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CNN LARRY KING LIVE

Last-Minute Campaign Frenzy

Aired October 28, 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, a week to go -- the all-out assault for votes is on.
(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESUMPTIVE NOMINEE: John McCain has ridden shotgun as George Bush has driven our economy toward the cliff. And now he wants to take the wheel and step on the gas.

(END VIDEO CLIP)

L. KING: Candidates are throwing everything against the wall, hoping something will stick -- calling, campaigning, convincing in a frenzy of political pleadings.

(BEGIN VIDEO CLIP)

GOV. SARAH PALIN (R), VICE PRESIDENTIAL CANDIDATE: Are you ready to send us to Washington to shake things up?

(END VIDEO CLIP)

L. KING: Plus, John McCain comes clean, admitting that he and Sarah Palin have clashed.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: When two mavericks join up, we don't agree on everything, but that's a lot of fun.

(END VIDEO CLIP)

L. KING: They've hugged.

Have they made up?

We'll go live to a Palin rally in Pennsylvania, to an Obama' even in Virginia.

The news breaking right now on LARRY KING LIVE.

Good evening and welcome to another edition of LARRY KING LIVE.

It's getting close.

We're heading toward Tuesday, aren't we?

That scene you see is in Norfolk, Virginia, where Barack Obama will be speaking shortly, the senator from Illinois.

We have a great panel here throughout the hour tonight.

In Austin, Texas is Karen Hughes, the former counselor to President George W. Bush, a supporter, as you might imagine, of John McCain.

In Stamford, Connecticut is Ari Fleischer, who served as White House secretary for President Bush, also a supporter of the senator from Arizona.

In Washington, Hilary Rosen, CNN contributor, political director and Washington editor-at-large for the HuffingtonPost.com, a supporter of Senator Obama.

And in New York, Dee Dee Myers, who was White House press secretary for President Clinton. She's a contributing editor to "Vanity Fair," a supporter of Barack Obama.

Before anything else, though, let's go to Las Vegas.

John King, CNN's chief national correspondent, is standing by surveying the scene there -- we understand, John, that the Latin vote is going to be key.

True?

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: Very interesting, Larry. When you get into the final days of a campaign like this, obviously, the most important thing is the message from the candidates. And they will duke it out until the last days.

But the second most important thing -- and increasingly almost equal with the message -- is what can you do on the ground?

What originally can you do to turn things out?

We spent the day with the Culinary Workers Union here. They have about 70,000 of their members, many of them Latinos, who they believe are Barack Obama supporters. And they are going door to door. And they're going back. They're saying vote early. And if they don't turn out on a day, they go back the next day and try to turn them out again.

Karen and Ari can tell you this better than I can. In the last two cycles, if George W. Bush was down two or three points in a key battleground state, the Republicans felt confident because they thought on election day they had a superior ground organization.

But this cycle, because of Obama's organization, Larry, and because of his resources and because of all the help coming in from the labor unions and other Democratic groups, I don't think you can say that this time. At least anecdotally, the Democrats, from my travels, have an advantage on the ground. And that is a big, big difference.

One other point. The Latino vote now is breaking 2-1 for Barack Obama or more in this election.

If you're a Republican, not only looking at next Tuesday, but looking at the long-term future of your party, given the growth of the Hispanic population in this country, that is a very troubling sign.

L. KING: John King, thank you, in Nevada.

We'll be checking with you later.

Karen Hughes, are you surprised at anything John said?

KAREN HUGHES, FORMER COUNSELOR TO PRESIDENT GEORGE W. BUSH, SUPPORTS MCCAIN: No. I actually agreed with John, that I think the expectation is that Senator Obama has a very good ground game. He is well organized. He has a huge fundraising advantage because he broke his promise not to accept public financing for the general election. So he's doing things like running expensive infomercials tonight night, where he's paying a million dollars each to buy 30 minutes of time.

He'll have that 30 minutes of time. The question is, will he have any information on those infomercials other than what we've already heard?

But I think John is absolutely right, that the ground game advantage this time, because of the money, because of Senator Obama's campaign's excellent organizational skills, does seem to be leaning toward the Democrats.

L. KING: You're watching, by the way, Governor Palin on the campus of Penn State University, in the middle of the State of Pennsylvania, the last minute push there.

We'll be joining her in a little while. We'll give you a couple moments of her speech.

Dee Dee Myers, what do you make of what John King had to say?

DEE DEE MYERS, FORMER PRESS SECRETARY, PRESIDENT BILL CLINTON: Well, I think he's right, as he so often is, that Senator Obama does have a great ground game. And I agree with most of the reasons that Karen stated, except there is one other -- a couple other factors. One is the tremendous enthusiasm that Senator Obama has been able to generate. They have a huge team of volunteers, people coming in to states like Nevada from California and Arizona and other states that aren't being contested in this. And that's really hard to gauge how important that is.

And they're turning out voters. And if you look at the numbers in these early days, we're still a week out. And already some states have seen 20 percent of eligible voters come to the polls -- and we're still a week from election day. So not only will the Obama machine turn out votes on election day, they're turning out votes before election day, taking -- making sure they give all those new voters, in particular, an opportunity to get to the polls, making sure they get to the polls. So that's critical. And we're going to see how well that advantage holds up over the course of the next week.

