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. Anticipation is building one hour before Jesse Helms' big announcement.
JONATHAN KARL, CNN CORRESPONDENT: I'm Jonathan Karl in North Carolina where I'll have home state reaction to Helms' expected retirement and a look at the Senate battle ahead.
BOB FRANKEN, CNN NATIONAL CORRESPONDENT: I'm Bob Franken in Modesto, California, where Congressman Gary Condit, after months of dodging reporters, is pursuing a coordinated plan of appearances and carefully selected media.
MAJOR GARRETT, CNN CORRESPONDENT: I'm Major Garrett in Texas, where the western White House is trying to put the best face on new budget numbers that show a dramatically smaller surplus.
ANNOUNCER: Now, Judy Woodruff takes you INSIDE POLITICS.
WOODRUFF: Thank you for joining us.
During his 28 years in the U.S. Senate, Jesse Helms often has raised the political temperature here in Washington and in his home state of North Carolina. Now with his expected announcement that he is retiring, Helms once again is stirring up many of his fellow conservatives and many liberals as well.
Our Jonathan Karl is outside WRAL-TV in Raleigh, North Carolina, where Helms' taped remarks are scheduled to air in less than an hour.
Jonathan, what do we know now about this announcement?
KARL: Well, we know that Helms has already taped it, and I've spoken to somebody who was in the room at the time of the taping. The taping was described as a very personal and gracious statement of Senator Helms' decision not to run for reelection and to retire when his term is up in January of 2003.
The statement was about 9 1/2 minutes long. And what's interesting about it, Judy, is that Senator Helms will be announcing his exit from the public stage in the very place where he entered the public stage, because it was for 12 years here at WRAL that every night on the 6:00 news, Senator Helms would come on and give his editorial commentaries. In fact, it was in his very last commentary from this station that Senator Helms announced way back in 1972 that he would run for the Senate of the United States.
Now meanwhile, Senator Helms, since the news of his announcement broke yesterday, has been receiving calls from political figures around the country about it. In fact, he has said he has received calls from former president George Bush and from Barbara Bush; also, from many of his Senate colleagues and from Madeleine Albright, Bill Clinton's secretary of state who forged, of course, a close relationship with Helms when he was chairman of the Senate Foreign Relations Committee.
As for here in North Carolina, you already have in advance of this announcement a sense of Jesse Helms nostalgia setting in.
BILL COBEY, NORTH CAROLINA GOP CHAIRMAN: You can't reinvent another Jesse Helms. Senator Helms is so unique in so many ways. One way is, unlike most politicians who don't want you to know where they stand on the issues, he'll go out of his way to make sure you know where he stands.
KARL: At the farmer's market outside Raleigh, public opinion on Jesse Helms is as it's always been: deeply divided.
UNIDENTIFIED MALE: Well, they'll be losing a good man all right.
UNIDENTIFIED MALE: I think it is time for some new blood to come in.
UNIDENTIFIED MALE: Well, I hate to see him go.
KARL: As Helms heads for the exits, the spotlight is shining brightest on Elizabeth Dole -- at least for now. Doug Haynes, a conservative who ran for Congress last year with Dole's support, has helped launch a Draft Elizabeth Dole effort.
DOUG HAYNES, DRAFT ELIZABETH DOLE GROUP: So I think she would be the ultimate Condit for Republicans to win in 2002. But like any other campaign, you got to raise money, you got to get out there and start campaigning early. And I think she needs to start pretty quickly.
KARL: National Republican operatives hope to anoint Dole as the heir to Helms' eat, but she faces a potentially crowded field of candidates who seem reluctant to bow out for someone who hasn't lived in North Carolina for decades.
In addition to Dole, other potential candidates include Richard Vinroot, the former Charlotte mayor who ran unsuccessfully for governor last year; former senator Lauch Faircloth; and Congressman Richard Burr.
COBEY: I don't want a rough primary.
KARL: The sole declared Democratic Condit is ready to go on the attack against Dole.
QUESTION: Do you consider Elizabeth Dole a North Carolinian?
ELAINE MARSHALL (D), NORTH CAROLINA GUBERNATORIAL CANDIDATE: I don't think she lives here. I don't think she votes here. I don't think she pays her taxes here. So that would be that she's not currently a North Carolinian.
KARL: And as for the efforts of Republicans to clear the field for Elizabeth Dole down here, many of those candidates are making it very clear that they do not want to play ball. Most specifically, Lauch Faircloth, the former senator from North Carolina has put out a statement already. The written statement says that he will consider seriously a run for Senate of the United States from North Carolina. And it goes on to say, quote, "More than anything, I believe the choice of our next senator should be made by North Carolinians, not by Senate D.C. politicians." That the statement coming out this hour from former senator Lauch Faircloth -- Judy.
