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CNN IN THE MONEY

Iraq Trumps Economy in Voter Concern; Has Campaign Finance Reform Worked?; How Will Election '06 Impact Wall Street & U.S. Economy?

Aired November 4, 2006 - 13:00   ET

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


JACK CAFFERTY, CNN ANCHOR: Well, the economy is pretty good, nobody cares. The war isn't so good, everybody cares. Money and mud have been thrown around like never before in a midterm election. And now it is time to pick your lousy ending: one party in charge or two parties in gridlock? And the voting machines might make their own decision. Nothing like watching democracy in action. This is IN THE MONEY.
Welcome to a special election edition of IN THE MONEY. I'm Jack Cafferty, joining me today, a couple of IN THE MONEY veterans. We have Jennifer Westhoven, and we have Andy Serwer, and we have more than full employment according to the economists, 4.4 percent, according to that jobs report on Friday.

ANDY SERWER, CNN ANCHOR: Yes. I think that is officially full employment, overflowing employment.

CAFFERTY: Right.

SERWER: It's a bountiful employment number, and you know, it's interesting, though, I guess the real question is, what kind of jobs are they? Because they're not the jobs back in the 1950s.

CAFFERTY: Sure.

SERWER: Not your father's jobs, not those great union jobs with all the benefits, 1.3 million Americans working at Wal-Mart, where the pickin's may be a little bit slim.

JENNIFER WESTHOVEN, CNN ANCHOR: Well, that's the part I'm interested in, too, right, because the White House says we've got 6.5 million jobs. Sounds great but, you know, when you look at these numbers, the amount of money that these jobs are paying is very thin. A lot of people are trying to work two jobs, and it's just a little bit -- I think it's' little bit confusing. We may have more jobs, yes, but how great are these jobs?

CAFFERTY: The other question you have to raise is, I don't know how many people we employ at the Department of Labor to put out these reports, but the revisions upwards to both the August and September job numbers, and in the case of August, it was the second major revision, were huge. I mean, the original reports didn't even come close. How come they can't get a better handle on what's going on?

SERWER: Well, it's an art, not a science. And you know, getting to your point, Jennifer, I ran into Dick Parsons, the CEO of Time Warner, our boss. And he said, I don't care if you have one job, two jobs or three jobs, as long as you're working 18 hours a day for me, then I'm happy.

(LAUGHTER)

SERWER: That's the kind of economy we're dealing with these days.

CAFFERTY: Doing a little sucking up, were you, Andy?

SERWER: Oh, a little, you know, it doesn't hurt, right?

CAFFERTY: The mess in Iraq taking center stage in the midterm elections. Good news about the economy is not getting much play at all. Our senior political analyst Bill Schneider joins us now to tell us why not.

I thought it was always about the pocketbook issues.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, you know, "the economy, stupid" is the old political cliche. It's dead, long live the new political cliche.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Democratic political consultant and CNN contributor James Carville coined the phrase "the economy, stupid" in 1992. Is there any doubt what the issue is this year?

JAMES CARVILLE, DEMOCRATIC POLITICAL CONSULTANT, CNN CONTRIBUTOR: Not anybody I've talked to and not anybody at any pollster talks to, it's Iraq.

SCHNEIDER: What happened to the economy? There are some signs it's gotten better. The stock market is hitting record highs. Gas prices are dropping. Have people noticed? Apparently, yes. Two months ago in our Opinion Research Corporation poll, most Americans said the economy was in poor shape. Now, 62 percent say it's in good shape.

But look at what else has happened, two months ago, at least 40 percent of voters said the economy and gas prices would be extremely important issues in their vote this year. Those numbers have taken a tumble. The number who say the economy will be important, down 7 points. The number who cite gas prices, down 16.

A new rule has taken over. When the economy is bad, the economy is the issue. When the economy is good, something else is the issue. It's Iraq, stupid. Do voters give the Bush administration credit for the improving economy?

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The truth is the tax cuts have led to a growing economy that has added 6.6 million new jobs since August of 2003. SCHNEIDER: In all of this, people who said the economy was in good shape rewarded the president's party with a strong vote of support. Now, more people say the economy is in good shape, and the reward they give Republicans is? Zilch!

Their vote for Congress is just about tied.

(END VIDEOTAPE)

SCHNEIDER: And there's the thanks of a grateful nation for you, Jack.

CAFFERTY: How much do you suppose, Bill, this might have to do with deteriorating conditions in the last few weeks in Iraq? Suddenly the violence has escalated, the number of American soldiers getting killed in the news every day going up. And some of these economic issues that you refer to are improving. So why do I have to worry about price prices? They're down $1 a gallon.

SCHNEIDER: That's exactly right, when the newspapers and the TV screens are filled with terrible news coming out of Iraq, especially if people see no end in sight, they get very angry and other news just goes by.

WESTHOVEN: I want to ask a little bit, is it really that, you know, Americans, oh well, if the economy is good, they start to focus on something else or is it that we're talking about blood right now, you know, we're talking about losing Americans, about Iraqis dying, is it just that when we're talking about, you know, death, that trumps the economy when you're talking about something as big as war?

