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Janet Reno Expected to File for Permission to Raise Gubernatorial Campaign Funds

Aired September 3, 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, HOST: This is INSIDE POLITICS. I'm Judy Woodruff in Washington. Janet Reno appears ready to take the next step toward running for Florida governor.

MAJOR GARRETT, CNN WHITE HOUSE CORRESPONDENT: I'm Major Garrett in Detroit where President Bush spent part of his holiday trying to show he's not his father.

JONATHAN KARL, CNN CORRESPONDENT: I'm Jonathan Karl on Capitol Hill with a preview of the economic fireworks that will be launched here tomorrow.

WOODRUFF: Also ahead on this Labor Day, my conversations with labor secretary Elaine Chao and AFL-CIO president, John Sweeney.

ANNOUNCER: Now, Judy Woodruff takes you INSIDE POLITICS.

WOODRUFF: Thank you for joining us. Mindful of her high name recognition and political history, Janet Reno has been testing the waters in Florida for months. Now, the former attorney general is expected to announce tomorrow that she is taking steps toward a run for Jeb Bush's job. A source tells me that Reno likely will issue a press release stating that she'll file the paperwork needed to designate a campaign treasurer, and that would clear the way for her to raise money to seek the Democratic nomination for governor.

At a Democratic picnic in Miami-Dade County today, Reno said it would be premature to call her a candidate.

(BEGIN VIDEO CLIP)

JANET RENO, FORMER ATTORNEY GENERAL OF THE UNITED STATES: Continue to talk to people. I've got some other people to talk to this afternoon. Want to make it the wisest decision I can.

(END VIDEO CLIP)

WOODRUFF: Well, if Reno runs, she would face a number of Democratic primary rivals, some of whom have already announced their candidacies. But it is the possibility of a Reno-versus-Bush fall match up that makes the already compelling Florida governor's race even more so.

Our Bill Schneider is here now with more on Reno's political prospects -- Bill.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: The big question: Can she win? You know, if she does run for governor, Janet Reno would certainly have a lot of baggage, but she also has some strengths.

(BEGIN VIDEOTAPE)

SCHNEIDER (voice-over): First things first. Can Janet Reno win the Democratic primary next September? The betting is she can, because there's no runoff anymore. You don't need 50 percent of the primary vote to win the nomination. You just need to come in first. And she does by a mile in a poll of Florida Democrats taken this summer.

Janet Reno is a Democratic celebrity, and unless she makes a gigantic mistake, she has to be considered the strong favorite for the nomination. The general election is a different story. She's running 15 points behind Governor Jeb Bush. For a well-known candidate like Reno, that's not good.

TYLER BRIDGES, "MIAMI HERALD": Conventional wisdom is that Janet Reno wins the Democratic primary and then loses to Jeb Bush.

SCHNEIDER: Reno does have several strengths, but each of them has a down side. She can raise a lot of money from Democrats around the country, but money would also pour into Jeb Bush's campaign to stop Janet Reno. She could motivate a high turnout among African- American voters and women, but also a high turnout against her among Republicans.

Like many states, Florida has elected a woman senator but never a women governor. There's still a lingering prejudice against women in executive positions. Reno has several negatives, but they could have an upside: She has Parkinson's disease. She'd have to deal with that up front by bringing physicians out to testify that she is able to serve.

BRIDGES: I think the fact that she has Parkinson's will be an issue; you can't help but notice it. Her hands shake.

SCHNEIDER: The up side? Florida has a large population of seniors, and they may see a vote for Reno as a way to make a statement about being tolerant of disabilities.

Then there's the Elian Gonzalez case and the huge controversy over her handling of it. There's no question that Cuban-Americans would come out solidly against Reno, but Cuban-Americans are only six percent of the Florida vote. Many other Florida voters agreed with Reno and admired her for standing up to Cuban-American pressure.

BRIDGES: Now a lot of other people across the state would see that she stood up for what she thought was the right decision, made a tough call. So it really could go in her favor.

SCHNEIDER: Reno's biggest problem? Having served eight years in the Clinton administration, she may be too liberal for Florida.

Jeb Bush lost the race for governor in 1994 to Democrat Lawton Chiles. The Democrat dominated the moderate vote. When Jeb Bush beat Democrat Buddy MacKay four years later, liberals held solid for MacKay, but the moderate vote was split. Message: A Democrat can win Florida only by appealing to moderate voters. Janet Reno is going to have to prove she can do that.

