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Inside Politics

Bush vs. Kerry: Round Three; Interview with Treasury Secretary John Snow

Aired October 13, 2004 - 15:00   ET

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

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


(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: You ready for tomorrow?

ANNOUNCER: Writing the spin before the final debate.

JOE LOCKHART, KERRY CAMPAIGN ADVISOR: We may be favored for tonight, but really the story is, the president has got a lot of pressure on him.

NICOLLE DEVENISH, BUSH-CHENEY '04 COMMUNICATIONS DIRECTOR: The Kerry campaign has reminded me of a peacock over the last 10 days.

ANNOUNCER: Will Bush or Kerry put their best foot forward tonight?

An oops that could sway Ohio. What did the treasury secretary say and how is it playing politically?

Tough competition. Even Bush and Kerry might prefer to watch that other grudge match tonight.

Party time on campus. Who needs a keg or a concert when the presidential election rocks?

(END VIDEOTAPE)

Now, live from Tempe, Arizona, site of tonight's presidential debate, JUDY WOODRUFF'S INSIDE POLITICS.

JUDY WOODRUFF, HOST: Thank you for joining us here once again today at Arizona State University.

This is where President Bush and Senator Kerry will have their last, best chance before Election Day to appeal at one time to tens of millions of voters. Just hours before their debate, a new poll suggests the race here in Arizona is closer than it has been, with Bush holding a five-point edge among likely voters. Bush was 10 points ahead in an Arizona poll released last week.

The president leads into tonight's debate zero for two based on some polls that show Senator Kerry won the first two face-offs. But Republicans are hoping that this third debate will be the charm after Bush's improved performance last week.

Our White House correspondent Dana Bash looks at the Bush camp's debate strategy.

(BEGIN VIDEOTAPE)

DANA BASH, CNN WHITE HOUSE CORRESPONDENT (voice-over): The Bush campaign frames the strategy for round three in simple terms.

GEORGE W. BUSH (R), PRESIDENT OF THE UNITED STATES: I think government ought to help people realize their dreams, not tell them how to live their lives.

BASH: Use the 90-minute focus on domestic issues to lay out what they call a fundamental difference in philosophy between the candidates.

MATTHEW DOWD, BUSH CAMPAIGN STRATEGIST: On the one hand, somebody who thinks big government and high taxes is the way to go, and the president, who thinks a smaller government with people having more control.

BASH: Mr. Bush's goals, question the senator's credibility by saying his spending proposals and promise to shrink the deficit don't add up, zero in on parts of Kerry's 20-year Senate record to argue he's a liberal.

BUSH: It's the crux of his healthcare policy.

BASH: And point to big proposals like healthcare as proof the senator wants to expand the government while Mr. Bush would give private incentives to expand coverage. But polls show the senator has an advantage with voters on key domestic issues, and Bush aides privately admit they have a high hurdle in turning that around.

And in the dizzying world of pre-debate spin, Bush aides are hoping what they see as team Kerry's overconfidence about a 2-0 debate record will backfire.

DEVENISH: The Kerry campaign has reminded me of a peacock over the last 10 days. They're very interested in admiring their feathers and really talking up their performance in the debates.

BASH: But some Republicans are concerned Senator Kerry is getting what the first President Bush dubbed the big mo, momentum. And this president needs a win.

DAVID GERGEN, FORMER PRESIDENTIAL ADVISOR: Can Kerry break out? Can he open up? And if he were to win a third time, conceivably he could do that. But I can guarantee you that if he wins tonight it will give him enough enthusiasm and fire in his campaign that it will go to the end in a very, very close race.

(END VIDEOTAPE)

BASH (on camera): And the Bush spin now is that they always thought it would be a close race. But, Judy, even quietly inside the Bush camp, they admit that Kerry has what one aide dubbed mini-mo and they're hoping certainly tonight with its large audience they can use it to stop that momentum -- Judy.

WOODRUFF: All right, Dana Bash, traveling with John Kerry, thanks -- or traveling with George Bush. Thanks very much.

Now we turn to the Kerry campaign. The senator arrived here in Arizona from New Mexico just about an hour ago, trying to stay loose but -- quote -- "not overconfident."

CNN's Ed Henry has been traveling with Kerry.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: John Kerry woke up here in Santa Fe and was greeted by supporters at his hotel, who wished him luck before he started making his way to Arizona. The Kerry camp feels very confident. They believe they won the first two debates, and they think that now it is shifting to a domestic focus, they can go three for three.

In fact, what did Kerry do on the eve of what could be the pivotal moment in this deadlocked election? He went out for a little exercise, went on a long bike ride for about 45 minutes last night, and then went to watch back at his hotel his beloved Red Sox lose to the New York Yankees in game one of the American League Championship Series. The bottom line, though, is bikes and baseball. The clear image that the camp was trying to project is that Kerry is very loose, very calm heading into this clash.

In fact, Kerry aides say that we've seen President Bush on the attack all this week because they believe that the president is very much on the defensive after the first two debates.

Here's Kerry campaign press secretary David Wade.

DAVID WADE, KERRY CAMPAIGN PRESS SECRETARY: Well, I think the pressure's on the president, and it seems like the president and the vice president both, as you've seen in these harsh attacks following each debate, they've sort of decided to write off all the undecided voters and to speak only to their hardened Republican base.

HENRY: Aides say that Kerry did not need to directly respond to the attacks from the president this week. They say the senator was comfortable, relaxing a bit and working in intense debate prep behind closed doors with staff. They say that Kerry will take the gloves off tonight, though. The senator believes that his record has been distorted on the domestic front by the president on a whole host of issues, including taxes and healthcare.

In fact, we got a little bit of a preview of what staffers say Kerry will do tonight. He released a new ad today, fighting back at attacks from the president, who has said that the Kerry health plan is going to be a big-government takeover. The Kerry campaign says that's a distortion, a fabrication. They say so in the new ad. And the Kerry camp says that overall what they are going to try to accomplish is what Al Gore did not do in 2000, in their estimation, and that is offer a clear choice between the two parties on every single issue on the domestic front.

Ed Henry, CNN, Santa Fe, New Mexico.

(END VIDEOTAPE)

WOODRUFF: Thank you, Ed.

Well, separately the, Kerry campaign says President Bush is going to have to answer tonight for some controversial comments by Treasury Secretary John Snow. Speaking in Ohio Monday, Snow responded to Democratic attacks on Bush as the first president since Herbert Hoover to end his term with fewer jobs than when he started.

Snow called that -- quote -- "a myth." The Kerry camp is seizing on that. Kerry aides say an ad featuring Snow's comments is in the works to air in Ohio, which has been hard-hit by job losses. And the Kerry campaign issued a statement responding to Snow -- quoting now -- "These comments reflect the callous disregard this administration has shown for the millions of people who are out of work and have seen their quality of life suffer over the last four years" -- end quote.

And here is what John Edwards said on the campaign trail about all this.

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL CANDIDATE: And now we find out that the Bush administration and their treasury secretary say that the surplus that they inherited when they came into office was a myth. I wonder if the four million Americans who've fallen into poverty in the last four years, I wonder if that's a myth.

What about the fact that folks' income is going down at the same time that the cost of virtually everything, healthcare, child care, college tuition, is going up? I wonder if they think that's a myth.

Well, here's the truth. Come November the 2nd, we're going to send George Bush out of town, and that will not be a myth.

WOODRUFF: Privately, one senior Kerry aide is telling CNN that Snow may have lost Ohio for the Bush camp. Secretary Snow will join us with his response to all this ahead.

New showdown state polls lead the headlines in our "Campaign News Daily." The results show Bush and Kerry battling for support in several crucial states and Ralph Nader could play a role as well.

In Minnesota, Kerry leading Bush by two points in a new poll from WGN Television and "The Chicago Tribune," Ralph Nader picking up 2 percent.

Next door in Wisconsin, the Kerry lead stands at four points with Nader again receiving 2 percent.

In Ohio, meanwhile, the survey gives Kerry a four-point edge over Bush, 49 to 45 percent. And, as for Iowa, "The Tribune" poll gives Bush a 47 percent lead to 45 percent for John Kerry, Nader getting 1 percent. The American Research Group also polled Iowans, and their results show Bush and Kerry deadlocked at 47 percent, with Nader picking up 2 percent. ARG also did a poll of voters in Oregon. That poll found Kerry holding a six-point lead, 50 percent to 44 percent. Ralph Nader did not qualify for the Oregon ballot.

Well, before Bush and Kerry go at it tonight, their high-profile allies are doing the talking for them. Up next, Kerry campaign senior advisor Joe Lockhart joins us with insights into the senator's final debate strategy.

And later, Bush campaign advisor Ralph Reed will give us his insider take on the president's game plan tonight.

Plus, a checkup on new campaign ads. Do they tell the truth about the candidates' healthcare plans?

With 20 days to go until the election, this is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

(CHEERING AND APPLAUSE)

WOODRUFF: From the sounds of this crowd, you can tell a lot of people here at Arizona State University are paying attention to this election. We are back here in Tempe, Arizona, the site of tonight's debate.

The battlegrounds are narrowing, you know, in the presidential campaign ad war. A survey of the top 100 media markets last week found the Bush campaign advertising in 16 states. The state hosting tonight's debate, Arizona, now is out of the mix. The Kerry camp ran ads in all of the same states as Bush, except Missouri. TNS Media Intelligence reports that the Bush campaign outspent the Kerry camp on ads about $15.6 million to $13.7 million.

But when you figure in DNC spending, the Democrats spent more, $21.8 million, compared with $15.6 million for the Republicans. TNS did not spot any Republican National Committee ads airing last week.

Now let's talk about the race and tonight's debate with Kerry campaign senior advisor Joe Lockhart here with me on campus.

Joe Lockhart, the Republicans and some of the reporters covering John Kerry are saying you all are overconfident going into this debate.

LOCKHART: Well, I don't think we're overconfident at all.

We understand that we have a lot of work to do. Votes have to be earned one at a time in this very tight race. But this is a problem for the president, defending his domestic agenda. John Snow was out earlier this week in Ohio saying that job loss in this country was a myth. You know, it shows they either can't face reality or they'd rather be dishonest about what's going on. There are two million Americans who have lost their job in the last four years, the worst record since Herbert Hoover. He's got to face that tonight.

WOODRUFF: But they turn around and say John Kerry's solution is a plan that would end up raising taxes on many, many Americans. And, in fact, John Kerry looked at the camera in the last debate, said, I'm not going to raise taxes on anybody under $200,000, but we still show in our poll half of the people asked still think he would raise taxes.

LOCKHART: Well, listen, this is the first debate that's going to be solely on domestic issues, and we look forward to having that debate.

You know, when you can't defend your record, you have to do something. And if you look at all their ads, they are a series of distortions and not truthful statements. You look at the healthcare ad. It's completely wrong. The Kerry plan has nothing to do with government-sponsored healthcare. It's run by private companies, just like we have now. It's just going to be lower premiums for Americans.

So, they have to come clean tonight on their record. I think that's why they wanted this one last. They wanted to put it to the end. They thought they would have put us away by now, but they haven't.

WOODRUFF: But the president, we are now hearing him increasingly talk about healthcare. He does say the Kerry plan would amount to a big-government bureaucracy, government takeover. He is increasingly calling John Kerry a liberal, a liberal, the most liberal member of the Senate. That's bound to hurt, isn't it?

LOCKHART: No, it's not bound to hurt because the public watches both of them. And that's what happened in the first two debates. Bush attacks, Kerry answers, and the public buys what Kerry's saying. That's why he won the first two debates.

So, you know, he can use any name-calling he wants. It's not going to get him any votes. In fact, there is evidence out there that it's losing him votes. He can call the Kerry health plan anything he wants, but he's not telling the truth. And I think when the public sees our plan, John Kerry talk about it, as opposed to their distorting untruthful ads, they make the decision and they wonder, why can't the president tell the truth?

WOODRUFF: But, you know, Joe Lockhart, John Kerry is seen by many analysts as having won the first two debates. But in the horse- race poll, this is an even -- this race is even. Why hasn't that translated, do you think?

LOCKHART: Well, let's remember. And, Judy, you were one of the people the White House was spinning so heavily before the first debate. It seems like it was months ago, but it was only about 10 days ago. They said that at this debate in Miami, they were going to knock us out of the race, we were so vulnerable, we were so far behind. Well, we're in a different place right now. The trend is going toward Kerry. Undecideds are moving in our direction because of the vision that John Kerry has laid out so effectively in the first two debates. And this one's going to just be about the economy and healthcare. And he really -- I mean, we expect him to come out very negative tonight, and it's because he can't defend his own record, so he has to try to change the subject.

WOODRUFF: The president today got the endorsement of the National Rifle Association. They are saying they're going to spend, I think, 10 -- I'm sorry. I don't remember the number -- $ 10 or $20 million in ads. This is a very powerful group. How does Senator Kerry counter something like this?

LOCKHART: Listen, I think this is going to come down to not what groups on the fringe believe. It's going to come down to whether the public thinks John Kerry's going to fight for the middle class or fight for the people George Bush has been fighting for, the top 1 percent.

When you look at the tax cut, it doesn't matter what George Bush says. John Kerry's not going to raise taxes on anyone unless you're in that top 1 percent. They got a trillion dollars in tax cuts over the last four years, and it didn't turn the economy around. So middle-class people are going to get a tax cut. Those at the top who can afford it the most are going to have the tax cut rolled back. It's that simple. Bush can call it anything he wants. He can call names. He can put labels. The public buys this, and that's why they're moving to John Kerry.

WOODRUFF: All right, we are hearing from Joe Lockhart, a senior advisor to the Kerry campaign.

Thanks very much.

LOCKHART: Thanks, Judy.

WOODRUFF: We'll see you tonight, too.

LOCKHART: Absolutely.

WOODRUFF: Before and after the debate.

LOCKHART: Yes.

