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CNN ELECTION CENTER

Politics: Playing the Race Card in the Presidential Race?; Big Profits For Big Oil

Aired July 31, 2008 - 20:00   ET

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


ROLAND MARTIN, CNN CONTRIBUTOR: Campbell is off tonight.
Hi, everybody. I'm Roland Martin.

TARA WALL, "THE WASHINGTON TIMES": And I'm Tara Wall.

And this is the ELECTION CENTER, where we break down everything that happened today in politics.

MARTIN: Well, you're sitting home, not feeling good about gas prices? Oh, but ExxonMobil is. The oil giant raked in almost $12 billion bucks in the second quarter, yes, billion, or, as math geeks here at CNN tell me, $1,485.55 every second. So, we will keep checking on the big oil clock tonight, so you can see how quickly that profit adds up. And what is Congress doing about it? So far, nothing.

WALL: Well, I'm not so sure that they should do anything about it, but we will get to that.

Also, guess what John McCain and Barack Obama are battling about now? It's all about race, not the presidential race, the race card. McCain came out swinging today, calling Obama's rhetoric shameful and divisive. They didn't want to go there, but they had to defend themselves.

MARTIN: And, folks, do you think Senator Obama was pleased to be compared to the Rhodes Scholars -- I'm sorry -- celebrities Paris Hilton and Britney Spears? Yes, right. You can hear for yourself later on.

WALL: And FEMA still taking heat over the handling of Hurricane Katrina. A CNN investigation caught them giving away $18 million in supplies meant for Katrina victims. Today, Congress wanted more answers.

All that tonight in the ELECTION CENTER.

MARTIN: First up, folks, the race card.

John McCain blasts Obama for even mentioning race on the campaign trail. Here's what McCain's campaign manager said today -- quote -- "Barack Obama has played the race card, and he played it from the bottom of the deck. It's divisive, negative, shameful, and wrong."

But was he really playing the race card? And is there any room to talk about race in the presidential race.

Dana Bash is live in Washington with that.

Dana, what's this all about?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Roland what this is about, at least today, is what Barack Obama said at three different stops in Missouri yesterday. Obama was reacting to John McCain's attacks on him. And as part of Obama's riff, he warned that his opponent would call him risky in part because he doesn't look like past presidents. Listen to what he said.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Nobody really thinks that Bush or McCain had a real answer for the challenges we face. So, what they're going to try to do is make you scared of me. You know, oh, he's not patriotic enough. He's got a funny name.

(LAUGHTER)

OBAMA: You know, he doesn't look like all those other presidents on the dollar bills, you know?

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

BASH: Now, the reality is that Obama made similar comments dating back to the Democratic primaries. But McCain advisers say they reacted aggressively today because they insist Obama was singling out McCain, when McCain had actually warned against injecting race into this campaign -- Roland.

MARTIN: Dana, for the folks at home, I just wanted to read you the Obama camp's response.

They said -- quote -- ""Barack Obama in no way believes that the McCain campaign is using race as an issue. But he does believe they're using the same old low-road politics to distract voters."

That was Bill Burton, campaign press secretary.

Now, Dana, McCain also addressed the issue today.

BASH: He did. It was actually, Roland. I was told this morning that McCain would come out and have a press conference, speak to reporters about it. He didn't, but John King did catch up with him and talked to him exclusively.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: It is. I'm sorry to say it, that it is. It's legitimate. And we don't -- there is no place in this campaign for that. There is no place for it. And we shouldn't be doing it. JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: They say that's not the case.

MCCAIN: OK, John.

KING: OK, Senator.

MCCAIN: I will let the American people judge.

(CROSSTALK)

(END VIDEO CLIP)

BASH: Now, you notice there McCain's answer was brief. He actually then walked away, clearly preferring to leave it to his staff. And at that very moment, Roland, his campaign aides were on the phone with me and I'm sure other reporters pushing and explaining why they're accusing Obama of playing the race card.

MARTIN: Now, of course, we see the campaign, the McCain campaign, Dana, get really aggressive on so many different stories. Really, why did they get so aggressive with this one? Why were they calling everybody trying to get their two cents in?

BASH: Well, here's what McCain advisers say.

They say that they think Obama actually cleverly used the issue of race in the primaries to push back on questions about his policies. So, the McCain camp is trying to lay down a protective marker here, that if race is going be an issue in this campaign, they want it on record that Obama is the one who brought it up first.

And, Roland, I will give you a little tidbit about tomorrow, an interesting footnote to this. You know with what John McCain is doing tomorrow? He's actually going before the National Urban League, of course, as you know, an African-American organization that is overwhelmingly pro-Obama. So, this is going to not end today. That's for sure.

MARTIN: All right, Dana, thanks a bunch. I appreciate it.

Folks, the race card is the story everyone is talking about today. But is the whole thing turning into a big misstep for the Obama camp?

Let's ask tonight's panel, "New York Observer" columnist Steve Kornacki and CNN political analyst Gloria Borger.

Tara, take it away.

WALL: All right, thanks, Roland. And thanks to our panel.

