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Bush Stimulus Package; British Boeing Crash; Hunting bin Laden; No Winner Until the Convention; Edwards Vs. Clinton & Obama; Volcano in Colombia Spews Ash

Aired January 18, 2008 - 17:00   ET

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


BLITZER: Happening now, with the economy reeling, President Bush says it's time for relief. He wants to put some money back in your pocket.
But is that enough to really make a difference?

What brought a Boeing 777 to a frightening crash landing?

Investigators in London coming up with one answer and that's raising some more frightening questions.

And a filmmaker who once searched for meaning in the super-sized world of McDonald's now has searched the globe for Osama bin Laden.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM.

President Bush says he wants to give the ailing U.S. economy a shot in the arm. He's backing a $145 billion stimulus plan that could put cash in your hands within weeks, much like the tax rebates handed out during the 2001 recession.

(BEGIN VIDEO CLIP)

GEORGE BUSH, PRESIDENT OF THE UNITED STATES: Americans could use this money as they see fit to help meet their monthly bills, cover higher costs at the gas pump or pay for other basic necessities. Letting Americans keep more of their own money should increase consumer spending and lift our economy at a time when people otherwise might spend less.

(END VIDEO CLIP)

BLITZER: The economy certainly a major topic out on the campaign trail today. But some of the leading Republican candidates were actually lukewarm to the idea of an immediate economic stimulus package.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I would love to work with Congress and the president -- but -- and I believe that we can and we need to. And, by the way, I still believe in the fundamental underpinnings of our economy is good and strong. And nothing is inevitable. Nothing in this world is inevitable. And, my friends, what we need to do to start with -- before we go any further -- is stop the out of control spending.

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: Nothing would more readily revive our economy and give back the capacity for economic prosperity than completely scrapping our current tax system, which penalizes productivity, and exchanging it for the fair tax, which is fair, it's flat, it's finite, it's family friendly. It doesn't penalize people for being married having kids and trying to do something with your own money.

FRED THOMPSON (R), PRESIDENTIAL CANDIDATE: Everybody on the Hill and everybody in Washington wants to rush willy-nilly, you know, at -- at some of these packages that will cost billions and billions of dollars. We need to make sure that we're targeting them in the right way.

(END VIDEO CLIP)

BLITZER: The three leading Democratic candidates all have their own stimulus idea. Some feel the president's proposal falls short.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D), PRESIDENTIAL CANDIDATE: I don't think it does enough. It talks about giving direct payments to people, which is good. I'm for that. But at least according to what we've been told, it leaves out 50 million working Americans.

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: It is more important for us to jump-start the economy than to try to balance this budget or be stingy about a stimulus package. Ultimately, that would cost the federal government a lot more in lost revenues if the economy keeps on sinking.

JOHN EDWARDS, PRESIDENTIAL CANDIDATE: In the short-term, we've got to stimulate the economy. I came out with a stimulus proposal before anybody else did. And my proposal is that we build green infrastructure and create jobs in the process; that we modernize our unemployment insurance laws to cover more people; that we give help to the states directly; and that we aggressively attack the mortgage foreclosure crisis.

(END VIDEO CLIP)

BLITZER: I'm going to be speaking live later this hour with Senator Edwards. We're going to be talking a lot more about this important subject.

So what does it all mean for you and the U.S. economy?

Let's ask CNN personal finance editor, Gerri Willis.

She's standing by.

The bottom line, is it likely Americans are going to get an $800 check or rebate?

GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Well, it would take Congress and the president coming to terms and agreeing on exactly what it is they want to give you. And we don't know when you'll get it. The earliest possible is probably June. That's because, Wolf, it takes 10 weeks just to cut the checks. Keep in mind, the IRS is in the middle of tax season and they're understaffed. It could take a while for this all to come together.

BLITZER: Does this really work, though, this notion of a tax rebate?

WILLIS: Well, there are a lot of skeptics out there. Let's look, though, back at 2001. Twenty to 40 percent of the checks were spent within days. Two thirds were spent within six months. Only a third of this money was saved.

But this money is best targeted truly at low and middle income class people. Then we'll get the money right back in the economy at the mall, at the auto lot, etc. And it has to happen soon, say economists. And the size of the solution has to depend on the size of the downturn. The two have to match. The government wants you to spend the money, though, but I think that people facing recession might just want to save it -- Wolf.

BLITZER: Thanks very much, Gerri, for that.

Gerri Willis reporting.

It was a very rough landing, short of the runway, ripping off the landing gear and damaging engines and wings. At least 17 people were hurt aboard that British Airways jet in London yesterday. Now investigators may -- repeat may -- know why.

CNN's Jim Boulden has the latest from London.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNN CORRESPONDENT (voice-over): After a day of combing over the wreckage at the end of Heathrow's southern runway, investigators say in an initial report, the engines on British Airways Flight 038 failed to respond to a demand to increase thrust. The plane was about two miles out from Heathrow. The report says the aircraft's speed reduced and the plane descended quickly. It landed hard on the grass some 1,000 feet short of the runway before sliding to the beginning of the tarmac. There were only minor injuries to some of the 152 people aboard.

