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THE SITUATION ROOM

Fiscal Cliffhanger; Hillary Clinton's Political Future; Interview With California Congressman Darrell Issa; Fiscal Cliff Bill in Limbo; Hillary Clinton's Road To Recovery; Iran Claims Success Firing New Missiles; North Korean Leader's First New Year's Speech; Maryland Same-Sex Couples Marry; Colorado's First Pot Club Opens

Aired January 1, 2013 - 16:00   ET

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


WOLF BLITZER, CNN HOST: Happening now: a fiscal cliffhanger. The Senate's bipartisan bill now faces a very uncertain future in the Republican-led House.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), HOUSE MINORITY LEADER: Our speaker has said, when Senate acts, we will have a vote in the House. That is what he said. That is what we expect. That is what the American people deserve.

(END VIDEO CLIP)

BLITZER: But is a sudden rift in the Republican leadership putting it all in jeopardy?

Also, we're breaking down the deal on the table right now. We're going to show you how it impacts view your bottom line.

And what about the secretary of state? Her dangerous blood clot, what could that mean for Hillary Clinton and her political future?

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

Right now, we're following breaking news. All eyes are on the House of Representatives, where lawmakers are weighing the future of a bill that's now effectively a fiscal cliff fix. No vote has been scheduled yet on measure the Senate passed in the middle of the night after sleep -- after steep, tax hikes and spending cuts kicked in.

The vice president, Joe Biden, has been wrangling Democratic votes, while Speaker John Boehner has been trying to overcome some seriously stiff Republican opposition.

Our senior congressional correspondent, Dana Bash, is beginning our coverage this hour.

Dana, what's the very latest as far as Republicans in the House, the majority are concerned?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: What the very latest is, Wolf, is that down this hallway is the House speaker's office. In that office right now are members of the House Republican leadership having a discussion about what to do, what are they going to do? Are they going to have a vote tonight and more importantly at this point are they going to try to put this Senate-passed bill on the House floor with an amendment?

It was very clear in talking to many, many House Republicans coming out of a meeting they had earlier this afternoon that there was a big desire to have an amendment with some spending cuts. In fact, I spoke with one of those Republicans, Steve LaTourette, and he gave us a sense of what happened in that meeting and what the speaker is really likely or willing to do when we're talking about those spending cuts.

(BEGIN VIDEO CLIP)

REP. STEVEN LATOURETTE (R), OHIO: The speaker, to his credit, says we are famous for putting poison pills in pieces of legislation where the Senate and our Democratic friends can say, that's a poison pill. He's asked that we be responsible and whatever the spending cuts are, that they either be something that the president himself has proposed in the past or the Senate has embraced in the past and I think that's what you will see.

(END VIDEO CLIP)

BASH: Very interesting there. He's not the only person who told me that, Wolf, that when you think about spending cuts, people might be wondering whether or not they are going to put something, an amendment on the floor which could be wide-ranging.

It seems as though if they do this, it will probably be targeted perhaps to put new spending cuts in to replace the sequester which is, of course, what the Senate did for two months. So this is all very up in the air but it is clear that it is -- it is really fluid now and it's not a sure thing that this could get through the House right now with Republican votes or Democratic votes. It's just not sure.

BLITZER: As far as I can tell, Dana, and you're much closer to this than I am, but based on what I'm hearing, if it were strictly up to the speaker of the House, John Boehner, I think he would allow that Senate-passed bill -- it passed, what, 89-8, a lopsided bipartisan majority -- to simply come up for a vote. But he's got problems, including his number two, the majority leader, Eric Cantor, who is making it clear he doesn't like, he can't support what the Senate passed in such a lopsided measure.

And as a result, it looks like there's going to be a vote maybe tonight on new legislation which would if it's passed by the House would then have to go back to the Senate.

BASH: That's right. First of all, let's just talk about your question about the House speaker.

He, I am told by several people in this meeting today, was very intentionally -- he did not give his opinion. He didn't say whether he supports or opposes this bill. Eric Cantor did and he was certainly sending a signal to conservatives and he was making clear his personal position for good reasons.

But as the speaker goes, he really, I'm told, was very careful to just listen to concerns of the members. But it is true that if they do amend this, that it would have to go back to the Senate down the hall here and it would have to be passed by them or not. The other thing, just to sort of play this out a couple of days, there's a new Congress sworn in on Thursday, in just two days.

If they don't finish this and send it to the president in the next two days, they are going to have to start all over again legislatively because it's a new Congress and that is what has to happen.

One other thing I will tell you is that in this meeting I'm also told it wasn't just concern about spending cuts. There were a fair number of people, I'm told, who did stand up and say let's not let the perfect be the enemy of the good and let's just do this and fight another fight down the road and many of those people had a lot of concerns about what happens tomorrow morning and overnight internationally, but here in the U.S. tomorrow morning when the markets opens. There's a lot of concern about spooking the markets.

BLITZER: Yes, there's potentially a real danger out there.

Dana, we will get back to you. As soon as you get more, let us now.

