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CNN LARRY KING LIVE

Is America Broken?

Aired March 3, 2009 - 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, Republican smackdown -- Rush Limbaugh rips into the RNC chairman, but he refuses to acknowledge his own power over the party.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: I have no control. I am not in charge of one Republican policy.

(END VIDEO CLIP)

KING: The conservative pit bull is still barking.

Is he the top dog in the eyes of the GOP base.

Plus, Tavis Smiley tackling a nation's major problem. He says the country can be transformed.

But how and when?

What every citizen must do now to help the country recover from what ails America.

And Bob Woodward -- he's got his own ideas and we'll hear what he thinks, right now on LARRY KING LIVE.

Good evening.

An outstanding program tonight. Tavis Smiley, the commentator, radio and TV personality. He's in Philadelphia. He's at the Constitution Center in Philadelphia, wrapping up a town hall meeting about accountability. It's good timing, because he's the best-selling author. And his new book is "Accountable

Making America As Good As Its Promise." There you see its cover.

And in Washington, a man who knows how to sell books, Bob Woodward, the Pulitzer Prize winning journalist of "The Washington Post," number one "New York Times" best-selling author. His latest book is "The War Within."

A couple of moments with Tavis, then we'll bring Bob in.

What do you -- what got you on the idea of accountability as the subject of a book?

TAVIS SMILEY, COMMENTATOR, RADIO & TV PERSONALITY: This is the third and final book, Larry, in a trilogy about how to make America as good as its promise. My sense is this. That whether we are black or white or brown or yellow or red, rich or poor, educated or illiterate, suburban or urban, Republican or Democrat, we all want the same thing, Larry -- to live in a nation as good as its promise.

Here's the problem. There's a divide in this country between the promise of America and the possibility in America for every one of us.

How do we shrink that gap?

By holding people accountable. The truth of the matter is in America, we're good about symbolism but not so good about substance. We're good about excitement and euphoria around elections, but we don't start talking accountability until four years later, when that person -- or two years later, when they're running for re-election.

Why not start at the beginning?

Why wait respectfully for CNN to tell you at the end of 100 days how the president is doing?

Why not start the process with him, of holding him and all leaders accountable from day one?

We kept hearing, I'll be ready on day one. But accountability starts on day one. This isn't about Barack Obama exclusively. It's about all of our leaders being held accountable to keep and honor those promises that they made.

So, quickly, here's what the book does. It lays out everything Barack Obama said as a candidate running for the White House on the major issues that matter to us -- health, education, the environment, the economy, the criminal justice system, etc. Here's what he said. These are the promises. Here's a checklist. Here's a framework for assessment.

But right along with that, here's what we can do as American citizens to actively engage our self in our democracy, to help him become a great president.

KING: Good idea.

Bob Woodward, what do you make of that idea?

BOB WOODWARD, "THE WASHINGTON POST": Well, it's as ambitious as the Obama agenda. And he -- you know, Tavis is right, accountability is the big issue. And in the newspaper business, we often talk about accountability reporting -- in other words, doing exactly what he's doing here.

And he's exactly right, it is something that should not be done just after 100 days or one year or four years.

And if you look at the situation the president is now in, I mean it's staggering the number of things he has announced and said he is going to do. I've never seen anything like it. And if you lay some of these things end to end, you realize there are going to be problems. There are going to be bumps in the road on lots of this.

To be very specific, his budget announced a very ambitious energy program, which is dear to his heart and the hearts of lots of environmentalists, in particular. And he's going to try to clean things up. One of the things he wants to do is have less coal or clean coal, as it's called. And if you look at the United States Senate, which is a good way to get into the accountability issue, you realize there are about 15 or 16 Senators called the coal Democrats. They are Democrats -- take Indiana, 96 percent of their electricity comes from coal. So they're not necessarily going to jump on the Obama bandwagon in terms of what he has initially proposed.

KING: Yes. Hence the problem.

Tavis, the economic crisis is priority number one. We're all going to have to deal with accountability in that.

Here's what the president had to say during a White House photo- op with Britain's Prime Minister Gordon Brown.

Watch.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: My main message to the American people is just to recognize that we dug a very deep hole for ourselves. There were a lot of bad decisions that were made. We are cleaning up that mess. It's going to be sort of full of fits and starts in terms of getting the mess cleaned up. But it's going to get cleaned up.

(END VIDEO CLIP)

KING: Tavis, it's early, but is he being accountable?

SMILEY: I think he's being accountable aggressive and I think he's being aggressive. And I think he's doing everything he can do. I don't think any of us believes, Larry -- you, Bob, me, any of us believes that we have -- we've seen all that's going to be required to turn this around.

There's going to be more money. The banks are going to get more money. They're going to come back to Congress for more money. The automobile industry is coming back. So we've not seen all the money that's going to have to be applied to this. And I can understand the anger in America about having to keep bailing these people out with our taxpayer money.

