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New Jolts to Political Establishment; Leak from CIA's "Red Cell"; Rebuilding NOLA One Home at a Time; Selling Sex Online; NASA's Tips for Trapped Minors; Home Sales Take Dive in July; President Obama's Maine GOP Allies

Aired August 25, 2010 - 17:00   ET



Happening now, an incumbent senator may be frozen out in Alaska and a rich newcomer to politics gets a warm embrace in Florida. This hour, what new primary results tell us about the Republican Party right now and the bigger battle in November.

Also, a new explosion of deadly violence in Iraq, just as President Obama prepares to mark the end of the U.S. combat mission.

Are Iraqi forces and American troops left behind prepared for the worst?

And some unlikely help for miners in Chile, who may be trapped underground until Christmas. Rescue teams are turning to astronauts for advice.

Wolf Blitzer is off today. I'm Suzanne Malveaux, and you're in THE SITUATION ROOM.

Two states 5,000 miles apart are stretching the message to the political establishment. No one should assume that they are safe this election year. In Alaska right now, GOP Senator Lisa Murkowski, a member of one of the state's most famous political families, may be on the brink of defeat. The unofficial vote count shows her trailing Tea Party backed newcomer Joe Miller by less than 2,000 votes in yesterday's primary.

Now in Florida, wealthy political newcomer, Rick Scott, has won the Republican nomination for governor. Now he spent about $50 million -- that's right -- $50 million of his own money to defeat the GOP establishment candidate, Attorney General Bill McCollum.

Our CNN senior political editor, Mark Preston, is just back from covering the Florida primary. And CNN political producer Shannon Travis, he's been following the Alaska race for us. He's has done extensive reporting on the Tea Party movement -- now, Shannon, I want to start with you first here.

This was really kind of an extraordinary night, very exciting. You were the one to break the news, obviously, before that the Tea Party was backing Joe Miller. Tell us, is that where this sudden surge of support is coming from?

What do you think?

SHANNON TRAVIS, CNN POLITICAL PRODUCER: It is, Suzanne. I mean an extraordinary night. It's an extraordinary race. You know how you're watching one of those Hollywood thrillers a lot of times and it always includes a scene of like wow! where does that come from?

This is that scene in this race.

Just back in June, before the Tea Party Express endorsed Joe Miller, he was a virtual unknown. No one had really heard of this guy who was campaigning, not getting a lot of traction. The Tea Party Express -- classic -- a classic move that they've been doing this campaign season. They came in. They poured in people. They poured in resources. They got his message out to what they told me, to level the playing field against a powerful and popular Senator Murkowski. So that's basically what came in and helped -- helped Joe Miller, basically, be on the cusp of knocking out a powerful and popular senator in Lisa Murkowski in Alaska.

MALVEAUX: And, Shannon, what was also very interesting, too, what -- who actually became a part and ject -- and interjected herself in this race, of course, the former Alaskan Governor, Sarah Palin.

How much of an influence did she play in his success?

TRAVIS: Could be the power of Palin possibly rearing its head again. Sarah Palin endorsed Joe Miller, again, back when he was a little bit more than just -- just a little bit more than a little known name throughout the state. But there is a little bit of bad blood. She denies this, but there's a little bit of bad blood between her and the senator, Senator Murkowski.

If you remember, Palin knocked out Murkowski's father, who was then governor of Alaska in 2006, in a gubernatorial primary. So there is a little bit of maybe bad blood there.

But also, when Palin resigned the governorship, Murkowski came out and said -- basically accused her of abandoning the state.

So if this -- if Joe Miller pulls this out, it will be a win for Palin and it might actually extend this bit of bad blood between the two women.

MALVEAUX: All right, Shannon.

I want to go to Mark now.

I want to get a -- a look at the new GOP nominee for governor in Florida.

Now, over the last three decades, Rick Scott became one of the most powerful people in the health care industry, buying some of the largest hospital chains in the world and building an empire. Now, as chief of Columbia HCA, he was ousted by his own board of directors in 1997 over a major health care fraud scandal.

Now, it's important to note that Scott was not directly implicated in any wrongdoing. He also founded Conservatives for Patients' Rights, a group that is credited with helping to stop President Obama from including a government-run option in health care reform legislation -- and, Mark, you were down there in Florida. It was very exciting last night. I was watching you up late at night there. Scott pulled a major upset.

Now, how far do you think his money is going to take him?

Is it going to sweep him in all the way, because we're talking about a lot of money here?

