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Economic Rescue Plan For America?; Fred Thompson Withdraws From Presidential Race

Aired January 22, 2008 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: Happening now: emergency action to stop financial markets from reeling. The Federal Reserve steps in while President Bush and Congress still are trying to get an economic rescue plan together.
Also this hour, Hillary Clinton and Barack Obama keep the fireworks going after their debate slugfest, and Bill Clinton center stage through it all, including today. Are voters, though, being turned off by all the sparring?

And the rise and fall of Fred Thompson. His presidential campaign is now over. Will any of the remaining Republicans benefit, though? The best political team on television standing by for that and more.

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

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

Financial markets around the world are in turmoil right now. But, on Wall Street, the Dow Jones industrials close down 128 points. It could have been a whole lot worse. That was a big improvement from a plunge of more than 400 points earlier in the morning. The Federal Reserve took emergency action today to try to calm investors' recession fears.

It slashed two key interest rates, and a hefty three-quarters-of- a-percentage point. Now the pressure is growing for President Bush and the Congress to act and to act quickly.

Let's go to our White House correspondent Ed Henry. He's watching the story for us.

Talk of an economic stimulus package, it's a lot of talk right now. But is it going to happen?

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, both sides are rushing to show they're on top of this situation. And Democrats and Republicans insist they're getting closer to a deal to actually do something about it.

(BEGIN VIDEOTAPE)

HENRY (voice over): Markets plunging, consumers hurting.

UNIDENTIFIED FEMALE: I'm definitely concerned because I know my retirement fund is completely deteriorating.

HENRY: Washington, scrambling.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I believe we can find common ground to get something done that's big enough and effective enough so that an economy that is inherently strong gets a boost.

HENRY: While President Bush works with congressional leaders on an economic stimulus plan that may take months to actually reach consumers, the Federal Reserve hit the panic button, slashing a key interest rate by three-quarters of a point, the biggest cut in 24 years, to deal with an economic shock that's becoming a defining issue in the 2008 campaign and could overshadow the president's final year in office.

ANNE MATHIAS, STANFORD GROUP: If we go into a recession, even if we have this economic stimulus package, we are not going to be out of the recession. It's not going to be smooth sailing by September and October and the waning days of the presidential campaign. And this could not be worse news for the Republicans.

HENRY: A long list of economic headaches for the president, from the subprime mortgage crisis, to rising prices for gas and food, stoking concerns about inflation. Amid Wall Street's wild rise Tuesday, Mr. Bush huddled privately at the White House with his economic team and then dispatched Treasury Secretary henry Paulson to Capitol Hill, pushing his stimulus plan of nearly $150 billion in tax cuts and government spending.

HENRY PAULSON, TREASURY SECRETARY: Time is of the essence here. And the president stands ready to work on a bipartisan basis to enact economic growth legislation as soon as possible.

HENRY: There's also risks political risks for Democrats if they appear to be dawdling, which is why they're also sounding a rare note of bipartisanship.

REP. NANCY PELOSI (D-CA), SPEAKER OF THE HOUSE: We think that message that is sent to the American people about bipartisanship at a time when they are feeling the financial pain will instill confidence in the consumer and hopefully in the markets as well.

HENRY: But some economists believe any relief may be too little, too late.

MATHIAS: Well, it's sort of a Band-Aid.

(END VIDEOTAPE)

HENRY: Now, specifically, Democratic and Republican leaders on the Hill say they think they can get this stimulus plan to the president's desk by mid-February, but economists note that it might actually take until late spring or early summer before the U.S. government gets these checks rolling and in the mail to people and get them into their pockets. So, the short-term impact really might not be that much -- Wolf.

BLITZER: Ed Henry, thanks very much.

This is the fourth time the Federal Reserve has slashed interest rates since September. Further cuts are expected when the Fed meets next week. The cuts could ripple through the economy. If you have a credit card with a variable interest rate, you may pay less on your debt. Interest rates on home equity loans may also dip, but your mortgage payment won't go down because the Fed cut affects short-term interest rates.

If you're in the market for a new car, auto loans should get cheaper.

Now to the red-hot tensions in the Democratic presidential race. Hillary Clinton and Barack Obama are trading new accusations, after they came out swinging on our debate stage last night. And Bill Clinton continues to be a leading player in this campaign slugfest as well.

CNN's Jessica Yellin is in South Carolina -- Jessica.

(BEGIN VIDEOTAPE)

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Wolf, in speeches today, the candidates are talking about the issues, but their campaigns still seem to be fired up over last night's debate, and they cannot stop squabbling.

(voice-over): It would seem the love fest is over.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: Wolf, wait a minute. Wait a minute. Just a minute.

You know, now that...

BLITZER: Senator Edwards...

YELLIN: At the center of this drama, Bill Clinton.

H. CLINTON: You talked about Ronald Reagan being a transformative political leader. I did not mention his name.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Your husband did.

H. CLINTON: Well, I'm here. He's not.

OBAMA: OK. Well, I can't tell who I'm running against sometimes.

YELLIN: That wasn't enough to knock out the former president, who is throwing punches again today.

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I thought he was running against me in Nevada for a while. YELLIN: And Senator Hillary Clinton isn't backing down either. She chastised Obama for his attacks on her husband and on her campaign.