That said, this isn't President Obama's responsibility. That is to say, it's not his fault that we are into this. But we now look to him for leadership to guide us out of the situation that we are in. And here's the problem. For eight years of the Bush administration, we had no accountability. That's how we got in this mess. And so what's happened is that the rich keep getting richer, the poor keep getting poorer, the middle class is stagnated. It would be different, Larry, if everybody were making money and the rich were just getting richer at a faster clip. That's not the case.

The bottom line is this gap between the have-gots and the have- nots in America continues to widen. And it would be laughable if it weren't so serious. But people are making the argument that this new budget represents class warfare. Class warfare was what we had for eight years. It's time now to level the playing field.

The question is, will this budget trickle down -- pardon the phrase -- to the weak working class?

The working poor -- that term is an oxymoron. We've got to do better by the weak working class in this country. This money eventually has got to get down to everyday people.

KING: And we'll ask Bob Woodward's thoughts on that. And as obvious, you see the crowd behind him. That's the forum that he's been conducting today -- a big town hall.

Who's leading the Republicans?

That's tonight Quick Vote. Go to CNN.com/larryking and cast your ballot. You can vote for Rush Limbaugh or Michael Steele. We've got another election.

We'll be back after this.

(COMMERCIAL BREAK)

KING: Before Bob comments on what Tavis had to say, it may not be a major economic story, but it is $45 million and Manny Ramirez is coming back to the Los Angeles Dodgers for two years, $45 million.

Ah, well, Bob, we all -- we all work in the corn fields.

All right. What do you make of what -- of what Tavis just said about where the president has to go with this?

WOODWARD: Well, he, he's got this giant task. I mean it is an economic convulsion. It is a convulsion in lots of other areas. And the question is are the institutions that exist up to the task?

Just to take two quickly. Our business, the news media, we've been slow to change and adapt to the Internet. And we're paying a price for that.

Another is the Congress. If you look at the issue of energy, somebody was telling me the other day there are 30 -- count them -- 30 committees or subcommittees in the U.S. Congress that deal with energy issues.

So how can you make sense of out of that and get a policy through in a reasonable period of time? These institutions, including our own, are going to have to change.

KING: Tavis, Obama's economic team was on Capitol Hill today. Fed Chairman Ben Bernanke was grilled about the latest bailout of AIG.

Take a look and then comment.

(BEGIN VIDEO CLIP)

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: AIG exploited a huge gap in the regulatory system. There was no oversight of the financial products division. And I share your concern. I share your anger. It's a terrible situation. But we're not doing this to bail out AIG or their shareholders, certainly. We're doing this to protect our financial system and to avoid a much more severe crisis in our global economy.

(END VIDEO CLIP)

KING: Tavis, where is it all going?

SMILEY: Well, you heard those two words again, Larry -- there was no oversight. We keep coming back to this issue of accountability or the lack thereof.

The Obama -- the Obama administration has a new Web site called Recovery.org that allows us to see the transparency the Obama administration wants us to see about how the money that they are talking about is going to be spent. I think that's a good move. Kudos to the Obama administration.

But, again, it's about accountability. I said earlier the American people are angry for good reason. And they're angry because what they keep seeing are these bailouts of these major institutions. Now, we understand that the backbone of our infrastructure has got to be shored up so that the rest of the country can breathe.

But at some point, again, I repeat, Larry the question is whether or not this money ever gets to the weak working class.

Does it get to everyday people?

And if that doesn't happen, my sense is that psychologically, the American people can never turn the corner here. And again, nobody begrudges the rich. Nobody begrudges these corporations being shored up. But we do not have in this country, Larry, a poverty agenda.

We had three presidential debates between Mr. McCain and Mr. Obama, when they were running. The word poverty never came up. And all I'm saying is that we have got to have a poverty agenda in this country for those who are falling behind. And if we don't pull these people up at some point soon, I think the situation is going to get worse.

You asked where it's headed? I don't know where it's headed, but it's a very good place, Larry.

KING: Bob, can you be optimistic?

WOODWARD: Sure. I mean, look at Warren Buffett, the great financier, said the economy this year is going to remain in shambles, was his public word.

KING: Right.

WOODWARD: And then he said, at the same time, our best days are ahead and things are going to get fixed at some point.

I think Tavis is right. You know, the clock is running on all of this -- all of these proposals and these ideas and the bailout of the insurance firm AIG -- so far $180 billion. That makes the baseball players' salaries look small.

That is a giant amount of money. Where it's going, who's getting it, whether any of it will come back to the taxpayers are big questions. And if some of this doesn't start moving, there's going to be a political price to pay.

KING: Tavis, do we demand accountability, do you think?

