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CNN Late Edition with Wolf Blitzer

Interview with Bill Richardson; Interview with Tim Pawlenty

Aired June 22, 2008 - 11:00   ET


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

SEN. BARACK OBAMA, D-ILL.: He was all over the map on public finance, right?

SEN. JOHN MCCAIN, R-ARIZ.: Senator Obama's reversal on public financing is one of a number of reversals.

BLITZER (voice-over): John McCain and Barack Obama accuse each other of campaign flip flops. We'll talk with Obama supporter, Governor Bill Richardson and McCain supporter, Tim Pawlenty.

From rising gas and food prices to the housing crisis, a look at the candidates' plans for the ailing U.S. economy with McCain campaign senior economic adviser Douglas Holtz-Eakin and former Clinton labor secretary and Obama supporter Robert Reich.

PRESIDENT GEORGE W. BUSH: For many Americans, there is no more pressing concern than the price of gasoline.

BLITZER: Will Congress agree to offshore oil drilling to help ease the price of gas? Answers from Democratic Congressman Robert Wexler and Republican Congressman Eric Cantor.

And insight and analysis on all of the week's politics from three of the best political team on television.

Plus, we'll assess the war on terror and the hunt for Osama bin Laden with journalist and author Ahmed Rashid and CNN terrorism analyst Peter Bergen.

And 10 years of LATE EDITION. A look back at my 1998 interview with South Africa's Nelson Mandela.

The first hour of LATE EDITION begins right now.

(END VIDEO CLIP) BLITZER: It's 11 a.m. here in Washington, 8 a.m. in Los Angeles and 6 p.m. in Baghdad. Wherever you're watching from around the world, thanks very much for joining us for LATE EDITION.

We'll get to my interview with the governor Bill Richardson in just a moment, but first a very important meeting underway in Saudi Arabia right now. Officials from 36 countries are meeting to try and figure out a way to try to bring down record oil prices. CNN's Wilf Dinnick is in Jeddah, Saudi Arabia. He's covering the summit for us. And there were some announcements, some dramatic announcements in the course of today. What's going on, Wilf?

DINNICK: Well really, a huge announcement here. The oil minister here in Saudi Arabia saying they're going to boost production, put way more oil out there on the market and ease the demand. They're talking about 9.7 million barrels a day, that's something they haven't done since the Iran/Iraq war. And then they're going to boost that to the end of next year, to 12.5 million barrels a day. That's something the Saudi Arabian government or this kingdom has never done before. They say they're going to invest in new refineries and put new oil fields and bring more oil out.

Now what that does is it sends a message to the market and really what the kingdom here is doing in the Saudi Arabian government is straddling both sides of the fence, because here there are two diverging views. One, the Americans, who are saying that really this a case of supply and demand. We just need more oil out there and that will ease the prices. The OPEC nations, many of the Middle Eastern nations that supply the oil say no, it's actually the market that is really out of whack here. It's things like the traders in New York and London who have been trying to make a quick buck by trading paper contracts for oil, thinking that there isn't enough oil out there.

So really we have a case now of just more oil out of the markets, going to appease the Bush administration, but there's going to be -- and everyone's saying this -- no short term relief at the pumps, just at least right yet.

BLITZER: OK, we'll see how this falls out. Wilf Dinnick reporting for us from Jeddah. Important news as he just says, news that could affect this U.S. presidential campaign as well.

The campaign is ratcheting up another notch with Barack Obama and John McCain challenging each other on a whole host of issues including the economy, energy, campaign cash. Both candidates accusing each other of flip flopping on key issues.

Let's discuss all of this. Joining us from Santa Fe with his take on McCain versus Obama is the New Mexico Governor Bill Richardson. He's a strong supporter of Barack Obama, a former energy secretary himself. Governor, thanks very much for coming in. Let me get your immediate reaction to the breaking news out of Saudi Arabia that they're about to dramatically increase production of oil. What does it mean to you?

RICHARDSON: Well, it's about time. You know, the Bush administration has waited eight years to pressure OPEC and their great friends, the Saudis. When President Bush came in, he said he was going to job own OPEC to increase production. Well, it's finally happened. It's going to help a little bit, maybe reduce prices just a little. But it's a welcome step because by putting more oil on the market, you deal with a supply and demand issue more effectively. But what is needed is not what the president and John McCain want to do, which is drill off shore. What is needed is a comprehensive strategy of fuel efficiency, 50 miles-per-gallon vehicles, a mass transit. What is needed is investments in renewable energy and solar and wind. It means dramatic conservation efforts, green technology, the American public being more careful about appliances.

BLITZER: But Governor, excuse me for interrupting, but in the short term, if the Saudis do increase their oil production, that will increase supply out there and presumably will have an impact on the price per barrel, which right now what is about $135 a barrel. If they're going to increase their production, that price will go down and I assume eventually at least in the short term, it could have an impact on the price per gallon at the pump here in the United States.

RICHARDSON: Well you know, it will go down a little bit. It won't be significant and that is welcome. But you know, at the same time, the head of the Russian natural gas agency Gazprom is predicting that oil will go to $250 per barrel within a year. So you've got these conflicting views.

The point is that we have got to have a bipartisan comprehensive strategy and this administration, it seems Senator McCain, they want to do is drill, drill, drill. You can't drill your way out of the problem. Now it's offshore where it's going to take years, 10 years to start getting some of the oil out of the ocean. And also it's going to take until 2030, an effort to -- fuel prices won't go down until then. This is according to independent agencies. So they're very cosmetic steps.

BLITZER: You say a McCain administration would drill, drill, drill, but listen to what Senator McCain says about an Obama administration, which he said would simply tax, tax, tax. Listen to this.


MCCAIN: For Senator Obama, the solution to every problem and the answer to every challenge is a tax. And he's convinced that the 1970s style windfall profits tax is juts what America needs in the 21st century.


BLITZER: OK, do you want to respond to that because he makes the point, Senator McCain, that that windfall profits tax on big oil, it didn't work in the 1970s when Jimmy Carter tried it and it's not going to work this time.

RICHARDSON: Well, I think that's a false premise, what was advocated in the Bush administration was give special preferences to oil, coal and nuclear. And what Senator Obama and many Democrats are advocating is have a level playing field. Shift those enormous tax breaks for oil companies that are making billions and shift them over to solar, to wind, to biodiesel, biofuels, to green technology, to green buildings, to fuel-efficient vehicles, to hybrid fuels, to plug- in hybrid vehicles. To mass transit instead of massively-building highways, going to commuter rail and light rail. So it's not taxes, it's basically shifting the burden and have a level playing field.

BLITZER: But do you support, governor, a windfall profits tax on Exxon Mobil, Chevron, the other big oil companies?

RICHARDSON: Yes, yes to shift them to solar and wind. They got this tax break five years ago in the energy bill that they didn't deserve. Billions of dollars, $20 billion for Exxon in one or two months in terms of profits. I mean, that is obscene. That money should go to refineries. That money should go to research into renewable energy. It should go into drilling here in the United States.

The oil companies have millions of leases where they could drill in the continental United States. Why aren't they doing that? Why do they want to go offshore?

BLITZER: Here's a point that Rudy Giuliani, the former Republican presidential candidate, the former mayor of New York and now a strong supporter of John McCain -- this is the point that he makes. Listen to this.


RUDY GIULIANI (R), FORMER PRESIDENTIAL CANDIDATE: The reality is Barack Obama opposes almost everything that could realistically reduce the price of oil. Expanding refineries, expanding nuclear power, which is something that he doesn't embrace.


BLITZER: All right, let's go through those two points. Does Barack Obama, and you for that matter, do you oppose expanding refineries?

RICHARDSON: No, but it should be done in an environmentally- sensitive way. So the answer is no.

BLITZER: But where would you do it, Governor? Because there haven't been new refineries built in the United States in what, almost three decades.

RICHARDSON: Well, with proper environmental permitting, Louisiana, Texas, many other places. But also on nuclear power, Wolf, we've got to deal with the problem of waste from nuclear waste. But it doesn't omit greenhouse gas emission. They should be an option. So should carbon clean coal technology, carbon sequestration, natural gas.

RICHARDSON: There are many options. But the only options that the Bush administration and John McCain seem to have is drill, drill, drill, fossil fuels.


BLITZER: What about nuclear power?

Are you ready to start seeing a bunch of new nuclear reactors built in the United States to ease the pressure on importing oil?

RICHARDSON: If they abide by environmental standards, and if we have a solution to the problem of waste. In Nevada, they don't want to take that waste. We can't do it in regional sites.

We need to develop a technologically safe way to store this waste. That has to happen, Wolf. But we should proceed with nuclear power as an option.

BLITZER: Here is a question on Iraq, and I'll put -- you know, you're a foreign policy expert, former U.S. ambassador to the United Nations.

The New York Times, yesterday, had a major front-page story, a very lengthy story. Among other things, it concluded with this.

They're reporting in Iraq right now. "Violence in all of Iraq is the lowest since March 2004. The two largest cities, Baghdad and Basra, are calmer than they have been for years. There are signs that both the Iraqi security forces and the Iraqi government are making strides."

Are you ready to concede, right now, that John McCain was right in proposing that this surge, this military surge, take effect more than a year ago, because it seems to be having a positive impact?

RICHARDSON: Absolutely not. I welcome this positive news, obviously. We want to see a reduction in the violence, but the questions that I would ask, has there been progress among the political groups in Iraq for a reconciliation? The answer is "Very limited."

