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CNN CAPITAL GANG

Lockhart Talks About Patients' Rights Bill; Shalala Discusses Overhauling Medicare; Can Diplomacy Improve China's Human Rights Record?

Aired August 4, 2001 - 19:00   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.
MARK SHIELDS, HOST: Welcome to CAPITAL GANG. I'm Mark Shields, with Robert Novak, Kate O'Beirne, and Margaret Carlson.

Our guest is former White House Press Secretary Joe Lockhart. It's good to have you back, Joe.

JOE LOCKHART, FORMER WHITE HOUSE PRESS SECRETARY: Good to be here.

SHIELDS: Thank you.

President Bush emerged from the White House with a Republican congressman who had long opposed him on HMO reform.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Today I'm very pleased to announce that Congressman Norwood and I have reached an agreement on how to get a patients' bill of rights out of the House of Representatives.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. CHARLES NORWOOD (R), GEORGIA: So the bottom line and the gold is, we want to change the law. And the last time I looked, that's pretty difficult to do without the presidential signature.

(END VIDEO CLIP)

SHIELDS: The revised patients' bill of rights was quickly brought to the House floor amid a Democratic assault on Congressman Norwood.

(BEGIN VIDEO CLIP)

REP. PETE STARK (D), CALIFORNIA: I'm sorry that Dr. Norwood sold out for a brief display in the Rose Garden.

(END VIDEO CLIP) SHIELDS: The Norwood bill carried by five votes along party lines. The week began with the ABC-"Washington Post" poll showing a 59 percent job approval rating for the president, and ended with a triumphant cabinet meeting.

(BEGIN VIDEO CLIP)

BUSH: We're ending drid -- dre -- deadlock and drift and making our system work on behalf of the American people.

(END VIDEO CLIP)

SHIELDS: Bob, why all the hype about a bill that probably won't get through the Congress?

ROBERT NOVAK, "CHICAGO SUN-TIMES": Mark, it -- whatever happens to the bill in the Senate is less important than the political significance. What it, is it saves President Bush from a terrible dilemma of either having to veto a popular bill, or to sign a bill which is really a -- something for the trial lawyers, the most important special group for the Democratic Party.

So not only does it send him into this recess on a high note, it really takes him off the hook, because you saw now from the very nasty House debate, the attack by the Democrats in the House, that any kind of relief for the HMOs from a all-out ass -- or for, or for employers from an all-out assault by the trial lawyers is no good, because the Democratic Party was shown to be in hock to the -- to this very unpleasant pressure group.

SHIELDS: Margaret?

MARGARET CARLSON, "TIME" MAGAZINE: These awful Democrats, calling the HMO bill of rights, which is what it is, and if this were to go through, it would override many states' laws which give people actually more rights.

Bush was right to take this lovely moment in the Rose Garden, but it is -- you know, pop the champagne corks. But it is a very momentary victory. He had to actually keep Charlie Norwood there and not let him out and announce it for fear that he would go back to the original bill, go back, talk to McCain, and see that he'd been hornswoggled on this.

SHIELDS: And strictly watching Charlie Norwood, that he looked like one of those prisoners in Korea, you know, where they blinked with their eyes. I mean, the poor guy had been kept for 72 hours without water or light.

Joe Lockhart.

LOCKHART: Well, it's -- it may have been champagne, but it was cheap champagne, and it's going to cause a pretty bad hangover, I think, for Bush.

SHIELDS: Why? LOCKHART: What this does, it reinforces the worst that the American people believe, that he's not looking after their interests, but he's looking after special interests. He came out this week for legislation that the HMOs and insurance companies love. They're all over the paper saying this is their bill. He did it with energy, with oil. I think he's going to find when he comes back, there's going to be a real hangover.

SHIELDS: Kate.

KATE O'BEIRNE, "NATIONAL REVIEW": People have all taken to calling the patients' bill of rights, you know, a one-word popular measure. It might more accurately be called a mystery measure. Polls show that -- of course, anything called "bill of rights" is popular. Pamela's bill of rights, shoppers' bill of rights...

SHIELDS: ... airline passengers.

O'BEIRNE: That might be a stretch, Mark. When people were asked in open-ended, What does the patients' bill of rights do, only 12 percent of the public really knows, and we can't fault them, it's very complicated. And of course there is agreement on 80 percent of this bill, which is extending services.

Most people care about extending health services, they care less about the availability of lawsuits. But as Bob said, the number one profession for donating campaign donations nowadays is lawyers, and of course the number one PAC for Dems is the American Trial Lawyers.

So George Bush faced either a political loss and a bad bill, or a political win and what is essentially still in many respects a bad, a bad bill, and he decided to take a political win...

SHIELDS: ... let me ask this, this, this terrible bill that we're talking about, Charlie Norwood had endorsed for -- up until the beginning of this week.

(CROSSTALK)

NOVAK: It figures.

