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Jobs Slashed in February: Most in Five Years; Dems Duel Before Wyoming Caucuses; Interview With Tom Daschle

Aired March 7, 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, for many people there's new reason to fear the worst for the U.S. economy. Tens of thousands of Americans lost their jobs in a single month. And that's forcing President Bush to be respond today.
The presidential candidates also discussing what many people fear, recession. The political ramifications right now enormous.

The Obama campaign sees another misstep, and the Clinton camp pouncing. It involves an ugly anti-Clinton comment regarding questions about Obama's Iraq promises and Clinton suggesting that Obama's camp says one thing in public but another thing in private.

And both parties are seeking more than a few good men and women to help their party's nominee.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

We're also standing by to hear from the candidates this hour as well, both Hillary Clinton and Barack Obama.

In the meantime, construction workers, salespeople, financial services workers and a lot of everyday Americans that we all know are seeing their jobs simply wiped out. There's huge economic news today that will likely affect all Americans. Employers slashed 63,000 jobs in February alone. It's the most seen in five years, and it's a figure that the president simply could not ignore. And the news, that's having a huge impact right now on the presidential race.

We have several reporters covering this story. Dana Bash is in Atlanta. Jessica Yellin is in Cheyenne, Wisconsin.

Let's begin our coverage over a the White House with our White House correspondent, Elaine.

Elaine, the president wasted no time in going to the microphones and responding on what clearly is some seriously bad economic news.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: That's right, Wolf. After those job numbers came out, President Bush very quickly added to his schedule a statement on the economy, trying essentially to calm fears that the country is in or headed toward a recession.

(BEGIN VIDEOTAPE)

QUIJANO (voice over): Anxious to put the best face on yet more bad economic news, President Bush acknowledged the strain on Americans...

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: And I know Americans are concerned about our economy.

QUIJANO: ... but predicted the situation will start looking up later this year.

BUSH: We expect investment will continue to grow and that businesses will begin creating new jobs in the months ahead.

QUIJANO: Yet for the near term, the president's top economic adviser sounded pessimistic. For the first time, raising the possibility that the economy could shrink.

ED LAZEAR, CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: We have definitely downgraded our forecast for this quarter.

QUIJANO: The somber economic picture stands in stark contrast to the mood four years ago. That's when President Bush took credit for an economy seemingly buoyed by high homeownership rates.

BUSH: Thanks to our policies, home ownership in America is at an all-time high.

I love the fact that more and more people are opening up their front door of their homes -- welcome to my piece of property, welcome to my home.

QUIJANO: But four years later, amid an outbreak of mortgage foreclosures, some analysts say there are few signs the economy is stabilizing.

TERRY SAVAGE, PERSONAL FINANCE ADVISER: Not only does no one go out and buy a new house and new washer and dryer, but people who weren't thinking of selling are going, whoops, I better not go out shopping for new clothes or a new car. And it's a vicious cycle downward.

(END VIDEOTAPE)

QUIJANO: But the president argues while times may be tough now, help is coming this spring in the form of tax rebate checks, part of that economic stimulus package. He also says that people will eventually start seeing positive effects of interest rate cuts by the Federal Reserve -- Wolf.

BLITZER: Those checking supposedly going to start going out in May.

All right. Thanks, Elaine, very much for that.

Democrats who want to succeed President Bush are also talking about the economy. Today they took their messages to Republican territory, and Vice President Dick Cheney's back yard. That would be in Wyoming, which is a reliably red state. But it's awash in blue today as Hillary Clinton, Barack Obama and a lot of their supporters are flooding the state. And that's because Wyoming's Democratic caucuses are tomorrow.

Jessica Yellin is in Cheyenne right now watching the story for us.

Let's talk about what the candidates are saying about this clearly deteriorating economic situation.

What are they saying, Jessica?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, you know both Democratic candidates have been hitting this scene hard for months, insisting, as Senator Clinton likes to say often, that Americans don't need Washington to tell them the country is in a recession. They can feel it in their pocketbook already.

So these new numbers reflect pure political opportunity for both candidates, and they're using the news to try to play to their strengths. Senator Clinton insisting she's the one ready to be the steward on day one, saying in a statement, today's numbers "... should put rest any doubts that our economy is in deep trouble. These are painful reminders that we need a president who is ready to be a steward of our economy starting on day one."

Well, of course she insists that would be her. But Barack Obama is seeing another opening, an opportunity to both tie John McCain to what he considers President Bush's failed economic policies, and then tie Senator Clinton to them as well, saying that the news proves that we "... can't afford John McCain's promise of four more years of the very same failed Bush economic policies, or another politician who promises solutions but won't change the divisive, lobbyist-driven politics in Washington."

