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Obama Administration Budget Details Revealed; Dreams vs. Political Reality

Aired February 25, 2009 - 22:00   ET



Tonight, we begin with breaking news: new details of how President Obama plans to spend your money and who could be paying more because of it.

His first budget comes out tomorrow. But, tonight, we're learning about a massive chunk of it, hundreds of billions of dollars to pay for health care reform. Now, this is something Americans overwhelmingly say they want. Tonight, some early details about how it will work and how much more it could cost you.

Ed Henry has the breaking news tonight from the White House. In a moment, Ali Velshi has the implications.

Let's begin with Ed -- Ed.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Anderson, what we're learning tonight is, the president will announce tomorrow that he's going to put $634 billion into what he's calling a health care reserve fund, essentially a piggy bank that can only be cracked open to deal with health care reform, that being because the president last night laid out that health care, the spiralling cost of health care, is really the biggest piece of a puzzle in terms of trying to solve this fiscal crisis.

How is he going to pay for all this new money going into health care reform? One way we're learning tonight is, he's going to ask -- ask 1.5 million wealthy senior citizens to pay higher premiums for their prescription drugs, going to be a big deal. This is going to raise $8.1 billion over 10 years. These are senior citizens who are making $170,000 a year or more.

Starting in 2011, they're going to pay more money for the prescription drugs that they get subsidized by the federal government. The president -- the president is going to get pushback from Republicans about this. But here's how he put it today about how he wants to frame the larger argument.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Last night, I outlined my vision for our common future, one in which we accept the responsibility to act boldly and wisely to confront the extraordinary challenges of our times, put people back to work doing the work America needs done, and lay a new foundation for America's growth and prosperity.


HENRY: What top officials are saying tonight is that they're not worried about just fixing the recession over the next six months or so. The president wants to pour a lot more money into investing in not just health care, but education, energy, all these other issues, to rebuild the economy for the long term -- Anderson.

COOPER: Ed, also now, the president is planning to limit tax breaks for the wealthy. How does that work out?

HENRY: That's right. Anybody making over $250,000 a year is going to be affected by this. Basically, there's going to be a cap on how much they can write off for itemized deductions, like mortgage insurance, charitable contributions.

Now, top Obama officials explain it this way. If Bill Gates wanted to write off a $10,000 mortgage at a 35 percent tax rate right now, he would get a tax break of $3,500. Under the Obama plan, he would only be able to walk away with a tax deduction of $2,800, because it would be capped, that deduction, at 28 percent.

All told, across America, that would raise $318 billion over 10 years that then would be folded into this health care reserve fund. This is obviously going to anger some people who are wealthy, who are going to have to pony up more money.

Republicans are going to revive some of the old arguments from the last campaign. It's going to be a real clash of ideas. They're going to say, this is essentially raising taxes and is redistributing wealth, as we heard John McCain say.

What top officials tonight are saying here is that they're going to push back by saying, in the recent stimulus bill, the president cut taxes for 95 percent of Americans. In this plan, he's going to ask only 5 percent of Americans to pay more in taxes -- Anderson.

COOPER: All right, Ed Henry at the White House, thanks.

This is the kind of story that -- that can overwhelm us all with the wonkish details. And between this, the stimulus and bank bailout, there's a lot of wonkish details floating around these days, not to mention a lot of money floating around.

But this is important stuff -- vital, actually.

So, let's talk about it with chief business correspondent Ali Velshi.

Ali -- Ali, the president basically is saying that this is essential for -- for the health, the fiscal health, of this country. How is health care essential for fiscal health?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: I'm going to, first of all, pretend you didn't call me a wonk. (LAUGHTER)

VELSHI: But I'm going to tell you about this. There are two basic issues here, Anderson.

The first is, with all of these people who are unemployed, before we started getting into all these layoffs, we had some -- almost 50 million people in the United States without health care, without access to health care. Now that number is bigger. There are more and more people falling off their federal health care.

And that's just dangerous for society. The second problem that we have is that the health care that the government does pay for, particularly that part that is entitlement spending, is not necessarily done all that efficiently.

So, it's one of those areas that the government has to spend trillions of dollars on. And there are places where it can be made more efficient. So, on one side there's the -- the -- President Obama's promise that he made as candidate Obama to extend health care to a greater number of Americans.

And, on the other side, there's the struggle they're having with the budget deficit that can be met in some cases by dealing with health care. But it's an expenditure that is going to be making things hopefully cheaper in the long run. But the problem is, right now, we're out of money to spend things.

Now, tomorrow, we're going to get a federal budget, the first look at a federal budget. That is the federal budget for the 2010 fiscal year. Right now, we're in the 2009 fiscal year. And that goes until September 30. So, this is the 2009 look at government spending. The budget for 2009, $3.66 trillion. That's what it takes to run America for a year.

Of that, about two-thirds of it is mandatory. We can't -- so, think about it as your house budget. You have to pay for the lights to stay on. You have to pay for certain things. So, what can you cut? Well, you can't cut the obligations to Medicare and to Social Security.

David Walker is going to be on the show with you. He will explain a little more about that.

