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The Situation Room

Rescuing the Economy; Democratic Presidential Candidates Duel on Economy; Fmr. President Bill Clinton on Hillary's Campaign; McCain Says Surge is Working in Iraq

Aired March 17, 2008 - 16:00   ET

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

WOLF BLITZER, CNN ANCHOR: Happening now, rescuing the economy. President Bush sounds more like a fan of drastic action than he did only a few days ago.
The Democrats, right now they're pouncing. But could they do much more to ease this economic crisis?

Plus, John McCain in Iraq. He tells CNN he's seen proof that he was right on the war and the Democrats were wrong. Will this trip help him in the presidential battle back home?

And Bill Clinton denies playing the race card. In a rare sit- down interview, the former president opens up about his role in his wife's campaign, her tense showdown with Barack Obama.

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Economic nightmares are coming true for many Americans right now, and the political leadership knows they can't ignore the growing sense of fear that is out there. President Bush and the Democrats who want his job all making a point once again today to talk about issue number one for voters. The urgency fueled in part by drastic new measures to try to prevent a leading investment bank from collapsing.

Our Suzanne Malveaux is covering the Democrats on the economy. But first let's go to the White House. '

Our Ed Henry is standing by to tell us what the president did to try to reassure a very jittery Wall Street and very jittery American public -- Ed.

ED HENRY, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, just like last week, the president is again being cheerleader in chief, trying to be optimistic about the future. But in a sharp departure from his speech on Friday, he's now in favor of more dramatic government intervention, which could be a sign that the White House is getting more nervous about the health of the economy.

(BEGIN VIDEOTAPE)

HENRY (voice-over): The day for President Bush was supposed to be focused on the luck of the Irish. Instead, fearful the economic crisis is spreading, the president made a last-minute change to his schedule, bringing reporters in to a morning meeting just as the markets opened. GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: In the long run our economy is going to be fine. Right now we're dealing with a difficult situation.

HENRY: The upbeat tone belies the fact the government took extraordinary action this weekend. The Federal Reserve rushing in with $30 billion in taxpayer money to back JPMorgan Chase's takeover of Bear Stearns, the troubled investment bank that has cratered.

BUSH: We're in challenging times. But another thing is for certain, that we've taken strong and decisive action.

HENRY: Different than what he said Friday, when he warned against the government doing too much to deal with a rough patch on the road.

BUSH: You know full well it's important not to overcorrect, because when you overcorrect you end up in the ditch.

HENRY: White House spokeswoman Dana Perino insisted there was no contradiction.

DANA PERINO, WHITE HOUSE PRESS SECRETARY: This isn't about bailing anyone out. These actions are intended, as I said earlier today, to minimize financial market disruptions.

HENRY: But families who have lost their homes, like this one in California, see it otherwise.

UNIDENTIFIED FEMALE: Well, the banks are being take care of. They're being saved. But what about us that made the banks? If it wasn't for us, people that have homes, they wouldn't have no business.

HENRY: And some economists are urging the White House to drop its opposition to bailing out individual mortgages.

LYLE GRAMLEY, STANFORD WASHINGTON RESEARCH GROUP: I think we face a situation sufficiently dire so that we could end up with a financial and economic meltdown if we don't move aggressively.

(END VIDEOTAPE)

HENRY: Now, that same economist though did give the president credit for moving quickly to push through that economic stimulus plan. But if you remember, those tax rebate checks are not going to be hitting mailboxes until mid-May. Two very long months away -- Wolf.

BLITZER: Ed Henry at the White House watching this story. Thanks, Ed.

The Democrats, Hillary Clinton and Barack Obama, rarely skip an opportunity to blame the president for the nation's economic problems. But as the situation gets worse, they are increasingly trying to one- up each other.

Let's go to Suzanne Malveaux. She's out on the campaign trail watching all of this in Pennsylvania.

Suzanne, what are we hearing from these Democratic candidates today?

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: Well, Wolf, you're absolutely right. They both put the blame on President Clinton (sic), but they are also using the upcoming five-year anniversary of the Iraq war to make the case that it's the cost of the war and the estimate of the trillions of dollars that they believe has really contributed to this economic crisis. They say by ending this war, it will free up some funds to do the kinds of things they want to do -- health care, creating jobs, as well as grants.

And today I had a chance to ask Barack Obama what is he doing specifically now to have an impact?

(BEGIN VIDEOTAPE)

MALVEAUX (voice-over): Both candidates are competing over who would be the best steward of the economy. For voters, issue number one.