(APPLAUSE)

BOULDEN: Twenty-four hours later, relieved and thankful, the pilots and chief cabin stewards stood before B.A. staff and media for the first time.

PETER BURKILL, BRITISH AIRWAYS PILOT: As you know, an investigation is being carried out by the Air Accident Investigation branch. So it is not possible for me to make any public comment on the circumstances of what happened.

BOULDEN: The plane's captain, Peter Burkhill, revealed the copilot, John Coward, was the handling pilot for the approach. Passengers say it appeared all was normal when the plane started its decent Thursday afternoon. But then it went terribly wrong. Pilots had seconds to react.

Mike Giles has flown a 777.

MIKE GILES, RETIRED COMMERCIAL PILOT: The pilot, whoever we'd find, would have been concentrating solely on keeping that airplane in the air for as long as he possibly could.

BOULDEN: This is the very landing pattern Flight 038 took Thursday. Unlike the planes you see here in videos shot last year, B.A. Flight 038 landed short of the runway.

JERON ENSINK, FLIGHT 038 PASSENGER: At the moment that the emergency exit door was opened and I saw the wing in a strange angle -- and at the moment that I came down the slide and walked away from the plane, I realized that the landing gear was completely missing from the plane and that it was just flat on its belly.

BOULDEN: There was no fire and the fuselage was left intact and everyone aboard survived. That offers investigators a rare opportunity to interview everyone and thoroughly dissect this crash landing to answer some troubling questions.

KIERAN DALY, AIR TRANSPORT INTELLIGENCE: The difficulty is that all of the explanations sound very, very strange and highly improbable, but it happened, nevertheless.

BOULDEN: It's still expected to take months before investigators fully know why the 777 slammed down at Heathrow.

Jim Boulden, CNN, London.

(END VIDEO TAPE)

BLITZER: Let's check back with Jack Cafferty.

He's in New York with The Cafferty File -- Jack.

CAFFERTY: That's just a miracle, you know?

BLITZER: Yes. Yes.

CAFFERTY: I mean that's just a miracle that that thing came down and the fuselage didn't break, no fire, no explosion.

The show will go on and so will the caucuses in some Las Vegas casinos. That's because a federal judge is refusing to shut down nine casino-based locations for tomorrow's Nevada caucuses. The decision is seen as a boost for Barack Obama, since he's been endorsed by the union that represents many of the shift workers who will use those casino locations to caucus. The lawsuit had been brought by a state teachers union that endorsed Hillary Clinton. And the fallout over the case led to a dispute between the two campaigns.

The Clinton people deny playing in roll in the lawsuit, but they are critical of the casino locations, saying that the system seems to benefit other campaigns and is "unfair."

For his part, Obama welcomed the judge's decision, saying anything else would have meant disenfranchisement for many who work on the Las Vegas strip -- people like maids, dishwashers, bellhops, members of the Culinary Workers Union that endorsed Obama.

The rules for holding the caucuses were set by the Nevada state Democratic Party leaders.

So here's the question -- do you see anything wrong with Nevada holding caucuses in casinos?

You can go to CNN.com/caffertyfile and post your comments there on my blog -- Wolf.

BLITZER: Jack, thank you.

Thank you very much.

Coming up, Congress exposing a charity scam. You're going to find out whether money raised for veterans actually ended up being used for a golf membership and legal fees in a divorce case.

Plus, a roller coaster election year, to be sure. Find out how this time around it could actually drag into the summer and all the way to the nominating convention.

And John Edwards makes some gains with voters, but will it be enough to keep him in the race?

We're watching this. He'll be joining us live to explain why he should be the next president of the United States.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: He says he's helping veterans, but Congressional investigators suspect the founder of two charities may be helping himself to a windfall. He was called to answer those questions before the House Oversight Committee.

Brian Todd is watching the story for us.

Did he get grilled by the lawmakers -- Brian?

What happened? BRIAN TODD, CNN CORRESPONDENT: He took a lot of heat, Wolf. Seemingly some real pent up frustrations there on the part of lawmakers over the fact that many charities don't have to be transparent about the way they do business.

(BEGIN VIDEOTAPE)

TODD (voice-over): They're supposed to provide financial relief and other services to disabled veterans returning from Iraq and Afghanistan. But according to Congressional investigators, the leaders of two major veterans charities spent most of the money they raised on themselves.

UNIDENTIFIED MALE: It's really a fraud against Americans who agree to give you their hard-earned dollars, isn't it?

ROGER CHAPIN, VETERANS' CHARITIES FOUNDER: Absolutely not. We made no representations whatsoever to the donor as to the percentage of the money going to the charity.

TODD: Roger Chapin, founder of non-profits called Help Hospitalized Veterans and The Coalition to Salute America's Heroes, defends himself before a House committee.

House investigators say between 2004 and 2006, Chapin's two charities spent only a quarter of the nearly $170 million they raised on veterans.

