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President Bush Addresses Congress and the Democrats Respond

Aired February 27, 2001 - 8:30 p.m. ET


BERNARD SHAW, CNN ANCHOR: It has been just over five weeks since George Walker Bush stood outside this historic, imposing building, promising to preserve, protect and defend the United States Constitution, then summoning his listeners to be "citizens, not spectators."

JUDY WOODRUFF, CNN ANCHOR: Tonight, President Bush returns to Capitol Hill, and decidedly not in the role of spectator.

To CNN viewers watching worldwide, good evening from Washington. I'm Judy Woodruff.

SHAW: And I'm Bernard Shaw. In a few moments, the president will deliver his first address to a joint session of Congress. This time, he will summon lawmakers to enact his agenda.

WOODRUFF: And just as important, he is hoping to win over you, the voters in the United States, with what he calls plain-spoken words about his priorities.

SHAW: There is no secret about what those priorities will be. They've been signaled clearly by the White House staff and even by the president himself.

Our CNN senior White House correspondent John King has the short list of what to listen for.

JOHN KING, CNN CORRESPONDENT: Well, Bernie, two full dress rehearsals conducted here at the White House today. The president as we speak getting into his motorcade for the short drive up to Capitol Hill. It will be his first speech to a joint session of Congress. Tomorrow morning, he releases his first budget proposal.

In his short five weeks in office, the president has already proven to members of both political parties that he is likable. The challenge and the question he begins to answer tonight, will they embrace his agenda?


KING (voice-over): The speech ran 36 minutes -- that's without applause -- in a morning practice run, a new president getting ready for a defining moment. GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The problem we have oftentimes in America is that people will be asked the 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: In his speech, Mr. Bush calls for a government that is active but limited, engaged but not overbearing. It will be a speech and a 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 a billion dollars in military pay increases.

Selling it is the president's challenge now.

KEN DUBERSTEIN, REPUBLICAN STRATEGIST: Look, he is very likable. The American people clearly chose him 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 decade. 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 2 trillion of that over the next decade.

Democrats say Mr. Bush won't 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: And tonight is a test not just for this president, but also for Washington's new political balance. When George W. Bush addresses the Congress, it will be the first time in nearly 50 years that a Republican president is addressing a Congress where both chambers are also controlled by the Republicans -- Bernie.

SHAW: John, he wants a tax cut. We all know that. But what does this president say about the lack of nationwide fervor, according to the polls, for such a cut?

KING: Well, as the president said in that piece, the president believes the White House -- the American people, excuse me, have always been given a false choice. For eight years, President Clinton said if you had a big tax cut, that means you would have to cut Medicare, tap into the Social Security trust fund, not spend enough on education. President Bush says that's not true, and with a $5.6 trillion government surplus, you can fund all those priorities, you can pay down the debt. And he will make the case tonight that any family with such a surplus would also want a little tax relief, wouldn't they?

SHAW: OK, John King at the White House, thanks very much

Also with us tonight is CNN senior political analyst Bill Schneider.

WOODRUFF: Bill, this is a big speech for the president, but it isn't exactly what you'd call a crisis speech. How does that affect what the president's trying to do?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: I think it's a problem for the president, because he did not get elected at a time of economic crisis, the way Reagan did -- Ronald Reagan in 1981 or Bill Clinton even in 1993.

The crisis gave a sense of momentum. People said, "Do something!" And they were ready to follow the president's leadership as long as something got done.

There's no sense of urgency, and that explains one reason why a lot of the attention has been on other matters, including former President Clinton rather than on this president's agenda.

WOODRUFF: All right, Bill Schneider, thanks very much,

After a short break, we will shift our focus from the president to his audience: a nearly evenly divided Congress. Our special coverage of the president's address to Congress continues in just a minute.


WOODRUFF: The new president has talked and listened, shaken hands and slapped more than a few backs. But make no mistake about it, tonight is about more than just changing the tone in Washington. It is also about power. And from the power structure on Capitol Hill, here is CNN congressional correspondent Jonathan Karl -- Jon.

JONATHAN KARL, CNN CORRESPONDENT: Well, Judy, all that back- slapping and handshaking, and not to mention the free dispensing of nicknames to key members of Congress, has been part of President Bush's much publicized and so far highly effective charm offensive. But as Democrat Joe Lieberman said earlier today, the charm stops here. Bush now faces the difficult task of getting his agenda through a divided Congress.


KARL (voice-over): President Bush is the first president since Eisenhower to face a Congress controlled by his own party, but his party's control is so narrow Republican leaders warn the president will have to lobby hard to pass his agenda.

SEN. TRENT LOTT (R-MS), MAJORITY LEADER: He's going to have to do it in an aggressive way. He's going to have to speak to the American people. He's going to have to be prepared to talk to individual senators, understand where their concerns are, and be prepared to work with them.

KARL: The Republican majority is so slim -- a 50-50 tie in the Senate and a mere five seats' majority in the House -- that it will be virtually impossible for the president to get anything passed without Democratic support.

SEN. JOHN BREAUX (D), LOUISIANA: ... you can't just, I think, send something to the Congress and say that's how it's going to be. The numbers won't add up.

SEN. JOHN MCCAIN (R), ARIZONA: The American people have chosen the president of the United States, but I also have a mandate.

KARL: With no votes to spare, Bush will also likely have to work with his one-time nemesis John McCain, who has already shown a willingness to battle the White House on issues ranging from campaign finance to managed care. And McCain is yet to be sold on Bush's tax cut.

MCCAIN: 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 quite as concerned about the size of it as I am 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 hope that there is a hidden Bush majority here in this 50-50 Senate thanks to the fact that there are some 20 Democrats here who come from states that voted for Bush, in some cases overwhelmingly. Several of those Democrats are up for re-election next year, and Republicans hope that they will feel pressure from back home to vote in favor of the Bush agenda -- Judy.

WOODRUFF: Jonathan, when Senator McCain says he wants to see the details of the tax cut before he makes up his mind, how many of those details are already available now?

KARL: Well, there are a number -- most of the details are out there in terms of what exactly Bush wants to do. But what McCain is talking about is the tax cut must go through the Finance Committee here in Senate. And what that means you've got a Finance Committee that already has at least one Republican, Jim Jeffords of Vermont, who says he is opposed to the $1.6 trillion tax cut.

McCain is hoping that there will be some changes. McCain sounds a little bit like a Democrat on this, talking about how he's concerned that as currently constructed, the Bush tax cut benefits, in McCain's words, the rich at the expense of the poor.

WOODRUFF: All right, John Karl at the Capitol. And as we talk to Jonathan, we see pictures of President Bush's motorcade as it makes its way from the White House, and we think that is up Pennsylvania Avenue, toward the Capitol.

And once again, we're going to call on our senior political analyst, Bill Schneider.

SHAW: Bill, this president has tried very hard, we all know, to get individual members of Congress to like him. But now, he needs to make them a little afraid?

SCHNEIDER: That's exactly right. The charm offensive has worked very well. He's a very popular figure, particularly given former President Clinton's troubles. Now, he's got to start a fear offensive.

That doesn't mean he has to be a nasty guy, but what it means is he's got to make members of Congress fear that if they defy him, they're going to pay a price. Ronald Reagan was a perfectly nice and decent guy, but members of Congress were terrified that if they defied him, they'd pay a price because he'd campaigned against them and because he had clout with the electorate.

If you defied Lyndon Johnson when he was president, you'd probably wake up missing an important body part. This place works through fear, and fear is a very important currency. You cannot charm members of Congress.

When Bill Clinton's health care plan failed, Congress decided this was not a man be feared, and they rolled right over him even though it was Congress controlled by his own party, the Democrats. So Bush has got to make it clear to Congress they cannot defy him on important issues like the tax cut without paying a price.

WOODRUFF: So, Bill, are you saying this is something that the new president understands because of the way he's operated in Texas? Because it seems to me so much of what we've heard about Texas is a lot of it was charm.

SCHNEIDER: A lot of it was charm, but Texas is not Washington. The Democrats in Texas are not the Democrats in Washington. They are -- there is a lot more bipartisanship in Texas. I have covered Texas politics, and parties get along very well there. They work together quite frequently. There is not the partisan bickering and animosity you find in Washington.

And George Bush, I think, has got to learn that lesson fast. He is certainly surrounded by people, like Andrew Card and Dick Cheney, who have a lot of Washington experience, and who know that lesson and can teach him quickly.

SHAW: Well, we're surrounded by a lot of CNN personnel. Our senior political analyst is in Austin, Texas, Jeff Greenfield. Jeff, in terms of President Bush's communicative skills, can he make some headway on his image tonight?

JEFF GREENFIELD, CNN SENIOR ANALYST: I think you've asked one of the great open questions of the first part of the Bush administration. The person-to-person charm that everybody talks about has so far not translated, as for has anyone can tell, in the kind of presence in a formal occasion that say Ronald Reagan was the master of and that Bill Clinton got very good at. If you watched George Bush's press conference, there was some sort of tentativity about it. Now, the president tonight is in one of the most desirable forums anyone could want for stepping up in weight in terms of being the real president. The whole panoply of the joint session of Congress. It's not technically a State of the Union speech, but it is.