Steve and Gloria, hang on there. There's a lot more on this story, including -- do we have Steve and Gloria? There we go. All right.

Steve and Gloria, you have seen and heard all of the comments that went about today.

Gloria, first to you. Isn't Obama playing the race card, essentially?

GLORIA BORGER, CNN SR. POLITICAL ANALYST: No, I -- look, I think that what you're seeing is both of these candidates in a way and in their own way trying to inoculate themselves on the race issue.

Obama is an African-American candidate running for president. During the primaries, as Dana said, he has talked about race. On June 20, in Jacksonville, Florida, he said, and by the way, I'm black. He's talked about it.

And the McCain campaign is saying that the other day he specifically mentioned John McCain and that's what got them really upset. They say they at first didn't really want to go with this. They were trying to decide whether to do it. But then they felt that John McCain was attacked.

And so what McCain is doing is laying down this protective marker, saying, look, for future reference, I did not lay down this race issue first. You did.

But let me say this. I think this is a very, very risky strategy for the McCain campaign.

WALL: Yes.

And, Steve, isn't this legitimate, though? Listen, he's talking about unifying the races. He does not have to mention John McCain in what he has said. And I think quite frankly his campaign kind of backed off of it a little bit and said, well, we don't just -- we don't mean John McCain. We're talking about liberals and others, not specifically John McCain.

Obama is usually careful with his words. Is this going to help McCain at the end of the day?

STEVE KORNACKI, COLUMNIST, "THE NEW YORK OBSERVER": Oh, well, there are two different issues here.

The first is on the specific charge that Obama linked John McCain to some racially insensitive tactics, if you read closely and parse closely what Obama said and what you played, you could make the connection that Obama was trying to connect it to McCain or seemed I think to be trying to connect it to McCain.

And Obama campaign backed off of that quickly, because I think as you noted before, this is something that has been used before. This is a line that Obama has been using for a long time. It was more of an informal thing.

(CROSSTALK)

KORNACKI: The issue here is why the McCain campaign took a line that otherwise I think would have mostly been ignored and why they have run with it to the degree they have run with it.

And they see an advantage. It's not just about inoculation. I think this is a tactic we have seen for a long time from the Republican Party, from Republican candidates. I'm not saying McCain himself, but I'm saying from the Republican Party, where if you take an issue like this, you're basically saying, hey, Barack Obama is looking for special treatment here. Barack Obama is looking for preferential treatment here.

That's what they're saying to white voters.

(CROSSTALK)

MARTIN: Steve, here's the reality, though. The Obama campaign screwed up. The candidate made the comment. He did link it to McCain. Had he said bloggers, had he said talk show hosts, had he said others -- and, so, I think this was Obama making a mistake.

(CROSSTALK)

KORNACKI: It is.

(CROSSTALK)

KORNACKI: But, Roland, I agree with you. This is a mistake on Obama's part.

But what does it tell you about the McCain campaign that they took something that otherwise would not have been noticed -- people were not -- reporters were not out there saying that Barack Obama was playing the race card. Why did the McCain campaign make such of issue of accusing him of playing the race card? And what voters are they trying to appeal to by picking a fight on this issue? That's the second question.

(CROSSTALK)

BORGER: Look, the McCain campaign is trying to pick a lot of fights with Barack Obama right now, in case you hadn't noticed.

KORNACKI: But why on race, Gloria? But why on race?

(CROSSTALK)

WALL: Hang on. Hang on. There's a lot more on this story, of course, including the racially coded word that some people are using when they talk about Barack Obama.

And, later, how Exxon is raking it in, while the energy crisis has everybody else in America hurting, and why the do-nothing Congress is living up to its name.

(COMMERCIAL BREAK)

MARTIN: In this election, race just can't be swept under the carpet. One issue that has got people talking is the words that are used to describe Senator Barack Obama, words you would not hear anybody using about John McCain.

Back with us now, Steve Kornacki and Gloria Borger.

And, folks, look, these words are quite interesting. And one of the words that jumps out is the word uppity. We have heard this used. Joe Scarborough uses it all the time on his morning show. I have seen it with columnists. What are people actually saying when you hear the word uppity in association with Senator Barack Obama?

KORNACKI: Well, I think...

BORGER: I don't hear it a lot. If Joe Scarborough uses it, that's news to me. I mean, I think that uppity is a word that has got all kinds of racial associations with it, honestly. So...

KORNACKI: Here's where when people start in a negative way trying to sort of exploit the race issue with Barack Obama, the effect that they're going for -- I'm not saying this is necessarily the McCain campaign or McCain himself.

But, just in general, to the extent it's used in this campaign, you would have to think back to something that Jesse Helms did in 1990, when he was running a Senate campaign, running for his life against a black guy named Harvey Gantt.

He ran an ad about affirmative action. It's a famous ad where white hands were crumpling up a pink slip. And, basically, the narrator said in the ad that you needed that job, you wanted that job, and they had to give it to a black guy because of affirmative action.

