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THE SITUATION ROOM
President Obama to Give 'Sobering' Address; Economy Goes From Bad to Worse; No End to Wasteful Spending
Aired February 24, 2009 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SUZANNE MALVEAUX, CNN ANCHOR: Happening now, a nation in economic crisis braces for sobering words from its new president. Mr. Obama is set to address why Americans are suffering so much and what more he can do to help.
We are standing by to get excerpts soon from that speech.
Plus, the soaring cost of the presidential helicopter alerts Congress of a potential train wreck ahead. Why some lawmakers say the defense budget is in a tailspin.
And an insurance giant apparently wants more financial help from the federal government. Is it time to let AIG sink or swim on its own?
Wolf Blitzer is on assignment. I'm Suzanne Malveaux. And you're in THE SITUATION ROOM.
Wolf Blitzer is on his way to our studio after a high-level briefing at the White House. That is where President Obama now is preparing for another milestone of his brief time in office.
He delivers his first speech to a joint session of Congress about five hours from now. It is not considered an official State of the Union Address, but he is going to focus heavily on the state of America's battered economy.
I want to go straight to our White House correspondent, Dan Lothian.
Dan, you've been following all the developments, obviously getting a little bit of hints, what he's going to say later today -- Dan.
DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right. And you know, the speech is expected to last about an hour.
According to senior aides, it will have very broad themes. It won't get bogged down in any of the details, because they believe that the American people want to know the game plan, but don't need to know every move out there on the field. The game plan, of course, fixing the economy.
LOTHIAN (voice-over): As the president prepares to address a joint session of Congress, the economic picture is sobering: mounting job losses, a housing meltdown, consumer spending on life support, and a credit crunch. Senior advisers say Mr. Obama will mix sober talk with an optimistic tone.
CHRISTINA ROMER, COUNCIL OF ECONOMIC ADVISORS: He's like a doctor; right? The patient's in his office. He's going to tell us the truth. We have a serious problem. But the important thing is he has a plan.
There's this treatment and we will get better. And I think that is the ultimate message of hope that he's going to give.
LOTHIAN: And one prescription that the president is expected to highlight is the $787 billion stimulus package.
ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Giving tax cuts to the American people and creating jobs, the bill has already done that. But you'll hear him talk about financial stability, about a housing plan for responsible homeowners that have played by the rules.
LOTHIAN: The president will also touch on energy independence, education reform, and health care, all components of the administration's overall economic agenda. Senior aides say Mr. Obama will only deal briefly with foreign policy issues like Iraq and Afghanistan.
The president's address will be closely watched by Americans who are looking for some good news. When asked in a recent CNN/Opinion Research poll if Obama's speech will make you feel more confident about the economy, 62 percent said likely; 37 percent said not likely. High expectations for a president who, after a month in office, still has an approval rating of over 60 percent.
Despite stumbling on some cabinet appointments and a blow to bipartisanship, Mr. Obama gets high marks from some political observers.
ALLAN LICHTMAN, AMERICAN UNIVERSITY: I would give Obama an A in policy accomplishment for getting the biggest spending bill through the Congress in history in just a month.
LOTHIAN: White House officials say the president will also talk tonight about wanting to work with Republicans to deal with some of these tough economic issues. And as for the speech itself, we're told by senior aides that the president was heavily involved in laying out some of the broader themes for this speech, but that Jon Favreau, the speechwriter who as behind his inaugural address, is also behind this one -- Suzanne.
MALVEAUX: Dan, thank you. Obviously, we'll get right back to you when we have those excerpts. Thanks again, Dan. We'll see you soon.
Well, there's going to be plenty of VIPs on hand tonight in the House chamber for the president's speech, including the pilot who successfully landed a US Airways flight in the Hudson River last month. Captain Chesley "Sully" Sullenberger will be a guest in the House speaker's box, along with the first officer and a flight attendant from Flight 1549. Sullenberger testified before Congress today about airline safety. We're going to have a report on that straight ahead.
But first, let's zero in on the dire economic straits President Obama, all of us are facing right now.
There's a new report that shows consumer confidence took a nosedive this month, with Americans more scared than ever about losing their jobs and their retirement savings. And several big stores -- Target, Home Depot, Macy's -- are reporting a big drop in profits in the last three months of 2008.
Well, our Senior Business Correspondent Ali Velshi is here.
And obviously, Ali -- good to see you -- you are always very good at breaking all of this down.
You are talking about some economic warnings, some indicators from the president. Do you think it's really that bad out here, or is he (ph) exaggerating?
ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Well, Suzanne, an issue with the American economy more so than others -- and people say this all the time, but it's a fact -- it is more dependent on consumer spending than most other major economies. And as a result, we are more dependent on how consumers feel.
So we've got our CNN Reel Feel Economic Indicator. We've taken a look at five measures that actually touch people to see why it feels as bad as it does.