SMILEY: We don't. And that's the point I was trying to make earlier, Larry. And particularly, I'm concerned about this election. And I want to be clear about this. I want Barack Obama to be a great president. I believe he can be a great president, but only if we help make him become a great president.

Every speech he gives, Larry, every speech he gives now, he's talking about hold me accountable. He says that in every speech, hold me accountable. I can't do it by myself.

Again, this new Web site Recovery.org, he's saying clearly it's about accountability.

But here's our problem. And I'm especially concerned about it now. Because we are so excited as a country about the symbolism of his victory, I don't want us to get stuck on the symbolism and never get to the substance. It would be tragic to look up four years from now and have squandered a possibility to really move America closer to becoming a nation as good as its promise.

I believe that this moment is so pregnant with possibility. I believe our country, for all the negativity that we see, is potentially on the precipice of greatness. But it will only happen if we make elected officials honor the promises that they made.

KING: Well said.

SMILEY: Their -- how might I put this -- their accountability, Larry, is our responsibility.

KING: All right, let me get a break and we'll be right back.

Ahead on LARRY KING LIVE, the late night guys are jumping all over the Republicans' family feud and we're going to share a few laughs in 60 seconds.

(COMMERCIAL BREAK)

KING: Political infighting is the gift that keeps on giving to late night television.

Let's look at some of last night's fare. The targets -- Rush Limbaugh, Michael Steele and the GOP.

(BEGIN VIDEO CLIP FROM "LATE LATE NIGHT WITH JIMMY FALLON," COURTESY NBC)

JIMMY FALLON, HOST: Just before I went on, Rush Limbaugh called me up and said he wants me to fail.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP FROM "THE COLBERT REPORT," COURTESY COMEDY CENTRAL)

STEPHEN COLBERT, HOST: Michael Steele's plan to revitalize the Republican Party. Jim, he told "The Washington Times" on February 19th he wants to apply conservative principles to "urban suburban hip-hop settings."

After all, what is a gated community but a super high-end ghetto?

(END VIDEO CLIP)

(BEGIN VIDEO CLIP FROM "THE LATE SHOW WITH DAVID LETTERMAN," COURTESY WORLDWIDE PANTS INC.)

DAVID LETTERMAN, HOST: What about this bonehead Rush Limbaugh, honest to God?

He was the keynote speaker at some function and he comes up. He -- he looks like an Eastern European gangster, you know?

(LAUGHTER)

LETTERMAN: He's got the black jacket on with the black silk shirt and it's unbuttoned like, oh, yes, when you think Rush Limbaugh, you think ooh, let's see a little flesh.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP FROM "THE DAILY SHOW WITH JON STEWART," COURTESY COMEDY CENTRAL)

JON STEWART, HOST: I wonder which luminaries spoke this year.

RUSH LIMBAUGH, RADIO TALK SHOW HOST: This is the voice of the new castroni (ph), by the way, guys that have lost their guts. You can't say, Mr. Limbaugh, that you want the president to fail.

UNIDENTIFIED MALE: Some in the media like to think that the conservative movement is on the way out.

LIMBAUGH: And, of course, the media today is a bunch of hacks.

UNIDENTIFIED MALE: The press is biased, prejudiced, not very intelligent and will not report our message.

STEWART: I think he's talking about me.

(END VIDEO CLIP)

KING: When we come back, more with Tavis and Bob.

Don't go away.

(COMMERCIAL BREAK)

KING: We're back with Tavis Smiley and Bob Woodward.

Tavis Smiley, of course, in Philadelphia at the famed Constitutional Assembly.

All right, Bob, we'll start with you this go-around.

What do you make of this whole -- this whole Rush Limbaugh thing?

(LAUGHTER)

KING: You can't say it without laughing, but what do you make of it?

WOODWARD: Well, look, he's a force. And the new head of the Republican Party criticized him and said Limbaugh was only an entertainer. And the wrath of God and the Republican base came down on him and so he apologized. He realized that you can't bite Rush Limbaugh and lead the Republican Party. And I think that's -- that's absolutely true.

But, you know, it's part of the show. And the Republicans don't have a whole lot of influence. So it is a lot of show.

I was fascinated and very fascinated with what Tavis is saying about accountability. And I think what he's saying -- he's endorsing much more serious investigative reporting, because that is how public officials and government can be held accountable for what they say and then how it supports or contrasts with what they do.

KING: By the way, Tavis, we have an e-mail question for you from Killeen, Texas -- from Char in Killeen, Texas: "Mr. Smiley, do you think the Republicans are afraid of Rush Limbaugh? Why don't they stand up to him when they disagree with what he says?"

SMILEY: Let me say right quick, Bob Woodward just -- what he said a moment ago, he was absolutely right about. There's an accountability on the part of the media, as well. And we have to make sure that as we move through the 100 days this administration, the media doesn't fall down on its job the way we did in the Bush administration -- not asking the kinds of questions, not raising the kinds of issues about the war and other issues that we should have been on top of.

