PBS NewsHour; January 24, 2011 3:00pm-4:00pm PST

Captioning sponsored by MacNEIL/LEHRER PRODUCTIONS

>> Woodruff: GOOD EVENING. I'M JUDY WOODRUFF. A SUICIDE BOMBER SET OFF A HUGE EXPLOSION INSIDE MOSCOW'S BUSIEST AIRPORT TODAY.

>> Ifill: AND I'M GWEN IFILL. ON THE NEWSHOUR TONIGHT, WE HAVE THE LATEST ON THE DEADLY ATTACK FROM JOHN SPARKS OF INDEPENDENT TELEVISION NEWS AND "WASHINGTON POST" REPORTER WILL ENGLUND IN MOSCOW.

>> Woodruff: THEN WE GET TWO DIFFERENT VIEWS OF THE REPUBLICANS' PLEDGE TO SLASH THE FEDERAL BUDGET.

>> Ifill: PAUL SOLMAN SURVEYS EUROPEAN ECONOMISTS ABOUT THAT CONTINENT'S DEBT CRISIS.

>> NOBODY KNOWS QUITE HOW BANKRUPT THE ENTIRE SYSTEM IS. THAT'S THE HUGE CONCERN IN THE E.U. AT THE MOMENT WHICH IS WHAT ARE WE LIKELY TO SEE WHEN THESE CARDS ACTUALLY END UP FALLING.

>> Woodruff: WE GET AN UPDATE ON THE "NOT GUILTY" PLEA FROM TUCSON SHOOTING SUSPECT JARED LOUGHNER, AND LOOK AHEAD TO THE CHALLENGES OF ENSURING A FAIR TRIAL.

>> Ifill: PLUS RAY SUAREZ TALKS TO LYNN SWEET OF THE "CHICAGO SUN TIMES" ABOUT TODAY'S COURT RULING KICKING FORMER WHITE HOUSE CHIEF OF STAFF RAHM EMANUEL OFF THE BALLOT FOR MAYOR.

>> Woodruff: THAT'S ALL AHEAD ON TONIGHT'S NEWSHOUR. MAJOR FUNDING FOR THE PBS NEWSHOUR HAS BEEN PROVIDED BY: MOVING OUR ECONOMY FOR 160 YEARS. BNSF, THE ENGINE THAT CONNECTS US.

>> OIL COMPANIES HAVE CHANGED MY COUNTRY.

>> OIL COMPANIES CAN MAKE A DIFFERENCE.

>> WE HAVE THE CHANCE TO BUILD THE ECONOMY.

>> CREATE JOBS, KEEP PEOPLE HEALTHY AND IMPROVE SCHOOLS.

>> AND OUR COMMUNITIES.

>> IN ANGOLA CHEVRON HELPS TRAIN ENGINEERS, TEACHERS AND FARMERS, LAUNCH CHILD'S PROGRAMS. IT'S NOT JUST GOOD BUSINESS.

>> I'M HOPEFUL ABOUT MY COUNTRY'S FUTURE.

>> IT'S MY COUNTRY'S FUTURE. AND BY UNITED HEALTHCARE.

>> AND BY THE BILL AND MELINDA GATES FOUNDATION. DEDICATED TO THE IDEA THAT ALL PEOPLE DESERVE THE CHANCE TO LIVE A HEALTHY, PRODUCTIVE LIFE. AND WITH THE ONGOING SUPPORT OF THESE INSTITUTIONS AND FOUNDATIONS. AND... THIS PROGRAM WAS MADE POSSIBLE BY THE CORPORATION FOR PUBLIC BROADCASTING. AND BY CONTRIBUTIONS TO YOUR PBS STATION FROM VIEWERS LIKE YOU. THANK YOU.

>> Woodruff: A DEVASTATING BLAST RIPPED THROUGH A CROWDED TERMINAL IN MOSCOW'S LARGEST AIRPORT TODAY. AT LEAST 35 PEOPLE DIED AND MORE THAN 170 WERE INJURED, MANY CRITICALLY. WE BEGIN WITH A REPORT NARRATED BY JOHN SPARKS OF INDEPENDENT TELEVISION NEWS.

>> Reporter: THERE ARE NO SCREAMS, NO CRIES OF DISTRESS. THE TERRIFYING EXPLOSION FOLLOWED BY SMOKE AND THE MURMUR OF THOSE STILL CAUGHT WITHIN. THIS THE ARRIVAL HOLE OF MOSCOW'S MAIN INTERNATIONAL TERMINAL SOME MINUTES AFTER IT WAS DESTROYED BY A BOMB. IN THE DISTANCE, PASSENGERS AND STAFF MAKE THEIR WAY OUT. THEY TREAD WARILY ARM IN ARM PAST SUITCASES AND HANDBAGS. THEIR OWNERS WERE FLUNG TO THE GROUND BY THE FORCE OF THE BLAST. THE FOLLOWING PICTURES ARE DISTURBING. RUSSIAN POLICE SUSPECT IT IS THE WORK OF AT LEAST ONE SUICIDE BOMBER. THE CAMERAMAN STEPS AROUND THE BODY OF ONE VICTIM TO THE LEFT A MAN CLUTCHES AT HIS LUGGAGE TROLLEY. WITNESSES SAY HUNDREDS OF PEOPLE RUSHED TO THE EXITS AFTER THE EXPLOSION, MANY SUFFERING FROM SHOCK. OTHERS WERE COVERED IN BLOOD.

>> THERE WAS ALREADY A LOT OF SMOKE AT THE BAGGAGE CLAIM AREA. THERE WERE A LOT OF PEOPLE CROWDED THERE BECAUSE THE ESCALATOR STOPPED. THE STAFF ORGANIZED EMERGENCY EXITS BUT THE DOOR WAS VERY NARROW AND PEOPLE CROWDED THEIR IMMEDIATELY. SO THE STAFF STARTED BREAKING THE WALLS TO LET THE PEOPLE OUT.

>> Reporter: RUSSIA'S PRESIDENT MEDVEDEV PROMISED A THOROUGH INVESTIGATION.

>> ALL STEPS WILL BE TAKEN, HE SAID, AND THE TRAIL IS STILL WARM. THIS IS THE SECOND ATTACK ON THE COUNTRY'S TRANSPORTATION NETWORK IN THE LAST YEAR. TWO FEMALE SUICIDE BOMBERS KILLED 40 PEOPLE LAST MARCH IN AN ATTACK ON A MOSCOW METRO STATION. THEY CAME FROM THE RUSSIAN STATE THAT HAS A MUSLIM MAJORITY. RUSSIA IS FIGHTING ISLAMIC INSURGENTS IN A NUMBER OF ITS REPUBLICS INCLUDING CHECHNYA.

>> Woodruff: PRESIDENT OBAMA CONDEMNED THE ATTACK, CALLING IT AN "OUTRAGEOUS ACT OF TERRORISM." FOR MORE, I SPOKE A SHORT TIME AGO WITH REPORTER WILL ENGLUND OF THE "WASHINGTON POST" IN MOSCOW. WILL ENGLUND, THANK YOU FOR TALKING WITH US. REPORTS ARE THAT AT LEAST 35 ARE DEAD. WHAT MORE DO YOU KNOW AT THIS POINT ABOUT WHAT HAPPENED?

>> WELL, WE KNOW THAT A SUICIDE BOMBER PERHAPS MORE THAN ONE SUICIDE BOMBER WENT INTO THE RECEPTION AREA IN THE INTERNATIONAL TERMINAL AT THE AIRPORT ABOUT 14 MILES SOUTHWEST OF THE SOUTHERN LIMITS OF MOSCOW. IN AN UNSECURE AREA. AFTER PASSENGERS HAVE ARRIVED AND THEY HAD THEIR PASSPORTS CHECKED, PICKED UP THEIR LUGGAGE, GONE THROUGH CUSTOMS ALL THAT STILL SECURE. THEN THEY COME OUT THROUGH THE DOORS WHERE PEOPLE AND DRIVERS AND FRIENDS AND HELL RELATIVES ARE WAITING FOR THEM. IT WAS IN THAT AREA THAT THE BOMBER SET OFF THE BOMB, DID CREATE A VERY LARGE AMOUNT OF DAMAGE IN THE AIRPORT AND A LOT OF DEVASTATION TO THE PEOPLE WHO WERE WAITING THERE. WE HAVE REASON TO BELIEVE THAT A LOT OF THE VICTIMS WERE PROBABLY TAXI DRIVERS LOOKING FOR FARES. ALSO, I UNDERSTAND THAT THERE WERE A FAIR NUMBER OF TAJIK PEOPLE LIVING HERE IN MOSCOW WHO HAD GONE TO THE AIRPORT TO MEET FRIENDS AND RELATIVES COMING OFF A FLIGHT.

>> Woodruff: WE KNOW OR WE'VE SEEN REPORTS THAT AT LEAST SOME EYEWITNESS REPORTS THAT A MAN, A DARK COME PLEKTED MAN WAS SEEN THERE BY A SUITCASE AND THERE WAS AN EXPLOSION. ANY DEFINITIVE ABOUT WHO WAS BEHIND THIS.

>> THERE IS NOT AT THIS POINT. I FIND THAT A LITTLE BIT SURPRISING. THE RUSSIAN AUTHORITIES HAVE NOT BEEN POINTING ANY FINGERS YET. THERE WAS A POLICE REPORT, A VERY UNCONFIRMED ONE, I SHOULD SAY-- AND I THINK IT'S PROBABLY SPECULATIVE-- SUGGESTING THAT ONE OF THE BODIES LOOKED LIKE AN ARAB, RAISING THE POSSIBILITY THAT THIS WAS NOT THE USUAL CHECHEN OR NORTH CAUCASIAN TERRORIST BUT MAYBE SOMEBODY ELSE. ACTUALLY I THINK WE DON'T KNOW.

>> Woodruff: WHAT ARE RUSSIAN AUTHORITIES DOING RIGHT NOW TO INVESTIGATE THIS?

