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Senators Seek Compromise on Patients' Bill of Rights; President Bush Meets With Israeli Prime Minister

Aired June 26, 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: Serving up a compromise with employers in mind. We'll look at what's on the table in the debate over patients' rights.

As New Jersey Republicans choose a nominee for governor, might their votes foretell the GOP's future?

And snapshots from suburbia. There's more color in those pictures than there used to be.

Now, Judy Woodruff takes you INSIDE POLITICS.

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

For a second time, the new Democratic majority in the Senate has managed to preserve a vital element of its patients' rights bill. In a 56-to-43 vote today, Republicans failed to fully shield employers from lawsuits over health care coverage. But now, the door is open to a compromise on this issue. Our congressional correspondent Kate Snow joins us with an update -- Kate.

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Judy, a very fluid process on the Senate floor, both sides now indicating that they are willing to compromise, at least to some extent. Right now at this hour, a group of about 10 moderate senators meeting with Senator Trent Lott, the Republican leader, trying to talk about compromise, talking about the issues of liability, and particularly the issue that you just mentioned, employer liability, when and whether a person can sue their employer because of a health care problem.

That's been the subject of a lot of debate today, a debate that's been closely watched by small business owners.

(BEGIN VIDEOTAPE)

SNOW (voice-over): Lynn Martins has 16 full-time employees at her family-owned restaurant just outside Washington. She pays for most of their health insurance, but worries that could change if a patients' bill of rights becomes law.

LYNN MARTINS, RESTAURANT OWNER: My greatest fear, other than being sued, is that my employees, I will not be able to provide my employees with health insurance. SNOW: Her words echo a Republican argument, one she's made herself on Capitol Hill, that exposing employers to potential lawsuits will increase the cost of insurance, making it even harder to provide that benefit.

SEN. PHIL GRAMM (R), TEXAS: All over America small businesses are going to call in their employees and say, "I want to provide these benefits, but I cannot put my business that my father, my mother, my family have invested their heart and soul in, and therefore I am going to have to cancel your health insurance."

SNOW: Republican Phil Gramm brought the argument to the Senate floor, offering an amendment to protect employers from all lawsuits, but Democrats defeated the measure after arguing it would backfire.

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: Because it gives the worst employers an economic incentive to cut corners on employee health care and frees them from all accountability when they do so.

SNOW: The Kennedy-McCain-Edwards bill being debated would allow lawsuits against an employer only if there was direct participation by the employer in a decision that caused a worker's problem with an HMO.

But that language could still change. Both Democrats and Republicans have indicated they're willing to compromise on the issue of employer liability. Moderates on both sides are working on one possibility, allowing employers to designate a decision-maker who would be responsible and liable for health insurance decisions.

President Bush made several phone calls to those moderates, encouraging them to work out an agreement. Republicans say he wants a bill he can sign.

SEN. OLYMPIA SNOWE (R), MAINE: I think it would be politically perilous for us to be sending a bill to the president of the United States that he has to veto. It certainly wouldn't be good for Republicans. It wouldn't be good for Americans.

(END VIDEOTAPE)

SNOW: President Bush has made it clear, though, that he will not sign a bill that puts small businesses in jeopardy. And there are other concerns as well, Judy, concerns about the extent of liability, how much money could a person get if they went to court, also concerns about which courts should have jurisdiction -- is it federal or state courts -- and about the scope of this bill, how many people should be covered -- Judy.

WOODRUFF: Kate, that's a look at the Senate. Bring us up to date on what's going on in the House with regard to patients' rights.

SNOW: House Republicans today, Judy, introduced their own version of a patients' bill of rights. They are calling it a compromise and they are calling it something they think President Bush will sign. In fact, they say the president has indicated that to them. It is similar to the other bills we've been talking about on the Senate side in the kind of protection that it provides and the kinds of services, such as emergency room services that it provides. What is different, though, a key difference, Judy, is that it would allow a limited right to sue in state courts. That's something that Republicans on the Senate side have very much resisted. House Republicans say this is a true compromise.

(BEGIN VIDEO CLIP)

REP. BILLY TAUZIN (R), LOUISIANA: We want a bill that can be signed by the president. This one will be signed by the president, and I think can be passed by the House, and that makes it the most valuable bill I think on the Hill.

(END VIDEO CLIP)

SNOW: There is, of course, a competing bill on the House side, it's known as Norwood-Dingell. It got a lot of attention last year. That bill's sponsor, Charlie Norwood, saying he thinks that this compromise is not a true compromise, he says that it's a bill that simply benefits the HMOs.

(BEGIN VIDEO CLIP)

REP. CHARLES NORWOOD (R), GEORGIA: The question before us and has been before us is if a patient suffers injury or death from a wrongful denial of care, are they guaranteed access to a just court remedy? That is the question. Now, I know enough about this new bill to tell you the answer for them is no.

(END VIDEO CLIP)

SNOW: Charlie Norwood, again, hoping that he can draw support for his version of a patients' bill of rights on the House side. But Judy, House Republican aides say they feel they have got a lot of momentum, they feel they are gaining support already, just today with their compromise, and they think that they are going to have enough votes to win out over the Norwood-Dingell bill -- Judy.

WOODRUFF: All right. Kate Snow at the Capitol.

And now, for more on patients' rights and President Bush's lobbying efforts, let's go to our senior White House correspondent John King.

John, first of all, how involved is the president in reaching out to lawmakers on this issue?

JOHN KING, CNN WHITE HOUSE CORRESPONDENT: Well, very involved, Judy, and we're told he will be more involved in the days and, if necessary, in the weeks ahead. As Kate mentioned, the president calling three senators today, one Democrat and two Republicans. The administration officials say more calls likely, some perhaps this evening, although the president is busy on international matters at the moment. And certainly in the days ahead, some phone calls, some meetings and some speeches around town in the next few days as well, as the president makes sure that his voice is heard publicly in this very contentious and very important political debate. Administration officials insisting this is about policy, the president wants to move as quickly as possible toward a bill he can sign.

But they also understand this is a very important political issue, and they want to make sure the president's case is heard. They insist he wants to sign a bill, but they also remind us of his history: as Texas governor, he vetoed one proposal from the Texas legislature on this issue. The second bill, one often cited now in the federal debate over a patients' bill of rights, became law in Texas without then-Governor Bush's signature.

WOODRUFF: John, would the folks at the White House agree with Senator Olympia Snowe's characterization that it would be "politically perilous," in her words, for the Republicans to send the president a bill that he couldn't sign?

KING: Well, Senator Snowe would say it would be perilous for the Democrats as well. Many Democrats would disagree with that. Some Democrats privately would say this wouldn't be a bad issue for the Democrats in the 2002 midterm elections to have the president vetoing a patients' bill of rights bill, they say would be just fine by them.

They also insist, of course, they would prefer to get something signed, but that they are not willing to go so far to get a bill that they think is meaningless. So for all the debate over policy, where you can sue, how much you can sue for, there is also a great element of politics about this.

And this is a very familiar debate. We've had it throughout the Clinton administration as well.

WOODRUFF: Now, John, to a different matter. As you know, House Democrats are trying to get information about Vice President Dick Cheney's energy task force meetings. They've gone now through the General Accounting Office, and how is the White House responding to these requests?

