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CNN LARRY KING LIVE

Report Says Palin Abused Power; The Effect of Negative Campaigning; Will Voter Registration Fraud Hurt the Democrats?

Aired October 10, 2008 - 21:00   ET

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


LARRY KING, HOST: Tonight, anger and insults -- and here they go again.
(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESUMPTIVE NOMINEE: It's easy to rile up a crowd by stoking anger and division, but that's not what we need right now in the United States. The times are too serious.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: But he never answers the serious and legitimate questions he's been asked.

(END VIDEO CLIP)

KING: Is that what we're in for the next 25 days, as the economy spins out of control?

Plus, scandal in the making -- could claims of voter registration fraud damage the Democrat's chances?

We've got an exclusive with the organization under investigation.

And candidates as comic relief.

(BEGIN VIDEO CLIP FROM "SATURDAY NIGHT LIVE," COURTESY NBC)

UNIDENTIFIED MALE: Here's my initial. I would continue what I've done for 25 years, which is to reach across party lines -- something that pea pants over here

(LAUGHTER)

UNIDENTIFIED MALE: ...would never even consider.

(END VIDEO CLIP)

KING: The hits just keep on coming -- Funny or going too far?

(BEGIN VIDEO CLIP FROM "SATURDAY NIGHT LIVE," COURTESY NBC)

UNIDENTIFIED MALE: Your time is up.

UNIDENTIFIED MALE: If I could, this is a really interesting story.

(END VIDEO CLIP)

KING: All next on LARRY KING LIVE.

Good evening.

We begin with breaking news about Sarah Palin and the investigation into her firing of Alaska's public safety commissioner. A state legislative committee has found the governor abused her authority when she dismissed Walter Monegan, but violated no laws in doing so.

Also making headlines, Treasury Secretary Henry Paulson says that for the first time since the Great Depression, the United States will buy an ownership in a broad variety of banks. This news comes as the Dow closed out with its worst weekly point drop in history.

We'll start with the news about Sarah Palin.

Let's meet our panel.

In San Antonio is Joe "Pags" Pagliarulo, the radio talk show host.

In Los Angeles here with us also is radio talk show host, Stephanie Miller.

In Washington is Jonah Goldberg, editor-at-large, the "National Review Online."

And also in Washington, old friend, Lanny Davis, Democratic strategist, served as special counsel to the president during the Clinton administration. He is a supporter of Obama, as is Ms. Miller.

Mr. Goldberg and Joe Pagliarulo are supporters of McCain.

We might start with Lanny, since he's a lawyer.

OK, how can she be guilty of something but not guilty of something?

LANNY DAVIS, DEMOCRATIC STRATEGIST, SUPPORTS OBAMA: Well, first of all, the abuse of power finding is very serious for an elected executive. The Constitution and precedent suggests that abusing governmental power are grounds for impeaching a president. I suspect they would be grounds in Alaska.

So the abuse of governmental power is a serious offense for an elected official. You don't have to violate criminal law in order to be impeached.

If she abused her power, that's very, very serious.

KING: So it doesn't have to be illegal? DAVIS: Correct. And that's the long held precedent in any impeachment cases. It's abuse of governmental power that can cause the impeachment.

Now, why they're withholding 1,000 pages -- this is a special counsel who made these findings. The charge of partisanship is ludicrous. This special counsel made findings that he looked at the evidence. But for some reason, the political forces decided to withhold 1,000 pages of the underlying documents.

Now, I can imagine, having been in the Clinton White House, that had the Clinton White House held back a thousand pages of documents -- we were always accused of nasty things by holding back one page.

KING: All right...

DAVIS: So this is a very mysterious development.

KING: Pags, does it concern you?

JOE "PAGS" PAGLIARULO, TALK RADIO HOST, SUPPORTS MCCAIN: Well, it concerns me that I don't understand exactly -- just, it's the same thing you said off the top, Larry -- how can this be an abuse of power, which is, in fact, an offense. I mean I looked it up on Google right before the show when this thing broke. And it appears to be against the law.

How can it be against the law when she did what she's allowed to do?

As the governor of that state, she is within her rights to fire anybody who is in an appointed position. She fired the guy. They still had this hearing. And holding back a thousand pages, I'm not sure if we think that they're holding it back to help her or to hurt her.

I think the bottom line is this is a non-story right now. I mean somebody said -- there was a panel that said that this was an abuse of power and it's a panel that also said but she's allowed to do that all she wants, so have a nice day.

KING: Stephanie, why are you -- why do you mock?

STEPHANIE MILLER, TALK RADIO HOST, SUPPORTS OBAMA: I don't mock. I'm just saying it's the top story on CNN. It's breaking news. And in Joe's world, it's a non-story.

You know, as Lanny said, abuse of power is a serious -- the fact that she could not only be vice president, but then be impeached as governor of Alaska is a pretty big story. You know, I give you President Bush Exhibit A, Abuse of power, who has not been impeached yet, but could be.

KING: Jonah, what's your read?

JONAH GOLDBERG, EDITOR-AT-LARGE, "NATIONAL REVIEW" ONLINE: I think this is all pretty silly. The reason why it's breaking news and the top of Larry King is because it just happened, not because it's all that important.

No one here knows, and I guess including Lanny, whether or not this meets the bill for impeachment, according to the constitution of Alaska. And if we're going the bring up the Clinton standard, in the Clinton years, the response always was abuse of power is this obscure sort of thing. He didn't break any laws, that's all we care about.

It sounds to me that this was a political enterprise. They came out with a compromise where they basically said she broke no laws, but we don't want to seem like a whitewash because we have Obama supporters on the investigating parties. And so what we're going to do is we're going to say she did something wrong, even though she broke no laws.

