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Patients' Rights Stirs Lively Senate Debate; Appeals Court Shoots Down Microsoft Breakup; Is the Economy Out of Hot Water?

Aired June 28, 2001 - 17:00   ET

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


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

(BEGIN VIDEO CLIP)

SEN. EDWARD KENNEDY (D), MASSACHUSETTS: It's the power of the HMOs against the little guy!

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: You will see a big lottery for trial lawyers.

(END VIDEO CLIP)

ANNOUNCER: For the night toward the Fourth of July, senators keep shooting for progress on patients' rights.

An appeals court shoots down the breakup of Microsoft. We'll review the case with two famous legal figures, Ken Starr and C. Boyden Gray.

And is the comeback kid on the comeback trail again?

Now, Judy Woodruff takes you INSIDE POLITICS.

JUDY WOODRUFF, CNN ANCHOR: Thank you for joining us. The Senate wrangling over patients' rights has been intensifying today as majority leader Tom Daschle sticks to his threat to scrap the Fourth of July recess if the bill is not completed before then. Members are pushing toward a vote on a key compromise, and Republicans are debating their next moves. Our congressional correspondent Kate Snow has the latest from the Hill -- Kate.

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: Well, wrangling is the right word, Judy. They have been all day back and forth over amendments, over issues that Republicans want to tack onto this bill Democrats are not in favor of. And at this hour, we are waiting for a key vote on what looks to be one of the biggest compromises on this bill.

(BEGIN VIDEOTAPE) SNOW (voice-over): One major hurdle cleared: a compromise meant to protect small businesses from being sued by workers with health care problems. Republican Senator Olympia Snowe helped broker the deal. Companies with outside insurance can designate a decision-maker that would be responsible and liable for medical decisions.

SEN. OLYMPIA SNOWE (R), MAINE: The bottom line is that we seek to protect employers from liability in cases where they aren't making the medical decisions that harm patients or result in death while still protecting patients rights, which, after all, is the goal of this legislation.

SNOW: Companies that are self-insured would also be protected from suits if they had no direct participation in the decision that caused a medical problem.

But a small portion of large corporations that self-administer their health care plans would not be protected. For example, 700,000 people Wal-Mart covers could still sue the company.

Another deal brokered would allow states that already have patient protections on the books to keep those laws, instead of having to comply with new federal rules.

But for Republicans, there are still several sticking points. For one, where can lawsuits be filed, in federal court or in federal and state courts? How quickly can disputes be brought to court? And how much can a patient ultimately be awarded by the court? The president wants changes in the bill before he'll sign it.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The Senate still has some important amendments ahead of it, and the president hopes that the Senate will work with him and not just try to work in a fashion that puts politics before progress.

SNOW: But Democrats suggest a majority of the Senate is ready to go along with the bill as written.

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: We've come a long way. We've already divided between federal and state jurisdiction. We've applied caps. We've done a number of things to accommodate those who are in opposition to the liability provisions of the bill, and I don't know how much further we can go.

(END VIDEOTAPE)

SNOW: An aide to Senator Daschle says that he is still hopeful that they will be able to get a patients' bill of rights out of the Senate, hopefully sooner rather than later.

Republicans, Judy, have just emerged from a meeting with all of their conference, every one of the Senate Republicans meeting to talk about their strategy. Senator Don Nickles, the second-ranking Republican telling us that they are now planning on staying here, they are planning on pursuing a number of amendments that they think are critically important. Senator Santorum, Rick Santorum from Pennsylvania telling us if we're not making a whole lot of progress, my guess is we'll just find a way to wrap this up.

So, they are going to try to do some more, but if they can't make enough progress, they may have to let this go and let the House try to add some of the provisions, the key provisions that Republicans want and that the president has asked for -- Judy.

WOODRUFF: Kate, the atmosphere there is described as tense. Can you give us an example of just how tense it has been?

SNOW: I absolutely can, and that's a good word. Earlier today, one of the big issues, Judy, that they are all ready and waiting to go on a break here for July Fourth. There is supposed to be a recess that was supposed to have begun tomorrow, continuing through next week for the July Fourth holiday. Many members obviously have plans, one member has a plan to go on a fishing trip, that's Senator Stevens -- and that came out in a very terse exchange between Senator Daschle, the majority leader, and Senator Stevens.

(BEGIN VIDEO CLIP)

SEN. TED STEVENS (R), ALASKA: I plead with the Senate: let us proceed with this bill! We should put aside all other desires. There is no timeframe on the patients' bill of rights that matters to this country! It's a bill that must be passed, and I'm going to vote for it, but it does not have the urgency of the supplemental.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

DASCHLE: Certainly, we can agree than it's more important than fishing, than any other kind of vacation we could be taking next week. Certainly it's more important than that.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

STEVENS: Leader, I'm not going to forget that. That was a cheap shot.

(END VIDEO CLIP)

SNOW: What they were referring to there, Judy, the supplemental they were referring to is something Senator Stevens is very concerned about, that is a defense supplemental, some money that they think is much needed -- in fact, Democrats agree is much needed for defense, for the military, about $6 billion that they want to send to the military.

That bill is sort of hung up in the middle of all of this discussion and debate over the patients' bill of rights. Republicans saying that they think this is the first big misstep by Senator Daschle, that he has not allowed them to vote on that military money, that instead he's working on what they call a very political bill, this patients' bill of rights. Democrats saying, though, they fully intend to get to that military money and that bill. They fully intend to do that. Daschle saying today that he has promised the president that he will get to that, it's just that he wants to pass a patients' bill of rights first -- Judy.

WOODRUFF: All right. Kate Snow at the Capital.

The other main story here in Washington today: a federal appeals court unanimously reversed a lower court ruling that would have broken up the software giant Microsoft. The appeals court ruled that the original judge in the case, Thomas Penfield Jackson, made inappropriate comments outside the courtroom that gave the appearance that he was biased against Microsoft.

But the court of appeals agreed with some of Jackson's findings, most notably that Microsoft did violate antitrust laws, which helped maintain its monopoly on the software market. Today's ruling puts the case in the hands of a new judge who will decide what penalty Microsoft should face. The company says the decision significantly narrows the case, and removes the, quote, "breakup cloud" from Microsoft.

(BEGIN VIDEO CLIP)

BILL GATES, CHAIRMAN, MICROSOFT: We're very pleased that this ruling reverses the lower court ruling and sets a much higher standard for these issues than the lower court applied. It sets a high bar for any ruling against the inclusion of new features in software products.

(END VIDEO CLIP)

WOODRUFF: In response to the Microsoft ruling, the Justice Department also is declaring victory, and we have more on that from our justice correspondent Kelli Arena -- Kelli.

KELLI ARENA, CNN JUSTICE DEPARTMENT CORRESPONDENT: Judy, the Justice Department had adopted a wait-and-see attitude toward the Microsoft case, refusing to speculate on strategy. Well, today, Attorney General John Ashcroft would only say the department is reviewing the decision and described the appeals court ruling as a victory.