The California Republican congressman, the chairman of the House Oversight Committee, Darrell Issa, went to the House floor today to voice his concerns about the Senate's fiscal cliff bill.

(BEGIN VIDEO CLIP)

REP. DARRELL ISSA (R), CALIFORNIA: When faced with a mountain of debt that we were heading for, like an airplane, did we climb over it? No. What we're going to do in the present plan is put nearly another trillion dollars worth of debt on the American people.

(END VIDEO CLIP)

BLITZER: So will the congressman vote for it?

Congressman Issa is joining us now live from Capitol Hill.

Congressman, thanks very much.

If it just comes up the way it passed the Senate, could you live with it?

ISSA: I think in its current form, this opportunity, this once-in-a- lifetime opportunity to do real spending cuts has to be seized, meaning I'm with Eric Cantor.

I can't vote for it in its current form and for a good reason. The Senate, the president and the vice president failed to meet their obligation, their own stated obligation which was to bring us a balanced bill, one that had tax adjustment, yes, but also had spending cuts. This one fails at that and fails badly. BLITZER: So where are the spending cuts you will seek as part of an amendment to the Senate-passed legislation?

ISSA: Well, the very first one we debated on the floor this morning, the $11 billion that would be saved by, among other things, not increasing the pay of members of Congress.

We certainly would like to see that one included. We believe the president's executive order throwing $11 billion in new spending on just a few days ago was inappropriate, to say the least. We also -- our committee has passed over $80 billion over a year worth of changes that we believe could be there. Some of them could be adopted in this package. Some of the tax extenders could be adjusted.

As you know, Wolf, there's a complex amount of possible areas, and if you can't find it -- and, oh, by the way, if you're saying that less than two month from now or approximately two months from now we're going to be dealing with sequestration avoidance, then you have really failed to meet your requirement.

This bill should take care of sequestration for at least a year and it very clearly spell out what changes need to be paid for as part of a nearly $4 trillion tax cut.

BLITZER: You realize, of course, Congressman, if you don't pass legislation, similar -- actual legislation that the Senate passes between now and noon on Thursday, millions of your constituents out there, all across the country, are going to see a significant tax increase, not just rich people making more than $400,000 a year, but middle-class families will immediately start paying more.

ISSA: Well, as you know, Wolf, starting January 1, the Obamacare tax increase kick cans in and 21 different taxes increase that Speaker Pelosi passed when she had the role under this president.

But let's also remember that if we get it right on January 2, 3, 4 or 5, we ultimately still will not have these kick in. It's already passed the 1st. Technically, the taxes have gone up. The market will open. I would like it to open with a resolution, but if we don't signal that we're willing to cut this $1.3 trillion per year deficit meaningfully, then in fact the American people aren't getting a tax cut.

They are getting a tax deferral, meaning they eventually will have to pay these taxes because the money will still be owed. It will simply be next year or the next generation. Either way, I think we have to put a down payment, as the president said, on real reduction, something he hasn't done with the Senate in this bill.

BLITZER: You know, a lot of your constituents, though, Congressman, they are going to hate you. They are going to hate your fellow Republicans in the House of Representatives if you don't allow new legislation to go forward and they are going to be paying a whole lot more in taxes.

ISSA: Well, Wolf, I only have one voting card and I was instructed by my voters when I was reelected to vote my conscience, to vote their best interest, not for one day, but for the rest of their lives.

The only way I can do my job is use my best judgment to make sure that we're not passing on debts that we can't pay in the future. Dealing with Social Security, dealing with Medicare, some of these things are complex and would take more time. But some of the spending cuts that have already been voted through the House that simply aren't in the Senate bill could be dealt with in a matter of hours.

And I think the Senate knows that although they passed a bill on a very bipartisan basis, they didn't do the heavy lifting. The heavy lifting is adding some additional spending cuts and sending it back over. My voters want a tax cut if they can have it, but they want a tax cut that is real, not one that you don't pay today, but you owe it tomorrow.

BLITZER: So all those Republicans -- it was an 89-vote majority, 89-8 vote, only eight Democrats and Republicans in the Senate voted against it. There were three senators who were not present, did not vote in this vote in the middle of the night. All of those 89, including all of the conservative Republicans, like Pat Toomey and others, they were wrong?

ISSA: You know, Wolf, I can't account for what happens after midnight and all of that partying and revelry and drinking that goes on New Year's Eve at 2:00 in the morning.

What I can tell you is they did half of a bill. The half of the bill certainly is going to be popular certainly in the way of holding down taxes, but the other half is there's no spending reductions. As a matter of fact, there is additional spending. The president has packed this bill with some items he wanted, including tens and billions of dollars for unemployment extension, which is going to have to be paid for. Hurricane Sandy relief, which is somewhere between $27 billion and $60 billion comes right behind it. That's new spending.

The American people told all of us to deal with the deficit. Sure, we'd like lower taxes, but again I think what Republicans realize is that a lower tax that is only temporary because ultimately you're borrowing the money is not lower tax. It's a tax deferral.