>> WELL, THEY'RE PROMISING TO LAUNCH A THOROUGH INVESTIGATION. PART OF THAT INVESTIGATION, AS PRESIDENT MEDVEDEV OUTLINED IT THIS AFTERNOON ON NATIONAL TELEVISION, WILL BE TO FIND OUT WHAT THEY DID WRONG, WHO SLIPPED UP AND ALLOWED SOMETHING LIKE THIS TO HAPPEN. I THINK A POINT HERE IS THAT THE ATTACK WAS AGAINST THE VERY POTENT TARGET, A TERRORIST TARGET. IN OTHER WORDS, THE AIR TRAVEL INFRASTRUCTURE. IN FACT, THE TERRORIST WAS SIMPLY LOOKING FOR A CROWD OF PEOPLE. HE COULD HAVE DONE IT AT A MALL. HE COULD HAVE HAVE DONE IT AT A RAILROAD STATION. A SCHOOL AS HAS BEEN DONE HERE IN THE PAST. HE CHOSE AN AIRPORT BECAUSE I THINK OF THE ADDED SIGNIFICANCE OF AIR TRAVEL AND TERRORISM.

>> Woodruff: IS ANY GROUP, ANYONE CLAIMING RESPONSIBILITY?

>> NOT TO MY KNOWLEDGE. NOT YET.

>> Woodruff: AND THERE HAVE ALSO BEEN, AS YOU KNOW, REPORTS THAT AUTHORITIES SUSPECT THAT REBELS FROM THE CAUCUSES REGION, THE NORTH REGION, MIGHT BE BEHIND THIS. WHY WOULD THEY HAVE THOSE SUSPICIONS?

>> WELL, IT'S A PRETTY EASY SUSPICION TO HAVE. MOST OF THE MAJOR TERRORIST ACTS IN RUSSIA OVER THE LAST DECADE EITHER CLEARLY HAVE BEEN COMMITTED BY SEPARATISTS FROM THE NORTH CAUCUSES OR AT THE VERY LEAST IN SOME CASES AUTHORITIES HAVE BLAMED SEPARATISTS FROM THE NORTH CAUCUSES. YOU MIGHT REMEMBER THE SCHOOL SIEGE IN 2005. THERE WERE BOMBINGS IN THE MOSCOW METRO JUST LAST MARCH, ALMOST A YEAR AGO. THESE WERE CARRIED OUT BY ISLAMIC SEPARATISTS FROM THE CAUCUSES. TWO PLANES WERE BROUGHT DOWN BY BOMBS IN 2004. CHECHEN WOMEN WERE ACCUSED IN THAT PARTICULAR CASE. SO IT'S NO STRETCH TO IMAGINE THAT THIS MAY HAVE BEEN CARRIED OUT BY THE SAME GROUPS. BUT AS I SAID AT THIS POINT, THERE REALLY DOESN'T... NO EVIDENCE HAS BEEN MADE PUBLIC ONE WAY OR ANOTHER.

>> Woodruff: WE'RE ALSO HEARING, WILL ENGLUND, ABOUT RUSSIAN SECURITY OPERATIONS IN RECENT MONTHS IN THE NORTH CAUCUSES, LOOKING FOR REBELS. IS THERE ANY MORE INFORMATION ABOUT THAT AND WHETHER THAT COULD HAVE... THIS COULD BE IN RETALIATION FOR THAT?

>> WELL, ALTHOUGH CHECHNYA HAS BEEN REALLY VERY SIGNIFICANTLY QUIETED DOWN FROM THE REALLY BAD TIMES IN THE... WHEN THEY WERE AT WAR THERE IN THE MID 1990s AND THEN AGAIN IN THE EARLY 200 0s, THE KREMLIN HAS A FIRM GRIP ON THE CAPITAL CITY OF GROWS KNEE. THERE WAS A LOW-LEVEL WAR GOING ON IN CHECHNYA AND ON TO THE EAST AND TO THE WEST. JUST SMALL LITTLE BATTLES, LITTLE EXPLOSIONS AT POLICE BUILDINGS, FOLLOWED BY SECURITY SWEEPS THROUGH VILLAGES IN THE MOUNTAINS. BOTH SIDES TAKING CASUALTIES. ONE THING THAT I THINK A LOT OF AMERICANS WOULD BE SURPRISED TO HEAR IS THAT THE RUSSIANS ARE TAKING AS MANY CASUALTIES IN THE CAUCUSES RIGHT NOW AS AMERICANS ARE IN AFGHANISTAN. ON THE SAME LEVEL OF INTENSITY.

>> Woodruff: IT'S... YOU'RE RIGHT. IT'S SOMETHING THAT DOES NOT GET THE ATTENTION HERE THAT ONE MIGHT EXPECT. WILL ENGLUND WITH THE "WASHINGTON POST," THANK YOU VERY MUCH.

>> THANK YOU.

>> Ifill:

>> Ifill: STILL TO COME ON THE NEWSHOUR, THE BATTLE OVER SPENDING CUTS IN CONGRESS; THE DEBT CRISIS IN EUROPE; A "NOT GUILTY" PLEA IN THE TUCSON SHOOTINGS; AND RAHM EMANUEL'S BID FOR MAYOR OF CHICAGO. BUT FIRST, WITH THE OTHER NEWS OF THE DAY, HERE'S HARI SREENIVASAN. WELCOME BACK, HARI.

>> Sreenivasan: AT LEAST 26 PEOPLE DIED IN IRAQ TODAY WHEN TWIN CAR BOMBS TARGETED SHIITE PILGRIMS SOUTH OF BAGHDAD. THE BLASTS OCCURRED JUST OUTSIDE KARBALA, WHERE ANNUAL RELIGIOUS RITUALS WERE BEING HELD. SOME 75 PEOPLE WERE WOUNDED. A RECENT SURGE IN VIOLENCE HAS CLAIMED THE LIVES OF MORE THAN 170 PEOPLE IN IRAQ IN JUST THE LAST WEEK. IN TUNISIA, THE ARMY CHIEF OF STAFF TOLD ANTI-GOVERNMENT PROTESTORS THAT THE ARMY WOULD BE THE "GUARANTOR OF THE REVOLUTION." HIS COMMENTS CAME AFTER DEMONSTRATORS CLASHED BRIEFLY WITH AUTHORITIES IN THE CAPITAL OF TUNIS. TODAY'S UNREST WAS PROVOKED WHEN ALLIES OF THE FORMER PRESIDENT HELD ONTO LEADING ROLES IN THE INTERIM GOVERNMENT FORMED LAST WEEK. MEANWHILE, THE POLICE STAGED A SEPARATE PROTEST DEMANDING THE RIGHT TO FORM A UNION. ANGER MOUNTED IN THE WEST BANK AFTER LEAKED DOCUMENTS CLAIMED PALESTINIAN LEADERS ALLEGEDLY OFFERED BROAD CONCESSIONS IN 2008 PEACE TALKS WITH ISRAEL. THE AL-JAZEERA NEWS NETWORK REPORTED THAT LATE SUNDAY CITING HUNDREDS OF INTERNAL PALESTINIAN MEMOS. NEGOTIATORS WERE APPARENTLY WILLING TO COMPROMISE ON JERUSALEM AND THE FATE OF REFUGEES. TODAY PROTESTERS VANDALIZED THE SATELLITE CHANNEL'S BUREAU IN RAMALLAH. THEY BURNED AN ISRAELI FLAG AND SPRAYED GRAFFITI. PALESTINIAN PRESIDENT MAHMOUD ABBAS CONDEMNED THE REPORTS.

>> WHAT IS MEANT IS TO MIX THINGS UP. I HAVE SEEN WHAT THE TV CHANNEL BROADCASTS. I SAY HERE EXPRESSLY THAT WE HAVE NOTHING TO HIDE. THIS IS WHAT ALL THE ARAB COUNTRIES ALTOGETHER UNILATERALLY KNOW. IN ALL OUR NEGOTIATIONS AND MEETINGS REGARDING ANY ISSUE THAT WE DISCUSS, WE SUBMIT IT ALL TO THE ARAB COUNTRIES, BACKED UP BY DOCUMENTS.

>> Sreenivasan: THE AL-JAZEERA NETWORK IS BASED IN QATAR. TODAY A TOP AIDE TO PRESIDENT ABBAS ACCUSED THE GULF STATE OF TRYING TO DAMAGE PALESTINIAN INTERESTS. THE U.S. SUPREME COURT BOLSTERED THE ABILITY OF WORKERS TO SUE FOR RETALIATION TODAY. THE COURT DECIDED FOR A KENTUCKY MAN. HE WAS FIRED FROM A MANUFACTURING PLANT AFTER HIS FIANCEE, WHO ALSO WORKED THERE, FILED A SEX DISCRIMINATION COMPLAINT. IN THE UNANIMOUS DECISION, THE JUSTICES HELD THAT RETALIATION AGAINST A THIRD PARTY EMPLOYEE IS GROUNDS FOR A SUIT UNDER FEDERAL LAW. STOCKS RALLIED ON WALL STREET TODAY, BOOSTED BY THE STRENGTH OF TECHNOLOGY AND NATURAL RESOURCES SHARES. THE DOW JONES INDUSTRIAL AVERAGE GAINED 108 POINTS TO CLOSE AT 11,980. THE NASDAQ ROSE 28 POINTS TO CLOSE AT 2717. LONGTIME FITNESS GURU JACK LALANNE DIED YESTERDAY AT HIS HOME IN MORRO BAY, CALIFORNIA. AN EXERCISE PIONEER, HE HOSTED THE FIRST NATIONALLY TELEVISED WORKOUT SHOW, AND DEVELOPED PROTOTYPES OF MODERN-DAY FITNESS EQUIPMENT. HE ALSO FOUNDED A CHAIN OF HEALTH CLUBS. LALANNE DIED OF RESPIRATORY FAILURE DUE TO PNEUMONIA. HE WAS 96. THOSE ARE SOME OF THE DAY'S MAJOR STORIES. NOW, BACK TO GWEN.

>> Ifill: BUDGET BATTLES ARE HEATING UP ON CAPITOL HILL. THE HOUSE OF REPRESENTATIVES TODAY BEGAN DEBATING SEVERE SPENDING CUTS PROPOSED BY THE REPUBLICAN MAJORITY. NEWSHOUR CONGRESSIONAL CORRESPONDENT KWAME HOLMAN HAS OUR STORY. BY PUTTING THE ISSUE OF SPENDING FRONT AND CENTER HOUSE REPUBLICANS WERE SENDING A CLEAR MESSAGE ON THE EVE OF THE PRESIDENT'S STATE OF THE UNION ADDRESS. THEIR EFFORT TODAY WAS TO INSTRUCT THE BUDGET COMMITTEE TO REDUCE NON-SECURITY SPENDING TO PRE-2008 LEVELS WHICH WOULD SAVE $84 BILLION. CALIFORNIA'S DAVID DRIER.

