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McCain Camp: Obama Plays 'Race Card'; Scandal-Ridden Senator Fights: Pleads Not Guilty in Corruption Case; Candidates in Their Own Words

Aired July 31, 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, John McCain's campaigns levels a very serious allegation against Barack Obama. They say he's using the race card in this campaign against John McCain. And you're going to hear what the Obama campaign is now saying.
We also have exclusive comments from Senator McCain. He just spoke to our own John King. You're going to want to hear this.

Also, the senator accused of scheming to hide thousands of dollars worth of gifts wants you to know how he pleads, but as Ted Stevens fights to clear his name, he's also fighting to keep his seat as the longest-serving Republican ever in the U.S. Senate.

And who do you think can fix the energy crisis the best? You're going to listen to Senators Obama and McCain in their own words, and then you'll have a chance to decide.

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

Right now, John McCain's campaign is accusing Barack Obama of a politically poisonous act: playing the race card. It stems from something Senator Obama said yesterday in Missouri. He said he represents change from reckless Republican policies and that McCain wants to continue those policies. But then Senator Obama also said this...

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: So what they're saying is, well, we know we're not very good, but you can't risk electing Obama. You know, he's new. He's -- he doesn't look like the other presidents on the currency.

(APPLAUSE)

He -- you know, he's got a -- he's got a funny name. I mean, that's basically the argument, he's too risky.

(END VIDEO CLIP)

BLITZER: The McCain campaign now pouncing. The campaign manager, Rick Davis, calling that comment from Senator Obama shameful, adding -- and I'm quoting now -- "Barack Obama has played the race card, and he played it from the bottom of the deck."

Let's bring in Dana Bash. She's covering the McCain campaign. And Suzanne Malveaux, she's covering the Obama campaign for us.

Dana, I know that John McCain just spoke to our own John King, and they had an exchange on this sensitive issue.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: That's right. It's interesting.

I was told this morning that John McCain was going to come out and talk to the entire press corps. He didn't do that. But as you said, John King did get an exclusive. Attempted to speak to him, and here's what happened.

(BEGIN VIDEO CLIP)

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Your campaign says he's playing a race card by saying that, by saying that you're trying to scare people, make them think this guy doesn't look like past presidents. Is that a fair criticism, for Rick Davis to say the Obama campaign playing the race card?

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: It is. I'm sorry to say that it is. It's legitimate. And we don't -- there's no place in this campaign for that. There's no place for it, and we shouldn't be doing it.

KING: They say that's not the case.

MCCAIN: OK, John.

KING: OK, Senator. Thanks. Appreciate it.

MCCAIN: I'll let the American people judge.

(END VIDEO CLIP)

BASH: Now Wolf, he's saying let the American people judge, but the reality is John McCain's campaign was extremely aggressive, first of all, about getting the statement out this morning that they think Barack Obama is playing the race card, but also calling those of us who cover John McCain and trying to explain why they're doing this. And they say that Barack Obama, not once like we played earlier, but three times yesterday said that John McCain and Republicans were trying to scare people about Obama and saying that he's risky because he looks different than other presidents on dollar bills.

Steve Schmidt, who is John McCain's senior adviser, he told me that that is a smear and a disgusting accusation about McCain. That's why they felt politically they wanted to push this.

BLITZER: Very strong words.

So how is the Obama campaign, Suzanne, reacting?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, the Obama campaign believes that this is a winning issue. They've actually launched a Web site. They're going back and forth. But Bill Burton, the spokesperson, early today releasing a statement saying, "This is a race about big challenges, a slumping economy, a broken foreign policy, an energy crisis for everyone, but the oil companies..." -- and he goes on to say, "Barack Obama in no way believes that the McCain campaign is using race as an issue, but he does believe that they're using the same old low-road politics to distract voters from the real issues in this campaign. Those are the issues he'll continue to talk about."

I just got off a conference call with campaign manager David Plouffe and other reporters, and essentially they're saying, look, we're going to hit back, we're going to hit back hard. They believe that they are aggressive tactics.

They're launching this Web site. It's called lowroadexpress.com. And they essentially say that for every kind of accusation or misinformation from the McCain campaign, they are going to answer in kind.

BLITZER: Because it doesn't get more poisonous or explosive than to inject this whole issue of race, especially when you have obviously the first African-American on a major ticket. So what's the strategy behind the McCain campaign right now?

BASH: Well, this is part of a broader strategy that we've seen over the last couple of weeks, Wolf. As you know, to be much, much more aggressive in going after Barack Obama, but not just that -- in talking about things that they think will benefit them politically.

