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McCain's Rebel Endorsement; 'Sleeper' John Edwards; Interview With John McCain, Joe Lieberman

Aired December 17, 2007 - 16:00   ET

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


JOHN KING, CNN ANCHOR: And happening now, a rebel takes on John McCain's cause. Democrat-turned-Independent Joe Lieberman announces his stunning endorsement. What does this mean for McCain and the Republican presidential race?
The fight for endorsements is heating up for both parties. This hour, the top Democrats are duking it out in Iowa. Can John Edwards find a way to steal some of the Clinton-Obama spotlight?

Plus, President Bush warns of storm clouds over the economy. Recession fears may be darkening his sunny outlook just in time for Christmas.

Wolf Blitzer is off today.

I'm John King.

You're in THE SITUATION ROOM.

It's a new and a needed shot in the arm for Republican John McCain, and it's a slap in the face to the Democratic presidential candidates. Senator Joe Lieberman of Connecticut flaunting his Independent streak by endorsing McCain's White House bid today. The Democrats' vice presidential pick back in 2000 says his longtime colleague is best positioned to break through the partisan gridlock.

Our Mary Snow was in New Hampshire for this big announcement today.

Mary, one assumes Senator McCain hopes this helps him with the Independents who are so important there in New Hampshire.

MARY SNOW, CNN CORRESPONDENT: Yes, John, Senator McCain is really making an aggressive push in this final stretch before next month's New Hampshire primary. He's hoping to seize on today's endorsement and recreate a victory he saw in this state eight years ago.

(BEGIN VIDEOTAPE)

SNOW (voice over): He was once called the maverick of the Republican Party. He jokes that he may be seen as the eccentric uncle of the Democratic Party. Senator Joe Lieberman, the Democratic vice presidential nominee in 2000, whose now turned Independent, knew crossing the aisle to endorse Republican senator John McCain for President would draw attention. SEN. JOSEPH LIEBERMAN (I), CONNECTICUT: You know, I know it's unusual for a Democrat to be endorsing a Republican.

SNOW: McCain says he sought Lieberman's endorsement, hoping to show he can work with partners across the political aisle.

JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I think it's great when anyone crosses party lines to support a candidate from another party. The easiest thing for Joe to do, would have just sat on the sidelines in this campaign. That way no one would criticize him.

SNOW: While their political parties may be different, they stand together on one big issue -- supporting the surge in Iraq. Lieberman says he thinks McCain is the best candidate to fight Islamic extremists, and Lieberman took a swipe at the Democrats.

LIEBERMAN: I think the Democratic Party, to its damage, has left that tradition of a strong foreign and defense possible. And that includes the leading Democratic presidential candidates.

SNOW: McCain is appealing to Independents in this early primary state.

MCCAIN: Town hall meeting after town hall meeting, people stand up and say, why can't you all work together? Why can't Republican and Democrat work together for the good of this country?

SNOW: McCain is hoping to recreate his 2000 victory in New Hampshire when Independents supported him, but political observers in this state are skeptical.

DANTE SCALA, UNIVERSITY OF NEW HAMPSHIRE: I don't think he can do exactly what he did in 2000 because times have changed so much and Independents have changed up here as well.

(END VIDEOTAPE)

SNOW: And John, one big change is that Independents here in New Hampshire, since 2000, have been voting for Democrats. And for John McCain, that means that his chief rival in securing those Independent voters is on the other side of the aisle, Democratic presidential hopeful Senator Barack Obama -- John.

KING: More interesting by the day.

Mary Snow in New Hampshire with the latest twist.

Mary, thank you very much.

And just ahead, I'll talk to senators McCain and Lieberman about today's bombshell endorsement and whether they think it will actually translate into votes for Senator McCain.

Democrat John Edwards is trying to get in on the endorsement action today. Questions persisted about whether he's being dangerously overshadowed by Hillary Clinton and Barack Obama. Edwards appears though on the cover of "Newsweek" under the headline "Sleeper." His campaign may be flying under the radar, but polls still show he's quite competitive with both Clinton and Obama in Iowa.

Let's bring in CNN's Suzanne Malveaux. She is there in Iowa with the Election Express right there.

Suzanne, tell us about this new endorsement for Senator Edwards today.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, John, really 'tis the season for endorsements. This is the time when all the candidates, the work that they've been putting in, the handshaking, the courting, they hope pays off here.

Senator John Edwards getting an endorsement of Iowa's first lady, the governor's wife, Mari Culver. She, of course, hoping to attract some of the female voters, as well as many people who are still undecided.

She said the reason she is backing him is because he has a good, appealing, popular story, a personal story. She also appreciates the anti-poverty platform. And then take a listen. This is the most important thing she believes.

(BEGIN VIDEO CLIP)

MARI CULVER, IOWA FIRST LADY: Third, and most importantly, I believe John Edwards can win.

(APPLAUSE)

(END VIDEO CLIP)

MALVEAUX: So a big question, whether or not these endorsements make all that much difference. Sometimes they do, sometimes they don't.

