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JUDY WOODRUFF'S INSIDE POLITICS

Economic/Employment Figures Become Campaign Fodder; Courting The Latino Vote; Campaign Ad Spending; Candidates And Small-Town America

Aired August 6, 2004 - 15:30   ET

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


(BEGIN VIDEOTAPE)
ANNOUNCER: Even the White House admits today's numbers are disappointing.

UNIDENTIFIED MALE: Yes, we're not satisfied with the level of job creation we saw today. The economy is creating jobs, it's moving forward, but not at a rapid enough pace.

ANNOUNCER: Will the news affect the presidential race?

UNIDENTIFIED MALE: You're registered to vote, right?

ANNOUNCER: Vote campaigns reach out for crucial Latino voters, but which side has the edge?

The ad wars. John Kerry goes dark, but some key allies step in to keep the Democratic message on the air.

ANNOUNCER: Shouldn't America be a top priority? The Media Fund is responsible for the content of this advertisement.

(END VIDEOTAPE)

ANNOUNCER: Now, live from Washington, JUDY WOODRUFF'S INSIDE POLITICS.

CANDY CROWLEY, GUEST HOST: Thanks for joining us. Judy is off today. I'm Candy Crowley.

The war in Iraq and debates over values have at times dominated discussion in this presidential race. But sooner or later, it seems it always comes back to jobs and the economy.

The latest example, the government today released new job numbers for July, and the total of about 32,000 is less than economists had expected. The overall unemployment rate, measured by a different formula, actually dropped slightly to 5.5 percent.

Since January, more than 1.2 million jobs have been created, meaning the White House has fallen behind its stated goal of 2.6 million new jobs this year.

It didn't take long for the less than hoped for numbers to become campaign fodder. John Kerry weighed in at a stop in Missouri, while George Bush says he's confident his plan is working.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Our economy has been through a lot. Today's employment report shows our economy is continuing to move forward, and it reminds us that we're in a changing economy and we've got more to do. I'm not going to be satisfied until everybody who wants to work can find a job.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: We can do better than having Americans see a declining number of jobs per month. It was 67,000 a month before, it was 201,000 one month before that.

But basically, over the last four years, we've had a net negative loss of jobs in the United States of America. And the jobs that are being created pay $9,000 less on average than the jobs that we're losing overseas.

(END VIDEO CLIP)

CROWLEY: Democrats continued their rapid response to the new job numbers with this TV ad. It starts airing tomorrow in 20 states and it blames the president for the loss of U.S. jobs overseas.

We're going to discuss the latest jobs reports from both the Bush and Kerry perspectives. We want to go to the White House first, where Josh Bolten, the president's budget director is standing by.

Josh, thanks for joining us. I wanted to -- what happened? Why is this number so much lower than everyone expected?

JOSH BOLTEN, BUSH BUDGET DIRECTOR: I'm not sure. And we'd like to see a better number. But Candy, I think we need to look out over a longer period to get a real trend.

And overall, the trend, as your setup piece made clear, is positive. We've got -- since just last summer, we've got about a million-and-a-half jobs created in this economy. And there's a lot of reason for optimism going forward. The numbers actually look very good. I think most private sector forecasters will say they look very good for the months ahead.

So, the pictures, while it's not as good as we'd like to see it on job creation, is overall positive. And the policies, most importantly, for a campaign, the policies the president has in place are the right ones to move us forward.

CROWLEY: But if you do look at the trend, if you're look -- if you want to look at a longer trend, you have to look back at March and see that there was a big jump in jobs but it's been going down since then. That's got to be somewhat ominous for you all because that's the wrong direction, isn't it? BOLTEN: The wrong direction would be if we were losing jobs. We're gaining jobs. And we want to see the jobs gain more quickly, but basically we're headed in the right direction.

If you look back at the numbers that came out a week ago, the second quarter GDP numbers, what they showed is real strength in the export sector, real strength in business investment, continued strength in housing, and some weakness in the consumer sector. So, that -- that maybe could have raised some concerns.

But since then, we've seen great strength in consumer confidence. So, I think that gives private sector forecasters and the administration some reason to expect that in the months ahead we'll be doing much better. And the important part here is that this recovery is being fueled by the president's tax cuts. This would be exactly the wrong time to try to reverse that and raise taxes.

CROWLEY: Well, if you look at how many more job reports you're going to have before the November election -- I think we're talking about three at most -- at some point, it's beginning to look as though you are going to be an administration that lost more jobs than it had to begin with. There's no way to pretty that up is there?

BOLTEN: I don't know. What you -- what the American people should and I think will look at is, where did we come from? And where we came from is a recession that the president inherited that was serious -- just ask the people who were looking for work as the president came into office and during that first year of office, followed immediately by the shock of 9/11, corporate scandals that came to light, a lot of very serious shocks to this company.

The president's policies have been, I think, extremely well timed to pull us out, to bring us into recovery. And I think that's what the people are going to be voting on, what are -- they the right policies to take us forward.

