>> sandra: all new at 2:00, president biden about to address the nation, congress, and all of the american voters in tonight's state of the union expected to lean in on the economy claiming americans are better off under his watch. so, why are so few of them buying what the biden administration is selling? we'll ask larry kudlow, he's got some ideas, and gone all the way to sit next to john roberts in d.c. to sound off on that. "america reports" rolls into hour two, i'm sandra smith in new york. hi, john. >> john: had a chance to spend some time with larry earlier, good to reconnect. larry, along with bret baier and bill mcgurn here with a reality check on the current state of the union. the top story is something we likely will not hear a lot about tonight, china's spy flight. it's a fox news alert. >> sandra: so here's the update

at this hour. the u.s. navy is racing to recover the debris from the chinese spycraft miles off the coast of south carolina. on the screen right now, our first look at what those divers are now pulling out of the ocean and at the balloon itself, so take those new images in. >> john: it went down in relatively shallow water, about 50 feet deep. biggest challenges are currents and water temperature which is only this time of year about 53°. >> sandra: in a moment, we will be speaking to retired navy seal commander sears about what they are recovering and what the navy is doing about it. >> john: bryan llenas is off a boat close to the recovery effort. how is it looking from where you are, bryan? >> the weather has gotten better since the weekend, incredible conditions on the water, great

for a salvage operation underway. you are looking live at our fox news drone showing you the military ships that are over the debris field said to be 15 by 15 football fields wide. right now this is all about what's happening underwater. you mentioned 50 feet deep. the u.s.ns pathfinder is a survey ship using special sonar and unmanned underwater vehicles to map out the sea floor and locate what's left about the airship 50 feet below. size of a regional lear jet. the debris on the surface of the ocean has been picked up by navy divers. it's first brought on to the u.s.s. carter hall to be categorized by the fbi and naval investigator. brought on to shore, unloaded and then taken to the fbi crime lab at quantico, virginia.

u.s. fleet forces command released these new images from sunday showing the team's pulling out remnants of the white chinese spy balloon from the atlantic ocean after it was shot out of the sky by an f-22. the commander of norad and northcom said the decision to allow the spy balloon to travel across the country allowed the military to collect intel on the chinese surveillance air ship using spy planes. >> assess what they were doing, what kind of capabilities existed on the balloon, what kind of transmission existed and you'll see in the future that time frame was well worth its value to collect. over. >> and explosive ordnance team is on-site, they don't know if there were explosives and people on shore should watch out for

some debris, perhaps it could wash up on shore and contact law enforcement if it does happen. >> john: whoever was wishing you clear skies and calm seas got their wish. bryan, thanks for the update. appreciate it. sandra. >> sandra: david sears now, retired navy seal commander, seal team 6 member and author of "smarter, not harder," he has insight into dive operations like this one. put the images on the screen for the viewers, the first look we are getting now of the u.s. navy just releasing the images to us, what should we make of what we see on the screen here and what does it tell you so far what has been recovered? >> it's one of the first things they are going to do, recover the surface debris, and smaller boats put out rigid inflatable boats so they are rigid bottom and inflatable side, standard

coast guard and navy at sea recovery boats and they'll pull everything they can in and clear that scene so then the other ship, the pathfinder can pass over and map out with sonar, the bottom of the sea floor and see where the rest of the debris is. then they'll grid that area out and from there commence the dive operations. >> john: dave, the search area is said to be 15 square football fields around, which is actually not too bad when you consider how much ocean there is out there. i assume that pieces of the balloon would have floated away, but that the payload package probably came down intact, at least until it hit the water. do you expect that that would be in more of a concentrated debris field than the balloon itself? >> well, coming from that altitude and the speed it came down at, water turns into, acts just like concrete, it's pretty hard, it's going to break stuff

up. so the smaller pieces, a lot of the debris that's going to happen, smaller pieces are going to get caught in the current and spread across the debris, the 1500 by 1500 debris field they seem to have identified. you'll have some larger intact pieces as well, and from there you'll begin to sort of map the rest of it with the currents. >> sandra: what should people make of sort of the drama that is now hang from this spy balloon incident, the drama inside of china, and the information that those people are getting there about how we handled this here. >> china always has two messages they are putting out. always putting out an internal message, which is different than their external message. so their global times newspapers and productions will put out an external message and the people inside of china will get a different message, and xi always wants to make it a very nationalist message, the u.s. is the enemy, we are doing bad

