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President Obama Targets Tax Cheats; Tracking Tax Dollars Overseas; Interview With Shimon Peres

Aired May 4, 2009 - 15:59   ET


WOLF BLITZER, CNN ANCHOR: Happening now, President Obama's new plan to crack down on corporate tax cheats. He may be picking a tough fight with Congress and with big business.

The swine flu outbreak reaches an ominous new level. We're standing by for a news conference this hour by the Homeland Security secretary.

And disaster strikes the Dallas Cowboys. After the team's training facility collapsed, are other structures like this one at risk?

I'm Wolf Blitzer in CNN's command center for breaking news, politics and extraordinary reports from around the world.


President Obama wants to deprive tax evaders of loopholes in overseas havens that are helping to make many of them rich. Today he unveiled a plan to overhaul the tax code and put billions into the U.S. Treasury. But critics say it amounts to a tax hike that could drive more companies and U.S. jobs overseas.

Let's begin with CNN's Jill Dougherty. She's over at the White House. She's watching this story.

They're not as simple, necessarily, as a lot of people might think. There are reservations already beginning to come in.

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: There are from Capitol Hill, Wolf. And, you know, fasten your seatbelt, because the Obama administration is gearing up for what promises to be a major fight with big business.


DOUGHERTY (voice-over): It's only fair, President Obama says, tax laws should not reward companies that invest overseas instead of investing in America.

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES: Today, I'm announcing a set of proposals to crack down on illegal overseas tax evasion, close loopholes, and make it more profitable for companies to create jobs here in the United States.

DOUGHERTY: Mr. Obama says what he calls a broken tax system rewards companies for moving jobs offshore and transferring profits to overseas tax havens.

OBAMA: It's a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.

DOUGHERTY: Eighty-three of the 100 largest companies in the U.S. take advantage of these laws, according to the Government Accountability Office. The president also wants to target individual wealthy Americans who avoid taxes by hiding their money in overseas bank accounts. These proposals he claims will help raise $210 billion over the next 10 years. To enforce the new laws, the White House wants to hire almost 800 more IRS agents.

The U.S. Chamber of Commerce counters the president's plan is, in reality, a huge tax hike.

MARTY REGALIA, U.S. CHAMBER OF COMMERCE: It will make our companies less competitive, make it harder for us to create jobs here, and make it more advantageous for foreigners to buy our companies and operate them as foreign multinationals.


DOUGHERTY: Already, big companies have sent 200 opposition letters to members of Congress, the first salvo in a major lobbying campaign -- Wolf.

BLITZER: There's going to be a battle, no doubt, on this one.

All right, Jill. Thanks very much.

Let's take a closer look at some big-name companies that are taking advantage of the overseas tax shelters.

Brian Todd is here in THE SITUATION ROOM taking a closer look.

What do we see, Brian?

BRIAN TODD, CNN CORRESPONDENT: Well, ironically, Wolf, there was a GAO report on this just a few months ago. This report, from December of last year, says 83 of the 100 largest publicly traded U.S. corporations in terms of their revenue in the year 2007 reported having subsidiaries in jurisdictions that were listed as tax havens, or what they call financial privacy jurisdictions.

Now, President Obama acknowledged a lot of these tax havens are legal, but he says the tax code, of course, in his mind, should be rewritten so that these companies can stop sheltering some of this revenue overseas and start paying more tax in the U.S. So we took a look at some of the companies with the biggest number of these "subsidiaries."

The leader in that category is Citigroup, 427. These offices are in places like the Cayman Islands, Gibraltar, and places that aren't even countries, like a place called the Isle of Man and a place called Guernsey. Try Googling that. Number two on the list, Morgan Stanley, with 273 tax havens. Again, the Cayman Islands shows up in theirs, there in the Caribbean.

Number three is the News Corporation. That's the parent company of the Fox News Channel, with 152 tax havens. We also have to acknowledge that our company, TimeWarner, had four tax havens listed in this GAO report.

We contacted all these companies. They're not really commenting so much on the GAO report. We are getting indications though, Wolf, that some of them are saying it's not that they're not paying any taxes, they're paying some taxes in places like Ireland, but that, you know, it's not like they're getting off scot-free without paying taxes in any of these places. Some of them, they don't pay taxes.

BLITZER: And it's not as if they're doing anything illegal.


BLITZER: They're working within the system. The system may not be what President Obama likes, but they're trying to save some money for their shareholders.

TODD: Absolutely. None of these companies, at least with regard to this GAO report. And the GAO says this flat out, this is not an illegal operation. These are tax loopholes that these companies are taking advantage of.

BLITZER: Brian Todd, thanks very much.