And I think the continuation of the president's tax cuts, the continuation of a policy focused on lower energy prices, lower healthcare costs, lower torte costs -- fewer frivolous lawsuits is what I'm talking about -- all of those policies I think are the ones that people are going to be voting on. And when they look at those policies, I think they're going to want to support the president.

CROWLEY: As you heard in the clip that we had from John Kerry, one of his biggest applause lines out on the campaign trail is that the tax cut awards businesses for shipping jobs overseas in that of course they can pay the tax rate overseas, where the profit is being made. Where do you all stand on that -- on that tax code provision? Do you want it repealed, is it fair?

BOLTEN: The administration has a proposal that we put before the Congress. It's -- that's -- they're working on some tax legislation right now that would inhibit people from basically moving their profits overseas and being taxed overseas.

We don't support proposals that basically make it hard for people to do international business, because that would greatly inhibit investment in the United States. And a lot of good jobs today are coming from very strong investment in the United States.

Pessimism, isolationism, higher taxes never created a single job in this country. And the president isn't going to go for those policies, even if they make good politics in the short run.

CROWLEY: Josh Bolten, the president's budget director, thanks so much for joining us.

That, of course, the view from the White House. With me now for the Kerry campaign perspective is Alexis Herman. She's a Kerry campaign economic advisor, former labor secretary under President Clinton.

OK. Let's go with the glass half full. They did create more jobs. There has been a net gain of jobs over the past six months. What's wrong with that? Can't we expect that there'll be some blips along the way?

ALEXIS HERMAN, KERRY ECONOMIC ADVISOR: Candy, I think we have to go back to what the president said in February of '02. This is after 9/11, this is after what the administration claimed was the recession that they inherited.

The president said then he was going to create six million new jobs going forward. And if you look at what has happened, in fact, we lost 1.5 million. So, overall, they're actually behind seven million jobs in terms of the president's commitment.

So, even giving the administration the benefit of the doubt on the 9/11 trauma that we all experienced as a nation, all of the anxieties, at that point, when the tax cuts did kick in, this was their prediction in terms of what they said this economy was going to do.

And I think, instead, we've had a very unpredictable and a very unstable path within the recent months in particular.

CROWLEY: Well, we've also had some -- some figures that they can point to. Consumer confidence is at its highest since January, it's gone up for the past four months. That says something about how people are feeling about the economy, that there's something out there that makes them feel positive.

HERMAN: I think it's fair to say that consumer confidence most recently has gone up. But I think, again, if you look at this issue holistically, Candy, that also has been back and forth, back and forth. We can't really say that we've had stable, predictable customer confidence. And I'm also...

CROWLEY: But these are unstable times, aren't they?

HERMAN: These are unstable times. But I'm also very concerned that we have 11 percent almost unemployment rate for African- Americans. So, even when you look behind this month's job report, there's some very troubling statistics that I'm very concerned about in particular, and that's just another indicator that we have deeper issues, I believe, in terms of what's really going on.

CROWLEY: Now, one of the things that the Republicans are saying, when they look at these numbers, is, look, 5.5 percent unemployment is below the average of the '70s, the '80s and the '90s, and 5.5 is what the unemployment rate was in July of '96, just before Bill Clinton got elected.

So, why is it so bad now and it was OK then?

HERMAN: Well, I think you have to look at where we started. When we left office, we had historic unemployment rates, 30-year lows, the lowest ever for African-Americans, the lowest ever for Latinos. This was an economy that was literally lifting all sectors of the economy.

You look at what's going on today, yes, 5.5 percent. But as I said, it's almost 11 percent of the African-American community, the Latino community, it's up this month, 6.8 percent.

And then, you have to also look at the fact that we have over a million new workers working part-time for economic reasons. They're not even in the statistics to say nothing of the more than 1.3 million workers now that are discouraged.

CROWLEY: Do you buy, though, that when George Bush took office we were in the middle of a down trend, that he, in fact, inherited a recession? Yes, they were good then, but the economy was on a down side.

HERMAN: I accept the fact that we had softening in the economy, but I also believe that we had some fundamental choices to make when we did pass the tax cut, when we believed that that was going to put us on a path to more stable growth and that didn't happen. And I also go back to saying, in February of '02, the administration laid out its own economic path to progress, and we have not achieved those goals.

CROWLEY: Alexis Herman, economic advisor to John Kerry, thanks so much. It's really good to see you.

HERMAN: Thank you.

CROWLEY: Making a pitch for Latino voters. Both campaigns reach out, but which side is making the better case? We'll visit the frontlines in Arizona when we return.

President Bush speaks with minority journalists one day after Senator Kerry addressed them. Who got the warmer welcome?

Plus, is a controversial commercial getting a free ride? We'll ask an expert.

