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Supreme Court Extends Key Rights Gitmo Detainees; Pakistan's Anger Over U.S. Air Strikes; Belgian Brewer Attempts Budweiser Takeover

Aired June 12, 2008 - 17:00   ET

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


WOLF BLITZER, CNN ANCHOR: And to your viewers, You're in THE SITUATION ROOM.
Happening now, a major ruling by the Supreme Court that slaps the hand of the Bush administration once again -- a ruling about terror suspects in Guantanamo Bay.

Also, buying America -- foreign companies trying to scoop up landmark U.S. buildings and now one of the country's best brewers.

And some see them as the scourge of politics.

Are lobbyists, though, getting a bum rap?

We're going to show you how you may be tied to them.

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

A major decision by the United States Supreme Court that the president says could impact the war on terror. Prisoners at Guantanamo Bay in Cuba will get the same rights as every American after a sharply divided Supreme Court ruling.

Let's go to our justice correspondent, Kelli Arena. She's joining us now from the Supreme Court. You just were out there at Guantanamo Bay.

This is a major, major development, Kelli.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, you know, Wolf, depending on who you talk to, this is either the greatest day in history or the worst for the U.S. Constitution and the rights that it provides.

(BEGIN VIDEOTAPE)

ARENA (voice-over): They're being held on foreign soil. They're not U.S. citizens. But today, the Supreme Court ruled the detainees held at Guantanamo Bay do have rights under the U.S. Constitution because they're in U.S. custody.

It's a major defeat for the Bush administration.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And we'll abide by the court's decision. That doesn't mean I have to agree with it. ARENA: The court ruled 5-4 that foreign fighters and accused terrorists at GITMO can contest their detention in civilian court. It also ruled the Bush administration's procedures to classify those detained as enemy combatants is inadequate.

Pentagon defense lawyers declared victory.

MICHAEL BERRIGAN, OFFICE OF MILITARY COMMISSIONS: It's a great day for the rule of law and a vindication for American principles of justice.

ARENA: Justice Anthony Kennedy, writing for the majority, said, "The laws and Constitution are designed to survive and remain in force in extraordinary times."

But Justice Antonin Scalia shot back, saying the ruling "warps our Constitution" and warned, "The nation will live to regret what the court has done today."

Like Scalia, some worry about the implication.

SEN. LINDSEY GRAHAM (R-SC), ARMED SERVICES COMMITTEE: Al Qaeda will be given the same rights as an American citizen, something we didn't do for the Nazis.

ARENA: The administration opened the detention facility in Cuba shortly after 9/11 to hold people suspected of having ties to Al Qaeda or the Taliban.

CULLY STIMSON, FORMER PENTAGON OFFICIAL: There was a belief that it would not be subject to the reach of the federal district court.

ARENA: There are about 270 men still there. Most have never been charged. Judges here in Washington, D.C. are bracing for a flood of legal challenges. What's more, this decision casts doubt on the future of the military war crimes trial. The Pentagon intends to try about 80 detainees and one is already planning an immediate challenge. Lawyers for Salim Hamdan, an alleged driver for Osama bin Laden, say that they will file to have the charges against him dismissed.

(END VIDEOTAPE)

ARENA: Wolf, it's important to note there's nothing in this decision today that requires the government to release the prisoners being held at Guantanamo Bay. And if you think that this ruling is a definitive word on this issue, think again, because President Bush is already talking about new legislation -- Wolf.

BLITZER: Kelli, thanks very much.

Kelli is at the Supreme Court.

Let's get some more on the implications of this important ruling. We'll turn to our senior legal analyst, Jeff Toobin. He's joining us.

You were just there at Gitmo yourself, Jeff. What do you think? What's the fallout in the short-term and in the long-term?

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Short-term, chaos, Wolf. This is a situation now, where, as Chief Justice Roberts said in his dissenting opinion, at least in the old system there was a set of rules about how the detainees could challenge their incarceration. Now it's simply up to each federal district court judge who will hear these cases. So there are going to be probably 200 cases filed in the relatively near future asking federal district courts to set a standard.

So what's clearly going to happen is this is all going to go through the appellate process going. And it means more years of delay.

BLITZER: But they're are not going to be released, these nearly 300 detainees, any time soon?

They're going to go through this legal process?

TOOBIN: And it's all testimony to the fact that the Bush administration had a fundamentally flawed idea from the beginning, which was somehow keeping them in Cuba at Guantanamo would wall them off from the American legal system. And now, for the third time, the Supreme Court has said no. Your systems are inadequate. We are going to have other systems.

What the court did not do today is say what an acceptable system was. That's the problem. There is no road map there for how to do this correctly. It's just going to be kicked down the road to the next president for him to deal with.