SCHNEIDER: War is big, and when American lives are being lost, particularly when people don't see an endgame, a victory in sight, they get very angry. And when they're angry about that, they don't have time to think about other issues. It's always been the case.

When the economy is good, people always think about, well, what else is the problem? It was once Watergate, it was Vietnam in the 1960s when we had an economic boom. In the early part of this decade, it was all the war on terror. When the economy is good or even pretty good, something else is always the issue.

SERWER: Bill, I talked to a Republican businessmen, though, and they really fault the president and the administration for not being able to take advantage of the fact that the economy is good. Do you think that they are inept in terms of being able to communicate to the American people that, hey, you know, things are pretty good out there. Ask yourself, are you better off today? Why can't they get that message out there?

SCHNEIDER: Well, they -- I don't think they're inept. I just think that people are focused on other things. Iraq, Iraq, Iraq. Sometimes a good economy can actually make a difference. Let me give you a good example. 1998, remember that midterm, Bill Clinton was facing impeachment and he was saved, the voters gave the Democrats more seats in the House. Why? The good economy. They said, well, if the economy's good, he must be doing his job. They came to the defense of that president and pulled off a big surprise. But in this case, it's a war, not a sexual escapade.

CAFFERTY: And there was no war then and the economy was probably -- you could make the argument even better than it is now. I mean, Wall Street was humming, it was...

SERWER: Yes, '98 was...

(CROSSTALK)

CAFFERTY: It was just -- you know, we were going in into this big boom time.

SCHNEIDER: There are years -- you know, we have an indicator, how well are things going in the country? When that number is over 60, then the economy really takes over as the issue. When it's under 40, like 1992, "it's the economy, stupid." What is it now? 50/50, it is right in the middle, which means something else is the issue.

CAFFERTY: All right, Bill Schneider, CNN's senior political analyst, thank you for coming on our tiny little program. Appreciate it.

SCHNEIDER: Sure.

CAFFERTY: When we come back on IN THE MONEY, quid pro no, see if campaign finance reform has done anything to clean up the link between the corporations and the politicians.

And later, the best campaign ad money can't buy. See how the candidates are using social networking sites in order to get free P.R.

Plus, voting for the long haul, find out how your choice at the polls Tuesday could have an impact on our economy as a whole. We're coming back.

(COMMERCIAL BREAK)

CAFFERTY: Candidates in the major parties spending a record amount of money on this year's midterm elections and it's real high class, stuff, too. Have you seen the commercials? That doesn't mean all of those campaign finance reform laws have failed, nay, nay, at least that's what our next guest says. Norm Ornstein is a resident scholar at the American Enterprise Institute. He is the author of "The Broken Branch: How Congress Is Failing America & How to Get It Back on Track."

Norm, welcome. Nice to have you with us.

NORM ORNSTEIN, RESIDENT SCHOLAR, AMERICAN ENTERPRISE INSTITUTE: It is great to be here, Jack.

CAFFERTY: Two-point-six billion dollars being spent on the midterm elections, the most money ever for a midterm. Where's the reform.

ORNSTEIN: Of course, maybe that's why the unemployment rate has gone down. The reform is here, when the McCain-Feingold bill passed, the people who were against it said that the parties would wither and die on the vine. That this would all go to these outside...

CAFFERTY: We should be so lucky.

ORNSTEIN: ... special interest groups. The fact is that the parties are now raising more money and hard money than they did in hard and soft combined. They're not shaking down big donors. We don't have million-dollar people who are coming in and dominating the process in the same way.

The number of small donors is sharply up, as a proportion and in the absolute numbers. So there's some good things out there. I'm not going to defend the commercials.

SERWER: Hey, Norm, every time we have campaign finance reform, though, very smart people out there figure out ways around it. You see the same thing with tax reform. So what about just throwing the whole thing out the window? I mean, is it all sort of just hopeless?

ORNSTEIN: I don't think it's hopeless, in the same way that we're not going to throw the tax system out of the window. We know every time we do a tax reform that the next day there are going to be the barnacles building up on the hull again and you're going to have to scrape them off at some point down the road.

I know that the campaign finance system is never going to work perfectly or well. You're always going to have money in politics. And, you know, part of -- it's $2.6 billion. Look what it costs to get messages across in this society now, with the million Web sites and channels, the cacophony. So you've got to have at least some limits on the system. That's what the tax system does.

People dodge it, people evade it. You try and punish them, we don't do that much in the campaign system, but you try and adjust on a periodic basis. And I know we are going to have to do that every few years. But there's no panacea.

WESTHOVEN: Without glossing over some of the things that we may still need to do, what do you feel is the thing you're most proud of when it comes to this bill, you know, how the new law is working, that really might keep some, you know, corrupt politician from sitting in his office one day and thinking, you know, if I don't vote for this, I'm going to lose my job, I'm going to do this, I had better do what they tell me?

ORNSTEIN: Well, you're not going to cut out access by prominent people and you're not going to cut out corruption. You know, as long as there's money and human beings together, you're going to have that temptation to be fulfilled.

I'm very proud that we've cut way back though on the shakedowns. The embarrassment that we used to have, you'd have the speaker's club, you pay $100,000, you come in, you get lunch or dinner with the committee chair of your choice. You have a menu of options. We don't have that as much anymore.

