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Clinton Loses Key Union Nod to Obama; Rematch in Michigan: McCain Versus Romney; Interview With John Edwards

Aired January 9, 2008 - 16:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now, a setback after Hillary Clinton's stunning New Hampshire comeback. We're going to tell you how Barack Obama trumped her today. And I'll ask Democratic rival John Edwards how he can compete right now.
Plus, a Republican rematch in Michigan. Native son Mitt Romney is aiming for a badly needed victory. Would his campaign crumble if New Hampshire winner John McCain defeats him again in Michigan.

And Granite State voters proved the pollsters were wrong. At least that was true for the Democratic primary. We're going to investigate why.

I'm Wolf Blitzer at the CNN Election Center. You're in THE SITUATION ROOM.

Hillary Clinton says she's taking a deep breath after her jaw- dropping win in New Hampshire, but this may take a little oxygen out of the room. Just a short while ago, the largest labor union in Nevada announced it's endorsing Barack Obama's presidential campaign. The support of the 60,000 member Culinary Workers Union could boost Obama's chances in the Nevada caucuses only 10 days from now.

Let's go to our senior political correspondent, Candy Crowley. She's watching this story for us.

Candy, explain to our viewers why this endorsement is so significant.

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, first of all, because this is the biggest organization in Nevada with a political apparatus that a candidate can walk in and use so they can help drive out the vote and they can give guidance to the candidates to where the caucuses, the more important caucuses, will be. They know who they can drive out.

They can say to members, get out, we support Barack Obama. And certainly in the Nevada caucuses, that's going to be very helpful because this is kind of -- it's certainly a new place on the calendar for them, and people think that perhaps this is a little iffy business.

I will tell you that the Clinton campaign is now sort of downplaying expectations for both Nevada and South Carolina. Someone familiar with the campaign's thinking told me, "I would rather downplay expectations there because Nevada looks tough for us in light of this Culinary Union endorsement of Obama and other elements," and they also think South Carolina will be tough.

They clearly are looking to play a bit in both of those places, but they also are looking to those February 5th states as well.

BLITZER: Lots of talk today, as you know, Candy about how Hillary Clinton managed to pull that upset win last night in New Hampshire, where you are right now. I want to play for you a little clip of what she told CNN's "AMERICAN MORNING."

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: Oh, I don't know what all the factors were, but I'm really glad I had a chance to say what I believe with all my heart, that, you know, politics isn't a game, it's not a horse race, it's about peoples' lives. You know, that's why I do what I do.

It's obviously really, really hard to get up every day and, you know, go out and stand up for people who don't have a voice, don't have an advocate, who sometimes are just rendered invisible, but that's what I think I'm supposed to be doing. And I've done it for 35 years.

(END VIDEO CLIP)

BLITZER: Candy, some hints if you listen closely to what she's saying, maybe even if you weren't listening so closely, that her effort to get more personal, connect with voters, is going to continue.

How much more of that do we expect to see from this campaign in the immediate days ahead?

CROWLEY: Moving on, you can expect to see that. As one source told me, she's gotten rid of that sort of frontrunner-itis. They believe that she has gotten stronger on the campaign trail, that she is connecting with voters.

They think, in fact, that this victory became -- came about because she connected with voters. In particular, working single women on the issues -- child care, job security, things like that.

So they think that she has finally, as one said, put flesh on the bones of both her experience, and they also expect that they will be laying out Barack Obama's experience here. They will be challenging what he has to say when it needs challenging.

Now, they say we're certainly willing to take the hit for going negative, but we believe we will only be putting out the facts. If he says this, we will put the facts out and let you all judge.

So they are going to be both aggressive toward Obama and a little more open, a little more personal, with Hillary Clinton.

BLITZER: Candy Crowley, thanks very much. Barack Obama, by the way, is leaving his New Hampshire loss behind him. He is campaigning today in the Super Tuesday battleground state of New Jersey. The Obama camp says it's raising money at a rapid pace this year, pulling in an average of $1 million a day.

We are going to hear from Obama. That's coming up. And we're going to have a live report from our Suzanne Malveaux.

Democrat John Edwards is setting his sights on a state -- the actual state where he was born, South Carolina. Just ahead, I'll ask Edwards about his strategy for survival after coming in third in New Hampshire.

Governor Bill Richardson is back in his home state of New Mexico after his fourth-place showing last night. Very disappointing for him. We are going to -- we are told, by the way, he will take a couple days off to work at his day job and consider -- consider the future of his presidential bid.

Now that Iowa and New Hampshire are behind them, the presidential candidates have a busy month of contests ahead. On Tuesday, next Tuesday, it's the Michigan Republican primary.

On Saturday the 19th, Nevada holds Republican and Democratic caucuses. And there's a GOP primary that day in South Carolina. Democrats hold their South Carolina primary the following Saturday.