Interrupted by applause, applause when he comes in, the whole notion of the president as the commanding figure before the legislative body and the question you're asking is the one we're going to have an answer to when this speech is done.

The other intriguing part of this for me, you know, one of the striking things about George Bush is that he has put a program down in this first month as if he had been elected with 55 percent of the vote and 350 electoral votes. There is nothing in his campaign so far that he's cut back on because of the odd way he got to the presidency.

And the question is whether or not the Congress is going to respond to this program the way they did when Ronald Reagan came in with an authentic mandate, when Reagan used to say if they don't see the light, they'll feel the heat. The question is, in political terms, does George Bush carry that kind of political weight to push the Congress in his substantive direction.

SHAW: Underscoring that question will be the president's words tonight in the House chamber. That's where he'll deliver his joint address, and Jeff, we'll check back with you very shortly.

This is how the chamber looks right now. People are slowly filtering in: diplomats, members of the Supreme Court, the Cabinet, the members of the 107th Congress.

In a moment, the Democrats, and two very important men who are not here this evening. And during the president's speech tonight, you can chat with our Wolf Blitzer online at


SHAW: Two former presidents will be casting very long shadows tonight. As you can probably guess, Bill Clinton is one. But also, Ronald Reagan. Back in '81, he pushed a big tax cut through Congress and the memories of the deficits that came after will very much be on Democratic minds tonight.

Congressional correspondent Kate Snow joins us with more on the Democrats' strategy -- Kate.

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Bernie, that's right. It will be the Democrats who invoke the name of Ronald Reagan tonight in their response to President Bush's speech. Senate Minority Leader Tom Daschle with House Minority Leader Dick Gephardt expected to talk first and foremost about history, about 1981, about that tax cut.

They will call it a huge mistake that led to skyrocketing deficits, and a quadrupling of the national debt and they will say, they will suggest that endorsing President Bush's tax cut would bring back those days and it would be hard, as they say, to get out of that ditch. That is part of Democratic strategy here tonight to spread their message in Washington and beyond.


UNIDENTIFIED MALE: This is what George W. Bush has done on these issues.

SNOW (voice-over): The Democrats taking their campaign against President Bush's budget to the streets of Los Angeles, part of a national multimedia attack.

UNIDENTIFIED MALE: It is clear that George Bush's priorities are far from those shared by American public.

SNOW: Democratic leaders acknowledge they don't have the megaphone President Bush has, but they'll tell anyone who will listen, the president's plan is too good be true.

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: How do you say you're going to get that kind of a tax cut, still pay down the debt, and make commitments that you suggested for education and defense and the other issues that you've raised.

SEN. JOE LIEBERMAN (D), CONNECTICUT: The challenge to our party is to very directly state that President Bush's proposals, with all respect, run the risk of taking our economy into a recession, which it is not in now, because he is spending a surplus that is projected and not real.

SNOW: Democrats think that message will resonate, armed with recent polls indicating many Americans think Mr. Bush's tax cut unfairly benefits the wealthy.

REP. GEORGE MILLER (D), CALIFORNIA: The fact of the matter is the country is not with him on a huge tax cut that threatens Social Security and isn't fair to working people in this country. And that's been -- that's pretty clear.

SNOW: What is not clear is whether Democrats will stick together, when it comes to supporting a smaller tax cut. One key senator says he supports his Democratic leadership, but if the president is flexible, there may be room for compromise.

SEN. MAX BAUCUS (D), MONTANA: My hope is that he then starts to send some signals he is willing to work with Congress and work -- willing to deal, but if he stays focused and fixated on the 1.6 trillion, not one penny more, not one penny less, my way or the highway, he is going to be in trouble.


SNOW: Democrats also insisting they need more details about how President Bush plans to pay for this giant tax cut as they term it. House Democrats have sent a letter to the White House asking President Bush to please encourage his Republican colleagues here on the Hill to first pass a budget through Congress and then only then take up the tax cut bill.

That is not in cards, though, as of right now. House Republicans planning, hoping to take up this bill on the floor of the House, the tax bill, that is, by next week. Back to you.

SHAW: Kate as we watch New York's freshman senator Hillary Rodham Clinton, on the left there, on the floor, a quick question, what kind of reception will the Democrats give this Republican president?

SNOW: The two minority leaders, Tom Daschle and Dick Gephardt were asked that today earlier, and they said, look, we are going to be polite; we are certainly not going to be rude, we are going to be appreciative that we are here, we are going to be responsive to the president.

They said this will not be a tense atmosphere; they said -- they noted that in times past, some of the State of the Union addresses had been a bit tense, that not be the case this year -- Bernie

SHAW: Thank you, Kate Snow. Certainly, there was tension in the chamber, during the whole impeachment proceedings.

WOODRUFF: Absolutely right. Well, one of the biggest surprises of the last five weeks has been the almost daily competition for headlines between the Bush White House, and the executive mansion's former occupant.

Today, Bill Clinton was in New York for a speech at an entertainment and media conference. Cameras were not allowed in. However, our national correspondent, Bob Franken, reports Clinton joked that he would try his best not to make any news today, and he did not mention the pardon controversy.

SHAW: Well, we are joined by a group of very special friends, our Washington bureau chief Frank Sesno, and senior political correspondent Candy Crowley.

WOODRUFF: Also still with us: senior political analyst Bill Schneider and in Austin, Texas, CNN senior analyst Jeff Greenfield.

Frank Sesno, I want to begin with you. We have been talking, listening to Kate Snow talk about the Democrats. Did they feel that there is any more of a sympathetic ear out there to their arguments, which we are going to hear a little of tonight, because this was such a closely divided electorate back in November?

FRANK SESNO, CNN WASHINGTON BUREAU CHIEF: I think they feel they're very much in the game. You know, normally, at a time like this, we would be in full honeymoon mode here. And the Democrats -- as Bill Schneider was talking about, and Candy and I were talking about earlier today -- the minority party would have an element of fear, and they would not want to crossing the new president. The new president might have a mandate.

That is not quite the case now, because when have you such a narrowly divided Congress like this, they feel that they are very much more in play, so there are going to be more challenging elements of what going to be hearing from the Democrats. No, it won't be tense, but there will be some real challenges, Judy.

One of them, for example, a Democratic response, I'm told. There's going to be a reference to election reform, in the need to reform the election system. That is a not very subtle dig at George W. Bush, the Florida debacle, and the very contested nature of the presidential race that put him where he is tonight.

SHAW: Candy, a theme that Bill Schneider touched on a short while ago, we are used to seeing you in Austin, Texas; you are here in Washington. Jeff Greenfield is in Austin, Texas right now. Is Washington really Austin, metaphorically speaking?

CANDY CROWLEY, CNN CORRESPONDENT: Metaphorically speaking, no, it's not. And that point has been made quite a bit. The Democrats in Texas are not like the Democrats on the Hill. Tom Daschle, Dick Gephardt are very different from the people that George Bush is used to working with down in Texas.

Having said that, this is a man of very good political skills, and some political acuity where he can pick up what's going on in a room, and what's, you know -- size up the political dynamics. He is going to have to work a lot harder here to win over those on the other side of the aisle, but, he has -- this is also a man with great faith of his own abilities.

WOODRUFF: And Jeff Greenfield, speaking of Austin, you are there, as Bernie said. What are the skills that this new president brings to the task in front of him?

GREENFIELD: I should first mention that Candy's been voted an official permanent resident of Austin because she was here so long. As a matter of fact, I did spend today, at lunch with people who covered George Bush throughout his governorship, and, the point that they make, is that the personal skill that George Bush had was overwhelmingly what brought him success.

He defined his mission as having a few goals: four, in particular, accomplishing during the first couple years and basically, was a governor who could win over these Democrats who were not his ideological opponents, because they liked him, because there was a kind of common ground.

The idea that a President in Washington can do that, absent the sense among the Congress, that this president has come with an agenda, is a very, very questionable trait. I asked some of these people what, besides George Bush's personal skills, was his greatest asset? They all said the same thing. Everyone always underestimated him.

From the time he got into the governor's race against Ann Richards, from the time he became the governor, his greatest virtue -- his greatest skill was that people thought he really wasn't all that swift, that he really wasn't all that effective. And we will see if that works in Washington.

SHAW: I have a burning question to ask Bill Schneider, and we will do that in just a moment. We are just about to begin introducing dignitaries on the Hill.

WOODRUFF: We are watching some fascinating pictures up there, faces from the election: Joe Lieberman, Hillary Clinton, but we will come back to that in a minute. We'll take you back live to the Congress after a quick break.


WOODRUFF: Welcome back to President Bush's address to Congress. We are just moments away from watching this new president walk into the House chamber. Tonight, Bernie, we were told that only one of the nine Supreme Court justices would attend, and there he is: Justice Stephen Breyer, one of the four justices who voted to continue the Florida recount. But he and his colleagues were overruled by the five of the majority.

SHAW: I'd like to know why he's the only one of the non-members of the high court, but quickly to Bill Schneider with my burning question:

Will President Bush be speaking to the people in this House or to the people in the land?

SCHNEIDER: He is going to be speaking to people in the land, because that's the way to get to the people in this house, Bernie. He's got to sell his tax cut.

