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Dow Takes Giant Plunge; McCain's Negative Vibes; Reagan Breaks Pelvis in Fall; Cheney Undergoes Outpatient Procedure

Aired October 15, 2008 - 17:00   ET


WOLF BLITZER, CNN ANCHOR: And to our viewers, you're in THE SITUATION ROOM.
Happening now, breaking news -- another stunning turnaround in the stock market, is time a heartbreaking plunge. The Dow down more than 700 points amid warnings that the economy won't get better anytime soon.

Just hours away from now, the final presidential debate. Hillary Clinton knows what it's like to square off against Barack Obama. Tonight, she'll be in his corner.

And in a key battleground state, one party fears voter fraud, another worries about voters being deprived of their rights. It's all sounding very familiar to folks in Ohio.

I'm Wolf Blitzer at the CNN Election Center. You're in THE SITUATION ROOM.

But first, to the breaking news. Today, another day -- a very volatile day on Wall Street, where the Dow Jones Industrial Average took its second biggest point plunge ever -- ever in history, down more than 733 points.

Let's go straight to senior business correspondent, Ali Velshi, to tell us what happened. Ali, what happened?

ALI VELSHI, CNN SR. BUSINESS CORRESPONDENT: Well, two big things have happened and they both point to the same thing. It's fears of a further economic downturn.

First, let me give you a sense of what happened today. Look at that -- a 733 point drop. That was massive. It was a big percentage drop, too.

Now, I just want to take you back to Friday, when we sort of started to see the end of these massive sell-offs. On Friday, it was still pretty bad -- 128 points. But given some of the losses we've got, not that big a deal.

And then Monday, look at that, 936 points. We've never ever seen a gain like that on a point basis on the Dow. And then yesterday, 76 points lower. That seemed like we were still in the range of comfort.

And then today, look at this -- and most of that happened in the last hour of trading -- down 733 points. Two things happened. I want to give you a sense what they were. Basically, the first one is that a few Federal Reserve officials were talking about -- well, let me tell you about that first one first. Retail sales were down 1.2 percent in a month. And that's the biggest drop we've seen in three months in an economy that is heavily dependent on Americans spending money.

So basically, Americans who are not feeling that their home values are going up or that their wages are going up because of unemployment or that the stock market is going up and their retirement is secure, have no reason to feel wealthy and to spend money. And we've seen a drop in retail sales.

That makes people worry that companies will start to lay people off or won't be able to hire. And it starts a vicious circle of people not being able to spend.

And that drags us into problem number two, and that is a couple of Federal Reserve officials both said that we are in a recession or we are likely in a recession. Now, they both pointed out what a lot of economists are saying. That's not a controversial statement. Most of us think we are.

Ben Bernanke still hasn't said we are. The administration hasn't said we are. To some people, Wolf, this is an academic statement. But to other people, it's important because this Fed and this administration have been behind the curve on how bad this economy really is. So some people would just like to say get over with it, let's admit it and let's get on with things.

BLITZER: All right, Ali. I want to have you stand by, as well.

It's even worse, by the way, over at the tech heavy NASDAQ, off about 8.5 percent, to a five year low. Poppy Harlow of is joining us from the NASDAQ. What happened over there -- Poppy?


All that really separates the NASDAQ from the Dow and S&P right now is that it closed at the lowest point since June 30th of 2003. We haven't seen it closing this low in more than five years.

What's going on here is huge technology companies are getting whacked with sellers selling left and right. Names like Intel reporting strong earnings yesterday. But they said, hey, we have no idea what the fourth quarter is going to bring.

And then we have Google reporting tomorrow. And if you look at Google's stock, half -- more than half of the stock's value has been wiped out this year alone. And that is because it relies on those advertisers. And those advertisers are American businesses and they are not spending money right now -- Wolf.

BLITZER: All right, Poppy, stand by.

And this sets the stage for this, the final presidential debate, only a few hours away right now. Sagging in the polls, John McCain needs a big win tonight, if he can do it. But his bare knuckles campaign against Barack Obama doesn't seem to be doing much damage -- hasn't yet. McCain may only be hurting himself in the process -- this according to some latest poll numbers.

Suzanne Malveaux and Dana Bash are here. They're working the story for us. Dana, let's start with you. The strategy for Senator McCain -- he has his work cut out for him. Only a few days left in this campaign.

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Absolutely. And, you know, McCain said this week that he expects to be asked about the fact that he's been trying to connect Barack Obama to William Ayers. But an aide just told me that they don't think that they want to the send him out with an Ayers bat to club Obama with.

Still, McCain aides have learned that it's a tough line to walk between raising the questions they complain reporters don't ask about Obama and being perceived as overly negative.


BASH (voice-over): John McCain on the stump, sharpening his attacks big time last week.

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE: Who is the real Barack Obama? I guess he believes if a lie is big enough and repeated often enough, it will be believed.

BASH: Sarah Palin even sharper.

GOV. SARAH PALIN (R-AK), VICE PRESIDENTIAL CANDIDATE: He didn't know that he had launched his career in the living room of a domestic terrorist?

BASH: Frustrated supporters urged McCain to hit even harder.

UNIDENTIFIED MALE: Sir, I believe that in the next coming debate, it is absolutely vital that you take it to Obama, that you hit him where it hits, that's his soft spot.

