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Capital Gang

Congresswoman Jennifer Dunn Discusses the Sagging Economy, Bush's Backtrack on CO2 and the Northwest Mechanics Strike

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

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

ANNOUNCER: Live from Washington, THE CAPITAL GANG.

MARK SHIELDS, HOST: Welcome to CAPITAL GANG. I'm Mark Shields with Al Hunt, Margaret Carlson, and in Boise, Idaho, Robert Novak. Our guest is Republican Congresswoman Jennifer Dunn of Washington state, a powerful member of the powerful Ways and Means Committee. Great to have you back, Jennifer.

REP. JENNIFER DUNN (R), WASHINGTON: Thank you. Glad to be here.

SHIELDS: Thank you. Stocks fell sharply yesterday, ending a very bad week. The Dow Jones Industrial Average fell below 10000 and the Nasdaq dropped to its lowest level since November 1998.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm concerned that a lot of Americans' portfolios have been affected. I've got great faith in the entrepreneurial spirit, and I believe the plans we're putting in place by working with the Congress are going to serve as a second wind for economic growth.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: What we're seeing is a talking down of the economy, the suggestion of a recession, the suggestion of a showdown in order to justify a what looks like it's going to be a $3 trillion tax cut.

(END VIDEO CLIP)

SHIELDS: Bob Novak out in Boise, does President Bush risk being blamed for impending economic trouble?

ROBERT NOVAK, "THE CHICAGO SUN-TIMES": Well, Mark, of course, the incumbent president has always suffered politically if there's bad economic times, and this stock market is an indicator that things are bad. But it is outrageous and ridiculous for anybody who's as intelligent as Dick Gephardt to say that the president of the United States has talked down the economy, has caused the recession by saying things were not as good as they ought to be. The person who is responsible for the hard times and the falling stock market is Alan Greenspan, who tightened for too long and hasn't loosened quickly enough. He didn't realize there was a deflation instead of an inflation. It's his fault. It's not Bush's fault.

SHIELDS: Al Hunt, is Bob Novak right in Boise?

AL HUNT, "THE WALL STREET JOURNAL": Well, he was right until all of sudden he started talking about substance. He was right in the politics when he said that a president always gets credit when it's good and gets blamed if it's not good. So, this kind of is a silly argument whether you can talk it down or you blame somebody else.

But, of course, he's wrong about Greenspan. Bob listens to that loony (UNINTELLIGIBLE) crowd who have been wrong about the economy for 10 years. There's a lot of good things about this economy. Unemployment is very low. Inflation is very low. Productivity is still quite strong.

And there are things that are not so good, Mark. There's too much debt, and there's consumer confidence going down. If you want to do something, though, reshape his tax cut. Make it front-loaded. Give it to working class people who will spend it and who need it. That's what'll happen and before somebody says that's a Marxist notion, that was suggested by two of the great pillars of modern economic policy, Paul Volcker and Bob Rubin.

SHIELDS: Jennifer Dunn, a $10 trillion dollar economy, and we're talking about a $6 billion tax cut this year. Not really terribly, terribly stimulative. And the difference between Ronald Reagan and George Bush is Ronald Reagan was constantly talking optimistically. Things are going to get better. You do this, and we're going to march and George Bush really is sounding a little bit gloom and doom.

DUNN: Well, I don't think he should be blamed for undermining the economy. I think that's totally false what Gephardt has charged him with. A president is supposed to be realistic and candid, but he has to be balanced at the same time. And that's what George Bush is doing. He is coming out with the only solution that Congress and the administration really have control over and that's fiscal policy and tax cuts.

Mark, what's really going to be happening is 17 million small businesses will be helped by this tax cut. And we are, we are, Al, helping the lower income people because that cut in marginal rates is for the lowest marginal rate and Anybody who pays income taxes will get almost $200 a year by the end of the year.

So, front-loaded? Yes, it should be, and I would like to see a larger tax cut, but let's do what the president recommends and let's follow his advice. We're in a time of surpluses. We can afford it. Cut those taxes.

SHIELDS: Margaret Carlson, President Bush said in the clip we just showed that he was worried about people's portfolios. Now, that's a word you doesn't hear a lot at the legion post or probably in the bleachers at most ball games. Maybe at the Yale Club or the economic club, but portfolios, that's one of his concerns.

MARGARET CARLSON, "TIME" MAGAZINE: Yes, I think that's what I have my daughter's artwork in, little portfolios. It's the elites in some ways that are feeling very bad because as Al says, the classic indicators of a recession aren't there and employment is holding up.

It is the fact that you're watching that ticker along the bottom of the screen, I see people doing it at airports, and it's going down, down, down. So, people like Bob really feel that the economy is worse than most people who still have their jobs. Bob could host a program called "Who Used to Be a Millionaire?" because people are feeling poorer.

HUNT: He wouldn't qualify to host that. He still is.