Let's check in with Jack Cafferty on this Monday for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Add Condoleezza Rice to the growing list of former Bush officials weighing in on the torture debate. The former secretary of state got into it with a fourth grader over the weekend. He asked her what she thought about the Obama administration saying about the harsh techniques that were employed under President Bush.

Condoleezza Rice defended Bush's policies on the interrogation of terror suspects, saying the president would not have authorized anything illegal. "He was also very clear that we would do nothing, nothing that was against the law or against our obligations internationally." Rice added how difficult a time after 9/11 was, and even though they were terrified of another attack on the country, the president was not prepared to do something illegal.

Rice's latest comments come days after telling students at Stanford University, "We didn't torture anyone." She insisted waterboarding was legal by definition if it was authorized by the president.

Say what?

It sounds a lot like former President Richard Nixon. Remember? He claimed, "When the president does it, that means it's not illegal." And we all know how well that worked out for him.

Meanwhile, a recent Senate report shows that Rice was among the top Bush officials who approved the use of waterboarding, which has been considered a form of torture for centuries -- look up the Spanish Inquisition. This may be why she, much like former Vice President Dick Cheney, is out making the rounds these days defending what they did. She was doing it with a fourth grader.

Here's the question: When it comes to the torture debate, Condoleezza Rice says President Bush would not have authorized anything illegal. Do you believe her?

Go to and you can post a comment on my blog -- Mr. Blitzer.

BLITZER: Jack Cafferty, thank you very much.

The Obama administration insists it's not easing up on its fight against swine flu. We're standing by for a briefing. It will be live coming up, the homeland security secretary, on the latest on the outbreak and the federal response.

Also ahead, what it was like when that roof caved in. Chilling first-hand accounts of the disaster over at the Dallas Cowboys' training facility.

And is President Obama showing weakness in the Middle East on par with Jimmy Carter? I'll ask the Israeli president, Shimon Peres. He's here for an exclusive interview. He's ready to speak out about President Obama's harshest critics.

We'll get his response. That's coming up.


BLITZER: Israel's president is talking about President Obama, the Palestinian Authority of Mahmoud Abbas, and the Middle East peace process. Shimon Peres spoke to the American Israel Public Affairs Committee here in Washington. He also sat down for an exclusive television interview with me.


BLITZER: There are some here in Washington, critics of President Obama and his administration, who think that he's going to be squeezing Israel in the peace process right now. Newt Gingrich, the Republican, former Speaker of the House of Representatives, in an interview with "The Jerusalem Post," I'll read to you.

He said -- he called U.S. President Obama's program of engagement on Iran a fantasy, and his Middle East policies are very dangerous for Israel. He summed up Obama's approach as "... the clearest adoption of weakness since Jimmy Carter."

SHIMON PERES, ISRAELI PRESIDENT: Maybe it is another side as well. I have much respect for Gingrich. But I want to say, for the first time, the Arab world, or most of the Arab world, because 70 percent of them are Sunnis, say Iran is our problem, let's make peace with Israel and enable us to unite and stand together against the real danger. So, for the first time, we have a chance to make a region of peace, not just a bilateral peace with the Palestinians.

You know, many Israelis ask, we should give back everything to the Palestinians? What will they give us back? Well, they will give us back -- apparently, they don't have much. But if the return will be a region of peace, that is a great promise.

BLITZER: Because there's deep concern that the new prime minister of Israel, Benjamin Netanyahu, is, so far, refusing to support what's called a two-state solution: Israel and Palestine. I know you support a two-state solution, but the prime minister is not saying that he does.

PERES: Well, he said his view in a little bit more sophisticated way. He said, A, we shall abide to all the commitments of the previous governments. One of the commitments is to the roadmap. The roadmap calls for a two-state solution.

BLITZER: So why can't he just say that?

PERES: He has a coalition. He has to keep them together. He must, like many politicians, do what Kissinger used to call constructive ambiguity.

It takes time, you know, to bring together such a coalition of a simple matter. And let him do it his way. I think before he will come to see President Obama, the government will have a clear policy.

BLITZER: In favor of a two-state solution?

PERES: I don't want to promise ahead of time. I'm not a member of the government. I may hope that this will happen, but I shall wait to see.

He said in addition to it, we are not going to govern (ph) the Palestinians, and then I'm ready to restart right away the negotiations with the Palestinian Authority. If you combine all these traits, well, I think it sounds positive.

BLITZER: Because I'll just be -- as you know, both the president, President Obama, and the secretary of state, Hillary Clinton, they've made it very clear over these past several weeks and months that they favor what's called a two-state solution. President Obama, speaking recently...


OBAMA: I am a strong supporter of a two-state solution. I have articulated that publicly, and I will articulate that privately. And I think that there are a lot of Israelis who also believe in a two- state solution."


HILLARY CLINTON, SECRETARY OF STATE: We happen to believe that, you know, moving toward a two-state solution step by step is in Israel's best interest.