And any attempt to really bring uppity, if you want to use that word, or whatever the word is about race, it's to make Barack Obama the candidate that Jesse Helms tried to make Harvey Gantt, the candidate of affirmative action, the candidate who wants special treatment.

(CROSSTALK)

MARTIN: Gloria, I had David Gergen on my radio show yesterday on CNN Radio. He said there is no doubt, when you hear that word being used, it's sending a negative connotation about Obama, that he's one of these black guys who doesn't know his place.

(CROSSTALK)

BORGER: No, no, absolutely.

(CROSSTALK)

BORGER: Excuse me?

WALL: Gloria and Roland, what -- just, what negative connotation does it infer? I mean, what...

(CROSSTALK)

BORGER: Just what Roland said. It's just what Roland said, that this is somebody who doesn't know his place.

But I must say that what I think the issues here that we're talking about is, the McCain campaign, which does not used that word, I must say, is trying to make the case to the American people that Barack Obama does not have the experience or the credentials to be president of the United States.

And I think a better case for McCain to make, rather than fights over these other issues, is the -- is the fact that John McCain is experienced in working across the aisle. He's a bipartisan guy who can appeal to independent voters. And I think this toughness that they're now exhibiting in the campaign could backfire against them with those independent voters. That remains to be seen. But...

WALL: Steve, if I could ask, is it legitimate to raise some issues outside of just -- are there words that are OK to use, not OK to use? Who is the arbiter of the words that are going to be able to be used during the campaign without seeming racist or being racist? What can and can't be asked legitimately about Barack Obama and his leadership and his experience?

KORNACKI: Yes. No, I mean, listen, I was always under the impression that uppity was strictly a negative word when it's used in association with black people.

MARTIN: It is.

(CROSSTALK)

KORNACKI: So, that's news to me that you have somebody on MSNBC using that word every day.

But I think there's -- listen, this is not about what the McCain campaign is doing. This is about what happens a few levels removed from there. It's like George Bush Sr. He was above the fray when he ran against Michael Dukakis, but everybody under him said terrible things about Michael Dukakis.

You go on the Internet, you go on talk radio, you here what they're saying about Barack Obama, and it's crude and it's ugly.

(CROSSTALK)

MARTIN: Absolutely. Hey, Steve, hold tight one second. We have got to move on. But hold on. You guys are coming back with this.

And coming up next, folks, we will count the money big oil has made -- Tara really likes this -- just in the few minutes you have been watching us. Trust me. You will not believe it.

Also, do you think FEMA did a good job helping Katrina victims? Neither does Congress. We will have that story when we come back.

(COMMERCIAL BREAK)

WALL: OK, before we talk about the energy crisis, here's another look at Roland's silly little clock.

MARTIN: Yes.

(CROSSTALK)

MARTIN: Nearly two million bucks in 16 minutes, yes, uh-huh.

WALL: Yes. And it's counting up how much money ExxonMobil is making during this hour based on the record-setting $11.68 billion profit it reported today. I thought it was a good thing, good for the economy when U.S. companies make money.

As for doing something to bring down oil and gas prices, that's Congress' job. So, guess what our lawmakers are doing today?

As Suzanne Malveaux shows us, nothing useful.

(BEGIN VIDEOTAPE)

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT (voice-over): Congress is taking off for a five-week vacation after failing to come up with an energy solution to sky-high gas prices. It seems like everyone's got someone else to blame.

REP. JOHN BOEHNER (R), MINORITY LEADER: Democrat leaders confirmed yesterday that they'd rather take five weeks off than to allow a real vote on more American-made energy.

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER: The majority of the congressional Republicans have voted no on renewable energy.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Leaders ought to be giving these members a vote, a chance to vote yes or no as to whether or not we ought to be finding more domestic oil.

MALVEAUX: Voters are looking for leadership on how to get out of this mess, making energy policy a big campaign issue.

OBAMA: We need to bring down gas prices but, first of all, we've got to provide relief to families.

MCCAIN: We need nuclear power. We need clean coal technology.

MALVEAUX: One of the main differences between the candidates' plans, whether to allow new domestic drilling for oil. McCain says yes. Obama says no.

But CNN's Miles O'Brien, who covers the industry, calls the issue a red herring.

MILES O'BRIEN, CNN TECHNOLOGY ENVIRONMENT CORRESPONDENT: The offshore oil drilling thing, you have got to remember that this really has nothing to do with gas prices today. It's become really a political issue, because the technicalities are this. It would take seven to 10 years to get any of that oil out of the ground. MALVEAUX: Obama is pledging to take on the big oil companies making record profits, like ExxonMobil. McCain is pledging to use government incentives and lower tax rates for businesses to invest in renewable energy.

O'BRIEN: It's always easy to go after big corporations. They are easy villains. But the fact is, we are importing an awful lot of oil from the Middle East, four times the amount of oil we imported back in the first gas crises of the 1970s.

MALVEAUX: In fact energy experts say the biggest failure in leadership comes from the candidates' refusal to take on voters' behavior.

O'BRIEN: Political candidates are loathe to ask Americans to conserve. The candidates today still have that same notion, that asking Americans to conserve is political death.

