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THE SITUATION ROOM

Candidates and Your Money; Are Clinton's Chances with Black Population Damaged?; Florida Congresswoman Debbie Wasserman Schultz Discusses Democratic Do-Over

Aired March 13, 2008 - 16:00   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, the presidential candidates staking their grounds on how to spend your money. McCain, Clinton and Obama all back in the U.S. Senate today. They're going after wasteful spending and they're also going after one another.
Hillary Clinton now says she's sorry. And she's saying it over and over again. Are African-Americans accepting her apologies? This hour, a new round of Clinton's uphill fight for black support.

And exposed by scandal. The woman identified as Governor Eliot Spitzer's call girl now under intense scrutiny.

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

Let's begin with a big question mark hanging over the Democratic presidential race. Will there be a primary revote in the critically important state of Florida? The state Democratic Party now is floating a plan to hold a do-over that would include mail-in ballots and in-person voting on June 3rd.

Let's go to John Zarrella. He's been all over this story. He's joining us now from our Miami bureau.

Lots of activity going on John. What is going on right now?

JOHN ZARRELLA, CNN CORRESPONDENT: Well, Wolf, the plan was floated. It's already being attacked. And, you know, maybe you changed your mind when you voted on January 29. Maybe you didn't vote at all.

Well, now, if you're a Democrat in Florida, there is a chance of a redo. A chance to do it all over again and go to the polls again. But all you have to do this time is get up off the couch and go to the mailbox.

(BEGIN VIDEOTAPE)

ZARRELLA (voice-over): The state Democratic Party is proposing what's been rumored for a week -- a vote-by-mail primary.

KAREN THURMAN, FLORIDA DEMOCRATIC PARTY CHAIRWOMAN: This has got to move forward. I think the unrest is not good, and I'm ready to try to give them something to look at. If this is not it, then what?

ZARRELLA: The party's proposal also sets up 50 regional election offices where people can vote in person. According to the proposal, this will ensure disadvantaged communities have the ability to vote. The plan needs several stamps of approval before it can move forward. If the Obama and Clinton campaigns don't sign off on it, one Democratic Party leader says it's dead in the water.

UNIDENTIFIED FEMALE: We don't want to move forward if this is not what people want to do.

ZARRELLA: And with the ink on the proposal barely dry, there are already concerns. Florida Senator Bill Nelson, a leading advocate for a revote, is concerned this plan does not provide a way for the state to verify signatures. Representative Robert Wexler, an Obama supporter, is not satisfied either.

REP. ROBERT WEXLER (D), FLORIDA: ... is that a mail election would be a chaotic, potentially divisive election that would wind up with two contested elections, not one.

ZARRELLA: State party officials say the revote plan will cost between $10 million and $12 million. Between now and April 14, fundraising to cover the cost and final Democratic National Committee approval.

April 30, last day to register to vote. May 1, set up the 50 regional offices. May 9, ballots go out in the mail. June 3, Primary Day. Whether it's this plan or something else, the national Democratic chairman says there needs to be a resolution for the good of the party.

HOWARD DEAN, DNC CHAIRMAN: The issue is here, is do we want to be united at the convention? If we wanted to be united at the convention, we ought to try to fix this problem now and not wait until the convention to fix it.

(END VIDEOTAPE)

ZARRELLA: Under this proposal the state of Florida will have absolutely nothing to do with running this. It's going to be run by private companies.

It will be determined by a committee that's set up. But part of the problem, of course, now is, Wolf, that while everybody or most people seem to think there needs to be a fix, as Howard Dean said, nobody seems to be able to agree on what that fix should be -- Wolf.

BLITZER: So let me just get one thing straight, because there's a lot of snowbirds, as they're called, in Florida, Florida residents who spend the winter down in Florida, but go to the spring and summer up North. I assume they'll be able to get their ballots whenever they are, and they'll be able to vote by ballot even if they're living in New York or Minnesota or someplace else?

ZARRELLA: That's absolutely correct. And, in fact, there's a provision in there that will allow for overseas ballots to go out to the military. And those would all be mailed out well ahead of time, once this proposal is ironed out. But you're absolutely right, also to the snowbirds as well, the ballots would be available.

BLITZER: All right. A lot of those snowbirds watching us right now here in THE SITUATION ROOM. A lot of other people as well.

John, thanks very much.

The tug-of-war over the Florida primary goes back almost a year. Last May, the state legislature votes to move up the presidential contest from March to late January. In August, the DNC gives Florida an ultimatum -- push back the primary or your delegates won't be seated at the convention.

A 30-day deadline passes. Florida refuses to budge. On January 29, Florida primary turnout reaches a 20-year high, even though the Democratic candidates agreed not to campaign in the state. Hillary Clinton wins by a 17-point margin. Now top Democrats, as you see, they're scrambling to find a way to let Florida wind up playing a role when all is said and done.

