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Inside Politics

John McCain Fires a Shot Across the Bow to President-elect Bush; Did California's Decision to Raise Energy Rates Make Anyone Happy?

Aired January 4, 2001 - 5:00 p.m. ET

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

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: I cannot and will not, in good conscience, give up on this effort. The longer you delay in bringing up this issue, the less the likelihood it is of passage; I mean, that's just a political reality.

(END VIDEO CLIP)

JUDY WOODRUFF, CNN ANCHOR: By relaunching his bid for campaign finance reform, John McCain raises the possibility of a new clash with George W. Bush.

BERNARD SHAW, CNN ANCHOR: Meantime, the president-elect hears the high-tech blues, even as he keeps plugging away for tax cuts and his choice for attorney general.

WOODRUFF: Plus, California's political lightning rod: the latest on the state's power crisis.

ANNOUNCER: From Washington, this is INSIDE POLITICS with Judy Woodruff and Bernard Shaw.

SHAW: And thanks for joining us.

The old, "With friends like these..." line might be going through George W. Bush's mind now that John McCain now that John McCain is throwing down the gauntlet again on an issue they sparred over during the Republican presidential primaries.

CNN's Chris Black reports.

(BEGIN VIDEOTAPE)

CHRIS BLACK, CNN CONGRESSIONAL CORRESPONDENT (voice-over): Just as George W. Bush gets ready to take office, his old rival John McCain is back, provoking a divisive battle over the issue of campaign finance reform.

MCCAIN: I promised millions of Americans, when I ran for president of the United States, that I would not give up on this crusade of reform. BLACK: McCain and Democrat Russ Feingold will introduce legislation to outlaw the unregulated contributions to political parties just two days after Mr. Bush's inauguration.

Republican leaders pleaded with him to wait until later in the year.

SEN. DON NICKLES (R), OKLAHOMA: I don't think that's a good way to start. I'd like to see us give it a little bit of time, see if we can't come up with a compromise.

BLACK: McCain, ever the maverick, said there's no reason to delay.

MCCAIN: To say that we shouldn't take it up right after the inauguration because of some legislative agenda is simply nonsense.

BLACK: President-elect Bush opposes McCain's legislation, preferring curbs on labor unions. Supporters of reform say that would kill any bill.

GEORGE W. BUSH, PRESIDENT-ELECT OF THE UNITED STATES: But I will tell you that I think it's very important for us to make sure that the bill is fair and balanced. And one way to do that is for there to be paycheck protection, so that a union member will be able to opt out of a union spending money if he or she doesn't like the purpose for which it's being spent.

MCCAIN: I have the utmost respect and -- of the verdict of the voters and I will do everything in my power I can to cooperate with President Bush and the incoming administration. But I cannot and will not, in good conscience, give up on this effort.

BLACK: The Republican presidential candidates clashed over the issue...

BUSH: There's a $1,000 limit.

MCCAIN: He can give $1,000 to the RNC, the DNC, or anybody else.

BUSH: Excuse me, that's not...

(CROSSTALK)

BUSH: ... called the First Amendment...

MCCAIN: That's what it's all about.

BLACK: Some Republicans say Bush should embrace part of McCain's agenda.

SCOTT REED, GOP STRATEGIST: The campaign of 2000 was a $3 billion election night. Clearly, the American people think enough is enough; that's part of the magic of the message that McCain hit on when he ran for president. And I think people are sick and tired of the special interests dominating the daily activities of what they expect the government to do to serve the people.

(END VIDEOTAPE)

BLACK: McCain and Feingold brought with them the senator they say gives them enough votes to shut off a filibuster by opponents; that is Senator Thad Cochran of Mississippi, a conservative Republican who could act as a bridge to other Republicans on this issue -- Bernie.

SHAW: Two questions about matters on the Hill there: First of all, what's this about a tentative power-sharing agreement?

BLACK: They're getting very, very close, Bernie. According to Republican senators familiar with the deal, the committees would be divided 50-50 between Democrats and Republicans. This has been a central point insisted upon by the Democrats to reflect the 50-50 ratio in the Senate.

Republicans would, however, retain the chairmanship; Democrats don't object to that. They would also divide committee resources and staff equally, right down the middle. But it's important to remember, Bernie, that, until the deal is really done -- it's not done; this could unravel because of other side-issues that still have to be negotiated.

SHAW: Confirmation hearing -- Don Evans, commerce secretary. How did it go?

BLACK: A real love-in. He was warmly welcomed by both Republicans and Democrats. In fact, Senator J. Rockefeller, the Democrat from West Virginia was positively effusive in his praise of Don Evans.

He did get some questioning. There was a lot of concern about trade, about enforcing trade laws to make sure that imports don't hurt U.S. businesses. This came from Fritz Hollings, who chaired the committee. It was the first time we saw a Democrat chairing a committee in a long time up here.

And there was also a lot of concern about the census. My Evans really dodged questions; John Kerry of Massachusetts tried to nail him down on whether he would support statistical sampling, something Republicans oppose. But he said he's wait and see what the professionals at the Department of Commerce recommended to him -- Bernie.

SHAW: Chris Black on the Hill; thank you -- Judy.

WOODRUFF: Well, we are joined now by Senator Russ Feingold, Democrat of Wisconsin. He is, of course, the cosponsor of the McCain- Feingold campaign finance reform legislation.

Senator Feingold, thank you for being here.

SEN. RUSS FEINGOLD (D), WISCONSIN: Good to be here. WOODRUFF: Are you and Senator McCain, in effect, kicking sand in the face of the president-elect, because this is an issue that he's not ready to come your way on?

FEINGOLD: Absolutely not. This isn't about Bush versus McCain at all; and that's not how John McCain intends it or I intended it -- certainly not Thad Cochran.

This is about whether or not we're going to pass a true bipartisan bill that now has 60 percent support in the Senate or more, overwhelming bipartisan support in the House. And, in fact, I would say that President-elect Bush's comments, the comments of Vice president-elect Cheney and Andrew Card have all been very modest on this.

This doesn't have to be a confrontation. In fact, I think it will work out. So the effort to pit McCain against Bush on this really is not what's happening.

WOODRUFF: You're saying their words have been moderate, but it's clear that they don't want this to come up first thing. You're introducing this two days after he's inaugurated.

FEINGOLD: I didn't hear the president say that today. i didn't hear him use the word "veto." I didn't even hear him say that our bill wasn't balanced.

He indicated that there should be a balance between unions and corporations; we agree with that, we think our bill does that. And, as John McCain said today, the president-elect actually had a proposal on campaign finance reform. We don't agree with every piece of it, but we think we can negotiate. And I'm very optimistic; I think the Bush administration is going to do the right thing on this in the long run.

WOODRUFF: But the Republicans -- most of the Republicans in the Senate, as we know, have opposed this in the past. We just heard Senator Nickles, who's in the leadership, saying, what's the rush here, in effect. What is the rush?

FEINGOLD: Well, their numbers are dwindling.

And here's the rush: If we don't do campaign finance reform at the beginning of one of these election cycles, it gets to be too late. What happens is the fund-raising starts. The people that are going to run against each other start raising money and people feel locked in.

It is now, right after a $3 billion federal election that we have to do that. The fund-raising starts right away -- we have to change this so everyone can feel comfortable, going into another election cycle, that this will be fair and balanced for both parties.

And we've waited five years; we now have the votes. It should be first, it should be done.

WOODRUFF: Do you have the votes? FEINGOLD: I'm very confident. I think we've got 60 people who are on record now, saying that they are for McCain-Feingold, or certainly saying they would vote for cloture -- to stop the filibuster.

I believe...

WOODRUFF: And it takes 60 votes?

FEINGOLD: It would take 60; we've got that.

I suspect, with a person of the stature of Thad Cochran, one of the most respected members of the Senate and a conservative member of the Senate -- I know there will be other Republicans, I think we're well over 60, but we have to prove it by having a vote. But we feel more confident than we've ever felt in the long five years that John and I have been working on this.