BASH: McCain advisers called the attacks crucial to sowing voters' doubts about Obama. But it seems to have backfired. A "New York Times" poll shows after stepping up his anti-Obama rhetoric, McCain's favorability ratings dropped 4 points and Obama's rose 4 points.

In fact, when voters were asked what they think McCain spends more time doing, only 31 percent said explaining what he'd do as president. Sixty-one percent said he's spent more time attacking Obama. McCain's own brother reportedly sent a worried e-mail to GOP officials saying: "Make ads that show John not as a crank or a curmudgeon, but as a great leader for his time."

But McCain's supporters say their data shows it's not so much that his attacks aren't working, it's that Obama's are. He's spending an unprecedented amount of campaign cash blanketing battleground states with anti-McCain messages.


NARRATOR: John McCain admits he doesn't understand the economy. So who advises him?


TERRY NELSON, REPUBLICAN STRATEGIST: They have the ability to run a very significant positive message about their vision while also running a -- you know, having enough money to get through a very significant negative image about John McCain. And you can't say that that's -- that wouldn't have an impact on the race.


BASH: Whatever the reason, McCain's negatives do seem to be going up and his aides are trying to correct that.

Now, McCain has introduced a new economic plan, returned to his convention speech mantra that he'll fight for you. And he's also added a lot more about what he'd do as president to his stump speech. And all of that, I'm told, Wolf, by aides are the things that he is preparing for tonight's debate.

BLITZER: His mission tonight got a whole lot harder because of what happened on Wall Street today, as well.

BASH: It did. No question.

BLITZER: Suzanne Malveaux, Senator Obama, he's going to have a special guest out there cheering him on in the audience at Hofstra University out on Long Island.

SUZANNE MALVEAUX, CNN WHITE HOUSE CORRESPONDENT: And we've seen a lot of Hillary Clinton lately. She is campaigning for Barack Obama, a real question about her role. Even some of her supporters tonight are going to be looking at the debate to see whether or not McCain actually uses Hillary Clinton as a foil -- whether he'll point to her, to Clinton in the audience and say your fellow Democrat said you're not ready to lead on day one or take that 3:00 a.m. Emergency call, so why should we?


SEN. HILLARY RODHAM CLINTON (D-NY), FORMER PRESIDENTIAL CANDIDATE: To make a very simple message abundantly clear, we must elected Barack Obama and Joe Biden on November 4th.

MALVEAUX (voice-over): Once his fierce adversary, Hillary Clinton is barnstorming across blue collar America to shore up Barack Obama's support.

CLINTON: My family spent summers in a cabin on Lake Winola.

(APPLAUSE) CLINTON: We went swimming and fishing and played a lot of pinochle.

MALVEAUX: Privately, Clinton believes Obama can win. But publicly, she demurs, like many on the Obama team.

CLINTON: Well, I don't want to jinx what is going on, because it is very promising and I'm really optimistic.

MALVEAUX: Those close to Clinton say since losing the primary, Hillary Clinton is in a better place -- sleeping soundly and taking better care of herself. She's now traveling five to six days a week stumping for Obama. She's described as being in the zone.

CLINTON: Because here in Scranton, people are built tough.


CLINTON: Here in Northeastern Pennsylvania, we don't go down without a fight.

MALVEAUX: Friends say Clinton has managed to fundraise while campaigning, paying off much of the campaign debt she owed to small vendors -- an obligation that weighed heavily on her after her primary loss. She also sees her supporters now lining up behind Obama. As one of Clinton's friends put it: "She's relieved that not only will she not be blamed for his possible defeat, but get some credit for his success -- for promoting his economic message."

CLINTON: Well, he has to keep talking about the solutions he has for our economic woes and, you know, really give people who are not yet decided the confidence that by voting for him, their lives will better.


MALVEAUX: And Clinton's friends say she no longer envisions returning to the White House as occupant, but she does see a significant role for herself in reforming health care. She believes that Barack Obama could be in the White House for the next eight years.

BLITZER: It's pretty impressive, when you think about it. Those Hillary Clinton supporters who voted for her, obviously -- she and her husband have worked really hard to convince them to support Barack Obama. And most of them have already indicated that that's the way they're going -- some of them probably reluctantly, fearfully, but they're listening to the Clintons.

MALVEAUX: That's true. And one of the things that they say is that they believe that she really provided kind of a lesson for Barack Obama. She was really a good closer in the last days, in the primary season. And what did she focus on? What did she emphasize? She talked about the economy. She talked about how people were suffering and the kinds of solutions that she would bring. They believe that Barack Obama has learned from her and is essentially doing the same thing. BLITZER: And it's interesting, the McCain decision to pick Sarah Palin, I think, was, in part, designed to try to lure some of the women who supported Hillary Clinton over to the McCain camp. I'm not sure it's actually worked out that way.

BASH: It's unclear if it has. If you look at polls, it doesn't look like it has. It's mostly been about ginning up the conservative base.

But I've got to tell you that the McCain campaign, particularly in states like Pennsylvania, they insist that they are working extremely hard. And they insist they are having some success, still, with those Hillary Clinton voters in those rural parts of that state and that if there is any chance of that not -- of them not getting completely wiped out in Pennsylvania, that may be why.

BLITZER: Dana and Suzanne are going to be us all night, as well. We're going to be watching this debate. Stay tuned for that.

