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Political Fight Brewing Over the Shrinking Surplus; Gary Condit Agrees to Interview

Aired August 20, 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 in Washington. The political fight over the shrinking budget surplus goes further amid uncertainty about where the economy is headed.

KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: I'm Kate Snow on Capitol Hill. Democrats launching an air war against President Bush's budget policy.

BOB FRANKEN, CNN NATIONAL CORRESPONDENT: I'm Bob Franken in Modesto, California, where Congressman Gary Condit's advisers are planning their new media strategy.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: I'm Bill Schneider in Washington, where some Republicans are revved up to become easy riders.

ANNOUNCER: Now, Judy Woodruff takes you INSIDE POLITICS.

WOODRUFF: Thank you for joining us. Before we get to this day's political news, we have an update on a deadly rampage in Sacramento. Police there say that a 27-year-old man killed his wife today and then headed to another home in the area where he allegedly killed four other family members: an infant, a 9-year-old girl and an elderly couple. Police say all of the victims suffered some form of blunt trauma. The young girl apparently was stabbed.

In addition, police say a 2-year-old child is missing. They believe that he may have been taken by the suspect. They still are searching for that suspect identified as a Ukrainian immigrant named Nikolay Soltys, who was seen driving a silver Nissan Altima. There is no word of a possible motive. We'll have more on this story as new details become available.

And now we turn to the sharpening political debate over the economy and the shrinking federal budget surplus. From Washington to Wall Street, many will be taking their cues this week from two men: President Bush and Federal Reserve chairman Alan Greenspan.

Mr. Bush is taking his economic pitch into the heartland again. In Wisconsin today, he urged Congress to make his request for military, education funding top priorities. The president is due this hour in Missouri, where he is expected to talk at greater length tomorrow about the budget, Social Security and Medicare, and to point a finger back at Democrats who are blaming him for the dwindling surplus.

Meantime, Alan Greenspan's Fed holds another policy meeting tomorrow to decide whether to raise interest rates for the seventh time this year. In anticipation of the Fed meeting tomorrow, the Dow Jones Industrial Average closed up 79 points after a day of light trading.

For more on the Fed, the economy, and the surplus, let's bring in CNN's financial news reporter, Tim O'Brien.

Tim, what are people looking for tomorrow?

TIM O'BRIEN, CNN CORRESPONDENT: Well, the betting is there will be a 25 percentage -- a 25 basis point or one-fourth of a percentage point drop in the interest rate. Good case can be made for making it a half-a-point drop. The thinking is that were the Fed to do that, it might be perceived as panic, and nobody wants that. So we don't know -- we won't know until 2:00 Eastern tomorrow, but the betting is it will be a fourth a percentage point reduction in the interest rates.

WOODRUFF: Tim, as we pointed out, if there is a cut tomorrow, it would be the seventh one this year. Why do people think the economy hasn't shown more improvement?

O'BRIEN: Well, one possible reason is that some economists say the interest rates are not the problem. The problem is the decline in earnings and profits by the corporations we keep getting them in. They've been coming in for a long time now and that's what the problem is. It also takes a long time for these interest rates to take effect, these rate cuts to take effect, usually six to nine month. So the ones that started last January might only be taking effect right now.

WOODRUFF: And Tim, of course, when the economy isn't doing well, revenues are down, the surplus projections are now down, and there are people who are saying that's a good thing, what's that all about?

O'BRIEN: Yeah, that's surprising. You and I would think that money in the bank is a good thing and not having the money in the bank is a bad thing. But the principles that work so well guiding us don't always work for the economy. There are those economists, and a good number of them I might add, who believe that when times are tough, that's when the government should be spending money. Some economists didn't like the politics of the recent -- the tax rebate program that's now under way. But as an economic matter, they say that might do it. The timing is perfect; it just might trigger a recovery. The president's chief economic adviser spoke to CNN just a short while ago and said, yes, it's remarkable that we have $160 billion surplus right now. But it's not surprising that more money is going out than is coming in and that might just stabilize the economy.

At Harvard when I was a professor, we used to call that an automatic stabilizer. And that is, in fact, what's going on. The government naturally collects less money and expends more during a slowdown in the economy. So it is very natural.

Another natural example might be unemployment compensation and welfare. Massive spending programs especially when people are out of work. But they do have the positive effect of stimulating hope, and of course, stimulating consumer spending, which can help keep the economy afloat.

WOODRUFF: Tim, at the same time, is it fair to say the administration had wanted a smaller surplus?

O'BRIEN: No. I think the administration wanted the surplus to be as strong as it possibly could be just as we would like to have as much money in our bank accounts as we can possibly have. But sometimes the spending is an investment. In our case, it might be investment in stocks; in the administration's case, this is an investment in the economy that many economists believe will pay off.