WOODRUFF: You said today, senator, I believe these are your words, that "this is a modest bill."

FEINGOLD: It is.

WOODRUFF: How much scaled-down would it be -- will it be from what you were talking about last year?

FEINGOLD: Well, John and I started five years ago with a bill that had to do with free TV time and discounted TV time. That's where we ought to be someday. And then we had another scaled-down bill; and finally, in the last session, we scaled it down as far as I think we really can.

We have to simply ban...

WOODRUFF: The soft...

FEINGOLD: ... the soft money to the political parties.

And there are other provisions that Senator Cochran is very interested in: the so-called Snow-Jeffords provisions that deal with these phony-issue ads that are done near the end of the campaign. There's a lot of talk about maybe having that being a part of it as well.

We haven't settled on the final package, but we know the minimum, we've reached the minimum that we're going to accept, and we must pass a ban on that soft money.

WOODRUFF: And that's banning the soft money.

FEINGOLD: That's right.

WOODRUFF: As I understand it, up until now, Senator Lott has not agreed to schedule this. What sort of agreement are you going to have to have to get some sort of debate and then a vote? FEINGOLD: Well, it would have to be done now, almost immediately after the swearing in of the new president. It would have to be a completely open process, with no time limit, to allow every senator the opportunity to freely amend the bill and with an up-or-down vote on the bill.

If that agreement is not made, John and I will move forward because we now have the super-majority that allows us to conduct ourselves that way in the Senate. It took a long time, but now we think we're there.

WOODRUFF: And will you attempt -- will you reach out to President-elect Bush to see what his views are?

FEINGOLD: Oh, absolutely.

Well, not only that, but I have the highest regard for the comments that have been made by President-elect Bush and others. The statements that he has made indicated that he's for campaign finance reform, that he understands that at least some kinds of soft money are not appropriate.

That's a long way. This is I positive thing; this is an example of the bipartisanship that the president-elect has talked about. I'm looking forward to a very positive relationship with the new White House on this.

WOODRUFF: All right, Senator Russ Feingold, thank you very much. We appreciate it. We'll be watching it closely, as well.

And now let's bring in our senior analyst, Jeff Greenfield from New York.

Hi, Jeff.

JEFF GREENFIELD, CNN SENIOR ANALYST: Hi, Judy.

WOODRUFF: We've just been talking about the campaign finance proposal, Jeff. Should George W. Bush be concerned?

GREENFIELD: Well, I think any time a new president comes into office, and one of the first things that begins to dominate the political landscape is an issue he really was not part of, he ought to be concerned. And I think he also ought to be concerned, more than anything else, with the presence of Senator Cochran at that press conference today, because for most Republicans who are opposed to campaign finance in the Senate, this has been described as essentially a partisan deal that benefits Democrats and liberals more than it -- and it hurts Republicans and conservatives.

That was Governor Bush's big argument against McCain during the primaries. If a conservative Republican from Mississippi, like Thad Cochran, is going to sign on, that's the first warning sign. You almost can consider it the canary in the coal mine, that first sign of trouble, that maybe there are going to be Republicans moving to the side of John McCain on this issue in the Senate. WOODRUFF: And among Democrats, we assume, no real dissension in the ranks?

GREENFIELD: Well, not yet. But I think campaign-finance reform is one of those issues that sounds great. I mean, it's almost like opposing -- I was going to say motherhood, but I guess there are some population-control people who oppose motherhood. But everybody, in some way, is for campaign-finance reform, until you get into the details.

For instance, Senator Cochran was talking today about the independent expenditures by groups that come on do those ads, where there are no limits in terms of how much you can raise or spend. They don't say: Vote for Smith or Jones. They say: Call Smith and tell him to stop being a terrible person. The more you get into that kind of area, the more the conservative base gets its back up. They need some liberal groups that have funded ads, independent expenditures, get their back up.

What I'm getting at is, the tougher the bill is in terms of what it restricts, the more opposition it's going to raise, and -- and this is very important -- the more the courts are going to take a hard look about whether or not this is restricting political speech in violation of the First Amendment. So you can't really say that every Democrat is going to be on board until you know specifically what's in the bill.

WOODRUFF: Well, in terms of politics, Jeff, Senator McConnell, who's probably the leading opponent of all this, has said that nobody ever lost an election opposing campaign-finance reform. Is he right?

GREENFIELD: Well, he is right. And I should point out that the senator you just talked with, Russ Feingold -- who is one of those people who literally put his career on the line by running for reelection two years ago, limiting himself in terms of what he took in terms of campaign funds, even though the law would have permitted him to do much more. And he almost lost that election.

I mean, I think he said afterwards that his reelection proved that you could run this way. But for a lot of people in the political field, until this becomes the kind of issue that galvanizes public support -- and there's no indication so far in the polls that it is -- I think it is going to be much tougher to get campaign-finance reform passed if the politicians actually believe that these laws would stick.

One of the big protections right now that politicians have is that -- as I mentioned earlier -- the Supreme Court of the United States has looked very skeptically at laws that restrict the expenditure of independent political funds. They regard it as a First Amendment violation. And my feeling is, a lot of people will support this bill as long as they are sure it will never actually come to pass and inhibit what they can do in terms of collecting money.

Just one other quick point: Balanced against that, there are an awful lot of people seeking or holding elective office who are generally fed up with how much time it takes out of their life to go and drum up money on an almost daily basis, month after month after month. That, I think, is the one feeling that, if it spread, you could actually wind up seeing a stampede for campaign-finance reform on Capitol Hill.

WOODRUFF: All right, Jeff Greenfield in New York, thanks very much -- Bernie.

SHAW: Though president-elect Bush fielded questions about campaign-finance reform, his main focus this day was on the nation's financial health. Bush met with the leaders of high-tech firms, a sector that has lost a good deal of its magic and value on Wall Street.

And, as CNN's Major Garrett reports, tax cuts remain very much on Mr. Bush's mind.

(BEGIN VIDEOTAPE)

MAJOR GARRETT, CNN CORRESPONDENT (voice-over): Mr. Bush's two- day economic conference was as much about taking the pulse of the economy as building political support for a major tax cut.

BUSH: I think the tax relief is necessary. The question is how fast we implement it, whether or not we -- you know -- it was phased in over a period of time. It's possible that we may need to implement it faster.

GARRETT: The invited corporate chieftains echoed Mr. Bush.

JACK WELCH, CEO, GENERAL ELECTRIC: We are going to need the bold action that you're proposing to get this economy back on track.

GARRETT: The Bush strategy is to leverage the business support on Capitol Hill, where many Democrats still oppose the centerpiece of the Bush tax cut: an across-the-board reduction in income-tax rates. But the Fed's move increased recession fears, which could strengthen Mr. Bush's case.

RUDY PENNER, URBAN INSTITUTE: Oh, it certainly won't make it more difficult. It may make it easier, because it is an indication that the Fed thinks there is a problem in the economy.

GARRETT: And that's a message the Bush team and its surrogates will drive home.

SEN. RICK SANTORUM (R), PENNSYLVANIA: I think it just makes it very clear that there is a need to do something to help this economy going down the road. And I think it just shows that Governor Bush was right on target during this campaign.

GARRETT: Analysts say the faster a tax cut is approved, the faster the economy will feel the effect.

The WILLIAM BEECH, HERITAGE FOUNDATION: A tax cut can stimulate the economy. There's no question about it. It can make your labor less expensive for you, and so you can work more for that matter. It will stimulate labor. It can stimulate factory-building and new machines, which make you and I more productive.

(END VIDEOTAPE)

GARRETT: The president-elect says he does not interpret the Fed's move as a warning not to cut taxes, or a sign that Fed wants to drive the economy. Mr. Bush says it only strengthens his arguments for big tax cuts quickly. It will up to him now to persuade Congress of the same thing -- Bernie.