With 88 days left until the election, this is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

CROWLEY: The Kerry-Edwards train tour continues this weekend, but President Bush has more than campaigning on his agenda. He's heading for the Bush family compound in Kennebunkport, Maine. Tomorrow, the president attends the wedding of his nephew, George P. Bush, son of the Florida governor, Jeb Bush.

John Kerry and John Edwards are taking an overnight train from Kansas City to Lamar, Colorado. They will spend Saturday campaigning in Colorado and New Mexico.

For candidates of either party, campaign trips to the Southwest are made with an eye to the Latino and Hispanic vote. As Ed Lavandera reports from Arizona, these voters are a bloc neither party can take for granted.

(BEGIN VIDEOTAPE)

ED LAVANDERA, CNN CORRESPONDENT: Ask a Latino Democrat in Arizona what issues they care about most and you're likely to hear about education and the economy. John Kerry hits the right notes for them.

KERRY: I have fought to try to do what is right.

UNIDENTIFIED FEMALE: I feel that he would help because the Democratic Party has always been for the underdog, both the middle class and the poor. Then the Republican.

LAVANDERA: Ask a Latino Republican what issues they find most important and you're likely to hear about values and character.

BUSH: This is my heart. This is what I believe.

UNIDENTIFIED MALE: I think that the Latino vote is very family- oriented as well, and very moral, morally-oriented. And you can see that Bush focuses a lot on the family.

LAVANDERA: That message works well for Republicans. It helped President Bush garner about 35 percent of the Hispanic vote in Arizona four years ago. But take a look at the television advertisements targeting Hispanics voters in this state and you'll notice a subtle change. The ad describes Kerry as the man of faith, family and honor.

Bush hits the themes of education, healthcare and the economy. It's a subtle change that illustrates how the Latino vote is evolving.

(on camera): According to a nonpartisan research group, only 12 percent of Hispanics in Arizona called themselves Republican back in 1990. Now, Republicans make up almost 30 percent of this state's voting Latino population.

EARL DE BERGE, POLITICAL ANALYST: The whole concept that it's a monolithic voting group that it all thinks the same, it's all Democrat, it's all liberal, it does what it's told to do by Democratic Latino leaders is just bunk. LAVANDERA (voice-over): This means there can be pitfalls for candidates courting Latino voters. John Kerry recently discovered that even talking about immigration, a topic traditionally labeled a Latino issue, can unite and just as easily alienate Hispanic voters at the same time.

Kerry was touting his immigration reform plan recently in Phoenix. The plan would give illegal immigrants a chance to earn U.S. citizenship.

Earl De Berge is an analyst that studies Hispanic voting trends in Arizona. He says the speech caused Kerry to fall six points in the polls. Surprisingly, the drop came almost entirely from Independent Hispanic voters.

DE BERGE: He believed that that was going to be a home run with the Latino population. And indeed, it was the reverse.

LAVANDERA: De Berge says this snapshot from the campaign trail should remind politicians that it won't be easy winning the support of Latino voters this year.

UNIDENTIFIED MALE: You registered to vote, right? OK.

LAVANDERA: Ed Lavandera, CNN, Phoenix.

(END VIDEOTAPE)

CROWLEY: Democrats like to boast about being the party of diversity, but this year's Republican convention is shaping up as the most racially diverse in the party's history, with the number of minority participants up 70 percent over 2000. According to "The Washington Times," more than 800 of the 4,853 Republican delegates -- that's about 17 percent -- will be minorities.

Hispanics will be the largest group. Black representation will be up 65 percent from 2000. Asian-Americans up 40 percent.

Also, in the name of minority outreach, both Senator Kerry and President Bush spoke to a convention of minority journalists this week in Washington. Senator Kerry's appearance on Thursday was greeted with enthusiastic applause. The audience also applauded many of his answers.

The president's reception was polite but noticeably cooler. The journalists applauded harder for the questions and questioners than they did for many of the president's answers.

He did make some news, though, telling a questioner that colleges should abandon legacy admissions and admit students on merit. George W. Bush followed his father to Yale and acknowledged today, "I had to knock on a lot of doors to follow the old man's footsteps."

When Senator Kerry accepted his party's nomination in Boston, he also agreed to federal campaign spending caps. So, who's picking up the tab now to keep the candidate's message on the airwaves? We'll get the latest numbers on the ad wars when we come back.

(COMMERCIAL BREAK)

CROWLEY: Since July 30, when Senator Kerry became the Democratic nominee, his campaign has been limited to $75 million in federal funding which has to last until Election Day. While the campaign saves its cash for the critical fall period, some pro-Kerry groups have stepped in to pay for new ads.

With me now to break down numbers for both campaigns' ad spending, CNN advertising consultant Evan Tracey of TNS Media Intelligence, which tracks ad spending in the nation's top 100 media markets.

Lots of money being spent out there by campaigns, by the outside groups. Let's boil it down first to Kerry-Edwards. Where are we on their spending?

