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Obama Blasts McCain on Economy; McCain's Harsh Reality; President Bush Talks U.S. Economy, Heads to Europe

Aired June 9, 2008 - 16:00   ET


WOLF BLITZER, CNN ANCHOR: Happening now, Barack Obama tries to use the bad economy against John McCain. The Democrat is jumping feet first into this general election campaign right now, but critics say Obama still needs to fill in some gaps in his own economic plan.
Also this hour, McCain's harsh reality. His own campaign manager says Republicans face one of the worst political environments in modern history. We're taking a closer look at McCain's strategy to try to overcome that.

And the $4 gallon dilemma. Gas prices hit a new high and White House hopefuls feel the pressure to do something about it. We're going to tell you where they stand.

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

It's now down to just the two of them. Barack Obama and John McCain, head to head. But as they kick off the first full week of the general election campaign, there's someone else in the picture. That would be George W. Bush.

Obama today is putting fresh energy into his attempt to saddle McCain with the president's baggage. And McCain and his advisers are busy honing a strategy to try to win in November despite voter anger at Mr. Bush.

CNN's Dana Bash is covering the McCain campaign. She's standing by.

But let's go to Jessica Yellin first. She's covering the Obama campaign.

And Senator Obama today hitting hard on the economy, hitting McCain in the process.

JESSICA YELLIN, CNN CONGRESSIONAL CORRESPONDENT: He sure is, Wolf. The Obama campaign is convinced they can hit a homerun on the economy, and they're linking John McCain to George Bush's policies.


YELLIN (voice-over): Barack Obama on the economy.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: It is time to try something new. It is time for a change. YELLIN: In his first policy speech of the general election, the presumptive Democratic nominee repeatedly tied his opponent to George Bush, whom he mentioned 15 times.

OBAMA: Senator McCain wants to turn Bush's policy of too little too late into a policy of even less even later. John McCain's approach to health care mirrors that of George Bush.

YELLIN: He charged McCain with flip-flopping, once opposing, now supporting Bush's tax cuts. And he accused McCain of supporting policy that would give the oil conglomerate ExxonMobil $1.2 billion in tax breaks.

OBAMA: That isn't just irresponsible. It's outrageous.

YELLIN: The McCain campaign fired back, insisting Obama doesn't understand the economy, has repeatedly voted to raise taxes, and is making claims that cannot be verified because "... there are not enough specifics." Obama promised more details.

OBAMA: A week from today I'll be talking about this long-term agenda in more detail.

YELLIN: He did outline a number of short-term proposals, including a $50 billion economic stimulus package in part to extend unemployment benefits and create a $10 billion fund to help folks facing foe closure; a mostly voluntary health care program that would lower premiums to $2,500 for the average family; a middle-class tax cut to about 95 percent of Americans; a windfall profits tax on oil companies; and a $4,000 a year college tuition credit for students who volunteer after graduation.

Obama is taking this pitch to battleground states over the next two weeks.


YELLIN: And Wolf, you can expect to see Obama making this pitch in Missouri, Pennsylvania, Ohio and Florida, all states the campaign considers battlegrounds and that they hope to win by both turning out new Democrats and turning out disaffected Independents. They do expect to have some steep competition from John McCain in all those states -- Wolf.

BLITZER: Major differences between these two candidates on issue #1, the economy.

Jessica, thanks very much.

Let's bring in Dana Bash. She's covering the McCain campaign for us.

They're under no illusions, are they, Dana, about the challenge that Senator McCain faces on this issue?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: They certainly aren't, not at all. You know, on fundamental issues like the economy, Wolf, McCain is going to run a classic Republican campaign: Barack Obama will raise your taxes; I won't. But what will be very different from recent GOP campaigns is the kind of voter that McCain campaign targets. It has to be in order to win.


BASH (voice-over): A quick stop at this Richmond, Virginia, coffee shop to get his mug on camera was John McCain's only public appearance before heading to three private fundraisers for much needed cash. But on his Web site McCain's campaign manager posted their strategy against Barack Obama, starting with this ominous reality.

RICK DAVIS, MCCAIN CAMPAIGN MANGER: I want to talk a little bit about today's political environment. It's among the worst in modern history for Republicans.

BASH: McCain advisers say their best shot at beating Obama is with Independent voters on issues from taxes to the environment.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Senator Obama has no record of being involved in this issue that I know of. I will stick by my record and my commitment of many years to reducing greenhouse gas emissions.

BASH: The latest CNN poll shows a McCain/Obama dead heat among Independents. McCain a advisers also say he must win a number of so- called disaffected Democrats, Hillary Clinton voters in swing states like Ohio and Pennsylvania who told pollsters they would not vote for Obama. But strategists in both parties say luring them will be tough.