WOODRUFF: All right, Tim O'Brien reporting from New York, thanks.

Well, many congressional Democrats do not see the shrinking budget surplus as a good thing, and they're trying to place the political blame for it on President Bush. Let's check in with our congressional correspondent, Kate Snow.

Kate, what are the Democrats saying?

SNOW: Well, politically, it might actually be a good thing, Judy. That's because they can make some political hay out of this. In fact, the Democratic National Committee, the DNC, is going to start running some ads this week. They'll start running on Wednesday. They call it a modest campaign. That means they're not spending a whole lot of money in it but they are targeting a few places. They're going to run the ads in Washington, D.C., also in places I'm told like Waco, Texas and Independence, Missouri. Why those places?

Well, the media. Waco, Texas is where the White House press corps is right now with President Bush. And Independence is where President Bush travels tomorrow. These television ads are going to be saying that President Bush is spending money that was set aside for Medicare rather than saving it and he's using it on a tax cut. They're going to be drumming that message, Judy, over the next few weeks. We've already heard it. The message is by Democrats that the surplus is effectively gone and that too much money has been wasted. It's taking away money that was earmarked for Social Security.

(BEGIN VIDEO CLIP)

REP. DICK GEPHARDT (D-MO), MINORITY LEADER: I think in order to keep from spending Social Security money this year, they've cooked the books here in the midyear budget projections. They've used an accounting gimmick to say that they're not actually spending Social Security money when they actually are, in my view. I think the projections for next year are rosy scenarios.

(END VIDEO CLIP) SNOW: The House minority leader from yesterday's Sunday talk shows. Expect to hear more of the same next Sunday. And Judy, expect that they will continue to drum on this as these numbers are released from the White House, from the administration, and then again from the congressional budget office next week -- Judy.

WOODRUFF: And Kate, are the Republicans concerned? Are they worried about this Democratic offensive?

SNOW: No, in fact Republicans will tell you that what they call a modest campaign by is really just a big joke. They say this is all aimed at the media. This is all aimed at garnering some attention, creating a buzz. They say the Democrats don't have a leader right now, they don't have a message right now, and therefore, they're seizing on this much like they seized on energy just a few months ago. They say that people are happy with the tax cut and they don't see any threat from this Democratic campaign -- Judy.

WOODRUFF: All right, Kate Sow at the Capitol.

And we are joined now by former Clinton economic adviser, Laura Tyson, and Stephen Moore who was an economic correspondent for the publication, "Human Events."

Laura Tyson, to you first. And to the Fed tomorrow, what do you think the Fed is likely to do?

LAURA TYSON, FORMER CLINTON ECONOMIC ADVISER: Well, I think the Fed will certainly reduce rates. Whether it's 25 basis points or 50 is really the only debate. The view that it will be 25 is simply that that's what the market expects, and that they could still give the chairman asymmetric bias, meaning that he could reduce rates further between tomorrow's meeting and the next meeting.

WOODRUFF: And Stephen Moore, do you expect the same thing?

STEPHEN MOORE, "HUMAN EVENTS": Twenty-five to 50 basis points. Laura Tyson is right about that. And the economy really needs, this Laura. You know, we're just seeing a suffocating monetary policy over the last year or so. The Fed went way too far last year in increasing rates and tightening the monetary policy. We do need these rate cuts and I would like to see 50 basis point decline.

WOODRUFF: So what affect is this going to have, Laura Tyson?

MOORE: Well, it's one of many factors that should help the economy along in the next several months. We do have the 275 basis points of reduction already in place, so this will be additive to that. We do have lower energy prices feeding in. We do have lower inventories feeding in. We have a slightly weakening dollar feeding in. And finally, the tax rebates. All of those things are offering some additional demand to an economy, which is considerably weaker than people anticipated.

WOODRUFF: Where does that mean the economy is, though, Stephen Moore, are we, given those positive -- some positive signs, but also some negative signs? Are we closer to a recession? Are we moving away from a recession? What's your...

MOORE: We're in a recession, Judy. If you take out the government sector of the economy over the last six months, the only area of growth has been in the government sector. Private sector actually is in a recession over the last six months. Look, we need to see, I think, in addition to these rate cuts that we hopefully will get tomorrow, we need to see I believe additional tax cuts. We should cut the capital gains tax immediately. That would provide some impetus to the stock market.

You know, I go around the country, Judy, talking to businessmen, and I would say right now you talk to nine out of 10 businessmen and they say this is a real rotten economy. So I think things could be a little bit worse than some of these Washington economists are talking about right now.

