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CNN LATE EDITION WITH WOLF BLITZER

Interview With Mowaffak Al-Rubaie; Interview With Senators Specter, Wyden

Aired March 23, 2008 - 11:00   ET

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


GLORIA BORGER, GUEST HOST: It's 11:00 a.m. in Washington, 8:00 a.m. in Los Angeles, and 6:00 p.m. in Baghdad. Wherever you're watching from around the world, thanks for joining us here for "Late Edition" on this Easter Sunday. I'm Gloria Borger, sitting in for Wolf Blitzer.
This week's bailout purchase of Wall Street's Bear Stearns by JP Morgan highlighted the growing anxiety about the U.S. economy. If a big company like Bear Stearns needs help, what about regular consumers? Joining us to talk about the economy, as well as other key issues, are Republican Senator Arlen Specter of Pennsylvania and Democratic Senator Ron Wyden of Oregon. Thanks to both of us for being here with me this morning.

Senator Specter, let me start with you. This past week, we saw the Federal Reserve stepping in and the taxpayers essentially footing the bill for this bailout of Bear Stearns.

I guess the question to you this morning is, should there be more significant oversight of Wall Street so we don't find ourselves in this situation again?

SPECTER: Gloria, that's entirely likely, once we sort it all out. Right now we don't understand all the ramifications as to what is going on on Wall Street. It's kind of disconcerting last week, when Bob Rubin, the former secretary of the treasury, who's at Citigroup, says that there are some things happening that he doesn't understand. Well, I think we've got to make a calm appraisal of the entire situation. Already, the battle lines are being drawn with front-page stories on the New York Times saying that some people think we need more regulation and others think it would retard the expansion of the economy. So I think we oughtn't to be hasty. We ought to take a close look at it, but not be afraid to do some regulating if it appears warranted.

BORGER: Do you think it's likely, Senator, though, that we're going to wind up with some more regulation of Wall Street here?

SPECTER: Well, I think it's too soon to tell. Right now, we're in the midst of the turmoil and the crisis. I think Chairman Bernanke did the right thing. We don't like bailouts, really opposed to them, but where it had the potential of having a domino effect over so much of Wall Street and it really turned out to be not much of a bail streak (ph) where you had Bear Stearns at $150 a year ago, $50 several weeks ago, and being bailed out at $2. BORGER: Senator Wyden, you're on the Finance Committee. What do you think is going to happen?

WYDEN: My sense, Gloria, is our regulatory system simply has not kept up with the times. You have got a lot of these exotic financial instruments, different rules for investment banks than you have, say, for commercial banks.

And what I'm concerned about -- because I reluctantly went along with the Bear Stearns deal -- is I just don't want a system that's rigged against the little guy. There's a real sense in our country right now that somehow the big guys get to privatize their gains and socialize their losses. We've got to go out at this very carefully. Certainly this idea of bailing out a handful of very powerful interests, and then for example not doing anything about credit card abuses, not doing anything to help, for example, with counseling for middle-class families trying to get out of these housing agreements where they were pretty much tricked -- that's not right.

BORGER: Senator Specter, do you agree with Senator Wyden, that this sends possibly the wrong signal to the average consumer? Well, you're going to help Bear Stearns, but what about me?

SPECTER: Well, I think there has to be some focus on these subprimes and all the foreclosures. Senator Durbin and I have different kinds of legislation which would authorize the bankruptcy courts to give some help to the individuals whose mortgages are being foreclosed. We're also taking a look at what happens with so-called interchange rates, where there is concern that some of the major credit cards are really charging exorbitant fees. So all of that is under consideration.

I hope that the Senate will take up, when we get back in 10 days, the issue of giving some relief to the individuals whose mortgages are subject to foreclosure. Senator Durbin and I put that legislation in last November. It really is a matter of urgency. That's the little guy who needs some attention, and I hope we do it soon.

BORGER: How about, Senator Wyden, a central new regulator to oversee all of this? Some would say that's more government bureaucracy you don't need; some would say you need someone who understands what's going on.

WYDEN: It's certainly something that's ought to be looked at. Even the Bush administration agrees that financial services today are very fragmented.

But I would also point out that a lot of the economic concerns that we face right now are directly related to the war. We're going through $1 trillion on the war in Iraq, $10 to $12 billion a month. Frankly, the American people would like, for example, to see us focused on infrastructure here at home, such as repairing our roads, and not just spending all this money in Iraq.

BORGER: Well, let's switch to the economy generally. And let's go to you, Senator Specter, because the economy, as we say here at CNN, is issue No. 1 with the American public. You're from the state of Pennsylvania. You are a Republican, but you've got a big Democratic primary coming up in that state on April 22nd. What do these Democratic candidates have to say to voters in your state on the economy?

SPECTER: They need to address the war in Iraq. That continues to be a major issue. They have to address the economic crisis to come up -- I think they'd really have to squarely concede that we are in a recession. I think that's a starter. I don't think that the candidates have been sufficiently candid. I don't think we can deal with the problem until we acknowledge what it is. Health care is a big issue.

BORGER: Senator, I think the Democrats are calling it a recession. I don't think a lot of Republicans are, but...

SPECTER: Well, I don't know that they are, Gloria, but perhaps so. In all of the tumult, perhaps I've missed that, but I think as a generalization, there's not been a sufficient recognition of the depth of the problem. Certainly on the proposals. I don't hear talk about what to do about these mortgage foreclosures. I haven't heard any reference to the Durbin bill or the Specter bill. I haven't seen -- there's been criticism, immediately when Bear Stearns went under, there is a lot of criticism, but I haven't heard any constructive suggestions as to what they would do. Let's hear something positive as well as something negative.

BORGER: Well, let's hear from Senator Wyden. You haven't endorsed a Democratic candidate, I should start by saying, but you clearly talk to these Democratic candidates, particularly since you're an unpledged superdelegate. I'm sure they both want your support.

What is the difference between these two candidates when it comes to the issues that Senator Specter was just talking about?

WYDEN: First of all, the Democrats all have constructive ideas on what to do about the economy. The fact of the matter is, the combination of $100 a barrel oil, skyrocketing credit card, subprime mortgage mess, that's just hit American families like a wrecking ball.

Now, for example, we'll try to bring up a housing bill in the Senate right after the recess, try to get some counseling for the families that really have been tricked into a lot of these deals, mortgage revenue bonds, trying to assist the home builders. These are specific, moderate, targeted proposals. Senator Dodd is trying to build bipartisan support.

BORGER: What about your presidential candidates?

WYDEN: As far as our presidential candidates, they've laid out proposals in both of these areas that we're talking about, the financial system and the housing system.

And the reality is, Gloria, that we're seeing record participation in these Democratic primaries for a reason. We're seeing huge interest at the grassroots level, voter participation, online fundraising. These are small fundraising efforts where people are giving up lunch money to participate in the Democratic primaries, and it's because the country wants to change the course.

BORGER: Senator Specter, we were talking about whether the candidates are calling this a recession, but according to a CNN poll, 74 percent of the American public believes that the country is already in a recession.

BORGER: And here's what Secretary Paulson said last week about that on "Late Edition" with Wolf Blitzer. Just listen.

(BEGIN VIDEO CLIP)

SECRETARY OF TREASURY HENRY M. PAULSON JR.: I'm not focused right now on what you call it. Economists will argue about this for months and months. We know the economy has slowed down. The American people know it has slowed down. So the important thing is, what do we do about it? And we have an economic stimulus plan.

(END VIDEO CLIP)

BORGER: Senator Specter, so the checks from this economic stimulus plan are going to be in the mail in May. Do you believe that that is going to be enough?

SPECTER: Absolutely not. I think it's going to require more. We -- Gloria, we put up 1 percent -- we put up $150 billion on an economic recovery program with a budget which -- with a gross national product and economy of $15 trillion. That's about 1 percent.

I think that it's a good bit more political than it is really what some hope. On the economy, I think more has to be done.

BORGER: What would you suggest, Senator?

SPECTER: Well, I would suggest that there be action by the Fed to stabilize the municipal bond market. That has caused a tremendous, tremendous upheaval. I convened a group of bankers to try to get a feel for it a few days ago. And the liquidity issue is very much in play.

I called up Fed Chairman Bernanke to find out if they had enough assets and enough capital in the Fed. They are limited by what the debt limit is. And only Congress can raise the debt limit. The chairman...

BORGER: And what did he tell you -- what did he tell you?

SPECTER: Well, he told me that they didn't need any legislation right now. It might not be a bad idea to bring Congress back. Wouldn't do us any harm to cut the recess short and come back to Washington and work on some of these problems. But he said that they had enough latitude on the debt limit, they moved on the subprime mortgages, but the municipal bond market makes the whole situation very shaky, and the liquidity issue, I think has to be addressed. BORGER: So, Senator, you think that this is urgent enough right now for Congress to cut short its spring break and come back and deal with these issues in the economy?

SPECTER: Well, I think that it could have a salutary effect. It would show that there is concern by the Congress that we're in this too. I come back to the subprime mortgages and the housing bills which Senator Durbin and I have. And there have been other proposals, as Senator Wyden has suggested.