(CROSSTALK)

CARLSON: The wealth effect has hit. But one of the things Bush does is he says different things. He says the economy is fine, and then later the same day he says the economy is sputtering. And he's done a lot of this to get the tax cuts and the good news for Bush is that the Democrats seem to be saying, yes, let's do it quicker. If we're going to have one, let's do it quicker because that will stimulate the economy.

SHIELDS: How about that, Bob Novak? Do we need a front-loaded tax cut?

NOVAK: You know, what we need is a bigger tax cut. We need a capital gains tax cut is what we need.

SHIELDS: That's a novel idea.

NOVAK: What we really need is Alan Greenspan to start liquefying the economy, pouring more money into it because if you really talked to people out there on the front line of this economy who hire people, Mark, who actually hire people, they are scared to death what is going on.

Now, I've heard a lot of nonsense on this show in the last 12 years, but I don't think -- in the last three minutes I don't think it's ever been more. When you say that George W. Bush is gloom and doom, didn't you hear what he just said? He said that he's got a program that's going to fix the economy. He thinks things are going to be better because of the entrepreneurial spirit.

I'm not so sure he's right. But to say he's pessimistic is ridiculous and you know, that's the Dick Gephardt line. You can do better than that, Mark.

SHIELDS: Bob, if you recall, Bob, during the campaign, it was a calculated political move by the Republican ticket. Dick Cheney and George Bush warned that this economy was in real trouble. Why? Because they didn't want Al Gore to benefit from Bill Clinton's good economy. You know that. That was a political move, Bob, last fall. NOVAK: The economy was in trouble, and if you talk to people in heavy industry, if you talk to people who actually hire people, they saw it coming six months ago, and the Democratic propaganda can't change that.

HUNT: Bob Novak -- I didn't hear Bob Novak for eight years when Alan Greenspan was helping direct the greatest economy we've ever seen in the history of this country, I never heard Bob Novak giving praise for it. Jennifer, you surely don't agree with Bob Novak, do you, that Alan Greenspan is the great villain in America, do you?

DUNN: I think it's a combination. You put those interest rate lowerings that we're going to see on Tuesday from Greenspan together with our tax relief program, and you're going to get this economy moving. But I would add one more thing...

SHIELDS: What's that, Jennifer?

DUNN: ... that this economy started going downhill for some of us, like in the Pacific Northwest, a year ago when the antitrust suit against Microsoft was launched...

NOVAK: Exactly.

DUNN: ... and the dot-coms started going downhill.

SHIELDS: And that's why Al Gore lost both Washington and Oregon to George Bush, which he didn't do, of course. But Bob, I have heard very little talk -- Bob, just one thing. I have heard very little talk this week about the privatizing of Social Security. Do think that has anything to did with the Nasdaq numbers?

NOVAK: No, I think it's still part of privatizing and if you understood that, it isn't the Nasdaq stocks that the people would be investing in in Social Security. But I think Jennifer said something that is the real truth, the -- along with Alan Greenspan, Bill Clinton was culpable when he made this antitrust attack on Microsoft, and that's when things started going downhill.

CARLSON: The other dot-coms...

(CROSSTALK)

HUNT: And Newt Gingrich was the one that gave us the great economy, right, Bob. I see why you're in Boise.

DUNN: And Jimmy Carter talked about malaise. That's undermining the economy.

SHIELDS: Honest to God, that went back to Jimmy Carter. Let's blame Roosevelt.

HUNT: And wait a minute, Mark. Bob is with Elvis out in Boise right now.

SHIELDS: Bob, were you at Yalta? Jennifer Dunn and the gang will be back with the president's flip-flop on carbon dioxide.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. On September 29th last year, presidential candidate George W. Bush presented his energy program in Saginaw, Michigan.

(BEGIN VIDEO CLIP)

BUSH: We will require all power plants to meet clean air standards in order to reduce emissions of sulfur dioxide, nitrogen oxide, mercury and carbon dioxide within a reasonable period of time.

(END VIDEO CLIP)

SHIELDS: Five months later, on February 26th, Environmental Protection Agency Administrator Christie Whitman cited that very speech.

(BEGIN VIDEO CLIP)

CHRISTIE TODD WHITMAN, EPA ADMINISTRATOR: George Bush was very clear during the course of the campaign that he believed in a multi- pollutant strategy, and that includes CO2.

(END VIDEO CLIP)

SHIELDS: After a storm of protest from mining and industrial interests and from conservatives, the president this week told Governor Whitman he had changed his position, and he does not regard carbon dioxide as a pollutant.

Margaret, did President Bush make his mistake when took that position last September or when he abandoned it this March?

CARLSON: Well, when he made it, it wasn't a mistake because it was very good campaign strategy. It made Al Gore look -- the green guy look a little less green because he wasn't calling for that at the time. And while people say, oh, he doesn't get votes from the Sierra Club, he certainly wanted to appeal to moderate Republicans and independents who do care about the environment. So, it was smart for him to do that.