WOODRUFF: And Jon, all the more interesting, because our White House correspondent, John King, is reporting that senator -- former senator Bob Dole is urging his wife to run and is talking to other Republican operatives about it.
KARL: Absolutely. And there is anticipation and expectation that she will go ahead and announce that decision. Clearly, that's what many of the key Republicans both in North Carolina and in Washington concerned with this race are saying.
But one thing that's interesting is here at WRAL, there will be a retrospective that will be aired tonight. And David Crabtree, the senior anchor here, who also interviewed by the way, Helms, the only interview that Helms gave, invited all the potential candidates -- both Democratic and Republican -- to appear on the set, to appear tonight on this retrospective. They all agreed to appear with one exception: Elizabeth Dole. But we are told by Dole supporters down here and those close to her that they expect to see something from her, some kind of a public announcement, at least an announcement saying that she is indeed still seriously considering a run for Senate sometime in the next 48 hours.
WOODRUFF: All right, Jon Karl reporting from Raleigh.
And we'll have much more on Helms' retirement and the race to replace him a little later on INSIDE POLITICS. And CNN will carry Helms' announcement as it airs in North Carolina. That's at 6:00 p.m. Eastern on CNN's "First Evening News."
Meantime, on now to another lawmaker making headlines in a very different way: Congressman Gary Condit. We have learned more today about Condit's new efforts to repair his public image so battered during the widespread coverage of the Chandra Levy case.
Our national correspondent Bob Franken is in Condit's home district in California.
Bob, what are the people around Condit saying right now that we've learned two magazine interviews he's agreed to do?
FRANKEN: OK, first of all, we can now present some evidence that these interviews have already started with the cover of "People" magazine, which I hasten to point out is owned by the same AOL-Time Warner corporation that owns CNN.
Yesterday in Los Angeles, Gary Condit, along with his wife and two children -- Chad and Katie -- went and were photographed and did the interviewing for a "People" magazine spread. You can see the cover that we have. The cover shows Congressman Condit, along with his wife, Carolyn. That is expected to hit the newsstands on Friday.
We are warned away from assuming that that means that Carolyn Condit will appear in the interview that "ABC News'" Connie Chung is doing with the congressman at 10:00 p.m. Eastern tomorrow night. That is not something that we are told that we should expect, although it is a very fluid situation, still the subject of negotiation.
Back to the magazine. Condit on Friday will be also interviewed by "Newsweek" magazine. That covers the two news weeklies that we've discussed before. In addition to the interview tomorrow night with "ABC News," there will be another interview with a local television station. Negotiations are still underway. At last word, that had not yet been decided which station would do the interview. I would point out that Modesto has no station. The stations that cover this area are located in Sacramento and Fresno. So that takes care of the local TV interviews at this point. There's also going to be at least one interview with a local newspaper.
So far, we've been told that "The Modesto Bee," which is the main newspaper in Condit's market, has not been contacted by Condit's representatives. We should point out that "The Modesto Bee" was one of the papers that recently called for Condit to resign from Congress. That is the latest in the mass media situation.
One other one, and that has to do with the mass mailing that we were expecting to go out for the last several days. Condit's advisers want that to arrive in the home of the voters -- more than 200,000 are going to be sent out -- wants that to arrive Thursday before the television interviews. They're keeping it very secret about exactly when they're going to send it out. And they're not telling us at all what's in that. We are told that as late as 3:00 tomorrow morning local time, which would be 6:00 a.m. Eastern, that could arrive at the Modesto post office. It has not yet. It could arrive that late and still make it to the homes of all the area that's covered by this by tomorrow before the television interview.
Again, we've heard nothing about exactly what's in that. We have been told that there was a long debate about exactly what would go into that newsletter, including the degree of an apology that would be offered by Congressman Condit. He was reluctant to go as far as some of his advisers. We don't know at the final product yet. That is the status of all that's going to be happening right away, Judy. There is the possibility there could be more media interviews to follow.
WOODRUFF: All right, Bob Franken, we want you to stand by. And let's bring in our congressional correspondent, Kate Snow, to get a little more information about that mailing that Condit and his office are sending out.
KATE SNOW, CNN CORRESPONDENT: Judy, a congressional source telling us here on Capitol Hill that they were contacted, that the Hill was contacted, and in fact, a House office here contacted last week by a member of Condit's staff who asked in an informal type of inquiry, just over the phone, whether or not it might be OK for this mailing to go out and for it to be through the typical channels that members often use, which is at taxpayer expense. We understand that call came in here, and the officials made the determination, according to our source, that this mailing could not go out in that usual manner, that it could not be paid for by the taxpayers. The source telling us it is not, without question, is not being paid for by public funding; it is being paid for by Gary Condit through some sort of private funding.