MALVEAUX (on camera): In fact, Americans are 4 percent of the world's population, but we use 25 percent of the planet's energy. Politicians remember how President Jimmy Carter paid politically for asking Americans to conserve.

Suzanne Malveaux, CNN, Washington.

(END VIDEOTAPE)

WALL: Thanks, Suzanne.

And we're again back to talk about our do-nothing Congress and its do-nothing approach to the energy crisis.

"New York Observer" columnist Steve Kornacki and CNN senior political analyst Gloria Borger back to join us.

Steve, first to you.

OK, ExxonMobil has this billions of dollars of profits quarter. I think that is the American way, capitalism. What's wrong with that?

KORNACKI: Listen, I'm going agree with pretty much what Miles O'Brien said in that piece we just ran. I think this entire debate is a fraud from both sides, from the Democratic side and from the Republican side.

First of all, of course, it's funny that the Republican Congress is now complaining the Democrats are going back off on vacation. The Republicans, when they controlled Congress, set a world's record for number of days off. I remember, they wouldn't even raise the minimum wage. They would rather go on vacation than do that.

But, be that as it may, listen, this is a sham of a debate. The Republicans have reduced this to drill, drill, drill, drill, drill.

(CROSSTALK)

WALL: But Americans want some action, don't they?

KORNACKI: No, no, Tara, that's fine. Listen, you drill all you want. Approve all the offshore drilling you want.

Here's the problem. The worldwide demand for oil is 86 million barrels a day. The worldwide production is 85 million. When the supply and demand curves meet like that, you have problems. You have exploding prices. And it's only getting worse, because the average U.S. consumer takes in a year 25 barrels a year. The average Chinese or Indian consumer is at two barrels a day (sic). Their population is seven times what our population is, and their demand for this oil is just beginning.

So, we could suck the Earth dry of oil, but we have real long- term problems here, and drilling is not going to answer it.

(CROSSTALK)

BORGER: Can I tell you what the real problem here is?

(CROSSTALK)

MARTIN: What's the real problem, Gloria?

(CROSSTALK)

BORGER: The reporting on this is that the Republicans have stopped the Senate from taking up this legislation because they don't like the way it's being funded, because they say the funding for these tax credits for renewable energy would have -- you would have to raise taxes to pay for it, $54 billion. They don't want to do it that way. You would have to raise taxes on hedge funds and multinational corporations. And they don't want to do it.

So, this has come down to the usual argument of, who pays?

(CROSSTALK)

KORNACKI: But do it or don't do it, it's not going to...

(CROSSTALK)

MARTIN: I have got to say this. I'm sorry.

WALL: Why go after the profits, though, Roland?

MARTIN: Because the American people should be angry. They should be angry.

WALL: No.

MARTIN: They're the ones that are losing money. And these guys are raking the dough in.

(CROSSTALK)

WALL: Their profit margin is 8 percent. That's minuscule, way below the industry average of 20 percent.

(CROSSTALK)

MARTIN: Show the clock again.

WALL: What about the billions in taxes that they're also paying out? Do we not have balance here? Is that the only answer, is to go after the oil companies?

MARTIN: They have made $2.5 million in 20 minutes.

(CROSSTALK)

KORNACKI: Here's where the Democrats are clueless, too. They're advocating a windfall profits tax as a cure-all for the energy. Yes, OK. Put your windfall profits tax on. Guess what? You're still paying $4 at a pump, because the price is coming -- it's an upstream issue here.

The oil companies are not making much money off what they sell at the pump. It's upstream where the profit is being made.

(CROSSTALK)

KORNACKI: So, slap your windfall profits tax on. You're not going cut the cost. And the production is going to go down, because the exploration is going to go down if you put a windfall profits tax on.

WALL: But, in the meantime, this is -- it's great for us to sit here and debate this. The Congress should have been debating this. They should have addressed this, as Americans continue to count Roland's silly clock over here.

(CROSSTALK)

MARTIN: Yes, $2.57 million.

WALL: The issue, it still needs to be addressed at the end of the day, does it not, Gloria?

BORGER: Yes, it does.

But the issue here is not really the profit margin of ExxonMobil. The issue is what they do with their profits.

(CROSSTALK)

BORGER: They have poured $7 billion back in. They poured more, however, back to their shareholders. And that's the crux of the argument we're having.

WALL: All right, well, to be continued.

(CROSSTALK)

KORNACKI: And the shares went down.

(LAUGHTER)

WALL: I'm sure they will take it up after the recess.

Steve and Gloria, hold on a second.

Next, we will hear how the presidential candidates are spinning this energy crisis and Exxon's profits.

This is the ELECTION CENTER.

(COMMERCIAL BREAK)

MARTIN: Welcome back. We're in the CNN ELECTION CENTER. Campbell Brown is off tonight. I'm CNN political analyst, Roland Martin.

WALL: And I'm Tara Wall, deputy editorial page editor for "The Washington Times" and former CNN adviser for the Republican National Committee.