H. CLINTON: Senator Obama is very frustrated. He clearly came last night looking for a fight.

YELLIN: Today, Obama's campaign raised the stakes. His supporter, former Senate majority leader Tom Daschle, told reporters he thinks this kind of backbiting destroys the party.

Meantime, Obama insists he's taking the high road.

OBAMA: This is exactly the kind of politics we cannot afford right now, not when the stakes are this high.

YELLIN: But it seems he's not opposed to attacks when he's the one making them.

OBAMA: Being ready on day one means getting it right from day one.

She changed her plan to look like mine.

Only in Washington could Senator Clinton say that NAFTA led to economic improvements up until she started running for president.

YELLIN (on camera): The latest development? The Obama campaign has announced they're forming a truth squad of supporters who will speak out any time they say their candidate's record has been distorted.

But the truth is, all the campaigns have had informal truth squads for months with supporters who will make their candidate's case, but also say things the candidates themselves don't want to be caught saying in public -- Wolf.

(END VIDEOTAPE)

BLITZER: Jessica Yellin in Greenwood, South Carolina, for us, thanks.

John Edwards is proclaiming he won the Democratic debate in South Carolina. Edwards often was upstaged by the sparring that went on between the front-runners, Clinton and Obama, but he suggests he scored points by staying above the fray.

(BEGIN VIDEO CLIP)

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: Between all the allegations of Hillary serving on the Wal-Mart board and Senator Obama working for a slumlord, I was proud to represent the grownup wing of the Democratic Party last night.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

BLITZER: Coming up, we're going to show you how the voters are responding to the fireworks between Clinton and Obama. That's coming up.

But let's go to Jack Cafferty right now. He's got "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: The grownup wing apparently is also the smallest wing of the Democratic Party.

BLITZER: If you believe the polls.

(CROSSTALK)

CAFFERTY: Yes, he hasn't won anything yet.

BLITZER: Yes.

CAFFERTY: You have got to win some stuff here.

(CROSSTALK)

BLITZER: You got to win. Winning is important.

CAFFERTY: Winning is essential.

All right. It just wouldn't be Washington without the pork. It would be a much better place, but it wasn't be the same.

"The New York Times" reports President Bush is unlikely to defy Congress on spending billions of dollars earmarked for their pet projects. Administration officials say he will probably insist that, in the future, you know, out there somewhere in the future, that lawmakers give more justification for pork-barrel spending. That will happen.

A group of fiscal conservatives in Congress along with budget watchdog groups have been trying to get the president to clamp down on earmarks. They want him to issue an executive order that would instruct agencies to disregard earmarks that were not listed in the text of the legislation. The reason? More than 90 percent of all earmarks are not actually included in the bills at all, but rather they are slipped into committee reports. I didn't even know that.

Mr. Bush said in last year's State of the Union address -- Remember? -- quote -- "The time has come to end this practice" -- unquote.

Well, apparently, the time hasn't come yet. Despite those calling for tougher rules when it comes to earmarks, more and more lawmakers are trying to score such pet projects, so they can then brag to their constituents about bringing home the bacon.

The White House Office of Management and Budget shows that 2008 spending bills that have been signed by the president include more than 11,700 earmarks totaling $17 billion. Some of these pet projects include museums, and bicycle trails, and control of agricultural pests, and aid to military contractors, who are making things like be merino wool boot socks.

The military contractors in this country definitely qualify as hardship cases, don't you think? Poor things.

Here's the question. What will it take to sometime get rid of pork spending by Congress?

Go to CNN.com/caffertyfile and post a comment on my new blog.

Empty rhetoric, broken promises, your federal government at work -- Wolf.

BLITZER: I don't think we should hold our breath, Jack.

CAFFERTY: No.

BLITZER: No, not going to happen.

All right, Jack, thanks very much.

Barack Obama wants to set the record straight. He's talking about religion, the Pledge of Allegiance and President Clinton's allegations. He's talking to the Christian Broadcasting Network and the journalist David Brody. David Brody in THE SITUATION ROOM, that's coming up next.

Also, which candidate will best help with your money in this battered economy? Find out exactly what the Republicans are promising.

And the actor Heath Ledger found dead in his apartment. Is a drug overdose involved? We will have the latest.

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

(COMMERCIAL BREAK)

BLITZER: We will get to the interview that Barack Obama gave the Christian Broadcasting Network and David Brody just a little while ago.

(NEWS BREAK)

BLITZER: Democratic presidential candidate Barack Obama is stepping up his fight against an e-mail smear campaign, alleging he's a Muslim with ties to radical Islam.

Here's what he told David Brody, the senior national correspondent for the Christian Broadcasting Network, just a little while ago, earlier today.

(BEGIN VIDEO CLIP) OBAMA: Basically, the e-mail falsely states that I'm Muslim, that I pledged my oath of office on a Koran, instead of a Bible, that I don't pledge allegiance to the flag, scurrilous stuff.

And I want to make sure that your viewers understand that I am a Christian who has belonged to the same church for almost 20 years now. It's where Michelle and I got married. It's where our kids were dedicated. I took my oath of office on our family Bible.

