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CNN INSIDE POLITICS

Levy Disappearance Investigation Grows More Urgent; Campaign Finance Set Aside in House; Will Olympics Foster Human Rights in China?

Aired July 12, 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.
JUDY WOODRUFF, CNN ANCHOR: This is INSIDE POLITICS, and I'm Judy Woodruff on Capitol Hill. The House is waging what may be the final battle in a six-year political war over campaign finance reform.

MARTIN SAVIDGE, CNN NATIONAL CORRESPONDENT: I'm Martin Savidge in Modesto, California, where the parents of Chandra Levy continue to follow the twists in the D.C. police investigation to try to find their daughter.

BILL SCHNEIDER, CNN SENIOR POLITICAL ANALYST: I'm Bill Schneider, also in California, with new poll numbers on the Levy case and Congressman Gary Condit's role in it.

CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I'm Candy Crowley back on the Hill. Stay tuned for the head-counting and head- butting in that debate over campaign cash.

ANNOUNCER: Now Judy Woodruff takes you INSIDE POLITICS.

WOODRUFF: Thank you for joining us. Well, under the Capitol dome over there, there have been as many plot twists in the campaign finance reform debate as a soap opera. Right now, everything is on hold, while members wrangle behind the scenes over rules that may determine whether a landmark reform bill survives.

But Capitol Hill also is echoing with questions about Congressman Gary Condit and the Chandra Levy investigation. Our Bob Franken is still on the police beat here in Washington. Martin Savidge is at the Levy's parents' home in California.

Bob, first to you. Bring us up to date on the latest.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: Well, it's not too far from the Capitol Hill, Judy, where police are doing another dramatic expansion of this investigation. This is an investigation now that has taken a large segment of the police force to the abandoned buildings of northwest Washington, buildings where they are searching, quite candidly, for the body of Chandra Levy.

It is not, they say, that they've concluded that Chandra Levy, in fact, has met foul play, they just want to exhaust all possibilities. And you're seeing officers coming out of one of these buildings. Oftentimes, their job is quite difficult, as their commander explained to reporters.

(BEGIN VIDEO CLIP)

MARK BEACH, D.C. METROPOLITAN POLICE: A long-term or abandoned structured is whether it's structurally safe to support an officer or support a dog or the fire personnel, should we decide to go. The second thing is contacting the owner once we leave and have it firmly secured so nothing can be added.

(END VIDEO CLIP)

FRANKEN: Of course, this has turned into a massive investigation into what is simply a missing person's case. But the missing person is 24-year-old Washington former intern Chandra Levy, who has been linked romantically with Congressman Gary Condit, an admission police sources say he finally acknowledged when he spoke to investigators last Friday night.

Now that has caused the call for him to take a polygraph test. And his attorney has said he's willing to discuss the matter with police, but the police and attorney Abbe Lowell have really reached some snags because the attorney wants to put some limitations on the questions, and the police chief makes it very, very, very clear he does not want to do that.

(BEGIN VIDEO CLIP)

CHIEF CHARLES RAMSEY, D.C. METROPOLITAN POLICE: Well, there are discussions that are taking place. I've not participated in those discussions. Whether or not this will be a reality, I have absolutely no idea. The only thing I do know is this: If we can't have an interview in which we're able to ask the questions we want to ask, then there's no point in doing it.

(END VIDEO CLIP)

FRANKEN: No comment from the congressman's attorney. Congressman Gary Condit, whose total credibility has been raised -- a lot of questions raised about that as this investigation is unfolding -- Judy.

WOODRUFF: All right, well, Bob, we want you to stand by as we bring in Marty Savidge, who is outside the Levy home in Modesto, California -- Marty.

SAVIDGE: Judy, as you mentioned, authorities are on the move in Washington, D.C. Now sheriff's deputies have shown up here outside of the Levy home. We are told by Zane Clark (ph), who is the assistant sheriff of Stanislaus County here, this is at the specific request of the Levy family. Their presence here will now be 24 hours a day with quite possibly an officer stationed inside.

He says that at this point, there had been no threats that have been received by the Levy family. This is a security measure. But he mentioned something interesting. Also said that the officer will be manning the phones and keeping up direct lines of communications to other authorities involved in the investigation. That is all he says. Don't read anymore into it other than that.

Now the other news coming out of Modesto has to do with the FBI and reportedly an interview that they have done with a preacher here in this community, a minister by the name of Otis Thomas. The FBI confirms through sources to CNN that they have, in fact, had talked to this man, communication, and that he's relayed some information. The FBI not saying exactly how it may fit in the missing person's case of Chandra Levy.

"The Washington Post," though, is reporting that in addition to being a minister, Otis Thomas is also a landscaper and has worked for a number of years for the Levy family, struck up a relationship and had conversation. During one of those talks, according to "The Washington Post," he mentioned the story that his daughter, a number of years ago, at the age of 18, reportedly had a romantic relationship with Congressman Condit. He warned them about such relationships. You could imagine the impact that would have on the family of missing intern Chandra Levy. That's "The Washington Post."