SHAW: Major, the president-elect taking a look at his internal staff and making some additions?

GARRETT: Some additions to the White House senior circle today: first among them, Karl Rove, named a special adviser to the president, with a very large portfolio indeed. It will include all matters political for the White House, plus public liaison and strategic planning. Mr. Rove, as you well remember, was the chief strategist for the Bush presidential campaign.

He was also a top strategist when the governor ran for election first in 1994, and again in 1998 -- also, Joe Allbaugh, who was the president-elect's campaign manager throughout the campaign this year to head the Federal Emergency Management Agency -- having someone this close to the president-elect a clear sign that he believes this agency is vital to his administration and to its public presence when disaster strikes and Americans turn rapidly to the help from the federal government -- Bernie.

SHAW: And if that health is not speedily available, it could have political repercussions.

GARRETT: As it did for his father during Hurricane Andrew in Florida. You recall the President Bush then was under very intense criticism from Florida residents for not responding, to sort of being what they thought was asleep at the switch. Bill Clinton understood that message. He revitalized the Federal Emergency Management Agency, made it a vibrant organization -- out there all the time. He went to disaster sites himself. Clearly, the president-elect has taken some lessons from both examples -- Bernie.

SHAW: Major Garrett in Austin -- Judy.

WOODRUFF: And still ahead on INSIDE POLITICS: obstacles for George W. Bush's pick for attorney general. We will talk with the "Washington Post's" Thomas Edsall about the opposition facing John Ashcroft.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: I expect all my Cabinet officials will be -- face tough questioning, and I -- I am confident all will be confirmed. These are good, solid Americans who will be able to do the jobs to which I've appointed them.

(END VIDEO CLIP)

SHAW: All signs are pointing to a nomination battle for one or more of the Bush Cabinet choices. Senate Democrats and a number of organizations are opposing the confirmation of the attorney general nominee, former Senator John Ashcroft of Missouri, for his positions on abortion and civil rights. Patrick Leahy, the top Democrat on the Senate Judiciary Committee, met with Ashcroft today to discuss some of his concerns.

(BEGIN VIDEO CLIP)

SEN. PATRICK LEAHY (D-VT): Well, I wanted more to point out to him that there would be a fair and objective hearing; that most of the concerns that I might raise have been concerns that have been raised in the press; told him that the -- everybody will have a chance to express those, and that he should be aware of it.

(END VIDEO CLIP)

SHAW: The two met for more than an hour. They discussed a range of topics from legal to personal matters. In addition to Ashcroft, Labor Secretary nominee Linda Chavez and Interior Secretary nominee Gale Norton may also be contested in Senate confirmation hearings.

Well, Thomas Edsall has been following this story for "The Washington Post." He joins us now for "The Post" sitting room. Tom, basically, what's the aim of this opposition?

THOMAS EDSALL, "THE WASHINGTON POST": Well, the first aim is if they can draw blood; they want to draw blood, and if they could actually defeat a nominee, that would be like icing on the cake. But what they're really looking for is to try to paint the Bush administration and these nominees as very conservative, representing people outside the mainstream, to do in effect what they could not do during the campaign, which was to push Bush far out to the right.

SHAW: You mentioned the campaign, are these groups also intending to energize their base?

EDSALL: No question they're looking to 2002. They're looking to a number of things. One is 2002. The other is they want to raise money for themselves and the political parties. The best way to raise money is when people are threatened, and they want to present all three of these nominees as major threats to major liberal constituencies with an eye to both, as I say, cash and votes.

SHAW: With so many groups -- with so many groups in these liberal constituencies, can they speak, can they act in unison?

EDSALL: Well, in fact, they've worked over time with the Bork nomination, with James Watt, with a lot of the Reagan administration and Bush administration nominees. They have had a lot of practice going after and forming coalitions, and there now really is what they call a progressive coalition. It's really a liberal alliance from environment, labor, women's groups, civil liberties, civil rights groups all joining together, and, in fact, they have developed a pretty good ability to join forces. You have environmentalists now opposing Ashcroft, for example. So, that all four prongs are ready to go against this guy.

SHAW: Well, we've done a lot of reporting on Ashcroft, let's look at two of the nominees: Linda Chavez for Labor Secretary. How does organized labor feel about her?

EDSALL: They are very upset. Especially, I noticed Gerald McEntee if AFSCME is fit to be tied. She was with organized labor a long time ago, with the American Federation of Teachers. She really jumped ship and moved pretty sharply to the right. She's been an opponent of affirmative action. She has been hostile to the minimum wage and opposed the 1996 minimum wage hike. They are not pleased at all.

SHAW: Interior, Gale Norton?

EDSALL: There, the environmental groups are similarly going up off the wall. It's interesting that both Chavez and Gale Norton, incidentally, are both opposed to affirmative action. She comes -- Gale Norton comes out of the conservative legal movement that has been -- that was very strong in the 1980s: The property rights with strong ties to major developing and oil interests. This has got the environmental people up in arms, and they are sure to put up a strong fight against her.

SHAW: Lastly, the bottom line question: Do these groups have the votes in the Senate to defeat these nominees or any proposed by Mr. Bush?

EDSALL: At this moment, no way. Not even approaching it. They've got to -- they have to find something that really opens up a wound and they have not got that yet.

SHAW: Thomas Edsall, "Washington Post," thanks very much.

EDSALL: Thanks.

SHAW: Judy.

WOODRUFF: Well, there's still much more ahead on this edition of INSIDE POLITICS. Still to come: The energy crisis in California. The latest move in the struggle to provide electricity to homes and businesses. Plus:

(BEGIN VIDEO CLIP)

TONY CLARK, CNN CORRESPONDENT (voice-over): Both the president- elect and the vice president-elect are oil men by profession. Increasing U.S. energy production is something they believe in strongly.

(END VIDEO CLIP) WOODRUFF: From power lines to oil wells, Tony Clark on the energy policies of the next administration.

And later, controversy in New Hampshire. The startling comments of one of that state's newest legislators.

(COMMERCIAL BREAK)

SHAW: We'll have more of the day's political news coming up, but now a look at some other top stories.

Well, after yesterday's big rallies, the stock markets beat a retreat today. The Dow Jones Industrial Average finished the day with a loss after the Fed-driven surge of nearly 300 points Wednesday. The Dow closed the day down 33 points. The Nasdaq lost nearly 50 points.

The official unemployment rate is due for release tomorrow. Today, a private firm that tracks the employment picture said lay-offs jumped in December.

CNN's Ed Garsten has more from Detroit.

(BEGIN VIDEOTAPE)

ED GARSTEN, CNN CORRESPONDENT (voice-over): Boxes of personal effects in hand, pink slips in their pockets; thousands of Montgomery Wards employees leave their jobs for the last time as the 125-year-old company shuts down.

Auto workers at DaimlerChrysler assembly plants are placed on temporary lay-off as car sales slow to a trickle. Breon Carter saw it coming.

BREON CARTER, LAID-OFF AUTOWORKER: Sales started to go down. As far as production, it went from just skyrocketing to the other direction now, so we are in those trying times.

GARSTEN: Indeed the employment office in suburban Detroit is more crowded that usual with workers who lost their jobs or were laid- off temporarily last month.

This woman, who didn't want to be identified, lost her job at a bank.

UNIDENTIFIED FEMALE: Just severance. They were cutting back jobs.

GARSTEN: Their experiences are not unique, according to a new study by Challenger, Gray & Christmas, an out-placement company. It's calling last month the worse for job cuts in eight years. According to the report, more than 133,000 jobs were cut in December, compared with fewer than 45,000 in December of 1999. It was only the fourth time in eight years monthly job cuts were above 100,000.

Even so, there were 9 percent more jobs eliminated in 1999 than in 2000. The hardest hit industry in 2000: Retail, with a loss of more than 94,000 jobs.