I think they should have been acted on a long time ago. They have been in play since last November. I don't want to interrupt a lot of recess plans, but I don't think it would do any harm to go back to work on these issues, for Congress to do that.

BORGER: OK. Thank you so much to both of you.

Stay with us, because coming up, we've got more politics with Senator Specter and Wyden. When we come back, both have big primaries, as we were talking about, coming up in their home states.

(COMMERCIAL BREAK)

BORGER: And welcome back to LATE EDITION. I'm Gloria Borger, sitting in for Wolf Blitzer today. Coming up in our next hour, we'll hear from two top advisers to the Clinton and Obama campaigns, but first we're talking with Republican Senator Arlen Specter of Pennsylvania, and Democratic Senator Ron Wyden of Oregon.

Let me start with you, Senator Wyden, on the war. We're now heading into our sixth year of the war in Iraq. I want to play for you a little something that the president said about the war this week.

(BEGIN VIDEO CLIP)

PRESIDENT GEORGE W. BUSH: War critics can no longer credibly argue that we're losing in Iraq, so then they argue the war costs too much. In recent months we've heard exaggerated amounts of the costs of this war.

Those costs are necessary when we consider the cost of a strategic victory for our enemies in Iraq.

(END VIDEO CLIP)

BORGER: Senator Wyden, there is some talk today that military commanders at the Pentagon are saying that they want to put off troop withdrawals in Iraq. What's your feeling about that?

WYDEN: It's a very troubling development, Gloria, and of course it's contrary to what the Bush administration has already pledged. It seems to me that the surge with a very lengthy pause on troop withdrawals is pretty much a blank check to the Iraqis. We're already seeing that there has been foot-dragging on key governance questions in Iraq, particularly the passage of the oil law. Oil, of course, is 90 percent of the revenue in Iraq. It seems to me you put off those troop withdrawals, you send exactly the wrong message to the Iraqis. And again it's another argument for business as usual there.

BORGER: Well, Senator Specter, what do you feel about that? General Petraeus has also made it clear that he may want to pause these troop withdrawals.

SPECTER: Well, I'm very concerned about it, Gloria. They told us about the troop withdrawals when we had some critical votes before, sort of in reliance on that, I'll be looking very closely at what General Petraeus has to say when he testifies before Congress soon. I think we have to take a very close look at it. I'm at least encouraged by the statement that they will not be having 15-month extensions, but only 12-month.

But I think there has been a lot of reliance on troop withdrawals. Look, if we had known that Saddam did not have weapons of mass destruction, we never would have gone in. Once we are there, we don't want to leave it destabilized. But we do need an exit plan, an exit strategy. And the troop withdrawals were a very key part of that when we had some key votes several months ago.

BORGER: So do you think this will be interpreted as the administration going back on its word when it proposed the surge?

SPECTER: I do believe you can say they have gone back on their word, because there are contingencies they can't predict. I think the statements are made in good faith, but notwithstanding that, if a reduction in troops will not take place, that really requires a reassessment of our strategy.

WYDEN: If there's a very lengthy pause on troop withdrawals, I think this will really fire...

BORGER: What's lengthy? What's lengthy?

WYDEN: We'll have to see, but the point is, this is going to fire up the anti-war movement. What we have said is the point of the surge is to make progress in terms of political reconciliation. That's not getting done.

Now to hear that the planned troop withdrawals aren't going to go forward, it seems to me, sends a message that we're not serious about change there, victory. And I think the administration has a warped definition of victory here.

It's about Iraqis governing themselves without our troops -- our courageous troops holding it together, and that's not happening.

BORGER: Senator Wyden, let me just ask you, we were talking before about the fact that you haven't endorsed a candidate. Obviously you have got a primary coming up in your state. Will you endorse either Senator Obama or Senator Clinton?

BORGER: You're free to do it here today if you'd like. WYDEN: Gloria, I said many months ago that I was going to be neutral on this. Senator Bennett, he's the Republican senator of Utah. He and I have put together 14 senators for the first time in history working for universal coverage in the health-care area. I just think if I endorse somebody, people are going to say, that's Obamacare...

BORGER: Not before the primary?

WYDEN: Not before the primary and for a very specific reason: We are moving ahead with something that's never happened, and that's bipartisan support for universal health care.

BORGER: And before we go today, Senator Specter, very quickly, you know there's been a controversy over some independent contractors who have looked into the passports of the three top presidential contenders. Do you think this is something that the Justice Department ought to be looking into?

SPECTER: Absolutely. That kind of a breach of privacy is just despicable, I think. There are federal criminal statutes involved. I think that ought to be a very intense investigation. I think privacy is a very fundamental matter.

And if you can't have privacy for Senator McCain and Senator Clinton and Senator Obama, so what's the average person facing? No, I think that's very serious. It ought to be pursued very diligently, in a tough way.

BORGER: So you want the attorney general to look into this? Because he hasn't been inclined to do so.

SPECTER: Well, I think it's a very high-level problem. And I do think it ought to be something for Attorney General Mukasey, and I think that it may well be something for the Senate Judiciary Committee, where I'm the ranking member.

BORGER: OK, and very quickly.

WYDEN: I agree with Senator Specter. I will also say the Government Accountability Office has been warning about this problem for a decade. And it seems to me in this administration, there's been pretty much a culture of disregard for privacy, and that's part of the problem. BORGER: OK. And Senator Specter, I have to say you do have a new book out, and I'm sure it's going to be on the best sellers list.

SPECTER: It's "Never Give In." It's about my fight against cancer in the Senate. The book tells how I was given two mixed diagnoses on Lou Gehrig's disease and three to six weeks to live on a malignant brain tumor. This book tells about my battles in the Senate, where I found it easier to fight with senators than with cancer, and the distraction was very helpful. I think it could help people who are facing the problems with cancer.

BORGER: And Senator, how are you feeling? SPECTER: I feel good. I feel good. Gloria, once I got my hair back, like Sampson, got all my strength back. I'm at the top of my game. Thank you.

BORGER: Oh, well, thanks. We are really glad that you are. Thanks so much to both of you for being with me this morning.

And when we come back, it's Easter Sunday. we'll head to the "Late Edition" update desk for celebrations around the world. "Late Edition" will be right back.

(COMMERCIAL BREAK)

BORGER: You're watching "Late Edition." I'm Gloria Borger reporting from Washington. On this Easter Sunday, we're following observances around the world. Fredricka Whitfield is at the "Late Edition" update desk with details. Fred?

FREDRICKA WHITFIELD, CNN: Good morning, Gloria, and happy Easter.

Thousands braved a downpour to attend Easter Mass at the Vatican. A white canopy over the steps of St. Peter's basilica protected Pope Benedict XVI as he led worshipers. He denounced violence in Africa, the Middle East and Tibet, calling for solutions that will safeguard peace and the common good.

And this at Arlington National Cemetery in the predawn hours. An estimated 5,000 people attended sunrise service at the amphitheater. Services held at Arlington honor this country's service members.

And many members of the U.S. military are spending Easter overseas. This the service in Kabul, Afghanistan. The chaplain says the service will remind troops that God is with them even when they are in harm's way. Last year was the most violent year in Afghanistan since the 2001 invasion.

Vice President Dick Cheney is spending Easter in the Holy Land. He attended a service at a tiny chapel in Jerusalem. Later he met with Palestinian Authority President Mahmoud Abbas. Cheney told reporters any Middle East peace agreement will require painful concessions by both Israelis and Palestinians. And people gathered before dawn to attend sunrise Easter service at Stone Mountain, just outside Atlanta, Georgia. Every Easter, Stone Mountain hosts two nondenominational services, one at the bottom of the mountain and one at the top.

And that's the latest from the update desk. Now back to Gloria.

BORGER: Thanks, Fredricka.

And up next, a debate on the number one issue for U.S. voters. That's the economy. Is the government doing enough to turn things around? We'll get two very different views when "Late Edition" returns. Stay with us.

(COMMERCIAL BREAK)

BORGER: Wall Street rallied this week after the Federal Reserve cut a key interest rate, but the mood did very little to erase fears that the U.S. economy is already in a recession. Joining us from San Francisco is Laura Tyson. She was a chief economic adviser in the Clinton administration, and she's now an adviser to Hillary Clinton's campaign. And here in Washington, Grover Norquist, president of Americans for Tax Reform. He's also the author of a new book, "Leave Us Alone: Getting the Government's Hands Off Our Money, Our Guns and Our Lives."

Thanks to both of you for being here with me this morning. First to you, Grover Norquist. I want to get your reaction to the talk we've been having this morning with the two senators, as well as in the newspapers about now having the need to regulate Wall Street in the wake of what's gone on this past week, particularly with Bear Stearns.

NORQUIST: Government creates problems, and then it wants more power to solve the problems it created. We're still in the process of undoing the damage from the 1930s, when they regulated the banks and set up the S and L's for a fall, which we then went through, and they said you can't have banks and investment companies and insurance companies and real estate companies doing different things to limit competition.