(END VIDEOTAPE)

SCHNEIDER: Democrats are hoping that the Florida race will be a referendum on Governor Bush and his well-known brother. But they're relying on outrage over the Florida recount to drive up the Democratic turnout. But with Janet Reno as a candidate, the race could just as easily end up being a referendum on her.

WOODRUFF: Bill, what about an issue here, namely the economy? People in Washington are talking about a concern nationally. What about the economy in the state of Florida?

SCHNEIDER: The economy could wash over all the other issues in this race as it could all over the country. Remember, Jeb Bush is an incumbent. He is a Republican incumbent, and he is a Republican incumbent who is the president's brother. So if the Florida voters want to make a strong statement about a bad economy, they no what they'll do.

WOODRUFF: Bill Schneider, thanks very much.

Well, the Bush brother who does reside in the White House spent this Labor Day reaching out to union members in Wisconsin and Michigan. In the process, the president kept up his recent drill about the economic downturn.

CNN's Major Garrett joins us now from Detroit with more on Mr. Bush's message and the politics behind it -- Major.

GARRETT: Hello, Judy. You know, Wisconsin and Michigan are part of the cruel geography, at least as far as the Bush White House is concerned, about the 2000 election. President Bush narrowly lost in Wisconsin. He lost in Michigan twice: once to John McCain in the Republican primary and again by a much larger margin than he would have hoped to Al Gore. He came to Wisconsin and Michigan today to e with labor union workers, trade union members, to send a general message of sympathy to works around the country and specifically in those two states.

(BEGIN VIDEOTAPE)

GARRETT (voice-over): For the president, Labor Day meant breaking a sweat with carpenters in Wisconsin. Later with the Teamsters in Detroit, he conceded there was no national holiday from economic anxiety.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This is a Labor Day where we can't a celebrate a boom in the economy. GARRETT: Most presidents play down economic woes, but not this one. He tells just about everyone how bad things are.

BUSH: As a matter of fact, our economy has grown at a paltry one percent for the last 12 months, and that worries me.

Our economy began slowing down last year, and that's bad news, and I'm deeply worried about the working families all across the country.

GARRETT: Presidents usually fear highlighting economic gloom, but White House aides say Mr. Bush fears what happened to his father even more.

President Bush's bewilderment at the sight of a grocery store scanner became a symbol of his apparent distance from everyday American life.

GEORGE HERBERT WALKER BUSH, 41ST PRESIDENT OF THE UNITED STATES: You have to know where the code is.

GARRETT: For the second Bush White House, there is an almost Clintonian urge to appear connected, sympathetic, to feel America's unspoken economic pain. The White House is even copying Clinton's economic rhetoric.

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The president is going to focus like a laser beam on the economy.

GARRETT: And as the economy teeters between slowdown and recession, the contrast is apparent to Bernie Vanderheiden, a Wisconsin dairy farmer.

BERNIE VANDERHEIDEN, DAIRY FORMER: I think he's more connected to the working people than his dad was.

GARRETT: That perception helps attract skeptical voters like Pat Meulenans, a Wisconsin carpenter. His family's feeling the economic pinch and hasn't seen much help from the new president. Still...

PAT MEULENANS, CARPENTER: This is probably the first time I've seen an attempt like this where any Republican president has made an attempt to get in touch with the working class people. The main reason why I'm here, if he's willing to make an attempt, I'm willing to listen.

(END VIDEOTAPE)

GARRETT: The president never tires of telling crowds the tax cut will reinvigorate the economy. But if it doesn't, senior White House aides concede that no amount of "I feel your pain" rhetoric will shield him from the voter backlash his father faced -- Judy.

WOODRUFF: Well, Major, what about the reaction to the president going after what has been typically thought of as a Democratic constituency? GARRETT: Well, it was very good in Wisconsin, I must tell you, Judy. This morning, the reception was very loud, very enthusiastic. Detroit this afternoon, quite a different story, a much smaller, much more subdued crowd inside. Outside, many protesters waving signs, chanting; some signs speaking to a divide in conquer strategy they see this Bush White House pursuing with the Teamsters Union. Specifically, its courtship with the union president, James Hoffa. The president went out of his way in his remarks today to praise Jimmy Hoffa, saying that union president was running an above-board union, and he said somewhat soothingly to the Teamsters crowd that that's something that people in Washington are beginning to notice. The unspoken message there, Judy, is that maybe, just maybe the federal consent decree that has governed this union for more than a decade may, in fact, be coming to an end, which will be very welcomed news to Teamsters -- Judy.

