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THE CAPITAL GANG Discusses the U.S.-China Standoff, the Senate's Budget Bill and Affirmative Action at the University of Michigan

Aired April 7, 2001 - 19:00   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.
MARK SHIELDS, HOST: Welcome to CAPITAL GANG. I'm Mark Shields with the full gang: That's Al Hunt, Robert Novak, Kate O'Beirne and Margaret Carlson. At the beginning of the week, President Bush addressed the spy plane incident by making demands on China.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It is time for our servicemen and women to return home, and it is time for the Chinese government to return our plane.

(END VIDEO CLIP)

SHIELDS: But by Thursday, the president was adopting a softer tone.

(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.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SUN YUXI, CHINESE FOREIGN MINISTRY (through translator): It is our view that the expression of regret is a step in the right direction in solving this problem.

(END VIDEO CLIP)

SHIELDS: This led to sounds of optimism in Washington yesterday.

(BEGIN VIDEO CLIP)

BUSH: We're working hard to bring them home through intense discussions with the Chinese government, and we think we're making progress.

(END VIDEO CLIP) SHIELDS: But today, The Chinese vice premiere wrote to the U.S. Secretary of State demanding an apology. He said, quote: "Regrettably the U.S. statement on this incident so far, is unacceptable to the Chinese side. And the Chinese people have found it most dissatisfying," end quote.

Kate O'Bierne, will the President Bush have to apologize to get the crew back?

KATE O'BEIRNE, "NATIONAL REVIEW": Mark, an apology is out of the question. Our unarmed plane, a week ago tonight, was in international waters and a reckless Chinese pilot came too close to it endangering our 24 person crew, and there's nothing to apologize for.

Now the Chinese, apparently, are unwilling to accept the covert sort of recognition, apology, that the administration was willing to offer, which was the regret over the loss of the life of that Chinese pilot who caused the entire incident, and referring to what happened as a tragic accident.

Apparently they're not going to be satisfied with that, nor are the Chinese people. And we know how, with what exquisite care the tyrants in China pay attention to public opinion. They have been careful, the State Department, about not calling this crew hostages, but it's been a week. The Chinese are now holding 24 American hostages.

SHIELDS: Twenty-four American hostages, Al Hunt, to get them back is it going to require an apology? The president changed this week from tough, early in the week, to more accommodating later in the week.

AL HUNT, "THE WALL STREET JOURNAL": I agree with Kate. I think an apology is out of question. I also suspect this won't be a protracted crisis. This is not going to be a Pueblo or Iranian hostage crisis. Henry Kissenger reportedly told the Chinese, he's very close to them, they ought to have these people, at least get this issue resolved, by Monday, and I expect it will be by the time we're on the show next week.

But I'll tell you, I don't think this is a big test for George W. Bush. I think after maybe after an initial miscalculation or two, I think he's done just fine. I think it's a crisis for the Chinese. I think that's where the real crisis is, because if they don't resolve this quickly, I think the consequences for them are going to be really, really quite significant.

I think it will escalate the arms race in East Asia. I think it's going to certainly make America much closer to Taiwan. I think it's going to at least threaten our economic ties to China -- that'd be disastrous for China -- and thirdly I think it's going to cost them the 2008 Olympics.

SHIELDS: Oy, Bob Novak. Your own reading of this, is it quite as strong and severe as Al's? ROBERT NOVAK, "CHICAGO SUN-TIMES": It's pretty much, but I think we have a lot at stake in maintaining relations with China as well. Now, Kate, the idea that you -- makes you scoff at a public opinion problem in China, they do have a public opinion problem in China, but they have an even bigger military problem. The military is up in arms about this.

I think they are just searching for -- both sides -- right as we sit here, are searching for some word that is stronger than regret, and not as strong as apology. But it's so much in the interest of both sides to get this settled, because the engagement, constructive engagement, with China has worked. China is a very different country than it was the first time I visited in the late '70s. There has -- capitalism has softened things there. There is more freedom. You look at the people. They're different kinds of people. And so -- and of course they need us, as Al said, very badly, so I think it's going to be settled.

SHIELDS: Listening to human rights experts, including Elliot Abrahams, a certified, card-carrying conservative, "It's worse today in China than it was this year, it's worse last year than it was the year before, so much for your constructive engagement making it better for the people there" -- Go ahead.

MARGARET CARLSON, "TIME" MAGAZINE: China still has a lot to answer for in that regard. And Gary Bauer based practically his entire presidential campaign on that.

NOVAK: Did well too, didn't he?

CARLSON: Well, but he brought it to people's attention, and I think it made a difference. They're just going to have to get out the thesaurus and look for a word, as Bob says, that gets us past "regret." If, at the beginning of the week, when this first started, Bush had been a little less hard line, we might not have all this melodrama surrounding the words.