WOODRUFF: We appreciate it, Joe Lockhart.

Well, we are going to get the Bush campaign's response ahead from advisor Ralph Reed.

Two additional notes, now, though, from the campaign trail. Former President Bill Clinton has not been able to campaign for John Kerry because of his recent heart surgery. But Clinton has been advising Kerry, we have learned, by telephone. The Associated Press reports that Clinton calls Kerry regularly to offer advice and Clinton is also expected to record phone calls and possibly radio ads on Kerry's behalf.

Independent candidate Ralph Nader has suffered another legal setback in Ohio. A federal judge has refused to order the secretary of state to place Nader on the Ohio ballot, citing evidence of fraud by signature collectors. Nader is officially on 35 state ballots, including a dozen battleground states.

Ahead on INSIDE POLITICS, find out what's at stake in a sports wager between two political heavyweights.

And slugging it out for viewers, the battle between tonight's baseball playoff games and the final presidential debate.

(COMMERCIAL BREAK)

WOODRUFF: We're on a campus famous for its football, the Arizona State Sun Devils.

But moving on to another sport now -- we're glad to have this crowd with us -- baseball and politics -- baseball and politics are as American as apple pie. So it's no surprise a friendly political wager is riding on the outcome of the American League Championship Series. If the Boston Red Sox lose, Massachusetts Governor Mitt Romney has agreed to make a public appearance wearing a New York Yankees jersey. And if the Yankees lose, New York Governor George Pataki will have to publicly don a Red Sox jersey. Game two of the A.L. Championship Series is tonight, with the Yankees one game up.

For some Americans, it'll be a tough call tonight, watch the debate or watch the ball game. But at least one event will have a clear winner.

Our Bruce Morton explains.

(BEGIN VIDEOTAPE)

BUSH: What's the score?

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): The president asking about last night's Red Sox-Yankees game. It's something, baseball playoffs and presidential debates all at once. They used to say Americans only concentrated on the election once the World Series was over. But the season got longer. So now we have to think of two things at once.

The debates have more TV viewers; 43 million watched No. 2. About 26 million watched last year's Yankees-Red Sox seventh game. But, in person, well, the Yankees had 56,000 last night, the debates just a few hundred in the hall, not much Cracker Jack money there. And you can't even sell cold beer. And baseball's a lot less formal of course. At Wrigley Field in Chicago, the announcer used to lead the crowd in singing "Take Me Out to the Ball Game." Hard to imagine Bob Schieffer this evening singing: take me out to the spin room, where all the experts loom. Buy me some spin and a talking point. I don't care if the world's out of joint. No. Bob has a nice voice, but no. Still, that is the real difference. In baseball, you know who won. Last night, you could watch all those Yankees circling all those bases and you knew who won. Or take that famous old baseball poem "Casey at the Bat." He strikes out, you may remember. And Mudville loses the game.

Ernest Thayer wrote: "Oh, somewhere in this favored land, the sun is shining bright, the band is playing somewhere, and somewhere hearts are light, and somewhere men are laughing and little children shout, but there is no joy in Mudville. Mighty Casey has struck out."

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: And he's trying to make you believe it.

MORTON: Not in politics. Tonight, the Bush people will explain how Kerry struck out. The Kerry people will explain how Bush struck out. And they'll do it and do it and do it, sound bites without end, until the last reporter whimpers and runs away.

And tomorrow, or the day after, or maybe every day until November 2, we'll be arguing about a question baseball fans can usually answer easily.

BUSH: What's the score?

MORTON: Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: We'll see. Bruce, thanks very much.

Well, we're hearing from the campaigns and we're speaking with the pundits, but what do the students here at Arizona State University have to say about the race for the White House?

(CHEERING AND APPLAUSE)

WOODRUFF: Coming up, we'll gauge the political pulse on this excited campus.

And stay with CNN throughout the day and into the evening, as we keep our spotlight on the presidential debate. Our prime-time lineup kicks off at 7:00 p.m. Eastern.

(STOCK MARKET UPDATE)

(COMMERCIAL BREAK)

WOODRUFF: John Kerry lands in Arizona just hours before the final presidential debate. But the Kerry campaign is not waiting until tonight to go after President Bush over healthcare.

George Bush gets ready for this final showdown as well, and he lands the endorsement of the National Rifle Association.

Welcome back to INSIDE POLITICS. I'm Judy Woodruff, live today again at Arizona State University, the site of tonight's presidential debate.

(CHEERING AND APPLAUSE)

WOODRUFF: You can just tell how much enthusiasm there is on this campus.

You know, the ground rules for tonight's showdown are pretty much the same as what they were for the first presidential debate. Both candidates will stand behind lecterns and the questions will be asked by a single moderator. In this case, Bob Schieffer of CBS.

Tonight's questions will cover economic and domestic policy. Bush and Kerry, once again, will not be permitted to bring notes or props on stage, and they will not be allowed, supposedly, at least that's what the rules say, to ask each other questions.

The original rules also call for no camera shots from behind the candidates and no so-called cutaway shots. The television networks have largely ignored the no-cutaway request, however, which led to several shots of a frowning President Bush reacting to Kerry's comments in the first debate.

With me now to talk more about tonight's showdown is CNN's political editor, John Mercurio.

All right, John, you've been talking to both the campaigns. What are their strategies going into this debate?

JOHN MERCURIO, CNN POLITICAL EDITOR: Well, you know, it's sort of interesting. Those sort of rabid spin operations that we saw during the first debate and to some degree in the second debate have really scaled back. Neither campaign, I think, has tried to engage in too much of a pre-game spin.

What we are seeing, the continuing trend, is sort of these dueling strategies between the candidates trying to appeal to these dramatically different groups. Bush to his conservative base, and Kerry reaching out to the sort of swing voters, to the centrists, the small group of undecided voters.

Now, what we saw in St. Louis last week was sort of interesting. Bush delivering sort of a coded message to anti-abortion activists, answering a question about which Supreme Court justice he would choose. He said he would never choose a justice who supported the Dred Scott decision on slavery.

Now, a lot of people sat there and scratched their head, and said, "What's he talking about?" Well, anti-abortion activists for a long time have equated the Dred Scott decision with Roe v. Wade. So this was a message to his base to say, I will never support -- even though I've never talked about a litmus test, I'll never support a justice who supports Roe v. Wade. At least that's a widely held perception.

Another strategy I think you're seeing is the different ways the two of them are trying to frame the debate. Now, President Bush for the past two debates has tried to avoid very detailed policy discussions and is trying to paint sort of a broad general overview, an ideological overview, painting Kerry as a liberal, as a flip- flopper, as somebody you can't trust, as somebody who will raise your taxes and wants a government-sponsored health plan.

Kerry, on the other hand, is pushing for a much more detailed policy discussion on specific issues that he thinks Bush has failed on. So the challenge is for Bush to make this sort of a broad-brush debate, and the challenge is for Kerry to concisely articulate his policies.

WOODRUFF: Well, they're each doing what they think benefits them.

Look back, though, John, at the strategies going into the debate one and debate two. As you look back on them, which set of strategies have been more effective, do you think?

MERCURIO: You know, it sort of depends on what you mean by effective. Now, the polls that we've seen coming out of the debates, almost every poll I've seen has shown that Kerry won both debates, the first one decisively, the second one much more closely.

A lot of national polls that we've seen since both debates have shown Kerry closing the gap, obviously. And recently, in the past two days, we've seen battleground state polls in Ohio, Wisconsin, New Hampshire, all showing that Kerry is now actually leading the president by at least a few points. Very interesting on that score.

But the president, again, is appealing to a very specific group. And they might be sort of flying below the radar screen of these polling groups.

WOODRUFF: You mean his conservative base? Is that what you're referring to?

MERCURIO: So again -- his conservative base -- the conservative base that he's trying to motivate to show up. It's a very important group. And if they end up being motivated the way that the president thinks they are, then he ultimately could be much more effective.

WOODRUFF: That could make the difference. OK.

MERCURIO: We won't know for a couple more weeks, though.

WOODRUFF: We won't. We won't. But we can wait. We're patient.

MERCURIO: We're patient.

WOODRUFF: OK. No, we're not. John Mercurio, thanks very much.

John is our political editor at CNN.

Well, many people say they expect the Bush and Kerry healthcare proposals to play a major role in tonight's debate. Their differences already are the subject of new television ads from both campaigns. We asked Howard Kurtz of CNN's "RELIABLE SOURCES" to look at the facts.

(BEGIN VIDEOTAPE)

BUSH: He says he's going to have a novel healthcare plan. You know what it is? The federal government's going to run it.

HOWARD KURTZ, CNN'S "RELIABLE SOURCES" (voice-over): President Bush has been making that charge against John Kerry for days -- most recently in an attack ad.

UNIDENTIFIED MALE: John Kerry and liberals in Congress have a healthcare plan for you: a big government takeover.

KURTZ: But that's misleading. The government wouldn't run healthcare in a Kerry administration. The Democratic candidate would use tax credits and build on the current system of private insurance to cover millions more Americans.

And the cost?

UNIDENTIFIED MALE: This $1.5 trillion government program...

KURTZ: That's an estimate from the right-leaning American Enterprise Institute, which has employed both Dick Cheney and his wife, Lynne Cheney. Kerry says his plan will cost half as much. Other experts call that a low-ball estimate.

UNIDENTIFIED MALE: Rationing, less access, fewer choices, long waits.

KURTZ: Again, that's misleading. Senate Majority Leader Bill Frist says that "rationing" and "long waits" refer to the Medicaid program, which would cover more patients under the Kerry plan.

In other words, the Bush administration is already presiding over a program that involves healthcare rationing. And there's no evidence that Kerry would take medical decisions away from doctors.

Today, Kerry returned fire on the airwaves.

UNIDENTIFIED FEMALE: George Bush's attacks on John Kerry's healthcare plan are called "not true," "outright fabrications."

KURTZ: Says who? An ABC News report and a "St. Louis Post- Dispatch" editorial, along with other news organizations.

UNIDENTIFIED FEMALE: Listen for yourself.

UNIDENTIFIED MALE: Rationing, less access, fewer choices, long waits.

UNIDENTIFIED FEMALE: Wait a minute. That's what we have now under George Bush. It's Bush that let insurance companies overrule your doctor. Costs have skyrocketed. The Kerry plan lowers costs. You choose your doctor.

KURTZ: But Kerry is wrong to say the president lets insurance companies reject treatments. That's a healthcare system that's been in place under previous presidents as well. And whether Kerry's complicated plan will actually cut costs remains to be seen.

A second Kerry ad tries to seize the offensive.

KERRY: For the last four years, one man has stood between America and lower-cost prescription drugs: George Bush.

KURTZ: That's a stretch. The president has blocked efforts to import cheaper drugs from Canada, but so did President Clinton. Drug costs have been rising for many reasons for decades.

(on camera): This is a battle that goes to the heart of the campaign. Is Kerry a big-government, big-spending liberal? Does Bush make inflammatory charges without evidence? That argument will be front and center at tonight's debate.

Howard Kurtz, CNN's "RELIABLE SOURCES."

(END VIDEOTAPE)

WOODRUFF: Earlier, we reported on comments by the Treasury secretary, John Snow, who was quoted on Monday in Ohio as saying Democratic claims about jobs losses during the Bush administration are "a myth." Secretary Snow joins me now from St. Louis.

Mr. Secretary, what is going on here? Are you saying that jobs -- the total number of jobs has not gone down under President Bush?

JOHN SNOW, TREASURY SECRETARY: No, Judy. Let me say what -- respond to that.

We know that jobs have been lost. The president inherited an economy in a steep decline. He inherited a stock market that was melding down, and then we faced 9/11.

All of that had a devastating effect on the economy, on growth and on jobs. And the president recognized that something had to be done. And he provided leadership.

He forced through the Congress major tax legislation that has put the economy on the right path. And now we've had the best growth in 20 years, and we're beginning to create a lot of jobs. Thirteen straight months of job creation, nearly two million jobs, according to the Establishment Survey.

The unemployment rate at 5.4 is lower than the average of the '70s or the '80s or the '90s. And, I point out, it's low -- it's the same level it was in 1996, a year when many of the president's...

WOODRUFF: But why did you use... SNOW: ... you know, took credit. So, no, what I'm saying is the economy is on the right path. And whether you look at the Household Survey, which says that during the last four years we've created 3.2 million jobs, or you look at the Establishment Survey, which says in the last 13 months it's nearly two million jobs, the record is a good one. We're on the right path, and we're creating lots of good jobs.

WOODRUFF: But why did you use the word "myth" in referring to job loss, when it's -- the statistics show out of the government itself that there's been a job loss?

SNOW: Judy, what I was saying is that the charges that the president's record is the worst in decades on job creation is simply not credible. It has no factual foundation. Under the Household Survey, 3.2 million jobs have been created.

WOODRUFF: Well, the quote -- let me just read you the quote that we see in the newspaper in Findlay, Ohio, "The Courier." "Claims like the one that Bush will be the first president to end a term with fewer jobs than when he started are nothing more than myths."

SNOW: Well, as I say, that's not what I said. What I did say is that charges...

WOODRUFF: OK. So you're saying that's incorrect?

SNOW: Yes, it's incorrect. What I'm saying is, this president's record is a good one. He's recognized that the economy took a lot of blows, that action was needed. He provided leadership. And now the economy is on the right path.

WOODRUFF: Quickly, you also were quoted as saying that the so- called surplus that President Bush inherited, you said it was a mirage. "It never existed." Do you believe that?

SNOW: Well, sure I do. And anybody that looks at the facts will believe that, because that estimate was made before anybody understood that the stock market would melt down, we'd have the recession, we'd have 9/11. And it was an estimate that wasn't borne out by the facts. It was simply an estimate...

WOODRUFF: Mr. Secretary...

SNOW: ... that turned out to be a mirage.