At a time when many Americans are close to pressing the economic panic button, the presidential candidates know they can't afford to miss a new round of votes in the U.S. Senate. On the line right now today in the Senate, tax cuts, budget fat, and whether White House hopefuls would spend your money wisely.

Let's go to Capitol Hill. Dana Bash watching this story for us.

Dana, you've been away from your normal beat, the congressional beat, for some time. But all of the candidates making a rare appearance today here in Washington. Explain what's going on.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: That's right. I've been gone because they've been gone. In fact, Wolf, it's been five months since all three of these presidential candidates who are still in the race have been in the Senate at the same time.

The last time it was about a vote on a controversial judge. So, as you can imagine, it had to have been something that really will affect their presidential campaigns to bring them back here today.

(BEGIN VIDEOTAPE)

BASH (voice-over): Instead of attending a fundraiser for much- needed campaign cash, John McCain made a rare appearance as his day job in the Senate. Democrats Barack Obama and Hillary Clinton returned to the Capitol, too, after long absences.

What lured the presidential candidates to the Senate? Legislation to ban the controversial practice of earmarks for one year. All three candidates support it, but for McCain, railing on earmarks is a signature issue.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: In 24 years as a member of the United States Congress, I have never asked for nor received a single earmark pork barrel project have from my state. Senator Clinton had gotten $342 million worth of earmark pork barrel projects. The senator from Illinois, because he's junior, had only gotten about $92 million.

BASH: McCain hopes to appeal to Independent voters fed up with Washington by making earmarks a major dividing line with Democrats.

MCCAIN: They should ask that those earmarks that they asked for and obtained -- the money hasn't been spent yet. Ask them to turn that money back to the Treasury.

BASH: Obama did suddenly comply with one McCain demand, revealing for the first time what earmarks he sought in 2005 and 2006, his first two years in the Senate. And on his way to Washington, Obama renewed his attack on McCain for wanting to make the Bush tax cuts he initially opposed permanent.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: These are all steps that John McCain rightly said were irresponsible when they first came up, that certainly were unprecedented at a time of war.

BASH: But for all the campaign discourse, pleasantries back in the club of the Senate. McCain and Clinton saying hello. And this -- knowing the press was watching Obama engaged Clinton, and the two sat for several minutes of one-on-one conversation, making sure to smile.

Lest anyone use this to rekindle talk of a so-called dream ticket, across the Capitol, the House speaker warned, no way.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: Take it from me, that won't be the ticket.

(END VIDEOTAPE)

BASH: Meanwhile, back in the Senate, if you look at the floor, they're actually still having a series of votes on budget-related measures. But, Wolf, they haven't had that vote on the issue that they all came back for off the trail, and that is that one-year ban on earmarks.

In fact, Senator McCain isn't even here anymore. He just left to go to Philadelphia for a campaign fundraiser. And there's been a tug- of-war between McCain and his allies and the Senate Democratic leadership all day trying to get that vote moved up.

It didn't happen. The Democratic leadership wouldn't budge. So Now McCain is hoping that this vote is going to happen late enough for him to be able to come back from his fundraiser and cast a vote later tonight -- Wolf.

BLITZER: All right, Dana. Thanks very much. Dana back on Capitol Hill.

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

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, Bill Clinton, as you know, was once famously dubbed America's first black president. And both Clintons have enjoyed tremendous popularity among African-Americans. That is, perhaps until now.

Last night, Hillary Clinton found herself apologizing to black voters. She said she was sorry for her husband's comments following the South Carolina primary which Barack Obama won. You'll recall back then Bill Clinton said Jesse Jackson also won South Carolina when he ran for president. It was a comment seen as belittling Barack Obama's victory.

Hillary Clinton said that she was sorry if anyone was offended and claims that that's not what her husband meant. Clinton also responded to Geraldine Ferraro's remarks that Obama wouldn't have made it this far if he were white. Clinton said she repudiates and deeply regrets those comments, adding that Ferraro doesn't speak for her. Ferraro resigned last night from Clinton's campaign finance committee.

Apologies are not something that we're used to hearing come out of Hillary Clinton's mouth. She doesn't do it very often. In fact, a lot of people have been disappointed that she has refused to apologize for her vote to authorize the war in Iraq. The closest Hillary has come is to say that she regrets it.

Heartfelt or not, these apologies to African-Americans have become a political necessity. Consider this -- in a poll taken last October, black Democrats preferred Clinton to Obama by a margin of 57 to 33 percent. Fast forward five months. These days, Barack Obama is winning between 80 and 90 percent of the African-American vote.

So here's the question: How much damage has been done to the Clinton standing in the African-American by Bill Clinton and Geraldine Ferraro?

Go to CNN.com/caffertyfile, where you can post a comment on my blog -- Wolf.

BLITZER: Jack, thanks for that. Jack Cafferty will be back shortly.

You can see it and feel it every time you go shopping. Guess what? Inflation is up, and hitting all of us where it hurts. Just ahead, why efforts to keep prices down could actually create yet more economic pain.

