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THE SITUATION ROOM

Secretary Clinton's Clot between Brain and Skull; U.S. to Go Over Fiscal Cliff; Terrorists Walked in "Unimpeded"; Interview with Rand Paul; Secretary Clinton's Clot Between Brain & Skull; Bounty Offered to Kill U.S. Ambassador

Aired December 31, 2012 - 17:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


WOLF BLITZER, HOST: And you're in THE SITUATION ROOM.

Happening now, two breaking news stories we're following.

Secretary of State Hillary Clinton is hospitalized with a potentially serious blood clot in her head. Doctors have just revealed the location.

Also, America is just hours away from a massive tax hike and spending cuts, heading over the dreaded fiscal cliff. President Obama says an agreement, though, is within sight.

The Republican-led House of Representatives, though, will now wait until after the country goes after that fiscal cliff, at midnight tonight, before coming up with a deal, if, in fact, there is a deal.

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

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

UNIDENTIFIED FEMALE: This is CNN breaking news.

BLITZER: Let's get to the first breaking news story we're following right now. The secretary of State, Hillary Clinton, is in the hospital this New Year's Eve with a potentially serious blood clot, which doctors have now revealed is located between her brain and her skull.

Let's go straight to CNN's foreign affairs correspondent, Jill Dougherty, for the latest -- Jill, Dr. Sanjay Gupta is going to join us momentarily, as well.

But tell us what her doctors have just revealed.

JILL DOUGHERTY, CNN CORRESPONDENT: Well, Wolf, backing up just a little bit, all day today, the question was, where was that blood clot?, because, after all, in the statement that came out initially, there was no indication of exactly where it was located. We knew that she had a blood clot as a result of the concussion that she suffered when she had the flu. So now, just a few minutes ago, the doctors who treat Secretary Clinton issued a statement, a very technical statement, defining precisely where that is located.

And I'll leave it, of course, to Dr. Sanjay Gupta to explain precisely. But essentially, it is a clot in a vein that is located between the skull and the brain, behind the right ear. And the significance of that is, of course, it's not what people were thinking, which might be something -- let's say deep vein thrombosis in her leg, something she's suffered from -- or suffered previously, in 1998.

But they are also saying that other than that, she is making excellent progress and should make a full recovery.

So what they're doing right now, Wolf, is they are looking at and treating the secretary with blood thinners. But they point out, she won't be released until they figure out exactly the dose that she needs.

So this is significant, of course, for the secretary's schedule. She was going to be coming back this week, everyone thought, looking forward to it; ready, pretty soon, to testify on Benghazi and many other things. But now it looks as if this could take a while longer.

BLITZER: It certainly does.

All right, Jill, stand by.

I want to bring in our own Dr. Sanjay Gupta, our chief medical correspondent, himself a neurosurgeon who knows a lot about blood clots in the head -- Sanjay, I want to read the full statement that her two doctors just released and then you and I will discuss what we have learned. This is the statement from her doctors, Dr. Lisa Bardack and Dr. Gigi Albayumi (ph). "In the course a routine follow- up MRI on Sunday, the scan revealed that a right transverse sinus venous thrombosis had formed. This is a clot in the vein that is situated in the space between the brain and the skull behind the right ear. It did not result in a stroke Republican neurological damage. To help dissolve this clot, her medical team began treating the secretary with blood thinners.

She will be released once the medication dose has been established. In all other aspects of her recovery, the secretary is making excellent progress and we are confident she will make a full recovery. She is in good spirits, engaging with her doctors, her family and her staff."

All right, Sanjay, when you heard the whole statement, walk us through what went through your mind.

(AUDIO GAP)

SANJAY GUPTA, CNN CORRESPONDENT: Well, Wolf...

(AUDIO GAP) BLITZER: I think I've just lost Dr. Gupta.

We're going to try to reestablish our connection with him.

Dr. Gupta is learning about all of this just as we're learning about it.

And just to recap right now, the secretary of State, Hillary Clinton, is in New York -- in a New York hospital. She's recovering not only from a blood clot that was discovered as a result of her routine follow-up MRI on -- on Sunday, but she had originally gotten very, very ill as a result of a severe case of the flu that she had. She became dehydrated. She fainted at one point and she fell on her head, we are told. And that resulted in a concussion and that's why she's been out of commission over these past few weeks, didn't testify before the House or the Senate on the Benghazi report.

But now we've just learned, as a result of this MRI on Sunday, that she does have a blood clot in the vein that is situated in the space between her brain and the skull. And it's right behind the right ear.

So we're -- we're hoping, obviously, she makes a full recovery as her doctors are expressing confidence that she will.

We'll connect with Sanjay and we'll get his analysis of what's going on.

But in the meantime, there's another breaking news story we're following right now, including that so-called fiscal cliff. Only seven hours until the ball drops for New Year's and seven hours until the United States formally goes over that fiscal cliff.

