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The Situation Room

Saturday Mail Ending; Military Pay Debate; Tourists Attacked in Acapulco; Armstrong May Face Legal Trouble; Hagel Vote Delayed; Iran's Leader Gets The Ultimate Insult; New Details About Alabama Kidnapper; U.S. Warship Stranded In Philippines; Japan: China's Actions "Dangerous"; Boy Scouts Postpone Decision On Gays

Aired February 06, 2013 - 16:00   ET

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

WOLF BLITZER, CNN ANCHOR: Happening now: cutting military pay, why paychecks for the men and women who put their lives on the line for the United States are now under attack.

Also, the end of Saturday mail -- details of drastic action looming at the U.S. postal service.

Plus, possible criminal charges against Lance Armstrong. Federal investigators aren't giving up yet.

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

Cutting our pay, that's how one U.S. officer says U.S. troops view the recommendation for a smaller pay increase in 2014. No one goes into the military to get rich, but most service men and women need every dollar in their paycheck. So worried that next pay increase may be smaller than expected is not going over well among the troops.

Our Pentagon correspondent, Barbara Starr, has the details. She's working the story.

Barbara, tell us what's going on.

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Well, look, Wolf, in this town, there's nothing that causes more anxiety in budget politics than the concept of cutting the pay for the troops. But that is exactly what is on the table if Congress and the president cannot reach an agreement on a spending plan.

(BEGIN VIDEOTAPE)

STARR (voice-over): The troops usually are happy to see Defense Secretary Leon Panetta, smiles and handshakes all around. But days before he leaves office, Panetta has bad news. He's proposing less money in their paycheck next year.

Panetta, a savvy Washington operative in budget politics, is leaving it to Congress to figure out how not to cut pay and keep thousands of defense employees on the job.

LEON PANETTA, U.S. DEFENSE SECRETARY: We will furlough as many as 800,000 DOD civilians around the country for up to 22 days. They could face a 20 percent cut in their salary. You don't think that's going to impact on our economy?

STARR: But the recommendation to slow the military pay raise will put troops in the middle of that political fight between Congress and the president over spending.

REP. HOWARD "BUCK" MCKEON (R), CALIFORNIA: He should be looking out for soldiers, sailors, airmen, Marines that he sends into harm's way.

STARR: Panetta is proposing just a 1 percent increase in troop pay for 2014. According to internal Pentagon calculations, it should have been at least 1.7 percent, which was the increase this year. It may not be a huge deduction, but it's badly needed cash for strapped military families.

For a junior enlisted service member with two years in uniform, the basic pay is about $1,500 a month. Panetta's recommendation would mean about $130 less pay than planned. One official familiar with the plan says -- quote -- "It's a pay cut, no matter how it's explained."

Panetta, in his last major speech, did not hold back his concern about Congress failing to reach a deal on spending.

PANETTA: This is not a game. This is reality. These steps would seriously damage a fragile American economy and they would degrade our ability to respond to crisis precisely at a time of rising instability across the globe.

(END VIDEOTAPE)

STARR: Now, let's be clear. The administration is laying this right at the feet of Congress, saying one of the reasons they have to go this way is that Congress is continuing to fund a bunch of old, unneeded weapon systems that the military says it doesn't need. So they have got to cut somewhere. Pay increases may be it.

But, Wolf, make no mistake, $130 a year for a young military family with children living in tough economic times, that's serious money to them. That is money that they have been counting on -- Wolf.

BLITZER: If the military says they don't need these weapons, that should be a no-brainer. But there's a lot of political stakes involved. That's why Congress is refusing to go along and eliminate some of these unnecessary military programs. Barbara, thanks very, very much for that report.

Secretary Panetta, by the way, also made another scary prediction about future attacks on the United States. He's warning that the next Pearl Harbor could be a cyber-attack.

(BEGIN VIDEO CLIP)

PANETTA: We are literally the target of thousands of cyber-attacks every day, every day, thousands of cyber-attacks that are striking at the private sector, strike at Silicon Valley, strike at other institutions within our society, strike at government, strike at the Defense Department and our intelligence agencies.

And cyber is now at a point where the technology is there to cripple a country, to take down our power grid system, to take down our government system, take down our financial systems, and literally paralyze the country.

(END VIDEO CLIP)

BLITZER: Secretary Panetta says any future attack by any enemy will definitely, he says, include a cyber-attack.

Two men who will have to worry about all of this face two moments tomorrow up on Capitol Hill. A Senate committee may vote to confirm Chuck Hagel's nomination as the nation's next defense secretary. A different committee holds a confirmation hearing for the man picked to run the CIA, John Brennan.

For more of both of these controversial nominees, let's bring in our chief congressional correspondent, Dana Bash, also our chief political analyst, Gloria Borger, who is walking into THE SITUATION ROOM right now.