When Speaker Pelosi and when Democrats were in charge, as a matter of fact, even when Bush was in and they were not in charge, they used the word pay-go constantly. In other words, is there an offsetting pay for what you do?

President Bush's tax cuts were not paid for. They were anticipated to be grown out of. These are not anticipated to be grown out of. CBO has already said 3.967. In other words, $4 trillion will be added to the debt over 10 years with this tax cut unless we do some spending cuts to help offset it.

Right now, the president's still in a spending mood. We need to get him in a savings mood.

BLITZER: I just want to clarify one point. You said it was after the New Year's and they were partying. Are you suggesting that Mitch McConnell and your fellow Republicans in the Senate, they were a little bit drunk when they voted on this last night?

ISSA: Of course not. I was having a little bit of fun with you, Wolf.

The fact is that it was after midnight. It was a piece of legislation that was intended to be passable, not necessarily to be right. And this was in fact something that Joe Biden found a way to get the art of the possible. In other words, send something from the Senate that the House could consider.

Now it's in the House. And what we find missing from it is any kind of reasonable spending reduction, something that the House has dealt with in committee. We have bubbled it up. We have a lot of figures. And also, quite frankly, the lack of any fix on sequestration -- the idea that in the next two months, in addition to this, we are going to be dealing with, if you will, the cliff in defense, the sequestration, and the cliff in the sense that if we don't raise the debt limit, I don't think those should be put off.

I think they could easily be dealt with today. I don't know if I will get my way, but I'm with Eric Cantor. This bill in its present form is not good enough because it doesn't deal with spending reduction in any way, shape or form. And the American people are smart enough to know that what you don't pay today, but owe tomorrow, you will have to pay tomorrow.

BLITZER: We have got to go, Congressman. But you still have confidence in the speaker?

ISSA: I have confidence in the speaker. He's listening. He's making the process open, but, of course, that includes people like myself and Leader Cantor who say we have got to be open to change and we want to see them.

BLITZER: Darrell Issa, the congressman from California, Congressman, thanks very much.

ISSA: Thank you, Wolf.

BLITZER: We're going to have much more on the breaking news here in THE SITUATION ROOM.

We're also standing by to get White House reaction to this latest rift, this apparent rift, between the House speaker and the Republican majority leader when it comes to the fiscal cliff bill. What's going on?

Plus, we will have the latest on Hillary Clinton's blood clot. When she might be released from the hospital, what could it mean for her future? Lots of news happening right here right now in THE SITUATION ROOM.

(COMMERCIAL BREAK) BLITZER: We're following the breaking news here in Washington. House Republican leaders, they are meeting right now, they are trying to decide whether to hold a vote on the Senate's fiscal cliff bill that passed in a lopsided 89-8 majority in the middle of the night. Many Republican lawmakers, though, have grave concerns about the lack of spending cuts in the Senate-passed bill and they could decide to amend the measure, send it back to the Senate.

CNN'S Tom Foreman is joining us now. He's working this part of the story for us.

Tom, how big of a complication would this be?

TOM FOREMAN, CNN CORRESPONDENT: This is massive, Wolf. I can't even say how big it is.

I'm standing inside of our virtual Senate where last night a lot of people thought solutions were under way as they passed all of these different measures that would have something to do with the fiscal cliff. But on the other side of the Capitol, on the House side, dark clouds have been gathering all day long because there are some things that were passed here that the House Republicans just hate and let me show you some examples.

For example, there's one over here. If you look at this whole notion of the cap, we're where you're going to keep the Bush tax cuts and where you're going to get rid of them. Big debate went on about this, over and over and over again.

Ultimately, they decided that they'd put it at $450,000 for couples, about $400,000 for individuals. If you make less than that, you get to keep the Bush tax cuts. If you go over that, you pay more in taxes. Why do Republicans hate that? They hated that because they say this is all about increasing taxes, not at all about controlling spending.

What about this? Deductions, the idea that you're going to save some people who make more money, you're going to lose some of the deductions that you had before. You're going to have them capped. You're not going to be able to just take as many loopholes to avoid taxes in the future.

Same issue here. Why do the Republicans resent this so much under the White House? Because they're saying, once again, this is all about raising taxes. It is not about controlling spending.

And, Wolf, as Congressman Issa mentioned just a few moments ago, even on the measures that are about spending, many of the House Republicans think the Senate went absolutely the wrong direction.

Look at this. This was the measure that had to do with providing extended unemployment benefits for about 2 million Americans out there. We know there are about 12 million who remain unemployed but some need extended unemployment insurance. That was approved for an additional year at a price tag of I think about $30 billion overall. This is another thing that the House Republicans are saying, hold on about, you cannot do this. They are saying, all you are doing is running up spending and charging the taxpayers even more to try to pay for it.

The main complaint from the House is not that you can't do some of these things with taxes, maybe some of them oppose that outright. But others are saying, if you're going to do that, you must have the second half of the equation. You must address spending.