In the meantime, investigators say, Chapin's charities spent $17,000 for membership in a golf club; more than $3,000 for meals, hotels and entertainment for Chapin and his family; more than $4,000 for a condominium for Chapin; and even gave another charity official more than $100,000 to handle his divorce settlement.

In that three year period, investigators say, Chapin and his wife received $1.5 million in salary and other compensation.

Chapin denies that.

CHAPIN: I did not take in $1.5 million. That's totally inaccurate. I took in $750,000 -- over the half of what you're talking about...

UNIDENTIFIED MALE: (INAUDIBLE).

CHAPIN: ...plus some bonuses.

TODD: Chapin says the accusation that he's lined his pockets at the expense of veterans is nonsense, says he has loaned more than half his after-tax salary back to his charities. Chapin and his colleagues say they have to spend a lot of fundraising and direct mail.

But one watchdog group say veterans' charities are notorious for mismanagement.

DANIEL BOROCHOFF, AMERICAN INSTITUTE OF PHILANTHROPY: They're woefully in effect. They waste too much money raising money. They wrap themselves around the American flag. They hide behind the First Amendment and they solicit too many people.

(END VIDEO TAPE)

TODD: In fact, one of Chapin's charities paid retired General Tommy Franks, who led the invasion of Iraq, $100,000 to appear on one of its solicitation letters.

Contacted by CNN, General Franks' aide says he did help raise money for that charity back in 2004 and 2005, but he stopped his support when he learned that not enough money was going directly to the troops -- Wolf.

BLITZER: Brian, thank you.

Brian Todd reporting for us.

Let's check back with Carol Costello.

Actually, she's off today.

We'll check in with Fredericka Whitfield.

She's monitoring some important stories incoming into THE SITUATION ROOM right now.

Carol is off. But Fred is here -- hi, Fred.

FREDRICKA WHITFIELD, CNN ANCHOR: And that's right.

Hello again, Wolf.

Well, he gave the FBI valuable information about his meetings with Osama bin Laden. Now an admitted terrorist and Canadian citizen has been sentenced to life in prison by a New York judge. Mansour Jabarah plotted to blow up U.S. Embassies in Singapore and in the Philippines. Before sentencing, he renounced terrorism and pleaded unsuccessfully to be allowed to go home.

Missing off the coast of San Diego, an unexploded demolition charge. The Navy dropped it yesterday during a training exercise, but it failed to go off. Divers sent out later couldn't find the charge and the Navy now says it's expected to wash ashore on a military beach.

And one of the three victims of that Christmas Day tiger attack at the San Francisco Zoo admits taunting the animal before it escaped and mauled his friend to death. Court documents say 19-year-old Paul Dhaliwal confessed that all three were yelling and waving at the tiger while standing on top of the rail around its enclosure. Tests show the men had been drinking and smoking marijuana. Dangerous business -- Wolf.

BLITZER: Very dangerous. You don't taunt animals like that.

WHITFIELD: Not at all.

BLITZER: That's terrible.

All right, thanks very much, Fred, for that.

An armed man here in Washington up on Capitol Hill comes frighteningly close to the Senate Office Building. We're going to show you what happened.

Plus, Democratic presidential candidate John Edwards -- he's standing by to join us live. We'll talk about the U.S. economy, fears of a recession, what he would do if he were president.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: A security scare here in Washington near Capitol Hill just a little while ago. A man arrested with what authorities say was a shotgun.

Let's go right to CNN's Kate Bolduan.

She's watching the story for us.

What happened -- Kate?

KATE BOLDUAN, CNN CORRESPONDENT: Well, some more troubling details coming out, Wolf, about how this whole thing went down. This happened just a few blocks here from our studio, very close to the Senate Dirksen Building. And that's -- we're hearing that the supposed gunman -- what they're describing as looked like a rifle -- was just a few hundred yards from the Senate building.

What we're hearing now is two eyewitnesses are telling CNN some more detail. One witness says that this man stopped and asked for directions to the Supreme Court.

Another eyewitness saying that she saw the entire thing go down. She heard the Capitol Police say please -- you know, stop where you are to this man. She then noticed the man with a bag over one shoulder and what she described as a rifle over his other. At then, at one point, the gentleman turned to her and said, "I have to get to the Supreme Court."

Shortly after that, the Capitol Police demanded that he get on the ground. He did. And about five Capitol Police converged and took him into custody.

But it's important to note, of course, that the Capitol Police say that there were no threats made from this gentleman. But there are some troubling details that we're now learning coming out, as we learn a little more about his man. His identity has not been told to us. As this all was going on, the Capitol Police are now looking at a car that they say had some very suspicious items inside. They're not going into any detail about that. But they're now looking at a car that they are associating with him, as well.

Meanwhile, right around that Capitol -- all around this area and that Senate building, Wolf, is still shut down.

BLITZER:

Kate, thanks very much.

Kate Bolduan watching this story for us.

A scary moment here on Capitol Hill.

BOLDUAN: Yes.

