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The Situation Room

White House Begins Talks with Lawmakers; Deal Reached to Pay Military Death Benefits; Janet Yellen Named to Chair Fed; Taking A Beating In The Polls; Default Dangers; Default: How Bad Could It Get?; Default: How Bad Could It Get?; Redskins Owners E-mails Fans; Interview with Sir Richard Branson; Shutdown Metaphor Mania

Aired October 09, 2013 - 17:00   ET

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

WOLF BLITZER, HOST: And warning signs are already flashing about a looming U.S. default. But there are some debt ceiling deniers out there who are rejecting the forecasts of economic catastrophe.

Who's right?

We'll have a debate this hour.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

This may be how a compromise begins. After weeks of public posturing by both sides leading to a government shutdown and threatening a debt default, the White House has just begun a series of meetings with lawmakers. House Democrats are the first group to sit down with the president. Republican leaders are next in line.

Let's go live to our chief Congressional correspondent, Dana Bash, who is following all of this -- Dana, the full GOP conference won't be going to the White House, all 233 members.

What's going on over here, because all the Democrats, the entire Democratic Caucus of the House, was invited?

DANA BASH, CNN CHIEF CONGRESSIONAL CORRESPONDENT: That's right. And House GOP leaders decided that it would not be best for 233 House Republicans to go to the White House, because it wouldn't be productive. Look, the whole House Republican message is that they want a chance to sit down with the president, with the White House, and talk. So they are taking advantage of this invitation, which is for tomorrow, for Republicans, and saying just the GOP leaders and the key committee chairmen will be attending. They were the only ones who will attend because, you know, let's just face it, having a discussion with 233 people generally isn't that productive.

But more importantly, nobody has said this or on the record or even close, but just knowing the makeup of the Republican caucus, I think that the leaders feel that maybe it would be best for some of their more conservative and, maybe even more importantly, their more outspoken members, to not be there. BLITZER: What's the latest, Dana, that you're hearing about any possible movement, especially when it comes to that debt ceiling?

BASH: There are still no official talks, particularly between the Republicans here on Capitol Hill and the White House. But there certainly are unofficial bipartisan discussions going on all over, particularly in the United States Senate. And that is something that Senator Dick Durbin, the number two in the Senate on the Democratic side, sort of spilled the beans on, to Jake Tapper on "THE LEAD" just the last hour.

Listen to what he said.

(BEGIN VIDEO CLIP)

SEN. DICK DURBIN (D), ILLINOIS: I think you probably would guess, and it would be true, there are conversations underway as to what we will discuss, you know, what we will negotiate over, what things will be on the table.

(END VIDEO CLIP)

BASH: Now, House Republicans say that they are not having any discussions, as I said, with the White House and no official discussions. But that, of course, is going to be the toughest nut to crack when it comes to any deal, particularly on the debt ceiling.

I am told today by a senior House Republican source, Wolf, that they are beginning to realize, inside the Republican leadership, that they are likely going to have to pass a debt ceiling increase with the help of Democrats, something that they've not been willing to do when it comes to the funding bill, which ended up with a government shutdown.

And I'm also told that they're sort of preparing, at least some people, inside the House Republican leadership, to pass a clean debt ceiling increase. But -- and this is a big but -- along with it, the promise, with specifics, for negotiations to deal somehow with the debt and deficit. It would have to happen in tandem. And this is something that they're sort of realizing is going to likely have to be something that they're going to give on, but they're going to be able to at least say that they getting at least negotiations in the short- term.

But this is an important point, as I button this up, there aren't any active discussions even going on within the Republican Caucus on this, because they -- I'm told by senior Republican sources, that they can't do that, because they don't know what to talk about because they're not in discussions with the White House.

So we're still in this kind of odd situation, this almost parallel universe going on.

BLITZER: It's still a mess out there.

All right, Dana, thanks very much.

Maybe they'll get some movement going.

It's one of the most disturbing consequences of the government shutdown, the death benefits paid to families of fallen servicemen and women have been cut off, leaving some facing a potential struggle to even pay for funeral expenses.

Now there may be a temporary fix.

Let's bring in our Pentagon correspondent, Barbara Starr, who's looking at this.

What are you learning -- Barbara?

BARBARA STARR, CNN CORRESPONDENT: Well, there may be a fix, Wolf. But tonight, it may well be worth remembering what President Lincoln said in the final months of the Civil War when he said it was "the solemn responsibility of government" -- and I quote "to care for him who shall have borne the battle and for his widow and for his orphan."