And I'm glad Bob raised that, because Bob is a good example. Bob is a good example of the kind of investigative reporting that can make America a better country.

To your question, Larry, from the e-mail, I don't think that they are necessarily afraid of Rush Limbaugh. But I think Bob Woodward was right about this, as well, that Rush is more than an entertainer.

And with all due respect to my friend Michael Steele, the mistake he made was to dismiss him as just an entertainer.

There are people who take their news cues from Rush Limbaugh. They form their policy -- their beliefs about policy and political issues from Rush Limbaugh.

And here's the last thing that Michael Steele has to understand. One, to get into any tit for tat, back and forth with Rush Limbaugh distracts you from the serious job you have as chairman, number one. And you don't have any time to waste on that.

But the other thing is, given Rush's platform, Larry, you are never, Mr. Steele, ever going to have the last word with Rush Limbaugh. You'd never have the last word. So don't let Rush pull you into these kinds of distractions, quite frankly.

KING: But if he is a force, Bob, why didn't McCain win the election?

WOODWARD: Well, he's a force in the Republican Party. But he -- he doesn't represent...

SMILEY: And he didn't like John McCain.

WOODWARD: Yes. That's quite true. And questioned...

SMILEY: That's the main reason, yes.

WOODWARD: Yes. But I don't think Rush Limbaugh can determine who's going to be president. I don't think that's going to happen ever. But he is this force. And you, in the party, you've got to deal with him. I think Michael Steele was right, that a lot of this is entertainment and a lot of good fun. And, you know, in terms -- and Limbaugh was right when he says he doesn't control any policies. He doesn't control the policies. But I've been in states in this country -- in one case when I was physically in danger and somebody started saying, well, what does Rush think?

Is this a good thing or a bad thing?

And so he has lots of influence.

KING: Let me get a call.

Gainesville, Georgia, hello.

UNIDENTIFIED FEMALE: Hello.

KING: Yes?

UNIDENTIFIED FEMALE: Hi. This question is for Tavis Smiley.

KING: Go ahead.

UNIDENTIFIED FEMALE: Well, for both of you, but first, Tavis Smiley. Do you agree with the tax increases on churches, universities, charities, environmental groups and reducing the tax benefits of owning a home?

KING: We only have a minute, Tavis.

SMILEY: Yes, I think this tax issue is very tricky. The bottom line is we can't continue to give tax breaks to the rich and the lucky and not find a way to increase the minimum wage to a living wage for everyday people. That's the short answer.

KING: So, Bob Woodward, you -- are you personally optimistic?

WOODWARD: I mean you get up and go to work every day and you try to figure out what's going on. So you're optimistic. Look, this -- Obama has got a lot of talent. There is a lot of centralized control in the White House. And they're trying to figure these things out. And we're going to measure them month by month.

But there is so much on his plate, not just in terms of the economy, but in foreign affairs. I mean it would keep 10 presidents busy.

KING: Well put.

Tavis Smiley, the commentator, radio and TV personality. His new book is "Accountable

Making America As Good As Its Promise."

And Bob Woodward, our dear friend, the Pulitzer Prize winning journalist and "New York Times" best-selling author.

Coming up, are the Republicans playing into the Democrats' hands with the Rush Limbaugh story line?

That's next.

(COMMERCIAL BREAK)

KING: Here we go. The disparity in the Republican Party -- that's the essence of the topic ahead.

And with us in Los Angeles, Arianna Huffington, the co-founder and editor of Huffington.com.

In Washington, Nancy Pfotenhauer, the Republican strategist, was a senior adviser for John McCain.

Here in L.A. Stephanie Miller returns to LARRY KING LIVE, host of her own radio show.

And in Portland, Oregon, Lars Larson, host of his own show, known for being right on the left coast.

All right, Arianna, is Limbaugh dividing the party or constructing it?

ARIANNA HUFFINGTON, EDITOR, HUFFINGTONPOST.COM: Oh, Limbaugh is obviously just talking to the base -- the 20 to 22 percent of Americans who stayed with George Bush right to the end no matter what. That's who he's talking to.

And I really don't think that he is the main danger for the republic. I think the main danger for the republic is Karl Rove and people like that, who go on the shows, including George Stephanopoulos on Sunday, and try to rewrite history -- try basically to make us forget how we got here and blame Barack Obama for having to spend the hundreds of billions of dollars he has to spend in order to got us out of this mess.

KING: In other words, they caused the problem and they're blaming Obama?

HUFFINGTON: Exactly.

KING: Nancy, what do you make of the Rush impact?

