Return to Transcripts main page

The Situation Room

Fiscal Cliff Plan Pits GOP Against GOP; Huge Crowd Storms Egyptian Presidential Palace; Syrians Terrified of Chemical Weapon Attack

Aired December 04, 2012 - 17:00   ET

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

WOLF BLITZER, CNN ANCHOR: And you're in THE SITUATION ROOM.

Happening now, Syrian rebels laying siege to a key government military base. Our own Arwa Damon is on the ground inside Syria and behind rebel lines.

Violence spreading in Egypt -- protesters break through barbed wire barriers to attack police, as ambulances race to the presidential palace.

And why a father fears he'll never see his five-year-old daughter again unless the United States Supreme Court steps in.

We want to welcome our viewers in the United States and around the world.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

Weeks of violent protests in Egypt are now spreading. Demonstrators angry at a perceived presidential power grab delivered their outrage today at political offices and even at the presidential palace itself in Cairo, where one of the -- at one point, protesters breached the security barricades.

CNN's Reza Sayah is in the Egyptian capital for us -- Reza, you just got back from some of those violent protests at the Egyptian presidential palace.

Tell us what you saw.

REZA SAYAH, CNN CORRESPONDENT: Wolf, we want to be careful not to blow this out of proportion, because there were no widespread clashes, but certainly there were moments of tension a few hours ago. That's when protesters started throwing rocks, debris at police. And they broke through a barrier, some barbed wire that security forces had arranged. Security forces responded by firing tear gas.

The question was, would things get uglier?

Would things escalate?

They didn't. Police switched their strategy. They retreated, went behind the palace walls, and things calmed down considerably.

In the next few hours, the protests were mostly peaceful, impassioned, slogans, again, against President Morsi. Most of these opposition factions have focused their protest demonstrations over the past couple of weeks here in Tahrir Square. But tonight, Wolf, they went to the president's palace with their message that they don't like what he's done with these decrees, they don't like the draft constitution. Some still calling for his ouster -- Wolf.

BLITZER: The other day, some of those protesters were getting closer and closer, Reza, to the U.S. Embassy compound in Cairo. That's not far away from Tahrir Square.

Is that embassy secure?

Is it in -- is everything OK there?

SAYAH: It is. And that had everything to do with the proximity of the U.S. Embassy to Tahrir Square. It's just a couple of blocks away. At no time were there any indications that these protesters were targeting the U.S. Embassy, and tonight, no indications they were targeting the palace. The state media saying the president was at no time in danger.

And back here at Tahrir Square a week or so ago, when the clashes were really intense, they were really triggered by the troublemaking elements, and the teenagers that had very little to do with the fight for democracy here -- Wolf.

BLITZER: The bottom line, it looks like there's been -- there's no end, at least in the short-term, to the demonstrations, the protesters, the clashes with police, the tear gas. The pictures are very dramatic.

Is that a -- an accurate assessment -- Reza?

SAYAH: It seems that way. But it's also important to point out that the momentum seems to be shifting in favor of the president and his supporters. He's called for the national referendum on December 15th. He already has executive power and legislative power, additional powers with those decrees. He has a lot of supporters. These opposition factions, these opposition protesters, the question is, how much staying power are they going to have?

How much stamina do they have?

And what other options, beyond protesting, do they have?

We'll keep our eyes out in the coming days -- Wolf.

BLITZER: We certainly will.

Reza Sayah on the scene for us in Cairo.

Thank you. Meanwhile, NATO is echoing President Obama's strong warning to the Syrian regime of President Bashar al-Assad against using chemical weapons against his own people. U.S. intelligence is deeply concerned right now that the Assad regime is mixing deadly sarin gas for possible use against rebels and civilians.

The NATO secretary-general calling that unacceptable, saying it would draw immediate international reaction.

Inside Syria, the possibility of chemical attacks has civilians terrified.

Joining us now from Northern Syria, our own Arwa Damon -- Arwa, we've -- we've now learned the Syrian military is actually mixing up various recipes for poison gas.

What are the rebels, the civilians there on the ground in Northern Syria where you are, telling you about this?

ARWA DAMON, CNN CORRESPONDENT: Look, Wolf, this is a civilian population that has not been able to defend itself against bullets and bombs. So when it comes to any sort of chemical warfare, they have no defense system whatsoever, no way to take or undertake any sort of preparations.

Some of the rebels and the activists that we have been talking to do, in fact, believe that the stronger the stranglehold grows on regime forces, the greater the likelihood it is, despite everything that the government is saying, that they are, in fact, going to somehow employ these chemical weapons.

