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Piers Morgan Live

Romney's Damage Control; Libya Attack is Terrorism; Battleground America; Actress Kelly Rutherford Involved in Tragic International Custody Battle Over Her Two Young Children

Aired September 19, 2012 - 21:00   ET

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

PIERS MORGAN, HOST: Tonight, a moment of crises or a moment of truth? The no-longer secret Mitt Romney tapes. In this corner, Romney defended by Governor Bob McDonnell in Virginia and in this corner top Democrat Jennifer Granholm.

Plus battleground America. One-on-one. The question that could decide this country's future. Tonight it's Nic Kristof and Larry Kudlow on America's $16 trillion national debt and Romney's 47 percent gaffe.

And from sitcom star to political animal, Kelsey Grammer. Why it's been an endangered species, a Republican in Hollywood. I'll ask the good Dr. Frasier Crane for his prescription for "Keeping America Great."

(BEGIN VIDEO CLIP)

KELSEY GRAMMER, ACTOR: I think smaller government is a good idea. Always have. I think lower taxes are a good idea. Always have.

(END VIDEO CLIP)

MORGAN: This is PIERS MORGAN TONIGHT.

Good evening. We start with breaking news. You're looking at live pictures from Miami where Mitt Romney is on stage at a rally. We'll keep an eye on that for you later on.

Also breaking news on the attack in Libya that killed Ambassador Christopher Stevens. The country's terrorism chief now says it was a terrorist attack but it was not planned in advance. We'll have more on that in a few moments.

But we begin with Mitt Romney early today. He told an audience in Atlanta that President Obama believes in redistribution of wealth and he does not.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: The tape came out a couple of days ago with the President saying yes, he believes in redistribution. I don't. I believe the way to lift people and to help people to have higher incomes is not to take from some and give to others but to create wealth for all of us. To create an economy so strong it lifts everybody.

(END VIDEO CLIP)

MORGAN: Virginia's Republican governor, Bob McDonnell, tells me why he's standing up for Mitt Romney. Welcome.

GOV. BOB MCDONNELL, (R) VIRGINIA: Hi, Piers. Good evening.

MORGAN: Let me start with a simple question for you. Did you agree that when Mitt Romney said that 47 percent of Americans are victims who basically scrounge off the state?

MCDONNELL: Well, mathematically the number was right, 46.4 percent of the people pay no federal income tax. I certainly wouldn't have said it that way. And I think Mitt Romney has agreed that he shouldn't have said it either. I think the broader point, though, Piers, is with this lousy Obama economy, 8 percent unemployment rate for 43 months.

There are a lot of people are hurting. They can't work. Food stamps are at the highest level and -- in the history. Entrepreneurship is at the lowest level in 30 years. And so we've got to do better. We've got to have a job creator. So yes, I agree with that part. We need more taxpayers created because more people are working.

MORGAN: Here's the problem you had, is it, for the American people to throw out Barack Obama they've got to believe that Mitt Romney understands their -- their cares and concerns and can do something about it. It's very hard for them, when all they see in the last 48 hours, is a sound bite of him saying, he doesn't care about nearly half of the population. His words not mine.

MCDONNELL: Well, it shouldn't have been said that way. And I think he said that -- he's admitted that was -- that was a mistake. But I didn't read the full context that way, Piers. I have read that he wants the economy to get better to create more taxpayers so more people will participate in funding governments so we can do something about this $16 trillion national debt.

I mean I think that's the larger takeaway. But he certainly wouldn't say it that way again. But the broader point about having a champion for the small businessman and a debt reducer and a job creator I think that's a good point. It's a big contrast with the President.

MORGAN: Let me just tell you the results of three polls. These are recent polls in three key states. One is Michigan, Mitt Romney's home state, obviously. Among likely voters. Barack Obama 52 percent, Mitt Romney 44 percent.

Then Virginia, this is your home state.

MCDONNELL: Yes.

MORGAN: Barack Obama 50 percent, Mitt Romney 43 percent. Then Wisconsin. Paul Ryan's home state. Obama 52 percent, Mitt Romney 45 percent. A clear pattern now emerging in those three states that have particular resonance to you and to Paul Ryan and Mitt Romney of a -- of a lead and momentum in the favor of the President. What are you guys going to do about this?

MCDONNELL: Well, Piers, I'd rather be ahead than behind right now. The fact is, five months ago we were down by eight. It's now a margin of error. We still got work to do. I think the ground game is going to be critically important. We're doing a lot better than we did four years ago in Virginia.

But I would say that what Mitt Romney has done well is being able to make out the case why Barack Obama shouldn't be re-elected. That is 8 percent unemployment rate, 43 months. A crushing and unsustainable debt that this president has failed to lead on.