You'll recall back in 2004, when the former governor's wife, Christie Vilsack, she gave the nod to Senator John Kerry. He ended up winning the Iowa caucuses, but really this is a dead heat, a three-way tie here. Anybody could emerge coming out of the pack here.

I had a chance to talk to Senator Edwards about what he needs to do the next two and a half weeks before the caucuses to break out.

(BEGIN VIDEO CLIP)

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: It's crunch time now. What Americans want to see is what we're going to do to make America better. And in my case it will be absolutely clear. I mean, we're going to stop the corporate greed that's going on, we're going to restore the power and the democracy to the American people, and we're going to make sure we leave this country better than we found it.

(END VIDEO CLIP)

MALVEAUX: So John, his campaign quite strong when it comes to the grassroots organization very much in place. Also talking about the kinds of issue that is resonate with a lot of folks here. That is about the economy and healthcare.

The problem that he is going to have if he catapults onto the national stage, he doesn't have the kind of resources that the other candidates do -- John.

KING: Crunch time, indeed. Seventeen days to the Iowa caucuses.

Suzanne Malveaux live for us in Des Moines.

Suzanne, thank you very much.

And Suzanne and Mary Snow are, of course, part of the Emmy Award- winning best political team on television.

For the latest political news any time, check out our Political Ticker at cnn.com/ticker.

Time now for "The Cafferty File". Jack joins us from New York.

And I know Wolf always says this, so I have to say this. Jack, you're part of that Emmy Award-winning team, too.

JACK CAFFERTY, CNN ANCHOR: That's correct.

KING: Happy Monday.

CAFFERTY: How about those Red Sox?

KING: "Ron Paul Becomes the $6 Million Man," that's the headline on Politico about the Republican presidential candidate's astounding fundraising accomplishment yesterday, the Boston Tea Party. Paul did it again. He raised more than $6 million online in a single day, and that follows a fundraiser last month that brought in $4.2 million in a single day.

That's a pretty good hourly rate.

The campaign says it's raised more than $18 million this quarter. This could very well mean that Ron Paul will out-raise his Republican rivals for the fourth quarter. And if he does that, he'll be able to fund a presence in a lot of the states that will be voting on February 5th.

Ron Paul has the kind of grassroots organizations that politicians dream about. In addition to his phenomenal fundraising abilities, mostly among small, individual campaign contributors, he has a devoted following that in any given moment can almost overpower the Internet.

Any time that we mention Ron Paul's name here on THE SITUATION ROOM, his supporters immediately begin writing to us in droves. They're fanatic in their devotion to him and very appreciative of any mentions we've ever given him. It's a phenomenon that's unique to Dr. Paul.

We talk about all the candidates all the time, but we never, ever get a response to any of the rest of them like we get when we mention Ron Paul's name. It's pretty amazing.

Nevertheless, most consider him a distant long shot, and he's stuck in the single digits in most of the national polls.

So here's the question: If Ron Paul can raise more than $6 million in one day, how come he's not higher in the polls?

E-mail your thoughts to caffertyfile@cnn.com, or you can go to -- we're past that already. Or you can go to cnn.com/caffertyfile, where you can post a comment on my blog -- John.

KING: I bet you're going to get quite a few e-mails, and I bet quite a few of them come from Ron Paul's supporters.

CAFFERTY: Well, we already have, actually. There's 700, 800 came in before the program on the air, because when they put the questions up on the Internet site, people start writing right away.

Did you write, John?

KING: You are right about their enthusiasm. I don't write when I anchor, but you are right about their enthusiasm. When you're at other campaign events across the country, Ron Paul's supporters show up. A great deal of enthusiasm.

I think you hit on the key question -- can he translate the money and the enthusiasm into votes? And we're only a few weeks from finding out.

CAFFERTY: There you go.

KING: Be back with you in a little bit.

John McCain now has Joe Lieberman in his corner. Is this endorsement more of a statement about McCain's presidential bid or is it about Lieberman's disillusionment with the Democrats?

Up next, I'll talk with both senators, McCain and Lieberman.

Plus, Mitt Romney versus Mike Huckabee. And President Bush is caught in the middle. A new dustup over Republican loyalty and allegations of arrogance.

And so much about talking up the economy. What's driving the president's suddenly glum view about America's finances?

Stay right here. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK) KING: They're proverbial strange bedfellows, but senators John McCain and Joe Lieberman both like to think of themselves as mavericks with independent streaks of their own.

And joining us now live, Republican presidential candidate John McCain and his new campaign supporter, Independent Democrat Joe Lieberman of Connecticut.

Senator McCain is in New Hampshire. Senator Lieberman obviously on Capitol Hill.

Let me begin with you, Senator McCain.

I want to get to the importance of this endorsement in a minute, but first, one of the controversies in the Republican primary right now is this Mike Huckabee article in "Foreign Affairs" where he takes after President Bush pretty good, accuses him of a bunker (ph) mentality.

It seems to suggest that it's the president's fault, at least in part, that we're in a diplomatic confrontation with Iran. And on the subject of Iraq, which I know is near and dear to you, he says this -- Mike Huckabee does in "Foreign Affairs" -- "Our invasion of Iraq went well militarily, but the occupation has destroyed the country politically, economically, and socially."