MARK PRESTON, CNN POLITICAL EDITOR: Well, Suzanne, if he hadn't spent that $50 million, I don't think Rick Scott would have been the nominee as we speak today.

I'll tell you, let's put a couple of things in perspective. Of the $50 million, Suzanne, $21 million was spent just on television ads. Nobody knew Rick Scott in Florida. He had very low name I.D. He was able to build the narrative about himself. Now, let's -- let's go back to 2008. In the final 60 days, Suzanne, of the 2008 presidential campaign, President Obama spent $28 million in Florida alone just on TV ads. So that's probably the number we're going to see Rick Scott -- or get close to the number that Rick Scott could probably spend in these closing weeks right now of this campaign.

Money certainly helped Rick Scott in this narrative and the fact that he had spoke about being the anti-establishment candidate. Bill McCollum was expected to win. And, of course, today he's the loser.

MALVEAUX: And, Mark, we expect that there's going to be a very compelling Florida Senate race, as well.

Give us a quick update.

PRESTON: Yes, I mean, really. This, quite frankly, could be the premier Senate race of the 2010 mid-term election. We're going to have a fight between three candidates. All have a very interesting story line.

First, Marco Rubio. He is a young conservative. He was able to push the very popular governor, Charlie Crist, out of the Republican primary. Charlie Crist, right now, is running as an Independent. And then last night, Kendrick Meek, the Democrat, was able to fend off a challenge from the billionaire real estate investor, Jeff Greene, who spent more than $20 million to try to capture that nomination, Suzanne.

So heading into November, you have this match-up -- these three men all fighting for these critical votes, fighting for the votes in the middle. And I'll tell you, Suzanne, talking to advisers today to Rubio and talking to advisers to Kendrick Meek, they are all taking shots right now at Charlie Crist. Charlie Crist is a very popular governor. Of course, the Gulf spill has really helped to build up his popularity. He has been popular in the past. And they are all taking shots at -- at Charlie Crist, Suzanne, because they're afraid that Charlie Crist could eke in for a win in November.

MALVEAUX: All right. Mark, thank you so much.

We'll be watching those races very closely.

Well, Sarah Palin reclaimed her Midas touch last night after a series of primary season defeats. All the Republicans she endorsed in this latest round of contests have won or are in the lead.

In addition to Joe Miller's potential victory in her home state of Alaska, Senator John McCain survived a fierce primary challenge in Arizona, with the support of his former White House running mate. Now, Palin's picks for Congress in Arizona and Florida also won, as did her candidate for a -- Florida -- Florida attorney general.

A whistleblower Web site is exposing more U.S. government secrets. WikiLeaks today posted an apparent CIA report on whether the world believes that the U.S. is exporting terrorism. Now the spy agency is downplaying the leak from its so-called "red cell." The CIA spokesman says that this is not a blockbuster.

But here's CNN's Atika Shubert.


ATIKA SHUBERT, CNN CORRESPONDENT: WikiLeaks has just put out their latest leaked document. According to WikiLeaks, this is a document from the CIA. It is nowhere near the scale of the Afghan war diary that came out earlier this year. That leak, of course, was ten -- tens of thousands of documents -- internal U.S. military records about the ongoing war in Afghanistan.

This document that was released today, on the other hand, is a simple three page memo written by the CIA "red cell." That's a unit within the CIA that tries to think out of the box and come up with alternative viewpoints. And that's exactly what this memo has done. The title is, quote, "What if Foreigners See the United States as an Exporter of Terrorism?"

So it really just tries to go over how foreign nationals may be viewing U.S. policy.

Now, this document is labeled secret, but it's certainly not a top secret or a highly classified document. In fact, many of the views in it may not be particularly secret for people that have been following this policy debate.

But perhaps if it does not make news, it's more noteworthy that WikiLeaks is putting out these leaked documents at all, considering the le -- the legal challenges and pressure it's under. WikiLeaks may simply be trying to prove that it is still operational despite the controversy surrounding it. Atika Shubert, CNN, London.


MALVEAUX: Well, the secret to keeping 33 trapped miners alive for months may come from outer space or deep under the sea. We're going to explain.

And bullets and bodies in the streets of Iraq, just as President Obama finals finalizes plans to address the nation about the formal end of combat.

And new information about former President Jimmy Carter's rescue mission in North Korea and what the Obama administration has to say about it.


MALVEAUX: Jack Cafferty is here with the Cafferty File -- hey, Jack, how are you doing?


The White House insists on calling this a recovery summer. But to other folks out there, it's starting to look a lot more like the Great Depression.