WOODRUFF: Well, if we don't -- whether we get those tax cuts or not -- and I don't think many people think we're going to get them in the near term -- Laura Tyson, what about what all this is doing to the surplus, the fact that it's gone down almost $100 billion, and the effect that's having on the administration's plan?

TYSON: Well, the problem for the administration is that they themselves have said things which they shouldn't have said, such as, "We won't dip into the Medicare surplus and the Social Security surplus." Today, actually, the economic adviser Lindsey said, "We don't think we'll dip into them." In fact they are dipping into them. If there weren't the accounting adjustment that was made in Social Security this year, we'd be spending part of the Social Security surplus.

I think the big question really is next year. They're about to go into a process of building a budget for 2002. And the administration is saying that they think the U.S. economy will be growing at 3.2 percent next year, which is significantly higher than what private sector economists are saying. If they take that projection into this budget struggle, they will have a rosy scenario, they will not have credible budget estimates. And then next year, when the surplus again is much smaller or they're in deficit, their credibility will be gone.

MOORE: There is some truth to that, I think. And the fact is that the administration right now is crossing their fingers and hoping for higher growth. But if this recession lingers on, you're going to have a lot of nervous Republicans as they have to face the voters of course in November 2002 in the mid-term elections. And this is why the real key to bringing these surplus numbers back up is to get the economic growth rate back up, because if Laura's right and we have continued, you know, one percent economic growth or less, these surpluses are going to disappear very closely -- very quickly, and that's why I keep telling the administration, "Look, get an economic growth plan. Don't worry about the surpluses right now. Let's get that economic growth up from zero or one percent right now back to the three -- or four percent growth rate we had over the last decade." WOODRUFF: Laura Tyson, is the Bush tax cut helping or hurting right now?

TYSON: Well, I would agree here with Mr. Lindsey in terms of one thing he said. I was not a fan and I'm not a fan of the Bush tax cut, but I was a fan of the idea of having a rebate. That was actually a Democratic proposal that the administration signed onto because they wanted to get passage of the full long-term tax cut. I was in favor of a rebate because I thought the economy was weak. It's coming in an ideal moment. It is actually helping consumption spending. So the real issue then is not this year, which all of the policies are in place for this year now except monetary policy. The real issue is next year. And it seems to me again the key thing here is credibility. If you have the financial markets lose trust in an administration because it makes projections that are simply not believable, then that is going to mean higher interest rates, a deficit premium on interest rates, and it's going to undo all of the hard work of the 1990s which was to restore fiscal credibility.

MOORE: But you know...

WOODRUFF: Stephen Moore, a very quick question finally...

MOORE: Yeah.

WOODRUFF: ... on this whole debate over whether the administration is dipping into the Social Security, Medicare surplus. Are they or aren't they?

MOORE: It's too early to tell. You know, we're very perilously close to tapping into it. But I'll say this: If we don't get that growth rate back up soon, we're going to see these surpluses disappear very quickly. We need to have, by the way, more investment and more saving. I don't think consumption is the problem. It's not that American consumers aren't consuming, it's that businesses aren't investing, people are coming out of the stock market. And until businesses have an incentive to invest, I think this could be a long, drawn out recession, unfortunately.

WOODRUFF: All right, Stephen Moore, Laura Tyson, good to see you both. Thank you.

TYSON: Nice to see you, Judy.

MOORE: Thank you.

WOODRUFF: And Stay with us. This is INSIDE POLITICS.

ANNOUNCER: The president goes hole hog, next on INSIDE POLITICS.

(BEGIN VIDEO CLIP)

SCHNEIDER: Try wrapping your mind around this concept: Republicans on Harleys.

(END VIDEO CLIP) ANNOUNCER: Bill Schneider on a different kind of political cycle. Also ahead, new details of conversations between Bill Clinton and Israel's Ehud Barak. What did they say about a pardon for Marc Rich?

(COMMERCIAL BREAK)

WOODRUFF: President Bush said today that the military will remain a key spending priority, but as we told you earlier, his critics are warning that the budget surplus already is vanishing. In a speech to the nation's oldest major veterans group, Mr. Bush also said that he will work to improve government health services for military veterans.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: When the draft board got your file, it worked efficiently. But now when you need health care, forms get lost and answers come late. That is no way to treat American veterans, and that is going to change.

(END VIDEO CLIP)

WOODRUFF: CNN White House correspondent Major Garrett is traveling with the president, and he filed this report.

(BEGIN VIDEO CLIP)

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: President Bush interrupted his Texas summer vacation to travel to Milwaukee, Wisconsin, talking veterans' issues with the Veterans Foreign Wars at their 102nd annual convention. He pledged to the delegates that he would speed up the processing of veterans' claims at the Veteran's Administration. He also told them of his support for a constitutional amendment to ban flag burning. But the president's most important remarks, at least as far as Washington is concerned, dealt with the upcoming budget battle. He told Senate Democrats he expects them to send him a defense bill sooner rather than later.

