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Pipeline Blast: What the Company Knew; Reading the Tea Party Leaves; GOP Establishment vs. Tea Party; Homeland Security Snafu; Clean and Green Car Washes

Aired September 15, 2010 - 23:00   ET


ANDERSON COOPER, CNN ANCHOR: Thanks for watching.

Tonight: the explosion, the fire, the death and destruction. New evidence it might have been prevented. We've learned that a California utility knew a gas pipeline was aging, planned to upgrade a portion of it, even charged their customers to do the work but that work never got done. We're "Keeping Them Honest".

Also tonight, Christine O'Donnell's stunning upset in Delaware's senate race, the Tea Party's growing power, and why today so many Republican Party leaders who lined up against her before the primary are now saying they're embracing her, at least in public. Congressman Ron Paul joins us live.

And later why Pennsylvania's governor is so embarrassed it comes down to this question, how would you feel if you found out the government was spying on you, reporting you to local police as a potential threat just because you were taking part in a peaceful protest?

It happened in Pennsylvania. You won't believe some of the groups that got targeted. Environmentalists, gays, lesbians, even animal lovers. We'll tell you where it happened and how taxpayers got stuck with the bill.

A lot to cover tonight but we begin as always "Keeping Them Honest" with an event that didn't have to happen, the huge explosion in San Bruno, California that incinerated a neighborhood and killed at least four people. We've got new evidence tonight suggesting that this nightmare might have been preventable. The lives lost, the homes destroyed, the explosion and fireball so intense that first responders initially thought a jetliner had crashed.


UNIDENTIFIED MALE: We've got multiple houses, we're trying to get close. We have extreme heat. We have possibly several blocks on fire at this time.

UNIDENTIFIED MALE: Call for fourth alarm for this. Looks, it appears we have a plane down in the neighborhood. Multiple structures on fire and we have a fireball still coming out.

(END AUDIO CLIP) COOPER: Of course they didn't know it wasn't a plane, they didn't know at first. It was a gas line. Later we would learn a broken section of the line was more than six decades old.

And just today we've learned this, that PG&E, which is the local utility, knew for three years that the pipeline itself was dangerous. So dangerous they committed to repair a portion of it just a couple miles north of the explosion site, but they did not fix it.

And to add insult to injury, PG&E was already getting millions of dollars from utility customers, those millions were meant to be spent doing the work they said they'd do but they didn't. Millions from rate payers who some of them, the same people whose homes are now gone.

Dan Simon did the reporting on this. He, tonight, is "Keeping them Honest" for us -- Dan.


DAN SIMON, CNN NATIONAL CORRESPONDENT (voice-over): The line that exploded last week was laid down in 1948. It was so old that for safety reasons, Pacific Gas and Electric made plans to replace a section of it in south San Francisco just a couple miles away.

In 2007, it got rate increases to do the work. According to a consumer watch dog group, PG&E got $5 million for the project. But the group called TURN, The Utility Reform Network, says it never happened.

MIKE FLORIO, THE UTILITY REFORM NETWORK: The money is spent on what they call higher priority work.

SIMON (on camera): And what was that?

FLORIO: Well, you can't track the dollars one by one, but we do know that they spent $62 million more on management incentive bonuses than they had forecasted in 2009.

SIMON (voice-over): Mike Florio is a senior attorney for the watchdog. He says PG&E spent the money dedicated to replace the pipeline. So it is now seeking rate increases again, another $5 million to replace the same stretch of pipeline.

(on camera): And how do you know this?

FLORIO: Because it's right in the documentation they filed with the PUC to support their rate cases. You know, if you dig deep enough into these big, thick documents, this is what you find.

SIMON (voice-over): the California Public Utilities Commission or PUC, is deciding whether to go along with PG&E's request. Those documents provided to CNN by TURN say that section of pipe ranks in the top 100 for highest risk of failure. The PG&E documents also say if the replacement of the pipe does not occur, risks associated with this segment will not be reduced. High volume natural gas lines snake through the San Bruno neighborhood. PG&E hasn't disclosed exactly where the problematic line is. But as we discovered, much of the line runs right through residential areas.

(on camera): This is another large section of pipeline, this one is about a mile away from where the explosion happened. It is also feet away from many homes. The location of pipelines like this are generally kept secret to literally prevent terrorists from coming in and blowing them up, so it's possible that people might be living next to them and not even know it.

(voice-over): The only way to tell may be from these yellow sidewalk markers, that for example, are used to alert construction crews of danger.

According to PG&E, it won't be until 2013 though until that section of pipe it identified a few years ago will be replaced.

FLORIO: If they fixed that section they said they wanted to fix, maybe they would have found something. That led them to look a mile or two south of there. We don't know that. What we do know is the project was slated for 2009, it didn't get done, and now they're proposing to do it again in 2013.


COOPER: What is PG&E saying about all this tonight, Dan?

SIMON: Well, Anderson, we asked them repeatedly to provide us with a statement. We finally got one tonight. I'm going to read it for you -- I'm going to read it in its entirety.