In fact, not too far from Aleppo is one of the main suspected places, a weapons manufacturing facility that rebel fighters are telling us is one of the areas that the regime is really focusing on defending. It is one of the areas where there are great suspicions. There is some intel saying that that is, perhaps, one of the sites that the regime is, in fact, experimenting when it comes to chemical weapons.

So people here are naturally phenomenally terrified that that could potentially be an option that the regime does, in fact, choose to undertake -- Wolf.

BLITZER: Arwa, we also know you've been following this tense standoff between the Syrian regime, the military facilities there at a base surrounded by rebel forces.

I want to play this report that you filed.

(BEGIN VIDEOTAPE)

DAMON (voice-over): Close to Aleppo, the rebels have a stranglehold on a sprawling military base.

(on camera): There's a red gate that's right next to a stone wall. And then right behind it is the wall that is the outer perimeter of the military academy. It's less than 100 meters away, some 300 and -- and 30 feet.

(voice-over): We've quickly moved to another vantage point in a building next door. Alishah Bland (ph) commands the Lions of Aleppo battalion.

"It's clashes," he says nonchalantly. Shanan (ph) used to be a tailor. Since the uprising began, he's been wounded four times and detained three.

The rebels don't have binoculars, so he uses a camera to zoom into the base and show us government positions.

(on camera): You can see a sandbagged fighting position on the roof of one of the buildings inside.

(voice-over): Fighting has been fierce, but the rebels are confident they have the upper hand.

Shanan (ph) uses a pool table to map out where government units are. In all, three rebel brigades are surrounding the base, plus, a militant Islamist group.

Danous Rafant (ph) has this part -- the most dangerous. "It's the road to Aleppo," Jablan says.

"Once we finish the Mushad Academy (ph), the direct route to the north will be open," he adds.

So far, 250 soldiers at the base have defected since the uprising began, the majority joining rebel ranks. But some 450 remain inside. Air drops of food often miss their target. The rebels have shot out the water supply.

(on camera): There used to be a sniper that was on top of the water tower who would take shots at them and there are still bullet holes in the glass here.

(voice-over): "They own the night, but we own the day," Shablan boasts. He says the rebels could easily overrun the base, but they want to give others a chance to defect. They've even punched holes in the walls of the perimeter. Jamal (ph), a defected soldier, says the senior officers are just looking after themselves. He and the others here, some of whom don't want to appear on camera, fled together. They were trainers on the base.

"Around the perimeter, it's something of a human shield," Abu Jafar (ph) says. "There isn't a single point that doesn't have a soldier on it. There are only two to three meters between each."

The soldiers have stockpiles of artillery. But Jamal says their options are dwindling. They have reached a point where they think they can't go back. They have reached a dead end.

Slowly, they are weakening, he says.

This is not the first base in Northern Syria to come under siege. In at least this area, the Free Syrian Army is gaining the upper hand in a grim war of attrition.

(END VIDEO TAPE)

BLITZER: And Arwa is back with us from Northern Syria -- Arwa, how much territory do the rebels actually control in and around Aleppo?

DAMON: You know, it's pretty impressive how far they have actually managed to come, given the fact that there has been virtually no significant international support, based on our moving around the area and what they've been telling us. They control, or, rather, the regime does not control the eastern portion of the city of Aleppo itself, although there are pockets where there are still significant front lines in that portion. They control a little bit of the southwest and the northwest, as well. They do not, though, however, for example, control the Aleppo airport, which lies to the east. That is partially a military airport, as well.

But here's what's interesting, Wolf, is that a lot of these military, uh, bases, military institutions or facilities, are increasingly coming under siege. A pilot who recently defected from the military portion of the Aleppo airport told us that it was around 50 percent under siege.

And so the rebels are really beginning to move in and force the regime into various parts of the city and onto their bases, in many instances, as well.

BLITZER: Arwa Damon is one of the few Western journalists inside Syria right now.

She's reporting from Northern Syria, risking her life to bring us these exclusive reports.

Arwa, be careful over there.

We'll touch base with you later.

DAMON: Thank you.

BLITZER: "Out of balance" -- that's how President Obama is describing Republicans' plans for avoiding the fiscal cliff.

Can these two work together?

We're going to ask Congresswoman Debbie Wasserman Schultz.

She's the chair of the Democratic National Committee. The president has just asked her to stay on that job.

Plus, outrage over those red light camera tickets boiling over. And now, there's a lawsuit.

(COMMERCIAL BREAK)

BLITZER: That's a bitter backlash from Republicans, at least some Republicans, over the House GOP proposal to keep the country from going over the so-called fiscal cliff at the end of this year. While President Obama says it doesn't go far enough, Republican critics say it goes way too far when it comes to raising taxes.

