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Airliner Hijacked in Mexico; The Birthplace of the Taliban; Palin's New "Death Panel" Attacks; 9/11 Mastermind Photos at Gitmo; What the President Will Propose

Aired September 9, 2009 - 17:00   ET

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


WOLF BLITZER, HOST, THE SITUATION ROOM: And, to our viewers, you're in THE SITUATION ROOM.

Happening now: rising U.S. casualties, charges of election fraud, and a growing Taliban threat. The stakes never have been higher in Afghanistan. CNN right now is in the war zone. We will take you live to Afghanistan.

Your family's health may hang in the balance. President Obama goes before Congress just three hours from now to make an urgent pitch for action on health care reform. Two U.S. senators who will be standing there are standing by for us. Democrat Sherrod Brown and Republican John Thune, they are getting ready to debate.

And one of the world's most powerful nations may be sapping America's strength with a very aggressive spying campaign. Is China potentially setting up the United States for a knockout blow?

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

All that coming up. But let's begin with the breaking news out of Mexico City right now, where the hijacking of a commercial airliner has ended peacefully. More than 100 passengers have been taken off the Aeromexico jet. Eight people have been taken into custody after threatening to blow up the airliner. There were U.S. citizens on the plane and police may be wary of a lingering threat out there. They've been checking for explosives on the runway.

CNN's Rick Sanchez has been tracking this story for us from the very start.

He's joining us now live with more -- Rick, you're monitoring what's happening in Mexico City. It looks like it's been resolved, but there are still -- there are still questions out there.

RICK SANCHEZ, CNN ANCHOR: It's an amazing story from beginning to end, certainly, the way it developed during the course of the last oh, two hours here, Wolf.

The pictures really told the story. It's one of the few events that we've actually seen develop live from the International Airport there in Mexico City. The flight was said to be coming -- to be coming in from the Yucatan Peninsula when suddenly there were reports that someone on the plane had supposedly made a threat of having a bomb on board. They immediately forced the plane down. And after the plane landed, there were 40 minutes of anxiety, with passengers still on the ground. But there you see finally, 45 minutes after the plane came to land, there were passengers who were evacuated from the plane. There were about 104 of them, according to reports.

The passengers say, for the most part, they didn't know exactly what was going on in the air, but they sensed there was something on the ground as soon as they landed and they saw all those Mexican security forces there on the ground.

The interesting thing we're learning now is that at least three people, all said to be Bolivians, have been arrested by Mexican authorities. We don't know exactly what has been said about them in terms of what actual threats they had made.

But, you know, as we watch this, the pictures were really amazing, how this security detail was able to come in and get some of those folks off the plane. There you see the pictures. And then soon after that, we started seeing, Wolf, some pictures of some of the suspects themselves -- these alleged hijackers getting taken off the plane.

BLITZER: Rick, I'm going to interrupt you for a moment, because I want to show our viewers this picture, as well. Watch your monitor right now. They -- the hijackers said they had a bomb in a cardboard box. That cardboard box -- take a look at this, authorities detonated it. We're going to show you what -- what we saw.

(VIDEO CLIP)

BLITZER: All right. You saw that, Rick. They do that always. I don't think there was a bomb inside, but they -- they don't want to take any chances whatsoever in these kinds of situations.

SANCHEZ: It was obviously a precautionary method -- measure that they took there, Wolf, because we had heard from Juan Molinaro (ph), who was one of the president's spokespersons there and one of the directors of the communications office, saying that it seemed to him that there was a threat on board the plane, but there was never actual sighting of any explosive device. That's what they're saying from the official sources there.

The long and the short of it is that it looks like the good news in this case is that thing played out. And there were really anxious moments for a long time for security officials, for Mexican officials and for folks on the plane there, that there was something really horrible that could be happening. But in the end -- in the end, the good news is, Wolf, that they were able to get everybody off the plane.

BLITZER: And very good news, indeed.

Thanks very much.

Rick Sanchez doing some excellent reporting.

Jeanne Meserve is standing by in our Washington bureau -- Jeanne, what are you hearing about U.S. citizens on board that plane?

JEANNE MESERVE, HOMELAND SECURITY CORRESPONDENT: Well, we only have preliminary information from U.S. law enforcement sources. But they say there were 112 people on this flight. It's their understanding that they were American, they were Mexican and they were French. We don't have any breakdown on numbers yet, though. How many of those were Americans just isn't clear.

Now, the Transportation Security Administration has been monitoring events in Mexico but it's directly involved, because this is an international incident and this not an American character -- carrier, rather. But it's worth noting of course, that hijackings have become a real rarity, particularly in the United States. There has not been a successful hijacking since 9/11 of 2001. That is almost eight years ago. And the reasons are better screening at the airports, reinforced cockpit doors, some pilots are armed and -- and passengers who seem empowered and ready to take things into their own hands.

But they'll be looking at what happened in Mexico to try and see if there are any security lessons which should be learned from what happened there.

BLITZER: And we're only two days away from the eighth anniversary of 9/11 this Friday.

Jeanne, thanks very much.

The stakes have never been higher in Afghanistan, where the situation looks increasingly shaking. The government is accused of outright election fraud. American casualties right now are on the rise. And Taliban insurgents are making a bloody comeback.

CNN has deployed its full resources to the war zone.

Our Michael Ware has been to Kandahar -- a strategic city which remains right on the edge of Taliban territory. It's a city Michael used to know very, very well. Here's his report.