Now, we've gone back to 1980, because that's as far back as we can go where we're measuring the same thing and the scales are the same. But that's more than a generation and, of course, that includes some recessions that we've had between now and then.
Let's start with unemployment. Right now, unemployment is at 7.6 percent on the scale. Now, what we've done is we've gone back to 1980. The best it's ever been is number 10 on the scale. The lowest it's been in that period is zero on the scale.
So zero would have been 1982, when it was 10.8 percent. The low end of the scale is 3.9 percent. So in the last generation, unemployment comes in just below the halfway point. So on the more negative side of the scale.
Let's take it over to personal income.
Now, we've adjusted this for inflation over time. Over the last 30 years, adjusted for inflation, personal income has been as low as $32,600 and as high as $39,100. We're right now at $34,600. So, again, on the low point on the scale, closer to a 3.
Let's take a look at personal savings. Now, this is an interesting one. Back in the '80s, a lot of people will tell you the recession was worse or felt worse back then. But back in 1982, people were saving. They were banking 12.2 percent of their income, which meant if you had a recession that went on for a year or longer, you could weather the storm.
About a year ago, we were lower than zero. Almost zero. We were 0.7 percent.
Right now, because of this crisis, we're banking a little more money, about 3.6 percent, and that comes in a little higher than 3. So again, we haven't crossed the halfway point on any of these scales.
Let's look at industrial production. That is the measure of everything that is produced in this country.
Obviously, when factories shut down, when manufacturing workers are laid off, we produce less. The best we've had is 10.7 percent increase year over year in industrial production. The lowest we've had, guess what? We're at zero right now, 12.1 percent. So on this measure, we are at the lowest point in the scale.
And finally, appreciation of home prices. How much did your home go up by in a year?
In the last 32 years, the best we've had is a year where home prices were up 9.7 percent. This past year, 6 percent on the downside. We're negative 6 percent. That puts us also at zero.
So of our five measures of the economy, and how it feels to you, we're at zero on two of them. We're not more than halfway on any of them. And this has deteriorated since October, when we first started doing this measure.
So, President Obama is going into a speech where things feel tough for Americans, and he's got to have as much solution as confidence in tonight's speech -- Suzanne.
MALVEAUX: A lot on his plate to deliver tonight. Thank you, Ali.
President Obama sends his 2009 budget blueprint to Congress just two days from now, but there are billions of dollars worth of spending that is in the pipeline right now, and it's awaiting Congress' approval. Well, watchdog groups say it is packed with wasteful projects that this country just can't afford.
Here's our congressional correspondent, Dana Bash, who has been following this.
What have you noticed?
DANA BASH, CNN SR. CONGRESSIONAL CORRESPONDENT: That's right, Suzanne. You know, even as President Obama comes here to Capitol Hill tonight -- he will address Congress and the nation about the troubled economy and the need for fiscal discipline -- as we speak, legislation is moving through Congress that is packed with billions in pet projects.
BASH (voice-over): Democratic Congressman Heath Shuler bucked his party and voted against the president's stimulus bill because of too much excess spending. But now he's poised to spend $870,000 taxpayer dollars for a red Wolf breeding center in his North Carolina district. It's an earmark Shuler's spokesman calls critical to protect an endangered species, but congressional watchdog groups call that and other pet projects now moving through Congress business as usual.
RYAN ALEXANDER, PRESIDENT, TAXPAYERS FOR COMMON SENSE: Members of Congress heard -- you know, may have heard the call for change, but they also heard the call to make sure that they delivered projects to their districts and to their campaign contributors.
BASH: In fact, tucked inside a $410 billion package to fund the government for the rest of this year, 8,570 earmarks totaling $7.7 billion. And bringing home that bacon is bipartisan.
Even Republican Senator Lindsey Graham, who campaigned alongside John McCain as he railed against earmarks, is getting $950,000 for a convention center in Myrtle Beach, in his home state of South Carolina. Democrat Jerry Nadler has $381,000 for jazz education at Lincoln Center.
Compared to previous years, Congress is cutting back on its earmarks, but some say the process is still distorted.
ALEXANDER: The general problem with earmarks is the decisions are made on the basis of political muscle.
BASH: For example, Senate Majority Leader Harry Reid of Nevada is securing $951,500 to make Las Vegas more environmentally friendly.
SEN. HARRY REID (D-NV), MAJORITY LEADER: Congressionally-mandated spending is part of our job. That's what we do. We shouldn't depend on bureaucrats downtown to take care of our individual states.
BASH: And while the Senate Republican leader blasted the price tag of the spending bill...
SEN. MITCH MCCONNELL (R), MINORITY LEADER: It strikes us that we're on a spending spree of gargantuan proportions here.
