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Trump On U.S. Downgrade; S&P Downgrade; President Obama Live Speech on Economy, Financial Markets and Service Member Deaths in Afghanistan

Aired August 08, 2011 - 13:13   ET

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

(COMMERCIAL BREAK)

WOLF BLITZER, CNN ANCHOR: All right. We're back here in the CNN NEWSROOM. We're awaiting the president of the United States. About 15 minutes or so from now, he'll be going go into the diplomatic dining room in the White House to address the nation, indeed the world on two subjects, the economy right now, when we see the markets going down once again on this day, the day -- the first trading day after the downgrading of America's credit rating from AAA to AA plus.

The president, we're told, will also be speaking about the loss of some 30 American troops in Afghanistan over the weekend, 22 of whom were navy S.E.A.L.s when their tunic (ph) helicopter went down -- was brought down allegedly by Taliban fire in this fire fight in the eastern part of Afghanistan. The president will be speaking on both of these issues. Don't know if he'll be answering any questions from reporters. I suspect he won't, but we'll hear what he has to say.

We've got all of our reporters and analysts standing by, and Donald Trump is joining us as well, he's been kind enough to spend time with us. Donald, as you look at the president of the United States, the U.S. credit rating has been downgraded from AAA to AA, and what grade do you give the president in the first two and a half years of his administration?

DONALD TRUMP, REAL ESTATE MOGUL/REALITY TV STAR (via telephone): Well, obviously, it's not been a good period of time for him or for the country. I don't want to give him grades, because I don't think it's appropriate. It would be obvious what the grade would be and I don't think it's appropriate to say.

But I will say that it's been a very, very bad time for this country in terms of its history. It's been an embarrassing time for this country in terms of its history. And certainly thus far, if you talk about two and a half years or so, it's been a -- it's been quite a significant blow for the United States.

We're no longer the same. I read constantly now about China overtaking us in 2016. Unthinkable if you thought about that five or six years ago, that China would overtake us. And we're allowing them to overtake by allowing them to rip us and make our products. All of our products. And we're not taxing them and they're manipulating.

So, you know, when you hear that so often I keep reading about China will overtake us in 2016, I wouldn't want to be president and have China all of a sudden supersede the United States, which, again, was unthinkable just a few years ago.

BLITZER: A lot of our viewers, Donald, are watching, they're nervous right now, they've got 401(k), they've got their IRAs, their savings, whatever they have, and they're wondering, what should they do with their money to protect their money and maybe even see a little growth. You are a billionaire. Do you want to share some advice with folks out there who are really edgy right now?

TRUMP: Well, I wouldn't take the money out at this point. It's gone down a lot over the last month and I wouldn't take the money out at this point. You have to hope for the best.

I've never been a big stock market person because, you know, I just sort of figure you might as well go play Roulette. Your banking on other people running your company, et cetera, et cetera. But at this point, with the kind of Dow that you've seen, you know, you'll take it out and then all of a sudden it goes back up, I wouldn't recommend that they take the money out. It's very sad. And, again, there's no reason for this. You know the -- somebody should have spoken to Standard & Poor's. They obviously had no respect for whoever it was. But they should not have been allowed to do this.

And, you know, as you were asking me before, why are they so respected? They shouldn't be respected. But that's just years of tradition and history. But based on all of the calls that they've made over the last number of years, Lehman and lots of others, they should not be respected.

BLITZER: Because the two other major credit rating agencies, Moody's and Fitch, they still have the U.S. as a AAA. They have not downgraded the U.S., only S&P -- only S&P has.

TRUMP: Well, they'll probably see -- well, I watched a couple of the Standard & Poor's top people on the television over the last couple of days and they are loving it. They're having such a good time. And I'm sure Moody's will say, oh, gee, you know, they're having a good time, let's do the same thing.

I mean we just don't have a well-run country. It's as simple as that. And if we did, you wouldn't be talking about Medicare cuts and Paul Ryan wouldn't have to be doing all of the things that he's doing in terms of, you know, the potential cutting of Medicare, which is a disaster as far as I'm concerned. It happens to be a great program. Get rid of the abuse, get rid of all of the problems that you have with it, but it happens to be a great program.

BLITZER: Yes. And Social Security as well and Medicaid.

TRUMP: Oh, Social Security --

BLITZER: These --

TRUMP: But the economy can solve those ills.