DONALD BYRNE, UNIVERSITY OF DETROIT-MERCY: This is the big time for retailing, and if you're going to make a decision you wait until Christmas is over.

GARSTEN: Despite a record sales year in 2000, the last four months is were weak in the auto industry, leading to 85,000 jobs being cut last year.

JACK WEATLEY, MICHIGAN UNEMPLOYMENT AGENCY: This is a busy time for us because the auto industry lays-off a lot of people on temporary basis.

GARSTEN: High energy costs and interest rates are being blamed along with increased competition from overseas auto companies.

(on camera): According to the report, the pace of monthly job cuts began accelerating in July. During the last half of the year, monthly job cuts on the average were 75 percent higher then they were in the first half.

(voice-over): The trend doesn't appear to be abating, as Sears and Office Depot announced store closings, and DaimlerChrysler said its shutting a plant in Toledo forever. Still, the U.S. unemployment rate remains at just 4 percent. New numbers are due out Friday.

Ed Garsten, CNN, Detroit

(END VIDEOTAPE)

WOODRUFF: Illegal drug use has dropped 50 percent over the past 20 years. And drug-related crimes, including murder, have also declined, according to Drug Policy Director Barry McCaffrey. However, McCaffrey says the war on drugs is far from over.

(BEGIN VIDEO CLIP)

BARRY MCCAFFREY, NATL. DRUG POLICY DIRECTOR: A lot remains to be done. There is no question that we're still looking at a U.S. society in which 6 percent of us, last month, used an illegal drug: 14 million Americans, 52,000 dead a year, $110 billion in damages. And many of us would argue that, if you examine almost any social, medical, legal, or international problem that faces us, the 270 million of us in this country, that, at heart and soul of it, will be the chronic abuse of illegal drugs, as well as alcohol.

(END VIDEO CLIP)

WOODRUFF: Those were among McCaffrey's last public words as part of the Clinton administration. President-elect George W. Bush has yet to name a new drug policy director.

A brushfire raging across some 10,000 acres near San Diego is now almost 10 percent contained. A local emergency has been declared, as hundreds of people are forced from luxury homes and trailers. High winds have hampered efforts to bring the fires under control. There is much more ahead on INSIDE POLITICS. When we return: California's power crisis. We will have a live report on today's rate increases. And later, there were controversial remarks concerning women and police by a New Hampshire state lawmaker.

(COMMERCIAL BREAK)

SHAW: In California, officials took another step today designed to ease the pain of the state's power crisis. The Public Utilities Commission voted unanimously to grant emergency rate increases to two cash-strapped utilities.

CNN's Fred Katayama is outside the Public Utility Commission building in San Francisco -- Fred.

FRED KATAYAMA, CNN CORRESPONDENT: Well, Bernie, protesters have gone home for the day, but today's decision pleased no one. The California Public Utilities Commission voted unanimously to hike electric rates for an emergency period of 90 days, an average of 10 percent across the board.

That is two-thirds less than what the utilities said they needed to avoid bankruptcy. Now, specifically, residents will see their bills go up an average of 9 percent, or roughly $5.40 -- for small businesses, up 7 percent, large businesses up 15 percent. It will reportedly cost California businesses roughly $400 million over the 90-day period.

Earlier, a senior vice president of Southern California Edison said: "We are extremely disappointed. The decision does not go far enough to ensure the survivability of the company." Over on Wall Street, investors sold off shares of the two big utilities, the parents of Southern California Edison and PG&E. One analyst said today's ruling assures that the companies will be forced to file bankruptcy -- for bankruptcy protection.

Hours earlier, consumers marched up these steps in protest, shouting -- well, shouting, "No way, we won't pay." Now, one consumer advocate said the utilities should be just allowed to declare bankruptcy, saying that consumers will not be scared off by the utilities threats that the lights would go out if drastic action is not taken off soon. Over in Sacramento, Governor Gray Davis is expected to address the energy crisis in the state of the state address on Monday.

He will outline the steps to boost energy conservation, to boost energy supplies and to stabilize energy rates. He is also expected to announce that the state will dedicate $1 billion of the state's surplus for energy initiatives. Now, back here in San Francisco, one commissioner speaking today said: "We are voting today on the epitaph of deregulation. It is dead today" -- Bernie.

SHAW: Fred Katayama in San Francisco, thanks very much -- Judy with more on this.

WOODRUFF: Well, what caused California's power crisis? A number of people blame a shortage of energy due to deregulation. But some argue that there's no shortage and that the crisis is a figment of imagination.

CNN's Charles Feldman reports.

(BEGIN VIDEOTAPE)

CHARLES FELDMAN, CNN CORRESPONDENT (voice-over): Flip a switch, the electricity flows. That's how it's supposed to work. But a deregulated energy market in California now threatens that assumption.

GOV. GRAY DAVIS (D), CALIFORNIA: We're in deregulation, at best, prematurely.

(on camera): Who's to blame for what, so that the public understands exactly what the situation is.

DAVIS: All right, here's -- I think the people that insisted that we get in deregulation in 1995 and 1996 made a huge miscalculation. They did not anticipate the recovery that California experienced and the particular needs of the tech-based economy here in California. Secondly, there was no effort to build more plants to meet that demand.

FELDMAN (voice-over): In a nutshell, here's what deregulation did: It forced California's investor-owned utilities to sell much of their power-generating plants. And now they must buy back that power at market prices, prices that are, well, electrifying. And here's the catch: Deregulation prevented most utilities from passing rising costs on to their consumers until at least 2002.

(on camera): When talking about this dilemma, people keep using the phrase "an energy crises" or "an energy shortage." Is it really about a shortage of energy?

JOHN BRYSON, EDISON INTERNATIONAL: A very small part of this total crisis is associated with a shortage of electricity. The problem is primarily a problem between high, wholesale costs of electricity that we have to buy in California to keep the lights on and low regulated retail rates.

FELDMAN: When people talk about an "energy shortage," is that an inaccurate description?

HARVEY ROSENFIELD, CONSUMER ADVOCATE: Yes. There is no "energy shortage." There is a --there are -- there is an energy cartel of companies that is manipulating the supply at any given moment in order to artificially induce massive price increase and get high profits from them.

FELDMAN (voice-over): The power industry in California is now the target of no fewer than six investigations by state and federal agencies.

GARY ACKERMAN, WESTERN POWER TRADING FORUM: Charles, we've been investigated up and down and sideways and every which way possible. And you know what? After all these months, over six or seven months, nobody has found one shred of evidence to suggest that there's any price manipulation, any gaming, any collusion or any wrongdoing on the part of the generators here in the state of California or in the Western region.

FELDMAN: But at least two powerful California politicians are calling for a criminal investigation by the Justice Department.

JOHN BURTON, CALIFORNIA STATE SENATE: The people of this state are getting taken to the cleaners and billions of dollars is going to the outside-of-state generators.

FELDMAN: So it has come to this in California: Investor-owned utilities claim if they keep shelling out more and more money to buy electric power and can't pass that cost on to consumers, they will go belly-up. The crisis, real or manufactured, is pitting utilities against generators, consumers against utilities, and politicians trying to come up with something, anything, that will make everyone happy -- solutions ranging from early rate increases to federal regulation of electric wholesale prices to the negotiation of long- term contracts between utilities and power generators so that prices are not set on the volatile spot market.

And watching all of this? Twenty-five other states moving toward energy deregulation that are actually looking toward California as a role model.

Charles Feldman, CNN, Los Angeles.

(END VIDEOTAPE)

WOODRUFF: And to advance that story a little further, CNN's Charles Feldman has just learned that a request for a criminal investigation into California's energy crisis by two democratic, elected officials in that state is moving forward.

An aide to democratic U.S. Senator Barbara Boxer says that Attorney General Janet Reno's office has reviewed Boxer's request for a probe to determine whether price gouging and market manipulation is taking place. Now, this request has been forwarded to the Justice Department's antitrust division -- Bernie.