BASH: ... he would not disavow pet projects. His home state of Kentucky will get millions of dollars.
BASH: Now, President Obama demanded that there be no pet projects or earmarks in the $787 billion stimulus bill. And when he signed it, he declared proudly that there was no pork barrel spending. But the White House has not yet said, Suzanne, what he thinks about this bill moving through Congress now that does have earmarks in it, and it's going to reach the president's desk probably in a couple of weeks. MALVEAUX: Thanks, Dana. Obviously something the president has to address.
Well, time now for "The Cafferty File." Jack Cafferty joining us.
Jack, it's nice to see you in person here.
JACK CAFFERTY, CNN ANCHOR: Yes. We don't get to sit at the same desk very often. I don't know if that's good or not.
Most Americans hungry to hear what the president has to say about the economy tonight when he addresses that joint session of Congress. There's a new "USA Today"/Gallup poll out showing 74 percent of those surveyed eager to hear the president talk about the economic challenges facing the country.
Eighteen percent want to hear about jobs and job creation or unemployment. Fifteen percent want information about the banking crisis. Fourteen percent want to hear more about that $787 billion stimulus package. Eleven percent want the president to talk about the housing crisis, and 10 percent say it's all about health care.
Outside the economy, other issues mentioned are the wars in Iraq and Afghanistan, education, and illegal immigration.
"The New York Times" suggests this morning the president's challenge tonight will be to declare that "out of ugly necessity," big government is back. But if done right, it won't last for long. The hardest part will be for the president to convince Americans they cannot save themselves without first saving "the banks that let greed blot out prudence, the carmakers who ignored competitive reality for a quarter of a century, and homeowners who somehow persuaded themselves that housing prices only go up."
It's a tall order for President Obama, and he's no slouch in the oratory department. Amidst all the rotten economic news, he will have to be at once reassuring and realistic. It's a tall order.
Here's the question: What do you want to hear from President Obama tonight?
Go to cnn.com/caffertyfile. You can post a comment on my blog.
MALVEAUX: Do you know what you want to hear from the president?
CAFFERTY: It's a long list of things that I want to hear. You know, he's got a very difficult assignment, and I think he's doing a pretty good job so far. But the economic reality is working against him.
CAFFERTY: Bernanke is out today saying it's two or three years before this thing starts to recover. So what can he realistically say? We're in deep stuff here, and it's going to be a long, dark night. And at some point we hope it will start to get better. And other than that, I don't know what he can say. MALVEAUX: OK. Just hours away from that.
A sign of desperate times in New York City. People lined up as far as the eye can see, all clamoring to get a job.
Plus, how does your state stack up in the foreclosure crisis? We're going to show you a fascinating new tracking map that is online.
And we are tracking breaking news. Illinois Senator Roland Burris still refusing to step down, even after the senior senator from his state, Dick Durbin, suggested that it is time for him to go.
You're in THE SITUATION ROOM.
MALVEAUX: Well, freezing New York City weather could cause frostbite, but there were swarms of people lined up in the frigid cold with just one hope -- finding a job. At this job fair, lines ran as far as the eye could see, but for many, the wait was short compared to the time that they've actually been out of work.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: I thought it would take a few months. I have good skills, I have good education. And just -- you know, ,people aren't hiring. So just very difficult to get out there and get your name. And they -- and you know, I've tried networking and using my contacts, but, you know, places just aren't hiring.
UNIDENTIFIED FEMALE: I'm trying to look at other industries because it just isn't happening. I'd like to stay in management, but -- taking a sales job -- but they're not even hiring for that.
(END VIDEO CLIP)
MALVEAUX: Our CNN's Deborah Feyerick was at the job fair.
And obviously, I mean, that was amazing to see, all of the people that were wrapped around the block there. What made this so unique and different from some of the other...
DEBORAH FEYERICK, CNN CORRESPONDENT: It was really the feeling. They had a job fair similar to this one about three months ago. That one, there were just a third the number of people in line.
So there's this growing sense, all these people really, really eager to work. But the problem is, is they are all saying there just aren't any jobs out there.
Also the kind of people in line, all different kinds of ages, all different levels of experiences, all different backgrounds. Some of them have been out of work for a month. Some have been out for a year. And they are really trying to piece together exactly where the jobs are. And that is what is most challenging for them. MALVEAUX: And what was the sense of their mood? Were people discouraged being in those lines, or do they have a sense, like, if I just hang on another hour, maybe there will be something for me when I get to the front of the line?
FEYERICK: Good question. I think there's no option. They have to hang on. But a lot of them are really running out of money, and that's why they were standing in these freezing cold temperatures.
There were 5,000 people on that line for 1,000 jobs. So that's, you know, more than five to one. But still, they were there, because they'll take any leads that they can get.