It says, quote, "PG&E is committed to performing the work necessary to assure the safety of its gas transmission system. Accordingly, PG&E is constantly prioritizing its projects using the most recent up-to-date information available, in this particular case, PG&E did identify this line section as being a high priority project in its 2008 gas transmission rate case filing.

Subsequent to that filing, PG&E performed an external corrosion direct assessment in 2009 and based on the updated assessment and the assurance it provided us, we rescheduled the project accordingly. PG&E spent more on its gas transmission capital program than authorized for the period 2008 to 2009."

So the bottom line here with the statement is they're not denying the basic facts of the story. They're just saying they looked at their priorities and they determined that they shifted during that period from 2008 to 2009 -- Anderson.

COOPER: Dan, appreciate the reporting.

Let's dig deeper now with Mark Toney of TURN, The Utility Reform Network, a consumer advocacy organization. You believe that if PG&E had done this work that this would have been prevented? MARK TONEY, EXECUTIVE DIRECTOR, THE UTILITY REFORM NETWORK: Well, it's hard to say that exactly. What we do know is that PG&E has a pattern of receiving money for gas pipe repairs that they said needed to be done and then spending the money on somewhere else.

COOPER: Where did they spend the money, though? I mean, if they're raising money saying we need to repair these things, what are they actually spending it on?

TONEY: Well, sometimes they spend the money on executive compensation, bonuses, sometimes they spend it on their bottom line, sometimes they spend it on different areas.

Our main point is that if they have identified a gas pipeline that is -- needs to be repaired, that is at risk of having a leak, and they get money for it, then we expect them to fix those gas lines.

COOPER: And are they allowed to do that? Are they allowed to say we'll fix this gas line, raise money for it and not do it? Is there oversight?


TONEY: The California Public Utilities Commission we feel needs to exercise stronger oversight and basically require PG&E and all the utility companies that if they say they're going to fix something, they get the money to fix it, then they darn well better fix it.

COOPER: How bad are pipes out there? For a lot of people all around the country, not just in California, I mean, we don't think about the pipes underground. How old are a lot of these pipes?

TONEY: Well, a lot of these pipelines are 50, 60 years old or more. And that is a huge concern that people have. What happened in San Bruno is a worst case scenario. And PG&E and other companies need to be absolutely vigilant in making sure that lines are inspected and where they're found to have trouble to actually fix them and not just say they're going to fix them.

COOPER: Mark Toney, appreciate you being on. Thank you very much.

TONEY: Absolutely.

COOPER: A really disturbing story. Let us know what you think. The live chat is up and running at

Up next, Congressman Ron Paul on rising Tea Party power after last night's primary upsets. What does it mean for midterms and governing once the elections are over? We'll talk to him.

Also ahead, all those Republican big wigs who were trashing Christine O'Donnell before last night; today they're singing a different tune -- a lot of them. We'll talk with Eliot Spitzer, Alex Castellanos and Tea Party organizer, Dana Loesch.

We'll be right back.


COOPER: A lot of raw politics to talk about tonight, the Republican Party's Tea Party turnabout, it unfolded before our eyes following Christine O'Donnell's upset win in the Delaware primary.

The establishment many members of which had backed Representative Mike Castle initially offered only tepid support for O'Donnell. But that quickly changed today with GOP chairman Michael Steele saying O'Donnell now has the full backing of the committee. Also National Republican Senatorial Committee chairman John Cornyn said he and the committee strongly stand by her.

Though they issued tepid congratulations last night, today Senator Cornyn said that the committee is giving O'Donnell the maximum campaign donation of $42,000. We'll talk to our reporters to find out what some Republicans on Capitol Hill are saying behind closed doors in a moment.

Right now it seems Karl Rove is the only one who's still publicly criticizing O'Donnell saying she's made, quote, "nutty statements" in the past. And on Fox News last night he made it clear he thinks she's the wrong choice for the party. Listen.


KARL ROVE, FOX NEWS CONTRIBUTOR: Christine O'Donnell is now going to answer in the general election that she didn't have to answer in the primary is her own checkered background.

I've met her. I'm not -- I've got to tell you, I wasn't frankly impressed at her abilities as a candidate. It does conservatives little good to support candidates who at the end of the day, while they may be conservative in their public statements, do not advance the characteristics of rectitude and truthfulness.

I'm for the Republican but I've got to tell you, we were looking at eight to nine seats in the senate; we're now looking at seven to eight.


COOPER: Sarah Palin responded to Rove, telling him and others who dismiss O'Donnell to, quote, "buck up". Democrats are certainly the infighting helps them. But there are plenty of Democrats concerned about the enthusiasm and energy unleashed by Tea Party activists.

With me now is former presidential candidate, Texas representative Ron Paul whose son, obviously, Rand Paul is running for senate in Kentucky and is a Tea Party favorite.

Congressman, thanks very much for being with us here. What do you think of Christine O'Donnell? Do you think she can win? REP. RON PAUL (R), TEXAS: Oh, sure I think she can win. I think she's going to have to work very hard. She has the roughest job of all the Tea Party candidates because she's in a more liberal state.