The Florida primary is January 29th, and then it's Super Tuesday, February 5th. More than 20 states hold contests on that day, including delegate-rich California, Illinois, and New York.

John McCain and Mitt Romney both are on the ground in Michigan. McCain is looking for a New Hampshire bounce. Romney is looking for a much-needed rebound.

Our chief national correspondent, John King, is in Michigan right now.

John, the contest in Michigan looking even more interesting after the results of New Hampshire.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: It sure is, Wolf. And you see that crowd behind me? Well, that is New Hampshire's number two place, where the former Massachusetts governor, Mitt Romney, just arriving on the scene here in Grand Rapids.

If you want to understand the do or die stakes potentially for Governor Romney here, take this bit of information. His campaign decided today to stop television advertising in South Carolina. Governor Romney has been buying ads there for months, had viewed it as a high-stakes state. His campaign now acknowledges they're going to pour more resources into Michigan, hoping to beat John McCain.

(BEGIN VIDEOTAPE)

KING (voice over): In boxing terms, it's rematch time. New Hampshire's Republican winner sees the stakes as enormous.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: We won New Hampshire. We'll win Michigan. We'll win South Carolina. We will win the nomination, and I will be the next president of the United States, with your help.

KING: The glow of victory is obvious, but so are the challenges. The economy dominates here. Michigan's unemployment rate is 7.4 percent. And Senator McCain moved quickly to promise help.

MCCAIN: We are a Judeo-Christian-valued nation. And we cannot leave these great Americans behind. I want to tell you, I will help you create new jobs...

KING: McCain talked of reforming wasteful federal job training programs and using community colleges as training incubators, but he passed when asked how a McCain presidency would differ from the approach of his chief rival here, Michigan native and former businessman Mitt Romney.

MCCAIN: I do not get into the comparisons. I don't know what his positions are. We run our campaign. We think we have a strong set of proposals.

KING: A comeback brings new energy, but it also stirs old questions. Among them, whether McCain's new emphasis on immigration will satisfy conservatives who revolted last summer when the senator pushed to give legal status to millions here illegally. He acknowledged the political toll on the flight from New Hampshire to Grand Rapids.

MCCAIN: I think it's hurt me everywhere. But we will continue to send the message that we have to secure the borders. The borders will be secured first.

(END VIDEOTAPE)

KING: And Wolf, as you saw, Governor Romney arrived here just moments ago. Aides say his focus will be the economy and the economy almost exclusively.

With the way he describes it, Governor Romney says he takes it personally given his Michigan roots, and he believes he has the business fix-it experience and experience as governor to turn the economy around. And again, Wolf, you cannot overestimate the stakes for Governor Romney here -- second in Iowa, second in New Hampshire.

This is the state where he was born, where his father was governor. They believe they have a showdown here with John McCain and they believe they have to win it -- Wolf.

BLITZER: Thanks very much, John.

John will be in Michigan for us.

In the wide open Republican contest, Mike Huckabee is zeroing in on South Carolina. He's looking to do well there, especially with Christian conservatives, just as he did to secure his win in Iowa.

(BEGIN VIDEO CLIP)

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: We're excited about South Carolina. And the reason is, is because I believe that here in South Carolina, it's going to be the place where we will continue the momentum that we have seen in this campaign. And we're going to take it all the way from here on to Florida. And ultimately, the White House. But South Carolina is going to be a turning point in this nomination process, and you're going to be part of a great piece of history.

(END VIDEO CLIP)

BLITZER: Fred Thompson also is campaigning in South Carolina. It's been a make-or-break state for the former Tennessee senator after his poor showing in New Hampshire.

Our Dana Bash, by the way, will have a live report from South Carolina. That is coming up.

Rudy Giuliani is putting more time and energy into Florida once again today as part of his strategy to look beyond Iowa and New Hampshire, where he did poorly in both of those states.

Let's go to Jack Cafferty right now. He's got "The Cafferty File" here in THE SITUATION ROOM.

JACK CAFFERTY, CNN ANCHOR: Thank you, Wolf.

"Back From the Dead" and "Who's Crying Now?" are the headlines in the two big New York tabloids about Hillary Clinton's upset victory in New Hampshire last night. Her surprising come-from-behind win proved all the pundits and all the polls wrong.

Polls released in the last two days leading up to that election showed Barack Obama with anywhere from a five to a 13-point lead over Clinton. Even her own campaign was expecting a loss as late as 9:00 last night. There were reports about staff shakeups, you name it.

So, how did Hillary manage to stun everyone and become the second Clinton comeback kid in New Hampshire? Nobody knows for sure, but the smart money is pointing to a diner where the former first lady was fighting back tears on Monday.

Nobody that I talked to could ever remember seeing Hillary Clinton like that. Raw, real emotion that may have gone a long way toward countering her reputation as a cold and calculating political machine.