Has there been progress in dividing up the oil revenues so that there can be a reconciliation? The progress is minor.

Has there been an effort to reach out, in a very tough way, to the Irans, to the Syrias, to have a regional agreement that involves a potential U.N. peacekeeping force, a reduction of tensions? The answer is no.

This policy is not working. And you talk about energy; you talk about health care and education, we are spending billions on this war with no end, when we should be spending these billions at home on education, on health care, on human resources, on helping our people.

BLITZER: Governor Richardson, we've got to leave it on that note. Thanks very much for joining us.

RICHARDSON: Thanks, Wolf, nice to be with you again.

BLITZER: Thank you.

And just ahead, which candidate has the better plan when it comes to taxes and trade? We'll talk about that with Senator McCain's senior economic adviser. He'll be here. Then we'll get the other side from former Clinton labor secretary and Obama supporter Robert Reich. "Late Edition" continues right after this.


BLITZER: Coming up in our next hour, by the way, we'll be speaking with the Minnesota governor, Tim Pawlenty. He's being mentioned as a potential vice presidential running mate for John McCain. That interview in the next hour.

But right now, we're turning to the number one issue for U.S. voters. That would be the struggling U.S. economy.

John McCain is warning that Barack Obama's economic policy would take the United States back to the 1970s and the troubles of Jimmy Carter's administration. Let's discuss this and more with Douglas Holtz-Eakin. He's a senior economic adviser to the McCain campaign.

Doug, thanks very much for coming in.

HOLTZ-EAKIN: My pleasure.

BLITZER: He's Barack Obama, this week, criticizing what he would call a flip-flop from John McCain on offshore oil drilling. Listen to this.


OBAMA: Believe me, if I thought there was any evidence at all that drilling could save people money who are struggling to fill up their gas tanks, by this summer or this year or even the next few years, I would consider it, but it won't, and John McCain knows that.


BLITZER: All right. A couple of questions. First of all, this is a major reversal on the part of John McCain, who earlier had opposed offshore drilling off the coast of Florida and California and elsewhere, and now supports it. Is that right?

HOLTZ-EAKIN: John McCain has always supported the state's ability to make this decision. When the states had no protection, he wanted the federal moratorium in place.

Now that there's been a deal, Louisiana has some drilling in the Gulf; Florida wants some protection, he thinks it's appropriate to get the feds out of the way entirely and let the states makes those decisions.

BLITZER: And how long, assuming they go ahead and start drilling off the coast of Florida and elsewhere -- in California -- how long would it be before there was a real significant additional supply that could have an effect?

Because Senator Obama and others say it could be 10 years that we're talking about?

HOLTZ-EAKIN: Well, it would take about five years to get the oil onshore and begin getting the real impacts in supply and demand. But we'll send a signal to the world markets and we'll send a signal, in particular, to futures markets that the United States is going to take control of its energy destiny and not have to go, as the Bush administration has, hat in hand to the Saudis, and ask for more oil.

And the truth is, Barack Obama has no plan in energy. He's opposed to lowering gas taxes. He's opposed to additional exploration. He's opposed to nuclear power. He thinks, you know, higher gas prices are just fine; they just happened too quickly for his taste.

BLITZER: Well, you heard the whole litany of what Governor Richardson just said on what he wants to do to reduce America's addiction on imported oil.

HOLTZ-EAKIN: It's important. You know, John McCain believes that we have to get rid of the strategic weapon that is oil. We have to stop being held victim to this around the world. So what do we do?

We take care of our business, control a little bit at home and then move on to more nuclear power, renewables, alternatives. He's laid this all out from the beginning.

BLITZER: The Saudis announcing today they're going to increase oil production, oil exports. Is that something you welcome?

HOLTZ-EAKIN: It's important to have greater global supply, but it would be better if the United States controlled its energy destiny. That's what John McCain wants to do.

BLITZER: Are you -- what, are you concerned about the United States is simply going to become even more addicted to Saudi and other foreign oil sources?

HOLTZ-EAKIN: We've seen a bipartisan failure for 30 years, you know. In the 1970s we imported 30 percent of the oil; now we import 60 percent of the oil. And our national security is at risk. Our economy is at risk. And our environment is at risk.

It's time to have some bipartisan leadership, take control of our destiny.

BLITZER: Would it be wise, because Iraq is now exporting a lot and pumping a lot of oil, much more than it was, with the relative quiet that's developed in certain parts of the country over the past year. They're exporting; they're pumping more oil.

Should the Iraqis be selling oil to the United States at a discounted price?

HOLTZ-EAKIN: Oil should occur on the world market at market prices. BLITZER: Why not -- given the hundreds of billions of dollars the United States has spent to rebuild that country and try to bring some stability to the Iraqis, why not have them export oil to the United States at a reduced price?

They would still make some money, but they wouldn't make as much as they are making right now.

HOLTZ-EAKIN: Look, as senator McCain, who has gone there and seen the conditions on the ground eight times, correctly pointed out, we had to bring a new strategy to Iraq.

We had to get some peace, a path to prosperity for the Iraqis. But that path doesn't lie in the U.S. being dependent on Middle Eastern oil. The entire strategy was built around getting the United States to be able to exit with peace and build energy security for ourselves at home.

BLITZER: So, just to be precise, Senator McCain believes the Iraqis should export oil to the United States at the going international price, which, right now, is about $135 a barrel?

HOLTZ-EAKIN: Senator McCain believes there should be an international oil market but he believes the United States should not be self-dependent on that from the Iraqis or anyone else.

BLITZER: Here's the latest AP/Ipsos poll asking this question. Which track is the economy heading? Seventy-six percent of the American people said the U.S. is heading in the wrong economic track, 17 percent said the U.S. is heading in the right economic track.

That's a pretty disproportionate number. Give me an example of what -- other than pork barrel spending earmarks, a different strategy that John McCain would take on economic policy than President Bush is taking right now?

HOLTZ-EAKIN: Well, this is more than the Bush administration which has disappointed Americans for eight years. This is about a Democratic Congress that cannot address great issues. It's about Washington being broken.

BLITZER: But what would Senator McCain do differently in the short term if he were president of the United States, differently than what's already being done by President Bush, and I know you're going to say he would find ways to eliminate pork barrel spending, the so- called earmarks, but beyond that what would he do?

HOLTZ-EAKIN: Step one in reforming Washington. Senator McCain is a person who reached across the aisle that need judicial appointments, he got it done. When he recognized the importance of immigration, he stood with Senator Kennedy, tried to solve this great problem. We'll see someone who wants to actually help America, not pursue old style politics.

BLITZER: Here's what Senator Obama says that John McCain would do. Listen to this. (BEGIN VIDEO CLIP)

OBAMA: John McCain wants to double down on George Bush's disastrous tax policies, not only by making permanent the Bush tax cuts for the wealthy but by adding $300 billion in new tax cuts that give a quarter of their revenue to households making over, get this, $2.8 million a year.


BLITZER: All right. You want to respond to that? HOLTZ- EAKIN: Well, Senator Obama has a problem in his own in that he talks a lot about taxes, says he's going to cut taxes for 95 percent of Americans.

BLITZER: But is this true, the suggestion that he's saying you want to give a huge tax break to those Americans making $2.8 million a year and more, that's true, right?

HOLTZ-EAKIN: No. Senator McCain has examined the facts on the ground. Right now the top marginal tax rate in America is 35 percent. Under Senator McCain's plan it would be 35 percent. Dividends, capital gains, the access to capital for small businesses right now 15 percent. Under Senator McCain's let's create jobs first plan, 15 percent.

Mr. Obama is talking about tax cuts for the wealthy. They're not anywhere. What John McCain would do is reduce the corporate tax rates that's sending jobs that have pension benefits, health benefits and important security for Americans, he's cutting rates.

BLITZER: You want to cut capital gains rate.

HOLTZ-EAKIN: Capital gains tax should be 15 percent.

BLITZER: You want to cut it?

HOLTZ-EAKIN: It will be 15 percent under John McCain. This is flowing rhetoric, but the reality on the ground is John McCain wants to create jobs in the country. He doesn't want to burden small businesses. He wants to keep jobs from going overseas. He's got a plan to do that. Senator Obama, the one person who will raise taxes in this race, is going to tax small businesses, put employer mandates on for health insurance they can't afford and really threaten the jobs that Americans need right now. John McCain has jobs first. Senator Obama has talk first.

BLITZER: All right. Douglas Holtz-Eakin, senior adviser on economic matters for Senator McCain, thanks for coming in.

HOLTZ-EAKIN: My pleasure.

BLITZER: And up next, we'll get a different perspective, what the Democrats would do to try to help the ailing economy if they take back the White House. The former Clinton labor secretary and Obama supporter Robert Reich standing by live to join us right after this. (COMMERCIAL BREAK)

BLITZER: Regardless of who wins the White House in November, many economists are expecting the next president of the United States to face some very, very tough economic realities. Let's continue our conversation. Right now joining us from Berkeley, California is the former Clinton Labor Secretary Robert Reich. He's supporting Barack Obama right now. Mr. Secretary, thanks for coming in.

REICH: Good morning, Wolf. BLITZER: What's your immediate reaction of the Saudis decision to increase oil production from 9 million barrels a day to 9.9 or so million barrels a day and then to further increase by another million or two over the coming months? What do you think about that?

