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"Don't Ask, Don't Tell" Repeal Dies; House Democrats Revolt Against President Obama; Several Democrats Measures At Serious Risk; White House Christmas Tree Lighting Ceremony

Aired December 9, 2010 - 17:00   ET

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


WOLF BLITZER, HOST: Brooke, thank you very much.

Happening now, breaking news -- Senators reject the appeal of "Don't Ask, Don't Tell," at least for now. It's a major, major defeat for President Obama and for gay rights activists.

And making matters worse for the White House, House Democrats are in a revolt right now against their president and his tax deal with the Republicans. This hour, the internal warfare and what it could cost taxpayers.

And anger exploding on the streets of London. But British lawmakers are taking a big step to try to rein in spending anyway.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

ANNOUNCER: This is CNN breaking news.

BLITZER: Let's begin with the breaking news. The United States Senate killing hopes for repealing "Don't Ask, Don't Tell" any time soon. The Senate Democratic leader holding a critical vote just moments ago -- a vote virtually certain that he and his party and his president would lose.

Our senior Congressional correspondent, Dana Bash, is standing by on Capitol Hill.

But let's go to our Pentagon correspondent, Barbara Starr, first -- Barbara, this is not only a setback for the president and the vice president, but for the secretary of Defense and the chairman of the Joint Chiefs.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Absolutely, Wolf. And at this hour, no word at all from Defense Secretary Robert Gates or Admiral Mike Mullen, chairman of the Joint Chiefs, about the vote on Capitol Hill within the last several minutes -- within with the hour.

Secretary Gates traveling overseas. No comment from the Pentagon yet about all of this. But earlier this week, Secretary Gates, in fact, made some very unusual comments about this. It was a vote that he wanted and yet, he appeared to downplay some of it, saying it might not even happen.

Have a listen.

(BEGIN VIDEO CLIP)

ROBERT GATES, SECRETARY OF DEFENSE: And I'm not particularly optimistic that they're going to get this done. I would hope that they would. And the reason is that in October -- and I don't know whether any of these memos reached you all or not -- but in October, we had a district court judge in California that basically overturned the "Don't Ask, Don't Tell" law and required the military worldwide to comply immediately.

(END VIDEO CLIP)

STARR: Secretary Gates talking to troops in the Persian Gulf, wanting this and then, saying, oh, well, maybe there won't be time in Congress. A lot of people around the Pentagon raised eyebrows at that comment.

The second part of what he said, that's the major problem for the Pentagon now, Wolf. There is a court case out in California. Federal judges about to hear oral arguments on the constitutionality of "Don't Ask, Don't Tell." There is every expectation that the federal courts will continue with previous rulings that it is unconstitutional to have this ban, they will order it lifted and the Pentagon will have to move smartly to comply with it. They won't have the time to adjust that they had hoped for if Congress had passed the repeal -- Wolf.

BLITZER: It doesn't look like Congress is going to pass that repeal any time soon.

Let's go to Capitol Hill.

Dana Bash is standing by.

And I -- I guess the question that's puzzling me and a lot of folks out there, Dana, is why did Harry Reid, the Senate majority leader, get this vote going today, knowing it was going to lose?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That is such a controversial question, Wolf, that a lot of people are asking. You're right. And the reason is because if you look at the math, people who sport the repeal say that they do believe there are 60 senators who agree with them, that they agree with repealing this "Don't Ask, Don't Tell" policy.

GOP Senator Susan Collins voted yes today, but other Republicans, though, who support the repeal say that they didn't want to do this before the Congress does -- deals with what they consider more pressing matters, like dealing with the tax cut bill.

So the question that everybody is asking is, why did Senator Reid go ahead and do this?

Well, he says that he doesn't believe that Republicans would have ever come around and it would always been hard to get those 60 votes to proceed to this bill. But I can tell that you talking to gay rights activists, they, in the words of one, feel betrayed by Senator Reid, that he pushed for this at this time; but, also, Senator Lieberman, I should tell you, just did a press conference. He is one of the big support others of a repeal. He said that he talked to Harry Reid and that Senator Reid did tell him that he would try to take this up one more time -- a standalone repeal bill -- before the lame duck session is over. There's a lot of pressure on Senator Reid to do that.

BLITZER: But that would be really problematic procedurally...

BASH: Yes.

BLITZER: -- because of amendments and everything else.

BASH: Absolutely.

BLITZER: It's by no means guaranteed of passage.

BASH: No means -- by no means guaranteed of passage. And -- although Senator Lieberman said that -- said that -- that the Democratic leader promised he would do it. There is a limited time here that we're talking about, because they do want to get out of here before Christmas and there are a whole lot of other things that are on their plate.

BLITZER: They might a have a chance, if they give up their Christmas, they give up their New Year's and just stay working in Washington. I -- although I suspect most of the senators are not going to buy into that.

