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Congressional Republicans and the White House Reach Budget Compromise; President Commission to Examine Social Security Reform

Aired May 2, 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.

After going round and round, congressional Republicans and the White House reach a budget compromise with help from some Democrats.

Also ahead...

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Today, young workers who pay into Social Security might as well be saving their money in their mattresses.

(END VIDEO CLIP)

ANNOUNCER: President Bush signs up a panel to review Social Security, prompting dire warnings from Democrats.

(BEGIN VIDEO CLIP)

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: We are not going to stand by and let Social Security be ruined.

(END VIDEO CLIP)

ANNOUNCER: And speaking of retirement funds, will Congress let you invest more in IRAs and 401(k)s?

Now, Judy Woodruff takes you INSIDE POLITICS.

JUDY WOODRUFF, CNN ANCHOR: Thank you for joining us.

It was pretty low-key, as claims of victory go, a few words and a brief photo opportunity of President Bush with select members of Congress. Perhaps that is because, as widely expected, the newly clinched budget deal gives Mr. Bush most, but not all, of what he wanted.

Our Jonathan Karl looks at the numbers and the political calculations behind them.

(BEGIN VIDEOTAPE) JONATHAN KARL, CNN CORRESPONDENT (voice-over): The president brought key members of Congress, including several moderate Democrats, to the White House to celebrate after congressional negotiators struck a deal on a budget outline that cuts taxes and raises spending.

BUSH: Finally, it couldn't have been done without the cooperation and the work of some of -- some of our Democrat friends: Breaux of Louisiana and Miller of Georgia, Condit of California -- members around this table who realize that -- it's time -- it was time to come together to put a good budget together on behalf of the American people.

KARL: The budget outlined makes room for a tax cut of $1.35 trillion over 11 years. It also allows for a 4.9 percent increase in government spending next year. Those Democrats touted by the president praised the size of the tax cut, but expressed concern that the budget outline doesn't increase spending enough.

SEN. JOHN BREAUX (D), LOUISIANA: We ought to be realistic to know that there are some real needs out there in education, in national defense, in Medicare with prescription drugs, and if we set the spending level arbitrarily low in the budget, Congress will be there busting the budget as we've done in the past.

KARL: The deal was struck by Republican negotiators in the House and Senate, but they had moderate Democrats in mind, Democrats needed to pass a budget in the Senate.

BREAUX: I think in a 50-50 Senate, the most important thing for the White House to understand, which I think eventually they did, is that they have to work with both sides. Bipartisanship is a two-way street. And I think in the end they recognized that and in the end it produced a very positive result.

SEN. RICK SANTORUM (R), PENNSYLVANIA: That's a change, a dramatic change for this city and one that is very, very welcomed for this city and obviously for the country.

KARL: But Democratic leaders said Bush only agreed to work with Democrats on a smaller tax cut after failing to get his full $1.6 trillion tax cut through the Senate.

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: He was dragged kicking and screaming to that number and now has claimed victory. And I've said it before, but we'll take more victories like that. I think he did it the hard way. He could have done it in a much more bipartisan and conciliatory way, a much more cooperative way.

(END VIDEOTAPE)

KARL: Now, there's absolutely no guarantee that Congress will actually keep to that 4.9 percent increase, or actually close to 5 percent increase, in federal spending next year. As a matter of fact, budget negotiators tell us that they expect to see this year an emergency supplemental bill, they call it, but emergency spending this year of between 6 and 6 1/2 billion dollars. And also they expect more defense spending to come later this year after Defense Secretary Donald Rumsfeld completes his review of defense spending.

And of course, Congress has shown year after year that they are more than capable of well going past the budget limits that they set in the spring when they get around to actually completing the budget process in the fall -- Judy.

WOODRUFF: All right, Jonathan Karl reporting from the Capitol, thanks.

About 20 minutes ago, I talked about the budget deal with Bush administration budget director Mitch Daniels, and I began by asking him why the White House didn't hold out for more of what Mr. Bush wanted on tax cuts and spending.

(BEGIN VIDEOTAPE)

MITCH DANIELS, WHITE HOUSE BUDGET DIRECTOR: The president got the best deal any president has gotten in a long, long time. This will be the biggest tax cut in a generation. It's actually more than he originally called for in his campaign. And on the spending side, it marks a substantial moderation of the recent runaway growth in spending. So, of course, you always like to do a little better. But it's a fine and fair and balanced deal. That's what compromises deliver.

WOODRUFF: Is Tom Daschle, the Democratic leader in the Senate, right when he says the president was dragged kicking and screaming to this tax cut, and which he's now declaring a victory?

DANIELS: You know, there are some jobs -- and I guess Senator Daschle's is one -- and some job descriptions that require you to say silly things from time to time. You know, the president wasn't dragged anywhere on taxes. In fact, he stayed in one place, and eventually, starting from zero, the Democratic opposition, or a majority at least, came seven-eighths of the way to his position.

Yes, a compromise took place and the president has always indicated he's prepared to do that. But it's an outcome that's going to serve the interest of Americans, and that's what he cares about most.

WOODRUFF: Well, you won't be surprised to know the Democrats are also saying that this could have been done in a more bipartisan and a more conciliatory way than it was.

DANIELS: Nothing they say would surprise me. But the facts are that this as bipartisan a budget resolution as the nation has seen in a long time. Ordinarily, they've divided on strictly party lines, and you know, the president is really not too concerned with declarations of victory and defeat. He's really concerned with the results and the result here is a good one.

WOODRUFF: Can you truly say it's bipartisan when -- what? -- the president has three Democrats standing with him there?

DANIELS: Well, -- we -- well, we had the substantially more votes than that already. And I think that when this compromise budget resolution is laid before both Houses, you'll see substantial numbers of Democrats, larger numbers of Democrats, joining us, and we'll welcome that.

WOODRUFF: What did you learned, Mitch Daniels, about the limits of the president's power when you're dealing with a Senate that is 50/50?

DANIELS: Well, we've, I think, learned that the obvious is true: Namely, in a situation like that, there's tremendous leverage on the part of each and every senator. And we were within a vote or two of a complete success in the Senate, but that last vote or two was critical and did require that some accommodation.

WOODRUFF: And let me ask you, on the spending side, even the moderate Democrats, who are with you on the tax cut, like John Breaux of Louisiana, are saying they still have some concern about the spending. It is a 5 percent increase. They're worried that it may not cover parts of education -- for example, reading and Headstart -- prescription drugs, and so on: priorities that they say they believe even the White House would like to see.

DANIELS: This proposal adds well over $100 billion in new spending and that ought to be enough. There are some people in Washington for whom no amount of spending will ever be enough. And they probably can't be accommodated. But the needs of the nation and certainly its priorities will be very well met by this budget, and it is important to begin to bend downward somewhat the spending line of recent years, which has been averaging well over 6 percent a year, and the nation really can't afford that on an ongoing basis.

WOODRUFF: But practical -- I hear what you're saying, but practically speaking, you're going to need the votes in the Senate to get there. Are you confident you're going to have that? Senator Breaux was expressing some reservations today even though, again, he is with you on the size of the tax cut.

DANIELS: All parties finally have to give a little in order to get to a reasonable compromise. And I think that's what's occurred here.

It will be important, of course, to enforce this budget resolution. And the president will have to be vigilant, and he said he will be, in making sure that as the actual spending decisions are made that the trickery and gamesmanship that's characterized many recent years is eliminated, and that we deliver at the end of the year a budget that adheres to these very reasonable limits.

WOODRUFF: So are you confident you're going to have the votes?

