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Palin Dragging Down McCain?; Interview With John McCain

Aired October 22, 2008 - 18:00   ET


WOLF BLITZER, CNN ANCHOR: And, to our viewers, you are in THE SITUATION ROOM.
Happening now: John McCain says, all he can do is to laugh at critics who say he is erratic when it comes to the economy. On another dismal day for Wall Street, what would McCain do to help your finances? Stand by. My one-on-one interview with Senator McCain today, that is coming up.

Barack Obama takes a detour from the economy to talk about national security and being tested in crisis. The best political team on television on whether some voters may still be uneasy about having Obama at the helm.

And Sarah Palin as a drag on McCain, a reversal of fortune for the running mate who once gave her boss a boost in the polls.

We want to welcome our viewers in the United States and around the world.

I am Wolf Blitzer. You are in THE SITUATION ROOM.


SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Homeowners are the innocent bystanders in a drive-by shooting by Washington and Wall Street, greed, excess, and corruption.


BLITZER: Senator John McCain likening the financial crisis to a deadly crime.

I sat down with Senator McCain in New Hampshire today. We talked at length about the troubled economy and a lot more. And, even as we spoke, the stock market was beginning another perilous slide, down more than 500 points at the closing bell. The McCain interview and what he is saying about your money, that is coming up in just a moment or so.

But, today, Barack Obama briefly veered away from his near- constant focus on the economy. He zeroed in on national security, surrounded by his top foreign policy advisers, the backdrop, the battleground state of Virginia.

Here's CNN's Jessica Yellin -- Jessica.


JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, Obama says this meeting with his national security advisers has been planned for weeks to keep him apprised of a whole host of international issues, but it also comes just as the McCain campaign is attacking Obama over comments made by his running mate, comments that McCain and Palin say call into question the Obama's readiness to be commander in chief.

(voice-over): Rousing cheers for Barack Obama in a state that was once considered a long shot.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: There are no real parts of the country and fake parts of the country.

YELLIN: With his healthy lead in Virginia, Obama turned today to shore up a perceived weakness, his national security experience. Obama spoke to reporters after holding a private meeting with his top foreign policy advisers.

OBAMA: To succeed, we need leadership that understands the connection between our economy and our strength in the world. Our economy supports our military power. It increases our diplomatic leverage. And it is a foundation of America's leadership in the world.

YELLIN: This turn to national security comes on the heels of his endorsement by Colin Powell.

OBAMA: General Powell is one of our finest soldiers and statesman. He has been a source of advice. And I look forward to drawing on his counsel.

YELLIN: But it also comes as his running mate makes headlines telling donors that if Obama is elected...

SEN. JOSEPH BIDEN (D-DE), VICE PRESIDENTIAL CANDIDATE: We're going to have an international crisis. A generated crisis to test the mettle of this guy.

OBAMA: You know, I think that Joe sometimes engages in rhetorical flourishes (ph). But I think that his core point was that the next administration is going to be tested regardless of who it is.

YELLIN: And it seems designed to address any lingering security concerns among late deciding voters.

STU ROTHENBERG, ROTHENBERG POLITICAL REPORT: I think there's still a sense that Senator McCain's greatest strength is national security. That's the one area where he has an advantage over Senator Obama. And so I think all that will Barack Obama is trying to do now is neutralize that issue because on every other issue, the Democrats are way ahead.

YELLIN (on camera): Now, Homeland Security Secretary Michael Chertoff is telling reporters he believes terrorists might see this change in administration as a prime opportunity to attack U.S. interests. He says that is true regardless of which man becomes president -- Wolf.


BLITZER: Jessica, thank you. Another steep and disturbing plunge in stock prices today, and it is more reason for voters to wring their hands or clutch the wallets only 13 days before the presidential election. America's economic anxiety has not been a good thing for John McCain's campaign.

I sat down with him today in the battleground state of New Hampshire, and we spoke at length about what matters most to voters right now.


BLITZER: Colin Powell was pretty biting in his criticism. He said you were a little unsure of how to deal with the economic crisis. You seemed to have, he said, a different approach every day. He sensed you don't have a complete grasp of the economic crisis the American people are going through right now. I wonder if you would like to respond to Secretary Powell?

MCCAIN: Except to say that I am happy to have the endorsement and support and belief of five former secretaries of state, Henry Kissinger, George Shultz, Jim Baker, Larry Eagleburger, and General Al Haig, and over 200 retired military generals and admirals that have supported my campaign.

I respect General Powell, but I respectfully disagree. I especially disagree when he said the comments that he made about Governor Palin, the most popular governor in America, governor who knows energy issues, $40 billion pipeline, reformer, took on the governor of her own party.

And I hope that, some time, General Powell will take time out of his busy schedule to meet with her. I know she would be pleased to meet with him.

BLITZER: But, on the economic issues, his criticism was that you were going back and forth of some of the specific issues, and he didn't like that. He thought that Senator Obama had a consistency in his approach.


