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White House Expresses Regret for Missing Chinese Pilot; California Blackouts Continue; Will McCain-Feingold Survive Court Scrutiny?

Aired April 5, 2001 - 17:00   ET

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


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANNOUNCER: Live from Washington, this is INSIDE POLITICS with Judy Woodruff.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I regret that a Chinese pilot is missing. And I regret one of their airplanes is lost.

(END VIDEO CLIP)

ANNOUNCER: More words of regret from the United States; this time from the president himself. How will China respond?

Rolling blackouts and California politics. It's enough to turn a governor Gray.

(BEGIN VIDEO CLIP)

GOV. GRAY DAVIS (D), CALIFORNIA: They want me to solve this problem. I expect to be judged by how I solve it.

(END VIDEO CLIP)

ANNOUNCER: And she looks like Hillary, she talks like Hillary; there's just one problem:

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I'm not the real Hillary.

(END VIDEO CLIP)

ANNOUNCER: So who is she, and what's she doing outside Bill Clinton's office?

Now, Judy Woodruff takes you INSIDE POLITICS.

JUDY WOODRUFF, HOST: Thanks for joining us. President Bush added his voice today to the expression of "regret" over the loss of a Chinese pilot, in that collision between an American spy plane and a Chinese fighter jet. But the administration still insists it will not apologize for the incident, as the Chinese have demanded.

As discussions between the two countries continue, the spy plane's 24 American crew members remain on the ground in China, with no end in sight to the standoff. We start our coverage with our senior White House correspondent John King.

(BEGIN VIDEOTAPE)

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT (voice-over): The president's tone on day five of the standoff was conciliatory, as senior U.S. officials reported the pace of diplomacy was intensifying, and that there were some signs of progress.

BUSH: I regret that a Chinese pilot is missing. And I regret one of their airplanes is lost. And our prayers go out to the pilot, his family.

KING: The president's personal statement of regret echoed one by Secretary of State Powell a day earlier, in public, and in a letter to China's vice premier.

China's ambassador to the United States made another trip to the State Department. One Chinese diplomatic source described "intensive activities" and said the two governments were "close in touch and working very hard."

One senior U.S. official tells CNN there are indications China will allow access to the 24 crew members on Friday. U.S. officials are pushing for permission for the crew to call home, too. Mr. Bush again made clear that access is not enough, and gently raised the prospect of lasting damage to U.S.-China relations.

BUSH: My mission is to bring the people home. And as to whether or not we'll have good relations, my intention is to make sure we do have good relations. But the Chinese have got to act, and I hope they do quickly.

KING: Mr. Bush told newspaper editors he remains an advocate of trade with China. But his spokesman made clear the outcome of the standoff could influence the White House position in any Congressional debate about China trade.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president is taking it one step at a time.

KING: The administration hopes its statements of regret would soften China's demand for an apology. And two U.S. sources say that in private meetings with the Chinese, the administration is presenting evidence that China's planes have been flying dangerously close to U.S. surveillance flights.

FLEISCHER: The reason we have said -- what the United States government has said what it said about the apology is based on information that we have, and I'm not going to go beyond that.

KING: Top aides say the president is being briefed day and night on any developments.

(END VIDEOTAPE)

KING: Senior U.S. officials say the next move is up to the Chinese. They're waiting here at the White House to see how China reacts to the president's public statement of regret, and whether indeed U.S. diplomats are granted access to the 24 crew members -- Judy.

WOODRUFF: John, it is almost as if the timetable that the United States has set is not the same timetable that the Chinese have in mind?

KING: It's one of the reasons the United States has declined to list any specific date. The president has said they should be released now, but he hasn't said what would happen. He hasn't set a specific time line. U.S. officials asking for patience in any conversations we have with them, saying, look, we understand the Chinese move a bit more slowly than we in the United States, but certainly -- and you see the outcries in Congress, you see even groups like the U.S. Chamber of Commerce, very pro-business, pro-China, saying there could be long-term damage to the relationship here.

Certainly, as our week here in the United States draws to a close, the United States and senior officials saying tomorrow is a very important day in this standoff.

WOODRUFF: Why do you say tomorrow? Or why are they saying tomorrow, John?

KING: Because U.S. officials all day have been saying there's some progress being made in these private diplomatic conversations, urging us to be patient. The White House strategy today, privately, the officials in the U.S. government very upset that the U.S. crew members are apparently being interrogated without any U.S. representatives present.

That would normally bring a public outcry from the administration, but administration spokesmen under orders to be calm about that, not to be critical about that. They are hoping all of this private diplomacy bears some fruit. But, U.S. officials conceding that if we are at this point tomorrow and there's no evidence the diplomacy is working, the United States may have to change its tactics.

WOODRUFF: Well, John, is there something that the administration has in mind as the next step, that it could take if they don't have results by tomorrow?

KING: Well, that's the big debate. Does the president start talking publicly about things he might do if this is not resolved quickly? He could cancel his planned trip to Beijing in the fall. He could say the United States is prepared to oppose China's effort to host the 2008 Olympics.

The White House does not want to have those conversations in public because they believe it would only stiffen China's resolve and make it harder to win the release of the 24 crew members, so the line here is the president's priority is for everyone to ratchet down the rhetoric, let the diplomacy play out for a few more hours, it's almost day break in China now. See if there is progress Friday. If not, they do concede the president will have to reconsider just how he handles this.

WOODRUFF: All right, John King, at the White House. Thanks.

For more on diplomatic efforts to resolve the standoff, let's check with CNN State Department correspondent Andrea Koppel.

Andrea, I believe you were listening to John talking about the White House being hopeful for signs of progress. What are you hearing at the State Department?

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: Well, I'm hearing here, Judy, that officials feel that this was, you know, this was a very productive day. They feel that overnight they did get a positive response from the Chinese to Secretary of State Powell's letter, the letter that he wrote to China's vice premier, the Chinese made remarks this morning, that is the Chinese ambassador to Washington during his meetings here at the State Department, that some of what Secretary Powell had suggested he put forward some ideas as to how the two sides might bridge the difference, some mechanisms for them to do that.

And his expression of regret yesterday. He said it a couple of times and he repeated in his letter that that went over well and that really did resonate with the Chinese government. And they feel that they're making some progress, Judy; they don't feel they're out of the woods yet, but feel they're moving in that direction.

WOODRUFF: Andrea, what do they say about the timetable issue. The fact that Americans, United States, seems to be operating on a more speeded-up timetable than the Chinese appear to be?

KOPPEL: The sense you get, Judy, is that this administration and officials here at the State Department are very well aware of the American news media's cycle, and the fact that if this incident should run and last through the week, and run until Saturday, when by then it will have been a full week, that by the time Sunday talk shows begin, and by the time the interviews are done with various legislators on the Hill, the rhetoric will again intensify.

And so, they feel that pressure, and they also recognize that there are 24 Americans who are being held and their families are obviously worried and concerned about them. So, they want to get it wrapped up as quickly as possible.

WOODRUFF: Do you have a sense, Andrea, what the next diplomatic step could be? They've been having conversations with the Chinese ambassador to the U.S. Is there another clear diplomatic step that could come next?