And if we can get more small donors dominating this process, somebody gives 500 bucks, that's not going to corrupt a politician. We'll be better off. We have got a long ways to go and you have got to go beyond the campaign system, the earmark business is a disaster, you know? There's so much that's happening there, that has careened out of control.

CAFFERTY: Start with term limits, I suppose, and you could work backwards from there. But let me ask you about the perception that is widespread in this country that the government is bought and paid for by the corporations, that the big businesses, the Defense Department, big pharmaceutical, just tick them off, that the middle class taxpayer, the guy out in Lincoln, Nebraska, doing 50 hours a week and trying to make his mortgage payment, has no voice left in Washington, D.C., it's gone, and the big corporations, big business interests control everything.

ORNSTEIN: Well, of course, in the end, you're still, if you're a politician, going to have to get the votes from that guy out in Lincoln, Nebraska. But when it comes to access in Washington, there's no question that the big interests have an enormous amount of access.

But let's face it, take all the money out of the system. Warren Buffett calls you from Omaha, Nebraska.

CAFFERTY: OK.

ORNSTEIN: And are you going to take his call before you take the call of Jack Cafferty Jr. out in Lincoln, Nebraska? Of course you are. You know, we -- I don't want to be naive here and recognize that large interests are always going to have influence.

What you can do is begin to contain that influence a little bit and keep the temptation that's there from getting out of control.

SERWER: So what are the best things that could be done now, Norm? I mean, what would you key in on?

ORNSTEIN: Well, the first thing we've got to do is fix the presidential system. Two years to go now and it's completely broken. Nobody is going to buy into this system in 2008, where there are some voluntary limits in return for getting some matching funds. So we're going to have only those who can raise huge sums of money being effective as candidates.

The next thing that we need to do is to make sure the challengers have even more opportunities to get into the game. We're going to have a wave election here, which will bring the incumbent re-election rate down to 95 percent maybe.

SERWER: Wow.

(LAUGHTER) ORNSTEIN: Or maybe 94. And you know, where the challengers are doing well, again a benefit of the new law. More and more of them are getting over the threshold where you can get a message across. I want seed money for new candidates coming into the race, free TV time on the broadcasts networks, not on...

CAFFERTY: Yes, go to PBS.

ORNSTEIN: ... cable.

(LAUGHTER)

ORNSTEIN: Well, look, you know, frankly, if I had my druthers, I would free the broadcasters of their public interest obligations by having them pay an amount equal to 20 percent of what have they say they do and give that money to public broadcasting, where I am a director, and let them do an awful lot of the political discourse.

There are ways of dealing with this, they are not easy to do, partly because of the big corporate broadcasting interests.

CAFFERTY: Of course.

WESTHOVEN: OK. Speaking of the discourse, I want to ask about these 527 ads, because it seems like that's an area where there are a lot of people, you know, columnists who are really upset about what's been happening here.

CAFFERTY: Well, you've got two elements here. The 527s are not a problem so much with the law as the implementation of the law. The Federal Election Commission could easily deal with this by saying, you're a political committee. You're trying to elect and defeat candidates. You have limits on what you can spend and disclosure requirements. We need -- another reform is getting rid of the Federal Election Commission as we know it and trying to do something better.

But what's also happened is the predictions of those who decried campaign finance reform, that these outside groups would overwhelm the parties, has not proven true. And in fact the 527 groups have declined a little bit.

The real difficulty there is the Supreme Court has said individuals can spend as much as they want independent of candidates, that's a First Amendment issue. And as long as we're dealing with that, you have the potential for a billionaire coming in and overwhelming the race. We now have this fellow Bob Perry in Texas of the Swift Boat fame, who is doing what George Soros did the last time, except he is doing it with attack ads. Soros was doing it much more with get-out-the-vote efforts.

But you are always going to have to deal with that. The other interesting issue here is these ads that the parties are financing, but where they don't have the responsibility for them, you know, it is such a hoot to hear the chairman of the Republican National Committee with this ad that ran in Tennessee...

CAFFERTY: In Tennessee.

(CROSSTALK)

ORNSTEIN: The "call me" ad, saying, well, we financed it, the tag line says "the Republican National Committee is responsible" for it, but I had no control over it. We can deal with this sham, frankly, by taking away artificial limits on what the parties can spend and basically make them responsible for what they're doing and link them to the candidates, so that a candidate can't get into his own sham of saying, oh, I hate this, but i had nothing to do with it. It's just not right.

SERWER: All right, we're going to have to leave it at that, obviously, topic A grist. And we appreciate you coming on the program. That's Norm Ornstein, who is the resident scholar at the American Enterprise Institute. Thanks, Norm.

ORNSTEIN: My pleasure.

SERWER: Coming up after the break, a herd of cash cows. Find out who is the biggest winner in the campaign ad blitz.

Plus, free love, see how politicians are getting attention from young voters without spending a cent.

And red states, blue states, and pink slips. We'll see what this election means for employment and the rest of the economic picture.