Plus, Rudy Giuliani campaigning right now for John McCain in Pennsylvania. Could he be campaigning for a job in a McCain administration?

And coming up next, will the new proposal for a revote in Florida fly? I'll ask Democratic Congresswoman and Clinton supporter Debbie Wasserman Schultz where she stands. She's standing by live. She's deeply involved in this effort.

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

(COMMERCIAL BREAK) BLITZER: As we just heard from John Zarrella, there's certainly a lot of talk right now, talk of a possible compromise among Democrats over whether to hold a primary revote in Florida. But even with a proposal by the state party now on the table, there's still plenty of details to work out and lots of disputes that have to be resolved.

Let's discuss with a top Florida Democrat congresswoman, Debbie Wasserman Schultz. She's here.

You're a strong supporter of Hillary Clinton. Yesterday we spoke to Robert Wexler, who's a strong supporter of Barack Obama. He's a Democrat from Florida as well.

Are you on board when it comes to a mail-in, to a redo that would have partial -- you could go to some 50 polling stations out there, but most people would get a ballot that they could simply figure out, sign it, and send it back?

REP. DEBBIE WASSERMAN SCHULTZ (D), FLORIDA: No, I'm not on board by any means. And neither of the -- none of the nine Democratic house members from Florida are supportive of that concept.

BLITZER: Including supporters of Hillary Clinton and Barack Obama.

SCHULTZ: And our neutral members as well. We all agree that that would be...

BLITZER: But Bill Nelson likes it.

SCHULTZ: Bill Nelson likes it. He's the exception in our delegation. We believe it would be a huge experiment that has never been tried. It's...

BLITZER: It's been tried in Oregon. They do it very successfully there.

SCHULTZ: But it took them 10 years to perfect it. And in Florida, where we've been struggling for the last eight years to restore voters' confidence that when they go to the polls their vote counts, you know, the voters' nerves there are very raw. And having another risk -- and risk another fiasco would really not be a good idea.

BLITZER: Well, what's wrong -- so what do you do then? If you don't want to do a mail-in, how do you -- do you just want to do a full-scale primary again? Because yesterday Robert Wexler said, and it sounded ridiculous, but he insists they don't have the machines, they don't have the equipment.

SCHULTZ: Logistically, they're telling us it would be almost impossible for us to do that because we have our 15 counties that are shifting from touch-screen machines to optical scanning. I'm not 100 percent sure that that's accurate.

BLITZER: Why not simply take a piece of paper and do it -- and get a box. And, you know, you sign, it and you just say Obama or Clinton.

SCHULTZ: You know, I think...

BLITZER: And you're done. It maybe -- take a little bit longer to count, but, you know, you have people who volunteer to do that.

SCHULTZ: I think exploring the possibility of redoing the primary, which gives everybody a familiar process that they have access to, is worth looking at, but there are significant obstacles. And then the state law has to be changed to allow a state party to run -- to run an election verified with state signature requirements.

BLITZER: So it looks like you've got a bunch of bad options. Which is the least bad? Because Bill Nelson and a lot of other Democrats say, you know what? Let these people have a chance to vote. Even the so-called snowbirds who live up in the North in the summer. They could get their ballots early enough.

You mail out those ballots a month in advance. They could mail them back by the deadline, and they would be able to participate.

SCHULTZ: But what about poor communities? You have poor communities with -- that are transient, that have inconsistent addresses.

BLITZER: Well, there would be certain locations where they could actually vote.

SCHULTZ: Wolf, they're only proposing two locations per congressional district. In a district like mine, where there's two counties, only parts of two counties, that might be fine. In a district like Allen Boyd's in north Florida, he has 16 counties.

BLITZER: So nothing is perfect. But here's the question again. What's the least bad?

SCHULTZ: We can't choose from these two least bad options. We have to sit down with all the parties and hammer out a compromise that is inclusive of the decisions that the voters made on January 29th.

BLITZER: Do you want a float a proposal right now, what you would like to do?

SCHULTZ: Well, I've already talked about a proposal, as have a number of us, where we would come up with a component of the delegation -- a seating of our delegation based on the votes cast in part on the 29th and based on the results of the rest of the primaries. I mean, I think that's one way to do it.

You could also give -- the Republicans only cut half the delegation from the Republicans in Florida. You could do that and base it on the proportion that was voted on the 29. So there are a number of ways that you could do it.

BLITZER: The majority leader, Steny Hoyer, he's worried that this race between Hillary Clinton and Barack Obama is getting too nasty.

He said this -- he was quoted in "The Washington Post" -- "When they attack one another, it's not just an attack on the other candidate. It is taken I think by women and by African-Americans in a more personal sense. To that extent, I think the continued clash between the two candidates, which is inevitable, is not particularly helpful."

You're among the leadership right now. Is he right?

SCHULTZ: I think he is right. I think we need to make sure that we focus on the issues. And that's what Senator Clinton has been doing.