It's -- she has a much more difficult job than my son has in Kentucky or Angle has in Nevada. So, no -- but she can win. There's a lot of unhappiness in this country. And for that reason, the numbers are just coming together.

Democrats are disillusioned, they're not going to show up, the Republicans are, and the Tea Party people are added on to the Republicans because a lot of them haven't been involved before. They're independents and it adds to it. It isn't taking away from the Republicans.

If you have a Republican base, the Tea Party people add on to it. That's why she has a very good chance.

COOPER: So the Democrats tonight who are saying this is great for the Democratic Party, you think they're mean measuring the drapes too early?

PAUL: Well, if I talk to Republicans and they sounded a little too cocky, that's what I would tell them. I don't think anybody should get -- they should wait and see. They should always run -- I used to run track and I always assumed somebody was going to step on me if I didn't keep running.

So I think that's the way it is in politics. You have to keep running and not assume you can glide to victory.

COOPER: Yes. It's not over until it's over.

A number of Tea Party activists who I've talked to in the last couple days and before this primary were saying, look, even if she can't win, it's still important that she won. And we don't really care if she can't win, it's important to make a point, it's important to vote your principles. Do you think that's true or do you think it's more important to get a safe Republican seat in the senate?

PAUL: I think both is true. I think the fact that she won is very important and we should be glad about that. But also you should go for the winning. But I guess you're suggesting that, if you knew she couldn't win, therefore you should cop out and bend your principles.

Well, I'm not one that would endorse that very easily, because my goal in life has been to nudge people over to a more principled position, whether it has to do with foreign policy or civil liberties or economic policies, so that's always been my goal. So I think winning along with those goals and those principles of course is the ideal situation.

COOPER: Is there room in the Republican Party today for, you know, a Mike Castle who some would call a moderate Republican or what some in the Tea Party would say is just a liberal Republican or a Democrat who just calls themselves a Republican. But I mean is there room for a Mike Castle in the Republican Party today?

PAUL: Sure. Probably depends on the state, it's going to be much tougher because we live in revolutionary times. What we're witnessing today is change coming from the grassroots. I have noticed over the many years that presidential candidates always campaign on change and they never get it.

But change, real change only comes philosophically from the grassroots, when the people endorse certain views or condemn certain views. And that's what's happening this time. This only happens once maybe in two or three lifetime.

COOPER: Do you really believe this is a revolutionary time? That this is a --

PAUL: Oh, yes. Because it's -- but it's economics. I see everything in terms of economic policies, and that's what drives everybody. That's what makes people so angry and upset. You think if there were no economic problems this would be going on?

This is the end of Keynesianism. Keynesianism has been with us for 70 years and it's failing. And even the liberals know it's failing. It's sort of like the revolutionary end of an age with the downfall of the Soviet system. It finally just didn't work.

You didn't have to fight anymore. It didn't come from the leaders, it came from the grassroots and that's what's happening right now. The grassroots knows that government fails. Even today statistics says hardly anybody trusts the government anymore and good reason.

COOPER: But WHAT about --

PAUL: It doesn't function. It doesn't have the right system anymore.

COOPER: There are those who say, well, look, what about actually getting things done in Washington? I mean, that compromise is essential in politics, that no matter what you need at some point to compromise with someone on the other side of the aisle or someone even within your own party to effect change.

Do you think that's true? And if so do you think these new voices, those who have been elected by the Tea Party and their supporters, do you think they're going to be willing to compromise on things?

PAUL: Well, I don't think we have to -- have to compromise, I think you build coalitions. I work a lot with the Democrats on foreign policy and civil liberties, so I think coalitions are very good. But compromise, yes, if I want to eliminate the income tax and the other side wants to reduce it 50 percent, I would say, well, you know, if it's reduced 50 percent, that's not bad. That's a good compromise.

But if somebody else wants to double your taxes, and somebody says, it's not doubled, let's just increase it by 25 percent; no I don't deal with those kind of compromise. Always compromise with people in your goals which to me is perfecting liberty, increasing individual liberty and the free marketplace.

When you compromise moving in that direction and working with coalitions, that's quite a bit difference. But if you work coalitions and you know, I've worked with the various ones like Barney Frank and Dennis Kucinich and others in trying to promote an agenda. And this is seen as compromise. It's not exactly compromise.

But I think the people in the country see this as good, because you can work together and find out what you agree on. I think the war issue is a great issue that -- and you know, the Federal Reserve has been something. I had tremendous support from Democrats. I had 320 members of congress sign on to that bill.

So that is what I think is important. But I didn't have to compromise my principles.

COOPER: As a sitting member of Congress, though, given the anger that's out there, obviously you have a lot of support among and sort of, you know, a lot of credit among Tea Party activists. But do you think some Republican Congress people are concerned about being seen as too moderate, as being seen as being too willing to compromise?

PAUL: By the Tea Party people, you mean?


PAUL: Yes, I think that's it, but I just think that we're moving in the right direction. I think the most magnificent thing is that this revolution is going on and the people have discovered it, and they're not blaming the average citizen, they're blaming Washington. That's why Republicans and Democrats are losing.