But there's another developing story we're following right now -- major health issues with both Vice President Dick Cheney and former First Lady Nancy Reagan today. He's having some heart problems. She's hospitalized. Let's bring in our chief medical correspondent, Dr. Sanjay Gupta, for the latest.

Sanjay, let's start with Nancy Reagan, the former first lady. What's going on?

DR. SANJAY GUPTA, CNN CHIEF MEDICAL CORRESPONDENT: Well, she's 87 years old and she fell last week at her home. What we know is that she had a broken pelvis and a broken sacrum. We've been on the story over the day, Wolf, and we know she's not going to need surgery, but she is going to need some pretty extensive rehabilitation over the next six to eight weeks.

A major issue for the doctors to try and figure out with her is why she fell, what was the source of that fall. That's something they're working on, as well.

But as you mentioned, she's going to be in the hospital at least for the next several days -- Wolf.

BLITZER: What about the vice president -- Sanjay?

GUPTA: Well, you know, Vice President Cheney has a well-known history of heart problems. And today was a day that his heart gave him trouble, as well. He was having some trouble in the morning. He subsequently went to the White House doctor and by afternoon was scheduled for a procedure at the hospital. Take a look.


GUPTA (voice-over): Wednesday morning started off with business as usual. Vice President Dick Cheney was in the morning briefing when he personally informed the president of his irregular heartbeat and the treatment he would need to undergo. (on camera): What you're looking at here is the heart surrounded by the lungs and all the major blood vessels within the chest. The procedure that the vice president is going to have today is best described by looking at a cross-section of the heart, as we see here. Go ahead and blow that up.

These are the ventricles of the heart, up here the atrium. Those are other chambers of the heart. Instead of bating normally, they're sort of quivering in place.

The concern is blood can start to pool, it can start to clot and sometimes flick off, possibly causing a stroke.

The procedure that he's going to have today will hopefully restore a normal heartbeat.

(voice-over): This isn't Cheney's first brush with heart problems. He had his first heart attack 30 years ago. He's had four in all. The most recent was in 2000, right after clinching the election.

Doctors described it as minor and inserted a stent to open up his artery. Since then, he's had angioplasty surgery, a defibrillator implanted, suffered an arterial aneurysm and deep vein thrombosis.

The good news is while there are risks to Wednesday's procedure, it is considered relatively minor. It's an outpatient procedure and doctors estimate Cheney will be back to business as usual in about 24 hours.


GUPTA: You know, so there he is, leaving the hospital, Wolf. A busy day for the vice president, no question. But a relatively simple procedure for him in the scheme of things. It sounds like he tolerated it just fine. Again, a little electroshock to the heart to restore it back to that normal rhythm -- Wolf.

BLITZER: All right. Let's hope they're both just fine. Thanks very much, Sanjay, covering the story for us.

In CNN's battleground coverage, there's a fight going on right now in a key toss-up state and it's a fight involving voter registration. CNN's Mary Snow is in Cincinnati. Mary, Ohio residents may be saying here we go again. What's going on?

MARY SNOW, CNN CORRESPONDENT: Yes, Wolf, some fear a flashback to 2004, when people waited hours to vote. There was a lot of the confusion. Here in Ohio -- Ohio is bracing for record turnout, but it is also bracing for potential problems.


SNOW (voice-over): Exactly what kind of problem to expect with newly registered voters in Ohio depends on who you talk to. Democrats are concerned about voter suppression. Republicans fear voter fraud and cite instances such as the Cleveland man who said he registered to vote 73 times.

FREDDIE JOHNSON, OHIO RESIDENT: They just needed a signature and they told me I wasn't going to get into trouble.

SNOW: The case is now being investigated. Ohio's secretary of state, Jennifer Brunner, a Democrat, says while counties need to investigate fraud, registration fraud turning into voter fraud is rare.

JENNIFER BRUNNER (D), OHIO SECRETARY OF STATE: Between 2002 and the end of 2005, there were only four reported cases of illegal voting, which sometimes people refer to as voter fraud.

SNOW: Brunner became the target of a Republican-led legal battle. It resulted with a federal appeals court ordering she must provide Ohio's 88 counties with a list of newly registered voters whose information doesn't match their driver's license or Social Security records.

Brunner had argued checks are already in place, there wasn't enough time to add a new system and she feels voters will be penalized.

Some election law experts agree.

PROF. DANIEL TOKAJI, OPSU ELECTION LAW EXPERT: It could result in a lot of eligible voters being challenged at the polling place and possibly disqualified, even though they're really eligible to vote.

SNOW: For example, a change in marital status or slightly incorrect address, such as street instead of avenue, could place you on the mismatch list. Republican Ken Blackwell says providing those lists are necessary.

KEN BLACKWELL (R), FORMER OHIO SECRETARY OF STATE: What we don't want is a situation where there's a close election and there's a lot of doubt about the integrity of the system.

SNOW: And Blackwell should know. In 2004, he was then the Ohio secretary of state, when lines at the polls lasted for hours and provisional ballots remained to be counted after election day.

Some say there's another problem.

BLACKWELL: This is an intrinsic problem when have you a partisan election -- elected official controlling the administration of elections, as most states, including Ohio, do.


SNOW: Now, Ohio's secretary of state has a deadline of Friday to provide a list of people who -- of new voters whose names and information doesn't match up with state records. And she estimates at least 220,000 people may be on that list. But she also says she's going to urge counties not to force people to have to use provisional ballots -- Wolf. BLITZER: Mary Snow in Ohio with our battleground coverage there. Thank you.

