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CNN LATE EDITION WITH WOLF BLITZER

Examining Details of the Bailout; Reviewing the VP Debate

Aired October 5, 2008 - 11:00   ET

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


WOLF BLITZER, CNN ANCHOR: This is LATE EDITION, the last word in Sunday talk.
(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: The rescue package that we just passed through Congress isn't the end of what we need do to fix our economy.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: This rescue bill isn't perfect. It is an outrage it is even necessary. We have to stop the damage to our economy.

BLITZER: The candidates reacted to the historic $700 billion bailout bill. We will talk about its economics and political impact with Democratic Congressman Rahm Emanuel and Republican Congresswoman Marsha Blackburn. Plus, an exclusive Sunday interview with New York Mayor Michael Bloomberg on the financial crisis and his run for a third term.

SEN. JOE BIDEN (D-DE), VICE PRESIDENTIAL CANDIDATE: You have got to have a timeline to draw down the troops.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: Your plan is a white flag of surrender in Iraq.

BLITZER: The vice presidential candidates square off before a record television audience. We will assess Biden versus Palin and more with two top adviser from the Obama and McCain campaign.

"Washington Post" reporter Barton Gellman, author of the new book "Angler: The Cheney Vice Presidency" talks about the challenges facing the next vice president.

PALIN: Our opponent is someone that sees America as imperfect enough to pal around with terrorists who targeted their own country.

BLITZER: And The McCain campaign steps up attacks on Barack Obama one month before election day. We will look at the strategies for both sides with the best political team on television. The first hour of LATE EDITION begins right now.

(END VIDEO CLIP)

BLITZER: It's 11:00 a.m. in Washington, 8 a.m. in Los Angeles and 6 p.m. in Baghdad. Wherever you are watching from around the world, thanks very much for joining us for LATE EDITION. It was an anxiety-ridden week that saw stocks plunge, small businesses get squeezed, and there was a surge in U.S. job losses. It ended with Congress approving and President Bush signing historic legislation designed to rescue both Wall Street and Main Street.

Joining us now to discuss the big $700 billion bailout package and what it means for American taxpayers, two guests. Illinois Congressman and Democratic Caucus Chairman Rahm Emanuel, he's joining us from Chicago. And in Nashville, the site of Tuesday's second presidential debate, Republican Congresswoman Marsha Blackburn of Tennessee. She is a key member of the House Financial Services Committee. Let me thank both of you for coming in.

Congresswoman Blackburn, let me start with you. You voted against the this package both last Monday when it was basically a clean version as well as Friday when it included some other legislation not related to the bailout specifically. You said no in effect to the president and the vice president and the secretary of treasury, the Federal Reserve chairman, Senator McCain, and your own Republican leadership. Why?

REP. MARSHA BLACKBURN (R), TENNESSEE: I did because it was too much of a bailout and not enough of a workout. But Wolf, I will tell you this. Senator McCain was engaged in this. He was respectful. He certainly moved this debate forward and his leaving the campaign trail and coming to Washington was a game changer in this debate because it is what forced everyone to start putting all of their issues on the table, putting their proposals and their ideas, giving their perspective and the certainly Republican study committee did that and the Republican Conference had done that, the Democrats conference said if he is coming to town, we have got to get busy.

BLITZER: But tell us Congresswoman Blackburn why Senator McCain was wrong.

BLACKBURN: Well, I think that for me individually and for my district, looking at that $11.315 trillion debt ceiling was something that was just too expensive. Since the Democrats have taken control of Congress in '07, going through '07 and '08 they moved that debt ceiling from $8.9 trillion to $11.3 trillion. The $700 billion price tag was just too much money.

BLITZER: Excuse me, congresswoman. When President Bush took office, there was roughly a $5 trillion national debt and over the past nearly eight years, it has gone up to around $9 trillion, but it's going to go even higher as a result of this. Why is it -- remind me -- since those eight years, six of those years Republicans were in control of Congress, all eight years the Republicans have been in control of the executive branch of the government. Why are the Democrats to blame for this doubling of the national debt?

BLACKBURN: Well, Wolf, and you are right, it was $5.59 trillion. You're right and I think President Bush spent too much. I think Congress has spent too much. And I think that one of the things that should have happened in this bill was some across-the-board spending cuts. We could have done more with free market initiatives. We had too much bailout and not enough workout in the bill. We didn't use enough free market components in this. Raising the debt ceiling and the $700 billion price tag, those are all items that were of concern.

BLITZER: Let me bring in Rahm Emanuel, because you voted for the legislation both times, congressman. You are one of the leaders on the Democratic side, the majority in the House of Representatives. But there's a lot of concern that the $700 billion was augmented with what is called pork or earmark spending to try to help the archery industry and for kids, for example, rum imports from Puerto Rico and the Virgin Islands, films produced in the united states, what do these measures have to do - and there was other pork in there as well or earmarks. What do these earmarks have to do with bailing out Main Street and Wall Street?

REP. RAHM EMANUEL (D), ILLINOIS: Wolf, I want to answer both topics here. First, it is ironic that Marsha left off - the fact is under George Bush and the republicans, the national debt has increased by 65 percent. The national debt has increased by 65 percent and there's going to be -- the one thing you can always say about George Bush is we will forever be in his debt. And that is his legacy.

In fact, he not only inherited a $5 trillion debt and increased it to 10 by going higher, he inherited a surplus, a surplus and his run deficit every year of his presidency. That's number one.

And what happened here in the economic problems we have today, both on Main Street and also on Wall Street, are basically the backdrop of what his economic policy that have weakened the middle class and run an economic strategy. I am going to get to the other part of it. When Dick Cheney said deficits didn't matter, boy, did they take that to heart and run it up.

Number two, the core of this bill is about bringing a basic financial stabilization to the financial area and calming that market so people once again start lending and borrowing and moving the economy. And second, giving protections to taxpayers. The things that also does this, there were tax cuts in here for alternative energy, to create industries here in this America and jobs here in America as well as giving middle-class tax cuts. The items you mentioned should never have been part of the bill. Had the House passed the bill on Monday, they wouldn't have been. And Those who vote no bear responsibility for those additions being added to it.

BLITZER: Congresswoman Blackburn, take a look at the horrible job loss numbers that were released only the other day here in Washington. In September, the last month, 159,000 jobs lost were since January 1 of this year, 760,000 jobs have been lost, economists say that in order to just keep up with the population increase, people going into the job force you really need to create 100,000 new jobs a month to stay even.

What's going on over here? And aren't you concerned that your vote against this legislation that is going to try to stimulate jobs in effect by strengthening the credit market and strengthening industries and is only to -- your vote against it would have further exacerbated the economic crisis. BLACKBURN: You know, Wolf, I think that everyone realized something needed to be done. And certainly many of us who were putting proposals on the table for consideration knew something needed to be done. We disagreed with what that something should be. We didn't think that the taxpayer should be the first resource to go to for this. We felt like the taxpayer should be the resource of last resort because we are going to solve a problem like this, you go either to the taxpayer or to the private sector. We preferred to have the private sector there first, to work through loans, to work through insurance. Certainly we thought that this legislation should have something dealing with Fannie and Freddie, which is the root cause of the problem.

BLITZER: Go ahead, Congressman Emanuel.

EMANUEL: Look, this is one piece of something we have to do and there are other pieces to follow. Second, after this basic financial piece, second, we must reform the financial industry and bring more oversight and more transparency and more regulations that are comprehensive and effective. Number two, we need to deal with declining home values and have a strategy that deals with basically of the two million homes that are basically 90 days, deal with basically stabilizing that because that will make the whole process work. That's the number one area that is starting to turn this.

And third and most important, we need an economic strategy that strengthens it is middle class. What has happened to the middle class under George Bush is they are working harder, earning less, and paying more. And the middle class has suffered, $1,200 loss of median household income. While energy cost, health care cost, as well as education costs have gone up $4,800.

EMANUEL: An economy cannot grow if the middle class is weakened. And we have to strengthen them by having a jobs agenda that basically starts to reward the middle class and put them at the center of our economic policies. That is a strategy that makes sure the middle class are strong and has been missing the last seven years.

BLITZER: I think that the basic message you are hearing from Senator Obama right now to the American people is that if you like the economic policies of this Republican administration of George Bush over the past eight years, you are going to love John McCain's economic policies. Here is what Senator Obama said on Friday.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE: Senator McCain and his running mate talk about job killing. That's something they know a thing or two about. Because the policies that they have supported and are supporting are killing jobs in America every single day.

(END VIDEO CLIP)

BLITZER: All right. This is -- this message is clearly resonating. Take a look at the polls, the national polls as well as in the battleground states. Go ahead and defend the economic policies of Senator McCain.

I will be happy to defend the economic policies of Senator McCain. Because we know that Barack Obama has voted to raise taxes on the middle class and he has $1 trillion in new spending that he wants to put on top of this $11.3 trillion debt ceiling that we now have. We know that when that happens, taxes go up because that is how you are going to pay for it. Talk to any small business first ...

BLITZER: All right. I hear you attacking Senator Obama. I don't hear you defending or supporting or expressing any solidarity with the economic policies of Senator McCain.

BLACKBURN: Well, Senator McCain has already told you, one of the first things he will do is reform government and work for ways to reduce spending. That is going to make a difference in tax policy and it is going to make a difference in what you are going to have at the end of the month.

EMANUEL: Wolf?

BLITZER: Hold on, hold on.

BLACKBURN: He wants to extend '01 and '03 tax cuts ...