Let's talk about the other huge setback for the White House today. The House Democratic Caucus, they decided they don't even want to bring up his tax compromise that he negotiated with the GOP leadership.

What's going on?

BASH: Boy, it was such an act of defiance, and, really, a calculated slap by House Democrats at their fellow Democrat in the White House, Wolf, who think that they -- that he basically sold them out in negotiating this tax cut package with Republicans.

What happened was -- it was actually a surprise. The House Democrats had a meeting and there was a vote that was approved by voice vote, with people chanting, we are told, "Just Say No," not to bring up this tax cut package on the House floor in its current form.

Here's what Democrat Chris Van Hollen said afterwards.

(BEGIN VIDEO CLIP) REP. CHRIS VAN HOLLEN (D), MARYLAND: This message today is -- is very simple, that the -- in the form that it was negotiated, it is not acceptable to the House Democratic Caucus. It's as simple as that.

(END VIDEO CLIP)

BASH: Now -- now, to be clear, Democrats in the White House and elsewhere who wanted to get this done have been sort of relying on Republican votes to pass this. But House Democrats still run the place. So they're the ones who dictate the floor. That's why it's important.

Now why are Democrats so angry on process and on policy?

First on policy, Wolf, some -- many, many House Democratic Congressmen have told me, look, they might have been able to swallow the idea that they're breaking a campaign promise and they're going to extend tax cuts for the wealthiest Americans. But it is that estate tax provision that's in this package, the idea that individuals who have estates up to $5 billion will be exempt from the tax, that is something that was very, very hard for them and -- and really put them over the edge on -- on the policy, because they say it's just a giveaway to the wealthy.

On process, boy, is there anger. And it's not going away -- anger at the White House, Wolf, by House Democrats, Democrats in the Senate, as well, for being shut out of the process, for, as I said, maybe being sold out. The president dealing with Republicans only. In the words of one source I talked to, it was, quote, "breathtaking" how the White House mishandled this in thinking that they could just push House Democrats -- squeeze them into doing this.

BLITZER: Yes, they sort of just took -- took them for granted, presumably.

All right, Dana, stand by.

Let's go to the White House.

Our senior White House correspondent, Ed Henry, is joining us now -- Ed, what are they saying over there, in the face of these setbacks?

ED HENRY, CNN SENIOR WHITE HOUSE CORRESPONDENT: You know, Wolf, it's amazing. It's a -- it's such a dichotomy. You hear Dana reporting about that and it really sounds like things could be -- and I stress could be -- falling apart there on the Hill. You've got House Democrats in an open war, essentially, with this president.

Meanwhile, on this end of Pennsylvania Avenue, they have sort of this -- this kind of shrug, what, me worry?

They think, in the end, they're still going to get this tax cut through somehow. And they keep churning out press release after press release, saying the mayor of Tulsa, the mayor of Charlotte, any number of people around the country are endorsing this tax cut plan. And yet the people who actually have to vote on it -- not mayors out there around the country, but the people on the Hill who have to vote on it, are not ready to approve it.

Robert Gibbs brushed all that off in his briefing today. He said, look, we're willing to make maybe some minor changes here, but said they cannot make major changes to this plan or it will just unravel.

Take a listen.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: If one side takes out what they don't like and the other side takes out what they don't like, we're -- we're going to have that. And that -- a blank piece of paper -- is not going to prevent middle class tax rates from going up.

(END VIDEO CLIP)

HENRY: And what's really interesting is when you talk to senior officials here who are counting the votes on the Hill and trying to lobby wavering lawmakers, what they say is they don't think it makes sense for House Democrats to block this on the merits, because the president, as he's laid out this week in his news conference and other venues, wants to help people whose unemployment benefits are expiring, middle class folks who are going to see their tax goes up January 1st without any deal.

And, secondly, here at the White House, they don't understand the politics of it, because they say if you look at this, the bottom line is if the Democrats on the Hill block this and people's taxes go up on January 1st and then a new Republican House comes in a couple of days later and all of a sudden passes tax cuts, you know, brings back the old Bush tax rates, all of a sudden, the Republicans have a great narrative, saying that they're cutting taxes while it was the Democrats that raised them going into 2011/2012. It's not really a narrative this White House wants to see -- Wolf.

BLITZER: What a story unfolding here in Washington right now.

Don't go too far away, Ed.

We're going to check back with you.

President Obama and Congressional leaders may want to take a close -- a good and long look at what's going on across the Atlantic right now, as they watch a new attempt at compromise possibly -- possibly falling apart. Massive protests -- look at this -- in London over a hike in university tuition approved by British lawmakers today.

Look at this. Many people can't help but wonder if something like this could happen here in the United States, where there's also soaring spending, soaring debt and economic pain. Let's hope it can't. But the tensions in London are real right now, as they are elsewhere in Europe, because of all the debt and the spending cuts that are going forward.