Our senior Congressional correspondent, Dana Bash, is on Capitol Hill watching all of this unfold -- Dana, what are you hearing?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, Republican sources I'm talking to think that maybe it is sort of the goldilocks scenario. As you said, if one side thinks it's too far, the other side thinks it's not far enough, maybe it's just right.

(BEGIN VIDEOTAPE)

BASH (voice-over): The House Republican fiscal cliff counteroffer calls for $800 billion in tax hikes. It maybe half of what the White House wants.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Rates are going up. They have to go up.

BASH: But the fact that House GOP leaders proposed raising $800 billion in taxes is roughing many a feather in their own party.

SEN. JIM DEMINT, (R) SOUTH CAROLINA: Republicans should not be conceding that the federal government needs more money and negotiating with ourselves and treating the president's proposal like it's serious.

BASH: GOP senator, Senator Jim DeMint, is an anti-government, anti-tax purist who helps raise millions for conservative candidates, even against fellow Republicans.

DEMINT: There's some that want to go the politically expedient route to give the president what he wants to get out of this mess.

BASH: DeMint is hardly the only conservative upset with House Republican leaders. The Conservative Heritage Action Network sent this alert to supporters saying "call your representatives. Tell your representatives tax hikes are not part of the solution. The e-mail included a not so subtle threat saying, this infamous pledge cost George H.W. Bush re-election.

GEORGE H.W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: Read my lips, no new taxes.

BASH: Well-aware of the potential conservative blowback that could imperil his leadership, House speaker, John Boehner, was careful to include other GOP leaders on this proposal letter to the president, including former vice presidential candidate, Paul Ryan, who spent months on the campaign trail arguing against tax increases.

REP. PAUL RYAN, (R) VICE PRESIDENTIAL CANDIDATE: He won't raise taxes, we will cut taxes for small businesses and working families.

BASH: House GOP sources tells CNN they hope conservative backlash is proved to the White House that Boehner is trying to compromise. In fact, even the Senate Republican leader fell short of embracing the House GOP offer that includes tax increases.

SEN. MITCH MCCONNELL, (R) MINORITY LEADER: The House Republican leadership is trying to move the process forward. Frankly, I had hoped we would be accomplishing more in the real talks that are going on privately. But I can tell you that being aware of those is nothing going on privately that's not going on publicly.

(END VIDEOTAPE)

BASH (on-camera): So, why are there no talks going on privately right now? Well, Democratic sources I talked to say that they really believe right now they've got a win-win strategy going. If one win would be for Republicans at the end of the day to cave and give in on raising taxes for the wealthiest Americans, so they're hoping maybe they can run out the clock and push that.

But if they fail and we do over the fiscal cliff than they believe that Republicans will get blamed for that, because they wouldn't go along with raising taxes on the wealthy. But one interesting subplot is going on, Wolf, in the house.

According to a member of the Senate Republican leadership I talked to that John Boehner really has to be careful to whatever he agrees to, if he agrees to a deal, to make sure that it can get a majority of the majority. Meaning most of the Republicans in the House could vote for it, because if he doesn't, that it could weaken him ultimately and make it harder for him to negotiate with the White House in further negotiation about other things in the future.

BLITZER: As you know, Dana, Nancy Pelosi and her fellow Democrats, they are pushing what's called this discharge petition to skirt around Republican opposition. Get a vote. They need 218 to approve this procedure. They have a vote on whether to approve continuing the tax breaks for 98 percent of the families out there. Does it have a chance from getting off the ground?

BASH: It looks very unlikely. It's a heavy lift. Not impossible, but very unlikely. So far, according to a Democratic source, they have 142 signatures, but Wolf, they need 218.

Just to give you a sense of how hard it's going to be, our Congressional producer, Deirdre Walsh, talked to Republican, Tom Cole, who, of course, has been one of the few saying, we should pass just the middle class tax cuts even he says that he won't sign the discharge petition, because that is going beyond policy.

It's really about loyalty to your party and hard to see Republicans going for that. And right now, still, Republicans have a huge majority. So, it'd be hard to get the 218.

BLITZER: All right. Good point. Thanks very much, Dana.

There's more than just taxes at issue right now. Entitlements, specifically, Medicare are huge part of the fiscal cliff standoff. Our chief national correspondent, John King, is joining us over with the magic wall. John, explain to our viewers how Medicare factors into all of this.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, in one sentence, it's where the money is or at least where a lot of the money is. And look, we have this credibility standoff right now. Republicans say the president won't be credible until he pushes the Democrats to do more on Medicare and other entitlement cuts and additional spending cuts.