A couple of good jobs, many of them in government, DHS, ICE, Drug Enforcement Agency, FBI. Those were some of the jobs being offered -- electric companies, insurance companies. But again, really, the people outnumbered the amount of jobs that are available.
MALVEAUX: And did you see anything that was similar in the people in line? Were they mostly working class, or was it, you know, blue collar, white collar jobs that they were seeking?
FEYERICK: You know, that's what was so interesting. I asked them, OK, well, "How long have you been laid off?" The range of answers varied, but also the kinds of jobs -- finance, insurance, party planning, personal assistant, some college students out looking for a first job.
People -- one woman who you heard there, she was at a church. She felt, well, I'm going to go get a better job. But she's been out of work for nine months. So, yes, a real different range, but everybody just wants to work.
MALVEAUX: Wow. Fascinating stuff.
Thank you so much, Deborah.
Which states are being hit the hardest by the economy? Well, a new map on CNN.com is tracking everything from unemployment to foreclosure rates, state by state.
I want to go to our Internet reporter, Abbi Tatton.
And Abbi, tell us about this map.
ABBI TATTON, CNN INTERNET REPORT: Suzanne, it's looking pretty grim right now. It's data from the U.S. Department of Labor that shows that for the first time since they began keeping records, unemployment is on the rise in all 50 states. The records began in the 1970s.
We're tracking that data here on the Economy Tracker at CNN.com. If you can zoom in, you're going to see that depending on the darkness of the states, that's the unemployment level in that state, with Rhode Island, Michigan leading the way in unemployment at over 10 percent each. We're also following here the knock-on effects of that unemployment. The foreclosure statistics are also mapped out here. Nevada leading the way in that statistic.
But it's also the stories behind all this data that we're trying to follow online with this new Economy Tracker, the voices of the people who are suffering right now from the economic crisis. Take a listen to one of our iReporters right now, John Stevens.
He's in Torrington, Connecticut. Last year he worked in the auto industry, earning about $80,000 a year. Right now he's unemployed, facing foreclosure.
Take a listen.
(BEGIN VIDEO CLIP)
JOHN STEVENS, IREPORTER: I don't know what to do. I can't afford an attorney. I keep calling HUD counselors that are approved in my area. I can't get them to return my phone calls.
I can't get through to them because they are so swamped with people. I don't know what to do.
(END VIDEO CLIP)
TATTON: So many stories like that that we're hearing from people, iReporters who are recording what they are going through and posting it on ireport.com. We're putting it on CNN.com, people, Suzanne, who really want to hear from President Obama tonight.
MALVEAUX: OK. Thank you, Abbi.
It has already gotten $150 billion of your money, but is insurance giant AIG about to ask for even more taxpayer money from the government?
And President Obama is set to make his first speech before a joint session of Congress. We'll talk about the expectations for tonight and look back at what two popular presidents said at their first speech.
MALVEAUX: The Pentagon must ask itself what it wants versus what it needs. It's set to make tough choices about spending. One expense being debated, upgrading the fleet of helicopters that carry and protect the president.
And it's President Obama's first speech before a joint session of Congress. What does he need to say to get you on board with his economic plan? I'll speak with a top economist, Jeffrey Sachs.
(COMMERCIAL BREAK) MALVEAUX: You're in THE SITUATION ROOM.
Happening now, a lot on the line as President Obama prepares for tonight's major speech before a joint session of Congress. Two top senators hash out two key issues -- terrorism and the economic crisis.
Federal Reserve Chairman Ben Bernanke has his own take on the economic climate. We'll find out what he thinks the recession will turn around.
And if you are planning spring travel, a strong word of warning from the State Department about a popular vacation spot.
We are standing by to be joined by Wolf Blitzer.
I'm Suzanne Malveaux. And you're in THE SITUATION ROOM.
We are counting down to President Obama's joint address to Congress tonight. He's expected to discuss the tidal wave of red ink in the federal budget and how he plans to slash it by half in his first term.
Now, other presidents have grappled with the federal deficit during their first big speeches after taking office. I want you to listen to these remarks from Presidents Clinton and Reagan.
(BEGIN VIDEO CLIP)
RONALD REAGAN, FMR. PRESIDENT OF THE UNITED STATES: Our national debt is approaching $1 trillion. A few weeks ago, I called such a figure, a trillion dollars, incomprehensible. And I've been trying ever since to think of a way to illustrate how big a trillion really is.
And the best I could come up with is that, if you had a stack of $1,000 bills in your hand, only four inches high, you would be a millionaire. A trillion dollars would be a stack of $1,000 bills 67 miles high.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP, FEBRUARY 17, 1993)
BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I well remember, 12 years ago, President Reagan stood at this very podium and told you and the American people that, if our national debt were stacked in $1000 bills, the stack would reach 67 miles into space. Well, today, that stack would reach 267 miles.
