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Inside Politics

President Bush Prepares to Take His Policy Agenda Before Congress and the American People

Aired February 27, 2001 - 5:00 p.m. ET

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

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Sometimes it's hard to make those budget speeches very poetic.

(END VIDEO CLIP)

JUDY WOODRUFF, CNN ANCHOR: As President Bush prepares to wax about tax cuts before Congress, some Democratic opponents are sharpening their metaphors.

(BEGIN VIDEO CLIP)

SEN. JOE LIEBERMAN (D), CONNECTICUT: If we take the medicine President Bush is offering, I'm afraid we're going to have a bad case of pneumonia.

(END VIDEO CLIP)

BERNARD SHAW, CNN ANCHOR: Also ahead: a coffee shop stop and compromise are part of Bill Clinton's day, as he faces more pardon fallout.

WOODRUFF: And on this Mardi Gras, we explore the question: can America's economic good times still roll?

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

SHAW: Thanks very much for joining us.

The chamber will be packed with members of the House and Senate and various guests, but President Bush says he will be speaking tonight primarily to the American people. He wants them to help him persuade the sharply divided Congress that his budget package is the way to go.

Our senior White House correspondent John King is counting down to Mr. Bush's big speech -- John?

JOHN KING, SENIOR WHITE HOUSE CORRESPONDENT: Well, Bernie, obviously a very big night for the president. His first speech to a joint session of Congress. His first budget will be released tomorrow morning, and in the view of many here at White House, the first opportunity for this president to seize the spotlight and lay out his agenda in detail to the American people after a month in which he's often been forced to share the spotlight with his controversial predecessor.

(BEGIN VIDEOTAPE)

KING (voice-over): It is a defining night for the president -- a big speech he hopes redefines the debate over taxes and spending.

BUSH: And the problem we have oftentimes in America is that people will be asked a question, do you want tax relief or do you want somebody not to get their Medicare check? I'm going to be making the case that, with the right leadership, the right priorities and the right focus, that we will fund important programs and have money left over for tax relief.

KING: Mr. Bush met with Colombian President Andres Pastrana between speech rehearsals. He also called in Republican congressional leaders to give them a preview.

The speech ran 36 minutes without applause in a morning rehearsal. It is an address and the budget shaped by key Bush campaign promises: a 10-year $1.6 trillion tax cut, a $4.6 billion increase for the Department of Education, $2.8 billion more for the National Institutes of Health and $1 billion in military pay raises. Selling it is the president's challenge now.

KEN DUBERSTEIN, REPUBLICAN CONSULTANT: Look, he is very likable. The American people clearly chose on likability. We like to like our presidents. But now you have to go to the next step, which is selling your policies.

KING: Mr. Bush will propose paying off most, but not all, of the nation's long-term debt over the next 10 years. The outstanding debt will be about $3.2 trillion when the next fiscal year begins October 1st.

Mr. Bush says it makes sense to pay down two trillion of that over the next decade. Democrats say Mr. Bush wont retire all the debt, because he needs the money for his big tax cut, but the president says that's not the case.

BUSH: The American people have got to understand that we'll be paying down the debt as it comes due. But the idea of prepaying debt at a premium to the taxpayers -- makes no sense to do that.

KING: As he promised in the campaign, Mr. Bush will call for a bipartisan commission on Social Security reform. And he will put in a plug for his proposal to allow workers to invest a small portion of their Social Security payroll taxes in private investment accounts.

The question is whether a majority in the evenly divided Congress -- and the audience watching at home -- accepts Mr. Bush's case that his approach strikes the right balance. PETER HART, DEMOCRATIC POLLSTER: All of the polling that we have done suggests that you have to be able to deal with the deficit, and you have to be able to invest in such areas as education and Social Security.

So, if tax cuts are seen as something for the wealthy, he's going to be playing back to his Republican base and losing independents and Democrats.

(END VIDEOTAPE)

KING: Tonight's speech and the budget debate to follow -- not just a key test for this president, but also for his party. It has been nearly 50 years since a Republican president went before a Congress under total Republican control -- Bernie.

SHAW: John, in the minds of all those thinkers and planners on the president's staff there at the White House, in their judgment, what is the most basic thing this new president must do tonight?

KING: He wants to come across to the American people as fair and balanced, to keep his campaign pledge of being a compassionate conservative.

They know the Democrats will say, he can't pay for this, it doesn't add up, and to have the tax cut, he's cutting critical programs. The president wants to make the case to the American people tonight: don't believe that, that the only reason the Democrats want to keep all that money in Washington and not give you a tax cut is because they want to spend it -- Bernie.

SHAW: John King at the White House -- Judy?

WOODRUFF: Many congressional Democrats who had applauded wildly during presidential addresses during the past eight years may be sitting on their hands tonight.

Our Jonathan Karl has a preview, as Capitol Hill gears up for Mr. Bush's speech and the battle ahead.

(BEGIN VIDEOTAPE)

JONATHAN KARL, CNN CORRESPONDENT (voice-over): As President Bush prepares to outline his agenda before Congress, Democrats are poised to pounce.

LIEBERMAN: Harry Truman used to say, "The buck stops here." I think tonight the charm stops here.

KARL: Democrats have their sights set on the Bush budget, specifically the tax cut, and they have commissioned a private poll to help map strategy. In a memo on the poll to Democratic Party Chairman Terry McAuliffe, pollster Mark Mellman wrote, quote, "The single most compelling argument against the Bush tax plan is that 43 percent of the tax cuts go to the wealthiest 1 percent of Americans." SEN. DICK DURBIN (D), ILLINOIS: I cannot think of an easier task than to sell people on the idea of cutting their taxes. But it appears that the president is having a tough time making the sale, even though he has suggested that this is good for the economy, that it will provide additional spending power for people in America. Folks are a little skeptical.

KARL: Democrats are encouraged by polls showing stronger support for education spending and debt reduction than tax cuts, and they think Bush simply doesn't have the support to get his plan through Congress, especially because at least two Republicans in the evenly- divided Senate have expressed opposition.

And a third Republican, John McCain, isn't yet prepared to support the Bush tax cut.

SEN. JOHN MCCAIN (R), ARIZONA: I think -- at least in my case, the administration is going to have to convince me of the size of it, but I'm not as quite as concerned about the size of it as I am of the details of it, and that's why I'd like to withhold judgment until we see who really gets what and under what circumstances.

KARL: But Republicans are also encouraged, eager to welcome their first Republican president to Capitol Hill since President Bush's father was in the White House.

SEN. TRENT LOTT (R-MS), MAJORITY LEADER: There's been sort of a feeling that there's a new sheriff in town, he's doing a great job reaching out to everybody and trying to get his message across, and looking forward to working with him.

(END VIDEOTAPE)

KARL: Trent Lott predicts the margin of victory for the Bush tax plan will ultimately come from Democrats, especially those from states that voted overwhelmingly for George W. Bush in the last election.

In a recent interview today with Bloomberg News Service, Lott mentioned two Democrats specifically, Max Cleland of Georgia and Mary Landrieu of Louisiana. Both Democrats up for re-election next year in states that voted for George W. Bush.

Regarding Landrieu, Lott said specifically: "I know Louisianians, they do want a tax cut, and if she doesn't vote for it, she's going to pay a price for it."

From that senator's office, though, no word yet on how she stands on the Bush tax cut -- Judy.