In our efforts to try to verify that story, we went to the apartment of Otis Thomas last night. He was not there. We found a note that was taped to the door. Let me read you a few excerpts from that note. It is actually said to be written, at least signed, by the name Jennifer Thomas. It says, "I will tell you that I never knew Mrs. Levy's daughter. I never met that congressman who's involved in all of this." It goes on: "I don't even know how both me and my father got mixed up in this. We don't know anything, so stop calling us and showing up at our door." The name at the bottom of the page in signature, Jennifer Thomas. FBI agents now said to be very interested in talking with her.

You can imagine a lot of interest now focused once more back on the Levy family this morning. Dr. and Mrs. Levy came out to collect the paper. They did have a few words to say.

(BEGIN VIDEO CLIP)

SUSAN LEVY, CHANDRA LEVY'S MOTHER: Well, you can see I haven't looked at the newspaper at all yet today. So all I can say is this: Yes, I do know Reverend Thomas.

DR. ROBERT LEVY, CHANDRA LEVY'S FATHER: We know Reverend Thomas. And we do appreciate his concern. But we have to, you know, see what was said and what's going on.

SAVIDGE: Did he outline an affair that his daughter was having to you?

R. LEVY: I know there's, you know, things reported, and you know, we -- it's in the paper, and right now, we can't really comment more on that.

S. LEVY: We appreciate anyone coming forward to helping us get my daughter home. Thank you very much.

R. LEVY: We appreciate your help. (END VIDEO CLIP)

SAVIDGE: And the key communication there is that they do, in fact, know Otis Thomas. They wouldn't say how, rather, and they wouldn't explain what he told them -- Judy.

WOODRUFF: Martin, given all that, is it still fair to say that the bulk of the investigation is focused here in Washington, that it's not the police in Modesto in that part of California who are spearheading any of this?

SAVIDGE: That is correct. Authorities here say that they stand by and are always ready to respond to the needs of the Washington, D.C. police department. They have a direct line to the chain of command, that at this point, they say, they have not been asked to search for anyone.

And Bob Franken here in Washington. Bob, how much is known about what police found when they went into Congressman Condit's apartment and searched it?

FRANKEN: Well, actually, there were initial reports that all the bags they were carrying out contained evidence that they had found. Actually, the bags were the same bags that they brought in. They ended up, really, with just very little, a couple of specks from a Venetian blind. They didn't know if that was blood or if it was paint. They decided they wanted to take a look for analysis.

A drop of blood in the bathroom that investigators say is unremarkable but they took it anyway, and a few items of clothing -- a jacket, a cap, a couple of other things like that. They brought them back to the police department. They're deciding whether they are worth sending to the crime lab. It did not produce a huge amount of evidence.

WOODRUFF: All right, Bob Franken here in Washington, thanks to you and to Marty Savidge out in California.

And you can stay tuned to CNN for the latest developments in the search for Chandra Levy. Coming up tonight on "LARRY KING LIVE," D.C. police chief Charles Ramsey talks about the investigation. That's at 9:00 Eastern.

And now back to the House showdown over campaign finance reform. It seems to be turning into even more of a cliffhanger than we had expected. And our senior political correspondent Candy Crowley has been watching all the comings and goings over there at the House of Representatives.

Candy, what has just happened?

CROWLEY: Well, believe it or not, Judy, the House is in a quorum, which doesn't look like much on television, but it's parliamentary code for stuck, and they pretty much been stuck all day long. What has happened on the House side with campaign finance reform is that the Republican-controlled House put out a set of rules under which campaign finance reform would be debated. Democrats and their Republican allies immediately balked at the rules and said, "Look, they are set up specifically to try to deep six this campaign finance reform bill which is what Republicans want."

This went back and forth all day. There was talk of a compromise. It was not to be. As of the latest we have heard, Republicans say that they will go forward with those rules. But there has to be a vote on it. And Democrats say with some Republican allies, they have the votes to defeat the rule, which Republicans say they will yank the bill from the floor and maybe put this into sometime in the fall.

In any case, right now, they are still trying to figure out where to go and how to take this first vote. But there is no one who has been fiercer in pushing this bill than Mr. Campaign Reform.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: We'll never, ever give up this fight, because there will be more scandals, there will be more increases in the so-called soft money, and there will be more influence of the special interest, until we -- as we have many times in the past 200 and some years of this country -- reform.

(END VIDEO CLIP)

CROWLEY: Now what is going to happen next is that they have to have this vote on rules. Should they get past that, and again Democrats say they won't, they still have to come to the bill. And Democrats are not sure whether they have enough Republican votes to put forward their campaign finance reform bill. They have been lobbying fiercely all day long, not just on the rules but on the bill itself.

There was particular concern over the congressional black caucus. The black caucus felt that they have not been consulted, and they fear that campaign finance reform would mean that some of their efforts for voter registration and get-out-the-vote would be underfunded. There was a meeting with the House leadership in which they were promised that the percentage they got last year in the last election year for all of those efforts would be -- may be as much as doubled. So they hope that that will keep some of the Congressional Black Caucus on board.

There still are many bill-killers out there, amendments, a number of them. One of them offered by Republicans would make it so that permanent legal residence could not give any campaign contributions. Another says that all candidates would have to get 50 percent of their contributions from their home state. But the truth is, according to Democrats, nearly any one of these bills that are not sanctioned by the main bill are really killers. This is a very delicate balance here, and they believe that any amendments that are added onto this will take away support either in the House or in the Senate. And Judy, one of the things that they want to do here is keep this bill out of conference committee. So they've been working very closely with Senator McCain, Senator Feingold to keep a bill that will make it through the House and then they can send it over to the Senate and sort of get around that conference committee, which they think would bury campaign finance reform.

