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Inside Politics

Linda Chavez Withdraws as Labor Secretary Nominee; Interest Groups Band Together to 'Stop Ashcroft'

Aired January 9, 2001 - 5:00 p.m. ET



LINDA CHAVEZ, FORMER LABOR SECRETARY NOMINEE: I have decided that I am becoming a distraction, and therefore, I have asked President Bush to withdraw my name for secretary of labor.


BERNARD SHAW, CNN ANCHOR: Linda Chavez becomes a Bush Cabinet casualty, blaming her fate on the "politics of personal destruction." Also ahead...


RALPH NEAS, PEOPLE FOR THE AMERICAN WAY: John Ashcroft is well- qualified to be head of the Christian Coalition. He is well-qualified to be head of the National Rifle Association. He is not qualified to be attorney general of the United States.


SHAW: A liberal dose of criticism from a new coalition called Stop Ashcroft. Plus, the Clinton farewell tour: revisiting the old political magic in Michigan.

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

SHAW: Thanks for joining us. Judy is off today.

When Linda Chavez stepped up to the podium today, she said she had a statement to make beyond the fact that she was bowing out as labor secretary nominee. She says she wanted to put a human face on the efforts about the aid she gave an illegal immigrant, reports that helped turn her into a political liability for President-elect Bush.

CNN's Eileen O'Connor covered the news conference at Bush transition headquarters -- Eileen.

EILEEN O'CONNOR, CNN CORRESPONDENT: Well, it was an unusual press conference, Linda Chavez bringing out people she said she helped through -- throughout her life, and she said she helped them because she, too, had been helped in her childhood when her parents as immigrants were often injured or sick, and she had been pulled up and had always vowed that she would help people as well.

And she said, though, that this all came about, though, all of this press conference, her defending herself, because of accusations that she had, in fact knowingly had an illegal immigrant in her house and had not disclosed that fact to the Bush-Cheney transition. Also, there was discrepancies between information she had given, according to sources, to the Bush-Cheney transition about Marta Mercado, who lived in her house and did some chores for her and who she found a job for, and that of neighbors and Marta Mercado.

So while she denies it, sources say it was pressure from the Bush-Cheney transition team that put Linda Chavez up before the press to withdraw her name from the nomination and from consideration as labor secretary.


CHAVEZ: I have decided that I am becoming a distraction, and therefore, I have asked President Bush to withdraw my name for secretary of labor.

I do this with some regret, because I think that it is a very, very bad signal to all of those good people out there who want to serve their government and want to serve the people of the United States. But so long as the game in Washington is a game of search and destroy, I think we will have very few people who are willing to do what I did, which was to put myself through this in order to serve.


O'CONNOR: Of course, there were Democrats on Capitol Hill, had said that they weren't going to attack her on the fact that she had housed an illegal immigrant, but what they were going to attack her on was her hypocrisy. During the Zoe Baird nomination, when she had been accused of hiring an illegal immigrant and employing them in her home -- she was nominated for attorney general -- Linda Chavez was very outspoken in her criticism of Zoe Baird. And she was asked about that today, and she said that the two situations were not different, that the relationship with Marta Mercado was more as a friend and a helping hand, not as employer to employee.

And she says, as she was surrounded by all of these people that she said she would -- had helped throughout her life, she said even knowing what happened to her this week, she would still reach out that helping hand if she had to do it all over again. But President-elect George Bush issued a statement saying, too, that "Linda is a good person with a great deal of compassion for people from all walks of life. Her upbringing and life life's work prepared her well for the issues facing the Labor Department. I am disappointed," he said, "that Linda Chavez will not become our nation's next secretary of labor."

Linda Chavez, Bernie, said that she would have made a great secretary of labor -- Bernie.

SHAW: Eileen, did Linda Chavez do anything that raised a particular red flag for the Bush team?

O'CONNOR: Well, what it was is what she didn't do, and that was fully disclose the fact that Marta Mercado had lived in her house as an illegal immigrant for several years. And even at this press conference, she told us that she knew from the very beginning that Mercado did not have legal status.

Her family says and she says that she did try to sponsor her, but they said she did not bring that out -- and she admitted that -- in her first vetting process. And also, sources say that she wasn't fully forthright in later vetting processes.

And also, Bernie, very important, was the fact that the FBI, sources say, were looking into the fact that she had reached out to some neighbors and had talked about how she had hoped this incident with Marta Mercado wouldn't come up. The FBI was concerned and were looking at the possibility that that was perhaps some kind of trying to influence witnesses that would be talked to during her vetting process.

Mercado herself says that all she did was go over her memories with Chavez, and she denies that she was at all influenced or coached -- Bernie.

SHAW: OK, thank you. Eileen O'Connor.

Let's talk about the withdrawal of Linda Chavez with former Clinton Labor Secretary Robert Reich and Mike Russell of the Issues Management Center, a group created to support a conservative agenda in the Bush administration.

Mike, first to you, has Linda Chavez thrown in the towel prematurely?

MIKE RUSSELL, ISSUES MANAGEMENT CENTER: Well, you know, Bernie, that's an interesting question. I may be one of the only operatives on Capitol Hill who believes that she may have too early. I think if she had called this press conference today or maybe yesterday with the people, flanked by the people that she has helped through life, with those kinds of testimonies of how she helped them, how she improved the quality of their lives, and if she had essentially taken a line in the sand and said, "I've done nothing wrong and I'm going to be a great secretary under this new president, this president-elect," I think we may have seen a different ball game starting today.

But she chose to move on, and we have to respect her decision.

SHAW: Robert Reich, was she premature?

ROBERT REICH, FORMER CLINTON LABOR SECRETARY: Bernie, if this was indeed a Zoe Baird-type situation, if she did know that she was employing an illegal immigrant and not paying Social Security taxes, well, then, I'm afraid she had no choice. After all, that precedent has been established.

SHAW: Mike Russell, should George Bush have fought harder for her?

RUSSELL: I don't think it's a question of George Bush fighting harder for her, Bernie. I think that, you know, I think anybody who knows how these issues work in Washington know that as you're nominated and you go through this vetting process, you may be the subject of attack. It's how you handle that situation individually and how you work as a team to -- to get the most positive word about -- out about what you can do to work for this new administration and move the ball forward for the Bush team.

Obviously, she -- she felt like she could not do that anymore. In her own words, she was a "distraction." So she chose to move on.

But I think the issue represents a continuing problem in Washington, and that is what kind of a ringer are we going to continue to squeeze people through every time they volunteer their services for the federal government. I don't think anybody here in Washington has a problem with a robust debate on someone's public policy positions, where they stand on issues a, b and c, or legislation they may have supported or opposed.

I think when we get into this kind of vilification based on someone's personal life -- and we've seen this time and time again -- it creates a real problem.

SHAW: Robert Reich, was she vilified? She at the news conference said the game in Washington is a game of search and destroy. Vilification?

REICH: Well, I don't know that she was vilified. And again, I'm safely out of Washington, Bernie. You know Washington and you know Washington press better than I. But I can see that there certainly were issues raised, a serious issue raised about the simple question of illegality. Did she know that she was, in fact, violating the law?

And after all, this is a situation in which somebody is being nominated to be labor secretary, somebody who is in charge of enforcing the labor laws of the United States.