And what did they do? They made every one of those more risky. We still haven't undone the damage the government did in the first place. Besides, the Democrats spent the last 20 years demanding that banks make unsafe loans because they thought that certain constituencies weren't getting loans, so the banks, Mau-Maued into doing that, made loans that then went sour. So now it's their fault.

BORGER: So do nothing?

NORQUIST: No. Continue the deregulatory regime, which Clinton used to be for, which the Democrats used to be for. Now there's a new group of Clintons that aren't for deregulation, that aren't for free trade anymore.

BORGER: Well, let's hear from Laura Tyson on this. What do you say?

TYSON: Well, what I say is, we've seen a situation where the Federal Reserve has been forced to protect the global and national credit system from collapse, to come in and basically give a line of credit, both to broker dealers and to a particular institution, Bear Stearns, through JPMorgan Chase.

Now, these are not regulated institutions. And it seems to me we -- it is absolutely going to have to be the case that if the Federal Reserve is being called in to provide credit for these kinds of institutions, it is going to have to provide supervisory oversight. The other thing we've learned here is the great need for transparency.

You know, there's a lot of evidence that's been reported that Bear Stearns's stock was driven down by huge hedge-fund plays. Now, just having transparency about the strategies of hedge funds and where the assets are and what the strategy is would help a lot. We have an absolute lack of information in our credit markets right now, and credit markets depend upon good information to function.

And finally, I would say we need an issue of reserves. What we've seen here is that we've seen the explosion of securities with inadequate reserves held against them. So we have to look at reserve requirements, and we have to look at margin requirements for the kinds of very sophisticated new assets that we have in credit markets.

BORGER: Well, but let me play for you both something that Barack Obama said about the bailout this week, and get you to react to it.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, D-ILL.: I think that Secretary Paulson is, along with Ben Bernanke, are taking some creative steps to deal with the issue, and I'm encouraged that they're trying to act swiftly.

(END VIDEO CLIP)

BORGER: Grover Norquist?

NORQUIST: Well, that's very kind, but Barack Obama is somebody who wants to take the top marginal rate for American small businesses to 55 percent, when you look at his economic program. He calls for stopping the move towards free trade and undoing the one success of the Clinton administration, which was NAFTA. And he's against deregulation in other zones of the economy, and he gives the trial lawyers everything they want.

Of course the economy is scared of both Barack Obama and frankly Hillary Clinton. And if one of those is going to be president in 2009, the stock market and the economy are wise to start slowing down in anticipation.

BORGER: Well, Laura Tyson, you've endorsed Senator Clinton. And how would she fix the economy differently from Barack Obama?

TYSON: Well, I think it's important to note, you know, I heard the first part of your discussion this morning. And the senators failed to mention the fact that basically, Senator Clinton has been talking about the mortgage crisis for at least a year. She was the one who came out first talking about the need to supervise and look over, who are these mortgage brokers, and exactly what are their incentives, and exactly what information are they required to give customers?

We know there was a huge amount of predatory and unfair lending. Fast-forward to now, she has just come out with a proposal for a second stimulus package. The second stimulus package would actually devote about $40 billion directly to the cause, the root of the recession. It's not tax rates, it is -- or it's not NAFTA. Those are issues that are not about the current situation.

NORQUIST: Wait a minute. She's the one who switched on that.

BORGER: OK, wait. Go ahead, Laura.

TYSON: The current problem...

NORQUIST: Laura, Laura.

TYSON: The current problem is not those problems. The current problem...

NORQUIST: She says it is. She's running against her own free trade position.

TYSON: Excuse me, please, would you let me finish.

NORQUIST: You're the one who's interrupting, ma'am.

BORGER: Laura, Laura, you finish, and then Grover, you go.

TYSON: All right, fine. I am talking about the $40 billion stimulus package, second stimulus package which Senator Clinton has proposed, $30 billion to the states to help them in the restructuring of mortgages, $10 billion in additional mortgage revenue bonds. And she also has embraced the Dodd and Frank legislation, which really calls for an FHA guarantee to help move distressed mortgages from the private sector.

BORGER: OK. Laura, I'm going to let Grover respond.

NORQUIST: As long as she filibustered? Look, the large problems we have in this economy are that 2011, the 2001 and 2003 tax cuts disappear. That's over the next 10 years a $2 trillion tax increase that both Obama and Clinton support, that massive tax increase. They've each added additional tax increases that they want to put on top of that.

Take a look at -- make a list of the ideas that Hillary Clinton and Barack Obama have. Every one of them will make your 401(k) smaller. And the problem that the Clintons have and that Barack Obama has is that we're no longer running in the economy of 50 years ago, where 10 or 20 percent of Americans own shares of stock. Now it's about 60 percent of adults.

And they've a list that will make the 401(k)s and savings less. BORGER: OK. Well, let's talk about taxes for a moment. Laura Tyson, let me play for you something that Senator McCain said on this topic last week.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, R-ARIZ.: Right now, we've got to take some steps which are very, very necessary. And the first thing we want to do is not raise your taxes, so the tax cuts have to be permanent. We can't raise your taxes in a time of economic difficulty in America.

(END VIDEO CLIP) BORGER: Laura Tyson, what's your response to Senator McCain?

TYSON: My response to Senator McCain and to Grover Norquist, frankly, is that if you listen to all of the central bankers in the world, if you listen to most economists in the world right now, if you listen to most financial market experts, the focus is on saving the credit system. The focus is on keeping the U.S. from a long recession because we have an unmitigated housing crisis.

We can talk about tax rates, but I don't understand why we're not talking about the need, as I would agree with, I think, Senator Specter, bring the Congress back. We have a financial emergency on our hands.

We have to find a way to take a very large number of distressed assets, which might lead to a $2 trillion credit contraction in the U.S. economy, and deal with them through the FHA, through the stimulus package that Senator Clinton has proposed.

BORGER: OK.

TYSON: We have to deal with housing right now.

BORGER: OK, Laura Tyson. And let me throw this to you, Grover Norquist. As a Republican, when the economy is in bad shape, and I think we can all agree that that's what the American public believes right now, voters generally blame the people who are running things at the White House. How does a Republican presidential candidate make the case that he can do a better job of managing the economy than his Republican predecessor?

NORQUIST: We've been through this in 2002. When the economy was extremely poor, the Democrats wanted tax increases, more trial lawyers, more labor unions, bailouts to state governments, not to the American people. They want to get the money first to the states before people see anything.

And the American people said no. They went with the people who wanted to reduce the capital gains tax, reduce taxes on dividends, reduce individual taxes. So the challenges the Ds have, the Democrats have a series of things they do. They give the trial lawyers billions of dollars' ability to sue people.

BORGER: But let's talk about the economy here.

NORQUIST: Trial lawyer depredation, it's very important both to Hillary Clinton and Barack Obama to fund-raise, but also to the damage that's done to the American economy. And they've come close to killing the auto industry with a lot of their lawsuits and taxes that they've put on them.

BORGER: OK. I'm going to have to let Grover have the last word here, but Laura Tyson will certainly be coming back to you and to Grover Norquist as we head into this election. Thanks to both of you very much for being here today. BORGER: And just ahead, no primary do-over for Michigan's Democratic voters. Does the blame fall on one of the candidates? You'll want to hear what Clinton supporter James Carville and Obama supporter Tom Daschle have to say, that's when LATE EDITION returns.

(COMMERCIAL BREAK)

BORGER: You're watching LATE EDITION, I'm Gloria Borger, reporting from Washington. Hopes for a Democratic primary do-over in Michigan died this week. The failure to clear up the delegate mess left the Clinton and Obama campaigns pointing fingers at each other. Clinton supporter James Carville and Obama supporter and former Senator Majority Leader Tom Daschle spoke with Wolf Blitzer in THE SITUATION ROOM.

(BEGIN VIDEOTAPE)

WOLF BLITZER, CNN ANCHOR: On what basis do you blame Barack Obama for the failure of the Democrats in Michigan and the state legislature to come up with a strategy?

JAMES CARVILLE, CLINTON SUPPORTER: But there is Senator Obama's people in Lansing doing everything they could to not have this vote.

BLITZER: Is that true?

TOM DASCHLE, OBAMA SUPPORTER: No. That's not true. I love James, but, listen, you know, Hillary Clinton has had about five different positions on this whole thing. I'm not sure what her latest one is. But the bottom line is, she said this was a meaningless primary...

BLITZER: Here's the question. Were you secretly trying to derail a redo?

DASCHLE: No, not all. Absolutely not. There was absolutely no...

CARVILLE: Everybody in Michigan knows...

DASCHLE: ... evidence of that. We want to have a good vote, if it's possible.

CARVILLE: We'll put up the money for it.

DASCHLE: Well, that's the point. CARVILLE: We put up the money...

BLITZER: Is that a problem? If Clinton supporters...

DASCHLE: Of course it's a problem.

BLITZER: Why is that a problem?

DASCHLE: If you want to have a Clinton-financed primary, how does that solve the problem? CARVILLE: You put up half, and we put up half.

DASCHLE: Well...

CARVILLE: (INAUDIBLE) offered that today (INAUDIBLE), we could have...