Senate Democrats have been thinking just the opposite, wanting to hold that defense bill to the very end of the 13 that must reach the president's desk hoping to extract from him concessions on other domestic spending priorities such as education, the environment and health care. But the president said that's old-style thinking. He wants a defense bill and the $39 billion in extra spending he's asked from Congress right away. If he doesn't get, it he said, the delegates here will know whose priorities are being put forward first. He wants education and defense to be top priorities and he's challenged Senate Democrats to do the same. Major Garrett, CNN, Milwaukee, Wisconsin.

(END VIDEO CLIP)

WOODRUFF: After his address to the VFW, President Bush headed to a Harley-Davidson motorcycle plant. The president met with Harley- Davidson employees along the assembly lines, praising their work and their world famous product. CNN senior political analyst Bill Schneider joins us now with more on the president and the political symbolism of the Harley-Davidson. There is such a thing, right?

SCHNEIDER: There sure is, Judy. Try wrapping your mind around this concept: Republicans on Harleys. Could the GOP Party symbol be changing from an elephant to a hog?

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): Motorcycles used to mean outlaws, like Marlon Brando in "The Wild One," 1953, leader of a gang called the Black Rebels. "What are you rebelling against?," the girl asks. "What do you got?," Brando answers. The anti-establishment biker image took on a counter-culture tinge with "Easy Rider" in 1969, sex, drugs and "Born to be Wild." Maybe there was a political message there. Captain America on his Harley goes looking for America. Left- wing? Right-wing? Actually, it's both. Most of all, it's American. The motorcycle is a symbol of personal freedom, more precisely, freedom from authority, something all Americans value, but particularly, the young.

When states began passing laws requiring bikers to wear helmets, the bikers went nuts. Don't tell a biker what to do. That's anti- government sentiment. Not a big reach for Republicans. The shift started in the 1980s when President Reagan used tough trade sanctions to save Harley-Davidson, the only motorcycle still made in America.

RONALD REAGAN, 40TH PRESIDENT OF THE UNITED STATES: Kick on the engine, Harley, and turn on your thunder.

SCHNEIDER: Look at what's happened to Harley buyers since the 1980s. Almost 10 percent of them are now bought by women, not cycle chicks, governors and Republican women.

ELIZABETH DOLE: Yeah, rev it, baby. Let's get out of here.

SCHNEIDER: The median age of a Harley buyer has gone from 35 to 46. That's nearly 50; baby boomers recapturing their youth, like Congressman Gary Condit, a Harley rider, and this dangerous gang of outlaws. Oh sure, a Harley can still say, "Up the establishment," but look at Harley buyers' incomes. A median income of more than $75 thousand does not exactly put you outside the establishment. The typical Harley buyer today is a guy in his 40s, making over $75 thousand. According to our exit poll, those guys voted 61 percent for George W. Bush. Harleys have gone establishment, and Republicans have figured out what to do with them. Democrats still have a problem.

ANN RICHARDS (D), FORMER TEXAS GOVERNOR: I don't want any pictures taken of me with this motorcycle without this helmet. And if you think I'm going to put it on, you are crazy.

SCHNEIDER: Maybe if she had ridden the bike, there would have been no Governor Bush. And maybe if he had ridden a Harley instead of a tank, there would never have been a President Bush.

(END VIDEOTAPE) SCHNEIDER: When will we know the world has turned upside down? When they play "Born to be Wild" at a GOP convention. Vroom, vroom, Judy.

WOODRUFF: Bill, do you think we'll be around for that?

SCHNEIDER: Well, I think so.

WOODRUFF: All right.

SCHNEIDER: And we'll ride on our motorbikes.

WOODRUFF: All right, Bill Schneider.

Well, right now, we have a development in the ongoing case involving Chandra Levy, Congressman Gary Condit. And for that, let's go to Modesto, California, Condit's home district, and our own Bob Franken -- Bob.

FRANKEN: Well, Congressman Gary Condit has just put out an announcement announcing where he will do the hard-fought-for first television interview, a network television interview that has been awaiting almost since the beginning of the Chandra Levy case, which is now of course more than three months old. He is going to be interviewed on "ABC News," prime time, which is a 10:00 p.m. Eastern this Thursday night by ABC News correspondent Connie Chung.