>> TIME FOR US TO EXERCISE OUR POWER OF THE PURSE. RESTRAINT IS LONG, LONG OVERDUE. WE MUST RETURN TO FREE BAILOUT PRE-BAILOUTS, PRE-BINGE SPENDING LEVELS FOR FUNDING THE FEDERAL GOVERNMENT. WE KNOW THAT A GREAT DEAL OF HARD WORK AND TOUGH DECISIONS LIE AHEAD FOR EVERY SINGLE MEMBER OF THIS INSTITUTION.

>> Reporter: PROGRAMS THAT COULD BE PARTICULARLY HARD HIT INCLUDE AMTRAK PASSENGER RAIL, THE NATIONAL ENDOWMENT FOR THE ARTS, AND THE CORPORATION FOR PUBLIC BROADCASTING. EVEN WITH THOSE CUTS, THE FEDERAL BUDGET DEFICIT IS EXPECTED TO TOP $1 TRILLION THIS YEAR. DEMOCRATS MEANWHILE ARGUED BROAD CUTS WOULD HAVE SERIOUS CONSEQUENCES. OREGON'S PETER DEFAZIO.

>> IF WE WERE ONLY GOING TO GET TO A BALANCED BUDGET THIS YEAR WITH CUTS, THAT WOULD MEAN ELIMINATING THE ENTIRE GOVERNMENT OF THE UNITED STATES OF AMERICA. WE'D STILL MAKE OUR SOCIAL SECURITY PAYMENTS. WE WOULDN'T BE ABLE TO EXEMPT THE PENTAGON WHICH THEY WANT TO DO IF WE WANTED TO REALLY GET TO $1.6 TRILLION. NO MORE BORDER, YOU KNOW, BORDER PATROL. NO MORE HOMELAND SECURITY. NO MORE COAST GUARD. NO MORE POSTAL SERVICE. NO MORE CENTERS FOR DISEASE CONTROL. THE DEPARTMENT OF EDUCATION, GONE. THEY WOULDN'T CARE MUCH ABOUT THAT. PARK SERVICE I GUESS WE'D PROBABLY SELL OFF THE PARKS TO THE HIGHEST BIDDER. I DON'T KNOW.

>> Reporter: FEDERAL SPENDING ALSO DOMINATED THE CONVERSATION ON THE SUNDAY POLITICAL TALK SHOWS. MITCH McCONNELL URGED THE PRESIDENT TO FOCUS ON CUTTING THE SIZE OF GOVERNMENT, NOT GROWING IT.

>> I THINK EXCESSIVE GOVERNMENT SPENDING, RUNNING UP DEBT, MAKING US LOOK LIKE A WESTERN EUROPEAN COUNTRY IS THE WRONG DIRECTION. THAT'S THE DIRECTION THEY TOOK THE FIRST TWO YEARS. THE AMERICAN PUBLIC AS ONE PUNDIT PUT IT ISSUED A MASSIVE RESTRAINING ORDER. I DON'T THINK WE'LL GO IN THAT DIRECTION ANY LONGER.

>> Reporter: NOT ALL REPUBLICANS SEEM TO APPEAR TO BE ON THE SAME PAGE WITH WHAT TO CUT. ERIC KANTING SAID EVERYTHING WAS ON THE TABLE INCLUDING DEFENSE SPENDING. THAT PUT HIM AT ODDS WITH A GROUP OF G.O.P. LAWMAKERS WHO SAID LAST WEEK SUCH CUTS SHOULD BE OFF LIMBS.

>> WE'VE ALWAYS SAID THIS TOO. EVERY DOLLAR SHOULD BE ON THE TABLE. I'VE SAID....

>> INCLUDING DEFENSE.

>> ABSOLUTELY. I'VE SAID BEFORE NO ONE CAN DEFEND THE EXPENDITURE OF EVERY DOLLAR AND CENT OVER THE PENTAGON.

>> Reporter: FOR HIS PART THE PRESIDENT WAS SHORT ON SPECIFICS THIS WEEKEND. IN A VIDEOTAPED MESSAGE EMAILED TO SUPPORTERS PREVIEWING TOMORROW NIGHT'S SPEECH HE STUCK TO BROAD THEMES SUCH AS COMPETITIVENESS, JOB CREATION, AND RESPONSIBLE DEFICIT REDUCTION.

>> MY PRINCIPLE FOCUS... MY PRINCIPAL FOCUS, MY NUMBER ONE FOCUS IS GOING TO BE MAKING SURE THAT WE ARE COMPETITIVE, WE ARE GROWING AND WE ARE CREATING JOBS NOT JUST NOW BUT WELL INTO THE FUTURE. I'M FOCUSED ON MAKING SURE THAT THE ECONOMY IS WORKING FOR EVERYBODY. FOR THE ENTIRE AMERICAN FAMILY. WE'RE ALSO GOING TO HAVE TO DEAL WITH OUR DEFICITS AND OUR DEBT IN A RESPONSIBLE WAY. WE'VE GOT TO REFORM GOVERNMENT SO IT'S LEANER AND SMARTER FOR THE 21st CENTURY.

>> Reporter: AT THE WHITE HOUSE TODAY, PRESS SECRETARY ROBERT GIBBS TOLD REPORTERS THEY WOULDN'T BE GETTING ANY MORE FROM HIM.

>> WE WON'T HAVE A DEBATE IN WASHINGTON ABOUT WHETHER WE NEED TO MAKE SHALL CHANGES AND WHETHER WE NEED TO CONTROL OUR SPENDING. WE'RE GOING TO HAVE HOPEFULLY A BIPARTISAN DISCUSSION AND WORK TOGETHER ON HOW WE GO ABOUT DOING THAT.

>> Reporter: THAT DISCUSSION WILL BEGIN IN EARNEST IN MID FEBRUARY WHEN THE PRESIDENT UNVEILS HIS BUDGET FOR THE COMING FISCAL YEAR.

>> Ifill: JEFFREY BROWN HAS MORE ON THOSE BIG DECISIONS TO COME ON SPENDING AND CUTTING.

>> Brown: FOR MORE ON THE CUTTING AND SPENDING DEBATE, WE TURN TO ROBERT GREENSTEIN, EXECUTIVE DIRECTOR OF THE CENTER ON BUDGET AND POLICY PRIORITIES, A POLICY ORGANIZATION THAT ADVOCATES FOR LOW-INCOME FAMILIES. AND CHRIS EDWARDS IS DIRECTOR OF TAX POLICY STUDIES AT THE CATO INSTITUTE, WHICH IS DEDICATED TO FREE MARKETS AND LIMITED GOVERNMENT. WELCOME TO BOTH OF YOU. CHRIS EDWARDS WE DON'T HAVE SPECIFICS YET, DO WE? AS A STARTING POINT, HOW HARD OR EASY WOULD IT BE TO DO WHAT THE REPUBLICANS ARE TALKING ABOUT THIS YEAR?

>> WELL, THE REPUBLICANS ARE OFF TO A GOOD START. THEY PROMISED TO REDUCE SPENDING ON DOMESTIC PROGRAMS BACK TO 2008 LEVELS. WHAT THAT MEANS IS THIS. SPENDING ON THESE DOMESTIC PROGRAMS HAS ROUGHLY DOUBLED SINCE 2000 FROM ABOUT $280 BILLION A DECADE AGO TO ABOUT $550 BILLION TODAY. THE REPUBLICANS WANT TO TAKE ABOUT $100 BILLION OUT OF THAT. THAT SEEMS LIKE A GOOD START TO ME. I WISH THEY WOULD INCLUDE DEFENSE CUTS. THEY ALSO HAVE TO TACKLE ENTITLEMENTS.

>> Brown: HOW HARD OR EASY? SAME QUESTION TO YOU.

>> VERY HARD. WE'RE TALKING ABOUT $100 BILLION THAT DOESN'T INCLUDE ANY CHANGES IN THE PENTAGON. IT RULES OUT ANY OF THE SPENDING OR THE SUBSIDIES THAT ARE IN THE TAX CODE THROUGH SPECIAL INTEREST TAX LOOPHOLES. THE $100 BILLION WOULD HAVE TO COME ENTIRELY FROM THINGS LIKE ELEMENTARY AND SECONDARY EDUCATION. WE NEED TO HELP COLLEGE STUDENTS AFFORD COLLEGE. PROTECTING FOOD SAFETY. AIR TRAFFIC CONTROL. ALL OF THESE SORTS OF THINGS. LAW ENFORCEMENT. PROTECTING THE BORDERS. TO GET $100 BILLION NOW WHEN A NUMBER OF THE MONTHS OF THE FISCAL YEAR ARE ALREADY GONE, IT WOULD MEAN ALL THOSE THINGS GET CUT BY A THIRD OVERNIGHT. YOU'RE CUTTING THE CANCER RESEARCH BY A THIRD. SERVICES FOR DISABLED FRAIL ELDERLY BY A THIRD. IF YOU DIDN'T WANT TO CUT SOME THINGS BY A THIRD, FINE. THEN YOU'D HAVE TO CUT OTHER THINGS BY TWO-THIRDS. THESE WOULD BE THE MOST SEVERE CUTS IN THESE KINDS OF PROGRAMS IN AMERICAN HISTORY. BY COMING RIGHT NOW WHILE THE ECONOMY IS REALLY WEAK, YEAH, WE NEED SPENDING RESTRAINT WHEN THE ECONOMY RECOVERS. YOU DO IT RIGHT NOW, YOU WILL LOSE HUNDREDS OF THOUSANDS OF JOBS BECAUSE YOU'RE PULLING OUT MONEY FROM THE ECONOMY. YOU'LL HAVE LESS SALES IN THE PRIVATE SECTOR.

>> Brown: LET'S COME BACK TO THAT BIGGER QUESTION ABOUT THE ECONOMY. BUT WHEN YOU LISTEN TO THAT LIST, WHAT IS YOUR REACTION? THAT'S A GOOD LIST?