But the most important thing for me is having something to say or having some influence on what the message should be. Right now the message is, Washington has messed up and we have to do something. They spend too much money, government is too big, we have to reduce the size and scope of government.

But then on the finer points is where the discussion is going on, and I don't like the idea of having one kingpin either dictating what everybody believes in. I think it should be grassroots and that is good.

But in my modest way, what I'll try to do is get the Tea Party people to think about, you can't cut back spending if you don't think about foreign policy and bringing troops home and ending endless war, you know. And we should, as conservatives be concerned about civil liberties. Those are the kind of things very important to me. And the grassroots in the Tea Party movements are very open to that, even though I would admit they don't all agree with that, because a lot of other Republicans now have gotten involved, and they -- and they want it to be the old Republican agenda.

COOPER: Right.

PAUL: And the Tea Party people don't like that, and they can see through this. And one thing is, if some of these people get elected and they don't do as expected, if they keep voting for big government and more taxes, they're going to be held actable this go around.

COOPER: All right. It's a fascinating time. Congressman Ron Paul, it's always good to talk to you. Thank you, sir.

PAUL: Thank you.

COOPER: Coming up next on the program: the inside story behind today's Republican establishment turnaround. They now say they're embracing Christine O'Donnell. What our sources are telling us about the GOP's change of opinion about the Tea Party candidate. That's coming up.

And later peaceful protests with Big Brother watching, how one state's Homeland Security Department was spying on law-abiding citizens.


COOPER: Before the break we told you about the Republican Party's flip-flop over -- or some members of it -- Christine O'Donnell's victory in Delaware. They didn't want her to win, now they're embracing her in public at least. Why the change of heart? Politico has a quote, saying it's, quote, "a vivid illustration that the base is in charge and has the leadership running scared. Our sources at the Capitol have been digging for facts. Senior congressional correspondent Dana Bash and senior political analyst Gloria Borger joined me earlier for tonight's "360 Insider Briefing".


COOPER: Dana, we've seen a lot of back and forth with the support for O'Donnell. Republicans clearly not happy at first, even the senatorial committee last night putting out a very tepid congratulations to her. What have you heard today from your sources? They appear to at least now be rallying around her.

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: "Appear" being the operative word. Look, privately, nothing has changed. Republicans who want to win that seat are still very unhappy that Christine O'Donnell won and that Mike Castle didn't.

In the words of one source I talked to today, yesterday their polls showed that Castle winning by 11 points and O'Donnell losing by 11 and that has not changed today.

However, and this is the big however, despite that, they understand that the most critical thing going forward to November is winning, not just in Delaware, but across the country. And sources I talked to today said the last thing -- they realized this morning when they woke up -- the last thing they need is to try to tamp down or accidentally tamp down on some of that energy that they're seeing that they need to get out there against Democrats in November.

COOPER: So Gloria the National Republican Senatorial Committee says they're giving the maximum allowable $42,000. There's a lot more though they could do. What should we be looking for in the weeks ahead?

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, I talked with a senior strategist involved in these Senate campaigns and he said to me, look, we could give her more money, a couple weeks down the line. They've got another $180,000 they might be able to give her somewhere along the line. They could even give her more money for so-called independent expenditure used for campaign ads.

But here's the big thing, Anderson. They don't want to waste their money. They're very pragmatic. If it looks like she's a viable candidate and by that he said to me if she's within single digits of the Democrat, then they're going to throw some money at her. But if she's not a viable candidate, why do they want to waste their money or waste their time?

They were mad about this race. They've accepted that she's won. It sounds like the stages of grief but they're not willing to just throw money at something they think could just be a lost cause I think.

COOPER: Gloria, is that why Karl Rove is the only one who kind is still continuing to, you know, say negative things about O'Donnell publicly, because he's not in office?

BORGER: Well, no, but here's the interesting thing about what Karl Rove is saying. What he's saying is that she's not a credible candidate. He's saying that in a general election campaign, she has some ethical issues, questions of how she's spent campaign money, why her college degree -- questions about whether she got a college degree or not, or when she got it still linger.

He thinks that all of these questions are going to be raised in a general election campaign and that it could really be trouble for her. So his feeling is, is this the way a conservative movement wants to introduce itself to the American people? You want credible candidates.

You didn't hear him say that about Rand Paul, you didn't hear him say that about Joe Miller in Alaska. But you're hearing him saying about her because he doesn't think she's a good candidate to represent conservatives or the Republican Party. It really has very little to do with establishment, not establishment, it has to do with who she is.

COOPER: It's a fascinating day. Gloria Borger thanks. Dana Bash, thank you.


BASH: Thank you. COOPER: Well, Democratic National Committee chairman, Tim Kaine says he's loving the GOP turmoil. He told the "New York Times", and I quote, "Republicans thought they were embracing the Tea Party and at times it turns into the Donner party. Despite Democratic hopes of Republican cannibalism, however, the enthusiasm and energy of Tea Party supporters should worry Democrats in November."

Joining me now is Eliot Spitzer, former New York governor and co- host of CNN's new program, "PARKER-SPITZER"; also Republican consultant and political contributor Alex Castellanos; and blogger and radio host Dana Loesch, who's also the co-organizer of the St. Louis Tea Party coalition.