She's been talking about the issues that matter to Americans, talking about how she's the most prepared to be the president of the United States on day one. And negative personal attacks and degenerating this campaign into those makings no sense.

BLITZER: And is Nancy Pelosi, the speaker, right when she says forget about that so-called dream ticket, it's never going to happen? She guaranteed that.

SCHULTZ: Well, I think that's up to the eventual nominee. And any talk of a vice presidential running mate is premature at this point.

BLITZER: So what do you think?

SCHULTZ: I think that it's going to be up to the nominee.

BLITZER: But do you think it's doable?

SCHULTZ: You know, I don't know. I think things change so rapidly in politics that, is it doable? You know, if you were predicting right now, probably not. But we've seen stranger things happen, and I think it's too early to tell.

BLITZER: We certainly have. I wouldn't rule it out by any means.

All right. Debbie Wasserman Schultz, thanks for coming in.

SCHULTZ: Thanks.

BLITZER: Good luck. You've got your hands...

SCHULTZ: We need it.

Just ahead we're going to be talking to a leading Barack Obama supporter, former senator and former presidential candidate Bill Bradley. That's coming up. He actually, by the way, has accused the Clinton campaign of conducting a "big lie." I'll ask him about that quote.

And Chrysler tells its employees, take some time off this summer. But it won't be by choice. Why is the company forcing its employees out of work for two weeks for the first time in Chrysler history?

And what's a fierce rivalry among friends? John McCain and Rudy Giuliani, they're together again. You're going to find exactly what they're up to right now.

Lots more news coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWSBREAK)

BLITZER: Just like her rival, Barack Obama, Hillary Clinton needs every vote she can get, so her campaign cannot afford to alienate whole blocs of them. But comments about race from Clinton supports that many people felt crossed the line have deeply angered some African-Americans. Now the candidates himself -- actually, the candidate herself, I should say, is using two simple words -- "I'm sorry."

Let's bring in Suzanne Malveaux. She's watching this story for us.

Suzanne, it's a very sensitive story, and it comes on the heels of the Geraldine Ferraro flop.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, you're right. I mean, there's been a series of gaffs that have really made a lot of African-Americans uncomfortable with the Clinton campaign. But Clinton is far from giving up on this critical voting bloc. And interestingly enough, there are many African-Americans who agree with her, that she should continue to reach out and engage the community.

(BEGIN VIDEOTAPE)

MALVEAUX (voice-over): Hillary Clinton is in the hot seat...

UNIDENTIFIED FEMALE: Let's hear it for Senator Clinton.

MALVEAUX: ... facing fallout from racially-charged remarks from fundraiser Geraldine Ferraro. At a gathering of black publishers, she tried to make amends.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: I rejected what she said. And I certainly do repudiate it.

MALVEAUX: Senator Clinton was full of apologies before this group, as she was confronted with various perceived offenses, including remarks considered racially insensitive that her husband, the former president, made on the campaign trail.

CLINTON: I am sorry if anyone was offended. It was certainly not meant in any way to be offensive.

MALVEAUX: She even apologized for President Bush's lackluster response regarding Hurricane Katrina. CLINTON: I apologize. And I'm embarrassed that our government so mistreated our fellow citizens.

MALVEAUX: Her aides say this is not a mea culpa tour, but rather a clear message she has not given up on the black vote.

TRACI BLUNT, CLINTON CAMPAIGN: So because the numbers are skewed, and it appears as if we are losing ground in African-American communities, she's not conceding that vote whatsoever.

MALVEAUX: But looking ahead, she certainly has her work without out for her. While Barack Obama has steadily seen his African- American support grow from 78 percent in South Carolina, 90 percent in Virginia, and 92 percent in Mississippi, Clinton has lost ground.

JOHN B. SMITH, NATIONAL NEWSPAPER PUBLISHERS ASSN.: They're open to her, but at this point they're kind of lukewarm because of disparaging comments of some of her people. Not necessarily she.

MALVEAUX: While Clinton tries to minimize the damage, she's leaning on loyalists.

One of her biggest fans is Philadelphia Mayor Michael Nutter, seated in the critical state of Pennsylvania, where she will campaign heavily for that important contest.

(END VIDEOTAPE)

MALVEAUX: And Clinton's game plan is that she is going to deny Obama a clean sweep. She's going to put herself out there to answer the tough questions before the black media. She's going to be visiting churches, civil and social organizations. And she's working through a faith outreach program. So, Wolf, basically, don't count her out.

BLITZER: I'm sure she is going to try to do her best with all of those communities. She's going to need every single one of those votes.

Thanks very much, Suzanne, for that.

MALVEAUX: Thanks, Wolf.

BLITZER: Politics can certainly make for some strange relationships. Good friends could become rivals, but, ultimately, make up after one beats the other.

That's the situation between John McCain and Rudy Giuliani. Today, the former presidential candidate was campaigning for the presumptive Republican nominee.