BLITZER: Congressman Emanuel, hold on a second. I will play this clip from Senator McCain going after Senator Obama and I will let you respond.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, (R) PRESIDENTIAL CANDIDATE: We can go backwards with job killing tax hikes, same old broken partisanship and out of control spending that Senator Obama would have us do. Or we can bring real reform to Washington.

(END VIDEO CLIP)

BLITZER: All right, go ahead Congressman Emanuel.

EMANUEL: First of all, Wolf, there is going to be a tax cut. John McCain has a plan to reward the wealthiest one percent in America which has led us to this economic crisis in our country. Barack Obama has a tax cut to the middle class. There will be a tax cut. The question is who will benefit and who won't. And Barack Obama's tax cuts will help the middle class.

Second, this period of time will be known under George Bush as Great Recession. His economic policies weakened the middle class and deteriorated their economic purchasing power. And John McCain promises you four more years just like the last eight. We have to fundamentally change the economic policies of this country which is what Barack Obama offers. One, that if you work, we have health care. Two, we have to have a universal savings strategy. Three, you have to build a hybrid economy that strengthens alternative energy. And four, that we have a tax cut to reward the middle class with the hard work they do to strengthen this country. BLITZER: Congressman Emanuel, we are almost out of time. But I want you to react to this charge that Governor Sarah Palin, the Republican vice presidential nominee, leveled yesterday against Senator Obama given his relationship in Chicago where you are from over the years with William Ayers who was one of the leaders of the Weather Underground, a terrorist organization back in the '60s. Listen to what she said.

(BEGIN VIDEO CLIP)

SARAH PALIN, (R) VICE PRESIDENTIAL CANDIDATE: Our opponent is someone who sees America as imperfect enough to pal around with terrorists who targeted their own country.

(END VIDEO CLIP)

BLITZER: All right. Give us your reaction to what this new element relatively new, hearing it for first time from Governor Palin, although the charge has been around for some time. Give us the nature of what your understanding of his relationship with William Ayers.

EMANUEL: First of all, William Ayers -- when William Ayers was doing whatever he was doing, Barack Obama was eight years old. Has no relationship to him. Only relationship he had was educational reform in Chicago years later. Let me take on it one step back. And I have done politics. If we are going to go down this road, you know, Barack Obama was eight years old, somehow responsible for Bill Ayers.

At 58, John McCain was associating with Charles Keating. At 68 he was working on behalf of lobbyists in the telecom industry pressuring the FCC. If we really want to talk who is associating with who we will go down that. I will tell you what will happen.

The American people will lose in that transaction. But it won't focus on what happens to them over the next eight years of turn thing country around. I'm not in the business of giving political advice to John McCain. But I would watch when you're going to deal with associations.

BLITZER: Before you respond, congresswoman, before you respond I want to remind our viewers, Charles Keating was one of the S&L leaders who went to prison for stealing money ...

EMANUEL: Who John McCain was associated with.

BLITZER: He was an associate of John McCain ...

EMANUEL: And John McCain got admonished by the Senate Ethics Committee for that.

BLITZER: Go ahead. Let Congresswoman Blackburn respond.

BLACKBURN: William Ayers and Bernadine Dohrn, she was on the FBI's most wanted list at one point in time. William Ayers held a fund-raiser for Barack Obama at his home in 1995. Indeed, there are reports that Barack Obama's political career was launched at the home that they shared. Bernadine Dohrn and William Ayers, they were on the board together of the Chicago Annenberg Foundation. That foundation that Barack Obama headed gave money to William Ayers for his collaboration and that money was supposed to increase the scores, the test scores, of children. There is not a documentation that that was done. Those didn't increase.

BLITZER: Very quickly, very quickly, Congressman Emanuel.

EMANUEL: When Barack Obama was eight years old. The question is what we will do over the next eight years to turn this country around and strengthen the economy.

BLACKBURN: It's an issue of trust and transparency, Wolf.

EMANUEL: If they want to go down the road of associations, we will go down that road but America won't win.

BLACKBURN: Is Barack Obama going to come out and say William Ayers is my friend, I have a long-running association with him?

EMANUEL: Oh, Marsha, that's not true. It's not true and you know that.

I know politics when I see it. This is just a political tactic because John McCain cannot talk about the economy.

BLACKBURN: Rahm, come on. You know John McCain has a great policy on the economy. We know that. I think that -- probably Rahm and I could agree we are disappointed the Cubbies lost last night.

EMANUEL: We are disappointed. But I will tell you this. For the guy that said he doesn't know much about the economy over the last seven days he has showed America that's true.

BLACKBURN: No, he did a great job the last seven days. Helped push something forward and focus the American people's attention on it.

BLITZER: We have to leave it there, unfortunately. Marsha Blackburn, thanks very much for joining us.

BLACKBURN: Thank you, Wolf.

BLITZER: Rahm Emanuel, thanks to you as well.

BLITZER: And just ahead, the record-setting vice presidential debate. We will get a top journalist and best-selling author's take on Sarah Palin, Joe Biden and the man they both hope to succeed, that would be Dick Cheney. You are watching LATE EDITION, the last word in Sunday talk.

(COMMERCIAL BREAK)

BLITZER: Coming up in our next hour, the New York City mayor, Michael Bloomberg, on the financial crisis and his bid for a third term. This is a "Late Edition" Sunday exclusive. That's coming up. But, first, the next vice president may have an expanded role as a result of Dick Cheney's eight years of the Bush administration.

Let's take a closer look at the challenges Sarah Palin or Joe Biden might face, with a man who has spent a long time studying the current vice president of the United States.

That would be the Washington Post reporter Barton Gellman. He's the author of a brand-new book entitled "Angler: The Cheney Vice Presidency." It's number four, today, on the New York Times bestseller list.

Bart, thanks very much for coming in.

GELLMAN: Thanks for having me.

BLITZER: Congratulations on the bestseller.

GELLMAN: Thank you.

BLITZER: I know you worked really hard on this book.

Here is a clip of what Sarah Palin said about Dick Cheney and his role as vice president at the debate the other night. Listen to this.

(BEGIN VIDEO CLIP)

GOV. SARAH H. PALIN, R-ALASKA: I do agree with him that we have a lot of flexibility in there, and we'll do what we have to do to administer, very appropriately, the plans that are needed for this nation.

(END VIDEO CLIP)

BLITZER: All right. She was talking about Vice President Cheney. And you've spent a lot of time studying the vice president.

What were you thinking about her description of what her role might be?

GELLMAN: Well, it sounded like Dick Cheney could have written that description. The idea of flexibility, on the one hand and "do what we have to do."

Those are two of the watch-words (ph) of a man who believes in executive supremacy and believes that other branches of government and the public, actually, cannot restrict the executive in its...

BLITZER: So what I hear you saying is that, if she were vice president, she'd -- you see Dick Cheney as a role model? Is that what you're saying?

GELLMAN: Yes, well, what you aspire to and what you can do are two different things. Dick Cheney's power came, in part, from a relationship with a very specific president. And it came from his own enormous experience and skill. I mean, Dick Cheney, as a lame duck with two broken wings, packs a lot more punch than either of the current V.P. candidates is likely to.

BLITZER: Here is what Joe Biden said, at the debate the other night, Thursday night, about Dick Cheney. And I'll play this clip.

(BEGIN VIDEO CLIP)

SEN. JOSEPH R. BIDEN JR., D-DEL.: Vice President Cheney has been the most dangerous vice president we've had, probably, in American history. The idea he's part of the legislative branch is a bizarre notion invented by Cheney to aggrandize the power of a unitary executive. And look where it's gotten us. It has been very dangerous.

(END VIDEO CLIP)

BLITZER: All right. He makes two points. The first point: the most dangerous vice president we've probably had in American history.

What do you think?

GELLMAN: Well, part of it we still have so much to learn about Cheney.

I spent a year working on a series, with a partner in The Washington Most, and then another year on the book. And there were so many new stories that I came up with for the book that I feel like we're still just scratching the surface.

BLITZER: Did you get any cooperation from him or his team in writing this book?

GELLMAN: Well, it was limited. I used to talk to him when he was secretary of defense. He did not want to talk for the book. He allowed some of his staff to talk to me, but not on most of the things you really want to know about Dick Cheney, what he says to the president and that sort of thing.

But a lot of people who knew a lot of things did talk, on the record, for the first time, Andy Card and Condi Rice and Josh Bolten, Steve Hadley.

BLITZER: So you did get White House cooperation.

Now, what about this other notion, the idea he's part of the legislative branch?

He had come up with this notion since he is the tie-breaker in the U.S. Senate, when there's a tie.

GELLMAN: Well, he is both understudy, his principle constitutional role, in the executive, and president of the Senate. And what he actually says is that he's got a foot in both branches and is a member of neither. And that actually pretty conveniently exempts him from the oversight and from the rules that bind either the legislative or the executive branch.

BLITZER: It was a unique interpretation of the Constitution, when we heard that from him. I had never heard that from anyone before. Had you?

GELLMAN: Well, it's actually interesting. Dick Cheney and David Addington, his lawyer, did not make that up. There were -- there was an obscure opinion dating back to the 80s, in the Office of Legal Counsel at Justice, which was on a very precise and limited matter, and they took that and they ran with it.

One of the things that Cheney often does is he takes a widely accepted principle and he, sort of, blows through all the old boundaries to bring it to a fairly extreme position.

BLITZER: Here is another clip of Sarah Palin at the debate the other night, talking about the vice presidency. Listen to this.

(BEGIN VIDEO CLIP)

GOV. SARAH H. PALIN, R-ALASKA: Well, I'm thankful that the Constitution would allow a bit more authority given to the vice president, also, if that vice president so chose to exert it, in working with the Senate, and making sure that we are supportive of the president's policies and making sure, too, our president understands what our strengths are.