CNBC reports that economist David Rosenberg says like today, the Great Depression had its high points, including a big stock market gain at times and a series of positive GDP reports. But in both cases, the signs of recovery were unsustainable and gave people a false sense of stability.

According to Rosenberg, the U.S. economy is, quote, "in a depression, not just some garden variety recession," unquote. He compares how both during the 1930s and today, people have a euphoric response to any glimmer of good economic news. He says that in the 1929 to 1933 depression, there were six quarterly bounces in gross domestic product readings. So far, we've had four this time around.

Several top analysts have slashed their GDP predictions for 2010 down to the 1.5 percent to 2 percent range -- some even lower. The president of the Chicago Federal Reserve says that the risk of a double dip recession is growing now, adding that the government programs meant to help homeowners are not working.

Existing home sales plunged 27 percent last month -- twice as much as analysts expected. And new home sales -- that report out today -- fell by more than 12 percent, to their slowest pace ever. Economists warn that a double dip in housing prices is just around the corner. And that would slow any sort of recovery even more.

Add in the fact that there are no jobs, unemployment remains stuck near 10 percent and the outlook is dark.

Top it all off with this. Morgan Stanley said today that the global debt crisis is just beginning. The bond market tussle that we saw in Europe this past spring, they say that's just the beginning.

So here's the question -- what might it mean that there are some striking similarities between the Great Depression and today's economy?

Go to and post a comment on my blog -- Suzanne.

MALVEAUX: Does not sound like good news there, Jack. Thank you.

CAFFERTY: Well, it's not.

MALVEAUX: Five years ago this hour, Hurricane Katrina was bearing down on Florida. When the full scope of the disaster became clear, 70 percent of homes had been destroyed in New Orleans alone.

Today, the city is still recovering. Our CNN's Tom Foreman is following one group showing people how to rebuild.


When you think about the more than quarter million homes lost all up and down the Gulf Coast, you have to think about something else, too. Who was living in those homes? Working class people. The people who make the ports work, who make the tourism business work, who make the fishing industry work, the oil business -- all of that. Without those folks, recovery is impossible.

That's why five years later there are still aggressive efforts, especially in this city to help resettle those families.


FOREMAN (voice-over): When Katrina hit New Orleans, working- class neighborhoods took the worst of it -- more fatalities, more flooding, and less hope for navigating the bewildering tide of expenses and red tape to rebuild.

In the Ninth Ward, Florine Jenkins (ph) felt it.

(on camera): Did you have any clue what to do?


FOREMAN (voice-over): In the Gentilly neighborhood, Nikki Najiola saw it too.

NIKKI NAJIOLA, BUILD NOW!: Did you tear down your house? Do you put it back together? If you put it together, do you have to elevate it? If you are going to elevate it, how high are you going to elevate and where's that money going to come from? And do you take it from this pool of money or from that? It was just so overwhelming.

FOREMAN (voice-over): That's why now Nikki manages a unique, nonprofit project called Build Now! Simply put, it is a construction company that offers an array of modestly priced home designs and endless supply of free advice to anyone trying to build and a commitment to bring the working-class neighborhoods back.

BEN SEYMOUR, BUILD NOW!: We actually currently are in the living room.

FOREMAN: Ben Seymour is in charge of construction and says not only are the homes designed to stand far above flood waters and resist gales with eaveless roofs and anchored porches, but the designs can be easily adjusted larger or smaller to fit the needs of families minding their money.

SEYMOUR: You can size it down, still gives you a big open field and it's built to what you're going to use.

FOREMAN (on camera): In every way these really are working class family homes.

SEYMOUR: Absolutely, absolutely.

FOREMAN (voice-over): This is not a giveaway. The clients pay fair value, on average around $150,000. But just having a guide through the baffling process of permits, insurance, and financing in the wake of Katrina was a godsend for Ms. Jenkins.

(on camera): Which house do you like better, you r old house -- ?

JENKINS: Oh, this one. This one.

FOREMAN (voice-over): And one at a time, that is how they hope to keep turning empty lots into homes again.


FOREMAN: Build Now! is just doing a marvelous job, but they're not the only group doing such things. There are many of them trying to help working class families get back, get back to work, and to feel whole again.

That's the goal here and it's an effort that will clearly be going on for many more years, many more anniversaries of this storm -- Suzanne.

MALVEAUX: Thank you, Tom.

An investigation leads to a crackdown on Craigslist. Authorities want the website to scrap its adult services section and we're going to tell you why.

And later, rattled nerves in Colombia as an ancient volcano wakes up.