SHAW: Given California's power problems and indications, OPEC may soon reduce oil production. President-elect Bush may be forced to act quickly on these issues after taking office. Our national correspondent Tony Clark looks at what we might expect from a Bush administration energy policy.

(BEGIN VIDEOTAPE)

TONY CLARK, CNN NATIONAL CORRESPONDENT (voice-over): Both the president-elect and the vice president-elect are oil men by profession. Increasing U.S. energy production is something they believe in strongly, including the controversial opening to drilling of the pristine Arctic National Wildlife Refuge in Alaska. GEORGE W. BUSH, PRESIDENT-ELECT: You bet I want to open up a small part of -- a part of Alaska, because when that field is on-line it will produce 1 million barrels a day.

CLARK: So when George W. Bush tapped former Senator Spencer Abraham to be his secretary of energy, he picked an ally in that battle.

SPENCER ABRAHAM, ENERGY SECRETARY NOMINEE: We have vast resources within the United States, and these are crucial to our country's security.

CLARK: Last year, Abraham tried unsuccessfully to get the protected Alaskan coastline opened up.

SEN. FRANK MURKOWSKI (R), ALASKA: Spence is a realist, and realism dictates that we need to generate more energy here in the United States.

CLARK: Alaska Senator Frank Murkowski says Abraham will be a secretary of energy who is action-oriented. Ironically, the action Abraham called for in the past was for the Energy Department to be abolished altogether, describing it as wasteful and having no core mission.

ABRAHAM: It is incumbent upon us, who campaigned on the notion that we can reduce the size of government, that we should reduce the size of government, to attack these problems in the kind of constructive way I believe we can.

CLARK: Abraham held that view as recently as last year.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY-DESIGNATE: It shows that President-elect Bush is willing to put people in the Cabinet who don't hold his views in their entirety. You never can fill your Cabinet with people who are 100 percent of you.

Now some environmentalists worry about the direction Abraham will take the Energy Department. They point to his fight against tougher fuel efficiency standards, and his stance on environmental issues. In his November re-election bid, Abraham was the Sierra Club's No. 1 target.

(BEGIN VIDEO CLIP, SIERRA CLUB AD)

NARRATOR: Great Lakes pollution is closing our beaches, poisoning our fish and threatening our drinking water. But instead of helping, Senator Spencer Abraham has voted against clean water and the Great Lakes.

(END VIDEO CLIP, SIERRA CLUB AD)

CLARK (on camera): The Sierra Club gave Abraham its lowest rating on environmental issues. According to one Sierra Club director, "Abraham led the fight for more gas-guzzling SUVs and to find the oil to keep them running." The group's concern is that Abraham's position could become U.S. energy policy.

Tony Clark, CNN, Austin.

(END VIDEOTAPE)

SHAW: And up next: Bob Novak on everything from Bush's economic forum to his latest White House appointments. INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: Well, joining us now with his reporter's notebook: Bob Novak of the "Chicago Sun-Times."

All right, Bob, lots of things to talk about. What are you hearing about these meetings that the president-elect has been holding in Texas with business leaders yesterday and today?

ROBERT NOVAK, CNN POLITICAL ANALYST: As gloomy, Judy, as the business leaders and the president-elect sounded in public, it was much worse in private. They were really singing gloom and doom behind closed doors; and these business leaders were very critical of Federal Reserve Chairman Alan Greenspan, a man who is usually not criticized.

I think that criticism would have snuck out in the public if it wasn't for the fact that Greenspan cut interest rates yesterday. If you think it was just coincidence that that interest rate cut came when those people were meeting down there, I think it's wrong. I think it was intended to, kind of, soften them.

WOODRUFF: All right, well let's talk about some of the president-elect's appointments including, surprising to some, putting Joe Allbaugh at the Federal Energy management -- I'm sorry, Emergency Management Agency.

NOVAK: FEMA.

WOODRUFF: FEMA, yes.

NOVAK: Joe Allbaugh was one of the iron triangle, the big three, who ran the president's campaign; everybody thought he was going to be White House chief of staff. And your initial reaction is, boy, what did he have against Allbaugh? But as I talked to politicians, they say this was a brilliant maneuver because FEMA is very important, politically, to any president dealing with disasters.

One of the reasons George Bush Sr. got in trouble was he didn't have his own man at FEMA. You remember all of the trouble he got in on disasters in Florida and elsewhere.

A very good move, politically, by George W. Bush.

WOODRUFF: And what about the move to put Democrat Norm Mineta at Transportation?

NOVAK: Everybody likes Norm Mineta, and this was the handiwork of somebody who is very low profile, Andrew Card, the chief of staff -- new chief of staff at the White House. He was the chief lobbyist for the automotive industry when Mineta was chairman of the House Transportation Committee.

But one person it hurts: is congressman -- former Congressman Lee Hamilton of Indiana. He's been mentioned for U.N. ambassador and CIA director, as a Democrat. He's got a lot of opposition by conservatives; they're saying, now that you have one conservative -- one Democrat -- I'm sorry, one Democrat in the Cabinet, you don't need another.

WOODRUFF: Even one is too many in...

NOVAK: One is enough.

(LAUGHTER)

WOODRUFF: One is enough. All right, let's, move over to the Hill, Bob, and talk about some shake-up today, if you will, among Republicans. They were work out who's going to be chair of what committee and lo and behold, Henry Hyde no longer going to chair the House Judiciary Committee.

NOVAK: He ran into term limits. He wanted a waiver on term limits so that he could continue another term on judiciary since he was preoccupied with impeachment. They said, no, but surprise, they did give him the International Relations Committee, which conservatives had at least demanded on that over the person who had been favored of it, the more moderate Congressman Bereuter of Nebraska.

Conservatives were very unhappy, though, when Bill Thomas of California, a very tough guy, got the Ways and Means Committee over Phil Crane, who is a much more a tax cutter and a free trader and had seniority on Thomas, but Thomas got the committee chairmanship.

WOODRUFF: You're concerned that Thomas won't be the -- won't be pushing tax cuts as much as they would like?

NOVAK: Thomas marches to his own drummer more than anybody else's.

WOODRUFF: Finally, Jim Traficant, the congressman from Ohio. He's a Democrat, but what's going on?

NOVAK: He voted for Hastert for speaker. He said he was going to for a couple of years, and he did, and that's all it took from his Democratic colleagues. They cheered and clapped sarcastically when he did it because he is out of there.

They didn't formally kick him out of the Democratic Caucus, but he virtually is out because they took away his committee assignment on the House Transportation Committee where he ranking Democrat on one of the subcommittees.

Now, he not going to become a Republican. He is going to stay a Democrat. But I predict that the Republicans are going to give him some committee assignments. He's going to be a Democrat in name only. He'd be as good as a Republican. A very colorful guy...

WOODRUFF: You mean the Republicans can put him on a committee?

NOVAK: That's right. That's where they're going to go, put a Democrat on committee. You can count on that. The other thing is, in all in the Cleveland papers, you know, he was acquitted on income tax charges 20 years ago. The IRS is after him again, and so that's going to be very interesting because there's a change in political leadership in this country. Now, we know the IRS is never political, but is he going to be indicted or not?

WOODRUFF: What are you suggesting, Bob? You just left that one hanging out there.

(CROSSTALK)

NOVAK: A hanging chad.

WOODRUFF: You may need to explain it. Do you think we should have him back later on the show for him to explain this? OK, Bob Novak. Thank you. Don't let anyone else see that notebook but us.

Still ahead, what prompted the New Hampshire governor to issue a veiled rebuke to a state legislator? Bill Delaney has the details next.