MCCAIN: Well, I can do is laugh.

We have been very consistent about cutting spending, cutting taxes, and the fundamentals of our economic message. Senator Obama has been all over the place, including wanting to -- quote -- "raise taxes on only the rich," 95 percent -- tax cut for 95 percent of Americans, when 40 percent of them pay no federal income taxes as it is. You know, whatever it, he's changed. Look at the positions that he held on tax increases when he was first running in the primary, and look at them now. They are vastly different. And the fundamental difference -- and maybe Secretary Powell agrees with him -- I don't know -- but to spread the wealth around is certainly not something that I would ever do, that I would ever do.

BLITZER: Do you think -- do you agree with Ben Bernanke, the chairman of the Federal Reserve, who said this week -- he said that it is now a good time for a second economic stimulus package, seeming to join hands with Nancy Pelosi and Harry Reid. Is it a good time to do that, to come up with another $150 billion stimulus package?

MCCAIN: I will be glad to look at anything that could be helpful to our economy. I respect Ben Bernanke.

I'm sick and tired and the American people are sick and tired of the pork barrel spending. Why don't we cancel the $18 billion in pork barrel projects that we put in last year, at a minimum, and use some of that money to help stimulate the economy as well, instead of bridges to nowhere and projectors in planetariums, such as Senator Obama asked for?

He asked for nearly $1 billion in pork barrel projects. Why don't we ask those -- him to make give -- make sure that money that was given to pork barrel projects back to helping American families? And then I think that Americans would be more likely to support such a thing.

Approval rating of Congress is at 9 percent. No wonder. We have put out -- we have got a $10 trillion debt to our kids, $500 billion to China. We don't want to continue that spending practices. And Americans are sick and tired of it.


BLITZER: But you voted for that $700 billion rescue plan, or bailout plan, even though it had another $100 billion or so in unrelated expenditures that some would call pork or earmarks, whatever.

MCCAIN: Yes. So did...

BLITZER: Where would you, as president, draw the line between vetoing that kind of spending bill or accepting it because of the greater good that it also includes, as you decided in the bailout?

MCCAIN: I would have vetoed literally every spending bill, even those that I had voted for, if I were president of the United States, and made them famous, the way Ronald Reagan did.

Let's have no doubt about this situation. We've presided over the largest increase in the size of government in the last eight years than any time in history. So we can take a hatchet and we can take a scalpel and we can reduce the spending. And we can start by vetoing the normal appropriations bills. We all know that we are in a situation of severe financial crisis. And the Democrats shouldn't be proud of adding $100 billion in pork barrel spending. They should be embarrassed.

BLITZER: But you voted for it too.

MCCAIN: I had to vote for it, obviously, when we were in a situation of huge financial crisis. But we wouldn't be in the crisis we're in if a couple of things hadn't happened.

One, $10 trillion of debt, dramatically overspending, increasing the size of government, and Democrats defending Fannie and Freddie in their outrageous practices which put us into the ditch to start with. The same people that are for the rescue package are the same people that defended Fannie and Freddie, and when some of us proposed legislation to fix it. And so we should have started long ago towards vetoing these bills.

When you are in an extraordinary crisis, obviously you have to take extraordinary measures.


BLITZER: And coming up in the next part of my one-on-one interview with Senator McCain: why one I-Reporter asks him if it is hypocritical to accuse Barack Obama of socialism -- part three of the interview continuing right after this.

Also, we're going to get immediate reaction from the Obama campaign. I will be speaking with chief strategist David Axelrod. He is standing by live. He has been listening to Senator McCain. We will get his reaction.

Plus, the Palin factor -- has John McCain's choice of a running mate already come back to haunt him?

Lots going on today right here in THE SITUATION ROOM.


BLITZER: Let's back to the breaking economic news of the day, a horrible day on Wall Street once again.

My interview with Senator John McCain, we're going to continue now with part three of that interview.

As stock prices were tanking once again today, I spoke at length with Senator McCain about the financial crisis. And some of our viewers got to weigh in as well.


BLITZER: We asked some of our viewers to send us some questions, I-Reports, as we call them.

We got one from Steve Erkhart (ph) of Quincy, Massachusetts. He says he plans to vote for Obama, but he considers himself an independent.


UNIDENTIFIED MALE: Senator McCain, don't you think it is hypocritical for you to be accusing Senator Obama of being a socialist, when you also signed on to the $750 billion bailout of our financial system?


MCCAIN: Well, thanks, Steve.

We all know that we are in a severe financial crisis. And the big mistake that the administration has made now, and the secretary of treasury, is not going out and buying up these home loan mortgages that are bad, and give them back to the homeowners at a mortgage rate they can afford and stay in their homes.

It was the housing crisis that started this. It is the housing values that are going to start getting us out. During the Depression -- Senator Clinton suggested -- the Homeownership Loan Corporation, which we did -- which was an enactment of the Depression era, and we ended up having more money go back to the Treasury.