Unlike Ronald Reagan, who came in with a big mandate, as Jeff said, in 1980, a mandate for change. I don't think voters last year were voting last year for a big change in the direction of the country. There was no economic crisis driving public support, people are not furious with government the way they were in the early 80s, so to a lot of Americans, Bush's tax cut looks like the solution for which there is no obvious problem.

That's why Bush has to sell it. He's got to sell it to the people, so that they would put pressure on the legislature -- legislators, and the legislators will say, you know, I've got to vote for this thing, or I could be in political trouble.

SHAW: The first lady of the land, Laura Bush, receiving the plaudits, the applause, and the cheers, and the smiles, and an obvious affection from everybody here in the House chamber.

WOODRUFF: I don't think we've ever had a situation before where a current first lady and the immediately former first lady were in the chamber at the same time. Of course, Hillary Rodham Clinton there as the senator from the state of New York.

UNIDENTIFIED FEMALE: Mr. speaker, the president's cabinet. (APPLAUSE)

WOODRUFF: These are the people who George Bush has put in place to help him get this agenda, the budget, taxes and the rest of it through Congress, you see it is lead by Colin Powell, who literally just landed back in Washington tonight from a trip to the Middle East.

Frank Sesno, how important are these key members of the president's cabinet in selling something like this?

SESNO: Well, they are very important, in fact, they are assigned a very important task. One of them is to show up tonight and show their enthusiasm for their boss, which they are all doing, as you can see, with a great degree of relish, but beyond that, in immediate days, their job is to fan out across Washington, across the talk shows, and really across the country, and to help sell this budget.

It's sort of a tradition, it's a rite of passage, really, presidents come in, they make their big pitch in sort of the broad strokes, and then it comes to the cabinet members.

We should point out that his budget director, Mitch Daniels and Paul O'Neill, his Treasury secretary, will be back on the Hill here on Thursday, testifying before Congressional committees as to this budget.

Now, here's the problem: if you talk to people in this administration, you don't have to dig very deep before the name Bill Clinton comes up, because just as they are going to be trying to fan out, to sell the president's budget, Dan Burton, the congressional chairman of the House Government Reform and Oversight Committee is going to start his hearings on Thursday. Messages collide.

WOODRUFF: There is a fellow who's served both in the Clinton cabinet, Norm Mineta -- right there in the forefront -- and in the current Bush cabinet as the secretary of transportation.

SHAW: Jeff Greenfield and Bill Schneider, the president held a luncheon today at the White House for all the network anchors and the Sunday talk show anchor hosts, and I got the impression that there is very little "woe is me" in this president's mind. I mean, after all, we just saw Donald Rumsfeld, a former secretary of defense, Colin Powell, this man, past chairman of the joint chiefs of staff, he has got a lot -- Dick Cheney, a former chief of staff at the White House at age 34. Bush seems to me to have a lot of heft when it comes to pursuing his program.

SCHNEIDER: He is surrounded by deal makers. In Washington -- these people have been around Washington a long time, many of them go back to the Ford administration 25 years ago. They know how to cut deal when the time comes to cut a deal.

So, even though Bush is not experienced in the ways of Washington, he is certainly surrounded by people who are.

GREENFIELD: One other quick point that he has going for him: you'll see President Bush, Vice President Cheney and Speaker Hastert in the shot when Bush speaks. The last time three Republicans were up on that podium together was 1954, in the Eisenhower administration.

The very fact that the Republicans control all three branches of the federal government, that is the House, Senate and president -- that alone is something that no president since Eisenhower has even experienced.

WOODRUFF: Candy Crowley, how comfortable do you think this new president is -- the son of a president, walking into this chamber tonight. You covered him throughout the campaign?

CROWLEY: He seems to be somebody -- and one of the things he said, I think it was on "LARRY KING" one day -- during an interview when he said, look, I hope on my tombstone it's written, "I'm comfortable in my own skin" -- it pretty much makes him comfortable almost everywhere.

BILL LIVINGOOD, HOUSE SERGEANT AT ARMS: Mr. Speaker, the president of the United States.


CROWLEY: I think that, you know, this personal reaching out that he tends to be so good at, that charm offensive is -- he does tend to look at everybody as a potential friend.

At the same time, this is somebody that knows very well who in room is for him and who is against him. He sizes it up very neatly and can do it very quickly, so this is a room he knows has to play, but he believes he's got the skills to play.

SHAW: One thing worth pointing out here too is that -- I just wanted to make reference to that picture you saw of the president's wife Laura Bush -- and the woman standing next to Laura Bush is a woman by the name of Wendy Smith (ph), a woman with Down's syndrome who wrote to the president, who spoke very eloquently, you may recall, at the Republican National Convention this summer, a very moving few moments from that woman, and she is here tonight -- one of the honored guests, sitting next to first lady Laura Bush.

You won't hear the president introduce her by name, because I'm told they felt that just would be a little over the edge and unnecessary, but the graciousness of the invitation, they hope, will speak for itself.

SCHNEIDER: That is the news of economic slowdown -- the economic news, which you just received today about the consumer confidence index dropping for the fifth month in a row -- it's not very good. It's the lowest level of consumer confidence in more than four years.

We wonder, will President Bush address it, and what will he say to reassure nervous consumers? He will probably argue that the tax cut is needed to boost the economy.

It's not clear that argument will sell, because his opponents will argue that a slowing economy makes a tax cut more risky. The surplus may not be there. So, the economic situation, clearly, a big factor in this event.

WOODRUFF: This president is clearly getting a welcome reserved maybe only for new presidents. Things seem to harden up a little bit around this city.

I wanted to point out, Bill, Bernie, Candy, Frank, that the gentleman seated on the other side of Laura Bush is the mayor of Philadelphia. He is a Democrat. His name is John Street, but he has been pushing for education reform, and he's been leading fair housing opportunities for the poor.

These are things that President Bush has said that he wants to highlight. And to me, it also says, hey, I can work with Democrats, too.

SHAW: You can sense the getting-to-know-you feeling. This president is virtually taking a stroll on the floor of the House of Representatives. He didn't march right down the aisle and come up to be introduced by Speaker Hastert, he is strolling the floor, getting to know you, you could almost hear the song.

WOODRUFF: Is that Joe Lieberman? Looks like the back of his head.

SHAW: I'll know that haircut anywhere.

SCHNEIDER: One of the issues he's going to address tonight is going to be debt reduction. One of the interesting things that's happened in Washington is that under Clinton, Democrats have become the party of fiscal responsibility. Bush, I think, is going to make an effort to appropriate that issue tonight and say, I'm for fiscal responsibility too, my tax cut plan is fiscally responsible.

SHAW: You know, you have to put yourself in this man's shoes. And if we do that, you have to think, how sweet it is.

SESNO: There's such a different feel in this room, too. I mean, if you compare this to recent years past, turbulent times when Bill Clinton has stepped into this very place you call -- he was in a position of giving the State of the Union speech literally days after Monica Lewinsky scandal broke, and it seemed that his difficulties and controversy followed him into this room. We watched who was standing, who was applauding, who was not.

But it always had that extra level of significance and meaning, as we went into a remarkable process, impeachment process. This is totally, totally different.

WOODRUFF: As you said that, Frank, we saw pictures of them, a picture of the former first lady Hillary Rodham Clinton, very much a part of that whole saga.

SESNO: Very much still a part of political scene, both Clintons. REP. DENNY HASTERT (R-IL), SPEAKER OF THE HOUSE OF REPRESENTATIVES: Members of Congress, I have the high privilege and a distinct honor of presenting to you the president of the United States.


BUSH: Thank you very much. Thank you very much. Thank you.

Mr. Speaker, Mr. Vice President, members of Congress, it's a great privilege to be here to outline a new budget and a new approach for governing our great country.

I thank you for your invitation to speak here tonight. I know Congress had to formally invite me, and it could have been a close vote.


So, Mr. Vice President, I appreciate you being here to break the tie.


I want to thank so many of you who have accepted my invitation to come to the White House to discuss important issues. We're off to a good start.

I will continue to meet with you and ask for your input. You have been kind and candid, and I thank you for making a new president feel welcome.


The last time I visited the Capitol, I came to take an oath. On the steps of this building, I pledged to honor our Constitution and laws.


And I asked you to join me in setting a tone of civility and respect in Washington.


I hope America is noticing the difference, because we are making progress. Together we are changing the tone in the nation's capital. And this spirit of respect and cooperation is vital, because, in the end, we will be judged not only by what we say or how we say it, we will be judged by what we are able to accomplish.

America today is a nation with great challenges, but greater resources. An artist using statistics as a brush could paint two very different pictures of our country. One would have warning signs: increasing layoffs, rising energy prices, too many failing schools, persistent poverty, the stubborn vestiges of racism. Another picture would be full of blessings: a balanced budget, big surpluses, a military that is second to none, a country at peace with its neighbors, technology that is revolutionizing the world, and our greatest strength: concerned citizens who care for our country and care for each other.

Neither picture is complete in and of itself. And tonight I challenge and invite Congress to work with me to use the resources of one picture to repaint the other, to direct the advantages of our time to solve the problems of our people.