MALVEAUX: Kate Bolduan is monitoring some of the other top stories that are in THE SITUATION ROOM right now.

Hi, Kate. What are you following?


Well, a new low for a major sector of the housing market. The Commerce Department says new home sales fell about 12.5 percent in July, those are new home sales. That is the lowest level on record and completely unexpected, experts actually thought the sales would pick up from June.

A major reason for the drop? Many buyers bought their homes earlier in the year when the Home Buyer Tax Credit was still in effect.

And in California, officials believe they've identified where and when the salmonella outbreak first hit their state. They say illnesses were initially reported at a prom and graduation party in May. Partygoers were served a custard pastry made with tainted eggs. The state sent out a nationwide alert which tipped off officials in Minnesota and Colorado to the suspected source, Hillendale Farms of Iowa and Wright County Eggs. The outbreak has now spread to 23 states.

And firefighters are making headway against a wildfire that scorched 1,300 acres in Southern California. Helicopters battled the blaze overnight; mild weather is also helping contain the flames.

The fire is now 30 percent contained and not posing an immediate threat to homes. People who were forced to evacuate are now being allowed to return home -- Suzanne.

MALVEAUX: Thank you, Kate.

Well, there is a new move aimed at cracking down on selling sex online. We'll spotlight top prosecutors' concerns about Craigslist. CNN's investigation may have helped spur this new call for action.

And how can you possibly keep trapped miners from giving up if they're cramped together underground for months? And why will the rescue take so long? We're looking for the answers.



Happening now, militants go on the offensive in Iraq right after thousands of U.S. troops leave. A live report from Baghdad is coming up.

Plus, thieves caught on tape stealing an historic gold bar from a museum, but a week later there are no leads. Hear why this case may be tough to crack.

Wolf Blitzer is off today. I'm Suzanne Malveaux and you're in THE SITUATION ROOM.

The attorneys general of 17 states are banding together to crack down on Craigslist. Now, they just sent a letter to the classified ad website asking it to get rid of its adult services section. The reason? Concerns about prostitution and child sex trafficking.

Now, this renewed call to clean up Craigslist comes after CNN's in-depth reporting on this problem. Here is CNN's Amber Lyon.


AMBER LYON, CNN CORRESPONDENT: Well the seventeen --

Let me show you how easy it for these pimps to use Craigslist to sell their girls. So we're actually going to post an ad for a fictional prostitute right now. Don't try this at home, OK.

It says right now that it'll cost $10 per ad, five bucks to repost.

One of the big things going on with Craigslist right now is they're saying they're monitoring all of these ads that come through on adult services to check to see if any of the girls are under age or young so we put some words in here, "sweet, innocent, new girl" and we're going to see what happens. We'll see if Craigslist is going to let our ad post. We'll also see what kind of calls we get.

CALLER: I saw your ad on Craigslist.

LYON: Hello?

CALLER: Yes, what's our donation for an hour in-call?

LYON: What are you looking for? What type?

CALLER: Uh, just half an hour. Just a quick half hour get together.

LYON: OK. What is your name?




LYON: OK, so what is that now? We've had 15 calls and the ad has only been up for three hours; 15 calls in three hours.

TEXT: Our ad asked for $200/hour. The rang off the hook for two days.

LYON: OK, so we're on the main page of the Washington, D.C. Craigslist section right now. And to get to the adult services section, you scroll past the for sale section. It's right underneath pet services is adult services.

(voice-over): Craigslist says its staff manually screens all of these adult services ads and will reject any that make it look or sound like you're selling sex. That may not be easy, but when we looked through the ads most of them were pretty blatant.

(on camera): Look at that. She is sitting here in her underwear.

(voice-over): On a single day last week, we counted 7,000 adult services ads in the major metropolitan areas where Craigslist is most active. Dozens had photos with young looking females. Dozens more had words that are used youth as a selling point.

The FAIR Fund investigates juvenile trafficking.

ANDREA POWELL, FAIR FUND: And most of the young people who have been exploited on line talk about Craigslist. They don't talk about the other sites. Craigslist is like the Wal-Mart of online sex trafficking right now in this country.

"M", FORMER UNDERAGE PROSTITUTE: We post ads around four or five and you wait to get a call. You wait to get a call.

POWELL: From everything that we understand, when they are being exploited by a pimp or trafficker more accurately described the trafficker is keeping the money.

"M": And if I didn't get it -- yes, he'd beat me.