REICH: Well, it's great but it's not going to solve the long- term problem because demand is outstripping supply when it comes to oil. Demand from developing countries, demand from developed countries and there's a limited supply of oil. This is the whole point and Senator Obama wants to move the nation as rapidly as possible to wind and solar and other alternatives, renewable sources of energy, that are also not going to harm the environment.

BLITZER: But that's going to take a long time for all of those other sources of energy to really have an impact. People are suffering right now, $4 a gallon, some places around the country closer to even $5 a gallon.

REICH: It is going to take some time, but even the Energy Policy Institute, even the Energy Department says that if we had more drilling here in the United States, it wouldn't be until 2030 that you real saw the results.

So in the meantime what Senator Obama is saying is we want a windfall profits tax, even Exxon Mobil has $12 billion of profits this year. I mean, take some of that money, return it to individuals. Exxon Mobil and the other companies are not using that for new drilling. They are using the money to buy back their stocks. What we want to do is make it easy for individuals now to deal with their problems but also have an energy policy for the long term.

BLITZER: You heard Douglas Holtz-Eakin, the McCain economic adviser, just now make the point saying that Barack Obama would increase taxes on a whole host -- in a whole host of areas. As an economist is it a good idea when there are rough economic times to go ahead and increase taxes because a lot of economists, I think you'll agree, say that's about the worst time to increase taxes because that would further worsen the overall economy?

REICH: But look at, Wolf, what Senator Obama wants to do exactly the opposite. The independent non-partisan tax policy center, what you want to do is look at the independent non-partisan centers. They say they looked at the two plans and they said Senator Obama's plans would cut middle class taxes three times more than Senator McCain's plan. BLITZER: But he would increase taxes on people making more than $250,000 a year. He would allow the Bush tax cuts to lapse and they would go back to the higher levels that were in place during the Clinton administration. So the question as an economist, is that a good idea to increase taxes during rough economic times?

REICH: Wolf, it is a good idea to cut taxes on the people who are going to spend the additional tax revenues and those are people in the middle class. You have to have some revenues to keep the government going and the Bush tax cuts for the very wealthy, people over $750,000 a year, are not great for the economy because the wealthy already have as much money as they need, you know.

That's the definition of being very wealthy. You're not going to spend your additional tax cuts. Look, what you want to do is get the tax cuts where they will have a big impact. That's what Senator Obama wants to do. That is on the middle class and, again, every independent analysis shows that his tax cuts for the middle class and his overall tax cuts are bigger than John McCain. What John McCain wants to do is continue supply-side economics. Continue to give big tax cuts for the rich. That's the last thing we need now.

BLITZER: When you were the labor secretary to the first term of the Clinton administration, President Clinton and then Vice President Al Gore, they pushed through the North American Free Trade Agreement. You were part of that administration. Was that a mistake?

REICH: I don't think it was a mistake, but it wasn't really a tremendous help. I mean, what Senator Obama wants to do, and I certainly totally support this -- I think every Democrat and every independent and a lot of Republicans do as well -- is you put labor and environmental standards into our trade agreements, so it's not a race to the bottom.

If you have an environmental standard and a labor standard that, for example, bars all slave labor, guarantees the right to organize, maintains kind of minimum labor standards throughout the world, you are setting a floor for all nations.

It's not protectionism. This is a way of actually getting everybody up rather than having the bar continue to trend downward.

We tried to do this in NAFTA, and, unfortunately, we couldn't get the Mexican government support. We tried to have a labor and environmental side agreement. I think it would have been a much better agreement had we had that.

BLITZER: The Republican presumptive nominee, Senator McCain, went to Canada on Friday. He gave a speech in Ottawa, and among other things he said this. Listen.


MCCAIN: Demanding unilateral changes and threatening to abrogate an agreement that has increased trade and prosperity is nothing more than retreating behind protectionist walls. (END VIDEO CLIP)

BLITZER: All right. Go ahead and respond.

REICH: Well, I just -- that's just not the case. I mean, what Americans need is a trade system that both expands trade and also maintains rules that, to the extent possible, maintains fairness. I mean, we are in a world economy right now, whether you look at oil markets, Wolf, or you look at agricultural markets, that are not based on totally free trade. They are not based on the free market. They are based on governments that are intervening in all kinds of ways.

BLITZER: But what would you do -- what would you recommend -- what would you recommend be done if Canada and Mexico said, you know what, this is a treaty, we like this treaty. It's been good for the economies of all of North America. What would you do if they said they don't want to renegotiate, they don't want to reopen it up?

REICH: What I would recommend, and, again, that's my recommendation, is we work with them, as we did in the original NAFTA. We talk with them and persuade them that labor and environmental standards are good for them, not only good for us but they are good for them.

Let me give you an example, Wolf. Supposing there was a standard that said the minimum wage in these countries shall all be half the median wage. Well, that's what it should be here in the United States, and the countries that we trade with, to the extent that their minimum wages can be half their median wages, that means that the gains from trade are more widely spread in all these countries. That means there are larger middle classes. That means there are more stable governments. That means there are more people to trade with us. It just makes logical sense.

BLITZER: We've got to leave it there, Mr. Secretary. Thanks for coming in.

REICH: Thanks very much, Wolf. Bye-bye.

BLITZER: And coming up next, parts of the Midwest have been underwater now for more than a week. Is the worst finally over? We're going to get to the latest on what's going on in the flooding in Iowa, Missouri, Illinois, elsewhere. Stay with us. We'll be right back.


BLITZER: Let's get an update right now on those massive floods crippling the Midwestern United States. Reynolds Wolf is joining us now from Grafton, Illinois, where he's knee deep in the water. What's the latest, Reynolds? Is it getting better or worse?

REYNOLDS WOLF, CNN CORRESPONDENT: Right now, Wolf, it is getting worse. We've got the water that's flowing in from actually two rivers, the Illinois River and the Mississippi River in this spot, but we also -- not just coming in from the ground, but also from the skies above. The skies have opened up and the rain has begun to fall, as we speak.

You know, they were not expecting this kind of flooding right here in Grafton. This is a bit of a surprise too, that we had, of course, additional rainfall in parts of Missouri and we've had bubbles of water that have actually made its way down this river system. And this is the effect. This is what we've been seeing here.

Now, just to give you a little bit of perspective. We were talking with the mayor earlier, and if you happened to look up here at the awning, notice the copper-colored awning -- that was actually the height, Wolf, of the flood of '93. So although this has been a major flood, certainly not a record-maker at this point.

But still, this is a day when people should be out here enjoying this spot. This is a very historic town. A lot of people come here. It's a destination place. The ice cream here, they say, is great. There's plenty of bald eagles to see. But today, what we're seeing is plenty of water. And you'll notice the name of the road we're on, the Illinois River Road, certainly living up to its billing in more than one way.

Let's send it back to you in Washington.

BLITZER: River Road, indeed. All right, Reynolds, we'll check back with you. Thank you.

Up next, which candidate would oil executives want to see in the White House come November? And when do they expect oil prices to start coming down? Will they ever come down? Again, I'll speak with the CEO of Chevron about the pain consumers are feeling at the pump. That interview when we come back.


BLITZER: Record high gas prices have U.S. oil company executives on the hot seat right now. I spoke about it with Dave O'Reilly, the chief executive officer of Chevron. We spoke this week in "The Situation Room."


O'REILLY: Let me point out what we're trying to do about this. Because I think the issue here is one of supply. And prices are high today, but it's fundamentally a concern about oil supplies.

Seventy-five percent of the price of gasoline is related to crude oil. We're very dependent on crude oil imports. The total world demand for crude oil has been growing steadily over the last decade, and that is affecting everybody's price.

So it is a concern, but we need to work on the supply side as well as the demand side to bring change.

BLITZER: Because you've had record profits, right?

O'REILLY: We're investing those record profits. BLITZER: But billions and billions of dollars in profits, more than ever before?

O'REILLY: Yes, but it's a big business, and a return-on-sales basis, we're right in there with the average of American business today.

What we're doing is investing that money. For example, last year we did make a lot of money, $18.7 billion. This year our capital investment in new supplies is 22.9 billion, almost $23 billion.

BLITZER: You know that Barack Obama says, if he's president, he wants a windfalls profit tax. He wants to take a chunk of your profits, right now, and give it back to the American people.

John McCain opposes that, as you know, so I assume you'd like to see John McCain elected president?

O'REILLY: Well, I would like to see no windfall profit tax, and I'll tell you why. First of all, we are already heavily taxed as an industry. Our tax rates last year were at 45 percent, compared to in the 30s for the average of all industry.

Secondly, as I mentioned earlier, we're investing the money. If you take the money away, it will reduce investment, reduce supply, and have exactly the opposite effect of helping the problem that you've referred to.

And thirdly, we've done it before. We've had windfall profit taxes. Congress has studied them, about 30 years ago. And what happened under those circumstances is supplies dropped domestically and we became even more dependent on imported oil. You don't want to do that today.


BLITZER: And coming up next, is the Taliban making a comeback in Afghanistan?

Is there any progress, at all, in the hunt for Osama bin Laden? We'll speak with two experts with enormous insight into the region when "Late Edition" continues.


BLITZER: Welcome back to "Late Edition."

With the war in Iraq, the strengthening of Al Qaida and the Taliban in Afghanistan and Pakistan and Osama bin Laden still very much at large, are the United States and its allies losing ground in the war on terror?