>> I THINK JUST ABOUT ALL THOSE CUTS WOULD BE GOOD. I ADD IN FARM SUBSIDIES. $25 BILLION A YEAR. THIS IS SORT OF... WE TAX AVERAGE PEOPLE TO FARM CORPORATIONS. ENERGY SUBSIDIES. THESE ARE BUSINESS SUBSIDIES THAT GO TO BIG CORPORATIONS. THE FEDERAL GOVERNMENT DOES ALL THIS FUNDING LOCAL GOVERNMENTS LIKE $10 BILLION A YEAR ON PUBLIC HOUSING AND URBAN TRANSIT. THIS SORT OF STUFF. THAT STUFF ISN'T REALLY A FEDERAL RESPONSIBILITY. I THINK GET THE GOVERNMENT OUT OF BUSINESS SUBSIDIES. GET THE GOVERNMENT OUT OF FUNDING IN LOCAL ACTIVITIES.

>> Brown: AND THE CONSEQUENCES OF MAKING SUCH BIG CUTS IN SUCH A QUICK AMOUNT OF TIME?

>> I THINK WE'D HAVE A BETTER GOVERNMENT HERE IN THE UNITED STATES. I THINK RUNNING THESE TRILLION DOLLAR DEFICITS IS EXTREMELY DAMAGING TO THE ECONOMY. IT'S REALLY UNSETTLED IN FINANCIAL MARKETS. ALL THESE BASIC INVESTMENTS LIKE AIR TRAFFIC CONTROL, WE CAN DO IN THE PRIVATE SECTOR. CANADA HAS A PRIVATE AIR TRAFFIC CONTROL SYSTEM. SO, YOU KNOW, CUTTING AIR TRAFFIC CONTROL WOULD BE A GOOD THING IN MY VIEW.

>> Brown: YES?

>> I AGREE WITH CHRIS THAT IT WOULD BE GOOD TO REIN IN FARM SUBSIDIES AND BUSINESS SUBSIDIES. UNDER THE REPUBLICAN PROPOSALS YOU'RE NOT ALLOWED TO DO THAT IN EITHER OF THOSE AREAS. FARM SUBSIDIES ARE AN ENTITLEMENT, SEPARATE PART OF THE BUDGET. MOST OF THE BUSINESS SUBSIDIES ARE COMING THROUGH TAX BREAKS IN THE TAX CODE. A SEPARATE PART OF THE BUDGET. WE'RE TALKING ABOUT REALLY A VERY LARGE CUTS OVERNIGHT. WE SHOULD KEEP IN MIND THAT THE PART OF THE BUDGET THEY WANT TO TAKE $100 BILLION OUT OF, ONE THIRD OF THAT PART OF THE BUDGET IS FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS. THEY ALREADY HAVE HUGE BUDGET HOLES.

>> Brown: IT WOULD FALL ON THEM.

>> IT WOULD FALL ON THEM. THEY'LL THEY'D FIRE EVEN MORE TEACHERS. THEY'D CUT BACKFIRE AND POLICE EVEN MORE.

>> Brown: WHAT ABOUT THAT? WOULD IT BE THROWN ON TO THE STATES AND LOCAL GOVERNMENTS THAT DON'T HAVE ANY MONEY.

>> I THINK THE FEDERAL GOVERNMENT SHOULD CUT THE STATE AND LOCAL ACTIVITIES. THEN IT WOULD UP TO EACH STATE HOW THEY WANT TO FUND THESE PROGRAMS. THE FEDERAL GOVERNMENT SPENDS $60 BILLION IN K-12 EDUCATION. FEDERAL INVOLVEMENT HASN'T HELPED AMERICAN STUDENTS OR TEST SCORES. CANADA HAS NO FEDERAL DEPARTMENT OF EDUCATION. THEIR KIDS DO MUCH BETTER ON INTERNATIONAL TESTS THAN DO AMERICAN KIDS. I DON'T THINK FEDERAL INVOLVEMENT IN THESE LOCAL ACTIVITIES IS THE ANSWER.

>> Brown: IT'S PARTLY ECONOMICS AND PARTLY POLITICS HERE OF COURSE INESCAPABLY. WHEN YOU GET TO THE LIST THAT YOU'VE BOTH BEEN TALKING ABOUT, WHAT HAPPENS POLITICALLY? ISN'T THAT ALWAYS SOMEBODY'S SACRED COW OR SOMEBODY... SOME REPRESENTATIVE REPRESENTS THESE.

>> YOU'RE ABSOLUTELY RIGHT. EVERY SINGLE FEDERAL SPENDING PROGRAM HAS A SPECIAL INTEREST GROUP THAT SUPPORTS IT. THERE IS SOME HEAVY LIFTING INVOLVED IN SPENDING CUTS. I WISH THE REPUBLICANS WOULD COME OUT AND GIVE US MORE SPECIFICS. SO FAR AS WE'VE SEEN REPUBLICAN LEADERS HAVE BEEN VERY SHY ABOUT TELLING US EXACTLY WHERE THEY WOULD WANT TO CUT. WE DON'T KNOW WHETHER THEY'LL BE CUTTING ACROSS THE BOARD OR CUTTING A SPECIFIC PROGRAM. CERTAINLY I THINK WE NEED TO GET THE FEDERAL GOVERNMENT OUT OF AREAS LIKE K-12 EDUCATION. THE FEDERAL SIMPLY DOESN'T HAVE THE MONEY ANYMORE TO FUND THESE LOCAL ACTIVITIES. THAT'S THE MESSAGE THE REPUBLICANS SHOULD BE GIVING HERE.

>> Brown: YOU THINK, BOB GREENSTEIN, IT'S NO ACCIDENT WE HAVEN'T HEARD SPECIFIC YET FROM EITHER SIDE.

>> IT'S NO ACCIDENT BECAUSE IT'S A CAMPAIGN PLEDGE. CUT SPENDING WITH A CAPITAL S. THERE IS NO SPENDING WITH A CAPITAL-S THAT'S A PROGRAM. THERE ARE THINGS LIKE EDUCATION AND CHILD CARE AND PROTECTING THE BORDERS. THEY'RE AFRAID TO ACTUALLY PUT THE SPECIFICS ON THE TABLE. IN TERMS OF CHRIS'S POINT ABOUT STATE AND LOCAL GOVERNMENTS, THEY'RE FLAT ON THEIR BACK NOW BECAUSE OF THE DOWNTURN. WHAT ARE THEY GOING TO DO? DOUBLE TAX RATES TO MAKE UP FOR A WITHDRAWAL OF FEDERAL FUNDING FROM EDUCATION? I MEAN THIS IS REALLY NOT SOMETHING....

>> I MEAN, THE FEDERAL GOVERNMENT DOESN'T HAVE ANY MAGIC SOURCE OF FUNDS. THE FUNDS FOR FEDERAL PROGRAMS EVENTUALLY COME FROM THE TAX PAYERS WHO LIVE IN THE 50 STATES. SO THERE'S NO MAGICAL SOURCE OF FUNDS HERE. WE'VE GOT... THE TAX PAYERS HAVE ON PAY FOR ALL THE SPENDING.

>> THERE'S SOMETHING SURREAL ABOUT OUR HAVING JUST EXTENDED A TAX CUT THAT PROVIDES AN AVERAGE TAX CUT OF $125,000 A YEAR TO EACH PERSON WHO MAKES OVER A MILLION A YEAR. SOMEHOW WE COULD AFFORD MASSIVE TAX CUTS FOR THE WEALTHIEST PEOPLE IN THE COUNTRY BUT WE HAVE TO SLASH K- 12 EDUCATION, AIR TRAFFIC CONTROL, CLEAN AIR AND WATER? CANCER RESEARCH.

>> Brown: LET ME COME BACK TO THE ISSUE YOU RAISED AT THE BEGINNING THAT THIS IS THE EXACT WRONG TIME TO BE MAKING CUTS OF THIS SORT. WHETHER WE NEED TO DOWN THE LINE OR NOT. IN A LOUSY ECONOMY, THE ARGUMENT IS, WE NEED TO BE SPENDING MORE. NOT CUTTING LESS.

>> I THINK THAT'S BACKWARDS KEYNES KEYNESIAN ECONOMICS. WE'VE HAD DEFICIT SPENDING OF A TRILLION DOLLARS A YEAR THE LAST THREE YEARS. WE STILL HAVE ALMOST 10% UNEMPLOYMENT. I DON'T THINK THE IDEA OF BIG GOVERNMENT SPENDING HAS SOLVED OR ECONOMIC PROBLEMS. I THINK LIKE BRITAIN NOW WE NEED TO HAVE A SPENDING CUT PACKAGE PUT IN PLACE. WE NEED TO START REDUCING THESE DEFICITS. WE NEED TO GET THE FEDERAL GOVERNMENT OUT OF THE PRIVATE SECTOR SO THAT THE PRIVATE SECTOR CAN START GROWING AGAIN. THE GOVERNMENT WON'T MAKE THE ECONOMY GROW AGAIN. ULTIMATELY IT'S GOT TO BE PRIVATE BUSINESS PEOPLE FEELING COMFORTABLE WITH THE ECONOMIC PICTURE TO START INVESTING AGAIN.

>> Brown: AND A BRIEF LAST WORD TO YOU.

>> I THINK THE KEY ECONOMIC STUDIES SHOW IF WE HADN'T DONE WHAT WE'VE DONE IN THE LAST TWO YEARS UNEMPLOYMENT WOULD PROBABLY BE ABOUT 12-13% NOW. IF YOU WANT TO MAKE AN ANALOGY WITH GREAT BRITAIN EVEN AFTER ALL THE CUTS THEY'RE DOING, THEY WILL HAVE GOVERNMENT AT 40% OF THEIR GROSS DOMESTIC PRODUCT. THEY HAVE A MUCH BIGGER PUBLIC SECTOR THAN WE DO. EVEN AFTER THEY DO ALL THEIR CUTS, THEY'LL HAVE A BIGGER PUBLIC SECTOR THAN WE DO BEFORE WE MAKE ANY CUTS. SO THE ANALOGY DOESN'T REALLY WORK.

>> Brown: THE BEGINNING OF A BIG ARGUMENT HERE IN WASHINGTON. THANK YOU BOTH VERY MUCH.

>> THANK YOU.

>> THANK YOU.

>> Woodruff: NOW TO WORRIES ABOUT AUSTERITY MEASURES IN EUROPE. THERE WAS NEW FALLOUT TODAY FROM THE CONTINENT'S DEBT CRISIS. IN IRELAND, THE GOVERNMENT ANNOUNCED ELECTIONS ARE LIKELY NEXT MONTH AFTER PRIME MINISTER BRIAN COWEN RESIGNED AS LEADER OF HIS POLITICAL PARTY. AND IN SPAIN, OFFICIALS SAID TROUBLED BANKS THERE NEED $27 BILLION IN FRESH CAPITAL. NEWSHOUR ECONOMICS CORRESPONDENT PAUL SOLMAN HAS AN UPDATE, PART OF HIS ONGOING REPORTING ON MAKING SENSE OF FINANCIAL NEWS.

