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Capital Gang

Is the Bush Tax Cut Good Fiscal Policy?; Will Anyone Defend Clinton's Marc Rich Pardon?

Aired February 17, 2001 - 7:00 p.m. ET

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

ANNOUNCEMENT: From Washington: THE CAPITAL GANG.

MARK SHIELDS, HOST: Welcome to CAPITAL GANG; I'm Mark Shields, with a very full CAPITAL GANG: Al Hunt, Robert Novak, Kate O'Beirne and Margaret Carlson.

A leading Republican senator told President Bush his tax cut plan is still short of support for passage.

(BEGIN VIDEO CLIP)

SEN. PETE DOMENICI (R-NM), CHAIRMAN BUDGET COMMITTEE: Right now, it would appear that there are a number of senators who are undecided; and there are between 47 and 49 that are absolutely committed, and we're still working.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We got a lot work to do; I understand that.

(END VIDEO CLIP)

SHIELDS: Earlier in the week, Federal Reserve Chairman Alan Greenspan was asked by the Senate Banking Committee whether he endorsed the Bush plan.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, CHAIRMAN, FEDERAL RESERVE: Marginal tax rate reductions have always, in my mind, been the most effective way to enhance economic activity. But I was not in the Senate Budget Committee actually responding to a question which related to any particular tax recommendations that were currently in play.

(END VIDEO CLIP)

SHIELDS: Bob Novak, a week ago the Bush tax cut had an inevitable momentum about it; how is it in big trouble?

ROBERT NOVAK, "CHICAGO SUN-TIMES": Well, it would be if you had to rely on Dr. Greenspan. You know, he did his impression of the Delphic oracle where he -- on the one hand this, on the other hand that. But what -- I still think they're in pretty good shape. A lot of the wet liberal Republicans in the Senate are having meet meetings with the Democrats about having -- squishy -- having a possibility of a trigger that, as the economy gets worse you raise taxes and -- invoking the ghost of Herbert Hoover.

But by and large, I think they're in pretty good shape, and this is very important to the Republican Party. This is the most important legislation that the president has and all this other stuff is secondary, and he knows it.

They know that they can play around with little education bills, but this is the big casino.

SHIELDS: You know, it was just 10 years ago that anti-Communism, anti-welfare, get tough on crime were the rallying cries for the Republicans...

NOVAK: Tax cuts work for me.

SHIELDS: ... now we're down to the single issue -- the one unifying theme is tax cuts, Margaret.

MARGARET CARLSON, "TIME" MAGAZINE: Yes, that's all there is. I mean, you -- St. Alan of Greenspan's endorsement of the tax cut was always modified. It was never as wholehearted as the proponents of tax cuts like Mr. Novak made it out to be. He's just coming and, as they say, clarifying his remarks.

You know, what surprises me is that Bush doesn't see any political risk in this big of a tax cut tilted towards the rich. There is some risk in it that -- let's say the economy does weaken and unemployment goes up two points; it's going to be Bush's economy, it's no longer Clinton's economy, his stamp will be put on it. Now, there will still be a tax cut, it's just not going to be this particular one.

And the Democrats' tax cut now -- I think Gore proposed a $500 billion tax cut -- they're up to $750 billion. We might end up there.

KATE O'BEIRNE "NATIONAL REVIEW": Actually, there's at least one analysis showing that the economic feedback effect of Bush's tax cut, which Washington is calling a $1.6 trillion -- following the growth that would come as a result of this tax cut, it would be about $900 billion dollars, which is right where the Democrats are.

I do think momentum slowed this week for the tax cut, though, Mark, for two reasons.

SHIELDS: Because of Jefferson and Chafey (ph)?

O'BEIRNE: No -- for two reasons: the Democrats flailed around for a couple of weeks; they now have the vague outline of an alternative, which they'll use defensively -- at least there's something they can be talking about. And I think both President Bush and Paul O'Neill -- it was a mistake to throw cold water on a brushfire for even bigger tax cuts. I think that helped slow the momentum, unfortunately. SHIELDS: That's an interesting point Kate makes, Al; but they're trying to stake out -- obviously the White House is -- sort of this responsible fiscal position against the major tax cuts that they see in the offing in both committees.

AL HUNT "THE WALL STREET JOURNAL": Well, yes; and Mark, you know last week Bob Novak said, and I quote, "kids get used to it, this big tax cut's going to be enacted." Well dad, let me tell you something: Don't spend all your riches yet because you're not going to be quite as rich as you think from this thing. Margaret is right; there's going to be a big tax cut -- bigger, probably, than there should be, but it's not going to be nearly as big as some thought beforehand.

And I'll tell you, there was some bad news for it this week; Pete Domenici, I think, is dreaming when he says there are 47 or 49 firm votes for it -- only one Democrat. You've already have two Republicans who've peeled off; there's a half dozen other Republicans, if you talk to them, they don't want a tax cut that big. Snowe and Collins of Maine, Voinovich of Ohio, Specter, McCain.