(END VIDEO CLIP)
MALVEAUX: Well, we're joined by our senior political analyst, Gloria Borger, to make sense of all of the stacks of the bills and everything.
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: I don't know how many stacks we would have today.
MALVEAUX: But, obviously, it's like small potatoes when you think about...
MALVEAUX: ... Clinton and Reagan, and what Obama is dealing with now.
BORGER: Yes, you know, absolutely.
And when you think of the deficit, not the debt, let's take a look at this, these statistics here, because we -- we put these things together. In 1990 -- '81, when Ronald Reagan was complaining, the deficit was just $78 billion, which was 2.6 percent of the gross domestic product. And that's all the goods and services that we produce in this country.
In '93, $255 billion deficit for Bill Clinton, 3.9 percent of the GDP. And you see here, this year, Barack Obama, the estimates are $1.5 trillion for the deficit and almost 10 percent of the GDP, Suzanne. It's huge.
MALVEAUX: So, what did it look like when there was a surplus?
BORGER: It kind of hard to remember when there was a surplus. But there was that shining moment, starting in about 1998 to about 2002, when we -- when we did have a surplus.
And that's because Bill Clinton passed the Deficit Reduction Act in 1993, largely with Democratic votes. Also, the economy was performing quite well at the time. It may be a chicken-and-egg situation, but we actually did not have any red ink. Imagine that. It's hard to think when we're ever going to get there again.
MALVEAUX: Yes, hard to imagine.
I want to bring in Jeffrey Sachs. He's a professor of economics at Columbia University.
What does the president need to say this evening to the American people?
JEFFREY SACHS, DIRECTOR, COLUMBIA UNIVERSITY EARTH INSTITUTE: He needs to explain how we're going to have a recovery and what the medium term looks like, not just the one year or two years, but the next five years, and I hope, more and more, tonight, when they unveil the budget in four days, and then when they go to London for the G-20 meeting in early April, how the whole world fits together right now.
You know, we're talking about this crisis as if it's a U.S. crisis only. But this is a worldwide crisis. And, so, we need to see the pieces fitting together to restore confidence, to get investment now moving once again. Consumers are going to be on their backs for quite awhile, because the loss of wealth has been so huge. We need to get investment going, government and private. And the president has to outline the framework for that.
MALVEAUX: I want you to listen real quickly to Ben Bernanke, the Fed chair, what he said earlier today.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: If actions taken by the administration, the Congress and federal government are successful in restoring some measure of financial stability, and only if that is the case, in my view, there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.
(END VIDEO CLIP) 9 MALVEAUX: Is he right? What -- what is that going to feel like?
SACHS: I think what we're going to have is a very tough year this year. And, most likely, although, you know, this is crystal-ball gazing, a very gradual recovery.
We're not going to have a sharp rebound, because we were living beyond our means, and we were in a bit of a bubble, asset prices -- that means stock market, housing prices -- way out of sight, out of historical norms. They have crashed. They aren't going back to where they were, even if we stabilize.
So, the recovery is going to be a gradual recovery. And that means high unemployment for quite awhile and the need for government to lead the recovery for quite awhile.
BORGER: But -- he also has to convince people, politically, that the government is not going to grow this way forever, that he understands that there's a limit to how much government can grow, and that he's got to get those deficits under control that we were just talking about before, because it can't go on exponentially like this, or it won't be good for us in the long term.
OK, Jeffrey, thank you so much.
This tough recession is forcing many organizations to decide between what they want and what they really need. And the Pentagon is facing those decisions.
Our CNN Pentagon correspondent, Chris Lawrence, joining us now.
And, Chris, what are they grappling over?
CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, for example, Suzanne, the president has put the new Marine One helicopters on hold while he reviews the costs, which have ballooned past the price of Air Force One.
But that really may just be the tip of the iceberg.
LAWRENCE (voice-over): The price of the new Marine One helicopters nearly double within just a few years of the contract being signed, it's just one example of what lawmakers call a broken system of defense spending.
SEN. JOHN MCCAIN (R), ARIZONA: We're facing a train wreck.
LAWRENCE: Senators John McCain and Carl Levin introduced legislation to reform how the Pentagon buys weapons and equipment. Levin said, the Pentagon's largest acquisition programs are, on average, two years behind schedule and are over budget by $300 billion. He cited the Navy's combat ship program as an example.
SEN. CARL LEVIN (D-MI), ARMED SERVICES COMMITTEE CHAIRMAN: The initial goal was $220 million a ship and a two-year construction cycle. We're now at $500 million a ship, and it's way beyond two years.
LAWRENCE: They want the Defense Department to make tradeoffs early on between cost and performance, use more competitive prototypes to make sure new technologies work before trying to build them, and establish an independent director to give unbiased assessment of costs.
Now, some of these are recommendations the defense secretary himself has made.