EVAN TRACEY, TNS MEDIA INTELLIGENCE: Well, you're right, it's been unprecedented, the spending, overall. And the Kerry-Edwards campaign, it's really almost like back to the future for them now.

This is where they were in March with -- with no resources then, but now it's limited resources. And the groups and the parties really stepped up in March to kind of -- to bridge that gap.

But you know, Kerry ramped it up and spent about -- about $79, almost $89 million on his own, really spent heavily that week of the Democratic National Convention. It was almost a "use it or lose it" situation.

But now you have the DNC stepping in with the help of the 527s, DNC spending close to $1.5 million a day. All told, these groups have spent about $4.5 million since the convention on behalf of Kerry.

CROWLEY: Lots of money. So, we're about three weeks from the Republican convention. Do they still have cash to burn? Because they're not under the restrictions. And will they have money to be up during the Olympics?

TRACEY: Absolutely. They Bush campaign, when you look at the way Bush-Cheney started, they began big. They're clearly going to end big.

By all reports, they have about $60 million left in the bank. Their spending really since the end of the Democratic convention is approaching over $1 million a day. So, they're going to have $30, $40 million to spend.

The Olympics won't even really be a luxury with that kind of money, and really only a month to spend it. Again, they're in the same spot, use it or lose it.

CROWLEY: So, we've talked a lot in the last couple of days about the Swift Boat ads and anti-Swift Boat ads. And a lot of attention to that one criticizing John Kerry from other people who served on swift boats. Has that ad even aired anywhere?

TRACEY: Well, you know, first of all, Bush has had very little help from 527s, maybe only about $1.5 million all told. This spot has only aired a couple of times in small markets like Charleston, West Virginia, and a few other places. They would need Howard Dean-like fund-raising, though, to match what free airtime they're getting right now from the press talking about it.

CROWLEY: Now, when you look at all the ads that are out there, do you ever look at it up against the polls? Are any of them anywhere striking a chord?

TRACE: Well, the Swift Boat ad was interesting because it had timing and the correct message, and that's why it got so much national attention. I think time will tell as to whether that had any impact or not in the polls.

But right now, there's a lot of negative ads being run by the Kerry's 527s. That's clearly keeping the president's numbers down. And conversely, the president has spent about $80 million himself really attacking Kerry on a number of the issues. Some of that you see reflected in this polls.

But aren't moving much. And the ad spending sure is.

CROWLEY: I wonder if they sit around thinking, "Gosh, we could have saved all that money."

Thanks so much, Evan Tracey, CNN media consultant. Appreciate it.

TRACEY: Great to be here. Thanks.

CROWLEY: A key figure in the anti-Kerry campaign being conducted by a group of Vietnam War veterans reportedly has backed away from one of the group's main contentions. The "Boston Globe" quotes a Kerry former commanding officer as saying, "He made a terrible mistake in signing an affidavit suggesting Kerry did not deserve his Silver Star."

George Elliott signed the affidavit in connection with a book being put out by the anti-Kerry group. Kerry was awarded the Silver Star for killing a Vietcong soldier who was carrying a rocket launcher.

Razor-thin winds in Florida and New Hampshire helped put George W. Bush into the White House. So, where do the horse races in those two crucial states stand right now? The latest poll numbers when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

ANNOUNCER: Mining for votes in the Granite State. President Bush campaigns in New Hampshire, a crucial state he barely won four years ago.

On the train with the Democratic duo.

KERRY: Let them chant, ladies and gentlemen, because they've only got three more months to chant.

ANNOUNCER: We've got some scenes from a late night stop that you may not have seen.

KERRY: Thank you (INAUDIBLE).

BUSH: It's good to be in...

ANNOUNCER: Small towns get big recognition. Why are the two campaigns spending so much time out in the heartland?

(END VIDEOTAPE)

ANNOUNCER: Now, live from Washington, JUDY WOODRUFF'S INSIDE POLITICS.

CROWLEY: Welcome back.

The pace of the presidential race these past seven days has seemed more like the traditional blitz through October than the dog days of August. Ever since John Kerry and John Edwards hit the road out of Boston, it's been full speed ahead for both tickets. And there's evidence the Democratic convention may have given Kerry a boost in two showdown states.

An American Research Group survey in Florida gives Kerry an eight-point lead over Bush, 52 percent to 44 percent. Up north, in New Hampshire, Kerry has opened a seven-point lead, 50 percent to 43 percent. One factor working for Kerry, the poll found that he has solidified his support among fellow Democrats.

President Bush is already working to improve his status among New Hampshire voters. He held a rally there just a couple of hours ago. Our Jill Dougherty is traveling with the Bush campaign -- campaign.

(BEGIN VIDEOTAPE)

JILL DOUGHERTY, CNN CORRESPONDENT: President Bush was in the country today, Stratham, New Hampshire, at Bittersweet Farm, a picnic with 3,000 core supporters. New Hampshire is a state with a lot of Independent voters. And if you look how Bush did four years ago, the president had -- actually, he won the state, but it was only by a hair, one percent.