Undoubtedly, Washington has become a pretty cruel place. Somebody told me, in fact, just before my confirmation hearing that be very careful, Washington is already the kind of place that if you prick your finger, the sharks will bite off your arm.

Well, it's not a pretty place, and even Bill Clinton -- in fact, not even -- certainly Bill Clinton learned that.

SHAW: Let me ask you, looking ahead, does this increase the charged atmosphere here, Mike Russell, as this town looks at John Ashcroft, the attorney general? I understand that your group is sponsoring ads to persuade wavering senators.

RUSSELL: I think it does indeed, Bernie. I think, you know, the piece, the introductory piece here included remarks from -- of a spokesman from an organization that has just newly been formed to -- quote -- "Stop Ashcroft." I'm going to tell you our group, the Issues Management Center, is not going to sit idly by and let these kinds of ad hominem character assassinations continue.

SHAW: What are you going to do?

RUSSELL: Well, we're going to get out there and we're going to talk about why these people deserve to serve, and we're going to go up with radio in targeted districts. We're going to get on the air where we can. We're going to talk to individuals. We're going to probably start direct-mail campaigns, maybe go up with some telephones.

I think that the time has come for us, when we have to, to punch back.

Now, I will say this as well. We're here with the hope that a new spirit of governing can in fact begin. And I think Trent Lott, majority leader of the United States Senate, has done a good job by agreeing to split these committees straight down the middle. I'd like to see some groups on the left say, all right, we're going to see how this nonpartisan agenda really works and let's back off a little.

SHAW: Robert Reich, battle royal over Ashcroft?

REICH: I think there will be, Bernie. I think he probably will get confirmed anyway, but undoubtedly, a lot of groups -- women's group, African-American groups, people that are concerned about Ashcroft's record -- and by the way, I think there needs to be a distinction made between character assassination, going after what somebody may have done with their lives 20 or 30 years ago, and what somebody stands for, what they believe, how vigorously they're going to enforce the law.

Undoubtedly, the Ashcroft nomination is going to attract an awful lot of heat given what he has said in the past about his beliefs and the question about whether he will vigorously enforce the laws as they are.

RUSSELL: But they're already starting now.

SHAW: OK, gentlemen.

RUSSELL: When someone is saying that he's qualified to run the Christian Coalition but not serve as attorney general, that to me is questioning his faith. That's a personal attack it and that's beyond the line.

SHAW: On that note, we thank Mike Russell here in Washington and Robert Reich in Boston.

REICH: Thanks, Bernie.

SHAW: Robert Reich will be back a little later in INSIDE POLITICS.

You're quite welcome.

And now, we turn to efforts to defeat another Bush Cabinet choice. As Mike Russell alluded, a number of interest groups banded together to take aim at attorney general nominee John Ashcroft.

CNN's Jeanne Meserve has more on the coalition, its issues and its strategy.


NEAS: John Ashcroft is well-qualified to be head of the Christian Coalition. He is well-qualified to be head of the National Rifle Association. He is not qualified to be attorney general of the United States.

JEANNE MESERVE, CNN CORRESPONDENT (voice-over): They are angry. Hear them roar in numbers they hope too big to ignore. Labor is here; environmental and gun control groups; gay rights, civil rights, women's rights organizations -- all bonded into a coalition called, quite simply, Stop Ashcroft.

WADE HENDERSON, LEADERSHIP CONFERENCE ON CIVIL RIGHTS: What makes this campaign unique is the extraordinary scope of the opposition to John Ashcroft and the speed with which it has come together.

MESERVE: Time is short and the odds long, so in meetings and conference calls, they plot how to get their word out with maximum speed and efficiency.

Some of the largest memberships organizations in the country are in this coalition.

UNIDENTIFIED FEMALE: This is an urgent action alert asking you to call your senator to oppose John Ashcroft's nomination as attorney general.

MESERVE: They are working the phones and zipping out e-mails to gin up grassroots opposition. NARAL's Web site includes a form letter to send to senators.

Senators, of course, will determine Ashcroft's fate. They will be lobbied hard. But if that doesn't turn the tide, there may be demonstrations.

HENDERSON: Let me say that we've taken the position of by any means necessary.

MESERVE: Since defeating Ashcroft is a long shot, some have asked if the campaign against him is a gimmick to raise money, recruit members and prepare for judicial nomination battles ahead.

KATE MICHELMAN, PRESIDENT, NARAL: We don't have the resources, the time or the energy to do this as a test case. We are fighting this because of its real and tangible threat to a woman's right to chose.

MESERVE: Environmental groups in the Stop Ashcroft coalition are using similar tactics to derail another nominee, Gale Norton to be interior secretary. Is that diluting their impact? CARL POPE, EXECUTIVE DIRECTOR, SIERRA CLUB: Now, if we opposed everybody that we had any disagreement with, sure, we'd be diffusing our efforts, but we're being very targeted here.

MESERVE (on camera): Other members of the coalition had focused their efforts on defeating Linda Chavez, but with the withdrawal of her nomination, they can concentrate their efforts more fully on John Ashcroft.

Jeanne Meserve, CNN, Capitol Hill.


SHAW: Secretary of state nominee Colin Powell also was on the defensive today about a speech he gave shortly before the election. It was funded by the deputy prime minister of Lebanon, who also is a businessman with close ties to Syria. Powell told CNN that will not influence his work as secretary of state in any way.


COLIN POWELL, SECRETARY OF STATE NOMINEE: I gave a speech to a group of students at Tufts University, and it was part of the work I did in the speaking circuit. I've given many, many such speeches, and there should be no concern in anyone's part that it influences me in any way.

I was a private citizen at the time. It was before the election, and I had accepted the speech even before the primaries. And I was very, very pleased, once I was announced to be secretary of state, I stopped giving all speeches.


SHAW: Powell was on the Hill today, where he met with Senator Joe Biden, the top Democrat on the panel that will hold a hearing on his nomination one week from today. There is no indication Powell's speech at Tufts will have any effect on his confirmation.

Education secretary nominee Rod Paige also was on the Hill on this day before his confirmation hearing. Paige met with Senator Edward Kennedy, the top Democrat on the committee that will consider his nomination.

Still ahead on INSIDE POLITICS, the first political loss for the Bush administration. More on the withdrawal of Linda Chavez, with our own senior analyst Jeff Greenfield.


SHAW: The Bush transition team will have to choose a new nominee for labor secretary after this afternoon's withdrawal of Linda Chavez. Joining us now, our senior analyst Jeff Greenfield.

Jeff, I'm wondering, did Linda Chavez give her ideological opponents ammunition? JEFF GREENFIELD, CNN SENIOR ANALYST: Oh, sure. We talked yesterday, Bernie, just about this time 24 hours ago that it's almost impossible to defeat a Cabinet nominee based on their views unless they're really out of the mainstream, because most senators, even on the opposition party, say, well, a president's entitled to put his team in place.

But so when you have done something that seems wrong -- and in this case, it kept shifting. Did she hire an illegal alien? Did she know it was an illegal alien? Did she tell the Bush team? Once something was on the table other than her views, it made it a whole lot easier, because then the Bush camp, the Bush team itself I think it's pretty clear put some pressure on Ms. Chavez to say, I don't want to blot the coffee book first out of the box. So, yes, I would think so.