Dana, let me start with you. What are your sources telling you about Chuck Hagel's confirmation?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, you know, there are supposed to be -- at least the chairman, Carl Levin, wants there to be a vote on his confirmation -- on his nomination, rather, in the Senate Armed Services Committee tomorrow, but it might not happen. One may reason is because many Republicans on the committee don't want it to.

In fact, we're told that they are circulating a letter urging Senator Levin to delay it. And they say, these Republicans, that they are still waiting for key information from Hagel. For example, Senator Lindsey Graham told me he still doesn't have information on the speeches that Hagel gave after leaving the Senate, who he spoke to, what he said, and what he was paid.

And the ranking Republican on the committee, James Inhofe, also said that he's not so sure it should go forward tomorrow. He said he's talking to Levin about it, but he told our Ted Barrett to look for people to slow this train down until they get everything they need. And one thing that we do know -- and you know Senator Levin as well, Wolf -- is that he doesn't like partisan food fights.

And so this aide said that they would not be surprised if Levin does delay the vote in order to accommodate Republicans' demands or requests. But it's still very much up in the air at this hour.

BLITZER: Still even at this hour.

Gloria, the performance that he did in testifying last week, Chuck Hagel, widely panned, he wasn't prepared, stumbled repeatedly, how has that changed the equation as far as his eventual confirmation?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: It hasn't helped him, Wolf.

I find it pretty extraordinary in making phone calls to people who are close to the White House and some inside the White House that they believe that he didn't perform well. One person close to the White House said to me -- quote -- "Hagel did not take the prep sessions as seriously as he needed to."

These are people who want him to get confirmed. So his performance did not endear himself to the White House. There's a second level of concern about him, and this is among Democrats, and that is that this confirmation has become about Hagel's own qualifications.

And the fear is that even if he is confirmed, that there will be a hangover inside the Pentagon. And, you know, under the best of circumstances, Wolf, you know the Pentagon is a very difficult building to manage. And he could have made his job, if he gets confirmed, a lot tougher once he gets there.

BLITZER: That's a serious complication.

BORGER: Yes.

BLITZER: The other confirmation, Dana, the other confirmation hearing that will take place tomorrow involves John Brennan to be the nation's next director of the CIA. The Senate Intelligence Committee is going to hold hearings, but his nomination also now being questioned.

BASH: That's right, ironically, not necessarily by Republicans. The most interesting criticism is coming from the president's fellow Democrats. Some of those on the left, like Ron Wyden of Oregon, who says that he's not so sure that he thinks Brennan is the man for the job because he is very upset about the U.S. drone policy, specifically allowing or ordering drones to kill U.S. citizens who are suspected as terrorists.

So that has sort of turned the whole idea of partisan politics on its head because it's again the president's fellow Democrats who are questioning his qualifications based on that. In fact, he said, look, we questioned the Bush administration in its use of interrogation tactics. And we should do the same kind of standards for a Democratic president.

I expect to hear a lot of that in the hearing tomorrow.

BORGER: You know, Wolf, and while this Brennan confirmation process could get bogged down as senators request more information about the use of drones, the White House is feeling fine about this. I mean, Brennan's fight will be about policy. It is their policy. It is not about Brennan's qualifications.

And they believe that the public is with them on the use of drones. And if you look at polls, two-thirds of American public heartily approve of the use of drones, even if the left wing of the Democratic Party doesn't. quite frankly I think the White House feels very secure about Brennan. The president is very close to Brennan. As for the Hagel nomination, I think they are feeling he didn't really do the job he needed to do when he was before the committee and they're worried that could hurt him.

BLITZER: You know, Dana, I just got a statement e-mailed to me from Amnesty International USA's Security with Human Rights Campaign from Zeke Johnson.

And he raises serious questions about John Brennan, among other things, saying, "The committee must press him for specific answers about to whether and to what extent he was involved in the administration's policies on torture, indefinite detention at Guantanamo and extrajudicial killings."

These are subjects that are going to come up. But a lot of them, he's not going to be able to answer because it involves classified information.

BASH: That is exactly right. Look, he's going to be -- he's nominated for the country's top spook and he's going to be before a committee of senators who have top-secret clearance. And they know things, all of them in that room, that we can't know. That's a very, very good and important point.

The to interesting point is that it seems as though the chairwoman of this committee, Dianne Feinstein, sort of has John Brennan's back. She released a statement yesterday talking about the fact that she had seen information on that proves the legality of this drone use. So that definitely helps Brennan big time on the dynamic of his nomination at his confirmation hearing.

BLITZER: Lots of confirmation hearings about to take place, and Jack Lew, too, for Treasury. We will watch all of this in the coming days. Guys, thanks very much.

The push for gun control is getting some star power. Celebrities, including Tony Bennett, Chris Rock, among others, they joined with shooting survivors here in Washington today to call for increased gun regulations.

