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Inside Politics

Bush Administration Working to Make Good on Its Tax Cut Pledge Against Backdrop of Economic Jitters

Aired January 30, 2001 - 5:00 p.m. ET

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

JUDY WOODRUFF, CNN ANCHOR: The Bush team works to make good on its tax cut pledge against a backdrop of economic jitters. On the John Ashcroft nomination, push finally comes to shove in a Senate committee. Georgia says so long to the old state flag, and the political fire storm surrounding it. And:

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: Quoth the raven, nevermore.

(END VIDEO CLIP)

WOODRUFF: We stay versed in New York politics, as Senator Clinton eats humble pie.

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

WOODRUFF: Thanks for joining us. Bernie is off today.

If President Bush needed any more evidence that the economic downturn is a dominant factor in his early days in office, he got it today. A key gauge of consumer confidence plunged to its lowest level in four years. And in response to flagging growth, the Federal Reserve Bank appears poised to cut interest rates again tomorrow. As Mr. Bush keeps his eye on the Fed, and the latest figures, our John King is keeping tabs on the president -- John.

JOHN KING, CNN CORRESPONDENT: Well, Judy, and remember, as president-elect just a few weeks ago, George W. Bush was more than happy to rush out and praise the Fed chairman Alan Greenspan when the Fed last cut interest rates; today, we asked if he was expecting another rate cut to give the economy a little boost, and Mr. Bush said he had learned a very important lesson during the transition and no longer as president would he comment or speculate, say anything positive or negative, about the independent Federal Reserve.

But Mr. Bush was clearly in a mood today to talk about another subject very close to his heart and very important in his plan to bring the economy back: tax cuts.

(BEGIN VIDEOTAPE) KING (voice-over): The president told the Republican leadership he wants to sign a tax cut as soon as possible, but is no longer insisting that his plan be considered as one big package.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The most important criterion for how the tax package is handled is, whether or not it will succeed, and these are the members who are going to have to work to get it out of the House, and so we're listening to their strategy.

KING: Speaker Dennis Hastert believes more bipartisan support can be generated if the House votes separately to eliminate estate taxes and the so-called "marriage penalty" on two-earner couples. But if the tax cut is broken up, GOP sources say Mr. Bush made clear he would prefer an across-the-board rate cut first. That part of the Bush package carries a $730 billion price tag. And the president wants the cut retroactive to the beginning of the year as a way of boosting consumer confidence, now at a four-year low.

REP. RICHARD ARMEY (R-TX), MAJORITY LEADER: It is very important for us to let the American people know that we understand the needs of the economy, and we're working seriously on the tax cut, and help is on the way.

KING: In all, Mr. Bush wants to cut taxes by $1.6 trillion over the next 10 years. Democratic leaders favor half that, an $850 billion tax cut. Recent comments by Fed Chairman Alan Greenspan gave momentum to the Bush view, and the White House hopes new surplus estimates add even more steam to the tax cut bandwagon. The Congressional Budget Office now projects a $5.7 trillion surplus over the next decade, up more than $1 trillion from its projection of just three months ago. Mr. Bush took note of the growing surplus at an Oval Office swearing-in ceremony for Treasury Secretary Paul O'Neill.

BUSH: Because our government has a surplus does not mean that every American family has a surplus. In fact, many families are feeling squeezed by high energy prices and credit card debt. We need to give them their own money back.

KING: The president has said to be confident he will get most of what he wants, but he might have to wait. Senate Majority Leader Trent Lott says the tax cut debate could run into late June or early July.

(END VIDEOTAPE)

KING: Now, Democratic leaders were relatively solid today as the Republicans and the president made their case for a big tax cut. But tomorrow morning, both the Senate Democratic Leader Tom Daschle and the House Democratic Leader Dick Gephardt are prepared to come out and publicly make the case, that they are ready for a big tax cut, too, but not nearly as big as the presidents. They say, you can't cut taxes that much if you also want to pay down the debt and keep the promises Mr. Bush made during the presidential campaign -- Judy.

WOODRUFF: And John, two quick things; number one, if there is agreement that there needs to be some kind of tax cut, there's disagreement on how much. What about on the across-the-board feature?

KING: That will be one of the big debates. Now, Mr. Bush believes he has the momentum now because Mr. Greenspan said last week, the fairest way to cut taxes is to cut marginal rates. The Democrats say this is a boom to the rich. The Bush public relations strategy will focus on the other end of the spectrum; they say they want to cut the tax rate for those in the lowest bracket from 15 to 10 percent. That will be part of the coming public relations war over, who will make out best over each party's tax plans.

WOODRUFF: John, we can see the urgency now attached to this, given the new economic figures, but what about the 10-year aspect of this? Is that something that the president is absolutely wedded to?

KING: Well, they just think that the way you do the federal budget, most tax cuts are based on 10-year projections. That doesn't mean, of course, they couldn't change it, next year or the year after -- if the economy turned down and revenues slowed and the surplus numbers turned sour, they could certainly change it. But at the core of those projections or 10-year budget figures, the big question is: how fast can you get a tax cut into the system, into the economy -- no one believes Congress can pass this for several more months, that's why Mr. Bush wants the marginal rates cut first so that when it is passed, it is retroactive, and that immediately would be noticed by any American in their paycheck. Obviously, their federal withholding would go down with their tax rate.

WOODRUFF: All right, John King at the White House, thanks very much.

For more on the economy in the Bush era, we turn to CNN financial news reporter Peter Viles.

Peter, hello, welcome to Washington.

PETER VILES, CNN CORRESPONDENT: Good to be here.

WOODRUFF: Let me ask you about this report today, the unexpected -- or the drop in consumer confidence. Wall Street did or didn't expect this to be the size that it is?

VILES: Wall Street was bracing for bad news on consumer confidence, but not this bad. They expected a modest decline in January. Instead, we had the biggest decline in a four-month streak of declines, an 11 percent decline, which tells Wall Street, the economy is deteriorating faster than they thought, perhaps faster than the Federal Reserve thought. So, this is a negative in an already negative landscape for Wall Street and for the Fed.

WOODRUFF: Now, what does this mean when you connect it to the expected move of some sort by the Fed tomorrow? What's the connection?

VILES: Well, I think on Wall Street, there is now a feeling that a 50 -- or a 50 basis point, half a percentage point cut -- is built in tomorrow, that's guaranteed. This bad news today sparks some speculation, perhaps, the Fed may go even further than that tomorrow. And even if they don't go further than that tomorrow, it means a further interest rate cut is now in the offing sometime between now and March.

WOODRUFF: Does that mean that they already built in an expectation for the half-point drop?

VILES: On Wall Street, yes. It is priced into stocks and bond prices; they say it is baked into the cake. If they don't get the half a percentage point tomorrow, you can expect a bad reaction in the market, but they are fully expecting, at least, a half a point tomorrow.

WOODRUFF: All right, Peter Viles, thank you very much. Good to see you, appreciate it.

And now we go to Capitol Hill, where the Senate Judiciary Committee is nearing a vote on John Ashcroft's controversial nomination as attorney general. Here is Congressional correspondent Jonathan Karl -- Jonathan.

JONATHAN KARL, CNN CORRESPONDENT: That's right, Judy. That vote is expected in just about 15 minutes; and as soon as the vote happens, the debate over the Ashcroft nomination will move right to the Senate floor. Republicans hope to finally get a vote on the Ashcroft nomination by the end of the week, but even before it reached the floor, the top Democrat in the Senate, Tom Daschle, took to the floor of the Senate and said he will vote against Ashcroft.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: How can John Ashcroft enforce laws he has spent his entire public career fighting? And what would that say about him if he did? I've turned this over in my head 100 times. Every time, the answer is sadly the same: I do not believe John Ashcroft is the right person to lead the United States Department of Justice. For that reason, I will vote no on this nomination.

