Governor David Paterson is joining us from New York. Governor, thanks very much for coming in.

Good to join you again, Wolf.

What’s the story? You know what’s going, and you can tell us. Is Hillary Clinton going tobe the next Secretary of State?

I haven’t the slightest idea. I came on to talk about budget deficits, but what I would sayis that if it came to pass, New York’s loss would be America’s gain, which is how we feltwhen Hillary Clinton ran for president. But no one’s spoken to me and I’m not going tospeculate on the speculation.

So she hasn’t mentioned anything to you yet about the possibility of giving up her senate seat, because I take it you would have tremendous authority, responsibility in naming her successor?

I don’t have tremendous authority in many areas right now, particularly in terms of our fiscal deficit, but I do have the authority to appoint a new senator if either of the senatorsof New York were to leave office.

But nobody’s had that conversation with you yet, is that right?

No they probably know how busy I am and don’t want to disturb me.

You’ve got a lot going on right now. I want you to listen, I spoke earlier in the week withGovernor Sarah Palin, your Republican colleague from Alaska, and we spoke about the fact that an African-American is about to be the next President of the United States, and I asked her whether or not that should eliminate the need for affirmative action in thecountry, and listen to what she told me:“With the intent of treating everybody equally, and providing equal opportunity in theworkplace and in education, there are some specific policies that I’m sure we can movebeyond.”What do you think? Does this eliminate the need for affirmative action in our country?

Well I appreciate that Governor Palin recognized that not in all cases have we moved beyond, and I think that that’s what Senator Obama’s election in some ways symbolizes.That anybody that doesn’t think that we’ve gone a long way towards racial equity in thissociety is a charlatan, but anyone that thinks that we have solved all the problems, notonly racially, but in terms of national origin and women, who are 51.8% of the populationand don’t get to the areas that I think their talents take them, shows that we still havesome distance to go.

Let me pick your brain for a second. How does it feel to you, you originally supported Hillary Clinton, I believe, correct me if I’m wrong, but you later supported Barack Obama very enthusiastically. What does it mean to you that the next commander-in-chief is going to be an African-American?

Well I think just as people turn on television and they might watch a program in whichthey were in the audience and they’re looking around for themself, or when they passaround pictures to children after they take their school photos every year, I think that thisis something that emerging groups love to see, is being able to find someone who theyrelate to in government and I think that’s what President Obama does. But what makesBarack Obama almost transition above race and ethnicity itself is the fact that there’s somany white Americans who seem so happy that our country has reached a point nowwhere we can elect an African-American, or a woman, or an Hispanic president, and Ithink that’s what was so stunning and amazing about what’s gone on in the last 10 days.

Let’s talk about my home state of New York and the economic situation, because you’vecome up with a new approach, some would call it almost a revolutionary approach, todeal with the enormous fiscal and economic problems facing the people of New York right now. Very briefly, tell us what you’re doing because it potentially could be a model for other states.

Well we are going to go back into session, and other states, Arizona under Governor Napolitano and Kentucky under Governor Beshear, they’re going back in to close their budgets down, and the chief financial officer of Florida thinks that their economy hasturned so far that they’re gonna have to go back in, and California’s coming back again, but in New York we are moving the date of our budget submission up by six weeks, toDecember 16, hoping that if we can close our budget earlier, and exact many spendingreductions, that that would transform into getting the greater bang for our buck in reducedreductions next year. And obviously, education and healthcare comprise over 52% of our general fund, the fund that we can cut the budget from. We have a $14 billion deficit over the next two years, out of $56-60 billion that we can cut, so we have severe problems, butwe think the sooner we address them, the stronger and faster we can recover from them.

Is New York State, like some other states out there, going to be appealing to the federal government for a massive financial bailout?

Well we don’t want just money from the federal government. We think that if thegovernment gave us the resources to inject into infrastructure repair, which this countryhasn’t addressed in a decade, we have about 95 shovel-ready projects that we may not beable to afford to complete otherwise. Remember, New York gets back $86.9 billion lessthan we pay in taxes, and we have a lot of states right now, in fact Governor Palin’s statehas the highest per capita return for their taxes. They get back a whole lot more than theygive. But even states like South Carolina with a $16.9 billion return more than they pay intaxes, they are going back in because they have a $500 million budget deficit they have toclose.