And amid the escalating claims of voter registration fraud, will the voting on election day be fair? Let's go to a senior adviser to the Obama campaign, the chief strategist, David Axelrod. He's joining us from Hofstra University, the site of tonight's debate. David, thanks for joining us.


BLITZER: All right. What is the Obama campaign doing to make sure that it's fair not only in Ohio, but elsewhere, because there have been all these accusations leveled involving ACORN, this organization. What are you doing to try to fix all this?

AXELROD: Look, Wolf, we want to make sure that anybody who votes is eligible to vote and that everybody who's eligible has the opportunity to vote. And if there are any irregularities in registration, they should be dealt with and dealt with severely.

But I'll tell you that we've got literally millions of people across this country who have registered, who are excited to participate in this election. I think we want to make sure that the polling places can accommodate all those who want to vote and that everybody gets the chance to participate in what I think is the most important election we've faced in many, many, many years.

The news from the stock market today underscored what everybody knows, which is this is a huge election and we want people to participate.

BLITZER: And, clearly, a lot of folks concerned about a recession.

Explain exactly -- because there's been a lot of confusion out there -- what has been, what is your campaign's relationship with this group ACORN?

Because a lot of folks out there are hearing all sorts of stuff. But give us what your understanding -- and I assume you understand it quite well -- what exactly is your involvement with this group?

AXELROD: Well, let me be very clear. They're not involved with us in terms of our voter registration efforts. Our voter registration efforts are being conducted by our campaign. We've got, you know, hundreds of thousands -- perhaps millions of volunteers -- across the country working registering people, going door-to-door. And that's how we're doing voter registration.

ACORN did some -- an affiliate of ACORN did some get out the vote work for us in the primaries -- in some of the primaries. And that was -- that was the extent of it.

I think the reason this is being raised now is that -- I fear that the Republicans are trying to set for the kind of voter intimidation that we've seen in past elections. And that we don't want. As I say, we want to make sure everybody who votes is eligible and we want to make sure that everybody who is eligible and wants to vote gets that opportunity.

And we're not going to stand for voter intimidation of the sort we've seen orchestrated by Karl Rove in the past. And we've got lawyers mobilized all over the country to make sure that these elections are conducted fairly and openly.

BLITZER: All right. Let's talk about the debate tonight. This is the final debate between Barack Obama and John McCain. He said the other day, McCain, he said he's going to whip Obama's "you know what."

I assume that you've been practicing for some of that whipping that might take place tonight. Tell us how Senator Obama is going to react if, for example -- and it's still a big if -- if Senator McCain decides to raise the issue of William Ayers, the Weather Underground radical from the '60s.

AXELROD: Look, Senator Obama is happy to discuss any issue that arises. I will say, Wolf, that I think that the people are tuning into this debate and I think there will be tens of millions of Americans watching tonight who are more interested in how these guys are going to whip rising unemployment, whip the crash on the stock market, how we're going to strengthen incomes that have been declining.

And I think that if Senator McCain wants to take the debate in a different direction, he does so at his own risk. These are, as I said at the beginning, serious times. We have big problems. People are looking for these candidates to offer positive, constructive answers how we get out of the mess we're in.

Senator Obama has them. They involve changing the direction we've been on for the last eight years. Senator McCain -- it's up to McCain to defend his support of those policies and explain how a continuation of them is actually going to help us out of the mess we're in.

BLITZER: The Republican vice presidential nominee, Governor Sarah Palin, gave an interview to our affiliate up in New Hampshire today, WMUR. And she spelled out what she thought was fair in these final days of the campaign. Listen to Governor Palin.


PALIN: I don't characterize at all our campaign being negative when we talk about someone's record and associations. That's what the electorate deserves to hear.


BLITZER: All right. Do you have a problem with that?

AXELROD: Yes, well, I mean it's not that I have a problem with them. Look at the poll in "The New York Times" today. By a 2-1 margin, the American people believe that the McCain-Palin campaign has been negative and that Senator Obama -- by the same margin, people have said Senator Obama is talking about the issues.

Again, I think they have to run their own campaign and we'll run ours. We're going to talk about the future of this country and how we create jobs and growth, raise incomes, deal with the energy crisis, deal with the health care crisis. And if they want to do something else, that's their choice. But I think that the American people are not in the mood for that.

BLITZER: David Axelrod, we'll be watching tonight. Thanks for coming in.

AXELROD: OK. Thanks, Wolf. Good to be with you.

BLITZER: Thank you.

Three dollars a day for food -- it may sound severe, but a growing number of Americans are discovering the harsh reality of life on food stamps. So we'll explain.

Plus, new tales of corporate outrage -- you're going to find out which company sprang for $86,000 for a hunting trip, as it saw the a multi-billion dollar government bailout.

And it's a first for a presidential campaign -- you'll find out how Barack Obama's ads are ending up on video games.

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


BLITZER: Carrie Lee is monitoring some other important stories incoming into THE SITUATION ROOM right now.

Lots of news going on on this day, Carrie. What's going on?


Well, first up, African-American employees with the U.S. Marshal's Service are suing the agency for race discrimination. The lawsuit claims they were denied promotions and accused of being lazy. Two hundred current and former employees asking for at least $300 million in lost wages. An agency spokesman denies the allegations. The U.S. Marshal's Service is in charge of capturing fugitives and protecting federal judges.