Now, it looks like he's not keeping the promise because of pressure from the coal industry and conservatives. During the campaign, if you want to say that Clinton gave the pardon to Denise Rich for money, look at this. Ken Lay, who is the chairman of Enron, during the campaign give a million dollars and had Bush's ear. He wanted carbon dioxide to be a pollutant because he has natural gas and he has the technology for reducing it.

Then lo and behold, it turns out the coal industry gave $3 million, so they win. They got to the White House, and now we won't have carbon dioxide on this list of pollutants. It's just rolling over for the industry. SHIELDS: Jennifer Dunn, Republicans, Democrats in the Pacific Northwest are green. They're very sensitive to the environment. What about this? This is a tough one to sell back home.

DUNN: One of the reasons that I believe the president stepped back from the one time he mentioned that in one speech through one word being inserted in one sentence. So, it wasn't major policy...

CARLSON: It's a typo.

DUNN: I think one of the reasons he did is because of the problems we're having with energy in the West. Right now, we're at a terrible standstill. Energy has increased threefold the cost of our bills, electricity and natural gas way up.

And I think one of the reasons he did this, and I think it's responsible for him six months later in the middle of a terrible energy crisis, to stand back and take a look at his policies. And yes, he has changed his position in that one small way.

But don't forget, Mark, the president, when he was campaigning, was known much more for the big policy item, his position on Kyoto. People knew he was against that, so they voted for Gore if they cared about those.

SHIELDS: Al Hunt, at the time of this, he emphasized that his targets would be mandatory in the reduction of carbon dioxide as opposed to Al Gore's being voluntary. So, there was a strong political implication to this as it was played out, and quite frankly, suburban Republicans are nervous.

HUNT: Mark, I'm sorry but I think this debate over the semantics about whether it was inserted by somebody else or not is really the best debate of that sort since Bill Clinton, you know, what he meant by "is."

But I think there are two problems here. Number one, he just chopped Christie Whitman's legs off. I mean, she now has no credibility. She can't stand up to any interest group the rest of time she's there. And secondly, you're right, it is suburban Republicans.

I talked to Jennifer's colleague this week, Jim Greenwood, from Bucks County, Pennsylvania. And he said, look, what scares me is you put this, then you have the Arctic, and the perception were are a party that cares more about the oil and energy barons than we do the environment. And I think the battle for American politics in the next couple years is going to be won and lost in the suburbs.

DUNN: But let me tell you, you know, Margaret made a point...

NOVAK: You know -- wait a minute. I would like to say something.

SHIELDS: Let me just get to you, Bob. Anytime, though, your president or your candidate uses the words retreat, renege, flip-flop and all the rest are in the headline, that really bothers you, doesn't it?

NOVAK: No, that's -- people like you use the word flip-flop. I don't use the word flip-flop. Let me try to bring some clarity to this. Only the eco-extremists talk about regulating carbon dioxide. How in the world did it get in George W. Bush's speech? That's what the people who are in the White House want to know.

It was in the 49th paragraph of a 60-paragraph speech on energy. He didn't notice it. The aides didn't notice it. I'll tell you who else didn't notice it. "The New York Times" reporter didn't notice it because he didn't put it in the story from Saginaw. "The Washington Post" reporter didn't notice it because he didn't put it in the story. It didn't appear in any on the networks. Somebody slipped it in. But the left wing...

CARLSON: A gremlin.

HUNT: Who did it?

NOVAK: Let me finish this. You don't like -- can I please? The left-wing activists at the Environmental Protection Agency noticed it. They fed it to Governor Whitman. She went on the air with it without checking the White House, and if she's humiliated, she deserves it because this is a conservative administration and that kind of nonsense has no place in it.

DUNN: Hey, Bob, I've got to take you on on that one. Christy Whitman is a very effective member of this Cabinet. I think what that shows to everybody is that George Bush likes to have people who may have different points of view and he's willing to hear the whole truth. But he will make the final decision. And that's what comes with being a Cabinet member. You have to go with it.

HUNT: Do you think the same person that mailed that debate tape may have slipped that word into...

SHIELDS: Bob, I don't know who was doing all these seditious things to candidate Bush, but I will say this: He has turned Christie Whitman in the (UNINTELLIGIBLE) of this administration. He did cut her legs off.

Next on CAPITAL GANG, the White House aborting an airline strike.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. Northwest Airlines mechanics and off- duty mechanics from other unions picketed airports and picketed the White House this week. They were protesting President Bush's pledge to prevent a strike of Northwest Airlines. That did not improve the new president's relations with organized labor.

(BEGIN VIDEO CLIP)

JOHN SWEENEY, PRESIDENT, AFL-CIO: We've had our differences with Republican administrations in the past, but there never has been a transition such as this one where such anti-worker initiatives have been taken in the first 45 days of an administration without any discussion with the labor movement.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MITCH DANIELS, WHITE HOUSE BUDGET DIRECTOR: I don't know if Mr. Sweeney feels personally mistreated or whether he's speaking on behalf of his organization. I would say that elections are about changing policy. The administration has changed, and policy with it.