WOODRUFF: I was just -- OK. Mr. Secretary, it's been -- there's been some comment on the number of speeches that you've given in the so-called battleground states as the secretary of Treasury. How many speeches are you giving right now on an average week in these battleground states? I know the speech on Monday was to a Republican -- a county Republican group in Ohio.

SNOW: Yes. Well, Judy, I've traveled around the country. I can't give you any precise -- precise answer on that. But I think it's part of my job to get out and hear from taxpayers and hear from small business to make sure we understand what people on the ground are thinking and doing.

WOODRUFF: All right. Well, we are going to leave it there. Secretary John Snow, we thank you for making time to come talk to us. We appreciate it.

SNOW: Hey, thank you. Good to be back with you.

WOODRUFF: Thanks very much.

A veteran White House advisor and debate watcher will offer his thoughts on tonight's showdown. Just ahead, I'll talk with David Gergen about the final face-off between Bush and Kerry.

And later, are the students here excited about politics? We'll check.

(CHEERING AND APPLAUSE)

WOODRUFF: There's your answer. We'll check the political pulse here at Arizona State.

(COMMERCIAL BREAK)

WOODRUFF: We are at Arizona State University, site of tonight's debate. And for more perspective on what's coming up tonight and the state of the presidential campaign, we are joined now from Boston by David Gergen. He was an advisor to four presidents, Republican and Democratic, and is now editor-at-large for "U.S. News & World Report," as well as being on the faculty at Harvard.

David Gergen, you talk to a lot of people on both sides of the aisle. Where is this race right now?

DAVID GERGEN, "U.S. NEWS & WORLD REPORT": Dead even. And the momentum is with neither side. I think that John Kerry had certainly had momentum coming out of the first debate. The president has slowed him down.

I think they're both racing neck and neck right now, Judy. But tonight's debate could make a significant difference in the dynamics of the race.

WOODRUFF: David, let's talk about President Bush first. What does he need to do tonight here in Tempe?

GERGEN: He has to win. He can play for a tie, but I think he has to win. A loss would, I think, really be damaging.

The public perceives, Judy, that he's lost the first two of these debates. To lose the third in a row would not only be unprecedented in presidential debates for an incumbent president to lose to a challenger three debates in a row, but also, I think, would put a definite cloud over his election prospects.

It's worth remembering that the -- this is the ninth time we've had presidential debates in the television age. In the last three times, when the challenger against an incumbent president has been seen as the winner of the debate showdown, that challenger has gone on to win the election.

That happened in '76 with Jimmy Carter. It happened in 1980, when Ronald Reagan came in as the challenger. And it happened in 1992.

I'm not saying that a John Kerry victory tonight will guarantee election. I am saying that a John Kerry victory tonight would very, very likely ensure an extremely tight race all the way to the end. George Bush needs to break through tonight. He needs to -- he needs to punch through tonight.

WOODRUFF: Well, for him to do that, David, what does he need to avoid doing that he did in the first two debates? Or does he -- is it that simple?

GERGEN: Well, that's an interesting question, Judy. It seems to me we all know he was sluggish in the first debate. The second debate I think he was sometimes a little overheated, but he did -- obviously did a much better job. He was aggressive and was much more in command of his facts.

It seems to me tonight he needs to be presidential. John Kerry has succeeded in looking poised, confident, knowledgeable, presidential, if you'd like. And I think tonight, this is the time when George Bush has to sort of rise above him and transcend him a little bit and make him look more like the challenger and not like the man who's in the office himself.

And that means he's got to be very much in command of facts, not just themes, but facts, arguments. Slow it down a little bit, look into the camera, talk to the people, don't play just to the base.

I think that, you know, you had your political analyst on just before, your own CNN analyst, and he was saying, well, the president's plan is to play to his base. It seems to me, in a debate like this tonight, the president wants to win the national debate, not just the debate with his own base.

WOODRUFF: If that's what George Bush needs to do, what does John Kerry need to do tonight?

GERGEN: Well, John Kerry has got an opportunity, historic opportunity to really wind up as the three-time winner. And I think for him that means he has to continue the same kind of poise and he has to obviously punch and lance the various arguments that come from the president. But I think he needs to make his emotional connection with the voters a little more effectively and talk more about his plans.

And one final thing that's very important, Judy, very, very important for this race. You know, there's a famous letter Abigail Adams wrote to her husband when he was in Philadelphia. It said, "Remember the women, John." And I would say the message for John Kerry tonight is, "Remember the women, John." Because women now -- women have reversed field in this.

The biggest thing that's happened since these debates started, John Kerry was 10 points down among women when the debates started in the Gallup-CNN poll. He's now eight points ahead.

That's the dramatic change that's taken place. And tonight John Kerry needs not only to cement that, but he needs to speak to women's issues.

I'm not sure he's ever mentioned the word "woman" in two debates. He's got to speak directly to women's issues and see if he can't solidify that. That's going to be the key to the election for him eventually, I think.

WOODRUFF: And very quickly, is there anything Kerry should avoid doing, David, that he did in the previous debates?

GERGEN: I think it -- we've heard too much about "my plan" for this and "my plan" for that. A lot of people think that's just sort of tin talk. And I think he's got to be a little more persuasive that there's some substance underneath that, and he's got a real chance to pass some of these things.

WOODRUFF: David Gergen, it's always a pleasure to talk to you.

GERGEN: Thank you, Judy.

WOODRUFF: Thanks very much. We appreciate it.

Coming up next on INSIDE POLITICS, we turn our attention to the students here at Arizona State University. Find out which election issues matter to them.

(COMMERCIAL BREAK)

WOODRUFF: This is the place to be if you're in Tempe, Arizona. We're on the campus of Arizona State University.

Sorry about that. We had a little bit of a satellite problem. But we think we're back now.

National security, Iraq, and the economy, we know those are a few of the issues on the minds of the students here at Arizona State. And with tonight's final presidential debate only hours away, the excitement is already building.

(BEGIN VIDEOTAPE)

(voice-over): Electricity on a campus where parties often trump politics.

UNIDENTIFIED MALE: The one and only.

WOODRUFF: Welcome to the ASU campaign circus, where Democrats hawk Bushocchios...

UNIDENTIFIED MALE: It makes people laugh. It's sort of a tongue in cheek way of pointing out the president's credibility gap.

WOODRUFF: ... as Republicans arm students with signs and such.

UNIDENTIFIED MALE: We'll give you signs if you're going to go hold them for TV.

WOODRUFF: Here, camp Kerry's won a small victory. Their table is by far the most popular. We think we know why.

UNIDENTIFIED MALE: Hey, who's going to the Foo Fighters and John Kerry tomorrow?

UNIDENTIFIED MALE: Is that free?

UNIDENTIFIED MALE: It's free.

WOODRUFF: Campus campaigning's taken on a competitive streak. When Bush girls walk by, Kerry boys jump into action, waving signs of their own. But beyond all the hoopla, you'll find some serious talking going on.

(on camera): And anybody getting angry? I mean, do you see people raising their voices about this or what?

UNIDENTIFIED FEMALE: They try to be civil about it, but I do see -- hear some heated discussions about it.

UNIDENTIFIED FEMALE: I'm Alison Bush (ph).

UNIDENTIFIED FEMALE: I'm Natalie (ph).

WOODRUFF (voice-over): More than 30 years after Vietnam, war is again the main topic on campus.

UNIDENTIFIED FEMALE: They came back, and they just felt like, "Why were we even there?" I mean, do you agree with why we're in Iraq?

UNIDENTIFIED FEMALE: One of the big -- the big reasons I'm a supporter of Iraq is because we're going to build a second democracy in the Middle East and start a domino effect.

UNIDENTIFIED FEMALE: I feel like this is an amoral war, and that's really why I support John Kerry.

WOODRUFF: Cadet Cory Harris (ph) returned from Iraq in April. A staunch supporter of the war, he feels the picture painted in the media is unduly negative.

UNIDENTIFIED MALE: I can tell you it's my first-hand experience, it was a very positive experience. So much support from the local people. We did a lot of humanitarian work over there, putting schools together. And to be honest, we were like rock stars to these kids. WOODRUFF: Still, when conversation turns to the election, Cadet Harris confesses he's torn.

UNIDENTIFIED MALE: I am still undecided.

WOODRUFF (on camera): When do you think you'll decide?

UNIDENTIFIED MALE: Hopefully after this debate. The debates I think are the most important thing, and I can't wait to watch this one.

WOODRUFF (voice-over): Confident in the leadership abilities of both candidates, he says he's looking to other matters, the economy and the future makeup of the Supreme Court.

Under the blooming bougainvillea away from the hubbub, where students study and quietly ride their bikes, a young mother soothes baby Jacob. Jennifer Brown (ph) never cared about politics before.

UNIDENTIFIED FEMALE: Now that I have him and now that I'm further into school and looking towards the future, I realize that it has everything to do with everything.

WOODRUFF: As her life changed so did her priorities. This year's chief concern...

UNIDENTIFIED FEMALE: National security, making sure that there is a tomorrow for our children and that it's free for them and for our neighboring countries.

WOODRUFF: Another college student thinking beyond her next exam.

(END VIDEOTAPE)

(on camera): And we're grateful to all the students here on campus for talking to us.

Well, throngs of political figures and journalists converging on the city of Tempe in anticipation of tonight's debate. Coming up, we'll talk with our senior correspondents about what is at stake for Bush and Kerry tonight. And we'll consider the questions both candidates would prefer not to answer.

(COMMERCIAL BREAK)

WOODRUFF: Well, as the markets are about to close on Wall Street, I am joined by Lou Dobbs in New York for another edition of "The Dobbs Report."

Hi, Lou.

LOU DOBBS, ANCHOR, "LOU DOBBS TONIGHT": Hey, Judy. How are you? Thank you.

Oil prices resuming their relentless climb and putting more pressure on stock prices today on Wall Street. The Dow has been down below 10,000 for much of the afternoon. The Dow now sitting at 10,000.49 Up 78.69. Solid earnings, however, from Intel and Yahoo preventing the technology stocks from declining too much. The Nasdaq down 5 points.

Oil prices rising on the day. Crude oil settling up more than $1, selling at $53.64 a barrel. Heating oil futures hitting a record this session as well.

Oil not the only commodity hurting stock prices today. Metals and mining stocks hard hit by a number of downgrades and steep declines in both gold and copper futures prices. An aluminum producer, Alcoa, one of the Dow's worst performers today and Phelps Dodge a copper producer tumbling more than $8 a share. Unlike oil, there is more supply of copper than demand.

No doubt you know about the shortage of our flu vaccines, but now there are widespread reports of price gouging. Some companies apparently looking to, believe it or not, to cash in on the crisis, they're offering hospitals the vaccine at highly inflated prices sometimes more than ten times the previous market value. The Kansas attorney general has filed suit against one Florida company called Medstat (ph) before the shortage charging $85 for ten doses. A week later allegedly trying to charge $900.

Supplies indeed are scarce after British officials suspended the license of one of the biggest vaccine manufacturers Chiron, and now there is a critical examination of the concept of outsourcing this country's medical care abroad. The shortage has forced Rite-Aid for example to shut down 500 flu clinics after this Saturday. Walgreen and CVS have already cut short their clinics.

Coming up at 6:00 p.m. on "LOU DOBBS TONIGHT" here on CNN, "Broken Borders," while American border hospitals are stretched thin, treating waves of illegal aliens, American taxpayers are also footing the bill for healthcare within Mexico, believe it or not. Tonight an incredible special report on how millions of your tax dollars are being spent on healthcare for Mexican citizens south of the border.

(BEGIN VIDEO CLIP)

TOMMY THOMPSON, HHS SECRETARY: This is really an investment, to make sure that somebody that's infected doesn't come into the United States, carries that disease into the United States. Better to find out right now, and better to take care of it at the border. This is a -- an investment for the healthcare of America.

(END VIDEO CLIP)

DOBBS: Also tonight, a deadly day for American troops in Iraq. Insurgents have killed six American soldiers. We'll have a report for you from Baghdad tonight.

Also, democracy at risk. We take a look at the integrity of our nation's voting system and the threat of voter fraud, rising cases and charges of voter fraud already. And we'll have the latest from Tempe, Arizona, leading up to tonight's political presidential presentation. Judy, back to you.

WOODRUFF: Lou, I have a question for you. But before I tell you -- or before I ask you, take a look at the sign we just spotted in the crowd. "Lou Dobbs For President." What do you think?

DOBBS: If drafted, I won't run. And that's the end of that story. But very nice -- a very nice thought.

WOODRUFF: Going to be a very disappointed group of young people here. Lou, what are the issues that you think deserve the most attention tonight?

DOBBS: I think the two critical issues, Judy, they form around one central issue in the country today, that's jobs. And I think related to that, there has to be an examination of trade policy that both of these candidates will put forward in the next four years. American jobs just under too much pressure.

Our middle class under assault by trade policies. And the other, of course, is immigration, about which we've heard very little from these two candidates. Immigration, "TIME" magazine's cover story five weeks ago forecasting 3 million illegal aliens coming into the United States. We have to deal with that issue and its impact on our economy and indeed our society.

WOODRUFF: You're right. We have not heard much about that one. All right, Lou, thank you very much. See you tomorrow, Lou.

INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Five hours from now, President Bush and Senator Kerry face off one last time.

KERRY: I feel great.

BUSH: I can't wait for the healthcare debate.

ANNOUNCER: They say they're ready but what does each candidate need to do to win tonight's final presidential debate?

The issues that Americans want to hear about, and the issues Bush and Kerry want to talk about may be very different. Our Bill Schneider explores.

(END VIDEOTAPE)

Now, live, from Tempe, Arizona, site of tonight's presidential debate, JUDY WOODRUFF'S INSIDE POLITICS.

WOODRUFF: Welcome back. INSIDE POLITICS today coming to you from Arizona State University, Tempe, Arizona. Some excited students here where the crowds are forming. The excitement is building for the final round of the Bush-Kerry debate series. What do the candidates need to do tonight, and what do they need to prove?