Is that a fair view, Senator McCain? Do you agree with that? Has the U.S. invasion destroyed the country politically, economically, and socially?

JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Well, first of all, let me say that if you assume that Joe Lieberman and I are strange bedfellows, you have not seen our record of support for the men and women in the military, for our nation's security, for our belief that the surge in Iraq would work, and our addressing together many issues of national security for many, many years.

I didn't read Mr. -- Governor Huckabee's column. I do know that the surge in Iraq is succeeding.

Joe and I and Senator Lindsey Graham were over there during Thanksgiving, and we know that the surge is succeeding. We've got a long way to go, and it's a hard, hard challenge ahead, but we're very pleased with the progress and the general and men and women who are serving.

KING: You've been tough, Senator McCain, on the president, specifically on the issue of the initial strategy. You said from the beginning you need more troops. You did not think very highly of Secretary Rumsfeld, wanted him gone at a time when many Republicans thought you were going way out of line for a Republican.

In terms of Mike Huckabee's criticism of the president, the language you have heard -- you say you haven't read all this -- is that appropriate, in your view, or over the top for a Republican president and a sitting commander in chief at a time of war? MCCAIN: I let others be the judge of it. And I can't comment on articles I haven't met, but I know I was critical of the Rumsfeld strategy because I had the experience and the knowledge and the judgment to know that it was wrong, and advocated this strategy, which is succeeding.

No other candidate who's running, including Governor Huckabee at the time, or Mayor Giuliani or Governor Romney, did that, because they didn't have the experience and the knowledge and the judgment. And I did, and I was the only one that said that strategy would fail and which strategy would succeed.

And I think I owe that obligation not to the president or anybody else, but to the men and women who are serving in the military who are in harm's way in a very bad strategy, and now they are in harm's way in a succeeding strategy.

KING: Senator Lieberman, let me bring you into the conversation.

I want to know how you came about a decision, a dramatic decision, an Independent Democrat, as you call yourself, to endorse this Republican candidate for president. Before you answer, I want you to listen to something you said in your own campaign just about 17 months ago.

On July, 2006, you were campaigning against a Democrat, Ned Lamont. Much of your party, as you well know, abandoned you in that primary. And you said this to Ned Lamont about the stakes in the 2008 presidential election. Let's listen.

(BEGIN VIDEO CLIP)

LIEBERMAN: I want Democrats to be back in the majority in Washington and elect a Democratic president in 2008. This man and his supporters will frustrate and defeat our hopes of doing that.

(END VIDEO CLIP)

KING: Why important now, Senator Lieberman, to elect a Republican president in 2008?

LIEBERMAN: Well, what I was saying in that is exactly the reason why I'm supporting John McCain today. Look, I'm from a tradition of the Democratic Party that goes back to Harry Truman and Hubert Humphrey, Scoop Jackson, progressive on domestic policy, strong on foreign and defense policy.

My opponent last year and the group around him represented an entirely different point of view. And I stood and fought them. And I said if they won the primary, I worried that they'd embolden and strengthen that element within the Democratic Party.

Presidential candidates in 2008 in the Democratic Party would begin to defer to that group in the party. And in November, they would have a hard time convincing the American people, who know we're at war against a brutal enemy that attacked us on 9/11, that they were prepared to do what was necessary to defend America.

So, in fact, what I worried about has happened, and, in fact, that's why I'm supporting John McCain, because, honestly, he's closer to the Truman-Jackson Humphrey-Kennedy foreign policy that I associate with being a Democrat than the other candidates are today. And most important, he has got a proven record of breaking through the partisanship.

He can unite our country to defend our country against the Islamist extremists and win this war. And look, what you talked, John, about before is exactly an example.

He supported the war as I did against Saddam Hussein. it was the right thing to do. But when he saw the strategy going wrong, he didn't yield to partisan loyalty and not criticize the president, Secretary Rumsfeld. He said we've got to change this, it's not working.

And when they finally did, it's begun to work. So that's why I support jack McCain and that's why I think it's totally consistent with what I said last year.

KING: So, peel back the curtain, Senator McCain. You obviously have worked closely with Senator Lieberman on the war and other issues.

He is a Democrat, an Independent Democrat. You're a Republican. So you're thinking, all right, maybe I want this guy's endorsement.

Take us behind the scenes. How did you get it?

MCCAIN: Well, with Joe and I, we're very close and dear friends, as I said. I just asked him, and he said he would think about it and get back to me.

And again, Joe could have easily just said, look, I'll sit back and watch this one play out. But again, I believe he really displayed what I think is remarkable trade, and that's doing what I think he thinks is best for the country. And I'm honored and grateful.

KING: And how has it helped, Senator McCain? You don't like process questions, but you're in a state where you're competing for Republican votes, but also you can get Independent votes. How do you think it helps in a place -- you obviously announced it in New Hampshire for a reason.

MCCAIN: Thanks, Joe -- John.

Thanks again, Joe.

Thanks, John, for the question.

LIEBERMAN: You're welcome.