I talked to Susan Collins, Bob, and this is going to break your heart -- she said, yes, I think we can have a sizable tax cut, but I don't want a top rate cut from 39.6 to 33, I want a trigger; debt relief still matters more. And you had people like George Soros (ph) and Bill Gates Sr., who understand a little bit about wealth -- they're even richer than Bob Novak -- say that if you want to do away with the estate tax it would kill charitable contributions.

NOVAK: The very rich don't care because they put it in these foundations that become left-wing anyway.

I will say two things. First place, you've covered the Ways and Means Committee, I covered the Ways and Means Committee; you know you can't predict the revenue losses from these tax bills. The idea that you can be precise on 1.6 -- there are some economists who think the loss on the -- revenue loss on the Bush proposals is only about $900 billion. Some think it's $1.2 trillion. So the senators and congressmen who talk about revenue loss -- it's silly.

Now, the other thing is, Secretary of the Treasury O'Neill had some very bad testimony, and he is a real problem because he keeps saying, will this help the economy? He says it won't hurt it. That said, and then the other thing is it's just ridiculous for him to suggest that the president would veto a tax cut that's bigger. He will not veto, and that's not the case.

O'BEIRNE: That did help slow the momentum.

You know, the big spenders in Congress like Susan Collins and Olympia Snowe, they never worry about having a trigger in place in case their spending plans wind up outstripping any kind of a surplus -- it's only for tax cuts. I really wish it were possible to lower everybody's rates unless you live in Maine; or lower everybody's rates unless you live in Rhode Island.

SHIELDS: Let me just make one point, and that is I think that a crunch did come this week. Anybody who really takes seriously President Bush's stated position on the campaign about a transition to privatization of Social Security realizes the tax cuts kills that. I mean, it's a trade-off. In other words, the money is not going to be there. There's no...

NOVAK: That's nonsense; that's absolute nonsense.

SHIELDS: Listen -- I talked, Bob -- I talked to people who have to vote on this this week and they said the trillion dollars necessary for transition costs to go to privatization of Social Security is wiped out by the tax cut, and that's the crunch they're going to have to...

NOVAK: That's absolute nonsense.

HUNT: Bob Novak cites these figures of 1.21, they're -- I think even more economists, bob, will tell you it's going to cost 2 1/2, 2.6 trillion. And let me ask this: If you say it's an economic stimulant -- if you're a Cainsian (ph), now, that's why you want this tax cut...

NOVAK: I'm not Cainsian.

HUNT: ... Well that's what you just cited a few minutes ago -- you would have a totally different kind of tax cut. You wouldn't have a tax cut that primarily rewards the wealthy; you give it to people who are going to spend it. So, therefore, you reshape it...

NOVAK: But I'm not -- wait a minute, wait a minute...

HUNT: But you say that's the case -- you were upset with Paul O'Neill because he said it's not going to do that much for the economy short-term, you know...

NOVAK: I don't think he understands...

HUNT: That's Caines, Bob.

NOVAK: I don't think he understands economics that well; and I am not a Cainsian. I don't think -- I think what you do -- I'm a supply-sider -- I think what you do is you encourage investment, that's what you need to do. And I have to say one other thing; that I think that these people who are so nervous -- so nervous about helping people who are the most productive elements of society...

HUNT: The rich.

NOVAK: They ought to change parties.

SHIELDS: They are not the most productive elements of society, you know it and I do, too. The most productive elements are nurses, teachers and cops.

The gang of five will be back with more defense spending, but not right now.

(COMMERCIAL BREAK) SHIELDS: Welcome back.

This was military week for President Bush, who promised to add $5.7 billion for military pay and housing and fewer overseas deployments.

(BEGIN VIDEO CLIP)

BUSH: You and your families are the foundation of America's military readiness. But while you're serving us well, America is not serving you well enough. Many in our military have been over-deployed and underpaid.

We'll help make the peace, but we're going to be reluctant to put troops on the grounds to keep people apart -- warring parties apart.

(END VIDEO CLIP)

SHIELDS: But the Bush administration resisted Republican congressional demands for an immediate supplemental appropriations bill to provide additional funds for the Pentagon.

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE: It seems to me a perfectly rational and logical thing for the president of the United States to do -- to engage his brain before he opens the taxpayers' wallet.

SEN. JOHN WARNER (R-VA), CHAIRMAN, ARMED SERVICES COMMITTEE: They can put together that supplemental in a very carefully prepared manner, then come to Congress and, if I may give advice to the president, say, this is what I need, not a dollar more. If you roll that thing down the Hill and make it grow, I'll veto it.

(END VIDEO CLIP)

SHIELDS: Kate, why is the Bush administration, which promised help was on the way, holding up money for defense?

O'BEIRNE: Well, during the campaign George Bush promised that pay increase at a bigger -- at a higher rate than Bill Clinton's and the housing help. And, of course, he's promised to deploy missile defense and he's made moves in that direction.