(END VIDEO CLIP)

KARL: Daschle, up until then, had not tipped his hand about how he would vote. With the top Democrat in the Senate now saying he will vote against Ashcroft, this shaping up to more and more of a party- line vote. Although in the Judiciary Committee, where the hearings are just now wrapping up and the final debate is taking place before that vote in about 15 minutes, Democrat Russ Feingold stood up against his own party and said he would vote for John Ashcroft.

(BEGIN VIDEO CLIP)

SEN. RUSS FEINGOLD (D), WISCONSIN: I believe the American people desperately want us to conduct ourselves where possible in a bipartisan manner, with civility, and with give and take, and act as if those terms have real meaning and are not just empty rhetoric. So when I vote for John Ashcroft in committee, I'm reaching out to the new administration, to my Republican colleagues, and especially those on the opposite side of this committee.

(END VIDEO CLIP)

KARL: What's interesting about Feingold: He is one of the most liberal members of the United States Senate, and yet, saying the president deserves his pick as attorney general. The hearing still going on. The final discussions -- there you see Mitch McConnell, a Republican, who, of course, as all 50 Republicans in the Senate will vote in favor of Ashcroft. Let's hear what McConnell has to say.

SEN. MITCH MCCONNELL (R), KENTUCKY: For example, our former colleague Senator Moynihan stated that John, "will be a superb attorney general." And our current colleague, Senator Torricelli, who knew of John's skill and character from their service together on this committee, stated that, "while I have obvious philosophical differences with John, his ability and integrity simply can't be questioned."

Now, despite John's experience and dedication to duty, I've heard a lot of people say he's unfit to be attorney general because of his strong and abiding faith in God, his firm belief in law and order, and his commitment to the Constitution, even when that commitment is at odds with those unbiased legal scholars on the editorial board of the "New York Times."

Far from disqualifying him from public service, however, these qualities only enforce my belief that he'll ably serve as the nation's chief law enforcement officer. This committee would serve the nation by recommending his confirmation, and I certainly hope that's what it will do.

SEN. ORRIN HATCH (R), UTAH: Senator McConnell, we appreciate it. Senator Durbin, we turn to you.

SEN. RICHARD DURBIN (D), ILLINOIS: Thank you, Senator Hatch, and Senator Leahy and thank you for the good, fair, and complete hearing; I think both sides had all the witnesses that they asked for...

KARL: There is Senator Durbin on the Democratic side of the committee. Again, Durbin will be voting against Ashcroft. This will come down now to 18 people on the judiciary committee: 18 senators, 9 of them Democrats, 9 of them Republicans in the evenly divide Senate. The final vote looks like it will come down to a 10-8 vote in favor of John Ashcroft. And all 9 Republicans voting for Ashcroft and the one Democrat, Russ Feingold, crossing party lines in that committee, in saying he will vote in favor of George W. Bush's pick to be the attorney general.

This debate moves right to the floor of the United States Senate. You had heard some time over the last couple of weeks speculation whether or not Senator Ted Kennedy of Massachusetts would lead a filibuster in order to kill the nomination by preventing it from coming up for a vote. Kennedy today retracting that, saying he would not lead a filibuster against John Ashcroft -- now, it's just a matter of getting it to the floor of the Senate and hearing a final vote on Ashcroft. We're told a number of Democrats want to speak at length, maybe to challenge to get this nomination wrapped up this week, but clearly, the Republicans are going to everything they can to make that happen.

WOODRUFF: Jonathan, as recently as last Friday, when I interviewed Senator Kennedy, he said he was still holding out the prospect of a filibuster. What's the thinking on why he dropped the idea?

KARL: There are two primary factors for Senator Kennedy on this. One, he'd be unlikely to win. In fact, it looks like there may be over 60 senators who are in favor of Ashcroft -- or in favor of having a vote on Ashcroft. Kennedy would need at least 40 of his fellow Democrats to have a filibuster; it looked like he might have been walking into a losing battle.

There is another thing Senator Kennedy has talked about, and that is, as this debate moves to the floor of the Senate, he wanted to see a debate on Ashcroft's record, on his credentials, on his record, on his views, not a debate on procedural issues like a filibuster, trying to get a closure vote, he felt that it would have been a not a very productive way to go forward, he would lose, and lose also in terms of changing the debate from Ashcroft's record to Kennedy's own tactics on the floor.

WOODRUFF: All right, Jonathan Karl at the Capitol. We had hoped at this point to have an interview with Senator Mitch McConnell. As you just saw a few seconds ago, he is still testifying, still participating in the actions of the Senate Judiciary Committee, so we'll get that interview forward in just a few minutes when we can bring him with us.

The politics of the new South collides with symbols of the past. Up next: a governor puts his political capital on the line to change the official state flag. The political impact of this afternoon's Georgia Senate vote when we return.

(COMMERCIAL BREAK)

WOODRUFF: The current state flag of Georgia will soon be part of history. Georgia's state Senate today approved a new flag design that dramatically reduces the part of the banner that includes the old Confederate battle flag. Joining us now from the state capitol in Atlanta is CNN national correspondent Gary Tuchman -- Gary.

GARY TUCHMAN, CNN CORRESPONDENT: That's right, Judy. The old Georgia state flag will soon be gone, a new one will be making its debut, because the Georgia House and Senate have approved a plan to get rid of the old controversial flag which has flown above this state capitol building since 1956, and throughout the state of Georgia for those 45 years. The old flag is controversial because it contains the Confederate battle symbol comprises about three-quarters of the flag. The new flag does not get rid of the stars and bars, but puts it in one of five small rectangles in the bottom of the new flag, with the words "In God We Trust" added to it.

Today's Senate vote was expected to be very close, 29 yes votes were needed from the 56-member body for approval.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Yeahs are 34 and the nays are 22. This bill under constitutional majority has, therefore, passed.

(END VIDEO CLIP)

TUCHMAN: So the vote was 34-22. The governor will sign the bill. Opponents of a new flag say the current flag, the one that's been here since the 1950s, is not racist; it is part of Georgia and southern heritage. However, other people say it is a racist flag, and threaten an economic boycott if it wasn't changed. The governor of the state, Roy Barnes, says he did have to twist some arms to help get it passed.

(BEGIN VIDEO CLIP)

GOV. ROY BARNES (D), GEORGIA: The greatest reason to be for this flag is because it unites all of our people, and puts a matter of division to the side. Georgia has always been known as a state that unites as a people and is not divided on any grounds, whether it be racial or ethnic or gender or anything else. And this vote today confirms that.

(END VIDEO CLIP)

TUCHMAN: The governor could sign the bill as early as tomorrow, and once he does, the state of Mississippi will be the last state to prominently display the stars and bars on its state flag -- Judy, back to you.

WOODRUFF: All right, Gary Tuchman reporting from the Georgia state capitol.

For more on the decision to change the Georgia state flag, and the potential political effect of today's state Senate vote, we are joined by Cynthia Tucker, the editorial page editor of the "Atlanta Constitution."

Cynthia, there are people in the state of Georgia who tried for years to get rid of the current state flag, what changed? Why was this possible today?

CYNTHIA TUCKER, "ATLANTA CONSTITUTION": Well, Judy, I think that the people who have been trying for a decade were actually critical to the change that finally took place. This has been a wave that has been building for about 10 years. Now Georgia Senator Zell Miller, in fact, who is governor in 1993, risked a lot of political capital trying to get the flag changed; couldn't get it done.