And U.S. troops and private contractors could be prosecuted by Iraqi courts if they commit crimes off American military bases. Now that's according to Iraqi officials. They say it's a compromise -- part of a draft security arrangement covering U.S. military operations in Iraq. The U.S. would maintain the right to try troops or contractors for crimes committed on military property. The agreement still has to be ratified by the Iraqi parliament.

Well, first, U.S. lawmakers learned AIG employees spent time at a posh spa. Now we find out top executives spent $86,000 on an English hunting trip. Now, this news come just days after the insurance company received a second, multi-billion dollar loan from the Federal Reserve. Last month, the government granted the company an $85 billion loan. A company spokesman says the trip was planned months before the company asked for that government money.

The name is Omar. You know it. And it's wreaking havoc in the Caribbean. Now, this is a view of the coast in Bonaire, in the Netherlands Antilles. It was shot by a -- on a cell phone by a CNN I- Reporter, Roella Pourier. Hurricane Omar is packing winds of 85 miles an hour. And forecasters expect it will strengthen into a category two storm tomorrow. Some areas, Wolf, could receive up to 20 inches of rain.

BLITZER: Wow! All right, let's hope for the best. Carrie, stand by. Thank you.

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

Happening now, John McCain fighting to keep traditionally Republican states in his column. We're going inside his campaign's battle to hold its turf.

Meanwhile, one state that hasn't gone to a Democrat in 44 years is now leaning toward Barack Obama -- details of a major shift on our CNN electoral map.

Plus, the election, the economy and impeaching President Bush -- Donald Trump weighs in on that and much more. My one-on-one interview with him -- that's coming up, as well.

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

Another stunning turnaround in the electoral map, as our latest poll shows a key battleground state -- that would be Virginia -- turning away, at least for now, from John McCain. Other states certainly could follow.

Let's go to our senior political analyst, Bill Schneider. He's working the story for us. What do the battleground states all have in common, Bill?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Wolf, they're all red states. John McCain is having to defend Republican territory.


SCHNEIDER (voice-over): Republicans are on the defensive. Seven states that voted for George W. Bush in 2004 are now up for grabs.

One is Colorado, which Bush carried by five points in 2004. This year, Colorado is contested.

MCCAIN: Colorado will be one of those states that is very key in deciding who the next president of the United States is.

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE: We will not just win Colorado, we will win the general election and you and I together, we're going to change this country and we're going to change the world.

SCHNEIDER: A new CNN poll by the Opinion Research Corporation gives Barack Obama a 4 point lead in Colorado -- still close, but Colorado could go Democratic for the first time since 1992.

Winning Florida would be sweet revenge for Democrats. The disputed Florida outcome in 2000 made Bush president. In 2004, Florida voted to reelect Bush.

John McCain claims a special tie to Florida, based on his experience as a prisoner of war.

MCCAIN: In the years that I was away in prison, the people of Orange Park, Florida took care of my wife and family.

SCHNEIDER: Nevertheless, Obama now leads in Florida by five.

Missouri has voted for the winner in every presidential election, save one, for the past 100 years, including Bush in 2004, by 7 points. And now? McCain leads by just 1 point in bellwether Missouri.

Virginia is a surprise battleground. It hasn't voted for a Democrat for president in 44 years. Bush carried Virginia by 8 points in 2004. But Virginia is changing.

OBAMA: And together, we will not just win Virginia, we will win this general election. And together, you and I, we will transform this nation and transform the world.

SCHNEIDER: Virginia is the big news in our battleground poll. Obama is 10 points ahead -- a statistically significant lead -- and one reason why CNN is shifting Virginia and its 13 electoral votes from the toss-up category to leaning Obama.


SCHNEIDER: Now, the Democrats did have dreams of carrying Georgia, which gave George W. Bush a 17 point victory in 2004. But our new poll shows Georgia staying in the Republican column, but McCain now leads Obama by eight points, which means the Republican margin has been cut in half from what it was four years ago. Georgia is not turning blue. But it's definitely a lighter shade of red -- Wolf?

BLITZER: Bill Schneider is at Hofstra University for us, getting ready for tonight's debate as well. Thank you.

So with Virginia now turning light blue, our CNN Electoral College map estimates that Barack Obama would win enough electoral votes to capture the White House if and it's certainly a huge if, if the election were held today.

Joining us now a pair of CNN political contributors, Democratic strategist James Carville and national talk radio talk show host Bill Bennett.

Bill, you've studied this closely. I know you like Senator McCain a lot. What is happening in Virginia which has been such a reliably red, reliably Republican state at least in presidential contests?

WILLIAM BENNETT, NATIONAL TALK RADIO HOST: Well, I haven't studied it had that closely, the state of Virginia. Clearly John McCain is on defense he knows that and he needs to go on offense. He will go on offense tonight I believe. You will see the Navy fighter pilot of old. You know he can't leave anything on the field or as they say with those jets, he's got to come back with an empty tank. There's a lot he has to say. There's a lot he has to do. But he's a fighter. He joked the other day, we got him just where we want them, which is the right spirit. Let's see if he can make good on that.