(COMMERCIAL BREAK)

SHAW: Now to New Hampshire, where today, Governor Jeanne Shaheen delivered an inaugural address that contained a very clear message for one freshman state lawmaker. Shaheen saying elected officials owe law enforcement officers respect, and that officials honor the citizens in uniform. Her remarks a very clear reference to the recent controversy over the opinions of Nashua's newly-elected representative Tom Alciere.

Bill Delaney explains.

(BEGIN VIDEOTAPE)

BILL DELANEY, CNN CORRESPONDENT (voice-over): Among positions taken by Tom Alciere: killing police is justifiable; women who nag should be beaten; children shouldn't have to go to school. In November, Alciere became a member of the New Hampshire state legislature.

(on camera): Alciere was elected to the legislature here in Concord, New Hampshire, from the city of Nashua, winning by just 55 votes, running as a Republican. He'd been thrown out of the Libertarian Party several years ago. Many voters likely were unaware of his views, which were mostly expressed in letters to the editor and on the Internet.

(voice-over): Fellow legislators gathered in Concord Thursday for the inauguration of Governor Jeanne Shaheen also were unaware of Alciere's views until a local newspaper printed them last Sunday. Alciere didn't attend the inauguration.

Now, Democratic Representative Ray Buckley's among many, from both parties and in law enforcement, calling for Alciere's resignation. He quoted an Alciere Internet posting from 1998.

RAY BUCKLEY (D), NEW HAMPSHIRE STATE LEGISLATURE: "There's nothing wrong with wasting cops. They go around threatening innocent, random people at gun point, and they whine about it when one of us humans kills a cop."

DELANEY: On Buckley's cable TV show this week, Alciere showed no inclination to resign.

TOM ALCIERE, NEW HAMPSHIRE STATE LEGISLATURE: I have a mandate from the people. I have a mission to accomplish here.

DELANEY: Even many representatives calling for Alciere to quit, like Republican Ron Giordano, say he has a right to his opinions, however horrific.

RON GIORDANO (R), NEW HAMPSHIRE STATE LEGISLATURE: He hasn't done anything on the House floor that would require us to remove him. He has a right to say what he wants. He has a right under free speech.

DELANEY: State officials say removing a representative is very difficult. They are investigating whether Tom Alciere's committed any crimes.

Bill Delaney, CNN, Concord, New Hampshire.

(END VIDEOTAPE)

SHAW: Please. stay with us, as INSIDE POLITICS continues at the top of the hour.

WOODRUFF: Two United States Senators will square off over John Ashcroft's nomination to be attorney general. And we'll look at the Federal Reserve chairman's relationship with the next President Bush and with the previous one.

(COMMERCIAL BREAK)

WOODRUFF: George W. Bush faces a new charge on Capitol Hill for campaign finance reform. Will it give him headaches in the early days of his presidency?

SHAW: A leader of the battle to impeach President Clinton loses a new political power-struggle on the Hill.

WOODRUFF: Plus: a dot.com perspective on the president-elect and the economy.

SHAW: Welcome back to INSIDE POLITICS. George W. Bush and John McCain are downplaying the possibility that they will be at odds in the coming weeks over campaign-finance reform. But the possibility is there now that Senators McCain and Russ Feingold plan to introduce their reform legislation just two days after Bush's inauguration as president.

(BEGIN VIDEO CLIP)

MCCAIN: I promised millions of Americans when I ran for president of the United States that I would not give up on this crusade of reform: the gateway to which is campaign-finance reform. I have the utmost respect and -- of the verdict of the voters. And I will do everything in my power I can to cooperate with President Bush and the incoming administration.

(END VIDEO CLIP)

SHAW: As you recall, Bush and McCain sparred over campaign- finance reform when they were rivals during the GOP presidential primaries. Today, Bush renewed his call for reform legislation that puts limits on labor unions.

(BEGIN VIDEO CLIP)

BUSH: I support a campaign-funding reform, so long as business and labor are treated equally. And I think it's very important to make sure that there is paycheck protection in any campaign-funding reform, so that the playing field is level. But I think, so long as somebody doesn't have any -- if money is being spent on behalf of somebody who has no voice, I think we ought to get rid of that kind of money. For example, if corporate America is spending money on behalf of a shareholder, and a shareholder has no voice, I think that ought to banned, so long as the same is applied to labor unions as well.

(END VIDEO CLIP)

SHAW: Let's talk more about campaign-finance reform and the potential for fireworks with CNN congressional correspondent Chris Black.

Chris, what's the Republican view of this?

BLACK: Well, Bernie, there's no question that most Republicans are strongly opposed to McCain-Feingold in its various form. But over time, more and more are beginning to see the need for some sort of change. So, as of today, according to Senator McCain, there are 10 Republicans who are willing to vote with 50 Democrats to at least cut off debate and keep debate going on some sort of reform legislation.

That has been the key number. They had a majority in 1999, when it last came to the Senate floor. They had 53 votes, but not the 60 votes they needed to shut off a filibuster.

SHAW: Is McCain the man from Arizona doing this to upset a Bush administration? BLACK: Not really. Remember, Bernie, that this was a -- this is a signature issue for John McCain. This is one of the issues he ran for president on. This is one of the issues that showed the public that he was independent-minded. He ran against the special interests. And so this is very much John McCain. He is very much a maverick. He doesn't have a great relationship with George Bush, you have to acknowledge that.

But I really don't sense that that's what's primarily motivating him. He believes that if he doesn't move now, he'll lose the momentum. And, frankly, most groups, like Common Cause and other groups interested in campaign-finance reform, agree with that tactic, agree with the strategy. They think the farther away you get from the election, the more difficult it will be.

SHAW: Let's move to another subject -- a very fascinating subject -- what's this about power-sharing?

BLACK: Well, Bernie, as one senior Democratic aide just said to me, there's no white smoke yet. So the deal is not quite done. But they are very, very close. What we're hearing -- mostly from Republican senators -- is that they are willing to give the Democrats their key demand, which is a 50-50 break, Democrats and Republican, on all committees.

This is a crucial thing. Republicans would retain the chairmanship, which is something that the Democrats had said all along they would agree to. They would also split right down the middle committee resources and staff. But one thing they still have to work out, the key to making this work, is some sort of a mechanism to bring legislation to the floor of the Senate in the event of a tie in committee. They haven't worked out that mechanism yet. But they think they can.

And they think, if they do, they'll have a deal.

SHAW: Chris Black on the Hill, thank you -- Judy.

WOODRUFF: And now we turn -- return to another source of possible friction on Capitol Hill: the nomination of former Senator John Ashcroft as U.S. attorney general. We're joined now by two members of the Senate Judiciary Committee that will hold hearings on Ashcroft's confirmation: Republican Senator Jon Kyl of Arizona and Democrat Patrick Leahy of Vermont.

Senator Kyl, to you first: Are you confident, without -- within a shadow of a doubt, that John Ashcroft will be confirmed, despite the brewing opposition to him?

SEN. JOHN KYL (R), ARIZONA: I am 100 percent confident that he'll be confirmed. There is no reason not to confirm him, except for some politics being played by some people at the fringe and, I think, some people who would like to kind of dust up the new president a little bit, perhaps lay the groundwork for fights on conservative judicial nominees. It's all about politics. It's not about John Ashcroft. He will be confirmed. WOODRUFF: Senator Leahy, is that all this about? There are no issues, no substance here? It's just politics?

SEN. PATRICK LEAHY (D), VERMONT: No, I think it's a lot more than politics. And I think it would be doing John Ashcroft a disservice to say that we would look at this only as a political thing. Senator Ashcroft knows me and knows the other members of the committee well enough to know that we won't do that.

But the attorney general is a lot different than most other Cabinet officials. The attorney general has to protect the rights of all of us, whether you are in the minority, the majority, ethnic, or anything else. Liberal, conservative, it doesn't make any difference. All your rights have to be protected by the attorney general. And I think it's legitimate to ask him -- just as we would ask a Democratic nominee -- how will he protect those rights and assure people that they can have confidence that no matter where they fit on the political spectrum, that their rights will be protected.