DASCHLE: If you could have a primary, clearly that would work. But you can't have a primary if you can't resolve these practical issues.

CARVILLE: What are the practical issues? Let people vote.

DASCHLE: Well, you said you weren't going to let the people vote who voted last time? There was a lot of disenfranchised people, Wolf, that couldn't...

(CROSSTALK)

BLITZER: All right. What about that argument that Senator Daschle makes that there would be enfranchised voters?

CARVILLE: Again, you have a primary, you let people vote. Anybody watching this show...

BLITZER: Just Democrats or Republicans who voted the last time? Independents, could they vote too?

CARVILLE: Whatever. Different states have different rules. Have a Democratic primary. Let Democrats vote. Anybody that's watching this show can see that I and Senator Clinton want to have a primary and let people in Michigan decide. Anybody can see as good a man as Senator Daschle is and as fine a man as Senator Obama is, they don't want to have it because they would lose it. And that's the wrong signal sent out.

This is, he doesn't want to have this for the simple fact he would lose. Just like he would lose in Florida. Now if the Democratic nominee is afraid to face a primary of Democratic voters, can you imagine what the general election would be like? I think Senator Obama ought to show strength and say, you know what, I want to run this thing, put up half the money...

(CROSSTALK)

BLITZER: Those are strong words. Go ahead, Senator Daschle.

DASCHLE: James, they are strong words. And they're totally wrong. They're totally wrong. He doesn't know whether we would win or lose. We've won more states than Hillary across the country. All over the country, Wolf. We could probably win that one as well.

(END VIDEOTAPE)

BORGER: That argument is certainly going to be continued. And next on LATE EDITION, the view from Iraq, as the war enters year six. We'll hear from Iraqi National Security Adviser Mowaffak al-Rubaie. LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BORGER: The Iraq War entered year six this week with President Bush vigorously defending the 2003 invasion. Both Democratic presidential candidates promising to end the war, and the Republican presidential nominee talking up the success of the so-called surge.

But the U.S. presidential election is putting renewed pressure on Iraqi leaders to meet key political goals. A short while ago I spoke with Iraqi National Security Adviser Mowaffak al-Rubaie.

(BEGIN VIDEOTAPE)

BORGER: Dr. al-Rubaie, thanks so much for being with us this morning. As you know, this week marked the fifth anniversary of the war in Iraq. And it's a war that a majority of Americans oppose.

And according to our recent CNN poll, 61 percent of Americans believe that the next president should remove most troops within a few months, and 33 percent say we should keep the same number of troops there.

Now you are Iraq's national security adviser, what would you say to Americans and to the Democratic presidential candidates who want to move those troops out very quickly?

AL-RUBAIE: I believe it has to be based on the conditions on the ground. It depends on the development and the growth and the equipment and the capabilities of the Iraqi security forces, and the preparedness of the Iraqi security forces.

It also has to do depend on the security condition on the ground. What does Al Qaida plan in Iraq? And are they going to continue taking on the coalition and the government of Iraq or not? Are they trying to drive the coalition and destroy the nascent democracy in Iraq or what?

These are -- things have to be studied on the ground. And I think this should not be a purely political decision. It should be also a technical, military and intelligence decision.

BORGER: Well, as you know, next month General Petraeus is going to come to Washington and testify about what he will recommend. And the word is that he is going to call for a pause in this drawdown. Is that something you support?

AL-RUBAIE: I think General Petraeus and Ambassador Crocker are going to have a much easier time this time around in Congress, because we have gained a lot of security achievements in the last few months. And with the -- with a lot of political progress as well, we have achieved.

BORGER: Is that a yes for the pause in the drawdown?

AL-RUBAIE: Well, the pause is a technical term, I believe, that is being used. We believe that the drawdown has started. But it has to be linked intimately to the conditions on the ground.

If the conditions on the ground dictate that we have to have a pause, then we will have to have a pause.

BORGER: If the Democrats and Republicans agree on anything in this presidential race, it is that the Iraqis need to start taking some more responsibility for their own future. I want to play with you -- play for you a few statements from all of the top presidential contenders and get your response.

(BEGIN VIDEO CLIP)

OBAMA: Fighting a war without end will not force the Iraqis to take responsibility for their own future.

CLINTON: I believe the best way to get the Iraqis to move to take responsibility is for us to end their blank check.

MCCAIN: All of us are frustrated with some of the progress they haven't made, particularly provincial elections. That needs to happen.

(END VIDEO CLIP)

BORGER: What is your response?

AL-RUBAIE: I certainly agree. And there is no doubt about it. We are assuming more responsibilities in the provinces. Eight out of the -- well, more than half of the provinces in Iraq are under our control. There are so many legislation. We are passing legislation by -- like packages. And three legislation we are passing in one go. Another legislation is going to be passed. We are assuming more responsibilities.

Most of the military and security operations done on the ground is done by the -- is led by the government -- by the Iraqi security forces, and supported by logistical support by the coalition.

We are taking by the day -- literally by the day and by the week, we are gradually assuming more responsibility. And by the way, we are spending a lot of money on projects in economy and building our Iraqi security forces and doing all sorts of things.

BORGER: What do you say to Americans, though, who are clearly running out of patience with the war in Iraq? How much more time do you think Americans should be willing to give Iraqis?

AL-RUBAIE: Let me tell you something, Gloria. Honestly, this war is well worth fighting. This war, we are talking about war against global terror. This is global terrorism hitting everywhere, and they have chosen Iraq to be a battlefield. And we have to take them on. If we don't prevail, if we don't succeed in this war, then we are doomed forever. And I understand and I sympathize with the treasure, with the money, with the blood you have invested.

But -- and the United States has invested, and the Iraqis have invested three times blood than the Americans in the way of casualties, in the way of spending their treasure and money. So we are not talking about leaving Americans fighting this war on their own. We are with them and we are taking the lead.

But I understand and sympathize with the mothers, with the widows, with the children who have lost their beloved one in this country. But honestly, it is well worth fighting and well worth investing the money and the treasure and the sweat and the tears in Iraq.

BORGER: Well, I want to play for you something that Senator John McCain said in New Hampshire this past January about U.S. presence in Iraq, and then get you to respond to it.

(BEGIN VIDEO CLIP)

MCCAIN: Maybe 100. We have been in Japan for 60 years. We have been in South Korea for 50 years or so. That would be fine with me as long as Americans...

UNIDENTIFIED MALE: So that is your...

MCCAIN: As long as Americans are not being injured or harmed or wounded or killed. Then it's fine with me.

(END VIDEO CLIP)

BORGER: So would that be fine with you too, 50, 60 years?

AL-RUBAIE: It depends on the conditions, again. And it depends on the negotiations that we are engaged now between the government of Iraq and the United States government. It depends on the -- we will look on the -- in the battlefront, in the field.

What we need we will keep and we will -- for those -- for the Americans troops we don't need, we say, thank you very much, indeed. A big, big thank you for the United States of America for liberating Iraq, for helping us in sustaining the security gains in Iraq, and thank you very much, and we will give them a very, very good farewell party then.

BORGER: OK. Well, it sounds...

AL-RUBAIE: But it depends on the conditions on the ground. When we -- it is yet to be -- we are -- we cannot declare total victory on Al Qaida now, because Al Qaida is really fatally injured now.

BORGER: So do you think the Democratic...

AL-RUBAIE: And they have sustained a lot of pressure and injuries.

BORGER: So do you think the Democratic presidential candidates...

AL-RUBAIE: But as yet...

BORGER: ... are short-sighted?

AL-RUBAIE: ... we are far from declaring total victory.

BORGER: Do you think the Democratic presidential candidates are short-sighted?

AL-RUBAIE: I don't want to get involved in the election in a foreign country. I don't want to get involved in -- between the Republican and the Democrat at all.

BORGER: OK. Thank you very much, Dr. al-Rubaie. I take it you have no candidate in this race?

(LAUGHTER)

AL-RUBAIE: Thank you very much, indeed, Gloria, for having me.

BORGER: Thank you.

(END VIDEOTAPE)

BORGER: And there is much more ahead on "Late Edition," including top Clinton adviser Senator Evan Bayh, and top Obama adviser Governor Janet Napolitano, and the increasingly bitter battle for the Democratic nomination. "Late Edition" continues at the top of the hour.

(COMMERCIAL BREAK)

BORGER: This is "Late Edition," the last word in Sunday talk.

Obama gets a boost.

(BEGIN VIDEO CLIP)

GOV. BILL RICHARDSON, D-N.M.: I am very proud today to endorse your candidacy for president.

(END VIDEO CLIP)

Clinton fights on.

(BEGIN VIDEO CLIP)

CLINTON: We have to elect a president who, starting on January 20th, 2009, will bring our nation together.

(END VIDEO CLIP) BORGER: The Democratic presidential race is neck and neck. We'll talk with Clinton supporter Senator Evan Bayh and Obama supporter Governor Janet Napolitano.

(BEGIN VIDEO CLIP)

MCCAIN: Hopefully we'll have a peace process that will bring all of this to an end.