DANIELS: Yes, I think that we will have the votes, certainly for this resolution, and as I said, it will take constant vigilance the rest of the year to make sure that this resolution has meaning.

WOODRUFF: And just finally, Mitch Daniels, with having to lower the size of the tax cut from what the president originally asked for, what are you having to -- to shelve from that tax cut?

DANIELS: That will be -- to be determined, but we're very close to the total amount that the president asked for. And there are -- there is a wide variety of options available to the tax-writing committees to get the key priorities in there. The core of the plan, of course, is individual rates. That's what will help the economy the most, help small business the most, and help all taxpaying Americans. That's got to be at the core, and the other key elements, I think there's room for the basics.

WOODRUFF: Well, Mitch Daniels, the director of the Office of Management and Budget, we thank you very much for joining us.

DANIELS: Thank you.

(END VIDEOTAPE)

WOODRUFF: And joining us now from Capitol Hill: a Democrat who is key to the budget deal, Senator John Breaux of Louisiana. Senator Breaux, were you surprised that you all were able to put this together?

BREAUX: Well, I was very happy, Judy. I think that it shows that when both sides work together you can actually produce a result that is good not only for one party, but for both parties, and probably more importantly, it'd be good for America.

WOODRUFF: You did express, as I cited in my interview with Mitch Daniels, the budget director, that you still have some concerns about whether there's going to be a support for spending increase of just 5 percent, less than what many Democrats want, and I think you may have heard what his answer is: For some people, there's never enough money. Where is that going to end up?

BREAUX: Well, I hope that it ends up with something that gets us a realistic budget number on the spending. As I understand it, the $667 billion is only about six-tenths of 1 percent above the inflation rate, and if you're looking at the needs in education and other areas, there are substantial, realistic needs in these areas.

If we're going to require students to do better and hold them accountable for their performance, it also is going cost something. Education is free, but it's not free to bring it about in the way that we want to bring it about to all Americans. So, I'm concerned that if the spending numbers are so low, Congress may come back in the later part of the year and bust the caps and bust the budget, which I think would be a serious mistake.

WOODRUFF: If you are -- but you're saying you're comfortable with it. You can live with the 5 percent.

BREAUX: Well, we still are trying to see the details on it. I know the tax number is very clear. It's $1.25 trillion over 10 years, plus $100 billion in so-called stimulus spending over the next two years. That's a pretty clear number, but I think people are still sort of waiting to find out where the spending number is going to come out.

I mean, I think there is a legitimate concern. I think that there are those of us who want to hold the line on spending, but know that you have to do so in a realistic fashion. If we make artificially low targets, Congress is just going to come back in the latter part of the year and bust those caps and bust those targets and spend what people think is absolutely necessary.

WOODRUFF: So, you're saying the White House may have to settle for more than a 5 percent increase?

BREAUX: Well, I would hope that we'd have a budget that we can live by, but I'm just saying that if it's artificially low with the caps, I guarantee you that when defense spending needs are brought to the Congress, Congress is going to meet those needs, even if it's in addition to what those caps have.

I think people want to pay for the national security. They want to pay for education, and I think that we ought to get a realistic number on the spending, so we can stick with the budget.

WOODRUFF: Well, it sounds like this is still not -- there certainly still is not agreement here because we heard Mitch Daniels saying $100 billion in new spending ought to be enough, but let me move on to the tax cut. Many of your own Democratic colleagues are saying that this is still much too large of a tax cut. What are you saying to them?

BREAUX: I think the number is very important, Judy, but I think more important than the number is how the tax cuts are distributed. I think that if we can aim the tax cuts at the people who need them the most -- I believe in giving marginal rate cuts as President Bush did, but I think that they ought to be fairly distributed across-the-board. I think that that's going to be a legitimate fight.

I think we can do something on the estate taxes, but not necessarily eliminate it, but raise the exemptions up to take care of probably 98 percent of all Americans or more, and I think we can do something on the marriage penalty, really. So, I think that how we structure it, which is the Finance Committee and the Ways and Means Committee's responsibility, is going to be critically important to see whether something can pass.

WOODRUFF: Senator, there are those who are looking at this and saying this is a victory for you, for the moderate Democrats in the Senate who are willing to go along with it, but it's a blow to your Democratic leadership in the Senate. Is that what was intended here?

BREAUX: I don't think so, not at all. I think Senator Daschle and I worked closely. We work closely with Republican colleague who are more moderate, I guess, from a center standpoint. I think the whole question is not a question of who wins and who loses in Washington, it's whether we can get an agreement that brings about victory for the American people.

We spend too much time arguing about which party wins and which party loses, and I've always said that our goal should be to make sure the American people win. I think this represents that. I think Tom Daschle has done a wonderful job in trying to bring about some reason and balance, and I think he's been successful.

WOODRUFF: And you're comfortable reaching across the aisle and working with the president on this one?

BREAUX: It's the only way we can get something done. I mean, we have a 50/50 tie vote in the Senate, a 10-10 tie vote in the Finance Committee. If we don't reach across the aisle on both sides, we're not going to get a single thing done.

WOODRUFF: All right, Senator John Breaux of Louisiana. Thank you very much.

BREAUX: Thank you, Judy.

WOODRUFF: We appreciate it.

President Bush also took a step today toward achieving a longer- term item on his agenda: Allowing workers to privately invest some of their Social Security funds.

Our John King reports on the panel appointed by Mr. Bush, and the Democratic complaints about it.

(BEGIN VIDEOTAPE)

BUSH: I now have the honor of signing the commission into being.

JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: The new Social Security commission is charged with delivering on a major and controversial Bush campaign promise.

BUSH: Social Security reform must offer personal savings accounts to younger workers who want them.

KING: By that, the president means letting workers direct a small portion of their Social Security payroll taxes into private investment accounts: stocks, bonds, mutual funds. Many Democrats oppose the idea and hope recent turmoil on Wall Street undercuts political support.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: It is a huge fundamental change to privatize it and to allow people to invest their accounts on their own. If you just look at the last year of experience with the stock market, you know that that is a risky idea.

KING: But the commission is stacked with people who back the president's approach, including Democrats like former Senator Daniel Patrick Moynihan, its co-chairman. If there are no changes to the system, the government projects Social Security will begin paying out more than it takes in in 15 years, and run out of money in the year 2038.

It is the aging of America that is causing the strain. When Social Security was created, the ratio of workers to retirees was 40- 1. It is now 3-1. Social Security is the hallmark of The New Deal, long called the third rail of American politics because the elderly are among the most reliable voters, and the options for improving the program's financial footing could be politically painful: raising the eligibility age, now 67, although the president opposes that; increasing payroll taxes, reducing benefits, and taxing Social Security payments as all other pensions are taxed.

A tough political debate any time, and Mr. Bush wants a report this fall and congressional action before the 2002 elections.

VIN WEBER (R), FRM. U.S. REPRESENTATIVE: I don't think this breezes through without a problem. I think it will be a long, arduous process, but I think at the end of the day, the facts are so overwhelmingly on the president's side that to do nothing will become the irresponsible position.

KING: But Republican Congressional leaders are already a little nervous.

(END VIDEOTAPE)

KING: Those Republicans have delivered a very blunt private message to the White House. If the president wants Social Security debated next year, in an election year, when the Republicans are defending those very narrow congressional majorities, the White House needs to prove first that a significant number of Democrats are willing to stand up and back major changes.

WOODRUFF: So, how does the White House resolve that, John? They are hearing this from their Republican friends on the Hill, how do they then feel comfortable enough to go forward and do what they did today?