It wasn't until Wednesday that -- or Thursday -- that he introduced "regret" after Secretary of State Powell said it on Wednesday. And that, at least, on Thursday got the Chinese to say, you know, we still need an apology, and we still need to investigate, but let's talk. And so we got that far. And I think if we get past the, you know, calling them hostages and the yellow ribbons, if we get something before then, we can -- both the Chinese and the Americans -- can pull back and we can each save face.

SHIELDS: Do we sense that George Bush is looking strong or weak? Quick.

NOVAK: I think he looks strong. I think he looks alright, but I just want to raise one point. If we had a Chinese plane that was looking around New York, 60 miles offshore, and they ran into one of our jets or our jets ran into them, forced them down on Long Island. Do you think we'd be as -- and the American pilot was killed, do you think we'd be as...

(CROSSTALK)

O'BEIRNE: Our responsibilities in Asia and our responsibility in South China Sea are not the same as China buzzing Manhattan Island in a plane.

NOVAK: Well that's what the Chinese think. They think we're arrogant that because we have responsibility...

(CROSSTALK)

O'BEIRNE: Well, they are wrong.

HUNT: I mean, Kate's right. There's no way we would keep Chinese hostage here. I mean now that's a, you know, I mean, I think the word "sovereign" should not have been used. That was a mistake, but I don't think they're analogous, Bob. I do think there are pressures inside China. There is a nationalist streak there which I think is something that's real, but also the army is a real problem over there, and we can't let them call the shots. We have to hope they don't call the shots.

SHIELDS: We have to conclude it, but not before -- I want to associate myself with Kate O'Beirne's observations.

The gang of five will be back with the political fallout from the spy plane standoff.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. "The Washington Post"-ABC poll showed 64 percent approval for the way President Bush is handling the spy plane standoff. Leading Democrats also approve.

(BEGIN VIDEO CLIP)

REP. DICK GEPHARDT (D-MO), HOUSE MINORITY LEADER: We want our people and our property to be returned. And I think the president has rightly stated the policy of this country, and we stand behind that policy.

(END VIDEO CLIP)

SHIELDS: But there was rumbling on the right.

(BEGIN VIDEO CLIP)

REP. BOB BARR (R), GEORGIA: One thing I think the president ought to consider is recalling our ambassador and issue the very strongest diplomatic note that's possible at this time.

(END VIDEO CLIP)

SHIELDS: And the conservative Republican chairman of the House International Relations Committee signaled he no longer supports open trade access for China

(BEGIN VIDEO CLIP)

REP. HENRY HYDE (R), ILLINOIS: My inclination is to oppose it now. I have supported it in the past, in the expectation that China would loosen its human rights abuses, would reduce them, and that things would improve. I don't see that happening at all.

(END VIDEO CLIP)

SHIELDS: Margaret Carlson, is Henry Hyde indicative of the political fallout?

CARLSON: Well, you know, the rumbling on the right was somewhat muted, actually, up until Henry Hyde broke this news on Bob's program. You know, the best thing a Republican president has going for him -- I hardly ever congratulate Bob for that program.

(CROSSTALK)

CARLSON: ... oh, and Mark's, oh, I'm sorry. And Hunt.

(CROSSTALK)

CARLSON: The best thing a Republican president has going for is that him he gets a little bit of a pass from Congress, unlike a Democratic president who's called soft on Communism, you know, if he doesn't come out rattling his saber.

We had Congressman Duncan Hunter introducing a bill this week to revoke PNTR status. And now Henry Hyde is saying they are hostages. I think Bush has two weeks until Congress gets back as a kind of breathing space. The idea that he's got to placate the hard liners who, you know, still feel the Cold War deeply, and labor and others. And then, you know, the people who only want a trade policy toward China -- let's protect that $116 billion -- is going to have to stand in the middle. But when they get back, if it's not settled, I think he's really going to have a hostile group, especially of the hard- liners.

SHIELDS: Kate.

O'BEIRNE: Well, John McCain this week sounded like one of those hard-liners and Senator Joseph Lieberman sounded exactly the same as most Congressional Republican have sounded. There's been real unity on the Hill, I think, in an overwhelmingly negative reaction. And what the House always does is reflect public opinion.

Two thirds of the public, of course, an attitude of sort of hardening against China, and I think members of Congress reflect that. Going back home means they can't introduce legislation, but it also means that the White House is no longer going to be able to be talking to them on a daily basis very easily, getting them to either tone down remarks, or avoid saying certain things. So, now that they're back home, they can speak freely.

SHIELDS: Bob Novak. NOVAK: Kate, I think you are just hearing different people than I am. I agree with Margaret. I think it was a very muted reaction on the hill, there were very -- Jesse Helms, for example, has not said one word, purposely not said a word, because he doesn't want to interfere with the administration. There's been very little criticism from the anti-China block of the Democrats.