BLITZER: You know, it's interesting, though -- and I write this at CNNPolitics.com on my blog post today. This 5-4 decision, with Justice Anthony Kennedy, the swing vote once again. You've got four liberal justices and you've got four conservative justices. It underscores the stakes in this presidential election right now, given the fact that McCain says he would prefer conservatives like Scalia or Alito or John Roberts, as opposed to Barack Obama, who told me a few weeks ago he prefers liberals like Stephen Breyer and Ruth Bader Ginsburg.

Whoever the next president is going to be is going to have an enormous impact not only for four or eight years, but for a long time thereafter.

TOOBIN: Enormous, Wolf. The four liberals are all relatively near the end of their careers.

John Paul Stevens just celebrated his 88th birthday. Ruth Ginsburg is 75 years old. David Souter is 68 and really wants to return to New Hampshire.

The stakes in this election are so enormous for the Supreme Court that I hope this is one of the issues we'll be talking about as we get closer to election.

BLITZER: We'll be talking a lot about it. It's a very important issue for conservatives and for liberals.

Jeff, thanks very much.

Jeff will be back later in THE SITUATION ROOM.

Meanwhile, U.S. military officials make an unusual move in an attempt to quell anger in Pakistan. Pakistani officials are furious, as you probably know, saying U.S. air strikes killed 11 Pakistani troops earlier in the week.

Let's go to our senior Pentagon correspondent, Jamie McIntyre. He's watching this story for us.

Jamie, this has got a lot of potential ramifications for U.S.- Pakistani relations, the war on terror, the hunt for bin Laden.

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: That's right, Wolf. And that's why the U.S. military took the unusual step of releasing video footage from a spy plane flying overhead during this Tuesday engagement, which the military said last night showed that this was a legitimate strike on insurgents fighting coalition forces right along the Afghan/Pakistan border and not some kind of tragic mistake, in which 11 Pakistani soldiers were killed.

But, even as they released the video, which contained a narration describing how seven different fighters were killed in this engagement on the ridge and insisting that there were no military outposts, eyewitnesses who have been to the scene say there was something that resembled a Pakistani outpost made of bricks and mud in this remote location.

All of this has resulted in an investigation now -- a full investigation of what happened in this engagement and whether this video shows the entirety of the incident. Both Pakistan and Afghanistan have been invited to take part in this incident. And the Pentagon, at this point, is not saying that it is not responsible for the deaths of those 11 Pakistanis, only that the investigation will have to come to that conclusion -- Wolf.

BLITZER: All right, Jamie. Thanks very much.

Jamie will stay on top of this story for us.

Let's go back to Jack. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, we've got a highly unpopular Republican president, an equally unpopular war in Iraq, a battered GOP brand, economic worries, $4 plus gasoline. It seems like it ought to add up to an election tailor-made for a Democrat, especially one who's promising change.

But that's not what the polls are indicating -- at least not now. The latest CNN poll of polls shows Barack Obama leading John McCain 48 percent to 43. That's a difference of just five points. A new "Wall Street Journal"/NBC poll puts Obama's lead at six -- double his previous lead. But it's much smaller than the Democrats 16-point lead when voters are asked, without the candidates names, which party they want to win the White House.

The poll points to strengths and weaknesses of both candidates.

When it comes to Obama, he leads John McCain among African- Americans, Hispanics, women, Catholics, Independents, even blue collar workers. And Obama is also ahead 61 to 19 percent among those who say they voted for Hillary Clinton in the primaries. So much for the disaffected Clinton supporters.

But McCain leads Obama among white men by 20 points. The Arizona senator also tops Obama when it comes to white suburban women, which is a critical voting bloc in presidential elections.

However, Obama leads McCain among all white women.

As for McCain, his biggest challenge just might be President Bush. One Democratic pollster calls the president a "200-pound ball and chain" around McCain's ankle.

Also, more voters in the survey say they're looking for a president who will bring change instead of one who has more experience -- again, suggesting that Obama should be favored here by perhaps more than he is.

Here's the question: What does it mean if Barack Obama and John McCain are less than 10 points apart in the polls?

Go to CNN.com/caffertyfile. You can post a comment on my blog.

You know, you look at the breakdown of this stuff and it suggests Obama should be way in front, Wolf. But that's not how it is.

BLITZER: It's a fascinating political season. I think we all agree on that.

Jack...

CAFFERTY: This is your stuff, isn't it?

BLITZER: Yes.

CAFFERTY: You like this.

BLITZER: I like this stuff.

Thank you, Jack.

CAFFERTY: OK.

BLITZER: You hear candidates rail against them, but lobbyists are so ingrained in politics, even you -- yes, even you may have ties to them that you're not necessarily aware of. We're going to show you what's going on.

Also, foreign investors are eying another American landmark. We're going to show you who's buying America and why it has some people outraged.

Plus, a tornado kills four boy scouts and injures many more at a remote camp. You're going to hear just what it was like when the storm tore through.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: A bitter fight is shaping up right now as a European company is making an unsolicited take-over bid for one of America's most well known corporate brands. Mary Snow is watching this story for us in New York.