BLITZER: You have these programs that --

TRUMP: If we had somebody that could get the economy going, all of the -- you wouldn't be talking about Social Security and you wouldn't be talking about the entitlements. You wouldn't be having to think about cutting Medicare. Who wants to cut -- I don't want to cut Medicare. So you wouldn't be talking about that if the economy was roaring. And it could very easily if we stopped other nations from abusing us. If the economy was roaring, people wouldn't have to be talking about cutting Medicare and Social Security.

BLITZER: You know Richard Quest, Donald, Richard Quest and Ali Velshi are with us as well, two of our excellent business reporters. I wonder if they have a question. Would you mind answering a question for either one of them?

TRUMP: No.

BLITZER: All right, Ali, why don't you go ahead and ask Donald something that's on your mind?

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes, thanks, Donald.

TRUMP: Hey, Ali.

VELSHI: Good to talk to you again, as always.

Talk to me about your concerns, you know, about China. China is a big issue here because they're the biggest buyer of our foreign debt right now. But, you know, listen, you're a smart guy. You've been in business for a long time. Particularly in the type of business you're in, you know that China's growth and China's ascendancy has nothing to do with this administration or how the government's been run, they've been ascending for a long time.

I'm not sure what you're thinking we could do differently. We've got a recession. We had a financial crisis. We've got a China and an India that's growing. I need an answer from you. What do you think we should be doing? You told us what's wrong.

TRUMP: Sure. I think it's a very fair question. But the truth is, you can do something immediately. And, Ali, you know, because we've had many discussions, and you know I was never a big fan of George Bush because it started there. But now it's gotten so rampant, it's totally out of control.

The fact is, that China is manipulating their currency, they're making it very, very difficult, almost impossible, for our companies to compete with their companies, and they're making our products. And what I'm saying is, because of the manipulation, if you threw a 25 percent tax on all products made in China, because of the manipulation, and it should be a 41 percent tax based on the numbers, but forget that. You throw a 25 percent tax on all products made in China, number one, your coffers will be brimming with money. And number two, China will do everything possible for you not to do that. And they'll make concessions that you never dreamed of. So what I -- so when you talk about the administration, what can they do? They could do a lot and they could start by taxing all Chinese products.

Ali, China's going to make $300 billion plus, much more than that, that was the projection, but it's going to be higher, this year on the United States. $300 billion. That doesn't include all the jobs they're taking because of their manufacture (ph). We're rebuilding China. We have to rebuild our country. To hell with China. China is not our friend. They're our enemy. They're an enemy. They're not our friend. They laugh at us.

BLITZER: All right, Donald, I know you've got to go. But a very quick question from Richard Quest and a quick answer and then we'll let you go.

Go ahead, Richard.

TAPPER: OK. Sure. Hello, Richard.

RICHARD QUEST, ANCHOR, "QUEST MEANS BUSINESS": All right, Donald, good to talk to you, as always.

Two questions for you. Firstly, how would you have stopped S&P from effecting the downgrade? Surely that would have been pretty impossible legally to stop them from doing the downgrade? And, secondly, after what John McCain said yesterday, does anybody believe that S&P was wrong on their assessment of the U.S. economy?

TRUMP: Well, I actually think what S&P did was wrong and I think they did it for a lot of other reasons, Richard. And I think you probably feel that also. I think what they did was disgraceful.

Now, look, we have a bad economy and things are not going well and we're not -- we are a dysfunctional -- and the president himself said it, we've become a dysfunctional nation. But somebody should have really put the clamps on S&P, at least by going and talking and doing whatever they had to do. That doesn't mean they would have been able to stop them, but something should have happened. And at a minimum, a better deal should have been made so S&P couldn't have gotten away with their nonsense.

BLITZER: All right, we'll leave it there. Donald Trump, it was very nice of you to join us as we set the stage for the president of the United States. Always good -- by the way, I didn't say congratulations to you on the birth of a grandchild. Congratulations to you as well.

TRUMP: Thank you, Wolf. That's very nice. I appreciate it.

BLITZER: Of course.

BLITZER: All right, Donald Trump, thanks, very, very much.

Richard Quest is staying. Ali Velshi is staying. John King is here. We're getting ready to hear from the president of the United States. Our coverage --

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BLITZER: All right, we're awaiting the president of the United States. He's getting ready to go into the diplomatic dining room over at the White House and speak to the nation, indeed the world, on two subjects, the U.S. economy, what's going on, another bad day up on Wall Street today in the aftermath of the downgrading of America's credit rating. Also we're going to be hearing from the president on the tragedy, what happened in Afghanistan. Thirty American troops killed when a Chinook helicopter went down, 22 Navy SEALs.