SEN. HILLARY CLINTON (D-NY), PRESIDENTIAL CANDIDATE: The economy is in trouble.

MALVEAUX: As an example of taking action, Senator Clinton boasted she had just spoken with the Treasury secretary and president of the Federal Reserve.

H. CLINTON: I relayed to them my thoughts and concerns.

MALVEAUX: Something early on Obama could not match.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: Well, we have a number of phone calls that are scheduled. I've been talking to some of the heads of the larger banks on Wall Street.

MALVEAUX: Obama praised the Fed for taking action to restore confidence in the market.

OBAMA: I think that Secretary Paulson is -- along with Ben Bernanke -- are taking some creative steps to deal with the issue. And I'm encouraged that they're trying to act swiftly.

MALVEAUX: Obama also pitched tax cuts for the middle class and legislation he co-sponsored aimed at ending the mortgage meltdown.

OBAMA: This is not a bailout for lenders or investors who gambled recklessly. And it is not a windfall for borrowers. It is a fair and responsible way to help stem the foreclosure crisis.

MALVEAUX: For her part, Clinton touted her own plan to create new jobs, and reminded voters of the good old days back when her husband was in office.

H. CLINTON: The only four years that we spent -- that we took in as a federal government were from '98 to '01.

(END VIDEOTAPE)

MALVEAUX: And Wolf, really the truth of the matter is, is that there's very little difference between these two candidates when it comes to the general idea of their economic plans, their economic packages. Both of them are talking about tax cuts for the working class.

Both are talking about repealing the tax cuts for the wealthy. Also amending the North American Free Trade Agreement and creating new jobs through alternative source of energy.

I even had a chance to ask Barack Obama, what are some of these differences here? He struggled and he essentially said, well, Senator Clinton is going to have a tougher time implementing some of her plans because of her close ties to special interests -- Wolf.

BLITZER: All right, Suzanne. Suzanne is in Pittsburgh for us. Thanks very much.

Barack Obama, by the way, is now planning to address issues of race and his presidential campaign head on. The Democrat will give what his campaign is calling a major address on the issue of race and politics tomorrow.

This comes as Obama is trying to distance himself from the racially-charged comments of his former pastor, the Reverend Jeremiah Wright. Obama says his speech tomorrow will touch on Wright's remarks, remarks Obama has called -- and I'm quoting now -- "inflammatory and appalling."

(BEGIN VIDEO CLIP)

OBAMA: The statements that were the source of controversy from Reverend Wright were wrong. And I strongly condemn them. I think the caricature that's being painted of him is not accurate. And so part of what I'll do tomorrow is to talk a little bit about how some of these issues are perceived from within the black church community, for example, which I think views this very differently.

(END VIDEO CLIP)

BLITZER: All right. We're going to have a lot more on the Reverend Wright's comments, the fallout, the political fallout. That's coming up in our "Strategy Session." Donna Brazile will be here for that.

Let's check in with Jack Cafferty. He's got "The Cafferty File" on this Monday.

Hi, Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, the Democratic superdelegates are looking for a way out. There's a growing sense among these almost 800 party insiders that they want the battle between Clinton and Obama resolved before the convention in August.

However, "The New York Times" reports that interviews with dozens of these undecided superdelegates find them uncertain about who could actually step in and help end this thing before the Democrats bloody themselves anymore. Many of these undecided superdelegates say they plan to wait and see what happens in the remaining primary contests, although many also believe they will ultimately side with the will of the voters. This goes against the approach that Hillary Clinton is pushing, that the superdelegates should decide for themselves who they think would be the best candidate.

A lot of the superdelegates are talking about having some outside power broker step into this thing and try to make a deal. Some of the names being tossed around include DNC chairman Howard Dean; former Vice President Al Gore; House Speaker Nancy Pelosi. Others think it would be simply impossible for an outside person or group to reach an agreement between these two candidates, each of whom has so much support.

Meanwhile, it looks like Democratic voters aren't so sure about this whole idea of superdelegates to begin with. A new CNN/Opinion Research Corporation poll shows that 50 percent of registered Democrats think superdelegates are a bad idea. Only 42 percent think they're a good idea.

Obama leads Clinton when it comes to pledged delegates, number of states won, and the popular vote. As for superdelegates, Clinton leads Obama 237-207, although he continues to narrow the gap there.

So here's the question: Should the superdelegates step in and end the fight between Hillary Clinton and Barack Obama before the convention?

Go to cnn.com/caffertyfile. You can post a comment on my blog -- Wolf.

BLITZER: All right, Jack. Thank you.

Bill Clinton, one-on-one, denying he played the race card against Barack Obama. .