WOODRUFF: Would undermine it as it came up.

CROWLEY: Right.

WOODRUFF: Candy, this has gotten very personal, has it not, particularly among some of the Republicans?

CROWLEY: Tensions were definitely showing today, and it was over these rules. Mr. Shays, Congressman Shays from Connecticut, believed that he had a deal from his party leadership for a straight up or down vote on his campaign finance reform bill and he believes that these rules violated that.

WOODRUFF: All right.

(BEGIN VIDEO CLIP)

REP. CHRISTOPHER SHAYS (R), CONNECTICUT: It's screwed, and I said no; he was right.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. RICHARD ARMEY (R-TX), MAJORITY LEADER: This is unreasonable. It's naive. It's uninformed. It's arrogant. To say that I am being subjected to unfairness when I'm asked to go through a normal legislative process is arrogant.

(END VIDEO CLIP)

CROWLEY: So there you are, another -- again, the debate today has all been about these rules. Republicans saying that the rules they put out for separate votes on a lot of amendments is, you know, status quo sort of stuff. And Democrats saying, no, you know, this is a delicate balance; they know by putting this way by setting these rules this way, they're really trying to kill campaign finance reform.

WOODRUFF: All right, Candy Crowley.

And along with Candy, our congressional correspondent, Jonathan Karl, has been covering this campaign finance reform debate.

Jon, there are some new figures out there coincidentally on political fund-raising. Now what are they telling us about this whole debate?

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Well, what they tell us is that with the possibility that campaign finance reform could become law this year, there has been a mad dash to raise money with both parties raising money at a record pace for a non-election year. But what's interesting about these figures is that the Democrats, despite their record- setting pace, are absolutely getting swamped by the Republicans.

Take a look at figures for the party committees that run the House campaigns for the Republican. For the Republicans, the National Republican Campaign Committee raised $39 million in the first six months of this year. But the Democratic congressional campaign committee raised $18 million. Again, a record pace, but less than half of what the Republicans raised.

What those figures don't tell you is the difference was even more pronounced in hard money, the regulated money, those donations that are limited to a thousand dollars per person, per election. In that category, Republican campaign committee raised $21 million compared to just $8 million for the Democrats.

The only area where Democrats were competitive in all this was soft money, the very money that would be banned by the campaign finance reform legislation pushed by people like John McCain and Russ Feingold, Chris Shays and Marty Meehan.

So making that point, Richard Viguerie, who is seen by many as the godfather of Republican direct mail fund-raising, put out a statement today saying if this were to pass, if campaign finance reform were to pass, it would be a boon to conservatives. Viguerie said, and I quote, "I wish to thank liberals for continuing to pass legislation that enhances conservative fund-raising and weakens Democrats."

Now Dick Gephardt who, of course, is the top Democrat in the House of Representatives shrugged of these suggestions that somehow this reform would actually help Republicans. Here's what he said.

(BEGIN VIDEO CLIP)

REP. DICK GEPHARDT (D-MO), MINORITY LEADER: ... understand the bill and that this is a huge advantage for them. Well, if it is, they ought to vote for it. I mean, they out-raise us in hard money, they out-raise us in soft money. I mean, you can't have it both ways. They can't run around and say this is a great bill for them and it's going to destroy us, but they're not for it.

(END VIDEO CLIP)

KARL: And Gephardt has been working furiously behind the scenes trying to convince nervous Democrats that this will not hurt the party. But I'll tell you, Judy, a lot of the Democratic strategists, those consultants that run these campaigns and who actually depend on this money, say -- acknowledge privately that this could really hurt them, really hurt the Democrats in the next election cycle should this become law, Judy.

WOODRUFF: That's right, John. A couple of them have come out in favor of it, but the vast majority we're not hearing a great deal from. All right, Jon Karl at the Capitol and Candy Crowley here with me at the Canon House office building.

We've heard from Candy and Jon. And now for a look at the president's strategy on campaign finance reform and the stakes, let's go to our White House correspondent Kelly Wallace.

Kelly, what happens if the people who want the soft money ban get it passed and it lands on Mr. Bush's desk?

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Well, it's interesting Judy. You know, President Bush has not made campaign finance reform one of his six priorities that he hoped to finish work on in his first year in office. Still, though, Bush advisers say he does support campaign finance reform, and if a bill gets to his desk that he believes reforms the system, he will sign it.

He has also said to lawmakers that they should not count on him for a veto. At the same time, he has laid out the principles, principles he wants to see in a final bill, including banning the unregulated contributions by corporations and unions, although he does not support a ban on the unregulated contributions by individuals which, of course, as you know is included in the Senate bill spearheaded by Senators McCain and Feingold.

And it's interesting, Judy, the White House is not really involved in this debate that's getting underway in the House, not really sort of putting its support behind either of the House bills about to be voted on. Basically, the administration is kind of sitting back watching to see what happens, waiting to see if anything comes out of the House and goes to a conference committee. And then if a bill gets to his desk, the president says if he believes it ultimately reforms the system, he would sign it -- Judy.