KING: A standoff now between the administration and the General Accounting Office, the investigative arm of Congress. Cheney's office has provided some records to the GAO, financial records: how much federal money did that task force spend as it compiled the president's energy report, and interviewed people and studied the issues addressed in that report.

What the administration will not turn over is information about just who that task force met with, who in the energy industry came in for meetings, what other lobbyists might have had meetings. The administration is insisting that because Democrats are asking for this information, and they're in the minority in the House, that the GAO does not have an authorized investigation, does not have the legal standing to request that information. The GAO insisting that it does. There has been an exchange of letters and many phone calls between the attorneys, but still a standoff, one the GAO says could eventually end up in a much more contentious issue. It is saying it is prepared to send a demand letter for those records. If such a letter is sent, the administration would have 20 days to comply, or the dispute could go before the Congress and even to the courts.

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

Well, now, let's talk to sponsors of the competing patients' rights bills in the Senate. Republican Bill Frist will be with us shortly. Right now, we're joined by the chairman of the Health, Education and Labor Committee, Senator Edward Kennedy, Democrat of Massachusetts.

Senator Kennedy, now that you have this latest Republican attempt to change the legislation defeated and behind you, are you confident the bill is going to pass substantially in its present form?

KENNEDY: Increasingly so. We've had a series of votes today in the United States Senate, and on each and every one of those votes that we have had, they have been for the patients of America, rather than for the HMOs, and I'm hopeful that we will be able to continue that process through the week and end up with a good bill.

The bill that we're talking about now is basically the Norwood- Dingell bill, the McCain-Edwards-Kennedy legislation. It is bipartisan in the United States Senate. It had 63 Republicans in the House of Representatives. It has the support of more than 500 medical organizations, including all the professional doctors, nurses and patients' organizations.

As Charlie Norwood said just a moment or two ago, not only does the new proposal that has been introduced by the Republicans in the House not serve the interests of the HMOs, but it has failed, really, to target the concerns that the health professionals have identified and that is what our bill does and why I think it's important that it becomes law.

WOODRUFF: So you are saying the compromised language that some of the House Republicans have come up with in an effort to get around your concerns and get some language that would be acceptable to your side and to the White House, you are saying this doesn't work for you?

KENNEDY: Well, we haven't had a chance to study it closely, but we have worked with Dr. Norwood, who's a Republican co-sponsor and a leader of this issue in the House of Representatives, and he has had a chance to review it. We have great confidence in his judgment. And as he pointed out as emphatically and as directly as possible that this served the HMOs rather than the patients. This isn't a complicated issue. It's been before the Congress now for five years.

We have fought the HMO industry for five years getting it to the floor of the United States Senate. We've got a good bill. It's a compromised legislation and it's one that is going to protect families, protect doctors, protect nurses. And that's what this is really all about.

And when the HMOs overrule doctors and nurses and do it in such a way that it hurts or harms the patients or even causes death or serious injury, that they will have the ability to pursue that right in a state court, which historically has had the jurisdiction for this kind of a problem with medical malpractice.

WOODRUFF: Well, Senator, as you know, President Bush, other Republicans have said that's just not acceptable to them. Let me ask you about the compromise that Senator Olympia Snowe and other moderate Republicans in the Senate are working on, which would shield businesses from liability if those businesses work with an outside entity -- an insurer, for example -- and the business themselves is not making any of the medical decisions about an employee. Would you be willing to go along with that?

KENNEDY: It certainly seems to me to make a good deal of sense. We wouldn't -- that's right on target with what the purpose of the legislation that we have. There is no interest in holding employers responsible that aren't making the medical decisions affecting those employees. I listened with great interest to the small business person that you interviewed.

This legislation wouldn't affect them. It's only, for example, if you have an HMO, and an employer says to the HMO, let me know if any costs are going to be over $100,000. And then the employer says, we're not going to pay...

WOODRUFF: Senator, I'm going to have to interrupt you because the Israeli prime minister, Ariel Sharon stepping to the microphones in front of the White House. Let's go to the White House and listen.

(INTERRUPTED FOR CNN COVERAGE OF BREAKING NEWS)

(JOINED IN PROGRESS)

ARIEL SHARON, ISRAELI PRIME MINISTER: ... meeting. We discussed, in depths, strategic issues and a peace process in the Middle East. I emphasize that Israel is committed to peace. We accepted the Mitchell report, and George Tenet plan, which refers to the first phase of Mitchell report, and that is complete and full cessation of hostilities, violence, terror and incitement, which will enable to move forward. That is our position. It has been stressed and emphasized very clearly.

QUESTION: (IN FOREIGN LANGUAGE)

SHARON: (IN FOREIGN LANGUAGE)

WOODRUFF: Do we have an interpreter?

Israeli Prime Minister Ariel Sharon having met with President George W. Bush at the White House talking to reporters. As you heard he made a very brief statement calling once again for a complete end to the hostilities between Palestinians and Israelis and clearly his comments directed more at the Palestinians, and just was starting to answer a question from an Israeli journalist. We'll bring you up to date on what the Israeli prime minister had to say in just a moment.

And now we want to turn back to our lead story today on INSIDE POLITICS, and that is the debate in the Senate on patients' bill of rights legislation. We just heard from Senator Edward Kennedy, Democrat, chairman of the Senate Health Committee. Now for the other side of the patient's rights debate, Senator Bill Frist, Republican of Tennessee.

Senator, are you discouraged by the vote today in the Senate where an effort to shield employers completely from any liability went down to defeat?

SEN. BILL FRIST (R), TENNESSEE: No. It means we've got to do. There are basically two things that are wrong with the Kennedy bill. And I should add that it's also Dr. Norwood's bill over in the House. Both of these bills have two major faults. No. 1, you can sue your employer. And if you can sue your employer, small businesses, midsized businesses are just going to drop health insurance. So we've got some work to do.

No. 2 is this whole issue of frivolous lawsuits. Our bill, the Frist-Breaux-Jeffords bill, in contrast to the Kennedy bill, does not allow frivolous lawsuits and does not allow your employer to be sued. Those are two critically important principles that are fundamental. The president of the United States has made it very clear, he wants strong patient protections and enforceable patients' bill of rights. But he doesn't want frivolous, unnecessary lawsuits because that drives up the ranks of the uninsured.

WOODRUFF: Well, Senator, we just heard as you know we were just talking to Senator Kennedy, and he said he would be willing, he said -- right on target -- was the comment that he made when I ask about the language that Senator Olympia Snowe, other of your Republican moderate colleagues in the Senate are attempting to come up with that would shield businesses from liability if they turn medical decision- making over to an outside entity, like an insurer.

FRIST: That is exactly right. And it's good because Senator Kennedy is admitting that his underlying bill allows employers to be sued. And that is going to hurt the uninsured. It's going to drive premiums sky high. They are going to skyrocket. So it's good he admits his bill is bad. It does allow his employers to be sued and he's open to an amendment.