Right now, the polls are showing a lot of movement toward Senator Kerry. The Bush campaign has been targeting voters who are not necessarily completely satisfied with the president, but they have not necessarily moved into the Kerry camp yet.

Jobs, a big issue here in New England. And those new job figures not particularly positive for the president, but Mr. Bush saying he is not satisfied either. But overall, he feels that the economy is moving forward. BUSH: Our economy has been through a lot. Today's employment report shows our economy is continuing to move forward. And it reminds us that we're in a changing economy. And we've got more to do. I'm not going to be satisfied until everybody who wants to work can find a job.

DOUGHERTY: President Bush began the day in Washington, D.C., at the Unity Conference, bringing together minority journalists. It was the same venue that Senator John Kerry spoke at yesterday. The reception with Kerry, a bit more positive, a bit more warm, today, more standoffish. In fact, there was even one heckler for the president.

Jill Dougherty, CNN, Stratham, New Hampshire.

(END VIDEO CLIP)

CROWLEY: While the president hit New England, Vice President Dick Cheney spoke to a crowd in Minnesota. Hundreds of people gathered to hear Cheney inside Cabela's Sporting Goods store in East Grand Forks. Cheney used much of his speech to defend the administration's handling of the economy.

Both members of the Democratic ticket made a short detour from their whistle stop campaign trip today. Senators Edwards and Kerry traveled to a farm in Smithville, Missouri. They weren't there just to talk about price supports or livestock. This is the 21st century, after all. Their focus was mostly on renewable energy.

(BEGIN VIDEO CLIP)

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL CANDIDATE: By the year 2020, making sure that our fuel for our vehicles, at least 20 percent of it comes from renewable sources of energy. And all of us believe that that's a very important step in the right direction.

KERRY: We could put in place, and John Edwards and I will put in place, the tax incentives, the joint venture efforts that help us to build an independent fuel base for America, alternatives, renewables, the fuels that you can produce right here in Missouri, in the parts of the Midwest. It'll give you more value. Your farming will be better.

(END VIDEO CLIP)

CROWLEY: Even though they're focused on the future, Senators Kerry and Edwards are taking a page from the 1948 presidential campaign, specifically President Harry Truman's whistle stop tour.

CNN's Dana Bash is riding the rails with the candidates.

(BEGIN VIDEO CLIP)

DANA BASH, CNN CORRESPONDENT: The Democratic duo climbed aboard the westbound train and smiled for their Harry Truman photo-op. Twenty-six cars rolling through 1,800 miles. That's five states, 41 electoral votes, if you're counting, and they're counting. First quick back of the car stop, Washington. That's Washington, Missouri.

KERRY: Change is coming to Washington. Both Washingtons.

BASH: Whistle stopping along the Missouri River, the vista seems too serene to be a battleground, but it is. And when they got to the state capitol, the senator showed off his knowledge of the local dialect.

KERRY: I've just come from Missouri to Missouri.

BASH: And he tipped his hat to native son, Mark Twain, those his daughter thought maybe he tipped it a bit too far.

KERRY: Huck Finn never wanted to grow up. And I said to myself, "Hmm, kind of like some of those guys my daughters have been going out with," you know?

BASH: For Mrs. Heinz Kerry, it was all about girl power.

TERESA HEINZ KERRY, WIFE OF SEN. JOHN KERRY: You go. All the girls, you go -- 90-year-old girls, 80-year-old girls, six-year-old girls.

BASH: Running an hour-and-a-half late, they just missed the local evening news. But at least this will make the pre-Letterman- Leno newscasts. So, will this.

A quick pick of a jam session, the senator from Massachusetts, donning a cowboy hat. Back on the train, destination, Kansas City, 11:00 p.m., an unannounced stop in Sedalia. It wasn't on the press schedule, but it seemed to be on the Bush-Cheney schedule. The Kerry- Edwards team never lost their smiles, but clearly weren't happy.

EDWARDS: We all love -- will you let us speak, please? Will you let us speak?

BASH: And then it was Teresa's turn.

HEINZ KERRY: But if Laura Bush was here, I'd say hello politely to her and I'd expect all Democrats to do that, too.

BASH: One well-heard heckler screamed for her to turn the mike over to her husband. And they weren't the only problem.

KERRY: I've just been informed by Amtrak we have a train out here that's holding.

BASH: And even as he tried to squeeze in a few remarks...

KERRY: Let them chant, ladies and gentlemen, because they've only got three more months to chant.

BASH: After that, no more stops, just an occasional slow roll, this one at 12:30 in the morning in a place dripping with symbolism, Independence, Missouri, Harry Truman's home town.

Dana Bash, CNN, Kansas City, Missouri.

(END VIDEO CLIP)

CROWLEY: We've been talking about it all week, but do new numbers finally show a bounce for John Kerry? We'll speak with both campaigns when we come back.