Let's bring in our senior White House correspondent John King with the Bush camp and our senior political correspondent Candy Crowley with the Kerry camp. John, to you first, I think a lot of people believe there is more pressure on the president tonight. What are his people saying they believe he needs to do?

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: They say he needs to draw and he will draw a sharp philosophical contrast with Senator Kerry painting him as a tax-happy liberal. The president will try to make the case that he has (INAUDIBLE) to the economy, to taxes, to healthcare and to other domestic issues that would put more choices and power in the hands of individuals, less power in the hand of the government. They believe that's an appealing message.

Let me just start with this, though, Judy. We have been led to believe by the White House over the recent days that the president was informally preparing for this debate, yet today underscoring the stakes of this debate tonight, the president needs a win. David Gergen told you that a short time ago.

Dan Bartlett saying the president has had two formal run-throughs with his debating partner Senator Judd Greg in just the past 24 hours. That they have been taking advantage of every minute during the president's travel to prepare for this debate. Air Force One, in the limousines, they understand fully well that the president needs a strong showing tonight.

And it's not just because of pundits talking about the bad performances in the prior debates, they see evidence in the polling. Places like New Jersey and Minnesota starting to shift Senator Kerry's way. They know they need a strong showing tonight -- Judy.

WOODRUFF: If that's what the Bush people are saying, Candy, what are the Kerry people saying the senator needs to do tonight?

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, they're saying, you know, that basically all of this tonight is really on the president. I mean, they read those same polls. They love these debates. They've been very, very good for John Kerry.

They look at the internals from the first and second debates, saying Kerry's likability has gone up, George Bush's likability has gone down. Being able to see his leadership. John Kerry has gone up, George Bush has gone down.

So these debates have been very good forums for John Kerry. They look for another one tonight, although they do find it necessary to tell us that they're not overconfident. So that, you know, tells you something there. Obviously he needs not to have a big mistake. Beyond that, he needs to put in the same kind of performances he has the last three times. They are quite confident. Although, as I say, they add they're not overconfident.

WOODRUFF: Well, specifically, John, when the -- I mean, when the Bush people talk about improving on the president's performance, what do they think specifically he needs to improve on?

KING: Well, first and foremost, Judy, what they want to do is remind the American people that perhaps job growth is not as robust as they would like. The president will say as Secretary Snow said earlier in the program, he inherited a declining economy, it fell into recession, and then the September 11 attacks and the president will say it was his tax cuts that pulled the economy out of that recession.

And the job growth is now just beginning to hit a robust upswing. And he will make the case that a Kerry presidency would stall that growth with higher taxes.

So, they believe the president must try to convince the American people that he has done as much as possible given the circumstances on the economy. And it's very similar when it comes to healthcare. Senator Kerry can turn to the president and say, your ideas might be great, sir, he disagrees with many of them of course, but what have you done the past four years. The president's argument has to be that he had these tremendous challenges.

The September 11 attacks and an economy in recession, that he had no choice but to focus most of his attention in the first term on those twin challenges. The president will make the case that he has handled those two challenges well, and now can focus more on other domestic issues like healthcare in a second term.

It's a tough challenge. He is the incumbent president. He has to both defend his record and try to convince the American people he has a better plan than Senator Kerry looking ahead to the next four years.

WOODRUFF: Candy, if those are the arguments the president is making, how does John Kerry counter that do his people say?

CROWLEY: Well, I think you heard at least a preview of that in the St. Louis debate. And that is, first of all, the tax and spend liberal label, Kerry will dismiss and say labels don't matter. I was one of the very few senators who voted for Deficit Reduction Act.

So, he will stress his conservative fiscal resume, as well as say, look, what John said, he's had four years, all he's really done is give tax cuts to the wealthy. I mean, that has been the signature issue of John Kerry when it comes to George Bush. If you set Iraq aside, that is, look what we could have done with this money he spent on a big tax cut for the rich.

So you'll hear a lot of that tonight. We could have had healthcare, but he didn't push it and he gave money to his rich friends. We could have had meaningful prescription drug bills. However, he spent all this money to help his rich friends in the pharmaceutical industry.

So, I think you will hear a lot of that rich friends, you know, "I'm fighting for regular people, I'm fighting for the middle class, and George Bush is a candidate of rich people." WOODRUFF: OK. We're hearing it from the reporters who know these candidates better than anybody. Candy Crowley, John King, thank you both. Appreciate it. See you -- a lot of you tonight.

Well, both campaigns already have their spinners working overtime, hours before the debate. Coming up, Bush campaign advisor Ralph Reed weighs in and offers the Republican counterpoint to our interview with Joe Lockhart earlier.

Plus, the elephant's in the room. The big, but not necessarily talked-about, issues looming over the debates.

(COMMERCIAL BREAK)

WOODRUFF: Yes, they do know how to make their choices heard. Earlier in the show, we heard from Kerry campaign's senior advisor Joe Lockhart of tonight's presidential debate stakes. Now, let's get the Republican viewpoint from Bush campaign advisor Ralph Reed.

Ralph Reed, seems to be a growing consensus that the president needs to win -- clearly win tonight in order to make up for the first two debates. What do you think?

RALPH REED, BUSH CAMPAIGN ADVISOR: Well, I'll leave those kind of judgments to the pundits. But I have to tell you, Judy, I think the pressure is really on John Kerry.

If you look at "The Washington Post" tracking poll, the president is ahead by three. If you look at the ABC poll, he's ahead by four. You look at the CBS poll, he's ahead by three. He looks very strong in the battleground states. If you look at the internals of the ABC poll, three percent more Bush voters than Kerry voters say they're certain to vote for the president. He leads on strong leader...

WOODRUFF: That's pretty narrow, though, isn't it?

REED: Well, but in a close race, that's a percent-and-a-half advantage by the time you get to Election Day in the overall electorate. And he's got a 20-point advantage on strong leader.

And when people are asked who do you think takes clear positions on issues, George Bush wins that by 23 points. So, I think the pressure's on John Kerry.

WOODRUFF: I interviewed David Gergen a little bit earlier. As you know, he's worked for a Democratic president, he's for a Republican president...

REED: Yeah, sure.

WOODRUFF: ... for Ronald Reagan. He said one thing George Bush needs to do tonight is be presidential. He said he had a tendency in the first two debates to get almost angry, feisty, and he said he really needs to come across presidential tonight.

REED: I didn't really see the interview. My purpose is not to just get in a dispute with David Gergen, who I have a lot of respect for. But I think what the president needs to do is to lay out his positive optimistic vision for a new term.

He needs to talk about the incredible accomplishments he's had in only three-and-a-half years. The most sweeping educational reform in 40 years. The most sweeping educational reform in 30 years. The deepest and broadest tax cuts since Reagan. And the strongest economy in 20 years. I think if he does that, we're going to come out of here very strong.

I'll tell you something else -- if you look at the first debate and you look at the Gallup poll after that debate, by a seven-point margin, people who said Kerry did better in the debate said they liked Bush more. By five points, they said they agreed with him more. And by three points, they said they believed him more.

WOODRUFF: So, you're saying winning the debate doesn't matter?

REED: I think what I'm saying is I may not be the smartest guy in the politics, but if people don't like you, they don't agree with you, and they don't believe you, they're not going to vote for you.

So, I think the Kerry campaign is high-fiving in the locker room because their candidate's a smooth talker. But if the voters believe our candidate more, if they believe the president more than John Kerry, he's not going to win.

WOODRUFF: Ralph Reed, you mentioned Medicare reform, prescription drug reform. What if John Kerry tonight points out 13 percent more people are without health insurance today than when George Bush took office? How does the president answer that?

REED: Well, it's just simply false. If you look at the current data, 15.6 percent...

WOODRUFF: This is -- I thought this -- this was from neutral organizations that analyze these things.

REED: Well, I'm just telling you what the facts are -- 15.6 percent of the country was without health insurance under Bill Clinton. Today, it's 15.6 percent of the country.

And the question is, what do you do to reach those who don't have health insurance? And the answer is, what the president's done is he's either set up or is setting up 600 community healthcare clinics so that they can get primary care and preventive care, number one.

Number two, you set up health savings accounts so that people can get catastrophic, low-cost health insurance, because they set up a high deductible under their health savings account.

And number three, you make health insurance deductible for individuals, as well as for employers. We've had a bias in the tax code for employers to provide health insurance, but not individuals to purchase it. That's the way you do it. Not John Kerry's $1.5 trillion government run healthcare plan where 80 percent of the people that he insures are going to be under a government-run bureaucratic program.

WOODRUFF: Well, you know they dispute that, because they talk about how it's not nearly as -- but just one last question quick. Norman Ornstein of The Enterprise Institute, the analyst we've know for a long time...

REED: Right.

WOODRUFF: ... saying he's surprised at how much of, in his words, "negative water" the president's carrying right now. He talked about usually in a campaign at this point, you see good cop, bad cop -- the president's a good cop. He says the president is doing a lot of the negative stuff himself.

How do you see that?

REED: Look, I think John Kerry walked out on a stage at the FleetCenter in Boston, and in a speech of close to 6,000 words spoke for 73 words about his record in the Senate. He's trying to run from the most liberal record of the U.S. Senate.

The president, not only has a responsibility, he has an obligation to the American people, to let them know what that record is. And I think he was exactly right Friday night when he said, look, you can run, but you can't hide.

John Kerry's voted 350 times for higher taxes. He voted for No Child Left Behind and now he says he's against it. He has the most liberal record in the Senate according to "The National Journal," which is hard to do in a chamber that includes Ted Kennedy. But he did it, and we're going to point that out.

WOODRUFF: "The National Journal" disputes that, but we can talk about that the next time we talk. And I know we'll talk again.

REED: OK, Judy.

WOODRUFF: Ralph Reed, speaking up for the Bush/Cheney campaign, and we'll see you tonight...

REED: Look forward to it.

WOODRUFF: ... in the spin room. Thanks very much, Ralph Reed.

REED: Thanks, Judy.

WOODRUFF: All right. Bush and Kerry have 90 minutes, but will they cover all the bases? Up next, our Bill Schneider looks at some of the big issues largely overlooked in the first two debates and the overall (IANUDIBLE).

(COMMERCIAL BREAK)

WOODRUFF: The National Rifle Association today officially endorsed George W. Bush. The decision came as no surprise since the NRA already has spent about $1 million on ads opposing John Kerry. And they say they'll spend millions more. The gun rights issue has been largely overshadowed in this presidential campaign, but it has some company on the sidelines.

Here now our senior political analyst, Bill Schneider.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): They've got issues, issues that have not been talked about very much. With gas and oil prices soaring, you can bet John Kerry will be eager to get energy on the agenda. He also wants to talk about stem cell research.

KERRY: When it comes to stem cell research, the president is making the wrong choice against science and sacrificing science for extreme right-wing ideology.

SCHNEIDER: And the environment which polls show is the issue where Kerry enjoys his strongest advantage over Bush. Bush wants to talk about the issue he used in 2000 to define himself as a compassionate conservative.

BUSH: I'm looking forward to talking about education. This is a subject about which I've got great passion.

SCHNEIDER: And you can bet he will figure out a way to get an international issue into the domestic debate.

BUSH: I'm looking forward to probably spending a little time hopefully on the war on terror.

SCHNEIDER: All that won't leave much time for three huge issues looming over the domestic agenda: the federal budget deficit, $415 billion this year. Kerry accuses...

KERRY: He relieved you of the budget surplus of the United States of America. Now you have the biggest deficits in history.

SCHNEIDER: Bush defends.

BUSH: We have a deficit because this country went into a recession. Secondly, we're at war. And plus, we cut taxes for everybody.

SCHNEIDER: Maybe tonight we'll find out what they plan to do about it. Another looming crisis: health care, 45 million uninsured, rapidly rising costs. Kerry has got a plan. Bush portrays it as a return to what he has called "Hillary care." Kerry may get a chance to defend it tonight.

Then there's the elephant in the room. Everybody knows it's there, but nobody wants to talk about it.

JOE KLEIN, "TIME": The Baby Boom generation, we're about to retire, and we're going to send the costs of Social Security and Medicare through the roof. And neither of these guys want to tackle it, because it only involves pain.

(END VIDEOTAPE)

SCHNEIDER: The next president will almost certainly have Supreme Court vacancies to fill. Those confirmation fights are likely to be the most contentious political battles in the next four years. Funny thing, though, it has always been hard to get voters to think much about the Supreme Court -- Judy.

WOODRUFF: Although, you know, Bill, a couple of students here at Arizona State brought that up talked about that. Very quickly, Bill, what do you think? Do you think that Bob Schieffer is going to be able to pin these candidates down tonight on what they would do to cut the deficit in half?

SCHNEIDER: Well, Charles Gibson tried that in the last debate and he made a little bit of headway. But basically they resorted very quickly to attacking each other instead of laying out their plans. This is the final debate, and I think they're going to be mostly in attack mode, not in revelation or explaining mode.

WOODRUFF: All right. We heard it here, Bill Schneider, our senior political analyst. Thank you, Bill.

INSIDE POLITICS will return after this message.

(COMMERCIAL BREAK)

WOODRUFF: A lot of enthusiasm here at Arizona State. That is it for INSIDE POLITICS this Wednesday. I'm Judy Woodruff. I'll be back tonight to join Wolf Blitzer, Anderson Cooper and the rest of the CNN election team for the final presidential debate. CNN's special coverage begins at 7:00 p.m. Eastern. I'll see you then. "CROSSFIRE" starts right now.

Take it away, guys.

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


Aired October 13, 2004 - 15:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
UNIDENTIFIED MALE: You ready for tomorrow?

ANNOUNCER: Writing the spin before the final debate.

JOE LOCKHART, KERRY CAMPAIGN ADVISOR: We may be favored for tonight, but really the story is, the president has got a lot of pressure on him.