And tonight, many in Washington will tell you the government is failing to do that.

(BEGIN VIDEOTAPE)

STARR (voice-over): At Dover Air Force Base, 24-year old Army Ranger, Cody Paterson, came home to his family as Defense Secretary Chuck Hagel paid his respects. Killed on his second deployment to Afghanistan, his colonel called him "a courageous soldier."

Unbearable grief for families of the fallen made much more because the government shutdown left them without death benefits.

From the Senate chaplain, condemnation for all political leaders.

BARRY BLACK, SENATE CHAPLAIN: Lord, when our federal shutdown delays payments of death benefits to the families of children dying on faraway battlefields, it's time for our lawmakers to say enough is enough.

STARR: Publicly, the White House was promising the president wanted to fix a tragedy for the families that had become a P.R. disaster.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: So he was not pleased to learn of this problem.

STARR: As Hagel stood on the tarmac, top aides were urgently working on a solution. The Pentagon signed a contract with Fisher House Foundation, a private organization that helps war wounded. Fisher House will pay the families' bills and a $100,000 death benefit. The government will pay it back when the shutdown ends.

Twenty-four-year-old Army special agent, Joseph Peters, also killed in Afghanistan a few days ago. His friends upset about the payments being frozen.

KARA JARRAR, FRIEND OF ARMY SPECIAL AGENT PETERS: It's absolutely ridiculous that the family was losing their son, husband. They shouldn't have to worry about that right now.

(END VIDEO TAPE)

STARR: Now, a senior official here at the Defense Department, Wolf, says that Hagel warned White House officials and Congress several days ago, when the shutdown was imminent, that the death benefits would not be paid. And there was even a news briefing for reporters on that very fact -- Wolf.

BLITZER: Barbara, there's some other potentially serious news out there related to the shutdown for those who have served in the military.

What can you tell us about that?

STARR: Well, this next disaster looming is for veterans, who will not, at this point, to get -- likely get their November 1st benefits check. The secretary of Veterans Affairs today said November 1st, it is possible more than five million veterans, their surviving spouses and their children, will not get the checks that they are owed because the government will run out of money unless something is done -- Wolf.

BLITZER: They've got to fix this and they've got to fix it quickly.

Barbara Starr at the Pentagon, thanks very much.

Even as the country faces a looming financial crisis, President Obama, just a little while ago, named Janet Yellen to be the next head of the Federal Reserve. It's, arguably, one of the most powerful jobs in the world, overseeing the stability of the U.S. economy.

If confirming by the U.S. Senate, she'll succeed Ben Bernanke and become the first woman to chair the U.S. central bank.

Let's bring in our senior White House correspondent, Jim Acosta.

He's been watching all the day's developments over there -- Jim.

JIM ACOSTA, CNN SENIOR WHITE HOUSE CORRESPONDENT: Wolf, President Obama, of course, introduced Janet Yellen as the next chair -- chair of the Federal Reserve, noted that she'll be the first woman to lead the Federal Reserve in its 100 year history. And he paid a lot of compliments to Ms. Yellen, noting the fact that she is tough, but fair, and not only because she's from Brooklyn, talked about her bona fides as an economic policymaker, saying that she warned of the housing meltdown before it happened in 2007 and 2008.

But at one point, Wolf, he didn't make any direct reference to the debt ceiling deadline that is looming or the shutdown that is underway right now. But he did make sort of an implicit message when he said that, talking about the progress that's been made since the recession, said that we shouldn't do anything to threaten that progress.

Wolf, this was the one optic, perhaps the only one of the day, that the president could control. BLITZER: So, Jim, did the -- is there anything else going on, as far as that meeting that the president is now having with House Democrats, all 200 House Democrats who were invited over?

What's the White House saying about that and also about the fact that only some Republicans will show up at the meeting tomorrow, even though all House Republicans were invited?

ACOSTA: Right. Well, the president invited basically all members of Congress for these meetings this week. And you're right, House Republicans did respond to that by saying, no, they're just going to send their leadership and their committee members -- their committee chairmen, as Dana was mentioning just a few moments ago, Wolf. We can say that that meeting is underway right now with House Democrats. It started at about 4:40 this afternoon. We didn't see all of them go in. Many of them slipped through various side entrances to White House.

But White House Press Secretary Jay Carney, after receiving word from Speaker Boehner's office that only leadership, House Republican leadership and key committee chairmen would be coming over, fired off a pretty tough statement.