The reason House officials said that they determined that this mailing did not directly relate to the congressman's work as a member of Congress. And number two, when they were asked about this initially, they were asked about the possibility of sending out some 600,000 pieces of mail. That is, of course, more than the number of people that live in Congressman Gary Condit's district, young and old, not just voting age. So there was some question about the amount of mail that he wanted to send out.
One thing we do know is that it's likely this is going to be quite costly for Gary Condit, assuming he's using private money to fund this. We're told by people here on the Hill that it costs some $300,000, $400,000 maybe even $500,000 to send out a mailing of this size typically using the bulk mail rates. So this will not be a cheap endeavor.
And also one last thing. We are told that it's not very typical for members of Congress to send out letters to all of their constituents at once. Certainly, a lot of members send out mailings to key-targeted groups. But to send this kind of mass mailing, not so typical -- Judy.
WOODRUFF: All right, Kate Snow at the Capitol; Bob Franken in Modesto.
And the other big political story this day, the battle over the shrinking federal surplus. The Bush administration formerly released its budget update today. It forecast a $158 billion surplus for the current fiscal year. Now that is 40 percent lower than the Office Of Management And Budget had predicted back in April. But when you subtract the money dedicated to Social Security and the postal service deficit, that leaves only $1 billion of surplus money for the politicians to spend. Democrats are pouncing on those numbers, and they're casting blame on the president and his tax cut plan, which is why the White House is working hard to put its own spin on the surplus.
Our White House correspondent Major Garrett is with the president and his aides in Crawford, Texas.
Major, what are they saying about all of this?
GARRETT: Judy, there's basically two reactions: number one, "Don't blame us;" number two, "We're all in this together." Let's go to the first one, "Don't blame us." The Bush administration says, "Look, we inherited a sluggish economy. Sluggish economies do one thing to budget surpluses. They shrink them because less tax revenue arrives in Washington. According to these new budget numbers, that takes about $80 billion out of the projected surplus.
Now let's get to the part, "We're all in this together." The Bush administration points out, yes, in fact, the Bush tax cut took about $40 billion out of that surplus. But as they point out, 12 Senate Democrats voted for it and 28 Democrats in the House voted for that tax cut package. Moreover, they say, many Democrats, senior Democrats, wanted an even larger tax cut in this first year to stimulate the economy. The White House says if that had happened, the surplus would be even smaller. So, "Don't blame us; we're all in this together. That's the rhetorical response to these new numbers -- Judy.
WOODRUFF: Now what about growth projections for next year, Major? We know the White House, the budget office is putting out a projection that is rosier, if you will, than what private economists are saying.
GARRETT: Well, the official number for growth next year is 3.2 percent. This year, the Office Of Management And Budget is saying the economy will grow at 1.7 percent. You can do the math at home. That's almost a doubling in economic growth in one year.
Now the White House says that is clearly within the range of the composite blue chip average. But if you take the blue chip average, what's that? That's the projections from the top 50 private economists in the United States. Their average is 2.8. Now the White House says it's going to grow at 3.2 percent, slightly at the higher, more optimistic level.
What does all this mean politically? What these new numbers released today show is if, in fact, the economy does grow at 3.2 percent, there will be just enough room in next year's budget to cover Social Security and a little bit additional spending. But if the economy does not grow at 3.2 percent, there won't be. And the kind of political arguments and aggravation the White House is experiencing today will only be magnified next year in the midst of an election year -- Judy.
WOODRUFF: All right, Major Garrett is out with the president in Crawford, Texas. Thanks. We'll talk more about the surplus a little later with White House budget director, Mitch Daniels and the ranking Democrat on the House Budget Committee, John Spratt. Stay with us. This is INSIDE POLITICS.
ANNOUNCER: Is Gary Condit manipulating the news media? Margaret Carlson and Tucker Carlson have a few choice words about the congressman's political rehab strategy. Also ahead...
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WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): Helms was loved and he was hated. His name could raise vast amounts of money for both the left and the right.
(END VIDEO CLIP)
ANNOUNCER: Bill Schneider on the financial fallout from Jesse Helms' retirement. And reflections on Elizabeth Dole's possible bid for Helms' seat from our Bruce Morton.
(BEGIN VIDEO CLIP)
BRUCE MORTON, CNN CORRESPONDENT (voice-over): Is she more popular with Republicans in Washington than with Republicans in her old home state?
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ANNOUNCER: Live from Washington, there's more of INSIDE POLITICS with Judy Woodruff straight ahead.
WOODRUFF: With the Senate so closely divided, word of a planned retirement sparks immediate speculation. In North Carolina, one early favorite to run for the Jesse Helms seat is a woman known to voters not just in the state but nationwide. Our Bruce Morton takes a look at the Tar Heel State and one potential Helms successor.
SEN. JESSE HELMS (R), NORTH CAROLINA: I want to go through here.