I lead the Pledge of Allegiance when I open up the Senate. I have been saying the Pledge of Allegiance since I was 3 years old. And I think it 's very important for people not to buy into the kinds of dirty tricks that we have become so accustomed to in our politics. And people need to understand I'm unequivocal about this. I'm not and never have been of the Muslim faith.

I think that those who are of the Muslim faith are deserving of respect and dignity. But to try and feed into this fear-mongering and to try to question my faith commitments and my belief in Jesus Christ, I think, is offensive.

(END VIDEO CLIP)

BLITZER: And David Brody is joining us now from Greenville, South Carolina. He's the reporter from the Christian Broadcasting Network who did this interview.

David, thanks very much for joining us.

Give us a little more context, how this discussion you had with Barack Obama started and what's going on. Clearly, he wants to assure Christians out there, especially in advance of the South Carolina primary, that he is a Christian, not a Muslim.

DAVID BRODY, SENIOR NATIONAL CORRESPONDENT, CHRISTIAN BROADCASTING NETWORK: You know, Wolf, we had about 15 minutes or so, 10 or 15 minutes, to talk about this.

And I can tell you that it was going to come up towards the end of the interview. I was about to bring it up. But, before I could even get to it, he wanted to bring it up, and, clearly, an attempt by the Obama campaign to put an end to what he calls scurrilous attacks here.

This has been going on for a while, Wolf. This e-mail has been out there. I can tell you that, within "evangelical circles" -- as we put that in quotation marks -- I can tell you that, indeed, this is a talker out there.

And they know it. The Obama campaign knows it. And they want to put an end to it. So, this was proactive on their part to let everybody know that these charges within the e-mail are unfounded.

BLITZER: You also had an interesting exchange with him. And I'm going to play this exchange on the whole Bill Clinton, Hillary Clinton nastiness that has developed in recent days. Listen to this clip.

(BEGIN VIDEO CLIP)

BRODY: Are you looking for a fight here?

OBAMA: Oh, absolutely not. I wasn't looking for a fight. What I'm looking for is a correcting of the misstatements that have been coming out of the Clinton camp, not just from the senator, but also from her husband, over the last month.

And, you know, I think everybody who has watched me campaign knows that we have been trying to focus on the issues and we have been making sure that we maintain a positive campaign. But, you know, if you spend a month taking in incoming, at a certain point, you have to make sure that we correct the record. And that's what we did.

And, you know, my main focus is to try to make sure that I'm communicating with the voters what I'm going to do to help them get health care, and what I'm going to do to make sure that the economy's working for them, and that people have good jobs and good wages, and that we talk about how we're going to make this country safer. Those are my priorities.

This stuff is a distraction, but it's a purposeful strategy that they have employed over the last month. And we have had to sort of put a check to it.

BRODY: You say it's a strategy. Do you think it's -- a lot of this is done on purpose to kind of get you off your game a little?

OBAMA: Oh, there's no doubt. I mean, look, up in New Hampshire, President Clinton, you know, was making stuff up about my opposition to the war in Iraq.

You know, we had, you know, the Clinton camp repeating that we were in favor of the Yucca Mountain nuclear waste facility in Nevada, even though I consistently said I wasn't, the latest episode where I praised Ronald Reagan's political skills, and they suggest that somehow I had complimented Ronald Reagan's economic policies and said they were superior to Democrats.

I mean, these are all things that were just made up. And I understand that's the political tactics that we have become accustomed to.

(END VIDEO CLIP)

BLITZER: All right, good work, David.

David Brody is the senior national correspondent for the Christian Broadcasting Network.

World market jitters and the campaign trail -- Republicans try to seize on this issue and lay out their own vision for a fix.

And President Clinton, the former president of the United States, caught snoozing.

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

(COMMERCIAL BREAK)

BLITZER: They're issues you certainly care about, your money and your leaders. But which leader can do the best in helping deal with your money? They're all touting what they would do if they were elected president of the United States.

Let's go to CNN's Mary Snow. She's in Palm Beach Garden in Florida watching this story.

You have been checking the various Republican proposals. What are you learning, Mary?

MARY SNOW, CNN CORRESPONDENT: Well, Wolf, all the Republicans out on the campaign trail were keeping an eye on Wall Street. All of them are touting an economic stimulus package by the White House and Congress. But, after that, each one claims that he has the best ideas in order to boost the economy.

(BEGIN VIDEOTAPE)

SNOW (voice-over): For Rudy Giuliani, some of his answers for the economy were pulled out of his pocket, literally. Yes, he has a tax cut plan, but he's also touting a single form to simplify how you file taxes.

RUDOLPH GIULIANI (R), PRESIDENTIAL CANDIDATE: It's a tax reform and a tax reduction. And it will simplify the economy in that it will be a lot less expensive, a lot easier to file your taxes. I think you will see a lot more compliance.

SNOW: And Giuliani figures that will mean more money in the economy. More money, says Senator John McCain, could come through cutting government spending. He advocates tax cuts on individuals and corporations and says a recession isn't inevitable.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: I still believe our fundamental underpinnings of our economy are strong, but it's obvious that we are facing challenges which will require actions such as the Federal Reserve took today.