WOODRUFF: All right, Kelly Wallace. And we're going to see you a little later in the program, because there were some other things going on at the White House today. We'll hear about that then. But for right now, stay with us. This is INSIDE POLITICS.

ANNOUNCER: Are Americans suspicious of Congressman Gary Condit and his role in the Chandra Levy case? The answer is coming up next.

The stage is set for a vote on the 2008 Olympic site. We'll discuss the buzz over Beijing's chances and the opposition. And later...

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Today I announced the first step toward helping American seniors get the prescription drugs they need and deserve.

(END VIDEO CLIP)

ANNOUNCER: ... the president's new prescription.

Live from Washington, Judy Woodruff brings you more of INSIDE POLITICS straight ahead. (COMMERCIAL BREAK)

WOODRUFF: Our lead story today on INSIDE POLITICS, the continuing investigation into the disappearance of intern Chandra Levy. And let's go right now to the Washington bureau to CNN's Bob Franken, who's been following this story -- Bob.

FRANKEN: And we are joined by assistant police chief Terry Gainer, Terrance Gainer, who is going to help us, I hope, get up to date on the various facets of this investigation.

Let me just start if I could, Chief Gainer, with the question of DNA. One of the matters that was discussed was a DNA sample from Congressman Condit. Can you tell us about that?

ASST. CHIEF TERRANCE GAINER, D.C. METROPOLITAN POLICE: Well, it's one of the things they offered and one of the things we're going to take them up on. Beyond that, I won't comment.

FRANKEN: Has that actual sample been taken yet?

GAINER: Bob, I don't have any comment on that. Some of the things we ought to try to keep confidential; everything is so exposed right now. Some things I think we can keep confidential.

FRANKEN: OK, so you're not going to discuss that. That let's talk about the polygraph test. We know that there are negotiations going on, and they have not always been the most efficient negotiations. What is the status of the negotiations with the congressman?

GAINER: Well, actually, I think it might be incorrect to say they've been inefficient. I talked to Mr. Lowell today and we haven't spent a lot of time on this. So it's not as if we are in the middle of some contract negotiation. We're going to get to it; it's not make or break in this case, and there's a lot of other things we're doing.

FRANKEN: When you say you're going to get to it, do you expect there will be a lie detector test administered?

GAINER: Well, it's my hope. I think the only way one will be successful is to ensure that we have good-quality questions and it's done by a very competent examiner. That's the value of a polygraph. But, you know, the continued concentration only on the congressman I think does a disservice to our investigation.

FRANKEN: Very, very quickly, one last thing, very quickly. Are you planning to release pictures, new pictures...

GAINER: It is our intention to do that, because one of the theories we're operating on that Ms. Levy went off on her own and does not want to be found. If that is the case, one of the things we can do is alter the pictures we have, crop her hair, shorten it, color it blonde, put it in a ponytail so people will have some other visual reference in case they see her or have seen her on the street.

FRANKEN: Chief Gainer, thank you -- Judy.

WOODRUFF: All right, Bob Franken, thank you very much.

And Chief Gainer, thank you very much.

To our other story we are following today, there's a new CNN/"USA Today"/Gallup Poll that was released just this hour, and it includes a look at how the public views the Chandra Levy case.

Joining me now from Los Angeles with more, CNN senior political analyst, Bill Schneider.

Bill, let me just cite to you one of the questions from this poll I know you're familiar with. The people who were -- who took these questions were asked: How closely are you following the Chandra Levy disappearance? Sixty-three percent said very -- said closely; 37 percent said not closely. Now do these percentages surprise you?

SCHNEIDER: Well, take a look: 63 percent. How high is that? Well, consider this: Last month we asked people how closely they've been following news about the patients' bill of rights? And then, 36 percent said closely. Chandra Levy, 63 percent; patients' bill of rights, 36 percent. That tells you something.

Now is all the interest in the Chandra Levy case being driven by, quote, "irresponsible press coverage," unquote? Well, the public doesn't think so, by two to one, people think that the press has behaved responsibly, responsibly in covering the Chandra Levy matter. People are genuinely interested in this story -- Judy.

WOODRUFF: Bill, another question in this poll, people were asked whether Congressman Gary Condit should take a lie detector test. Eight-three percent said yes; just 13 percent said no. Eighty-three percent, now that is an enormous majority.

SCHNEIDER: That is huge. And when over 80 percent think you should take a lie detector test, it's a pretty strong indication that people think you are hiding something. In fact, the public is very suspicious of Congressman Condit. Two-thirds told us they think it is likely that he was directly involved in the disappearance of Chandra Levy.

More than 70 percent said that if their own congressman were involved in a matter like this, they would be less likely to vote for him. Now most Americans clearly do not trust Congressman Condit. Of course, most Americans do not know Congressman Condit. His constituents do. And ultimately, they're going to be the ones who have to judge him -- Judy.

WOODRUFF: All right, Bill Schneider joining us now from Los Angeles.

And Bill will be back a little later this hour with a look at how President Bush is faring in the new poll. But coming up first, the politics of sports, as its longtime president prepares to retire the International Olympic Committee, considers a controversial favorite to host the 2008 summer games.