ROBERT GATES, U.S. SECRETARY OF DEFENSE: We must have the courage to make hard choices.
LAWRENCE: McCain wonders why private companies develop technologies, yet still manage to tell their customers how much it's going to cost, then produce the product.
MCCAIN: Why can't we do that in -- in defense acquisition?
LAWRENCE: The legislation is aimed at cutting costs outside the most expensive part of the budget, personnel. Lawmakers are reluctant to cut costs associated with troops, especially with 17,000 more now headed to Afghanistan.
LEVIN: Whether it's in terms of pay, benefits, their families, their health care, we're -- we're not going to do that.
LAWRENCE: And Secretary Gates says, the Pentagon can save more money if the branches start to share more technology, in other words, developing technology and systems that they can all use, instead of the Army, Marines, Air Force all building their own -- Suzanne.
MALVEAUX: Sure. Thank you, Chris.
One bailout may not be enough for an insurance giant. Does AIG deserve more help from taxpayers, or is it time to cut the lifeline? There's some panic on Wall Street over concerns that the president may nationalize banks. Should Mr. Obama be saying something to ease those fears? Stand by for our "Strategy Session."
And, later, the hero of the so-called miracle on the Hudson, he warns that -- Congress that the airline industry is a mess.
MALVEAUX: Well, apparently, in this recession, $150 billion can't buy what it used to. A financial giant that may provide you insurance may soon say that it needs more of your taxpayer dollars to avoid collapse.
Let's turn to our Mary Snow with that story -- Mary.
MARY SNOW, CNN CORRESPONDENT: Well, Suzanne, it's really sparking a lot of debate of how far the government should go to help this company.
AIG is due to release its financial results for the quarter and for the year soon, perhaps within a matter of days. The expectation is that there's going to be grim news and the possibility for the government to perhaps take more drastic steps.
SNOW (voice-over): It's already received $150 billion in government money. But unable to dispose of loss-making units, AIG, American International Group, apparently needs more help.
In a statement, the company says, "We continue to work with the Federal Reserve Bank of New York to evaluate potential new alternatives for addressing AIG's financial challenges."
And it's prompting some economists to say, it's time for Uncle Sam to throw in the towel on AIG.
JEFFREY MIRON, ECONOMICS PROFESSOR, HARVARD UNIVERSITY: We need to just let it go. Taking taxpayer money and continuing to give it out in a way that ends up benefiting AIG shareholders and bondholders, people who made bad decisions that put it in the current position, that's just crazy. And it's not going to return it to health.
SNOW: The U.S. government stepped in last year to save the insurance and financial giant, because it was so intertwined with other businesses in the U.S. and around the world. Some economists say it's still in the interest of the U.S. economy to save AIG to prevent a sequel to the credit crisis last fall.
LAKSHMAN ACHUTHAN, AUTHOR, "BEATING THE BUSINESS CYCLE": If AIG or another large financial institution were to fail, OK, it's very likely that you would have a repeat. The credit system would freeze up again. And to the extent we're even having loans that are going out right now and credit cards are working right now, those things would probably slow to a crawl very, very quickly. SNOW: At the center of the storm is AIG's financial products unit, which, among other things, insured mortgage-backed securities and other high-risk debt.
Some analysts say adding to those losses is AIG's exposure to the commercial real estate market.
SNOW: And some analysts who closely follow the company say they expect AIG to post a loss of $60 billion. But others we talked to say they can't say for sure just how big the loss is. But, in their words, they say they know that it will be huge.
MALVEAUX: Mary, thank you so much.
President Obama readies for a huge moment for his new presidency. Well, what should we expect tonight in his first speech before a joint session of Congress?
And a seasoned economist explains to you what you should be listening for.
MALVEAUX: This just in.
We're get something excerpts from Republican Governor Bobby Jindal. He's going to be delivering the Republican rebuttal, the response to President Obama's address, the speech later today.
And just one of the things he's going to be saying: "You elected Republicans to champion limited government, fiscal discipline and personal responsibility. Instead, Republicans went along with earmarks and big government spending in Washington. Republicans lost your trust, and rightly so" -- that from Governor Jindal of Louisiana, Republican, who is going to be giving the rebuttal to Obama's speech later this evening.
Joining me now for today's "Strategy Session" are Democratic strategist and CNN political contributor Donna Brazile and Republican strategist Dick Armey, chairman of FreedomWorks and a former House majority leader.
I want to start off with both of you, just getting reaction to the case that Governor Jindal is making, that Republicans, that people lost their trust, because they were spending too much. Perhaps he's saying that Obama now is guilty of the same.
DONNA BRAZILE, CNN POLITICAL ANALYST: I don't think he's saying that President Obama is guilty of it. I think what he's trying to say that, for Republicans to come out of the wilderness, they have to be a party of principle, a principle of lower taxes and, of course, smaller government.
