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THE SITUATION ROOM

Obama, McCain Talk Failing Economy; Sarah Palin and Tax Cuts

Aired September 16, 2008 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: And happening now: another company in peril. A stock rebound on Wall Street can't erase fears of economic disaster exactly seven weeks before America votes.
Barack Obama and John McCain are zeroing in on the financial turmoil. McCain is targeting what he calls corporate greed. Obama is targeting what he calls a stunt by Senator McCain.

And Sarah Palin's stand on tax cuts. Is she the fiscal hawk she claims to be? We are on the ground in Alaska. We're checking her record. All that and the best political team on television.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Voters and investors are on edge across the United States. They are wondering if the economy will go from bad to worse over the next 49 days. Those are the exact number of days left before the United States elects a new president.

A bit of relief on Wall Street today. The Dow Jones industrials closed up 141 points, after yesterday's 500-point plunge. Prices fluctuated when the Federal Reserve decided against another interest rate cut, at least for now.

The nation's biggest insurance company, AIG, could be the next shoe to drop. It is now scrambling for billions of dollars of cash to stay afloat. Presidential candidates campaigning in crucial battleground states today, they are focusing squarely on what is now issue number one by all accounts, the state of the U.S. economy.

We want to go first to our senior political correspondent, Candy Crowley. She is watching all of this unfold in Colorado today.

Obama is hitting McCain very hard, putting McCain on the defensive today as a result of what he said yesterday -- Candy.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: Absolutely.

And after 10 days of playing a bit of defense himself, Barack Obama is only too happy to be putting John McCain behind the eight- ball. The campaign knew all along that if they could turn the issue toward the economy, they believe that favors Barack Obama.

(BEGIN VIDEOTAPE)

CROWLEY (voice-over): Barack Obama sees an opening in the crisis on Wall Street, a way to connect on Main Street, and disconnect John McCain.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: We are in the most serious financial crisis in generations. Yet, Senator McCain stood up yesterday and said that the fundamentals of the economy are strong.

CROWLEY: McCain later said he was talking about American workers and American products, but it is the Obama campaign's favorite line now worth repeating on the ground and in the air.

(BEGIN VIDEO CLIP, OBAMA CAMPAIGN AD)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: Our economy, I think, still, the fundamentals of our economy are strong. The fundamentals of our economy are strong. The fundamentals of our economy are strong.

(END VIDEO CLIP)

CROWLEY: In Golden, Colorado, a swing area of the sort key to electoral victory, Obama offered what he called six principles to prevent a Wall Street crisis in the future, which basically boiled down to better oversight and increased regulation of financial markets, mortgage brokers and banks.

McCain has also called for something similar, but Obama questioned that commitment and used it as another opportunity to paint McCain as a tool of big business and lobbyists.

OBAMA: And referred to himself as -- quote -- "fundamentally a deregulator." Now, this is what happens when you confuse the free market with a free license to let special interests take whatever they get, however they can get it.

(CHEERING AND APPLAUSE)

CROWLEY: The inspirational rhetoric is all but gone now, less talk about hope, more about fear around the kitchen table, all designed to improve Obama's fortunes among working-class white voters, particularly women. It is an attempt to show the most reluctant of voting blocs that he understands where they live.

OBAMA: This is a major threat to our economy and its ability to create good-paying jobs and help working Americans pay their bills, to help Americans save for their futures and make their mortgage payments.

(END VIDEOTAPE)

CROWLEY: After he completed courting the working-class, Obama took off for California, where there will be a couple of fund-raisers, one of them hosted by Barbra Streisand. The McCain campaign didn't take long to respond to that, with John McCain himself saying he would rather be talking to working men and women than out there with all those celebrities -- Wolf.

BLITZER: The Obama campaign could raise $9 million alone tonight at that fund-raiser.

Candy, stand by.

John McCain is trying to prove that he does in fact understand American's economic pain. And he is now some getting a help from the crowd-drawing running mate. That would be the governor of Alaska, Sarah Palin.

Ed Henry is traveling with McCain in Ohio right now.

After some stumbles, apparently, they're trying to get their act together. They're going forward, this Republican ticket. What's the latest, Ed?

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: Well, it is interesting.

Yesterday -- Wolf, yesterday in Florida, John McCain had a solo rally on his own and there were some empty seats in Jacksonville. Today, here in Ohio, a packed crowd, very loud, raucous because he had Sarah Palin at his side. I can tell you, when Sarah Palin wrapped up her remarks and John McCain was speaking, some people were filing out of the room as if they had already heard the top act after Sarah Palin finished.

The McCain camp, though, is banking on the fact that there is a lot of chemistry and energy when they come together.

(BEGIN VIDEOTAPE)

HENRY (voice-over): Reunited, and it feels so good, John McCain back on the trail with Sarah Palin, who draws much larger and louder crowds than he does solo.