(END VIDEO CLIP)

SHIELDS: Al Hunt, is it anti-labor -- isn't it, to try stop an airline strike?

HUNT: Well, Mark, I think to be fair, Democratic presidents have done that and no one said they were anti-labor. Moreover, I think Mitch Daniels has a point. John Sweeney is going to have to get used it. Elections do have results and this is going to be the most anti- union administration that we've seen in a while. Certainly far more so than the Clinton administration.

But if there's gloom and doom at the House of Labor on I Street, they are popping the champagne corks a couple of blocks away on K Street where the business lobbyists know that they're going to make out like bandits. Many of them are bandits, and they're going to do -- this is going to be a very pro-business administration.

SHIELDS: Bob Novak, what about that? I mean, are we talking about labor bashing? If you'll recall, Richard Nixon, of course, made strong overtures and big inroads into organized labor and Ronald Reagan had a lot of Reagan Democrats in organized labor. George Bush appears to be bound in the other direction.

NOVAK: Well, they were dealing with George Meany and Lane Kirkland, who were more or less -- much more evenhanded than John Sweeney, who just has vowed to destroy every Republican he can get his hands on. But believe me, this airline business is a no-lose proposition for President Bush. This is like the air controllers strike.

People don't want these money hungry, greedy people who work for airlines to inconvenience them. All kinds of people fly on airlines these days. It isn't just the rich people, and particularly with Northwest, this is a rogue union. It's not an AFL-CIO union. They turned down a contract that would have met as much as $75,000 a year for mechanics. There's no public sympathy for that. So, I think this is a political bell-ringer for George W. Bush.

SHIELDS: Bob, just a point of personal information, over the last 15 years, the top 1 percent have seen their incomes go up 103 percent and those who are blue collar workers have seen their incomes go up a total of 3.2 percent. So, money-hungry, greedy doesn't really apply to blue collar workers.

NOVAK: That's your opinion, Mark. SHIELDS: Thank you, Bob.

DUNN: Mark, I would just say that after the AFL-CIO spent $45 million that we can find, that are reported to work against President Bush and against the Republicans, I don't see that he can expect that they're going to be his best friend. They're not going to be.

Now, law provides President Bush the opportunity to call for this cooling off process. I think it's important that he use this power and I'll tell you, I went through a summer flying last summer that I don't want anybody ever to experience again. I think he realizes it would disrupt the economy if we let this thing go and I hope they use that cooling-off period to come to a conclusion, an agreement.

SHIELDS: Margaret Carlson.

CARLSON: I think the 60-day period is OK, but what Bob misses is how much the unions, the mechanics and the pilots have given to the airlines over this period. You know. Northwest Airline mechanics haven't had a raise since 1992. They had a pay cut in 1993. They were asked to make concessions all along the way for the health of the airline. Now, they're asking for something back, and now they are not getting it. I don't know how sympathetic Americans are to management taking advantage of labor and you know...

NOVAK: Can I ask you a question?

CARLSON: No, no, no, you can't. In the Reagan days, you know, there was a very negative opinion of labor. Now, 18 percent of -- only 18 percent of people according to a Peter Hart poll recently have a negative view of labor.

HUNT: I'll ask Bob as question so he can get a comment in. Bob, why is it that you never refer to your fellow multi-millionaires as greedy, the K Street lobbyists and everything, and you only refer to $60,000 a year workers as greedy. Would you answer that?

NOVAK: Because I'm not fighting a class struggle. I'm not a Marxist. I don't believe in that. But I do believe, and I'd like Margaret to tell me why this union, which is not an AFL-CIO union and they're trying to organize other unions; you notice even John Sweeney doesn't support them, why they turned down a contract that would provide senior mechanics as much as, with overtime $75,000 a year. Tell me why they turned them down?

CARLSON: It hardly made they whole for the years...

NOVAK: Oh, come on.

CARLSON: ... in which they gave the paybacks.

HUNT: You want that much in a tax cut for yourself for a week, Bob.

NOVAK: It's war on labor. That's...

SHIELDS: Last word, Margaret Carlson. We'll be with a CAPITAL GANG classic on a 1997 strike.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. After the most closely-watched strike in many years, the teamsters union claimed victory in its 1997 settlement with United Parcel Service. Not long after that, the union's president was stripped of his office on grounds of a corrupt election. This is what your CAPITAL GANG said on August 23, 1997.

(BEGIN VIDEOTAPE)

HUNT: Public opinion was very much behind labor in this fight and that says something. That was unusual, and I think it says something about the widespread sense that this booming economy has left a lot of people behind, a lot of struggling workers, and that's good news for labor.

