Return to Transcripts main page

THE SITUATION ROOM

Hillary Clinton's Final Push; South Carolina Polls; Ad Fact Check

Aired December 14, 2007 - 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, Hillary Clinton on the ropes. After some bruising weeks, she's fighting to regain her footing and trying to prove she's a winner.
Also this hour, a new test of the Oprah factor. Did her star power help Barack Obama in South Carolina? We have some brand-new snapshots of support in that early primary state.

Plus, a new sign that Mike Huckabee is playing in the big leagues. Right now he's hiring a veteran political strategist in hopes of capturing some Reagan-era magic.

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

Now less than three weeks before the first presidential contest, Hillary Clinton's campaign certainly has seen some better days. The fallen Democratic front-runner is trying to jump-start her political machine and re-claim her image as the inevitable nominee before it's too late. Is she this campaign's comeback kid?

CNN's Jessica Yellin is with Senator Clinton out in Iowa, sort of re-launching her effort right now in the midst of some lower poll numbers.

What's going on, Jessica?

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: Well, Wolf, after a few weeks of bad stumbles by the campaign, Senator Clinton is now kicking off this final push to the caucuses by driving home the message that she is the Democrat who can win in November.

(BEGIN VIDEOTAPE)

YELLIN (voice over): Over and over, Senator Clinton made the case that she is the most electable Democrat.

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: We have an opportunity here in Iowa, and then in the succeeding contest, to nominate the person we think is best able to win. I'm battle- tested, I can withstand what is going to inevitably be the Republican attacks on whoever we nominate.

YELLIN: From the same stage, a key Des Moines congressman endorsed her, echoing that message.

UNIDENTIFIED MALE: We endorse Hillary because we want to win. YELLIN: It's an appeal to frustrated Democrats whose desire to take back the White House might override their urge to choose the candidate they like the best, and a new ad works to soften her image, portraying her as a warm person who understands voters' problems.

CLINTON: My mom taught me to stand up for myself and to stand up for those who can't do it on their own.

YELLIN: Clinton aggressively distanced herself from a former campaign official's comments about Barack Obama's past drug use, but she also insisted if she's the nominee, there will be no surprises.

CLINTON: I'm a known quantity, I am tested and vetted.

YELLIN: She insists that's not a veiled criticism of Senator Obama.

(END VIDEOTAPE)

YELLIN: And today Senator Clinton brought with her two farmers from New York who are going to travel Iowa on her behalf. It's part of a new effort by the campaign to bring out real people, including Senator Clinton's own family, to sort of testify about the differences, the work she's done to change their lives -- Wolf.

BLITZER: What is she saying, Jessica, about losing her lead in Iowa?

YELLIN: Well, she's sort of shrugging it off, Wolf, and downplaying her expectations, saying she always expected this to be a tough state, her husband never competed here in 1992, and she's excited and prepared for the fight. So you could really frame it as setting expectations low so that whatever comes, if she finishes first, if she finishes second, it's a win for her against these lowered expectations -- Wolf.

BLITZER: All right. Thanks very much. Jessica Yellin on the scene for us in Iowa.

Let's go to the first southern battleground state. That would be South Carolina. Our brand-new poll shows Hillary Clinton losing some new ground there and Republican Mike Huckabee skyrocketing to the head, the head of the Republican pack.

Let's go out to our senior political analyst, Bill Schneider. He's in South Carolina for us. He's joining us now live.

Let's take a look at our latest CNN/Opinion Research Corporation poll. Among the Republican likely voters in South Carolina, look at this -- Huckabee in July was at only 3 percent. He's now at 24 percent. He's atop the pack there.

Thompson at 17; Giuliani 16; Romney 16; McCain 13; Ron Paul going from 2 percent to 11 percent in South Carolina. But Huckabee, that's the huge surprise there. Not only in Iowa is he doing well, he's clearly doing well in South Carolina, Bill, as well. WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: That's correct. And South Carolina is important because this is the Republicans' base. This is their conservative base. And when a Republican wins South Carolina, as George W. Bush did when he beat John McCain in 2000, it means the base is with him. So Huckabee's surge to the lead here in South Carolina is very, very important.

Notice also in the poll that Rudy Giuliani has seen his support drop by about half here in South Carolina since July. I spoke to a political analyst, Scoff Hoffman (ph) of (INAUDIBLE) University here in South Carolina, who said he thinks that Hillary Clinton's troubles are spilling over to the Republican primary. He said that when Republicans see Hillary Clinton may not be the nominee, they stop supporting Giuliani and they start supporting a candidate they really like, and that's Mike Huckabee.

You know, the polling shows, our poll shows, that Republicans rate Huckabee as the candidate least like a typical politician, but Giuliani is the one they think has the best chance of winning. Giuliani is first in their heads, Huckabee is first in their hearts.

BLITZER: And that's showing up in this new poll in South Carolina among likely Republican voters.