(BEGIN VIDEOTAPE)

MICHAEL WARE, CNN CORRESPONDENT: How does that make people feel here in Kandahar?

(voice-over): I wanted to see what had happened to this place since I had left. Kandahar -- it's the birthplace of the Taliban and the capital of the south, the fiercest combat zone. I once lived here, before Iraq and after the fall of the Taliban.

(on camera): So much has changed here in Kandahar. There's new buildings. There's new roads. There's new tree lines. But there's also a new Taliban. There's a Taliban here that wasn't here just a few years ago and this city now lives in the shadow of the Taliban.

The Taliban control neighborhoods here. In fact, this is a Taliban neighborhood. These police are from a police station right in the midst of a Taliban stronghold. They're very much on the front lines guarding the Gates to Kandahar.

(voice-over): In fact, here in this marketplace, the mood among shopkeepers is anxious. "Everyone in Kandahar is saying the city is surrounded," this businessman says. "There's something like 200 men standing here. Go. Ask them -- is there Taliban or not?"

Here, the sense of a city under siege goes much deeper than just hurting business. Even here in the city, you cannot speak out against the Taliban. "Those who do speak up face a terrible conclusion," this shopkeeper says. I found, for many, these fears are growing -- even though a major U.S. and Canadian base is located at Kandahar's air field, just outside the city limits -- their vehicles in the city streets.

(END VIDEO TAPE)

BLITZER: And Michael Ware is joining us live now from Kabul. Amazing stuff you've been working on, Michael, over there. But tell us once again why Kandahar -- what happens in Kandahar could be a barometer for what happens in all of Afghanistan.

WARE: Well, it's certainly going to tell us what's happening with the Taliban itself -- the foremost enemy of coalition troops here. Let's not forget, Kandahar is the second largest city in the country. It's the capital of the south. It's the old imperial capital. And it's the birthplace of the Taliban.

So what goes down on the streets of Kandahar will tell you so much about which way goes the south of the country.

Obviously, there's different issues to the north and to the east, as you approach -- to the west as you approach Iran. But Kandahar gives you a very good measure of how President Obama's war against the Taliban is faring. And, quite frankly, Wolf, that measure right now is not a good one. It's something to worry about -- Wolf.

BLITZER: It seems, to a lot of experts out there -- and you're one of them, Michael -- that all the options before the U.S. right now -- and there are several different options, including sending thousands of additional troops -- all the options are pretty bad right now.

Are there any good options?

WARE: Well, there is -- there is one element that's been missing from the mix, according to a lot of the major players I've spoken to in Kandahar. Many of them have been telling me, you know, when I first arrived eight years ago, you're never ever going to have enough international troops, American or otherwise, to get the job done here. And you probably won't get enough Afghan Army troops either -- certainly not in the time frame that the American public is allowing President Obama.

So you've got to start looking for other solutions. Now apart from negotiations and political solutions that could lead to an end to the conflict by dealing with the Taliban, there's something else, as well. It's learning from the lessons of Iraq and transporting them here. It's engaging the tribes to attack the Taliban and keep them out of their area, to arm militias -- in many ways turning back to the old warlords, who won the Soviet war here in Afghanistan in the '80s -- some of whom have returned to the Taliban not because they believe in the Taliban cause, but because they're so disenchanted with the Afghan government and the American mission.

And I can tell you, the Karzai family is calling for a return to tribal militias. And there is some interest within the U.S. military to look at this option because of the successes we saw in Iraq. That could be the missing element -- Wolf.

BLITZER: And General David Petraeus, who's the U.S. military commander for the -- for the Central Command, which overseas Iraq and Afghanistan, he certainly understands this situation well.

Michael Ware, be careful over there.

Tonight, an "A.C. 360" special report -- Afghanistan elections, the Taliban resurgence and mounting American casualties. It's a critical moment for the region and for the U.S. Anderson Cooper takes you inside Afghanistan "Live from The Battle Zone," all this week at 10:00 p.m. Eastern only here on CNN, the worldwide leader in news.

Let's bring in Jack Cafferty right now.

He's got The Cafferty File.

I've been watching those special reports on "A.C. 360" all of this week.

CAFFERTY: Great stuff. Oh, yes.

BLITZER: These guys, as I said yesterday, they're risking their lives to get the news to all of us.

CAFFERTY: And -- and doing a job that is head and shoulders above anything else that's been done over there. And that includes all the lads that are down the street at the old gray lady and elsewhere. I mean we've got -- we've got the best journalism coming out of that war zone, I think, right now of anybody.

BLITZER: Without a doubt.

CAFFERTY: Right?

We'll stop patting ourselves on the back now at the risk of bruising ourselves.

President Obama's speech to Congress tonight is seen as a turning point -- have you ever heard this before? -- one way or the other, when it comes to health care reform. The month of August didn't go according to the Democrats' plan and now, divisions within the president's own party threatening to stop his signature domestic issue from going forward.

Camille Paglia, who supports the president, rights on Salon.com -- and she does terrific columns there -- she says: "It's still possible for the president to turn things around with a strong speech tonight."

What's he going to say that hasn't been said?

But she acknowledges that after a summer "of grisly hemorrhaging, too much damage has been done."

Paglia asks how a White House that couldn't even smoothly pull off an innocuous back to school pep talk will revamp health care. And she criticizes the Democratic Party for becoming arrogantly detached from ordinary Americans and for not realizing that talk radio and the Web is where the debate is at.