They're holding off -- they're beginning a thorough review, which I think is in order -- they're holding off for the moment on what some defense experts think should be about $5 billion to meet the critical short-term needs that the president expressed concern about during the campaign. I suspect, though, we will see it. I think we'll see it this year, and I think we'll see it under circumstances that won't permit Congress to add 12, 15 or 20 billion dollars to it, which is what they typically do when you're moving a supplemental appropriations bill.

SHIELDS: But why the delay now, Al Hunt? HUNT: Well, geez, it baffles me because I obviously didn't listen very carefully to George Bush during the campaign, because when he said he was going to provide that extra money, and also that extra R and D money, I forgot that he must have added, after we have a top- to-bottom review. I just didn't hear him say that.

I'll give you the answer. The answer is the tax cut, because Bob Novak's absolutely right: They care about that more than anything else. They care about taking care of those people more than anything else. And after the tax cut, then you can do all these other things because people won't be counting.

SHIELDS: Bob Novak, the first line of defense is the most productive and successful people in the country.

NOVAK: He has -- Al has a certain amount of truth in that. What they're concerned about is that, if you get a supplement out and they get all of your friends putting in all kinds of little tax -- spending programs into the supplemental, that the numbers start to add up, and that's a pressure against the tax cut by the people who have all these green-eyeshade economics.

But I'll tell you this: The defense-oriented members of Congress are really mad at the president on this because they want the money now. So this is a tremendous tension. I think the strategy by Vice President Cheney and others is to give this, as Kate said, later in the year; but the defense lobby, including Senator Warner, says we need the money now. So this is a real problem that they have not resolved.

SHIELDS: Margaret, they made the case during the campaign that they were short on ammunition, short on parts, short on gasoline. I mean, there was just shortages everywhere. You got to run in and really give some money -- I'll tell you this, the political momentum's going to run out if they don't do it soon.

CARLSON: And remember, the food stamps for the military, they need to be respected and given housing and pay.

And in some ways the money that's there is going to go over there in these other things. The spare parts are not going to be answered right away. But this defense lobby has to place to go. I mean, you know, Bush is their guy, they're going to give him time to study it and come around on it because, what else are they going to do?

He cannot go the whole -- do a full Reagan, which is tax cuts and defense spending because therein lies the madness of deficits. He can't do it. And there's no place -- there's no easy place to cut now. I think a lot of the waste, fraud and abuse is out of a lot; there are no welfare queens to go after. We don't have Social Security queens and kings to go after. So the money really cannot come from other places.

NOVAK: I feel like...

HUNT: I'm going to acknowledge that I don't have great sources within parts and this administration, but I was told by one member of Congress that this came as a surprise to Don Rumsfeld; that Don Rumsfeld was kind of blindsided by this. I don't know if that's true.

NOVAK: I think that's sheer nonsense.

But I'll tell you what I'm really concerned about, from your perception of it, is you don't think that they're going to increase the defense spending. They are going to increase defense spending. And all this stuff is just -- Mark, in all due respect, it's just ridiculous. You're saying, gee, where's the money coming from? They're going to have more money, it's just that there is a demand for it right now. And that's -- that is the problem.

SHIELDS: From where?

NOVAK: From the members of Congress. From the...

O'BEIRNE: And the strong defense community, frankly, and the Pentagon, who have meekly gone along with Bill Clinton's budgets, which have been insufficient offer the past number of years -- they think they need between $5 and $10 billion in the short-term, but if you send a bill like that up to Congress it will wind up being $35 billion and you'd be lucky if defense spending was 20 percent of it...

NOVAK: That's the problem.

O'BEIRNE: ... and that's the problem.

SHIELDS: Wait a minute: The Republicans control the House; the Republicans control the Senate...

O'BEIRNE: And Republicans will spend extra money on a supplemental bill...

(CROSSTALK)

SHIELDS: This the first time in 50 years that the Republicans have controlled all three branches.

NOVAK: Come on.

SHIELDS: I think at some point, you have to accept responsibility.

HUNT: But our friends are going to create the problem, Mark, according to Bob.

NOVAK: There's a third party called the appropriators, and they want to just load on.

SHIELDS: Oh, that's it,Bob -- you'll explain that to us later.

Next on CAPITAL GANG: a criminal investigation of the Marc Rich pardon.

(COMMERCIAL BREAK) SHIELDS: Welcome back.

The U.S. attorney in New York city launched a criminal investigation of President Clinton's 11th hour pardon of fugitive financier Marc Rich. At the same time, Senate hearings questioned the Justice Department's role in that pardon.

(BEGIN VIDEO CLIP)

SEN. ARLEN SPECTER (R-PA), JUDICIARY COMMITTEE: When you were told they were living abroad, you were not told that they were under indictment?

ROGER ADAMS, U.S. PARDON ATTORNEY: No, sir, I...

SPECTER: Or that they were fugitives?

ADAMS: First, I was not told they were fugitives. I learned that from the FBI.

(END VIDEO CLIP)

SHIELDS: Meanwhile, President Clinton's plans for a high-priced government-financed office in midtown Manhattan switched to an empowerment zone in Harlem. But the mayor of New York city had a prior claim on the property.