Some of these resources will come from government -- some, but not all. Year after year in Washington, budget debates seem to come down to an old, tired argument: on one side, those who want more government, regardless of the cost; on the other, those who want less government, regardless of the need.

We should leave those arguments to the last century and chart a different course.


Government has a role and an important role. Yet too much government crowds out initiative and hard work, private charity and the private economy. Our new governing vision says government should be active, but limited; engaged, but not overbearing.

And my budget is based on that philosophy. It is reasonable, and it is responsible. It meets our obligations, and funds our growing needs.

We increase spending next year for Social Security and Medicare and other entitlement programs by $81 billion. We have increased spending for discretionary programs by a very responsible 4 percent above the rate of inflation. My plan pays down an unprecedented amount of our national debt. And then when money is still left over, my plan returns it to the people who earned it in the first place.


A budget's impact is counted in dollars but measured in lives. Excellent schools, quality health care, a secure retirement, a cleaner environment, a stronger defense -- these are all important needs, and we fund them.

The highest percentage increase in our budget should go to our children's education. Education is my top priority.


Education is my top priority, and by supporting this budget, you will make it yours as well.

Reading is the foundation of all learning, so during the next five years, we triple spending, adding $5 billion to help every child in America learn to read. Values are important, so we've tripled funding for character education to teach our children not only reading and writing, but right from wrong.

(APPLAUSE) We've increased funding to train and recruit teachers, because we know a good education starts with a good teacher. And I have a wonderful partner in this effort.

I like teachers so much I married one.


Laura has begun a new effort to recruit Americans to the profession that will shape our future: teaching. She will travel across America to promote sound teaching practices and early reading skills in our schools and in programs such as Head Start.

When it comes to our schools, dollars alone do not always make the difference. Funding is important and so is reform, so we must tie funding to higher standards and accountability, for results.


I believe in local control of schools. We should not and we will not run public schools from Washington, D.C.


Yet when the federal government spends tax dollars, we must insist on results. Children should be tested on basic reading and math skills every year between grades three and eight. Measuring is the only way to know whether all our children are learning. And I want to know, because I refuse to leave any child behind in America.


Critics of testing contend it distracts from learning. They talk about "teaching to the test." But let's put that logic to the test. If you test a child on basic math and reading skills, and you are "teaching to the test," you are teaching math and reading. And that's the whole idea.


As standards rise, local schools will need more flexibility to meet them. So we must streamline the dozens of federal education programs into five and let states spend money in those categories as they see fit.


Schools will be given a reasonable chance to improve and the support to do so. Yet if they don't, if they continue to fail, we must give parents and students different options: a better public school, a private school, tutoring or a charter school.

(APPLAUSE) In the end, every child in a bad situation must be given a better choice, because when it comes to our children, failure is simply not an option.


Another priority in my budget is to keep the vital promises of Medicare and Social Security, and together we will do so. To meet the health care needs of all America's seniors, we double the Medicare budget over the next 10 years.

My budget dedicates $238 billion to Medicare next year alone, enough to fund all current programs and to begin a new prescription drug benefit for low-income seniors.


No senior in America should have to choose between buying food and buying prescriptions.


To make sure the retirement savings of America's seniors are not diverted to any other program, my budget protects all $2.6 trillion of the Social Security surplus for Social Security and for Social Security alone.


My budget puts a priority on access to health care without telling Americans what doctor they have to see or what coverage they must choose.

Many working Americans do not have health care coverage, so we will help them buy their own insurance with refundable tax credits.


And to provide quality care in low-income neighborhoods, over the next five years we will double the number of people served at community health care centers.


And we will address the concerns of those who have health coverage yet worry their insurance company doesn't care and will not pay.

Together, this Congress and this president will find common ground to make sure doctors make medical decisions and patients get the health care they deserve with a patients' bill of rights.


When it comes to their health, people want to get the medical care they need, not be forced to go to court because they didn't get it. We will ensure access to the courts for those with legitimate claims. But first, let's put in place a strong, independent review so we promote quality health care, not frivolous lawsuits. (APPLAUSE)

My budget also increases funding for medical research, which gives hope to many who struggle with serious disease.

Our prayers tonight are with one of your own who is engaged in his own fight against cancer, a fine representative and a good man, Congressman Joe Moakley.


God bless you, Joe.

And I can think of no more appropriate tribute to Joe than to have the Congress finish the job of doubling the budget for the National Institutes of Health.


My New Freedom Initiative for Americans with disabilities funds new technologies, expands opportunities to work and makes our society more welcoming. For the more than 50 million Americans with disabilities, we must continue to break down barriers to equality.


The budget I propose to you also supports the people who keep our country strong and free, the men and women who serve in the United States military.


I am requesting $5.7 billion in increased military pay and benefits and health care and housing. Our men and women in uniform give America their best, and we owe them our support.


America's veterans honored their commitment to our country through their military service. I will honor our commitment to them with a billion dollar increase to ensure better access to quality care and faster decisions on benefit claims.


My budget will improve our environment by accelerating the cleanup of toxic brownfields. And I propose we make a major investment in conservation by fully funding the Land and Water Conservation Fund.


Our national parks have a special place in our country's life. Our parks are places of great natural beauty and history. As good stewards, we must leave them better than we found them, so I propose providing $4.9 billion over five years for the upkeep of these national treasures.


And my budget adopts a hopeful new approach to help the poor and the disadvantaged. We must encourage and support the work of charities and faith-based and community groups that offer help and love one person at a time.


These groups are working in every neighborhood in America to fight homelessness and addiction and domestic violence, to provide a hot meal or a mentor or a safe haven for our children. Government should welcome these groups to apply for funds, not discriminate against them.


Government cannot be replaced by charities or volunteers. Government should not fund religious activities.


But our nation should support the good works of these good people who are helping their neighbors in need.


So I propose allowing all taxpayers, whether they itemize or not, to deduct their charitable contributions. Estimates show this could encourage as much as $14 billion a year in new charitable giving, money that will save and change lives.


Our budget provides more than $700 million over the next 10 years for a Federal Compassion Capital Fund with a focused and noble mission: to provide a mentor to the more than 1 million children with a parent in prison and to support other local efforts to fight illiteracy, teen pregnancy, drug addiction and other difficult problems.


With us tonight is the mayor of Philadelphia. Please help me welcome Mayor John Street.


Mayor Street has encouraged faith-based and community organizations to make a significant difference in Philadelphia. He's invited me to his city this summer to see compassion in action.

I'm personally aware of just how effective the mayor is. Mayor Street's a Democrat.

Let the record show...


Let the record show, I lost his city, big time.



But some things are bigger than politics, so I look forward to coming to your city to see your faith-based programs in action.


As government promotes compassion, it also must promote justice. Too many of our citizens have cause to doubt our nation's justice when the law points a finger of suspicion at groups instead of individuals. All our citizens are created equal and must be treated equally.


Earlier today, I asked John Ashcroft, the attorney general, to develop specific recommendations to end racial profiling. It's wrong, and we will end it in America.


In so doing, we will not hinder the work of our nation's brave police officers. They protect us every day, often at great risk.


But by stopping the abuses of a few, we will add to the public confidence our police officers earn and deserve.


My budget has funded a responsible increase in our ongoing operations. It has funded our nation's important priorities. It has protected Social Security and Medicare. And our surpluses are big enough that there is still money left over.

Many of you have talked about the need to pay down our national debt. I listened, and I agree.


We owe it to our children and grandchildren to act now, and I hope you will join me to pay down $2 trillion in debt during the next 10 years.


At the end of those 10 years, we will have paid down all the debt that is available to retire.


That is more debt repaid more quickly than has ever been repaid by any nation at any time in history.


We should also prepare for the unexpected, for the uncertainties of the future. We should approach our nation's budget as any prudent family would, with a contingency fund for emergencies or additional spending needs.

For example, after a strategic review, we may need to increase defense spending, we may need to increase spending for our farmers or additional money to reform Medicare. And so my budget sets aside almost a trillion dollars over 10 years for additional needs. That is one trillion additional reasons you can feel comfortable supporting this budget.


We have increased our budget at a responsible 4 percent. We have funded our priorities. We paid down all the available debt. We have prepared for contingencies. And we still have money left over.

Yogi Berra once said, "When you come to a fork in the road, take it."


Now we come to a fork in the road. We have two choices. Even though we have already met our needs, we could spend the money on more and bigger government. That's the road our nation has traveled in recent years.

Last year, government spending shot up 8 percent. That's far more than our economy grew, far more than personal income grew and far more than the rate of inflation. If you continue on that road, you will spend the surplus and have to dip into Social Security to pay other bills. Unrestrained government spending is a dangerous road to deficits, so we must take a different path.


The other choice is to let the American people spend their own money to meet their own needs.


I hope you'll join me in standing firmly on the side of the people. You see, the growing surplus exists because taxes are too high, and government is charging more than it needs. The people of America have been overcharged, and, on their behalf, I'm here asking for a refund.


Some say my tax plan is too big.


Others say it's too small.


I respectfully disagree.


This plan is just right.



I didn't throw darts at a board to come up with a number for tax relief. I didn't take a poll or develop an arbitrary formula that might sound good. I looked at problems in the tax code and calculated the cost to fix them.

A tax rate of 15 percent is too high for those who earned low wages, so we must lower the rate to 10 percent.