LYON (on camera): So we're here at George Washington University and we just found out that Craig Newmark, he's the founder of Craigslist, he is going to be speaking here today at a tech conference. He doesn't know we're coming. He has been very media shy lately about all of these allegations against him.

This guy is the Craig in Craigslist, it's his list.

So can people trust that children are not being sex trafficked on Craigslist?

CRAIG NEWMARK, FOUNDER, CRAIGSLIST: I think we explained that thoroughly on our blog.

LYON: That's where Jim Buckmaster says that you will immediately contact law enforcement if you suspect any ad --

NEWMARK: Jim does a great job showing that we do more than anyone in this area. Pretty good for a community of 50 million people.

LYON: This is inspector Brian Bray with the D.C. Metropolitan Police Department. He is also in charge of the Prostitution Enforcement Unit.

In Craigslist's blog they say they're going to immediately contact law enforcement any time they see a suspicious ad and you say you've never been contacted by them.

BRAIN BRAY, METROPOLITAN POLICE: That's correct. It does bother us from a law enforcement perspective because the problem is so rampant that, you know, to get a handle on it we need all the assistance on it we can get. And if they're notifying, I'm not sure if they're notifying the right people because we're not getting a call.

LYON: What are you guys doing to protect these girls?

You guys say in the blog that you will remove any ad that looks like the person might be suggesting they're going to offer sex. Look at this ad. It says, "young, sexy, sweet, and bubbly." Clearly, here she writes, 250 an hour. I mean, what do you think she is selling in her bra and underwear? A dinner date? And she's in her bra and underwear? What are you guys doing?

NEWMARK: Have you reported this to us?

LYON: But you guys say you screen these ads manually in your blog.

NEWMARK: I don't know what this is. Have you reported this to us?

LYON: Why do I have the responsibility to report this to you when it's your website? You're the one posting this online. I just want to know.

I mean -- OK. We've run into a lot of victims and a lot of advocates that pretty much call your site the Wal-Mart of child sex trafficking. In 2008, Craigslist agreed to report any suspicious ads to the center for missing and exploited children which works with police to find and rescue trafficking victims. A few years and hundreds of thousands of sketchy ads later, the center says Craigslist has reported fewer than 100.

Thank you for your time, Craig.


LYON: And as Suzanne mentioned earlier, 17 state attorneys general sent a letter to Craigslist asking them just to completely shut down that adult services section. They say they've found our interview with Craig Newmark, quote, deeply troubling.

They say for the past few years craigslist has been promising them they're going to better screen these adult services ads for child sex trafficking for prostitution and they say based d on our investigation and an investigation they're conducting on their own that's just not happening -- Suzanne.

MALVEAUX: Thank you, Amber. Excellent reporting.

Trapped miners in Chile may look to the heavens for comfort but not in the way that you might think. Stand by to hear how NASA may help keep them comfortable and alive for months.

Even on vacation President Obama is reminded that he can't get by without a little help from some Republican friends. (COMMERCIAL BREAK)

MALVEAUX: Kate Bolduan is monitoring some of the other top stories that are coming into THE SITUATION ROOM right now. What are you working on?

BOLDUAN: On edge in southwestern Colombia officials there have issued a red alert for the volcano. It had a non-explosive eruption early today. Smoke and ash could be seen coming out of the volcano. Thousands of residents have been ordered to evacuate.

Former president Jimmy Carter is in North Korea trying to negotiate the release of an American detainee. 31-year-old Mali Gomes was sentenced to eight years at a hard labor camp for illegally crossing the North Korea border and for an unspecified hostile act. The Obama administration says Carter is traveling as a private citizen and is not carrying a message on behalf of the U.S. government.

Talking and texting on your cell phone. Well, who does it most? A year-long survey by the Nielsen Company found women text and talk on their cell phones more than men do. African-Americans and Hispanics use their phones more than whites. And southerners out chat their northern neighbors. Not surprisingly, Suzanne, teenagers out text everybody.

MALVEAUX: I'm still trying to catch up to all the technology. Thank you, Kate.

Finding 33 trapped miners alive is only the beginning of a long and difficult rescue process. Officials in Chile are looking to anyone and everyone who might be able to help the miners survive for months. Cramped, bored, possibly scared to death in those mines.

I want to bring in our CNN's Brian Todd. There are a lot of questions around this mine rescue effort. How do we think they're going to fare? How are they going to do?

BRIAN TODD, CNN CORRESPONDENT: That is a very good question, Suzanne, and one they really don't know the answer to just yet. One former miner we spoke with is now a safety expert for a miners' union and says he has never seen anything like this. Rescuers have to drill 2300 feet down to a shelter. It is about 95 degrees Fahrenheit down there and that is just the start of what will be enormous challenges.