(BEGIN VIDEO CLIP)

JOHN ASHCROFT, U.S. ATTORNEY GENERAL: I don't believe that we are in a weakened position. My own view is that this is a victory for the department, and so the department is not, I believe, in a weakened position here. The court did find that Microsoft had engaged in unlawful conduct to maintain its dominant position in the computer operating system arena, and we'll carefully read the decision with a view toward shaping our conduct.

(END VIDEO CLIP)

ARENA: The department will now meet with the 19 state attorneys general which joined in the suit against Microsoft to digest this opinion and decide on strategy. They can choose from several options, including a possible settlement with the company -- Judy.

WOODRUFF: All right. Kelli Arena, thanks.

And now we're joined now by two prominent legal figures who are on opposite sides of the Microsoft case. Former independent counsel Kenneth Starr was drafted by a high-tech trade group, known as Procomp, all of the Microsoft competitors, to help craft a legal brief on the government's behalf. And former White House counsel C. Boyden Gray is a legal consultant for Microsoft.

Gentlemen, is Microsoft now home-free as far as all of its concerns, Ken Starr?

KENNETH STARR, FORMER INDEPENDENT COUNSEL: Clearly not, Judy. The court of appeals today unanimously concluded, as Attorney General Ashcroft indicated, that Microsoft had violated the antitrust laws, and these are serious violations, that it had abused its monopoly power.

It's sending the case back, not all aspects were upheld, but that was one of the most important dimensions of that opinion, and now there will be further proceedings, which we all knew would occur, in terms of what the appropriate remedy is.

Will the remedy be a structural remedy, as we see in the antitrust arena? Will it go to the composition of the company? And the jury is out on that. We need to have evidence, which the lower court did not take in the first round. So, this is a very -- I think Attorney General Ashcroft is exact right, this is an important victory for the Justice Department.

WOODRUFF: Victory for the Justice Department and victory for Microsoft, Boyden Gray?

C. BOYDEN GRAY, MICROSOFT LEGAL CONSULTANT: I think it is a victory for consumers, really. Because the key issue going forward is whether Microsoft and other platform network monopolies or broad-based platforms can add new features to their products.

And the court of appeals makes absolutely crystal clear that as long as you don't behave in an exclusionary way, you can add new features to products like Windows, and for consumers, that's the big victory. Now Microsoft may be told on remand that there is certain exclusionary practices, many of which they've already ceased engaging in, cannot be used in the future.

And that -- we remain to see how that comes out. For consumers and innovation, it's a big victory. The department will not be able to regulate the new economy the way they originally thought they could do when this case was originally won.

WOODRUFF: Are you reading this the same way, Ken Starr?

STARR: I'm really not, because I think Boyden, who's a great gentleman and great lawyer, is being excessively polite in talking about "exclusionary conduct," which is a more elegant way of saying that individual companies can be competitive in the marketplace, and they can be innovated. That's what the antitrust laws are designed to do.

What Microsoft did here was anti-competitive. These exclusionary practices ended up having adverse affects on consumers, so I don't think the Justice Department ever anticipated ever contemplated, and certainly, I don't think the competitors of Microsoft would ever welcome any kind of remedy that, in fact, involves the regulatory hand of Washington.

And that's why we have to have these further proceedings, based on the fact that Microsoft, what it did, was illegal in the marketplace.

WOODRUFF: That being the case, Boyden Gray, you are still shaking your head when you lessen to this?

GRAY: There is no fine in consumer harm, even in the sweep of the judge's opinion, which the court of appeals said it was drastically cutting back on. I'm not making it up. Drastically is the word they used.

Consumers are benefited by the ruling because competition and innovation can go forward. Exclusionary tactics, no. But integration, inclusion, innovation is given a complete green light here. That's the important thing going forward.

WOODRUFF: But the new judge could still order remedies?

GRAY: He could.

WOODRUFF: That would set Microsoft back, is that not correct?

GRAY: I don't believe in terms of what's important for consumers that Microsoft can be set back. Clearly, there is almost zero chance of a breakup. And the remedies that they will be perhaps facing will deal with conduct much of which they've already ceased engaging in.

WOODRUFF: Do you agree, Ken Starr, that, as Bill Gates put it, the cloud of breakup over the company has now been lifted. That that's gone as an option?

STARR: No, it is too soon to tell. What the court of appeals, in this very elaborate opinion contemplates, is further proceedings. They did not say this case is over.

To the contrary, they held -- the antitrust laws had been violated and there has to be an appropriate remedy that is tailored. And the court was very careful and being cautious, courts should be careful. They should be cautious; they should look at all the evidence. That is what is now going to happen, we will now have a full-blown evidentiary process before the judge on remand, to determine exactly what is the right remedy.

The antitrust laws would tell us that the right remedy for the right conduct is something that goes to the structure of the company.

WOODRUFF: What about the role of the Justice Department? We heard Kelli Arena's report, Boyden Gray, but we do have a change of administrations. Do you expect the United States Justice Department to maintain the stance that it has maintained on this?

GRAY: I think the change of administration is much less important for the future than the scope of the court's ruling. And what the department started out saying they were going to do, is use this case as an example of how they will "regulate the new economy."

The court of appeals has said, as long as you don't engage in exclusionary tactics you can add whatever features you want to existing products, and that I think is the key ruling looking forward to the future.

WOODRUFF: Do you think, Ken Starr, there is a decent chance the Justice Department could decide to just back off this whole thing and actively go after a settlement here?

STARR: I don't think so. They can't just back off the whole thing, because these findings are too important in terms of the nature of Microsoft's products, its monopoly position in this very important market. It's going have to take steps, that's its duty to ensure that competition is restored in the marketplace.

You don't do that with just another settlement. We've experienced that with Microsoft before. We will have to get another remedy that really works.

WOODRUFF: If you are Bill Gates and we heard his comment for the television cameras a moment ago, Boyden Gray, but if you are Bill Gates and the people who have a stake in this company, are you sleeping easily tonight or are you going to lie awake worrying what's still out there?

GRAY: No, I think you will sleep better than before, but what you have to understand is going forward in the future, they cannot do, engage in some of the practices which they have long since engaged in, but they cannot do those kinds of things in the future.

On the other hand, they are not in any way barred from expanding the universe of Windows products.

WOODRUFF: Ken Starr, how do you think they should sleep tonight?

STARR: I think they should be very uneasy, and I think consumers should be uneasy in light of what Bill Gates is saying, is going to be the next generation of Windows, and all of the products and you hear Boyden say, go ahead and bolt anything to these products that you want to. Even if you are in a monopoly position, I don't think the court of appeals agrees with that.

They are not trying to interfere with the market economy. They are trying to keep a monopolist from engaging in anti-consumer practices. WOODRUFF: Ken Starr and C. Boyden Gray, thank you both very much. We appreciate you being with us.

STARR: Thank you.

WOODRUFF: Good to see both of you.

A final note on Microsoft, and its political ties. The company's political donations have increased dramatically since the Clinton administration launched the antitrust suit against Microsoft. In 1996, Microsoft's political donations totaled $256,000. Most of it went to Democrats, according to the Center for Responsive Politics.