KING: Lanny...

MILLER: Larry, can I just say...

KING: All right, hold it.

Go ahead.

DAVIS: (INAUDIBLE)...

MILLER: Can I just say...

KING: Hold, Lanny.

MILLER: ...how can this be an abuse...

DAVIS: Larry...

MILLER: ...how can this be -- this was started by Republicans, Jonah, and Democrats in Alaska.

How is this suddenly a partisan thing?

GOLDBERG: I said there were partisans on it...

MILLER: You know, if I said to someone from the RNC...

GOLDBERG: ...and this is the way they got a compromise.

MILLER: ...you couldn't find someone completely unqualified that wasn't under investigation to run for vice president?

DAVIS: Let me agree with...

MILLER: This is ridiculous.

DAVIS: Let me agree with Jonah that we don't know what the Constitution of Alaska -- at least right now I don't know, but abuse of governmental power -- and we aren't disagreeing on that -- is a serious offense for an elected official, can (INAUDIBLE)...

PAGLIARULO: Larry, if I may comment, too? DAVIS: And, in fact, in the Clinton White House...

KING: One at a time.

DAVIS: ...that I'm familiar with, we never said that abuse of power was not an impeachable offense. We said that the actions that were taking place involved private conduct...

KING: Was...

DAVIS: ...not abuse of power.

KING: Lanny, hold it.

Was there a violation of ethics law here?

DAVIS: Well, what we found in...

KING: Apparently not.

DAVIS: ...in the findings is abuse of power would be a violation of ethical considerations that a governor who is not denying that she had caused phone calls by her staff -- multiple calls to be made calling for the resignation of this trooper, who was involved in a family dispute. She's never denied that. And all the other factual issues here stand for what they are.

But I do think that it should be a non-issue in this campaign because, as we will discuss, the great issue facing this country, this economic crisis, should be the main focus of the campaign.

KING: Yes. And I agree.

And we'll hear lots more of this as go on.

But let's move to the economy. It remains the number one issue. Both Obama and McCain had it on their agendas as they campaigned today.

Here's a sample.

(BEGIN VIDEO CLIP)

OBAMA: I know John McCain's worried about his campaign. But that's not what I'm worrying about. I'm thinking about Americans losing their jobs and their homes and their life savings. I'm worried about folks who started off with a 401 (k) and now they've a 101(k). (END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MCCAIN: In so many ways, Washington is still on the wrong track. We need change. We need change and I know how deliver it. The status quo is...

(APPLAUSE) MCCAIN: ...the status quo is not on the ballot. We're going to see change in Washington.

The question is in which direction will it go?

(END VIDEO CLIP)

KING: Pags, is it going to get worse?

PAGLIARULO: No, I think it's going to get better if John McCain gets elected. And I think the reason why is we can look at the example of Ronald Reagan. The last thing you want to do is raise taxes on anybody if you're in an economic downturn like this. It doesn't make a whole lot of sense. And Obama is very funny with the 401(k) to a 101(k). That's like somebody saying that Sarah Palin isn't qualified without saying why she's not qualified.

The bottom line here is the economy is down, people are scared.

But you know what, I just refinanced a car yesterday, Larry, and I got a much lower rate than I had before that. The economic times are bad for 6 percent of people who aren't paying their mortgages on time. You and me, we're paying our mortgages on time. It's bad for 6.1 percent of people who aren't working. Ninety-four percent of us have jobs and we're holding onto jobs. Barack Obama wants to tax people like us.

KING: I thought he said...

PAGLIARULO: He wants to tax our eyeballs out.

KING: Wait, wait, hold it, hold it. He said he wants to lower taxes on 95...

PAGLIARULO: Well, he says he wants to lower...

KING: So why are you discounting that?

PAGLIARULO: Well, I'm not discounting it. What I'm saying...

KING: Well, that's what he said.

Are you saying he's a liar?

PAGLIARULO: I'm saying that he is going to raise taxes on corporate America and people making $250,000 a year and more.

KING: Right.

PAGLIARULO: Those are the people that hire people, Larry. Those are the people that -- if you raise their taxes, they're not going to pay the higher taxes. The consumer is. And the employees possibly could lose their jobs.

KING: Let me get a break and come right back. Don't miss your chance to take part in this very show. Go to our blog at CNN.com/larryking right now and tell us what you think or what you'd like me to ask our guests.

It's our newest interactive Web feature.

When we come back, John McCain just defended Barack Obama. This you've got to see, and we'll show it to you next.

(COMMERCIAL BREAK)

KING: We're back with our panel.

Emotions have been running very high at some McCain-Palin events. And McCain seemed to try to dial things back earlier today at a town hall meeting in Minnesota.

Watch and then we'll get our comments.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I've got to ask you a question. I do not believe in -- I can't trust Obama. I have read about him and he's not -- he's a -- he's an Arab. He is not...

(CROSSTALK)

UNIDENTIFIED FEMALE: No?

MCCAIN: No, ma'am. No, ma'am. He's a decent family man, a citizen that I just happen to have disagreements with on fundamental issues. And that's what this campaign is about. He's not. Thank you.

(APPLAUSE)

UNIDENTIFIED MALE: Frankly, we're scared. We're scared of an Obama presidency.

MCCAIN: First of all, I'd want to be president of the United States and obviously I do not want Senator Obama to be. But I have to tell you, I have to tell you, he is a decent person and a person that you do not have to be scared as president of the United States. Now, I just...