(BEGIN VIDEO CLIP)

WILLIAM JEFFERSON CLINTON, FMR. PRESIDENT OF THE UNITED STATES: First of all, what happened there is a total myth and a mugging. And I think it's been pretty well established.

(END VIDEO CLIP)

BLITZER: Coming up, the former president at length on his controversial role in his wife's campaign, whether he needed to be reigned in. The interview with Bill Clinton, that's coming up next.

Also, John McCain on the ground in Iraq, praising the military surge. Critics suggest he's only seeing what he wants to see. Our interview with John McCain, that's coming up as well. And shopping for a candidate. How do voters' fears about the economy play into their presidential choices? We have some new poll numbers for you.

Stay with us. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Bill Clinton right now back in the spotlight of his wife's presidential campaign. He's denying he played racial politics on her behalf in the South Carolina primary, or that he or his role in the campaign has been diminished because of that controversy.

The former president sat down with CNN's Sean Callebs in New Orleans yesterday.

(BEGIN VIDEOTAPE)

SEAN CALLEBS, CNN CORRESPONDENT: Has your role in the campaign changed at all from South Carolina? Has it evolved?

W. CLINTON: No. No. First of all, what happened there is a total myth and a mugging. And I think it's been pretty well established.

Charlie Rangel, the most important African-American official today, the chairman of the House Ways and Means Committee, said in unequivocal terms in South Carolina that no one in our campaign played any race cards. That we had some played against us, but we didn't play any.

What we started doing in -- actually in New Hampshire is what we continue to do. In New Hampshire, we -- I went to the northern part of the state to the distressed areas and talked about Hillary's energy plan and how it would enable the New Hampshirites to reopen a lot of their timber mills and generate electricity from wood waste and other things, because her plan would reroute some of the transmission lines there and make New Hampshire more energy independent.

So, then we went to -- Nevada didn't work because half the Democratic (ph) votes in Las Vegas. So everybody has to campaign there, as well as out in the state.

But then when we got to South Carolina, and when we got to most recently in Texas, and Ohio and in Pennsylvania, generally she goes to the bigger, more populous areas, and I try to go around -- in to the rural areas of the state to make sure that every place knows that we want their vote. And it's worked pretty well.

If you look at when we did it in Missouri, in Missouri, where I thought we were going to get killed because the whole political establishment was against Hillary, she lost St. Louis 90-10, but she carried 109 of the 114 counties in Missouri. Then it worked like a charm in Tennessee and Oklahoma and Arkansas because she had a good profile there. She got 70 percent of the vote in Arkansas because they know her there. So that's basically what we do. We try to organize it so I can go places that normally a presidential campaign doesn't go, and hopefully run our vote up there. And she can make her case as she has to in the big urban areas and to the media.

CALLEBS: If, as you said, the race card was played against you -- I was at the State of the Black Union a few weeks back when your wife came in and said if anybody was offended by what happened in my campaign, I apologize. In Mississippi, nine out of 10 black voters supported Barack Obama.

Are you concerned that this is becoming more polarized?

W. CLINTON: No. No. That was going to happen -- Iowa did that. People that really understand politics know that.

Once African-Americans understood that they had a candidate with a serious chance to win the nomination, and perhaps the presidency, then it was going to be a question of somewhere between 80 to 90 percent were going to support him. Except in areas where she had a particularly strong profile.

Like, she got about -- I think about 30 percent of the African- American vote in Florida, probably over 20 percent, anyway, in California. And probably 25 percent and higher in the areas where the African-American members of Congress supported her. And she probably got about 35 percent, maybe a little more, in Arkansas, where she had a very strong lifetime of experience.

And she won Congressman Rangel. So she won Harlem, where my office is. Actually won, which was astonishing.

But I think that that was just going to happen. The most important thing is for her to make it clear to all voters in a way that he does when he tries to get middle-aged working women to vote for him, you know, something that she does very well. That she wants their votes, she thinks she would be their president, and whatever they do in the primary, if she's the nominee, she's going to represent them.

I think that you've got to understand, most of these voters like both of these candidates. While the campaign has to be presented and reported as a conflict because it's a contest, you know, and you've got to know what the differences are, and while the -- some of the surrogates may say things which are or are not on message, or things over the top, and while you have to examine people's history and record in public life, the fundamental fact is most of the Democrats like both of these candidates.

And they're trying to figure out who would be the best president, who is likely to do things or be what I need most in a president, and who is most likely to win? And the rules are organized so that the thing has to be kept very close. That was a decision the Democrats made 20 years ago.