I've talked to Olympia Snowe and Mike Dewine and Ben Nelson. They're putting together a very good amendment. What it says is that a designated decision-maker, again, we'll have to see the final wording, will be the entity that is being sued. If that's the case that will bring certainty to the system. It' doesn't really affect the cost very much, so I'm very encouraged, No. 1, that Senator Kennedy recognizes his bill allows employers to be sued -- and that's wrong -- No. 2, that there are frivolous lawsuits and therefore we need to contain those frivolous lawsuits in a way that is accountable to the patient.

WOODRUFF: Well, let me ask you, Senator, about the comment by Senator Norwood of Georgia. He's a Republican. His comment about the compromised language that is emerging in the House is his concern that any legislation that, in his words, doesn't allow a wronged -- a wronged patient guaranteed access to a just remedy is just not going to fly.

FRIST: And he's exactly right there. To clarify for the viewers, in the Senate there are two bills. There's the Norwood- Dingell bill, which is the equivalent of the McCain-Kennedy bill. And in the House there is a new bill introduced today, a centrist, balanced bill that was introduced today, which corresponds to the Frist-Breaux-Jeffords bill.

The problem with the Norwood bill in the House and the Kennedy bill in the Senate is that it has frivolous lawsuits and allows employers to be sued. We agreed. We say, sue the HMOs if they made a medical decision that causes harm or injury. That's in the Frist- Breaux-Jeffords bill. But what you don't want to do is allow people to go to the courts before they try to have an internal appeals process or an independent physician, at least in a very balanced way, consider what's best for the patient.

Don't run off to the courts the first day, especially because the trial lawyers out there are putting 40 percent of whatever they make, or whatever the suit is for, they put it in their pockets and only about 53 cents gets to the patient.

WOODRUFF: Senator, how do you define a frivolous lawsuit?

FRIST: A frivolous lawsuit is one that hasn't had to go through an internal appeals or external appeals process. That's how you fix the system to have independent unbiased independent physicians at first coming in and trying to settle the dispute. They allow you to bypass that and go straight to the court. Where the court system we know you will have in their bill uncapped noneconomic damages -- uncapped. It could be millions and millions of dollars.

Our bill allows appropriate economic compensation. You make the patient whole. In addition it allows another half a million dollars in what is called noneconomic damages. Their's goes way beyond that with no limits on the economic damages.

WOODRUFF: Senator, are you confident that in the end there is going to be a compromise, language that both sides are going to be willing to accept that is on the president's desk he can sign?

FRIST: You know, I do. The contrast is there. In truth, from what you've just heard, we are about 93 or 4 percent in agreement, some big decisions: Do you have to exhaust the appeals process? Should it be in federal court, should it be in state court? Should there be appropriate caps on these lawsuits? What should the scope actually be?

Once we decide those four issues and we've already decided about 90 percent, we will be able together, to present a bill to the president of the United States that is strong, that is enforceable, that's to the benefit of every patient who is out there or potential patient, and I think it can be done this year.

WOODRUFF: And finally, senator, on a different subject, we have learned that you've been talking in the last few days with former Senator Bob Dole about a health problem that he has. We now know that he's going to be entering a hospital in Cleveland, I believe tomorrow. Can you give us just a few words on the status of that and what the senator's prospects are?

FRIST: Well, I don't want to go into the details of the procedure. It is an elective procedure, one that he's had the real privilege of being able to go and to study and talk to a lot of physicians, And I've had the real privilege of being able to talk to it about him. Expected to have a great outcome.

I hope I'm so healthy when I'm his age. He is a truly healthy, healthy person and individual. So I'm confident he'll come through it fine.

It's a very common vascular procedure, has to do with the blood vessel. Actually very common today, and the procedure is performed frequently. So he'll do very well.

WOODRUFF: All right, Senator Bill Frist. And by the way, we are told that the -- Senator Dole has what is called an abdominal aortic aneurysm, and as you just heard Senator Frist describing it, it is something that is commonly seen or at least frequently seen among older Americans.

Senator Frist, thank you very much. And we also want to thank Senator Edward Kennedy, whom we had to interrupt a few moments ago when we went to the White House to hear the Israeli prime minister speak.

New Jersey Republicans have a race on their hands. When INSIDE POLITICS returns, we'll check in on the battle for New Jersey governor, the primary battle and the squabble over the direction of state Republicans.

Also ahead, the Garden State's role as a suburban bellwether: New Jersey leads the way into a new era of politics in suburbia.

Plus: a White House meeting for Los Angeles Mayor Richard Riordan. Is he the best Republican hope to defeat California Governor Gray Davis? This is INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: New Jersey Republicans are going to the polls today, choosing their candidate for governor. Few predicted the race between Bob Franks and Bret Schundler would be close, but now it appears the right to challenge Democrat Jim McGreevey will come down to the wire.

CNN's Jason Carroll is in New Jersey.

(BEGIN VIDEOTAPE)

BRET SCHUNDLER (R), NEW JERSEY GUBERNATORIAL CANDIDATE: Hello, everybody.

JASON CARROLL, CNN CORRESPONDENT (voice-over): Bret Schundler brought his family as he cast his vote in a race he hopes will eventually change his title from Jersey City mayor to New Jersey governor.

SCHUNDLER: If someone were to say, "Well, what explains your success?" I'd say it has to do with having a little bit more faith in people.

BOB FRANKS (R), NEW JERSEY GUBERNATORIAL CANDIDATE: Good morning, sir. Bob Franks running for governor. Have a great day.

CARROLL: Former Congressman Bob Franks says the people will make him the Republican nominee in this primary race, but he expects a photo finish.

FRANKS: These races always come down to the wire when you have two credible candidates. I think it's going to be close.

CARROLL: And for New Jersey Republicans, that's somewhat of a surprise, because if history were the only guide, Franks would be well ahead.

Franks is a moderate in a state that's traditionally moderate. As a Republican candidate in a highly publicized Senate race last year, Franks started with greater name recognition. Party leaders have backed him, and most papers endorsed him. Schundler is more conservative than Franks.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I'm asking the question do you advocate...

SCHUNDLER: I believe we should...

UNIDENTIFIED MALE: ... ultimately...

SCHUNDLER: I believe we should...

UNIDENTIFIED MALE: ... if you proselytize...

SCHUNDLER: I believe we should make abortion illegal.

(END VIDEO CLIP)

CARROLL: Schundler is pro-life and pro-gun. He's the political outsider. Franks, the insider. So why has Schundler seemed to come from behind? Where is his strength?

(on camera): The answer might lie in who traditionally comes out to vote in Republican primaries. They tend to be more conservative than those who show up in a general election.

(voice-over): Political analysts say there's another widely held belief about this race. The tighter it became... (BEGIN VIDEO CLIP, FRANKS CAMPAIGN AD)

NARRATOR: Schundler cheated kids out of a better future and instead promoted himself.

(END VIDEO CLIP)

CARROLL: ... the more the candidates attacked each other.

(BEGIN VIDEO CLIP, SCHUNDLER CAMPAIGN AD)

NARRATOR: Bob Franks is desperate. He's attacking Bret Schundler for running these ads to help needy children get scholarships. Bob Franks is losing, so he's lying.

(END VIDEO CLIP)

INGRID REED, POLITICAL ANALYST: It really became quite nasty in the sense that both sides were using depictions of the other candidate in a way that was sort of disrespectful.

