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State of the Union

Interview With David Axelrod; Interview With Gary Bauer

Aired October 17, 2010 - 09:00   ET


CANDY CROWLEY, HOST: If ever there was a power troika, it is money, politics, and television. Wrap your mind around this: An estimated $3 billion will be spent on TV ads this election season.


UNIDENTIFIED MALE: Paul Hodes' motto -- tax, borrow or spend.

UNIDENTIFIED MALE: John Boehner, Paul Ryan and Michele Bachmann are planning a sneak attack on Social Security and Medicare.

UNIDENTIFIED FEMALE: For heaven's sakes, she supported Obamacare.

UNIDENTIFIED MALE: And that threatens our lives.

UNIDENTIFIED MALE: Twenty-eight years of Barbara Boxer, and America is going broke.


CROWLEY: None of these ads are from the candidates or even their parties. These ads were paid for by a particular category of non- profit independent organizations not required to tell who gives them the money that pays for the ads. This year, all outside groups favoring Republican candidates or causes are outspending those who favor Democrats by more than 6:1. If you can't beat 'em, pummel them, so Democrats are.


PRESIDENT BARACK OBAMA: To win this election, they are plowing tens of millions of dollars into front groups that are running misleading negative ads all across America. Tens of billions of dollars are pouring in. And they don't have the courage to stand up and disclose their identities. They could be insurance companies, or Wall Street banks, or even foreign-owned corporations. We will not know because there's no disclosure.


CROWLEY: Are voters being duped as they sit in front of their TVs, or amid continuing signs of a grim election day ahead, are Democrats trying to rouse the party faithful with warnings of sinister forces at play? Today, 16 days to the election, White House senior adviser David Axelrod on the fierce battle for control of Congress and the president's accusations of mystery money tipping the balance.

Then, conservative activist Gary Bauer, involved in two of the many outside groups pumping money into this year's election.

Plus, assessing the impact of all those ads and all that cash with Time magazine's Mike Duffy and veteran ad analyst Evan Tracey. I'm Candy Crowley, and this is "State of the Union."

No matter how much money is spent this election season, next January President Obama will, in all likelihood, have to work in a very different political reality that includes fewer Democrats and more Republicans on Capitol Hill. In a wide-ranging interview in today's New York Times magazine, Peter Baker offers a glimpse into what an aide called Obama 2.0.

"I keep a checklist of what we have committed to doing," the president says, "and we've probably accomplished 70 percent of the things that we talked about during the campaign, and I hope as long as I'm president, I've got a chance to work on the other 30 percent."

And that 30 percent includes immigration and energy reform and reining in government spending in times of great need. Joining me to discuss this and more is David Axelrod, a senior adviser to the president, up in Boston today. Thanks so much, David, for joining us.

AXELROD: Happy to be here, Candy, thanks.

CROWLEY: Let me start first, before we get to campaign spending, with the president's last two years agenda in his first term. What is the single most important priority come the end of January?

AXELROD: Well, look, we have two continuing priorities. One is to generate more growth and jobs. That's fundamental. We're still digging out from the worst recession since the Great Depression, and there's been a lot of devastation from that, that we have to heal, and that means accelerating our recovery. We've had nine straight months of private sector job growth, but we need more of it, so that's certainly going to continue to be a focus.

But in the mid and long-term, we do also have to focus on our fiscal situation. We didn't just inherit a financial crisis and an economic crisis, but also a fiscal crisis, and we have to -- and we have to deal with that, and lay the foundation for future growth. Fiscal reform is part of that. Energy is a part of that. Managing the health reform.

CROWLEY: What about immigration?

AXELROD: Is part of that. Education reform is part of that, and certainly immigration is an issue that we want to tackle. You know, a couple of years ago, there were 11 Republicans in the United States Senate who worked with Democrats to try and pass immigration reform. There were none in this last couple of years, but it's an issue we have to solve. We have to impose some responsibility and accountability on this system and on people who are here illegally, on the borders, on employers who are skirting the law.

We also have to address the issue of people who are coming here to study. They're being educated in American universities, and then they go back to their countries because our immigration laws don't allow them to stay. They go back to their countries, and so we create assets for foreign competitors, and that's another issue we have to address. So immigration certainly is part of the agenda we want to address going forward.

CROWLEY: One of the things in this interview that I found interesting, the interview with Peter Baker, is the president said, look, if the Republicans win in this election, they're going to have to prove they can lead if they take over a majority. If they lose, they're going to be more contrite and they are going to have to work with me. What does the president have to do in what is very likely to be that changing political environment? Does he have to change a thing?

AXELROD: Candy, from the moment we arrived here, our goal and our aspiration was to get past this very destructive hyperpartisan environment in Washington because we had big challenges to solve. One of our great disappointments was that the Republican Party made a political decision essentially not to cooperate.