NICOLLE DEVENISH, BUSH-CHENEY '04 COMMUNICATIONS DIRECTOR: The Kerry campaign has reminded me of a peacock over the last 10 days.

ANNOUNCER: Will Bush or Kerry put their best foot forward tonight?

An oops that could sway Ohio. What did the treasury secretary say and how is it playing politically?

Tough competition. Even Bush and Kerry might prefer to watch that other grudge match tonight.

Party time on campus. Who needs a keg or a concert when the presidential election rocks?

(END VIDEOTAPE)

Now, live from Tempe, Arizona, site of tonight's presidential debate, JUDY WOODRUFF'S INSIDE POLITICS.

JUDY WOODRUFF, HOST: Thank you for joining us here once again today at Arizona State University.

This is where President Bush and Senator Kerry will have their last, best chance before Election Day to appeal at one time to tens of millions of voters. Just hours before their debate, a new poll suggests the race here in Arizona is closer than it has been, with Bush holding a five-point edge among likely voters. Bush was 10 points ahead in an Arizona poll released last week.

The president leads into tonight's debate zero for two based on some polls that show Senator Kerry won the first two face-offs. But Republicans are hoping that this third debate will be the charm after Bush's improved performance last week.

Our White House correspondent Dana Bash looks at the Bush camp's debate strategy.

(BEGIN VIDEOTAPE)

DANA BASH, CNN WHITE HOUSE CORRESPONDENT (voice-over): The Bush campaign frames the strategy for round three in simple terms.

GEORGE W. BUSH (R), PRESIDENT OF THE UNITED STATES: I think government ought to help people realize their dreams, not tell them how to live their lives.

BASH: Use the 90-minute focus on domestic issues to lay out what they call a fundamental difference in philosophy between the candidates.

MATTHEW DOWD, BUSH CAMPAIGN STRATEGIST: On the one hand, somebody who thinks big government and high taxes is the way to go, and the president, who thinks a smaller government with people having more control.

BASH: Mr. Bush's goals, question the senator's credibility by saying his spending proposals and promise to shrink the deficit don't add up, zero in on parts of Kerry's 20-year Senate record to argue he's a liberal.

BUSH: It's the crux of his healthcare policy.

BASH: And point to big proposals like healthcare as proof the senator wants to expand the government while Mr. Bush would give private incentives to expand coverage. But polls show the senator has an advantage with voters on key domestic issues, and Bush aides privately admit they have a high hurdle in turning that around.

And in the dizzying world of pre-debate spin, Bush aides are hoping what they see as team Kerry's overconfidence about a 2-0 debate record will backfire.

DEVENISH: The Kerry campaign has reminded me of a peacock over the last 10 days. They're very interested in admiring their feathers and really talking up their performance in the debates.

BASH: But some Republicans are concerned Senator Kerry is getting what the first President Bush dubbed the big mo, momentum. And this president needs a win.

DAVID GERGEN, FORMER PRESIDENTIAL ADVISOR: Can Kerry break out? Can he open up? And if he were to win a third time, conceivably he could do that. But I can guarantee you that if he wins tonight it will give him enough enthusiasm and fire in his campaign that it will go to the end in a very, very close race.

(END VIDEOTAPE)

BASH (on camera): And the Bush spin now is that they always thought it would be a close race. But, Judy, even quietly inside the Bush camp, they admit that Kerry has what one aide dubbed mini-mo and they're hoping certainly tonight with its large audience they can use it to stop that momentum -- Judy.

WOODRUFF: All right, Dana Bash, traveling with John Kerry, thanks -- or traveling with George Bush. Thanks very much.

Now we turn to the Kerry campaign. The senator arrived here in Arizona from New Mexico just about an hour ago, trying to stay loose but -- quote -- "not overconfident."

CNN's Ed Henry has been traveling with Kerry.

(BEGIN VIDEOTAPE)

ED HENRY, CNN CONGRESSIONAL CORRESPONDENT: John Kerry woke up here in Santa Fe and was greeted by supporters at his hotel, who wished him luck before he started making his way to Arizona. The Kerry camp feels very confident. They believe they won the first two debates, and they think that now it is shifting to a domestic focus, they can go three for three.

In fact, what did Kerry do on the eve of what could be the pivotal moment in this deadlocked election? He went out for a little exercise, went on a long bike ride for about 45 minutes last night, and then went to watch back at his hotel his beloved Red Sox lose to the New York Yankees in game one of the American League Championship Series. The bottom line, though, is bikes and baseball. The clear image that the camp was trying to project is that Kerry is very loose, very calm heading into this clash.

In fact, Kerry aides say that we've seen President Bush on the attack all this week because they believe that the president is very much on the defensive after the first two debates.

Here's Kerry campaign press secretary David Wade.

DAVID WADE, KERRY CAMPAIGN PRESS SECRETARY: Well, I think the pressure's on the president, and it seems like the president and the vice president both, as you've seen in these harsh attacks following each debate, they've sort of decided to write off all the undecided voters and to speak only to their hardened Republican base.

HENRY: Aides say that Kerry did not need to directly respond to the attacks from the president this week. They say the senator was comfortable, relaxing a bit and working in intense debate prep behind closed doors with staff. They say that Kerry will take the gloves off tonight, though. The senator believes that his record has been distorted on the domestic front by the president on a whole host of issues, including taxes and healthcare.

In fact, we got a little bit of a preview of what staffers say Kerry will do tonight. He released a new ad today, fighting back at attacks from the president, who has said that the Kerry health plan is going to be a big-government takeover. The Kerry campaign says that's a distortion, a fabrication. They say so in the new ad. And the Kerry camp says that overall what they are going to try to accomplish is what Al Gore did not do in 2000, in their estimation, and that is offer a clear choice between the two parties on every single issue on the domestic front.

Ed Henry, CNN, Santa Fe, New Mexico.

(END VIDEOTAPE)

WOODRUFF: Thank you, Ed.

Well, separately the, Kerry campaign says President Bush is going to have to answer tonight for some controversial comments by Treasury Secretary John Snow. Speaking in Ohio Monday, Snow responded to Democratic attacks on Bush as the first president since Herbert Hoover to end his term with fewer jobs than when he started.

Snow called that -- quote -- "a myth." The Kerry camp is seizing on that. Kerry aides say an ad featuring Snow's comments is in the works to air in Ohio, which has been hard-hit by job losses. And the Kerry campaign issued a statement responding to Snow -- quoting now -- "These comments reflect the callous disregard this administration has shown for the millions of people who are out of work and have seen their quality of life suffer over the last four years" -- end quote.

And here is what John Edwards said on the campaign trail about all this.

SEN. JOHN EDWARDS (D-NC), VICE PRESIDENTIAL CANDIDATE: And now we find out that the Bush administration and their treasury secretary say that the surplus that they inherited when they came into office was a myth. I wonder if the four million Americans who've fallen into poverty in the last four years, I wonder if that's a myth.

What about the fact that folks' income is going down at the same time that the cost of virtually everything, healthcare, child care, college tuition, is going up? I wonder if they think that's a myth.

Well, here's the truth. Come November the 2nd, we're going to send George Bush out of town, and that will not be a myth.

WOODRUFF: Privately, one senior Kerry aide is telling CNN that Snow may have lost Ohio for the Bush camp. Secretary Snow will join us with his response to all this ahead.

New showdown state polls lead the headlines in our "Campaign News Daily." The results show Bush and Kerry battling for support in several crucial states and Ralph Nader could play a role as well.

In Minnesota, Kerry leading Bush by two points in a new poll from WGN Television and "The Chicago Tribune," Ralph Nader picking up 2 percent.

Next door in Wisconsin, the Kerry lead stands at four points with Nader again receiving 2 percent.

In Ohio, meanwhile, the survey gives Kerry a four-point edge over Bush, 49 to 45 percent. And, as for Iowa, "The Tribune" poll gives Bush a 47 percent lead to 45 percent for John Kerry, Nader getting 1 percent. The American Research Group also polled Iowans, and their results show Bush and Kerry deadlocked at 47 percent, with Nader picking up 2 percent. ARG also did a poll of voters in Oregon. That poll found Kerry holding a six-point lead, 50 percent to 44 percent. Ralph Nader did not qualify for the Oregon ballot.

Well, before Bush and Kerry go at it tonight, their high-profile allies are doing the talking for them. Up next, Kerry campaign senior advisor Joe Lockhart joins us with insights into the senator's final debate strategy.

And later, Bush campaign advisor Ralph Reed will give us his insider take on the president's game plan tonight.

Plus, a checkup on new campaign ads. Do they tell the truth about the candidates' healthcare plans?

With 20 days to go until the election, this is INSIDE POLITICS, the place for campaign news.

(COMMERCIAL BREAK)

(CHEERING AND APPLAUSE)

WOODRUFF: From the sounds of this crowd, you can tell a lot of people here at Arizona State University are paying attention to this election. We are back here in Tempe, Arizona, the site of tonight's debate.

The battlegrounds are narrowing, you know, in the presidential campaign ad war. A survey of the top 100 media markets last week found the Bush campaign advertising in 16 states. The state hosting tonight's debate, Arizona, now is out of the mix. The Kerry camp ran ads in all of the same states as Bush, except Missouri. TNS Media Intelligence reports that the Bush campaign outspent the Kerry camp on ads about $15.6 million to $13.7 million.

But when you figure in DNC spending, the Democrats spent more, $21.8 million, compared with $15.6 million for the Republicans. TNS did not spot any Republican National Committee ads airing last week.

Now let's talk about the race and tonight's debate with Kerry campaign senior advisor Joe Lockhart here with me on campus.

Joe Lockhart, the Republicans and some of the reporters covering John Kerry are saying you all are overconfident going into this debate.

LOCKHART: Well, I don't think we're overconfident at all.

We understand that we have a lot of work to do. Votes have to be earned one at a time in this very tight race. But this is a problem for the president, defending his domestic agenda. John Snow was out earlier this week in Ohio saying that job loss in this country was a myth. You know, it shows they either can't face reality or they'd rather be dishonest about what's going on. There are two million Americans who have lost their job in the last four years, the worst record since Herbert Hoover. He's got to face that tonight.

WOODRUFF: But they turn around and say John Kerry's solution is a plan that would end up raising taxes on many, many Americans. And, in fact, John Kerry looked at the camera in the last debate, said, I'm not going to raise taxes on anybody under $200,000, but we still show in our poll half of the people asked still think he would raise taxes.

LOCKHART: Well, listen, this is the first debate that's going to be solely on domestic issues, and we look forward to having that debate.

You know, when you can't defend your record, you have to do something. And if you look at all their ads, they are a series of distortions and not truthful statements. You look at the healthcare ad. It's completely wrong. The Kerry plan has nothing to do with government-sponsored healthcare. It's run by private companies, just like we have now. It's just going to be lower premiums for Americans.

So, they have to come clean tonight on their record. I think that's why they wanted this one last. They wanted to put it to the end. They thought they would have put us away by now, but they haven't.

WOODRUFF: But the president, we are now hearing him increasingly talk about healthcare. He does say the Kerry plan would amount to a big-government bureaucracy, government takeover. He is increasingly calling John Kerry a liberal, a liberal, the most liberal member of the Senate. That's bound to hurt, isn't it?

LOCKHART: No, it's not bound to hurt because the public watches both of them. And that's what happened in the first two debates. Bush attacks, Kerry answers, and the public buys what Kerry's saying. That's why he won the first two debates.

So, you know, he can use any name-calling he wants. It's not going to get him any votes. In fact, there is evidence out there that it's losing him votes. He can call the Kerry health plan anything he wants, but he's not telling the truth. And I think when the public sees our plan, John Kerry talk about it, as opposed to their distorting untruthful ads, they make the decision and they wonder, why can't the president tell the truth?

WOODRUFF: But, you know, Joe Lockhart, John Kerry is seen by many analysts as having won the first two debates. But in the horse- race poll, this is an even -- this race is even. Why hasn't that translated, do you think?

LOCKHART: Well, let's remember. And, Judy, you were one of the people the White House was spinning so heavily before the first debate. It seems like it was months ago, but it was only about 10 days ago. They said that at this debate in Miami, they were going to knock us out of the race, we were so vulnerable, we were so far behind. Well, we're in a different place right now. The trend is going toward Kerry. Undecideds are moving in our direction because of the vision that John Kerry has laid out so effectively in the first two debates. And this one's going to just be about the economy and healthcare. And he really -- I mean, we expect him to come out very negative tonight, and it's because he can't defend his own record, so he has to try to change the subject.

WOODRUFF: The president today got the endorsement of the National Rifle Association. They are saying they're going to spend, I think, 10 -- I'm sorry. I don't remember the number -- $ 10 or $20 million in ads. This is a very powerful group. How does Senator Kerry counter something like this?

LOCKHART: Listen, I think this is going to come down to not what groups on the fringe believe. It's going to come down to whether the public thinks John Kerry's going to fight for the middle class or fight for the people George Bush has been fighting for, the top 1 percent.

When you look at the tax cut, it doesn't matter what George Bush says. John Kerry's not going to raise taxes on anyone unless you're in that top 1 percent. They got a trillion dollars in tax cuts over the last four years, and it didn't turn the economy around. So middle-class people are going to get a tax cut. Those at the top who can afford it the most are going to have the tax cut rolled back. It's that simple. Bush can call it anything he wants. He can call names. He can put labels. The public buys this, and that's why they're moving to John Kerry.

WOODRUFF: All right, we are hearing from Joe Lockhart, a senior advisor to the Kerry campaign.

Thanks very much.

LOCKHART: Thanks, Judy.

WOODRUFF: We'll see you tonight, too.

LOCKHART: Absolutely.

WOODRUFF: Before and after the debate.

LOCKHART: Yes.

WOODRUFF: We appreciate it, Joe Lockhart.

Well, we are going to get the Bush campaign's response ahead from advisor Ralph Reed.