Our reporters are all standing by. Ali Velshi, David Gergen, Richard Quest, Brianna Keilar. John King is with me here in our CNN's Washington studios.

John, this is a late addition, as we've been saying. The president was not scheduled to speak now, but I assume he felt he had to go out there and reassure a lot of nervous Americans that the economy is not necessarily in that bad shape, despite what the S&P ratings agency did.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Well, he sees what's happening in the markets here in the United States. He also sees what's happening in markets around the world. He's had some consultations, Wolf, with some of his colleagues on the world stage about, a, trying to get the Europeans to do more to bring stability to Europe's debt crisis. That will be his challenge just to convince the American people, and down the road the financial markets, that he will pressure this super committee to do more about the debt and deficit.

I think, more broadly, Friday night into Saturday, I think it's fair to say, was the darkest moment of the Obama presidency. He's the first president in history to have this downgrade happen on his watch. And just as he is digesting that, he is told it is the deadliest day in the 10-year war in Afghanistan.

This is a very difficult chapter for him as president. A difficult time for him as president, trying to figure out how quickly to pull back from Afghanistan, these debts, having a lot of people beg the question, is the strategy working, did the surge work, can we pull out.

Of course there are some saying it's proof, get out now, get out yesterday. And now he deals with the biggest economic challenge of his presidency as well at a time, this is not a political moment, this is a presidential challenge to address the nation and the world right now. But, let's be honest, we are moving closer and closer to a re- election campaign year in which these challenges significantly -- the economic challenge in particular -- significantly undermine his prospects for re-election. And the president knows that.

BLITZER: Yes, he certainly does.

David Gergen's our senior political analyst. David, you served four American presidents. If you were advising this president in the hours leading up to his remarks right now, what does he need to say? What does he need to tell the American people at this critical, historical, historic moment?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: It's tough. John King was right, the president had just concluded the worst week of his presidency. His credibility is not high on these issues. And, yes, as you well know, the fear and anger levels around the country are incredibly high. And so people, right now, Wolf, I don't think are looking for more words. And they -- they're looking for more actions. They're looking for decisiveness on the part of Washington and indeed in Europe.

And I do think what's critical, to go to John King's point again, what's critical here is that this not be seen through -- as more politics. That this -- his statement today and his statements in days ahead be all about, how do we get -- unite the country. Even though he may loses his presidency doing it, he has to be willing now to say, the country is in serious danger of going into a second recession. It will be very, very calamitous for a lot of Americans. We've got to pull together and do whatever it takes. Put our politics aside to get the country back on the right path.

BLITZER: Richard Quest is with us as well. Actually, he was with us but he's not with us anymore. But Ali Velshi -- Ali Velshi is with us.

Ali, we see the markets going down as dramatically as they are here in the United States. It follows the lead of what happened in Europe and it follows the lead of what happened in Asia. This is a worldwide phenomenon we're seeing donned (ph).

VELSHI: Yes. Yes.

BLITZER: The Dow Jones Industrials right now down 323 points.

VELSHI: And I'm going to take this opportunity to disagree with my two very good friends, John and David, on this. I remember a day -- I might -- maybe it was September -- Monday, September 29th, maybe I'm getting it wrong, in 2008 when the Dow dropped 777 points because TARP wasn't passed. I remember a day in January of 2009 when you added up all the layoff announcements in one day and 75,000 people were laid off. Nobody other than us cared or knew about the U.S. credit limit prior to two months ago.

Canada, one of the safest, best economies in the world, one of the strongest banking systems, went for years without a triple-A credit rating and has bounced back tremendously. I don't think we need to overdo how serious this is.

I will tell you this, though. Fascinating to me that the right is angry at S&P, the left is angry at S&P. Everybody's angry at S&P. Ben Bernanke said several months ago in testimony, all you need to do is read a newspaper to know what America's debt problems are. Donald Trump was right about that. So I don't know why we're all -- I don't know why this market is this concerned about this. We all knew this.

S&P says we're worth a little less than we were. Moody's and Fitch don't. This market reaction is entirely disproportionate to what's actually happening in the world, and I don't think -- I disagree -- and I know a lot of smart people disagree with me, I don't think it goes down in history as some turning point because President Obama is the first president to preside over the downgrading of the AAA credit rating. That's more important to some people than it is (ph).