Let's go to Mary Snow. She's following this story for us from Pennsylvania.

What happened, Mary? MARY SNOW, CNN CORRESPONDENT: Well, Wolf, not the role that Rudy Giuliani had envisioned for himself, but he said, because he has campaigned, he has the role of fund-raiser down. And that's what he did here today for Senator John McCain, saying he's doing it out of a labor of love and commitment.

Senator McCain is in D.C. today and had to cancel his appearance because he is at his day job, had earmark legislation coming up and had it to vote. But, you know, in the past couple of days, there's been talk about who John McCain will pick for his vice presidential running mate, this because he said he's in the process of beginning to search for a V.P.

Rudy Giuliani, of course, was asked what would he think about being the number two on his former rival's ticket. He said he thinks John McCain would make a good choice, whatever it is.

(BEGIN VIDEO CLIP)

RUDOLPH GIULIANI (R), FORMER NEW YORK MAYOR: You don't make that decision until you get very, very close to the convention. You get all the facts. And you pick somebody who can be president. You pick somebody you can work with. And then, when you have somebody that fits those two criteria, you pick somebody that fits what you believe is -- is needed. So, I'm sure John will make a very wise decision. But that's down the road.

QUESTION: Would you take the job?

GIULIANI: That's a question you only answer if somebody asks you the question who can actually make the decision, and then you have to make the decision. You don't run for it. And you don't speculate about it. And you don't have hypotheticals about it.

(END VIDEO CLIP)

SNOW: We did ask him about one hypothetical, though, a McCain/Romney ticket that has been talked about in the past couple of days. And all Giuliani would say is that he thinks there are a lot of good ticket possibilities out there -- Wolf.

BLITZER: We will be hearing a lot more about all these vice presidential potentials out there.

Mary, thanks very much for that.

The nation's largest labor federation says McCain can run for president, but he can't hide from the record. The AFL-CIO promising, everywhere McCain goes in the coming months, union protesters will confront him on his economic positions.

The group has actually launched an anti-McCain campaign, including a Web site entitled McCain Revealed. A spokeswoman for the group says McCain's record does not speak for working families, calling McCain -- and I'm quoting now -- "Bush number three." The McCain campaign calls this old-style attack politics. There are more reasons today for Americans to feel anxious about the economy. Oil prices hit a new high, trading above $111 a barrel -- $111 a barrel. Gold prices are up, too, hitting $1,000 an ounce for the first time ever. The value of the dollar fell again, sinking to an all-time low against the euro.

And the government reports, retail sales last month were weaker than expected. The treasury secretary, Henry Paulson, is trying to offer a ray of hope to financial markets by unveiling proposals to try to improve regulation of the troubled mortgage industry.

(BEGIN VIDEO CLIP)

HENRY PAULSON, U.S. TREASURY SECRETARY: The objective here is to get the balance right. Regulation needs to catch up with innovation and help restore investor confidence, but not go so far as to create new problems, make our markets less efficient, or cut off credit to those who need it.

(END VIDEO CLIP)

BLITZER: Adding to the nation's economic pain right now, inflation rates are outpacing what Americans can earn. The Federal Reserve indicates it's ready to cut interest rates once again in a matter of days, but will that really help? Will it really do anything?

Let's turn to our senior business correspondent, Ali Velshi. He is watching this story for us.

There's a catch-22 here. It's not good. And I see that $111 barrel behind you, and it gets a lot of people nervous.

ALI VELSHI, CNN CORRESPONDENT: Well, this is what it is. I mean, the price of oil has been going up almost $1 every day. We know that's not sustainable. It causes inflation. And of all the economic problems out there, Wolf, inflation is the one that faces every American.

Now, inflation can be fought most of the time. But, unfortunately, right now, with America on the brink of a recession, it's not one of those times. And that sinking dollar you were talking about, Wolf, it's a big part of the problem.

(BEGIN VIDEOTAPE)

VELSHI (voice-over): Crude oil is traded in U.S. dollars, even though the U.S. only produces seven percent of the world's oil. Other nations that produce oil get paid for it in dollars, which are worth less and less with each passing week, which means non-U.S. producers make less money per barrel as the dollar drops, unless, of course, they're able to charge more per barrel.

Some say -- and this chart shows -- that, when the dollar drops, oil gets more expensive. Now, individual countries don't really set the price of oil. The market does. But OPEC's 14 members produce 42 percent of the world's oil. So, they can influence the price by controlling how much they produce. And oil works its way into everything we buy, into the diesel that trucks use to transport goods, into the heating for factories and into the packaging for products we buy.

Inflation is a real problem. The Federal Reserve typically fights inflation by raising interest rates, making it more expensive for businesses and consumers to borrow money. That curbs demand and brings prices down. In fact, raising interest rates is so effective, that it not only tackles inflation, it slows the whole economy down, which is exactly why the Fed can't cut interest rates right now. The U.S. economy is already slowing down fast.