TODD (voice-over): An image both chilling and uplifting. A trapped Chilean miner peers toward a camera lowered thousands of feet into a mountain. It's here where he and 32 others have been trapped since early August. They're alive and for the most part healthy for now. But it could take until Christmas to get them out.

(on camera): Why is it going to take three to four months to get those guys out of there?

DENNIS O'DELL, UNITED MINE WORKERS OF AMERICA: Because of the manner in which they have to drill. What they have to do in this case because they don't know the conditions of the mine underground because we've already had it collapse, they're going to have to drill from the top down.

Normally, they would drill a small hole all the way down from the top to the bottom and then they would hook a large drill bit up and drill from the bottom up, which would allow all of the debris to land down here and then they would have equipment that would remove that.

In this case they have to drill from the top down which means it's going to be slower and more methodical. What they have to do when they drill in this direction down, they actually have to remove all the rock and debris.

TODD (voice-over): Dennis O'Dell worked in coal mines for 20 years. He is now safety director for the United Mine Workers of America. Though he is a union official, we consulted him because of his expertise on mines and safety, not for commentary on how the Chilean mine was run or what led to the August 5th cave-in.

Some three weeks into this operation, officials from NASA and submarine experts are being consulted.

(on camera): So NASA presumably being called in for expertise on how to sustain people in isolation for long periods of time. Sub experts on the issue of claustrophobia. What do you think they'll tell them about this situation?

O'DELL: They're going to try to prepare the rescue workers and the company folks to let the workers know how to prepare themselves to be able to stay underground for this length of time.

TODD: How are they going to keep conditions of sanitary down there for that period of time?

O'DELL: They'll have to make provisions with the holes they drill to send down something so they can actually put the waste in and carry it to the outside.

TODD: For months it will be 33 people inside 538 square feet, the size of a small apartment. How are they going to keep these 33 guys from going insane?

O'DELL: What they're going to have to do is actually send in card games, pipe in music, have communications set up to where they can talk to folks from the outside.


TODD: As of now officials have not told the miners how long it will take to get them out. O'Dell says that's probably the right way to go at this point because if they tell them now he says some of them might start to get emotionally unstable and that could affect the whole crew, Suzanne. It is a very delicate situation.

MALVEAUX: Unbelievable story. Is there any way the miners could actually start digging themselves out?

TODD: O'Dell says they probably can't. It's a great question. We asked this. Our producer David Gracey asked why can't they start digging themselves out. He says they can't do it right now because the mine is too unstable. They might cause another cave in if they do that.

They have to preserve their own energy. That's crucial. They're going to be down there for months. It's crucial.

Also if they do that they may have to use equipment that's diesel powered. The fumes down there, they can't get that stuff circulating right now. There are a lot of dangers in this and they'll be faced with those dangers until Christmas time. Unbelievable.

MALVEAUX: Unbelievable. We'll be watching very closely. Thank you so much Brian.

Well, imagine watching your home being burglarized on your phone. That's right. While you're thousands of miles away. Well, that happened to a Texas man who had just bought a new security app.

But first, a former drug czar weighs in on a proposal, California to legalize marijuana. Bill Bennett joins us next in THE SITUATION ROOM.


MALVEAUX: Two government reports out this week point to an economic downturn in the housing market. With the economy expected to play a huge role in the fall elections will the Democrats take a beating for this?

Joining us for today's strategy session Democratic strategist James Carville and national talk radio host Bill Bennett; both CNN political contributors. Thanks for joining us in THE SITUATION ROOM this afternoon.

Want to start off and give you a couple numbers and throw this out for you. This is what we have learned just in the last 24 hours. Existing home sales down 27 percent. That's the lowest in 15 years. And then today we learned that new home sales are down 12.4 percent. That is the lowest on record.

James, I want to start with you because obviously Republicans are looking at this and saying, you know, this is really bad numbers. It's bad news. How do the Democrats keep this from being a liability to their party and to Obama's economic policies come midterm elections?

JAMES CARVILLE, DEMOCRATIC STRATEGIST: It's going to be a liability. How big is the question. It seems to me we have some unelectable or unre-electable Democrats and the Republicans' answer is to run unelectable Republicans against them.

Yes, it's going to be a tough cycle. There's no doubt about this. The recession started in December of 2007. It's a very nasty one. But when you look at these results of these primaries we couldn't get any better candidates to run against them than we're getting.