BLITZER: I want to elaborate on what he needs to do as a fighter but let me bring James in right now. You know, a lot of Democrats, they're pinching themselves, James, and saying, you know what? This is no time to get cocky, no time to get overconfident. They've seen these close contests whether in 2000 or 2004 slip away, Dukakis back in '88, a campaign you remember well. Give us your sense what's going on.

JAMES CARVILLE, DEMOCRATIC STRATEGIST: Well, I mean I said after the debate a week ago this race is over. I mean I've just been around and could something happen tonight? Probably not. I think Senator McCain will give a good account of himself. He's a fighter. He's a courageous guy. I think the trick for him is to not act like a loser but act like an underdog. But the country has decided that it's going to make a change and I don't see anything between now and Election Day that's going to change that.

BLITZER: All right. So Bill, when you say that McCain has to come out fighting, explain what that means. Does he raise the William Ayres Reverend Wright? What does that mean?

BENNETT: Sure, but first of all, it is not over. The pollsters say it's over. The predictors say it's over. It's not over till the American people have their say. They were saying it was over, James, on the way to Gainesville, some of those LSU guys before the game was played. Sorry, buddy. You know? All's fair. This is politics.


BENNETT: But yes, he does. He brings it up not because it's irrelevant. He brings it up because the two questions Wolf are still the questions that Fred Thompson asked at the convention. He said there's two questions you don't have to ask about John McCain, who is this man and are you sure you want to entrust the country to him.

There are still serious questions about Barack Obama, his alliances in the past. We heard from Jesse Jackson yesterday. The Obama campaign said he has nothing do with this campaign. Reverend Wright really didn't know what he was saying. Bill Ayres, that was 40 years ago although the association was very recent and Bill Ayres hasn't recanted. There are still questions.

John McCain has to ask the public, step back, we know this guy is a superb campaigner. We know he's a wonderful speaker but are you sewer you want to entrust the country.

BLITZER: So how does he respond when McCain does that tonight, James?

CARVILLE: I think A, it's not much of the kind of telegraphing their punches. I think that they're going to be pretty ready for it. I think he'll answer that and I think segue right into the fact the colossal failures of this Republican administration, remind people that John McCain said there was no big issue that he and Bush disagreed on and then push off the way he wants to take the country.

Look, I respect these guys. They'll fight to the end. But it's done. And I said that after the debate last Wednesday night. It's not going to change. The country wants a change and nothing's going to stop them from having this change.

BLITZER: Bill, you saw that poll in the New York Times today, the CBS News New York Times poll that said the negative statements Senator McCain has been making lately about Barack Obama seem to have backfired. Do you buy that?

BENNETT: No, I don't. I mean I think most of the interpretation has been it's been negative. As Mark Halperin pointed out today the other day before a group of journalists, I think the coverage in the media, and this was Halperin speaking, has been very much loaded toward Barack Obama. I do not understand how it is negative for John McCain or Sarah Palin to say that Bill Ayres was a terrorist. The most negative thing said so far in this campaign was said by supporters of Obama, that is a highly placed people like John Lewis.

BLITZER: You have to admit it's pretty negative when Sarah Palin says that Senator Obama was quote and I think it's a direct quote palling around with terrorists.

BENNETT: Well, what is Bill Ayres, an experimental physicist? I mean he tried to blow up police officers and judges and Barack Obama was a pal through the late '90s and into the year 2001. I had a Democrat call the show today, Wolf, who saw the picture of Bill Ayres in 2001 when he was on the board with Barack Obama standing on an American flag. Ayers was standing on the American flag. He's an unrepentant terrorist. That's an accurate description.

BLITZER: All right. What about that? James, what do you think?

CARVILLE: Again, I'm pretty sure that Senator Obama saw David Axelrod on the show right before we went on. I got a sneaky idea that they know this is coming. And you know, it's -- I think what they're going to do is hold the Republicans accountable for what they've done to this unit and he'll have a very good answer for Bill Ayres and that kind of stuff.

I think the country is going to very much going to make a change here and it's not just going to be a change at the presidential level but the Democrats are going to build on the House and Senate majorities. This is just what's happening in American politics. I mean, I've got great admiration for the secretary. If I was him, I'd be doing the same thing he's doing. I would be fighting right to the end. Same thing with Senator McCain. But they're in a position that the country's just tired of the Republican Party and they're going to make a change.

BENNETT: Well, one other person bring in Joe the plumber. You know? I hope for John McCain tonight we hear some of Jack Kemp and we hear about Joe the plumper. You know about Joe the plumber.

BLITZER: Hold on guys. I'm not giving up on you guys yet. We've got more to discuss. I want to take a quick commercial break. James Carville and Bill Bennett are sticking around. We're going to continue this conversation.

Also coming up, as you look at live pictures coming in from Hofstra University, Hempstead, Long Island here in New York, that's where the debate will be taking place 9:00 p.m. Eastern tonight. We're going to go back there for more.

Also coming up, Donald Trump. What does he have to say about all of this?

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


BLITZER: Get back to James Carville and Bill Bennett. Bill, Sarah Palin she really energized the conservative Republican base. Doesn't seem at least according to polls to have done much to bring in those independent moderate undecided voters, at least if you believe the polls. Was it a risky decision to bring her in? Some Republican strategists like Matthew Dowd, he was the chief strategist for Bush four years ago, believe that's the case.