SHAW: Well, that moves into the area I wanted to ask you about. Was it politically necessary for Linda Chavez to fall on her own sword?

GREENFIELD: Well, you know, again, I don't -- I'm sorry to keep quoting myself. But we talked yesterday about the idea that your own man says so, like when kids play ball and there's no umpire, when your own team admits that, you know, yes, my guy was out, that's when you give up the fight.

In this case, what seems to have happened, as our reporters were telling us throughout the day, was that within the Bush camp itself, the idea that Ms. Chavez may not have been completely forthcoming about the circumstances seemed to create some doubts. And those are the circumstances under which a Cabinet nominee or anyone else has to retreat.

I mean, you can make the case -- in fact, I thought for a minute when she showed up with all those people she helped that she was preparing to mount a full-fledged defense, that...

SHAW: So did I.

GREENFIELD: ... the reports of her withdrawal might be wrong. But I think that was a way for her to say, look, you know, what I did I did for good and noble motives, but I'm still withdrawing. And I think the reason was because it was no longer a matter of a simple political fight between the Bush team and its enemies or its adversaries. Now, there was a problem within the Bush team.

I should also mention, Bernie, you know, we used to say that Cabinet nominees almost always got confirmed. This is the third- straight administration now where a Cabinet member has either been forced to withdraw or has been defeated. You had John Tower with Bush, you had Zoe Baird and Kimba Wood with Clinton, and now Linda Chavez.

I mean, I'm beginning to think that the smart thing for a president to do was not nominate like a sacrificial lamb that you know you're going to throw over the side so you can have the people you really want in place.

It's astonishing how this developed. It seems to be with every administration.

SHAW: And quickly, one last point, she said at her news conference -- quote -- "I've decided that I'm becoming a distraction and I've asked President Bush to withdraw" -- unquote. Certainly, John Ashcroft wouldn't follow her?

GREENFIELD: No. And that's where, if this thing, if this thing proceeds, we are going to see a genuinely unprecedented event in Washington where a Cabinet nominee is challenged not for any personal wrong, or perhaps wrong, but solely on the basis of that nominee's views. And that, as I say, generally speaking, even the opposition says, no, you know, we wouldn't put him on the court for life, but for the life of the administration, OK.

It now appears we are heading in for a Pier 6 brawl based on the views of a Cabinet nominee, and that's almost unprecedented. I think you have to go back about 60 or 70 years to see one of those.

SHAW: Indeed, Jeff Greenfield in New York, thanks a lot.


SHAW: And there is much more ahead on this edition of INSIDE POLITICS. Still to come...


KELLY WALLACE, CNN CORRESPONDENT: President Clinton returns to Michigan State University to make the case the country is stronger than it was eight years ago.


SHAW: Kelly Wallace on President Clinton's trip down memory lane. Plus re-examining those Florida ballots: the latest on news media efforts to catalog Florida's uncounted votes.

And later, beyond Florida, an Illinois effort to end ballot confusion.


SHAW: We'll have more of this day's political news coming up, but now a look at some other top stories. Police in California this day arrested a suspect in the so-called "Angel of Death" killings. Former hospital worker Efren Saldivar has been charged with the murders of six elderly patients at the Glendale Adventist Medical Center. The arrest follows a nearly three-year investigation.

In 1998, he confessed to killing as many as 50 patients, but later he recanted.

A state report due out Thursday indicates possible security lapses may have set the stage for the escape of those seven inmates from a maximum security prison in Texas. The men escaped with numerous weapons December 13th. Police say they are extremely dangerous and are probably hiding out in the Dallas area. The men are accused of killing a police officer on Christmas Eve.

Tighter security and better intelligence may help avoid attacks similar to the bombing of the USS Cole. That is the conclusion of a panel appointed by Defense Secretary William Cohen. Cohen says the bombing exposed a "seam in the fabric" of the military's anti- terrorism defense. But Secretary Cohen says even the best efforts cannot eliminate every risk.

The attack in Yemen last year killed 17 American sailors.

A new study suggests that watching television at mealtime may contribute to unhealthy eating habits among children. The study, by Tufts University, finds that children who eat with the television on eat more snacks and drink more sodas than those who eat with the television off. It also found that the former group eats fewer vegetables and fruits.

Another new study purports to rate the likelihood that certain vehicles have of rolling over in an accident situation.

CNN's Ed Garsten has that story from Detroit.


ED GARSTEN, CNN CORRESPONDENT (voice-over): The worst-rated vehicles: the Chevy two-wheel-drive Blazer and its cousin, the GMC Jimmy, just one star each. The best of the two dozen rated by the federal government: the Honda Accord, five stars. What's the difference?

According to the rollover rating system, a vehicle with five stars has less than a 10 percent chance of rolling over in a one-car mishap, such as hitting a curb or a ditch. But a vehicle with only one star has more than a 40 percent chance of rolling over.

(on camera): The rollover ratings are based on a ratio of the height of the vehicle compared with the distance between the wheels of the vehicle. The federal government says the smaller the ratio, the better.

(voice-over): That's because it means the vehicle has a lower center of gravity, making it, in theory, less prone to rolling over. But the auto companies counter the so-called "static stability system" does not completely reflect a vehicle's rollover probability.

RICK WAGONER, CEO, GENERAL MOTORS: Frankly, vehicle stability is a lot more complex than that, and it's got to do with driving dynamics, handling characteristics of the vehicle, the kind of tires used.

DIETER ZETSCHE, CEO, CHRYSLER DIVISION: Rollover is a dynamic process, and there is just no way to describe and judge a dynamic process with a static test.

GARSTEN: However, NHTSA Administrator Sue Bailey insists static stability is an accurate measure.

SUE BAILEY, ADMINISTRATOR, NHTSA: Our static stability factor or this top-heavy specific center of gravity issue correlates very, very well with our real-world crash data of over 200,000 crashes out there on the highway.

GARSTEN: The Ford Explorer has come under fire for rolling over as a result of tread separations on its tires. It rated just two stars. The company believes static stability ratings are insufficient.

PRIYA PRASAD, FORD SAFETY RESEARCH: We believe that dynamic tests are needed to accurately determine the rollover propensity of these vehicles, and we are doing research and we are ready to help NHTSA to develop a better scheme.

GARSTEN: The federal government admits the rollover rating system is just a start, but one it hopes that will lead the automakers to build safer vehicles and to prevent 10,000 deaths each year in rollover accidents.

Ed Garsten, CNN, Detroit.


SHAW: And still ahead on INSIDE POLITICS, President Clinton kicks off a farewell tour as his time in office nears an end.


SHAW: William Jefferson Clinton only has 11 more days as chief executive, and this may not be enough time to solve the world's toughest problems, but it is enough time to revisit some of his favorite places.

CNN's Kelly Wallace has the story.


KELLY WALLACE, CNN CORRESPONDENT (voice-over): The start of his last campaign: President Clinton returned to Michigan State University to make the case the country is stronger than it was eight years ago.

WILLIAM J. CLINTON, PRESIDENT OF THE UNITED STATES: When I took office, the national unemployment rate was 7.3 percent, 7.4 here in Michigan. Now, it is 4 percent. It's been below 5 percent for three years and it's 3.7 percent in Michigan.