PFOTENHAUER: You know, I think it's something the Democrats are enjoying. There's an old rule in Washington. That's when your political adversaries are hurting themselves, you don't get between the dog and a lamp post. So I think they're having a good time. I think it's less of an issue among Republicans. I think you have party leaders who are watching Mr. Steele's performance very much, and are somewhat concerned about what occurred. And then you have, as Arianna pointed out, you have the conservative base that cares very much about Rush Limbaugh, and that every day tune to listen to him.

And, you know, this is going to have a little bit of a disaffection impact I think on the conservative base. They weren't happy already. So --

KING: Stephanie, what effect can Rush have if he is, in affect, preaching to the choir?

MILLER: I don't know.

KING: What effect on the election or on politics?

MILLER: I thought I was the only one for years listening to Rush and thinking, is he on drugs? As it turns out, he was. I love this, that he literally is the leader of the Republican party. And more pathetic than that, these guys can't grovel enough to apologize to him and tell him they're sorry and kiss his ring. It's hilarious.

KING: Lars, what do you make of the Michael Steele thing?

LARSON: I got to you something, Michael Steele is, of course, the elected leader. Rush is the heart and soul of the party. He has the freedom to remind us of where the party ought to be. Something that a lot of RINO Republicans have forgotten about, as they moved away from the real values of the party. That's what I think he does for the party.

KING: On his radio show today, Rush brushed off the Steele story as old news, and took fresh aim at Obama. Check it out.

(BEGIN VIDEO CLIP)

LIMBAUGH: Is the idea of the remaking of America into a so- called socialist paradise so important to you that you will sit around and happily, without any concern, watch your wealth dissipate and everybody else's? This is Obama's economy. They're trying to slough this off on Bush. They're trying to say all the deficits are Bush. They're not going to get away with that.

(END VIDEO CLIP)

KING: I'm a little puzzled.

MILLER: This is what I love. He says, I hope the president fails, and his listeners are like, that's right, Rush. Meanwhile, they're losing their health care. They're going, honey, as long as we have electricity, listening to Rush, everything will be good.

KING: Arianna and then Nancy.

HUFFINGTON: What is stunning is that he can be so disconnected from the facts and from reality, to forget or pretend he is forgetting that 1.6 trillion dollars were added to the deficit by George Bush, to forget that it was the Bush policies of deregulation that allowed what happened on Wall Street to happen, and that had led to the suffering of millions of Americans. And instead of reporting, people are not allowed to forget that and disconnect the past from the present.

KING: Nancy, what do you make of hoping for failure. Supposing it worked, and there were maybe some socialistic inclines, but more people went to work and more people had health care? Why would that be bad?

PFOTENHAUER: Well, I think the point is that Rush -- and I agree with him wholeheartedly on this -- believes these policies are antithetical to the American dream, and absolutely the wrong direction for the economy. I would be delighted to challenge the other two panelists on this one. What he has put together in the so-called stimulus package is an embarrassment. You had Nancy Pelosi and Harry Reid writing the bill. You've put in 46 billion for 15 programs that OMB already declared ineffective. You have 300 million dollars going for golf carts, for heavens sake. Then turns around and, in a downturn economy, and advocates a tax increase. At the same time, he is making protectionist noises. This is a nasty economic cocktail, and it is going to hurt the American people. And I think that's what Rush Limbaugh has been trying to underscore. And he is exactly right.

KING: If he fails, Stephanie, that will be good?

MILLER: I guess that is what Nancy and her friends want. As long as you have a place to listen Rush on the radio -- if he fails we all fail.

KING: If his policies fail, he fails, right?

MILLER: Exactly. To me that seems treasonous.

HUFFINGTON: I would love to hear Nancy and Lars tell us why they think we got to the place we are now? Which of George Bush's policies, in terms of tax cuts, in terms of deregulation, got us here?

KING: Lars, a fair question.

LARSON: Let's go back to late 1999, when the Clinton administration pushed for the American government to be behind making loans to people on mortgages that they could not afford, and qualifying people who, by the numbers, should not qualify for mortgages. It was in fact the dream to own a house, but only if you can afford to own it. And those kinds of policies led to us where we are.

The fact that we had to fight a war, that both the Congress and the president approved of, the fact that tax cuts did a great deal of good for this country -- Larry, you asked the question about people going to work. It would be great if people go to work. But if the short term policy of putting people to work means long term socialism, and we get the same kind of thing that Europe has got, socialized medicine, high unemployment, and morbid economies -- I want America's economy to be vibrant. That's good for everyone.

KING: In effect, Lars, you are saying that the New Deal failed?

LARSON: The New Deal did fail. People have forgotten that the lesson, as told very well by Amity Shlaes, is that at the end of the '30s, we had just as high unemployment as the average of the entire ten years of the Depression.