things to chinese and he wants to kind of stir up a big fervor in his own populus of nationalism and that they are under attack, that's to be expected in a situation like this. and on the outside, his diplomatic communications have always been we are innocent, we didn't do anything, we deny everything. >> john: you know, as the debris from this balloon are collected and make their way to quantico, virginia for analysis, the chinese government is saying we want our stuff back. and the foreign ministry says in response to a question whether china has asked the u.s. to return the wreckage of the downed balloon, a spokesman said it's not the u.s. but china. dave, i don't know if you can hear me or not. i think we may have lost coms with dave. >> sandra: dave, can you hear me? ok, we will establish ifb with him there.

interesting to see if this is addressed and how this is addressed. obviously the china threat specifically tonight, ro khanna was on our air this morning talking to bill and dana, i believe, and he believes the president should lead with china, and the threat that it poses, and what specifically our plans are to combat that threat. >> john: yeah, and back to what the foreign ministry was saying, you know, they want their balloon back with you i would as -- but i would assume they are not going to get it back. comprehensive analysis done of all of this stuff, give them back what's left, i don't think we would do that. >> sandra: this is going to take days, the recovery of these assets, there is a lot of personnel involved, obviously, and then as dave was just detailing the next step would be the divers. but they are still in the initial search area and they are refining that search area, according to dave. they are going to secure the

search area, and any last debris, they are going to get every single piece of debris that they can out of those waters, and a big task. they said it's going to take days, john. >> john: if anybody can do it, the u.s. navy can do it. >> sandra: indeed. >> john: the china spy flight threatens to overshadow the state of the union address. jacqui heinrich is on the north lawn of the white house as the president puts final preparations into the speech. what are you hearing tonight, jacqui? >> we know house republicans nearly held a vote today condemning president biden over his handling of the spy balloon but several members pressured gop leadership to drop that effort and instead deliver a bipartisan resolution condemning china on this, so that on the issue of china the split government is speaking with one voice and that bipartisan vote could come as soon as later this week. the white house is denying, though, that president biden had to rewrite portions of his state of the union address after the

spy balloon incident and the speech has been considered an anchor for an upcoming 2024 announcement from the president. white house officials said this morning that biden will lay out a new set of priorities where he thinks he can advance his unity agenda in the coming year, including efforts to end cancer, support veterans, opioid crisis and expand mental health resources but have not heard a response yet to reports that house speaker kevin mccarthy specifically asked president biden not to assail ultra maga republicans during his address. >> i mean, i think the american public wants to see people that the election is over, the american public 90 days ago wants divided governments, they want to see us work together. if anybody acts in that manner they are a loser in the big picture of life. >> the white house is still punching back on some divisive issues. a spokesman said in response to a house gop hearing on

immigration and the border that it's clear house republicans are more interesting in staging political stunts than rolling up their sleefrs and working together to deliver legislation on this issue they say has dogged many, many administration's and on thursday the president will almost certainly be hitting house republicans when he goes to florida to talk about social media and medicare, issues that are important to seniors and we have heard a lot of rhetoric from the white house that republicans would damage those programs, john. >> john: jacqui heinrich with a look ahead from the white house, thank you. >> china is the most challenging national security threat america has faced in 30 years. >> we saw the aggression even in my home state of south carolina. >> serious of china, our entire country needs to move faster. >> sandra: the last warning from the former commander in charge

of the pacific fleet, sounding the alarm on china's growing threat at a hearing on capitol hill. this is not the first time this has happened. the pentagon admitted it failed to see previous spy flights and only found out about it through u.s. intel, and china has more launchers? what does that last point, what does that last point tell you? >> well, look, sandra, we are facing the largest and most serious enemy military build-up in modern history. the chinese navy is now larger than the u.s. navy, they are cranking out new ships at a rate of 5 to 1. their space force is launching more into space than the united states and the rest of the world combined. as you mentioned, they are also launching new technologies that