So, what the president has to deal with is about one-third of the pie, which is discretionary spending, spending that they can start to play with a little bit. But about half of that discretionary spending is defense spending.

So, part of the president's conversation in the budget will be about pulling back some of the investment in -- in the war. But that can't be done instantly. So, he's got less than a half of a third of the pie to start to tinker with to try and bring down our budget deficit.

In 2009, our budget deficit is going to be more than $1.3 trillion. The president says he's going to bring that back to a budget deficit that is about half-a-trillion dollars over limit by 2013.

It is a big goal. And we are still spending more money than we take in -- Anderson.

COOPER: Yes, a tall order. Ali, thanks.

The House today passed its own spending measure to keep the government operating just through September, the end of the fiscal year. The bill's price tag is more than $400 billion. And tucked inside it -- you guessed it -- between all those operating expenses, are more than 8,000 pet projects, special projects, some call them, earmarks. Others just say pork.

Whatever you call them, it is your money being spent, your future at stake.

Dana Bash has been investigating.


DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT (voice-over): Less than 24 hours after President Obama urged Congress to make tough choices to lower the deficit, his fellow Democrats in Congress moved to increase government spending.

REP. JIM MCGOVERN (D), MASSACHUSETTS: For health care projects, for education projects, all very important to get our economy moving again.

BASH: The $410 billion spending bill funds the government for the rest of this year, with $31 billion more than last year. Republicans accuse Democrats of living in a parallel universe.

REP. PETE SESSIONS (R), TEXAS: American families and small businesses are making sacrifices across this country and cutting expenses, due to tough economic times. Yet, this Democratic majority continues to spend like there's no problem at all.

BASH: Democrats insist they're mostly trying to make up for cuts under President Bush that hurt the needy. For example, a program that feeds poor women and infants would get $6.9 billion, a 21 percent increase.

But Democrats are also giving generous increases for everything from the Agriculture Department to Amtrak. Congress is giving its own budget a 10 percent increase to $4.4 billion. And though Republicans blast the bill, they demanded 8 million more taxpayer dollars to prevent GOP aides from being fired, which usually happens after a party loses seats in an election.

Then there are those pet projects...

REP. JOHN BOEHNER (R-OH), HOUSE MINORITY LEADER: I just think this is out of control. BASH: ... $7.7 billion in earmarks -- business as usual, say watchdog groups.

UNIDENTIFIED FEMALE: Members of Congress heard -- 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: The House Democrat in charge of spending decisions is bringing tens of millions back to his Wisconsin district, including $1.9 million for a new building at the University of Wisconsin. He proudly defended earmarks.

REP. DAVID OBEY (D-WI), HOUSE APPROPRIATIONS COMMITTEE CHAIRMAN: The fact is, without the earmarking process, the White House and its anonymous bureaucrats would make every single spending decision in government.

BASH: The reality is that bringing home the bacon is bipartisan. Even Republican Senator Lindsey Graham, who campaigned alongside John McCain as he railed against pork barrel spending, is getting $950,000 for a Convention Center in Myrtle Beach in his home state of South Carolina.

(on camera): President Obama demanded there be no earmarks in the $787 billion stimulus package. But he hasn't taken a position yet on the some 8,500 pet projects in this bill, which will likely reach his desk next week.

Dana Bash, CNN, Capitol Hill.


COOPER: All right, "Keeping Them Honest."

Let us know what you think of all this spending. Join the live chat happening right now at Also, check out Erica Hill's live Webcasts during the break tonight.

We're also following the money tonight with David Gergen, Joe Johns, and David Walker, who has got inside experience tracking every last taxpayer penny.

Also, we're going to take you to a place in America where the jobs are plenty, the banks are strong, and houses are actually worth something. Where is this magical land, and what's their secret? Find out ahead.

And Michelle Obama opening up about her kids, their new life in the White House, what games they play at the dinner table, what they don't want to name their dog -- new information we haven't heard before.


MICHELLE OBAMA, WIFE OF SENATOR BARACK OBAMA: I come here as a mom -- as a mom whose girls are heart of my heart and the center of my world. They're the first things I think about when I wake up in the morning and the last thing I think about before I go to bed at night.


COOPER: Mrs. Obama, Sasha and Malia and more -- tonight on 360.


COOPER: More on tonight's breaking news, new details of President Obama's first budget, a massive chunk of money over 10 years to fix health care, and tax changes that could leave wealthier seniors paying more.

Mr. Obama, of course, is on record promising to spend the money wisely. That's what he said last night.


B. OBAMA: I want to pass a budget next year that ensures that each dollar we spend reflects only our most important national priorities.


COOPER: The president last night promising to keep his eye on the bottom line.

Tomorrow, the budget itself -- already, Republicans are attacking it, calling it the second wasteful spending bill in just two weeks.

Let's talk strategy now and money with senior political analyst David Gergen, Joe Johns, and David Walker, former comptroller general of the United States.

David, we heard in Ed Henry's -- David Walker -- Gergen -- we heard in Ed Henry's piece, the president has this ambitious plan, $634 billion to reform health care.