He's one of the most popular governors in the country. But can Arnold Schwarzenegger help President Bush capture California? We'll look at the latest poll numbers from the Golden State.

Plus, he didn't score an invite to the democratic convention. Will Ralph Nader fare any better when the Republicans meet in New York? With 24 days left until the Republican National Convention in New York City, this is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

CROWLEY: New poll numbers, new job numbers and new third-party ads. Both the Bush and Kerry campaigns have been watching all three. Right now, I'm joined by Steve Elmendorf, political director for the Kerry camp, and Bush campaign spokesman Terry Holt.

OK, the poll numbers. Both in New Hampshire and in Florida, Terry, outside the margin of error, John Kerry has a pretty good lead. Are we now seeing that that convention did give him a boost?

TERRY HOLT, BUSH CAMPAIGN SPOKESMAN: Well, John Kerry was the feature of the entire month of July. He named his running mate. We've always said that if he was to meet historical standards, he'd have about a 15-point lead at this point in the campaign. I think what's more remarkable is that he really failed to make a basic connection with the American people.

He failed to answer a basic question about whether or not we should have gone to Iraq. He says, "Maybe." He says, "It's complicated." So, there's still a lot of burden of proof on Kerry. He hasn't closed the sale, yet, Candy.

CROWLEY: Now, when you look at these numbers, I'm assuming you looked that he actually did close the sale.

STEVE ELMENDORF, KERRY POLITICAL DIRECTOR: Well, we are very heartened by them. We think that the numbers show that John Kerry and John Edwards's, positive, optimistic message that they delivered at their convention and that they're delivering on their bus trip and their train trip across the country is getting through. And George Bush's negative, vicious attacks on John Kerry and John Edwards are hurting them.

CROWLEY: Let me first talk to you about something that Terry just said, which is the business about not having an Iraq plan. Because when we're out on the trail, what we hear is, "I do have a plan, but I've got a lot of cards to play, but I can't tell you what those cards are."

Is that going to be enough for a voter to switch in the middle of war, to say, "Well, I've got a plan," because, as you know, it's been compared to, you know, the secret plan that Richard Nixon had to end the war. What's the difference?

ELMENDORF: Well, he hasn't said he has a secret plan. And clearly, voters are unhappy. If you look at all the polls, one thing we see is that the voters are unhappy with George Bush's plan and that John Kerry has described how he would have approach our entry in Iraq in a completely different manner and he would approach it in terms of dealing with the world in a completely different manner.

CROWLEY: Terry, you know, when we do look at the polls, what you see is that president has lost his edge in Iraq, not on terrorism and the home front, but they now trust John Kerry every bit as much as trust George Bush to carry out the war in Iraq. Doesn't your "don't change horses in mid-stream" argument fade with that?

HOLT: Well, I think that, you know, the president was in New Hampshire today and he said, and I think it's very appropriate to re- say it, that the American people deserve a straight answer about how John Kerry would have dealt with Iraq.

Would he have gone in, knowing what we all knew, knowing that Saddam was a problem? How come he can't say yes or no? It's remarkable. And if you're going to be commander-in-chief, you'd better be able to make determined decisive decisions. And John Kerry is incapable of that.

I mean, think about how he has acted as a senator. He supported the president going into Iraq and then he opposed funding the troops in the field. That is the single most confusing thing about John Kerry's foreign policy agenda.

CROWLEY: So, do you think that -- I mean, what this bottom line answer to would he have gone into Iraq knowing what we know now?

ELMENDORF: Well, I think what we need from Terry Holt today and from George Bush, the commander-in-chief, is we need them to repudiate these ads that the Swift Boat Veterans for Bush-Cheney are running...

HOLT: That's not a change of subject, is it?

ELMENDORF: ... that John McCain has denounced as dishonorable and dishonest. And if George Bush could stand up and tell the Bush- Rove cronies to pull their ads down. That's what we need from Terry...

(CROSSTALK)

HOLT: You cannot go 88 days without...

CROWLEY: I'm one that can go with the flow here, so...

HOLT: They can't go 88 more days without answering that question.

CROWLEY: OK, we'll let you both stay where you are. Because I'm not sure I'm sure we're going to get anywhere on the argument about Iraq and the war. But I did want to ask you, they have asked you to condemn those ads from the swift boat veterans who are against John Kerry. What do you think about those ads? Do you need to come out and say we reject this sort of thing?

HOLT: Well, in fact, you know, we think that this whole range of 527 soft money, unregulated money activity, has really changed the political landscape significantly, and we've called on the Kerry campaign to join us in deploring all soft money, unregulated money activity, by these ad campaigns, tens of millions of dollars have been spent attacking the president personally.

We didn't hear John Kerry calling for a repudiation of those. In fact, they've been coordinating with those organizations to make up the differences in the key ad markets around the country, moveon.org, America Coming Together, all of these soft money, shadow Democratic groups have dominated the landscape. This is a little thing in a sea of soft money advertising this year.