we are struggling to play catch-up, including hypersonic missiles that are incredibly difficult, if not impossible for us right now to defend against. so, you know, look, i think -- i agree with my colleague, ro khanna, the president should start with china, describe it for what it is, the most serious adversary we have ever faced. even against the soviet union never faced one that could rival us economically and technologically at the same time they could militarily. and so that's, we need to hear from the president, i believe, that this spy balloon was a sputnik moment for all americans. we have been talking about this tidal wave of espionage we are facing but obviously it's behind the scenes. this was very visible, very tangible, and i think it should serve as a wake-up call now for the new cold war that we are in just as it did back in the 1950s against the soviet union and their satellite. >> sandra: i'm probably catching

you a little off guard, have you had a chance to look at the new pictures, they are on the screen for the viewers, the u.s. navy just released the first images of the recovery of the debris. they are pulling them up into the in flightable boats that dave sears just described as we continue to watch the debris being recovered from the waters there. what is your reaction so far from what we have seen pulled out of the water? >> well, look, i mean -- you know, thank god for the u.s. navy and their capabilities, and i think there is, you know, we are going to learn a lot from this recovery. my point would be, though, we shot it down, the administration saying it's a good thing we let it traverse the mainland and shot it down over the ocean so we can have this recovery. my point is we shot it down over the wrong ocean. it should have been shot down over the pacific ocean and we still are lacking clarity on the decisions that were made and why they were made as we saw this approaching our air space and

canadian air space, and why it took, you know, a bunch of enterprising photographers and civilians to alert the congress and the country to what was going on. >> sandra: this is the former commander on the cold war comparison that was made at the hearing earlier today. i want to play it out for you and get your reaction. >> it is a shame that the secretary of state's visit was canceled or postponed. at the height of the cold war, we should never forget we maintain diplomatic relations with the soviet union, even in those dark days, the 1960s and 1970s. i hope we get back on some diplomatic footing with the prc. it's important to both countries. >> sandra: your reaction to that, congressman. >> well, of course. we need diplomatic relations, and we always have a risk of catastrophic miscalculation. our adversaries need to point

out consequences for aggressive actions. sandra, this was essentially kind of a middle finger to diplomacy, to take this action right before blinken's visit and if we just kept on with business as usual that could be interpreted by our adversaries around the world on top of the afghanistan withdrawal and on top of chinese propaganda that america is weak, there's no consequences for our action, and that we are truly a power in decline. so i think actually secretary blinken was right to cancel his visit. that does not mean we reestablish, and back to the cold war, reagan famously walked out of the summit with gorbachev whether they did not come to the table with what we understood what was going to be agreed. so, there is also, you got to be willing to walk away in diplomacy and demonstrate consequences for bad actions. >> sandra: good to get your thought, congressman, thank you very much. john. >> john: victory over china

brought one rural corner of america together for a remarkable moment. watch the moment the city council in grand forks, north dakota, voted unanimously to reject china's bid to put a corn mill there, sparking national security concerns. watch this. >> a motion, second on the floor, all those in favor aye, opposed same sign, motion carries unanimously. [yelling and cheering] >> john: chinese-owned group would have built the plant 12 miles from the grand forks air force base. the company will retain ownership of the 300 acres of land that it purchased for the plant, but no corn mill. that thing popped. >> sandra: that is remarkable. and i was just digging through the numbers going back to the conversation we just had with michael waltz on the amount of money that u.s. firms are

pumping into china's a.i. sector. you are talking billions of dollars, john, while we are talking about the threat that they pose, you look at the amount of u.s. dollars that are getting pumped into that sector, 37% of investment of artificial intelligence, $42 billion -- >> john: a serious disconnect we prop up china's economy, propping up their military and the moment, the moment that there is any kind of hostilities between the united states and china that supply chain that comes over from china gets shut down. so that's all of our pharmaceutical, raw materials, electronic equipment, that's manufactured goods, cheap hair dryers, i mean -- china has got a lot of economic power over the united states whereas we seem to think we are the ones who are calling the shots. >> sandra: indeed. will we wake up? >> john: i don't know, i hope so.

