[Wolf Blitzer, Cnn Anchor:] Thanks very much, Lou. Happening now, the controversy over the federal attorney firings. The president offered to let top aides talk to Congress, but not under oath. And he warns lawmakers, take it or leave it. Right now Democrats are not taking it. As the candidates battle it out on the campaign trail, "Real Time's" Bill Maher isn't pulling any punches. He tells us what he really thinks about both sides of the presidential race. And is Arnold Schwarzenegger a closet liberal? Is Rush Limbaugh irrelevant? Why are these Republican heavyweights caught up in a grudge match? I'm Wolf Blitzer. You're in THE SITUATION ROOM. Tonight, an historic showdown between the White House and the Congress potentially, not since the impeachment of President Clinton has the government come this close to a constitutional crisis. Regarding the controversy over the firing of those eight U.S. attorneys, President Bush, in effect, is daring Congress to bring it on. He says he will give Congress unprecedented access to information. He will allow Congress to interview presidential adviser Karl Rove and other White House officials, but President Bush will not stand for transcripts in those interviews, and he says he'll go to the mat, go to the mat against allowing any of those officials to testify under oath. Congressional Democrats want sworn testimony from those officials, and to force that, Democrats are threatening subpoenas right now. The president is warning Democrats, don't choose confrontation.
[George W. Bush, President Of The United States:] We will not go along with a partisan fishing expedition aimed at honorable public servants. It will be regrettable if they choose to head down the partisan road of issuing subpoenas and demanding show trials when I have agreed to make key White House officials and documents available.
[Blitzer:] We're watching every angle of this showdown and potential constitutional crisis. Our congressional correspondent Dana Bash is on Capitol Hill, but let's go to the White House. Our correspondent Suzanne Malveaux is standing by. Suzanne, how far is the president willing to take this fight?
[Suzanne Malveaux, Cnn White House Correspondent:] Wolf, the president is going to take this all the way. This is their final offer, senior administration officials tell me. And they say they believe this is a very generous offer. This president is going to take it all the way to the Supreme Court, if necessary, really to respond with a sledgehammer, a political sledgehammer to this potential threat to the White House and to this challenge to the White House over executive privilege and executive power.
[Blitzer:] Why is he so fired up on this?
[Malveaux:] Well you know ever since I've covered this president, the president as well as the vice president have felt that the executive branch has been severely weakened since Watergate, that it got worse during the Clinton era. And this is really considered a test case here, Wolf. The Democratic Congress that has this subpoena water, they want to flex their muscles with that. They're very eager to do so. And the White House, which feels like this is just the beginning of a slippery slope, that if they allow Rove and Miers to go under oath that it's going to open the flood gates for everybody else. So they believe on principle alone here, that they have got to fight this, and they've got to respond using a political sledgehammer, Wolf.
[Blitzer:] The president in public is strongly supporting, standing by his man, the attorney general, Alberto Gonzales. What are you hearing behind the scenes in private?
[Malveaux:] Essentially what we heard from the president in public is lay off my guy. I'm the one who can save him, and that's exactly what I'm doing here. I spoke with a very senior administration official close to the president today who said, look, the only way that Gonzales goes is if he offers his resignation. He has not done that and it's even questionable whether or not the president would accept his resignation. Now I also talked to Republican insiders and strategists who say, look, the people who are talking about this kind of we're finding replacements for the guy. They don't have the political juice, we're told. They're not at the table when it comes to decision-making. They don't know what they're talking about, but everybody is looking, Wolf, to next week, how Gonzales performs next week is going to be critical. The one thing that the White House, as well as some of these Republican advisers do agree on is that for this week, Gonzales is safe Wolf.
[Blitzer:] Suzanne, thank you. Democrats are swinging directly back at the president, calling his "take it or leave it offer" a nonstarter. Listen.
[Sen Chuck Schumer , New York:] Any lawyer will tell you that the offer made by the president is not going to get the truth. No transcript, no oath, no public testimony. What are we hiding?
[Blitzer:] Let's go straight to our congressional correspondent Dana Bash. Democrats, Dana, seem to be flatly rejecting the president's offer of the no sworn testimony, no transcripts. Give us their bottom line.
[Dana Bash, Cnn Congressional Correspondent:] That is their bottom line, Wolf. The Senate judiciary chairman, Patrick Leahy, just after he met with the president's top lawyer, White House counsel Fred Fielding, issued a statement saying that he flat out rejects the offer from the White House. Essentially what he says is it's not constructive and it is not helpful for the White House to tell the Senate how to do their investigation. As you said, the biggest problem for Democrats in this offer is that it does not allow them to put Karl Rove and others under oath. And more specifically, it doesn't allow them to have transcripts of what they say. What Democrats are saying is that this does not allow them to conduct a proper investigation because they won't exactly know whether or not there is accountability, whether or not these White House officials are contradicting one another or even themselves.
[Blitzer:] The president said he's going to go to the mat, absolutely he said when asked that question. So what do the Democrats do now, practically speaking?