UNIDENTIFIED MALE: The next president of the United States, John McCain!

HENRY: They enter to the strains of "Rocky" and immediately came out swinging over the economy.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: We also need serious reform on Wall Street, and John McCain is the guy who will get it done.

(CHEERING AND APPLAUSE)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL NOMINEE: We are going to put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street and America. We are going to put a stop to it.

(CHEERING AND APPLAUSE)

HENRY: Here on the road, they are running as outsiders.

PALIN: With your vote, we are going to Washington, D.C., to shake things up.

(CHEERING AND APPLAUSE)

HENRY: But McCain's latest solution to fix the economy comes straight from inside of the beltway, appoint a blue-ribbon panel in Washington to probe Wall Street.

MCCAIN: We have to assure every American that their deposit in a bank is safe. We have to have a 9/11 Commission. And we have to fix this alphabet soup of regulatory agencies that is left over from the 1930s.

HENRY: In Colorado, Barack Obama jumped all over that idea.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL NOMINEE: Senator McCain offered up the oldest Washington stunt in the book. You pass the buck to a commission to study the problem.

(LAUGHTER)

OBAMA: Now, here's the thing. This isn't 9/11. We know how we got into this mess. What we need now is leadership that gets us out.

HENRY: Obama senses an opportunity to seize the momentum back by touting the fact his tax cuts would put more money in the pockets of middle-class voters. But McCain and Palin note, Obama also wants to raise taxes on the wealthy, which could further damage an already teetering economy.

PALIN: His tax plans really would kill jobs and hurt small businesses and make even today's bad economy look like the good old days.

(END VIDEOTAPE)

HENRY: Now, on "AMERICAN MORNING" today, you heard John McCain there floating the idea of a 9/11-style commission to look into this whole mess on Wall Street, but quite interesting that, at this rally in Ohio, McCain did not mention it, hours after Barack Obama had hammered away at the idea of a commission, saying it was not good enough.

It gives you a sense maybe the McCain camp is pulling back. They realize it's not necessarily a winning line out here on the stump, Wolf.

BLITZER: I suspect you are right. Ed Henry reporting for us from Ohio, thanks very much.

Let's go to Jack. He has got "The Cafferty File" in New York.

JACK CAFFERTY, CNN ANCHOR: Well, maybe he decided we don't need a commission, because, to paraphrase John McCain, the economy is strong, right?

BLITZER: Fundamentally strong. The fundamentals are strong. (CROSSTALK)

CAFFERTY: Fundamentally strong. Yes, yes, don't need no commission. Economy is strong.

Bear Stearns, Lehman Brothers, Merrill Lynch, AIG, Fannie Mae, Freddie Mac, the crisis on Wall Street is enough to rattle any investor, let alone somebody who is about to retire or who is already living on fixed income -- 401(k)s and pension plans, many of which have exposure to these troubled companies I just mentioned, are taking huge hits as a result of this fundamentally strong economy.

Luckily, we have the safety net of Social Security to fall back on, at least for now. Remember, four years ago, President Bush made a big push to partially privatize Social Security, you know, so we could then individually invest our future with those great minds on Wall Street.

It failed back then, but that concept could still very much become a reality, because, you see, John McCain also supports supplementing Social Security with private investment accounts. His opponent, Barack Obama, does not.

Here is the question. In light of the failures of large financial institutions, is privatizing Social Security a good idea? Go to CNN.com/caffertyfile. Post a comment on my blog -- Wolf.

BLITZER: See you soon, Jack. Thank you.

Let's go out to Media, Pennsylvania, outside of Philadelphia. Right now, Joe Biden is speaking about the economy right now.

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL NOMINEE: We have watched the military, the bravest, best military we have ever had in our history, stretched so thin, so thin, that the United States chairman of the Joint Chiefs of Staff says we are in trouble. We are breaking, breaking the Army.

That is not coming from Joe Biden. That is coming from our Joint Chiefs of Staff, ladies and gentlemen. And how many times, how many times have we deployed your neighbors and some of you one, two, three, sometimes up to five times deployed.

You know, just as George Herbert Walker Bush was nicknamed Bush 41, and his son was known as Bush 43, John McCain, if he wins, will easily become known as Bush 44.

(CHEERING AND APPLAUSE)

BIDEN: Because, ladies and gentlemen, take a hard look -- take a hard look at the positions John, who is a friend of mine -- John and I, we have been friends since before he went to the Senate. John is a decent, honorable man. He served this country with honor and nobly. He deserves our respect.

But America deserves more than a brave soldier. It deserves a wise leader, a leader who understands our problems.

(CHEERING AND APPLAUSE)

BIDEN: And, ladies and gentlemen, on the issues, on the issues that most people in my neighborhood, the places I grew up, talk about at their kitchen table, the issues like, can we afford tuition for college, how are we going to pay for mom's MRI, is the company really going to drop our health insurance, are they really going ship our jobs abroad, how are we going to heat our homes, how are we going to heat our homes this winter -- I was in Marshallton, Delaware, the place I represented as a county and official and now represent as a United States senator.