Instead, we are bailing out the banks and other institutions that were complicit in this. So, extraordinary circumstances require extraordinary action.

BLITZER: Because you do want to spend...

MCCAIN: But it was a failure. And if we had done what I wanted done, and what I have fought for, for reform and transparency, and fixing Fannie and Freddie, as I did, we wouldn't have been in the situation we are in, and I wouldn't have been faced with a decision of whether to vote for it or not. We never -- it never should have happened.

BLITZER: Because you want to use $300 billion of that $700 billion to buy up what are called these bad mortgages, and then try to renegotiate them at a reduced price. Is that too...


MCCAIN: Not try to. It's exactly what we did during the Depression. It is not a new invention.

BLITZER: But is too much federal government involvement in the free market system?

MCCAIN: Of course it is. But we are in an extraordinary crisis.

The homeowners are the innocent bystanders in a drive-by shooting by Washington and Wall Street, greed, excess, and corruption. So, why shouldn't we help? The first role of government is to help people who are in crisis or need. That is why we have government. But, if we had not done what we did to set this whole house of cards up, we wouldn't be faced with these situations we have today. I'm proud of my record of reform, taking on my own party. Senator Obama has never taken on his party on any major issue. And that is just a matter of record. And he is the most liberal senator, and the biggest taxer and the biggest spender. That's not the way out. We have stark differences.

BLITZER: We have to wrap up the interview, but I...


BLITZER: I was reminded walking in, coming here to Manchester, June of 2007, I moderated one of the early Republican debates. You were up on the stage.

MCCAIN: You did a great job.

BLITZER: I don't know about that.


BLITZER: But there were eight or 10 of you Republican candidates.

And, at that point, it didn't look very good, if you remember, for John McCain. Your poll numbers were not very good. There were some formidable challengers.

MCCAIN: They were in the tank.


BLITZER: But you came back.

We only have a few days left to go right now. Can you come back from what the polls are saying and be elected on November 4?

MCCAIN: Sure, Wolf. And we will. And we are moving up rather significantly.

But I think we will be up late. It's going to be a tough race, and -- but we're working hard. And I am confident of victory.

And, by the way, you still ask the best and toughest questions about -- more than anybody. And, so, I am glad to be on with you again.

BLITZER: I'm glad we got through some substantive issues. Senator McCain, thanks very much.

MCCAIN: We certainly did.

BLITZER: Good luck.


BLITZER: And let's get some immediate reaction from the Obama campaign. David Axelrod, the chief strategist, is joining us from the rally that just took place in Leesburg, Virginia, not far from Washington.

All right, he says, repeatedly -- and I want you to explain, David -- he says, Obama has never taken on his own Democratic leadership on any substantive issue. Is that right?

DAVID AXELROD, CHIEF OBAMA CAMPAIGN STRATEGIST: Well, that's not true in Illinois, and it wasn't true -- and it has not been true in Washington.

The first vote that he cast in -- in Washington was for a tort reform bill that many in the Democratic Party opposed, Wolf. He supported charter schools and pay per performance for teachers, which many in our party opposed. And he of course was an author of an ethics bill that leaders of both parties attacked him for supporting and opposed him on.

So, that is not even -- I mean, that's simply not true, but the important thing...


BLITZER: What about the other charge he makes, that Obama is the most liberal senator, the biggest taxer, and the biggest spender out there?

AXELROD: None of that is true. And of course it is hyperbole.

But, look, none of that is important. What is important is, what are you proposing for the country? What we have heard Senator McCain do today, as he has throughout the campaign, is support an economic theory that we have had for the last eight years that has delivered the worst economic economy in memory, the worst financial crisis since the Great Depression.

And his prescription is to do more of the same. I think the American people are rendering a verdict on that. These 35,000 people who showed up today here in Leesburg, Virginia, understand that we need change. We can't keep doing the same thing, the same trickle- down, deregulation theory that has created the crisis we have.

And yet he keeps on advocating for the same policies we have seen from the Bush administration. We have to change those policies.

BLITZER: What about this other charge he makes, David, that Senator Obama has lurched back and forth on tax cuts, changing his position from a year ago, refining it? Is he still where he was a year ago, or has he modified his overall tax structure?

AXELROD: Wolf -- Wolf, Senator Obama has been consistent from start to finish in this campaign. There's a fundamental difference between these two candidates. Senator Obama believes that the way we grow this economy and rebuild the middle class is to focus tax cuts on the middle class. Senator McCain wants to double down on the Bush policy. He wants to give $200 billion more to big corporations, $100 billion more to the wealthiest Americans, and hope that it trickles down.

It is a fundamentally different view about how we grow this economy. The thing is, we have tested his theory for the last eight years. We know what the result is, the worst record on jobs we have seen in some time, 750,000 jobs lost this year alone, and declining wages, and a generally disastrous economy. We cannot keep doing what we are doing.

BLITZER: What do you do in these final days, 13 days to go, to avoid overconfidence, looking at all these poll numbers in these battleground states? The Democrats have been overconfident in the past, only to be disappointed on Election Day. What are you and your team doing to avoid that right now?