And, Mary, what is going on?

MARY SNOW, CNN CORRESPONDENT: Wolf, a Belgian brewer wants to take over, the maker of Budweiser beer -- a family-owned company and business for nearly 150 years. And it's just the latest potential deal involving a foreign company that's striking a nerve in the U.S.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Beer is at the heart of a brewing international battle that is stirring patriotic passions. Belgian brewer InBev is in a hostile take-over bid to buy Anheuser-Busch, the maker of Budweiser.

Missouri's governor calls the deal deeply troubling and a save Anheuser-Busch movement has sprouted, equating Budweiser with being as American as apple pie and baseball.

ED MARTIN, SAVE A.B.: In this case, we have a sort of American original -- a company that is so American in its origin, how it grew and what it became and what it stands for.

SNOW: And it's not the only one. A New York icon, the Chrysler Building, is being eyed by an Abu Dhabi investment fund looking to buy a major stake. A London-based hedge fund's move to take control of CSX, one of the largest railroads in the U.S., has prompted a heated battle. Several lawmakers stepped to block the move, citing national security concerns.

Columbia University's Jack Coffee says consolidation is inevitable.

JOHN COFFEE, COLUMBIA UNIVERSITY LAW SCHOOL: I think we have to recognize that we're in a global world. And in a global world, national boundaries don't count as much as they used to.

SNOW: And the U.S. dollar doesn't count as much as it used to.

PETER MORICI, UNIVERSITY OF MARYLAND: Right now, U.S. companies are a bargain because the dollar has fallen so much against the euro and the stock market is weak. This is a particularly good time to scarf up U.S. companies. SNOW: One economist says because the U.S. is in so much debt, with swelling trade deficits, foreign ownership of U.S. companies will only continue.

MORICI: The United States is in a position where it will have to sell-off its most valuable assets -- its real estate, its intellectual property, its brands, its technology. And our children will merely become workers for foreign owners. We'll become tenants in our own society.

(END VIDEOTAPE)

SNOW: Now, Peter Morici says he doesn't expect that trend to change as long as the U.S. remains so dependent on foreign oil and foreign products and says the U.S. is to blame for not managing its swelling debt -- Wolf.

BLITZER: Mary, what a story. Thanks very much.

We'll stay on top of this one.

Meanwhile, it seems everyone loves to hate them, but lobbyists are an integral part of politics. And even though candidates scramble to distance themselves from lobbyists, you may have ties to them that you don't even know about.

Brian Todd has been watching this story. And he's joining us here in THE SITUATION ROOM.

They're making news, lobbyists. A lot of focus on lobbyists. But what are you learning?

BRIAN TODD, CNN CORRESPONDENT: Well, Wolf, you know, every time there's a political flap over lobbyists who work for the campaigns, like this week with the search teams for the vice presidential picks, you get the candidates, you get the pundits railing on the lobbyists. They are the easiest of targets, but maybe they shouldn't be.

(BEGIN VIDEOTAPE)

SEN. BARACK OBAMA (D), PRESUMPTIVE NOMINEE: America...

SEN. JOHN MCCAIN (R), PRESUMPTIVE NOMINEE: ...their mortgage, their groceries.

TODD (voice-over): Want to get a rise out of presidential hopeful?

Drop the "L word" on him.

MCCAIN: We need to close the door firmly on corporate lobbyists.

OBAMA: We will not take a dime from Washington lobbyists.

TODD: How easy is this target? A Gallup Poll late last year asked respondents to rate the professions in terms of honesty and ethics. Lobbyists finished dead last, behind car salesmen, lawyers and politicians. Ouch. But before you jump on the bandwagon, listen to those who watch the industry. They'll tell you not every lobbyist is a back room hack trying to rip you off.

BRODY MULLINS, "WALL STREET JOURNAL": There's lobbyists for your pets. There's lobbyists for your health care. There's lobbyists for your home. There's lobbyists for your car. There's lobbyists for your job.

TODD: If you're a teacher, a cop -- even if you're old, you've got an advocate working the halls of Congress for your cause. Tirelessly and in almost complete obscurity, they toil to clean up the environment, get better benefits for soldiers. And even as the two presidential candidates talk of changing the lobbyist culture in Washington and rooting out lobbyists from their campaigns, they also need these kinds of people.

STUART ROTHENBERG, "THE ROTHENBERG POLITICAL REPORT: Look, to run for president, you have to associate yourself with people who've been in and around Washington, people who know presidential politics, know campaigns, know people who are wealthy so that you can raise money from them.

TODD: Watchdog groups say lobbying gets a bad rap because success in the profession is often heavily influenced by wealth and who wields it.

MULLINS: Companies can hire dozens and hundreds of lobbyists and spend millions of dollars to change regulations to favor them and consumers often can't do that. That's really where the problem comes in.