Britain's Prince Charles has been drawn into the protest against tuition hikes in Britain in a dangerous way. We'll explain what's going on.

And a spectacular blaze and a home that was essentially a bomb factory is burned to the ground.

And what, if anything, can be done to stop supporters of WikiLeaks from attacking popular Web sites with links to your finances?

(COMMERCIAL BREAK)

BLITZER: We're looking at live pictures of Washington, DC. The president and the first family, they're getting ready to light the Christmas tree over at the White House. We'll check in shortly to see what's going on. Stand by for that.

Let's go to Jack right now for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN CONTRIBUTOR: See if you can figure out who said this. Quote: "Both parties follow the mood of the moment instead of leading from the front. Especially in these tough times, we need our leaders to inspire the whole country, not criticize half of it."

Or this: "As families struggle to get by, they have seen little but partisan gridlock, political pandering and legislative influence peddling, finger-pointing, blame games and endless attacks."

Or: "We've got to pull together and focus on what's important for America and then roll up our sleeves and fix the things that need fixing. This is the greatest nation on Earth."

Or this: "We need to shift course. We need those in government to stop demagoguing and start delivering."

Or: "Today, we again have our future in our hands. We can blame others or we can put our nose to the grindstone and get back to work. We can keep kicking the can down the road and allow the country to fall further behind or we can face up to the hard choices." Those comments are part of a speech made by a man who has said over and over again he's not interested in national political office.

It doesn't sound like it, does it?

The sweeping speech was actually given by the mayor of New York City, Michael Bloomberg, in which he calls for a middle way in government. Maybe the Republican turned Independent, Bloomberg, is thinking the same thing a lot of the rest of us are -- when you look at the possible presidential candidates for 2012, it's kind of a yawn.

Sarah Palin? Don't make me laugh.

Mitt Romney? Been there, done that.

Barack Obama? Probably, but he could lose.

Anyway, here's the question -- what do you suppose New York Mayor Michael Bloomberg is up to?

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

BLITZER: A lot of people are wondering.

It's an intriguing question.

Jack, thank you.

Let's get back to the breaking news we are following, the Senate rejects the repeal of "Don't Ask, Don't Tell" in a critical test vote that happened within the past hour or so. Right now though, some other important measured backed by Democrats are also at serious risk.

A bill that could give hundreds of thousands of young immigrants legal status in the United States has stalled in Senate. The so- called DREAM Act was approved by the House yesterday, but Senate Democrats today yanked the bill, conceding they simply don't have the votes to pass it. We are told, though, it could be brought up again in a week. Let's see if that happens.

Meantime, Senate Republicans have derailed a bill to help 9/11 first responders who got sick from working at Ground Zero. The $7.4 billion package failed in another test vote in the Senate earlier today.

Let's talk about all of this and more with our senior political analyst, David Gergen.

David, here is a question that I have been asking myself, why has the administration and the Democratic leadership in Congress waited until the very end of this session of Congress to try to do so much? They had so long to do "Don't Ask, Don't Tell," so many years do the DREAM Act. The START Treaty, for example, was approved -- was signed, what, seven or eight months ago. They waited until the lame duck session to try to do this and they might wind up doing nothing?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Wolf, it's -- they have really gotten themselves into quite a mess, haven't they? And it's procedural messes, it's a substantive mess, it's very disappointing to a lot of their supporters, especially Democratic liberal base. But it is important for the country, too, it is going to divide the country.

Wolf, I've puzzled over this, as you have. One answer is I think they had so much on their agenda. They tried -- they were so overly ambitious of all the things they wanted to pass. Health care consumed an enormous amount of time, and with a lengthy agenda, a lot of things got left to the end. And it's been unrealistic since the beginning to think that in these last lame duck session, especially after such a resounding negative vote from the public and elections, to think you could get this stuff pushed through.

Right now, maybe they can get one or two of these things through, but today's defeat on "Don't Ask, Don't Tell" was a major blow to the agenda of the administration. And frankly, I'm biased on this. I thought we ought to get rid of "Don't Ask, Don't Tell." I was there when President Clinton and advised President Clinton to embrace it, and I think it is now time to change it. So I am biased, but it's disappointing that it's gone down this way today. A major defeat.

BLITZER: And as bad as the legislative numbers are right now for the president and the Democrats in the House and the Senate during this lame duck session, you know it's going to be a whole lot worse in the next Congress when there will be a significant, a huge Republican majority in the House of Representatives and the majority that the Democrats have in the Senate is going to be cut back dramatically.

GERGEN: That's absolutely right, Wolf. So things like "Don't Ask, Don't Tell" have much less chance next year, so does the START Treaty, so do a number of things, which is why it is so urgent from the Democratic point of view to get these things passed.