NOVAK: Mark, if this is a great victory for labor, I'd sure hate to see a defeat: 15,000 lay-offs, and it takes the ordinary UPS worker, it's going to take them two or three years to make up the pay he's lost. That's a victory?

KATE O'BEIRNE, "THE NATIONAL REVIEW": The public, I think, was on their side. But it was short-term because within hours, practically, of the strike being over, come back the old corrupt union bosses now with the election being vacated, you know, reminding the public of what the long-term problems have been like.

SHIELDS: The face of organized labor in this case were the UPS people, and I don't care who you are, you deal with UPS people every day. They're bright, they're helpful, they're collegial, congenial.

NOVAK: Tough kind of triumphalism of Ron Carey talking about fighting the company and now he is again being charged with corruption. I think the tide on the PR battle may be turning. This could this could be a big plus for the Republicans.

(END VIDEOTAPE)

SHIELDS: Bob Novak, in 1998, that didn't turn out, but did the UPS settlement turn out eventually to be a plus for the Republicans?

NOVAK: No, I can't imagine why I said that four years ago.

(LAUGHTER)

NOVAK: But what I do know is all this stuff about the sweet little UPS workers and labor had a good position again was ridiculous. Of course, Ron Carey was booted out. His man was defeated by Jim Hoffa, the least friendly union to the Democratic administration. So, it was maybe a minor win, but it was certainly not a triumph for labor.

SHIELDS: Jennifer, you saw that for the first time. Your reaction. DUNN: Well, it was a sad time because UPS lost a lot of contracts, but I say it also is a point in favor of a president stepping in, as Clinton did during those days, to have a cooling-off period and eventually to solve the problem.

SHIELDS: Margaret.

CARLSON: When the general public knows the labor side of it, labor wins. I remember that period of time. People honked their horns at the UPS van and thumbs up.

SHIELDS: Thumbs up. I remember that.

CARLSON: And if we get to know northwest mechanics that way, perhaps they'll get the same break.

SHIELDS: We don't have the same interaction, of course, with mechanics.

CARLSON: As a matter of fact, we don't really like the airlines that much.

SHIELDS: No -- Al Hunt.

HUNT: Mark, I think the only issue is whether anything we're saying tonight will be as irrelevant four years from now...

(LAUGHTER)

HUNT: ... as what we said back then is right now.

SHIELDS: But I think it's very refreshing, Robert Novak, that you acknowledge something you said four years ago was not prophetic, and that exercise in humility is truly refreshing.

HUNT: I identify with Bob on that.

SHIELDS: that's right. Jennifer Dunn, thank you for being with us. We'll be back with the "Newsmaker of the Week," the White House director of faith-based initiatives; our look "Beyond the Beltway" at Israel's new leader, and our "Outrages of the week." All that after a check of the hour's top news.

(COMMERCIAL BREAK)

(NEWS BREAK)

SHIELDS: Welcome back to the second half of CAPITAL GANG. I'm Mark Shields with Al Hunt, Margaret Carlson, and on assignment in Boise, Idaho, Robert Novak.

Our "Newsmaker of the Week" is John DiIulio, director of the new White House Office of Faith-Based and Community Initiatives.

John DiIulio Jr., age 42, Democrat, Catholic, Gore voter, on leave as University of Pennsylvania professor, scholar, author, social activist. Earlier this week, John DiIulio was interviewed by our Al Hunt.

(BEGIN VIDEOTAPE)

HUNT: There is a perception that President Bush's faith-based initiative has received more political flack than anticipated and is on a slow track in the administration in Congress. Is that accurate, John DiIulio?

JOHN DIIULIO, DIRECTOR OF FAITH-BASED INITIATIVES: Not as far as I'm concerned.

(LAUGHTER)

DIIULIO: We opened our doors February 20th, about four weeks ago, and yes, the administration, at least today, is 50 some days old. So, we're doing the three things that I think the executive orders tell us to do. So if we're not, somebody ought to tell me.

HUNT: I suspect you anticipated the protest from the left, the ACLU and the like, but are you surprises and what do you make of the criticism from the right: the Jerry Falwells, the Marvin Olaskys, the Pat Robertsons?

DIIULIO: It's a -- you know, I've been teaching American government for 20 years, and I always tell my students that government is about dispatch, deliberation, and that's democracy. And I excepted to hear a lot of different comments from people all across the spectrum, from left to right, religious, nonreligious. There's a lot of, you know, legitimate questions that one would raise about a new office of faith-based and community initiatives.

HUNT: Louis Farrakhan is very controversial, but the Nation of Islam is very involved in prison ministries; Scientologists are very controversial, but they're very involved in inner city drug programs, and the question is, should they be eligible for charity choice grants?