(END VIDEOTAPE)

TODD: Now, in Washington, you can't always tell right off the bat if someone is a lobbyist for a particular corporation. They rarely put the word lobbyist on their business card. And they'll say they work for organizations like these. Look at the diversity of this group -- the Motorcycle Riders Association, the Association of Retired Americans, the National Beer Wholesalers, Fashion Models. They work for all sorts of different groups.

And, Wolf, they often -- you know, they're not going to say I'm a lobbyist for Anheuser-Busch, you know, equating themselves with a corporate giant. It's the National Beer Wholesalers so that it looks a little bit more benign. That's why lobbyists sometimes get a bad rap, because they -- they are perceived to hide behind these names. But they're really doing hard work and there's nothing wrong with it.

BLITZER: Petitioning the government.

TODD: That's right.

BLITZER: That's in the Constitution.

TODD: Absolutely.

BLITZER: Every American citizen has that right, to petition our government.

TODD: Right.

BLITZER: Brian, thanks very much for that.

Everyone wants to pay less for gas, so why is a plan to cut the price having so much trouble getting through Congress?

We're going to show you.

Plus, another crane accident, this time at an NFL stadium. We're getting details of injuries. We'll update you right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Carol Costello is monitoring some other important stories incoming into THE SITUATION ROOM right now.

Carol, what's going on?

CAROL COSTELLO, CNN CORRESPONDENT: Well, can you believe it, Wolf?

Three people were hurt and one of them is in critical condition right now after another crane topples over at a construction site, this one at the Dallas Cowboys' new billion dollar stadium. The crane appears to have broken loose from its base at the construction site in the Dallas suburb of Arlington. Wind gusts of up to 30 miles per hour were reported at the time of the accident.

Just a short time ago, Yahoo! announced that all talks involving a business deal with Microsoft are over. Yahoo!'s shareholders had hoped that Microsoft might revive a take-over bid that fizzled last month. Yahoo!'s shares plunged more than 10 percent on the news.

And even as the CDC reports the salmonella outbreak from domestic tomatoes has spread to 23 states, lawmakers are stepping up an investigation into the safety testing on imported foods. On Capitol Hill this morning, a House subcommittee voted to subpoena nine companies responsible for analyzing the most dangerous foods entering the country. Investigators have been told that some companies routinely circumvent regulations by testing food until a clean result comes up. They just test it and test it and test it. A clean result, it's good -- back to you, Wolf.

BLITZER: Carol, thanks very much.

An unbelievable story of government waste -- enormous government waste. Tens of billions of dollars worth of brand new household supplies meant for Hurricane Katrina victims locked in a warehouse for two years. And now it's all gone. We have an exclusive CNN investigation. You'll want to see this.

Plus, in an instant, a roaring wind scattered their camp and killed four of their friends. You're going to see and hear exactly what it was like for these Boy Scouts when a tornado tore through their camp, in their own words. That's coming up.

And not everyone is on board with their party's candidate. Up ahead, why some Democratic members of Congress say they won't endorse Barack Obama.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: To our viewers, You're in THE SITUATION ROOM.

Happening now, the online rumor mill -- the Internet has helped make Barack Obama's presidential bid. Now his campaign is trying to make sure it doesn't break him.

Also, easing your pain at the pump -- both candidates say they have a plan. But can they really do anything?

Carol Costello has got a story on this.

And Gulf Coast outrage -- millions of dollars worth of Hurricane Katrina relief supplies given away -- and the victims didn't get any of it. We've got the details for you.

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

A gas tax holiday, a windfall profit tax on oil companies -- populist ideas that sound good on the presidential campaign trail, but are unlikely to become reality any time soon.

Let's bring back Carol. She's watching this story for us.

McCain and Obama, they're trying to do something about gas prices, but not necessarily with a whole lot of success.

COSTELLO: No, not with any success at all, actually. You know, it appears to be both -- you know, both presidential candidates are senators. Both can craft legislation. Both supposedly have clout with their respective parties, who want them to look good at this particular time.

So why aren't they able to push their ideas through the legislature right now?

Why wait?

(BEGIN VIDEOTAPE)

MCCAIN: They're power plants.

COSTELLO (voice-over): They were talking the talk again. MCCAIN: Give Americans a little relief from the -- from the gas tax.

COSTELLO: Ah, the gas tax holiday -- a summer long suspension of the federal gas tax -- a plan that might save you, on average, 18 cents a gallon.

MCCAIN: If you want to call it a gimmick fine. You know the economists, they're the same ones that didn't predict this housing crisis we're in.

COSTELLO: But what critics call a gimmick is having a tough time of it in a Senate committee. Yes, the Senate -- right now. Months ago, back in April, when McCain's idea was born, he introduced Senate Bill 2890 to provide for a fuel tax holiday. Today, as that old "Schoolhouse Rock" song describes it...

UNIDENTIFIED MALE: I'm just a bill. Yes, I'm only a bill and I'm sitting here on Capitol Hill.