PERES: May I tell you, this won't rupture the friendship between America and Israel?

BLITZER: It won't rupture, you're saying?


BLITZER: Well, it would rupture the relationship if Prime Minister Netanyahu comes here and says he can't support a two-state solution.

PERES: You asked me a question, I gave you an answer. We still consider the friendship with America our top priority.

We see in President Obama a friend of Israel, a real leader that seeks peace. We have much respect and hope for him. We should listen carefully to what he has to say. Prime Minister Netanyahu doesn't come here just to tell his side of the story, he comes to listen.

BLITZER: The prime minister also says that he's not going to negotiate with the Palestinian Authority of Mahmoud Abbas unless they, the Palestinians, formally declare their support for Israel as a Jewish state.

PERES: No, sir. He didn't make it a condition.

BLITZER: Well, explain to me what his position is.

PERES: He said, I expect they will do it, but he didn't make it in a way of an ultimatum. And then let me remind you, the United Nations' resolution on 29 of November, 1947, called for two states, an Arab state and a Jewish state. There was nothing new in it.

BLITZER: So what are you saying to the president of the Palestinian Authority, Mahmoud Abbas? You, Shimon Peres?

PERES: I say look at the United Nation's resolution.

BLITZER: So what do you want him to do?

PERES: To follow this resolution.

Look, let's distinguish between negotiations and ultimatums. We don't give ultimatums. We don't put conditions. We don't suggest preconditions. We don't suggest links (ph).

Negotiations should be without prior conditions, open. Every side has the right to put his request on the table. BLITZER: As you know, some of the Arab states are urging the Palestinians to form a national unity government that would include Fatah, the group that supports Mahmoud Abbas, and Hamas, the leadership in Gaza.

Is that acceptable to Israel?

PERES: It's unacceptable to the Palestinians. They try in vain.

We think that Hamas is a tragedy for the Palestinians. They divide them. They postpone their chance to build a Palestinian state. The Palestinians could already have a state if it wouldn't be for Hamas.

Hamas is a rebellion. They revolted against their own authority. They're an illegitimate government in the eyes of the Palestinian Authority.

BLITZER: So what happens if they're brought in to the Palestinian Authority?

PERES: They won't be brought in unless they will meet the requests of the Palestinian Authority, which is they have to declare for peace, for negotiations, for the recognition of Israel. If they'll accept it, OK.


BLITZER: All right. Part two of the interview with Shimon Peres, that's coming up in the next hour. We have an extensive exchange on whether or not Israel is going to go forward and try to destroy Iran's nuclear facilities on the ground right now. That's coming up in the next hour.

And tomorrow, here in THE SITUATION ROOM, our interview with Pakistan's president, Asif Ali Zardari. He's coming to Washington to meet with the president. Can Pakistan' protect its nuclear arsenal from extremists?

We'll talk about that and a lot more tomorrow. The interview with President Zardari, right here in THE SITUATION ROOM.

And we're only minutes away from a live news conference with the Homeland Security secretary, Janet Napolitano. She's about to give us the latest on what's going on with the swine flu.

Plus, investors around the world hang on Warren Buffett's every word. Now the billionaire tycoon is revisiting his dire warnings about the state of the economy.

We have a new CNN interview with Warren Buffett, the Oracle of Omaha. That's coming up.

And President Obama prepares to confront Pakistan's leader about the risk of that nuclear arsenal. Could it fall into terrorists' hands? Stay with us. You're in THE SITUATION ROOM.


BLITZER: All right. This just coming in to THE SITUATION ROOM. President Obama facing a potential headache from members of his own party. It involves his efforts to try to close the detention center at Guantanamo Bay.

Let's go straight to our senior congressional correspondent, Dana Bash. She's working the story for us.

What's going on, Dana?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: What's going on is that in order to begin to close Guantanamo Bay, President Obama has asked his fellow Democrats in Congress for $80 million, a total of $80 million in the war supplemental.

Well, the House Democrats have rejected that, at least for now, and they say it's because he does not have a plan to actually close Guantanamo Bay. And until he does that, his fellow Democrats in the House are saying that he's not going to get the money.

I'll read you a quote from the House appropriations chairman, David Obey. This comes by way of our producer, Deirdre Walsh.

He said, "So far as we can tell, there is yet no concrete program for that. And while I don't mind defending a concrete program, I'm not much interested in wasting my energy defending a theoretical program. So when they have a plan, they're welcome to come back and talk to us about it."

Now, this, it's important to note, comes on a backdrop of Republicans absolutely pounding away, Wolf, at President Obama and Democrats at the very thought of closing Guantanamo Bay without that plan. And the very though of giving this kind of money to the administration in order to do that, again, without that plan. And the idea that because they don't have a plan, many members of Congress are saying that they're hearing back from their districts that they don't want these prisoners to end up in their back yards.