And here it is. It says, quote -- well, it mentions that the president is disappointed that the speaker is preventing all of his members from coming over. But it says, quote, "The president will talk to anyone any time and looks forward to their visit to the White House, but will not pay the Republicans' ransom for doing their job. If the Republicans want to have a real discussion, they should open the government and take the threat of default off the table."

So, Wolf, not only is that some pretty tough coming from the White House, it's an indication that both sides can't even agree on who's going to meetings at this point. That's how bad it is right now -- Wolf.

BLITZER: Yes, it's still pretty bad. It's got to get better.

All right, thanks very much, Jim Acosta, at the White House.

Coming up, the debt ceiling deniers, as they're called, rejecting the idea that an economic catastrophe could be looming out there. We're going to have two economists. They will debate what's going on. And Tweet us some suggested questions using the hash tag, sitroom.

And what do corporate leaders think of the stalemate that may lead to a U.S. debt default, at least potentially?

Won't -- the Virgin Group founder, Sir Richard Branson, he is here today in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The shutdown stalemate is dealing a blow to all sides here in Washington. Republicans are taking a hit. So are the Democrats.

Let's discuss what's going on.

CNN's Richard Quest is here; our chief political analyst, Gloria Borger; our chief political correspondent, Candy Crowley, the anchor of "STATE OF THE UNION" -- Gloria, the latest Gallup shows the Republican Party's favorable rating now at 28 percent.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: Right.

BLITZER: That's down 10 points from a month ago. That seems to be a record low, according to Gallup. Is this a sign the shutdown is having more of an impact on Republicans than Democrats. You can see the Democrats, they down as well.

BORGER: Look, the Democrats aren't exactly popular either. And as you know, the Congressional approval rating overall is like in the single digits. In some polls, you can't get much lower than that. Clearly, the Republicans have taken a larger hit on this, and this is exactly what I think the House Speaker anticipated when he originally did not want to have the strategy of tying -- defunding Obamacare to funding the government.

This was something he and others warned of, but that was not to be the case, because there's a group of Congressional Republicans very differently in the House. And so, now, they're kind of stuck. And so, what they're trying to do, Wolf, is talk a lot more about spending cuts, reform tied to raising the debt ceiling than they are in terms of talking about attaching -- defunding of Obamacare to the funding of the government, because by the way, Wolf, they always knew they could never get that down.

CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: Right. But it's also -- I don't think people -- well, they shouldn't have aatached (ph) Obamacare. They don't like the spectacle of the government being shut down, and that's what's driving everybody's numbers down.

BLITZER: Because if you take a look at this -- the poll that we did at the end of last month and in September, how's Obama handling his job as president, 44 percent approval, 53 disapproval. I did see a people today that haven't -- 37 percent approval. That's pretty low right there. How is the president handling his job as president if he has Democrats, 80 percent approved, independents only 33 percent approved. But look at this, Candy, only 12 percent of Republicans approve the job he's doing.

CROWLEY: It's been lower, but that's probably the least surprising of those numbers. This is not a -- this is the heaviest hit the Republicans are going to take. They're going to take this hit from the government shutdown. What the Democrats are far more worried about is how the president's affordable medical act is -- Affordable Care Act is going to play out. That's their big 2014 worry.

This, you know, will somehow work out. The Republicans are taking a hit. They're going to get hit. The Democrats will hit them, but if they have more stories about people whose insurance has quadrupled than they have stories of people who finally have insurance, they're in trouble. That's their big worry. BORGER: But the Republicans stepped on their own message. That's the problem. They could be talking about exactly what you're talking about --

CROWLEY: Well, they are. They're trying to. It's just the shutdown is the loudest --

(CROSSTALK)

BLITZER: And the looming debt ceiling issue is a huge issue as well. You're here, Richard, in Washington. You're broadcasting your show from Washington, because the meetings of the IMF --

Yes.

BLITZER: -- that are going. I know you spoke with the leader of the world bank today among others. The rest of the world must be pretty nervous, jittery right now seeing what's going on here in the United States.

RICHARD QUEST, CNN INTERNATIONAL BUSINESS CORRESPONDENT: absolutely conflicted. On the one hand they are saying this is no way to run a country, and they sort of saying those Americans have got no idea what they are doing, but on the other hand, they are serially worried about the ripple effects. Those U.S. treasuries are in every bank, insurance company, government, and the ripple effects of any sort of any distraction could be tremendously --

BLITZER: Explain that to us. So, let's say -- and I don't think it's going to happen. Virtually, no one thinks it will happen, but let's say they get to October 17th, and they reach that debt ceiling and there's an increase, what would happen to those U.S. treasuries that the Saudis, the Chinese, the Japanese, and millions and millions of American --

QUEST: All right. These are your options. One, you immediately stop spending so you don't go into any further debt. Well, that's a 4.2 percent cuts in federal spending that would drive the U.S. economy into recession and the rest of the world probably with it. Two, you somehow manage to finagle robbing Peter to pay Paul for a bit longer. Jack Lew (inaudible) financial chicanery.