Maureen Dowd goes after the president in today's "New York Times" for not being tough enough. And she's probably right: "Sometimes, when you've got the mojo, you have to keep your foot on your opponents' neck. Civil discourse is fine. But when the other side is fighting dirty, you should get angry. Don't let the bully kick sand in your face."

Dowd suggests the president needs to be -- I love this line -- "less Spocky and more Rocky."

But despite all the gnashing of teeth, it's worth pointing out the critical players in all of this are still at the table. And it's worth remembering the political cost to Bill Clinton when reform didn't happen on this subject during his first term.

Here's the question -- is it too late for President Obama to change people's minds on health care reform?

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

My big question going into this speech tonight is what is he going to say that we haven't heard 100 times before already?

BLITZER: We'll watch at 8:00 and we'll find out.

CAFFERTY: Yes, but the answer is nothing.

BLITZER: He's going to try to convince the American public that what he wants to do is going to help them with their safety, their security, their health care.

CAFFERTY: Yes. But they've been trying to do that for months.

BLITZER: Yes.

CAFFERTY: It's not working.

BLITZER: We'll see if he can do it tonight.

CAFFERTY: OK.

BLITZER: He's -- he's a good speaker.

CAFFERTY: He's a great speaker. BLITZER: Yes.

CAFFERTY: He needs to be a good president and get some of his programs passed.

BLITZER: More Spocky, less...

CAFFERTY: More Rocky...

BLITZER: More Rocky, less Spocky.

CAFFERTY: Less Spocky, more Rocky.

BLITZER: Maureen Dowd, she's a...

CAFFERTY: Maureen -- yes.

BLITZER: She is. She's a great writer.

CAFFERTY: When you've got Camille Paglia and Maureen Dowd slapping the president around a little bit, that's not a good sign for him.

BLITZER: No. Not good at all.

Jack, thank you.

CAFFERTY: Sure.

BLITZER: One of the world's most powerful nations targeting America's top secrets.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The sad joke in the Pentagon is if somebody can't find a document, someone else says, well, call the Chinese.

(END VIDEO CLIP)

BLITZER: China accused of a massive spying operation in the United States.

What's behind the accusation?

And after a serious health issues, Apple CEO Steve Jobs now back in the spotlight with a brand new line of high tech gadgets.

And Sarah Palin making new charges about so-called death panels.

How should the White House handle her latest attacks?

(COMMERCIAL BREAK)

BLITZER: Even as President Obama prepares to go before Congress later tonight -- and the American people -- in a make or break push for health care reform, the former Alaska governor, Sarah Palin, is back with a fresh accusation about so-called death panels. Let's talk about that and more with a pair of CNN political analysts, the Democratic strategist, Paul Begala, and Republican strategist Ed Rollins.

Guys, thanks very much for coming in.

She writes this in "The Wall Street Journal" today on the op-ed page: "Is it any wonder that many of the sick and elderly are concerned that the Democrats' proposals will ultimately lead to rationing of their health care by, dare I say it, death panels? Establishment voices dismissed that phrase, but it rang true for many Americans."

It certainly did ring -- ring true for a lot of Americans out there...

PAUL BEGALA, CNN CONTRIBUTOR: Yes.

BLITZER: ...who were concerned when they heard her raise it weeks ago. And now she's reiterating.

BEGALA: How humiliating for her. It rang true. Truth is an absolute. Truth is not relative. Things don't ring true for some people. Some people are lied to. Those people were lied to. They were lied to buy Mrs. Palin. She should be ashamed of herself for lying to -- to my mother and yours.

But now she writes this. She says, jeez, no wonder some people, it rang true for them. She should say mea culpa, mea culpa, mea maxima culpa, I lied your mother, I'm very sorry. That's what she ought to be

(CROSSTALK)

BLITZER: She's -- instead of saying that...

BEGALA: She should be ashamed of herself.

BLITZER: ...she's saying exactly the opposite. She's saying in "The Wall Street Journal" today, I was telling the truth and I'm still telling the truth.

ED ROLLINS, REPUBLICAN STRATEGIST: I've defended Sarah Palin many times in the past. I'm not about to defend her on this issue. There are very legitimate issues and people on Medicare have to have real concerns about what is going to happen to them. And those are things we ought to be talking about. You don't have to scare them. You can have a very serious discussion about we have to basically alter our system, otherwise we're going to be broke nationally. And I think, to a certain extent, when you get into these fringe things, you diminish arguments for things that are serious.

BEGALA: In fact, I have a -- one of my sayings in this health care debate has been as -- as long as the Republicans are talking about death panels and not the deficit, I'm happy, because that's the real argument.

ROLLINS: Right. The real argument... BEGALA: That's the legitimate criticism is can we afford this?

That's where the debate ought to be.

BLITZER: Right.

ROLLINS: That's where the debate ought to be. And particularly among the young people, who are going to bear so much of this burden.

BLITZER: When you take a look at the Republicans' decision, they're going to have a response. It's always very difficult after a president delivers an address before a joint session of Congress, whether a State of the Union or a special address, as he is tonight, for some Republican to get up there and speak for five or six months and offer a response. Now Representative Boustany of Louisiana is going to give the Republican response. I guess he was selected because he, in his earlier life, is a doctor.