(COMMERCIAL BREAK)

CAFFERTY: Well, you have to excuse the big smiles on the faces of some of our bosses these days around here. You see, the midterm election is setting a record for spending on campaign TV ads, and guess who makes all the big profits on that?

No matter who wins on election day, we win. Doesn't matter which way the election goes. Cnnmoney.com managing editor Allen Wastler has more on all that in our special election edition of "The Numbers."

And the number is large.

ALLEN WASTLER, CNNMONEY.COM MANAGING EDITOR: And the number is $1.8 billion and we're still counting. The experts say it could get up to $2 billion with the political ads that they're buying this year. That is more than the last election, which was $1.7 million. And it's more than double what was in the last midterm election, which was $966 million.

Oh, i just love it when they sling the mud, don't you?

CAFFERTY: Maybe that's why the old stock price crawled up $1.50 or so here at Time Warner.

WESTHOVEN: Is that all TV? Is that all ad spending?

WASTLER: For the most part it's TV, and shame on you, the Internet is really a good value for your advertising.

(LAUGHTER)

WASTLER: But it's mostly TV and it's mostly local TV, because most of these -- we have got a lot more tossup races going on right now, a lot more local issues like tobacco laws, stem cell research, gay marriage.

So all those ad bucks are piling in, piling in, and if you look at the local TV networks, the Sinclairs, the LIN TVs, Heart-Argyle, all of their stocks are beginning to creep up because they're seeing all of this money pulled in. Yes, we like the money.

SERWER: And you know, the production value of these things, obviously, there's an escalation going there, too, because you have got to keep making better and better ads that are more expensive all the time. I mean, "call me," you know, and those little beauts like that. You know, they spend some money doing these things and obviously they're scratching their heads and trying to be outrageous and crazy. And sometimes they go way over the top like with that one.

CAFFERTY: Yes. Or just plain stupid and offensive.

SERWER: There is that.

CAFFERTY: Which is what that one was.

SERWER: That was.

WESTHOVEN: That one. It may be great for the TV ads, but boy, I think it's really awful for the voters sometimes. These ads lately have been just despicable sometimes.

WASTLER: But you know, they have said that every election. OK? Every election somebody reaches a new low.

SERWER: Willie Horton...

(CROSSTALK)

WASTLER: When Willie Horton -- everybody was like, it couldn't possibly go lower than that, and now we got the -- you know.

WESTHOVEN: IN every election I will hope that someday there will be some accountability when it comes to these ads.

CAFFERTY: How about Dukakis riding around in the tank with the helmet on.

SERWER: Well, he did that. That was not Photoshop.

(LAUGHTER)

CAFFERTY: That wasn't offensive, that was just silly.

(CROSSTALK) SERWER: Well, if you do things like that, things will happen to you, as they say, in more graphic terms.

CAFFERTY: Jennifer.

WESTHOVEN: If you thought social networking sites like MySpace and Facebook were just tools for high school kids and 20-somethings to fool around? Well, think again. Because political candidates are jumping in, putting up profiles to try and get their attention.

(BEGIN VIDEOTAPE)

WESTHOVEN (voice-over): Eighteen- to 29-year-olds are spending more and more time socializing online.

UNIDENTIFIED FEMALE: I check my Facebook like two to three times a day.

WESTHOVEN: So politicians are joining them in the virtual networking world, posting profiles to explain their stand on the issues.

UNIDENTIFIED MALE: You can actually find out all about a candidate basically with just one single click. It's incredibly convenient. You don't have to research through papers or magazines.

WESTHOVEN: Candidates from different parties in all corners of the country are gaining political supporters the way social networkers find friends. It's completely free, and the potential voting audience is immense. Myspace.com sees up to 56 million unique visitors a month and about 80 percent are voting age.

Another top site, Facebook, has 10 million members. Most from the highly coveted college set. Users show support by posting campaign banners and links to candidates' profiles for all their friends to see.

UNIDENTIFIED MALE: A number of my friends have also supported politicians. I have tended to go look at the politician's Web page because I'm wondering what are these issues that if my friend likes that I might like as well?

WESTHOVEN: Some industry insiders say this type of friend-to- friend chain reaction is a new kind of word-of-mouth campaigning.

JEFF BERMAN, MYSPACE.COM: It really is the 21st Century version of the yard sign for the community that's on MySpace, and given the size of the community, that can be a pretty powerful yard sign if do you it right.

WESTHOVEN: Big signs maybe, but not all users are reading them.

UNIDENTIFIED MALE: I've seen the campaign issues but I haven't really paid too much attention to it.

UNIDENTIFIED FEMALE: I have never noticed any politicians. I know that there are a lot of celebrities.

WESTHOVEN: Rock the Vote is known for using the power of celebrity with this age group. But even it's shifting its strategy, the non-partisan, not-for-profit has teamed up with Facebook to help register voters for the midterm election.

HANS RIEMER, ROCK THE VOTE: Ten or 15 years ago, Rock the Vote would go on air and show a PSA with celebrities encouraging young people to vote. Today, we're going more and more to the Internet to use young people to reach their peers. It's a big difference, and we think it's really more powerful.

UNIDENTIFIED MALE: Folks, when a cowboy shakes your hand...