MORTON (voice-over): He mostly got where he wanted to go winning always narrowly in a state with a split personality. Old rural North Carolina, tobacco, not the force it once was, but still here. Small Protestant churches. The country's number two hog producer. Hogs and hog waste are issues here. But at the same time, the urban areas are booming. Charlotte is a major banking center, lots of new business. The research triangle -- Duke, the University of North Carolina -- mean high tech, lots of new professional people. Population up 37 percent between 1980 and 2000.
So who might succeed Helms? How about Elizabeth Dole? Dole, 65, starts with advantages. Grew up in North Carolina, "Most likely to succeed," her high school yearbook said. Went to Duke. Her presidential campaign means she has high name recognition in the state and nationally and a national money-raising base.
Harrison Hickman is a Democratic pollster from North Carolina.
HARRISON HICKMAN, DEMOCRATIC POLLSTER: I think the challenge for her will be to transform her celebrity status into political support if she's going to be a viable candidate.
MORTON: Other Republicans could run in a primary against her: former senator Lauch Faircloth, defeated 2000 gubernatorial candidate Richard Vinroot, conservative congressman Richard Burr. She has some advantages.
ELIZABETH DOLE (R), FORMER PRESIDENTIAL CANDIDATE: Actually, what we'll be doing is making history together, right? So let's make history.
MORTON: A woman president would have made history, of course. What she did in Iowa was respectable -- third in the straw poll there before dropping out with money woes. And she brought a lot of new people, a lot of women into the process. She can do the same thing in her home state. On the other hand, she may not be conservative enough for some on issues like abortion and guns.
QUESTION: I was wondering how you feel about the Second Amendment?
DOLE: I'm for it, absolutely. That does not include -- I would be for a ban on automatic weapons, The AK-47s, et cetera.
QUESTION: Right, amen.
HICKMAN: Can she hold some of these more conservative, more traditional rural voters who voted for Jesse Helms? It's almost a religion for them. They're called Jessecrats in North Carolina. Would they be willing to accept not just a woman as a senator but sort of a more moderate woman?
MORTON: She's a strong campaigner. These were Tri-Delts in Iowa, but she knew their song from her school days. She is conservative, but no Helms. And some wonder: Is she more popular with Republicans in Washington than with Republicans in her old home state? Bruce Morton, CNN, Washington.
WOODRUFF: Well, for more on Elizabeth Dole's chances of potential Senate candidate and Jesse Helms, I'm joined by two men who know the Senate and who know North Carolina. Carter Wrenn joins us from Raleigh, North Carolina. He is a Republican strategist who worked on three of Jesse Helms' Senate campaigns. And with me here in Washington, Stu Rothenberg of the "Rothenberg Political Report."
Carter Wrenn, before we talk about Elizabeth Dole, Jesse Helms leaving. How big a vacancy does that leave in American politics? CARTER WRENN, GOP STRATEGIST: Well, I think Senator Helms had the stature of Barry Goldwater or Ronald Reagan, and it will leave a vacancy.
WOODRUFF: And Stu Rothenberg, same question.
STUART ROTHENBERG, CNN POLITICAL ANALYST: Well, Judy, I think he could change Republican politics and national politics. He was the cutting edge of the social conservative movement, religious conservatism, populist conservatism. Of late, he's lost some of his energy, I think. He's a different Jesse Helms now going out than he was when he came in. But he's certainly changed Republican politics as well as the country.
WOODRUFF: And Carter Wrenn, does the Senate change for his not being there?
WRENN: I think a lot. I think he was for years the person that sort of defined conservatism in the Senate and who had the courage to push an agenda that a lot of politicians would just assume have swept under the rug. So, yes, I do think it will change.
WOODRUFF: Stu, what would you add to that?
ROTHENBERG: Well, I think Carter's absolutely right. If you think about 30 years ago when Senator Helms came to Washington, it was a different Republican Party. This was before Ronald Reagan, before confrontational, controversial conservatism. And he really injected that into Republican politics. Some people think, of course, negatively. They regard him as Senator No, and confrontational, divisive along racial lines. But whatever you think, whether you criticize him or respect him, he's certainly had a huge impact. He is in a sense the Republican version of Senator Edward Kennedy.
WOODRUFF: All right, Carter Wrenn, let's talk now about potential successors. Some people are talking about Elizabeth Dole as if she would almost be a shoo-in. Do you think she would be?
WRENN: No. I'm not sure at this point if all the talk about Mrs. Dole is just another one of your Washington political feeding frenzies, or whether she's really considering coming back to North Carolina and running. It's hard to tell. So that's the first step.
The second step is that you have three good candidates in the state. And I would expect that we'll have a primary of some sort. Senator Faircloth and Congressman Burr have both indicated that they would run in the primary, and Mr. Vinroot has indicated that whereas it's somewhat awkward because of his friendship with Mrs. Dole, that wouldn't determine his decision. So I expect we may be looking at a primary, but that's not always bad.