And what you find is "The Weekly Standard" hysterical. My good friend, William Kristol, along with his collaborator, Bobert Kagan, is calling President Bush revealing fear, fear of the Chinese, fearing that people around the world will see this capitulation as excuse for moving in. I don't think anybody feels that's way. I think they want to get the people back and resume trying to get some kind of a relationship with the world's most populous country.

SHIELDS: Bill Kristol crazy, is he, Al?

HUNT: No, he not crazy. I think he's wrong on this. But, Bob, I'm afraid that you're wrong too. I think, I agree the reaction hasn't been that intense so far, but this is a tinder box that could be ignited at any time. If they're not back in two weeks it'll be ignited, but there are all kinds of other issues. More human rights repression the (UNINTELLIGIBLE) could ignite it in America.

And I'll tell you the issue that scares me half to death is Tibet. If they really want to go after Tibet the way the Chinese are want to do sometimes, there will be a terrible reaction here in America. So I think there are all kinds of problems out there that threaten -- but I agree with you, it's the most important bilateral relationship we have.

SHIELDS: I think Al Hunt makes a very good point, and I have to say I think Bill Kristol has been consistent and right on this. He has taken on the corporate power up, of the Republican party, which has written the policy, the trade policy, in China.

Let's be very blunt about the corporate jets that line up at Reagan National Airport on the private strip and they come in and they go to Capitol Hill and Capitol Hill responds. And I just say this, I want to say, Bill Kristol, Nancy Pelosi, a Democrat from California, Frank Wolf, a Republican from Virginia, and Chris Smith a Republican from New Jersey deserves our thanks.

NOVAK: If the labor unions were lining up you would be all for it.

SHIELDS: They don't have corporate jets, Bob, like...

(CROSSTALK)

SHIELDS: Next on CAPITAL GANG, the Senate adopts a budget, and the winner is?

(COMMERCIAL BREAK)

SHIELDS: Welcome back. The Senate passed a budget 65 to 35, but only after scaling down President Bush's tax cut by 25 percent: $1.2 trillion, compared to $1.6 trillion the president insisted upon and which was passed by the U.S. House. Even so, Democrats opposed the budget, 35 to 15, while Republicans supported it, 50 to 0. Victory was claimed by everybody.

(BEGIN VIDEO CLIP)

SEN. CHARLES GRASSLEY (R) IOWA: This is a tremendous victory for the president of the United States. Just think, he has moved the Democrats from zero tax cuts last summer, to $1.3 trillion tax cuts just today.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: We have said from the beginning, if he'd work with us, we could reach bipartisan compromise. He chose not to do that, and he got beat.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN BREAUX (D), LOUISIANA: What we have shown today that it is, in fact, possible to change the political culture of Washington. A vote of 65 to 35 for a budget is a significant change from the way business has been done in the past.

(END VIDEO CLIP)

SHIELDS: Bob Novak, was there a winner and who was it?

NOVAK: Well, Senator John Breaux thinks he was the winner, but he wasn't because he doesn't he doesn't have an agenda or a public purpose. He's just playing the game. The closest thing to a winner was President Bush, because everybody who was talking at the beginning of the year said he couldn't ever get an across the board tax cut through, he couldn't even a tax cut of 800 billion, instead it was almost 1.3 trillion.

And the fact is that he beat the system. He beat Bob Byrd who was trying to prevent the process that goes by, that they use, that prevents a filibuster. So, they will have a conference committee, they'll have a very big tax bill. I don't think it's the best tax bill possible, but it is a modest victory for the president and the associated press saying he got a stinging defeat, that is not the AP I work for, I tell you that.

(CROSSTALK)

SHIELDS: Thank goodness -- Kate, aren't we looking at, quite frankly, a tax bill that will be changed in order to win the support of a number of those he moderate Republican senators?

O'BEIRNE: Well, first of all, it's going to get bigger. They're going to conference with the House, which would have passed the full 1.6 trillion, and the Senate bill will get bigger, even Senator Breaux says...

NOVAK: It did pass the 1.6 trillion.

O'BEIRNE: Exactly, and even Senator Breaux allows that this one's going to get bigger. The details, there's going to be another big fight over the details. Absolutely, unfortunately. I don't think it will be possible. It does not look too good at the moment, adding a cap gains tax cut, which is unfortunate. It would do the market immediate good and actually bring in surpluses.

But the important thing, it seems to me, to recognize, is the president has not budged a nickel he's been asking for -- it should even be bigger -- and the Democrats have come up by about a trillion dollars -- from the 1.6 trillion dollars. Tom Daschle recently had said we can't go above 900 billion, and yesterday 15 of his democrats well above 900 billion, so they're clearly moving in his direction.