WOODRUFF: All right, Major Garrett, who's been traveling with the president, now in Detroit, Michigan. Thanks.

Stay with us. This is INSIDE POLITICS.

ANNOUNCER: On this Labor Day, dueling views of some big issues facing America's workers from AFL-CIO chief John Sweeney and labor secretary Elaine Chao.

Also ahead, stem cell politics, the next moves on the Hill and questions about fuzzy science. And...

(BEGIN VIDEO CLIP)

RON BROWNSTEIN, CNN CORRESPONDENT: In the Civil War, America divided between the blues and the grays. Today, it's the blue and the red.

(END VIDEO CLIP)

ANNOUNCER: Ron Brownstein takes us on a colorful tour of the political landscape. Live from Washington, there's more of INSIDE POLITICS with Judy Woodruff straight ahead.

(COMMERCIAL BREAK)

WOODRUFF: As we've been saying, organized labor is not a traditional Republican Party ally, but President Bush's Labor Day visit with union workers was no accident. Mr. Bush has worked to win union support since he took over the White House with some limited success. In a moment, we will hear from the president's labor secretary, Elaine Chao.

First, I recently discussed labor politics with AFL-CIO president John Sweeney. And I began by asking him if he is concerned about the nation's sluggish economy.

(BEGIN VIDEOTAPE)

JOHN SWEENEY, AFL-CIO PRESIDENT: We're very concerned about the economy and what direction it's going. We're concerned about the indications that we see in terms of layoffs and what's taking place in the workplace, and employers tightening their belt and what affect that's having on working families. And our members are concerned, and this is a very serious issue.

Indications are that there will be more layoffs, and unfortunately, many of the layoffs are in higher-paying jobs and good- benefit jobs. And that even makes it more serious in terms of what affect it has on workers.

WOODRUFF: Are you optimistic or pessimistic about where the economy is headed right now?

SWEENEY: I wish I could say I was optimistic, but I don't think we're into it long enough yet. But the indications are that the economy is really softening, and there's no sign that it's going to let up.

WOODRUFF: The new evidence that the surplus is shrinking pretty dramatically, how does that affect organized labor's agenda, your legislative agenda?

SWEENEY: It definitely is going to impact on programs that workers consider very important. And we're also very aware of the threat that it may be to Social Security. And so it is a big concern, and we think that giving a tax break to the wealthy and sacrificing the surplus is the wrong way to go.

WOODRUFF: Should the tax cut be reversed? Should it be undone?

SWEENEY: Well, we're certainly going to have to look at the revenue situation. And if it requires a change in tax policy, I think we've got to have the political will to do that.

WOODRUFF: Labor secretary Elaine Chao has said that it's going to take a hundred -- it would take 167 years, she says, to inspect every workplace in America just once. And for that and other reasons now she's proposing to emphasize reducing workplace injuries through prevention and education rather than through regulation. In other words, stressing voluntary rather than required regulations. Is that the right approach?

SWEENEY: She's being very unrealistic. Voluntary doesn't work, and the whole issue of safety and health has been studied for many years. And the standards that were eventually put in place were the results of all that survey and study. And for her to repeal all of that after all the work that's gone into this -- this goes back to the days when Elizabeth Dole was secretary of labor. And it really is an insult to workers to really take away these standards that are so important to them and their safety and their health and their jobs. And Elaine Chao should understand that the voluntary system will not work.

WOODRUFF: Different subject: drilling for oil and gas in the Alaskan National Wildlife Refuge, ANWR. The Teamsters, which are of course a major part of the AFL, have been lobbying very hard for this. It passed the House. The vote in the Senate is looking very, very close. Is the AFL as a federation going to work hard to get this passed in the Senate as the Teamsters are or what? What's your posture?

SWEENEY: The Teamsters have a very strong position on this as well as some of the other unions in the building in construction trades. But there is a mixed reaction among the -- all the affiliates of the AFL-CIO. We have been strong supporters of good environmental policies and energy policies in our country, and we're in the midst of trying to find a balance for the difference of views that there are over the drilling. We have tried to work closely with the environmentalists on many issues, and we're continuing to monitor this situation. The Teamsters as an individual affiliate or any other union can take a stronger position than the AFL-CIO if that's what their members want them to do. But we're working closely with them where we can.