WOODRUFF: All right, Carter Wrenn's already named four people here. What about Elizabeth Dole? Is this just a Washington feeding frenzy, Stu.
ROTHENBERG: I don't think so, Judy. I've been doing some reporting in the last few weeks on this, but actually the last few hours. And I believe she's seriously considering the race. I believe that she knows she has to make some sort of a decision soon to indicate that she may well run. There will be an attempt -- there already is an attempt by former senator Lauch Faircloth to kind of intimidate her out of the race, to indicate that he is running.
Richard Vinroot very interested. I'd be surprised, actually, if Richard Burr runs. I think he's a very attractive candidate. He's young. He has a lot of options in the future. Does he want to run now? Is he going to really take the risk?
WOODRUFF: Let's quickly touch on Democrats. Carter Wrenn, who would the strongest Democrat be?
WRENN: Jim Hunt. There was a report on the TV news this morning here that the Democrats were urging Hunt to run for the Senate. And if Hunt gets in the race, it will change this whole election. He would be -- Jim Hunt's been elected to major office more than anybody else ever in North Carolina history. And if he gets in this race, it's a major change. It makes it a much tougher race for Republicans.
WOODRUFF: But Stu, until now, he's saying he won't do it. Who might run if he doesn't? And do you think he will?
ROTHENBERG: Well, there are actually a number of Democrats who have ruled out this race who may look at it again. Jim Hunt I think is a name you have to consider. He's not going to step on the senator's announcement today, but give him a few days, give him a few weeks, he may well get in the race.
Bobby Efforts (ph) may look again. Marc Basnight, the president pro tem of the North Carolina Senate, a Democrat, had ruled it out, is under increasing pressure to run again. We know that Elaine Marshall is in, as we noted earlier in the package. Dan Blue, a state legislator. A lot of attention to the gentleman named Mark Erwin, a 50-ish, very wealthy -- a real estate developer, could put millions of dollars into the race. Has given money to Republican candidates but also to the DNC and Bill Clinton. A lot of Democrats are talking him up.
WOODRUFF: All right, Stu Rothenberg, Carter Wrenn, thank you both. Good to see you.
WRENN: Thank you, ma'am.
WOODRUFF: We appreciate it.
ROTHENBERG: Nice being here.
WOODRUFF: And now we want to go quickly back to Modesto, California to our own Bob Franken with perhaps a development there, Bob?
FRANKEN: Well, Judy, we're now learning much more about bulk mailing than we ever thought we would. We're here to report that some of the newsletters that Gary Condit is sending to each and every one of the constituents, 200,000-plus, some of that mail has arrived at the Modesto post office. And here's why only some of it has. The way that it works is a commercial bulk mailer, somebody who is nongovernment, can do some of the pre-processing. And it can be delivered then directly to the Modesto post office. They properly prepared a small percentage of it, apparently.
Much of it was not properly pre-processed, and in fact, has gone to the Stockton post office, which will go through the official processing effort. And then it will be send to Modesto. That material, which is already here, will go out tomorrow morning. It is totally conceivable that the rest of it will get here in time, also. And then all of it would get out tomorrow morning. It is the fondest hope of the Condit advisers that the mailings get to the voters tomorrow before the television interviews. The one which of course is most prominent is the one that's conducted by Connie Chung on ABC tomorrow night. So now you know every single thing about the process and the progress of the bulk mailing that Congressman Condit is trying to send out.
WOODRUFF: All right. Bob Franken out Modesto.
A check of some of the day's other top stories straight ahead, including the latest on the return to Earth of the space shuttle Discovery. Also, the official White House word on this year's budget surplus. We will talk with the president's budget director, Mitch Daniels, and the ranking Democrat on the House Budget Committee.
WOODRUFF: A surplus of wrangling over the budget. More on that story, ahead.
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MITCH DANIELS, WHITE HOUSE BUDGET DIRECTOR: The nation is awash in extra money and it's going to be.
(END VIDEO CLIP)
WOODRUFF: We'll discuss the bottom line with WHITE HOUSE budget director Mitch Daniels and House Democrat John Spratt.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: The business of political causes and issues is a lot like professional wrestling: there is good and there is evil.
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WOODRUFF: Where does Jesse Helms fit into that scenario? Our Bill Schneider looks at the retiring senator as political hero and archrival.
(COMMERCIAL BREAK) WOODRUFF: As we discussed earlier, the White House office of Management and Budget today released its projections for this year's budget surplus. OMB director Mitch Daniels joins us now with more on the budget and his response to criticism by the Democrats in Congress.