(COMMERCIAL BREAK)

WOODRUFF: We promised you a discussion on the upcoming vote tomorrow by the International Olympic Committee and whether to grant China the 2008 games. But we're going to wait a moment and do that and first go to our Candy Crowley who's back here with me. Candy, they're voting on the floor. What's going on?

CROWLEY: Well, we got a vote. This may be the start or the end of it. The bets are that what's happening here is they are taking a vote on the rules, that is under what rules do you debate, you know, what amendments will be brought up, how long you debate, and you know, how many votes there are. So they're voting on the rules. The Democrats don't like them. Democrats say, "We have enough Republicans. We have enough Republicans to kill the rule." If and should that happen, Republicans have said, "Fine, then that's it for the bill."

Now, they can get a discharge petition, the Democrats can. But that's going to take some time. And what it really means is that for now, campaign finance reform would get pulled off the floor, we'd probably revisit it come fall and you hear a lot of screaming.

WOODRUFF: Reform in the form that John McCain and Shays-Meehan wanted?

CROWLEY: Yes, yes, absolutely.

WOODRUFF: All right, Candy Crowley. We'll certainly come back to you for an update before this hour is over.

As we promised a moment ago, the debate over the Olympic Committee vote tomorrow. Members of the committee are in Moscow right now to choose a host city for the 2008 summer games. This is the last big IOC meeting for Juan Antonio Samaranch, who is retiring after 21 years as committee president. Beijing is considered the favorite among the five cities competing to host the games, but human rights activists and some members of Congress have lobbied IOC members to vote against Beijing.

The debate over Beijing's bid mirrors the political debate right here in Washington over U.S. relations with China. And joining me now with a view on tomorrow's vote, James Lilly, who is the former U.S. ambassador to China. We are also going to be joined by Democratic congresswoman Nancy Pelosi of California, but she's over there on the House floor doing what Candy Crowley was just telling us about, and that is voting on campaign finance reform.

So Ambassador Lilley, I'm going to turn it to you. You're going to have the floor all to yourself. When -- let me just ask you first, when the White House announced that it was not going to take a position on this, did that in effect give a green light to the IOC to say yes to Beijing?

JAMES LILLEY, FORMER U.S. AMBASSADOR TO CHINA: No, it doesn't. It says that the United States, unlike what we did last time, is we're not going to take a position. Last time, as you know, the Chinese lost by two votes. They blamed it on us. They turned very mean, racist propaganda. These dinosaurs turned out all this invective against us. We don't have to appease these people, but you don't gratuitously insult them. This should be decided on the basis of the facilities. Do the Chinese have the clean air? Do they have the room? Can they handle the media? Is the traffic manageable? If they can do it and they're the best at it, give them the Olympics.

The fact that they're getting it has a political cut to it. It's a double-edged sword. Negatively, it feeds their nationalistic fervor. It can turn them into nationalistic fanatics.

On the other hand, it could open up their whole system to close scrutiny, and this will make it much harder for them to crack down. So I would say on balance, it's probably going to be a positive thing for China and for the world.

WOODRUFF: Well, you already moved into answering the question I wanted to ask you, but let me just put it out there about human rights. I'm sure you are aware the new Amnesty International report shows that China executed more people in the last three months, something like 1,780 people, than it executed in the past three years. Why is giving the Games to China going to be an incentive for them to improve this human rights record?

LILLEY: I don't think there's a connection. I'm sorry to say that, but I don't think there's a connection between their executions and winning the Olympics. The decision was made a long time ago that China would be part of the international community. The U.N., the World Trade Organization, the WHO, World Health Organization, and the Olympics -- they're part of the community, like it or not.

You judge it on the ability of China to perform what the committee demands of them. That they have a poor human rights record, there is no question. I was there at Tiananmen, I know this personally. They have shot these people, they have a strike-hard campaign, they are trying to stop corruption, they are doing it by Draconian means; this is the way they handle things.

To change this or to alter it or influence it, you bring them into the world, you expose them for the rule of law, you expose the executions and this has an influence for sure over time.

WOODRUFF: All right, former...

LILLEY: One more thing Judy. There probably won't be war before 2008, either.

WOODRUFF: They're probably what, sir?

LILLEY: There probably will not be war in the Taiwan Strait before the year 2008; that gives us a seven-year period.

WOODRUFF: Well, that opens up a whole new set of issues we don't have time to get into now, but let me just thank you, former U.S. Ambassador to China James Lilley.

As I said, we were to be joined by California Congresswoman Nancy Pelosi. She was called on the floor of the House to vote on campaign finance reform.

Ambassador Lilley, thanks for being with us.

LILLEY: Thank you.

WOODRUFF: A quick reminder: CNN plans live coverage of tomorrow's announcement of the host city for the 2008 Summer Olympics. Our coverage begins tomorrow at 10:00 a.m. Eastern.

The president and the polls. Is Mr. Bush gaining or losing ground with the American people? We've got some new numbers when INSIDE POLITICS returns.

And are Americans divided over stem cell research? A look at public opinion and political realities coming up.

(COMMERCIAL BREAK)

WOODRUFF: By some accounts, President Bush's top political advisers have been mindful in recent weeks, you could say, of trying to pump up his poll numbers. For an update on where Mr. Bush stands with the American public, let's bring back our senior political analyst Bill Schneider; he's out in Los Angeles.