A still combative President Obama says an agreement is in sight. And the Senate Republican leader, Mitch McConnell, says it's very, very close, as well.

But House Republicans have decided they will not vote until after taxes have already gone up. They're supposed to go up after midnight.

We have complete coverage of this breaking news story for you, as well.

Let's begin this hour with our senior Congressional correspondent, Dana Bash -- so, Dana, as we've been saying, we are going over the fiscal cliff.

DANA BASH, CNN CORRESPONDENT: Technically, that is true. And the House has decided that there's no point, from the perspective of Republicans who run the House, to stay tonight, because the plan over the past two or three days, has been for the Senate, which is down the hall behind me, to vote on any kind of deal first and then send it to the House. Well, the Senate isn't even there yet. They're very close, very, very close, but close doesn't give a bill to the -- to the people who need to write it and put it on the floor for votes. So that's the reason why House Republicans decided that they would just let their members know on New Year's Eve that it's OK to go home and that they hope, they say, that they will vote tomorrow.

Yes, technically, there's no question, we are going over the cliff. But it's important to underscore the fact that tomorrow is a federal holiday. And so that means that the markets aren't going to be open to be spooked, which is a big concern here in Congress. And more importantly, they are still hoping that tomorrow they can take the vote that will put things the way they want it, you know, seal the deal.

The other political subtitle -- subplot to this which I think is also very interesting -- and we've been reporting on this for a few days -- is that when the U.S. does go off the fiscal cliff, and everybody's taxes go up, politically and technically, what everybody can say that they voted on are tax cuts, because the taxes are already up, as opposed to voting on tax increases. So it's a lot more politically palatable, easier to explain to constituents, and more importantly, perhaps, their political rivals.

Now, one last thing before I go back to you, Wolf, I should tell you, I pointed to the Senate. That's down here behind me. Right on the other side of the Rotunda, Senate Republicans are meeting as we speak. They're getting an update from Senate Republican leader, Mitch McConnell, who, of course, has been the chief negotiator on talks with the vice president.

We were told going into this meeting that there wasn't a deal, that they were just getting an update. But perhaps we'll have more of a sense of whether the Senate even thinks that they can vote tonight. Mitch McConnell wanted to just get everything done that they agreed to. But so far, the Democrats who are running the Senate are saying not yet.

BLITZER: Well, if it's more politically palatable, Dana, for the House Republicans to vote on it tomorrow, as opposed to today, why not -- why not the Senate Republicans?

Why don't they wait until tomorrow, as well?

BASH: That's a great point. It's something that we have been talking about internally in the hours and hours and hours that we've been spending walking in the halls and standing and waiting to see what will happen, that that is certainly a potential political reason to wait. It doesn't seem as though that really is what's driving the Senate Republicans. It's more of an issue of, I'm told by Republican sources in the House, maybe just a handful of Republicans who could be swayed to vote for it, where otherwise, they wouldn't have been able to do it.

BLITZER: Dana, stand by.

We're going to continue to watch this story. I'm anxious to see what the Senate, the Democratic leadership, the Republican leadership, decides to do.

Will there be a vote on the floor of the United States Senate in the coming hours or not, a deal or no deal? Stand by, lots at stake.

What does it mean, though, if the U.S. goes over the fiscal cliff?

Technically, the U.S. already going over the fiscal cliff because the House is adjourning.

Tom Foreman is joining us now with more details.

What are you seeing -- Tom?

What does it mean?

TOM FOREMAN, CNN CORRESPONDENT: You know, Wolf, even if you don't care about politics, you don't care about the president, you don't care about the parties or Congress or anything else, you should be watching this number back here right now, because if this gets to zero without a deal, every taxpayer in America is going to be affected, or at least we're going to be one giant step closer to them being affected, because taxes will go up for everyone.

By how much?

Let's look at some examples here.

Let's say that you make $50,000 a year. That's the median income in this country. I'm talking about for a couple, for a family. It's a little bit different with individuals, but still pretty close.

If you make $50,000 a year, your taxes are going to go up by $2,000 next year and every year after that unless this thing is fixed somehow. That's a whopping amount of money for people making that little.

And that's what is in place if this goes that direction.

What about if you make more than that?

Let's say that you make $75,000 a year. That's a pretty good bit more.

But if you make $75,000 a year, you're going to pay an additional $3,500 in taxes next year and every year after that unless something is done about that. So another big increase there for a couple.

And now let's look at $250,000. This is the amount the president has been talking about a whole lot -- $250,000 a year. Your taxes will go up by $8,000 next year if a deal is not struck.

Now currently, with the numbers we're talking about, Wolf, if they can make this deal, where the cutoff for all this happening is $450,000, then none of this happens. All of these people would keep the current Bush era tax cuts. They would not see these increases. The increases would only kick in for people who are making more than $450,000 as a couple, or more than $400,000 as an individual. They would return to the Clinton era tax rates of 39 percent versus 35 percent right now. But that's only if there's a deal. If there is not a deal, this is what's waiting for virtually all of us out there, which is a whole lot more taxes than we currently pay.