SHIELDS: That's right, I mean, that John McCain and Republicans have endorsed. So, I mean, I -- it's hard for me to...

NOVAK: Mark, well, let's look at...

SHIELDS: ... believe this was...

NOVAK: ... let's look at the politics of this thing, just...

SHIELDS: All right.

NOVAK: I mean, the congressional politics, and I think Joe can appreciate this, that you had in 1999 the Norwood bill, you had 68 Republicans crossing over to vote for it, 68. I mean, the Republican leadership, which had a little slightly bigger majority then than they do now, had lost control of the floor. On Thursday night's vote, they only lost six Republicans, three Democrats came over. It was a party line vote.

I mean, you had people who had abandoned the party, Henry Hyde, Bob Barr, conservative Republicans, had gone over two years ago to vote for this, not because it's a good bill, Margaret, but because it's a slogan.

And so what, what Charlie Norwood coming over, saying, Yes, you do get patients into the emergency rooms without an HMO ticket, it does give the patient rights. But what it does is, it takes the Republicans off the hook on this issue.

CARLSON: Bob, this was a partisan vote, and this is how Bush got Norwood to come over, Don't hand Democrats a victory on this. The other thing is that most people know, and those people that say in the polls that Bush doesn't represent them, that without a lawyer against an HMO, with a child that's in a wheelchair, you're nothing. You have no clout whatsoever. And this just gives you the same clout.

This crowing about bipartisanship coming out of the White House...

NOVAK: The law, the lawyers, are going to protect patients?

CARLSON: ... the -- the -- Yes, yes, they are. Without a lawyer, I mean, what do you do?

(CROSSTALK)

O'BEIRNE: ... you know something? You know who's...

CARLSON: Wait a minute. They crowed about bipartisanship on this as if Bush had twisted the arm of the Democrats. This was, you know, two Republicans in the same room. This was not...

O'BEIRNE: But you know who's going to be denied these rate...

CARLSON: ... a Democrat.

O'BEIRNE: ... protections, federal employees. They are not extending these same right to sue to federal employees, because the federal employees' unions are afraid of premium increases. Sixty percent of House Republicans have never served with a Republican president, and I think what they've learned over these months is how valuable it is to have the president making a case for them, because the alternative to the Norwood bill, the Fletcher, Republican bill, patients' bill of rights, was picking up support and was threatening a House majority.

(CROSSTALK)

LOCKHART: I don't think there was any question that the alternative bill, the one that Bush wanted...

SHIELDS: Fletcher-Swann (ph). LOCKHART: ... was dead. And...

SHIELDS: Fletcher was dead. Do you think if...

CARLSON: People -- look, that's why the pressure came on.

(CROSSTALK)

LOCKHART: No, that's why, that's why Norwood, Norwood did...

(CROSSTALK)

LOCKHART: The Republicans think this is somehow a big victory, I think. They have managed to move themselves in lockstep again to the right and out of the mainstream. The American public wants a patients' bill of rights...

NOVAK: Why, why was...

LOCKHART: ... the American public wants a patients' bill of rights...

NOVAK: Why...

LOCKHART: ... and once again the Republicans and George Bush have said that the special interests...

NOVAK: Why was...

LOCKHART: ... are more important.

NOVAK: Why was Dick Gephardt and all these guys hysterical on the House floor Thursday screaming and yelling if it was such a terrible thing...

LOCKHART: I'll tell you, one of the reasons they were screaming...

(CROSSTALK)

LOCKHART: ... was, is George Bush came to town and said he wanted to change the atmosphere, he wanted to get away from partisanship. And then he brought somebody down and said, You can't leave the building until you're with me. I don't know that that changed the atmosphere there.

SHIELDS: OK, I'll say this, George Bush, if I'm not mistaken, during the entire campaign trumpeted the Texas bill, the Texas law which provides the right to sue HMOs.

LOCKHART: Which he refused to sign.

SHIELDS: All right, which he -- which he -- which he refused to sign, became law without his signature. And now he's...

(CROSSTALK) SHIELDS: ... in the true conservative tradition, the belief in states' rights, he's preempted the Texas law...

(CROSSTALK)

SHIELDS: ... with this bill.

LOCKHART: That's how he got elected, by preempting states' rights.

SHIELDS: Joe Lockhart and THE GANG will return, and to look at more pre-vacation wins for President George W. Bush.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

The House also passed President Bush's energy bill to permit drilling in Alaska's Arctic National Wildlife Refuge. The bill won support from 36 House Democrats.

(BEGIN VIDEO CLIP)

REP. DICK GEPHARDT (D), HOUSE MINORITY LEADER: The bill would let oil companies drill in Alaska, one of the most pristine wildlife areas in the world.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

REP. CLIFF STEARNS (R), FLORIDA: This three square miles is not the ecological wonderland that the opposition has made it out to be. It is a frozen desert with few signs of life.