Now, whether or not the tears told the ultimate tale, New Hampshire women supported Hillary in a way they didn't in Iowa. One senior Clinton adviser suggested that John Edwards' unsympathetic response to Clinton's tears on Monday may have even pushed more women to the polls to support Hillary. Edwards made some stupid remark about "presidential campaigns are tough business." Yes, they are, John. In case you hadn't noticed, you finished third last night with a lousy 17 percent of the vote, and you might well be on your way to ending your campaign, this time the same way you did in 2004. But that's another story for another day.

Here's the question. Behind by double digits in several last- minute polls, why was Hillary Clinton able to come back and win the New Hampshire primary?

Go to CNN.com/caffertyfile. You can post a comment there on my new blog -- Wolf.

BLITZER: We're going to be speaking John Edwards momentarily. And we've got a lot to talk about with him, Jack.

CAFFERTY: Indeed.

BLITZER: Thanks very much.

Edwards, so far, 0 for 2 this primary season. He came in second in Iowa, third in New Hampshire. Will South Carolina be his last stand?

I'll ask Senator Edwards about his strategy for survival. What's he planning on doing next?

Plus, two remarkable comeback stories. What do they teach us about this presidential campaign? You're going to find out in our strategy session.

Plus, voters already are worried about the economy. And now a dire new warning that the nation may be heading into a recession.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Welcome back.

John Edwards is looking to reboot his presidential campaign in his native South after his third-place finish in New Hampshire. The Democrat is campaigning today in South Carolina, heading into the January 26th contest there. The former North Carolina senator is joining us now.

Senator, thanks very much for coming in.

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: Thanks, Wolf. Thanks for having me.

BLITZER: Was it much of a disappointment? I assume it was, coming in third in New Hampshire.

EDWARDS: Oh, no, it actually is exactly what we expected from what we saw. You know, if you look at what's happening, we have had two states now, one was Iowa, where I finished second ahead of Senator Clinton and behind Senator Obama. The next was New Hampshire, where they both finished in front of me and I finished third.

Now we go to Nevada and South Carolina. South Carolina, where I am today, is the state that I won the primary in 2004.

I was born here. I have a lot of connection here. I know what's happening in people's lives here. Not because I read it some where, because I've lived it.

BLITZER: Both of these states are important, but you're really counting on South Carolina, you're saying, more than Nevada?

EDWARDS: No. I wouldn't say that. I wouldn't go that far. I think both those states matter.

I'm very much in this for the long haul, Wolf. I mean, I'm seasoned at this. I've been through it before. And I know what matters, and the most important thing is to stay focused, to continue to move, to talk about the middle class, jobs, how we stand up against special interests.

I mean, that's what people want to hear. They want somebody who they know has some courage and fight.

I'd just point out, and you have been talking about it all day on CNN, I'd just point, you know, it wasn't three, four months ago all of you guys were writing -- not you, but the media was writing John McCain off. He was dead, he didn't have a chance, and now look at where he is.

I mean, these things change, and they change quickly. And I think there are three of us who still have a real shot at this.

BLITZER: That's a fair point.

The community, the Hispanic community in Nevada, the African- American community there, and also the African-American community in South Carolina, these two states are very different demographically than Iowa or New Hampshire, where there is a tiny African-American community, tiny Hispanic community. Is that going to force you to retool your strategy, your message, the issues you're focusing in on right now, or is it going to continue the way you started? In other words, are you shifting your strategy based on the different populations in Nevada and South Carolina?

EDWARDS: Well, it's not a strategy shift, Wolf. I mean, I ran here in 2004, I grew up in the South, I know very well what matters to people here.

They want to know that you understand what their lives are like. They want to know that you know what it means when all these jobs have left South Carolina and North Carolina, which is where I live now.

They want to know that when you talk about the middle class and the struggles of the middle class, it's not something that somebody explained to you, that you understand what it means in their lives. And they want to know that when somebody doesn't have health insurance, that you understand what impact it has on their lives.

This is -- they are looking for somebody who understands what's happening to them in a very real and personal way. So I think both here and in Nevada, what I stand for, what I believe, and my personal convictions about these things matter. And I think they are going to matter in the caucus in Nevada and the primary in South Carolina.

BLITZER: Tell us why you believe the African-American Democratic voter, and that could be 50 percent of the primary in South Carolina, why they should vote for you as opposed to Barack Obama or Hillary Clinton, for that matter? What exactly do you bring to the African- American community in South Carolina which has its own unique problems?

EDWARDS: I have been fighting for the causes they care most about my whole life. No one has been more vocal and more outspoken and more leading as -- by the way, as leading African-American figures like the Reverend Jesse Jackson have pointed out on issues of poverty than I have.

I mean, I have been out there driving this issue, making certain that it's discussed in the campaign. It's a huge issue here in South Carolina. Here in the state of South Carolina.