MCCAIN: There's -- 42 percent of the voters are Independent voters, John, as you know, and here in New Hampshire, some will break Democrat, some Republican, some lean Democrat, some lean Republican. But I think the Independent voter is a very important voting bloc, and I hope that this will motivate them to give me another look and maybe support my candidacy.

Joe is very credible with many, many of these people. I can see how warmly he was greeted by the people here in New Hampshire this morning.

KING: And Senator Lieberman, when he makes that point about the Independents, if you look at the polling right now, most of them seem inclined to vote in the Democratic primary. They did in 2006, voted Democrat in New Hampshire because of their anger at the war.

LIEBERMAN: Right.

KING: Take me inside what you think your role can be. And as you answer, what you're doing today is a pretty damning indictment of three very prominent Democrats, several prominent Democrats. But Hillary Clinton, Barack Obama, and John Edwards, you have served with all three of them.

LIEBERMAN: Yes.

KING: That's a pretty damning indictment of them, what you're doing today.

LIEBERMAN: Well, as I said in my statement today, we have got many fine people running for president in both parties, and some of them are my friends. But this is a moment of so much importance to America, there's so much at stake in this election of our next president, that I don't think you can make it on partisan lines. And I just have differences of opinion, respectful differences of opinion with the leading Democratic candidates.

When John called me, I thought about it, because I'd been saying all along that this election was too important to decide who to support based on party. I was going to go with the person I thought would do the best job. I thought I'd wait until after both parties had their nominees, but then as I thought about it, John is my favorite.

I think he can two a better job for America, in uniting us and cutting through the partisan gridlock. He really is the change candidate in this race because he's a restless reformer and strongest on national security, which is bottom line the most important issue of the day. So I just decided when John asked, you know, this is my responsibility. If I think he's the best, I've got to get in there at this moment while he's got a fighting chance to get this nomination.

Incidentally, I think people are taking a second look at John McCain, as they have second thoughts about some of the other candidates. And I hope that my endorsement today will encourage people in New Hampshire to play their traditional role, which is to lead the country. And I think if they -- if they go with John McCain, he'll win this nomination, and then I think he can get elected and be the best president. KING: A final thought from you, Senator McCain.

We spent a lot of this conversation talking about national security. The president gave a speech today in which his assessment of the economy was significantly more sober, if you will, than he might have given several months ago, even several weeks ago.

What is your state as a Republican candidate for president, your state of the state of the economy, and why should people who might be worried about the economy want to vote for John McCain?

MCCAIN: Well, I think that the underpinnings of the economy are very strong. I think we're going through a difficult time here, and we all know a lot of the reasons for it -- the subprime lending crisis, the housing situation, so there is a weakened dollar. I think that one of our fundamental problems is our spending spree, our failure to enact sound spending practices, which has given us unfunded liabilities of enormous proportions which our kids are going to have to pay for unless we address it.

We've got to make our tax cuts permanent. We cannot increase taxes, otherwise I think it's going to have a harmful effect on the economy. We need to do away with this AMT, which is about to eat into the incomes of 20 million Americans.

So there's a number of steps we need to take. They need to be vigorous, and one of them -- the first item on the agenda is to resolve this housing crisis and allow millions of Americans to be able to afford their payments on their home loan mortgages.

KING: We're out of time today, but we hope we get to speak to both of you in the days ahead. Seventeen days until Iowa. Another week we'll be in New Hampshire.

Senator McCain in Concord, New Hampshire, Senator Lieberman here in Washington, D.C.

LIEBERMAN: Thanks, John.

KING: Gentlemen, thank you both.

LIEBERMAN: Take care.

MCCAIN: Thanks again, Joe, John.

KING: Bill Clinton plays into the Iowa expectations game. Will he help his wife by talking down her chances? Donna Brazile and J.C. Watts are standing by for today's "Strategy Session."

Stay right here. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWSBREAK)

KING: A Republican presidential candidate criticizes the Bush administration and then is criticized for it. Mike Huckabee calls the administration's policies arrogant. And that's giving Republican rival Mitt Romney fresh fodder for anti-Huckabee attacks.

And Hillary Clinton wants you to know some things about her you might not already know.

Stay with us and you'll hear just what they are.

(COMMERCIAL BREAK)

KING: You're in THE SITUATION ROOM.

Happening now: out of Saudi Arabia, new developments regarding a female rape victim who was sentenced to 200 lashes and prison time. We will tell you what's happened and how the United States is responding.

Also, shocking allegations against more than 100 United Nations peacekeepers. They're accused of sexually exploiting some women and young girls they were supposed to protect.

And one attorney calls it an epidemic, witnesses to crimes being kidnapped, shot, even killed for telling the truth about what they saw. What can be done to stop it?

Wolf Blitzer is off today. I'm John King. You're in THE SITUATION ROOM.

With just over two weeks until the first major presidential contest, you can bet all the candidates will be carefully watching what they can say and carefully watching what their rivals say, hoping for something to use against them.

Right now, apparently, Mitt Romney thinks he's found something regarding Mike Huckabee. Romney is blasting Huckabee, after Huckabee criticized the Bush administration.

CNN senior political analyst Bill Schneider joins me.