(END VIDEO CLIP)

BLITZER: All right. Did you understand what she was talking about there?

GELLMAN: Well, syntax makes it impossible to be sure what she's saying. What immediately preceded that quote was her saying that the vice president casts the tie-breaking vote in the Senate. It's possible that she was saying only that the vice president can do more to lobby the Senate and try to effect the outcome than just cast his one vote.

But when she uses the term "authority," it does, again, bring to mind the fact that Dick Cheney has essentially transformed this role into the nearest thing to a deputy president the country's ever had.

BLITZER: He came into office, Dick Cheney, as a former White House chief staff under Gerald Ford, a former United States congressman from his home state of Wyoming, a leader in the House of Representatives, a secretary of defense. You and I both covered him when we covered the Pentagon during the first Gulf War, and more recently, for almost eight years now, a vice president of the United States.

He's had enormous experience. What do you think? You probably haven't asked him this question. But what do you think he thinks about the Sarah Palin decision by John McCain?

GELLMAN: I -- I have no idea what Dick Cheney would think about Sarah Palin. He -- what he cares about is that the person in the number two slot is prepared to be experienced enough to be, has the judgment to be commander in chief.

BLITZER: Because he came in with a wealth of experience, and as critics say, it didn't really help, because they say he did an awful job.

She comes in with, obviously, a limited amount of experience, if, in fact, she is elected.

GELLMAN: Well, that's true. There have been relatively inexperienced presidents who have done pretty well. There's, I think it's fair to say, never been a candidate for the number one or number two spot who had less Washington experience and knowledge.

BLITZER: At the Republican convention in St. Paul, on the first night, Cheney was supposed to fly in with the president and address the convention.

That was canceled, that first night, because of the hurricane, Hurricane Gustav, that was moving toward the Gulf Coast, as you know. And he never showed up after that, never went by a satellite, as the president did, never made any presentation.

There was no reference to him whatsoever at the Republican convention, over the days that followed, even though he had served in several of these capacities over the years.

How do you think he must have felt, seeing how he was effectively ostracized by his own party at this, the last convention of his administration?

GELLMAN: Dick Cheney cares less about his public image than anyone I've ever covered. He's the nearest thing to an anti- politician we have had in high office. I doubt that he cared very much.

I think you have to add to that the fact that Cheney has barely mentioned McCain's name, and vice versa, during this campaign. They did not get along.

They were never warm and close, but the debates over torture, over the capital gains tax cut, over executive authority, and McCain's very strong and personal criticism of Cheney over the Iraq war broke any bonds between them.

In fact, Liz Cheney, the vice president's older daughter, said, on a network that shall not be named, that it would be bad for the country if McCain were elected.

BLITZER: So that's why we're not seeing the vice president out there on the campaign trail?

GELLMAN: I think so.

BLITZER: But I'm sure that McCain's probably not anxious to see the vice president out on the campaign trail, right now, either.

GELLMAN: It's a mutually beneficial separation.

Barton Gellman is the author of "Angler: The Cheney Vice Presidency."

And remind our viewers why it's called "Angler."

GELLMAN: His Secret Service code name, partly for the love of fishing, but it's a nice metaphor for the stories I tell, about the way he operates, in the book.

BLITZER: Thanks very much for coming in. Congratulations on the bestseller.

GELLMAN: Thank you.

BLITZER: Still ahead, the best political team on television on what the campaigns' game plans should be as they head into Tuesday's second presidential debate.

But up next, we'll go live to the campaign trail and get an update on a new turn in this campaign that's getting nasty.

What are the candidates up to today?

CNN's Jim Acosta is following Barack Obama in North Carolina. We'll go there live, in just a moment.

(COMMERCIAL BREAK)

BLITZER: And welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. In just a moment, we will discuss Tuesday night's big debate with four top strategists. But first, let's get the latest from the campaign trail. CNN's Jim Acosta is in Asheville, North Carolina right now.

Jim, tell our viewers what's going on right now.

ACOSTA: Wolf, Barack Obama is finding himself on the defensive this weekend, responding to some attacks from the McCain campaign in the form of Sarah Palin. She was out West at a couple of fund-raisers yesterday and accused Barack Obama of having palled around with terrorists. That quote from Sarah Palin.

She is referring to the past association Senator Obama had with William Ayers, the former member of the radical group the Weather Underground which carried out a couple of bombings in the United States back in the 1960s.

Various press accounts have reported that Barack Obama did not have much of a relationship with Mr. Ayers. They served on a nonprofit board at one time and Mr. Ayers did sold a coffee for Barack Obama when he was running for the state senate.

But nonetheless, the Obama campaign is feeling that it should fire back. They have already released a new campaign ad pointing out that a McCain campaign spokesman was quoted in one newspaper as saying that they have got to turn the page from the economy to Barack Obama's character.

And that new ad from the Obama campaign points out that many Americans can't turn the page on the economy because they are struggling as we speak with the bailout package this was passed in Washington last week, this is no time to turn the page from the economy.

But nevertheless, the Obama campaign is also on the attack yesterday. Barack Obama was campaigning in Newport News, Virginia, he accused the McCain campaign of having a "radical approach on health care."

That elicited a response from Tucker Bounds, the spokesman for the McCain campaign, who said, quote: "Barack Obama is lying about John McCain's health care plan." So, Wolf, just a month left in this campaign and the brass knuckles are coming out.

Barack Obama will be campaigning here in Asheville, North Carolina, later today. This is where he is going to be doing his debate preparations which have already gotten under way here in western North Carolina and if Barack Obama -- if a Democrat is campaigning in Virginia, North Carolina, at this stage of the campaign, Democrats doing pretty well right now -- Wolf.

BLITZER: Jim Acosta in North Carolina for us. We will check back with you, Jim. Thank you. And just ahead, both campaigns, as you just heard, stepping up their attacks. Will it help? Who will it hurt? We will have analysis from the best political team on television right after this.

(COMMERCIAL BREAK)

BLITZER: From the financial bailout to the vice presidential debate, a dramatic week in politics. Here to discuss it all, our CNN contributors. They are four of the best political team on television. Joining us in New York, Republican strategist Alex Castellanos, Democratic strategist Donna Brazile, Republican strategist Leslie Sanchez. And here in Washington, Hilary Rosen, she is the political director of huffingtonpost.com.

Guys, thanks very much for coming in. Alex, why do you think yesterday, of all days, it was obvious that Sarah Palin decided to throw the whole William Ayers issue out there in leveling this charge that Barack Obama had this relationship with "terrorists"?

ALEX CASTELLANOS, CNN CONTRIBUTOR: Sarah Palin has become the queen on the chess board. She is the fighting piece and maybe the most powerful piece on the board for communications for the McCain campaign. And when you have the presidential candidate on one side combating the vice presidential on the other, that's probably a plus for McCain. They are trying to change the agenda. And the case, of course, is that he was only 8 years old when Ayers did this, but he wasn't 8 years old when he held his first political fund-raiser at the home of a domestic terrorists. And that's a little tough for him to explain.

BLITZER: Now, Donna, they say it wasn't a fund-raiser, they say it was a coffee back in 1995 when Barack Obama was getting ready to launch his political campaign. And he had this "coffee" at William Ayers' home in Chicago. They were neighbors at that time. Go ahead and tell us how ugly, how nasty, this final month of the campaign is going to get.

DONNA BRAZILE, CNN CONTRIBUTOR: Well, Sarah Palin is living up to her reputation as a pit bull. But unfortunately, Washington, D.C., does not need any more mean attack dogs. We need leaders who are humble, who will help bring about accountability and make sure that we can get our economic house back in order.

It is unfortunate that Sarah Palin, who refused to cooperate with an investigation taking place in Alaska under her watch as she once upon a time said that she would cooperate with the investigation, whether or not she abused her power in firing her brother-in-law, but she won't subject herself to that.

And Sarah Palin has not held a national news press conference. So to get on the campaign stump and start throwing accusations that she may or may not have read in a newspaper because we don't know if she reads the newspapers, but the fact is, is that Senator Obama has no ties with William Ayers.

What Senator Obama is trying to do is focus this campaign on economy, focus it on the American people. And that's what John McCain should be doing as well.

BLITZER: There was a long article yesterday on the front page of The New York Times. And it jumped inside on the relationship between William Ayers and Barack Obama. And they concluded it was not especially close. That was The New York Times. And she said she did read that article.

The Obama campaign, Leslie, is reacting very strongly, they're coming out with a new ad even as we speak, suggesting that John McCain is really erratic, in a crisis, and among other things, the ad says this, it says "three-quarters of a million jobs lost this year, our financial system in turmoil, and John McCain, erratic in a crisis, out of touch on the economy, no wonder his campaign wants to change this subject."

Leslie, they're pre-empting -- obviously, trying pre-empt this final strategy in this system in turmoil. And John McCain? Erratic in a crisis. Out of touch on the economy. No wonder his campaign wants to change the subject." Leslie, they are preempting, obviously trying to preempt this final strategy and this final month whereby they will try to change the subject from the economy let's say to Barack Obama's character and judgment.

SANCHEZ: Well, it's absolutely correct. I mean let's look at the bottom line is Democrats benefit from this economic downturn. People want to punish the party of power and that's the reason you have seen the fluctuations in these battleground states. A lot has so much more to do with this economic implosion and what's happening on Capitol Hill than it has to do with the candidacy of Barack Obama and any fresh ideas.