And what I'm told by the McCain campaign is that the reality is they know that Barack Obama has made these statements before, even going back to the Democratic primary. But they are hearing some of the things like what Suzanne was saying, some of the suggestions like what you just made, that perhaps by going after them and by actually talking about this in such an explosive way that, in fact, the McCain campaign, they're the one injecting race in this.

I asked, again, Steve Schmidt about that. He said, "We didn't inject it. He injected it by saying the things he did yesterday."

BLITZER: Because they also make the point, Suzanne, the McCain people, that you know what? The Obama campaign used this race card, they allege, against the Clintons, especially Bill Clinton. They made it sound during the primaries that Bill Clinton was a racist, using the racial issue to try to undermine Senator Obama.

And they say, you know what? We're not going to fall into that trap. If they even imply in the most modest way that Senator McCain is using race as an issue, they're going to pounce with all their power.

MALVEAUX: And also, to the larger issue, is really what they call character assassination. That it's not just about race, but they can point to the Britney Spears, the Paris Hilton, that that advertisement, that they actually know that the Republicans have come out and criticized that ad publicly, saying that this is not the kind of candidate, the McCain that we knew.

So they believe that they have something that is beyond race, but really looking at how they've mischaracterized Barack Obama basically on many -- a host of different issues.

BLITZER: The campaigns -- this presidential campaign taking a significant turn today. We're going to have much more on this story, guys, coming up.

There's another major story we're following right now. A scandal-ridden U.S. senator walking into a federal court to defend himself.

Republican Ted Stevens could face years in prison if convicted of lying about accepting gifts. But today, he faced a judge and listened as his lawyer entered his plea.

Our justice correspondent, Kelli Arena, is outside the courthouse where Stevens appeared today.

Kelli, update our viewers on what happened.

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Well, Wolf, as expected, the senator pleaded not guilty today. Actually, his lawyer did the talking for him. Stevens barely uttered a word in that courtroom.

His lawyer, Brendan Sullivan, basically asked for two things. The first is a speedy trial.

He argues that he wants to clear his client's name before the general election in November. He also argues that the case is not a very complex one, and so shouldn't take that much time.

The judge did set a tentative date for September 24th for that trial, Wolf. And the prosecution says they expect it to last just about three weeks.

Stevens' team is also asking for a change of venue. They say that this trial should be held in Alaska. Why? Because they say 90 percent of the witnesses that are going to be called are from Alaska, that the events that were outlined in the indictment took place in Alaska, and so the trial should be held in Alaska.

Now, legal experts say it's also a bit of some maneuvering here because it is expected that any jury in Alaska would be much more friendlier to the senator than a jury here in Washington, D.C. A hearing date was set for that motion as well, and that will be on August 19th.

Now, as for a plea deal, Wolf, we've heard a lot about that. The prosecution said that there were no offers on the table at this time, but legal experts are certainly not ruling one out.

(BEGIN VIDEO CLIP)

DAVID LAUFMAN, FMR. FEDERAL PROSECUTOR: If the government is able to admit into evidence all the evidence referred to in the indictment, Senator Stevens' lawyer should take a good, hard look at the possibility of a resolution with the government, shy of going to trial.

(END VIDEO CLIP)

ARENA: Now, there were no special restrictions placed on the senator. He did have to surrender his passport, but other than that, Wolf, it's business as usual for him.

BLITZER: All right, Kelli. Thanks very much for that update.

It hasn't happened in a long time, a U.S. senator formally indicted. He's 84 years old and he could face prison time as well.

Let's check in with Jack Cafferty today. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Remember when John McCain talked about how he wasn't going to run a negative campaign, how he wanted to focus on the issues, not get down in the political mud? I remember that. I guess you can chalk it up to something else that McCain has changed his mind about.

Now he has apparently decided that going negative is the way to win the White House. You don't need to look much farther than McCain's ads, which have become increasingly negative, calling Barack Obama a celebrity, comparing him to Britney Spears and Paris Hilton, or the ad that shows Obama playing basketball instead of meeting with the troops.

One study points out that one-third of John McCain's ads refer to Obama negatively. On the other side of that coin, 90 percent of Obama's ads don't even mention John McCain.

These negative ads feed the perception of McCain as an angry candidate. Even some Republicans don't think the strategy is such a good idea. Former top McCain strategist John Weaver called that celebrity ad, the Britney Spears/Paris Hilton, "childish," "tomfoolery." Those were his words. Other Republicans have characterized it as "unprofessional," "absurd" and "juvenile."

An editorial in "The St. Petersburg Times" says of McCain, "The self-described happy warrior from 2000 has turned sour, and the candor and straight talk that once made him such an attractive candidate are rapidly disappearing."