And I do want to point one more thing out here, Wolf. Already, in the coming year, you're probably going to see your taxes go up a little bit, because this past year, we've all enjoyed a relief from payroll taxes. Those have been reduced a little bit. There's no real sign that that's going to continue. There's going to be a little bump up, so that if you make, say, $30,000 a year, you'll pay maybe $50 more per month. If you made $120,000 a year, you might pay close to $200 more a month.

You may not see that so much, because it will just vanish in your check. But nonetheless, that's already coming. It's all the rest of this that is at stake. And that's why I say whether you care about politics or not, keep watching that number, because that number is tied directly to your wallet -- Wolf.

BLITZER: It certainly is.

All right, Tom, a good explanation.

Thank you.

As the U.S. moves closer and closer to that fiscal cliff, I'm going to speak with Republican Senator Rand Paul about the consequences. We're taking a closer look at what all of this will mean for you.

Plus, Hillary Clinton is spending New Year's Eve in a hospital in New York City with a potentially serious blood clot in her head. We're going to hear from a medical expert.

Stand by.

(COMMERCIAL BREAK)

BLITZER: I just want to update you on the breaking news we've been covering here in THE SITUATION ROOM.

First, the secretary of State, Hillary Clinton, she has now been diagnosed, thanks to a routine follow-up MRI, with a blood clot in the vein that is situated in the space between the brain and the skull, right behind the right ear. It did not result in a stroke, according to this follow-up MRI, or neurological damage. This according to her doctors.

She's described as being in good spirits, excellent pro -- making excellent progress. But we're watching what's going on.

We're going to check in with our own chief medical correspondent, Dr. Sanjay Gupta, for an update on what's going on. He's a neurosurgeon, as our viewers know.

The other breaking news story we're following is, at least technically speaking, the United States, at midnight tonight, will go over that fiscal cliff. That's because the House of Representatives is now adjourning for the day. It will not consider any legislation that may pass the United States Senate, at least until tomorrow. So technically, the U.S. is going over the fiscal cliff, although if the Senate passes legislation and the House follows suit tomorrow, practically speaking, it won't have any impact, because tomorrow being January 1st, a federal holiday.

Much more on both of these stories coming up.

But there's other news we're following, including the former president, George H.W. Bush. He is now out of intensive care.

Mary Snow is monitoring that and some of the other top stories in THE SITUATION ROOM right now.

What's the latest -- Mary?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, a spokesman for Mr. Bush says his condition has improved and he's been moved to a regular hospital room in Houston. He's been hospitalized for more than a month, initially with bronchitis. A fever sent him to intensive care. A note from Bush's chief of staff assured supporters his condition is not dire and everyone should, please -- and I'm quoting here. "Put their hearts back in the closet."

Venezuelan President Hugo Chavez is suffering from new complications following cancer surgery. Venezuela's vice president says the president has been battling a respiratory infection and his health remains delicate. Officials have canceled New Year's Eve celebrations in Caracas and are asking for prayers. The 58-year-old president first announced he had cancer back in 2011.

Here in the U.S., nine people are dead following a tour bus crash in Oregon. The bus skidded on ice, crashed through a guardrail and fell several hundred feet down an embankment yesterday. One official says passengers apparently ejected from the bus as it fell. At least 26 people are injured, including the driver. The bus was returning to Vancouver from Las Vegas.

And two boys are back home in Georgia with their mother after being missing for 10 days. The boys were found in Austin, Texas when a man watching CNN's coverage of the story recognized their photos and called police. The boys' father faces felony charges of Interstate interference with custody -- Wolf.

BLITZER: Mary, thank you.

A newly released Senate report on the attack in Benghazi, Libya reaches a damning conclusion, namely, that terrorists essentially walked into the compound and set it on fire. The U.S. ambassador and three other Americans were killed.

Our Pentagon correspondent, Chris Lawrence, is joining us now with the findings -- Chris, update our viewers.

CHRIS LAWRENCE, CNN CORRESPONDENT: Well, Wolf, this new report spreads the blame for that attack, blaming intel, State, even the Pentagon, to some degree, saying there was no plan in place to rescue Americans there.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): A new Senate report says the State Department should have shut down the Benghazi mission before the attack that killed four Americans. It chastised officials for relying on local militia to guard the front gate.

SEN. SUSAN COLLINS, (R), MAINE: The terrorists essentially walked into the compound, virtually unimpeded.

LAWRENCE: Senators say the State Department missed plenty of red flags. A rocket-propelled grenade hit the Red Cross in May. A bomb exploded outside the U.S. mission in June. And another RPG hit the British ambassador's convoy, prompting the U.K. to close its mission.

Senators questioned how much more the State Department needed to see before officials realized they didn't have enough security.

SEN. JOE LIEBERMAN (I), CONNECTICUT: We've got to close this facility because we can't protect American personnel in Benghazi.