I mean, let's just -- call it a spade a spade. With respect to that, he knows the conversation could shift. Now that that were normalizing this economic issue, there's going to be a change and look at the fact that we have a month to go and in a political campaign, that's an eternity. So he's correct. You are going to see them be aggressive in these attacks and try to keep the issue on the economy. But there is a lot of other concern with respect to judgment and experience that are going to be alluded to.

BLITZER: How much, Hilary, will this latest effort by Sarah Palin and the McCain campaign to try to revive the whole questions about experience, his judgment, Barack Obama, how much will it resonate?

ROSEN: You know, the McCain campaign has no choice right now but to try to hit the reset button on this campaign. And as we have seen over the course of the last two months once they were successful doing it, when they picked Sarah Palin, and polls seemed to bounce a little bit and once they were unsuccessful which is when John McCain jumped in on the economic issue, I don't think that they are going to be successful if their reset button attempt here is to go negative against Barack Obama. He's too risky and too liberal, he's not ready.

BLITZER: But they do have this William Ayers, the Tony Rezko, the Reverend Wright thing. They have individuals they can throw out there.

ROSEN: If they throw mud like that, then you go back to Charles Keating, you go back to Sarah Palin's investigation. You go back to Cindy McCain's troubles. You know, I just don't think that John McCain wants to take this nuclear strategy. And I think for Obama, the country has seen him, at the debate on foreign policy, and cool in the economic crisis. I don't think those sort of attack pieces are going to stick.

BLITZER: Let me let Alex, weigh in. Looking ahead to the Tuesday night debate in Nashville, Tennessee, Alex, John McCain said the other day just wait until Tuesday night. What should we be bracing for there?

CASTELLANOS: I think you are going to see McCain trying to draw sharp differences. But I want to agree a little bit with Hillary here. You know, you can pry voters away from your opponent. But you also have to give voters a place to go. And right now there is an economic fire. And people want somebody to put that fire out. And I think for the McCain attacks to actually work, we have all been in this campaign, they have to -- it would be a great thing for example to see McCain tell his economic story, which is a good one. Get on TV, buy two minutes of TV, on CNN maybe, every night for a week. And say hey, this is my strategy for a stronger economy. Tonight we are going to talk about tax cuts and reform in Washington because we have to change Washington. Tomorrow night we're going to talk about energy, the power of recovery. We are going to talk the next night about education and a knowledge to compete in the new global economic frontier. Next night, we're going to talk about health care. John McCain needs to do something big and bold on the economic plus side to make the attacks work.

BLITZER: I want everybody to stand by because we have a lot more to discuss with our panel, including some key changes in the battleground states that appear to be shifting this presidential contest. And remember, on Tuesday night at 9:00 p.m. Eastern, it is debate night in America. Tune in to CNN as John McCain and Barack Obama face off in their second, the second of three debates. This one in Nashville, Tennessee. LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back. We are talking politics with four of CNN's best Republican strategists, Alex Castellanos and Leslie Sanchez and Democratic strategist Donna Brazile and Hilary Rosen.

Leslie, were you surprised last week, in recent days, when the McCain campaign formally told us they were simply conceding Michigan, they really didn't have a chance to win in Michigan and they were pulling out their resources for Michigan. And John McCain was canceling a visit to that important battleground state.

SANCHEZ: I wouldn't say surprised, Wolf. I say that it's part of the political reality. I really tell you what I'm going to be looking for are the polls that are coming out on Friday and Saturday. They are the ones that will take into considering the vice presidential debate, the debate that we are going to have on Tuesday. It is going to - we are already start tapping down of this economic crisis in the sense of management leadership Congress is start doing something.

So it's going to give us a better read of where these candidates really are. And what you are seeing is it is still very unpredictable. And that 10 percent is moving back and forth. They are not loyalists in any part to either of the candidates.

BLITZER: They can change their mind, a free country. Donna, let's take a look at our estimate of what the Electoral College map looks like right now. Right now, we have 189 of the electoral votes leaning either leaning for or for McCain, 250 for Obama. You need 270 to be elected president of the United States. That's looking very, very good for Senator Obama. Is this a done deal already?

BRAZILE: Absolutely not, 30 days is a long time in politics. And, you know, while John McCain has pulled out of Michigan, Senator Obama must redouble his efforts in Ohio and Florida and Pennsylvania. This is going to be a very tight election, Wolf. And despite the new poll numbers, Obama understands that he has to continue to grow the electorate. And tomorrow is the deadline for voter registration in many states across the country. So I believe Obama has a slight advantage because he has been able to really do a phenomenal job and compete in places where the Republicans did well last time around, Colorado, North Carolina, Virginia. But in order to win, he has to go out there and really get his troops out on Election Day.

BLITZER: Let's take a look at some of these battleground polls, Alex. I am going to bring you into this conversation. And we will take a look at Pennsylvania right now. And our likely voters right now we have Obama at 51 percent, McCain at 41 percent, unsure, 8 percent. Pennsylvania is a state McCain is still fighting for. In Florida right now, and all of us remember how important Florida is, 49 percent for Obama, 44 percent for McCain, 7 percent unsure. In Colorado, one of the states that Donna just mentioned, right now Obama is ahead 51 to 47 percent in Colorado. In Virginia, which is normally a very reliable red state in a presidential contest, Obama, 48, McCain, 47, unsure five. Alex, how worried, how worried should John McCain be right now?

CASTELLANOS: It is a good time to get out the prayer rug because it is getting very tough. The playing field is shrinking and narrowing. Yes, he can still win this thing.

CASTELLANOS: Of course. We've seen so many twists and turns, but he is back on his own 40 yard line. Pulling out of Michigan was a big deal. My rule for pulling out of states like that is wait until the last possible minute and then don't do it because it kind of sends a message that the campaign has started to back up.

The problem for the McCain campaign now, and their big challenge is, now this is not a state-by-state battle, the way it's been all the way along. This is a big thing about the national environment that has turned against Republicans and not just John McCain, by the way. This is happening in Senate races around the country, congressional races. We're seeing Republican Senate candidates who have all of a sudden dropped four or five points because an economic crisis has happened on the Republican watch. So, these candidates, including McCain, now have to do something big to turn around a national environment, not just win a state race.

BLITZER: And, you know, the debate this coming Tuesday night, national, is going to be a town hall format. This is what John McCain wanted throughout this whole -- several past months. He wanted to go out in a town hall format and debate Barack Obama. He's going to have that chance Tuesday night. And it's supposed to be his strength, the town hall format. Is that an opportunity for him to try to reverse some of this trend?

ROSEN: Well, it is an opportunity on the messaging and to demonstrate that he can connect the voters who are really dealing with this economic crisis. You know, I think we all expect him to do very well that night, and Barack Obama walks into that night with a disadvantage. I think on the -- for the Republicans, it's a national campaign because of the economic situation. For the Obama campaign, it's very much a ground game. You know, not ...

BLITZER: To get the vote out.

ROSEN: To get the vote out. Not only are the voter registration deadlines happening in the next two or three days in all of these key states, but mail-in ballots are starting. So people are actually starting to vote.

BLITZER: On the ground game last time, 2004, Leslie, Karl Rove and the Republicans had a brilliant ground game, especially in Ohio, which was decisive. They really got that conservative base out there, energized, even though John Kerry and his team did a good job, it was nowhere nearly as good as the Republicans did. Do they have that motivation, that ground game this time, working for John McCain and Sarah Palin?

SANCHEZ: I think it's not where it could be, in fairness, Wolf. I think it's -- the fundamentals are there. It's getting the base excited and motivated. And it is getting there. And it is something that I would say the Bush team built to counter a lot of the union efforts that has been tremendously discussed on the campaigns. What is going to be interesting is how Barack Obama is going to be using political technology, you know, the Internet, mobile texting. This is almost like a Maserati in first gear. He's been using it and building an intense database. Now the question is the first time in political history butting that mechanism to work in a way that can go neighbor to neighbor and get people to turn out.

It's really unknown what that effect will be.

BLITZER: All right, guys. We've got to leave it there. But a good discussion and we'll continue in the days ahead. Looking forward to seeing you all Tuesday night for the debate in Nasvhille.

Coming up, a conservative radio and TV talk show host had some very tough words for Republican candidate John McCain this week. You might be surprised by what Glenn Beck is saying. Stay with us. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: Welcome back. Conservative TV and radio talk show host Glenn Beck isn't afraid to speak his mind, and this week he had a lot to say about John McCain's decision to vote for the $700 billion economic bailout plan. I sat down with him earlier in the week in THE SITUATION ROOM.

(BEGIN VIDEO CLIP)

BLITZER: What about the decision that John McCain made last night to vote yay, in favor of this legislation?

GLENN BECK, CNN HN HOST: I think he lost the election. There was a moment here for somebody to rise up as a leader. You have nine to one calls coming into the Capitol Building saying this is outrageous. This bill was bad last week. This bill that they passed last night is outrageous. The things that they put into this bill.

When people really find out for those who don't know already the things that are in this bill, this is the problem with Washington. You're asked and told this is the most important thing that we have voted on. This could mean the collapse of our economy if we don't do it. And they put earmarks on it and captain earmark doesn't step to the plate?

(END VIDEO CLIP)

BLITZER: And there is much more ahead on LATE EDITION. Key advisers from both campaigns and my exclusive Sunday interview with Mayor Mike Bloomberg.

LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: This is LATE EDITION, the last word in Sunday talk.

(BEGIN VIDEO CLIP)

MCCAIN: We can go backwards with job-killing tax hikes.

OBAMA: What Senator McCain and his running mate talk about job killing, that's something they know a thing or two about.

BLITZER: McCain and Obama spar over jobs and taxes. And Sarah Palin steps up the attacks against Barack Obama.

PALIN: Our opponent is someone who sees America as imperfect enough to pal around with terrorists who targeted their own country?