>> this process is likely to take quite a bit of time. it's not going to be, we don't think, smooth, it's probably going to be bumpy, and so we think we are going to need to do further rate increases. >> sandra: a-ha, ok. a short time ago, jay powell signalling a long and bumpy road ahead to bring down inflation. why markets are reacting to what he just said. >> john: his forecast coming just hours before the president is expected to tout his economic accomplishments. so, is it too soon for biden to take a victory lap? larry kudlow has got something to say on that. he's coming up next. to fight inflation is to pay off your high-rate debt to lower your monthly payments. at newday we make it easy. our newday 100 loan lets you combine your first mortgage, your second mortgage, your high-rate credit cards, personal loans and car loans into one, low monthly payment. so you can save hundreds every month. and at newday, there's not one dollar upfront to apply.

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different story. 64% of americans saying they are living paycheck to paycheck, while 82% of the middle class is cutting into savings just to get by. let's bring in larry kudlow, host of kudlow on fox business. larry, great to see you down here in washington again. >> thank you. >> john: we can renew the chats we used to have on the white house north lawn. talk about jerome powell. two things. big jobs number in january is a sign that inflation may be difficult to tame, but then a couple minutes later he said i see inflation easing significantly in the next year. so, a little something for everybody there. >> yeah, i mean, look at job creation is not inflationary, i'm glad people are working. i don't know if that number has credibility or not, so i think that's the wrong reason. however, we still have a cpi over 6%, services inflation are

still very high and the fed has to guard against that. and look, suppose you get the inflation rate down to 4, 5%, i think powell is talking about. that number three years ago, four years ago would be unimaginable, we had 2% inflation for three decades. that's what the federal reserve has to deal with, and so i think they will continue to raise their interest rates and they will continue to shrink the money supply. the other problem that powell may have, region wages are falling. they have falling every month of biden's presidency, ok. the last four quarters, just some numbers, john, real wages for blue collar workers down almost 2% for the year, that's the worst since 2011. cost of living under mr. biden has gone up 14%.

so those are problems. that's cutting into the kind of middle class success that we had earlier and that's why biden's economic polls say we don't believe your story. >> john: and one of the polls was an abc news poll out at the beginning of the week, which was only yesterday, but you know, these weeks tend to take longer than a lot of people would like them to. found that 41% of people say they are worse off now than they were two years ago, that's ronald reagan's old question now, better off now than four years ago. four in ten people say we are worse off than we were when biden took over. that's not a good number for him to go to the state of the union on. >> the purchasing power has erode. estimates are they have lost in real dollars, $15 a week, $60 a month, that stuff mounts up. middle income making $65,000 a year, that's a problem for biden. and i know you had the blowout

jobs number on friday, and again, i say fine, more people working is better. on the other hand, almost every other number, whether it was manufacturing production, consumer spending, home sales, new housing starts, every other number was negative in november and december. going into this year, the gdp tracker for the atlanta fed was 0.7% for the first quarter. now, that jobs number may tr translate into a stronger economy, but it was not a stronger economy, some people doubt the actual number. everything was coming down and inflation still remains historically high so i can understand there is a dissatisfaction. president biden is going to go out and raise taxes, ok, he's going to talk about higher taxes, oh, my gosh. successful earners, wealthy

earners are making too much money, john, the top 1% of the taxpayers pay 42% of all the taxes. 42%. the bottom 50% pay about 2.5%, and he's going after that. so, what is that? that's more government spending, that's more redistributionism, pardon the phrase, more big government socialism. hate to say it. >> sandra: larry, hello, missing you in new york. a lot of market movement on the jay powell stuff, market still trying to sort of figure it out. they went up, then down, he said this, the shortage of workers, which i think a lot of people are talking about all over this country, the shortage of workers feels more structural than cyclical and i know for you you could easily explain it. but for me, i don't like when an economyist uses the word feel,

by the way, but structural versus cyclical. people are not having the job skills to fill open jobs, how do you interpret that? >> i'm not 100% sure but will posit this view. despite the fact that the unemployment rate is low, the reality is in the last few years people have left the labor force and the reason they have left the labor force is that government benefits without work requirements, and government benefits pay more and more. so it doesn't pay to work, sandra. and i think that's part of the structural imbalance. you have a huge demand for workers, people are leaving the labor force, that's why these participation rates and the employment ratio is low. you have lost 7 to 7.5 million people so that would cover a lot

of the demand for labor. so that may be what powell is talking about. >> john: quick local story. our local cvs pharmacy, always a soviet-style line in front of the prescription drug counter, and that's because they don't have enough people. they have interviewed person after person after person, only managed to hire one person in the last year to take the pressure off. one person. >> sandra: and walgreens announced they are scaling back the hours their pharmacists have to work to retain their pharmacists, and to attract new pharmacists because it's so tough out there right now. >> john: crazy. larry. thanks for coming to d.c. again. >> sandra, see you soon. i'll be back. >> sandra: thanks, john. nypd officer is on life support after he was shot in the head. new details are just coming out on the suspect involved in this, and it has a lot of people asking why was this guy walking freely in the first place. we'll be right back.