But what he hadn't done I think as well as we need to do is to say now here's what I'm going to do, here's the case for what a Mitt Romney to get you and the average American family, the middle class, on the road back to the American dream and to prosperity.

I think that's going to be the closing argument. The last four -- the last 45 days, Piers. And I tell you, the independent voters in Virginia, they just care about getting results. They don't care about party politics. They care about which guy has got the best ideas on jobs, energy, taxes, spending and the military here in Virginia.

And I think Mitt Romney make an effective case down the road. I think it'll be a close case. But I think -- close vote, I think Romney wins, though, at the end of the day in Virginia.

MORGAN: I mean, I admire your optimism. But I mean the last two weeks have been a complete disaster as far as the Romney campaign is concerned. And senior Republicans like yourself --

MCDONNELL: We've had better weeks.

MORGAN: Yes. And you've got to start be feeling rather twitchy that if this carries on then Barack Obama is not going to win probably not even -- not even in a close race. It might be quite a comfortable margin if this carries on. So this campaign has got to regroup, refocus and do something pretty sharp, hasn't it?

MCDONNELL: Well, I'm not nearly that pessimistic at all. Like I said, Barack Obama won Virginia by seven. I won by 18 the next year. So the independent voters really make up their mind oftentimes right near the end. And I don't think the more Mitt Romney -- I think I agree with you on this. Mitt has got to continue to focus what he started this campaign about six months ago in earnest and that is that we can do a lot better.

The President has tried, his policies have failed. You can't have four -- four years of unemployment over 8 percent and a crushing debt and the gas prices doubling and entrepreneurship at a low. And all -- this high level of people on food stamps and call that a success for the middle class. So he's got to then make it very clear why a Romney presidency will mean better access to that American dream for people. And -- I'm not at all discouraged. Forty-five days is a long time in politics. And I think the debates are going to be more important.

And here's the other thing. I think we're going to have financial parody down the road. Four years ago, we got crushed, 2-1 in Virginia, on spending and so, Piers, I think that we've got a descent chance to win. It's margin of error, four points, things can change quickly and I think the independent voters still really haven't made up their minds yet.

MORGAN: Governor McDonnell, I admire your optimism and you make some valid points. It is a long way to go yet and Mitt Romney will certainly have the financial fire power if he can just stop committing gaffes.

Anyway for now, Governor, thank you very much.

(LAUGHTER)

MCDONNELL: Okay, Piers. Thanks a lot.

MORGAN: And here to argue the other side is top Democrat, Jennifer Granholm, the former governor of Michigan, the host of Current TV's "The War Room with Jennifer Granholm" and author of "A Governor's Story."

Welcome to you. How are you?

JENNIFER GRANHOLM, CURRENT TV'S "THE WAR ROOM WITH JENNIFER GRANHOLM": I am great. Thanks for having me on.

MORGAN: Have you calmed down yet from your barn-storming convention performance?

(LAUGHTER)

GRANHOLM: It was so much fun, Piers. I must say. The crowd just really caused a wave and I rode it.

MORGAN: I was a bit worried you might explode on stage.

GRANHOLM: Well, it was a lot of fun, I can tell you that.

(LAUGHTER)

MORGAN: Well, I loved the enthusiasm.

GRANHOLM: Yes, I think --

(CROSSTALK)

MORGAN: There we go. Let's hear a bit over here.

(BEGIN VIDEO CLIP) GRANHOLM: Barack Obama. When America, when it was losing 750,000 jobs per month, who gave us a lift? Barack Obama. When American markets broke down --

(END VIDEO CLIP)

MORGAN: Quite a fabulous performance there, I got to say.

(LAUGHTER)

GRANHOLM: Well, I appreciate it. It was -- I really do attribute it to the crowd. And honestly, you know, in the back when you're doing this stuff they say you've got to keep going because they were worried about timing and -- so I kept going but the crowd kept getting louder and louder. And at one I just had to stop because they were chanting. They were totally into it because the message was right. That the auto bailout, if you will, the rescue saved more than just jobs in Michigan but all across the country. And calling out those states was a way to get them excited.

MORGAN: Well, let's turn to the big story that's erupting all over Washington and indeed America, which whether Mitt Romney's campaign has death charged itself through his own words. You heard there the argument from one of its supporters.

Do you think that he can survive this? I mean what is the view from the Democrats' side?

GRANHOLM: Well, obviously, I mean, Bob McDonnell, bless his heart for trying his best to put on a still upper lip. But honestly I don't know how he can diss half of the population. And it's not just dissing them. It was a condescending unbelievably insensitive way of insulting people by calling them all victims when nobody, as the President said, nobody wants to be a victim. So I -- you know, if this isn't the final straw, obviously he's got a couple of debates, three debates, to be able to resurrect himself. But I don't know what is.