Appreciate all of you being with us.

Eliot, White House Press Secretary Robert Gibbs said -- and I quote that -- "this shows there's a very vociferous debate going on inside the Republican Party for the hearts and minds of Republican voters." Is he right?

ELIOT SPITZER, CNN CO-HOST, "PARKER-SPITZER": Of course he's right, but he's also the victim of that debate, because that debate has created enthusiasm and energy.

The Tea Party is taking over the Republican Party in many states -- in Delaware, not so clear. But right now, the Democrats are saying we're no longer setting the agenda. And the fear that the Democrats have is that this enthusiasm, even for candidates who Karl Rove admits are not credible, from many other perspectives, may continue through November. And this could be a tsunami that nobody could possibly have predicted.

COOPER: Dana, do you think O'Donnell is credible? Do you think she can win?

DANA LOESCH, ORGANIZER, ST. LOUIS TEA PARTY COALITION: I do think she can win. I think she can win as soon as Karl -- people like Karl Rove stop going on television and trying to snatch victory from the jaws of defeat.

We haven't even begun to try yet. I liked Michael Steele's approach. And I can't believe I'm saying this, but I think Karl Rove could possibly take some notes from how Michael Steele approached this.

But that doesn't help, going on camera saying that a candidate isn't credible and just -- and talking about how, well, it took her two decades to pay off her college loans. Well, forgive her for not being rich, like you, Karl Rove, but it doesn't really -- you want to talk about winning moderates and independents, that's not the way you go about it.

It's really bizarre.

SPITZER: That's not the only measure of credibility. I don't think Karl Rove is focusing -- is focusing exclusively on, can she win?

I think there's a reputational harm that he is worried about, when the Republican Party that has a Mike Castle, who has been a serious, thoughtful public servant, is defeated by somebody whose views on issues seem to be so completely disparate and far afield from normal ideas that are tethered to fact and reason.

I think that is what Karl Rove is scared about. There's a reputational hit the Republican Party will really suffer from if they embrace candidates like this.


COOPER: Alex, are you concerned about this?

ALEX CASTELLANOS, CNN POLITICAL CONTRIBUTOR: No, I think it's -- I think it demonstrates a lot of energy in the Republican Party. Look, this is an anti-establishment year, anti-Washington year. People look at all these -- these qualified people we have in Washington and working together in a bipartisan way.

And in a bipartisan way they've spent the country into bankruptcy. They've put us in debt for -- that will take forever to pay. So they want it to stop.

And that's what you're seeing, I think, this year is a -- is a populist, a revolt against the establishment of both parties. And they've just eaten the Republican establishment for a snack. Now dinnertime is November, and only Democrats are going to be on the menu.

SPITZER: Well, you know, that's a great metaphor and I applaud you for it. The problem is that the closest metaphor I think that many people can see historically is to the Know Nothing Party, the Know Nothing Party of the 1840s and '50s, which was an equivalent populist uprising of anger and venom against the establishment. It burned out pretty quickly when economic times returned to normal. In that case it was anti-immigrant fervor.

CASTELLANOS: I think there's another historical precedent, Governor Spitzer. I think there's a much larger --


CASTELLANOS: -- excuse me -- I think there's a much larger historical precedent, and that's a country that was founded -- founded by a group of people who didn't want to be told what to do by an elite royalty that thought it had the answer to everything.

And right now Washington is doing that. It's bankrupted the country and people are really concerned about it. I think the Republican Party just got a wake-up call that said, "Look, we don't want to send a message out that says we're more concerned about keeping our power in Washington than to listen to Republicans."

COOPER: Dana -- Dana, do you think it's going to burn out in any way?

LOESCH: I don't think it's going to burn out. And I want to -- Mr. Spitzer said something that was very interesting, that this isn't tethered in fact or reality.

I have to point out that Mike Castle is a very incredibly -- he's a very established Beltway candidate for sure, but he's also a candidate whose record differed from where the majority of Americans polled, where they fall.

The majority of people are more identifying with the grassroots movement than they are with people like Mike Castle. I mean, there was a Rasmussen poll that was taken just -- I believe it was in August, where something like 75 percent of -- or thought of the American people thought that the congressional Democrat agenda was too extreme.

And then you look at all of the tracking that has been taking place. Gallup released a poll also in August showing that the majority of independents, they are favoring the Republican Party, meaning they're favoring the grassroots conservative candidates that are really actually providing a difference in parties.

SPITZER: You're talking --

LOESCH: People like Mike Castle is Democrat light.

SPITZER: You're talking -- you're talking very persuasively about poll numbers. I'm not talking now about poll numbers or what might happen in a moment in one election at one moment in time.

What I'm talking about is the seriousness of confronting deficits with policies that will really do something about it. A Bill Clinton who gave us a surplus versus a George Bush whose tax cuts created this.