CNN's crime and justice correspondence, Joe Johns, is here in THE SITUATION ROOM.

Joe, this is all part of a bigger push.

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: Wolf, we have seen it before, we will likely see it again. But it always gets your attention, celebrities on Capitol Hill fighting for a cause.

This time it was a whole cast of artists and others promoting gun control to try to keep the pressure on Congress.

(BEGIN VIDEOTAPE)

JOHNS (voice-over): Stars speaking out in Washington. It's the latest push by gun control groups to lobby the Congress. AMANDA PEET, ACTRESS: Doing nothing will fail. Doing nothing has failed.

ADAM SCOTT, ACTOR: If we as a people don't act after Sandy Hook, then we as a people are broken.

TONY BENNETT, MUSICIAN: I would like assault weapons eliminated.

JOHNS: The event follows a Super Bowl ad and a star-studded public service announcement.

UNIDENTIFIED FEMALE: For the children of Sandy Hook.

UNIDENTIFIED FEMALE: Demand a plan.

JOHNS: All part of a high-profile campaign by Mayors Against Illegal Guns to demand a plan from politicians in the wake of the Sandy Hook shooting.

MARK GLAZE, EXECUTIVE DIRECTOR, MAYORS AGAINST ILLEGAL GUNS: After a mass shooting like this, we usually expect that for about a month the public will be paying a lot of attention and it's possible to get some work done, but the window is still open. It's been more than six weeks and it's not closing any time soon.

JOHNS: The man who started the group, billionaire New York Mayor Michael Bloomberg, is hiring Republican lobbyists and opening up his sizable wallet with an eye on the next election.

GLAZE: He spent about $10 million in the last election and said he was putting his toe in the water. I guess we will find out what the whole foot is worth.

JOHNS: And Mayor Bloomberg is getting help from former Congresswoman Gabby Giffords and her husband, Mark Kelly, who launched Americans for Responsible Solutions to counter spending from the NRA. They have a goal of $20 million for the 2014 campaign.

But even with money and star power, it's still unclear if Congress is listening. The hot-button issues of assault weapons and high-capacity magazines already seem to be taking a back seat to more modest legislation on background checks.

Still, celebrities are hoping their message, sometimes with a little humor, will break through.

CHRIS ROCK, COMEDIAN: The president and the first lady are kind of like the mom and the dad of the country. And when your dad says something, you listen. And when you don't, it usually bites you in the ass later on.

(END VIDEOTAPE)

JOHNS: And just to give you a sense of the money disparity at play here, the NRA and other gun rights organizations spent a record amount in the 2012 election while for gun control groups it was their lowest total since 1990, according to the Center for Responsive Politics.

In terms of lobbying Congress in 2011 and the better part of 2012, gun rights groups actually spent 10 times more than gun control groups. So those Bloomberg and folks like that have a lot of catching up to do.

BLITZER: They're going to have to come up with the cash.

Mike Bloomberg, though, the mayor of New York, he has a lot of money.

JOHNS: Absolutely.

BLITZER: If he wants to spend it, he obviously can.

JOHNS: That's for sure.

BLITZER: Thanks very much, Joe, for that report.

I spoke about all this, by the way, with Tony Bennett. We spoke about gun control, a whole lot more. You can see an interview. That's coming up later on in THE SITUATION ROOM during our 6:00 p.m. Eastern hour.

Authorities in the Dominican Republic are trying to find the source of accusations that a U.S. senator took free plane trips to sex parties in the Caribbean. Senator Robert Menendez of New Jersey calls the allegations a smear by right-wing blogs. They first surfaced in an e- mail someone named Peter Williams, who has not come forward or as far as we know spoken to anyone in person.

Drew Griffin of CNN Special Investigations Unit is in the Dominican Republic right now. He reports authorities haven't started their investigation yet and can't confirm claims the Peter Williams email came from a computer in Mexico.

Shockwaves from the U.S. Postal Service. Financial crisis about to hit your mailbox. Details of the end of Saturday delivery in the United States.

And why Lance Armstrong could possibly still face criminal charges.

(COMMERCIAL BREAK)

BLITZER: Change is coming in every household in the United States. The Postal Service is stopping Saturday delivery of your cards and letters, which started way back in 1863. It's been uninterrupted for more than half a century.

CNN's national political correspondent Jim Acosta is here. He's got details for us.

Jim, this is a major decision by the Postal Service. What, Saturday delivery started in 1863?

JIM ACOSTA, CNN NATIONAL POLITICAL CORRESPONDENT: That's right. This is a big change, Wolf. The unofficial motto of the U.S. Postal Service is: "Neither snow nor rain nor heat nor gloom of the night stays these couriers from the swift completion of their appointed rounds." But you can now add to that "except for letters on Saturday".

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): You've got mail -- but soon, probably not on Saturdays.