COSTELLO: And analysts say that it's sitting only proves that it's a gimmick. After all, they say, John McCain is a presidential candidate. There are 49 Republican senators and the support of Independent Joe Lieberman on this issue.

LARRY SABATO, UNIVERSITY OF VIRGINIA: The question arises, if he can't get a bill passed out of the Senate while he's a presidential candidate and his colleagues have lots of incentive to help him, why should people believe that, as president, he'll be able to get anything done?

COSTELLO: Sabato throws the same dart at Senator Barack Obama. He's for a windfall profit tax on oil companies. A few days ago, an energy bill that included a 25 percent tax on unreasonable oil company profits died in the Senate, even though Obama expressed support for the measure.

SABATO: The truth is that presidential candidates always try to get the voters to believe that if they will only elect them president, all of their problems will be eased or even disappear.

If only it were that easy. It's not.

COSTELLO: But politicians seem to believe. Neither candidate is giving up on their idea.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Is there anybody here who would like to have that relief from their gas tax?

(CHEERING AND APPLAUSE)

MCCAIN: Yes. Thank you. Most Americans want that.

(END VIDEOTAPE)

COSTELLO: Now you could argue once you become president you'd have a lot more clout. But for cash-strapped Americans, the stalemate in Congress is frustrating. And they're looking for a sign of which candidate can really reach across the aisle and get something done.

BLITZER: Right now they're very busy campaigning, though, so it's hard to get something done in the Senate.

COSTELLO: Something tells me even if they were back there, it'd be hard to get something done.

BLITZER: You're absolutely right. Carol, thanks very much.

With Hillary Clinton out of the race, both McCain and Obama are trying to win over the women who backed her. Joining us now to talk a little bit about more, our CNN political contributor Leslie Sanchez. She's a Republican strategist, a former adviser to President Bush. And Lisa Caputo, she was a Hillary Clinton press secretary in the White House, a deputy assistant to President Clinton.

Ladies, thanks very much for joining us.

LISA CAPUTO, FMR. HILLARY CLINTON PRESS SECY.: Thank you.

LESLIE SANCHEZ, CNN POLITICAL CONTRIBUTOR: Thank you.

BLITZER: Leslie, it looks like Carly Fiorina, the former Hewlett-Packard CEO, she's really playing a very aggressive role now on behalf of John McCain. She's out there today and she's wooing some of those Hillary Clinton supporters who may not necessarily feel comfortable with Barack Obama.

Is this a "Mission: Impossible" or is there any possibility she can actually get something accomplished?

SANCHEZ: I think she's doing a dynamic job. I think that was one of the smartest strategic moves that the McCain camp made was putting her with the victory fund and getting her on the road. She's a dynamic executive who really exemplifies the economics of this country, strong, principled. And people rely on her judgment in terms of the selecting a candidate. So there's a lot of transference.

What's interesting about women voters, you've got to remember George Bush won them in 2004. And of the 19 states that John Kerry won, nine would have been lost without that gender gap. There's not a monolithic group of women. A lot of the feminists are ideologically going to be aligned with Barack Obama.

But the suburban mom, married women, highly religious women and independent conservatives are really where the fight is going to be.

BLITZER: And, Lisa, Carly Fiorina, she has been a frequent guest here in THE SITUATION ROOM. She's now out in Ohio and Pennsylvania and she's trying to get some of these women to come out and support John McCain. What do you think?

CAPUTO: Well, I think it's a smart move on the McCain campaign's part. But I don't see it really making inroads. Quite frankly, Wolf, I think that what you're seeing happening in the Democratic Party is the traditional women's organizations, Emily's List, Planned Parenthood, a lot of the really true women's organizations are uniting around Barack Obama.

In fact, if you take a step back and look at the issues and where Senator McCain is, particularly as it relates to the balance on the Supreme Court, that's where you're seeing people for women mobilizing around Obama. Because they're concerned about McCain's overturning Roe v. Wade with a selection of a justice to the court that would not uphold Roe v. Wade.

(CROSSTALK)

BLITZER: Leslie, I was going to say, for a lot of women that's going to be a game-changer right there. The 5-4 split, if you will, on the Supreme Court and McCain's position that he would like to see Roe versus Wade overturned.

SANCHEZ: Well, you know, the interesting part is this is not a new argument. I think the Democrats go back to the same playbook and try to talk about conservative judges. They talk about reversing Roe v. Wade. I heard somebody else talking about -- go start talking about abortion, you know, and this is really how you mobilize women.

I think people could not be farther from the truth. Women are concerned about the economy, they're concerned about health care, they're concerned about whether their child is going to be able to go to the good doctor or the bad one. They're going to be looking at these fundamental things.

The feminist movement are going to, like I said, align with Barack Obama. It'll mobilize them. That's great. That's not where the fight is, the fight is the swing voter who are weak Democrats, weak Republicans and independents. That's -- and really I think they're going to be looking at the economy.