LAWRENCE: The report also condemned communication failures, like the fact the head of the military's Africa Command didn't even know about the two dozen CIA personnel stationed nearby.

Senators argued if the Pentagon had the resources to respond faster, perhaps the military could have helped fight off the second attack on the CIA annex, which came hours after the first.

COLLINS: We should have sufficient personnel, ships, weapons and other assets available to be able to respond in the course of several hours.

LAWRENCE: The report essentially orders intelligence agencies to look beyond terrorist organizations when assessing threats. It recommends intel officials, quote, "Broaden and deepen their focus in Libya and beyond on nascent violent extremist groups in the region that lack strong operational ties to core al Qaeda or its main affiliate groups."

(END VIDEO TAPE)

LAWRENCE: And perhaps the most damning indictment of this report is the fact that the State Department did not follow its own recommendations from previous security failures, such as installing these so-called man traps -- a sort of a high tech gating system that senators argue may have stalled that mob at the front gate and perhaps saved some American lives -- Wolf.

BLITZER: Chris Lawrence, thanks very much.

Important information for our viewers.

Much more news coming up, including the latest on the fiscal cliff. One senator accusing Democrats of trying to stick it to the rich.

We're going to talk with Senator Rand Paul of Kentucky. We'll ask him why he says a fiscal cliff deal won't help the country.

Stand by.

(COMMERCIAL BREAK)

BLITZER: The breaking news we're following, the United States is going over the fiscal cliff, at least for a short while. The House of Representatives deciding just a little while ago it will not vote on a deal tonight.

Earlier, President Obama sounded slightly optimistic.

Listen to this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: They are close, but they're not there yet. And one thing we can count on with respect to this Congress is that if there's even one second left before you have to do what you're supposed to do, they will use that last second.

(END VIDEO CLIP)

BLITZER: Let's bring in our chief White House correspondent, Jessica Yellin, for the latest on what they're thinking over there at the White House -- I assume they're hoping for a deal and that the Senate will actually pass it tonight, before midnight.

JESSICA YELLIN, CNN CORRESPONDENT: Yes, Wolf. And they're hoping for a deal. The sense I'm getting is that action is going to move more over to the Hill, where Senators McConnell and Senator Reid's staff, perhaps, can start working the remaining details out. And, you know, there has always been some hope that the Senate can resolve this. But the problem when we go over the cliff, Wolf, is that while the Democrats have had a challenge wooing Republicans to date, once the nation goes over the fiscal cliff, it's the Democrats who could revolt, because as soon as taxes go up tomorrow -- and Republicans will be racing, Democrats assume -- will be racing to find a way to bring taxes down.

And many Democrats are of the opinion that that will give Democrats enormous leverage come tomorrow. They'll have more negotiating power come tomorrow. And so you might see Democrats tomorrow be even less willing to sign onto this deal. So in 24 hours, Democrats might like today's deal even less -- Wolf.

BLITZER: And it's getting more and more complicated as the delay continues over at the White House.

Are they at least suggesting that if we go over the cliff tomorrow, that there's still a possibility that both -- let's say the Senate doesn't act tonight, that they act sometime tomorrow. They say they can still resolve this. So for practical purposes, the worst parts of this fiscal cliff won't be really felt by the American public?

YELLIN: Absolutely. The problems are not technical. In terms of putting off the taxation and what has to be done mechanically with the IRS so that Americans don't feel a tax pinch, that can be handled. If there is a deal on those spending cuts, that can be handled. If we go over the cliff tonight and have a deal tomorrow, or even in a week, that can be handled.

The problem is, the politics change tomorrow. Once we've gone over the cliff, it's a whole new ball game that it is today, before, because tomorrow, the leverage has shifted. The views look different to both Democrats and Republicans. And we might just see a different kind of tug of war play out in 24 hours -- Wolf.

BLITZER: Jessica Yellin, we'll be staying in very, very close touch with you.

As soon as you hear anything important over there, let us know.

There may be an agreement at hand, but at least technically, the United States is, in fact, now going over cliff. There were some tough words on Capitol Hill today.

Listen to this from Senator Rand Paul of Kentucky.

(BEGIN VIDEO CLIP)

SEN. RAND PAUL (R), KENTUCKY: Mark my words, you will raise tax rates and you will feel good because you went after and you got those rich people, because you said you were. You campaigned against rich people and you got enough envy whipped up in the country. And you're going to get them. You're going to stick it to those rich people.

Well, guess what?

You may not get any more revenue. You may not get any more economic growth. But you can say I stuck it to the rich people.

(END VIDEO CLIP)

BLITZER: And Senator Paul is joining us now from Capitol Hill.

Senator, thanks very much.

Tough words from you. I want you to explain what you meant in a moment.

But let's talk about what's going to happen.

Are you hearing there will a vote tonight, before midnight, on the floor of the Senate?