I was at a gas station in Marshallton. The first guy that walked in, in Delaware, I run -- and those of you who know Delaware, I run as Joe. That is the only thing we put up, is just Joe. And so, I am standing there because it's a small state. Everybody knows you. And I'm standing there at the gas pump. And the first guy who comes, I happen to know.

I said, Charlie, how you doing? I said, how much does it cost to fill up your tank? And he looked at me and he said, I don't know, Joe. True story. And I said, you don't know? He said, Joe, I never have enough money to fill it all the way up.

Ladies and gentlemen, those things, those issues we discuss, as ordinary as they are profound, John McCain, John McCain is profoundly out of touch. Let me...

BLITZER: All right, so, there you have the gist of what he is saying. He's going after John McCain on the economic issue. That is issue number one. We will continue to monitor Senator Biden.

Remember, earlier in THE SITUATION ROOM, we heard from Governor Palin. She was speaking out on the campaign trail today a well.

So, what is real and what is rhetoric? We are checking the facts about Governor Palin's tax record in Alaska. Stand by. We will go out to Anchorage.

And some political observers are wondering right now, is Joe Biden really the best vice presidential pick for Barack Obama?

And get this. If you own or have heard of a BlackBerry, a top aide to John McCain says you should thank John McCain. He says McCain helped create the BlackBerry. Will this spark a kind of Al Gore created the Internet controversy?

Stick around. We're watching everything right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: These days, Governor Sarah Palin is not only talking about jobs. She's also talking about taxes, and she is touting her record as the governor in Alaska and as the mayor of a small town there.

We are trying to separate the real from the rhetoric on whether or not she cut or raised taxes.

Jessica Yellin is joining us from Anchorage -- Jessica.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, in this tough economic environment, taxes have become a big part of the debate on the campaign trail. So we took a closer look at Governor Palin's record on the issue.

(BEGIN VIDEOTAPE)

YELLIN (voice-over): Governor Sarah Palin vows, if she and John McCain are elected, they will slash taxes.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL NOMINEE: We are going to bring tax relief to all Americans.

YELLIN: And she says her record in Alaska proves it.

PALIN: I am returning a chunk of that surplus straight back to the people, because they can spend it better than government can spend it for them.

(CHEERING AND APPLAUSE)

YELLIN: Alaska has no state sales tax, no state income tax, and no statewide property tax. So, what taxes did Palin cut as governor?

LT. GOV. SEAN PARNELL (R), ALASKA: It started with her first year, when she introduced a studded tire tax repeal, business license fee reductions. It's culminated this year in a gasoline tax suspension.

YELLIN: That is true. Eliminating that tire tax saves drivers $5 on each winter tire. The gas tax saves them eight cents a gallon for a year.

On the stump, John McCain says Obama wants to raise taxes, and he singled out Obama's proposal to place a windfall profits tax on oil companies.

MCCAIN: And he is convinced that the 1970s-style windfall profit tax is just what America needs.

YELLIN: Palin instituted exactly that kind of tax here, giving some of the money back to Alaskans. Checks arrived last week, and it has made her popular.

And what about this claim?

PALIN: Property taxes were way too high, so every year in office, I cut the rates for six years in a row.

YELLIN: As the mayor of the town of Wasilla, Palin did cut property taxes repeatedly, but she raised sales taxes to finance an ice skating and sports arena which is still in the red. She improved city infrastructure, but left the city still in debt. Partisans are divided on the question, is Palin a fiscal conservative?

BILL WIELECHOWSKI (D), ALASKA STATE SENATOR: I would Governor Palin is a fiscal conservative in the same vein as George Bush.

UNIDENTIFIED MALE: Well, actually, she's the fiscal hawk in the House.

(END VIDEOTAPE)

YELLIN: On the topic of taxes, Wolf, Governor Palin is the only candidate of the four who has not yet released her personal tax returns. The campaign says they will release them on their own timetables -- Wolf.

BLITZER: Thanks very much for that, Jessica Yellin, reporting.

From one vice presidential nominee to another. Now that Governor Palin has ignited the Republican base -- and she certainly has -- some political observers are wondering if Joe Biden was the wrong pick.

Let's go Carol Costello. She is working this part of the story -- Carol.

CAROL COSTELLO, CNN CORRESPONDENT: You know, that is speculation, Wolf, that really adds up to nothing. Joe Biden is Barack Obama's V.P. pick and he was front and center today, making the rounds on the morning talk shows. He's trying to take the spotlight off that other V.P. candidate and put it on Barack Obama. So, how is he doing?

(BEGIN VIDEOTAPE)

COSTELLO (voice-over): Sarah Palin seems to be a game-changer.