BLITZER: A documentary filmmaker who one searched for meaning between the golden arches of McDonald's has now searched for -- the globe, that is -- for the al Qaeda leader, Osama bin Laden.

CNN's Brooke Anderson has the story -- Brooke.

BROOKE ANDERSON, CNN CORRESPONDENT:

Wolf, the filmmaker who ate nothing but McDonald's for 30 days straight in the 2004 documentary "Super Size Me" is now sinking his teeth into the topic of terrorism.

Morgan Spurlock is here at the Sundance Film Festival to premier his new movie "Where in the World is Osama Bin Laden?"

(BEGIN VIDEOTAPE)

ANDERSON (voice-over): Osama bin Laden -- the most wanted man on the planet.

(VIDEO CLIP)

ANDERSON: The Al Qaeda leader has evaded capture for more than six years. So Oscar-nominated filmmaker Morgan Spurlock, from "Super Size Me" fame, thought he would try to track him down.

MORGAN SPURLOCK, FILMMAKER: I think that we answer a lot of questions that the U.S. government hasn't answered in the film. I think we address -- we address this topic in a way -- this whole idea of Osama bin Laden and where is he and terrorism and the war on terror in a way that is finally understandable to a lot of people.

ANDERSON: In "Where in the World is Osama Bin Laden?," premiering at the Sundance Festival, Spurlock travels to trouble spots like Pakistan and Afghanistan.

SPURLOCK: To all kinds of places in the Middle East -- all kinds of stands, you know. (LAUGHTER)

SPURLOCK: There's a whole lot of stands in the movie.

ANDERSON: His goal?

Nothing less than finding the world's most wanted terrorist.

SPURLOCK: I was scared. You know, that you go into places where things are blowing up and people are shooting at you. And it's scary.

ANDERSON: To prepare himself, he went through hostile environment training.

(BEGIN VIDEO CLIP FROM "WHERE IN THE WORLD IS OSAMA BIN LADEN?")

UNIDENTIFIED MALE: I'm going to simulate a hand grenade attack.

UNIDENTIFIED MALE: You would have been killed.

(END VIDEO CLIP)

SPURLOCK: You can prepare to a point, but it's never the same.

ANDERSON: His film is meant to question the nature of the U.S. war on terrorism. But he does it with his trademark humor.

(BEGIN VIDEO CLIP FROM "WHERE IN THE WORLD IS OSAMA BIN LADEN?")

UNIDENTIFIED MALE: How do we determine where the sniper is at based on our situation again?

SPURLOCK: Hold up a hat on a stick?

(END VIDEO CLIP)

SPURLOCK: I think the movie is funny. I think the movie deals with a really hard issue -- a hard to swallow issue and in an entertaining way, which is rare for something like this.

ANDERSON: And he's ready to share his film with the president.

SPURLOCK: We'll take it to his house. I'll show up and we'll watch it together.

It would be great, you know?

I'll bring it myself. We'll like sit in the -- sit in the viewing room at the White House. I'd love to show it to him.

ANDERSON (on camera): Have a little popcorn.

SPURLOCK: We'll have a little popcorn. It's -- I told you, it's a movie to watch popcorn to. It'll be good.

(END VIDEO TAPE) ANDERSON: Rumors have been flying that Spurlock did find Osama bin Laden during his journey. Spurlock would only say you'll have to watch the movie to find out.

It premiers here at Sundance on Monday -- Wolf, back to you.

BLITZER: Brooke, thanks very much.

Brooke Anderson reporting.

So where is Osama bin Laden?

U.S. intelligence officials have said he's most likely in a rugged area of Pakistan near the Afghan border. Bin Laden remains on the FBI's Most Wanted List and the U.S. government has a $25 million reward out for his capture. The closest the U.S. may have come to capturing bin Laden was back in December of 2001, in the battle of Tora Bora in Afghanistan. Since then, bin Laden has issued five videos and 15 audio recordings.

President Bush calls for quick action to try to jump-start a sputtering economy. He wants to give tax incentives to businesses and tax relief to you.

Do Democrats have a better idea?

I'll ask the Democratic presidential candidate, John Edwards. He's standing by live.

Also, if the candidates keep taking turns winning primaries, at least one of the races may not be decided until the convention at the end of the summer. We're going to take a closer look at what could happen then.

Stay with us.

You're in THE SITUATION ROOM.

(COMMERCIAL BREAK)

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

Happening now, nine Western nations are calling on Kenyan police to stop killing unarmed protesters. Four more people died in political violence today. Hundreds have been killed in unrest sparked by allegations of fraud in last month's presidential election. We're watching the story.

Israel has carried out two air strikes in Gaza, calling them retaliation for Hamas rockets fired at Southern Israel. Palestinian security forces say the air strikes killed one person and injured 14.

I'm Wolf Blitzer.

You're in THE SITUATION ROOM. The presidential candidates have been taking turns winning the primaries and the caucuses. And if they keep it up, it's possible -- yes, it's possible at least one nomination may not be decided until the summer convention.

CNN's Tom Foreman is looking into that possibility -- it would be the first brokered convention, as they say, Tom, in decades.