Starting in August, the U.S. Postal Service is halting delivery of letters and first class mail on Saturdays, but package delivery will continue. It's all part of the plan to save the cash-strapped Postal Service $2 billion, after it posted a $16 billion loss last year. Customers saw this one coming.

AUTUMN NORMAN, POST OFFICE CUSTOMER: Five days a week is fine for me. I don't do, you know, a ton of business on the weekends.

ACOSTA: With more people using private companies like UPS and Federal Express and shoppers opting to browse online, the postmaster general says the carriers just can't compete with convenience.

PATRICK DONOHOE, POSTMASTER GENERAL: Since 2008, we've seen a steady decline in use of first-class mail. People pay their bills online. It's simple. It's easy. It's free. You cannot beat free.

ACOSTA: And while members of Congress love naming post offices --

UNIDENTIFIED MALE: First Lieutenant Oliver Goodall Post Office Building.

The Brigadier General Nathaniel Woodhull Post Office Building.

ACOSTA: -- they are in no mood for yet another bailout.

REP. HENRY WAXMAN (D), CALIFORNIA: I think it has to be necessary, unfortunately, that the postal service can't sustain Saturday delivery.

ACOSTA (on camera): Even as Congress is trying to cut the fat at the U.S. Postal Service, lawmakers have easy access to their local post office. There are five, yes, five different branches just for the House of Representatives.

REP. DARRELL ISSA (R), CALIFORNIA: Jim, it's a great point. The fact is that the Post Office has asked and we have told them to go ahead and close some of the House and Senate post offices.

ACOSTA (voice-over): Historians note Post Offices are forever stamped into the Constitution. But the Postal Service still suffers from a bloated bureaucracy and legacy costs like paying for the health care benefits of future retirees.

Now, as Oversight Committee Chairman Darrell Issa says, changes are long overdue.

ACOSTA (on camera): Is this the beginning of the end of the Postal Service do you think (ph)?

ISSA: This is not the beginning of the end of the Postal Service. This is, in fact, the beginning of the reforms that will allow the Post Office to deliver a world-class product to every point in America for an affordable price.

ACOSTA (voice-over): Mail delivery is part of American culture, from the pony express to Cliff Clayton.

UNIDENTIFIED MALE: By my calculations, our next president has to be named Yelnik Miguola (ph).

ACOSTA: But unless the Postal Service can keep up with the 21st century, layoffs can be delivered next.

REP. STEVE COHEN (R), TENNESSEE: If they eventually lay people off, it's going to hurt constituents.

(END VIDEOTAPE)

ACOSTA: Now, it's up to Congress to decide whether it want to challenge the Postal Service's decision. But with both Democrats and Republicans aware that they might have to pay for Saturday service, they may be unlikely to say, return to sender, Wolf.

BLITZER: Yes, lots of politics involved in this as well, as there always has been.

ACOSTA: In the Postal Service, you better believe it. Yes.

BLITZER: Jim Acosta, thanks very much.

ACOSTA: You bet.

BLITZER: A lot of people don't seem to mind losing Saturday mail delivery. Last year, 63 percent told pollsters they support of ending Saturday delivery as a way to save money. Only 32 percent wanted to keep Saturday deliveries going.

If you want to weigh in, by the way, on the Postal Service, just click on to CNN.com. In addition to articles and its problems, there's a poll on whether you'll miss mail delivery.

Mexican authorities say they know who's behind the gang rape of some tourists, but they are also saying that the victims may share some of the blame.

(COMMERCIAL BREAK)

BLITZER: Lisa Sylvester is here in THE SITUATION ROOM monitoring some of the top stories unfolding right now, including a really disturbing development in Acapulco.

LISA SYLVESTER, CNN CORRESPONDENT: Yes, that's right, Wolf.

Mexican investigators say they have identified and are monitoring several suspects for the rape of the six Hispanic tourists in Acapulco last weekend. The young women, ages 20 to 34, were among more than a dozen people victimized by a group of gunmen who burst into a beach bungalow and also stole property. Investigators believe the victims bought drugs from the suspects days before.

And five people are dead after a powerful 8-point magnitude earthquake today sent tall waves crashing over the eastern region of the Solomon Islands. Officials in the Sta. Cruz area say the tsunami followed within minutes of that earthquake. It damaged the local airport and villages but did not threaten the wider region.

And the U.S. housing market is showing positive signs. And a major home improvement retailer is taking cue. Home Depot says it will hire more than 80,000 seasonal workers just in time for spring, which is its busiest season. That's 10,000 jobs more than last year at this time, signs that Home Depot which cut back in the recession is counting on more robust sales.

And could Former Governor Jeb Bush soon join the ranks of baseball team owners? The "Miami Herald" reports that Bush recently made a large offer to buy the Florida Marlins with a group of wealthy investors. But sources say the current owner is emphatically not selling.