Of course he always maintains that Senator Clinton is willing to work with lobbyists, but he would change all that. And therefore, he would do more to improve the economy.

This -- we will see this discussed for the next days and weeks on the campaign trail -- Wolf.

BLITZER: The economy is going to be a huge, huge subject, obviously.

There was a resignation in the Obama camp today. One of his top foreign policy advisers, Samantha Power. What happened?

YELLIN: Well, this is a person who was one of Senator Obama's foreign policy advisers until today. She was speaking to an international newspaper when she described Senator Clinton -- and she's quoted saying Clinton is a "monster."

Well, this is the kind of language that Barack Obama has personally denounced, saying that politicians should not be about personal destruction or this kind of negative attacks. So Samantha Power resigned today, and they accepted her resignation quickly. But no sooner did she resign than more news emerged that she provided the BBC with an interview in which she said, effectively, that although Barack Obama is promising to withdraw troops from Iraq immediately when he gets in office, that he really can't make that promise because he'll have to base that decision on news he gets once he's commander in chief, once he has classified access.

Well, the Clinton campaign, as you might guess, has seized on all this to say that Barack Obama says one thing for public, but his officials will be saying something privately, differently. The Obama campaign says, look, she was never an Iraq adviser, this is not our position, and you should not be judging us based on Samantha Power's words to the BBC.

Bottom line, she's resigned, but it's another topic for the biting -- back biting between the two campaigns -- Wolf.

BLITZER: All right, Jessica. Thanks very much.

Jessica's in Cheyenne, Wyoming.

Let's go to Casper, Wyoming, right now. Listen in to Barack Obama speaking out for the first time today. Want to hear what he's saying right now.

(JOINED IN PROGRESS)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: ... circumstances, we cannot afford to wait. We can't wait to fix our schools. We can't wait to fix our health care system. We cannot wait to bring good jobs and good wages back to the American people.

We cannot wait to end this war in Iraq. We cannot wait.

(APPLAUSE)

So when I decided to run, it was because I believed that the size of our challenges had outstripped the capacity of a broken politics to solve. And I also believed that the American people were hungry for something new. That they were tired of a politics that involved tearing each other down instead of lifting the country up.

(APPLAUSE)

That they were tired of spin and PR instead of straight talk and honesty about the challenges that we face as a country and how we're going to solve them. And most of all, most of all, I decided to run because I was betting on you, the American people.

I was betting on you because my experience, my start in public service, was as a community organizer. I went to work with churches on the south side of Chicago where steel plants had laid off thousands of workers. And so unemployment was devastating, communities were falling on hard times. And these churches wanted to come together and help set up a community organization to provide job training for the unemployed and after-school programs for youth. It was the best education I ever had, working for three years for this group before I went to law school, because it taught me ordinary people can do extraordinary things when they're given a chance. They really can.

(APPLAUSE)

And it taught me that, you know, change in America doesn't happen from the top down. It happen from the bottom up. It happens because people decide it's time for change.

And so I have believed throughout my career that if we could just bring the America people together -- back, white, Hispanic, Asian, Native-American, young, old, rich, poor, Democrats, Independents, and yes, some Republicans, if we could bring them together to challenge the special interests in Washington and to challenge ourselves to be better, to be better parents and better neighbors and better citizens, then there would be no challenge that we could not meet and no destiny we would not fulfill. That was my belief when I decided to run this race.

And I have to say that after a year of crisscrossing the country and speaking to hundreds of thousands of people and shaking tens of thousands of hands, and kissing hundreds of babies and, you know, getting a little bit of spit-up on my jackets once in a while, and eating hundreds of chicken dinners, I am here to report that my bet has paid off, because the American people are ready for change. They're standing up and saying we want to be heard. It is time to turn the page and write a new chapter in American history.

BLITZER: All right. On that note, we'll break away from Barack Obama's remarks.

We're also standing by. Hillary Clinton is going to be speaking this hour as well. We'll go there once she starts speaking.

We'll move on right now to some other political news.

Over the course of the past 60 years, only two Democrats have won Wyoming in a general election. Guess who? Harry Truman and Lyndon Johnson.

Democrats hope to change that this upcoming election. It won't be easy though in November.

In tomorrow's caucuses, by the way, 18 delegates are up for grabs. And looking ahead, Mississippi will hold its Democratic primary Tuesday with 40 delegates at stake. And on April 22nd, the delegate bonanza. That would be Pennsylvania, offering the chance of 187 delegates.

Let's go to Jack Cafferty. He's got "The Cafferty File." He's watching all of this -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, it's looking now like Barack Obama will almost certainly finish the primary season with more pledged delegates than Hillary Clinton, although it won't be enough to clinch the nomination.