WOODRUFF: Jonathan, how does that square with what we are told the Senate Budget Committee Chairman Pete Domenici told the president himself, not so many days ago, that he didn't think the votes were there to pass the tax cut?

KARL: Well, right now, the votes aren't there. You have at least two Republicans who are on record saying that they are against the tax cut, and now you just heard John McCain saying, hey, he's still not sure if he's going to vote for it.

There have also been similar concerns expressed by other moderate Republicans. So, they do not have all 50 Republicans yet, and they only have one Democrat on record supporting it. But what Lott is saying that when push comes to shove, when you get down to a vote on this, you got a bunch of Democrats, a number of Democrats, from states that are Bush states, and they're going to feel pressure, and ultimately going to vote for the tax cut.

In other words, we've got a long ways here before we finally get to a vote on this. We'll be seeing a lot of posturing, Judy, but nobody really knows right now how a vote would come down on a tax cut.

WOODRUFF: All right, John Karl, reporting from the Capitol, thanks -- Bernie.

SHAW: And once again, we take this subject to the grounds of the White House. Mary Matalin, an adviser to President Bush and Vice President Cheney -- we should note, we'll get the other side in just a moment, when Judy interviews former Clinton White House chief of staff, Leon Panetta.

Mary Matalin, President Bush says he's going to cut the rate, the level of federal spending, but isn't the wild card in this the United States Congress, the fact that this new president does not control Democrats, and it's questionable about his ability to control his fellow Republicans?

MARY MATALIN, ASSISTANT TO PRESIDENT BUSH: Well, Bernie, what he does control is a very big megaphone, and he has a very persuasive manner about him, and he also has a very good budget package.

It's reasonable, it's rational. There are increases, the budget continues to grow at a rational 4 percent, not the unsustainable 6 percent that it's grown at -- or 8 percent -- over the last couple of years, and it prioritizes and funds our national priorities -- education being the number one.

It totally protects Social Security. Every penny of Social Security is kept in their. Medicare, doubles the funding for Medicare over 10 years. There's a prescription drug program for seniors. NIH funding doubles.

It protects all of our priorities, including defense, of course, and then it pays down the debt. The maximum amount of debt that can be paid down is going to be paid down. That will be the fastest debt retirement in history, and then and only then does it get to tax relief.

So, it's a package that hasn't been spoken of in its totality until tonight, and the speech is great and the president hasn't gone out to the countryside yet to persuade his friends on both sides of the aisle to support and I think they will when America hears it in its totality.

SHAW: Well, on that point, with most polls showing most American citizens are not agitating for tax cuts, how does he create a groundswell in their favor?

MATALIN: Well, Americans are agitating for election -- I mean, for education reform, which is the number one priority. Spending has increased at the Department of Education greater than in any other department. For the reading program, the funding for that has tripled. Only after our priorities are funded, the maximum amount of debt to be available to pay down is paid, then we spend a quarter of the surplus.

It is not a budget surplus. It is a tax surplus. We give it back to the people or we don't take it in the first instant. That incentivizes productivity and incentivizes entrepreneurs. That's how we got to this prosperity that we are at in the first place, incentivizing those that create jobs and grow the economy. I think there will be a clamor for that when people can put it in its total context.

SHAW: Back to the subject of reducing federal spending, tell us precisely, precisely where will you cut spending?

MATALIN: Bernie, again, we are growing the budget at 4 percent. Everything is increasing. The national budget is increasing. Everybody wants to pick on what's being cut. What being cut are duplicative programs, obsolete programs, but the budget overall is growing at 4 percent. That is greater, in most cases, than personal income.

So, there continues to be a rate of growth that is -- will fund our priorities, but not the unsustainable rate of growth that would not just eat up the surplus if we kept growing it that rate, would have to dip into Social Security. It's a very rational, reasonable budget and will be presented by a very rational and reasonable President Bush tonight.

SHAW: Is he betting that he'll get all the tax cuts he wants?

MATALIN: He hopes that the tax cuts will comport with his values, which are that inequities need to be stripped from the code. The lowest wage earners are facing the biggest barriers to the middle class and frankly we punish success. Entrepreneurs, risk-takers, those who succeed are being punished for success.

We are disincentivizing, discouraging marriage. We are tearing down the family farms and family businesses. So, we'll have all those parts into it, the death tax, the marriage tax but it needs to strip the inequities from the tax code and we need to quit punishing success. And if those values are all there -- he understands that the Congress has to work its will on the package, but we're hoping that those values will remain intact.

SHAW: And if the members of Congress, both houses, pile up?

MATALIN: No piling on. This is not a Christmas tree. There are just as many of our friends who think that there is -- this not big enough. As the president says, some think it's too small, some think it's too big. He thinks it's just right. This tax relief plan of President Bush is just right.

SHAW: And before you leave us, how long is this battle going to go on?

MATALIN: Well, as long as it takes to get it done, Bernie, and we're going to miss you not joining with us. What, tomorrow being your last day? We'll miss you, but we know you'll be in the battle in absentia.

SHAW: And I'll be watching Judy from the sidelines. Thanks very much for joining us.

MATALIN: Thanks, Bernie, we'll miss you.

SHAW: Thank you very much -- Judy.

WOODRUFF: We're not ready for you to go. You've got another program and three-fourths to go.

Well, now, as promised, we are joined by Leon Panetta, a former chief of staff in the Clinton White House. Leon Panetta is this something that you believe can be accomplished, a $1.6 trillion tax cut over 10 years, funding the nation's priorities, as we're hearing from Mary Matalin and others, and finally paying down the debt?

LEON PANETTA, FORMER WHITE HOUSE CHIEF OF STAFF: Well, I've got serious concerns about it, Judy, and the reason is we just spent 20 years getting out of the last hole that was created when there was a promise for a bug tax cut, increased defense spending and a promise that somehow we could balance the budget and we wound up quadrupling the national debt.

I think what we're being promised now is that we can obviously increase defense, we can increase spending in a number of areas, we can have a $1.6 trillion, we can pay down the debt, and somehow we'll be fine and I just have serious concerns about whether or not those promises can be met.

WOODRUFF: But as you know, Leon Panetta, the White House is looking at projected -- official projected budget surplus in the trillions of dollars, $5.6 trillion, which they say makes all this very doable. In fact, they say that surplus number is conservative.

PANETTA: To pass any budget, it really has to be real, it has to be affordable and it has to be fair. First of all, is it real? I mean, we have a projected surplus. This is a projection over 10 years as to surplus. It's not money in the bank. As a matter of fact, two- thirds to 70 percent of the projected surplus is in the last five years.

So, it happens after 2006 to 2011 that we see that surplus. You cannot base current spending or a tax cut on those kinds of long-range projections. Secondly, we're talking about whether or not it's affordable. And the reality is we are looking at a tax cut that probably, by the time you are through, is more like $2.1 trillion. With interest on the debt and all the spending initiatives, the likelihood is we're going to blow the non-Social Security surplus.

WOODRUFF: Well, let me ask you about both of those points. Number one, the point you made most of these surpluses are in the latter half of the coming 10 years. What the president and the people around him are saying is that whether it completely materializes or not, we're never going to get there.

We as a country, as a government, is never going to get there unless spending is held down. So, this is clearly a device, if you will, they're using to hold down spending. What is wrong with that?