AXELROD: Well, first of all, Wolf, we have the advantage of having been in this race for 20 months. We have been 30 points in polls at some points. We have been written out of this race. We don't pay much attention to polls.

We go out. We talk to people door to door, neighbor to neighbor. That is how -- that is why 35,000 people showed up here today, 100,000 in Missouri. We are building this from the grassroots up. And we're going to work at it every single day from now until the polls close on November 4. We are not taking anything for granted.

BLITZER: David Axelrod joining us from Leesburg, Virginia. It's a red state, but you are ahead by 10 points in our CNN/"TIME" magazine poll that we just released today. David, thanks very much. Good luck.

AXELROD: Thanks, Wolf. Good to be with you. Thank you.

BLITZER: Thank you.

Coming up, we're going to go in-depth with these new polls that are just coming out. Our own John King, he is over at the magic map with a much closer look at some of the most important states you need to keep an eye on.

And the Sarah Palin factor, has it gone from bounce to thud for John McCain?

And two planes collide over Colorado, all the makings of a horrible tragedy, but you won't believe how it ended. We will show you right here in THE SITUATION ROOM.



BLITZER: A voting group that once seemed within John McCain's grasp now is leaning Barack Obama's way. The best political team on television standing by. We will discuss whether Senator McCain can recover in these final 13 days.

And also stand by for John King and our magic map. John is going to show us where Senator McCain has his work cut out for him, based on our brand-new battleground polls.

And why Sarah Palin's attempt to dress for success may have the opposite effect, big bucks and the backlash -- all that and more right here in THE SITUATION ROOM.


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

Happening now, new poll numbers just out from the battleground state of Ohio. Remember, no Republican has ever won the White House without Ohio -- what the new numbers might mean for John McCain.

Also, Barack Obama pulling ahead with one key voting bloc, why seniors are now leaning away from the GOP and toward the Democratic candidate, all of this, plus the best political team on television.

And the Palin impact on the McCain campaign -- is the vice presidential candidate helping or hurting?

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

Right now, we have some new battleground state polls. Let's show them to you, first up, North Carolina.

In our CNN/"TIME" magazine/Opinion Research Corporation poll, we have Barack Obama ahead right now 51 to 47 percent. That is a four- point lead in a traditionally Republican state. Let's go to the next state right now, Nevada, Obama ahead here as well by four points, 51 to 46 percent.

Let's go to the critical battleground state of Ohio. Right now, we have Barack Obama ahead in Ohio, 50 to 46 percent, once again, four points, according to this latest poll.

In Virginia -- Virginia, another key battleground state -- Obama is ahead by 10 points, traditionally a red state, 54 to 44 percent in this new CNN/"TIME"/Opinion Research Corporation poll.

Finally, in West Virginia -- this is a state that Senator McCain is still doing well in -- 53 percent for McCain in West Virginia, 44 percent for Barack Obama. Let's assess what all this means.

We'll go to our chief national correspondent, John King -- John.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Wolf, all five of these states where we have new battleground polls are considered must- wins for Camp McCain. Yet it's Barack Obama leading in four of the five. Let's take a closer look, beginning with North Carolina. What Obama is doing so far in early voting and needs to continue to do is run up African-American turnout down here in the Charlotte and Fayetteville area; also, up here, college campuses and African- Americans critical to Obama's chances. Not since Jimmy Carter has a Democrat carried North Carolina. Obama with a narrow lead going into the final days.

The numbers here in Virginia are quite stunning. And as you know quite well, most of the vote -- about 25 percent of the vote in the State of Virginia will come from up here in Northern Virginia. Barack Obama at the moment running ahead of McCain two to one.

Some evidence of a Sarah Palin effect. Moderates are breaking Barack Obama's way. And nine percent of Virginia voters who identify themselves as Republicans say they plan to support the Democratic candidate for president.

The one bright spot for McCain in our new polling is over here in the State of West Virginia. A good lead there, but, again, more trouble as you move west into the State of Ohio. What is most troubling for the Republicans out here, a dead heat in the Cincinnati/Dayton area. This is where Republicans must build a cushion in statewide races. Also in this state, as well, it is 10 percent of voters who identify themselves as Republicans who say they plan to vote for the Democratic candidate. So more trouble for John McCain there.

And, lastly, we head west, out to Nevada. This is state, again, only five electoral votes, but a must-win for McCain by a more than two to one margin. Barack Obama is running ahead among non-white voters. A large Latino influx into the Las Vegas area in the last four years. That is benefiting Obama at the moment.

And another troubling sign for the Republicans, Bush narrowly carried this state four years ago. Based on his margin up here in the northwest, Washoe County, you see here a 4 point advantage for George W. Bush four years ago. At the moment, John McCain is only running 2 points ahead -- a dead heat in that state, as well.