All right, Bill, have they been successful? Is the president holding up in the polls?

SCHNEIDER: We have some good news for the president. A lot of people have been saying, we're waiting to see if his numbers drop below 50. Guess what? They've gone in the other direction: his job approval rating, 57 -- up a few points. Personal approval rating, 70 -- almost as high as Ronald Reagan at this point.

Critics say he's been too conservative, that he is following a conservative agenda he didn't run on. Only 35 percent of Americans share that criticism. President Bush is getting high marks on issues, especially education and taxes, where he's delivered, and the patients' bill of rights.

The Democrats in the Senate put that issue on the top of the agenda, but President Bush claims it's his issue too, and most Americans approve of the way he's handling the patients' bill of rights. I think what really stands out for President Bush are his personal qualities. People like him; they respect him. They think he's a strong leader, and they overwhelmingly find him honest and trustworthy, which they often did not think about President Clinton.

WOODRUFF: So all good news for the president, Bill? No bad news?

SCHNEIDER: There is some bad news, consider these findings: percentage of Americans who believe big business has too much influence in this administration, 67. Percentage who thinks President Bush is out of touch with the problems of ordinary Americans, 50. Percentage of people who approve of the way President Bush is handling the issue of campaign finances, 37.

Now, these findings add up to one big criticism, he's too close to big money. He's led a privileged life, he's been in the energy business, he has a lot of rich friends from whom he raises a lot of money. Sounds like the same criticisms people made of his father.

And the truth is, he has the same vulnerabilities as his father did. What's saving President Bush right now is that things are not really very bad. It's not that people are hurting, it's not like it was in 1991 and '92 during the recession when people were hurting.

WOODRUFF: Well there is a very, very difficult issue before the president right now, Bill. He's looking at whether to allow federal funding of research on embryonic stem cells. What are Americans saying about that?

SCHNEIDER: Mixed views, Judy. On the one hand, most people believe that research using human embryos is morally wrong -- 54 percent. On the other hand, an even larger number, 69 percent, believe that that kind of research may be medically necessary to help find cures for serious diseases.

In fact, among those people who believe stem cell research is morally wrong, most of them also believe it's medically necessary. In this case, I think, medical necessity trumps moral qualms. It's a very, very tough call for most Americans and it is going to be a tough decision for the president.

WOODRUFF: All right, Bill Schneider, second time on the program today. Thanks, Bill.

Stem cell research, approval ratings -- who better to discuss all that with than the president's own pollster, Matthew Dowd. Dowd sat down with our analytical tag team, Stu Rothenberg of "The Rothenberg Political Report," and Charlie Cook of "The National Journal" at a coffee shop just a block or two from here.

Let's listen in.

(BEGIN VIDEOTAPE)

STU ROTHENBERG, "ROTHENBERG POLITICAL REPORT": Matt Dowd, you are senior adviser at the Republican National Committee handling strategy and polling. Catholic voters very much in the news, the president has to address stem cell research. Can you talk about the politics of this?

MATTHEW DOWD, REPUBLICAN POLLSTER: I think from sort of seeing the polling data, I'll speak from that. This is not an issue that's sort of very well understood by the vast majority of the public, including Catholics, there are certain Catholic constituencies that this issue is extremely important to. So I have a hard time sort of weighing the exact political impact of this, sort of broadly, even among Catholics.

But ultimately, I think it's going to be a policy decision first, and then they have -- the White House will obviously have to deal with the political impact of that decision, and that's I think something they're cognizant of.

CHARLES COOK, CNN POLITICAL ANALYST: The polling data I've seen showed a 19-point margin of Catholics supported stem cell research. I don't see the potency on the pro-life side on this issue that you normally see on partial birth, or federal funding, or many of the other pro-life issues; is it really there?

DOWD: This issue, since it has to be explained so thoroughly and so much, it is very hard to poll on. Because you have to give so much information, and once you provide so much information, you're sort of leading away from objectivity and more to subjectivity, depending how you word the question because people just do not have an understanding of what stem cell research is, it's just not understood.

It's only understood by a small constituency in the country. Does the decision itself have a huge political impact? That's very debatable. But does it have a big political impact on certain constituencies? Of course.

ROTHENBERG: Matt, let's turn back to the president and to his image. Some people are saying George W. Bush is too conservative and that's why there's been some opposition to him. Many of us think it has less to do with ideology but more with this perception that he's too corporate, too tied to big business through his environmental and energy decisions.

DOWD: First, I think that presumption that there's a problem today, I think, stretches it way too far. The way the electorate is -- and I talked about this at other times and over the last six months, and the closeness of the election reflected this, we have a very polarized electorate.

Which means have you Democrats, 40 percent of the population that basically has a very high disapproval rating of the president. And you have 40 percent or 36 percent of the nation that has a very high, 95 -- 96 percent rating of the president. So, we sort of walk in. The president walks in with the parameters for how he can move those numbers...

(END VIDEOTAPE)

WOODRUFF: We are breaking into that interview; we hope to bring you the rest of it. But right now we want to tell you the rule -- the deal to get campaign finance reform voted on the floor of the House has gone down to defeat. We are going to take you now to a news conference by House Speaker Hastert.