In a "Newsweek" piece titled "Hillary's New Math Problem," Jonathan Alder writes how, despite Clinton's wins this week the delegate math is still working against her. He suggests Clinton needs to win by very large margins in all of the 12 remaining primaries, an average -- a victory in each one of about 23 points, which is more than the double the margin of her win in Ohio.

If Clinton is not leading in pledged delegates by June, a lead in the popular vote could help her to convince the superdelegates that she's the stronger candidate. But right now Clinton trails Obama there as well by about 600,000 votes.

It all boils down to a very messy scenario for the Democrats, where the nearly 800 superdelegates could be left to ultimately decide the nominee. Clinton still leads Obama when it comes to the votes of the party insiders, the superdelegates. The current guesstimate is about 238 to 199 for him. But keep in mind that if Obama maintains a pledged delegate lead, he will ultimately need fewer superdelegates to commit to him in order to become the nominee.

Alder at "Newsweek" also adds that several prominent uncommitted superdelegates have told him there is no way they will reverse the will of Democratic voters, that it would shatter young people and destroy the Democratic Party.

So here's the question: How confident are you that the winner of the most pledged delegates in the primary season will become the Democratic nominee?

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

BLITZER: Jack, thank you for that.

And as we just reported, one of Barack Obama's advisers has resigned for calling Hillary Clinton -- and I'm quoting now -- a "monster." Can Obama's campaign afford any more missteps like that? I'll talk to a prominent Obama supporter, the former Senate majority leader, Tom Daschle. He's here in THE SITUATION ROOM.

Also, now that the Air Force has given a multi-billion-dollar deal to a European concern, the House speaker is laying the blame partly on John McCain.

And how are the CEOs able to pocket millions and millions of dollars when their companies post negative gains? That's what the U.S. Congress wants to know. They held hearings today.

We'll tell you what happened right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Barack Obama says he's looking forward to tomorrow's caucuses in Wyoming and the upcoming huge battle in Pennsylvania, but surely his campaign is looking back at his losses on Tuesday, and how not to repeat them.

(BEGIN VIDEOTAPE)

And joining us now, the former Senate majority leader, Tom Daschle. He's a major supporter for Barack Obama.

Senator, thanks very much for coming in.

TOM DASCHLE (D), FMR. SENATE MAJORITY LEADER: Thanks, Wolf. Good to be here.

BLITZER: This was a pretty good week for Hillary Clinton. Not such a good week for Barack Obama, especially in Texas and Ohio. What happened?

DASCHLE: Well, actually, Texas turned out a lot better than we expected, Wolf. When you look at the delegates...

BLITZER: Well, in the primary, though, she lost by three points -- I mean he lost by three points.

DASCHLE: Well, but when you look at the overall delegate count, I think we're actually going to come out ahead in delegates. So, the bottom line is, we probably won more delegates in Texas than she did. And we'll take that.

Obviously, it's the delegate count that matters. And we feel very good about the delegate count there, and where we're going in Wyoming tomorrow and Mississippi next week.

BLITZER: The point though is that -- and James Carville makes this point, among others -- if she goes on and wins in Pennsylvania, and then there's a do-over in Michigan and Florida, major big states that the Democrats really need if they want to be in the White House, she's going to have a huge advantage going in terms of momentum and an effort to try to convince those superdelegates like you that they should jump on her bandwagon.

DASCHLE: Oh, Wolf, I don't think so. First of all, we've won 28 of the 43 contests so far. We're going to win Wyoming we think. And I think with the next 12 we'll take what we're going to get there.

Actually, she has to win 60 percent of every single contest over the next two months in order to be able to overtake us with regard to delegates.

BLITZER: In terms of the pledged delegates.

DASCHLE: The pledged delegates.

BLITZER: But the party rules say those nearly 800 superdelegates, in the end they're probably going to be the ones that make the final decision. And like you, they can decide whoever they think is going to be most qualified to beat John McCain in November.

DASCHLE: Well, that's true. But I would be amazed and actually appalled if they were to overturn the verdict of the elected delegates. The elected delegates are going to go to the convention as the elected representatives of 50 states and...

BLITZER: Here's the question -- should it be who gets the most delegates, elected delegates, or who gets the most votes in all of these various primaries? Because if she goes on and wins decisively, let's say, in Pennsylvania, and there are re-dos in Michigan and Florida, where there are a lot of Democrats, millions of them, who should be -- who would be in the better position to say to the superdelegates, more Democrats voted for me or I got more delegates? You understand the difference?

DASCHLE: I do understand the difference, but I think it will be a distinction without a difference, because in my view, Barack is going to win the popular vote. He's going to win the delegate vote.