WOODRUFF: Immigration. AFL-CIO organized labor in the last couple of years has changed course on this matter to support the notion of granting legal amnesty to millions of illegal immigrants. You're looking at as a way to preserve wages in this country by making them part of an organized labor. You have met with the president of Mexico, Vicente Fox. However, now President Bush is saying, "We don't want blanket amnesty. We want some sort of guest-worker program." Is that going to be satisfactory?

SWEENEY: No. We hope that we're going to be able to get legislation that will protect workers, immigrant workers, give them the same protections as other workers, enforce the labor laws that apply to workers and apply them to immigrant workers as well. And we will be pushing for a strong amnesty program.

WOODRUFF: Final question, Mr. Sweeney. Your own arena, the house of labor, the 550,000-member carpenters union split off from the AFL, the federation, this past spring saying among other things that they want to see more emphasis on recruitment of new union members. The leader of the carpenters union said among other things that there's too much bureaucracy here.

You were elected in 1995 to bring unity and growth to the labor movement Do you think that's what you've accomplished?

SWEENEY: I think that we have had a lot of success. We have a long way to go, but we certainly have increased the focus on organizing, and more resources are going into organizing in the history of the AFL-CIO. The affiliates are very much involved in a lot of the new programs, and our political activities have been pretty good over the past few years as well mobilizing our rank-and-file workers.

The carpenters should be in the AFL-CIO. It's good for the AFL- CIO. It's good for the carpenters to be a part of the Federation of Labor here in the United States. Doug McCarron and I have been meeting over the past few weeks and we've had some very good discussions. He's a very good leader, and I think that he realizes how important it is for us to have solidarity. WOODRUFF: Well, John Sweeney, president of the AFL-CIO, thank you very much. We appreciate your joining us.

SWEENEY: Enjoy the rest of your Labor Day.

WOODRUFF: Thank you.

SWEENEY: Thank you.

(END VIDEOTAPE)

WOODRUFF: John Sweeney likes to point out that he already had a working relationship with labor secretary Elaine Chao before she joined the president's Cabinet. But their previous dealings do not offset fundamental disagreements on some key political issues. Earlier, I spoke with Elaine Chao, and I asked her about the challenges facing America's workers and where she believes the U.S. economy is headed.

(BEGIN VIDEOTAPE)

ELAINE CHAO, U.S. LABOR SECRETARY: We will be having our unemployment figures coming out next Friday, so we'll have a better idea then. But obviously, the economy has been softening somewhat. But all economic indicators seem to point to a bottoming out, and that the economy should be getting better. I think the president's tax cut is going to help. The consumer confidence appears to be waning a bit. And the president's, again, tax package should help.

I should also say that the larger issue is one of where the economy's going overall. Our economy's undergoing a fundamental transformation from a manufacturing-based economy to a service-based economy, and now even more so to an information-based economy. And what this means is that the knowledge worker will be at a premium, those who are better educated, those with better skills.

WOODRUFF: So when the head of the AFL-CIO said he says, as he is saying that he's concerned given all these signs out there, is he being too pessimistic?

CHAO: I think they are always trying to paint things in a rather negative way in an effort to, I think, shore up their own standing and to help their own membership drive. There certainly is concern for everyone about the economy. And again, I think the most important thing to focus on is the long-term trend of the economy. We are not encouraging workers to invest in themselves, to be more educated, to learn more new skills, to constantly be in charge of their own career, or their work. We are not helping them to understand the realities of the 21st century work force.

WOODRUFF: Do you think then that the head of the AFL-CIO, John Sweeney, and others are being misleading when they paint a darker picture about this and other related matters?

CHAO: Well, I would hope that they're not. But, obviously, sometimes it works to some people's agenda to paint a darker economic picture.

WOODRUFF: Let me bring up another issue that we discussed with John Sweeney, and that is what to do about ergonomics-related injuries in the workplace, so-called stress related or repetitive motion injuries. Your administration is looking at coming up with either voluntary guidelines, evidently, or some sort of mandatory regulations. John Sweeney and others are saying to go voluntary would be a big mistake. There have been so many studies done over the last 10 years dating back to Elizabeth Dole that show these kinds of injuries need to be addressed by the federal government. Where are you on this issue right now?