On the Democratic side, let's take a closer look at that right now. Hillary Clinton is still on top among likely Democratic primary voters, 42 percent. Obama has gone from 27 to 34 percent, a nice bump for him. Edwards remaining about the same, at 16 percent right now.

And I want to point out to our viewers, this poll was taken after the Oprah Winfrey event in South Carolina last weekend on behalf of Barack Obama.

SCHNEIDER: And Barack Obama has seen his support jump quite a bit among African-American voters. Democrats also see South Carolina as their base state. Why? Because almost half the primary voters here in the Democratic primary are African-Americans.

African-American voters here in South Carolina in our poll are split evenly between Obama and Clinton. So there's been a big bump for Barack Obama.

The poll also shows that when they're asked, who do you think is least like a typical politician, the answer is Obama. Who do you think has the best chance of winning in November? Hillary Clinton.

That's why they're split. Their heads are with Hillary Clinton, their hearts are with Obama. Same division as on the Republican side.

BLITZER: And I think we've pointed out before, Bill, correct me if I'm wrong, about 50 percent or so of the likely Democratic voters in South Carolina are African-Americans. Is that right?

SCHNEIDER: That is correct. It's about 42 percent, because a lot more Hispanics have moved here to South Carolina, but it's well over 40 percent of the likely voters are in fact African-American, and they're the Democratic Party's base.

BLITZER: Bill Schneider in South Carolina for us.

Thanks very much.

A new sign that Mike Huckabee is a front-runner, he's hired the veteran Republican strategist Ed Rollins as his new national campaign chairman.

Coming up, we're going to have more on this decision to bring Ed Rollins into his campaign. What does it do for Mike Huckabee and his mixed success at the helm of presidential campaigns?

Also this note -- Ed Rollins has been, as many of our viewers know, a frequent guest on "LOU DOBBS TONIGHT." He'll be joining Lou later, 7:00 p.m. Eastern, to talk about this new challenge.

Bill Schneider and Jessica Yellin, as all of our viewers also know, they are part of the Emmy Award-winning best political team on television. Remember, for the latest political news at any time, just check out our political ticker at CNN.com/ticker.

Jack Cafferty is another member of the best political team on television. He's joining us once again at the end of this week for "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: "The end of this week." It has a nice ring to it, doesn't it?

BLITZER: Yes, it does.

CAFFERTY: Democratic presidential contenders are calling for higher taxes on the richest Americans and on big corporations. At yesterday's debate, Hillary Clinton said she wants to keep the middle class tax cuts that Congress passed under President Bush, but favors raising taxes for the wealthiest. John Edwards agreed, saying our tax policy has been established by the big corporations and wealthiest Americans, and he says the U.S. should get rid of those tax breaks. Barack Obama weighed in, saying we need to put those tax breaks and tax loopholes back into the pockets of hard-working Americans.

The Democrats also agreed that the idea of balancing the federal budget would have to wait. What a surprise.

Obama said we won't be able to dig ourselves out of the Bush-era deficits in the next year or two. Only Bill Richardson said balancing the budget would be a high priority, noting that as the governor of New Mexico, he's required to balance the budget.

All this, of course, a far cry from what we heard from the Republican candidates the day before in Des Moines. They called repeatedly for the elimination of the estate tax -- that benefits the wealthy -- and a reduction in the income tax paid by corporations.

So here's our question this hour. Is calling for higher taxes on the rich a good strategy for the Democratic presidential candidates? E-mail your thoughts to caffertyfile@cnn.com or you can go to cnn.com/caffertyfile and post a comment on my new blog there. We are getting a hell of a response, Wolf, on that blog.

BLITZER: I'm not surprised, Jack. You've got a huge following out there. Do you actually try to read a lot of those e-mails coming in?

CAFFERTY: I take them home with me at night and try to memorize most of them, yes.

BLITZER: Good. Excellent. Because a lot of them are very good.

All right. Stand by, Jack.

Jack will be reading some of those e-mails later this hour.

Mike Huckabee may be the new darling of the Republican voters, but not everyone is necessarily all that impressed. Up next, Headline News host Glenn Beck gives us his unique take on Huckabee and whether there's substance behind his surge. We'll talk about that and a lot more with Glenn.

Also, behind the pretty pictures. We're going to tell you if a new Barack Obama ad has any meat to it.

And just in time for the holidays, a new inflation report that hits many of us where it hurts. We'll have the bottom line on why prices keep on climbing.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(NEWSBREAK)

BLITZER: Coming up, it's a painful reality check for all of us heading out to the malls. Prices climbing higher and higher. We're going to tell you who's getting hit the hardest. What about inflation?

And CNN Headline News host Glenn Beck, he's standing by to join us live right here in THE SITUATION ROOM. We'll talk about the campaign trail. What does he think about the new front-runner? That would be Mike Huckabee on the Republican side.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: We're keeping the presidential candidates, Democrats and Republicans, honest. We're taking closer looks at their respective ads, their commercials, how they're playing. Are they telling us the truth?