CARROLL: Political attacks aside, Republicans are closely watching because this primary may define where the party is headed.

DAVID MURRAY, GOP CONSULTANT: We have the same dynamic as the Republican Party in the nation, whereby there is the dynamic of whether the Republicans are going to choose a more right-wing, ideologically anti-government, you know, socially conservative type of Republican or a more moderate, centrist type of Republican.

CARROLL: In the final days of the primary, Franks made a pitch to cap property taxes..

(BEGIN VIDEO CLIP, FRANKS CAMPAIGN AD)

NARRATOR: Now, a bold plan to stop New Jersey's skyrocketing property taxes.

(END VIDEO CLIP)

CARROLL: It's a popular idea in New Jersey, but will his strategy be enough to outrun a man who appears to be coming from behind?

Jason Carroll, CNN, New Jersey.

(END VIDEOTAPE)

WOODRUFF: More now on that New Jersey Republican primary and what the outcome could mean for the direction of the state Republican Party. We're joined here in Washington by Terry Jeffrey. He's the editor of "Human Events." And across town at "The Washington Post" newsroom, Thomas Edsall.

Tom Edsall, let me just start with you. Based on your reporting on this race, whom do you expect to win? THOMAS EDSALL, "WASHINGTON POST": Well, all the trends are going with Bret Schundler. He was way behind in the polls back in April. He is, I think, more than even now. His own polling shows him substantially ahead. He's got a very good pollster in Public Opinion Strategies. He has momentum. He's got a sense of purpose to his campaign.

Bob Franks is running as kind of the establishment candidate who was put in after the original candidate was forced to withdraw. That campaign lacks the sort of vitality and vigor that you see in a winner.

Schundler looks pretty good at this moment.

WOODRUFF: Terry Jeffrey, I know you've been watching this race very closely. You've been writing about it. What has happened here to this so-called "establishment candidate," Congressman Franks?

TERRY JEFFREY, EDITOR, "HUMAN EVENTS": Well, I think he's been -- he's seen one of the most exciting new candidates to come onto the scene in the Republican Party in a long time, Judy.

What's so exciting about Bret Schundler is this is a conservative Republican who's never walked away from core conservative values, yet he's three times been elected mayor of Jersey City, New Jersey, which is a majority minority population. The third time he was re-elected was 68 percent of the vote in a city that's 65 percent minority. He got 70 percent of the Latino vote, he got 40 percent of the black vote, and he did that with a conservative message.

And now he's saying he intends to take that message not just to Republican voters, but to a large bloc of unaffiliated Catholic voters in the state and also to black and Latino voters.

This is a new trend in the Republican Party, following up on George Bush's efforts last year to expand the Republican base.

WOODRUFF: Tom Edsall, why is the Schundler message hitting home in Jersey City?

EDSALL: Well, one, I think you've got a guy who, unlike most conservative Republicans who talk a lot about minorities and so forth, this is a guy who has actually gone out and won. As Terry pointed out, he went into Jersey City, a Democratic-machine city and he beat the machine three different times. It's a pretty impressive record.

And Jersey City, I think, it is, of all the job growth in the state in the major cities, something like 90 percent of it has been in Jersey City alone during his administration. There's been a -- there's been gentrification, property value increase, and he's done a number of very innovative things to make the city both more livable and to put it on a better fiscal plane.

So he is not so much a conservative Republican, in a sense is part of this empowerment Republican wing, the kind of Jack Kemp, but sort of the real Jack Kemp as opposed to a lot of hype. WOODRUFF: Terry Jeffrey, do you accept that characterization, that in Schundler, the Republicans have more of an economic conservative rather than what's been called popularly a social conservative?

JEFFREY: No, I think Bret Schundler is an across-the-board traditional conservative. He believes in limited government. He believes in free markets. He believes in traditional values. He is pro-life. I think what is unique about him as a candidate and as a politician, is he does not underestimate the intelligence of the voters.

He goes out and says, look, these are my values, this is how I believe these values are translated into public policies that are good for and good for our community. That's how he won the confidence of the blacks and Latinos who supported him in Jersey City. I believe that's how he won the confidence of the Republican primary voters who are going to elect him -- their nominee I think today.

And I think this guy could start a real national trend in the Republican Party. If he's elected governor of New Jersey this November, he immediately becomes a potential presidential candidate down the road, Judy.

WOODRUFF: Now, again, we're jumping ahead a little bit, Tom Edsall. We're talking to him as if he's already won the primary. We should point out, Republicans are voting today in New Jersey, we'll find out tonight who won. But if Schundler were to win, how would he stack up against the Democratic candidate Mr. McGreevey?

EDSALL: A lot will depend on McGreevey's ability to portray him as an anti-abortion, gun-rights kind of hard right candidate. New Jersey is a moderate state, it has moved really to the left in its presidential voting. It's the suburban state in the country. It's really the testing ground for suburban messages and suburbs have become the dominant constituency in all politics in the country. So it really is going to be very interesting.

How much can this guy translate his message, Schundler, in his case, and how much can McGreevey, who is really a lunch pail Democrat kind of guy, that closely tied to the unions, he's a regular working class, comes out of Woodbridge, New Jersey. It's going to be two very interesting parts of their respective parties, challenging each other.

I -- Schundler could be very competitive if he were to win. He could also turn out to be a total disaster, we really don't know yet.

WOODRUFF: What happens, Terry Jeffrey, if Tim McGreevey, again, if Schundler wins and McGreevey tries to portray him as a "extreme conservative."

JEFFREY: I think that Schundler will puncture some myths about the Republican Party, Judy. The truth of the matter is I think that potential for the Republican Party to expand its base in New Jersey, where Christie Todd Whitman never broke 50 percent of the vote, is by bringing Catholic and minority voters in. His commitment to school choice and pro-life will attract those voters and I think that he will win an outright majority in November.

WOODRUFF: All right. Terry Jeffrey, editor of "Human Events," Tom Edsall at "The Washington Post."

Gentlemen, thank you both.

JEFFREY: Thank you, Judy.

WOODRUFF: We'll be looking for those results and we'll be reporting them tomorrow on INSIDE POLITICS.

Suburbia, we've been talking about it, in transition, and the changing political landscape. Our Bill Schneider examines why some suburbanites are leaving, where they're going, who's moving in, and the political effect, when INSIDE POLITICS continues.

(COMMERCIAL BREAK)

WOODRUFF: You heard "The Washington Post's" Tom Edsall refer to this just a moment ago. They were once safe havens for an American middle class fed up with the crime and the density of the city. Home to tract housing, manicured lawns, and backyard barbecues, the suburbs were also bastions of political conservatism. But is that still true? Our Bill Schneider has been examining that question, especially as it relates to New Jersey and its governor's race.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: That's right. Tom was right. New Jersey is a state of suburbs. Suburbs used to mean Republican and sure enough, New Jersey voted Republican in six straight presidential elections, from 1968 through 1988. Then something happened. New Jersey voted Democratic in 1992, 1996 and 2000. Last time, it wasn't even close. Al Gore carried New Jersey by 15 points. What's happening? The suburbs, they are a-changing.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): You wouldn't think the term suburbs and diversity would go together. The stereotype has always been white middle class family with two kids, a dog, and a station wagon. Whoops -- make that an SUV. No more.