L. KING: Ari Fleischer, logically, is this -- is this winnable for Senator McCain?

ARI FLEISCHER, FORMER WHITE HOUSE PRESS SECRETARY, PRESIDENT G.W. BUSH, SUPPORTS MCCAIN: Well, it is winnable still, Larry. And I think what you to look at is the gap closing. And there is starting to be, at least, evidence that it is starting to narrow, though Obama continues to have a 4, 5, 6 point lead.

A Gallup poll came out today and said it was a 2 point race.

And just coming here, I saw that Bill McInturff, who is John McCain's pollster, issued a memo. And in that memo, Larry, he wrote that: "They are functionally tied across battleground states and that the numbers are improving sharply over the last four tracks."

In other words, what the McCain campaign has seen from their private polling is that with each new day, the numbers narrow even more.

The question is, will we see this manifest now in a lot of the public polls, as well as the private poll?

That's what we ought to keep an eye on. A week is still enough time for things to happen. Clearly, it's late. But this is not over yet.

L. KING: Hilary, if all that's true, are these Independents coming to McCain or are they people switching?

HILARY ROSEN, CNN CONTRIBUTOR, POLITICAL DIRECTOR, HUFFINGTONPOST.COM: Well, there were some undecideds and there were still some margin of the Republican Party undecided. And Independents were breaking about 60 to 70 percent for Obama. So there was some room there for McCain to still get some.

I think the point that Dee Dee made is important to expand on. Barack Obama is not paying these people on the ground, these field workers that everybody is so impressed with. These are volunteers. And that in and of itself is historic.

There's this thing called street money, which people are used to paying in political campaigns to get the voters out. That's not happening in the Obama campaign. That enthusiasm is now resulting in these early voting states like Florida and North Carolina, with some counties that are unexpectedly Independent and breaking 2-1 for Obama in the votes.

And when you look at the Hispanic vote, we expect Mexican Latinos and Puerto Rican Latinos have been breaking for Obama. But in Florida, Obama is getting almost 40 percent of the Cuban vote, which, you know...

L. KING: Well, that's strange.

ROSEN: ...John McCain needs to get a 90 percent of the Cuban vote to win in Florida.

So this enthusiasm has really spread out in very key places. And we're seeing evidence of it in these early voting states.

L. KING: OK. We're going to take a break.

You're listening to Hank Williams, Jr. , by the way, is singing in advance of Governor Palin speaking at Penn State University. We'll give you a brief notice of what happens in that speech, as well as Senator Obama's in Norfolk, Virginia.

We'll be right back.

(VIDEO CLIP)

(COMMERCIAL BREAK)

L. KING: We're back.

Governor Palin is about to address a rally at -- the Road to Victory Rally, it's called, at Rec Hall Penn State University. There she is.

When we get to the meat of her speech, we'll bring you a couple moments of it.

But right now, the economy remains the number one issue with voters. Campaigning today in the crucial state of Pennsylvania, Senator McCain tried to leverage that -- leverage that against Obama.

Watch.

(BEGIN VIDEO CLIP)

MCCAIN: And that's the problem with Senator Obama's approach to our economy -- he's more interested in controlling wealth than creating it, with redistributing money instead of spreading opportunity.

(BOOS)

MCCAIN: Senator Obama is running to be redistributionist-in- chief. I'm running to be commander-in-chief.

(APPLAUSE)

(END VIDEO CLIP)

L. KING: Karen, there's something puzzling.

Isn't redistribution of wealth the graduated income tax?

HUGHES: Well, no, Larry, I'd make a distinction, because what Senator Obama's plan is proposing is taking people who currently pay the vast majority of the tax burden in the U.S. and taking money from their taxes and instead of using it to fund government, to operate our national defense or to fund the legitimate functions of government, he would give that money to people who currently who pay no income taxes -- the 40 percent of Americans who today pay absolutely zero in income taxes. And so that is a redistribution...

L. KING: Well, but if someone gets...

HUGHES: That's different than saying...

L. KING: ...welfare, isn't that money coming from people with more than they have so that we can help those who have less?

HUGHES: Yes, it is, Larry. And I think there are legitimate functions of government to tax people and to help people.

L. KING: And that -- I don't hear Karen.

HUGHES: I'm sorry?

L. KING: I'm sorry.

We've lost Karen Hughes.

All right, Ari Fleischer, can you help us with this?

FLEISCHER: Well, let me -- yes, let me jump in. Larry, here's the problem. A progressive income tax code is something all Americans agree to. But then there are extremes and Barack Obama represents the extreme. If all his so-called tax cuts, which are really just redistribution programs, are enacted, almost half the country -- 49 percent -- will no longer pay any income taxes at all.

We're going too far under Senator Obama. The problem is going to be that the majority is soon going to be able to say we don't want to pay any income taxes, but we want government services, despite the fact we don't pay for them. This is redistribution to an extreme.

And that's why I think John McCain, if he is closing the gap here at the end, he's had some good things happen to him here now. This redistribution-in-chief line, the thing about John -- you know, Barack Obama -- the radio interview where he lamented the fact that the civil rights movement was not able to do more to redistribute wealth.

It's a long history of social advocacy that represents something that most Americans in the middle are not comfortable with, because they know it's their money that's going to get taken from them and given to somebody else who pays no income tax.