CROWLEY: But did the -- I'm asking about the president.


CROWLEY: What does the president need to do?

AXELROD: I understand, but Candy, it takes two to tango. The president...


AXELROD: ... I'll never forget -- I'll never forget the president going up to the House to talk to them about the Recovery Act, and the entire Republican House caucus issuing a statement before he arrived to meet with him saying they were going to vote en masse against his plan. We have to get passed that...

CROWLEY: So you think it's all the atmosphere (ph) is all the Republicans?

AXELROD: ... and recognize we both have -- we both have responsibilities for the future of the country.

So what I'm saying is we're going to continue to reach out, Candy, and we're going to look for common ground, and a way forward to solve the problems facing this country, and we're hoping that -- the Republicans will have more seats in Congress regardless of whether they have control or not. We're hoping with that comes a greater sense of responsibility. The last two years weren't encouraging...

CROWLEY: So you think it's up to them, really.

AXELROD: ... but perhaps the future will be. Well, I think that it's up to us to extend our hand, as we have before. It's up to them to decide whether they're going to take it or whether they're going to do what they've done for the last two years.

CROWLEY: Let me turn you to the economy here, because the Fed chief, Ben Bernanke, said this past week that the economy is more sluggish than he thought, that he believes given this current conditions of the economy, that unemployment is going to remain high for perhaps the next couple of years was the indication. He was talking about the Fed having to do more to kind of get more money into the marketplace.

Given that environment, is it still wise for you all to stick with the idea that you ought to take money out of the marketplace by allowing tax rates to go up on the wealthy?

AXELROD: Well, look, Candy, if you look at the Congressional Budget Office and all the other studies that have been done, the least stimulative tax cut we could give would be a tax cut to millionaires and billionaires who already have...

CROWLEY: But it's still stimulative in a bad economy.

AXELROD: ... money (inaudible) -- and nobody wants to borrow $700 billion more to pay for tax cuts that aren't going to stimulate the economy and aren't going to benefit the 98 percent of the American people.

We want a tax cut for the middle class, up to $250,000. Everyone would get a tax cut up to $250,000 of income. That would be stimulative, because people who need money in their pocket to spend and pay for the things that they need to live would have more money in their pocket. That makes sense. We proposed other tax cuts. We want to accelerate expensing so that businesses can buy equipment next year and not pay taxes on those purchases next year. We want ...

CROWLEY: How about capital gains?

AXELROD: ... a permanent research and development tax credit. Well, we believe that there should be action on capital gains, but not to go back to where it was, perhaps to 20 percent. That would be a responsible level and would still encourage growth in investment.

CROWLEY: So you are sort of willing at some point -- people think this might be a risk -- you need to have money stay in the marketplace, so that people will buy things, and even if you can make the case that the rich don't spend as much as a percentage of their income, they still spend something, and that is money that businesses say they need in the marketplace so people will buy their stuff. So that they can make more stuff.

AXELROD: Businesses -- listen, what we need to do is get a tax cut to the middle class, Candy. But the other thing that's weighing down on our economy and you hinted at it and certainly Mr. Bernanke has, is our fiscal -- is our fiscal situation. And the notion that we borrow $700 billion for the next ten years from China or some other country in order to pay for tax cuts for millionaires and billionaires doesn't make sense. This is part of how we got in trouble in the first place.

CROWLEY: But it's going to cost you to do it for the middle class. AXELROD: So we ought to do the things that make sense for our economy. Let's talk about the tax cuts that I just mentioned, that actually have -- that everyone agrees would stimulate the economy, and focus on putting the emphasis where it belongs.

CROWLEY: We've got to take a quick break, so maybe if I could get a yes or no. Do you think that there is any wiggle room in that position? Are you adamantly against anything that would even temporarily extend those tax cuts for those making $250,000 and up?

AXELROD: We don't think tax cuts for the middle class should be held hostage for tax cuts for the wealthy.


AXELROD: ... that would cost...

CROWLEY: Wiggle room?

AXELROD: ... 700 billion we would have to borrow.

CROWLEY: So no wiggle room?

AXELROD: You heard my position, Candy.

CROWLEY: All right. Thanks. Stick with me, David. Up next, is the president off the mark with those claims about shadowy campaign cash? David Axelrod stays with us.


CROWLEY: In our next segment we'll turn our conversation with David Axelrod to campaign spending, now a staple of the president's campaign rhetoric. The White House argument is twofold. This DNC ad covers the first.


UNIDENTIFIED MALE: The U.S. Chamber of Commerce, they're shills for big business and they're stealing our democracy. It appears they've even taken secret foreign money to influence our elections.