MORGAN: I mean one thing that may save him is the fact we're in this new kind of news cycle industry where everything just last about in two minutes and already there's been a tape that's come out of your beloved leader, the President, apparently talking about his love of redistribution of wealth and the Republicans have reacted very fast to this. They've rattled out a new attack add. Let's take a look at this.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If you've been successful you don't -- you didn't get there on your own.

Because I actually believe in redistribution.

We suggest redistribution of wealth.

If you've got a business that -- you didn't build that. Somebody else made that happen.

UNIDENTIFIED MALE: We say this is the socialist Obama. Coming out of the closet.

(END VIDEO CLIP)

MORGAN: So what do you have to say to that, Jennifer?

GRANHOLM: Well, you know, first of all, redistribution, Barack Obama saying that he wants to make sure we have a fair society and we have Mitt Romney who's in favor of obviously redistributing up. So he wants to cut from the middle class and give the upper class tax breaks. He wants to preserve the tax breaks for those who make the most.

I mean redistribution cuts both ways, buddy, and I'm telling you, if we want to have a fair society, if we're all going to pitch in to provide the opportunities for people, then we -- want to make sure that we have a fair tax structure and that whole redistribution argument is totally baloney when you consider what Mitt Romney and Paul Ryan's plans have in store for people in the middle class.

MORGAN: And tell me this, though. Not withstanding Mitt Romney's capacity for gaffes, which is clear and present, and causing them problems, if you take the bigger picture, why should any president in America be re-elected when unemployment is over 8 percent?

GRANHOLM: Well, because the trajectory is right. We've had over two years of every consecutive month of job creation and when you look at the party that is obstructing the effort to create further jobs, when you've got a party who's every single one of them has signed pledges not to compromise with the President, you have to look and point the finger at who is causing the blockage of the President has.

The American Jobs Act, which is going to create a million jobs sitting in Congress for one year because the Republicans absolutely refused to create jobs in a way that in the past they have absolutely voted in favor of. The same kind of tax credits. Why wouldn't you not -- why wouldn't you want to stop the off-shoring of jobs by rewarding businesses that just shift jobs overshores through tax breaks for them.

Why wouldn't you want to stop that? But they refuse to do it because they do not want to give the President a win. That is a story that the President needs to continue to tell. He has created jobs in spite of the opposition that we've seen in Congress. And, you know, I hope that when November 6th comes around people will give the President a working majority so that he can get his jobs bill passed.

MORGAN: Jennifer Granholm, always good to have you on the show. Thank you very much.

GRANHOLM: Hey, you've got to come on my show some time. "The War Room". We want to make sure that we have you as a guest.

MORGAN: Well, as long as you don't shout at me like you did at that convention, I might be tempted.

(LAUGHTER)

GRANHOLM: Very good. That would be great.

MORGAN: I'll see you soon. Thanks for coming on.

GRANHOLM: All right. Very good.

MORGAN: When we come back. Breaking news out in the Middle East. New information on the deadly embassy attack that killed U.S. ambassador to Libya, Chris Stevens.

(COMMERCIAL BREAK)

MORGAN: Breaking news tonight on the attack in Benghazi that killed Ambassador Christopher Stevens and three other Americans. This country's counterterrorism chief says it was a terrorist attack but it wasn't planned. But was the ambassador on an al Qaeda hit list?

Joining me now is Fran Townsend, CNN national security contributor and a member of the CIA External Advisory Committee. Last month Fran went to Libya with her employer, MacAndrews & Forbes.

Fran, what do you know about this? There are two al Qaeda strands to this story that are breaking today. One is that the ambassador himself through sources close to him feared he was on an al Qaeda hit list and secondly that the ringleader for the attack may have been somebody who'd been at Guantanamo Bay and was released back to the Libyans by America.

What do we know about both these things?

FRAN TOWNSEND, CNN NATIONAL SECURITY CONTRIBUTOR: Well, first, let's start with the Guantanamo detainee. I have not yet myself confirmed it but we have seen reports that it's possible that Kumu, the guy who is one of the leaders of Ansar al-Shariah, that this is a splinter group from al Qaeda in eastern Libya related to al Qaeda and the Islamic Maghreb.

Kumu was a guy who had been with bin Laden in Sudan. He had worked for an Islamic charity in Afghanistan. He's sort of a known bad guy. We know he's in eastern Libya. And it would be natural that authorities would be looking at him and other leaders of Ansar al- Shariah if they believe that there is this link.