It needs a kick-start, the kind that comes from cutting interest rates, which is what the Fed has been doing since September, and what it is likely to do at its next meeting on Tuesday. And that's likely to push the dollar down further. And, if you buy this argument, it could make oil even more expensive.

(END VIDEOTAPE)

VELSHI: Now, Wolf, a low dollar isn't all bad news. One of the few areas in the United States where jobs are being creating is in the tourism and hospitality sector. And some manufacturing, believe it or not, is actually moving into the United States.

BMW announced earlier this week that it's shifting some production here from Germany. But, Wolf, for most people, a lower dollar means inflation. And, right now, that is a problem with no easy solution.

BLITZER: You're absolutely right, Ali. Thanks very much. We will watch these numbers with you.

And, for more on your finances, you can check out CNN.com's special report entitled "Right on Your Money." Get tips on how to better manage and invest your money with video tutorials and an interactive guide. You can also read or share I-Reports with others -- that and a lot more at CNN.com/rightonyourmoney.

In the shadow of scandal -- the man set to take over Eliot Spitzer's job speaking out about a new day for New York. We are going to be hearing from Lieutenant Governor David Paterson.

And Barack Obama, he is accusing John McCain of performing a flip-flop on the road to the Republican presidential nomination. Is that a fair criticism? Our "Strategy Session" weighing in.

And later, are Islamic militants posing a new threat in cyberspace?

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

(COMMERCIAL BREAK)

BLITZER: In New York, amid days of scandal and a stunning political collapse, the man wanting to help heal the painful moment coming out to speak.

Now the -- that the governor, Eliot Spitzer, has resigned in disgrace for alleged ties to prostitution, the incoming governor, David Paterson, talked about the toll it's taking on him and so many others.

(BEGIN VIDEO CLIP)

LIEUTENANT GOVERNOR DAVID PATERSON (D), NEW YORK: This has been a very sad few days in the history of New York. And, for me, it's been sadder. My heart goes out to Eliot Spitzer, his wife, Silda, his three daughters, his parents. I know them all. They're friends of mine. Last summer, his parents actually had my wife, Michelle, and I up to lunch one day. And we used to call them our other family.

(END VIDEO CLIP)

BLITZER: Although Paterson talked about what's already happened, he also looked ahead.

(BEGIN VIDEO CLIP)

PATERSON: I did not get to this position in the way that most people have, in the way that most people would want. But I made a commitment when I gave my word to Governor Spitzer in January of 2006, when I left as the Democratic Senate leader to be his running mate, that I would be prepared if in event I had to assume authority.

I am prepared. And, on Monday at 1:00 p.m., I will have the oath of office administered to me in the assembly chamber.

(END VIDEO CLIP)

BLITZER: And I think I speak for all of our viewers when I wish the incoming governor only -- only -- success.

We're learning more about the alleged prostitution ring involved in this scandal. Let's go to our senior correspondent, Allan Chernoff. He's in New York. He's looking into this story.

What are -- what are you coming up with? What are you finding, Allan?

ALLAN CHERNOFF, CNN SENIOR CORRESPONDENT: Wolf, this is just an incredible story. Her mother says that the call girl involved here may not have even known who Eliot Spitzer is. But she played a key role in one of the great political downfalls in New York State history.

(BEGIN VIDEOTAPE)

CHERNOFF (voice-over): "The New York Times," on its Web site, outed the call girl by the name of Kristen who unwittingly brought down the governor of New York, Eliot Spitzer

Kristen was born Ashley Youmans and on her MySpace page, now disabled, calls herself Ashley Alexandra Dupre. She's a 22-year-old aspiring singer, a high school dropout who left her home in the southern New Jersey town of Jackson, and now lives in this new Manhattan high-rise rental.

(on-camera): Ashley told "The New York Times" she's worried about being able to pay her rent here. She hasn't slept very much in the past few days and said, "I just don't want to be thought of as a monster."

(voice-over): Her older brother, Kyle, says he's very close to Ashley and describes her as smart and the best sister you could have.

KYLE YOUMANS, BROTHER OF KRISTEN: She's a great woman, an independent woman, and she will make it through. She will be fine.

CHERNOFF: Ashley, according to "The Times," is the high-priced hooker from the online prostitution ring Emperors Club VIP, who Governor Eliot Spitzer allegedly paid $4,300 to travel by train from New York to meet him at a Washington, D.C., hotel room on February 13.

After the encounter, law enforcement authorities say, a government wiretap recorded Ashley describing Spitzer: "I don't think he's difficult. I'm here for a purpose. I know what my purpose is."

Ashley says she left a broken family and abusive home in her MySpace blog, where she also offers a sample of her musical talent.

(MUSIC)

ROB "LOGAN & MYSTERIOUS," ASHLEY ALEXANDRA DUPRE'S RECORD PRODUCER: I noticed she had been through a lot. And it made, as young as she is, a strong individual, a strong lady.