DIIULIO: I keep trying to tell folks that that question is an interesting question, but it's not germane at all to what we're doing or have proposed. It's not germane to what President Clinton did in 1996, August 22nd, when he signed the Charitable Choice Law that we have been out talking about and defending for the past four or five weeks because any -- under public law, under constitutional interpretation as it now stands, any organization, any individual who can afford the postage and fill out the request for a proposal can send in a grant proposal. All I can say is what we're doing to, trying to make the grant-making process more performance-based and results-driven.

HUNT: The other criticism that some make is that after a straight arrow like John DiIulio leaves, that this could become a patronage arm of either political party, the churches and the religious-based groups. As one person said that you role could be the chief engineer for the patronage machine. Is that a legitimate concern? DIIULIO: I don't think so. I've been studying community-serving ministries and community-based organizations for the last five or six years, in all the city of Philadelphia, 2,000 congregations, churches, synagogues, and mosques, 90-plus percent of them provide community services: preschools to prison, food pantries, homeless shelters, health screening. All those organizations, now how many have applied for and gotten charitable choice help in the past four-and-a-half years? One.

HUNT: How would the potential recipients of this be different from what Catholic Charities, Lutheran Ministries, and Jewish Family Services have been doing for decades?

DIIULIO: They wouldn't necessary be all that different. What we're hoping to do is have some of those organizations partner more closely with the smaller community-based religious and other organizations to really achieve civic results together.

HUNT: Final question: You are indeed a oxymoron. A street savvy academic, but you're not a political neophyte, and yet this is the first serious stint you've had in government. In the six or seven weeks you've been here, what's surprised you the most?

DIIULIO: I guess that what surprised me the most, and I guess I am a political neophyte of sorts of sorts, Al, because I've been listening and learning. I've mean, I've been -- I guess I'm sort of a happy warrior, I guess. I just think it's wonderful. People are discussing and debating this stuff, and yet when you listen and learn in Washington, people say you're retreating or equivocating or you don't know what's up. Hey, we're right on schedule it's week four, faith and community issues. It's a big country.

(END VIDEOTAPE)

SHIELDS: Al Hunt, let me just preface it by saying I think this the one truly defining and unique initiative of the Bush administration. You know, everything is kind of predictable, the tax cuts and all the rest of it. This is -- but John DiIulio, did he sound to you in that interview like someone who is not long for the Washington scene?

HUNT: Mark, he is a moral man of total integrity who is interested in what works and not in pursuing some partisan or ideological schemes. So that sounds like somebody who's not going to be a long-termer.

There are lots of legitimate questions about this initiative. I agree with you about it, and John DiIulio is the first to concede that. But Mark, the problems are so deep-seated, other things haven't worked. There are some encouraging initiatives that you hope could be emulated on a larger scale, and I don't think anyone could seriously deny that spirituality plays some role for people who are really in trouble the sort of people who John is trying to address.

The other thing I would say about him is that he is an oxymoron. He is this Ivy League professor who has spent more time in soup kitchens and in drug rehab centers and homeless shelters and prisons than anyone any of us have ever met in the federal government.

SHIELDS: Bob Novak, did it surprise you the question Al Hunt asked John DiIulio, the resistance? You expected the ACLU and sort of the secular left to oppose this in almost knee-jerk fashion, but did it surprise you the Pat Robertsons and the religious right and Marvin Olasky, that resistance and that outspoken opposition?

NOVAK: No, because it bothers me. The program bothers me, the idea of the government getting its nose in these private organizations and charities and any time the government is involved, it usually makes a mess of it.

So, I think Pat Robertson's proposal has a very good basis that you should have -- consider tax credits for these organizations instead of grants. Tax credits rather than deductions. Now, let me add one other thing.

Any time a Republican president names a non-conservative Democrat to a high office, particularly one who is not in politics, he is buying trouble. I remember President Nixon had John Mayor of Harvard as his food nutritionist, and the minute he got in people, started speculating like you are with Mr. DiIulio, when is he going to leave? So, that is a very serious question and of doubtful wisdom by the president in my opinion.

SHIELDS: Bob, thank God the government didn't meddle in the building of the University of Illinois, your alma mater, or the University of Maryland, your favorite team you rooted for today -- Margaret Carlson.

CARLSON: I hate to think that he's too good to succeed here, as Al mentioned earlier. This whole thing, it sounds so good. You say, well, yes, there are so many good organizations we all know, why can't they get a lift from government? Why can't they get that help and duplicate what they're doing?

But you know, as I said a few weeks ago, it's going to set off this minor religious war competing for the money. How do you get it? The established religions already do get it. Catholic Charities, as we all know, gets a lot of the money and then you have Pat Robertson and Jerry Falwell and these people sniping each other, saying, oh, he should get it but he shouldn't. And that's not a religion and, you know, what about Islam? These are not problems we've that confronted before, and I think they're very difficult.

HUNT: Also let us say that look, this guy is not conservative, but he co-authored a book with Bill Bennett, who Bob Novak has revered; he wrote for "The Weekly Standard," a very conservative magazine' he is a protege of that great social conservative James Q. Wilson. So this is not some kind of lefty, Bob Novak.

