinion part of the day, the evening hours. They are obviously conservative, but I'm not shocked by this at all. I think Roger was right. It was a very weak field that needed shaking up.

BLITZER: You think, Mary, that Fox News is basically an arm of the GOP?

MARY MATALIN, CNN CONTRIBUTOR: No, I do not think Fox News is an arm of the GOP, but there are a number of really incredible conservatives and libertarian voices there. I cannot believe I'm going to have this holiday cheer of agreeing with Paul Begala that Roger Ailes is not only a genius.

He is a visionary with a robust enthusiasm for life and work, but not so much robust affection for politics anymore so I immediately thought, K.T. had overstepped. Believe me, we begged him to get back into politics.

He has a huge impact in what he is doing, but he is running a news organization, and everything that's in the story about shaking up the field was probably true. But I love to hear Paul Begala call one of my favorite people in the world a genius, because he is that.

BLITZER: You want to revise or amend your comments, after what Mary said, Paul?

BEGALA: Sometimes the truth hurt, but the guy is remarkable. He's a very talented guy.

BLITZER: He certainly is. All right, let's talk a little bit about the former President George W. Bush. He gave a rare speech today over at the Federal Reserve Bank in Dallas. Listen to this clip.

(BEGIN VIDEO CLIP) GEORGE W. BUSH, FORMER U.S. PRESIDENT: America can be a lawful society and a welcoming society at the same time. As our nation debates the proper course of action relating to immigration, I hope we do so with a benevolent spirit and keep in mind the contribution of immigrants.

(END VIDEO CLIP)

BLITZER: He still wants, Mary, comprehensive immigration reform. He tried and failed when he was president, but he's making a major pitch for it once again.

MATALIN: Right. And he got 17 percent for Hispanics and 16 percent more Asians. That doesn't mean we have to give up our principles and it was the Democrats that stopped the comprehensive immigration. We need it for the economy and we need to do it morally.

BLITZER: We've got to leave it. Guys, thank you very much.

The once in the future king or queen, the royal baby talk is all the talk. But what would twins, yes, twins mean for succession to the throne? We're going London live, straight ahead.

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BLITZER: The latest now on the royal baby, Britain's Katherine, the Duchess of Cambridge, is spending a second day in a London hospital. She was admitted for acute morning sickness, a condition often associated with women carrying twins, which raises lots of questions about succession to the throne.

CNN's royal correspondent Max Foster is joining us now live from London with details. Max, what's the latest?

MAX FOSTER, CNN ROYAL CORRESPONDENT: Well, we've been given the information the duchess is pregnant and in the hospital. But they don't want to give a running commentary. Prince William was here today, spent the day with the duchess. When he left, we did get an update.

This is what the palace told me. The duchess is continuing to feel better. She and the duke are grateful for the good wishes they've received. She will continue to remain in the hospital and be treated for acute morning sickness. She's improving as she rests and gets the nutrients she needs.

BLITZER: I know, Max, there's been question about succession, especially if there are twins. We have no idea if she's carrying twins, but has all this been worked out and if it has, walk us through what happened.

FOSTER: Well, the pressure is on. You know, there is a general agreement in the government, and the queen agrees with this, everyone has agreed, but if Kate has a girl, that girl should automatically become the next in line to the throne after Prince William. But at the moment, she has a younger brother, and that younger brother will leapfrog her. Just to give you a sense of how complicated this is, Wolf, these laws go back hundreds of years. You have to identify which laws, going back a hundred years, or a thousand years even, what needs to be changed.

Not just in this country, but in 15 other countries, Canada, Australia where the queen is head of state, but there was a breakthrough today. All those governments in those countries said we can't sort out our laws in this country. So there has been some progress.

One stumbling block, Wolf, and that is a Catholic still will never be able to succeed to the throne and some people in Scotland and Canada think there's discrimination still in the law so they have a problem with it. So that might block things.

BLITZER: If there are twins, it doesn't make any difference if the first child is a boy or girl, that first child will be the next in line?

FOSTER: What's interesting is that if there's a C-section, which child becomes the first to come out? The first one to come out will be the next one to the throne.

BLITZER: Protests over at Egypt's presidential palace in Cairo. Reza Saya will tell us what he saw, that's coming up.

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BLITZER: Former New York Mets baseball star, Lenny Dykstra sentenced after pleading guilty to bankruptcy fraud. Kate Bolduan is back. She's got that and some of the other top stories -- Kate.

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: The outfielder who helped the Mets win the 1986 World Series was sentenced to 6-1/2 months in a federal prison, already serving time for an unrelated crime and facing up to 20 years there.

Lenny Dykstra admitted selling items from his $18 million mansion after creditors seize it in bankruptcy. The former all-star and self proclaimed financial guru had earned $36.5 million as a major leaguer.

The six children who were riding this bus fortunately were not injured, but the driver will be charged with running a red light. The Florida Highway Patrol says the bus was t-boned then hit the pole. A sight no parent ever wants to see.

A new movie about Steve Jobs will premier at the Sundance Film Festival, Ashton Kutcher, TV's highest paid actor plays the Apple entrepreneur and in this just released photo, you see, he looks a lot like a young Jobs. The film covers a 30-year span from Jobs' college dropout days to his years in the world of technology, another movie, Wolf, you got to see.

BLITZER: I will see it for sure. Thank you.