Or special correspondent, Frank Sesno, is here in THE SITUATION ROOM.

It's going to be a fascinating, new wrinkle. What do these ads say? Are they honest? Are they not so honest? Are they embellishing? What's going on?

FRANK SESNO, CNN SPECIAL CORRESPONDENT: Do they say anything? That's the real question.

Let's take a look today at Barack Obama and what he's doing on the air. He's got a 60-second ad. It's very, very interesting. He's trying to capitalize on a certain sense of momentum, and he would think -- or would like the rest of the world to think inevitability.

(BEGIN VIDEOTAPE)

SESNO (voice over): As Iowa ticks down, the ad wars ratchet up. And with Barack Obama trying to look credible, electable and on the move, this ad...

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE (voice over): I'm Barack Obama, and I approved this message.

(on camera): We are in a defining moment in our history. Our nation is at war. The planet is in peril.

SESNO: ... 60 seconds of fawning visuals and cliched generalities, tries to reinforce the points. There are quick shots of wrapped gazes, starry-eyed voters literally looking up to Obama.

OBAMA: America, our moment is now!

SESNO: The camera work puts Obama center stage in a place that appears cavernous, maybe like the floor of the Democratic convention. Look at that again. The ad, the convention. The ad, the convention. But there's not much content here.

OBAMA: The same old Washington textbook campaigns just won't do.

SESNO: No plans, no policy, no names. The full screens go for character. "Scrupulous honesty" is one example.

Joe Klein's "TIME" column did praise Obama, but it also referred to his confusing campaign and static performances.

OBAMA: I want to be the president...

SESNO: Glittering is what this ad is all about. They've come to elevate Obama, not explain him.

(END VIDEOTAPE)

SESNO: So elevate Obama, not explain him, is what this ad is trying to do.

There is one shot in this, Wolf, where he says, you know, we don't need the fights of the '90s again. I'm not exactly sure, and he doesn't say what the fights of the '90s are, but clearly, it's an attempt to differentiate himself from Hillary Clinton, to say I'm not Hillary Clinton, I represent the new direction, the change, the what you really want to do with Washington.

BLITZER: If you were living in Iowa right now or New Hampshire or South Carolina, you would be bombarded with these 30-second spots which historically have been very effective, and they spend an enormous amount of time, the professionals, working on every split second in these images.

SESNO: Every split second -- the way the candidate is lit, the way they're framed in the photo, the looks and the gazes, which is what was so interesting in that spot, as they're looking at the candidate.

Another very interesting thing in that spot, there were no minority faces. They were all white faces looking at Barack Obama. Maybe not surprising necessarily, because in Iowa nearly 94 percent white, but here's a candidate who's running on diversity. That 60- second ad showed none of it.

BLITZER: And, you know, there's a whole new phenomenon of the ads now appearing not only on television, or radio, for that matter, but on the Internet. And there they have a lot more time to do these slick commercials, and you're taking a closer look at those as well.

SESNO: We're going to be looking at all -- you know, I was talking to Mark Preston (ph), one of our guys here who writes for CNN.com and does other things, and he was showing me a count yesterday. If you are sitting in a 24-hour period in Iowa in all different markets, over 500 buys in a day, in a 24-hour day. So what you said at the outset, that you're inundated with these ads, absolutely the case.

BLITZER: And that's going to be a regular feature here in THE SITUATION ROOM as we go on.

SESNO: As much as you can take of it, Wolf.

BLITZER: Well, it's fascinating material.

SESNO: Oh, it's very...

BLITZER: And we want to take a closer analysis of all these guys.

SESNO: That's right. What they're try to go do in front of the camera, in their speeches, in their ads. It's all part of the persona and the policy mix they're trying to put forward.

BLITZER: Frank, thanks very much.

Coming up, the always provocative and outspoken Glenn Beck. He's part of our own CNN family. We'll talk to him about what's happening in the campaign.

Also, amid front-runners stumbling, underdogs surging, Glenn is about to offer his unique take on the White House race.

And they're affectionate, flirtatious, and quite revealing, e- mails regarding three former astronauts allegedly caught up in a love triangle. The e-mails have now been released. You'll be able to judge for yourself because we're going to share some of them with you.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, President Bush gets something he wanted, the attention of a reclusive world leader. North Korea responding to a letter from the president, but can the nation the president once included as part of the so-called "axis of evil" be trusted?

We're on top of this story.

It's your money, all $32 million of it, but guess how it was spent on one project in Iraq? Here's a hint -- some say it was simply wasted, every dime.

And he wrote a book on Hillary Clinton entitled "A Woman in Charge," but how much does that title currently hold true given recent stumbles in Senator Clinton's campaign? I'll ask the Pulitzer Prize- winning journalist and Clinton biographer, Carl Bernstein.