Highly unlikely, it's not going to work. Three, you default. You stop paying the debt. And everybody now stop even if it's a technical default, even if it's a moment to default that was going in 1979 when those computer problems, everybody starts to wonder who's next, who's holding the baby, what's going to happen?

And that uncertainly -- now, there is a few out there that says it's going to be that bad. And there is a senator that says let it happen. And there are also some economists that say rule getting on (INAUDIBLE) nothing. But who wants to take the risk?

BLITZER: Yes.

CROWLEY: Well, that's actually what the treasury secretary said. If you press him on what's going to happen, what will this look like, what will happen, he goes, we don't want to find out.

QUEST: Yesterday, the IMF downgraded world economic growth quite substantially --

BLITZER: Because of?

CROWLEY: Because of this?

QUEST: All sorts of reasons, emerging markets, but they also threw in the possibilities of what's happening in the U.S.? It's a very fragile global situation.

BORGER: And let's remember, these are politicians. If one Social Security check does not go out, if one Medicare payment cannot be made, if interest rates start going up, if we start going into a recession like we did in 2009, they're going to react to it. They're politicians. They understand what will happen. They may disagree on when it will happen --

CROWLEY: But what's dangerous is they do feel that they have time after the 17th. That 17th seems very fungible.

QUEST: 1979, the --

BORGER: But why even play up to the deadline? I mean --

QUEST: Exactly. That's exactly the point.

BLITZER: They got to figure this out. They got to figure out in the next few days. Guys, thanks very much for joining us.

Up next, we can already see the early warning signs of what a possible default would do to the economy. We're going to show you what it really could look like. Stand by.

And debt ceiling deniers as they're called. They reject the very notion that a catastrophe could be brewing. Two economists, they are here. We'll debate what's going on. You could tweet your suggested questions using thr #sitroom. Stay with us. You're in the SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: The threat of a default is already impacting the economy, but just how bad could things get if the Congress doesn't extend the debt ceiling? CNNNs Tom Foreman is here to take a closer look. What are you seeing, Tom?

TOM FOREMAN, CNN CORRESPONDENT: You know, Wolf, a variety of warning signs are already flashing in the economy over a possible default, and here is the first and clearest one, the price of running the United States government is rising. You can see in the cost of treasury bills. These are notes that are sold to investors. Those investors give the country money to operate, and in return, they get their money back plus some interest. And that interest rate is rising because of all the uncertainty. They want more money back for loaning money now. Other possible warnings signs are not so clear right now. For example, what about the markets? Well, they have been more down than up lately, and the S&P 500, in particular, has fallen a good bit, although, it was recently a bit high. So, it's hard to know precisely what that decline means right now.

And of course, there's a lot of talk about what might becoming in terms of falling home values, loss jobs, and so on, but so far that is really just talk. So, we have no real sign of it happening quite yet, Wolf.

BLITZER: So, Tom, how does this picture change when and if an actual default were to occur? I don't think it would occur, but let's say it did.

FOREMAN: Well, that's when we move into completely speculative ground here, Wolf. And I think it's important to bear in mind. Whether or not that happens this months on the 17th or so or if it comes later on, sometime later, we don't really know and there's a lot of disagreement about you can define default, but there's pretty broad agreement among the economic analyst that the day of your undeniably in fault, when we're not paying for all sorts of things out there, almost everything changes, and probably for the worse

If the government can't pay its bills, almost 150 million Americans who get some kind of government assistance will not or they won't get all of it and depending on how that is manage. That conclude millions of older folks who absolutely rely on Social Security to stay alive and have their homes. In that environment, loans for new or growing businesses, the stock market, housing values, jobs, even the gross domestic product, could all start falling and fast.

And here's one of the most ominous possibilities. Go back to that idea of the government selling treasury bills to fund everything the government does. There's the real fear that in a default situation, no one will buy them or not enough people will buy them, and these investors who routinely roll over their investments in America might suddenly say no, it's too risky, I want to cash in. That could effectively bankrupt the nation in short order with no ability to borrow or to face a very long struggle to become solvent again -- Wolf.