PANETTA: Well, it was an argument that was used in the '80s that somehow, again, we could cut taxes and all we need to do is hold down spending. But Judy, let me tell you something, if there is anything that is bipartisan in this town, it is spending. Republicans like to spend on defense, on transportation, on highways, on their favorite areas of spending, and Democrats like to spend on their favorite programs.

The reality is that you cannot hold that back, and the Gramm- Rudman -- There was a bill that was passed during the '80s called Gramm-Rudman that said if we exceed spending levels, we'll cut everything across-the-board. That trigger never worked because Republicans and Democrats said no, no, no, we can't restrain spending when it comes to this area.

WOODRUFF: Are you saying, Leon Panetta, literally there is no way to restrain spending by Congress and an administration?

PANETTA: Oh, no, I think there is a way to try to restrain spending. You put caps on discretionary spending. That's what we did in the '90 budget agreement that we put together with President Bush's father. But we also did a pay-go requirement which said if you want to cut taxes, if you want to increase entitlements, show us how you're going to pay for it. And very frankly, none of that has been presented as part of this budget.

WOODRUFF: You also made the point that the tax cut is likely to be, instead of $1.6 trillion, over $2 trillion and yet, again, the president, the people around him are saying they're not going to let anything get added to this by Congress. They want it right where it is.

PANETTA: Well, I'm basing the $2.1 based on the promises that the president made with regards to other tax credits. He said we would have additional tax credits in education, for home owners, for other areas, for health care. In addition to that, there are what are called extenders, like research and development tax credits that are going to be extended. They always are by the Congress.

In addition to that, there is what's called the alternative tax, which has to be fixed, otherwise middle income taxpayers are going to wind up paying more taxes. That's $2.1 trillion just in that. If you add the corporate tax cuts that they would like to add, and they say we're entitled to at least a third of any tax cut, you're talking about a tax cut that will be in excess of that. I commend the president. If he can hold back those forces, then believe me, he's doing one hell of a job.

WOODRUFF: Let me finally ask you, Leon Panetta, about a story with regard to former President Clinton, whom you served as White House chief of staff. Today, The Wall Street Journal" reporting that the president made a phone call to the president of CBS in order to try to get a payment dispute resolved for his friend Harry Thomason. You were quoted as saying if this happened, it would be inappropriate. Is this an abuse of presidential power, if it happened?

PANETTA: Judy, I'm sure that if you look at past presidents, the likelihood is that those kinds of calls have been made for personal friends at one time or another. But it is my view that the president of the United States ought not to engage in those kinds of private conflicts and use the office of the presidency to try to influence a settlement in one way or another. That's inappropriate, and it seems to me that presidents in the future ought to avoid that.

WOODRUFF: When you were in the White House, were you aware of any sort of intercession like this on the part of the president?

PANETTA: No, no, I wasn't, and I would discourage it, because again I just think that the president has enough to do, based on trying to implement good policy for the country. He doesn't need to get involved in private disputes.

WOODRUFF: Finally, those pardons that are still very much under investigation, the subject of controversy, Leon Panetta, have those now created a permanent tarnish on President Clinton's reputation?

PANETTA: Well, I don't know that it's permanent. Clearly it damages his legacy as president. Right now, it's damaging the Democrats' ability to try to get their message across, and very frankly, I think it's damaging President Bush's ability to use the bully pulpit. But I think ultimately once this is investigated and once we get through it, hopefully people will again look at his record as president, and weigh it with regards to the mistakes he made as well.

WOODRUFF: All right, Leon Panetta, we thank you for joining us.

PANETTA: Thank you.

WOODRUFF: Good to see you. Thank you.

And tomorrow, we will get a high-level assessment of President Bush's budget speech from none other than Vice President Dick Cheney. He'll be our guest right here on INSIDE POLITICS.

And when INSIDE POLITICS returns: the latest on the Clinton pardons controversy, including a potential deal on who gets to see the donor list for the Clinton Presidential Library.

(COMMERCIAL BREAK)

SHAW: Former President Clinton retained his hold this day on at least part of the news media spotlight. Our CNN national correspondent Eileen O'Connor reports on a potential deal related to those presidential pardons and the Clinton Presidential Library.

(BEGIN VIDEOTAPE)

QUESTION: Mr. President, are you going waive executive privilege?

EILEEN O'CONNOR, CNN CORRESPONDENT (voice-over): Sources close to former President Clinton say he desperately wants to put the controversy over his pardons to rest. These sources say he has instructed his attorney to say he will waive executive privilege for his former aides set to testify before Congress. And Mr. Clinton has decided to allow a congressional committee access to lists of donors to his presidential library.

Former aides say the president wants to prove donations to his party or his library from the ex-wife of fugitive financier Marc Rich had nothing to do with Rich's pardon.

JOE LOCKHART, FORMER WHITE HOUSE PRESS SECRETARY: He wants to answer legitimate questions from legitimate lines of inquiry, and he was not compelled to do this. He's made this decision in an attempt to get the facts out and put this all behind us.

O'CONNOR: Clinton's attorney, David Kendall, proposed allowing Congressmen Dan Burton and Henry Waxman to review the donor lists, agreeing to provide further documents pertaining to names that they found relevant. Kendall wrote that their cooperation, quote, "... should lay to rest any questions about the planned library and the Clinton presidential foundation."

Burton wants to expand the team of those examining the records and wants a final say on requesting additional documents. All this paves the way for the former president's White House counsel Beth Nolan, his deputy counsel Bruce Lindsey, and his chief of staff, John Podesta, to testify at hearings slated for Thursday.

Not testifying? Denise Rich, former DNC finance chair Beth Dozoretz, and now Marc Rich, who are all refusing to testify on the grounds of self-incrimination, citing the ongoing criminal investigation by the U.S. attorney in New York.

That investigation is presenting an out for senior Republicans, who believe, like the White House, it may be time for Congress in any case to move on.

SEN. TRENT LOTT (R-MS), MAJORITY LEADER: I think you try to find out all you can, you see if some remedial action is necessary, and you move on and let the U.S. attorney do her job.

O'CONNOR: Former Clinton aides say fueling this fire further smacks of a vendetta.

LOCKHART: I have said for weeks now that President Bush would show real leadership if he called Congressman Burton and Senator Specter down to the White House and said, we've got better things to do with our time, let's move on.

(END VIDEOTAPE)

O'CONNOR: Still, it was an outspoken Democrat, Barney Frank, who on Tuesday, citing abuses of the pardon power under Mr. Clinton, introduced a constitutional amendment that would curtail the pardoning power around the time of the change of term of the president, basically limiting it so that presidents couldn't pardon anyone a month before the elections until the new president was put into place.

But so far, curtailing presidential pardoning power is something that both parties have seemed rather reluctant to do -- Bernie.

SHAW: Eileen, let's go back to Marc Rich for a moment. Can this man be forced to testify?

O'CONNOR: Well, he could be cited for contempt of Congress. But before you get there, Bernie, what's likely to happen is that Congress would offer him immunity. And basically by citing the Fifth Amendment, invoking the Fifth Amendment, all of these people are inviting Congress to offer them immunity.

But unfortunately, any offers of immunity are on hold because Congress doesn't want to interfere with that criminal investigation in New York.

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

WOODRUFF: Well, former President Clinton was the featured speaker this afternoon at a media and entertainment conference in Manhattan. CNN's national correspondent Bob Franken heard the president's speech, and he joins us now from New York.