BLITZER: We'll discuss that and more with two top campaign advisers.

MICHAEL BLOOMBERG, MAYOR, NEW YORK: I plan to ask New Yorkers to look at my record of independent leadership and then decide if I've earned another term.

BLITZER: New York Mayor Michael Bloomberg talks about his political future and the big bailout in an exclusive Sunday interview.

PALIN: People aren't looking for more of the same. They are looking for change, and John McCain has been the consummate maverick.

BIDEN: How different is John McCain's policy going to be than George Bush's? I haven't heard anything yet.

BLITZER: And three of the best political team on television on the presidential race one many from Election Day. LATE EDITION's second hour begins right now.

(END VIDEO CLIP) BLITZER: And welcome back to the second hour of LATE EDITION. As the nation nervously watched this week's dramatic battle over the $700 billion financial bailout plan, the economy was certainly the prime issue for the presidential candidates, as well. I'm joined now by two senior campaign advisers to discuss what should be done to avoid what the newest issue of "Time" magazine is calling -- take a look at this cover -- "The New Hard Times." Linda Douglass formerly of ABC News, is with the Obama campaign, and Nancy Pfotenhauer is with the McCain campaign. Ladies, thanks very much for coming in. Nancy, I'll start with you. I'm going to play a clip of what John McCain said on the conditions he needed in order to support the $700 bailout package. Listen to this.

(BEGIN VIDEO CLIP)

MCCAIN: It would be completely unacceptable for any kind of earmarks to be included in this bill. It would be outrageous for legislators and lobbyists to pack this he is rescue plan with taxpayer money for favored companies. This simply cannot happen.

(END VIDEO CLIP)

BLITZER: All right, there was some money in there, for NASCAR, for the archery industry, for rum imports, for movies, to make movies in the United States. He hates those kinds of earmarks.

NANCY PFOTENHAUER, MCCAIN CAMPAIGN ADVISER: I know.

BLITZER: Those pork barrel spending. Yet he went again and not only voted for them, he urged Republicans to follow suit. Why?

PFOTENHAUER: Well Wolf, I think it was a very clear signal of the seriousness of the problem that we were facing, the potential fallout. I mean, clearly he's built his career on opposing this types of special interest provisions, although they were tax provisions primarily, not overspending provisions. But the bottom line is he basically felt like the financial risk, the fallout potential for the economy if this did not go forward, if the hemorrhaging was not stopped, was so severe that it justified or warranted a vote, although he said, look, this is emblematic of the problem in Washington.

BLITZER: You heard the conservative commentator Glenn Beck.

PFOTENHAUER: I did. I've been on his show. He said it to me.

BLITZER: He said McCain could have won, maybe, if he would have taken a firm stance against it because of the pork barrel spending. Instead, he went with Barack Obama and all the others in supporting it and he thinks that cost him the election.

PFOTENHAUER: I think that's a perfect example though of why John McCain does what he thinks is right, not necessarily politically expedient. It would have been one path that could have been taken and offered him at least a short-term political bump. But, again, this is a gentleman who said I'd rather lose an election than lose the war. He does what he thinks is right and he lets the political chips fall where they may. Now, that makes it a challenge sometimes for us, but he did what he believed to be the right thing.

BLITZER: All right. The McCain campaign has come out with a new ad going after Barack Obama, Linda, on the whole issue of taxes. And Barack Obama's going to raise your taxes and all of this. Here's a little clip from the ad.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Who is Barack Obama?

OBAMA: I'm a tax cutter.

UNIDENTIFIED FEMALE: Really? Senator Obama voted 94 times for higher taxes, 94 times. He's not truthful on taxes.

(END VIDEO CLIP)

BLITZER: Average working-class folks, they hear an ad like that and they say you know what, economic times are tough enough. I don't need the government raising my taxes in the midst of all of this. So how do you respond to this ad?

LINDA DOUGLASS, OBAMA CAMPAIGN ADVISER: Well, first of all, that claim, which the McCain campaign has been making over and over again, has been debunked by every single fact-checking organization you can possibly find. These are some non-binding resolution that had tax cuts, tax, you know, maybe, you know, there might possibly have to be some kind of a tax increase, and if they voted on it later, it was completely nonbinding.

Senator John McCain has voted more than 94 times for similar resolutions in Congress. And here's the most important thing -- Barack Obama would cut taxes for 95 percent of middle-class families, and John McCain's tax plan cuts $300 billion in taxes for the wealthiest Americans and corporations and leaves 100 million families behind. So the whole core of Barack Obama's economic plan is a tax cut for the middle class, and yet they keep making this false claim that he wants to raise taxes.

BLITZER: Let's go through that first point that Linda made. A lot of these votes were on what they call these budget resolutions, which are really nonbinding, in effect, but they do lay out in effect what the budget should include.

PFOTENHAUER: Of course they do. I worked for budget committee.

BLITZER: Senator McCain has voted for these legislations.

PFOTENHAUER: But they are very important because they set out - I mean, as you know, the budget committee comes forward and says we've got a, quote, unquote, spending limit and revenue hole we're going to meet and this is how they subscribe -- these are the instructions they send to the finance committee and the appropriations committee, which may ignore those recommendations, but they do set up the path, and not only did Senator Obama vote for this, he went forward and spoke and said this is the right direction. We were finally getting, quote, unquote, back on track.

If you want to talk about tax policy, what Senator Obama is advocating in an economic downturn, rather, is a disaster, and he is raising taxes on capital formation, which every time you hear that, you should say job creation. John McCain is providing middle-class tax relief and keeping taxes low and lowering the business tax rate, which is the second worst in the world. Obama complaints about losing jobs overseas. This is the single most competitive disadvantage that we have.

BLITZER: Economists make the point that at a time of economic recession, which clearly a lot of people believe we are in right now, this is not a good time to raise taxes.

DOUGLASS: Overall under the Obama plan, number one, I want to stress again that 95 percent of American families would get a tax cut. Secondly, the tax rates would be lower than what they were under Ronald Reagan.

BLITZER: He wants to taxes on people earning more than ...

DOUGLAS: The only people who would have a tax increase are people who make $250,000 a year and that encompasses something like 1 percent of small businesses. The McCain campaign keeps saying that he's trying to raise taxes on small businesses. Only a tiny, tiny percentage of small businesses make $250,000.

PFOTENHAUER: Hundreds of thousands of them. Almost 500,000 of them, according to the most recent IRS reports.

DOUGLAS: The average American gets a tax cut and 100 million average American families are left behind by John McCain, who mainly directs his tax cuts to the rich.

BLITZER: Go ahead.

PFOTENHAUER: That's not true, and this is a good topic of conversation because they are out-and-out lies. I'm not saying misrepresentation here, which I usually am very careful to term. Out- and-out lies being propagated by the Obama campaign about John McCain's health care proposal.

BLITZER: Hold on, wait a second. I have a new ad that Obama's putting out on this specific point, going after John McCain's health care program, and I'll play a clip.

PFOTENHAUER: OK.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: McCain would impose a new tax on health benefits, taxing your health care for the first time ever. It's a multi-trillion-dollar tax hike, the largest middle-class tax increase in history. You won't find one word about it on his Web site, but the McCain tax could cost your family thousands.

(END VIDEO CLIP)

BLITZER: That scares a lot of people when they see that.

PFOTENHAUER: That's why I said it's important for them to understand it's an out-and-out lie. You want to talk about failing to fact check.

BLITZER: What's the lie?

PFOTENHAUER: The lie is they look at the way the benefits are treated but they don't acknowledge that there is a $5,000 refundable tax credit given to every single American family, $2,500 for individuals. In fact, according to the fact checkers, every single American would be better off under the McCain proposal than they are currently treated. For example -- and I don't know whether it was -- you know, they've got people like Jason Furman in there.

BLITZER: Who is an economic adviser.

PFOTENHAUER: Who advocated our approach beforehand.

BLITZER: Let Linda respond. Go ahead, Linda.

DOUGLASS: First of all, he didn't advocate your approach, but I don't want to actually go down that road. I want to respond directly to the fact that he does, in fact, increase taxes on health benefits. Right now, if you get a health benefit from your employer, you don't pay any taxes on it. So say you make $40,000 a year and you have a benefit worth $10,000. Now you're going to be getting taxed on $50,000 basically of income. That will be a new tax that Americans have never had to pay before. Secondly --

PFOTENHAUER: You don't understand the tax code.

BLTZER: What about the $5,000 tax credit?

DOUGLASS: $2,500 for an individual. That tax credit does not at all keep pace with inflation. Every analyst who's looked at this sees that the price of health premiums is going up 7 percent a year. This subsidy goes up 2 percent a year. You fall farther and farther and farther behind. And that also by the way is the amount of money that might cover a young, healthy person. But if you're the middle-aged or older worker with many more health problems, your costs are something like $12,000 a year.

(CROSSTALK)

PFOTENHAUER: This cannot be -- this has to be purposeful because there are people like Jason Furman involved. It can't just be that most of the people talking about it don't understand. But let me walk through the same example.

Somebody earning $40,000 a year, they're in the 15 percent tax bracket. They've got a $12,000 health insurance policy provided by their employers, this is precisely the example Joe Biden used in the debate. You figure out your tax consequences by taking the $12,000 and multiplying it by your tax bracket, by the 15 percent. That's $1,800. Under our plan, you're given a $5,000 credit. You are $3,200 better off.

BLITZER: We're not going to solve the tax -- health care...

PFOTENHAUER: ... under our plan.

BLITZER: ... issue right now.

PFOTENHAUER: I mean, the lower you are, the better your tax advantage.

