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STEVE INSKEEP, host:

It's MORNING EDITION from NPR News. Good morning, I'm Steve Inskeep.

We're not even through January, and if you own stocks, you may be worth noticeably less than you were on New Year's Day. The slipping market is just one reason that President Bush will endorse measures to improve the economy today, and the people who want to replace him are taking the chance to offer their own ideas.

Here to talk about that and more, NPR's national political correspondent Mara Liasson. Mara, good morning.

MARA LIASSON: Good morning, Steve.

INSKEEP: Also our political editor, Ken Rudin. Good morning to you as well.

KEN RUDIN: Hi, Steve.

INSKEEP: So how are the candidates addressing the economy?

RUDIN: Well, you know, the Democrats have a different view than the Republican. Democrats have seen this more as a Henny Penny approach that the sky is falling and the recession is here, and they have been calling for more drastic measures. The Republican…

INSKEEP: Which would cost more than a Henny Penny, I presume.

RUDIN: A little bit more than Henny Penny. But the Republicans have really mostly been ignoring it. Mitt Romney has always been focusing on abortion and immigration and bringing back Ronald Reagan - that might be difficult. But we saw something different that happened in Michigan, the highest unemployment in the nation. Mitt Romney suddenly became the businessman, the guy who turned around the Olympics, the guy who turned around Massachusetts. He could turn around the economy, too, even though he has not been specific.

INSKEEP: Are Republicans, when you say they have been ignoring this until now, is that because this is in some way a weakness for Republicans, Mara Liasson?

LIASSON: Well, I actually think Republicans are now paying a lot of attention to it. But there's a differences of opinion about how bad things are, and also, the cost of a short-term fix. I think that Democrats generally seize on the economy. This is something that's usually a good issue for them, and especially when you've got an incumbent president of the other party.

INSKEEP: Okay, so we have a voting in Nevada - or rather, caucuses in Nevada on Saturday. Also a big primary for Republicans, on the Republican side in South Carolina on Saturday. What's at stake?

LIASSON: Well, I think there's a lot at stake for three of the Republican candidates. For John McCain who was beat here in South Carolina by George W. Bush in 2000, he really has to show that he can build a coalition starting with the strong base of military families that he has there. He has got the establishment in South Carolina behind him this time.

For Mike Huckabee, he's got to show that his appeal can reach beyond evangelical voters. There are plenty of them down there, and he is doing very well among them. But he's pushing his populist message talking about economic problems for middle and working-class families, the kind of Sam's Club Republicans that you hear a lot about now.

And for Fred Thompson, it's very important because he has to win somewhere. Both McCain and Huckabee have won other places: Iowa and New Hampshire. Fred Thompson hasn't won anywhere. He hasn't really done well anywhere. He's got to win here; he is the southerner in this race.

INSKEEP: When you look at the polling data from South Carolina, do you see a real front-runner right now?

RUDIN: Well, I'd rather you don't say the word polling data because right before New Hampshire, we were writing off Hillary Clinton. Before Michigan, we were writing off Mitt Romney. So who knows, but obviously, these candidates have to win. John McCain, running out of money, needs to win somewhere. Mitt Romney has so much money. Even if he doesn't win South Carolina, he's bankrolled through the February 5th primaries.

And you know, I think with Fred Thompson, the Hollywood writers strike has certainly hurt him. He has not had much to say.

(Soundbite of laughter)

RUDIN: And he has to win somewhere - and maybe some.

INSKEEP: Come on. Well, he comes up with his own lines.

RUDIN: Maybe. I know.

INSKEEP: Unless he doesn't. And you come up with your own lines. We know that for sure. Has it been a clean campaign in South Carolina?

RUDIN: No, it has not. And we go - I mean, go back to 1980, there has been dirty tricks always in South Carolina. Probably, the reason they do it there is because it works, and two, because it's very important. The winner of South Carolina primary has always gone on to win the Republican nomination.

John McCain, eight years ago, was pilloried - they said that Cindy McCain was a drug user. They said that he had fathered a black baby out of wedlock. He and Cindy McCain adopted a child in a Bangladesh orphanage, for goodness sakes. But those flyers - those scandalous flyers are out there again. They are saying that John McCain abandoned his fellow POWs to save his own skin when he was in Hanoi. So it's gotten very, very ugly. And except this time, McCain has the apparatus, the organization, and perhaps, the money to fight back, unlike 2000.

INSKEEP: How ugly, if at all, have things been in Nevada, where the biggest focus is on the Democratic side?

LIASSON: Well, a lot less ugly than South Carolina by those standards. I think Nevada is a very close race. This is the first time that Hispanic voters are going to weigh in in large numbers. We're going to see a real test of union clout. The big unions there have endorsed Barack Obama. Hillary Clinton has what you might call the Nevada Democratic establishment on her side.

Yesterday, a judge ruled against the Clinton supporters who were trying to stop the caucuses being held inside the casinos where a lot of those union workers work. The suit was brought, of course, after the union decided to support Barack Obama.

The issues there are, of course, the economy. Nevada has the highest rate of home foreclosures in the country. And also, there is a local issue: the Yucca Mountain nuclear waste site. All three Democratic candidates are opposed to it, and the big argument is who is more opposed to it.

You haven't had a lot of polls in Nevada - that's probably a good thing. But there is one coming out today - that shows Hillary Clinton ahead.

INSKEEP: Mara Liasson, thanks very much.

LIASSON: Thank you.

INSKEEP: And our political editor Ken Rudin, thanks to you.

RUDIN: Thanks, Steve.

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