(END VIDEO CLIP)

BORGER: John McCain moves to the international stage, while hopes of Democratic do-overs in Michigan and Florida die. Insight and analysis on a wild week in the race for the White House from three of the best political team on television. "Late Edition's" second hour begins right now.

And welcome back. I'm Gloria Borger. Wolf Blitzer is off today.

Senator Hillary Clinton is looking to the next big contest, that's in Pennsylvania, to make her case that she should be the Democratic Party's nominee. One of her top supporters is Indiana Senator Evan Bayh, who's here with us this morning. Thanks so much for being with me today, Senator. You were out on the campaign trail in Indiana with Senator Clinton this week. She's got a very important primary coming up in your state on May 6th. Is she going to win?

BAYH: I think she will, Gloria. It's going to be a tough contest. You know, Barack is from next door. Twenty percent of the people in Indiana watch Chicago TV, so he's a familiar figure, and he'll probably outspend her four or five to one.

But I think ultimately her focus on middle-class economic issues, those kitchen-table issues, the cost of health care, job security, pension security, those kinds of things combined with her strength and experience I think will resonate very well with working-class blue- collar voters in our state.

BORGER: Now, this week was a tough week in many ways for Senator Clinton, not the least of which was because Senator Obama received the endorsement of New Mexico Governor Bill Richardson. After he endorsed Senator Obama, he said this. I want you to listen to it.

(BEGIN VIDEO CLIP)

RICHARDSON: I'm not going to advise any other candidate when to get in and out of the race. I think that senator Clinton has a -- she has a right to stay in the race. But I think eventually, we don't want to go into the Democratic convention bloodied.

(END VIDEO CLIP)

BORGER: What do you say about that not-so-subtle hint that maybe she ought to get out of the race? BAYH: Well, I'd say a couple things about that, Gloria. First, the people of New Mexico endorsed Hillary Clinton. So I guess we'd rather have their support than Bill's support, even though he's a good guy. Secondly, I think it's -- I don't know if presumptuous is the right word, but for him basically to tell the 6.5 million people of my state that we shouldn't count, that we shouldn't have a say, that these two candidates should just pack it in and go home, I don't think that's right, and we've got a lot more people than New Mexico does.

Let's take this process through its conclusion. When do you call democracy off? So, let's go to Pennsylvania, let's go to Indiana and North Carolina, let's go all the way, and then we'll be able to total it up. I don't think we'll know until we get there who's going to win this thing. And until then, calling on people to drop out, I think is just not appropriate.

BORGER: Do you think the endorsement, Richardson's endorsement, will make a big difference?

BAYH: You know, I don't. I think a fair amount of humility is in order for all of us political people. And these endorsements, they're nice to have, no doubt about it. But I think this is an important election, Gloria, and people will be looking at who is best prepared to lead this country forward to deliver the results that they're looking for in their daily lives.

This is a serious substantive election. So, I think they're going to -- I think these endorsements mostly are just part of the background noise.

BORGER: Well, here's what Governor Richardson said about the importance of his endorsement. Let's listen.

(BEGIN VIDEO CLIP)

RICHARDSON: Let's say it was a difficult conversation. But you know, I resent the fact that the Clinton people are now saying that my endorsement is too late because I only can help with Texans -- with Texas and Hispanics, implying that that's my only value. You know, that's typical of some of his advisers that kind of turned me off.

(END VIDEO CLIP)

BORGER: What do you say to that?

BAYH: I don't have a lot to say about that, Gloria. Again, the people of New Mexico voted for Hillary Clinton. And I think all of us in public life should be, as I said, a little humble about the value of our endorsement under any circumstances.

BORGER: Well, you know, this was also a tough week for Senator Obama. He had the Rev. Wright controversy. But for Hillary Clinton, also, the decisions in those key states, Florida and Michigan, not to do a do-over primary was a blow to her campaign. Lots of folks said -- let's listen to what Senator Obama said about that and Senator Clinton this week. (BEGIN VIDEO CLIP)

OBAMA: I was told there was going to be Iowa and then New Hampshire and that Michigan and Florida would not count. And so, we didn't campaign there, and my name wasn't even on the ballot in Michigan. Senator Clinton had that same view until it turned out that she might need Michigan and Florida and suddenly had a different view.

(END VIDEO CLIP)

BORGER: Is he right?

BAYH: Well, nobody could have predicted this, Gloria, I think that's fair to say. And we're faced with a dilemma now. We can't have a convention without Michigan and Florida. And what ought to happen is they ought to have revotes. That's the fairest way to handle this. Let the folks in Michigan and Florida go to the polls and express their preference.

BORGER: That's not going to happen. It looks like it's not going to happen.

BAYH: Well, and if that can't happen, then we're left with a choice among imperfect alternatives. And we ought to choose the one that, although imperfect, best expresses the will of the people of those two states.

BORGER: OK, I'm game. Which one? What would you propose? Here can you do it.

BAYH: Well, we've got to count the votes. I mean, it was imperfect, the two elections. Florida, at least their names were on the ballot. It was a level playing field. No one campaigned, that's true.

But you had 1.7 million people, a record turnout of Floridians, go to the polls. So it's hard to say they weren't engaged in the election in expressing their will. Michigan is even more imperfect because Barack took his name off the ballot.

BORGER: Well, is there some way to divide up these delegates in a way that would be fine with the Clinton campaign as well as the Obama campaign? Are you guys working on some kind of a formula here?

BAYH: Well, I personally am not involved. But again, I think the fairest thing, as James Carville was saying in his very eloquent way earlier in your program was have a revote. Let the people decide this thing.

If that can't happen, then we're left with these choices of imperfect alternatives, and the one that although imperfect best expresses the will of the people in these two states is to count the results because they did have record turnouts.

BORGER: If you don't count the votes in Florida and Michigan, it's going to be very difficult for her to overtake Barack Obama in the popular vote. The delegate math is also very difficult for her. Lay out a scenario here about how Hillary Clinton wins this nomination.

BAYH: Well, I do think the popular vote is important. But that's a circular argument. It brings us back to Florida and Michigan. What do we do about that? I mean, we've got to find a way to count the two largest states in the country. So that is sort of one and the same.

And then I think neither one of them can win, Gloria, neither one without the so-called superdelegates. And so, then you get into questions about electability, who has the momentum, all those kinds of things.

But ultimately, you know, if you look at the aggregate popular vote, and as we all recall in 2000, to our, as Democrats, great sorrow, we do expect presidents based upon the electoral college. So who carried the states with the most electoral college votes is an important factor to consider because ultimately, that's how we choose the president of the United States.

BORGER: Well, we also choose the president on the issues. So let's talk a little about the differences between these candidates on the issues. Hillary Clinton's campaign says that she is better qualified to manage the economy. What is it in her background and her experience that makes her better qualified to tackle the economic problems than Barack Obama?

BAYH: Well, part of this is a question of experience. And we can get into the debate about she obviously was not president of the United States. She was first lady.

But I think we all know that she was famously and not a first lady who was simply engaged in the ceremonial aspects of the job. I mean, President Clinton and she have had a partnership going back 20 some years to their time in Arkansas. So, she was there and was able to see what policies worked and what didn't at a time when our country created 22 million new jobs, 2 million new business, lifted millions from poverty into the middle class and offered welfare into work.

And so, that kind of seasoning and experience. And I should say this, Gloria. Learning from not only those things that went well, but also learning from those things that maybe didn't go quite so well, like some of the NAFTA trade policies and health care and that kind of thing. Those are all things that she can bring to this job. And between two good people, I think two good people, give her the best chance of getting it right from day one.

BORGER: Well, talking about the experience issue, last week some of then first lady Clinton's schedules were released when she was -- from when she was in the White House. And there has been some controversy over whether that shows that she was, in fact, engaged or whether that shows that she was just having tea with a bunch of people, doing, you know, typical first lady things.

And let me read you something that a top Obama adviser, Greg Craig, told The New York Times this morning. And he said, and I quote: "There is no evidence that she participated or asserted herself in any of the crises that took place during the eight years of the Clinton presidency." How would you respond to that?

BAYH: Well, the schedules show, Gloria, that she was involved particularly in issues that affect health care, women's right, and children. The SCHIP program to extend health care to kids, the immunization program, initiatives to make adoption more readily available to American families. And a whole host of other things.

So to get to the words that you used, Hillary Clinton just off having tea with people and eats crumpets? I don't think so. And I think most objective observers would know that she was much more substantively involved than that.

BORGER: Now this campaign, I think most people would agree, has also taken kind of a nasty turn in the last week or so. And the Obama campaign is now openly saying that Hillary Clinton has an Achilles heel and that her Achilles heel is that the voters don't trust her.

In a March Gallup poll, and we can show this to you, Obama is considered trustworthy by 63 percent of the voters. Clinton trustworthy by 44 percent of the voters, 53 percent say she's untrustworthy. And Obama's campaign manager said this on Friday about that issue. Just listen to what he said.

(BEGIN VIDEO CLIP)

DAVID PLOUFFE, OBAMA CAMPAIGN MANAGER: It will be next to impossible to win a general election if more than half the electorate believes that you're not trustworthy.

