>> schieffer: today on "face the nation," the president's top advisor, david axelrod, and a key republican strategist and former chairman of the republican national committee, ed gillespie. with just three weeks to go until the mid-term elections, the republicans are smelling blood. >> do we have to take it? >> no! >> hell, no, you don't. >> schieffer: with more analysts predicting the republicans will regain control of the house, the president and the vice president are on the campaign trail now virtually non-stop. do they have a plan to reenergize the supporters who propelled president obama into office? we'll ask david axelrod, one of the main architects of the obama victory in 2008. then we'll turn to ed gillespie one of the republicans' key strategists this year. finally, i'll have some thoughts on those who protest at military

funerals. do they have a right to intrude on grief in the name of free speech? but first, coming down to the election wire on "face the nation." captioning sponsored by cbs "face the nation" with cbs news chief washington correspondent bob schieffer. and now from cbs news in washington, bob schieffer. >> schieffer: good morning again. and welcome to "face the nation." david axelrod is the senior advisor to president obama. mr. axelrod, let's just start with the headline news. just when we thought the housing crisis, which was, let us not forget, the beginning of our economic problem-- just when we thought it couldn't get any worse, now we find that this sloppy paperwork by the lenders may have made some of these foreclosures now that are being contemplated invalid.

some of the biggest lenders are now freezing foreclosures until they can get all this straightened out. i guess the first question i would have is, does the administration favor some kind of national moratorium on these foreclosures to get this all sorted out? >> first of all, bob, it is a serious problem. it's thrown a lot of uncertainty into the housing market that, as you know, is already fragile. it's bad for the housing market and it's bad for these institutions, which is why they're scrambling now to go back through their documentation for all of this, as they should. the president was concerned enough to veto a bill that came to him last thursday that would have unintentionally made it perhaps easier to make mistakes. so we are concerned. we're working with these institutions. i'm not sure about a national moratorium because there are, in fact, valid foreclosures that probably should go forward and where the documentation and paperwork is proper. but we are working closely with

these institutions to make sure that they expedite the process of going back and reconstructing these and throwing out those that don't work. >> schieffer: i mean, i guess people are worried about what do you think the impact this is going to have on an economy that's pretty shaky right now? >> look, our hope is that this moves rapidly and that this gets unwound very, very quickly, and that if they can go back, reconstruct their paperwork, and what we've stressed to them is that they need to expedite that process and work very, very quickly to get it done. we're going to continue to push for that. >> schieffer: let's switch to politics. last week, of course, the president's on the campaign trail. he's on the campaign trail just virtually all the time now. while he was out there, the democrats put out an ad that's released this morning that

blames the republicans, and specifically the u.s. chamber of commerce, for injecting foreign money into campaigns. the president's words on the trail last week were, groups that received foreign money are spending huge sums to influence american elections. let's just look at this ad that the democrats put out today. >> karl rove, ed gillespie-- they're bush cronies. the u.s. chamber of commerce. they're shills for big business. and they're stealing our democracy, spending millions from secret donors to elect republicans to do their bidding in congress. it appears they even have taken secret foreign money to influence our elections. it's incredible. republicans benefiting from secret foreign money. >> schieffer: now, i want to ask you about that, because "the new york times" looked into the chamber specifically and said the chamber really isn't putting foreign money into the campaign. that it does charge its foreign affiliates dues that bring in less than $100,000 a year. a lot of organizations,

including labor unions, do that. but the chamber has an annual budget of $200 million. along with that it keeps these foreign dues separate. they do spend heavily in politics-- $25 million so far. they expect to spend $50 million. but this part about foreign money, that appears to be peanuts, mr. axelrod. do you have any evidence that it's anything other than peanuts? >> well, do you have any evidence that it's not, bob? the fact is that the chamber has asserted that, but they won't release any information about where their campaign money is coming from. that's at the core of the problem here. what we've seen, in part because of a loophole that the supreme court allowed earlier this year, we now see tens of millions of dollars being spent by the chamber and a number of organizations, some of which just cropped up. ed gillespie and karl rove run one of them. tens of millions of dollars from undisclosed donors under benign names like the american crossroads fund. they're spending heavily in all