PAUL: I think there's a very good chance there will a vote tonight. I think they have come to agreement. I think taxes will go up; also, spending will go up.

But I've always thought that, really, the crisis of the tax rates going up is not the real crisis in our country. The real crisis in our country is the debt crisis. And I think we -- we missed it on that. We're not going to address the debt crisis in any meaningful way.

BLITZER: How will you vote on the legislation, assuming there is a deal and it comes up tonight?

PAUL: Well, you know, I've always said it's a bad idea to raise taxes on anyone. And it doesn't really matter whether they're rich, poor or middle class.

If you take more money out of the private sector and send it to government, most of what I've seen up here, with the money that we receive is wasted, inappropriate and counterproductive. So I don't think there should be more revenue coming in. I think we should actually have less revenue, but a lot less spending, because we don't do it very wisely.

BLITZER: So will you hold your note and vote in favor of it or will you reject it?

PAUL: You know, we're going to protect 99 percent of the people from drowning, which, you know, when you use the analogy of drowning, it makes everybody -- they should understand that basically raising taxes is drowning. It's a bad idea.

So we're going to save 99 percent of the people. We're going to make those tax rates permanent, is what I'm hearing, which is good.

The only thing that kind of confuses me still, that is that if it's good to protect 99 percent of people from a policy akin to drowning, that why is it good, then, to go ahead and throw the 1 percent overboard and raise the taxes on those?

Maybe because they can afford it. Well, the problem is, a lot of us work for rich people. You might sell a fancy car to a rich person or you might build a yacht that a rich person buys. So we are interconnected with these people. So I don't think you can necessarily punish one segment of the economy and it not have repercussions on the middle class.

BLITZER: So does that mean, Senator -- I'm sorry for being obtuse, are you going to vote yes or no, in favor or again, the legislation, the deal?

PAUL: I'm a likely no, because there's a lot of new spending in it, also. And there's going to be tax increases, which I think are bad for the economy. There's also going to be increases in spending. We have a spending problem up here. And instead of trying to restrain spending, they took entitlements off the table and they've actually added in new spending. There will be new spending in this bill, which I think is the wrong direction to take the country in. BLITZER: You know, of course, if you were in the majority and you voted no and there was a majority in the Senate that voted no, millions of people in Kentucky would automatically see their taxes, if you make under $400,000 a year as an individual or $450,000 a family, your taxes are going to be going up. And that would be painful to 99 percent of the people out there.

PAUL: I agree. But you have to realize who's insisting on taxes going up. The president has created this fiscal cliff. He has said that he will not approve keeping the same tax rates for those 99 percent that people have sympathy for, that I have sympathy for in my state.

I'm one of the 99 percent. I'm not one of the 1 percent. Most of my friends I know are in the 99 percent. So, I do want to protect their rates. And I would protect everyone's rates.

The president is the one who has created this fiscal cliff. He insists on raising taxes. It's really his intransigence that endangers those 99 percent.

BLITZER: But the president is saying that he is now willing to do what the Republicans asked back in 2001, 2003, make those Bush tax cuts permanent. And he's saying yes, the Democrats now have agreed. Democrats say they will be permanent. There will be no tax increases for 99 percent, for people making under $450,000 a year. Those will be permanent taxes.

You support that. But because 1 percent are going to have to pay a little more, they're going to go from 35 percent to 39.6 percent, if you're making more than $450,000 a year, you're going to be willing to see all those millions of other middle class families suffer?

PAUL: It's actually not that. Actually, if it were only that bill, Wolf, if it were just protecting the 99 percent, well, I want to protect 100 percent. I would vote for a bill that protected 99 percent. Heck, I'd probably vote for a bill that protected 80 percent, because I want to protect anybody from big government.

But the thing is, is it's not just that. They're heaping on new spending. So, not only are they raising taxes, maybe on a small percentage of people, but a large amount of money, but they're also going to spend more money.

So, it's a spending bill. It has stimulus spending in there. It's going to give a five-year stimulus spending to some of the president's plans from 2009.

So, I object to increasing spending and increasing taxes. That's really the deal killer for me. If it were just tax rates and you told me I had the choice of protecting 99 percent, I would vote for -- you know, when the House bill came up that would have protected 99 percent, I would have voted for that because it didn't have new spending.

This has new spending which I think is taking the country in the wrong direction.

BLITZER: But just put on your political punditry hat for a moment. I assume you agree that if Harry Reid and Mitch McConnell put it up on the floor and there's a vote tonight, it will pass the Senate despite your objection?

PAUL: Yes, I think it will pass with bipartisan support in the Senate. And the House is a little more unpredictable. I think it will end up, once Democrats sign on board in the House, it should pass as well. But it's going to require Democrats and Republicans, it probably in both bodies, in order to pass.