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

The overnight sensation of the GOP presidential race now has a new campaign chief. Mike Huckabee is calling veteran Ed Rollins a good fit with his team, and it doesn't hurt that Rollins invokes memories of Ronald Reagan, the president Republican candidates can't mention enough.

Our Dana Bash is out on the campaign trail in Iowa. She's watching this story for us.

It's a sign, I guess, of a new stage in the Huckabee campaign, the decision to bring Ed Rollins on board.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: It sure is, Wolf. Huckabee has been relying on a small but loyal group of aides that is befitting of an insurgent campaign, not one that is surging here in Iowa and South Carolina. He had constantly downplayed the challenge of getting to the next step until today.

(BEGIN VIDEOTAPE)

BASH (voice over): Bolting from asterisk to front-runner in key early contest states brings as much strain as it does excitement. And Mike Huckabee is turning to an old hand from the Reagan years for help.

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: Today I would like to make an announcement that I believe will help fill in many of the gaps that we've had up until this point and will help us in that vast national infrastructure and movement.

BASH: Ed Rollins is best known as an architect of Ronald Reagan's historic 49-state landslide reelection in 1984 and sees parallels.

ED ROLLINS, NATIONAL CAMPAIGN CHAIRMAN, MIKE HUCKABEE: I was with Ronald Reagan from the day he couldn't win as governor to the day he couldn't win as president. Democrats were lined up, please, please, God, give us Ronald Reagan so that we can beat him like a drum. At the end of the day, he had an ability to connect with people. Mike Huckabee has that ability to connect with people.

BASH: Tapping Rollins as his national campaign chairman is not a choice without risks. He has also overseen presidential campaigns that have not fared well, like Jack Kemp's 1988 run and Ross Perot's 1992 Independent bid.

ROLLINS: And obviously, as you know by my reputation in the past, I've sometimes been too candid.

BASH: Several GOP strategists say Rollins' strong-willed, outspoken style has been known to cause internal campaign turmoil.

SCOTT REED, FMR. DOLE CAMPAIGN MANAGER: He ran President Reagan's reelection. It was the Cadillac of all operations and quite successful. Since then he's had a different track record, where history shows he's ended up turning on most of his candidates when they don't agree with him 100 percent.

BASH: Some differences between Rollins and the former Baptist preacher were on display immediately -- stylistic ones.

ROLLINS: And this is going to be a unique campaign for me. This is the only campaign I've ever been in where there are no doughnuts and no booze. So it's going to be a real, real struggle for me to basically, you know...

(END VIDEOTAPE)

BASH: Now, all jokes aside, picking a hardball veteran strategist like Ed Rollins really tells us something new, Wolf, about Mike Huckabee, that beyond his image as a nice guy and a man of God, he is obviously somebody who is willing to engage in a good old- fashioned campaign street fight.

BLITZER: Dana, thanks very much.

Dana is in Des Moines, Iowa.

Ed Rollins, by the way, also was involved in some other high- profile Senate and gubernatorial campaigns and managed to stir up controversy in the process.

He worked on the 2006 U.S. Senate campaign of Florida congresswoman Katherine Harris. The two had a falling out, and Rollins quit, questioning the viability of her campaign. Harris lost that election.

Rollins also ran Christy Todd Whitman's successful 1993 gubernatorial campaign in New Jersey. Rollins later claimed he secretly paid so-called walking around money to black ministers and others to suppress Democratic turnout. Under investigations, Rollins said he had exaggerated. A federal grand jury concluded no laws had been broken.

Let's get an unconventional look at this presidential race right now from radio talk show host and CNN Headline News host Glenn Beck. He's the author of "The New York Times" number one best-selling book, "An Inconvenient Book."

Glenn, thanks for coming back.

GLENN BECK, HOST, "GLENN BECK": You bet, Wolf.

BLITZER: All right.

What do you think of this decision to bring Ed Rollins now into this Huckabee -- the Huckaboom, as it's called right now?

BECK: I got to tell you....

BLITZER: Give us -- give us your immediate reaction.

BECK: OK.

I am so sick and tired of hearing people talk about how much they're like Ronald Reagan. I haven't seen Ronald Reagan show up yet. I wish people would be themselves, not Ronald Reagan. I'm a fan of Ronald Reagan. Now let's find the next great leader in our country. And I don't think it's Mike Huckabee.

I want to make it very clear, I am -- I like the governor. I think he's a decent human being. He has credited my program as being the catalyst for his boom. It was the first -- after it happened, his -- his career started to take off. That's what he said, not me.

But I have to tell you, I think he's made just critical errors lately. I think this guy is going to implode. And, if he doesn't implode, he gets the Republican nomination, I think the Republicans might as well just write it off.

BLITZER: Really?

BECK: Yes.

BLITZER: That's pretty shocking.

All right. Give us one or two examples of the critical errors he's made.

BECK: I -- I had an opportunity to sit with the governor yesterday, because I was very upset at the governor. And we have had a decent relationship with each other. And I happened to be at the airport in Iowa. He was at the airport in Iowa, and we were both waiting to get on our planes.