SHIELDS: Margaret Carlson, it struck me, looking at this,that George Bush could have claimed victory up until the diminution of the tax cut by the Senate vote earlier this week. If, in fact, he had just said, look what I've done -- just as Kate said -- I've moved the Democrats this far, but I think he was spooked by the ghost of his father. That his father had changed on taxes, and he wasn't going to do it. He remained just sort of rock solid.

CARLSON: He remembers "read my lips." It's the specter hanging over him. But he was right to claim victory, why not do so? But when you ask who the winner is, I think winner are the moderates. Bush joked at the gridiron dinner that he hopped to clone Dick Cheney so that he doesn't have to do any work. What he needs to do is clone Dick Cheney three times or four times to have that many votes in the Senate.

It turns out that pulling Zell Miller over is not enough. And he has a real problem with Jeffords and Chafee. And he could have had a problem with Olympia Snow and others, but for the moment she's buying the trigger mechanism that she asked to be put in there. I think this is an omen of things to come for Bush, and that the moderates are quite powerful.

SHIELDS: Al Hunt?

HUNT: It's not that big a setback for Bush. But let me tell you why it's a real problem for Bob and most of his allies in this government. They don't care if you have a 1.2 or a 1.6 or a $2 trillion tax cut, they don't have to decide. What they care about is they want that top rate down to 33 percent, they want to end the estate tax and they want to see if they can get a cap gains tax cut.

And if they have to get a few ornaments on that tree for the rich, little bit for the working poor, little bit for middle class, little bit higher marriage penalty, those are kind of nuisances, but they will do that in order to get it. The problem is as the size gets lower, let me tell you something -- the Senate is not going back to 1.6 -- the size gets lower and Republicans like Susan Collins, which Margaret cited there would be some moderates that would insist it be reshaped, when they say, wait, you've got to give more to the working poor, you've got to give more to the middle class, you're not going to get a cut to 33 percent. You're not going to get an end to the estate tax for the very wealthy, like Robert, and you're not going to get a cap gains tax cut of any significance. That's the real problem here, Mark.

NOVAK: The problem is they don't figure it right. Because they should have a feedback that calls for greater revenue. There is going to be a capital gains cut. I will predict it. Of course that brings in revenue. And how can the Democrats claim victory -- nobody has brought this up -- when they vote against the bill -- boy we had a big win. We voted against the bill, but it's a great win -- tell me that.

SHIELDS: I'll tell you this, Bob, this week on Tom Harken's amendment, $450 billion was adopted for education over the next 10 years. Do you know how much George Bush was boasting he was putting in the reading program? Five billion over the next -- 5 billion...

(CROSSTALK)

SHIELDS: ... increase in education was a major, major victory.

NOVAK: Oh boy. If you believe that...

SHIELDS: Hey, Bob, you believe it. We will be back with a CAPITAL GANG classic on a previous confrontation between the United States and China.

(COMMERCIAL BREAK)

SHIELDS: Welcome back. U.S.-Chinese relations were ruptured nearly 12 years ago when Chinese troops fired on demonstrators in Beijing's Tiananmen Square. First-year President George Bush then reacted cautiously. This was the reaction of the CAPITAL GANG, and our guest, then White House chief of staff John Sununu, on June 10, 1989.

(BEGIN VIDEO CLIP, CAPTIAL GANG, JUNE 10, 1989)

HUNT: I wish George Bush would have moved sooner than he did. But I think once he moved this week, I think both his actions and his rhetoric struck exactly the right tone. On the one hand he showed we're serious, cutting off all military assistance, saying, you know, sorry, that doesn't go.

But on the other hand, this is a country going through incredible turmoil right now. It's not over by any means, and I don't think we ought to cut off all relations with China right now.

NOVAK: He's a day late and a dollar short. I was embarrassed as an American when the President of the United States says he tried to get somebody on the phone and the line was busy. He came out in his press conference, he said Deng Xiaoping, we don't know whether he was part of this. The next day he's on supporting this bloody outrage. JOHN SUNUNU, WHITE HOUSE CHIEF OF STAFF: He was the first one to speak out against what was being done in terms of violence. He was the first western leader to put sanctions on it.

SHIELDS: I have to -- I have to line up with Mr. Novak because quite frankly, the radical doctrine that freedom is not simply a matter of internal concern, which the American people understand and grasp.

PAT ROBERTSON: Let me -- let me agree with Mark and Bob. I think -- I think the president's stance he's taken so far, cutting off military and maintaining some of the economic relationship and diplomatic, fine. But doesn't the president have an obligation to really articulate what is in the heart and soul of the American people?