SNOW: Mitt Romney has added economic turnaround to his message. He's calling for tax cuts and mortgage help.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: What you're seeing with the stock market reaction here and around the world is a recognition of these long-term features and underscoring the need to take a different direction in the economy.

SNOW: Mike Huckabee says that change needs to come by wiping out income taxes altogether and replacing them with a national sales tax.

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: If we could free people up to go out and earn, get their whole paychecks, it could make a truly huge difference in securing jobs and making the economy work.

SNOW: But any of these plans are at least a year way, and economists say, right now, time is of the essence.

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: It's how quickly are these fiscal stimulus initiatives enacted. That's the real issue. It's about -- it's more about when and not what.

(END VIDEOTAPE)

SNOW: And economists say, in order to avoid a recession, what's really needed is to get cash into the hands of consumers within a matter of weeks, not months or years -- Wolf.

BLITZER: Thanks very much, Mary, for that.

Hillary Clinton and Barack Obama are carrying on with the brawl they began in our Democratic presidential debate last night. So, how is it all playing with voters? We can tell you exactly when some people say they got turned off.

Plus, is Senator Clinton risking her support within the African- American community? The best political team on television weighing the fallout from this war of words between Clinton and Obama.

And John McCain, looking like the GOP front-runner these days, if he wins the nomination, will conservatives be satisfied or will they bolt?

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

(COMMERCIAL BREAK)

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

Happening now: Verbal warfare between the Clinton and Obama camps, what impact, though, is it having on Democrats? Find out which group says Hillary Clinton's attacks on Barack Obama are turning them off.

Also, Republican John McCain, mentioned over and over again by the Democratic candidates at last night's debate, is he now the inevitable Republican nominee?

And Fred Thompson bows out of the Republican contest. We're going to show you what derailed his campaign and who stands to benefit from his departure, all of this, plus the best political team on television.

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

The race between Barack Obama and Hillary Clinton has reached a ferocious new level with their heated attacks on each other at last night's debate in South Carolina. So, what do voters make of all this bickering?

Let's go to CNN's Carol Costello. She's got some unique insight.

Carol, what can you tell us about how the voters react?

CAROL COSTELLO, CNN CORRESPONDENT: Well, yes, Wolf, I got to tell you a couple things right off the top. You have to keep in mind, this was a record-setting debate. Almost five million people tuned in, and they stayed tuned in. Yet, when we assembled a group of voters, they clearly were turned off by the squabbling. Or were they?

(BEGIN VIDEOTAPE)

OBAMA: Wait. No. Hillary, you just spoke.

CLINTON: I did not say anything about Ronald Reagan.

OBAMA: You just spoke for two minutes.

COSTELLO (voice-over): The sparring between Clinton and Obama was quite feisty.

BLITZER: Senator...

CLINTON: I didn't talk about Reagan.

OBAMA: Hillary, we just had...

COSTELLO: It certainly gave our assembled voters something to measure. Each were given a meter. If they approved of what the candidates were saying, they made that red line go up. If they disapproved, it went down.

Observe -- Obama is scolding Clinton as he tries to demonstrate his long commitment to displaced workers.

OBAMA: While I was working on those streets watching those folks see their jobs shift overseas, you were a corporate lawyer sitting on the board of Wal-Mart.

COSTELLO: Clinton shot right back -- accusing Obama of embracing Reaganesque ideals.

CLINTON: And I was fighting against those ideas when you were practicing law and representing your contributor, Rezko, in his slum landlord business in inner city Chicago.

(APPLAUSE AND BOOS)

OBAMA: Oh, no, no, no, no, no, no.

COSTELLO: And while the live audience applauded, our voters did not like the sparring. And it wasn't the only time the candidates got personal.

CLINTON: You talked about Ronald Reagan being a transformative political leader. I did not mention his name. You...

OBAMA: Your husband did.

CLINTON: Well, I'm here. He's not. And...

OBAMA: OK, well, I can't tell who I'm running against sometimes.

CLINTON: ...I know -- well...

(APPLAUSE)

COSTELLO: At one point, John Edwards, clearly in line with the way our voters felt, tried to tone it down.

JOHN EDWARDS, PRESIDENTIAL CANDIDATE: This kind of squabbling, how many children is this going to get health care?

How many people are going to get an education from this?

(APPLAUSE)

EDWARDS: How many kids are going to be able to go to college because of this?

COSTELLO: Ah, see the line go up?

In fact, Edwards got a lot of reaction from our voters -- especially with this exchange.

OBAMA: Race is a factor in our society. There's no doubt that in a race where you've got an African-American and a woman and John...

(APPLAUSE AND LAUGHTER)

(END VIDEO TAPE)

COSTELLO: Don't you just have to feel sorry for Edwards sometime?

I mean, something else interesting. You know, Wolf, I talked to a lot of pundits today. There were split. Some said Clinton was too aggressive in this debate, that Obama was too defensive or maybe it was vice versa. I don't know. Maybe it was a tie.

BLITZER: Thanks, Carol, for that.

Carol Costello reporting.

The Clintons, both of them, and Barack Obama clearly at war right now.

So what will it mean for the election?

What will it mean for the Democratic Party?

Let's talk about that and more with our senior political analyst, Gloria Borger. She's here in Washington.