WESTHOVEN: Humorous and popular musician Kinky Friedman is an independent running for governor in Texas. He's currently behind in the polls but he is winning the virtual popularity contests. He has more than 50,000 supporters on Facebook and MySpace combined.

LAURA STROMBERG, PRESS SECY., KINKY FRIEDMAN FOR GOVERNOR: We wont find out until Election Day whether those MySpace friends and those Facebook friends translate to votes. We're hoping that they will.

WESTHOVEN: So the big unknown is whether online support will mean real support in the election booth. Rock the Vote is taking careful note this go-round as it prepares for the presidential elections to come.

RIEMER: Social networks are here to stay. For us, this is about testing new approaches so that when the storm comes in 2008, we know what to do.

(END VIDEOTAPE)

WESTHOVEN: If you think that sounds too good to be true, it's not all pro-candidate propaganda on these social networking sites. Users can also create profiles or groups explaining why a candidate should not be elected as well.

Coming up, if your portfolio had a seat belt, you'd be fastening it right now. See how the midterm elections could shake up Wall Street and the economy.

And also ahead, one politician who won't be hitting you up for a last minute contribution. Find out how Bill Bradley builds himself a life after politics.

And we want to hear about what you think about the show, about the election. Come on, you know you yell at the TV. We want to hear it. Put it in writing. Send us an e-mail right now, inthemoney@cnn.com.

(COMMERCIAL BREAK)

FREDRICKA WHITFIELD, CNN ANCHOR: Hello, I'm Fredricka Whitfield at the CNN Center in Atlanta. IN THE MONEY continues in a minute. But first these headlines.

A stiff curfew about to be imposed in Baghdad and two other areas in Iraq. The move comes as the country awaits the verdict in Saddam Hussein's first trial. The curfew will be put into place tomorrow morning, just ahead of the expected announcement of the verdict. Hussein could get the death penalty if convicted.

More boasting from Iran as that country's military conducts a new round of war games. An Iranian general says his military now has missiles that can reach nearly 900 miles, and weapons that could penetrate advanced bulletproof vests. He made those comments to the state-run news agency.

A new call for the removal of U.S. Defense Secretary Donald Rumsfeld. This one from four newspapers read by U.S. military personnel around the world. The Army Times and its sister publication will come out for Rumsfeld's ouster in an editorial to be published on Monday.

For American voters, it's just three days until the midterm elections. In red states and blue ones, it's a frantic pace for the candidates as they head to the home stretch. President Bush on the trail today to rally his party's faithful. Polls still show the Republican Party is in danger of losing its control of Congress.

And those are the headlines. IN THE MONEY continues right now.

CAFFERTY: Well, we know whoever wins on Tuesday will be well- taken care of. Politicians tend to be very good at raising cash and the perks aren't too bad either. But how about the rest of us? Joining us now with a look at what this election might mean to all of our pocket books and to some other issues as well, Greg Valliere, who is the chief strategist at the Stanford Washington Research Group; and John Rutledge, who is the chairman of Rutledge Capital.

Before we start talking issues, who is going to be running the Congress on Wednesday morning, do you think?

GREG VALLIERE, CHIEF STRATEGIST, STANFORD WASHINGTON RESEARCH GROUP: Very close call, but I think the Senate stays narrowly Republican by a seat or two. The House probably the Democrats by a handful of seats. Basically, it's a tie. If you thought there was gridlock, Jack, in the last two years, just wait until the next two years.

CAFFERTY: Do you agree with that? Do you think the Democrats will have a piece of the pie at least?

JOHN RUTLEDGE, CHAIRMAN, RUTLEDGE CAPITAL: Yes, who has been running Congress? Congress hasn't been doing anything.

CAFFERTY: Yes, well, that's a good point.

RUTLEDGE: So, yes, Dems will win the House. The Senate's up for grabs, which means you have a total standoff for the next two years. CAFFERTY: Now the stock market likes that. In the '90s, when we had a Democrat in the White House and the Republicans running Congress, everybody made a lot of money. And the market's been rallying into this election. How is Wall Street going to react, do you think?

VALLIERE: I think it's benign. I don't see a big impact. But if you were hoping to get some good stuff, Social Security reform, extending some of the tax cuts, you're not going to get anything good or bad. It's just gridlock.

RUTLEDGE: Going to be a little hard to tell, also, because we've just had enormous news about the growth of jobs, the profit numbers in the third quarter in the 20s, and so the stock market is going nuts anyway. But the issue long term I think is whether or not we keep the low dividend and capital gains tax rates. And with the Democrats controlling the House, where tax bills emerge...

CAFFERTY: Right.

RUTLEDGE: ... very unlikely to happen. That's worth a big chunk of the stock market.

CAFFERTY: There are also some signs out there the economy's starting to slow. Not -- I mean, the jobs report aside, and there was a good jobs report and big revisions in August and September, but housing is beginning to show signs of getting tired and there are some other areas of the economy that are starting to show signs of slowing.

VALLIERE: Yes, I think tax cuts are important to be extended. I disagree a little bit, I think that the dividend and cap gains rate at 15 percent are definitely good through '08, maybe through 2010. If the Democrats in Congress tried to undo it, Bush would veto it. That is the big story in the next two years, the Bush veto, which he's used once in six years, I think he'll use a dozen times in the next two years.