CROWLEY: No outside fact checker has found any evidence that latter charge is true. Three million businesses, mostly domestic, and some foreign are dues-paying members of the U.S. Chamber of Commerce, an estimated $100,000, or less than 1 percent of the chamber's total budget come from the dues of foreign businesses.

The Chamber adamantly denies the charge and there is no evidence that money from foreign dues is funding the Chamber's political ads.

Moving on to the second objection, this time directly from Mr. Axelrod.


AXELROD: Tens of millions of dollars from undisclosed donors under benign names like the American Crossroads Fund, and they're spending heavily in all of these elections.


CROWLEY: He is talking about groups classified by the IRS as 501(c)s. These are non-profit organizations that list their primary mission as something other than political so they don't have to tell who gives them money. Crossroads GPS and the U.S. Chamber of Commerce fall in this category.

What do voters make of all of this? In a recent poll 47 percent said a candidate promoted by groups with anonymous donors is less likely to get their vote, 41 percent said it doesn't matter. Campaign cash with David Axelrod, next.


CROWLEY: We are back with Senior White House Adviser David Axelrod.

Let's get right to it. You and the president, a lot of other Democrats have been complaining particularly about the Chamber of Commerce, which doesn't release its -- who is supporting some of these ads that it's out there, and it's out there with millions of dollars worth of ads in some key states.

And every single fact-check has said there is just no proof of this. Why do you sort of continue to push this idea that the Chamber is doing something illegal, because it would be illegal to use foreign money in campaigns?

AXELROD: First of all, I think that is not the main question. I would ask you, because I know you're a great reporter, of the $75 million they're spending on campaigns, how much comes from companies with foreign investments? How much comes from the insurance industry? How much comes from the -- Wall Street? How much comes from the oil industry? I'd ask you that.

CROWLEY: Sure, I mean, all of which would be...

AXELROD: No, no, I'm honestly asking -- I'm asking you a question, Candy. How much comes from each of those places? You don't know, because they don't disclose.

CROWLEY: Right, sure. AXELROD: They say, trust us, trust us, we're -- everything is cool, everything is kosher, don't worry about it, but we're not going to disclose. Let me tell you something, people don't disclose, there's a reason.

We tried to pass a law through the United States Congress that would force all these organizations, whether they support Democrats or Republicans, to disclose where their money is coming from. Fifty-nine Democrats in the Senate voted for it, every Democrat, 41 Republicans in the Senate used a procedural technique, a filibuster, to block a vote on this, because they wanted to keep it secret. Why? CROWLEY: Well, let me back this up then and say you're perfectly right and it is perfectly legal for these groups that are classified as not having their primary mission be political to keep their donors a secret. Totally legal.

AXELROD: If, by the way -- it's perfectly legal if they spend a majority of their money on something else, it will be interesting to see if that's the case.

CROWLEY: OK, but...

AXELROD: Because all of these funds, all of the sudden Karl Rove creates a fund, it now has, you know, upwards of $50 million that they're spending, probably over $100 million by the end of this in campaigns across the country. And there are dozens of these sprung up, all run by Republican political operatives, called "social welfare organizations."

There's one called The Committee for Truth in Politics, ironically named because they won't reveal their contributors, that is based in North Carolina. And their mission, their stated mission, is to promote the social welfare of North Carolina. And they're running negative ads against Democratic candidates in Washington, in California, and in Ohio.

You tell me if this is on the up-and-up.

CROWLEY: OK. Let's -- OK, we've established that it's legal and it's an even playing field. Democrat-leaning groups could do this, in fact, Democratic-leaning groups are doing it with much less success than Republican groups are doing this.

CROWLEY: So you can understand why at this point Republicans are going, you know, they are losing this perfectly legal battle to go on the air and this is sour grapes. That you all are using this as a way to stoke your base, and say, oh my goodness, the big insurance companies are coming, the big businesses are coming. And it's because you don't want to talk about the economy, you don't want to talk about TARP. You don't want to talk about...

AXELROD: This is about...

CROWLEY: ... the stimulus bill.

AXELROD: Candy, let me tell you something, this is about the economy because if an interest group can give millions of dollars to Karl Rove secretly and he can run ads -- negative ads against Democratic candidates across the country under the American Crossroads Fund rubric or The Committee for Truth in Politics or these others, they're going to have tremendous influence over the future.

The chairman of the Senate Republican Committee, Senator Cornyn, says their first missions will be repeal health reform and repeal financial reform. And that means, for example, on financial reform, that we're going to go back to the time of hidden fees and hidden penalties, of the mortgage chicanery, and no one will know who is paying for these ads.