And I had a conversation with him for about 25 minutes, where I told him that I was really, quite honestly, disgusted by the whisper campaign that he did against Mitt Romney. I think that, when you start to divide Christians, and you start to campaign, quite honestly, in the same way that Ronald Reagan would not, but more in the style of an extremist mullah, where you're saying who's Christian and who's Christian enough for you, I think that's a real problem.

When you look at the polls that show only one out of every 20 non-Southern Baptists or evangelical in New Hampshire and South Carolina will say they will vote for Mike Huckabee, I think this is a guy who is not going to be able appeal to the -- to the mainstream.

BLITZER: Well, what -- how do you explain the -- the surge clearly in Iowa, in our new poll, in South Carolina, how do you explain that? And then I want to ask you if -- if he did anything in that 20- to 25-minute private conversation you had that reassured you?

BECK: Let me answer that one first: No. He did apologize to me and to anyone he might have offended with that. But I -- you know, as I told him...

(CROSSTALK)

BLITZER: I want to be precise. For the viewers who don't know, you are a Mormon, and you were upset about the innuendo in that Sunday "New York Times" magazine article...

BECK: Oh, yes. Oh, yes.

(CROSSTALK)

BLITZER: ... where he raised questions if Mormons believe Satan and Jesus Christ are brothers.

BECK: Yes. It's -- it's just an incredible thing, for him to actually try to say with a straight face, that I -- I was just asking the question, like "The New York Times" reporter can ask -- or answer any real question on faith, and him just, what, I didn't know that they would print that, it is as believable to me as Hillary Clinton saying, you know, this whole cocaine thing with Obama, maybe he sold drugs; maybe he didn't; I'm not saying that; it just might be the Republican machinery that might bring that up -- just by saying these things, that becomes the story.

No matter how many times you apologize, it becomes the story. And, quite honestly, on both sides, and any candidate that does this kind of thing, it is beneath the president of the United States. I -- so far -- and I haven't seen him yet -- I'm waiting for a president to show up.

SANCHEZ: The -- so, he didn't reassure you. But what about the -- the surge that he's -- that he's had lately? How do we -- how do you explain that?

BECK: Yes.

I can't, other than, I don't think there is anybody in there -- you know, I talk about it on my program quite a bit, that I would like to take a little piece of each of them. I would like to take a bit of Giuliani, I would like to take a bit of Fred Thompson, a little bit of Mitt Romney, I have said in the past, up until the other day, a bit of Mike Huckabee, and combined them for a conservative candidate.

Where Ronald Reagan had pretty much all of it, these guys don't. They have little pieces. So, I think the only way I can explain it at this point is that people are like, well, I don't know. Maybe not that guy, maybe not that guy.

And he's -- his numbers are not coming from anyplace else, it appears at this point, than Fred Thompson. And I think that shows Fred Thompson's support starting to erode, although I thought he looked really good in the debate, for the first time, just a few days ago.

BLITZER: Yes, he showed some spark that he...

BECK: He did.

BLITZER: ... hadn't shown earlier.

Very quickly, your book is called "An Inconvenient Book."

BECK: Yes.

BLITZER: A lot of us remember another film and book, "An Inconvenient Truth," by Al Gore.

BECK: Yes. Yes.

BLITZER: He spoke in Bali, Indonesia, this week...

BECK: Oh.

BLITZER: ... at the -- at the global warming summit.

BECK: Yes.

BLITZER: And he said this. I'm going to play the clip and then we will talk about it, because I know you're no great fan of Al Gore and his -- and his thesis on global warming. But take a listen.

(BEGIN VIDEO CLIP)

AL GORE, FORMER VICE PRESIDENT OF THE UNITED STATES: My own country, the United States, is principally responsible for obstructing progress here in Bali.

(END VIDEO CLIP)

BLITZER: All right. When you heard that -- you're shaking your head. You're closing your eyes.

BECK: Yes.

BLITZER: You're grimacing. You're not happy?

BECK: No. Here's why, Wolf.

I mean, even if you believe in global warming -- and I do believe -- I mean, it's hard to refute that the world is getting warmer -- you have to talk about the solutions. What do you do to solve the problem?

What we're talking about is $26 trillion. I can feed, clothe and educate every man, woman and child on planet Earth for the next 100 years and still have $21 trillion dollars left. This is truly about global socialism. If you listen to what else he was talking about, he was talking about a new U.N. global tax.

I'm sorry. I don't want any more taxes from Washington. I certainly am not going to pay taxes to the United Nations.

BLITZER: Glenn Beck's bestseller is called "An Inconvenient Book." His program airs on our sister Headline News at 7:00 and 9:00 p.m. Eastern.

Glenn, thanks for stopping by.

BECK: Thank you very much, Wolf.

BLITZER: An underdog presidential candidate taking off, so to speak. We are going to tell you about Ron Paul's big launch. And we are going to track it online.