BLITZER: Very dire situation, potentially out there. Good explanation. Tom, thanks very much.

So, we're seeing other dire warnings about what could happen if Congress doesn't extend the debt ceiling and the United States were to go into default, but there are some debt ceiling deniers as they're called out there. They're rejecting the forecast of economic catastrophe if the debt ceiling isn't raise by October 17th.

So, who's right? Let's discuss what's going on with two guests, the former Clinton labor secretary, Robert Reich, now with the University of California-Berkeley, and Stephen Moore who writes for "Wall Street Journal." Guys, thanks very much for coming in. I'll start with you, Steve. Go ahead and tell us, if the dead ceiling is not raise by October 17th, what would happen? Would there be a catastrophe? Would our economy go into deep recession if not depression?

STEPHEN MOORE, WALL STREET JOURNAL: Well, Wolf, great to be with you. And i hope you're not going to call me a debt ceiling denier.

BLITZER: No.

MOORE: But I don't think it would -- look, I don't want to see this happen. I think it's kind of crazy that we're in this situation, and it is hurting the economy, but I think some of these really dire forecasts, you know, like a bankruptcy in the United States or even -- I would even make the case to you, Wolf, that the chance of actually a default on our debt and this is a case the president has been making, the treasury secretary, your analyst just made, I think that is irresponsible, because the chance of a default on the debt is very close to zero.

And the reason for that is even if we hit that debt ceiling, which I hope we don't do, but even if we do, there is still money to pay off the bondholders. And in fact, I make the case that they make the first claim. Now, is that a good thing for the economy? Clearly no, but let's not scare people who own bonds to say that they're not going to get paid.

BLITZER: Robert Reich, go ahead.

ROBERT REICH, FORMER LABOR SECRETARY: Well, I think that kind of argument, Steve, with due respect is irresponsible, because even though there might theoretically be money to pay the interests to the bondholders for a few days, it is only a few days. You know, Jack Lew has, what, about $30 billion on hand as of the 17th, could be the 18th, but we're talking only about a few days.

And in the meantime, there would not be any money to pay Social Security payments or Medicare payments or do anything else the government is doing. I mean, this would be, if not technically a default, this would be a calamity for Americans, for millions of Americans, and for a huge number of people in the global economy. We should not even get close to this kind of a situation.

I'm worried not only about October 17th. I'm worried about the days leading up to October 17th as more and more people who are lending the United States money or who have lent the United States money get nervous about the ability of the United States to deliver on its full faith and credit, and interest rates start rising.

STEPHEN MOORE, WALL STREET JOURNAL: Bob, let's say that you're right. You know, I don't agree with everything you said, but I agree with you, that we don't want and go up to that point of no return. The question I would ask you. You worked for Bill Clinton. I was working for the Republican Congressional leadership back then in, what was it, 1995 and 1996, when we had a similar situation.

Bill Clinton got on the telephone with Newt Gingrich, made a deal. Clinton gave a little bit. Gingrich gave a little bit, and we got out of this. And Wolf, the problem I have with this crisis, everything is blaming Republicans and they do deserve some of the blame here, but it takes two to tango.

And you can't negotiate with a president who has said repeatedly for the last three weeks he will not budge, he won't move an inch. That is not negotiation, that is not compromise, and Bob Reich, that is not getting us out of this crisis.

REICH: Steve, let me distinguish 1995-1996. I was there. That was not an attempt by Republicans to stop or amend or change a rule of law, a law that is already on the books. That was a disagreement between Republicans and Democrats over a budget. Now, that was blamed on to Republicans ultimately, and I think then in that instance, Republicans deserve the blame.

But right now, we have the Republican Party saying essentially, we are going to and we have shut down the entire government. We are not going to raise the debt ceiling unless a particular law we don't like called the Affordable Care Act already on the books, already passed by Congress, already signed into law by the president, already affirmed by the Supreme Court as constitutional, unless that law is changed or delayed or amended or rescinded.

That's not the way in a democracy we work, and that is dangerous. That is playing with fire, that is unethical. The constitution -- I'm sure the framers of the constitution did not consider that that would be done by one party. And you know something -- one final point, Steve. If that is the way the game is played, no law on the books is safe. Social Security is not safe, Medicare is not safe. Nothing is ever safe again.

MOORE: Bob, I disagree with you. The constitution -- you know this, Wolf, it gives the power and the purse (ph) to Congress. Congress can fund or not fund anything that it wants to in the budget. Now, you can disagree with its priority of not wanting to fund some parts of Obamacare, but this is the prerogative of the House, you work it out. And this is something that is very legitimate.