KING: Well, they're hoping, number one, to create a coalition very much like we just heard about on the tax cuts. Senator John Breaux already has been the chairman of a bipartisan Medicare task force, shown a willingness to deal with these issues. The moderate Democrats in the Senate, the so-called Blue Dog moderates and conservatives in the House, many of them from the Democratic Leadership Council, a group that has supported a variation of these private investment accounts; they're hoping there that there actually are the votes once you bring this up.

Number two, they also hope that Senator Moynihan gets them out of this box. He has proposed something very much in line with what Mr. Bush wants, but politically, it's a little bit different. Right now, Social Security payroll taxes are 12 percent. The president says let people take 2 percent or so of that and put it in private investment accounts.

What Senator Moynihan says is if you make other changes, structural changes, lowering the inflation adjustment and things like that, you could actually cut Social Security taxes to 10 percent. So then, the tax is at 10 percent, you give people the option of still paying 12 percent and you put that other 2 percent into private investment accounts.

So then, the president could say he is not taking money out of trust fund. He's just allowing people to keep paying a little more into these new accounts.

WOODRUFF: Some would say very clever. John King, thanks very much. We appreciate it.

And up next, we will talk more about Social Security with a member of the new presidential commission: Robert Johnson of Black Entertainment Television. Also ahead:

(BEGIN VIDEO CLIP)

MAYOR RICHARD RIORDAN, LOS ANGELES: The president called me, as well as the first lady, and he's trying to push me to run for governor.

(END VIDEO CLIP)

WOODRUFF: The Los Angeles mayor gets some White House encouragement to run for higher office.

And later, the importance of political teamwork: an early assessment of the president's Cabinet.

This is INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: Let's talk more now about the new White House commission on Social Security with one of its members, Robert Johnson. He happens to be the founder and chief executive of Black Entertainment Television. Bob Johnson, there are people who are already out there saying, this -- the deck is stacked. We know what this group is going to recommend. How do you see your mandate?

ROBERT JOHNSON, SOCIAL SECURITY COMMISSION: Well, Judy, I just met the other 15 members of the commission, and they are all very independent-minded people, they're all very dynamic people with dynamic personalities, and I don't think they've made up their minds. I think they've got some principles and some guidelines that we've been asked to examine as part of this, but you've got great leadership in Senator Moynihan and Dick Parsons; again, two dynamic people.

So, I am expecting that we will look at this with the interest of saving Social Security and making sure that people who retire will continue to receive Social Security, young people who are working will find Social Security there for them.

WOODRUFF: Do you agree with what the president said today when he said, young people who are now paying into Social Security might as well be putting their money in the mattress or under the mattress for all they can count on it?

JOHNSON: Well, I think compared to what you can get if you put your money someplace else, sure. I mean, 2 percent is just not a viable return for anybody who is looking to create wealth or to create a retirement nest egg. It's just not a smart way to manage money.

WOODRUFF: And yet, as Senator Tom Daschle, I think was, said today, if you put the money in the Nasdaq market a year ago, where would you be today? I mean, the markets are not always reliable.

JOHNSON: Well, I think if you look at it from that sort of narrow snapshot of the market, sure; you can buy flybynight.com and lose your savings. But nobody's talking about that. I mean, my company, for example, has been in the market for 20 years, and I've created a tremendous opportunity with Black Entertainment Television.

So, what we're talking about is taking a part of Social Security that you contribute, and putting it in sound investments. We're going to look at that. As I said, no decisions have been made, but that's what we're going to look at. So, no one is going to be taking a chance in any market, but the market, over 20, 30 years, has performed very well.

WOODRUFF: Are you, at this point, inclined to want to find a solution that involves privatization, that involves giving people the ability to invest at least part of their own money?

JOHNSON: I think that's one of the principles that we were charged with. I think we're going to look at it. I think the argument is, if you don't find a solution, you are going to end up in the situation where you either have to decrease the amount that you are paying out to retirees or increase the money that you put in, and neither one of those solutions is acceptable.

So, you've got to create more value, you've got to create more income into the system or, as was pointed out, 2015, you start paying out of the deficit -- the surplus and then by 2037, you're bankrupt. And so that's untenable as a position for any policy-maker, any elected official. So, we've got to find a solution, and obviously, going into the market is an option.

WOODRUFF: There may be many, many young people out there who are listen you to go and saying, that sounds very reasonable. There maybe many older people, my generation, who are saying, well -- and older -- saying, I don't know. Is this something we really want to take a chance with?

JOHNSON: Well, Judy, for the people of my generation, your generation, that Social Security system will be there for the retiring baby boomers and those near retiring. But I think when you look at what we have to face, is we've got fewer workers and more people living longer and retiring.

So, we've got to solve the problem for that young person saying what's going to be there for me. I'm going to put a lot of money in; I get nothing back, and I think the market potential is a potential way to address that.

WOODRUFF: All right, the president is saying get this done by this fall. Is that optimistic or do you think that can happen?

JOHNSON: I believe that Senator Moynihan and Dick Parsons are going to take this team, put us in enough sessions to look at all the issues and by the fall, we're going to have a report.

WOODRUFF: And the outcome precooked?

JOHNSON: Not at all. I mean, I've heard -- Tom Daschle and I are very close friends, and I have a great deal of respect for Tom, but there's no way you can say these 16 members have their minds made up on what the formula will be. We respect the guidelines, we see the principles and our primary goal is to make sure that there is money in the till when you and I and our kids retire, and we will do that.

WOODRUFF: All right, Robert Johnson, we thank you very much. We appreciate your coming in. Good to see you.

JOHNSON: Thank you; you, too.

WOODRUFF: Thank you.

And much more political news ahead, but first, we'll have a check of the day's other top stories, including the latest from the world of entertainment and the contract negotiations for Hollywood writers. We'll be right back.

(COMMERCIAL BREAK)

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

More fallout from the spy plane dispute between the United States and China. Washington is cutting all military ties with Beijing. CNN military affairs correspondent Jamie McIntyre reports the move is a sign of displeasure over China's refusal to return the EP-3. A team of U.S. experts has arrived on Hainan Island to inspect the plane, and to determine whether it is flyable.

It is overtime for talks to avert a Hollywood writers strike. The talks resumed this afternoon after the expiration last night of the contract between writers and the studios. Among other demands, the writers want a greater share of rerun profits and overseas sales.

Should a doctor take into account a person's race when prescribing medications? CNN's medical correspondent Elizabeth Cohen looks at this controversial issue.

(BEGIN VIDEOTAPE)

ELIZABETH COHEN, CNN CORRESPONDENT (voice-over): Should African- Americans and white people be given the same drugs, in the same dosage, for the same medical problems? Dr. Lonnie Fuller and his colleagues at the Morehouse School of Medicine say perhaps not. They say they've discovered genetic differences that make white people and African-Americans metabolize drugs differently. DR. LONNIE FULLER, MOREHOUSE SCHOOL OF MEDICINE: About 40 percent of African-Americans would probably fit into the slow- metabolizer group, and maybe 20 percent of Caucasians would fit into that group.

COHEN: With slow-metabolizers, drugs stay in the body for an unusually long time, meaning that a regular dose could actually become an overdose. Dr. Fuller says physicians should keep this in mind when prescribing drugs to African-Americans.

FULLER: We say, "start low and go slow."

COHEN: Two studies in "The New England Journal Of Medicine" take a look at this issue of race and drug metabolism. One found that a heart drug worked better on whites than on blacks. Another found that a different heart drug worked the same in both groups.