NOVAK: But I have a little measurement that I always have, Al, and that is if you think a guy is really good, I'm very, very suspicious of him because he's not for the things I'm for.

(LAUGHTER) HUNT: You know, Bob, that never stopped you doing all your Jack Kemp for president columns.

NOVAK: I know.

SHIELDS: Next on CAPITAL GANG, "Beyond the Beltway" looks at Israel's hawkish new prime minister.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. "Beyond the Beltway": Ariel Sharon completed his multi-party coalition government and took office as Israel's 11th prime minister. The 73-year-old former general closed the West Bank town of Ramallah, seat of the Palestinian Authority, and prepared to visit Washington on Tuesday.

Joining us now is Ambassador Dennis Ross, the former U.S. special envoy to the Middle East for more than 12 years, and now counselor at the Washington Institute for Near East Policy. Thank you for coming in, Dennis Ross.

DENNIS ROSS, FRM. MIDDLE EAST SPECIAL ENVOY: Pleasure.

SHIELDS: Great, we appreciate your being here. Will we see real progress toward peace under this legendary hawkish leader of Israel, Ariel Sharon?

ROSS: We are not in a stage where you can focus on a solution. We are in a stage where you have to focus on management. When I hear the analogy of Nixon to China, I say what's the measure you're talking about?

If the measure is diffusing this, managing it, finding a pathway way back towards peaceful coexistence, I think there's a very distinct possibility that he can do that. If the measure is solving the conflict, that's not in the cards right now. It's going take time to get back to the point where you can begin do that.

SHIELDS: Can you say, I mean, not asking you to be a clairvoyant, but can you say the first year is management, and after that -- is there a time you can but on each of those separate stages?

ROSS: First, he's in a government that will have to face elections again in two years, assuming has that the national unity government that he formed will hold, number one.

Number two, I think we're talking about several years. I mean, we had a point where there was an opportunity to end this conflict, and Barak had a mission do so, President Clinton was obviously committed to doing so, and the fact is Chairman Arafat couldn't seize the moment, he couldn't take advantage of the opportunity. When you miss an opportunity, there is a consequence, and it will take time to recoup and get back to where we were.

SHIELDS: Bob Novak, does Dennis Ross, as usual, make sense to you? NOVAK: Yes, he does, and I think there was a great opportunity that was missed, and I believe that Mr. Arafat was at fault, but let me also say that there are a lot of American Jews, there are a lot of my fellow conservatives who just hated General Barak for making these concessions.

The idea that they support Sharon, they want a hard line, and I just want to know where this all ends? What is it at the end of the tunnel if Sharon is going to come in with this very hard line and no chance for peace?

SHIELDS: Al Hunt, do you see a chance for peace?

HUNT: Well, look, I'll defer to Dennis Ross, who I think is one of the greatest public servants we've ever had. I really mean that, Dennis. But I guess what -- I really have a question for Dennis, more than a point here.

ROSS: Sure.

HUNT: When you're at your most optimistic and you've looked down the read 10 or 15 years from now and there's peace over there, do you see a pluralistic Middle East where Jews and Arabs, you know, live together, even, work together, trade together or do you see a separatist Middle East where they live peacefully but they have nothing to do with one another?

ROSS: I think basically this is a process where you go through a divorce first and after you have a divorce, then you can look at reconciliation. It's not going to be a new Middle East the way Shimon Peres first envisioned it back in the early '90s.

You may eventually get there, but you're going to have to go through a process first where each side establishes a certain comfort level with the other. After they establish that comfort level, and then you begin to see a restoration of some amount of trust, then you can begin to see new business being formed, you can see certain cooperation in a way that both sides feel a stake and a self-interest in pursuing it.

SHIELDS: Dennis Ross, let me just ask you, our concentration and focus now is on Ariel Sharon, but what about the Palestinians? What about Mr. Arafat? Has he now forfeited the chance as a leader to really be a true negotiator of peace?

ROSS: I think the problem is that basically he had an opportunity that he couldn't take advantage of to end a conflict. There's a difference between ending a conflict and managing a conflict.

If you ask me does Chairman Arafat want to be able to live in peace with Israel, I will tell you yes, I think actually he does. Is he capable at this point of negotiating a resolution that ends the conflict? The answer is no, he is not. Is there anybody else in the Palestinian side? No. And you have to understand, whatever the criticisms of Arafat internally, and there are many now and they're much more pronounced than they used to be before, he is still an icon. From the standpoint of most Palestinians. he took a movement that had no standing internationally and transformed it. He will always gain credit for that.

Can he create an end to the conflict? No. Can he be someone who manages it? Again, I think so. There were five partial agreements. Ariel Sharon is coming in, and I will tell you, 18 months ago, he and I sat together and he said to me, we can't do what they want do to end the conflict; they can't do what we want. We're going to have to manage this over a period of time.