WALLACE: Aides say the president wanted to return to places he considers special in his final days, like East Lansing, the site of his final debate in 1992 with then-President Bush and Ross Perot.

CLINTON: My history with Michigan is profoundly important to the opportunity that I have had to serve as president.

WALLACE: This battleground state was a critical component of Bill Clinton's victories. He won Michigan handily in 1992 and 1996, wooing back those so-called Reagan Democrats who left the party in the 1980's.

And so the president came here to say thank you and to remind people of his ideas for the country's economic future.

CLINTON: We spent almost 12 cents on the dollar of every tax dollar you pay to the federal government in interest on the debt. It is the third biggest item in the federal budget. That's 12 cents on the tax dollar, we can either give back to you in tax cuts or invest in our common future.

WALLACE: Later in the week, he returns to New Hampshire to thank supporters for standing with him when his campaign was floundering just before the 1992 primary.

CLINTON: And I will be there for you until the last dog dies.

WALLACE: Next week, he wraps up his political career with a trip to his home state of Arkansas. Aides are also considering a final news conference or a farewell address like Ronald Reagan's.


RONALD REAGAN, PRESIDENT OF THE UNITED STATES: And so, goodbye; God bless you; and God bless the United States of America.



SHAW: Kelly Wallace there reporting on President Clinton from East Lansing, Michigan.

Coming up, defining this Clinton presidency: What he's done; what he failed to do; and what it all need means for his legacy.


SHAW: Time now for a brief discussion of the Clinton presidency and how he will be viewed by the world once he leaves office. Today, we focus his economic record. We're joined by Robert Hormats of Goldman Sachs and once again by Mr. Clinton's former labor secretary, Robert Reich, who has just published a new book: "The Future of Success."

Bob Hormats, first to you: The secret behind the economic boom.

ROBERT HORMATS, GOLDMAN SACHS & CO.: Well, I think there were several secrets: some of them Clinton gets credit for; some are other people's doing. Corporate restructuring has been very big. There's been deregulation of the economy really since the latter part of the 1970s. Federal Reserve policy by and large, not totally, but by and large has been successful.

But what President Clinton did do was he had major improvements in the budget which have led to a budget surplus. He gave the Fed a lot of running room. He didn't put pressure on the Fed; supported a strong dollar, which is very important to capital coming here and he got NAFTA through and he got trade liberalization through in the first term, which has improved opportunities for American goods abroad.

So he has made an important contribution along with the corporate sector, along with the Fed and previous administrations who had also contributed to the process.

SHAW: Well, Robert Reich, how much was of this was luck and how much of it was hard work and how much of it this that was due to having some very bright people around him?

ROBERT REICH, FORMER CLINTON LABOR SECRETARY: It was all bright people around him. Like me. Actually, Bernie, it wasn't that. Really, there was a deal struck right at the start of the Clinton administration between Alan Greenspan and Bill Clinton.

Alan Greenspan said, listen, Mr. President-Elect, you get the deficit down, forget all of your big $50 billion a year budget plans in terms of new investments and education and job skills and health care. Get that deficit down and I will go easy on interest rates, on short-term interest rates. I'll bring them down and the economy will take off.

That deal at the start of the Clinton administration was the most important thing that happened. Bill Clinton, accepted the deal, and interestingly, George W. Bush is not accepting a similar deal from Alan Greenspan.

SHAW: How do you know that?

REICH: Well, you can tell because Greenspan is very clearly saying, look, I'm trying to get a soft landing here. I'm going to bring interest rates down. Don't interfere and George W. Bush is saying, but I want my big tax cut and Alan Greenspan is not happy with a big tax cut because that is going to interfere with the soft landing. That means much more stimulus than a mere interest rate reduction is going to offer.

SHAW: Bob Hormats, were you aware of this deal struck between the chairman of the Fed and the new incoming president?

HORMATS: Well, I don't know that it was a deal that Clinton made precisely with Greenspan, but there was certainly an implicit understanding that if the fiscal side of the ledger; that is to say, the budget, was brought to the line; that we got rid of this huge deficit and more toward a surplus, it gave Greenspan a lot more running room to lower interest rates.

Plus, it did something else which is very important: It enabled the government to stop being a big drawer on the savings pool of the United States, and enabled the private sector to have cheaper money and that helped to build up the infrastructure, the investment that we've seen. That infrastructure's been very important to improving productivity, which has been critical to this noninflationary recovery.

REICH: Bernie, there's another...


SHAW: But these deficits -- yes, I was just going to point out these deficits went down because of that unexpected surplus that just came out of nowhere.

HORMATS: Well, it didn't really come out of nowhere because the corporate sector was making a lot of changes and we got a lot of growth and we got a lot of productivity improvement and capital gains; all those things, I think, were contributors to this big surplus that we have now, which very few people really predicted in 1992, 1993.

REICH: Nobody predicted.

SHAW: That was -- yes go ahead, Bob.

REICH: Absolutely nobody predicted it. In fact, we, in 1992, 1993, at the start of the Clinton administration, we saw $200 billion, $300 billion dollar deficits as far as the eye could see. And nobody had any idea that the economy would grow as fast. I think, undoubtedly, corporate restructuring and investments in technology at the beginning of the 1980s did help.

But Greenspan cutting those interest rates and Bill Clinton getting that deficit and that fiscal house in order really were absolutely central to the story.

SHAW: Robert Reich, what, glaringly, did this 42nd president fail to do?

REICH: Well, I think there's an unfinished agenda. I'm not sure I would say fail in a sense of not measuring up. But there is a large unfinished agenda, Bernie, in the sense that now 45 million Americans don't have health insurance. It was only about 35, 38 million in 1992, 1993. Also, child poverty: About the same percentage of children in this country -- almost one out of five -- is in poverty as was in poverty in 1992...

SHAW: Well...

REICH: ... despite this huge, wonderful economy. So there is a big unfinished agenda here.

SHAW: Did he botch the health-care issue early on, first term?

REICH: Well, undoubtedly that was a big failure. The number-one failure of the first term was health care. And obviously the big, glaring failure -- underscored -- second term was Monica Lewinsky, leading to impeachment. Those are the two big -- well, the big blots, the big marks on the Clinton presidency. SHAW: Well, Bob Hormats, do you suppose that the president and his supporters are hoping that his success with the nation's economy will drown out the noise of his personal failings?

HORMATS: I think so. And I think history will give him a lot of credit -- not full credit, but a lot of credit -- for the economic recovery that we have seen, and for this budget surplus, and for this huge surge in productivity. But there are things he, I thought, could have done which he did not do. Bob has pointed out a couple. We still have to reform Social Security and put it in a stronger footing.

Medicare is going to be in trouble 10, 15 years from now. Education: The big Achilles heel of this economy is, we are not turning out enough people to drive a knowledge-driven economy. Over the next 10, 15 years, we're going to have to do a lot more to improve education. And one other thing: We need trade. We need to expand exports. And he did not use his influence to develop a consensus which would enable us to negotiate further to open markets for American goods and services around the world. That was a mistake, too.

SHAW: I leave with you this observation. And I hope that you will have a one-line response, if you would, because we are fast out of time. But do you find it ironic that George Herbert Walker Bush took steps that really helped Bill Clinton when he became president? The economy took off. It's robust now -- talk of a recession. But Bill Clinton is handing son of Bush some pretty good numbers. Irony?