(END VIDEO CLIP)

SHIELDS: Yesterday, the Democratic-controlled Senate had to accept a reduced version of FarmAid passed by the Republican House because the House had adjourned for the summer a day earlier.

Kate O'Beirne, is drilling for oil and cutting FarmAid really something Republicans can cheer about?

O'BEIRNE: Well, Republicans certainly see both as political and policy wins. I would agree with them with respect to policy on the farm bill if it were a cut in FarmAid, but it's not. The emergency bill that's now been approved represents $3 billion more in farm income, farm income than last year, so -- but it's not as big as greedy Tom Daschle and Tom Harkin wanted. They wanted a couple of billion extra, and they over-promised, and they just couldn't deliver. It hasn't been a good couple of weeks for Tom Daschle.

And on ANWR, of course, what the Republicans were able to do was split some unions from the environmentalists in the Democratic base and put the decision to drill in ANWR. The approval now in the House is completely defensible and necessary.

SHIELDS: One of the great moments this past week was the anti- union Republicans led by Mary Matalin, counsel to the vice president, bringing Jim Hoffa, the president of Teamsters, around to introduce him in behalf of drilling in the, in the -- in Alaska to Republican House members, Joe.

LOCKHART: Well, I -- again, a great move that I think will hurt him in the long run. You've got -- "The New York Times" calls it today a $33 billion giveaway to the oil and gas industry.

SHIELDS: You're talking about the tax breaks.

LOCKHART: His, his, his energy plan. And if you look at it, you've got a couple industries in this tough economy that have done well. Oil companies have record profits, and Bush's response is, Let's give them more. It's the president of the special interests, not for the real people.

SHIELDS: Bob Novak, what about that? I mean...

NOVAK: I agree with Joe that the people who really believe in the editorials of "The New York Times" are going to be upset with that. I think they all, they all vote somewhere left of the Democratic Party anyway.

But this was a major political development. There is a break in the monolithic labor union facade. This isn't just the Teamsters, Margaret. It's...

SHIELDS: UAW.

NOVAK: ... it's UAW, it's the construction union, and they're sick and tired of the elitist Democrats, the environmentalists, the garden clubs preferring fuzzy animals and little fish over America -- over American workers.

One of the interesting things, the Democratic senators told me that when they were putting these terrible restrictions on Mexican tricks -- trucks, which are supposed to be a Teamster issue, the Teamsters weren't very enthusiastic. You know why? Because they're working with the administration on a lot of things. So there is a -- there's a real chink in that armor.

SHIELDS: Now, the conservative explanation was last week that this was bowing and scraping to the Teamsters' union to vote on the trucks.

NOVAK: Well, they're wrong, they're wrong. I do a little reporting...

SHIELDS: All right, OK, but that was the conservative...

(CROSSTALK)

CARLSON: ... very little, very little, very little. Now, you know, this is shortsighted of labor. The environmentalists can help them at other times. And ANWR is going to be the poster child of the Bush administration's failures on environmental policy.

And this energy bill, you know, the patient bill of rights, too bad, but it's not that big a deal. It's, you know, giving people who already have insurance more rights. The differences are significant but not huge.

The energy bill is gigantic. It really is going to make a huge difference in this $33 billion, which is just nothing but subsidies to drillers and coal miners. And even appliance manufacturers, who were going to reduce the energy needed for washers and refrigerators, are getting, like, $100 an appliance to do what they were already going to do. They're just shoveling the money...

NOVAK: You don't care about jobs, do you, for people?

CARLSON: ... out the door. Yes, I do. They're just shoveling money out the door to drillers and, you know, the Bush cronies from the oil PACs.

SHIELDS: "Wall Street Journal" this week reported that Shell Oil is sitting in its bank $11 billion it cannot spend, because it does -- can't even drill. That's what they've got in windfall profits over the last year, Bob.

But add to that, I think that this did show a fault line between blue collars and greens, between the environment and workers. To hear Bob Novak talking about American workers is wonderful, when he's been so disrespectful...

NOVAK: I -- no, I love workers...

SHIELDS: ... to them and absolutely -- yes, you like them when they work for the minimum wage.

CARLSON: The dignity of labor and the minimum wage.

SHIELDS: Yes. But the reality is, they were forged into alliance on trade bills in the past, but this is, this is a moment of tension between the two.

NOVAK: It's very important, very important.

SHIELDS: Next on CAPITAL GANG, a Bush nomination rejected.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Mary Sheila Gall, a long-time member of the Consumer Product Safety Commission, became President Bush's first nominee to be officially rejected in the Democratic-controlled Senate. The Commerce Committee turn down her nomination as commission chairman 12 to 11 in a party-line vote.

(BEGIN VIDEO CLIP)

SEN. BARBARA BOXER (D-CA), COMMERCE COMMITTEE: She didn't fight for consumers. She didn't seem to care about the safety of children, whether it was with baby walkers or bunk beds or cribs or baby bath seats.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), COMMERCE COMMITTEE: But it's a defeat for the process. The president of the United States should have the right to appoint members of his team unless there is an overriding issue.