You may recall that President George W. Bush co-owned the Rangers before he was elected president. So, we'll see if that happens or not. So, just in time for spring baseball.

BLITZER: You know they're now the Miami Marlins. They used to be the Florida Marlins but now they've renamed the Miami Marlins.

SYLVESTER: I stand corrected. All things baseball.

BLITZER: I know what a baseball fan you are.

(LAUGHTER)

BLITZER: So I remember when George W. Bush was an owner of the Texas Rangers.

Thanks very much, Lisa, for that.

SYLVESTER: Good point.

BLITZER: Iran's president is visiting Egypt, but things aren't going as smoothly as expected. Somebody gives him the ultimate insult.

Up next, though, Senator Marco Rubio gives him a job that could lift his profile for the 2016 presidential race.

(COMMERCIAL BREAK)

BLITZER: We have just learned Senator -- possible 2016 Republican presidential candidate, possible --Marco Rubio will give the Republican response to President Obama's State of the Union address next week. At this, he'll deliver his response in both English and Spanish.

Let's discuss what's going on in our "Strategy Session." Joining us, the Democratic strategist, Paul Begala. The Republican strategist Alex Castellanos. They're both CNN contributors.

Alex, what does that say to you that the Republicans have picked Senator Rubio to respond to the president?

ALEX CASTELLANOS, REPUBLICAN STRATEGIST: (SPEAKING IN SPANISH)

I think it's a great idea that the Republicans are putting our next generation against a new generation of Democrat. Barack Obama. I mean, he moved the ball forward for Democrats, and now you're seeing the next generation of Republicans step up. He's one of our most talented Republicans, but he also represents new ideas. He's what we would call a bottom-up Republican. Grow the economy bottom up from where you live and work and save, not top-down from Washington. Real differences with Barack Obama.

BLITZER: The fact that he's going to do it in Spanish as well, that will appeal to some Latinos and Hispanics out there.

PAUL BEGALA, DEMOCRATIC STRATEGIST: Absolutely. It's a terrific choice. The Republicans have chosen very wisely. He's an outstanding speaker just as an old speechwriter myself. I've seen him speak, and he is powerful and mesmerizing.

But I think he's winning two different primaries. First the Republican Latino primary, which is pretty much just him and Ted Cruz, the new senator from Texas, who has I think stumbled a bit coming out of the chute. Rubio has been I think more in the Hillary Clinton/ Barack Obama model. A superstar from day one who's been, I think, very careful and judicious about how he uses that star power.

He's also winning the ideas primary, which where I think his opponent is probably Paul Ryan, who I thought gave a very weak speech recently at the National Review Institute. Rubio seems to be coming out with new ideas, as Alex says, and new ideas that will move his party to the center, which is wehre elections are won. Outstanding choice for the Republicans.

BLITZER: Because on immigration reform, he's joined forces with some Democrats, comprehensive immigration reform. Senator Vitter of Louisiana goes so far as to call him - he's a Republican -- naive. So he's getting some criticism from the right.

CASTELLANOS: Naive for some means hopeful and optimistic for others, and I think that's what some Republicans have been lacking. You know, as Republicans, we've been painted in the times -- rightly so, that we're only the party of the guys in suits and business men in an old world.

Are we the party for everyone? Do we have an offer of better way for everyone in the United States, not just, you know, our alleged 53 percent, which we didn't even have? And Rubio, I think, speaks to that.

BLITZER: He's got to be really careful in giving that Republican response to the president's State of the Union address. Because Paul, you remember a few weeks ago Bobby Jindal gave a response, the Louisiana governor, and he bombed in that one. He did not do well. And it hurt him. He's not coming back. He's making a significant comeback.

You look into that camera without an audience -- I don't know how they are going to do it for Rubio, but they've got to be careful in staging it the right way.

BEGALA: It is very, very difficult. I'm older - I'm probably even older than Wolf. I'm old enough to remember when Bill Clinton, the governor of Arkansas, gave a response to Ronald Reagan, and he looked terrible, too. And he went on to have a pretty decent career.

If it were me, here's what I'd do. Honestly, free advice here for Mitch McConnell, Speaker Boehner - I tried actually to get the Democrats to do this when Barack Obama was in the Senate. I said, give Barack Obama a notepad, sit him on the front row and let him actually make some notes during the speech and give an authentic, extemporaneous response. Just listen carefully to the speech instead of something prescripted.

I think Marco Rubio is smart enough to do that. In two languages! I would not script him honestly. This sounds radical. Just give him a notepad or a notebook or whatever this is, an iPad, and let him make notes during the speech.

BLITZER: The president has a local audience, got a worldwide audience as well. Would it be smart for Marco Rubio instead of just looking into a camera reading from a teleprompter, have an audience that he was addressing?