Hi, Bob.

BOB FRANKEN, CNN CORRESPONDENT: Hi, Judy. And when you are in New York, this is a very dangerous place to be, in the middle of a group of camera people. We're waiting for President Clinton to leave after making his speech.

When he arrived he answered no questions. Don't be surprised if he answers none as he departs, because during his speech he said, "Even though I was good at making news -- and I still am, against my wishes -- I'm going to try not to make some today." And he went on then to make a speech which had absolutely nothing to do with the entire pardons controversy.

It was a speech about media responsibility, to go beyond sensational reporting and to report on what he considered to be important issues. Now at one point, he talked about favoring cameras in the courtroom. But by his wishes, no cameras were allowed in the speech. But he didn't make any news.

The news of the day is, is that one of the co-sponsors of this event, the Credit Suisse First Boston Corporation, who is sponsoring this, along with "Variety," the daily show business magazine, Credit Suisse got out of the picture entirely. You could not see any indication that they were a co-sponsor. And sources were telling us the reason for that is there was quite a bit of controversy among many of the customers, the clients of Credit Suisse, a financial services company, that -- who were very unhappy that in fact they were sponsoring Bill Clinton.

So the sponsor, Credit Suisse, decided to take a very low profile. They were participants in this, but they just did not want it made very public.

President Clinton made a speech, as I said. We're expecting him to leave. If he is true to form, he will have nothing to say to us whatsoever about the pardons controversy -- Judy.

WOODRUFF: All right, Bob Franken, stay safe in Manhattan. Thanks very much.

Well, the pardon issue is evidently taking a toll on how New Yorkers view their new senator, Hillary Rodham Clinton. In a new Marist College survey, registered voters were asked if they believed Senator Clinton when she said she did not know her brother accepted $400,000 to help obtain presidential pardons, or when she denied knowing that her campaign treasurer assisted with some pardon applications.

Thirty percent said they believed Senator Clinton, 58 percent said they did not.

SHAW: And there is much more to come here on INSIDE POLITICS.

Straight ahead: a big-picture view of the economy. Two economists who advised former presidents join us to preview tonight's address to Congress.

Also ahead: the nation's top law enforcement agents prepare to answer questions about the FBI agent accused of betraying his country.

And later: the president, the honeymoon, and the challenge ahead. Our Candy Crowley on George W. Bush and the leadership question.

(COMMERCIAL BREAK)

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

Federal agents today discovered a tunnel under the Arizona- Mexican border containing millions of dollars worth of cocaine. The tunnel runs from a house in Nogales, about 3/4 of a mile from the border.

Officials said they recovered 198 bricks of cocaine with an estimated wholesale value of $6.5 million. It is the sixth time since 1995 that officials have found a tunnel used to smuggle drugs from Mexico to the United States. SHAW: Members of an appeals court today rebuked the trial judge who ordered the breakup of Microsoft. The chief appeals judge said the comments made to reporters by Judge Thomas Penfield Jackson, criticizing Microsoft, were out of line.

Microsoft's lawyers argued Jackson should be disqualified and his ruling thrown out. Government lawyers countered that the comments were not enough to overturn the judge's decision. The two-day hearing adjourned with no indication how soon a ruling will be made.

WOODRUFF: The Clean Air Act withstood a significant challenge today from U.S. Industry. That after the Supreme Court assured the Environmental Protection Agency that the EPA has the authority to set clean air standards.

The story now from senior Washington correspondent Charles Bierbauer.

(BEGIN VIDEOTAPE)

CHARLES BIERBAUER, CNN CORRESPONDENT (voice-over): The justices rejected the American Trucking Association claim that Congress gave the Environmental Protection Agency too much leeway to set clean air standards for soot and ozone emissions but showed too little concern that complying would cost industry $60 billion a year.

HOWARD FOX, EARTH JUSTICE: The EPA has to set these national standards that honestly tell the public how much the air has to be cleaned up in order to protect their health.

BIERBAUER: Justice Scalia, writing for a unanimous court, said the Clean Air Act "... does not delegate legislative power to the EPA in contravention of the Constitution."

Moreover, "The EPA may not consider implementation costs in setting standards."

Justice Breyer observed that Congress intended to force technology forward: "...industries will be asked to do what seems to be impossible at the present time."

ED WARREN, AMERICAN TRUCKING ASSOCIATION: We all want to reduce pollution. But the question is how to do it efficiently, how to do it effectively, how to allocate resources sensibly.

BIERBAUER: The justices did find EPA's implementation scheme to be unlawful and even senseless.

Justice Scalia: "Some areas of the country could be required to meet the new, more stringent ozone standard in, at most, the same time allowed them to meet the old standard."

Industry says the health concern over ozone levels is a balancing act.

WARREN: We're really talking about a trade-off between respiratory illness on the one hand, and added skin cancers and cataracts and the like on the other hand.

BIERBAUER: Environmentalists say it's just a question of when.

FOX: What it said was EPA had to take another look, perhaps allow more time -- But that falls far short of stopping the process dead in its tracks, which is what industry was trying to do.

BIERBAUER (on camera): The EPA is required, in any event, to review and revise its air quality standards every five years. The court's ruling gives them clear authority to do that.

Charles Bierbauer, CNN, the Supreme Court.

(END VIDEOTAPE)

SHAW: When INSIDE POLITICS returns: What does sagging consumer confidence say about the economy and the president's budget plans?

Judy will talk dollars and political sense with two former White House economic advisers.

(COMMERCIAL BREAK)

WOODRUFF: With President Bush preparing to talk tonight about how his tax cut plan will benefit Americans, new figures released today show consumers are feeling less than optimistic about the economy.

The consumer confidence index dropped for the fifth straight month to its lowest level in more than four years. Economists say the confidence drop was fueled by worries about jobs and the business climate.

In another key indicator, new home sales plummeted more than 10% in January. That was the biggest drop in seven years, despite the recent rate cuts that lowered mortgage rates.

Joining us now to talk about the economy and its effect on politics and the budget/tax cut debate: Jim Miller, former director of the Office of Management and Budget under President Reagan; and Gene Sperling, former national economic adviser to President Clinton.

Gentlemen, good to see both of you. Thank you for being here.

GENE SPERLING, FORMER NATIONAL ECONOMIC ADVISER TO PRESIDENT CLINTON: Thank you for inviting us.

WOODRUFF: Gene Sperling, given these new numbers on consumer confidence, the other numbers that are out there on the economy -- Are we more likely now to be facing a recession?

SPERLING: I don't think so. I think what most people see is that we're having a couple of quarters of fairly low growth because people have contracted -- company's, factories -- manufacturing has contracted some. But I think most people see that inventory is going down. And I think that most major forecasters think that as the inventory is being worked off, people will start buying more in the future, and that we'll see growth, perhaps over 3 percent, by the second half of the year.

I think that one -- I think one mistake President Bush...

WOODRUFF: Well, let me just ask Jim Miller.

Jim Miller, do you agree with that assessment, that we're likely not to be headed into a recession?

JIM MILLER, FORMER REAGAN OMB DIRECTOR: Well, I find myself in the unusual position of agreeing with Gene on that. I don't think we will have two successive quarters of contraction.

But I'd -- I'm not quite as optimistic as he is on the recovery. I think it's extremely important that we get this tax package and that will promote economic growth and make sure that this lull doesn't extend any further than need be.