(END VIDEO CLIP)

SHIELDS: Margaret, what is the overriding issue that did defeat Miss Gall?

CARLSON: It was that she never saw a defective product, she only saw defective parents. She could find a reason for every injury other than the product at hand.

Now, if McCain wanted to vote for her for under secretary of Commerce, where you defend the manufacturer come what may, you know, the president should get his nominee. But this, the very purpose of this organization is to look at products that are dangerous to children and to either recall them or give them standards.

She just wanted, you know, manufacturers to -- oh, well, if we feel like it, we'll do it, otherwise we won't.

SHIELDS: But Kate O'Beirne, she had been renominated in 1999, not -- originally appointed by a Republican president, renominated by President Clinton in 1999 and concern -- confirmed, I guess, without dissent in the Senate.

O'BEIRNE: I'm sorry to say that Margaret's reflecting the phony talking points of Barbara Boxer and Hillary Clinton. She was defeated, I think, for two reasons, part petty politics, a friend of Hillary Clinton's is currently chairman, and she'd like her to remain chairman, and part proxy, as a proxy way to fight against what might be less of a regulatory agenda from the Bush administration.

Mary Gall was on that commission for over 10 years. Over 90 percent of the time, the commission's unanimous. In a couple of cases she took a common-sense approach, saying parents are equally responsible or responsible for the use of these products. She also favored voluntary standards, which are much faster to put in place and have a higher rate of compliance than mandatory standards.

And you're right, she had taken those positions before Congress -- before the Senate unanimously confirmed her two years ago. So this is a petty payback on the part of Hillary Clinton. LOCKHART: We're forgetting one little detail here, which is that under the previous Senate administration, no nomination was ever straightforward. There was always a deal with Trent Lott. And she was part of a deal in order to get through someone who did care about...

O'BEIRNE: Even though she maimed children, you'd deal -- you'd make a deal over her?

LOCKHART: No, listen, listen, she was in a position, I think, where she was in that commission, there were enough people around her that we did protect children's family. But you know what?

NOVAK: You're talking about Ann Brown, you're talking about Ann Brown.

LOCKHART: Yes, certainly, certainly, certainly talking about Ann Brown. But if you look at where she was, she believed that all of this should be voluntary. The commission was against her on most issues. This shouldn't be voluntary. There are some, there -- and most manufacturers are responsible. There are some that you need to regulate. It's the last line of defense.

SHIELDS: Bob Novak, there are some you need to regulate, aren't there?

NOVAK: Well, not in my opinion. I think that whole commission should be abolished, but that's another story.

Two points. This, this, this woman was in no trouble till Hillary Clinton made it her project.

SHIELDS: Pretty effective, then, huh?

NOVAK: There was absolutely -- very effective. Hillary is a rising power in the Senate and the Democratic Party. She got a unanimous party line vote. Don't underestimate her. She is, she is more disciplined...

SHIELDS: Second point?

NOVAK: She is more disciplined than her husband.

Second point is, this is a rehearsal for future confirmation fights, and if the White House is saying, Well, we've lost this, they better try to revive it. Because once you show weakness on Capitol Hill, the bloodsuckers will come after you on every, on every nominee.

SHIELDS: I commend everybody to the first page -- front page story in "The Wall Street Journal" on Friday, which showed the entire pattern of no regulation, pulling back, whether it's nursing homes, banks, tax shelters.

NOVAK: I hope so.

SHIELDS: This administration... O'BEIRNE: Oh, no regulation...

SHIELDS: ... and I -- no, I tell you...

(CROSSTALK)

SHIELDS: ... and that's what this is, it's a fight that one side is for consumers and people and working families, and the other side is for big business.

CARLSON: All voluntary, all the time.

LOCKHART: That's what the -- and that...

CARLSON: That's the watchword of the Bush administration.

LOCKHART: And that's what, and that's what this whole first six months has been about. We've got a president's for big business, and right now there's -- it's -- we're -- we should be glad there's someone willing to stand up to him.

NOVAK: And this, and this was a mean-spirited attack on a very nice woman...

CARLSON: Oh, it was not.

NOVAK: ... by the way, really mean-spirited.

CARLSON: It wasn't a bit mean.

(CROSSTALK)

CARLSON: It stayed straight...

LOCKHART: ... I got a whole file -- I got a whole file of nice people to...

CARLSON: ... it stayed on the...

LOCKHART: ... that they -- the Republican Senate tore apart.

CARLSON: Yes, it was about...

(CROSSTALK)

CARLSON: ... baby walkers and bunk beds.

O'BEIRNE: And she stayed for 10 years, and they completely distorted her record in an incredibly unfair way. But Hillary got it into her pretty little head to oppose her, and that was going to be that.

SHIELDS: Her pretty little head?

CARLSON: Her head, oh...