PALIN: Guys and gals...

COSTELLO: Her star burning so brightly, a piece of toast that bears her likeness is on eBay.

And Joe Biden. Joe who? Joe who has become Mr. Attack Dog.

BIDEN: John McCain could easily become known as Bush 44. America needs more than a great soldier. John McCain is profoundly, profoundly out of touch with the American people.

COSTELLO: Note, Senator Joe attack dog did not mention the pit bull with lipstick, but Senator John McCain. And that has turned the spotlight just a little on Biden and his own track record, like how he dropped out of the 1988 presidential race after he plagiarized a British politician's speech, and how he voted against the first Gulf War, opposed the surge in the latest war. And there are questions about earmarks and why Biden has only disclosed one year of earmarks for his home state of Delaware, $342 million for 2009. BIDEN: We have no Lawrence Welk museums. We have no bridges to nowhere in Delaware. It is all straight up.

COSTELLO: Still, analysts say not much about Biden's record or the candidate himself will resonate with the voters like say they have with Sarah Palin.

LARRY SABATO, DIRECTOR, UNIVERSITY OF VIRGINIA CENTER FOR POLITICS: He has been in the Senate for 36 years. He is a part of the furniture of the Senate. And, you know, for that reason, he just does not interest most people.

COSTELLO: And that in part is why some Democratic voters say Obama should dump Biden for Hillary Clinton, like George McGovern dumped Thomas Eagleton back in '72, when his medical came to light.

Biden himself fueled speculation he should go.

BIDEN: She is easily qualified to be vice president of the United States of America. And, quite frankly, it might have been a better pick than me.

COSTELLO: But despite it all, analysts say that is more than a long shot.

STUART ROTHENBERG, EDITOR AND PUBLISHER, "THE ROTHENBERG POLITICAL REPORT": These were important initial decisions that these men made, the presidential nominees of their parties. They cannot acknowledge that they were wrong.

(END VIDEOTAPE)

COSTELLO: So Joe Biden will remain the pick. One Democratic insider close to Hillary Clinton told me today Joe Biden is now doing a great job. The frustration is that Barack Obama has not sent Joe Biden out in attack mode earlier. He hopes Biden continues on this track -- Wolf.

BLITZER: It's a little late to start changing the ticket now. In several states, those presidential ballots are already being printed out with the respective names.

All right, Carol, thanks very much for that.

Her supporters suggest she is the focus of a political witch- hunt. The investigation hanging over Governor Sarah Palin takes a new dramatic turn today. You're going to hear what is going on.

And Barack Obama will be hanging out with some pretty rich and famous people later tonight out in Los Angeles. We will tell you what is going on.

And surprising health news regarding President Bush. You may have noticed the spot on his forehead. We will tell you what it means. Lots of news happening right here on THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWS BREAK)

BLITZER: Republicans argue, Sarah Palin is certainly qualified to be vice president of the United States, but a top McCain ally, an economic adviser to McCain, says Palin could not necessarily cut it as a CEO.

McCain and Obama are in a red-hot battle over who is better equipped to help Americans in economic pain. Who is sending the strongest message? The best political team on television is standing by.

And Barbra Streisand lends her voice to help elect Barack Obama. Could that be music to McCain's ears?

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

(COMMERCIAL BREAK)

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

Happening now: One of the world's largest insurance company, certainly the largest one in the United States, AIG, now on the verge of collapse, an American bankruptcy that would send shockwaves across the economy unlike anything we have seen so far. Stand by.

Also, celebrities and lipstick are out; the economy is in. John McCain and Barack Obama, they are waging a new battle on the issue that impact all Americans.

Plus, a top McCain adviser says Sarah Palin is qualified to be vice president of the United States, but not qualified to be a CEO -- all of this, plus the best political team on television. I'm Wolf Blitzer. You are in THE SITUATION ROOM.

Right now, the largest insurance company in the United States and certainly one of the largest in the world, AIG, is in a mad scramble for some huge amounts of cash, facing possible collapse if it comes up short. The financial pain from that failure would be widespread and deep, would affect all of us in one way or another.

Let's go to Mary Snow. She is working this story for us.

All right, Mary, explain what is going on. What's the latest?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, the latest is that insurance giant AIG says tonight in a statement it's working on ways to increase short term liquidity. It might need to raise up to $75 billion. Now hopes that AIG might be rescued rallied stocks today, this after a rocky day on Wall Street as it braces for the outcome of this latest crisis.

(BEGIN VIDEOTAPE)

SNOW (voice-over): At the center of the drama on Wall Street, the fate of American International Group, AIG, the world's largest insurance company is frantically trying to raise enough cash to stave off bankruptcy. This on the heels of the collapse of investment bank Lehman Brothers. Many on Wall Street warned a failure of AIG would be far worse and hope the government would provide some sort of life raft.