BLITZER: And I think it's fair to say, Lisa, that for most women, of course, the bread and butter issues, the economy and the war in Iraq for that matter, those are going to be the dominant issues.

CAPUTO: Yes. I agree. But I would say, those issues are core Democratic issues. And there's no question both Barack Obama and Senator McCain are going to be going after those security moms, so to speak,. those who are concerned about our own national security. But those bread and butter issues on the economy, on health care, on education, those are core Democratic issues.

And let's not forget, women control 80 percent of consumer spending, Wolf. So I would say that when you think about those statistics and more and more women becoming the CFOs of the household, and more and more women really controlling the purse strings in the household and in the economy because they're going up the corporate ladder, that means that they're going to be worried about economic policy.

And that's why you see Barack Obama out on the campaign trail this week with a robust economic tour around the country, which I think quite frankly is starting to overshadow Carly Fiorina.

(CROSSTALK)

SANCHEZ: No. You know, Wolf, real quickly, a lot of those are small business owners, they are looking at the tax implications, capital gains. They are taking care of their aging parents. You know, they want sensible solutions but they want certainty. And I think that's the difference between what you get with John McCain.

BLITZER: All right. Leslie Sanchez, Lisa Caputo, good discussion, ladies. Thanks very much.

CAPUTO: Nice to see you.

BLITZER: Some victims of Hurricane Katrina say they still desperately need some of the most basic household goods. So why did FEMA actually give away a whole warehouse full of supplies and other federal and state agencies, what's going on?

Plus, it's only a rumor about Michelle Obama, but it's big enough that the Obama campaign is now fighting back with full force. You're going to find out what they're doing. Lots of news happening today right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: This is an amazing story of outrage. In the wake of Hurricane Katrina, the federal government, our federal government, stockpiled tens of millions of dollars worth of household supplies, all supposed to help the victims of Hurricane Katrina.

But get this. Those essential supplies never got to those who really needed them. Let's turn to CNN Abbie Boudreau, she's with "CNN SPECIAL INVESTIGATIONS UNIT."

This is a story of outrage, Abbie, what happened?

ABBIE BOUDREAU, CNN CORRESPONDENT: Well, this story is so hard to believe but it did happen. And FEMA, the federal agency responsible for helping victims in emergency situations, has no apologies for trying to save money by getting rid of all of these supplies.

(BEGIN VIDEOTAPE)

BOUDREAU (voice-over): Warehouses full of plates, cups and dinnerware, brand new coffee makers, stoves, cleaning supplies, $85 million worth of household items. FEMA says some of it was donated, though most of it purchased by the federal government to help Katrina victims...

DEBRA REED, KATRINA VICTIM: This is the kitchen.

BOUDREAU: ... like Debra Reed recover from one of the deadliest hurricanes in U.S. history.

REED: It's unreal, because we haven't received none of this. I know I haven't.

BOUDREAU: CNN uncovered these items that never made it to many of those still struggling. Instead, we learned FEMA just kept these items in storage for the last two years, then gave it all away to other federal and state agencies for free.

REED: An honest person like me, who had homes here, I didn't get nothing. I'm going to turn because I'm about to cry.

(CRYING)

REED: I didn't get nothing. I fought. I fought to get my money. But they wouldn't give it to me, so I ended up going under the bridge.

BOUDREAU: This is where she's talking about.

REED: That little bit of tent right there, that's my tent.

BOUDREAU (on camera): This one right there?

REED: Yes. The little bitty one.

BOUDREAU (voice-over): Reed, like hundreds of others after the storm, was forced to live on the street. Homeless, living in tents in New Orleans.

(on camera): This is what you've lived in for eight months?

REED: Eight months.

BOUDREAU (voice-over): She lived here until a re-housing group called Unity of Greater New Orleans helped her find a home, a new home, but no new supplies other than a few pots and pans, supplies that did exist in FEMA warehouses, but sat unused.

MARTHA KEGEL, UNITY EXEC. DIR.: These are exactly the items that we are desperately seeking donations of right now.

BOUDREAU: Martha Kegel is Unity's executive director. Her group is a nonprofit that works with FEMA and other local organizations to re-house victims of Katrina.

KEGEL: FEMA, in fact, refers homeless clients to us on a regular basis and asked us to house them. How can we house them if we don't have basic supplies?

BOUDREAU: Yet she says FEMA never told her and other community groups that it had tens of millions of dollars worth of brand-new supplies meant for Katrina victims. We showed her the photos CNN obtained of the government giveaway.

KEGEL: They can only take one fork, one spoon, one knife. They can only take one mug. They can only take one plate. We don't have enough to go around. BOUDREAU: She says she's forced to beg for donations. And says FEMA was told in regular meetings the group was desperate for supplies.

KEGEL: It has been hard to find these kinds of donations.

BOUDREAU (on camera): Right. And this warehouse -- or if you'd call it a warehouse, is nothing like the FEMA warehouse where everything was completely brand new, items stacked to the ceiling in some cases.