Ask these folks why they feel it's necessary to keep these funds secret. We tried to make them public, even the Democratic funds -- Democratic-leaning funds. We don't think anybody should keep these things secret.

CROWLEY: Well, can't we ask...

AXELROD: If you can walk into...

CROWLEY: ... then what are the Democratic...

AXELROD: If you can walk into...

CROWLEY: Can't we ask then, I mean, you have like Americans United for Change and other Democratic groups who also aren't revealing their donors. What are they hiding? Isn't that a legit question?

AXELROD: If we passed -- yes. Candy, look, I think that we believe deeply in disclosure, no matter who is running the ads. Now you said in your opening, you're right, it's 6 to 1 this spending in favor of Republican candidates. And in Colorado Michael Bennet, a fine senator, has six different funds running ads against him. He is being out-spent 3 to 1.

These funds, Karl Rove's group said they're going to plunk down $50 million in the last three weeks of the House races. That's more than the Democratic Congressional Campaign Committee will spend in the entire cycle. So these secret special interest funds will have a louder voice in the last three weeks of this cycle than the Democratic Party did throughout the cycle.

There's something fundamentally wrong with that. And if they don't want to disclose who their money is coming from, there's a reason for that. And the reason is, they don't want to say, this ad was brought to you by Wall Street, this ad was -- who wants to repeal financial reform, this ad was brought to you by the health insurance industry who wants to repeal health insurance reform, this ad was brought to you by the oil industry that doesn't want to have to be responsible when they leak oil in the Gulf of Mexico.

CROWLEY: If these Democratic groups who say they simply are unable to raise this kind of money in this particular environment, that Democrats particularly on the liberal side who are prone to give big money into some of these independent Democratic-leaning groups are just not doing it this year, if you had that kind of money that could go into independent groups, wouldn't you be happy they were using that money? It is totally legal.

AXELROD: Well, look, obviously this gives a huge advantage to Republicans, but this isn't just a threat to the Democratic Party, Candy. If someone can walk into a congressional office and say, if you don't vote my way, the insurance industry or Wall Street, if you don't vote our way, we're going to give Karl Rove $10 million and we're going to blow you away in the next election, what kind of impact is that going to have on our country?

That's why we support a law to disclose all of it, Republicans or Democrats. And, you know, speaking of Mr. Rove, back in 2004, when Democratic groups were spending heavily that election, he complained about that. But all of those groups disclosed where the money was coming from.

We didn't hide where the money was coming from. And yet he said it was a threat to democracy. Well, what about secret funds, funded by special interests? That is a threat to our democracy. And, you know, he may have switched 180 on this when it's to his advantage. I'm going to maintain that it's bad whether it's done on behalf of Democrats or Republicans.

CROWLEY: One quick point and then a question. The quick point being that when we looked at the House races, all of the spending, parties, candidates, outside groups, Democrats are still outspending Republicans on this.

But let me move you on to just the final question, and that is the Republicans have said all along when it came to finance reform, listen, we're for full disclosure. Everybody would say how much they put in, let's take off the contribution limits and just disclose everything. What's wrong with that? You could have had a deal but you didn't deal with them?

AXELROD: Well, look, if we -- we have taken off the contribution limits. We've just taken them off for big corporations and special interests who can give money to these secret funds. If you and I give a contribution, it's limited to $2,300 and we have to divulge that we're participating.

Through these funds, they can give unlimited amounts of money. They can give $100 million and never have to disclose, and that's wrong.

Listen, Mitch McConnell, the leader of the Senate Republicans, has been an avowed enemy of any kind of finance -- campaign finance reform, whether it was McCain-Feingold or any of the others. He wants unfettered ability to tap these special interests to support his candidates.

And that's why we don't have -- that's why we don't know who is contributing this money today. So you should direct your questions to Senator McConnell. CROWLEY: Thank you so much. We'll do that the next time we have him. David Axelrod...


CROWLEY: ... senior adviser to the president, thanks for your time. Appreciate it.

AXELROD: Happy to be here, thank you.

CROWLEY: When we come back, we'll talk with conservative activist Gary Bauer. One of his groups is running ads but he won't say from where he's getting the money.


CROWLEY: Following the money trail is a complicated slog through different rules for different groups. This ad is paid for by the Campaign for Working Families, a political action committee, or PAC, founded by conservative activist Gary Bauer. It went up on Nevada TV Friday.


UNIDENTIFIED MALE: The destruction of our health care and tragic unemployment, but Obama didn't do it alone. He had an accomplice. Harry Reid voted with Obama a stunning 95 percent of the time.


CROWLEY: By law, Bauer's PAC has to disclose its donors, but he is also involved with another group, The Emergency Committee for Israel. It ran this ad in Pennsylvania against the Democratic Senate candidate.