BOB LENZNER, NATL. EDITOR, FORBES MAGAZINE: AIG has transactions all over the world with banks, investment banks, insurance companies, hedge funds and multinational companies. They can't afford to let it go bankrupt.

SNOW: AIG has businesses in some 130 countries that span from insurance on mortgages, cars, life insurance to airplane leasing. A blow to them would triple widespread ripple effects, adding to the crisis three credit agencies downgraded AIG's credit rating, making it tougher to borrow money.

PROF. PETER MORICI, UNIVERSITY OF MARYLAND: If AIG fails because it has inadequate money to back up all of the foreclosures that are taking place, then it creates problems for the big banks in New York. They don't have enough money.

SNOW: As worries mounted, the Federal Reserve decided not to cut interest rates. It said strains in financial markets have increased significantly and noted worries about inflation is a reason why it left interest rates unchanged.

ALAN BLINDER, FORMER FED. RESERVE VICE CHMN.: A lot of people thinking the fed would cut interest rates. I think if the stock market and the other markets had really been disastrous today, maybe they would have.

(END OF VIDEOTAPE)

SNOW: Some economists say the Federal Reserve's decision not to cut interest rates may have calmed some fears of a worsening financial crisis by sending the signal it didn't feel more economic stimulus was necessary right now. Wolf?

BLITZER: Mary Snow working the story for us. Thanks for that explanation. The economy as we all know that's issue number one according to all of the polls out there on the campaign trail with the Obama campaign hammering John McCain very hard right now. McCain is fighting back though. Are the campaigns finally back to some real issues. Let's talk about that and more with our CNN senior political analyst Gloria Borger, and the Christian Broadcasting Network's senior national correspondent David Brody and our senior political correspondent Candy Crowley. They're all part of the best political team on television. Gloria, it seems that Barack Obama and Joe Biden they founded a message on a substantive issue, the economy, in which they are hammering away at John McCain.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Yeah, I think they are really glad not to be talking about lipstick on a pig and other things, Wolf. This is back to their issue terrain. But you know they have to still prove to the American people that they are fighters who will fight for you. Today, Obama came out with some very specific ideas, talking about how he would regulate Wall Street, things that we have heard before. Establishing the differences with John McCain, but McCain has made himself into a maverick and a fighter. And that in talking to democrats is what they think is still lacking from Obama. We will have to see this week how it plays out.

BLITZER: You are out there on the campaign trail with McCain, David, right now do they seem to be on the defensive as a result of what McCain said yesterday, the fundamentals of the U.S. economy he says remains strong?

DAVID BRODY, CHRISTIAN BROADCASTING NETWORK: Well, defensive to a point, Wolf. I mean defense in the sense that you know today, Sarah Palin and John McCain both talked about the economy at length. You heard McCain talk about I'm a fighter, I'm a fighter, I'm a fighter, they talked a lot about that today. You know Wolf, I have to tell you, I mean I looked at John McCain's website today, and all of these plans he has for the economy, it's all there on his website and there's a lot of stuff there. The problem that the campaign seems to have is that they have not been able to articulate that as much in a stump speech. They have to work on that a little bit more it seems to me to be able to synthesize and say, listen, I am different from the president and I am going to show you exactly what we're all about. It's there on the website, but you know what, people aren't going to the website, they're listening to the 14-second soundbites, Wolf.

BLITZER: Is that because, David, as some of his critics suggest, he really is so much more comfortable talking about foreign policy than he is talking about the economy?

BRODY: Right. Oh I don't think there is any question about it, Wolf. I also think you know part of the problem for McCain is that he has to watch it in terms of the economic gaffe lines. I mean, for example, McCain wants to talk obviously about foreign policy issues and when of course Georgia was in the news with Russia we saw that it upticked for McCain. And now here he is having to be kind of in a defensive mode, and they need to somehow figure out how to turn this around. I think the way they have to go about and do that is maybe to a degree Wolf, talk a little bit about, who John McCain is going to surround himself with from an economic adviser standpoint. Don't go the Phil Graham route, necessarily, obviously, don't do that, but forward looking. Who is he going to surround himself within the administration.

BLITZER: You know, Candy, we heard James Carville in the last hour, he is always a little bombastic, but he flatly said that September 15th, that would be yesterday, was the day this campaign changed, that Barack Obama would be guaranteed to win provided he didn't have some sort of major gaffe over the next 49 days precisely because John McCain said to the American people the fundamentals of the economy are strong. Now James sometimes can go out there on a limb, but are the Obama people that confident right now that things have changed?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONENT: Well, look, they certainly believe that they are now on their terrain as Gloria said. They believe that when you focus on the economy and all of the things that are wrong with the economy, people naturally turn to democrats who are more interventionists on things like this. That they will look more closely at McCain. But the problem with the Obama campaign as described to me by outsiders, these are not people inside the campaign, but leaders in the democratic strategist, democratic officials, they say what he needs to do is he needs to be able to come out and say, look, on the back of the business card, I can tell you what I am going to do for you. They think that it hasn't focused enough yet. That the people still are unclear, you can have all of the plans you want, but they need to sort of clearly lay out a here is what I am going to do. Now the Obama people obviously think they have done that, he had a very extensive speech today, but basically democrats say he has to winnow that down. Certainly they are hoping that James Carville is right. They are not about to go that far, but this is the conversation they want to have.