Meanwhile, McCain's flip-flop on the issue of offshore drilling has netted him some big bucks from the big oil companies. A nonpartisan campaign finance watchdog group says that after McCain announced that he was changing his position and he was now going to support offshore drilling, the big oil companies opened their wallets.

Campaign Money Watch found that in Texas alone, oil-related donors gave $1.2 million to McCain's Victory '08 fund in June, 73 percent of the money coming in after he reversed his position on offshore drilling.

You think that's a coincidence?

Here's the question: Is going negative against Barack Obama a winning strategy for John McCain?

Go to CNN.com/caffertyfile. Post a comment on my blog -- Wolf.

BLITZER: Jack, thank you.

Barack Obama talks about some struggling homeowners today being victims to predatory lenders. What would he do to stop them? You're going to hear him explain in his own words. That's coming up.

And a potential John McCain running mate is standing by live. Rob Portman helped President Bush with economic and trade policy in the White House. I'll ask about his vice presidential prospects, if he thinks increasingly negative Obama attacks are fair game.

And a fresh poll gauges how happy you are with the company's direction. It shows just how sour your mood is right now.

Stand by. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Today, CNN is launching a fresh effort to help you get to know the presidential candidates and where they stand on the most important issues. Each hour we're going to be bringing you more of what they're saying on the campaign trail to help you better decide.

Today, Senator Barack Obama was in Cedar Rapids, Iowa, and he talked about the struggling real estate market and helping struggling homeowners.

(BEGIN VIDEOTAPE)

OBAMA: Immediately, we have to shore up the housing market not only for the families who are losing their homes every single day, but also for the overall health of the financial system and the economy. I was glad to see that a housing proposal that I had been supporting for quite some time finally moved through and the president signed it. It is going to help only, though, about 10 to 20 percent of the people who are at risk of foreclosure, so more is going to need to be done.

Also, help states with foreclosure prevention programs, to continue to provide counseling to people whose homes are at risk. But if we can stabilize the housing market, particularly by helping borrowers and lenders get together and negotiate so that the borrower can stay in their home, pay their mortgage, share in the profits if at some point the housing market bounces back up, if we can do more of that, then at least there's kind of a floor, and hopefully the banks and the credit institutions will start feeling a little more confident again about lending, not only to homeowners but also to businesses.

So that's step number one. Step number two is we've got to redesign our financial regulation. I mean, we...

(APPLAUSE)

You know, this is an example of what happens when special interests dominate Washington.

I had been talking about cracking down on predatory lending and mortgages for a couple of years now, but every effort was stymied and blocked. So you had nobody watching, overseeing the financial markets. And the truth of the matter is that so much of our financial system is now outside of the traditional FDIC-insured banks, that they pose a huge danger because they're not subject to the same regulations, the same capital requirements and so forth.

So we've got to think about how we redesign that system. That's number two.

Number three, we've got to get some immediate relief to families. We already had one stimulus package that I think helped soften some of the blow with these rising gas prices and helped to keep the economy from going into a complete tailspin. But I think we need a second round of stimulus.

I think we need some more energy rebate checks in the pockets of Americans right now to help them, particularly as we go into the winter when heat -- home heating prices are going to be a huge worry for a lot of families. And some of the stimulus should also come in the form of helping people in the LIHEAP program, the Low Income Heating Assistance Program.

I think we could still have more work to do in terms of extending unemployment insurance, because a lot of people have been laid off. So an immediate program to provide help to families, and also to state and local governments who are really cash-strapped right now. That I think is going to be important.

(END VIDEOTAPE)

BLITZER: And coming up shortly, you're going to hear what Senator McCain is saying about energy independence in his own words. That's coming up in a few moments.

As we've been reporting, Senator Obama's positions are coming under increasingly negative attacks from John McCain and his supporters. Just today, the McCain campaign is accusing Senator Obama of playing the race card. And you heard Senator McCain himself say he agrees with that charge in that interview he had with our own John King.

Let's talk a little bit about more of that and some important subjects.

Joining us is Rob Portman. He's in Cincinnati. He's often mentioned as a possible McCain running mate. He's a former congressman from Ohio, and he's helped President Bush with economic and trade policy over these years as well.

Congressman, thanks very much for coming in.

ROB PORTMAN (R), FMR. U.S. REPRESENTATIVE: Wolf, great being on with you.

BLITZER: Are you comfortable with the way this campaign has made this turn? All of a sudden, the McCain campaign today and Senator McCain publicly accusing Senator Obama of playing the race card?

PORTMAN: Well, I'm comfortable with the fact that it's fair game to talk about Senator Obama's experience and lack of experience, talk about his judgment and talk about his policies. And that's what that ad does. And it's interesting to me that Senator Obama's response to that ad was to talk about the possibility of somebody raising and playing the race card.