That's his vulnerability and McCain's closing in on it here at the end.

L. KING: I got you. All right, that's a good explanation.

Let's check in with a little bit of Governor Palin speaking now at Penn State.

PALIN: And make John McCain the next president of the United States.

(APPLAUSE)

PALIN: Are you ready to send us to Washington to shake things up for you?

(APPLAUSE)

PALIN: OK. So let me start with a little update on our opponent's economic plan and ideology -- a little bit of lesson here.

(BOOS)

PALIN: And you probably know the story so far already by now. But after all the big speeches Barack Obama has given and after all of that evasive talk about the tax increases that he plans, it took "Joe the Plumber" from Toledo, Ohio to get our opponent to finally come to the point Barack Obama said he wants to spread your wealth around.

(BOOS)

PALIN: In other words, he thinks it's your job to earn the wealth and his job to spread it around.

(BOOS)

PALIN: He calls that spreading the wealth. Joe Biden calls higher taxes patriotic. And to "Joe the Plumber," he says...

L. KING: All right, Dee Dee Myers in New York, is this making an impact?

MYERS: Well, I think that the McCain campaign is doing -- continuing to do what it's done, which is throw spaghetti at the wall and hope that something sticks. Every day there's a new charge, based mostly on something pulled out of Senator Obama's past or something taken out of context that Senator Biden said, instead of having a more comprehensive message.

You know, most Americans favor, as you pointed out, Larry, a system that tries to make society more fair by making sure those with the most contribute more than those with the least. People who have -- who don't make as much money, who pay a lot in payroll taxes and Social Security and Medicare taxes and things like that, they deserve some relief, too.

And in the Obama administration, under his tax cut plan, those who are paying all kinds of taxes -- state and local taxes, as well -- are entitled to relief. They've seen their incomes go down and their gas prices and their energy prices and the cost of tuition and all those things go up. They're entitled to a little relief. And Senator Obama is going to make sure they get it.

And, you know, one other thing.

L. KING: All right...

MYERS: You know, the McCain campaign is trying to paint Senator Obama like some big radical. And then you look at the people who he surrounded himself with, who are advising him on economic issues -- Warren Buffett; Paul Volcker, former chairman of the Fed; Bob Rubin, one of the most respected Treasury secretaries of all time. It just doesn't stick. It just isn't right.

L. KING: I've got to -- let me get a break, Dee Dee.

We'll come right back.

We're going to check in with our own Ms. Crowley, who, by the way, is on the scene where Obama will be speaking.

Don't go away.

(BEGIN VIDEO CLIP)

PALIN: There he was, Barack Obama, speaking in one of those rare moments when the real ideology starts coming through.

And it makes you wonder, how do they pull that out from him?

It's almost like the interviewer was "Joe the Plumber" himself. He...

(APPLAUSE)

PALIN: Sometimes in politics, it's those candid little moments that give us the whole picture. That's what says it all. But our opponent's ideological commitment to spread your wealth around has been tried in other societies. And the only thing it ever spreads is scarcity and poverty and bureaucracy. And it stifles the entrepreneurial spirit that...

(END VIDEO CLIP)

(COMMERCIAL BREAK)

L. KING: Candy Crowley, CNN's senior political correspondent, is in Norfolk, Virginia -- Candy, Norfolk, that's a Republican stronghold, isn't it?

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: It is. And, you know, what's interesting is, obviously, Virginia is top on the Democratic -- on the Democrats' wish list. We were also in a very, very Republican part of Virginia earlier, a rural part of Virginia, where he came with the Democratic governor, Tim Kaine; the former governor, Mark Warner, who's now running for the U.S. Senate. Barack Obama -- all three up on stage, raising their hands, looking at the poll numbers here in Virginia, feeling really good.

So it's not just that Obama is going to kind of what one would expect, Northern Virginia, which contains a lot of Democrats and people that would naturally come out and vote for Obama. He is going into strongholds -- Norfolk, of course, has a base here -- a military base. So, obviously, one would think this was a conservative place.

But I have to tell you, Larry, you know, the crowds, which have always been pretty big with Obama, some of them are enormous now. It's pretty amazing. And we're in a baseball field at the moment and pretty much packed the place. I think you can probably see it behind me.

L. KING: Yes.

CROWLEY: So it doesn't matter -- it hasn't seemed to matter where we are, even if it's a Republican place in a Republican state, he can still bring them in.

L. KING: Thanks, Candy.

Candy Crowley on the scene in Norfolk, Virginia.

Barack Obama will be speaking at that baseball field shortly.

And we'll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP, COURTESY WTAJ)

(APPLAUSE)

PALIN: Maybe you should get up here and help me out.

(APPLAUSE)

PALIN: Barack Obama, you know, he voted 94 times for higher taxes, even on hardworking, middle class Americans making $42,000 a year.

(BOOS)

PALIN: He had 94 chances to be on our side and 94 opportunities he took to be on the side of bigger, more enforcing -- more forceful government, instead of being on our side. And now he's committed to almost a trillion dollars more in new spending. He won't tell you where those dollars will come from, though, to pay for those proposals. Got to come from higher taxes.

So you can either do the math or you just go with your gut. Either way, you can draw the same conclusion -- Barack Obama is for bigger government and higher taxes. And...