Let's discuss. Joining us from Santa Fe, New Mexico, the journalist Ahmed Rashid. He's the author of a powerful new book entitled "Descent into Chaos: The United States and the Failure of Nation-building in Pakistan, Afghanistan and Central Asia." And also joining us here in Washington, our CNN terrorism analyst, Peter Bergen. His most recent book is entitled "The Osama bin Laden I Know: An Oral History of Al Qaida's Leader."

Gentlemen, thanks very much for coming in.

And Ahmed, let me begin with you and ask you the question I just asked. Are the United States and its allies, right now, losing ground in the war on terror?

RASHID: Well, I would certainly say that the Taliban are gaining ground. We've seen, in recent weeks, astonishing new tactics that they've used, the assassination attempt on president Hamid Karzai, the jail break in Kandahar.

These are new urban guerrilla tactics that the Taliban have not been very good at before. They now seem to be doing it. And they seem to, of course, have imported a lot of new technology from Iraq, IEDs and new ambushes, explosives, that they're using, with devastating effect.

In fact, more American troops are now being killed in Afghanistan than they are in Iraq.

BLITZER: Well, is that the same thing? When you say the Taliban is getting strong, can we also assume that Al Qaida is getting stronger?

In other words, do you differentiate much between Taliban and Al Qaida?

RASHID: Well, I do differentiate between them, of course, because, I mean, the Taliban are very much on the ground, and there are thousands. They're a fighting guerrilla force, and Al Qaida is much fewer.

But I think the Taliban advances could not have taken place without support from Al Qaida. It is Al Qaida that has established for the Taliban the route to Iraq, and so there's a lot of traffic, now, between Al Qaida in Iraq and Al Qaida in Pakistan, Afghanistan.

Al Qaida has also increased the money from the drugs trade for them. Because Al Qaida is now being able to deal with traffickers well outside Afghanistan, and rake in much larger profits from drugs trafficking than before.

And Al Qaida, of course, seems to be very much an organizational tool for the Taliban. For example, I'm sure that this jail break, with all its sophistication, was probably carried out with the help of some planning by Al Qaida operatives.

BLITZER: Well, let me bring Peter into the conversation and ask you the same question.

Are the United States and its allies losing ground in the war on terror right now? BERGEN: Well, it depends where you are. I mean, as Ahmed has pointed out, I mean, certainly Al Qaida on the Afghan/Pakistan border has resurged, as the national intelligence estimate said in 2007.

Certainly the Taliban are able to conduct these large-scale operations. But if you move to Iraq, where I recently returned from a trip that was sponsored by the Defense Department, it's quite clear Al Qaida in Iraq has scored a series of tremendous own (ph) goals. It isn't defeated as a terrorist organization, but it's being defeated as an insurgency there.

And in fact, there is some evidence, now, that people within Al Qaida are leaving Iraq for Afghanistan, which they see as a, sort of, more fruitful area of jihad than Iraq itself.

BLITZER: Do you have any reason to believe, Ahmed, that the U.S. and its allies are any closer, right now, to finding Osama bin Laden?

RASHID: Well, I think there's a huge effort going on, obviously. And quite clearly, President Bush would like to see some developments on this front before the elections, before November.

But, I mean, we have no indication on the ground that anything dramatic is about to happen. There are much stepped-up attacks by U.S. forces using drones and missiles into the Pakistani side of the border, where, if intelligence tells them that there's a gathering of extremists, whether Taliban or Al Qaida, U.S. forces are now reacting very, very fast and they don't seem to be always asking the Pakistanis for permission. Now, I mean, that's clearly-and-an indicator that they are really trying to step up, but we don't know at all where he is.

BLITZER: Do you agree with that, Peter?

BERGEN: Yes, we have informed policies about where he may be, but no real information going back to the battle of Tora Bora in December of 2001 where we knew where he was.

BLITZER: And he slipped out.

BERGEN: And he slipped out. But since then, it's been zero.

BLITZER: There's a new government, as you know in Pakistan, Ahmed, your home country. Asif Ali Zardari, the widower of Benazir Bhutto, he recently said this, and I'm going to put it up on the screen. "We have tried confrontation; we have tried battling them; we have also tried ignoring them. It is now time to engage them."

Referring I suspect to the Taliban and al Qaeda. What do you make of this?

RASHID: Well, I think, you know, the problem is that the military has been engaging the Taliban in these peace deals for quite some years, and they haven't been able to get very much out of them.

I think what the civilian government wants to do is to have a more comprehensive plan, political reform in the tribal areas where the Taliban and al Qaeda are based and economic development, education, things like that.

But, you know, such plans have to be backed by a strong military position. And the problem right now is, it seems, that the military is in a very scattered position. The military is not on the offensive. It's not showing a picture of strength to the extremists and this, of course, stymies the whole effort by the civilian government.

BLITZER: I guess the question is, Ahmed, is the new government in Pakistan which is obviously very critical of Pervez Musharraf the president, is the new government in Pakistan ready to take more aggressive steps in cooperation with the United States to go after the terror?

RASHID: I think it would, if the military and the civilian governments were speaking from one page. I don't think they are speaking from one page, unfortunately. What you need is a mixture of economic and social development plus military power which only army can provide. BLITZER: You suggest in your book and correct me if I'm wrong, Ahmed, that there's still huge elements in the Pakistani intelligence service as well as in the Pakistani military who are not only sympathetic to the Taliban, maybe even al Qaeda, but actually helping them?

RASHID: Well, I think there's enormous sympathy for the Taliban within the military establishment, and there's no doubt that the Taliban do have sanctuaries in Pakistan where they are not really affected by any kind of military action, and we've seen, for example, in recent figures in the fighting in the south, up to 30-to-40 percent of the fighters who are coming into southern Afghanistan are coming from the Pakistan side of the border.

BLITZER: What do you think about that, Peter?

BERGEN: Well, you know, one of the realities is this is a civilian government that's actually --

BLITZER: The new government of Pakistan?

BERGEN: Yeah, and they are hampered by Pakistani public opinion and there's a poll released on Friday by a D.C.-based polling organization Terror-Free Tomorrow in which 50 percent of Pakistanis favored negotiation not only with the Pakistani Taliban, but with the Afghan Taliban and al Qaeda itself.

So these are some of the political realities. This government, Pakistan, has tried an all-military approach that was a failure. They tried an all-appeasement approach and as Ahmed said, looking at kind of a mix of a new kind of carrots and sticks in the tribal areas.

But, you know, nothing has really worked heretofore and unfortunately right now it seems the Pakistani government may default to a process of appeasement partly based because that's what the public wants. BLITZER: Ahmed, in your new book "Descent Into Chaos," you write these words and I'm sure you carefully considered them because you're a thorough journalist before you wrote them. "The international community's lukewarm commitment to Afghanistan after 9/11 has been matched only by its incompetence, incoherence and conflicting strategies -- all led by the United States."

Go ahead and explain what the problem was, why you believed the U.S. missed a golden opportunity to deal with Osama bin Laden and al Qaeda.

RASHID: Well, Wolf, right after the war ended in 2001 frankly the U.S. was already thinking of preparing for Iraq. It had too few troops on the ground. It was not willing to commit forces to Afghanistan because it was preparing for Iraq.

It was not prepared to commit adequate funds for rebuilding the Afghan army and the police, all for reconstruction. And for about three and a half years, until 2004, the end of 2004, we had a very lackadaisical policy by the U.S. and there were differences, of course, between the U.S. and its allies over Iraq and over Afghan policy, which made the Europeans less eager to come in and commit. They did finally. NATO came in in 2005, but by then that window of opportunity, which the Afghan people had given the Americans.

They had welcomed the Americans, they said, you know, come in and sit here but help us redevelop the country. That window of opportunity which was open I think for about three years, four years until the Taliban regrouped in 2003, that was lost because -- largely because of the war in Iraq.

BLITZER: Peter, you mentioned earlier that you just came back from a DOD, Defense Department sponsored trip to Iraq. What's the bottom line? What did you see?

BERGEN: Well, it's pretty persuasive when you go through Fallujah and Ramadi and Basra, all places which were quite difficult places until relatively recently and see relative calm has been resort.

But, of course, there's so many -- the wheels can come off very easily. There are so many issues out there that haven't been resolved, provincial boundaries, hydrocarbon laws, an election that's coming up which could be a good thing or bad thing depending how it's carried out, the provincial elections. But the bottom line is very qualified optimism, I would say.

BLITZER: And from your perspective, we only have a couple seconds, Ahmed, what do you see in Iraq?

RASHID: Well, you know, I think Iraq and Afghanistan are at a very similar position that there have been tactical gains by the U.S. and NATO forces in parts of Afghanistan, parts of Iraq, but how do you turn those tactical gains into strategic, a winning strategy for the governments in Afghanistan and Iraq. And that connection is just, you know, is not being made because both these governments are essentially very weak.

BLITZER: All right guys, we've got to leave it right there. Ahmed Rashid's new book is entitled "Descent Into Chaos." Thanks very much for coming in. Much more LATE EDITION right after this.


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


BUSH: My administration has repeatedly called on congress to expand domestic oil production.

BLITZER (voice-over): What could Congress do to help ease the price of gas? We'll discuss that and more with Democratic Congressman Robert Wexler, who supports Barack Obama and Republican Congressman Eric Cantor, who supports John McCain.

MCCAIN: Do not underestimate. I consider myself an underdog.