>> Reporter: AS 2011 FESTIVELY DAWNED ACROSS EUROPE, ECONOMISTS THERE BROODED. FOR ALL THE CELEBRATION, WAS EUROPE'S FINANCIAL SYSTEM ABOUT TO IMPLODE? GREECE AND IRELAND ALONE WERE HOBBLED BY MORE THAN HALF A TRILLION DOLLARS IN DEBT. DEBT COSTING MORE AND MORE TO REFINANCE AS INVESTORS LOST FAITH. WOULD EUROPEAN UNION SURVIVE? WOULD ITS CURRENCY, THE EURO? NOW SINCE THE NEWSHOUR FACES FINANCIAL PRESSURES OF ITS OWN, COST CONSCIOUSNESS TRUMPED A TRIP TO EUROPE. WE OPTED INSTEAD FOR A GRAND TOUR OF DENVER WHERE EUROPEANS WERE AMONG THE ROUGHLY 10,000 SO-CALLED DISMAL SCIENTISTS ATTENDING AMERICA'S ANNUAL ECONOMICS CONVENTION. AT PLAUSIBLY APPROPRIATE VENUES WE INTERVIEWED VISITING EUROPEAN ECONOMISTS STARTING WITH ONE FROM ICELAND. I HOPE YOU'LL BEAR WITH THE HOCKEYYNESS HERE. ICELAND SO WE TOOK YOU TO THE ICE RINK.

>> I'M WARMER AT HOME.

>> Reporter: HIS COUNTRY EXPERIENCED THE FIRST OF EUROPE'S FINANCIAL ICE STORMS AND PROVIDES SOME PERHAPS USEFUL LESSONS. LIKE EVERYWHERE ELSE, THE CRISIS BOILED DOWN TO BANKERS MAKING BAD LOANS.

>> THE BANKS LOST SEVEN TIMES THE VALUE OF ICELAND'S NATIONAL INCOME IN A GIVEN YEAR.

>> Reporter: AND YET.

>> OUR UNEMPLOYMENT IS MEASURED IN SINGLE DIJ ITS WHILE INCOME DID NOT PLUNGE VERY DEEP.

>> Reporter: WHY ISN'T ICELAND, IF YOU'LL PARDON THE EXPRESSION IN THIS CONTEXT, NOT FLAT ON ITS REAR? HOW COME ICELAND IS COMING BACK?

>> ATLANTIC AUTHORITIES MADE SEVERAL RIGHT DECISIONS AFTER THE CRASH. THEY CALLED IN THE I.M.F..

>> Reporter: ICELAND'S ECONOMY ACTUALLY GREW IN THE LAST QUARTER OF THE YEAR. PARTLY THAT'S BECAUSE ICELAND'S CURRENCY HAS DEPRECIATED, BOOSTING ITS EXPORTS. AND BECAUSE THE GOVERNMENT DIDN'T BAIL OUT THE BANKS. INSTEAD WITH THE INTERNATIONAL MONETARY FUND'S HELP, IT MODIFIED ITS LOAN AGREEMENTS WITH FOREIGN CREDITORS TO PAY BACK MAYBE 40% OVER YEARS OF WHAT ITS BANKS BORROWED. IN GREECE THE GOVERNMENT IS STILL STRUGGLING. ITS DEBT WAS RUN UP BY THE STATE ITSELF. HIRING TOO MANY GOVERNMENT WORKERS WITH TOO GENEROUS PENSIONS WHILE COLLECTING TOO LITTLE IN TAXES TO PAY THE TAB. WHEN REPORTING THEIR LAST SUMMER, TWO QUESTIONS HUNG OVER ATHENS LIKE SMOG. WOULD GREEKS STOMACH A LOWER STANDARD OF LIVING WHEN JOBS AND PENSIONS WERE SLASHED? WOULD TAX COLLECTION BE REFORMED?

>> SO MANY NEGATIVE IS BEING SAID ABOUT GREECE.

>> Reporter: AT DENVER'S CIVIC CENTER PARK WE ASKED THIS MAN WHETHER SEVEN MONTHS LATER PROGRESS HAD BEEN MADE. IS THE AVERAGE PERSON PAYING HER OR HIS TAXES?

>> NOT FULLY. AND OF COURSE EVERYBODY WANTS EVERYBODY ELSE TO PAY THEIR TAXES. IF GREECE WAS ABLE TO COLLECT TAXES ACCORDING TO THE EUROPEAN UNION AVERAGE, AT THIS POINT THERE WOULD NOT HAVE BEEN ANY DEBT PROBLEM RIGHT NOW.

>> Reporter: ARE YOU PERSONALLY MORE OR LESS HOPEFUL OR THE SAME AS YOU WERE IN JULY?

>> A BIT LESS HOPEFUL BECAUSE SOME OF THE PEOPLE IN THE GOVERNMENT ARE NOT FULLY UNDERSTANDING OF WHAT NEEDS TO HAPPEN. OR SOMEHOW THINGS ARE NOT MOVING AS FAST AS THEY COULD BE MOVING.

>> Reporter: YES, HE SAYS, THE GOVERNMENT IS MAKING TOUGH BUDGET CUTS. BUT TAX REFORM IS BEING HELD UP IN THE COURTS. AND RED TAPE STILL RESTRAINS ECONOMIC GROWTH AS IT HAS FOR DECADES. IRELAND'S CRISIS BY CONTRAST HAS COME AS A SURPRISE. AFTER BOOMING FOR DECADES, IT TOO IS NOW CRUSHED BY DEBT. WE TOOK THIS PERSON TO AN IRISH PUB, IF NOT TO DROWN HIS COUNTRY'S SORROWS AT LEAST TO EXPLAIN THEM.

>> WE HAD HOUSING PRICES GOING UP THE ORDER OF 15% A YEAR FOR QUITE A LONG TIME. EVERYBODY WAS BUYING A SECOND HOME. EVERYBODY WAS BUILDING ADDITIONS TO THEIR HOUSES. PEOPLE DIDN'T GIVE AS MUCH PAUSE AS THEY SHOULD HAVE.

>> Reporter: TO PAIR PHRASE BANK ROBBER WILLIE SUTTON REAL ESTATE IS WHERE THE MONEY WAS, WHERE THE BANK LOANS WENT UNTIL THEY WENT BAD. UNLIKE ICELAND, IRELAND ASSUMED THE DEBTS OF ITS FAILING BANKS. IT NOW OWES CREDITORS, MAINLY EUROPEAN BANKS AND THE IMF, MORE THAN ITS ENTIRE G.D.P.

>> I THINK MOST PEOPLE THINK THEY'RE UNSUSTAINABLE.

>> Reporter: DO YOU DEFAULT SOMETIME IN THE FUTURE?

>> I THINK WE DO. I THINK AT THAT POINT THEN EVERYTHING GETS RESTRUCTURED.

>> Reporter: ULTIMATELY, THAT IS, IRELAND WILL RENEGOTIATE THE TERMS OF ITS DEBT WITH FOREIGN INVESTORS AS ICELAND IS DOING. WAIT A MOMENT. IF ICELAND DOES THIS, GREECE IS BROKE, AND IRELAND'S DEBTS ARE UNSUSTAINABLE, WHAT HAPPENED WHAT HAPPENS TO EUROPEAN CREDITORS? THAT'S THE QUESTION PLAYFULLY POSED IN THIS AUSTRALIAN COMEDY ROUTINE THAT'S GONE ON VIRAL ON THE INTERNET. A MOCK QUIZ SHOW.

>> CORRECT. HOW MUCH DOES IRELAND OWE.

>> $865 BILLION.

>> CORRECT. WHO DO THEY OWE IT?

>> THE EUROPEAN ECONOMIES MOSTLY.

>> Reporter: THE HOST IS PRETENDING TO QUIZ THE CONTESTANT, A FINANCIAL CONSULTANT NAMED ROGER.

>> CORRECT. HOW GERMANY, FRANCE AND BRITAIN GOING, ROGER?

>> THEY'RE STRUGGLING A BIT AREN'T THEY.

>> CORRECT. WHY?

>> BECAUSE THEY'VE LENT ALL THESE VAST AMOUNTS OF MONIES TO OTHER EUROPEAN ECONOMIES THAT CAN'T POSSIBLY PAY THEM BACK.

>> CORRECT. WHAT ARE THEY GOING TO DO?

>> THEY'RE GOING TO HAVE TO BAIL THEM OUT.

>> CORRECT. WHERE ARE THEY GETTING THE MONEY TO DO THAT, ROGER?

>> THAT'S A GOOD QUESTION. I DON'T KNOW THE ANSWER TO THAT ONE.

>> Reporter: PROFESSOR?

>> NOBODY KNOWS QUITE HOW BANKRUPT THE ENTIRE SYSTEM IS. THAT'S THE HUGE CONCERN IN THE E.U. AT THE MOMENT AND THE HUGE CONCERN FOR IRELAND WHICH IS WHAT ARE WE LIKELY TO SEE WHEN THESE CARDS EVENTUALLY END UP FALLING? I THINK THE SMART MONEY AT THE MOMENT THINKS SPAIN AND ITALY MIGHT BE THE STRAW THAT BREAKS THE CAMEL'S BACK.

>> Reporter: SPAIN. THE WORLD'S 10th LARGEST ECONOMY. LIKE IRELAND IT SUFFERED A CRIPPLING REAL ESTATE IMPLOSION THAT THREATENED ITS REGIONAL BANKS AND THUS THE STATE ITSELF IF IT HAS TO SALVAGE THEM. AT A RESTAURANT OUR SPANISH EXPERT ELABORATED.

>> REAL ESTATE DEVELOPERS AND LOANS TO CONSTRUCTION COMPANIES. BETWEEN BOTH OF THEM IT'S AROUND $450 BILLION EUROS.

>> Reporter: IN U.S. TERMS THAT'S $7 TRILLION IN POTENTIALLY BAD LOANS.

>> THAT'S EXACTLY RIGHT.