PETER HART, DEMOCRATIC POLLSTER: He's a Republican. He happens to believe we stay in Iraq as long as we can. And he's voted with George Bush 89 percent of the time.

BASH: For months, Republican operatives have been privately expressing concerns to CNN about how the McCain campaign is executing its strategy.

MCCAIN: And that's not change we can believe in.

BASH: GOP fears that spilled into the open about flat visuals and a negative message in last week's primetime speech just before Obama's. Republican strategist Bill Kristol wrote in "The New York Times," "Almost every Republican I've talked to is alarmed that the McCain campaign doesn't seem up to the task of electing John McCain."


BASH: McCain advisers are well aware that there are plenty of Republicans worried about how prepared they really are for a fight against Obama. But a spokeswoman responded by saying they have risen above doubts of pundits before and will do it again. Still, Wolf, one senior adviser told me you can be sure we will not see that now infamous green backdrop ever again -- Wolf.

BLITZER: I don't blame them.

Thanks very much, Dana, for that.

This note to our viewers -- later this hour, two top advisers for McCain and Obama, they will be right here. They're standing by to face off on issue #1 in the election, the economy. We have a major debate that you will see. It's only minutes away right here in THE SITUATION ROOM.

Let's go to Jack Cafferty for "The Cafferty File" though right now -- Jack.

JACK CAFFERTY, CNN ANCHOR: Wolf, Hillary Clinton may be out of the race, but that doesn't mean her supporters are automatically going to flock to Barack Obama. Not by a long shot.

As she officially endorsed Obama on Saturday, Clinton urged the crowd to back Obama. When she said it, many cheered. But some supporters booed. Loudly.

A CNN poll out Friday shows 60 percent of Clinton supporters say they're going to vote for Obama. But 17 percent say they'll vote for McCain and 22 percent say they won't vote at all.

Hillary Clinton's base includes many working-class voters, as well as the elderly and, of course, women voters. Clinton made a special appeal to women in her speech on Saturday as she compared the milestones that both she and Obama had achieved in this race as the first serious female and African-American candidates with a shot at the White House. Obama said he's thrilled and honored to have Clinton's support, honors her historic campaign, saying, "She shattered barriers on behalf of my daughters and women everywhere."

There are now signs of unity online as well. Obama's Web site, updated with a message that says, "Thank you, Senator Clinton," and links to a form where visitors can write to her. And Clinton's Web site now urges visitors to support Senator Obama today.

It's a regular love-in.

Some Clinton supporters think the best way for Obama to get her 18 million voters is to put her on the ticket as vice president.

So here's the question: What do you think Barack Obama has to do to win over Hillary Clinton's supporters?

You can go to and post a comment on my blog if you so desire -- Wolf.

BLITZER: A lot of bruised feelings out there among those Clinton supporters, Jack. There's still -- many of them are, based on the e- mails, the conversations that I've had since Hillary Clinton's speech Saturday afternoon, they're saying, you know what, they're not going to vote for Obama. And then I say to them, well, what if she is on the ticket? Then they say, well, then they would vote for Obama. But short of that, they're saying, you know what? They don't want to vote for Obama. And he needs those votes desperately in Ohio, in Pennsylvania, in West Virginia, states that he lost. Without those Clinton supporters, he's in deep trouble when you look at the electoral college map.

CAFFERTY: Yes, but you're assuming that he's not going to get any of the Democratic votes in those states against John McCain, and I don't think that's the case at all. He may not get all of Hillary's votes, but he's going to get a big chunk of them. And if he gets those, plus the ones that he got, it might be enough.

BLITZER: All right. Good. We'll see what happens.

Jack, stand by. We've got a lot more coming up.

Many Americans fear $4 a gallon gas is just the beginning of their pain at the pump. Many people are paying more than that already.

We're looking at the Obama and McCain plans for easing record fuel prices and America's dependence on foreign oil.

Also ahead, Obama's vice presidential search team gets an earful on Capitol Hill. We're going to tell you what happened today. You're going to want to hear this.

And in our "Strategy Session," a new red flag about Michelle Obama's role in her husband's campaign. We'll tell you what's going on.

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


BLITZER: Let's get back to our top story, the economy and what's going on.

President Bush says he can certainly understand why a lot of Americans are deeply concerned about the economy right now. He spoke as he left for what's being described as a farewell trip to Europe, where he also has a serious popularity problem.

Let's go to our White House Correspondent Elaine Quijano. She's traveling with the president in Slovenia right now.

Even as the president was leaving for a major farewell visit to Europe, Elaine, he couldn't ignore what's going on back here on the U.S. economy, and he spoke out earlier today. Update our viewers on what's going on.