Two additional notes, now, though, from the campaign trail. Former President Bill Clinton has not been able to campaign for John Kerry because of his recent heart surgery. But Clinton has been advising Kerry, we have learned, by telephone. The Associated Press reports that Clinton calls Kerry regularly to offer advice and Clinton is also expected to record phone calls and possibly radio ads on Kerry's behalf.

Independent candidate Ralph Nader has suffered another legal setback in Ohio. A federal judge has refused to order the secretary of state to place Nader on the Ohio ballot, citing evidence of fraud by signature collectors. Nader is officially on 35 state ballots, including a dozen battleground states.

Ahead on INSIDE POLITICS, find out what's at stake in a sports wager between two political heavyweights.

And slugging it out for viewers, the battle between tonight's baseball playoff games and the final presidential debate.

(COMMERCIAL BREAK)

WOODRUFF: We're on a campus famous for its football, the Arizona State Sun Devils.

But moving on to another sport now -- we're glad to have this crowd with us -- baseball and politics -- baseball and politics are as American as apple pie. So it's no surprise a friendly political wager is riding on the outcome of the American League Championship Series. If the Boston Red Sox lose, Massachusetts Governor Mitt Romney has agreed to make a public appearance wearing a New York Yankees jersey. And if the Yankees lose, New York Governor George Pataki will have to publicly don a Red Sox jersey. Game two of the A.L. Championship Series is tonight, with the Yankees one game up.

For some Americans, it'll be a tough call tonight, watch the debate or watch the ball game. But at least one event will have a clear winner.

Our Bruce Morton explains.

(BEGIN VIDEOTAPE)

BUSH: What's the score?

BRUCE MORTON, CNN NATIONAL CORRESPONDENT (voice-over): The president asking about last night's Red Sox-Yankees game. It's something, baseball playoffs and presidential debates all at once. They used to say Americans only concentrated on the election once the World Series was over. But the season got longer. So now we have to think of two things at once.

The debates have more TV viewers; 43 million watched No. 2. About 26 million watched last year's Yankees-Red Sox seventh game. But, in person, well, the Yankees had 56,000 last night, the debates just a few hundred in the hall, not much Cracker Jack money there. And you can't even sell cold beer. And baseball's a lot less formal of course. At Wrigley Field in Chicago, the announcer used to lead the crowd in singing "Take Me Out to the Ball Game." Hard to imagine Bob Schieffer this evening singing: take me out to the spin room, where all the experts loom. Buy me some spin and a talking point. I don't care if the world's out of joint. No. Bob has a nice voice, but no. Still, that is the real difference. In baseball, you know who won. Last night, you could watch all those Yankees circling all those bases and you knew who won. Or take that famous old baseball poem "Casey at the Bat." He strikes out, you may remember. And Mudville loses the game.

Ernest Thayer wrote: "Oh, somewhere in this favored land, the sun is shining bright, the band is playing somewhere, and somewhere hearts are light, and somewhere men are laughing and little children shout, but there is no joy in Mudville. Mighty Casey has struck out."

SEN. JOHN KERRY (D-MA), PRESIDENTIAL CANDIDATE: And he's trying to make you believe it.

MORTON: Not in politics. Tonight, the Bush people will explain how Kerry struck out. The Kerry people will explain how Bush struck out. And they'll do it and do it and do it, sound bites without end, until the last reporter whimpers and runs away.

And tomorrow, or the day after, or maybe every day until November 2, we'll be arguing about a question baseball fans can usually answer easily.

BUSH: What's the score?

MORTON: Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: We'll see. Bruce, thanks very much.

Well, we're hearing from the campaigns and we're speaking with the pundits, but what do the students here at Arizona State University have to say about the race for the White House?

(CHEERING AND APPLAUSE)

WOODRUFF: Coming up, we'll gauge the political pulse on this excited campus.

And stay with CNN throughout the day and into the evening, as we keep our spotlight on the presidential debate. Our prime-time lineup kicks off at 7:00 p.m. Eastern.

(STOCK MARKET UPDATE)

(COMMERCIAL BREAK)

WOODRUFF: John Kerry lands in Arizona just hours before the final presidential debate. But the Kerry campaign is not waiting until tonight to go after President Bush over healthcare.

George Bush gets ready for this final showdown as well, and he lands the endorsement of the National Rifle Association.

Welcome back to INSIDE POLITICS. I'm Judy Woodruff, live today again at Arizona State University, the site of tonight's presidential debate.

(CHEERING AND APPLAUSE)

WOODRUFF: You can just tell how much enthusiasm there is on this campus.

You know, the ground rules for tonight's showdown are pretty much the same as what they were for the first presidential debate. Both candidates will stand behind lecterns and the questions will be asked by a single moderator. In this case, Bob Schieffer of CBS.

Tonight's questions will cover economic and domestic policy. Bush and Kerry, once again, will not be permitted to bring notes or props on stage, and they will not be allowed, supposedly, at least that's what the rules say, to ask each other questions.

The original rules also call for no camera shots from behind the candidates and no so-called cutaway shots. The television networks have largely ignored the no-cutaway request, however, which led to several shots of a frowning President Bush reacting to Kerry's comments in the first debate.

With me now to talk more about tonight's showdown is CNN's political editor, John Mercurio.

All right, John, you've been talking to both the campaigns. What are their strategies going into this debate?

JOHN MERCURIO, CNN POLITICAL EDITOR: Well, you know, it's sort of interesting. Those sort of rabid spin operations that we saw during the first debate and to some degree in the second debate have really scaled back. Neither campaign, I think, has tried to engage in too much of a pre-game spin.

What we are seeing, the continuing trend, is sort of these dueling strategies between the candidates trying to appeal to these dramatically different groups. Bush to his conservative base, and Kerry reaching out to the sort of swing voters, to the centrists, the small group of undecided voters.

Now, what we saw in St. Louis last week was sort of interesting. Bush delivering sort of a coded message to anti-abortion activists, answering a question about which Supreme Court justice he would choose. He said he would never choose a justice who supported the Dred Scott decision on slavery.

Now, a lot of people sat there and scratched their head, and said, "What's he talking about?" Well, anti-abortion activists for a long time have equated the Dred Scott decision with Roe v. Wade. So this was a message to his base to say, I will never support -- even though I've never talked about a litmus test, I'll never support a justice who supports Roe v. Wade. At least that's a widely held perception.

Another strategy I think you're seeing is the different ways the two of them are trying to frame the debate. Now, President Bush for the past two debates has tried to avoid very detailed policy discussions and is trying to paint sort of a broad general overview, an ideological overview, painting Kerry as a liberal, as a flip- flopper, as somebody you can't trust, as somebody who will raise your taxes and wants a government-sponsored health plan.

Kerry, on the other hand, is pushing for a much more detailed policy discussion on specific issues that he thinks Bush has failed on. So the challenge is for Bush to make this sort of a broad-brush debate, and the challenge is for Kerry to concisely articulate his policies.

WOODRUFF: Well, they're each doing what they think benefits them.

Look back, though, John, at the strategies going into the debate one and debate two. As you look back on them, which set of strategies have been more effective, do you think?

MERCURIO: You know, it sort of depends on what you mean by effective. Now, the polls that we've seen coming out of the debates, almost every poll I've seen has shown that Kerry won both debates, the first one decisively, the second one much more closely.

A lot of national polls that we've seen since both debates have shown Kerry closing the gap, obviously. And recently, in the past two days, we've seen battleground state polls in Ohio, Wisconsin, New Hampshire, all showing that Kerry is now actually leading the president by at least a few points. Very interesting on that score.

But the president, again, is appealing to a very specific group. And they might be sort of flying below the radar screen of these polling groups.

WOODRUFF: You mean his conservative base? Is that what you're referring to?

MERCURIO: So again -- his conservative base -- the conservative base that he's trying to motivate to show up. It's a very important group. And if they end up being motivated the way that the president thinks they are, then he ultimately could be much more effective.

WOODRUFF: That could make the difference. OK.

MERCURIO: We won't know for a couple more weeks, though.

WOODRUFF: We won't. We won't. But we can wait. We're patient.

MERCURIO: We're patient.

WOODRUFF: OK. No, we're not. John Mercurio, thanks very much.

John is our political editor at CNN.

Well, many people say they expect the Bush and Kerry healthcare proposals to play a major role in tonight's debate. Their differences already are the subject of new television ads from both campaigns. We asked Howard Kurtz of CNN's "RELIABLE SOURCES" to look at the facts.

(BEGIN VIDEOTAPE)

BUSH: He says he's going to have a novel healthcare plan. You know what it is? The federal government's going to run it.

HOWARD KURTZ, CNN'S "RELIABLE SOURCES" (voice-over): President Bush has been making that charge against John Kerry for days -- most recently in an attack ad.

UNIDENTIFIED MALE: John Kerry and liberals in Congress have a healthcare plan for you: a big government takeover.

KURTZ: But that's misleading. The government wouldn't run healthcare in a Kerry administration. The Democratic candidate would use tax credits and build on the current system of private insurance to cover millions more Americans.

And the cost?

UNIDENTIFIED MALE: This $1.5 trillion government program...

KURTZ: That's an estimate from the right-leaning American Enterprise Institute, which has employed both Dick Cheney and his wife, Lynne Cheney. Kerry says his plan will cost half as much. Other experts call that a low-ball estimate.

UNIDENTIFIED MALE: Rationing, less access, fewer choices, long waits.

KURTZ: Again, that's misleading. Senate Majority Leader Bill Frist says that "rationing" and "long waits" refer to the Medicaid program, which would cover more patients under the Kerry plan.

In other words, the Bush administration is already presiding over a program that involves healthcare rationing. And there's no evidence that Kerry would take medical decisions away from doctors.

Today, Kerry returned fire on the airwaves.

UNIDENTIFIED FEMALE: George Bush's attacks on John Kerry's healthcare plan are called "not true," "outright fabrications."

KURTZ: Says who? An ABC News report and a "St. Louis Post- Dispatch" editorial, along with other news organizations.

UNIDENTIFIED FEMALE: Listen for yourself.

UNIDENTIFIED MALE: Rationing, less access, fewer choices, long waits.

UNIDENTIFIED FEMALE: Wait a minute. That's what we have now under George Bush. It's Bush that let insurance companies overrule your doctor. Costs have skyrocketed. The Kerry plan lowers costs. You choose your doctor.

KURTZ: But Kerry is wrong to say the president lets insurance companies reject treatments. That's a healthcare system that's been in place under previous presidents as well. And whether Kerry's complicated plan will actually cut costs remains to be seen.

A second Kerry ad tries to seize the offensive.

KERRY: For the last four years, one man has stood between America and lower-cost prescription drugs: George Bush.

KURTZ: That's a stretch. The president has blocked efforts to import cheaper drugs from Canada, but so did President Clinton. Drug costs have been rising for many reasons for decades.

(on camera): This is a battle that goes to the heart of the campaign. Is Kerry a big-government, big-spending liberal? Does Bush make inflammatory charges without evidence? That argument will be front and center at tonight's debate.

Howard Kurtz, CNN's "RELIABLE SOURCES."

(END VIDEOTAPE)

WOODRUFF: Earlier, we reported on comments by the Treasury secretary, John Snow, who was quoted on Monday in Ohio as saying Democratic claims about jobs losses during the Bush administration are "a myth." Secretary Snow joins me now from St. Louis.

Mr. Secretary, what is going on here? Are you saying that jobs -- the total number of jobs has not gone down under President Bush?

JOHN SNOW, TREASURY SECRETARY: No, Judy. Let me say what -- respond to that.

We know that jobs have been lost. The president inherited an economy in a steep decline. He inherited a stock market that was melding down, and then we faced 9/11.

All of that had a devastating effect on the economy, on growth and on jobs. And the president recognized that something had to be done. And he provided leadership.

He forced through the Congress major tax legislation that has put the economy on the right path. And now we've had the best growth in 20 years, and we're beginning to create a lot of jobs. Thirteen straight months of job creation, nearly two million jobs, according to the Establishment Survey.

The unemployment rate at 5.4 is lower than the average of the '70s or the '80s or the '90s. And, I point out, it's low -- it's the same level it was in 1996, a year when many of the president's...

WOODRUFF: But why did you use... SNOW: ... you know, took credit. So, no, what I'm saying is the economy is on the right path. And whether you look at the Household Survey, which says that during the last four years we've created 3.2 million jobs, or you look at the Establishment Survey, which says in the last 13 months it's nearly two million jobs, the record is a good one. We're on the right path, and we're creating lots of good jobs.

WOODRUFF: But why did you use the word "myth" in referring to job loss, when it's -- the statistics show out of the government itself that there's been a job loss?

SNOW: Judy, what I was saying is that the charges that the president's record is the worst in decades on job creation is simply not credible. It has no factual foundation. Under the Household Survey, 3.2 million jobs have been created.

WOODRUFF: Well, the quote -- let me just read you the quote that we see in the newspaper in Findlay, Ohio, "The Courier." "Claims like the one that Bush will be the first president to end a term with fewer jobs than when he started are nothing more than myths."

SNOW: Well, as I say, that's not what I said. What I did say is that charges...

WOODRUFF: OK. So you're saying that's incorrect?

SNOW: Yes, it's incorrect. What I'm saying is, this president's record is a good one. He's recognized that the economy took a lot of blows, that action was needed. He provided leadership. And now the economy is on the right path.

WOODRUFF: Quickly, you also were quoted as saying that the so- called surplus that President Bush inherited, you said it was a mirage. "It never existed." Do you believe that?

SNOW: Well, sure I do. And anybody that looks at the facts will believe that, because that estimate was made before anybody understood that the stock market would melt down, we'd have the recession, we'd have 9/11. And it was an estimate that wasn't borne out by the facts. It was simply an estimate...

WOODRUFF: Mr. Secretary...

SNOW: ... that turned out to be a mirage.