(BEGIN VIDEO CLIP)

WILLIAM J. CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I asked myself down in Florida: If I could go anyplace in New York to have an office starting today, where would I go? And immediately I thought of the empowerment zone in Harlem.

MAYOR RUDY GIULIANI, NEW YORK: If we can straighten this out, we would like to; but the city has legitimate concerns here. And for some people to say, oh, the city should just step aside, that isn't right either.

(END VIDEO CLIP)

SHIELDS: Margaret Carlson, is Bill Clinton getting a bad rep here?

CARLSON: No.

(LAUGHTER)

CARLSON: I'm afraid he deserves most of what he has gotten. Even this week former Commerce Secretary Bill Daley saying that his conduct was terrible, devastating and appalling. And that's just the words we can say on the air.

You know, saying that he was dreaming of moving to Harlem while he was on the restricted golf course in Florida -- even if it's true, he shouldn't say it because it looks so transparently false. Finally, doing it at this late date doesn't really buy him much after, you know, trying to get the penthouse at $800,000 dollars in midtown Manhattan.

And on the pardon, the fact that it's going to Mary Jo White in New York, a U.S. attorney, could be job insurance for her -- Ashcroft may not want to appoint a new U.S. attorney while she's doing this. And, in some ways, moves it is off center stage -- like Ken Starr kind of took Monica Lewinsky and buried it for a while because he was investigating it. Getting it into the legal process in New York may actually take the steam out of those hearings in Congress.

SHIELDS: Mary Jo White does serve a purpose as U.S. attorney -- democratically appointed -- doing that investigation for the White House. It kind of distances them from -- they'd like to have Clinton offstage a little bit, I think, and probably out of the Washington headlines, wouldn't they?

O'BEIRNE: I think the Democrats want Clinton offstage far more than the Republicans do. I don't see that he's doing much damage to President Bush. The comparison, of course, really benefits President Bush. And it's very difficult to pay much attention to anything Dick Gephardt and Tom Daschle are saying because their No. 1 Democrat still controls the headlines.

It's like they've lost the pulpit but they're stuck with the bully. You know, the cameras will always go to Bill Clinton. And I always thought he was transparent; many of us thought he was transparent and shared the Daley opinion long before he finally did. But, boy, without the trappings of the White House, did he ever look so transparent. He -- I'm sure he feels he could use cruise missiles right about now. He used to be able to distract everybody's attention from the trouble he got himself into; but now there he is with just his lame excuses, speaking on his own behalf. And it's really a problem for Democrats.

SHIELDS: Bob Novak, I have to ask you: I mean, for certain right-wing radio -- those of us who listen to it -- Bill Clinton is methadone. I mean, this story is, you know, they need the fix and it keeps it going, and they aren't talking up the Bush program. They aren't making the case for Bush the way you might expect them too.

NOVAK: Yes, it's a little boring on talk radio, and the people call in to talk about the subject we were talking about like estate tax and the defense supplemental -- it's not that kind of issue.

But Bill Clinton is Bill Clinton; he bring it on himself. He has this conversation with Geraldo Rivera and he starts in the whole -- that the Republicans are after him and he was blindsided. He was blindsided! He didn't know who Marc Rich was?

And, you know, I was talking to some Democrats who are trying to support him; they say it's all Jack Quinn's fault. If Jack Quinn hadn't misled him, he wouldn't have gone down that road. Well, that's a lot of nonsense, too.

But I'll tell you something, I kind of enjoy it. It's -- this town isn't the most exciting place in the world, even with a great Republican administration in there; and just to have the president talking about Harlem on his mind, that is a lot of fun.

SHIELDS: Al, one of things he did say to Geraldo Rivera -- he said, I don't have a press person -- I don't have an infrastructure. Now, if he had a press person, the first thing the press person would have said is, don't go on Geraldo Rivera.

HUNT: Proof positive. I agree with everything that Kate and Bob just said. I think the Democrats had a fleeting moment where they thought things were going to be good this week, and that's when Arlen Specter raised the possibility of impeachment again. And they forgot that one of the great love stories in this town is between Arlen Specter and any headline with his name in it. So unfortunately, that went away real, real quickly.

Margaret's absolutely right -- or Bob's absolutely right, I guess, you know, whoever said it was to blame.

CARLSON: We could both be right.

HUNT: To blame it on Jack Quinn is sort of silly. I did get a kick out of Jack Quinn this week, however, who is Marc Rich's lawyer, saying that he did talk to Beth Dezuras (ph), who's the former finance person for the DNC and close friend of Denise Rich's, but he didn't talk about any fund-raising connection. I guess he talked to her about the European rapid deployment force or something.

The pardon gets smellier and smeller; nothing is going to change that. But, Mark, it's not reviewable, and my guess is there's not...

NOVAK: I've got to say -- still say something about Specter; House Republican Impeachment Manager Lindsey Graham, a basketball fan, says that Arlen Specter is doing a makeup call; he voted for -- to -- against impeachment, now he says you're going to have another impeachment. That's a makeup call by a referee.