(BOOS)

PALIN: We have to really listen to our opponent's words through all of this. Here are the nuances that he chooses, even -- the words. He says now that he's for a tax credit, which is when government...

(END VIDEO CLIP)

L. KING: We're back on LARRY KING LIVE.

By the way, a reminder, Senator McCain will be our special guest tomorrow night. Senator McCain our special guest tomorrow night.

Karen Hughes -- I hope we've got her back in Austin. We lost her earlier.

If you listen to this campaign, Obama wants to lower taxes here. Right now, Governor Palin is railing against taxes.

Are taxes bad, because I thought the government exists on taxes?

HUGHES: Well, it depends, Larry. Yes, the government has to tax. But if you believe in...

L. KING: So why is it a bad word?

HUGHES: Well, because if you believe in a growing economy, if you believe that a rising tide lifts all people and that all people should have opportunity, you don't want to tax to an extent that it becomes a negative incentive, that it punishes businesses, that is punishes jobs. That's what's happened with our corporate tax rate in the U.S. A lot of people are worried about American jobs going overseas.

Well, one of the reasons is we have the second highest corporate tax rate on our businesses of any industrialized nation in the world. And that's what's causing American companies to move overseas and take American jobs overseas with them.

So if we want to keep American jobs here at home, we have to make it economical for companies to invest in America...

L. KING: All right...

HUGHES: ...and to -- and to create jobs here.

L. KING: All right...

HUGHES: And so that's why Senator McCain has proposed lowering that tax rate.

L. KING: So, Hilary, if we lower a lot of taxes, do we have to cut services?

Or then how do we do a bailout like we just did?

ROSEN: Look, it's worth putting some facts to all of this rhetoric. Barack Obama is talking about cutting taxes.

John McCain wants to cut taxes. It's just the issue of who gets the tax cut.

Barack Obama is talking about tax increases of only 3 percent on the highest tax rates. John McCain has talked about corporate tax cuts. Barack Obama is saying 95 percent of the American people deserve a tax cut because they're making less than $250,000 a year.

And this notion that somehow the economy is in trouble because of corporate tax rates is just silly. We have just gone through the worst economic crisis this country has seen over the course of many, many years.

And guess what?

Corporate CEOs are not flying to Washington saying our problem is that our taxes are too high. That's why Barack Obama's message is resonating, because the wealthy have gotten wealthier and the middle class has gotten squeezed. And people realize that. It's resonating.

L. KING: Ari Fleischer, has she got a point?

FLEISCHER: Well, I think the real issue here is the purpose of the tax code is to raise money so that government can pay its legitimate bills.

L. KING: Right.

FLEISCHER: The problem you get into is when people start to use the tax code to accomplish every type of social tinkering you can imagine -- to get people health care, to get people education, to get people into college, to pay for defense, to pay for transportation -- everything. And this is where Barack Obama wants to give tax cuts to people who pay no income taxes.

That's the redistributive problem that I think Barack Obama is pushing over the edge, Larry -- too much social tinkering, too much of what he would call social justice, which for many in the middle means that their money is going to be taken from them, because the government can use it better than you or I could use our money.

This is the moral issue about taxation. And, again, I think if this race is closing, it's closing now because John McCain has found a consistent economic message. And given the financial meltdown, the economy is the only thing people care about. And this typically is a bread and butter winner for Republicans.

L. KING: All right, we're going to take a break and then we'll...

MYERS: And, Larry, it's also a question of fairness.

L. KING: We're going to take a break and when we come back, we'll have Dee Dee Myers respond.

You're watching LARRY KING LIVE.

One more reminder, Senator McCain will be our special guest tomorrow night.

Governor Palin is speaking at Penn State.

And we'll be hearing from Senator Obama soon in Norfolk, Virginia. We'll be right back.

(BEGIN VIDEO CLIP, COURTESY WTAJ)

PALIN: John and I will impose a spending freeze to cover all but the most vital functions of government.

(APPLAUSE)

PALIN: We'll balance the federal budget by the end of our first term. And you can count on us to follow through on our promises because we are the only candidates in this race with a track record of reform. We have not been just talking the talk. John and I both have walked the walk.

(APPLAUSE)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: By thanking not only one of the finest governors in the country, but one of the finest men...

L. KING: We'll be back with our panel momentarily.

Barack Obama has just begun his speech in Norfolk, Virginia.

Let's first check in with John King.

He's in Las Vegas. We heard from him earlier -- John, earlier in the evening, you're our state man. You know everything that's happening on the map.

What are -- what are you going to -- what are you going to look for early?

What's going to be your key indicator?

J. KING: Well, look where Barack Obama is right now, Larry. He's in Norfolk, Virginia. That is a Navy military community. It's also a place where you have a lot of retirees. But it's also not far from the Hampton Roads area of Virginia, where you have a lot of African- Americans.

The polls in Virginia close at 7:00. It is very difficult for John McCain to get to 270 electoral votes without winning the State of Virginia.

Is it impossible?