So you have all of those things going on, along with Republicans trying to ramp up their idea that Democrats aren't keeping you safe. So all of those dynamics are playing into this very big deal, which is the Democrats in Congress rejecting President Obama's request for money to close Guantanamo Bay right now.

BLITZER: Yes, a lot of it an explosive story right now. David Obey slapping the White House around a little bit right now. That does not happen every day, the Democratic chairman of the Appropriations Committee telling the White House, you know what? You want the money, give us a plan before you start asking for the money.

It doesn't happen every day, Dana. Good point.

BASH: It doesn't.

BLITZER: Yes. Thanks very much.



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

Happening now, fears that nuclear weapons could fall into terrorists' hands. President Obama's top military adviser talks about the safety of Pakistan's nuclear arsenal and why you should worry about what he calls the Taliban's thuggery.

He's already disgraced. John Edwards faces federal investigation. At issue, was campaign money for the former presidential candidate used to keep his extramarital affair quiet?

And one of the most powerful and richest men in the world desperate to protect his reputation. The Italian prime minister, Silvio Berlusconi, his wife accuses him of having an eye for young women. Wait until you hear what the prime minister says.

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

The billionaire investor Warren Buffett is proclaiming that the U.S. economy is no longer sinking in quicksand. Thousands of people flocked to Omaha over the weekend to hear the Berkshire Hathaway chairman's latest take on the markets and the recession.

Poppy Harlow of was there, and she interviewed Warren Buffett. Listen to this.


POPPY HARLOW, CNNMONEY.COM CORRESPONDENT: The world wants to hear from you right now. And when we spoke in October, you called it an economic Pearl Harbor. Where do we stand right now? Where is recovery at this point?

WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY: Well, we -- it isn't Pearl Harbor anymore. We're in an economic war of sorts, but the situation has come a long way since we talked in October.

At that time, the financial system, shortly before that, middle of September, very, very close to a meltdown. I mean, it was a strike at the very heart of the American economic system.

A lot of smart things were done then. I give great credit to the people that were -- were working on the problem, I mean, getting in there and guaranteeing the commercial paper or the money market funds. And it -- it brought stability to the system.

And that has laid the framework for an improved economic situation. But that's going to take time. So, we are now in the more drawn-out phase of -- of fighting the battles of the war. And, you know, they come along, like Chrysler or whatever it may be, and you take them one at a time. You don't win them all. But the crisis has passed.


BLITZER: All right, let's bring in Poppy Harlow right now.

What advise, Poppy, is Warren Buffett giving investors at this sensitive moment?

POPPY HARLOW, CNN CORRESPONDENT: You know, no surprise, Wolf, this student of value investing says, listen, buy securities and hang on to them in the long-term. No one know what is the market is going to do in a year, but, 30 years out, if you buy security, if you buy stocks in good-run companies, this will benefit.

He says, listen, the worst thing you can do is try and buy and sell stocks and guess what the market is going to do. Wolf, he even told me even he himself cannot do that well, which was pretty interesting, to hear him admit that he can't do something well when it comes to the stock market, Wolf.

BLITZER: Did he mention specific risks, Poppy?

HARLOW: Yes, he certainly did, especially inflation. He talked a lot with me about long-term inflation, the risk there. He said the government has to do what it's doing now. He really takes his hat off to the Obama administration.

But long-term inflation is a risk. I will quote him here, Wolf: "There's no free lunch in economics. What we're do right now will have an effect later on, but it's still the right thing to do."

This is a big supporter of the Obama administration -- Wolf.

BLITZER: That's right. He was an early supporter.

Did he have mention anything to you, Poppy? Does he have any regrets, anything, about what the Obama team is doing?

HARLOW: You know, he really doesn't. He really support what they are doing. He does caution that there are some risks, but he also supports the private-public investment partnership plan. That is an idea, Wolf, that he told us first back in October.

And, of course, months and months later, the Treasury came out with a similar plan. So, he really does support it. And he thinks the administration has to take the unprecedented steps that it's taking right now.

BLITZER: Poppy, thanks very much.

And, to our viewers, you can see Poppy's full interview with Warren Buffett at

Warren Buffett transformed Berkshire Hathaway from a failing textile-maker in 1965 to a conglomerate now worth almost 80 businesses, including car insurance, paint, ice cream, and underwear. Since December of 2007, Berkshire stock has fallen 39 percent, from $140,000 a share to $94,000 a share.

Buffett says his best investment was in GEICO insurance, his worst, investing in ConocoPhillips back in 2008, when the price of oil was high.