(END VIDEOTAPE)

CHERNOFF: Ashley may be asked to testify in the case against the four alleged ringleaders of the prostitution ring. It's not expected that she is going to face any charges -- Wolf.

BLITZER: Allan Chernoff, thanks very much for that.

In our "Strategy Session": The House speaker, Nancy Pelosi, rains on the idea of what some are calling the Obama/Clinton or Clinton/Obama dream ticket.

(BEGIN VIDEO CLIP)

PELOSI: I do think we will have a dream team. It just won't be those two names. Whoever our nominee is and whoever he or she is and whoever he or she chooses will be a dream team, as the Democrats go forward.

(END VIDEO CLIP)

BLITZER: But can the Democratic Party be united if they're not running mates? Also, Obama charges McCain with flip-flopping when it comes to tax cuts. Is he foreshadowing what an Obama-McCain race would look like?

All that and a lot more coming up -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: As we reported, Barack Obama accusing John McCain of flip-flopping. Obama says McCain reversed his position on President Bush's tax cuts to win Republican votes.

Let's discuss that and more in our "Strategy Session." Joining us, Democratic strategist Stephanie Cutter, and the conservative commentator Terry Jeffrey. He's editor in chief of the Cybercast News Service.

I will play that little sound bit for you, Terry, of what Obama said about McCain. Listen to this.

(BEGIN VIDEO CLIP)

OBAMA: He made a decision to reverse himself on that. That was how, I guess, you got your ticket punched to be the Republican nominee. But he was right then, and he's wrong now.

(END VIDEO CLIP)

BLITZER: He's referring to the two votes that McCain had in 2001 and 2003, joining only Lincoln Chafee, the then Republican senator, among the Republicans and voting against the Bush tax cuts, saying, it wasn't a good time to go ahead with those tax cuts, the country was at war, and they were skewed toward the rich.

And then he has changed his mind since then. Now he says they should be made permanent.

TERRY JEFFREY, EDITOR IN CHIEF, CYBERCAST NEWS SERVICE: Well, that's a good summary of it, Wolf. I hate to say it, but Senator Obama is absolutely right. McCain has flip-flopped on taxes. This is one of the things conservatives didn't like about him. It wasn't just that he voted against those two major tax cuts, and was only one of two Republicans to do that.

It was that the rhetoric he used at the time was class war rhetoric. He said these were tax cuts for the rich. He also essentially rejected the supply-side economic theory, which has proved correct again with the Bush tax cuts, that tax cuts will include revenue. The good news for conservatives, he's now pledged not just to disallow any tax increase, but, when he's president, he's going to be for major tax cuts, including eliminating the alternative minimum tax and making the Bush tax cuts permanent.

BLITZER: What do you think about this, the strategy that McCain had, if it was a strategy? Maybe he just came around and said, you know what, those tax cuts have worked, and it's a good idea to make sure that they remain permanent. What's going to be the winning strategy? I guess that is the question.

STEPHANIE CUTTER, DEMOCRATIC STRATEGIST: Well, in 2001, when he voted against those tax cuts, it was seen as courageous. And, you know, he was right then that we were in a war, wrong time to -- to cut taxes. And they were skewed to the wealthy.

We're still in a war. And the tax cuts are still skewed to the wealthy. So, there's no need to make them permanent now. And what Obama is doing is actually pretty smart politically. He's going after McCain and not Hillary Clinton. He's acting like the front-runner. And he's attacking him on the economy, which is incredibly important for Pennsylvania.

BLITZER: How much trouble does McCain still have with the conservative base, if he does? I don't -- he seems to be, you know, generating some renewed support now.

JEFFREY: I think this is his -- I think he does have a problem, Wolf. And I think it's that the conservatives that habitually go out and vote, when it gets down to a question between McCain and Obama or McCain and Clinton, the ones that are voting are going to vote for John McCain. The problem he has is a lack of enthusiasm among Republican and conservative voters in general.

You see it in primaries, where you have huge turnout on the Democratic side, very modest or small turnout on the Republican side. He needs to generate enthusiasm for his campaign. It has to start with conservatives.

BLITZER: Nancy Pelosi flat-out rules out the possibility of what some people call the dream team, the dream ticket, Obama/Clinton, Clinton/Obama.

I will play it once again, this little clip. Listen to this.

(BEGIN VIDEO CLIP)

PELOSI: I do think we will have a dream team. It just won't be those two names. Whoever our nominee is and whoever he or she is and whoever he or she chooses will be a dream team, as the Democrats go forward.

(END VIDEO CLIP)

BLITZER: You agree with her, that there's no way -- she's guaranteeing it.

CUTTER: Yes.

BLITZER: There's no way that Clinton and Obama would be on the same ticket?

CUTTER: Well, I think, if you were making the choice today, it's probably accurate. But if anything that we have seen in this race is, it's unpredictable. We have got a long way to go until this thing ends, at least six weeks. Just think six weeks prior how different the race looked. So, you know, there's nothing static in this race. We have to see where we end up and where the tensions lay then. And, you know, anything is possible.