BENNETT: Yes, well he's left Bush or Bush left him some years ago. Perhaps. I mean the pollsters can work through the tea leaves on this. I still think it was a tremendous play. It excited the base. You remember, Wolf, we were at the convention while all this happened. This was quite extraordinary. And you could see the excitement.

Without the base and without the base excited, John McCain doesn't stand a chance. I think a lot of independents actually think better of Sarah Palin but it's become, you know, the kind of intellectually respectable thing-to-do which is to trash her. I don't. Somebody said the other day are there any intellectual conservatives who like Sarah Palin? Here's one right here. I guess I'm an intellectual. I've got a PhD anyway. I still think it was a good choice and the kind of choice he had to make to validate himself with the base.

BLITZER: Whatever you think of her, James, was it a blunder or a brilliant move?

CARVILLE: Well, I think it was a blunder and you know, you're right. Secretary Bennett is an intellectual but so is David Frum and David Brooks and Charles Crossheimer and George Will and a host of other people. I think it's evident to a huge majority of the American people that she is not up to the job. It was a kind of a gimmicky thing they did that backfired.

But I don't think it would have mattered who they would have picked. The country's just ready for a change. I suspect that the McCain high command understood this and McCain wanted to pick Lieberman. They wouldn't let him because you can't have a pro-choice person running in the Republican Party. It's not allowed. So they had to pick her and it backfired. I don't know if it would have matter that had much more in the end anyway.

BLITZER: Don't go away because we've got a good night ahead of us, a strong night ahead of us and lots to discuss as this is, the third and final presidential debate will take place. Of course, CNN will have live coverage. Thanks to James Carville and Bill Bennett.

Three dollars a day, that's what the average food stamp recipient gets to spend on meals. Now the governor of one state is on food stamps. You're going to find out why.

And another devastating day for investors. I'll talk about that and a lot more with Donald Trump. I asked him whether he thinks America is headed for a depression. His answer and the rest of my one-on-one interview with Donald Trump that's coming back. We're back in 90 seconds.


BLITZER: What would you eat if you only had as little as $3 a day for food? Fast-growing number of Americans are finding out, including a governor and some CEOs now living on food stamps to drive home an important point.

Carrie Lee is back with us once again working on the story. It's hard to believe but how does a person survive on $3 a day?

LEE: You know you count every penny and make it count, Wolf, and a record number of Americans doing exactly that as we speak. People are struggling with high unemployment, rising costs for energy not to mention food and so millions of Americans have no choice but to turn to the government for help.


LEE: Across the country, families are struggling to put food on table.

UNIDENTIFIED FEMALE: It's very difficult to try and figure out how I'm going to get through this month. You get into a hole and it's hard to get out.

LEE: To make ends meet, almost 10 percent of Americans today, a record 29 million people rely on food stamps, 4 million more than in 2005. In Michigan the only state with rising poverty and falling incomes last year, it's 13 percent. To highlight the hunger crisis, Governor Jennifer Granholm and other state officials and even some Detroit auto executives this week are living on just the same amount as the state's food stamp allowance.

GOV. JENNIFER GRANHOLM (D), MICHIGAN: Went shopping my son and I on Meier on Sunday night and had our amount of money that we were supposed to be shopping with then and it's a good lesson for him. Good lesson for my family.

LEE: The average recipient gets $101 a month. At three meals day, that's about $1 per meal.

GRANHOLM: A lot of macaroni and cheese.

LEE: State officials expect the problem will only get worse.

ISMAEL AHMED, MICHIGAN DEPT. OF HUMAN SERVICES: The national economics in Michigan's auto industry have caused poverty to grow at an exponential level. For instance, food stamps have gone up double in the last eight years.

LEE: With the economic downturn, the threat is nationwide.

STACY DEAN, CTR. ON BUDGET POLICY PRIORITY: Those who are recently been laid off or maybe lost a couple of shifts so their income has fallen and yet they're facing higher prices at the pump and in the grocery store need the help of the program to put food on the table.


LEE: And these latest figures don't even count new requests for food stamps since September. You know, during that month, Wolf, 160,000 jobs were lost, home foreclosures soared. We have several finance firms went out of business and let's not forget hurricane damage. This record almost 10 percent of Americans on food stamps, 29 million, is pretty much virtually going to go even higher.

BLITZER: Well that is really shocking, shocking numbers indeed. Carrie, thanks for that report.

More bad news right now. Also at a record high, home foreclosures and behind the number is a heartbreaking reality for literally millions of families. CNN's Carol Costello introduces us to one of them.

CAROL COSTELLO, CNN CORRESPONDENT: Wolf, so many families have lost their homes because of toxic mortgages and who was the government bailing out? The banks. For those who have lost everything, that stings. In McComb County, Michigan there's a fire say going on.


UNIDENTIFIED FEMALE: Seventy-five six hundred.

COSTELLO (voice-over): Hundreds of homes seized by banks are being auctioned off.

UNIDENTIFIED FEMALE: Forty-nine thousand. COSTELLO: At bargain basement prices.

UNIDENTIFIED FEMALE: That just breaks my heart.


UNIDENTIFIED FEMALE: You know, seeing it like it is.

COSTELLO: The Wards lost hair home after refinancing. They say they thought the interest rate was fixed. It was not. Today their lost family home sits empty, bought at auction by a bank for $20,000. It's not only devastating for the Wards but to their former neighbors who are seeing the value of their own homes plummet. It irks real estate agent Donna Caumartin.