SPITZER: And so I think the difference is certain objective facts that, at the end of the day, will emerge that will shed light. I think Ron Paul is a fascinating guy, but when he says Keynesianism is dead, he just is simply fundamentally wrong. What is dead is --

LOESCH: Well Castle --


SPITZER: -- the procession of libertarianism that he was a proponent of that took us over the cliff in terms of an economic crisis as close to a depression as we've had in 80 years.

LOESCH: And TARP has been supporting policies which tripled our deficits.

CASTELLANOS: Anderson, Anderson -- excuse me.


Castellanos: I'm sorry. Excuse me, but look, there's something out there happening that's much bigger than the Tea Party. The Tea Party is certainly a part of it, but when you look around the country, there's a new generation of Republican candidates out there.

You have independent business women, outsiders in California: Meg Whitman, Carly Fiorina; Kelly Ayotte in New Hampshire. You have Bob McDonnell in Virginia; Chris Christie in New Jersey; Scott, Massachusetts.

All these new candidates have one thing in common. They're outsiders. They're fresh faces. And they don't want to grow Washington's economy; they want to grow America's economy. They want to stop taking money out of the American people's economy and sending it to Washington.

SPITZER: Let me make something very clear. I don't want to go --

CASTELLANOS: The Tea Party is the easiest part to focus on, because it's got the brightest feathers and is the most colorful, but it's much bigger than that. That's why Republicans are probably going to gain something like 52, 53 seats.

SPITZER: Alex, I could not agree with you more.

CASTELLANOS: Ask Americans about Keynesianism being dead. They're voting on it this election.

SPITZER: Well, I could not agree with you more about growing the private sector and private sector job creation versus government. And in fact, that is what smart politics is all about.

What I'm saying is the policies coming out of the Tea Party are simply so disassociated from reality in terms of what it takes to do it. And if you sit down with a Meg Whitman; you sit down with business leaders who have grown business, who have run businesses, they will tell you that what the Tea Party is talking about and what Ron Paul is talking about is simply contrary to good economics.

And I would suggest to you that the nations right now whose growth is outstripping us by huge margins, whether it's India, Vietnam, Japan, even France and Germany, you look at what they're doing, in fact I think you would find out that your perspective is being proven dead wrong by what economics is working.

COOPER: I want to give Dana the last thought.

CASTELLANOS: Keep telling the Democrats to spend.

LOESCH: Excuse me, with all due respect, though, you can't -- you can't say that economic policy which talks about spending billions of dollars for yet another stimulus after we spent 11 frillion (ph) dollars for yet another stimulus that contributed to the deficit, that contributed to high unemployment. You can't say that that's good economic policy. And those are all things which the grassroots movement is vehemently against.

SPITZER: Look, the underlying -- if I could just --

LOESCH: That's not good economics, that's irresponsible and that's fact.

SPITZER: I know Anderson -- the reason that was necessary, unfortunately, was because of the deregulatory policies, libertarian policies that were put in place by Tea Party-like false regulators like Alan Greenspan and Larry Summers --

LOESCH: You mean like Chris Dodd? Because he was --

SPITZER: Absolutely. Yes, absolutely.

LOESCH: You're talking about Fannie Mae and Freddie Mac and things like that.

SPITZER: I agree with that. That was not genuine government smart policy. I agree with that critique.

CASTELLANOS: Spitzer advice to Democrats, spend more. I love it.

SPITZER: No, no, no. It's not spending. It took years to do it. What you're saying simply doesn't work.

LOESCH: I hope that that narrative keeps going.

COOPER: Dana Loesch, good to have you on again. Alex Castellanos, Eliot Spitzer, thanks very much.

LOESCH: Thank you.

A quick reminder: don't miss "PARKER-SPITZER" right here on CNN, 8:00 Eastern Time October 4, every weekday thereafter until the competition cries uncle, I guess.

Still ahead on 360: a revelation that has Pennsylvania's governor fuming; it's one thing to keep an eye on potential terrorists but another to conduct surveillance on ordinary Americans. We're going to tell you what this is all about and the fallout that's followed.

Plus BP back on the hot seat. Tony Hayward grilled in London, insisting that short cuts were not taken to save money.

Back in a moment.


COOPER: I don't know if you've seen these pictures. Take a look. It looks like gravel, right? Those pictures look like a gravel road. Those are all fish, dead fish. It's a major fish kill in southern Louisiana in Plaquemines Parish, just thousands and thousands of them. Question is, is there a link to the BP spill? We'll take a closer look. Meanwhile, we're following some other important stories. Isha Sesay joins us with a "360 Bulletin" -- Isha.


President Obama is turning up the pressure on congressional Republicans over the economy. Today he criticized Senate Republicans for holding up his $42 billion plan to aid small businesses. But he also praised two GOP senators for breaking with their leadership for moving with the bill today.

Meanwhile, the president plans to bypass the Senate and appoint Elizabeth Warren as his special adviser to help to set up a new consumer protection agency under the Wall Street Reform Bill. If he officially nominated Warren to run the agency, she'd have to be confirmed by the Senate in a potentially bruising battle.

Tony Hayward, outgoing chief of BP, denied today that the company installed only one blowout preventer on the broken well in the Gulf to save money. He told a parliamentary committee in London that the single blowout preventer which failed should have worked, and the oil industry needs to know why it didn't.