>> Reporter: UNLIKE IRELAND, SPAIN HASN'T BAILED OUT THE BANKS THAT FINANCED THE BUBBLE... YET. BUT THERE'S NOW SERIOUS TALK THAT IT WILL.

>> THIS IS A VERY IMPORTANT QUESTION. WILL IT START BAILING OUT TROUBLED FINANCIAL INSTITUTIONS? THIS IS SOMETHING THAT SHOULD NOT HAPPEN. I HOPE OUR AUTHORITIES HAVE LEARNED FROM THE IRISH EXPERIENCE ON WHAT A CATASTROPHIC ROUTE THIS IS.

>> Reporter: SO FINALLY WHAT ABOUT GERMANY WHOSE BANKS SO INDULGENTLY FINANCED THE DEBT OF ITS NEIGHBORS? GERMANY IS THE BACK STOP FOR CURRENT PLANS TO EXPAND EUROPE'S BAILOUT FUND. BUT AT DENVER'S CAFE BERLIN ECONOMIST HAROLD ULIG SAID GERMANS ARE NOW FEELING PUT UPON.

>> THEY'RE UNHAPPY. THEY RECOGNIZE THAT GREECE HAS LIVED BEYOND ITS MEANS, THAT THERE WAS A BIG HOUSING BOOM IN SPAIN, THAT THERE WAS A HUGE EXPANSION IN IRELAND, A BIG CREDIT EXPANSION IN IRELAND. AND NOW THEY HAVE TO PAY FOR ALL THAT. THIS IS PARTICULARLY DISAPPOINTING BECAUSE THE GERMANS HAVE BEEN TOLD AT THE BEGINNING THAT THERE WOULD BE NO BAILOUT. THIS HAS BEEN TOLD TO THEM MILLIONS OF TIMES.

>> Reporter: YET GERMANY KEEPS BEING TAPPED.

>> GERMANY DOESN'T HAVE POCKETS THAT ARE DEEP ENOUGH TO BAIL OUT HALF OF EUROPE. THEY CAN'T BAILOUT IRELAND AND GREECE AND ITALY AND SPAIN. IT'S JUST TOO MUCH. IF SPAIN WERE TO FALL. IF THERE WAS A BAILOUT OF SPAIN, YOU WOULD SEE SERIOUS DISCUSSIONS. YOU KNOW, FRACTURING OF EUROPE. I THINK THAT WOULD BE BAD POLITICS INDEED AFTER SPENDING SO MANY DECADES OF GETTING EUROPE... THERE WOULD BE A BIG PRICE TO PAY.

>> Reporter: AND A POTENTIALLY BIG PRICE FOR US ALL.

>> Ifill: NEXT, TO TODAY'S COURT HEARING FOR THE MAN ACCUSED OF CARRYING OUT A MASS SHOOTING IN TUCSON JUST TWO WEEKS AGO. JARED LOUGHNER APPEARED FOR AN ARRAIGNMENT THIS AFTERNOON IN A PHOENIX COURTROOM. THE FEDERAL CHARGES AGAINST HIM INCLUDE THE ATTEMPTED ASSASSINATION OF CONGRESSWOMAN GABRIELLE GIFFORDS, AND THE ATTEMPTED MURDER OF TWO OF HER AIDES. HE WILL LATER FACE STATE CHARGES DEALING WITH THE OTHER VICTIMS. FOR MORE ON LOUGHNER'S TIME IN COURT, WE TURN TO MICHAEL KIEFER OF THE "ARIZONA REPUBLIC." THANK YOU, MICHAEL, FOR COVERING THIS FOR US. WHAT DID HE PLEA AND HOW DID IT COME OUT?

>> ACTUALLY HIS ATTORNEY ALLOWED OR ASKED THE JUDGE TO ENTER A PLEA FOR HIM, A PLEA OF NOT GUILTY. IT'S PRETTY MUCH A PROCEDURAL THING. THE MOST INTERESTING THING I THINK IS THAT AS IN HIS EARLIER APPEARANCE HE SMILED ALL THE WAY THROUGH IT. HE LAUGHED, SEEMED TO LAUGH AS IF AT SOME PRIVATE JOKE. THE REST OF IT, AS I SAID, WAS PROCEDURAL. A MOTION TO MOVE THE PROCEEDINGS DOWN TO TUCSON BECAUSE THE VICTIMS AND THE WITNESSES ARE DOWN THERE AND....

>> Ifill: I WANT TO ASK YOU ABOUT THAT. BUT I WANT TO GO BACK TO THIS QUESTION OF HIS DEMEANOR. WE JUST SAW SOME SKETCHES THAT SHOWED HIM WEARING GLASSES AND AN ORANGE JUMP SUIT. HOW WAS HE LED IN, HOW WAS HE LED OUT? DID HE STAND OR SIT OR SPEAK?

>> NO, HE DID NOT SPEAK. HE WAS BROUGHT IN IN AN ORANGE JUMP SUIT. IN BELLY CHAINS AND LEG IRONS. HIS HANDS CUFFED TO THE CHAIN AROUND HIS WAIST. HE CAME IN AND SAT AT THE TABLE AND WAITED MAYBE 10, 15 MINUTES BEFORE THE HEARING STARTED. THAT'S WHEN HE WAS SMILING. HE LOOKED QUITE A BIT DIFFERENT ACTUALLY FROM HIS LAST HEARING. HIS FACE IS NO LONGER SWOLLEN. HE LOOKS LEANER. HIS HAIR IS GROWING OUT. AND HE WAS WEARING GLASSES. I GUESS YOU'D SAY HE LOOKED MORE LIKE THAT PICTURE IN HIS FACEBOOK PAGE WHERE HE'S WEARING GLASSES.

>> Ifill: WHO WAS IN THE COURT BESIDES REPORTERS AND LAWYERS?

>> THAT'S PRETTY MUCH IT. THERE WERE PROBABLY ABOUT 110 PEOPLE THERE. MOSTLY JOURNALISTS. DIDN'T APPEAR THAT THERE WERE ANY FAMILY OR FRIENDS THERE. SO IT WAS... THAT WAS IT.

>> Ifill: PERHAPS BECAUSE IT WAS IN PHOENIX THERE WEREN'T RELATIVES OF VICTIMS OR ANYTHING LIKE THAT?

>> YOU KNOW, IT'S REALLY HARD TO SAY AT HEARINGS. VERY OFTEN... I COVER THE COURTS. IT'S NOT UNCOMMON FOR FEW PEOPLE TO SHOW UP TO THE HEARING. THE WHOLE THING WAS OVER, I THINK, ABOUT SEVEN, EIGHT MINUTES. THEY ENTERED THE PLEA. THEY DISCUSSED MOVING THE CASE TO TUCSON OR MOVING THE PROCEDURE BACK DOWN TO TUCSON.

>> Ifill: PEOPLE WHO DON'T... PARDON ME FOR A MINUTE. FOR PEOPLE WHO ARE NOT FAMILIAR WITH THE GEOGRAPHY OF ARIZONA, TUCSON IS SOME DISTANCE FROM PHOENIX. A COUPLE HOURS AWAY. IT'S NOT....

>> AN HOUR-AND-A-HALF OR TWO HOURS.

>> Ifill: SO IT'S NOT INSIGNIFICANT THAT IT WAS DISCUSSED MOVING THE VENUE.

>> NO. IN THE MOTION THAT WAS FILED YESTERDAY, THE PROSECUTOR HAD IN FACT SAID OR NOTED THAT, THAT IT'S A TWO-HOUR DRIVE EACH WAY. IT REALLY WOULD CREATE A HARDSHIP FOR PEOPLE WHO WANTED TO ATTEND THE HEARING.

>> Ifill: YOU MENTIONED JUDY CLARK HIS DEFENSE ATTORNEY WHO DID NOT OBJECT TO MOVING THIS BACK TO TUCSON. I'M CURIOUS ABOUT WHY WE SAW THE CHARGES THAT WERE BROUGHT TODAY AND NOT OTHERS WE CAME TO EXPECT. LIKE THE MURDER CHARGES. WE DIDN'T SEE THOSE TODAY.

>> WELL, UNDER, UNTS THE CONSTITUTION YOU HAVE A CERTAIN NUMBER OF DAYS TO GET SOMEONE INDICTED SO HE'S BEEN INDICTED ON THESE CHARGES. THEY'LL TAKE THEIR TIME. THE PROSECUTOR SAID THAT A SUPERSEDING INDICTMENT WOULD BE FORTH COMING PROBABLY WITHIN ABOUT 30 DAYS. SO ONE WOULD ASSUME THAT THAT WOULD HAVE THE FEDERAL MURDER CHARGES. AND THEN THE STATE HAS DECIDED TO TAKE A BACK SEAT AND FOR THE TIME BEING. BUT THERE WILL BE SUBSEQUENT CHARGES. IT'S MY UNDERSTANDING THAT LOUGHNER COULD ALSO STILL BE CHARGED AGAIN FOR THE MURDERS THAT HE WILL BE... THAT HE'S ALREADY BEEN CHARGED FOR BUT NOT YET INDICTED.

>> Ifill: I JUST WANT TO CLEAR ONE OTHER THING UP ABOUT VENUE. THERE WAS SOME TALK FOR A WHILE THAT BECAUSE A FEDERAL JUDGE WERE INVOLVE AND SO MANY JUDGES HAD TO RECUSE THEMSELVES THAT THIS MIGHT BE MOVED OUT OF STATE ENTIRELY. IS THAT STILL A POSSIBILITY?

>> WELL, YOU KNOW, IT'S A POSSIBILITY. IT'S REALLY HARD TO SAY. I KNOW THERE WERE ASSUMPTIONS MADE THAT BECAUSE THE JUDGES FROM SAN DIEGO AND THE DEFENSE FROM SAN DIEGO THAT IT WOULD GO TO SAN DIEGO. YOU KNOW, THERE'S A LOT THAT HAS TO HAPPEN YET. I MEAN THEY'RE GOING TO PROBABLY DISCUSS ISSUES OF WHETHER LOUGHNER IS KPE TEPT TO STAND TRIAL. ... COMPETENT TO STAND TRIAL. WHO KNOWS WHAT COULD HAPPEN IF HE'S GOING TO PLEAD GUILTY. THE ONLY TIME... OR ENTER A PLEA AGREEMENT, RATHER. THE ONLY TIME THAT... WELL, A CHANGE OF VENUE HAS TO DO WITH THE JURY. THEY WANT TO MAKE SURE THAT THEY CAN FIND AN IMPARTIAL JURY. SO, WHEN THEY'RE SURE IT'S GOING TO A JURY TRIAL, THEN THAT MAY COME UP AT THAT POINT.