The -- as you point out, Piers, the director of the National Counterterrorism Center today testified that it was a terrorism attack. And if you're looking at terrorists in eastern Libya near Benghazi, he'd certainly be at the top of my list.

MORGAN: Where does this leave us in terms of going forward in the investigation?

TOWNSEND: Well, look, there is no question that given -- you know, when I had been in Libya, in Tripoli, and met with Ambassador Stevens, he had acknowledged to me in a long conversation that in fact there was an increase of extremism in eastern Libya. He had encouraged me myself to go to Benghazi to see that the situation there really was getting more concerning.

I will tell you, Piers, I had noticed when I was in Tripoli the rise of militias even in the center of Tripoli. And the ambassador had been traveling, had -- was very familiar with Benghazi, was familiar with the rebels having been there before the fall of the Gadhafi government. And he was in a good position to really understand the threat and express real concern about it.

MORGAN: Do you feel, from all we're now hearing, that he was properly protected or should there have been more done for him there?

TOWNSEND: You know, it's hard to say. I will say that I was very surprised when he arrived. He and I had breakfast on August 29th at the Corinthia Hotel. And I was surprised when he arrived. He arrived in what appeared to be an armored but he -- he entered the hotel lobby, he had no security with him.

But he was again, very comfortable. He believed he needed to be talking to people. It would not have been his style to have a big security footprint. The problem with that, Piers, is he himself, an ambassador in that position, is a national asset and this was particularly true of Chris. He was incredibly brave, incredibly capable, and it seems to me we ought to have wanted to protected him as best we could and allow him to get his job done.

MORGAN: Fran Townsend, thank you very much.

TOWNSEND: Thanks, Piers.

MORGAN: Mitt Romney's campaign is in damage control. Trying desperately to return the focus to the nation's economy. Can he change the balance in battleground America?

Well, joining me now is Larry Kudlow of -- CNBC's "The Kudlow Report," and "New York Times" columnist, Nic Kristof.

Welcome to you both. I'm going to start, Nic, just on that point that Fran was raising there, about this apparent al Qaeda link to all this. What do you make of that?

NICHOLAS KRISTOF, COLUMNIST, NEW YORK TIMES: Well, while there is a lot of uncertainty about who exactly killed Ambassador Stevens, there's no doubt that al Qaeda and the Islamic Maghreb, which is the group they're talking about, is something we should be losing a lot of sleep over. It is active in West Africa. I'd say that while al Qaeda in Afghanistan, for example, in Pakistan is on the wane, in Mauritania, in Mali, in Algeria. That al Qaeda affiliate is very much on the march and now, you know, trying to gain strength in Libya --

(CROSSTALK)

LARRY KUDLOW, HOST, CNBC'S "THE KUDLOW REPORT": Why are a lot of these -- why are a lot of these guys fighting in Iraq? Isn't that so the migration was fighting either with al Qaeda or offshoot groups and then wind up moving into Libya?

KRISTOF: There was more of that that's much less true of al Qaeda in the Islamic Maghreb than others. The al Qaeda in the Islamic Maghreb is much more of really a West African organization.

MORGAN: Is al Qaeda still run by any central force? Or is it a sort of amorphous series of terror cells around the world now?

KRISTOF: There's really not much of a center structure to it anymore. Partly because it's -- you know, they get penetrated and whoever is playing that kind of central switchboard operator merely gets hit by a drone. And so it's really more a collection of affiliates that are quite decentralized that share an ideology, that share a passion for violence, and, you know, it's not as if they're sharing resources or anything. But there -- they take advantage of any kind of vacuum of power and that's what they're getting right now in eastern Mauritania and northern Mali, and so on.

MORGAN: One of the last point on this. Given what's happening in the Middle East at the moment, a lot of -- a lot of instability. Clearly, in a fundamentalist sees on that kind of thing, we've seen that many times in the past, how dangerous is this right now, do you think? Across the Middle East. You're seeing this kind of ongoing and increasing instability if al Qaeda is still operating with these cells?

KRISTOF: I don't -- I mean I think that this goes in kind of a sign. I think that there are going to be some really rough moments ahead. But I don't think that our embassy in Cairo is going to be taken the way our embassy in Tehran was. I think that -- you know, I covered Indonesia, the fall of Indonesia. That was incredibly messy for years. You look at Eastern Europe likewise. Romania is still a messy after all these years after democracy came -- kind of in 1989. So I think that the Middle East is going to be very messy for a long time to come. Libya will be messy.

And I think I worry more about Egypt actually than about -- than about Libya. But it'll -- but I don't think it's going to go over a cliff.