If we had the Republican rules, Hillary would have a prohibitive lead in the delegates, and Senator Obama's people would be upset because he has a little bit of a lead in the popular vote now. By the end of this process, it's more likely that Hillary will be ahead in the popular vote, and he'll have a little lead in the delegates because we have so many caucuses and things like that.

That's the rules we have. If John McCain were subject to our rules, he wouldn't be near the Republican nomination yet, and you would probably still have four of them still in it. Those are the decisions we made. So we've got to live with it.

Most Democrats like both of them. They're trying to make those three decisions -- who would be the best president, who would be the president that I need, who is most likely to win?

We just need to let everybody vote. And I predict to you that by the time the voting is finished, we'll have a feeling about what we'll do. And then people won't begrudge the so-called superdelegates and the decisions they make.

What will make people mad is if it looks like some mad dash to shut this thing down before everybody gets their say. And before we resolve Florida and Michigan, which is really important -- however it's resolves -- the Democrats almost certainly cannot win an election without Michigan, the state that ought to be the most fanatic Democratic state in the country because they've suffered so much.

And the Democrats almost certainly can't lose the White House if they win Florida, which has been a great state for Hillary. But it's also a state of the future. We want America to sort of go where they seem to be going. So we'll just have to see what happens.

(END VIDEOTAPE)

BLITZER: The former president speaking with our Sean Callebs in New Orleans.

Coming up, a positive outcome amid days of scandal. New York swears in a new governor and ads a new pay page to its history, while also trying to turn the page on some of the darkest days the state has seen.

And what do you think about own economic situation and the economy in general? New CNN polls leave little in doubt.

Lots of news happening right here in THE SITUATION ROOM.

(NEWSBREAK)

(COMMERCIAL BREAK)

BLITZER: To our viewers, you're in THE SITUATION ROOM.

Happening now, Barack Obama and Hillary Clinton sparring over Iraq. Both say they would start pulling out troops if elected, but what are the real differences in their plans? We're watching this. Do you have an individual right to own guns, or does the Constitution give that right collectively to state militias only? The United States Supreme Court will address Washington, D.C.'s sweeping ban on handgun ownership. You're going to hear from two people with very different and emotionally charged opinions.

And tomorrow Barack Obama will deliver what his aides say will be a major speech on race. Will it answer the questions some people have, or why he closely -- the question being why he closely followed a spiritual adviser who made some very controversial statements about race?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

For many people right now it's virtually all about the economy. We're seeing urgings of calm from President Bush, sounds of alarm from the Democrats who want to replace him, and bank bailouts designed the to prevent shock waves in an already shaky financial market.

Let's get some analysis of what's going on. Our senior political analyst, Bill Schneider, is watching the story for us.

Bill, as we take a look at the story -- and there are a lot of complications added -- you're getting a closer look at where the candidates stand on this -- and whether they agree or disagree on some key points of what to do about the economy.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: That's right.

One thing we found -- find in the poll is that Democrats overwhelmingly agree that the economy is in terrible shape. But they don't agree on much else.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Looks like the economy is beginning to swallow up the agenda for 2008. Asked which issue will be most important when you decide how to vote, 42 percent of Americans say the economy in the new CNN/Opinion Research Corporation poll taken over the weekend.

The economy now leads the war in Iraq by two-to-one. Concern about the economy has nearly doubled since October. The reason? Nearly three-quarters of Americans think the economy is now in recession, up from two-thirds last month. Just under half felt that way in October.

Republicans are divided over whether the country is in a recession.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: The fundamentals of our economy are strong. We're still the greatest exporter, the greatest importer, the greatest innovator, the strongest economy, the strongest nation in the world.

SCHNEIDER: Democrats are nearly unanimous. Ninety-one percent say we're in a recession.

OBAMA: I believe there's such a thing as being too late. And -- and that hour is almost upon us. We are at a defining moment in our history. Our nation is at war. Our economy is in a shambles.

H. CLINTON: I cannot stress to you, we are in a very dangerous period in the economy.

SCHNEIDER: But Democrats are not in agreement on much else. Among Democrats nationwide, Barack Obama has a narrow lead over Hillary Clinton for the Democratic nomination, 52 percent to 45 percent, close, just like the total primary vote in the states that have voted so far. The economic issue may be helping Clinton stay competitive.

H. CLINTON: I would call the leadership of Congress and say, you may be on a two-week vacation. I want everybody here. We're going to sit here and figure out what we're going to get out of this Congress.

SCHNEIDER: Among Democrats who say the economy is their top priority, Clinton is narrowly ahead of Obama.