We're talking about realistic ways to bring down oil and gas prices. At least, that's what John McCain is talking about. Well, Barack Obama, he is complaining, because ExxonMobil is doing so well.

Here are the candidates in their own words, starting with Senator McCain.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama says that he wants energy independence, but he's opposed to new drilling at home. He's opposed to nuclear power. He's opposed to an innovation prize for electric cars.

My friends, we must begin immediately in drilling offshore, so we can get some of the oil that's off our own coasts.

(CHEERING AND APPLAUSE)

MCCAIN: We have to begin that drilling. And Senator Obama opposes it.

(CHEERING AND APPLAUSE)

MCCAIN: He said that the high cost of gasoline doesn't bother him, only that it rose too quickly.

Yesterday, he suggested we put air in our tires to save on gas. My friends, let's do that. But do you think that's enough to break our dependence on Middle Eastern oil?

(LAUGHTER)

(APPLAUSE)

MCCAIN: I don't think so.

OBAMA: We just learned today that ExxonMobil made nearly $12 billion last quarter. This is coming off of $11 billion the quarter before that and $11 billion the quarter before that. No United States corporation has ever, in American history, made that much of a profit in a quarter. Never happened before.

But while big oil is making record profits, you're paying record prices at the pump. And our economy is leaving working people behind. For far too long, we have had an energy policy that works for the oil companies. I think we had -- I think it's time that we had an energy policy that works for you...

(CHEERING AND APPLAUSE)

OBAMA: ... that works for the American people, that works for our children and our grandchildren and future generations.

(END VIDEO CLIP)

WALL: OK, so we heard from both of them. And we're back again with Steve Kornacki and Gloria Borger.

Gloria, everyone's heard what these candidates are saying. But quite frankly, look, look at the numbers, look at the polls we have up. It shows 69 percent of Americans, quite frankly, favor offshore drilling. So that would put Senator McCain in tune with most Americans, right?

BORGER: Yes. I think on this particular issue that John McCain is in tune with Americans and that the Democratic Congress is not, because Americans are feeling the pinch here. And I think, however, if you drill down, excuse the pun, on these numbers, you'll also see that what Americans want is a broad-based energy policy that does a little bit of this and does a little bit of that.

So offshore drilling is part of that. But they also wanted -- you know, they also want to conserve energy and they want to do the things that Barack Obama is talking about.

WALL: Also, Gloria --

BORGER: That's the question voters ask, why does it have to be either or?

WALL: Yes, but couldn't Barack Obama though show some leadership, some bipartisanship by making some concessions on drilling?

BORGER: Well, you know, it's interesting. Barack Obama believes like Arnold Schwarzenegger. The Republican governor of California believes that you shouldn't drill offshore. Both Obama and McCain know that you can't get results from this very quickly. I mean, these are why you can't solve these problems overnight in Congress. But what they want, what, you know, both of these candidates quite frankly, have proposed, you know, very comprehensive energy plans that do a whole variety of things.

MARTIN: Hey, Steve.

Hey, Steve, I get all the folks talking about why Obama's against it. But John McCain has been against also oil drilling all these years. He's not into the American people. He flip-flopped. That's what he did.

KORNACKI: Can I just tell you something? I finally understand why the right was so fed up with John McCain for so long. Because I just listened to his so-called solution, his comprehensive solution besides drilling, which will do nothing to reduce the price. It will have no effect at all for at least 10 years.

(CROSSTALK)

KORNACKI: But he just said -- he just said this other thing, oh, Senator Obama won't support an innovation prize for the development of an electric vehicle. Well, only, only someone who is not a true believer in a market and a true conservative would believe that there is not a sufficient incentive in the market right now for the development of an electric vehicle and you need a price for Uncle Sam to pay for it.

(CROSSTALK)

WALL: I think McCain --

KORNACKI: That's pathetic. What kind of policy is that?

WALL: McCain has called for many alternatives including some of the things you mentioned in addition to drilling. And some would say he's, you know, he stepped it up and come around and evolved from his position and --

(CROSSTALK)

KORNACKI: But we're getting him credit for drilling, Tara, but drilling does not -- it does nothing. The world demand is going so fast for this, you go find a few million barrels that 10 years from now are offshore.

WALL: But the transition period, Steve, --

KORNACKI: It's going to do nothing to lower the prices. We'll find a solution set.

MARTIN: Gloria, isn't this playing to the emotions of the American public who basically see the gas prices going up? And they will cling to anything in order to see gas prices come down?

BORGER: No. Well, what comes to mind is the little gas tax holiday?

MARTIN: Right.

BORGER: Do you remember that, Roland?

MARTIN: Oh, yes. What happened to that?

(CROSSTALK)

WALL: It was innovative

BORGER: First proposed by Hillary Clinton --

WALL: It was innovative.

BORGER: First proposed by Hillary Clinton and then proposed by John McCain? But suddenly it has disappeared because most economists said, you know what, folks? That's not going to get you very much. And Barack Obama called it, again, look, if energy were an easy problem to solve, we would have solved it. We haven't.