(BOOS)

MCCAIN: Now, I just -- now, look. I -- if I didn't think I wouldn't be one heck of a lot better president, I wouldn't be running, OK. And that's the point.

(END VIDEO CLIP)

KING: Do you think, therefore, Stephanie, he has felt the effect of negative campaigning and is trying to right the wrong?

MILLER: Yes, Larry. This is no coincidence that, you know, the new "Newsweek" poll, among others, came out today showing that this is backfiring big time. Barack Obama is up double digits in the "Newsweek" poll. His favorability rating is going up. John McCain's is going down.

Now, John McCain is growing a conscience after rallies that frankly, are frightening -- cries of "Terrorist!" and "Kill him!" The Secret Service had to investigate someone that yelled "Kill him!" at a Palin rally.

This is not a coincidence. When they're -- when the leaders are espousing the kind of rhetoric they are...

KING: Jonah...

MILLER: ...and the ugly stuff that's being shouted at these rallies.

KING: Jonah Goldberg, does it concern you and is it smart for him to back down a little here?

GOLDBERG: Well, I mean, no one likes people who are yelling racial epithets or yelling "Terrorist!" and all that kind of stuff. And I think that's sort of silly.

I think McCain did the right thing in sort of trying to -- trying to correct what the facts are. I don't think he should have said you have no reason to be scared of Barack Obama being president. I think he could have said you have no reason for being scared about him being a terrorist or being, you know, an Arab or any of those things.

You know, what's going on with the Republican Party right now is there's enormous frustration with how, you know, badly the McCain campaign has been doing and how badly managed it seems to be, to a lot of people. And how McCain himself doesn't seem to want to win it. And that frustration has come out in places.

But I think the story line that we're getting -- first of all, that "Newsweek" poll is sort of silly. It has an enormously absurd sample of Democrats over Republicans in it. But generally speaking, you know, what is driving -- what is driving a lot of Republicans crazy is they see the press not doing anything in terms of pushing back on Obama's record. They don't see the McCain campaign being aggressive enough. And they see this as essentially a coronation. And they're getting very frustrated with it.

And this guilt by association stuff by a few hotheads in these crowds when you had, you know, Barack Obama's campaign saying that Sarah Palin was a Nazi sympathizer because she had a Pat Buchanan button on once, even though she was a Steve Forbes guy.

But a lot of this stuff has been going on both ways. But it only gets this is kind of coverage when it's -- when it hurts McCain.

KING: All right, Lanny, you want to comment?

DAVIS: Well, I may surprise everybody here. First of all, I disagree with Stephanie that anything should be associated with Senator McCain because of a few crack pot bigots in the audience. We'd resent it if somebody said that about people who are the fringe elements of our audiences.

And, secondly, I appreciate the John McCain that we just saw. I've appreciated him ever since 2000. On a personal level, I've had that experience with him. My best friend is Joe Lieberman, who's supporting him.

I'm a strong supporter of Barack Obama because of Barack Obama's positions on the issues. And what John McCain has just done is remind us that you can differ with somebody on issues and present a choice. And John McCain is a good conservative. And he does have the ability to present a choice.

But I'm for Barack Obama because he's talking about constructive solutions for the country. And that's where the debate should be.

KING: All right. We've got to get a break.

Could claims of voter registration fraud damage the Democrats' chances?

Back with a report in 60 seconds.

(COMMERCIAL BREAK)

KING: Let's go to Atlanta, to Drew Griffin, correspondent with the CNN Special Investigations Unit.

He's looking into this ACORN story.

What's it all about?

DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT:

Larry, we went into Lake County, Indiana. This is a heavily Democratic county in a red state of Indiana. It's a state that Barack Obama wants to win, wants to turn blue this election.

ACORN, the community activist group, has had a major registration drive across the country and thought to be very successful -- 1.3 million new voters.

But in Lake County, that whole stack there -- that whole stack of voter registration records turned in by ACORN, every single one of them so far, Larry, has turned out to be fraudulent -- 2,100 out of a stack of 5,000. And they haven't even looked at the other 2,900 yet. And these are not -- these are not mistakes, not boxes not checked. And they're actually frauds -- wrong signatures, one person fills out a bunch of different ones, another one registered to a sub sandwich shop, dead people being registered to vote.

It's what the bipartisan group in that election commissioner's office is calling just pure fraud in these registrations turned in by ACORN. KING: How widespread?

GRIFFIN: Well, in -- you know, in many different states now -- we've heard about Nevada just this week and several other states where these ACORN registration drives have a lot of fraudulent registrations turned in.

Now we have to point out, these are voter registration fraud. There's no allegations of voter fraud yet, because these people aren't voting yet. But this registration drive by ACORN

is fraught with problems across the country.

KING: All right.

Thanks very much, Drew.

You'll be staying right on top of it.

And we'll hear from the chief organizer of ACORN, right after this.

(COMMERCIAL BREAK)

KING: Before we get back with our panel, let let's go to New Orleans and meet Bertha Lewis, chief organizer of ACORN, the Association of Community Organizations for Reform Now.

Bertha, what do you make of what we just heard, of all these kind of whacko registration forms?

BERTHA LEWIS, CHIEF ORGANIZER, "ACORN":

Well, I think they're whacko allegations. The fact of the matter is we have registered over 1.3 million new voters. And we've registered them in over 21 states. Sixty to 70 percent of them are people of color. Half of them are folks under 30.

So this is a huge, huge effort that people ought to be excited about. I mean this is the most patriotic thing you can do, to register people to vote.

KING: What -- but, Bertha...

LEWIS: ...and just because you have allegations, doesn't make it true.

KING: What do you make of what Drew Griffin just reported, though?