This has been the subject of deliberations by the Condit advisers for several weeks, which would be their first venue. I would like to read the statement that has just come out. This is from the Condit people from day one. "Congressman Condit has cooperated with law enforcement authorities on the Chandra Levy investigation. He will respond publicly this week to questions regarding her tragic disappearance. On Thursday night, August 24th, 2001, Congressman Condit will sit down with Connie Chung in an ABC televised interview. The congressman will also communicate directly with his constituents and speak with other media. The other media have not been determined. The congressman has fully responded to all questions," the statement goes, "put to him by law enforcement authorities to try to find Ms. Levy. He can now address in a public forum the issues that have been raised over the past three months.

Question number one: Will the interview be done here in Modesto, California, in New York, or some other location?" According to the Condit advisers, that has not been determined; arrangements are still being made for that interview. His first public televised interview will be a network interview with ABC correspondent Connie Chung on ABC prime time this coming Thursday night -- Judy.

WOODRUFF: Bob, why is this one interview so important?

FRANKEN: Well, of course, there has been this long anticipation that Congressman Condit would not only put out the occasional public statement, which was on paper, but would in fact go on television to answer all the questions that have accumulated, not just to put out a statement but to submit to the questioning that a reporter might do, the normal skeptical kind of questioning. There was an extensive, a long debate among the advisers of Congressman Condit. Everybody including CNN had put in the request to be the first venue for an interview. After a long deliberation, we are told, they decided on Connie Chung and the interview on "ABC News" on Thursday night.

WOODRUFF: And, Bob, you've been following this story from the very beginning. Do you expect that something new will -- in the way of information will come out of this?

FRANKEN: Well, that'll be the fondest hope, of course, of the interviewer, Connie Chung. Of course, Congressman Condit is going to have to field a huge number of questions. He's going to probably have to put to rest some of the speculation that has come out of the story and try and respond to some of the facts that have come out of this story and try to get the ball rolling on recovering and repairing his political damage.

One other we can tell you is that there are plans for later this week for a letter to go out, a mass mailing to all constituents to begin the explanation to the people who vote for Congressman Condit in what is now California's 18th congressional district. I should point out there is a redistricting going under way at the state legislature in California, which of course changed the dynamics of the district. In any case, the congressman is planing that letter. We're told he's also planning other media. That could include local interviews and, of course, there may be other network interviews.

WOODRUFF: All right, Bob Franken reporting with this latest information from Modesto. And now, let's go back it our Bill Schneider in the studio here in Washington.

Bill, when it comes to Congressman Condit's political future, is an interview like this likely to make a difference for him?

SCHNEIDER: Well it could, Judy. He's got to explain himself. You know, the biggest question has been since April 30th when Chandra Levy disappeared: Why is Congressman Condit, who is believed to have had an intimate relationship with this woman -- he's -- at least there are indications that he did. Why hasn't he said anything? He certainly knew her, was very close to her. Why was he so distant from the investigation? Why was he so reluctant to cooperate? Why wasn't he more supportive of his family -- her family, rather? And why didn't he say anything? So this will be his opportunity finally months later to say something.

WOODRUFF: So -- and this comes at a time when the newspapers in the congressman's district have editorialized, calling on him to step down. His support -- he's seen his support in Congress waning. I guess the question in the minds of so many people is: Why wait until now? And can this turn the tide for him?

SCHNEIDER: Well, why wait until now? He obviously feels confident that he can make a sufficient public explanation and try to save his political career. There are really two separate issues: one is his personal conduct, which was less than exemplary, given his relationships with more than one woman outside of his own wife; and second of all, how he's behaved over the last four months, why he's been so reluctant to step forward, so apparently uncooperative and not been supportive, as one would have expected him to be for someone that he was very close to. These are all mysteries, and the mysteries have raised suspicions. The police say he is not a suspect in this case. They have no evidence linking him to Chandra Levy's disappearance, but he still has a lot of explaining to do about his conduct. Could it save him? If there is no evidence linking him to her disappearance, and if he can make a sufficient explanation, there's a possibility his constituents may understand, because they know him quite well personally.

WOODRUFF: All right, Bill Schneider here in the Washington studio. INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: New insights now into the Marc Rich pardon flap, and Bill Clinton's private comments about the man who caused him so much grief at the close of his presidency. That story when INSIDE POLITICS returns.

(COMMERCIAL BREAK)

WOODRUFF: Here in Washington a key member of the president's team has decided to step aside after just six months on the job, and there is word that a second key adviser may soon do the same.

Joining me now with more on the president's team, "TIME" magazine's Jay Carney, and his reporting on this subject appears in this issue of "TIME."

Jay, we're talking about John DiIulio, who's the president's main point person on his faith-based initiative. What happened here?