[Bash:] Practically speaking, what they say is they're going to go back to their corner, so to speak, they're going to try to figure out what their counter proposal is and as an insurance policy, they're going to go ahead and do something that the president strictly warned against, Wolf. And that is that tomorrow morning the House Judiciary Committee is going to vote to authorize the chairman of that committee to issue subpoenas for Karl Rove and others. The Senate is going to do the same thing in its judiciary committee on Thursday. They say that they might not have to use it, but they are going to do that, just to have that option. Now, they did not they certainly expected some kind of offer short of full public testimony. But also they, perhaps, didn't expect this kind of digging in by the president. So this could be a negotiation or it could be the beginning of as Suzanne was talking about a real constitutional showdown. Because Democrats here also want to stick to their principle and they want to show the White House that they are in charge now and they want to sort of make it clear to the White House that they're not just going to wither under the president's warnings.
[Blitzer:] We heard the president voice his strong support for the attorney general, Alberto Gonzales. What do Republicans on the Hill say?
[Bash:] You know CNN has learned that there was a meeting here this morning, Wolf. The Senate Republican leadership met to make what one participant called a cold assessment of the situation regarding Alberto Gonzales. And what they decided is that certainly Alberto Gonzales does not have a reservoir of goodwill here. In fact, many Republicans don't necessarily like him very much, in terms of the job that he's doing. But at the same time, the leadership decided that they're not going to go ahead with an active push to get him out. That's the leadership, Wolf, on the in terms of the rank and file, Ted Barrett, my colleague here and I talked to about a dozen Senate Republicans and it is clear still, especially among moderates like Susan Collins of Maine, Lisa Murkowski of Alaska, that they simply are very upset because they still say they don't think Alberto Gonzales has the credibility he needs to continue to do his job.
[Blitzer:] Dana on the Hill. Thanks. And as we mentioned, President Bush is standing by his man, at least in public, the attorney general, Alberto Gonzales. But is the White House showing loyalty or just paying lip service? He's pledged to support other top officials in the past, even as he was easing them out of office. Last May 25 the president said the Treasury secretary, John Snow, had not given any indication he would be leaving his post.
[Pres. Bush:] No, he has not talked to me about resignation. I think he's doing a fine job. After all, our economy is strong.
[Blitzer:] But days later the White House admitted the president had misled the public confirming that when Mr. Bush spoke, Snow had already indicated that he was leaving and a successor, Henry Paulson, had already accepted the job. Then November 1, Mr. Bush did not beat around the bush, if you will, telling reporters flat out that he wanted the defense secretary, Donald Rumsfeld, to stay on until the end of his presidency, but only days later, Rumsfeld was out.
[Unidentified Male:] Last week you told us that Secretary Rumsfeld would be staying on. Why is the timing right now for this and how much does it have to do with the election results?
[Bush:] Right. No, you and Hunt and Kyle came in the Oval Office and you asked Hunt asked me the question one week before the campaign, and basically it was are you going to do something about Rumsfeld and the vice president? And my answer was, you know, they're going to stay on and the reason why is I didn't want to inject a major decision about this war in the final days of a campaign. So the only way to answer that question and to get you on to another question was to give you that answer.
[Blitzer:] So is the president waiting for the right moment now to make a move over at the Justice Department? Could Alberto Gonzales already be on his way out? We're watching this very, very closely. Once we know more, we'll of course share it with you. Let's go to Jack Cafferty in New York. He's got "The Cafferty File" Jack.
[Jack Cafferty, Cnn Anchor:] Wolf, our nation's capital has a major reading problem. A new report says 36 percent of Washington, D.C.'s residents are functionally illiterate. That means they have a hard time doing things like understanding bus schedules, reading maps, filling out job applications. And we're not just talking about members of Congress here either. Compare that to the national rate of 21 percent. The report by the State Education Agency found adults over 65 had the lowest literacy score of any group and it's thought that growing number of Hispanic and Ethiopian immigrants are part of the reason for these low numbers in Washington, D.C. It's a problem that comes with a price tag. The Washington, D.C. Chamber of Commerce says the city lost up to $107 million in taxes every year between 2000 and 2005 because there were not enough qualified job applicants. So here's the question. Why is the rate of functional illiteracy so much higher in Washington, D.C. than elsewhere in the country? E-mail your thoughts to CaffertyFile@CNN.com or go to CNN.comCaffertyFile Wolf.
[Blitzer:] Jack, thank you. Coming up here in THE SITUATION ROOM, one-on-one with Bill Maher the comedian loses faith in one of the 2008 front-runners.
[Unidentified Male:] John McCain supports the idea that more troops is the answer in Iraq. To me, that's just dumb. It's just not bright. So he's out. Not my favorite anymore.
[Blitzer:] Does Bill Maher have kinder words for Senator Hillary Clinton? We'll find out. Plus, the terminator versus the guy who calls himself the most dangerous man in America Arnold Schwarzenegger taking on Rush Limbaugh find out why they're trading insults over the airwaves. And bracing for bombs and terror scrambling against what Israel feels is a looming threat from Iran. Stick around. You're in THE SITUATION ROOM.