He's ahead done that. He's ahead by 300,000 or 400,000 right now in the popular vote, and he's ahead in the delegate vote. I think that at the end of the day the elected delegates have to be the ultimate decider at the convention.

BLITZER: And you're on the record as saying that if Hillary Clinton...

DASCHLE: Absolutely.

BLITZER: ... has more elected delegates, you as a superdelegate will go ahead and switch from Obama to Hillary Clinton.

DASCHLE: I've indicated my strong support for Barack Obama, but if the elected delegates are not what I expect them to be, absolutely. I'm going to follow through the with the commitment I've made many times before.

BLITZER: A lot of focus today on Samantha Power, a former policy adviser to Barack Obama who, in an off-the-record comment, called Hillary Clinton a "monster." And then she apologized for that. But she was effectively thrown under the bus today. She resigned from this campaign.

Are you happy this way this unfolded? I assume you know Samantha Power, and you obviously know Barack Obama.

DASCHLE: Well, it's tragic. Obviously when emotions flair and the kinds of things that you would hope wouldn't happen and get the kind of press they do. You really don't have any choice. These things are going to happen.

BLITZER: Was this handled right? Should she have been...

DASCHLE: Absolutely. I think it was handled appropriately. I have great respect for Samantha, but there really is no other -- we can't tolerate that. That kind of thing is not going to be acceptable. And we did the right thing.

BLITZER: Do you want to see another set of primaries in Michigan and in Florida organized for June?

DASCHLE: I really -- I think the better way to do it is to allocate delegates based on who has got the kind of -- the actual ratio that exists at the time. I would even go for splitting them 50/50.

But to go through all of this, to spend $18 million, just to me is a waste of money. It drags this thing out. And ultimately there probably wouldn't be that much difference in the ultimate vote. So my guess is, Wolf, that the most prudent thing to do is to allocate delegates and be satisfied and move on.

BLITZER: Because the Clinton people say something very different. They're ready for another set of primaries. They're confident she can win in Michigan and Florida.

DASCHLE: Well, you know, we've gone from 20 points down to almost tied in state after state after state. I'm confident that we will either win or be virtually at an even rate with Hillary when these votes were taken. And I really don't see spending all of that money and spending all of that time when we could resolve it in a lot more prudent way.

BLITZER: We'll leave it there.

Tom Daschle, thanks for coming in.

DASCHLE: Thanks for having me.

(END VIDEOTAPE)

BLITZER: And later here in THE SITUATION ROOM, we'll be speaking with a major supporter of Hillary Clinton, the Pennsylvania governor, Ed Rendell. He'll be joining us live in THE SITUATION ROOM during our 6:00 p.m. Eastern hour.

It's one of the biggest deals for military equipment in U.S. history. And it's now causing plenty of controversy. Coming up, why the House speaker, Nancy Pelosi, is blaming a presidential candidate for some of the trouble.

And John McCain talking about the ailing economy. His solution, plus what made his temper flair a bit today out on the campaign trail.

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

(NEWSBREAK)

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, a key adviser to Barack Obama calls Senator Clinton a "monster" and she loses her job. But the Obama campaign has to do damage control over more than just one off-handed remark. Florida and Michigan taking a very serious look right now at a primary do-over. Can they pull it off with little money and even less time?

And it's one of the most elite law enforcement units of the federal government. CNN's Kelli Arena standing by. She's going to give us an exclusive look inside -- all this coming up in our next hour.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Employers slashed 63,000 jobs in February alone. That's the most seen in five years, and it's something that has ripple effects throughout the economy. The Republican presidential candidate John McCain is talking about the pain that the news like this is causing a lot of Americans and what he would try to do to resolve it.

Let's go to Dana Bash. She's in Atlanta. She's watching this story.

What did he have to say about this clearly deteriorating economic situation, Dana?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, there was a really telling moment at a town hall today, Wolf. He obviously is running on his national security credentials. But, when a voter asked Senator McCain what his biggest issue, most important issue is today, he responded, it's obvious, the economy.

(BEGIN VIDEOTAPE)

BASH (voice-over): An Atlanta town hall, John McCain insisted the term recession matters to economists, not people feeling the pinch, but concede that America is likely in one.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: The main factor out there is that Americans are hurting right now. And they don't care too much whether it's technically a recession or not. So, I would say that it's very likely. And more and more economists are saying that -- that we are probably -- quote -- "in a recession."

BASH: That bleak assessment is vivid proof the presumptive Republican nominee sees the political reality of a sour economy, a huge challenge for a candidate who admits his strongest suit is not economics.

MCCAIN: I have been involved in the economic issues affecting this country for the last 25 years. Am I more versed on national security issues? I would argue yes.