I mean, Congress is funding things they want to fund and defunding things that they don't. The power of the purse, read the constitution, rest with the Congress.

REICH: You have a completely wrong reading of the constitution, Steve. If that were the reading, if that were the way the -- if that were the way we and our government would operate, then what -- we'd have showdown after showdown. Now, granted, that's what the Republicans have given us in recent years. But we will have a showdown on every piece of legislation that Republicans didn't like. I mean, the Fair Labor Standards Act, I mean -- you name it, there would be extortion --

(CROSSTALK)

MOORE: You know, why not delay it for a year, Bob? It's not ready for primetime. You know that. BLITZER: Hold on one second. One final question.

REICH: That's not the issue.

BLITZER: Steve, one final question to you and final question very quickly to both of you.

MOORE: Yes.

BLITZER: I don't think it will happen, but if there were this debt ceiling, default, let's say, and the U.S. got a limited amount of money, who gets paid first, creditors like China or Saudi Arabia or the Japanese or Social Security recipient? Steve.

MOORE: Well, that's a doomsday scenario, but I believe that the creditors do, because the U.S. constitution guarantees the full faith and credit of United States government. I believe it's the 14th Amendment.

BLITZER: Go ahead, Professor Reich.

REICH: Well, that same -- yes, that same clause, for clause number four in the 14th Amendment, Wolf, I think that would give authority to the president, not only to pay off the debt and to pay interest on the debt, but also to pay all of the other obligations incurred by the United States.

In fact, I hope he uses it and I hope he basically, if we get to the October 17th or 18th and the Republicans still want to play extortion, I hope the president says, well, you're forcing my hand, the constitution requires me to do this.

(CROSSTALK)

MOORE: That ain't going to happen. He could be impeached for that.

BLITZER: He said yesterday he doesn't want to do that --

REICH: Well, I think that's why exactly what the Republicans in the House are planning. That's part of the long-term strategy --

(CROSSTALK)

MOORE: All they want is a deal here, Bob.

REICH: Look it, they already had a deal. This act, the Affordable Care Act has already been negotiated to death. That's what we call the legislative process. It's over. It's done.

BLITZER: Let's leave it on that note. Let's hope the 14th Amendment won't be necessary. Let's hope they do come up with some sort of solution so there won't be any default, all the U.S. obligations are paid for, all the Social Security recipients that their checks on time

MOORE: Congratulations to Bob Reich on his new movie.

BLITZER: All right. Congratulations to Bob Reich on his new movie.

REICH: Thank you.

BLITZER: Indeed, guys. Thanks very much.

REICH: I thought you'd never mention that. I thought you'd never mention that.

(LAUGHTER)

REICH: Thank you very much.

BLITZER: Thank you very much. A good solid debate.

Much more ahead, including Senator John McCain. He's making his frustration very clear. How does he think this crisis could be solved? He's joining us live. Tweet us your questions using the #sitroom.

(COMMERCIAL BREAK)

BLITZER: The Washington Redskins' owner sends a letter to the fans about the team name. We have details and a lot more news right after this.

(COMMERCIAL BREAK)

BLITZER: Take a quick look at some of the other top stories we're watching here in the SITUATION ROOM.

The United States is now cleared to hunt terrorists inside Libya suspected in the deadly attack on the U.S. mission in Benghazi. A senior officials tells CNN the Libyan government has given, quote, "tacit approval" to conduct the missions. Four Americans were killed in that attack including the U.S. ambassador, Chris Stevens.

The United States says it's, quote, "recalibrating" its assistance to Egypt which now totals more than a billion dollars a year, most of it military aid. The state department says support to civilian sectors continues, but certain military projects will be cut back.

The owner of the Washington Redskins is taking his argument for keeping the team's name directly to the fans. In an e-mail, Dan Snyder writes of the deep meaning he says the name has, and he says he owes it to the fans along with players and coaches to preserve that heritage. Some find the Redskins name offensive to Native-Americans.

Up next, how worried is the corporate world about a possible U.S. debt default. I'll ask the Virgin Group founder, Rich Branson. He's here live in the SITUATION ROOM.

But first, a NASCAR driver who created -- I should say cheated death is back on track and using his experience to help others. Joe Carter has the story in this "Impact Your World."

(BEGIN VIDEOTAPE) JOE CARTER, CNN CORRESPONDENT (voice-over): At the start of the 2010 NASCAR season, Ryan Vickers was a driver to watch, and then his world stopped.