So it's too bad it was brought into the campaign. It has no place in this campaign. And I think it is fair game, though, to talk about experience, judgment and policy issues.

That's what a decision is going to be about, after all. And the people are going to have to make a decision whether given where we are in the economy, which is a soft economy, whether we should be raising taxes or not. Given where we are in terms of our critical need to become independent of foreign oil, are we going to do everything we can, which is what Senator John McCain wants to do, or are we going to say no to a lot of constructive proposals to make us independent?

So those are fair game.

BLITZER: So, just to be precise, and then I want to move on, when Barack Obama mentioned yesterday that he looks different than other presidents who are on U.S. currency, you interpreted that, what, as an attack on Senator McCain?

PORTMAN: Well, that's not what he said, Wolf. What he said was that the McCain campaign is telling you that. And that is inappropriate. And it would be inappropriate on either side, by the way. The race card should not be played by either side.

You know John McCain pretty well. I know him pretty well. It's not something he's ever going to be comfortable raising.

This campaign will not go there on the McCain side. And I think what they said today is, let's not go there either side. The response by Senator Barack Obama was very directly, you know, a criticism of Senator McCain's campaign, saying that they were saying that.

BLITZER: All right.

Let's talk a little bit about economic policies. We like to call it the economy being issue #1 in this campaign.

About 500,000 jobs have been lost in the country since January 1st. The most recent numbers not as bad as they could have been because the economic stimulus package injected some funds into the overall U.S. economy. But, you know, if you look at all the numbers out there, people are blaming President Bush for this really serious economic downturn.

It's almost -- it's going to be very hard for Republicans, including Senator McCain, to say, you know what? They're different and they've got a different strategy than what we've seen during the past almost eight years.

PORTMAN: Well, two things, Wolf.

First, Senator McCain does have a different strategy. He has a different strategy on taxes. As you know, he's calling for immediate tax relief for families.

I heard what Senator Obama said a moment ago about helping families by doubling the exemption for people that have kids. That gives them more money in their pockets, another $3,500.

He's also talking about allowing businesses, particularly small business, to immediately expand. So that's going to be a great shot in the arm for small business.

And he's talking about lowering the corporate rate. Why? Because we now have the second highest corporate rate of any developed country in the world, and we're losing headquarters and jobs. So he has some different proposals, certainly on energy, different proposals.

BLITZER: But can he afford all that given the $500 billion deficit that we now see projected for the coming fiscal year?

PORTMAN: Well, you know, having lived through some ups and downs on the deficit when I was in Congress, particularly, as you know the growth of the economy is the single most important factor. The deficit went up this year for two years.

One is the stimulus checks you talked about earlier, but also because our economy is soft. And because, therefore, revenues are not coming in as they should be.

So, if you focus tax relief on pro-growth, pro-jobs tax relief, which is where Senator McCain is -- and these are changes, frankly, from where President Bush is -- you're going to help grow that economy and help deal with the deficit, as well. So, those are differences.

Second is, let's look at the economy. I mean, housing prices, I agree with what Senator Obama just said in the tape you showed of him at the recent town meeting. The housing market has been a major factor here.

You saw the second quarter results came out today. You just mentioned those. And they were better than expected. But still, housing is a drag.

And second is oil prices and food prices. And here again, the question is, what are you going to do about it? Not, you know, are you going to be the same or different. It's what are you going to do about it?

And what Senator McCain is saying is, let's do it all. Yes, more conservation.

Senator Obama talked about putting more air in your tires. Great, let's do that. We should do everything we can on conservation. That's not going to be enough.

We also need to do more on alternative energy. And as you know, Senator McCain has been a leader on that.

But where Senator Obama won't go is both using nuclear power and also using coal, and of course exploring particularly offshore, where there's a lot of reserves. So these are big differences and I think that's all fair game.

BLITZER: We're out of time, but very quickly, have they asked you for documents as part of the vice presidential vetting process?

PORTMAN: No, they haven't. And you know, we talked about this before, but I think there's probably a long list rather than a short list. And he's got a lot of great choices, and I'm sure he'll make a good one.

BLITZER: Well, they still have time to ask you for those documents, Congressman.

Thanks very much for coming in.

PORTMAN: Thanks, Wolf. Good to be on with you, as always.

BLITZER: Appreciate it.

No immunity. A federal judge says two top White House advisers can be forced to testify under subpoena. Congress wants to know what they know about the firing of those nine U.S. attorneys.

And a deadly plane crash in southern Minnesota, it happened after bad weather moved in. Now the investigation gets started.