CHAO: I think it's a bit unfair to paint Secretary Dole as being the person responsible for the ergonomics issue. I don't think that that is a truthful representation, number one. Number two, we were given this issue when we first arrived in office. The final rule for ergonomics was pushed out in the last administration in the waning days. In fact, it was promulgated on January 16th. So this issue was one that was thrusted upon us.

I'm very concerned about worker injury. I'm very concerned about muscular skeletal injuries. But I think we need to understand what is an ergonomics injury. And that has not been fully agreed upon yet. And if the government is truly -- to find out -- to regulate this injury, we need to understand what it is. So I have an open mind, and I hope that all stakeholders involved in this debate will keep an open mind as well. I have already said that I will have some kind of a finding in September, and we are still pretty much on track.

WOODRUFF: So when the head of the AFL-CIO says to do anything other than have mandatory regulations would be an insult to American workers, would be an anti-worker move, what do you say at this point?

CHAO: Well, as I mentioned before, I'm very anxious to work with organized labor, and it really would help the dialogue if we were not so much in -- faced with such extreme language. As I mentioned before, I'm very concerned about these injuries. I want to have very good relations with organized labor, but they've got to do their part as well. And there are some organized labor leaders that are very -- that we can work with. I mean, President James Hoffa of the Teamsters, President Doug McCarron of the carpenters union have...

WOODRUFF: Both of whom you're going to be with be on Labor Day?

CHAO: Yes. We have worked very well with them. These are enlightened labor leaders who understand that their responsibility is to create jobs for their membership and that there are opportunities to work with this administration toward that goal.

WOODRUFF: Finally, a quick question about immigration.

CHAO: Yes.

WOODRUFF: The president of Mexico and others, now organized labor in this country, is advocating blanket amnesty, making it all the people who have come to the United States from Mexico to work making them legal workers in this country. The president, at first, indicated -- President Bush indicated he might consider that. Now he's saying, no, there won't be blanket amnesty. There's going to be some sort of guest worker program. How do you see that getting resolved, and do you see it satisfying people like President Fox in Mexico?

CHAO: Well, obviously, this relationship between the United States and Mexico needs to be a very special one and is a very special one. And this administration feels very strongly about creating this special relationship. I think all these issues related to immigration are in discussion. And when President Fox comes in September, we will have an announcement to make at that time.

WOODRUFF: Do you know what it will be?

CHAO: If I did, I wouldn't tell you anyway on the air.

WOODRUFF: All right, Secretary Elaine Chao, thank you very much. And we appreciate you being with us.

CHAO: Thank you.

(END VIDEOTAPE)

WOODRUFF: For what it's worth, Secretary Chao and AFL president John Sweeney say they are in frequent contact with one another despite their differences on a number of issues.

The United States and Israel have heard enough at the world conference on racism. When we return, the response to what Secretary of State Colin Powell called "hateful language" directed toward Israel.

(COMMERCIAL BREAK)

WOODRUFF: The United Nations-sponsored world conference on racism continues in South Africa. But the United States and Israel delegations will no longer be a part of the proceedings.

CNN State Department correspondent Andrea Koppel joins me now with the story -- Andrea.

ANDREA KOPPEL, CNN STATE DEPARTMENT CORRESPONDENT: Judy, for those who have been following this conference -- the to-ing and fro- ing -- it should be no surprise that Secretary of State Powell made the announcement today that he was recalling the U.S. team.

For months, the State Department has been saying that there's language that would appear in the final declaration of this racism conference that singles out Israel and is a criticism of Israel and that it should be removed. And that's something, after four days on ground, the U.S. team was unable to accomplish. I am told that Secretary Powell spoke with the team this morning and made the decision then that they had hit a wall and that they weren't going to be able to make any more progress if they were to stay in Durban. And so he pulled the plug and called the team home. In his announcement, his written announcement, Secretary Powell expressed regret for having to recall the team.

He said, "I know you do not combat racism by conferences that produce declarations containing hateful language -- some of which is a throwback to the days of Zionism equals racism -- or supports the idea that we have made too much of the Holocaust, or suggests that apartheid exists is Israel, or that singles out only one country in the world, Israel, for censure and abuse."

Now, officials I have spoken with here in Washington say the main roadblock to trying to get this language removed from the final text was many In the Arab world -- in particular, a number of Muslim and Arab countries -- who said that there was just no way that that language was going to be removed.

Now, the U.S. announcement also drew criticism in Durban, where the conference is ongoing. But one representative, one member of the U.S. team, U.S. Representative Tom Lantos, who is a well-known outspoken supporter of human rights and of racial equality, said that, really, the U.S. had no choice.