But they have to come back to this tax issue and have the Democrats in the House of Representatives saying they won't bring it up, Nancy Pelosi won't bring it to a floor vote unless there is significant changes, really imperils that bill as well. So this is a tough time for the White House.

And I think what's also surprising, Wolf, and what I kept asking myself, I'm puzzled, maybe you have an answer, I don't understand why the president isn't more of a master of the Congress. It's his party that is running it after all, with large majorities. And you would think as a Democratic president, he would have enough allies up there to sort of organize things. He is not LBJ, but you would think he has come closer than he has.

And right now, he is -- you know, one of the mistakes he made here, he has made the same mistake twice but in different ways. You know, on so much of things that came before the House early on, he just gave all the authority to Nancy Pelosi to write the bills, stimulus bill, health care bill and so forth and so on. But now when it came to the tax bill, he left them out of the process. And one of the reasons they are so angry was they were cut out of the process. He just negotiated. This was -- it's very strange.

BLITZER: Yes, very strange. I don't remember a time like this at least the recent history --

GERGEN: I don't either.

BLITZER: -- we have seen this in Washington.

All right, stand by, David, appreciate it very much.

The president of the United States is getting ready to light the Christmas tree together with his family. We will take a quick break, we will see the lighting of the White House Christmas tree right after this.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: -- gathered with presidents to light out national tree. Now it hasn't always gone off without a hitch. On one occasion, two sheep left -- (COMMERCIAL BREAK)

BLITZER: There it is, the White House Christmas tree. What a beautiful, beautiful sight. The president and the first family, they have just gone forward with the annual tradition. They lit the Christmas tree. There you see the president walking down. He is always excited, as is every president to do this.

Kate Bolduan is watching with us, as well. It's a lovely, lovely scene. You got to admit, you drive by the White House, the Ellipse, the National Mall, you see that Christmas tree lit, it is a wonderful sight.

KATE BOLDUAN, CNN CORRESPONDENT: If you live in Washington, D.C., that really signifies that the holiday season is here. When you see that beautiful tree in front of the White House, which you're going to see in the pictures that we are showing you, it really is an annual tradition that regardless of your political leanings or even your religious leanings, it indicates that the holiday season is here. And I think we even heard the president wish everyone a happy holiday on behalf of Beau.

BLITZER: This is Jackie Evancho from "America's Got Talent." She is a soprano prodigy singing "O Holy Night." You know, let's listen for a few seconds.

(JACKIE EVANCHO SINGING "O HOLY NIGHT")

BLITZER: All right, there it is. You can see the beauty here in Washington right now. It is a festive season indeed, and it is one that if you come to Washington during these coming days, I recommend it highly, drive by the National Mall, check it out.

All right, let's get back to some news, some top stories. Kate is still here.

What is going on, Kate?

BOLDUAN: Lots going on, Wolf, let's get right to it.

Some of the stories we are watching now include Citigroup. Well, Citigroup has announced that Peter Orszag is joining its global banking division as a vice chairman. You remember this guy, the former budget director was the youngest member of President Obama's cabinet and played key role in helping the administration get the economic stimulus bill and health care reform legislation passed. Orszag left the White House in July.

Also in politics, potential GOP contender Mike Huckabee is planting new roots in a state often critical to the general election, think about it. "The Arkansas Times" is reporting that the former Arkansas governor and 2008 presidential candidate is building a $2.2 million home on the Florida panhandle. You knew that. Huckabee told CNN this week he is currently considering a second White House bid.

Now, I know everyone was very concerned about this. The lead singer of the rock band, The Doors, has just been posthumously pardoned nearly 40 years after being convicted of indecent exposure and open profanity during a Miami concert. Outgoing Florida Governor Charlie Crist proposed that the late Jim Morrison officially be let off and the state clemency board voted in favor of the request. Morrison was appealing his conviction when he died in 1971.

And for only the second time, an empty chair will be used to represent a Nobel Peace Prize winner at tomorrow's honors ceremony. Professor Liu Xiaobo is serving an 11-year sentence in a Chinese prison for what the government calls inciting subversion of state power. The Nobel Committee says the gesture is meant to show support for those in China struggling for human rights. Noble Committee is known to make some controversial picks.

BLITZER: Congratulations to the professor.

BOLDUAN: In 2009, who won? You know this.

BLITZER: No, we are going to the commercial right now.

He deserved it, right?

BOLDUAN: He did.

BLITZER: OK, that is what everybody thinks, some people not so much.

BOLDUAN: If you are in China, maybe not so much.

BLITZER: Students in Britain are fighting mad right now, now that the Parliament has voted to raise their tuition in a big, big way. Just ahead, the political pearls of trying to cut spending.

And why protesters say they are planning to disrupt the funeral of Elizabeth Edwards.

(COMMERCIAL BREAK)

BLITZER: You are in THE SITUATION ROOM.