(END VIDEO CLIP)

BORGER: What's your response to that?

BAYH: Well, you mentioned Achilles heel. Let's remember, Achilles' side won the war, after all. And these polls you can use to spin this any which way. I mean, if you look at strength, experience, prepared to be commander-in-chief on day one, those all favor Senator Clinton.

And, look, I think in the general election, she'll have an excellent chance of winning because of her message about blue collar working class economic issues and those character traits of strength and experience that I think people will be looking for.

And regrettably John McCain, I've served with him, he's a good man, I honor his service to our country, but he has embraced the Bush economic policy which have not gone so well, and he has embraced the Dick Cheney Iraq policies, which have not gone well, and the American people reject. And I think that is going to give him a very hard chance of winning this election.

BORGER: Senator Evan Bayh, thanks so much for taking out time this morning to be with us. Thank you. BAYH: Good to be with you.

BORGER: And when we come back, we'll get a very different view from a key supporter of Barack Obama, Arizona Governor Janet Napolitano.

And later, from passports to preachers, the best political team on television will join me to wrap up the week. It's analysis you simply can't get anywhere else. So stay with us on LATE EDITION.

(COMMERCIAL BREAK)

BORGER: And welcome back to LATE EDITION. I'm Gloria Borger sitting in for Wolf Blitzer. Right now it looks like there will be no re-do of the Democratic primaries in Michigan and Florida.

That was the first topic I raised with Arizona Governor Janet Napolitano, who has endorsed Barack Obama, when we sat down earlier.

(BEGIN VIDEOTAPE)

BORGER: Governor, thanks very much for joining us. This week, the important states of Florida and Michigan decided not to redo their votes. Let's take a listen to what Hillary Clinton had to say about that.

(BEGIN VIDEO CLIP)

CLINTON: I do not see how two of our largest and most significant states can be disenfranchised and left out of the process of picking our nominee without raising serious questions about the legitimacy of that nominee.

(END VIDEO CLIP)

BORGER: So she's essentially saying that if there is no revote in those two states and if Barack Obama were to become the nominee, that he would be illegitimate. What's your response to that?

NAPOLITANO: Well, I think she's just wrong about that. Barack is going to go into the convention having won more states and more delegates than she would have. You know, Florida and Michigan, it's regrettable. It's a situation caused by their own state parties' intentional decision not to abide by the rules.

And, you know, the Obama campaign has been very clear on this. This is a function of the Democratic National Committee, their rules. And the Obama campaign will comply with whatever the national rules are. And if they're changed in the middle of the game, which is really what Senator Clinton is proposing, they need to be changed in a way that's fair to everyone.

BORGER: But, Governor, didn't Obama really have the most to lose here because a state like Florida would really be very good to Hillary Clinton given its demographics and that she's trying to get ahead in the popular vote and make the case to those superdelegates that she is winning in the popular vote? So wasn't Senator Obama playing a few games here, too, by just kind of hanging back on this issue?

NAPOLITANO: Well, no. I mean, he had no choice. This was a function of the Democratic National Committee, the rules they set, the rules that everybody agreed to before the first caucus was held. You know, everybody knew what the rules were.

And, again, Florida and Michigan are going to be very important states come this fall. And they are going to be states that Obama is going to campaign heavily in.

BORGER: So you're a governor. What's your solution? If you were the governors of those states, what would be a fair solution for seating those delegates at the convention?

NAPOLITANO: You know, I think a fair one would be if you can't have a revote, and there are lots of difficulties with having a revote, it's a lot easier to say you're going to have one than to actually conduct a second election in a way that's fair and make sure that everybody's voting rights are protected and the like.

But you know, a solution would be to say, we will seat your delegations but we will divide the delegates -- the elected delegates, equally so that there are...

(CROSSTALK)

BORGER: But that's a nonstarter -- Governor, that's a nonstarter with the Clinton campaign. You know that.

NAPOLITANO: Well, but you asked me what would be fair. As a governor, I say that way they don't have any impact on the result. Why? Because they chose to violate the rules. But their delegates are still there. They're still participating in the process. And we're getting ready for the general election which is really where the focus ought to be.

BORGER: But that's not going to happen, because the Clinton campaign will not agree to that. So what's the next best?

NAPOLITANO: Well, then we'll wait and see what the DNC says. Again, from the Obama campaign perspective, the only thing we can do is to say this is a function of the national party, the rules are the rules, again, that Senator Clinton and her campaign agreed to before this process started.

If there's going to be a change, now that Florida and Michigan are clear they can't have a revote for reasons that are very serious and good reasons, they can't do that, we'll see if there are any other changes made.

BORGER: OK. Let's move to the next state, Pennsylvania. Very, very important state for both of these candidates. CNN poll of polls shows Hillary Clinton substantially ahead, with 52 percent; Obama behind 39 percent; undecided at 9 percent.

What does he have to do to win in that state? NAPOLITANO: Well, first of all, you know, I think he needs to continue to do what he has been doing, is talk about his vision for the future, talk about how he would handle the economy, how he would handle the war in Iraq.

And by the way, I have to say, even though the media is focused on Pennsylvania, it's a big state, but there are a number of other states left, as well. There are over 500 delegates left to be elected in total, and 400 and some odd are from states outside Pennsylvania.

So even though the focus is there from the media and from the Clinton perspective, because that's a state where she happens to be ahead, it is by no means the only state still at issue here.

BORGER: Well, you mentioned the economy before. Let's talk about that, because Senator Clinton has been making substantial inroads with voters, particularly men, at the lower end of the economic scale. Why is it that Senator Obama is having a tougher time connecting with those voters?

NAPOLITANO: You know, I don't know why that is, because when you look at his career and what he has done, he started off, as a matter of fact, as an organizer working with steel workers who had been thrown out of work in Illinois. So he knows very well and has worked -- has given his own life time to helping those workers.

And I think what he needs to do and what he will be doing is making that case, that he knows on the ground what it means to be unemployed, to see your benefits running out, to see factories closing, to see mills not reopening. And we've got to have an economic plan for the country that not only takes that into account, but prepares the American worker for the globalization of this economy and says, look, we're not going to have the same economic structure we have always had. What we need to do and what the next leader of this country needs to do is lead us into the next century.

BORGER: Now, things this week have gotten pretty nasty between these two campaigns. Let me read to you from a Clinton campaign memo that was received late last week, went out to every journalist in America. Here's what it said, referring to Barack Obama, it says, "He calls for high-minded debates while practicing low-down politics. He promises a different kind of campaign while attacking Hillary's character."

What's your response to that?

NAPOLITANO: Well, you know, I think that it's regrettable. It's kind of -- you kind of create a strawman and argue against that, as opposed to focusing on the issues. And the issues to me are very straightforward and very serious. It's what we do with this economy, which is going into recession if it's not there already; it's how we handle America's place in the world, particularly with our commitment, our ongoing commitment in Iraq, and how we reconfigure that. Those are the things these candidates need to be talking about.

And I've got to tell you, out here in Arizona, that's really what people are listening for. They're not reading faxes and memos that go back and forth journalists in Washington, D.C.

BORGER: But, Governor, you know, the Obama campaign is sending its own faxes and memos out. And here's what the Obama campaign said this past week about Senator Clinton. It said, "Senator Clinton has consistently made political calculations to deliberately mislead the American people."

Isn't the Obama campaign effectively calling Hillary Clinton a liar here?

NAPOLITANO: I think what they're saying is, based on what was released from her archives, that in Ohio, when she pretty much disavowed any knowledge or support of NAFTA, she was actually in meetings whatever cheering NAFTA on, and they were pointing out that -- that conflict.

But, again, this is stuff that to me is inside baseball. What people out in the states are listening for is who's going to be the next leader, who has really got a solid plan for the economy, who's got a solid plan for moving America ahead in the world.

And in a long campaign, you're going to have some back-and-forth. That is to be expected. But in the end, what is going to happen is Mr. Obama, Senator Obama, will be the nominee. The party will be united, and off we go to campaign against Senator McCain.

BORGER: Well, you know, but this week also -- and I don't want to belabor this point too much, but the Obama campaign released this picture of the Reverend Wright, the controversial reverend that Senator Obama spoke so much about this week, meeting president, then President Bill Clinton. Released this picture, handed it over to the New York Times. I mean, does that kind of thing elevate the discussion, also?

NAPOLITANO: Well, I think the point of that is to show, look, everybody has connections here.

But the important thing about that is the speech that Senator Obama gave. It would have been very easy to give kind of a bumper sticker, short soundbite type of speech about race in this country. And one of the reasons I support Senator Obama is because he doesn't do that. He really put forth and respected American voters enough to say, look, this is complicated on all sides, and many people have very serious and legitimate views about the issue of race. And what we can't ignore is that race remains an issue.

And I thought his talk the other day was one of the most significant of this campaign or any campaign that I've been involved with.

BORGER: And some Clinton supporters argue that this will adversely affect his electability as a general election candidate. What do you say to that?