HORMATS: Well, the numbers are not looking as good now. But he certainly left him a very strong basis for future growth. There's a lot of productivity that has been built into the new technology and the new capital investment we have seen over the last several years. So there's a very sound economy in a general sense, if not in an immediate sense.

REICH: Bernie, the big problem facing any president is how to engineer things so that, by the time reelection year comes, the economy is on an upswing. If you get a recession early on, you are better and have a better chance of having an upswing three or four years later. That's the irony. That's the problem facing George W. Bush right now. He gets a pretty good economy. But he wants to get the worst out over with -- he wants to get the worst off over with fast.

SHAW: Two of the best minds and finest persons to ever serve in public office: Robert Reich, former labor secretary, with a new book, "The Future of Success," and Robert Hormats of the Goldman Sachs.

Gentlemen, thank you very much.

HORMATS: Thank you.

SHAW: Quite welcome.

And when INSIDE POLITICS returns, looking at ballot reform: from the examinations of the Florida election to voting solutions in Illinois.



JIMMY CARTER, FORMER PRESIDENT OF THE UNITED STATES: We would not monitor elections in the United States if called in as an outsider. And we wouldn't go into a country that had laws like ours.


SHAW: Former President Jimmy Carter saying he would not play the role of monitor in a U.S. election, despite the problems in the presidential battle in you-know-where. The CNN News Group today joined a number of other news-media organizations in sponsoring an in- depth survey of Florida's 180,000 ballots that did not register on machine counts.

The National Opinion Research Center, a nonprofit survey firm, will evaluate and classify the condition of each ballot. But it will not access whether a vote was actually cast. In a statement released today, CNN News Group chairman Tom Johnson said: "The Florida presidential election was one of the most important news stories of 2000. And we believe the effort is incomplete without a deliberate and thorough examination of all the ballots."

Well, joining us now: Doyle McManus of the "Los Angeles Times," which is among the news organizations sponsoring this ballot survey.

What do you say to some people who -- cynically or critically -- say: This is a part of the news media's effort to embarrass George Bush?

DOYLE MCMANUS, "LOS ANGELES TIMES": There is nothing here that should embarrass president-elect Bush. He is the president-elect of the United States. He is going to be inaugurated. We don't know how -- what this review of those ballots is going to show. You will notice we are deliberately not calling it is a recount, because it's not aimed at declaring a winner.

The recounts already happened. This is an attempt to find out answers to all of the questions that were left hanging in mid-December when the recount stopped.

SHAW: Well, if it's not a recount, why you are doing this?

MCMANUS: Well, because there are 180,000 ballots, some of which got looked at, some of which never got looked at, which have all variety of marks on them, which are going to tell us an awful lot about the way our elections work and don't work.

Let me give you an interesting example. You know, we spent a lot of time back in November and December, Bernie, looking at the hanging chads and the ones that were not punched out. There are ballots there where, using an optical scanner, where people tried to fill them in, changed their mind, crossed it out, circled another one, where the intent of the voter is very clear. In many of those counties -- those are Republican counties -- that will show extra Republican votes, incidentally. The intent of the voter was clear, but the system couldn't count it. So I think we are going to learn a lot about the weakness in our election system.

SHAW: So you expose problems. Now, what do you do with the expose?

MCMANUS: Well, are going to, number one, be able to classify the problems and figure out which problems are big problems and which ones are small problems. We hope, as part of this, to find whether there is a racial dimension to these problems, to find out more about the African-American vote in parts of Florida and the Hispanic vote in other parts of Florida, see if there are particular problems in those communities.

And that's going to help us have some better ideas about ways to fix those problems.

SHAW: And what are you going to do you with the information once you get it?

MCMANUS: Well, the -- there are eight major news organizations involved in this, funding this, including CNN and the Tribune Company, which owns the "Los Angeles Times," the "Chicago Tribune" -- "The New York Times," "Washington Post" all involved -- "Wall Street Journal." We are going to write news stories about it. CNN, I am sure, is going to air stories reporting what we have found.

But the other important thing we are going to do is make the data publicly available for anyone who wants to come see it: politicians, political parties, academics, county governments, state governments. This is something that we can do if we pool our resources that may actually turn out to be a resource for a lot of people.

SHAW: But, Doyle, isn't this redundant? Isn't the state of Florida, with a commission and a task force, doing precisely what you and other people in the news media are purporting to do?

MCMANUS: They are not doing exactly the same thing. Yes, you are exactly right: There is a state of Florida task force looking at the problems. And they're taking a government approach. They are not going to in and redo all of the -- you know, recount and reclassify and categorize all of these ballots to see what is actually there, because that, for them, would be a prohibitive waste of government money.

We are going to actually come up with some data that any state in any county can use. And you know what? On something that was as messed up as that Florida election, maybe having a couple of redundant efforts is not such a bad idea.

SHAW: And to some people who would dismissively say this is a waste of money, you say what?

MCMANUS: Well, we work for companies that are out there to make a profit. And it's their own money. We are not going to spend a nickel of public funds on this.

SHAW: And the upshot is that you will not declare a -- quote -- "winner" after you have looked at over 180,000 ballots?

MCMANUS: I don't think we have any a way to declare a winner, because, number one, there already is a winner. Now, what we may find is that we may, at the end of this, be able to say: You know what? If all of the counties in Florida had used one rule, Al Gore would have won that election. But if they had used another standard -- another standard that is used someplace else -- George W. Bush would have won.

You, the reader, the viewer, the voter, you are going to have to make up your own mind about what you think about that.

SHAW: And what will you do about the more than 60 different voting standards in the 67 counties in Florida?

MCMANUS: That is -- that is part of the story. One of the fascinating things here is that votes are counted different ways in every county. We've already found just about every variety of behavior you can, including some counties where they stuck stickers on holes so that the holes wouldn't show up, and others where they pulled the chads off the back. That is one of the things we are trying to figure out. We are trying to compile the best catalog we can of all the different things they did, so that, hopefully, Florida and other places will realize: We got to have some uniform standards.

SHAW: Reform.

MCMANUS: Reform is a good thing.

SHAW: Doyle McManus, "Los Angeles Times," thanks very much.

MCMANUS: Thank you, Bernie.

SHAW: Always good to see you.

The Florida Supreme Court ruled in Al Gore's favor during that Florida election battle. Now, three of its members are targets of Republican fund-raising efforts. A group called the Emergency Florida State Supreme Court Project has sent out letters trying to raise $4.5 million to unseat three of the justices, all of them Democrats. Justices are appointed by the governor. But Florida voters cast ballots on whether they are to be retained.

Questions about the accuracy of punch-cards ballots will once again go to court. Two class-action suits were filed today in Florida and Illinois, challenging the use of the Votomatic punch-card systems. The suits allege that the inaccuracy of the punch-card machines violate the rights of voters. In Illinois, at least one county already is considering ways to improve the balloting process and ensure its citizens' right to vote.

CNN's Hena Cuevas reports.


BOB ZENI, AMERICAN INSTITUTE OF GRAPHIC ARTS: We regard all of these as improvements.

HENA CUEVAS, CNN CORRESPONDENT (voice-over): Among the changes meant to make the infamous punch-card less confusing: color to show the wrong side, different-size fonts to emphasize instructions, and directions both in English and in Spanish.