Since then, there have been active coalitions building, the Georgia business community has been very active in lobbying for a flag change -- in fact, the "Atlanta Constitution" has on its op-ed page today, a piece from Ted Turner, founder of CNN, and Time Warner mogul, urging a new flag, saying the old flag was an embarrassment. So, this wave has actually been building for about a decade now.

In addition to that, Georgia had an opportunity to witness the debacle in South Carolina, where in fact, South Carolina endured an economic boycott, lost millions of dollars in conventions and business before it finally was persuaded to bring down the Confederate emblem, this is not the stars and bars, by the way, the St. Andrew's cross with stars.

That same emblem was a major part of the Georgia state flag that was adopted in 1956, and today, the state Senate finally voted to change that flag.

WOODRUFF: So Cynthia, is that the end of this? We saw the vote was 34, yes; 22, no. Have we heard the end of this now?

TUCKER: Oh, no, Judy. We haven't. You know, in the South, the past is never past. There is substantial minority, I believe, of Georgians who are nevertheless very vocal about the 1956 flag. They said it represented southern heritage.

They said that they resented the state knuckling under under the threat of a boycott and they have threatened political reprisals in the next campaign cycle. So, I expect this to be an issue in legislative races and in the governor's race the next time around. So no, by no means have we heard the end of this.

WOODRUFF: Are those people you are describing, Cynthia, mostly Democrats, mostly Republicans, or both?

TUCKER: Well, if you look at the vote, Judy, you will see that it came unfortunately close to being a party-line vote. In the state Senate, only about 25 percent of state Republicans voted for the flag change. About 75 percent voted against the change.

If you look out in the state's rural areas, however, I think that you see that many of the people who, I think it is safe to say, that the vast majority of the people who wanted to hold onto the 1956 flag are white. I don't think you will find more than, say, one token African-American who thought that the 1956 flag was a fine thing.

But in many of the rural areas, they are, in fact, Democrats. And so the Democratic Party may in fact pay in the next election cycle if some of those people decide to defect to the Republican Party.

WOODRUFF: Democratic Party may pay and which politicians may pay, do you think?

TUCKER: Well, I certainly think that people will aim at Governor Roy Barnes' reelection. I think they will aim to make that an issue in his campaign. He's in a very strong position. I doubt if he will be vulnerable. I think that there may be, unfortunately, a few isolated state House members and state senators who made the very courageous decision to do the right thing, to vote to change the flag, but who nevertheless will find themselves threatened in their reelection a couple of years from now. I do think their opponents will seek to make this vote an issue, and in some of the areas of the state where there are very few African-American voters, it may be that there is enough white sentiment in favor of the current flag that some legislators will lose their seats. So there is no doubt that there may be for some a political price to be paid for the vote that was made today.

WOODRUFF: And just to clarify, Cynthia, those in trouble, mostly Democrats?

TUCKER: Those in trouble will likely be Democrats, yes.

WOODRUFF: All right, Cynthia Tucker, editorial page editor of "The Atlanta Constitution." Thanks very much. Good to see you.

And still much more ahead on INSIDE POLITICS. Still to come:

(BEGIN VIDEO CLIP)

MIKE HANNA, CNN CORRESPONDENT (voice-over): Despite some talking as if he's already lost the election, Ehud Barak maintains he still has a chance of winning.

(END VIDEO CLIP)

WOODRUFF: Mike Hanna on the Israeli prime minister's reelection battle, in a race that some see as already decided.

Plus: Redecorating, GOP style. We will see the new look in the Oval Office. And later:

(BEGIN VIDEO CLIP)

SEN. CHARLES SCHUMER (D), NEW YORK: The Ravens are a great football team, and they deserve victory. They outplayed the Giants. They're Super Bowl champions, and no one can take that away from them.

(END VIDEO CLIP)

WOODRUFF: A losing bet has New York senators eating crow, and speaking in verse.

(COMMERCIAL BREAK)

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

Internet giant Amazon.com has joined a growing list of companies making large corporate layoffs. The online retailer is reporting a fourth-quarter loss of $90.4 million. That loss is less than expectations, but a company spokesman says cutbacks are necessary to improve long-term health. Amazon is planning to lay off about 1,300 of its employees. That is about 15 percent of its workforce.

Police in San Jose, California have arrested a 19-year-old man they say planned to blow up a community college. They say Al DeGuzman had dozens of pipe bombs, Molotov cocktails and other weapons, and planned to carry out a "Columbine-style attack."

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We've taken the threat here at De Anza College as credible. Bomb-making materials were located and this was the site that we were informed that it would be the target of bombs or explosive devices of some sort. Right now, we have evacuated the De Anza College campus, and we're proceeding or in the preparation stages of doing a full search of the campus itself.

(END VIDEO CLIP)

WOODRUFF: The suspect had attended De Anza College, which lies about 45 miles south of San Francisco.

The weekend killings of two popular Dartmouth College professors has stunned the normally quiet town of Hanover, New Hampshire. Investigators have begun scouring the area around the home for clues, but they are offering the public little information about the killings. The state attorney general says he understands community fear about what happened, but has, he says, no reason to believe the killer is a threat to the community at large.

(BEGIN VIDEO CLIP)

PHILLIP MCLAUGHLIN, NEW HAMPSHIRE ATTORNEY GENERAL: The kind of alarm that there should be here would be the sort of alarm that there would be in any community where I live or where you live if two lovely and highly-respected individuals were murdered as occurred here. We would, of course, all be alarmed to some degree.

(END VIDEO CLIP)

WOODRUFF: The killings took place just three miles from the Dartmouth campus.

In less than 12 hours, a verdict is due in the trial of two Libyans accused of bombing Pan Am Flight 103. A panel of Scottish judges is to announce its decision tomorrow at 5:00 a.m. Eastern. There are three possible verdicts: guilty, innocent, or not proven. The bombing killed 270 people on December 21, 1988.

In India, a top official says the human toll from Friday's earthquake could reach 100,000 dead. Other Indian officials say the number of dead is much lower, probably between 10,000 and 20,000. President Bush telephoned his Indian counterpart today, and said that the first flights of United States aid have begun to arrive at the scene.

When INSIDE POLITICS returns, losing a Super Bowl wager and betting on the governor's race. New York politicians in the spotlight, just ahead.

(COMMERCIAL BREAK)

WOODRUFF: The Senate Judiciary Committee getting closer now to a vote on the most controversial nominee of new President George W. Bush's Cabinet.

Let dip in now.

(JOINED IN PROGRESS)

UNIDENTIFIED SENATOR: ... economic development for the state of Missouri and the Ashcroft administration. He is a now executive vice president with Western Resources in Kansas. We would offer that for the record.

SEN. ORRIN HATCH (R), UTAH: With that objection, we'll put it in the record and we'll recess for five minutes while we get everybody here. What -- people are on their way, and I want to give everybody a chance to vote in person.

UNIDENTIFIED SENATOR: And I would, if I could, offer one more thing, Mr. Chairman?

HATCH: I'll withhold my recess. Go ahead.

UNIDENTIFIED SENATOR: All right. With regard to Paul Offner, he is identified clearly as a partisan Democrat.

WOODRUFF: We just heard the committee chairman, Senator Orrin Hatch say they're going to take a five-minute recess before the vote gets under way. We will cut away and go back to INSIDE POLITICS. But as soon as the committee vote gets under way, we'll go right back to the Capitol.