MORGAN: Let's turn to the economy. Larry, give me a good defense of Mitt Romney's claim. If he was -- if you take out all the rhetoric, if you take out all the gaffe element and the rhetoric, and you cut to his principle point that he claims he's been making a lot on the stump which is that, you know, a lot of people in America, mainly the ones who vote for Barack Obama don't much tax, they don't pay income tax, and are basically living off government handouts?

KUDLOW: Well, that particularly argument is not one that I would have made, to tell you the truth. I mean --

MORGAN: Is it -- is it accurate?

KUDLOW: Well, no, I don't think it is accurate. I mean I think the 47 percent or 49 percent of households that are getting government benefits is accurate. That's a good number. Once you get beyond that, the issue that nobody pays or half the people pay income tax, that is statistically true but somewhat misleading because so many people pay the payroll tax. Again, I'm just giving you straight facts here. I haven't taken any positions yet.

And the idea that you can derive from government benefits and income tax, some voting patterns is a very flawed idea. I don't know why a smart like Romney made it. For example, retirees vote heavily for Republicans.

MORGAN: Yes.

KUDLOW: And will vote heavily for Mitt Romney. But they don't pay any income taxes. Veterans groups, the same way. Regarding the whole issue of non-income tax payment. Middle class people, let's take middle class people, who might be earning $50,000, $60,000, $70,000 a year. Okay? They get a child tax credit, let's say about three or four kids. They get a child tax credit which among other things might take their income tax liability right away.

Now those people may or may not vote for Romney. But if I were he I wouldn't write them off. I don't -- you know, it's funny, I have a friend of mine who said, all he was trying to say is that half of the people in the country are going to vote for him and half of the people in the country are going to vote for Obama. And then there's this small percentage across 10 states who are going to decide the election. If that's all he was trying to say, he should have said that.

MORGAN: But that isn't all that he said. And that's the problem. What if -- what he did was it led sucker to everybody who thinks there are two Mitt Romney's. There is a guy in private, particularly when he's talking to big fundraising pals and he wants their money where he'll say all this stuff. And there's a guy in public saying a completely different kind of thing. And you add that to the flip- flopping on all sorts of different stuff like abortion and so on, you get a sort of reputation he's building up now of a guy with no real political principles.

KRISTOF: Well, I mean, if at the end of the day he was essentially complaining about people who are feeling like victims, even as they've used the tax code, and that's kind of how he comes across himself. I mean here's a guy who wealthy, the average -- about 60 percent of Americans when all the taxes are paid. You know, state, local and federal, they pay about a quarter or more of their income in taxes. One quarter.

And meanwhile Romney may well pay less than that because of interests -- carry interests and so on. So here we have a guy -- a group of people who are kind of feeling sorry for themselves because they're taking advantage of these tax rates. It just comes across as insulting.

(CROSSTALK)

KUDLOW: I just want to make a -- I just want to make a counterpoint on this.

MORGAN: Larry, hold your point.

KUDLOW: I'm sorry. Right.

MORGAN: Keep the viewers on tender hopes. We'll take a quick break and come back and get to your counterpoint, and also talk about President Obama's appearance on "Letterman," where he seemed to forget what the national debt was.

KUDLOW: Right.

MORGAN: We love a counterpoint.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: What is also true is that we are going to need to ask folks like you and me to do a little bit more. And if you and I are paying the same tax rates we did under Bill Clinton, then that helps to close the deficit.

If we do those two things, then we can manage very effectively and get our books in order.

DAVID LETTERMAN, "THE LATE SHOW": Do you remember what that number was? Was it 10 trillion?

OBAMA: I don't remember what the number was precisely.

(END VIDEO CLIP)

MORGAN: President Obama on "The Late Show" with David Letterman. How big a mistake was that? Back with me now is Larry Kudlow, cNBC's "The Kudlow Report," and "New York Times" columnist Nick Kristoff

Thank you for staying, gentlemen. Kelsie Grammer was due to be on by now, but he appears to have left the building. We're not quite sure what's going on. He was here. I spoke to him. And he was due and was happily looking forward to coming on. But he has exited stage left. So we have half an hour left. He may or may not come back. We shall see.

But for now, I couldn't think of two finer -- finer stand ins to continue.

KRISTOFF: You better say that.

MORGAN: Someone tweeted earlier, what an unlikely pairing, Nick Kristoff and Larry Kudlow on CNN right now. I can't think of a better pairing than you two.

KUDLOW: It is a pleasure to meet Nick. I've read him for many years. I guess we have some differences of opinion, but it is a pleasure.

MORGAN: Let's get to those differences. What was the counter point you were going to come back? KUDLOW: I want to say a couple of things on this Romney stuff, I think sort of ripped it apart earlier.