Lots of news happening right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWSBREAK)

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

Happening now, they put their lives on the line for their country, but they're still vulnerable to a heinous crime. Women and sexual assault in the U.S. military.

FEMA says it made some mistakes. The agency talking today about all that household stuff that the Katrina victims really needed but never got. It could be our CNN investigation that got them talking about what's going on.

They're candidates, not superheroes, but these would-be presidents are now showing up in comic books. Their search for voters in the funny pages. We'll update you on what's going on.

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

Those insane prices at the pump, what gives? Whose fault is it? Who are giving some of the answers and who should we blame?

Suzanne Malveaux is back. She has got some of her own answers.

What do we know, Suzanne?

MALVEAUX: Well, Wolf, I've been talking to industry experts, and they believe that both of these candidates are not talking about the most important problems, taking those on, the causes behind the energy crisis. So far, no one has provided a solution.

(BEGIN VIDEOTAPE)

MALVEAUX (voice over): Congress is taking off for a five-week vacation after failing to come up with an energy solution to sky-high gas prices. It seems like everyone's got someone else to blame.

REP. JOHN BOEHNER (R), MINORITY LEADER: Democrat leaders confirmed yesterday that they'd rather take five weeks off than to allow a real vote on more American-made energy.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: The majority of the congressional Republicans have voted no on renewable energy.

BUSH: Leaders ought to be giving these members a vote, a chance to vote yes or no as to whether or not we ought to be finding more domestic oil.

MALVEAUX: Voters are looking for leadership on how to get out of this mess, making energy policy a big campaign issue.

OBAMA: We need to bring down gas prices but, first of all, we've got to provide relief to families.

MCCAIN: We need nuclear power. We need clean coal technology.

MALVEAUX: One of the main differences between the candidates' plans, whether to allow new domestic drilling for oil. McCain says yes. Obama says no.

But CNN's Miles O'Brien, who covers the industry, calls the issue a red herring.

MILES O'BRIEN, CNN TECHNOLOGY & ENVIRONMENT CORRESPONDENT: The offshore oil drilling thing, you have got to remember that this really has nothing to do with gas prices today. It's become really a political issue, because the technicalities are this: It would take seven to 10 years to get any of that oil out of the ground. MALVEAUX: Obama is pledging to take on the big oil companies making record profits, like ExxonMobil. McCain is pledging to use government incentives and lower tax rates for businesses to invest in renewable energy.

But O'Brien says neither candidate is focusing on the most pressing problem.

O'BRIEN: It's always easy to go after big corporations. They are easy villains. But the fact is, we are importing an awful lot of oil from the Middle East, four times the amount of oil we imported back in the first gas crises of the 1970s.

MALVEAUX: In fact energy experts say the biggest failure in leadership comes from the candidates' refusal to take on voters' behavior.

O'BRIEN: Political candidates are loathe to ask Americans to conserve. The candidates today still have that same notion, that asking Americans to conserve is political death.

(END VIDEOTAPE)

MALVEAUX: Well, in fact, Americans are 4 percent of the world's population, but we use 25 percent of the planet's energy. And politicians remember how President Jimmy Carter paid politically for asking Americans to conserve.

But we do see some political courage coming from Obama, talking about putting air in your tires. We will see if either one of these candidates have a national plan asking us to conserve.

BLITZER: Because that's what the country wants. They want to know what's going on.

MALVEAUX: Right.

BLITZER: Suzanne, thanks very much.

As we said only a few moments ago, today, CNN is launching a new effort to try to help you get to know the two presidential candidates and where they stand on the most important issues. Each hour, we're going to be bringing you more of what they're saying on the campaign trail to help you better decide.

We heard just a little while ago from Senator Obama.

Now Senator McCain on the nation's energy crisis.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama says he wants energy independence but he's opposed to new drilling at home. He's opposed to nuclear power. He opposed an innovation prize for electric cars.

My friends, we must begin immediately in drilling offshore, so we can get some of the oil that's off our own coasts.

(CHEERING AND APPLAUSE)

MCCAIN: We have to begin that drilling. And Senator Obama opposes it.

(CHEERING AND APPLAUSE)

MCCAIN: He said that the high cost of gasoline doesn't bother him, only that it rose too quickly.

Yesterday, he suggested we put air in our tires to save on gas. My friends, let's do that. But do you think that's enough to break our dependence on Middle Eastern oil?

(LAUGHTER)

(APPLAUSE)

MCCAIN: I don't think so.

So, I believe -- I believe that every energy source needs to be part of a solution. We need to develop new alternative energies, like wind, solar, tide, biofuels. But we also need to develop more existing energies, like nuclear power and clean coal.

(APPLAUSE)

MCCAIN: Nuclear power is safe. Clean coal technology is vital.