ROLLINS: Well, I think he may make some legitimate medical. But the audience -- the audience is tuned off. You can't follow a president, I don't care who you are. You've worked for presidents, I've worked for presidents. Trying to be that -- in that rebuttal role is the worst role of all. And I think it's better to go the next day to have a press conference to respond in any way, shape or form. But they're trying to hold the audience when you're competing with people like you and us, it just doesn't work.

BLITZER: Because after the State of the Union, another politician from Louisiana, Bobby Jindal, the governor...

BEGALA: Right.

BLITZER: ...he gave the Republican response. It didn't exactly work out all that well for him.

BEGALA: No. And he's a very gifted guy and a very bright guy. I think Ed's right. But it's a sort of a tradition. Dr. Boustany, interestingly enough, was a co-sponsor of legislation that would fund that sort of late in life counseling that Governor Palin is attacking. So you have a bit of cross pressures here.

But I think you'll see the progressives and the Democrats picking apart, for example, how much money does this doctor get from health insurance companies?

It turns out, at least from the information I've gotten from liberal groups, that 20...

BLITZER: Dr. Charles Boustany...

BEGALA: Dr. Boustany -- Congressman Boustany now -- 20 percent of all the money he's raised in his Congressional career has come from insurance companies, HMOs, the people who I suspect President Obama will cite as some of the villains in this -- in this episode. So...

ROLLINS: If we want to go down that road, we're going to start looking at the blue dogs -- how much money some of them have gotten from the health (INAUDIBLE).

BEGALA: Well, they all -- yes. That money permeates the whole thing.

(CROSSTALK)

BLITZER: It's unbelievable how much money, Ed, is being spent right now...

ROLLINS: Oh, it's just (INAUDIBLE).

BLITZER: ...commercials, television commercials pro and against the president's health care plan.

ROLLINS: You're talking, long-term, trillions of dollars that are going to shift from one pocket to another here. And so there's a lot at stake and a lot at stake for Americans. And they need to pay attention. They need to pay attention to the president and they need to pay attention to other people that are going to have counterpoints.

BLITZER: It seems like the specifics he was going to get into tonight -- we got a lot of word over these past few days from the White House, he's really going to give us all the specifics, clarify everything.

Now we're hearing maybe not.

BEGALA: Yes, I don't believe a president should negotiate with himself. Now if he gets up there tonight, as we're hearing in the leaks, and he's going to say, well, I want to limit patients' rights to sue doctors who maim them or kill them or hurt them, well, OK, I'm not for that. But I could be for it if I got something. If you got four or five or 10 votes from the other party for that -- that's how you horse trade.

BLITZER: This is a huge issue for a lot of...

BEGALA: But I wouldn't give it away.

BLITZER: ...Republicans out there...

BEGALA: I wouldn't give away anything.

BLITZER: ...to limit medical malpractice lawsuits.

ROLLINS: You know, this -- well, that's -- that's the thing that should be a part of this. You know, I think a lot of Republicans would be very supportive of tort reform. It's not even in the game.

You know, if he stood up and said the truth -- and the truth is that, listen, you're going to pay more for your health care and it's probably not going to be as good, you know, that's not a very compelling speech, but it would be very truthful. I think the...

BLITZER: But at the same time, millions of your fellow citizens who don't have it right now, they'll get it, as well.

Are you willing to make that trade-off? ROLLINS: I -- I'm willing to do whatever we can could to help those people. But I think people ought to have choices here. And what I don't like is the mandates. I don't like -- as an American, I don't like someone mandating to an employer or mandating to an individual that you have to have health insurance. I think it ought to be desirable and I think we ought to make it available but certainly not mandated.

BLITZER: A final word.

BEGALA: That's a more honest debate. OK, I believe that the government, for example, mandates that we pay for auto insurance because when you don't have insurance -- in this case, health insurance -- we all pay. We don't leave you to die in the gutter. God forbid you're young, you think you're bulletproof, you don't buy health insurance, God forbid you get in a car wreck, I'm paying, Ed's paying, you're paying...

ROLLINS: But you do have...

BEGALA: ...so we're shifting the costs...

(CROSSTALK)

ROLLINS: You do have the option of driving or not driving. You don't have the option of basically going and hiding in the woods...

BEGALA: Oh, you don't have the option of not getting sick.

ROLLINS: ...and not being in a car wreck.

(CROSSTALK)

BLITZER: We're going to continue this.

BEGALA: But that's the real debate (INAUDIBLE).

BLITZER: You're both going to be with us as we cover the president's address before Congress later tonight.

Ed and Paul, stand by.

And. You're going to see the presidential address live right here on CNN. It all begins at 8:00 p.m. Eastern.

President Obama's big health care speech to Congress, as you know, only a few hours away. The debate on Capitol Hill is intensifying as lawmakers wait to see specifically what the president will say. Two U.S. senators have their own debate on several sticking points. That's coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Two days before the 9/11 anniversary this Friday, we're now getting some new pictures of the mastermind, Khalid Sheikh Mohammed.

Let's go to our homeland security correspondent, Jeanne Meserve -- Jeanne, tell us what's going on.

MESERVE: Well, Wolf, the last photograph we saw of Khalid Sheikh Mohammed was snapped on the night he was captured. There it is -- disheveled, disoriented with some stubble on his chin. Well, that was taken several years ago. That's the image we've all lived with.

Well, take a look at him now. We have some photographs taken down at Guantanamo Bay. In this photograph, Khalid Sheikh Mohammed is wearing what appears to be a turban on his head. He appears to have fashioned a sheet into some sort of prayer cloak. He is even holding in his hands prayer beads.