It should concern you. He's an able reporter. It's a strong investigative unit. They've looked at all these things.

Aren't you worried, concerned?

LEWIS: Oh, I'm not worried whatsoever, because here's why. First of all, in every county, when you register voters, you've got to turn in every single card, no matter how weird or whacko it may appear. That's the law. We train our voter registration workers. We try to verify those people who've registered three times on the phone.

If we can't, guess what?

We flag them, we tag them, we bundle them, turn them into the authorities and any worker that we suspect has been turning in false cards, we turn in that worker's information to the law enforcement officials.

So it is a little peculiar that we've been doing this for 18 months, we turn them in every two weeks. And I guess they're trying to make it appear as if all of these just showed up at once.

But you know what else is good?

The system actually works, because any new voter is going to have to come and show their I.D.

KING: That's true.

LEWIS: That's true.

KING: And you register -- do you register Republicans, too?

LEWIS: We don't care who you are register as. We are nonpartisan -- Democrat, Republican, Independent. We just want you to register. And once you register, we want to make sure that you're on the rolls and we want you to vote.

KING: OK.

Thank you.

Bertha Lewis, chief organizer for ACORN.

Is this much ado about nothing, Stephanie?

MILLER: Absolutely, Larry, particularly with the black voter suppression the Republican Party has engaged in in 2000 in Florida and then 2004 in Ohio. This is a story they hoped the media would bite on, and it did.

As Bertha just said, they're the ones that brought these registrations forward. If they're fraudulent, they won't be able to vote. It's a non-story.

KING: Because you have to bring whatever they fill out?

MILLER: Yes.

KING: Pags, do you think it's a story?

PAGLIARULO: Oh, I think it's a big story. When you've got over 40 percent in a stack of 5,000, Larry -- 40 percent. My goodness. I couldn't be wrong 40 percent and keep my job.

When you've got that many that are fraudulent -- proven fraudulent by a CNN reporter, I think that it's something to take a close look at. And there are many, many more that haven't gone through yet.

You know, in Nevada, it's interesting. My radio station in San Antonio is the Dallas Cowboys radio station. Some Dallas Cowboys players, I guess, stopped the season, went out to Nevada and registered to vote through ACORN. And now they're registered in Nevada.

That's another -- another way that this was red-flagged.

Look, this is a big, big story. I want everybody to be able to get their vote, but let's not make stuff up.

KING: OK, Jonah, what do you make of it?

GOLDBERG: Oh, I thought Bertha was charming and lovely and lying through her teeth.

(LAUGHTER)

GOLDBERG: I think that...

KING: Lying?

GOLDBERG: Yes. I mean, look, first of all, ACORN is a well- established, very radical, left-wing organization. You don't have to take my word for it. Look in almost any mainstream newspaper -- "The New York Times," "The Washington Post," and just read the articles about ACORN. They have been reigned down with indictments all over the place. They have deep ties to the Obama campaign, who is a -- who ran leadership training seminars for ACORN-affiliated groups. He was their lawyer in the 1990's. He spent hundreds of thousands of dollars for them -- on them to mobilize voting drives in Ohio in the primaries. It's deeply tied to the Democratic Party.

The idea that somehow it's this nonpartisan group that signs up Republicans and all the rest, it's just total nonsense.

KING: OK, Lanny?

DAVIS: Well, I just heard a lot of innuendo, but very little fact. If there is fraud, then those people who committed the fraud, those workers, as I just heard the lady from ACORN say, should be arrested and convicted. But they haven't been convicted of anything yet. And so your reporter using the word fraud, this is still evidence.

But what troubled me, she should have denounced it strongly. And I think she was saying that they flag it and she would not countenance any worker who they found to be committing fraud.

To then take that as if there's some conspiracy going on here -- and, of course, people being indicted means nothing. You can indict a ham sandwich, Jonah. So we both realize that right now, the evidence in that stack looks pretty bad. But I don't know how you can extrapolate that to the 1.1 million.

Let's wait for the facts to come in before we rush to judgment.

But if it's fraud, Larry, they ought to be arrested and have a fair trial.

KING: And we'll be right back with our panel. Lots more to discuss. We'll discuss this William Ayers factor.

And what was Sarah Palin up to today?

We'll have that and more political news of the day right after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCCAIN: How many times, my friends, have the pundits written off the McCain campaign?

We're going to fool them again. We're going to fool them one more time.

(APPLAUSE)

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

OBAMA: The American people aren't looking for someone who can divide this country, they're looking for somebody who will lead this country.

(APPLAUSE)

(END VIDEO CLIP)

KING: Keep blogging on our interactive forum at CNN.com/larryking. You can download our current pod cast of Michelle Obama.

The McCain campaign launched another TV ad that tries to link Obama to the radical William Ayers. It's titled "Blind Ambition."

Watch.

(BEGIN VIDEO CLIP FROM JOHN MCCAIN FOR PRESIDENT CAMPAIGN AD)

UNIDENTIFIED FEMALE: Obama's blind ambition -- when convenient, he worked with terrorist Bill Ayers. When discovered, he lied. Obama -- blind ambition, bad judgment.

(END VIDEO CLIP)

KING: Is Bill Ayers a bad rap, Stephanie?

MILLER: Larry, I have to disagree with my friend Lanny Davis from earlier when he said that, you know, they cannot -- McCain and Palin can't be held responsible for these crackpots at their rallies yelling "Terrorist!" and "Kill him!" I absolutely disagree. When you have the vice presidential candidate saying that this candidate pals around with terrorists and then you're surprised when someone yells "Terrorist!" at a rally, then you're surprised when someone yells, "Kill him!"