HUNT: We have to say, right now, no more manhunts. I mean amnesty for all those students. We have to try to help them find a way out of this whole thing.

SUNUNU: And in fact that is why the ambassador has been kept there. To keep that message clear, and to keep that line of communication there.

NOVAK: But you get the idea that he is very reluctant, John, and that comes over.

(END VIDEO CLIP)

SHIELDS: Al Hunt, how do our judgments look some 12 years later?

HUNT: I think the gold medal clearly goes to Margaret and Kate. I think they look better than anybody because they were not there. Lucky you.

SHIELDS: John Sununu?

HUNT: John Sununu was not the gold medal winner that day, or any other day, as a matter of fact. Mark, I still think that the initial Bush response to Tiananmen was appropriate, I think the follow-through was lousy. Same thing could be said about the Clinton Administration's policy toward China.

SHIELDS: Bob Novak.

NOVAK: I can remember the outrage there was because he just -- he seemed so soft. He seemed to have no sense of how terrible this was, even though perhaps he was saying the right thing. The thing that strikes me, as I looked at this little tape about three times now, is the naivete by everybody, including me that we could really affect this huge country, that we could bring democracy there somehow, even though their power didn't want it, and I think we had to have lower goals in China, more achievable goals. And I think this was really innocent and naive by us 12 years ago.

SHIELDS: I've heard creative rationalizations in me life. I mean, that we're going to take their slave labor products, we're going to ignore it, and we're going to say we don't care if they brutalize their people, tyrannize their neighbors, terrorize the world and sell nuclear arms because it's a hell of a market, right, Bob?

NOVAK: That is right. Because it's a big country.

O'BEIRNE: I think an important reminder is how the American public attitude was so negative against the Chinese, given the terrible abuse and murder of their own people in Tiananmen Square. And those were their own people. Now they are holding 54 American hostages, and I agree with Al.

SHIELDS: Twenty-four.

O'BEIRNE: Twenty-four American hostages and I agree with Al. The stakes are much higher on China than on the U.S., and they run the same risk. They didn't the Olympics, earlier Olympics, because of Tiananmen Square, now they're in trouble for 2008.

CARLSON: Right, they keep talking about Chinese public opinion there, I mean they're very emotional over this, but the public here could harden against them, but we never really do anything about China.

NOVAK: You want to Bomb them?

CARLSON: We just keep trading with them. Well, we've never even withheld Most Favored Nation Status toward them...

SHIELDS: Because of the bucks. Let's be honest about it. We'll be back with the newsmaker of the week: Bush economic adviser, Lawrence Lindsey, our look beyond the beltway at affirmative action, with Ward Connerly, and our outrages of the week all after a check of the hour's top news.

(COMMERCIAL BREAK)

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

Our "Newsmaker of the Week" is Larry Lindsey, assistant to the president for economic affairs and principal architect of Bush's tax plan. Lawrence Lindsey. Residence: Clifton, Virginia. Age: 46. Republican. Protestant. Ph.D. Harvard, former Harvard professor. White House aide in the first Bush administration. Former Federal Reserve governor.

Our Al Hunt interviewed Larry Lindsey outside the White House earlier this week.

(BEGIN VIDEOTAPE)

HUNT (on camera): Dr. Lindsey, you've been in office for 11 weeks, is the economy better or worse than you anticipated on January 20th? LAWRENCE LINDSEY, WHITE HOUSE ECONOMIC ADVISER: Oh, Al, we're doing the best we can. The economy is having some problems, particularly in the manufacturing sector. We're hoping the Congress will enact President Bush's program speedily. And we look forward to a very prosperous decade ahead of us.

HUNT: What do you consider the biggest economic problem confronting America today? If you had to pick one.

LINDSEY: If I had to pick one, I think it's going to be our need to get our long-term health in order, economic health in order. We are a nation that has not saved enough. We have a Social Security system that needs to be reformed, a Medicare system that needs to be reformed. So I would have to say it would have to be higher saving.

HUNT: Let's talk about you for a moment. Three years ago, you were very prescient, you got out of the stock market, you anticipated the downturn that has occurred. You also were an architect of the Bush tax cut plan, which is big on tax cuts, not quite as big on tax reform. What does all that say about your economic philosophy?

LINDSEY: Well, I'm a great believer in free markets, and a believer in America.

HUNT: Do you think you can come back and revisit the tax reform, as opposed to tax cut issue, later?

LINDSEY: Well, I think that the tax proposal the president has put forward is full of reform. It solves some of the biggest problems we have in our tax code, including the marriage penalty, the death tax, which is a great maker of complexity. It takes care of problems at the bottom. It takes six million families with children off the tax rolls. That's 20 percent of all families with children. That's the best reform you can get, isn't it? It's not to pay taxes.