KOPPEL: I'm told, Judy, that the next step will not be coming from this building, they don't expect any other meetings with the Chinese ambassador. Today, I'm told that now, all eyes are focused on Beijing, and as John mentioned, it's almost day break there, and at that point the U.S. ambassador, Ambassador Prueher, would pick up the ball from there and resume his talks with the Chinese foreign ministry. It's kind of ping-pong diplomacy here as they fill 24 hours in a day.

WOODRUFF: All right, Andrea Koppel at the State Department.

Senator Richard Lugar serves on both the Senate Foreign Relations Committee and the Senate Intelligence Committee. He joins us from Capitol Hill.

Senator Lugar, are you getting the small positive signals that we're hearing from our correspondents?

SEN. RICHARD LUGAR (R), INDIANA: No, I'm not hearing positive signals, but I don't hear negative ones either. I think this is a time of watchful waiting; there is obviously the diplomatic intensity that's been described to you in this program, and it should be productive. The Chinese have raised several questions, including, who is responsible?

They alleged at some points that we were at fault, that we should not be flying these flights to begin with, and should stop and turned them a nuisance, they thought, as a matter of fact, that compensation might be required in addition to an apology.

But, in fact, they want to know exactly what happened. And we have been able to offer, I would hope, pretty good evidence of precisely what occurred. So, this may form finally a basis, given the fact that the president expressed regrets that he did today, the sensitivities of the Chinese historically that we have not valued life in China in the same way we value it in this country, of course, is erroneous, but we need to point out we have a high value of life in both countries and a high value on the relationship, which is in really severe jeopardy at this point.

WOODRUFF: Senator, are you suggesting that the Chinese are coming around to the U.S. version of how this happened, that it was an accident, that the Chinese plane came too close to the U.S. plane?

LUGAR: I think that's absolutely inevitable, unless, dogmatically, the Chinese refuse to take a look at facts. This is one of these situations that not only can be explained, but can be explained in detail, and I'm sure is being explained in detail.

But the fact is, too, it was unexpected by the Chinese or us. Indeed, the landing by our aircraft, miraculous as it was that those 24 Americans were saved, was a big surprise. How well the Chinese are able to operate in these crisis situations -- or whether at least some elements within the Chinese political realm want to use incidents of this variety to tweak the system, to see if there are opportunities to be mined from, that we can't know. But nevertheless, hopefully they will get over it. The fact is that we have very, very serious situations and the Chinese leaders know that.

WOODRUFF: How disturbing is it, senator, that the Chinese are interrogating those crew members?

LUGAR: Well, that is disturbing, particularly given the fact that there is not other American diplomatic presence there. But nevertheless, the Chinese, I suppose, are attempting to gain the facts. They would say they're going to get the facts. At this point, we believe our crew members have not been mistreated.

But as you pointed out, they've been there a long time. It is time for them to be released. The intensity of the American feeling with regard to that will increase hourly.

WOODRUFF: But what about the -- this came up in the questions with our correspondents a minute ago, senator -- that this whole sense that the United States is on a much more speeded up timetable, thanks to our news cycles in this country, whereas the Chinese may not feel that urgency to get this resolved?

LUGAR: I doubt whether that's the case. Given interviews that CNN and others have done with people in China, it is clear that they feel anger, that they've been stimulated by news reports to believe that Chinese nationalism has been maligned, or that a pilot was needlessly killed, or various other things. So the Chinese government is attempting, apparently, to restrain these emotions, having got them started.

But it's a dangerous course, they realize that. That civilian- military leadership dichotomy there is apparent, the dichotomy between those who want commerce and those who are nationalists. So they are riding a very, very tough road in terms of internal politics, which they must surely see, and I would hope, want to resolve swiftly.

WOODRUFF: Well, if there is such a dichotomy, then how does it get resolved?

LUGAR: It gets resolved because somebody in China is in charge. For the moment, we may not be certain who that is. With Jiang Zemin having taken, inexplicably, a two-week state visit to another continent, obviously it must be someone else, unless he has left instructions, or in fact still is in charge from wherever he is. But there appears to be confidence, I would gather, on the Chinese side that they are going to come to a resolution, or he would not have left.

WOODRUFF: And finally, senator, Andrea Koppel at the State Department just reporting for us that this is a time where the ball is really, you know, in Beijing, that there's nothing more the U.S. can do in Washington diplomatically. That this is a point where we wait for them to make the next step. Do you see it this way?

LUGAR: Yes, because the next step must be release of our people. And, at least, an opportunity to repair the plane to see if it can fly out. Those are the prerequisites for moving ahead strongly with the trade relationship, the political relationship, the other agenda that was discussed by high-ranking Chinese officials who came over here just, in fact, last week.

WOODRUFF: All right, Senator Richard Lugar, we thank you very much for joining us.

LUGAR: Thank you, Judy.

WOODRUFF: Thank you.

Ever since it was announced that the U.S. Navy plane had made an emergency landing in China, the Bush administration has chosen its words carefully. Our senior political analyst Bill Schneider has some thoughts about words that have been used, and words that have been avoided -- Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: That's right, Judy. There's literally a war of words going on in the China affair. The administration insists this is an "accident," not a "crisis." It involved a "surveillance" plane, not a "spy" plane. The Chinese are demanding an "apology," but both the president and the secretary of state have expressed "regret." And most important, the American servicemen and women are not -- well, the "H" word, because if people see them as, you know, "hostages," that puts the president in a political bind.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): President Jimmy Carter's preoccupation with the Iranian hostage crisis turned it into a personal and national obsession: "America Held Hostage."

JIMMY CARTER, FORMER PRESIDENT OF THE UNITED STATES: This is an issue that's been constantly on my mind and on the minds of the American people.

SCHNEIDER: Despite his denials, Ronald Reagan made his worst decision as president, secretly trading arms to Iran, because of his frustration over a hostage situation.

RONALD REAGAN, FORMER PRESIDENT OF THE UNITED STATES: The United States has not swapped boatloads or planeloads of American weapons for the return of American hostages, and we will not.

SCHNEIDER: President Bush's father got caught up in a hostage crisis in 1989, when terrorists killed American Lieutenant Colonel William Higgins in Lebanon. The president veered between treating the matter as a grave national crisis and trying to downplay the issue.

GEORGE BUSH SR., FORMER PRESIDENT OF THE UNITED STATES: I don't want to be responsible for the loss of innocent life.

SCHNEIDER: If a president takes a situation like this too seriously, the United States government ends up being held hostage by the crisis, as President Carter's was. The other side controls your agenda, which is why President Bush has, so far, been cautious.

BUSH: Our approach has been to keep this accident from becoming an international incident.

SCHNEIDER: But there are ominous signs. Yellow ribbons. The "H" word.

REP. DANA ROHRABACHER (R), CALIFORNIA: Until our 24 military personnel are returned, they should be considered as hostages being held by a hostile power.

SCHNEIDER: Yes, the American service personnel are being held against their will, but they are being held by a government, not a group of terrorists threatening to kill them. Terrorists have only one interest: their cause. But a government like that of China has a wide variety of interests, like U.S. arms sales to Taiwan, like hosting the Olympic games, like trade.

