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Social Security Reform Commission Meets; Privatization Proposals Draw Protests From Democrats

Aired July 24, 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. I'm Judy Woodruff. President Bush rallies the troops in Kosovo. Now he's headed home to wage new battles in Congress.

JONATHAN KARL, CNN CORRESPONDENT: I'm Jonathan Karl on Capitol Hill with the debate over Social Security that's prompting new protests against privatization.

KATE SNOW, CNN CORRESPONDENT: I'm Kate Snow also on Capitol Hill, where the president needs all the help he can get from wavering Republicans on a Patients' Bill of Rights.

MAJOR GARRETT, CNN CORRESPONDENT: I'm Major Garrett at the White House. China convicts a U.S. space scholar. I'll have U.S. reaction.

ANNOUNCER: Now, Judy Woodruff takes you INSIDE POLITICS.

WOODRUFF: Thank you for joining us.

More than six decades after it was created by Congress, Social Security is proving once again that it can stir political passions like few government programs. The president's bipartisan commission on Social Security reform met today here in Washington to consider an interim report on the program's future. Commission members were greeted by protesters who said the commission has exaggerated the problems facing Social Security in an effort to raise public support for privatization. The demonstrators included labor and women's groups and other traditional Democratic Party allies.

Meanwhile, inside, commission co-chairman Daniel Patrick Moynihan, dismissed the criticism, and he read a letter by fellow Democrat and former senator Bob Kerrey that describe the dangers of ignoring needed reforms.

(BEGIN VIDEO CLIP)

DANIEL PATRICK MOYNIHAN, CHAIRMAN, SOCIAL SECURITY REFORM COMMISSION: "The do-nothing plan discloses no details other than opposition to increasing (UNINTELLIGIBLE) of taxes, citizens who want to know the rest of the details must look to the Social Security trustees who will tell them this: The do-nothing plan proposes to cut benefits 25 percent to 33 percent."

(END VIDEO CLIP)

WOODRUFF: The interim report concludes that without changes, Social Security will face shortfalls by the year 2016, which would force the government to cut benefits, raise taxes, cut spending or borrow from the financial markets. Lawmakers on Capitol Hill are keeping, you can imagine, a close eye on the Social Security commission, and so is the White House. We have reporters at both locations. Major Garrett is at the White House and congressional correspondent Jonathan Karl is on the Hill.

Jonathan, let's start with you. Let's talk first about the reaction up there to what the commission is saying in this interim report.

KARL: Well, Democrats responded by launching what they say will be a sustained and very loud effort to portray the president's Social Security commission as simply an effort by Republicans to destroy Social Security.

(BEGIN VIDEOTAPE)

REP. DICK GEPHARDT (D-MO), MINORITY LEADER: The Republican Party has always opposed Social Security and Medicare, and these latest scare tactics are part of a 66-year drive to gut Social Security and let people fend for themselves at age 65.

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: Your Social Security benefits will be cut under the president's commission report by 41 percent, nearly one-half.

KARL (voice-over): The two Democratic leaders called the commission's preliminary report biased, misleading, fallacious, unwise, skewed, misguided and flat out wrong.

GEPHARDT: We're not name calling, we're not engaging in any harsh rhetoric. We're trying to have an active debate here on a very important topic to everybody in this country.

KARL: Democrats have accused the White House of stacking the deck by filling the commission with advocates of partial privatization. But one of the commission's Democrats appealed to the Democratic leadership to give him a chance.

ROBERT JOHNSON, SOCIAL SECURITY REFORM COMMISSION: I would urge my fellow Democrats to lower the rhetoric, stop the kill-the-messenger strategy, and focus on trying to address a very serious problem that will not go away simply by calling out names or trying to hide in the sand.

KARL: The two sides can't even agree on the scope of the problem. President Bush and his commission say Social Security will be in serious financial trouble in just 15 years. Democrats think the problem is more than 30 years away.

(END VIDEOTAPE) KARL: As for Republicans on Capitol Hill, there's not a lot of optimism about any kind of fundamental Social Security reform passing Congress in the short term or even in the mid-term. Part of the problem up here, Judy, for Republicans, is that the few Democratic allies that they had had on Capitol Hill have left Congress, people like Bob Kerrey, Daniel Patrick Moynihan, Chuck Robb, senators who had been open to the idea of some form of privatization now are no longer in Congress. That leaves just John Breaux as the soul Democrat at least in the Senate who is willing to talk about any kind of partial privatization, hardly enough to build a broad bipartisan coalition as Republicans acknowledge.

WOODRUFF: Jonathan, why have Democrats jumped on this so wholeheartedly" Why are they so against it? What do they think they can get out of this issue?