Is he going to be able to convince Congress, the American people that this is critical to spend money on? We're throwing around, again, just hundreds and hundreds of billions of dollars. Is this really critical?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: That's -- that's going to be a very good question, Anderson.

And I -- I think one of the big questions about the president's speech last night, a rousing speech, took us up to the mountaintops, but I think a lot of people are now going to look at this and say, we need to focus on the recession first. We need to stabilize the economy. Once we have done that, let's then see where we can go on health care and -- and -- and energy and these other issues.

And do we really want to now pass a 600 and -- for -- whatever this huge number -- over $600 billion? One of the surprises in Ed Henry's report -- and I can't believe that this is a deep view in the White House, but he reported that -- that people in the White House are saying -- working on the recession over the next six months is not all that important. What's really important is to do health care and energy.

That is not the view of the country. So, you know, we went up to the mountaintop last night, very successful speech. Today, we get down to some heart realities. There are going to be a lot more questions ahead.

COOPER: David Walker, the OMB director, Peter Orszag, told CNN yesterday that a massive overhaul of the health care system can be achieved this year and that is should provide universal coverage.

Is that just wildly optimistic?

DAVID WALKER, FORMER UNITED STATES COMPTROLLER GENERAL: We clearly need it for basic and essential health care that's affordable and sustainable over time.

But the last thing in the world we ought to do is expand health care coverage, dig our hole deeper, before we fundamentally reform the health care system and a way to constrain costs and to deal with the huge unfunded obligations we already have. I think it's totally unrealistic.

COOPER: So, this -- this money that is being set aside, this 600 or so billion dollars, what exactly is that supposed to do?

WALKER: I don't know if I can tell you this. The federal government has never had a piggy bank that had a penny in it.


WALKER: There's no such thing.


COOPER: Joe, how much are Republicans going to fight against this?

JOE JOHNS, CNN SENIOR CORRESPONDENT: Well, there's always going to be this philosophical difference. It's the issue of letting the market decide vs. letting the government decide. It's very simple.

And the machine is already going to get started. You know, I mean, you have things like cost controls, which the industry, the various industries, would fight against. You have things like subsidies that they might well be for.

All in all, though, it's very difficult to see how this president handles all the other things he has to do, as others have said, and also deal with this monstrosity of an idea, which Bill Clinton and Hillary Clinton fought tooth and nail, and simply could not get through the Congress, with a Democratic Congress. COOPER: And, David Walker, this Congress now that Congress is spending that we were just talking about in Dana Bash's piece, I mean, there's -- there's -- there's an increase in the amount that the government is already spending just in the regular budget.

WALKER: Well, the omnibus that just passed has an 8 percent increase in discretionary spending. That is unbelievable.

COOPER: Why is that -- that's higher than normal?

WALKER: Oh, definitely higher than normal. I mean, inflation is much lower than that.

And I think the president really is going to try to hold the line on the baseline increase in discretionary spending in the budget he's going to unveil tomorrow. But it's coming, you know, after an 8-plus percent increase this year. So, you know, frankly, if you can hold the line, you should hold the line.

COOPER: David Gergen, I mean, the amount of money that we're talking about are just staggering. And it -- you know, if confidence is an important thing to have in this system, does this help build confidence, or does it make people just more worried?

I just read, you know, they're going to be sending $800 million, or $900 million, to help rebuild Gaza. It just seems like we're throwing around an awful lot of money.

GERGEN: Well, I think that one of the things we're going to be looking for tomorrow is, what do these deficits really add up to and how is he really planning to get it down?

If he is serious about trying to reduce the deficit in half and -- and -- now, and start pivoting, it seems to me that the first place he's got to start is look at those earmarks that Dana Bash was just talking about. I just think 8,500 earmarks in this -- in this bill that the Congress just passed, you know, that just leaves him -- leaves him wide open, if the president signs onto that, to hypocrisy.

I just don't -- I don't believe Barack Obama believes in those 8,500 earmarks. The question is going to be, is he going to stand up to it in some way? And I think that's going to be a test for him.

COOPER: David, David Walker, I mean, earmarks are something we have always seen on Capitol Hill. All these congressmen, Republicans, Democrats, senators, they -- they all do it. Some of them admit it. Some of them don't. Can -- can the president really do anything about it?

WALKER: Well, he's going to have to put his foot down. It's a difficult thing.

I think people need to understand what earmarks are and they aren't. They actually don't increase spending one dime. They represent the -- the Congress saying, this is how I want the money to be spent. They corrupt the system -- there's no question -- because there's a politicalization -- politicization of what ends up happening...


COOPER: And not all of them are bad. I mean, there are some important things...

WALKER: No, not all of them are bad. But...

COOPER: ... that get funded this way.

WALKER: Right. But some of them have nothing to do with national priorities and are highly questionable.

JOHNS: And it's, let's make a deal. You know, you have Democrats and Republicans both signing on to this, so, I agree, you agree, we will pass a bill.

A lot of times, you can't get certain bills passed through the Congress unless you have something to sweeten the deal a bit. So, they all collude together, even though so many people you hear say, we don't like earmarks. It's the same old system.

GERGEN: I agree with that, Anderson.