Happening now, they are known as hacktivists, groups allegedly attacking popular credit card companies who have broken ties with the whistle blowing site WikiLeaks. Could their actions, though, trigger some a dangerous cyberwar?

Plus, the so-called bomb factory house burns. The federal judge clears the way to destroy the largest ever cache of homemade explosives.

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

Lots of mayhem erupting on the streets of London right now over a controversial parliament vote to raise the existing tuition cap by nearly $10,000 a year. At one point, angry protesters even attacked a car carrying Prince Charles and his wife, Camilla.

Our senior international correspondent, Dan Rivers, is in London and has all the details.

DAN RIVERS, CNN SR. INTERNATIONAL CORRESPONDENT: Wolf, the police are slowly beginning to push the protesters out of Parliament Square after hours of angry and bitter protests which didn't stop this vote getting approved in the Houses of Commons behind me.

Police have been slowly trying to push them back on to the agreed -- route for this protest, which is down Whitehall (ph) here. Some of the more headline-grabbing incidents in all this are clearly when the car carrying Prince Charles and Camilla was attacked as it went to a theater performance in central London. Both of the royals escaped unharmed, but a sign of just how ferocious some of these protests have got.

Some government buildings down here were also attacked, including the treasury, windows broken in the treasury. But none of that stopped this vote getting passed, narrowly, by 21 votes. But, nevertheless, this raising of the cap on tuition fees will now go through. It will go through to the House of Lords and through the normal procedure, to the absolute bitter acrimony and anger of the students who have been here all day.

And don't forget, this is just the first austerity measure to really bite here in Britain. There will be many months and possibly years of this kind of angry protest coming as the cuts start to bite -- Wolf.

BLITZER: Dan Rivers in London.

We're watching that story with you.

A top economic adviser to the president is being accused of using scare tactics to try to get the tax cut deal with the Republicans passed. Is the threat of a second recession real, or is it simply an exaggeration made up by Larry Summers?

And it could be the vehicle that burns (ph) astronauts back to the moon -- at least brings them back to the moon?

(BEGIN VIDEO CLIP)

JOHN ZARRELLA, CNN CORRESPONDENT (voice-over): If the shuttle was the limo of spacecraft, then Orion is, well, the smart car, designed to be much smaller, cheaper, safer than shuttle, and to go a heck of a lot farther.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BLITZER: It's been almost 40 years since U.S. astronauts last set foot on the moon. NASA has no plans right now to send crews become to the lunar surface, but there is -- yes, there is a space vehicle being developed right now that could make manned missions safer and more practical.

Here's CNN's John Zarrella.

(BEGIN VIDEOTAPE)

ZARRELLA (voice-over): This is the inside of the future. It's a mockup of the Orion spacecraft.

PAM MELROY, LOCKHEED MARTIN: Your head is going to be down there.

ZARRELLA (on camera): Right.

MELROY: So you probably want to kind of squat down a little bit.

ZARRELLA: Right.

(voice-over): If the shuttle was the limo of spacecraft, then Orion is, well, the smart car, designed to be much smaller, cheaper, safer than shuttle, and to go a heck of a lot farther.

MELROY: By 2015, we hope to have humans on board. And then after that, it's just a question of where we want to go next, because this is a multi-purpose vehicle and it can go anywhere.

ZARRELLA: Since the end of the Apollo moon missions, no humans have gone anywhere but circling the Earth or to the Space Station. Orion, Apollo on steroids, could go there, too, ,but its real reason for being is to eventually take astronauts to the moon, perhaps Mars. Its first deep space mission could be to an asteroid called 2008EA9.

MELROY: So, in 2019, we could be spending two Orions docked together with two crew members on board out to do a spacewalk and scoop up some of that asteroid and bring it home.

ZARRELLA: One-time space shuttle commander Pam Melroy says two astronauts would be plenty comfortable inside the cylinder during the three-month trip, and no problem at all for four astronauts going to the moon.

MELROY: I assure you, in zero gravity, when you can float, this is lots of room for four people.

ZARRELLA (on camera): Really?

MELROY: Oh, yes.

ZARRELLA (voice-over): Yes, easy for her to say. Orion is supposed to be 10 times safer than shuttle. One reason, a powerful launch abort system. In its first real test, three rocket motors produced half a million pounds of thrust, pulling the crew module away from the pad in a matter of seconds.

UNIDENTIFIED FEMALE: It takes you from zero to 600 miles an hour in three seconds.

ZARRELLA: At the Kennedy Space Center, NASA and Lockheed Martin showed a mockup of the escape system and the crew module. Young Patrick Gallow (ph) has no problem with the notion of an Orion ride to an asteroid.

(on camera): It's pretty cramped in there. I have been inside that thing.

PATRICK GALLOW, NASA VISITOR (ph): Yes.

ZARRELLA: You're OK with that?