(on camera): Studies like these have people asking: Should scientists be doing studies based on race? An author of an editorial in the journal says race is a social distinction, not a biological one.

(voice-over): Georgia Dunston, a microbiologist and director of the New National Human Genome Center at Howard University, agrees. She says Dr. Fuller's study, is -- in her words -- "a bankrupt kind of mental paradigm."

GEORGIA DUNSTON, HOWARD UNIVERSITY SCHOOL OF MEDICINE: When we look at DNA, there is no way that you can group, organize, sort genes in such a way that you've got some collection of genes that would correspond to the racial groups that we use.

COHEN: She says the human genome project found there's very little genetic variation between racial groups.

DUNSTON: Genetics show us that humankind is essentially one large family.

COHEN: But Dr. Fuller says, since people tend to marry within their own ethnic group, certain genetic diseases, such as sickle cell anemia, are more common in one group than another. So he says it's legitimate to make racial distinctions in medicine, as long as they're meant to help people and not prove that one group is inferior or superior to another.

Elizabeth Cohen, CNN, Atlanta.

(END VIDEOTAPE)

WOODRUFF: When INSIDE POLITICS continues, Ron Brownstein checks the Bush agenda to see which issues are still waiting on Capitol Hill.

(COMMERCIAL BREAK)

WOODRUFF: In the Senate, Republicans and Democrats are nearing agreement on one of President Bush's priorities: education. Joining us now to talk more about education and other issues on the Bush legislative agenda, Ron Brownstein of "The Los Angeles Times."

Ron, how do you account for the Senate finally being prepared to do this, to do something about what the president wants?

RON BROWNSTEIN, "THE LOS ANGELES TIMES": Well, they have been haggling. I mean, this is really old-fashioned legislating going on here, in a way that it's something we haven't seen in quite a while: Both parties and the White House have been negotiating over, really, minute details of changes in education -- federal education policy -- that when finally implemented, people could actually feel in what options are available to parents, what kind of tests their kids will face, and how their schools will be measured.

WOODRUFF: Can you tell at this point how much the president is going to be able to get of what he wants?

BROWNSTEIN: Well, he's going to get a broad framework of what he wants, and the basic idea of trading accountability for flexibility, giving states more freedom in how they spend federal education dollars and then requiring more accountability from them in showing progress and improving test performance of kids.

He's not going to get -- he got sanded down, Judy, from both edges, interestingly on this. He's probably not going to get the school vouchers that he wants that would enable kids to go to private schools if the public schools fail to improve their performance, and interestingly, from the right, he's had to give some ground on the actual way this testing mechanism would work out conservative fear that it would move too much toward Washington dictating curriculum.

So, that's been watered down a little. He's had to give a little ground on the left, but clearly he's moved the whole thing in his direction, as have the Democrats. Both sides, really, I think, in the end, will be able to say -- can point to pieces of this that are good from their point of view.

WOODRUFF: All right, let me ask you about Social Security. The president named this panel today. We just talked a few minutes ago with Bob Johnson of BET, who's going to be one of the members. What is the president trying to accomplish by naming this panel? This clearly, he believes, is going help him politically.

BROWNSTEIN: Yes, I think this is really an open question. Because, I mean, on the one hand, it make sense for the president to have a commission that will flesh out the technical details of his proposal. He ran a series of principles that were pretty clear in broad terms. He wants to carve out part of the payroll tax for individual accounts, people can invest with their own retirement, but there wasn't a specific plan.

How much of the payroll tax will be carved out? Was kind of benefit cuts may be required to make the numbers add up? But to do this technically is really, it seems to me, looking at it from the wrong end of telescope. The bigger question is a political question. Is there a consensus, is there a majority in either house of Congress for the kind of basic carve-out plan that the president proposes? He has two basic choices here. He can try to draw to draw up the ideal plan that fulfills his principles, and maybe push that through on a narrow party-line vote, like the budget, or he can work at it from the opposite end and say, "OK, what is the plan that would get me 58 or 60 votes in the Senate?" That would lead to some very different analysis and conclusions than going at it trying to draw up the ideal private account plan.

WOODRUFF: So, what are the options for him, if you say he doesn't have the so-called "carve-out" then what does he have?

BROWNSTEIN: Well, the problem with carve-out right now is there's only on one Democrat on record who's supporting this idea: John Breaux, who was here before. There may be a few others to support it. There could be a few defections on the republican side, and I think, as John King was suggesting, Republicans are going to be very leery of making the most fundamental changes in Social Security since its inception, on a virtual party-line vote.

I mean, that is something that can not be a very attractive proposition. The question is, what other compromises are out there? The other idea is the add-on idea, where you create individual accounts that people invest with their own retirement, but as a supplement to Social Security, not as a carve-out.

That was something that Bill Clinton and Al Gore proposed. It wasn't attractive to Republicans because it went coupled with any kind of reforms to save money in Social Security, but if you put those two ideas together maybe you could begin to make some progress.

WOODRUFF: But just by doing the add-on the president doesn't get where he went to be.

BROWNSTEIN: Well, he does get the idea of individuals being allowed to invest with their own retirement. I mean, that would be in an add-on. What you don't get is any way of controlling the long term cost of Social Security and maybe that could be part of it.

WOODRUFF: We may have another opportunity to talk about it .

BROWNSTEIN: Yes, we'll have a few, I bet.

WOODRUFF: All right, Ron Brownstein.

BROWNSTEIN: Before we retire.

WOODRUFF: Thanks very much -- yes, let's hope.

Just ahead, the mayor of Los Angeles is thinking about his next job. Could he add the state's highest office to his resume?

Plus, the Cabinet secretaries earn praise and criticism. A look at the first 100 days for the Bush Cabinet.

(COMMERCIAL BREAK) WOODRUFF: When President Bush announced his controversial missile defense plan, Defense Secretary Donald Rumsfeld was at his side. When the administration faced a standoff with China, Secretary of State Colin Powell took the lead. The 100-day reviews of the president's performance are in. Now our Major Garrett takes a closer look at how the Bush Cabinet secretaries have handled their first few months on the job.

(BEGIN VIDEOTAPE)

MAJOR GARRETT, CNN CORRESPONDENT (voice-over): The Bush Cabinet comes with big names and big egos, and the new president has let them take center stage as his agenda and events dictate.

C. BOYDEN GRAY, FORMER WHITE HOUSE COUNSEL: He likes to delegate authority. He delegates it well. He runs this like a more corporate model, the way Reagan did, and more so than even his father.

GARRETT: The approach was best on display during the standoff with China over the U.S. surveillance plane. Secretary of State Colin Powell took the lead on negotiations for the crew's release. Afterward, Defense Secretary Donald Rumsfeld followed up with a hard- nosed account of China's role in the midair collision.

Together, they carried out the president's policy of tough engagement with China. The White House hopes this kind of teamwork will emerge throughout the Cabinet. But a former White House chief of staff says the results in the first 100 days have been mixed.

JOHN PODESTA, FORMER WHITE HOUSE CHIEF OF STAFF: I think he's done a pretty good job of assembling a team of talented people, and then the question is whether you can build them into a team that works with the White House staff and really supports the goals of the president. And on that, I think, the jury's still out a little bit.

GARRETT: There have been some public disagreements. Mr. Bush overruled the head of the Environmental Protection Agency on whether to reduce carbon dioxide emissions, even though Christie Whitman merely restated a campaign promise. And when health and Human Services Secretary Tommy Thompson suggested there was administration flexibility on the use of embryonic stem cells in medical research, the White House said there wasn't.