No one should pay more than a third of the money they earn in federal income taxes, so we lowered the top rate to 33 percent.


This reform will be welcome relief for America's small businesses, which often pay taxes at the highest rate. And help for small business means jobs for Americans.


We simplified the tax code by reducing the number of tax rates from the current five rates to four lower ones: 10 percent, 15, 25 and 33 percent. In my plan, no one is targeted in or targeted out. Everyone who pays income taxes will get relief.


Our government should not tax and thereby discourage marriage, so we reduced the marriage penalty.


I want to help families rear and support their children, so we doubled the child credit to $1,000 per child.

(APPLAUSE) It's not fair to tax the same earnings twice, once when you earn them and again when you die, so we must repeal the death tax.


These changes add up to significant help. A typical family with two children will save $1,600 a year on their federal income taxes.

Now, $1,600 may not sound like a lot to some, but it means a lot to many families. $1,600 buys gas for two cars for an entire year. It pays tuition for a year at a community college. It pays the average family grocery bill for three months. That's real money.

With us tonight, representing many American families, are Steven and Josefina Ramos.


They are from Pennsylvania, but they could be from any one of your districts. Steven is a network administrator for a school district. Josefina is a Spanish teacher at a charter school. And they have a 2-year-old daughter.

Steven and Josefina tell me they pay almost $8,000 a year in federal income taxes. My plan will save them more than $2,000.

Let me tell you what Steven says: "$2,000 a year means a lot to my family. If we had this money, it would help us reach our goal of paying off our personal debt in two years' time." After that, Steven and Josefina want to start saving for Lianna's college education.

My attitude is, government should never stand in the way of families achieving their dreams.


And as we debate this issue, always remember: The surplus is not the government's money; the surplus is the people's money.


For lower-income families, my tax plan restores basic fairness. Right now, complicated tax rules punish hard work.

A waitress supporting two children on $25,000 a year can lose nearly half of every additional dollar she earns above the $25,000. Her overtime, her hardest hours, are taxed at nearly 50 percent. This sends a terrible message: You will never get ahead.

But America's message must be different. We must honor hard work, never punish it.


With tax relief, overtime will no longer be overtax time for the waitress. (APPLAUSE) People with the smallest incomes will get the highest percentage of reductions, and millions of additional American families will be removed from the income tax rolls entirely.


Tax relief is right, and tax relief is urgent. The long economic expansion that began almost 10 years ago is faltering. Lower interest rates will eventually help, but we cannot assume they will do the job all by themselves.

Forty years ago, and then 20 years ago, two presidents, one Democrat, one Republican, John F. Kennedy and Ronald Reagan, advocated tax cuts to, in President Kennedy's words, "get this country moving again."

They knew then what we must do now: To create economic growth and opportunity, we must put money back into the hands of the people who buy goods and create jobs.


We must act quickly. The chairman of the Federal Reserve has testified before Congress that tax cuts often come too late to stimulate economic recovery. So I want to work with you to give our economy an important jump start by making tax relief retroactive.


We must act now because it is the right thing to do. We must also act now because we have other things to do. We must show courage to confront and resolve tough challenges: to restructure our nation's defenses, to meet our growing need for energy, and to reform Medicare and Social Security.

America has a window of opportunity to extend and secure our present peace by promoting a distinctly American internationalism. We will work with our allies and friends to be a force for good and a champion of freedom. We will work for free markets, free trade and freedom from oppression. Nations making progress toward freedom will find America is their friend.

We will promote our values. We'll promote the peace. And we need a strong military to keep the peace.

But our military was shaped to confront the challenges of the past, so I have asked the secretary of defense to review America's armed forces and prepare to transform them to meet emerging threats.

My budget makes a down payment on the research and development that will be required. Yet, in our broader transformation effort, we must put strategy first, then spending. Our defense vision will drive our defense budget, not the other way around.

(APPLAUSE) Our nation also needs a clear strategy to confront the threats of the 21st century, threats that are more widespread and less certain. They range from terrorists who threaten with bombs to tyrants and rogue nations intent on developing weapons of mass destruction.

To protect our own people, our allies and friends, we must develop and we must deploy effective missile defenses.


And as we transform our military, we can discard Cold War relics and reduce our own nuclear forces to reflect today's needs.


A strong America is the world's best hope for peace and freedom.

Yet the cause of freedom rests on more than our ability to defend ourselves and our allies. Freedom is exported every day as we ship goods and products that improve the lives of millions of people. Free trade brings greater political and personal freedom.

Each of the previous five presidents has had the ability to negotiate far-reaching trade agreements. Tonight, I ask you to give me the strong hand of presidential trade promotion authority and to do so quickly.


As we meet tonight, many citizens are struggling with the high cost of energy. We have a serious energy problem that demands a national energy policy.

The West is confronting a major energy shortage that has resulted in high prices and uncertainty. I have asked federal agencies to work with California officials to help speed construction of new energy sources. And I have directed Vice President Cheney, Commerce Secretary Evans, Energy Secretary Abraham and other senior members of my administration to develop a national energy policy.


Our energy demand outstrips our supply. We can produce more energy at home while protecting our environment, and we must.


We can produce more electricity to meet demand, and we must.


We can promote alternative energy sources and conservation, and we must.


America must become more energy independent, and we will.


Perhaps the biggest test of our foresight and courage will be reforming Medicare and Social Security.

Medicare's finances are strained and its coverage is outdated. Ninety-nine percent of employer-provided health plans offer some form of prescription drug coverage. Medicare does not.

The framework for reform has been developed by Senators Frist and Breaux and Congressman Thomas, and now is the time to act.


Medicare must be modernized, and we must make sure that every senior on Medicare can choose a health care plan that offers prescription drugs.


Seven years from now, the baby boom generation will begin to claim Social Security benefits. Everyone in this chamber knows that Social Security is not prepared to fully fund their retirement, and we only have a couple of years to get prepared.

Without reform, this country will one day awaken to a stark choice: either a drastic rise in payroll taxes, or a radical cut in retirement benefits. There's a better way.

This spring I will form a presidential commission to reform Social Security. The commission will make its recommendations by next fall. Reform should be based on these principles: It must preserve the benefits of all current retirees and those nearing retirement. It must return Social Security to sound financial footing. And it must offer personal savings accounts to younger workers who want them.


Social Security now offers workers a return of less than 2 percent on the money they pay into the system. To save the system, we must increase that by allowing younger workers to make safe, sound investments that yield a higher rate of return.

Ownership, access to wealth, and independence should not be the privilege of a few. They are the hope of every American, and we must make them the foundation of Social Security.


By confronting the tough challenge of reform, by being responsible with our budget, we can earn the trust of the American people. And we can add to that trust by enacting fair and balanced election and campaign reforms.

(APPLAUSE) The agenda I have set before you tonight is worthy of a great nation. America is a nation at peace, but not a nation at rest. Much has been given to us and much is expected.

Let us agree to bridge old divides. But let us also agree that our good will must be dedicated to great goals. Bipartisanship is more than minding our manners, it is doing our duty.


No one can speak in this Capitol and not be awed by its history. At so many turning points, debates in these chambers have reflected the collected or divided conscience of our country. And when we walk through Statuary Hall and see those men and women of marble, we are reminded of their courage and achievement.

Yet America's purpose is never found only in statues or history. America's purpose always stands before us.

Our generation must show courage in a time of blessing as our nation has always shown in times of crisis. And our courage, issue by issue, can gather to greatness and serve our country. This is the privilege and responsibility we share. And if we work together, we can prove that public service is noble.

We all came here for a reason. We all have things we want to accomplish and promises to keep. Juntos podemos, together we can.


We can make Americans proud of their government. Together, we can share in the credit of making our country more prosperous and generous and just, and earn from our conscience and from our fellow citizens, the highest possible praise, "Well done, good and faithful servants."

Thank you all. Good night, and God bless.

WOODRUFF: In exactly 49 minutes, the new president has outlined for members of Congress and for the American people watching on television, listening on the radio, what he wants to do, at least for the first part of his administration. He wants to pay down the debt, at least two-thirds of it. He wants to have a significant tax cut, $1.6 trillion and he wants to fund priorities.

And Bernie, we heard them picked off one after the other. He talked about education. He talked about health care. He talked about the poor. He talked about a number of, in his words, priorities that probably Democrats didn't expect to hear from the lips of a Republican.

SHAW: And these Republicans in the House chamber, those from the House as well as from the other side of the Capitol building, the Senate, they wanted their party leader to come before them so that Democrats and indeed the country could size up this man. How is he going to comport himself? How is he going to speak? How would he sell? Would he sound and seem presidential? And you could tell by their roars, their cheers, that they feel he did quite well.

WOODRUFF: Jeff Greenfield, you have been watching and listening from Austin, Texas. How did he do?

GREENFIELD: You know, when you look at the polls that we will be taking and everybody will be taking overnight, the people will say he did fine, and the reason I can confidently predict that is they always say the president does fine in these situations, even when the pundits don't think so, as they did when Bill Clinton's speeches sometimes seemed to go on as long as telethon.