Also joining us in New York, our own Jack Cafferty and our senior analyst, Jeff Toobin.

They're all part of the best political team on television.

Is this really damaging to these two candidates right now, Jack?

What do you think?

CAFFERTY: Well, it's sort of unseemly and unpleasant to listen to. It's one of those things where you get a little uncomfortable watching them go at each other's throats.

Edwards was right when he sort of called a halt and said what does all of this have to do with the price of tea in China?

The problem is nobody is hearing Edwards in this campaign and everybody is fixated on Obama and Clinton.

But it's -- I'm getting a little tired of it. And while we're on the subject, I think it's time for Bill Clinton to start acting a little more like a former president and still less...

GLORIA BORGER, SENIOR POLITICAL ANALYST: Forget it.

CAFFERTY: ...and a little less like some political hack.

BORGER: That's never going to happen Jack, and you know it. I mean he loves being the precinct captain and the vice presidential candidate all rolled into one. Bill Clinton is campaigning in South Carolina and Hillary Clinton is taking her race around the country. This is completely calculated. And everything we saw last night, by the way, was completely calculated, including John Edwards saying oh, guys, why can't we get along?

This is the kind of squabbling the public hates, because he knew that was exactly what he had to do, because they were going to go after each other.

JEFFREY TOOBIN, CNN SENIOR LEGAL ANALYST: Wolf, I'd like to dissent from the idea that this was some kind of unprecedented bloodbath, food fight, Texas death match. You know, this is politics. This sounds like virtually every campaign I've ever seen. The candidates get nasty with each other.

So what?

It's forgotten. You know, in a few months they're...

BORGER: Well...

TOOBIN: Neither candidate has said one word that would stop from supporting the other in a general election.

BLITZER: Well, let me...

TOOBIN: They haven't said anything that would run...

BLITZER: Let me just...

TOOBIN: ...(INAUDIBLE) stop each other from running against each other -- running with each other. I mean I just don't think this is any big deal.

BLITZER: We were there...

BORGER: Well, I think there's a lot of bad blood.

BLITZER: Hold on, Gloria. Hold on, Gloria. There is one fear that was widely expressed to me last night and this morning from members of the Congressional Black Caucus who cosponsored this debate with us in South Carolina last night. Here's the fear they have -- and, Gloria, I'll let you weigh in first -- that if Hillary Clinton gets the nomination, in the process, though, she beats up on Barack Obama -- the first really serious African-American that has a chance of getting the Democratic nomination -- it's going to so alienate African- American voters -- a key core constituency of the Democratic base out there -- they're simply going to walk away. They're not going to show up in November and vote for her. And that could dramatically hurt the Democratic nominee, if it's Hillary Clinton.

That's the fear that I heard from top people in the Congressional Black Caucus.

BORGER: You know, I don't think it's just the Black Caucus members who are worried about that. I think there's a lot of rank and file Democrats who fear that the enthusiasm is going to be taken away from a lot of Democratic voters because of this squabbling. And, you know, to Jeff's point, there really is bad blood right now between these two candidates. And, you know, I guess Hillary Clinton, if she's the nominee, could always ask Barack Obama to be her running mate as a gesture of goodwill, an olive branch, knowing full well that he would turn it down and then everybody could be happy.

But at this point, this is a party that's very split along racial lines. And Barack Obama got into this race not as an African-American candidate, but that's what he seems to have to be talking about right now, because he's been backed into it.

CAFFERTY: And who backed him into it?

BORGER: Well, you can answer that question, Jack. You know.

CAFFERTY: So can you.

(LAUGHTER)

CAFFERTY: So can you.

BORGER: The Clintons did. Of course, the Clintons did.

CAFFERTY: Exactly. And that...

TOOBIN: That's right. Of course they did. CAFFERTY: And that goes right to Wolf's point, which is that, you know, members of the Congressional Black Caucus and other African- Americans in this country are excited about Barack Obama's candidacy. And they have watched him conduct a campaign without the race component in it until it was brought up by the Clintons. And now all of a sudden, it's kind of lurking in the background of this race.

And with the racial sensitivities that exist in this country and the fact that this is truly an historic effort on the part of an African-American candidate -- this isn't Al Sharpton running for president. This isn't Jesse Jackson running for president. This is a guy who's got a real chance of winning this thing. I think those fears are absolutely well-founded and they'd better start treading a little lightly.

TOOBIN: Come back in...

BORGER: Well, they're not going to.

TOOBIN: Come back in October. In October, regardless of who the candidate is, there will be enormous popular support in the black community for Hillary Clinton or Barack Obama. This election is too important. Black people are too smart to get distracted by this. I just think this is typical politics and it will be forgotten in the fall.

BORGER: I think this is about winning and I think the Clintons know exactly what they're doing. And they may even -- in fact, this may be a very smart political strategy for them, because they've gotten Obama a little bit off his game right now, because he's busy responding to Bill Clinton. And that's not what he wanted to be doing.

BLITZER: And he's also...

TOOBIN: And if Barack Obama can't beat -- can't beat Hillary Clinton, he can't beat John McCain or Mitt Romney or whoever it's going to be. So, you know, he'd better come up with some better answers about why he keeps -- you know, why he didn't -- he voted "present" so often. I mean, you know, this is a tough thing to do. And I just think it's going to be now or it's going to be later.