WOODRUFF: I was just -- OK. Mr. Secretary, it's been -- there's been some comment on the number of speeches that you've given in the so-called battleground states as the secretary of Treasury. How many speeches are you giving right now on an average week in these battleground states? I know the speech on Monday was to a Republican -- a county Republican group in Ohio.

SNOW: Yes. Well, Judy, I've traveled around the country. I can't give you any precise -- precise answer on that. But I think it's part of my job to get out and hear from taxpayers and hear from small business to make sure we understand what people on the ground are thinking and doing.

WOODRUFF: All right. Well, we are going to leave it there. Secretary John Snow, we thank you for making time to come talk to us. We appreciate it.

SNOW: Hey, thank you. Good to be back with you.

WOODRUFF: Thanks very much.

A veteran White House advisor and debate watcher will offer his thoughts on tonight's showdown. Just ahead, I'll talk with David Gergen about the final face-off between Bush and Kerry.

And later, are the students here excited about politics? We'll check.

(CHEERING AND APPLAUSE)

WOODRUFF: There's your answer. We'll check the political pulse here at Arizona State.

(COMMERCIAL BREAK)

WOODRUFF: We are at Arizona State University, site of tonight's debate. And for more perspective on what's coming up tonight and the state of the presidential campaign, we are joined now from Boston by David Gergen. He was an advisor to four presidents, Republican and Democratic, and is now editor-at-large for "U.S. News & World Report," as well as being on the faculty at Harvard.

David Gergen, you talk to a lot of people on both sides of the aisle. Where is this race right now?

DAVID GERGEN, "U.S. NEWS & WORLD REPORT": Dead even. And the momentum is with neither side. I think that John Kerry had certainly had momentum coming out of the first debate. The president has slowed him down.

I think they're both racing neck and neck right now, Judy. But tonight's debate could make a significant difference in the dynamics of the race.

WOODRUFF: David, let's talk about President Bush first. What does he need to do tonight here in Tempe?

GERGEN: He has to win. He can play for a tie, but I think he has to win. A loss would, I think, really be damaging.

The public perceives, Judy, that he's lost the first two of these debates. To lose the third in a row would not only be unprecedented in presidential debates for an incumbent president to lose to a challenger three debates in a row, but also, I think, would put a definite cloud over his election prospects.

It's worth remembering that the -- this is the ninth time we've had presidential debates in the television age. In the last three times, when the challenger against an incumbent president has been seen as the winner of the debate showdown, that challenger has gone on to win the election.

That happened in '76 with Jimmy Carter. It happened in 1980, when Ronald Reagan came in as the challenger. And it happened in 1992.

I'm not saying that a John Kerry victory tonight will guarantee election. I am saying that a John Kerry victory tonight would very, very likely ensure an extremely tight race all the way to the end. George Bush needs to break through tonight. He needs to -- he needs to punch through tonight.

WOODRUFF: Well, for him to do that, David, what does he need to avoid doing that he did in the first two debates? Or does he -- is it that simple?

GERGEN: Well, that's an interesting question, Judy. It seems to me we all know he was sluggish in the first debate. The second debate I think he was sometimes a little overheated, but he did -- obviously did a much better job. He was aggressive and was much more in command of his facts.

It seems to me tonight he needs to be presidential. John Kerry has succeeded in looking poised, confident, knowledgeable, presidential, if you'd like. And I think tonight, this is the time when George Bush has to sort of rise above him and transcend him a little bit and make him look more like the challenger and not like the man who's in the office himself.

And that means he's got to be very much in command of facts, not just themes, but facts, arguments. Slow it down a little bit, look into the camera, talk to the people, don't play just to the base.

I think that, you know, you had your political analyst on just before, your own CNN analyst, and he was saying, well, the president's plan is to play to his base. It seems to me, in a debate like this tonight, the president wants to win the national debate, not just the debate with his own base.

WOODRUFF: If that's what George Bush needs to do, what does John Kerry need to do tonight?

GERGEN: Well, John Kerry has got an opportunity, historic opportunity to really wind up as the three-time winner. And I think for him that means he has to continue the same kind of poise and he has to obviously punch and lance the various arguments that come from the president. But I think he needs to make his emotional connection with the voters a little more effectively and talk more about his plans.

And one final thing that's very important, Judy, very, very important for this race. You know, there's a famous letter Abigail Adams wrote to her husband when he was in Philadelphia. It said, "Remember the women, John." And I would say the message for John Kerry tonight is, "Remember the women, John." Because women now -- women have reversed field in this.

The biggest thing that's happened since these debates started, John Kerry was 10 points down among women when the debates started in the Gallup-CNN poll. He's now eight points ahead.

That's the dramatic change that's taken place. And tonight John Kerry needs not only to cement that, but he needs to speak to women's issues.

I'm not sure he's ever mentioned the word "woman" in two debates. He's got to speak directly to women's issues and see if he can't solidify that. That's going to be the key to the election for him eventually, I think.

WOODRUFF: And very quickly, is there anything Kerry should avoid doing, David, that he did in the previous debates?

GERGEN: I think it -- we've heard too much about "my plan" for this and "my plan" for that. A lot of people think that's just sort of tin talk. And I think he's got to be a little more persuasive that there's some substance underneath that, and he's got a real chance to pass some of these things.

WOODRUFF: David Gergen, it's always a pleasure to talk to you.

GERGEN: Thank you, Judy.

WOODRUFF: Thanks very much. We appreciate it.

Coming up next on INSIDE POLITICS, we turn our attention to the students here at Arizona State University. Find out which election issues matter to them.

(COMMERCIAL BREAK)

WOODRUFF: This is the place to be if you're in Tempe, Arizona. We're on the campus of Arizona State University.

Sorry about that. We had a little bit of a satellite problem. But we think we're back now.

National security, Iraq, and the economy, we know those are a few of the issues on the minds of the students here at Arizona State. And with tonight's final presidential debate only hours away, the excitement is already building.

(BEGIN VIDEOTAPE)

(voice-over): Electricity on a campus where parties often trump politics.

UNIDENTIFIED MALE: The one and only.

WOODRUFF: Welcome to the ASU campaign circus, where Democrats hawk Bushocchios...

UNIDENTIFIED MALE: It makes people laugh. It's sort of a tongue in cheek way of pointing out the president's credibility gap.

WOODRUFF: ... as Republicans arm students with signs and such.

UNIDENTIFIED MALE: We'll give you signs if you're going to go hold them for TV.

WOODRUFF: Here, camp Kerry's won a small victory. Their table is by far the most popular. We think we know why.

UNIDENTIFIED MALE: Hey, who's going to the Foo Fighters and John Kerry tomorrow?

UNIDENTIFIED MALE: Is that free?

UNIDENTIFIED MALE: It's free.

WOODRUFF: Campus campaigning's taken on a competitive streak. When Bush girls walk by, Kerry boys jump into action, waving signs of their own. But beyond all the hoopla, you'll find some serious talking going on.

(on camera): And anybody getting angry? I mean, do you see people raising their voices about this or what?

UNIDENTIFIED FEMALE: They try to be civil about it, but I do see -- hear some heated discussions about it.

UNIDENTIFIED FEMALE: I'm Alison Bush (ph).

UNIDENTIFIED FEMALE: I'm Natalie (ph).

WOODRUFF (voice-over): More than 30 years after Vietnam, war is again the main topic on campus.

UNIDENTIFIED FEMALE: They came back, and they just felt like, "Why were we even there?" I mean, do you agree with why we're in Iraq?

UNIDENTIFIED FEMALE: One of the big -- the big reasons I'm a supporter of Iraq is because we're going to build a second democracy in the Middle East and start a domino effect.

UNIDENTIFIED FEMALE: I feel like this is an amoral war, and that's really why I support John Kerry.

WOODRUFF: Cadet Cory Harris (ph) returned from Iraq in April. A staunch supporter of the war, he feels the picture painted in the media is unduly negative.

UNIDENTIFIED MALE: I can tell you it's my first-hand experience, it was a very positive experience. So much support from the local people. We did a lot of humanitarian work over there, putting schools together. And to be honest, we were like rock stars to these kids. WOODRUFF: Still, when conversation turns to the election, Cadet Harris confesses he's torn.

UNIDENTIFIED MALE: I am still undecided.

WOODRUFF (on camera): When do you think you'll decide?

UNIDENTIFIED MALE: Hopefully after this debate. The debates I think are the most important thing, and I can't wait to watch this one.

WOODRUFF (voice-over): Confident in the leadership abilities of both candidates, he says he's looking to other matters, the economy and the future makeup of the Supreme Court.

Under the blooming bougainvillea away from the hubbub, where students study and quietly ride their bikes, a young mother soothes baby Jacob. Jennifer Brown (ph) never cared about politics before.

UNIDENTIFIED FEMALE: Now that I have him and now that I'm further into school and looking towards the future, I realize that it has everything to do with everything.

WOODRUFF: As her life changed so did her priorities. This year's chief concern...

UNIDENTIFIED FEMALE: National security, making sure that there is a tomorrow for our children and that it's free for them and for our neighboring countries.

WOODRUFF: Another college student thinking beyond her next exam.

(END VIDEOTAPE)

(on camera): And we're grateful to all the students here on campus for talking to us.

Well, throngs of political figures and journalists converging on the city of Tempe in anticipation of tonight's debate. Coming up, we'll talk with our senior correspondents about what is at stake for Bush and Kerry tonight. And we'll consider the questions both candidates would prefer not to answer.

(COMMERCIAL BREAK)

WOODRUFF: Well, as the markets are about to close on Wall Street, I am joined by Lou Dobbs in New York for another edition of "The Dobbs Report."

Hi, Lou.

LOU DOBBS, ANCHOR, "LOU DOBBS TONIGHT": Hey, Judy. How are you? Thank you.

Oil prices resuming their relentless climb and putting more pressure on stock prices today on Wall Street. The Dow has been down below 10,000 for much of the afternoon. The Dow now sitting at 10,000.49 Up 78.69. Solid earnings, however, from Intel and Yahoo preventing the technology stocks from declining too much. The Nasdaq down 5 points.

Oil prices rising on the day. Crude oil settling up more than $1, selling at $53.64 a barrel. Heating oil futures hitting a record this session as well.

Oil not the only commodity hurting stock prices today. Metals and mining stocks hard hit by a number of downgrades and steep declines in both gold and copper futures prices. An aluminum producer, Alcoa, one of the Dow's worst performers today and Phelps Dodge a copper producer tumbling more than $8 a share. Unlike oil, there is more supply of copper than demand.

No doubt you know about the shortage of our flu vaccines, but now there are widespread reports of price gouging. Some companies apparently looking to, believe it or not, to cash in on the crisis, they're offering hospitals the vaccine at highly inflated prices sometimes more than ten times the previous market value. The Kansas attorney general has filed suit against one Florida company called Medstat (ph) before the shortage charging $85 for ten doses. A week later allegedly trying to charge $900.

Supplies indeed are scarce after British officials suspended the license of one of the biggest vaccine manufacturers Chiron, and now there is a critical examination of the concept of outsourcing this country's medical care abroad. The shortage has forced Rite-Aid for example to shut down 500 flu clinics after this Saturday. Walgreen and CVS have already cut short their clinics.

Coming up at 6:00 p.m. on "LOU DOBBS TONIGHT" here on CNN, "Broken Borders," while American border hospitals are stretched thin, treating waves of illegal aliens, American taxpayers are also footing the bill for healthcare within Mexico, believe it or not. Tonight an incredible special report on how millions of your tax dollars are being spent on healthcare for Mexican citizens south of the border.

(BEGIN VIDEO CLIP)

TOMMY THOMPSON, HHS SECRETARY: This is really an investment, to make sure that somebody that's infected doesn't come into the United States, carries that disease into the United States. Better to find out right now, and better to take care of it at the border. This is a -- an investment for the healthcare of America.

(END VIDEO CLIP)

DOBBS: Also tonight, a deadly day for American troops in Iraq. Insurgents have killed six American soldiers. We'll have a report for you from Baghdad tonight.

Also, democracy at risk. We take a look at the integrity of our nation's voting system and the threat of voter fraud, rising cases and charges of voter fraud already. And we'll have the latest from Tempe, Arizona, leading up to tonight's political presidential presentation. Judy, back to you.

WOODRUFF: Lou, I have a question for you. But before I tell you -- or before I ask you, take a look at the sign we just spotted in the crowd. "Lou Dobbs For President." What do you think?

DOBBS: If drafted, I won't run. And that's the end of that story. But very nice -- a very nice thought.

WOODRUFF: Going to be a very disappointed group of young people here. Lou, what are the issues that you think deserve the most attention tonight?

DOBBS: I think the two critical issues, Judy, they form around one central issue in the country today, that's jobs. And I think related to that, there has to be an examination of trade policy that both of these candidates will put forward in the next four years. American jobs just under too much pressure.

Our middle class under assault by trade policies. And the other, of course, is immigration, about which we've heard very little from these two candidates. Immigration, "TIME" magazine's cover story five weeks ago forecasting 3 million illegal aliens coming into the United States. We have to deal with that issue and its impact on our economy and indeed our society.

WOODRUFF: You're right. We have not heard much about that one. All right, Lou, thank you very much. See you tomorrow, Lou.

INSIDE POLITICS continues right now.

(BEGIN VIDEOTAPE)

ANNOUNCER: Five hours from now, President Bush and Senator Kerry face off one last time.

KERRY: I feel great.

BUSH: I can't wait for the healthcare debate.

ANNOUNCER: They say they're ready but what does each candidate need to do to win tonight's final presidential debate?

The issues that Americans want to hear about, and the issues Bush and Kerry want to talk about may be very different. Our Bill Schneider explores.

(END VIDEOTAPE)

Now, live, from Tempe, Arizona, site of tonight's presidential debate, JUDY WOODRUFF'S INSIDE POLITICS.