of these elections. one race in colorado, there are six different organizations running negative ads against the democratic senator there, michael bennett. know one knows where the money is coming from. my question back to you and for your next guest is, why not simply disclose where this money is coming from? and then all of these questions will be answered. >> schieffer: that will certainly be fine with me. but i want to go back to this thing about the chamber of commerce. if they're only taking in $100,000... >> if they are. >> schieffer: but you question that. >> well, i don't know. no one knows, bob. the point is i can assert anything i want, but you have as a good journalist you would ask me how do we know that's true? do you have documentation to prove that? if the chamber opens up its books and says "here's where our political money is coming from. here are the million dollar, two or three million dollar contributions we've gotten from this company or that industry," then we'll know. but until they do that, all we have is their assertion. >> schieffer: do you... i guess i would put it this way.

if the only charge, three weeks into the election that the democrats can make is that somehow this may or may not be foreign money coming into the campaign, is that the best you can do? >> no. i think that we have a more fundamental concern, bob, which is that the republican party and the interest groups who are now the major force in some of these campaigns want to turn the clock back to the very same policies that got us into this mess in the first place-- that exploded our deficits, that put the special interests in control to write their own rules: the oil industry, wall street, insurance industry. that presided over economic policies that punished the middle class. their incomes dropped by 5% during the eight years before we got here. and that ultimately crashed our economy. and now, they want to turn the clock back to those policies. we just can't afford to do that. but these... this issue of this special interest spending is very important.

it's never happened before that organizations are spending this kind of money. and the american people need to ask why is the... why is the oil industry, the... wall street and others spending this kind of money to defeat candidates and elect others in this sort of secretive way? you know, that is a threat to our democracy. >> schieffer: what do you think would happen, mr. axelrod, if the republicans do take the house? because more and more analysts are saying it looks like that's going to happen. do you believe it will force democrats and republicans to start working together, or do you see something... more gridlock perhaps? >> well, let me say i don't... you know, i don't think that that is going to be the outcome of the election. my hope is that you will see more cooperation. as you know, bob, the posture of the republican party, from the moment we got here, has been basically to deprive the president of bipartisan support so they can accuse him of not being bipartisan.

the day that the president went up to talk to the republican caucus about the recovery act in the house, they issued a release on the way up, on his way up to the hill saying they weren't going to give him one vote. at a time when we had a national crisis that we needed to address. so i'm hoping that with more seats, the republicans will feel a greater sense of responsibility to work with us to solve some of these problems. >> schieffer: i'm told you've become a serious student of the tea party. bill clinton said the other day that sarah palin is a force to be reckoned with. what do you make of sarah palin? do you take her seriously? >> she certainly has a following. she's an interesting personality. you know, i'm not going to pass judgment on the level of force she represents in our politics. but she has... when she sends out a tweet on twitter or puts something on her facebook, you

guys cover it, people respond to it. so that makes her a player in our politics. >> schieffer: and the tea party itself. do you believe, as some democrats do, that it is simply a motivator for democrats? >> well, i think some of the positions that some of the tea party-supported candidates have taken-- eliminating social security, eliminating medicare, eliminating the department of education, dismantling laws to protect our air and water-- these are not positions that most americans or certainly most democrats don't support that. i think that is motivating. i don't discount the impulse of millions of people who have supported these candidates who are frustrated with some of the things that they've seen over the years here in washington and who are frustrated with the economy. but i don't think... what's interesting is you've got a republican party that is sort of bifurcated between rank-and-file

people who have that impulse, and these sort of corporate republicans here who are... they at the tea party convention in nashville john boehner was up on wall street telling the big finance houses there that he was the only one who stood between them and financial reform and they should give him millions of dollars, which they apparently are. i don't think that's what those folks bargained for but that's where we are. >> schieffer: let me ask you a final question. when john boehner, the republican leader of the house, was here i asked him, i said, talked to him about things where the two sides could work together. i said why don't you and the president announce jointly that the two of you will pledge to try to stop smoking. he said he'd take it under consideration or thanked me for the suggestion. do you think the president would be willing to join in some kind of a campaign like that? >> you know, we sort of started that campaign, bob, because we waged a big battle in the congress to get the fda to regulate tobacco so that we could stop the marketing of these products to children. >> schieffer: but he still smokes. >> but the president has... is doing a pretty good job on that, by the way.