The number of households that are government dependant, that get assistance from the government has really sprouted in the last 20, 25 years. In most of the '80s, it average about 30 percent. And as these data show, it's close to 50 percent now. I don't like that. I think that is an unhealthy sign for the economy.

I think that people hearing that won't like it either. In other words, as inartfully as Romney may have made his case, people hearing that we are becoming more government dependant will not like that, which opens the door for Mitt Romney, if he walked throw it. And we will see.

His door is, Mr. Obama, you're for a government dependent entitlement state. That's how Romney puts it sometimes. I, on the other hand, am for a free enterprise opportunity society. That -- I think that Romney's argument is fundamentally, inherently more popular in this country than Mr. Obama's bigger government, dependency argument.

The question and the mystery for the Romney campaign is why he doesn't stay on that message? He did during the primaries. And then all of a sudden it went away.

MORGAN: He seems to --

KUDLOW: It is like one of your old AM radios, where you are listening as a kid and you are tying the copper wire to your radiator. The sound comes in and out. It beams in and out. With Mitt Romney, his message beams in and out. I think that's difficult for him, because politics is about repetition, If you want to sell it, it is about repetition. He doesn't get that.

MORGAN: One of the problems is he keeps putting his own foot in his own mouth. You did this brilliant little thing on Twitter. You started a hashtag #RomneyEncore, and it quickly became a viral thing. Your first one I think was what will he do for an encore, condemn people who don't save enough for a weekend house, use #RomneyEncore. And off it went. Everyone joined in.

There is a kind of interesting point there. On the face of it, this should be a very, very easy gig for a Republican nominee to take on an incumbent Democrat president. You have unemployment over eight percent, gas prices have doubled. You have people out of work, helpless, furious. You have them dissatisfied with all sorts of things in this country.

And yet, at the moment, Obama is beginning to stretch a lead as if everything is honkey dory. And the reason has to be Mitt Romney, doesn't it?

KRISTOFF: Yes, I mean, the joke has been that he needs to hire a management consultant from Bain to try to rescue his campaign.

MORGAN: Why is he proving to be right now anyway so haphazard? KRISTOFF: I think that part of it is that he spent six years now effectively in a Republican primary bubble, talking to people where everybody sort of thinks that the 47 percent is this parasitic group in America. And there are these memes that go around that I think he just wasn't ready to see how these would react more broadly.

And on foreign affairs, he stepped in because he just doesn't seem to have thought about foreign affairs the way he has about domestic.

MORGAN: There he is. He says he can't remember the exact figure.

KUDLOW: Obama should have been able to say 11 trillion and change, and it has gone up to about 16 trillion and change. He should have known that.

MORGAN: Why did he not want to say that, do you think?

KUDLOW: Perhaps he just doesn't like those numbers. They're very big numbers. He is being blamed, fairly or unfairly, for a 5.5 trillion dollar increase in debt. Bill Clinton at the convention, who gave a great speech in my opinion, tried to bail Obama out on the debt. But Obama didn't really take Clinton's advice.

I just want to slow you down a little bit. I know you cited polls showing movement for Obama. But if you look at other polls, for example Gallop's overnight polling of likely voters, Rasmussen's overnight polling of likely voters -- these are two brilliant polls -- these guys are running neck and neck. And they are even running neck and neck in the swing states, in the battleground states.

MORGAN: Are you surprised Romney is not ahead? I am. I'm surprised that on all of the statistical information available, only one I think incumbent president in history has been re-elected with unemployment over eight percent, and that was FDR?

KUDLOW: As an old Reagan guy, literally, in the last century, I worked for Reagan in his first term. I was not in his campaign, but I did work for him. In that race, Reagan was losing to Carter right up through the middle of October.

(CROSS TALK)

KRISTOFF: Eight points behind in October.

KUDLOW: And then things switched in the debate. I have a sense -- you may disagree or not -- but because neither of these guys have run really good campaigns, okay -- Obama very negative and making his own errors. Now they have this redistribution tape, Obama redistributionist -- Romney making the mistakes we have talked about tonight. I think that the debates could be very important.

MORGAN: Yes.

KUDLOW: And we may not know how this thing is going to flip until the very end.

MORGAN: I think they are going to be crucial. On the redistribution thing, what is redistribution and why has it become a dirty word?

KRISTOFF: I don't see why it should b. After all, in the Eisenhower years, we had a federal marginal income tax rate of 91 and 92 percent. That was obviously for redistribution. Social Security system is in part about redistribution, if you have a debt.

And I think also that quote from Obama's speech has been somewhat unfair. He goes onto say that he favors redistribution to create opportunity. That is a key phrase. It's different from sort of carving out somebody. You're talking more -- he talks about public schools in that speech, this kind of thick.