WOODRUFF: Welcome back. INSIDE POLITICS today coming to you from Arizona State University, Tempe, Arizona. Some excited students here where the crowds are forming. The excitement is building for the final round of the Bush-Kerry debate series. What do the candidates need to do tonight, and what do they need to prove?

Let's bring in our senior White House correspondent John King with the Bush camp and our senior political correspondent Candy Crowley with the Kerry camp. John, to you first, I think a lot of people believe there is more pressure on the president tonight. What are his people saying they believe he needs to do?

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: They say he needs to draw and he will draw a sharp philosophical contrast with Senator Kerry painting him as a tax-happy liberal. The president will try to make the case that he has (INAUDIBLE) to the economy, to taxes, to healthcare and to other domestic issues that would put more choices and power in the hands of individuals, less power in the hand of the government. They believe that's an appealing message.

Let me just start with this, though, Judy. We have been led to believe by the White House over the recent days that the president was informally preparing for this debate, yet today underscoring the stakes of this debate tonight, the president needs a win. David Gergen told you that a short time ago.

Dan Bartlett saying the president has had two formal run-throughs with his debating partner Senator Judd Greg in just the past 24 hours. That they have been taking advantage of every minute during the president's travel to prepare for this debate. Air Force One, in the limousines, they understand fully well that the president needs a strong showing tonight.

And it's not just because of pundits talking about the bad performances in the prior debates, they see evidence in the polling. Places like New Jersey and Minnesota starting to shift Senator Kerry's way. They know they need a strong showing tonight -- Judy.

WOODRUFF: If that's what the Bush people are saying, Candy, what are the Kerry people saying the senator needs to do tonight?

CANDY CROWLEY, CNN SR. POLITICAL CORRESPONDENT: Well, they're saying, you know, that basically all of this tonight is really on the president. I mean, they read those same polls. They love these debates. They've been very, very good for John Kerry.

They look at the internals from the first and second debates, saying Kerry's likability has gone up, George Bush's likability has gone down. Being able to see his leadership. John Kerry has gone up, George Bush has gone down.

So these debates have been very good forums for John Kerry. They look for another one tonight, although they do find it necessary to tell us that they're not overconfident. So that, you know, tells you something there. Obviously he needs not to have a big mistake. Beyond that, he needs to put in the same kind of performances he has the last three times. They are quite confident. Although, as I say, they add they're not overconfident.

WOODRUFF: Well, specifically, John, when the -- I mean, when the Bush people talk about improving on the president's performance, what do they think specifically he needs to improve on?

KING: Well, first and foremost, Judy, what they want to do is remind the American people that perhaps job growth is not as robust as they would like. The president will say as Secretary Snow said earlier in the program, he inherited a declining economy, it fell into recession, and then the September 11 attacks and the president will say it was his tax cuts that pulled the economy out of that recession.

And the job growth is now just beginning to hit a robust upswing. And he will make the case that a Kerry presidency would stall that growth with higher taxes.

So, they believe the president must try to convince the American people that he has done as much as possible given the circumstances on the economy. And it's very similar when it comes to healthcare. Senator Kerry can turn to the president and say, your ideas might be great, sir, he disagrees with many of them of course, but what have you done the past four years. The president's argument has to be that he had these tremendous challenges.

The September 11 attacks and an economy in recession, that he had no choice but to focus most of his attention in the first term on those twin challenges. The president will make the case that he has handled those two challenges well, and now can focus more on other domestic issues like healthcare in a second term.

It's a tough challenge. He is the incumbent president. He has to both defend his record and try to convince the American people he has a better plan than Senator Kerry looking ahead to the next four years.

WOODRUFF: Candy, if those are the arguments the president is making, how does John Kerry counter that do his people say?

CROWLEY: Well, I think you heard at least a preview of that in the St. Louis debate. And that is, first of all, the tax and spend liberal label, Kerry will dismiss and say labels don't matter. I was one of the very few senators who voted for Deficit Reduction Act.

So, he will stress his conservative fiscal resume, as well as say, look, what John said, he's had four years, all he's really done is give tax cuts to the wealthy. I mean, that has been the signature issue of John Kerry when it comes to George Bush. If you set Iraq aside, that is, look what we could have done with this money he spent on a big tax cut for the rich.

So you'll hear a lot of that tonight. We could have had healthcare, but he didn't push it and he gave money to his rich friends. We could have had meaningful prescription drug bills. However, he spent all this money to help his rich friends in the pharmaceutical industry.

So, I think you will hear a lot of that rich friends, you know, "I'm fighting for regular people, I'm fighting for the middle class, and George Bush is a candidate of rich people." WOODRUFF: OK. We're hearing it from the reporters who know these candidates better than anybody. Candy Crowley, John King, thank you both. Appreciate it. See you -- a lot of you tonight.

Well, both campaigns already have their spinners working overtime, hours before the debate. Coming up, Bush campaign advisor Ralph Reed weighs in and offers the Republican counterpoint to our interview with Joe Lockhart earlier.

Plus, the elephant's in the room. The big, but not necessarily talked-about, issues looming over the debates.

(COMMERCIAL BREAK)

WOODRUFF: Yes, they do know how to make their choices heard. Earlier in the show, we heard from Kerry campaign's senior advisor Joe Lockhart of tonight's presidential debate stakes. Now, let's get the Republican viewpoint from Bush campaign advisor Ralph Reed.

Ralph Reed, seems to be a growing consensus that the president needs to win -- clearly win tonight in order to make up for the first two debates. What do you think?

RALPH REED, BUSH CAMPAIGN ADVISOR: Well, I'll leave those kind of judgments to the pundits. But I have to tell you, Judy, I think the pressure is really on John Kerry.

If you look at "The Washington Post" tracking poll, the president is ahead by three. If you look at the ABC poll, he's ahead by four. You look at the CBS poll, he's ahead by three. He looks very strong in the battleground states. If you look at the internals of the ABC poll, three percent more Bush voters than Kerry voters say they're certain to vote for the president. He leads on strong leader...

WOODRUFF: That's pretty narrow, though, isn't it?

REED: Well, but in a close race, that's a percent-and-a-half advantage by the time you get to Election Day in the overall electorate. And he's got a 20-point advantage on strong leader.

And when people are asked who do you think takes clear positions on issues, George Bush wins that by 23 points. So, I think the pressure's on John Kerry.

WOODRUFF: I interviewed David Gergen a little bit earlier. As you know, he's worked for a Democratic president, he's for a Republican president...

REED: Yeah, sure.

WOODRUFF: ... for Ronald Reagan. He said one thing George Bush needs to do tonight is be presidential. He said he had a tendency in the first two debates to get almost angry, feisty, and he said he really needs to come across presidential tonight.

REED: I didn't really see the interview. My purpose is not to just get in a dispute with David Gergen, who I have a lot of respect for. But I think what the president needs to do is to lay out his positive optimistic vision for a new term.

He needs to talk about the incredible accomplishments he's had in only three-and-a-half years. The most sweeping educational reform in 40 years. The most sweeping educational reform in 30 years. The deepest and broadest tax cuts since Reagan. And the strongest economy in 20 years. I think if he does that, we're going to come out of here very strong.

I'll tell you something else -- if you look at the first debate and you look at the Gallup poll after that debate, by a seven-point margin, people who said Kerry did better in the debate said they liked Bush more. By five points, they said they agreed with him more. And by three points, they said they believed him more.

WOODRUFF: So, you're saying winning the debate doesn't matter?

REED: I think what I'm saying is I may not be the smartest guy in the politics, but if people don't like you, they don't agree with you, and they don't believe you, they're not going to vote for you.

So, I think the Kerry campaign is high-fiving in the locker room because their candidate's a smooth talker. But if the voters believe our candidate more, if they believe the president more than John Kerry, he's not going to win.

WOODRUFF: Ralph Reed, you mentioned Medicare reform, prescription drug reform. What if John Kerry tonight points out 13 percent more people are without health insurance today than when George Bush took office? How does the president answer that?

REED: Well, it's just simply false. If you look at the current data, 15.6 percent...

WOODRUFF: This is -- I thought this -- this was from neutral organizations that analyze these things.

REED: Well, I'm just telling you what the facts are -- 15.6 percent of the country was without health insurance under Bill Clinton. Today, it's 15.6 percent of the country.

And the question is, what do you do to reach those who don't have health insurance? And the answer is, what the president's done is he's either set up or is setting up 600 community healthcare clinics so that they can get primary care and preventive care, number one.

Number two, you set up health savings accounts so that people can get catastrophic, low-cost health insurance, because they set up a high deductible under their health savings account.

And number three, you make health insurance deductible for individuals, as well as for employers. We've had a bias in the tax code for employers to provide health insurance, but not individuals to purchase it. That's the way you do it. Not John Kerry's $1.5 trillion government run healthcare plan where 80 percent of the people that he insures are going to be under a government-run bureaucratic program.

WOODRUFF: Well, you know they dispute that, because they talk about how it's not nearly as -- but just one last question quick. Norman Ornstein of The Enterprise Institute, the analyst we've know for a long time...

REED: Right.

WOODRUFF: ... saying he's surprised at how much of, in his words, "negative water" the president's carrying right now. He talked about usually in a campaign at this point, you see good cop, bad cop -- the president's a good cop. He says the president is doing a lot of the negative stuff himself.

How do you see that?

REED: Look, I think John Kerry walked out on a stage at the FleetCenter in Boston, and in a speech of close to 6,000 words spoke for 73 words about his record in the Senate. He's trying to run from the most liberal record of the U.S. Senate.

The president, not only has a responsibility, he has an obligation to the American people, to let them know what that record is. And I think he was exactly right Friday night when he said, look, you can run, but you can't hide.

John Kerry's voted 350 times for higher taxes. He voted for No Child Left Behind and now he says he's against it. He has the most liberal record in the Senate according to "The National Journal," which is hard to do in a chamber that includes Ted Kennedy. But he did it, and we're going to point that out.

WOODRUFF: "The National Journal" disputes that, but we can talk about that the next time we talk. And I know we'll talk again.

REED: OK, Judy.

WOODRUFF: Ralph Reed, speaking up for the Bush/Cheney campaign, and we'll see you tonight...

REED: Look forward to it.

WOODRUFF: ... in the spin room. Thanks very much, Ralph Reed.

REED: Thanks, Judy.

WOODRUFF: All right. Bush and Kerry have 90 minutes, but will they cover all the bases? Up next, our Bill Schneider looks at some of the big issues largely overlooked in the first two debates and the overall (IANUDIBLE).

(COMMERCIAL BREAK)

WOODRUFF: The National Rifle Association today officially endorsed George W. Bush. The decision came as no surprise since the NRA already has spent about $1 million on ads opposing John Kerry. And they say they'll spend millions more. The gun rights issue has been largely overshadowed in this presidential campaign, but it has some company on the sidelines.

Here now our senior political analyst, Bill Schneider.

(BEGIN VIDEOTAPE)

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST (voice-over): They've got issues, issues that have not been talked about very much. With gas and oil prices soaring, you can bet John Kerry will be eager to get energy on the agenda. He also wants to talk about stem cell research.

KERRY: When it comes to stem cell research, the president is making the wrong choice against science and sacrificing science for extreme right-wing ideology.

SCHNEIDER: And the environment which polls show is the issue where Kerry enjoys his strongest advantage over Bush. Bush wants to talk about the issue he used in 2000 to define himself as a compassionate conservative.

BUSH: I'm looking forward to talking about education. This is a subject about which I've got great passion.

SCHNEIDER: And you can bet he will figure out a way to get an international issue into the domestic debate.

BUSH: I'm looking forward to probably spending a little time hopefully on the war on terror.

SCHNEIDER: All that won't leave much time for three huge issues looming over the domestic agenda: the federal budget deficit, $415 billion this year. Kerry accuses...

KERRY: He relieved you of the budget surplus of the United States of America. Now you have the biggest deficits in history.

SCHNEIDER: Bush defends.

BUSH: We have a deficit because this country went into a recession. Secondly, we're at war. And plus, we cut taxes for everybody.

SCHNEIDER: Maybe tonight we'll find out what they plan to do about it. Another looming crisis: health care, 45 million uninsured, rapidly rising costs. Kerry has got a plan. Bush portrays it as a return to what he has called "Hillary care." Kerry may get a chance to defend it tonight.

Then there's the elephant in the room. Everybody knows it's there, but nobody wants to talk about it.

JOE KLEIN, "TIME": The Baby Boom generation, we're about to retire, and we're going to send the costs of Social Security and Medicare through the roof. And neither of these guys want to tackle it, because it only involves pain.

(END VIDEOTAPE)

SCHNEIDER: The next president will almost certainly have Supreme Court vacancies to fill. Those confirmation fights are likely to be the most contentious political battles in the next four years. Funny thing, though, it has always been hard to get voters to think much about the Supreme Court -- Judy.

WOODRUFF: Although, you know, Bill, a couple of students here at Arizona State brought that up talked about that. Very quickly, Bill, what do you think? Do you think that Bob Schieffer is going to be able to pin these candidates down tonight on what they would do to cut the deficit in half?

SCHNEIDER: Well, Charles Gibson tried that in the last debate and he made a little bit of headway. But basically they resorted very quickly to attacking each other instead of laying out their plans. This is the final debate, and I think they're going to be mostly in attack mode, not in revelation or explaining mode.

WOODRUFF: All right. We heard it here, Bill Schneider, our senior political analyst. Thank you, Bill.

INSIDE POLITICS will return after this message.

(COMMERCIAL BREAK)

WOODRUFF: A lot of enthusiasm here at Arizona State. That is it for INSIDE POLITICS this Wednesday. I'm Judy Woodruff. I'll be back tonight to join Wolf Blitzer, Anderson Cooper and the rest of the CNN election team for the final presidential debate. CNN's special coverage begins at 7:00 p.m. Eastern. I'll see you then. "CROSSFIRE" starts right now.

Take it away, guys.

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