SEN. CHARLES GRASSLEY (R), IOWA: They want to get into the World Trade Organization. Respect for law is a basis of the World Trade Organization membership.

SCHNEIDER: A hostage crisis immobilizes the United States. The U.S. government's actions are limited by American values. Protecting American lives takes precedence over all other objectives, which is why the American people are surprisingly patient. It wasn't until five months into the Iranian hostage crisis that President Carter lost public support. President Bush's response has been to ratchet up the pressure on China. On Monday, he expressed frustration.

BUSH: Failure of the Chinese government to react promptly to our request is inconsistent with standard diplomatic practice, and with the express desire of both our countries for better relations.

SCHNEIDER: On Tuesday, it sounded like a veiled threat.

BUSH: This accident has the potential of undermining our hopes for a fruitful and productive relationship between our two countries. To keep that from happening, our servicemen and women need to come home.

SCHNEIDER: Today, the pressure went up. In the end, there is only one standard of success.

(END VIDEOTAPE)

SCHNEIDER: In a hostage crisis, the U.S. often looks helpless, and the president looks ineffectual. And politically, that is very damaging, which is why the Bush administration insists this is not a hostage crisis -- Judy.

WOODRUFF: All right, Bill Schneider. Thanks very much.

Still ahead on INSIDE POLITICS:

(BEGIN VIDEO CLIP)

SEN. DICK DURBIN (D), ILLINOIS: Someone in that department has been caught with their hand in the hamburger. (END VIDEO CLIP)

WOODRUFF: The regulation that was almost cut from the school lunch menu. A look at why the Bush administration backed off.

But first:

(BEGIN VIDEO CLIP)

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT (voice-over): With the Bush tax cut on the ropes in the Senate, Republican leaders acknowledge Democrats have the momentum.

(END VIDEO CLIP)

WOODRUFF: Jonathan Karl on the GOP's 11th-hour push: can Republicans make a comeback before this round of the Capitol Hill budget battle ends?

This is INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: Tomorrow, the Senate is slated to cast the final vote on the Bush budget outline. So far, Republicans have not been able to muster enough votes for passage, and as Jonathan Karl reports, with the clock ticking, GOP leaders are turning up the pressure.

(BEGIN VIDEOTAPE)

KARL (voice-over): With the Bush tax cut on the ropes in the Senate, Republican leaders acknowledge Democrats have the momentum.

SEN. DON NICKLES (R), OKLAHOMA: Maybe they're on a roll. Maybe the people who want to tax and spend are on a roll.

KARL: But in the face of setback that gutted $450 billion out of president's $1.6 trillion tax cut proposal, Republicans are working furiously to resuscitate the full tax cut before the Senate takes a final vote on the budget outline, expected Friday.

NICKLES: I consider that a setback, and I hope to repair the damage before we're done, by tomorrow night.

SEN. KAY BAILEY HUTCHISON (R), TEXAS: We are going to try for the next two days to bring sanity into the budgeting process.

KARL: Republican leaders have Vermont Republican Jim Jeffords in the crosshairs. CNN has learned Vice President Cheney met with Jeffords Thursday morning, but without success. After the meeting, Jeffords sent Cheney a letter formally rejecting White House offers that fall short of his bottom line demand: $180 billion in increased special education spending as the price for his vote on the tax cut.

The White House is also working on Nebraska Democrat Ben Nelson, who Republicans have long hoped would support the budget. After Nelson voted Wednesday night to slash the tax cut, White House budget director Mitch Daniels called Nebraska's largest newspaper and blasted Nelson's vote, saying it, quote: "Cut severely into the tax relief that president wants for Nebraskans and other Americans. It did surprise us and disappoint us."

Daniels also said Nelson was apparently, quote, "overcome by the pressure he couldn't withstand from his party elders." An aide to Nelson called the White House criticism "unhelpful" if they are trying to win his support.

Democrats, meanwhile, say this week's developments show the president's tax cut is dead, regardless of the final vote on the non- binding budget outline.

SEN. CHARLES SCHUMER (D), NEW YORK: The bottom line is this: the president shot too high. He put too much of the surplus into tax cuts.

(END VIDEOTAPE)

KARL: Republicans are saying they are deeply frustrated with their own fellow Republican Jim Jeffords, and Majority Leader Trent Lott is now telling people that they have essentially written Jeffords off, they no longer count on striking a deal with him to get his support for the budget outline. That means that if the president's budget is to pass with the kin of tax cut he is looking for, he is going to find at least one more Democrat to come on board -- Judy.

WOODRUFF: All right, Jon Karl, and we want you to stand by, Jon, because we want to bring back our senior White House correspondent John King at this moment. John, talk about how the president is perceived by some as not as involved as he should be personally in lobbying senators?

KING: Well, there was some grumbling, Judy, in the past 24 hours from senior Republicans on Capitol Hill and in the Senate that the president needs to "step up," in their words. Vice President Cheney, as Jon Karl mentioned, has been working lawmakers quite vigorously on Capitol Hill.

The White House is a bit sensitive to that criticism. You saw President Bush in his speech to newspaper editors today talk about how -- used the word "senators" repeatedly, trying to increase some political heat on the Senate. But aides here at the White House saying the president has made some calls, and that he will make more calls between now and the final Senate vote on that budget resolution, but they reject the notion that the president is not engaged. They say there is a moment when they use the president's arm-twisting, and they don't believe that they used -- they believe they have used it when necessary. They say they don't want to abuse it.

But they do acknowledge privately here, quite a setback. Especially, as Jon Karl mentioned, Senator Nelson's vote. They had worked him quite aggressively, and they thought they had that vote.

WOODRUFF: Well, Jon Karl, given where Jim Jeffords is, and saying he's not going to support the president, given the difficulties with Ben Nelson, what other Democrats can the Republicans go after?

KING: Well, the Republicans have not given up on Ben Nelson yet. They actually think they have a better chance, some of them, than actually -- winning over Ben Nelson than they do winning over Jim Jeffords.

But there is another Democrat you haven't heard a lot about recently, and that's Max Cleveland of Georgia. Of course, Max Cleland's fellow Georgian, Democrat Zell Miller is the sole Democrat that's on board for the whole Bush tax cut, and they believe that Cleland, who's up for re-election next year, is facing increased pressure to support a tax cut. So, he is somebody they are looking at.

If you noticed, when John Breaux came out with his compromise budget proposal, Max Cleland was not one of the people joining on with John Breaux, so they still think there is a chance there for Max Cleland, but they say it's a long shot.

WOODRUFF: All right, Jon Karl at the Capitol and John King at the White House, thank you both.

And speaking of Senator Ben Nelson, I interviewed him just about an hour ago. We're going to show that to you in just a moment on how he feels he's caught in the middle of the budget battle.

And Republican Senator Lincoln Chafee, a look at how he is weathering the pressure from his party.