>> Ifill: THAT'S ONE OF THE....

>> IT'S REALLY VERY EARLY.

>> Ifill: WE'LL WATCH FOR THAT. MICHAEL KIEFER, THANK YOU VERY MUCH. FOR A CLOSER LOOK AT THE LEGAL AND ETHICAL ISSUES AT PLAY LET'S PICK UP WHE IN THE LOUGHNER CASE, WE ARE JOINED BY LAURIE LEVENSON, PROFESSOR OF CRIMINAL LAW AT LOYOLA LAW SCHOOL, AND A FORMER FEDERAL PROSECUTOR. THIS WHOLE QUESTION ABOUT COMPETENCY. WE HEARD THIS KIND OF DISTURBING STORY OF HIM COMING TO COURT TODAY, LAUGHING AS IF TO HIMSELF. WE'VE HEARD LOTS OF OTHER STORIES ABOUT HIM. AT WHAT POINT DOES THAT BEGIN TO ENTER INTO THE DETERMINATION OF THE COURT ABOUT WHAT CHARGES TO BRING AND HOW HE'S TO BE PROSECUTED?

>> WELL, I THINK THAT THE JUDGE EVEN TODAY ASKED JUDY CLARK THE DEFENSE LAWYER, ARE THERE ISSUES OF COMPETENCY? SHE SAID NOT AT THIS TIME. I THINK THEY'RE TRYING TO SORT THIS OUT. EVENTUALLY THEY MIGHT SEND HIM OUT FOR A COMPETENCY EXAM. THEY WOULD SEND HIM TO A HOSPITAL PRISON INSTITUTION TO BE EVALUATED. THAT COULD TAKE MONTHS. AND DETERMINE WHETHER HE REALLY UNDERSTANDS THE PROCEEDINGS AND CAN PARTICIPATE. IF HE CAN'T, HE'S SENT TO THE INSTITUTION TO GET BETTER. THEN WHEN HE IS BETTER THEY'LL HAVE THE PROCEEDINGS. BUT IF HE'S COMPETENT THEY'LL JUST MOVE FORWARD.

>> Ifill: NOT AT THIS TIME. THAT DOESN'T EXCLUDE THE POSSIBILITY OF HER MAKING THIS CASE LATER. TODAY SHE WASN'T PREPARED TO MAKE THAT CASE.

>> THAT'S RIGHT. SHE IS MOVING VERY CAREFULLY HERE. THERE'S A LOT THAT NEEDS TO BE SORTED OUT. THEY STILL NEED TO KNOW WHAT THE FEDERAL AUTHORITIES ARE GOING TO CHARGE, WHETHER THEY'RE GOING TO SEEK THE DEATH PENALTY, WHAT HIS MENTAL STATE IS, WHAT HIS MENTAL HISTORY SHOWS. I THINK JUDY CLARK IS DOING WHAT SHE OFTEN DOES, PLAY IT CLOSE TO THE VEST. NOT REVEAL ANYTHING MORE THAN SHE HAS TO.

>> Ifill: YOU SAY WHAT SHE OFTEN DOES. SHE'S KNOWN IN LEGAL CIRCLES FOR MOUNTING THIS KIND OF DEFENSE BEFORE?

>> SHE HAS REPRESENTED VERY DIFFICULT DEFENDANTS IN THE PAST. PROBABLY THE ONE BEST KNOWN BY YOUR VIEWERS IS THE UNA-BOMBER TED KACZYNSKI WHO ALSO HAD SOME MENTAL PROBLEMS AND REPRESENTED SUSAN SMITH WHO DROWNED HER CHILDREN. JUDY CLARK IS VERY FAMILIAR BOTH WITH THE FEDERAL DEATH PENALTY AND THEN WITH MENTAL ISSUES AS WELL. SHE NEEDS TO GET THE INFORMATION FROM THE GOVERNMENT IN ORDER TO DECIDE WHAT OUR TACTICS WILL BE FOR HER CLIENT.

>> Ifill: ONE OF THE THINGS YOU WOULD THINK SHE WOULD BE WORRIED ABOUT IS THE POSSIBILITY OF A TAINTED JURY. TODAY THEY WERE TALKING ABOUT MOVING THIS BACK TO TUCSON, EXACTLY THE PLACE WHERE YOU CAN IMAGINE EVERY SINGLE PERSON CALLED FOR JURY DUTY HAS HEARD ABOUT THIS. WHY WOULDN'T SHE HAVE OBJECTED TO THAT TODAY?

>> I THINK IT'S A MATTER OF TIMING. RIGHT NOW AS THE REPORTER SAID THEY'RE JUST DEAL ING WITH PRETRIAL MATTERS AND HEARINGS. SHE WANTS TO APPEAR AS COOPERATIVE AS POSSIBLE. IF THEY END UP HAVING THIS TRIAL IN ARIZONA, SHE'S FIGHTING FOR HIS LIFE PERHAPS. SHE WANTS IT TO LOOK LIKE THEY'RE COOPERATING. THERE WILL BE A TIME IF THERE ACTUALLY IS A TRIAL FOR HER TO ARGUE IT'S UNFAIR. THERE'S INFLAMMATORY PUBLICITY. WE HAVE TO MOVE IT OUT, MAYBE MOVE IT TO SAN DIEGO OR SOMEWHERE ELSE. SHE DOESN'T HAVE TO ARGUE THAT NOW.

>> Ifill: HOW DOES ONE DETERMINE IF SOMEONE IS MENTALLY COMPETENT TO STAND TRIAL IN A CASE LIKE THIS ESPECIALLY WHEN THERE HAS BEEN SO MUCH PUBLICITY ABOUT WHAT SEEMS TO BE INSTABILITY STABILITY ON HIS PART?

>> THIS IS SOMETHING THAT HAS TO BE SORTED OUT FRANKLY BY EXPERTS, BY THE DOCTORS, MAKE SURE THAT THIS ISN'T A SHOW. WHICH SOME PEOPLE WILL CLAIM. IN FACT HE DOESN'T REALLY GET WHAT'S HAPPENING IN THESE PROCEEDINGS. NOW IT'S A LOW THRESHOLD TO BE COMPETENT. ODDS ARE HE PROBABLY IS COMPETENT. WE'VE HAD PEOPLE LIKE THE FREEWAY... THE SUBWAY SHOOTER IN NEW YORK. HE WAS BIZARRE BUT HE WAS COMPETENT. AND THERE'S TWO DIFFERENT ISSUES HERE, OF COURSE. WHETHER HE'S COMPETENT TO STAND TRIAL WHICH IS DOES HE UNDERSTAND WHAT'S HAPPENING? CAN HE PARTICIPATE? THEN THE SECOND ISSUE OF WHETHER HE'LL RAISE AN INSANITY DEFENSE.

>> Ifill: THERE'S EVIDENCE THAT THE GOVERNMENT HAS PUT FORWARD THAT THERE MAY HAVE BEEN PREMEDITATION INVOLVED IN HIS ACTIONS WHICH LEADS ONE TO THINK THAT THAT DOESN'T MAKE HIM INSANE IF HE CAN SIT THERE- PLOT AND PLAN?

>> THAT WOULD MAKE IT MUCH HARDER FOR HIM. YOU'RE ABSOLUTELY RIGHT. IF HE'S PLANNING AND THEY HAVE THE WRITINGS BY HIM THAT'S CALLING IT AN ASSASSINATION AND HE'S BUYING THE AMMUNITION AND TAKING THE TAXI AND THEN ON THE DAY OF THE SHOOTING EN HE'S TOLD TO GET BACK IN LINE AND HE MOMENTARILY DOES THAT, THAT SHOWS THAT HE WAS FUNCTIONING. THE STANDARD FOR INSANITY IS NO LONGER THE ONE WE HAD BEFORE WHEN REAGAN WAS SHOT. IT'S ONE THAT VERY DIFFICULT FOR DEFENDANTS TO MAKE.

>> Ifill: IS THERE A DISTINCTION TO BE MADE BETWEEN THE FEDERAL CHARGES AND THE STATE CHARGES WHICH WE ANTICIPATE AS WELL?

>> THERE ARE. FIRST OF ALL THE STATE CHARGES WE ASSUME WILL BE THE MURDER CHARGES. PROBABLY GOING TO BE THE DEATH PENALTY CHARGES. THE PROCEDURES ARE DIFFERENT. IN THE FEDERAL CHARGES HE'S STARTING TO GET SOME OF THE DISCOVERY HERE. I THINK HE GOT A LOAD OF 250 INTERVIEWS ALREADY FOR HIS LAWYER TO REVIEW. SO THE PROCEDURES ARE DIFFERENT. AND ALSO THE TONE OF THE COURTROOM CAN BE QUITE DIFFERENT.

>> Ifill: LAURIE LEVINSON, THANK YOU SO MUCH FOR HELPING US OUT.

>> MY PLEASURE.

>> Woodruff: AND TO A RULING IN ANOTHER COURTROOM TODAY THAT UPENDED THE CHICAGO MAYORAL RACE. RAY SUAREZ HAS THAT STORY.

>> Suarez: WITH LESS THAN ONE MONTH TO GO BEFORE THE PRIMARY, AN ILLINOIS APPELLATE COURT RULED IN A 2-1 DECISION TO REMOVE FORMER WHITE HOUSE CHIEF OF STAFF RAHM EMANUEL FROM THE BALLOT IN THE CHICAGO MAYORAL RACE. EMANUEL'S ELIGIBILITY TO RUN WAS CALLED INTO QUESTION BECAUSE HE LIVED IN WASHINGTON WHILE SERVING IN THE OBAMA ADMINISTRATION. TODAY'S RULING WAS A SETBACK FOR THE FRONTRUNNER, BUT HE PLANS TO APPEAL TO THE ILLINOIS SUPREME COURT. HE SPOKE TO REPORTERS THIS AFTERNOON.

>> WHEN THE PRESIDENT ASKS YOU TO SERVE THE COUNTRY AS HIS CHIEF OF STAFF THAT COUNTS AS PART OF SERVING YOUR COUNTRY. I HAVE NO DOUBT THAT WE WILL IN THE END PREVAIL AT THIS EFFORT. AS MY FATHER ALWAYS USED TO SAY, NOTHING IS EVER EASY IN LIFE. SO NOTHING IS EVER EASY. THIS IS JUST ONE TURN IN THE ROAD.