Everyone knew last night the Senate wasn't really doing that, Wolf, but the notion was that this was a step at a time deal. Maybe they could get this part done and then address spending a little further down the line maybe in a few weeks or a couple months. The House, however, seems to be slamming the brakes on that to some degree and maybe enough members over there are saying at this point that they just can't take the deal unless they see right upfront where the spending cuts will be.

We'll see how it shakes out, Wolf.

BLITZER: Yes, that's precisely what conservative Republicans, Tom, are saying right now. Thank you.

Let's dig a little bit deeper right now with CNN contributor Ryan Lizza. He's the Washington correspondent for "The New Yorker" magazine.

It looks like there's a battle going on between the speaker, John Boehner, and, the majority leader, Eric Cantor. Eric Cantor saying he cannot support the Senate bill.

RYAN LIZZA, CNN CONTRIBUTOR: Yes, you know, we haven't seen, at least I haven't seen yet, at least something's changed, we haven't seen Boehner come out and make a statement.

BLITZER: He doesn't really said whatever, but the impression I've been getting from people over the past few days, whatever passed the Senate if it passed in a lopsided bipartisan majority, with a lot of Republicans onboard, he would allow that to come up for an up-or-down vote in the House.

LIZZA: Yes, it looks like the dynamics that was in place in 2011 when Boehner was really, really trying to come to an agreement and he had people like Cantor and Paul Ryan on his right, and they were, they didn't want -- they did not want an agreement. They want to take it to the vote or take it to the election. It seems like be that dynamic has opened up again.

Up until -- up until now, since the election, Boehner and Cantor have been like this.

BLITZER: Right.

LIZZA: They have -- you know, Cantor stood on stage at the press conference the day after Boehner's Plan B failed and took responsibility for that failure. They were together in leadership agreeing on the path forward up until this moment. Cantor has come out against the deal and Boehner is still trying to feel where the conference is.

BLITZER: So, let's say the House tonight comes up with legislation, the Senate legislation, but it includes an amendment for significant spending cuts. And it passes with a lopsided just Republican majority, the Democrats vote against it, the Republicans vote in favor of it by and large.

LIZZA: Yes.

BLITZER: Then what?

LIZZA: Well, Senate Democratic aides are telling us that they won't pass anything if it comes back from the House with additional amendments. That's the line that, you know, is being quietly being put out. I haven't seen any senior Democratic senators come out and say that, but if that holds, this whole thing false apart.

BLITZER: Because there's going to be a whole new Congress starting Thursday at noon, so they start from scratch. In the meantime, the markets will open tomorrow. They are very worried about stability, continuity, if you will. And we could see some significant reaction.

LIZZA: Right. This legislation expires Thursday at noon. What the Senate passed last night expires Thursday at noon.

You might see some liberal Democrats say forget about it. They amend this, we're not -- we're not going to --

(CROSSTALK)

BLITZER: A lot of those liberal Democrats, they like the fact that it's going to be huge defense cuts. Conservative Republicans don't like that but they don't like that, for example.

LIZZA: They don't love the Senate deal, there are a lot of senate liberals that voted for it and didn't love it. And a lot of liberals are arguing that Obama caved and they don't like the deal that he negotiated. And they might say, you know what, we're already over the cliff. Let's wait for the new Congress to get sworn in on Thursday. We have a few more Democrats in the House. And a few more Democrats in the Senate and we'll start over.

So this is pretty bad news if you think from the perspective of wanting a deal before Thursday.

BLITZER: Yes. If they start all over again, they could do it within a few days presumably and retroactively make sure that the tax increases don't go into effect. But it's my experience in Washington, the longer you wait on a deal like this, the more complicated potentially you could get.

LIZZA: Yes. I mean, they can't let us continue on the fiscal -- we've gone over the fiscal cliff. But they can't keep them in place. BLITZER: Yes.

LIZZA: I mean, everyone agrees that that's disastrous if we keep them in place. We're going to tip the economy into a recession if that happens.

BLITZER: Unemployment could go from 7.75 percent to 9.5 percent.

LIZZA: Yes. So, look, the White House tried to do a grand bargain with Boehner, right, where they do spending and revenue -- with cuts and revenue. It didn't work, kicked it over to the Senate. They got the mini-deal where they just did the revenue piece. It's been kicked back to the House and the House is now saying, no, no, forget it, forget it, we want these spending cuts, too. So, everyone has to be in a room negotiating this thing.

BLITZER: Yes, that's not happening right now.

All right. Ryan, you'll be back later. Thank you.

The Vice President Joe Biden has just weighed in on the confusion in the House of Representatives. What is he saying? Stand by. Jessica Yellin is over at the White House.

(COMMERCIAL BREAK)

BLITZER: Let's get some more on the breaking news we're following.

House Republicans expressing grave concern about the Senate's fiscal cliff bill, with the Majority Leader Eric Cantor saying flatly he does not support what the Senate passed in the middle of the night, 89-8. Republican senators voting in favor of the legislation.