(BEGIN VIDEO CLIP)

REP. TOM LANTOS (D), CALIFORNIA: This conference was designed to deal with discrimination globally. Instead, it has focused on one country in a punitive fashion.

The conference stands self-condemned. And it has deviated from its original goals and objectives. And the American delegation -- of which I'm a part -- came here in good faith with the best of the intentions. And we have been rebuffed every step of the way by the people who hijacked this conference. The United States is utterly innocent in watching the conference collapse.

(END VIDEO CLIP)

KOPPEL: Now, obviously, Secretary of State Powell is the highest-ranking African-American ever to serve in the U.S. government. He wanted more than ever to attend himself. But as a result of that language not being able to be removed from the final text, he had to make the decision that the conference would go on without the United States.

INSIDE POLITICS will be back right after this.

(COMMERCIAL BREAK)

WOODRUFF: A difficult, some might say daunting legislative agenda awaits members of the House and Senate tomorrow when they return to work.

CNN congressional correspondent Jonathan Karl joins us now to preview some of the battles ahead on Capitol Hill. Jonathan, while the members have been away, new surplus estimates came in showing a much smaller surplus than it had been thought earlier. Democrats are jumping all over this, saying: Where are the Republicans going to come up with the money to take care of the president's priorities? How are the Republicans responding?

KARL: Well, the Democrats are coming in full steam ahead on this immediately when they get back here this week to Capitol Hill.

Essentially, the Democratic question is: Who lost the surplus? And they're pointing the finger at the Republicans. Republicans, very interestingly, on this, are not going to get defensive about their tax cut. Obviously, the Democratic subtext here is that it's the Republicans' fault that the surplus is diminishing, largely because of that tax cut that the president pushed through up here on Capitol Hill, largely on party-line votes.

But Republicans are saying that they are not going to get defensive about the tax cut. As a matter of fact, they are going to say that the question needs not to be, "Who lost the surplus?" but "Who has a plan to stimulate the economy?"

And they're going to say, far from revisiting that tax cut, what needs to happen is, we need additional tax cuts. So part of the Republican strategy, you'll hear from leaders in both the House and the Senate on the Republican side, is: Let's get additional tax cuts to boost this economy, because that is what is important right now.

WOODRUFF: What sort of additional tax cuts, Jon? And how would they save the economy?

KARL: Well, first and the foremost, as far as economic stimulus, Republicans are saying what they want to go forward with is a capital- gains tax cut. They say that's the direct -- most direct way that Congress can stimulate economic growth. They also believe it's something that can be revenue-neutral in the short term because people sell assets, bringing in more revenue, even if it's at a lower rate.

So that's one key area: capital-gains tax cut. And they believe they have a perfect vehicle for that in the minimum wage increase. Democrats are going to push very quickly up here for a minimum wage increase. And Republicans are going to say: How can we force small businesses to pay more for workers when they are laying off workers if we don't give them something in return?

That something, they believe, is a capital-gains tax cut.

WOODRUFF: And what about the Democrats, Jonathan? I mean, what sort of answers do they have?

KARL: Well, Democrats are very much on the offense here. They are pointing out that President Bush inherited record economic budget surpluses here, that there is -- that he needs to account for the fact that the surplus has diminished. And Republicans -- they're going to try to hold Republicans to the promise they have made repeatedly over the last two years not to dip into the Social Security surplus. So what you can look for this week is that the Senate budget director, Kent Conrad, is going to call in Mitch Daniels on Monday -- I mean on Wednesday -- essentially to call him to the carpet, saying: What is the story with the surplus? What's your plan for not spending the Social Security surplus?

So Democrats on the offensive here -- but it's interesting. If you noticed on Sunday, John Kerry, one of the more liberal members of the Democratic Party from the Senate, came out and said that he is actually willing to consider the possibility of that very capital- gains tax cut the Republicans are talking about, because of the need to stimulate the economy.

WOODRUFF: And just quickly, Jonathan, the president's priorities, education and defense, where do they go?

KARL: Well, those are the biggest-ticket spending items that are not included in the budget outline as was passed by the Congress. And they need to find that money. The president has talked about increasing defense an unspecified amount as far as the budget outline is concerned.

That's a big battle -- Democrats hinting that they may hold defense until the very last budget deal to make it a stark comparison: Do you want to increase defense spending at the cost of dipping into the Social Security surplus?