TOM FOREMAN, CNN CORRESPONDENT: This would be so wild if it actually happened. Imagine if you had two political conventions in which the parties actually had to decide then and there whom they wanted for president. We haven't seen that in ages, but it could happen. There's a slight chance.

FOREMAN: Let's look at the Republicans first, where the first three races have been slit among different candidates. In order to win the nomination, a candidate has to be nominated by a majority of the delegates at the party convention. The magic number is 1,191 delegates needed.

Right now, Romney has 54; Huckabee has 22; McCain has 15. There are 55 more up for grabs this weekend. But then, on Tsunami Tuesday, February 5th, 1,020 delegates will be decided among the contenders.

And with all these states voting all at once, if there's no national consensus on a frontrunner, then you could see two or more candidates still charging toward a photo finish at the convention.

And if it really came down to a very narrow margin of popular support between a couple of frontrunners, you could count on a lot of deals or counter deals or maybe even dirty deals at the convention to decide which one would actually get the nod. That's a possibility -- a distant one, but a possibility, on the Republican side.

WOLF BLITZER, CNN ANCHOR: There's also a possibility it could happen on the Democratic side.

FOREMAN: Funny you should ask about that. On the Democratic side, really what we're talking about is the chance that the candidate who gets the nomination may not be the one who gets the most votes. Check this out. When you look at the total number of delegates, Clinton is way ahead. She's got 190 votes compared to 103 for Barack Obama and 51 for John Edwards.

But in terms of who people voted for, the popular vote, Obama actually has a slight lead in terms of the number of people he has grabbed among the delegates who have voted for them. How is that possible? Because the Democrats have what's called super delegates. These are important Democrats, elected officials, party officials and they get to vote for whomever they want at the convention. If their contest went right down to the wire, it's possible you could have most Democrats in the country voting for one candidate and the party picking another one, and the party's pick would be the one that mattered, Wolf.

It's not likely on either side, but we're closer to it this time than we have been in a long, long time in any election.

BLITZER: That's why it makes this contest on the Republican end, the Democratic side, so fascinating. We're going to be watching it every step of the way, Tom. Thanks, a very good, excellent explanation.

Let's get back now to the top story. The president's call for a shot in the arm for America's ailing economy. President Bush is urging Congress to immediately enact a stimulus package. He said it must include tax incentives for businesses encouraging them to create jobs and to buy equipment. He also says it must include some quick income tax relief for individuals. Putting cash back in payer's pockets to boost consumer spending.

Joining us now from Oklahoma City, the Democratic presidential candidate, John Edwards.

Senator, thank you very much for coming in. Let me get your quick reaction to what the president had to say. It's getting bipartisan support here in Washington. The Democratic majority, the leadership in the senate and house, they seem to be receptive to work with the president to get something going. What do you think?

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: Well, I think we need a stimulus. That's why about a month ago I laid out my own stimulus proposal. I think the dollar amount is in the right ballpark. There are a couple of things that are of real concern and I hope they can be worked out. Number one, there are about 50 million families, low or moderate income families, who get little or no help from the president's proposal. The second is there seems to be no lasting impact. Of course, the purpose of stimulus is to stimulate the economy in the short term. But if you can do it in a way, like I have suggested, that builds out green infrastructure and gets us off our carbon based economy, you get two benefits. One is you stimulate the economy in the short term and secondly, you create jobs that last over the long term. And you get America off its addiction to oil.

BLITZER: The president isn't including in his current short term economic stimulus package the notion of extending, keeping alive his tax cuts that were acted in 2001 and 2003. He says that remains a very important long-term goal. I want you to listen specifically to what he says about keeping these tax cuts in place.

(BEGIN VIDEO CLIP)

PRES. GEORGE BUSH, UNITED STATES: This tax increase would put jobs and economic growth at risk. Congress has a responsibility to keep that from happening. So it's critical that congress make this tax relief permanent.

(END VIDEO CLIP)

BLITZER: He says it could be a huge tax increase for American ifs the congress allowed these tax cuts to lapse. What do you think?

EDWARDS: Well, he's dead wrong. First of all, if he's talking about the tax breaks and the tax relief for middle class families, yes, that's very important. In fact, I would go another step. I think that middle class families are struggling so mordantly that they need additional tax relief to help them save, send kids to college, pay for health care. If he's talking about making permanent tax cuts for the wealthiest Americans, he's just completely wrong. What we ought to be doing instead of giving tax relief to the wealthiest Americans, is we ought to be using that revenue to deal with the huge structural problems we have in America's economy. Our dysfunctional health care system, our addiction to oil, being able to send kids to college, I mean all of these things are things we need to do to strengthen and grow the middle class, which is how we actually sustain economic growth over the long term.

BLITZER: Americans, Democrats right now are looking to differentiate between your and Hillary Clinton and Barack Obama. Give us an example of what you would do differently right now as opposed to Hillary Clinton and Barack Obama to try to stimulate the economy right now. Is there a significant difference between you and your two rivals?