The public generally thinks the president does well. There are two other points I'd like to make. Some of what he said when he talked about the putting aside the old debate between those who want more government regardless of cost and those who want less regardless of need, that's almost echo of Bill Clinton's that third way idea.

And the second thing I would raise is this: When Ronald Reagan came before this body 20 years ago, with a mandate, when he was recovering from the assassination attempt, he focused his speech on one issue, his economic plan, and it will be an interesting question whether or not this speech, which was wide-ranging, was effective as it would have been if he had just focused on his tax plan.

Clearly, the president wanted to strike many themes, and I think we'll find out not in next day, with instant polls, but over time, whether that was the right way go.

SHAW: Bill Schneider.

SCHNEIDER: Well, the themes of the speech were wide-ranging, but I sense a plan here that the president has. It was very responsive to public opinion. You know, Americans say they favor a tax cut, but they think other needs like Social Security and domestic needs should have higher priority.

So what did the president do? He spent the first half of this speech, talking about those other priorities, education, Medicare, Social Security, health care, military pay, the environment, his compassionate capital fund an to end racial profiling, and then, halfway into the speech, he said climatically, we've increased the budget at a responsible 4 percent. We've funded our priorities. We've paid down all the available debt. We prepared for contingencies, and guess what folks? we have money left over.

It was, then, and only then, that he started talking about a tax cut. That was very shrewd. he said after we have the money left over, then we can afford this tax cut. It is not risky.

WOODRUFF: But it's only been in the last few days, Candy Crowley, that this administration has been stressing how much they want how much -- they think a priority it is to pay down the debt. CROWLEY: Well, and you heard the president say I know how important it is to all of you to bring down the debt, and I have heard that. They obviously here that in order to get this tax cut through, or much of it because he won't get all of it, what he had to do was sell not just this Congress, but the American people on the fact that he is reducing the debt. He knew was important to do, and he stressed that tonight because they read that language.

SHAW: One of the instances of cues here is that once the president leaves the chamber, once you see him go through the doors, a countdown of five minutes will begin and then two Democrats will come forward, Frank Sesno, and give their party's response.

SESNO: They will. Three times in this speech, to pick up on what Bill Schneider was saying a moment ago, the president said there is still money left over. He is very strongly trying to make that case.

You're going to hear the Democrats take that on, as they've been taking it on for several weeks, now. They have three main elements in their argument. They contest the size of the tax cut the president is proposing. They say it's simply too big and it would not leave enough money for the priorities, not only that they want, but that they contend the president wants.

Secondly, they say it is very shaky economics to project what the budget and the budget deficit will look like 10 years out. You can't project a budget and an economy this size that far down the line. And finally, they say, there is a fairness problem here. You have heard them say it before. You'll hear them say it again tonight.

Too much of the president's proposed tax cut goes to the wealthiest Americans. Size, fairness, and projections. The president tried to address and in fact preempt every one of those issues tonight, but this is what the debate is going to be. It's what it has been. It's going to sharpen as the budget itself comes out and they start wrangling over the details now.

WOODRUFF: Now joining us, someone who is going to be part of that debate from all across the country, in Berkeley, California, Laura Tyson, who was a chief economic adviser to Bill Clinton for much of his presidency. When you heard, Laura Tyson, when you heard the president say repeatedly tonight we're going to have money left over, in essence, he was saying to do what I want to do, was he persuasive at all to you?

LAURA TYSON, FORMER NATIONAL ECONOMIC ADVISER: Well, he wasn't because he ended up with the $1.6 trillion he has always been talking about and if you look at the projected surpluses, even the large numbers, that he is now assuming with certainty will occur over 10 years, he is leaving out reserving the Medicare trust fund for the future.

He is leaving out alternative minimum tax relief for Americans. Many Americans will get a tax cut, but if they don't get alternative minimum tax relief, they'll actually be paying higher taxes and finally, he's leaving out the reality that population is going to grow and just as population grows, real government spending is going to have to grow more than he suggests.

So, the real numbers here are more like, a projected 10-year surplus, with uncertainty, of about $1.7 trillion outside of Social Security. His tax cut is $1.6 trillion. He's got no money to spend on any of his priorities.

SHAW: Where do you think this will really come down? You know this town very well. You know that both sides are going to have to negotiate. They're going to have to deal. Given your insight, where do you think the Bush tax cut ultimately will go?

TYSON: Well, I think that the proposal of using about a third of the money over time for spending, a third for tax cut and a third for debt reduction, which has been the Democratic proposal, is one that is going to work pretty well because that simple approach to a surplus, number one.

Number two, I think there's going to have to be some kind of trigger mechanism. That means each year you kind of look at a debt target, and you look at what the surplus really is and then you decide how much tax to put in as a cut the next year. And, finally, frankly, I think there is -- the estate tax is not going to be repealed, and I think there is going to be much less relief at end of the day for the top 1 percent.

Right now, under the Bush tax proposal, the top 1 percent of taxpayers, those with $750,000 a year income or more, get as large a pile of tax cut money as the bottom 80 percent. And I think that will influence how Americans feel about the tax cut, and will influence that Bush proposals. It will influence what actually gets done. At the end of the day, it will be fairer, and it will be smaller.

WOODRUFF: All right, Laura Tyson, we want you to stay with us. We're going take a break. When we come back, more live coverage of the president's address to Congress, and we are just minutes away, Bernie, I think from hearing the Democrats's response. We'll be right back.


SHAW: One of the most beautiful buildings in the world, the Capitol of the United States of America with the Statue of Freedom atop it. In a matter of seconds, the Democratic Party will be giving its response: One member of the House, one from the Senate.

WOODRUFF: That's right. The Democratic leader of the Senate, Tom Daschle. the Democratic leader of the House, both minority leaders, Dick Gephardt. The two of them will share the responsibility for the Democratic response. I don't know if this is first time that's ever happened, Bernie, but it's not typical.

SHAW: But they're going to be under a lot of pressure. They know people will be watching and listening to everything they're saying, and they have to be civil. They cannot be the hammer and tongue atmosphere that has gone down in this town in years past.

WOODRUFF: Our colleagues, as we listen to Senator Daschle, have been talking about how the president reached out to Democrats. Let's hear -- see what the Democrats say, whether they reach out to Republicans.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: Good evening. I'm Dick Gephardt from Missouri, Democratic leader in the House of Representatives.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: Good evening. I'm Dick Gephardt from Missouri, Democratic leader in the House of Representatives.

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: And I'm Tom Daschle of South Dakota, the Democratic leader in the Senate.

Tonight, our nation's Capitol was filled with hope as our new president spoke to Congress for the first time about his priorities for America. Now we'd like to take a few minutes to speak to the American people, to those we are fortunate to represent in South Dakota and Missouri and across America, the hard-working Americans who deserve a booming and vibrant economy, the seniors who seek security in retirement after a lifetime of hard work.

We want to speak to the teachers and students who are striving to master the ideas of a new century in crowded classrooms built in the last century, and to all Americans who want to know that in the halls of our government, their voices are heard and their priorities matter.

We believe, as they do, that America's prosperity must work for all Americans. When President Bush proposes ideas that bring us closer to that goal, like his literacy initiative or increases in military pay, we will work with him, and work hard, to turn those ideas into laws. When he makes proposals with which we disagree, we'll work with him to find common ground.

But when he insists on proposals that threaten the prosperity of all Americans or that harm Social Security or Medicare, we will fight and fight hard to put the interests of working families first.

Tonight we begin a debate that will profoundly effect the strength of America's working families for years, perhaps generations, to come. The prosperity that you have built these last eight years has given us all a chance to live better lives at every age. But this opportunity will be squandered if we repeat the mistakes of a generation ago.

In 1981, Dick and I sat in the House Chamber when another new president talked to the American people about stimulating our economy. The words spoken that evening were strikingly similar to the message we heard tonight. We were promised that if we gave huge tax cuts to the wealthiest Americans, the benefits would trickle down, deficits would disappear and the economy would flourish.

Congress supported that experiment. It was a huge mistake. As President Bush's own treasury secretary, Paul O'Neill, said recently, it put America "in a ditch that was horrendous."

Deficits skyrocketed. The national debt quadrupled. High interest rates choked American industries. Unemployment soared. Working families struggled to meet their mortgages, to pay for health care and save for college.

It took us 18 years, four acts of Congress, and a lot of hard work by the American people to get out of that ditch. But working together, we turned record deficits into record surpluses. Freed from the dead weight of deficits, you did what Americans do best. You worked hard; you created the longest economic expansion in history.

And now America has a choice. What shall we do with the blessings of our new prosperity? Our first priority must be to continue paying down the trillions of dollars in federal debt Washington ran up in the 1980s. We can't just pass this debt onto our children, not when we have the ability to pay it off.

By paying down the debt, we'll also keep interest rates low, which will mean real savings for every American family. We agree with the president. We want a significant tax cut this year.

But we want a different kind -- a tax cut that is part of a responsible budget, that lets us pay off the debt and invest in America's future, one that is fair to all Americans. President Bush's plan doesn't do those things.

Think about your own family budget. Imagine you hadn't saved for your retirement, when you owed money on your credit cards and you couldn't afford health insurance, then you're told you might get some extra money sometime down the road. What would you do?