KING: We'll be right back. Let me get a break. Who is leading the Republicans? That's tonight's quick vote. Still time to cast your ballot. Go to CNN.com/LarryKing. Vote. We've got a new election, Limbaugh or Steele. So far, 79 percent say it's Rush. More after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

STEELE: Rush Limbaugh is an entertainer. Rush Limbaugh, his whole thing is entertainment. Yes, it's incendiary. Yes, it's ugly.

LIMBAUGH: It is time, Mr. Steele, for you to go behind the scenes and start doing the work that you were elected to do, instead of trying to be some talking head media star.

(END VIDEO CLIP)

KING: We're back with our panel. Democrats and liberal groups are doing their best to handcuff Republicans to Rush Limbaugh. Take a look at part of a 30-second spot from Americans United.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Who was the leader Republicans hailed as a hero last weekend? Was it Sarah Palin?

GOV. SARAH PALIN (R), ALASKA: No, no, no.

UNIDENTIFIED MALE: Bobby Jindal?

GOV. BOBBY JINDAL (R), LOUISIANA: No, no, no.

UNIDENTIFIED MALE: Michael Steele?

MICHAEL STEELE, RNC CHAIRMAN: No, no, no.

UNIDENTIFIED MALE: Mitch McConnell?

SEN. MITCH MCCONNELL (R), KENTUCKY: No, no, no.

UNIDENTIFIED MALE: Then who? Not Rush Limbaugh?

LIMBAUGH: Yes, yes, yes, yes, yes, yes.

(END VIDEO CLIP)

KING: Is that effective, Arianna?

HUFFINGTON: You know, I honestly think that you should not be underestimating your enemy. I think that Rush Limbaugh is the massive, shiny object that Joan Steal (ph) talks about that distraction us from the real enemies. The people who are really falsifying reality are the people that Democrats and anybody who cares for this economy need to be challenging. The people who are saying that it was not George Bush and the Republicans who got us here.

We need to understand how we got here in order to get out of here. And it is going to take longer than anybody hopes to get out of this mess. It is important that people are using patience to understand what is happening.

KING: Nancy, is she right? PFOTENHAUER: Well, I obviously disagree with her assessment. Clearly, we can debate and I would love to how we got to where we are. Actually, let me answer one of Arianna's earlier points, and say that the thing that George Bush did wrong, and that Republicans as well as Democrats did wrong, is they spent the taxpayers' money carelessly. They were -- it was a taxpayer funded party for eight years.

Now, my problem is that President Obama is George Bush on steroids when it comes to spending. He has met him and raised him. And he has added, like I said, tax increases into the mix. If he were advocating economic policies that were good for this country, I would support him. I have supported him when he talked about things like entitlement reform. But when he advocates things that are bad for Americans, it is people's duty to challenge him. That's patriotic.

MILLER: Nancy, Barack Obama is doing the exact same thing he said during the campaign; 95 percent of Americans are getting a tax cut under this plan. It is the top one percent that is finally paying their fair share. You, Larry.

KING: And Rush.

PFOTENHAUER: How can they pay more than the 70 percent they already pay?

MILLER: Are you pretending that George Bush's policies didn't get us where we are? We inherited this recession, these policies.

KING: Lars, let Lars get in.

LARSON: Stephanie forgets about that energy tax that's included in there, that is going to hit the poor harder than anything else. This is crazy. And Arianna's view that in this bipartisan administration of Barack Obama, that if you disagree with the president, you disagree with the Democrats, all of a sudden you are the enemy. Isn't that the kind of talking that we were told that was not going to happen in this new administration?

PFOTENHAUER: Exactly.

HUFFINGTON: The point I made, Lars, is to distinguish Rush Limbaugh's role in what is happening from the role of all those Republicans, including you, including Nancy, including Karl Rove, going on the shows and are basically falsifying reality, falsifying facts, having no new ideas about how to get out of this mess. These are the people we need to be challenging, because it is that kind of talk that is completely misleading the American public.

MILLER: Yes, how does President Obama fail without America failing? Explain that to me.

KING: Let me get a break. We'll pick right up with Nancy. More to come on this edition of LARRY KING LIVE. Next your blog comments. What are you saying about tonight's show? Find out in 60 seconds.

(COMMERCIAL BREAK) KING: Let's check in with our blog correspondent, David Theall. David, what are the folks saying tonight?

DAVID THEALL, LARRY KING LIVE BLOG CORRESPONDENT: Hey Larry, it's another fun night on the blogs. Just as you are debating on the panel, it is certainly happening on the blog, talking about the Grand Old Party and the debate happening between Mr. Steele and Rush Limbaugh, and where the Republicans are going.

A couple quick comments. Somebody says "they're hopeless," talking about the Republicans. Another says, "please keep Limbaugh in the news. It is destroying their party."

Yet others are saying "Michael Steele is the right man for the job at the right time."