HUNT: When it comes to economic policy-making in the Bush administration, who sits at the table? Who are the primary movers of economic policy?

LINDSEY: Oh, that, without a doubt, it's the president. The president was the one, for example, who worked very extensively in putting the tax cut together. We advise him, but he's the guy who calls the shots.

HUNT: It's widespread perception on Capitol Hill that George Bush is a broad-brush man, but doesn't get involved in the specifics of his tax and budget plans, is that fair?

LINDSEY: I don't think it's fair. A group of us spent almost six months with the president back in 1999, putting this tax plan together. He understands it, he understands the details, and I don't think it's fair at all. The president is very much on top of it.

HUNT: Can you give us an example in the last couple months of a specific issue he's been deeply involved in the economic area? LINDSEY: Oh, sure, putting the budget together, for example. The president was very active in making those decisions. He worked with OMB director on that, on Medicare reform, on Social Security. The president is on top of all of these issues.

HUNT: Dr. Lindsey, you also served under the previous President Bush, and I know you can -- I'm sure you can cite some similarities between the two Bush presidencies. What are the specific differences between the two Bushes, as far as approach to economic policy-making or on specific issues?

LINDSEY: I think this President Bush is a man in his generation, like most people in his generation, is comfortable with domestic reform. He appreciates the need for it.

I think his father grew up in a generation when foreign concerns were much more pressing. And I would say that's the biggest difference between them.

(END VIDEOTAPE)

SHIELDS: Al Hunt, how does Larry Lindsey compare with Bob Rubin in terms of economic influence in the administration?

HUNT: Mark, we may not see the likes of Bob Rubin for a long time. His special understanding of the markets in the '94 and '98 crises, his judgment and his great relationship with Alan Greenspan all were exceptional.

But Larry Lindsey is a very, very smart guy, and I think what's really important is he has the ear of this president. I think he and George W. Bush formed a real policy bond during the campaign.

What remains to be seen is how -- who will be the real players in big economic decisions, and especially interesting, in the international area, is what people are already speculating on the possible clashes between Dr. Lindsey and the equally brainy undersecretary of the Treasury for international affairs, John Taylor.

SHIELDS: Bob Novak, your own sense of Larry Lindsey. I mean, he got out of the stock market three years ago. Did you follow him?

NOVAK: Well, he -- I sure did, and he -- you know, we'd be in a lot of trouble if everybody got out of the stock market. He used to give an answer...

(CROSSTALK)

NOVAK: Yes -- he used to give an answer, I'd hate to lose money. It's a terrible answer. He doesn't give that answer anymore. He just didn't answer you when you asked him about getting out of the stock market.

He's in an awful lot of things in this administration, on the airline -- coming airlines problem, all these different things. Also in gross -- in overall economic strategy -- and I worry about that, because I think he made some mistakes in drafting this tax bill. I think he should have had some more reform in it. There's very little reform in it, and he should have had a capital gains cut, and maybe he should have just rolled back the Clinton tax increase.

So I don't have as much confidence -- and I like him very much, he's a good man, but I don't have much confidence in him.

SHIELDS: Margaret, it struck me in listening to him that it was a good interview, except he wasn't quite convincing when he said the president calls the shots.

CARLSON: Well, no one is convincing exactly when they say that, but I found it interesting that he said, you know, we spent six months on this in 1999, this tax cut. And what's happened is that times have changed. We are in leaner times now, and Larry Lindsey might not be the right person, because the tax cut should have been changed in some ways that the Democrats wanted, faster, fairer, and this just simply hasn't happened. So he's not moving quickly enough to the changing economic times.

SHIELDS: Why do you think he hasn't moved, quite frankly, Kate?

O'BEIRNE: You know what seems perfectly plausible to me -- and having talked to him quite a bit during the campaign -- is that this tax cut is very much George W. Bush's. One reason it took quite a while to work out is because they worked so closely with him.

And I think you saw it on the campaign trail. He was terribly comfortable with the details of this. Not even just mastering the details, with promoting the merits of this plan.

Now, I believe it should be even bigger. I think a cap gains tax is critical to it, but I think it's very much George W. Bush's tax cut.

SHIELDS: I think it absolutely little sense in the time of economic downturn to wait the year six or year seven before anything kicks in. I mean, that is not showing flexibility, but it was great, Al.

Next on CAPITAL GANG: "Beyond the Beltway" looks at a court ruling that says the University of Michigan is violating the Constitution by using in its admissions policy.

(COMMERCIAL BREAK)

SHIELDS: Hello, America. Welcome back. Now, our look "Beyond the Beltway." In 1997, a 43-year-old white woman named Barbara Grutter was denied admission to the University of Michigan law school. She sued, claiming racial discrimination. Last month, federal district Judge Bernard Friedman ruled in her favor, and found the law school's admission policies unconstitutional because of their focus on race.