Under the president's approach, you would spend the money immediately -- money that you might never see -- without taking care of your debts, your medical bills or your retirement. You wouldn't do that, and neither should we. But that's exactly what the president proposed tonight.

Let's take a closer look: First, the president's tax plan is far more expensive than the $1.6 trillion he claimed.

When you add the interest on the debt and all the other hidden costs, the true cost of the president's tax cut is well over $2 trillion. It will consume nearly all of the available surplus, at the expense of prescription drug coverage, education, defense and other critical priorities.

Even worse, instead of strengthening Social Security and Medicare, the president's plan actually takes money from both programs, and that is irresponsible, and it's wrong.

Worse still, the president's plan depends far too heavily on a 10-year budget estimate, which is no more reliable than a 10-year weather forecast. And there's no room for error.

Nobody's crystal ball is that good. Just ask Texas. Two years ago, using rosy forecasts, then-Governor Bush signed a budget that cut taxes by $1.8 billion. But his budget projections were wrong. And today, Texas faces a serious budget shortfall.

If his budget predictions now are as faulty as they were then, his tax cut would bring huge deficits, increase the national debt and put our economy back in the ditch.

Finally, the president's plan is deeply unfair to middle-income Americans. The wealthiest 1 percent, people who make an average of over $900,000 a year, get 43 percent of the president's tax cut. The president also wants to eliminate the estate tax for the wealthiest of the wealthy.

Democrats want to make it easier for you to pass on your family farm and small business to the next generation, and our estate tax plan does that.

But the president's proposal provides so much to America's wealthiest families that they themselves are calling it a mistake. Bill Gates Sr., Warren Buffett, members of the Rockefeller family have said that it gives so much to so few that it will actually force tax increases or cuts in Social Security and Medicare and other essential programs. They're right, and the president's estate tax cut is only part of the reason.

Let us be clear: All Americans deserve a tax cut. But surely, the wealthiest among us should not get it at the expense of working families. There's a better way.

GEPHARDT: Thank you, Tom.

Democrats have a better plan, a balanced plan that treats the national budget the way you treat your household budget.

Our plan provides $900 billion in tax cuts for all Americans. Our plan protects every dollar of the Social Security and Medicare trust funds. It strengthens Medicare and adds an affordable prescription drug benefit so seniors don't have to choose between food and medicine. It strengthens Social Security rather than subjecting it to a volatile stock market, so that it will be there, not only for the baby boomers, but for their children and their grandchildren.

Our plan enables us to keep paying down the national debt, the debt we ran up in the '80s, so we can keep interest rates low and keep our economy growing. And it invests in the future of our country, by making sure every child can get an excellent education at a first-rate public school.

The president touched on many of these goals tonight, but we can't accomplish any of them if we spend the entire surplus on the president's tax cut. If what the president said tonight sounded too good to be true, it probably is.

Education is one of our highest priorities, and we believe that strengthening public schools is one of our greatest challenges. The president has made education an important part of his agenda, and, in this, he has our support.

We have differences with his plan. Like most Americans, we don't support spending public money for private school vouchers, and we will never support a reduction in the federal commitment to under-served children and communities.

We'll work with the president to increase literacy, demand accountability and improve every public school. But with tax cuts consuming almost all of the projected surplus, he cannot possibly keep his commitment to leave no child behind.

Millions of seniors depend on Social Security and Medicare, and we have a responsibility to preserve and protect them. We made promises. We need to keep them.

The president said he's dedicated to preserving Social Security and Medicare. We take him at his word. But the president's plan threatens these critical programs.

His plan fails to set aside the resources Social Security and Medicare will need in the future and uses them instead to pay for his tax cut.

All seniors need prescription drug coverage. Democrats believe we should use part of the surplus to provide a reliable, affordable Medicare prescription drug benefit for all seniors. The president has a different approach. His plan excludes millions of middle-income seniors who don't have prescription coverage and need it.

We want to work with the president to solve the prescription drug problem the right way. But we can't add a Medicare prescription drug benefit, we can't improve public schools, we can't address any of our highest priorities if the president does not scale back the excesses of his tax plan.

President Bush's numbers just 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 the greatest needs and highest priorities of our country.

The conversation we begin tonight is more than a struggle over this year's budget; it's really about our future. It's about the most important decisions this generation of Americans will make for a very long time to come.

Our country is strong. But we can make it stronger by fighting for stronger families with a higher minimum wage, a patients' bill of rights, safer schools, safer streets and a cleaner environment; by fighting for a stronger economy with a budget that extends the greatest economic expansion in American history; by fighting for a stronger democracy with real campaign finance reform and a renewed commitment to fair and modern elections.

The challenge of writing a budget that is fair and responsible is considerable, but we face other challenges just as great. All across America, too many people have lost faith in the fundamental principle of democracy, the principle of one person, one vote. We must act to restore their confidence. We should not leave this session of Congress without reforming our election process. Our democracy depends on it.

In addition, too many in Washington and too many Americans have lost faith in the possibility of principled compromise. With Congress so closely divided, some would say that finding common ground is simply impossible. We refuse to believe that. We are determined to steer our country on a more productive course.

We recognize that the president campaigned on an agenda. So did we.

Where our agendas coincide, let's make quick progress for the people. Where our agendas differ, we ask the president to demonstrate his leadership by reaching out for the benefit of all Americans. If he extends his hand, we will grasp it. Tonight, we extend ours.

The things that are most meaningful in our lives often require real effort to meet others halfway: business partnerships, friendships, marriages. It's the same with our democracy. We can do what the people sent us here to do if the president is willing to join us in the middle.

We believe that making America better is the greatest work of all. It is to that task that we pledge ourselves tonight.

SHAW: Dick Gephardt of Missouri, the House Democratic leader, and his counterpart in the Senate, Tom Daschle of South Dakota, speaking for the Democratic Party.

Arizona Republican Senator John McCain joins our live coverage of this very important night in the United States.

Senator, you just heard the Democrats throw down their marker. You heard your party's leader throw down his. Is this the kind of atmosphere in which the people's business can be done?

SEN. JOHN MCCAIN (R), ARIZONA: Oh, I think so, Bernie. I think that the final comments by both Senator Daschle and Dick Gephardt indicated that they would like to reach across the aisle and work together on a number of the issues that were raised tonight.

Obviously, there will be some differences, but you know, I think that all of us learned a lesson from the last campaign, and that is that Americans would like to see us work together for a change, and the credit would redound to all of us.

SHAW: Is the -- no, go ahead, Judy.

WOODRUFF: Senator, you said that business can get done in this atmosphere, and yet, we just heard Senator Daschle say the president's numbers don't add up. He said the only thing that's left, if you look at George W. Bush's numbers, is room for a tax cut. What are the American people to believe when they get such diametrically different views of what reality is?

MCCAIN; Well, I think there are some differing views, but there is also an agreement that overall -- and I am one of those, along with the Democrats -- that believe that we need a tax cut. The question is, is how big and where it's directed. That is different from previous years.

I think that congressional hearings and congressional debate will probably illuminate us on these numbers. And I think that the American people are probably a little confused right now, and they deserve better information. And they'll be getting some of it from you two. At least you, Judy, not you anymore, Bernie. We're going miss you.

SHAW; Thank you. I'll miss covering you, too.

Realistically, you said the committees will hold their hearings, the Congress will work its will. Tell the American viewers, or people watching around the world for that matter, after all has been said and done on the Hill, when it comes to a tax cut, when are they going to get dollars in their wallets and purses?

MCCAIN: I think that it's going to -- this whole issue will probably be concluded one way or another by sometime in April or May. And I think that'll be a significant amount of time spent in debate and other labors.

Look, we agree that Americans need to cut taxes. The question is, is where those taxes are going to be implemented, where the majority of the taxes will fall, cuts will fall. And also, by the way, I think we must guard against the Christmas-treeing of the special interests weighing in and getting their special deals in the tax bill. We must guard against that as well.

WOODRUFF: Senator, our colleague Frank Sesno is sitting right next to me, reminding us that we didn't hear anything from the president tonight about campaign finance reform. He did talk about a number of other issues.

Would you have liked to have heard him address that? We know that he's not with you yet on that one.

MCCAIN: Well, he did say electoral and campaign reform. And the printed remarks said campaign finance reform, so I was very encouraged by that and sprang to my feet and applauded heartily upon him saying that.


I think we can work together on it. I'm hopeful that we can. But look, if we want to really make those changes that the president outlined tonight, and that Dick Gephardt and Tom Daschle talked about, we're going to have to get the special interests out of the business, and campaign finance reform has got to be enacted. And the end of March we're going to begin on that effort.

SHAW: I'm curious about something you said. You're projecting late April, May. Most of the substantive work will be done. But still, there's a body of thought that thinks that actually this president's tax proposal should be broken in two: pass one half this year, one half the next year.

MCCAIN: I think that'd be the subject of negotiations. And I don't think it's clear yet. I think you're going to be talking to Chuck Grassley later on, and he's going to have a better handle on that.

But I think all of us realize that the time of maximum influence of a president, it is in his first six months, his or her first six months of the presidency. So I don't think's any doubt that the White House and the Republicans would like to see this issue resolved, at least to a significant degree fairly early.

SHAW: Thank you, Senator McCain.