BLITZER: All right, guys, stand by, because we're going to continue this conversation.

We'll take a quick break.

Much more coming with the best political team on television.

They'll talk about Fred Thompson -- his decision to drop out of the Republican contest earlier today. You're going to find out what happened to his campaign and who will his departure help in the process?

And -- look at this -- nappers caught on camera. We're going to show you who's joining the ranks of history's greatest snoozers. Only Jeanne Moos will have this special story for us. That and a lot more coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

EDWARDS: And it's becoming increasingly likely, I think, that John McCain is going to be the Republican candidate. And who can compete against John McCain in every place in America?

CLINTON: If John is right and Senator McCain is the Republican nominee, I believe of any one of us, I am better positioned and better able to take on John McCain.

OBAMA: We've been sort of like John McCain, but not completely.

(END VIDEO CLIP)

BLITZER: Am I missing something?

Is John McCain already the Republican presidential nominee?

What do you think, Jack Cafferty?

CAFFERTY: Well, I think that was probably the lamest answer that Barack Obama gave all night. That aside, it might be too early to coron -- do the coronation for John McCain. I'm not saying we've got to wait until Super Tuesday. I think we have to wait until Florida. If McCain can whip Giuliani in Florida and whip Romney in Florida, then it might it be time to say OK, he's on his way to having this thing locked up. But I think it's too early.

BLITZER: Gloria?

BORGER: I think it's -- I think it's too early, too. You know, in any other year, you'd say oh, he's the frontrunner and he's going to have it locked up. But this isn't any other year, Wolf.

And John McCain has to prove that he can win within conservative Republicans. He does very well with moderate Republicans. He does very well with liberal Republicans. He does well with Independent voters. But he's got to start winning with conservative Republicans. And that's what he's got to try and do in Florida. Not only veterans -- who love John McCain -- but also beyond that community. He's got to prove to the Republican establishment and Republican voters that he might actually be able to carry them in an election in November.

TOOBIN: You know, when I heard that last night, the first thing I thought was haven't these candidates learned anything from the pundits' experience making predictions?

BORGER: Kiss of death.

(LAUGHTER)

TOOBIN: I mean, you know, sure, McCain does look like he has the clearest path to the nomination. But there's a long way to go. He doesn't have many delegates and it's a very volatile year.

BLITZER: It wasn't exactly a shocker today, Jack, that Fred Thompson announced he's dropping out of this race. But let's take a look at the political fallout.

Among the Republicans, who gains, who loses?

CAFFERTY: Well, if he hadn't announced it, I'm not sure anybody would have noticed.

(LAUGHTER)

CAFFERTY: I mean I -- you know, it's like he hasn't -- he's only been here what -- you know, he wasn't that interested in campaigning. I think he would have liked it if somebody would have said you can be president. But he didn't want to work to get the job. And I'm not sure it means a heck of a lot for anybody. Somebody said that he might be trying to position himself to be vice president. He'll deny that.

If Giuliani were to get the nominee, he might need a conservative like Thompson on the ticket with him. If McCain becomes the nominee, I'm not sure that there's a -- you know, Fred's going to have to get those residuals coming in.

BORGER: You know, Wolf, the conventional wisdom is that Thompson's support -- such as it is, because it wasn't a tremendous amount -- would go to Huckabee, because, of course, he's conservative and a social conservative and that those voters who liked Fred Thompson, that's the way he ran. Mike...

BLITZER: And a Southerner, too.

BORGER: Yes, and a Southerner -- might go to Mike Huckabee. But, you know, right now, Huckabee's campaign is running on fumes. I don't think he's in a position to really take advantage of that.

So watch for Mitt Romney, who is also running as a social conservative, to go after those six or seven Thompson voters that are out there.

(LAUGHTER)

BORGER: And he'll try -- he'll try and get them.

TOOBIN: You know, Wolf, you have to go all the way back to Rudolph Giuliani to find a campaign that has been singularly as unsuccessful as Fred Thompson's has been.

(LAUGHTER)

BORGER: That far back?

TOOBIN: You know, I just don't think it will have any impact at all, his departure...

BLITZER: Well, it could have a... TOOBIN: ...just as his arrival didn't.

BORGER: You know...

BLITZER: It could have an impact in new episodes of "Law and Order," though.

BORGER: It could. It could. But, you know, this was such an interesting candidacy. It was created by the Republican establishment in Washington, who felt that they needed a new horse. They needed someone else. So they created this. They took a guy who was television. They said let's turn him into a presidential candidate. He will clearly appeal to the American public. And it totally flopped.

TOOBIN: It's like 1984, when the Democratic establishment said, you know, let's have John Glenn run for president.

BORGER: Right. Exactly.

TOOBIN: He was an astronaut.

BORGER: Right.

(LAUGHTER)

TOOBIN: He was terrific. It turns out not one person in America wanted to vote for him.

CAFFERTY: Well, take a look at the...

TOOBIN: That was the ultimate problem.

CAFFERTY: Take a look at all the other ideas the Republican establishment in Washington has had for the last seven years.