BASH: Reacting to a new report of widespread job loss, McCain called for worker retraining. The first thing he would do for economy as president? Make permanent the Bush tax cuts he originally voted against.

MCCAIN: So that the American businesses and families are sure that they will not experience the impact of what I think would be a very serious blow to our economy.

BASH: Meanwhile, another town hall question was a bit of a flashback.

UNIDENTIFIED MALE: John Kerry approached you in 2004 about being his running mate. Would you be open to returning the favor and considering him as your running mate?

(LAUGHTER)

MCCAIN: No.

(LAUGHTER)

MCCAIN: I'm a conservative Republican. So, when I was approached when -- we had that conversation back in 2004, I mean, that's why I never even considered such a thing.

BASH: Later, a "New York Times" reporter reminded McCain that, four years ago, he denied to the newspaper that Kerry approached him. That elicited a testy exchange.

MCCAIN: Everybody knows that, that I had a conversation. There's no living American in Washington that knows that. There's no one.

And you know it, too.

(CROSSTALK)

MCCAIN: No, you know it. You know it. So, I don't know -- even know why you asked.

(CROSSTALK)

MCCAIN: No, you do know it. You don't know.

(CROSSTALK)

MCCAIN: I don't know. But it's well known that I had the conversation. It was absolutely well known by everyone. So, do you have a question on another issue?

(END VIDEOTAPE)

BASH: Now, that exchange went on and on. And Senator McCain still refused to ask any questions about the topic.

Democrats jumped on this issue, immediately issuing a press release saying that Senator McCain is -- quote -- "Senator Hothead," saying it's the latest example of what they see as his temper.

And, Wolf, Steve Schmidt, who is Senator McCain's top adviser, he responded by the saying that this whole issue is complete and total nonsense -- nonsense -- insisting that Americans really care about things like the 63,000 job loss last month -- Wolf. BLITZER: Dana Bash, on the campaign trail in Atlanta, thank you.

The labor report today shows the biggest drop in U.S. payrolls in five years. And those numbers translated to some big trouble for a lot of American families.

Let's go to our senior correspondent, Allan Chernoff. He's watching the story for us.

What does this number tell us, Allan, because you have studied it closely over the many years?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Wolf, the economy is clearly losing jobs. And when that is happening, the debate about whether or not we're in a recession is pretty much irrelevant. The fact is, the economy is stumbling badly. When people have trouble finding work, that has serious political implications.

(BEGIN VIDEOTAPE)

MARK SCHLEISNER, UNEMPLOYED: I had met you at the job fair.

CHERNOFF (voice-over): Mark Schleisner, an experienced software developer, has been job-hunting aggressively.

SCHLEISNER: Oh, yes, I can do technical aspects as well.

CHERNOFF: He lost his last full-time position nearly a year ago as part of a corporate downsizing and thus far has been unable to land full-time work.

SCHLEISNER: I know I can deliver. It's just rough. It's just really -- it's just really difficult.

CHERNOFF: And then she spoke to someone here. And, ultimately, she got to the hiring manager.

CHERNOFF: Mark is getting professional advice from a top career counseling firm, the Five O'Clock Club. But he's finding companies are slow to hire.

SCHLEISNER: I have a lot of skills, but a lot of I.T. places, it seems, are holding the line on hiring.

CHERNOFF: The fact is, many companies no longer are hiring. They're laying off.

The economy lost 63,000 jobs last month, the worst monthly job loss in five years. The unemployment rate dipped slightly, to 4.8 percent. Analysts say, that's because many discouraged hunters simply dropped out of the job market.

With the economy sinking, voters say it's their number-one concern. That may play to the advantage of Senator Hillary Clinton. CNN's exit poll from last Tuesday's Ohio primary showed Senator Clinton with a clear advantage over Senator Obama among voters who said the economy is their most important issue.

DAVID EPSTEIN, PROFESSOR, COLUMBIA UNIVERSITY: If you look ahead to Pennsylvania -- Pennsylvania, Ohio very different similar states demographically and economically -- I think that gives the Clinton campaign a big boost looking ahead to the big April 22 contest in Pennsylvania.

CHERNOFF: If the employment picture turns even darker as the year progresses, it may play into the hands of Democrats. CNN's latest national poll shows voters believe Senators Clinton or Obama are better able to handle the economy than Senator McCain.

(END VIDEOTAPE)

CHERNOFF: It's ironic. The Iraq war has been a political liability for the Republicans. But now that the economy is really sinking and people like Mark Schleisner are having a tough time landing a job, the Republicans have to hope that the national discussion turns back to foreign policy. That's where Senator McCain does have an advantage. He's perceived as better able to handle the Iraq war and terrorism than either Obama or Clinton -- Wolf.