BORGER: You know, the problem, Wolf in a nutshell is that they were ahead in double digits on who is best able to handle the economy coming out of the democratic convention. We have seen that lead on the economic issue be whittled down to single digits somewhere between three or seven or eight points, which given what's going on in the country should be a lot higher. So they know something is not connecting.

BLITZER: All right. Stand by guys, because I want to continue this. But we will take a quick break. We'll continue on the other side, and republicans are also arguing that Sarah Palin is certainly qualified to be vice president of the United States, but a top McCain ally, a senior economic adviser says Palin couldn't cut it as a CEO. What's going on? Our question to you this hour, in light of the failures of large financial institutions, is privatizing social security a good idea? That is Jack's question, his e-mail, lots more coming up here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's go right back to the best political team on television. David Brody, I'm going to throw this to you, Carly Fiorina, the former chairman and CEO of Hewlett Packard, now a senior economic adviser to the McCain campaign was interviewed today by a radio station in St. Louis, KTRS and she had this exchange, take a listen.

(BEGIN AUDIO CLIP)

UNIDENTIFIED MALE: Do you think she has the experience to run a major company like Hewlett Packard?

VOICE OF CARLY FIORINA: No, I don't. But you know what, that's not what she is running for.

(END OF AUDIO CLIP)

BLITZER: All right. She was referring to Sarah Palin, the republican vice presidential nominee. Wow. BRODY: Yeah, wow, Wolf. I mean, you know, it was a no, I don't, and how about a dot, dot, dot, and this isn't germane to the discussion or something like that. I mean it was just so directly against Palin. It was -- you know, somewhat, and I mean add it to the list of gaffes, the Phil Graham hall of fame, it goes right in there. And so you know this is the problem for the McCain campaign and the reputation, and look, Wolf, this is all about impressions, right, I mean Phil Graham, Carly Fiorina. I mean it goes down the list now and the Obama campaign is saying, well thank you for that softball. I mean it was a gaffe, there's no doubt about it, Wolf.

BLITZER: And she may have gotten herself deeper into that hole, Candy, because later she said a major corporation is not the same as being the president or vice president of the United States and it is a fallacy to suggest that the country is like a company. So of course to, run a business you have to have a lifetime of experience in business, but that's not what Sarah Palin, John McCain, Joe Biden or Barack Obama are doing. So she is basically saying none of them are qualified to be a CEO, Candy.

CROWLEY: Well, and had she said that sort of at the top, had she said no, and neither is Joe Biden and neither is, you know, had she done that, I mean this is the problem coming from Hewlett Packard is that, you know, politics sometimes is about the art of the soundbite and she doesn't hear that and Phil Graham who should know better, didn't hear that. They don't hear their own soundbites, sorry, but this is the way it works in politics, and she needed to put that part up with the no and say, it's a whole different skill set, that's not what they're running for, but she didn't do it, so of course that one soundbite is out there.

BORGER: Wolf, first rule of holes, stop digging. She was in bad enough the first time, then she made it worse. I don't know if we're going to see her out there a lot anymore. You know McCain made his own mistakes this week on the economy, saying the fundamentals are strong. This is the last thing he needed.

BLITZER: Here is what the Obama campaign, Bill Burton responded he said, "If John McCain's top economic adviser doesn't think he can run a corporation, how on earth can he run the largest economy in the world in the midst of a financial crisis." Apparently even the people who run his campaign agree that the economy is an issue John McCain doesn't understand as well as he should." So David, you're out there on the campaign trail with John McCain right now, is this going to be a little issue, a big issue, I mean it sort of plays into this whole debate that's going on right now?

BRODY: Well, you know, obviously, they're going to downplay it, but it was interesting Wolf, today because you know his whole speech today was about the economy, but specifically, Wolf, he was talking about Barbara Streisand and it was interesting, because he is talking about how Barack Obama is jetting off to have cocktails with Barbara Streisand while he is here with the working people of Ohio. So it seems like he's going to play that card quite often and hopes that it resonates in the (INAUDIBLE), I think that's a big part of what's going on here. BLITZER: And he is referring, Candy to that big fundraising event tonight Barbara Streisand out in Los Angeles. They're going to raise about $9 million for Barack Obama. I guess that money will be -- they like the fact that it's going to be a lot of money, even though there could be a downside in terms of the glitter and the glamour.