(CROSSTALK)

BLITZER: I'm going to switch subjects for a moment.

PFOTENHAUER: You're being given $5,000 in tax credit. Linda, it works out on net better for everybody in every single tax bracket.

BLITZER: All right. We are not going to resolve this, this debate right now. But I do want your reaction, as senior adviser to Senator Obama, to this the statement that Sarah Palin made yesterday about his relationship with Williams Ayers, formerly of the Weather Underground. Listen to this.

(BEGIN VIDEO CLIP)

PALIN: Our opponent is someone who sees America as imperfect enough to pal around with terrorists who targeted their own country?

(BOOING)

(END VIDEO CLIP)

BLITZER: All right. She was referring to an article yesterday in The New York Times that had -- a long article about the relationship between William Ayers and Barack Obama. And their conclusion was it wasn't especially close, the relationship, but they did have a relationship.

DOUGLASS: Yes. So they served on a board together. Number one, he committed some terrible acts when Barack Obama was 8 years old. Barack Obama has denounced everything he did, found them absolutely reprehensible. This is somebody with whom he serves on a board, and as The New York Times found, you are correct in pointing out, they were not particularly close.

He doesn't ascribe to any views that he might hold. Sarah Palin herself said yesterday that most of what's in The New York Times is true, so if The New York Times has concluded they weren't particularly close after this exhaustive investigation, this is such a red herring.

The McCain campaign has announced publicly that they are now going to engage in personal attacks on Barack Obama, whether they're true or not, because they want to turn the page on the financial disaster that is making more people... (CROSSTALK)

BLITZER: All right. They want to change the subject from the economy.

PFOTENHAUER: No, they actually -- if you got back and you listen to what was said, is we want to focus on how to start growing the economy rather than stopping the hemorrhaging on the economy, which is why about two-thirds to three-quarters of every single speech that Senator McCain or Governor Palin gives is about the economy.

Anyway, to get back to the Ayers point, that 2,000-word article in The New York Times made it clear that there was a relationship that had been "downplayed," quote-unquote, and also raised the point that can you imagine if John McCain had hung out with -- held a political campaign event at, launched his political career, arguably at an event, served on a couple of boards with someone who had been bombing abortion clinics, how that would somehow be considered illegitimate.

This gets to the fact that Senator Obama misrepresents himself.

BLITZER: Would it be fair for the Obama campaign to raise the whole Charles Keating S&L crisis?

PFOTENHAUER: Well, as long as -- certainly, people have talked about it and that's why, you know, when Mr. Bennett came forward, who was the Democratic counsel and said Senator McCain was completely exonerated and in fact he had recommended that Senator McCain not be included even in the charges, and the Democratic leadership had said, and I quote: "We can't do that because then it would only be Democrats accused."

So -- but the point is that Senator Obama misrepresents himself, whether it's about his tax policy, his spending policies, Second Amendment rights, campaign financing or public financing...

BLITZER: We're out of time, but go ahead, very quickly.

DOUGLASS: Wait, hold on a second. He did not misrepresent himself. He serves on a board having to do with improving education in Chicago schools that is funded by one of the most conservative Republicans in this country, served on a board...

BLITZER: The Chicago (INAUDIBLE) Annenberg.

(CROSSTALK)

DOUGLASS: ... this guy is not an adviser of his, he's not a contributor of his. He has nothing to do with the campaign...

BLITZER: He hosted a coffee for him.

PFOTENHAUER: He was a contributor and...

(CROSSTALK) DOUGLASS: ... years ago, back in the '90s, one coffee, he was not involved in any of his campaign. Secondly, I think Wolf does ask a good question about Charles Keating. And I think that, you know, if we're going to start examining relationships that the presidential candidates have had, this is one which cost the taxpayers $2 billion, cost many...

(CROSSTALK)

PFOTENHAUER: Was Senator McCain completely exonerated?

DOUGLASS: Thousands of families to lose their life savings...

PFOTENHAUER: Was he completely exonerated?

(CROSSTALK)

DOUGLASS: ... certainly worth...

PFOTENHAUER: He was completely exonerated, and let's just point out that Barack Obama was 34 years old when he had the event -- the campaign event at Mr. Ayers' house and that Mr. Ayers has contributed to him before.

DOUGLASS: And this is what they call turning the page away from the economy.

BLITZER: Nancy Pfotenhauer, Linda Douglass, we're going to leave it there, but we'll continue this. We still have month a month to go and anything can happen over the next month.

Coming up, my exclusive Sunday interview with New York's mayor, Michael Bloomberg. We'll talk about the financial crisis that is hitting his city very hard right now and why he's looking to change New York's law so he can run for a third term.

Also, is Tuesday's debate a must win for the presidential candidates? We'll ask three of our best political team on television. LATE EDITION continues right after this.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. In a news conference on Thursday, the New York City mayor, Michael Bloomberg, warned that the city was on the verge of an economic crisis and said it was a challenge he wanted to face if he was allowed to run for a third term.

Mayor Bloomberg is joining us now from Berlin, Germany. He is heading to London for an important conference there.

But first, tell us, Mr. Mayor, why are you in Berlin? I understand you're getting an award because of the efforts you've undertaken in New York to curtail smoking.

MAYOR MICHAEL BLOOMBERG (I), NEW YORK CITY: They have a big European conference here of lung doctors. And smoking, obviously, is one of the things at the top of their priority list. So I gave a little talk about what we've done in New York and in the United States to convince kids not to smoke and to get adults to stop smoking and the effect that it has had in terms of reducing heart attacks and other diseases right away.

So, it's a big deal over here. And if you remember, after New York went smoke free, first Ireland and London and Italy and then England and Scotland and France and Germany and Turkey, all of these countries have banned smoking.

Sadly, in the United States, we don't have the courage to do it nationwide. But a lot of states have already done it, and most people in the United States now live in smoke-free jurisdictions.

BLITZER: Well, congratulations on the award, Mayor. Thanks very much for doing that...

BLOOMBERG: Thank you.

BLITZER: ... as someone who visits New York quite often.

Let's talk about this economic crisis. In addition to being the mayor of New York, you're also a billionaire. I think you're number eight on the Forbes 400 right now. They say you're worth $20 billion, which is a lot of money. So, you understand what's going on.

I'm going to play a clip of what the president said yesterday in the aftermath of the signing of this $700 billion bailout package. And you'll tell me if you think he's right. Listen to this.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Though the $700 billion dedicated to this plan is a large amount, the final cost to taxpayers will actually be much lower. Many of the assets that the government will be purchasing still have significant underlying value. As time passes, they will likely go up in price, and this means that the government should eventually be able to recoup much, if not all, of the original expenditure.

(END AUDIO CLIP)

BLITZER: Do you agree? Do you think he's right?

BLOOMBERG: I think he's right. We're not going to send out $700 billion to Wall Street and not get any of it back. Whether you'll get it all back, only time will tell.

What's happened here is there are lots of these securities that banks around the world hold, particularly in the United States. Nobody knows how to value them because they're based on home mortgages, and nobody can predict how many foreclosures there will be.

But what we do know is that most people will not have their mortgages, their houses foreclosed on, and most of these securities will have value. But since you can't value them at the moment, people are worried about the balance sheets of the banks. The banks, then -- nobody will put money in them. Then they don't have money to make loans. And that's one of the things that is bringing down the whole economy. And it's just part of a general crisis of confidence in the financial system not just in the United States but around the world.

BLITZER: Did the Congress and the president do the right thing in making this bailout package the law of the land?

BLOOMBERG: I think that this is something that had to be passed. You could argue that over the last few years we should have seen a problem coming, and, in fact, in New York, if you go back and look, we each year have taken a big part of the extra money we had and prepaid future interest payments so that we're going to reduce our debts down the road. But the truth of the matter is nobody wanted to the end a world where everybody could get a mortgage, every stock went up, everybody could buy each other's businesses.

It was too good for everybody, and it went on for much too long. It was obvious it was going to come apart. Nobody could ever predict when, but the worst happened, and now we've got to deal with that. And I think this economic package, this stimulus package or bailout package, however you want to label it, is one part of what is necessary.

Keep in mind, we had a stimulus package about six months ago where all it really did is it cost the country $150 billion of sending checks to everybody, and most people really didn't -- it didn't solve their economic problems. A lot of them went out and bought things like a flat-screen TV that was made outside of America, and it really -- I described it as giving a drink to an alcoholic. It was symptomatic of what we've been doing.

We've been spending money we don't have in Washington, and, in fact, some states and cities have been doing that, as well. We haven't been willing to address the real issues that face this country. Who's going to pay for health care down the road. Another 10 or 15 years it's going to consume 25 percent of our GNP and we just can't do that.

And this transfer of wealth from young people to old people is something that can't go on forever, and that's where young people are paying into these insurance pools, people my age and older who are using the health benefits, we're not willing to do that and not willing to have an intelligent immigration policy, we're not willing to face who's going to pay for Social Security, what we do on public education or crime in the streets, any of these things.

And that's where these big crises of confidence come from. A lot of things that you see the government not addressing. And in the end, people sort of lose hope.

BLITZER: So, what else? Assuming that the U.S. is facing a long and deep recession right now, and a lot of the economists believe it is, what else in the immediate term, the short term, must the federal government do right now? BLOOMBERG: Well, we're going to have a new administration. I don't know who's going to get elected. But whoever gets elected, their primary job is to work with Congress. Congress has, I think because of redistricting, become so partisan that it's very difficult for them to come to the center, make an agreement with the people on the other side of the aisle, and that's what democracy requires to go ahead.