Two years later, when Microsoft's battle with the government began, the firm's political contributions rose to $775,000. That year, more money went to Republicans, a trend that continues to this day.

In the 2000 election year, Microsoft's political contributions soared to $2.4 million. As we look toward the 2002 election cycle, Microsoft already has contributed $195,000.

What impact will the court's decision have on Microsoft's stock? We will have complete analysis coming up on "LOU DOBBS MONEYLINE," Lou's special guest will be the founder of Microsoft, Bill Gates; that's at 6:30 p.m. Eastern.

We will talk economic policy with the president's budget director Mitch Daniels, later on INSIDE POLITICS.

But first: new attention on Roger Clinton, and those last minute pardons issued by then-President Clinton as he left office in January.

Also ahead: a look at Hollywood's connection with Democrats, on a night the party holds a major fund-raiser.

Plus: access to emergency care, and its role in the patients' rights debate. This is INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: Former President Clinton is back in Washington today, in part to help raise money for the Democratic Party. This D.C. stopover is not the first visit for the former president since he left office, but it is, perhaps, his most high-profile Washington appearance so far.

For an update on Bill Clinton and his life after the White House, here's CNN senior political correspondent Candy Crowley.

(BEGIN VIDEOTAPE)

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT (voice-over): Guess who came to lunch?

WILLIAM J. CLINTON, FORMER PRESIDENT OF THE UNITED STATES: I am, I think, glad to be back. And I'm glad to see so many of you out there.

CROWLEY: Bill Clinton made a post-presidency debut in Washington Thursday, playing to his strengths; a speech on race by day.

W. CLINTON: The fear of the other, of people who are different from us, has a much longer and sturdier history than the impulse to reach out and live together in harmony.

CROWLEY: And a little fund-raising by night, emphasis please on little.

W. CLINTON: Oh, I'm doing a little bit. But, you know, not very much. I'm doing a little to help them in smaller groups; and if I can help, I want to.

CROWLEY: Boy can he help. No one in the Democratic Party is a bigger draw than Bill Clinton. They've been salivating to get him out there.

TERRY MCAULIFFE, DNC CHAIRMAN: The base of our party dying to see the president again, and appreciate what he had done for this country over the course of his administration.

CROWLEY: The former president reemerged on the fund-raising scene earlier this month. And while Senator Joe Lieberman is actually the featured guest at tonight's bash, it didn't hurt attendance when word got out that Bill Clinton might drop by. He is a bit of a reluctant bride. Did he mention he won't be doing this all that much?

W. CLINTON: I don't think it will be a particularly big thing. I'm just -- they've asked me to do a few things, and I've done them; not particularly many.

CROWLEY: The best politician of his generation, we are told, is no longer that interested in politics.

JOE LOCKHART, FORMER WHITE HOUSE PRESS SECRETARY: It would provide a wrong picture of the former president if there was a focus on what his domestic political strategy is, because the domestic political strategy is to stay out of domestic politics and to do the kind of things that a former president can do.

CROWLEY: He's happy to drop by fund-raisers, says an aide, but he's not going to run the party from Chappaqua.

(on camera): People close to the former president say he wants to play the international elder statesman role, focusing on AIDS, the digital divide, and expanding educational opportunities and health care throughout the world. But can such a political animal go cold turkey? In the words of one aide: "Early on it was rough; February and March were not fun."

(voice-over): But since then, according to those around him, the former president, the youngest ever to hold that title, has gotten his sea legs, traveling largely in Europe. He is, said an aide, in great shape. He looks great and he's having a grand old time. W. CLINTON: You can even ask me a question when it's over. I can say that because nobody cares what my answer is anymore, so it's great.

CROWLEY: The line between wistfulness and relief seems small. Somehow you get the feeling that the man who dominated this town for eight years doesn't think it's that great.

Candy Crowley, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: As candy noted, former President Clinton is expected to appear tonight at a Democratic fund-raiser in Washington, headlined by former vice presidential candidate Joe Lieberman. With the 2002 money race already in full swing, both sides will need their traditional donors to dig deep once again.

As CNN political analyst Ron Brownstein of "The Los Angeles Times" tells us, the Democrats may be alienating one of their most important allies: Hollywood.

(BEGIN VIDEOTAPE)

RON BROWNSTEIN, CNN POLITICAL ANALYST: When Democratic donors gather here in Constitutional Hall for a glitzy fund-raiser, the marquee attractions will be...

(voice-over): ... two popular acts: the four tops and Roberta Flack.

(on camera): The surprising part is that the third big name on the bill tonight, Democrat Senator Joe Lieberman of Connecticut, is emerging as the entertainment industry's principal scourge in Washington.

SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: God bless America.

BROWNSTEIN (voice-over): In 2000, when Lieberman ran as Al Gore's vice presidential nominee, Hollywood opened its wallets for the ticket. This spring, though, Lieberman ruffled feathers all across Hollywood by introducing legislation to give the Federal Trade Commission more authority to regulate the marketing of violent movies and other entertainment toward kids.

LIEBERMAN: Hopefully this legislation will make the hard job of raising kids in today's culture a little bit easier for America's parents.

BROWNSTEIN: Now he's scheduled a hearing for next month in his Senate Governmental Affairs Committee to examine whether the existing systems for rating movies, television shows, video games and music is effective.

He also wants to explore ways to nudge the entertainment industry toward a single, uniform rating system for all these products. Almost without exception, the entertainment companies fiercely oppose the Lieberman initiatives on both marketing and ratings.

Adding to their outrage is the fact that New York Senator Hillary Clinton, another big beneficiary of Hollywood campaign cash, is Lieberman's main ally on both crusades. The irony is that even as these Democrats are targeting Hollywood, President Bush has taken a low profile, preferring to talk more about the responsibilities of parents than the obligations of producers.

(on camera): It only goes to show that even in Washington, you can't always just follow the money. In the 2000 election, TV, movie and music producers gave more than four times as much money to Democrats as Republicans. Yet right now it's Democrats who are now putting the most pressure on the big entertainment companies. Politicians biting the hand that feeds them? That's a political plot twist worthy of Hollywood itself.

This is Ron Brownstein for INSIDE POLITICS.

(END VIDEOTAPE)

WOODRUFF: Republicans chose last night to hold a fund-raiser of their own here in Washington. The GOP brought in more than $20 million at the event, which was headlined by President Bush and Vice President Dick Cheney. More than 4,000 tickets were sold at a cost of $2,500 per plate. Donors who gave $25,000 or more were given the chance to request a member of Congress to join them at their table.

ROBERT NOVAK, "CHICAGO SUN-TIMES": Do they have to sit with a member of Congress?

WOODRUFF: You can hear the voice of our next commentator here.

Joining us now with his "Reporter's Notebook," Bob Novak of the "Chicago Sun-Times."

All right, Bob, I understand that you've already been picking up some dissatisfaction among some of the donors at this dinner last night.

NOVAK: I love this story.

President Bush and Vice President Cheney have developed a technique, which some of their Cabinet members use, too. It's fairly new. They come to a dinner, they give the speech, and they leave. So they don't -- they speak before dinner, they don't wait for the meal, and they are in and out of there.