Mitch Daniels, you are describing the glass as half full, saying it's the second biggest surplus in history. The Democrats are saying the White House with this tax cut has squandered the surplus, that it's down to just one or two billion if you take away Social Security. Who's right?
DANIELS: I am of course. But let's get the facts straight, I suppose that's the good starting point. We do have the second largest surplus in history. It's $160 billion, an astonishing thing after a year of economic slowdown. And it reflects the fact that we're in an era of surpluses now so far as the eye can see.
The surplus came down about $40-some billion, Judy, based on the weak economy. All the rest was by act of Congress and a part of that, the tax rebates, which are now arriving in people's mailboxes and just in time if we are going to get the economy going again.
WOODRUFF: So when the Democrats say, it's not just the economy, it's the president's $1.35 trillion tax cut that has caused a large part of this shrinkage in the surplus, what do you say?
DANIELS: I just ask them to go back and reflect on the fact that the president's tax cut has only just begun and many of them, in fact, argued for and voted for larger tax reduction in this particular year. So in a sense, they're arguing with themselves now, if they are concerned about a surplus of only $158 billion.
WOODRUFF: How do you explain to the public, Mitch Daniels, people who don't follow these budget numbers regularly, when you say there's only a $1 or $2 so called on-budget surplus that doesn't count Social Security and then you look at, for example, the president's requested increases in education spending, almost $40 billion more in military spending. How do you pay for that?
DANIELS: We have more than enough money to pay for all of our national priorities, Judy, and still have $158 billion leftover. The notion of an on-budget surplus is a Washington convention. It asks us, I suppose, to overlook the first $157 billion of extra cash that the government has taken out of people's hands beyond what it needs to pay its bills.
We have a good use for that money and that is to pay down the national debt. We are doing it this year, well over $100 billion. And the debt burden on the federal government next year is going to be the smallest in 25 years. So this is a good news story and we ought not obscure it really with, with political rhetoric.
WOODRUFF: Just, quickly, Mitch Daniels, coming up, House Democratic Congressman John Spratt, among others, is saying that the tax cuts that the president proposed ought to be reconsidered in light of where the economy is. Would the White House reconsider any way, shape, or form those tax cuts?
DANIELS: Congressman Spratt's a great leader and an honorable man but I think that he is just dead wrong on this. It would be exactly the wrong medicine for a weak economy to raise taxes. Economists universally are saying that the best hope we have for a prompt and full recovery is the president's tax relief, both the near- term stimulus and also the promised rate reduction.
So, with respect to a great congressional leader, I think he's really got exactly the wrong medicine for what ails us now. I do commend him, however, for thinking about the big picture, which is not whether a gigantic surplus or an even larger one is necessary. The real question is: How do we get the economy going again?
WOODRUFF: All right. Mitch Daniels, the director of the Office of Management and Budget. We appreciate it. Thank you very much.
DANIELS: Thank you.
WOODRUFF: Not surprisingly, Democrats in Congress have a much different view of the budget and the shrinking surplus. And as I just suggested joining me now from our Washington bureau South Carolina Congressman John Spratt who is the ranking Democrat on the House Budget Committee.
Congressman, you just heard Mitch Daniels say we should be pleased about these budget surplus figures. It is still the second largest surplus in American budget history.
REP. JOHN SPRATT (D), SOUTH CAROLINA: Well, let me clear up one thing. I haven't called for reconsideration of the tax cut. I supported the rebate. Was the first to propose it in the House budget resolution that I brought to the floor, didn't vote for the president's tax bill. But in the middle of what could be a recession right now, I would have mixed judgments about whether or not we would want to repeal the tax bill, or change it. So I haven't actually taken that position.
Let me tell you the situation with the surplus, though. Mitch Daniels, good man, he says that we've got the second largest surplus in our history. In truth, when you back out Social Security, there is no surplus.
The entire surplus represented in this year's budget is a surplus in Social Security.
WOODRUFF: Well, and you just heard Mitch Daniels say that this is just a Washington fiction, that that's still money that should be counted because that's money that can be spent?
SPRATT: No, that money could -- should not be spent. What he said was we'll use that money to go into the open market -- unlike the past -- in the future we'll go into the open market, we'll buy outstanding bonds, Treasury Bonds and we will invest the surplus in Treasury Bonds, but at the same time, pay down our national debt, as much as $3 trillion worth. I am for that policy, helped for that policy and that's what we ought to do. But that's the reason you can't use it for other spending purposes. If you spend it, you can't use it for debt repayment.
WOODRUFF: What do you say, Congressman Spratt, to Mitch Daniels and others in the administration, who say that economists agree that tax relief, the president's tax cut is the single best hope to get this economy back on track?