ELAINE QUIJANO, CNN WHITE HOUSE CORRESPONDENT: Well, that's right, Wolf. You know, President Bush will not be back in Washington for another week. And the president, here in Slovenia, will be attending his final U.S./European Union Summit. Now, we should tell you, first of all, his European agenda is encompassing a number of items, including curbing Iran's nuclear ambitions, the Middle East peace process, as well as climate change. But before he left Washington, as you noted, the president wanted very much to make clear that he still remains focused on domestic concerns, including the issue that polls show continues to be issue No. 1 for the American people.


GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: A lot of Americans are concerned about our economy. I can understand why. Gasoline prices are high, energy prices are high.

I do remind them that we have put a stimulus package forward that is expected to help boost the economy. Of course, we'll be monitoring the situation. We'll remind our friends and allies overseas that we're all too dependent on hydrocarbons. We must work to advance technologies to help us become less dependent on hydrocarbons.


QUIJANO: Now, also on the president's agenda, Afghanistan, and boosting European involvement there. Now, to underscore the need in Afghanistan, First Lady Laura Bush made an unannounced visit to Afghanistan on Sunday. Her trip coming, Wolf, just days before a donor's conference taking place on Thursday in Paris. A conference where the United States hopes other countries will pledge billions of dollars in support of Afghanistan's development -- Wolf.

BLITZER: Elaine Quijano in beautiful Ljubljana, Slovenia, one of the best kept secrets in Europe. I've been there.

Elaine, enjoy your time there, albeit it will be very, very brief.

The president, by the way, visits six European nations over the next week. From Slovenia, he travels to Germany, then it's on to Italy, where he'll make a side trip to the Vatican. Mr. Bush also plans stops in France, England and northern Ireland.

So what was the reaction to Barack Obama's victory in his campaign headquarters in Chicago? There's a brand-new video that's been posted to YouTube that gives us a behind-the-scenes view.

Let's go to our Internet reporter Abbi Tatton.

Abbi, what's Obama telling us now?

ABBI TATTON, CNN INTERNET REPORTER: Wolf, this is the video that the Barack Obama campaign posted to their YouTube page over the weekend. It shows Barack Obama, now the presumptive nominee, returning to his Chicago campaign headquarters on Friday to cheers and high-fives.

A spokesman said it was recorded so people who worked for the campaign but couldn't be there could hear what he had to say. You can see the people there crowded around him. Some of them perched on desks. Some of them sitting on the floor listening to him. Some even recording him on cell phones as he thanked them for their hard work.


OBAMA: Everybody thought that at some point this thing was all going to be a flash in the pan. And collectively, you, all of you, most of whom are -- I'm not even sure of drinking age, you've created the best political organization in America and probably the best political organization that we've seen in the last 30, 40 years.


TATTON: Young staffers not unusual in a presidential campaign, but this is the team that helped propel Barack Obama with -- through fund-raising organization to win the nomination.

The John McCain campaign is out with a YouTube Web video of their own today. This, a strategy detailing how they're going to go head to head with the Barack Obama organization. They put out an earlier version before Iowa predicting how McCain would wipe out Republican challenges. That one came true.

Barack Obama in this video telling people that they should take a couple of days' break, but then they should return and be prepared to work twice as hard -- Wolf.

BLITZER: You've got to give both of those campaigns a lot of credit for getting to where they are right now. Two excellent staffs.

All right. Thanks very much, Abbi, for that.

Coming up, Apple unveils the newest version of its wildly popular iPhone. It has double of one thing you want, half of something you want to keep as well. We'll tell you what's going on on that front.

And gas now tops $4 a gallon on average in the country. What's a presidential candidate to do about that? We're looking at the pressure that's put on both Barack Obama and John McCain. And their top advisers, by the way, they're standing by live right here in THE SITUATION ROOM to debate the economic pain you're feeling.

Stay with us. A major debate coming up in THE SITUATION ROOM.



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

Happening now, something's happening that could impact what you pay for gas. It involves the supplier of so much of the world's oil. That would be Saudi Arabia. And their surprising change of thinking that could affect all of us.

We're watching this story. Stand by. We've got some news.

Also, recent political wisdom said evangelical votes belonged to Republicans. Not anymore necessarily. You're going to find out what's drastically changing and why John McCain and Barack Obama right now are starting to fight for that evangelical vote.

And more or less? Apple unveils the newest version of its wildly popular iPhone. It has double of one thing you want, half of something else. We'll tell you what's going on.

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

Republicans surely hope John McCain's campaign could get him into the White House, but there's also said to be some alarm that his campaign may not be able to get that done. And that tops our "Strategy Session" right now.