And so, you see the only ways you can put together a bill is by adding all these earmarks. On your program a few minutes ago, somebody was complaining about that. But the truth of the matter is that's probably the only ways the leadership can get a bill that's controversial through Congress in this day and age, and we've got to somehow or other pull everybody together and say it's too important to do it that way. Let's work together and stop the partisanship where one side accuses the other of every bad thing and then comes back and forth.

BLITZER: Who has a better grasp of the economic crisis right now in your opinion? Would it be Barack Obama or John McCain? And you know both of these men.

BLOOMBERG: Well, I know both of them. They're both business friends. I have enormous respect for both of them. I think both have very different approaches, and the public will have a real choice if this four or five weeks when they go to the polls in terms of who can best handle it, I've sort of been disappointed that in both cases, I think they are in an election where they feel compelled to avoid the controversial issues, they are unwilling to say to the public, look, we can't do everything. Everybody says great.

But they're unwilling to say which things we can't do. And if we -- they all have programs to affirmatively do things, whether it is reducing taxes or expanding service, and I think both have some of that, but the -- it doesn't balance. And they're not willing to say where the money's going to come from and who is not going to get what.

We are going to have to ration services. We are going to have to decide which are the most important things and walk away from some things which are very desirable but we just don't have the money for. And sadly, whether it is the all-news cycle or the pundits or it's the public itself, we're unwilling to say we can't have everything and we can't have it now. And that instant gratification is what sadly has gotten us into this -- into this situation.

BLITZER: Have you decided -- have you decided, Mr. Mayor, who you're going to vote for?

BLOOMBERG: I pretty much have, but I think what I will do in the end is try to spend the next four or five weeks encouraging both of them to be specific, to speak out, to tell us not what they're going to do for today's problems, because today's problems aren't going to be the ones necessarily that they'll have to face in the next four years.

I want to know now how they approach problems and whether they're willing to stand up and take controversial positions and be a leader. You know, they've both stood up and said some things that were not politically correct, but I respect them. McCain talked about free trade in Ohio, and he's been more pro immigration, where he comes from a state where that's not an easy position to take.

Barack Obama stood up for performance pay, for example, in schools. That's not an easy thing for him to stand up to.

But I think both of them, whether it's because the election cycle or because of the advice they're getting, they're not willing to stand up and explicitly say where they will be and how they're going to get us out of Iraq, how they're going to win in Afghanistan, how they're going to fix the domestic problems and build international relations around the world. We can't revisit all treaties and still have good relations. We can't do -- a lot of things they've promised are mutually exclusive.

BLITZER: Last April you said you weren't going to seek a third term, but now you change your mind. Tell us why.

BLOOMBERG: Well, the city is going to have problems. I don't know that it's going to be a crisis. I hope it's not. What we're doing is preparing for the worst and hoping for the best.

I think New York has a great hand to play. We've been responsible. We've worked hard to diversify our economy, to make it a great place for people to live and businesses to thrive. But we're going to have some things that are going to require somebody that's independent to stand up, and I think that I've been prepared for this, I've worked hard in doing it. We've started a lot of projects. I'd like to see them through.

And it's easy to cancel them in tough time, and I want to make sure we don't because it's in tough times, Wolf, that we really have to make the investment in the future so that when the good times come, we'll have the things available. That's not something that I think somebody coming in cold would find easy to do. There's nothing magical about any one candidate. The public's going to have a choice a year from this coming November after I've gone through a lot of the tough economic times to decide whether they want me or whether they want somebody else.

But, you know, when like at my two daughters, I want to be able to say to them, your father didn't walk away when the going looked like it was going to really be tough and your father was going to devote four more years of his life to helping other people. It's the most satisfying thing in the world, and I want to be able to like what I see when I look in the mirror. I could have an easier life, but I don't think I could ever have a more satisfying life than what I've done for the last seven years.

BLITZER: And one final question, Mr. Mayor, before I let you go. How worried are you about the financial crisis and its impact on New York City given the fact that so much of the financial world is based in New York City, whether on Wall Street or elsewhere? Are you looking at a scenario of New York as it was in the '70s when, you know, there was that headline, famous headline in "The New York Daily News," something along the lines of "Ford to New York," something along the lines of, "Drop Dead"?

BLOOMBERG: Well, we are in much better shape than that, thank you. I think that we are going to have some tough times. We're going to have to look around for alternative revenue sources. We're going to have to look around for ways to do things more efficiently with less. But we are not going to go back to the '70s. We're not going to walk away from the safe streets and clean streets. We're not going to walk away from improving public education and helping our cultural institutions. That was the mistake that was made back then. And New Yorkers, Wolf, if you think about it, we are a highly taxed city, but New Yorkers pay those taxes, and they pay it because they like what it buys them. It buys them a great standard of living, a quality of life and a future for their kids and grandchildren. And that's just too important. We'll find a ways to do it. Is it going to be tough?

Yes, it's going to be tough, but we're also going to be called on to help other cities and the rest of our state because we are the economic engine of New York. We're going to be called on to help the rest of America. Remember, New York sends a lot more to both Albany, our state capital, and to Washington than we get back. And that's just something that we're honored to do and glad we're in a situation we can. But everybody has to be in this together.

BLITZER: So you don't think New York City will be going to the federal government and asking for a specific bailout?

BLOOMBERG: We have no plans to do so. What we're going to do is do what we've always done, basically -- take care of ourselves. We've always thought that when there's a crisis, we have to be the first ones there and take responsibility and pay for it and help each other. And, you know, back in 9/11 and 2001, this country came to New York and we have not forgotten that. We certainly understand whether it's a Katrina or it's an economic problem, New Yorkers have to be able to do their part. Can we finance the federal government? No, of course we can't do that. But we certainly can make sure that we lead by example and make sure that when it comes to sharing best practices or volunteering ourselves elsewhere around this country, that we in a ways make sure that we repay what this country did for us.

BLITZER: Mayor Bloomberg, good luck to you. Good luck to everyone in New York. Thanks very much for joining us.

BLOOMBERG: Thank you for having me, and have a nice afternoon from Berlin.

BLITZER: Thank you. I know the mayor's heading to London for an economic conference tomorrow. We'll see you back in New York, mayor. Thank you.

And coming up, we'll look at the increasingly negative presidential campaigns with the best political team on television. Also, we'll have a live report from Nashville, where they're already preparing for Tuesday's live presidential debate, the second of three. LATE EDITION continues after this. (COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. We'll get to our political panel in just a moment, but first, let's go to CNN's Bill Schneider. He's out in Nashville where they're getting ready for Tuesday night's second presidential debate, the second of three. Set the stage for us, because there are some fascinating poll numbers we're seeing on the eve of this debate.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Yes, there are. The first presidential debate which was in Mississippi, the polling indicated it was won by Barack Obama by about 13 points. So, people said he did the better job in the debate.

This second debate here in Nashville is going to have a different format. This debate will be a town hall format. Some of the questions will be asked by the moderator, but many of them will be asked by members of the audience. This is an audience of uncommitted voters, carefully selected as uncommitted voters. John McCain may do better in this kind of format. He's very used to the town hall format. He holds town halls all the time.

But these debates, town hall debates, are often very telling, they often provide the most dramatic moments in a campaign. We remember back in 1992 in a town hall debate, a woman asked a question about the national debt, which appeared to confuse the Republican candidate George Bush, the first George Bush, and Bill Clinton went up to the woman, looked her straight in the eye and tried to talk to her directly about her concerns and her issues. Well being able to relate to voters and their concerns very important in a town hall. And one other thing. If either of the candidates tries to go negative when you're with an audience of ordinary voters, they don't like it. We've heard them sometimes get very upset when the candidates start attacking each other, so that's going to be hard to do in a town hall format. Wolf?

BLITZER: The base on both sides, they like that negativity debate sometimes. The moderate middle, as they say, the Independents not necessarily so much. All right, Bill, stand by. Up next, we're going to get reaction from our political panel on this increasingly nasty war of words between the McCain and Obama campaigns.

BLITZER: Lots of news going on today, right here on LATE EDITION.

(COMMERCIAL BREAK)

BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. We watched Joe Biden and Sarah Palin debate last week, but elections are seldom decided by the vice presidential candidates. This coming Tuesday, we return to the main event, as John McCain and Barack Obama face off for a second time.

To preview that, and a lot more, we're joined now in the studio by three of the best political team in television. Our senior political analyst Gloria Borger, our senior political correspondent Candy Crowley, and our White House correspondent Ed Henry.

Candy, this whole notion of an "October surprise," we're in the final month now before November 4th. How concerned are both of these campaigns about what they call an October surprise?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: You know, I think that's more mythology than it is anything else. I think the surprise probably was more a September surprise, and that was the economy. I don't see anything changing that story line.

I mean, obviously, you can have some outside force, you know, something happen overseas, something else to happen at home but, you know, it was September. I don't think they're all that worried about October surprises at this point.

BLITZER: And the McCain-Palin effort to revive Obama's connections with William Ayers and Tony Rezko, maybe even the Reverend Wright, how significant of a maneuver is that?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, it's important to them because they have to, as they call it, turn the page. And while the economy has been the key issue, that has been of great news to Barack Obama. He beats John McCain in polls -- in head to head polls on who is better able to handle the economy.

What they still have to do is create that question of risk, is he safe enough to be president? Do you trust him? And so, what they're trying to do is chip away at the character of Barack Obama.

Some people, some Republicans I talk to say, no, John McCain has to show that he can manage the economy, that he can't spend all his time chipping away at Barack Obama, but right now that's what the campaign is doing.