My dad, who ran with Barry Goldwater in '64, would be rolling over in his grave, as would Barry Goldwater, who, by the way, was not a fan of John McCain.

This is the dirtiest gutter politics I have seen in my lifetime. This is a guy that did something when Barack Obama was eight.

What, his Big Wheel wasn't fast enough to keep up with him to stop him from setting bombs?

LARRY KING, CNN ANCHOR: Well, he went to -- he went to a breakfast, they served on the same commission, went to a breakfast...

MILLER: He went to -- he was on board with him. The board meets once year.

KING: All right.

MILLER: That's palling around with a terrorist?

KING: Pags, is the...

MILLER: That's ridiculous.

KING: In the charge made against Obama, is the implication that he supports terrorism? Is that what you're imply?

JOE "PAGS" PAGLIARULO, TALK RADIO HOST, SUPPORT MCCAIN: No, I think the implication is that...

KING: What is the implication?

PAGLIARULO: He has pretty bad judgment in who he chooses to be his friends. They weren't associates, they were friends. And as far as...

They were not friends.

PAGLIARULO: I'm sorry. Stephanie, I didn't interrupt you. I'm just trying to get out what Larry asked me to say.

At that rally earlier, the lady yelled out that -- or said that he was an Arab and that she was afraid of him. John McCain has never called Barack Obama an Arab, has never called him a terrorist. He -- stated a simple fact.

This man, Bill Ayers, was a guy who was a terrorist. A guy who says he was happy that he didn't -- wished that he did more. He's a guy that since he did that 40 years ago has not changed his politics whatsoever, yet for some reason, Barack Obama, one of the smartest men who we've ever seen run for office if you believe a lot of the rhetoric, did not look at -- look closely enough at the man in whom's home.

He started one of his political campaigns. He didn't look into this man's background enough to find out what he did 40 years ago. I don't care that Barack Obama was 8. I didn't say Barack Obama blew anything up. And neither did anybody else.

McCain certainly isn't saying that. But it's very important that we find out who these people are that he's been friends with for years and years. And there's no way he didn't know about Bill Ayers at some point, the Weather Underground, and what this guy who is helping him to dole out money in Chicago has in his background.

KING: But Lanny...

PAGLIARULO: It's not very smart if that's what he did.

KING: Lanny, wasn't he Chicago's "Man of the Year" a couple of years ago?

LANNY DAVIS, DEMOCRATIC STRATEGIST, SUPPORTS OBAMA: Yes. I don't get...

KING: I don't...

DAVIS: I don't get that and I agree with Senator Obama, describing his conduct, that he hasn't shown contrition about as detestable but having said something nice about Senator McCain and having had experience with that side of him, let me just say that what we saw in that commercial is the duplicity of the McCain campaign organization.

On the one hand, the candidate tries to take the high rode. On the other hand they use the word "liar" which is specifically a word that Senator McCain has renounced, that you can question somebody's judgment but don't o accuse them -- attack them personally.

So Senator McCain can't have it both ways and that is a slimy commercial, just as the commercial that accused Barack Obama of supporting teaching sex to kindergarteners. It's below contempt and McCain allowed that to happen because his campaign organization is putting this slime out and that's causing McCain...

KING: OK.

DAVIS: ... to go down in the polls.

PAGLIARULO: Larry, I'd to comment on that when you get a chance.

KING: Well, hold it.

Jonah, I'm going to show you something. Joe Biden pushed back against the McCain campaign's attacks on Obama several times this week. Here's an example, I'll have your comment.

(BEGIN VIDEO CLIP)

SEN. JOE BIDEN (D), VICE PRESIDENTIAL CANDIDATE: All these things they said about Barack Obama, in the rallies and on TV debate -- on TV before the debates, and all the things they're saying after the debate.

John McCain, if you noticed couldn't bring himself to look Barack Obama in the eye and say these things. Well, folks, folks, in my neighborhood, in my neighborhood, if you want to say something about me, look me in the eye and tell me. Say it to me.

(END VIDEO CLIP)

KING: Jonah, was that effective?

JONAH GOLDBERG, EDITOR-AT-LARGE, NATIONAL REVIEW ONLINE: It's good rhetoric. I mean Joe Biden is good at that stuff as long as there's not a fact checker around.

Look, at the end of the day I don't understand why Bill Ayers isn't relevant. And I can't imagine for the life of me a single liberal or Democrat who wouldn't think it was relevant if, say, John McCain had his first fundraiser for political office, sat on boards with an abortion clinic bomber, or a co-conspirator of Timothy McVeigh.

The idea that somehow this is beyond the pail or irrelevant to the public discourse is ludicrous, particularly when Barack Obama's story about his relationship with Ayers keeps changing.

And I'll tell you -- another relevance to this is that Barack Obama claims this to be bipartisan, he puts himself forth as a moderate, yet there is not an ounce of history to his record where he seriously challenged the left-wing base of his party or he has ever denounced people like Bill Ayers, or Jeremiah Wright or Bill Ayers' wife...

MILLER: What?

GOLDBERG: ... Bernardine Dohrn, until it became politically necessary while he was running for president. He's a very left-wing guy who's passing himself off as something that he's not and the press hasn't covered him properly.

MILLER: He had denounced strongly both -- Reverend Wright's comments and his...

GOLDBERG: Only...

(CROSSTALK) MILLER: And by the way, you don't have to stand up to your party when they're right one every issue. John McCain only has to stand up to his party...

PAGLIARULO: OK, come on.

MILLER: ... because they're wrong on every issue...

(CROSSTALK)

MILLER: ... and now he's flip-flopping on everything we had an agreement.