And some of the people who paid 2,500 smackeroos apiece to sit down were complaining to me that they would like for the president and the vice president to hang around like they hang around, so at least they can see them and maybe eat the food. Now, that may sound petty, but when you spend that kind of money for dinner, maybe you'd like the celebrity to join you.

WOODRUFF: You mean, they actually want to see them for a few minutes? NOVAK: See them, yes -- up there eating the steak.

WOODRUFF: All right, next item: New Jersey. The victorious Bret Schundler in the Republican gubernatorial primary. What are you hearing about his campaign?

NOVAK: You know, a famous politician who ended up in New Jersey named Richard Nixon used to say that a Republican goes to the right to get nominated, left to get elected. But Bret Schundler is playing a little different game. He is not going to try to be a liberal Republican, a Christie Whitman in New Jersey, although no conservative in memory has been elected in this state.

What the plan, I am told, is he is going to try to appeal to the blue collar voters -- be a kind of a blue-collar Republican. Ronald Reagan is his model; Ronald Reagan won New Jersey comfortably twice, and Schundler getting away from the conservative liberal models, being a blue-collar Republican. We'll see if he can pull it off.

WOODRUFF: Blue collar, but not liberal.

NOVAK: That's right.

WOODRUFF: All right. Today Tom Daschle, meeting with a representative of the Building Trade Unions?

NOVAK: The Building Trade Union had been wooed by the Republicans because their energy plan gives them jobs, and I am told they are really unhappy with the Democratic energy program because it is too green. It doesn't provide new jobs. And the Building Trade Unions are interested mostly in working, they're not interested in ideology. This is the greatest inroad I've seen by the Republicans in that group since very early in the Reagan administration, and Tom Daschle is trying to tell them to come back to the fold.

WOODRUFF: All right. I'm moving all over the place today, because that's where your notebook is today, Bob Novak. The House Republican leadership and what they're now thinking about campaign finance reform legislation.

NOVAK: The one thing, Judy, that they don't want is for a bill -- for the McCain-Feingold bill to fly through the House of Representatives right to President Bush's desk so that the president has the dilemma of whether to sign it or to veto it. So what they are intent on doing is having substantial changes in the bill.

They no longer think they can kill the bill in the House of Representatives, but the House Republican leadership wants to change the bill enough so it gets into a House-Senate conference. And anything can happen in the House-Senate conference when you have bargaining. That's the strategy. We'll see -- if they cannot change the bill in the House, they have lost that fight.

WOODRUFF: All right, last but not least, the state of Ohio, former Congressman, former presidential candidate John Kasich, thinking about running? NOVAK: There was a report that Congressman Kasich, who has just left politics, left the House of Representatives to make a little money, was interested in running against the Republican governor of Ohio, Robert Taft, who is not all that popular. I checked with some Republican sources in Ohio, and they say Taft is in bad shape. Kasich could probably win a primary. That would be a huge story.

But alas, Judy, Don Thibaut, the former chief of staff for John Kasich sent out an e-mail to interested parties saying Kasich has no interest in running for governor, that he will campaign side by side with reelection with Bob Taft, and I think this is an authorized denial. So we just won't have the fun of an Ohio Republican contesting the primary for governor next year.

WOODRUFF: So you take that as a Shermanesque statement.

NOVAK: I think he's out of here.

WOODRUFF: All right, Bob Novak, we always love looking in your notebook.

NOVAK: Thank you.

WOODRUFF: Thanks very much.

Well, just before Bob joined us, we were hearing about President Clinton, but coming up next, CNN's Eileen O'Connor with a look at new questions for the president's brother, Roger Clinton.

(COMMERCIAL BREAK)

WOODRUFF: Former President Clinton's brother, Roger, faces new questions about his lobbying efforts on behalf of friends and associates who wanted presidential pardons. Roger Clinton was among the 177 people who received pardons in the last hours of the Clinton presidency. But his efforts to gain pardons for others are now under investigation.

CNN national correspondent Eileen O'Connor has the latest developments.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP, "LARRY KING LIVE")

ROGER CLINTON, WILLIAM J. CLINTON'S BROTHER: All I have is the truth. That's all I have.

KING: But you're not telling it.

(END VIDEO CLIP)

EILEEN O'CONNOR, CNN CORRESPONDENT (voice-over): Those were fighting words to a Congressional committee investigating pardons granted by Former President Bill Clinton. In a letter from Committee Chair Republican Dan Burton to Roger Clinton obtained by CNN, Burton complains Clinton should do more to cooperate with his investigation.

The committee wants only to obtain the truth, so that it can conclude its investigation of President Clinton's grants of clemency. Burton also wants answers, asking: "Was the payment of $50,000 from Anna Gambino related to any actions taken by you for the benefits of Rosario Gambino?"

Rosario Gambino is currently serving a 45-year sentence for selling heroin. His children, Anna and Tommy, were friends of Roger Clinton, and paid him $50,000 in 1999. Through his attorney, Roger Clinton won't confirm or deny that his client may have asked his brother, then President Bill Clinton, to consider a pardon for Gambino.

His attorney says Roger Clinton acknowledges accepting money from the Gambinos. He won't comment on what it was for, only saying it was not related to a request for a period for Rosario Gambino. "He did not receive any money in connection with making any recommendations for pardons," Roger Clinton's attorney, Bart Williams, said.

Gambino never received a pardon, though sources say White House documents indicate a request for a background check was done. Roger Clinton told CNN's "LARRY KING" he did ask for pardons for some friends, noting none were granted. And he claims all were out of prison.

(BEGIN VIDEO CLIP)

R. CLINTON: I requested four or five people for pardons that were dear friends of mine and in our families. All had served, and all had served and had been out for a long time.

(END VIDEO CLIP)

O'CONNOR: His attorney acknowledged Roger Clinton had written a letter to the parole board on Gambino's behalf. That request was also denied well before he received any money. The former president declined to comment on whether his younger half brother had done anything wrong.

W. CLINTON: I don't have anything to say about that. I don't know.

O'CONNOR: The committee is also looking into other payments made to Roger Clinton, even asking him if he reported them on his tax returns. The committee staffers admit that even if Roger Clinton took money and lobbied for pardons, that in itself is not a crime.

Eileen O'Connor, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Meanwhile, Senator Hillary Rodham Clinton's job approval rating has topped the 50 percent mark for the first time since she took office in January. A new Quinnipiac University poll shows 52 percent of New Yorkers approve of the former first lady's performance. Her approval rating in late April was 47 percent, and it was only 40 percent in March, in the wake of the White House pardons controversy.

Taxes, spending and White House priories: When we return, White House Budget Director Mitch Daniels joins us to discuss the economy and the president's future budget plans.

(COMMERCIAL BREAK)

WOODRUFF: On the economic front, Americans' federal tax rebate checks soon will be in the mail. The Federal Reserve just cut interest rates another quarter point, and the Bush administration has sent a somewhat controversial Pentagon budget over to Congress. In other words, there's much to talk about with White House Budget Director Mitch Daniels, who joins us now on INSIDE POLITICS on a warm afternoon at the White House.