I think people are very leery about the idea of Robin Hood kind of approaches. I think creating more even starting lines, more equal schools, early childhood education to try to create more opportunity, I think there is a lot more sympathy for that approach.

KUDLOW: I think -- I think we probably disagree on some of this. But look, I think right now, given this lousy economy -- and this economy is growing at two percent roughly. It is the worst recovery in post- war history. Oddly enough, if you go back 10 or 12 years, we have been growing at about two percent, which is way below what America should do.

Look, I'm an old Reagan guy. I say put some more freedom into this economy. Get your innovators and your entrepreneurs to get more interested in starting up a business and carrying forward, like a manufacturing business. The energy sector is coming alive. Keep your regulators at bay for a while. Don't talk about raising tax rates for a while.

We can solve these longer term issues right now. The thing that solves the debt, the thing that solves the unemployment, the thing that helps the inequality if not there. And that is economic growth. And that is the biggest problem that this country has. We should be growing now, after a very deep recession, closer to five percent than two percent. And to me, still at the end of the day, that's what this election is going to be about.

MORGAN: Okay, I have got to leave it there. Final word, Nick?

KRISTOFF: Let me push back at the notion that taxes make all the difference in growth. After all, you had Bush cut taxes and you had slow growth. You had Clinton raise taxes and you had extraordinary growth.

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KUDLOW: Bush did well in the mid-2000s. But I would add to that that marginal tax rates do impact the economic decisions. So to regulations impact economic decisions. And frankly, on the issue of redistribution, federal spending affects decisions, because people -- a businessman looks at a big deficit, like a trillion dollar deficit -- a businesswoman. And you know what they see down the road? They see more government and more taxes to finance it. That is one of the big problems here. That is why I think the Obama program, with its spending and deficits, has really kind of backfired on him. People say, you know what, we're going bankrupt. I don't really feel like making an investment for 20 or 30 years is this country's going bankrupt.

MORGAN: I'm going to have to cut you off in your prime. I rather like this little pairing, unusual though it may have been, and longer than it was intended. I thank you both very much. Good to see you. Thank you, Larry.

Kelsey Grammer still hasn't come back, but we still have 20 minutes. Tension mounts. Coming up, a TV star finds herself in the middle of a real life drama. The custody battle that sent Kelly Rutherford's children to France, and Alan Dershowitz is stepping in to defend the children's rights.

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MORGAN: Kelly Rutherford starred in TV dramas like "Gossip Girl" and "Melrose Place." But in real life, she's living a nightmare. She lost an international custody battle for her children, who were born in America. Now they are in France with her ex-husband. The judge's decision to send them there has stunned legal experts in this country, and even attracted the attention of Alan Dershowitz.

He and Kelly Rutherford join me now exclusively. Kelly, let me start with you. In very simple terms, what happened here with you and your ex-husband?

KELLY RUTHERFORD, ACTRESS: Um, he got kicked out of the country and --

MORGAN: He had his visa revoked?

RUTHERFORD: He had his visa -- yes exactly, he had his visa revoked. And yet there is no sort of justification for it. We don't know why. We keep asking questions and trying to figure it out. And I keep coming up with no answers from the judge or anyone. He is not required to show anything.

So he asked that the kids come live with him in France, even though we have no connection to France. And the judge said --

MORGAN: He is German?

RUTHERFORD: He is German.

MORGAN: But he's living in France.

RUTHERFORD: Yes.

MORGAN: You went over to France with the children to see him?

RUTHERFORD: I went to visit them, yes.

MORGAN: And then you discover that they are not coming back. A court order has been put out that says they stay in France. Is this indefinitely?

RUTHERFORD: Yes.

MORGAN: Because he can't come back to America, therefore you can't share custody.

RUTHERFORD: Exactly.

MORGAN: Therefore the French have decided everyone stays there apart from you?

RUTHERFORD: Well, the American judge said this, the California judge. The concern is that France will now have jurisdiction.

MORGAN: How do you feel about this?

RUTHERFORD: I'm beside myself. I didn't think anything like this would be possible.

MORGAN: Alan Dershowitz, it seems almost extraordinary, this story. How is it possible?

ALAN DERSHOWITZ, DEFENSE ATTORNEY: I have long been interested in the rights of children in contested divorce cases. Often children are the ones who are not represented. And the interests of the children are neglected as parents fight among themselves. In the 1960s and '70s, I litigated the rights of children who were taken away from hem because their mother was a lesbian. In the 1980s, I was involved in the case of Walter Polobcheck (ph), who was a Russian boy who wanted to stay in America. His parents were compelled to go back.