And the other point is, with American families all over the country now cutting back on their own budgets, they're prepared and they want and they supported the president on a stimulus package that creates jobs. They're -- they're prepared to spend more money on things that are essential.

But I think the country wants to see the government cut back on those things which are very marginal and don't really help create jobs. And it seems to me, in this environment, it really -- to go to David Walker's point, to put an 8 percent increase in your overall discretionary spending is really -- it is unbelievable.

COOPER: We're going to have to leave it there.

David Walker, it's always good to have you on. David Gergen, as well, and Joe Johns, thanks. Appreciate it.

It's confusing stuff, but it's important. That's why we continue to cover it every night.

And, before we move on, last night, Dana Bash informed us that a number of congressmen got to the House chamber hours early, so they could get an aisle seat and be seen shaking hands or schmoozing with the president.

Now, I got to tell you, I like, many of you, were surprised to hear this. I have great respect for elected officials. I have always assumed they have so many important things on their plate, that there is no way they would spend multiple hours warming a seat, like a tween waiting in line to see the Jonas Brothers.

But it was wrong. Today, we did some checking. And a bunch of them did this. There's Dennis Kucinich. You see him right there trying for a little face time with the president, angling for a crucial handshake.

Nine hours -- he sat in that seat for nine hours. He got there nine hours early, waited just for that moment. That was nothing compared to Congressman Eliot Engel, who waited 12-and-a-half hours in -- oh, that's Dennis Kucinich actually warming up the seat.

Then -- so, Engel waited 12-and-a-half-hours -- 12-and-a-half- hours -- just for that moment.

Now, last night, I think I said I thought it was pathetic that our elected representatives had nothing better to do than sit around for so long. Today, Congressman Eliot Engel of the Bronx had this to say to "The New York Daily News."

"What's really pathetic is that Anderson Cooper apparently doesn't share my enthusiasm for participating in such a historic and wonderful celebration of democracy. I'm sorry he is so jaded."

Pathetic may have been too strong a word. I certainly have nothing against the congressmen, nor do I think I'm jaded. But I do think it's worth knowing how our elected officials choose to spend their time.

And,if you feel sitting on a bench for 12-and-a-half hours is the best use of your time, so be it. It's up your constituents to decide if they agree with you.

All right, let's move on.

With all these layoffs, guess who's having trouble hiring? President Obama and his treasury secretary. See why they're stuck with jobs they cannot fill and how their employment problem could end up costing us all billions.

Also, former President Bush has a new job. We will tell you what it is and how much he may be making for it.

And Michelle Obama opening up about Sasha and Malia, their life in the White House, and what names they're considering and not considering for their new dog.

Also tonight, just moments ago, actually, the president honoring his favorite musician, Stevie Wonder.

How the White House got a little funk -- funky tonight -- when 360 continues.


COOPER: Starting this week, teams of government investigators are going to go into the country's 19 biggest banks, open up the books, and see how bad things really are, see how much of your money they will need to keep going. So, today, President Obama talked about what happens after that with his financial team and lawmakers from both sides of the aisle. Take a look.


B. OBAMA: And I have the utmost confident that if these outstanding public servants standing beside me are working in concert, if we all do our jobs, if we once again guide the markets' invisible hand with a higher principle, our markets will recover. Our economy will once again thrive and America will once again lead the world in this new century as it did in the last.


COOPER: Mr. Obama sketching the outlines of how to keep Wall Street honest without over-regulating private enterprise -- a big catch, however. He's having a hell of a time getting his team together.

Candy Crowley has the "Raw Politics."


CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): Forgive the treasury secretary if he looks a little haggard, but he just got another job.

B. OBAMA: I have asked my economic team to develop recommendations for regulatory reform and then to collaborate with these members of the Congress and others from both sides of the aisle.

CROWLEY: Timothy Geithner's portfolio also includes oversight of bailout funds for the financial industry, keeping watch of the auto industry, and staying in touch with foreign counterparts about the global turndown.

To see who's helping, check out the Treasury Department's Web site under officials. Timothy Geithner is flying solo. Nine assistant or undersecretary slots are open. One government source says: "Policy development is getting behind. Filling those slots would take big chunks off the secretary's plate."

There are close to 500 high-level appointments that require Senate confirmation. Only a small percentage have been nominated and confirmed, pretty standard for new administrations. But, in nonstandard times, this is a president operating at warp speed. Does he have enough of a team to carry out an aggressive, expansive agenda?

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: I -- I don't think the -- the -- the administration believes that that -- that we lack the -- the necessary infrastructure to move the country forward and get things done.

CROWLEY: Of 15 Cabinet-level agencies, just two, the State Department and the Pentagon, have deputy secretaries. At Housing and Urban Development, seven assistant secretary positions are vacant. At EPA, 13 of 14 jobs requiring Senate confirmation are unfilled.

Michael Feldman was in the White House during the 1992 Clinton transition.

MIKE FELDMAN, DEMOCRATIC STRATEGIST: To some extent, they're trying to build a plane and fly it at the same time. So, there's no analogue for what this administration's going through. They have got unprecedented challenges.