KARL: Well, Democrats clearly think that they've got a home run political issue here kind of reminiscent of what happened when Newt Gingrich talked about Medicare withering on the vine and we saw it endlessly in those ads by the Democratic Party back in 1996. They really believe that Bush has made a mistake by appointing a commission without Democratic input up here on Capitol Hill and by talking about privatization. But Judy, one thing that's important to point out is this is exactly the argument that we heard from Al Gore and his strategists during the presidential campaign last year when candidate George Bush proposed some form of partial privatization and Gore really tore into him in the same way. And what was interesting is much of the polling during the campaign last year, Bush actually went up on the question of Social Security, and Democrats, Al Gore did not seem to get much traction on the issue.

WOODRUFF: All right, Jon Karl at the Capitol. And now for the White House view, let's turn to our correspondent there, Major Garrett. Major, what are they saying?

GARRETT: Well, a couple of things, Judy. First of all, the reason you create a commission is to catch this type of political flack. It insulates the president, sort of a political heat shield right now. You recall during the campaign the president said that President Clinton and Vice President Gore had not led on Social Security -- he will. Well, he's not jumping into the lead just quite yet. He wants the commission to sort out many of the very deep and problematic underlying issues with Social Security.

And I've talked to some members of the commission today. First of all, they're upset with all the protest. They believe they're being hounded already when they haven't had a chance to deliberate in public about what to do with the future of Social Security. And they're considering many options, among them partial privatization. But they're also considering possibly raising the retirement age, possibly increasing the amount by which payroll taxes are currently assessed at, higher income levels to put more money into the system. Many, many things are on the table. They haven't even had a chance to go through all those things. So what the White House and some of the commission members say: Give the commission a chance. Let these eight Republicans and eight Democrats take their time to sort through these issues, make recommendations to the president. That will be up to him to sell it to a skeptical Congress.

WOODRUFF: Major, at the same time, aren't some of the criticisms that we're hearing from the Democrats, don't they contradict what we were hearing from the previous Democratic administration?

GARRETT: Judy, allow me if you will to read something that Bill Clinton said from the podium of the United States House of Representatives when he delivered his 1999 State of the Union Address. And I quote the president directly. "Today, Social Security is strong," President Clinton said then. "But by 2013, payroll taxes will no longer be sufficient to cover monthly payments. And by 2032, the trust fund will be exhausted and Social Security will be unable to pay out the full benefits older Americans have been promised." Well, you can shift the dates a little bit, 2012, 2016. The problem is fundamentally the same. There are fewer workers, more beneficiaries, and as you try to put that math together, some structural changes have to be made to Social Security to maintain the current benefit structure. That's what the commission is wrestling with. That's what the president's asked them to do. The White House and the commission are just asking for a modicum of patience to let them sort that all out -- Judy.

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

And now I'm joined by Dick Parsons. He is the Republican co- chairman of the president's Social Security Reform Commission. He is also the co-chief operating officer of AOL-Time Warner, which is the parent company of CNN.

Dick Parsons, are you surprised at the vehement reaction this commission interim report is getting?

RICHARD PARSONS, SOCIAL SECURITY REFORM COMMISSION: Not really. I should be. A rational person would be surprised because you know, there isn't really that much to debate about. Everybody acknowledges what the president said in his State of the Union in 1999. Social Security is not, as it's currently structured, sustainable over time. It's going to run into a problem. We all know that. It's a function of the demographics.

A program that was -- when it was set up, there were 42 people working to support every person who was retired, is moving into an era where in 20 years, there will be two people working for every retiree. So we all know there's a problem. And why people are whipping it up the way our interim report they are should surprise you, but because I've been around politics for a while and I understand the game, I'm not surprised.

WOODRUFF: But you've got this new huge discrepancy, your commission in the draft report is saying there's going to be a problem by 2016. The other folks, the Democrats, most of them are saying it's not till 2039. How do you know that you're right and they're wrong?

PARSONS: It's a question of semantics. Let's go back to that quote that was just read that then-President Clinton gave. He said that in 2013. We're saying in 2016 now this is what the Social Security commission actuaries say. The amount of money that Social Security takes in on a current basis will, for the first time in many, many years fall below the amount of money that goes out. And at that point, we're in cash flow deficit. At that point in time, the Social Security commission has to start to redeem some government IOUs that they have been getting over the course of the years. Now we're not saying the government won't stand behind its commitment to honor those IOUs, but we are saying that the government is going to have to turn somewhere to get the cash to do that. And they're really going to have raise taxes or increase the borrowing or cut other government spending.

WOODRUFF: But you've got the man who was running the Social Security system until this year, a man named Kenneth Apfel saying today that he is really disturbed at the language in the report of the commission, and he's calling it misleading and inaccurate. How do you account for the differences?