KEGEL: Right.

BOUDREAU: This warehouse is really just full of mostly used items.

KEGEL: Right.

BOUDREAU: And it's in the back of an abandoned church.

(voice-over): FEMA tells CNN these items were part of starter kits it gave away to 140,000 families in the Gulf. But it says the need wasn't there anymore for these items. And it wasn't worth paying more than $1 million a year to keep storing them.

So FEMA declared the items federal surplus and gave them all away. First to federal agencies like prisons, the post office, and the Border Patrol.

KEGEL: It seems to me that FEMA is acting like this crisis is over, that it has been over. It's not over. The most vulnerable people are still very much suffering and are homeless as a result of Katrina.

BOUDREAU: These items were then offered to all states. But ironically, Louisiana passed on taking any of them. A state official there tells us, they were unaware that Katrina victims still had a need for the household supplies. Instead, 16 other states took the free items to benefit their cities, schools, fire departments, and various nonprofits such as food banks, though no Katrina victims were helped. In all, the government says it gave away 121 truckloads.

(on camera): FEMA turned down our request for an on-camera interview, saying the surplus property was, quote, "not news."

KEGEL: This stuff really, really is beautiful stuff.

BOUDREAU (voice-over): Yet Martha Kegel calls it big news, and still cannot make sense of how this could have happened.

KEGEL: It just makes me sad to look at this. Is there any way we could still get this stuff? Is it all gone now? It's all gone.

BOUDREAU (on camera): It's all gone.

(END VIDEOTAPE) BOUDREAU: Unity and other community groups we've talked to say this shows a true disconnect between what the government believes and what is really happening on the ground.

BLITZER: Abbie, why did they say it's not news? I mean, that's FEMA statement in response to your reporting. I don't understand.

BOUDREAU: Well, tell me about it. I mean, we asked the same thing. You know, how can you say this is not news? We've been asking them for months because we've known about this for a while. We actually were like, if this isn't news, then maybe we're making a mistake. Is it possible that this -- you know, that we don't know the whole story?

But we do know the whole story. This is absolutely the whole story. And we're asking those same questions and we're hoping that someone can help us get to the bottom of this. We don't know why FEMA says it's not news.

But what we also found was actually another really interesting point of this was that Mississippi was actually one of the states that did receive the FEMA supplies. But those items went to the state's prisons just like the other states and various agencies such as the department of wildlife. And none of those items reached Katrina victims.

So it's one of those stories, you just have to wonder why and how could this happen.

BLITZER: All right. Well, stay on top of it for us, Abbie. I suspect in the next few days, if not the next few hours, FEMA will be issuing another clarification of what exactly happened. You'll update us tomorrow, right?

BOUDREAU: Absolutely.

BLITZER: All right. Abbie, good work. Thanks very much.

A deadly tornado tears through a Boy Scout camp in Iowa. Four scouts are dead, many others are hospitalized. And the community is trying to pick up the pieces. We're going to take you there live.

And he said before that he'll never -- something he'd never say again. Now some are saying our own Lou Dobbs might actually run for governor of his home state of New Jersey. What's going on? Lou is standing by live right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Severe and deadly weather in western Iowa. A tornado strafed a Boy Scout camp, killing four teenagers. More than a dozen scouts are still in the hospital while others are recounting the sudden terror that tore their camp apart.

CNN's Dan Simon has more.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Someone came in and told us there was a tornado. He told us to get underneath the tables.

UNIDENTIFIED MALE: All of a sudden two seconds later the tornado was on top of us.

UNIDENTIFIED MALE: The walls were starting to cave in and blowing around and the chimney collapsed.

UNIDENTIFIED MALE: It picked up our adult leader's car and threw it 50 -- about 50 yards, easy.

UNIDENTIFIED MALE: I didn't really know what to do except hunker down and hope for the best.

DAN SIMON, CNN CORRESPONDENT (voice-over): But these boy scouts had more than hope, they had knowledge. Just a day before it hit, they trained for exactly this kind of emergency and it helped.

BRADLEY SUNDSBOE, TROOP LEADER: I grabbed a kid by the neck, through him in the shelter, closed the door. Told everybody to get on their hands and knees.

UNIDENTIFIED MALE: Eight seconds the tornado passed. That was like the longest eight seconds I've ever had.

BEN KARSCHNER, BOY SCOUT CAMPER: It was, like, I just -- like a pounding sensation on your back. It wasn't, like, blowing around. It was just going straight on, not stopping.

SIMON: Then, as suddenly as it started, it was over. And a strange silence covered the camp. The scouts, dozens of them with minor injuries, sprang into action. But it was clear almost immediately how bad the situation was.

THOMAS WHITE, BOY SCOUT LEADER: I grabbed a first aid kit and ran up to where the one that all the kids were, like, not alive, dead. A bunch of us, we got together and we started undoing the rubble from the fireplace and stuff and pulling kids out.