Let me prove my point to you, Wolf. You said it at the beginning of the show. Mortgage rates are set by the 10-year note, not the 30- year Treasury, the 10-year note. It is down since Friday. The 10- year note is actually -- it costs less money to borrow money -- for the U.S. to borrow money for 10 years than it did on Friday. The 30- year note -- people will loan money to the U.S. for 30 years for 3.68 percent. I can't get a mortgage for that rate.

So clearly, the effect of borrowing has not been felt. This stock market effect -- the stock market is always more jittery than the bond market. It's also half the size of the bond market internationally.

So I think that's -- it's one of those things where there's an irrational, jumpy investor population, and that's what you're seeing in this market. I truly do not think -- I think our debt problems are serious, our deficit problems are serious. I just don't think that this is reflective of what this is.

BLITZER: All right, Ali, hold on for a moment because I want to pick up that thought. I just want to remind our viewers who may just be tuning in right now at the bottom of the hour, we're expecting to hear momentarily from the president of the United States in the diplomatic dining room. There you see a live picture coming in from the White House. The president will be speaking on the economy and on the deaths of those 30 American troops in Afghanistan -- both subjects. We expect him to be speaking for about 10 minutes.

Let me bring John King back into this conversation. You know, people think about what's happening on Wall Street. It may be irrational, it may be a bit of a panic sell, or whatever, but in the past two, three weeks, the market has gone down well more than 1,000 points, the Dow Jones Industrials. And I mean, you talk about what that means, we're talking at least $1 trillion, maybe $2 trillion in equity. That's people's investments that have simply have gone away.

JOHN KING, HOST, "JOHN KING USA": And I hope my friend Ali Velshi is exactly right, that this some irrational overreaction and that in several days, the markets grow and my 401(k) gets better, your 401(k) gets better and everybody out there's watching who's investment in the stock market gets better.

But there's a cumulative impact here. So Ali's right, it's not just about this. But if you're the president of the United States -- the government just said the other day job growth is pretty modest, unemployment rate is persistently high. There's, you know, 16 million Americans out there who are unemployed or underemployed. This president has now been the leader of this country for two-and-a-half years in which the economy is treading water or worse.

Then he gets this horrible, horrible tragic news in Afghanistan, and so there's a funk in the country right now, Wolf, and it's reflected in our new poll. Is the economy still in a downturn and are conditions getting worse? In April, 36 percent of Americans said still getting worse, 60 percent say that now. How are things going in the country today? In May, 60 percent of Americans said badly, now 75 percent of Americans say badly. Three in four Americans say the country's heading in the wrong direction.

That, number one -- Ali could back me up on this. I don't think he will disagree. This is a consumer spending-driven economy. If consumers think things are going badly, they save their money. They don't spend. It makes the economic problems worse.

And if three in four Americans think the country's heading in the wrong direction, you try to be an incumbent president of the United States, get reelected in that kind of an environment, with people in a funk, people think the country's on the wrong track, persistently high unemployment, and now a reminder -- and God, let's pray that this is a one bad thing in Afghanistan, but a reminder also that there's a 10- year war that most of the country just wishes would be over.

BLITZER: You know, I want to just touch on what's going on in Afghanistan right now. Barbara Starr and Brian Todd are working this part of the story. Barbara, let me go to you first. We don't have Barbara. We'll get Barbara in a moment. But I think Brian Todd is with us. Brian, are you in Norfolk, Virginia, right now.

BRIAN TODD, CNN CORRESPONDENT: Wolf, I'm in Virginia Beach, Virginia, right now, just right near Norfolk.

BLITZER: All right. So you've been speaking to some of the family members of those Navy SEALs who were killed in that Chinook takedown, the Taliban using shoulder-fired grenades, I believe, to knock down that helicopter carrying 30 American troops, another seven or eight Afghan troops, 22 Navy SEALs. The president will be speaking about this momentarily.

Do we know yet, Brian -- I don't know if you know this -- when the remains will arrive at Dover Air Force base in Delaware?

TODD: It's a little unclear right now, Wolf, when they're going to be returned. We are getting word that it will be probably within the next couple of days. I did hear one report saying it could be as early as tomorrow. Sometimes these things are a little bit fluid, obviously, as they get the bodies processed properly overseas and then brought back to Dover Air Force Base. But we are told in the next couple days that those bodies will be returned, and we have spoken to a couple of the families who say they plan on going to Dover to meet their loved ones.