Mitch Daniels, thank you for being with us.

MITCH DANIELS, WHITE HOUSE BUDGET DIRECTOR: Thank you, Judy.

WOODRUFF: Given everything that's going on, in particular the Fed's decision to cut rates yesterday, what shape do you think the United States economy is in?

DANIELS: It's pretty clear that President Bush inherited a much weaker economy than we knew at the time, still obviously sputtering. I guess the good news is that, first of all, the Fed has acted aggressively, but also that I think that the president's tax cut, as many economic observers have mentioned, is coming at just the right time.

WOODRUFF: Mitch Daniels, are you distressed that, as "The Wall Street Journal" is pointing out today, companies across the country, their sales and earnings are continuing to come in below already lowered expectations, and that's causing them to make decisions that are going to make an economic turnaround even more difficult?

DANIELS: I think there's cause for some concern. There had been both good and encouraging and discouraging news. But, again, I say that the best news we have is that effective on Sunday, withholding rates for all taxpayers will drop -- the first step in tax relief -- and that not too long after that, the first installment on tax relief will come out in the form of checks to all Americans, and let's hope that provides the boost at the right moment.

WOODRUFF: I am asking these questions because the Congressional Budget Office is seeing falling corporate earnings revenues, they have already begun to forecast overall tax receipts will be about $20 billion lower than anticipated. Some people are saying that it can be even more than that. Is this a concern for you?

DANIELS: It's a small one. I also think that revenues this year will run $20 or $30 billion less. Let's remember, on a $2.2 trillion base, that's less than a point. In fact, revenue forecast this year will be a lot closer than they have been for years. But they'll be off a little on the downside, and let's remember also that we're going to run a very large surplus under any set of assumptions, and that's a good thing.

WOODRUFF: But even given how small it is, are you having to factor this in as you consider spending plans? Are you having to make adjustments?

DANIELS: I think there will be some adjustments necessary. Congress and the president have agreed that we will run very large surpluses for the future. All of the Social Security net receipts, for example, will be held off budget. And beyond those surpluses, there will be a need for some spending discipline. Spending will not be able to grow as fast as it has the last few years.

WOODRUFF: Let me ask you now about the Pentagon budget. As you well know, the administration sent over a request to the Hill for something like, what is it -- more than $18 billion in additional defense spending, a total of 329 billion for the next fiscal year. This is the largest increase in defense spending since the Reagan administration. Is the money available, Mitch Daniels, to cover this without having to cut back elsewhere?

DANIELS: No, the money's clearly available, and it should be invested. Defense has been underfunded for many years, while spending has exploded in other areas. This is the first honest budget request in some time. It involves almost entirely a money for people, that is health care, housing, and pay, to catch up on the quality of life for our men and women in uniform.

Also, basic readiness: fuel, ammunition and so forth. And it is necessary, regardless what strategy or transformation of the military Secretary Rumsfeld may be recommending this fall, it's necessary to put right years -- after years of neglect.

WOODRUFF: So, when the Senate Budget chair, Senator Kent Conrad asks, how can you afford to do this, particularly with falling revenues -- what we were just talking about, cuts and the surplus -- and what he describes as the non-Social Security, non-Medicare surplus for the next year, being in his words, "wiped out," you're confident the money's there to pay for this?

DANIELS: Yes. Once again, the nation's running very, very large surpluses, and we should -- and we should protect every penny of Social Security, and we should use every penny of Medicare for Medicare only. But there is room for the necessary repair of our national defenses, the first responsibility of government. The president's proposal is a prudent one, not all that many people think is necessary, but certainly enough to catch things up in a very meaningful way.

WOODRUFF: What do you say, then, to the Republican chairman of the House Budget Committee, Congressman Jim Nussle, who is calling the Pentagon request -- and I am using his word, "irresponsible," because he is saying the secretary of defense didn't wait to finish up this review of Pentagon spending that he's been conducting. He's saying, how can you ask for more money when you are still in the middle of reviewing?

DANIELS: Yes, I know, he said it to me yesterday while I sat in the chair testifying before his committee, and I understand his point of view. Jim Nussle is a very responsible Budget chairman. And he is asking, as the president has, that before we make future large investments, long-term investments in defense, Secretary Rumsfeld bring forth a new vision of what a 21st century national security would look like.

But the answer I gave yesterday was that, regardless of what that new strategy might be, we owe it to the men and women in uniform to equip them properly and to take care of their basic housing and financial needs, and that this is -- this catch-up in the spending is necessary regardless what strategic direction we go as we move forward.

WOODRUFF: All right. Well, Mitch Daniels, who is the director of the Office and Management of Budget, we thank you very much, and we wish you safe travels as you head home to Indianapolis this weekend.

DANIELS: Thank you, Judy.

WOODRUFF: Thanks very much.

Secretary of State Colin Powell meets face-to-face with top Israeli and Palestinian leaders. When we return, new developments in Middle East peace negotiations, and a look at some other top stories.

(COMMERCIAL BREAK)

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

Former Yugoslav president and alleged war criminal Slobodan Milosevic has been sent to The Hague, where he will face the International War Crimes Tribunal. According to the U.S. State Department, Milosevic will arrive there at 6:00 Eastern time. Today, the Yugoslav government extradited Milosevic who's charged in connection with ethnic cleansing in Kosovo. A prosecutor's spokesman says the charges against Milosevic may be expanded to include alleged crimes in Croatia and Bosnia and a possible charge of genocide.

Secretary of State Colin Powell and Israeli Prime Minister Ariel Sharon say a week of quiet is needed between Israelis and Palestinians before an official cooling-off period can begin. Powell is in the Middle East hoping to defuse the crisis there. The Israeli leader said he hoped that the cooling-off period would work.

(BEGIN VIDEO CLIP)

ARIEL SHARON, ISRAELI PRIME MINISTER (through translator): We see the continuation of this as follows: Complete and utter cessation of terrorist actions of violence and of incitement and as soon as complete quiet exists there will be seven days of trial or tests in order to see how the Palestinian Authority manages to keep its undertakings and then a period will start of six weeks, a cooling down period, and throughout -- throughout that entire period complete quiet must prevail.

(END VIDEO CLIP)

WOODRUFF: Earlier Secretary of State Powell met with Palestinian Authority President Yasser Arafat. Powell says he supports Arafat's call for an international monitor to help enforce a cease-fire.

This story just in from CNN national security producer Chris Plant and CNN's Tom Spain. CNN has learned that the U.S. Army quietly halted the flight operation of the entire fleet of Apache attack helicopters two weeks ago and did not make this grounding public. The decision to halt flight operation followed the recent crash of an Israeli Apache helicopter in which the, quote, "tail rotor head assembly separated from the aircraft in flight."

This is according to a U.S. Army document. The Army issued a safety of flight message dated June 15, ordering all Apache flights to be discontinued until each one of them -- there are 742 U.S. attack helicopters -- can be inspected for potentially faulty tail rotors.