JAY CARNEY, "TIME": Well, John DiIulio, who was a professor at the University of Pennsylvania and a Democrat, very active in the subject of faith-based charities, had always said that he was a short- termer at the White House. But the president's faith-based charities initiative is stalled in Congress, and the idea that the point person for this, for the White House, a very high-profile position, a very important initiative for the president, would suddenly wash his hands of it and leave I think is somewhat startling and indicative of how badly the initiative is going and how bad a time John DiIulio was having.

WOODRUFF: Jay, the White House has been saying this was planned all along, he never said he was going to stay longer than half a year. Sorry about the sirens here in downtown Washington, but we live with it. But they're giving a really very different version.

CARNEY: Well, they would, wouldn't they? I mean, they obviously have to put their best spin on it. I don't think anybody wanted over at the White House DiIulio to leave because it looks bad. It looks bad to have a prominent Democrat in a Republican administration be the first senior White House official to leave. And I think it looks bad because it says again that this important initiative for the president, one that he used a lot during the campaign to help describe himself as a compassionate conservative, is in so much trouble on Capitol Hill.

John DiIulio is not a political animal. I think he had a lot of time with the partisanship on the Hill, and probably being, you know, in a sea of Republicans over at that White House.

WOODRUFF: He came out of an academic...

CARNEY: He's an academic. He likes to -- he has ideas. He likes to speak them outloud, and that's not what you do in the diplomacy of politics.

WOODRUFF: How much support did he get from within the White House?

CARNEY: Initially a lot, but toward the end there was a big clash internally over whether to move forward quickly on the initiative, which is what the president's political advisers wanted, or to try to gradually build bipartisan support, which is what John DiIulio wanted. He lost that argument. The initiative has sort of crashed and burned and been way scaled back, and I think that's another reason why he's leaving.

Now, he -- he does have health problems. His family lives in Philadelphia. There are other reasons why you wouldn't want this difficult job. But...

WOODRUFF: High pressure.

CARNEY: Exactly.

WOODRUFF: Now, the other person we're talking about here is Sandy Crest, who's been in charge of the president's education reform initiative, one of the very few Democrats as DiIulio in the administration.

CARNEY: Well, the only other in the White House itself, of course, is a Cabinet secretary who's a Democrat. And again, another incredibly important initiative to the president, and education reform, maybe even more than faith-based charities, was one that showed him to be a new kind of a Republican, more moderate. Sandy Crest also let it be known that he wouldn't be sticking around for long. He's actually not even taking a salary, more of an adviser to the White House. But the minute that education package is done, he's out of town.

WOODRUFF: And any indication, Jay, whether the president would bring in other Democrats to do other -- fill other roles in his White House, in his administration?

CARNEY: Well, none yet. I mean, we're all waiting to see what the president's second-year agenda will be. I know they're working on it already. Karl Rove, the president's political adviser, is working on it, because they know that they can't sort of try to rest on their laurels, especially, as you were talking about earlier, if the economy's in trouble. They need some new initiatives.

And if maybe there are some more sort of centrist Democratic moderate style initiatives, he'll bring in more Democrats. But there's not a large universe of people to choose from who would come work for a Republican president.

WOODRUFF: All right. Jay Carney, "TIME" magazine, thanks very much.

And here in Washington, as well, documents from the final days of the Clinton administration shed new light on the presidential pardon given to fugitive financier Marc Rich. For the latest on that, let's bring back CNN congressional correspondent Kate Snow.

Kate, what have you learned?

KATE SNOW, CNN CORRESPONDENT: Well, there's no bombshell here, Judy. There are no startling revelations of wrongdoing or anything like that. But it is more fodder certainly for President Clinton's critics. The transcripts show that then Prime Minister Ehud Barak of Israel brought up the case of Marc Rich back in December, and then there was a second phone call: that one on January 8th. And let me read from that transcript.

In that second conversation, Mr. Barak again mentioned Rich. President Clinton responded: "I know quite a few things about that. I just got a long memo and am working on it. It's best that we not say much about that."

Mr. Barak then: "OK, I understand. I'm not mentioning it in any place."

Mr. Clinton: "I understand."

To that, Representative Dan Burton here on Capitol Hill, a Republican and the chairman of the House Government Reform Committee, says that he is worried about that conversation. He has sent a letter to Ehud Barak asking questions about why he said that he understood that he shouldn't say much. Why did he make that comment?

Burton also asked the former prime minister about another conversation that took place, this one on January 19th, just one day before President Clinton left office. In this one, Mr. Barak asked of the Marc Rich pardon petition rather -- he said: "Might it move forward?" President Clinton: "I'm working on that, but I'm not sure. Here's the only problem with Rich: There's almost no precedent in American history. There's nothing illegal about it, but there's no precedent."

And Judy, again, the very next day, on January 20th, is when President Clinton did go ahead and issue that pardon for Marc Rich -- Judy.