WOODRUFF: Well, Senator, what is your chief concern about him?

LEAHY: Well, I think those are the concerns. I mean, those are the concerns that should be asked of anybody who's going to come in as attorney general. He'll have a very fair hearing. And I've told him that. I sat down and spent about an hour-and-a-half with him today. I told him the general areas that I will go into.

He's not going to have any surprises from me, nor from anybody else. But he will have to ask very specific questions, because that will set out not only what his policies would be, but what the president-elect's policies would be. I think Senator Ashcroft, probably more than anybody else, knows that is a legitimate area of inquiry.

WOODRUFF: Senator Kyl, let me ask you about one instance that we expect fully the Democrats will be raising, and that is the confirmation to be -- to the federal bench of Ronnie White, the Missouri Supreme Court justice. This was a nomination that Senator Ashcroft opposed. He accused Ronnie White of being pro-criminal, being soft on capital punishment, when, in fact, he had upheld the death sentence in something like two-thirds of the cases before him. How do you explain Senator Ashcroft's move in that case?

KYL: First of all, let me say that the questions that -- and I can call him Mr. Chairman for a couple of weeks -- Pat Leahy suggested would be asked of any nominee. And John Ashcroft will have no problem answering those questions. He will enforce the law fairly and straightforwardly. So he'll have no trouble with those questions.

With respect to Ronnie White, understand that John Ashcroft voted to confirm 26 of the 28 African-American nominees of President Clinton during his time in the Senate. And the only two that he didn't vote to confirm, one was withdrawn, because she was so controversial, and the other, Ronnie White, was defeated with over 50 votes in the Senate. In other words, all of the Republican -- almost all of the Republican senators voted against Ronnie White. John Ashcroft didn't lead the charge. He didn't stop the nomination. He was simply one of 50-plus Republicans who voted not to support him. And the reason was...

WOODRUFF: He didn't lead the charge?

KYL: No, no, no. There was an effort by outside groups who knew Ronnie White -- the law-enforcement associations, the Sheriff's Association, among others -- in Missouri and nationwide that led the fight to stop him, because they felt that he was -- quote -- "soft on crime."

The reason for that was his numerous dissents, far more than any of his colleagues, and, in particular, the sense of cases like the one in which an individual killed a sheriff's deputy, then went by the fellow's house and shot his wife through the window and killed her, shot two other sheriffs' deputies -- I mean, a gruesome crime, and yet Ronnie White, as a judge on the Supreme Court, voted to overturn his conviction. It was that kind of thing that bothered people...

(CROSSTALK)

LEAHY: I would hope we're not getting into revisionist history. The fact is, it was a party-line vote. All Republicans voted against Ronnie White. All Democrats voted for him. In the Judiciary Committee, a number of the Republicans that voted for him initially voted against him. I think Senator Ashcroft would be the first one to say that he led the fight. He certainly led the fight on the floor against Ronnie White.

But I would hope that we realize this is Senator Ashcroft's confirmation here, not Ronnie White's. But I would also point out that a number of those dissents, Ronnie White was joined by a lot of judges appointed by then-Governor Ashcroft. And in a lot of his -- things where he voted against the death penalty, so did all the Missouri Supreme Court. So, as a number of the law enforcement officials who wrote to us said, they considered him pro-law enforcement and pro-victims' rights.

WOODRUFF: Well Senator Leahy, Senator Kyl, I know this is just the beginning of what we're going to hear on, not only Senator Ashcroft, but on the Ronnie White vote; and we appreciate your joining us today.

LEAHY: Thanks very much.

KYL: Thank you.

WOODRUFF: We appreciate it -- Bernie.

SHAW: That's on the Senate side; but over in the House Judiciary Committee, Republican Henry Hyde of Illinois has lost his bid to retain the chairmanship of that panel, a position that gained him national attention during the impeachment of President Clinton.

As a consolation prize of sorts, Hyde was given control of the International Relations Committee.

CNN's Jonathan Karl reports on Hyde's battle and why he had to wage it at all.

(BEGIN VIDEOTAPE)

REP. HENRY HYDE (R), JUDICIARY CHAIRMAN: The committee will come to order.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT (voice-over): Conservatives call him the conscience of the house, but Henry Hyde has been fighting an uphill battle to keep the powerful judiciary chairmanship that made him a Republican hero during the impeachment of President Clinton.

HYDE: William Jefferson Clinton, president of the United States, is impeached for high crimes and misdemeanors.

KARL: It has nothing to do with Hyde, but everything to do with a GOP power shake-up that is sending some of the House's elder power brokers into obscurity. It dates back to when Newt Gingrich and the Republicans were swept into power six years ago. They imposed term limits on the barons of the House, the committee chairmen.

NORM ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: Term limits for committee chairs was right at the front of the Republicans' revolution-reform for the next decade. Republicans believed, having been out of power for 40 years, in term limits as a way of flushing old power structures out and bringing new ones in.

KARL: Six years later for people like Hyde, the time is up. Hyde has plead for an exception; others have taken a different route. With their chairmanship terms up, several powerful Republicans simply decided to leave Congress altogether. Most notably: John Kasich, former Budget chairman; Bill Archer, Ways and Means; James Talent, Small Business; Thomas Bliley, Commerce; and William Goodling, Education.

And, in the latest exit, 28-year House veteran Bud Shuster, the controversial Transportation chairman, has announced he is retiring, citing health reasons.

ORNSTEIN: You've got a lot of Republicans, including Republicans at the leadership level, kicking themselves over what's happened with the term limits for chairs.

(END VIDEOTAPE)

KARL: The process has certainly caused some headaches for the Republican leadership in the House, but some Republican leaders are privately happy to see some of the old guard forced out. As one top Republican strategist to the House leader said, quote: "Without term limits, you get chairmen who are oblivious to the world around them."

What they're saying, basically, is, look, that was part of the message of the 1994 Republican revolution is that we want to bring in new blood and new ideas. And the way you do that is you change around the most powerful people in the House, and those are the House chairmen -- Bernie.

SHAW: Jon, I must ask you, is the man from Illinois going graciously?

KARL: Well, you know, it's a pretty serious consolation prize, International Relations Committee. Some of the aides to Henry Hyde were worried that he would be left without any chairmanship at all; and they were privately saying, in that case he would have to just leave the House.

But he's given a very powerful chairmanship; it's not the one he wanted, but it is International Relations, and it's an important chairmanship. So it's not a matter of going graciously.

And I'm sure what you'll hear, when they actually come out here -- we're expecting them in a few minutes, the House leaders -- is lots of kind words for Henry Hyde and some gracious statements from Henry Hyde, saying he looks forward to new challenges with the International Relations Committee -- Bernie.

SHAW: And, of course, Democrat Lee Hamilton, formerly in the House from Indiana, did a lot with that chairmanship.

KARL: Absolutely.

SHAW: Thank you Jonathan Karl, on the Hill -- Judy.

WOODRUFF: And still ahead on INSIDE POLITICS: high-tech companies and the Bush administration. The politics of that pairing, with Jim Glassman and Elizabeth Wasserman, up next.

(COMMERCIAL BREAK)

SHAW: President-elect George W. Bush wrapped up his two-day conference on the economy today by challenging Congress to pass his tax cut plan. Bush met with business leaders from the technology sector, calling them the leading edge of thought in the world.

Bush told the group of CEOs that he would work with them to improve job training programs, among other things. The president- elect says the economy needs a kick-start, which he believes his tax cut would provide.

Joining us now to talk more about the Bush administration, the economy and those high-tech firms: Jim Glassman of the American Enterprise Institute and Elizabeth Wasserman of "The Industry Standard."

First, let's talk politics. Silicon Valley worked both sides of the street with their campaign contributions. What are they expecting from a Bush White House?