PARSONS: Only thing I can tell you is in our judgment, it is not misleading, it is certainly not inaccurate. And I'd have to understand from Mr. Apfel what his concerns were. But all we have done at this stage -- this is our interim report. It seeks to do only two things: one, to call attention, to call the public's attention to the fact that there's an issue here, there's a problem in Social Security needs structural reform; and two, to illuminate the nature of the problem so people can understand why we have to start to fix the problem now and not wait until we're at zero hour to fix the problem. That's all we're trying to do at this point in time.

WOODRUFF: Let me also quote to you something Minority Leader Dick Gephardt in the House said today. I interviewed him a little earlier today. He called the draft report irresponsible and he said, this is a commission that's a stacked debt. And he said the country deserved an objective commission whose members have not already made up their minds about privatization.

PARSONS: With respect, the minority leader is just mistaken. First of all, let's start with the end of his statement, that we should have a balanced commission with people who are objective. There is no greater advocate and champion of Social Security over the last four years than my co-chair Senator Daniel Patrick Moynihan. You can go to the record, as they say. He is the guy who has been there for the system, for 40 years in public life.

Secondly, there are, as you noted, it's balanced: eight Democrats, eight Republicans, all good men and women, you know, who have only one agenda in this situation which is to...

WOODRUFF: But his point is they all...

PARSONS: ... come up with the best solution to the structural imbalance in the problems that we see that we can. We have no other agenda.

WOODRUFF: But Mr. Gephardt's point is you all came into this already believing that at least partial privatization is an answer. PARSONS: He may have another agenda.

WOODRUFF: What do you mean by that?

PARSONS: Well, as I said, all we're trying to do on the commission is, first of all, illuminate for the American people what the nature of the problem is so they can understand it and understand the need for change. And then give the president and the Congress a menu, a prescription, a set of recommendations for how to deal with that problem. Other people have other kinds of agendas like how this may affect their popularity, their all-around acceptability within their social club or their community or who knows what?

WOODRUFF: And you're saying that may be the case with Mr. Gephardt?

PARSONS: I'm just saying he may have another agenda. Our agenda is the only one I can speak to definitively is simply to come up with the best ideas we can.

WOODRUFF: All that aside, going in, you already have a very controversial issue when you are drawing this sort of criticism when you barely have left home plate to start to make it around the bases. What does that say to you about what your prospects are?

PARSONS: Well, you know, for years, Social Security was the third realm of American politics, so no one is really surprised that it's going to be a tough political battle. I think what we're going to try and do is educate the people. I mean, the Americans aren't stupid. Every poll that anybody has taken of late has shown that particularly among minorities, well, African-Americans and Hispanic, there's a real interest in trying to figure out how they can create wealth for themselves, how they can get a piece of the American pie. They are way ahead of the people who purport to represent them in my judgment. I believe that treating people like adults, believing that they can understand complicated issues if you break it down for them and that they can make intelligent judgments around their own self- interest will win the day at the end of the day.

WOODRUFF: All right, Dick Parsons, who is the co-chairman of the president's commission on Social Security reform, thank you very much.

PARSONS: Thank you.

WOODRUFF: Good to see you. We appreciate it.

And stay with us. This is INSIDE POLITICS.

ANNOUNCER: The future of Social Security as seen by the top Democrat in the House. A conversation with minority leader Dick Gephardt after the break. Also, gauging House for the proposed Patients' Bill of Rights. The version preferred by the president faces a tough road ahead. Plus...

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Those who wear America's uniform deserves America's full support. And you've got it.

(END VIDEO CLIP)

ANNOUNCER: The commander in chief visits the troops in Kosovo, the president's last stop before heading home to Washington. Life from Washington, Judy Woodruff brings you more of INSIDE POLITICS straight ahead.

(COMMERCIAL BREAK)

WOODRUFF: House Minority Leader Dick Gephardt spent this past weekend in Iowa, not far from his home state of Missouri and also home to the first in the nation presidential caucuses. A little earlier today, I spoke with Congressman Gephardt about his Iowa trip, and I started by asking him if he agrees with the preliminary findings of the president's commission on Social Security reform.

(BEGIN VIDEOTAPE)

GEPHARDT: I really don't. I think their report is irresponsible. I think they're showing we've got a stacked deck on this commission. I think they've already decided that the president's plan of privatization of Social Security is the way to fix this problem, let people invest a lot of their own money. Our problem is that the Social Security we think according to the latest actuary reports is good until 2038 or '39. And if you do the president's plan, you might cause a reduction as much as 40 percent of present benefits going out of Social Security.