CAFFERTY: What about the tax cuts that are due to expire, though, don't they have to be voted back in or they will automatically go away?

RUTLEDGE: The issue today is these tax cuts expire automatically in 2010. The reason to me that's interesting is because it takes a positive act of Congress to continue them, and the average maturity of the profits in a stock is about 25 years. So the tax rates far out there on the horizon are pretty important, too. But at least it means we're not going to get an extension in the near term.

CAFFERTY: What are the Democratic issues likely to be? What's going to be at the top of their list, besides perhaps launching a bunch of formal investigations into the administration?

VALLIERE: Very quickly, minimum wage, you'll probably get that soon. A bill to let the head of HHS directly negotiate on Medicare prescription drug prices, bad story for the drug stocks. Maybe something... CAFFERTY: That could be a veto for President Bush too, right?

VALLIERE: Could be. Something maybe on executive compensation denying the tax deductibility there. And maybe something on oil industry windfall profits, I can't see that bill making it into law. But maybe they take away some of the oil industry's tax breaks. Those things I think could move pretty quickly.

RUTLEDGE: And getting rid of any chance of wiping out the AMT, or reforming the -- it is the alternate minimum tax.

CAFFERTY: Of course.

RUTLEDGE: The estate tax reforms out the window at the same time. But I think the sleeper here is that there's a telecom bill that is being held up in the Senate and if the Democrats control the Senate, that telecom bill will never pass. That telecom bill is what is going to unleash capital spending in new fiber optic networks. And the big competitive gain between the U.S. and China is over IT and communication, not over sewing machines and manufacturing.

CAFFERTY: What kind of focus are they likely to have on foreign policy as relates to things like the economic relationship that we have with China? Are the Democrats going to attempt to address anything like that, become more aggressive, for example, with China on currency issues, trade barriers, tariffs, trade deficits that are just humongous?

RUTLEDGE: Well, Smoot -- or Schumer has a protectionist bill in Congress, along with Lindsey Graham, that would be a total disaster if it passed. I don't think it's going to pass but they can use it for bargaining in other ways. And I think that's a big issue. Iraq is an issue but Iraq's not going to go away no matter who is in the Congress or who is the president.

VALLIERE: One of the interesting stories is many of the one of the winners, like Sherrod Brown in Ohio, who will probably beat DeWine, is a protectionist. Sherrod Brown doesn't like NAFTA, would like to support the Smoot -- or Schumer-Graham bill, but it won't happen, that would get vetoed.

CAFFERTY: It will get vetoed, there's no chance they are going to be able to override. There is an issue with China. China is kind of holding a lot of our IOUs and they're whacking us around in trade pretty good. We've got a big deficit with them. What's the -- what should the approach be with them? You can't just let it go on the way it is, can you?

RUTLEDGE: Well, you know, what's happening in China is they fear inflation more than any other economic issue. Inflation has overturned three governments in China. Pegging to the dollar is their way of outsourcing their inflation rate to the Fed. Their inflation rate is exactly the same as ours. They're not going to change that. So I think that foreign reserves, trade and those issues are ones that they're going to resist changes to. CAFFERTY: What about the Fed and interest rates and whether or not the economic statistics that we're looking at are going to justify perhaps more hikes? I mean the jobs report this past Friday, huge upward revisions to both August and September, and not exactly a benign or negative number for October. Are they going to be ready to start raising rates again very soon?

VALLIERE: Well, you've got to say with the kind of gridlock that we all expect, Ben Bernanke is the most powerful player in Washington on domestic issues for the next two years. I think everyone, before Friday's unemployment report, thought the next move would be a rate cut.

CAFFERTY: Down, yes.

VALLIERE: Now it's up in the air. You can't rule out a rate hike. I don't think anything is going to happen until the end of the winter, early spring. But I think this hope the bond market had for three or four rate cuts coming, those hopes have been dashed.

CAFFERTY: Yes. Bonds went right off the edge of the cliff the minute those jobs numbers came on Friday. I don't know what kind of recovery they might have staged in the afternoon, but they sold off right away on those numbers.

Who has the lead dog in the race when the presidential campaign begins, which will be next Wednesday? I mean, the campaign will be off and running, the posturing, the positioning, all of those things regardless once the midterms are out of the way. Depending on who controls Congress, who do you like looking toward '08? I know it's a long way out. But I mean, that's going to be the big story politically now, immediately after the midterms.

VALLIERE: Well, I think two things very quickly. Number one, the Republicans need a foil. What better foil for the next two years than House Speaker Nancy Pelosi, Chairman Rangel, Chairman Dingell, all of that is a good foil. The second point though is the two most contentious states in America in the last two elections, Ohio and Florida, are going to tilt heavily to the Democrats on Tuesday night. That has implications perhaps for '08.

CAFFERTY: Well, what do you think, John, what do you see?

RUTLEDGE: I think also the rogue Republicans that have been hard to keep on the porch, John McCain, are going to be more important, so he's going to have more clout along through the primaries, too.