I personally just don't like it because I think we're kicking the can down the road and we aren't really addressing the real crisis, which really, to tell you the truth, was not the fiscal cliff that everybody has been talking about. It's a debt crisis, where we're spending over $1 trillion each year we don't have, where we now owe more per person than they do in Greece. In some -- by some measurements, we're worse off than Greece now. And this deal will do nothing to help reduce the deficit.

BLITZER: Hey, Senator Paul, happy new year to you, to everyone out there. Thanks very much for joining us.

PAUL: Thank you, Wolf.

BLITZER: Please pass along my best regards to your dad as well.

We have more details emerging right now on the Secretary of State Hillary Clinton's condition. We'll speak with our own Dr. Gupta on the blood clot that has just been discovered between her skull and her brain.

(COMMERCIAL BREAK)

BLITZER: We're following the breaking news about the Secretary of State Hillary Clinton. She's now been diagnosed as having a blood clot in the vein that is situated in the space between her brain and the skull behind her right ear. This according to her doctors who said the blot clot in her head was discovered as a result of what they describe as a routine follow-up MRI on Sunday.

They insist she is making excellent progress. They say, "We are confident she will make a full recovery."

Let's bring in our chief medical correspondent, Dr. Sanjay Gupta. He's joining us by phone.

I got to tell you, Sanjay, when I heard, yesterday, that she had a blood clot, I assumed it was in her leg, deep vein thrombosis. Maybe some place else. I always assumed it would be much more serious if it was in her head.

You're a neurosurgeon. When you read the statement her doctors put out just a little while ago, what did you think? DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT (via telephone): Yes, you know, I agree with you. It was a little surprising that they didn't just come right out and say that.

What I think the most concerning thing was and what people sort of were worried about the most was the fact that -- the idea that this could be a blood clot actually pushing on her brain. You think a head injury. You have blood that's collecting, and that's pushing on the brain. And that's not what this is, and we had a pretty good idea it wasn't because you wouldn't treat something like that with blood thinners.

What this is, is a blood clot in a vein. It's not a vein in her leg. But, rather, one of the veins that drains blood from her brain. So, this is -- it is -- it is more concerning. They were very careful with how they worded this, Wolf. To say, look, there's no evidence that she has had a stroke, any neurological damage. But that's exactly what you would be concerned about.

And, you know, this is certainly -- from a neurosurgeon's perspective, a more urgent matter. It's not, again, a mass or collection of blood pushing on the brain. But this is something you want to address fairly quickly.

BLITZER: Of course. Obviously, that goes without saying. They got to do something.

So, how do you address it? When you say they're giving her blood thinners, what do you suspect? What kind of blood thinners is she receiving? And how long will she need to be on this? Especially given the fact she has a history of this problem. Behind her knee, she had a blood clot not that long ago.

GUPTA: Let me put it to you like this. When you think about the blood glow to the brain, there's two things that are happening simultaneously. There's blood flowing to the brain and there's blood flowing away from the brain. That probably makes a lot of sense.

Here's the concern. If one of the areas that control the blood flowing away from the brain becomes blocked, then the blood starts to build up within the brain, within the skull. And that's what could possibly cause a stroke.

In this case, you know, the particular vein they're talking about, they -- from the description it sounds like there's enough other areas for the blood to travel so that that the blood is not building up in the brain. But still, Wolf, to your point, you have to take care of that problem by giving someone, in this case the secretary of state, blood thinners. You essentially start to break up the clot that is sitting within that blood vessel. It usually takes -- it can take a few months. But after that, the clot, you know, will be gone and the blood flow will be restored to normal.

As you point out, she's had a history of blood clots in the past, back in 1998. In fact, I was working in the White House that time for her. And, so she has this propensity to develop blood clots. And this may be another indication of that.

But again, you know, this is -- you know, you want to make sure that, you know, she's not developing any pressure inside the skull as a result of this blood clot in that particular vein.

BLITZER: They'll monitor it. I know you're going to be with us at the top of the hour, Sanjay. But quickly, I assume this blood clot in her head resulted from the concussion she suffered after she fainted a few weeks ago.

GUPTA: Yes, you know, it's interesting, it's not a very typical thing, to be frank. You know, you don't typically see blood clots forming in veins after this sort of concussion. I think we may be getting more details, as you point out, precisely as to why this occurred.

But one of the things, again, is that she is somebody who has formed these blood clots before. In the previous instance, it was in her legs. But she may be, you know, there are certain people who are just more likely to develop blood clots. And I'm sure this is something her doctors are thinking about, checking various parameters within her blood to see, you know, does she clot more vigorously than normal. And that in combination with the brain injury or concussion could have led to this.

But, you know, when I -- like you, Wolf, when I was hearing all this, you and I were together at the very start when we first heard about her concussion, there were certain pieces just sort of missing. I think there may still be some details that are forthcoming, Wolf.

BLITZER: I know we're going to be getting more information. You'll be joining us throughout our coverage. Sanjay, stand by for that.

Once again, Hillary Clinton now diagnosed with a blood clot situated between her brain and her skull, behind her right ear. More on this story coming up.