WOODRUFF: Well, I'm sure you know this, former Democratic Senator Pat Moynihan, is the co-chair of this commission, is saying unless something is done now, you're either going to have to raise taxes, cut benefits or do massive borrowing.

GEPHARDT: I just don't think that's right. I respectfully disagree with former Senator Moynihan and others who think like he thinks. This could have been a wonderful opportunity to fix problems in Social Security if the president had put an objective bipartisan commission together that didn't have all the same view of what to do with this system. I'm afraid this is a stacked deck commission and it's not going to produce anything that the Congress is going to want to deal with and try to get done. This was a missed opportunity.

WOODRUFF: Well, it is bipartisan. Senator Moynihan is a Democrat. I want to also read you a comment from another member of the commission, another Democrat businessman, Bob Johnson, who says other Democrats who are criticizing this should, "in his words, lower the rhetoric, stop trying to kill the messenger," and he said try to fix the problem rather than calling names and trying to hide in the sand. That's his words.

GEPHARDT: Well, no one is interested in calling names or making false accusations. What we want is an objective commission that has different views within it, which we don't think this commission does, and first find a real objective examination of the facts -- what are the real facts about Social Security -- rather than coming up with these scary numbers that we don't think are right. Let's sit down and together try to figure out what the real facts are. That's the first place to start.

WOODRUFF: Just very briefly, Mr. Gephardt, are you saying that nothing should be done this year about Social Security?

GEPHARDT: No, I think having a commission is a good idea. I wish it were a different commission that hadn't already made up its mind about both the facts and the answer to the facts. I think we could use this year to get a bipartisan agreement on what's wrong with the system and then begin the work of what to do about it. And I think that as in 1983, it is possible to get a bipartisan agreement on what to do. One of the first things we don't want to do is continue with a budget that might get into the Social Security and Medicare trust funds. If we could avoid, that we would have a longer future on Social Security and Medicare.

WOODRUFF: Different subject. In Iowa this weekend, you created a stir with some remarks over whether you would raise taxes if the economic circumstances of 1993 repeated themselves. I don't want to go into all that, but I just want to ask you flat-out: Would you support a tax increase if the economy were not to come out of this downturn and we were to face deficits again?

GEPHARDT: I'm not for a tax increase and never said that. In fact, I have supported tax decreases, tax cuts. I think our economy needs tax cuts. It's unfortunate this was misreported which I think it was. I am not for tax increases, I am for tax cuts. I think the tax bill that we just finished was a missed opportunity. I think it could have been a better tax cut. I think it could have been more focused on people in the middle class, people trying to get in the middle class, and to foster more capital investment, which is what I think this economy needs to really get going again.

WOODRUFF: Stem cell research. Yesterday, the pope urged President Bush in a meeting not to put federal funds behind research of embryonic stem cells. If the president goes along with that recommendation, does not recommend this sort of funding, does not support this funding, do you have the votes to overcome that regardless of the president's decision?

GEPHARDT: I think we might. This is a very serious and difficult question, and we all wrestle with it. But I think the benefit, the possible benefit, the potential that can come from this research in terms of fighting Alzheimer's and diabetes and cancer and other dread diseases outweighs the arguments on the other side. I realize what people are saying on the other side. No one is happy about abortion, and no one wants that outcome. But if this research can go forward and we need to help with it, we could give a better life and a longer life to millions of Americans who suffer from these dread diseases like Parkinson's and diabetes. So I hope we will go ahead with this research.

WOODRUFF: So-called Patients' Bill of Rights. As you know, this issue is heading for a showdown soon. My question to you is: Do Democrats now have enough support for moderate Republicans to do what you want, to defeat the version that President Bush is supporting?

GEPHARDT: You know, this issue has been going on now for three or four years. We have supported what we think is an enforceable, effective Patients' Bill of Rights that gives people rights that they can ultimately get enforced. We think the Republican version of this bill is hollow, that it's not enforceable, that it would not be effective. And for that reason, we have really tried to pass our bill. I think we do have, and I hope we will have later this week enough moderate Republicans with most of the Democrats. We think we're going to get 99 percent of the Democrats to pass an enforceable, effective bill. We did that a year or so ago and hope we can do that again now.

WOODRUFF: When do you think it's going to come up?

GEPHARDT: Well, I hear that it's going to come up Thursday. I think they're short of the votes they need to pass their bill. It may be that if they don't have the votes, they'll put it off till next week or even beyond the August recess.

WOODRUFF: All right, Representative Dick Gephardt, who is the minority leader in the House, thank you very much.

GEPHARDT: Thank you.

WOODRUFF: Good to see you again.