Clearly, there seems to be some significant problems right now, and maybe a significant break between Eric Cantor and the Speaker John Boehner.

Let's bring in our chief White House correspondent Jessica Yellin.

Jessica, I understand that we just heard from the Vice President Joe Biden, who has played an important role in putting this deal together.

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: That's right, Wolf. The vice president playing the role of the informal go-between, the negotiator, with Senate Minority Leader Mitch McConnell, being an informal commentator now. He -- well, the entire staff here at the White House has been watching, waiting and anxiously he anticipating word from the Hill as this snag has arisen in the afternoon.

Frankly, here at the White House, they sort of, I get the sense, for it to be on the way to resolution by now. Folks on the inside have been hungry. That mess is closed at the White House and the vice president took it on himself to go out and get some sandwiches and he left the White House grounds, took a stroll across the street to pick up lunch for himself. We have video of it. I hope we're rolling that, if we can play some of the video on his walk over to potbelly. Someone asked him a question, our Lesa Jansen. Listen to what he said.

(BEGIN VIDEO CLIP)

LESA JANSEN, CNN PRODUCER: Mr. Vice President, are we going to avoid the fiscal cliff?

JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: I hope so.

JANSEN: What did you say? I'm sorry?

BIDEN: I hope so. I think so.

(END VIDEO CLIP)

YELLIN: "I hope so. I think so."

That was the vice president. He walked about 2 1/2 blocks from the White House and brought home -- I don't know if -- we don't have video of it. He brought home sandwiches, it looks like three or four sandwiches for his entire staff, Wolf.

You know, the challenge for the White House now is that the president did have something of a relationship with Speaker Boehner. He no longer does. The vice president had something of a relationship with Eric Cantor, but not one that could overcome their philosophical differences on these issues.

They don't really have a play left -- a move left to make in terms of getting the House GOP to change its position right now. They really have to watch and wait to see what happens as the House decides what to do tonight, Wolf.

BLITZER: So, what do officials at the White House expect -- what do they expect to happen between now and tomorrow? Because the deadline is over by Thursday at noon, that's when the new Congress is sworn in.

YELLIN: Well, they're -- I mean, the way they put it, they are counting on the House to realize that this is the best option left, in their view, and fight on the tax -- sorry -- fight on the debt issue in the next fight because there's a debt ceiling fight left to come. If they cannot get a win out of this, if this deal collapses, there's two moves the White House will have.

One, they are starting to rebuild the relationship with the business community and I would suspect that the White House will call on CEOs to pressure Congress to either pass this bill now -- I mean, I wouldn't be surprised if they are on the phone with CEOs now calling them in to try to pressure leaders on Capitol Hill to pass this or get something passed before Thursday.

And if not that, then play the blame game because already someone has said to me inside, if this goes down, then House Republicans have pushed us off the fiscal cliff. Now, we've fallen -- we're over the cliff, but the blame is -- will be shifted to Republicans for permanently putting us there -- Wolf.

BLITZER: Yes, that's going to be a huge, huge political impact. We'll see what happens. But the news right now from the House of Representatives, very, very dramatic.

Looks like they are not, at least the Republicans, going to go along with the Republican colleagues from the Senate and pass this legislation as would have sent it to the president for a signature, they would have resolved it. Folks could have moved on, but it doesn't look like that is happening right now. All right, Jessica, thanks very much.

Could the latest standstill in the fiscal cliff deal come back to haunt Republicans? We're talking about that in our "Strategy Session." Lots of news, breaking news happening right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: All right, we're following breaking news. Let's discuss what is going on in our "Strategy Session." Joining us two CNN contributors, the Democratic strategist, Maria Cardona and the "New York Times" columnist, Ross Douthat, who often writes from a conservative perspective.

ROSS DOUTHAT, CNN CONTRIBUTOR: Now and again.

BLITZER: First of all, what do you make of what is going on? A lot of Republicans are telling me that they are worried if this whole deal collapses and millions of Americans see their tax rates go up, they are going to blame Republicans.

DOUTHAT: Yes, that seems pretty likely. I mean, I don't think there really is a clear argument for Republicans in the House not passing the bill. That said, I think what Republicans in the House are thinking is they look at the negotiations that have happened over the last 48 hours.

And they say, well, look, we got the president of the United States to sort of break his campaign pledge on the $250,000 tax threshold, take it up to $400,000, $450,000 and we didn't make huge concessions. I mean, we, they weren't in the room negotiating.

So I think their theory is, we pushed, Obama bent, let's ping-pong the bill back and let's see if they bend a little more. I think what that misses is there is an immense pressure on the president, not Democrats in Congress from the left that won't let Senate Democrats play ping- pong with the bill but that's --

BLITZER: Can the Democrats accept the little ping-pong right now in the next 24 hours? Let's say the House passes the Senate version with one amendment that calls for some specific additional spending cuts and it goes to the Senate. Do you think that's doable?