And Anderson, this was no cat stuck up a tree. Firefighters in Oregon were called to rescue a 1,500-pound camel that fell into a sinkhole. His name is Moses. He was said to be calm while pulled out of the hole; clearly not very happy. Thankfully, Moses is ok.

COOPER: I read this. The camel is owned -- one of several camels owned by, I guess, a pastor or some pastors, which I guess hence the name Moses.

But I'm surprised. You know, camels spit. Have you ever ridden a camel?

SESAY: I have. They're miserable.

COOPER: Yes. They can be miserable animals. I mean, I love animals but they spit a lot.

SESAY: I do too. But they're miserable; they're grumpy; and they smell. So quite frankly, you're not going to find an advocate here for the camels.

COOPER: Those three adjectives also describe me. I'm miserable, grumpy and smell -- some days. Isha, we'll talk to you in just a couple more minutes.

SESAY: I'm going to leave that one there.

COOPER: Please do.

The government spying on ordinary Americans in the name of homeland security -- you're not going to believe this. Happening in Pennsylvania, and the groups being targeted certainly don't sound like a threat to national security. Wait until you hear who's getting investigated.

And a picture of environmental disaster that's got to be seen to be believed -- I'm just stunned by these images. We'll explain what is going on here. Massive fish kill in Louisiana.


COOPER: What if you learned that the government was spying on you? Reporting on you as a potential threat simply because you went out and protested something? Well, tonight that's exactly what people in the Commonwealth of Pennsylvania are learning.

A private security contractor hired by the State Homeland Security Department paid for by taxpayers compiled a list of what they seem to believe were potentially threatening groups and reported them to law enforcement. The groups they targeted? Well, as you'll see, they weren't exactly al Qaeda or even Al Capone.

Pennsylvania's governor, Ed Rendell, says he just found out about it, and he's furious.


GOV. ED RENDELL (D), PENNSYLVANIA: Good lord. And to think that we spent $125,000 on this is, at a time when every penny is dire for us, is a further embarrassment.


COOPER: We're going to talk to the governor in just a moment. He's ending the contract with the security firm, and he's apologizing to Pennsylvanians.

But first, I just want to show you a little bit about this contractor that was hired and what groups they apparently considered a threat. I think it's going to surprise you.

The contractor is this group, the Institute of Terrorism Research and Response. It's an American-Israeli non-profit. This is their Web site. It's called the You've got the guy with the gun. It all looks very official, someone playing chess down here.

Now, take a look: here is their mandate from the federal government, from the Department of Homeland Security's own Web site. And the mandate sounds legit. It's to protect this stuff: the food supply, dams, chemical plants, crucial, critical infrastructure that, if destroyed, in the words of the Department of Homeland Security, would have a debilitating effect on the security of the country. All right. So far, so good.

Now, this is what some of what the outfit came up with. This is Pennsylvania Intelligence Bulletin 131, which they wrote. And one of the groups that they're warning about -- take a look -- are animal rights activists of Philadelphia planning to demonstrate peacefully at what they call the Worst of the Worst. So what is the worst of the worst, according to animal rights activists? Well, it's the Lulu Shrine Rodeo in Plymouth Meeting, Pennsylvania. This is where they were going to protest. And this is what this contractor was so concerned about.

Now, other bulletins done by the contractor warned about events like this one. This is the gay pride festival of Central Pennsylvania. This is a picture from last year's event. Not sure what this has to do with critical infrastructure that they were so concerned about.

Now, there were plenty of groups that these -- that these contractors targeted: people protesting peacefully against gas drilling in the state's shale deposits, education protesters, even pacifists.

Governor Rendell spoke with us about this mess earlier tonight.


COOPER: Governor, you said this is embarrassing. What particularly upset you about this?

RENDELL: Well, because we paid out $125,000 for a yearly contract to get information about rallies that are basically just protest rallies.

And our job, Pennsylvania Homeland Security Department, is supposed to carry out the federal mandate to report any -- when there's credible evidence of threats to critical infrastructure, we're supposed to report that to local law enforcement and to the holders of the infrastructure themselves.

But there was no credible evidence that any of these protests that there was any threat to infrastructure at all, or any critical infrastructure. No credible evidence.

To give you an example, Anderson, there was -- it was disseminated to local law enforcement that there was a gay and lesbian pride festival. Now, good lord. What threat to critical infrastructure? There was --

COOPER: Some have suggested -- there are some who have suggested that they were alerting law enforcement for that, because there could be counter-protesters who didn't like gays and lesbians and would cause violence. Have you heard that or is that just a spin on them?

RENDELL: That's a spin. And remember, the task, the mandate to us at Pennsylvania homeland security is not to take care of situations like that, but to take care of credible threats to critical infrastructure.

COOPER: Do you know how this security company chose what groups to try to gather intelligence or report on? Because I mean, like you say, they focus on -- on groups opposing to drilling. They didn't seem to have any concern about groups who, you know, who are in support of drilling.