The president, of course, says, Republicans aren't serious until they agree to raise tax rates on the wealthy. But let's look at the Medicare argument. Let me give you one scenario. Come over here, we'll take a peek at this. If you're a single man and you were born in 1945, that means you're approaching 70, you're on Medicare.

If you made about $20,000 a year during your career, that was your average, then in Medicare taxes, you paid about $18,000, roughly $18,000 to $20,000 in Medicare taxes. That's what you pay. If you made about $110,000 a year in your career, well, you paid about $88,000 to the government in Medicare taxes.

That's what you paid in. And a lot of conservatives and others are just saying you need to change the program. This is one of the reasons why. This is what you get out. Again, if you paid $18,000, you're getting more than ten times out over the course of your lifetime in Medicare benefits. If you paid about $88,000 in, you're getting more than 2-1 deal, if you will, more than $200,000 in benefits for what you paid in.

So, conservatives and Republicans in Congress now say we've got to change this program somehow. We've got to take some money out of Medicare, reduce the costs. And here's one of the reasons they say that's so essential, Wolf. This is where the money is. If you look through the 1970s, the 1980s, the 1990s, even up to now, the green is the revenue, the money coming in to Medicare.

The red line is the cost. Well, roughly, the money coming in has kept pace with the cost up to now. But look at 2020, you start to see this gap, right? Then you have this much coming in, but because of the baby boom generation, this much going out in benefits, this is why Medicare, down the road, adds so much to the federal budget deficit.

So, to get a credible deal, what do some Republicans say, raise the retirement age to 67, somewhat even say higher, but raise it to 67 or means testing, meaning making more wealthy American, more (INAUDIBLE) Americans pay more into the system or get less out of the system. That are several ways to do this.

So, what I'm about to show you isn't exact. But if you means test, that means you're paying less out to affluent Americans. That means you're keeping the revenue line closer to the cost line. If you also raise the retirement age, you do the same thing. You're paying out less as money comes in, so you're keeping the revenue like closer to the cost line. That is the goal. So that when you do a 10 or 20-year deficit calculation, Medicare is not adding to the federal deficit. But, Wolf, that's the policy and it's difficult math. But you know the politics.

Just as Republicans are having a backlash against their speaker saying we don't think we should put tax increases on the table, the Democrats, especially liberal Democrats who just helped this president get elected and some of the new members of Congress who had a lot of liberal support, they say they ran promising not to touch Medicare.

So, they say they won't do this. So, you have the credibility challenge. Republicans say give us entitlement and other spending cuts. Democrats say give us higher tax rates. That's why we have a stalemate.

BLITZER: Stalemate continuing right now. John, thank you. Thanks very much.

An internet icon wanted for questioning in the killing of a neighbor reportedly revealing his whereabouts after weeks of evading police. Stay with us. You're in the SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: An intense typhoon has now struck the Philippines. Kate Bolduan is back. She's monitoring that and some of the other top stories in the SITUATION ROOM right now. What happened?

KATE BOLDUAN, CNN CORRESPONDENT: A very powerful typhoon. It's the most powerful typhoon to hit the Southern Philippines in decades with top winds of 110 miles per hour. It came to the shore early this morning, destroying homes, setting up a landslide, and killing more than two dozen people.

The International Space Station captured this shot of the typhoon, hope we can show you, as it was bearing down on the Philippines. We'll show it to you a little later.

A lawyer for internet security pioneer, John McAfee, says he has left Belize and is in Guatemala City. McAfee is wanted for questioning in Belize in connection with the shooting death of his neighbor last month. He was -- he has told CNN that he's innocent and will not surrender to police. He expects to hold a news conference tomorrow.

And former Alaska governor, Sarah Palin, has apologized for remarks she made about Congressional Republicans she thinks are compromising too much in the battle over the fiscal cliff. On Fox News, She called them wusses who are being, quote, "wobbly on conservative principles." In her apology, the former vice presidential nominee, repeated those characterization. But for the record, there's no real compromise happening at the moment.

BLITZER: A lot of obliteration, though, in --

BOLDUAN: That makes a very hard to say (ph).

(LAUGHTER)

BLITZER: It's the kind of case you rarely see at the United States Supreme Court. You're going to find out why the justices are about to weigh in on a child custody battle.

(COMMERCIAL BREAK)

BLITZER: The fiscal cliff looms at the end of the month. President Obama standing firm in his ground in this interview he did today with Bloomberg TV.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We're going to have to see the rates on the top 2 percent go up. And we're not going to be able to get a deal without it.

(END VIDEO CLIP)

BLITZER: Let's talk about the fiscal cliff and more with Democratic Congresswoman Debbie Wasserman Schultz of Florida. She is the chair of the Democratic National Committee.