We are also hearing from people like Michelle tonight. She says, "the GOP," in her mind, "equals gone, obsolete, pathetic." Yet Bradley counters that with this: "Republicans lost big in 1992 and staged a come back for the ages in 1994. Democrats also scratched their way back to power. Anyone who counts the Republicans out is ignoring political history, if not political certainty," says Bradley.

We're going to continue this discussion, as we always do, on the blog, CNN.com/LarryKing. Look for that blog link. Click it. Jump in. We look forward to hearing from you. Larry, back to you.

KING: Thank you, David. As always, David Theall, right on top of the scene. Coming up, more on Rush, the Republicans and the fight for the GOP power scene, when LARRY KING LIVE returns.

(COMMERCIAL BREAK)

KING: A couple quick notes. Lest you think that CNN takes credit for the story about Manny Ramirez resigning with the Dodgers, or signing with the Dodgers, it was ESPN that reported it a while ago, and we just reported what they said. When we said in introducing Arianna Huffington that it was Huffington.com, no it is HuffingtonPost.com. We like to make everything right.

(NEWS BREAK)

KING: Nancy, the problem with all this is does it bring discord? Does it take away from real issues when we get into basically personality stories?

PFOTENHAUER: You know, I think it is a distraction. And I think that's why the Democrats love it and they want to keep it going. I think the Republicans will turn the page, move on, and start really spending their time doing what they should be doing, which is articulating solutions to the problems that we're facing. And, frankly -- and pointing out how what Obama is advocating, the Obama administration is advocating, these aren't new ideas. They have been tried and they have been tried several times and failed. You can point to places like Germany and France that have done almost exactly what the Obama administration is advocating. What you see there is a third lower quality of life. You see lower economic growth. You see higher taxes and you see higher unemployment. So, it's not a recipe for success. It is a recipe for mediocrity at best. That's why Republicans have to step forward and articulate their solutions.

MILLER: You are right, we should stick to the same policies that got us where we are now. I agree with you.

PFOTENHAUER: I think there need to be real changes.

KING: You criticized the Bush policy?

PFOTENHAUER: I did on the record at the time.

MILLER: Nancy, you are right about one thing. We love this episode of Republican. It's delightful and it's not solving any of the serious problems that the country is facing. You know who is it good for? Rush Limbaugh. He loves this attention.

If I could say something tonight that gets me that kind of attention, like maybe Rush Limbaugh should be executed for treason. How about that?

KING: It is true that any kind of -- Rush is a personality -- is enjoying this, isn't he?

LARSON: Of course he is. You know I think this is good for the party, in this sense: it reminds people to take a look at what the values are. What do they believe the party really represents? And reminds people like Michael Steele, when you call the comments of Rush Limbaugh ugly and divisive, I don't think they're ugly and divisive. An awful lot of us do the best we can to define what the party means to us, and what it ought to stand up for, and how not to try to behave like Democrats to get more votes. That's not the way that any party has ever won elections.

KING: Arianna?

HUFFINGTON: Actually, right now, Lars, you know that the Republican party has a real problem, in terms of appealing to the majority of Americans. In the latest the "New York Times" poll --

LARSON: We disagree.

HUFFINGTON: -- the Republican party did not get more than 30 percent in any category, women, men, southerners. They got about 25 percent of the 18 to 25-year-olds. Unless the party wants to commit suicide, it will start moving beyond the Rush Limbaugh divisive ugly message.

LARSON: I disagree with you.

HUFFINGTON: And start appealing to the majority of Americans. It's not a matter of whether you disagree with me. It is a matter if you disagree -- (CROSS TALK)

MILLER: What do you stand for? What does the Republican party stand for, other than being the party of no, against everything that Barack Obama is for? What are you for?

LARSON: Small government, individual liberty, maximum individual liberty, minimum government intrusion into your life, small government, low taxes. It's very easy.

MILLER: The party of warrantless wiretapping and the party just gave us a trillion dollar deficit, you're the party of fiscal conservatives and government out of our lives?

PFOTENHAUER: I love this blaming the deficit -- you had actually midwifed under Democratic rule, faster increased spending. Spending increased more quickly when Democrats took over Congress under George Bush than when Republicans were there under George Bush. And what we're seeing right now, with -- with Barack Obama is ridiculous. He is -- his increase over and above, just what he added on since he has come into office, not what he inherited -- not what he inherited.

MILLER: -- the mess that George Bush got us into.

(CROSS TALK)

PFOTENHAUER: He added on 540 billion dollars over and above what he inherited.

KING: Doesn't surplus mean you have to spend? That's what a surplus does? That's what an incentive plan does?