WALL: Yes. Well, and we could have solved it I think probably years ago since it's been on the table for so long. And these senators, quite frankly, have been sitting senators, Obama for three years and McCain for 24. They could have done something then.

(CROSSTALK)

BORGER: You have had George Bush in the White House.

KORNACKI: What if we listened to Jimmy Carter in the late 1970s? What if we listened to President Carter?

WALL: We need to stop you again there. We need to stop you again there.

The attacks and the counterattacks between Obama and McCain are getting more personal. Aside from me and Roland getting more personal up in here, I want you to hear what they're both saying today about that humorous McCain ad -- humorous that compares Obama to Paris Hilton and Britney Spears. Can anyone take a joke anymore? We'll be right back.

(COMMERCIAL BREAK)

MARTIN: Here in the CNN ELECTION CENTER is day two of the presidential campaign held hostage by Britney Spears and Paris Hilton. Yes, it's true.

It all started when the McCain campaign unleashed its nastiest attack ad yet. Take a look at how this whole thing started.

(BEGIN VIDEO CLIP, CAMPAIGN COMMERCIAL)

NARRATOR: He's the biggest celebrity in the world. But is he ready to lead?

(END VIDEO CLIP)

MARTIN: And Tara is over there laughing. But before we chew this over...

WALL: Hilarious.

MARTIN: ... let's hear what the presidential candidates had to say today about Paris and Britney.

(BEGIN VIDEO CLIP)

OBAMA: Given the seriousness of the issues, given the fact that the decisions that we make right now are going to help determine the future not just of the next generation but perhaps generations after that. Given the magnitude of our challenges when it comes to energy and health care and jobs and our foreign policy, do you think that we'll be having a serious debate?

But, so far, all we've been hearing about is Paris Hilton and Britney Spears. I mean, I do, I do have to ask my opponent, is that the best you can come up with? Is that really what this election's about? Is that what is worthy of the American people?

Even the media has pointed out that Senator John McCain, who started off talking about running an honorable campaign has fallen back into the predictable political attacks, the demonstrably false statements, you know, but here's the problem. I'm not interested in getting into a tit for tat.

These negative ads, these negative attacks spending all this time talking about me instead of talking about what he's going to do, that's not going to lower your gas prices. That's not going to help you stay in your home if you're falling behind on the mortgage. That's not going to help you find a job if it's been shipped overseas. It doesn't do a single thing to help the American people. It's politics as a game, but the time for game-playing is over.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Earlier this year, you had made comments about like the mudslinging, how it would have been effect in other campaigns and how you didn't want to do that. But recently, especially last week when Obama went to Europe, it seemed like there was a lot of campaign ads that you had put out that were doing that.

And the one yesterday comparing him to Britney Spears and Paris Hilton, like, I was like, OK? So it seems like Americans like me and other people, like you may have flip-flopped on what you have said earlier. And what's your response to that?

MCCAIN: First of all, let me say that there are differences and we are drawing those differences. And I've said earlier I admire his campaign but what we are talking about here is substance and not style. And what we're talking about is who has an agenda for the future of America.

And, these are -- campaigns are tough. When I'm proud of the campaign that we have run, I'm proud of the issues that we are trying to address with the American people. And again, I would hope that Senator Obama would join me so that we could discuss this as he said he wanted to "duel" over taxes, I believe, it was yesterday.

So, all I can say is that we're proud of that commercial. We think Americans need to know that I believe that we should base this campaign on what we can do for Americans here at home and how we can make America safe and prosperous, and that's the theme of our campaign. I thank you.

(END VIDEO CLIP)

MARTIN: Wow, John McCain, proud American, and proud of Britney and Paris. Back with us again, New York Observer Steve Kornacki, and CNN senior political analyst Gloria Borger.

And Steve, look, even former top McCain adviser John Weaver says that the ad went too far. How can he stand there and say I'm proud of that commercial?

KORNACKI: Well, he can because he wants to win. Listen, I'm going to cut the McCain campaign some on this one from a strategic standpoint. You know, look, we're clearly not seeing the McCain that we all remember from 2000 and from the years following, the guy who became easily the most popular politician in the country. But I think the McCain campaign realizes that, you know what, this election is Barack Obama's to lose, it's not John McCain's to win.

So, you know, McCain can run the great high-minded, you know, T.R. like campaign that he run in 2000. Have the town hall meetings, have the great statements of personal principle, you know, the thing that John Weaver sort of wants him to do. And you know what, if you get to Election Day and voters like John McCain and they like Barack Obama, they're going to pull the lever for Barack Obama.

(CROSSTALK)

MARTIN: But, Gloria, this is --

KORNACKI: You know, McCain's people have to think this has to be a referendum on Obama and you know, it's going to get ugly. And the price could be his reputation but he wants to win so he's doing it.

MARTIN: Gloria, this is not "American Idol." Isn't he being risky with this strategy of playing this kind of little game here?

BORGER: It's very risky. And, you know, I talked to Steve Schmidt, who's the senior adviser to the McCain campaign, who said, you know, what is this contest? Is it "American idol"? Is it "Dancing With the Stars"?