The university is appealing the verdict, contending that it makes its admission decisions on a wide range of issues, including race. Joining us now from Sacramento, California, is Ward Connerly, a member of the Board of Regents at the University of California, and an outspoken opponent of using race as a factor in university admissions.

Ward Connerly, what is the significance, in your judgment, of this University of Michigan decision?

WARD CONNERLY, CALIFORNIA CIVIL RIGHTS INITIATIVE: Well, there are several things I think that are very important. First of all, it explodes that race has been used as only one of many factors by universities in this nation. Race is being used in ways that are far beyond what the Bakke decision, Justice Powell, envisioned.

It is not -- it is not a tie breaker. It is the factor that is being used, and it's not being used simply for those people who are disadvantaged --certainly, Ms. Grutter is disadvantaged. It is being used to prop up a system that benefits middle- and upper-income kids from professional families, and it's good that the court has decided to stop this stuff.

SHIELDS: But as a tie breaker, is it still acceptable?

CONNERLY: In my view, it is not acceptable, because the minute you start using race as one of many factors, even an itty-witty-bitty tiny factor, you are not using it for somebody else, and I think that violates the Equal Protection clause of the Constitution. It also violates the Civil Rights Act of 1964, which said that we would all be treated equally without regard to race.

SHIELDS: Margaret Carlson, no regard to race at all in admissions policies?

CARLSON: Well, I'm wondering if Dr. Connerly suggests that if it is one of many factors if it's OK, because in order to get diversity, using race as one of many factors seems to me to be something that we do want to have. We use whether you're a legacy, or whether you're a good athlete or many other things as one of many factors to get a diverse student body.

CONNERLY: Those are fact...

SHIELDS: Go ahead.

CONNERLY: Those are factors that seems to me that transcend race. Anyone can be an athlete, or a legacy, although I abhor legacy admits in a public institution, but the idea of using a person's skin color or where their parents came from, or grandparents came from, to achieve this diversity -- to me, it just -- it violates the Constitution. It's wrong in this nation.

NOVAK: Ward, I think it's very interesting that the Republicans in Congress and in the administration are scared to death of this issue, where I think the public opinion is against racial quotas and against using race. And they're relying on the courts! They're praying that the Supreme Court will take this -- this decision will get to the court, and they'll finally clarify the situation. Nobody knows how the Supreme Court will come out. It will probably be a 5-4 decision one way or the other, but don't you find it interesting, Ward, that the Republicans and conservatives are so terrified of this issue?

CONNERLY: Not conservatives so much, but the Republicans really are. And Bob, it's one of the mysteries -- great mysteries of all time. I can't understand why a principle that goes to the heart of what it means to be an American is so -- creates such fear in the hearts of my fellow Republicans. I don't understand it.

SHIELDS: Well, Ward, you saw it up close and personal in Florida with Governor Jeb Bush.

CONNERLY: That's right. That's right, and shame on him. This is something that we should not be afraid to touch! Democrats, Republicans, moderates, what's more sacred in this nation than the idea that you're going to be treated equally? Nothing is more sacred.

SHIELDS: Kate O'Beirne, the question of legacies and race. I mean, that is fascinating to me. Why -- is because somebody has a very inadequate SAT score, but because his father gave a gymnasium, should he be admitted to a school.

O'BEIRNE: Well, it's not -- it's not a pernicious classification. In fact, in the undergraduate case in Michigan, because they've also had them challenged, skin color gives you 20 points on their point system for admissions. Being a legacy gives you four. Perfect SATs gives you 12. -- This is not tipping in the favor of race, certainly not in the undergraduates, and law school looks similar.

It's so amazing now to see liberals defending racial discrimination, which is exactly what this is. The University of Michigan law school, it's in the name of creating a critical mass of students for diversity. Well, two points about that: "critical mass" sounds liked a quota, and diversity is only skin color, as though your skin color is the one thing that -- that depicts everything else about you, all of your opinions and views.

I venture to say there's not intellectual diversity in the University of Michigan law school. That's not the kind of diversity they're going for. Yet, it's much easier to see how intellectual diversity would enrich the educational environment of the school than discriminating on the basis of race.

CONNERLY: And the other thing...

SHIELDS: Go ahead, Ward.

CONNERLY: And the other thing that I find so fascinating is that on most of these college campuses, there's probably no place that is more segregated than -- other than maybe a church at noon -- than a college campus. These kids do not mix together. They are not together in classrooms, in many cases. You have these ethnic studies classes. You have kids that are clustered on the basis of race. So I don't know how this diversity is going to result in this great, rich educational experience when these kids are so segregated.

O'BEIRNE: Sometimes, they ask for separate graduations, and it stigmatizes the kids unfairly who get admitted.