CROWLEY: Well, there is a reason only one cool reporter is being allowed into that and no cameras. So, yes, they understand that, you know, if you have been fighting the elite image that it doesn't really help to go out there and have Barbara Streisand be your headliner. But honestly they need the money, this is a lot of money and there will be no pictures. Really hard to kind of keep that thing going without the pictures kind of up there with the Hollywood elite. So I don't know that this has a lot of traction.

BLITZER: But these are people who need people, right? [ Laughter ]

CROWLEY: Exactly. These are people who need money.

BRODY: Someone has a cell phone camera.

BORGER: I can't sing. Wolf, you'll have to sing.

BLITZER: All right, I'm not going to sing either. All right guys, thanks very much.

In light of the failures of large financial institutions, is privatizing social security really a good idea? Jack Cafferty is standing by with your e-mail on this hour's question. And an adviser claims that John McCain helped invent the blackberry. Let me repeat that, an adviser says John McCain helped invent the blackberry and now the candidate, himself, is weighing in. Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Lou Dobbs is getting ready for his show that begins right at the top of the hour. He has a little preview for us. Lou, what are you working on?

LOU DOBBS, CNN ANCHOR: Wolf, coming up at the top of the hour, we'll have much more on the presidential campaign. What these candidates are saying about this economy of ours and what they're going to do about it.

Also, the food and drug administration refusing to accept rising evidence that a common chemical in plastics is dangerous to our health and could cause serious illness. We'll have that special report.

And a major victory today for opponents of policies that give cheaper tuition to illegal aliens and preferential treatment that is denied to American citizens. We will have that report. What is our automobile industry? Well, they are fighting back. General Motors unveiling a potentially world-beating electric car, the volt, an American car company competing. We'll be telling you all about it. Among my guests here tonight, best selling author (INAUDIBLE), author of the new book "Book of Faith." He has provocative insights on this nation's failure to secure our borders and ports as well. Join us for all of that 7:00 eastern right here on CNN. For all the days news as well from an independent perspective. Wolf, back to you.

BLITZER: See you in a few moments Lou, thank you. Let's go back to Carol right away, she's monitoring some other stories, including a developing story. Carol, what is happening?

CAROL COSTELLO: I wish I could tell you much more than I have right now. All I know is the associated press is reporting a small plane has gone down in Mexico. That plane was carrying Mexican and U.S. officials, but no more information is available as of yet than that. I wish I could pass along more. Of course, we will keep following this story, but this is the little I know. In Mexico, a plane went down killing all four aboard, including Mexican officials and officials from the United States.

Let's head out to Texas now, because there are long lines of cars and lots of frustration. People lined up in cars trying to get a glimpse of what hurricane Ike left behind. Thousands of people are still in shelters and 1.5 million customers are without power. President Bush toured the hardest-hit areas today and promised the government will work as fast as it can to aid recovery. Officials want residents to leave the most devastated areas like Bolivar peninsula and Galveston.

General Ray Odierno is now in command of U.S. forces in Iraq. He takes over for General David Petraeus who was credited with halting Iraq's slide into an all-out civil war. The new general says he's encouraged by the progress in Iraq, but stresses, it's in a fragile state and much more needs to be done. Back to you.

BLITZER: Carol, thanks very much. General Raymond Odierno, very good guy. We'll be talking to him, hopefully, in the future, not that far off. Let's go back to Jack. We'll talk to him right now, because he's got the "Cafferty File." Jack?

JACK CAFFERTY: The question this hour Wolf, in light of the failures of large financial institutions, is privatizing social security a good idea? Juliana writes, "You're delusional to think about dismantling our nation's only financial safety net for retirees during this time of economic instability. Privatization is a capitalist concept driving only by avarice and greed. I already suspect my hard earned 401(k) monies are a pyramid scheme for the rich. So please don't give them our social security dollars to squander on risky investments as well." Jonathan writes, "Social security is just that, social security. By privatizing social security it does nothing more than remove that fundamental principal upon which it's based." Gale in New York, "Given the level of ineptitude, deliberate blindness and general lemming tendencies of most Americans, no. We're just too stupid to do this on our own." Grace writes, "If it wasn't for FDR and social security, I would be living with my Republican children. Enough said." M.J. writes, "Why don't we just give McCain and Phil Graham all our money and then they can just put us in camps and then ration our food and blankets? No, I don't want them gambling with my social security. Haven't they done enough?" Steven says, "If you like all the excitement we've seen in our economy, culminating in the last few days' excitement on Wall Street, you're going to fundamentally love the excitement to your retirement plans brought about by the privatization of social security." And Jan in Illinois, "I just received my first check last month. After 45 years of working it's not much, but I need every penny. If there's any chance of privatization, well I can't take the risk of not having this money. $581 a month isn't much but it beats the hell out of nothing."