BLITZER: We'll access McCain's campaign with a potential running mate, Governor Tim Pawlenty of Minnesota.

OBAMA: I've got a lot of work to do everywhere. This is going to be a tough general election.

BLITZER: From the battle over campaign flip-flops to coverage of the presidential candidates' wives, insight from three of the best political team on television.

Plus, ten years of LATE EDITION. A look back at my 1998 interview with South Africa's Nelson Mandela. LATE EDITION's second hour begins right now.


BLITZER: And welcome back to the second hour of LATE EDITION. We'll speak with Congressman Robert Wexler and Congressman Eric Cantor in just a minute.

First, today's international energy summit in Saudi Arabia. Officials from 36 countries gathered there to discuss ways to try bring down record oil prices. This is important breaking news we're following. CNN's Wilf Dinnick is in Jeddah, Saudi Arabia where the meeting was held. It just wrapped up only moments ago. Wilf, update our viewers in the United States and around the world on the decisions the Saudis announced.

DINNICK: Well, the Saudi government is saying here they're going to really bump up production here, 9.7 million barrels of oil a day, they're going to get up to at the end of the July. And they haven't seen that kind of production since 1981.

And then by next year, they're going to look at 12.5 million barrels per day. That's a huge amount of oil, something they've never done here in the kingdom, but they say they're going to invest in new refineries and oil fields and then they say that will put more oil out on the market. That's really going to please the Bush administration. We spoke to the secretary of energy here, the U.S. delegation, and they're saying this is really just a case of supply and demand and there must be more oil on the market.

But we have to warn the viewers at home and those people that are concerned about the price at the pumps, no short-term solution yet. We spoke to the deputy oil minister here in Saudi Arabia and he's saying, listen, the kingdom, OPEC, those oil-producing nations, we don't set the price, the marketplace does.

But one thing they all did agree on, they're going to invest more in oil industry. So that means more oil refineries, getting more capacity, putting more oil in reserve. And they're going to do that for all nations. That's a commitment they're making. And then down the line later on, there'll be more oil in the market and they feel that will ease demand with more supply out there. Wolf?

BLITZER: All right, Wilf Dinnick reporting for us from Jeddah. That's new since the Sunday morning newspapers, to be sure.

Let's discuss this with our two guests joining us right now here in our Washington studios. Congressman Robert Wexler of Florida, he's the author of a brand-new book entitled "Fire-Breathing Liberal." We'll discuss that as well. And Republican Congressman Eric Cantor of Virginia. Congressman, thanks for joining us, the Republican vote counter or whip, right in the House of Representatives. Let's get your immediate reaction, Congressman Wexler, to this announcement from the Saudis?

WEXLER: It's excellent news. I hope it will bring down the price of gas at the pump. But what it does do is it highlights how dependent we are as a nation on the whims of the Saudis and other oil- producing countries and we need to end that dependency.

And we best do so by engaging in conservation measures, by bringing the efficiency standards up on our automobiles, and at the same time investing huge sums of research monies into alternative fuels, clean coal, solar, wind and we have to look at what France is doing with respect to nuclear power, where they use it for their electricity.

BLITZER: What do you think? What about this decision from the Saudis?

CANTOR: Well, you know, I think it's good news because anytime you increase supply across the world, you're going to help reduce the disparity between the rise the demand.

But I think it also highlights, Wolf, what's going on in Congress over the last several weeks and what we'll be talking about next week and what the presidential nominees are talking about.

The bottom line is, we've got to do something to ease the pain the families are having at the pump. And on the table right now is lifting the moratorium on offshore drilling and so that we can begin to explore the energy that America has.

And at the end of the day, 70 percent of Americans have said now that they support such actions and what we're hearing on the campaign trail, though, is just the opposite. John McCain does say now that he does support that. Barack Obama, all he's talking about along with Nancy Pelosi and others is slapping a windfall profit tax on oil companies. You know, doing the things -- pointing blame instead of trying to fix the problem.

BLITZER: All right, what do you think? You're from Florida. Your state will directly be affected if you start getting a lot of offshore drilling platforms off your coast.

WEXLER: It will be disastrous. But here are the --

BLITZER: Can't they do it environmentally sound, right now? Can't they do it the safe way? Even during Hurricane Katrina, all those offshore oil platforms in the Gulf Coast, they survived.

WEXLER: There's a chance, but we're not willing to take that chance in Florida. Here are the facts, Wolf, which is most important, 63 million acres already in the United States and in our waters are subject to oil exploration that are not being used.

The Bush administration itself, the Bush Energy Department said if we open up these lands, there won't be a drop of oil that will come from these new leases until 2017. That's not going to provide relief at the pump. But what it will do is will jeopardize our tourism in Florida, it will jeopardize all the shipping lanes, it will create all kinds of havoc. That's not the way to --

BLITZER: Would you support offshore drilling off the coast of Virginia?

CANTOR: Absolutely. And our legislature has taken the stance to say that they support it as well. We are the one state on the East Coast who believes that we can do it in an environmentally sensitive way. In fact, I am an advocate of doing that and using some of those revenues to help support the clean up.

BLITZER: You know, Governor Schwarzenegger in California, who's a strong supporter of John McCain, he doesn't like the idea.

CANTOR: Listen, John McCain has said he's for states allowed to choose. So if Robert says Florida doesn't want to try and explore their energy resources off their coast, then that would be Florida's decision to make.

At the end of the day, we've been hearing this line that it will take 17 years for us to see a return for 17 years now. Where would we be if we would done it back then? The point is, if we can send the signal to the global markets, I do think that we will begin to see a ratcheting down of the upper pressure on the prices at the pump.

WEXLER: We can send those same signals to the global markets by investing, understand the urgency of creating alternative fuel sources. We created an atomic bomb with the Manhattan project when we had to win World War II. We sent the man back to the moon safely. We can develop alternative fuels, but we have a sense of urgency. And by drilling off of the southeast or southwest coast of Florida, that won't the do it.

BLITZER: Here's what Senator Obama said on Friday. Listen to this.


OBAMA: When I hear John McCain say that he is now in favor of the same oil drilling off the coast that he was opposed to just a week ago, what he doesn't tell you is that George Bush's own Energy Department has said that this will have no impact on consumers until 2030.


BLITZER: You want to respond?

CANTOR: Yeah. Well, again, that means that there will not be actual product that may result and come on to the markets until then. But we all know that the speculation that goes on in the commodities markets today is having a big impact on what the price is at the pump. And that speculation is based on future supply and demand and the disparity there.

BLITZER: Given the enormous amount of money, hundreds of billions of dollars the United States has spent trying to help the people in Iraq, should the Iraqis, who are now major oil exporters, should they be selling oil to the United States at a discounted price?

CANTOR: Well, again, I think that anytime you enter into that kind of market influencing, at the end of the day, we are giving a lot of our taxpayer dollars to Iraq and if you ask them to go and not get the revenues that they need to go and support their own efforts, because I think at the end of the day, what we want is Iraq paying for their own reconstruction, not U.S. taxpayer dollars.

So I think it's just the fungibility of money you're talking about. You give a discount on the oil to the United States, or you can have the United States taxpayers paying less into the Iraqi reconstruction.

BLITZER: You agree?

WEXLER: We need to do more than that. First of all, we need to begin to responsibly end the war in Iraq. But in the meantime, the Iraqi government should be providing the oil at a discounted price for our military and for the rehabilitation services that are going on, certainly they should. And they ought to be using the oil revenue that they are gaining at enormous prices to fund the reconstruction. The American people shouldn't be doing that.

BLITZER: But the point that Senator Obama and a lot of Democrats make, as you know, Congressman Cantor, is that if the U.S. withdrew from Iraq and freed up, let's say $100 billion a year that the U.S. taxpayer is now spending in Iraq, that would go a long way in dealing with a lot of the domestic economic problems the country is facing.

CANTOR: You know, look, I don't think any of us want to be there spending U.S. taxpayer dollars, but we have done so to protect our national security. Let's call it how it is. Let's look at what's going on and the statements being made by Barack Obama.

CANTOR: And, you know, look, he's an extraordinary politician. There's no doubt about it. But, at the end of the day, he is not talking straight with the American people.

BLITZER: Give me an example.

CANTOR: Well, during the campaign, during the primary process, he was talking about absolutely unconditional withdrawal from Iraq; we need to do what Robert says and withdraw immediately.

Now he's talking about, well, there may be conditions; there may be concerns.

And you go through the list of things that are out there today, with the war in Iraq; you can talk about the issue of public financing that you've been discussing this morning; the mortgage crisis, et cetera. There are many, many instances where Barack Obama, although extraordinary in his political rhetoric, has not talked straight with the American people.

BLITZER: He says it will take about 16 months for withdrawal?

WEXLER: He's been very consistent. Senator Obama has said we would withdraw between one and two brigades every month. It would take about 16 months to do so. And he's made certain to say we'll get out as responsibly as we were irresponsible, vice versa, in getting in, that we have to make sure not to repeat the mistakes.

But on a question of character, the American people should compare. Barack Obama went to Detroit, to the car manufacturers, to say that we needed to increase our efficiency standards, not a message they wanted to hear.

John McCain, when he reversed himself on offshore drilling, went to the oil executives in Houston to make his announcement. Who's talking straight?

BLITZER: What about that?