BLITZER: It's interesting, also, Ed, that the Obama-Biden campaign, they've got a new pre-emptive ad that they've just released within the last half an hour or so. I'm going to play a little clip. Listen to this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Three-quarters of a million jobs lost this year, our financial system in turmoil, and John McCain erratic in crisis, out of touch on the economy. No wonder his campaign wants to change the subject.

(END VIDEO CLIP)

BLITZER: All right. Is that going to be a successful strategy? Because they've learned, I think, the lessons of 2004, of 1988, when there were Democratic presidential candidates who didn't respond as quickly to some of the attacks.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Learning the lesson of 2004, John Kerry getting burned for not responding to personal attacks, but also learning the lesson, maybe, of 1992, "it's the economy, stupid."

I mean, if Obama can just keep coming back to -- no matter what is thrown at him, the economy, the economy. As Candy said, the dynamic has changed dramatically in the last couple weeks because of the financial crisis.

One quick point, look where Sarah Palin is going tonight. They added a stop. She's going to Nebraska. When was the last time a Republican presidential or vice presidential candidate in the final 30 days had to go to Nebraska? Name it. Nobody...

BLITZER: Very interesting, they're both fighting for Nebraska and for Maine, for the simple reason that those are two states where they divide up their electoral votes based on congressional districts. And there's one congressional district in Nebraska the Democrats think they have a shot at. There's a Democratic -- there's a district in Maine where the Democrats think they have a shot at. So, that's why he has to go out to Nebraska. Because this could be a really close electoral contest.

CROWLEY: Yes, it could be. You know, I mean, look, right now we're beginning to see the polls. They do gel at this point. I mean, we're now going into things with a two in front of how many days left, right? I think we're going to move into...

BORGER: But who is counting, right?

(CROSSTALK)

(LAUGHTER)

CROWLEY: Yes, but, you know, look, I wanted to just go back to John McCain for a minute, because I think he has to do both of these things. He does have to chip away, and he doesn't have to create doubt about Barack Obama. There already is some to build on, so they absolutely have to do that. Maybe that's the Palin job. But he has also got to make some argument for why him. So he is really...

BLITZER: On the economy.

CROWLEY: Yes, absolutely.

(CROSSTALK)

BLITZER: The fact that they both voted, McCain and Obama, for the bailout package, does that sort of take that issue off the table?

BORGER: It does. It's kind of interesting. Because of course the bailout package had $100 billion in so-called earmarks in it, which would have been an interesting opportunity for McCain to take, but he didn't. So -- for whatever reason. So, they are both for it, so that kind of takes that off the table.

But to follow up on Candy's point, they're both trying to prove that the other candidate is riskier, and so in that ad when they quoted the word "erratic," that's the word -- that's the buzzword in the Obama campaign about John McCain, and McCain is trying to show that Obama is not safe either.

BLITZER: How sensitive are they? You were out on the campaign trail with the McCain folks in the past few weeks. How sensitive are they? How worried are they about this erratic charge that, you know, he's sort of erratic?

HENRY: In a word, right? I think they kind of dismiss it. They think that the Obama camp is just throwing that out there. And they don't take it too seriously, they think it's an attack going back and forth. But I think where Sarah Palin fits in here, as Candy pointed out, is a big deal.

And while you still -- people vote on the top of the ticket, you have to wonder, when they're throwing out charges now on the McCain side that Obama, you know, has these associations or connections, you wonder if they're starting to regret sort of almost taking the experience thing off the table.

In the summer, the McCain camp was gaining a lot of ground by saying this guy is risky, he is untested. And that sort of went off the table when Sarah Palin was picked. I was on the campaign trail with her yesterday in California, she is very positive for this ticket in terms of getting people out there, the energy is incredible.

Friday -- Saturday in California, much bigger crowd in an outdoor arena for Sarah Palin. Day before that, I was in Colorado with John McCain, much smaller indoor crowd. He cannot get the same crowd.

So she has got an excitement out there. We've seen that over and over. But on the other hand, they sort of took the experience off the table in terms of nailing Obama day in and day out that he is not ready. And I wonder in the long run whether they'll regret that.

BLITZER: Yes, well, we'll know on November 4th if they'll regret that. But what do you think?

CROWLEY: Absolutely -- well, I mean, one of the things this ad reminds me of is that Barack Obama has said all along on the campaign trail, particularly when it came to foreign policy, well, if John McCain would like to debate foreign policy, I'd be glad to debate judgment and temperament. That has always been something that they have really dug at.

And it's just sort of out there, you know, John McCain, is he tempt remittal, is he this? And I think McCain did himself no favors this week with that Des Moines Register ed. board interview where he got very testy.

And he's not following his own lesson learned. He said, after 2000, people don't vote for angry candidates. He knew that. He knew that was one of the reasons he lost in 2000. And in this (INAUDIBLE), I think he has got to be really careful on Tuesday in going forward.

BLITZER: Good point. All right. Stand by, guys. We have a lot more to talk about with our political panel.

Also coming up, "In Case You Missed It," highlights from the other Sunday morning talk shows. We'll be right back.

(COMMERCIAL BREAK)

BLITZER: We'll get back to our political panel in a moment, but first in case you missed, let's check some of the highlights from the other Sunday morning talk shows here in the United States.

On CBS, the House Republican Whip Congressman Roy Blunt responded to a new Obama campaign ad that describes John McCain as being erratic during the bailout negotiations.

(BEGIN VIDEO CLIP)

REP. ROY BLUNT (R), MINORITY WHIP: He was in contact with me every day about who he could call, who he could talk to. I think he came back and changed the discussion. I didn't see him as erratic at all. In fact, I saw him as very purposeful, very selfless in what he was trying to do.

(END VIDEO CLIP)

BLITZER: On ABC, Minnesota's Republican Governor Tim Pawlenty, who's backing John McCain and Pennsylvania's Democratic Governor Ed Rendell, who's supporting Barack Obama, they assessed the candidates' chances in their respective battleground states.

(BEGIN VIDEO CLIP)

GOV. TIM PAWLENTY (R), MINNESOTA: It's entirely plausible for a Republican to win, and particularly the kind of Republican Senator McCain is, a maverick, populist, straight talker. I think those kinds of values and approaches sell well in the upper Midwest. He's going to be here this week. So I'd still say there's an advantage or it leans to the Democrats, but Senator McCain could win here.

GOV. ED RENDELL (D), PENNSYLVANIA: The economic crisis changed everything in Pennsylvania. It started getting people focusing on the issues. And when they focus on the issues here, they conclude that Senator Obama's plans are much better for their families.

(END VIDEO CLIP)

BLITZER: Highlights from the other Sunday morning talk shows here on LATE EDITION, the last word in Sunday talk. This programming reminder -- don't miss "Beyond the Politics," a CNN special hosted by our political contributor Bill Bennett. That airs tonight at 8 p.m. Eastern, only here on CNN.

Up next, Tina Fey once again as Sarah Palin on "Saturday Night Live" last night. If you missed it, we'll have a clip and our panel will discuss.

(COMMERCIAL BREAK)

BLITZER: We're back with three of the best political team on television, Candy Crowley, Ed Henry and Gloria Borger. "Saturday Night Live" last night, roll the tape.

(BEGIN VIDEO CLIP)

QUEEN LATIFAH, ACTRESS: How will you solve the financial crisis, being a maverick?

TINA FEY, ACTRESS: You know we're going to take every aspect of the crisis and look at it and then we're going to ask ourselves what would a maverick do in this situation? And then, you know, we'll do that.

(END VIDEO CLIP)

BLITZER: All right, serious question. Gloria, very funny, but how much does this hurt? I assume it does hurt, all the satire, all the comedy about Sarah Palin. How much does it hurt the McCain campaign?

BORGER: Well, I think what happens was she started out very high and then the descent got very steep. And you saw that in the polls, that a majority of the people questioned whether she can serve as vice president. And I think, you know, she did fine in the debate. She didn't embarrass herself, as lots of people said after those Katie Couric interviews. I think there was a lot of question about that, but now she'll go back to being a vice presidential candidate and help rally debates.

BLITZER: Candy?

CROWLEY: Absolutely it hurts. You know, we should go back to those polls about where people get their news. But, look, Letterman, "Saturday Night Live," Leno, Jon Stewart, all those things hurt.

BLITZER: Do you agree?

HENRY: A little bit. If he picked Mitt Romney or Tim Pawlenty, I think we would all agree it wouldn't be on "Saturday Night Live." It's pretty hard to kind of pick fun. She's being lampooned in a way that probably does hurt. I still, though, think there are people around the country that are connecting with her when I go out on the trail and see that. And I think they get angrier when they see "Saturday Night Live" do that and they see us talk about it. And I do think there's a little bit of a disconnect where there are people out there who are kind of feeling kind of sorry for her a little bit, feeling like it's a pile-on right now.

BLITZER: Just like the liberal elite media or whatever. All right, guys. We're going to leave it right there. Remember, Tuesday night, we'll be working. We've got a big debate, the second presidential debate. This additional programming note -- Fareed Zakaria sits down with the former Microsoft CEO Bill Gates. That's coming up in a couple minutes, right at the top of the hour. LATE EDITION continues right after this.

(COMMERCIAL BREAK) BLITZER: You can always get our podcast if you miss some of the show. Go to our Web site and there it will be. That's your LATE EDITION for this Sunday, October 5th. Please be sure to join us again next Sunday and every Sunday at 11 a.m. Eastern for the last word in Sunday talk. Remember, we're also in "THE SITUATION ROOM" Monday through Friday from 4:00 p.m. to 7:00 p.m. Eastern. Until tomorrow, thanks very much for watching. I'm Wolf Blitzer in Washington. "FAREED ZAKARIA GPS" starts right after this.

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