As far as the education goes, that, of course, the president's No. 1 domestic priority -- and he wants some increased money for education that needs to be found. But Democrats, on that side, will be looking for even more money than the president does. And they may need to answer to the question of: Where does that money come from? Are Democrats willing to dip into that Social Security surplus?

WOODRUFF: All right, Jon Karl reporting at the Capitol.

Well, the president walked a fine political line with his recent decision on federal funding for stem-cell research. Now there are new questions about the scientific evidence behind the president's decision.

For more on that, I'm joined by James Carney of "TIME" magazine.

Jay, the reporting that you did in this week's "TIME," it makes it sound as if the White House exaggerated, or at the very least made the most of whatever was out there in the way of available stem cells. What's the truth?

JAMES CARNEY, "TIME": Well, the truth is hard to find in this case, Judy.

What happened is that the White House had made up its mind pretty clearly that the perfect political play for the president in this difficult decision was to allow federal funding for research on existing stem cell lines. The problem was, there weren't that many lines in existence, as far as scientists knew, or as far as the National Institutes of Health knew. So under orders from both the White House and secretary of Health and Human Services, Tommy Thompson, the NIH scoured the world for more stem cell lines.

Now, when the president announced that there were more than 60, scientists were shocked -- scientists involved in stem cell research. And even some of the scientists whose research was cited in this report, as released last week, were sort of shocked to find out. In Sweden, for example, Goteborg University credited with having 19 existing stem cells lines. But if you talk to the scientists there, they say that you can't really define them as existing stem cell lines.

It's very premature. In fact, only three right now of the 19 are viable.

WOODRUFF: What happens, Jay, if the 64 lines that the White House promised as being there aren't there?

CARNEY: Well, to be fair, it's possible that all of the existing derivations, which are sort of the early versions of stem cell lines, could blossom into full-blown stem cell lines. And there could be more from those existing derivations. But the likelihood is that there will be fewer.

In Sweden, for example, of those 19, they expect maybe eight, nine. So there probably will be far fewer. And then there will be a debate about whether or not there are enough existing stem cell lines. And if enough scientists and researchers say that there are not, and enough disease advocacy groups say that there aren't enough to do this research, President Bush could find himself right back into the same situation that he had before, which is under pressure from the scientific community and these advocacy groups to allow federal funding of embryonic stem cell research -- in this case, allowing federal funding in which the embryo would be destroyed.

WOODRUFF: In the meantime, is there any political fallout for the president? Congress has to weigh in here. What are we looking for there?

CARNEY: Not surprisingly, Judy, because the Democrats now control the Senate, there will be hearings investigating how this decision was made and investigating just whether or not these 64 lines are viable and robust, as Secretary Thompson said. Ted Kennedy will have those hearings.

They want to look into the decision-making process and embarrass the president, essentially, sort of make this moral and ethical and righteous decision that he portrayed himself as having made look a lot more political.

WOODRUFF: And is Congress more likely to turn this thing inside out and say there is a lot less or a lot more? I mean, who... CARNEY: Fortunately for the president, it will take time to find out whether or not these lines are viable. So he has time. What I think Democrats in Congress will likely do is try to just make it less of a political victory for the president, embarrass the president a little bit.

There are not the votes right now to push through legislation that would force federal funding for actual embryonic stem cell research. So I think the policy will stay as it is. But the president may not get as much of a political boost out of his decision as it seemed a few weeks ago.

WOODRUFF: That was going to be my last question.

Finally, what are you learning about what the public -- how the public is viewing all this? Is the president still in pretty good shape on this issue, as he seemed to be at the time of the announcement?

CARNEY: I think so, because right now we are at the level of discussion where it's a question of what constitutes an actual stem cell line, a viable stem cell line. These are questions that scientists decide and a handful of people in Washington, not the average American, who probably still remembers that the president sort of walked a fine line and is allowing some research, but sticking to his pro-life principles.

So, for now, I think he is safe for the public.

WOODRUFF: And, again, just to be clear, we are talking only about federally-funded stem cell research, not about the private research that we know will continue to go on.

CARNEY: Exactly. But in this early research, federal funding is crucial, because a lot of private firms don't want to take this initial plunge and risk a whole lot of money until that early research is done. So federal funds are crucial at the earliest stages of this kind of research.

WOODRUFF: All right, Jay Carney.