Congratulations. The president has nominated you for another term. Let's talk about that in a moment. But let's talk about the fiscal cliff right now. The president says the Republicans have to agree to raising the -- the marginal tax rate for the wealthiest top 2 percent from 35 percent.

Does he mean it has to go back up to 39.6 percent as was the case during the Clinton administration or is there some wiggle room in between 35 and 39.6?

REP. DEBBIE WASSERMAN SCHULTZ (D), FLORIDA: The president has repeatedly said there's plenty of room for compromise. But really what this boils down to is a matter of fairness and a matter of math. Giving certainty for the middle class, that is absolutely essential. I mean there is no way mathematically, if you look at the Republican's proposal, that you can get to the kind of deficit reduction that we need to with preserving the middle class tax cuts by not increasing as the Republicans refuse to do the upper tier rates. And there's room for discussion, but that has to be part of the package.

(CROSSTALK)

BLITZER: So the 39.6 percent, that's not a red line?

SCHULTZ: As far as I know and the conversations I've had, the president has said there's room for compromise, but for the red line to be drawn in the sand by Republicans to say that an increase in rates on the wealthiest most fortunate Americans is not on the table is not fair and it's also going to make it so that we mathematically cannot get to the kind of deficit reduction that both parties know we need to -- BLITZER: Because they are coming up with a counterproposal, capping deductions, eliminating loopholes on wealthy people, raising revenue by $600 billion.

SCHULTZ: The math does not work when it comes to making sure we preserve the certainty -- that we get certainties for the middle class, that we make sure that we get the kind of deficit reduction that you need, and you can't do it without increasing the tax rates on people who make more than $250,000. Up to the first $250,000, the rates wouldn't go up. But above $250,000, they need to, because the deficit reduction that we ultimately agree to can't be done on the backs of the middle class.

BLITZER: Watch this, because you'd be interesting. They're lighting the Christmas tree up on Capitol Hill not far away from where you and I are. The speaker of the House, John Boehner -- there it is. That's always a nice, a nice picture up on Capitol Hill. This is a 65-foot Englewood spruce that was brought in from White River National Forest from Colorado, harvested on November 2nd, made the long trip, stopped in 28 communities along the way to the U.S. capital.

It will be decorated with approximately 5,000 ornaments. It already is in fact. Hand-crafted by Coloradoans to reflect this year's theme, "Celebrating Our Great Outdoors." Doing a little bit of "Oh Tannenbaum" right now. Let's listen in for a second.

Very nice picture indeed. All right. We're talking about serious stuff, but I wanted to show our viewers that nice holiday moment there, the Christmas tree over at the capital.

The British Prime Minister Tony Blair, he was here in THE SITUATION ROOM. We spoke. There are serious ramifications if we go over the fiscal cliff. Listen to what he just told me.

(BEGIN VIDEO CLIP)

TONY BLAIR, FORMER BRITISH PRIME MINISTER: In the global economy as a whole, there's a -- there's a lack of confidence, there's a worry about where it's going. If you can sort out this issue, then even though that doesn't sort out all the problems of the American economy or the global economy, it would be a big boost, I think.

(END VIDEO CLIP)

BLITZER: I think everyone wants to avoid going over the fiscal cliff, although there are an increasing number of Democrats who are saying, you know what, we'll go over the fiscal cliff, the Republicans will be blamed for that. That will be good for the Democrats.

SCHULTZ: Well, this is not about politics, this is about fairness and making sure that when it comes to -- just as Prime Minister Blair has said, when it comes to making sure that we give the global economy the certainty that it needs and the stability that it needs, we have to reach an agreement so that we don't go over the fiscal cliff. But, quite frankly, President Obama has made it very clear, congressional Democrats have made it clear, and the American people on election day made it clear that there has to be a balanced plan that cannot balance our deficit reduction on the backs of the middle class.

BLITZER: Are you ready for significant cuts in spending in Medicare and Medicaid?

SCHULTZ: We're ready to make sure that we have a balanced approach that includes significant spending cuts, likely voted for when the Republicans played chicken with our economy last summer and we had more than a trillion dollars in spending cuts only with no revenue to increase the debt ceiling and get a down payment on deficit reduction.

So we've shown that we are ready to make the spending cuts necessary and the Republicans need to step up to the plate and recognize that in order to mathematically get to the size of deficit reduction that we need, without balancing that deficit reduction on the backs of the middle class and give certainty to the middle class, that they have to make sure that we increase rates on the wealthiest Americans.

BLITZER: If they do that, will you cut spending in Medicare and Medicaid?