Joining us, our CNN political contributor and Democratic strategist, Donna Brazile, and our conservative columnist, Terry Jeffrey. He's editor-in-chief of the Cybercast News Service.

Guys, thanks to both of you for coming in.

You probably saw Bill Kristol's column in "The New York Times" today -- Terry, let me start with you -- lamenting what he sees as serious problems in the McCain camp. He writes this -- he says -- and Bill Kristol is a long-time conservative, used to work for Dan Quayle in the White House. You probably remember that -- "... with the battle against Hillary Clinton behind him, everything seems to be going swimmingly for Obama. Meanwhile, the McCain campaign dog paddles along. And almost every Republican I've talked to is alarmed the McCain campaign doesn't seem up to the task of electing John McCain."

Bill Kristol, the editor of "The Weekly Standard," writing in "The New York Times."

What do you think?

TERRY JEFFREY, CONSERVATIVE COLUMNIST: Wolf, I thought Bill Kristol made an excellent point there. You know, one of the things Ronald Reagan taught us is that in the age of television, providing an irresistible image with irresistible language could basically manipulate the media to drive your message out there to the broader public. Now we have the new media, the Internet age. You're showing YouTube videos of Barack Obama at his campaign office a little bit earlier in this program.

The McCain campaign needs to be able to manipulate that media to deliver his message in a compelling way. And it was a classic example of how so far he's been (INAUDIBLE), the Tuesday night speech by Obama versus his.

BLITZER: But the Democrats would be wise to not overlook this fact. When he's an underdog, John McCain -- and he was virtually dead a year ago, as a lot of our viewers will remember -- he manages to come back. This is a guy who fights. And presumably will be a formidable challenger to Barack Obama.

DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Wolf, no one is questioning Senator John McCain's political skills or his experience or his knowledge about national security. What Terry said is absolutely right. This is a new era in American politics.

You have to be able to go on all cylinders, not just rely on the free media or even paid media. But Terry's right, you have to compete everywhere, where voters live, where they eat, where they play, where they pray, but also where they blog. And that's what John McCain will have to do to generate excitement.

BLITZER: Barack Obama shows up at any place and he goes to a big stadium and 60,000, 70,000 people show up. Can John McCain do that around the country right now?

JEFFREY: No. He's not going to have the "rock star appeal" of Barack Obama. There's no doubt about it. And quite frankly, when it gets right down to it, given what you've talked about also in this program, the political atmosphere this year, where the economy is dragging along, the Iraq war is still unpopular, if John McCain wins, Wolf, it's basically going to be because people decide they did not want Barack Obama.

I think as a default people understand John McCain is qualified to be president. They can trust him on national security issues. Barack Obama has not answered those questions yet. And if he doesn't answer them, that's how McCain wins.

BLITZER: McCain right now is very competitive in the national polls among registered voters. Our most recent poll, 49-46. A three- point margin of error. That's very competitive right now. And among Independents he's equal with Barack Obama right now.

So, yes, there's a lot of problems, people are worried about the economy, people don't like the war. But he's very competitive in the polls.

BRAZILE: But you know, Senator Obama is not just filling the audience with people who want to hear him talk. He's filling these stadiums and these auditoriums because people are tired of the war. They're tired of the policies that John McCain is out there promoting.

So this is a good season for people who are interested in hearing McCain's -- I mean, Senator Obama's message. And that's why they're filling those stadiums. But look, no one doubts that Senator McCain will have a very interesting coalition that he pulls together. But Senator Clinton, this weekend, I thought, made Senator Obama's job much easier by endorsing him and pledging to support his candidacy.

BLITZER: You think McCain can win a significant number of those really angry Hillary Clinton supporters?

JEFFREY: I can, Wolf.

And I don't think it's just because they have some attachment to Senator Clinton. I think, if you look at the exit polls, what that vote was in Ohio and in Pennsylvania especially, they're more culturally conservative Democrats.

And I think the question for that vote is going to be, is Senator Obama too far to the left on national security, too far to the left on cultural issues to trust with the presidency of the United States? I think the Republicans can make that case whether Senator McCain personally makes it or not. And I think that's where the election is going to pivot.

BRAZILE: But, first, he has to bring together the Republican coalition, because there are some cracks in their foundation.

And while the Republicans are most interested in sowing seeds of division within the Democratic Party, they have some problems within...


BLITZER: There are plenty of cracks on both sides.


BLITZER: There was an intriguing paragraph in "The New York Times" story today.

I will read it to you, Donna: "Recognizing the extent to which Republicans view Michelle Obama's strong views and personality as a potential liability for her husband, Mr. Obama's aides said they were preparing to bring aboard -- aboard senior operatives from previous Democratic presidential campaigns to work with her."