Bill, what's this latest dust-up all about?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, it's about foreign policy, of all things, which is neither of those candidates' strong suit.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): (AUDIO GAP) ... when Mike Huckabee wrote in Foreign Affairs" magazine: "American foreign policy needs to change its tone and attitude, open up, and reach out. The Bush administration's arrogant bunker mentality has been counterproductive at home and abroad."

Arrogant bunker mentality? That's quite a thing for a Republican candidate to say about the Bush administration, as Mitt Romney was quick to point out. MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I said, well, did this come from Barack Obama or from Hillary Clinton? Did it come from John Edwards? No, it was one of our own. It was Governor Huckabee.

SCHNEIDER: Huckabee explained.

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: I didn't say the president was arrogant. And one of my opponents has -- has mistakenly -- and maybe purposefully -- my position on that. I have said that the policies have been arrogant.

SCHNEIDER: Huckabee wrote: "Much like a top high school student, if the United States is modest about its abilities and achievements, if it generous in helping others, it is loved. But, if it attempts to dominate others, it is despised."

Republican caucus and primary voters may not worry too much about whether the United States is loved.

ROMNEY: The truth of the matter is, this president has kept us safe these last six years. And that has not been easy to do.

SCHNEIDER: Sixty-one percent of Republicans approve of the way President Bush has handled foreign policy. Nearly a third are critical. At the same time, about half of Republicans endorse the view that the next president should take the country in a new direction.

HUCKABEE: I have got to show that I do have my own mind when it comes to how this country ought to lead, not only within its own borders, but across the world.

(END VIDEOTAPE)

SCHNEIDER: Huckabee is betting that the desire for change has resonance, even among Republicans. Now, that's a risky bet. He risks being called disloyal to a Republican president -- John.

KING: Bill Schneider, worth watching -- thanks, Bill, very much.

And, tonight, you can hear just what Mike Huckabee thinks about this increased scrutiny. He will appear on CNN's "LARRY KING LIVE." That's right here at 9:00 p.m. Eastern.

If you don't already, Hillary Clinton wants you to know she's compassionate and funny. The Clinton campaign has launched a new Web site featuring people making that and other points on Clinton's behalf.

CNN senior political correspondent Candy Crowley is following Senator Clinton today. She joins me now live from Des Moines, Iowa.

Candy, let's start with, turn on your morning TV this morning, and there was Senator Clinton everywhere. What's behind this media blitz?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Yes, absolutely.

Well, what's behind is, they are trying to get on a roll here. They have hit a rough patch over the last four to five weeks. Now is the time you want to try to start building momentum. They got a couple key endorsements, including the "Des Moines Register" endorsement in the Sunday papers.

So, they sort of wanted to go at this weekend and into this week with a huge push to try to generate excitement, frankly, try to move some of the undecideds, but also to get some of their key caucus-goers excited. So, they have put her out there. They intend to keep putting her out there.

KING: So, trying to get a little bit more energy, and, at the same time she's on TV, back to this new Web site, thehillaryiknow.com -- I'm sure people are clicking on it all over the country right now -- hoping, obviously -- it's an effort to warm people to her image. Explain why.

CROWLEY: Well, you know, because, look, here's -- here's what the polls all show. And here is what they know very well in the Clinton campaign.

That is, first, that people see her as a leader. Second, they think she's very smart. Her Achilles' heel always has been, is she cold, is she calculating, is she just another conniving politician? So, what they have done is, they have set up these Web -- this Web site with these testimonials.

They are from childhood friends. They are from some names you would recognize, Wesley Clark among them, Vilsack from -- the former governor here, people like that. But they're also from just some of her constituents in New York, saying, well, she called me. I told her I had this problem. Here's what she did.

I mean, today, we heard from a longtime -- one of her closest friend from elementary school, who told us that Clinton was captain of the crossing guards in elementary school. So, we're getting a lot of that sort of personal data.

And -- and why? I mean, Hillary Clinton really said so herself in this bite you're going to hear.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: Here in Iowa, I want you to have some flavor of who I am, you know, outside of the television cameras, when all the cameras and the lights disappear, what I do when nobody is listening or taking notes and recording it, because it's hard, when you're in public life, to have that kind of sharing experience with thousands and millions of people.

(END VIDEO CLIP)

CROWLEY: I don't know if you can tell, John, but there is a definite tonal difference here. This is not the rallying Hillary Clinton. This is not the policy Hillary Clinton. This is the personal side of Hillary Clinton.

They think -- they think they need to cross that barrier, to say, look, here is the woman you haven't seen yet.

KING: As a -- as a former president once put it, the kinder, gentler side of Hillary Clinton.

(CROSSTALK)

KING: And, Candy, you know, one of the difficulties, one of the -- sometimes, the plus, sometimes a minus, is that she has a former president who is among her supporters out there on the campaign trail.

And Bill Clinton saying over that weekend that a vote for Barack Obama is like -- quote -- "rolling the dice."

How does Hillary Clinton address the Obama experience question?

CROWLEY: She says, everyone should mean -- read the "Des Moines Register" endorsement of her.