SCHULTZ: We have made it very clear that we need to provide savings, we need to find more savings in Medicare. We already had $716 billion in savings in the Affordable Care Act, which added eight years of solvency. President Obama has proposed $360 billion in additional Medicare savings. And we know that you can do hundreds of billions in savings. So absolutely --

BLITZER: Because you know a lot of liberals in your party, they'll vote against it if there's any significant cut in Medicare and Medicaid, these so-called entitlement spending.

SCHULTZ: Well, let's be clear that when -- we know that there are savings that can be found in Medicare and Medicaid. But what absolutely we have to make sure that a priority in any deal is that it does not -- you don't balance this first on the middle -- on the backs of the middle class. You've got to make sure we have significant spending cuts, balance with an increase in rates.

We can do tax reform also, but mathematically in order to get the certainty the middle class needs and the deficit reduction we need, we have to make sure that revenue, with rate increase, is a part of the package.

BLITZER: And very quickly, I want to play a little clip of the president once again from Bloomberg TV today suggesting do a modest deal now, punt, and do a bigger deal next year. Listen.

(BEGIN VIDEO CLIP)

OBAMA: We're not going to be able to come up with a comprehensive tax reform package that gets it all done just in the next two weeks. We're not going to be able to come up with necessarily a comprehensive entitlement reform package that gets it all done in the next two weeks.

When you look at what Ronald Reagan did back in 1986, working with Bill Bradley and others, that was a year and a half process. So what I've suggested is, let's essentially put a down payment on taxes, let's let tax rates on the upper income folks go up.

(END VIDEO CLIP)

BLITZER: And then he said maybe next year they can go back down, work out a down payment on entitlement cuts, if you will. Look, you've had a year and a half to do this. It's not just three weeks. You knew this was coming a year and a half ago.

Where has been the congressional House Democrats and Republicans and White House leadership on this? Why wait until the last three or four weeks of the year to deal with something you've known, Congresswoman, that's been coming up for so long?

SCHULTZ: As I said, last summer, Democratic, like me and like many other Democratic members, had to go home and defend in our districts -- you know, I represent a liberal Democratic district who was none too happy that their -- that their representative voted for -- $1.5 trillion in spending cuts only.

But I knew that we can't engage in my way or the highway politics. Democrats have been at the compromise table for all of this year and a half, as has President Obama. It is time for the Republicans to recognize that the only way that we are going to get to this the significant deficit reduction we need is through certainty for the middle class, a balanced approach to spending cuts, as well as revenue increase in the rates, a down payment as President Obama talked about, and then we need to spend next year on some of the larger issues.

BLITZER: You understand the frustration that it always comes down to the last few weeks in a tough situation that we knew was coming out for so long

(CROSSTALK)

SCHULTZ: Now it's incredibly -- you're right. It's incredibly frustrating that the Republicans are still digging their heels in and refuse to recognize that whatever plan we come up with, and that we do have to have balance, fairness and it has to work mathematically. And their plan on the table simply does not.

BLITZER: The president had nice words to say about you today in nominating you for another term. You've got a lot going on, Congresswoman.

SCHULTZ: Well, there's -- we have a lot going on in the country and it's a big challenge and I'm really privileged and honored to be asked by the president to continue to serve. BLITZER: Thanks for coming in.

SCHULTZ: Thank you.

BLITZER: We'll take a quick break. Lots more news right after this.

(COMMERCIAL BREAK)

BLITZER: Let's go to the U.S. Supreme Court right now. And an issue we hardly every see reaching the justices' ranks. The issue of international child custody.

Our crime and justice correspondent Joe Johns is joining us now with details.

This is a fascinating case.

JOE JOHNS, CNN CRIME AND JUSTICE CORRESPONDENT: It is, Wolf. Tomorrow the Supreme Court will hear a highly personal case that crosses borders and cultures. It could be the last chance for a father to fight for his daughter in U.S. courts. We talked to both sides including the mother via Skype in a remote area of Scotland.

(BEGIN VIDEOTAPE)

JOHNS (voice-over): Eris Chafin is a beautiful 5-year-old in the middle of a bitter custody battle between two parents at the end of a rocky marriage.

JEFF CHAFIN, ERIS CHAFIN'S FATHER: My daughter, she's my -- she's my sparkle. She's everything for me.

LYNNE CHAFIN, ERIS CHAFIN'S MOTHER: If my daughter comes to the United States, I believe I will never see her again.

JOHNS: It's a complicated legal fight, dealing with international borders and treaties and important enough that the U.S. Supreme Court has taken the case.

The last time Eris was in the U.S., her father shot this video of her. But now she lives in Scotland where her mother Lynne is from. A federal judge ruled that Lynne could legally take Eris back to Scotland, despite her father's objections.