(CROSSTALK)

SHIELDS: ... I was going to say, Really? I mean, I -- what do you call that, Bob? Would you call that...

NOVAK: That's nice...

SHIELDS: ... demonization?

(CROSSTALK)

CARLSON: Hillary, Hillary would rather have a big head.

SHIELDS: Yes. Big head.

NOVAK: Ooh.

SHIELDS: All right. We'll be back with a "CAPITAL GANG Classic": Bill Clinton's fateful decision five years ago this week.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

Five years ago this week, President Bill Clinton announced that he would sign a Republican-sponsored welfare reform bill after vetoing two previous versions. This is what your CAPITAL GANG said on August 3, 1996. Our guest was a leading Democratic opponent of welfare reform, Congressman Charles Rangel of New York.

(BEGIN VIDEOTAPE, AUGUST 3, 1996)

AL HUNT, HOST: Margaret, did the president take the Republicans off the hook and undermine congressional Democrats?

CARLSON: Well, both parties got off the hook, in a way, because nothing was happening, and there was gridlock. But President Clinton and this welfare bill, as we discussed last week, it was a terrible thing for him to sign.

NOVAK: This is a body blow to two groups of people, the congressional Democrats and Bob Dole. This is good for the president. He just abandoned all the principles of the liberalism and the party.

REP. CHARLES RANGEL (D), NEW YORK: I think everyone won but the kids. I mean, it's not welfare reform. They say that this is going to require people to work. Well, they didn't give the money for the jobs, but they cut off the children whether there's a job available or not.

O'BEIRNE: He did what he had to do this week. It was a pragmatic decision, but he did what he had to do, because the bill he signed was night and day from what he himself had introduced, his own plan, three years ago.

HUNT: I thought one of the more mind-boggling assertions that I've heard in recent months was President Clinton claiming that the final decision on the welfare bill had nothing to do with politics, it was all on substance.

RANGEL: Effectively, the federal government says, Young poor kids are not entitled, leave it up to the states. We've knocked off 60 years of tradition.

CARLSON: The states will be begging...

HUNT: I think it's sad we did that. That's the...

CARLSON: ... to give it back to the federal government.

RANGEL: They will.

(END VIDEOTAPE)

SHIELDS: Margaret Carlson, were you and Congressman Rangel wrong at the point? And if so, why?

CARLSON: Well, I had to start wearing glasses as a result of that. Listen, if unemployment were at 6 percent, there might be a different tune about welfare reform. Some of this was going to happen anyway in economic boom times.

And what people have not calculated is the effect on children. And there was a study that came out last week by a nonpartisan group which found that children of single mothers put to work, usually to watch other people's kids or flip hamburgers, usually low-level jobs, were arrested more often, got -- had lower grades, and on and on.

This has not been good for the kids.

SHIELDS: Bob?

NOVAK: The interesting thing, Margaret, is this welfare was not an anti-recession device, it's supposed -- it's a permanent program. It -- reform has worked. You people are all wrong. I remember the '96 convention, said, We're going to fix it, we're going to fix it when we come back. There's no bill out there. You were wrong, and you should admit it, Margaret.

O'BEIRNE: In fact, Mark, there had been strong economic times before, and still a persistently large welfare-dependent population until welfare reform came along, and the welfare rolls have been cut in half. And it's not good for children to be raised on welfare, because we know that it moves from generation to generation.

LOCKHART: It was an imperfect bill. The president promised to fix it. He fixed many pieces of it. This is an ongoing problem where we're going to need to stay on this. But it was the right thing to do to sign it, and it was the right thing to do to fix a number of the provisions within it.

(CROSSTALK)

NOVAK: ... Joe. SHIELDS: I have -- I have to -- I have to re-echo what Al Hunt said five years ago. It had nothing to do with politics? It had everything to do with politics. It helped Republicans running for reelection, it helped Bill Clinton running for reelection. Don't...

LOCKHART: And that was a great thing. That's why it worked.

SHIELDS: OK, Joe. Joe Lockhart, thanks for being with us.

We'll be back with the second half of THE CAPITAL GANG and the "Newsmaker of the Week," former Health and Human Services secretary Donna Shalala, Beyond the Beltway looks at Secretary of State Colin Powell's Asian tour with CNN's Andrea Koppel, and our outrages of the week, all after a check of the hour's top news.

(COMMERCIAL BREAK)

ANNOUNCER: From Washington: THE CAPITAL GANG.

SHIELDS: Welcome back to the second half of the CAPITAL GANG. I'm Mark Shields with Robert Novak, Kate O'Beirne and Margaret Carlson.

Our "Newsmaker of the Week" is former Secretary of Health and Human Services Donna Shalala. Donna Shalala: age 60; residence: Miami, Florida; religion: Protestant; PhD, Syracuse University; President, Hunter College; Chancellor of the University of Wisconsin at Madison; HHS secretary for all eight years of the Clinton administration. Became president of the University of Miami on June 1.