Also, the House of Representatives won't, won't be voting tonight. So what will it mean specifically when the United States at midnight tonight goes over that fiscal cliff?

We're going in depth. That's next.

(COMMERCIAL BREAK)

BLITZER: So what will it mean if the United States does, in fact, go over the fiscal cliff, even for a day or two?

Joining us now is Greg Ip. He's the U.S. economics editor for "The Economist" magazine. Ali Velshi joining us from New York as well.

How dangerous is this situation right now? The United States is going over the fiscal cliff, at least technically, for a day, maybe longer. What do you think?

GREG IP, THE ECONOMIST MAGAZINE: Well, based on what we know right now, it's probably not going to be a big deal. Presumably, the legislation that will get passed will be retroactive. So, even if rates go up for a day, it will be retroactively put back to where they were. And since people weren't going to feel it since they got their first paycheck in January, they may never know anything happened.

But it's kind of a mixed picture nonetheless, because as markets get a look at this deal, there are a few things that are going to become apparent.

Number one, although we've removed the single biggest piece of the fiscal cliff, which was the possible tax increase on the middle class, we still got the sequester to deal with. That's $110 billion a year. The payroll tax cut goes away, that's worth $1,000 per family in the coming year. That suggests there's still a risk of significant fiscal tightening.

BLITZER: How many days before there is a danger point, before they -- the U.S. will really potentially go into another recession?

IP: Well, if the other pieces of the fiscal cliff are not fixed, that could start happening in the next month or two, especially as the realization begins to dawn on investors and the public that these other things haven't been dealt with. We'll see defense contractors issuing layoff notices, the federal government furloughing workers and the same thing. And then, of course, we have the whole threat of the debt ceiling being hit in two months from now and the possible loss of confidence that entails.

BLITZER: Ali Velshi is with us.

Ali, you got a question for Greg, too.

ALI VELSHI, CNN CHIEF MEDICAL CORRESPONDENT: Yes, first thing I want to do is I want to correct something that Rand Paul said on your air a few minutes ago and I'm glad Greg is there. Rand Paul made a ridiculous, ridiculous statement about how the U.S. spends more per -- has more debt per capita than Greece.

Let me explain to everybody. The U.S. is the eighth highest per capita production in the world, OK? It's the richest country in the world. It's eighth highest. Greece is number 34. So we have more of everything than Greece does.

So that remarkable fear-mongering about debt, which Republicans are putting in, is what part of the problem is.

Greg, there -- the debt concern in America is real. It is real. It is nowhere near as real as people like Rand Paul need to make it sound. Greece can't issue its own bonds. America can.

There is about zero chance -- in fact, I have more chance of growing hair than the U.S. has of defaulting on its debt. I think this is ridiculous and we have to point out that a lot of these Republicans, particularly Tea Party Republicans, are making these statements that are simply not true.

The U.S. stands no chance of defaulting on its debt anytime in your or my lifetime.

IP: Well, I think I agree with you on almost all of that, Ali. But I think it's worth pointing out there is a point in here the Republicans are raising, which is a good one, which is that if the deal goes through, as it's been written, and that's all we get, the impact on long-term deficits is negligible.

VELSHI: Right.

IP: The debt is still on an unsustainable rising path. We've made no meaningful reforms to the entitlement programs.

VELSHI: Right.

IP: If I have a concern, it's that everybody knows what we need is a deal that smoothes us out of too much austerity in the near term so we don't go back to recession. The deals with the debt over the long term.

And I worry we're getting the opposite. A deal that squeezes us tighter in the next six months when we're least able to prepare for it but does nothing about that long-term debt picture, which is what should concern us.

BLITZER: Let me ask both of you.

Ali, first to you. Why do you assume that the United States would not default? What happens in February or March if the House of Representatives, if there aren't 218 votes to raise the debt ceiling?

VELSHI: Right. So that would be a technical default. The idea that by law the United States can't pay its bills because we've hit the debt limit is very different from the U.S. being unable to pay its bills.

It may be legally locked in to not paying its bill because we don't increase the debt limit, which is -- you know, the debt's limit another discussion. There's virtually no other normal country in the world that has one. It's just a bad way of doing business because we divorce our -- how much we can spend from our actually legislation. It would be much more sensible to have the two connected to each other. I know that's something Democrats and Republicans share a view on.

This is just an anachronism. It's a bad way of doing business. But that -- you're right, we could technically, the Treasury could be bound to not pay bills. But there's no chance that the U.S. will not be able to afford its ability to pay bills.

And we -- there's just so much nonsense in the debate. If we got past the nonsense and realized what we need to focus on is long-term debt reduction, short-term economic creation and job creation, that would be the answer.

BLITZER: All right.

VELSHI: But we get pushed into our corners and don't say things that make sense, that's the problem.

BLITZER: Very quickly, Greg. If the U.S. does technically default, that U.S. credit rating would presumably go down again. There would be severe repercussions as a result of that.