New York Democrat Andrew Cuomo is taking aim at his father's old job, governor of the state of New York. The younger Cuomo announced his intention to run in the 2002 race during a party with supporters last night. If he gets the Democratic nomination, the former housing secretary under President Clinton would likely face Republican Governor George Pataki, who is expected to run for a third term. You may remember it was Pataki who defeated Mario Cuomo's reelection bid in 1994.

For more on the New York governor's race, New York's junior senator, and all things political in the Empire State, let's turn now to Fred Dicker of "The New York Post" who is in the state capital, Albany.

Fred Dicker, thank you for being with us.

FRED DICKER, "THE NEW YORK POST": Thank you, Judy. If I'm smiling, it's because I have the prospects of an Andrew Cuomo race against George Pataki in my mind. It should be a great race, if it happens.

WOODRUFF: Now, are you or the rest of the New York press corps surprised at his announcement last night?

DICKER: We knew it was coming. What was surprising, Judy, and I was down there last night in Manhattan at Ken Coal's (ph) event. What was surprising about it was the boldness of it, the unequivocal nature of it. Most people had expected Andrew Cuomo to say he was forming a committee to explore the possibility of running. Instead, he said I am running, and the announcement overshadows an announcement coming this Thursday from the other leading Democratic potential candidate in New York, the state comptroller Carl McCall. He has a big event to announce his plans to run on Thursday, as I said.

WOODRUFF: Is it smart for Cuomo to do this?

DICKER: Oh, yes. I mean, it was very smart. One of the raps against his father, Governor Cuomo, was that was he was sort of the "Hamlet on the Hudson." He was indecisive. Here was bold Andrew Cuomo saying I'm running and it's had the effect of really overshadowing a little bit the announcement coming Thursday from his likely rival.

WOODRUFF: Why does it overshadowing that?

DICKER: Well, because it wasn't expected, number one. Number two, the timing was clearly designed to have an impact. It just came three days or four days before this other announcement was coming. Andrew Cuomo could have waited. He could have waited weeks. He could have set up a committee first after he made an announcement before his legal campaign committee was established, and he did that later today.

WOODRUFF: And what are the polls showing on the Democratic side?

DICKER: Well, a pretty tight race. But interestingly enough, since Andrew Cuomo hasn't been in New York for about eight years, the polls show that amongst Democrats, Andrew Cuomo has a slight lead over Carl McCall. That may be because of the Cuomo name and then in head- to-heads against Governor Pataki, should Pataki run again, Pataki is ahead...

(CROSSTALK)

WOODRUFF: Fred Dicker, we're going to interrupt, and I apologize about that, and go back to the United States Senate. Actually, to the Senate Judiciary Committee. They're about to vote on the nomination of Ashcroft to be attorney general.

UNIDENTIFIED FEMALE: Mr. Kyl?

SEN. JON KYL (R), ARIZONA: Aye.

UNIDENTIFIED FEMALE: Mr. DeWine.

SEN. MIKE DEWINE (R), OHIO: Aye.

UNIDENTIFIED FEMALE: Mr. Sessions.

SEN. JEFF SESSIONS (R), ALABAMA: Aye.

UNIDENTIFIED FEMALE: Mr. Brownback.

SEN. SAM BROWNBACK (R), KANSAS: Aye.

UNIDENTIFIED FEMALE: Mr. McConnell. SEN. MITCH MCCONNELL (R), KENTUCKY: Aye.

UNIDENTIFIED FEMALE: Mr. Leahy.

SEN. PATRICK LEAHY (D), VERMONT: No.

UNIDENTIFIED FEMALE: Mr. Kennedy?

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: No.

UNIDENTIFIED FEMALE: Mr. Biden.

LEAHY: No, by proxy.

UNIDENTIFIED FEMALE: Mr. Kohl.

SEN. HERBERT KOHL (D), WISCONSIN: No.

UNIDENTIFIED FEMALE: Mrs. Feinstein.

LEAHY: No, by proxy.

UNIDENTIFIED FEMALE: Mr. Feingold.

SEN. RUSSELL FEINGOLD (D), WISCONSIN: No.

UNIDENTIFIED FEMALE: Mr. Schumer.

SCHUMER: No.

UNIDENTIFIED FEMALE: Mr. Durbin.

SEN. RICHARD DURBIN (D), ILLINOIS: No.

UNIDENTIFIED FEMALE: Ms. Cantwell.

SEN. MARIA CANTWELL (D), WASHINGTON: No.

UNIDENTIFIED FEMALE: Mr. Chairman.

HATCH: Aye.

UNIDENTIFIED FEMALE: Mr. Chairman, the votes are 10 yeas, eight nays.

HATCH: The nomination is reported to the floor and I'm not sure whether we'll have debate tonight, but we certainly will have it tomorrow. We welcome all of you to come and make your points on the floor and we're hopeful that we can vote before the end of tomorrow evening.

And I would like the cooperation of the committee and both sides to be able to do that. With that, we'll recess until further notice.

WOODRUFF: So, there you have it. John Ashcroft has jumped one hurdle on his way to becoming the attorney general of the United States. Senate Judiciary Committee just voting 10 yes, eight no to confirm President Bush's choice.

CNN's John Karl has been covering the battle over this nomination. Jonathan, only one Democrat voting for.

KARL: Well, in fact, Judy, the Democrats had tried very hard to get all Democrats to vote against Ashcroft. The lone standout here, of course, Russ Feingold of Wisconsin. Russ Feingold got a visit earlier today from Senator Kennedy. Kennedy making one last pitch to Feingold to vote against this nomination.

They spoke for about 20 minutes. Kennedy making it very clear that he believes that John Ashcroft stands against so much of what the Democratic Party stands against for and would be a threat as attorney general, but Russ Feingold wasn't buying it. Russ Feingold, what's so interesting about this Judy, is he really is one of the most liberal members of the Senate. He's somebody who adamantly opposes the death penalty, putting him to left even of many of his Democratic colleagues.

But for the second time in his career, standing out there on a very critical issue for Democratic interest groups, and saying, no, he's not going with his team. He's not going with his party. He is going to vote his own way and vote with the Republicans. The first time, you remember, was during the Senate impeachment trial when he was the lone Democratic to come out and vote in favor of calling witnesses to testify in that trial.

WOODRUFF: So, John, just quickly to look ahead, now that this is out of committee, we heard Senator Hatch say it goes to the floor tonight, tomorrow? What are the expectations?

KARL: Well, the Republicans are working very hard to try to get a vote on this this week so that finally President Bush will have his attorney general. But the Democrats are making no such guarantees. Lott has been not able to come to an agreement with Daschle on this about how much time the debate will take place.

So, Lott's intention, and we'll see if this happens now, Lott's intention was to begin debate immediately on the floor of the U.S. Senate on the Ashcroft nomination, have that debate continue tomorrow, and Lott was saying, if need be, have the debate go right through the night tomorrow night, positioning it for a vote on Thursday. But again, no agreement from the Democrats yet on that.

The expectation is that we will have someone -- we will have a vote by Thursday. But there is no guarantee of that and, of course, the Republicans are very anxious to get out of town because they are all going on a retreat beginning Thursday afternoon down in Williamsburg, Pennsylvania. So, the vote has to happen on Thursday if it's to happen this week.

WOODRUFF: All right, Jonathan Karl at the Senate Judiciary Committee. Thanks very much.

And now our apologies to Fred Dickers from "The New York Post." Fred, are you back with us? DICKER: I am, Judy. Thank you.