(COMMERCIAL BREAK)

WOODRUFF: As our Jonathan Karl reported, Senator Ben Nelson is one of the Democrats targeted by the Republican Party. A little while ago, I talked with Senator Nelson, and I asked him how he responds to the critical comments that the White House budget director made to a Nebraska newspaper, "The Omaha World Herald," following Wednesday's vote.

(BEGIN VIDEOTAPE)

SEN. BEN NELSON (D), NEBRASKA: He also said that he admired my independent spirit. But it seems that they admire it more when it's in their favor, then when it goes the other way. I think that the truth of the matter here is, that I have been working very diligently to try to bring about a bipartisan resolution of this tax cut and budget.

That's why Senator Breaux and Senator Jeffords and I and others today introduced a tax cut of $1.25 trillion. I think that if we can find a way to bridge the gap between 1.250 and 1.6, we are talking trillions, I think we can have a tax cut and a budget that will get bipartisan support. That's what it's all about.

WOODRUFF: So when Mitch Daniels of the White House tells the "Omaha World-Herald" that Senator Nelson was overcome by the pressure he couldn't withstand from his party's elders, how does that make you feel?

NELSON: You know, it's not about that at all. And I think, probably, what are we seeing here is as we get near the end, people in their -- their rhetoric gets a bit more heated. And so what I -- what I really want to say is that I voted for education, I voted for agriculture. I support those, and I have said all along and I did when I was campaigning, that I wanted a tax cut.

But I wanted one that didn't cut hope and one that would adequately taking care of reducing the debt, retiring Social Security, obligations as well as Medicare, with the prescription drug benefit, education, military spending, as well as agriculture. And so, I think that my votes have been true to that.

WOODRUFF: And yet, they are saying that your vote, what you are supporting adds to federal spending, beyond what they think is reasonable.

NELSON: Well, I think that different people can have different thoughts about that and both perhaps be reasonable. My point is that I voted for a $97 billion appropriation for agriculture. My opponent or my colleague -- former opponent voted for $165 billion, even though he signed a letter for $100 billion.

I think that the truth of the matter is that you have different views of this, and right as we get to the end of the line here, there will be differences of opinion. But I think we will have a tax cut. It's going to be in the 1.25 level -- trillion 250 or up to 1.6. It's a question of where the negotiations begin.

WOODRUFF: But you are saying the president is not going to get what he wants here.

NELSON: Well, there don't seem to be enough votes for that. Senator Jeffords and Senator Chafee from their side of the aisle have left. And they are supporting the 1.250.

I think what this needs to be about is a bipartisan resolution. The president ran, saying that he wanted to be bipartisan. That he wanted to bring a different culture to Washington, to be a uniter and not be a divider. I ran on the same platform; I think that we can find a way to come together.

WOODRUFF: But he has been targeting senators like you who are viewed as people he could persuade, he did very well when he ran for president in your state.

NELSON: Very well.

WOODRUFF: In Nebraska. Is this the sort of tactic going after you that will help him down the road, do you think?

NELSON: I don't know. I think that the people of Nebraska voted for me as well and I told them that I wanted the tax cut. But I wanted the tax cut to take care of those items that I mentioned including agriculture and education. And when I vote for those appropriations, I think that I am voting for the way that the people of Nebraska want me to because I am supporting the major tax cut. I never heard anybody think that $1.250 trillion is anything but a major tax cut; and I think that we can close the gap if all of the parties will stop the rhetoric and sit down at the table and begin to discuss.

WOODRUFF: How do you know that the country can't afford a tax cut of the size that the president wants.

NELSON: Well, I think that the question is, whether you can do something over 10 years with those kinds of projections. And they are all iffy. It's like projecting and predicting the weather over a period of time. It's very difficult to do.

But whether or not it's 1.6 or 1.250, the key here is, in order to get the bipartisan tax cut, there has to be give and take. And I think that that sends a good message to the people of America, to the financial markets, to the people of the world, that things are changed in Washington and you can get the bipartisan support for a major tax cut.

WOODRUFF: But you are saying the president hasn't recognized this up until now, is that what you are saying?

NELSON: We have had discussions and conversations and I hope that is those discussions and communications will continue into the future, and do it directly with one another.

WOODRUFF: But has that happened until now?

NELSON: I have spoken to the vice president on several occasions in the last two days. And yes, it is happening. But these are -- these are very delicate times. There are very important issues out here. Education and agriculture. Military spending last evening. A number of issues that are coming up yet today. And I am very hopeful that we will be able to find a solution that is bipartisan.

I have been asked by others, what do you want for are a vote? It's not about that. The only thing I want is bipartisanship. A tax cut and a budget that will bring in 55 or 60 or more votes. I think that sends the right message. To do it on the 50-50 with the tie breaker by the vice president, I don't think sends the message as strongly, then something that is bipartisan.

WOODRUFF: All right. Well Senator Ben Nelson. We thank you for joining us, we appreciate it.

NELSON: Thank you, Judy. It's good to be here.

(END VIDEOTAPE)

WOODRUFF: With the partisan battle over the president's budget intensifying, Republican Senator Lincoln Chafee has come under fire for his decision to vote against the proposal. Our Jonathan Karl spent some time with the senator to find out why he chose to weather his party's criticism

(BEGIN VIDEOTAPE)

KARL (voice-over): As the Republican most likely to vote against his party, Lincoln Chafee can sometimes single-handily hold the balance of power in an evenly divided Senate. That makes him the Democrats' favorite Republican.

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: He is under a great deal of pressure and in spite of that he is -- he has stood his ground, and I admire that.

SEN. LINCOLN CHAFEE (R), RHODE ISLAND: That's one of the difficult parts in taking this position, is to be lumped in with Tom Daschle, when you're really seen as -- because the atmosphere has been so partisan here, I just think I'm doing the right thing, I don't want to be cast as toeing the Democratic line.

KARL: But when it comes to tax cuts, Chafee has consistently been lined up with Democrats and against George W. Bush, dating back to his own election campaign last year.

CHAFEE: You could almost count on the question, do you support President Bush's 1.3 -- at the time -- trillion dollar tax cut. My answer was a stock one: no, it's too big.

KARL: Chafee won his election in Rhode Island by a 15-point landslide. At the same time, Bush lost the state by an even larger 29 points. To survive in a state where only 14 percent of the voters are registered Republicans, Chafee sees his father, the late Senator John Chafee, as the role model.

CHAFEE: A Republican that did well, was very successful in a Democratic state, was governor and then Senator for all those years, some tough campaigns, so I always ask, how would've dad voted on this?

KARL: The elder Chafee was among the Senate's most liberal Republicans, but he was also consistently seen as a party loyalist on big votes, and some Republicans privately say the elder Chafee would never vote against a new Republican president's first budget.

CHAFEE: Well, I'm not an exact clone, I guess is the answer to that, and in a way, I think there's some party loyalty here in protecting our party. If we get into trouble with too deep a tax cut, it's going to hurt our party.

KARL: As the Senate nears a vote on the president's budget outline, Chafee is again giving his party's leaders heartburn, this time by not only opposing the president's budget, but also signing on to a competing proposal offered by Democrat John Breaux.

Jonathan Karl, CNN, Capitol Hill.