But we're in a recession. And what President Obama tonight will do is -- is lay out his vision for how we come out of this recession and get the American people back on the road to recovery.
This is not about being against Republican principles. I think, in ordinary times, to have those principles, is -- it is remarkable. But we're not -- we're in an urgent crisis right now. And we need a plan to get this economy moving again.
MALVEAUX: Mr. Armey?
DICK ARMEY, FORMER REPUBLICAN HOUSE MAJORITY LEADER: Well, I think what the governor is acknowledging is, the public does not like excessive and indiscriminate spending, especially in the form of pork barrel earmarks.
And the Republicans have learned that lesson, and they are backing off that kind of behavior. I think that the -- the biggest reservation that I hear from people today about the current package they have just signed into law this past week is that it's still laden with pork barrel earmarks.
MALVEAUX: I want to address something that a lot of people have been speculating about, whether or not the federal government is actually going to be nationalizing some of these big banks that are in trouble.
On the one hand, you have President Obama, as well as Robert Gibbs, saying, no, we're not actually going to entertain that. But, on the other hand, the Treasury Department has been a little bit ambiguous about this, saying that they're going to do whatever it takes; these banks cannot fail.
A "Wall Street Journal" editorial saying: "The current fear stems in particular from the uncertainty of the government's intentions toward some of the largest banks that are thought to be too big to fail. The Treasury has promised what it calls stress tests, which are reasonable in theory, but the Obama Treasury has announced them as if they are new cable TV reality show, 'Survivor: Manhattan.'"
Donna, what does the president need to say tonight to put that to rest? Does he need to address this very specific issue that people are really worried about?
I -- I hope that he can tap into the anxiety that many Americans feel today, in terms of their own ability to pay their mortgage and to make ends meet.
But, look, with regards to the bank -- and I don't know -- I haven't talked to Mr. Armey about this, but we can't continue to pour money down a big hole. I mean, at some point, we need to hold him accountable to the billions of dollars we have already given to them. This is taxpayers' money.
And need to -- we need to find out what they have done with the money, what are they planning to do with the money they have. Before they come back and beg us for more money, taxpayers, tell us what you have done for us lately. ARMEY: Yes.
MALVEAUX: The -- go ahead.
ARMEY: Well, first of all, the use of the term nationalization is a completely confused misnomer right now. Nobody knows what they mean by that.
The fact of the matter is, the concept of too big to fail in itself is, I think, somewhat questionable. Take the -- take the bank. Let the FDIC take it into receivership. Clear up its assets and -- and move on, and to get the thing done with.
What they are going to do now is pour billions of dollars of taxpayers' money there for worthless paper that reflects some semblance of ownership with no control or say in the matter. That's not nationalization. As far as I'm concerned, it's simply subsidizing an existing problem to make it live longer.
BRAZILE: We need more transparency and accountability. I hope the president will call on the banks to give us that, and not just more money.
MALVEAUX: Real quick, I want to show you some new poll numbers here going into this speech, CNN/Opinion Research Corporation poll. Will Obama's speech to Congress make you feel more confident about the economy? Sixty-two percent say likely. Thirty-seven percent say not likely.
Also, Obama's policies will move country in right direction, 67 percent; wrong direction, 31 percent.
Mr. Armey, let me start off with you.
Is there perhaps a risk here that the expectations are much too high for this president going into this speech?
ARMEY: Well, first of all, I think the -- the polling data reflects high hopes.
President Obama is very good at -- at raising our hopes. We have seen this just recently with his secretary of the treasury coming out, and, in fact, dashing them. I think the public, especially the -- the professional markets, need real, concrete stuff.
MALVEAUX: Thank you.
ARMEY: And I don't know if they will get it.
MALVEAUX: OK. Thank you very much. We have got to leave it there. Thank you so much.
BRAZILE: Thank you.
MALVEAUX: The number-two Democrat in the Senate is urging his colleague Roland Burris to step down. But Burris is not budging. We will have the latest on the breaking news in this political saga.
Plus, two leading senators on what they need to hear from the president tonight. Democratic -- John Kerry and Republican John Thune are standing by.
And the miracle on the Hudson pilot warns, airline veterans like him may be an endangered species.
(BEGIN VIDEO CLIP)
CHESLEY "SULLY" SULLENBERGER III, PILOT: I am worried that the airline piloting profession will not be able to continue to attract the best and the brightest.
(END VIDEO CLIP)
MALVEAUX: As promised, Wolf Blitzer is back with us now.
He's joining us. I understand that you are coming from the White House. You had lunch with the president and some other folks. Tell us -- tell us what happened earlier today.