BLITZER: And how were the families down in Virginia Beach, Virginia, where so many of those Navy SEALs were based? How are they coping? I can only imagine how said and upset and -- not only the family members but the whole community must be.

TODD: The community is really reeling at this point, Wolf. The responses from the families kind of run the gamut. You know, we talked to one of the widows yesterday, Kimberly Vaughn (ph), very composed with me over the phone and talked a little bit about her husband, and then when we got a little bit more into the interview, she started to really get very emotional and cry and talk about her children. The families are incredibly strong, but you know, it is just so, so difficult.

Just a couple of hours ago, we went to two of the Navy SEALs' houses, and the response is really interesting. I mean, I knocked on one door, and a young man came to the door, clearly a friend of one of the SEALs. He said he was. And he looked like he might be a SEAL himself. At least, he looked like he was in the service. And he was very stoic, very courteous but said the family didn't want to talk right now.

Went to another family's home, and a young lady answered the door. She said she was the sister-in-law of one of the SEALs who died. Again, very courteous, very nice, didn't want to talk, said the family didn't want to talk, and then she just broke down and started crying.

And you know, you feel bad for going up to these people. You feel guilty for even knocking on the door. You're just trying to get some kind of response to this, some kind of emotion, and you get it, and you walk away just feeling just so badly for these people, the sacrifices that they're making, and that their loved ones have made. And it's a community-wide thing. There's a real kinship with the SEALs and with the Navy here in Virginia Beach and in Norfolk, and you feel it all around, not just with the families but with the people you talk to on the street, as well.

BLITZER: Yes, my experience over the years, there are so many of these family members, surviving family members -- they actually want to speak about their dead son or their father or their brother or sister...

TODD: Right.

BLITZER: ... because they just want people to remember something about them during these critical hours after they get the horrible news. Brian, stand by.

Barbara Starr is standing by. We expect to hear from the president of the United States momentarily. He's going to be speaking about the tragic loss of those American troops in Afghanistan, also about the overall state of the U.S. economy.

Our special coverage will continue here in the CNN NEWSROOM right after this.

(COMMERCIAL BREAK)

BLITZER: All right, you're looking at live pictures of the White House, in side the diplomatic dining room over the White House. Momentarily, we're told, the president of the United States will go to the microphones there, speak about two subjects, the economy -- this on a day where the Dow Jones Industrials down more than 300 points as we speak right now. Also, will speak about the deaths of those 30 American troops in Afghanistan, whose Chinook helicopter went down in a firefight over the weekend, 22 Navy SEALs were among those killed.

Our Pentagon correspondent, Barbara Starr, has been working all weekend covering this story for us. Barbara, any updates on what's going on right now?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, Wolf, what is happening behind the scenes right now is family members of the fallen are being offered the opportunity by the military to fly to Dover Air Force Base. That's what goes on when the fallen return. The families are offered the opportunity to go there and be there when their loved one comes off the plane for that final journey home.

We're being given some indications that the return ceremonies at Dover could -- could -- happen as soon as tomorrow. It's a very long flight from Afghanistan. The plane will stop and refuel along the way before it comes back to the United States. They can always run into, you know, weather or other problems. So still, there's a bit of vagueness about this.

But the thinking is that they will possibly be back home in the United States sometime tomorrow, and we are awaiting word -- we expect defense secretary Leon Panetta to travel to Dover, the chairman of the Joint Chiefs. And the possibility is the president also will go. But that -- no official word on that yet, Wolf.

BLITZER: And in recent years, they've allowed coverage, camera crews to go to Dover Air Force Base and see the planes come in with the remains, with the bodies. I assume that's going to happen tomorrow, right?

STARR: Under very strict rules, we do expect that to happen. The privacy of the families will be very much respected. The way it happens is, television camera is allowed to take a shot, a single shot, camera shot, of the casket being removed from the plane, honors being rendered, salutes being given. The family members will stand just off camera. No one wants to invade their privacy at this point. We will not be able to show their faces at all.