WOODRUFF: Now, Kate, when all this about the Marc Rich pardon, the pardon of others come out earlier this year, there were congressional committees talking about looking into this. Is that still in the works?

SNOW: Well, some of it has died down, Judy, particularly because of the Senate changeover to Democratic control. But in the House, Representative Burton continues to look into this. In fact, I'm told by his committee that that they plan to put out a report some time, in their words, "later this fall," which is a little later than they had hoped. But again, it doesn't carry any weight as far as legal authority. That would just be a report to put it on the record, perhaps to embarrass former President Clinton.

Meantime, the U.S. attorney's office, we should note, in New York continues to investigate the case as well -- Judy.

WOODRUFF: All right. Kate Snow, once again from the Capitol.

A potential early entry in the race for the White House in 2004. Straight ahead, civil rights activist Al Sharpton hits the ground running after his release from prison.

(COMMERCIAL BREAK)

WOODRUFF: That's not an even number. Well, former -- it's an even number, but not your usual house sale number.

Former presidential candidate is apparently moving out of Washington to live in New Jersey full-time.

Well, one man looking at a move to Washington is civil rights activist Al Sharpton. Sharpton announced today that he will form an exploratory committee to consider a run for president in 2004. He also criticized what he said was a Democratic Party turned to the political right, quote, he says, "in the name of a winning strategy."

Sharpton told CNN's "CROSSFIRE" he is sure that he is qualified to be president.

(BEGIN VIDEO CLIP)

REV. AL SHARPTON, PRESIDENT, NATIONAL ACTION NETWORK: The best example of my ability to govern is to look at the intellect and the thought process that I've tried to demonstrate compared with the present occupant. Every time I look at George Bush I know that I'm qualified to at least do what he does.

(END VIDEO CLIP)

WOODRUFF: Well, you can see Al Sharpton's complete comments on "CROSSFIRE." That's tonight, beginning at 7:30 Eastern here on CNN.

Several potential candidates considering races in Illinois have political backgrounds at the highest levels of the Clinton administration. Joining me now to talk about Illinois politics and the big-name Democrats who may get involved is Bruce Dold. He's the editorial page editor of the "Chicago Tribune."

Bruce, first, let's talk about Bill Daley, who of course was the -- the secretary of commerce under President Clinton. What's this about his thinking about running for governor? How likely?

BRUCE DOLD, "CHICAGO TRIBUNE": I think he's very serious. I just got off the phone with him a few minutes ago, and he thinks the political pieces are in place. He's done the polling. He likes the way it looks. The question he said for him is whether he wants to put himself personally through a campaign like that.

He hasn't been a candidate before. His brother's run several times for mayor, but this would be the first time out for Bill.

WOODRUFF: Now, why -- how good a shot would he have? You've already got -- what? -- seven or eight people who are talking about running. Why would he even consider this a good opportunity?

DOLD: You'd have to wonder about that, because the Republicans have controlled the state, the governorship, for 25 years now. The Democrats haven't had any marquee names. But you've got a scandal that's plagued the Republican administration in there now. The incumbent governor isn't going to run, so he sees an opportunity.

You know, the big question he's got to deal with, though, is this too much power. You've got Rich Daley and Bill Daley as governor, there's going to be a lot of suspicion.

I asked him about that, and he said: "Oh, that's easy. I'm going to call on Rich to quit."

I think he was kidding, but I think he has to answer that there's too many Daleys that are going to be running the state.

WOODRUFF: But seriously, I mean, he -- one has to assume he's done polling on that question. Did he talk about that with you?

DOLD: We didn't talk about the polling specifically. I know that, you know, his polling has shown that Mayor Daley is very popular outside of the city of Chicago as well as inside the city of Chicago. But he does better than 60 percent in the suburbs and down state. So I think they think they can get past that issue about the, you know, too much power.

Rich Daley has been, you know, relatively scandal-free. He's seen as a doer, as a very businesslike guy, and I think Bill Daley would expect that he'd come across the same way. Al Gore was also very popular in this state. He polled -- he ran 55 percent in Illinois. And I think Gore figures commerce secretary, the Gore connection, you know, that Bill Daley can do pretty well with that.

WOODRUFF: All right. Let me quickly turn you to Rahm Emanuel, who of course worked in the Clinton White House for a good part of the time Mr. Clinton was president. He's talking about running for Congress from one of the districts that make up Chicago. What are his chances?

DOLD: Well, oddly enough, Bill Daley's decision may influence that. Rahm is looking at running for the northside district, the one that Dan Rostenkowski held several years ago. Rod Blagojevich, who's the incumbent there, is running for governor. Now if Rod gets out, if Bill Daley gets in the governor's race, Rod may want to reclaim that seat.