According to 2000 census, racial and ethnic minorities now make up more than a quarter of the suburban population in the nation's 102 largest metropolitan areas. The Brookings Institution has just come out with a report identifying a new kind of American suburb. How's this for an oxymoron: "melting pot suburbs"?

WILLIAM FREY, MILKEN INSTITUTE: These melting pot areas are places that are gaining lots of new Asian and Hispanic minorities as a result of the last two decades of very heavy immigration to these areas.

SCHNEIDER: Where are they? Places that have always attracted large numbers of immigrants, like New York, Washington, Miami, Houston, Los Angeles, San Francisco and Chicago. What's new is that immigrants are moving straight to the suburbs. That's happening, in part, because whites are leaving -- too expensive, too congested, too urban.

FREY: In the east, they're moving to the Southeast. In the west, they're moving inward to Nevada and Colorado and Utah and Arizona, and what that's doing is freeing up more suburban space for a lot of the new minorities.

SCHNEIDER: In the 1980s, suburban politics went something like this. Suburbanites were homeowners. Homeowners are taxpayers. Taxpayers hate taxes. So suburban voters were Republican. Do taxes still matter in the suburbs? Absolutely.

But so do other issues, like values. Immigrants and migrants from other parts of the country often bring liberal social values with them when they move to the suburbs. In the 1988 election, the suburbs went Republican by a solid margin. George Bush the elder carried the suburban vote in every part of the country. By 2000, the suburban vote was almost evenly split and the suburbs were moving in different directions.

In the Northeast, the suburban vote was Republican in 1988. By 2000, the Northeastern suburbs -- places like, oh, say, Chappaqua, New York -- were solidly for Al Gore. Same thing happened in the west. The Bush suburbs of 1988 switched to cowboy Al in 2000.

The Midwestern suburbs have remained true to the GOP faith, but George W. Bush carried them by a smaller margin than his father did.

Republicans have held on quite nicely in the fast-growing Southern suburbs. They voted for Bush the father by 18 points and Bush the son by 20. The suburbs are not one thing anymore. Their population is diverse, and so is their politics.

WILLIAM FREY, MILKEN INSTITUTE: Now, if you tell somebody you live in the suburbs, it could mean anything. You could be rich, you could be poor, you could be white, you could be a minority, you could be all kinds of family types.

SCHNEIDER: You could even be a Democrat.

(END VIDEOTAPE)

SCHNEIDER: One thing is still true: Suburbanites are overwhelmingly homeowners. You want to stir up the suburbs? Talk about taxes, which is exactly what the candidates in New Jersey are talking about -- Judy.

WOODRUFF: Coincidence.

SCHNEIDER: Coincidence, right.

WOODRUFF: Bill Schneider, thanks.

And one update now on a future governor's race. Los Angeles Mayor Richard Riordan met today at the White House with key presidential adviser Karl Rove. Riordan leaves office this Saturday after two terms as mayor. President Bush has encouraged him to run against California's Democratic governor, Gray Davis. Riordan, however, says he has made no final decision.

(BEGIN VIDEO CLIP)

MAYOR RICHARD RIORDAN (R), LOS ANGELES: It's something that will be on my mind a lot in the weeks ahead. Right now, I'm still mayor of Los Angeles. I am thinking about the city, which is my first love in life. And when I'm through with that, I will think very seriously about the possibility of running for governor.

(END VIDEO CLIP)

WOODRUFF: There are two other Republicans who are already in the governor's race, and they've also met with Bush advisers: California's secretary of state, Bill Jones, and investment banker William Simon Jr.

A final farewell to an American original: the funeral for Carroll O'Connor, and some of the day's other top stories when INSIDE POLITICS continues.

(COMMERCIAL BREAK)

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

The nation's largest sweepstakes publisher has settled a multimillion-dollar lawsuit out of court. Under the settlement reached today, Publishers Clearing House Sweepstakes will pay $34 million to 26 states. Each of these states accused the company of using deceptive marketing language such as, quote, "You're a winner" in its promotional materials.

(BEGIN VIDEO CLIP)

JENNIFER GRANHOLM, MICHIGAN ATTORNEY GENERAL: They send these little greetings cards to make people believe that they are, you know, very specially identified with the company. It says, "You're a guaranteed winner." Again, not permissible.

They often send very official-looking documents. This looks like it's a legitimate overnight delivery. It's not. It's just a piece of junk mail, really. And it makes it looks like it's an official, important document. They can't do this anymore.

(END VIDEO CLIP)

WOODRUFF: Meanwhile, the "publishing house" says that it will award its next million-dollar prize scheduled for August the 23rd.

A retired in the colonel in the United States Army Reserves was convicted of spying for Moscow today. He is the highest-ranking military official ever found guilty of espionage. 74-year-old George Trofimoff could spend the rest of his life in prison. It took a jury in Tampa just two hours to convict him of spying for Moscow during the '60s, '70, '80s and '90s. The Knight Commission on Intercollegiate Athletics is calling on NCAA schools to raise the graduation rates for student athletes to at least 50 percent and to ban schools who don't meet those requirements from participating in bowl games.

More on this from CNN's Skip Loescher.

(BEGIN VIDEOTAPE)

SKIP LOESCHER, CNN CORRESPONDENT (voice-over): Ten years ago, the Knight Commission criticized universities for shortchanging academics in order to pull in the big bucks from college sports, and the newest Knight report says the problems with big-time college sports have gotten worse, not better.

UNIDENTIFIED MALE: We're in trouble and we've got to do something about it.

LOESCHER: The report chides the NCAA, saying its rules clearly haven't restored the balance between sports and classroom achievement.

UNIDENTIFIED MALE: Some of the teams have not graduated Afro- Americans, and this is -- this is not right.

LOESCHER: Graduation rates from division one football teams are now only 48 percent, 35 percent for basketball.

UNIDENTIFIED MALE: We bring these people to these campuses, and we use their talents, so to speak, but we're not seeing to it that they get education.

LOESCHER: Instead, the report says schools are scrambling to bring in the millions of dollars that winning teams and coaches can provide. But the Knight Commission says that is not a school's primary purpose.

UNIDENTIFIED MALE: We're not in the entertainment business, nor are we a minor league for professional sports.

LOESCHER: Only a very few college players are ever drafted by the NFL or NBA, according to the report, and students who don't make the grade in the pros often find themselves in a world that demands skills their universities didn't require them to learn.

Skip Loescher, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: The actor Carroll O'Connor was remembered today at a service in Los Angeles. O'Connor died last week of a heart attack at age 76. A private burial is planned for later.

A number of actors attended today's service, including some of the cast of "All in the Family." It was on that show that O'Connor's face became familiar around the country as the bumbling bigot Archie Bunker. (COMMERCIAL BREAK)

WOODRUFF: The power shift in the United States Senate has triggered a new fight, one which threatens to stall reorganization of committees and work in the chamber. At issue: How judicial nominations should be handled.