And as we've seen over the last couple of days, over the weekend, many family members across the country coming forward. Many of them do want to speak about their loved ones, want their loved ones to be remembered, to tell the story of their lives, their service to the country, their -- what has happened to their families now. But many families, Wolf, decide to keep this very private. They are terribly grief-stricken. And funerals being planned already, of course, funerals in home towns across the country, and the possibility, of course, that some of them will be laid to rest here at Arlington National Cemetery in Washington -- Wolf.

BLITZER: Our deepest, deepest condolences to all the family members who have suffered as a result of this latest incident in Afghanistan. Barbara, thanks very much.

The other subject the president will be addressing will be the state of the U.S. economy. Let's take a look at the Dow Jones Industrials right now. Take a look at these numbers. You can see, 390 points down, flirting, getting closer to 400.

Ali Velshi is watching what's going on. Ali, when I woke up this morning, I assumed we would go down 100, 200 points. I'm surprised it's now approaching 400.

VELSHI: Yes, and in fact, it actually just crossed 400 while you were talking to Barbara a few minutes ago. So we're actually off the lows of the market.

Let me give you the other side of the equation, right? So we've got the markets. One of the things that I know you know and I think our viewers are most concerned about is how does the downgrade affect you on the ground. Obviously, if you have a 401(k) or an IRA, this is affecting you right now. But what about interest rates?

Now, remember two things. Many credit cards work off of the prime rate. The prime rate is determined by what the Fed does. So right now, the Fed rates are between zero and a quarter percent. Prime rate's always 3 percent higher. So prime is 3 to 3.25, and your credit card often, particularly with a moving rate, is tied to that.

Mortgages are set in the 10-year bond market, and the 10-year bond, as you pointed out when we started our coverage, is actually down right now.

So for the moment, the immediate -- and here's your Dow, by the way, below 400 now, off more than 3.5 percent. So at the moment, while the instinct is that a downgrade should have led to interest rate increases, so far that hasn't come to pass. And the reason for that, Wolf, is if you're going to move your money out of being invested in American bonds, where does it go? There aren't enough Canadian and Australian bonds, and you know, other companies that are AAA -- other countries that are AAA-rated.

And you're certainly not taking your money to Europe right now. Europe is globally possibly as big of a problem as the United States. And the difference, Wolf, is here in the United States, our debt problems are political, as we have seen play out for the last several months. In Greece and Italy and Spain, in places like that, they are much more structural. They're much harder to change, which is why you saw rioting in the streets in Europe that you don't see that in the U.S.

So, there's a sense that, for all that's going on out there, American bonds, the American dollar is still a safer investment. The American economy is still most likely to generate a return. That's why you are seeing no increase in interest rates yet. Who knows what the next 12 hours, 24 hours, three weeks, three months hold? And I think long-term, I have always been betting on the fact that interest rates will go up, but for now, no reaction to the downgrade where it really matters, in the bond market. BLITZER: Yes. Down 400 points, the Dow Jones Industrials right now. It may be unfair, but a lot of people -- once the president starts speaking, a lot of people will look at where the Dow Jones is at the beginning of his remarks, and ten minutes later, where the Dow Jones is at the end of his remarks to see if he's reassured or raised -- further concerns of those investing in Wall Street.

We will take another quick break. Our coverage continues after this.

(COMMERCIAL BREAK)

BLITZER: Not a good day on Wall Street. Take a look at this, the Dow Jones Industrials down 426 points. Getting closer to the 11,000 marks. Only a couple weeks ago it was over 12,600, I believe. It's dropped a lot over these last couple weeks, but today has been a brutal day up on Wall Street.

Once again, Ali Velshi is watching what is going on. You suggest this is sort of irrational panic on the part of investors, traders out there, Ali. Explain once again what you mean.

VELSHI: A debt downgrade has a direct relationship to bonds. If you are downgraded, Wolf Blitzer, it will cost you more money for me to lend you money. That's the direct relationship. You became riskier, so you should cost more.

So, the place you should see the reaction to a debt downgrade of the United States is in the bond market, and that's exactly where we are not seeing it. So, it's very strange that we've skipped the reaction in the bond market, the place that it actually matters, and we have gone straight to the stock market. As you know, the stock market tends to be more populated by either irrational investors, momentum players, day traders, people who -- hedge funds, computerized trading. So, there are a lot of reasons why a stock market reaction would be bigger than a bond market reaction.

Now, if you take all the stock markets in the entire world -- all the value of all the stock markets in the entire world, Wolf, it's half as much money as all the bond or debt markets in the entire world.