And informed U.S. Army official who asked that he not to be identified told CNN that this is expected to take up to three months to complete the inspections and return the entire fleet of helicopters to working status. The Senate works on a series of compromises on patients' rights legislation. A look how this measure could affect your care in the emergency room when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: As we told you earlier, the Senate is attempting to push through a series of compromises on a patients' bill of rights. Among the issues, whether patients should have direct access to emergency care. With an inside look, here's CNN medical correspondent Rea Blakey.

(BEGIN VIDEOTAPE)

REA BLAKEY, CNN CORRESPONDENT, (voice-over): Dr. Tiffany Medlin Osborn fights for patient's rights everyday.

DR. TIFFANY MEDLIN OSBORN. UNIVERSITY OF MARYLAND SHOCK TRAUMA CENTER: I have no problem doing that. I'd love to help you.

BLAKEY: As an emergency physician at the University of Maryland shock trauma center, she's frustrated with the way some health insurers treat patients.

OSBORN: One, the phone does not equal a physical. Two, care should not equal fear. And three, you should be able to go to the closest facility to get your care.

BLAKEY: ER physicians say, too often insurance companies create barriers to emergency care.

DR. MICHAEL RAPP, AMERICAN ASSOCIATION OF EMERGENCY PHYSICIANS: Preauthorization doesn't make any sense in the emergency situation.

BLAKEY: The American Association of Health Plans says the bulk of ER horror stories are old news. The majority of health plans today follow codes of conduct that ensure emergency care will be covered.

KAREN IGNAGNI, AMERICAN ASSOCIATION OF HEALTH PLANS: Our members are working hard to make sure beneficiaries understand their rights, to make sure that beneficiaries understand that if they have an emergency, they should go to the emergency room and it will be covered.

BLAKEY: Thirty-two states and the District of Columbia have adopted what's called a prudent layperson standard. It allows patients with emergency symptoms to seek emergency care without fear that their health insurer will later deny their claim. Something physicians say should be part of a national patient protection law.

RAPP: It'll produce a basic minimum standard that all states would have to adhere to.

BLAKEY: The emergency care section of the Senate's patients' rights bill guarantees access to ER's, without the need for prior authorization, regardless of whether the ER participates in the patient's plan.

Emergency departments represent less than 2 percent of the nation's $1 trillion health care expenditures. Supporters of national patient protection laws say there's no evidence the number of ER visits increase when patients have guaranteed emergency coverage.

Rea Blakey, CNN, Washington.

(END VIDEOTAPE)

WOODRUFF: Every Friday, our Bill Schneider awards a political play of the week. Now, we want your nominations for the weekly play. You can e-mail your ideas to INSIDEPOLITICS@CNN.com. He's the guy in the striped hat. And tune in on Fridays to see if you picked the play of the week.

With much of the this nation's energy problems apparently behind us, at least for now, who's getting the credit? Our Bill Schneider will have a report. And later, the first state-wide ban on using cell phones while driving is signed into law. Stay with us.

(COMMERCIAL BREAK)

WOODRUFF: President Bush tries to rev up support for his energy plan, with a new drive for conservation. After talks at the White House, is outgoing L.A. Mayor Richard Riordan eying the governor's office? We'll ask him.

And later: Tobacco ads are featured in the Supreme Court's term finale.

Welcome back to INSIDE POLITICS. President Bush sent Congress a summary of his energy proposals today, even as he tried to jump start efforts to get them passed. Mr. Bush announced a series of steps to save energy, in an effort to counter his critics who say his plan is short on conservation. Our White House correspondent Major Garrett has more on the president's evolving energy strategy.

(BEGIN VIDEOTAPE)

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT (voice-over): Fuel cell-powered vehicles, hyperefficient appliances, a glimpse into America's energy future and part of the elaborate remaking of President Bush's image.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We saw a lot of that today. We saw new automobiles that will be more fuel-efficient, while making sure that consumer demand for comfort is met. We saw new technologies being developed out of Silicon Valley and Massachusetts and other states, that will make consumer products more energy- efficient.

GARRETT: Senior White House advisers say Mr. Bush remains trapped in an image box, one built by vice president Cheney's dismissive remarks about the value of conservation.

DICK CHENEY, VICE PRESIDENT OF THE UNITED STATES: Conservation may be a sign of personal virtue, but it is not a sufficient basis all by itself for a sound, comprehensive energy policy.

GARRETT: Even though a third of Mr. Bush's energy plan is devoted to conservation, advisers readily concede the Cheney speech cemented the perception the president was more interested in drilling than conserving, and that's led to serious setbacks in Congress.

Dozens of House Republicans have voted with Democrats to block: oil and natural gas drilling off of Florida's western shore; mining leases in national monuments; and Thursday, offshore drilling in the Great Lakes.

Many house Republicans opposed such drilling before, something one Republican said the White House should have known.

REP. JACK QUINN (R), NEW YORK: Just because we have someone else in the White House now doesn't mean we can change those votes.

GARRETT: Senior advisers say Mr. Bush will press ahead to boost domestic drilling and mining. He invited key Republicans and Democrats to the White House to turn up the heat, all this effort comes as gas prices drop and fears of widespread blackouts dim. And analysts doubt the success of Mr. Bush's sudden emphasis on conservation.

JAMES THURBER, AMERICAN UNIVERSITY: I think it's going to be very hard for the president to simply look at an electric car and say, this is great, and have -- overcome this obvious transparent shift in policy.. (END VIDEOTAPE)

GARRETT: The House will debate the president's energy plan in July. But the Senate won't take action until the fall. That is because the new majority leader Tom Daschle said there is no hurry on the energy front, and that has prompted White House complaints that the new Democratic majority in the Senate is playing politics with energy -- Judy?

WOODRUFF: Major, with all this new talk and focus on conservation by the president, and the White House, does everyone in the administration now believe that enough is being done with regard to energy production in the part of the president's energy plan?

GARRETT: There is a significant displeasure here in the White House, Judy, about the votes that happened here in Congress. Now for example, the today vote in the House banning offshore drilling in the Great Lakes. You know, Ari Fleischer said today that wasn't really a big part of the president's energy plan.

And they say, well, the main sponsor was Representative David Bonior of Michigan, a Democrat who is running for governor. That is a part of big push in Michigan to put his energy and environmental credentials on the table. But nevertheless there are defeats that the White House is suffering on these appropriations bills in the House.

The House is run by Republicans, it is traditionally been more conservative, more supportive of production issue questions there than the Senate. So the White House knows all too well that the early defeats in the House spell very great problems on the question of boosting domestic supplies in the Senate. But what White House advisories say is look, this is a long-term problem, the president has always said it is a long-term problem, he will remain engaged on this issue, he has no choice but to continue to pound the Congress and try to persuade the public that conservation is a big part of his plan.

But that conservation alone can't handle all of the country's energy needs and that production at some point has got to be found, sooner rather than later.

As just a side note to that, Judy, as gas prices fall and the situation in California appears less serious than a month or two ago, White House knows there is less interest in Congress in drilling in places that many voters consider too environmentally sacred to open up for drilling or mining -- Judy?