CAFFERTY: All right, it will be interesting to see. I appreciate you both coming in. Nice to have you here. John Rutledge, the chairman of Rutledge Capital. Greg Valliere, the chief strategist of Stanford Washington Research Group.

Lots more ahead on IN THE MONEY coming up next as we continue, bosses who do what governments won't. We'll look at the people who changed the way corporate philanthropy does business. And later, how to tame a political animal. Beat it to death with a stick. See what happened when Bill Bradley traded running for talking. Stick around.

(COMMERCIAL BREAK)

SERWER: For some of America's richest people, making money is easy, it's giving it away that's hard. A new generation of philanthropists is taking on that challenge and bringing the innovations they brought to the business world to the nonprofit world.

(BEGIN VIDEOTAPE)

SERWER (voice-over): It's a small world, when it comes to big money philanthropy.

BONO, U2: The phone rings and it's Bill Gates and he said, are you sitting down? He said, I've got somebody to who wants to tell you something here, and so Warren comes on the phone. Hi, Bono. Listen, ah, I want to tell you, ah, you know, I got all this money and you know, I don't want to spend it, and -- I said, (INAUDIBLE), Warren? He said, well, it's about $32 billion.

SERWER: Warren Buffett's gift to the Bill and Melinda Gates Foundation created as about $15 billion behemoth. Today the world's richest men have created the world's biggest foundation. And as you would expect from Bill Gates, he is running his charity like he was running his company, focused on results and accountability in its core missions of global poverty and education.

The Gates Foundation tactics may be new but the concept has been around for 100 years. At the start of the 20th Century, steel baron Andrew Carnegie was the world's richest man. In 1911 he decided to give away the bulk of his fortune, founding the Carnegie Corporation with $125 million.

VARTAN GREGORIAN, PRES., CARNEGIE CORPORATION: Carnegie started the concept of scientific philanthropy, because he distinguished between charity, which you give out of pity, sympathy, to philanthropy, which argued conviction to solve the causes of poverty and other things.

SERWER: Today's philanthropists see themselves as Wall Street investors and are demanding strong returns from their investments as they bring the skills of the business world to the non-profit world.

STEVE GINDERSON, CEO, COUNCIL ON FOUNDATIONS: The new generation of philanthropist I think is different in two ways, both in process and in product. They very much are different in process, in that they are looking for those ways in which you can very effectively combine technology, the marketplace, et cetera, and try to achieve an outcome. In terms of product, they're uniquely focused on economic and social justice issues.

SERWER: When it comes to social justice, the world's celebrities are using their visibility to draw attention to global issues. Angelina Jolie, Brad Pitt, and U2's Bono have helped draw the world's attention to the plight of poverty in Africa.

BONO: Africans love to trade. You know, they're a very entrepreneurial people. They have to be. If they're not, usually they're dead. You know, but on any street corner you'll find that. And I also picked up from Africans that they want to do business with us. They -- that dignifies the relationship, rather than being the recipient of aid.

SERWER: Venture philanthropy is the non-profit world's way of creating that business relationship. Groups such as Acumen Fund don't give money away. Instead they fund start-up companies dedicated to improving health or clean water and expect them to become sustainable.

These companies can then repay their startup costs allowing new companies to get funded. Innovative thinking and accountability may be driving the new players, but the old foundations say some results are hard to measure, and that there still is a place to play for them next to the newcomers.

GREGORIAN: Without the American philanthropy, most of the museums and cultural organizations, ballet and opera and so forth, all of them will be either bankrupt or will be a hand-to-mouth operation. Foundations are taken care of.

So suppose I'm giving to opera. I bring Pavarotti here for two seasons to sing. How do you measure the results? He came, he sang, he enchanted people.

(END VIDEOTAPE)

SERWER: In the coming weeks we'll continue our look at giving and some of the innovators in this field.

Coming up next, don't send money. Bill Bradley is way beyond the days of looking for campaign contributions. We'll show you what happened after he got out of politics.

And it's time to hear from you as we read some of your e-mails from the past week. You can send us an e-mail right now to -- we are at inthemoney@cnn.com.

(COMMERCIAL BREAK)

SERWER: Allen Wastler is back now with a look at what the legacy of the election will be.

Allen, what do you think?

WASTLER: Well, there have been a lot of noticeable things about this election. I mean, there's been mudslinging. There's been a new meaning to this. But we decided to go around the panel.

Jennifer, what do you think the most notable thing is going to be about this election season?

WESTHOVEN: My favorite thing is always the campaign ads, all right? I just really -- I enjoy them. I enjoy how completely colorful and ridiculous they can get, how off-base from the truth they can get. I just like the fact that at least when the parties -- you know, some offshoot of the party puts on a really aggressive ad, they actually have to say, we approved this ad. I think that's important.

WASTLER: All right. And you know what? I've got a different take. Totally away from politics, I think that there is a crowning of a new king. And this is our little surprise on Andrew here, we decided to note the fact there is a new king of Fortune magazine. We wanted to congratulate Andy Serwer.

SERWER: This is my coronation, is that what you're trying to tell me?

CAFFERTY: Absolutely.