CASTELLANOS: You know, sometimes that's a great idea, sometimes not. But the most important thing in this is going to be to offer an alternative.

We're in the ditch right now as a country. The president has had four years to try to grow this economy. Republicans have only had one thing to say as an alternative: no. If Marco Rubio can stand up there and say, no, we're more than no, there's a better way to grow this economy, to move this economy forward -- equal opportunity in education, let the money follow the child. Let's let every parent in the country do what Barack Obama does, choose the best school for their kids. If he offers some new ideas, it doesn't matter if there are people around him, he will connect with that voter at home.

BLITZER: Let's talk about this little mini war going on between the Texas governor and the California governor. Rick Perry, he's trying to bring some folks from California, open up businesses in Texas. Watch this.

(BEGIN VIDEO CLIP)

GOV. RICK PERRY (R), TEXAS: Building a business is tough. But I hear building a business in California is next to impossible. This is Texas governor Rick Perry. And I have a message for California businesses. Come check out Texas.

(END VIDEO CLIP)

BLITZER: Jerry Brown, the governor of California, not very happy. He's brushing it off. What do you think of this little effort to go after business in California, lure them to Texas?

BEGALA: Well, first off, there's a lot of economic analysis to suggest that doesn't work. New businesses create new jobs. Google wasn't poached from somewhere. It was homegrown in California. Dell computers wasn't poached; it was homegrown in Texas. That's a much better strategy.

I think Perry is trying to do three things. I think he's trying to cover up from his declining poll numbers. I think he's trying to cover up and distract from the fact that California beat his state in new jobs in 2012. And the third, um, oops, I forgot.

No, come on, he's a dope and he's an embarrassment to my state. California has a longer life expectancy, higher per capita income, cleaner air and higher percentage of people with health insurance. So, my state of Texas, my beloved state under Rick Perry, has gotten poorer, sicker, dirtier, and we die younger. So, he's got a lot to do back home before he complains about California.

CASTELLANOS: Gee, it can't be that bad because Texas is leading the nation in job creation. And by the way, California -

BEGALA: California beat them last year!

CASTELLANOS: Actually -- actually -- you know how many people have moved out of California, taxpayers in the past decade? Nearly 400,000 taxpayers and they take $30 billion with them. That's why California is just not a great place to create business.

BEGALA: California has created twice as many jobs last year as Texas.

CASTELLANOS: I want to give Jerry Brown some credit. He's trying to address the financial mess there. But Texas has the second lowest - I think the lowest taxes of any state. California has the second highest. So, what kind of environment do you want to create a business in? If you build a business in California, the next ten years, you're going to be paying for someone else's spending.

BLITZER: This is the first time I remember -- maybe you guys can remember a time - do you ever remember a time when a governor of one state actually addressed people in another state?

BEGALA: Sure.

BLITZER: Go ahead.

CASTELLANOS: It does happen.

BEGALA: Arnold Schwarzenegger. He had he a bust. Right before the (INAUDIBLE) tech crashed, California was booming. And Governor Schwarzenegger had a moving van that he took to Nevada. And he asked people in Nevada to relocate. And the whole thing crashed.

CASTELLANOS: Texas is known to have a few wrestlers.

(LAUGHTER)

CASTELLANOS: So they are going to California to wrestle some business --

BEGALA: Governor Brown's office directed me to a Bloomberg News story that said in 2012, California created 350,000 jobs; Texas only 175,000. And so, California right now has bragging right on more jobs. And they have a more per capita income.

Again, I love Texas. I'd much rather live there. OK? But Governor Perry you know, he's -- modestly gifted and he's could use a little humility.

BLITZER: Good line there. That oops.

All right, guys, thanks very much for coming in.

Lance Armstrong's career may be over, but his legal troubles may only be beginning. We're going to tell you what may be in store.

(COMMERCIAL BREAK)

BLITZER: Just this week, the United States attorney who decided not to bring criminal charges against Lance Armstrong says he hasn't changed his mind, despite the disgraced cyclist's confession to Oprah Winfrey that he doped.

But now we're learning Armstrong's legal problems may be far from over. CNN's Ed Lavandera has been working the story for us. He's joining us with the latest details.

Ed, what's going on?

ED LAVANDERA, CNN CORRESPONDENT: Hey, Wolf. Well, since that confession last month that Lance Armstrong used steroids throughout his cycling career and winning seven Tour de France (sic), that has not done much to calm down the controversy that is swirling around it.

(BEGIN VIDEOTAPE)

LAVANDERA (voice-over): A year ago, Lance Armstrong was told by federal prosecutors that the two-year investigation into his use of performance-enhancing drugs was over. No charges would be filed.

OPRAH WINFREY, OWN: So here we are in Austin, Texas. LAVANDERA: Then, last month, Armstrong confessed to years of doping. Despite that confession, the United States attorney in Los Angeles said the case would remain closed.