ZENI: We believe that if anyone has the right to vote, they should also have the ability to vote.

CUEVAS: For voters looking at the new design, any change helps.

UNIDENTIFIED FEMALE: This is very much clearer. And, you know, it's very readable and understandable.

UNIDENTIFIED MALE: I mean, anything that is going to make it easier for citizens to vote and vote the way they want to -- and if this is intended to do it and it does it, then it will be a good thing.

CUEVAS (on camera): Why the change? Cook County, which includes Chicago, saw an increase in the number of ballots that didn't register a vote for president. Worried the county wouldn't get a voice in the next election, officials here moved to update the ballot and how it's counted.

(voice-over): The election board also plans to look at a sample of the disqualified votes for more clues.

LANGDON NEAL, CHICAGO BOARD OF ELECTIONS: I think what we learned in this last election is that we have a lot of new voters who exercised their rights in this election, and we have a component of our society who needs to -- needs help in understanding the voting process and their rights as a voter.

CUEVAS: Another goal for the board, working with Jesse Jackson, is to reduce the numbers of tossed-out votes.

NEAL: One of the most disappointing things to us at the election board is: We currently have the technology in place which we believe could have significantly reduced those disqualified votes.

CUEVAS: One of their proposals is the use of a precinct-ballot counter, where voters feed their ballots directly into the machine. If there if a mistake, the machine spits it out, giving voters a second chance to cast a valid vote. Currently, Cook County has the counters, but is stuck in a legislative battle with the state legislature over whether it can use them to count the punch cards.

UNIDENTIFIED MALE: I don't know how much better this is.

CUEVAS: For voters and officials, the real test for the changes will come in the 2002 midterm elections.

Hena Cuevas, CNN, Chicago.


SHAW: Please stay with us. When INSIDE POLITICS continues at the top the hour, we'll have a fresh report on Linda Chavez bowing out as labor secretary nominee. Plus: the state of Gray Davis' political future as the governor grapples with California's power crisis.


SHAW: Now that Linda Chavez has withdrawn as labor secretary nominee, how might President-elect Bush fill the hole in his Cabinet?

The sailing may be smoother for Bush's choice for interior secretary. We'll have an update on her prospects and the opposition.

Plus: a look back at some past Cabinet nominees and the flaps that did them in.

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

SHAW: Welcome back to INSIDE POLITICS. As presidential transition controversies go, it was relatively short lived. Linda Chavez withdrew her nomination as labor secretary less than three days after the story broke about the room and money she gave an illegal immigrant.

CNN's Eileen O'Connor has more now on the Chavez announcement and the message she sent about the political process.


EILEEN O'CONNOR, CNN CORRESPONDENT (voice-over): Linda Chavez says her mistake was not realizing how housing an illegal immigrant in her home, and finding her work, would look. It was that lack of forthrightness, sources say, that led aides to the president-elect to pressure her to withdraw.

LINDA CHAVEZ, FORMER LABOR SECRETARY NOMINEE: I have decided that I am becoming a distraction. And therefore, I have asked President Bush to withdraw my name for secretary of labor.

O'CONNOR: Chavez said her withdrawal was due to the politics of personal destruction, that the press had made too much of the story, and that her biggest regret is it would send the wrong signal to good people.

CHAVEZ: So long as the game in Washington is a game of search and destroy, I think we will have very few people who are willing to do what I did, which was, to put myself through this in order to serve.

O'CONNOR: Chavez surrounded herself with those she had helped, she said, to put a human face on the story. They called her a savior.

BENSON BUI, FRIEND: If I don't have a Linda Chavez, so that means, I don't have everything today.

O'CONNOR: The president-elect said in a statement:

"Linda is a good person, with a great deal of compassion for people from all walks of life. Her upbringing and her life's work prepared her well for the issues facing the Labor Department."

"I am disappointed that Linda Chavez will not become our nation's next secretary of labor."


O'CONNOR: Chavez said she knew that she was skirting the law in housing this illegal immigrant, Marta Mercado, but she says she doesn't look at green cards when she is confronted with a battered woman who needs housing.

But the Bush team became especially concerned when, through the vetting process, they heard of reports that Chavez had contacted a neighbor, saying she hoped the Marta Mercado story wouldn't come up to the FBI. Mercado herself says that she was not coached, that Chavez told her to talk to the FBI, but she does say that they did talk about the past, and that Chavez and she went over things to refresh her memory.

Also, though, Democrats on Capitol Hill say it wasn't just the illegal immigrant situation, or the fact that she'd housed an illegal immigrant, which they say could be looked upon as an act of compassion, it was the hypocrisy that she had been so critical of Zoe Baird when she was nominated by President Clinton and was accused of hiring an illegal immigrant in her home at the same time, she, Linda Chavez was housing Marta Mercado and helping her find work.

But, according to people, lawmakers on Capitol Hill applauded her decision to withdraw. Tom Daschle in a statement, the Senate majority leader for the next few days and also Senator Kennedy, who was going to chair the hearings on the nomination of Chavez, said that "if there's a silver lining to the events of recent days, it's the opportunity to name a labor secretary in the distinguished tradition of recent Republican presidents, secretaries like John Dunlap, William Usery, Elizabeth Dole, who have been effective in carrying out the important mission of the Labor Department to enforce the nation's labor laws fairly for the working families of America."

That, according to the AFL-CIO, for them, was the real issue. They said Linda Chavez was always a controversial nomination. This, say Bush sources, just made her impossible to sell -- Bernie.

SHAW: Thank you, Eileen O'Connor.

incidentally, Linda Chavez will discuss the controversy around her nomination and her decision to pull out tonight at 8:00 p.m. Eastern on WOLF BLITZER REPORTS, of course, here on CNN.

In addition to Chavez, another one of the three women tapped for the Bush Cabinet has proven to be something of a political target. But as CNN's Jonathan Karl reports, Gale Norton's nomination as interior secretary seems to be on safer ground.


GEORGE W. BUSH, PRESIDENT-ELECT OF THE UNITED STATES: serve as the 48th secretary of interior, I will nominate Gale Norton of Colorado.

JONATHAN KARL, CNN CORRESPONDENT (voice-over): Shortly after the announcement was made, environmental activists declared their opposition, and Washington conventional wisdom put Gale Norton on the list of George W. Bush's endangered Cabinet picks.

But as Norton makes the rounds on Capitol Hill, on Tuesday meeting with the number two Democrat Harry Reid, she has generated little controversy, and senior Senate Democrats acknowledge, barring some unforeseen revelation, she will easily be confirmed. It's not for lack of trying. On Friday, a coalition of the nation's largest environmental groups, will announce a campaign to defeat Norton.

CARL POPE, EXECUTIVE DIRECTOR, SIERRA CLUB: Gale Norton's most visible qualification for her job is that she's studied laws at James Watt's knees, and she comes to this post with a history of involvement in really extremist activities.

KARL: Two decades ago, Norton worked for an organization founded by James Watt, later Ronald Reagan's controversial interior secretary, an enemy of environmentalists, who gained fame when he refused to allow the Beach Boys to play on the National Mall, because rock'n'roll would attract "the wrong element." Nancy Reagan, a Beach Boys fan, disagreed, and reinvited the band.