Now another issue many of you are watching right now: Who will replace the retiring Supreme Court Justice David Souter? President Obama is calling senators who will have a say. The White House says he phoned Senators Orrin Hatch and Arlen Specter. Both sit on the Judiciary Committee.

Finding a replacement could give President Obama some real headaches.

Our senior political analyst, Bill Schneider, is joining us right now.

Bill, how could the Republican minority in the Senate potentially defeat the president's nominee, if in -- if in fact that could be possible?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, they have to find an issue that divides the Democratic majority.


SCHNEIDER (voice-over): Republicans don't have the votes to defeat President Obama's choice for the Supreme Court. They have to get some Democrats to join them, possibly on a hot-button social issue.


SEN. ORRIN HATCH (R), UTAH: Their side will make sure that it's a pro-abortion justice. I don't think anybody has any illusions about that.


SCHNEIDER: Suppose the issue of gun control comes up during the confirmation hearings. Support for stricter gun laws has dropped to 39 percent, the lowest level in at least eight years.

Forty percent of Democratic voters oppose tougher gun laws, Republicans could use that issue to try to peel away Democratic senators. Republican voters are more unified in their views. Nearly eight in 10 oppose tougher gun laws.

A more recent CNN/Opinion Research Corporation spotlights same- sex marriage as another hot-button issue.

MITT ROMNEY (R), FORMER MASSACHUSETTS GOVERNOR: There should be a national standard. And my own view is that marriage is a relationship between a man and a woman.

SCHNEIDER: A narrow majority of Americans opposes legal recognition of same-sex marriage, including close to 40 percent of Democrats. Again, Republicans are more of one mind, nearly 80 percent opposed.

But there's a risk for Republicans if they make same-sex marriage an issue. Young voters strongly favor marriage equality. They're the future of American politics.

Abortion is always likely to come up in a Supreme Court confirmation.


SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: I would not provide a litmus test, but I am somebody who believes that Roe vs. Wade was rightly decided.


SCHNEIDER: The public remains divided on abortion rights. Among Democrats, just under 30 percent call themselves pro-life. But the abortion issue also splits Republicans. Just over 30 percent of Republicans say they're pro-choice.


BLITZER: All right, that's Bill Schneider reporting. I want to go right to the briefing, Janet Napolitano, the secretary of homeland security, the latest on the swine flu.


JANET NAPOLITANO, U.S. SECRETARY OF HOMELAND SECURITY: So don't read anything into the -- into the location, other than it was convenient.

But this is our daily briefing to update Americans about our national efforts in respect to the H1N1 flu outbreak.

Currently in the United States, we have 286 confirmed cases in 36 states. The large majority of these cases are mild flu cases. They have not required hospitalization. Many of the patients already have recovered.

As the Centers for Disease Control and Prevention noted over the weekend, we have started to see encouraging signs that this virus may be mild and that its spread may be limited. We are, therefore, cautiously optimistic, but nevertheless we realize that this is not the time to rest.

We are preparing fully. We also have in mind that H1N1 flu could die down soon and return later again this fall when the flu season enters back in full swing. This is always a concern with a new strain of the flu virus. We will therefore continue to prepare in the coming months to address that possibility. And as I have said, this effort is a marathon, not a sprint.

In addition, it is possible that the World Health Organization will raise its pandemic alert level to Level 6.

This would not be a surprise, nor would it affect our preparation efforts, since we have been preparing since the first appearance of H1N1 flu as if this will be Level 6.

Let me again explain what Level 6 means: A rise in the pandemic alert level from the WHO does not mean that the virus has become any more severe. Rather, it means that it has spread to a number of countries around the globe. In other words, the level is about geography, not severity.

But having said that, we will continue to closely monitor the virus for the coming days and the coming weeks.

I think it's important to note that federal government, state governments and local governments have been planning for a number of years in case we face a situation like the current one. Those plans are serving us well now, because we're actually seeing how well they work and also areas where we need to continue to improve.

And I want to repeat what I have been saying and what many of us have been saying since H1N1 first appeared: We all have a responsibility here. Individuals have a responsibility to cover your mouth when you cough with your sleeve, not with your hand, to not go to work or send your child to school if the child is sick or you are sick, to wash your hands continuously with -- with water or use an alcohol gel.

Families have responsibilities here beyond just the individual. And that is to think ahead. It's all about preparation. What would you do if your child were released from school for a number of days and had to remain at home? Because, realize, when a school is closed, it's not for the kids to go the mall or be out.

It's for them to stay at home. How would you handle that sort of a situation?

What would you do if a caregiver couldn't come to work?

Those kinds of questions, families should be asking themselves and thinking through because that's good preparation, not just for flu, but for other kinds of outbreaks or disasters that could occur.

Businesses -- we have been interacting a lot with the private sector this past week. Indeed, we had conference calls, last week. I think one of them had over 1,000 private-sector participants.