EDWARDS: I think the biggest difference is on this specific issue is what I have proposed is that we put money, as I mentioned a moment ago, into green infrastructure. The difference between that position and what Senator Obama has suggested, which is more focused on tax cuts and some of the proposals Senator Clinton has made is it has a long-term positive effect. Not just a short-term positive effect. So I think that's the most significant difference.

I think it does -- I think all of us have suggested doing things about unemployment insurance, modernizing the laws, dealing with the mortgage crisis in the country. There are a group of things that all of us have talked about doing. I've also talked about getting aid to the states so that they don't pull money out of the economy at a time when we're trying to stimulate the economy because of budget shortfalls.

But I think the single biggest difference is I'm talking about an investment that provides short-term stimulation and builds out a long- term green infrastructure that we need anyway.

BLITZER: The Nevada caucuses tomorrow are pretty important; then a week from tomorrow the Democratic primary in South Carolina. Tell us how you have to do in both of these states in order to pursue your ambition to become president.

EDWARDS: I've said this over and I've said this on your show many times, I'm in this very much for the long term, Wolf. I don't look at this as a one contest or two contest race. We've had two states that have voted so far. We'll have two more over the next week or so. Then we'll have 46 states left to go. I mean I was interested in the discussion you had just a few minutes ago about the possibility of a brokered convention. But I think what's different about this particular race is on our side we have three candidates, each of whom are still taking significant chunks of the vote, each of whom are still taking significant chunks of delegates. What that means is voters continue to have the opportunity to see us, to evaluate us, to see us in debates. I know we're going to be on your network on Monday in South Carolina I believe. Now that we've narrowed the field and the focus is on the three of us, people see real choices between the three of us. I think it's a very healthy thing for the Democracy. I know that my message of fighting for the middle class is something people respond to.

BLITZER: You agree it could go all the way to the Democratic convention in Denver? Is that what you're saying?

EDWARDS: Absolutely it could. No question about that.

BLITZER: Thanks very much for coming in, Senator Edwards. We'll see you Monday in Myrtle Beach, South Carolina at the Democratic presidential debate that we're co-sponsoring with the Congressional Black Caucus Institute.

EDWARDS: Thanks, Wolf.

BLITZER: Thank you very much. And our coverage of that debate is 8:00 p.m. eastern on Monday night.

Republican White House hopefuls are talking about the economy out on the campaign trail. You're going to find out what they think of the plan President Bush is backing to try to avoid recession and what they would do instead.

Plus, the issues on many minds in South Carolina; find out why voters there generally don't want to talk about race.

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

(COMMERCIAL BREAK)

BLITZER: Tomorrow South Carolina primary for the Republicans will be the first of the current campaign in the south where the long history of racial tension could be a factor in the way people lined up voting.

CNN's Suzanne Malveaux is joining us now from Charleston. She's watching this story.

You've been talking to a lot of people out there. Race seems to be a factor, but it's changing over the years. What's the latest?

SUZANNE MALVEAUX, CNN CORRESPONDENT: Well, Wolf, you know it's really -- it's not like comparing one candidate's health care plan to another. This is an issue, race, that a lot of people were very uncomfortable to talk about. So I tried to put them at ease here and essentially say what are you speaking about privately with your family and your friends, the things we don't here publicly. There were some people who really quite candid about how race is playing a factor in the race.

(BEGIN VIDEOTAPE)

MALVEAUX: While the candidates may be downplaying the race factor, make no mistake, for some voters it's bubbling just below the surface.

SAMUEL ROBINSON, OBAMA SUPPORTER: It's not going to go away, pigmentation. One of the things of life is I can't wash off this black. I can't bleach it off. I can't even pray it off.

DIANE WIGGINS, UNDECIDED VOTER: There's too much history with the fact that there is too much racism. I believe that the blacks are more racist than the whites.

MALVEAUX: Almost everyone we talked to said race is not a factor in deciding who goes to the White House.

UNIDENTIFIED FEMALE: I think the qualifications are what is important.

SHERYL MACK, CLINTON SUPPORTER: We are united regardless of our race, color or creed.

MALVEAUX: But some who think race is a factor say it's almost a little embarrassing to admit.

CAROL SMALLS, OBAMA SUPPORTER: If Obama get in there, it's truly a change. And that's what I would like to see. And it has nothing to do with his color. Well, you know, I'm going to be honest. That's all I can be. Yeah, I think I would like to see a black man in there, but also, I like what he stands for.

MALVEAUX: Understandably, Barack Obama is a source of black pride. But he has transcended race and won the support of many white voters as well. But in South Carolina dig beneath the surface and you find an unease.

WIGGINS: I feel they have so much anger towards us. What is it? African-Americans. They're not African-Americans. They're Americans. This is what I'm saying. They play such a big card on being an African-American. They're not. This is what makes me angry.

MALVEAUX: Why does it anger you?

WIGGINS: Because they say that everybody should be equal, and so forth -- they're not. We're not equal.

MALVEAUX: When you say we're not equal, I don't understand. What do you mean by that?