SHIELDS: This is not ESPN, in case you thought you were watching that -- but there is a certain degree of irony in the Republicans being shocked at the trading of money for influence. You know -- Washington, money buys access, access buys influence, and it's true in both parties and it's tragically so.

We'll return with a look back at how the CAPITAL GANG reacted to an earlier presidential pardon.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

On Christmas Eve 1992, then lame-duck President George Bush issued a pardon to former Defense Secretary Caspar Weinberger and four other officials in connection with the Iran-Contra scandal. Independent counsel Lawrence Walsh immediately announced an investigation of the former president on the grounds that he was pardoning people in a case in which he was personally involved. This was the reaction by your CAPITAL GANG on January 2, 1993.

(BEGIN VIDEO CLIP, CAPITAL GANG, JANUARY 2, 1993)

HUNT: Mark, as Cap Weinberger suggests, is this a personal vendetta against President Bush?

SHIELDS: No, it isn't Al. First of all, let's get a couple of things -- a couple of basics straight. You cannot have, on a sustained basis, a free government as long as the executive is somehow exempt from the rule of law. Now at what level, is it GS-12, GS-18, at which an executive employee of the federal government of the United States says, I'm going to do what I think is in the best interest of the country rather than what the law says?

NOVAK: The idea right now, under the constitutional powers of the president, in what was the greatest act of his presidency, he pardoned these people. And now this man, Judge Walsh, out of control with snide remarks -- well, I'm glad he's got a good lawyer -- is saying, we don't have any chance to get the people that we were persecuting, but we're going after the president of the United States.

HUNT: I thought the pardon of Weinberger was justified, despite the fact that he misled Congress.

For one thing, he was on the right side of what was, let's face it, a disgraceful...

NOVAK: What did he mislead them on?

HUNT: Let me finish, please -- a disgraceful policy. But to then give a blanket pardon to Clarridge (ph), to George (ph), to Elliott Abrams (ph) -- people who clearly lied, there wasn't any mistake in the -- they were liars.

NOVAK: Not true.

HUNT: I think that it was an unconscionable act, and all it does is pinpoint George Bush's untruthfulness about this whole issue.

(END VIDEO CLIP)

SHIELDS: Al Hunt, does the Weinberger pardon, eight years later, stand the test of time?

HUNT: Better than some of the rest of us, Mark.

Yes, I think it does. I think it was a good pardon. We shouldn't forget George Bush's -- the former George Bush's complicity and duplicity in an illegal operation, but I also welcome Bob Novak's indignation over out of control, zealous prosecutors. For a minute I thought he was talking about Ken Starr.

NOVAK: Well, I mean, obviously Ken Starr was just a pussycat compared to Lawrence Walsh. Can you imagine saying he's going to investigate the president because he issued a pardon. And now we can look back at it years later and say that was demagoguery and nonsense; there was no investigation, it was just meanness.

O'BEIRNE: It made me nostalgic about the good old days when liberals cared about the rule of law; it's been about eight years, I guess, since they cared.

I think it was a praiseworthy pardon of Caspar Weinberger. He actually is the reason why presidents should have pardon power: to correct a wrong done to an upstanding patriot like Cap Weinberger.

CARLSON: You know, it's similarly not possible for a pardon to look controversial anymore after Marc Rich, unless George Bush pardons, in advance, Sean "Puffy" Combs, there's just nothing -- there's nothing to complain about.

SHIELDS: Now, should we be investigating, Bob, by your definition, the pardon -- Dan Burton should be investigating that pardon by Bill Clinton?

NOVAK: If you think Marc Rich and Caspar Weinberger are comparable, the answer is no; they're not...

(CROSSTALK)

NOVAK: They made an investigation of the president of the United States, not that the pardoning power, yes.

SHIELDS: We're talking about investigating...

CARLSON: But it is an investigation of the president of the United States, Bob.

SHIELDS: It is an investigation of the president of the United States.

NOVAK: I guess I'm inconsistent, aren't I?

SHIELDS: The gang will be back for the second half of CAPITAL GANG, with a look at an independent Democrat from Georgia, civilians aboard the USS Greeneville, and our outrages of the week, all after a check of the hour's top news.

(COMMERCIAL BREAK)

SHIELDS: Welcome back to the second half of CAPITAL GANG. I'm Mark Shields, with Al Hunt, Robert Novak, Kate O'Beirne and Margaret Carlson.

Hi, Margaret.

Freshman Senator Zell Miller of Georgia last month broke the solid line of democratic opposition to President Bush's proposed tax cut when he cosponsored the Bush bill. A popular former governor, Miller, at age 68, was retired from politics last year when the sudden death of Republican Paul Coverdell opened a Senate seat. Senator Miller, who was overwhelmingly elected in November, is our news personality of the week, and Al Hunt visited with him in his Senate office.

(BEGIN VIDEOTAPE)

HUNT: Senator Miller, you stunned political Washington three weeks ago when you endorsed George Bush's big $1.6 trillion tax cut. How has that affected your life in the Senate?