And Treasury Secretary Paul O'Neill lost influence when he said Mr. Bush's tax cut would do little to quickly boost the slumping U.S. economy. These clashes could impose discipline, but there could be a price.

PODESTA: I think once Cabinet officials put their hand on a hot stove and feel the burn of -- that can come from the humiliation of a White House undercutting your statements, they're less likely to go out and be bold, and try to advance their own policies.

GARRETT: Other Cabinet secretaries have stayed on message and gained clout. Despite being a Washington newcomer, Education Secretary Rod Paige is a force on Capitol Hill. Attorney General John Ashcroft, whom the White House believes has been able to shake off the confirmation controversy, is a leading voice on crime and federal judges. Transportation Secretary Norm Mineta, the only Democrat, has smoothed potential troubles with airline strikes.

GRAY: I think they're all doing a great job. And you'll see some of the ones that have been quiet emerge when their issues become part of the top tier of the agenda.

GARRETT (on camera): Other Cabinet secretaries have yet to hit their stride. But White House officials say they there have been almost no Cabinet-level leaks and no policy back-stabbing. And by that standard, they say, the president is off to a very impressive start, one that can only breed success in the future.

Major Garrett, CNN, the White House.

(END VIDEOTAPE)

WOODRUFF: Turning to elections, past and future: The outgoing mayor of Los Angeles is receiving some high level encouragement to run for higher office. On last night's THE POINT WITH GRETA VAN SUSTEREN, here on CNN, Republican Richard Riordan talked about a phone call he received from the President.

(BEGIN VIDEO CLIP, THE POINT WITH GRETA VAN SUSTEREN)

RICHARD RIORDAN, MAYOR OF LOS ANGELES: The president called me as well as the first lady, and he is trying to push me to run for governor, but I have nothing against the people of California, so I don't know why I should run.

GRETA VAN SUSTEREN, HOST: Is that an absolute "no," as to a run to governor, or is that a "maybe" or a "wait and see"?

RIORDAN: Well, it's not exactly Sherman-esque but...

(LAUGHTER)

VAN SUSTEREN: So, we don't have an answer.

RIORDAN: Well, we will see.

(END VIDEO CLIP)

WOODRUFF: Richard Riordan leaves office in June after serving two terms as mayor of L.A. California's Democratic Governor Gray Davis is up for reelection in 2002.

Back on the East Coast, a new Quinnipiac University poll provides an early snapshot of the race to succeed New York City Mayor Rudy Giuliani. Among Democrats, public advocate Mark Green has a commanding lead over his expected opponents, including the city council speaker Peter Vallone.

Earlier today, Vallone won the endorsement of the former Mayor Ed Koch. In a head-to-head matchup with potential Republican candidate Michael Bloomberg, Green remains the heavy favorite. Two thirds of respondents, however, said they don't know enough about Bloomberg to form an opinion of him. Bloomberg is the billionaire founder and chief executive of Bloomberg LP, a news and information company.

Members of the New York Congressional delegation today criticized the military's bombing practice on the Puerto Rican island of Vieques. The latest exercises ended on Tuesday, after five days of target practice and the nearby arrests of more than 180 protesters.

SEN. HILLARY RODHAM CLINTON (D), NEW YORK: Not an issue just about a little island off the coast of Peurto Rico. This is an issue about how we treat our fellow citizens, what respect we show for one another, whether or not we are going to give self-determination and dignity to the people who are our brothers and sisters in Peurto Rico and Vieques. And it is not just a question of ending the bombing, but it is also a question of reparations for what the bombing has already caused.

(END VIDEO CLIP)

WOODRUFF: New York lawmakers from both parties have become increasingly vocal in their opposition to the Vieques bombings. Almost 3 million of New York's 19 million residents are Hispanic.

Up next: Internet gossip columnist Matt Drudge avoids a date in court. And we talk politics and policy with Margaret Carlson and Tucker Carlson.

(COMMERCIAL BREAK)

WOODRUFF: Former White House Aide Sydney Blumenthal has dropped a $30 million lawsuit against the Internet gossip columnist Matt Drudge. Blumenthal had accused Drudge of libel back in 1997 after Drudge posted a story that suggested he beat his wife. Drudge apologized and retracted the report, soon after it was posted.

Yesterday, Blumenthal dropped the lawsuit and agreed to pay $2,500 dollars to Drudge's attorneys for travel costs. He told the "Washington Post" that the case cost him tens of thousands of dollars, but he said suing Drudge made it clear the story was in his words "a malicious and reckless lie."

Joining me now to talk about what has been an already very busy news week here in Washington, two INSIDE POLITICS regulars: Margaret Carlson of "Time" Magazine, and Tucker Carlson of the "THE SPIN ROOM" right here on CNN.

First of all, Tucker and Margaret, let's talk about the Social Security commission the president put together today. Tucker, is this something that will help the president get to where he wants to be in reforming Social Security?

TUCKER CARLSON, HOST, CNN'S "THE SPIN ROOM": Well, I mean the Democrats seem to think so. It's weird that these commissions are normally considered pointless and a lot of hand ringing and recommendations that are never acted upon. And it was striking to see Tom Daschle respond to this kind of visceral, slightly over the top way, as if the commissioners will actually get things done. So, if they think it will be effective, that's an indication that it may be.

MARGARET CARLSON, "TIME" MAGAZINE: Yes, because, ordinarily, you would think he was kicking the can down the road on something that's really tough, a lot harder to deal with once you are president than when you are in the campaign.

And Tucker is right, they are all up in arms. Of course, they're partly up in arms about the people on the commission thinking that they are pro-private investment.

WOODRUFF: Well, we talked to Mr. Johnson, one of the members on the commission, he was on the show a little while ago, he said, yes, I want to look at investment, but we don't know how this thing will come out. I mean, what is going on here?

M. CARLSON: The Democrats were really against that. It seems to be what they would is to calculate what people retiring right now would get, given the meltdown in the market, and it would be a very sobering reality for people that would be gambling part of their money in the market.

T. CARLSON: I don't know. Look, an easy way -- you just keep over and over, it will be out of money by 2038 and also, to some extent, this can be an argument over the Clinton legacy, that might be effective. You can say, after eight years, this was never ever really taken up in a serious way, certainly not solved. Here we are coming in and taking the hard, sober steps required to fix this looming problem. It seems like an...

M. CARLSON: Hard, sober and very slow steps, because it is a future solution, if there is one.

WOODRUFF: Margaret, the budget and tax cut agreement that has evidentially come out -- I say evidently, because there does seem to be agreement on the size of the tax cut -- we talked to John Breaux earlier, but he was saying, on the spending side, it's not clear to him if we have a number.

M. CARLSON: This is always the problem: keeping spending down in accordance on everything else, and there's absolutely no agreement on that. Even Bush -- the Republican Party's not in agreement with Bush on that, but Bush can claim victory. He's wise to come out of this and claim victory for his tax cut, but there's still a fight down the road.

WOODRUFF: Should -- go ahead.

T. CARLSON: I mean, that's really the essence of it, because the great reason -- often unspoken reason for a tax cut from the conservative Republican point of view -- is to keep government limited. Right? So the less money government has, the less it can grow. So, I mean, this is the number that I think people who are paying close attention to, and this is where the victory comes or not.

WOODRUFF: And the tax cut, he wanted 1.6; he is getting 1.35. Not bad.

M. CARLSON: Not bad.

WOODRUFF: Missile defense, the president saying we can maybe we will do something, we're not giving you the details, we're not giving you the price tag, and maybe we can do something by 2004. Tucker, is this the kind of thing that Democrats and others will go along with?