IP: First, two points. Number one, it's possible we could hit the debt ceiling and rather than stop paying interest on the bonds, which would be a default, we stop paying Social Security checks, we stop paying the soldiers' salaries, we stop paying all those other bills instead --

BLITZER: None of that's going to happen --

IP: But, we will see. But --

BLITZER: Social Security, soldiers, they're going to get their money.

IP: But the Treasury worries about is that accidents can happen. And you might miss a payment. And the thing that's rather worrisome about that sort of default, you can't retroactively fix it. That's why that is a different animal from the fiscal cliff, the tax rates.

BLITZER: All right.

IP: You can retroactively fix those tax rates. You can't retroactively fix a default.

BLITZER: All right. Greg Ip of "The Economist" -- thanks very much.

Ali, don't go too far away.

A United States ambassador now has a price on his head. We have details on the latest on the al Qaeda plot that also targets U.S. servicemembers.

Stay with us.

(COMMERCIAL BREAK)

BLITZER: Al Qaeda's branch in Yemen is now putting a price on the head of the United States ambassador. They're offering several pounds of gold for his death, and another reward for anyone who kills a United States service member.

Brian Todd has this report.

(BEGIN VIDEOTAPE)

BRIAN TODD, CNN CORRESPONDENT (voice-over): Less than four months after the killing of U.S. Ambassador Chris Stevens in Benghazi, Libya, word of a specific threat to another American envoy in another Arab country where al Qaeda is dangerously strong. A bounty of $160,000 worth of gold has been placed on Gerald Feierstein, the U.S. ambassador to Yemen.

According to site Intelligence Group, which monitors jihadists on the Internet, the bounty was announced in audio clips and screen grabs posted by militants.

We can't verify the clip's authenticity, but the U.S. and Yemen governments are taking them seriously. The militants also offered $23,000 for the killing of an American soldier in Yemen. Analysts those militants may be affiliated with al Qaeda in the Arabian Peninsula, the terror group's powerful branch in Yemen.

GREGORY JOHNSEN, AUTHOR, "THE LAST REFUGE: YEMEN": They've really been looking for a way to hit the United States whether the U.S. embassy in Yemen which they attacked in 2008, or carrying out more attacks here in the United States.

TODD: This is the same group that came close to detonating the a bomb in the underwear of a militant in a 2009 Christmas day plane plot to bomb an airliner bound for Detroit. It attempted to send printer bombs to the U.S. the following year and tried again this year to bomb a plane bound for the U.S.

It's also not the first time al Qaeda or an affiliate has offered gold for the killing of a prominent American.

PETER BERGEN, CNN NATIONAL SECURITY ANALYST: The example that leaps to mind is Paul Bremer, who, of course, was the most important American non-military official in Iraq during the George W. Bush administration. And Osama bin Laden himself offered substantial gold reward basically for his death.

TODD: No one got to Bremer.

The odds of an assassination this time? A Yemeni official says security has been stepped up around the U.S. ambassador the areas where diplomats live.

Analysts say Ambassador Feierstein may not need to reinforce his personal security detail too much.

JOHNSEN: In Sana'a, you essentially have this little mini-Green Zone in which all the people at the embassy live within a very secure corridor there right next to the embassy and so they travel from this secure housing location to the embassy and back and forth. And they don't really get out which makes them very, very difficult targets.

(END VIDEOTAPE)

TODD: But one deadly asset that al Qaeda in Yemen has may tip the balance. And it's this man, Ibrahim al-Asiri, the young master bomb- maker for al Qaeda in the Arabian Peninsula. Intelligence officials say he was behind the Christmas Day attack three years ago and the printer bomb plot. He once placed a bomb inside the body of his own brother which came close to killing a top Saudi official.

Ibrahim al-Asiri is still at large, has been able to train others on his techniques, experts say. And, Wolf, still a dangerous man in Yemen.

BLITZER: Yes. Good security of the ambassador in Yemen, I'm sure he does.

TODD: Yes.

BLITZER: I bet it's been tightened a bit.

TODD: Absolutely, it has.

BLITZER: Brian, thanks for that report.

With the U.S. poised to head over the fiscal cliff, people are still finding reasons to celebrate in Times Square.

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BLITZER: Although Washington may be focused on the fiscal cliff, revelers in New York are getting ready to party. They're already crowding into Times Square to ring in 2013.

Poppy Harlow is right in the middle of it.

What's it like now, Poppy?

POPPY HARLOW, CNN CORRESPONDENT: I'm going to let you listen for yourself, Wolf.

How excited are you guys?

(CHEERS)

HARLOW: They have come here from Kuwait, Australia, London, Japan, Ontario, Houston to celebrate this momentous occasion. Behind me, the ball is going to drop -- 12,000 pounds, 32,000 light bulbs, 2,000 pounds of confetti are going to fall here on Times Square.

Beyond excited, they're counting down, practicing the ball right now.