Plus, Southern comfort for Mike Huckabee -- now that he's leading -- leading -- in South Carolina, can his surge keep going? The Huckabee phenomenon, that's coming up in our "Strategy Session."

And later, a homegrown terror plot from behind prison walls.

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

(COMMERCIAL BREAK)

BLITZER: It seems no one can escape it. Just take a closer look in your closets, in your kitchen cabinets, your garage, and it's clear just how much all of us are paying for many of the basic things we all need.

Let's go to CNN's Ali Velshi. He's in New York with some new numbers on what I'm referring to.

And they're pretty disturbing, Ali.

ALI VELSHI, CNN CORRESPONDENT: That's right, Wolf.

If you have this nagging feeling that prices all around you are going up, you are right. The government just confirmed what we all already know. November's inflation numbers show a 4.3 percent increase in prices for consumers goods over the previous year. That's pretty big, Wolf.

And the usual suspects are to blame -- energy prices, food prices, clothing prices, medicine prices, transport prices.

Some examples, gasoline -- you know this -- up 82 cents a gallon from a year ago. And that's despite a 12 cent drop from record gasoline prices, which were reached last May. Clothes are up, too. These vests don't come cheap. Medical care costs, Wolf, up 5 percent, including prescription drug costs, that have increased for millions of Americans.

Food prices are up, a combination of increased demand for grain from developing nations and America's newfound obsession with growing corn for ethanol. It's pushed prices up for wheat, soybeans and, for that matter, for corn.

And those high oil prices mean higher prices for transportation, Wolf. You have seen it in airline ticket prices, but transportation prices are up in general, close to 10 percent for the year.

Now, for those of you who followed this news today and heard economists and policy wonks say that inflation is up only a manageable 2.3 percent for the year, get this. They're talking about something called core inflation. That strips out energy and food prices. I say ignore the core, unless you know people who exist without food and energy.

Real inflation is up 4.3 percent. And, if you have got kids in college or drive a couple of cars, you're probably paying even more for that, Wolf, but you already knew that.

BLITZER: And it's sort of like a hidden tax on all of us, because...

VELSHI: Absolutely.

BLITZER: ... the prices go up, we have to spend more, and our income may not necessarily be going up to match it.

VELSHI: That's exactly right. And that's why inflation is a danger. And that's why this economy needs a close eye on it. We will stay on it.

BLITZER: Ali, thanks very much for that.

We're following another important story regarding your food and your money right now. Just a short while ago, the U.S. Senate passed a $286 billion farm bill by an overwhelming margin. It has far- reaching implications.

Let's go to Brianna Keilar. She's up on Capitol Hill, watching this story for us. All right. People hear the words the farm bill, and they don't realize that it does have enormous ramifications for a lot of consumers -- every consumer out there, Brianna.

BRIANNA KEILAR, CNN CORRESPONDENT: It does, Wolf.

And, actually, even though the Senate did pass the farm bill, it was missing key reform efforts to lower subsidies for wealthy farmers. And because of that, the White House has issued a brand-new veto threat.

Now, the government started giving subsidies back during the Depression era. This was to -- to help out farmers who were going through rough times, to make sure that it didn't sink them. Well, the farming industry has changed. Corporate farms are a big part of it now.

But this program, the subsidy program, which awards subsidies based on how big a farm is, it hasn't changed. So, what you have is corporate -- some corporate farms that are big and profitable, and they're just raking in subsidy dollars. And then you also have small family-run farms, and they're just getting assistant scraps.

Here's a look at the issue from the point of view of both a proponent and a critic of lowering farm subsidies.

(BEGIN VIDEO CLIP)

SEN. CHARLES GRASSLEY (R), IOWA: You can't have 10 percent of the biggest farmers getting 73 percent of the benefits out of the farm program, and expect urban voters and taxpayers to be supportive of a safety net for farmers.

SEN. BLANCHE LINCOLN (D), ARKANSAS: What happens 10 years from now, if we put farmers out of business, and, all of a sudden, we're becoming dependent on foreign food, just as we have become dependent on foreign oil?

(END VIDEO CLIP)

KEILAR: Measures that would have lowered these farm subsidies failed yesterday. And, right now, this effort is still up in the air -- Wolf.

BLITZER: And, so, the impact on consumers is what?

KEILAR: Well, at this point, if you're talking about subsidies, it's not going to save them. It's not going to cost them. This is what one expert is telling us.

As you just said Ali say, food prices are high. And this expert told us that it's really the demand for corn to make the alternative fuel ethanol that is going to have a lot more of an impact on food prices than the farm bill -- Wolf.

BLITZER: Brianna Keilar, on Capitol Hill, thanks very much.

Coming up in our "Strategy Session": Senator Clinton says she would be willing to declare a truce.

Listen to this.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE: With respect to anything negative, I would be happy to enter into an agreement with everyone, but it would have to be an agreement with everyone.