SPRATT: Well, tax relief is one way to give the economy a boost. I'm not sure the package the president put together is the best in terms of increasing aggregate demand. One thing we can do to help this economy move forward is to get interest rates down. Fed took them down yesterday. If we continue religiously our commitment to use these trust funds, Medicare and Social Security, solely for the debt repayment, we'll be sending a positive message through the financial markets and I think we'll help bring the interest rates down.
Let me say something about the overall problem. This year's problem is not so serious in itself as it is as a sign of the worst things to come. When we started this year in January, OMB predicted a surplus over 10 years, cumulative of $5.6 trillion. Of that the $5.6 trillion, 3.1 consisted of surpluses and Social Security and Medicare.
That left $2 1/2 trillion of what we called "unavailable surplus." That was where we were in January. Today, if you look for the 10 year-non-Social Security, non-Medicare surplus, you will find that it's $38 billion. We have gone from a cumulative surplus of $2.5 trillion to $38 billion.
That is something to be concerned about because that limits our freedom of action, the policy and issues that we can take, further tax cuts, further spending initiatives. This is a serious development, and if anything else happens to the economy, this assumes a 3.2 percent growth percent growth rate for the next 10 years -- a bounce back.
WOODRUFF: Congressman, you say that this limits freedom of action. The White House is saying, again, we should be very pleased that, given the state that the economy's been in, that it's been moving down for the last year, that the surpluses are as strong and as large as they are?
SPRATT: Well, I don't call it a large surplus. Listen, we don't have a surplus, we don't have a surplus outside these two trust accounts. That's our point. There is no more budget surplus in the general fund, basic budget of the United States.
When you back out Social Security and back out Medicare, over 10 years there's only a $38 billion bottom line left. That's all left of the surplus, and I am looking at these numbers, taking these numbers from page 4 of Director Daniel's Report.
WOODRUFF: All right. Well, Representative John Spratt, who is the ranking Democrat on the House Budget Committee, we thank you very much. Good to see you, Congressman.
SPRATT: Thank you.
WOODRUFF: Back on the Jesse Helms beat. Now that the conservative icon is about to announce his retirement, are some liberals feeling a loss? That story when we return.
WOODRUFF: When Senator Jesse Helms' taped announcement of his retirement airs in North Carolina in the next hour it will mark a turning point in American politics. Our Bill Schneider is here now with more of the impact of Jesse Helms' decision -- Bill.
SCHNEIDER: Jesse Helms will be missed, and not just by the right. For the past 30 years, Helms has been a very useful figure for the left.
(voice-over): Helms was loved and he was hated. His name could raise vast amounts of money for both the left and the right. Ask Rodger Craver, leading direct mail fund-raiser for the left.
RODGER CRAVER, DIRECT MAIL FUND RAISER: The business of political causes and issues is a lot like professional wrestling. There is good and there is evil, and Jesse Helms, to those of us on the left, is evil.
SCHNEIDER: To raise money in politics, you need a devil. To the left, Helms was the great Satan.
REP. JUANITA MILLENDER-MCDONALD (D), CALIFORNIA: One man cannot hold this much power in the Congress of the people.
SCHNEIDER: For decades, Helms' name on a fund-raising appeal would make liberals' flesh creep and their wallets open.
"He is sophisticated, shrewd and dangerous," the letters said. "He refers to a black as Fred and all blacks are freds. He thinks it is funny." "Join the battle to defeat Jessie Helms. Enclosed is my contribution."
Of course, Helms' name was just as good at raising money for the right. Their mail invoked devils on the left -- "radicals and liberals" like Jesse Jackson and Eleanor Smeal, the same inflammatory language -- "The National Liberal Coalition, led by the union bosses and Jesse Jackson, have launched a massive hate campaign" to defeat Senator Helms.
CRAVER: He perfected, or at least advanced, direct mail for political causes -- unfortunately, the wrong political causes, but he made an enormous contribution to that.
SCHNEIDER: So what will the direct mail fund-raising industry do now? The right still has some devils to attack -- Teddy Kennedy, Hillary.
But what devils does the left have? Newt Gingrich was a terrific devil, but he's gone. Tom Delay? Katherine Harris? No? how about John Ashcroft?
RALPH NEAS, PEOPLE FOR THE AMERICAN WAY: Who would have thought at the beginning of the millennium a president-elect would name or would nominate to the attorney general someone to the right of Senator Jesse Helms?
SCHNEIDER: Pretty scary, huh? But no Jesse Helms.
CRAVER: I don't see anyone on the right who is nearly as vehement and deadly as Jesse Helms has been.
SCHNEIDER: Vehement and deadly. In politics, that's poisonous. But in fund-raising, it's a bonanza.
WOODRUFF: And we'll see who replace him, if anybody. Bill Schneider, thanks.
More on the impact of Jesse Helms' retirement. When we come back, we will talk with Margaret Carlson and Tucker Carlson.