BLITZER: Thanks very much for that, Allan. We will get back to you.

Nancy Pelosi blaming John McCain. She says he's partly responsible for an American company losing a huge Air Force contract to a European country.

Also, regarding the fight over seating Florida and Michigan delegates at the Democratic Convention, what are the candidates' positions on that? That's coming up in our "Strategy Session."

And he couldn't earn the top spot, but would Mike Huckabee want the number-two spot on the Republican presidential ticket? You're going to hear what he has to say right now.

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

(COMMERCIAL BREAK)

BLITZER: A huge defense deal gone sour for Boeing is spilling over into the presidential race right now, the House speaker, Nancy Pelosi, directly blaming the Republican presidential candidate, Senator John McCain, for the contract being outsourced overseas.

Let's go to our Pentagon correspondent, Jamie McIntyre. He's watching this story for us.

All right, give us the background. What -- what has happened, and what are the charges that are being hurled left and right?

JAMIE MCINTYRE, CNN SENIOR PENTAGON CORRESPONDENT: Well, Wolf, as you North Korea, Senator McCain has been the nemesis of Boeing for years. The question is, did he have anything to do with the fact that Boeing lost out on this multi-billion-dollar deal to build the next generation of aerial refueling planes?

(BEGIN VIDEOTAPE)

MCINTYRE (voice-over): No sooner did this European-made jetliner win the $40 billion tanker competition than supporters of loser bidder Boeing began crying foul. But House Speaker Nancy Pelosi moved the debate into the arena of presidential politics when she appeared to blame presumptive Republican presidential nominee John McCain for the loss of American jobs.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: It was on course for Boeing before. I mean, the thought was that it would be a domestic supplier for it. Senator McCain intervened, and now we have a situation where this work may be outsourced.

MCINTYRE: Pelosi's comments imply McCain somehow steered the lucrative deal away from Boeing, a company he did go head to head with in 2003. Back then, McCain blew the whistle on an expensive Air Force plan to lease tankers from Boeing for $23 billion. As McCain was quick to point out on the campaign trail, that deal turned out to be rigged.

MCCAIN: I intervened in a process that was clearly corrupt. That's why people went to jail. That's why the Government Accountability Office said that I saved the taxpayers over $6 billion.

MCINTYRE: An Air Force procurement official was convicted of giving Boeing preference in return for a promise of future employment. The result was a new competition to purchase tankers that no one complained was unfair until after Boeing lost.

MCCAIN: I never weighed in for or anything anybody who was competing for that contract. All I asked for was a fair process. And the facts are, I never showed any bias in any way to anybody, except for the taxpayer.

(END VIDEOTAPE)

MCINTYRE: Now, we went back to Speaker Pelosi's office for a clarification. And an aide told CNN that the speaker was, in any way, not criticizing McCain for exposing that flawed lease deal back in 2003, but she was suggesting that McCain may have had something to do with the criteria being changed by the Air Force to favor a bigger plane, such as the one built by the Europeans.

Now, we have asked the McCain campaign to respond to that. We're waiting for that response. But, Wolf, I don't think I'm going out on a limb when I tell you they're probably going to deny that as well.

BLITZER: And John Murtha, the chairman of the Defense Appropriations Subcommittee, an ally of Nancy Pelosi, he has been making very similar charges against McCain on this issue as well in recent days.

Jamie, thanks very much for that report. Ron Paul announced in a new YouTube video that he's winding down his presidential campaign. But the long-shot Republican candidate promises, the revolution will continue.

Let's go to our Internet reporter, Abbi Tatton. She's watching the story for us.

Abbi, what is he asking his supporters to do now?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, Ron Paul is asking those -- those die-hard supporters of his in this YouTube video to still participate in the remaining contests. But he's acknowledging he may not be headed for the White House.

(BEGIN VIDEO CLIP)

REP. RON PAUL (R-TX), PRESIDENTIAL CANDIDATE: Though victory in the conventional political sense is not available in the presidential race, many victories have been achieved due to your hard work and enthusiasm. For that, I am deeply grateful and encouraged.

We must...

(END VIDEO CLIP)

TATTON: That YouTube video addressing this lot, those die-hard supporters of him, the ones that brought you the Ron Paul Blimp, that flooded the Web with their comments, with their YouTube videos, and organized multiple money bombs for this candidate that brought in millions of dollars and had the pundits scratching their heads.

Well, Ron Paul is saying that this presidential bid might be winding down, but he's telling them he still needs them for the next phase. He's touting a political action committee to fund like-minded candidates. He's also touting an upcoming book, "The Revolution: A Manifesto," which he assures his supporters will soon be available online -- Wolf.

BLITZER: Abbi, thanks for that.