CROWLEY: Let me set aside the coordination, because that would have you saying that you've done something illegal. So, I'm assuming you're going to say you're not coordinating with the 527s.

ELMENDORF: We are not coordinating, no.

CROWLEY: But the fact of the matter is that you have had much more 527 money from the beginning of what we would call the general election. There have been ads out there that have compared the president to Hitler, that have been really, really tough ads. Are you responsible for all those ads, as you want the Bush-Cheney campaign to be responsible for the swift boat ad?

ELMENDORF: No. We're not responsible. The difference is that when we saw -- that when the Adolf Hitler -- MoveOn did an ad, we repudiated it and said they shouldn't do that. And George Bush should repudiate these ads that John McCain has called dishonest and dishonorable. I'm not saying he has to take responsibility for them, but he could stand up and say that they are dishonest and ask that they be stopped.

CROWLEY: Terry, is there a difference between repudiating an ad that they say is dishonest and repudiating all 527s?

HOLT: Well, there's not much of one. I mean, these groups out there have changed the political landscape, as I said. And they say some things -- and, you know, putting a bag over the head of the Statute of Liberty, some of this stuff out there, and directed at President Bush, has been unfair, has been flat wrong.

And that's why the president said let's get rid of all of it. We deplore all the shadow money activity. And we would hope that John Kerry's campaign would join us in making that call.

CROWLEY: I'm assuming that you all are just real happy to have the 527s out there.

ELMENDORF: We would like to join with George Bush if he would repudiate the ads that the swift boat veterans for Bush-Cheney are running, that John McCain said it was dishonorable and dishonest.

(CROSSTALK)

HOLT: The 527s had front row seats at your convention two weeks ago. I mean, look at the coverage. They were all over the place. I mean, you folks have decided to turn the Democratic Party over to a group of liberal hate groups. And I think we really need to seriously consider whether or not these unregulated money groups have a proper place in a very serious election.

CROWLEY: Let me turn the corner, Steve, to jobs and see if I can keep you at about 30 seconds so I give Steve time to talk on the jobs. And that is something went wrong. You all now sort of are being judged against your own criteria as to how many jobs you thought you would create this year, and you're falling far short of that. How are you going to sell that out there?

HOLT: Well, you know, we're making progress. It's the difference between going from a recession and into a recovery where we've created 1.5 million jobs in less than a year. There were 32,000 people who got jobs this month. Unemployment is going down. We have fast economic growth, the fastest in 20 years. Home values are up. People's retirement looks better. It's the broad picture.

And the president said today we won't be satisfied until everybody who wants a job can get one. And we have to have a plan -- we do -- to reduce taxes, and regulation, and litigation, and John Kerry's answer is to tax small business, the job creators in this country.

CROWLEY: Steve, let me interrupt there, and just add, look, let me look at it half full. 5.5 percent unemployment, which is what Bill Clinton had at about this point in his reelection campaign. They are creating jobs. What's wrong with the figure?

ELMENDORF: George Bush has lost more jobs than any president since Herbert Hoover, 1.8 million jobs lost since he was president. If they want to have a comparison with Bill Clinton, Bill Clinton's created 22 million jobs when he was president. It's a easy comparison.

HOLT: And neither Bill Clinton or Hoover had 3,000 lives lost in Manhattan on September 11th and had to go to war.

CROWLEY: I've got to go. I've got to go, Terry.

Thank you so much, Terry Holt with Bush-Cheney and Steve Elmendorf with Kerry-Edwards. We appreciate both of you, hope you'll come back.

HOLT: Absolutely.

CROWLEY: Still ahead, Republican efforts to defeat one of their own in Tennessee fall through. We'll have the story when we return.

(COMMERCIAL BREAK)

CROWLEY: An update now on the squabble among Vietnam veterans over Senator John Kerry's war record. Earlier, we told you that a key figure in the anti-Kerry campaign being conducted by a group of Vietnam veterans had reportedly backed away from one of his group's main contentions.

The Boston Globe quoted Kerry's former commanding officer George Elliott as saying he made a, quote, "terrible mistake" in signing an affidavit suggesting Kerry did not deserve the Silver Star.

Now, the anti-Kerry group, Swift Boat Veterans for Truth, tells CNN that Elliott considers today's article in the Globe, quote, "extremely inaccurate." The group says Elliott reaffirms his statements in the affidavit.

Checking the Friday headlines in campaign news daily. He tried it in Boston and it didn't work. Now, Ralph Nader is trying again in New York. Nader has written to RNC Chairman Ed Gillespie requesting credentials to attend the Republican convention. No response yet from the chairman. Nader made the same request of the Democratic convention, but the Democrats turned him down.

A new poll in California confirms the conventional wisdom that John Kerry is running very well in the Golden State. The latest field poll gives Kerry a 12-point lead over Bush, 53 percent to 41 percent.