UNIDENTIFIED MALE: Does Congressman Joe Sestak understand Israel is America's ally? Sestak raised money for an anti-Israel organization the FBI called a front group for Hamas.


CROWLEY: The Emergency Committee for Israel is one of those groups not required by law to reveal who gives it money. So Pennsylvania voters don't know who specifically paid for that ad. We'll ask Gary Bauer about all of this, next.


CROWLEY: Joining me now, conservative activist and former presidential candidate Gary Bauer.

Thank you so much for being here.

BAUER: My pleasure to be with you. CROWLEY: Now that I have you here, you have spent a lifetime on a lot of the social issues, the so-called values voter issues.

BAUER: Right.

CROWLEY: That has been, to me, sort of, noticeably absent in this particular campaign. And I wanted to read you a couple things that two Republicans have said, because it's even Republicans who seem to be much more focussed elsewhere.

And the first came from John Cornyn. As you know, he went and spoke to Log Cabin Republicans. And when Tony Perkins, a friend of yours from the Family Research Council objected, Cornyn wrote him and said, "Listen, part of my job is to reach out to those committed to defeat Senate Democrats this November. The Log Cabin Republicans" -- that is, gay Republicans -- "are doing just that."

And then Governor Mitch Daniels, whom I sure you also know, of Indiana...

BAUER: A friend.

CROWLEY: Yes -- said this about social issues: "The next president would have to call a truce on the so-called social issues. We're" -- "we're" meaning Republicans -- "going to just have to agree to get along for a little while until the economic issues are resolved.

So are social issues off the table?

BAUER: No, social issues aren't off the table. And both of the gentlemen that you quoted are friends of mine and I work with them on many issues, but I would say, with all due respect, on this, they're absolutely wrong.

I would say to Governor Mitch Daniels you know, it's -- it's not our side that has declared war on social issues. I would love to be able to call a truce on it. The reason the social issues are in such play so many years is that others have declared war. There's a major movement going on in this country to change the definition of marriage.

Now, if -- if Mitch Daniels thinks he can call a truce on that, that would be great, but as long as people are pushing to change the definition of marriage, there are going to be millions of Americans that say no; we want marriage to stay between one man and one woman.

CROWLEY: I do want to move on to the money issues. But I think that what they're trying to say is the Republican Party, if it has a narrow base, cannot win and do anything. People are concerned about the economy. We need to do that instead of bringing up which are really divisive issues, particularly when you look at the independents, things like gay marriage...

BAUER: Right. CROWLEY: Other -- things like abortion. These are all issues that tend to particularly divide the independents whose votes you need.

BAUER: Look, the -- all these issues -- every issue is divisive in America today. Are my Republican friends going to tell me that reforming Social Security is not divisive? Of course it is. The whole tax cut debate is a very divisive issue.

These values issues actually expand the Republican Party. They don't narrow it. Independence doesn't -- doesn't equate to moderates. Millions of independents are pro-life. Millions of independents believe marriage is between a man and a woman.

One more quick point on this, Candy. There was a vote in California, a very liberal state, on the marriage question just a couple of years ago, and Los Angeles, which John McCain lost massively -- the people of Los Angeles voted overwhelmingly to keep marriage between one man and one woman. And those were essentially African- American and Hispanic voters. So these values issues, I would say to my Republican friends, are what we need to grow the party, not to shrink it.

CROWLEY: Let me turn to you the money question. You are co- chair of one group that is putting ads on the air usually concerning people's -- candidates' support for or against Israel...


CROWLEY: ... and do not disclose the donors. Would you do that? Would you give me the name of the donors?

BAUER: No, of course not.

CROWLEY: Why not?

BAUER: Because these are issue ads, and under the laws of the United States and repeated court rulings... CROWLEY: But they're attacking Joe Sestak, so that's not quite an issue. That's a, like, don't -- don't vote for this guy.

BAUER: No, it doesn't. It never says in the ad, don't vote. If you say vote for or vote against, then it is a direct political ad.

CROWLEY: That's a nuance. That's a nuance.

BAUER: Well, look, I think...

CROWLEY: Do you think voters don't come away from that thinking, oh, I shouldn't vote for Joe Sestak?

BAUER: Look, I don't write the laws and I don't make the court decisions. And the courts have said, for very good reasons, I might say, that, in these kinds of ads, there doesn't have to be disclosure.

The first court decision on this involved the NAACP in Alabama. Somebody wanted to get their list of donors. Bigots wanted to get the list of donors so they could harass the people that were donating to the NAACP.

The reason this disclosure issue is so important, Candy, quite frankly, is that, on the left in this country, there has been in recent years campaigns of intimidation and outright thuggery when people have put their names on the line and promoted conservative ideas.