WOODRUFF: Well, that's what I want to ask you both about. Gene Sperling, what about this 1.6 trillion over 10 years tax package the president is going to talk about tonight? What effect is that going to have on all these economic conditions?

SPERLING: I don't think people expect it to have much impact. Very little of the tax cut would even come in this year, so I think for growth, much of the impact could largely be negative, because to the degree that this tax cut and its budget -- which I think together will come close to 3 trillion when you get all the Bush spending and defense proposals in -- to the degree that this marks us turning away from a commitment to paying off our debt. I think that could have a negative impact on savings and capital formation and ultimately our long-term economic growth.

WOODRUFF: All right. I'm going to interrupt this interview for just a moment, because I'm told by our producer that John King at the White House has obtained some excerpts of the president's budget address tonight that we can actually put on the air.

John, you want to share some of that with us before we go back to this interview?

JOHN KING, CNN CORRESPONDENT: I will, Judy, quickly. The White House putting out some excerpts from the speech. No surprises here, just a little bit of the language the president will use tonight in making his case.

First and foremost, the White House says the president will call for a government that is -- quote -- "active but limited. Engaged, but not overbearing."

And in trying to sell his tax cut, the president will make the case that he will increase government spending at 4 percent. It's been on average 6 percent in the last three years. He will make a case that this money belongs -- the extra surplus money -- belongs back in the pockets of the American people.

Quote -- "Unrestrained government spending is a dangerous road to deficit, so we must take a different path," the president's speech will say.

Quote -- "The other choice is to let the American people spend their own money to meet their own needs to fund their own priorities and pay down their debts. I hope you will join me and stand firmly on the side of the people."

Those are the major excerpts released by the White House right now. Not surprising. The words they want to put out early are those that they believe will help the president make his case in his big speech tonight.

Obviously, as you've been discussing with Mr. Sperling and Mr. Miller, the biggest debate in this right now is can the president sell his tax cut plan? He will make the case to the Congress and to the American people tonight that the American people deserve some of the surplus back, and if you leave it in Washington, the Democrats will spend it.

WOODRUFF: All right, John King. Thanks very much for that.

And I want to turn around and ask Jim Miller: Part of what John King is referring to, this -- the size of these tax cuts, the president wanting to get it in there right now to get the economy going -- Many Democrats are saying what that's going to do is just what happened in the 1980s. It's going to -- instead of helping the economy, it's going to end up increasing the deficit.

MILLER: Well, let me say: Number one, we want to avoid what happened in the early 1980s where we had a tax cut but it was phased in over a longer period of time. It didn't become effective for a while, and people postponed income-producing activity to reduce tax liability, so you want to make it immediate. You want to make it retroactive, and that's what the president has done.

I think -- I disagree with Gene. I think that this tax cut will increase economic activity, give people reason to increase investment and increase economic activity down the road, and I think that the surplus will be far and away enough to -- to have this tax cut but also to have a substantial reduction on the deficit as well.

WOODRUFF: Gene Sperling, why are you so convinced that the tax cut won't help the economy soon?

SPERLING: Well, first of all, if they try to keep it anywhere near $2 trillion, very little of it's going to come in this year, so there's not much that...

WOODRUFF: They're going to make it retroactive. They would like to make it retroactive.

SPERLING: Well, you see, that's where they're trying to have it both ways. They're trying to hide the ball on the true cost of their budget.

Why? Because they know the American people have good common sense. They know that there is no long-term Social Security fix, there's no long-term Medicare fix. We're over $3 trillion in debt. So when they hear that this tax cut is over $2 trillion, they ask: Why, oh, why, after we just dug ourselves out of deficits and are starting to pay down the debt, would we make a 10-year commitment of 2- to $3 trillion?

And they know that that -- that kind of deficits and debt had a bad impact on their mortgage rates, on interest rates, and economic growth. So the American people want moderation. A moderate tax cut that still pays down the debt.

WOODRUFF: Jim Miller?

MILLER: Gene, the tax cut is $1.6 trillion over 10 years.

(LAUGHTER)

MILLER: Not two, not three. There is $2 trillion of paying down of the debt and there's about $2 trillion left over to fix Social Security, which needs to be fixed and which I understand the president will be talking about tonight.

We have to face some reality. We have overpaid revenue to the federal government. We deserve a refund. If you go down to the McDonald's store and get a Big Mac and fries and hand them a $5 bill, you expect to get some change back, and that's what the American people expect. They expect to get their change back.

WOODRUFF: Why doesn't that make sense, Gene Sperling?

SPERLING: You know what it's like when you buy a car and you hear it's, like, 399 a month, and then you find out there's taxes and there's all these different things. And soon you find out it's 650 or $700.

WOODRUFF: You're saying the administration's not leveling?

SPERLING: Oh, they're not leveling. Look what Jim just did here. 1.6 trillion -- well, everybody knows when you take the interest savings that are lost it's 1.9. Jim just called for it to be retroactive. That makes it 2.3 trillion.

What the Bush team is doing is they're playing hide the ball. They're for making it retroactive but they won't tell you how much it cost. They're for big national missile defense, but they won't tell you how much it costs.

The reason why is because they know if the American public knew how irresponsible this was, they would reject it. And what you're going to see tonight from President Bush is one large attempt to mislead people into thinking this is affordable.

WOODRUFF: Jim Miller, a very brief response. MILLER: Well, I think the numbers are on the table, and that they're conservative. In fact, they are based on so-called static scoring. If you had dynamic scoring you would show the surplus is even larger than what is forecast.

I think there's plenty of room here to do what the president wants. And to the extent that there is some constraining factor here, it will constrain the growth of government and that's good, not bad.

WOODRUFF: All right. It's great to have you both on. We want to continue this. We can't do it right now, but we'll do it in the future.

Thank you, again. Jim Miller, Gene Sperling, we appreciate it. Thank you.

Fallout from the arrest of an alleged FBI spy. Next on INSIDE POLITICS: the FBI director and others prepare to go before a Senate committee. We'll preview tomorrow's closed-door hearings on the arrest of Robert Hanssen.

(COMMERCIAL BREAK)

WOODRUFF: We have some new information now on the arrest of accused spy Robert Hanssen. CNN's Justice correspondent Kelli Arena joins us now.

Kelli, what have you learned?

KELLI ARENA, CNN JUSTICE CORRESPONDENT: Judy, we just got hold of the affidavit noting what FBI agents allegedly found in the package that Robert Hanssen dropped off under a footbridge in a Northern Virginia park. Now, the FBI contends it was meant for Hanssen's Russian contact.

The package was retrieved just as Hanssen was arrested, and inside the package was a computer diskette containing an encrypted letter. It was decrypted, and it appears that Hanssen may have known the FBI was onto him.

Let me quote from the document. It was a letter saying: "Dear Friends, I thank you for your assistance these many years. It seems, however, that my greatest utility to you has come to an end, and it is time to seclude myself from active service. Since communicating last, and one wonders if because of it I have been promoted to a higher, do- nothing senior executive job outside of regular access to information within the counterintelligence program."

He continues: "It is as if I am being isolated. Furthermore, I believe I have detected repeated bursting radio signal emanations from my vehicle." He goes on to say: "I strongly suspect you should have concerns for the integrity of your compartment concerning knowledge of my efforts on your behalf. Something has aroused the sleeping tiger."