WOODRUFF: All right, Major Garrett at the White House.

Some Senate Republicans today echoed the White House complaints, about the Democrats' timetable for acting on Mr. Bush's energy plan.

(BEGIN VIDEO CLIP)

SEN. FRANK MURKOWSKI (R), ENERGY COMMITTEE: They are deliberately delaying this for political gain. They refuse to respond to the reality that this is a crisis. And as a consequence, what we're attempting to do here is to communicate to the American public that the security of our standard of living is at stake by this delay.

(END VIDEO CLIP)

WOODRUFF: The energy committee's new Democratic chairman, Jeff Bingaman, says he hopes for an energy bill by the end of July. And he says he plans hearings on the issue throughout the month.

There's been no shortage of finger-pointing over the energy crunch particularly when it comes to problems in California. Our Bill Schneider says a new kind of competition may be replacing the blame game. What's that about?

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: A few weeks ago, politicians were obsessed with the question, who gets the blame for the nation's energy problems? Now the energy situation is improving. Gasoline prices are down. California has avoided blackouts so far this summer. So politicians are obsessed with a different question: who gets the credit?

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): President Bush, who has not been notably attentive to California over the past few months, suddenly can't stop talking about how much his administration has done for the Golden State.

BUSH: The federal government has stood side by side with the people of California, working to alleviate the situation there.

SCHNEIDER: Doing what, exactly?

BUSH: We've expedited the ability of California to build new power plants.

SCHNEIDER: Oh yeah? says California Governor Gray Davis. Well, so have I.

GOV. GRAY DAVIS (D), CALIFORNIA: My administration has worked night and day to license new plants.

SCHNEIDER: Not only that, says Davis, but I've rallied a movement to conserve energy.

DAVIS: We can't get through the summer however, without heroic conservation on the part of Californians.

SCHNEIDER: Oh yeah? says Bush. I can top that. I've got vampires on my side.

BUSH: I want to talk about what's called vampires.

SCHNEIDER: You know, devices that need recharging, like your cell phone. You plug them in at night. They drink your electricity, just like a vampire drinks your blood.

BUSH: By that, I mean the federal government will work hard to purchase and promote those energy savers that only use one watt of energy.

SCHNEIDER: So who gets the credit here? The answer is, nobody. According to a new "Los Angeles Times" poll, Californians are not particularly impressed with Governor Davis's handling of the state's electricity problem. Davis's disapproval figure has gone up ten points since February. They're even less impressed with President Bush's handling of the problem. Bush's disapproval figure has gone up more than 20 points.

Most Californians don't believe there ever really was a power shortage. First they were told there wasn't enough power. Then prices shot up. Then, suddenly, miraculously, there was more power. And prices started to go down. To economists, it's evidence that the market works. To voters, it's evidence of greed. And maybe wrongdoing.

Eighty-six percent of Californians endorse the view that power companies have manipulated the market to boost their profits. California's attorney general wants to put them in jail. California's governor is demanding refunds.

DAVIS: If they are on the list, we will go after them.

SCHNEIDER: Which may be why Governor Davis fares better in this situation than President Bush. Bush does not have much credibility on energy and environmental issues because of his ties to the energy industry. Governor Davis may not have done enough, but at least he's on the right side. President bush, people are not so sure.

(END VIDEOTAPE)

SCHNEIDER: It's the power companies who get the blame. But people can't vote on them. They can only vote on politicians. The rule for a politician is, the closer you get to the power companies, the more suspect the politician is.

WOODRUFF: Can you do that line about drinking your blood one more time?

SCHNEIDER: Only in a vampire movie.

WOODRUFF: OK, we have got to find an occasion for you to do that again. A man of many talents.

SCHNEIDER: I'll bring in my fangs.

OK, Bill Schneider, thank you very much.

The political fortunes of California Governor Gray Davis may be of more than a passing interest for the outgoing mayor of Los Angeles. Republican Richard Riordan joins us now from L.A. to discuss among other things whether he wants Davis' job.

Mayor Riordan, thanks for being with us.

MAYOR RICHARD RIORDAN (R), LOS ANGELES: Judy, good evening. WOODRUFF: Do you want his job?

RIORDAN: I'm looking very seriously at it. Most of the Republicans in Congress and Sacramento have asked me to run. I'm going to spend the summer traveling around California, then I'll make my decision in the early fall.

WOODRUFF: A number of Republicans, as you say, are urging you to run, both in California. You met with Karl Rove, the president's adviser at the White House...

RIORDAN: Yes.

WOODRUFF: ... what arguments are they making to you?

RIORDAN: Well, I think their general feeling is that only a person perceived to be a moderate can win in California, and I certainly -- I don't consider myself a moderate; I don't consider myself a liberal or a conservative. I'm just somebody who gets things done.

WOODRUFF: And is that a good reason to run?

RIORDAN: Well, that's what I've got to look at. I've got to fully understand the problems that California faces in the future with our tremendous population growth, and see if I think I'm the leader that can solve those problems and make us prepared over the next five, 10, 20 years to handle the dramatic increase in population.

WOODRUFF: At this point would you say you're inclined to do it or not?

RIORDAN: Well, right now what I'm telling everybody is I'm looking at it very seriously, which is true, and I can't say whether I'm inclined or not. But I'll make my decision sometime towards the end of the summer.

WOODRUFF: Mayor Riordan, you are, as we know, a wealthy man. How much of that wealth would it take if you were to run? It's not cheap to run for governor of California.

RIORDAN: Well, I think, as other people have found out, it's really not that good to put your own money in. I think people want somebody running who is not totally reliant on their own wealth. And I think I've shown that in Los Angeles, where I had, you know, vast majority of the vote both of Latinos and other minority groups.

WOODRUFF: Is anyone urging you not to run?

RIORDAN: Sure, there are a few. There are some Republicans that think I shouldn't run that -- and there are some liberals that think I shouldn't run.

WOODRUFF: Why not?

RIORDAN: Well, some Republicans think I'm not Republican enough, and some liberals think I'm too conservative. So you can take your choice.

WOODRUFF: Mr. Mayor, and I want to ask you about being mayor in just a moment, because I know Saturday is your last day in office. This "L.A. Times" poll that we talked about a moment ago -- I think Bill Schneider referred to it in his report -- it shows that almost half the people in California are faulting Governor Davis for his handling of the state's energy problems. How do you size up what he's done, and do you think you could do a better job?

RIORDAN: Well, I'm going to leave it to the voters to determine whether I could do a better job. And it's a little unfair for me to be criticizing Governor Davis right now because I'm not running the show. He's running the show; people will look in hindsight as to what kind of job he did.

I will point out that as mayor of Los Angeles, I opted not to go for deregulation, that we have a large excess of energy that we are supplying to the rest of the state.

WOODRUFF: Yes, Los Angeles has been a model for the rest of the state.

RIORDAN: Yes.

WOODRUFF: As we also heard in that poll, Mr. Mayor, for as unpopular or -- as unpopular as the governor is for his handling of energy, President Bush is faulted even more. Would you want President Bush to be out there campaigning actively for you, were you to run?