Democrats want to be able to consider a judge's ideology during the confirmation process. Republicans say they are opposed. They argue that that could set a new and dangerous litmus test for candidates for judicial positions. Earlier today I spoke with Democratic Senator Charles Schumer of New York, and Republican Jeff Sessions of Alabama, both members of the Judiciary Committee. I began by asking, if you start considering ideology, what's to stop the public from thinking of the courts as just another political institution?

(BEGIN VIDEOTAPE)

SEN. CHARLES SCHUMER (D), NEW YORK: I think the word there is "political." When we say ideology, we mean their views on important jurisprudential issues. You'd want to know, I think the public is entitled to know, through the Senate, what a nominee's view is on privacy, and what a nominee's view is on how broad the First Amendment should be expanded in terms of campaign finance, and in terms of their views of the Second Amendment.

No one wants to know how they would rule on specific cases. But the general judicial philosophy, or ideology, that a nominee has is important. And you know, we all vote on it. We all vote with that in mind. But in the last decade it's become a no-no to talk about it and that sort of led to a "gotcha" politics, where you look for some trivial little thing they did wrong in the distant past and then somehow, miraculously, either all of the Republicans or all of the Democrats think that that trivial little thing they did is wrong and the other side thinks it's right.

Let's bring these issues out on the table and discuss them. I think that's what our witnesses tended to say today.

WOODRUFF: Senator Sessions, what about that point, that ideology has really always been considered, it just hasn't been out in the open?

SEN. JEFF SESSIONS (R), ALABAMA: I don't know that that is exactly correct. The Bar Association and Lloyd Cutler, who was a White House counsel for President Carter, who testified that ideology should not be a factor. He quoted from their 1996 report of which he was a member and he said it should not be factor because it causes the public, as you said, to see this as just as another political institution.

It's critical for America that our love for the law and our respect for the law are being nourished. And we undermine that, I think, when we suggest that decisions on legal cases are based on politics. I voted for a tremendous number of Clinton nominees, many of whom politically disagreed with me, but I generally believed that most of those nominees were going to do as they said, which was to follow the law.

So, yes, there is some limit to how far we can ask. We can ask some questions but we need to be careful about that. But I think that Senator Schumer and I are wrestling with maybe the word, "ideology." It really troubles me. It suggests to those on the Republican's side that we have a major change in our historic way of evaluating judges, that the Democrats, now that they don't have the presidency, are going to use a new and much tougher standard to analyze Bush nominees. I think that that would unfortunate.

WOODRUFF: Senator Schumer, is that what is going on? That now that the Democrats are in the majority, although slightly in the Senate, that you want to be very careful not to let the president name too conservative judges to the federal courts.

SCHUMER: Well, look, I think that that is clearly part of what's going on here and should. I think that the president ran on being a moderate. The American people wanted a moderate. And I would not want to see a Supreme Court with five Scalia's. Maybe one Scalia or two as Thomas seems to be very similar in his views is fine. But to have -- for us not to ask questions of these nominees, and then end up with people way over, not in the mainstream, at least in the opinion of most Americans, I think, would be a serious and terrible mistake and would have consequences on people's lives.

You know, Judy, when the Constitution said that they didn't give the president a carte blanc. They said the Senate should advise and consent. And when you read the Federalists papers, they want a very active Senate. That's how it was the first 100 years of the republic. It wasn't at certain points in time when there wasn't much, you know, when the president wasn't nominating -- a president -- an ideological group of judges.

But once the president decides that he wants judges almost all to the right, I think that it's the job of the Senate to moderate and temper him, and you and can only do that if you ask nominees and learn nominees' general's view -- not on specific cases -- but on their general views of jurisprudence.

WOODRUFF: Senator Sessions, what about this point, that seeking a balance in the judiciary is good for the courts and good for the country?

SESSIONS: The president campaigned on the fact that he would appoint judges, he would obey the law and follow the law. That's what he promised to do. And he won on that campaign issue. I think the American people strongly support that. Fifty-two believe he will appoint good judges, 14 percent believe that he will appoint judges that are too liberal.

He's not going to be -- appoint radicals to this court. And I think he's going to do an excellent job with it. I just believe that we in the Senate need to give him the same deference that we gave to President Clinton. Clinton confirmed 377 judges. Only one was voted down. There were only 41 judges pending when he left office. That's a good record. I hope we're not seeing a major change just because they have half the Senate. Remember, the Republicans had 55 senators.

WOODRUFF: Right. Senator Schumer, are you saying that ideology should take precedence over the qualification? That you'd rather have a judge with mediocre talent and middling political views than one of -- -- I am sorry -- of acceptable political views than a judge with extraordinary talent?

SCHUMER: No, both should be in the mix, and neither one, I mean, first, we want -- I have had three criteria I have chosen judges for New York's state. They are excellence, No. 1 -- legal excellence, first and the foremost. Moderation -- I don't like judges too far left, too right. And the third is diversity. I don't think white males should be the only people on the bench.

But it should be part of it and it is part of it and go out and ask the American people. They will say it's part of it. A recent survey that I just saw said, who do you better trust choosing judges? The Senate Democrats or the president, and 53-39 said that the Senate Democrats were the ones. And why is that? Because I think people are afraid when President Bush said he wants more judges like Scalia and Thomas on the Supreme Court, when these folks are way out of the mainstream by almost any judgment, people are a little worried.

And we're not going to get our way, but we can temper the president's more extreme type of wishes and views and I think that that's an appropriate role. That is not to say anyone who agrees with me is a good judge and anyone who disagrees with me is a bad judge. I suspect I am going to vote for a lot of President Bush's nominees who I don't agree with, but I certainly want to know who I am voting for and give them a careful vetting without holding them up.

WOODRUFF: Well, gentleman, we are going to have to leave it there. Senator Chuck Schumer of New York, Senator Jeff Sessions from Alabama, thank you both for being with us.

SCHUMER: Thank you.

SESSIONS: Thank you.

(END VIDEOTAPE)

WOODRUFF: Now, the lighter side of John McCain: When we come back, last night's "Late Night" appearance by the Arizona senator. His thoughts on President Bush, party loyalty, and those oh-so-serious Swedes, when INSIDE POLITICS continues.

(COMMERCIAL BREAK)

WOODRUFF: He may be deadly serious when it comes to American politics, especially to the issue of campaign finance reform, but Arizona Senator John McCain is also known to enjoy a good laugh. His pointed humor and sometimes self-deprecating wit was on full display last night during an appearance on CBS's "Late Night With David Letterman." Here's a sample. (BEGIN VIDEO CLIP, "LATE NIGHT WITH DAVID LETTERMAN")

DAVID LETTERMAN, HOST: How's your buddy George doing? What do you think? What's it look like, now?

SEN. JOHN MCCAIN (R), ARIZONA: I think he's -- I think he's doing well. I think he had a good trip to Europe. I think he's -- anybody that has to meet with the prime minister of Sweden deserves our sympathy.

(LAUGHTER)

LETTERMAN: Wait a minute! What does that mean exactly? George W. gets wind of this meeting, and you say it was prearranged before the defection in Vermont, and then he invites you and your wife to the White House. Did that happen, and how did it go?

MCCAIN: It was very nice, there was the president and me, Laura and Cindy, and two food tasters.