(END VIDEOTAPE)

WOODRUFF: An 11-month-old lawsuit with the Congressional campaign committee and the House Majority Tom DeLay was resolved today and not without the continuing bickering between the two sides. The two parties signed an agreement dismissing the suit in which the Democrats accused DeLay of violating the racketeering laws by moving the large contributions among several organizations and using his office to threaten donors if they gave money to Democrats. The dismissible came just two weeks before arguments were scheduled to begin in federal court.

Delay hailed the agreement, calling the lawsuit "never anything more than a desperate ploy to win back the House." The Democrats lawyer, Bob Bower, though, disagrees, saying that because of the lawsuit, "DeLay's political schemes have been destroyed."

Coming up on INSIDE POLITICS, results from the Marine Corps investigation into a fatal crash of its experimental Osprey aircraft.

And the White House back pedals its announcement to end certain safety tests with school lunch meat. Stay with us.

(COMMERCIAL BREAK)

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

The husband of a Chinese-born academic who is being held in China for espionage, says the Sino-American diplomatic row is harming his wife's prospects. Gao Zhan was taken into custody almost two months ago, but was not formally charged with spying until after the military aircraft collision on Sunday. Her husband maintains that she is innocent.

Also today, a Republican senator announced that he'll introduce legislation to grant U.S. citizenship to Gao.

(BEGIN VIDEO CLIP)

SEN. GEORGE ALLEN (R), VIRGINIA: We are simply, with this legislation, asking on humanitarian grounds that Gao Zhan be released so she may return to her family and her university campus. We want to make her a United States citizen, because I believe that will afford her protections, it will afford her rights that she doesn't currently have as a permanent U.S. Resident.

(END VIDEO CLIP)

WOODRUFF: The White House said today that there is no link between Gao's arrest and the diplomatic standoff between Washington and China.

New information today could affect the future of the Marine Corps' troubled V-22 Osprey aircraft. Investigators say that a deadly Osprey crash in December of last year was caused by a hydraulics system failure, compounded by a computer software glitch. The Marine Corps acknowledges that it knew about problems with the hydraulics system more than a year before the December crash. That crash was one of two fatal Osprey crashes last year that killed a total of 23 Marines. The Osprey fleet has been grounded, while officials continue to review the Osprey program.

No change of venue for the murder trial of Kennedy cousin Michael Skakel. A Connecticut judge has ruled that Skakel's case will be heard in Stamford, Connecticut. Prosecutors have wanted the case moved to Bridgeport. Skakel is the nephew of Ethel Kennedy. He is charged with beating his neighbor, Martha Moxley, to death in 1975, when they were both 15 years old.

What a difference a day and some good news on earnings can make for the markets. Dell Computer and Alcoa had good news about their forecast for earnings. The markets started out the day with big gains, and never looked back. The Dow jumped more than 402 points. The Nasdaq bounced back, gaining 146 points, or nearly 9 percent in value.

There's more on the markets on the "MONEYLINE" news hour, and that's at 6:30 Eastern, right after INSIDE POLITICS.

A warning from Congress today on tax evasion schemes that are proliferating on the Internet. CNN's Brooks Jackson looks at the growing problem of scams to help people avoid paying taxes.

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): Here is one dot- com industry is that thriving: dubious schemes to avoid taxes sold over the Internet. Critic in Congress called it "mass marketing of tax fraud."

GRASSLEY: We want to expose these hucksters that are selling this snake oil with the idea that somebody could save some taxes that are in violation of our -- of our Internal Revenue code.

JACKSON: Fraud watchdogs say fraud is exploding out of control.

J.J. MACNAB, FINANCIAL PLANNER: Ten years ago, Leona Helmsley made her very famous statement, only the little people pay the taxes. Well, the little people have listened, and they don't want to do that anymore.

JACKSON: MacNab tracks Web sites selling dubious tax schemes, and says they've increased at least 170 percent in the last year alone.

At Senate Finance Committee hearings Thursday, the IRS conceded that fraudulent promoters have become a serious problem, quote, "organized tax evasion."

CHARLES ROSSOTTI, INTERNAL REVENUE SERVICE: There are definitely hundreds if not thousands of serious promoters.

JACKSON: The IRS has been cracking down, but according to some senators, not hard enough. JACKSON: How many of those thousands have you actually arrested?

ROSSOTTI; Well, we've had, let me see, 117 convictions over the last few years, and we have 135 investigations right now.

JACKSON: Senators called for an even stronger action, saying too many gullible taxpayers are being lured into criminal schemes. Witnesses urge the IRS to monitor the Web daily and move quickly to shut dubious Web sites.

ROBERT SOMMERS, TAX ATTORNEY: This is a consumer fraud. There is no First Amendment right to go out and commit consumer fraud in any form.

JACKSON: But IRS commissioner Rossotti said he lacked legal authority to close Web sites on his own, and that getting enough evidence for a court order requires lengthy investigation.

(on camera): It's an about-face for the Finance Committee, which only a few years ago held hearings painting the IRS as too tough on taxpayers. Then it pushed through legislation reducing levels of enforcement. Now the pendulum is swinging back.

Brooks Jackson, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: The White House is addressing the question of school lunch meat safety today. Ahead on INSIDE POLITICS: the Bush administration's revised position.

(COMMERCIAL BREAK)

WOODRUFF: The Bush administration reversed itself today on testing beef for school lunches. The White House now says that tests for salmonella will continue. This follows a highly criticized announcement last week that the government would end the tests.

Elizabeth Cohen has the story.

(BEGIN VIDEOTAPE)

ELIZABETH COHEN, CNN CORRESPONDENT: It seemed like a done deal: the USDA last week told meat suppliers that soon they could stop testing ground beef for salmonella contamination. This pleased the beef industry and outraged food safety advocates. The USDA even went so far as to post a draft of the new regulations on its Web site.

But Thursday afternoon that document disappeared from the site, and Bush spokesman Ari Fleischer told reporters that Agriculture Secretary Anne Veneman had just announced she'd never intended to stop Salmonella testing, it was all the work of an underling.

FLEISCHER: She's made her decision today, and made it clear, that the United States Department of Agriculture will continue to have those standards in place to protect school lunches so that we can inspect the meals so there is no salmonella present.

COHEN: Reporters asked, how could that happen?

FLEISCHER: I may be new in town, but I guess that's the first instance of a mid-level or an official at an agency saying something and the press getting a hold of it, and the press reporting it, without it being authorized by the secretary.

COHEN: Whatever caused the change in plans, Democrats and consumer advocates are happy.

DURBIN: Someone in that department has been caught with their hand in the hamburger. And as a result of that, we are going back to the standard that should apply.

COHEN: But the beef industry, which donated heavily to President Bush's campaign, is upset.

SARA LILYGREN, AMERICAN MEAT INSTITUTE: We are disappointed, because we'd like to see a change made. But we think that the administration will probably continue to listen to all the interested parties. We just hope we can keep on talking and maybe work towards a smarter standard.

COHEN: In a statement today, the U.S. Department of Agriculture said they would consider new measures to increase food safety. But critics say they're not expecting much. They say the Bush administration has already dismantled regulations intended to protect clean air and water, and they fear food might be next.