Now, he later indicates that he would also be in contact next year, same time, same place, if circumstances improved. Judy, you should also know the Senate Intelligence Committee is holding a closed hearing tomorrow on the Hanssen matter at 2:00 p.m. Testifying before that committee will be FBI Director Louis Freeh, CIA Director George Tenet and Attorney General John Ashcroft.

(BEGIN VIDEOTAPE)

ARENA (voice-over): The 100-plus page affidavit in the Robert Hanssen case did not answer one key question: How did Hanssen allegedly spy for 15 years without getting caught? The Senate Intelligence Committee is determined to find out.

SEN. RICHARD SHELBY (R-AL), INTELLIGENCE CHAIRMAN: We're going to question a lot of things: The assignment of people to posts. What do you do with them when they get there? Is there enough surveillance? What about the computers? What kind of security do you have with the computers?

ARENA: Future hearings will focus on securing the nation's secrets overall. It's expected that Congress will propose reforms such as regularly polygraphing agents and more aggressively auditing their finances. Whether those reforms will be implemented is less clear.

For example, during the Carter administration, there were 400 recommendations made to improve counterintelligence. That number was whittled down to 77, then to 12 during the Reagan administration.

DAVID MAJOR, COUNTERINTELLIGENCE EXPERT: And one of them was that everybody should have a serious counterintelligence program. Every agency should have one, but that never quite happened.

ARENA: Major, who was in charge of implementing security reforms under Ronald Reagan, blames shifting priorities, a lack of funding, and not enough congressional oversight.

SEN. BOB GRAHAM (D-FL), INTELLIGENCE COMMITTEE: I have been self-critical of our committee that we haven't given enough time to oversight, which is more than just trying to point fingers and assign blame.

(END VIDEOTAPE)

ARENA: So far, it seems little blame is being assigned to FBI Director Louis Freeh. Senators from both sides of the aisle expressing their continued support for Freeh and the job that he's done -- Judy.

WOODRUFF: Kelli, back on the Robert Hanssen incident, part of this information or all of this information your saying is coming from affidavits, and you're also suggesting there is more to come?

ARENA: Yes, this information came from an affidavit in support of search warrants. As you know, FBI agents searched Hanssen's home and his office and in his car and everything that they had with his personal property. What we're expecting next is the results of those search warrants. So, we're told that they're going to come very soon. WOODRUFF: All right, and when we get access to them, you'll be reporting on them.

ARENA: I'll be right here.

WOODRUFF: All right, Kelli Arena -- Bernie.

SHAW: Secretary of State Colin Powell wrapped up his first diplomatic trip to the Middle East and the Persian Gulf with a stop in Brussels today at NATO headquarters. After meeting with NATO ministers, Powell told reporters the United States would review its military presence in the Balkans, but he said the U.S. would act only after consulting with its allies.

Powell said the ministers also discussed the need for a missile defense system as well as the proposed European rapid reaction force. A little while ago, a White House spokesman said President Bush will meet next week in Washington with NATO Secretary-General Lord Robertson.

Ahead on INSIDE POLITICS, why the president will be stepping under a magnifying glass when he journeys to the Hill. Candy Crowley on political scrutiny and the questions that might be answered during tonight's address to the joint session of Congress.

(COMMERCIAL BREAK)

SHAW: And coming up here on INSIDE POLITICS, will tonight's presidential speech be a prelude to political battles ahead? Bruce Morton is going to look at presidents pasts, their first speeches before Congress and their subsequent struggles.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to INSIDE POLITICS.

President Bush's address to Congress tonight is a high-profile launching pad for a massive lobbying campaign on behalf of his budget package.

During an appearance with the Colombian president earlier today, Mr. Bush previewed his pitch for the lightning rod of his plan, a $1.6 trillion tax cut over 10 years.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm going to be making a case that with the leadership, the right priorities and the right focus that we will fund important programs and have money left over for tax relief.

And it's important for the American people to get some of their own money back. One, it will help the economy. Secondly, it will help the American tax payers pay off their own personal debt.

(END VIDEO CLIP) WOODRUFF: Democrats are kicking off their own campaign for a smaller tax cut, charging that Mr. Bush's version doesn't leave enough money for spending priorities and debt reduction.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: We really have two choices. We can build upon what we've done over the last couple of years and continue to pay down the debt and provide for opportunities to invest in education and health care and defense, or we can go back to 1981, and make the same tragic mistake we did then, which, as you recall, required four acts of Congress and 15 years to dig out of.

That's the choice.

(END VIDEO CLIP)

WOODRUFF: Senator Daschle will deliver the Democratic response to Mr. Bush's address tonight, along with House Minority Leader Dick Gephardt.

And we're joined now by our senior White House correspondent John King and our congressional correspondent Jonathan Karl.

John King, to you first. When the White House hears these kinds of objections from Democrats, are they building into the president's remarks tonight a response to that?

KING: Well, certainly, the president in his remarks, from the excerpts that we have seen, calls for government, as we said, to be, quote, "Active but limited, engaged but not overbearing."

That's the president's way of saying Washington has a $5.6 trillion surplus, excuse me, over the next 10 years, and you can pay for what he wants to pay for -- top national priorities -- and still give some money back.

There will be a debate here. The White House knows that, but they also say, look, the Democrats started at 200 billion of tax cuts last year, they're up and around 900 billion now. They think the momentum is going the president's way.

They understand support has slipped a little bit in the past few weeks. They blame a lot of that on the attention given to President Clinton, and they're looking forward not only to the speech, but to get the president out and around the country, where they believe he'll do a much better job promoting the plan.

WOODRUFF: Jon Karl, to you now. The Republicans on Capitol Hill, their numbers are smaller than they were the last time a president came to talk to them.

How are they viewing what the president is trying to do tonight? Is it a slam-dunk, as far as they are concerned?

KARL: Well, Trent Lott has said point-blank that the president has to be involved personally in pushing this plan up here on Capitol Hill, because the Republican majority is so narrow -- evenly divided in the Senate and just a five-seat majority over in the House -- so they're saying that the president -- this is step one -- he needs to be up here, personally involved, making the pitch not just to the public at large, but to individual members of Congress, making those phone calls, bringing them in, trying to pull over moderate Democrats, and also to make sure that moderate Republicans stay on board.

WOODRUFF: John King, is that what the White House is anticipating, that they're going to be able to do what Jon Karl is describing?

KING: Yes, indeed. No question at all that the president and the vice president will be personally involved in lobbying Republicans, and aides say look for the president to lobby Democrats as well -- and just look at the travel schedule in the days ahead.

One of the stops tomorrow: Omaha, Nebraska. Senator Chuck Hagel, a loyal Republican, Senator Ben Nelson, a former governor of that state, it's a very Republican state. President Bush carried it handily.

President Bush wants to go to there to make the case to the people of Nebraska. Maybe you ought to be giving your Democratic senator a few phone calls.

WOODRUFF: And Jon Karl, we understand that you now have some excerpts of Senator Daschle and Congressman Gephardt's response tonight to the president. What are you learning?

KARL: Well, they'll be giving their response jointly. I mean, I've got a few excerpts here, Judy, I can just go ahead and read a couple.