(LAUGHTER)

LETTERMAN: I suppose that's -- I guess that's necessary. I don't know.

MCCAIN: Food tasters are doing OK.

LETTERMAN: Are you leaving the Republican Party?

MCCAIN: No, no.

LETTERMAN: Have you thought about it?

MCCAIN: No.

(APPLAUSE)

MCCAIN: No, but -- it would have been nice to hear "Hail to the Chief" when I came in, as opposed to...

(LAUGHTER)

LETTERMAN: We'll play it for anybody!

MCCAIN: A little trip down memory lane.

(APPLAUSE)

(END VIDEO CLIP)

WOODRUFF: Last night on "David Letterman."

Israel's prime minister meets with President Bush, as Secretary of State Colin Powell prepares to head for the Middle East. We'll have the latest on the Mideast peace process when INSIDE POLITICS returns. Also ahead: a longtime Washington figure prepares to begin a new assignment overseas.

(COMMERCIAL BREAK)

WOODRUFF: A high-level meeting on Middle East peace: did it produce a meeting of the minds?

President Bush and the nation wait for possible action by the Fed. We'll look at the options, ahead.

And later...

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Baseball, in a way, is back in Brooklyn. But is it?

(END VIDEO CLIP)

WOODRUFF: Bruce Morton on the boys of summer in Brooklyn: then and now.

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

WOODRUFF: Welcome back to INSIDE POLITICS. It was the latest sign of the Bush administration's more active involvement in the push for Middle East peace. The president, meeting at the White House today with Israeli Prime Minister Ariel Sharon. Our senior White House correspondent John King has more on the talks and what, if anything, was accomplished.

(BEGIN VIDEOTAPE)

KING (voice-over): A friendly Oval Office meeting, but two very different views on the state of play in the Middle East.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We're gaining by inches, I recognize. Progress is in inches, not in miles, but nevertheless an inch is better than nothing.

KING: The administration wants to build on the fragile U.S.- brokered cease-fire the Israelis and Palestinians agreed to two weeks ago, but the bloodshed continues, and Prime Minister Sharon says there can be no new steps until all violence stops for a period of at least 10 days.

ARIEL SHARON, ISRAELI PRIME MINISTER: Israel will not negotiate under fire and under terror. If we will do that, we will never reach peace.

KING: This meeting marked the beginning of a more intense White House intervention. Secretary of State Colin Powell is off to the region, looking to push the parties to take steps beyond the cease- fire. The first would be an official cooling-off period, perhaps five or six weeks, then what the diplomats call confidence-building measures. In this case, a commitment by the Palestinians to arrest militants involved in attacks on Israel, and a pledge by Israel to stop expanding Jewish settlements in the West Bank and Gaza.

UNIDENTIFIED CROWD: Shame, shame, USA!

KING: But optimism is in short supply. These protesters outside the White House blame Israel and Mr. Sharon for the bloodshed. The prime minister says Palestinian leader Yasser Arafat is to blame. Just keeping the cease-fire in place could prove a major challenge.

DENNIS ROSS, FORMER SPECIAL ENVOY TO MIDDLE EAST: We are out of the solution business. That is not possible right now, because there has been a complete loss of faith in each side on whether or not the other is prepared to make peace. We have to reestablish a belief in peacemaking again.

KING: Adding to the administration's diplomatic challenge are mounting complaints from the Palestinian side of a pro-Israel bias.

(on camera): This was Prime Minister Sharon's second visit to the Bush White House, and Mr. Arafat has yet to be invited. Administration officials insist there is no bias, but they also make clear there will be no invitation for an Arafat visit until, in their view, the Palestinian leader does more to show his commitment to ending the violence.

John King, CNN, the White House.

(END VIDEOTAPE)

WOODRUFF: Like President Bush, Prime Minister Sharon came to their meeting today mindful of the diplomatic and political pressures he faces at home. CNN's Jerrold Kessel looks at the state of the cease-fire in the Middle East and the state of expectations on both sides of the conflict.

(BEGIN VIDEOTAPE)

JERROLD KESSEL, CNN CORRESPONDENT (voice-over): Israeli armor again surrounds the West Bank town of Hebron after a fierce firefight in the divided town on Monday extended into the night, posing the questions whether the sun is going down on the U.S.-brokered cease- fire.

BRIG. GEN. AMOS GIL'AD, ISRAELI ARMY INTELLIGENCE: There is no cease-fire. So, I don't need even any assessment. There is no cease- fire. Maybe I'll ask some of my colleagues, I haven't heard of it. There is no information about it.

AHMAD QURE'I, PALESTINIAN LEGISLATIVE COUNCIL: They are still continuing the same policy as a nation. The settlers have free hand. The Israelis want to use their power just only to impose what they want. KESSEL: Each side seems intent on showing the other is not living up to the cease-fire obligations it gave CIA Chief Tenet and other U.S. diplomats.

(on camera): But neither Palestinians nor Israelis are prepared to declare that they themselves are backing away from the terms of the Tenet truce, that so as not to risk pulling the rug under the mission this week of Secretary of State Colin Powell, a mission which is aimed at consolidating that truce and in setting them back on the path toward negotiations.

(voice-over): It's already time, say Palestinian leaders, to put all fighting aside immediately and to begin talking immediately.

QURE'I: We want the freeze of settlements to show our people also something. We want to show the people the political side of Mr. Mitchell, report not only the security. We are serious about security, but also we are more serious about the political side, because this is our cause.

KESSEL: But, say Israeli leaders, so long as Palestinian gunmen keep shooting, Israelis keep getting hurt and killed, that peace process cannot get going again.

DON MERIDOR, KNESSET FOREIGN AFFAIRS COMMITTEE: Mr. Arafat does not honor his new commitment to stop shooting, to stop the violence. It's going on. Israeli is restraining itself. I believe restraint didn't work.

KESSEL: Israel's foreign minister tells visiting American Jewish leaders there's a political context to Mr. Sharon's policy restraint.

SHIMON PERES, ISRAELI FOREIGN MINISTER: The people of Israel, the majority of them, would like to have -- to see a government of the right with a policy of the left. And that is more or less what we are having.

KESSEL: Exactly what Jewish settlers, who form the brunt of recent Palestinian attacks and who set up a protest camp opposite the prime minister's office, fear, that Mr. Sharon is locked into restraint even if violence continues.

The settlers' deeper fear, that if the United States can make the cease-fire take root, even in such flashpoint places like Hebron, then Mr. Sharon will be forced to a strategic choice, between continued full backing for them and the negotiating option.

Jerrold Kessel, CNN, on the West Bank.

(END VIDEOTAPE)

WOODRUFF: Turning now to the Balkans and the ongoing conflict in Macedonia. A Pentagon spokesman said today that the use of American troops to evacuate ethnic Albanian rebels in Macedonia was a, quote, "new event" for U.S. forces designed to defuse a volatile situation. But he said it does not mark an expansion of U.S. involvement in the region.

The Macedonian president also defended yesterday's moves by U.S. forces, which sparked riots by ethnic Slavs, furious about a cease- fire deal that paved the way for the evacuation.