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: Jack, thanks very much. See you back here tomorrow. Jack Cafferty with "the Cafferty file."

Barbara Streisand, as we've been reporting, is adding her voice and her star power to raise cash for Obama's campaign. The Obama camp confirms Streisand will sing at one of the two democratic fundraisers in L.A. tonight. Obama reportedly plans appearances at the events, which could raise a total of more than $9 million. John McCain mocked Obama today for cozying up to Streisand and other quote celebrity friends.

We're told Senator McCain had a laugh today when he heard that one of his top advisers suggesting that the candidate helped "create the blackberry." The adviser said McCain's work on the senate commerce committee opened the door to new technology. McCain has famously acknowledged being a novice of using the internet and e-mail. Another McCain aide says that any claim that the republican created the blackberry was simply a bone-headed joke. The joke told earlier today. Allies of republican vice presidential nominee Sarah Palin are ratcheting up efforts to discredit an investigation into alleged improprieties in her firing of Alaska's public safety commissioner. Just a short time ago in Anchorage, five republican state lawmakers filed suit to block an investigation. The suit calls the investigation -- and I'm quoting now -- "unlawful, biased, partial, and partisan." Palin is battling allegations that she and her advisers pressured the then public safety commissioner, Walt Monegan to fire a state trooper going through a bitter custody dispute with her sister, and that Monegan was terminated when he refused. Remember, for all the latest political news any time, check out cnnpolitics.com.

Some high-profile companies in deep trouble right now on Wall Street. Stand by. Jeanne Moos will take a closer look back at some of their now ironic ad slogans.

And posing with Senator McCain, that and more on the days best photos, coming up on our hot shots.

(COMMERCIAL BREAK)

BLITZER: Let's take a quick look at this hour's "hot shots." In Massachusetts Senator Ted Kennedy shakes hands with a poll worker after voting in the statewide primary. Kennedy has been undergoing treatment for a brain tumor. In Miami, a woman poses with a cardboard cutout of Senator McCain after becoming an American citizen. In Colorado a reporter tapes an address by democratic presidential candidate Barack Obama. And aboard the Amtrak Acela train with vice presidential candidate Joe Biden. There he is. Some of this hours "hot shots," pictures often worth a thousand words.

So, what's in a slogan? Judging by recent events on Wall Street, sometimes not very much. CNN's Jeanne Moos has a most unusual look back at the advertisements of some fallen corporate giants.

(BEGIN VIDEOTAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Stock market shock market. You know what gets me? The advertising for all these financial companies that flop.

No adversity lasts forever.

MOOS: You know in retrospect, all those ad slogans really do seem like bull. Take Merrill Lynch.

Merrill Lynch, for all intents and purposes, is gone.

MOOS: But what will never be gone is that old slogan.

Because at Merrill Lynch, we're bullish on the future.

MOOS: That one even made it into the ad slogan hall of fame at number 16. Then there's AIG, the insurance giant everyone's worried about.

AIG really gasping for air.

If AIG goes down --

Financial homicide.

MOOS: What really should be murdered is the slogan.

The AIG companies, the strength to be there.

Does your retirement plan provide predictability of income and protection against market risks?

Buddy, we're with AIG.

Oh.

MOOS: Should have said "uh-oh." But investors seem to be taking stock market losses in stride.

UNIDENTIFIED MALE: Oh, I've lost a lot of money, yes, a lot of money. But I'll get it back. It's in the hundreds of thousands.

MOOS: It's enough to cause this guy to rename his 401(k). Have you lost much money in the past couple days?

UNIDENTIFIED MALE: No. At the moment, I've got a 201(k).

MOOS: A 201(k). Now that Lehman Brothers has failed, folks are putting souvenirs like key chains and stress balls from the famed investment bank on eBay. There's a mouse pad that says "safe." A former employee put up this mug with the Lehman Brothers slogan, "Where vision gets built." And talk about a vision, some jokester offered a piece of toast with L.B. for Lehman Brothers on one side and B.S. for Bear Stearns on the other. Wall Street tourists are still bullish. Bullish on every angle of the famed bronze bull, and not everyone dreads getting their brokerage statement.

UNIDENTIFIED MALE: What he's currently eating is our Merrill Lynch statement and I wanted to show you his temper tantrum.

MOOS: Let's hope that's not his college fund. Jeanne Moos, CNN, New York.

(END OF VIDEOTAPE)

BLITZER: Always lots of material for Jeanne Moos. Thanks to Jeanne for that. Remember, you can always check out our SITUATION ROOM screen saver and stay up to date on the latest political news at the same time. Here's what you do, you download the screen saver at cnn.com/situationroom. You'll enjoy it. You'll like it. Do it. I'm Wolf Blitzer reporting in THE SITUATION ROOM. Up next, "LOU DOBBS TONIGHT." Lou?