What do you make of that?

BRAZILE: Well, first of all, the people who are out there attacking Michelle Obama are the same people who attacked Senator McCain in 2000.

And I think Michelle Obama is well aware of the kind of attacks that will be leveled against her. She is a valuable asset to Senator Obama. But, more importantly, she's smart. She's courageous. And she knows how to get Senator Obama's message out. And she will be an asset to the campaign this fall.

JEFFREY: Like Senator Clinton, Michelle Obama is a formidable person in her own right beside her husband. I think it would be a mistake for her to campaign like Hillary Clinton did in 1992, because I think she could magnify the perception that I was talking about, that Senator Obama's too far to the left on national security and too far to the left on culture to win those swing vote culturally conservative Democrats.

If she does that, she's going to hurt him.

BLITZER: All right, guys.

You want to just say something quickly?

BRAZILE: Well, I just want to say that she's not too far from what most average Americans want to see in their next first lady, someone who's dignified, someone who's gracious, and someone who cares about all of us.

BLITZER: We will leave it on that note, guys. Thanks very much for coming in.

Barack Obama's vice presidential search team, by the way, is reaching out to members of Congress right now. We're going to tell you about the talks taking place on Capitol Hill and what might be accomplished.

Plus, Obama vs. McCain on issue number one -- two of their top advisers, they're standing by right now live. They're going to be debate -- debating about the economy and the candidates' dueling plans.

And, later, new warnings that FBI background checks of would-be U.S. citizens are inefficient, and maybe even worse.

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


BLITZER: On Capitol Hill, a new move forward for Barack Obama's vice presidential search team. Talks are being held today with top House and Senate Democratic leaders.

Kathleen Koch is working this story for us.

All right, Kathleen, who is involved in these discussions?

KATHLEEN KOCH, CNN CORRESPONDENT: Well, Wolf,, two of the three members of Barack Obama's vice presidential search team, Eric Holder and Jim Johnson, have been meeting on the Hill since just after lunch, around 1:00. That was when they went into Senate Majority Leader Harry Reid's office for about a 30-minute meeting.

From there, then they proceeded directly to the House side. They have been involved in several meetings so far, first of all, with House Democratic Whip Jim Clyburn. Then they proceeded to House Majority Leader Steny Hoyer's office, where they left only a few minutes ago, and then headed into a meeting with House Speaker Nancy Pelosi. They will be talking with House Democratic Caucus Chairman Rahm Emanuel after that.

So, they have got quite a busy afternoon, as they're also playing a cat-and-mouse game with reporters, trying to dodge us -- Wolf.

BLITZER: And there's obviously a bunch of names that have been floated, speculated, involving members of Congress. What are you hearing?

KOCH: Well, Wolf, as a matter of fact, one of our Hill producers, Deirdre Walsh, caught up with the two gentlemen and asked a couple of questions of Jim Johnson, asked him, can you describe the kind of advice you're getting? He said, no.

She said, can you tell us if you have a list, long or short? He said, no, we're not talking about it.

And, so, what we're hearing from aides in the Senate and the House side is basically that these are courtesy calls. This is the vice presidential selection team paying their respects, getting some advice, talking really more, we're being told, about process, not talking about specific names.

But, certainly, Wolf, we're not in those meetings. And they will be discussing names, if they so choose. But, at that -- at this point, that's not what we're hearing -- Wolf.

BLITZER: Kathleen Koch on Capitol Hill, thank you.

Barack Obama and John McCain both say their plans to improve the economy is the better plan. But who's right? You can judge for yourself. We have two top economic advisers from both of their campaigns. They're standing by live. We're going to have a serious debate on the substance of economic issues. That's coming up next.

Also, a house and everything inside it simply watched away -- it's a battle against the clock and the rising tide in the Midwest. They're breaking news out there. We're going to have the story and amazing pictures for you -- that and a lot more coming up right here in THE SITUATION ROOM.


BLITZER: The average price of gas nationwide pushed farther above the $4 mark today, and Americans clearly are feeling the pinch.

A new CNN/Opinion Research Corporation poll shows, more than half of Americans, 55 percent, say they have cut back household spending because of soaring gas prices. Sixty-six percent say they have cut back on their driving because of the high cost of gas.

The presidential candidates say they share the voters' frustrations about these fuel prices and the nation's dependency on foreign oil. But what can they do about it?

Let's bring in our Brian Todd. He's looking at this story for us.

Brian, with every cent that gas prices go up, it becomes more and more of a presidential campaign issue.