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>> john: career criminal behind bars accused of luring an nypd officer into an ambush and shooting him in the head. the 26-year-old officer and husband and father of two is on life support. alexis mcadams is live in new york city. the mayor expected when the perp was caught he would have a long record and he does. >> that's right. the suspect has quite the rap sheet, he's been arrested in at least two states, everything from drug and gun charges to strangulation, now charged in connection with shooting a police officer. take a look here, officer fayes on the right, he was shot on saturday during when he was trying to buy a car on marketplace. a loving father and husband to two young kids. identified the gunman as randi

jones. police have not revealed what charges jones is facing just yet. investigators used the gravely wounded nypd officer's handcuffs to take that suspect into custody. >> new yorkers, we are in this together. the victim in this case is an nypd officer. we will relentlessly pursue anyone who carries an illegal firearms or shoots someone in this city. >> police believe jones could be connected to other armed robberies across the city. additional charges, john, could still be filed if the officer on life support does not make it, john. >> alexis, thank you so much, appreciate it. >> sandra: as the president prepares for the state of the union, the white house is facing criticism of the documents handling scandal and karine jean-pierre dodges questions at the podium.

but bill mcgurn says it's not her fault. don't blame the press secretary. she didn't give us the document scandal, joe biden and merrick garland did. we are joined now. chief speech writer, ok, so you are highly qualified to weigh in on what we might hear from president biden tonight, bill. first your top line thoughts on how the president, two years in, should approach the nation and members of congress this evening. what should he do? >> well, what usually you do is you try to put forward your agenda in the most broad terms possible, meaning the most appealing terms to a large segments of the american public. i mean, you are talking to the american people, not just to your party. and so these little tricks for speech writers, you try to

handle an applause line by writing it in a way that make you look bad if you don't cheer or you sit down or something. i don't know that president biden is going to follow that. he's given some pretty divisive speeches and i'm sure, i'm not sure there will be anything but a token gesture to the opposition. >> sandra: why is it when it comes to the handling of the biden documents scandal, which we are unlikely to hear about in the state of the union tonight, bill, but we have many times in that white house press briefing room, why do you believe the press secretary shouldn't be catching, you know, all the criticism for this? >> cause she didn't create the problem. look, we would never have heard of this problem or be a story except merrick garland chose to have a raid on a former president's home and possibly a

future president candidate. then joe biden compounded the error, went on "60 minutes" and said i don't know how anyone could be so careless. then they found it at his house. we would have no special counsels, no big -- no day-by-day drip drip if not for president biden and merrick garland's actions. and if they want to give some answers, they can. but they haven't. joe biden has given very few press conferences compared to donald trump and barack obama. and no one seemed to be demanding more, or demanding that he give answers. >> sandra: very interesting. to that point, if they even gave her some sort of nugget out there, might calm some criticism she's receiving for not giving the american public any information, and headline,

go bold, biden. if congress fails to act he will use his executive powers to address the challenges that we face. ok, that's bold? bill? >> yeah, i mean -- you kind of hit every cliche there. look, one of the things he's been bold in is spending, and from what i've seen what's coming tonight is a tax part of that. we are going to crack down, we have to get a lot of money. i saw today the irs announced they are changing the rules to have better reporting for waitresses' tips, this is the other side. but look, the reality is the state of the union now is president biden's opening shot in his 2024 re-election campaign. he's trying, testing out the themes, giving people what to say. he has a tough road, you know.