There are photographs, also, of his 32-year-old nephew, who is alleged to have helped move the money around to the 9/11 hijackers. His name, Ammar al-Baluchi. These two have been in Guantanamo Bay since 2006. Journalists have not been allowed to take their pictures, although they have seen them occasionally during legal proceedings.

The Red Cross, however, was allowed to take pictures. And some people close to the legal proceedings at Guantanamo Bay believe the pictures were sent to the families and the families then linked them to jihadi Web sites. So the two appear to be healthy. They even appear to have slight smiles on his face -- their faces. And as you note, we see these just two days before the anniversary of the 9/11 hijackings -- Wolf.

BLITZER: Interesting stuff.

Jeanne Meserve, thank you.

All right. The president is going to be delivering the big health care speech about two-and-a-half hours from now. We're getting some new details on what he will be saying.

Our senior political analyst, Gloria Borger, is here; our senior political correspondent, Candy Crowley -- Gloria, first to you.

What are you learning?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, I'm learning from one White House source who's close to the process that the president is going to propose another kind of trigger this evening, something called a fiscal trigger. And that would come into effect when it's clear that some cost savings in some areas -- say waste, fraud and abuse -- are not being achieved by a certain percentage. Then the trigger would kick in to scale back spending on certain expansions in health care. So that's very important, in a way, because part of his goal is to let people know that he's also trying to keep the deficit under control.

BLITZER: And you are also hearing he will get into sensitive issues, like medical malpractice lawsuits?

BORGER: Right. You know, medical malpractice, also known as tort reform, has not become -- been a part of this debate because Democrats are generally opposed to it. But I think the president tonight is going to -- going to talk about that.

BLITZER: It could irritate some trial lawyers and some associations...

BORGER: Who give a lot of money to the Democratic Party.

BLITZER: Candy, these are really sensitive issues. David Axelrod told us earlier the president is going to step up and deal with some of these issues. How much detail we don't know.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: And -- and what we do know is that some of this is going to be, again, an explanation of what he wants and what some things are and are not -- the death panels, that kind of thing. And he's going to be speaking to those consumers who already have health insurance and try to explain why this is in their best interests, because that's where they've had a lot of their -- the most difficulty while trying to kind of push this plan.

And I will say, it sounds like the president, who has promised that this would not add to the deficit...

BORGER: Exactly.

CROWLEY: -- is now...

BORGER: Exactly.

CROWLEY: -- beginning to come up with some sort of ingenious mathematical ways. The problem, I think, that he's going to hear from critics is it's really hard for the government to dial back -- for Congress to dial back what they've already promised.

BORGER: Sure.

BLITZER: I was going to say that Ed Henry, our senior White House correspondent, has been reporting he's going to try to reach out to Republicans in his address tonight, although I suspect he's going to reach out to senior citizens a lot more than Republicans.

BORGER: Right.

BLITZER: With the exception of Olympia Snowe and maybe Susan Collins of Maine...

BORGER: Right.

BLITZER: ...two moderate Republican senators, is there any real prospect that Republicans will come on board?

BORGER: No. I think they understand that there really isn't. But, actually, a lot of the speech, I believe, is not going to be folks inside the chamber, but it's those people Candy was talking about outside, in the real world, who still have to be convinced that this is something we really ought to be doing. And he's also going to, I think, address the differences between the House and the Senate versions. And he's going to say to Republicans, OK, step up with your ideas, because we haven't heard a lot of those. So if you've got a better idea than this, I would like to hear it, because I'll be open to it.

BLITZER: Go ahead, Candy.

CROWLEY: In the end, the White House has made the political calculation that there is one thing that trumps the bipartisanship that the president promised and that is getting something done. And that has been their message to some of these reluctant Democrats -- that the real danger here is doing nothing. If we end up, by the end of this year, the beginning of next year, and we don't have anything, we're going to end up paying for it at the polls.

So while bipartisanship is something that he has talked about, it is not their top priority. And we began to see that a while back when he said well, I want a bipartisan bill, but I'd much rather have Americans cover Americans with health care.

BORGER: And I think a week ago, the speech, I'm told, looked a lot more specific than it does right now, as I think Ed Henry has been reporting, this when you're talking to the American people you don't want to talk about a trigger and this, so you want to lay down some general principles but there are a lot of people who want to know what President Obama supports. One source at the white house said to me we will tell you what it is tonight. You will know what it is that Obama supports

BLITZER: And we're going to get some specifics because he's going to be speaking for about 40 minutes and that doesn't take into effect applause. A lot of Democrats will be giving him standing ovations. No doubt, Republicans, many of them, will probably be sitting on their hands during a lot of those interruptions. Guys, thanks very much.

Both sides have been digging in their heels on health care reform. Will the president be able to create a new momentum when he speaks before congress tonight? Joining us now from Capitol Hill two U.S. senators; Democratic Senator Sherrod Brown of Ohio and Republican Senator John Thune of South Dakota. Senators, thanks very much for coming in.

Is it okay with you, Senator Brown, if the president says tonight, you know what, it's time for medical malpractice lawsuits to be capped, tort reform as it's called, despite the support that Democrats have received from trial lawyers over the years?