but the bigger issue is this-- they can be role models for sure. but if we allow the tobacco companies to market their products to children, then we're creating a whole new generation of people who are addicted to tobacco. that's why... mr. boehner and the republican party were on the other side of that fight. >> schieffer: what about a pledge the two of them working together? do you think the president would consider something like that? >> we want to work together on any constructive thing we can. >> schieffer: all right. thank you, mr. axelrod for being with us. >> good to be with you. >> schieffer: back in a minute. ♪ [ man ] i thought our family business would always be boots. until one day, my daughter showed me a designer handbag. and like that, we had a new side to our business. [ male announcer ] when the martinez family saw an opportunity, the hartford was there. protecting their employees and property, and helping them prepare for the future. nice boots. nice bag. [ male announcer ] see how the hartford helps businesses at achievewhatsahead.com.

>> schieffer: back now the ed gillespie and a man who turns out as one of the key strategists in these midterm elections. we need to go first to what mr. axelrod said and that ad that the democrats are reporting about republicans injecting a lot of foreign money into this campaign. your answer.

>> my answer, bob, is that david axelrod is either woefully uninformed or willfully deceptive and dishonest, because the fact is, on three points he made here-- let's start with the first. karl rove and i don't run american crossroads as he said on this program. we're fully supportive of it. i've helped to raise money for it. i encouraged it to come together because i think we need something like that on the conservative side, because there's so much money on the liberal side. $400 million was spent in 2008 to help elect barack obama. we didn't hear mr. axelrod or others complaining that much of that money was undisclosed. there are organizations on the right who are playing by the same rules. but i'm not on the board. i'm not a paid consultant. i don't have any formal role. i'm not responsible for its decisions. second, i am responsible for the republican state leadership committee. i've chaired that group. we helped to elect candidates to state house and senate offices around the country and attorney general offices. we disclose all of our donors. 85,000 of them, all of them

american. third, the "washington post" and "the new york times" both completely repudiated this charge of foreign money being funneled through the chamber of commerce into american campaigns, the charge of illegal criminal activity. that was based on a blog posting that the president of the united states repeated that was put on a web site that's affiliated with center for american progress, a liberal nonprofit advocacy group that does not disclose its donors. so the fact is that this is the kind of abuse of power in a lot of ways and the kind of attacks that most americans are rejecting. it's one of the reasons they're in such trouble in this election. >> schieffer: let's just go back to the original premise, though. it may be legal and apparently... well, it is. >> sure, it is. >> schieffer: but wouldn't it be better for all concerned if we disclosed who was giving what money to whom? why not make these disclosures? >> bob, that's a debate for congress to have. you know, the... mr. schumer and

mr.... the chairman of the democratic congressional campaign committee tried to jam through a bill at the end of this session of congress. it didn't work. now that these groups are playing by the very same rules that the law that they passed earlier and tried to reform but were unable to, they're leveling charges all over the place. max baucus, the chairman of the senate finance committee, is calling for an i.r.s. investigation. there's already a treasury department inspector general investigation of the white house trying to find out how it is they came to get access to private tax information by coke industries... the coke brothers are on their enemies' list because they opposed their agenda. they support "free market" policies. and then how is it that the president's top economic advisor made that confidential information public? inspector general investigation, which is rightly being done, but that's the kind of steps they take. al franken, the senator from minnesota... democratic senator

calling for a criminal investigation of the chamber of commerce. you know, i mean this kind of intimidation to silence political opponents, bob, you wonder why people may not want to be disclosed? look what they're doing to folks who are stepping up and saying we're going to challenge you in the electoral process. >> schieffer: i take your point on all of that. but i still go back to the basic question. wouldn't it be a good idea to know who is putting money into campaigns? i mean, how do we not know that foreigners aren't pouring money in? because now, it is possible under the law. wouldn't that be a good thing to change that law? >> well, if everybody plays by the same rules, i'm for everybody playing by the same rules. again in 2008, $400 million went to help elect barack obama from liberal nonprofit advocacy groups, much of it non- disclosed, the sources of that. if people want to change the rules and have that debate, that's fine. don't accuse those who are playing by the rules of somehow doing something unethical or illegal. and the notion that david axelrod, one of the highest ranking officials... a sworn