T. CARLSON: It's much easier for Bush to make the argument. There are three big arguments against this. One, that it violates the ABM Treaty. Well, Bush basically said we signed this with a country that doesn't exist anymore, when the Vietnam War was still going 30 years ago.

Two, it upsets our allies. He's sending these delegations out to explain to them -- basically, all he needs to do is say, if we save one city, for not that much money from a missile attack, is this not money well spent? I don't know. I don't think it's a tough argument to make.

M. CARLSON: I think the last time it was tested it didn't work as well as one of those guidance systems inside your own car.

T. CARLSON: Not that those work very well either.

M. CARLSON: There not so bad. I find them very useful.

But the idea that he's done these two things is very good, because those were two objections: allies and the ABM Treaty. But it still has such a long way to go, and every test raises more questions about its reliability.

WOODRUFF: But Tucker, the White House is saying, what we really need to focus on, is a new, overarching world order. The old enemies are no longer, we're dealing with these new rogue states. They could knock off a city here, a chunk of the population there, and we need to be ready for that.

T. CARLSON: Well, sure. The only argument against that is the suitcase argument. This doesn't prevent somebody coming with a suitcase or by boat -- I mean, that's not much of an argument. Bush's speech yesterday, not well delivered -- not a great surprise. But if you listen carefully, a pretty good argument, pretty compelling. I mean, it scared me.

(LAUGHTER)

M. CARLSON: You scare easily.

T. CARLSON: Well, lots of threats out there.

WOODRUFF: Margaret is not so scared.

M. CARLSON: No! Calm as can be.

WOODRUFF: All right, Margaret Carlson and Tucker Carlson, thank you both. Good to see you.

There is still much more ahead on this edition of INSIDE POLITICS.

In the next 30 minutes, the key topic in Washington: money. From government spending to retirement accounts, the latest from the Hill and the White House. Those stories and much more, when INSIDE POLITICS continues.

(COMMERCIAL BREAK)

WOODRUFF: Welcome back to INSIDE POLITICS.

All in all, this seems to have been a pretty productive day for President Bush, as he moved forward on two campaign promises. The White House and congressional negotiators reached a budget agreement, that calls for nearly $1.4 trillion in tax cuts over 11 years. And it allows for a 4.9 percent increase in government spending next year.

Now, that is close to, but not exactly what Mr. Bush wanted. The Republicans still see it as a victory.

(BEGIN VIDEO CLIP)

REP. DENNIS HASTERT (R-IL), HOUSE SPEAKER: We think this is a bill that certainly can pass the House and the Senate with a great deal of pride that we're doing the right things for the American people. It was, I think, a great display of teamwork; not only the president reaching out, but work on both sides of the aisle and both sides of the rotunda.

(END VIDEO CLIP)

WOODRUFF: The president also created a new commission to review the Social Security system. Most of the members support Mr. Bush's campaign pledge to permit workers to invest some of their Social Security taxes in stocks or other private investment accounts. Democratic leaders say that's too risky, especially given the stock market's recent slide.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MINORITY LEADER: Why we would ask people to jeopardize their retirement savings, as critical as they are to my mother, to mothers and fathers just like mine all over this country, I can't tell you. But I think it's a huge mistake.

(END VIDEO CLIP)

WOODRUFF: And we are joined now by our senior White House correspondent John King. John, back to the budget deal. Is this really a bipartisan agreement?

KING: Well, it depends on how you define bipartisanship. Bipartisanship to Dick Gephardt and Tom Daschle is negotiating through them. Bipartisan to the White House is finding enough Democratic votes to get it through, a filibuster-proof majority in the Senate to get -- you have Senator Breaux, Senator Nelson, Senator Miller; that, to the White House, is bipartisanship.

There will be a disagreement about what that term means and a continued fight as they go through, as Senator Breaux said earlier in the show, spending. They have an agreement to limit spending to 5 percent. As they actually produce the individual appropriations bills, that will be a challenge.

WOODRUFF: John, moving on to the president's announcement of this Social Security commission. Already, some Democrats are saying this is the wrong way to go, very critical. Where is that going to end up?

KING: Well, it will depend exactly what the commission recommends. Number one, the president here thinks he gets to please those who supported his position in the campaign. He is now saying he is trying to be consistent with another campaign promise, following up on tax cuts.

When he actually has a document in his hands, come this fall, and asks the Congress to do something about it come next January, the question will be, not from the Democrats first, but from the Republican leaders. They want to see evidence that a significant number of Democrats will stand up and be for major changes before they, in an election year in which they're defending a very tiny majority in the House and a 50/50 Senate, the Republicans are not going to carry this ball unless there are a lot of Democrats going with them because they viewed it as a political suicide if they do.

WOODRUFF: All right, and John, let me turn you now to something else that the White House is paying attention to. This is a jam- packed period of time for them. We're going to be hearing much more about their energy policy in the coming days. What do we have to look forward to there?

KING: Over the next two weeks, a significant number of announcements from this White House on energy, culminating on May 17th, when the president will actually roll out the official administration energy policy.

We'll get a little but, though, as early as tomorrow. The president will sign an executive order, we're told, ordering all federal agents to try to cut their power usage by 10 percent in peak hours. When he does that, he'll order federal buildings, for example, to set the thermostat at 78; semi-reminiscent of President Carter. And to illustrate his commitment to conservation, he will send the secretary of energy, Spencer Abraham, out to San Francisco, where he will tour a new federal building that is among those viewed as energy efficient.

Part of this, a piece of what the president will propose in what he views as a comprehensive plan. Part of it also a little quick, political hit here, some sensitivity to the speech Mr. Cheney gave, the vice president gave last week, in which he said conservation was not enough, that you needed more supplies of oil and natural gas. There was some sensitivity that perhaps they were too dour, if you will, about the virtues of conservation. So they want to make clear that that will be part of plan.

WOODRUFF: But production and increasing the supply, doing more exploration is clearly a key piece of what this energy policy is going to be, right?

KING: Indeed, it is, and that includes controversial items like drillings in the Arctic National Wildlife Refuge, they want to bring on new power plants at the rate of essentially 1,900 -- as many as 1,900 over the next 20 years. They want more pipelines. There's a lot in here -- more nuclear plants.

One of the things we are told will be in the plan is a promise to the nuclear industry that they will streamline the permitting process. That has been the big hindrance, the reluctance from the nuclear industry because they get sued and because it takes so long to get a permit to build a plant. The administration will move on that front as well.

But they want to make clear that they view conservation as part of it. We will see that tomorrow, but many controversial items in this plan, many long-term items in this plan that will not be resolved during this first term of the Bush presidency.

WOODRUFF: Much more to come. I'm going to let you go. I just heard your pager go off. John King, thank you very much.

And now we want to turn to the Pentagon, where there have been some developments today with regard to U.S. policy toward China, and for that, let's turn to our military affairs correspondent Jamie McIntyre.

Jamie, you can bring us up-to-date.

MCINTYRE: Well, Judy, it's been a very interesting afternoon here at the Pentagon where are there some embarrassed and somewhat sheepish Pentagon officials who have had to say that it turns out that a memo of guidance sent out to the services that ordered a complete break in relations between the United States and China on a military- to-military basis was, in fact, in error; that a senior aide to Defense Secretary Donald Rumsfeld misinterpreted what the secretary intended to order and sent an order out on Monday, a memo, saying that the defense secretary had ordered a suspension of all contacts.