To start it off, from Congressman Gephardt, the Democratic leader over on the House side, he is going to say, quote: "If what we have heard tonight sounds too good to be true, it probably is. President Bush's budget numbers simply don't add up. Ours do. His plan leaves no money for anything except tax cuts. Ours does.

Our plan is better. It invests in a greater needs and highest priorities of our country."

Daschle then comes on and talks about the whole question of who benefits from the tax cut. This is going to be a central issue. We learned in a memo that was done by Democratic pollster Mark Mellman to Terry McAuliffe, the leader of the Democratic Party, that they believe -- that their polling is showing that this whole of question of who benefits is the best argument against the Bush tax cut.

So, here's what Daschle will say -- he will say, quote: "The president's plan is deeply unfair to middle-income Americans. The wealthiest 1 percent, people who make an average of over 940,000 per year, get 43 percent of the president's tax cut."

That's a figure that you've heard over and over again last year from the campaign of Al Gore, and it's something that is going to be central, again, to the battle here in Congress, the Democratic battle against the Bush tax cut.

WOODRUFF: And John King, quickly back to you. How does the White House respond to that?

KING: Well, the White House expects these arguments from the Democrats, and they believe that the president has a tough sales job ahead of him. But again, they also believe that Democrats have begun to move the president's way.

The big challenge now is to work on those Northeast moderate Republicans and to get out to the American people. They believed -- they watched how Ronald Reagan went out an sold his budget plan. They also watched how Bill Clinton changed from his campaign to his first budget address.

They believe the president will be consistent with his campaign promises tonight, that he's open to compromise, but he also understands that it will take months to make his case to the American people.

WOODRUFF: All right. John King at the White House, Jon Karl at the Capitol, and we'll be seeing both of you as we all watch the president a little later this evening -- Bernie.

SHAW: Now, let's bring in our senior political analyst Bill Schneider. Bill, what is the main thing that president has to achieve this night?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well -- what John just said, he's got to sell -- and I mean sell -- his tax cut.

Now, wait a minute. Why should he have to sell it to the American people? Don't Americans want a tax cut? Well, they do, but they think other things should have higher priority.

It's not like it was when Ronald Reagan took office 20 years ago. Reagan got elected with a huge mandate for change. The country was in a dire economic crisis, and people were furious at the government.

To a lot of Americans today, Bush's tax cut looks like a solution for which there is no obvious problem. That's why he has to sell it. How? By making the case that his tax cut is fair and that it's affordable.

He'll say it's fair because it benefits everybody, rich and poor. He'll reassure people that it's affordable, because we can meet all our other objectives and still have money left over for the tax cut.

SHAW: What other objectives?

SCHNEIDER: Well, most important, reducing the national debt. You know, under President Clinton, Democrats adopted the cause of fiscal responsibility. Democrats! President Clinton's parting message was a warning not to abandon the cause that has brought the country so much prosperity.

Bush needs to appropriate the Democrats' issue by claiming that he too is committed to debt reduction. Not eliminating it completely, he'll say that's unwise. And he has a powerful force to back him up -- Federal Reserve Chairman Alan Greenspan.

SHAW: What about Social Security and Medicare?

SCHNEIDER: Well, those are very, very big-ticket items. And it's not clear that Bush is ready to tackle them in this budget.

The word is, the president will call for a bipartisan commission to recommend changes. The idea is to show that he is committed to reform, but not to distract attention from his tax cut.

The president will deal with other spending very cautiously. He knows Americans did not vote for a major change of direction in the country last year. He'll talk about slowing the rate of growth of spending in some areas, and it'll be interesting to see just how specific he is about that.

SHAW: Anything else we should be watching for tonight?

SCHNEIDER: Well, you know, a lot of people are pretending not to notice, but there's an elephant in the room, and it's the economic slowdown.

We got a report today showing the lowest level of consumer confidence in more than four years. Now, what can the president say to reassure those nervous consumers?

President Clinton's State of the Union's speeches used to go well over an hour, but the public just loved them. They had something for everyone. Bush says his speech is going to be shorter, but he still will have to try to have something for everyone.

Conservatives -- they'll get a tax cut. Democrats -- they'll get debt reduction. Moderates will get prudence -- now, that's a Bush Senior word.

Interestingly, business may have to wait a bit. Bush insists he doesn't want Congress cluttering up his tax plan with a lot of business tax breaks. That way, the president can claim he's being fair, that this is a tax cut not for business, but for the people.

SHAW: It's going to be a long battle.

SCHNEIDER: It will be.

SHAW: Bill Schneider, thank you -- Judy.

WOODRUFF: Fun never ends.

And when President Bush enters the House chamber tonight, in some ways his presidency really begins. Our senior political correspondent Candy Crowley reports on what's at stake.

(BEGIN VIDEOTAPE)

BUSH: I only get to suggest, you all pass the laws. And that's what we're to work around.

(LAUGHTER)

CANDY CROWLEY, CNN CORRESPONDENT (voice-over): These first 38 days have been the equivalent of a pregame handshake, fueled by charm marked by civility. Now it's game time.

SEN. JOE LIEBERMAN (D), CONNECTICUT: I think tonight, the charm stops here, and we have to begin to look at the guts -- the truth of the Bush proposals.

CROWLEY: In Washington, charm makes business more pleasant, but in getting what you want, fear is more useful. Tonight will be dissected beyond the details of the Bush plan, to something less tangible but more fundamental to Bush's success. From K Street lobbyists to the old hands on Capitol Hill, this evening, they take the measure of the man.

SEN. TRENT LOTT (R-MS), MAJORITY LEADER: I think he has got to be very persuasive in how he makes his case and do it in such a way that the average American understands and identifies with.

CROWLEY: The question is simple: will this charming, sunny, get- along guy be a president to reckon with, or can they roll him?

HALEY BARBOUR, FORMER RNC CHAIRMAN: No president gets everything he wants, but this president has been smart enough not to bid against himself. He has made plain that this is the tax bill that he is for and this is why he thinks it's the right tax bill, and he has not been tempted by anybody to start bidding against himself on the front end.

CROWLEY: True to Texas form, Bush has been single-minded in his focus and stubbornly loyal to the details and numbers in his proposal. It is virtually the same plan he introduced a year ago on the campaign trail. Now all he has to do is get it passed.

JIM JORDAN, EXECUTIVE DIRECTOR, DSCC: He has the megaphone now, he has got the podium. Can he use it? For somebody who is not notably gifted rhetorically, can he convert his real political assets, which are sort of affability and likability and the sense of comfort that he projects -- can he project that into real leadership?

CROWLEY: The task is fairly daunting. Bush faces a public that is skeptical, and Democrats anxious to reassert themselves.

SEN. PAUL WELLSTONE (D), MINNESOTA: I think it's terribly important for Democrats to find their voice and for us to be as strong as possible, both in opposition to President Bush's tax cut proposal -- going mainly to the wealthy -- and in annunciation of what we stand for.

CROWLEY (on camera): If the Texas template holds, Bush will eventually come to a point where he agrees to a compromise but not until he's certain he's gotten all he can get without one.

Candy Crowley, CNN, Washington.

(END VIDEOTAPE) SHAW: When we return, an update on all the late developments today in the Marc Rich pardon case.

(COMMERCIAL BREAK)

SHAW: Former president Bill Clinton gave some ground today to the House committee investigating his pardon of financier Marc Rich. He waived executive privilege to allow his former aides to testify freely before Congress. And he has decided to allow the Congressional committee access to lists of donors to his presidential library. Negotiations on how that review will play out are still underway.