CROWLEY: Part of the slow-go is indigenous to Washington, a city of forums, badges and paperwork. There are FBI and ethics clearances.

And post-Daschle, post-Richardson, two failed Cabinet nominations, the White House has toughened up its vetting.

B. OBAMA: I think this was a mistake. I think it screwed up. And, you know, I take responsibility for it.

CROWLEY: As the Obama administration continues to try to fill some of those posts, in some departments, senior career employees are trying to pick up the slack.

(on camera): Still, there are a lot of empty offices in those buildings. Beyond jobs that require confirmation, hundreds of other political appointments are open.

Inside one office waiting for eight jobs to be filled, the sole employee confessed, "I'm just trying to keep from drowning."

Candy Crowley, CNN, Washington.


COOPER: Well, on top of everything else on President Obama's plate, a battle heating up over the most expensive fighter jet ever built. It's never seen combat. And some are saying we -- we need more of these jets. And how many jobs really would be lost if production stops? Tonight, we're "Keeping Them Honest."

Also, just two months after leaving office, what former President Bush is up to, a new job he has. We will tell you what it is tonight.

And new developments in the search for a dog for Sasha and Malia Obama -- word tonight the Obamas now know what type of dog would be the perfect fit. The question is naming it.


B. OBAMA: Malia is allergic, so it has to be hypoallergenic. There are a number of breeds that are hypoallergenic. On the other hand, our preference would be to get a shelter dog. But, obviously, a lot of shelter dogs are mutts, like me.


(COMMERCIAL BREAK) COOPER: Saving the economy, securing the nation, without a doubt, they are the two top priorities for the president. And, tonight, these key missions may be on a collision course.

At the center of the argument, the most expensive fighter jet ever built. That's it right there. The F-22 Raptor, it's called. Pentagon calls it vital to the 21st century Air Force. The Raptor had also never seen combat. Right now the fighter jet is in the middle of a firestorm. Some want to ground the entire program, saying it is wasting billions of dollars.

Now, others believe the fighter is vital to the country and to thousands of jobs.

Chris Lawrence tonight is "Keeping Them Honest."


CHRIS LAWRENCE, CNN CORRESPONDENT (voice-over): Is this jet President Obama's latest weapon in the fight against unemployment? He has to decide whether to keep building more F-22 Raptors or shut the line down.

YESENIA PEREZ, WORKS ON F-22: It's pretty scary, you know, to think that your whole life, your daily bread, you know, can be -- just rely on somebody's decision.

LAWRENCE: Yesenia Perez helps build parts for the F-22 in Florida. She'll likely lose her job if production stops. But each F- 22 costs around $143 million to build, paid for with your tax dollars. So critics are asking, could that money be better spent?

DANIELLE BRYAN, PROJECT ON GOVERNMENT OVERSIGHT: I think it's crazy to be making national defense decisions based on jobs programs.

LAWRENCE: But here's the catch. Al Qaeda doesn't have jets. And we're not fighting China or Russia right now. So the Raptor's a fighter jet without a fight.

We asked the jet's manufacturer, Lockheed Martin.

(on camera) Has the F-22 ever actually fired a shot in battle?

LARRY LAWSON, LOCKHEED MARTIN: Not yet, we have not. The Air Force has not employed the F-22 in an operational theater yet.

LAWRENCE (voice-over): The thing is, the Pentagon already has or is building about 190 Raptors. And the defense secretary says he doesn't need more.

ROBERT GATES, DEFENSE SECRETARY: I think it's something along the lines of 183 is a reasonable buy.

LAWRENCE: But nearly half of Congress wants more. CNN has obtained letters signed by hundreds of Republicans and Democrats, urging President Obama to keep building the Raptors. SEN. JAMES INHOFE (R), OKLAHOMA: If you want our kids that we send off to battle to have the best equipment, then we need to have F- 22s.

LAWRENCE: They argue more jets are needed to maintain America's air dominance and help the economy.

UNIDENTIFIED MALE: We're looking at somewhere around 100,000 jobs that are going to be lost all across the country.

LAWRENCE: But would that many people really lose their jobs? "Keeping Them Honest," we did our own math.

A recent economic study by the University of Massachusetts found $1 billion of military spending generates 8,000 to 9,000 jobs. So if you spend $3 billion to $4 billion a year on the F-22, you get maximum 36,000 jobs. That's a lot of people but far less than what they claim.

(on camera) Especially when you consider this. Some of these plants like Northrop Grumman tell us a lot of their workers would get moved to other projects, not fired.

(voice-over) Lockheed Martin says no one can predict who will be America's enemies in 20 to 30 years.

LAWSON: It's not about today. It's about decades from now.

LAWRENCE: But the president is fighting an economic war now. And in the battle for creating jobs, economists found education, mass transit, and infrastructure all generate far more fire power than military spending.

Chris Lawrence, CNN, Washington.


COOPER: Let us know what you think on the AC360 blog. Join the live chat happening right now.

And just ahead, new details in the search for a White House dog. Michelle Obama bares her arms, turning heads and making headlines, if you can believe it.

But first, Erica Hill joins us with a "360 News & Business Bulletin" -- Erica.