GALLOW: Mm-hmm.

ZARRELLA: You would go?

GALLOW: Yes. It would be fun to see something you've never been to before.

ZARRELLA: Now, there is one big stumbling block to all this talk about flying to the moon or an asteroid. Orion can't propel itself out of the atmosphere. You need a powerful rocket. And while it's coming, that rocket doesn't yet exist. Perhaps a case of the cart before the horse.

John Zarrella, CNN, at the Kennedy Space Center in Florida.

(END VIDEOTAPE)

BLITZER: There are new online attacks by supporters of WikiLeaks, major Web sites that so many of us use every single day now at risk of being brought down by hackers. What's going on?

And more potential diplomatic trouble for the State Department over those conversion airport security pat-downs, why one country is now calling them -- and I'm quoting -- "humiliating."

(COMMERCIAL BREAK)

BLITZER: A very disappointed President Obama now issuing a statement, reacting to the decision by the United States Senate today to not repeal "Don't Ask, Don't Tell," the policy that prevents gays from serving openly in the U.S. military.

The president's statement, among other things, saying, "A minority of senators were willing to block this important legislation, largely because they oppose the repeal of 'Don't Ask, Don't Tell.'" He's referring to the National Defense Authorization Act.

"As commander in chief, I have pledged to repeal this discriminatory law, a step supported by the secretary of Defense and the chairman of the Joint Chiefs of Staff, and informed by a comprehensive study that shows overwhelming majorities of our armed forces are prepared to serve with Americans who are openly gay or lesbian. A great majority of the American people agree. This law weakens our national security, diminishes our military readiness, and violates fundamental American principles of fairness, integrity and equality." The president very, very disappointed.

Let's talk about this and more in our "Strategy Session."

Joining us now, our Democratic strategist, Donna Brazile, a CNN political contributor, and Republican strategist John Feehery. He's the president of Quinn Gillespie, a public relations firm here in Washington.

Is it a public relations firm, a lobbying firm?

JOHN FEEHERY, PRESIDENT, QUINN GILLESPIE: It's both. We do both.

BLITZER: A consulting firm? All of the above.

FEEHERY: All of the above.

BLITZER: All right.

Let's talk a little bit about this.

You must be heartbroken, Donna, to see the president of the United States suffering setback after setback after setback. Some of these setbacks coming from fellow Democrats.

DONNA BRAZILE, CNN CONTRIBUTOR: Well, Wolf, I was heartbroken on November 2nd, but I'm in a mood to fight. I want to fight for middle class tax cuts, and I think most Democrats on Capitol Hill would like to see those tax cuts extended. They want to see unemployment benefits extended.

But there are parts of this deal, as you know, that makes some Democrats a little bit queasy, and I'm in that category. The estate taxes, for example, that's not a good use of our federal resources at a time when we are trying to save money.

So I think at the end of the day, the president will go up to Capitol Hill, he should go up to Capitol Hill, speak with the House Democratic Caucus, thank those members for taking some tough votes this past session, and perhaps you will get a compromise.

BLITZER: You know, the president says he hopes the Senate will reconsider and still vote repeal "Don't Ask, Don't Tell" during this current lame-duck session. Is that possible, you think?

FEEHERY: I don't think so. Lame ducks, this lame duck in particular, is very lame.

You know, it's very hard to push things through the system. I think that's the problem with this deal, is that the president didn't give the Democrats enough time to digest it. He didn't have the process broke down. And you have really an open rebellion. It kind of reminds me what happened in 1990 with the Bush budget deal when Republicans just scurried away from President Bush, and it killed him, really hurt him in his re-election bid. BLITZER: Because of the "Read my lips, no new taxes"?

FEEHERY: Exactly right. And when you have this kind of open rebellion with a president this late in the session, it's really not good news for his re-election bid, is my view.

BLITZER: Larry Summers, who is the outgoing head of the economic team at the White House, a man you probably know quite well, he spoke to our Suzanne Malveaux today. Yesterday, he caused an uproar by suggesting if you don't pass this deal as is, we're look at a double- dip recession, another recession, serious recession for the American people.

Listen to this exchange he had with Suzanne.

(BEGIN VIDEO CLIP)

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: In layman's terms, how do you hit back at the Democrats, the critics who say this warning about a double-dip recession is an exaggeration, it's an overstatement, that this is a political move?

LARRY SUMMERS, DIRECTOR, NATIONAL ECONOMIC COUNCIL: It's not a political move, it's an economic analysis. It's an economic analysis that tracks the judgment of many other economists.

(END VIDEO CLIP)

BLITZER: What they're suggesting, those who support the president's deal that he negotiated with the Republicans, the whole package, think of it as an economic stimulus package designed to create jobs, even though it's not paid for, as they say.

What's wrong with that analysis?