RENDELL: That's correct. And again, there was not one shred of credible evidence that any of these groups posed any threat to the wells, et cetera.

COOPER: Apparently, these reports were forwarded not just to police and law enforcement but also to private companies like these gas companies about these groups who oppose them. And I guess the argument for that is, well, there were -- there were some vandalism against some of these companies, and therefore, this was security.

But for the gay group, if it was supposedly to, you know, fear of protecting them, nobody seemed to have forwarded these reports to the gay group out of their own --

RENDELL: Of course not. And even the supposed vandalism, there was no credible evidence that any of the protesters had anything to do with the vandalism.

COOPER: You said you just found out about this. There was a column written about it, apparently, in the "Philadelphia Inquirer" almost two months ago. Columnist named Daniel Rubin. And he wrote, and I quote, "Those out of the loop might be alarmed to read the Pennsylvania Actionable Intelligence Bulletin, which warns law enforcement officials of such potential trouble spots as pro-education rallies, anti-gun demonstrations and the coming of the circus."

And he goes on to identify this group, the Institute for Terrorism Research and Response, as the firm collecting the information. Did you -- had you seen that article? Did anyone in your office tell you about that article?

RENDELL: No, and I don't mean to offend Mr. Rubin, but I try to read at least the major stories in every newspaper in Pennsylvania every day. That didn't get --

COOPER: When did you find out about this?

RENDELL: I woke up yesterday morning, and it was on the front page of "The Harrisburg Patriot." So I immediately called my scheduler, and I said I want to see these folks at 5:00 that afternoon. That was the earliest I could see them.

And I listened for a second. I found it to be total BS. And I told them we're terminating the contract and we were not disseminating any of this information again.

COOPER: You're standing by your state homeland security director, a guy named James Powers. Why? There are some who said --

RENDELL: I'm not standing by him. He made a --

COOPER: There's some who say he should be fired.

RENDELL: Well, sure. You know, our reaction to things like this in government is always, let's fire somebody to show that we've taken action. Let's fire somebody.

Well, Mr. Powers made a mistake. But he's supposed to be supervised by the Pennsylvania Emergency Management Agency. They sure as hell made a mistake. The state police knew that this was going on. They sure as heck made a mistake. I'd be firing people left and right.

COOPER: And what is your message to those, you know, protesters?

RENDELL: I said yesterday, I apologize to each and every one of the groups that were listed on that sheet. It shouldn't have been done, and it's not going to be done any more.

COOPER: Governor Rendell, appreciate your time. Thank you.

RENDELL: Thanks Anderson.


COOPER: Still ahead, building a better car wash that's both clean and green and profitable. Tonight's "One Simple Thing", just ahead.


COOPER: In tonight's "One Simple Thing", car washers going green; customers want clean cars but with a clear conscience. Paul Courson found a place where they get it.


PAUL COURSON, CNN CORRESPONDENT (voice-over): One easy way to tell whether your car wash is green, is to look at the way it handles the dirty water that comes off your car. Some newer facilities have actually figured out a way for it to be recycled.

DAVID PODROG, OWNER, MARITIME AUTOWASH: We have a state of the art re-claim system and we recover 95 percent of our wash water. That, combined with the better chemistry in the car wash chemicals allows us to really take the environment in the hand when we wash cars.

COURSON: Running his own car through, he acknowledged some of the old chemicals are cheaper and worked better, but at a price.

PODROG: Acid and especially hydrofluoric acid is very dangerous. So we end up paying more for safer chemicals than we would for more dangerous ones.

COURSON (on camera): Is this where the water is getting recycled at this end?

PODROG: This is and now we're going in to our final rinse. This is fresh water that's being applied along with our waxes.

COURSON (voice-over): Business is good, offsetting higher cost. And customers like the green approach.

ARIKA PEVENSTEIN, CUSTOMER: The car wash is great because it's environmentally friendly, and I'm really big into that.

CHRIS RIVERA, CO-OWNER, CANTON CAR WASH: The customer demand is there but it's also just inherent to our generation, I think, where we want to be good to the environment. We've grown up in that.

COURSON: Today's filtration technology is so sophisticated that it can even make tap water cleaner than what you drink.

(on camera): The water's been filtrated pretty good.

(voice-over): The reason they do it here is that when the water dries off, there are no spots left behind.

(on camera): As these cars go into the car wash, when the jets are washing the vehicle it's not just a random splash of water. It's a calibrated jet of water and the water goes into the recycling trough below.

(voice-over): They've even answered what to do about empty aerosol cans of window cleaner. One simple thing -- don't use them.

Treated wiping rags come out of a dedicated washing machine, moist and ready to use.

RIVERA: We grab it, clean the window and there's no -- no throwing out of any aerosol cans.

COURSON: How do these car washes compare with using a garden hose in your driveway? Well, the International Car Wash Association says the typical person uses more water than a commercial car wash and that the dirty run-off can pollute ground water. That means sites like this can be better for the environment.

Paul Courson, CNN, Baltimore, Maryland.


COOPER: Hey, that's it for 360. Thanks for watching. I'll see you tomorrow night.

"LARRY KING" starts now.