WOODRUFF: And we're sorry about cutting away. I do want to come back to you for two more two questions. We were talking, of course, about Andrew Cuomo announcing last night that he is going to run for the Democratic nomination for governor of the state of New York.

What about Pataki? Are you assuming that he is going to run for a third term as a Republican?

DICKER: I think most political figures in New York and journalists think he will run. I'm in the minority. I think there's a good chance he won't run. He says that he's planning to run. I think that that's true. Every indication is he's putting everything in place, but I think he won't make up his mind until the end of the year.

They'll so some hard-headed assessment of the polls, of his chances of winning reelection. Right now, it doesn't look too good for a statewide Republican. He's the last one standing, whether it was Rick Lazio or Al D'Amato or Dennis Vacco, a number of statewide Republicans have gone down, and Republicans have had other setbacks in New York as well.

WOODRUFF: And Fred, finally, a question about your newest United States senator, Hillary Clinton. What is the fallout at this point on the pardons, No. 1, that her husband granted in his last day in office? Among them, the fugitive financier Marc Rich, also the four Hasidic Jewish individuals, and separately from that the $190,000 worth of furniture and other items? What is -- what is her -- has she been hurt by all of this?

DICKER: She's being hammered, and a number of leading Democrats, including the Democratic attorney general of New York, Eliot Spitzer, have expressed strong objections to the pardon of Marc Rich. Others are very concerned about those four Hasidim from Rockland County, a community that voted overwhelmingly for her in the Senate race. It looks like a quid pro quo.

But bottom line is she has six years. This will be forgotten over time. She's hurt in the short run. A lot of other Democrats are embarrassed by this. Last night, Andrew Cuomo had to answer questions about it and say, it didn't look good, but he didn't have enough facts.

But the bottom, as I say, though, Judy, is that she'll be fine unless other things like this come along. It's going to be a long time before she has to run for re-election. This will be forgotten.

WOODRUFF: All right. Fred Dicker with "The New York Post," thanks very much.

DICKER: Thank you.

WOODRUFF: Appreciate it. And when we come back, we're going to talk with Senator Mitch McConnell about the Ashcroft vote and electoral reform across the country. We'll be right back.

(COMMERCIAL BREAK)

WOODRUFF: Just a few moments ago, we saw a sharply divided Senate Judiciary Committee split, but vote out the nomination of John Ashcroft to be President Bush's attorney general. Joining us now, a senator who's a member of the Judiciary Committee, Senator Mitch McConnell. We want to talk to you about that, senator, about the Ashcroft vote, but also about an effort you and some Democrats are working together on, and that is election reform.

But first, let me ask you about Ashcroft. The committee was divided: What do you think is going to happen on the Senate floor?

SEN. MITCH MCCONNELL (D), KENTUCKY: Well, the committee was divided, but Senator Feingold supported John Ashcroft. I think that's a good sign. John's going to have from five to 15 Democratic votes on the floor, and hopefully we can wrap this up this week and we'll have a new attorney general.

WOODRUFF: How many votes do you think ultimately Senator Ashcroft will have for himself?

MCCONNELL: Oh, gosh. I would say from 55 to 65 would be in the range I would predict, Judy.

WOODRUFF: Is there a lesson from all of this for the new president, do you believe?

MCCONNELL: Gosh, if there's any lesson, I think the president made it clear that he wanted a conservative in the office of attorney general of the United States. And John Ashcroft is certainly a conservative and a man of great integrity. I think it was a wise selection.

I think the president knew it would be somewhat controversial, but being president from time to time is controversial, particularly when you stand up for those things you believe in.

WOODRUFF: Senator, tell us about this election reform legislation that you are one of the lead sponsors of.

MCCONNELL: Yes, I am the lead sponsor, and Senator Torricelli is the lead co-sponsor. And basically, what we're saying here is that we don't another election in America in which we are steeped in the nuances of hanging chads, pregnant chads and dimpled chads. What we propose to do is to set up a nationwide commission, presidentially appointed -- two Democrats and two Republicans -- that will be the repository of the latest information, Judy, on the best way to conduct an election. And in addition to that, it will provide funds -- some of them matching, some of them just outright grants -- where there are areas that are too poor to buy the machines so we can upgrade the business of voting in this country so that election day itself goes in a much smoother way in the future.

WOODRUFF: As I understand it, senator, the Federal Elections Commission has estimated that it could cost as much as $9 billion -- a very rough figure -- to update, upgrade the nation's election equipment. What you're proposing is really a drop in the bucket compared to that. How do you -- how do you -- how do the two meet?

MCCONNELL: Well, we don't know what it's going to cost, frankly, and we're going to have hearings beginning in February to try to get a better handle on just what might be required. But this is an election issue that the American public is interested in. We think it's worth spending some money. Maybe we'll end up spending more than we anticipate to try to encourage localities to employ the most modern techniques to ensure that everyone's vote is counted.

WOODRUFF: Let me ask you about another piece of election reform legislation being introduced by two of your colleagues -- Senator Brownback, Senator Schumer. One of the arguments they're making is that their bill is preferable because it does not require the states to implement one specific reform -- in other words, that your bill has more a national mandate to it. How do you respond to that?

MCCONNELL: Well, there is no mandate in our bill. We do have a national commission, but we're not going to take over localities, and we're interested in taking a look at Senator Brownback and Senator Schumer's proposal. They'll be testifying before our rules committee on their bill, and I'm sure they have some good ideas that might be well be incorporated, Judy, in what we finally report out of the Rules Committee.

WOODRUFF: How does all of this, senator, mesh with campaign finance reform?

MCCONNELL: Well, it's an entirely separate subject, but it probably, you know, since we've got two weeks to debate campaign finance reform, floor time scheduled, it wouldn't surprise me if this issue does come up in the context of that, even though they're different issues. As you know, in the Senate, we;re frequently dealing with different issue on the same bill.

WOODRUFF: Are you concerned that Senator McCain is building support for his proposal? I mean, he's out around the country campaigning for it in the states of senators up for re-election.

MCCONNELL: Right. Well, Senator McCain is certainly enthusiastically behind the McCain-Feingold bill, as he has been for years. There are some of us who feel that that's a flawed way to go. But we're going to have this debate. And it's important to remember we have a new administration now. I think the president will insist on a bill that's fair to both sides and a bill that's constitutional. So I think we should have a full-ranging debate on this.

This is what Senator McCain has asked for, for years. I think it's a good idea this year as well. It should be a stimulating and interesting debate. It'll be educational for all of us, including you guys in the press.

WOODRUFF: Well, I'm sure we could stand with a lot of -- a lot of educating. MCCONNELL: Yes.

WOODRUFF: One quick last question -- do you think, senator, that we could end up this year with a ban on soft money?

MCCONNELL: Gosh, I don't know, Judy. It'll depend on what the bill looks like. You know, it will have to be fair and balanced to both sides, and it will have to be constitutional. But we're going to have a two-week debate and an opportunity to write that bill on the floor of the Senate, and we'll see what it looks like at the end.

WOODRUFF: All right. Senate Mitch McConnell, thank you again.

MCCONNELL: Thank you, Judy.

WOODRUFF: We appreciate you joining us.

The Israeli prime minister, Ehud Barak, insists the outcome of next week's election is not a done deal. But if the polls there are accurate, he is having a hard time convincing voters that he should be re-elected.

CNN's Jerusalem bureau chief Mike Hanna reports now on the election countdown and the continued violence leading up to the vote.