But, again, businesses need to think through how they would handle a period of severe flu, if there were a large degree of absenteeism; if services had to be restricted, and the like? And lastly -- government -- at all levels: local, state and federal -- we all have plans. Sometimes those plans haven't been dusted off for awhile. They need to be.

At the federal level, we need to be cognizant of the other demands and strains put on local and state budgets, particularly, during this economic downturn; and what we can all do working together to work our way through incidents like we're undergoing now with H1N1.

So, individual, family, private sector, government -- everybody has a shared responsibility and a role to play in this effort. As I have noted, we are cautiously optimistic. The Centers for Disease Controls is beginning to look at some of the guidance it has posted on its Web site. Some of that may be adjusted over the coming days.

And so, my last word here is to make sure that you go to the CDC Web site for information and for guidance, because that has changed, and will change, as we learn more and more about this particular outbreak.

With that, I will stop and take...

BLITZER: All right, there she is, Janet Napolitano -- she's the secretary of homeland security -- briefing us on what's going on.

I want to go right to our medical correspondent Elizabeth Cohen.

She's sort of preempting the World Health Organization, Elizabeth, saying she fully expects the WHO to announce they're raising the threat level of a pandemic from a five to a six. She is saying she thinks they're going to do that pretty soon, although she is saying that doesn't necessarily mean the situation is as horrific as that might sound.

You hear the World Health Organization say there's a pandemic, you got to get nervous, but she is saying, you know what? We expect they're going to be doing that.

Give us some context, some perspective.

ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: Wolf, here's the issue, is that people get confused about what the word pandemic means.

All a pandemic means is that a new virus has spread into various parts of the world. It doesn't mean that it's necessarily a very deadly virus. It doesn't say anything about the severity of the illnesses that people are having. All it means is that it spread.

So, you can have a pandemic -- pandemic with actually pretty low numbers of deaths. That's very possible. And, in fact, in the United States, and in most of the world, people have been seeing very mild disease, not severe disease, in this H1N1 outbreak.

BLITZER: So far, but what they're afraid of is that there could be a change in that virus, it could mutate, and even though it could be quiet over the summer months here in the Northern Hemisphere, in the Southern Hemisphere, where there is the flu season about to begin, we might be able to see how -- how serious this H1N1 virus really is.

COHEN: Right. Respiratory diseases, like the flu, tend to get worse in winter months. So, for the Southern Hemisphere, that is coming up. For the United States, that means, in the fall, they're going to be watching, what does H1N1 do when it comes back, if it comes back?

BLITZER: All right, stand by, Elizabeth. We're going to have more on this story coming up.

The former presidential candidate John Edwards confirms he's now the subject of a federal investigation. Stand by to find out what Elizabeth Edwards has to say about that and the link to her husband's extramarital affair.

And is your school in desperate need of repair? Don't write your congressman. Try writing your president.

And, later, CNN investigates Florida's most expensive transportation project. It's getting millions from the stimulus package. Critics say it's a boondoggle. And one is even suing to stop it.


BLITZER: Senator Arlen Specter of Pennsylvania sends a harsh message to Republicans: Wake up.

The new Democratic senator who was a Republican only a few days ago is talking about his party switch. Specter said staunch conservatives dominate the Republican Party right now and have little tolerance for Republican moderates.

Today, Senator Specter tested out his newfound Democratic ties.

Our senior congressional correspondent, Dana Bash, is in Hershey, Pennsylvania, watching what's going on.

How did it go today, Dana?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, you know, it has been nearly a week, Wolf, since Senator Specter switched parties, but this was the first time he publicly engaged the voters back home. And so we saw firsthand the way he has still tried to defend and explain his surprising move.


SEN. ARLEN SPECTER (D), PENNSYLVANIA: Good morning. How you all doing?


BASH (voice-over): He had represented Pennsylvania for nearly three decades, but Arlen Specter is reintroducing himself.

SPECTER: My principles have become much more aligned with the Democrats.

BASH: It's his first town hall as a Democrat. And Specter is still stunningly blunt about the real reason he left the GOP: He would lose as a Republican.

SPECTER: But do I want to stay in the Senate? Sure. Do you like your jobs?



BASH: But Specter is now on a campaign to convince voters his switch isn't just about him; it's about what he does for them.

SPECTER: My senior position on Appropriations has enabled me to bring a lot of jobs, a lot of federal funding to this state.

BASH: He boasted to his audience at the Hershey Medical Center about the hundreds of millions of dollars he delivered here, thanks to the power that comes with 29 years in the Senate.

SPECTER: Pennsylvania has a big interest in my seniority, big interest.

BASH: Not everyone here thought that. Specter's vote for the president's stimulus bill cost him support from Republicans like Joe Depatto, who gave the senator a polite earful.