(END VIDEOTAPE)

SCHNEIDER: So, how do Democrats want this race decided? Not by the superdelegates. Democrats think superdelegates at the convention are a bad idea by 50 percent to 42 percent. But most Democrats, 63 percent, to be exact, would like to see Florida and Michigan hold new primaries or caucuses -- Wolf.

BLITZER: Bill Schneider in Philadelphia for us, thank you.

Also regarding something that affects millions and millions of Americans, the IRS says it will start sending out those tax rebate checks on May 2. The government hopes they will help boost the struggling economy.

Let's get some more analysis of what is going on from our senior business correspondent, Ali Velshi.

He's watching the tumult, shall we say, up in New York.

Ali, how might these checks -- obviously, they're going to help individuals, but how might they help the economy in general?

ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: Well, it's good. We should get Bill back and ask him, because the evidence seems to be that Americans are going to take those checks and use it to help out some of the problems they have got generally speaking, pay off their debts, their credit cards, things like that. Unless you use that check, A, to buy something, to spend it in some way that helps the economy here in the United States, it's kind of money that -- that doesn't make sense to be spent.

The other thing is, given how this -- this economic situation that we're in has worsened over the course of the last couple of months, from the time that the decision was made to send those checks out to now, the actual amount of money that's being sent out is probably not going to make up for it.

In fact, in this last week-and-a-half alone, the Federal Reserve has injected probably two to three times the amount of money that Americans are going to get back just to help out the banking system, so, at this point, probably a drop in the bucket. And it's not even clear that Americans will use those checks in ways that will -- will accommodate or help the economy -- Wolf.

BLITZER: Explain this -- this purchase by J.P. Morgan Chase of Bear Stearns, and why individual investors out there, including a lot of our viewers who have IRAs, who have retirement funds, 401(k)s, why this potentially is so important.

VELSHI: Well, it's important because Bear Stearns was the fifth largest investment bank in the country. In fact, many people who invest in IRA or 401(k) have mutual funds that invest in the financial services sector. That has just been hammered for the past year.

Fundamentally, though, take a look at what the Dow did today. It actually ended higher. There's probably about a 300-point swing on the Dow today. In the end, there's some belief that the federal government and the buyout of Bear Stearns by J.P. Morgan might actually be good news.

Later this week, we will get word from Lehman Brothers and Goldman Sachs to see how the rest of the financial services are doing. But, most importantly, by tomorrow this time, Wolf, you and I will have spoken, because the Federal Reserve will probably have cut interest rates once again. That will give Americans some sort of discount on their debt, or at least their adjustable rate debt.

Expect the prime rate to go down tomorrow. That's probably going to be a bit of a shot in the arm for the economy.

BLITZER: All this week, at noon Eastern, Ali Velshi will be anchoring with Gerri Willis a show, "ISSUE NUMBER ONE," about the economy, I recommend it for our viewers out there.

Ali, thanks very much.

"ISSUE NUMBER ONE," the economy, well, this week noon Eastern -- right here on CNN.

John McCain uses his trip to Iraq to promote the surge and hammer the Democrats.

(BEGIN VIDEO CLIP)

MCCAIN: We are succeeding, and we can succeed. And American casualties overall are way down. That is in direct contradiction to the predictions made by the Democrats, and particularly Senator Obama and Senator Clinton.

(END VIDEO CLIP) BLITZER: The Republican nominee, in waiting, talks to our John King about his visit to Iraq and the politics of war -- the interview coming up.

Also coming up, one top GOP congressman is accusing the president of, "killing the Republican brand." We will talk about the economic backlash in our "Strategy Session."

And a bailout of a leading investment firm on the brink of collapse. What does the crisis at Bear Stearns mean for everyday Americans? Much more on this part of the story coming up as well -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Vice President Dick Cheney in Iraq today says there are still major issues to deal with over there, after five years of war. But he says, overall, the U.S. mission has been successful. That's a quote.

Cheney made an unannounced trip to Baghdad to mark this week's five-year anniversary of the U.S.-led invasion.

(BEGIN VIDEO CLIP)

RICHARD B. CHENEY, VICE PRESIDENT OF THE UNITED STATES: ... reflect back on those five years, I think it's been a difficult and challenging, but nonetheless successful endeavor, and that we have come a long way in five years and that it's been well worth the effort. I think the president's made a number of very tough and difficult decisions that have been carried out by some extraordinarily capable people.

(END VIDEO CLIP)

BLITZER: Probable Republican presidential nominee John McCain has wrapped up his own trip to Iraq, and he's sending a message back to the voters about the war and about his Democratic opponents.