ERICA HILL, CNN ANCHOR: Anderson, survivors of the Turkish jetliner crash at the Amsterdam main airport today say there was no warning. The Boeing 737 slammed into a field while trying to land. It broke into three piece. One hundred thirty-four people were on board. Nine were killed, including the pilots. Investigators are now trying to determine just what went wrong.

Wall Street ending the day slightly lower as investors weighed new details on the treasury's plan to stabilize the banking system. The Dow fell 80 points. The NASDAQ lost 16. The S&P 500 shed eight points.

Former President Bush beginning a speaking tour next month. His first stop? Calgary. So far he has plans for about ten speeches this year in Canada, Europe, Asia and the U.S. According to reports, he will make as much as $150,000 per speech.

Back at his old residence, 1600 Pennsylvania Avenue, the National Park Service has nabbed one of the raccoons that has eluded them for weeks after infiltrating the White House grounds. The masked invaders have been raising mayhem around the executive mansion. Yes.

They also got to Ed Henry once during a live shot. I don't know if we have that picture or not. But we're told the culprit that was caught -- I'm a little verklempt about the raccoons.

COOPER: Upset about these raccoons?

HILL: The raccoon was released safely in an undisclosed location. Don't worry.

COOPER: In an undisclosed location. The same place that the...


COOPER: Whoa. The same place Dick Cheney...

HILL: I was just going to say. Yes. I don't know about that.

COOPER: Wow. Is that raccoon going to keep popping up throughout the program?

HILL: There's a chance. A raccoon.

COOPER: We need Bill Murray here.

HILL: Roars like a lion.

COOPER: Time now for our "Beat 360" winners. It's our daily challenge to viewers, a chance to show up our staffers by coming up with a better caption for a photo that we post on our blog every day.

Tonight's picture, Senator Roland Burris of Illinois yawns during President Barack Obama's address to Congress last night.

Staff winner tonight is Joey. It's his birthday, coincidentally.

HILL: Yay, Joey!

COOPER: His caption: "Man, I should have brought my Snuggie."

HILL: See. That's why he wins, even when it's not his birthday.

COOPER: Our viewer winner is Jan from Ohio. Her caption? "What am I doing here? I thought I was going to wake up and find Blagojevich was just a bad dream."


COOPER: Jan, congratulations. Your "Beat 360" T-shirt is on the way.

So if you're hurting from the recession, keep watching and take a look at this.


DAVID BATCHELLER, APPAREO SYSTEMS: It seems like we're on the outside looking into an economic recession.


COOPER: Nice place to be, huh? Tonight Gary Tuchman uncovering America. That guy seems to be having fun. Sure you would be too if you lived there. He'll take us to a city where there are a lot of jobs, homes aren't losing value, and failing banks aren't hurting, either.

And just moments ago, Stevie Wonder honored at the White House. Tonight, we'll look into the musicians connections to the president and Michelle Obama. You could say he was a little bit of a matchmaker. We'll explain that ahead.


COOPER: President Obama painted a bleak picture of the economy in his address before Congress last night. Take a listen.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The impact of this recession is real, and it is everywhere. But while our economy may be weakened and our confidence shaken, though we are living through difficult and uncertain times, tonight I want every American to know this. We will rebuild. We will recover. And the United States of America will emerge stronger than before!


COOPER: Confident for the days ahead, for now, Mr. Obama says the recession is real and everywhere. Not exactly everywhere, it seems.

You might be surprised to know that there are communities actually thriving right now. Home prices haven't fallen. Unemployment is low, and jobs are still in demand. May be hard to believe, I know, but it's true. Especially up in Fargo, North Dakota, where as you'll see, things aren't really that bad.

Gary Tuchman traveled to Fargo for tonight's "Uncovering America."

(BEGIN VIDEOTAPE) GARY TUCHMAN, CNN CORRESPONDENT (voice-over): Whatever happened to those bullish economic days? When the housing market was vibrant. When there were plenty of jobs. When government budgets had surpluses.

(on camera) Those days still exist, but probably not where you are. You have to come where I am, to Fargo, North Dakota, where the typical morning temperature this time of year is around zero, and the unemployment rate isn't much higher.

(voice-over) Dennis Walaker is the mayor of Fargo.

(on camera) Is the city of Fargo, North Dakota, in recession?


TUCHMAN (voice-over): The unemployment rate is 3.4 percent, so low that most economists consider it full employment.

At Appareo Systems, an aerospace firm, the 44 employees here are not enough.

BATCHELLER: We're going to grow more than 50 percent this year in personnel and more than 100 percent in revenue.

TUCHMAN: This iron worker is so busy he has no time to talk to me on the ground.

(on camera) And away we go. How is business out here?

UNIDENTIFIED MALE: It's really good.

TUCHMAN (voice-over): Wind chill temperature in the negative digits doesn't seem to cool the workers' outlook here as they build an office building.

(on camera) So there's a lot of projects?


TUCHMAN: You can always find work?

UNIDENTIFIED MALE: Absolutely. You could quit your job today and go find another job. Easy.