JOE DEPATTO, PENNSYLVANIA REPUBLICAN: Do you feel that this is more self-serving for you (INAUDIBLE) Democrat (INAUDIBLE) trying to build more support...


SPECTER: Were you -- were you in favor for or for the stimulus package?

DEPATTO: I was against the stimulus package.

BASH: But Specter's focus is winning over Democrats. Some we talked to aren't so sure.

UNIDENTIFIED MALE: He's still going to vote the same way he's voted in the past.

BASH: Others, sold.

BASH: You will vote for him as a Democrat?


(END VIDEOTAPE) BASH: Now, we did find one potential big problem for Arlen Specter here. And that is, when we talked to Democrats independents -- and independents who said that they did plan to vote for Arlen Specter, we asked, well, what if he were running against the former popular Republican Governor Tom Ridge? And almost all of them said that they would have a very hard time choosing.

And that is potentially important, because we talked to one Republican strategist with knowledge of conversations, who said that he has been approached and hasn't closed the door to the idea of running for Senate here against Arlen Specter.

BLITZER: Because, right now, the polls show he would do much better against the conservative Republican Pat Toomey, as opposed to the more moderate former Governor Tom Ridge.

BASH: That's exactly right. The poll -- a poll that just came out today, Wolf, shows that he would beat Pat Toomey, that conservative, by 20 points. But he's in a statistical dead heat with Tom Ridge in that same poll. So, it does show a potential problem if -- and it is an if -- Tom Ridge, the popular former Republican governor, decided to run against Arlen Specter, the now Democrat.

BLITZER: That could be quite a little battle in the Republican Party for a primary, if Ridge vs. Toomey. We will see what happens -- Pennsylvania politics always exciting.


BLITZER: The Obama administration says it's trying to stay out in front of the swine flu outbreak. But are federal officials needlessly adding to the fear and to the hype? Stand by for our "Strategy Session."

And the Italian prime minister's personal life turns into a very public soap opera. His wife wants a divorce. He wants an apology.


BLITZER: Let's get right to our strategists.

Joining us, Democratic strategist Karen Finney, a former DNC communications director, and Republican strategist John Feehery.

What do you think of the way, John, the administration is handling this swine flu problem out there? Because a lot of folks are totally confused. Should we be that worried? Is it being overly hyped? It's a sensitive subject.

JOHN FEEHERY, REPUBLICAN STRATEGIST: There's two kinds of viruses. There's the actual swine flu virus, and then there's the media hysteria virus.

And I think that administration is trying its best, but then you have Joe Biden saying, don't fly. Don't go on anything. And it kind of blows it out of proportion. And then they're doing these daily press things. And people are confused.

And there's a real cost to that. The real cost is, schools get closed. People panic. And then you have other costs, which is that there might be a situation where people are saying, you know, the boy who cried wolf. Next time there is a real crisis, people won't believe it. And that -- that's something that they have to be worried about.

KAREN FINNEY, FORMER COMMUNICATIONS DIRECTOR, DEMOCRATIC NATIONAL COMMITTEE: Well, look, I think, in this situation, clearly, it's moving very quickly. They know that the pathogens are actually mutating. So, I think they are trying to stay ahead of it, and trying to give people as much information as they can, as up-front that they can.

I thought the press conference we were just watching with Janet Napolitano, she was trying to kind of clarify what the World Health Organization was talking about today. I think that's a good thing, that people understand what pandemic, what that really means, and so that they -- that there isn't, you know, sort of freaking out all over the place.

But I do think...


FINNEY: ... again, with regard to Joe Biden, look, they corrected it very quickly. And it -- but I agree with you that the -- the -- the other virus is the sort of media frenzy.

BLITZER: Let me change subjects, a little battle going on right now involving the president and the White House on the one hand, and some Democrats in the House of Representatives, John, where you used to work for a long time on the other.


BLITZER: David Obey -- he's the powerful chairman of the House Appropriations Committee -- he's telling the White House, you know, they want $80 million to relocate some of the inmates, some of the prisoners at Guantanamo Bay. But he's saying, until you come up with a plan, show me where they're going, what they're going to be doing, we're not going to appropriate that money.

It's pretty -- it's pretty unusual to see the -- the -- the chairman of -- the same party as the president telling the president, you can't have it.

FEEHERY: Not in my backyard.


FEEHERY: And I think a lot of people are concerned, where are they going to put these prisoners? They need a real plan. And they don't want to be surprised by the plan too late in the process. And they certainly don't want these prisoners going in their backyard. And I think that that is part of the concern.

FINNEY: Well, but I also think, look, Democrats agree with the president on closing Gitmo. They're just asking for a plan. So, one way or the other, I think it's going to happen. And I think the president -- I don't think...