(JOINED IN PROGRESS)

REP. DENNIS HASTERT (R-IL), HOUSE SPEAKER: ... even after we agreed to a unified amendment. I think it's pretty clear that Mr. Gephardt doesn't want the issue -- he'd like to use the -- he doesn't want the result, he'd rather have the issue for a campaign issue. That's sad. It's, I think, wrong-minded. But we have put our best foot forward, tried to put what our view is a good piece of legislation forward to compete against Mr. Shays.

The House of Representatives was denied the effort to debate the bill today and come out with a result that would, I think, benefit the American people. I think it's a sad day. I'm sorry this happened. But we will go on and move through with the rest of our agenda, the rest of the summer.

WOODRUFF: We've been listening to House Speaker Dennis Hastert. At one point -- Candy Crowley is with me here now at the Canon Building across from the Capitol -- he's saying Minority Leader Dick Gephardt wanted the issue here?

CROWLEY: Well, here we go. You will hear from the Democrats, I'm sure, very shortly, that Republicans will go to any length to try and kill this in its tracks and they didn't want to kill it outright so they killed it through the rule.

I think what we can draw from this is that had the Democrats and the Republican allies on campaign finance reform had the votes to go through these various hurdles and take these votes, they'd have gone ahead and done it. But it's sort of a temporary halt because they can come back, and I suspect we will see this bill in September. Not enough, I don't think, to do it between now and the August recess.

WOODRUFF: But what would change between now and September? They put so much effort into it.

CROWLEY: There is a lot of time for public pressure, which you will see from both sides. But there is a lot of time to talk to these people. This is a hugely delicate bill they put together here. It's ripe for picking this person off or picking that person off. So the Republicans can take their alternative and add things to it and try to attract people, and the Democrats can try to hold their people together and get more on.

So there's more time to wheel and deal.

WOODRUFF: All right, Candy Crowley, once again, a setback for campaign finance reform in the House. A deal on a set of rules has gone down to defeat. Both sides giving different explanations. The bottom line is a defeat for campaign finance reform at least for now.

INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

REP. TOM DELAY (R-TX), HOUSE MAJORITY WHIP: ... bent over backwards to be as fair as he could be. More so than...

WOODRUFF: You're listening to House Republican -- House Majority Whip Tom Delay talking to reporters about what has happened on campaign finance reform. And I think you can tell by the smile on his face, and the smile on the face of another Republican leader, J.C. Watts, they are very pleased with the outcome of the vote just moments ago on the House floor.

Joining me now for his "Reporters' Notebook," Bob Novak of the "Chicago Sun-Times." Bob, essentially what Delay and Hastert are saying is that the Democrats didn't have the votes.

ROBERT NOVAK, "CHICAGO SUN-TIMES": They didn't have the votes. And I got a tip from both sides of the aisle this afternoon that the rule -- they didn't have enough votes for the rule. They tried to change the rule on the fly, tried to revise it, the Republican leadership.

But that wasn't the real point. The point was the Democrats did not have the votes to pass Shays-Meehan. If anything was going to pass, it was going to be the Republican version. But on the rule, which is very complicated for laymen, the House of Representatives to function has to set a rule for each bill. And on this you had Democrats who, even those Democrats who opposed the Shays-Meehan bill voted against it.

So I would say the odds are, it's not for sure, that campaign finance reform may be dead for this year. The Democrats will have to get a discharge petition out to get it out -- to get it out of the committee. Now, the Republican leadership may say they're not happy about the rule going down, but anything that defeats this bill, I think, they can be happy about.

WOODRUFF: Bob, I should say that our congressional correspondent John Karl just called in to make sure that I'm wording this correctly. The Republican leadership is not happy that the rule went down but, in fact, they don't want campaign finance reform.

NOVAK: That's correct.

WOODRUFF: All right, let's move to another subject. You've been looking at what Democrats in the home congressional district of Gary Condit are saying. Are they worried?

NOVAK: It's not so much the Democrats in the district, Judy, it's that national Democrats feel that Gary Condit, because of the Chandra Levy story, is now unelectable in that district. Furthermore, they don't see how any Democrat can win in that district right now. It is a very conservative district, most conservative of any Democratic district in California.

And so what they want to do is to, under redistricting, they want to change the boundaries of the district for the 2002 election. And that means they don't want Condit to resign. If he resigns they'll have to have a special election in that district, which would elect a Republican.

That's the Democratic strategy right now, to hope that Congress can fill out this term, change the district and get a new candidate for 2002.

WOODRUFF: Two other quick items: Senate race in Minnesota.

NOVAK: Senate race in Minnesota has tightened up. The Mason- Dixon Poll show that the mayor of St. Paul, Norman Coleman, Republican who got beat by Jesse Ventura for governor a couple of years ago, four years ago, is now only four points behind Senator Paul Wellstone, the Democrat. That is now on the top of the list of districts that the Republicans are challenging for.

WOODRUFF: And finally, there was talk when George W. Bush, the president, met with the Russian leader Mr. Putin, that Mr. Putin was going to come to the Bush ranch. Now, what has happened to that?