SEN. ZELL MILLER (D), GEORGIA: Well, it didn't surprise anybody back in Georgia. But I think it's affected it all right. I still have friends on the democratic side and I still have friends on the Republican side, and I think they all understand that I'm going to do what I think's right regardless of what party might be sponsoring it.

HUNT: You've said it's a fundamental mistake for Democrats to oppose the Bush tax cut. There are conservative Democrats like John Breaux who say they want a big tax cut, but a smaller one than the president is proposing. Is that a fundamental mistake, to try to make it smaller, too?

MILLER: Well, I think what's happening is -- they're saying those words, they're mouthing those words, that we want a tax cut -- but I think their body language is saying that we're not all that much for it. And I think that's what the voters will pick up on. And I don't want the Democratic Party to have the reputation of being against tax cuts.

HUNT: Chairman Alan Greenspan of the Federal Reserve gave a green light to tax cuts a few weeks ago, but he also said that in the out years, in later years, that those tax cuts should be conditioned on the surplus actually materializing. Is that a good or a bad idea?

MILLER: Again, I would hate to argue with Chairman Greenspan on what's a good idea as far as the monetary policy's concerned; but I think that if we don't give these tax cuts -- if we don't carve out $1.6 trillion as a tax cut in the budget, I know what's going to happen to it: The Congress is going to spend it. They're going to spend it from both sides of the aisle. The thing that shocked me the most when I came to Washington last fall was how Democrats and Republicans alike gobbled up that surplus.

HUNT: Some people in the White House refer to you as their favorite Democrat, the moniker, "a Bush Democrat," is sometimes applied. How does that -- does that strike you as fair, accurate?

MILLER: Oh, I don't know. I'm sure that there will be things, as this administration goes along, that I will differ with them on. I differ with them on campaign finance reform. One of the first bills that I signed onto when I came to Washington was the McCain-Feingold bill. So, there'll be times that we agree, there'll be times that we disagree.

HUNT: What do we look forward to in the next couple months from Senator Zell Miller, the unpredictable Democrat?

MILLER: Oh, I'm not an unpredictable Democrat. I'm pretty predictable. I'm a person in Georgia who dealt with tax cuts; I cut taxes by $1 billion dollars in Georgia when I was governor. I want to cut taxes in Washington. And when I was cutting them in Georgia, I had all these folks telling me over and over, you can't do this; it'll bankrupt the state; it's not fair. I remember somebody telling me when I was trying to take the sales tax off groceries, well it's not fair because you're going to take the sales tax off caviar, and you're going to take it off of lobster.

(END VIDEOTAPE)

SHIELDS: Al Hunt, has Zell Miller -- an interesting populist twist there at the end -- made himself a pariah or a power broker?

HUNT: Mark; I think, probably, really neither. This is a very successful governor, a decorated ex-Marine, a really good guy, an engaging guy.

I may think he got snookered by Phil Gramm on the tax cut, but I'll tell you, he's sticking to his guns; he's not going for any of those kind of compromises. And he told me, however, that the notion that he and the Democrats are -- there are Democrats who are mad at him -- but that Tom Daschle took him to the woodshed is nonsense; they have a very good relationship. And the Republicans who call him a Bush Democrat will be very surprised to learn this is a very independent man.

The Senate's going to have floating coalitions. Zell Miller will be on one side sometimes and he'll be on the other side other times.

O'BEIRNE: Senator Miller was not snookered by anyone. He brings his experience to Washington at having been a governor who listened to all the class warfare claims down in Georgia. It was, I guess, called a risky scheme to cut taxes in Georgia and he did it and he worked; and as we all recognize, he's a very popular politician.

And he was here in December. Anyone who wants to claim any -- have any claim upon being fiscally responsible should look at the $560 billion in new spending over the next 10 years that Congress, on a bipartisan way, signed onto in December. And I suspected Senator Miller will watch that and realized if we do not cut taxes in the amount George Bush is talking about, all of that money will be spent.

SHIELDS: Just as a quick fact check: I mean, the hallmark of Zell Miller was not cutting taxes in Georgia, it was the Hope Scholarships. And the Hope Scholarships...

(CROSSTALK)

SHIELDS: ... Probably the most popular public education program in the country.

HUNT: His signature issue in Georgia. Everybody in Georgia identifies Zell Miller with the Hope Scholarship, absolutely.

NOVAK: In your view.

You know, the idea -- this isn't just a guy who went down to Mexico with Phil Gramm and was drugged and said, oh my God, I woke up in the morning and I'm for the tax cut. He's done a few other things; first place, he voted for John Ashcroft and he was an early -- I think he was the first Democrat to come out for John Ashcroft. Second thing is, he's for the Bush voucher plan on education. He said he was always against vouchers when he was in Georgia, but he thought it was a good plan and he wanted to support the president.

This is a different kind of Democrat than the kind we've seen. I used to see a lot of Democrats like this in the Eisenhower administration; used to see some of them in the Nixon administration. You don't see many of them anymore. It's not that he's very ideological, but he's not the mean, partisan George Mitchell-type Democrat who just pounds, pounds, pounds -- wait a minute, can I just finish -- pounds on the Republicans.