At that time, I said that's what Oslo was supposed to do, and the chance now is to see if you can conclude. Well, it turns out, we found out that you couldn't at that time. But it doesn't mean we don't have a challenge, and the challenge is stop the violence, create a pathway where you restore a level of confidence so that it becomes thinkable to again end the conflict.

SHIELDS: Margaret.

CARLSON: I wonder, you stop some of the violence, you get a pathway there, but the concessions will never be as great as they were under Barak. Everybody seems to agree that that was the best offer there would ever be. How do you now negotiate with less on the table?

ROSS: What you have to do is you change your sights, because you're not trying to resolve all the permanent status issues, you focus on what it is you can do. What's the challenge of diplomacy? It's to focus on the possible, not the unattainable.

My recommendation is you do two things: One, you have each side create a set of specific behaviors that they will live by day-to-day so you reduce the friction, you reduce the potential for confrontation and conflict. The Palestinians don't incite the violence; the Israelis don't expand settlements. You come up with a code of conduct on the one hand to manage the day-to-day relationship.

The other thing you have to do is you have to say all right, we cannot solve Jerusalem. We cannot solve refugees right now. We probably cannot solve borders right now, but there isn't contention over the issue of statehood. There really isn't contention over the issue of security arrangements, and I think there also may not be contention over the issue of Israeli disengagement. So you begin a political process that focuses on those issues at the same time that you work to change the realities on the ground.

SHIELDS: Bob Novak in Boise, final observation to Dennis Ross.

NOVAK: I would say that General Sharon has the same problems of Arafat in a constituency that he cannot please, that he cannot even do the limited things that Dennis is talking about, so I am in a very pessimistic mood, and I can't imagine much being accomplished in Washington this coming week. SHIELDS: Dennis, final word.

ROSS: I would say two things. First, I think in terms of the visit this week, you're not going to produce results. This is a first visit. This is a chance to get acquainted. The Bush administration deserves a chance to sort of figure out what is possible with Sharon, and then what is possible with the Arab leaders who are going to follow.

I am more optimistic than Bob because I think both sides understand they really don't have an alternative to peaceful coexistence. Where I'm concerned is not whether or not we will not get back on track that moves in that direction, the question for me is when. We may have more testing first, and if there's more testing first, unfortunately, it means more victims. But in the longer run, I'm optimistic.

SHIELDS: Dennis Ross, good to hear your optimism, thank you for being with us. The gang will be back for the "Outrage of the Week."

(COMMERCIAL BREAK)

SHIELDS: Now for the "Outrage of the Week." On the first day of Lent, Catholics around the world have ashes put on their foreheads with a reminder, quote: "Remember you are dust and will return to dust," end quote. When CNN founder Ted Turner noticed ashes on the foreheads of some CNN employees, Turner reportedly called them, quote, "Jesus freaks," end quote, and asked, shouldn't you be working for Fox?

In 1990, Turner called Christianity a religion for losers. Later he denounced Catholics and Pope John Paul II. Now, once again, Ted Turner has profusely apologized and condemned religious intolerance. Ted Turner may be truly contrite, but what he said remains the "Outrage of the Week" -- Bob Novak in Boise.

NOVAK: In 1998, Congress changed the name of Washington's close- in airport to Ronald Reagan National Airport, but passive resistance persists. Announcements by flight attendants often omit the Reagan designation. It is frequently also omitted from signs inside airports. And a Democratic member of the Washington Metro board has prevented the Republican president's name from appearing in subway stops. Don't expect these people to get over the election of George W. Bush when they can't even accept Ronald Reagan's.

SHIELDS: Margaret Carlson.

CARLSON: Current bankruptcy laws delicately balance the creditor's rights against society's interest in giving people who fall on hard times a fresh start. But new legislation destroys that balance, except for the wealthy. Congress keeps the homestead loophole, which allows wealthy folks like Burt Reynolds to file for bankruptcy, but keep millions sheltered in an expensive house. Studies show the little guy rarely abuses the system. So why the change? The largest single donor to President Bush and the Republicans was MBNA, the largest issuer of credit cards in the country.

SHIELDS: Al Hunt.

HUNT: Mark, as revelations surface about Denise Rich's unsavory political contributions and Hillary Clinton's $9.6 million of soft money, most of it funneled through the state party, the Senate considers McCain-Feingold campaign finance reform. President Bush would do nothing about the Denise Rich's, mocking his pledge to restore integrity to politics, and the author of the alternative, Senator Chuck Hagel is a good man with a sham plan that would embrace Hillary's scam. We'll soon see which senators are addicted to this system of political bribery and which one want to clean up corruption.

SHIELDS: Al Hunt is the main man as an exposure of sham and that's the clam.

This is Mark Shields saying good night for THE CAPITAL GANG. Tune in tonight at 8:30 for the premier of "TAKE 5," 8:30 Eastern, 5:30 Pacific. "CNN TONIGHT" is up next.

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