(BEGIN VIDEOTAPE)

HANNA (voice-over): In the midst of the Israeli election campaign, the deaths continue. In Gaza, the funeral of Mohammad Majed Abu-Mussa (ph). The 21-year-old was shot by Israeli forces Monday. The Israeli defense force says he was aiming a gun. Palestinian officials say he was carrying concrete blocks to renovate his home.

Israelis continue to die in the conflict as well. Here the funeral of Arieh Hershkovitz (ph). The 55-year-old was shot and killed by occupants of a passing car while driving on the road between Jerusalem and the West Bank town of Ramallah.

The ongoing deaths pointed to by critics of Ehud Barak as evidence the incumbent Israeli prime minister is incapable of ending the violence. The latest opinion poll indicates the majority of Israelis already see Ariel Sharon as the next prime minister. It shows the opposition Likud Party leader 20 percentage points ahead of Ehud Barak with less than a week to go before the election.

The Israeli media is openly speculating about the nature of the government Sharon will form, and on Israeli television the Egyptian president is asked how he would deal with the right-wing Likud Party leader.

HOSNI MUBARAK, PRESIDENT OF EGYPT (through translator): If he turns to me in the interest of mutual stability, so welcome. If he requests a meeting for the sake of a meeting, I don't have time to waste.

HANNA: An immediate response from a Sharon spokesman. RA'ANAM GISSIN, SENIOR SHARON ADVISER: He regrets very much that the current president of Egypt, Mubarak, finds it necessary to make such statements, because between nations he believes relations have to be -- particularly nations that signed a peace treaty -- relations have to be of open dialogue.

HANNA: Despite some talking as if he's already lost the election, Ehud Barak maintains he still has a chance of winning.

EHUD BARAK, PRIME MINISTER OF ISRAEL: The public will have to wake up, to realize that it's not about the two beauties, myself and Sharon, but about the fate of the people of Israel: that we are just means to implement certain policies.

HANNA: But all indications are that time has run out on a man who 18 months ago took over the reins of government with fulsome promises about the future.

(on camera): Then Ehud Barak pledged to bring about both peace and stability. Many Israelis, as well as Palestinians, insist he has achieved neither.

Mike Hanna, CNN, Jerusalem.

(END VIDEOTAPE)

WOODRUFF: For complete election coverage from Israel, you can stay with INSIDE POLITICS. Our senior political analyst, Bill Schneider, will join us live from Jerusalem. That's beginning on Thursday at 5:00 p.m. Eastern.

Up next, politics and office decor: how President Bush is putting a Republican touch on his new office.

(COMMERCIAL BREAK)

WOODRUFF: In his first days in office, President Bush has tried to emphasize matters of substance. But in the White House, style also is an issue.

Here's an inside look at the redesign of the Oval Office for the Bush era.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP, "THE LATE SHOW WITH DAVID LETTERMAN")

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Give the Oval Office one heck of a scrubbing.

(LAUGHTER)

(APPLAUSE)

(END VIDEO CLIP) WOODRUFF (voice-over): George W. Bush has done that, and more. Gone are the candy-striped couches and the royal blue rug. In its place, a $50,000 terra-cotta and sage green rug originally commissioned for Ronald Reagan. Busts of Democratic presidents Harry Truman and Franklin Delano Roosevelt have been sent back to storage; Republican Dwight Eisenhower has been dusted off.

On the shelves, Theodore Roosevelt's collected works.

One holdover from the Clinton years: the desk, the same one used by John F. Kennedy -- a gesture appreciated by Kennedy's brother.

SEN. EDWARD "TED" KENNEDY (D), MASSACHUSETTS: It's got, of course, a wonderful New England flair to it because it's from an old whaling ship that got caught in the ice and then made into a desk by Queen Victoria and given to an American president, and President Kennedy found it. And now it's being used. It's got -- and President Bush obviously has New England roots as well as Texas roots.

WOODRUFF: Bush's office has a few personal touches: family photographs, including one of Bush's grandfather, the late Senator Prescott Bush of Connecticut. And pictures of a line of family dogs, from Millie down to Spot.

For inspiration, a painting that hung in the governor's office in Texas and a hymn: both titled "A Charge to Keep." That, of course, is also the title of George W. Bush's autobiography. In it, he describes the painting's meaning for himself and his staff: "a horseman determinedly charging up what appears to be a steep and rough trail. This is us."

(END VIDEOTAPE)

WOODRUFF: The Bush White House has yet to disclose the price tag for its Oval Office makeover, but it is likely to cost, we are told, more than the $100,000 allotted by Congress for new presidents to redecorate. The rest of the money will come from private donations.

There is even more INSIDE POLITICS ahead in the next half hour. More on the economy and the Bush administration, plus the man behind the president's catchphrase of "compassionate conservative." Those stories and much more when INSIDE POLITICS continues.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to INSIDE POLITICS. Well, John Ashcroft's much-debated nomination to be attorney general now is in the hands of the full Senate. This after a 10-8 vote by the Senate Judiciary Committee just a short while.

Let's go to Capitol Hill and to CNN's Jonathan Karl -- Jonathan.

KARL: Well, that's right, Judy. The only Democrat on that committee to cross party lines and vote in favor John Ashcroft was Democrat Russ Feingold of Wisconsin. Now, what happens is the Ashcroft nomination goes right to the floor of the Senate where he is expected to win confirmation.

There are already at least a handful of Democrats who have announced they will vote in favor of him. But the Democrats that are against him are looking for as many votes against him as possible, and hoping to surpass the high-water mark of the Ed Meese nomination back in 1985. Thirty-one Democrats voted against Meese back then. Democrats now are hoping for more than that against Ashcroft.

Judy, one thing to look for with this final vote is look for potential presidential contenders on the Democratic side of the aisle. The conventional wisdom up here on Capitol Hill is that anybody who is seriously thinking about running for president as a Democrat will have to vote against the Ashcroft nomination.

So be looking for names like Evan Bayh, who actually has already said he'll vote against. John Kerry, also against, and then others like John Edwards and also Joe Lieberman. So, take a look for those votes as well. But again, as it goes to the floor of the Senate for debate, we're expecting a vote by the end of the week by Thursday, and we'll be looking very closely at some of those potential future presidential candidates and how they'll vote.

WOODRUFF: Jonathan, we just heard Senator Mitch McConnell predicting how many votes he thinks Ashcroft will get. What are you hearing up there?

KARL: Well, McConnell's a very good vote counter, and that's exactly what I'm hearing. He said that anywhere between 55 votes to 65 votes in favor of Ashcroft. Republicans up here are generally pretty confident that they will get at least 60 votes in favor. And again, Democrats are confident that they will get more than that 31 votes that voted against Ed Meese. So, you're essentially looking anywhere from 55 to 65 votes in favor of Ashcroft. Either way, enough for him to become the attorney general.

WOODRUFF: All right, Jonathan Karl at the Capitol. Thanks again, John.

Earlier today, President Bush prodded the Senate to complete the process of confirming his Cabinet choices. But, Mr. Bush also focused to a great degree on the economy. A dramatic drop in consumer confidence, and the expectation of another interest rate cut by the Federal Reserve tomorrow opened the door for Mr. Bush to make another pitch for his tax cut proposal.

(BEGIN VIDEO CLIP)

BUSH: This tax cut will give the biggest percentage reductions to people who struggle to get into the middle class, and American families who struggle to stay there. I believe in leaving more dollars with the people who earn them, and so does Secretary O'Neill. And I'm proud that those dollars will soon bear the signature of Secretary Paul O'Neill.

(END VIDEO CLIP) WOODRUFF: Mr. Bush made those remarks at the ceremonial swearing in of his treasury secretary, Paul O'Neill. On the matter of tax cuts, the president is no longer insisting that his plan be considered as one big package.