No, it's not impossible. But it is very, very hard for John McCain to get to 270 if he does not carry the State of Virginia. And Barack Obama right now is up somewhere in the vicinity of 8 to 10 points. I saw one poll today that I think had it down to 6 points or so. So let's throw out the polls for a week. Let's watch the candidates' campaign. But if Virginia goes for Barack Obama, then what you will see in Virginia is something you'll probably see across the country, that means African-American turnout is way up. That he will be doing very well in those suburbs outside of Washington, D.C., the northern Virginia suburbs.

The state is turning a bit Democratic. But Virginia is a demographic state that you can take to other places across the country. So if he does well there, you would assume he's going to do well elsewhere across the country.

I have an interesting conversation tonight. This is very good conversation if you're an undecided voter out there because you have a smart group of people talking about the policy differences between these guys.

LARRY KING, CNN ANCHOR: Yes.

J. KING: So I would look as the polls close, number one, in the East Coast. But also over the next few days watch this tax argument, the economic argument play out.

If McCain is to get back into the game, Larry, they believe that is the key, to try to convince people that Barack Obama is too liberal, that he's too left of center, and you do not want him in the White House.

It has worked for Republicans before. Whether it will work this time is a big open question.

L. KING: Thanks, John. John King on the money. We'll be looking for you in the days ahead as we head towards Tuesday.

Let's hear a little but of Senator Obama in Norfolk.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: In one week's time you can turn the page on policies that have put the greed and irresponsibility of Wall Street before the hard work and sacrifice of folks on Main Street.

In one week you can choose policies that invest in our middle class again and create new jobs and grow this economy from the bottom up so that everyone has a chance to succeed. From the CEO to the secretary, from the factory owner to the men and women who work on the factory floor.

In one week you can put an end to the politics that would divide a nation just to win an election, that tries to pit region against region and city against town, Republican against Democrat, that asks us to fear at a time when what we really need is some hope.

In one week, at this defining moment in history, you can give this country the change we need.

Norfolk, we began this journey in the depths of winter nearly two years ago on the steps of the old state capitol in Springfield, Illinois. Back then we didn't have much money. We didn't have a lot of endorsements. We weren't given much of a chance by the pundits or the polls. And we knew that our climb would be steep.

But we also knew this. We knew that the size of our challenges had outgrown the smallness, the pettiness of our politics. I believe that Democrats and Republicans and Americans of every political stripe, that they were hungry, hungry for new ideas, new leadership and a new kind of politics, one that favors common sense over ideology.

One that focuses on those values and ideals that we hold in common as Americans. Most of all, I believed in your ability to make change happen. I knew the American people were a decent people and a generous people, ready to work hard and sacrifice for future generations.

And I was convinced that when we come together our voices are more powerful than the most entrenched lobbyists and the most vicious political attacks and full force of the status quo in Washington that just wants to keep things the way they are.

L. KING: You're watching Senator Obama live in Norfolk, Virginia. And he's addressing what is a huge crowd there.

Dee Dee Myers, can -- can he win Virginia?

DEE DEE MYERS, FMR. PRESS SECY., PRES. BILL CLINTON: He very well can win Virginia. A year ago when the Obama campaign started saying they wanted to expand the electoral map and they were going to compete in places like Virginia, a lot of Democrats kind of, you know, scratched their heads and said, well, they won't be saying that a year from now.

Well, here we are a year from now, and there isn't a poll out there that shows John McCain winning Virginia. And as John King just pointed out, not only would a win in Virginia be a huge sea change for the state, it would be a very bad indicator for Senator McCain.

Because if Senator Obama is doing that well in a state like Virginia, which as it just said on your screen, has gone for the GOP candidate in 13 of the last 14 presidential elections, those sort of demographic changes and those trends are very likely to carry into other states across the country.

So a win in Virginia which, again, is entirely possible and maybe even likely, would be both a huge step forward for Senator Obama and a really bad sign for Senator McCain on election night.

L. KING: And we'll be back with more on this edition of LARRY KING LIVE.

McCain on this show tomorrow night. Don't go away.

(COMMERCIAL BREAK) OBAMA: John McCain says, I'm not George Bush. And yet he's still cannot tell the American people one single major difference, one single major thing he'd do differently from George Bush when it comes to the economy.

Not one thing.

John McCain says we can't spend the next four years waiting for our luck to change. I tell you what. You know that. But you also understand that the biggest gamble we can take is embracing the same old Bush-McCain tired worn-out policies that have failed us for the last eight years.

It's not change when John McCain wants to give a $700,000 tax cut...

L. KING: Tonight, what an effective politician he is verbally. He mentioned that having been in Virginia two years ago -- I can't hear myself while we're talking at the same time -- but he was there two years ago, and he seems just as strong tonight -- Karen?

KAREN HUGHES, FMR. COUNSELOR, PRES. GEORGE W. BUSH: Once again, listening to him I am struck by the beauty of the rhetoric, but also...

KING: Yes.

HUGHES: ... how totally disconnected it is from reality. For one, he talks about a triumph of common sense over ideology. Yes he's one of the most ideological members of the United States Senate, has the most -- consistently liberal voting record.

He talks about bringing Republicans and Democrats together, and then launches a very negative, very harsh attack against President Bush, and also fails to note that John McCain, his opponent, is the only candidate in this race who has any record of bringing Republicans and Democrats together.

When has Barack Obama reached out in a bipartisan way and worked with Republicans to achieve anything? He hasn't done so. John McCain has done so on issues from judicial nominations to campaign finance reform. He has a record of doing that. Barack Obama doesn't.