Elizabeth Cohen, CNN, Atlanta.

(END VIDEOTAPE)

WOODRUFF: Still ahead, why the power crisis may be dimming the California governor's hopes for a smooth reelection effort. The latest from the Golden State when we return.

(COMMERCIAL BREAK)

WOODRUFF: Tonight, California Governor Gray Davis plans to address his state residents, and he has asked California television stations to carry his remarks live. Davis is expected to talk about the energy crisis, from the newly approved rate increases, to his administration's plan for dealing with the power situation.

As our Anne McDermott reports, Davis is already paying a political price for the rolling blackouts and soaring costs.

(BEGIN VIDEOTAPE)

ANNE MCDERMOTT, CNN CORRESPONDENT (voice-over): A lot of the time, being governor of California is a pretty good gig, unless the lights go out. And Governor Gray Davis has been scrambling lately, trying to solve the energy crisis as he plunges in the polls. One recent survey shows the governor's popularity over the past couple of months has been cut in half. And this is a man some have thought might one day run for president.

ERIC SCHOCKMAN, POLITICAL ANALYST: His ratings are down, but his fund-raising is up.

MCDERMOTT: In fact, he's raised $26 million since taking office in 1998, and money is still coming in. That helps his reelection prospects in 2002 -- that, and the fact that there isn't a lot of competition out there. Or there didn't seem to be much until all that "Terminator" talk.

(BEGIN VIDEO CLIP, "TERMINATOR")

ARNOLD SCHWARZENEGGER, ACTOR: I'll be back.

(END VIDEO CLIP)

MCDERMOTT: Arnold Schwarzenegger is said to have begun the buzz himself. Though last November, he seemed relieved when a publicist helped steer him away from a political question.

SCHWARZENEGGER: Thanks for saving me on that one.

(LAUGHTER)

MCDERMOTT: But not all analysts think such a candidate would be credible.

SCHOCKMAN: I think it's a great delusion of grandeur, at best.

MCDERMOTT: The governor, for his part, says he's just focusing on the energy crisis.

DAVIS: We need every Californian, every one of you, to cut back at least 10 percent of the electricity you consumed last year. That is not hard.

MCDERMOTT: But that may bring to mind the days of malaise, when Jimmy Carter asked for conservation efforts during an earlier energy crisis, before being trounced in the polls by another California governor.

But the current governor doesn't worry about the past, and voters don't blame him for this crisis. They just want him to make it go away.

DAVIS: They want me to solve this problem. I expect to be judged by how I solve it.

MCDERMOTT: And, he adds, Californians seem to always survive the worst, whether the worst is a mud slide, earthquake, brushfire or blackout. And Davis seems to be saying he's a survivor, too.

Anne McDermott, CNN, Los Angeles.

WOODRUFF: Much more to come on INSIDE POLITICS. The latest on the U.S.-China standoff is next. And after that, we'll get Bob Novak's take on the political fallout from the China standoff.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH: My mission is to bring people home. And as to whether or not we'll have good relations, my intention is to make sure we do have good relations, but the Chinese have got to act.

(END VIDEO CLIP)

WOODRUFF: President Bush puts the ball in China's court as the international standoff wears on. Plus, will Senators McCain and Feingold soon see their effort tied up in the courts? The legal opposition to campaign finance reform. And later: does New York's junior senator have a twin?

CNN's Jeanne Moos investigates.

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

WOODRUFF: There appears to be cautious optimism here in Washington about the spy plane dispute with China; 24 crew members from an American surveillance plane remain stranded in China, but State Department sources tell CNN that there are signs of progress in discussions with the Chinese government. One day after Secretary of State Colin Powell offered his regrets, but no apology, President Bush offered a similar statement.

(BEGIN VIDEO CLIP)

BUSH: I regret that a Chinese pilot is missing, and I regret one of their airplanes is lost, and our prayers go out to the pilot, his family; our prayers are also with our own servicemen and women, and they need to come home.

(END VIDEO CLIP)

WOODRUFF: Chinese President Jiang Zemin arrived in Chile today to begin a two-week tour of Latin America. Some observers fear his absence from Beijing could delay a final resolution of the dispute.

For more on today's developments, let's bring in our military affairs correspondent Jamie McIntyre and our senior White House correspondent John King.

John, let's start with you; first of all, where do the negotiations between the U.S. and China stand right now?

KING: Well, those negotiations, Judy, U.S. administration officials tell us depend on what Beijing does next. It is just early morning now, China time, and U.S. officials are waiting to see how the president's statement of public regret is received in Beijing. And also, we're told by senior administration officials, that there are, quote, "indications, but no guarantees" that U.S. diplomats will be allowed access to those 24 crewmembers on Friday, China time.

Now, as the United States waits to see what happens there, also some domestic politics the administration is taking care of. Secretary of State Colin Powell traveling to Capitol Hill this evening to meet with members of the Senate Foreign Relations Committee. We're told by senior officials he has two major goals: one, to bring those members up to speed on the conversations, negotiations with the Chinese government; and two, to urge members of the Senate and other members of the Congress to follow the administration's lead in any public statements here.

The White House says this is a very sensitive moment. They believe we will see if this diplomacy will bear fruit in the next eight to 10 hours; they don't want any public comments in the United States to inflame the situation.

WOODRUFF: All right, and now, John, I want you to stand by; I want to go to Jamie McIntyre at the Pentagon.

Jamie, I understand there is new information at the Pentagon in terms of an understanding of exactly what happened with this collision.

JAMIE MCINTYRE, CNN MILITARY AFFAIRS CORRESPONDENT: Well, I guess it's really the latest theory. You know, China has said that the U.S. plane was banking to the left when the accident took place. The Pentagon still says it has no evidence of that, but it can't rule that out until it's able to talk to the crew.

But based primarily on an examination of the damage to the plane, the theory that's emerging here is that perhaps the Chinese fighter came underneath that left wing, and if it came close enough to the wing it could have reduced the lift under the wing, causing the wing to drop down and hit the plane. At least that's one of the theories that the Pentagon is looking at based on the damage; they still want to talk to the crew.

Also today, the Pentagon completely scoffed at the idea some retired military officers have suggested that perhaps this pilot should have ditched the plane at sea rather than let it fall into the hands of the Chinese. The Pentagon today said that's nonsense.

(BEGIN VIDEO CLIP)

REAR ADM. CRAIG QUIGLEY, PENTAGON SPOKESMAN: I have read that; I discount it completely. They cannot possibly understand what that pilot was going through at that moment. Only one person can: him.

(END VIDEO CLIP)

MCINTYRE: In fact, the orders that were given to the pilot specifically told them that the emergency destruction procedures of classified equipment was going to be secondary to the safety of the crew. So they say in flying that plane to the nearest airport, the pilot did the right thing.

WOODRUFF: Jamie, when it comes to the Chinese pilot, what does the Pentagon know about him?