DONNA CAUMARTIN, SCHULTES REAL ESTATE: This home went up on the market and it was listed for $109, 900. Now it's listed for $45,000. It's is the same house. It's a tremendous loss to the bank. Why wouldn't they try to do a loan modification or something or refinance it at different terms?

COSTELLO: Why do you think the banks won't negotiate with people?

CAUMARTIN: I don't know. I really don't know.

COSTELLO: Groups that help troubled homeowners say it's because many banks don't own the mortgages. They simply handle the paperwork for investors.

UNIDENTIFIED MALE: The servicers who the homeowners make their mortgage payments to are overwhelmed. They're not willing to staff up and frankly they have no skin in the game. If someone goes to foreclosure, they don't lose anything.

COSTELLO: The Wards did try to renegotiate with their lender, Washington Mutual, a bank seized by the federal government last month because it handed out so many bad loans.

KEITH WARD, FORMER HOMEOWNER: I spent hours, days.


WARD: On phone with our finance company, our bank asking them, what I can do. And the only thing they told me was they need if I remember correctly amounts of close to $20,000 up front and then they wanted to double our house payment also, on New Year's Eve.


WARD: At 4:00 in the afternoon, a gentleman put a notice on my door that there was a sheriff sale on my home.

COSTELLO: Both presidential candidates want to help people like the Wards. John McCain wants to use taxpayer money to buy and refinance troubled mortgages. Barack Obama wants a 90-day payment break for struggling homeowners, but it is too late for the Wards. Their house has already been auctioned off. They rent now nine blocks from their old home, and yes, they have found a way to cope.

WARD: A lot of patience and a lot of love. That is the only way we can do it.


COSTELLO: The Wards and many others in economic straits will listen to tonight's presidential debate wondering how the bailout plan will help them. They are hoping that they find some hope in tonight's debate -- Wolf?

BLITZER: All right. Carol, thank you. What a heartbreaking story.

Going after the gamers. You have decided to spend billions of dollars on TV and radio ads, at least some of them have. The next time you are playing a video game, you might not believe what you are seeing. Standby.

And my interview with Donald Trump, why he is praising the house speaker Nancy Pelosi at least on this.


DONALD TRUMP, CHAIRMAN & CEO TRUMP HOTELS & CASINO RESORTS: It seemed like she would really look to impeach Bush and get him out of office which personally would have been a wonderful thing.

BLITZER: To impeach him?

TRUMP: Absolutely. For the war.



BLITZER: With the election now exactly three weeks away, political ads seem to be everywhere, including some places you might not necessarily expect, like a video game. Susan Roesgen is working the story for us. Susan, video games?

SUSAN ROESGEN, CNN CORRESPONDENT: Yes, really, Wolf, for the first time ever a presidential candidate is advertising in video games, and so, I guess you better buckle your seat belt, Wolf, because it is going to be a wild ride.


ROESGEN (voice-over): Full throttle in a place called paradise. In the new Xbox video game called "Burnout Paradise," you have a lot to watch out for. But if you could slow down enough to see it, why look who is on the billboard, could it be Senator Barack Obama? Urging you to vote, and here he is again in a basketball video game. EVAN TRACEY, CAMPAIGN MEDIA ANALYST: First of all, I think it is clear evidence that the Obama campaign has more money than they know what to do with.

ROESGEN: In fact, Obama has raised twice as much money in campaign funds as Senator John McCain. According to the Obama campaign the ads are supposed to encourage the players to register to vote, but the ads only appear in games that are distributed in ten battleground states. And talk about change -- campaign media analyst Evan Tracey says that video games are a new way to reach the next generation, if Obama can get people to stop playing long enough to vote.

TRACEY: This is a captive audience and the other risk is that they will stay in and play games and not vote. So what they are really trying to do is a subtle, gentle reminder to turn off the games on Election Day and get out and vote.

ROESGEN: Even better might be to put Obama and McCain in the virtual cars and see who leaves whom in the dust.


ROESGEN: The idea for the video game ads by the way, came from the Obama campaign, and who knows, maybe one of Obama's daughters likes to play video games or something, Wolf, but anyways the campaign would not say how much they cost and yet our campaign media analyst you saw there Evan Tracey said probably not that much, but that television advertising is way, way more expensive and that is what the candidates have put most of their money to.

BLITZER: Well, they have a lot of money, the Obama campaign. So they can use it how they want. Thanks, Susan, for that.

Barack Obama's critics attacking his ties to a group called ACORN and it's now using squirrels. We're going to go inside of the GOP strategy.

Also, a major shift in our CNN electoral map, a state that's voted Republican for more than four decades now leaning toward Barack Obama.

Plus, Donald Trump rating President Bush in my one-on-one interview.


TRUMP: The United States has been stupidly managed for the last eight years.

BLITZER: So on this issue you give Bush --

TRUMP: On that issue, an F-minus.



BLITZER: The Republican Party is using a unique strategy to attack Barack Obama's association with the group known as ACORN. the community organizing group under fire for voter registration fraud. It involves squirrels. Our internet reporter Abbi Tatton is working the story. Abbi, how are squirrels involved?

ABBI TATTON, CNN INTERNET REPORTER: Well Wolf, the secret weapon, squirrels. Obama better watch out, right? This is new from the Republicans here. Remember in 2004, it was Flipper the dolphin following around Senator John Kerry.