CROWLEY: So you're saying that the main reason that you wouldn't tell me the donors who are putting these ads up trying to influence the outcome of an election -- you're telling me that they are afraid that they'll be harassed if people know they are pro-Israel.

BAUER: I think one -- well, I think one of the factors is that some of these folks are Democrats, and they don't want to alienate Democratic friends and people that they work with.

CROWLEY: But isn't that what democracy is all about?

You stand up and you say, here's what I'm for; here's what I'm against. Isn't democracy about someone being able to look at the television and go, oh, this Democrat put up this ad against this Democrat; hmm, that's interesting. If they don't know, it is coming at them in a vacuum. Is that democracy?

BAUER: Well, Candy, where was all this concern about democracy when Barack Obama, two years ago, was raising a massive amount of money, more than any time in the history of the United States? He had tens of thousands of donations that he did not disclose the names of.

And there's a lot of evidence that many of those donations may in fact have come from foreign citizens, not Americans. In fact, there was a couple of brothers in Gaza who gave $17,000 to the Obama campaign, and they gave that money back only after outside groups found that problem and disclosed it. So for Mr. Axelrod and these guys suddenly to be on their high horse and say that they're defending democracy, when for years the left has done this, including the unions, and nobody said a word...

CROWLEY: Gary Bauer, I can't thank you enough for coming in and joining us.

BAUER: My pleasure.

CROWLEY: This is an interesting discussion. This always gets people moving in the morning, doesn't it?

BAUER: Absolutely, it sure does.

CROWLEY: Thank you so much.

BAUER: My pleasure.

CROWLEY: Before moving on, we want you to know we did ask the Chamber of Commerce, American Crossroads, Crossroads GPS and the American Action Network to provide a leader of their organizations to appear this morning. They were either unwilling or unable to join us, which is why we are glad that Gary Bauer did.

When we come back, we work our way through the maze of money and politics with our panel.


CROWLEY: Joining me now here in Washington, Michael Duffy, assistant managing editor of Time magazine, and Evan Tracey, CNN consultant and president of the Campaign Media Analysis Group.

Evan, first let's just get the 50,000-foot view, $3 billion in ads in this midterm election. Compare that to other years?

TRACEY: Well, it's going to be a record cycle. We're looking about to be anywhere from $300 million or more above where we were in 2008, which was the last record here, and then the last midterms we were about $2.4 billion, so we're pacing well ahead of that. So it will be a big year for political ads.

CROWLEY: And, you know, Mike, we talk all the time about, oh, more money's being spent; more money's being spent. What's the net political effect of this? Does money always talk?

DUFFY: There's always plenty of it and there's always new ways to spend it. And of course, with the Citizens United case by the Supreme Court, their decision, there's a newfangled way to spend it and gives donors not only new ways to play, that they can do it anonymously; they can do it later in the cycle. And we're just entering that last chapter where we're going to see lots more ads at a much later date than we've ever seen before.

One official who I know is running one of these groups says he's going to spend two-thirds of the money he's raised in the next three weeks -- two weeks.

CROWLEY: And that's generally what we do see of ads of any sort, right, is they just -- you know, do not turn on your TV set in the last couple of weeks of the campaign.

TRACEY: Right, Candy. Politics is the only business I'm aware of that spends the most amount of money on advertising when it has the least amount of people left to influence.


It's all about getting those late, independent, undecided voters who are just tuning in.

CROWLEY: Is there any evidence that these outside ads -- and let's just narrow it down to the little -- to that segment which does not have to reveal who has given it money -- any evidence that those ads are any more effective than all the other ads that are out there?

DUFFY: There's a detail issue that makes a difference. In other words, because they can go later without having to disclose anything the way they did in the last cycle, we are seeing the people running these funds, these campaigns, wait until the very last second to decide, OK, this race I can make a difference in; now let's go; this race I can't; let's pull back.

So they -- there really is a, kind of, huge marginal last-minute impact that we weren't -- haven't seen before. But, of course, it's just about to start, and so we really won't know for another two weeks. But I think they believe they can make a huge difference here.

TRACEY: Yes, and here's where these groups can help. They can do a couple of things. They can add tonnage. They can reinforce the message that the candidates are trying to help. They're helping challengers who are underfunded, kind of, get to this point where their own ads can come on the air.

But when they provide that message that, politically, a challenger can't run for themselves, just like the Swift Boats did for George Bush, that's when these ads have their biggest impact.

DUFFY: And because the White House, led by Axelrod, as we just saw, continues to make such a big issue out of this, they -- that is actually having a, sort of, inverse proportional -- it's driving more money into these groups.

Every time he mentions the Chamber of Commerce, more people are calling up the Chamber of Commerce.