(END VIDEO CLIP)

BLITZER: But as we pass the point -- but are we past the point where positive politics will actually pay off?

And Republican Mike Huckabee turning to political strategist Ed Rollins to close the deal with primary voters -- does he have the Midas touch?

The "Strategy Session" -- coming up.

(COMMERCIAL BREAK)

BLITZER: South Carolina could prove pivotal for who becomes the presidential nominees and who becomes the next president of the United States.

Right now, our new poll shows Hillary Clinton losing a little bit of ground, Republican Mike Huckabee, on the other hand, soaring in South Carolina.

Joining us now in our "Strategy Session," our CNN analyst, the Democratic strategist Donna Brazile, and conservative commentator Terry Jeffrey, the editor in chief of the Cybercast News Service.

Guys, thanks for coming in.

I will put the poll numbers, Donna, back up on the screen. On -- on the Democratic primary voters, Hillary Clinton is at 42, Obama 34, a slight bump for him from 27 back in July, Edwards at 16 percent.

But look at this. When you take a look at the African-American voters, Democratic voters in South Carolina, who represent maybe 40, 45 percent of the potential vote in the Democratic primary, it's now 46 percent for Clinton, 45 percent for Obama. That's a significant shift from back in July, when it was 52 for Clinton, 33 for Obama.

In other words, Obama is doing a lot better among African- Americans. What is going on?

DONNA BRAZILE, CNN POLITICAL ANALYST: Well, it's still a dead heat, but it's clear that more African-Americans are getting to know Barack Obama. They're comfortable with his message.

BLITZER: Is it the Oprah factor? Because she was down there last weekend.

BRAZILE: Oh, there's no question that Oprah was a net plus for Barack Obama.

But, long before Oprah set foot in South Carolina, African- American voters were becoming familiar with Barack Obama. Remember, he had that huge gospel concert just a few weeks ago where there was a huge turnout of African-Americans. He's talking the talk. He's walking the walk.

And, look, if they have an opportunity to vote for someone who -- who can actually win the White House, Barack Obama, they will support him.

(CROSSTALK)

BLITZER: Yes.

On the Republican side -- we will put up these numbers -- Huckabee -- Huckabee has gone from 3 percent in South Carolina back in July to 24 percent. He's on top of the pack right now, Thompson 17. Giuliani has lost almost half of his support, from 30 to 16. McCain, he -- excuse me -- Romney has gone from six to 16. McCain, at 13, he has gone down from 21 percent in July. And Ron Paul has gone from 2 percent up to 11 percent.

But the most dramatic development is, of course, Mike Huckabee.

TERRY JEFFREY, EDITOR IN CHIEF, CYBERCAST NEWS SERVICE: Yes.

You know, Wolf, a few months ago, you would have said that Huckabee has to beat expectations in order to survive into South Carolina to have a chance to do well there. Now he's ahead by significant margins in most polls in Iowa. And, if he rolls through there, I think they are going to have a hard time stopping him in South Carolina.

If he -- if he wins Iowa, with the poll numbers he has now, you're looking at probably a Huckabee-Giuliani race after South Carolina.

BLITZER: After South Carolina.

JEFFREY: Yes.

BLITZER: You know, what about Ed Rollins? You know Ed Rollins.

JEFFREY: Absolutely.

BLITZER: All of us know Ed Rollins. He's been around for a long time. He's been brought on board to become the national chairman now of the Huckabee campaign. That elevates it to a new level, something, you know, he didn't necessarily have until today.

BRAZILE: This campaign, the Huckabee campaign, has been driven by the candidate's personality. So, what Ed is capable of doing is putting a structure, putting an organization around the candidates himself, so that he can go past the Iowa caucuses and perhaps win some of the later states.

BLITZER: He's had some success. There's Ronald Reagan, of course, being his biggest success.

He's had some failures, including the Ross Perot campaign, which he got involved with back in '92.

JEFFREY: That's right. And he also has a history of supporting very liberal Republicans who are quite different than Huckabee, like Christie Todd Whitman in New Jersey, Michael Huffington out in California.

But you know what? People should recognize that Michael -- Mike Huckabee has run a great campaign up to now. With very little money, he's having tremendous success. So, you know, if something ain't broke, don't fix it. So, hopefully, Ed Rollins is not going to go in there and try and fix Mike Huckabee's campaign.

BLITZER: But the argument is -- and you have worked on a lot of campaigns, including Al Gore's campaign -- you were the campaign manager back in 2000. You came pretty close to winning...

(LAUGHTER)

BLITZER: ... winning that contest.

It's one thing to run a very successful campaign in a couple small states, like Iowa, for example, but it's another thing to go national. And you need that kind of, I guess, experience if you're going to do that.

BRAZILE: And Ed understands the big picture. He understands the political landscape.

While he's not been involved in recent presidential elections on the Republican side, he knows enough about putting together an organization. So, it's not just about the man and his personality. But it's about putting together a structure.