And as the House prepares to debate that so-called Patients' Bill of Rights, the White House is raising the specter of a presidential veto. Supporters of the most sweeping version of the legislation which is opposed by the president say they have enough Republican votes for victory. But Health and Human services secretary Tommy Thompson today lobbied fellow Republicans and he said support for the bill opposed by the president would be a wasted vote.

(END VIDEOTAPE)

(BEGIN VIDEO CLIP)

TOMMY THOMPSON, HEALTH AND HUMAN SERVICES SECRETARY: Why go through this effort when the president has indicated that he will veto a proposal that will increase the number of uninsured and drive up the cost of insurance and improve the opportunities for litigation for the trial bar?

(END VIDEO CLIP)

WOODRUFF: For the latest on the competing plans for a Patients' Bill of Rights, let's go to CNN congressional correspondent, Kate Snow.

Kate, what are you hearing from Republicans on the Hill who are with the president? Are they worried? Do they think they can swing enough of their own party? What?

SNOW: They are worried. In fact, both sides saying this is going to be very, very close. Vice President Cheney just left Capitol Hill about an hour ago. We understand he was here meeting with some Republican moderates one on one in his House office, which he, in fact, rarely uses. According to Republican sources, the administration lobbying those key members, even some of those Republicans who signed onto the Norwood-Dingell-Ganske bill, the other bill, some of those who have their names on that bill, are being lobbied by the White House to join the White House version which is also known as the Fletcher bill.

One aide says members are being offered projects back in their home districts in exchange for votes for the bill. Every vote is going to count, Judy. As Mr. Gephardt just indicated, it is going to be close. In fact, our latest math indicates that the Fletcher bill would have to get everyone who has now declared undecided. They'd also have to get a handful of Democrats to support them in order to simply have enough votes to turn this over and to get the Fletcher bill, the Bush-supported bill, passed.

I want to turn now to one member who has decided to endorse that bill, the bill that's backed by President Bush, Representative Peter King, Republican from New York.

You were on the fence for days. Why now decide to back that bill?

REP. PETER KING (R), NEW YORK: Well, I had supported the Ganske bill last year. I voted for it. I met with the president a number of times. My feeling is that the president definitely wants a Patients' Bill of Rights. He's also going to veto the Norwood-Dingell bill. And the only way to get a Patients' Bill of Rights through is to get the Fletcher bill through the House, send it to conference committee. And then I believe the president will sign it.

SNOW: Mr. Gephardt said on our air that this bill is hollow, in his words. Those on the other side saying it simply won't allow enough of a right to sue, that it will restrict people so much in being able to go to court that it's not an effective bill.

KING: No, actually Congressman Fletcher expanded the original bill now to allow suits in state courts. It's not a perfect bill, but neither is Norwood-Dingell. And it's close enough -- the two bills are close enough that I feel that they should go to a conference committee and be worked out. The president should be allowed to work his skills on it and then have a bill he can sign. Otherwise, we get no bill at all.

SNOW: Do you think others will follow in your footsteps for those reasons?

KING: I would hope so. I think there's a number of them who are right behind me now who are waiting. That's why I went today. I figure maybe I have one person go, the others would jump in after me.

SNOW: One person jumps, the others follow. Were you promised anything by this White House? You heard me mention that some members were told by aides are being offered projects back at home. Were you offered anything?

KING: No, I really wasn't. But now that I hear this, maybe I'll go back in.

SNOW: If this bill goes -- if the Fletcher bill does not pass, in other words, if President Bush doesn't get his version of a Patients' Bill of Rights through the House either later this week, maybe even next week, is that a political defeat for Republicans here on the Hill, and particularly for Speaker Hastert?

KING: Well, I think it would hurt the president as far as not just the Patients' Bill of Rights but help him as far as his agenda. That hurts all Republican. So I feel that a president who's the head of our party is entitled to a presumption if it's close. And again, I voted for Norwood-Dingell last year. I think Fletcher was close enough to Norwood-Dingell that the president's entitled to the presumption of our support.

SNOW: Has he been telling members, the president that is, that it's better to vote once now than to have to vote a few times in terms of overriding a presidential veto?

KING: Well, the meetings I've had he's just been very passionate, very intense, saying he wants this, that he guarantees is that if it goes through a conference committee, a real bill is going to come out. And he's not going to bury it. He wants to sign a bill that's important for him, it's important for us and we should all be in this together.

SNOW: And you don't see him flip-flopping and suddenly signing the Dingell-Norwood-Ganske bill should it reach his desk? You don't think he'll do that?

KING: No, I'm very certain that he will veto it.

SNOW: Thank you very much, Congressman Peter King, Republican from New York. One of those who's decided to change his earlier stance and support the Fletcher bill. The White House, of course, hoping that there will be more to follow soon -- Judy.