(HELICOPTER NOISE)

WOODRUFF: And we are sorry about the helicopter, but sometimes those things happen...

CARNEY: Live TV.

WOODRUFF: ... here in Washington.

Thanks, Jay.

I am told that it is the president landing at the White House, which is just behind our location here at 16th and I streets downtown. That is his helicopter. How is that for timing?

WOODRUFF: Well, they call them the red states against the blue states. Where do you fit in?

Our Ron Brownstein explores the cultural divide when we return -- also, Al Gore back on the campaign trail; an update on the former candidate's political future.

(COMMERCIAL BREAK)

WOODRUFF: You recall last December, Al Gore's razor-thin loss to George W. Bush highlighted a political divide that goes far beyond simple party labels.

CNN political analyst Ron Brownstein of the "Los Angeles Times" traveled "Outside the Beltway" to find the real-life differences between the blue states and the red states.

(BEGIN VIDEOTAPE)

RON BROWNSTEIN, CNN POLITICAL ANALYST: We're here in White's Ferry on the Jubal Early, named for a famous confederate general in the heart of Civil War country, crossing from Maryland to Virginia.

In the Civil War, America divided between the blue and the gray. Today, it's the blue and the red. This ferry ride across the Potomac takes just a few minutes. But, politically, the distance between a blue state like Maryland behind me and a red state like Virginia up ahead is far greater.

(voice-over): More than any campaign in recent memory, the 2000 election showed us to be two nations.

Al Gore's America, the blue counties, are clustered along the cosmopolitan coasts and in the population centers of the Upper Midwest. George Bush's America, the red counties, stretch across the traditionalist Heartland from the Mountain West through the Great Plains in the South.

George Bush's America follows the "America the Beautiful" travelogue. If you're anywhere near purple mountain majesties -- say the Rocky Mountains -- you're in Bush country. Amber waves of grain, the fruited plain, that's all Bush too.

To get to Gore country, you have to turn to Woody Guthrie's America: California, the New York island, the redwood forests and maybe even the Gulf Stream water, if only a few chads in Florida had fallen the other way.

(on camera): Politics is only the least of the divisions that separate the states in blue America from those in red America.

(voice-over): If you can pick up a cafe latte on the way to work, you're probably in a Gore county. If it's coffee black, it's a good bet it's Bush. If domestic outnumber foreign cars on your block, it's probably a Bush county. If pickup trucks outnumber cars, it's definitely a Bush county.

If the line at the diner on Sunday morning is longer than the line for church, you're probably in a Gore county. But if deer hunters outnumber bargain hunters on Saturday morning, you're probably living in Bush territory.

(on camera): These are all signs of the times. Where we live, whether and where we pray, whether we view guns as a tool or a menace, even the cars we like and the foods we buy, these have all become signposts to the conflicting political loyalties of an America that is once again a house divided.

This is Ron Brownstein in Virginia for INSIDE POLITICS.

(END VIDEOTAPE)

WOODRUFF: And we will check out 2001 campaign trail and the Labor Day march in New York toward the mayoral primary. That's just ahead on INSIDE POLITICS.

(COMMERCIAL BREAK)

WOODRUFF: Al Gore is spending part of his Labor Day on the campaign trail -- not for himself, but for someone else.

He was in Minneapolis this morning to support of the city's mayor, Sharon Sayles Belton, who is running for reelection. Gore said he has not made up his mind about another run for president. But he took a subtle dig at the current White House occupant. He told his audience that some people said the country was headed in the right direction last year, and in his words -- quote -- "What are they saying now?"

Well, with just eight days to go until New York City's mayoral primary, five candidates spent part of their Labor Day campaigning at the popular West Indian American Day parade. The race to succeed term-limited Republican Rudy Giuliani is so hotly contested that the three major New York City newspapers each endorsed a different candidate yesterday.

"The New York Times" backed Democrat Mark Green, who faces three primary rivals. The "New York Post" endorsed another Democrat, Peter Vallone, with a headline, "Experience Matters." And the "New York Daily News" threw its support behind Republican Mike Bloomberg. The media mogul faces one opponent in the GOP primary -- INSIDE POLITICS in a moment.

(COMMERCIAL BREAK)

WOODRUFF: Well, we are out of time for this edition of INSIDE POLITICS. But, of course, you can go online all the time at CNN's allpolitics.com -- AOL keyword: CNN. Our e-mail address is insidepolitics@cnn.com.

I'm Judy Woodruff.

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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