MYRON EBELL, COMPETITIVE ENTERPRISE INSTITUTE: I don't think calling a Gale Norton a James Watt II, or James Watt the younger, will work. I know both of them and she is no James Watt.

KARL: Norton has long been an outspoken critic of Federal environmental regulations. She has also favored drilling for oil in Alaska's protected arctic wilderness, a position shared by Bush.

SEN. JOHN KERRY (D), MASSACHUSETTS: She's written, historically, some things that raise some questions. I don't know whether they rise to the level of problems, but I just think they are legitimate kinds of questions about policy.

KARL: Democrats will raise questions about her views, but if she answers another question correctly they predict smooth sailing for her nomination.

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: Can you enforce laws that you have publicly announced you are in disagreement with? If that is answered in the affirmative, convincingly, perhaps her problems will be of less significance.


KARL: Norton's confirmation hearing is next week, and, if the witness list is any indication, her critics may have a tough time getting their message across. The only witness scheduled to appear at that hearing is Norton herself -- Bernie.

SHAW: Jonathan, you are on the Hill, and I have to ask you a question about something going around up there. What's this about a Dick Armey memo on tax cuts?

KARL: Well, Dick Armey, which is, of course, the majority leader on the House side. sent out a memo to all Republican members of the House. He titled his memo A Call To Action, and the action he wants is the immediate action on George W. Bush's tax cut proposal. and what he said in the memo, is not only should we pass George W. Bush's tax cut plan, especially his cuts in income taxes, but we should make the tax cuts retroactive; in other words, actually making the size of George W. Bush's tax proposal even bigger than what the president-elect has suggested.

Now, this is not getting a very warm reception over here on the Senate side of the Capitol. Tom Daschle, the Democratic leader here in the Senate side was asked about this, and he said, look, we're already concerned that George W. Bush's tax cut is too large, so this would only make it larger, that's a problem, and we certainly don't think retroactive tax cuts are the way to go.

But what Dick Armey is saying, Bernie, is that because we have an economic down turn here, that we need those tax cuts -- we need them quicker than Bush has been talking about and the way to really spur the economy is to make those taxes retroactive; have them start as of January 1st of this year.

SHAW: Jonathan Karl on the Hill. Thank you.

We're joined now by Bill Press of CNN's CROSSFIRE and SPIN ROOM; and David Brooks of the "WEEKLY STANDARD."

David, who is responsible for Linda Chavez withdrawing this afternoon?

DAVID BROOKS, "WEEKLY STANDARD": It feels like we all are. We're in some Pagan ritual where we get together and we crucify someone for a three-day period and then we feel terribly guilty afterwards. I'm already beginning to feel guilty. If you look at her presentation today, is there any way to argue that what she did for this woman, Mrs. Mercado, any way, would have hurt her be a good labor secretary? On the contrary, it would have made her a better labor secretary showing the compassion and the people she did. And so, I think, we go through these rituals. It feels like a primal cult thing.

BILL PRESS, HOST, CNN CROSSFIRE: David, don't feel guilty. There is enough guilt to go around. But I would like, Bernie, to give the labor unions credit for defeating a nominee who was going to be hostile to them. But I don't think it's possible. I think that the credit or blame or whatever goes right to Austin, Texas.

I'm stunned by how quickly she was made to walk the plank, by how quickly the Bush team threw her over the side. Yesterday, I said to both my colleagues, Bob Novak and Tucker Carlson, you watch, they're going to make her walk the plank. And both of them denied it. They said, no, this Bush team -- they're fighters. They're going to hang in there. They could have won this battle, Bernie.

The Senate would not have shot her down over this illegal immigrant, and it's not that big of an issue. I think they gave up too easily, and I don't know what it says about them, but I'm stunned that they threw her over the side so fast.

SHAW: David, you are nodding head in agreement.

BROOKS: She was out there, touting her own horn today. Where was somebody else to tout the horn? Where was somebody else to say, all the records she had being compassionate to other people? The other thing is, what does it mean for John Ashcroft and Gale Norton? Are they going to stick by...

PRESS: Exactly. If I were John Ashcroft, I would be nervous. I'd be nervous that the heat -- really gets hot, they're going to say, hey, John, see you later.

BROOKS: I agree. This was winnable.

SHAW: I just want to insert some news here. CNN's Bob Franken sends word that Ronnie White of St. Louis, Missouri, the man whose federal judicial nomination was shot down in the Senate by Mr. Ashcroft, Ronnie White of St. Louis, Missouri is going to testify at the Ashcroft hearing.

What does that element do?

PRESS: I think it's one of the biggest strikes against John Ashcroft. I hear the word racist, which I think is very, very unfair about John Ashcroft, because he's not and he should not -- I don't know anybody, frankly, who's called him that but I keep hearing that word.

But there are questions about his commitment to civil rights. One of them is the honorary award he got -- accepted from Bob Jones University. The other is his words -- kind words, southern patriots, about the leaders of the Confederacy.

But principally, his battle against Ronnie White, who is a good member of the Missouri Supreme Court, and Ashcroft attacked him as being soft on crime, I believe, unfairly. For Ronnie White to be there, that's a powerful charge to level against John Ashcroft.

SHAW: And all this is going to play out before Senator Orrin Hatch's Judiciary Committee?

BROOKS: Yes, and John Ashcroft is different than Linda Chavez. He's being attacked not for something he did, but for just beliefs he holds. He holds the utterly conventional beliefs of the religious right, and there are tens of millions of people in that community in this country and if he is shot down, we are effectively saying to those people, you know, you can vote; you can serve in the army; but you can't serve in government because your views are somehow beyond the pale.


SHAW: Well, the question -- Jeff Greenfield has been raising that very point on INSIDE POLITICS for the last 48 hours. Should a president's nominee for any Cabinet position be rejected solely because of his or her ideology and beliefs?

PRESS: I would say absolutely not, and a president certainly has the right to appoint his or her, someday, people. But the opposition has a right to look at those people and say are they qualified for those jobs. And are they -- particularly can they be trusted, in this case, to uphold all the laws of the land equally and fairly? And that's -- those are the questions being raised against -- about John Ashcroft in the case of civil rights and in the case of abortion rights as well.

SHAW: David?

BROOKS: Look, the man was an attorney general for eight years in the state of Missouri. I mean, we all know the arguments pro and con, but I think today, one of the things we can say is the standards are just too high. Somebody makes a small mistake, their career really gets destroyed about it.


SHAW: I just want to leave you to be clear in my own mind, you both believe that George W. Bush left Linda Chavez twisting in the wind?

BROOKS: I think he walked away from a winnable fight.

PRESS: She did not tell him the whole truth when they interviewed her and I think they said, serves you right, good-bye.


SHAW: David Brooks, Bill Press CNN's "CROSSFIRE," thank you.

BROOKS: Thank you.

SHAW: And still ahead on INSIDE POLITICS, the governor of California, Gray Davis, confronts what he calls an energy nightmare.



GOV. GRAY DAVIS (D), CALIFORNIA: I assume the proponents of deregulation really did envision lower energy costs and smaller electricity bills. They certainly didn't envision this mess, but we must face reality. California's deregulation scheme is a colossal and dangerous failure. (END VIDEO CLIP)

SHAW: Tough words from California Governor Gray Davis. He made the remarks last night in his annual State of the State address to the California legislature. Davis is calling for an overhaul of the state's electric utility industry. He wants to create a public agency to buy and build power plants, and the governor is threatening to seize the plants of wholesalers guilty of price gouging. Davis says a failed experiment in deregulation has meant higher prices for consumers and an unreliable supply of electricity.