L. KING: Hillary, isn't that a very good point?

HILARY ROSEN, CNN CONTRIBUTOR: Well, no, because Barack Obama...

L. KING: No?

ROSEN: ... has a good record in the Senate, and his colleagues will say so. I think the sad part of this discussion is -- and sad for Ari and Karen -- is that what Barack Obama is benefiting from as well in this discussion is a wholesale rejection of George Bush and a lack of conviction on any of independent voter's part that's electing John McCain would not be reelecting George Bush's policies. Record unemployment, health care costs that are four times growing faster than wages, and a war, you know, that has brought us trillion dollar deficits when he inherited a surplus.

There's just no rationale to say that John McCain's history of supporting the economic policies of George Bush will change overnight. And that's what voters understand.

L. KING: Isn't it smart to run against George Bush, Ari?

ARI FLEISCHER, FMR. PRESS SECY., PRES. G.W. BUSH: Well, you know, it's so wonderful...

L. KING: It's smart, isn't it?

FLEISCHER: ... to hear Senator Barack Obama's eloquence where he acts post partisan, decries the art of politics and dividing people. And there he goes (INAUDIBLE) throwing attacks against John McCain for everything under the sun, calling people greedy, putting one class against another class.

He acts artful, he acts as if he's eloquent and he has eloquence to him. But it's really kind of like a rhetorical (INAUDIBLE) where he just throws word and everybody says, isn't that beautiful?

But then examine what he puts in there. And this is his eloquence. He calls government spending investments. He calls a tax cut when the government writes a check to somebody who pays no taxes. He's rhetorically very tricky. And this is going to be the problem.

He's using it to hide his ideology, because it is a very well worn liberal ideology of redistribute the wealth, tax and spend, and this is what this race is coming down to, and that's the way it should be. It's coming down on substance and on issues and hopefully a closer examination of Barack Obama's record.

L. KING: Dee Dee, though, if he's good as that, doesn't -- forget the rest, doesn't rhetoric win?

MYERS: Well, part of the president's job, of course, is to paint a picture of a vision of where the country should go and then bring Americans along, and Barack Obama has certainly shown himself capable of doing that.

That's why independent voters are supporting him. That's why people like former secretary of state to President Bush Colin Powell is supporting him. It's not because Colin Powell thinks he's a socialist or redistributionist, or just simply full of rhetoric. He, Colin Powell, and people like him, Scott McClellan, one of your former White House colleagues there, Ari and Karen, has also endorsed Barack Obama because they think he's in the best position to bring the country forward, to cut taxes for 95 percent of Americans.

And you know, we've heard all this before, oh, these tax cuts are going to ruin -- you're going to raise taxes and ruin America. President Clinton in 1993 raised the top marginal tax rate. Republicans said, oh, this is the end. It's going to bust the budget, destroy jobs.

In the next eight years, the economy created 23 million new jobs. We saw seven consecutive years of declining unemployment. We saw middle class wages rise and we saw the debt and the deficit reduced.

So if you want to go back to those policies, Barack Obama is your man.

L. KING: All right. I've got to get a break and we'll be right back with more. Don't go away.

OBAMA: ... the highest mountain top from the deepest of valleys. It's about...

(COMMERCIAL BREAK)\

OBAMA: I don't believe government can or should try to solve all our problems. I know you don't either. But I do believe government should do that which we can't do for ourselves.

We're going to -- we've got to be self-reliant. We've got to be independent. We're entrepreneurial. We don't -- we don't expect government to do everything for us. But government does have to provide for the national defense. We do have to protect ourselves from harm. Government has to...

L. KING: Quick question, Ari Fleischer, it's a blog question from Amica who writes, "How would a McCain administration be different to Bush's on foreign and economic policies?"

FLEISCHER: Well, you know, on foreign policy, number one, John McCain will be a powerful supporter of Israel, just as George was. I'm going to go right to that where there is an agreement.

L. KING: The question was different.

FLEISCHER: I (INAUDIBLE) we have a lot of worries -- yes, but I want to make this point, Larry, because at the first debate Barack Obama was asked to name America's three most important allies. He didn't even name Israel as one of the three most important.

So when it comes to that, to turn the question around, I really worry about where Barack Obama is going to be on very important foreign policy issue. And that is America's relationship with the only democracy in the Middle East, Israel.

On domestic issues, you know, John McCain, global warming has always opposed George Bush. John McCain voted against George Bush's tax cuts. He's got a pretty consistent message of taking on the Bush administration.

And on foreign policy, of course, he demanded that Donald Rumsfeld be fired. He was the first to say so and he said it frequently. This is where he's been somewhat of a maverick and I think he does earn his credit there.

L. KING: We'll be back with more of Karen Hughes, Ari Fleischer, Hilary Rosen and Dee Dee Myers. Don't go away.

(COMMERCIAL BREAK)

L. KING: We're back. Let's check in with Anderson Cooper. He'll host "AC360" at the top of the hour. What's up tonight?

ANDERSON COOPER, CNN ANCHOR: Larry, a lot of politics. Barack Obama speaking right now in Virginia, late stop in a very important battleground state. Tonight polls show Obama leading in key states, Virginia, Ohio and Pennsylvania. We'll have the latest numbers.