SIMON: Even as they mourned their friends, many of these scouts are awed at just how close they came to death.

WHITE: If we would have been a foot one way we would have got hit by a falling -- a huge falling branch. And if we would have been a foot the other way, we probably would have got sucked up.

SIMON (on camera): Five of the more seriously injured scouts are at this hospital in Omaha, their injuries ranging from skull and pelvic fractures to spinal cord injuries. Their parents at their bedside now having to share the tragic news that four of their fellow scouts are gone.

Dan Simon, CNN, Omaha.

(END VIDEOTAPE)

BLITZER: In other national disasters unfolding right now in the region, that would be flooding. Look at the huge area being impacted by rising water. It's ruining crops and prompting the Army Corps of Engineers to close a 200-mile stretch of the Mississippi River to agriculture and cargo ships.

All of this is all combining to drive up corn prices to record levels, about $7 a bushel. And there's a ripple effect. Corn is a staple food for livestock so you'll be paying more for beef and pork in the coming months.

Let's check back with Jack Cafferty, he has got the "Cafferty File" -- Jack.

CAFFERTY: Have you got any good news?

BLITZER: No. Not yet.

CAFFERTY: Wow. Tough stuff.

All right. The question this hour is, what does it mean if Barack Obama and John McCain are less than 10 points apart in the polls?

J.C., North Carolina: "McCain had the advantage of Obama and Clinton bashing each other until last weekend. Wait a few weeks and a tsunami of voters will flock to Obama. The first waves will come when women begin to glean McCain's views on freedom of choice and health care. Next, once Obama chooses a V.P., with defense and diplomacy chops, the men will join the women en masse to support Obama. This will happen even if McCain does not blow a fuse or deliver additional gaffes about not caring how long our troops remain in Iraq."

John in Albany writes: "Well, Jack, much to your annoyance, it means that Hillary supporters will decide who is the next president. That's as it should be. I'm one of those voters. And there's nothing like being the tie-breaking vote. It makes you feel very important."

Ozgur in Bloomington, Minnesota: "It means quite a few people don't view McCain as a typical Republican. He's popular with independents who are often fiscally conservative but socially more liberal. And the fact that polls show he's more desired in office than the Republican Party illustrates that point. Apparently his numerous breaks with the party in the past have paid off in terms of this election."

Robby in Florida writes: "What it means is the nation is pretty evenly divided between Republicans and Democrats. However, Democrats are far more excited about their candidate than Republicans. The small margin between the two candidates tells me it's easier for the Republicans to tell the pollster on the phone, I like McCain, than literally get up off the couch and go spend a couple of hours voting. Obama in a landslide because Democrats are far more likely to turn out to vote." Jay in Sherman, New York, writes: "It means that this is June. The American public really cares more about trips to the beach or picnics or ball games. Most people probably hung up when the pollsters asked for their opinions. Give us a break on this. After Labor Day, when the campaign begins in earnest, these polls might actually mean something. Until then I'm going to fire up the grill and enjoy my porch."

And Kevin offers this rather charred little bit of prose from Massachusetts: "Jack, it means your job is safe at least until November."

If you didn't see your e-mail here, you can go to my blog at cnn.com/caffertyfile and look for yours there among hundred of others -- Wolf.

BLITZER: Thanks, Jack. Thanks very much.

It has been less than 24 hours since the head of Barack Obama's vice presidential team resigned. Now John McCain's campaign is going after yet another member of the search team. We'll show what's going on.

And Lou Dobbs for governor? Lou is standing by live to talk about that and more right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Lou Dobbs is joining us now.

Lou, we noticed in The Star-Ledger of Newark, this note: "Several well-connected Republicans say they've heard the buzz that Dobbs, famous for sharp commentary about Washington policies and politics, may be turning his sights on Trenton and has inquired about the steps necessary to start a campaign."

You want to be governor of New Jersey?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": Well, you know, as I've been saying throughout, you know, I don't want to have to comment on this sort of thing because it's one of those things that starts with a number of strategists discussing and then, you know, bringing your name forward.

You know, I've tried to get away with a "no comment" on this as I -- you know, I'm trying to figure out what the heck is going on. I'll either have a comment on it either tonight on my show or tomorrow, you know, after I talk with all of the exploration committees that have been at work across the state.

BLITZER: Because we went through a similar exercise a few months ago when there was a buzz, Lou was going to run as a presidential candidate.

DOBBS: Yes. And I said never do I say never. And I will say that again. But at the same time, I have been pretty clear and most people who watch my broadcast and know me understand I haven't exactly got the temperament for politics to put up with these folks who require great patience.

I'm an advocacy journalist. That's my role. It's one I love and it's the responsibility I take most seriously.

BLITZER: Lou, we'll be standing by for your show to see if you're going to make a statement on this. It's intriguing.

DOBBS: You've got that.

BLITZER: See you in an hour, Lou. Thanks very much.

DOBBS: Take care.