WOLF BLITZER, CNN ANCHOR: It's really important, I think, to note that, on these days when the president of the United States, whether this new president or former President Bush, former President Clinton, whenever they have these major speeches to -- to Congress or to the American public, they usually invite in several of the anchors from the major networks, the news networks, to come in and get a little sense of his mood, his attitude, what he's trying to achieve, what he's not trying to achieve.
And a lot of it is off the record, as they say. Some of it just for our background use. But it's a good way for us to better appreciate what's going on.
John King, the host of CNN's "STATE OF THE UNION" and our chief national correspondent, he and I were invited, representing CNN. And he';s going to be joining us at the top of the hour. We are going to talk a little bit about what's going through the mind of this president of the United States.
You cover him on a daily basis. I think it's fair to say that his sense is that, speaking about the U.S. economy right now: The patient is sick. Here's what's going on. Here's what we have got to do, and -- and reassuring the patient tonight, you are going to be just fine, but there's going to be a lot of work that we have to do.
MALVEAUX: What was his temperament like? Is he confident, do you think, going in? BLITZER: He seemed -- he seemed very confident, very much on top of what's going on, almost professorial in explaining the intricacies of this -- of this economic dilemma, this economic crisis, and -- and always worrying about the delicate balance, when, you know, you have to be honest with the American people and say the situation is dire, the situation is bad, there is a crisis, but, at the same time, you have to leave the American people and you have to leave the -- the markets, if you will, the financial institutions, with hope that this is solvable.
And he really believes that it's solvable, but it's going to take some time.
And I understand you have a menu as well?
BLITZER: We had a very...
MALVEAUX: This was a lunch, obviously.
BLITZER: A very nice luncheon, including seared Virginia striped bass, which was delicious.
MALVEAUX: OK. Wolf, well, thanks. Nice and good to see you back. Keeping the seat warm for you.
BLITZER: Good to go. Good to come back.
BLITZER: Let's bring in Jack Cafferty, who has got "The Cafferty File."
Jack, you would have enjoyed this luncheon.
JACK CAFFERTY, CNN ANCHOR: He was eating better than we did today.
MALVEAUX: He certainly did.
CAFFERTY: The question this hour is, what do you want to hear from President Obama tonight?
Joe in Virginia writes: "I would like to hear him balance concern" -- just what Wolf was talked about -- "balance concern with hope, get us looking past the current mess to the future. The sooner we can begin changing the mood of gloom in the country, the quicker the recovery will come."
Joan writes: "What do I want to hear? We have got a hard row to hoe for a while. It won't be pretty or easy for everyone. Sacrifices will have to made and will become a normal habit. People will have to put aside personal greed for the sake of others of us who have nothing left to put aside. The days of flying high are gone."
Darin in Denver: "Good or bad, we need the truth. Americans are tired, scared and fed up. Let's try some honesty."
Nancy in Tennessee: "My choice would be, President Obama would become more silent, let the stimulus package do what it was designed to do. I have always been for transparency in the government, but I don't want it at the expense of my 401(k) in the stock market. Every time we get news out of Washington, the market takes an unfavorable hit. I have seen enough of Obama for this quarter."
Ben writes: "One, bank crooks -- executives -- will go to jail if they used federal dollars to line their pockets and those of their cronies. And, two, affordable health care for all is achievable. Why should the taxpayers pay for the health care of Congress, the White House, and all of their staffs, and not have access to the same?"
And, finally, Al in Lawrence, Kansas, writes: "Honesty. And won't that be refreshing for a change? I don't want sugarcoating. I'm not a child. I don't need him to tuck me in at night and tell me that there are no monsters under the bed. I have looked under the bed, and it's crowded with monsters. Just be honest. I can handle it."
If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. Look for yours there, among hundreds of others.
What else besides fish?
BLITZER: You want the complete menu?
CAFFERTY: We are going to live vicariously through you.
CAFFERTY: I ate in the cafeteria upstairs. It was awful.
BLITZER: It was a -- it was a delicious Maine lobster bisque for the appetizer...
BLITZER: ... if you like that kind of stuff.
BLITZER: Seared Virginia striped bass, little potatoes, the fancy words they have got here for these potatoes, glazed leeks. Crushed potatoes, that was what they had, and a vanilla fresh fruit confetti for dessert, tea, coffee, and the whole nine yards, a little wine.
If you're interested, the White House wine for that day was -- today -- a Merlot La Proportion Doree. CAFFERTY: Very nice.
CAFFERTY: You know, Suzanne and I helped pay for that.
MALVEAUX: Taxpayer dollars.
CAFFERTY: Taxpayer dollars.
BLITZER: It was very delicious.
MALVEAUX: We want our reimbursement.
BLITZER: Suzanne, thanks for helping us out today. Appreciate it very much.
MALVEAUX: Sure. Thanks, Wolf.
BLITZER: And, to our viewers, you're in THE SITUATION ROOM.