official in the white house would sit on this set and say i'm going to lob these charges and let them prove it's wrong. let's accuse the cameraman. "prove that you've not taken foreign money." that is an unbelievable mentality and the grasp on power... these ads are not a threat to democracy, bob. they may be a threat to their power. but their power and democracy are not the same thing. it's very revealing that they see it that way. >> schieffer: all right. let's talk about... david axelrod, i asked him, what did he think a republican takeover of the house would mean? he said, well, he doesn't think it's going to happen but he would hope it would lead to cooperation. do you think it would lead to cooperation, or should we expect more gridlock, more opposition? >> i think there will be areas where there's cooperation, areas where there's opposition. look, the republicans if they take control of the house and get very close in the senate, are going to try to put the brakes on all this reckless spending. we just saw this week alone they announced that there was the debt going up $1.3 trillion.

by the way, partly because $18 billion of stimulus money went to 72,000 dead people. we just saw this week that 95,000 americans lost their jobs and the unemployment rate remains at 9.6%, above 9% for the 14th straight month. we just saw that this administration... we know that this administration has incurred more debt in 18 months than president bush's administration incurred in eight years. republicans are going to put the brakes on that. but on areas maybe like free trade agreements, i think there may be some common ground if they can find areas where you can get spending restraint with this administration. republicans would be happy to go along with that. >> schieffer: talk a little bit about the tea party. you heard what mr. axelrod had to say about it. he basically takes them seriously. are they a problem for republicans? >> well, they've been a little disruptive in the primary process. to some candidates, and we have some unconventional candidates now because of tea party participation in the process. that's the right kind of problem. we've got 19 million people who voted in republican primaries

this past year versus 15 million in democratic primaries. four million more people voted in republican primaries than in democrat primaries. that's the first time i think since fdr, republicans have outpaced democrats in primary voting. that's a very good harbinger for what going to come on november 2. so the fact is there are some growing pains that are going on here with these new folks coming into the political process, coming into the republican party primary. but growing pains are better than shrinking pains. as a former rnc chairman, i would rather see that any day. so the fact is the best thing for us is that these folks are voting in republican primaries, not backing third party candidates, tea party candidates as a third party which would hinder our ability to elect republicans. >> schieffer: what's your take on sarah palin? do you think she is actually trying to run for president here? >> i don't know, bob. i have a lot of respect for sarah palin. i think she'll be a force if she does run in the republican party primary for the nomination. i'm not privy to her thinking on that. she leaned into it a little bit

recently. i can tell you there are a lot of voters, and i think she especially in iowa, who to whom she has strong appeal. and the question is, you know, would that... i think for governor palin is the question for all potential nominee s is can you go beyond your original base of support and build on it to win enough votes in other states to get the nomination. >> schieffer: ed gillespie. thanks so much for coming. >> appreciate the opportunity. >> schieffer: we'll be back with final thoughts in a moment. moment. [ wind howling ] [ technician ] are you busy? management just sent over these new technical manuals. they need you to translate them into portuguese.

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>> schieffer: finally, if you know me, you know i take second to no one in my defense of the first amendment. freedom of speech is our most important freedom. without it, we could not defend the others. but as i watched the lawyer for those kansas protesters argue before the supreme court that her group had a right to hold protests at the funerals of american soldiers, i was reminded that no freedom is possible without some limit. the courts decided long ago that free speech does not allow someone to falsely shout fire in a crowded theater. this group believes that soldiers are dying because god is punishing america for tolerating gays. so they argue they have the right to show up at any soldier's funeral and shout and wave disgraceful signs as long as they stay in a public area. i understand that in a free society, even a group as vile as the nazis has the right to publicize its cause.

i don't like it, but i recognize that even flag-burning is a form of legal political expression. but does the first amendment give anyone the right to open the heart of a dead soldier's parent and invade that person's privacy and grief with hateful noise and sights? i'm no lawyer, but i know enough about our constitution to know it is based on the premise of fairness. what these people are doing is not just unfair, it is wrong. if we can bar political parties from campaigning at polling places, surely there is a way to stop those who wish, for their own selfish purpose, to harass those who have given their children in the cause of freedom. back in a minute. back in the 80's, it was really tough for me and my family. i was living on welfare and supporting a family of four. after i got the job at walmart, things started changing immediately. then i wrote a letter to the food stamp office. "thank you very much, i don't need your help any more."

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>> schieffer: that's it for today. we'll be right here next week the face the nation. thanks for being here. captioning sponsored by cbs

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