(CHEERING AND APPLAUSE)

MCCAIN: My friends, nuclear power is safe. There are some veterans here in this room who served -- who served on ships that had nuclear power plants. We sailed them around the world for more than 60 years and we have never had an accident. And I can tell you that the French -- we always want to imitate the French, right?

(LAUGHTER)

MCCAIN: Eighty percent of their electricity is generated by nuclear power.

And, in case you missed it, we now have a pro-American president of France, which shows, if you live long enough, anything can happen in the world and America.

(CHEERING AND APPLAUSE)

MCCAIN: But, most importantly -- most importantly -- and you know this, but it's the compelling argument -- we can't keep sending $700 billion a year to foreign countries that don't like us. And some of that money ends up in the hands of terrorist organizations. It's got to stop.

(CHEERING AND APPLAUSE) MCCAIN: And we will stop it. And we have got to stop it.

(END VIDEO CLIP)

BLITZER: Senator McCain speaking earlier in Wisconsin. In the next hour, we will have more of what they're saying, the two presidential candidates, in their own words. Stand by for that.

So, is our country on the right track or the wrong track? What Americans think about the direction of the U.S. and who they think might be able to fix it. We have some brand-new CNN poll numbers coming up. Bill Schneider with that.

Plus, the courts are backing Congress, but will White House aides have to testify? There's a battle. And you will know what we know -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: A near record, sounds like something good, right? But we're talking about a new low, not very good. And it reflects the way you feel about how things are going in the country right now. You're not very happy.

Our senior political analyst, Bill Schneider, is watching all the numbers for us.

What do -- what do these new poll numbers tell us about the mood of the country right now, Bill, going into this election?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: One word, bad.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP)

UNIDENTIFIED ACTOR: How you doing?

UNIDENTIFIED ACTOR: How you doing?

UNIDENTIFIED ACTOR: How you doing?

UNIDENTIFIED ACTOR: How you doing?

(END VIDEO CLIP)

SCHNEIDER (voice-over): That's not just the greeting from a Budweiser commercial. It's also a question the polls have been asking for 35 years. How well are things going in the country today?

The answer right now? Yikes. Fewer than a quarter of Americans believe things are going well, the lowest number since the spring of 1980, when the country faced recession, rising energy prices, and a hostage crisis.

Turns out that question is a pretty good political indicator. In the fall of 1980, 32 percent said things were going well. President Carter lost. In 1992, 35 percent said things were good. The first President Bush went down.

Good times? That would be 1984, when it was morning in America. Seventy-four percent thought times why good -- Ronald Reagan reelected. Times stayed good through 1988, when Reagan's vice president won. Nearly 70 percent thought things were good in 1996, when Bill Clinton won a second term.

With only 24 percent of Americans happy right now, Barack Obama is running hard on the change issue.

OBAMA: We have to change course, and we're going to have to take some immediate action.

SCHNEIDER: But John McCain asks, what sort of change?

MCCAIN: I believe that, in a troubled economy, when folks are struggling to afford the necessities of life, higher taxes are the last thing we need.

SCHNEIDER: Why is the election closer than it should be with so many unhappy voters? Take a look at those unhappy voters. They really don't like President Bush, and they really do like Senator Obama. And Senator McCain? They kind of like him, too.

(END VIDEOTAPE)

SCHNEIDER: But not as much as Obama, which is why Obama is leading. But it's not a slam-dunk -- Wolf.

BLITZER: And in some of those battleground states right now, it shows it's neck and neck.

SCHNEIDER: Right.

BLITZER: We are going to have those numbers coming up. Thanks, Bill, very much.

In a battle of the branches, a blow to the Bush administration. And we're going to tell you what a federal court has just decided in a raging fight between the White House and the Congress.

And, now that John McCain's campaign has accused Barack Obama of playing the race card, how should the candidates handle this? We will have our assessment in our "Strategy Session." That's coming up.

And you might think it's unimaginable, but doctors performing brain surgery on patients, they say they can do it while the patients are awake. Our own neurosurgeon, Dr. Sanjay Gupta, explains why that might be a very good option.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK) BLITZER: It's a battle of the two branches of government, the executive branch and the congressional, the legislation -- legislative branch, but, right now, it's a blow to the Bush administration.

Congress can force two White House aides to testify under subpoena -- that ruling coming in from a U.S. district court today, a rejection of the Bush administration's claims of immunity. This involves the former White House counsel Harriet Miers and the current White House chief of staff Josh Bolten.

The House Judiciary Committee has been trying to force Miers to testify before Congress about the firing of those nine U.S. attorneys back in 2006. And House Democrats trying to force Bolten to hand over White House documents.