BRIAN TODD, CNN CORRESPONDENT: It certainly does. And the national scale of this is what is forcing the candidates' hands here.

Just some numbers to back that up -- the national average price is now above $4.02 a gallon, according to AAA. The average of $4 or more now hitting 22 states and D.C., and gas prices have risen for 32 of the past 34 days, setting records on 30 of those days.

Now, this is critical mass that is forcing the candidates to at least tell voters, we are trying to find a way out.


TODD (voice-over): One way to measure pain at the pump? Talk to the guys who help stranded motorists.

UNIDENTIFIED MALE: They are letting their gas tank get really low. And if something comes up, they have to make a trip.

TODD: Now pressure builds on the men running for president to have a plan.

MCCAIN: I propose that the federal government suspend all taxes on gasoline now paid by the American people from Memorial Day to Labor Day of this year.

TODD: John McCain proposed a so-called gas tax holiday back in the spring, and may soon call for it again. So far, it hasn't gotten anywhere.

Gas would be 18.5 cents per gallon cheaper, but experts say it would have saved an average family just about $30 for the summer. Barack Obama criticized McCain's plan as a gimmick. McCain says it would have helped, but he doesn't pretend it would have answered America's energy problems.

Now he and Obama are tussling over longer-term ideas, like whether to impose a windfall profits tax on big oil companies. McCain is against it, believing the oil giants would turn around and pass the added tax along to consumers. Obama believes the revenue from a windfall profits tax could be reinvested.

OBAMA: One place where that investment would make an enormous difference is in a renewable energy policy that ends our addiction on foreign oil.

TODD: McCain also talks about alternative energy, less dependence on foreign oil.

But we have heard this before.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ... move beyond a petroleum based economy and make our dependence on Middle Eastern oil a thing of the past.



JIMMY CARTER, FORMER PRESIDENT OF THE UNITED STATES: This intolerable dependence on foreign oil threatens our economic independence and the very security of our nation.


TODD: Analysts say, presidents have traditionally been unable to move the country toward less dependence on foreign oil, mainly because the alternative fuel sources weren't efficient or safe. New technology may get us there, they say, but factors outside the politicians' control will likely make oil and gas prices come down sooner.

ROGER DIWAN, PFC ENERGY: If the dollar strengthened dramatically, gasoline and crude oil will go down, and gasoline at the pumps will go down.


TODD: Analysts say, a president can start on that by getting central banks on the same page on interest rates, try to shore up the dollar on that score. And that may be one way to move oil prices down relatively quickly.

But, Wolf, very little a president can do in the short term. And the candidates have even less control.

BLITZER: Difficult problem indeed.

Brian, thanks very much.

And, as we just saw, rising gas prices, along with food prices, are among the items you care about the most. And you also want to know how John McCain and Barack Obama would ease the pain that you feel.

So, we have invited two of their top advisers to join us here in THE SITUATION ROOM and discuss these issues.

Nancy Pfotenhauer is a senior McCain policy adviser. Dan Tarullo is a senior economic adviser for the Obama campaign.

Guys, thanks very much for coming in.



BLITZER: The interesting thing, important thing is that there are really substantive, serious disagreements between these two campaigns on the basic economic issues of the day.

Here's what Barack Obama said today, Nancy, about John McCain's economic policies, as far as taxes are concerned. Listen to this.


OBAMA: John McCain once said that he couldn't vote for the Bush tax cuts in good conscience, because they were too skewered towards the wealthiest Americans. Later, he said it was irresponsible to cut taxes during a time of war, because we simply couldn't afford them.


BLITZER: He was referring to McCain's votes against the Bush tax cuts back in 2001 and 2003. Now McCain says he supports making those tax cuts permanent.

So, what Obama is suggesting, he's flip-flopped.

PFOTENHAUER: No, he hasn't flip-flopped. He's recognized reality, which is that we are in a much more significantly soft economy.

We're in an economic downturn. And there's no school of economic thought known to man that advocates raising taxes in that situation.

And what's important to note, when Senator McCain objected to these tax cuts back then, it was because Congress -- and I have to say this is blamed on the Republicans, because there was a Republican president and a Republican-controlled Congress -- engaged in an explosion of domestic spending.

And Senator McCain was one of the few people who stood on the Senate floor to stop it. He said, you have to lower taxes. If you're lowering taxes, you have to lower spending.

But when we're looking at what we're looking at right now, it's absolutely essential that we keep taxes down on savings and investment, that we keep government small, and that we have free trade, which is the antithesis of what Senator Obama is advocating.

BLITZER: All right.

A lot of economists, as you know, Dan, say, when the economy is in trouble, that's not a good time to raise taxes.