Let's go to Baghdad. Our chief national correspondent, John King, is on the scene for us.

John, tell us -- tell us a little bit about what McCain has done there, what he's saying. You had a chance to sit down with him today.

JOHN KING, CNN CHIEF NATIONAL CORRESPONDENT: He's been out on the streets, Wolf, taking his own firsthand look at the security situation. You know, for the past five years in the political debate about Iraq, this has been George W. Bush's war.

But watch and listen to Senator McCain, and it's abundantly clear he realizes this is his fight, too.

(BEGIN VIDEOTAPE)

KING (voice-over): Playtime on a road that, just months ago, was off limits, traffic jams, bustling markets, proof John McCain, tells CNN, he was right, and the Democrats dead wrong.

MCCAIN: The surge is working.

KING: On the balcony of what was Saddam Hussein's presidential palace, the senator made clear he came to Baghdad with many complaints.

MCCAIN: Their failure to declare provincial elections, oil revenue-sharing. There is still corruption in areas, particularly among Shiite parts of the government.

KING: But, overall, upbeat. His eighth visit to Iraq comes eight months before Election Day at home. And McCain is convinced the war that nearly doomed his candidacy is turning for the better.

MCCAIN: We are succeeding, and we can succeed. And American casualties overall are way down. That is in direct contradiction to the predictions made by the Democrats, and particularly Senator Obama and Senator Clinton.

KING: A drive through Baghdad now is different.

(on-camera): Six to eighth months ago, here in Baghdad's Karada neighborhood, car bombings were still frequent. But, as you can see now, the markets are open, the streets are quite busy, and the security situation is dramatically better.

(voice-over): But critics call it mostly a mirage and say, absent political reconciliation, U.S. troops would have to stay for decades in large numbers just to keep today's relative calm. And security improvements are hardly universal.

(on-camera): Senator McCain visited the Shurga market just up the road a bit a year ago as part of a high-profile effort to suggest security already was dramatically improving. But it took more than 100 troops to escort him and provide security for the visit. And, a year later, the neighborhood remains highly volatile, unsafe for an American to visit, and under the control of radical cleric Muqtada al- Sadr's Mahdi army.

MCCAIN: All I can say is that, yet, there are other neighborhoods of Baghdad where kids are out playing soccer, people are in the street.

KING (voice-over): What next is the new dividing line. Extra troops sent for the surge are rotating home. U.S. troop levels will drop to about 145,000 by July. The Democrats say, withdraw more quickly. McCain says, not so fast.

MCCAIN: We probably should hold the 15 brigades for a while and see how the progress goes.

(END VIDEOTAPE)

KING: Now, Senator McCain is well aware the Democrats will quickly criticize his call for a pause in any additional troop reductions. And he also acknowledges, Wolf, that public opinion back in the United States is not on his side.

But he believes, in the eight months to Election Day, that the facts are on his side, that, if he continues to make the case that the security situation is getting better here, and that if the Americans listen to the Democrats that Iraq will collapse quickly into chaos, he believes he can succeed -- Wolf.

BLITZER: All right, John, thanks very much.

We are going to have more of John's interview coming up in the next hour here in THE SITUATION ROOM -- John King on the scene for us in Baghdad.

Hillary Clinton and Barack Obama, by the way, are also talking about Iraq, as the five-year anniversary of the war nears. We are going to have a full report on their latest sparring over Iraq, what they're saying about McCain's strategy. That's coming up later in THE SITUATION ROOM as well.

In our "Strategy Session": Obama and Wright, the politician and his preacher.

(BEGIN VIDEO CLIP)

REVEREND JEREMIAH WRIGHT, TRINITY UNITED CHURCH OF CHRIST: ... and then wants us to sing "God Bless America?" No, no, no, not God bless America. God damn America -- that's in the Bible -- for killing of the innocent people. God damn America.

(END VIDEO CLIP)

BLITZER: Senator Obama has condemned his former pastor's remarks, but the controversy has taken Obama off-message. We're watching the story.

And a retiring Republican congressman says President Bush has ruined -- ruined -- the GOP's brand. We will talk about that and more with Donna Brazile and Terry Jeffrey.

They are standing by live -- right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: The statements that were the source of controversy from Reverend Wright were wrong, and I strongly condemn them. I think the caricature that is being painted of him is not accurate. And, so, part of what I will do tomorrow is to talk a little bit about how some of these issues are perceived from within the black church community, for example, which I think views this very differently.