But right now, Rahm is pretty serious. He's also been -- he's been doing the political work to make that run.

WOODRUFF: And the Clinton connection, a plus for both or a minus?

DOLD: On the north side of Chicago, in the congressional district, where Rahm would run, it's a plus. I think even statewide, while there was, you know, some anti-Clinton sentiment, you have to look at how Clinton ran in '96 and how Al Gore ran in 2000, that this was a Clinton-Gore state, and all in all, that's a positive for Bill Daley.

WOODRUFF: All right, Bruce Dold with "The Chicago Tribune." Good to see you. Thank you.

DOLD: Thanks, Judy.

WOODRUFF: A decade of political change. Coming up next on INSIDE POLITICS, beyond those famous smiley faces, the turbulence of the times and its influence on politics today.

(COMMERCIAL BREAK)

WOODRUFF: In the summer of the year 2001, our culture and politics seem at times to be a flashback to a decade some would prefer to forget, the 1970s. Just look at the flared pants, the platform shoes, or better yet the former members of the Ford administration who are serving once again at the White House.

CNN's senior analyst Jeff Greenfield has been thinking back on those times and they're lasting marks on American politics.

(BEGIN VIDEOTAPE)

JEFF GREENFIELD, CNN SENIOR ANALYST: How do you measure how politics changes? Well, you could get hypnotized by every poll. You could obsess about every twist and every turn in every election. Or you could try to measure change by taking a longer view, not just about campaigns, but about bigger things: how and where we live, how we work, what troubles us. What would we see if we took that long view, say, quarter-century long?

(voice-over): The Democrats in 1976, united behind Georgia Governor Jimmy Carter. Until his narrow victory that November, no Southerner had ever been directly elected to the presidency since the birth of the modern two-party system. But Jimmy Carter's election would mark a milestone in the shift of America's population and political center of gravity, to the South and to the West. Carter's election would be the first of six straight elections won by a Sunbelt candidate.

The power of the Sunbelt could be measured in other ways also. For example, the growth of country music into a mainstream, multibillion-dollar business with radio stations from New York to L.A.

The 1976 Republican convention in Kansas City, a party split down the middle between President Gerald Ford and conservative hero Ronald Reagan. While Ford narrowly won the nomination, it would mark the last time that conservatives did not decide the Republican nominee. It would also mark the last time a candidate favoring abortion rights would win a Republican presidential contest.

Carter's win over Gerald Ford was due in no small part to Watergate, but Watergate turned out to be a major boon to conservatives. How? By further eroding the nation's faith in government. That faith was hammered as well by other events and trends. The energy shortages of the '70s suggested that government could not protect America's reliance on cheap, plentiful energy. The Iran hostage standoff at the end of the decade suggested the mighty American government could not protect its citizens abroad. And the surge in violent crime, which began in the '60s and did not peak until the '90s, suggested government could not even protect its citizens at home.

The political trends of the '70s continued well into the '80s, mostly to the benefit of Republicans. It took Bill Clinton in 1992 to take the crime issue back from Republicans and to deal with the growing disillusionment with government. It was Clinton who declared "the era of big government is over." It was Clinton who signed the bill ending welfare as an entitlement. And it was Clinton who presided over an economy driven not by government, but by a booming marketplace.

By 2000, nearly half of all Americans were invested in the markets, a huge change from the days when people looked to Washington to guarantee their economic future.

But if the events of the '70s seemed to give conservatives the economic upper hand, it was very different on the social issues. Back in 1976, not single woman or Italian-American had ever sat on the Supreme Court. Only 18 blacks served in the Congress. Only five Jews. Not a single woman sat in the United States Senate.

Today, 36 blacks sit in the House, 13 women are in the Senate, 10 Jews. Two women, a black and an Italian-American sit on the Supreme Court. More broadly, Americans are far different in how they live and how they judge others. In matters ranging from premarital sex to gays to what is seen and heard on the airwaves, America at the millennium is simply not the same cultural country it was when it marked its bicentennial.

(on camera): And there is one other big difference: money. The 1976 election, the first post-Watergate race, was also the first conducted with publicly financed campaign funds. Taxpayers provided that money by checking off $1 from their tax forms.

Soon, however, the parties and their operatives discovered a loophole the size of the Grand Canyon: so-called "soft money." The 2000 elections cost a total of $3 billion, and there's no sign that number will do anything but grow. Jeff Greenfield, CNN, New York.

(END VIDEOTAPE)

WOODRUFF: INSIDE POLITICS will be right back.

(COMMERCIAL BREAK)

WOODRUFF: That's all the time we have for this edition of INSIDE POLITICS. 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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