What the Pentagon says now, the secretary meant to say was that he wanted a case review of the future contacts while the United States continues to negotiate with China over the return of the U.S. surveillance plane, and discuss his plans for resumption of its surveillance flights.

So, that would have been a dramatic step had the United States cut off completely military-to-military ties, but again, the Pentagon now very embarrassed, having to come out and say that they will issue a clarification, that this memo went off on Monday, signed by an assistant to Defense Secretary Rumsfeld was in error, and it was never intended to order the complete cut-off of military-to-military contacts, which was, in fact, ordered on Monday in the secretary's name -- Judy.

WOODRUFF: All right, Jamie McIntyre, and we appreciate the clarification because a little earlier in the program, just about half an hour ago, we reported the earlier version. So, we're glad to be able to set it straight at this point.

Jamie McIntyre, thanks very much.

And when INSIDE POLITICS returns, a Social Security fact check. What can you really expect from your retirement? Our Brooks Jackson does the math, and comes up with some potential numbers.

(COMMERCIAL BREAK)

WOODRUFF: Separate from the president's announcement of a commission to study Social Security today, the House overwhelmingly approved a measure designed to boost Americans' retirement savings.

CNN's congressional correspondent Kate Snow has the details on the bill and its prospects for passage in the Senate.

(BEGIN VIDEOTAPE)

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT (voice-over): The goal is simple: Encourage American workers to save more for retirement by allowing them to put more money into IRAs and 401(k) plans tax deferred.

The bill increases the annual limit for IRA contributions from $2,000 now to $5,000 by the year 2004. On 401(k) plans, the upper limit goes from $10,500 a year to $15,000 by 2006. It also allows Americans nearing retirement to play catch up with extra contributions of $5,000 a year allowed for workers over 50.

REP. BENJAMIN CARDIN (D), MARYLAND: It provides for the catch-up for people who have left the work place, which is particularly important for women; many of whom raised a family, are now back in the work force and need to be able to put money away for their own retirement.

SNOW: Since most Americans no longer stick with the same employer for life, the bill makes it easier for employees to take their retirement accounts with them when they change jobs. Those measures would affect about half of U.S. workers; the other half don't have retirement plans in the first place. Democrats raised concerns that the bill wouldn't give them equal opportunity to save.

REP. RICHARD NEAL (D), MASSACHUSETTS: One analysis of this bill showed that workers earning less than $41,000, the bottom 60 percent of the American work force would receive -- listen to this -- 4.3 percent of the benefits, and the top 5 percent of American workers with incomes of more than $134,000 would receive -- and listen to this number -- 42.4 percent of the benefits. REP. ROBERT PORTMAN (R), OHIO: There is no way, no way that he could know that, and I'm just disappointed that we're getting into that because this is going to help all Americans, including those making less than $41,000.

SNOW: It didn't take much to persuade his colleagues. In the end, only 24 members voted against the bill. But what happens next?

REP. RICHARD ARMEY (R-TX), MAJORITY LEADER: The fact of the matter is we have so much to do and so little room within $1.3 trillion to accomplish it all.

SNOW: The Senate Finance chairman is optimistic.

SEN. CHARLES GRASSLEY (R-IA), FINANCE COMMITTEE CHRM.: It's a very popular provision. Consider the fact that it's passing the House by an overwhelming margin. It would have that big of a margin in the Senate of the United States, and remember it was part of a package that almost passed in the last days of the Clinton administration.

(END VIDEOTAPE)

SNOW: Senate leaders may try to fit this retirement savings plan reform into the overall tax cut plan, or they may simply try to do it as a separate measure down the road. The Bush administration has expressed that it is supportive of the measure, but could depend on how exactly the measure gets to the president's desk.

Kate Snow, CNN live, Capitol Hill.

WOODRUFF: Thank you, Kate. And now let's bring in our senior political analyst, Bill Schneider. Bill, on the issue of Social Security: just how divided is the country?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Well, Judy, Consider this: President Bush's new Social Security commission has 16 members, and that includes the co-chairmen, 12 of them are over 50 years old. Imagine -- ancient.

The problem with the Social Security system is it's lost the confidence of younger Americans. For over 25 years, pollsters have been asking people, can you count on Social Security to be there when you retire? Back in 1974, 88 percent of Americans said yes. By '90, the number had dropped to 65 percent.

Since 1995, it's been hovering around 50 percent; nearly half of all Americans do not believe Social Security will be there when they retire. And who are they? Younger workers. Look at the split by age.

Under 50, inclined to doubt Social Security will be there; over 50, confidence goes up. way up. It's sort of the reverse of the tooth fairy. The older you get, the more you believe. And once you hit 50, you better believe in Social Security.

WOODRUFF: Let me ask you this, do younger workers believe the Social Security system is fair?

SCHNEIDER: Well, the polls show they don't, and there's a good reason for that because it's not. The last time a commission did something to save Social Security was back in 1983. It raised the payroll tax, and surprisingly, without much opposition. The money came from baby boom workers, and it was supposed to be reserved for their Social Security trust fund, only it wasn't.

The federal government used the Social Security surplus to make the deficit look smaller. They stole it. That's why Al Gore demanded that the Social Security surplus be put in a -- remember this word -- lockbox. Governor Bush agreed with him.

But if you put the money in a lockbox, it won't grow. Well, with people living longer and baby boomers starting to retire in 2010, the Social Security system is going to begin running out of money in 15 years.

WOODRUFF: So, are there other options?

SCHNEIDER: Well, let's see, you could cut Social Security benefits; you could raise the retirement age, imagine how older Americans would respond to that. What we need is more young workers to pay those payroll taxes. Now, I must confess, it's a little late for most baby boomers to have more children. But immigrants help.

The Social Security commission has two Latino members, one Democrat and one Republican. Now, nobody's talking about raising the payroll tax again. That tax is extremely burdensome and unfair, and it hits younger workers the hardest.

Last year, governor bush took a big risk. He proposed that workers be allowed to put a portion of their Social Security tax money into private retirement accounts, and something amazing happened. Governor Bush touched the third rail of American politics and he didn't die. Why not?

Look at this: Three-quarters of Americans under 50 like the president's idea; most older workers don't like it. There may not be many young people on the Social Security commission, but the president has stacked it in favor of what they, the younger workers, want -- Judy.

WOODRUFF: All right, Bill Schneider, thank you very much. We appreciate it. Given the public and the political disputes over Social Security, it can be difficult for workers to figure out exactly how they might fare when and if the system is reformed.

To get a better understanding of Social Security and how it works, our Brooks Jackson offers this inside view.

(BEGIN VIDEOTAPE)

BROOKS JACKSON, CNN CORRESPONDENT (voice-over): President Bush's commission is designed to propose big changes. RICHARD PARSONS, CO-CHAIRMAN, SOCIAL SECURITY COMMISSION: When you have two workers for every retired worker, it can't work. Do the math.

JACKSON: But change what? Let's look at how Social Security works now, what it pays and what it promises to pay to future generations.

(on camera): Today, 45 million Americans receive Social Security checks, mostly retirees, who get an average check of $844 per month, fully adjusted for inflation. Social Security supplies 40 percent of the income of all elderly persons. Without it, half the elderly would live in poverty. No wonder the president promises not to change benefits for those already getting them.

(voice-over): For younger workers, Social Security also promises fairly generous payments when they retire. Example: a worker 25 years old today who earns $30,000 a year is promised a monthly benefit of $1,125 upon retirement in the year 2043. That's 45 percent of what they were making: a good start toward, a comfortable retirement.