MALVEAUX: Bill is there an argument to be made here? Obviously the tax credits for buying houses, it has expired. It's dried up essentially. Now people are on their own. What can the government do? Should they be doing more? Should they be doing less? Now we're in a worse situation than we were before when the government had gone ahead and helped folks out here.

BILL BENNETT, NATIONAL TALK SHOW HOST: It doesn't matter what the government does, it gets worse. James is gracious, well half gracious I'd say to acknowledge it's a real problem for the Democrats. They've had control of the House for four years, the White House for two years. It seems everything they do is just going in the wrong direction. It's a huge liability.

We'll see about the candidates. We'll see how things turn out in November. James doesn't need me to, you know, instruct on the question of the importance of the economy. It is the economy as James said with another word which will put him in the thesaurus forever. He'll land in mortality for that. It's the critical issue. So we'll see.

I expect the results in November will bear out just how important it is. I think it's going to be a big November for Republicans. But don't take anything --

MALVEAUX: Does it help your party to bring up these bad economic numbers or is it more helpful to actually turn around and bring up solutions?

BENNETT: I think it's useful to talk about general directions and general principles and then a few specific. But I don't think you really have to enunciate these numbers. People know these numbers and no abstract number, general number is as persuasive to people as their own experience and what they see in their own lives is evidence enough. They know they want change. They know this isn't working.

MALVEAUX: James, how do Democrats and even independents, which is perhaps even more important in the midterm elections get over the skepticism about the Obama administration's economic policies, whether or not they're actually working and people are feeling them?

CARVILLE: Oh, right. There's skepticism.

But remember, the Republicans tend to propose the same old things. We know what caused this. This is a banking crisis caused by deregulation and no one was minding the store and we're dealing with the nasty after effects. Everybody knows what caused this. We are just -- we had a terrible crisis precipitated by banks and financial institutions acting irresponsibly. It's going to take a while to dig out of it.

People are skeptical of the Obama administration, well, it's to be expected. But they're also highly skeptical of the Republicans. The Republican Party has no more popularity today than on the election day of 2008. If we're going to lose seats, I'll concede that, but you know some of these candidates the Republicans are running are pretty far out there. We have a shot in places I never thought we did.

MALVEAUX: I want to turn a corner real quick if we can. Bill Bennett you were the former drug czar under George H.W. Bush and you penned an op-ed in the "L.A. Times" against proposition 19 which would legalize marijuana in California. Proponents of this movement have increased. They talk about the revenue that would be generated from taxes, taxing marijuana, purchases, and also allowing the police department to go ahead and take care of other crimes.

Why are you against proposition 19?

BENNETT: Maybe it's not so important that I am against it. People would associate me from being against that from time immemorial and into the future but I think what's interesting is that every drug czar, I was the first, but every drug czar since me, since I held the job, including myself, Democrats and Republicans, signed that editorial. We're all of the same view here.

Politics stops on this one. It would just be crazy. Why? A lot more people would use marijuana. Marijuana in use today is 30 times more powerful than the marijuana in the late '60s and '70s, the tetrahydrocannabinol is much more powerful. You'll have more accidents, more kids getting into trouble, more kids crossing into other drugs. You will have more bills for hospitalization, medical care. This is a lark, a siren song, and it is a big mistake. And that's why all of the drug czars, everybody's drug czars are opposed to this.

MALVEAUX: Bill we're going to have to leave it there. We've run out of time. But Bill Bennett, James Carville, thank you so much for joining us.

BENNETT: Thank you.

MALVEAUX: Well, the robbers who nabbed an historic gold bar from a museum may have made a huge mistake.


MALVEAUX: News now, shots from the president's vacation at Martha's Vineyard. When he is not buying ice cream or playing mini golf with the family, he may be moved to buy souvenirs for a couple of Republicans. Our CNN White House correspondent Dan Lothian explains.


DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT (voice-over): This sign on Martha's Vineyard welcomes the president to the island by thanking him for a long list of accomplishments, including health care reform, the stimulus, and two Supreme Court appointments.

SUSAN GOLDSTEIN, MANSION HOUSE OWNER: I didn't feel like I was waving a political party flag, so much as just saying, thank you, Mr. President, this is a very hard job.

LOTHIAN: A job that even the White House admits would have been much more difficult without the two Republican senators from Maine.

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Thankfully, we had Republicans like Susan Collins and Olympia Snowe.

LOTHIAN: Democrats have elevated them to special status.

SEN. HARRY REID (D), MAJORITY LEADER: Don't bad mouth all Republicans.