SHIELDS: You've just finished.

Go ahead, Margaret.

CARLSON: You're mean and partisan, Bob -- I don't want to go there.

Listen, he's a charming, folksy ex-governor of Georgia who's come as a freshman senator to Washington. And it's a very good way to get an interview with Al Hunt of CAPITAL GANG to be the maverick and to compete with John Breaux for that trip to the ranch and to be the go- to guy for the Republicans. He's going to float back and forth; he's not going to be a reliable Bush Democrat. He's a classic tax cutter; he's going to stick with that. But he's at least a DLC Democrat, known for the Hope Scholarship and not known for what you would like him to be known for, Bob.

SHIELDS: Just say one thing, Bob: campaign finance reform. McCain-Feingold; forget all your other Republican stuff, that's the killer for the Republicans.

Next on CAPITAL GANG: civilians on the submarine.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. It was revealed that 16 civilian guests were onboard the nuclear submarine the USS Greenville when it struck and sank a Japanese fishing vessel as it surfaced in Hawaiian waters. A civilian was at the controls, supervised by a sailor behind him.

(BEGIN VIDEO CLIP)

BUSH: What's going to be necessary is for Secretary Rumsfeld and the Defense Department to review all policy regarding civilian activity during military exercises.

(END VIDEO CLIP)

SHIELDS: CNN national correspondent Martin Savidge has been covering the story.

Martin, does the presence of the civilians add a new element to this investigation?

MARTIN SAVIDGE, CNN NATIONAL CORRESPONDENT: Well, the presence of the civilians is certainly -- would be considered hardly unusual in the investigation. But really, their presence actually clouds a larger, more frustrating question for the Navy at this point, and that is, how is it possible that a weapon as sophisticated as a nuclear submarine was unable, through it's periscope or, apparently, through its sonar array to detect a 180-foot Japanese vessel that was directly overhead?

Now, the presence of the civilians onboard is more of a public relations problem, certainly a political problem for the Navy; but it seems, at this particular point, that the civilians did not have a really active role in causing this accident. But one of the questions still looming is, was their presence -- and they were significant in number, 16 -- did they in some way distract the crew from what they were supposed to do?

But in other ways it is possible that the civilians are an additional help to the investigation because you have 16 extra pairs of eyes and ears that could hear everything that was going on leading up to the incident and after. And also, keep in mind these people are not sworn to any allegiance to the United States; they didn't take an oath to the U.S. Navy so their viewpoints could be considered as unbiased. So far they have bolstered all the reports that the Navy has given.

SHIELDS: Bob Novak, up to this point, anyway, the Navy has handled it in a miserable fashion.

NOVAK: Just terrible; one of the early briefings by a naval officer said you'll never learn the names of these civilians. He said that, flatly. And of course they were very slow in even talking about it, slow in saying they were at the controls. The whole question of crowding that many people onto a submarine, having them on the controls, even though that's not a very high-tech thing, to steer a submarine; I understand the junior sailors generally getting that duty.

But it's still, I think, too much public relations -- and it's coming home to haunt them. But the Navy, not for the first time, I think, has just made a public relations disaster out of this.

SHIELDS: Margaret Carlson.

CARLSON: Yes, the way it's leaked out has been absolutely terrible. And what we see here is that, you know, we found out it was -- there was a golf tournament and it was raising money for a memorial, and it makes the submarine look like the military's version of the Lincoln Bedroom, used for fund-raising, only it went terribly badly -- and there you have people dying for something that looks slightly like a party -- a fund-raising party.

We wouldn't have even found out about it except that a friend of Matt Lauer's was either on the submarine or knew somebody who was, and that's we found -- the Navy might never have told us that there were civilians onboard with, you know -- the one guy with his hands on the tiller.

SHIELDS: But -- go ahead, Kate.

O'BEIRNE: It's such a common practice, as you know, which most people didn't realize, for civilians to go off on short little missions like this as a community relations proposition. So in this case we might be looking at -- I can see how having civilians onboard could be a distraction for the captain and the crew. Now, this incident might be completely unrelated to the civilians being onboard, but clearly the Pentagon has got to look at that practice; it, maybe, was an accident waiting to happen.

Alternatively, it was a complete mistake leading to this tragedy, totally unrelated to the civilians. But I think that's a practice that's going to be under serious review at the Pentagon.

HUNT: I think it's going to be under serious review. I would guess, in the next week or so, that Secretary Rumsfeld will suspend this program for a while. This is a PR thing and, in many ways, it's quite benign. You've have -- it's not just submarines; you've had civilians fly planes with co-pilots, drive tanks with gunner's mates sitting beside them. But I think this is going to cause some kind of suspension.

I'm interested in what Martin says, however, because he raised some of the really interesting questions. The other interesting question is why did they lie about it in the first place, and why, when they finally -- after they hit the Japanese vessel, why did -- for 45 minutes did they not do anything and they wait for the Coast Guard to come and try to rescue these people?