Jeff is a U.S. Army sergeant who served in Afghanistan. He says Eris shouldn't be with her mother because Lynne has a drinking problem.

J. CHAFIN: Personally, I don't think that somebody with an issue, an alcohol issue like that, can take care of a child. You know, definitely on their own.

JOHNS: As evidence, Jeff points to this 2010 police video where Lynne was charged with disorderly conduct. But Lynne says it was an isolated incident after a night out. L. CHAFIN: You know, I had too much to drink and I apologized to the court. You know, when I was taken to court, that's just no reflection on me as a mother. I wasn't drunk in charge of my child.

JOHNS: It's a classic he said, she said.

L. CHAFIN: I believe he set me up.

JOHNS: Lynne accuses Jeff of unwanted controlling behavior including a plot to get her deported.

L. CHAFIN: He called the police on me on the 24th of -- Christmas eve and I was removed from the house. I was taken to jail.

JOHNS: Something Jeff denies.

J. CHAFIN: How could I get her deported? How is that even possible?

JOHNS: Telling a totally different story.

J. CHAFIN: I woke up with her standing over me with a knife.

JOHNS: So why would the Supreme Court get involved?

There's a treaty called "The Hague Convention" that says a child in the middle of an international custody battle goes to the country of her habitual residence.

Here's Lynne's lawyer.

STEPHEN CULLEN, ATTORNEY FOR LYNNE CHAFIN: The whole treaty turns on these two words. Habitual residence. What is the ordinary, regular home of this little girl?

JOHNS (on camera): And what is it?

CULLEN: Scotland.

JOHNS (voice-over): The federal court agreed that's where Eris belonged. But Jeff's lawyer argues the judge got it wrong.

The question is whether Lynne intended to stay in the U.S. with her family.

MICHAEL MANELY, ATTORNEY FOR JEFF CHAFIN: The phrase miscarriage of justice comes to mind.

JOHNS: But the main issue for the Supreme Court is if Jeff can appeal the decision now that Eris is out of the country.

MANELY: You've got to have that next level of review.

JOHNS: And it could have broader implications.

MANELY: This is a case that has immediate significant long- lasting impact for every parent in America.

JOHNS: Though most likely for military families and families who travel overseas. Ultimately, Lynne's lawyer says, it all comes down to this.

CULLEN: The welfare of the child is not good for a child to be like a ping-pong ball going backwards and forwards between different countries.

(END VIDEOTAPE)

JOHNS: Important to say that the treaty that affects this case is mainly designed to help children who have been abducted from their home country. This is a slightly different scenario.

The Chafin story has caught the attention of two Republican senators but neither office would say today they will introduce legislation addressing any of the issues, because passing a bill to circumvent a treaty would be controversial on the hill and suspect in the courts.

BLITZER: We'll see what the justices decide. Fascinating case indeed. Thank you very much, Joe.

Top governors sit down with President Obama over at the White House to discuss the fiscal cliff. Did they find any common ground?

(COMMERCIAL BREAK)

BLITZER: A bipartisan group of governors, three Democrats, three Republicans, are urging both sides to reach a deal to keep from going over the so-called fiscal cliff. They met privately with President Obama over at the White House today.

Among the governors, the Utah Republican governor, Gary Herbert, is joining us now from Capitol Hill.

Governor Herbert, thanks very much for coming in. Take us inside that room, if you can. What did you learn from that meeting that you didn't know going in?

GOV. GARY HERBERT (R), UTAH: I don't know if we learned a lot different, but it was nice to have the governors invited to be in the room. We sometimes have been ignored and underappreciated. And I think we have something to offer to help them solve some of the policy issues.

BLITZER: Are you more or less confident that we will avoid going over the fiscal cliff?

HERBERT: I've got some concerns that they're still a ways apart. States are trying to do their part by doing more with less. We recognize it's a shared sacrifice. We're prepared to take less money and we've asked to give us more flexibility. We can do more with less as a state.

BLITZER: What does that mean, more flexibility? Explain.

HERBERT: Well, money comes with strings. The more strings, the less flexibility. For example, our contractors that build roads in Utah say it cost about 30 percent more money, more cost to build a road under a federal program with federal money than with state money. That's because of strings.

BLITZER: Did you make that point to the president?

HERBERT: We did. In fact, we offered, with Medicaid reform and some of the healthcare issues, we've presented some waivers, as the state of Utah, and we've said, if you'll give us more flexibility, we can take less money, get a better outcome, help you balance your budget, and not tank the economy in the process.

BLITZER: What did he say?