Between Barack Obama and Hillary Clinton, every delegate certainly counts. But will the ones in Florida and Michigan count? Will they be seated in the Democratic Convention? We're going to talk about the candidates' positions in our "Strategy Session."

And Puerto Rico hopes to be a player in the presidential race. It wants to change its way of figuring into the contest. We will tell you how -- that and a lot more right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Florida and Michigan are taking a really hard and long look at the prospect of another Democratic primary. But who should decide, and can they make everyone happy? Can they make anyone happy?

Let's talk about that in our "Strategy Session" with our Democratic strategist Donna Brazile and Republican strategist John Feehery.

All right, Florida and Michigan, let's say they try to organize something in June, after the last scheduled contest, which is Puerto Rico. First of all, who would pay for another round of primaries or caucuses?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, you know, the Democratic National Committee offered to pay for another vote last year, prior to Florida's decision to go ahead, in violation of the rules.

I don't think the -- the Democratic National Committee is in a position now to pay for it. In 1996, Delaware violated the rules, and Bill Clinton was the -- of course, the president, as well as the Democratic candidate, and he got Delaware to come back in the fold. I'm hoping that -- that Florida and Michigan can come back in the fold. It's called...

(CROSSTALK)

BLITZER: So, they should pay this? The people in Florida and Michigan should pay for it themselves, if they want to have a redo?

BRAZILE: They -- they -- they violated the rules that they once backed. So, absolutely. If they want a revote, they need to pay for it.

BLITZER: Is that doable, you think?

JOHN FEEHERY, REPUBLICAN STRATEGIST: It's possible. I think both Florida and Michigan would want to have the focus on their separate economies. Michigan's car company is a disaster. With Florida, it's the real estate company. So, I think they would like to have that back and the attention back on them. At the end, it would be great.

Closer to the convention would be great for -- for our team, because, that way, a little bit of chaos. But I think it's complicated, because neither Clinton, nor Obama know how it's going to play out and who has the momentum.

BLITZER: Well, here's the other question that comes up. Do they do caucuses in Michigan and Florida, or do they do full-scale primaries? The Obama people like the caucuses. The Clinton people like the primaries.

BRAZILE: That's why somebody has to compromise. I know Governor Dean is sitting down with both Senator Levin and Senator Nelson, as well as the congressional delegation.

But they also should sit down with Senator Obama and Senator Clinton's campaign to come up with a compromise. Someone is going to get a little bit more than they expected. But the other person will not lose as much as -- as not having these two states involved.

BLITZER: What do you think about that argument, whether it should be primaries or caucuses?

FEEHERY: I defer to Donna.

I think that, like I said, it's complicated for both of these candidates, because whoever has the momentum will likely win. For Obama, you know, he really has nothing to lose, because he has not won either one. But he still -- if he loses either a caucus or a primary, that gives a big momentum to Hillary Clinton.

BRAZILE: Just to show you how difficult this is, Puerto Rico is now thinking about changing from a primary to a caucus. And they have to come back to the rules committee to get -- to get, of course, approval for that.

BLITZER: And they want to move up their date, too, to...

BRAZILE: They want to move up to June 1.

BLITZER: Move it up to June 1.

BRAZILE: Right.

BLITZER: As soon as I heard that, I thought, well, maybe they want to give Michigan and Florida some time to come in on June 3, which is a Tuesday, which might not be a bad date for Michigan and Florida.

BRAZILE: Which would also be in -- which will also occur inside the rules on timing. From February 5 until June 7, that's -- those are the dates that people must comply with.

BLITZER: And that's what -- that's what -- that was my initial suspicion that's why Puerto Rico wanted to move up.

Talk to me about this Samantha Power issue. I have known Samantha Power. She won a Pulitzer Prize. She's done outstanding work in trying to publicize what is happening in Darfur, in Sudan. She took a leave from Harvard for the past year to work for Barack Obama. She said in Scotland apparently some place the other day that Hillary Clinton was a monster, and she -- she said -- she apologized quickly. She said that was off the record. But, today, she resigned.

What has happened?

BRAZILE: Well -- well, first of all, I'm glad she apologized. And I hope she apologized to Senator Clinton personally.

But let me tell you, there's been a lot of what I call negativity going on over the last couple of months. This didn't start with Mrs. Power. She did the right thing. It's been going on for months, all of these insults going back and forth. And the level of discourse right now, I think, is -- is beneath the Democratic Party.

We all want to win in November. We would like to expand our progressive majority in the Congress. And if this -- this level of communication continues, we're in deep trouble. FEEHERY: This is great for the Clinton campaign, because it distracted -- the Obama campaign was making a great move towards talking about Hillary's ethics, the fact of what did she do in the White House? They won't disclose that. She likes to talk about her White House experience, but she doesn't like to say exactly what she did while she was in the White House.