SEN. SHERROD BROWN (D), OHIO: I don't think he's going to say it that way. I don't think caps work because you have patients that are injured badly occasionally by an incompetent doctor and I want to see better licensing on the state level of doctors that have a history of malpractice. I want to see -- I think we can do some kinds of reforms there, but I don't think you start off with caps. Where they have tried that before, places like Texas, places like Ohio, it hasn't -- it saved doctors a little bit of money in malpractice premiums but it hasn't saved the health care system money and in Texas Medicare costs have gone up significantly higher than the national average so I really think it's a bit of a bogus argument. I'm always open to new ideas. I hope the Republicans bring some forward.

BLITZER: I suspect Senator Thune sharply disagrees with you on that, don't you, Senator Thune?

SEN. JOHN THUNE (R), SOUTH DAKOTA: You would expect that, wouldn't you, Wolf. I hope the president does come out and make an argument for tort reform. I don't expect -- he may I think make some statements about it this evening, but I'd be very surprised to see if there's a serious effort here on capitol hill to include that, but it is, if you're going to meaningfully reform health care in this country, you've got to get the issue of the practice of defensive medicine which costs the estimates are $100 billion to $200 billion a year.

BLITZER: Tell Senator Brown -- Senator Thune, tell Senator Brown -- he says it hasn't worked in Texas, for example, where they have caps why he's wrong.

THUNE: Well, I think that the people if you talk to the people in Texas, you'd probably get a different argument. There are lots of states that have implemented caps. In fact, I was in Texas here a couple of weeks ago, and they tell me that physicians are moving to Texas because of the changes that they have made in tort laws down there, so I think medical malpractice reform, the issue of defensive medicine is something that's got to be address federal you're going to meaningfully get after the issue of health care reform and cost containment which everybody says they are for.

BLITZER: As you know, Senator Brown, so many doctors out there, they order all sorts of tests. They themselves think a lot of the tests are useless, but they are expensive to protect themselves preemptively from medical malpractice lawsuits.

BROWN: If I don't deny that's a problem but I also would assert that those -- there are studies that show, including in the book by Andrew Wile who is one of the best known doctors and most prolific writers in the country, has said that image of doctors who own their own MRIs, own imaging machines actually order three times the number of tests than those who don't. That's not defensive medicine. Unfortunately we've built this system, built all kinds of incentives into this system that distort the system and don't provide the best health care. We've got to deal with some of those issues, absolutely.

BLITZER: Senator Thune, anything the president can say tonight that would convince you personally to support him?

THUNE: Well, I think there are things he can say, and I think primarily his message tonight, Wolf, will be directed at wavering Democrats. He's going to try to shore up his own party in the congress and probably to the American people to try and get them back on board. He's got to get on offense. He had a terrible month in august. BLITZER: If he indicates he's going to give up on the so-called public option which you oppose strongly, a lot of Democrats love that public option of creating a government-run health insurance company to compete with the private insurance companies to create greater competition, if you will, if he says, you know what, let's just have a trigger, we'll try five years and if it -- if did doesn't work without the public option, we'll trigger it then. Is that something you'd be open to?

THUNE: I think the trigger is still problematic because it would be a hair trigger. I think that they would use that as a way of getting to a gate -- a gateway of getting to a public option, a government plan eventually, so I think he can try and repackage it and try to re-label it but it sort of ends up in the same place. If he were to come this evening and talk about tort reform and talk about interstate competition and talk about small business health plans and talk about covering people who have pre-existing conditions and portability and issues like that, there are a lot of things that I think Republicans are anxious to hear from him about and hopefully things we can find some common ground on.

BLITZER: I think he'll speak about those things later on tonight but getting back to the issue of a public option versus a trigger for a public option versus cooperative health insurance programs out there, where do you stand?

BROWN: Senator Whitehouse and I wrote the public option language. It's fair and brings in competition. In John's state of South Dakota, there's one insurance companies writes more than 60 percent of the plans in the state and southwest Ohio in the Cincinnati Ohio two insurance companies write 85 percent of the plans. They need competition. It's like private universities and public universities. The fact that they both exist make both better, and the public option is only an option that will help to drive down costs. It will help provide more choice, and it will -- it will give people the kind of choice that in my mind, particularly in those places that don't have the competition, it will make both the private insurance companies better and private insurance will make public insurance --

BLITZER: He makes a fair point, Senator Thune. There isn't a whole lot of competition in South Dakota.

THUNE: And if this plan were implemented, Wolf, there wouldn't be any. There would be one plan, the government plan, and that's the thing that concerns most people is that the government with a government plan is going to be more involved in the decisions that are traditionally made between doctors and patients. We need to have a robust private insurance market in this country. I think most Americans agree with that, and the other thing that I think is most troubling to a lot of Americans about this is the dramatic expansion at the federal level and the costs of this. I mean, even the most recent proposal that came out of the senate finance committee over a ten-year period about it's fully implement it had going to cost $1.8 trillion. That's a lot of new government spending at a time we're running trillion dollar deficits as far as the eye can see. BLITZER: We're out of time. If you want greater competition, why not let the insurance companies compete nationally as opposed to only within a state?

BROWN: I don't have a problem with that, but insurance companies have had since World War II, since they have been writing major -- since they have been writing a lot of health insurance, they have had 60 years to do this right. They -- you can talk about competition, but they -- they continue their pre- -- they continue denial of care for pre-existing condition and discriminate against people with disabilities and discriminate based on geography and gender and put lifetime or annual caps on care so that if you really get sick and it's expensive and you really need the insurance company, they do something called recision. They cut you off. The public option will bring competition. I didn't write it. When Sheldon Whitehouse and I wrote it we didn't write it to game the system. We want it to compete. We know if we'll drive costs down insurance companies need more competition. Erasing the state lines might help a little bit but it's not going to make that much difference because insurance go where they can make the most money.