(CROSSTALK)

KING: Hold it. Quiet. We have an agreement. I'm going to get to break now and we'll calm down and return momentarily.

(COMMERCIAL BREAK)

KING: By the way, one other thing on the state -- on the Palin ruling with regard to the occurrence in Alaska, after reviewing the report and the statute, our latest report in this is CNN, the distinction is that she violated a part of the state Ethics Act. But the firing itself, was legal.

So, Lanny, just quickly, you're the lawyer. How can you violate an act but it's legal?

DAVIS: Well you're violating an ethics act that may not be criminal and may be a civil penalty, or, in any event, if it's abuse of power, it's usually seen as an impeachable offense but, again, Jonah is right, I haven't read the Alaska constitution.

KING: OK. We need to know more about this. CNN's national poll of polls shows Obama leading McCain now by 8 points. How much trouble is he in, Stephanie? McCain.

MILLER: You know, Larry, I think...

KING: From your perspective.

MILLER: Well, I think it's very telling. You know, people keep saying it's the economy that's affecting McCain. It is John McCain's reaction to the economy that's affecting him starting from the fundamentals are strong to the firing the SEC chairman to tying himself to this bailout that didn't work, to now this new mortgage plan that even the right is against. That is a total giveaway to banks.

He has had a complete spastic reaction to the economy...

KING: Pags...

MILLER: ... and it is showing in the polls.

KING: Pags, why is your man behind?

PAGLIARULO: Well, he is behind because, I think, he made a fundamental mistake here. By the way, the fundamentals of our economy are good, it's a capitalistic society, it's a free enterprise society. And the way that we go at work and collect our paycheck...

KING: You better spread that around.

PAGLIARULO: ... is the best in the world.

KING: Because there's a lot of unemployed people that don't agree with you but go ahead.

PAGLIARULO: No, but there are. There are. 94 percent of us are employed, Larry, so I -- hopefully...

KING: 6 percent is huge.

PAGLIARULO: I think the majority are on our side.

KING: You think 6 percent is not huge?

PAGLIARULO: 6.1 percent is high but compared to France...

KING: Huge.

PAGLIARULO: ... or compared it to -- well, Jimmy Carter that must have been immense. The bottom...

KING: Carter (INAUDIBLE) for president.

PAGLIARULO: I think that what John McCain did here...

KING: OK. Go ahead.

PAGLIARULO: I couldn't hear you there for a second. What John McCain could have done here is said no to the bailout. Period, end of story. He should have said no to it. He should have voted against it. He could have hung his feather and has capped on that.

The fact that he said OK to something that had earmarks or pork in it like Barack Obama did and anybody else, I think that that made him one and the same people in Washington just like Barack Obama is.

He could have could have separated himself and that's why, I think, he's been hurting.

KING: Lanny, what do you think?

DAVIS: It's pretty simple. Barack Obama and his views on the issues, his specific proposals and by the way, he would cut taxes on 95 percent of the American taxpayers. That's a fact.

He proposed in southern Ohio today that small business administration loans should be made available on an emergency basis to small businesses. And rather than subsidizing lenders at 100 percent of the mortgages he'd force lenders to take a hit and write down the mortgages and people getting back their homes with a refinance.

He's proposing specific solution that the American people support. He's ahead in the polls because he's been more positive and more specific about the solutions business rather than the attack business, or erratic behavior from Senator McCain when he came back to Washington for reasons I still don't understand, suspended his campaign for reasons I still don't understand, said he might not debate for reasons I still don't understand.

And I began to wonder whether he had this stable framework to be president that he used to convey to me that he had.

KING: Jonah, why is he behind?

GOLDBERG: Well, it's a good -- actually I agree with a lot of the things that have been said. I think he's gotten off his game. This economy story, you know, which is the story, (INAUDIBLE) and it's a terrible thing by my light, because I think he actually has the better policies on health care, on taxes, and all these things.

I should perk the record on this 95 percent tax cuts thing. It's a check that he's going to give to a lot of people who don't pay income taxes and he's going to call it a tax cut, which is slightly different thing.

But look -- one of the shocking things to me is actually not how bad McCain is doing but actually that he's in this race at all. I mean you look at the fundamentals around how much this is a Democratic year, how bad the economy is.

How effective they've been able, and I think fraudulently to tie McCain to George Bush, and the idea that these guys were like arm and arm for the last eight years, should strike anyone who even read "The New York Times" as crazy.

But regardless, if you look at how much people want to change, how much this is a change election, how much that cost Hillary Clinton in the primaries that they wanted to change election, it is amazing that McCain has kept it this close.

I -- actually think that if you actually look at likely voters as opposed to registered voters it's a lot closer than people think and we could actually see this thing tighten up a considerable (INAUDIBLE).

KING: OK. Thank you very much, Jonah Goldberg, Lanny Davis, good having you both with us. Stephanie and Pags will remain. Two other guests will join us and we'll be back in 60 seconds.

(COMMERCIAL BREAK)

KING: "Saturday Night Live" had a funny show on last night, "Weekend Thursdays." They, of course, pull no punches, satirizing the most recent presidential debate. Let's take a look.

(BEGIN VIDEOTAPE, SATURDAY NIGHT LIVE) UNIDENTIFIED MALE: All right, we've fallen a bit behind so we're going to pick up the pace. Our next question is from Mark Ledew(ph) and it's for Senator McCain.

MARK LEDEW, ACTOR: Senator McCain, while here in the U.S., our economy is suffering. In Iraq there's an economic boom. Shouldn't the government of that country reimburse us the cost of the war?

UNIDENTIFIED MALE: My friends...