CROWLEY: Saying, "Here, have some money," right?


DUFFY: Last week the chamber was raising $30,000 a day, so much so -- a record for them -- their server crashed. And so -- so you're just seeing this, you know, pile-on factor.

CROWLEY: Let me play you something from a debate in Wisconsin. It's Senator Feingold challenging Ron Johnson, his Republican challenger. Feingold is behind. He's the sitting senator. And he's getting pummeled with these outside ads. And this is another way it's playing into politics. Take a listen.


SEN. RUSS FEINGOLD, D-WIS.: He is benefiting tremendously in his campaign from millions of dollars of these ads, and I am not, and I don't want them.

You say you don't want them? Will you call on them to stop?

SENATORIAL CANDIDATE RON JOHNSON, R-WIS.: I have no control over that.

FEINGOLD: Will you ask them to stop?

JOHNSON: That's -- that's part of the problem. You have no control over...

FEINGOLD: Will you ask them to stop?

JOHNSON: That's their right to free speech.



CROWLEY: So it's now being used -- out on the campaign trail, they're saying, whoa, these, you know, murky people and you don't know where it's coming from; will you ask them to stop?

How does this cut? I mean, in the end, is it hurting or is it helping?

DUFFY: Well, I think what the Democrats are trying to do now is a couple things. They're trying to, sort of, pull their own voters off the sidelines, by talking about how much money is going into these groups, these murky -- the "secret special interest"...


That was the term that Axelrod used -- very nice.

The second things is he's trying -- they're trying to get their own money off, as Evan says, off the sidelines. So, you know, the Republican money is off the sidelines; well, what about ours?

And, finally, there's another piece of this, which is -- you noticed how Axelrod talked about insurance companies, banks, sort of, big corporate powerful lenders...


DUFFY: That's designed, I think, in part, to, sort of, push a little bit of the Tea Party voters who are upset about those very same things to the sidelines. So it's, kind of, a three-fer for the Democrats, in theory.

CROWLEY: Let me -- he mentioned the outside -- you know, trying to get their guys off the sidelines in these outside groups.

You saw Axelrod say, oh, no, we won't like Democratic outside groups, which is easy to say when your guys aren't raising much money. So let me -- let me look at all outside groups. And this is those who have to -- PACs that do have to disclose their donors and those who don't have to disclose their donors.

How does that break down Democrat to Republican, in terms of spending?

TRACEY: Well, Republicans have a huge advantage in this cycle. The Democrat money has not shown up right now. The Republican money continues...

CROWLEY: This is in the House races now?

TRACEY: In the House races, it's really been almost like a bridge loan for these challenger candidates. That's where you see this the most. It's almost nullified the incumbent advantage that you usually have because incumbents been around longer; they've raised more money. And in this environment, they spend earlier.

You know, you look at the incumbents in this race they have five, six, seven ads on the air already. I many cases, challengers haven't bean on the air but these groups have been there. So that's really where the Republicans are feeling this advantage.

CROWLEY: So just looking at outside money alone, Republicans have a what kind of advantage ratio?

TRACEY: If you look at groups in the House races right now, it's in many cases 6-1, 7-1, as far as ad spending goes.

CROWLEY: And overall spending, the Republican committees, the candidates, just in the House, how does that break down?

TRACEY: You roll it up, and the Democrats are, right now, still in the lead. They've got about $55 million in ad spending to about $46 million if you roll up groups, candidates and parties for the Republicans.

So even with all these groups -- now, about a quarter of all House ads in the last 30 days have been from Republican groups for Republicans. So if you take that out, that deficit's even wider. So you can tell these groups are a big help to Republican candidates.

CROWLEY: Doesn't this, sort of, make it, Mike, look like sour grapes?

Doesn't this, sort of, look like, hey, we'd have had the advantage except for now you guys are taking advantage of the law, doing legal stuff?

I mean, doesn't that, sort of, you know...

DUFFY: Shocking, isn't it?


CROWLEY: Yes, right, exactly.

DUFFY: And we've forgotten the fact that Barack Obama raised -- I don't know -- $160 million, $180 million more than the Republicans did. Some of this is just -- you know, politics has its fashionable cycles, and at the moment it looks like a Republican cycle.

But I was very interested when Axelrod said just a few minutes ago that we need more disclosure. What will be interesting to see is, after the election is over, whether Democrats say, let's reform this and come out for transparency and disclosure of these groups or whether they simply man up and do this themselves under the rules that the Republicans are now operating.

CROWLEY: Well, what is the feel you get, that this really is we can't do this as well, so let's go beat them up?

TRACEY: Yes, I think earlier Michael hit the nail on the head. This is, kind of, working the refs a little bit. The refs in this case are the media and the voters. They're trying to get a foul called. It's like a basketball game, where every time down the floor you want something noticed by the referees and this.