WOODRUFF: Joining us once again, Margaret Carlson of "TIME" magazine and Tucker Carlson, co-host of CNN's "CROSSFIRE," to talk more about the Jesse Helms' retirement. Tucker, how big an empty hole does this leave?
TUCKER CARLSON, CO-HOST, CNN'S "CROSSFIRE": Oh, well, it's huge. I mean, apart from the fact that his politics were entirely correct all of the time. The great thing about Jesse Helms is he just had no regard for other people's opinion of him. He was a complete iconoclast. A couple of years ago a friend of mine was walking up the Capitol steps smoking and Jessie Helms, whom he did not know, walked up to him and said, son, it is good to see a man smoke a man smoke a cigarette -- which is about the least fashionable possible thing you could ever say to somebody but Jesse Helms just didn't care as he didn't care in politics.
He just said exactly that what he thought and that's a very appealing quality whether you agree with him or not, I think.
WOODRUFF: Margaret, repercussions of him leaving.
MARGARET CARLSON, "TIME": Today is the day for eulogies and to remember him kindly. But he is a throwback to another era that we won't see again and I think that we can be grateful for some of that.
Remember, he's the person who, when Harvey Gant was running against him, had the crumpled up pink slip in the hands of a white man arguing against affirmative action. He called all black people, Fred. He, was against almost every advance. You know, he softened in recent years, because North Carolina softened in recent years.
And the next person to be elected is not going to be nearly as conservative as Jesse Helms.
WOODRUFF: Tucker Carlson, Elizabeth Dole likely to run?
T. CARLSON: It certainly sounds likely. Apparently she is being pushed by the White House. It's not clear whether she'll be a very strong candidate. Not a good presidential candidate, but I have to say the Democrats -- Terry McAuliffe -- in particular coming out with an very amusing argument against her which is, she haven't voted in North Carolina in 30 years.
So it turns out, the new Democratic position is, if you are not from the state, you shouldn't be allowed to run for Senate from that state. Kind of amazing that they are making that argument in public.
WOODRUFF: Margaret, is that a hole in that argument?
M. CARLSON: I have to agree with Tucker. Yes. That Hillary Clinton hadn't voted in New York before she actually moved there. She'd only be been a tourist in the state she was elected from. So Terry McAuliffe should not harp on residency requirements.
Elizabeth Dole is always a good candidate before the campaign actually starts. Now, North Carolina could be different because she's from North Carolina, and she, she has a North Carolina way about her. She has been gone a long time and you have to wonder whether the things that hobbled her when she was running for president, her need for perfection, her need for control, her need to have the lines drawn where she is going to step and put her feet and the pastel suits.
If that is going to serve her well in North Carolina, didn't work well when she was running for president.
WOODRUFF: I have to the ask you both about Gary Condit. Tucker, what could he say in this interview tomorrow or on any of the interviews he is doing to help himself?
T. CARLSON: Well first off, I bet you 20 bucks he will say it with his wife on his side. That I think -- if you are Abbe Lowell and you are designing you include Mrs. Condit because it prevents Connie Chung or any interviewer from asking a ton of questions about his private life, which is of course, what the viewers are interested in.
So, if Connie Chung says to him, how many women did you have an affair with, he can turn to Mrs. Condit and say, my wife and I have settled this between ourselves. I think that he will make the case that he had nothing to do with the disappearance of Chandra Levy, and that he has been a good public servant otherwise. That is probably all he can say.
WOODRUFF: Margaret, can he help himself at this point?
M. CARLSON: He can help himself. The network giving him the interview can't help themselves. It's like giving a half an hour of free time of somebody who is only "a get," as they say in the business, because he was a witness in a life-and-death case in which he didn't help the police for three months.
That he got to decide the venue, the format, the live-to-tape, so that it's 30 minutes during which, which any politician would love, because any politician can filibuster for 30 minutes. There is no ability to have a producer talk in your ear, and say, listen, you missed this and this and there is no ability to cut the interview.
It's just Gary Condit going forward on his own kind of unimpeded to say that he fully cooperated with the authorities.
WOODRUFF: Less than a minute: new surplus figures. The surplus is down significantly. Tucker, who's winning this argument, the Democrats or the White House?
T. CARLSON: Well the White House could win if they continue the argument that the dwindling surplus, just like the tax cut, is an excuse to cut spending. I think that was an effective argument for the tax cut. It could be a great way to shift the burden of this politically to the Democrats.
WOODRUFF: All right. Margaret, you get two words.
M. CARLSON: That was always the, plan -- to cut spending. And now they get their wish, which is, there isn't enough money, so everybody's going to have to, including the White House on things that it wants like defense and education, have to cut spending.
WOODRUFF: Well, we're going to have to cut right out of this interview. Great to see of you, Tucker Carlson and Margaret Carlson. INSIDE POLITICS will be right back.
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