WIGGINS: Everybody is playing the white card, the black card.

MALVEAUX: There is mistrust on both sides. Some suspect Obama's win in almost all white Iowa was a fluke?

Why do you suppose there were whites though in Iowa who were publicly supporting a black man?

ROBINSON: It was fashionable.

MALVEAUX: There is also among some black voters a nagging doubt about whether whites in South Carolina will give Obama a chance.

ROBINSON: When we close the curtains, when the lights go down low and we can vote our prejudices because we're hidden.

(END VIDEOTAPE)

MALVEAUX: And Wolf, what he's talking about is really the fact that in South Carolina, it's a primary. It's a closed process very much like New Hampshire so that the fear is that perhaps people will say one thing and do another privately. Perhaps they won't vote for Barack Obama. I have to tell you, most of the people that we talked to they say they certainly hope that South Carolina has gotten over the issue of race. But they still realize in some ways it is going to determine who gets the nod here. Wolf?

BLITZER: Suzanne, thanks very much. Suzanne's been doing some terrific reporting for us on these issues over these past several days.

CNN and the Congressional Black Caucus Institute are sponsoring a Democratic presidential debate in Myrtle Beach on Monday, Martin Luther King Junior, Day. Please join Suzanne Malveaux and Joe Johns and me for the southern showdown, as we're calling it. That's Monday night at 8:00 p.m. right here on CNN, the presidential debate for the Democrats Monday night.

Let's get some more on the Republican reaction to the president's call for an economic stimulus plan.

Mary Snow is out on the campaign trail. She's watching the story for us in South Carolina. So what are the Republican candidates, Mary, saying?

MARY SNOW, CNN CORRESPONDENT: Well Wolf, the Republican candidates are making their final push, and they're trying to spell out exactly what they would do to help the economy, and they've been rushing to get out their plans.

(BEGIN VIDEOTAPE)

SNOW: It didn't take long for the president's plan to make it out on the campaign trail.

SEN. JOHN MCCAIN (R), PRESIDENTIAL CANDIDATE: I want to talk to you for a minute about spending. The president just gave a speech.

SNOW: South Carolina Republican presidential hopeful John McCain said he would like to work with the president and Congress, as the president suggested, but he told crowds his priority is to cut government spending.

MCCAIN: When spending goes out of control, guess what, your interest rates get higher. Your home mortgage payments get higher.

SNOW: McCain rolled out his own stimulus package a day ahead of the president that calls for a cut in corporate tax rates and a call to extend tax cuts now slated to expire in 2010.

When asked about the president's plan, former Senator Fred Thompson expressed caution about a stimulus package that had too many promises.

FRED THOMPSON (R), PRESIDENTIAL CANDIDATE: Well, I don't know that he announced much of a detailed plan. I think that he is talking about a package that would apparently entail about $150 billion that would mostly involve tax rebates. I think that if we're going to have a stimulus plan, that's probably the direction that we need to go in.

SNOW: Mike Huckabee said he thought President Bush's stimulus plan was on the right track.

MIKE HUCKABEE (R), PRESIDENTIAL CANDIDATE: Not even the IRS understands.

SNOW: He told crowds in South Carolina he wants to replace the income tax with a national sales tax, the so-called fair tax.

HUCKABEE: Nothing would more readily revive our economy and give back the capacity for economic prosperity than completely scrapping our current tax system.

SNOW: Two candidates not in South Carolina also weighed in. In Nevada, Mitt Romney said the president's plan made sense, and that his economic stimulus package would be coming out soon and had similar features. Rudy Giuliani called the president's package a positive step and touted his ideas for tax cuts to stimulate economic growth.

(END VIDEOTAPE)

SNOW: As the Republican candidate spelled out what they would do, news came that the unemployment rate here in South Carolina had risen to 6.6%. That is the 5th consecutive month that the jobless rate has gone up. Wolf?

BLITZER: Mary Snow reporting for us from Hilton Head, South Carolina. Thank you, Mary. She's going to be busy all day tomorrow as well.

A controversy other the confederate flag; Mike Huckabee stirring up some old passions in South Carolina. Could he be stirring up some trouble? I'll speak about that and more with the South Carolina Governor Mark Sanford. That's coming up.

And a volcano's violent eruption. We have the video. It's stunning.

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

(COMMERCIAL BREAK)

BLITZER: So what happens if all the plans to try to jump start the economy simply don't work? Joining us now, our CNN special correspondent, Frank Sesno. Frank, how bad could things get? FRANK SESNO, CNN SPECIAL CORRESPONDENT: Bad. Here's what we got. So far this year the Dow Jones is down 9.3 percent. So far in the past year gasoline is up 34 percent. And foreclosures according to the Mortgage Bankers Association from the third quarter of 2006 to the third quarter of 2007, increased mortgages in the foreclosure process up 72 percent. So this is tough stuff. The last time there was a Bush in the White House and a Clinton running for president it was the economy, stupid. This time it seems like it's just the stupid economy.