Al Hunt sat down with Donna Shalala earlier this week.

(BEGIN VIDEOTAPE)

HUNT: Medicare was signed into law 36 years ago this week by President Johnson, but the Bush administration says there are problems: Costs are spiraling, they say; spending will double in the next 10 years; it will get into terrible fiscal problems starting in the 2016. Do we need a drastic overhaul of Medicare?

DONNA SHALALA, FORMER HHS SECRETARY: We do need an overhaul of Medicare, and we need to build a consensus around that overhaul.

They're absolutely right: Costs are going to increase dramatically as we double the population in Medicare. It needs to be a more competitive program. We're overpaying for lots of things in Medicare. We've got to do some things with Medicare.

But first we have to build a consensus.

HUNT: One short-term solution -- partial solution that this president is proposing is to use the market system for a pharmacy discount card for prescription drugs for seniors. Is that a good idea? Bad idea? SHALALA: Well, I don't think it's a bad idea. It's not going help a lot, in part because it will be only mail order, and the discounts will be more marginal than most people actually need. In addition to that, I think all of us are concerned about small pharmacies in rural America, because you may, in fact, put some people out of business with this kind of proposal.

HUNT: You ran the Social Security system for eight years. There's now a commission that's been appointed to look into possible changes. Do you like that idea, of this particular commission?

SHALALA: Well, I like the idea of a commission. I would have appointed everyone under 40. One of the problems with the commission of gray beards is that the other gray beards that are getting Social Security think it's about them, and it's really not about them. It's about the next generation.

HUNT: A central argument about the possible solution is the question whether to partially privatize Social Security. Proponents say that if you look at history, that if you allow workers to invest some of that Social Security into equities they'll do much better than they do now. Critics say it's a huge risk. Good idea or a risk?

SHALALA: Well, first of all we ought to preserve what Social Security we currently have. If we want to add on some more savings, I think that's important to do. Most academics have a mobile pension plan which we move from one university to another.

HUNT: Secretary Shalala, you were an architect of the compromise to allow federal funding for embryonic stem cell research several years ago. What would be the effect if President Bush were to end federal involvement in embryonic stem cell research?

SHALALA: It would be an enormous tragedy for those who are suffering from unbelievable diseases. Whether or not the president makes the decision, I think one way or another that research will go forward. But whether you have diabetes today, you know that there's a possibility of breakthroughs because of this research. So I think it's important that we have ethical boundaries.

HUNT: And one of those ethical boundaries, the House decided the other day, was to ban all cloning for medical research. Did you agree with that vote?

SHALALA: I agree with a ban against human cloning. They also said that if this goes on aboard and someone finds a scientific breakthrough -- a cure for diabetes, for example, that cannot be transferred to the United States. I don't think they really meant that. But the ban on human cloning, I certainly agree with.

HUNT: It went too far because...

SHALALA: It went too far. It went too far, in particular, because if there is, in fact, a breakthrough aboard, I'm not sure they really mean that they want to stop Americans who have diabetes, who have Alzheimer's from getting those treatments. HUNT: You were a Clinton administration lifer: a two-term secretary. What were your thoughts as the president went out of office, particularly all the controversies over the pardons and the like?

SHALALA: I was very disappointed. We never got a victory lap. We did lots of good things on health insurance for kids, on immunizations, on welfare reform -- which obviously was very much bipartisan.

HUNT: Final question: Who is going within the NAACP football championship: Oklahoma or Florida State?

SHALALA: It's going to be the University of Miami, the Hurricanes, no question about it.

(END VIDEOTAPE)

SHIELDS: Kate O'Beirne, doesn't Donna Shalala seem surprisingly friendly toward this Republican administration for a lifelong Democrat like she's been?

O'BEIRNE: Well, Mark, it seems Secretary Shalala appreciates better than most, or as well as anyone else does, the serious problems Medicare faces. We've all known this for years. A bipartisan commission was put together a number of years ago, came up with fundamental reforms, and the Clinton administration walked away from it. Bill Clinton had no interest whatsoever in those kinds of reforms.

She now sees that President Bush is willing to tackle this tough issue, and I think she must be grateful knowing the program and caring about it as she does, that we have a president who's going to be more responsible than Bill Clinton and really take on a tough job.

SHIELDS: Margaret Carlson, watching the debate in the House on human cloning, I saw 300 white males in blue suits with white shirts and red ties come out four-square against cloning. And I just...

(LAUGHTER)

CARLSON: ... and we have another clone right here.

Listen, there's consensus against human cloning. I mean, who wants three Bob Novaks at Thanksgiving dinner? I think we can all agree...

SHIELDS: I do.

CARLSON: ... well, Mark, you're a kind and gentle man.

You know, therapeutic cloning is another matter. I heard Donna Shalala open to the benefits of therapeutic cloning, and I'm sure she's in favor of stem cell research on embryos. So in that way, she does not agree with the administration.