The educational disparity in South Carolina, I have always talked about the two public school systems we have. There is no better example of that than what's happening with the two public school systems here in the state of South Carolina.

Jobs, particularly in smaller towns, smaller communities, rural areas, I have been the leading force in driving those issues in this campaign. And that's a huge issue here in South Carolina. I mean, I know what's happening in the lives of all South Carolinians, and I certainly know what's happening in the lives of African-Americans.

BLITZER: How important is the Culinary Workers Union endorsement of Barack Obama in Nevada right now? They have 60,000 members and they are politically very charged and active.

EDWARDS: Well, first of all, I congratulate him for getting their support. They're a good union.

But I might point out, there are other very good unions in Nevada. The Carpenters, for example, are one of the unions. I have got several there supporting me.

I think a fair assessment of the union support in Nevada would be that Senator Clinton has some, I have I think more than she has, and Senator Obama has some. And I think it's relatively split between the three of us.

I think what's going to matter at the end of the day in Nevada is who has a message about jobs and the middle class and how you strengthen the middle class, and who actually can get their people to the caucuses on Saturday.

BLITZER: You called Senator Clinton, I take it, to congratulate her last night, is that right?

EDWARDS: I did.

BLITZER: How did that conversation go?

EDWARDS: It went very well. I told her congratulations. She had run very hard and her campaign had done a good job in New Hampshire, and she deserved to be congratulated.

BLITZER: Thanks very much for joining us, Senator. Good luck.

EDWARDS: Thanks, Wolf. Thanks for having me.

BLITZER: President Bush landing in Israel and sending a stern message to Iran. Coming up, confrontation amid talk of peace.

Plus, the fog and smoke are bad enough. The accident they caused, even worse.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWSBREAK)

BLITZER: If it comes true, it will hit hard at all of our wallets. Regarding the U.S. economy, the world's most profitable security firm warning Americans get ready for something no one wants.

We're going to have details.

And why was there such a disconnect between what many people thought would happen and what actually happened in New Hampshire? We're going to go behind John McCain and Hillary Clinton's big wins.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Happening now, with computers controlling much of the planes' operations, could hackers actually break their way into a system and take over? We're going to tell you why there is fear of one much-anticipated -- for one much-anticipated aircraft.

Some talking heads told you what would happen in New Hampshire's primary, but voters told them otherwise. How did some of the pundits get it so wrong?

And amid death and discord over a disputed election in Kenya, many Kenyans are watching the U.S. election. The reason, Barack Obama is Kenya's favored son.

I'm Wolf Blitzer. You're in THE SITUATION ROOM. Moments ago, the financial markets closed amid an alarming prediction that we would all have to brace ourselves for. After losses early in the day, the Dow Jones industrial average added almost 1 percent, as did the S&P and Nasdaq. This comes as the world's most profitable security firm forecast impending gloom -- gloom -- for the nation's economy.

Ali Velshi is here. He's watching all of this for us.

Goldman Sachs telling all of us, get ready.

ALI VELSHI, CNN CORRESPONDENT: Wolf, Goldman Sachs is the biggest investment firm, investment banking firm, in the world, and, frankly, in 2007, one of the only ones that got it right.

Now they say what you have been thinking: We are headed for a recession.

(BEGIN VIDEOTAPE)

VELSHI (voice-over): Goldman Sachs says the weak jobs report on Friday was the last straw. Unemployment unexpectedly jumped from 4.7 percent to 5 percent. That's the kind of jump that, historically at least, spells recession.

That's because losing a job or the fear of losing a job is the most certain way to make Americans slow down their spending. Americans are the world's best spenders, so, when they slow down, so does the world's biggest economy. A recession is officially described as a significant decline in economic activity spread across the economy lasting more than a few months.

The problem is, you can't officially measure a recession until months after it's started. And that's long after Americans know it's happening. And Americans are worried. Exit polls of New Hampshire primary voters show that 80 percent of Republicans and 97 percent of Democrats are worried about the economy.

So, what can be done to stave off a recession? Well, for starters, the Fed can continue to cut interest rates. Lower interest rates make it cheaper for consumers and businesses to borrow money. Rate cuts encourage consumers and businesses to spend, which, in turn, causes the economy to expand.

The Federal Reserve has already cut interest rates three times since September, and it's expected to shave another half-a-percentage point off at the end of January. And, if that doesn't work, the Fed could continue to cut rates in coming months.

(END VIDEOTAPE)

VELSHI: Now, anybody who was looking to the housing market for a bright spot, well, there's more bad news there, Wolf.

The National Association of Realtors says, don't expect a broad increase in home prices until some time in 2009, next year. And others close to the housing industry say it might be 2010 before we see a recovery in home prices.

BLITZER: So, this would not necessarily in most parts of the country be a good year to sell your house?