Our senior White House correspondent John King joins us now. John, tell us why is the president giving the green light, if you will, to breaking up the plan?

KING: Well, Judy, because all tax bills must originate in the House. That is the law of the land, and Speaker Dennis Hastert told the president he believes he can be much more effective getting it through the House as soon as possible if you break it down.

That's because of history. There is a bipartisan consensus, enough Democratic votes for issues like eliminating the so-called marriage penalty, for eliminating estate taxes. Enough Democrats already on record to vote for those proposal, so significant today that the president decided to yield strategically to the House leadership.

But also significant that he asked them that if they break his plan up, and the expectation is now that they will, that they do the first thing first is reduce rates across the board. That would allow the president to say he is keeping in line with his biggest campaign promise.

WOODRUFF: John, how urgent is the president saying this is, particularly given the fact that people on the Hill, Republicans are saying it may be June-July, before this legislation gets dealt with?

KING: Well, an interesting change of strategy there over the months. Remember, during the campaign, then-Governor Bush said basically a Republican argument that it's just a matter of fairness. We have a surplus. We should give the money back to the American people and cut taxes.

Then as the evidence came in that the economy was slowing, he made the case that this was urgent because you needed to get that money into the economy, to prime the economy with a tax cut. Now he's essentially splitting the difference because he has been told by the congressional leadership it will probably be July 4th before the big tax cut, the consolidated tax cut bill makes its way to the White House.

So, as he swore in Paul O'Neill for treasury secretary today, on the one hand, he said let's cut tax rates across-the-board, working class Americans could use. On the other hand he said, hey, the government has a big surplus. We shouldn't keep that money here in Washington. We should give it back to the American people. So, now it's a little bit of both as he tries to build momentum, and clearly the White House believes it has the momentum right now.

WOODRUFF: And finally, John, to change the subject, what about the man who was president until about 10 days ago? Word that he may play a role at this weekend's meeting of the Democratic National Committee?

KING: Well, former President Clinton had hoped to come to at least one of the pre-parties for this weekend's Democratic National Committee. The former president, remember, played a key role in helping his long-time fund-raiser Terry McAuliffe amass the support that Mr. McAuliffe now believes will make him the next DNC chairman.

Mr. Clinton had planned to come to a big Friday night party Mr. McAuliffe is throwing. We're now told by sources that the president will not attend and will not make any appearances at this weekend's DNC's festivities. In part because he believes he would now be a distraction because of all the controversy about the Marc Rich pardon and other pardons Mr. Clinton gave in his final days in office, the controversy over the expensive gifts the Clintons took as they left.

The first lady will have a role. We're told former Vice President Gore may speak at that party Friday night. But do not look for President Clinton now to show up this weekend because of all the debate over his final day in office.

WOODRUFF: All right, John King covering both presidents, the one who just left, and the new one. Thanks a lot.

Well, today, the new president, Bush sent Congress his proposal to allow faith-based organizations to compete for federal funds. And he went to a Washington family and child support center to promote the plan, which has generated some controversy. Critics are concerned, they say, that it blurs the separation of church and state. President Bush says that that is not the case. He portrays his plan as an example of his new brand of compassionate conservatism.

We are joined now by a man who some have dubbed as Mr. Bush's compassionate conservative guru. You are Marvin Olasky, professor of journalism at the University of Texas; also author of the new book "Renewing American Compassion."

Thank you for being with us.

PROF. MARVIN OLASKY, UNIVERSITY OF TEXAS: Good to be with you.

WOODRUFF: Are the you the guru of this whole theme?

OLASKY: I don't feel much like a guru. I don't have my robes or beads or anything like that. But I have been involved as a historian and then working with the Acton Institute to develop some of these plans and think through some of the implications.

WOODRUFF: And you've been talking about this with now President Bush for some years; is that right?

OLASKY: Right, yes. We started talking about this in 1993. This is something that's very near and dear to his heart. I think he really has the understanding that people can change and probably because he himself went through a change in 1986.

WOODRUFF: In a nutshell, Professor Olasky, what is it the president wants to do with it this?

OLASKY: Well, three things. Number one, get rid some of the regulations that just harass religious organizations. I have an article in the magazine I got "World" this week about a Navy base in California that's been closed for a few years. There's a homeless shelter, an Orange County rescue mission that is evangelically based wants to use it. They're just a lot of complications in the thing which really aren't necessary.

So, just ways to speed up the things to get shelter for homeless people. That's number one, getting some of the regulations out of the way. Number two is tax policy. Right now, about 30 percent of the American people itemize their taxes, and they're able to get the benefit of the charitable deduction, a 15 percent or 28 percent or whatever. The other 70 percent don't get any of that.

Why not be a small "d" democrat and make it available to all people by allowing people to take the standard deduction, but then, if they do contribute to a religious organization, a health organization, education, whatever, allow them to get a charitable deduction also. That's the second part.

Neither of those two, I think, is going to be -- I hope they're not going to be hugely controversial. It's the third element that's the controversial part, and this is the question of treating religious organizations the same way you treat nonreligious organizations. You look at the effectiveness of the program to help people out of poverty or fight alcoholism or drug addiction, and if it works, then the government can give it a grant. If it doesn't, don't.

WOODRUFF: What do you say to those critics, some of them with the ACLU, some with other organizations saying, for example, this so- called merger. They're saying it's a merger of church and state, what this would amount to, represents a terrible reversal of what this country has stood for since its founding?

OLASKY: Well, first of all, there's obviously a difference of interpretation of the First Amendment. The First Amendment says the Congress shall not establish any religion. That means giving preference to a particular religion.

The founders, when they wrote the First Amendment in 1789, were very concerned about what had happened in colonial days, where the Anglican Church was established by the British as the official church, given preferred status. You had to pay money to it whether you believed in it or not.

That's what they're trying to avoid. But they would have been utterly chagrined by the situation now, where in many ways, secularism or to put it bluntly, atheism has been enshrined as the preferred way of looking at things, and religious programs just are not allowed. They would have thought that's crazy.

WOODRUFF: What about another argument they're making, Professor Olasky, the ACLU in particular saying this would allow federal money, taxpayer dollars to go to religious organizations which are exempt from the civil rights laws?

OLASKY: Well, one of the proposals that I think Congress should be looking at is to not give funding to these organizations, religious organizations, for the hiring of staff. In other words, let them be involved in that themselves and let them make their own decisions. So you would not have federal money going to those types of programs that could potentially be...

WOODRUFF: So, you're saying that's a potential issue?

OLASKY: Oh, that is an issue. There's an issue of ways to protect the integrity of religious organizations. That's very important. We want to protect the integrity of government. We also want to make sure that the religious organizations, in the process of growing and being able to serve people better, are uncorrupted. That has happened quite frequently, and we have to find ways in this legislative process over the next few months to forestall that.

WOODRUFF: There's one other criticism that I want to ask you about. This came from Barry Lynn with the Americans United for Separation of Church and State. You're familiar with him. In his words, he said this is a political ploy to gain support from African- American voters which, as we know, voted overwhelmingly for Al Gore?

OLASKY: Well, you can never say anything about Washington or the White House in particular, you can't say that it's not political in some way. Certainly, if this works to help the living situations of lots black people, then maybe lots of black people or Hispanic people or Anglo people, whatever, will respond.