HERBERT: He's willing to look at flexibility. In fact, encouraged us to come back with some recommendations, some ideas with not only Medicaid, but with education, with transportation, other government programs, where we're partners with the state, and say, here's a better way to do things.

BLITZER: Because I remember, during the campaign, and you probably remember it a whole lot better than I did, when it came to welfare reform, the president cited two Republican governors out there who wanted more flexibility as far as welfare reform was concerned. You were one of those two Republican governors with Governor Sandoval.

Did that issue come up today? Do you have any regrets about what was said at time? Because some of your fellow Republicans weren't very happy with you.

HERBERT: No, it didn't come up. But the concept of more flexibility, finding states as laboratories of innovation and creativity, finding better ways to do things is a concept that everybody ought to embrace. It's not a partisan issue. If we can find better ways to do things and save money, we ought to do it. Whether it be welfare reform, whether it be building roads and transportation, whether it be health care, whether it be education.

And, again, states are prepared to step forward. Let us do what we do best. We'll find innovative ways to create better outcomes.

BLITZER: Have you decided whether Utah will participate in what's called those state-run health care exchanges under Obamacare?

HERBERT: We already have a health care exchange. We had a health care exchange way before the Affordable Care Act was ever passed. We have a state exchange. We are taking a very careful look to see if we can maintain our state exchange. Some of the mandates, some of the requirements give us pause. I'm going to explore that -- explore that with Secretary Sebelius and see if we can maintain it or do we have to turn it over to the federal government.

BLITZER: Sounds, though, like the conversation was a positive conversation with the president. You were happy you went?

HERBERT: I am happy. Again, it's nice to be invited. We've been ignored too much. I feel good about not only the conversation with President Obama and Vice President Biden and 13, but we met with Speaker Boehner today and Majority Leader Reid.

I feel the same way that at least they're listening to us for the first time, at least in my history here, about a very significant issue. So we hope to be a catalyst for good.

BLITZER: Let's hope for the best.

Hey, Governor, thanks so much for joining us.

HERBERT: Thank you very much.

BLITZER: Sounds like military make believe, but it's not. Up next, new camouflage. Stay with us.

(COMMERCIAL BREAK)

BLITZER: The Army and Navy are using some extraordinary new camouflage technology that can make troops disappear.

Here's CNN's Chris Lawrence.

CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Well, Wolf, the Army could soon be making a decision on its next generation of camouflage. But I've got to tell you, you won't believe where this technology is headed.

(BEGIN VIDEOTAPE)

LAWRENCE (voice-over): Camouflage can be the difference between a soldier getting shot and going home. So lots riding on the next generation design to outfit troops. It's only been eight years since the Army spent $5 billion on camo that critics say didn't fool anyone. Soldiers complained to the point the Army abandoned its one-size-fits- all universal pattern.

(On camera): So they were looking for camouflage that they could use everywhere?

GUY CRAMER, HYPERSTEALTH/ADS: Correct. And it didn't work anywhere.

LAWRENCE (voice-over): Guy Cramer is one of the designers competing to win the Army's next multi-million dollar contract. This summer he showed us the science behind every shape, size, and shade of these pixels.

CRAMER: You now have your camouflage. So we're trying to trick the brain into seeing things that aren't actually there.

LAWRENCE: Digital patterns recreate shapes already found in nature, and 3D layering creates depth and shadows where none exist. That's today's design. But developers already have one eye on tomorrow.

CRAMER: What's coming up down the road and very quickly is the "Harry Potter" cloak.

RUPERT GRINT, ACTOR, "HARRY POTTER": What is that?

LAWRENCE: With that fictional cloak, Harry isn't just camouflaged, he's invisible.

DANIEL RADCLIFFE, ACTOR, "HARRY POTTER": My body's gone.

LAWRENCE (on camera): How invisible are we talking here? If I walked into a room with a soldier wearing one of these cloaks --

CRAMER: You wouldn't see him at all. He would be completely invisible to you.

LAWRENCE (voice-over): This isn't make believe. The military has seen the so-called quantum stealth technology. It works by bending the light around an object, even concealing most of a person's shadow. Imagine what that could do for a sniper, hiding in a field, or the American pilots who ejected over Libya when their fighter jets crashed last year.

CRAMER: They could actually pull out very similar to what they carry with a survival blanket, throw it over top of them, and unless you walked right into them, you wouldn't know that they were there.

LAWRENCE: So what was once firmly in the world of make believe could quickly become quite real.

(END VIDEOTAPE)

LAWRENCE: The science is in the special fabric, so you don't need a power source or some instruction manual to make it work. Theoretically any soldier, even in the most remote location could quickly put it on and get it working -- Wolf.