NOVAK: What they are doing is they are looking at the Baylor football schedule -- Baylor University -- that's because Baylor is in Waco, Texas, which is the biggest town near the ranch. And when they play football they are all tied up in the hotels. So they have to find a weekend that Baylor is not playing football so that the president of Russia can come to Texas. Sports meet diplomacy in Waco!

(LAUGHTER)

WOODRUFF: All right, Bob Novak, thanks for a peek at the "Notebook." We'll be right back with more INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: President Bush today announced plans to help senior citizens pay for prescription drugs in a program that side steps Congress and could be up and running by the new year. For the latest, let's join CNN's White House correspondent Kelly Wallace -- Kelly.

WALLACE: Democrats, including Senate Majority Leader Tom Daschle who was just here meeting with the president, say Mr. Bush's plan offers a false promise to seniors, but Republicans say it is the first step towards prescription drug coverage for seniors.

(BEGIN VIDEOTAPE)

WALLACE (voice-over): Seventy-eight-year-old Eleanora Giuliano has high blood pressure and a thyroid problem. She needs four prescriptions a month, but says she doesn't always have the money to pay for them all.

ELEANORA GIULIANO, SENIOR CITIZEN: What are you going to do? If you can't afford the $67 every month, something's got to give. So the one I feel is not essential is going.

WALLACE: Flanked by seniors also struggling to pay their drug bills, President Bush said help is on the way. New discount cards which will be available to all Medicare beneficiaries by January of next year.

BUSH: Present the card at a participating pharmacy and you receive a substantial discount. It's as simple as that, and it's convenient. WALLACE: Private companies would sell cards to seniors, and in return would negotiate lower prices with the drug manufacturers. But criticism is coming from the small pharmacies who worry they, not the drug companies, will get squeezed, and Democrats, who say seniors already have access to discount cards characterize the president's new plan as a gimmick.

GEPHARDT: This is becoming an infomercial administration. They are engaging in illusion, they're trying to convince people that they are helping them on this problem when they are not.

(END VIDEOTAPE)

WALLACE: But the president calls discount cards just a first step, not a substitute for a broader drug benefit and comprehensive Medicare reform, but big differences remain between the two parties about just how to solve the problem. And this issue isn't likely to get Congress' full attention until lawmakers finish up work on another politically popular issue, and that is a patients' bill of rights -- Judy.

WOODRUFF: Kelly, stay with us, because -- for just a moment -- we want to look at what White House budget director Mitch Daniels had to say when he testified here on the Hill today. And much of the hearing centered on the shrinking budget surplus. Daniels blamed the slowing economy, but Democrats said the Bush tax cut was too big. And the Budget Committee chairman warned that the Social Security and Medicare trust funds could be at risk.

(BEGIN VIDEO CLIP)

SEN. KENT CONRAD (D-ND), BUDGET CHAIRMAN: It would be wrong to raise taxes in an economic downturn and I apply that to this year or next year, if we face economic downturn next year. But the administration and everybody else is not forecasting economic downturn next year. They are forecasting strong economic growth, but the numbers show that even in that context we're going to be using trust fund money to finance the other programs of government, and I don't think that's the direction we want to go.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

MITCH DANIELS, WHITE HOUSE BUDGET DIRECTOR: The nation's finances are in remarkably strong shape. Even in the midst of a year long slowdown in the economy, we continue to accommodate surpluses and to use the extra receipts to steadily reduce the nation's outstanding public debt.

(END VIDEO CLIP)

WOODRUFF: Kelly, we are listening to Mitch Daniels emphasize the positive here and say that the surplus is still going to be large. But how worried is the administration about decreasing revenues because of the slowed economy? WALLACE: Well, the administration is certainly concerned and senior advisers have told CNN they think the sluggish economy will continue, and that the unemployment rate could even go higher than it currently is, and that is why they are sort of using the shrinking budget surplus and the slowing economy as ammunition.

They say the goal now should be controlled spending. That is the best way to make sure those the surpluses don't diminish even more, and they also are citing some economic statistics saying that the tax cut is helping to spur on the economy.

But, of course, you hear Democrats with a completely different perspective. They think that this administration will eventually be forced to dip into the Social Security surplus or the Medicare surplus to pay for expensive programs such as defense budgets, and also Medicare reform --Judy.

WOODRUFF: And Kelly, quickly to another story that's been in the headlines the last couple of days in Washington, and that is White House counselor to the president, Karl Rove, it turns out, was the initial contact with the Salvation Army in discussions with that charitable organization about being exempted from anti-discrimination hiring practices?

WALLACE: Well, Judy, actually, it's a complicated story, and apparently the initial contact really was the office of the faith- based initiative here at White House,that the Salvation Army had contacted that office, and then senior officials at that office had then contacted the office of management and budget to look into this.

Basically, the Salvation Army asking for maybe some assistance, maybe a federal regulation to prevent it from hiring homosexuals. Karl Rove, we understand, a month later, did also contact the office of management and budget to get involved as well -- Judy.

WOODRUFF: All right, Kelly Wallace, a lot to keep track of over there. Thanks. And INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: Campaign finance reform down for the count. That's it for INSIDE POLITICS. I'm Judy Woodruff in Washington. And now on to the "FIRST EVENING NEWS" with Leon Harris.

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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