ANDRE BIROTTE, U.S. ATTORNEY: We made a decision on that case, I believe it was a little over a year ago. Obviously, we have been well aware of the statements that have been made by Mr. Armstrong and other media reports. That has not changed my view at this time.

LAVANDERA: Now it appears possible federal investigators aren't quite ready to give up. A spokesperson for the Federal Drug Administration, which has been investigating Armstrong for years, tells CNN it's, quote, "still an ongoing matter." And citing a high-level source, ABC News reports, agents are looking into charges of obstruction, intimidation and witness tampering.

UNIDENTIFIED MALE: You have never taken any performance-enhancing drug in connection with your cycling career?

ARMSTRONG: Correct.

LAVANDERA: This exchange during a 2005 deposition is in the middle of a multimillion-dollar battle.

JEFF TILLOTSON, SCA PROMOTIONS ATTORNEY: And our contract required that we pay him -

LAVANDERA: A Dallas-based insurance company is demanding that Armstrong pay back almost $15 million in bonus money for winning multiple Tour de France titles.

TILLOTSON: Mr. Armstrong thought he'd never be caught. Of course, he has been caught, exposed, confessed, admitted essentially to perjury. And so, we're simply going to ask him to finally live up to his word and give that money back.

LAVANDERA: But Armstrong's attorneys argue the insurance company has no right to get the money back because of this 2006 settlement agreement, which reads in part, quote, "no party may challenge, appeal, or attempt to set aside the arbitration award." Armstrong attorney says it's clear as day the insurance company has zero right to reopen the matter.

WINFREY: Did you ever take banned substances to enhance your cycling performance?

ARMSTRONG: Yes.

LAVANDERA: Since Lance Armstrong's interview with Oprah Winfrey, the disgraced cyclist has disappeared from public view. Once prolific on Twitter, he hasn't sent out a tweet in nearly a month. And his profile now ends with these words of wisdom: "Met patience in 1996, but only now am I getting to know and appreciate her."

(END VIDEOTAPE) LAVANDERA: Wolf, the United States Anti-Doping Agency banned Lance Armstrong from competitive sports for life, but it did say that if he cooperated with investigators under oath, there was a chance that could be reduced to eight years.

Interestingly enough, they have given him a deadline of February 6th. That is today to cooperate with investigators. But as far as we know, that has not happened -- Wolf.

BLITZER: That story, obviously, not going away, probably won't for a long time. Ed, thank you.

Iran's president just received a huge insult on camera. We're going to show what happened to him in Egypt and we'll explain why it's considered so, so humiliating.

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BLITZER: This just coming in to THE SITUATION ROOM. A new development in the story we told you about earlier. Now the Senate Armed Services Committee Chairman, Senator Carl Levin of Michigan, has released a statement saying the committee will not -- repeat, will not vote on the confirmation of Chuck Hagel to be the nation's next defense secretary as scheduled tomorrow.

I'll read you his statement, "The committee's vote on Senator Hagel's nomination has not been scheduled. I had hoped to hold a vote on the nomination this week, but the committee's review of the nomination is not yet complete. I intend to schedule a vote on the nomination as soon as possible."

A bump in the confirmation process of Chuck Hagel. Let's see how serious it is. Dana Bash is reporting this story earlier this hour. That vote on Chuck Hagel's confirmation will not take place tomorrow. We'll see what happens.

Here in the United States, the most insulting gesture you can make towards anyone involves very often your middle finger. But in the Middle East, it's throwing your shoe at somebody.

Think about it, the sole of your shoe touches all the filth that's on the ground so throwing your shoe at someone means you think they are just as bad as all of that filth or worse. That is why it was considered so offensive.

Back in 2008, when an Iraqi man threw his shoes at President Bush in Baghdad or earlier when Iraqi citizens used their shoes to slap a statue of Saddam Hussein after it was pulled down.

The latest target of a shoe thrower is Iran's president, Mahmoud Ahmadinejad, who is visiting Egypt. Here's CNN's Reza Sayah in Cairo.

(BEGIN VIDEOTAPE)

REZA SAYAH, CNN INTERNATIONAL CORRESPONDENT: There are probably worst insults in the Muslim world, but throwing a shoe at someone is one of the big ones. Both literally and symbolically it means throwing dirt, filth and whatever else you may have stepped on at someone you don't like.

And that's exactly what happened to Iranian President Mahmoud Ahmadinejad late Tuesday night here in Cairo during a visit to a moss mosque. A private television station captured the incident.

It's difficult to see exactly what happened, but if you look closely, you see President Ahmadinejad walking through a large crowd, greeting people. All of a sudden, you see someone throw a shoe at him. The shoe didn't hit the president. It hit a security guard.

He quickly made his way to a car and off he went. The prosecutor's office has detained four men. They are identified as members of an ultra conservative branch of Sunni, Islam. Of course, Iran is predominantly a Shia nation and Egypt is predominantly Sunni nation.