CANTOR: I mean, come on. Come on, Robert. I mean, the bottom line is, you know, Barack Obama has taken different sides on basically almost every issue this campaign has been about, the latest being this public financing issue.

How in the world can you be a post-partisan politician, somebody who wants to change the system, get out the big, bad money out of corruption in politics and then take the position that he has, and says, forget it; we're going to go all with unlimited money? BLITZER: He will be the first major presidential candidate, since the rules after Watergate went into effect in 1976, to opt out of public financing for the general election campaign.

Russ Feingold, Democrat of Wisconsin, one of the authors of campaign finance reform with John McCain, said this. He said, "This is not a good decision. While the current public financing system for the presidential primaries is broken, the system for the general election is not."

He says Senator Obama is making a mistake.

WEXLER: Senator Obama is not making a mistake. His campaign is the most publicly financed campaign in the history of America, $1.5 million contributors. Ninety-eight percent of those contributors have given $100 or less.

Barack Obama did something no candidate has done. Senator McCain should do it. He's told those 527s, the unregulated political committees that are associated at times with Democrats, don't you dare spend your money on our campaigns, on our behalf. And they've listened to him.

Senator McCain hasn't dared say that to the other side. And one other thing -- Senator McCain's not in the position to speak about this. He used his public financing as collateral to get a loan, and then, low and behold, he didn't use it, and he broke the law.

CANTOR: Listen. The bottom line is Barack Obama has backtracked and now is engaging in double-speak, in terms of his position on public financing.

If Barack Obama is so willing to be transparent, why is it that he refuses to respond to John McCain's request that they have regular town hall meetings so the American people can see the candidates for what they are and talk to them and see the give and take?

Why is it that Barack Obama refuses to even respond to the offer by John McCain camp to do that?

BLITZER: McCain has asked for 10.

CANTOR: That's right.

BLITZER: And so far, they've got zero.

WEXLER: Senator Obama has responded. He says he does want to do these town hall meetings, but...

CANTOR: But he's yet to even respond.

WEXLER: ... he wants to do them for a longer period of time. Senator McCain wants it a very short period of time for the two men to be standing there. Senator Obama wants it to be for a long period, so people can get in a lot of questions. And let's also remember, with all due respect, Senator Obama just became the presumptive nominee of the Democratic Party, just two Saturdays ago. Senator McCain's been running a general election campaign for three months.

BLITZER: Go ahead.

CANTOR: The bottom line is, Barack Obama realizes he now is going to have $300 million to spend on the campaign trail. He has abandoned all his earlier promises to stick with the public financing of his general election campaign, and he...


BLITZER: But, as a politician, you can't blame him for that. Would you rather have $300 million to spend in a general election campaign or $85 million?

CANTOR: Exactly the point; he is a politician. All this talk about being post-partisan, about cleaning up what's wrong with our system -- he has demonstrated, this week, that he is just the same as all the rest that he's been criticizing.

WEXLER: I have a question. Barack Obama went to, a left-of-center group and said, don't use your 527 on behalf of Democratic causes.

Is John McCain willing to do the same to Republican 527s?

CANTOR: There are no 527s.


Show me where the Republican 527s are. The complete monopoly on the 527s is on the Democratic side of the aisle and on the far left.

WEXLER: Eric, the guy who created the Willie Horton ad, that ran an racist ad -- he's about to create a 527 that's going to do a similar thing.

Barack Obama should not unilaterally disarm. You wouldn't want a president of the United States to unilaterally disarm.

BLITZER: We've got to end it. But you admit that this is a major reversal -- I don't want to use the word flip-flop because that's sort of pejorative -- a major reversal on Barack Obama's part?

WEXLER: No, I don't think it's a major reversal. I think it's a continuation of a broad-based public financing process that Barack Obama has...

BLITZER: But he did say, earlier, on several occasions, he wanted to have public financing for the general election...


WEXLER: Yes, that's right. That's correct. That's correct.

(CROSSTALK) WEXLER: And as president, he will continue to work to change the law so that it's actually doable, so that neither party is disenfranchised or put at a disadvantage.

BLITZER: I gave him the first word. I'll give you the last one.

CANTOR: Well, Wolf, obviously, we're going to have a lot to talk about over the next several months. I think the bottom line is, while we see, now, the real Barack Obama, the extraordinary politician that he is, taking the different sides on each issue, one after the other, each and every week.

BLITZER: We've got to leave it right there. Congressman Cantor, thanks for coming in.

Congressman Wexler, thanks to you as well.

WEXLER: Thank you.

BLITZER: No fist-bumping today?


WEXLER: With you or with him?

BLITZER: With him.


BLITZER: All right. This programming note: I'll be joined by the Democratic House speaker Nancy Pelosi in "The Situation Room" this Thursday, 4:00 p.m. Eastern. You're going to want to see our interview with the speaker.

Also, coming up next, John McCain's campaign: What advantages does he have over Barack Obama? We'll talk about it with one of the potential running mates for John McCain, the Minnesota governor Tim Pawlenty. He's standing by, live. "Late Edition" continues right after the break.


BLITZER: Five months out from the U.S. presidential election, the national polls shows Barack Obama with a narrow lead over John McCain. That's in our average of the major polls. But, of course, in politics, five months is more like a lifetime.

Joining us now from St. Paul, Minnesota, the site of this summer's Republican National Convention, is Minnesota's governor, Tim Pawlenty.

He's the national co-chairman for the McCain campaign. He's also been mentioned frequently as a potential prospect for the vice presidential slot on the GOP ticket.

BLITZER: Governor, thanks very much for coming in. PAWLENTY: Happy to do it. Thanks for having me.

BLITZER: We'll talk politics in a moment.

But let me get your reaction to the news of the day, at least so far, that the Saudis have decided to increase oil production by about 1 million barrels a day and maybe 2 million by -- within -- over the next few months.

What do you think about this?

PAWLENTY: Well, it's relatively good news. We have a supply and demand problem, so the more supply we can get into the market, the better.

But we also need to realize we can't just continue to rely on that approach for our future. And that's why John McCain has been so aggressive and bold in saying that we have to have a revolutionary change in our energy policy for this country.

He's been promoting Americanizing and diversifying our energy sources here, rather than looking to that as a long-term solution from the Middle East.

BLITZER: But what do you do about the addiction to Saudi and other imported oil?

PAWLENTY: Well, we have to diversify and Americanize our energy supply, and John McCain realizes that, so he's talking about, first of all, making sure we reopen the door on nuclear and have additional nuclear plants in our country to stimulate base load energy production, clean coal.

But he's also been a strong, strong advocate of more solar, more wind energy production, more geothermal, more biomass, more biogas.

We're going to need it all. But we need to do it in a way that's environmentally sensitive and friendly. And John McCain is extremely forward-looking with respect to those initiatives.

President Bush, this week, made the case for going ahead and drilling in Alaska and the Arctic National Wildlife Refuge, which is known as ANWR. Listen to the president.


PRESIDENT GEORGE W. BUSH: We should expand oil production by permitting exploration in the Arctic National Wildlife Refuge, or ANWR.


BLITZER: Now, Senator McCain disagrees on drilling in ANWR, in Alaska, up there. He says it's an area that's pristine and should be off-limits. What do you think? PAWLENTY: That's correct. Senator McCain does oppose drilling in ANWR, but he does support, as you know, opening up offshore drilling and drilling, in terms of domestic production, elsewhere.

He wants to leave the states in charge, in terms of getting their approval, but he is for expanded, domestic production of oil. And that's going to be a big part of where we need to go in the near-term, and in the intermediate and long-term, moving to these renewable and next generation energy supplies.

And I think Senator McCain has been a national leader in terms of those initiatives.

BLITZER: Here's some statistics that I'm sure you're familiar with. When President Bush took office seven years ago, almost eight years ago, the national debt was around $5 trillion. It's now closer to $9 trillion, and it's going up.

Senator Obama says, if Senator McCain has his way with the tax cuts he wants to make permanent, the Bush tax cuts which senator McCain originally opposed, that national debt is going to skyrocket. Listen to Senator Obama.


OBAMA: We've borrowed billions from countries like China to finance needless tax cuts for the wealthiest Americans and an unnecessary war. And yet senator John McCain is explicitly running to continue and expand these policies without a plan to pay for it.


BLITZER: All right. Go ahead and respond to Senator Obama.

PAWLENTY: Well, first of all, this is one more instance where the rhetoric and the reality around Senator Obama is going to be brought into the light through this campaign.

He continues to make claims about being one way, and he has a reality and a record that's a different way. In his case, he is for dramatically increasing taxes. We don't think that's the way of the McCain campaign. And Senator McCain doesn't believe that's the way to grow the economy...

(CROSSTALK) BLITZER: But he says he wants to do it only for those families making more than $250,000 a year. He wants to reduce taxes for the middle class, people making around $50,000 or $75,000 a year.

PAWLENTY: Well, when you look at his proposals, Wolf, including lifting the cap on Social Security taxes, in terms of income levels; when you -- not addressing the AMT at all, or very fully...


BLITZER: But on the Social Security -- excuse me for interrupting -- he says it would only go into effect, increasing those Social Security withholding taxes, for people making more than $200,000 a year.

PAWLENTY: Ninety-seven thousand for an individual or so...


BLITZER: But there would be a lapse between $97,000 and $200,000 or $250,000.

PAWLENTY: Well, but when you look at $97,000 of income, I think that's people who are clearly middle income or upper middle income, but that affects a lot of Americans.