(END VIDEO CLIP)

BLITZER: When Barack Obama speaks, many people will surely be listening. That will be tomorrow morning. He will be giving what his campaign calls a major address on the issue of race. He will be speaking in Philadelphia.

Will it help soothe some of the recent tension over the issue? Let's discuss in our "Strategy Session." Joining us, our political analyst the Democratic strategist Donna Brazile and conservative commentator Terry Jeffrey, the editor in chief of Cybercast News Service.

What do you think, Donna, about this whole uproar that has developed over the past few days?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, I hope Senator Obama tomorrow can get back on message and talk about the economy and what really is hurting people in this country, not a sermon the his pastor gave, but the fact that the people are worried about their jobs and keeping their homes.

Wolf, I think he has to talk about reconciliation. He clearly is a man of faith. He attends that church because it provides him with spiritual sustenance. And, so, I think, tomorrow, he should talk about his faith, talk about race, talk about religion, but also hope that he brings it back home to why he's running for president.

BLITZER: What does he need to say, you think, Terry, tomorrow?

TERRY JEFFREY, EDITOR IN CHIEF, CYBERCAST NEWS SERVICE: Well, I think the problem he has, Wolf, here is one of credibility. He says he wasn't aware of these remarks that Reverend Wright said, but he's been a member of this church for 20 years.

I think people, quite frankly have a hard time believing that. They know that the message that Barack Obama has been articulating himself differs from what Reverend Wright has been saying. But I don't -- I think a lot of people are incredulous about the claim he's made so far that he was not aware of this.

BLITZER: Because that's the complaint. The critics are saying, you know, your excuse that you didn't know that these were his views, that a lot of the critics say, that doesn't ring true.

BRAZILE: I don't know if he said it that way. But what he said was that, when those particular sermons were given, he may not have been in the congregation. Look, I have sat in church pews and listen to my priest say things, and I just say, I hope I don't hear that next week, because I want to come back to church.

Senator Obama has made reconciliation part of his message. And I think, tomorrow, he needs to talk about why that is his message and not about Mr. Wright's sermons. Reverend Wright's sermon will -- will be there for Terry and everyone else to pick through. Maybe he should put some Gospel music on. Maybe you will understand what the message really is, because I think people don't understand the message that many blacks hear in their churches on Sunday -- and whites, too, for that matter.

JEFFREY: Well, you know, look, Donna obviously has a better insight on the black church than I do. But I'm a big fan of the Reverend Martin Luther King. And the arguments that Martin Luther King made that led to victory in the civil rights movement were nothing like the racially polarizing remarks of Reverend Wright.

And, in fact, as a Catholic, I can completely identify with -- 100 percent -- with the moral argument that Martin Luther King, a Baptist black preacher, made for racial justice in this country. But there are 180 degrees removed, Wolf, from the kind of argument we heard from Reverend Wright.

BRAZILE: You don't know Reverend Wright. You haven't spent a day in his church. And you don't preach to people with broken souls and spirits. And, so, I'm not saying that he...

JEFFREY: But Martin Luther King would never have said those words, would he, Donna? He would not have made those arguments.

BRAZILE: Martin Luther King said things that made white people uncomfortable, even white people, that they are uncomfortable about some things that Martin Luther King said, but we all agree where we are going.

JEFFREY: Yes, but the way that Martin Luther King made white people uncomfortable was giving witness to the truth and appealing to what we know in our hearts is true, that it's wrong to discriminate against people because of their race.

BRAZILE: And has Reverend Wright ever called for jihad? No.

JEFFREY: A 180-degree difference from Reverend Wright.

BRAZILE: No, he never called for jihad. Reverend Wright has insulted black people, too. That's what is so magnificent about the black church. You sit in church and you're not just soothed, but you are challenged. And that's what Reverend Wright has done.

BLITZER: All right, we only have a few seconds left, but I want you to react to what the outgoing Congressman Tom Davis, Republican of Virginia, said, quoted in Sunday's "Washington Post."

"It's no mystery. You have a very unhappy electorate, which is no surprise, with oil at $108 a barrel, stocks down a few thousand points, a war in Iraq with no end in sight, and a president who is still very, very unpopular. He's just killed the Republican brand."

JEFFREY: Well, look, I'm not going to stand here and say that George Bush was a great conservative president. He wasn't, Wolf.

But Tom Davis is the Republican congressman who had a 56 percent rating the last time out from the American Conservative Union. He's to the left of George Bush. George Bush has political problems, I believe, to the degree he aped what Tom Davis wanted in a Republican president. So, I think it's very ironic for him to make that statement.