There's speculation that maybe this incident had to do with the Sunni- Shia rivalry. The prosecutor also saying that before the attacker threw the shoe, he yelled, you killed our brothers to President Ahmadinejad, perhaps a reference to the war in Syria.

Of course, Iran still backs the Assad regime in Damascus. Egypt is an opponent of the Assad regime, strong supporters of the rebels. Reza Sayah, CNN, Cairo.

(END VIDEOTAPE)

BLITZER: New details emerging about the hostage standoff and the rescue of that young little boy in rural Alabama. Lisa is back. She is monitoring this and some of the other top stories in THE SITUATION ROOM. What's the latest?

LISA SYLVESTER, CNN CORRESPONDENT: Wolf, law enforcement sources are sharing new details about Jimmy Lee Dykes' state of mind as the negotiated for Ethan's release from the kidnapper's bunker.

They say Dyke's was unable to understand why anyone would think the boy was in danger and that he, quote, "thought the whole world was wrong and that he was right." On Monday, Dykes was killed when the FBI rescued Ethan who turns 6 today.

And it could take two months to remove a U.S. mine sweeper that is stranded in an environmentally delicate reef off the Philippines. That word from the Philippines Coast Guard. The USS Guardian, a 224- foot long ship ran aground last month and the U.S. Navy is preparing to cut it out of the reef. Philippine officials have said they will seek compensation for damages.

And strained relations between Japan and China over disputed islands in the East China Sea reached a new revel today. Japan's prime minister called China's use of radar to track a Japan warship and helicopter, quote, "dangerous and regrettable."

That kind of radar could be used to produce information needed to fire on the Japanese ships. It's certainly an area of the world we'll keep an eye on -- Wolf.

BLITZER: A little tension going on between China and Japan. Thanks very much, Lisa, for that.

Will the boy scouts permit gay leaders and troop leaders? Why you'll have to wait a little longer now to find out.

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BLITZER: Taking a look at some of this hour's "Hot Shots," a group of curious penguins approach an I-Reporter on the Antarctic Peninsula. In Myanmar, visitors pay their respects by lighting 9,000 candles at one of Buddhism's holiest temples.

In Missouri, water sprays as a fountain begins to thaw in the early morning hours at a national park. Send in your photos to cnnireports.com or through Instagram using the hashtag cnnireport.

Too complex, that's what the boy scouts leaders say about the divisive of lifting the ban on gay scouts and leaders and they kicked it down the road postponing their decision and saying they need to review membership policies.

CNN's Casey Wian is outside Scout headquarters. He's joining us now with more. Casey, what's the latest?

CASEY WIAN, CNN CORRESPONDENT: Well, Wolf, we were expecting a decision today, but on this controversial issue of gays in the scouting, the boy scouts decided on 3-1/2 more months of uncertainty.

(BEGIN VIDEOTAPE)

WIAN (voice-over): Outside Boy Scout headquarters, opponents of a proposal by the organization to end its ban on openly gay scouts and scout leaders celebrated what may be a temporary victory, citing an outpouring of feedback from the American public. The scouts' national leaders delayed a vote on the issue until their annual meeting in May.

UNIDENTIFIED MALE: They didn't start talking about delaying the vote until everyone started getting up in arms. That tells me that the boy scouts are really good at politics and they know that they need to just push it off until nobody is paying attention.

WIAN: The Boy Scouts proposed allowing individual troops to admit gays after losing corporate funding from companies and charities with anti-discrimination policies, most donations comes from religious organization. This troop leader said the proposal conflicts with scouting's history of support for the traditional family.

UNIDENTIFIED MALE: We think the boy scouts should be supportive of that rather than selling out our souls for $ 5 million worth of united way contributions.

WIAN: But scouts and leaders who have been expelled for being openly gay say scouting anti-gay tradition is discriminatory and harms children. UNIDENTIFIED FEMALE: Just because they are being who they are. I don't want -- I can never not cry. I don't want one parent to tell their son that they can't be a part of scouts because they are not good enough.

WIAN: One former scout tells CNN he hopes the delay will lead to a broader change.

UNIDENTIFIED MALE: If this allows them to get their ducks in the row and do the policy to do it right, which is ending all discrimination in every single troop, then I think it's a good thing. If this is another excuse of delaying what they should have done 23 years ago, that's a totally different story.

WIAN: The boy scouts refused to appear on camera, but released a statement saying that the Boy Scouts of America's National Executive Board concluded that the due to the complexity of the issue, the organization need more time to examine the membership policy.

(END VIDEOTAPE)

WIAN: The Boy Scouts' oath requires scouts to be, quote, "morally straight." It's very clear that a very deep division exists over what that really means -- Wolf.

BLITZER: Casey Wian, thank you.