SHIELDS: Bob Novak.

NOVAK: She was one of the grown-up people in the -- few of the grown-up people in the Clinton administration. If there had been more like her, it would have been the moderate administration that was claimed in the 1992 campaign.

She was one of the only -- I think she was the only Cabinet member to attack the president in the Cabinet meeting on the Lewinsky affair, and...

SHIELDS: For lying.

(CROSSTALK)

NOVAK: Yes, she was the only one.

And I think she understands that they should have done something about Medicare, they should have done something about Social Security when they were in there for eight years, and they didn't do a damn thing.

The interesting thing I thought, was that she had a chance when the president set about those back years, to say something about, well, he was a great president anyway. She didn't say that. I'm sure if you ask her, was he a good president, sure. But I think she was disappointed not only in the send-off, but in the record of President Clinton.

SHIELDS: She did say that the send-off was sad, but she did list the good things that she thought they were eclipsed by the Marc Rich and the scandal that was surrounding the departure, Bob.

We'll go back and listen to it together when we have time.

NOVAK: All right.

SHIELDS: Next on CAPITAL GANG: "Beyond the Beltway" reviews Colin Powell in China and Asia with CNN's Andrea Koppel.

(COMMERCIAL BREAK)

SHIELDS: Welcome back.

"Beyond the Beltway": Secretary of State Colin Powell's Asian trip included his first visit to Vietnam since combat service there as a young officer. The climax was a visit to China intended to improve U.S.-Chinese relations after months of tension.

(BEGIN VIDEO CLIP)

COLIN POWELL, U.S. SECRETARY OF STATE: I think we moved the ball forward. There are still some outstanding issues to be resolved and some places where we don't have full agreement.

(END VIDEO CLIP)

SHIELDS: References to human rights were stripped from Secretary Powell's taped speech to the Chinese people.

Joining us now is CNN State Department correspondent Andrea Koppel, who covered the Powell trip.

Thanks for coming in, Andrea. Did Secretary Powell accomplish anything of real significance in China?

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: Well, he did; but you have to remember that the sights were set fairly low from the start of the trip, and that is that he went to China to say that the chapter, the EP-3 spy plane incident is behind us, and now we can look forward to the visit of President Bush in October, and that this is not a relationship that is going to be based solely on conflict -- that we actually want to find ways to work together.

SHIELDS: What about the stripping, though, of all reference to human rights in the taped speech that Secretary Powell -- that Chinese authorities just absolutely expurgated it?

KOPPEL: Well, that was actually -- it was an interview that was done on Chinese Central Television...

SHIELDS: Right.

KOPPEL: ... and this was -- they were asking him about his book, about his tour in Vietnam and what not. And, certainly, the State Department was under the impression that the entire interview would be aired.

I don't necessarily think that we should be surprised that his comments on human rights were taken out of the broadcast statement, especially when you think that three years ago when President Clinton was there there was this live press conference that he held with China's president and he did address a number of human rights issues.

SHIELDS: Yes, that's right. Bob?

NOVAK: Andrea, did you get the impression from the Chinese government that they wanted to improve relations too? That after all the pounding and the yelling, when they let these people that had been imprisoned on charges of espionage -- probably trumped up, but they had been in prison. Did you get the idea that they really wanted to lower the decibel level themselves?

KOPPEL: Absolutely. China's president, the premiere, every leader that Secretary Powell met with did everything but embrace him to their bosom.

This was a very important trip for China because it wants and it needs desperately to improve its economy. And the way to do that is to have good relations with the United States. And they also want to have a very successful APEC -- this is that economic regional meeting that takes place every year. They're the host of it in October, which is why President Bush is going there.

So they want to have had a good meeting, and they know that they need to have had a good relationship with the U.S. leading up to it.

O'BEIRNE: They care so desperately, Andrea, but not enough to significantly improve the human rights situation. Are they -- does Beijing just sort of separate that out at though -- and pretend it's unrelated to the kind of relationship they want with the West?

KOPPEL: Well, they know how to handle the U.S. And they know that if you give the U.S. a couple of released dissidents ahead of a trip, that that sort of takes the air out of the argument. And that's when they did, just, literally three days before secretary Powell arrived there.

O'BEIRNE: And those friendly gestures can go on forever because presumably all they need to do is snatch some other Americans off the streets, hold them for a while and then release them.

NOVAK: I don't think those were Americans, Kate.

O'BEIRNE: Well, naturalized citizens, or ones who -- legal residents here who are -- none of them belonged in jail, Bob.

(CROSSTALK)

NOVAK: One was a green card holder.

(CROSSTALK)

O'BEIRNE: And he they did hold her husband and son, too, who were, of course, American citizens. And none of them, of course, belonged in jail. But they could be doing these endless friendly gestures, couldn't they?