BLITZER: Thanks to both of you. We'll be watching you both in the senate tonight. Senator Whitehouse is the Democratic senator from Rhode Island for those of our viewers not familiar with him. Guys, thanks very much.

You'll see the presidential address live right here on CNN. It begins at 8:00 p.m. eastern, a little bit more than two hours from now.

Apple CEO Steve Jobs is back on the job and back in the spotlight.

(BEGIN VIDEO CLIP)

STEVE JOBS, CEO, APPLE: So I now have the liver of a mid-20s person who died in a car crash and was generous enough to donate their organs.

(END VIDEO CLIP)

BLITZER: After a long break for a very serious medical condition, we're going to bring you what else he said, Steve Jobs here.

And the spies among us. The Defense Department says China is the most aggressive. Wait until you hear the tactics Beijing is accused of using right here in the United States.

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

(COMMERCIAL BREAK)

BLITZER: Mary Snow is monitoring some other important stories incoming to THE SITUATION ROOM right now.

Mary, what's going on?

MARY SNOW, CNN CORRESPONDENT: Hi, Wolf. Eight members of an Iraqi family were killed today in a bombing in the northern city of Kirkuk. Police say the bomb was planted outside the home of a local anti-al Qaeda leader. He was killed along with seven of his relatives which included women and children. The only survivor was a 2-year-old child who was also wounded.

A "The New York Times" reporter who was kidnapped by the Taliban is a free man. British officials say NATO forces rescued Stich Farrell during a pre-dawn raid in northern Afghanistan. They say five people were killed in the operation, including an afghan journalist who was working with Farrell, a British commando and two civilians.

Millions of dollars in merchandise stolen during brazen heists at J.C. Penneys in several states, but now Louisiana police say the mastermind is in custody. Hector Castillo was arrested yesterday in Texas. Police say he admits taking part in five J.C. Penney burglaries. They say stolen property of $3. 5 million has been recovered, much it from the Castillo's home. Investigators are still searching for suspected accomplices.

Wolf?

BLITZER: All right, Mary, thank you.

One of the world's most powerful nations may be sapping America's strength with a very aggressive spying campaign. Is this rival a potential enemy, and is it already setting up the United States for a knockout blow? Our homeland security correspondent Jeanne Meserve has been digging and digging.

Jeanne, what are you learning?

JEANNE MESERVE, CNN HOMELAND SECURITY CORRESPONDENT: Well, Wolf, you know, the Cold War is over, but spying is not. Experts say along with Russia one country runs a particularly comprehensive and successful espionage operation against the United States, and that country is China.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: And liftoff of the space shuttle Discovery.

MESERVE: The space shuttle, the International Space Station, the Delta Four rocket and the F-15 fighter, some of the most sensitive and valuable technologies developed by the United States, and information about all of them was given to China by this man. Don Fang Chung was an aerospace engineer with a secret clearance. A search turned up 300,000 sensitive documents hidden under his house, letters with marching orders from his Chinese handlers, even a medal from the Chinese government. He was convicted in July. He had been spying for China for more than three decades. Experts say Chung is just one player in a complex and comprehensive Chinese espionage operation.

UNIDENTIFIED FEMALE: What kind of information are they getting from us?

UNIDENTIFIED MALE: They are getting pretty much everything. MESERVE: The Chinese government says such charges reflect an old cold war mentality.

WU JIANMIN, CHINESE MINISTRY OF FOREIGN AFFAIRS: They want to put out stories to demonize China for -- for their benefit. It's not good.

MESERVE: So the allegations about espionage are not true?

JIANMIN: Not true, no.

MESERVE: But there is ample evidence that Chinese are siphoning secrets to aid their military and economic development. Since 2006 the U.S. government has prosecuted 60 people for stealing secrets for China.

DAVID KRIS, ASST. ATTORNEY GENERAL: We've stopped some things from happening that if we had not stopped them then would have resulted in very grievous losses. Of course, you don't know what you don't know.

MESERVE: Chinese cyber capabilities are sophisticated and though difficult to prove the government and its surrogates are believed to have infiltrated computers at most U.S. government agencies.

ALAN PALLER, SANS INSTITUTE: The sad joke in the Pentagon is if somebody can't find a document somebody else says, well, call the Chinese.

MESERVE: Computer experts say hackers may have left behind code that could be triggered to shut down or destroy critical infrastructure, even weapons systems. The Pentagon recently told Congress, "Of all the foreign intelligence organizations attempting to penetrate U.S. agencies Chinese are the most aggressive."

KEN DEGRAFFENREID, FORMER COUNTERINTELLIGENCE OFFICIAL: It is a damaging thing, and it is unprecedented.

MESERVE: And it's continuing?

DEGRAFFENREID: And it's continuing, and we're not mounting a proportionate response at all.

(END VIDEOTAPE)

MESERVE: The U.S. wants to stay on good terms with the Chinese, and some experts say that has made it more difficult for the U.S. to deal effectively and forcefully with Chinese espionage, espionage that some believe is already jeopardizing the economic and military strength of the United States. Wolf?

BLITZER: All right, Jeanne, thank you. Jeanne Meserve reporting.