WOODRUFF: All right, Kate. And we'll see whether any other members follow in Congressman King's footsteps. Thank you very much.

SNOW: A new danger in the South. Why avoiding mosquito bites may be more important than ever. Also, the mystery over a fiery sky and a scorched field. A closer look at some of the day's other top stories when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: President and Mrs. Bush are due back in the United States about three hours from now. They've been in Europe for a week. Their final stop, a visit with U.S. troops in the Balkans. As a presidential candidate, Mr. Bush advocated polling the peacekeepers out of that region. But now, we have a look at the realities from CNN's senior White House correspondent John King. (BEGIN VIDEOTAPE)

JOHN KING, CNN CORRESPONDENT (voice-over): A hardy welcome at Camp Bondsteel. But the president's visit to Kosovo came at yet another delicate juncture in a region strained by ethnic hatred. And at an uncertain time for the U.S. peacekeeping troops Mr. Bush had hoped to have on their way home soon.

BUSH: Our goal is to hasten the day, when peace is self- sustaining. When local democratically elected authorities can assume full responsibility, and when NATO forces can go home.

KING: From above, some signs Kosovo is rebuilding, two years after the conflict. But in neighboring Macedonia, a NATO-brokered cease-fire is in danger of collapsing. Some U.S. troops already are involved in efforts to diffuse tensions there. And Mr. Bush was told, more could be needed, if the Macedonian government and the ethnic Albanian minority cannot come to terms on a political solution.

BUSH: We must not allow difference to be a license to kill and vulnerability an excuse to dominate.

KING: Camp Bondsteel was the final stop on a week-long visit to Europe, the troops gave their VIP guest a warm welcome. But many here worry about the prospect of a new deployment in Macedonia.

UNIDENTIFIED FEMALE: We are kind of stressed, of course, here in Kosovo with things going on in Macedonia. Of course, there's high stress, we are worried about if we are going to be extended, if we are going to go into Macedonia. But we are still keeping positive.

KING: Mr. Bush tried to lighten the mood by signing legislation that includes money for a military pay raise, but his trip was also a firsthand lesson in the grim realities of the Balkans.

The Kosovo peacekeeping mission involves 42,000 soldiers from more than 30 countries: 6,000 or about 15 percent of the force are Americans. 60,000 peacekeepers were deployed to Bosnia six years ago, one-third of them Americans. The Bosnia force is now down to 20,000 troops, roughly 3,300 or 18 percent from the United States.

BUSH: How's everybody doing back there?

UNIDENTIFIED MALE: Great.

BUSH: Good.

KING: Candidate Bush talked of making Europe carry the burden, and of bringing U.S. troops home as soon as possible. But he now says the allies came in together and will leave together.

(on camera): Just when that might be is for now a question that has no answer, and the president who had hoped to end the U.S. role here is now faced with the prospect of a peacekeeping deployment in a third Balkan nation.

John King, CNN, Camp Bondsteel, Kosovo.

(END VIDEOTAPE)

WOODRUFF: Meanwhile, back here in Washington, the Bush administration is trying to persuade Beijing to release a Chinese national married to a U.S. resident. For more on the case of Gao Zhan, let's bring in once again our White House correspondent Major Garrett -- Major.

GARRETT: Judy, today the Chinese government convicted Gao Zhan of spying and sentenced her to 10 years. A senior State Department official traveling with Secretary of State Colin Powell described the verdict as disappointing, and said the secretary of state and the rest of the Bush administration were watching China's actions were carefully. All of this means you could add academic freedoms to the list of grievances the U.S. has with China.

(BEGIN VIDEOTAPE)

GARRETT (voice-over): After a swift, secretive trial, China convicted U.S.-based scholar Gao Zhan of spying for Taiwan and sentenced her to 10 years of prison, one of two 10-year sentences given to U.S.-based scholars convicted Tuesday of spying. The trial lasted only four hours, and China rejected a U.S. request to witness the proceeding. The conviction stunned Gao's husband, who said China had no evidence to prove espionage.

XUE DONGHUA, GAO ZHAN'S HUSBAND: I feel so disappointed and surprised.

GARRETT: Donghua Xue hasn't heard from Gao since her arrest in February, and their son doesn't know about a verdict.

XUE: I kept the secret from him and he didn't know anything about this.

GARRETT: The case is more than a tragedy for Gao's family, it's another irritant in U.S.-China relations. Senior U.S. officials said Secretary of State Colin Powell, in Vietnam Tuesday, will raise the scholars' cases Wednesday when he meets with China's foreign minister and again when he arrives in China Saturday.

Tuesday, the State Department and White House urged China to release Gao on humanitarian grounds.