So, this Samantha Power screw-up was really a screw-up and really good for the Clinton campaign, because they were able to change the -- we're talking about that, instead of the Clinton ethic problems.

BLITZER: And the other screw-up was one of his economic advisers reportedly telling the Canadian consul general in Chicago that what Obama says on NAFTA in public is not necessarily what he -- what he really believes privately.

BRAZILE: Well, Senator Obama has not had a good week in terms of getting his message out.

But I think, going forward, talking about the economy, talking about jobs and health care, Senator Obama, as well as Senator Clinton, should stay on the issues and get rid of these insulting comments.

FEEHERY: He's clearly got a glass jaw. And I think that's very good for Republicans, who were kind of worried about...

(CROSSTALK)

BRAZILE: He has got a tough stomach, so be -- you might -- hit him in the jaw, but try to hit him in the stomach. You will see somebody that could do a little...

(CROSSTALK)

(LAUGHTER)

FEEHERY: I don't deny that.

(CROSSTALK)

BLITZER: Republicans would be making a mistake to underestimate him.

(CROSSTALK)

FEEHERY: I understand that. But that 3:00 a.m. ad really was something that showed that he has got a glass jaw...

(CROSSTALK)

BRAZILE: No, I think he's trying to keep this level of conversation on the issues, and not go down this road of personal attack. The campaign is struggling right now to avoid this kind of campaign.

BLITZER: All right, guys, we will leave it there. Donna and John, thanks very much.

FEEHERY: Thank you, Wolf.

BLITZER: One place you never hear about impacting the race, that would be Puerto Rico. But it's Democratic Party wants to be a player. you're going to find out what it's trying to do with -- with its caucuses.

The Clinton campaign pulls out its big gun once again in Pennsylvania. The former President Bill Clinton, he's out on the stump in Philadelphia.

And the long road to the national convention. What if the Democrats go down to the wire? What if?

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

(COMMERCIAL BREAK)

BLITZER: In our Political Ticker today: The Democratic Party in Puerto Rico is taking steps to move its presidential nominating contest up by a few days.

The plan it submitted to the Democratic National Committee would change the date from June 7 to June 1. It would also switch the contests from caucuses to a primary. A DNC spokeswoman says the change will probably be approved, but official action won't happen for about a month, June 1 in San Juan.

And, remember, for the latest political news any time, check out CNNPolitics.com. That's where you can read my daily blog post as well. I just posted one a few minutes ago.

Jack has got "The Cafferty File." He's joining us once again -- Jack.

CAFFERTY: Is it my imagination, or is the Democratic Party starting to look a little stupid in all of this?

(LAUGHTER)

CAFFERTY: I mean, now -- I mean, they -- the Republicans have a candidate. These people don't even know when they're going to hold their things. Do they have to do them once or twice? Are they -- can they move this? What about the -- I mean, it's really starting to look like, you know, the gang that can't -- that couldn't shoot straight.

The question this hour is: How confident are you -- here we go again -- that the winner of the most pledged delegates in the primary season will become the Democratic nominee?

We get this from Chris in Florida: "I have no confidence the nomination will go to the candidate with the most pledged delegates. In fact, after watching this debacle, I have no confidence the Democrats even know how to run their own party. Guess how much confidence I have that a Democratic president and mostly Democratic Congress can effectively run this country?"

Charlotte writes: "Superdelegates may very well decide this race. Their job is to figure out what states were won by which candidate. Will these states most likely vote Democratic, or are they states that will go to Republican in November? Since Obama has failed to carry important states in the primary, they have no choice but to consider that in making their decision."

Janice writes from Tennessee: "I don't feel very confident. This is the first time a black man has had a snowball's chance of winning the highest office. I don't think many people are ready for that, including the superdelegates and the news media. Example: When Hillary Clinton cried media bias, the media tucked their tails and jumped on the Clinton wagon. The superdelegates will do the same if the situation arises."

Marie in California: "I am not confident at all. The truth is, while Obama's supporters are talking math, Clinton's are claiming momentum. The old Washington machine is going to support Clinton, whatever the numbers are. So, watch out. The Democratic Party may be heading for self-destruction, rather than an invigorated spurt of growth and a working majority in the Congress."

And Mary sums it up this way: "I am so confident that the candidate with the most pledged delegates will be the nominee that I am willing to bet money Hillary Clinton will switch parties mid- primary and join McCain's ticket as the vice president. The Democratic voters will be satisfied, and Hillary will not have to go stark raving mad from having to actually concede something" -- Wolf.

BLITZER: Jack, thank you.

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