She's not touching that. She's not agreeing with that. But, you know, John, it's good when you have things like that out there, but you don't necessarily want to say them yourself. So, every time someone brought that up when she did round of morning talk shows, she said, well, I think that's what "The Des Moines Register" -- you should read that, because they say that I have the experience.

But she doesn't want to go to that place that, really, her husband went to, which is, boy, this is risky. If you nominate him, it's risky.

She didn't want to go that far. She just wants to say, look, look at my experience. I'm the most experienced person to put into the White House come 2009.

KING: More of the kinder, gentler.

(LAUGHTER)

KING: Candy Crowley for us...

CROWLEY: Yes.

KING: ... on the streets of Des Moines -- Candy, thanks so much.

And, when President Bush speaks, the markets listen. Is the president giving new reason to worry about the economy? We will tell you what the president said and why some people are concerned.

Also, it's Jack Cafferty's question of the hour. If Republican candidate Ron Paul can raise more than $6 million in one day, then why isn't he higher in the polls? Jack is back with your answers.

And is the ban against gays in the military serve -- gays serving openly in the military easing? Our senior Pentagon correspondent, Jamie McIntyre, takes a look.

(COMMERCIAL BREAK)

KING: President Bush is sounding more like a grinch about the economy than a man full of holiday good cheer. His remarks today made for more fuel on recession fears.

Let's bring in our White House correspondent, Ed Henry.

Ed, listening to the president, it seems like a big departure from how he framed the economy earlier in the year.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: That's right, John.

As you know, presidents choose their words very carefully on the economy. It's in their interests to talk it up. And, to be sure, Mr. Bush is still optimistic about the long term. But what's significant is, he's acknowledging there are problems in the short term.

(BEGIN VIDEOTAPE)

HENRY (voice-over): For the first time this year, President Bush acknowledged storm clouds hanging over the U.S. economy, even as he sought to reassure Americans about the future.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I fully understand the pinch some of your folks are going to feel. And, having said that, this economy's pretty good. There are some -- there's definitely some storm clouds and concerns, but the underpinning is good.

HENRY: A far cry from the high hopes the president was projecting back in January at a Caterpillar plant in Peoria.

BUSH: I would suggest moving back. I'm about to crank this sucker up.

HENRY: Before things stalled, Mr. Bush was saying the economy was strong.

BUSH: People are working and putting more money in their pocket. And the question facing the country is, what are we going to do to make sure it's strong tomorrow?

HENRY: The day after that stop in Illinois, the president was bursting with optimism as he visited New York City to deliver what he billed as a state-of-the-economy speech.

BUSH: As we begin this new year, America's businesses and entrepreneurs are creating new jobs every day. Workers are making more money. Their paychecks are going further. Consumers are confident. Investors are optimistic.

HENRY: While the president now acknowledges some trouble, he's trying to point the finger at Democrats.

BUSH: And the most negative thing the Congress can do in the face of some economic uncertainty is to raise taxes on the American people.

HENRY: Democrats insist, the president is trying to distract attention from a possible recession.

SEN. CHARLES SCHUMER (D), NEW YORK: The administration continues to see the economy through rose-colored glasses, whether it be the subprime crisis, the credit crisis, the energy crisis, the declining dollar crisis.

(END VIDEOTAPE)

HENRY: Now, the president insists he has taken steps to deal with the economy, from his early tax cuts, to his recent plan to deal with the subprime mortgage crisis.

But the fact of the matter is, in his final year, he would much rather by taking victory laps than dealing with a possible reception -- recession as something else that could damage his legacy -- John.

KING: The economy always matters at the White House.

Ed Henry, thanks so much.

HENRY: Thank you.

KING: In today's "Strategy Session": Senator Joe Lieberman explains his decision to endorse Senator McCain this way.

(BEGIN VIDEO CLIP)

SEN. JOSEPH LIEBERMAN (I), CONNECTICUT: For the record, none of the Democratic candidates asked for my support. And John McCain did.

(END VIDEO CLIP)

KING: But will the independent Democrat from Connecticut's support translate into votes for McCain?

And two Democrats outline very different expectations for Iowa. Good politics? Good strategy? That's on the table with Donna Brazile and J.C. Watts.

They're standing by -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

KING: Bill Clinton says it's a miracle his wife has a chance to win. And that has many people wondering just what he meant.

Here for today's "Strategy Session," two experts in the expectations game, CNN political analyst Donna Brazile, Democratic strategist, and J.C. Watts, former Republican congressman from Oklahoma. I want you to listen to this. Everyone plays the expectations game. We're 17 days away from the Iowa caucuses. Listen to the takes of Bill Clinton and Barack Obama.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I think it's a miracle that Hillary has got a chance to win. She might win this thing in Iowa.

(CROSSTALK)

B. CLINTON: And I -- but -- but -- and I'm not lowballing it. You can look at the facts here. I think it's a miracle because of the way the thing has played out.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Whoever wins this caucus is likely to win the nomination and is likely to win the presidency.

(END VIDEO CLIP)

KING: Donna Brazile. They're Democrats, so you go first. A, should Barack Obama be saying, win Iowa, win the presidency? And Bill Clinton, miracle?