Let's go to our White House correspondent, Elaine Quijano. She's watching this story for us.

What are they saying at the White House about this decision, Elaine?

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, as you might expect, White House Press Secretary Dana Perino says the administration certainly does not agree with this decision.

Officials right now at the Justice Department are reviewing it, still no word on whether the administration will actually appeal this ruling. But, as you know, Wolf, the Bush administration had argued that, in order for a president to get candid, unvarnished advice from those around him, those people had to be legally protected from having to come up before Congress and testify.

Well, today, this district court ruling says that those aides actually do have to show up before Congress. They simply can't ignore congressional subpoenas. However, when they do come, those aides can still claim executive privilege. They just have to come before Congress in order to do it.

Now, if this is appealed, though, of course, all of this could be moot. This is a matter of perhaps running out the clock, because those subpoenas expire, Wolf, once this Congress leaves office. So, again, this is an issue here where the clock certainly is a factor -- Wolf.

BLITZER: I know you will be on top of it for us, Elaine. Thank you.

So, let's move on and talk a little bit about the strategy right now. What's going on with the latest discussion, the latest talk of the race card all of a sudden being injected in this presidential campaign? Our "Strategy Session" coming up.

And did Senator Obama cross the line, or is the McCain campaign trying to push him? Did it cross the line?

And, attention, Florida, Ohio, and Pennsylvania voters. Plan on getting more visits from the presidential candidates. There's a new batch of polls that shows this race is very tight.

(COMMERCIAL BREAK)

BLITZER: Somebody's playing the race card out there. Is that what's going on right now in this presidential race? John McCain's campaign says, yes, and it says Barack Obama is the one doing it. Let's discuss in our "Strategy Session."

Joining us, our CNN contributor the Democratic strategist Donna Brazile. Also joining us, Tara Wall, the deputy editorial editor of "The Washington Times."

Does McCain, Tara, have a point in saying that Barack Obama has injected the race card?

TARA WALL, DEPUTY EDITORIAL PAGE EDITOR, "THE WASHINGTON TIMES": Absolutely.

I think he does make a point here that Barack Obama overstepped it a bit when he included John McCain and, quite frankly, the Bush administration, President Bush, inferring that they were playing the -- would play the race card against Barack Obama. He has not done such. McCain has not. The campaign has not.

And I believe Obama's camp has backtracked that a little bit, because there is certainty a lot out there on the blogs. The liberal bloggers are teeing this up, if you will, and calling McCain's most recent ad racist. And I think that's what Obama is referring to. He overstretched it when he included Senator McCain in that. And that's somewhere I don't think that he needs to go or he should go.

BLITZER: What do you think, Donna?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, I can understand the sensitivity of the McCain campaign, given the fact that they have had to condemn ads from various Republican state parties over the past few months, in Tennessee, and Washington State, and North Carolina, because it is factually correct that the Republicans have used race often in political campaigns as a wedge issue.

On this particular case, however, whether it's the ad featuring two white female blonde celebrities, I don't think that is as much race as it is culture. And, look, these are dangerous types of advertisements. If they want to make the point that Senator Obama is a celebrity, why not use Denzel Washington, who, by the way, is handsome?

But, rather, they know what they're doing. This is a very thin line. Perhaps this is a way to reignite the cultural wars, and not play the race card.

(CROSSTALK)

BLITZER: But, did -- Donna, did Senator Obama go too far in linking Senator McCain's campaign to this suggestion that, you know what, he looks different than other presidents on U.S. currency? WALL: And...

BLITZER: No, no, no, let's let Donna respond.

BRAZILE: You know, Senator Obama -- Senator Obama has made that point often.

(CROSSTALK)

BLITZER: But he never -- he never made the point in connection with Senator McCain.

BRAZILE: Perhaps he's -- perhaps he's referring to some of the right-wing blogs and the noise machine.

I would not have -- Senator McCain has clearly not stated that. Senator McCain has said many misleading, inaccurate things about Senator Obama. He's never said that Senator Obama will not look like on the people on those various dollar bills.

But the point, Wolf, that we should make, and not get into the tit and tat between these campaigns, is that race has no place in American politics. Ken Mehlman apologized for it back in 2005. The Obama campaign -- and Senator Obama himself gave an eloquent speech earlier this year...

WALL: That's right.

BRAZILE: ... that said, we should not use race.

BLITZER: All right.

BRAZILE: Absolutely.

BRAZILE: So, I don't think -- I think we need to go beyond that and talk about the issues. We have better issues to contrast. And the McCain can use people other than two white females.

BLITZER: All right, Tara, go ahead.