That benefit would go up to at least $1,687 a month if the worker had a spouse, even if the spouse has never worked, and the couple's combined benefit could be $2,250, assuming both spouses worked and both had the same $30,000-a-year income.

(on camera): There's a welfare element to Social Security: the less you earn, the more generous it is, relative to income. Those who make $20,000 a year would get 51 percent of what they had been making before retirement. But those earning $80,400, the maximum on which social security taxes are levied, would get only 28 percent.

(voice-over): A worker 45 years old today, for example, earning that maximum $80,400 a year, is promised a monthly check of $1,873, if single. That would go up to at least $2,809 for a married couple or as much as $3,746 if they both worked and have both earned the maximum.

Of course, those numbers can be lower for those who retire early. Age 62 is the earliest, and more for those who wait until age 70. To figure your benefits, go to the Social Security Administration's Web site, which now provides a benefit calculator. Plug in your age, income, age at which you wish to retire -- presto: a rough, but official, estimate of benefits.

(on camera): Or perhaps you've already received one of these. Social Security has mailed 133 million statements in the past year showing workers what their benefits are likely to be based on their actual earnings record.

Brooks Jackson, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Back at the White House, officials are very mindful of the many legislative hurdles still ahead, particularly when it comes to one of the president's top priorities: Education.

To get the latest on that, here's our White House correspondent, Major Garrett -- Major.

GARRETT: Judy, you know, one of the central political strategies here at the White House in the early days has been to stick with the conservative Republican base. That was clearly the strategy dealing with taxes, dealing with spending, and also dealing with questions of abortion and even environmental regulations.

But on education, the approach is different, and the White House is getting an earful from conservative Republicans particularly in the House, who feel offended that the president's education plan looks to them much more like a Democratic proposal than the conservative one they say the president ran on when he was a candidate.

Today, the president's senior domestic police adviser, Margaret LaMontagne, went up to see the House Republicans in a private meeting to sort of calm tensions. She got an earful, indeed. Several Republicans telling her that the president's bill looked more to them like something that a President Al Gore would have sent.

The central complain is there's not enough flexibility for states, there's too much money for the federal education bureaucracy and no choice, no vouchers whatsoever, and that really means when this bill comes to the floor in a couple of weeks, at least 50 and as many as 70 House Republicans will vote against it. That will be the first time there is a major break between this White House and the conservative Republicans on a key domestic issues.

The White House says, though, they'll lose those House Republicans, but pick up an equal number of Democrats because the president wants a bipartisan education bill more than he wants, at this moment, to appease House conservatives -- Judy.

WOODRUFF: Well, Major, that gets to my question, which is, why is it on this particular issue the president, the White House believes that it can afford to somewhat alienate the Republican base, conservative base, whereas on the list of other issues important to the White House, they don't feel they can afford to do that.

GARRETT: The answer is this, Judy: Polls and votes. The White House knows that House conservatives don't have the votes to pass vouchers, they don't have the votes to pass massive new flexibility for the states to spend federal education money.

They also know that in the Gingrich era, when Speaker Gingrich ran the House Republicans, Republicans generally across the country trailed the Democrats as many as 25 points on the education issue. President Bush has drawn equal or slightly ahead with Republicans on that education issue. A very big concern to the Democrats.

So, the White House says that the proof is in the number in the polls and also the proof is in the House conservative Republicans don't have the votes to get what they want anyway. So, why waste the time trying? Judy. WOODRUFF: All right, Major Garrett at the White House.

There is more INSIDE POLITICS coming up.

WOODRUFF: Secretary of State Colin Powell met today with Israeli Foreign Minister Shimon Peres. The talks were scheduled in part to hear the Israeli government response to a recent peace initiative sponsored by Jordan and Egypt. Before his meeting with Powell, Peres said his government's primary goal is to end the near nonstop clashes that have plagued the region for seven months.

(BEGIN VIDEO CLIP)

SHIMON PERES, ISRAELI FOREIGN MINISTER: ...to praying an end to the violence and to bring a beginning to peace. Actually, we would like to stop violence as soon as possible because of our interest to stop the (UNINTELLIGIBLE) in the areas in the possible date.

(END VIDEO CLIP)

WOODRUFF: The Israeli government has not rejected the proposal by Egypt and Jordan, but Israeli officials have indicated they want the initiative to require more specific steps by the Palestinians.

The streets were largely quiet in the Philippines today after at least six people died in Manila yesterday in fighting with state security forces. CNN's Veronica Pedrosa on the aftermath of the fighting which was sparked by the recent arrest of former Philippine President Joseph Estrada.

(BEGIN VIDEOTAPE)

VERONICA PEDROSA, CNN CORRESPONDENT (voice-over): Philippine police move in to arrest a senator now accused of rebellion. He's not home and nowhere to be found.

Gregorio Honasan, better known by his nickname, Gringo, is wanted for inciting the worst prices that has faced President Gloria Macapagal-Arroyo.

But others are surrendering in the face of the day-old state of rebellion, the low level state of emergency now declared across the Philippines capital. Mrs. Arroyo believes the pieces of her strategy to quell this crisis have already fallen in place.

GLORIA MACAPAGAL-ARROYO, PRESIDENT, PHILIPPINES: For now, it's crushed.

QUESTION: It's crushed?

ARROYO: Yes. Yes.

QUESTION: Completely?

ARROYO: Well, you should never let your guard down, right after something like that is crushed. You still have to do some mopping up and to make sure they will not resurface.

PEDROSA: Critics like former executive secretary Joseph Estrada (UNINTELLIGIBLE) are calling it virtual martial law.

EDGARDO ANGARA, FORMER ESTRADA EXEC. SECY.: She has authorized her military and police to pick up people without warrant for arrest, and that is the very essence of emergency, when you authorize the military to, in fact, pick up people who you think are against government.

PEDROSA: In response, Mrs. Arroyo has launched a media blitz to explain what the state of rebellion really means.

ARROYO: It gives me the power to use the armed forces to do the police work. And then also, it gives me the power to charge people with rebellion. Because you cannot charge people with rebellion unless there is a state of rebellion.

PEDROSA: But as her cabinet presents the very picture of common authority, the unrest has triggered fears for congressional elections due in just 12 days.

(on camera): So the presidency of Mrs. Arroyo has been defended for the time being. But the upcoming elections could turn out to be a referendum on her handling of the crisis, and indeed, of her legitimacy.

Veronica Pedrosa, CNN, Manila.

(END VIDEOTAPE)

WOODRUFF: Still ahead on INSIDE POLITICS: "People" Magazine has spoken, and one of the year's "50 most beautiful people" now lives at 1600 Pennsylvania Avenue. Details when we return.

(COMMERCIAL BREAK)

WOODRUFF: "People" Magazine is bestowing a compliment on First Lady Laura Bush. Mrs. Bush has been selected as one of this year's "50 most beautiful people." The first lady joins a star-studded list, which includes actors, actresses and athletes. The annual issue, which has actress Catherine Zeta-Jones on the cover, is due out tomorrow.

Late today the press secretary of Mrs. Bush said quote, "we are so glad that the world has the opportunity to see that Mrs. Bush is as lovely on the inside as she is beautiful on the outside."

"People" Magazine is a publication of CNN's parent company, AOL Time Warner.

That's all for this edition of INSIDE POLITICS. But, of course, you can go on-line all the time at CNN's allpolitics.com. AOL key word: CNN.

This programming note: Democratic strategist James Carville joins the fray on "THE SPIN ROOM" tonight with co-hosts Bill Press and Tucker Carlson. Catch all the action, starting at 10:30 Eastern.

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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