They were having real trouble breaking through. They weren't getting any attention. Well, guess what? They put out this ad, and, again, from a tactical point of view, they put out this ad, and we're running this ad and we're talking about it, which from their point of view, actually works for them. Because the storyline that they want to tell about Barack Obama is that he's presumptuous, OK? That's why they want to say to you.

They want to say John McCain is experienced. He's ready to be president, and they want you to think twice about Barack Obama. That's what they're doing?

Do I think the ad was silly? Yes. Did it break through for them? Sure.

WALL: Can we take a moment to just lighten up? I mean, is there such a thing as a lighthearted ad that people can get a joke out of them?

(CROSSTALK)

KORNACKI: Well, Tara, if you're going to do that -- if you're going to do that, 15 celebrities who fit the year. Let's not live in 2005.

MARTIN: Yes, Angelina Jolie. Maybe her.

WALL: Look, aside from the fact that it was humorous, let's look at, you know, the point behind the ad itself. I mean, is it not legitimate?

Look, we know Barack Obama is a rock star. We know, you know, most of the money he gets are from Hollywood liberals.

MARTIN: Oh, come on. Come on now. Come on.

WALL: Aside from national, is it OK to ask a legitimate question about whether he's ready to lead, whether he's experience. I mean that certainly is not off the table, is it not?

KORNACKI: Here's the problem. That's all the McCain campaign has. If you look at the model on this, this is like 1980. That was all the Carter campaign had over Ronald Reagan, the entire campaign, and it worked until October 28th. And then, the country saw them head to head in a debate and Reagan won overall the doubters and there was nothing left for Carter to stand on. It was a landslide.

The McCain campaign is going to leg this out as far as they can, but I wonder how long they can keep it up.

MARTIN: Absolutely.

WALL: Gloria --

BORGER: I think and I keep saying this, I think John McCain has a better story to tell. I think the maverick John McCain, who is looking to appeal to those 12 percent of undecided voters in this country, can say to them, I'm your guy because I've got the experience of working across the aisle. And I could have solved the energy bill if I've been president of the United States. Maybe we would have gotten that energy bill passed. And maybe we would have passed immigration reform. And maybe we would have had ethics reform a long time ago. MARTIN: That's right.

BORGER: That's what John McCain has to talk about.

MARTIN: Absolutely, Gloria. And I think we're spending more time talking about a silly ad as opposed to talking about McCain's credentials as being a leader. He has a problem.

Steve and Gloria, I appreciate it. Thanks a lot. We need to move on.

For as long as we're talking about celebrities...

WALL: It's a summer right now.

MARTIN: ... wait until you see hear what L.A.'s police chief had to say about Lindsay Lohan. It's anything but politically correct. Some are calling it offensive. We'll have it for you next.

And later, the U.S. Senate's new legal celebrity goes to court.

This is the ELECTION CENTER.

(COMMERCIAL BREAK)

WALL: And welcome back. We're live in the CNN ELECTION CENTER.

Let's quickly check the headlines. Erica Hill is here with tonight's "Briefing."

ERICA HILL, CNN CORRESPONDENT: And, Tara, we begin with a horrifying crime aboard a Greyhound bus in Canada.

Passengers say a young man was asleep leaning against the window when another man stabbed him several times with a butcher knife, and then decapitated him. As other passengers fled, one eyewitness says he will never forget what he saw.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: He was cutting off the guy's head there and he saw us. He came back to the front of the bus, told the driver to shut the door.

(END VIDEO CLIP)

HILL: Passengers and a trucker stop the suspect from getting away. It took hours though for police to coax him off the bus. He's now facing murder charges.

Eight people are dead after a charter that crashed in Southern Minnesota. There were powerful thunderstorms in the area just before the crash. The passengers were casino executives and developers in Atlantic City flying to Minnesota to visit a window factory.

Jaw-dropping testimony on Capitol Hill today. Congresswoman Jane Harman says 41 percent of women in a military hospital reported they have been sexually assaulted while in the service. She says U.S. servicewomen have a better chance of being raped than being killed in Iraq.

Senator Ted Stevens pleading not guilty today. The 84-year-old Alaska lawmaker is accused of hiding thousands of dollars in gifts from an oil services company. His trial is set for September, possible in Alaska.

And the Los Angeles police chief says passing new laws to patrol paparazzi is foolish. These pushy photographers have lost interest in celebrities such as Britney Spears, Lindsay Lohan and Paris Hilton.

(BEGIN VIDEO CLIP)

CHIEF WILLIAM BRATTON, LAPD: If you notice, since Britney decided wearing clothes and behaving, Paris is out of town not bothering anybody any more. Thank God. And evidently, Lindsay Lohan has gone gay. We don't seem to have much of an issue.

(END VIDEO CLIP)

HILL: The activist, though, do have an issue. They are angry. They say gay celebrities, including Elton John and Melissa Etheridge, are hounded by photographers and that they deserve more privacy, Tara.

WALL: A mixed bag, huh?

HILL: Yes.