WALL: And he -- and he did, yes. And this is why -- listen, this is why Barack Obama is better than this, and he should not have equated the fact that John McCain was calling into question whether people were voting for him out of popularity along the same lines as being racist.

I mean, look, if you're going to -- it's -- it's like you can't criticize him without -- he was suggesting that you can't criticize him without also saying that he's a racist. And, surely, that's not what Barack Obama means. And I think that's disingenuous for someone who has been unifying the races, who has said we are one America.

He did overstep. And, again, that's why his campaign had to pull back and rephrase what he said...

BRAZILE: But, Tara, you are familiar... WALL: ... because this -- that is that is un -- but that is an unfair characterization of John McCain and the McCain campaign.

BRAZILE: Tara, you are -- you are familiar -- you are very familiar...

BLITZER: Go ahead.

BRAZILE: Tara, you're very familiar with the proxies that are often used when race is not the actual subject. And whether it's saying that he's inexperienced, he's risky, is that a proxy for race, when they raise such scurrilous...

WALL: If that's a legitimate -- if that's a legitimate question to raise, Donna...

(CROSSTALK)

BRAZILE: ... such scurrilous charges and baseless attacks?

Why not fight about the issues? Look, Senator McCain and Senator Obama disagree on many issues, the economy, the war in Iraq, health care.

WALL: Absolutely. Absolutely.

BRAZILE: Focus on those issues. But these baseless, mean attacks have no place in American politics.

(CROSSTALK)

WALL: I believe he's doing -- I believe he's doing that, Donna. And I think that it is legitimate to question whether someone uses the judgment, has the judgment, has the experience, as a three-year senator. Those are legitimate questions, Donna, that do not play on race.

They -- they are questions that can be asked and answered. And Obama should freely and has answered those questions. It is wholly legitimate. And I think that...

BRAZILE: And what do you think about the ad using...

BLITZER: All right, guys.

BRAZILE: And, Tara, what was the purpose of the ad with -- with Paris Hilton and Britney Spears, when he could have used Denzel Washington or Sidney Poitier or anyone else?

WALL: Oh, come on, Donna. That's nitpicking. Barack Obama himself scoffed at the ads and made light of them himself.

BLITZER: All right, guys.

WALL: He wasn't too offended.

BLITZER: We have got to end it, unfortunately, right there. But we will continue this conversation.

Donna and Tara, thanks very much.

Big news from space today, the very first proof that water exists on Mars, and it's pretty exciting. We will explain what's going on.

And uproar over a suggested policy change by the Bush administration that would equate birth control and abortion. How would it impact your health insurance?

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Check out how close this race is coming in our -- today's "Political Ticker."

We have three contests in three battleground states. The Quinnipiac University poll shows, in Florida, Obama 46, McCain 44, very tight, in Ohio, 46-44, very tight. He has a little bit more breathing room in Pennsylvania, 49-42.

But, Jack Cafferty, this is looking like it could be a very, very competitive race in these battleground states. Everybody remembers Ohio from four years ago and Florida from eight years ago.

CAFFERTY: Well, yes, it's also July. So, we will have to wait and see.

The question this hour: Is going negative against Barack Obama going to be a winning strategy for John McCain?

Bob in Chicago writes: "McCain is an angry old man with a nasty temper. He has no positives. He has to go negative. It appears there never was a Straight Talk Express. That was just a mirage. This is the real John McCain."

John in Colorado writes: "Although negative campaigning has been successful in previous elections, this time around, the attack ads are backfiring on McCain. The fair-minded, moderate McCain, who earned so much respect in his career, has morphed into an old bitter Eddie Haskell character. He should fire his campaign staff, reverse course, and make every attempt possible to restore his dignity."

Jake writes: "Absolutely. America is full of low-information voters who believe anything they hear. Thinking and being informed is too hard and time-consuming for us Americans. It's so much easier to just vote against someone based on distortions, lies, and negative ads."

Dee writes: "I think negativity is what is keeping the polls so close. And, anyway, he's not really being all that negative. He's only pointing out the obvious, that Obama is not experienced enough for us to put our country in his hands."

Tim writes: "If the American people buy into this fear-mongering from the Republican hatchet men yet again, we deserve what we get, another four years of catastrophically bad leadership."

And C. in Mississippi says: "Hey, Jack, from old pessimistic curmudgeon to another, going negative is definitely a winning strategy. Sometimes, you have to slap around these young whippersnappers to get your way. Take you, for example. You're a winner in my book, and look what being negative has done for your career."

If you didn't see your e-mail here, you can go to my blog at CNN.com/caffertyfile. Look for yours there, among hundreds of others -- Wolf.

BLITZER: Lots of incisive comments there. Jack, thanks very much.

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