So, the stock market tend to be more irrational. And that's what you're seeing that playing out here. There's no reason why the companies -- of the Dow 30 companies, every single one except one, 29 companies are down right now. And there's no reason why a company like McDonald's or Kraft should be substantially many percentage points less in value than it was on Wednesday before we saw that first down leg on Thursday and then this.

So, if you're a rational investor and you value stocks based on what their earnings are likely to be and what your return should be, this doesn't make any sense whatsoever. Now, as John King pointed out very clearly, the markets are not always rational beings. Psychology and emotion and to some degree panic play a big role in this thing. But there are days, Wolf -- you and I have worked them over the last years --where you've seen a downturn in the market and you and I have been able to discuss why it's happened. This is just fear and panic overtaking the market. The bond markets are holding steady.

BLITZER: Ali, I assume the president will try to calm those markets. That's why he decided to come out while the markets were open. He could have waited until 4 p.m. Eastern when Wall Street closes, but he decided to do it now to try to reassure jittery investors.

David Gergen, we're very close to hearing from the president. But give us a thought as we get ready to hear.

DAVID GERGEN, CNN SENIOR POLITICAL ANALSYT: Wolf, I was in Chicago yesterday with a lot of top investment advisors from around the country. They're making the argument this is not irrational. That in fact, as you pointed out, this slide in the markets started before S&P. The S&P thing just added one more psychological blow. What people are really worried about is a second recession.

BLITZER: Double-dip recession, as they're calling it. Some are suggesting now there could be one in three chance that that could happen.

All right, so the president of the United States is about to walk into the Diplomatic Dining Room over there in the White House and address these two subjects. The hurtful U.S. economy right now, as well as what has happened in Afghanistan over the weekend when 30 American troops died as their Chinook U.S. Army helicopter went down in a firefight with the Taliban. 22 Navy SEALs among those dead.

The president will be speaking about both. And we assume the presiden, as far as economy is concerned, is going to try to reassure the nation. He knows the world will be watching at the same time. That the U.S. economy is not necessarily in such horrible shape. The Dow Jones, right now, as you can see, down 411 points. It's dropped 1,500, 1,600 points, though, over the past two weeks. A significant, significant fall in the Dow Jones Industrials. It's causing a lot of concern out there.

And presumably, the president of the United States and his advisors said you know what? It's a good idea to address the country right now and give to give some thoughts on what's going on.

So, the president will walk out, we'll hear what the president has to say and try to get some -- get a reaction, obviously. We're going to stay on top of this story. It's a big story for all of viewers.

Here's the president.

(BEGIN LIVE COVERAGE)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Good afternoon, everybody. On Friday, we learned that the United States received a downgrade by one of the credit rating agencies, not so much because they doubt our ability to pay our debt if we make good decisions, but because after witnessing a month of wrangling over raising the debt ceiling, they doubted our political system's ability to act.

The markets, on the other hand, continue believe our credit status is AAA. In fact, Warren Buffett, who knows a thing or two about good investments, said, "If there were a AAAA rating, I'd give the United States that." I and most of the world's investors agree.

That doesn't mean we don't have a problem. The fact is we didn't need a rating agency to tell us that we need a balanced long-term approach to deficit reduction. That was true last week. That was true last year. That was true the day I took office.

And we didn't need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive, to say the least.

We knew from the outset that a prolonged debate over the debt ceiling, a debate where the threat of default was used as a bargaining chip, could do enormous damage to our economy and the world's.

That threat, coming after a string of economic disruptions in Europe, Japan and the Middle East, has now roiled the markets and dampened consumer confidence and slowed the pace of recovery.

So all of this is a legitimate source of concern. But here's the good news. Our problems are imminently solvable. And we know what we have to do to solve them.

With respect to debt, our problem is not confidence in our credit. The markets continue to reaffirm our credit as among the world's safest. Our challenge is the need to tackle our deficits over the long term.

Last week we reached an agreement that will make historic cuts to defense and domestic spending. But there's not much further we can cut in either of those categories. What we need to do now is combine those spending cuts with two additional steps, tax reform that will ask those who can afford it to pay their fair share and modest adjustments to health care programs like Medicare.

Making these reforms doesn't require any radical steps. What it does require is common sense and compromise. There are plenty of good ideas about how to achieve long-term deficit reduction that doesn't hamper economic growth right now. Republicans and Democrats on the bipartisan fiscal commission that I set up put forth good proposals. Republicans and Democrats in the Senate's gang of six came up with some good proposals. John Boehner and I came up with some good proposals when we came close to agreeing on a grand bargain.