BLITZER: What do you think? BRAZILE: I think the Republican brand is in trouble. Fiscal conservatism often means fiscal -- fiscal -- a balanced budget. And to the extent that the president has hand a hand this weakening of the economy, we all know it.

BLITZER: Well, we will see what happens in November, because the economy right now -- and presumably then -- will be issue number one for the American voters.

All right, guys, thanks very much.

A serenade for Hillary Clinton? Find out which world-renowned showman will be singing for Hillary Clinton.

And a dollar just doesn't buy what it used to buy. Its value is rapidly, rapidly shrinking. You know what that means right here in the United States. But what does it mean for Americans shopping overseas?

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Checking our Political Ticker right now: Elton John and Hillary Clinton, a one-night-only concert. The music star has scheduled that concert in New York next month to raise campaign cash for Senator Clinton.

Tickets for the April 9 fund-raiser go on sale Wednesday. Prices start at $125 a seat. Elton John says, he's not a politician, but he believes in the work that Hillary Clinton does.

John McCain is using his campaign to promote March madness. He's challenging his supporters beat his picks in the college basketball tournament. McCain's Web site now includes a section for visitors to fill out brackets with the teams they think will win. Once McCain releases his picks -- that would be on Thursday -- the scoreboard will show how supporters' choices stack up against his. And winners will be awarded some prizes.

On this St. Patrick's Day, there's plenty of green to the road to the White House. Hillary Clinton wore a scarf dotted with shamrocks to mark the holiday. Barack Obama's campaign signs were changed to sport the color of the day and the shamrocks as well. President Bush accepted his annual bowl of shamrocks from the Irish prime minister, Bertie Ahern.

Remember, for the latest political news any time, you can always check out CNNPolitics.com.

That's where you can read my daily blog post as well. Just posted one before the show.

Let's go back to New York and Jack Cafferty for "The Cafferty File" -- Jack. CAFFERTY: The question this hour is: Should the superdelegates step in now and end the fight between Hillary Clinton and Barack Obama -- before -- before they get to the convention.

Keith writes: "With our economy now headed for a full-blown depression -- not a recession -- somebody better step in and end the Democrats' nonsense. I honestly don't think this country could survive another four years of Dubya's failed economic policies with McBush."

Rosalynd writes: "I don't think this selfish, spineless group of delegates has the courage to do what is necessary. This should have been over when Senator Obama ran off a string of 12 straight victories. Clinton's big-state argument is foolish, since several of those big states are blue anyway, the two candidates are about equal in big swing states, and Texas has been out of reach for the Democrats for three decades."

Steve writes: "On June 7, after the last state has voted, the superdelegates ought to step in and give the nomination to whoever is in the lead of pledged delegates at that time. There is no reason to wait until August for the convention.

Julia in Kentucky disagrees: "No, Jack, they shouldn't. How about voting for the candidate we want? Go back to the way it is supposed to be, and determine it by the popular vote. It seems to me, if we lay the choice at the feet of the superdelegates, then the actual choice is taken from us, letting the opinions of a few decide the outcome for millions."

Rosemarie in Florida says: "The superdelegates definitely should step in and remove Hillary Clinton's boxing gloves. A good referee for that would be Howard Dean, since he's the head of the Democratic National Committee. Hillary's the one who bloodied this race, and she's the candidate who is behind. We all know that, whatever plays out in the remaining primaries, Barack Obama can't be caught."

And Aaron in Champaign, Illinois: "Unless Obama and Clinton enter a steel cage fight to the death, how else is this thing going to end? Personally, I think I prefer the death match" -- Wolf.

BLITZER: All right, Jack, thank you.

And, to our viewers, you're in THE SITUATION ROOM.

Happening now, the Bush administration uses bailouts and jawboning to try to stem the turmoil that's sweeping through financial markets. The president says he's acting decisively. Democrats say he's actually dropped the ball.

As violence sweeps Iraq, John McCain pays a visit, saying he would do whatever is necessary to achieve success there, while Democrats compete to see who would get out sooner.

And Barack Obama plans a front-and-center speech on race in America. Can that overcome any setback caused by the racial rhetoric of his spiritual adviser?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Global stock markets plummet. The dollar touches record lows. And a major Wall Street firm all but collapses.

But, against the drumbeat of bad news, President Bush is upbeat, saying, his administration is on top of the situation.

(BEGIN VIDEO CLIP)

BUSH: We obviously will continue to monitor the situation. And, when need be, we will act decisively, in a way that continues to bring order to the financial markets. In the long run, our economy is going to be fine.

(END VIDEO CLIP)

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