We cap our look at global politics with a send-off for a new ambassador: Former Senate Majority Leader Howard Baker was sworn in today as the new U.S. ambassador to Japan. The Tennessee Republican is the latest in a long line of elder statesmen Washington has sent to Moscow -- or rather to Tokyo.

(BEGIN VIDEO CLIP)

HOWARD BAKER, U.S. AMBASSADOR TO JAPAN: There is a special, unique relationship that exists between the United States and Japan. It is remarkable indeed that given our history and relationship that Japan and the United States would develop this strong bond, this mutuality of respect, the shared common view of the necessity for peace in the world.

(END VIDEO CLIP)

WOODRUFF: In honor of Baker and his new title as ambassador, President Bush hosted an elaborate White House ceremony with a guest list that included more than a dozen senators, two former secretaries of state and one Supreme Court justice.

The challenge of gauging the economy. Alan Greenspan has led an aggressive series of interest rate cuts this year. When we return, we will consider the odds of another rate reduction and how the Fed announcement tomorrow could affect the economy.

(COMMERCIAL BREAK)

WOODRUFF: The Federal Reserve Board today began a two-day meeting that will culminate with tomorrow's mid-afternoon announcement on a potential cut in interest rates. Fed Chairman Alan Greenspan had new economic numbers to ponder as he arrived for work, including word of an increase in consumer confidence and higher new home sales.

CNN's Maggie Lake reports on the Fed meeting and the likelihood that rates may again be headed lower.

(BEGIN VIDEOTAPE)

MAGGIE LAKE, CNN CORRESPONDENT (voice-over): Faced with the threat of recession, the U.S. Federal Reserve has been aggressively lowering interest rates, slashing them by a hefty 2 1/2 percentage points this year: a dramatic page in history since Fed chief Alan Greenspan and his team have never cut rates so much in such a short period of time.

In a statement accompanying last month's rate cut, the Fed said it was concerned about "the erosion in current and prospective profitability in combination with considerable uncertainty about the business outlook." That outlook hasn't improved much. Despite the sharp drop in interest rates this year, the economy remains anemic.

ANTHONY CRESCENZI, MILLER TABAK & CO.: Job losses in the manufacturing sector in May were 124,000. So, that's one very strong reason. In addition, corporate profits seem to be very weak still. Preannouncements have been very sour, so the news, generally speaking, from corporate America has been pretty bleak, and the Fed might want to factor that in their decision.

LAKE: While bond strategist Anthony Crescenzi agrees the odds of a half of a percentage point rate cut have increased, he still believes the Fed will decide to cut by only a quarter of a percentage point. In fact, most of Wall Street is betting the Fed will want to avoid overshooting by lowering rates too much.

MICHELLE GIRARD, PRUDENTIAL SECURITIES: Sometimes too much of a good thing can be more negative. Of course, if the economy does grow too quickly and we start to see prices rise, then you end up in a situation where the Fed is having to raise interest rates, and that isn't good for either the stock market or the bond market.

LAKE: The problem is timing. Interest rate cuts operate with a lag, and it is not yet clear the five cuts this year will provide the necessary medicine to revive the economy.

(on camera): The Fed also has to consider the boost from tax rebates being mailed to Americans this summer. Analysts say these factors make this Fed meeting a very tough call.

Maggie Lake, CNN Financial News, at the New York Stock Exchange.

(END VIDEOTAPE)

WOODRUFF: There will be more analysis on the Fed's expected decision and how it will affect the markets and the economy coming up at the bottom of the hour on "LOU DOBBS MONEYLINE."

Forty-four years after the crowds fell silent, baseball is back in Brooklyn. Up next: a new park, a new team, but the game remains the same.

Bruce Morton takes us to the ballpark when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: Updating a story we told you about yesterday, the New York State Assembly overwhelmingly approved a bill that bans the use of handheld cell phones by drivers. The final vote was 125 to 19. The New York State Senate had already passed the legislation, and it now goes to Governor George Pataki, who has said he will sign it into law. Supporters say the law will make New York roads safer.

(BEGIN VIDEO CLIP) SHELDON SILVER, N.Y. ASSEMBLY SPEAKER: The public has indicated its support of this bill by better than 4-1, in polling that has recently been done. So it is clear that legislators have been responding their constituents who always seem to say that someone else who they almost had an accident with was holding a cell phone and not paying attention to driving on the road.

(END VIDEO CLIP)

WOODRUFF: And a warning to first-time violators of the law. They face fines of up to $100 starting on December 1st.

Long before the age of cell phones, the Brooklyn Dodgers helped to give New Yorkers something else to argue about: Baseball. Names like Jackie Robinson and Duke Snider are etched in baseball history. And when the Dodgers left for Los Angeles, a colorful page of sports history came to a close.

Last night in Brooklyn, the old days were back. Here's CNN national correspondent, Bruce Morton.

(BEGIN VIDEOTAPE)

BRUCE MORTON, CNN CORRESPONDENT (voice-over): Matthew Peterson, 19, throws the first pitch of the Brooklyn Cyclones' first home game to Maximo Made, 19, of the Mahoning Valley Scrappers at KeySpan Park in Coney Island -- a ball.

Baseball, in a way, is back in Brooklyn. But is it? The old Dodgers, who left 44 years ago, are legends, were heroes, won pennants, a World Series. Roger Kahn covered that team and wrote a book about them: "The Boys of Summer." This isn't that, he notes.

ROGER KAHN, AUTHOR, "THE BOYS OF SUMMER": I'm mostly offended by trying to sell it as, "Baseball is back in Brooklyn," as though there was any connection between Hall of Fame players and the single-A players they're going to have. Five percent players on that level ever get to sit on a Major League bench.

MORTON: Yes, defenders say, but...

UNIDENTIFIED MALE: We're not the Brooklyn Dodgers. They were a championship Major League team. We're the Brooklyn Cyclones, a Class A affiliate of the New York Mets. But just the fact that the community has taken on to this team so fast and so nicely, it's very fulfilling.

UNIDENTIFIED FEMALE: Thank you.

MORTON: In fact, they have sold most of the tickets they have for this season. And opening night was -- well, opening night: kids, caps, autographs, not very many empty seats either. One of the hopes is that the team will bring people back to Coney Island. The old amusement park isn't the draw it used to be. And the ballplayers themselves, just starting out, just want to play, not study Brooklyn history. MIKE JACOBS, CATCHER: For most us, it's just to be able to play, see what happens, see if we have the chance to make it to the big leagues.

ROBERT MCINTYRE, SHORTSTOP: It's nice to be in Brooklyn, you know, but just playing ball anywhere, no matter where it's at. And it's really what we wanted to do. And so it really doesn't matter where we're at.

MORTON: Mayor Rudy Giuliani, a Yankee fan, threw out the first ball. And the Cyclones, in white now instead of practice blue shirts, played. And Joe Pignatano, a catcher on the team that left 44 years ago, was there.

JOE PIGNATANO, FORMER BROOKLYN DODGERS PLAYER: Baseball is baseball. You can't change that.

MORTON: They won't be the heroes, the legends of summer. They'll be the new guys, the young guys, the boys from Class A. They won their opener 3-2.

Bruce Morton, CNN, Brooklyn.

(END VIDEOTAPE)

WOODRUFF: And congratulations to them. INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

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