Four of the five states, Wolf, must-wins for McCain. And heading into these final days, a lot of troubles for the Republicans -- Wolf.

BLITZER: John King at the magic map for us. Thank you.

So when Sarah Palin joined John McCain on the Republican ticket, she certainly helped move the polls his way. But now things are changing. Let's go to Dana Bash. She's standing by in the critically important battleground state of Ohio. I know you're getting ready for another McCain-Palin rally. They're going to there together. What's been shifting as far as Sarah Palin is concerned -- Dana?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, you know, you can see behind me, Wolf, the crowd. It's pretty -- it's a healthy size. What you're witnessing behind me is the Palin effect. She has been rallying the Republican base. But what the problem for John McCain is increasingly is the negative impact that she is having on voters who don't come to her rallies.


MCCAIN: I'm so proud of the enthusiasm that Sarah Palin has sparked across this country.

BASH (voice-over): What started as pure praise for his running mate has morphed into a staunch defense --


BASH: -- aimed at swing voters, increasingly less likely to vote for McCain because of Palin, especially Independent female voters McCain aides had hoped she would appeal to, like Susan McGraw.

SUSAN MCGRAW, INDEPENDENT VOTERS: I don't think he's ready for the big boys, you know, should something happen to McCain.

BASH: Palin's negatives among key voters are climbing at a stunning rate. A fresh Pew Research Center poll shows just last month, Independent voters' unfavorable view of Palin has spiked, going from 27 percent to 50 percent. Even more dramatic among Independent women, from 28 percent to 56 percent with an unfavorable opinion of Palin.

PALIN: Our opponent is someone who sees America as imperfect enough to pal around with terrorists who targeted their own country?

BASH: Pew's Andrew Kohut says rhetoric like that has backfired.

ANDREW KOHUT, PRESIDENT, PEW RESEARCH CENTER: And obviously she's been front and center in going after Obama. And I think it's hurt her.

BASH: And a new NBC News/"Wall Street Journal" poll suggests worry about Palin's experience is really dragging McCain down. Republican leaders insist she's still a plus.

MARK TRIANTAFILOU, HAMILTON COUNTY, OHIO, GOP CHAIR: And when people find out she's coming to this region, you know, our phones ring like crazy. So, you know, we still see tremendous energy. People are excited about her candidacy.


BASH: Now, it's a tradeoff that some pollsters and even some Republicans say may be too costly for McCain. Yes, Palin is having a positive effect on gathering his base. You can see behind me, there are a lot of people gathered here waiting for Sarah Palin and John McCain to start momentarily.

But the problem for John McCain, Wolf, does seem to be the fact that he needs voters to win who are in the suburbs and Independents. And as you saw, the evidence is mounting that those voters are actually moving away from John McCain because of Sarah Palin -- Wolf.

BLITZER: Yes, in significant numbers. Dana, thanks very much.

Let's bring in the best political team on television. Joining us, our senior political analyst, Gloria Borger; Steve Hayes, the senior writer for "The Weekly Standard;" and CNN political contributor, Dana Milbank, of "The Washington Post." Is she really a drag on the ticket right now, Sarah Palin?


BLITZER: What do you think?




DANA MILBANK, CNN CONTRIBUTOR "WASHINGTON POST": Hold on one second, Wolf. We've got -- we've had a discussion and you are a major newsmaker tonight with the McCain interview.

BORGER: Right.

MILBANK: We want to ask you some questions.

BORGER: We're putting you in THE SITUATION ROOM.

BLITZER: You know what? I'm supposed to be the one asking...

BORGER: No. We're asking you the questions.

BLITZER: We'll get to me in a moment. But let's assess Sarah Palin first and then we'll discuss me.

BORGER: We tried.

BLITZER: But go ahead.

MILBANK: He's in charge. He's in charge.

BLITZER: All right, go ahead. Give us -- Dana was saying something intriguing there.

Is she really, Sarah Palin -- because she did energize that base and she brought out those huge crowds...

BORGER: Right.

BLITZER: But is it now more harmful than helpful?

BORGER: I think she is proving to be a drag on the ticket. She did help gather the base. But if you look at women voters, Independent voters, even older voters seem to have questions about Sarah Palin. And I think that's why, getting back to your interview, it seemed to me that John McCain was a little bit defensive about Sarah Palin.

BLITZER: What do you think?

STEPHEN HAYES, SENIOR WRITER AT "THE WEEKLY STANDARD": Well, I think before she was picked, John McCain had to do two things. He had to excite conservatives and win Independents.

He clearly excited conservatives with Sarah Palin. I mean you go to these rallies and she's the one -- they're chanting her name before the rallies. But you've seen Independents sort of peel off. So I think Gloria is basically right on that part of it.

BLITZER: Yes, the seniors now are peeling off, as well. And that helps explain why in Ohio right now, 50 percent for Obama, 46 percent for McCain. We showed those numbers. There they are once again. McCain desperately needs Ohio and he desperately needs Virginia.