BRAZILE: Well, what's wrong is the world view that the Democrats, and as well as Republicans, must now accept, which is we can spend money when it's for the wealthiest Americans, but when it's for the poorest and those hit by the recession, the middle class, well, we have to pay for it.

BLITZER: But there's a lot of tax benefits for the middle class in this deal.

BRAZILE: There's a lot of tax -- but Wolf, this is a $900 billion package.

BLITZER: Most of it goes to the middle class.

BRAZILE: But the estate taxes extended --

BLITZER: Some of it goes for the wealthy, but most goes for the middle class.

BRAZILE: The money should go to those who need it the most, not those who will just invest it elsewhere. Look, Wolf -- BLITZER: So you say the president is flat-out wrong in signing on to this agreement?

BRAZILE: I think this framework has a lot in it that Democrats should -- and Republicans -- should support. But at the end of the day, we need to take a look at some of these other items and say, OK, can we make some more changes?

BLITZER: You think there's any changes -- is this a take it or leave it, or are they ready to start renegotiating the whole deal?

FEEHERY: Well, the Republicans are in the catbird seat. In about three weeks, they're going to take over the House, so they can negotiate a much tougher deal.

So they're standing put. If they want to get in on the deal, the Democrats are going to have to try to find five Republicans to vote in the Senate, which they're not going to get. This deal is as good as the Democrats are going to get. It's going to get a lot worse for them in January.

And I would say about Larry Summers, he's no politician. He's an economist. And I think he's right. And I wouldn't want to be the Democrats right now, vote down this bill and then have a double-dip recession.

BLITZER: Because if they don't pass this, you know, Donna, for millions and millions of middle class families, their taxes are going to go way up, $4,000, $5,000 a year, starting January 1st, if this deal isn't accepted.

BRAZILE: And that's why the president said it rightly, that this is like hostage taking.

Look, the Democrats have spent the last two years -- while the Republicans have been focusing on re-election, the Democrats have been trying to help middle class, help the poor through this recession. So I don't think anyone should blame the Democrats --

FEEHERY: Donna --

BRAZILE: -- for not going to bat for the middle class.

FEEHERY: Donna, Donna --

BRAZILE: John, this is a lousy deal --

(CROSSTALK)

FEEHERY: The Democrats have done nothing on tax -- they've done nothing on tax policy. They think -- this is overdue homework, overdue homework which they didn't do, and now they're getting --

BRAZILE: Sixteen tax breaks for small business. You're absolutely right on one point. They should --

FEEHERY: Overdue homework. They should have done this before the election.

BRAZILE: Absolutely. I agree with you on that point.

FEEHERY: And they deserve an upgrade.

BRAZILE: That's a political malfeasance. But the Republicans have long since failed because they wanted Obama to fail.

Wolf, we have to continue this conversation. But the bottom line is, you know what?

BLITZER: We'll continue it during the commercial break because we've got to go.

BRAZILE: But I've got to tell you this. President Obama, he should use an executive order and make sure that we no longer allow people who are openly gay and lesbian in the military to leave service just because of their sexual orientation.

BLITZER: All right. We'll see what he does on this.

BRAZILE: I hope so.

BLITZER: Guys, thanks very much.

Jack Cafferty is asking, what do you suppose New York Mayor Michael Bloomberg is up to right now?

And an ambassador from India says the pat-down she got at a U.S. airport was unacceptable. Security, is that what it was?

Stand by.

(COMMERCIAL BREAK)

BLITZER: Jack is joining us with "The Cafferty File" -- Jack.

CAFFERTY: The question this hour is: "What do you suppose New York City Michael Bloomberg is up to?"

David in Las Vegas writes, "America needs a strong independent party, and Bloomberg is the right guy at the right time. President Obama disappointed the Democrats, Independents and crossover Republicans that elected him. That ship has sailed now, and the country needs to look for a leader who can stop the downward spiral of the world's only superpower."

Tricia writes, "He's going to run. He realizes the two top party contenders will be disasters in the making and that the country can't stand for another six years the way things are going now. How unique that would be, to have a grownup in the White House for a change."

Carol in Massachusetts, "Bloomberg's gravitas gives him a bully pulpit, and he ought to preach loud and clear. But in the end, he shouldn't run. If he split the Independent vote, who knows what scary creature might slip through?" Scott in Illinois says, "I think in the end Mayor Michael Bloomberg will make a run for president, right along with Donald Trump."

Pete in Georgia writes, "Bloomberg is up to his eyeballs in pre- presidential positioning. A very successful business (billionaire), he has learned the fine art of political maneuvering in the New York City political arena, or should I say zoo? A Republican, when first elected -- good memories of Giuliani -- required a Republican to follow him. He then became an Independent, to get reelected."

By then, a Republican could not get elected in New York City. Then he needed a third term in spite of the two-term limit. He sounds like a typical lifetime politician who's now looking for the next office he can buy."