SHIELDS: I tell you, the most integrated institution in our society is the United States military, there is no question about that. And I see very few people, the sons of the country club members and distinguished Republican and Democratic benefactors, I don't see their children in the military -- but Al Hunt.

HUNT: Well, I think affirmative action has outlived its usefulness in some area, in the area of politics, for instance, but I think education is different, and I have -- and I've been to several college campuses, and had a different experience than Ward. I think diversity has really helped a lot of institutions, and it is market- testing. These lead schools use this, and it doesn't work, they're not going to be lead schools anymore.

But let me tell you -- there's a huge myth here, that other than race, what we have is some objective standards of high test. The biggest form of affirmative action is athletes in elite universities -- and I tell you, Bob Novak was so happy last week, cheering on the University of Maryland Terrapins out in Minnesota -- if it hadn't been for affirmative action for athletes, Bob, you wouldn't have had a team out there to cheer for!

NOVAK: That's some nonsense...

HUNT: If you were born five-foot-five and you weighed 110, you wouldn't be...

(CROSSTALK)

NOVAK: That is so nonsensical

HUNT: It's true!

NOVAK: ... because that is the one place where race doesn't make any difference. If they had affirmative action, they would have more whites on the teams. Isn't that right?

HUNT: But they couldn't have gotten in, Bob.

SHIELDS: Ward Connerly.

CONNERLY: You know, the other thing is that no matter how you slice it, when you give the level of preference -- let's not talk about affirmative action here, we're talking about preferences -- when you give the level of points that some of these institutions are giving, this is wholesale, unbridled discrimination. Don't call it diversity, Al. This is discrimination, because you're applying different standards to these kids.

Often, Asian kids who are bearing the brunt of it, and the under- represented minorities are not low-income poor kids. They're kids that come from middle-class families, professional families. It is wholesale discrimination.

SHIELDS: Ward Connerly, I thank you for joining us. The GANG will be back with "The Outrage of the Week."

(COMMERCIAL BREAK)

SHIELDS: OK. Now, for "The Outrage of the Week." Hard rock mining companies in the United States West have contaminated up to 12,000 miles of streams and 180,000 acres of lakes. Some of those polluting mining companies have gone bankrupt, leaving American taxpayers to foot an enormous cleanup bill.

One common sense Clinton administration regulation simply required the mining companies to post a bond that would cover the cost of any necessary cleanups, but the Bush administration, following $5 million of mining industry campaign contributions to the GOP, let the industry off the hook for the responsibility to post cleanup bonds, and that's an outrage -- Robert Novak.

NOVAK: In early 2000, House Democrats brought an anti- racketeering suit against House Republican Whip Tom DeLay with a bang. It was withdrawn this week with a whimper, two weeks before he was supposed to go on trial for extortion and money laundering. Democrats claimed that they have forced DeLay out of the fund-raising business, but that simply isn't so.

Actually, this attempted criminalization of politics was an outrage, and it failed to work.

SHIELDS: Margaret Carlson.

CARLSON: Mark, remember when Ronald Reagan tried to save a few pennies on the school lunch program by classifying ketchup as a vegetable? Last week, the Bush administration went further, axing a regulation that forced the meat industry to test hamburgers served in school for salmonella.

Imagine mad cow disease among children K-12. The day it hit the papers, the proposal was quickly withdrawn. The Bush administration keeps trying to kill health and safety regulations at this pace, soon we won't be able to eat, drink or breathe.

SHIELDS: Salmonella lunch with a little arsenic water chaser! Kate O'Beirne.

O'BEIRNE: Lighten up, Margaret.

CARLSON: And CO2 air!

O'BEIRNE: In an act of real compassionate conservatism, the Bush family adopted a homeless cat named Ernie. To protect the few sticks of furniture the Clintons left behind, the Bushes gave Ernie to a friend in L.A. before moving to the White House. Now Ernie has run away, no doubt trying to make his way back to the First Family he loves, with no media notice. Just imagine if John McCain's cat were missing! And where is the compassionate liberalism from the president's new friends on Capitol Hill during this trying time?

SHIELDS: Al Hunt.

HUNT: Let's start an Ernie fund? Mark, Monday night, as predicted here, Duke University, my wife's alma mater, not mine, won the NCAA basketball championship. Instead of celebrating this great team and this great coach, there's been too much whining about the referee supposedly favoring Duke. That's what they said about the Boston Celtics, UCLA and all the great champions.

To those cry-babies: get over it! The best team in college basketball won the championship.

SHIELDS: Bob Novak, do you know any cry-babies?

NOVAK: I tell you, those referees stole it for Duke.

SHIELDS: This is Mark Shields saying good night for THE CAPITAL GANG. "CNN TONIGHT" is up next.

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