For more on the situation in California, we're joined in Los Angeles by Dick Rosengarten of "California Political Week." Dick, a political question: Can this crisis cost Gray Davis a run for the presidency in 2004?

DICK ROSENGARTEN, "CALIFORNIA POLITICAL WEEK": Well, first, Bernie he has to get by, you know, reelection in 2002. Assuming that he doesn't stumble here and is not defeated for reelection, and that assumes quite a bit, he'll be one of the top five or six Democrats who will probably want to challenge George W. Bush.

SHAW: Well, his approval rating has gone from 67 percent to 49 percent. Is this power crisis pulling him -- putting him in a free fall?

ROSENGARTEN: You're talking about the new "L.A. Times" poll which came out on Sunday. Actually, among registered voters, it was 51 percent approval. But then when you ask the question how has he done in terms of handling this energy mess? The numbers just about reverse. It's about 28 percent approved.

And I have to say that those numbers reflect what it was, you know, earlier in the week, because right after the State of the State address, I'm willing to bet with all that tough talk and the buzz words that he was using, his numbers probably went back up.

I talked to a number of people this morning about how well they thought he did in this piece. Did he hit all the bases and everything? And he had to deliver a very bold speech, and I think he did. But the one thing that he didn't say was how much is it going to cost?

Now tomorrow, he delivers the -- his budget address and we'll find out some more there. I don't think there's any doubt that Governor Davis, probably along with the state treasurer, California Treasurer Phil Angelides, are both leaning toward a California public power authority.

It's going to cost billions of dollars, and it's going to take time to fix. It's not a magic bullet. It can't be done overnight, and, of course, you know, as soon as these rates go up a little bit, people are really going to start screaming and yelling.

SHAW: What about the criticism of some who say that Governor Davis did not act decisively enough and quickly enough when this problem first became apparent last summer?

ROSENGARTEN: Last summer, well, I think there is some criticism on him on that. The only thing that I recall that he did was that he -- he told the members of the -- his California Energy Commission to get busy and start approving some of the power plants that had been sitting there at the commission office for months and months and in some cases probably years waiting to be approved. That's the only thing that I knew that he had done last year, other than, you know, you know, make some obligatory things like saying the energy companies are ripping us off.

Now, he didn't say utility companies. He talked about the power generators. I mean, there is a distinction there. One of the other things in the speech last night that I thought was pretty good and it probably helps him politically with the business community as well as Republicans, he said under no condition was he willing to allow PG&E, Southern California Edison or San Diego Gas & Electric to go under. And I thought that was pretty significant.

SHAW: Do you think he is positioning himself to run for president in 2004 by what he's doing?

ROSENGARTEN: If this thing turns out successful; if Davis can deliver; if he can set up the California Power Authority, and bail us out of this mess, it shows that he sure as heck can do a lot of stuff. He is a centrist Democrat. He's pro-choice, but he's also pro- business and he's pro-death penalty. I mean, if he could just be a little bit more charismatic, I mean, he'd be like Bill Clinton. I mean, he'd be unstoppable because he comes from the center. He's a very cautious guy.

SHAW: You just took the word out of my mouth. I was going to say he's a very cautious politician and my question, last question to you is can he work with the legislature? Can he be more accessible?

ROSENGARTEN: Yes, you know, in the past he hasn't been. I assumed that you knew that and last night in his State of the State he sort of wrapped hands around the legislature, and I'm sure they said; oh, well, finally he's coming to us and maybe this will be power sharing, because you know, up until this point, he hasn't been too open with the legislature, a lot of stuff has been done in secret.


SHAW: Well, that's why I asked the question.

ROSENGARTEN: Yes, well, I mean, I think -- he gets along OK with Burton -- John Burton, who's the Senate majority leader and he gets along OK with the assembly speaker, Bob Hertzberg. But, I mean, do they have a real warm, feely-type, you know type relationship? It's good, but it's not great.

SHAW: Dick Rosengarten of the "California Political Week." We'll find out in these coming weeks what's going to happen with the California energy crisis. Thank you.

ROSENGARTEN: Happy new year. Bye-bye.

SHAW: And to you. Bye-bye.

Up next, our Bruce Morton on the reasons some nominees never make it to the Cabinet.


SHAW: Linda Chavez: She now joins the ranks of other presidential picks who did not survive the nomination and confirmation process. Despite opposition to many Cabinet nominees in recent history, our Bruce Morton reports there are only a handful of reasons that politically disqualify a nominee.


BRUCE MORTON, CNN CORRESPONDENT (voice-over): How does a president-elect lose a Cabinet pick? First, if they've broken the law. Zoe Baird never got to be Bill Clinton's attorney general because she had knowingly hired illegal immigrants as household workers and failed to pay their Social Security taxes.

Second, if it looks bad. Kimba Wood didn't get to become Bill Clinton's attorney general either. She had hired an illegal immigrant as a baby-sitter when it was legal, but she didn't tell the White House about it. The Clinton administration decided that showed a lack of candor and asked her to withdraw.

Then, it hurts if the other side can paint you as a radical. Bill Clinton withdrew his old friend Lani Guinier's nomination as assistant attorney general for civil rights because Republicans pounced on some articles she'd written on how to maximize black voting strength. She suggested things like cumulative voting. If there are five state legislators in your district, you could cast one vote each for five candidates or five votes for one candidate. Some corporations do that.

She suggested supermajorities for the passage of some laws, which is already true in the Senate, where you need 60 votes to break a threatened filibuster on just about anything. Still, Republicans labeled her a quota queen, and the political flap scared Clinton into dropping her nomination.

Gossip can do it. President Bush, the president-elect's father, nominated Texas Senator John Tower for secretary of defense. Senators, members of the club, usually get confirmed easily, but Tower faced charges of boozing and womanizing based on secret FBI files about him. The FBI puts everything, gossip, rumor, everything, in its files; so Tower was stuck.

Senators would say, well, if you could read this, and of course, you can't, you'd vote against him. Nobody was saying, he was drunk on such and such a day, so Tower never faced specifics he could deny, just rumors. He lost.

(END VIDEOTAPE) MORTON: Still, most Cabinet appointees get confirmed. Senators tend to feel these folks will be working for this president; he ought to have the people he wants, by and large. It's different with Supreme Court nominees, who may serve during several presidencies. Then, senators tend to feel my judgment counts just as much as the president's; I'm going to vote my convictions on this, as you know, Bernie.

SHAW: Indeed, thank you, Bruce. Bruce Morton.

Well, that's all for this edition of INSIDE POLITICS. But, of course, you can go online all the time at CNN's; AOL keyword, CNN.

And these programming notes: former Republican presidential candidate Gary Bauer and Democratic strategist Frank Greer will discuss the Linda Chavez withdrawal tonight on "CROSSFIRE." That's at 7:30 p.m. Eastern. And at 8:00 p.m., Chavez herself will be a guest on "WOLF BLITZER REPORTS."

I'm Bernard Shaw. The "MONEYLINE NEWS HOUR" is next.



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