Tom in Atlanta writes, "Simple, Jack. He's making perfect sense. I think his time has come."

And Mark in Oklahoma City says, "Bloomberg is one of the richest men in the world, so I would imagine that most of your faithful viewers don't give a damn what he's up to. We're trying to keep our jobs, pay our bills. We don't really spend a lot of time sitting around our dinner tables asking one another, 'Oh, by the way, honey, did you have any idea what Bloomberg is up to?'"

This question must come from Wolf.

(LAUGHTER)

If you want to read more on this, go to my blog, CNN.com/CaffertyFile.

BLITZER: Tell them the truth, Jack.

CAFFERTY: No, no. It's mine.

BLITZER: Yes. It's all yours.

CAFFERTY: It's all mine.

BLITZER: You always come up with your own questions.

CAFFERTY: I just thought it was funny.

BLITZER: Yes, me too. Thank you very much.

House Democrats are defying the president of the United States and rejecting his tax cut deal with Republicans. I'll ask one very outspoken Democratic congressman, New York's Anthony Weiner, to tell us about the anger -- anger that exploded behind closed doors today.

And White House tapes helped to bring down the Nixon presidency. Now hundreds of hours of secret recordings are being released.

(COMMERCIAL BREAK) BLITZER: Now a very different kind of protest threatening to disrupt the funeral of Elizabeth Edwards. The estranged wife of the former presidential candidate John Edwards is due to be buried in North Carolina on Saturday, and a radical group known for protesting military funerals is promising to show up.

Let's bring in our Pentagon correspondent, Barbara Starr -- Barbara.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Wolf, this group has caused years of anguish for military families of the fallen and the wounded, and now the Edwards' family.

(BEGIN VIDEOTAPE)

STARR (voice-over): Retired Sergeant Ryan Newell walked out of a Kansas jail on two prosthetic legs after begin charged with stalking members of a small radical church group that protests at military funerals, a group that now says it will appear at the funeral of Elizabeth Edwards.

Veterans around the country rallied for Newell, raising money for his defense. Newell had struggled after the war. He received a new home his community built for him and his family.

RYAN NEWELL, WOUNDED VETERAN, STALKING SUSPECT: Actually, it's brought a lot of comfort to us, and a lot of joy to us. It's helped with the recovery.

STARR: Newell is just one example of growing veterans' anger at the Kansas-based Westboro Baptist Church led by Fred Phelps and his family. The church has sought publicity by preaching hate-filled anti-homosexual messages claiming troops' deaths are punishment by God.

Newell, who lost both his legs in a roadside bomb attack in Afghanistan, was arrested with weapons in his car near a meeting of Westboro members.

Paul Reickhoff heads Iraq and Afghanistan Veterans of America. He says veterans are furious with the Westboro funeral protests.

PAUL REICKHOFF, IRAQ & AFGHANISTAN VETERANS OF AMERICA: They're angry and they're outraged and they're disgusted by it.

STARR: Reickhoff thinks the church has just one motive in trying to protest at Elizabeth Edwards' funeral.

REICKHOFF: They're looking for attention, and they recognize that the media will be there, there will be cameras there, and they can get more attention for their radical agenda. I hope that this doesn't detract from honoring this courageous woman.

(END VIDEOTAPE)

STARR: Now, Wolf, right to free speech of the Westboro Church is currently under lined before the Supreme Court. Veteran Ryan Newell is under the supervision of the Veterans Affairs Department. And if the Westboro Church members do show up at Mrs. Edwards' funeral, local law enforcement will be there to control the situation -- Wolf.

BLITZER: What a story.

All right. Thank you very much for that.

Kate Bolduan is monitoring some of the other top stories in THE SITUATION ROOM right now, including a new development in the case of that California home known as a bomb factory.

What do you have, Kate?

BOLDUAN: Hey there, Wolf.

Well, a federal judge cleared the way for authorities to burn down the house that you just mentioned which contains the largest ever cache of homemade explosives. Authorities say the home was too dangerous for bomb squads to reenter. The residents -- resident of the home, who is now being held on $5 million bail, had asked the judge to delay the burning so his lawyer could retrieve evidence.

The Richard Nixon Presidential Library is opening to the public a trove of new records including more than 250 hours of White House tapes. The library, which is part of the National Archives, will also open more than 140,000 pages of presidential records. Subjects on the tapes include Vietnam, American prisoners of war, and the infamous Watergate scandal.

Finally, actor Wesley Snipes is now incarcerated. The 48-year- old film star reported to a Pennsylvania prison today to begin a three-year sentence for failing to file tax returns. An attorney for Snipes says he is appealing his client's misdemeanor conviction. The actor tells CNN he is uneasy about losing his freedom, but praying for a miracle -- Wolf.

BLITZER: Thanks very much, Kate, for that.