KOPPEL: Absolutely. And certainly what they're going to continue doing with the U.S. is talking about improving their human rights record and, at least the short term, that seems to have satisfied the Bush administration. Secretary Powell said that they're going to renew, they're going to re-open the human rights dialogue which had been on hold since the bombing of the Chinese embassy in Belgrade back in 1999 during the Kosovo conflict.

CARLSON: Talking works so well for them, I don't know why the Chinese would ever change their behavior because they get away with whatever they want to get away with, and we want to keep trading with them, so it reinforces the worst behavior on their part.

Reporters at the White House tend to think of Secretary Powell as the great dissenter in the administration -- that he's really not in favor of an isolation. He would have kept the Kyoto Treaty, ABM -- he's still for it; he truly wants to engage in the world.

Are we at the White House not as sophisticated as those of you at the State Department where, you know, Powell is totally on board. He's not, in any way, against any of these administration policies.

And I have this follow up: Why was Secretary Powell on the floor with the microphone at dinner? (LAUGHTER)

KOPPEL: OK, well I'll answer that in a second.

I think that it's natural -- and we've seen this before in previous administrations -- that the secretary of state as the United States' top diplomat, is the one who has to deal with all of these governments and make nice. I do think that it is common knowledge that Secretary Powell is somebody who was more reluctant than others in the administration about taking a more, what some have called, unilateralist or isolationist approach towards these various treaties. And certainly he's the one who's trying to -- to try sort of middle ground with the Japanese on the Kyoto warming treaty and with the Russians on the ABM Treaty.

Now, to answer your other more important question...

SHIELDS: The musical.

KOPPEL: When he was in Vietnam -- this was for the southeast Asian Regional Forum, the annual meeting. And there's a tradition that all the foreign ministers put together some sort of skits, whether it's singing and dancing, whether it's reading a poem. And Secretary Powell sang "Old El Paso" with the Japanese foreign minister, who happens to be a woman. And so he was down on the floor because he was shot and dying, and his true love, foreign minister...

CARLSON: What a ham!

NOVAK: I can't imagine...

SHIELDS: Do you remember what Warren Christopher did?

No, go ahead.

(LAUGHTER)

NOVAK: Well, I was going to say I can't imagine John Foster Dulles doing that.

Just briefly, there was a totally different mood, it seems like, in Vietnam -- less tension than it is in China. Relations are generally good with Vietnam, aren't they?

KOPPEL: They are. And within a couple of weeks, I think sometime in early September they're supposed to sign the Vietnam Free Trade Agreement.

This is a very different period in our history, and what better way to exemplify that than the fact that you have a former U.S. soldier who served two tours of duty in Vietnam who goes back as the top U.S. diplomat -- that is Secretary of State Powell -- to improve the relationship with Vietnam?

SHIELDS: Andrea Koppel, thank you so much for being with us.

The gang will be back with the "Outrage of the Week."

Thank you. Thanks a million.

(COMMERCIAL BREAK)

SHIELDS: Now for the "Outrage of the Week."

Phil Sheridan said once, quote: "If I owned Texas and hell, I would rent out Texas and live in hell," end quote. That's why President Bush may have made a major political mistake by deciding to spend August on his ranch in broiling, parched Crawford, Texas.

The press corps likes a cool ocean breeze and maybe even a cold beer. Presidents Reagan, Kennedy, and Clinton all vacationed near the sea, and thus spared themselves a churlish press corps.

But Jimmy Carter and LBJ punished the press with Dixie summers and were denied second terms. A full month of Texas dust, heat, and alcohol-free meals could spell big trouble for George W.

Bob Novak.

NOVAK: You're going to be very popular in Texas.

Senator Dianne Feinstein of California is a nice person who means well. Too well. Playing big mother, she has warned major airlines that unless they limit passengers to two alcoholic beverages per trip, no matter how long the trip, she will do it by law, sort of airborne prohibition. You can't smoke on planes, and one word of criticism risks an arrest for air rage. Senator Feinstein claims she wants to curb air rage. How about better service, not less booze?

SHIELDS: Margaret Carlson.

CARLSON: This is the pro-drinking CAPITAL GANG.

By the time Minnesota tackle Korey Stringer got to the hospital, he was unconscious with a body temp of 108 degrees. He vomited three times on the field. Two days later a college freshman collapsed during football drills at Northwestern and died, as 18 players have since 1995. Coaches used to forbid liquids during practice. Now it's just considered unmanly to have a drink in 90-degree heat. With real men dying, shouldn't that ethic change?

SHIELDS: Kate O'Beirne.

O'BEIRNE: A California judge has ordered a retired couple to support their 50-year-old son indefinitely. Uh-oh. These parents must pay their son, a Stanford-educated lawyer, $3,500 a month because his emotional state prevents him from supporting himself. What's a parent to do? Obviously, don't raise lawyers, and leave no forwarding address.

SHIELDS: This is Mark Shields saying good night for the CAPITAL GANG.

"CNN TONIGHT" is next.

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