He also doesn't want to address, very clearly, the AMT, and he wants to boost capital gains taxes from 15 percent to almost double that. So if you have an IRA or a 401(k), which a lot of middle Americans do, and you go to retire or use that money, you're going to pay almost double the rate in taxation.

Senator McCain, on contrast, wants to increase the exemption for dependents from $3,500 to $7,000. He wants to make sure that we address the AMT. He wants to keep capital gains where it is now.

The other thing is, when Senator McCain talks about the economy, he talks about growing the economy, not increasing burdens.

And a lot of the tax analysis that gets done about the Obama and McCain campaign plans lumps in corporate tax reductions as, you know, for the wealthy. But most tax analysts who are nonpartisan will tell you that increasing taxation on businesses is quite regressive, because they pass it on to consumers, in most instances.

BLITZER: So, let me just be precise, Governor Pawlenty. You don't have a problem with allowing the Bush tax cuts that were implemented in 2001 and 2003 being made permanent, all of the Bush tax cuts, the estate tax plus the tax cuts for the wealthiest Americans, including billionaires?

PAWLENTY: They should have been permanent in the first place, Wolf. The fact that we're even having the debate, I think, is silly. But now that they're going to expire, I think they should continue.

And keep in mind, when you talk about tax cuts for the wealthy, that involves these reductions in corporate taxes, or increasing the AMT, or the exemptions I had talked about.

And when you look at as a basket, it's the kind of thing we need to do to grow jobs, expand the economy. Senator McCain understands that you cannot grow an economy by adding tax burdens on the people who invest, do research, build buildings, add jobs. Those are the folks we need to make sure that they are engaged financially in helping this economy grow.

We can't tax our way out of this. We're going to have to grow our way, in part, out of it. BLITZER: Minnesota is a major swing state right now. Both of these parties are going to be campaigning aggressively there. Your name has frequently been mentioned as a potential running mate for Senator McCain.

We spoke earlier about it and you said nobody has really gotten in touch with you about a vetting process that might be started, questions, stuff like that. But you had a chance, later in the week, to go ahead and do some campaigning with John McCain. Did the subject come up?

PAWLENTY: It did not. We talked about family and sports and politics and the like, but we did not discuss any talk about the vice presidential pick or vetting process or anything like that.

BLITZER: So nobody's been in touch with you and asked to see your IRS returns or anything like that?

PAWLENTY: They have not.

BLITZER: All right. Well, stand by, Governor. You never know. It could happen.


PAWLENTY: Very good.

BLITZER: But if it does, you're ready, right?

PAWLENTY: Well, I'm focused on my day job, as I mentioned to you before on this show, or your parallel show, during the week, that this is not something that I have designs on. I'm very happy with being governor of the state of Minnesota.

BLITZER: Good answer, Governor, and that's the correct answer. Thanks very much for coming in.

PAWLENTY: You're welcome.

BLITZER: Governor Tim Pawlenty of Minnesota will be out there in St. Paul for the Republican convention, the first week in September. We'll be in Denver for the Democratic convention, the last week in August.

Much more politics coming up with three of the best political team on television.

Also coming up, a decade of "Late Edition," South Africa's Nelson Mandela shares his memories with me in a rare 1998 interview. I think you're going to want to see this. We'll be right back.


BLITZER: Welcome back to LATE EDITION. I'm Wolf Blitzer in Washington. This year marks my 10th anniversary as the host of LATE EDITION. We're celebrating by showing you some of my best interviews from the last decade. On March 29th, 1998, shortly after I began hosting LATE EDITION, I had the opportunity to sit down with the South African president, Nelson Mandela at the presidential residence in Capetown. We spoke about numerous issues, including President Clinton's trip to the region and the time President Mandela spent in jail as a political prisoner. Here's part of my interview with the famed world leader.


BLITZER: Today we're sitting here in your beautiful home. The contrast between that cell and this home here in Capetown is remarkable. But it must be so amazing for you to see where you are right now, see where South Africa is right now, and to remember those days, which were only a few years ago.

NELSON MANDELA, PRESIDENT, SOUTH AFRICA: No, that is true. Having spent -- the fact that I spent so many years in prison is part of my life now. I don't think about it, because as I pointed out to the press yesterday, when I think of those days, they are unpleasant memories arise in my mind. And it was tragic, but at the same time it has important lessons, because human beings are human beings.


BLITZER: If you would like to see more of my interview with President Nelson Mandela, you can go to our Web site at Don't forget, we'll be celebrating my 10th year as host of LATE EDITION with an entire show dedicated to bringing you to best interviews from the past decade. Tune in on July 6th, 11 a.m. Eastern for a very special LATE EDITION. You'll want to see it.

Up next, flip-flops or principle changes of direction. Whatever you want to call them, there were lots of them out on the presidential campaign. Our political panel is standing by to tell us which flips were flop, right after the break. LATE EDITION continues right after this.


BLITZER: You could call this the week of the flip-flops in the race between Barack Obama and John McCain. Let's talk about that and a lot more. Joining us, CNN's senior political analyst, Gloria Borger, our White House correspondent Ed Henry and the "Hotline" editor-in-chief and CNN contributor Amy Walter. Guys, thanks very much for coming in.

Gloria, I'll going to start with you. I'm going to play a clip of what Barack Obama said at a fundraiser down in Jacksonville, Florida. The audio quality not that great, we only have audio, no video. So we'll put the words up on the screen as well.


OBAMA: We know what kind of campaign they're going to run. They're going to try to make you afraid. They're going to try to make you afraid of me. They're going to say 'he's young and inexperienced and he's got a funny name. And did I mention he's black? He's got a feisty wife.


BLITZER: All right, Gloria, what do you think about that?

BORGER: Well, I think it's unusual to hear Barack Obama talk about race like that. Throughout the entire campaign, he's really kind of tried to avoid presenting himself as an African-American candidate. I think now as a general election candidate, he realizes that race is a lot of issue for a lot of people and he's trying to talk about it a little bit --

BLITZER: A preemptive strike?

BORGER: A little bit more. There was a poll in the Washington Post this morning that showed that for three out of 10 Americans believed that race is going to be a factor in this campaign. So why not bring it up with a little bit of a sense of humor at this point, and then I'm sure we'll be having more conversations about it.

HENRY: Put it on the table, because it's not just the race issue, but the inexperience issue that he mentioned as well, and his wife, another issue that's been out there.

BLITZER: He mentioned, he says his feisty wife.

HENRY: And some people out there are going to appreciate that, that he sort of -- President Bush does that with humor about his wife all the time. He mentions that his wife kind of runs the show on some things, jokes about his mother running the show.

And the lighter touch can possibly work. But I think it's also about putting these issues on the table. Instead of dancing around it, John Kerry did that a little bit in 2004. Democrats want to see their nominee meet these things head on.


WALTER: Well, and I think also, we talk so much about some of these issues, but we still haven't had the debate yet between those candidates on the issues. This is a debate about the issues of the day where you look at the numbers and Barack Obama versus John McCain on the economy, on health care. He's going to be leading.

If it's about some of these character issues, again, if we go back to the 2004 model, sure, this is where Democrats have gotten themselves in trouble. So let's wait until -- I was thinking today about this poll, do Americans have problems with this, what are we going to see how race is going to play?

I think we have to wait for a moment here to see how the issues start to line up as they start to finally engage before we spend so much time talking about character.

BLITZER: Mike Huckabee, the former Republican presidential candidate, governor of Arkansas, former, he said this, "Republicans will make a fundamental if not fatal mistake if they seek to win the election by demonizing Barack Obama." Is that -- is he right?

BORGER: Yeah, I think he is right.

BLITZER: Because normally, a lot of times, demonizing the political opponent works.

BORGER: But in this election, what we've seen so far throughout these primaries was that the voters really reacted against negative campaigning this time. We really haven't seen as many negative ads as we are used to seeing in these campaigns and I think it's partly the public saying, enough.

WALTER: And look what happened in the primaries. Any time you saw, even in the Republican primary, these same attacks weren't working. We've seen these in special elections, some of these House races. The same sort of attack lines don't work. Voters are basically saying look, we hate the way politics is being run.

BLITZER: But it did work to a certain degree in 2004, the so- called swift voting campaign against John Kerry.

HENRY: Absolutely. That's why I think Barack Obama is talking about spending more money than ever, because he wants to meet these attacks head on. But I also think John McCain's been saying he wants to do this on the issues, Obama says he wants to do this on the issues. Everyone's going to have to call their bluff at some point and see whether they really do it. But when you're talking about the negative campaigning, Hillary Clinton kept trying to catch up by attacking Barack Obama's inexperienced and the like. It didn't really work, obviously.

So John McCain's going to have to come up and define himself, his message, who is he.

HENRY: It didn't really work, obviously. And so John McCain is going to have to come up and define himself, his message, who is he. I think just beating up on Obama is not going to be enough.

BORGER: Got to be much more creative this time. The 2004 style is not necessarily going to work in a year like this.

WALTER: Well and you can have the candidates taking the high road and the surrogates taking the low road.

BORGER: That's exactly right.

BLITZER: Is the decision by Barack Obama to forego the public financing -- public funding of this campaign in order to raise $300 million, $400 million, who knows how many millions he can raise as opposed to the $85 million that John McCain will deal with, the public funding. Is that going to be a problem for him, or is this just going to be an insider kind of story?