UNIDENTIFIED MALE: Time. We'll go now to Susan Hawkins who has a question for Mr. Senator Obama.

Miss Hawkins, quickly.

UNIDENTIFIED FEMALE: Senator Obama, health care costs have exploded as a full-time...

UNIDENTIFIED MALE: Mrs. Hawkins, I'm sorry, your time is up.

We've almost no time left and I'd like to get both our remaining questions in so I'm going to ask David Kip and Dalton Cheeks to read them simultaneously.

(CROSSTALK)

UNIDENTIFIED MALE: Senators, your simultaneous responses.

UNIDENTIFIED MALE: That's an excellent question.

UNIDENTIFIED MALE: Thank you for that question, Dalton, and let me tell you something.

UNIDENTIFIED MALE: Let me say, teachers are too important for the future of this country.

(SIMULTANEOUSLY)

UNIDENTIFIED MALE: In a McCain presidency, no veteran will go without the (INAUDIBLE) needs. That's one.

UNIDENTIFIED MALE: So even in this outrageous situation, when I'm president...

UNIDENTIFIED MALE: ... I promise, as a maverick...

UNIDENTIFIED MALE: ... that will change.

UNIDENTIFIED MALE: ... the reform-minded talking...

UNIDENTIFIED MALE: And that's change.

UNIDENTIFIED MALE: Straight talking maverick.

(END VIDEO CLIP)

KING: We'll take a look at the politics of humor after a short break.

(COMMERCIAL BREAK)

KING: Before we meet our two new guests joining us, let's check in with Anderson Cooper. What's going to happen on "AC 360" tonight?

ANDERSON COOPER, CNN ANCHOR: Breaking news tonight on the campaign trail. An ethic's inquiry has found Alaska governor, Sarah Palin, did, did abuse her power as governor in the firing of the state public safety commissioner and violated an ethics law.

But the inquiry also says she violated no state law. This has been a big question mark looming over the McCain campaign for quite a while. So now the question is how it's going to play on the trail.

We'll talk to the best political team on television about that. And we're expecting in a reaction from the McCain/Palin campaign any moment. We'll bring that to our viewers also.

There's also breaking news on the financial front. Just over an hour ago, Treasury Secretary Paulson announcing the treasury will buy stock in distressed American banks. Another step in a long list of actions to try and save the economy.

All that plus the latest edition to our ten most wanted, the culprits of the collapse. We are naming names as to who exactly got us into this mess. Who's to blame? We'll tell you tonight.

Busy night, it starts at the top of the hour, Larry.

KING: Thanks very much, Anderson Cooper, "AC 360" 10:00 Eastern, 7:00 Pacific.

Joe "Pags" Pagliarulo and Stephanie Miller, two outstanding talk show hosts remain with us. We're joined now in New York by Nancy Giles, social commentator, actress, contributor to "CBS News Sunday Morning," a supporter of Barack Obama.

And here in L.A., David Zucker. He is director of a new film "An American Carol." It's a new film satirizing Michael Moore and left- wing politics. A former Democrat, he became a Republican after 9/11 and has done ads for the RNC during previous elections. He is a supporter of McCain.

What, David, is the impact of humor in politics now?

DAVID ZUCKER, DIRECTOR, "AMERICAN CAROL," SUPPORTS MCCAIN: Well, I hope it will just change things completely. And I'll -- you know with the release of "An American Carol," I think, you know, hopefully, McCain will shoot up, you know, the eight points that he needs.

KING: And it will go through the roof.

ZUCKER: And this is -- we're just going to...

KING: This is it. ZUCKER: This will be because of me.

KING: "Saturday Night Live," though, its impact?

ZUCKER: I think they have a big impact. I mean when they do something that's funny, it's funny. I mean when they did Sarah Palin and with Amy Poehler as Hillary, I mean, I thought it was really funny.

I mean I don't know if there's anybody on "Saturday Night Live" who really comes from the right who really writes there. But they -- they still do great biting things and as long as they can do it both sides.

MILLER: But David, what can you think of Sarah Palin who says she watched the sketch about her with the sound off. What comedian -- she doesn't get the whole joke because that she's a dope. That's the joke.

ZUCKER: Yes, but -- wait a minute, am I a dope for watching Larry King with the sound off?

KING: Yes.

MILLER: Yes. Yes. Yes, you're a dope.

KING: Before we ask Pags' opinion, Nancy, what the effect of the "Saturday Night Live" on the culture and on campaigns?

NANCY GILES, SOCIAL COMMENTATOR, SUPPORTS OBAMA: Well, I can tell you what the effect of it is on me, it's great stress reliever. And I love that they have these -- see, I started watching "Saturday Night Live" when it first began.

I mean I'm aging myself but I was a fan of it back then. And I haven't watched it regularly in quite a while. And to see this cast, a lot of them were new to me, nailing these characterization of Sarah Palin and Joe Biden, even Queen Latiffa did a good Glenn Ifill, the guy who does Barack Obama.

All the details and just all the craftsmanship and how they're acting it. It's great and to also see their skill in many cases using the exact lines of dialogue and lines of interviews where nothing necessarily needs to be written.

KING: Pags? I want Pags to comment. I want to show you a clip here.

GILES: Oh great.

KING: Comedian Sarah Silverman is the spokesperson for "The Great Schlep." That's a campaign organized by the Jewish Council for Education and Research. Here's a bit of her video effort, the idea to swing older Jews in Florida to vote for Obama.

Watch. (BEGIN VIDEO CLIP)

SARAH SILVERMAN, COMEDIAN: If Barack Obama doesn't become the next president, I'm going to blame the Jews. I am, and I know you're saying, like, oh, my god, Sarah, I can't believe you're saying this.