MARIA CARDONA, CNN CONTRIBUTOR: It depends on what the ping-pong ball looks like, Wolf. It depends on what those spending cuts are and I do think that the leaders in the Senate will look at it because I think the American people do deserve for leaders to be responsible and here's where I think the Republicans are really going wrong on two fronts.

This is so politically perilous for them. They lost the election in November because the American people didn't think that Republicans understood what they are going through and if they are now the ones who are the architects of all of us going over the cliff and for millions of Americans taxes to go up, that's going to be very bad news for them.

The second thing is, if they think they are going to get a better deal, I think they better think again. Because if nothing happens and you've talked about this today and come Thursday at noon, there's going to be a new Congress with, guess what, more Democrats, more Democrats, more leverage for what the Democrats want.

DOUTHAT: But what the Republicans maybe thinking, right, is that, you know, maybe we can't get a better deal, but if Senate Democrats were already willing to cave at $450,000, maybe they will cave if we go over the cliff, swear in a new Congress, the House passes the bill with rates at $700,000. We can pressure Senate Democrats to sign. I agree I don't think that's likely.

CARDONA: That won't happen.

BLITZER: The Republicans in the House want. They are -- what they want is a lot more spending cuts.

DOUTHAT: Right.

BLITZER: They want to deal with entitlement spending, domestic spending, not defense spending, but they want to deal with domestic spending. Here's the question for both of you. How much trouble is John Boehner in as the speaker of the House?

CARDONA: I actually -- I actually don't think that John Boehner is going to be in that much trouble this year. I don't think when his speakership comes up for a vote that he will be in trouble. I don't see anyone else lining up to take his job. I don't see who in the world --

DOUTHAT: Perhaps in the last few hours we may have seen --

BLITZER: I just interviewed Darrell Issa and he says that he's with Eric Cantor.

CARDONA: So that might be changing, but I do think that John Boehner has certainly lost control of his caucus. But frankly, they might want a weak leader because then they think they can control him.

BLITZER: It's the second poke in the eye from his fellow Republicans. He had that Plan B, which didn't go anywhere, a million dollar cut off and now the pressure a lot of people got from the meeting at the White House last week, Boehner said, it's up to the Senate. Let them pass something. If it's a bipartisan majority, we'll bring it to the House and vote on it up or down.

DOUTHAT: But part of the dynamic in the House right now too is that you were talking about the political damage Republicans could sustain and there are about 50 or 60 Republicans who are sitting thinking, yes, I'm really worried about the political damage from going over the cliff.

But then there are a larger number of Republicans who are in safe seats, who are worried about being primaried and who think that they need to be perceived as standing up to President Obama. So that's the dynamic and that's the problem for Republicans --

BLITZER: Assuming all of the Democrats, all of the Democrats are united in the House and they vote for the Senate version, which won't -- assuming how many Republicans do you actually need to get to that 217? It's now 217 because there's an absent seat instead of 218. How many more Republicans would you need?

CARDONA: Probably not that many.

DOUTHAT: What we're hearing right now is that you have between 20 and 50 Republicans who are on board and that would be enough.

BLITZER: That would be enough?

DOUTHAT: If I'm a House democrat, why would I do that? I mean, OK, you could say for the good of the country and the economy.

CARDONA: You care about the country.

DOUTHAT: But at a certain point, I mean, I think this is a situation where --

BLITZER: You're doing it to prevent hundreds and millions of Americans from paying more in taxes.

DOUTHAT: But they aren't going to pay more in taxes if we spend another week fighting this out. And if Democrats are right about the political calculus, then actually the Democratic Party has an incentive to fight this out for a week and the long-term benefits for their party and theoretically for the country might be greater. I mean, sometimes you do just need to let these fights play out, right?

CARDONA: That may end up happening depending on what comes back if they do amend this and the spending cuts are this poison pill. But I do think right now that the majority of our leaders in Congress don't want to be the ones to make millions of Americans pay more in taxes.

But what drives me nuts, Wolf, about what Republicans are complaining about this bill that there are no spending cuts in it, they had so many opportunities to do a grand bargain with millions and millions of dollars of spending cuts. They couldn't get it together.

So at the end of the day, we knew about a week ago that this deal was not going to include any spending cuts. So for now for them to complain that this doesn't have any spending cuts to me is a way to drive a wedge into this and not getting anything done.

BLITZER: There's plenty of blame to go around at all fronts because the president as you know he had an opportunity for a grand bargain and accepting the Simpson/Bowles, the recommendations that he rejected, that was a moment in history that a lot of people say he should have grabbed, looking back.

DOUTHAT: Look, I have to say, the lesson right now is that House Republicans want to fight this out to the absolute bitter end and, you know, again sometimes there's something to be said. I know we like to talk a lot about the importance of bipartisanship, but you get better outcomes from both parties if you let the fights play out.

BLITZER: If you think this is a big fight, just wait a month or two when the raising the debt ceiling battle comes back.

CARDONA: I think what we need to invest for the American people are lessons in cliff jumping and rock climbing because that's what we're going to be dealing with.