VELSHI: That's exactly right. But, if you got a little money and good credit, might not be a bad time to start looking to buy.

BLITZER: And obviously probably a good time to buy a house.

VELSHI: That's exactly right.

BLITZER: All right. So, it's a win/lose...

VELSHI: Yes. Somebody wins.

BLITZER: It sort of balances out.

Ali, thanks very much for that.

VELSHI: All right.

BLITZER: Recession, we don't want, though, but it looks like it might happen.

New Hampshire primary results have done more than serve up big wins for Hillary Clinton and John McCain. They have also served important political lessons about the strength of women voters and independents and the weakness of some predictions.

Here for today's "Strategy Session," Jamal Simmons, Republican strategist John Feehery. Jamal is joining us from Las Vegas. John is in D.C.

All right, so let's talk about some of the lessons learned.

Jamal, first to you.

What's the most important lesson that you think we should walk away from, from last night?

JAMAL SIMMONS, DEMOCRATIC STRATEGIST: Enough with the irrational exuberance.

(LAUGHTER)

SIMMONS: This campaign is going to go for awhile. There's no sudden death in presidential politics.

People are going to have to win each primary, each caucus, add the delegates up, see where the voters are, and then we will get us -- we will get ourselves a president.

But, for right now, it's going to take a few -- a few more of these contests to see which way the -- the direction is really going to head.

BLITZER: John, what's the most important lesson for you?

JOHN FEEHERY, REPUBLICAN STRATEGIST: I would say don't overcount on younger voters. They -- they did -- they turned out in Iowa, but it doesn't seem like they turned out in New Hampshire.

It also seems that the -- the polls kind of change very quickly. And the fact of the matter is that people didn't really account for the amount of women that were going to come out, and how they broke for Hillary. You know, that last break on the tears, the reverse Muskie, effect, I would call it, really helped Hillary a lot. And I don't think the polls accounted for it.

BLITZER: You agree with that, Jamal, that that moment -- moment where she showed some real personal emotion wound up helping her?

SIMMONS: You know, I'm not sure about that.

What I think actually happened is, all the sort of positive spin that was out there, people were very excited about Senator Obama. It looked more likely that he was going to win. So, what -- what you probably saw were independents who would have voted for Obama think, OK, Barack Obama is going to be fine; I will go over to John McCain and I will support him.

You probably also had some women -- or some students, rather, who would have shown up on Election Day for Barack Obama, but they thought, hey, he's winning by 10 points. I will just go to the cafeteria instead or do something else.

BLITZER: Or vote for Ron Paul or somebody else. You never -- you never know.

You know, as you look at it from the Republican side, what lessons do you think the Republicans should take away from John McCain's dramatic come-from-behind victory?

FEEHERY: What I think every one of these candidates have learned is, don't -- don't listen to the media and pull out. There's no reason to pull out until the votes are actually cast.

I think that that's something that -- that Romney has got to figure out as he seems like he wants an all-in moment on -- in Michigan, but -- with his pulling out of South Carolina and Florida. But I don't think he necessarily needs to make any premature decisions.

I mean, sticking to it is really the most important lesson from the McCain victory. He stuck to it, and, you know, he won.

BLITZER: And you just heard John Edwards refer to the McCain comeback in explaining why he says he's in it until the end. He specifically referred to John McCain.

What do you think, Jamal?

SIMMONS: Yes. You know, Wolf, we have talked about this on the show before. I have always thought John McCain really was the -- the candidate who really kind of had an inside track on the Republican nomination. Republicans typically nominate the person who's next. They know who the nominee is going to be a lot earlier, in advance.

And nobody else seemed to be really closing the deal. None of the other candidates seemed to be really closing the deal. But, you know, everybody is going to leave -- in the Democratic side, they come out here to Las Vegas, to where the big Nevada primary is -- Nevada caucus that Senator Harry Reid put -- has put on the deck to be right now.

And it's going to actually be a pretty competitive contest, it looks like, with the unions breaking apart different ways, the way you said. And all the candidates will be here this weekend. And it's going to be a pretty tough contest here.

BLITZER: That -- that Nevada contest for the Democrats in 10 days.

In Michigan, the primary there for Republicans -- the Democrats aren't really competing in Michigan -- next Tuesday, John. If McCain wins in Michigan, and let's say that Mitt Romney comes in second, once again another silver for him, it's going to be -- there's going to be pressure on him to drop out. But what you're saying is, he should -- he should resist that.

FEEHERY: Well, yes, I think he wants -- he's putting all his chips on the table. He's saying he's going to win. I don't think that he necessarily needs to do that, because he's got the resources.

But, of course, that's a personal decision. Does he want to keep spending the money? One other thing about -- I have looked at polls. And don't be surprised if Mike Huckabee does very well in Michigan. I saw him -- he's right now currently second. And I don't know if McCain is -- is as strong as he was in 2000. Things are different now than they were. And...