But look at this -- 54 percent for Obama in Virginia, 44 percent for McCain. These are not encouraging numbers.

MILBANK: No. I just, this very afternoon, came back from the real America, Richmond, Virginia. And it's positively surreal there in the real America. And it really looks like this could occur. You have Mark Warner sweeping to this likely --

BLITZER: He's the Democratic Senate candidate.

MILBANK: -- to the likely Senate victory there. And I mean they have not seen something like this since 1964. It's another era altogether. Hard to believe that he's -- Obama is really up front by that, but that, to me, is the biggest story.

BLITZER: All right, you wanted me to ask me a question about my interview with Senator McCain.

BORGER: Well, I want to -- first of all, we want to ask you what he seemed like. I mean all -- a lot of the polls -- although some polls are tightening, some polls are not tightening. Did he seem confident? Did he seem --

BLITZER: You know, he didn't seem overly confident, but he seem like he was determined to fight this out. And certainly his aides who were there, Charlie Black and Nicole Wallace and Mark Salter, they -- you know, they're fighting. He's been in worse situations in his life in the past.

And, Steve, you spoke with him. You had an interview with him the other day. I read your interview in "The Weekly Standard." And he didn't give me the impression he's throwing in the towel. What did he give you?

HAYES: No. I think he was tired at the end of a long day when I talked to him Sunday night. But the most interesting thing to come out of my interview, I thought, I went with a list full of questions on foreign policy and national security. And he seemed much more interested in talking about the economy, because it's issue number one.

But if you look at the polls, the one issue where he consistently leads Barack Obama is national security. I would have thought he would have been excited at the prospect of beginning that back into the discussion one way or another.

BLITZER: Yes. And, you know, and there's no doubt that Senator McCain -- you know, at least in New Hampshire, he was energized by being there, because it brings back, for him, a lot of good memories.

HAYES: Yes, I mean it's a good place to be for him at the end. He didn't seem to me profoundly energetic in the interview. He got in a nice plug, I think toughest and best interviewer. Always good to shout out to the --

BLITZER: Nice shout out.


HAYES: -- to the interviewer. But, look, you know, he was a casual guy in his open plaid shirt there. And it's -- it was a little bit of joking.

BORGER: I've got one last quick question.


BORGER: Did he seem genuinely hurt by the Colin Powell endorsement?

BLITZER: I -- you know, he didn't say that, but, you know, I sensed he was. Remember, back in 2000, he said that General Powell was the single -- the individual he admired most among, you know, living heroes. And I'm sure he felt hurt by it. Do you agree?

MILBANK: Yes. I think he seems a little stunned by it.

BLITZER: You know, I'm sure he does. All right, guys, we've got much more to talk about.

Barack Obama defending himself against his critics, insisting he's up to the challenge facing the next president.

And Ellen DeGeneres puts the candidates in a dance challenge against his own wife. His answer to her questions.

Stay with us.


BLITZER: Senator Obama playing defense -- he's confronting criticisms he's not ready for an international crisis. We'll discuss with the best political team on television.



OBAMA: Whoever is the next president is going to have to deal with a whole host of challenges internationally. And that -- a period of transition in a new administration is always one in which we have to be vigilant. We have to be careful. We have to be mindful that as we pass the baton in this democracy, that others don't take advantage of it. That is true whether it's myself or Senator McCain.


BLITZER: You know, Gloria, if you look back at history there's been many challenges early on in any new administration, from the hostile governments or terrorists or whatever.

BORGER: Well, the first challenge, though, that Barack Obama has is from Joe Biden. You know, this whole story came from his running mate, that Barack Obama was going to be tested. And it's not a question that he wants to be answering right now. He wants to be talking about the economy.

He was very artful in answering it. And part of their answer is what you just said, yes, presidents are always tested, etc. But, come on, Joe Biden. What was he thinking?


BLITZER: And even Senator Obama today said, you know, Joe Biden is known for his rhetorical flourishes.


HAYES: Right.

BORGER: That's a nice way to put it.

HAYES: Which he had to say. I mean it -- he veered so far off script predicting this international crisis and then, in a sense, saying we are going to have a weak response to this crisis and you're going to have to get our back. I mean that's really a crazy thing to say...

BORGER: Crazy.

HAYES: ...two weeks out from the election.

MILBANK: Now, of course, Obama will have a crisis in his first six months, and that will be Joe Biden's first press conference.


BORGER: Right.

BLITZER: You know Joe Biden.

BORGER: That's what Sarah Palin says.

BLITZER: You've known him for a long time.

MILBANK: We're counting on it.

BLITZER: Here, Steve, probably the most disturbing numbers in this new CNN/Opinion Research Corporation poll. The Independents very disturbing, but among elderly Americans -- and let me show our viewers. Back in September, Obama was losing decisively to McCain, 57 percent, among elderly Americans. That's 50 and older, 50 and older -- older voters, 41 percent for Obama. Right now it's basically gone the other way. Obama gets the support of 54 percent of these older, likely voters, 44 percent for McCain. And they vote. The older you get in this country, the higher the percentage of actual voter turnout.