Also Senator McCain still fighting hard. His aides say he has a strategy to win even if he can't pull it out in Pennsylvania. McCain also talks about the rift with Senator Palin. Today we'll tell you what he said.

Another McCain adviser speaking out about Governor Palin. Yesterday remember it was diva, today, some calling her a whack job. That's from the McCain campaign.

Also on Wall Street, the Dow up almost 900 points. How long can swings like that keep happening? Ali Velshi weighs in. Those stories and more, Larry, at the top of the hour.

L. KING: A whack job?

COOPER: Someone -- a top adviser told "Politico."

L. KING: With friends like these...

COOPER: Exactly.

L. KING: Anderson Cooper, he'll host "AC360" at 10:00 Eastern, 7:00 Pacific.

We have a blog question for Ari Fleischer. It's from Dawn, "How does Sarah Palin's policy in Alaska of taxing the oil companies and distributing $3,269 to each citizen differ from distributing the wealth?"

FLEISCHER: Well, that's because there is no state income tax in Alaska. Nobody has to pay because Alaska has such an abundance of natural resources. The state actually gets the royalties and passes it back to its citizens.

I wish that was the case for everybody in every state. That would be a real big growing private enterprise. I'd have no problem with that.

L. KING: Hillary, what's your read -- yes? I'm sorry, who is...

ROSEN: Well, it's -- Ari said something before that must not go unanswered when he said that Barack Obama cannot be trusted to be a friend to Israel. I was in Florida last week, and that is the underground campaign that Republicans are trying to use against Barack Obama. They're subtly trying to affect the Jewish vote, not so subtly affect the Jewish vote by saying he's not going to be a friend to Israel, and that is just not true. The United States has always been a friend to Israel.

FLEISCHER: Then why didn't he identify Israel as one of our three friends?

ROSEN: Barack Obama has committed over and over again that protecting Israel is a top priority for him, and these kinds of smear tactics and rhetorical nonsense...

FLEISCHER: I'm just quoting him from the first debate.

ROSEN: ... that's just trying to address people out of fear, and that doesn't help American Jews and it doesn't help Israeli Jews.

FLEISCHER: Hilary, it's his lack of words. He's the one who didn't cite Israel...

ROSEN: You're wrong, Ari.

FLEISCHER: ... when asked.

ROSEN: You're taking words out of context from two years ago.

FLEISCHER: No, it was a question from Brian Williams at the first debate.

ROSEN: And you're not listening to everything he has said over the past year and a half. Directly in support of (INAUDIBLE).

KING: Well, all right, let's ask you simply. Ari, do you think he's opposed to Israel?

FLEISCHER: No, but I really do worry about his instincts when it comes to Israel. I think that Barack Obama wants so badly to be an accommodationist in the center when it comes to foreign policy.

And when Israel does things like it builds a security fence to protect its people, Barack Obama probably would have put pressure on Israel and said, don't do it. Just like when he went to APAC and called for an undivided Jerusalem and the next day when the Palestinians complained about it...

ROSEN: You know there's every...

FLEISCHER: ... he took the words back and he said that his words were poorly chosen.

L. KING: But Karen...

FLEISCHER: I think what it was, Larry...

ROSEN: It was John McCain who supported elections of Hamas and Palestine... L. KING: Let me get a word in.

ROSEN: And John McCain -- and Barack Obama opposed it. So this is just nonsense.

L. KING: Karen, it was George -- it was your president, it was George Bush who first called for separate states, did he not?

HUGHES: That's right. He called for a Palestinian state living side by side in peace with our friend and ally, Israel.

L. KING: Right. First president to do it.

HUGHES: And that's an important policy going forward.

L. KING: Well, why wasn't that considered anti-Israel?

HUGHES: Well, again, because it's...

L. KING: No previous president had ever called for it.

HUGHES: Larry, because he believes that's the best security for Israel is to live side by side in peace with a neighbor that is able to achieve a state for the Palestinian people. I traveled the world as the undersecretary of state for public diplomacy and public affairs.

And in Muslim populations around the world, I heard great concern about the plight of the Palestinian people. And I believe, as President Bush believes, as John McCain believes, that for the long- term security of Israel, it is important to have a Palestinian state that is a partner for peace.

L. KING: Bow, Dee Dee, does not Obama believe that or not?

MYERS: Yes, he does. He absolutely does. And Hilary's right, there is an underground campaign going on. Some sort of, you know, interesting words they're using are chosen often out of context that suggest that Senator Obama would be anything other than a strong friend of Israel.

There's absolutely no reason for Jewish Americans or any other Americans to believe that. It's simply a game. This is what the Republican campaign has come down to, fear. Asking voters to vote their fears, raising doubts about somebody, and asking voters to vote their fears, and it's not going to work.

FLEISCHER: Larry, can I get back on this?

L. KING: We'll be back with our remaining moment here. And we'll pick up with Ari right after this. Don't go away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP) MARK WAHLBERG, ACTOR: Time is running out. Please, get out there and register. If you want your voice to be heard, get out there and pull the lever.

JULIANNE HOUGH, DANCER: I'm Julianne Hough. And I'm 20, but this is my first election I'm going to be voting for. And I just encourage everyone to vote, you know, people for the first-time voting, vote. That's all I can say. I mean we're so blessed that we are -- you know, that we have the opportunity to vote. So do it.