>> Suarez: FOR MORE ON THE FALLOUT FROM TODAY'S RULING, WE ARE JOINED BY LYNN SWEET. SHE IS THE WASHINGTON BUREAU CHIEF FOR THE "CHICAGO SUN TIMES" AND A COLUMNIST FOR "POLITICS DAILY." WHY WAS THIS CASE EVEN BACK IN COURT? A COOK COUNTY COURT SAID HE COULD RUN. A BOARD OF ELECTIONS DECISION SAID HE COULD RUN. YET THERE HE IS STILL DEFENDING HIMSELF.

>> THAT'S BECAUSE THIS CASE WAS ALWAYS DESTINED FOR THE ILLINOIS SUPREME COURT NO MATTER WHAT HAPPENED IN THE LOWER COURTS. THE SKIRMISH WOULD GO ALL THE WAY. THE ATTORNEY WHO IS THE LEADING FORCE BEHIND THE CHALLENGE TO RESIDENCY WOULD HAVE BROUGHT IT TO THE SUPREME COURT TODAY IF THE APPELLATE COURT HAD RULED AGAINST HIM, RAY.

>> Suarez: IN HIS REMARKS TODAY, RAHM EMANUEL KEPT COMING BACK TO THAT IDEA THAT HE WAS SERVING THE COUNTRY. WHY IS THAT SO IMPORTANT IN THIS CASE?

>> IT'S IMPORTANT BECAUSE ILLINOIS LAW HAS AN EXEMPTION FROM THE RESIDENCY REQUIREMENT IF A RESIDENT WHO GOES TO SERVE THE COUNTRY. NOW CLEARLY RAHM EMANUEL SERVED THE CUP REIN HIS ROLE AS CHIEF OF STAFF. HE'S TALKING ABOUT A SECTION OF THE LAW THAT DEALS WITH THE ELIGIBILITY OF SOMEONE IN ILLINOIS TO VOTE. SO IT'S A MORE ELASTIC, MORE LENIENT THRESHOLD TO ALLOW PEOPLE WHO SERVE THE COUNTRY TO VOTE. NOW THE PART OF THE LAW THAT THE ILLINOIS APPELLATE COURT DEALT WITH TODAY WAS FROM SOME OTHER LANGUAGE IN THE ELECTION CODE DEALING WITH THE QUALIFICATIONS FOR A CANDIDATE. AND WHAT A CANDIDATE HAS TO DO IS LIVE IN THE MUNICIPALITY A YEAR BEFORE THE ELECTION. SO WHILE RAHM EMANUEL IS FOCUSING ON ONE LEGAL ASPECT OF THE CASE, THE APPELLATE COURT FOUND THAT THE PART OF THE CODE THAT TALKED ABOUT HAVING TO LIVE IN THE CITY A YEAR BEFORE YOU RUN, A VERY IMPORTANT PART OF THE LAW. THIS IS A VERY RIPE OPEN LEGAL QUESTION, RAY. IT HAS ALWAYS BEEN A CLOSE CALL BUT IT'S NOT SURPRISING THAT AN APPELLATE COURT FOUND AGAINST RAHM JUST AS IT WASN'T SURPRISING THAT LOWER COURTS FOUND FOR HIM.

>> Suarez: WHEN THE CAUCUS PICKING THE BALLOTS ARE ABOUT TO BE PRINTED EARLY VOTING STARTS IN CHICAGO AT THE END OF THIS MONTH. DOES HE HAVE ENOUGH TIME TO GET BACK IN THE RACE?

>> CERTAINLY. ONE, HE'S NEVER OUT OF IT. HERE'S WHY. HE HAS A FORMIDABLE LEAD AGAINST HIS THREE MAIN OPPONENTS. HE'S GOT MILLIONS AND MILLIONS OF DOLLARS MORE THAN EVEN THE SECOND PLACE GUY IN THE MONEY RACE. AROUND $10.5 MILLION. THE OTHERS HAVE $2.5 MILLION. AND THE OTHERS DON'T HAVE A HALF MILLION COMBINED. THIS CASE WILL BE TAKEN TO THE SUPREME COURT ON AN EXPEDITED BASIS, ON AN EMERGENCY BASIS. THERE HAVE BEEN MANY PUBLIC QUESTIONS OF GREAT PUBLIC INTEREST LIKE THIS ONE THAT HAVE GONE TO THE SUPREME COURT AND THEY HAVE ACTED SWIFTLY. THEIR FIRST DECISION THOUGH IS WHETHER OR NOT TO TAKE THE CASE. WE'LL KNOW THAT SOON.

>> Suarez: TODAY RAHM EMANUEL CALLED IT JUST A TURN IN THE ROAD BUT THE CITY CLERK, ONE OF HIS OPPONENTS, SAID THAT THIS MAY BE AN OPENING FOR CANDIDATES LIKE HIM TO GET ANOTHER LOOK. EVEN IF RAHM EMANUEL GETS BACK ON THE BALLOT. DOES THIS OPEN UP THE RACE A LITTLE MORE.

>> ABSOLUTELY. THERE IS POLITICAL DAMAGE THAT THE EMMANUEL CAMPAIGN HAS TO WORRY ABOUT EVEN IF LEGALLY THEY PREVAIL AND THEY'RE ON THE BALLOT. WHAT HAS HAPPENED IS THAT RAHM EMANUEL HAS RUN A VERY GOOD CAMPAIGN WITH HIS MILLIONS HE'S WELL FUNDED. HE HAS RUN A MINI-PRESIDENTIAL CAMPAIGN FOCUSING ON 50 WARDS INSTEAD OF 50 STATES. HE'S JUST OVERWHELMED HIS OP IGS. HE'S OUTORGANIZED THEM AND BEEN VERY MESSAGE DRIVEN, VERY MUCH LIKE A MINI-PRESIDENTIAL CAMPAIGN. NOW EVERYONE IN CHICAGO MIGHT KNOW RAHM AND THEY KNOW THE OTHER RIVALS, BUT THERE IS A CERTAIN AMOUNT OF FLUIDITY IN THE RACE. THIS IS A GREAT CHANCE FOR SOME OF THE CANDIDATES BECAUSE WHAT YOU WANT TO DO NOW IN THE RACE IS AT LEAST COME IN NUMBER TWO ON FEBRUARY 22. WHY THEY CALL IT A PRIMARY IN ILLINOIS, RAY, IT'S NON-PARTISAN. IF NO ONE HAS MORE THAN 50% OF THE VOTE COME FEBRUARY 22 THE TOP TWO FINISHERS FACE OFF APRIL 5. SO IT'S VERY MUCH A RACE FOR SECOND PLACE AND TO KEEP RAHM BELOW 50%.

>> Suarez: WHAT HAPPENS NOW? YOU SAY THERE'S GOING TO BE AN EXPEDITED APPEAL. I GUESS THAT PAPERWORK IS WHERE? ON ITS WAY TO SPRINGFIELD. WHEN WILL WE KNOW WHETHER THEY'RE GOING TO HEAR THE CASE.

>> I'M NOT SURE OF THE TIMETABLE RIGHT NOW. I TALKED TO RAHM EMANUEL'S CAMPAIGN A SHORT TIME AGO. THEY'RE ALSO GOING TO ASK FOR A STAY OF THE ILLINOIS APPELLATE ORDER. AND THE ILLINOIS APPELLATE COURT JUST SAID DON'T PUT HIM ON THE BALLOT. IF YOU HAVE, TAKE HIM OFF. THEY WANT THAT DECISION STAYED SO THAT BALLOTS ARE PRINTED. THAT MIGHT ALSO BE A SIDE SKIRMISH IN THIS UNFOLDING LEGAL DRAMA OVER WHO WILL BE THE NEXT CHICAGO MAYOR.

>> Suarez: LYNN SWEET OF POLITICS DAILY AND THE SUN TIMES THANKS FOR TALKING TO US.

>> THANK YOU.

>> Ifill: AGAIN, THE MAJOR DEVELOPMENTS OF THE DAY. A SUICIDE BOMBER HAS KILLED AT LEAST 35 PEOPLE AND WOUNDED OVER 170 AT A MOSCOW AIRPORT. AND IN AN UNANIMOUS DECISION, THE SUPREME COURT RULED COMPANIES CAN'T FIRE PEOPLE BECAUSE THEY ARE IN A RELATIONSHIP WITH OTHER EMPLOYEES WHO COMPLAIN OF DISCRIMINATION. AND TO HARI SREENIVASAN FOR WHAT'S ON THE NEWSHOUR ONLINE. HARI?

>> Sreenivasan: WE TALK TO KPBS REPORTER AMITA SHARMA. SHE PROFILES THE SAN DIEGO JUDGE PROCEEDING OVER LOUGHNER'S FEDERAL TRIAL. ON THE POLITICAL CHECKLIST, NEWSHOUR POLITICAL EDITOR DAVID CHALIAN TALKS TO JUDY ABOUT THE PRESIDENT'S TASK IN THE STATE OF THE UNION. WE'LL LIVE STREAM OUR COVERAGE TOMORROW, AND WE'LL HAVE AN ANNOTATED VERSION OF THE SPEECH WITH EXPERT ANALYSIS. ALL THAT AND MORE IS ON OUR WEB SITE, newshour.pbs.org. JUDY? TO OUR HONOR ROLL OF AMERICAN SERVICE PERSONNEL KILLED IN THE IRAQ AND AFGHANISTAN CONFLICTS. WE ADD THEM AS THEIR DEATHS ARE MADE OFFICIAL AND PHOTOGRAPHS BECOME AVAILABLE. HERE IN SILENCE ARE NINE MORE.

>> Woodruff: AND THAT'S THE NEWSHOUR FOR TONIGHT. ON TUESDAY, MARK SHIELDS AND MICHAEL GERSON WILL PREVIEW THE PRESIDENT'S SPEECH AND WE'LL HAVE LIVE COVERAGE AT 9:00 P.M. EASTERN. I'M JUDY WOODRUFF.

>> Ifill: AND I'M GWEN FILL. WE'LL SEE YOU ONLINE, AND AGAIN HERE TOMORROW EVENING. THANK YOU, AND GOOD NIGHT. MAJOR FUNDING FOR THE PBS NEWSHOUR HAS BEEN PROVIDED BY:

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