WASTLER: Andy, congratulations. If you haven't heard, Andy Serwer is now the new editor of Fortune magazine. So we trumped up this little segment, Andy, just to wish you well and congratulate you on your crowning achievement.

SERWER: Well, thank you, guys. Did you get this at Burger King?

CAFFERTY: There you go?

(LAUGHTER)

CAFFERTY: It looks terrific.

WESTHOVEN: It looks fancy.

SERWER: I don't know if it has been fitted. That's very corporate. It really is. This is going to do wonders for my credibility.

(LAUGHTER)

WASTLER: Good job.

SERWER: Because it's all about street cred here at IN THE MONEY and Fortune magazine as well. Thank you very much.

WESTHOVEN: You deserve it.

SERWER: That's very nice of you. Appreciate it.

CAFFERTY: Much deserved and good luck to you in your new assignment. They made a very wise choice.

SERWER: Thank you, Jack.

CAFFERTY: But that doesn't mean you're off the hook. You will be here every Friday to do this program no matter what.

SERWER: Yes. Indentured servitude continues.

CAFFERTY: OK.

WESTHOVEN: Yay!

CAFFERTY: Very good.

SERWER: Thank you.

WESTHOVEN: He's already had two careers, first in pro basketball, then in politics. And today, the man they once called "Dollar Bill" is still money. Bill Bradley is in this week's edition of "Life After Work."

And CNN's Jen Rogers has the story.

(BEGIN VIDEOTAPE)

BILL BRADLEY, FORMER NEW JERSEY SENATOR: I've decided to withdraw from the Democratic race for president.

JEN ROGERS, CNN CORRESPONDENT (voice-over): Bill Bradley exited the political stage more than six years ago.

BRADLEY: You never get over it. And that doesn't mean that it eats away at your core, like poison.

ROGERS: Failure is not familiar to Bill Bradley. His life story is one of legend. An All-American basketball player at Princeton, a Rhodes scholar, a basketball hall-of-famer we are two NBA championships, and 18 years as a Democratic senator from New Jersey. Now, he's a private citizen.

BRADLEY: I was in public life to try to make the world a better place. Now that I'm in the private sector, I want to do the same thing.

ROGERS: One way Bradley hopes to make a difference, giving Americans something to feel good about.

BRADLEY: I'm Bill Bradley and this is "American Voices" only on Sirius Satellite Radio.

People say to me, do you miss anything about politics? And I said, yes I miss two things. I miss not doing public policy 24 hours a day, and I miss the people.

ROGERS: Bradley's weekly show features the underdogs and unsung heroes that make up the American landscape.

BRADLEY: This is why this show is so much fun. I have the total authority to give credit for anything that I'd like to give credit for. So you got credit for taking the risk and showing America your great singing voice.

ROGERS: His show, his books, his work as an investment banker make up the latest chapter in a storied career, but probably not the last. BRADLEY: I'm having such a great time now, that I couldn't imagine doing anything more than I'm doing at the moment. I mean, I wish there were 28 hours in a day.

ROGERS: Bradley jokes he would gladly return to the NBA.

BRADLEY: Get a few new hips and knees, you know, who knows? Like they have a designated hitter in baseball, maybe they will have a designated foul shooter. And if they had that, I'm right there.

ROGERS: But while he'd consider a return to the sports arena, Bradley says the political one is out and he has no plans to run for office again.

Jen Rogers, CNN, New York.

(END VIDEOTAPE)

WESTHOVEN: We'll be right back with more IN THE MONEY.

(COMMERCIAL BREAK)

CAFFERTY: It's time now to read your answers to our "Question of the Week" about what issue is most important to you in these elections.

Phil wrote from Malvern, Pennsylvania: "The most important issue to me is to vote out every single incumbent regardless of their party. The issues no longer matter since our representatives only real issue is to stay in office. If we can throw out the incumbents this time, it will be easier to do it next time. And this is ultimately the best way to get term limits." He is right on.

P.W., Daytona Beach, Florida: "The security of our country is the most important issue. I'll be cautiously optimistic if the Republicans stay in office and very pessimistic if the Democrats gain control."

And Tom in Indiana offers this: "I will vote to elect officials who will get us to believe in ourselves again, and turn us away from this culture of fear. Our leaders cultivate the fear of terrorists, fear of predators, fear of lawsuits, and the fear of spinach. All we really have to fear is fear itself. FDR, where are you?"

Here's next week's e-mail "Question of the Week": Did you think your vote really counted in this election? Send your answers to inthemoney@cnn.com. You should also visit our show page at cnn.com/inthemoney.

On that note, thank you for joining us for this special election edition of IN THE MONEY. My thanks to Fortune magazine managing editor, I like the way that sounds, Andy Serwer; HEADLINES NEWS correspondent Jennifer Westhoven, and cnnmoney.com managing editor Allen Wastler.

We invite you to tune in to CNN's coverage of the election on Tuesday night with the best political team on television. There they are, the four horsemen and -women of the apocalypse.

(LAUGHTER)

See you back here next week, Saturday at 1:00, Sunday at 3:00 Eastern. Until then, enjoy the rest of your weekend. I may be fired immediately.

(LAUGHTER)

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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