NAPOLITANO: Well, I'm not surprised. What do you expect them to say? You know, they're playing a role there. But, again, in talking with Arizonans and people out here who aren't in that Beltway mix, they're impressed with Senator Obama. They're impressed that he took the time to really explain his views, and now they want to get back to the issues that really animate this campaign and really animate the general election for the presidency. How do we deal with this economy? How do we deal with the war in Iraq? How do we deal with health care? That's what people are listening for.

BORGER: Well, Governor, thanks very much. I know if Wolf Blitzer were here, I have to say one thing, because he's such a basketball fan, he would say that he's very sorry about Arizona, but he would probably say there's still hope for the Phoenix Suns, right?

NAPOLITANO: Very good. And ASU is still in the NIT, and the ASU women are alive and well in the NCAA.

BORGER: OK. Just channeling Wolf here a little bit.

NAPOLITANO: There you go.

BORGER: Thanks so much, Governor.

NAPOLITANO: Thank you so much.

BORGER: And in just a moment, our political panel will examine the increasingly bitter battle for the Democratic presidential nomination. But up next, a look at Easter around the world. Stay with "Late Edition."

(COMMERCIAL BREAK)

BORGER: We're keeping our eye on some stories as Christians around the world celebrate this Easter Sunday. Fredricka Whitfield is at the "Late Edition" update desk. Fred?

WHITFIELD: Hello again, Gloria. Well, thousands braved a downpour to attend Easter Mass at the Vatican. A white canopy over the steps of Saint Peter's Basilica protected Pope Benedict XVI as he led worshipers. He denounced violence in Africa, the Middle East and Tibet, calling for solutions that will safeguard peace and the common good.

And this was the scene at Arlington National Cemetery in the predawn hours. An estimated 5,000 people attended sunrise service at the amphitheater. Services held at Arlington honored this country's service members.

And many members of the U.S. military are spending Easter overseas. This is a service in Kabul, Afghanistan. The chaplain says the service will remind troops that God is with them even when they're in harm's way. Last year was the most violent year in Afghanistan for U.S. troops since the 2001 invasion.

Vice President Dick Cheney is spending Easter in the Holy Land. He send attended a service at a tiny chapel in Jerusalem. Later, he met with Palestinian Authority President Mahmoud Abbas. Cheney told reporters any Middle East peace agreement will require painful concessions by both Israelis and Palestinians.

And this one comes from an i-reporter in Oklahoma City. For this Easter celebration, a six foot bunny flew in on a helicopter and dropped eggs on hundreds of kids for them to scoop up there for their baskets. Lots of fun there in Oklahoma City.

And that's the latest from the update desk. Now back to Gloria.

BORGER: Thanks a lot, Fredricka. And straight ahead, the best political team on television is here to examine this really wild week in politics. So don't go anywhere.

(COMMERCIAL BREAK)

BORGER: And welcome back to "Late Edition." Usually I'm on the political panel, but this week Wolf is off, so I'm the one that gets to ask all the questions. I like that. And here to give the answers are Mark Halperin, who writes "The Page," Time magazine's political column. Mark joins us from New York. And with me here in Washington, CNN Congressional correspondent Jessica Yellin, who has been covering the Democratic race, and CNN senior political analyst Bill Schneider. Thanks to all of you for coming in this morning.

It was a very, very tough and nasty week this week on the campaign trail. Let me start with you, Jessica. Barack Obama had his Rev. Wright controversy. Hillary Clinton won't get the do-overs she wanted, I think, in Florida and Michigan. And then to cap the week off, Obama got the endorsement of New Mexico Governor Bill Richardson. Let's start there and listen to what he told John King this week.

(BEGIN VIDEO CLIP)

RICHARDSON: Well, we had a -- I talked to Senator Clinton last night. Let me say we've had better conversations.

(END VIDEO CLIP)

BORGER: Obviously that was in a press conference, not just to John King. But he also said that again. So was this a surprise, and how did the Clinton campaign react to this?

YELLIN: Ouch. You wonder if there was something uttered like, you're dead to me. I mean, the last time, Richardson's people say, the Clintons had called Richardson just a week before, trying to get him on board. I think that the Clinton folks are trying to downplay it, but this is so devastating for her.

Not because of the Latino vote, not just because it could lead to a superdelegate avalanche, but because Bill Richardson is such a political person. He wants to be on winning team. And clearly he's betting that Barack Obama is going to be the winner. It's a signal to everyone else that the political -- the most ambitious political types want to get on board with Barack Obama. Now is the type to jump.

BORGER: Do you think this could be about his self interests then? I'm shocked. Let me just say, James Carville, a very big Clinton supporter on our show earlier today on tape, had this to say to The New York Times about a Bill Richardson endorsement. Let me quote here. He said, "Mr. Richardson's endorsement came right around the anniversary of the day when Judas sold out for 30 pieces of silver. So the timing is appropriate if not ironic."

SCHNEIDER: That is a really far-fetched comparison. It got a lot of Obama people very, very angry. It implied that somehow he was connected to the Clintons and owed them. Well, he's got to owe them something. He was a member of the Clinton cabinet. He was an ambassador to the United Nations. .

But that doesn't mean that he is indebted to Hillary Clinton. He's indebted to Bill Clinton for having helped his political career. But the idea that this was some sort of a betrayal, a personal betrayal, I think, you know, in politics, that's just not going to work.

BORGER: Mark, let me go to you for the bottom line here. How much is this going to matter?

HALPERIN: I think it does matter for the following reason. The superdelegates are what matter at this point. Obama needs many more of them to win this nomination. And what Richardson, I think, is Exhibit A for is someone who was publicly pressured by the Clintons, who does owe the Clinton political machine, if not Senator Clinton, as Bill suggested, a big debt of gratitude.

And for him to go against them, I think may free up some other people, very much the way Senator Kennedy's endorsement I think had that effect on some people, saying it's OK to go against the Clintons. You can live, you can survive and maybe even thrive if you take that risk. And, again, Obama needs a lot more superdelegates to do that if he's going to mathematically get the number he needs.

BORGER: But I think that, Jessica, Obama had some troubles in week. With the Rev. Wright controversy, he gave a speech. A lot of people said it was a terrific speech. Other people said they don't think it's going to move the dial for him. Do you think that this is an issue that's going to continue to haunt him if, indeed, he becomes the Democratic nominee?

YELLIN: Absolutely. And the reason why is less for the politics of race, but really if you look at what Rev. Wright said in the clips that were played over and over, some of those comments could you have heard at any anti-war rally on the far, far left.

People who are angry about America's belligerence in the world. And for a general election audience that is conflicted about a Democratic Party that might seem weak on national security, it bolsters the argument that Barack Obama is left of Ted Kennedy. I mean, that's what the Republicans want to say.

And so, it's not the race aspect. It's element of this that has to do with, how liberal is Barack Obama. BORGER: And have we seen any evidence in the polls that this is moving the dial one way or the other, Bill?

SCHNEIDER: Well, yes. Last weekend, when the clips first surfaced of Rev. Wright's incendiary comments, which Barack Obama, of course, repudiated in his speech, Barack Obama's unfavorables went up. The Gallup tracking poll showed Hillary Clinton's lead over him. She gained a lead over him and the lead was increasing to seven points.

Then he spoke on Tuesday, and something very dramatic happened. Her lead started to diminish, and by the end of the week, after the speech and after the Richardson endorsement, he moved back some to a slight lead. So it seems to be working with Democrats.

What about the larger electorate? You know what the poll shows, the tracking poll?

SCHNEIDER: It shows that between Hillary Clinton and John McCain, the race is a tie. Between Barack Obama and John McCain, the race is a tie, which means there's really no difference in terms of electability at this point.

BORGER: Mark, Hillary Clinton really seemed to be staying away from this Reverend Wright issue. Every time she was asked about it, she moved on to something else. Why didn't she want to touch it?

HALPERIN: Well, it's just -- it's a little too incendiary and I think her campaign feels the damage is being done without her direct involvement.

You know, increasingly, I think if you look at the Obama campaign and try to figure out what they're up to, a lot of what they're doing now quite rationally is look with an eye towards the general election to make sure that he's well-positioned to -- after he sews up the nomination, which, if you ask most people, seems a lot more likely than not, to be in a position to beat John McCain in the general election.

You know, I agree that a lot of the danger here is about whether he can be painted as liberal because of his association with Wright, but I think there's a bigger issue that he didn't address in the speech and I'm surprised he hasn't on one level, which is an issue of outrage about some of the things Wright said.

Not disapproval, not rejection, but outrage. And I think a lot of general election voters he'll need to win feel outraged about what Wright said and haven't heard from him what they want to hear, what they need to hear if they're comfortable with him as president, which is outrage.

BORGER: OK. Everybody, please stay right here because we still have an awful lot of politics to cover. But straight ahead, top supporters of Hillary Clinton and Obama talked about the increasingly bitter fight for the Democratic nomination this morning. And we'll bring you what they had to say in our very popular "In Case You Missed It" segment. So stay tuned. (COMMERCIAL BREAK)

BORGER: "In Case You Missed It," let's check some of the highlights from the other Sunday morning talk shows.