Former aides say Clinton wants to prove he did not pardon Rich in exchange for donations. His former White House counsel, Beth Nolan, former deputy counsel Bruce Lindsey and former chief of staff John Podesta are scheduled to testify on Capitol Hill on Thursday.

WOODRUFF: Former Democratic National Committee finance chair Beth Dozoretz has refused to testify Thursday, invoking her Constitutional right against self-incrimination. CNN's Patty Davis has more now on Dozoretz, on how she figures into the pardon controversy.

(BEGIN VIDEOTAPE)

PATTY DAVIS, CNN CORRESPONDENT (voice-over): Fund raising success won Beth Dozoretz access. Golf on Martha's Vineyard with the president. Dozens of visits to the White House and a Clinton fund raiser at hers.

WILLIAM J. CLINTON, 42ND PRESIDENT OF THE UNITED STATES: I want to thank Ron and Beth for having us here.

DAVIS: But her fund raising success is earning her Republican wrath, especially now since she's refusing to testify before the House committee investigation in the Clinton pardons.

REP. CHRISTOPHER SHAYS (R-CT), GOVERNMENT REFORM COMMITTEE: She has something to hide and it appears to be criminal in nature, and we want to know what it is.

DAVIS: The committee wants to know exactly what Dozoretz did to help get a pardon for Marc Rich, the ex-husband of her friend Denise. Did she arrange for Denise Rich to donate $450,000 to the Clinton library in exchange for the pardon? And what did she tell the president? Dozoretz emphatically denied to CNN Tuesday that there was any quid pro quo. Friends say she tried to help Denise Rich out of loyalty.

DEBORAH SALZBERG, FRIEND: Beth is totally honest, and has a tremendous amount of integrity and she would never do anything wrong or illegal.

DAVIS: Dozoretz arrived in Washington the same year Bill Clinton did. Some describe her as a social climber, whose money and connection quickly earned her the Clinton's friendship. Bill Clinton is godfather to her daughter.

In the late 1990s, Dozoretz became finance chair of the Democratic National Committee. Not only did she and her wealthy husband give over one 1 million dollars to the Democrats, but Dozoretz pledged to raise another million for the Clinton library.

As the Clintons prepared to leave the White House, she gave them personal gifts: a dining room table, server, and golf clubs, gifts worth $7,000. The night before President Clinton granted the pardon, Dozoretz called to thank him, even before the White House asked the Justice Department to check Rich's background.

(on camera): Now, Beth Dozoretz not only faces a Congressional investigation, federal producers have launched a criminal probe that will likely take months. The intense scrutiny, her friends say, is taking its toll.

Patty Davis, CNN, Capitol Hill.

(END VIDEOTAPE)

WOODRUFF: When INSIDE POLITICS continues, why a standing ovation tonight might not signal Congressional support down the road. The lessons of history and presidential addresses.

(COMMERCIAL BREAK)

SHAW: Beautiful picture. With the president's address now less than three hours away, we have looked at what Mr. Bush is expected to discuss tonight and what his political adversaries might be looking for.

Now, Bruce Morton looks at what, if anything, this president might read into his first reception on the Hill and the future of his legislative agenda.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): It is the grandest entrance, the biggest moment in American politics.

(BEGIN VIDEO CLIP, 1993)

UNIDENTIFIED MALE: Mr. Speaker, the president of the United States!

(APPLAUSE) (END VIDEO CLIP)

MORTON: The House, the Senate, the Cabinet, the Supreme Court all on their feet, applauding. This was Bill Clinton's big tax speech to a joint session in 1993. George W. Bush can probably use some of this drama right now. He hasn't exactly been dominating the headlines lately.

SUSAN PAGE, "USA TODAY": I think it's a big moment for him. You know, he -- the election was disputed. And, along with the inauguration speech, this is a moment when he seems to be president, when he can make his case, where he can make his arguments for the programs that he ran on for president.

(APPLAUSE)

MORTON: All the cheering can be deceiving. Bill Clinton, elected with less than 50 percent of the vote -- Ross Perot was a third-party candidate, remember -- proposed tax increases, mainly on the wealthy.

(BEGIN VIDEO CLIP, 1993)

WILLIAM J. CLINTON, PRESIDENT OF THE UNITED STATES: I ask you all who are listening tonight to support a raise in the top rate for federal income taxes from 31 percent to 36 percent.

(END VIDEO CLIP)

MORTON: Republicans jeered.

(BEGIN VIDEO CLIP, 1993)

SEN. TRENT LOTT (R), MISSISSIPPI: This is baked-over stuff I have been seeing for 21 years: Raise taxes, raise spending and cut defense.

(END VIDEO CLIP)

MORTON: Clinton's plan did pass without a single Republican vote in the House or the Senate, where it squeaked through, with Vice President Gore casting the tie-breaking vote. It took until August to work its way through Congress.

Ronald Reagan, who rode into office with a solid mandate -- he beat Jimmy Carter handily -- got substantial Democratic support for his income-tax-cut proposal, but it was July before he signed that bill into law at his ranch.

This time?

PAGE: Things are about to get tougher, because he's going to put together a plan, put forward a plan that has some details in it that people can attack. And they will attack it -- on both sides.

(BEGIN VIDEO CLIP, 1993) REP. TOM FOLEY (D-WA), SPEAKER OF THE HOUSE: I have the high privilege and distinct honor of presenting to you the president of the United States.

(APPLAUSE)

(END VIDEO CLIP)

MORTON: Cheers, at least two standing ovations guaranteed -- and then the fun starts.

Bruce Morton, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: As many of you who are watching no doubt know, and I as still have a hard time believing, tomorrow will be Bernie's last day on INSIDE POLITICS as he steps back from the anchor desk. Well, we plan to send him off in style.

(BEGIN VIDEO CLIP)

SHAW: I came to cover a summit. I walked into a revolution.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SHAW: Details are very sketchy at this moment. We are told that shots were fired at his party as he left the hotel.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SHAW: The first question goes to Governor Dukakis.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SHAW: As you know, there's been a earthquake out here, at least 6.5 on the Richter scale.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SHAW: The most devastating story I've even covered at CNN was the bombing of the federal office building in Oklahoma City.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SHAW: The skies over Baghdad have been illuminated. (END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SHAW: This is thunder. This is lightning. This is death. This is hell.

(END VIDEO CLIP)

WOODRUFF: Well, as you can tell, it has been an exciting and in many ways revolutionary 20 years that Bernie Shaw has covered. We will have a full hour of highlights and special guests, starting at 5:30 p.m. Eastern tomorrow. And just before all that, on INSIDE POLITICS, Bernie will interview a special guest, the vice president of the United States, Dick Cheney.

Bernie, tell me you've changed your mind.

SHAW: I wish I could.

WOODRUFF: You still can.

SHAW: Well, maybe by tomorrow this time.

WOODRUFF: We'll talk about it. Maybe in the next 24 hours we'll work on it. That is all for this edition of INSIDE POLITICS. But of course, you can go online all the time at CNN's allpolitics.com; the AOL keyword CNN.

SHAW: And this programming reminder: CNN's special coverage of President Bush's speech to a join session of Congress begins at 7:30 p.m. Eastern. I'm Bernard Shaw.

WOODRUFF: And 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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