BLITZER: It's a little embarrassing, though, for the president to be slapped down like this by David Obey.

FINNEY: Well...


FINNEY: Not the way you would like to see this happen. But I think, ultimately, they're going to try to reach the same goal on that, is to close Guantanamo.

FEEHERY: And David Obey loves to do this kind of thing.


FEEHERY: He loves to show that he's the powerful Appropriations chairman. He's a good guy, but he likes to show his power.

BLITZER: Well, he's got -- he's a...

FINNEY: But doesn't anyone?


FINNEY: Is there anyone up there that doesn't?


BLITZER: The -- because he's an independent guy, David Obey. He likes to do what he thinks is best. And he's a powerful guy, because he controls a lot of that money. The appropriations process on the Hill is -- is obviously very important.

How much wiggle room does the president have right now? He's got a few months, probably until, let's say, July to make a decision on who's going to be a Supreme Court nominee. How much freedom does he really have, given all the pressures from within the party...


BLITZER: ... within his own team?

FINNEY: Well, you know, it's interesting. I think it's probably likely that the president will get to one, two, maybe even three Supreme Court justices. Obviously, there's the most pressure on this first one. I think he has laid out the criteria pretty -- pretty well over the weekend in terms of what he's looking for in a Supreme Court justice. I was disappointed to see that Republicans think that compassion and empathy seem to be some kind of a litmus test. I think the president has some wiggle room. But I hope that, as we're having this discussion about, you know, these sort of quotas or what kind of person should be on the court, that, when we talk about diversity, we recognize that diversity is a good thing, and that can be people who have different kinds of experience, men, women, Hispanics.

BLITZER: Anything wrong with having a Supreme Court that looks like America?

FEEHERY: Not at all, as long as they all agree that the law is important, which is, I think, my most important thing.

And having empathy is not the most important thing, as opposed to actually following -- and following the law.

FINNEY: But the president said that as well.

FEEHERY: And I would -- I would say that -- to answer your -- your question, I think the president has a lot of wiggle room.

I think he's going to pick -- I think he knows exactly the kind of person he wants to pick. And I think he's going to do it the way he wants to do it. And I don't think he's going to really listen to anybody else.

FINNEY: I think that's right.

BLITZER: He's the president of the United States, so he can do that.



BLITZER: All right, guys, thanks very much.

It sounds like a long shot. An eighth-grader goes to the very top of the U.S. government to repair his dilapidated school.

Plus, Elizabeth Edwards on the federal investigation of her husband and the link to his extramarital affair.

And, later, first lady Michelle Obama gets a jump on Cinco de Mayo celebrations.


BLITZER: Let's check in with Jack for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: (AUDIO GAP) this hour is, when it comes to the torture debate, Condoleezza Rice says that President Bush would not have authorized anything illegal. Do you believe her? She said that, by the way, in a discussion she was having with a fourth- grader.

Clair writes: "After Condi dropped the ball on 9/11, her only recourse was to green-light torture. How else could she and her fellow Bushies establish a nonexistent link between the attacks and Iraq and Saddam Hussein? If we Americans don't have the guts to put these monsters -- Rice, Cheney, and Bush -- on trial, we should play it their way and ship them off to a country that will do it for us."

Mack in Michigan writes: "How pathetic is it that the former secretary of state is reduced to arguing semantics with a fourth- grader to try and justify the harm and disgrace that she and the other neocons have inflicted on the United States?"

Kai in Portland writes: "Well, let's see. Water-boarding is torture, and it is illegal. Look it up. And Bush authorized it, right? So, doesn't that mean that, in the real world, what he did was illegal? What am I missing here?"

Susan in Idaho weighs in with this: "I believe Rice believes it. If one suspects their superior is not on the up and up, it's pretty difficult to believe in their own credibility. There was a real good reason Colin Powell, and one would have thought that Rice would have wised up then."

Larry in Texas writes: "She is living in a place where there is no U.S. Constitution. And they think they're God, establishing laws out of fear and based on the presumption they can do no wrong because of who they think they are. It is sickening to me that these people were elected to protect us and, in the long run, caused so much damage, that it may never be set right, unless they are prosecuted and sent to prison."

And David in North Carolina says: "It's a shame that the administration she represents spent the entire last eight years speaking to all of us like we're fourth-graders."

If you didn't see your e-mail here, go to my blog at Look for yours there, among hundreds of others.

You do that every day, don't you, Wolf?

BLITZER: I certainly do, as do thousands and thousands of people all over the country.

CAFFERTY: There you go.

BLITZER: Thanks, Jack.

And, to our viewers, you're in THE SITUATION ROOM.

Happening now: a threat to the entire world. Israel's president sounds an ominous warning about Iran's nuclear program. But would Israel attack to keep Iran from getting the bomb? My exclusive television interview with the president of Israel