(END VIDEOTAPE)

GARRETT: The convictions, Judy, come amid continuing tensions between the United States and China over a range of issues: China's military build-up, the future of Taiwan, global missile defense. Yet, through all these tensions, which of course were exacerbated considerably during the surveillance plane standoff, the United States has maintained strong relations with China on the issues of trade, and of course, it did not object to Beijing's successful bid for the Summer Olympics in 2008. Overall, U.S. officials say they hope not only this case but other cases involving U.S.-based scholars are fully resolved before President Bush travels to Beijing in October -- Judy.

WOODRUFF: Major, you mentioned that Secretary of State Powell will be bringing this case up with the Chinese. What about when the president goes to China in the fall for a scheduled trip, how is that trip going to be affected by these developments?

GARRETT: Well, right now, there is no word whatsoever from the White House that the president's scheduled is any way changed or will be affected by this. I can tell you -- and we reported on CNN previously -- that when he talked -- that is to say, President Bush -- with Chinese President Jiang Zemin about two weeks ago, he raised generally all the issues revolving around the trials and accusations against the U.S.-based scholars in China.

He also raised human rights issues and religious freedoms issues. The president always raises those, as does Secretary of State Powell and other senior officials in their meetings with senior officials with the Chinese government.

As for the trip itself, it is part of a Asia-wide trip that will also take the president to South Korea and to Japan as part of a Asia- wide trip that focuses not only on China, but economic relations throughout the region, a very important trip for this president and not that has not being changed in any way right now -- Judy.

WOODRUFF: All right. Major Garrett at the White House. And now, a couple of political items just in to CNN: Florida's Secretary of State Katharine Harris is poised for a possible 2002 congressional run. David Johnson of the Florida Republican Party says Harris is about to open up an exploratory account and is putting together a campaign team. 44-year-old Harris became a controversial figure during last year's Florida presidential recount. She would run for the seat of retiring Republican Dan Miller.

Meanwhile, former Ambassador of Vietnam Pete Peterson filed papers this morning to enter the Florida governor's race. The sources close to Peterson say he has not yet made an official decision to run. He would join a crowded field of Democrats who may challenge GOP Governor Jeb Bush next year. Former Attorney General Janet Reno is also thinking about making that race.

The latest developments in the Chandra Levy case, including the release of a new home video. Just ahead, we'll update the investigation and get the latest on a possible fourth police interview with Congressman Gary Condit.

Also ahead: remember Rick Lazio? We'll tell you about a move by New York Republicans to encourage his return to elected office.

(COMMERCIAL BREAK)

WOODRUFF: The search for missing intern Chandra Levy continues to inch forward on several fronts. CNN's national correspondent Bob Franken joins us now with the latest on the investigation and the questions surrounding Congressman Gary Condit -- Bob.

BOB FRANKEN, CNN CORRESPONDENT: And Judy, the term "inch forward" is probably an appropriate one. No success in the searches today of the parks and woodlands, and no success so far by police and the lawyers for Congressman Gary Condit to set up a fourth interview. The police have several questions they wanted to discuss with the congressman. He left his apartment building this morning without the arrangements being made.

Police want to talk to him about some gaps in the timeline that he presented, the one that would offer the look at what his activities were on May 1, the last day that Chandra Levy is accounted for. They also want to ask about what police sources say was an effort by him to drop into a garbage can in Alexandria, Virginia a watch case he had received from somebody who ultimately was identified as another woman having a relationship with him. The police want to ask him about that, to see if it has any relevance to the case.

Meanwhile, the family in Modesto, California has put out new video of Chandra Levy. Of course, this is an effort, a periodic effort to show how she would look so people could in fact understand what she looked like in case they saw somebody so that they could report to police. But what was different about this one is they also put out her -- some of her voice. They had her talking about an intern program that she was considering in Washington.

(BEGIN VIDEO CLIP, "LEVY FAMILY HOME VIDEO")

CHANDRA LEVY, MISSING INTERN: People are doing the IDEA program, or parts of the IDEA program. They are going to like here in Sacramento, but not D.C., or they are going here and to D.C., or they are not doing the IDEA program. They just want to experience it.

(END VIDEO CLIP)

FRANKEN: And, of course, the whole idea here is to see if somebody can find her, can spot her and report this to police, as I said. And Judy, it's been 85 days since anybody has heard from Chandra Levy.

WOODRUFF: Bob, the police thinking about an interview with Congressman Condit, another one. Why don't they just go ahead and have one? Why do they talk about it without just getting it done?

FRANKEN: Well, they have no way of forcing him. The police have no intention of doing that. They are trying to get the congressman to agree to one, and of course that means the negotiations and negotiations with lawyers, and that can take some time.