Reports say two-time presidential hopeful Alan Keyes will accept an offer to become the Republican candidate for the Senate from Illinois. A welcoming rally for Keyes has been scheduled for Sunday afternoon. He will face off with another African-American, Democrat Barack Obama. Keyes would replace Jack Ryan, who abandoned his campaign after embarrassing details emerged in his divorce records.

A racist candidate who believes in preventing what he calls the "less-favored races" from reproducing, has won the Republican nomination for Tennessee's eighth district house seat. James Hart was the only person to run as a Republican in yesterday's primary and he easily defeated a write-in candidate who received the party's endorsement. Hart will face long-time incumbent, Democrat John Tanner, in November.

We in the media are often attached at the hip to our BlackBerrys. Well, as it turns out, some politicians are, too. It seems that during a debate Wednesday night, instead of the regular scribbled notes to glance at, Florida Congressman Peter Deutsch actually received messages from his political consultant via his BlackBerry.

However, Deutsch said he didn't get any tips or answers to tough questions. Instead, he just got words of encouragement. Welcome to the 21st century.

Still ahead, when it comes to politics, they're a group that's often overlooked. But our Bill Schneider said they won't be this year. And for that, he's giving them his political play of the week. Stay tuned for the winner when we come back.

(COMMERCIAL BREAK)

MARY SNOW, CNN FINANCIAL NEWS CORRESPONDENT: I'm Mary Snow at the New York Stock Exchange. The major market indices all tumbled to their lowest levels this year. That after jobs data showed the economy added just 32,000 jobs in July, far short of the 228,000 jobs expected by economists.

Taking a look at the numbers: The Dow ended the day down 147 points, extending a two day loss to more than 300 points; the Nasdaq lost 44 points, or two-and-a-half percent. That is the latest from Wall Street. JUDY WOODRUFF'S INSIDE POLITICS continues in a minute.

(COMMERCIAL BREAK)

CROWLEY: Showdown states, swing voters and poll numbers, within the marriage of error. It's the story of 2004, the campaign. And this week, something more. For that, we've got Bill Schneider.

BILL SCHNEIDER, CNN, CORRESPONDENT: Candy, forget red states and blue states. We want to talk about a different two Americas, one of which gets this week's political play of the week.

(BEGIN VIDEO CLIP)

SCHNEIDER: There really are two Americas in this campaign. There's favored America, 17 hotly contested states, and forgotten America, the 33 states where politicians think they know the likely outcome. No reason to campaign in those states. Forget them.

A lot of the favored states are in the Midwestern heartland, the part of America snotty types from New York and California call "flyover country." Nobody's flying over those places this year.

KERRY: Twenty-two states in 15 days, and 17 buses and some trains.

SCHNEIDER: They're stopping over...

BUSH: I'm traveling our country, coming to Ohio a lot, by the way.

SCHNEIDER: ... in a lot of places that usually don't get much attention.

BUSH: It's good to be in Mankato.

It's great to be back here in the Quad-Cities area.

KERRY: Thank you, Sedalia.

I like Jefferson City.

SCHNEIDER: Why is rural and small town America getting so much attention? Look at the numbers. In 2000, Bush carried the rural vote by more than 20 points across the country. This year, the race looks a lot closer. If Kerry can hold down Bush's margin in rural areas, where Democrats usually do poorly, swing states like Ohio, Missouri, Wisconsin, and Iowa, could all go Democratic. Hence...

KERRY: I think of Joe Jackson coming out of that corn and saying, "Is this heaven?" And Ray Kinsella says, "No, it's Iowa." But it's one in the same to me, one in the same.

BUSH: I envision the day when sometime somebody walks in and says, "Well, Mr. President, you'll be happy to hear the corn crop is up, and we're growing more soy beans in America."

SCHNEIDER: Pity the poor voters in New York, and Atlanta, and Houston, and Los Angeles. They're the forgotten Americans. It's the voters in favored America who get front-row center seats in this campaign, as well as the political play of the week.

(END VIDEO CLIP)

SCHNEIDER: Imagine living in forgotten America, a place where you won't see wall-to-wall campaign ads on TV, or get a mailbox full of fliers everyday, or get endless telephone calls from campaigns and poll takers. How sad for us, Candy.

CROWLEY: Really, terrible sad. Let me ask you about this rural vote. Do we have any signs that it's changing at all? I mean, it helped George Bush last election.

SCHNEIDER: Yes.

CROWLEY: Any chance there in that demographic?

SCHNEIDER: Well, as we saw in those graphics, it is closer than it was in 2000, though Bush is still leading. And the other thing we know is that John Kerry did very well with rural Democrats in the primaries, so Democrats are holding out hope that Edwards can appeal to small town voters. His theme song is I'm a small town boy.

CROWLEY: Thanks so much, Bill Schneider.

You all have a great weekend. We thank you for joining us. "CROSSFIRE" starts right now.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com


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