HUFFINGTON: Basically, Republicans right now are sounding like Herbert Hoover. Even if the situation were not as extreme as it is now, even if unemployment did not keep rising, if millions were not going to be thrown out of their homes, then it would have been a very different situation, and different decisions would be made. George always said that he who controls the past controls the future. Right now, Republicans are trying to rewrite the past, to rewrite history, and they should not be allowed to do that.

KING: But is stimulus' purpose spending? Isn't it's purpose to spend? What is a stimulus?

LARSON: But it has to be meaningful in some way. Just digging holes and filling them in, that's ridiculous. And, Larry, to artificially raise the price of energy, the way cap and trade will do, on top of -- of economic woes like this, is insane policy.

KING: All right. We'll take a break and come back with our remaining moments with this panel, which, I summation, does not agree. We'll be right back.

(COMMERCIAL BREAK)

KING: Stephanie, admittedly, whether he inherited, didn't inherit, inherited part of it, you've got to admit --

MILLER: He inherited it. Larry, he's been in for six weeks. Can you with a straight face call this Obama recession? Are you kidding me? What are you channeling Sean Hannity?

LARSON: Larry, does he have to make the deficit even deeper end and even bigger and spend more and put us into even more --

KING: I don't know, I'm not an economist. I don't know. Nancy?

PFOTENHAUER: Christina Romer, who's one of his top economic advisers, she and her husband did the scholarly research that showed if you want to stimulate or get a positive impact on the economy, it's better to cut certain taxes, rather than increase government spending. Government spending has not --

First of all, the government can never inject anything into the economy it doesn't first remove. The real question is, are these resources being spent in a way that is more likely to be stimulative than if they were left in the private sector. And there is no evidence, whatsoever, that government's going to do that the right way. And when you look at this --

MILLER: -- is spending. And by the way, Lars, it's not digging a hole and filling it in. They're building bridges and things that we need.

(CROSS TALK)

KING: One at a time.

PFOTENHAUER: They're spending 300 million dollars on golf carts.

LARSON: Do you think the economy will be stimulated by that 9.2 million dollars one mile bike path in downtown Minneapolis? Nine point two million dollars for a mile of bike path, what's that going to stimulate?

PFOTENHAUER: This is the pork barrel bill to end all pork barrel bills.

HUFFINGTON: It's very easy to find individual things that should not be in the bill.

LARSON: A lot of them, thousands of them.

HUFFINGTON: There's no question that what's Nancy's saying doesn't make any sense at all. You have a major liquidity crisis in this country. We would all love it if banks were lending money. We would all love it if small businesses could get credit. It's not happening, Nancy, and you know it's not happening.

PFOTENHAUER: Arianna, they are borrowing and taxing.

HUFFINGTON: -- needs to increase the deficit. And you know that. I wish you could just be more honest about what's really happening.

PFOTENHAUER: Arianna, I wish you could be more informed, then, about what you're discussing, because the government cannot inject in what it doesn't first take out. We are massively increasing our debt at this point, and he's increasing taxes in a recession. This is Econ 101. If you tax something, you get less of it. If you subsidize it, you get more of it. He is taxing prosperity. We will get less of it. He subsidizing --

(CROSS TALK)

HUFFINGTON: This is equally valid, that during the campaign, you said that the one part of Virginia was the real Virginia and one part of Virginia wasn't. That's the same kind of rubbish that you are repeating right now, and it is actually wrong.

LARSON: Oh, but Larry, Stephanie --

KING: Lars, didn't the private sector play any part in this problem?

LARSON: Oh, of course they did, but regulated heavily by the government and prodded by the government --

MILLER: They weren't regulated. That's the problem.

PFOTENHAUER: Well, a huge part of it was Fannie and Freddie and that they were basically --

LARSON: And by the way, do you remember that George Bush asked for regulation in '03 of Fannie and Freddie to clamp it down and Barney Frank and company said, you can't stop poor people from getting loans. And he asked for regulation.

PFOTENHAUER: Exactly. You had Barney Frank, you had Chris Dodd, you had the Democrats basically preventing regulation of Fannie and Freddie. It's just rewriting history.

HUFFINGTON: You may want to remember who was in charge of the Securities and Exchange Commission.

KING: We're out of time. Thank you, Arianna Huffington, Nancy Pfotenhauer, Stephanie Miller, Lars Larson.

Here's the latest on the Dodgers and Manny Ramirez. According to Major League Baseball, the Dodgers and Ramirez made significant progress in contract talks today. No agreement has been reached. "I'm still working on it, but it's yet to be finalized" said Scott Boras. He's Manny's agent. Usually when they talk about that, it's about to be finalized, knowing Mr. Boras, responding to reports that the deal was done. Let's call it about to be done.

Tomorrow, a dramatic custody case that involves two countries, two court systems, two families, and one little boy in the middle of it all. That's Wednesday night's LARRY KING LIVE. Now Anderson Cooper and "AC 360."