SHIELDS: Martin Savidge, Al Hunt raised a central question, and I guess one of the, at least suggested answers is, one of the reasons they couldn't help the Japanese victims were that there were 16 extra bodies already on the submarine.

SAVIDGE: Well, those that were onboard -- the civilians, in the interviews they've given said that immediately they were told to go down one deck below to the mess area, and then after that they were told to go down even deeper into the vessel, and that's in the torpedo room. Clearly that was a means of getting them out of the way. The mess area is the main entry and exit of the submarine, so if they were planning to bring survivors aboard, it was indicative that they were preparing to do, possibly, that.

The sea state at the time -- it was choppy, it was wavy. Submarines are not meant to be deck vessels; they're not meant to handle people on top of their decks. They're egg-shaped, they're awkward to walk on. And even in a relatively mild sea, water comes pouring in through the hatch that they use. It is difficult, and if you have life rafts coming up against the side of the vessel, they slam against the side of that submarine. It's very hard, very difficult, very awkward.

So that's the defense that the Navy gives in not instantly rendering aid from the vessel itself, but we are told the crew was preparing to do that, if called upon.

SHIELDS: I see; because we all do remember, of course, in history that President George Bush the first, a Navy flyer, was rescued at sea by a U.S. submarine...

SAVIDGE: By some type of submarine.

SHIELDS: That's right; exactly true.

Martin, what do you look forward to? I mean, do you really feel that this is going to lead to a suspension of similar public relations efforts on the part of the service?

SAVIDGE: That's hard to be believed because it is such a valuable practice. The Navy had been the Silent Service; they had been top secret for many years, with the advent of the Cold War collapsing. Then it was seen that it needed to justify its position, especially when it came to the submarines. So the ride-along program is very valuable.

It should be pointed out that one of the greatest benefits has been to the media in the ride-along program, since we've been able to take you aboard and show you how both the surface vessels and the submarines operate and give you a great deal of insight. So it is not just, say, the joyriders that would be blocked off, but it could also mean that the media would not have access. And in times of conflict, in times of crisis, that is something we rely upon greatly.

So the Navy may back off for a little bit; it's hard to believe that they would stop it completely.

SHIELDS: It's a good point, Martin. You've hit us right where we live, with a conflict of interest on this one. We want to know, and at the same time we like that treatment that obviously the Defense Department has provided.

Martin Savidge, thanks for being with us.

The gang will be back -- the gang of five is -- with the outrage of the week.

(COMMERCIAL BREAK)

SHIELDS: Now for the "Outrage of the Week."

Virginia, a beautiful state, is often guilty of ancestor worship. They speak of General Lee and Mr. Jefferson like the two men were out on a coffee break. Sometimes Virginia is a little slow on the uptake. As an example, the Virginia state legislature has just now passed a bill that would require Virginians, when renewing their drivers' license, to pass an eye exam.

Until that becomes law, remind me, please, to stay off Virginia roads.

Bob Novak. NOVAK: Congressional Democrats have been talking a lot about bipartisanship, but how serious are they? Not very, to judge from who House Democratic Leader Dick Gephardt picked to head a new task force on voting problems. He chose Congresswoman Maxine Waters of Los Angeles. Nobody matches Ms. Waters in Republican-bashing and a passion for confrontation. To the House Democrats, bipartisanship means buy-my-partisanship.

SHIELDS: Buy-my partisanship!

Margaret Carlson.

CARLSON: Treasury Secretary Paul O'Neill, two weeks ago, complained that Democrats couldn't resist taxing those, quote, "rich, dirty S.O.B.s," popularly known as, quote, "robber barons." This Thursday "The New York Times" ran a piece on a disgraceful Alcoa factory in Mexico featuring wages of $6 a day, workers overcome by gas leaks and limits of three sheets of toilet paper per worker per day. The CEO at the time said his plants were so clean you could eat off the floor. That CEO was Paul O'Neill, whose income topped $35 million in 1999.

Fine for Mr. O'Neill, but let's stop the whining about robber barons.

SHIELDS: Kate O'Beirne.

O'BEIRNE: This past week we ignored Abraham Lincoln's birthday, and on Monday we'll, essentially, ignore George Washington's in favor of a silly, plural Presidents Day to honor the whole lot of them, including Bill Clinton. According to federal law, the third Monday in February is a holiday to celebrate the birthday of the father of our country; the day later rightly included the great emancipator. But now, what an outrage, Monday we honor the great prevaricator.

SHIELDS: Al Hunt.

HUNT: They miss him so much.

Mark, the foes of campaign financing repeatedly charge the McCain-Feingold is a bonanza for organized labor. This week the AFL- CIO, after four years of silence, raised objections to the measure, realizing that this time it might actually pass. McCain-Feingold is not a panacea, but it would severely weaken the extortion-legalized bribery collusion between vested interest and politician. That's why leaders of organized labor, as well as the leaders of the religious right and big tobacco opposed it, and that's why it should be passed.

SHIELDS: Amen.

This is Mark Shields saying goodnight for the CAPITAL GANG.

"CNN TONIGHT" is coming up next.

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