BLITZER: So, you're saying Huckabee could surprise a lot of us and win in Michigan? Is that what...

FEEHERY: Well, that's what the polls -- that's the latest polls I have seen. So, don't -- don't be surprised if -- if McCain does not win this, and I -- and if Huckabee does a lot better than people think.

BLITZER: I think that's fair advice.

SIMMONS: Well, you know, Wolf, one more thing.

BLITZER: Go ahead, Jamal.

SIMMONS: One more thing.

I think the one thing that's particularly clear about this contest for the Democrats is, we are seeing record number turnout in all these states. And, so, that is going to be a huge plus for us going into November, if these trends keep up. The Democrats are just swamping the Republicans when you total up our votes.

BLITZER: Guys, thanks very much for coming in, Jamal and John. Appreciate it.

SIMMONS: Thank you.

BLITZER: We know the Democratic and Republican candidates, but could there be a third-party candidate? One name often floated still, despite all his protestations, the New York mayor, Michael Bloomberg. This week, he attended a meeting urging the two main parties to stop the bickering. I will talk about it with a man who was there in Oklahoma, the former Senator William Cohen.

And exclusive Pentagon animation of the breakup of an F-15 fighter jet. We are going to show you that as well.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Now to the Democrats' showdown in the first Southern battleground of 2008. That would be South Carolina.

As we have said, John Edwards is hoping to do well in his own backyard. You heard our interview with him just a few moments ago.

But Hillary Clinton and Barack Obama have other ideas.

Let's turn to CNN's Dan Lothian. He's in South Carolina right now.

It looks like this is going to be a pretty pierce and potentially critical battle among these Democrats.

DAN LOTHIAN, CNN BOSTON BUREAU CHIEF: That's right.

This is really a fierce battle. Senator Obama will be coming here to South Carolina tomorrow. Senator Clinton's campaign tells us that she will be in the state some time soon. And Senator John Edwards, well, he is already here, had an event this morning, will be having another event here in Columbia tonight.

All of these candidates realize the critical nature of this state in getting the Democratic presidential nomination.

(BEGIN VIDEOTAPE)

LOTHIAN (voice-over): The leading Democratic candidates locked in an intense battle to win over South Carolina voters -- at Hillary Clinton headquarters in Columbia, volunteers are working the phones and blasting neighborhoods with signs.

KELLY ADAMS, SOUTH CAROLINA CLINTON CAMPAIGN DIRECTOR: We are ready. New Hampshire, of course, gave us the springboard to take us right into January the 26th.

LOTHIAN: A few blocks away, they are burning up the phones, too, for Senator Barack Obama, working to get out their message of change to anyone who will listen.

RICK WADE, SENIOR OBAMA CAMPAIGN ADVISER: People are just fired up. I mean, they are ready to -- to make this state the next win.

LOTHIAN: And part of the winning equation is wooing African- Americans, who make up 50 percent of the state's Democratic primary voters.

TODD SHAW, UNIVERSITY OF SOUTH CAROLINA: If a Democratic candidate is going to make headway in the Deep South, and this being a bellwether Deep South state, you need the black vote to do that.

LOTHIAN: And who wins? Blacks here have been divided, loyalty to the Clintons, longtime allies of the black community, vs. Obama, a relatively unknown.

At this Columbia barbershop, Damon Hardy says he is supporting Obama, but, as he gave me a much-needed haircut, explained why some blacks are still waffling.

DAMON HARDY, BARBERSHOP OWNER: It's OK they want Obama to win, but they don't want their vote to be wasted on someone who they don't think is going to win. They don't really think Obama has a chance. So, they are voting Hillary Clinton because of her experience.

LOTHIAN (on camera): You think that is going to change, though, when people start seeing that white people are voting for him?

HARDY: Oh, yes. That's going to change a lot.

LOTHIAN (voice-over): In all this, the white Democratic vote, which makes up most of the other 50 percent, can't be ignored.

LEROY CHAPMAN, POLITICAL EDITOR, "THE STATE": You see something with younger white voters and older, more established, high-income white voters, favoring Obama. Clinton does well, of course, among women.

(END VIDEOTAPE)

LOTHIAN: Senator John Edwards has been reaching out to those working-class white families who have been hit hard by a difficult textile industry.

Today, at an event in Clemson, he told them: "I was born here. I know what's going on in your lives. I don't have to read about it in a book" -- Wolf.

BLITZER: Dan Lothian in Columbia, South Carolina, we will be hearing a lot from you. Thanks very much.

The New Hampshire comeback wins of Hillary Clinton and John McCain put even more uncertainty into the presidential race. It's wide open, still, very much right now. And could that open the door, potentially at least, to a third-party presidential bid? There has been lots of buzz, lots of speculation about the New York City mayor, Michael Bloomberg.