WOODRUFF: All right. Bob Franken, thanks very much.

Could a man named Rick Lazio be headed for the comeback trail? We will find out what his party leaders think after this.

(COMMERCIAL BREAK) WOODRUFF: Breaking story now from Macedonia, one, of course, of the former Yugoslav republics, where fighting has been ongoing between government troops and rebel ethnic -- rebel forces. It -- just in the last few hours, hundreds of angry Macedonians, who are said to be upset over being ejected by rebels from their village, have done a rampage through the city. And for the very latest, we want to go to freelance journalist Juliette Terzieff. She is in the city, in the town of Tetovo.

Juliette Terzieff, are you there?

JULIETTE TERZIEFF, JOURNALIST: Yes. Hello, Judy.

In the last couple of hours, we have seen several hundred, actually close to a thousand Macedonians rampaging through the streets of Skopje. They have attacked the offices of British Airways, McDonald's, the German embassy and the British embassy, and also the building housing offices of the Organization for Security and Cooperation in Europe. They have set several vehicles on fire and smashed the windows of several more, and at this precise moment have made their way to the American embassy, where they are currently throwing stones at the embassy, trying to break into the embassy itself.

Now all of this comes as a demonstration earlier this afternoon by Macedonians who were evicted by their homes from ethnic Albanians swelled out of control, and police in the capital are said to be overwhelmed by the amount violence and the number of demonstrators and unable to do very much to stop them.

Now all of this comes after two days of heavy, intense fighting in and around the city of Tetovo in the northwest, where I am at the moment, and we can hear even now, after a full day's worth of fighting, that there are still intense battles going on for the army base on the eastern side of the city. There has been tank fire, mortar fire, snipers, machine guns and small arms fire in the city. In the last two days, there have been 10 civilian deaths and more than 30 people injured and admitted to the hospital here in Tetovo. And at this moment, there is no signs of the violence abating -- Judy.

WOODRUFF: Juliette, the reports indicate that the people who are protesting are accusing NATO forces, the so-called KFOR peacekeeping forces, of collaborating with these ethnic rebels, who have evicted them. What relevance does that have to what's going on here?

TERZIEFF: Well, that has the utmost relevance. I think that is one of the main catalysts behind what we're seeing in the capital this evening. Last week, when talks came to a standstill between ethnic Albanian and Macedonian politicians, the climate of tolerance plummeted in this country, and over the last five or six days we have seen Macedonian politicians issuing extremely inflammatory rhetoric against the West, against NATO, the European Union, and two Western envoys who have been trying to mediate talks between the two sides.

One politician went so far as to call NATO a friend, a great friend, actually, of those seeking to destroy the country: that, of course, meaning the ethnic Albanian rebels. And as the politicians' rhetoric has become more and more inflammatory and as the violence increased in the north part of the country, resulting in so many civilian casualties, the tempers of the civilian population on both sides of this conflict have become enraged and have led to what we are seeing on the streets of Skopje this evening -- Judy.

WOODRUFF: Juliette, can you give us a sense of the size of the NATO, KFOR peacekeeping troops there? What is their -- their presence at this point? Do you have something in terms of numbers?

TERZIEFF: Yes. Well, at the moment, there are about 7,000 NATO troops stationed in Macedonia, and they mainly are logistical support for the KFOR mission, the Kosovo peacekeeping force in the neighboring Serbian province, which has been in place for the last two years. Now, NATO has also signed off on an additional 3,000 troops that were supposed to come in to disarm the rebels should a political deal be reached. But that, of course, has not happened yet. And with political talks stalled at the moment and the violence erupting, both in the city of Tetovo and in the city of Skopje, it's unlikely that that's going to happen anytime soon -- Judy.

WOODRUFF: All right. We've been talking with Juliette Terzieff, freelance reporter. She's reporting from Tetovo in Macedonia. As you've been hearing, violence has broken out in the town -- the city of Skopje just within the last few hours.

CNN will continue to follow this story and bring you updates as they come along. INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: Another view of Washington. We'll have to find out what that building is.

Rick Lazio, who lost to Hillary Clinton last year in the race for the U.S. Senate in New York, may be eying a return to Washington. Republican Party leaders say they're trying to convince Lazio to run for his old House seat. Lazio represented New York's second congressional district for eight years before taking aim at the Senate. Word is he has not ruled out making a race against freshman Democrat Steve Israel. But first, however, Lazio has to pay off his remaining debt from his losing Senate bid.

And that's it for this edition of INSIDE POLITICS, but of course, you can go online all the time at CNN's Allpolitics.com. AOL keyword: CNN. Our e-mail address is insidepolitics@cnn.com.

I'm Judy Woodruff. "FIRST EVENING NEWS" 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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