It will be interesting to see, sort of, where this money comes, you know, do the Democrats try and get this to parity or louder at the very end?

Are they just absorbing hits now?

Because every time they try and talk about issues in their ads, the Republicans are there to counteract. They talk about Social Security; Republicans talking are about Medicare cuts. They talk about trade, you know, outsourcing to China; Republicans are talking about stimulus dollars going to China.

This is a message where it's really, kind of, hard for Republicans to rejoin and say, yes, you have money, too.

CROWLEY: Let me just ask you both, just because both of you follow this, understand the differences between -- this is a 1C and this is 1-4 and all that kind of stuff. Is it a danger to democracy to have people who can anonymously give money to groups who then run ads to influence elections? Do you think that's (OFF-MIKE)?

DUFFY: In 1972, Richard Nixon had the Townhouse project, which is basically a White House-run secret special interest fund. And it took Congress three years to fix it. And that was with a Democratically reform-minded Congress. If the Congress believes at some point this needs to be changed or reformed, it's going to take much longer now than it did in the 1970s to turn it around.

DUFFY: So I believe that both sides, both parties will say, this is horrible and it's bad for democracy, but until we fix it, let's try it ourselves.

TRACEY: Yes, and I think, look, we go back through the recent history of campaign finance and you had soft money that went through the parties, then it went to the 527s after the McCain-Feingold bill. Now we have got sort of an amendment to that, which is allowing the money to come in later and the messages to be more political.

So it's hard to say, OK, the next place you go, is it going to be any better? I mean, this is, again, every time they try and fix the problem...

CROWLEY: It gets worse.

TRACEY: It gets worse or the pieces change. CROWLEY: Let me just say one thing really quickly. Citizens United, as I understand it, and nod your heads yes or no, because I've got to go, tinkered around the edges, but you were always -- those anonymous donors existed pre-this Supreme Court decision.

DUFFY: Yes, it was a subtle change in law which had a huge practical impact.

CROWLEY: Right. I just wanted to clarify that.

TRACEY: Exactly.

OK, great. Come back and explain this to us. We really appreciate it both very much, Mike Duffy, Evan Tracey, thank you.

Up next, a check of today's top stories. And then, why you now have the chance to be closer than ever to President Obama.


CROWLEY: Time now for a check of today's top stories. President Obama and first lady Michelle Obama are hitting the campaign trail together for the first time since the 2008 presidential race. The president and first lady head to Ohio today for a Democratic fund- raiser and will headline a rally tonight at Ohio State University.

Sarah Palin urged California Republicans to support GOP candidates in the midterm elections. About 2,000 people turned out last night in Anaheim where the former vice presidential candidate slammed congressional Democrats.


SARAH PALIN (R), FORMER ALASKA GOVERNOR: So what do you do with employees like that who aren't doing their job? You fire them! You fire Pelosi, retire Reid, and their whole band of merry followers. And we get back on the right track.


CROWLEY: California Republican gubernatorial nominee Meg Whitman and GOP Senate candidate Carly Fiorina did not attend the rally.

Australia has its first Catholic saint. Pope Benedict today sanctified 18th Century nun Mother Mary MacKillop as Saint Mary of the Cross of MacKillop. She was the first Australian nun to leave the cities and minister to Australia's rural poor.

Those are your top stories here on STATE OF THE UNION. Up next, your chance for a photo-op with the president.


CROWLEY: The idea for this week's "Finally" came from STATE OF THE UNION associate producer Jessica Rummel in an e-mail with the subject line "Lamest App Ever." Obama and Me" by the company Too Big to Fail.

Through the wonders of PhotoShop you can use the app to get close to the president, a lot closer than the Secret Service or the first lady would ever allow. With the shackles of reality removed, there are tons of things to do with the 44th president.

Put him in the palm of your hand, on top of your head, or a play date with the president and Mr. Potatohead or the president and Elmo. You can make him the star of your foosball game. Like we said, "lamest app ever," who does this stuff?

You can check out all of these photos and more at You won't find that last photo though. We're holding out for the presidential interview that doesn't require an app.

And don't forget next week, CNN and The St. Petersburg Times are partnering with the University of South Florida to host a STATE OF THE UNION special, the Florida Senate debate. I'll sit down with Congressman Kendrick Meek, Governor Charlie Crist, and Marco Rubio, just 10 days before the election. That's next Sunday, 9:00 a.m. Eastern, only here on CNN.

Until then, thanks for watching STATE OF THE UNION. I'm Candy Crowley in Washington. For our international viewers, "WORLD REPORT" is next. For everyone else, "FAREED ZAKARIA: GPS" starts right now.