(LAUGHTER)

CAFFERTY: It's no surprise to me the Fred Thompson thing didn't go anywhere.

BLITZER: I can't tell you how many people in that Republican establishment -- especially here in Washington, the beltway, you know, the Republican lobbyists...

BORGER: Right.

BLITZER: ...the so-called elite, when they were even thinking of getting him in, they said this is the new Ronald Reagan. He's an actor.

CAFFERTY: Yes.

BLITZER: He's media-genic. He's powerful. And he's really going to turn things around.

(CROSSTALK) CAFFERTY: If you want to look at the definition of irrelevant, look up the Republican establishment in Washington, D.C.

BORGER: Right.

CAFFERTY: That's irrelevant.

(LAUGHTER)

TOOBIN: Fred Thompson definitely was the tallest candidate.

BORGER: Right.

(LAUGHTER)

BORGER: But, you know, it's so...

CAFFERTY: And the baldest.

BORGER: ...it's so arrogant, though, you know, to think that you can be anointed in Washington and you're pretty good on television and you look pretty good and you -- and you have great name recognition because you're in "Law and Order," and, gee, I can then become president.

And I think they talked him into it. And I think they said to him, you know, you don't have to work that hard.

(LAUGHTER)

BORGER: You can actually just get this job, get in late, let the public take a look at you. You're different. You're going to win. It didn't work out that way.

CAFFERTY: He bought that part about not having to work very hard. He liked that part.

(LAUGHTER)

CAFFERTY: You can sit in the trailer until it's time for your close-up, Fred.

(LAUGHTER)

BLITZER: Thank you very much.

We've got to leave it right there.

Gloria, Jeff, you can go home.

Jack you can't. We've got The Cafferty File coming up.

CAFFERTY: No I want to stay until the bitter end.

BLITZER: You've got to stay with me.

Lou Dobbs is getting ready for his show. That begins right at the top of the hour. He's giving us a preview right now -- Lou?

LOU DOBBS, HOST, "LOU DOBBS TONIGHT": My gosh, Wolf, you guys are vicious. You're eviscerating the fellow on the day he steps out of the race.

BLITZER: He happens to be, by the way, a very nice man, very intelligent...

(LAUGHTER)

DOBBS: Sure, now he's a nice man...

BLITZER: I like him (INAUDIBLE)...

DOBBS: Now he's a nice man, Wolf.

BLITZER: He is. He is.

DOBBS: You and your colleagues, my goodness. You've been holding that back all the time he's been in. That's so unkind.

Anyway, Wolf, thank you very much.

Coming up at 7:00 p.m. Eastern here on CNN, we'll much more on the Federal Reserve's decision to bring that surprise interest rate cut to the markets this morning.

Will it do enough to help working men and women and their families, who have been literally devastated by an outright war on our middle class?

And the Bush White House, the Democratically led Congress, presidential candidates of both parties -- well, they're all failing to tackle the critical long-term problems that face this economy. One of the world's most respected authorities on our economy, Professor Jeremy Siegel, is among our guests tonight.

And private landowners along our border with Mexico are putting their own interests ahead of national security -- refusing to allow a border fence to be built. The Department of Homeland Security has a few things to say to those folks. We'll have that report.

And we'll have the latest for you on the increasingly nasty fight in the Democratic presidential campaign. I'll be joined by three of the country's best radio talk show hosts.

All of that and more. We hope you'll join us at the top of the hour for that, all the day's news and much more -- Wolf, back to you.

Be nice.

BLITZER: I like it...

DOBBS: Be nice, Wolf.

BLITZER: I love that, when Lou Dobbs tells me I'm vicious. (LAUGHTER)

BLITZER: Now, you've got to really learn to open up, Lou. In your next hour, tell our viewers how you really feel. Don't hold it in.

DOBBS: I promise to not be constrained.

BLITZER: OK.

DOBBS: Thanks, Wolf.

BLITZER: Thanks very much.

Lou Dobbs coming up in a few minutes.

It could be a critical boost -- a powerful union announces its endorsement today. You're going to find out who's getting some potentially key support.

Plus, what will it take to get rid of pork barrel spending by Congress?

Jack Cafferty and your e-mail. That's coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: On our Political Ticker this hour, Hillary Clinton is getting a new endorsement from another powerful labor union -- the United Farm Workers. The Democrat is campaigning in California today, looking for votes in the Democratic primary on Super Tuesday. That's February 5th.

John Edwards is asking David Letterman to do for him what Oprah did for Barack Obama. It was a joking appeal for an endorsement today when Edwards taped an appearance on "The Late Show". No response from Letterman. But we are told that the Democrats and the late night host messed up one another's hair a little bit.

Remember, for the latest political news any time, you can check out CNNPolitics.com. That's where you can read my daily blog. I wrote today about the debate last night, what was going through my mind in asking those questions.

Let's go to Jack Cafferty.

He's got The Cafferty File -- Jack.

CAFFERTY: Do you know how many hits The Cafferty File blog got today?

BLITZER: The Cafferty File is a great -- a great blog.

CAFFERTY: Thirty-seven thousand.

BLITZER: Really? CAFFERTY: So there.

The question -- what will it take to get rid of pork spending by the Congress?