(BEGIN VIDEOTAPE)

SESNO: What if the ripple effect from the housing collapse, the credit crunch, the market meltdown, record losses in the financial sector, $3 gallon gasoline become an economic tsunami? It's the question that's got everyone worried. The president wants to put money in people's pockets.

BUSH: Passing the growth package is our most pressing economic priority.

SESNO: The candidates are making promises.

OBAMA: The $10 billion fund that would help prevent foreclosures.

CLINTON: A $30 billion fund to help hard hit communities.

ROMNEY: I will fight to bring back good jobs.

MCCAIN: The old jobs won't come back.

SESNO: The fed chairman says if there's going to be a stimulus package there's no time to waste.

UNIDENTIFIED MALE: For this to be useful, you would need to act quite quickly.

SESNO: But what if a $13 trillion economy won't turn on a dime? Or a 100 or $150 billion stimulus package? It means from Wall Street to main street tighter belts and hard decisions lie ahead.

For a preview, turn to the states where tax revenues are down, governments are cutting.

In California, the governor proposes across the board cuts. They may close state parks, cut money for schools, stop paying dental care for the poor.

In Rhode Island, state workers may be forced to take unpaid days off.

In Kentucky, rescue squads and emergency management are among the agencies getting cut.

From Ohio to Alabama, Maryland to Arizona less hiring and services from border security to child support enforcement cut back.

What if this is a preview of 2008? Maybe it will scare the politicians into actually doing something. It will change the nature of the campaign. But someone should tell the truth. This bubble isn't done bursting. It's probably going to get worse before it gets better.

(END VIDEOTAPE)

SESNO: And concerns about it gets worse before t it gets better are really driving public opinion. Look at a few numbers here. People who say that gasoline prices extremely are very important to their vote, 70% say that. Economic conditions today, people calling them poor, 59%. And the most important issue that people are identifying in what they think is important for their vote for president, the economy. This is really weighing on people's minds, whether this stimulus package can do anything. This isn't just another business cycle recession. This is a boom to bust recession driven by this housing market and this credit crunch.

BLITZER: Frank Sesno, thanks very much; solid reporting by Frank as usual.

Let's check back with Jack Cafferty. He's got the Cafferty file. Jack?

JACK CAFFERTY, CNN CORRESPONDENT: I was struck by the examples Frank used of the state. They're cutting spending. And if you don't have any increase in revenue on the horizon, then the way you balance your budget is you don't spend as much. Maybe the states could teach that to the people in Washington, D.C. who seem to have no concept of that whatsoever.

The question this hour is do you see anything wrong with Nevada holding its caucuses in casinos?

Cody writes, "Everybody has the right to vote, and I think it's a very positive thing to make arrangements for people who are tied to certain locations to vote. Since when does it matter where one votes as long as they're voting? Great decision from the judge."

Dennis in Santa Ana, California, "How would requiring casino workers to caucus at locations other than their workplace have diluted their vote? Are casino workers the only caucus participants? How are they different from any other employee? This clearly provides an unfair advantage to a segment of the Nevada population, how can it not? More importantly, this demonstrates the weakness of caucusing and the requirement to be physically present does restrict those who can attend." I think you have to be present to vote too unless you vote by absentee ballot.

James writes, "They ought to hold the caucuses wherever and whenever Americans can get there. It's the caucuses that are held at 8 p.m. on Thursday night last until midnight that keep most working class Americans at home, concerned more with work the next day." Thomas in South Carolina, "It doesn't sound any more idiotic than squeezing 50 people into someone's living room in Iowa. At least they will have cocktail waitresses."

D.J. in Iowa, "I think the only way it's unfair is that not all businesses can caucus at the workplace. If it were to be fair, they would allow all businesses to hold caucuses to ensure that all working individuals are given the same right to vote."

Evan writes, "Not at all. As long as we aren't hitting the bookies and plopping down the wife's saving all on Kucinich, I think we'll be fine."

Erik writes, "Casinos in Nevada are just not the place to hold an election. They are busy and to be honest slightly vulgar. The atmosphere just isn't right. If you want an honest election then they should be held in some place respectable." Like Ohio maybe.

And Bo writes, "Jack, have you ever been to Nevada? There is nothing but casinos. Where else are they going to hold the caucuses?" Wolf?

I've been to Nevada.

BLITZER: Yeah, you grew up there. All right. Jack, thanks very much.

The confederate flag and tomorrow's South Carolina primary; we're going to talk a little bit more about that with the state's governor. He's going to be joining us right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: It's dramatic pictures of a volcano in southwestern Colombia. Abbi Tatton is looking at this eruption online. Show us what we know.

ABBI TATTON, CNN INTERNET REPORTER: Wolf, the area still on high alert after this, a web cam trained on the Galeras volcano. This is one of the most active in Colombia, exploding into life last night a little after 8:00 p.m., sending white smoke and ash spewing into the air from the summit of about 14,000 feet. And an eruption in 1993 killed nine. No injuries reported this time, though the area is still on high alert of an imminent eruption. Wolf?

BLITZER: Abbi, thank you.

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