BLITZER: My -- my own sense -- and I want you to weigh in, Terry -- is that the bitterness -- the only way they will really be able to resolve, end that bitterness, and unify the Democratic Party is to have that so-called dream ticket.

JEFFREY: I think there's a lot of wisdom in that, Wolf. I think Speaker Pelosi is flat wrong. I think, especially if there's some way that Hillary Clinton pulls out the nomination -- I don't think she will -- she would need Barack Obama as her V.P.

BLITZER: Desperately.

JEFFREY: And if people think that a heated primary campaign cannot be healed, Ronald Reagan picked George W. Bush in 1980, after Bush called his economics voodoo economics, after -- Ronald Reagan's turning point in his campaign, quite frankly, was a debate in New Hampshire where he said, "I paid for that microphone" when George Bush was trying to freeze out the other Republicans. Of course they can come back together.

BLITZER: And there's been plenty of historic evidence beyond that...

JEFFREY: Absolutely.

BLITZER: ... as well.

Guys, thanks very much for coming in.

CUTTER: Thanks.

BLITZER: House Republicans say they have been ripped off. They say they trusted a longtime bookkeeper for the group that raises funds for House Republicans. Now the FBI is involved.

And a prominent Obama supporter reportedly accusing Hillary Clinton's campaign of dishonesty. Why is the former presidential candidate, the former Senator Bill Bradley saying that? He's standing by live here in THE SITUATION ROOM. And I will ask him.

Stay with us. We will be right back.

(COMMERCIAL BREAK)

BLITZER: On our Political ticker: A longtime senator is being remembered as a political pro and a proud liberal who stood up to big business.

Howard Metzenbaum died at his Florida home last night. The Democrat served 18 years as a U.S. senator from Ohio. His feisty style and attention-grabbing tactics often earned him the nicknames of "Senator No" and "Headline Howard." The Senate majority leader, Harry Reid, today praised Senator Metzenbaum as a man who knew how to work the system to fight for workers.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: A smile has to cross my lips when we talk about Howard Metzenbaum, because he was someone who really a senator. He was -- he had read the bills. He wanted to make sure that people were treated fairly. And, if they weren't, he knew how to slow things up.

(END VIDEO CLIP)

BLITZER: Former Senator Metzenbaum was 90-years-old. Our condolences to his family.

Remember, for the latest political news any time, you can always check out CNNPolitics.com. That's also where I write my daily blog post. Just posted one just before the show.

You might be interested in reading it -- Jack.

CAFFERTY: You know who I just talked to?

BLITZER: Who?

CAFFERTY: Bill Bradley.

BLITZER: He's going to be on the show coming up.

CAFFERTY: I know he is.

This is one of the -- one of the classy guys ever to walk onto the floor at Madison Square Garden in a Knicks uniform and one of the classy guys to ever walk onto the floor of the United States Senate. What a terrific fellow. I hadn't seen him in a long time. Goes back to our old days, local news here in New York.

Anyway, I digress.

The question this hour is: How much damage has been done to the Clintons' standing in the African-American community by Bill Clinton and Geraldine Ferraro's comments?

D. writes from Miami, Florida: "As an African-American, I think the harm is irreparable. I watched in shock and disbelief as Hillary responded, 'Well, I didn't say it' in response to Geraldine Ferraro's ludicrous arguments. I never liked Hillary, but I was willing to give her a pass based on the accomplishments of her husband. After his numerous meltdowns, the pass is rescinded. Now her own judgments have left much -- such a bitter taste in my mouth, that I wince at the mere mention of her name."

Les writes from Oklahoma: "I really don't know how much damage they have done in the African-American community. But how come everybody assumes that all Obama supporters are African-American? I am an old white guy who thinks this young man is one of the brightest young people to come alone in a long time. I hope we give him a chance."

Pat writes Cincinnati: "Gee, Jack, do you suppose the media lifting words out of context, playing them over and over, and then asking a pejorative question might be the problem here? I judge people on their actions, by looking at their history. This country knows the Clintons are not the least bit racist, and I am ashamed that Senator Obama is continually fanning the flames, racist flames, to further his candidacy. I suspect there will be a backlash, because the country's memory is longer than you give it credit for."

Tom in Pennsylvania writes: "If it is perceived that the nomination is stolen from Obama, the African-American vote, as well as the newly-registered youth vote, will be lost for a generation."

And Bruce writes from Sugar Loaf, New York: "This is huge. All the trust the Clintons gained in the African-American community in the eight years Bill Clinton was president has eroded in the span of two months. The divisive campaign 'Billary' has conducted is shameful, selfish, and very destructive to the Democratic Party. Race is still a very explosive issue in this nation and will continue to be for some time to come. You would think the Clintons would know better" -- Wolf.

BLITZER: Jack, thanks very much.

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