Well, I think -- you know, you don't know what the issues will be when the election for governor takes place. Energy may not be the major issue. And certainly, in some ways, the issues like, you know, free markets and everything go right over people's heads. So I think the president, his positions may not be very well understood by the average voter.

WOODRUFF: Why do you think Republicans have had a hard time lately running in California statewide, Mr. Mayor? We know George Bush put something like -- George W. Bush put something like $10 million into the state and lost to Al Gore by 12 points. That wasn't as bad as some thought he would do, but he still lost.

RIORDAN: Well I think, you know, we've been an endangered species for some time in California, mostly because we've run candidates who are too far right of what the average Californian wants for their leader.

WOODRUFF: You think it's as simple as that?

RIORDAN: I think it's pretty much as simple -- that people are looking for a leader; they're looking for a leader that's more-or-less nonpartisan, and they don't want somebody who is ideological, whether on the far left or the far right.

WOODRUFF: And do think that's how George W. Bush was seen, as too far right? RIORDAN: He isn't too far right in my opinion. He's a very compassionate person. But I think maybe on this issue he maybe looked that way.

WOODRUFF: As you leave the post of mayor of Los Angeles, your successor coming in, of course, is James Hahn. You didn't support him, you supported Mr. Villaraigosa. But what do you see as James Hahn's primary task coming in to run that city?

RIORDAN: Well, you know, first of all let me say we've worked very well on the transition. He's hiring about 70 of my staff, and we're going to have sort of a seamless transition.

His big challenges are safety, to improve the morale of the police department, improve the recruiting on the police department, to continue helping the school districts with siting new schools, helping children with after-school programs. And then, bottom-line is improving the quality of every neighborhood in Los Angeles, particularly the poor neighborhoods.

WOODRUFF: What will you miss most about the job?

RIORDAN: The children. I think it's just wonderful to go to parks, to go to schools and have children treat with you such love, respect, ask you, really, sort of interesting, tough questions about what you're going to do to make the life of children better -- buy them books, get them smaller classes.

WOODRUFF: Well, I bet if you decide to run for governor, there will be some children who want to spend time with you then.

RIORDAN: I sure hope so, if that happens.

WOODRUFF: And even if you don't.

Mayor Richard Riordan, thank you very much as you spend your, what, last two or three days before leaving office. Thanks very much for joining us.

RIORDAN: Midnight Saturday. Thank you very much, Judy.

WOODRUFF: Good to see you.

RIORDAN: Good to see you.

WOODRUFF: Free speech and tobacco industry ads: In the last ruling of its term, the U.S. Supreme Court scores one for cigarette makers. The story when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: After a series of legal setbacks for big tobacco, the Supreme Court today handed down a victory for cigarette makers.

With more, here's CNN senior Washington correspondent Charles Bierbauer. (BEGIN VIDEOTAPE)

CHARLES BIERBAUER, CNN SENIOR WASHINGTON CORRESPONDENT (voice- over): Massachusetts wanted to ban outdoor and some indoor tobacco ads within 1,000 feet of public parks, playgrounds and schools. But the justices ruled that when Congress passed the Federal Cigarette Labeling Act requiring health warnings, it preempted the states from placing such restrictions on advertising content.

TOM REILLY, MASSACHUSETTS ATTORNEY GENERAL: Every day that goes by that they are able to target their advertising toward kids like this is a bad day.

BIERBAUER: Once it answered the federal versus state question, the court did not need to go any farther on cigarette ads. But in the rest of the divided and complex ruling, it laid down a First Amendment marker for cigars and smokeless tobacco, not covered under the federal controls on cigarette advertising.

Justice O'Connor's opinion for the court says: "The tobacco industry has a protected interest in communicating information about its product, and adult customers have an interest in receiving this information."

Tobacco companies took that to include cigarettes.

BILL OHLEMEYER, VICE PRESIDENT, PHILIP MORRIS: We're not interested in trying to advertise outdoors, we're not interested in trying to advertise near playgrounds or near schools. All we wanted to do, and the reason we were involved in this challenge was to provide adults who chose to smoke with truthful and accurate information about cigarettes at the point of sale.

BIERBAUER: The justices said some restrictions on self-service sales for all tobacco products would not violate the First Amendment.

Again, Justice O'Connor: "Unattended displays of tobacco products present an opportunity for access without the proper age verification required by law."

REILLY: Historically, the states have had the power and the authority to protect their children. So, this was a little bit disappointing in terms of the court. But the Congress can step up and say "you're wrong, we are going to change the law."

BIERBAUER (on camera): So, tobacco's legal wars are hardly over. But this is a victory for the tobacco companies, shielded, as it turns out, by Congress, the court and the First Amendment.

Charles Bierbauer, CNN, the Supreme Court.

(END VIDEOTAPE)

WOODRUFF: Much more on INSIDE POLITICS after this.

(COMMERCIAL BREAK) WOODRUFF: This story just in to CNN, from our correspondent John King. The Secret Service has apologized Thursday for asking a Muslim man to leave a meeting at the White House complex. The agency said it made a mistake in its clearance process and was trying to reach the man directly to apologize.

The man's name Abdullah Al-Arean (ph), he is an intern in the office of Democratic Congressman David Bonior of Michigan. He had entered into the Old Executive Office Building along with a group of Muslims for a meeting with administration officials. About 10 minutes into the meeting, Secret Service officers asked him to leave. Other members of the group has decided to leave with him. Again, the Secret Service apologizing, saying a mistake was made.

In a decision expected to please pro-gun advocates, the Bush administration moved today to sharply restrict the amount of time the government can hold onto background check information disclosed by gun purchasers. Attorney General John Ashcroft says he will propose holding onto the records for just one day, rather than the 90 days outlined by a Clinton administration rule.

But gun control supporters sharply criticized the decision.

(BEGIN VIDEO CLIP)

ASHCROFT: ... of those who attempt to purchase guns illegally. The second is to improve the accuracy, efficiency and reliability of the national instant criminal background check system, a system we call NIX.

(END VIDEO CLIP)

WOODRUFF: But gun control supporters sharply criticized this decision, saying that it would weaken the landmark Brady law aimed at keeping guns out of the hands of criminals.

More than 18 million checks have been conducted since 1998. The records have been kept to give the FBI time to look for fraud and abuse in the gun-buying system.

New York Governor George Pataki today signed into law a bill which bans drivers from using handheld cell phones. As the governor signed the measure, he was joined by the families of people killed in traffic accidents caused by drivers who were using cell phones.

A potential loophole in the new will allow people to dial their cell phones while driving. Governor Pataki said the law's effects would be studied to see if it might need strengthening in the future.

INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: And now this personal announcement relates to CNN. CNN chairman and CEO Tom Johnson has announced this afternoon his retirement from that position today after 11 years. He said it is now time for him, at the age of 60, to spend more time with his wife and his family. He called CNN "the most respected news organization in the country." I want to say on behalf of all of us who have worked for and with Tom Johnson, we wish you the very best. You will be missed.

And that's all for this edition of INSIDE POLITICS. 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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