MCCAIN: Thank you, Bernie.

SHAW: You're quite welcome, sir, as Judy takes us back...

MCCAIN: God Bless.

SHAW: Thank you, very much. As Judy takes us back to another guest.

WOODRUFF: Good to see you, Senator McCain. Yes, and our apologies to Laura Tyson, a former top economic adviser to former President Clinton. We heard Senator McCain, Dr. Tyson, say that he thinks the American people may well be confused tonight because they are hearing one version of economic budget reality from the president, another from the Democrats.

How would you help clear this up?

TYSON: Well, first of all, I think the Republicans and the Democrats agree that 10-year projections are highly uncertain. So all of these numbers that are being bandied about are uncertain.

No. 2, I think I would tell the American people there is some really good news in here terms of areas of agreement. The Social Security surplus is off the table for either spending or tax cuts. And that is somewhere around $2 trillion over 10 years, and that's going to be preserved for Social Security. That's very good news. Another thing I think people can believe and count on...

WOODRUFF: But let me just interrupt you.

TYSON: Sure.

WOODRUFF: How then did Sen -- what did Senator Daschle -- I'm sorry, Congressman Gephardt...

SHAW: Well, we just lost her...


WOODRUFF: We may have just lost her. I wanted to ask her, because we heard Dick Gephardt say that the president's plan threatens Social Security and Medicare, but it looks like we lost the satellite from California. Our apologies.

SHAW: Those darn satellites have bitten us again.

WOODRUFF: Our apologies.

We're going to take a short break. When we come back we're going to talk with a Democratic, a very familiar face in the United States Senate, West Virginia Democrat Robert Byrd.

We'll be right back.


SHAW: The majesty of that building, the Capitol of the United States. Inside, in Statuary Hall, the ranking member of the Senate Appropriations Committee. He ranks in many, many other ways in this official town, Senator Robert Byrd of West Virginia.

Senator, when the president was talking about tax cuts, why were you sitting on your hands?


SHAW: Why were you sitting on your hands when the president talking about tax cuts?

BYRD: Well, I was listening to what he had to say. I think his proposal is sheer madness. A $1.6 trillion tax cut is a high wire act, and if the projected surpluses don't materialize, as they very well may not, there is no safety net to catch us when fall right back in the deficit ditch. And I -- Go ahead.

WOODRUFF: Go ahead, senator, finish you thought, please.

BYRD: Well, I was around when we had the Reagan tax cuts, and we were promised then that we were going to have big surpluses, and instead we had huge deficits and we had increased interest rates. We had higher unemployment. We had inflation and we're headed right back in that direction if we go along with this adjustment, $1.6 trillion tax cut. We'd be living in a fool's paradise.

WOODRUFF: Senator, so when the president and the people around him point out that there are surpluses projected at $5.6 trillion over the next 10 years and the president talks about finding his priorities and education, funding Social Security and Medicare -- as he said three or four or five times tonight, there is still enough money left to pay for the tax cut of this size.

BYRD: There will not be enough money. I'm absolutely positive of that, and even those who propose that we will have surpluses warn us to be careful, and not depend upon those, really. We have seen these projected surpluses just don't materialize.

SHAW: Senator, does your blunt language, calling the president's proposal sheer madness and describing it as a high-wire act, does that portray the rawness of the Democrats?

BYRD: It portrays my viewpoint that it's tremendous mistake if we pursue that course. This country has pent-up needs. We need to do something about Social Security and about Medicare, and we need to be mindful of the fact within 10 years we're going to see this baby boom generation starting to retire.

There's going to be a tremendous need for a prescription drug benefit, defense needs, payments to farmers. We need to pay down the debt, which would best tax cut of all for all of us and for our children likewise. I think we are very poor stewards if we spend this money just on the basis of the projected surpluses. They may never materialize.

Once the action is taken by Congress to pass tax cut, that money is going out. There's no guesswork about that, but these projected surpluses may never materialize, and they are pure guesses.

WOODRUFF: Senator Byrd, we would ask you to stand by because we want to bring in now one of your colleagues in the Senate, Republican Senator Charles Grassley of Iowa. He is chairman of the Senate Finance Committee. Senator Grassley, how do you respond? I don't know if you heard, but we just heard Senator Byrd say this is sheer madness. It's folly for President Bush to be proposing a tax cut of this magnitude.

SEN. CHARLES GRASSLEY (R), IOWA: Well, first of all, this magnitude is really the third smallest tax increase we had as a percent of GDP in the last half century...

WOODRUFF: Tax increase.

GRASSLEY: Tax decrease. Thank you for helping me. Tax decrease, and consequently, it ought to be looked in proportion to what it is. We have overtaxed the people of this country at the highest level since World War II, 20.6 percent of the gross national product. Normally, we've taxed about 19 percent for about 40 years.

That's a level of taxation that the people have accepted, and it's not harmful to the economy. And what we need to do is think in terms of what we can accomplish not just through government, but what we can accomplish through people themselves and helping people to help themselves.

I think really, this speech we heard tonight is a breath of fresh air. President Bush's sincerity and optimism are very refreshing. It's going to encourage a lot of people to do better. Just this sort of leadership is going to help the economy grow and we're going to be able to do all the things that he asked. Why? Not because government's done anything great here in the last 10 years, but because people have produced, worked so hard. The reward of their work is a lot more money coming in to the federal treasury. We can let the people keep that. It'll turn over many more times in the economy if this spend it than if I spend it.

We're going to be able to protect Social Security. All that money goes for Social Security, all the of Medicare money is going to be used for Medicare. We're going to be able to fund our highest priority, which is education.

SHAW: But Senator Grassley, having said what just said, are you dismiss out of hand the very strong, forceful opinions expressed by the gentleman across the aisle, from the other party, Robert Byrd of West Virginia. He called your party's leader's proposal sheer madness. What do you say to him?

GRASSLEY: Well, I have a great deal of respect for Senator Byrd. Let me suggest to you if we would keep up the level of expenditure of the last three years, we would not only spend the tax reliefs that we're planning, but we'd spend a half a trillion dollars more and not only that, but you could not sustain that level of expenditure over a long period of time.

You know, if we were to have a recession, the income would come down but you know how it is. We would never reduce the -- we never reduce the level of expenditure. It would stay high, then you'd have a deficit again.

SHAW: Well, Senator Byrd, is that what you want to do, increase the level of spending?

BYRD: Let me say this to my good friend Chuck Grassley. He very well knows that the $561 trillion that they're talking about is having been expended in the last few months of the last session, that of that, $193 trillion was pay back for the physicians and doctors and hospitals on Medicare; and Republicans as well as Democrats, supported that pay back -- that give back, so that's 193 billion of the 561 billion; so we both joined in that. I hope we won't forget that.

GRASSLEY: We will spend and 8/10 trillion dollars on Medicare over the next ten years. That's twice the rate of tax decrease we are talking about. We have plenty of effort that we are putting forth to provide for the medical needs of our seniors.

WOODRUFF: Senator Charles Grassley and Senator Robert Byrd, we want to thank you both, gentlemen, for being with us. Clearly, this debate over the budget -- over taxes has just begun.

BYRD: Thank you Bernie and thank you Judy.

WOODRUFF: Thank you both for joining us.

SHAW: Very interesting to get a taste of what we are going to hear on the floor of the Senate.


SHAW: And the committees.

WOODRUFF: You heard Gephardt and Daschle saying, this is not going to fly. Jeff Greenfield, you have been listening to all of this.

GREENFIELD: Yes, and I would make you a bet: if more than one out of every 100,000 Americans outside the think tanks of Washington followed that last debate, I will buy them a house. This is one of frustrating things when you get down to real hard numbers. Former Senator Moynihan used to say, we are all entitled to our own opinion, but we're not entitled to our own facts.

There are Democratic facts and Republican facts; and they are picked up and used, not as information exchanges, but as weapons. And I believe what this is ultimately coming down to, is whether the Democrats can remind people, or of what they argue, was the bad result of the Reagan tax cut or whether the general impulse people have, to want their taxes lowered expressed by President Bush, you have been overcharged and on your behalf, I'm here to ask for a refund, will carry the day.

I don't believe this debate will be resolved one way or the other, based on who's numbers are more accurate.

WOODRUFF: So, are you betting on either side being able to do that, Jeff.

GREENFIELD: You know, after election night last, I don't make projections, much less predictions.

WOODRUFF: We heard you say that, Jeff. One of these days we will get you come off that.

GREENFIELD: My prediction is that we will miss Bernard Shaw a whole lot.

WOODRUFF: That you are exactly right. We are still hoping you will change your mind.

SHAW: Well, I have 24 more hours, more or less.

Well, it's been very interesting. We hope that you have enjoyed our coverage of this important night. The president of the United States -- his first joint Congressional address, emphasis a lot on post tax cut and also other things.

And to our senior analysts Bill Schneider and Jeff Greenfield in Austin, Texas; to Frank Sesno and Candy Crowley.

WOODRUFF: Here in the studio with us; and we want to thank you all for joining us; thanks to our other guests; we will take a break. When we come back -- when CNN comes back, we will join "THE SPIN ROOM" in progress thanks very much.

SHAW: With Bill Press and Tucker Carlson.



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