What is he up to? That speculation grew somewhat louder this week when Bloomberg took part in a bipartisan summit meeting in Oklahoma.

The former Defense Secretary and U.S. Senator William Cohen was there. The head of the international consulting firm The Cohen Group is joining us now from Washington.

All right, you were there. You were on the scene. About 1,000 people showed up. David Boren, the former U.S. senator, the president of the university there, he chaired this event.

What was the buzz all about as far as, potentially, Secretary Cohen, a third party emerging?

WILLIAM COHEN, CNN WORLD AFFAIRS ANALYST: Well, actually, there were 17 of us who were there. And there was no discussion about the creation of a third party or endorsing an independent candidate.

Mayor Bloomberg obviously drew some of that crowd, by virtue of what he has been able to do in New York. But the crowd was there on their feet because they were disenchanted with the system, the way it's working. They are seeing polarization in this country. They're seeing that we are not really performing the way we should. We are seeing our security falter, domestic security, international security, Social Security, Medicare, Medicaid, et cetera.

And they want people to come together to the center. To the extent that the two parties and the leaders of those two parties that we select are unable to reach across the party lines, so to speak, and build a consensus to deal with these problems, then I think you have the possibility of a Mayor Bloomberg or someone else stepping in and say, let me show you what needs to be done to solve our problems.

BLITZER: So, in other words, if you get a hard-line person from the left and a hard-line person from the right, that may open up the possibility for a third party emerging, maybe under Bloomberg, maybe under someone else, trying to rally moderate Democrats and moderate Republicans and independents; is that what I'm hearing?

COHEN: I think that's exactly what's taking place, that we are seeing the parties pull to the extremes. Extreme partisanship has caused paralysis.

We are getting nothing done, in terms of the real issues confronting this country. We are in danger, from our educational system, to our Social Security systems, to our energy or lack of energy policy. All of these issues are pushed -- pushed to the sideline in terms of the parties trying to dominate the other.

So, what we have is stagnation; what we have is paralysis; what we have is dysfunction. And, so, you have someone who may come forward and say, unless the two candidates are able to demonstrate, with some serious representations and detailed representations, how they are going to bridge the gap and get back to the center of American politics, then you have the door open for a possible independent candidacy.

BLITZER: Briefly, before I let you go, put on your hat as a former defense secretary.

That incident in the Persian Gulf, in the Strait of Hormuz, where these Iranian vessels were circling around some U.S. naval warships, it got pretty close, almost close, to actual shots being fired.

How worried should we be about an accidental war erupting between the U.S. and Iran?

COHEN: Well, Wolf, there were several scenes came to my mind's eye, number one, the time that that truck plowed through and blew up the Marine barracks in Beirut back in 1983, killing 241 of our Marines, injuring another 100, also, the attack on the USS Cole, which killed 17 sailors and injured many more.

I think it is very, very dangerous and provocative on the part of the Iranians to play around by threatening to go after our warships. We came very close to opening fire on them. And, of course, there could be untoward consequences, unforeseen consequences, once that starts.

So, I think they better take care not to threaten to go after our ships, because I think the captains of those ships, mindful of what happened to the USS Cole, where a supply boat, and a small boat, was able to blow a very big hole in one of our great warships, as such, we are not going to let that happen again, and certainly not with an aggressive act, when they are coming directly at our ships.

So, I think they have to be very careful, pull away. These are international waters. And I think, when the Iranians deny this took place, this is a question of, who you going to believe, me or your lying eyes? Those videos are pretty clear, what was taking place.

BLITZER: Secretary Cohen, thanks for coming in.

COHEN: Pleasure.

BLITZER: Pollsters got the Republican race in New Hampshire right, but the Democrats, that was another matter -- just ahead, why Hillary Clinton's upset proved the pollsters wrong.

And, weeks before John McCain won New Hampshire, his campaign posted his comeback plan. Our Abbi Tatton has the story.

That's coming up -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Polls, we talk a lot about polls. They got it pretty much right on the Republican side in New Hampshire, not necessarily on the Democratic side.

What went so wrong, Bill Schneider? You're taking a postmortem on the polls in New Hampshire.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: What went wrong? Good question and one that a lot of people are looking into right now.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): All the pre-primary polls predicted an Obama victory in New Hampshire. Why did they get it wrong?

The blogs are full of speculation.

ABBI TATTON, CNN INTERNET REPORTER: Some of the things out there are the -- how can you trust polling in the age of cell phones, when the pollsters aren't reaching all these people? Was it the weather?

SCHNEIDER: Another prominent theory: White voters lie to pollsters. They say they will vote for a black candidate, but, when they get into the polling booth, they don't.