TARULLO: Well, first off, Wolf, what Senator McCain is proposing is not a temporary reduction in taxes. That's a stimulus measure. He's proposing a permanent reduction in taxes, and a massive one at that, and one whose benefits will go highly disproportionately to corporations and to high-income individuals.

BLITZER: Do you want to respond to that?

PFOTENHAUER: I would like to respond to that.

The cap gains rate -- 47 percent of the people who benefit from a low capital gains rate are people who make $50,000 or less. Seventy- nine percent of the people who benefit make under $100,000.

The income tax that Senator Obama is planning to increase, approximately 55, almost 60 percent of the folks who will be paying that increased income tax are small-business owners. Senator Obama's plan kills small businesses. BLITZER: All right.

Go ahead.

TARULLO: But you note, though, Wolf, what Nancy has done is to cite the number of people and not the number of dollars.

If you look at the number of dollars paid in capital gains tax, it is highly disproportionate to the top 5 percent of income. I think there's a more important point here, though. Are we going to address the kind of problems that your correspondent just described in his report by giving relief to the middle class? That's what Senator Obama has proposed.

BLITZER: But what McCain says is that Obama is a throwback to the old liberal tax and spend. Listen to what McCain says. I will play this clip.


MCCAIN: Senator Obama seems to want to go back to the failed policies of the '60s and '70s: bigger government, higher taxes, more government programs.

I don't think that's the right way to go.


BLITZER: All right. You want to respond?

TARULLO: Yes. There are two things to say about that.

First, I do think that the McCain campaign is worried about the appeal that Senator Obama and his message of change have for the American people. Secondly, what he is proposing are things to deal with exactly today's problems, the middle-class squeeze, number one, and, number two, he lays out an agenda for a dynamic economy, an innovation-based economy that can create the good jobs of tomorrow.

There's nothing backward-looking about that.

BLITZER: And what Senator Obama keeps saying is, if you like the economy under Bush, vote for McCain, because he's going to basically keep those same policies in place.


Actually, he's dramatically different from President Bush. And it's because of the issue I raised earlier. And that's spending. And Republicans and Democrats alike have to recognize that Senator McCain was probably the taxpayers' best friend from that standpoint over the last eight years.

But let me seriously disagree with my colleague here, and just say, there is no country on this earth that has taxed its way to prosperity. And what we're advocating works whether it's in the United States or in Ireland or in New Zealand. What you're advocating doesn't work, whether it's in the United States or Germany and France.

BLITZER: All right.

PFOTENHAUER: Germany and France...

BLITZER: Let Dan respond.



BLITZER: Go ahead.

TARULLO: Well, first off, I think it is fair to -- in some sense, to say that John McCain's tax policies are not George Bush's. They go George Bush one better. He is increasing the tax cuts for the upper-income parts of our society, number one.

Number two, what is Senator Obama doing here? He is not raising taxes alone. He's raising taxes on some groups, precisely so that the middle class, who's borne the brunt of the last eight years of economic policies, can get some relief.

It's hard to imagine a better indefinite support for the economy than $80 billion in the hands of the people who spend.

BLITZER: I want you to respond, Nancy. But listen to how Senator McCain phrases that -- excuse me -- Senator Obama phrases that.


OBAMA: For all of his talk about independence, the centerpiece of John McCain's economic plan amounts to a full-throated endorsement of George Bush's policies.


BLITZER: All right, so, you mentioned there are some differences as far as spending is concerned. He's going to be more robust in cutting spending. Is there any other difference that you see between the McCain economic strategy and the current Bush strategy?

PFOTENHAUER: Well, we do a couple of things differently.

For example, we say point blank that we're going to repeal the AMT, which would save the average family who is caught....


BLITZER: That's the alternative minimum tax?

PFOTENHAUER: Sorry, the alternative minimum tax.

That would save the average family that is caught in that an estimated $2,700. We also do a few other things that are important, like make permanent the RND credit, move it up, allow for 100 percent of expensing.

He's very focused on innovation and technology, and gotten applause all around the country and from editorial boards all over because of his call for a ban on cell phone taxes and the Internet taxes, because that's part of the engine that drives innovation.

But let me get back to the middle class. It's not like we are forgetting the middle class. There's a very -- first of all, the best thing you could do for the middle class is improve the economic growth. And the other proposal...

BLITZER: All right.

PFOTENHAUER: ... Senator Obama's proposal, is going to lead to serious, seriously slower growth than Senator McCain's.

BLITZER: Another major difference is on the issue of free trade between what McCain is supporting, what Obama is supporting. I will play this clip of what McCain says about Obama's strategy.


MCCAIN: And he must know how foolish it is to think Americans can remain prosperous without opening new markets to our goods and services. But he feels he must defer to the special interests that support him. That's not change we can believe in.