ELIZABETH WASSERMAN, "THE INDUSTRY STANDARD": Well, they're interested in all the issues they discussed today: education reform, training of workers, et cetera.

But they're also interested in the larger issues. I wouldn't be surprised if they do support his -- the Bush tax cuts to spur the economy. Also, there are issues of regulation; and some of these companies, some of the executives who were standing right beside the president-elect are very concerned about antitrust issues. You had people from Cisco, Intel, AOL.

SHAW: Jim?

JIM GLASSMAN, AMERICAN ENTERPRISE INSTITUTE: Yes, I think, Bernie, that those are the big issues. Now, how much they were discussed here, I don't know.

But, really, antitrust; all of these big companies have to worry about what happened to Microsoft, even though a lot of them incited the Clinton Justice Department to go after Microsoft. They have big market shares themselves -- companies like Cisco, AOL, EMC, they've got to worry about that.

Also, the holding up of mergers; a lot of high-tech companies are very concerned about that. I mean, I realize that, you know, Time Warner owns CNN, but that was absurd for that merger to have been held up for a year and then very onerous conditions put on it. That's probably going to change in the Bush administration and it's something, certainly, these high-tech executives want to see changed.

And the third issue -- and I'm not sure whether it came up today, but it should have if it didn't -- is telecommunications. I mean, Americans are just not getting broadband, fast access to the Internet quickly enough. And there are some regulations that have been left around for a long time; the Bush administration is going to have to address that with its new FCC, with its new FTC and that's got to be at the top of the agenda.

SHAW: Do they feel that -- broadband expansion?

WASSERMAN: Well, you know, the telecommunications industry wants tax cuts, too, specific to its industry. So, you know, that's something to look forward to, to see what happens, Bernie.

SHAW: A very blunt question: Does the Republican Party have ground to make up with the high-tech industry?

GLASSMAN: Tremendous ground to make up.

SHAW: Why?

GLASSMAN: You know, it seems to me that the Republican Party's free-market orientation's much closer to that -- to the philosophy, the economic philosophy, of the people in Silicon Valley, the high- tech executives. And yet the Republican Party has basically ignored Silicon Valley, the rest of high-tech America for a long time.

SHAW: Why? Why? Why? WASSERMAN: You know, Clinton -- the Clinton White House was doing a good job. They embraced, early on, a hands-off policy regarding the Internet; industry liked it. You know, just more recently there have been suggestions of, perhaps, legislating privacy issues over the Internet and the merger issues that we discussed and, perhaps, conditions on Internet access over cable, too.

GLASSMAN: But things have really changed in the Clinton administration in the last year, essentially since the Microsoft suit. And I think that's really turned off a lot of people in Silicon Valley.

But on issues that are tremendously important -- they're kind of micro-issues in Silicon Valley such as H1B Visas; in other words, allowing more immigrants to come in for high-technology. Republicans are far ahead of the Democrats on that. But they essentially have ignored Silicon Valley. Now, part of it...

(CROSSTALK)

WASSERMAN: The labor issue.

GLASSMAN: That's true. Part of is cultural. You know, if you go out there, Silicon Valley is basically Palo Alto. People in Palo Alto don't get along with the Republican. Now, the advantage that Bush has, though is Austin. I mean, he's been in Austin for six years. You saw the pictures, Michael Dell is standing right up there from Dell Computer. It is a hot bed of high technology and that's an advantage. But absolutely, in answer to the question, the Republicans have a lot of ground to make up.

WASSERMAN: Yes, and that's one reason you didn't see, you know, an oil summit or an energy summit. That sector of the economy was squarely behind President-Elect Bush. Silicon Valley, the technology community was hedging its bets.

SHAW: We're fast running out of time, a matter of seconds. I don't want to sound overly simplistic, but Elizabeth Wasserman, starting with you first. Does the high-tech industry have a friend in the White House, the Bush White House?

WASSERMAN: I believe so. I think that this was a signal, the president-elect being flanked by Carly Fiorina, Steve Case, Michael Dell, Jim Barksdale was a signal to the rest of the tech community they've got a friend in the George Bush.

GLASSMAN: Yes, I think it's true. The Bush White House will be much friendlier to high technology than the last year of the Clinton administration. But the key is going to be the people that Bush appoints to the Federal Communications Commission, the Federal Trade Commission, maybe even the FDA. Don't forget, really in high technology pharmaceuticals is probably the premiere high technology industry sector in this country, and again telecommunications. He's got to address that big problem.

SHAW: James Glassman, the American Enterprise Institute; Elizabeth Wasserman, "The Industry Standard." Thanks very much, we'll be watching this.

And when we return, Bruce Morton on what may be Washington's new odd couple: George W. Bush and Alan Greenspan.

(COMMERCIAL BREAK)

WOODRUFF: When the Federal Reserve unexpectedly slashed a key interest rate yesterday, President-Elect Bush was quick to praise the Fed and its chairman, Alan Greenspan. And Bush did it again today.

But as Bruce Morton reports, the cordial relationship with Greenspan may not be shared by other members of the Bush family.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): There he was, the president-elect, giving his blessing to Federal Reserve Board Chairman Alan Greenspan's decision to lower interest rates to perk up the economy.

BUSH: I'm pleased that the Fed has cut the interest rates. I think the cut was needed. It was a strong statement that measures must be taken to make sure our economy does not go into a tailspin.

MORTON: And when he came to Washington last month and met the Fed Chairman, the president-elect was all smiles.

BUSH: I talked with a good man right here this morning. We had a very strong discussion about my confidence in his abilities, and I mean that in all sincerity.

MORTON: Not all the Bushes would agree. The president-elect's father, the former president, told David Frost in a 1998 interview Greenspan is why he lost the presidency to Bill Clinton in 1992.

(BEGIN VIDEO CLIP)

GEORGE BUSH, FRM. PRESIDENT OF THE UNITED STATES: Alan Greenspan disappointed me. I reappointed him and he disappointed me in the way that they begrudgingly lowered the rates. I think that if the interest rates had been lowered more dramatically, that I would have been reelected president because then the recovery that we were in would have been more visible. We would have been ahead of the power curve instead of behind it in terms of unemployment and other lagging indicators, and so I was disappointed that he didn't do that.

(END VIDEO CLIP)

MORTON: Instead, Clinton won. His slogan: "It's the economy, stupid." Not all presidents tussle with the Fed. Ronald Reagan had a recession early in his first term, needed, many said, to curb the inflation of Jimmy Carter's presidency. But then the sun came out and Reagan campaigned for reelection on the slogan: "It's morning in America."

Carter did struggle with the economy, and proposed changing the Fed chairman's term to coincide with the president's so that a new president could appoint his own chairman. It didn't pass. Greenspan's current term expires in the summer of 2004. Fed Chairmen, like Congress, the Supreme Court, have power independent of the president. Presidents don't always like that.

BUSH: I talked with a good man right here.

MORTON: But if the economy turns sour on his watch, Mr. Bush may decide his father knew best after all.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

SHAW: And lastly, something we're not pleased to report. The political magazine "George," founded by the late John F. Kennedy Jr. announced today it will cease publication. A statement from the magazine's publisher says the company cannot, quote, "make "George" work economically despite a stellar editorial product," unquote. "George" magazine continued after Kennedy's death in 1999. "George" will end its run with a special commemorative issue this March. They will be missed.

WOODRUFF: They will be. It's really too bad.

And that is all for this edition of INSIDE POLITICS, but, of course, you can go online all the time at CNN's allpolitics.com; AOL keyword CNN.

SHAW: And this programming note: Tonight on "CROSSFIRE," Democratic Congressman James Traficant will discuss his decision to go against his party and vote for Republican Dennis Hastert for House Speaker. That'll be at 7:30 p.m. Eastern. I'm Bernard Shaw.

WOODRUFF: And I'm Judy Woodruff. The "MONEYLINE NEWS HOUR" is next.

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

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