In the Elian Gonzales case, I expressed interest to make sure that the rights of the child were represented. And this case, unfortunately, is typical of that situation. These are American children who were born in America. They are American citizens. And they essentially been deported without any determination that really it is in their best interest not to be Americans, not to go to the schools in which they were enrolled, not to remain with their friends, not to remain with their mother, in order to satisfy a father who obviously, as a result of some fault on his part, has been deported.

The obvious solution would be to keep the children with their mother in America and perhaps arrange once a month for the mother to bring the children up to Canada or to the Caribbean where the father could visit with them. That would be much less disruptive to the children's lives than to have them wrenched out of the schools in which they're enrolled. Their tuition has been paid. Their friends are there. And put them in a country where the father has no connection, the children have no connection, to be brought up as French kids rather than as Americans.

MORGAN: Just to clarify, the judge that took this decision, though, was in America. This is not a French judicial decision. This is an American judge?

DERSHOWITZ: It's an American judge, a woman, American judge who decided that it would be best for everybody if the children moved out of this country. It makes absolutely no sense from any logical point of view, from the best interests of the children. And I think these children have the right to be represented, have their interests defended.

Kids have the right to make sure they're brought up in the country in which they were born and not to be thrown around like footballs -- like political footballs. I'm afraid the children's interests have been neglected in this case.

MORGAN: Kelly, how are your children? Do you have daily contact with them? Can you call them? Are you Skyping them? What are you doing?

RUTHERFORD: I do. This morning, I actually set my alarm for 1:00 am so I could call them when they were leaving for school in France. And I Skype with them every afternoon.

MORGAN: Do they know what is going on?

RUTHERFORD: I think they have an idea, but they don't really. I do my best to just say look, mommy is going to be there as much as possible and mama will figure this out with your father. And know that I love you and I will be there ad much as I can.

MORGAN: How old are they?

RUTHERFORD: Three and five.

MORGAN: Your ex-husband, what kind of relationship had you had with him up to this point in terms of -- obviously you separated, but were you still talking to each other? Were you amicable at all?

RUTHERFORD: Not -- not so much. It was -- I feel like once we separated, it was then just about you know -- really about the children, being -- arguing over who gets the most time with the children. And a lot of that I guess happens in divorce.

But this one, in particular, was kind of odd because basically he was seeing the kids a lot until his visa got revoked. And then, all of a sudden, it was about getting them out of the country.

MORGAN: Have you tried to appeal to him and his humanity over this?

RUTHERFORD: Of course.

MORGAN: What does he say?

RUTHERFORD: He says no, we are going through the court system. He doesn't want to talk about it. He just wants to go through the courts.

MORGAN: Alan, I suppose the crucial thing now is what can you do about this? You are one of the best at what you do in the world. What is the next legal step that you can take on Kelly's behalf?

DERSHOWITZ: Well, I think we have to find a very good established lawyer who emphasizes the rights of children to find the right vehicle, whether it be a federal court lawsuit protecting the interests of the children as American citizens, whether it be an appeal in the California courts. All of these options have to be considered.

But from my point of view, at least, the focus has to shift from the rights of the parents to the rights of the children. And they have to be represented fully by somebody whose only job is to protect their interests and make sure their rights as American citizens are fully protected and vindicated.

MORGAN: Well, I wish you all the very best with it. Kelly, I'm just so sorry. I am a father of four myself. I can't imagine anything worse than this. We got a statement, for what it's worth, from your ex-husband Daniel Giersch's lawyer, Fahi Takesch Hallin. He says "my client, Daniel Giersch, continues not to comment in order to protect the children."

I just wish you all the very best with this. It seems an absolutely ridiculous case, to put it mildly, and incredibly wounding and hurtful to you.

RUTHERFORD: Yeah, it has been. It's been very challenging. But thank you so much for having me on and for having Alan on. It really helped.

MORGAN: Best of luck with it. Alan, thank you for joining me. Best of luck with the legal campaign.

DERSHOWITZ: Thank you so much.

MORGAN: When we come back, Only in America, an extraordinary love story that's made in the USA and told in just 22 pictures.

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MORGAN: For tonight's Only in America, they say that a picture can tell 1,000 words. Well, this story is told in 22 picture alone. This is the story of Taylor Morris and Danielle Kelly. He is a Naval specialist who was severely wounded when he stepped on an IED in Afghanistan back in May. Taylor lost his legs, his left arm and his right hand. President Obama honored him with a purple heart for his outstanding courage.

But Taylor's own heart belongs to his girlfriend Danielle, who has been by his side throughout his recovery. To fully understand their love story and, indeed, the sacrifice made by so many of our service men and women, let's look at these pictures taken by their friend, Tim Dodd, the perfect tribute to a wounded warrior and the woman who loves him.

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