Jews are the most liberal, scrappy, civil rightsy group there are. Yes. That's true. But you're forgetting a whole large of Jews that are not that way and they go by several aliases. Nana, Papa, Zany, Bubby, plain old Grandma and Grandpa.

These are the people who vote in Florida. I'm making this video to urge you, all of you, to schlep over to Florida and convince your grandparents to vote Obama. It can make the difference.

(END VIDEO CLIP)

KING: Pags, what do you make of this whole humor thing?

PAGLIARULO: Well, you know, I don't know how funny that was. Sarah Silverman is funny sometimes. I didn't laugh at that. But, you know, she's trying to get people excited to go and vote.

I mean, as far as "Saturday Night Live," goes, I go back with Nancy. I've been watching it from the very beginning.

GILES: Right.

PAGLIARULO: I've always gotten a good laugh out of it. But I feel as though they've been very one-sided. There are so many...

GILES: Do you really?

PAGLIARULO: ... great comedy bits that were ignored here when people are calling Barack Obama Jesus Christ, you could have him water to wine, you could have him walk on water. I mean there were so many funny things that they avoided, I feel as though they've been unbelievably partisan.

But it's their right. I mean it's funny every once and a while. I didn't think Sarah Silverman is going to make much of a difference in Florida, though.

KING: OK. Let me get a break and come back with more.

GILES: OK.

KING: The McCain campaign, by the way, has reacted to the Palin report. We'll have it for you right after the break.

(COMMERCIAL BREAK)

KING: We have a statement from the McCain campaign on the Palin report.

Quote, "Today's report shows that the Governor acted within her proper and lawful authority in the reassignment of Walt Monegan. The report also illustrates what we've known all along. This was a partisan-led inquiry run by Obama supporters and the Palins were completely justified in their concern regarding Trooper Wooten given his violent and rogue behavior,

Lacking evidence to support the original Monegan allegation, the legislative council seriously overreached and making a tortured argument to find fault without basis in law or fact.

The governor is looking forward to cooperating with the personnel board and continuing her conversation with the American people regarding the important issues facing the country."

That's the response from McCain to ruling today by the legislative board in Alaska.

Here's a clip of David Zucker's new comedy, "An American Carol." It arrived in theaters across the country last Friday. Watch.

(BEGIN VIDEO CLIP)

TRACE ADKINS, ACTOR: What? You do not want to mess with the Angel of Death. Listen, punk, there are consequences for what you do. Let's go.

KEVIN FARLEY, ACTOR: Good, we get another field trip. Can we go some place cool this time like Paris or Hollywood?

ADKINS: Now that's a good idea.

FARLEY: What's going on here? Where are we?

ADKINS: Hollywood, just like you wanted, only now it's called bin Laden City.

FARLEY: My god.

ADKINS: Yes, they kept all the buildings, just changed the signs.

FARLEY: Oh, no, this isn't happening.

ADKINS: We lost the war on terror, nice work. Great bunch of movies you made for the other side.

Yes. Terrorists really appreciated your work.

(END VIDEO CLIP)

KING: Is it hard being a liberal turned conservative in Hollywood?

ZUCKER: Well, it's a little lonely. I mean...

(LAUGHTER) ZUCKER: We figure, you know, "An American Carol" will get -- you know, get the support of our 50 percent of the country and our 5 percent of Hollywood. And -- but it's, you know, it's a little (INAUDIBLE) Kelsey Grammar said once that it's the new gay. And so -- and I -- I, of course, said that to some magazine interviewer and it became my quote, but I should give Kelsey credit for that.

KING: Nancy, don't you think it can be just as funny to be conservative as it is to be liberal?

GILES: Well, sure. It's funny, you know, humor is a very subjective thing. It's not anything that you can really -- well, yes, you can measure it in terms of who laughs and who doesn't.

The release -- the statement you just read by the McCain campaign about what Sarah Palin's -- you know the results of the action was, that's comedy, as far as I'm concerned. Because the truth of the matter is, it was a nonpartisan -- it was bipartisan group that wanted to examine what was going on in the first place, not led by Obama.

But I don't want to sidetrack. It's -- comedy, I think, comes from pain and time and a little bit of distance and precision. And I think that, oh gosh, I'm forgetting the other gentleman's name, not David Zucker but the other gentleman.

PAGLIARULO: Joe. It's OK.

KING: Pags.

GILES: Joe made a real -- he made an excellent point about the humor that can happen with Barack Obama. I loved all three of his ideas. And I think if people calm down and don't think, oh my god, it's going to be racist and if they really come up with really good ideas, of course, you can go after him with the same kind of vigor you can after McCain and Palin.

KING: Sure, why not.

GILES: Absolutely.

MILLER: Sarah Palin -- once you're a punchline on "Saturday Night Live," you're done politically, and David, I speak for all of us in America, when I say, please, for the love of God, just make another airplane, please. We love you.

KING: Thank you all very much.

MILLER: Please, another "Naked Gun," something.

KING: Pags, Stephanie, Nancy, and David Zucker.

GILES: Come home, David.

KING: Thanks very much. Great having you with us.

So many of you are weighing in on our blog. Every day we hear from more and more of you. So don't miss out on your chance to take part in the show. Just go to our blog, it's CNN.com/larryking. Tell us what you think or what you'd like me to ask our guest.

While you're there, download our latest podcasts, Michelle Obama.

Monday, Sheryl Crow and Dean Cain talk politics. Right now, it's time for Anderson Cooper and what a day again in "AC 360."

Anderson?

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