UNIDENTIFIED MALE: I just couldn't breathe. Every single breath became so painful. I couldn't stand it. That's what I just said, OK, we have to do something.

CARTER: Vickers had blood clots in his left legs, lungs and fingers. Doctors also found a hole in his heart prompting surgery.

UNIDENTIFIED MALE: I think at first, your reaction is just trying to sort it through. You know, am I going to be OK? And then, what about what you love to do? And that's racing. You know, as the doctor put it, you're going to take the risk of dying for another clot or potentially an internal injury and bleeding to death, you know, being on blood thinners.

CARTER: Vickers was eventually cleared by doctors and did come back.

UNIDENTIFIED MALE: I wasn't sure if I'd ever race again, period, much less, you know, to give back to this level in a winning car.

CARTER: Vickers sees his second chance as a chance to help others. He supports Clot Connect, a foundation started by one of his doctors.

UNIDENTIFIED MALE: -- help in trying to support as often as I can along the way, putting them on the race car and donating money and time. But I will say that through the ups and downs, I kept my eyes open and said, OK, you know what, this sucks but what can I learn from it? The truth is I probably grew more as a person through the negative experiences than I did the positives.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

BLITZER: In our next hour, I'll speak live with Senator John McCain. So does he see a way out of this current stalemate? Tweet us, use the #sitroom.

(COMMERCIAL BREAK)

BLITZER: The political turmoil here in Washington has huge implications for businesses around the United States, indeed around the world. So what do corporate leaders make of the stalemate?

Let's bring in the Virgin Group founder, Sir Richard Branson.

Sir Richard, thanks very much for coming in. When you see what's going on, this debate here in the United States right now, from the business perspective, your business perspective, what do you think?

SIR RICHARD BRANSON, FOUNDER, THE VIRGIN GROUP: We find it completely bizarre. I think, you know, the fact that a few people can hold up America, hold up the world, you know, is astonishing. And very worrying. I think that -- you know, we just have to hope that this gets resolved extremely quickly so that this fragile economy that we have on a global basis is not damaged and that we can continue to grow out of the recession.

BLITZER: If the stalemate continues, how would it impact your business, for example?

BRANSON: Well, look, I think it's going to impact all businesses worldwide if American doesn't pay its bills. You know, if a company doesn't pay its bills, it goes bankrupt. If a country like America doesn't pay its bills, it will send horrendous ramifications, I think, worldwide.

So -- you know, so I just hope sense prevails over the next day or two. I mean, it shouldn't be left longer than that. You know, so we can continue to work to try to get the world back on its feet again and make sure that, you know, people who are out of the work can get jobs and that no more damage is done.

BLITZER: You've been hugely successful with the business world. You're also very creative. You've got a lot of ideas. So do you have any -- do you have any good ideas you can offer all the folks here in Washington? What they need to do, how they should resolve this?

BRANSON: Well, look, I'm slightly biased because I see a health system in Great Britain that is not perfect, but it works well. And if I needed an operation in Great Britain, I would choose to have it under the NHS than to go privately. And, you know, and that applies to any single person who is living in the UK.

And I think, you know, if this new health system in America, with all -- all the imperfections of anything new can be given a chance, I think, you know, 10 years from now, we will look back and think, you know, why didn't America always have a system where you looked -- you looked after the poorest person and you didn't have a situation, you know, where people were not properly looked after?

And so, you know, I just very, much hope -- very, very much hope, you know, this can get resolved. And this law that's already been passed be given a chance to work.

BLITZER: You're here in Washington to -- I guess promote this new film on the war on drugs. Totally different subject, but let me play a little clip from the film. Watch this.

(BEGIN VIDEO CLIP)

RICHARD NIXON, FORMER U.S. PRESIDENT: We must wage what I have called total war against public enemy number one in the United States, the problem of dangerous drugs.

MORGAN FREEMAN, NARRATOR: Since 1971, $2.5 trillion have been spent on the war on drugs.

RONALD REAGAN, FORMER U.S. PRESIDENT: When we say no to drugs, it will be clear that we mean absolutely none. GEORGE H.W. BUSH, FORMER U.S. PRESIDENT: Some think there won't be room for them in jail. We'll make room.

UNIDENTIFIED MALE: If you can't control drug use in a maximum security prison, how could you control drugs in the free society?

FREEMAN: It's a business worth $320 billion worldwide.

BILL CLINTON, FORMER U.S. PRESIDENT: If all you do is try to find a police or military solution to the problem, a lot of people die and it doesn't solve the problem.