In the Democratic race, eight polls taken after Iowa all showed Obama beating Clinton. Polls often do make mistakes, but it is rare that eight polls all make the same mistake. Compare the actual vote. The big discrepancy was in the Clinton vote. She got nine points more support than the polls predicted. Edwards' vote was close. Obama's vote was right on target, 37 percent in the polls, 37 percent in the primary, no apparent racial effect.

What seems to have happened is that late-deciding voters went heavily for Clinton. Why? Maybe a strong Clinton ground operation pulling working-class voters went to the polls. She did well among voters whose top concern was the economy and those who said they were falling behind financially.

Another theory had to do with Senator Clinton's show of emotion the day before the vote.

TATTON: One idea that I'm seeing out there today is the idea that women voters saw the media playing those clips of Hillary's tears again and again and again in the last few days, and they didn't like it. And the women voters voted, not just for Hillary, but against the media and what they were doing.

(END VIDEOTAPE)

SCHNEIDER: A lot of voters appear to have made up their minds for Hillary Clinton at the last minute, that one theory is women looked themselves in the mirror and asked whether they actually wanted to vote against the first woman with a real shot to win the presidency.

BLITZER: Bill Schneider, thanks very much for that. We are going to be studying those polls for a long time. It's that teary-eyed moment that might have helped Hillary Clinton win in New Hampshire. And now there is a revelation about the woman who helped prompt that show of emotion. Guess who she actually wound up voting for?

Also, New Hampshire voters told many in the news media, not so fast. Voters did opposite of what many of the talking heads were predicting. So, how did the top pundits get it so wrong?

And computers control much of the plane's operations, but could hackers actually break into its system and take over a plane? That's a very, very real fear right now.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: On our Political Ticker: John McCain's win in New Hampshire last night is giving his presidential campaign new life.

Let's go to our Internet reporter, Abbi Tatton. She's showing us what's next for McCain online -- Abbi.

TATTON: Wolf, it was a month ago that the McCain team put their whole plan, their whole prediction about how this would all go down on YouTube and on their Web site -- campaign manager Rick Davis predicting a Huckabee win in Iowa and then a McCain win in New Hampshire.

Well, they got that right. So, what's next? Well, according to this strategy update that they have got online, it's all about now building online fund-raising, building momentum to take them into the next states.

And you could see them at it last night right out of the gate at 9:00 p.m. Look at this e-mail, fund-raising e-mail, that went out to supporters: Make a donation and spread the word about McCain before you even go to bed tonight.

John McCain has some expertise in this area. In 2000, he used the Web to bring in money during the primary season. And, this -- this time, boy, do they need the cash to come in -- Rick Davis, the campaign manager, saying, with a laugh in that presentation, "Online resources have always been a big issue for our campaign" -- Wolf.

BLITZER: I can reaffirm that Rick Davis prediction. I saw him at a juvenile diabetes research dinner a couple months ago. And he was very firm, saying, things are going to break for McCain. He called it, at least so far.

Let's go to Jack Cafferty. He's got "The Cafferty File."

CAFFERTY: You mean there's somebody who got last night right?

BLITZER: John McCain's top strategist.

CAFFERTY: It's a very short list.

Here's the question this hour: Behind by double digits in several last-minute polls, why was Hillary Clinton able to come back and win the New Hampshire primary?

Ace writes: "This was a primary, not a caucus, so the votes were private. To put it bluntly, the women in New Hampshire were more comfortable voting for a woman than a black man. Silly me. I thought another white state, Iowa, choosing Obama was a sign of change. Perhaps New Hampshire, though, another predominantly white state, proves the same tired old ideas still apply."

Ivan in Chicago: "The biggest reason was the media. They kept showing that emotional display by Hillary, which the media figured would sink her campaign. But that's just what the voter wanted to know, that Hillary was not a robot, but was a person of feelings. So, as a Hillary supporter, I thank those of you in the news media."

Cathy writes: "Before Hillary showed her softer side, she didn't seem to be a person who could understand the problems most people outside politics face every day. I haven't decided who to vote for in my primary, but I am at least more open now to what Hillary has to say."

Beverly writes: "Somebody on her staff said, hey, we're going to lose this thing big. You better loosen up and show a little feeling. Make them think you're human and vulnerable. And she did. Never for one minute did I think it was genuine. I think this woman experienced her last real emotion when she was 6. But older women in New Hampshire went for it. And I can't explain the unions. Go figure."

Evan in Washington: "I think people are paying too much attention to her tears in the diner. It was her ground game and her entrenched team in New Hampshire that got the vote out on Hillary's behalf. The Clintons have always maintained an incredibly well organized team of supporters in that state. And it clearly paid off this time."

And David writes: "Forget the tears. It was probably because the people grew tired of the messianic hype surrounding Obama. In any case, thank God we didn't crown a champion with just two of 50 judges weighing in" -- Wolf.

BLITZER: Jack, thanks very much.

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