HAYES: Yes. I'm not sure my mom and dad are going to like being described as older voters. But having said that...

BLITZER: Are they over 50?

HAYES: They're over 50...

BLITZER: All right, they're old.

HAYES: So I guess they're older voters.

BLITZER: They're very old.

HAYES: I think this number leapt off the page when I was looking through this poll.


HAYES: I mean this -- this is amazing turnaround. And we started seeing these numbers sort of creep toward Barack Obama over the past several weeks. I thought John McCain would have an opportunity to win them back by basically saying, look, that young whippersnapper over there is not ready to lead the country in a time of crisis.

He started making the case that Barack Obama was too risky, but he made it for about three days and then went off on a different narrative.

BORGER: And then the debates came.



BLITZER: You know, and if you don't get those older voters, you're not going to win the presidency.

HAYES: Yes. That's a big problem. I mean some of this is sort of the normal shift targets been going toward Obama. I'm sure he has a larger share of, you know, left-handed oboists at this point, as well. But not a shift of this proportion.

And if you look at when it really happened, it was about when the market really started to tank.

BLITZER: Yes, the economy.

BORGER: Right.

HAYES: And you've got to think a lot of these...


BLITZER: And the debates at the same time, basically...

BORGER: The debates.

BLITZER: He showed enduring those debates that, you know, he was up to it.

BORGER: Right.

BLITZER: And at least he was competing with McCain.

BORGER: So people are looking at their retirement accounts. You've got the debates. But, also, I think, getting back to Sarah Palin, I think it's older voters who feel less comfortable with Sarah Palin. They say wait a minute, he's 72 years old.

What if he's not around?

And don't forget the ads that Obama has about how he's unraveling...


BORGER: ...McCain's going to unravel your Medicare, etc. etc.

BORGER: That's a problem.

BLITZER: Guys, thanks very much.

I want to check in with Lou. His show is beginning at the top of the hour. What are you working on -- Lou?

LOU DOBBS, CNN ANCHOR: Wolf, we'll have the very latest from the campaign trail tonight examining the disparity in the poll numbers. Some polls showing Obama with a double digit lead. Two polls showing Obama with only a lead of one point and two points.

Three top political analysts join us to tell us what's really going on.

And the stock market today plummeting again. The Dow Jones Industrials falling more than 500 points. Wall Street firms at the center of our financial crisis and receiving huge sums of taxpayer money while handing out -- are you ready -- more than $20 billion in bonuses for the outstanding work, of course, done this year.

We'll be talking, also, about Treasury Secretary Henry Paulson. He's at it again. He's praising Communist China and refusing to demand that China take strong action to help the rest of the world in this global economic crisis.

Please join us for all of the day's news and much more, from an Independent perspective next -- Wolf, back to you.

BLITZER: Lou, thanks. See you in a few moments.

Sarah Palin's pricey makeover -- the GOP candidate spending $500 -- excuse me. The GOP spending $150,000 on clothes and stylists, makeup and hair.

So what did the Alaska governor get out of this?

Plus, a health alert for people who smoke. For the first time, a government panel is recommending a vaccine for some.

And in Colorado, a small plane carrying inmates collides with another aircraft. It's a story with a truly unexpected ending. We'll tell you what happened right here in THE SITUATION ROOM.


BLITZER: Let's check back with Zain.

She's monitoring some other important stories incoming into THE SITUATION ROOM right now. What's the latest -- Zain?

ZAIN VERJEE, CNN CORRESPONDENT: Wolf, an amazing story of survival. Two small planes carrying a total of six people collided in the air in Western Colorado this morning. But authorities say both planes landed safely and no injuries were reported. One of the planes was a sheriff's department Cessna carrying two inmates, a deputy and a pilot. The other was also a Cessna with two people aboard. The cause of the crash is being investigated.

For the first time, a federal health panel is recommending a vaccination specifically for smokers. The government's advisory committee on immunization practices now says adult smokers under 65 should get the pneumococcal vaccine. The shot is already recommended for anyone over 65. The vaccine protects against bacteria that cause pneumonia, meningitis, as well as other illnesses. Studies show that smokers are much more at risk of those diseases than nonsmokers.

And, Wolf, I want you to take a look at this -- Ellen DeGeneres challenging Barack Obama about his dancing.



OBAMA: And let me tell you that Michelle may be a better dancer than me, but I'm convinced I'm a better dancer than John McCain.


VERJEE: Are you a better dancer, Wolf, than either Barack Obama or John McCain?

BLITZER: Maybe John McCain, but certainly not Barack Obama. He's good.

But did you see Sarah Palin? She's got some moves, too.

VERJEE: Yes, she is...

BLITZER: Did you see her on "Saturday Night Live?"

VERJEE: Yes, I did. I did.

BLITZER: I wanted -- yes.

VERJEE: I did see that.

BLITZER: Look at Zain. Go Zain.