JEFFREY: But you know what? He doesn't need it.

Where Huckabee needs a structure is in Iowa and New Hampshire, where it's all retail politics; it's all about getting people out. That's why Oprah Winfrey helped Obama out there so much. She helped him identify a lot of voters.

Huckabee doesn't need organization on February 5. What he needs is momentum and free media. He needs CNN and FOX News talking about him all the time. He needs his voice and his face out on free media and in front of the newspapers. Ed Rollins isn't going to give him that.

BLITZER: All right, guys, thanks very much, Donna and Terry. BRAZILE: Thank you.

BLITZER: Good discussion.

Cream or sugar? The presidential candidates spill the beans about their coffee habits.

Plus, is Laura Bush ready for this, a close encounter with CNN's Richard Quest, on a quest of his own for the holiday spirit? You are going to want to see this.

And inside the NASA love triangle, as it's called -- very personal e-mail now being made public. We are going to tell you what they say.

Stick around. You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's take a campaign coffee break right now.

The Associated Press asked the presidential candidates how they like their coffee. And take a look at this. Rudy Giuliani prefers low-cal sweetener. Any brand will do. Mike Huckabee is more specific. He likes Splenda. John McCain is fond of cappuccino or coffee with cream and sugar.

Fred Thompson says, cream, please. Bill Richardson also a cream kind of guy. Barack Obama takes it black, but says he rarely drinks coffee. John Edwards says, no thanks, he doesn't drink the stuff. And, on this issue -- look at this -- Hillary Clinton is a flip- flopper. Sometimes, she takes it black, sometimes with cream.

Remember, for the latest political news at any time, you can always check out our Political Ticker at CNN.com/ticker.

Supporters of Republican presidential candidate Ron Paul may dominate on the Internet, but now they have their sights set on U.S. airspace.

The Ron Paul blimp is on the -- is in the air, that is, as we speak.

Let's bring in our Internet reporter, Abbi Tatton. She's watching this blimp for us.

What's going on, Abbi?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, right now, they say they're heading towards Charleston, South Carolina.

The realities of blimp planning meant this week that the launch was a couple days delayed. And the flight plan is somewhat different than they had hoped. But there it is now, getting off the air today in North Carolina, the latest supporter-generated exercise to raise the profile of the candidacy of Ron Paul, a candidate who hovers around 6 percent in the national polls.

This comes, of course, after that fund-raising drive that supporters did online last month, brought in more than $4 million in a day. And those supporters on the Internet will tell you that there's more to come. They are planning another one this weekend. They say that this is going to be the big one, bigger than the one last month.

And, also, Ron Paul said on this show that it could bring in as much as $5 million. He's also said that he's struggling to know what to do with all this cash. A spokesman for the campaign says that, now, they have 90 full-time paid staffers. That's in contrast to three nine months ago -- Wolf.

BLITZER: That's a Ron Paul phenomenon, I must say, indeed.

All right, Abbi, thanks very much.

Jack Cafferty has got "The Cafferty File" -- Jack.

CAFFERTY: That -- stuff about the coffee?

BLITZER: Yes.

CAFFERTY: Fascinating.

(LAUGHTER)

BLITZER: How do you like your coffee?

CAFFERTY: It's -- nobody cares.

(LAUGHTER)

CAFFERTY: The -- the question this hour, is calling for higher taxes on the rich a good strategy for the Democratic presidential candidates?

Frank writes: "I don't know if raising the taxes for corporations and richer people will actually be good for lower-class people. As we all know, if you fine a company or raise their taxes, they will take it out on us workers with smaller incomes by bringing up prices to cover those raised expenses. Vicious cycle, don't you think?"

Greg in Mechanicsburg, Pennsylvania: "Only an idiot would call what they plan to do a tax increase. That plays right into the hands of the Republicans. What the Democrats really should call it is a restructuring of the tax code to make it more fair for all Americans, which is really what it is."

Rich in Texas: "No, it isn't. There are two kinds of people who pay taxes in America, the middle class and the rich. The poor pay either nothing or next to nothing in taxes. If it were not for the rich, who own the businesses that employ the middle class who work in them, there would be no taxes to pay to either the government or the poor. Those are the cold, hard facts. And the Democrats who pander to the poor for their votes don't seem to understand that concept." Beth writes from Maine, "Yes, we have got to pay for what we need somehow. Who better to pay for it than those who can best or most afford it? If I paid half my income in taxes, I'd feel fortunate to be so wealthy."

Tyler in North Carolina: "Personally, I think it's the right tactic, as long as it does not affect my middle class wallet."

And Corinne writes: "It's the only strategy to get us out of the situation that eight years of Republican reign always puts us in, recession and putting us -- putting the little -- putting it to the little guy in this country. Doesn't anybody have a memory?" -- or the ability to speak clearly?

I will work on this and try to do better next hour -- Wolf.

BLITZER: You will, I am sure, Jack. Thanks very much.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.voxant.com