LOTHIAN: At a recent conference of liberal Democrats, Senate majority leader Reid did all but call them saints.

REID: I hope I don't get in trouble by calling them something nice to them here.

LOTHIAN: And they supported the extension of unemployment benefits.

SEN. OLYMPIA SNOWE (R), MAINE: I supported the unemployment benefit extension much to consternation to the minority leader and others on the side.

LOTHIAN: There is also if auto industry bailout, Wall Street reform and the massive $862 billion stimulus bill they helped to push over the 60-vote threshold. Some critics in their own party labeled them rhinos, Republicans in name only.

SEN. SUSAN COLLINS (R), MAINE: That description really always disappoints me. I represent very traditional New England Republican values. I'm for a strong national defense. I believe in personal responsibility, in the individual freedom.

LOTHIAN: Maine has a history of embracing independents. Former Senator Margaret Chase Smith often broke with her Republican Party, and the state elected two independent governors in the last three decades.

ROSE SALLS, MAINE RESIDENT: I think that we in Maine take great pride in the fact that we are able to elect our politicians with a whole bunch of different viewpoints.

WILLIAM COHEN, FORMER DEFENSE SECRETARY: I think that it is maybe in the soil, and certainly in the DNA.

LOTHIAN: Bill Cohen, a former Republican Congressman from Maine, voted to impeach President Nixon and years later worked for a Democrat, as President Clinton's defense secretary.

COHEN: The Maine people tend to elect those they feel are intelligent with high integrity and inform themselves of issues and then vote not on ideological or party basis, but what is in the best interest of the state or the country. LOTHIAN: Senator Collins says she does not feel used by the White House, because she votes on the merits of the bill and puts the language in line with her values.

COLLINS: This White House has done a lot of outreach to me, and I do appreciate that. I don't always agree with the president. I'm very open to arguments and I always try to be straight forward in letting this president or the past president know my views on an issue.


LOTHIAN: Now, Senator Collins says that sometimes for a moderate Republican, it is very lonely up on Capitol Hill, because there is pressure from both sides, but ultimately, she does what is right for the people who put her into that job. Now, a quick update on the presidential vacation here this afternoon, the weather cleared up, and the first family went out to a restaurant in oak bluffs and the president got in nine holes of golf. Suzanne?

MALVEAUX: Finally stopped raining. Thank you, Dan. Good to see you.

Jack Cafferty is asking, what might it mean that there are striking similarities between the great depression and today's economy? He is back in a moment with the Cafferty file.

And is this what the end of U.S. combat operations in Iraq should look like? A wave of bombings and dozens dead?


MALVEAUX: Jack joins us again with the Cafferty file. Hey, Jack.

CAFFERTY: Suzanne, the question this hour, what might it mean that there are striking similarities between the great depression and today's economy?

Andy writes, "It means that we are living at a time when America will fall as a world power. We are spending money we don't have. The two political parties have forced each other into a corner where they can't raise taxes even though we may collapse if additional federal revenue is not raised. The scariest factor in all of this is that there is no politician that can inspire America to achieve excellence. We have outsourced the jobs, allowed American corporations to move out of the country, we allow illegals to have more benefits than American citizens, and I don't see an end to what is going on."

Mark writes, "It might mean that we are in or headed to a similar many year economic entrenchment, by I think it more likely means we have too much print space and air time to fill, so provocative comments like those of Rosenberg get play they don't deserve. This is a severe recession, but it is over."

Dave in Cleveland writes, "I'm not sure, but the similarities between the depression years and today are remarkable. It took a war to pull us out of that extended period. The direction proposed by today's administration is forward, forward over a cliff. We need some very tight fiscal policy and including the wind down of many of our entitlement programs. No one challenges that we can't afford them, but not one single leader steps forward with the truth and hard solutions."

Larry in Wisconsin said, "I wish my dad was still alive because he could answer it. He lived through the last depression. What I recall from the job situation that he used to tell me about, I don't see it quite that bad as yet. He would tell me about the government- sponsored jobs to help with employment, and things like lumberjacking and various other manual labor jobs, and we are not doing that, but should we?"

Karen writes, "We are in a depression but you can't say that because people are weak and they could not take it so we get glimmers of hope and a pat on the head and everybody goes about the business in a fog."

And Dave says, "The main difference is in the great depression people made real changes in their lives in order to correct things, and today, they don't want to change. They want the government to fix everything while they waste time and money updating their social network pages and then tweeting about it."

If you want to read more about it, go to my blog,

MALVEAUX: All right. Thank you, Jack.