BLITZER: A lot of jobs are at stake here in the United States as a result of the export industry, as you know, Dan.

TARULLO: That's correct, Wolf.

Let me just say first, because there's one important issue from our last little colloquy that needs to be addressed. And that is, where are these cuts that Senator McCain says he will make going to come from? If you look at his tax plans, we would have to cut the equivalent of one out of every $4 of non-military discretionary spending. I mean, where is that going to come from? Is it going to Head Start? Is it going to be education?

BLITZER: All right, but very quickly on the trade.

TARULLO: On trade, look, Senator Obama, as he said today in Raleigh, has -- is for free trade. But he's not for trade policies that don't protect American workers. He's not for trade policies like the failed Korea agreement that failed to open up a market for U.S. manufactured goods.

BLITZER: All right, guys, we're up against the clock, but I'm going to invite both of you back, because there's a lot more we want to discuss.

PFOTENHAUER: I want to talk about trade.


BLITZER: All right. We will talk about trade. We will talk about health care. We have got a lot more coming up.

Thanks to both of you for coming in on this day.


TARULLO: Good to be with you.

BLITZER: From the first lady to a former one, Laura Bush says she admires something about Hillary Clinton. You're going to find out why the first lady is praising her predecessor and how she personally felt about the prospect of a first female president. Stand by for that.

Also, he ran against him. So, will Bill Clinton soon campaign for Barack Obama? What's going on as far as Bill Clinton's future is concerned? We have new information.

And have you wished for an iPhone that costs less, but does more? Yes, you have. We have details of Apple's newest version of its wildly popular phone -- these details about to emerge.

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


BLITZER: On our Political Ticker today: The first lady, Laura Bush, says she admires Hillary Clinton's grit and strength she showed during the Democrats' hard-fought primaries.

Speaking in Slovenia today, Mrs. Bush says she wants to see a woman win the White House, but a Republican woman. The first lady also came to the defense of Michelle Obama, suggesting her remark that she was proud of the United States for the first time in her life was probably misunderstood.

McCain and Barack Obama go head to head for the important Latino vote next month. Both presidential candidates will speak at the annual conference of the nation's largest Latino civil rights and advocacy group. The National Council of La Raza will meet in mid-July in San Diego.

Remember, for the latest political news any time, check out That's where you can download our new political screen-saver and where you can check out my latest blog post. Just posted one before the show.

Let's check out Jack Cafferty right now. He's got "The Cafferty File" -- Jack.

CAFFERTY: What's on your mind on your blog post today?

BLITZER: Same thing that is on everybody's mind. Those very disappointed Hillary Clinton voters, can Obama get them? I know that's your question as well.

CAFFERTY: Well, as a matter of fact, it is.

What does Barack Obama have to do to win over Hillary Clinton's supporters?

Pablo, Arlington, Texas: "Obama should talk turkey with the Clintonistas. He, not McCain, is the fellow who will advance the same agenda that Hillary stands for. With Hillary pushing in the Senate, Nancy pushing in the House and Barack pulling from 1600 Pennsylvania Avenue, the progress most of Hillary's supporters seek is all but guaranteed."

Mike in Hot Springs, Arkansas: "One of the main things Obama can do is keep reminding the people that he is half-white. Us old white men would love to hear about his white World War II grandfather. We would love to see his white grandmother. He has spent his whole life defining his blackness. It is about time he started working on the white side. If he does not, he won't win."

Lynn writes: "The only way is to put Hillary Clinton on the ticket. Come on, Jack, it is kiss and make up time for you, too. You spent the whole primary season saying mean things about her."

Will in Los Angeles writes: "One debate between Obama and McCain will silence all of this."

Chryssa in Boise, Idaho: "I was shocked that Hillary didn't say anything negative about McCain in her speech on Saturday. She needs to specify to her supporters why McCain is a bad idea and how his beliefs don't align with anyone who supported Hillary."

Shelby writes: "You just don't get it. So many of us older white women engaged for the first time because we felt like we might have a voice for once. Voting for Obama or McCain is nothing new, just two more men. Who cares which one of them is elected? It's just more of the same."

And Colleen in Weddington, North Carolina: "He doesn't have to do anything to win over this North Carolina Hillary supporter. It is done. The only thing he has to be is not John McCain or any other war-loving, fiscally clueless Republican."

If you didn't see your e-mail here, you can go to my blog at and look for yours there. We post hundreds of them each hour with each question -- Wolf.

BLITZER: And we're also standing by to find out what Bill Clinton has in store, as well, in this next chapter in this race.

Thanks, Jack. We will get back to you shortly.