DOUTHAT: Or a slope, a gentle fiscal slope.

BLITZER: Let's hope for the best. Guys, thanks very much.

CARDONA: Thanks, Wolf.

BLITZER: We're also following other news including Secretary of State Hillary Clinton's condition. We'll have the latest on her blood clot and when she could be released from the hospital and what it could mean for her political future. Stand by.

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BLITZER: News of a blood clot between Hillary Clinton's brain and her skull raising new questions about her future right now. She was already expected to step aside as secretary of state, but she's a leading presidential contender for 2016 if she chooses to run again. So how will her current health crisis potentially impact her future?

CNN's Mary Snow is joining us now. Mary, first of all, what's the latest on the secretary's condition?

MARY SNOW, CNN CORRESPONDENT: Wolf, we haven't heard from her doctors since yesterday when they updated her condition disclosing the details of the blood clot that put Secretary of State Hillary Clinton in the hospital on Sunday saying that she is making excellent progress.

Now an expert in blood clots told us if unrelated these clots could be serious, but he said the fact it's being addressed is a good sign.

(BEGIN VIDEOTAPE)

SNOW (voice-over): On the day when Secretary of State Hillary Clinton was supposed to be getting ready to return to work, she spent another day at a New York hospital. Her doctors say they are treating her with blood thinners after discovering a blood clot in the vein between the brain and skull behind the right ear.

They expect her to make a full recovery and say she did not suffer a stroke or neurological damage. Dr. Jack Ansell is not involved in Secretary Clinton's case, but has treated cases like hers and calls them rare. He is the chairman of the Department of Medicine at Lenox Hill Hospital.

(on camera): What does this mean for the future?

DR. JACK ANSELL, CHAIRMAN, DEPARTMENT OF MEDICINE, LENOX HILL HOSPITAL: I think her future is as good as her past. She should recover from this. She will be treated with blood thinners. I can't say how long because I don't know all of the circumstances, but certainly minimum of three to six months, may well could be longer. In some rare cases, could be lifelong, but many patients are on blood thinners for life. She should recover fully and get back to work.

SNOW: And that work is grueling. Hillary Clinton has traveled to more than 100 countries as secretary of state and logged close to a million miles during that time. Dr. Ansell says while travel is something to watch out for among people who suffer blood clots, most often in the leg veins, which Mrs. Clinton did have in the late 1990s, he doesn't see her travel schedule being an impediment.

ANSELL: I think that travel is probably more an issue with the blood clot she had back about 12 years ago in her leg. So anybody who has had a blood clot, they are always at risk for developing another one and the risk is greater than if they never had a blood clot. So I think travel is potentially an issue for the secretary, but I would imagine that when she travels she's not sitting in a coach seat cramped up and sitting still.

SNOW: Secretary Clinton is planning to step down as President Obama's second term begins. While she has repeatedly said she's not interested in running for president again, she is viewed as the Democratic favorite in 2016 should she choose to run.

(END VIDEOTAPE)

SNOW: Wolf, doctors familiar with these types of rare clots say it's unlikely that it developed as a side effect as Clinton's recent concussion. Some speculate it could be linked to an underlying condition or to dehydration, which her aide say she experiences after a stomach virus a few weeks ago -- Wolf.

BLITZER: We wish her, of course, a speedy, speedy recovery. Mary, thanks very much.

Other news we're following including Iran kicking off the New Year with a major show of military force. Up next, what this latest move could mean for a critical international waterway.

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BLITZER: We'll get back to the breaking news on the fiscal cliff drama in the House of Representatives in a moment. Let's get to another important story right now, Iran. Another dramatic show of military force that has captured the world's attention mainly because of where the action is taking place.

Let's bring in our Pentagon correspondent Chris Lawrence, he has the latest details. Explain what is going on, Chris.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, these are just exercises, Wolf, but you're right, the key is where Iran is firing these missiles. Seventeen million barrels of oil pass the Strait of Hormuz every day. That's 20 percent of the entire world's oil supply in a very narrow waterway that Iran has threatened to blockade before.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): Iran started the New Year showing off some new technology, including an upgraded missile designed to destroy warships. Iran has been test firing a range of weapons near the Strait of Hormuz including an air defense system designed to confront fighter jets, helicopters, and drones.

MICHAEL O'HANLON, BROOKINGS INSTITUTION: This tells me more about their willingness to, you know, keep the pressure up, stay in a somewhat inflamed and confrontational mode.

LAWRENCE: Analyst Michael O'Hanlon says the test didn't dramatically move the ball for Iran's technology, but it sends a warning to the U.S. and nations in the region regarding any attempted strike on Iran's nuclear facilities.

O'HANLON: Short term they may actually like the idea telling us that they can escalate, to make us think it's not just a pinprick surgical strike, but the beginning of a war and may feel that they can intimate certain participant countries into rethinking whether it's the United States or one of the Gulf states like Qatar or U.A.E. or Kuwait.