TUCHMAN (voice-over): Business downtown is booming. The housing market is still decent.

(on camera) Homes aren't losing the value here?

UNIDENTIFIED MALE: No, they're not.

TUCHMAN (voice-over): North Dakota has the largest budget surplus in the nation. One of only four states with a surplus this year. So what the heck is going on here? I hear a consistent answer at Fargo's curling rink.

UNIDENTIFIED MALE: People in the upper Midwest are very conservative. They don't tend to overextend themselves and stuff.

UNIDENTIFIED MALE: There's just a work ethic up here that you don't see everywhere.

TUCHMAN: Yes, North Dakota has oil production and agriculture, but so do a lot of places. What seems unique in this region...

WALAKER: We didn't get caught up in the sub prime mortgages. And I think our bankers need to be significantly applauded for that.

UNIDENTIFIED FEMALE: One fifty, 170, 190.

TUCHMAN: The Gate City Bank is one of the largest in North Dakota.

(voice-over) You think you make less money because you don't give riskier loans?

STEVE SWIONTEK, CEO, GATE CITY BANK: Yes. I believe we do. But that's OK.

TUCHMAN: North Dakotans seem to believe conservative bankers and savers have helped keep their economy steady over the years. Not too many highs, not too many lows.

SWIONTEK: We have well over 12,000 plus mortgage loans that we service. And we had three foreclosures last year. And this year, I don't see it to be much greater. It could be three to five.

TUCHMAN: There is concern here. Business isn't as robust as it was a few months ago. And the unemployment office is a bit busier. But...

BATCHELLER: Somebody I was talking to said, we're not signing up for the recession.

TUCHMAN: Even in the frigid cold, the iron is still hot.

Gary Tuchman, CNN, Fargo, North Dakota.


COOPER: Wow. We could all learn a lesson from them.

Federal agents are calling it Operation Accelerator. After a nearly two-month investigation, dozens of suspects connected to a brutal Mexican drug cartel were arrested here inside the United States.

The raids were announced by U.S. Attorney General Eric Holder. They come as the violence in Mexico continues threatening to spill across the border at an alarming rate. Tomorrow night, we're going to take you to a border city in Mexico some people consider the most dangerous city in the world. Michael Ware, right on the front lines in Iraq, to Juarez, Mexico.


MICHAEL WARE, CNN CORRESPONDENT (voice-over): This is the cartel war in Mexico, a conflict raging on America's doorstep. A conflict in which police officers like these in the city of Juarez are fighting for their lives. While the drug cartels are battling throughout the city, to put control of a lucrative drug rout into the United States.


COOPER: That's tomorrow. We'll have Michael's full report.

More news tonight about Michelle Obama as mom. She's talking about family life inside the White House and gets pretty personal about raising Sasha and Malia.


MICHELLE OBAMA, FIRST LADY: And there isn't a day that goes by, particularly after having kids, that I don't wonder or worry about whether I'm doing the right thing for myself, for my family, for my girls.


COOPER: And new details on the family pet.

Also, signed, sealed, delivered. The first family hosting Stevie Wonder tonight at the White House, the president's favorite singer. We'll have the highlights from the celebration.


COOPER: So next to her husband's speech, this maybe -- this may have been one of the most talked-about moments from last night. Michelle Obama and her sleeveless dress. Apparently, those in the fashion world, including members of the 360 crew who shall remain nameless, Erica Hill, know the plum-colored outfit was designed by Narcisso Rodriguez.

Whether it's what she's wearing or what she's saying, Michelle Obama is redefining the role of the first lady. No doubt about that. In a new interview she's speaking out about life in the White House.

And the same time, we have new details on Sasha and Malia and how the search for the family pet is just about over. In a 360 follow, here's Joe Johns.


JOE JOHNS, CNN CORRESPONDENT (voice-over): If you're looking to feed that seemingly never-ending mini obsession with everything Obama, please note the dress the first lady wore to the president's speech to Congress. Until now in Washington, when people talked about baring arms, there was a pretty good chance the topic had to do with gun control. But with Michelle Obama showing a liking for the sleeveless look even in winter, the magazines, the fashion writers and the blogs quickly began zeroing in on how baring arms has a whole new meeting inside the beltway.

"People" magazine put her on the cover sleeveless.

BETSY GLEICK, EXECUTIVE EDITOR, PEOPLE MAGAZINE: There's been a lot of talk in the last day or so about her arms and how great they look and you can tell that she works out.

JOHNS: There's also a development in the extensively covered search for a presidential first dog. Michelle Obama is leaning towards a rescued Portuguese Water Dog, which just happens to be the proceed of two of the highest profile political pooches in Washington.

GLEICK: That's right. They -- this is not their final, final decision. It's a dog that they're leaning towards. They really like it. Not too big. Not too small. And they've also chosen a date. This dog is coming in April. America, get ready. And she's having some really entertaining conversation with the little girls about what to name the puppy.

JOHNS: The kids suggested names like Frank and Moose, but the first lady vetoed both. Not lost in all of this is a pretty simple question. Just how is the first family adjusting? In an interview with "People," the first lady described what happened during a dinner time one night at the White House.