MCINTYRE: Well, they haven't been saying much about him publicly, but privately Pentagon sources have identified this pilot, Wang Wei (ph) as a bit of a cowboy who seemed to relish in aerobatic maneuvers designed to intimidate the U.S. surveillance planes. In fact, this wasn't the first close encounter with this pilot. Sources say that he was captured in a photograph taken by another crew that was flying near the China coast back in January.

In that picture he can be seen, his plane -- what the U.S. says is dangerously close to the surveillance jet, and he's holding up a sign in which there appears to be an e-mail address, a sort of friendly taunting, as it were. But the U.S., right after that incident formally complained to China that these cat-and-mouse games were getting dangerously out of hand.

WOODRUFF: And John King, back to you.

President Jiang Zemin of China not in his own country; he's on a two-week trip to South America. What is -- how is the administration reading that, in terms of getting this whole situation resolved?

KING: A bit of a debate over that, Judy. Some in the administration worry that with the Chinese leader out of country for up to two weeks, perhaps it will be difficult to get a decision made -- they don't think it will be impossible; he can obviously be in communication with Beijing. They think it might take a little bit longer, be more difficult.

But on the other hand, there are those who say, view this as a positive sign that the president would take this trip at this moment, they say, could be a sign that the Chinese government wants to show that this is not an all-consuming crisis, that by no means is (sic) the top officials in the Chinese government consumed by this. And perhaps that is -- the say now as they begin to say there's some progress in the diplomacy -- perhaps that is a good sign.

WOODRUFF: All right, John King, at the White House and Jamie McIntyre at the Pentagon; thank you both.

The U.S.-China standoff could prompt some members of Congress to change their travel plans.

CNN congressional correspondent Kate Snow joins us on that now from Capitol Hill -- Kate.

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Judy, we'll explain why they might change their travel plans in just a moment. Wanted to mention that Secretary of State Colin Powell is here on Capitol Hill now. He is briefing members of the Foreign Relations Committee of this Senate. Also, State Department officials were here throughout the day talking at least to one group of members of Congress; and some senators receiving guidance and receiving a meeting today with the Chinese ambassador to the United States.

So a lot of diplomacy on the level of the senators, and the House members here. The Chinese ambassador to the United States meeting with six senators; those are among the senators that you mentioned that have some travel plans over this Easter holiday break. They're about to take a two-week break for Easter. As you know, many times members of Congress will go on trips overseas.

Well, no surprise there were as many as four trips planned over to China, and one of those involves nine senators and 13 members of the House. And we're told at this point that at least three of that group of 22 have decided not to go on the trip to China. The others are either going or reconsidering, making up their minds as we speak on whether or not to go.

Senator Jeff Bingaman, a Democrat from New Mexico, is one of those who has clearly decided that he's not going to take that trip over to China. He says it's too much of a sensitive time right now between the two countries, and he talked with me a little bit earlier about the meeting that he had today with the Chinese ambassador to the United States.

(BEGIN VIDEO CLIP)

SEN. JEFF BINGAMAN, (D), NEW MEXICO: He believes that they do need to thoroughly investigate this; and they're trying to do that. And the reason that they're keeping the U.S. personnel there is to question them about this; and he feels that's an appropriate thing for them to do. Now, that's their government's position, and I think he articulates it well; but we tried to emphasize to him that we felt a thorough investigation should be done. We would like to participate in that. We did not see a reason to detain U.S. personnel while that occurred.

(END VIDEO CLIP)

SNOW: Now, many on Capitol Hill talking about the policy implications of all of this. The sentiment is that the longer that it goes on, the more there could be some kind of backlash against China here on Capitol Hill. Specifically, many members talking about the prospect of redoing, in a sense, the vote that they took last year on permanent normalization of trade relations with China. There is a potential for a vote in June on whether to extend most-favored nation status to China once again.

Senator Chuck Grassley saying that if the situation continues -- this incident with China -- that could jeopardize trade relations with China.

(BEGIN VIDEO CLIP)

GRASSLEY: The Chinese government ought to make a clear and distinct decision: Do they want to move forward, or do they want these obstacles that put their relationships with other countries, including the United States, in jeopardy?

(END VIDEO CLIP)

SNOW: As we mentioned, Judy, the senators and the House about to go on a break for a couple of weeks, be back in their home districts. One senior Republican aide had told us earlier there was a bit of frustration among Republicans that they weren't getting quite enough guidance from the White House on what they should be saying when out there in the field. But as we heard John King report, this meeting tonight with Secretary Of State Colin Powell may be in part to try to solve some of that.

He's here talking to members of the Senate Foreign Relations Committee trying to give them some guidance on what they should be saying and how to stick with the message. To this point though, Judy, most members have been sticking with backing the president and saying that they think the administration is doing everything the correct way. Back to you -- Judy.

WOODRUFF: All right, Kate Snow, at the Capitol. Thanks.

And joining us now with his reporter's notebook: Bob Novak of the "Chicago Sun Times."

Bob, I know you've been talking to a lot of people up on the hill. What are you hearing about, I mean, picking up on some of the things Kate was telling us, in terms of political fallout from this U.S.-China standoff?

ROBERT NOVAK, "CHICAGO SUN-TIMES": Well there is an anti-China lobby, if you will. It consists of liberal Democrats, some Republicans, who are worried about human rights, but also conservative Republicans, right-wing Republicans, if you will, who see China as a military threat. Some of President Bush's most loyal supporters, they want him to really kind of walk away from this constructive engagement.

That is not President Bush's policy. But it's a very difficult time for him, because he wants to keep cool, not exercise -- not exaggerate the situation, and wait for the Chinese to act while he's getting prodded by the conservative Republicans to do something, Mr. President -- tough time for him.

WOODRUFF: Let me move you now to the budget, the president's budget proposal, tax proposal, the Breaux amendment, bringing down the size of the tax cut. Senator Breaux was joined by Democrat Ben Nelson, by Republican Jim Jeffords, both of whom the White House had hoped, would support that.

NOVAK: This was a disastrous day. It was bad enough losing Ben Nelson, a freshman moderate Democrat. But Jim Jeffords, they promised Jim Jeffords almost everything he wanted -- everything they thought he wanted. He's a great champion of a program of disabled aid. And he just raised the ante above what President Bush wanted. So he gets neither the disabled aid and, of course, the president doesn't get the tax cut that he wanted.

They are just furious with Jim Jeffords right now. But you get several bites on this apple, Judy, they'll come around again, maybe in a couple of days and then when it comes out of conference. But this was a very serious defeat for the president, losing both Jeffords and Ben Nelson.

WOODRUFF: Move now, from the Senate to the House. McCain- Feingold has moved to the other body. What are you hearing about it?

NOVAK: This is fascinating. The Republicans think that they can -- there was 13 Democratic votes against McCain-Feingold in the house the last time when it was -- when they knew they wouldn't get out of the Senate. This time they think there is as many as 40 -- 40 Democratic votes against McCain-Feingold. But they won't be no votes, they will be votes for a substitute.

They're smart enough, the Republicans who oppose the campaign finance reform, not to just try to kill the bill, but to have a substitute, get it into conference. Goodness knows what will happen then.

WOODRUFF: All right, and finally a question about a House contest in the state of New Hampshire.