On FOX, Obama supporter Governor Bill Richardson and Clinton supporter Governor Ed Rendell discussed the challenge of overcoming the hard feelings now being generated by this very tight Democratic race.

(BEGIN VIDEO CLIP)

RICHARDSON: The leaders of the party, the voters in the Democratic Party, have to see that this bloodletting that would go between the last primary and the convention, is not serving us well. I mean, it gets negative proportionately more every single day. The best thing to do is unite around a candidate.

GOV. ED RENDELL (D-PA), CLINTON SUPPORTER: The superdelegates are supposed to exercise their judgment as to who is the strongest candidate to win in November. We have to take back the White House. We have two great candidates. Our job is to nominate the one who has the best chance to win.

(END VIDEO CLIP)

BORGER: On ABC, Senator Chuck Hagel explained why he hasn't yet endorsed his good friend, Republican presidential nominee John McCain.

(BEGIN VIDEO CLIP)

SEN. CHUCK HAGEL (R), NEBRASKA: When I endorse someone or when I work for someone or commit to someone, I want to be behind that person in every way I can. I've obviously got some differences with John on the Iraq War. That's no secret. I want to understand a little more about foreign policy, where he would want to go. Certainly doesn't put me in Obama or Clinton's camp. But John and I have some pretty fundamental disagreements.

(END VIDEO CLIP)

BORGER: And on CBS, Senate Armed Services Committee members Lindsey Graham and Jack Reed offered very different views on whether Iraq is finally turning the corner after five years of war.

(BEGIN VIDEO CLIP)

SEN. LINDSEY GRAHAM (R-SC), ARMED SERVICES COMMITTEE: There has been major political breakthroughs. Economically, oil revenues are up by 50 percent. Oil production has doubled. Inflation has gone from 66 to 5. Sectarian violence is down by 90 percent. Our casualties are way down. We've got a long way to go, but I believe the surge has worked on all fronts.

SEN. JACK REED (D-RI), ARMED SERVICES COMMITTEE: The problem with Iraq is every time you turn a corner, there's another corner. And I don't think politically that they've made the progress they have to make. The central government is not functioning effectively and one of the reasons I think is they feel they have as much time as they need because our forces are there.

(END VIDEO CLIP)

BORGER: Highlights from the other Sunday morning talk shows right here on LATE EDITION, the last word in Sunday talk.

And when we come back, our panel is going to turn to the Republican nominee, John McCain. Is he getting a leg up with voters while the Democrats continue to fight it out?

(COMMERCIAL BREAK)

BORGER: And welcome back. I'm Gloria Borger, and the subject is politics. Joining me is Mark Halperin from Time magazine, CNN's Jessica Yellin and Bill Schneider, all part of the best political team on television.

Let me start with you, Mark. This campaign has really taken a nasty turn in the last week or so. And now we find the Obama camp starting to call Hillary Clinton names, some would say. If they're so far ahead, why are they getting so nasty?

HALPERIN: Well, I think a couple things we talked about last segment. I suggested that they're really thinking about the general election. They believe Obama will be the nominee. That's what most people I know believe in politics.

So they've got a couple of rabbits here. One is that Obama becomes the nominee in May or June, or he doesn't become the nominee until the convention. Either way, he wants to try to minimize the damage he suffers here.

So, I think what they're trying to do is two things. Force Senator Clinton perhaps out of the race sooner by showing her that it will not be cost-free to stay in this race, and to turn some of the attention of the media and some of these wavering superdelegates back on to Clinton and her vulnerabilities rather than having, day after day, the scrutiny, relatively recent, relatively new to them, more focused on Obama than on Clinton.

YELLIN: I agree with Mark that there's one issue, which is that, Gloria, we have been saying that Obama has to show he can be negative. He has to show he can hit back. Now they are, and we're saying, whoa, they sound so nasty and negative.

And one of the reasons I think the tone is odd because it's so petty. It sounds like little kids running to the teacher saying, guess what she called me, guess what he called me. And it's not about the big issues.

BORGER: And how does this affect the Democrats in the long term?

SCHNEIDER: Well, there is one big surprise that we're seeing, and it's kind of hard to understand. John McCain is tied with both Clinton and Obama. Whichever one is the nominee, every poll shows the race is very close. Some of them show McCain a little bit ahead. How can that be?

President Bush has very low approval ratings, down to close to 30 percent. The economy is teetering into recession. Most voters think it's already there. They've given up on the war in Iraq. They're very angry. They want change.

And yet it's a tie between McCain and the Democrats? Two explanations. One is, the bitterness of the Democratic fight is costing the Democrats. But I don't really see that because most Democrats say even if they're a McCain supporter or a Clinton supporter, they could support the other candidate. They're not that angry.

The other is voters don't yet clearly link John McCain with George Bush even though he supports Bush's Iraq policy, even though he says he'd make Bush's tax cuts permanent. That connection isn't clear to voters because McCain has a reputation of an independent.

BORGER: Well, a lot...

HALPERIN: Gloria?

BORGER: Go ahead, Mark.

HALPERIN: Well, Gloria, I think Bill's exactly right, and I think it's going to be even easier for McCain. Now that he's the nominee, the White House will give him a lot of latitude. Democrats who think this election is going to be, I'll say in homage to Wolf, a layup for them or a slam dunk, I think they're just wrong.

The fact that McCain is tied now when he has just begun to remind people of that maverick image I think is a real danger sign for Democrats.

BORGER: And they're also worried about this race getting so, continuing to get so nasty and to go on for such a long time. I want to quote to you guys something I read that made me chuckle in Maureen Dowd's column in The New York Times this week.

She's quoting an unnamed Democrat who was looking at these Democratic fights in the party, and he said, " 'It's like one of those movies where you think you know the end, but then you watch with your fingers over your eyes.' " Democrats nervous?

YELLIN: Nervous? Yes, because Clinton is not going to go away. She is not going to go away easily, and this is going to go on no matter what. I mean, something very -- who knows what could happen? It's a cliffhanger to make her end.

SCHNEIDER: There's one possibility for her, I think. She's not going to be able easily to catch up in pledged delegates or popular votes. I don't think she can prove that he's unelectable. But if she shows a huge surge of late momentum in the late primaries, winning unexpected states like North Carolina or Oregon, suddenly those superdelegates are going to say, wait a minute, maybe the voters have changed their minds, and maybe they've come to love Hillary Clinton. That's the only way I think she can do it.

BORGER: OK, I can't let this political roundtable end this week without playing a little bit of a clip of the vice president of the United States, Dick Cheney, in an interview with ABC's Martha Raddatz, this on the fifth anniversary of the war in Iraq this week. Let's take a look at that.

(BEGIN VIDEO CLIP)

MARTHA RADDATZ, ABC NEWS: Let me go back to the Americans. Two- thirds of Americans say it's not worth fighting. And they're looking at the value gain versus the cost in American lives, certainly. And Iraqi lives.

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: So?

RADDATZ: So, you're not -- you don't care what the American people think?

CHENEY: No, I think you cannot be blown off course by the fluctuations in the public opinion polls.

(END VIDEO CLIP)

BORGER: OK, Mark Halperin, I'm going to give you the first reaction to that.

HALPERIN: Well, laughed at by Jon Stewart and a lot of American newsrooms. But look, the vice president and the president have been consistent. They believe what they're doing is right, and while sometimes they do rely on public opinion polls, on this issue, I think the vice president's reaction is what they truly believe.

They don't care about public opinion polls or short-term public opinions. They're going to be judged by history, in their view.

SCHNEIDER: So? Is that his answer? It shows certain contempt for the public opinion. Here, the people rule, and if you're carrying out a policy which is deeply unpopular and on which the polls have not wavered -- more than a year now, they've shown two-thirds of Americans opposing this war. It hasn't changed since the November 2006 election. If you pay no attention to that, and you are contemptuous of it, I think that's a real failing.

YELLIN: I covered that White House for three years. They think that's leadership. He's doing what he thinks is right. You know, the American people, be blanked.

BORGER: Can we just say he's clearly not running for re- election. How about that? And this reminder. If you would like a recap of today's program, you can get highlights on our "Late Edition" podcast. Simply go to cnn/podcasts.

Thanks very much to our political panel, and coming up at the top of the hour, "This Week in Politics" with host Tom Foreman.

(COMMERCIAL BREAK)

BORGER: Now let's take a look at what's on the cover of this week's major U.S. newsmagazines. Newsweek looks at "When Barry became Barack and What Obama's Journey Says about Race and Identity in America." Time explores "The Dalai Lama's Journey." And U.S. News and World Report is a double issue featuring a career guide for 2008, "How to Save Your Job."

And that's your "Late Edition" for Sunday, March 23rd. Happy Easter to everyone celebrating around the world. And a very happy birthday to Wolf Blitzer. He's going to be back here next Sunday at 11 a.m. Eastern for the last word in Sunday talk.

Until then, thanks for watching. I'm Gloria Borger in Washington. For our international viewers, "World News" is next. And for those of you in North America, "This Week in Politics" starts right now.

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