(END VIDEO CLIP)

L. KING: That's our campaign, to go vote. You're watching LARRY KING LIVE.

Ari Fleischer, you wanted to respond.

FLEISCHER: Well, one of the most important lessons I learned at the White House is that leadership comes from the president's heart and immediate judgments, particularly in summit meetings with foreign leaders.

And they don't need to be taught what to say. They don't need the advice of secretaries of state to really know what's in their heart. And that's why I found it -- and I say it openly. There's nothing underground. I say it on camera, troubling about Barack Obama and Israel.

At that first debate when Brian Williams said name America's top three most important allies he said...

L. KING: What did he say?

FLEISCHER: ... the EU, NATO and Japan. Hillary Clinton said Israel naturally. From the heart, she said it -- early. Barack Obama didn't do it. And for Brian Williams, said, what about Israel? Oh yes, of course, Israel. That's my worry. That it's only...

L. KING: Now which of those...

(CROSSTALK)

FLEISCHER: Larry, I can't hear you.

L. KING: Which of the three that he mentioned would you eliminate?

FLEISCHER: I think what I would have said is Great Britain, Israel and Japan. And I don't think...

L. KING: You would eliminate NATO?

FLEISCHER: NATO's not a country. He was asked which three countries.

L. KING: OK. FLEISCHER: And, again, he picked NATO because I think he was trying to be so broad and accommodationist, not bother to leave anybody off his list. But...

L. KING: Dee Dee, you want to respond?

MYERS: Yes. I just wish that Ari would recite all of the supportive things that Senator Obama said about Israel in the subsequent 20 debates with the Democratic primary contenders and the three debates against John McCain.

FLEISCHER: After he realized he made a mistake.

MYERS: Well, no, you know what? President Bush made some pretty serious foreign policy mistakes in the campaign of 2000, Ari. I don't remember you saying that disqualified him from being president.

Look, you have to take the sum and substance of a candidate's tenure over the long course of a campaign. And in that campaign, Senator Obama has been an unflagging, relentless, from the heart supporter of Israel. And that's just a fact.

L. KING: We're running close on time.

Karen Hughes, where do you stand on this Israel question?

HUGHES: Well, I think you have to also remember that Barack Obama, in one of the rare unscripted moments of his campaign, was asked by the YouTube questioner, would you meet with leaders like Ahmadinejad of Iran without precondition, and he said yes, I would, or I will.

And, you know, again, Ahmadinejad has called for Israel to be wiped off the face of the map. And so I think you do have -- I think Ari's right. You speak from the heart. He's had some troubling responses on questions about the strength of his support for our friend and ally, Israel.

L. KING: Hilary?

ROSEN: Well, I don't mean this as a personal affront, but I don't think that Americans really want to take cues on where we should be on our foreign policy from former Bush administration officials.

As a practical matter, people are rejecting where we are with our foreign policy. They don't like what's happened in the Middle East. George Bush did not make peace in the Middle East a priority until three months ago.

They are unhappy with the war in Iraq. They don't like the way he has negotiated or not negotiated with foreign leaders. And I think what Barack Obama's saying, you know what? Everything hasn't worked.

So we are going to try some things different, but that doesn't mean that he loses any alliance with our strongest supporters around the world. It means that he uses them more effectively to build a peaceful environment.

L. KING: All right. Ari, you want to close it out?

FLEISCHER: I hope Hilary's right about that, particularly with Israel. I hope so. But I'm afraid that Jesse Jackson has probably read Barack Obama better when he said that this election is going to represent a fundamental change in America's policy toward Israel. And I think he's got a good read on it.

MYERS: Ari, you know better than that. Jesse Jackson does not speak for the Obama campaign. And even Jesse Jackson had to admit that.

FLEISCHER: No, he doesn't, but that's why I said I think he has a good real on it.

MYERS: Come on, Ari.

FLEISCHER: I hope Hilary is right. But I don't think Barack Obama has given anybody...

MYERS: Please.

FLEISCHER: ... enough comfort to believe that he'll be an (INAUDIBLE) champion. He won't be anti, but I think he's going to try to be neutral. He's going to be probably somewhere in the middle.

ROSEN: This is as desperate as we can get this week.

FLEISCHER: And that's going to...

(CROSSTALK)

FLEISCHER: You could tell I struck a nerve, Larry. It's an issue that a lot of Democrats really worried about because they know there's a vulnerability about Barack Obama...

ROSEN: Respected Bush administration officials are counting on Jesse Jackson for their closing arguments.

FLEISCHER: ... and Israel and I think they sense it, too.

L. KING: So we are heading toward the close. Karen Hughes, Ari Fleischer, Hilary Rosen, Dee Dee Myers, I think we all should have a party when it's over no matter who wins.

ROSEN: I'll be there.

FLEISCHER: I'll be there.

L. KING: John -- John McCain's our guest tomorrow. Go to CNN.com/Larryking and blog right now with your questions. And while you're there, cast your quick vote. Can McCain make a comeback? Download our latest podcast, one of the most popular, too. Bill Maher.

It's time now for my man, Anderson Cooper, and "AC360." Anderson?