LAWRENCE: A Pentagon report this past summer found that Iran's ballistic missiles were becoming more accurate, more versatile and more deadly than ever. But for years U.S. intelligence officials circled the year 2015. They believe by then Iran could test an intercontinental ballistic missile with a range of 3,500 miles.

JOHN PIKE, GLOBALSECURITY.ORG: This would give them the ability to attack a number of European countries, which we give them a degree political influence in a crisis that they might otherwise have.

LAWRENCE: But the latest intelligence report from Congress was just released in the last few weeks. It reassesses that estimate and concludes Iran is not likely to test an ICBM in the next few years.

(END VIDEOTAPE)

LAWRENCE: So why is that? Well, the report says that economic sanctions are making it harder and harder for Iran to acquire the critical components and materials that they need. And the Iranians are not getting the help they need from Russia and China who whose support has actually been dropping over the past ten years -- Wolf. BLITZER: An important story we're watching. Thanks very much. Chris Lawrence over at the Pentagon.

Other news, North Korea's new leader Kim Jong Un delivering the country's first New Year's address in nearly two decades. Mary Snow is monitoring that and some of the top stories in the SITUATION ROOM right now. What's the latest, Mary?

SNOW: Wolf, Kim Jong-Un is calling for what he calls an all out struggle to overhaul his country's debt to economy as well as an easing of tensions with South Korea, but the young leader also praised last month's controversial launch of a long range rocket.

The launch was widely condemned by the United Nations and considered to be a test of a ballistic missile technology. We'll have much more on all of this just ahead in our next hour.

Here in the U.S., many same-sex couples in Maryland are ringing in the New Year with wedding bells thanks to the state's new same-sex marriage law, which went into effect at midnight. Maryland is the one of three states, which approved the law in the November election. Measures in the other two states Maine and Washington took effect last month.

And we're pleased to announce the newest edition to THE SITUATION ROOM family. He was born Friday night to our very own producer Melanie Buck Parks and our studio operator Chris Parks. He weighed in at 8 pounds, 13 ounces and joins his very excited big sister, Harper. All are happy, healthy, and we wish them only the very best. It's the great way to start the New Year.

BLITZER: Beautiful, beautiful kids. Lovely, lovely kids, the newest members of our Wolf pack here in THE SITUATION ROOM. Thanks so much for that.

We're following breaking news here on Capitol Hill. House Republicans are meeting right now to decide whether or not to amend the Senate's fiscal cliff bill. The ramifications could be enormous for you. We're going there live.

And straight ahead also, Colorado's first pot club opens its doors. We're going inside.

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BLITZER: The New Year marks the opening of a new club in Denver. It's Colorado's first marijuana club. CNN's Jim Spellman takes us inside.

(BEGIN VIDEOTAPE)

JIM SPELLMAN, CNN CORRESPONDENT (voice-over): It's 4:20 p.m., the traditional time for stoners to light up. Club 64 is open for business. The club gets its name for Amendment 64, which legalized recreational use of marijuana in Colorado. Their first meeting New Year's Eve was in a warehouse. It's a private club opened only to members who pay a $30 fee.

ROB CORRY, CO-OWNER, CLUB 64: You cannot buy marijuana from the club, but you can come in here, you can share marijuana or bring in marijuana.

SPELLMAN: Owner, Rob Corry, a long time marijuana advocate says the club is the culmination of a long-fought battle.

CORRY: This club is what the voters of Colorado finally wanted. They wanted adults to be able to get together and exercise our freedoms together.

SPELLMAN: Gabriel Kinderay is a charter member of Club 64.

GABRIEL KINDERAY, MARIJUANA ENTHUSIAST: Up until today, we were kind of the people that had to be secretive about who we were and how we lived our lives and over the last couple of years, we've been able to really talk more openly and they've accepted it and that's great.

SPELLMAN: Miguel Lopez hopes Amendment 64 and Club 64 can serve as a model for the rest of the world.

MIGUEL LOPEZ, PRO-MARIJUANA ACTIVIST: Let Denver serve as a beacon of hope for those who know what true freedom is really about.

SPELLMAN: It will be another year before selling marijuana can open here. It's unclear how the industry will operate since it remains illegal according to federal law. Denver police have told CNN affiliate KDVR, they are waiting for guidance from the city attorney and district attorney to see what, if any, action should be taken. But for the club owner, Club 64 is the start of a major change.

CHLOE VILLANO, CO-OWNER, CLUB 64: I've had so many dreams for this industry, but I see it as a place where people can come together and enjoy each other's company and really be open about the use of cannabis just like they are with alcohol.

SPELLMAN: And she says there's nothing to be afraid of.

VILLANO: I think the worst that can happen is we'll probably be closed sooner than most bars because everyone will want to go to sleep.

SPELLMAN: Jim Spellman, CNN, Denver.

(END VIDEOTAPE)

BLITZER: Colorado, by the way, isn't the only state that legalized marijuana. Back in November, Washington State also approved pot use for people 21 and older.