BORGER: Well, here's the bottom line. Barack Obama made a political decision, he made a tactical decision, that is, that he wants to win. And that is that he can raise more money. And that's what this is really about. No matter what he says.

Some people say, OK, that shows that Barack Obama is tough, tough enough to win, and some people say, and this is what the Republicans are going to do, they're going to turn it into a character issue. And it may work. They're saying, he's not a man of his word, number one. Number two, he's not a reformer.

HENRY: And he's acting like any other politician. He's tried to run this campaign under change, change you can believe in, the slogan, what not, and these kind of moves do raise questions about that.

But when you look at the raw politics of it, Obama's camp talk about spending money in states like Georgia where Democrats haven't competed in a long time. They say for example, as one dramatic example, they think there are about half a million African-Americans in Georgia who are not registered to vote. They think if they have the money, A, to actually register them to vote, but then, B, to actually spend some TV ad money there and say $5 million, $10 million, all of the sudden John McCain has to defend himself on turf he never thought he would have to.

WALTER: One issue doesn't make or break a campaign, patterns do. And this is going to be the bigger issue here. If the McCain camp and other surrogates can say, first, it was the flag pin. Are you going to wear it, are you not going to wear it? Now it is, are you going to come to town hall meetings? You said you wanted to do this, now you're saying no. Now it's campaign finance reform. Who is this guy? And going back to the question of inexperience.

BLITZER: Stand by, guys, we're going to continue this conversation. Lots more to discuss, including the high price of gas. That was a hot topic on the Sunday morning talk shows. We're going to tell you what was said in our very popular "In Case You Missed It" segment. Stay with us. LATE EDITION continues after this.


BLITZER: And now in case you missed it, let's check some of the highlights from the other Sunday morning talk shows here in the United States.

NBC's Meet The Press aired its first show since Tim Russert's death with NBC Nightly News anchor Brian Williams hosting. The network announced today that former anchor Tom Brokaw will host the show through the November elections.

Meanwhile, on the program, Obama supporter Senator Joe Biden and McCain supporter Senator Lindsey Graham squared off on Barack Obama's decision to forego public campaign financing.


SEN. LINDSEY GRAHAM, R-S.C.: Senator Obama looked at cameras all over the country, literally signed his name, I will accept public financing, and now, for whatever reason, he has broken his word and at one 1.4 million donors allows you to break your word, this is reinforcing everything that is wrong with politics. This is a game changer in terms of the general election.

SEN. JOSEPH R. BIDEN JR., D-DEL.: Obama did say, I'm going to be a game changer. He has been a game changer. Big money is not influence in this campaign. Major interests are not influence in this campaign. People who are able to say, look, if you don't change your mind, I'm withdrawing, I can affect your decisions, they do not impact on Barack Obama. He's had this incredible appeal that no one ever anticipated.


BLITZER: On CBS, McCain campaign economic adviser Carly Fiorina defended the presumptive Republican nominee's decision to change his position on U.S. offshore drilling.


CARLY FIORINA, MCCAIN CAMPAIGN ADVISER: The reality is, we have never before faced a situation where a gallon of gas is over $4 and is likely to remain over $4. We've never before faced a situation where the price of a barrel of oil has doubled in the last 12 months. So what John McCain has said is that we now need to take control of our own energy future, and that involves, among other things, tapping our own resources.


BLITZER: On ABC, Republican Senator Kay Bailey Hutchison and Democratic Congressman Ed Markey weighed in on the oil crisis and what to do about it.


REP. EDWARD J. MARKEY, D-MASS.: In the end, this crisis is really caused by 12 years of Republican control of Congress. We've gone from 46 percent dependence when the Republicans took over the House and Senate in 1995 to 65 percent dependence upon imported oil today.

SEN. KAY BAILEY HUTCHISON, R-TEXAS: Drilling offshore on a state-by-state option is something that I think we could do very environmentally safely. And yet, anything that says production is killed by the Democrats.


BLITZER: Highlights from the other Sunday morning talk shows here on LATE EDITION, the last word in Sunday talk.

Up next, our political panel looks ahead to the race for the White House, the role of the candidates' wives, among other subjects. We'll be right back.


BLITZER: We're back with the best political team on television, Gloria Borger, Ed Henry, Amy Walter.

Amy, Hillary Clinton is going to be going out later this week, actually on the campaign trail, fundraising, public events, helping Barack Obama. He's already doing pretty well in many of the major public opinion polls. This could only help him, right?

WALTER: Yeah. And certainly getting to that group of voters, those women voters, those folks who still have feeling, you know, somewhat upset here by the fact that their candidate is no longer in the race.

But it is true. In our own polling, we've found that Barack Obama's approval rating among Democrats, so those who say they strongly approve him, is 20 points higher even than either Bill Clinton's or Hillary Clinton's.

So he I think has already done a very good job of coalescing that base. It does not hurt to have Hillary Clinton out there getting, especially we hear about this ubiquitous group of people, the downscale white female voter, but those are the sort of folks that she can really help and really sort of pave the way for what she wants to do next.

BLITZER: What do you think?

HENRY: And I think she gave a very powerful speech obviously when she did eventually drop out. Everybody was somewhat surprised that she was as gracious as she was. But now this is the big step too. And how do you actually convert that into trying to get beyond OK, it's over, get my supporters that you were talking about onboard. And the third thing I think is everybody is going to be watching the body language so closely to see, can they be a ticket or not. Is this for real?

BORGER: I'm going to be watching whether or not he helps her pay down the debt, her debt. And there is still no agreement on that. And the campaigns have been talking, holding conference calls on this. And we still haven't seen an agreement on how he's going to help her. And she can also help him raise money, by the way, but I'm waiting to see when that happens.

BLITZER: Is that still out there in the cards, that that dream ticket is really viable?

BORGER: It may be out there in the cards, but it's low in the pack.

BLITZER: What do you think?

WALTER: I think it fell off the table.

BLITZER: Because of Patti Solis Doyle, the former Clinton campaign manager who had a falling out with Hillary Clinton was now named over the past few days to be the future vice president's chief of staff. WALTER: Right. I just think that in many ways it just still doesn't make sense in terms of what Barack Obama needs to do in terms of, if he's going to stick with his message, change, something different, he needs to pick somebody who's going to follow that message.

BLITZER: What do you think of -- we saw a lot of the wives this past week, Cindy McCain, she's going to be on the cover of the new issue of "Newsweek" magazine. She spoke with our own John King in Vietnam. Michelle Obama was on "The View." Are wives -- is everybody going to agree that wives should be off-limits in terms of this campaign?

BORGER: It's interesting. I don't think anything is off-limits anymore in any campaign anywhere.

HENRY: Right.

BORGER: Anyhow. So I think the wives understand that, that every move they make is going to be watched. I think what the American people do, though, is they look at the wife and see what does it tell you about the candidate? What does it tell you about him? And what is their relationship tell you about him?

You know, we like to think we understand and know these things, of course, we don't. We don't really understand relationships, political relationships are strange to begin with. It's very hard to be a political wife. But I think, you know, people kind of factor it in.

BLITZER: Because, you know, Ed, Americans vote on the substantive issues, oil, or domestic, foreign policy, but they also want to feel comfortable with the next president and the next first lady.

HENRY: Absolutely. They want to get a feel for who they really are. And you're right, the spouse can really help along. We saw Bill Clinton sort of hurt his spouse in this last campaign. And I think while everything is on the table in this day and age and the wives are quote/unquote fair game, low be the candidate who does a dirty trick against a wife. I think that really, really could backfire big time.

WALTER: Yes, absolutely. But I think you're right. Most voters don't pick one issue to vote on. They are voting on who they would like to see, who think can do the job for four years. So getting a better picture of them. And Obama especially, where people don't feel that they know that much about him. Getting the story of Michelle Obama and Barack Obama is something I think can help them.

BLITZER: We've got to leave it there, guys, thanks for coming in. If you would like a recap of today's program, by the way, you can get highlights on our LATE EDITION podcast. Simply go to LATE EDITION continues right after this.

(COMMERCIAL BREAK) BLITZER: Don't forget, coming up right after LATE EDITION in a few moments, "FAREED ZAKARIA GPS" takes a complicated look at international affair, world leaders, policy experts and journalists. This week, Fareed speaks exclusively with the Secretary of State Condoleezza Rice.


SECRETARY OF STATE CONDOLEEZZA RICE: I think the problem there is that one could never trust that Iran would stick to the deal. And the reason that nobody, and that includes Russia, China, wants Iran to have enrichment and reprocessing of any kind on its territory is because nobody trusts them not to cheat.


BLITZER: So stay tuned for the entire interview with Secretary Rice. That's coming up next on "FAREED ZAKARIA GPS."

One final note before I go. When I saw Tim Russert's son, Luke, this week, he asked me to do one thing for his late dad. Recalling that both Tim and I grew up in Buffalo, New York, he asked me to wrap up my Sunday show this week with these words in memory of his dad. So here it goes -- go, Bills!

That's your LATE EDITION for Sunday, June 22nd. Please be sure to join me next Sunday and every Sunday at 11:00 a.m. Eastern for the last word in Sunday talk. Remember, we're here in "THE SITUATION ROOM" Monday through Friday from 4:00 to 7:00 p.m. Eastern. Until then, thanks very much for watching. I'm Wolf Blitzer in Washington. "FAREED ZAKARIA GPS" starts right now.