the public, by the polls, a lot of people, including democrats, want a different candidate, and most americans don't seem to think he has many accomplishments compared to the president himself, who has very high opinion of what he's done. >> sandra: seems to be a real disconnect with the economy and the progress on the economy. he's about to tout tonight, and what people are feeling, that's for sure. bill, we'll see where it all goes. we'll be watching it. thank you very much, bill. >> thanks, sandra. >> sandra: all right. >> this isn't the first time the administration or dhs has tried to undermine the truth of what's really happening at the border. after two years of gaslighting, obstructions, stonewalling and lies we are finally able to hear straight from the source. >> john: house lawmakers sparring over the crisis at the border as the oversight committee hears from two border chiefs the biden administration had previously blocked from sharing their perspective. so, does the white house believe the border crisis will play a

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>> john: it's a big day on capitol hill as two top officials on the front lines testify on the crisis on the border, testimony the biden administration had previously tried to stop congress and the american people from hearing. let's bring in bret baier, anchor and executive editor of "special report." good to see you again. >> bret: hi, john. >> john: we have two chiefs, gloria chavez and modlin. >> we went from what i would describe as unprecedented to a

point i don't have the correct adjective to describe what's going on. it's almost limitless, the funds they have, they don't -- they don't have to follow policy, don't have to follow law, they don't recognize the international border, they don't recognize state borders. >> john: he's talking about illegal migration and the cartels pushing people across the border. this is testimony that mayorkas tried to prevent from happening. >> bret: and jim comer, oversight committee chairman was very vocal about pushing back on that and eventually the administration relented and those border patrol chiefs testified. some of the testimony is pretty stunning, stuff that we hear from bill melugin on the border all the time from sources, but to hear it from the border chiefs, the border patrol chiefs is stunning. they testified that illegal immigrants they interviewed, after apprehension, believed u.s. immigration law and policy changed after president biden's election to the points that they believe, the illegal immigrants

believe the border is open. now, that's completely different than what the administration portrays. >> john: it is, but in line with what illegal migrants have been telling griff jenkins and bill melugin and other folks on the border. >> bret: that's right, they have been saying exactly that, and that is the policy change and the signal, the bat signal that went out that said come, and that was a word used by candidate joe biden, come to the border, it's changed now in messaging. but the messaging has not got out to latin america and other places. >> john: i don't expect he will talk a lot in the state of the union, he's building as a conversation with the american people, expected to lean into the economy. but obama's press secretary, robert gibbs, suggested the speech will set the stage for a consequential battle between joe biden and house republicans. last year's theme was unity, that didn't go very far. so now what's this year's theme, war? >> bret: if you look at the speeches he's given and the maga

republicans line and the extreme maga republicans line, i mean, clearly they are trying to use that. some would argue they used it effectively ahead of the midterm election, that and the abortion issue to drive some independent and suburban districts the democrats' way. but this is a joe biden who traditionally has said i'm the guy that wants to reach across the aisle. i don't know if that message is coming out today. i bet we are going to hear how republicans are going to fight him tooth and nail and they want to cut your social security and medicare, something that speaker mccarthy has said is not going to happen. >> john: and we will see after the state of the union if he declares for re-election. which is a real question. tonight on "special report" you have senator joe manchin. >> bret: i do. and an op-ed, something about the debt ceiling that will be newsy. >> sandra: nice to see bret, we'll see him tonight. alleged financial crimes against

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murdaugh. jonathan serrie is on this. what have we learned about how murdaugh was able to pocket so much money? >> yeah, we heard testimony from janie seckinger. she's the cfo of murdaugh's former law firm. she says the defendant took advantages of the office's brotherly culture where everybody trusted each other. she said that murdaugh was successful not because of his work ethic but because of his ability to establish relationships, manipulate people in to settlements and persuade clients to like him. >> he used his personality more than technical skill. we look back and we see things that were manipulated and set up. i believe he did that a lot with his clients as well. >> she said he pocketed money intended for law firm.

when she talked to him about the funds, she said that his father and mother were ill and that evening his wife and son were murdered. >> sandra: thanks. now we lead up to the big moment, the state of the union. i'm sandra smith. >> john: i john roberts. "the story" with martha starts right now. >> martha: thank you very much, john and sandra. good afternoon. i'm martha maccallum live in our nation's capitol ahead of our special coverage tonight of president biden's second state of the union address. mitch mcconnell here today with me in a national television exclusive ahead of the big address tonight. first, new images of navy sailors pulling the remnants of the china spy flight out of the atlantic ocean. the fbi probing this debris. lawmakers are probin