A deafening round of applause at an Apple event in San Francisco, and here's why.

JOBS: So I'm vertical. I'm back at Apple loving every day of it. BLITZER: Apple CEO Steve Jobs is back on the job five months after getting a liver transplant. And President Obama pays tribute to Walter Cronkite during a memorial ceremony in New York. He says there was a reason why the legendary journalist was called the most trusted man in America.

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

(COMMERCIAL BREAK)

BLITZER: Apple CEO Steve Jobs is now back in the spotlight delivering the keynote speech at an Apple event today. Five months after receiving a liver transplant, he walked on to the stage to a standing ovation. Let's go to our internet reporter Abbi Tatton.

Abbi, show our viewers how he looked.

ABBI TATTON, CNN INTERNET REPORTER: You'll see from the pictures here, Steve Jobs still looked gaunt, but he told the assembled crowd in his first appearance in almost a year, I'm vertical and I'm back at work.

(BEGIN VIDEO CLIP)

JOBS: About five months ago I had a liver transplant. So I now have the liver of a mid 20s person, who died in a car crash and was generous enough to donate their organs.

(END VIDEO CLIP)

TATTON: Jobs thanked the staff at Apple who had filled in for him during his absence, urged everyone in the crowd to become an organ donor and then moved on to the news of the day, updates to Apple's iTunes, cheaper iPods and iPod Nano that now has a video camera and other announcements that went on during this event.

Before this, there had been rumors that one of the announcements today would be that the Beatles music catalog would finally be added to iTunes. A legal dispute has prevented that from happening. That announcement not forthcoming and some observers were overwhelmed by what was announced today but as you see from all the pictures and the buzz from when Steve Jobs entered the stage, that was the real headline for this event. Wolf?

BLITZER: He is a genius, we're just happy to see him back on that stage. Abbi, thank you.

Let's go to Jack Cafferty, he's here in THE SITUATION ROOM.

JACK CAFFERTY, CNN CORRESPONDENT: One of the great stories of American capitalism Steve Jobs and Apple.

The question this hour is it too late for President Obama to change people's minds on health care reform?

Susan in Alabama, "You know, he's had all summer to explain his health reform plan and he still needs more time? Please, if he can't sell it by now it's too late. This is one of his most important issues and he can't get it done. I think it's the substance of the plan and not the speaker that's the problem."

Bob writes, "Unless the president adds tort reform (puts a cap on these medical lawsuits) and doesn't raise taxes on the middle class, he has no chance."

Joey in Florida, "With respect Jack, I think the media have over stated the number of minds that need to be change but all I can gather, those who are disinclined for health care reform are health care insurance providers who don't want to lose their monopoly, Republican and some Democratic lawmakers who don't want to lose the donations of health care insurance providers, and a few hysterical, misinformed Americans who don't know socialism from shinola. Even combined, these people don't constitute a majority. The president needs to express what he wants, state what the country needs and offer the way to go and he's well able to do that."

Carol in Houston, "Looks like we needed Hillary the fighter instead. She would not have allowed the Republicans to get away with all of this."

John writes, "It's too late. He had his chance to be a changing force, but he proved in the first week of his presidency by making exception to no lobbyists in the White House that he is the same. I regret my vote."

And Steven says, "I think we're finally getting into the health care debate and Obama might be releasing details that we can sink our teeth into. The real question to me is are the conservatives full of crack pots or are the crack pots just getting all the air play? This country has gotten kind of weird lately."

If you didn't see your e-mail here, you can go to my blog at CNN.com/Caffertyfile. Look for yours there among hundreds of others and coming up in the next hour, we'll tell you how you can have dinner with Sarah Palin, if you want.

BLITZER: That's a good tease. A lot of people would love to have dinner. Don't tell us now. It's coming up in the next hour. We'll wait. Jack Cafferty, thank you.

A frightening scene over at the Mexico City airport, a commercial airliner is hijacked with more than 100 passengers on board. The standoff has now ended and we're going to tell you how.

And President Obama pays tribute to one of the most trusted men in America, Walter Cronkite.

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

(COMMERCIAL BREAK)

BLITZER: He was known as the most trusted man in America, the legendary CBS anchor man Walter Cronkite died at the age of 92. President Obama called Cronkite a voice of certainty in a world that was growing more and more uncertain. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: Through all the events that came to define the 20th century, through all our moments of deepest hurt and brightest hope, Walter Cronkite was there, telling the story of the American age, this is how we remember him today. But we also remember and celebrate the journalism that Walter practiced. A standard of honesty and integrity and responsibility to which so many of you have committed your careers. Our American story continues. It needs to be told. And if we choose to live up to Walter's example, if we realize that the kind of journalism he embodied will not simply rekindle itself as part of a natural cycle, but will come alive only if we stand up and demand it and resolve the value it once again, then I'm convinced that the choice between profit and progress is a false one and that the golden days of journalism still lie ahead.

(END VIDEO CLIP)

BLITZER: Walter Cronkite anchored the CBS evening news from 1962 until 1981.

Happening now, breaking news, it's a make or break night for health care reform. We're counting down President Obama's address to congress and we have just received excerpts from the speech, Americans lives could depend on it. Stand by.

This is the place to get the straight talk on reform and what it could mean for you. The best political team on television is on the case, we're trying to separate the facts from the fiction.

And a commercial airliner hijacked in Mexico, dozens of passengers and the crew are released. But in this era of high security, how could this even happen?

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