GLEICK: She was talking about a dinner time ritual the family has, which is roses and thorns. And the family goes around the table and they talk about their day, and talk about a rose of the day and a thorn of the day.

And Malia turned to President Obama and said, "You know, Daddy, your job is kind of a thorny job." And what she was saying, Mrs. Obama was saying that by comparison, her job is mostly roses.

JOHNS: Joe Johns, CNN, New York.


COOPER: I like the name Moose for a dog. I don't know. Let us know what you think at the live chat at

Tonight at the White House, a special jam session. Special honor for Stevie Wonder and the first family. We'll show you the celebration.

And see Spot ride. You know us. We cannot pass up ridiculous animal video. It's our "Shot" tonight.

And breaking news on your money. New details in how the president plans to spend it on health care and how much more some people might have to pay for that, ahead.





COOPER: Stevie Wonder back in April 2007 in Los Angeles. The man who was on his way to becoming the next president.

Wonder was an early and energetic supporter of Barack Obama in his run for the White House. But long before that he was a force in Barack and Michelle Obama's lives. Tonight, Stevie Wonder performed at the White House, where he received a lifetime achievement award.

Erica Hill takes us up close.


HILL: There is no greater honor for an American than one that comes from the president of the United States. But tonight the feeling is mutual, as the president celebrates a musician who has been an integral part of his life and his road to the White House.

B. OBAMA: When I was first discovering music, just like Michelle, it was Stevie's albums that I found, and his songs became the sound track of my youth. And through them I found peace and inspiration, especially in difficult times.

HILL: Stevie Wonder also helped the president connect with Mrs. Obama when they were dating. He'd been a favorite of the first lady, too.

M. OBAMA: Years later when I discovered what Stevie meant when he sang about love Barack and I chose the song "You and I" as our wedding song.

HILL: Little did they know the man who helped bring them together would become one of the president's most vocal supporters.

Wonder was there for nearly every major event in this president's journey to the White House. Performing at the "We Are One" concert just before the inauguration, Stevie Wonder, clearly a highlight for the entire Obama family. But Wednesday night it was Stevie Wonder's turn in the spotlight at this concert to be broadcast on PBS. As one of his biggest fans presented him with an award for his lifetime of achievement. The Gershwin Prize for Popular Song from the library of Congress, a celebration of artists who transcend musical and cultural boundaries.

B. OBAMA: This could be called the American tradition. Artists demonstrating the courage and talent to find new harmonies in the rich and dissonance sounds of the American experience.

HILL: And also inspiring generations. On hand to celebrate the legend tonight, an eclectic mix of American musicians.

B. OBAMA: Tonight's performances represent the most accomplished Stevie Wonder cover band ever assemble assembled.

HILL: From newcomer Esperanza Spalding to gospel duo Mary Mary, and fellow legend Tony Bennett.

Taking it all in from the front row, the first fan.


HILL: It was actually quite a concert. It airs tomorrow night, Anderson, on PBS. He's only the second person to win this award. It was established a couple years ago. Paul Simon was the first.

COOPER: He certainly deserves it for surviving having to play with the Jonas Brothers. I'm still not -- haven't recovered from that.

HILL: At the Grammys? I was hoping that maybe we'd get an answer as to why that was agreed to. But no information on that, unfortunately.

COOPER: All right. Erica, thanks very much.

Check out this dog. He's become a TV star. He's our "Shot," coming up next.

Plus, the top of the hour. Serious stuff. Breaking news. The president's new budget. We got our hands on some of the details before the entire plan is unveiled tomorrow. It's your money, your future we're talking about. You need to know. Be right back.


COOPER: All right. Erica, time for the "Shot" courtesy of YouTube. Meet Dotty, the bike-riding Dalmation. That's not Dotty. That's our...

HILL: Think about this.

COOPER: The cat's out of the bag. Here's Dotty.

HILL: Wow.

COOPER: Not only has Dotty perfected the art of pedaling. Dotty navigates smoothly -- apparently, Dotty is a he, by the way. Dotty navigates smoothly around cars. And one clearly excited announcer lining the street.


HILL: There you go. The raccoon.

COOPER: The footage was shot for a Japanese game show, of course. HILL: I hear that in the next...

COOPER: Boy, do we really need to see that one?

HILL: Do we really need that shot?


HILL: Wow.

COOPER: That's something to think about before you go to bed.

HILL: Sweet dreams. Yes. I was going to say maybe Dotty will lose the training wheels soon, but really -- thanks.

COOPER: It's like a nightmare.

HILL: Yes. Thanks.


HILL: A family show here. Good times. Good times. So what's coming up next?

COOPER: It's "360 After Dark, the Pet Edition."

Coming up at the top of the hour. Let's talk about that, shall we?

HILL: No more Dalmatians, please.

COOPER: No. That's it. We're done with the dogs.

HILL: Enough of the undercarriage.

COOPER: Yes, the undercarriage. That's a good term.

So will you be paying more under the president's new budget? Let's talk about budgets. Breaking news. We've got early details of how he is planning to pay to fix health care. How much more could be costing you ahead? Stay tuned.