So it's not a lack of plans or policies that is the problem here. It's a lack of political will in Washington. It's the insistence on drawing lines in the sand, a refusal to put what's best for the country ahead of self-interest or party of ideology. And that's what we need to change.

I realize that after what we just went through, there's some skepticism that Republicans and Democrats on the so-called "super committee," this joint committee that's been set up, will be able to reach a compromise. But my hope is that Friday's news will give us a renewed sense of urgency. I intend to present my own recommendations over the coming weeks on how we should proceed. And that committee will have this administration's full cooperation. And I assure you, we will stay on it until we get the job done.

Of course, as worrisome as the issues of debt and deficits may be, the most immediate concern of most Americans, and of concern to the marketplace as well, is the issue of jobs and the slow pace of recovery coming out of the worst recession in our lifetimes.

And the good news here is that by coming together to deal with the long-term debt challenge, we would have more room to implement key proposals that can get the economy to grow faster.

Specifically, we should extend the payroll tax cut as soon as possible so that workers have more money in their paychecks next year and businesses have more customers next year.

We should continue to make sure that if you're one of the millions of Americans who is out there looking for a job, you can get the unemployment insurance that your tax dollars contributed to. That will also put money in people's pockets and more customers in stores.

In fact, if Congress fails to extend the payroll tax cut and the unemployment insurance benefits that I've called for, it could mean 1 million fewer jobs and half a percent less growth.

This is something we can do immediately, something we can do as soon as Congress gets back.

We should also help companies that want to repair our roads and bridges and airports so that thousands of construction workers who've been without a job for the last few years can get a paycheck again. That will also help to spur economic growth.

These aren't Democratic proposals. These aren't big government proposals. These are all ideas that traditionally Republicans have agreed to, have agreed to countless times in the past. There's no reason we shouldn't act on them now. None.

I know we're going through a tough time right now. We've been going through a tough time for the last two and a half years. I know a lot of people are worried about the future.

But here's what I also know. There will always be economic factors that we can't control. Earthquakes. Spikes in oil prices. Slowdowns in other parts of the world. But how we respond to those tests, that's entirely up to us.

Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we've always been and always will be AAA country.

All the challenges we face -- we continue to have the best universities, some of the most productive workers, the most innovative companies, the most adventurous entrepreneurs on Earth.

What sets us apart is that we've always not just had the capacity but also the will to act; the determination to shape our future; the willingness in our democracy to work out our differences in a sensible way; and to move forward not just for this generation but for the next generation.

And we're going to need to summon that spirit today.

The American people have been through so much over the last few years, dealing with the worse recession, the biggest financial crisis since the 1930s -- and they've done it with grace. And they're working so hard to raise their families.

And all they ask is that we work just as hard here in this town to make their lives a little bit easier. And that's not too much to ask.

And ultimately, the reason I am so hopeful about our future, the reason I have faith in these United States of America is because of the American people. It's because of their perseverance and their courage and their willingness to shoulder the burdens we face together as one nation.

One last thing. There is no one who embodies the qualities I mentioned more than the men and women of the United States armed forces, and this weekend we lost 30 of them when their helicopter crashed during am mission in Afghanistan.

No loss is a stark reminder of the risks that our men and women in uniform take every single day on behalf of their country. Day after day, night after night, they carry out missions like this in the face of enemy fire and grave danger.

And in this mission, as in so many others, they were also joined by Afghan troops, seven of whom lost their lives as well.

So I've spoken to our generals in the field, as well as President Karzai, and I know that our troops will continue the hard work of transitioning to a stronger Afghan government and ensuring that Afghanistan is not a safe haven for terrorists.

We will press on and we will succeed. But now is also a time to reflect on those we lost and the sacrifices of all who serve, as well as their families. These men and women put their lives on the line for the values that bind us together as a nation. They come from different places, and their backgrounds and beliefs reflect the rich diversity of America.

But no matter what differences they might have as individuals, they serve this nation as a team. They meet their responsibilities together, and some of them, like the 30 Americans who were lost this weekend, give their lives for their country. Our responsibility is to ensure that their legacy is an America that reflects their courage, their commitment and their sense of common purpose.

Thank you very much.

(END LIVE COVERAGE)