WALL: I think we've got our fill of celebrities for the show, right?

HILL: They have. There's even two segments.

WALL: Thanks, Erica.

Well, CNN uncovered truckloads of stockpiled supplies left in a warehouse and meant for Hurricane Katrina survivors. Tonight, Congress asked tough questions. Find out if anyone admit the mistakes, when we come back.

(COMMERCIAL BREAK)

WALL: In just a few minutes, "LARRY KING LIVE" reveals secrets of a mysterious cult and new details on the search for a missing Florida toddler.

Larry, what's the latest?

LARRY KING, HOST, "LARRY KING LIVE": You're right Tara. We've got new developments regarding that missing toddler, Caylee Anthony. Is it a federal case now because the FBI has interviewed her relatives including the grandmother? And Cindy Anthony, that grandmother, is back with us tonight. And plus, we're going to look at some incredible claims. People who allege forced sex and other abuse while they were members of a cult. That's all ahead on "LARRY KING LIVE" next, Tara.

MARTIN: All right. Larry, thanks so much. We appreciate it.

There are new developments in a CNN investigation that outraged Hurricane Katrina survivors. Millions of dollars worth of supplies that were supposed to help people who lost everything sat for years in a warehouse. Members of Congress demand an explanation. Did they get it? That's next.

(COMMERCIAL BREAK)

MARTIN: For weeks now, CNN has been investigating the stunning discovery that FEMA, the Federal Emergency Management Agency, stockpiled nearly $20 million worth of vital household goods intended for the victims of Hurricane Katrina. Instead of being distributed, these items sat in the warehouse for two years. That's right. Two years.

And then, FEMA, finally decided to give the stuff away. But not to the hurricane victims. None of it went to hurricane victims. Naturally, Congress is now investigating.

Abbie Boudreau of CNN's special investigations unit uncovered this story. She joins us from Washington with the latest -- Abbie.

ABBIE BOUDREAU, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT: Roland, today, it was the first time FEMA agreed to talk on the record about the details of what happened in this case. It was also the first time FEMA acknowledged it made mistakes.

This afternoon the U.S. House and Senate subcommittees on Homeland Security grilled FEMA about why they have been storing millions of dollars of supplies for the past two years. One member of Congress said the agency had failed Americans.

The big question that we've been asking for months and that state and federal officials were asking all day long was, why did FEMA declare all of those items a surplus when there was still such an obvious need for those basic supplies? FEMA's answer was it was not aware that there was still a need because no one asked for the supplies. Of course, that was not a good enough answer from many state officials.

(BEGIN VIDEO CLIP)

PAUL RAINWATER, LOUISIANA DEVELOPMENT AUTHORITY: What is troubling to me is that the state would have never known about the supplies if CNN had not reported on the issue.

(END VIDEO CLIP)

BOUDREAU: Our investigation uncovered the brand new supplies in that warehouse never went to the hurricane victims. Rather they were given away to 16 states and various federal agencies like the U.S. border patrol, federal prisons and even the Department of Wildlife.

Our investigation also found nonprofit groups helping to re-house Katrina victims were in constant contact with FEMA officials about their needs, which makes you wonder why FEMA says it didn't know there were still a need for those supplies all along.

This whole time we've been investigating this story, we've pressed FEMA to do an on-camera interview. But today was the first time I actually had the chance to ask some questions to a top FEMA official about all of this.

(BEGIN VIDEOTAPE)

BOUDREAU: Why didn't the people working with the nonprofit groups that were part of FEMA, why didn't they come back to the leaders of FEMA saying there is an obvious need, let's get them some of those supplies?

ERIC SMITH, FEMA ASSISTANT ADMINISTRATOR: I would think that because the people that they're working with did not relay that need to them. Because if they did, they would have issued it to them.

BOUDREAU: Did FEMA let the victims of Katrina down in this particular case?

SMITH: No.

BOUDREAU: That is shocking for people. That is shocking for people to hear that. That FEMA is not acknowledging that you guys made mistakes in this case. You're saying you did not let the people of this hurricane down.

SMITH: You asked me, did I let them down versus make a mistake? Did we make a mistake? Yes. We all make a mistake. We acknowledge that.

Can we do better? Yes. But did we let them down, no.

(END VIDEOTAPE)

BOUDREAU: FEMA says it does have a new system that tracks supplies coming in after a disaster and has better coordination efforts with the states. The lawmakers at today's hearings, some of them say they aren't necessarily convinced. But FEMA does insist it's ready if another hurricane strikes again -- Roland.

MARTIN: That guy is delusional. Hey, great job with the story. We appreciate it.

BOUDREAU: OK, thanks.

MARTIN: Folks, we'll be right back.

(COMMERCIAL BREAK)

WALL: Before we go, here's one last look, one last look at Roland's silly little ExxonMobil props showing how much money they had made this hour based on profits. We're supposed to be happy if it was going up in taxes, right?

MARTIN: And, folks, we're out of time. I'm Roland Martin, Tara Wall --

WALL: Tara Wall.

MARTIN: Great night.

WALL: Good night.

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