NOVAK: Senate contest.

WOODRUFF: I'm sorry, a Senate contest for the U.S. Senate in the state of New Hampshire.

NOVAK: This is Senator Bob Smith's Republican seat. It's up next year. It's very difficult to see how the Republicans can retain control of the Senate without winning that seat. The polls indicate that anybody beats Bob Smith. Remember he left the Republican party for a while.

WOODRUFF: And then came back in.

NOVAK: ... and came back in. But the probable Democratic candidate, Jeanne Shaheen, the governor, that, the polls also indicate that the, probably, the only person she can beat is Bob Smith. So what the Republican establishment wants to do is to run John Sununu, that's John E. Sununu, the son.

WOODRUFF: The son.

NOVAK: The Congressman, the son of the former governor. Word is out that there will be a spot in the administration for Bob Smith if he gets out of the race. The administration denies this. Bob Smith denies this.

But the administration has not asked Sununu to get out of the race, and not run against Smith. Smith is backed by some very substantial conservative action groups. He claims he's got a million dollars in the kitty. This would be one of the meanest, toughest Republican primaries ever, between young John Sununu and Bob Smith. I can hardly wait. It's New Hampshire two years early.

WOODRUFF: All right, Bob Novak, thanks very much. Thanks for the look inside the notebook.

Another first lady is getting ready to make a bid for Congress. Sources in Oklahoma tell INSIDE POLITICS that first lady, Cathy Keating, will announce Saturday that she will enter the state's first district congressional race next year. Republican Congressman, Steve Largent, holds the seat, but he is expected to announce soon that he'll run for governor, The state's Republican Governor Frank Keating cannot seek reelection because of term limits.

Legal battle plans are in the making. Coming up on INSIDE POLITICS, those who oppose the restrictions in the McCain-Feingold bill and their strategies for challenging it in the nation's highest court.

(COMMERCIAL BREAK)

WOODRUFF: The House Of Representatives has yet to take up the debate over campaign finance reform. And President Bush hasn't signed anything into law. But opponents of the Senate-passed McCain-Feingold bill already are working on ways to defeat it in court.

Charles Bierbauer takes a look at possible legal strategies.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP)

NARRATOR: Two candidates for president are worlds apart when it comes to protecting Oregon's environment.

(END VIDEO CLIP)

CHARLES BIERBAUER, CNN CORRESPONDENT (voice-over): Issue ads by private groups that target a specific candidate would be prohibited 60 days before an election, and 30 days before a primary. Opponents of campaign finance reform say that's unconstitutional.

SEN. MITCH MCCONNELL (R), KENTUCKY: When the government tries to restrict the voices of citizen groups in proximity to an election, the chances of success under the First Amendment is virtually nil.

BIERBAUER: Reform supporters agree the court is unlikely to suppress issue ads unless they target a candidate.

(BEGIN VIDEO CLIP)

NARRATOR: Don't let Al Gore stack the supreme court with zealots who oppose your constitutional rights.

(END VIDEO CLIP)

DON SIMON, COMMON CAUSE: Money used for issue ads, as a general rule, can't be subject to regulation. So the question becomes: how do you draw the line between campaign ads on the one hand, and issue ads on the other hand? BIERBAUER: At a legal strategy meeting this week, reform critics ranged from the ACLU on the left to the Christian Coalition on the right.

MCCONNELL: McCain-Feingold is a target-rich environment for challenges in court, and that's essentially why we're here today.

BIERBAUER: Both sides look for clues in the Supreme Court's landmark 1976 ruling, Buckley v. Valeo, which said no to limits on spending, but yes to limits on campaign contributions, reasoning:

"The Federal Election Campaign Act's expenditure limitations impose far greater restraints on the freedom of speech and association than do its contribution limitations."

But the court has never addressed soft money that flows to political parties, and McCain-Feingold would ban.

SIMON: The court has ruled that it is constitutional for Congress to ban corporate and union money in federal elections. All the soft money provisions of McCain-Feingold do is simply implement those rules.

MCCONNELL: The Senate had a choice between prohibition and moderation, and it chose prohibition, that is, completely eliminating non-federal money. We think that raises serious questions about the party's rights to free association and speech as well.

BIERBAUER: The expected legal challenge would be on a fast track, Skipping one court of appeals to get to the Supreme Court, possibly right in the middle of the 2002 election campaign.

Charles Bierbauer, CNN, the Supreme Court.

(END VIDEOTAPE)

WOODRUFF: As we reported earlier, Chinese President Jiang Zemin is on a 12-day, 6-country tour of Latin America. Today, he landed in Chile in Santiago -- the capital city -- where he held a news conference.

On the telephone with us now, our correspondent Lucia Newman who was there when Jiang Zemin answered a question over the standoff with the United States over the surveillance or spy plane.

Lucia, tell us about the question and what Mr. Jiang had to say.

LUCIA NEWMAN, CNN CORRESPONDENT: Good evening, Judy. Indeed, the president was asked how -- when he would be releasing the crew of the U.S. spy plane and how far was China willing to go if it did not receive an apology from the United States. Now, the Chinese leader did not answer directly what he would do, but he seemed to insist on an apology.

He said quote, "I have visited many countries around the world and it is very normal that when people clash, it is natural," he says, "for these people to ask for forgiveness, to ask for an apology. He says, "now these people have brought their planes into our country, and they do not want to apologize. Is that natural?" he asked.

Then he went on to say he wanted to emphasize that both the United States and China should handle with the utmost care he said, "utmost care of their interests" in order to maintain their bilateral relations -- Judy.

WOODRUFF: And Lucia, how many questions did he take on this whole China question?

NEWMAN: Well, to call it a brief news conference would be an understatement. He only took two questions, one from a Chinese journalist and another from a Chilean journalist who was the one who asked the question about the standoff with the United States. The Chinese question was about relations with Chile.

I also want to add, though, that the president said that on his way to Chile he had been thinking about the pilot in the Chinese plane who is still missing and about the plane which he said he assumed is now lying at the bottom of the sea and that this had concerned him a lot -- Judy.

WOODRUFF: All right, CNN's Lucia Newman reporting from Santiago, where Chinese president Jiang Zemin has talked with reporters and answered a couple of questions, one of them about the standoff with the United States. And as you heard, she reported that, despite his insistence still that there be an apology from the U.S., he said this situation should be handled as he said with "the utmost care."

(COMMERCIAL BREAK)

WOODRUFF: First of all, our apologies. We told you we'd bring you a story about a woman who looks just like Hillary Rodham Clinton. We ran out of time with that report from Santiago on President Jiang Zemin. We're sorry.

That's all for this edition of INSIDE POLITICS. But, of course, you can go online all the time at CNN's allpolitics.com. AOL keyword, CNN.

These programming notes: Democratic Senator Paul Wellstone and Republican Congressman J.D. Hayworth will be discussing the president's budget tonight on "CROSSFIRE." That's at 7:30 p.m. Eastern.

At 8:00, CNN will present a special report on the U.S.-China standoff on "WOLF BLITZER REPORTS."

I'm Judy Woodruff. "MONEYLINE" is next.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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