(LAUGHTER)

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, let's -- let's, first of all, look at the Clinton campaign. Over the weekend, they got a tremendous boost with the endorsement by "The Des Moines Register." She has practically moved our campaign out to Iowa.

Her campaign manager, Patti Doyle Solis, is out there, many of her top surrogates. I received an e-mail today. I'm not -- you know, I'm not on anyone's team. But they want warm bodies and money. And no one has asked me for my body and my money at the same time.

KING: You surge your troops when you're panicking, don't you?

(LAUGHTER)

BRAZILE: Well, look, but that's what you do in the closing days of the campaign. You bring your team where you want to win. They want to win Iowa.

Obama is right. He's right in saying that, if you win Iowa, there's -- there's likely to be a lot of momentum going into New Hampshire and the other states. So, I think that team Clinton is trying to downplay expectations, but she hopes to win.

One last point -- some of the outside groups have spent over $1.5 million in TV and radio ads. I'm sure they want her to win as well.

(LAUGHTER) J.C. WATTS, CNN POLITICAL ANALYST: Senator Obama said about 45, 60 days ago that, if -- if he won Iowa, he felt like he would win the nomination. So, what he's saying isn't new.

But I think there's merit in what he is saying, because, John, look at it. If he wins Iowa, he goes into New Hampshire very strong. Michigan, South Carolina, he's -- you know, Oprah being down there 10 days ago had a real impact. He's got momentum.

What other state out there can he not be competitive in? So, she's got to be pretty concerned right now.

KING: Got a lot of ground I want to cover, but I want to follow up on this point. This is the time in a campaign when you're tired, when the tension is building. And the new guy, the kid, as the Clinton people would like us to think of Barack Obama, is supposed to get nervous and make a mistake.

He looks very confident. She is the one who is on all the morning shows this morning. She looks nervous. Fair?

BRAZILE: Absolutely.

Look, he looks presidential. Barack Obama is hitting his stride. He's sounding like he's -- he's a commander in chief. So, I think they have a lot to be worried about. But this race is still wide open. John Edwards is still on the hunt for votes. His votes haven't changed in the last four years. And we -- we still know that one of the second-tier candidates may, you know, have a good day on -- on Thursday, January 3.

WATTS: Just briefly, John, I think his -- his discipline has been amazing. You know, he hasn't been -- they haven't ruffled him. They haven't intimidated him. His discipline has been quite amazing.

And I think they have got to be concerned, even at this point, that they haven't shaken his confidence.

KING: You talk about discipline. Let's move on to the Republican race.

Mike Huckabee writes in "Foreign Affairs" -- at a time when he is coming up in Iowa, coming up in South Carolina, moving up in the polls nationally, Mike Huckabee criticizes the president quite sharply on a number of issues in foreign affairs.

And he says this about Iran: "When we invaded Afghanistan, Iran helped us. Tehran wanted to join us against al Qaeda. After President Bush included Iran in the 'axis of evil,' everything went downhill fast" -- essentially blaming a Republican president for the confrontation, the diplomatic problems with Iran.

J.C. Watts, should a Republican candidate for president being going after a Republican president?

WATTS: I don't think Tehran has ever been -- or Iran has ever been on the side of America against al Qaeda. I mean, they have been on the side of the bad guys, as -- as far as I can remember.

But, John, I do think there's some merit in saying that there's been some arrogance here? I mean, I -- that's not a new criticism toward the administration. I think we all have to be able to say, as Republicans, if we see other Republicans that are wrong, we have to be able to say they're wrong.

John McCain -- that's one of the reasons the establishment doesn't like John McCain, because they say he's a renegade. When you hear that, that's code word for, we can't tell him what to do. So, I think we all have to reserve the right to be critical of Republican administrations, if we're Republicans, or Democrat administration, if we're Democrats.

(CROSSTALK)

BRAZILE: And one should give him a copy of the Republican playbook that contains the 11th commandment, thou shall not criticize another Republican.

Look, Mike Huckabee is being candid. He's being honest. He's being truthful. But that, we all know in politics, can get you in a lot of trouble with your base.

KING: You say the Republican 11th commandment. We have got to go through this quickly, but let's listen to a new ad Mitt Romney is about to launch in Iowa, trying to stop Governor Huckabee.

(BEGIN VIDEO CLIP, ROMNEY CAMPAIGN AD)

NARRATOR: Huckabee granted more clemencies than the previous three governors combined. He even reduced penalties for manufacturing methamphetamine. On crime, the difference is judgment.

(END VIDEO CLIP)

KING: Now, before I ask you your opinion, I want to give you Governor Huckabee's response to this, of course.

He says, "What Romney fails to mention is that, even with the reductions, Governor Huckabee was tougher on methamphetamine manufacturers than Governor Romney was."

The bigger question is, Romney tried to hit Huckabee on taxes, tried to hit him on illegal immigration. Now he's going after him on crime and judgment, the bigger issue of clemencies and commutations and things like that.

Good strategy?