Arthur in South Carolina: "Simple. When people stop running for reelection, they'll be able to concentrate on their job instead of getting back every two or six years. Reelect no one -- no second terms, period. Keep pandering out with term limits."

Bruce: "Never, unless a president uses the line item veto. Then pork spending by Congress will go away until they find another way to spend our money."

Jarrod writes: "We can only blame members of Congress for this earmark problem for so long. After their term is up, it's our responsibility to review their actions, decide if they're still working on our behalf and if not, boot them out."

Forrest writes from Montana: "Better to spend the money here in the States than for Halliburton in Iraq. For the most part, pork has done a lot of good toward the improvement of Americans' lives."

What are you smoking, Forrest?

Robert writes: "Oh, it'll end when we dissolve Congress and force them to go back to their home states and get real jobs."

Clark in Spokane, Washington: "Sure, we'll get rid of the earmarks like we get rid of K Street."

Eric writes: "It'll take the end of the world as we know it. Armageddon must occur. Fire and brimstone must fall from the heavens, raining down on politicians who look at serving in Washington as a continuing source of income."

And Steve writes: "The only way we can get rid of pork spending is by getting rid of all the butchers of the economy. Choose better leaders."

Thirty-seven thousand -- Wolf.

BLITZER: Thirty-seven...

CAFFERTY: That's a lot.

BLITZER: Yes. Well, you've got a big fan base out there.

CAFFERTY: Yes, well -- no, it's -- you know, it's all part of THE SITUATION ROOM situation.

BLITZER: We've got a situation.

All right, Jack, see you tomorrow.

Thanks very much. Caught on camera dozing off -- CNN's Jeanne Moos takes a look at what happens when powerful leaders take some power naps on the job. It's Moost Unusual, when we come back.

(COMMERCIAL BREAK)

BLITZER: What happens when politicians fall asleep on the job?

CNN's Jeanne Moos takes a Moost Unusual look at powerful leaders caught on camera taking power naps.

(BEGIN VIDEO TAPE)

JEANNE MOOS, CNN CORRESPONDENT (voice-over): Bill Clinton seen here awake. Bill Clinton seen here falling asleep -- elbow falling off the arm rest falling asleep.

(BEGIN VIDEO CLIP, COURTESY NYPOST.COM)

UNIDENTIFIED MALE: To live up to their purpose and potential.

(END VIDEO CLIP)

MOOS: Oh, sure, he then cupped his ear as if trying to hear. But at this Martin Luther King Day celebration, he earned the headline, "Bill Has A Dream," from "The New York Post" which showcased the video.

(BEGIN VIDEO CLIP, COURTESY NYPOST.COM)

UNIDENTIFIED MALE: I believe that the time, as Victor Hugo said, is always right to do that which is right.

(END VIDEO CLIP)

MOOS: Maybe what's not right is showing this video. We all nod off. But when you're the president and, say, the pope is speaking a few feet away...

(BEGIN VIDEO CLIP, ROME, 1982)

UNIDENTIFIED MALE: ...falls especially up[on the leaders of the world.

(END VIDEO CLIP)

MOOS: Take some No Doz. For some reason, it's adorable when a dog naps...

(VIDEO CLIP)

MOOS: But we don't cut our sleepy politicians any slack -- be it a distinguished older Senator or a former president exhausted from campaigning for his wife.

(on camera): Wake up. No napping during this segment. (voice-over): And especially not during a cabinet meeting. Vice President Dick Cheney got nabbed apparently nodding off.

(BEGIN VIDEO CLIP)

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: ...work in a collaborative fashion with the federal government.

(END VIDEO CLIP)

MOOS: Practicing meditation was how a Cheney spokesperson laughed it off. YouTubers show no mercy, adding musical commentary to video of a droopy-lidded Senator Conrad Burns.

(VIDEO CLIP)

MOOS: ...or adding snoring to video of the Clintons at Ronald Reagan's funeral.

(VIDEO CLIP)

MOOS: But beware -- during a state of the union address, a bunch of politicians seemed to be snoozing. It turns out they were following the text of the president's speech in their laps.

A book called "The Art of Napping" lists Bill Clinton as a legendary napper. Clinton has talked about chronic sleep deprivation among members of Congress who commute.

(BEGIN VIDEO CLIP, COURTESY COMEDY CENTRAL/GARLINGAUGE.COM)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES: But I do believe sleep deprivation has a lot to do with some of the edginess of Washington today.

(END VIDEO CLIP)

MOOS: There was edginess over this video.

(BEGIN VIDEO CLIP, COURTESY NYPOST.COM)

UNIDENTIFIED MALE: Vanity asks the question...

(END VIDEO CLIP)

MOOS: Between supporters Bill Clinton is a 61-year-old guy who has had a heart attack and is working his butt off with little sleep. And critics -- the hand cupping the ear to hear better, the phony nods of agreement -- he lies even when he's sleeping.

On that note, let's let sleeping dogs lie.

Jeanne Moos, CNN, New York.

(END VIDEO TAPE) BLITZER: Now you can take the best political team with you any time, anywhere. Download our best political pod cast at CNNPolitics.com.

That's it for us.

I'm Wolf Blitzer in THE SITUATION ROOM.

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

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