(END VIDEO CLIP)

BLITZER: So, Sir Richard, what do you think? How do we have to deal with this problem?

BRANSON: Well, I've been privileged to sit on the Global Commission on Drug Policy over the last two years. We've examined the war on drugs. It's been an abject failure for 60 years. In business, if I've had a company that failed for 60 years, I would have closed it down 59 years ago.

So what we have done is we've looked at countries which have got on top of the problem. Portugal 12 years ago said we will not lock up our children. We will not lock up our brothers and sisters what -- for what any drugs they're taking. We will instead -- we'll help them. And if somebody has a drug problem, they come in front of a psychiatrist and a health worker and they are given advice, they're given help, they're given treatment.

And in that way, they've managed to get on top of the problem. They -- Portugal doesn't suffer the costs that hundreds of thousands of people in prison, their lives ruined. And instead there's people weaned off drugs. They've become useful members of society again, and it's dropped from number three as a, you know, major item in Portugal to number 19. It's almost become a nonevent. And I just hope that a big country like America can see sense and do something similar.

BLITZER: Looking forward to seeing the film.

Sir Richard Branson, as usual, thanks very much for dropping by.

BRANSON: Thank you very much. Cheers, Wolf.

BLITZER: Yes. Cheers to you, too.

Coming up, the government is partially shut down here in the United States. But the gym where members of Congress can work out, guess what, open for business.

(COMMERCIAL BREAK)

BLITZER: Standing by to speak live to John McCain in our next hour.

(COMMERCIAL BREAK) BLITZER: Here's Jeanne Moos on the shutdown.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN SPECIAL CORRESPONDENT (voice-over): This 5-year-old --

UNIDENTIFIED MALE: NASA.gov is not working.

MOOS: Doesn't understand the shutdown. Just knows he can't play games on his favorite Web site.

UNIDENTIFIED MALE: NASA, it's gone.

MOOS: The Democrats have gone to great lengths, using metaphors to make their case against the shutdown.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You do not hold people hostage.

UNIDENTIFIED MALE: American people, this is the GOP. We have your economy.

MOOS: The "Daily Show" even got advise from a former FBI hostage negotiator on how to deal with a Republican strategist.

JASON JONES, "THE DAILY SHOW": What are your demands?

UNIDENTIFIED FEMALE: Can you just put the microphone down?

JONES: It's called a megaphone.

UNIDENTIFIED MALE: Don't be condescending.

MOOS (on camera): But after hearing this hostage-taking stuff day after day it's almost as if the metaphor has taken us hostage. Let's hear some new ones.

(On camera): From a Republican congressman came this comparison.

REP. RAUL LABRADOR (R), IDAHO: You know, Anderson, it's kind of like you telling CNN that you want to go ahead and you want to extend your contract for a year. And CNN tells you that you -- that you have to sign the dotted line right now. And you can negotiate on the terms of your contract later.

ANDERSON COOPER, CNN'S AC 360: But it's not really that way because Congress hasn't passed my contract.

MOOS (voice-over): Certainly Republicans must have really bugged this congressman because he compared them to cicadas.

UNIDENTIFIED MALE: They come every 17 years. They make a strange and unpleasant noise, and then they shut down.

MOOS: A metaphor tweet from the liberal editor of Think Progress was so popular a Democrat read it on the House floor, likening it to Republican tactics.

REP. MIKE DOYLE (D), PENNSYLVANIA: Can I burn down your house? No. Well, let's talk about what I can burn down? No. You're not compromising.

MOOS (on camera): But why just dress up your argument with a metaphor when you can actually dress up?

(Voice-over): MSNBC's Rachel Maddow portrayed Republicans as a whaling boat being dragged at the bottom of the ocean by a harpooned whale.

RACHEL MADDOW, MSNBC'S RACHEL MADDOW SHOW: It turns out the crew is bunkers.

MOOS: The air got more poisonous when Jon Stewart razzed Republicans for not owning up to having engineered the shutdown.

JON STEWART, HOST, "THE DAILY SHOW WITH JON STEWART": Own it. Don't fart and point at the dog.

MOOS: At least we haven't had to suffer through mixed metaphors.

MADDOW: But the whack-a-do crew says no, don't do it.

STEWART: I can't stay mad at you.

MOOS: Jeanne Moos, CNN --

UNIDENTIFIED FEMALE: The federal government is shut down.

UNIDENTIFIED MALE: No!

MOOS: -- New York.

UNIDENTIFIED MALE: No!

UNIDENTIFIED FEMALE: I'm sorry.

(END VIDEOTAPE)