WATTS: If Donna and I competed against each other in campaigns, and Donna sees that I'm surging, that my -- my people -- I'm catching on, I'm getting traction, the campaign consultants are going to say, hey, look, you have got to go after her -- or after him., You have got to make him look bad.

That's the stupidity and -- and the ugly side of politics. John, I have said many times before, dogs don't bark at parked cars.

(LAUGHTER)

WATTS: Mike Huckabee is getting traction. He's making -- he's having an impact. And you are going to have candidates start to go after him. But I don't think this is going to matter, because I think it says to voters, there's a desperation factor here.

KING: You have got to be quick if you want to bark at anybody.

(LAUGHTER)

BRAZILE: Well, let me just say this. This will matter. This will stick. Unlike some of the other previous attempts to stop his surge, this will -- will get people in Iowa thinking about his record in Arkansas.

KING: Hmm. OK. We will keep watching. Interesting thought there.

Donna Brazile, J.C. Watts, thank you both.

A new sign of Rudy Giuliani's dwindling expectations in New Hampshire -- the details ahead on our "Political Ticker."

And witnesses put their lives on the line: startling new concerns about intimidations and cold-blooded murder.

Plus, we will tell you why security is even tighter than usual at the annual Muslim pilgrimage to Mecca.

(COMMERCIAL BREAK)

KING: Quick run through our "Political Ticker."

Rudy Giuliani's presidential campaign has pulled costly TV ads from the Boston market, seen by many voters in neighboring New Hampshire. Giuliani allies tell us the heavy ad buys have not improved his poll numbers in New Hampshire as much as they had hoped. Giuliani aides say the campaign is adjusting its resources, and the Republican still intends to compete in New Hampshire, but also wants to save money for down the road.

A new endorsement for Republican Fred Thompson today in Iowa, it comes from a Hawkeye State congressman, Steve King, a vocal opponent of abortion rights and illegal immigration. King is backing Thompson even though he's quite friendly with rival GOP presidential hopeful Tom Tancredo.

Another Iowa endorsement today, this one for Barack Obama, from Democratic Congressman Dave Loebsack. Loebsack was heavily courted by many of the Democratic hopefuls. Iowa's three Democratic House members are now split in endorsements among Obama, Clinton, and Edwards.

And Republican presidential candidate Mike Huckabee may be the rocket man of the presidential polls at the moment, but he's still behind in the money race. Today, Huckabee is attending a fund-raiser out in the Los Angeles area, taking a break from campaigning in the early voting states.

And, remember, for the latest political news any time, check out the "Political Ticker" at CNN.com/ticker.

Jack is in New York now -- back to Jack for "The Cafferty File."

JACK CAFFERTY, CNN ANCHOR: If Huckabee does as well in Iowa as the polls indicate he might, a lot those money problems might suddenly begin to disappear.

The question this hour is: If Ron Paul can raise more than $6 million in one day, how come he's not higher in the polls?

Doug writes from Sierra Madre, California: "Not higher? Because Ron Paul doesn't appeal to most right-wingers. Mr. Paul makes sense and tells the truth. And that just annoys a lot of Republicans."

Carlos writes: "Because he's not getting exposure in the mainstream media. The rise of Huckabee is a testament to this. As soon as Huckabee's name started being mentioned every five seconds, his poll numbers rose. Just because Ron Paul is low in the polls doesn't mean he shouldn't get news coverage. Those who get to hear his message absolutely fall in love with him."

Not John, apparently.

John in Keystone Heights, Florida: "Ron Paul isn't near the top of the polls for one reason. His message sucks."

John in Sacramento: "As a Liberal Democrat, I have watched Ron Paul over the last year. I don't understand why the media doesn't get that he represents a very disaffected segment of the Republican Party that hasn't had a real voice since Pat Buchanan in 1992. The Republicans operate like a massive corporation. Ron Paul represents a shareholders revolt."

Lynnda writes: "I think the reason Ron Paul is no higher in the polls is because few Americans understand what libertarianism is. It's much more in line with what our forefathers believed was important, but, as a nation, we have deviated so far from that original structure that today's Americans don't understand what it means."

J. writes: "He's not higher in the polls because he's not supported by the Republican Party management, the wealthy, corporate types, the defense, oil, and gas industries, et cetera. He seems to represent the common man, who feels without a voice in the usual D.C. political circus."

And, finally, Walter writes from Ohio: "The reason we love Ron Paul is because he loves his country more than he loves himself" -- John.

KING: Told you they would be interesting, Jack.

CAFFERTY: They are.

KING: Ron Paul always generates interest.

Jack, thanks so much. We will see you next hour.

And you're in THE SITUATION ROOM.

Happening now: It's a case that drew an angry and deeply personal reaction from President Bush, a Saudi rape victim sentenced to be whipped and jailed. Now the Saudi king has intervened. Can that undo any of the damage?

Russia fuels an Iranian nuclear plant, even as Iran steps up its defiance of the international community. Is this, you might say, adding fuel to the fire?

And now it's Bill Clinton vs. Barack Obama. The former president casts doubt about the would-be president's qualifications, but Obama works in some digs of his own.

Wolf Blitzer is off today.

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