BLITZER: I want to see Zain dance with Barack Obama.

VERJEE: No, no, no. I'm not very good -- oh, I don't mind that.

BLITZER: You would do that, right?

VERJEE: Or with John McCain. But I would like to see Wolf Blitzer and Jack Cafferty invited on Ellen to have a dance-off.

BLITZER: Dancing. Dancing with the stars.


BLITZER: All right, stand by, Zain.

Sarah Palin's new look -- nice clothes, new shoes, but how much did it all cost?


JEANNE MOOS, CNN CORRESPONDENT: What happened is basically the campaign spent like $175,000 -- $75,000 in one trip to Neiman Marcus and $50,000 at Saks.

UNIDENTIFIED FEMALE: Oh my gosh. That's great. I'll run for V.P.


BLITZER: Jeanne Moos take a closer look at Palin's pricey make- over and gets reaction from folks on the street.

We'll be right back.


BLITZER: Jeanne Moos is coming up. But listen to this exchange that Campbell Brown had today with the California governor, Arnold Schwarzenegger, about Sarah Palin.


CAMPBELL BROWN, CNN ANCHOR: Do you think she's qualified to be president?

GOV. ARNOLD SCHWARZENEGGER (R), CALIFORNIA: I think that she will get to be qualified.

BROWN: She will get there?


BROWN: What do you mean, she's not ready yet?

SCHWARZENEGGER: You know, by the time that she's sworn in, I think she will be ready. The answer is do you have the will -- do you have the will to educate yourself? Do you have the will to get up to speed? Do you have the will and are you a sponge that absorbs information very quickly?


BLITZER: All right, the full interview coming up just over an hour or so from now on Campbell's show, no bias, no bull, 8:00 p.m. Eastern, only here on CNN. I think you're going to want to see it.

Since hitting the national stage, Sarah Palin has certainly received a major fashion makeover. And it certainly wasn't cheap.

CNN's Jeanne Moos reports on this "Moost Unusual" election expense.


JEANNE MOOS, CNN CORRESPONDENT (voice-over): Sarah Palin before, Sarah Palin after.

After what?

After her new $150,000 wardrobe.

(on camera): They spent $75,000 in Neiman Marcus in one trip, then $50,000 at Saks.

UNIDENTIFIED FEMALE: Oh, my gosh. That's great. I'll run for V.P.

MOOS (voice-over): Not since her days of evening gown competition has Sarah Palin's wardrobe gotten this much scrutiny. The Web site Politico broke the story.

Left-wing blogs were gleeful, providing slide shows that tended to accent high heels while politicians and TV anchors went out of their way not to seem well-heeled.


UNIDENTIFIED FEMALE: I have on old jeans.


UNIDENTIFIED MALE: I get my clothes at Dillard's.

UNIDENTIFIED FEMALE: Did you sleep in that suit?


UNIDENTIFIED MALE: I pay for my own.

MOOS: The Republican National Committee says it used donated money, not taxpayer funds, to buy Palin's clothes.


BARBARA WALTERS, CO-HOST: $4,716 on hair and makeup.

JOY BEHAR, CO-HOST: And that's just lipstick for the pig.


MOOS: On "The View," they laughed about it, fought about it.


ELISABETH HASSELBECK, CO-HOST: Are you looking into Joe Biden's supposed botox shots?

BEHAR: Well, that's silly. I don't think Joe -- "Joe the Plumber" wears Manola Blahnick.


MOOS: But Sarah the shocker didn't shock celebrity stylist Robert Verdi.

ROBERT VERDI, DESIGNER: Oh, I think it's easy to spend $150,000 in one fell swoop.

MOOS: A single designer suit can cost $3,000 to $6,000. An agent who handles TV news talent told us clothing allowances are often built into contracts.

UNIDENTIFIED MALE: Never anything close to this. It was in the $10,000 to $15,000 range.

MOOS: The Obamas have so far avoided embarrassing expenses. Michelle wore a $148 dress on "The View." And though he landed on "G.Q." Barack Obama insists his suits are well worn.

OBAMA: I basically buy five of the same suits and then I patch them up.

MOOS: By the way, "Saturday Night Live" wouldn't reveal how much it spends outfitting Tina Fey in matching Palin garb.

The McCain campaign says Governor Palin's clothes will eventually be donated to charity.

(on camera): A Sarah Palin used suit?


MOOS: It would be a memento.

UNIDENTIFIED FEMALE: No, no, no, no, no.

MOOS (voice-over): She could save herself some money playing the Sarah Palin dress up Web game. Accessories include hockey helmet and gun. And the next time they chant, "Drill, baby, drill!"...


MOOS: ...fashionistas can chant, "Shop, baby, shop!"

Jeanne Moos, CNN, New York.


BLITZER: Nice outfits, though, you've got to admit.

Thanks very much for joining us. I'm Wolf Blitzer in THE SITUATION ROOM.

Up next, "LOU DOBBS TONIGHT" -- Lou.