But it's is politics, then this isn't going to work. What's really needed here is to find a way to liberate thousands of millions of people to be able to volunteer and to be able to express their beliefs. This whole idea of compassionate conservatism rises or falls on the willingness of people to come forward not just once a year, at Thanksgiving or Christmas, pass out food, and that's a commendable thing, but all through the year.

Spending five hours. let's say, a week helping a person to get off welfare, a person ho's recently out of jail, engaging in that one- to-one compassion. Now, a lot of people in this country believe that the most effective way of helping people in that situation is to talk about God, the nature of God and how God loves us and how we're created in God's image.

And therefore, even if people have been telling a homeless man for years that he's worthless, he is worthy because he's created in God's image, and thus, there is something wonderful about him. Now, religious people want to be able to tell the homeless man in that situation that. That's useful. They've seen this changes lives. They've seen it change their own lives, and if they're told you can't do that, you can't say that, their freedom of speech is taken away and they're just not going to come forward and volunteer and this effort will fail.

WOODRUFF: But you obviously don't think that will happen? OLASKY: I don't think it will happen, but it's going to be a long, difficult process over the next few months to try to set up a system to make this work.

WOODRUFF: All right, well, Professor Marvin Olasky, we thank you very much for joining us.

OLASKY: Thank you.

WOODRUFF: Thank you. And good to meet you.

And next here on INSIDE POLITICS: Watergate revisited. Twenty- eight years after the break-in, G. Gordon Liddy tells his version of events, under oath. What he said, and why he's talking, when we return.

(COMMERCIAL BREAK)

WOODRUFF: The man known for keeping quiet during the Watergate scandal has testified for the past two days in a Maryland civil trial. G. Gordon Liddy was cross-examined today in U.S. District Court about the infamous break-in at DNC headquarters.

CNN's national correspondent Bruce Morton was in the courtroom and you joins us now to tell us a little bit about what Gordon Liddy had to say. First of all, Bruce, what's going with this case. What's this all about?

BRUCE MORTON, CNN CORRESPONDENT: Well, Ida Maxie was her nickname. Maxie Wells was a 23-year-old secretary at DNC back in 1972 when the burglary occurred and she is suing Liddy for defamation, not because of anything he believed back then was he was in charge of the burglars, but because of a new theory he has about why it happened.

WOODRUFF: And, you want to tell us about that? What's the theory?

MORTON: Well, the theory evolved after he met with a man named Len Colodny, who wrote a book called "Silent Coup" back in 1991. The theory is it wasn't about political intelligence, which we all thought it was at the time, it was about a ring of call girls and their photographs in an envelope, the ring being run out of the DNC, that one of the women in this theory again was a woman who later became Mrs. John Dean, the wife of John Dean, then the White House counsel, and that the burglary therefore was ordered by Dean, not as everybody thought way back when, by then-Attorney General John Mitchell.

WOODRUFF: So, what have you seen and heard at this trial?

MORTON: Well, what I've seen and heard is that G. Gordon Liddy not lost a step. He is every bit as convinced that he is perfectly right about everything as he ever was. Reminded that Jeb Magruder, another one of the people who was around back then, and said no, no, this was Mitchell's idea, that I would believe Magruder under oath. If Magruder told me it was noon, I'd walk outside and look up at the sky to check. And his feelings for John Dean are pretty strong, too. WOODRUFF: Bruce, if I remember correctly, you covered some of this when you were with CBS back in the 1970s. Did it bring it all back to you? What was it like there today, watching him?

(CROSSTALK)

MORTON: Liddy brings it all back. You know, the lawyer for Ms. Wells says did you ever consider assassinating or murdering John Dean? And Liddy's lawyers objected. Liddy finally was told to answer and thanked the judge. I'm so glad to be able to answer this and then said I've said publicly on more than one occasion that a round of .9 millimeter ammunition costs about $0.25, and I want to get this right, quote, "the little son of a bitch isn't worth it. I wouldn't spend the quarter it would take to buy the bullet it would kill him. I despise him."

That is vintage G. Gordon. The other side of the coin is the courtroom was half empty, and the judge broke the trial at one point so that everybody could go get at least a glimpse of the parade in honor of the Super Bowl-winning Baltimore Ravens. So, once upon a time, it brought down a president, but...

WOODRUFF: It doesn't draw that kind of crowd anymore. All right, well, we're glad you were there. Bruce Morton, thanks a lot. We appreciate it.

Just ahead: The freshman Congressman from the state of Rhode Island and his unusual path to Washington. We'll visit with a new lawmaker who has made a habit of beating the odds.

(COMMERCIAL BREAK)

WOODRUFF: As the new members of Congress get settled here in Washington, there is one new House member who faces a few extra challenges. But as Kathleen Koch reports, that's nothing new for a 36-year-old freshman from Rhode Island.

(BEGIN VIDEOTAPE)

REP. JAMES LANGEVIN (D), RHODE ISLAND: As often happens in life, it doesn't turn out the way you think it's going to. Good morning.

KATHLEEN KOCH, CNN CORRESPONDENT (voice-over): It's a lesson James Langevin learned at 16. He was enrolled in a police cadet program when an accident changed his life.

LANGEVIN: Two police officers were looking at a new weapon. They didn't realize it was loaded. The gun accidentally went off. The bullet ricocheted off a locker and went through my neck and severed my spinal cord. And I've been paralyzed ever since.

KOCH: So Langevin refocused his energy toward a different type of public service, politics, serving in the Rhode Island state legislature and as secretary of state before his landslide election to Congress. His goals, accessible voting for all Americans, universal health care, and gun control. But first, Langevin has had to break down some barriers.

LANGEVIN: They had to rip out the door frame and the door that was here to make the bathroom accessible.

KOCH: Sound advice came from his friend, Senator Max Cleland.

SEN. MAX CLELAND (D), GEORGIA: I said it's going to be tough getting around because Capitol Hill is ancient. And a lot of it is accessible but a lot of it is not.

KOCH: Several chairs were removed from the House floor to accommodate Langevin's wheelchair, and more easily accessible voting stations and a new microphone system were added. He also got a prime first floor office, not normally given to freshmen.

LANGEVIN: I was closest to the Capitol and I'd be able to get quickly from my office to the House floor in enough time.

KOCH (on camera): So you're not worried about missing votes, then?

LANGEVIN: No.

KOCH (voice-over): The 36-year-old Langevin is energetic and optimistic. He says he may be the first quadriplegic Congressman, but won't be the last.

LANGEVIN: Hopefully, we're paving the way for other people with disabilities to run for office themselves.

KOCH: Kathleen Koch for CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Now, that's inspiration.

Finally, New York Senators Hillary Clinton and Chuck Schumer were making good today on their Super Bowl bet. Since the New York Giants lost Sunday's game to Baltimore Ravens, Clinton and Schumer had to appear before reporters on Capitol Hill and recite Edgar Allen Poe's "The Raven" to the delight of Maryland's Democratic senators.

(BEGIN VIDEO CLIP)

SEN. HILLARY CLINTON (D), NEW YORK: And the raven, never flitting, still is sitting, still is sitting/On the pallid bust of Pallas just above my chamber door,/And his eyes have all the seeming of a demon that is dreaming/And the lamplight o'er him streaming throws his shadow on the floor/And my soul from out that shadow that lies floating on the floor/Shall be lifted -- nevermore.

The end.

(END VIDEO CLIP)

WOODRUFF: Maybe this is the start of a new trend.

Well, that's 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.

This programming note: Senators Pete Domenici and Jon Corzine will be discussing the state of the economy tonight on "CROSSFIRE." That's at 7:30 p.m. Eastern.

I'm Judy Woodruff. "MONEYLINE" 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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